SAN FRANCISCO TAXI COALITION; PATRICK O‘SULLIVAN; GEORGE HORBAL; ALLIANCE CAB; S.F. TOWN TAXI INC.; SAI LEE, Plaintiffs-Appellants, v. CITY AND COUNTY OF SAN FRANCISCO; SAN FRANCISCO MUNICIPAL TRANSIT AGENCY; JEFFREY TUMLIN, Director of Transportation, Defendants-Appellees.
No. 19-16439
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
November 9, 2020
D.C. No. 3:19-cv-01972-WHA
FOR PUBLICATION
Appeal from the United States District Court for the Northern District of California William Alsup, District Judge, Presiding
Submitted July 16, 2020*
San Francisco, California
Filed November 9, 2020
Before: Kenneth K. Lee and Patrick J. Bumatay, Circuit Judges, and Roslyn O. Silver,** District Judge.
Opinion by Judge Lee
SUMMARY***
Civil Rights
The panel affirmed the district court‘s judgment on the pleadings in favor of defendants, but remanded for the district court to consider whether plaintiffs should be given leave to amend some of their state law claims in an action challenging regulations adopted in 2018 by the San Francisco Municipal Transportation Agency which favored recent owners of taxi permits (called “medallions“) over those who obtained their permits years ago.
The 2018 regulations favored taxi drivers who recently obtained medallions from the City of San Francisco for $250,000—only to see ridership dry up in the face of Uber and Lyft and other ride-sharing services. For example, the 2018 regulations gave priority for lucrative airport pick-up rides to recent medallion owners. Several taxi drivers, as well as groups representing them, challenged the 2018 regulations as violating equal protection, substantive due process, the California Environmental Quality Act (CEQA), and state anti-age discrimination law.
The panel held that rational basis review applied to the equal protection claim because this case did not implicate suspect or quasi-suspect classifications. The panel held that the 2018 regulations were rationally related to the legitimate government interests of aiding beleaguered taxi drivers and easing taxi congestion at the airport. The panel held that the City‘s attempt to mitigate the fallout for those most affected by a shift in the taxi market was a permissible state purpose, even if some questioned its policy wisdom. The panel also rejected plaintiffs’ invocation of substantive due process to strike down the 2018 regulations.
The panel held that plaintiffs’ pleadings failed to plausibly allege that the 2018 regulations qualified as a project under CEQA. The panel further held that plaintiffs failed to plausibly allege that the 2018 regulations were governed by
COUNSEL
Kenneth A. Brunetti and Gregory A. Rougeau, Brunetti Rougeau LLP, San Francisco, California, for Plaintiffs-Appellants.
Dennis J. Herrera, City Attorney; Wayne K. Snodgrass, Aileen M. McGrath, and James M. Emery, Deputy City Attorneys; City Attorney‘s Office, San Francisco, California; for Defendants-Appellees.
LEE, Circuit Judge:
Uber, Lyft, and other ride-sharing services have been a boon for commuters, but not so much for taxi drivers. Particularly hard hit are taxi drivers who recently obtained taxi permits (called “medallions“) from the City of San Francisco for $250,000 — only to see ridership dry up in the face of disruptive technology. In part to aid these taxi drivers, the San Francisco Municipal Transportation Agency (SFMTA) established several rules favoring recent owners of taxi medallions over those who obtained theirs years ago. So, for example, the new rules give priority for lucrative airport pick-up rides to recent medallion owners.
Several taxi drivers, as well as groups representing them, challenged these new rules as violating equal protection, substantive due process, the California Environmental Quality Act (CEQA), and state anti-age discrimination law. The district court granted the government‘s motion for judgment on the pleadings, ruling that the taxi drivers failed to state plausible claims. We affirm. The rules are rationally related to the legitimate government interests of aiding beleaguered taxi drivers and easing taxi congestion at the airport. We also affirm the judgment on the CEQA and age discrimination claims, but we remand for the district court to consider granting leave to amend those claims in the event the taxi drivers can allege additional facts to support them.
BACKGROUND
I. San Francisco Enacts Rules Favoring Recent Taxi Medallion Owners.
The SFMTA regulates taxis in San Francisco as well as taxi traffic at San Francisco International Airport (SFO).
Shortly after Purchased medallion owners began ponying up a quarter-of-a-million dollars to buy taxi medallions, ride-sharing services such as Uber and Lyft disrupted the taxi industry. SFMTA retained consultants to study the changing taxi market. The report found that Purchased medallion holders faced severe financial hardship because of high debt loads joined with fare loss to ride-sharing services. It also determined that taxi drivers clustered at SFO in search of high-value fares, causing significant congestion and long wait times.
In response to the consultants’ report, SFMTA adopted numerous regulations (the “2018 Regulations“), some of which are the focus of this litigation. Pre-K medallion holders are now prohibited from picking up fares at SFO, and Post-K medallion holders are disfavored from pickups with priority given at a fluctuating ratio to Purchased medallion holders depending on demand.
II. Several Pre-K and Post-K Medallion Holders Sue the Government.
The plaintiffs (the “Drivers“) sued San Francisco, the SFMTA, and its director (collectively, the “City“) in state court. The Drivers claimed, among other things, violations of substantive due process and equal protection under both state and federal constitutions, the California Environmental Quality Act, and anti-age discrimination law under
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction under
ANALYSIS
I. The Drivers’ Equal Protection and Substantive Due Process Claims Lack Merit.
The Drivers have failed to plausibly allege that the 2018 Regulations violate
Rational basis review applies to the equal protection claim here because this case does not implicate suspect or quasi-suspect classifications. See Ball v. Massanari, 254 F.3d 817, 823 (9th Cir. 2001). Under that standard, we ask “whether the legislation bears a rational relationship to a legitimate state interest.” Jackson Water Works, Inc. v. Pub. Utils. Comm‘n, 793 F.2d 1090, 1093–94 (9th Cir. 1986). “Where a regulation or statute affects only economic interests,” as here, “the state is free to create any classification scheme that does not invidiously discriminate.” Id. at 1093. We must uphold the law if there are “‘plausible,’ ‘arguable,’ or ‘conceivable’ reasons which may have been the basis for the distinction.” Id. at 1094 (quoting Brandwein v. Cal. Bd. of Osteopathic Exam‘rs, 708 F.2d 1466, 1472 (9th Cir. 1983)).
Here, the 2018 Regulations rationally serve legitimate purposes, and the Drivers fail to state a plausible claim otherwise. The City provides three interests motivating the 2018 Regulations: (1) reducing traffic congestion at the airport; (2) encouraging drivers to service the City; and (3) mitigating economic fallout for Purchased medallion owners.
There can be no dispute that the first two interests are legitimate. See, e.g., Sproles v. Binford, 286 U.S. 374, 394 (1932) (preservation and management of a state‘s highway system, including “fair distribution of traffic,” is a legitimate interest). The Drivers concede that taxi operators cluster at SFO because those riders offer high-value fares compared to trips within the City. They also admit that an oversupply of taxis at SFO leads to a shortage within the City.
The parties focus mainly on the third proffered interest — alleviating economic harm for Purchased medallion holders. The Drivers claim that the 2018 Regulations are pretext for impermissibly propping up the Purchased medallion market. But the only case cited in support is City of Cleburne v. Cleburne Living Center, 473 U.S. 432 (1985). That case involved “an irrational prejudice against the mentally retarded.” Id. at 450. The Drivers, however, do not allege any similar irrational prejudices. Instead, their claim boils down to simple disagreement with the City‘s efforts to balance the economic benefits and burdens of a regulated industry.
The Drivers also claim that the City‘s actions amount to impermissible economic favoritism. For this, the Drivers cite our court‘s opinion in Merrifield v. Lockyer, 547 F.3d 978, 991 (9th Cir. 2008). Merrifield involved a state law requiring controllers of non-vertebrate animals to obtain a pesticide license but did not require it for those controlling vertebrate animals. See id. at 988–89. The appellant there claimed that the distinction based on the
Not so here. Softening the economic fallout for Purchased medallion holders is a permissible state purpose and not a “naked attempt to raise a fortress” around them to insulate them from competition. Craigmiles, 312 F.3d at 229. The regulations do not single out Purchased medallion holders for favorable treatment with “no rational or logical reason for doing so.” Merrifield, 547 F.3d at 989. Rather, the rational reason is plain: Purchased medallion
holders bought or financed expensive permits from the City only to have the rug pulled out from under them by an unexpected disruptive technology. That the City would try to mitigate the fallout for those most affected by a shift in the market is a permissible state purpose, even if some may question its policy wisdom.
Merrifield stands for the unremarkable proposition that no rational basis exists if the law lacks any legitimate reason for its adoption. The Drivers ask us to read Merrifield to mean something much more. For better or for worse, governmental regulations today typically benefit some groups and burden others. So long as there are other legitimate reasons for the economic distinction, we must uphold the state action. In short, Merrifield provides an outer limit to the state‘s authority if the state‘s action borders on corruption, pure spite, or naked favoritism lacking any legitimate purpose. This case, however, does not come close to that outer bound.
The Drivers also claim that the 2018 Regulations fail to advance the stated interests because they do not increase taxi service within the City or decrease congestion at SFO. The record suggests otherwise. Taxis routinely circle the airport waiting for a ride, while riders in the City experience long wait times because hundreds of taxis sit idle at the airport. Moreover, the Drivers do not appear to argue that the 2018 Regulations fail to advance the goal of minimizing economic fallout to Purchased medallion holders. That concession alone is enough to end the inquiry. See Armour v. City of Indianapolis, 566 U.S. 673, 681 (2012) (the burden is on the challenging party to “negative every conceivable basis which might support it“) (internal quotations and citation omitted).
Finally, while the Drivers (for good reason) do not explicitly raise the revival of Lochner, they allude to the specter of substantive due process. See Lochner v. New York, 198 U.S. 45 (1905).2 They implicitly invite this
II. The 2018 Regulations Do Not Qualify as a “Project” Under CEQA.
The district court properly held that, based on the allegations in the complaint, the 2018 Regulations do not qualify as a “project” under CEQA. CEQA sets forth a three-tiered system to evaluate agency action for environmental effects:
First, the agency must determine whether the proposed activity is subject to CEQA at all. Second, assuming CEQA is found to apply, the agency must decide whether the activity qualifies for one of the many exemptions that excuse otherwise covered activities from CEQA‘s environmental review. Finally, assuming no applicable exemption, the agency must undertake environmental review of the activity[.]
Union of Med. Marijuana Patients, Inc. v. City of San Diego, 7 Cal. 5th 1171, 1185 (2019).
Relevant to this appeal is the first tier, which requires the agency to “conduct a preliminary review to determine whether the proposed activity constitutes a ‘project’ for purposes of CEQA.” Id. at 1197. To do this, an agency looks to the “general nature” of a proposed action to determine whether “the activity is capable of causing a direct or reasonably foreseeable indirect physical change in the environment.” Id. “[A]n indirect effect is not reasonably foreseeable if ... the postulated causal mechanism connecting the activity and the effect is so attenuated as to be ‘speculative.‘” Id. If the activity is not a project under CEQA, then the action is not subject to CEQA at all. See Muzzy Ranch Co. v. Solano Cty. Airport Land Use Comm‘n, 41 Cal. 4th 372, 380 (2007).
The nub of the Drivers’ argument is that the 2018 Regulations potentially impact the environment by increasing “deadhead” trips to and from SFO. They argue that Pre-K and Post-K medallion holders will still transport passengers to the airport, but now they will be inclined or required to return to the City without passengers. Similarly, Purchased medallion holders with priority at SFO will make trips without passengers to the airport to secure high-paying fares shuttling riders back into the City. This, the Drivers claim, “will encourage and promote hundreds of additional trips on Highway 101 [daily].”
But the complaint has not plausibly alleged that the 2018 Regulations increase the number of taxis in circulation or authorize more fares. Instead, they merely allocate existing fares among classes of medallion holders. Put another way, the taxis will continue to operate — and produce emissions and traffic — no matter if they are driving to and from SFO or within the City. At least based on
III. The Drivers’ Age Discrimination Claim Fails.
The Drivers argue that the 2018 Regulations violate state anti-age discrimination law. But the Drivers fail to plausibly allege in their complaint that the 2018 Regulations are governed by
assistance from the state.”
The Drivers essentially argue in their pleadings that because the SFMTA receives state funding for various programs, every subsequent action by the SFMTA triggers
Comunidad en Accion v. L.A. City Council is instructive here. 219 Cal. App. 4th 1116 (2013). There, a local community group challenged Los Angeles‘s siting decision for a solid waste processing facility under
1128. The court noted that to hold otherwise would be “inconsistent
Returning to San Francisco and taxis, the Drivers make only the bare assertion that because the SFMTA generally receives some unknown quantity of state funding,
CONCLUSION
We AFFIRM the district court‘s grant of the City‘s motion for judgment on the pleadings. We remand, however, for the district court to consider whether the plaintiffs should be given leave to amend their state law claims.