CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA; RASIER, LLC, Plaintiffs-Appellants, v. CITY OF SEATTLE; SEATTLE DEPARTMENT OF FINANCE AND ADMINISTRATIVE SERVICES; FRED PODESTA, in his official capacity as Director, Finance and Administrative Services, City of Seattle, Defendants-Appellees.
No. 17-35640
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
May 11, 2018
D.C. No. 2:17-cv-00370-RSL
Argued and Submitted February 5, 2018 Seattle, Washington
Filed May 11, 2018
Opinion by Judge Milan D. Smith, Jr.
SUMMARY**
Antitrust / Labor Law
The panel affirmed in part and reversed in part the district court‘s dismissal of an action challenging, on federal antitrust and labor law grounds, a Seattle ordinance authorizing a collective-bargaining process between “driver coordinators“—like Uber Technologies; Lyft, Inc.; and Eastside for Hire, Inc.—and independent contractors who work as for-hire drivers.
The ordinance permits independent-contractor drivers, represented by an entity denominated an “exclusive driver representative,” and driver coordinators to agree on the “nature and amount of payments to be made by, or withheld from, the driver coordinator to or by the drivers.”
The panel reversed the district court‘s dismissal of claims that the ordinance violates, and is preempted by,
The panel affirmed the district court‘s dismissal of claims that the ordinance was preempted by the National Labor Relations Act under either Machinists or Garmon preemption.
The panel remanded the case for further proceedings.
COUNSEL
Michael A. Carvin (argued), Jacqueline M. Holmes, Christian G. Vergonis, and Robert Stander, Jones Day, Washington, D.C.; Lily Fu Claffee, Steven P. Lehotsky, and Warren Postman, U.S. Chamber Litigation Center, Washington, D.C.; Douglas C. Ross and Robert J. Maguire, Davis Wright Tremaine LLP, Seattle, Washington; Timothy J. O‘Connell, Stoel Rives LLP, Seattle, Washington; for Plaintiffs-Appellants.
Stacey M. Leyton (argued), Stephen P. Berzon, and P. Casey Pitts, Altshuler Berzon LLP, San Francisco, California; Michael K. Ryan (argued), Sara O‘Connor-Kriss, Josh Johnson, and Gregory C. Narver, Assistant City Attorneys;
Michele Arington (argued), Assistant Attorney General; Joel Marcus, Deputy General Counsel; David C. Shonka, Acting General Counsel; Federal Trade Commission, Washington, D.C.; Robert B. Nicholson and Steven J. Mintz, Attorneys; Andrew C. Finch, Principal Deputy Assistant Attorney General; Makan Delrahim, Assistant Attorney General; Antitrust Division, United States Department of Justice, Washington, D.C.; for Amici Curiae United States and Federal Trade Commission.
William R. Peterson and Allyson N. Ho, Morgan Lewis & Bockius LLP, Houston, Texas; Harry I. Johnson III, Mоrgan Lewis & Bockius LLP, Los Angeles, California; Stacey Anne Mahoney, Morgan Lewis & Bockius LLP, New York, New York; for Amici Curiae Coalition for a Democratic Workplace, National Federation of Independent Business Small Business Legal Center, and Consumer Technology Association.
Matthew J. Ginsburg and Harold Craig Becker, Washington, D.C., for Amici Curiae American Federation of Labor and Congress of Industrial Organizations.
Jonathan F. Mitchell, Stanford, California; Thomas R. McCarthy, Consovoy McCarthy Park PLLC, Arlington, Virginia; for Amici Curiae Antitrust Law Professors.
Alan D. Copsey, Deputy Solicitor General; Noah G. Purcell, Solicitor General; Robert W. Ferguson, Attorney General; Office of the Attorney General, Olympia, Washington; for Amicus Curiae State of Washington.
Matthew J. Segal and Kymberly K. Evanson, Pacifica Law Group LLP, Seattle, Washington, for Amicus Curiae Professor Samuel Estreicher.
Rebecca Smith and Ceilidh Gao, National Employment Law Project—WA, Seattle, Washington, for Amici Curiae Los Angeles Alliance for a New Economy, National Domestic Worker Alliance, National Employment Law Project, Partnership for Working Families, and Puget Sound Sage.
Catherine L. Fisk, Berkeley, California; Charlotte Garden, Fred T. Korematsu Center for Law and Equality, Ronald A. Peterson Law Clinic, Seattle University School of Law, Seattle, Washington; for Amici Curiae Labor Law Professors.
Sanjukta Paul, Detroit, Michigan, for Amici Curiae Law and Business Professors.
Barbara D. Underwoоd, Solicitor General; Anisha S. Dasgupta, Deputy Solicitor General; Seth M. Rokosky, Assistant Solicitor General of Counsel; Eric T. Schneiderman, Attorney General; Office of the Attorney General, New York, New York; Douglas S. Chin, Attorney General, Department of the Attorney General, Honolulu, Hawaii; Lisa Madigan, Attorney General, Office of the Attorney General, Chicago, Illinois; Thomas J. Miller, Attorney General, Office of the Attorney General, Des Moines, Iowa; Janet T. Mills, Attorney General, Office of the Attorney General, Augusta, Maine; Brian E. Frosh, Attorney General, Attorney General‘s Office, Baltimore, Maryland; Maura Healey, Attorney General, Attorney General‘s Office, Boston, Massachusetts; Lori Swanson, Attorney General, Office of the Attorney General, St. Paul, Minnesota; Ellen F. Rosenblum, Attorney General, Office of
OPINION
M. SMITH, Circuit Judge:
On December 14, 2015, the Seattle City Council enacted into law Ordinance 124968, an Ordinance Relating to Taxicab, Transportation Network Company, and For-Hire Vehicle Drivers (Ordinance).1 The Ordinance was the first municipal ordinance of its kind in the United States, and authorizes a collective-bargaining process between “driver coordinators“—like Uber Technologies (Uber), Lyft, Inc. (Lyft), and Eastside for Hire, Inc. (Eastside)—and independent contractors who work as for-hire drivers. The Ordinance permits independent-contractor drivers, represented by an entity denominated an “exclusive driver representative,” and driver coordinators to agree on the “nature and amount of payments to be made by, or withheld from, the driver coordinator to or by the drivers.” Seattle,
Acting on behalf of its members Uber, Lyft, and Eastside, Plaintiff-Appellant the Chamber of Commerce of the United States of America, together with Plaintiff-Appellant Rasier, LLC, a subsidiary of Uber (collectively, the Chamber), sued Defendants-Appellees the City of Seattle, the Seattle Department of Finance and Administrative Services (the Department), and the Department‘s Director, Fred Podesta (collectively, the City), challenging the Ordinance on federal antitrust and labor law grounds. First, the Chamber asserts that the Ordinance violates, and is preempted by, section 1 of the Sherman Antitrust Act,
The district court dismissed the case, holding that the state-action immunity doctrine exempts the Ordinance from preemption by the Sherman Act, and that the NLRA does not preempt the Ordinance. The Chamber appealed both holdings.
We have jurisdiction over this appeal pursuant to
A. Ride-Referral Companies
Eastside is the largest dispatcher of taxicab and for-hire vehicles in the Pacific Northwest. Eastside provides licensed taxicab and for-hire vehicle drivers with dispatch, advertising, payment processing, and other administrative services, in exchange for a weekly fee, payable by drivers to Eastside. Relying on advertising and a preexisting client base, Eastside generates transportation requests from passengers, who call, text-message, or email Eastside to request a ride. Eastside then refers ride requests to drivers through a mobile data terminal. If a passenger uses a credit card to pay a driver, Eastside processes the transaction and remits the payment to the driver. The drivers who pay for Eastside‘s services are independent contractors—Eastside does not dictate how the drivers operate their transportation businesses. For example, some drivers own licensed vehicles, whereas others lease them.
Uber and Lyft, founded in 2009 and 2012, respectively, have ushered ride-referral services into the digital age. Uber and Lyft have developed proprietary smartphone applications (apps) that enable an online platform, or digital marketplace, for ride-referral services, often referred to as “ridesharing” services. After downloading the Uber or Lyft app onto their smartphones, riders request rides through the app, which transmits ride requests to available drivers nearby. Drivers are free to accept or ignore a ride request. If a driver accepts a ride request, he or she is matched electronically with the rider, and then proceeds to the rider‘s location and fulfills the ride request. If a driver ignores a ride request, the digital platform transmits the request to another nearby driver. Drivers may cancel a ride request, even after initially accepting it, at any point prior to the
Uber and Lyft‘s business modеls have facilitated the rise of the so-called “gig economy.” In order to receive ride requests through the apps, drivers contract with, and pay a technology licensing fee to, Uber or Lyft. These licensing fees are a percentage of riders’ paid fares: Uber and Lyft subtract their technology licensing fees from riders’ payments, and remit the remainder to drivers. Drivers’ contractual agreements with either Uber or Lyft are not exclusive—in fact, many drivers use several ridesharing apps and even operate multiple apps simultaneously. Drivers may use the Uber and Lyft apps for however long and whenever they wish, if they wish to use them at all.
B. The Ordinance
On December 14, 2015, the Seattle City Council adopted Ordinance 124968. The stated purpose of the Ordinance is to “allow[] taxicab, transportation network company, and for-hire vehicle drivers (‘for-hire drivers‘) to modify specific agreements collectively with the entities that hire, direct, arrange, or manage their work,” in order to “better ensure that [for-hire drivers] can perform their services in a safe, reliable, stable, cost-effective, and economically viable manner.” Seattle, Wash., Ordinance 124968, pmbl.
The Ordinance requires “driver coordinators” to bargain collectively with for-hire drivers. Id. § 1(I). A “driver coordinator” is defined as “an entity that hires, contracts with, or partners with for-hire drivers for the purpose of assisting them with, or facilitаting them in, providing for-
The collective-bargaining process begins with the election of a “qualified driver representative,” or QDR. Id.
Upon receiving proper notice from the QDR, the driver coordinator must provide the QDR with the names, addresses, email addresses, and phone numbers of all “qualifying drivers.”2 Id.
The QDR then contacts the qualifying drivers to solicit their interest in being represented by the QDR. Id.
Once the Director certifies the EDR,
the driver coordinator and the EDR shall meet and negotiate in good faith certain subjects to be specified in rules or regulations promulgated by the Director including, but not limited to, best practices regarding vehicle equipment standards; safe driving practices; the manner in which the driver coordinator will conduct criminal background checks of all prospective drivers; the nature and amount of payments to be made by, or withheld from, the driver coordinator to or by the drivers; minimum hours of work, conditions of work, and applicable rules.
Id.
The Director‘s review is not limited to the parties’ submissions or the terms of the proposed agreement. Id. Rather, the Director may gather and consider additional evidence, conduct public hearings, and request information from the EDR and the driver coordinator. Id.
The agreement becomes final and binding on all parties if the Director finds the agreement compliant. Id.
If the driver coordinator and the EDR do not reach an agreement, “either party must submit to interest arbitration upon the request of the other,” in accordance with the procedures and criteria specified in the Ordinance. Id.
The interest arbitrator submits the proposed agreement to the Director, who reviews the agreement for compliance with the Ordinance and Chapter 6.310, in the same manner the Director reviews an agreement proposed by the parties. Id.
The partiеs may discuss additional terms and propose amendments to an approved agreement. Id.
C. Procedural History
The Ordinance took effect on January 22, 2016.
The Chamber first filed suit challenging the Ordinance as preempted by the Sherman Act and the NLRA on March 3, 2016, but its suit was dismissed as unripe, because no entity had yet applied for QDR certification. See Chamber of Commerce of the U.S. v. City of Seattle, No. C16-0322RSL, 2016 WL 4595981, at *2, *4 (W.D. Wash. Aug. 9, 2016).
Subsequently, the Director designated Teamsters Local 117 (Local 117) as a QDR on March 3, 2017. On March 7, 2017, Local 117 notified Uber, Lyft, Eastside, and nine other driver coordinators of its intent to serve as the EDR of all qualifying drivers who contract with those companies, and requested the qualifying drivers’ contact information.
On March 9, 2017, the Chamber filed suit again, seeking a declaration that the Ordinance is unenforceable and a preliminary injunction enjoining the City from enforcing the Ordinance.4 Relevant to the present appeal,5 the Chamber asserted two federal antitrust claims—a violation claim and a preemption claim. Specifically, the Chamber claimed that the City violated section 1 of the Sherman Act by enacting and enforcing the Ordinance, and that the Ordinance conflicts with, and is preempted by, the Sherman Act. The Chamber also asserted two fеderal labor preemption claims, challenging the Ordinance as preempted by the NLRA under Machinists and Garmon preemption.
On March 21, 2017, the City filed a motion to dismiss. On April 4, 2017, before ruling on the City‘s motion to dismiss, the district court granted the Chamber‘s motion for a preliminary injunction.6
On August 28, 2017, the Chamber filed an emergency motion for an injunction pending appeal in this court. The City opposed the motion. On September 8, 2017, we granted the Chamber‘s emergency motion and enjoined enforcement of the Ordinance pending this appeal.
STANDARD OF REVIEW
We review the district court‘s grant of a motion to dismiss de novo. Shames v. Cal. Travel & Tourism Comm‘n, 626 F.3d 1079, 1082 (9th Cir. 2010).
I. State-Action Immunity Does Not Protect the Ordinance from Preemption by Section 1 of the Sherman Act.
We turn first to the Chamber‘s federal antitrust claims, and hold that the Ordinance does not meet the requirements for state-action immunity.8
A. Preemption
In determining whether the Sherman Act preempts a state or local law pursuant to the Supremacy Clause, we apply the principles of conflict preemption. “As in the typical pre-emption case, the inquiry is whether there exists an irreconcilable conflict between the federal and state [or locаl] regulatory schemes.” Rice v. Norman Williams Co., 458 U.S. 654, 659 (1982).
A state or local law, “when considered in the abstract, may be condemned under the antitrust laws,” and thus preempted, “only if it mandates or authorizes conduct that necessarily constitutes a violation of the antitrust laws in all
However, for purposes of this opinion, we discuss the Chamber‘s labor preemption claims last. The Chamber‘s NLRA preemption claims, in contrast to the Chamber‘s challenge to the district court‘s holding regarding state-action immunity, lack merit, and do not warrant reversal of the district court‘s order. As is evident from the Chamber‘s briefing and presentation at oral argument, the Chamber‘s federal antitrust claims, rather than its federal labor law claims, are the core of its appeal.
Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.”
Here, the district court assumed, without deciding, “that collusion between independent economic actors to set the prices they will accept for their services in the market is a per se antitrust violаtion.” On appeal, the City acknowledges that it “did not challenge the Chamber‘s contention that collective negotiations regarding topics such as payments to drivers could, absent Parker immunity, constitute per se antitrust violations.” Because the district court dismissed the Chamber‘s federal antitrust claims solely on the basis of state-action immunity, we limit our analysis to that issue. We accept, without reaching the merits of the question, that the Ordinance authorizes a per se antitrust violation. The parties may address on remand which mode of antitrust analysis—the per se rule of illegality or the rule of reason—applies.
B. The Requirements for State-Action Immunity
The state-action immunity doctrine derives from Parker v. Brown, 317 U.S. 341 (1943). In Parker, the Supreme Court held that “because ‘nothing in the language of the Sherman Act . . . or in its history’ suggested that Congress intended to restrict the sovereign capacity of the States to regulate their economies, the Act should not be read to bar States from imposing market restraints ‘as an act of government.‘” FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216, 224 (2013) (quoting Parker, 317 U.S. at 350, 352). Following Parker, the Supreme Court has, “under certain circumstances,” extended immunity from federal
State-action immunity is the exception rather than the rule. Indeed, the Supreme Court has stressed that it is “disfavored“: “[G]iven the fundamental national values of free enterprise and economic competition that are embodied in the federal antitrust laws, ‘state-action immunity is disfavored, much as are reрeals by implication.‘” Id. at 225 (quoting FTC v. Ticor Title Ins. Co., 504 U.S. 621, 636 (1992)); see id. at 236 (reiterating “the principle that ‘state-action immunity is disfavored‘” (quoting Ticor Title, 504 U.S. at 636)). In line with its “preference” against state-action immunity, the Supreme Court “recognize[s] state-action immunity only when it is clear that the challenged anticompetitive conduct is undertaken pursuant to a regulatory scheme that ‘is the State‘s own.‘” Id. at 225 (quoting Ticor Title, 504 U.S. at 635). The Supreme Court‘s narrow take on state-action immunity is all the more exacting when a non-state actor invokes the protective umbrella of Parker immunity: “[C]loser analysis is required when the activity at issue is not directly that of the State itself, but rather ‘is carried out by others pursuant to state authorization.‘” Id. (quoting Hoover v. Ronwin, 466 U.S. 558, 568 (1984)).
“Because municipalities and other political subdivisions are not themselves sovereign, state-action immunity under Parker does not apply to them directly.” Id. As such, “immunity will only attach to the activities of local governmental entities if they are undertaken pursuant to a ‘clearly articulated and affirmatively expressed’ state policy to displace competition.” Id. at 226 (quoting Cmty. Commc‘ns Co. v. Boulder, 455 U.S. 40, 52 (1982)). Local governmental entities, “unlike private parties, . . . are not subject to the ‘active state supervision requirement’ because they have less of an incentive to pursue their own self-interest under the guise of implementing state policies.” Id. (quoting Town of Hallie v. City of Eau Claire, 471 U.S. 34, 46–47 (1985)). “Where state or municipal regulation by a private party is involved, however, active state supervision must be shown, even where a clearly articulated state policy exists.” Hallie, 471 U.S. at 46 n.10.
i. The Clear-Articulation Test
We conclude that the anticompetitive restraint challenged in this case fails the first prong of the Midcal test. The State of Washington has not “clearly articulated and affirmatively expressed” a state policy authorizing private parties to price-fix the fees for-hire drivers pay to companies like Uber or Lyft in exchange for ride-referral services.
Our inquiry with respect to the clear-articulation test is a precise one. “[T]he relevant question is whether the regulatory structure which has been adopted by the state has specifically authorized the conduct alleged to violate the Sherman Act.” Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co., 99 F.3d 937, 942 (9th Cir. 1996) (emphasis added). The state‘s authorization must be plain and clear: The relevant statutory provisions must “‘plainly show’ that the [state] legislature contemplated the sort of activity that is challenged,” which occurs where they “‘confer ‘express authority to take action that foreseeably will result in anticompetitive effects.‘” Hass v. Or. State Bar, 883 F.2d 1453, 1457 (9th Cir. 1989) (first emphasis added) (quoting Hallie, 471 U.S. at 43-44). The state, in its sovereign capacity, must “clearly intend[] to displace competition in a particular field with a regulatory structure . . . in the relevant market.” S. Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 64 (1985).
Once we determine that there is express state authorization, we then turn to the concept of foreseeability, which “is to be used in deciding the reach of antitrust immunity that stems from an already authorized monopoly, price regulation, or other disruption in economic competition.” Shames, 626 F.3d at 1084 (second emphasis added). A foreseeable result cannot circumvent the requirement that there be express authorization in the first place: “[A] foreseeable result cannot create state authorization itself,” but must itself stem from express authorization, which is “the necessary predicate for the Supreme Court‘s foreseeability test.” Id. (quoting Columbia Steel Casting Co. v. Portland Gen. Elec. Co., 111 F.3d 1427, 1444 (9th Cir. 1997)). Wе must be careful not to “appl[y] the concept of ‘foreseeability’ from [the] clear-articulation test too loosely.” Phoebe Putney, 568 U.S. at 229.
Applying these principles to the Ordinance, we conclude that the clear-articulation requirement has not been satisfied. The state statutes relied upon by the City Council in enacting the Ordinance—Revised Code of Washington sections
We examine the state statutes in turn. First, Revised Code of Washington section
The legislature finds and declares that privately operated for hire transportation service is a vital part of the transportation system within the state. Consequently, the safety, reliability, and stability of privately operated for hire transportation services are
matters of statewide importance. The regulation of privately operated for hire transportation services is thus an essential governmental function. Therefore, it is the intent of the legislature to permit political subdivisions of the state to regulate for hire transportation services without liability under federal antitrust laws.
That the Washington state legislature “inten[ded] . . . to permit political subdivisions of the state to regulate for hire transportation services without liability under federal antitrust laws,”
The plain language of the statute centers on the provision of “privately operated for hire transportation services,”
Revised Code of Washington section
The power to regulate includes:
(1) Regulating entry into the business of providing for hire vehicle transportation services;
(2) Requiring a license to be purchased as a condition of operating a for hire vehicle and the right to revoke, cancel, or refuse to reissue a license for failure to comply with regulatory requirements;
(3) Controlling the rates charged for providing for hire vehicle transportation service and the manner in which rates are calculated and collected;
(4) Regulating the routes and operations of for hire vehicles, including restricting access to airports;
(5) Establishing safety and equipment requirements; and
(6) Any other requirements adopted to ensure safe and reliable for hire vehicle transportation service.
Our case law also forecloses the City‘s broad reading of the Washington statutes. In Medic Air Corp. v. Air Ambulance Authority, we distinguished between the market for air ambulance services and the market for dispatching air ambulances in the course of applying the clear-articulation test. 843 F.2d 1187, 1189–90 (9th Cir. 1988). We held that “a county board of health had clearly intended to displace competition by establishing a monopoly in the market of dispatching air ambulances in the county, and that state action immunity therefore shielded this monopoly.” Shames, 626 F.3d at 1084 (citing Medic Air, 843 F.2d at
Furthermore, the Supreme Court has discouraged extending state-action immunity indiscriminately, in line with the “principle that ‘state-action immunity is disfavored.‘” Phoebe Putney, 568 U.S. at 236 (quoting Ticor Title, 504 U.S. at 636). “[R]egulation of an industry, and even the authorization of discrete forms of anticompetitive conduct pursuant to a regulatory structure, does not establish that the State has affirmatively contemplated other forms of anticompetitive conduct that are only tangentially related.” Id. at 235. To illustrate, the Supreme Court held in Phoebe Putney that a state law vesting a local governmental entity with general corporate powers and allowing it to acquire hospitals “d[id] not clearly articulate and affirmatively express a state policy empowering the [entity] to make acquisitions of existing hospitals that w[ould] substantially lessen competition.” Id. at 228.
The Supreme Court has consistently demonstrated reluctance to careen beyond the bounds of state authorization in its application of the clear-articulation test. We must follow suit. In Goldfarb v. Virginia State Bar, 421 U.S. 773
Similarly, in Cantor v. Detroit Edison Co., 428 U.S. 579 (1976), the Supreme Court “concluded that a state commission‘s regulation of rates for electricity charged by a public utility did not confer state-action immunity for a claim that the utility‘s free distribution of light bulbs restrained trade in the light-bulb market.” Phoebe Putney, 568 U.S. at 235 (citing Cantor, 428 U.S. at 596); see Cantor, 428 U.S. at 584 (observing that “[t]he statute creating the Commission contains no direct reference to light bulbs“). The regulation of rates in one area—i.e., the regulation of rates charged to passengers for transportation services—does not confer the shield of state-action immunity onto anticompetitive conduct in a related market—i.e., price-fixing the fees for-hire drivers pay to Uber and Lyft in order to use their digital platforms.
In cases in which the Supreme Court found the clear-articulation test to be satisfied, the initial state authorization clearly contemplated and plainly enсompassed the
Similarly, in Southern Motor Carriers, the Supreme Court concluded that the clear-articulation test was readily satisfied where four state public service commissions decided to permit collective ratemaking by common carriers for intrastate transportation of general commodities. 471 U.S. at 62–66. Three of the four states had “statutes that explicitly permit collective ratemaking by common carriers,” the exact anticompetitive conduct in the precise market at issue. Id. at 63. Mississippi, the fourth state, had a statute authorizing the state public service commission not only to regulate common carriers, but also to “prescribe ‘just and reasonable’ rates for the intrastate transportation of general commodities.” Id. (quoting
Tellingly, Uber and Lyft did not exist when the Washington statutes were enacted.14 The very concept of digital ridesharing services was probably well beyond the imaginations of lawmakers two to three decades ago, much less foreseeable. But the fact that technology has advanced leaps and bounds beyond the contemplation of the state legislature is not, on its own, the dispositive factor in our holding today. Digital platforms like Uber and Lyft have become “highly interconnected with modern economic and social life,” Fields v. Twitter, Inc., 881 F.3d 739, 749 (9th Cir. 2018), and present novel challenges and contexts for regulation. Nevertheless, it is not our role to make policy judgments properly left to the Washington state legislature. Instead, we must tread carefully in the area of state-action immunity, lest “a broad interpretation of the doctrine . . . inadvertently extend immunity to anticompetitive activity which the states did not intend to sanction,” or “a broad application of the doctrine . . . impede states’ freedom by threatening to hold them accountable for private activity they do not condone ‘whenever they enter the realm of economic regulation.‘” Cost Mgmt. Servs., 99 F.3d at 941 (quoting Ticor Title, 504 U.S. at 635–36).
Applying governing law, we hold that the clear-articulation requirement for state-action immunity is not satisfied in this case.
ii. The Active-Supervision Requirement
We next hold that the Ordinance does not meet the active-supervision requirement for Parker immunity.
“The active supervision requirement demands . . . ‘that state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy.‘” N.C. State Bd. of Dental Examiners v. FTC, 135 S. Ct. 1101, 1112 (2015) (quoting Patrick v. Burget, 486 U.S. 94, 101 (1988)). Because “[e]ntities purporting to act under state authority might diverge from the State‘s considered definition of the public good” and “[t]he resulting asymmetry between a state policy and its implementation can invite private self-dealing,” the active-supervision requirement “seeks to avoid this harm by requiring the State to review and approve interstitial policies made by the entity claiming immunity.” Id.
As a threshold matter, we first clarify that the active-supervision requirement applies to this case. It is settled law that “active state supervision is not a prerequisite to exemption from the antitrust laws where the actor is a municipality rather than a private party.” Hallie, 471 U.S. at 47. However, where, as here, “state or municipal regulation by a private party is involved, . . . active state supervision must be shown, even where a clearly articulated state policy exists.” Id. at 46 n.10 (citing S. Motor Carriers, 471 U.S. at 62).
Southern Motor Carriers is illustrative. That case involved a collective ratemaking scenario similar to the one authorized by the Ordinance in the present case. In Southern Motor Carriers, four states permitted private rate bureaus, composed of common carriers, to submit rate proposals to
The involvement of private parties in municipal regulation renders this case ineligible for the municipality exception outlined in Hallie: ”Hallie explained that ‘[w]here the actor is a municipality, there is little or no danger that it is involved in a private price-fixing arrangement. The only real danger is that it will seek to further purely parochial public interests at the expense of more overriding state goals.‘” Dental Examiners, 135 S. Ct. at 1112 (alteration in original) (quoting Hallie, 471 U.S. at 47); see Phoebe Putney, 568 U.S. at 226 (noting that the municipality exception is designed to “preserve[] to the States their freedom . . . to use their municipalities to administer state
Having decided that the active-supervision requirement applies to this case, we turn to examine whether it is met. Clearly, it is not. It is undisputed that the State of Washington plays no role in supervising or enforcing the terms of the City‘s Ordinance.
The City cites no controlling authority to support its argument that the Supreme Court uses the word “State” simply “as shorthand for the State and all its agents, including municipalities.” The Supreme Court has stated repeatedly that active supervision must be “by the State itself.” Midcal, 445 U.S. at 105; see Dental Examiners, 135 S. Ct. at 1110 (stating that the policy must be “actively supervised by the State” (quoting Phoebe Putney, 568 U.S. at 224)), 1112 (explaining that active-supervision “requir[es] the State to review and approve interstitial policies made by the entity claiming immunity“); Ticor Title, 504 U.S. at 633 (“[T]he policy must be actively supervised by the State itself.” (quoting Midcal, 445 U.S. at 105)); Patrick, 486 U.S. at 101 (“[T]he active supervision requirement mandates that the State exercise ultimate control over the challenged anticompetitive conduct.“).
We take it as a given that the Supreme Court means what it states. In Hallie, the Supreme Court stated that “[w]here state or municipal regulation by a private party is involved, however, active state supervision must be shown.”17 471 U.S. at 46 n.10. In the first clause, the Supreme Court used “state or municipal,” thus drawing a disjunctive difference between the two words. In the second clause, it used only “state.” It is highly improbable that the Supreme Court chose to distinguish between states and municipalities in the beginning of the sentence, only to conflate the two in the latter part of the sentence.
In concluding that the active-supervision requirement is not satisfied in this case, we do not disturb Hallie‘s well-settled rule that municipal actors need not meet the active-supervision requirement. See Hallie, 471 U.S. at 47. Rather, following Hallie, we hold that in this case, in which private actors exercise substantial discretion in setting the terms of
II. The Ordinance Is Not Preempted by the National Labor Relations Act.
We next hold that the Ordinance is not preempted by the NLRA under either Machinists or Garmon preemption.
“Although the NLRA itself contains no express pre-emption provision, [the Supreme Court] ha[s] held that Congress implicitly mandated two types of pre-emption as necessary to implement federal labor policy.” Chamber of Commerce of the U.S. v. Brown, 554 U.S. 60, 65 (2008). Both are forms of implied preemption: The first is Machinists preemption, named after the Court‘s decision in Lodge 76, International Ass‘n of Machinists & Aerospace Workers v. Wisconsin Employment Relations Commission, 427 U.S. 132 (1976). Machinists preemption “forbids both the National Labor Relations Board (NLRB) and States to regulate conduct that Congress intended ‘be unregulated because left “to be controlled by the free play оf economic forces.“‘” Chamber of Commerce, 554 U.S. at 65 (quoting Machinists, 427 U.S. at 140). Machinists preemption stems from “the premise that ‘Congress struck a balance of protection, prohibition, and laissez-faire in respect to union
The second is Garmon preemption, named after the Court‘s decision in San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959). Garmon preemption “is intended to preclude state interference with the National Labor Relations Board‘s interpretation and active enforcement of the ‘integrated scheme of regulation’ established by the NLRA.” Chamber of Commerce, 554 U.S. at 65 (quoting Golden State Transit Corp. v. City of Los Angeles, 475 U.S. 608, 613 (1986)). “To this end, Garmon pre-emption forbids States to ‘regulate activity that the NLRA protects, prohibits, or arguably protects or prohibits.‘” Id. (quoting Wis. Dep‘t. of Indus., Labor & Human Relations v. Gould Inc., 475 U.S. 282, 286 (1986)).
A. Machinists Preemption
The Chamber first contends that the Ordinance is preempted by the NLRA under a theory of Machinists preemption because the Ordinance regulates economic activity that Congress intended to remain unregulated and left to the forces of the free market. The Chamber argues that Congress‘s choice to exclude independent contractors from the NLRA‘s definition of “employee” in
We begin by recounting briefly the history of the NLRA‘s definition of “employee.” In 1935, Congress defined “employee” in the NLRA as follows:
The term “employee” shall include any employee, and shall not be limited to the employees of a particular employer, unless
this subchapter explicitly states otherwise, and shall include any individual whose work has ceased as a consequеnce of, or in connection with, any current labor dispute or because of any unfair labor practice, and who has not obtained any other regular and substantially equivalent employment, but shall not include any individual employed as an agricultural laborer, or in the domestic service of any family or person at his home, or any individual employed by his parent or spouse.
National Labor Relations Act, Pub. L. No. 198, § 2, 49 Stat. 449, 450 (1935) (amended 1947).
About a decade later, the Supreme Court decided NLRB v. Hearst Publications, 322 U.S. 111 (1944), in which it held that “[w]hether . . . the term ‘employee’ includes [particular] workers . . . must be answered primarily from the history, terms and purposes of the legislation.” NLRB v. United Ins. Co. of Am., 390 U.S. 254, 256 (1968) (second alteration in original) (quoting Hearst, 322 U.S. at 124). In effect, the Hearst Court held that “the standard” for determining whether a particular worker was an employee within meaning of the NLRA was not one based exclusively on common-law agency principles, but rather “was one of economic and policy considerations within the labor field.” Id. Applying this new standard, the Supreme Court concluded that although newsboys were independent contractors, they were employees within the meaning of the NLRA. See Hearst, 322 U.S. at 131–32.
The Supreme Court‘s ruling in Hearst triggered swift Congressional condemnation. See United Ins., 390 U.S. at
The term “employee” shall include any employee, and shall not be limited to the employees of a particular employer, unless this subchapter explicitly states otherwise, and shall include any individual whose work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice, and who has not obtained any other regular and substantially equivalent employment, but shall not include any individual employed as an agricultural laborer, or in the domestic service of any family or person at his home, or any individual employed by his parent or spouse, or any individual having the status of an independent contractor, or any individual employed as a supervisor, or any individual employed by an employer subject to the Railway Labor Act, as amended from time to time, or by any other person who is not an employer as herein defined.
As the Supreme Court subsequently observed: “The obvious purpose of this amendment was to have the Board and the courts apply general agency principles in distinguishing between employees and independent contractors under the Act.” United Ins., 390 U.S. at 256. The legislative history of the amendment corroborates this observation. The House Report for the amendment explained:
An “employee,” according to all standard dictionaries, according to the law as the courts have stated it, and according to the understanding of almost everyone, with the exception of members of the National Labor Relations Board, means someone who works for another for hire. But in the case of [NLRB v. Hearst Publications, 322 U.S. 111 (1944)], the Board expanded the definition of the term “employee” beyond anything that it ever had included before, and the Supreme Court, relying upon the theoretic “expertness” of the Board, upheld the Board. In this case the Board held independent merchants who bought newspapers from the publisher and hired people to sell them to be “employees“. [sic] The people the merchants hired to sell the papers were “employees” of the merchants, but holding the merchants to be “employees” of the publisher of the papers was most far reaching. It must be presumed that when Congress passed the Labor Act, it intended words it used to have the meanings that they had when Congress passed the act, not new meanings that, 9 years later, the Labor Board might think up. In the law, there
always has been a difference, and a big difference, between “employees” and “independent contractors“. [sic] “Employees” work for wages or salaries under direct supervision. “Independent contractors” undertake to do a job for a price, decide how the work will be done, usually hire others to do the work, and depend for their income not upon wages, but upon the difference between what they pay for goods, materials, and labor and what they receive for the end result, that is, upon profits. It is inconceivable that Congress, when it passed the act, authorized the Board to give to every word in the act whatever meaning it wished. On the contrary, Congress intended then, and it intends now, that the Board give to words not far-fetched meanings but ordinary meanings. To correct what the Board has done, and what the Supreme Court, putting misplaced reliance upon the Board‘s expertness, has approved, the bill excludes “independent contractors” from the definition of “employee“. [sic]
H.R. Rep. No. 80-245, at 18 (1947).
Citing the House Report, the Chamber asserts that Congress excluded independent contractors from the NLRA‘s definition of “employee” in order to leave independent-contractor arrangements to the free play of economic forces, rather than subject to collective bargaining, federal or local. However, the portion of the House Report the Chamber relies upon actually refers to supervisors, not independent contractors. See id. at 16-17 (noting that
The House Report‘s discussion of the exclusion of independent contractors shows that Congress intended to effect a return to the status quo, rather than preempt state or local regulation of independent contractors. Congress added the exclusion in order to reject the Supreme Court‘s erroneous “new” construction of “employee” and to return to the common-law definition of “employee” that was in place nine years earlier, before Hearst. Id. at 18. While the Chamber makes much of Congress‘s exclusion of independent contractors from the definition of “employee,” the legislative history does not support the Chamber‘s claim.
Furthermore, the fact that a group of workers is excluded from the definition of “employee” in
[W]here, as here, Congress has chosen not to create a national labor poliсy in a particular field, the states remain free to legislate as
they see fit, and may apply their own views of proper public policy to the collective bargaining process insofar as it is subject to their jurisdiction. We find nothing in the National Labor Relations Act to suggest that Congress intended to preempt such state action by legislating for the entire field. Indeed, we draw precisely the opposite inference from Congress‘s exclusion of agricultural employees from the Act.
United Farm Workers of Am. v. Ariz. Agric. Emp‘t Relations Bd., 669 F.2d 1249, 1257 (9th Cir. 1982). We find no reason to treat independent contractors differently than these other excluded categories of workers.
Finally, the Chamber‘s reliance on Beasley v. Food Fair of North Carolina, Inc., 416 U.S. 653 (1974), is misplaced. In Beasley, the Supreme Court considered whether the exclusion of supervisors from the NLRA‘s definition of “employee,” which “freed employers to discharge supervisors without violating the [NLRA‘s] restraints against discharges on account of labor union membership,” “also freed the employer from liability in damages to the discharged supervisors” under a state law “that provide[d] such an action for employees discharged for union membership.” Id. at 654–55. The Supreme Court held that section 14(a) of the NLRA contained an express statement of preemption that precluded employers from treating supervisors as employees.19 Id. at 657-62. In so holding,
The Supreme Court also concluded in Beasley that the legislative history behind the supervisor exclusion “compels the conclusion that Congress’ dominant purpose in amending [NLRA sections] 2(3) and 2(11), and enacting [NLRA section] 14(a) was to redress a perceived imbalance in labor-management relationships that was found to arise from putting supervisors in the position of serving two masters with opposed interests.” Id. at 661-62. These legislative concerns do not apply to independent contractors. In sum, Beasley is inapposite and lends no support for the Chamber‘s claim.
Neither case law nor legislative history supports the Chamber‘s argument that Congress‘s choice to exclude supervisors from the definition of “employee” in
B. Garmon Preemption
Lastly, the Chamber argues that the Ordinance is preempted by the NLRA under a theory of Garmon preemption because the Ordinance “requires local officials and state courts to decide whether for-hire drivers are employees under the NLRA,” a determination which the Chamber contends is within the exclusive jurisdiction of the NLRB. We find this argument unpersuasive.
To start, the Ordinance expressly disclaims any such determination:
No provision of this ordinance shall be construed as . . . providing any determination regarding the legal status of taxicab, transportation network company, and for-hire vehicle drivers as employees or independent contractors. The provisions of this ordinance do not apply to drivers who are employees under 29 U.S.C. § 152(3).
Seattle, Wash., Ordinance 124968 § 6.
Moreover, the Chamber fails to meet the threshold requirement for a Garmon preemption claim. It is a “precondition for [Garmon] pre-emption[] that the conduct [at issue] be ‘arguably’ protected or prohibited.” Int‘l Longshoremen‘s Ass‘n v. Davis, 476 U.S. 380, 394 (1986). This precondition “is not satisfied by a conclusory assertion of pre-emption.” Id. “If the word ‘arguably’ is to mean anything, it must mean that the party claiming pre-emption is required to demonstrate that his case is one that the Board could legally decide in his favor.” Id. at 395. In other words, “a party asserting pre-emption must advance an interpretation of the Act that is not plainly contrary to its
The facts of Davis are illustrative. In Davis, there was a dispute over whether an individual was a supervisor—in which case there would be no preemption—or an employee—in which case there would be preemption, and the NLRB, rather than the statе court, would have proper jurisdiction over the matter. Id. at 394. The union in that case “point[ed] to no evidence in support of its assertion that [the individual] was arguably an employee.” Id. at 398. “Its sole submission [was] that [the individual] was arguably an employee because the Board ha[d] not decided that he was a supervisor.” Id. at 396. This was insufficient to meet the union‘s “burden of showing at least an arguable case before the jurisdiction of a state court w[ould] be ousted.” Id.
Like the union in Davis, the Chamber, without citing any authority, asserts that “there is no need for the Chamber to take a position on the employment status of for-hire drivers, and there is no need for the Chamber to provide any supporting evidence.” Instead, the Chamber lists, without elaboration, ongoing matters pending before the NLRB on the question of whether drivers who use ride-referral services are employees. As the party asserting preemption, the Chamber has not met its burden to show at least an arguable case that the drivers at issue are covered by the NLRA. Practically speaking, the question of whether drivers
The Chamber asserts the alternative argument that, “[a]t a minimum, the Ordinanсe is preempted under Garmon until the NLRB conclusively determines whether the for-hire drivers who use Uber, Lyft, and Eastside are employees or independent contractors.” This argument, too, is futile. As the Supreme Court stated in Davis, “Nothing in Garmon suggests that an arguable case for pre-emption is made out simply because the Board has not decided the general issue one way or the other.” Id. at 397.
The Chamber has not made any showing or set forth any evidence showing that the for-hire drivers covered by the Ordinance are arguably employees subject to the NLRA. We thus hold that the Ordinance is not preempted under the Chamber‘s theory of Garmon preemption.
CONCLUSION
For the foregoing reasons, we reverse the district court‘s dismissal of the Chamber‘s federal antitrust claims, and remand the federal antitrust claims to the district court for further proceedings. We also affirm the district court‘s dismissal of the Chamber‘s NLRA preemption claims.
The parties shall bear their own costs on appeal.
AFFIRMED IN PART, REVERSED IN PART, REMANDED.
Notes
Id. at 1112. In so stating, the Supreme Court made a noncontroversial point: The fact that a state may have clearly articulated a policy, and thus satisfied the first Midcal requirement, does not answer key questions about the implementation of the policy—questions which are addressed by the second Midcal requirement of active state supervision.The two requirements set forth in Midcal provide a proper analytical framework to resolve the ultimate question whether an anticompetitive policy is indeed the policy of a State. The first requirement—clear articulation—rarely will achieve that goal by itself, for a policy may satisfy this test yet still be defined at so high a level of generality as to leave open critical questions about how and to what extent the market should be regulated.
Here, the anticompetitive restraint turns on the discretion of private actors, as the EDR and the driver coordinator agree on set prices, which they subsequently submit to the Director for review. We have held a similar anticompetitive restraint was a hybrid restraint: Where “the regulation[] . . . ha[d] the effect of delegating to private parties the discretion to set the posted price to be held,” it was “an anticompetitive arrangement they could not achieve legally by explicit agreement.” Id. at 930.
Nothing herein shall prohibit any individual employed as a supervisor from becoming or remaining a member of a labor organization, but no employer subject to this subchapter shall be compelled to deem individuals defined herein as supervisors as employees for the purpose of any law, either national or local, relating to collective bargaining.