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Chamber of Commerce of United States of America v. City of Seattle

United States District Court, W.D. Washington, Seattle

April 4, 2017

THE CITY OF SEATTLE, et al., Defendants.



         This matter comes before the Court on “Plaintiff's Motion for Temporary Restraining Order and/or Preliminary Injunction.” Dkt. # 2. In ruling on this motion, the Court has also considered the request for preliminary injunctive relief filed by individual for-hire drivers in Clark v. City of Seattle, C17-0382RSL. Having reviewed the memoranda, declarations, and exhibits submitted in both cases and having heard the arguments of counsel for the Chamber, the Clark plaintiffs, and the City, the Court finds as follows:

         In January 2016, City of Seattle Ordinance 124968 came into effect. The Ordinance provides a mechanism through which for-hire drivers can collectively bargain with the companies that hire, contract with, and/or partner with them. Dkt. # 39-1. Pursuant to the procedures set forth in the Ordinance, Teamsters Local 117 gave notice to twelve “driver coordinators” that it seeks to represent their drivers in collective bargaining. Dkt. # 39-1 at 7. The driver coordinators had until April 3, 2017, to provide the names, contact information, and license numbers of their drivers to the union so that it may solicit their interest in collective representation by the Teamsters.[1] Three of the driver coordinators, Eastside For Hire, Inc., Lyft, Inc., and Uber Technologies, Inc., are members of the plaintiff Chamber of Commerce. The Chamber seeks to enjoin enforcement of the Ordinance, arguing that it violates and is preempted by federal antitrust law and is preempted by the National Labor Relations Act (“NLRA”). The Clark plaintiffs argue that the Ordinance should be enjoined because it is preempted by the NLRA and violates the First Amendment and the Driver's Privacy Protection Act.

         Although the procedure for obtaining a temporary restraining order differs from that which is applicable in the preliminary injunction context, the factors considered by the Court are the same. In order to obtain preliminary injunctive relief, plaintiff must establish “that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v. Natural Res. Def. Council, 555 U.S. 7, 20 (2008). In the Ninth Circuit, “if a plaintiff can only show that there are serious questions going to the merits - a lesser showing than likelihood of success on the merits - then a preliminary injunction may still issue if the balance of hardships tips sharply in the plaintiff's favor, and the other two Winter factors are satisfied.” Feldman v. Ariz. Sec. of State's Office, 843 F.3d 366, 375 (9th Cir. 2016) (quoting Shell Offshore, Inc. v. Greenpeace, Inc., 709 F.3d 1281, 1291 (9th Cir. 2013)) (internal quotation marks omitted, emphasis in original).

         A. Antitrust Claim

         The judicial power of the federal courts extends to “Cases” and “Controversies” pursuant to Article III, Sec. 2 of the United States Constitution. An Article III case or controversy exists if plaintiff can show that “(1) it has suffered an ‘injury in fact' that is (a) concrete and particularized and (b) actual and imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant[s]; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). An association, such as the Chamber, “has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Hunt v. Wash. State Apple Advertising Comm'n, 432 U.S. 333, 343 (1977).

         Section 16 of the Clayton Act, which governs claims for injunctive relief, provides in part that “[a]ny person, firm, corporation, or association shall be entitled to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws . . . .” 15 U.S.C. § 26. By its very terms, § 16 authorizes suits by associations, but it, like every other private litigant, “must have standing - in the words of § 16, [it] must prove “threatened loss or damage” to [its] own interests in order to obtain relief.” Cal. v. Am. Stores Co., 495 U.S. 271, 296 (1990). The Supreme Court has found that “[i]t would be anomalous . . . to read the Clayton Act to authorize a private plaintiff to secure an injunction against a threatened injury for which he would not be entitled to compensation if the injury actually occurred” and that Congress did not intend such a result. Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 111 (1986). Personal injury is therefore a prerequisite to instituting a private antitrust action - regardless of whether monetary or injunctive relief is sought.[2]

         Nevertheless, the Court will assume, for purposes of this motion only, that although the Chamber itself does not face a “threatened loss or damage, ” it may sue on behalf of its members if it can satisfy the three-part Hunt test. See Sw. Suburban Bd. of Realtors, Inc. v. Beverly Area Planning Ass'n, 830 F.2d 1374, 1380-81 (7th Cir. 1987). The City does not dispute that the Chamber's interests in this litigation are germane to its organizational purposes, but argues that the antitrust claim cannot be pursued without the participation of individual members in the lawsuit. Hunt, 432 U.S. at 343. The Chamber has the burden of proving that its members, Eastside, Uber, and Lyft, have suffered antitrust injury, which is “injury of the type the antitrust laws were intended to prevent and which flows from that which makes defendants' acts unlawful.” Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990) (internal quotation marks and citations omitted). Simply showing “injury causally linked to an illegal presence in the market” will not suffice if the injury flows from aspects of the Ordinance that are beneficial or neutral to competition. Id.; Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995). Based on the limited record evidence, one can reasonably infer that the Ordinance will reduce, if not extinguish, any variability in the terms and conditions on which for-hire drivers offer their services to the driver coordinators. The anticompetitive potential of all price-fixing agreements is likely to arise and may justify facial invalidation of the Ordinance without the need for Eastside, Uber, and/or Lyft to be party to this litigation. The Court is willing to assume that the Chamber will be able to satisfy the third prong of the Hunt analysis. 432 U.S. at 343.

         Whether the Chamber will succeed on the merits of its antitrust claim is unclear, however. Federal antitrust laws do not prohibit states or their political subdivisions from protecting their citizens' interests through reasonable regulation, even if those regulations have anticompetitive effects. Parker v. Brown, 317 U.S. 341 (1943). A municipality like the City of Seattle may that is personal to the plaintiff. enable a price-fixing scheme that would otherwise violate the antitrust laws “when it is clear that the challenged anticompetitive conduct is undertaken pursuant to a regulatory scheme that is the State's own.” FTC v. Phoebe Putney Health Sys., Inc., ___ U.S. ___, 133 S.Ct. 1003, 1010 (2013) (internal quotation marks omitted). The challenged regulation must “be one clearly articulated and affirmatively expressed as state policy” and “the policy must be actively supervised by the State itself.” Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980) (internal quotation marks omitted).

         The statutes on which the City relies clearly contemplate anticompetitive effects in the for-hire transportation industry. The taxi industry in Washington is heavily regulated at a local level under regulatory schemes that allow or require agreements which, in most other contexts, would be invalid as anticompetitive or monopolistic. The statutes have been used in a fairly consistent way, however, namely to allow municipalities to establish rates and other regulatory requirements in the taxi industry. They have never, as far as the Court is aware, been used to authorize collusion between individuals in the industry in order to establish a collective bargaining position in negotiations with another private party. There can be no doubt that rideshare companies such as Uber and Lyft have, at a truly startling rate, created havoc in this industry using a business model that simply did not exist before its recent technological development. Whether existing state law covers, or was intended to cover, the sort of regulation the City attempts through the Ordinance is far from clear. Questions also remain regarding the level of state supervision contemplated by the Ordinance. The City does not establish the terms and conditions under which for-hire transportation is offered. Rather, those terms and conditions are negotiated between private parties, and there is no requirement that the City evaluate the competitive effects of the agreements reached. The City's sole role is to review and approve the negotiated terms. While approval may be sufficient to trigger state immunity under governing case law, it is troubling that a disapproval again places the matter back into the hands of private parties, with no state oversight. Id., at 105-06. The novelty of the City's claim for antitrust immunity, the potential absence of any state oversight of the agreements, the lack of any evaluation of competitive effect, and the potential impact on an important transportation option for thousands of Seattle residents and visitors cannot be ignored. The Court finds that the Chamber has raised serious questions regarding both prongs of the immunity analysis.

         B. National Labor Relations Act Claim

         The Chamber and the Clark plaintiffs argue that the Ordinance is preempted by the NLRA because (1) it regulates activity that arguably falls within the statute, including the determination of whether a particular individual is an employee or an independent contractor (known as “Garmon preemption”) and (2) it regulates conduct Congress intended to leave unregulated, such as bargaining between independent contractors and the entities that hire them (known as “Machinists preemption”). The NLRA does not contain an express preemption provision. Nevertheless, the courts have found that certain areas of labor law are under the federal government's exclusive power. Other areas, however, are subject to state regulation even where they “intercede in the relationships between employees and employers.” Babler Bros., Inc. v. Roberts, 995 F.2d 911, 914 (9th Cir. 1993). The line between permissible interference and preemption is set forth in case law, in light of congressional intent, and “is continually evolving.” Id..

         1. Garmon Preemption

         In San Diego Bldg. Trades Council v. Garmon, 359 U.S. 239, 242 (1959), the Supreme Court noted that “Congress has entrusted administration of the labor policy for the Nation to a centralized administrative agency, armed with its own procedures, and equipped with its specialized knowledge and cumulative experience.” Determining which of “the variegated laws of the several States are displaced by a single, uniform, national rule” had proved difficult, however. Id. at 241. The interest in a uniform labor policy was often in direct conflict with the judiciary's regard for our federal system, including local control over activities that had long been the subject of state regulation. Id. at 243-44. After evaluating prior case law, the Supreme Court held that, in the context of activities that “may fairly be assumed” to be protected by § 7 of the NLRA (such as collective bargaining, the right to strike, the right to picket, etc.) or to constitute an unfair labor practice under § 8 of the statute (such as interfering with § 7 rights or discriminating between union and non-union employees), state regulation and jurisdiction must yield. Id. at 244. Where it is not clear whether a particular activity is governed by § 7 or § 8, the Court deemed it “essential to the administration of the Act that these determinations be left in the first instance to the National Labor Relations Board.” Id. at 244-45.

         The Chamber argues that the Ordinance is facially and categorically preempted because it allows local officials and courts to make a factual determination (whether the for-hire drivers covered by the Ordinance are “employees” or “independent contractors”) that must be left in the first instance to the Board. “The precondition for pre-emption” - that the conduct be arguably or fairly assumed to be protected under § 7 or prohibited under § 8 of the NLRA - “is not without substance. It is not satisfied by a conclusory assertion of pre-emption and would therefore not be satisfied in this case by a claim, without more, that [a for-hire driver] was an employee rather than [an independent contractor].” Int'l Longshoremen's Ass'n v. Davis, 476 U.S. 380, 394 -95 (1986). Neither the Chamber nor the individual plaintiffs has made even a bare assertion that for-hire drivers are employees: both have taken the position that the for-hire drivers covered by the Ordinance are independent contractors and not subject to the NLRA. Thus, the Chamber's claim of Garmon pre-emption is not tethered to the facts alleged. ...

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