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United States v. The City of Seattle

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

August 1, 2017

THE CITY OF SEATTLE, et al., Defendants.


          Robert S. Lasnik United States District Judge.

         This matter comes before the Court on “Defendants' Motion to Dismiss.” Dkt. # 42. Having reviewed the Amended Complaint and the memoranda submitted by the parties and having heard the arguments of counsel, 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 in Seattle can collectively bargain with the companies that hire, contract with, and/or partner with them. The Ordinance applies only to for-hire drivers who are independent contractors, not employees. Pursuant to the procedures set forth in the Ordinance, Teamsters Local 117 notified three Chamber of Commerce members[1] that it would like to represent their drivers in collective bargaining. The Chamber, acting on behalf of its members, filed this action arguing that the Ordinance violates and is preempted by the Sherman Antitrust Act, is preempted by the National Labor Relations Act, violates 42 U.S.C. § 1983, is unauthorized by state law, violates the Washington Consumer Protection Act, and violates the Washington Public Records Act.

         On April 4, 2017, the Court temporarily enjoined enforcement of the Ordinance because the Chamber had raised serious questions regarding its antitrust claim. Before the Court issued the injunction, defendants filed this motion seeking dismissal of all of the Chamber's claims. Only the response and reply memorandum therefore make reference to the Court's preliminary ruling. On April 11, 2017, the complaint was amended to add Rasier, LLC, a wholly-owned subsidiary of Uber Technologies, Inc., and Chamber member, as a plaintiff.[2]

         Defendants seek dismissal of certain claims on standing or ripeness grounds: those challenges implicate the Court's subject matter jurisdiction and are considered under Fed.R.Civ.P. 12(b)(1). Where defendants challenge the adequacy of plaintiffs' claims under Fed.R.Civ.P. 12(b)(6), the Court must determine whether plaintiffs have alleged facts that state a claim for relief that is plausible, not merely possible. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

         A. Antitrust Claim

         1. Standing

         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, can sometimes bring suit on behalf of its members even if it has not itself suffered an injury in fact. Associational standing exists “when: (a) [the association's] 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 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 the association, like every other private litigant, must have standing. In other words, it must prove a threatened “injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). The Supreme Court has found that the same standing requirement applies to claims under § 4 and § 16 of the Clayton Act, noting 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.

         The question is whether the “personal injury” language of Cargill precludes an association from seeking an injunction against actions that cause antitrust injury to its members. There are very few post-Cargill cases analyzing the point of intersection between Cargill and Hunt. In Sw. Suburban Bd. of Realtors, Inc. v. Beverly Area Planning Ass'n, 830 F.2d 1374, 1377-78 (7th Cir. 1987), the Seventh Circuit cited Cargill for the proposition that the antitrust injury requirement applies to antitrust claims for injunctive relief under § 16. The fact that the plaintiff-association had not demonstrated a threat of antitrust injury to itself was not dispositive: the court proceeded to apply the three part Hunt test when determining whether the association had standing to seek an injunction based on threatened antitrust injuries to its members. Id. at 1380 and n.2. In Fin. & Sec. Prods. Assoc. v. Diebold, Inc., 2005 WL 1629813, at *3 (N.D. Cal. July 8, 2005), the district court came to the opposite conclusion:

[N]o appellate authority has ever extended [the Hunt] rule to override the Brunswick/Cargill requirements under federal antitrust laws. . . . In the absence of clear Ninth Circuit or Supreme Court authority extending Hunt to antitrust cases, this Court is reluctant to ignore the Brunswick/Cargill requirement that a plaintiff must prove it has or will suffer antitrust injury itself. This alone is dispositive.

         Given the split in what limited authority there is, it is not surprising that the parties in this litigation disagree whether Cargill has displaced the associational standing analysis of Hunt.

         Having reviewed the parties' submissions and the relevant case law, the Court finds that Cargill does not resolve this issue. Cargill does not mention Hunt, nor does it discuss whether an association has standing to seek injunctive relief on behalf of its members. Defendants assert that Cargill effectively abrogated Hunt in the antitrust context, but do not explain why the associational standing analysis in antitrust claims would differ from that applied in other federal statutory schemes. It is true that the language of the antitrust statute presumes that the person bringing suit has been injured or threatened by conduct that violates the statute. But the same can be said for a wide array of federal legislation. Section 1983 of the Civil Rights Act of 1964, for example, makes every person who violates the statute “liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress . . . .” 42 U.S.C. § 1983 (emphasis added). Nevertheless, courts do not automatically reject § 1983 claims brought by an association simply because the association is seeking to vindicate the rights of its members. Rather, they apply Hunt's three-part test to determine whether the association has standing. See, e.g., Ass'n of Am. Physicians & Surgeons, Inc. v. Tex. Med. Bd., 627 F.3d 547, 550-51 (5th Cir. 2010); Kan. Health Care Ass'n, Inc. v. Kan. Dep't of Soc. and Rehab. Servs., 958 F.2d 1018, 1021 (10th Cir. 1992). The Supreme Court deliberately expanded the universe of viable plaintiffs in Warth v. Seldin, 422 U.S. 490, 511 (1975), when it held that “[e]ven in the absence of injury to itself, an association may have standing solely as the representative of its members.” The test for associational standing was later set out in Hunt. The Court is not persuaded that the Supreme Court expressly or by implication overruled decades of jurisprudence when it determined in Cargill that a plaintiff seeking injunctive relief under § 16 must show antitrust injury. The Court therefore concludes that an association may seek an injunction under § 16 on behalf of its members as long as it satisfies the Hunt test.

         An association “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, 432 U.S. at 343. In the context of the Hunt analysis, the City does not dispute that Uber, Lyft, Eastside for Hire, and, presumably, Rasier have standing to bring an antitrust action in their own right[3] or that the Chamber's interests in this litigation are germane to its organizational purposes. Rather, it argues that the claim for injunctive relief cannot be pursued without the participation of individual members because the relief would have to be narrowly tailored to address the threatened loss or damage each is experiencing. The Court disagrees. The Chamber, on behalf of its members, seeks a declaration that the Ordinance is unenforceable and an injunction on the ground that the Ordinance violates and is preempted by federal antitrust law. Plaintiffs allege that the Ordinance permits independent economic actors to collude on the prices they will accept for their services, a per se antitrust violation. Plaintiffs further allege that defendants' enactment and enforcement of the Ordinance constitutes an antitrust violation. In this context, the anticompetitive potential of the Ordinance can be shown and an appropriate remedy fashioned without the need for Eastside, Uber, and/or Lyft to be party to this litigation. The third prong of the Hunt analysis is satisfied. 432 U.S. at 343.

         2. Ripeness

         Defendants argue that the federal and state antitrust claims asserted in this litigation are not constitutionally ripe because they “rest[] upon contingent future events that may not occur as anticipated, or indeed may not occur at all.” Tex. v. U.S., 523 U.S. 296, 300 (1998). At the time this litigation was filed, the Chamber's members were faced with an imminent deadline to disclose the names and contact information of their drivers, thereby triggering a five-month representation drive and certification process. While it is possible that the representation efforts will be unsuccessful, a specific representative has targeted specific Chamber members under a process designed to horizontally fix the price and terms on which driver coordinators can contract with drivers. Ripeness is a justiciability doctrine that prevents courts from entangling themselves in abstract disagreements, untethered to concrete facts and effects. Nat'l Park Hospitality Ass'n v. Dep't of Interior, 538 U.S. 803, 808 (2003). Neither the constitutional nor prudential components of ripeness prevent plaintiffs' antitrust claim at this point in time. Now that a qualified driver representative has stepped forward and begun the organizing procedures, all of the relevant facts and parties are known, and the Court can resolve a concrete disagreement regarding whether the Ordinance is preempted by the antitrust laws and/or whether its enactment (as opposed to its enforcement) constitutes an antitrust violation. Plaintiffs should not be required to wait until they actually suffer antitrust injury to raise the primarily legal challenges at issue here. The City's ripeness objection is therefore overruled.

         3. State Action Immunity from Federal Antitrust Claims

         The Court assumes, for purposes of the immunity analysis, that collusion between independent economic actors to set the prices they will accept for their services in the market is a per se antitrust violation. The Supreme Court has found, however, that even in the face of clearly anticompetitive conduct, neither the language nor the legislative history of the Sherman Act suggests that “it was intended to restrain state action or official action directed by a state.” Parker v. Brown, 317 U.S. 341, 350-51 (1943). Although municipalities like the City of Seattle do not enjoy Parker-like immunity from the antitrust laws with regards to their own policy pronouncements (Town of Haillie v. Eau Claire, 471 U.S. 34, 38 (1985)), a municipality may restrict competition if its regulation is “an authorized implementation of state policy” (City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 370 (1991)). 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) (hereinafter, “Midcal”). Although state-action immunity is disfavored in light of the “fundamental national values of free enterprise and economic competition that are embodied in the federal antitrust laws” (FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216, __, 133 S.Ct. 1003, 1010 (2013)), the Supreme Court found that the states must be permitted “to use their municipalities to administer state regulatory policies free of the inhibitions of the federal antitrust laws” as long as the state's purposes are clear (City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 415 (1978)).

         a. Clearly Articulated and Affirmatively Expressed State Policy

         City of Seattle Ordinance 124968 was enacted under the authority of RCW 46.72.001 and RCW 81.72.200. RCW 46.72.001 provides that privately operated for-hire transportation services are a vital part of the state's transportation system and that regulating them to promote safety, reliability, and stability are essential government functions. The statute specifically states that “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.”[4] RCW 46.72.160 and RCW 81.72.210 authorize local regulation of for-hire vehicles and taxicabs with regards to license requirements, fees for service, routes and operations, safety and equipment requirements, and “[a]ny other requirements adopted to ensure safe and reliable for hire vehicle transportation [or taxicab] service.” The Ordinance, by its terms, is an attempt to exercise the authority granted by these state statutes to ensure safe and reliable for-hire and taxicab transportation services within the City of Seattle. The City Council made a number of specific findings related to how allowing for-hire drivers to have more control over their schedules and working conditions would improve the safety, reliability, stability, and economic benefits of the local transportation network.

         The statutes on which the City relies clearly delegate authority for regulating the for-hire transportation industry to local government units and authorize them to use anticompetitive means in furtherance of the goals of safety, reliability, and stability. The state “affirmatively contemplated” that municipalities would displace competition in the for-hire transportation market, a situation which satisfies the “clearly articulated and affirmatively expressed” requirement for state immunity. Phoebe Putney, 133 S.Ct. at 1011. See also S. Motor Carriers Rate Conference, Inc. v. U.S., 471 U.S. 48, 63 (1985) (explicit state statutory authorization for collective action by common carriers ends the inquiry as to the first prong of the Midcal test); Midcal, 445 U.S. 97, 105 (explicit state statutory authorization for resale price maintenance is a state policy forthrightly stated and clear in its anticompetitive purpose); New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. 96, 109 (1978) (explicit state statutory authorization “to displace unfettered business freedom in the matter of the establishment and relocation of automobile dealerships” falls outside the reach of the antitrust laws under the state action exemption); Bates v. State Bar of Ariz., 433 U.S. 350, 355-56 (1977) (state Supreme Court rule which prohibited advertisements and limited competition immunized state bar association from antitrust claim related to enforcement of the rule); Parker, 317 U.S. at 346 (explicit state statutory authorization for marketing programs that restrict competition among growers and maintain prices is a reflection of state policy).[5]

         Plaintiffs argue, however, that the state's authorization of anticompetitive regulations should be limited to the type of regulations identified in RCW 46.72.160 and the way in which municipalities have used the authorization in the past. In ruling on the motion for preliminary injunctive relief, the Court similarly expressed concern that the City's use of the statutes to regulate the relationship between for-hire drivers and the ride referral companies that contract with them was novel and went far beyond the establishment of rates and regulatory requirements. Dkt. # 49 at 5. After full consideration of this matter, the Court finds that a municipality's creativity in its attempts to promote the goals specified in the statute does not abrogate state immunity. A municipality need not “be able to point to a specific, detailed legislative authorization before it properly may assert a Parker defense to an antitrust suit.” City of Lafayette, 435 U.S. at 415. The fact that RCW 46.72.160 does not expressly authorize collective negotiation regarding the terms and conditions under which for-hire drivers provide their services does not alter the fact that the state clearly contemplated and authorized regulations with anticompetitive effects in the for-hire transportation sphere.

As long as the State as sovereign clearly intends to displace competition in a particular field with a regulatory structure, the first prong of the Midcal test is satisfied. . . . If more detail than a clear intent to displace competition were required of the legislature, States would find it difficult to implement through regulatory agencies their anticompetitive policies. Agencies are created because they are able to deal with problems unforeseeable to, or outside the competence of, the legislature. Requiring express authorization for every action that an agency might find necessary to effectuate state policy would diminish, if not destroy, its usefulness. . . . Therefore, we hold that if the State's intent to establish an anticompetitive regulatory program ...

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