Opinion

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

NORTHWEST SUCCESS, INC., Case No. 3:25-cv-970-SI

Plaintiff, OPINION AND ORDER

v.

CITY OF PORTLAND,

Defendant.

Clifford S. Davidson, Drew L. Eyman, and Jenna M. Teeny, SNELL & WILMER LLP,

601 SW Second Avenue, Suite 2000, Portland, OR 97204. Of Attorneys for Plaintiff.

Fallon Niedrist de Guzman, Deputy City Attorney, and Daniel Simon, Senior Deputy City

Attorney, PORTLAND CITY ATTORNEY’S OFFICE, 1221 SW Fourth Avenue, Suite 430,

Portland, OR 97204. Of Attorneys for Defendant.

Michael H. Simon, District Judge.

Plaintiff Northwest Success, Inc. (“NW Success”) has sued the City of Portland (the

“City”). NW Success seeks monetary, declaratory, and injunctive relief enjoining the City from

enforcing the Labor Peace Agreement contained in the City’s Sustainable Procurement Policy

against NW Success and other Oregon Forward Contractors (“OFCs”). The Court previously

denied NW Success’s motion for preliminary injunction and granted the City’s partial motion to

dismiss, allowing Plaintiff to replead. Northwest Success, Inc. v. City of Portland, 2025

WL 2379793, at *2-5 (D. Or. Aug. 15, 2025). Now before the Court is the City’s motion to

dismiss NW Success’s First Amended Complaint (“FAC”). For the reasons stated below, the

Court grants in part the City’s motion to dismiss.

STANDARDS

A. Motion to Dismiss for Failure to State a Claim

A motion to dismiss for failure to state a claim may be granted only when there is no

cognizable legal theory to support the claim or when the complaint lacks sufficient factual

allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs.,

Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint’s factual

allegations, a court must accept as true all well-pleaded material facts alleged in the complaint

and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-

Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012); Daniels-Hall v. Nat’l Educ. Ass’n, 629

F.3d 992, 998 (9th Cir. 2010). To be entitled to a presumption of truth, allegations in a complaint

“may not simply recite the elements of a cause of action, but must contain sufficient allegations

of underlying facts to give fair notice and to enable the opposing party to defend itself

effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). The Court must draw all

reasonable inferences from the factual allegations in favor of the plaintiff. Newcal Indus. v. Ikon

Off. Sol., 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). The Court need not, however, credit a

plaintiff’s legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal, 556

U.S. 662, 678-79 (2009).

A complaint must contain sufficient factual allegations to “plausibly suggest an

entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the

expense of discovery and continued litigation.” Starr, 652 F.3d at 1216. “A claim has facial

plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). “The plausibility standard is not akin to a

probability requirement, but it asks for more than a sheer possibility that a defendant has acted

unlawfully.” Mashiri v. Epsten Grinnell & Howell, 845 F.3d 984, 988 (9th Cir. 2017) (quotation

marks omitted).

BACKGROUND

In 2003, the Portland City Council adopted a Sustainable Procurement Policy, codified as

ADM-1.09, which provides guidelines for City purchases of goods and services. After several

meetings between the City and the Service Employers International Union, Local 49 (“SEIU”),

the City amended this policy to impose a Labor Peace Requirement (“LPR”) on contractors for

all City janitorial, security, and industrial laundry service contracts.

Under Oregon state law, the City’s janitorial services, laundry services, and security

services also must comply with the Oregon Forward Program (“OFP”). The OFP helps

individuals with disabilities achieve gainful employment by requiring public agencies to obtain

certain products or services—including, as relevant here, janitorial, laundry, and security

services—from qualified nonprofit agencies employing individuals with disabilities. See Or.

Rev. Stat. (“ORS”) § 279.840.

NW Success is an Oregon nonprofit corporation and an OFC that provides janitorial

services to the City. In 2023, NW Success unsuccessfully negotiated a labor peace agreement

with SEIU. The City nonetheless granted NW Success a contract for comprehensive custodial

services through August 31, 2025 (the “Contract”), determining that it met a “Good Faith

Exception” to the LPR. NW Success continued to attempt negotiations with SEIU to no avail.

Eventually, the City refused to renew the contract. NW Success requested a determination that it

again met the Good Faith Exception, but the Mayor’s Office did not respond. The City has since

awarded the next contract to a different contractor.

DISCUSSION

NW Success contends that the LPR is preempted by the National Labor Relations Act

(“NLRA”) and that its terms are unconstitutionally vague in violation of the Due Process Clause.

NW Success also argues that the City violated the implied duty of good faith and fair dealing

(“GFFD”) in failing to determine whether NW Success satisfied an exception to the LPR and

that the City’s representations to NW Success should be enforceable by promissory estoppel.

A. NLRA Preemption

NW Success first argues that, by virtue of the Supremacy Clause of the United States

Constitution, the LPR is preempted by the NLRA. The Supremacy Clause provides:

This Constitution, and the Laws of the United States which shall be

made in Pursuance thereof; and all Treaties made, or which shall

be made, under the Authority of the United States, shall be the

supreme Law of the Land; and the Judges in every State shall be

bound thereby, any Thing in the Constitution or Laws of any State

to the Contrary notwithstanding.

U.S. CONST. art. VI, cl. 2.

The NLRA protects workers’ “full freedom of association, self-organization, and

designation of representatives of their own choosing, for the purpose of negotiating the terms and

conditions of their employment or other mutual aid or protection.” 29 U.S.C. § 151. The law

“supplant[s] state labor regulation, not all legitimate state activity that affects labor.” Bldg. &

Const. Trades Council of Metro. Dist. v. Associated Builders & Contractors of Mass./R.I.,

Inc., 507 U.S. 218, 227 (1993) (“Boston Harbor”) (emphasis in original). Thus, the Supreme

Court has emphasized that preemption doctrines do not apply when a government entity “acts as

a market participant with no interest in setting policy.” Id. at 229.1

If the government is not acting as a market participant, but is instead regulating labor, the

NLRA preempts “(1) laws that regulate conduct that is either protected or prohibited by the

NLRA . . . , and (2) laws that regulate in an area Congress intended to leave unregulated or

‘controlled by the free play of economic forces.’” Interpipe Contracting, Inc. v. Becerra, 898

F.3d 879, 887 (9th Cir. 2018) (quoting Chamber of Com. v. Brown, 554 U.S. 60, 65 (2008)). The

first form of preemption is called Garmon preemption, and the second is called Machinists

preemption. See id.; see also San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236 (1959);

Lodge 76, Int’l Ass’n of Machinists v. Wisc. Emp. Relations Com., 427 U.S. 132 (1976).

To determine whether a state or local government is acting as a market participant, the

Ninth Circuit applies the two-part test from Cardinal Towing & Auto Repair, Inc. v. City of

Bedford. 180 F.3d 686 (5th Cir. 1999). See Johnson v. Rancho Santiago Cmty. Coll. Dist., 623

F.3d 1011, 1023 (9th Cir. 2010) (applying Cardinal Towing test). The first prong asks if the

challenged governmental action is taken in pursuit of the “efficient procurement of needed goods

and services, as measured by comparison with the typical behavior of private parties in similar

1 “When a state or local government buys services or manages property as a private party

would, it acts as a ‘market participant,’ not as a regulator, and [courts] presume that its actions

are not subject to preemption.” Airline Serv. Providers Ass’n v. L.A. World Airports, 873

F.3d 1074, 1079 (9th Cir. 2017) (“ASPA”). “Only if a statute evinces an intent to preempt such

proprietary actions by a state or local government is the presumption overcome and the action

preempted.” Id. The Supreme Court has held that the NLRA does not evince such an intent to

preempt state or local government actions taken as a market participant. Boston Harbor, 507

U.S. at 231-32 (“In the absence of any express or implied indication by Congress that a State

may not manage its own property when it pursues its purely proprietary interests, and where

analogous private conduct would be permitted, this Court will not infer such a restriction.”).The

Ninth Circuit has also held that the presumption is not rebutted by the NLRA. See ASPA, 873

F.3d at 1085.

circumstances.” Id. (quoting Cardinal Towing, 180 F.3d at 693). At the second prong, the

“narrow scope of the challenged action” must “defeat an inference that its primary goal was to

encourage a general policy rather than address a specific proprietary problem.” Id. at 1023-24

(quoting Cardinal Towing, 180 F.3d at 693). If either prong is satisfied, the governmental entity

is acting as a market participant. Id. at 1024. The government bears the burden of showing that

the market participant exception applies. Id.

The Court has previously dismissed NW Success’s NLRA preemption claim, finding that

the City met the “market participant” exception to NLRA preemption under either prong of the

Cardinal Towing test. Northwest Success, Inc., 2025 WL 2379793, at *6-10. In its FAC, NW

Success additionally alleges that: (1) the LPR does not apply to a discrete project, but instead

“broadly regulates three entire industries for any contract entered into with the City”; (2) SEIU is

the “only union” that represents workers in all three industries; (3) the City wanted to pass its

LPR before an “RFP” for a janitorial contract went out in order to “capture that contract”; (4) the

City must procure services through the OFP, whereas private parties do not; (5) the LPR imposes

liquidated damages; and (6) the NLRA does not apply to workers who are in a “primarily

rehabilitative relationship” with an employer, and NW Success is one such employer where its

employees are not subject to the NLRA. FAC ¶¶ 40-51. These new facts do not assist Plaintiff in

stating a claim for NLRA preemption.

The Court first asks whether the challenged governmental action is undertaken in pursuit

of the efficient procurement of needed goods and services, as one might expect of a private

business in the same situation. Airline Serv. Providers Ass’n v. L.A. World Airports, 873

F.3d 1074, 1080 (9th Cir. 2017) (“ASPA”). In ASPA, the City of Los Angeles required businesses

at LAX to enter into a labor peace agreement similar to the one at issue here. Id. at 1077-78. The

Ninth Circuit emphasized the “inherently competitive and commercial nature of airport

operations” in holding that the airport was acting as a market participant under the first Cardinal

Towing element.2 Id. at 1081-82. Similarly, the City here operates the facilities for which it is

procuring services and has “taken action to protect its proprietary interest” in the facilities

running smoothly.3 Id. at 1081. In so doing, the City participates in an inherently competitive and

commercial market, even if it were only contracting with OFCs. As NW Success’s FAC alleges,

there are five OFCs certified by the Oregon Department of Administrative Services (“DAS”).

FAC ¶ 49. Indeed, the Oregon Forward statutory scheme contemplates a competitive scenario in

which more than one OFC is interested in securing the same contract with the City.4 Therefore,

although the initial market from which the City procures services is a smaller, legislatively

prescribed pool, NW Success has failed sufficiently to allege facts showing that the OFP creates

2 In ASPA, the City of Los Angeles conditioned issuing licenses to service providers on

the condition that the providers entered into a “labor peace agreement” with any employee

organization that requested one. If the agreement was not finalized within sixty days, the dispute

was to be submitted to mediation, and, if unsuccessful, to binding arbitration. The terms of any

labor peace agreement had to include “binding and enforceable” provisions preventing picketing,

boycotting, stopping work, and any other “economic interference.” ASPA, 873 F.3d at 1077.

3 NW Success argues in their response to the City’s motion that the City has no

proprietary interest in rehabilitative workers because they cannot collectively bargain. ECF 45

at 17. NW Success fails to allege this in their FAC—indeed, they allege facts that indicate the

opposite. See FAC ¶ 33 (“The City selected Relay Resources [an OFC] for that emergency

procurement—who SEIU represents.”).

4 Oregon Administrative Rule (“OAR”) 125-055-0040 states, “In cases where more than

one Oregan Forward OFC provider has been determined suitable for an Agency’s needs, an

Agency may choose one of several methods to select an Oregon Forward provider,” including a

method that allows a public entity to “conduct a competitive procurement for a product or

service between two or more OFCs,” which may involve “grant[ing] comparative evaluation

points, percentages, or values in conducting the substantial equivalent of a request for proposals

competition.” OAR 125-055-0040(5) (emphasis added).

a market that differs so markedly from other markets that the City cannot act in a proprietary

capacity when it enters into contracts with OFCs.5 Thus, the City is a market participant.

The City’s actions independently qualify as market participation under Cardinal

Towing’s second prong.6 NW Success argues that, because it would constitute unlawful

assistance under Section 8(a)(2) of the NLRA for a private employer to condition business on its

contractor entering into an agreement with a particular union—and the City is doing “precisely”

that here by wording the LPR so that prospective City contractors must enter into a labor peace

agreement specifically with SEIU—the City is not a market-participant and is impermissibly

regulating labor relations. FAC ¶ 40. In support, NW Success refers to an email sent both to it

and SEIU from Derek Bradley, the Policy Director of then-City Commissioner Hardesty, that

stated: “We want to make sure Labor Peace comes before council in time to capture that

contract.” Id.

Whether a government actor also has political motives is irrelevant in determining

whether the market participant exception applies. The Ninth Circuit has held that “Congress did

not intend for the NLRA’s . . . preemptive scope to turn on state [or local] officials’ subjective

reasons for adopting a regulation or agreement. Johnson, 623 F.3d at 1026; see also Engine Mfrs.

5 The Court has already rejected NW Success’s argument that the City is not a market

participant because the OFP is not a private market. See FAC ¶¶ 47-49. First, this Court found,

consistent with the allegations in NW Success’s FAC, that the City is not acting only in a market

with OFCs. See Northwest Success, Inc, 2025 WL 2379793, at *8; see also FAC ¶¶ 47-49 (“[I]t

is hypothetically possible” that “all five . . . OFCs [are] unable or unwilling to meet the City’s

contracting needs.”). Second, the Court has determined that even if the City were contracting

solely with OFCs, it would still be acting as a market participant. Northwest Success, Inc, 2025

WL 2379793, at *8.

6 The Court previously considered and rejected NW Success’s argument on the second

Cardinal Towing prong that the City’s LPR is preempted because it serves the policy goal of

aiding unions.

Ass’n v. S. Coast Air Quality Mgmt. Dist., 498 F.3d 1031, 1046 (9th Cir. 2007) (“That a state or

local government entity may have policy goals that it seeks to further through its participation in

the market does not preclude the [market participant] doctrine’s application, so long as the action

in question is the state’s own market participation.”). Because the City’s policy does not, on its

face, favor a specific union, and specifically states that the LPR does not require any contractor

“to recognize a particular labor union,” the statements of an individual member of the staff of

one of the then-City Commissioners does not remove the City from the market-participant

exception. See N. Ill. Chapter of Associated Builder & Contractors, Inc. v. Lavin, 431

F.3d 1004, 1007 (7th Cir. 2005) (“Federal preemption doctrine evaluates what legislation does,

not why legislators voted for it or what political coalition led to its enactment.”). Under either

Cardinal Towing approach, the City is a market participant. Therefore, NLRA preemption does

not apply.7

7 NW Success’s NLRA preemption claim fails for another, independent reason: neither

Garmon nor Machinists preemption is appropriate because the NLRA does not apply to workers

who are in a primarily rehabilitative relationship with their employer. NW Success alleges that

its employees have this “primarily rehabilitative” relationship, see FAC ¶¶ 45-47, and argues that

this relationship makes NLRA preemption appropriate because the rehabilitative, not economic,

nature of its relationship with the City demonstrates that the City is not a market participant.

Even if NW Success is correct that the City is not a market participant, however, that does not

mean that the NLRA automatically applies.

Rather, the National Labor Relations Board has determined that it does not have

jurisdiction over rehabilitative employees. See, e.g., Brevard Achievement Ctr., Inc., 342

NLRB 982, 983 (2004). Accordingly, federal courts have uniformly held that “primarily

rehabilitative” relationships are not covered by the NLRA and thus are not appropriate for

Garmon preemption. See, e.g., Greene v. Dayton, 81 F. Supp. 3d 747, 750-51 (D. Minn. 2015),

aff’d, 806 F.3d 1146 (8th Cir. 2015); N.C. Farm Bureau Fed’n, Inc. v. United States, 781 F.

Supp. 3d 455, 481 (E.D.N.C. 2025). The same logic governs Machinists preemption. In fact, the

Ninth Circuit has already held that it is inappropriate in an analogous situation. See Chamber of

Com. of the United States of Am. v. City of Seattle, 890 F.3d 769 (9th Cir. 2018). As the court

explained:

[W]here, as here, Congress has chosen not to create a national

labor policy in a particular field, the states remain free to legislate

B. Void for Vagueness

NW Success also argues that the terms of the LPR are unconstitutionally vague in

violation of the Due Process Clause. “It is a basic principle of due process that an enactment is

void for vagueness if its prohibitions are not clearly defined.” Grayned v. City of Rockford, 408

U.S. 104, 108 (1972); see also U.S. CONST. amend. XIV (providing that no state “shall . . .

deprive any person of life, liberty, or property, without due process of law”). The void-for-

vagueness doctrine “addresses at least two connected but discrete due process concerns: first,

that regulated parties should know what is required of them so they may act accordingly; second,

precision and guidance are necessary so that those enforcing the law do not act in an arbitrary or

discriminatory way.” FCC v. Fox Television Stations, Inc., 567 U.S. 239, 253 (2012); see also

Grayned, 408 U.S. at 108 (noting that vague laws violate the “basic principle of due process,”

including “fair warning” and “explicit standards for those who apply [the laws]”).

To determine whether a statute provides fair notice, a court will consider whether it “fails

to provide a person of ordinary intelligence fair notice of what is prohibited.” United States v.

Williams, 553 U.S. 285, 304 (2008). When a statute involves only economic regulation, however,

courts analyze whether a “business person of ordinary intelligence would understand” the

conduct prohibited. Vill. of Hoffman Ests. v. Flipside, Hoffman Ests., Inc., 455 U.S. 489, 501

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.

Id. at 793 (quoting United Farm Workers of Am. v. Ariz. Agric. Emp’t Relations Bd., 669

F.2d 1249, 1257 (9th Cir. 1982)). Therefore, neither Garmon nor Machinists preemption applies.

(1982) (Hoffman) (emphasis added).8 Such is the case for the LPR. As to the avoidance of

arbitrary enforcement, the Supreme Court has stated that “if arbitrary and discriminatory

enforcement is to be prevented, laws must provide explicit standards for those who apply them,”

and “[a] vague law impermissibly delegates basic policy matters to policemen, judges, and juries

for resolution on an ad hoc and subjective basis.” Grayned, 408 U.S. at 108-09.

The Supreme Court and the Ninth Circuit, however, have recognized that “[m]any

statutes will have some inherent vagueness” and that a certain quantum of vagueness is

permissible—and even necessary. See Rose v. Locke, 423 U.S. 48, 49-50 (1975); McSherry v.

Block, 880 F.2d 1049, 1054 (9th Cir. 1989) (quoting same). Consistent with that recognition,

“statutes are not automatically invalidated as vague simply because difficulty is found in

determining whether certain marginal offenses fall within their language.” Parker v. Levy, 417

U.S. 733, 757 (1974) (quoting United States v. Nat’l Dairy Prods. Corp., 372 U.S. 29, 32 (1963)

(collecting cases)). Thus, a challenger seeking to invalidate a statute for vagueness carries a

heavy burden. A statute is unconstitutionally vague if it “specifie[s]” “no standard of conduct …

at all.” United States v. Lucero, 989 F.3d 1088, 1101 (9th Cir. 2021) (quoting Coates v. City of

Cincinnati, 402 U.S. 611, 614 (1971)).9

8 Courts evaluate the vagueness of a law in light of the sophistication of the persons or

entities subject to that law. See, e.g., Papachristou v. City of Jacksonville, 405 U.S. 156, 162-63

(1972) (striking down a vagrancy law under the “person of ordinary intelligence” standard,

noting that “[t]he poor among us, . . . the average householder[,] are not in business and not

alerted to the regulatory schemes of vagrancy laws”); Gonzales v. Carhart, 550 U.S. 124, 149

(2007) (applying a “doctors of ordinary intelligence” standard to a law prohibiting certain

medical procedures (quotation marks omitted)). Thus, here, the ordinary businessperson of

ordinary intelligence standard governs.

9 As explained in the Court’s previous Opinion and Order, the standard of review for

vagueness varies depending “in part on the nature of the enactment.” See Hoffman, 455 U.S.

at 498 (1982); accord Kashem v. Barr, 941 F.3d 358, 370 (9th Cir. 2019) (construing Hoffman).

NW Success argues that the LPR is unconstitutionally vague because: (1) the LPR is

subject to broad and unreasonable interpretation; (2) the Good Faith Exception and the Rejection

Exception lack precision and guidance; and (3) the liquidated damages penalty has no clear

standards. The Court previously determined that the Good Faith Exception itself is not

unconstitutionally vague. See Northwest Success, Inc., 2025 WL 2379793, at *17-18 (discussing

definition of “good faith,” LPR’s lack of timelines included in terms of Good Faith Exception,

and City’s failure to grant NW Success Good Faith Exception). The Court therefore focuses its

analysis on the Rejection Exception and the allegedly arbitrary enforcement of the arbitration

requirement under the Good Faith Exception.

1. Rejection Exception

NW Success argues that the Rejection Exception is unconstitutionally vague because it

lacks precision and guidance, because it does not specify what constitutes a labor organization’s

response that they do not wish to negotiate Labor Peace, and because the Rejection Exception

did not apply in these circumstances. FAC ¶¶ 57, 61. The Court considers these arguments

within the framework of fair notice and arbitrary enforcement.

See also Northwest Success, Inc., 2025 WL 2379793, at *17-18 (discussing applicable standard

of review).

“The degree of vagueness that the Constitution tolerates—as well as the relative

importance of fair notice and fair enforcement—depends in part on the nature of the enactment.”

Hoffman, 455 U.S. at 498. In analyzing the statute at issue, a court must consider whether the

statute: (1) involves only economic regulation; (2) contains only civil penalties; (3) includes a

scienter requirement; and (4) threatens constitutionally protected rights. See Hanlester Network

v. Shalala, 51 F.3d 1390, 1398 (9th Cir. 1995) (construing Hoffman). Applying those factors

here, the LPR regulates only economic activities and imposes only civil penalties. Under what is

“perhaps the most important factor,” the LPR also does not “threaten[] to inhibit the exercise of

constitutionally protected rights.” Hoffman, 455 U.S. at 499. Thus, the “degree of vagueness that

the Constitution tolerates” is greater for an LPR than in other circumstances. See id. at 498.

NW Success argues that the LPR fails to provide fair notice because there is “no way for

prospective contractors to know ahead of time what will satisfy the [exception].” Id. ¶ 56. The

Court is not persuaded. The Rejection Exception provides that when “the contractor follows

notification procedures set out in Exception 1, and the labor organization(s) respond that they do

not wish to negotiate labor peace,” the contractor may be awarded the contract as long as it

“provide[s] the City with written evidence of the response” and “demonstrate[s] that it has a

written plan for continuation of services in the event of economic interference by a labor

organization[].” ECF 38-1 at 4-5. The notification procedures in “Exception 1” are set out as

follows:

The contractor: 1) does not have an exclusive bargaining

representative representing its employees who may be performing

work on the service contract; 2) gave written notice to any and all

labor organizations that represent employees providing similar

services in the states of Oregon or Washington or that represent

any group of the contractor’s or subcontractor’s employees who

are or will be involved in providing such services of its desire to

jointly develop Labor Peace, and the applicable labor organizations

failed to respond within three (3) weeks or the applicable labor

organizations represented that they are not seeking to become the

exclusive representative of the contractor’s employees; and 3)

certifies that it has no reason to believe a labor dispute will occur

for the term of the contract.

Id. at 4. Read in conjunction with this text, the statute provides a “business person of ordinary

intelligence” fair notice of what is expected under the exception. Hoffman, 455 U.S. at 501. The

statute is readily understood to mean that, to satisfy the exception, a contractor must provide

notice to local labor organizations about the desire to negotiate labor peace as stated above, and

the labor organization(s) must respond within three weeks that they do not wish to negotiate

labor peace.

Further, NW Success argues that the LPR does not define what constitutes a labor

organization’s response that it “do[es] not wish to negotiate Labor Peace.” Similarly, the text of

the statute provides a businessperson of ordinary intelligence with fair notice as to what is

expected. On its face, the statute requires a showing that a labor organization has provided a

response to the contractor’s written notice indicating that it has no interest in the negotiation of

that agreement. Far from specifying “no standard of conduct” at all, the Rejection Exception

provides more than enough notice about what is required of contractors to meet its terms.

Lucero, 989 F.3d at 1101 (quoting Coates, 402 U.S. at 614).

A statute also can be void for vagueness under the Due Process Clause if it poses a

“significant risk” of arbitrary enforcement. Skilling v. United States, 561 U.S. 358, 412 (2010);

see also Stoianoff v. Montana, 695 F.2d 1214, 1222 (9th Cir. 1983) (rejecting vagueness

challenge in absence of a “clear indication” that the challenged law would be enforced

arbitrarily). NW Success argues that the Rejection Exception lacks precision and guidance,

risking discriminatory application, pointing to the fact that it did not qualify for the Rejection

Exception as evidence of arbitrary enforcement. As discussed above, the terms of the Rejection

Exception are sufficiently precise to avoid arbitrary enforcement. Moreover, NW Success does

not plead facts showing that they have met the Rejection Exception, evincing no indication that

the Exception was arbitrarily enforced in these circumstances.10

2. Good Faith Exception “Arbitration” Requirement

NW Success also argues that the term “arbitration” in the Good Faith Exception is not

objectively defined, rendering it vague and subject to arbitrary application. The Court has

10 See FAC ¶ 19 (“On October 4, 2024, the City communicated to Plaintiff and the Union

that it ‘expected the parties to comply with the Good Faith Exception by going to mediation

within the next 90 days, and if mediation fails, arbitration within 90 days after that.’” (cleaned

up); see also id. ¶ 21 “Plaintiff went to mediation with the Union and, when that was

unsuccessful, Plaintiff offered, on December 23, 2024, to submit the matter to arbitration

pursuant to the Good Faith Exception.”). SEIU did not communicate that it did not wish to

negotiate labor peace within the three weeks specified by the Rejection Exception.

already rejected the argument that the Good Faith Exception’s requirement for “an offer by the

contractor to submit the dispute about the terms of Labor Peace to prompt resolution thorough

binding interest arbitration before a neutral dispute resolution organization, and its participation

in that arbitration” is unconstitutionally vague. See Northwest Success, Inc., 2025 WL 2379793,

at *18 (quotation omitted). There, the Court found that “the LPR sets forth a sufficient written

standard governing how the Mayor’s Office is to determine whether a contractor meets the Good

Faith Exception.” Id. In its FAC, NW Success alleges that the City arbitrarily applied a definition

of arbitration to include a one-party arbitration, and arbitrarily applied deadlines for NW Success

to engage in that arbitration. FAC ¶ 59. Because the facts in the FAC do not support Plaintiff’s

argument, the Court finds that the “arbitration” requirement does not render the Good Faith

Exception to the LPR unconstitutionally vague.

a. Definition of “Arbitration”

NW Success’s allegations that the term “arbitration” is not objectively defined and that

the City arbitrarily applied a definition of arbitration to include “one-party arbitration” fail to

state a Due Process claim. NW Success argues that the LPR does not provide fair notice because

the term “arbitration” in the Good Faith Exception is not objectively defined. Statutes, however,

are not automatically vague even if “trained lawyers . . . find it necessary to consult dictionaries,

treatises, and judicial opinions before they may say with any certainty what [those] statutes may

compel or forbid.” Rose, 423 U.S. at 50. Particularly where, as here, the statute in question

pertains only to economic regulation and thus is evaluated under the “business person of ordinary

intelligence” standard, the lack of an objective definition of arbitration within the statutory

scheme is not unconstitutionally vague. A businessperson of ordinary intelligence would have

familiarity with what an “arbitration” is, and what is required to engage in it.11

b. Timelines

NW Success also argues that the lack of timelines to participate in arbitration to avail

itself of the Good Faith Exception makes the LPR unconstitutionally vague. Although the Good

Faith Exception itself does not have specific timelines for when parties are expected to engage in

mediation and arbitration, it does use the qualifying phrases “immediate” (for mediation) and

“prompt resolution” (through binding interest arbitration). See ECF 38-1 at 5. This language

brings the Good Faith Exception within the category of statutes that require “a party to conform

[their] conduct to an imprecise but comprehensible normative standard rather than no standard of

conduct specified at all.” Hoffman, 455 U.S. at 495 n.7 (1982) (cleaned up) (quoting Coates v.

City of Cincinnati, 402 U.S. 611, 614 (1971)). Therefore, NW Success fails to meet its heavy

11 Indeed, by its own pleading, NW Success demonstrates that it understands that

an “arbitration” requires at least two adverse parties. See FAC ¶ 28 (“By definition, an arbitration

includes at least two parties.”). That an arbitration resolves disputes between adverse parties,

however, does not mean that all parties must be present for a proceeding to qualify as an

arbitration. Just as a plaintiff files a lawsuit, a party may unilaterally commence arbitration. And

just like a default judgment can be entered against an absent party in a lawsuit, an arbitrator may

award relief in the absence of one party. See IFG Leasing Co. v. Snyder, 77 Or. App. 374, 380

(YEAR) (“[W]hen, as here, the objecting party is not required under the contract to participate in

the selection of the arbitrator, the arbitration, otherwise proper, may proceed in the objecting

party’s absence.”). An arbitration, therefore, may proceed without all parties present, but cannot

commence without one or more adverse parties contemplated.

Here, however, the problem lies in the fact that NW Success does not plead facts showing

that it commenced arbitration proceedings with SEIU within the timeframe given by the City.

See FAC ¶¶ 19, 27, 29. Nor does NW Success plead facts showing that they sought an order

from a court compelling arbitration. See IFG Leasing Co., 77 Or. App. at 380 (“An order

compelling arbitration is necessary . . . when one party refuses to participate in the arbitration

and the parties have made no provision for arbitration in the face of such refusal.”). Rather, NW

Success’s FAC indicates only that it engaged in informal discussions about the possibility of

arbitration and did nothing more during the applicable timeframe. Id. ¶¶ 21, 23. This fails to

plead “participation” in arbitration as required under the Good Faith Exception.

burden in pleading that the Good Faith Exception’s arbitration requirement is unconstitutionally

vague.

NW Success also argues that the Good Faith Exception’s arbitration requirement is

subject to arbitrary application in the establishment of time limitations to engage in arbitration.

The facts here, however, do not support that there is a “significant risk” of arbitrary enforcement.

As discussed above, the use of the qualifying words “immediate” and “prompt” sufficiently

cabins the establishment of the time limitations to avoid arbitrary enforcement. A statute that

confers discretion onto a decisionmaker is not automatically vague. See United States v.

Arallenes, 767 F.2d 1353, 1359 (9th Cir. 1985) (collecting cases). Moreover, the City provided

NW Success with additional guidance as to its expectations. The City communicated with NW

Success in its October 4, 2024, letter that it “expect[ed] the parties to engage in mediation within

the next 90 days. If mediation fail[ed], the City expect[ed] the parties to engage in interest

arbitration within 90 days following the failed mediation.” ECF 38-1 at 32. This is precisely the

“sub-regulatory guidance” and “pre-enforcement inquiry process” that has been found to

mitigate potential statutory vagueness. See, e.g., Or. Ass’n of Hosps. & Health Sys. v.

Oregon, 734 F. Supp. 3d 1139, 1162 (D. Or. 2024), aff'd, 2025 WL 1833815 (9th Cir.

July 3, 2025) (citing Hoffman, 455 U.S. at 498, 502, 504). That the City did not provide a one-

day extension after this time elapsed does not indicate a “significant risk” of arbitrary

enforcement. In sum, the Court finds that the LPR is not unconstitutionally vague.

C. Promissory Estoppel

NW Success asserts that the City promised that NW Success would receive a waiver

under the Good Faith Exception under certain conditions, that NW Success complied with those

conditions, and that the promise should be enforced through promissory estoppel. Promissory

estoppel claims require the following elements under Oregon law: “(1) a promise; (2) which the

promisor could reasonably foresee would induce a conduct of the kind that occurred; (3) actual

reliance on the promise; and (4) a substantial change in position by the party seeking to enforce

the promise.” Natkin & Co. v. H.D. Fowler Co., 128 Or. App. 311, 314 (1994) (citations

omitted). Oregon uses the term “promissory estoppel” to refer to two distinct concepts:

(1) “actions taken in reliance on a definite promise . . . as a substitute for consideration even

though the action was not bargained for by the promissor and was not performed as an agreed

exchange for the promise”; and (2) “when a party acts in reliance on an indefinite promise to

create a binding obligation.” Staley v. Taylor, 165 Or. App. 256, 261 n.5 (2000) (citations

omitted).

Additionally, “promissory estoppel against a governmental entity . . . can be applied only

in limited circumstances.” Arken v. City of Portland, 351 Or. 113, 138-39 (2011). Those

circumstances include:

[I]f (a) the municipality clothes the agent with apparent authority,

(b) the promise is one which the municipality could lawfully make

and perform, (c) there is no statute, charter, ordinance,

administrative rule, or public record that puts the agent’s act

beyond his authority, (d) the person asserting the authority has no

reason to know of the want of actual authority, and (e) the

municipality has accepted and retained the benefit received by the

municipality in return for the promise.

Id. at 139 (quoting Wiggins v. Barrett & Assocs., Inc., 295 Or. 679, 683 (1983). Not every one of

the above listed circumstances must be present for promissory estoppel to apply to a

governmental entity; instead, it is looked at as a totality of the circumstances. See id. (“[A]

comparison of the circumstances present here to the factors identified in Wiggins reveals

numerous reasons why promissory estoppel is inapplicable here.”).

Here, the City stated that it expected NW Success to comply with the Good Faith

Exception and engage in mediation within 90 days and, if that failed, arbitration within 90 days

after that. FAC ¶ 67. Additionally, subsequent communications from the City reinforced that

alleged “promise,” NW Success contends, because the City said that it was at a “crunch time” to

either receive assurances from NW Success that it would complete the steps necessary for the

Good Faith Exception or to begin an emergency procurement. Id. ¶ 68. NW Success argues that

because it is reasonably foreseeable that it would rely on a government entity’s communications

about its expectations and act in accordance with those expectations, and because it relied on the

communications and actions to its detriment, the City should be estopped from imposing the

LPR on NW Success. For the reasons explained below, the Court disagrees.

NW Success fails plausibly to allege that the City made a promise that NW Success

would receive a waiver under the Good Faith Exception. Read in its entirety, the letter in which

the City stated their expectation that NW Success would comply with the Good Faith Exception

was sent to “assist the parties in meeting the[] requirements by providing additional guidance on

the City’s expectations under [the Good Faith Exception].” ECF 38-1 at 32.12 The same is true

for the alleged “reinforcement” of the promise in the City’s October 4, 2024, email. Read in its

entirety, the email clarifies, “[a]t this time, given the parties have not provided a date for an

arbitration and assurances that the parties will, in fact, go through arbitration, NW Success’s

contract will expire on June 30, and the City will be immediately moving forward with an

emergency procurement.” ECF 38-1 at 41. These communications provide guidance to NW

Success of what it should do, but there is no indication of what the City will do in response to

12 When deciding a motion to dismiss, courts may rely on undisputed facts that the parties

presented to the court in documents referred to in their pleadings. See Tellabs, Inc. v. Makor

Issues & Rts., Ltd., 551 U.S. 308, 322 (2007) (“[C]ourts must consider the complaint in its

entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6)

motions to dismiss, in particular, documents incorporated into the complaint by reference, and

matters of which a court may take judicial notice.” (citation omitted)); see also Curzi v. Oregon

State Lottery, 286 Or. App. 254 (2017).

those actions—if anything at all. See Promise, BLACK’S LAW DICTIONARY (12th ed. 2024) (“The

manifestation of an intention to act or refrain from acting in a specified manner, conveyed in

such a way that another is justified in understanding that a commitment has been made; a

person’s assurance that a person will or will not do something.”). Since there is no evidence of a

promise made by the City, the Court dismisses NW Success’s claim of promissory estoppel. See

BenefitElect, Inc. v. Strategic Benefit Sols. Corp., 614 F. Supp. 3d 838, 844 (D. Or. 2022).

Even if the Court construed the above communications as a promise, however, any such

promise would be conditional on NW Success’s compliance with the requirements of the Good

Faith Exception. NW Success argues that the City’s promise was that “[NW Success] would

receive a waiver under the Good Faith Exception, for purposes of renewal or extension of the

Contract, if [NW Success] acted in accordance with that exception.” FAC ¶ 67 (emphasis

added). NW Success, however, did not comply with the requirements of the Good Faith

Exception. The City’s subsequent communication, rather than “reinforcing” the alleged promise,

explicitly states that NW Success’s contract will end because it has not complied with the

arbitration requirement and the City will go forward with an emergency procurement. ECF 38-1

at 41.

The Oregon Supreme Court has adopted the Restatement formulation of promissory

estoppel:

A promise which the promisor should reasonably expect to induce

action or forbearance on the part of the promise or a third person

and which does induce such action or forbearance is binding if

injustice can be avoided only by enforcement of the promise. The

remedy granted for breach may be limited as justice requires.

Cocchiara v. Lithia Motors, Inc., 353 Or. 282, 291 (2013) (quoting Restatement (Second) of

Contracts § 90(1) (1981)). The fact that NW Success never acted in accordance with the

exception (i.e., by arbitrating with SEIU) proves fatal for their claim of promissory estoppel,

because enforcement of the so-called promise would put NW Success in precisely the situation it

finds itself in now.13

D. Implied Duty of Good Faith and Fair Dealing

Finally, NW Success argues that the City violated the implied duty of GFFD found in

every contract in Oregon by declining to grant NW Success a waiver under the Good Faith

Exception to the LPR. Under Oregon law, “there is an obligation of good faith in the

performance and enforcement of every contract.” Ivanov v. Farmers Ins. Co. of Or., 344

Or. 421, 430 (2008). To properly plead a breach of this implied contractual covenant, a plaintiff

must allege that the “defendant was given discretion in the performance of the contract,” that

“the parties anticipated defendant's discretion to be exercised for a specific purpose,” and that

“defendant exercised that discretion for a purpose contrary to the reasonable contractual

expectations of the plaintiffs.” Ewing v. Country Mut. Ins. Co., 2012 WL 1758142, at *4 (D. Or.

Apr. 25, 2012), report and recommendation adopted, 2012 WL 1755675 (D. Or.

May 15, 2012), order amended and superseded, 2012 WL 2131540 (D. Or. June 12, 2012).

Under this Oregon common-law implied duty, a plaintiff must allege sufficient facts

plausibly to render a defendant in breach of the parties’ “objectively reasonable expectations” as

they relate to the express provisions of the contract. See Klamath Off-Project Water Users, Inc.

v. Pacificorp, 237 Or. App. 434, 445 (2010) (“The common-law implied duty of good faith and

fair dealing serves to effectuate the objectively reasonable expectations of the parties.” (emphasis

added)). In determining the objective reasonableness of parties’ expectations, Oregon courts note

13 Because the Court finds that NW Success has failed to plead sufficient facts to

establish one of the elements of their claim of promissory estoppel (i.e., that there was a promise

made by the City), and, even if there was, it was a conditional promise the conditions of which

were not fully met, the Court need not reach the issue of whether promissory estoppel can be

applied against the City as a governmental entity, under the Wiggins factors.

that “[t]he duty ‘does not operate in a vacuum,’ rather it ‘focuses on the agreed common purpose

and the justified expectations’ of the parties, both of which are intimately related to the parties'

manifestation of their purposes and expectations in the express provisions of the contract.” Id.

(quoting OUS v. OPEU, 185 Or. App. 506, 515-16 (2002)). Therefore, for a plaintiff to state a

claim for a violation of a party’s contractual expectation, the plaintiff must allege some common

purpose, contractual provision, or other fact that could evidence the objective reasonableness of

the expectation.

NW Success asserts that the City violated the implied duty of good faith and fair dealing

by declining to grant NW Success a waiver under the Good Faith Exception to the LPR when

NW Success participated in the Good Faith Exception process and satisfied it unilaterally to the

best of its ability. The City replies that the parties’ contract had only one express term governing

the renewal of the contract—the initial expiration date was June 30, 2024, “‘with the City’s

option to extend up to 1 additional 1-year period.’” ECF 42 at 24-25 (quoting ECF 38-1 at 6).

The City argues that after it extended NW Success’s contract to June 30, 2025, it had no further

obligations to extend the contract regardless of circumstances. Id. at 25. The Court agrees with

the NW Success.

NW Success plausibly alleges an objectively reasonable expectation that the City would

grant it a waiver under the Good Faith Exception. In 2023, the City granted NW Success a

waiver under the Good Faith Exception after negotiations with SEIU were unsuccessful. FAC

¶ 14. The City did so even though the parties did not engage in mediation. See id. (“When . . .

negotiations were unsuccessful, Plaintiff offered to mediate pursuant to the Labor Peace

Requirement. The Union’s position was that mediation was ‘premature.’”). Here, NW Success

did more to comply with the Good Faith Exception than when it was previously awarded the

exception. NW Success engaged in mediation with SEIU and offered several times to submit the

dispute to binding interest arbitration. Once again, SEIU refused to participate because it

believed that arbitration was “premature.” Id. ¶ 24. Once again, NW Success provided updates to

the City throughout the Good Faith Exception process. Id. ¶ 77. This time, however, the City

refused to make a determination that NW Success met the Good Faith Exception. This is enough

to render NW Success’s expectation that the Mayor’s office would use its discretion to determine

that NW Success met the Good Faith Exception to the Labor Peace Requirement objectively

reasonable. Therefore, NW Success states a claim for breach of GFFD.

CONCLUSION

The Court GRANTS IN PART the City’s motion to dismiss (ECF 42). The Court

DISMISSES NW Success’s First Claim, without further leave to amend, and DISMISSES NW

Success’s Second and Third Claims with leave to amend within 14 days if it believes, consistent

with Rule 11 of the Federal Rules of Civil Procedure, that it can cure the deficiencies identified

in this Opinion and Order.14 The Court DENIES the City’s motion to dismiss with respect to NW

Success’s Fourth Claim.

IT IS SO ORDERED.

DATED this 7th day of April, 2026.

/s/ Michael H. Simon

Michael H. Simon

United States District Judge

14 NW Success seeks leave to reallege a claim for breach of Oregon’s Privileges and

Immunities Clause in their Second Amended Complaint. By failing to replead this claim in their

First Amended Complaint, however, NW Success has waived this claim. See Lacey v. Maricopa

Cnty., 693 F.3d 896, 928 (9th Cir. 2012).