Airline Service Providers Ass'n v. Los Angeles World Airports

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

AIRLINE SERVICE PROVIDERS No. 15-55571

ASSOCIATION,

Plaintiff-Appellant, D.C. No.

2:14-cv-08977-

and JFW-PJW

AIR TRANSPORT ASSOCIATION OF

AMERICA, INC., DBA Airlines of

America,

Plaintiff,

v.

LOS ANGELES WORLD AIRPORTS;

CITY OF LOS ANGELES,

Defendants-Appellees.

2 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

AIRLINE SERVICE PROVIDERS No. 15-55572

ASSOCIATION,

Plaintiff, D.C. No.

2:14-cv-08977-

and JFW-PJW

AIR TRANSPORT ASSOCIATION OF

AMERICA, INC., DBA Airlines for ORDER AND

America, OPINION

Plaintiff-Appellant,

v.

LOS ANGELES WORLD AIRPORTS;

CITY OF LOS ANGELES,

Defendants-Appellees.

Appeal from the United States District Court

for the Central District of California

John F. Walter, District Judge, Presiding

Argued and Submitted January 13, 2017

Pasadena, California

Filed October 16, 2017

Before: Richard C. Tallman and Michelle T. Friedland,

Circuit Judges, and William H. Orrick, III, * District Judge.

*

The Honorable William H. Orrick III, United States District Judge

for the Northern District of California, sitting by designation.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 3

Order;

Opinion by Judge Friedland;

Dissent by Judge Tallman

SUMMARY **

Labor Law

The panel filed (1) an order (a) granting petitions for

panel rehearing with respect to the request that the court

amend its opinion to affirm the district court’s denial of leave

to amend but denying the petitions for panel rehearing in all

other respects, (b) denying petitions for rehearing en banc,

(c) withdrawing the opinion, and (d) directing the filing of a

new opinion; and (2) a new opinion affirming the district

court’s dismissal of an action brought by two air transport

trade associations asserting that the City of Los Angeles, in

its capacity as proprietor of Los Angeles International

Airport, may not require businesses at the airport to accept a

contractual condition concerning labor agreements.

In its new opinion, the panel wrote that airlines that

operate out of LAX hire third-party businesses to refuel and

load planes, take baggage and tickets, help disabled

passengers, and provide similar services. The City licenses

those service providers using a contract that imposes certain

conditions. One such condition, section 25, requires service

providers to enter a “labor peace agreement” with any

employee organization that requests one. The trade

**

This summary constitutes no part of the opinion of the court. It

has been prepared by court staff for the convenience of the reader.

4 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

associations argued that, because the City operates LAX, the

contractual conditions in LAX’s standard licensing

agreement are effectively municipal regulations. The

associations contended that section 25, as one such

“regulation,” was preempted by the National Labor

Relations Act, the Railway Labor Act, and the Airline

Deregulation Act.

The panel held that the Airline Service Providers

Association had associational standing to pursue all of its

claims.

The panel held that the associations failed to state a

preemption claim. The panel concluded that the City was

acting as a market participant, and not a regulator, when it

added section 25 to its LAX licensing contract because,

under the Cardinal Towing test, the City was attempting to

avoid disruption of its business, and the decision to adopt

section 25 was narrowly tied to a specific proprietary

problem. The panel also concluded that the preemption

provisions of the NLRA, the RLA, and the ADA do not

apply to state and local governmental actions taken as a

market participant.

The panel held that the district court did not err by

denying leave to amend the complaint.

Concurring in part and dissenting in part, Judge Tallman

agreed with the majority that the ASPA had standing to

assert its claims. Judge Tallman disagreed with the

majority’s conclusion that, as is, the complaint failed to state

a plausible claim that the City enacted section 25 as a

regulatory measure rather than a proprietary one. He wrote

that the complaint sufficiently alleged that section 25 was an

overly broad and facially suspect regulation of labor

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 5

relations that contravened the delicate congressional

balancing of national labor relations policy affecting key

facilities of interstate commerce.

COUNSEL

Michael M. Berger (argued), Matthew P. Kanny, and Maura

Kingseed Gierl, Manatt Phelps & Phillips LLP, Los Angeles,

California, for Plaintiff-Appellant Airline Service Providers

Association.

Robert Span (argued), and Douglas R. Painter, Steinbrecher

& Span LLP, Los Angeles, California; Douglas W. Hall,

Ford and Harris LLP, Washington, D.C.; for Plaintiff-

Appellant Air Transport Association of America.

Richard G. McCracken (argued) and Paul L. More, Davis

Cowell & Bowe LLP, San Francisco, California; Scott P.

Lewis and David S. Mackey, Anderson & Krieger LLP,

Boston, Massachusetts; for Defendants-Appellees.

ORDER

Appellants’ petitions for panel rehearing are

GRANTED with respect to their request that the court

amend its opinion to affirm the district court’s denial of leave

to amend but DENIED in all other respects. The petitions

for rehearing en banc are DENIED. No future petitions will

be entertained. The opinion filed on August 23, 2017 is

withdrawn and a new opinion is filed concurrently with this

order.

6 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

OPINION

FRIEDLAND, Circuit Judge:

We must decide whether the City of Los Angeles, which

operates Los Angeles International Airport (“LAX”), can

require businesses at the airport to accept certain contractual

conditions aimed at preventing service disruptions. 1 Two air

transport trade associations argue that the conditions are, in

effect, municipal regulations preempted by federal labor

law. We hold that the City may impose the conditions in its

capacity as proprietor of LAX and thus affirm dismissal of

the Complaint.

Background

Airlines that operate out of LAX hire third-party

businesses to refuel and load planes, take baggage and

tickets, help disabled passengers, and provide similar

services. The City licenses those service providers using a

contract that imposes certain conditions. One such

condition, section 25, requires service providers to enter a

“labor peace agreement” with any employee organization

that requests one. 2 If such an agreement is not finalized

within sixty days, then the dispute must be submitted to

mediation and, if mediation is unsuccessful, to binding

arbitration. Any labor peace agreement that results from this

process must include “binding and enforceable” provisions

1

Because the City of Los Angeles operates LAX, we refer in this

opinion to both entities collectively as “the City.”

2

Section 25 describes broadly the type of employee organization

that can make this request and does not require the employees to be

unionized.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 7

that prohibit picketing, boycotting, stopping work, or “any

other economic interference.”

It might seem at first glance that a labor peace agreement

would be detrimental to employees’ interests because it

deprives them of labor rights. In practice, however, if an

employer may not operate without such an agreement, the

employer may need to give benefits to its employees to

induce them to enter the agreement. Employees have an

incentive to trigger negotiations toward labor peace

agreements to obtain such benefits. Indeed, here, at least one

organization of service employees advocated for inclusion

of section 25 when the City was revising its standard LAX

licensing contract.

Two trade associations who have members that operate

at LAX brought suit in the United States District Court for

the Central District of California to challenge section 25:

Airline Service Providers Association (“ASPA”), an

association of third-party service providers; and the Air

Transport Association of America (“Airlines”), an

association of American airlines. The associations argue

that, because the City of Los Angeles operates LAX, the

contractual conditions in LAX’s standard licensing

agreement are effectively municipal regulations. The

associations contend that section 25, as one such

“regulation,” is preempted by two federal labor statutes—the

National Labor Relations Act (“NLRA”) and the Railway

Labor Act (“RLA”)—and by the Airline Deregulation Act

(“ADA”).

The district court dismissed the Complaint without leave

to amend. It dismissed the labor law preemption claims for

failure to state a claim and the ADA claim for lack of

standing.

8 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

Standing

The City challenges aspects of Plaintiffs’ standing, and,

in any event, we have an independent obligation to ensure

that we have subject matter jurisdiction. See, e.g., United

States v. McIntosh, 833 F.3d 1163, 1173 (9th Cir. 2016). For

the reasons that follow, we hold that the ASPA has standing

to pursue all of its claims. 3

An association like the ASPA has standing if (1) its

individual members would have standing in their own right,

(2) the interests at stake in the litigation are germane to the

organization’s purposes, and (3) the case may be litigated

without participation by individual members of the

association. Friends of the Earth, Inc. v. Laidlaw Envtl.

Servs. (TOC), Inc., 528 U.S. 167, 181 (2000) (citing Hunt v.

Wash. State Apple Advert. Comm’n, 432 U.S. 333, 343

(1977)).

To have standing in their own right, an association’s

members must have “suffered an injury in fact,” that injury

must be “fairly traceable to the challenged conduct of the

defendant,” and the injury must be “likely to be redressed”

by a decision in their favor. Spokeo, Inc. v. Robins, 136 S.

Ct. 1540, 1547 (2016).

The ASPA has alleged a sufficient injury in fact. It

alleges that its members will be forced into unwanted

negotiations that must terminate in either an agreement or

arbitral award—something virtually certain to occur given

3

So long as one plaintiff has standing, an appellate court has

jurisdiction to address his claims regardless of whether other plaintiffs

have standing. See, e.g., Rumsfeld v. Forum for Acad. & Inst’l Rights,

Inc., 547 U.S. 47, 52 n.2 (2006). Given our conclusion that the ASPA

has standing, we need not evaluate the Airlines’ standing.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 9

that an organization of service employees advocated for

section 25, suggesting that employees plan to make use of

the provision. We have recognized that “[t]he economic

costs of complying with a licensing scheme can be sufficient

for standing,” Mont. Shooting Sports Ass’n v. Holder,

727 F.3d 975, 980 (9th Cir. 2013), even if “the extent of [the

alleged] economic harm is not readily determinable,” Cent.

Ariz. Water Conservation Dist. v. EPA, 990 F.2d 1531, 1538

(9th Cir. 1993). Here, ASPA members will at least have to

devote resources, and thus incur economic costs, to

participate in negotiations, mediation, and possibly even

binding arbitration over a labor peace agreement, which they

would not otherwise be required to discuss. The time spent

in those negotiations is itself a concrete injury. 4

Second, the ASPA has shown a sufficient “line of

causation” between the City’s actions and this injury. See

Allen v. Wright, 468 U.S. 737, 757 (1984), abrogated on

other grounds by Lexmark Int’l, Inc. v. Static Control

Components, Inc., 134 S. Ct. 1377 (2014). The injuries it

claims are directly linked to the City’s conduct: The City

has made section 25 a mandatory component of its standard

licensing contract for service providers at LAX, and section

25 will force service providers to spend time negotiating

about a labor peace agreement. This is a sufficient causal

connection. See Cent. Ariz., 990 F.2d at 1538 (holding that

economic injury caused by contractual obligations that

stemmed from compliance with a regulation were

sufficiently caused by the regulation to support standing).

4

Because this injury is sufficient to support standing, we need not

consider whether the ASPA’s allegations that its members will be forced

to accede to employee demands during negotiations triggered under

section 25 could support standing.

10 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

Finally, the remedies the ASPA seeks would redress the

harm it alleges. See Spokeo, 136 S. Ct. at 1547. If, as the

Complaint requests, section 25 were enjoined on the basis of

preemption by federal labor law or the ADA, the ASPA’s

members would not suffer any adverse consequences of

complying with it. See Cent. Ariz., 990 F.2d at 1538 (“[The

plaintiff’s] economic injury is likely to be redressed by a

favorable decision since elimination of the [rule in question]

would necessarily eliminate the increased financial burden

the rule causes.”).

The ASPA’s individual members would therefore have

standing in their own right, and the first prong of the test for

associational standing is satisfied.

The second and third prongs are satisfied as well. The

ASPA alleges that it has an organizational interest “in the

consistent enforcement of unitary federal regulation of

airline industry labor relations.” The association’s asserted

purpose is therefore related to its legal claims in this action—

namely, that section 25 is preempted by federal statutes that

regulate airlines—satisfying the germaneness prong. As to

the third prong, the parties have identified no reason that the

ASPA’s members must participate individually in this case,

and neither have we. The ASPA thus meets all the

requirements for associational standing. 5

5

The district court’s contrary decision with respect to the ASPA’s

ADA claim rested largely on its conclusion that the ASPA’s members

are not subject to the ADA and, thus, that it could not assert claims that

rely on the ADA. A plaintiff’s ability to state a claim under a particular

statute is not a question of federal subject matter jurisdiction, however,

but rather a question of the merits of that claim. See, e.g., Lexmark,

134 S. Ct. at 1387 n.4.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 11

Lack of Preemption

Having concluded that the ASPA has standing, we now

turn to whether its preemption arguments state a claim on

which relief may be granted. We evaluate this question de

novo. Associated Gen. Contractors of Am. v. Metro. Water

Dist. of S. Cal., 159 F.3d 1178, 1181 (9th Cir. 1998).

“In deciding whether a federal law pre-empts a state [or

local] statute, our task is to ascertain Congress’[s] intent in

enacting the federal statute at issue.” Metro. Life Ins. Co. v.

Massachusetts, 471 U.S. 724, 738 (1985) (quoting Shaw v.

Delta Air Lines, Inc., 463 U.S. 85, 95 (1983)). The Supreme

Court has emphasized, however, that generally “pre-emption

doctrines apply only to state [or local] regulation.” Bldg. &

Constr. Trades Council of Metro. Dist. v. Associated

Builders & Contractors of Mass./R.I., Inc. (Boston Harbor),

507 U.S. 218, 227 (1993). 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 we

presume that its actions are not subject to preemption. See

id. at 229. 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. See

Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist., 498

F.3d 1031, 1041–42 (9th Cir. 2007).

For the reasons that follow, we hold first that the City

was acting as a market participant and not a regulator when

it adopted section 25. Second, because nothing in the

NLRA, RLA, or ADA shows that Congress meant to

preempt states or local governments from actions taken

while participating in markets in a non-regulatory capacity,

we conclude that section 25 is not preempted by those

federal statutes.

12 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

The City Is Acting as a Market Participant

To decide whether a state or local government is acting

as a market participant or instead as a regulator, we apply the

two-prong test first articulated in 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); accord, e.g., Engine Mfrs. Ass’n,

498 F.3d at 1041. First, is the challenged governmental

action undertaken in pursuit of the “efficient procurement of

needed goods and services,” as one might expect of a private

business in the same situation? Johnson, 623 F.3d at 1023

(quoting Cardinal Towing, 180 F.3d at 693). Second, “does

the narrow scope of the challenged action defeat an inference

that its primary goal was to encourage a general policy rather

than [to] address a specific proprietary problem”? Id. at

1023–24 (quoting Cardinal Towing, 180 F.3d at 693). If the

answer to either question is “yes,” the governmental entity is

acting as a market participant. Id. at 1024.

Johnson offers an example of how this test works.

There, a community college district had sold bonds to fund

construction projects. Id. at 1016. As the City did here, the

college adopted an agreement governing labor conditions for

contractors working on those construction projects that

prohibited strikes, picketing, and similar labor disruptions.

Id. at 1017. The agreement also made those unions the

exclusive bargaining representatives for workers on the

project, required the use of union “hiring halls” for staffing,

established mechanisms for resolving disputes, and required

the unions to create an apprenticeship program. Id. at 1016–

17.

Several non-union apprentices and apprenticeship

committees challenged those restrictions as preempted by

the NLRA and the Employee Retirement Income Security

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 13

Act (“ERISA”). Id. We held that the college was acting as

a market participant under both prongs of the Cardinal

Towing test. Id. at 1024–29. Specifically, we determined

that the college had a proprietary interest in the efficient

procurement of construction services, including in avoiding

labor disruptions. This was true even though the college

may have spent some of its money unwisely, and even

though a private actor may not have accepted terms as

unfavorable as the college had. Id. at 1025–27. We also

concluded that the scope of the challenged agreement was

narrow in that it applied only to construction projects worth

more than $200,000 funded by the bond initiative during a

certain time period. Id. at 1028–29. Accordingly, we held

that the college was acting as a market participant and that

the restrictions were not preempted. See id. at 1024–29.

Applying that precedent here, we hold that the City

satisfies both prongs of the Cardinal Towing test and so was

acting as a market participant when it added section 25 to the

LAX licensing contract.

1. Efficient Procurement of Goods and Services

First, like the college in Johnson, the City is attempting

to avoid disruption of its business: If a private entity

operated LAX, that entity would have a pressing interest in

avoiding strikes, picket lines, boycotts, and work stoppages.

Those interests are not any less pressing simply because the

City rather than a private business operates the airport, and

labor peace agreements are one way to protect those

interests. See Boston Harbor, 507 U.S. at 231–32 (holding

that Boston’s requiring a no-strike provision in

subcontractor agreements was permissible market

participation because the city was “attempting to ensure an

efficient project that would be completed as quickly and

14 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

effectively as possible” and because “analogous private

conduct would be permitted”).

Plaintiffs urge the opposite conclusion on the ground that

the City has not directly participated in the market and has

instead dictated contract terms to others who do. The City

does, however, participate directly in a market for goods and

services. “[A]irports are commercial establishments . . .

[that] must provide services attractive to the marketplace.”

Int’l Soc’y for Krishna Consciousness, Inc. v. Lee, 505 U.S.

672, 682 (1992) (citations omitted). If the City operates the

airport poorly, fewer passengers will choose to fly into and

out of LAX, fewer airlines will operate from LAX, and the

City’s business will suffer. It must avoid commercial pitfalls

as the proprietor of a commercial enterprise.

That fact makes this case distinguishable from, for

example, Golden State Transit Corp. v. City of Los Angeles,

475 U.S. 608 (1986). In Golden State, a plaintiff taxi

company alleged that Los Angeles had interfered with labor

negotiations by withholding the company’s license until a

strike against the company ended. See id. at 611–12. The

plaintiff argued that Los Angeles’s license decision was

preempted by the NLRA, and the Supreme Court agreed. Id.

at 615–19. The Court rejected Los Angeles’s argument that

its decision was justified by its general interest in ensuring

“uninterrupted [citywide taxi] service to the public by

prohibiting a strike.” Id. at 618. Los Angeles did not operate

the taxi service at issue in Golden State, nor did it use the

taxi company for any city functions or services. By contrast,

here, a department of the City of Los Angeles does operate

LAX, and it has taken action to protect its proprietary

interest in running the airport smoothly. Cf. Boston Harbor,

507 U.S. at 227 (“[A] very different case would have been

presented had the city of Los Angeles purchased taxi

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 15

services from Golden State in order to transport city

employees.”). The City is thus participating in the air

transportation market. 6

To the extent Plaintiffs argue more broadly that the City,

as the operator of an airport, is not participating in a private

market at all, we disagree. At first blush, that argument has

some intuitive appeal because most airports in the United

States are run by or affiliated with a governmental entity.

But the same is not true internationally. See generally, e.g.,

David L. Bennett, Airport Privatization After Midway,

23 Air & Space Law. 22, 22 (2010) (noting the “trend toward

private participation in airport ownership and operation in

most other parts of the world”); Zane O. Gresham & Brian

Busey, “Do As I Say and Not As I Do”—United States

Behind in Airport Privatization, 17 Air. & Space Law. 12,

13–14 (2002) (describing airport privatization

internationally and experimentation with airport

privatization in the United States). And, even domestically,

6

Plaintiffs relatedly argue that the City is not actually procuring any

goods or services but is instead essentially offering licenses, which they

describe as a “purely regulatory function.” But a private contracting

condition may be proprietary even though it could also be called a

licensing scheme. See, e.g., Johnson, 623 F.3d at 1017 (holding that the

challenged contractual provisions in a project labor agreement were not

preempted by the NLRA even though the defendant college district

restricted contractors on the project to employing only members of a

particular union, effectively offering a license to only one group). Nor

does it matter that the City would not be a party to the contracts that

included a labor peace agreement. The challenged municipal action in

Boston Harbor also involved requiring a no-strike condition in contracts

between third parties. 507 U.S. at 220–21. That did not stop the

Supreme Court from concluding that Boston was acting as a market

participant. Id. at 230–32.

16 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

Congress has enacted a “pilot program” for privatization of

airports. See 49 U.S.C. § 47134.

Moreover, the Supreme Court and other federal appellate

courts have recognized the inherently competitive and

commercial nature of airport operations. See Int’l Soc’y for

Krishna Consciousness, 505 U.S. at 682; see also Four T’s,

Inc. v. Little Rock Mun. Airport Comm’n, 108 F.3d 909, 912–

13 (8th Cir. 1997) (holding, in response to a Commerce

Clause challenge, that a city that operated an airport was

acting as a participant in the market for airport rental car

services). Airports also compete against private modes of

transportation, like long-distance travel by train, car, or bus.

See, e.g., Randall O’Toole, Cato Inst., Pol’y Analysis

No. 680, Intercity Buses: The Forgotten Mode, (2011),

available at https://www.cato.org/publications/policy-

analysis/intercity-buses-forgotten-mode (noting that

intercity buses were “America’s fastest growing

transportation mode” between 2007 and 2010 (citation and

internal quotation marks omitted)).

We therefore conclude that the City is acting as a market

participant under the first prong of the Cardinal Towing test.

2. Narrow Scope

The City’s actions independently qualify as market

participation under Cardinal Towing’s second prong. The

decision to adopt section 25 is narrowly tied to a “specific

proprietary problem,” Johnson, 623 F.3d at 1024 (quoting

Cardinal Towing, 180 F.3d at 693): service disruptions at

LAX, which the City manages as proprietor. Nothing in the

text of section 25 or in the Complaint’s allegations suggests

that section 25 will be enforced throughout the rest of the

City’s jurisdiction or that section 25 will hamper service

providers’ operations elsewhere.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 17

Plaintiffs argue otherwise, asserting that section 25 is in

reality a preempted labor regulation because it gives labor

unions a powerful bargaining chip, applies broadly to all

service providers at LAX, and governs any organization that

requests a labor peace agreement. 7 We find these arguments

unpersuasive for reasons that become apparent in

considering the three cases Plaintiffs primarily rely upon to

support their position. Compared to the regulations imposed

in those decisions, section 25 reaches a much narrower swath

of commercial activity and focuses on specific proprietary

needs.

First, Plaintiffs rely on Wisconsin Department of

Industry, Labor & Human Relations v. Gould Inc., 475 U.S.

282 (1986). In that case, the Supreme Court affirmed a

decision enjoining a Wisconsin law that barred all state

procurement agents from transacting with repeat NLRA

violators. See id. at 283–84. The Court held that

Wisconsin’s spending policy swept too broadly to constitute

a permissible exercise of market participation, particularly

given the lack of an obvious proprietary concern animating

the debarment scheme. Id. at 289–91. By contrast, section

25 does not govern all of the City’s contractual

relationships, 8 and the City has a clear proprietary interest in

avoiding labor disruptions of airport services.

7

The ASPA also argues that the Service Employees International

Union lobbied for section 25, demonstrating a pro-union motivation for

its adoption. As discussed infra in Part IV, such motive does not matter

to the preemption analysis.

8

The dissent suggests that section 25 may affect employment

relationships outside LAX, but, as discussed further below, Plaintiffs

have not alleged any such effects.

18 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

Second, Plaintiffs cite Chamber of Commerce of the

United States of America v. Brown, 554 U.S. 60 (2008).

There, the Supreme Court analyzed a preemption challenge

against a California law that prohibited employers who

received state funds from using those funds to “assist,

promote, or deter union organizing.” Id. at 63. The Court

held that the law did not represent permissible market

participation because it was “neither ‘specifically tailored to

one particular job’ nor a ‘legitimate response to state

procurement constraints or to local economic needs.’” Id. at

70 (quoting Gould, 475 U.S. at 291). The law’s preamble

even explicitly declared that its purpose was to prevent

employers from supporting or opposing union organization.

Id. at 62–63. The law also imposed onerous requirements

for segregating funds and record keeping, and created a right

of action for any private taxpayer to sue suspected violators.

Id. at 72. 9 Section 25, by comparison, is limited to

addressing the needs of LAX and does not announce any sort

of regulatory policy, require complicated recordkeeping, or

create litigation risks.

Third, Plaintiffs point to Metropolitan Milwaukee

Association of Commerce v. Milwaukee County

(Metropolitan Milwaukee II), 431 F.3d 277 (7th Cir. 2005).

That case involved a Milwaukee County ordinance

governing businesses the county had hired to provide

transportation and other services to elderly and disabled

residents. Id. at 277–78. Like section 25, the Milwaukee

9

The dissent suggests that the broad effects the Supreme Court

discussed in Brown may have been discerned through discovery, but the

Supreme Court’s analysis focused solely on the text of the challenged

law. See 554 U.S. at 71–73. The Supreme Court made clear that effects

the law would have were obvious on its face. See Id. Here, the text of

section 25 suggests no obvious overbroad effects, and Plaintiffs have

alleged none.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 19

ordinance required those businesses to sign labor peace

agreements, but unlike section 25, it imposed several

additional conditions favorable to union organizing and did

little to avoid service interruptions. See id. at 278, 281; see

also Metro. Milwaukee Ass’n of Commerce v. Milwaukee

County. (Metropolitan Milwaukee I), 325 F.3d 879, 880–81

(7th Cir. 2003).

The Seventh Circuit held that the ordinance was

preempted by the NLRA. Metropolitan Milwaukee II,

431 F.3d at 282. It rejected the county’s argument that the

ordinance was proprietary, in large part because the

ordinance’s impact would not be restricted to contracts with

the county. See id. at 279–82. For example, the ordinance

prohibited contractors from scheduling meetings designed to

discourage any of their employees from joining a union,

regardless of whether those employees worked on county

contracts. Id. at 280. The Seventh Circuit also reasoned that

the county could have achieved its goal of avoiding service

interruptions by other means, see id. at 282, and that several

of the requirements it imposed focused on union organizing

in particular, see id. at 278, 280–81; see also Metropolitan

Milwaukee I, 325 F.3d at 880–81. Here, by contrast, there is

no allegation that the purposes of section 25 could be

achieved by other means or that the licensing provision will

have spillover effects on the service providers’ operations

beyond their work for LAX. Rather, the nature of the

businesses at issue—services performed at LAX—by

definition allows for natural divisions between work for the

City and work for private parties: A job is either performed

20 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

at LAX or it is not, and a strike or other disruption either

occurs at LAX or it does not. 10

These arguments are more specific instances of

Plaintiffs’ broader allegation that section 25 cannot truly be

aimed at minimizing service disruptions because it is a poor

fit for that job. Under our previous decisions, evidence that

an alternative strategy could more effectively or cheaply

accomplish the same goals “bears only on whether [a state

or local government] made a good business decision, not on

whether it was pursuing regulatory, as opposed to

proprietary, goals.” Johnson, 623 F.3d at 1025. Similarly,

we have held that a state or local government may entertain

non-economic purposes and yet rely on the market

participant doctrine. See Engine Mfrs. Ass’n, 498 F.3d at

1046 (“That a state or local governmental entity may have

policy goals that it seeks to further through its participation

in the market does not preclude the doctrine’s application, so

long as the action in question is the state’s own market

participation.”). And although, as the dissent points out, the

Seventh Circuit decided Metropolitan Milwaukee II partially

in reliance on an obvious mismatch between the county’s

asserted purpose and its means of achieving that purpose, the

same court later emphasized that lurking political motives

are an inevitable part of a public body’s actions and are not

“a reason for invalidity.” N. Ill. Chapter of Associated

10

We disagree with the dissent that section 25 is written so broadly

as to reach the entirety of a given labor organization’s membership. In

context, it is clear that the provision in question, which refers to “binding

and enforceable provision(s) prohibiting the Labor Organization and its

members from engaging in” certain disruptive action, is meant to govern

service providers at LAX. Section 25 repeatedly refers to operations at

LAX, employees at LAX, and the LAX licensing program specifically.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 21

Builders & Contractors, Inc. v. Lavin, 431 F.3d 1004, 1007

(7th Cir. 2005).

This is not to say that a state’s supposedly proprietary

actions cannot become regulatory if enacted or enforced

overbroadly. Preventing such overbreadth is the purpose of

the second prong of the Cardinal Towing test. See Johnson,

623 F.3d at 1023–24. Concerns about overbreadth were

largely what led the Supreme Court to strike down the state-

wide spending restrictions at issue in Brown and Gould. See

Brown, 554 U.S. at 70–71; Gould, 475 U.S. at 289–91. But

no state-wide restrictions—or, indeed, city-wide

restrictions—are even alleged to be at issue here. The City

has merely imposed a contract term on those who conduct

business at LAX, which the City operates, and that contract

term serves a cabined purpose. 11 We therefore conclude that

the second prong of the Cardinal Towing test is satisfied, and

11

We briefly note our disagreement with two additional arguments

Plaintiffs advance. First Plaintiffs (and the dissent) argue that section 25

does not specifically address disruptions by non-union employees. That

omission alone does not suggest that the City has advanced a pro-union

regulatory policy rather than a proprietary interest. The LAX licensing

scheme includes other protections against non-union disruptions. For

example, if the airport believes it is necessary to hire police or to take

other steps to protect the “efficient operation of LAX” in the event of a

violation of section 25 or some other legal or regulatory violation, the

service providers may have to reimburse the airport regardless of what

or who caused the disruption. Service providers also guarantee the

quality of their work, and the City may demand the removal of a service

provider’s employees or agents.

Second, Plaintiffs argue that section 25 is overbroad because it

applies to all operations at LAX. But LAX would hardly avoid service

disruptions by requiring labor peace agreements from some service

providers and not others. A contract term that applied to fewer than all

of the service providers at LAX would risk disruptions attributable to

whatever service providers were not required to accept section 25.

22 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

that, in imposing section 25, the City has acted as a market

participant, not as a regulator.

The Presumption Is Not Rebutted by the NLRA, the

RLA, or the ADA

Having concluded that the City is acting as a market

participant, we must next consider whether there is “any

express or implied indication,” Engine Mfrs. Ass’n.,

498 F.3d at 1042 (quoting Boston Harbor, 507 U.S. at 231),

that Congress intended the NLRA, the RLA, or the ADA to

preempt actions taken by states and local governments in

their capacity as market participants. Absent such an

indication, the presumption that preemption applies only to

regulatory conduct remains in place. See id.

We begin with the NLRA. In Boston Harbor, the

Supreme Court held that the NLRA does not preempt state

or local government actions taken as a market participant.

See 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.”); see

also id. at 227 (“We have held consistently that the NLRA

was intended to supplant state labor regulation, not all

legitimate state activity that affects labor.”). Because the

City is acting as a market participant here, Plaintiffs have

thus not stated a claim for preemption under the NLRA.

We likewise conclude that Plaintiffs have failed to state

a claim for preemption under the RLA. We look to decisions

interpreting the NLRA to ascertain the RLA’s preemptive

extent. See Bhd. of R.R. Trainmen v. Jacksonville Terminal

Co., 394 U.S. 369, 383 (1969); Air Transp. Ass’n v. City &

Cty. of San Francisco, 266 F.3d 1064, 1075–76 & n.4; Beers

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 23

v. S. Pac. Transp. Co., 703 F.2d 425, 428 (9th Cir. 1983);

see also, e.g., Hull v. Dutton, 935 F.2d 1194, 1197–99 (11th

Cir. 1991); McCall v. Chesapeake & Ohio Ry. Co., 844 F.2d

294, 301–02 (6th Cir. 1988). For that reason, relying on the

fact that the NLRA does not preempt market participation by

state or local governments, we have stated that the RLA

likewise does not preempt such conduct. See Air Transp.

Ass’n, 266 F.3d at 1076 n.4 (explaining that the “RLA would

not preempt actions taken by [a municipal government

operating an airport] as a proprietor” (citing Dillingham

Const. N.A., Inc. v. Cty. of Sonoma, 190 F.3d 1034, 1037 (9th

Cir. 1999) (addressing NLRA preemption))).

Finally, we reach the same conclusion about the ADA.

Congress enacted the ADA to deregulate “the airline

industry through ‘maximum reliance on competitive market

forces and on actual and potential competition.’” Northwest,

Inc. v. Ginsberg, 134 S. Ct. 1422, 1428 (2014) (quoting

49 U.S.C. § 40101(a)(6)). The statute expressly preempts

states and their subdivisions from “enact[ing] or enforc[ing]

a law, regulation, or other provision having the force and

effect of law related to a price, route, or service of an air

carrier.” 49 U.S.C. § 41713(b)(1).

We and the Supreme Court have interpreted the phrases

“force and effect of law” or “effect of law” in preemption

clauses in other statutes as applying to governmental action

that is regulatory in nature and thus as not preempting market

participation. See, e.g., Am. Trucking Ass’ns v. City of Los

Angeles, 133 S. Ct. 2096, 2102–03 (2013) (interpreting the

Federal Aviation Administration Authorization Act of

1994); Associated Gen. Contractors, 159 F.3d at 1182–83

(interpreting ERISA). Under these cases, we conclude that

Congress did not intend the ADA to upset proprietary

24 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

conduct like that at issue here. 12 See Am. Trucking Ass’ns,

133 S. Ct. at 2102. Plaintiffs therefore have not stated a

claim under the ADA.

* * *

In sum, given the allegations presented in Plaintiffs’

Complaint, we conclude that the City was acting as a market

participant when it added section 25 to its LAX licensing

contract, and that the preemption provisions of the NLRA,

the RLA, and the ADA do not apply to state and local

governmental actions taken as a market participant. 13 We

therefore affirm the dismissal of Plaintiffs’ preemption

claims for failure to state a claim on which relief may be

granted.

Leave to Amend

Having concluded that dismissal of the Complaint was

appropriate, all that is left for us to consider is whether the

district court erred by denying leave to amend. Plaintiffs

have represented that remand for the purpose of amendment

would, in their view, serve no purpose. Specifically,

Plaintiffs have represented that nothing has occurred in the

years since section 25 took effect that would enable them to

amend their Complaint to add allegations of spillover effects

12

Our conclusion is bolstered by the inclusion of an express

statutory carve-out in the ADA that preserves the ability of a

governmental actor to “carry[] out its proprietary powers and rights.”

49 U.S.C. § 41713(b)(3).

13

In addition to its preemption arguments, the ASPA argues that

section 25 is an unconstitutional condition. But the ASPA does not

explain what constitutional right has been affected. Nor have Plaintiffs

appealed the dismissal of their constitutional claims.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 25

or other indications that section 25 operates in practice as a

regulation. In light of these representations, we conclude

that “the complaint could not be saved by any amendment,”

Ariz. Students’ Ass’n v. Ariz. Bd. of Regents, 824 F.3d 858,

871 (9th Cir. 2016).

Conclusion

The district court’s rulings are AFFIRMED.

TALLMAN, Circuit Judge, concurring in part and dissenting

in part:

I agree with the majority that the ASPA has standing to

assert its claims. But that is where the majority and I part

ways. Even as is, the Complaint states a plausible claim that

the City enacted section 25 as a regulatory measure rather

than a proprietary one. At this stage, we must say that this

overly broad and facially suspect regulation of labor

relations at Los Angeles International Airport (“LAX”)—

issued by the City’s airport commission ostensibly to

promote labor peace—contravenes the delicate

congressional balancing of national labor relations policy

affecting key facilities of interstate commerce. I respectfully

dissent.

I

A

It is well established that, in enacting the National Labor

Relations Act (“NLRA”), “Congress largely displaced state

regulation of industrial relations.” Wis. Dep’t of Indus.,

Labor, & Human Relations v. Gould Inc., 475 U.S. 282, 286

26 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

(1986). “The purpose of the [NLRA] was to obtain ‘uniform

application’ of its substantive rules and to avoid the

‘diversities and conflicts likely to result from a variety of

local procedures and attitudes toward labor controversies.’”

NLRB v. Nash-Finch Co., 404 U.S. 138, 144 (1971) (quoting

Garner v. Teamsters Local Union No. 776, 346 U.S. 485,

490 (1953)). To these ends, through the NLRA, Congress

erected “a complex and interrelated federal scheme of law,

remedy, and administration” and “entrusted administration

of the labor policy for the Nation to a centralized

administrative agency.” San Diego Bldg. Trades Council v.

Garmon, 359 U.S. 236, 242–43 (1959).

Two complementary preemption doctrines serve to

preserve uniformity in national labor policy. The first,

Garmon preemption, “forbids States to ‘regulate activity that

the NLRA protects, prohibits, or arguably protects or

prohibits.’” Chamber of Commerce v. Brown, 554 U.S. 60,

65 (2008) (quoting Gould, 475 U.S. at 286). The second,

Machinists preemption, “prohibits state and municipal

regulation of areas that have been left ‘to be controlled by

the free play of economic forces.’” Bldg. & Constr. Trades

Council of Metro. Dist. v. Associated Builders &

Contractors of Mass./R.I., Inc. (Boston Harbor), 507 U.S.

218, 225 (1993) (quoting Lodge 76, Int’l Ass’n of Machinists

& Aerospace Workers v. Wis. Emp’t Relations Comm’n,

427 U.S. 132, 140 (1976)). Together, Garmon and

Machinists preempt state and local policies that would

otherwise balkanize the “integrated scheme of regulation”

and disrupt the balance of power between labor and

management embodied in the NLRA. Golden State Transit

Corp. v. City of Los Angeles (Golden State I), 475 U.S. 608,

613–14 (1986).

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 27

Similarly, the Railway Labor Act (“RLA”) established a

centralized system of labor dispute resolution for the railway

and airline industries to promote the free flow of interstate

commerce. Aircraft Serv. Int’l, Inc. v. Int’l Bhd. of

Teamsters, Local 117, 779 F.3d 1069, 1073 (9th Cir. 2015).

Machinists and Garmon preemption also apply in the RLA

context. Bhd. of R.R. Trainmen v. Jacksonville Terminal

Co., 394 U.S. 369, 380–81 (1969).

B

As the majority correctly notes, a “market participation”

exception allows state and local policies to avoid preemption

analysis altogether if those policies serve to protect a

proprietary interest rather than regulate the labor market.

Boston Harbor, 507 U.S. at 229–30. But by focusing solely

on the market participant exception, the majority glosses

over a glaring reality: if the City had no proprietary interest

in LAX, section 25 would plainly be preempted by the

NLRA.

Section 25 requires service providers to enter into a

“labor peace agreement” (“LPA”)—a “binding and

enforceable” agreement that prohibits affected employees

“from engaging in picketing, work stoppages, boycotts, or

any other economic interference”—with any labor

organization that requests one. If a service provider and

requesting labor organization cannot reach a no-strike

agreement within sixty days, section 25 requires the parties

to submit to binding arbitration. If a service provider refuses

to abide by the terms of section 25, the City may revoke its

license to do business at the airport.

Section 25 represents precisely the type of local

interference in labor-management relations that Machinists

preemption forbids. In Golden State I, the Supreme Court

28 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

held that while the NLRA “requires an employer and a union

to bargain in good faith, . . . it does not require them to reach

agreement,” nor does it demand a particular outcome from

labor negotiations. 475 U.S. at 616; see also 29 U.S.C.

§ 158(d) (providing that the duty to bargain in good faith

“does not compel either party to agree to a proposal or

require the making of a concession”). The substance of labor

negotiations, and the results therefrom, are among those

areas Congress intentionally left to the free play of economic

forces when it legislated in the field of federal labor law. See

Golden State I, 475 U.S. at 616 (describing the NLRA as

providing only “a framework for the negotiations”).

The facts of Golden State I are instructive—and Los

Angeles has been in trouble before for flouting federal labor

laws. In that case, the Supreme Court found that Machinists

preempted the City of Los Angeles’ refusal to renew a taxi

cab company’s license when it failed to reach an agreement

with striking union members. Id. at 618. By conditioning

the renewal of the taxi cab franchise on the acceptance of the

union’s demands, the City effectively imposed a timeline on

the parties’ negotiations and undermined the taxi cab

company’s ability to rely on its own economic power to

resist the strike. Id. at 615. The Supreme Court held that the

City could not pressure the taxi cab company into reaching

a settlement and thereby “destroy[] the balance of power

designed by Congress, and frustrate[] Congress’ decision to

leave open the use of economic weapons.” Id. at 619.

Like the taxi cab company in Golden State I, service

providers here face a Hobson’s choice plausibly inferred

from the allegations of the Complaint. If a service provider

refuses to negotiate an LPA with a requesting labor

organization, it loses its right to do business at LAX. But if

the service provider negotiates an LPA, the union knows full

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 29

well that it can hold out for significant concessions in

exchange for its members giving up one of their most

valuable economic weapons—the power to go on strike. If

the union is unsatisfied with the terms the service provider

offers, the union can request mediation and binding

arbitration. Once forced to arbitrate, the tribunal will dictate

the result the service provider must accept. The threat of

binding arbitration thus seriously limits service providers’

ability to rely on their own “economic weapons of self-help”

to resist a union’s demands.

By forcing unwilling service providers to negotiate and

accept LPAs, section 25 compels a result Congress

deliberately left to the free play of economic forces. The

NLRA does not allow state and local governments to

“introduce some standard of properly balanced bargaining

power . . . or to define what economic sanctions might be

permitted negotiating parties in an ideal or balanced state of

collective bargaining.” Golden State I, 475 U.S. at 619

(alteration in original) (quoting Machinists, 427 U.S. at 149–

50). Yet that is exactly what section 25 does. In doing so, it

directly contravenes federal law.

II

A

Whether the City can enforce section 25 thus hinges

entirely on the applicability of the market participant

exception. The majority is willing to conclude—with little

examination of what the full effects of section 25 will be—

that the City’s proprietary interest in LAX immunizes

section 25 from preemption. Supreme Court precedent

cautions us against drawing such hasty conclusions,

particularly when serious questions persist about whether

section 25 advances the City’s proprietary interest.

30 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

As a preliminary matter, the Supreme Court has made

clear that not every government action escapes preemption

simply because it touches a proprietary interest. Gould,

475 U.S. at 287 (calling “an exercise of the State’s spending

power rather than its regulatory power. . . . a distinction

without a difference”). The animating concern of Gould, in

the words of Judge Posner, was that “[t]he [state’s] spending

power may not be used as a pretext for regulating labor

relations.” Metro. Milwaukee Ass’n of Commerce v.

Milwaukee County (Metropolitan Milwaukee II), 431 F.3d

277, 279 (7th Cir. 2005) (emphasis added).

The fact that the City of Los Angeles owns and operates

LAX through its municipal airport commission, and thus has

an interest in minimizing disruptions to air travel, cannot

alone qualify section 25 for the market participant exception.

Instead we must determine, by examining section 25’s

“actual content and its real effect on federal rights,” Livadas

v. Bradshaw, 512 U.S. 107, 108 (1994), whether section 25’s

“manifest purpose and inevitable effect” is to do more than

protect the City’s proprietary interest in running the airport,

see Gould, 475 U.S. at 291. 1 Because our inquiry is

informed by how section 25 might actually work in practice,

it “inevitably is fact-specific,” Roger C. Hartley,

Preemption’s Market Participant Immunity—A

Constitutional Interpretation: Implications for Living Wage

and Labor Peace Policies, 5 U. Pa. J. Lab. & Emp. L. 229,

1

To be clear, examining a challenged policy’s purpose does not

involve an investigation into policymakers’ “subjective reasons for

adopting a regulation or agreement.” Johnson v. Rancho Santiago Cmty.

Coll. Dist., 623 F.3d 1011, 1026 (9th Cir. 2010); see also Chamber of

Commerce v. Reich, 74 F.3d 1322, 1336 (D.C. Cir. 1996) (clarifying that

it was unnecessary “to question the President’s motivation in order to

determine whether the [Executive] Order” demonstrated a regulatory

purpose).

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 31

252 (2003), and deserves more than the surface-level review

undertaken by the majority.

The Supreme Court’s decision in Chamber of Commerce

v. Brown, 554 U.S. 60 (2008), illustrates the fact-sensitive

nature of our analysis. At issue in Brown was California’s

Assembly Bill 1889 (AB 1889), which prohibited certain

private employers from using state funds to “assist, promote,

or deter union organizing.” Id. at 63 (quoting Cal. Gov’t

Code §§ 16645.1–16645.7). The Court found it “beyond

dispute that California enacted AB 1889 in its capacity as a

regulator rather than a market participant.” Id. at 70. As one

obvious example, the preamble to AB 1889 announced an

explicit regulatory purpose. Id.

The heart of the Court’s market participation analysis,

however, focused not on AB 1889’s official purpose but on

its practical consequences. Significantly, although AB 1889

purported to affect only state funds, the statute’s

combination of compliance burdens and litigation risks

effectively deterred employers from using any funds, state

or otherwise, to exercise speech rights protected under the

NLRA. Id. at 72–73. In light of these realities, the Court

held that although California had a “legitimate proprietary

interest in ensuring that state funds are spent in accordance

with the purposes for which they are appropriated,” in

operation, AB 1889 “effectively reache[d] far beyond the

use of funds over which California maintains a sovereign

interest.” 2 Id. at 70–71.

2

The majority mischaracterizes my analysis of Brown. The critical

lesson from Brown is that preemption analysis requires a careful inquiry

into the actual effects of a challenged policy. Contrary to the majority’s

interpretation, the Court’s analysis did not focus “solely on the text of

32 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

With respect to section 25, we must be similarly sensitive

to the ordinance’s real-world impacts. We must also

construe the allegations in the Complaint in the light most

favorable to the party resisting dismissal. Syed v. M-I, LLC,

853 F.3d 492, 499 (9th Cir. 2017). Yet the majority seems

content to decide, with little examination of how section 25

might actually operate, that section 25 serves a purely

proprietary function. Applying the Cardinal Towing test, the

majority makes a conclusory finding that, “like the college

in Johnson, the City is attempting to avoid disruption of its

business.” And with similarly scant analysis, the majority

decides that section 25 is “narrowly tied to [the City’s]

specific proprietary problem.” Distinguishing between

government as market participant and government as

regulator, however, requires a closer look at section 25’s

“actual content” and “real effect[s].” See Livadas, 512 U.S.

at 108.

B

Under the first prong of Cardinal Towing, we cannot say

that section 25 reflects the City’s interest in the “efficient

procurement of needed goods and services,” as we might

expect from a private entity. Johnson, 623 F.3d at 1023

(quoting Cardinal Towing & Auto Repair, Inc. v. City of

Bedford, 180 F.3d 686, 693 (5th Cir. 1999)). At the risk of

AB 1889.” Rather, its ultimate preemption holding rested on how the

statute, once operationalized, would affect the real-world choices of

entities receiving state funds, and the use of funds over which the state

could claim no proprietary interest. Id. at 73 (“AB 1889’s enforcement

mechanisms put considerable pressure on an employer either to forgo his

‘free speech right to communicate his views to his employees,’ or else

refuse the receipt of any state funds. In so doing, the statute . . . chills

one side of the ‘robust debate which has been protected under the

NLRA.’” (citation omitted)).

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 33

stating the obvious, the City here is not directly procuring

goods and services to execute a discrete project, but rather

providing ongoing licenses permitting a host of service

providers handling baggage, assisting passengers, refueling

aircraft, serving food and beverages, and otherwise keeping

planes operating on schedule to do business at the airport.

The City’s proprietary interest here is thus markedly

different in kind than that in cases like Boston Harbor and

Johnson, where local governments required project labor

agreements that were “specifically tailored to one particular

job.” See Boston Harbor, 507 U.S. at 232.

Furthermore, unlike the project labor agreements in

Boston Harbor and Johnson, there is no evidence that a

private operator of LAX would use LPAs as a means of

ensuring labor peace. See Metro. Milwaukee II, 431 F.3d at

282. Section 8(e)–(f) of the NLRA specifically authorizes

the type of project labor agreements at issue in Boston

Harbor and Johnson, indicating that such agreements “are a

tried and true remedy for construction stoppages owing to

labor disputes.” Id. at 281–82. Nothing in the record

suggests the same is true for LPAs in the private

marketplace.

Indeed, if the City’s true purpose here is to minimize

work stoppages at LAX, section 25 seems an ill-fitted tool

for the job. Section 25 is both too narrow and too broad as

a means of achieving its purported objective. It is too narrow

because, by its own terms, section 25 does not even apply to

service providers’ employees, but only to the members of a

labor organization that requests an LPA. Therefore, if a

service provider’s employees currently have no recognized

collective bargaining representative, those employees will

not be covered by an LPA at all. Nor does section 25 apply

to other classes of airport workers who may threaten work

34 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

stoppages. Section 25 also applies only partial deterrence:

it penalizes service providers, but not labor organizations,

for violating an LPA.

At the same time, section 25 sweeps more broadly than

necessary to achieve its goal. In order for unions to forgo

their right to strike, common sense and long experience in

labor negotiations tell us we would reasonably expect that

service providers will have to make concessions favorable to

the unions. These concessions may be totally unrelated to

preventing strikes, and may or may not actually promote

labor peace. Instead of forcing service providers and labor

organizations into LPA negotiations, the City could have

used other, more targeted mechanisms to prevent labor strife.

In Metropolitan Milwaukee II, Judge Posner observed that

[t]he usual way of dealing with [service

interruptions] is to include contract terms that

by adding sticks or carrots or both give the

provider of the service a compelling

incentive to take effective measures to avoid

stoppages. The buyer can offer a premium

for timely performance and insist on the

inclusion of a stiff liquidated-damages

provision as a sanction for untimely

performance; there is also, as a further

incentive to good performance, the implicit

threat of refusing to renew the contract if

performance is unsatisfactory.

431 F.3d at 280. 3 Section 25 is far less straightforward. To

summarize, it only covers a service provider’s employees if:

3

The majority distinguishes Metropolitan Milwaukee II on the

grounds that the county ordinance at issue in that case “did little to avoid

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 35

(1) those employees are already represented by a labor

organization; (2) that labor organization requests an LPA;

(3) the labor organization and service provider enter into

LPA negotiations; and (4) the service provider makes

concessions acceptable to the union, which may be totally

unrelated to preventing strikes. If a service provider’s

employees are not already unionized, once a labor

organization secures an LPA, the labor organization must

then (5) become the certified bargaining representative of the

service provider’s employees through NLRB elections.

Compared to simple, contract-based incentives, see id.,

section 25 certainly seems a roundabout way to minimize

labor disruptions at LAX.

These tailoring problems suggest that section 25’s

“manifest purpose and inevitable effect” may not be to

protect the City’s proprietary interest in the airport at all. 4

See id. (holding that tailoring problems may indicate a

regulatory purpose); see also Hotel Emps. & Rest. Emps.

service interruptions” and “imposed several additional conditions

favorable to union organizing,” Nothing in the record establishes,

however, that section 25 would achieve labor peace any more

effectively. And for reasons explained infra, it is reasonable to assume

that section 25’s practical effect is to impose conditions on service

providers aimed at facilitating union organizing.

4

The majority suggests that the poor fit between section 25’s actual

effects and its purported goals should play no role in our preemption

analysis. But tailoring issues are highly relevant to our evaluation of the

first prong of the Cardinal Towing test—whether a challenged policy

“reflect[s] the [government] entity’s interest in its efficient procurement

of needed goods and services.” Johnson, 623 F.3d at 1023 (quoting

Cardinal Towing, 180 F.3d at 693). This inquiry is distinct from

examining policymakers’ motives, which does not play a role in our

analysis, and the narrowness of the challenged policy’s scope, which is

relevant to Cardinal Towing prong two.

36 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

Union, Local 57 v. Sage Hosp. Res., LLC, 390 F.3d 206, 214

(3d Cir. 2004) (noting that “[o]ther appellate courts that have

examined the regulator/market-participant distinction also

focus on the fit between the challenged state requirement and

the state’s proprietary interest in a particular project or

transaction” (citing Chamber of Commerce v. Reich, 74 F.3d

1322 (D.C. Cir. 1996))). If section 25 does not directly

advance the City’s proprietary interest, is it instead a pretext

for regulating labor relations? The complaint plausibly

alleges as much.

Historical experience with LPAs, which the majority

does not bother to consider, also provides useful insight into

whether section 25 reflects a proprietary interest or a

regulatory one. That experience suggests that section 25’s

true purpose is to alter the balance between labor and

management. In typical LPAs, in exchange for relinquishing

their right to strike, unions gain concessions from employers

to support unionization of the employer’s employees. See

Hartley, supra, at 246 (summarizing study of over one

hundred LPAs). For example, LPAs often require an

employer to remain neutral during union organizing drives.

Id. LPAs also often require employers to provide unions

with employees’ contact information and access to the

employer’s physical premises to assist with organizing

efforts. 5 Id. at 246–47. A review of LPAs in California

5

Under the NLRA, by contrast, employers may publicly oppose

unionization and refuse to give labor organizations access to workplace

facilities. 29 U.S.C. § 158(c) (permitting noncoercive employer speech

regarding unionization); Lechmere, Inc. v. NLRB, 502 U.S. 527, 538

(1992) (upholding general rule that employer may not be compelled to

allow nonemployee union organizers onto the employer’s property for

the distribution of union literature). Section 25 thus forces service

providers to give up statutory rights that would otherwise be protected.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 37

similarly found that, in most LPAs, “employers must grant

workplace access, provide employee information (names,

job titles, contact information, etc.) early in the organizing

campaign,” “refrain from making disparaging statements

about the union,” and/or “require that employers assent to

card check recognition and neutrality.” 6 Indeed, in this case,

counsel for the City admitted at oral argument that unions

would likely seek neutrality from service providers as part

of LPA negotiations. We should therefore be unsurprised

that, as the ASPA has alleged, the Service Employees

International Union (SEIU) lobbied heavily for section 25

after it tried unsuccessfully to unionize service provider

employees at LAX.

Given that LPAs are generally used to promote union

organizing, and given counsel’s own admission at oral

argument, we cannot conclude at this stage that section 25

simply reflects the City’s proprietary interest in preventing

work stoppages. Moreover, the City has failed to establish

that it enacted section 25 to respond to legitimate concerns

about work disruptions at LAX, as we might expect from a

private operator of the airport. The “manifest purpose and

inevitable effect” of section 25 thus appears to be aimed at

altering the balance of power between service providers and

organized labor. See Gould, 475 U.S. at 291.

C

Turning to the second prong of the Cardinal Towing test,

we again cannot say conclusively at this stage that section

6

John Logan, Innovations in State and Local Labor Legislation:

Neutrality Laws and Labor Peace Agreements in California, in The State

of California Labor 2003 157, 184 (Ruth Milkman ed., 2003), available

at http://www.iir.ucla.edu/publications/documents/StateofCALabor2003.pdf.

38 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

25’s real-world impacts will be sufficiently narrow to qualify

for the market participant exception.

Even on cursory facial examination, section 25 does not

appear narrowly drawn. In Johnson, we found that the

challenged project labor agreement condition in that case

was narrow in scope because it was both limited in time and

limited to construction projects costing over $200,000.

623 F.3d at 1028. By contrast, section 25 applies to any

service provider at LAX, no matter how big or small the

service provider’s operations there. And section 25 is

unlimited in duration; service providers must comply with

its terms as long as they want to remain licensed to do

business at LAX.

The practical effects of section 25 must also inform our

determination of whether its scope is narrow. A challenged

policy exceeds a state’s proprietary interest if the policy

effectively reaches employer conduct “unrelated to the

employer’s performance of contractual obligations to the

state.” Boston Harbor, 507 U.S. at 228–29; see also Brown,

554 U.S. at 71. In Metropolitan Milwaukee II, for example,

the court held that a Milwaukee County ordinance was

preempted because it affected government contractors’

employees regardless of whether they performed work on

government contracts. 431 F.3d at 279. The ordinance

required government contractors to secure LPAs that would

apply to the contractors’ “employees,” without specifying

whether “employees” within the meaning of the ordinance

was limited to bargaining units that worked on county

contracts. Id. The unrestricted language left open the

possibility that an employee who performed only some or no

work for the county would be covered by an LPA, even for

a labor dispute arising out of non-county work. Id.

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 39

Here, we have no assurances—besides the word of the

City—that section 25 will have no similar spillover effects.

The majority confidently asserts that section 25 will not

“hamper service providers’ operations elsewhere.” That

conclusion apparently rests on the fact that section 25 as a

whole is aimed at operations at LAX. But we should be

unsurprised that section 25 focuses on LAX, given that the

airport authority lacks jurisdiction to directly regulate

service providers beyond LAX; the City clearly cannot

impose contracting conditions on service providers with

whom it has no contractual relationship. The key point,

however, is that nothing in section 25 limits private

agreements between service providers and unions from

extending beyond LAX. Nothing in section 25, for example,

dictates that LPAs shall cover only LAX bargaining units.

The ordinance provides only that an LPA must apply to a

labor organization’s “members,” regardless of whether they

perform only some or none of their work at LAX. In LPA

negotiations, therefore, labor organizations may seek

concessions that affect service provider employees well

beyond LAX. And, depending on service providers’

business arrangements, it may be impracticable for service

providers to segregate their workforces so that only

employees who work exclusively at LAX are covered by an

LPA. 7 See Metro. Milwaukee II, 431 F.3d at 279–80.

7

Contrary to the majority’s suggestion, we have no indication that

any “natural division” between labor performed at and outside LAX

exists. It may be, for example, that some service provider employees

perform work both at LAX and at one of the many other regional airports

in the greater Los Angeles area. Should such an employee become

involved in a labor dispute, she would be bound by an LPA entered into

pursuant to section 25 regardless of whether the dispute arose at LAX or

elsewhere. This type of spillover concern was central in Metropolitan

Milwaukee II, 431 F.3d at 279–80.

40 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS

The sheer scale of LAX may also result in

spillover effects. According to the City, “LAX is the

fourth busiest passenger airport in the world,” and the

second busiest in the U.S. L.A. World Airports, General

Information, LAX: Los Angeles World Airports,

http://www.lawa.org/welcome_lax.aspx?id=40 (last visited

July 14, 2017). Last year, LAX handled over 80.9 million

passengers and nearly 700,000 aircraft takeoffs and

landings. Id. In Reich, the D.C. Circuit held that an

Executive Order affecting all federal contracts over

$100,000 served as a regulation, and not market

participation, in part because the federal government is such

a large purchaser of goods and services. 74 F.3d at 1338.

Here, “given the size of [LAX’s] portion of the economy,”

labor negotiations at LAX may similarly “alter . . . behavior”

in the wider market for worldwide airline services. See id.

The ASPA should at least be allowed to prove these potential

effects.

III

If we are to give effect to Congress’ intent to “avoid the

‘diversities and conflicts likely to result from a variety of

local procedures and attitudes toward labor controversies,’”

Nash-Finch Co., 404 U.S. at 144, we cannot allow the

market participation exception to become too broad. It is not

enough to simply accept state and local governments’

assurances that they only seek to enforce labor policies as

market participants, particularly when those policies would

directly interfere with core rights protected by the NLRA,

itself the product of careful congressional balancing of

national labor policy in industries affecting interstate

commerce. Even at this early stage of litigation, an inquiry

into section 25’s “real effect on federal rights,” Livadas,

512 U.S. at 108, raises serious doubts that the City’s interest

AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 41

in enforcing section 25 is merely about protecting its

proprietary interest in running Los Angeles International

Airport. Plaintiffs have pled enough to proceed to discovery.

I respectfully dissent.