Amicus Curiae Brief — Airline Service Providers Association, et al., Petitioners v. Los Angeles World Airports, et al.

No. 17-1183

In the Supreme Court of the United States

AIRLINE SERVICE PROVIDERS ASSOCIATION; and

AIR TRANSPORT ASSOCIATION OF AMERICA, INC.,

d/b/a AIRLINES FOR AMERICA,

Petitioners,

v.

LOS ANGELES WORLD AIRPORTS; and

CITY OF LOS ANGELES, CA,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

BRIEF OF THE CHAMBER OF COMMERCE OF

THE UNITED STATES OF AMERICA AND

THE RETAIL LITIGATION CENTER, INC. AS

AMICI CURIAE SUPPORTING PETITIONERS

STEVEN P. LEHOTSKY

JANET GALERIA

U.S. CHAMBER

LITIGATION CENTER

1615 H Street, NW

Washington, DC 20062

DEBORAH R. WHITE

RETAIL LITIGATION

CENTER, INC.

1700 N. Moore Street

Suite 2250

Arlington, VA 22209

BENJAMIN J. HORWICH

Counsel of Record

JOSHUA PATASHNIK

GIOVANNI SAARMAN

GONZÁLEZ

MUNGER, TOLLES &

OLSON LLP

560 Mission Street

27th Floor

San Francisco, CA 94105

ben.horwich@mto.com

(415) 512-4000

TABLE OF CONTENTS

Page

Interest of Amici Curiae.............................................. 1

Summary of Argument................................................ 2

Argument ..................................................................... 4

I. The Petition Presents a Question of

Widespread and Recurring Importance........... 4

A. Los Angeles’s Labor-Peace

Requirement Mirrors Requirements

Imposed by Other State and Local

Governments .............................................. 4

B. The Ninth Circuit’s Incorrect

Application of the MarketParticipation Exception Could

Undermine a Host of Preemptive

Federal Regulatory Regimes ..................... 7

II. The Decision Below Is Incorrect ................... 14

A. The Ninth Circuit Has Misapplied

This Court’s Decisions and

Misconceived the MarketParticipation Exception ........................... 14

B. The City’s Asserted Proprietary

Interest Is a Pretext for Advancing

Union-Favored Public Policy ................... 20

III.The Courts of Appeals Are Split on the

Question Presented ........................................ 22

Conclusion ................................................................. 24

(i)

ii

TABLE OF AUTHORITIES

Cases:

Page

Air Transport Ass’n of America v. City &

County of San Francisco, 992 F. Supp.

1149 (N.D. Cal. 1998) ............................................ 13

Aircraft Service International, Inc. v.

International Brotherhood of Teamsters,

Local 117, 779 F.3d 1069 (9th Cir. 2015) ................ 8

American Trucking Ass’ns v. City of Los

Angeles, 569 U.S. 641 (2013) ......................... passim

Associated Builders & Contractors, Inc. v.

Jersey City, 836 F.3d 412 (3d Cir. 2016) ......... 17, 23

Building & Construction Trades Council v.

Associated Builders & Contractors of

Massachusetts/Rhode Island, Inc.,

507 U.S. 218 (1993) ........................................ passim

Cardinal Towing & Auto Repair, Inc. v.

City of Bedford, 180 F.3d 686

(5th Cir. 1999) ...................................... 13, 14, 15, 23

Chamber of Commerce v. Brown,

554 U.S. 60 (2008) .......................................... passim

Chamber of Commerce v. Reich,

74 F.3d 1322 (D.C. Cir. 1996) ................................ 23

City of Columbus v. Ours Garage &

Wrecker Service, Inc., 536 U.S. 424 (2002) ............ 11

Engine Manufacturers Ass’n v. South Coast

Air Quality Management District,

498 F.3d 1031 (9th Cir. 2007) ................................ 17

541 U.S. 246 (2004) .......................................... 12, 13

iii

Cases—Continued:

Page

Garner v. Teamsters, Chauffers & Helpers

Local Union No. 776, 346 U.S. 485 (1953) .............. 8

Golden State Transit Corp. v. City of Los

Angeles, 475 U.S. 608 (1986) ................................... 8

Lodge 76, International Association

Machinists v. Wisconsin Employment

Relations Commission, 427 U.S. 132

(1976) .................................................................... 7, 8

Metropolitan Milwaukee Ass’nn of

Commerce v. Milwaukee County, 431 F.3d

277 (7th Cir. 2005) ..................................... 19, 22, 23

Michigan Building & Construction Trades

Council v. Snyder, 729 F.3d 572

(6th Cir. 2013) ........................................................ 23

Morales v. Trans World Airlines, Inc.,

504 U.S. 374 (1992) ................................................ 10

NLRB v. Nash–Finch Co.,

404 U.S. 138 (1971) .................................................. 8

Northwest, Inc. v. Ginsberg,

134 S. Ct. 1422 (2014) ............................................ 10

Rowe v. New Hampshire Motor

Transporation Ass’n,

552 U.S. 364 (2008) ................................................ 11

San Diego Building Trades Council v.

Garmon, 359 U.S. 236 (1959) .................................. 8

South-Central Timber Development, Inc. v.

Wunnicke, 467 U.S. 82 (1984) .................... 16, 17, 18

United States v. Locke, 529 U.S. 89 (2000)............... 11

iv

Cases—Continued:

Page

Wisconsin Department of Industry, Labor &

Human Relations v. Gould, Inc.,

475 U.S. 282 (1986) ........................................ passim

Wos v. E.M.A. ex rel. Johnson,

568 U.S. 627 (2013) ................................................ 13

Statutes:

Airline Deregulation Act (ADA),

Pub. L. No. 95-504, 92 Stat. 1705 .......................... 10

49 U.S.C. App. 1302(a)(4) ...................................... 10

49 U.S.C. App. 1302(a)(9) ..................................... 10

49 U.S.C. App. 1305(a)(1) ...................................... 10

Employee Retirement Income Security Act

of 1974, Pub. L. No. 93-406, 88 Stat. 829 .............. 13

Federal Aviation Administration

Authorization Act of 1994, Pub. L. No.

103-305, 108 Stat. 1569 ......................................... 10

49 U.S.C. 14501(c) .................................................. 11

ICC Termination Act of 1995, Pub. L. No.

104-88, 109 Stat. 803 ............................................. 10

49 U.S.C. 10501(b)(1) ............................................. 10

National Labor Relations Act (NLRA) ............. passim

42 U.S.C. 7543(a)....................................................... 12

45 U.S.C. 151a ............................................................. 8

46 U.S.C. 3703(a)....................................................... 11

Cal. Bus. & Prof. Code

§ 26051.5(a)(1)(E)(5)(A) ............................................ 6

Ga. Code Ann. § 34-6-21(c)........................................ 21

La. Rev. Stat. § 23:984(b) .......................................... 21

v

Statutes—Continued:

Page

Md. Code Ann., State Gov’t

§ 9-1A-07(c)(7)(v)(1) .................................................. 6

N.Y. Pub. Auth. Law § 2879-b(1)(d) ........................... 7

N.Y. Racing, Pari-Mutuel Wagering &

Breeding Law § 1346(2) ........................................... 6

Tenn. Code Ann. § 50-1-207(c)-(d) ............................ 21

Alameda, Cal., Ordinance 3201, § 6-59.5(m)

(Nov. 21, 2017) ......................................................... 6

Los Angeles, Cal., Admin. Code div. 7,

Chapter 3, Article 4, § 7.202 .................................. 21

Los Angeles, Cal., Mun. Code ch. VI, art. 6,

§ 66.33.6 .................................................................. 21

Los Angeles, Cal., Mun. Code ch. X, art. 4,

§ 104.11(l) ........................................................... 6, 20

San Francisco, Cal., Police Code art. 16,

§ 1609(b)(12) ............................................................. 6

Miscellaneous:

Bureau of Transp. Statistics, U.S. Dep’t of

Transp., Port Performance Freight

Statistics, Annual Report to Congress

(2017) ...................................................................... 12

Fed. Aviation Admin., U.S. Dep’t of Trans.,

Report to Congress, National Plan of Integrated Airport Systems 2017-2021

(2016) ...................................................................... 12

vi

Miscellaneous—Continued:

Page

Eric T. Smith et al., Preemption of WorkerRetention and Labor-Peace Agreements at

Airports, Nat’l Acad. of Sci., Eng’g, &

Med., Legal Res. Dig. 31 (Feb. 2017) ................... 4, 5

Mark Strassmann, Amazon HQ2: 20

Finalists Competing to Host New Headquarters, CBS News (Jan. 18, 2018, 6:40

PM) ........................................................................... 9

U.S. Chamber of Commerce, Labor Peace

Agreements: Local Government As Union

Advocate (2016) .......................................... 5, 6, 7, 21

INTEREST OF AMICI CURIAE 1

The Chamber of Commerce of the United States of

America is the world’s largest business federation. It

represents 300,000 direct members and indirectly

represents the interests of 3 million companies and

professional organizations of every size, in every industry sector, and from every region of the country. An

important function of the Chamber is to represent the

interests of its members in matters before Congress,

the Executive Branch, and the courts. To that end, the

Chamber regularly files amicus curiae briefs in cases

that raise issues of concern to the Nation’s business

community. Specifically, the Chamber has filed briefs

in several of this Court’s cases involving the marketparticipation exception, including American Trucking

Ass’ns v. City of Los Angeles, 569 U.S. 641, 651 (2013);

Chamber of Commerce v. Brown, 554 U.S. 60 (2008);

Building & Construction Trades Council v. Associated

Builders & Contractors of Mass./R.I., Inc., 507 U.S.

218 (1993) (“Boston Harbor”); and Wisconsin Department of Industry, Labor & Human Relations v. Gould,

Inc., 475 U.S. 282 (1986).

The Retail Litigation Center, Inc. (“RLC”) is a public

policy organization that identifies and contributes to

Pursuant to Rule 37.2(a), counsel for amici curiae provided

timely notice of intent to file this brief to counsel for all parties.

Petitioners have filed a notice of blanket consent with the

Clerk. Respondents’ counsel of record consented to the filing of

this brief. In accordance with Rule 37.6, no counsel for a party

authored this brief in whole or in part, and no such counsel or

party made a monetary contribution intended to fund the preparation or submission of this brief. No person other than the

amici curiae, their members, or their counsel, made such a

monetary contribution.

1

(1)

2

legal proceedings affecting the retail industry. The

RLC’s members include many of the country’s largest

and most innovative retailers. They employ millions of

workers throughout the United States, provide goods

and services to tens of millions of consumers, and account for tens of billions of dollars in annual sales. The

RLC seeks to provide courts with retail-industry perspectives on important legal issues impacting its members, and to highlight the potential industry-wide consequences of significant pending cases. The RLC frequently files amicus curiae briefs on behalf of the retail

industry.

Amici’s members and affiliates, many of which operate in industries affected by preemptive federal regulatory regimes established by Congress, have a keen

interest in ensuring that courts consistently and correctly apply the market-participation exception.

SUMMARY OF ARGUMENT

The City of Los Angeles (the “City” or “Los Angeles”)

by policy requires all service providers operating at Los

Angeles International Airport (the “Airport” or “LAX”)

to enter into so-called “labor peace” agreements—i.e.,

agreements with labor unions designed to prevent

strikes or other service disruptions. Despite the settled

rule that federal law broadly preempts local regulation

of labor relations and air services, the Ninth Circuit

approved this rule in the name of “market participation.” The Court of Appeals’ erroneous and overly

expansive conception of the market-participation exception to preemption warrants review for the reasons

stated in the petition, and because it more broadly

threatens to swallow up any number of preemptive

3

federal laws carefully crafted by Congress to promote

interstate commerce.

The market-participation exception rests on the

“distinction” this Court has recognized between “government as regulator and government as proprietor.”

Boston Harbor, 507 U.S. at 227. This narrow doctrine

reflects the reality that state and local governments

sometimes must “enter[] into . . . contract[s] just as a

private party would”—for example, to hire “a trucking

company to transport goods at a specified price.” Am.

Trucking, 569 U.S. at 649-650.

The marketparticipation exception allows governments to transact

as private parties do, even though federal law

preempts state and local regulation of (again, for example) the trucking industry.

The Ninth Circuit’s approval of the City’s policy requiring other parties contracting for services at LAX to

enter into labor-peace agreements stretches the market-participation exception beyond recognition, with

profound implications far outside the specific context of

this case. The City’s policy is not limited to service

providers at LAX, nor is it unique to Los Angeles. An

increasing number of jurisdictions have imposed similar requirements in a variety of circumstances.

The Ninth Circuit’s reasoning here would transform

the market-participation exception from a narrow

doctrine allowing state and local governments to buy

and sell goods and services into a hopelessly elastic

theory on which state and local governments could

regulate in fields that Congress has chosen to make

the exclusive province of the federal government—from

labor to transportation to air pollution to employee

benefits and beyond.

4

Whatever one thinks of requiring labor-peace

agreements as a matter of public policy, what matters

here is that it was a matter of public policy when Los

Angeles acted as a government regulator in requiring

service providers at LAX to enter into such agreements. Under the law as this Court and other federal

Circuits have articulated it, the City’s labor-peace

policy is regulatory and not contractual in nature, and

thus falls outside the scope of the market-participation

exception. This Court should grant certiorari to correct

the Ninth Circuit’s departure from that precedent and

to reaffirm that the market-participation exception

does not save laws like the City’s here.

ARGUMENT

I. The Petition Presents a Question

Widespread and Recurring Importance

of

A. Los Angeles’s Labor-Peace Requirement

Mirrors Requirements Imposed by Other

State and Local Governments

A labor-peace agreement (or labor-harmony agreement) is an agreement between an employer and a

union representing or seeking to represent the employer’s employees that includes terms preventing strikes

or other disruptions. See, e.g., Eric T. Smith et al.,

Preemption of Worker-Retention and Labor-Peace

Agreements at Airports, Nat’l Acad. of Sci., Eng’g, &

Med., Legal Res. Dig. 31, at 14 (Feb. 2017). The City’s

policy here, for example, requires that the agreement

“prohibit[] . . . picketing, work stoppages, boycotts, or

any other economic interference.” Pet. App. 127a. In

exchange for the union’s agreement not to engage in

these tactics, the employer agrees to waive certain

rights under federal law with regard to union organiz-

5

ing. For example, employers may agree to provide

workers’ personal contact information to the union,

give union organizers access to the workplace, or refrain from expressing opinions about the union.

With increasing frequency, state and local governments have sought to require private parties to enter

into such agreements—both by law and by contract.

Those jurisdictions favor such a requirement as a matter of policy because it promotes the interests of unions. The “practical effect” of these agreements “is to

provide unions with significant negotiating leverage

over employers who oppose unionization.” Smith,

supra, at 15. San Francisco pioneered the use of these

agreements in the 1980s and ultimately codified such a

requirement beginning in 1998. See U.S. Chamber of

Commerce, Labor Peace Agreements: Local Government as Union Advocate 5 (2016) (Labor Peace Agreements). 2 Since then, similar policies have been adopted in Los Angeles, Santa Monica, and San Jose, California; in New York, New York; in Seattle, Washington; in Portland, Oregon; in Washington, D.C.; in Baltimore, Maryland; and by the Port Authority of New

York and New Jersey.

Of course, within applicable legal constraints, state

and local governments in these jurisdictions are free to

pursue whatever policies they wish. But there are a

number of applicable legal constraints—including, as

relevant here, several federal statutes expressly

preempting such state and local regulations. See infra

at 7-14. Certain jurisdictions, including Los Angeles,

have therefore seized upon the market-participation

https://www.uschamber.com/sites/default/files/documents/files

/laborpeaceagreements.pdf.

2

6

exception as a vehicle for evading federal preemption

to enact their preferred policies.

Certainly, some state and local laws mandating labor-peace agreements touch on facilities in which the

government has some ostensible ownership or financial

interest, such as airports, seaports, stadiums, hotels,

and restaurants. See Labor Peace Agreements at 1315. But labor-peace-agreement requirements are by no

means limited to that context, and cities have imposed

the same requirements even where no proprietary

interest exists. For example, three California cities,

including Los Angeles and San Francisco, require

labor-peace agreements for cannabis license applicants

with ten or more employees. See Alameda, Cal., Ordinance 3201, § 6-59.5(m) (Nov. 21, 2017); Los Angeles,

Cal., Mun. Code ch. X, art. 4, § 104.11(l); San Francisco, Cal., Police Code art. 16, § 1609(b)(12). On their

face, these apply whether or not an applicant leases

government property or interacts with government as

a market participant; applicants simply operate their

businesses in the city, which is acting as business

licensor.

States have enacted similar state-wide requirements. Like San Francisco and Los Angeles, the State

of California requires labor-peace agreements for cannabis license applicants with twenty or more employees. Cal. Bus. & Prof. Code § 26051.5(a)(1)(E)(5)(A).

Maryland requires video lottery terminal licensees to

enter into a “labor peace agreement with each labor

organization that is actively engaged in representing or

attempting to represent video lottery and hospitality

industry workers in the State.” Md. Code Ann., State

Gov’t § 9-1A-07(c)(7)(v)(1). New York has an analogous

requirement for its gaming licensees, N.Y. Racing,

7

Pari-Mutuel Wagering & Breeding Law § 1346(2), and

also requires labor-peace agreements for contracts

relating to hotel and convention centers where there is

a state ownership or financial interest, N.Y. Pub. Auth.

Law § 2879-b(1)(d).

The number of jurisdictions with these requirements is only increasing. Millions of residents and

businesses reside in these jurisdictions, and they are

critically important to the national economy. Moreover, the decision below has outsized practical significance because the Ninth Circuit embraces many of

these jurisdictions, including California. See Labor

Peace Agreements at 13-15.

B. The Ninth Circuit’s Incorrect Application

of the Market-Participation Exception

Could Undermine a Host of Preemptive

Federal Regulatory Regimes

This case involves the intersection of two areas of

law in which Congress has chosen to expressly

preempt a wide range of state and local regulation:

labor and air service. The Ninth Circuit’s overly expansive conception of the market-participation exception could undermine the careful balance Congress has

struck not only in these preemptive regimes, but in a

number of others. See Pet. 24-27.

Labor Relations. This case itself shows how the

Ninth Circuit’s decision will undermine federal regulation of labor relations. “Congress struck a balance of

protection, prohibition, and laissez-faire in respect to

union organization, collective bargaining, and labor

disputes.” Brown, 554 U.S. at 65 (quoting Lodge 76,

Int’l Ass’n Machinists v. Wis. Emp’t Relations Comm’n,

427 U.S. 132, 140 n.4 (1976) (Machinsts)). The Na-

8

tional Labor Relations Act “largely displaced state

regulation of industrial relations.” Gould, 475 U.S. at

286. Congress’s goal 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, Chauffeurs & Helpers

Local Union No. 776, 346 U.S. 485, 490 (1953)). Similarly, for certain industries (including railroads and

airlines) Congress sought to “avoid any interruption to

commerce or to the operation of any carrier engaged

therein” by establishing a centralized, “mandatory

system of dispute resolution” in the Railway Labor Act.

Aircraft Serv. Int’l, Inc. v. Int’l Bhd. of Teamsters, Local

117, 779 F.3d 1069, 1073 (9th Cir. 2015) (citing 45

U.S.C. 151a).

This Court has recognized a pair of preemption doctrines to protect this balance struck by Congress.

Preemption under San Diego Building Trades Council

v. Garmon, 359 U.S. 236 (1959), “preclude[s] state

interference with the National Labor Relations Board’s

interpretation and active enforcement of the ‘integrated scheme of regulation’ established by the NLRA,”

Golden State Transit Corp. v. City of Los Angeles, 475

U.S. 608, 613 (1986). Preemption under Machinists,

427 U.S. 132, “forbids both the National Labor Relations Board (NLRB) and States to regulate conduct

that Congress intended be unregulated because left to

be controlled by the free play of economic forces,”

Brown, 554 U.S. at 65 (quoting Machinists, 427 U.S. at

140) (internal quotation marks omitted). Thus, for

example, this Court held preempted a California law

that prohibited certain employers receiving state funds

9

from using those funds “to assist, promote, or deter

union organizing.” Brown, 554 U.S. at 62, 69-76.

The Ninth Circuit’s approach here opens a gaping

hole in these preemption doctrines. Nothing about its

rationale is limited to service providers at airports; a

city that believes a labor-peace requirement (or any

other labor practice) fosters a more commercially hospitable environment could fashion a requirement like

Los Angeles did here. That conception of the marketparticipation exception is virtually limitless. The

court’s analysis turned on its belief that Los Angeles

participates in a “market” for airport services: “If the

City operates the airport poorly, fewer passengers will

choose to fly into and out of LAX, [and] fewer airlines

will operate from LAX.” Pet. App. 11a. But nearly

everything state and local governments do constitutes

“market participation” in that sense: all jurisdictions

can be said to compete in the marketplace to attract

residents, businesses, talent, and investment in the

same way they do airline passengers. See, e.g., Mark

Strassmann, Amazon HQ2: 20 Finalists Competing to

Host New Headquarters, CBS News (Jan. 18, 2018,

6:40 PM). 3 Permitting state and local regulations of

this sort is the logical endpoint of the Ninth Circuit’s

approach, yet that result is entirely at odds with this

Court’s decades-long understanding of the preemptive

scope of federal labor law.

Transportation. Congress has adopted broad deregulatory regimes governing various modes of transportation. In these areas, Congress has made an affirmative policy choice to rely on competitive market

https://www.cbsnews.com/news/amazon-hq2-20-finalists-com

peting-to-host-new-headquarters/.

3

10

forces, preempting state and local regulation. The

Ninth Circuit’s approach allows clever jurisdictions to

end-run that federal policy in the name of market

participation.

In particular, in enacting the Airline Deregulation

Act of 1978 (ADA), Pub. L. No. 95-504, 92 Stat. 1705,

Congress decided that “ ‘maximum reliance on competitive market forces’ would best further ‘efficiency, innovation, and low prices’ as well as ‘variety [and] quality

. . . of air transportation services.’ ” Morales v. Trans

World Airlines, Inc., 504 U.S. 374, 378 (1992) (quoting

49 U.S.C. App. 1302(a)(4), 1302(a)(9)). Congress expressly prohibited States from “enforcing any law ‘relating to rates, routes, or services’ of any air carrier” in

order to “ensure that the States would not undo federal

deregulation with regulation of their own.” Id. at 378379 (quoting 49 U.S.C. App. 1305(a)(1)). Thus, for

example, this Court has held that the ADA preempts a

passenger’s claim that an airline’s operation of its

frequent-flyer program breaches the implied covenant

of good faith and fair dealing under state common law.

Northwest, Inc. v. Ginsberg, 134 S. Ct. 1422, 1433

(2014).

Similarly, the ICC Termination Act of 1995, Pub. L.

No. 104-88, 109 Stat. 803, and the Federal Aviation

Administration Authorization Act of 1994, Pub. L. No.

103-305, 108 Stat. 1569, generally leave rail transportation and motor carrier transportation, respectively,

to market forces, not local regulation. Congress vested

the federal Surface Transportation Board with exclusive authority over “transportation by rail carriers,”

including “with respect to rates, classifications, rules

. . . practices, routes, services, and facilities.” 49 U.S.C.

10501(b)(1). And Congress preempted regulation “re-

11

lated to a price, route, or service of any motor carrier

. . . with respect to the transportation of property.”

City of Columbus v. Ours Garage & Wrecker Serv., Inc.,

536 U.S. 424, 429 (2002) (quoting 49 U.S.C. 14501(c)).

Thus, this Court held Section 14501(c) to preempt a

law regulating the delivery of tobacco products within

a state. Rowe v. N.H. Motor Transp. Ass’n, 552 U.S.

364, 367 (2008).

In the context of maritime commerce, Congress created a preemptive regime requiring the Coast Guard to

promulgate “regulations for the design, construction,

alteration, repair, maintenance, operation, equipping,

personnel qualification, and manning” of tanker vessels. 46 U.S.C. 3703(a). This Court has held that this

statute preempted Washington State regulations for oil

tanker operation and design adopted in the wake of the

Exxon Valdez oil spill. United States v. Locke, 529 U.S.

89, 94 (2000).

The Ninth Circuit’s reasoning could significantly

undermine all of these regimes. For example, the Port

of Seattle could impose by contractual demand what

Washington was unable to accomplish by statute, as

the Port could claim under the decision below that

otherwise-preempted regulations would further its

ownership interest in the safety and environmental

conditions of its facilities. Or, if Los Angeles’s proprietary interest in operating LAX in an efficient manner

allows the City to require service providers to enter

into labor-peace agreements, then why could the City

not also require service providers to (for example) give

discounts to airlines with superior on-time performance?

12

At a bare minimum, just as the City could require

labor-peace agreements at LAX, other state and local

governments could adopt similar requirements for

airports, ports, and other facilities they own or control.

The extent of such control is substantial—nearly 98

percent of the airports identified by the FAA as “important to national air transportation” are publicly

owned; only 77 of the 3,332 existing domestic airports

identified are private. Fed. Aviation Admin., U.S.

Dep’t of Trans., Report to Congress, National Plan of

Integrated Airport Systems (NPIAS) 2017-2021, at v,

2-3 (2016). 4 Governments also have unique control or

ownership interests in other channels and instrumentalities of interstate commerce, such as ports. E.g.,

Bureau of Transp. Statistics, U.S. Dep’t of Transp.,

Port Performance Freight Statistics, Annual Report to

Congress 2-2 (2017) (“Most ports are governed by port

authorities or harbor districts, which are usually part

of local or state government.”).

Clean Air Act. The Ninth Circuit’s decision could

also undermine federal regulation of emissions. As

part of amendments to the Clean Air Act, Congress

implemented a national regime for new vehicle emission standards. E.g., Engine Mfrs. Ass’n v. S. Coast Air

Quality Mgmt. Dist., 541 U.S. 246, 252 (2004) (citing

42 U.S.C. 7543(a)). In Engine Manufacturers, this

Court considered California’s South Coast Air Quality

Management District’s rules setting emission standards for vehicles purchased or leased by public and

private fleet operators. Id. at 248-249. The Court

indicated that some rules appeared to be preempted by

https://www.faa.gov/airports/planning_capacity/npias/reports/

media/NPIAS-Report-2017-2021-Narrative.pdf.

4

13

the Clean Air Act, such as a rule for private airportshuttle operators, but others might not be, such as

those governing internal state procurement decisions

(which could be insulated from preemption on a market-participation rationale). Id. at 258-259.

Under the City’s reasoning, improved air quality at

the Airport could be beneficial to passengers and employees, attracting more business to LAX and thereby

advancing the City’s ownership and financial interests.

Thus, the City could try to accomplish what this Court

recognized the air district could not: require precisely

the same airport-shuttle operators at LAX to purchase

vehicles satisfying precisely the same emissions standards. But that is not the way preemption works—state

and local governments may not “evade the pre-emptive

force of federal law by resorting to creative” mechanisms like Los Angeles has sought to do here. Wos v.

E.M.A. ex rel. Johnson, 568 U.S. 627, 636 (2013).

ERISA. Federal courts have also recognized a

market-participation exception to preemption under

the Employee Retirement Income Security Act of 1974,

Pub. L. No. 93-406, 88 Stat. 829. See, e.g., Cardinal

Towing & Auto Repair, Inc. v. City of Bedford, 180 F.3d

686, 692 (5th Cir. 1999). Accordingly, a municipality

may not, for example, refuse to contract with a company because of a policy-based disagreement with the

way in which the company structures its employee

benefits. Air Transp. Ass’n of Am. v. City & Cty. of

S.F., 992 F. Supp. 1149, 1179 (N.D. Cal. 1998). The

Ninth Circuit’s approach here threatens to disrupt this

area of federal preemption as well: Many state and

local governments could be expected to assert a proprietary interest in ensuring that their contractors have

14

satisfied, productive employees with generous benefits

structured in the way the government prefers.

II.

The Decision Below Is Incorrect

A. The Ninth Circuit Has Misapplied This

Court’s Decisions and Misconceived the

Market-Participation Exception

1. This Court’s decisions make clear that the application of the market-participation exception turns on

whether the government acts to further a proprietary

interest it shares with similarly situated private participants in the relevant market, or instead to further

its regulatory or policy interests. See, e.g., Am. Trucking, 569 U.S. at 651 (“The Port here has not acted as a

private party, contracting in a way that the owner of

an ordinary commercial enterprise could mimic.”);

Gould, 475 U.S. at 289 (“[B]y flatly prohibiting state

purchases from repeat labor law violators Wisconsin

‘simply is not functioning as a private purchaser of

services;’ for all practical purposes, Wisconsin’s debarment scheme is tantamount to regulation.” (citation

omitted)).

Determining whether the market-participation exception applies involves a two-part inquiry. First, the

government must actually participate in the relevant

market by buying or selling goods or services. See Pet.

14-16; Am. Trucking, 569 U.S. at 650 (“When a State

acts as a purchaser of services, ‘it does not “regulate”

the workings of the market . . . ; it exemplifies them.’ ”

(quoting Boston Harbor, 507 U.S. at 233)); Gould, 475

U.S. at 289 (a state must “function[] as a private purchaser of services”); Cardinal Towing, 180 F.3d at 693

(asking whether “the challenged action essentially

15

reflect[s] the entity’s own interest in its efficient procurement of needed goods and services”).

Second, the government must participate in a manner comparable to that of similarly situated private

parties. Otherwise, there is a strong “inference that its

primary goal was to encourage a general policy rather

than address a specific proprietary problem.” Cardinal

Towing, 180 F.3d at 693; see Pet. 27-28; Am. Trucking,

569 U.S. at 651 (a state must act “just as a private

company might,” i.e., “contracting in a way that the

owner of an ordinary commercial enterprise could

mimic”); Boston Harbor, 507 U.S. at 229 (conduct is

regulatory if it is “on the basis of a labor policy concern

rather than a profit motive”); Gould, 475 U.S. at 290.

The goal of this two-part inquiry is “to isolate a class

of government interactions with the market that are so

narrowly focused, and so in keeping with the ordinary

behavior of private parties, that a regulatory impulse

can be safely ruled out.” Cardinal Towing, 180 F.3d at

693. For example, in Gould, this Court invalidated a

Wisconsin policy under which the State refused to

contract with persons or firms that had repeatedly

violated the NLRA. 475 U.S. at 283-284. Recognizing

that Wisconsin sought to deploy its state procurement

policies to enforce federal labor law, the Court unanimously concluded that “Wisconsin ‘simply [wa]s not

functioning as a private purchaser of services,’ [and]

for all practical purposes, Wisconsin’s debarment

scheme [wa]s tantamount to regulation.” Id. at 289.

Thus, even where a government clearly participates in

a market, the market-participation exception does not

shield that activity from preemption if its function is to

advance a regulatory policy, as opposed to achieve the

16

sort of economic efficiency exhibited by similarly situated profit-motivated private actors.

By contrast, in Boston Harbor, this Court approved

the challenged government procurement policy—a

prehire collective-bargaining agreement that would

bind successful contract bidders—precisely because it

was in keeping with how similarly situated private

parties might act. There, the Massachusetts Water

Resources Authority (MWRA) was under a court order

to clean up pollution in Boston Harbor. 507 U.S. at

220-221. The order specifically “required construction

to proceed without interruption, making no allowance

for delays from causes such as labor disputes.” Id. at

221. Key to the Court’s reasoning was the fact that

Congress had specifically amended the NLRA to “permit[] employers in the construction industry—but no

other employers—to enter into prehire agreements.”

Id. at 230. Accordingly, “[t]here [wa]s no question but

that MWRA was attempting to ensure an efficient

project that would be completed as quickly and effectively as possible at the lowest cost . . . [and] the challenged action . . . was specifically tailored to one particular job, the Boston Harbor cleanup project.” Id. at

232. The Court contrasted this situation with a hypothetical one in which a government structured its purchasing decisions “on the basis of a labor policy concern

rather than a profit motive,” which the Court emphasized would be preempted, because the government

would be “perform[ing] a role that is characteristically

a governmental rather than a private role.” Id. at 229.

Likewise, in the context of the Dormant Commerce

Clause, a plurality of this Court refused to apply the

market-participation exception to Alaska’s sale of timber where “[t]he notice of sale, the prospectus, and the

17

proposed contract for sale all provided . . . that ‘primary manufacture within the State of Alaska . . . be required as a special provision of the contract.’ ” SouthCentral Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 84

(1984). 5 The plurality emphasized that although Alaska was acting as a seller of timber, it was seeking to

“leverage” such sales “to exert a regulatory effect in the

processing market, in which it [wa]s not a participant.”

Id. at 98. “Instead of merely choosing its own trading

partners,” Alaska was “attempting to govern the private, separate economic relationships of its trading

partners.” Id. at 99. No private party would have

behaved in the same way—because none would share

Alaska’s policy-based interest in promoting Alaska

timber production.

2. The Ninth Circuit’s decision cannot be squared

with these cases. By essentially ending its inquiry

upon concluding that the City participates in some

market, the Ninth Circuit ignored overwhelming signs

the City acted “on the basis of a labor policy concern

rather than a profit motive.” Boston Harbor, 507 U.S.

at 229.

To begin with, the Ninth Circuit’s reasoning fails to

recognize that the market-participation exception

generally allows the government to influence only the

market in which it participates. That is not the case

here. Rather, much as in Wunnicke, where Alaska was

Courts have recognized that the scope of the marketparticipation exception is the same in the preemption and

Dormant Commerce Clause settings. See, e.g., Associated

Builders & Contractors, Inc. v. Jersey City, 836 F.3d 412, 417

(3d Cir. 2016); Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt.

Dist., 498 F.3d 1031, 1040 (9th Cir. 2007).

5

18

“using its leverage in th[e raw timber] market to exert

a regulatory effect in the processing market,” 467 U.S.

at 84, the City is using its position as airport operator

to control its licensees’ independent interactions with

third parties (viz., the licensees’ employees), in a market for airport labor in which the City generally does

not participate. The policy similarly removes a degree

of bargaining freedom that licensees would otherwise

enjoy in the labor market. And, unlike in Boston Harbor, there is no particular authorization for these

agreements in the NLRA, nor is the City the ultimate

purchaser of the services governed by the challenged

labor agreements. See 507 U.S. at 231 (applying the

market-participation exception because the state agency was “purchasing contracting services”). “[T]he market-participant doctrine . . . allows a State to impose

burdens on commerce within the market in which it is

a participant, but allows it to go no further.” Wunnicke, 467 U.S. at 97. The Ninth Circuit’s opinion

allows state and local governments to go much, much

further.

Indeed, the Ninth Circuit’s conception of what it

means to participate in a market is virtually limitless.

The City’s participation in the “market” to attract

airline passengers and airlines to LAX is qualitatively

different from a government’s role in, say, purchasing

cars or computers for state employees to use at work.

Instead, it is akin to the kind of regulatory, policybased competition governments engage in routinely to

attract businesses and talent. See supra at 9. This

Court has never suggested the market-participation

exception can reach so far, and for good reason—such

an exception would swallow up the preemptive rules

laid down by Congress.

19

It is no answer to suggest, as the Ninth Circuit did,

that “[i]f a private entity operated LAX, that entity

would have a pressing interest in avoiding strikes,

picket lines, boycotts, and work stoppages.” Pet. App.

10a. As the dissent below noted, no evidence suggests

that similarly situated private parties advance this

interest by requiring labor-peace agreements. See Pet.

App. 32a. And the fact that the City (and like-minded

jurisdictions) also require labor-peace agreements in

many different contexts, from hotels to cannabis dispensaries, shows that the City’s asserted proprietary

interest is a mere cloak for the City’s preferred labor

policy, not an economic judgment rooted in the City’s

proprietary interest in airport management. See Metropolitan Milwaukee Ass’n of Commerce v. Milwaukee

Cty., 431 F.3d 277, 279 (7th Cir. 2005) (noting that the

principle of Gould is that “the spending power may not

be used as a pretext for regulating labor relations”).

The Ninth Circuit expressly discounted this part of

the analysis, concluding that a government entity

“may entertain non-economic purposes and yet rely on

the market participant doctrine” and that “lurking

political motives are an inevitable part of a public

body’s actions and are not ‘a reason for invalidity.’ ”

Pet. App. 17a-18a. That reasoning directly contradicts

this Court’s decisions. A government entity must

“function[] as a private purchaser of services,” Gould,

475 U.S. at 289, and “act[] as a ‘market participant

with no interest in setting policy,’ ” in order to “not

offend the pre-emption principles of the NLRA,”

Brown, 554 U.S. at 70 (emphasis added). Indeed, the

regulatory purpose behind Wisconsin’s procurement

policy is precisely why Gould concluded that policy was

preempted. The Ninth Circuit ignored that, as a gov-

20

ernment entity, the City is “different from private

parties and ha[s] a different role to play.” Gould, 475

U.S. at 290.

B. The City’s Asserted Proprietary Interest

Is a Pretext for Advancing Union-Favored

Public Policy

The larger context of this case and the prevalence of

labor-peace agreement requirements reveal that the

City is using a purported interest in avoiding airport

service disruptions as a pretext for furthering its regulatory ends. Again, the question here is not the wisdom of those regulatory ends, but simply whether they

are rooted in the City’s public policies or in its private

ownership interests.

In contrast to Boston Harbor, Los Angeles’s policy

here is not “specifically tailored to one particular job,”

507 U.S. at 232, or to one specific vendor or class of

vendors with a close nexus to potential service disruptions. Rather, the City has a blanket policy for all LAX

licensees—and that is only part of a larger policy program favoring labor-peace agreements and requiring

them in other contexts as well. Such a broad, untailored policy is necessarily regulatory: Los Angeles

requires labor-peace agreements by policy where it has

the political leverage to do so, not to further its ostensible proprietary interests in the airport-services market.

For example, Los Angeles also requires labor-peace

agreements from cannabis license applicants. Los

Angeles, Cal., Mun. Code ch. X, art. 4, § 104.11(l).

Applicants simply seek to operate their businesses

within Los Angeles, and the City is acting as business

licensor with no proprietary interest. The City also

21

requires labor-peace agreements for commercial and

multifamily waste collection franchisees, Los Angeles,

Cal., Mun. Code ch. VI, art. 6, § 66.33.6, as well as for

hotel operators with leases from the City, Los Angeles,

Cal., Admin. Code div. 7, ch. 3, art. 4, § 7.202. These

diverse requirements can only be understood as a

policy decision of broad application, belying any claim

that the labor-peace requirement at LAX was tailored

to interests particular to the Airport, or aligns with

how profit-motivated private parties act.

Moreover, the City is not alone. As explained above,

supra at 4-7, such policies have spread across the Nation, taking firmest root in jurisdictions in which unions are politically influential. The most natural inference from this strong correlation is that labor-peace

requirements are a matter of political interest, not

commercial calculation. Conversely, some States have

prohibited their municipalities from enacting such

requirements, further confirming the regulatory nature of these policies. See Labor Peace Agreements at

11-12; see La. Rev. Stat. § 23:984(b); Ga. Code Ann.

§ 34-6-21(c); Tenn. Code Ann. § 50-1-207(c)-(d).

Amici know of no evidence that private parties rely

on labor-peace requirements in similar circumstances.

These requirements thus stand in contrast to the prehire agreements approved in Boston Harbor, which are

both recognized by the NLRA and a tested tool of private, profit-motivated parties. 507 U.S. at 231, 233.

There are, moreover, far more logical ways to advance the City’s stated interest in avoiding service

disruptions. For instance, it could rely on traditional

contract remedies, such as damages or contract termination when service disruptions genuinely affect the

22

Airport. Cf. Am. Trucking, 569 U.S. at 650-651 (rejecting application of the market-participation exception

where Los Angeles port regulations were not limited to

ordinary contract remedies). That approach would

abundantly serve Congress’s deregulatory purposes by

leaving the Airport’s licensees—the true market participants—free to decide for themselves how best to minimize their liability for potential disruptions. And

some might opt to enter labor-peace agreements. But

any such agreement would be the product of genuine

market forces, not the dictate of a blanket city policy.

III.

The Courts of Appeals Are Split on the

Question Presented

The Ninth Circuit’s decision conflicts with decisions

of the Third, Fifth, Sixth, Seventh, and D.C. Circuits.

See Pet. 20-24.

The conflict with the Seventh Circuit’s decision in

Metropolitan Milwaukee is most direct, as both concern

labor-peace agreements. The Seventh Circuit considered a labor-peace requirement for firms providing

transportation services for elderly and disabled residents under contract with the County. Metropolitan

Milwaukee, 431 F.3d at 278. The court held the market-participation exception inapplicable because, unlike the agreements in Boston Harbor, there was “no

similar showing that labor-peace agreements are ‘tried

and true’ ” and the county pointed to no example of a

comparable policy imposed by a similarly situated

private party. Id. at 282. Moreover, “the existence of

effective contractual remedies for service interruptions

eliminates the need for states or their subdivisions to

create a special regime for the labor relations of their

contractors.” Id. at 281. The court found the inference

23

“inescapable” that the County was motivated by “dissatisfaction with the balance that the National Labor

Relations Act strikes between unions and management

rather than concern with service interruptions.” Id.

Similarly, in Cardinal Towing, the Fifth Circuit applied the market-participation exception to a contract

for non-consensual towing services requested by the

city. Cardinal Towing, 180 F.3d at 689. The court

distinguished this policy from “[l]icensing schemes

[which] do not invite proprietary analysis.” Id. at 693

n.2. The Third, Sixth, and D.C. Circuits have likewise

emphasized that the exception applies only where the

government actually participates in the market and

behaves as a profit-motivated private party would. See

Associated Builders & Contractors, 836 F.3d at 420

(holding the exception inapplicable to a policy requiring labor agreements for developers to receive tax and

other incentives because the city was “not selling or

providing any goods or services . . ., nor acting as an

investor, owner, or financier with respect to those

projects”); Michigan Bldg. & Constr. Trades Council v.

Snyder, 729 F.3d 572, 579 (6th Cir. 2013) (applying the

exception to a procurement law prohibiting contracts

from requiring labor agreements because the state was

acting “[j]ust as a private purchaser [in] choos[ing] not

to enter into PLAs”); Chamber of Commerce v. Reich,

74 F.3d 1322, 1336-37 (D.C. Cir. 1996) (invalidating an

executive order barring the federal government from

contracting with employers that hire permanent replacement employees during a lawful strike because

“[i]t does not seem to us possible to deny that the [order] seeks to set a broad policy,” for private contractors

would not “care whether a struck supplier hired permanent or temporary replacements”).

24

The Ninth Circuit’s decision cannot be squared with

these decisions, all of which—unlike the decision below—reflect a faithful application of this Court’s precedents. Review is warranted to resolve that conflict and

reaffirm the proper, limited scope of the marketparticipation exception.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

STEVEN P. LEHOTSKY

JANET GALERIA

U.S. CHAMBER

LITIGATION CENTER

1615 H Street, NW

Washington, DC 20062

DEBORAH R. WHITE

RETAIL LITIGATION

CENTER, INC.

1700 N. Moore Street

Suite 2250

Arlington, VA 22209

MARCH 26, 2018

BENJAMIN J. HORWICH

Counsel of Record

JOSHUA PATASHNIK

GIOVANNI SAARMAN

GONZÁLEZ

MUNGER, TOLLES &

OLSON LLP

560 Mission Street

27th Floor

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ben.horwich@mto.com

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