Justices should take LAX labor case

A petition for certiorari in Airline Service Providers Association v. Los Angeles World Airports (17-1183) asks the U.S. Supreme Court to once again correct the 9th U.S. Circuit Court of Appeals' failure to apply the broad preemptive force of federal labor law to California's attempts to regulate labor-management relations in contravention of the uniform national scheme established by Congress.

At issue in Airline Service Providers is the validity of a licensing condition the city of Los Angeles imposes on third-party service providers hired by airlines at the Los Angeles International Airport, requiring such providers to enter into a "labor peace agreement" prohibiting strikes with any employee organization that requests one. The 9th Circuit's split decision upholding Los Angeles' licensing condition was based on a radical and unwarranted expansion of the narrow "market participant" exception to federal labor preemption and conflicts with decades of Supreme Court precedent on the subject. The Supreme Court should grant review in this case to reaffirm the primacy of federal labor law and clarify the scope of the market participant doctrine.

The 1926 Railway Labor Act and 1935 National Labor Relations Act set forth comprehensive federal schemes for regulation of relations between labor unions and most private employers. Thus, states and local governments may not "regulate activity that the NLRA [or RLA] protects, prohibits, or arguably protects or prohibits," nor may they interfere with conduct by unions and employers that Congress intended "to be controlled by the free play of economic forces." Wis. Dep't of Indus., Labor & Human Rels. v. Gould, Inc., 475 U.S. 282, 286 (1986); Int'l Ass'n of Machinists & Aero. Workers v. Wis. Emp't Relations Comm'n, 427 U.S. 132, 140 (1976).

Because federal labor law "does not require [an employer and a union] to reach agreement," no one disputes that Los Angeles' requirement for labor peace agreements would be preempted if it were generally imposed on all private employers and unions within the city's jurisdiction. Golden State Transit Corp. v. Los Angeles, 475 U.S. 608, 616 (1986).

To evade this result, the 9th Circuit invoked the principle that state and local action is not preempted when the state or local entity acts as a market participant rather than a regulator. But the service providers subject to Los Angeles' licensing condition do not do any business with the city or airport at all. The affected service providers' clients are airlines who hire them "to refuel and load planes, take baggage and tickets, help disabled passengers, and provide similar services." Airline Serv. Providers Ass'n v. L.A. World Airports, 873 F.3d 1074, 1081 (9th Cir. 2017). Far from acting as a "participant" in the market for the providers' services, Los Angeles is instead regulating the providers by imposing conditions on their ability to do business with other private entities (airlines) at a public airport.

The only Supreme Court decision applying the market participant doctrine to shield a state or local entity from federal labor preemption involved markedly different circumstances than those present in Airline Service Providers. In Building & Construction Trades Council v. Associated Builders & Contractors, 507 U.S. 218 (1993) (Boston Harbor), the Massachusetts Water Resources Authority had hired a private company to manage a pollution cleanup project at Boston Harbor, and that company negotiated a prehire agreement with a union with terms and procedures that the NLRA expressly permits. The Supreme Court held that the water authority's adoption of the prehire agreement was market participation, not regulation, because a private landowner would be permitted "to choose a contractor based upon that contractor's willingness to enter into a prehire agreement" so "a public entity as purchaser should be permitted to do the same." (Original emphasis). The Boston Harbor case is inapplicable to Los Angles' licensing condition because, as Judge Richard Tallman pointed out in his Airline Service Providers dissent, "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 to do business at the airport."

The 9th Circuit's decision further conflicts with a long line of Supreme Court decisions finding the market participant rule inapplicable. For example, the Supreme Court in Wisconsin Department of Industry, struck down a Wisconsin statute prohibiting state agencies from purchasing products from firms that had repeatedly violated the NLRA. Even though the statute only affected how the state spent its own money (and thus presented a much closer case of market participation than Los Angeles' licensing condition), the Supreme Court held that the statute was preempted.

Similarly, the Supreme Court in Chamber of Commerce of the United States v. Brown, 554 U.S. 60 (2008) reversed a 9th Circuit decision upholding a California statute prohibiting employers from spending any funds received from the state "to assist, promote, or deter union organizing." The Supreme Court specifically found "that California enacted [the challenged statute] in its capacity as a regulator rather than a market participant," and distinguished the Boston Harbor case on the ground that "the challenged action [in Boston Harbor] 'was specifically tailored to one particular job,' and aimed 'to ensure an efficient project.'"

The 9th Circuit was also reversed in Golden State Transit, a case involving a strikingly similar attempt by Los Angeles to use its licensing power to impose its own local labor policy. In Golden State Transit, a taxi company's operations were halted by a strike, and Los Angeles refused to extend the company's franchise permitting it to operate unless the strike was resolved by a certain date. The Supreme Court held that because federal law allowed the taxi company to hold out to obtain concessions from the union, the city had unlawfully "destroyed the balance of power designed by Congress." Golden State Transit therefore confirms that licensing is regulation, not market participation. And just as in Golden State Transit, Los Angeles in Airline Service Providers is using its licensing authority to prohibit companies it does no business with from operating unless the companies reach particular labor agreements.

The 9th Circuit purported to distinguish Golden State Transit by noting that Los Angeles owns and operates the airport and thus has a "proprietary interest in running the airport smoothly," but the city also owns and maintains the roads and surely has just as strong of an interest in ensuring smooth and uninterrupted taxi service on them as it does in ensuring smooth and uninterrupted flight service at an airport. The relevant inquiry under the market participant doctrine is not whether a state or local entity has a property interest in the regulated area, but whether the government is the purchaser of the regulated businesses' goods or services. Cf. Boston Harbor, 507 U.S. at 227 ("[A] very different case would have been presented had the city of Los Angeles purchased taxi services from Golden State.").

The RLA and NLRA were enacted to end the patchwork of conflicting state and local attitudes toward unionization and construct a uniform national system for regulating labor disputes and collective bargaining. By mangling the market participant doctrine so that it includes state and local regulation of employers that states and local governments do not actually purchase any goods or services from, the 9th Circuit's decision in Airline Service Providers threatens to undermine Congress' national scheme. The Supreme Court should grant certiorari in this case to correct the 9th Circuit's misapplication of the market participation doctrine and affirm that states and local governments may not substitute their judgment on labor policy for that of Congress.