Facts

Attorney General Edmund G. Brown Jr. filed a claim of unfair business practices under Section 17200 et seq. of the Business and Professions Code against defendants Pac Anchor Transportation Inc. and Alfredo Barajas. Alfredo Barajas owns trucks and was the general manager of Pac Anchor, a motor carrier.

PLAINTIFF'S CONTENTIONS:
The state contended that the defendants misclassified the drivers driving Barajas' trucks for Pac Anchor as independent contractors, rather than employees, and therefore violated a number of state Labor and Unemployment Insurance Code provisions, as well as I.W.C. Wage Order 9-2001. The state alleged that Pac Anchor and Barajas were liable for the misclassification as a single enterprise.

DEFENDANT'S CONTENTIONS:
The defendants contended that the drivers were properly classified as independent contractors and that the arrangement between Pac Anchor and the drivers met the requirements of the federal Leasing Regulations, 49 C.F.R. 376 et seq.

The defendants alleged that the state's claim for unfair competition under section 17200 of the Business Professions Code was preempted by section 14501(c)(1) of Title 49 of the U.S. Code. The defendants filed a motion for judgment on the pleadings which argued that the state's claim of unfair competition under section 17200 was preempted per se under section 14501(c)(1) of the Federal Aviation Administration Authorization Act, 49 U.S.C. 14501(c)(1), which prohibits the state from enacting or enforcing laws related to motor carrier prices, routes, or services, and further that the claim was preempted because it is related to prices, routes and services.

Settlement Discussions

The defendants offered to settle for $50,000 but the state rejected the offer before the hearing.

Result

Judgment for defendants; the court granted the defense's motion for judgment on the pleadings.

Other Information

According to defense counsel: Judge Elizabeth A. White granted the motion for judgment on the pleadings. Judge White found that the holding announced in Fitz-Gerald v. Skywest, 155 Cal.App. 4th 411 (2007), was that section 14501(c)(1) preempts section 17200 claims per se. Therefore, the state's section 17200 claim against the defendants was preempted per se. In addition, Judge White found that the state's enforcement action threatened to have a significant impact upon motor carrier prices, routes, and services. Therefore the action was directly connected with prices, routes and services and preempted by section 14501(c)(1). Moreover, the court found that even if the connection were not direct, the action threatened to erect a forbidden entry control that would discourage the participation of independent contractor drivers in the trucking market, because if the state were granted the requested relief, drivers would either have to purchase trucks or renegotiate their leases to remain independent. Consequently, the economic effect of the state's action frustrated Congress' deregulatory purpose in enacting section 14501(c)(1), which was to maximize competitive forces in the trucking industry and encourage the use of independent contractor drivers where it is profitable. Defense counsel indicated there were some objections to the report, but did not provide comment. FILING DATE: Sept. 5, 2008.