AIRLINES FOR AMERICA V. CITY AND COUNTY OF SAN FRANCISCO, No. 22-15677 (9th Cir. 2023)Annotate this Case
The City and County of San Francisco (the City) owns and operates San Francisco International Airport (SFO or the Airport). Airlines for America (A4A) represents airlines that contract with the City to use SFO. In 2020, in response to the COVID-19 pandemic, the City enacted the Healthy Airport Ordinance (HAO), requiring the airlines that use SFO to provide employees with certain health insurance benefits. A4A filed this action in the Northern District of California, alleging that the City, in enacting the HAO, acted as a government regulator and not a market participant, and therefore the HAO is preempted by multiple federal statutes. The district court agreed to the parties’ suggestion to bifurcate the case to first address the City’s market participation defense. The district court held that the City was a market participant and granted its motion for summary judgment. A4A appealed.
The Ninth Circuit reversed the district court’s grant of summary judgment. The court concluded that two civil penalty provisions of the HAO carry the force of law and thus render the City a regulator rather than a market participant. The court wrote that because these civil penalty provisions result in the City acting as a regulator, it need not determine whether the City otherwise would be a regulator under the Cardinal Towing two-part test set forth in LAX, 873 F.3d at 1080
Court Description: Preemption. The panel reversed the district court’s grant of summary judgment in favor of the City and County of San Francisco in an action challenging the City’s Healthy Airport Ordinance, which requires airlines that contract with the City to use San Francisco International Airport to provide employees with certain health insurance benefits.
Federal law generally preempts state or local government action that has the force and effect of law. But when a state or local government buys services or manages property as would a private party, it acts as a market participant, not as a regulator, and courts presume that its actions are not subject to preemption.
Airlines for America, a representative of the airlines, alleged that the City, in enacting the ordinance and amending SFO’s contract with the airlines, acted as a government regulator and not as a market participant, and the ordinance therefore was preempted by multiple federal statutes. The district court held that the City was a market participant and granted its motion for summary judgment.
The Healthy Airport Ordinance contains a civil penalty provision authorizing the Airport Director to impose daily fines, with discretion to increase the amount of the fines. The ordinance also contains a civil penalty provision authorizing the City to collect liquidated damages. The City AIRLINES FOR AMERICA V. CITY & COUNTY OF SAN FRANCISCO 3 can seek to enforce these provisions in a municipal administrative proceeding. Reversing and remanding, the panel held that the two civil penalty provisions carried the force of law and thus rendered the City a regulator rather than a market participant.
Dissenting, Judge Schroeder wrote that, in amending SFO’s contract with the airlines, the City acted as a market participant and at most included a contractual penalty clause that might be unenforceable.