Lil' Man in the Boat, Inc. v. City and County of San Francisco et al, No. 3:2017cv00904 - Document 29 (N.D. Cal. 2017)

Court Description: ORDER GRANTING IN PART AND PART DEFENDANTS' MOTION TO DISMISS by Judge Jon S. Tigar granting in part and denying in part 12 Motion to Dismiss. (wsn, COURT STAFF) (Filed on 7/24/2017)
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Lil' Man in the Boat, Inc. v. City and County of San Francisco et al Doc. 29 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 LIL' MAN IN THE BOAT, INC., 7 Plaintiff, 8 v. 9 CITY AND COUNTY OF SAN FRANCISCO, et al., 10 11 United States District Court Northern District of California Case No.17-cv-00904-JST ORDER GRANTING IN PART AND PART DEFENDANTS' MOTION TO DISMISS Re: ECF No. 12 Defendants. 12 Before the Court is Defendants’ motion to dismiss. ECF No. 12. The Court will grant the 13 14 motion in part and deny it in part. 15 I. BACKGROUND1 16 Plaintiff Lil’ Man In The Boat, Inc. “owns and operates a licensed commercial charter 17 Motor Vessel ‘Just Dreaming’ that provides transportation and hospitality services on the San 18 Francisco Bay both for locals and visitors from all over the globe.” ECF No. 1 (“Compl.”) ¶ 1.2 19 Plaintiff “hosts parties and receptions, and transports guests to visit local landmarks (like Angel 20 Island or the Golden Gate Bridge) and cities (like Oakland and Sausalito), among other things.” 21 Id. ¶ 25. Plaintiff’s customers come “from all over the United States, and from other states and 22 countries such as China, France, Mexico, Russia, Germany, Australia, and Spain.” Id. Since 2006, Just Dreaming has operated out of the Port of San Francisco, and, “by local 23 24 25 26 27 Plaintiff asks the Court to take judicial notice of the “State of California, San Francisco Bay Conservation and Development Commission, Permit Number 2-84, originally issued on March 16, 1984, as amended, Amendment No. Seventeen of September 25, 2008, issued to the San Francisco Redevelopment Agency and the Port of San Francisco.” ECF No. 116. Because this document is a public record, the Court grants the request. Lee v. City of Los Angeles, 250 F.3d 668, 688-689 (9th Cir. 2001). 1 2 28 For the purpose of deciding this motion, the Court accepts as true the allegations from Plaintiff's Complaint, ECF No. 1. See Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). 1 regulation, must load and unload its passengers at the North Side Dock of Pier 40’s South Beach 2 Harbor.” Id. ¶¶ 1, 27. Defendants the City and County of San Francisco and the San Francisco 3 Port Commission (together operating under the title “Port of San Francisco” and referred to here 4 as “Defendant City”), Elaine Forbes, Peter Daley, Jeff Bauer, and Joe Monroe (collectively, 5 “Defendants”) “operate and regulate the North Side Dock, including by setting all fees and 6 charges associated with charter vessels’ excursion landings.” Compl. ¶ 27. In 2016, Defendants “insist[ed] on a written landing rights agreement (the “2016 Landing 7 8 9 10 Agreement”) between Defendant City and all commercial charter operators like Plaintiff who wished to land at the Port.” Id. ¶ 7. Most importantly, the 2016 Landing Agreement increased “landing fees” for use of the North Side Dock. “In 2013, 2014, and 2015 Defendants’ landing fee for commercial vessels such as MV Just Dreaming was $160.00. In 2016, the fee increased to 11 United States District Court Northern District of California $220 for commercial vessel operators who signed the 2016 Landing Agreement, but remained at 12 13 14 15 the 2015 rate for those who refused to sign the new agreement by virtue of a ‘grace period’ extended by Defendants.” Compl. ¶ 27. The 2016 Landing Agreement also requires each “commercial vessel operator to pay 7% percent of its monthly gross revenues3 in any month when (i) the 7% percent fee for such calendar month exceeds the (ii) the base landing fee for such 16 calendar month.” Id. ¶ 35. Non-commercial or recreational vessels “pay little or nothing to 17 Defendants” for use of the same dock. Id. ¶ 35. Defendants reserve the right to raise fees at any 18 time. Id. ¶ 34. 19 Despite paying these fees, vessels like Just Dreaming may only use a “small portion” of 20 the North Side Dock. Id. ¶ 30. Moreover, Defendants allow recreational vessels to “moor for 21 hours and even days,” further decreasing the available docking space. Id. Nor is the North Side 22 Dock in good condition. The dock is “not secured or protected, exposing the vessels to damage 23 from Bay surges and making passenger loading difficult and potentially dangerous.” Id. ¶ 31. 24 “Additionally, for the last three years, Defendants rarely inspect[ed] or maintain the North Side 25 Dock despite its poor condition and repeated requests by tenants to do so.” Id. 26 3 27 28 Gross revenues include the sale of alcoholic beverages. Id. ¶ 8. Plaintiff alleges that this requirement forces it to violate California Business and Professions Code section 23300, which “prohibits [unlicensed entities like] Defendants from participating in, receiving, or sharing any revenue or profit from alcohol sales within the state.” Id. 2 Plaintiff alleges that the “excessive fees imposed on commercial vessels have resulted in a 1 2 profit to Defendants, far in excess of the costs to maintain the North Side Dock.” Id. ¶ 33. 3 Specifically, Plaintiff explains that “Defendants’ budget for operation of South Beach Harbor for 4 fiscal years 2015 through 2021 shows that approximately $500,000 per year will be taken as ‘rent’ 5 from the Port to the Defendant City, and approximately $1,000,000 will go to Defendant City’s 6 general funds.” Id. ¶ 32. As support, Plaintiff attaches to the Complaint a “budget for operation 7 of South Beach Harbor from 2015 through 2021.” ECF No. 1-6. In addition to the fee provisions, the 2016 Landing Agreement contains other terms to 8 9 10 which Plaintiff objects. Id. ¶ 37. “For example, it requires commercial vessel operators to waive every claim for damages against the Defendants.” Id. ¶ 37; ECF No. 1-3 ¶ 20.3 (“Licensee agrees that Licensee will have no recourse with respect to, and Port shall not be liable for, any obligation United States District Court Northern District of California 11 of Port under this License, or for any Claim based upon this License . . .”); ¶ 15.4 (“Licensee, as a 12 material part of the consideration to be rendered to Port, hereby waives any and all Claims, 13 14 15 including without limitation all Claims arising from the joint or concurrent, active or passive, negligence of the Indemnified Parties, but excluding any Claims caused solely by the Indemnified Parties’ willful misconduct or gross negligence.”) 16 Defendants stated that Plaintiff and other commercial vessel operators had to sign the 2016 17 Landing Agreement or they “would not be able to use the Port for commercial activities at all as of 18 January 1, 2017.” Compl. ¶ 41. Plaintiff refused to sign the 2016 Landing Agreement. Id. ¶ 44.4 19 As a result, Plaintiff is “locked out of South Beach Harbor (and, in reality, the City and County of 20 San Francisco) for purposes of conducting their businesses.” Id. Plaintiff’s complaint alleges four causes of action arising out of the 2016 Landing 21 22 Agreement. First, Plaintiff brings a Section 1983 claim based on violations of the Tonnage 23 Clause, the Commerce Clause, the Rivers & Harbors Act, and the First Amendment. Second, 24 Plaintiff alleges that Defendants violated the Bane Act. Third, Plaintiff seeks declaratory and 25 injunctive relief. And fourth, Plaintiff brings a claim for unjust enrichment. Plaintiff’s complaint 26 is a putative class action and Plaintiff seeks to represent the following four classes: 27 “Fearing for their businesses, some commercial vessel operators ceded to Defendants’ demands and signed the 2016 Landing Agreement.” Id. ¶ 11. 3 4 28 1 (a) All persons and entities licensed by the USCG for commercial passenger service who, at any time during the three years preceding the filing of this action to the date of Class Certification have landed at, moored, or caused passengers to traverse South Beach Harbor and incurred or paid fees to Defendants for that opportunity; 2 3 4 (b) All persons and entities who, at any time during the three years preceding the filing of this action to the date of Class Certification, were licensed commercial passenger vessel operators subject to Defendants’ demand that they execute and/or comply with the terms, payments and conditions of the 2016 Landing Agreement in order to use South Beach Harbor; 5 6 7 8 (c) All persons and entities who, at any time during the three years preceding the filing of this action to the date of Class Certification, were licensed commercial passenger vessel operators and signed the 2016 Landing Agreement and complied with its terms; 9 10 (d) All persons or entities who, for the past three years to the present, have been licensed for sale and consumption of alcoholic beverages and who were or are subject to Defendants’ demand for payment of a percentage of revenues or profits. United States District Court Northern District of California 11 12 13 Id. ¶ 45. Defendants moved to dismiss on March 30, 2017. ECF No. 12. They argue that each of 14 15 Plaintiff’s claims fail as a matter of law. 16 II. 17 LEGAL STANDARD A complaint must contain “a short and plain statement of the claim showing that the 18 pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). While a complaint need not contain detailed 19 factual allegations, facts pleaded by a plaintiff must be “enough to raise a right to relief above the 20 speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “To survive a motion 21 to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to 22 relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation 23 marks omitted). “A claim has facial plausibility when the plaintiff pleads factual content that 24 allows the court to draw the reasonable inference that the defendant is liable for the misconduct 25 alleged.” Id. While the legal standard is not a probability requirement, “where a complaint pleads 26 facts that are merely consistent with a defendant's liability, it stops short of the line between 27 possibility and plausibility of entitlement to relief.” Id. (internal quotation marks omitted). The 28 Court must “accept all factual allegations in the complaint as true and construe the pleadings in the 4 1 light most favorable to the nonmoving party.” Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2 2005). 3 III. ANALYSIS 4 A. 5 First, Defendants argue that Plaintiff’s claim under the Constitution’s Tonnage Clause fails 6 Tonnage Clause as a matter of law. Under the Tonnage Clause, 7 No State shall, without the Consent of Congress, lay any Duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay. 8 9 U.S. Const. art. I, § 10, cl. 3. Defendants claim that the fees imposed by the 2016 Landing 11 United States District Court Northern District of California 10 Agreement are fees for a service, not tonnage duties. ECF No. 17 at 7. This distinction matters 12 because the Tonnage Clause “does not extend to charges made by state authority, even though 13 graduated according to tonnage, for services rendered to and enjoyed by the vessel.” Clyde 14 Mallory Lines v. State of Alabama ex rel. State Docks Comm’n, 296 U.S. 261, 265–66 (1935). 15 For example, “[p]roviding a wharf to which vessels may make fast, or at which they may 16 conveniently load or unload, is rendering them a service,” and charging for that service does not 17 violate the Tonnage Clause. Keokuk N. Line Packet Co. v. City of Keokuk, 95 U.S. 80, 84–85, 24 18 L. Ed. 377 (1877). Here, the challenged fees appear to be fees to compensate Defendants for use 19 of the North Side Dock; in other words, fees for service.5 That is not the end of the inquiry, however. Fees for service can still violate the Tonnage 20 21 Clause if they have “a general, revenue-raising purpose.” Polar Tankers, Inc. v. City of Valdez, 22 557 U.S. 1, 10 (2009). In other words, where a fee is used “for projects which do not and could 23 not benefit” those paying the fee, the fee is unconstitutional. Bridgeport & Port Jefferson 24 Steamboat Co. v. Bridgeport Port Auth., 567 F.3d 79, 82–83 (2d Cir. 2009). 25 The fact that the fees are called “fees” and not “duties” or “taxes” is not dispositive, as Defendants suggest. Charges described as fees have been held to violate the Tonnage Clause, despite their labels. See, e.g., Captain Andy’s Sailing, Inc. v. Johns, 195 F. Supp. 2d 1157, 1162 (D. Haw. 2001) (“[T]he Court concludes that DOBOR's assessment of a two percent (2%) ORMA Fee against the “Hula Kai” is an impermissible tax in violation of the prohibition against tonnage duties.”) (emphasis added). 5 5 26 27 28 1 Plaintiff makes two primary arguments why the landing fees are not lawful fees for 2 service. First, Plaintiff argues that the calculation of the fees as a percentage of gross revenue 3 when that amount exceeds the per use fees demonstrates that the fees are not actually 4 compensation for commercial boats’ use of the North Side Dock. As support, Plaintiff relies on 5 the Second Circuit’s opinion in Bridgeport. There, the Bridgeport Port Authority (“BPA”) 6 “imposed a passenger fee on all persons and vehicles embarking on, or disembarking from, the 7 Ferry Company ferries at the Dock.” 567 F.3d at 82–83. Plaintiff asserts that Bridgeport’s per 8 passenger fees are analogous to the revenue-based fees imposed by Defendants here. While it is 9 true that the Second Circuit held that the BPA’s fees violated the Tonnage Clause, Plaintiff misstates the rationale behind that holding. The fact that the fees were collected on a per 11 United States District Court Northern District of California 10 passenger basis did not factor into the court’s analysis. Rather, the court concluded that, although 12 the fees were ostensibly fees for service, they were actually “used for the impermissible purpose of 13 raising general revenues and for projects which do not and could not benefit the ferry passengers.” 14 Id. at 85. For example, a BPA official “testified that the purpose of passenger fee has always been 15 ‘to create a source of revenue to support the operations of the Port Authority.’” Id. at 88. 16 Moreover, the fees were used to pay for “non-ferry services [that] are not available to ferry 17 passengers; they were ‘completely unrelated and unavailable to the fee payers.’” Id. In other 18 words, the Second Circuit invalidated the fees because of how they were used, not how they were 19 collected. In analyzing Plaintiff’s Tonnage Clause claim, therefore, the mere fact that the landing 20 fees can be based on gross revenue does not support the inference that they are not actually fees 21 for service. 22 Second, Plaintiff argues that funds collected through the landing fees generate a budget 23 surplus that Defendants divert to the City’s general funds. Compl. ¶¶ 30-31. The Complaint 24 alleges that “Defendants’ budget for operation of South Beach Harbor for fiscal years 2015 25 through 2021 shows that approximately $500,000 per year will be taken as ‘rent’ from the Port to 26 the Defendant City, and approximately $1,000,000 will go to Defendant City’s general funds.” 27 Compl. ¶ 32. As support, Plaintiff attaches to the Complaint a “budget for operation of South 28 Beach Harbor from 2015 through 2021.” ECF No. 1-6.A. 6 Fees that are diverted to general revenue funds and that are not actually used to defray the 1 2 costs for which they are collected violate the Tonnage Clause. Captain Andy's Sailing, Inc. v. 3 Johns provides one example. 195 F. Supp. 2d 1157 (D. Haw. 2001). To operate commercially 4 within the Na Pali coast, Hawaii’s Division of Boating and Ocean Recreation (“DOBOR”) 5 requires the “payment of two percent (2%) of the permitted vessel’s gross receipts” (“ORMA 6 Fee”). Id. at 1162. The defendants “argued the assessment of the ORMA Fee is justified in order 7 8 9 10 to recover the costs of regulating the Na Pali Coast ocean water. Id. at 1173. The district court disagreed, concluding that the fee violated the Tonnage Clause “because it [did] not relate to a specific service that confers a “readily perceptible” benefit to vessels operating in the Na Pali Coast ocean waters.” Id. The court noted that the record was “bereft of any evidence corroborating the existence of any regulatory scheme specific to the Na Pali Coast ocean waters,” United States District Court Northern District of California 11 and that the fee was really “a revenue measure that is used to recoup the costs of a statewide 12 boating program whose many components are not limited to commercial navigation within the Na 13 14 15 Pali Coast ocean waters.” Id. at 1174. Under Captain Andy's Sailing and Bridgeport, therefore, if the landing fees go to the City’s general fund instead of being used to provide services at the North Side Dock, they likely violate the Tonnage Clause. 16 Here, Plaintiff has plausibly alleged that some portion of the landing fees go to the City’s 17 general funds, rather than for the services for which they are collected. Compl. ¶ 33 (“[E]xcessive 18 fees imposed on commercial vessels have resulted in a profit to Defendants, far in excess of the 19 costs to maintain the North Side Dock.”). The budget Plaintiff attached to its Complaint projects a 20 roughly $1,000,000 surplus for the South Beach Harbor for all but the 2015-16 fiscal year. ECF 21 No. 1-6. The budget also lists as an “expense” over $500,000 in “Port Rent/Reserve for Capitol.” 22 Id. Together, these line items suggest that the South Beach Harbor’s revenue exceeds its expenses 23 by over $1.5 million. Of course, the surplus is for the South Beach Harbor as a whole, not for the 24 North Side Dock specifically, and the budget does not make clear which revenue line represents 25 the landing fees. This means it is difficult to say what role, if any, the landing fees have in 26 contributing to the $1 million surplus.6 Nevertheless, at the motion to dismiss phase, the Court 27 For example, it may be that the landing fees are included in “Commercial Rental,” a revenue line which accounts for only $250,000 of the total $5 million operating revenue. If so, they obviously 7 6 28 1 agrees with Plaintiff that the fact of the overall Harbor surplus, together with Plaintiff’s allegations 2 that the North Side Dock is small, unsecured, and poorly maintained, Compl. ¶¶ 30-31, raise a 3 plausible inference that the landing fees are going to general revenues and not to provide services 4 at the dock. Given these allegations, Plaintiff’s Tonnage Clause claim survives the motion to 5 dismiss. 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 B. Dormant Commerce Clause 1. Three Prong Test Second, Plaintiff argues the landing fees violate the Dormant Commerce Clause (“DCC”). “This ‘negative’ aspect of the Commerce Clause prohibits economic protectionism that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.” New Energy Co. of Indiana v. Limbach, 486 U.S. 269, 273 (1988). A fee like the one at issue here survives a DCC challenge where it “(1) is based on some fair approximation of use of the facilities, (2) is not excessive in relation to the benefits conferred, and (3) does not discriminate against interstate commerce.” Nw. Airlines, Inc. v. Cty. of Kent, Mich., 510 U.S. 355, 369 (1994). The Supreme Court “has never held that the amount of a user fee must be precisely calibrated to the use that a party makes of Government services.” United States v. Sperry Corp., 493 U.S. 52, 60 (1989). Plaintiff argues that the landing fees fail the first two prongs of the Northwest Airlines test for largely the same reasons that the fees violate the Tonnage Clause. First, Plaintiff again claims that the use of gross revenue to calculate the landing fees demonstrates that they are not a fair approximation of use. But the Ninth Circuit rejected that argument in Alamo Rent-A-Car, Inc. v. City of Palm Springs, 955 F.2d 30 (9th Cir. 1991). There, Alamo challenged an “access fee” it was required to pay for “for using the airport access roads to pick up and drop off airline passengers who rent its cars. The access fee charged [wa]s seven percent of the gross receipts Alamo generate[d] from customers picked up at the airport.” 955 F.2d at 30. The Ninth Circuit held that “calculating use by a percentage of gross receipts is a fair approximation” of use, and 27 28 cannot be responsible for a $1 million dollar surplus. 8 1 concluded the first prong had been “easily” satisfied. 955 F.2d 30, 31 (9th Cir. 1991), as amended 2 on denial of reh'g (Jan. 24, 1992). The same is true here. Plaintiff has plausibly alleged, however, that the landing fees are “excessive” when 3 4 compared with the benefits the North Side Dock confers. Plaintiff claims that Defendants allow 5 commercial boats like Just Dreamin to use only a “small portion” of the dock, neglect maintenance 6 of the dock, and divert landing fee revenues to the City’s general fund. Compl. ¶¶ 30-33. As the 7 Court found in its Tonnage Clause analysis, these allegations make it plausible that Defendants are 8 realizing a profit from the landing fees while providing only minimal services. They also serve to 9 distinguish this case from Alamo, where the Ninth Circuit concluded that the airport access fee was not excessive on stipulated facts after trial. Alamo, 955 F.2d at 31. The court explained that 11 United States District Court Northern District of California 10 Alamo had “offered no proof” that an access fee of seven percent of gross receipts excessively 12 compensated the City of Palm Springs for providing “improved airport facilities,” including 13 security, maintenance, overhead, and debt service costs. Id. That this issue has come before the 14 Court on a motion to dismiss is another basis for reaching a different conclusion than the Alamo 15 court, which did not have to accept Alamo’s allegations as true. Here, all Plaintiff must do is 16 plausibly allege that the landing fees are excessive when compared with the benefit commercial 17 operators receive in exchange. At the motion to dismiss phase, it has met that burden. The Court acknowledges the tension between Alamo’s reasoning and the fact that 18 19 “Evansville makes clear that it is immaterial where the funds are deposited and whether those 20 specific funds are the funds eventually used to effectuate the Statute’s purpose.” Ctr. for Auto 21 Safety Inc. v. Athey, 37 F.3d 139, 144 (4th Cir. 1994) (citing Evansville–Vanderburgh Airport 22 Authority District v. Delta Airlines, 405 U.S. 707 (1972)). But, ultimately, a line can be drawn 23 between deciding whether a fee is higher than necessary to cover the designated service’s costs, 24 and whether the fee is actually used to cover the costs.7 In this case, the alleged budget surplus 25 26 In Athey, the Court separately noted that there was no “dispute that the total amount raised through registration fees did not exceed the funds necessary to cover Maryland's administration and enforcement of the Statute.” 37 F.3d at 143. 7 27 28 9 1 and limited permissible use of the dock at least makes it plausible that Defendants’ fees are 2 excessive and therefore fail this prong of the Northwest Airlines test. That leaves the last factor: whether the fees “discriminate against interstate commerce.” 3 Id. To show discrimination, Plaintiff states that “the Port imposes the Landing Fee, however, only 5 on these commercial charter vessels; recreational vessels are not being subjected to this 6 imposition.” ECF No. 15 at 15. Because commercial vessels are more likely to be engaged in 7 interstate commerce, Plaintiff’s argument goes, charging them and not recreational vessels 8 discriminates against interstate commerce. Plaintiff cites to no case that has endorsed this theory 9 for showing a fee’s discriminatory effect, and the Court declines to adopt it here. In fact, in 10 Alamo, the Ninth Circuit concluded that an analogous access fee “not discriminate against 11 United States District Court Northern District of California 4 interstate commerce, but applies to inter- and intrastate passengers equally.” Alamo, 955 F.2d at 12 31. Likewise here, the landing fees apply to all commercial boats, regardless of who is traveling 13 on those boats or whether they are operated by in-state or out-of-state companies.8 “[A] party 14 cannot satisfy its burden simply by showing that a government action affects an out-of-state 15 company or manufacturer.” Industria y Distribuction de Alimentos v. Trailer Bridge, 797 F.3d 16 141, 146 (1st Cir. 2015) (citing Exxon Corp. v. Governor of Md., 437 U.S. 117, 126 (1978). 17 “Instead, the evidence must illustrate that the government action interferes with interstate 18 commerce by, for example, dissuading competition from out-of-state corporations.” Id. Plaintiff 19 has failed to make such a challenged showing here. 20 Plaintiff has plausibly alleged that one of the three of the factors identified by the Supreme 21 Court in Northwest Airlines is not satisfied here, 9 and has therefore stated a claim under the DCC. 22 23 24 25 26 27 28 8 Presumably, in Alamo, residents of the area used the access road but were not charged the access fee (since it was calculated as a percentage of each company’s revenue), but that did not factor into the Court’s analysis at all. 9 The Northwest Airlines test is written in the conjunctive, meaning that a defendant must demonstrate all three prongs are met to defeat a DCC claim. This leads to the odd possibility that, even if a fee does not discriminate against interstate commerce, it can still violate the DCC if, for example, it not a fair approximation of use. See, e.g., Bridgeport & Port Jefferson Steamboat Co. v. Bridgeport Port Auth., 567 F.3d 79, 86 (2d Cir. 2009). Such is the case here. 10 1 2. Market Participant Exception 2 Defendants next argue that even if Plaintiff has plausibly alleged that the landing fees do 3 not pass muster under the three-prong Northwest Airlines test, the DCC should still be dismissed 4 because Defendants charge the fees as a “market participant.” ECF No. 12 at 7. Supreme Court 5 precedent “make[s] clear that if a State is acting as a market participant, rather than as a market 6 regulator, the dormant Commerce Clause places no limitation on its activities.” S.-Cent. Timber 7 Dev., Inc. v. Wunnicke, 467 U.S. 82, 93 (1984). For example, the Court rejected DCC challenges 8 against states who favored their own citizens when purchasing scrap metal, Hughes v. Alexandria 9 Scrap Corp., 426 U.S. 794, 806 (1976), or selling cement, Reeves, Inc. v. Stake, 447 U.S. 429, 436–37, (1980), because a state may “impose burdens on commerce within the market in which it 11 United States District Court Northern District of California 10 is a participant.” S.-Cent. Timber Dev., Inc., 467 U.S. at 93. 12 Although initially persuasive, Defendants market participant argument ultimately fails 13 because there is an exception to the exception: where the state has a monopoly over the services at 14 issue, the market participant exception does not apply. See W. Oil & Gas Ass'n v. Cory, 726 F.2d 15 1340, 1341 (9th Cir. 1984) (“Cory”); Shell Oil Co. v. City of Santa Monica, 830 F.2d 1052, 1057– 16 58 (9th Cir. 1987). In Cory, for example, the Ninth Circuit explained that there was “no other 17 competitor to which [the plaintiff gas companies could] go for the rental of the required strip of 18 California coastline.” 726 F.2d at 1341. That meant the plaintiffs had “no choice but to renew 19 their leases despite” their objections to the rates charged. Id. Similarly, here, Plaintiff has 20 plausibly alleged that Defendants enjoy a monopoly over docks in San Francisco. Specifically, 21 Plaintiff alleges that “[m]ost charter vessels like Plaintiff that accommodate 500 passengers or less 22 that wish to load and unload passengers within the City and County of San Francisco must do so at 23 the North Side Dock under Defendants’ regulations.” Compl. ¶ 27. Without access to the North 24 Dock, Plaintiff claims it is “locked out of South Beach Harbor (and, in reality, the City and 25 County of San Francisco) for purposes of conducting their business.” Compl. ¶ 44. Defendants 26 respond Plaintiff “can use Pier 39 or the San Francisco Marina,” ECF No. 17 at 11, but at the 27 motion to dismiss phase, the Court must take the allegations in the Complaint as true. The Court 28 concludes that Plaintiff has plausibly alleged Defendants occupy a monopoly position such that 11 1 the market participant exception does not apply. The motion to dismiss is denied as to the DCC 2 claim. 3 C. 4 Third, Plaintiff argues that the landing fees violate the Rivers and Harbors Act (“RHA”). 5 The RHA provides that: 6 No taxes, tolls, operating charges, fees, or any other impositions whatever shall be levied upon or collected from any vessel or other water craft, or from its passengers or crew, by any non-Federal interest, if the vessel or water craft is operating on any navigable waters subject to the authority of the United States, or under the right to freedom of navigation on those waters, except for (1) fees charged under section 2236 of this title; (2) reasonable fees charged on a fair and equitable basis that— (A) are used solely to pay the cost of a service to the vessel or water craft; (B) enhance the safety and efficiency of interstate and foreign commerce; and (C) do not impose more than a small burden on interstate or foreign commerce[.] 7 8 9 10 United States District Court Northern District of California 11 12 13 River and Harbors Act 33 U.S.C. § 5(b). Few courts have interpreted this provision of the RHA, and the parties each rely largely on a state supreme court case to argue either for or against a violation of the RHA. 14 Defendants focus on Brusco Towboat Co. v. State, By & Through Straub, in which the Oregon 15 Supreme Court analyzed an RHA challenge10 to the State Land Board’s requirement that “anyone 16 who maintains a permanent structure on or over state-owned submerged and submersible lands 17 under navigable waters enter into a lease and pay rent.” 589 P.2d 712, 715 (Or. 1978). The Court 18 held that the leasing program did not violate the RHA because “[i]t does not impose a charge for 19 the use of the navigable waters as a highway, or tend to limit the privilege of navigation to any 20 particular class of persons or vessels. It merely imposes a charge upon those who wish to occupy, 21 to the exclusion of others, portions of the state’s lands in pursuit of their own business activities.” 22 Id. at 724. Defendants argue that the landing fees are analogous to these leasing fees and therefore 23 do not offend the RHA.11 24 The plaintiff actually brought the claim under Oregon’s version of the RHA, but the two laws are interpreted the same way. See, e.g., State, Dep't of Nat. Res. v. Alaska Riverways, Inc., 232 P.3d 1203, 1205 (Alaska 2010) 10 25 26 11 27 28 Defendants also make the argument that the landing fees fall outside the scope of the RHA because they are charges for landing rather than using the navigable waters around San Francisco. ECF No. 17 at 14. This is an overly simplistic analysis. Fees can operate as a tax on the use of navigable waters even if not labeled as such. 12 1 Plaintiff points the Court to the Alaska Supreme Court’s decision in State Dep't of Nat. 2 Res. v. Alaska Riverways, Inc., 232 P.3d 1203, 1205 (Alaska 2010). That case involved a similar 3 leasing scheme, under which the “State of Alaska has the authority to require private parties who 4 construct wharves into adjacent navigable waters to enter into leases.” Specifically, the State 5 proposed “a twenty-five year lease of approximately one acre of shoreland to Alaska Riverways 6 for $1000 per year or $.25 per paying passenger, whichever is greater.” Id. The Alaska Court 7 8 9 10 United States District Court Northern District of California 11 distinguished Brusco Towboat and held that the proposed Alaska Riverways lease violated the RHA. Id. at 1221. The critical difference between the two cases, the court explained, was that “[i]n Brusco Towboat, the administrative agency did not attempt to calculate the lease fee based on passenger count but instead based the lease fee on the amount of water surface area occupied.” Id. Plaintiff argues that, just as an “assessment of a lease fee based on passenger count for exclusive use of state land implicates 33 U.S.C. § 5(b),” id., so do the landing fees because they 12 are calculated as a percentage of gross revenue. 13 14 15 16 Neither case is directly on point because neither involves a fee calculated using gross revenue, but the Court finds Alaska Riverways most analogous to the facts here. Defendants cannot claim that the landing fees are calculated based on the amount of docking space Plaintiff occupies, as was the case in Brusco Towboat. And although a per passenger fee is not the same as 17 a gross revenue fee, both are most plausibly categorized as “use” charges, rather than permissible 18 lease or rental fees. Therefore, this Court concludes that Plaintiff has sufficiently alleged that 19 Defendants “proposed assessment [], however labeled, is a charge exacted specifically for the use 20 of navigable waters.” Alaska Riverways, Inc., 232 P.3d at 1221. Plaintiff has stated a claim under 21 the RHA. 22 D. 23 Fourth, Plaintiff challenges the 2016 Landing Agreement under the First Amendment. First Amendment 24 Specifically, Plaintiff claims the Agreement’s requirement that “commercial vessel operators [] 25 waive every claim for damages against the Defendants” places an unconstitutional condition on 26 Plaintiff’s First Amendment Right to Petition. Compl. ¶ 37; ECF No. 1-3 (“Licensee agrees that 27 Licensee will have no recourse with respect to, and Port shall not be liable for, any obligation of 28 Port under this License, or for any Claim based upon this License . . . .”). 13 Defendants offer two reasons why this claim should be dismissed: 1) Plaintiff cannot 1 2 demonstrate the required causation element for this section 1983 claim, and 2) the challenged 3 provisions in the Agreement are not unconstitutional conditions.12 Both arguments fail. 4 “In a § 1983 action, the plaintiff must also demonstrate that the defendant’s conduct was 5 the actionable cause of the claimed injury.” Harper v. City of Los Angeles, 533 F.3d 1010, 1026 6 (9th Cir. 2008). To do so, “the plaintiff must establish both causation-in-fact and proximate 7 8 9 10 causation. Id. Defendants argue that Plaintiff would have refused to sign the 2016 Landing Agreement even without the waiver provision because of, for example, the fees imposed by the Agreement. Therefore, Plaintiff cannot show that the waiver provision the cause-in-fact of his injury. ECF No. 12 at 21. Defendants rely exclusively for this argument on Emmert Indus. Corp. v. City of Milwaukie, a Ninth Circuit memorandum disposition that rejected a section 1983 on United States District Court Northern District of California 11 12 13 14 15 similar grounds. 307 F. App’x 65 (9th Cir. 2009). In Emmert, “[t]he record show[ed] that the litigation waiver was not a but-for dealbreaker” because “Emmert objected to several provisions of the proposed agreement, and each was independently fatal to the settlement.” Id. at 67. On that basis, the court held that “the waiver was not the actual or proximate cause of Emmert’s injury.” Id. 16 Memorandum dispositions are not binding, and the Court declines to apply [Emmert’s] 17 reasoning in this case. The Court takes Plaintiff’s objections to the various parts of the 2016 18 Landing Agreement at face value and assumes that Plaintiff would have independently rejected the 19 Agreement based on any one of the challenged provisions. Indeed, Defendants could have made 20 this same argument with respect to the fees imposed by the Agreement; claiming that they were 21 not a but-for dealbreaker because Plaintiff would not have signed anyway due to the waiver 22 provision. Taken to its logical conclusion, Emmert’s reasoning would bar a plaintiff from 23 challenging any term of an agreement where more than one term is objectionable. Agreements 24 with only one objectionable term could be challenged in court, but those with a greater number 25 12 26 27 28 Defendants also argue in reply only that Plaintiff misinterprets the Landing Agreement, which does not actually require a waiver of the right to sue. ECF No. 17 at 16-17. The Court does not consider new facts or argument made for the first time in a reply brief. “It is inappropriate to consider arguments raised for the first time in a reply brief.” Ass’n of Irritated Residents v. C & R Vanderham Dairy, 435 F.Supp.2d 1078, 1089 (E.D. Cal.2006). 14 1 would be immune from attack. That cannot be correct. In reality, Defendants are suggesting that 2 Plaintiff views the landing fees as more important than the waiver and that Plaintiff would have 3 accepted the waiver had the fees been acceptable. That concession does not appear in the 4 Complaint, however, and the Court will not assume it for purposes of this motion. The Court will 5 not dismiss the First Amendment claim on causation grounds. Next, Defendants argue that the First Amendment claim fails because the Landing 6 7 8 9 10 United States District Court Northern District of California 11 Agreement’s waiver is not an unconstitutional condition. ECF No. 12 at 21-22. “Under the wellsettled doctrine of ‘unconstitutional conditions,’ the government may not require a person to give up a constitutional right . . . in exchange for a discretionary benefit conferred by the government where the benefit sought has little or no relationship to the property.” Dolan v. City of Tigard, 512 U.S. 374, 385 (1994). The Ninth Circuit has further explained that the government must “have a legitimate reason for including the waiver in the particular agreement,” which “almost always 12 include a close nexus—a tight fit—between the specific interest the government seeks to advance 13 14 in the dispute underlying the litigation involved and the specific right waived.” Davies v. Grossmont Union High Sch. Dist., 930 F.2d 1390, 1399 (9th Cir. 1991). 15 16 Defendants begin by claiming that the waiver is not unconstitutional in the first place because the government routinely seeks and obtains litigation waivers. ECF No. 12 at 22 (citing 17 Emmert Indus. Corp., 307 F. App’x at 67) (holding that “it is not at all unusual or impermissible 18 for the government to seek a litigation waiver as part of a settlement agreement of a pending 19 dispute or a potential lawsuit.”). Citing to cases that have upheld waivers, however, does not 20 mean waivers are per se constitutional. In Emmert, for example, the court held that the waiver 21 was not an unconstitutional condition because it met the close nexus test, id., not settlement 22 agreements often include waivers. 23 The waiver in this case is unlike the others that Defendants cite because it is not contained 24 in a settlement agreement that resolves a lawsuit to which the government is a party. Defendants 25 emphasize Emmert, for example, but the court’s reasoning there does not support the same result 26 here: 27 28 In this case, the City had a legitimate interest in settling a dispute over a rundown house that had dragged on for years. The condition the government imposed a 15 1 2 3 4 litigation waiver directly advanced this interest by ensuring the dispute would come to a quick end. The benefit Emmert was to receive a comprehensive settlement was also closely connected to the litigation waiver and the City’s need for resolution. Id. Here, the 2016 Landing Agreement does not concern, much less resolve, a pending dispute; it is focused on future disputes. Plaintiff alleges that the Agreement requires a broad, prospective 5 waiver of “every claim for damages against the Defendants” in exchange for the right to land at 6 the North Side Dock. Id. ¶ 37; ECF No. 1-3 ¶ 20.3 (“Licensee agrees that Licensee will have no 7 recourse with respect to, and Port shall not be liable for, any obligation of Port under this License, 8 or for any Claim based upon this License . . . ”). 9 The Court sees the waiver here as more analogous to the one in Davies than Emmert. In Davies, “Dr. Davies and his wife sued the [local school d]istrict in state court, alleging violations 11 United States District Court Northern District of California 10 of 42 U.S.C. § 1983 and various state law causes of action in connection with the District’s 12 transfer of Mrs. Davies, who had been employed as a teacher in the District.” 930 F.2d at 1399. 13 As a condition of the parties’ eventual settlement, “the District extracted a waiver of Dr. Davies’ 14 right ever to seek or accept a position on the [School] Board.” Id. The Court concluded that the 15 “nexus between the individual right waived and the dispute that was resolved by the settlement 16 agreement [wa]s not a close one” because “[t]he underlying dispute had little connection with Dr. 17 Davies’ potential future service on the Board.” Id. In so holding, the court contrasted Davies’ 18 wavier with “release-dismissal agreements,” “in which a criminal defendant releases his right to 19 20 21 22 23 24 25 26 27 file an action under 42 U.S.C. § 1983 in return for a prosecutor’s dismissal of pending criminal charges.” Id.; Town of Newton v. Rumery, 480 U.S. 386, 389 (1987). The waiver here is overly broad and fails to meet the close nexus test. In order to gain use of the North Side Dock, Plaintiff had to waive the right to bring “any Claim based upon this License.” ECF No. 1-3. Defendants argue that avoiding exposure to “extensive litigation costs and potential damages” is a “legitimate reason” for including the waiver. ECF No. 17 at 17. But a general reduction in “financial and legal risk,” id., is not the kind of “specific interest” that has been found to satisfy the close nexus test. Notably, Defendants cite no case that has upheld a general litigation waiver as a part of a contract to use government property. Defendants’ only cases involve waivers as a prerequisite to dismissing pending litigation, which, as the Davies court 28 16 1 explained, is factually dissimilar. Particularly at the motion to dismiss phase, the Court will not 2 assume without support Defendants’ claim that the government commonly and lawfully inserts 3 broad waiver provisions in commercial contracts. Id. at 18 n.8. 4 The Court denies the motion to dismiss as to Plaintiff’s First Amendment claim. 5 E. 6 Defendants next seek dismissal of Plaintiff’s Bane Act claim. The Bane Act prohibits a 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 Bane Act person from “interfere[ing] by threat, intimidation, or coercion, or attempt[ing] to interfere by threat, intimidation, or coercion, with the exercise or enjoyment by any individual or individuals of rights secured by the Constitution or laws of the United States, or of the rights secured by the Constitution or laws of this state.” Cal. Civ. Code §§ 52.1(a), (b).13 Liability under section 52.1 “requires an attempted or completed act of interference with a legal right, accompanied by a form of coercion.” Jones v. Kmart Corp., 17 Cal. 4th 329, 334 (1998). The Act makes clear that “[s]peech alone is not sufficient to support [a Bane Act claim], except upon a showing that the speech itself threatens violence against a specific person or group of persons.” Cal. Civ. Code § 52.1(j). Defendant claims Plaintiff cannot state a Bane Act claim for two reasons: 1) because Plaintiff cannot allege that it faced violence or a threat of violence, and 2) because Plaintiff has not alleged that Defendants deprived Plaintiff of any constitutional or statutory rights. ECF No. 12 at 24. 18 Defendants’ second argument can be dispensed with quickly. Plaintiff has sufficiently 19 alleged a violation of its First Amendment rights. Therefore, Plaintiff can state a Bane Act claim 20 if the Complaint plausibly alleges that Defendants used some form of coercion to interfere with 21 that First Amendment right. Defendants argue that Plaintiff alleges it faced only a “verbal threat of economic harm if it 22 23 did not sign the 2016 Landing Agreement.” Id. If Plaintiff challenges speech only, it must also 24 allege violence or a threat of violence to support a Bane Act claim. Cal. Civ. Code § 52.1(j). 25 26 27 28 13 In the vast majority of Bane Act claims, even those that involve interference with a First Amendment right, the coercive act is an arrest or some other detention by law enforcement. E.g., Eberhard v. California Highway Patrol, No. 3:14-CV-01910-JD, 2015 WL 6871750, at *7 (N.D. Cal. Nov. 9, 2015). This appears to be an unusual proposed application of Civil Code § 52.1. 17 1 Plaintiff objects to Defendants’ characterization of its conduct as speech and describes the 2 following “coercive and intimidating acts”: “prohibiting Plaintiff from landing at the Port of San 3 Francisco, taking illegal fees, requiring Plaintiff and others to expose themselves to criminal 4 liability.” ECF No. 15 at 25. The Court agrees with Defendants that the first “act” is actually just 5 speech. Defendants told Plaintiff that it could not use the North Side Dock if it did not sign the 6 7 8 9 10 agreement; Plaintiff does not allege that it was actually prevented from landing. Nor can the other two “acts” have interfered with Plaintiff’s First Amendment rights. Logically, it cannot be that collecting the landing fees (and thereby supposedly exposing Plaintiff to liability under section 23300) was an act designed to coerce Plaintiff into signing the allegedly unlawful waiver. Both the fees and the waiver were part of the same objectionable 2016 Landing Agreement. Having to pay the fees was another reason not to sign the Agreement and the waiver within it, rather than the 11 United States District Court Northern District of California other way around. 12 Because Plaintiff challenges speech only, it must also allege violence or a threat of 13 14 15 16 violence. Cal. Civ. Code § 52.1(j). Plaintiff makes no attempt to satisfy this requirement, focusing instead on the unsuccessful argument that Defendants engaged in coercive acts, not just speech. In any event, the Court sees no support for the proposition that economic coercion of the kind at issue here can constitute violence or threats of violence. See Gottschalk v. City & Cty. of 17 San Francisco, 964 F. Supp. 2d 1147, 1164 (N.D. Cal. 2013) (noting that the plaintiff cite[d] no 18 authority indicating that ‘economic coercion’ . . . may constitute violence or threats of violence 19 within the meaning of either of these statutes”). 20 The Court dismisses Plaintiff’s Bane Act claim without prejudice. 21 D. 22 Given the Court’s finding that Plaintiff plausibly alleged claims under the Tonnage Clause, Declaratory, Injunctive Relief, and Restitution 23 DCC, RHA, and First Amendment, Plaintiff’s derivative claims for declaratory relief, injunctive 24 relief, and restitution survive the motion to dismiss. The Court denies the motion to dismiss as to 25 these claims. 26 /// 27 /// 28 /// 18 CONCLUSION 1 2 3 4 5 6 The Court denies the motion to dismiss with respect to the Tonnage Clause, DCC, RHA and First Amendment claims, and grants it with respect to the Bane Act claim. IT IS SO ORDERED. Dated: July 24, 2017 ______________________________________ JON S. TIGAR 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19