Airlines For America v. City and County of San Francisco

Background

Airlines for America (A4A), a trade organization whose members include several airlines, sued the City and County of San Francisco over the Healthy Airport Ordinance (HAO). The HAO amended San Francisco’s existing health-care requirements for certain employees at San Francisco International Airport. It requires covered employers either to offer specified health plans or to pay $9.50 per covered employee per hour into a city-administered health fund. The ordinance also provides several enforcement measures, including recovery of unpaid amounts with interest, liquidated damages, contract cancellation, a three-year ban on future city contracts, and a civil action.

A4A initially alleged that the HAO was preempted, meaning overridden, by the Airline Deregulation Act, the Employee Retirement Income Security Act of 1974 (ERISA), and the Railway Labor Act. It also alleged violations of the Contracts Clauses of the federal and California Constitutions. The Airline Deregulation Act claim had previously been dismissed with prejudice by stipulation. The remaining claims concerned ERISA and Railway Labor Act preemption, the two Contracts Clause claims, and requested monetary relief.

The City’s partial motion to dismiss challenged A4A’s associational standing for the ERISA claim, the Contracts Clause claims, and the request for monetary relief. Associational standing allows an organization to sue on behalf of its members when the members would have standing individually, the interests involved relate to the organization’s purpose, and neither the claims nor the requested relief requires individual members to participate in the lawsuit. The City did not dispute the first two requirements; it argued that A4A could not satisfy the third.

ERISA Preemption

A4A claimed that the HAO was preempted by ERISA because it could force airlines to create, change, or end employee benefit plans or to provide benefits separately required by the HAO. ERISA preemption includes laws that refer to ERISA plans and laws that have an impermissible connection with those plans, such as laws that interfere with uniform plan administration.

The City conceded that A4A had associational standing to bring a facial challenge based solely on the HAO’s text under the “reference to” theory. A4A also pursued a “connection with” theory, under which it argued that the HAO forced airlines to modify ERISA plans or collective bargaining agreements.

The City argued that the connection-with claim would require individualized evidence about each member airline’s health plans and collective bargaining agreements. The court rejected that argument under A4A’s stated theory. Relying on the reasoning of an earlier appellate decision involving carrier regulation, the court held that A4A could attempt to show that the HAO was preempted as to one member airline and therefore should be treated uniformly as to all member airlines. Because that theory required participation from only one member airline, it did not create an associational-standing problem.

The court therefore held that A4A had associational standing to pursue its ERISA preemption claim and denied the City’s motion to dismiss that claim. To address possible discovery burdens, the court ordered A4A to identify its proposed single-member test case, identify documents it intended to use, cooperate in obtaining relevant member documents, and facilitate their production.

Contracts Clause Claims

A4A alleged that the HAO substantially impaired its members’ collective bargaining agreements with their employees, violating both the federal and California Contracts Clauses. The City argued that deciding those claims would require examining each airline’s collective bargaining agreement and the effect of the HAO on each airline’s ability to comply with it.

The court accepted A4A’s stated theory that the claims involved a qualitative question—whether the HAO substantially impaired existing contractual relationships—rather than a calculation of the financial effect on each individual airline. A4A also represented that the collective bargaining agreements were publicly available. Based on that theory, the court concluded that the claims did not require individualized proof of the financial impact under each agreement and held that A4A had associational standing to bring the federal and state Contracts Clause claims.

Monetary Relief

A4A sought an order requiring the City to return fees, contributions, fines, penalties, or other monetary payments collected from its members under the HAO. The City argued that calculating the amount would require evidence from every member airline concerning covered employees, hours worked, and withdrawals by employees from the city fund.

The court held that there was no absolute rule preventing an association from seeking monetary relief for its members. It concluded that the requested disgorgement could be calculated through a straightforward accounting of which airlines deposited money into the city fund, how much each deposited, and how much the employees withdrew. Because the City possessed the necessary information, the court held that A4A had associational standing to seek this relief and denied the City’s motion to dismiss as to the monetary claim.

Disposition

Judge Edward M. Chen denied the City’s partial motion to dismiss the challenged claims and its request for monetary relief. The court stated that it could revisit the associational-standing issue if A4A departed from the theories described in the opinion or if the City encountered actual hardship obtaining necessary discovery. The opinion does not decide the ultimate merits of whether the HAO is preempted or violates either Contracts Clause.