Airline Service Providers Assn, et al v. Los Angeles World Airports, et al

Filing

FILED OPINION (RICHARD C. TALLMAN, MICHELLE T. FRIEDLAND and WILLIAM HORSLEY ORRICK) AFFIRMED IN PART; VACATED IN PART; REMANDED. Judge: RCT concurring & dissenting, Judge: MTF Authoring, FILED AND ENTERED JUDGMENT. [10554492] [15-55571, 15-55572]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

AIRLINE SERVICE PROVIDERS
ASSOCIATION,
Plaintiff-Appellant,
and
AIR TRANSPORT ASSOCIATION OF
AMERICA, INC., DBA Airlines of
America,
Plaintiff,
v.
LOS ANGELES WORLD AIRPORTS;
CITY OF LOS ANGELES,
Defendants-Appellees.

No. 15-55571
D.C. No.
2:14-cv-08977JFW-PJW

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2 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
AIRLINE SERVICE PROVIDERS
ASSOCIATION,
Plaintiff,
and
AIR TRANSPORT ASSOCIATION OF
AMERICA, INC., DBA Airlines for
America,
Plaintiff-Appellant,

No. 15-55572
D.C. No.
2:14-cv-08977JFW-PJW

OPINION

v.
LOS ANGELES WORLD AIRPORTS;
CITY OF LOS ANGELES,
Defendants-Appellees.

Appeal from the United States District Court
for the Central District of California
John F. Walter, District Judge, Presiding
Argued and Submitted January 13, 2017
Pasadena, California
Filed August 23, 2017
Before: Richard C. Tallman and Michelle T. Friedland,
Circuit Judges, and William H. Orrick, III, * District Judge.

*

The Honorable William H. Orrick III, United States District Judge
for the Northern District of California, sitting by designation.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 3
Opinion by Judge Friedland;
Dissent by Judge Tallman

SUMMARY **

Labor Law
The panel affirmed in part and vacated in part the district
court’s dismissal of an action brought by two air transport
trade associations asserting that the City of Los Angeles, in
its capacity as proprietor of Los Angeles International
Airport, may not require businesses at the airport to accept a
contractual condition concerning labor agreements.
Airlines that operate out of LAX hire third-party
businesses to refuel and load planes, take baggage and
tickets, help disabled passengers, and provide similar
services. The City licenses those service providers using a
contract that imposes certain conditions.
One such
condition, section 25, requires service providers to enter a
“labor peace agreement” with any employee organization
that requests one. The trade associations argued that,
because the City operates LAX, the contractual conditions in
LAX’s standard licensing agreement are effectively
municipal regulations. The associations contended that
section 25, as one such “regulation,” was preempted by the
National Labor Relations Act, the Railway Labor Act, and
the Airline Deregulation Act.

**

This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.

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4 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
The panel held that the Airline Service Providers
Association had associational standing to pursue all of its
claims.
Affirming in part, the panel held that the associations
failed to state a preemption claim. The panel concluded that
the City was acting as a market participant, and not a
regulator, when it added section 25 to its LAX licensing
contract because, under the Cardinal Towing test, the City
was attempting to avoid disruption of its business, and the
decision to adopt section 25 was narrowly tied to a specific
proprietary problem. The panel also concluded that the
preemption provisions of the NLRA, the RLA, and the ADA
do not apply to state and local governmental actions taken as
a market participant.
Vacating in part, the panel held that the district court
erred by denying leave to amend the complaint because the
associations possibly could allege large spillover effects that
would substantiate their claim that, in reality, section 25 acts
as a regulation. The panel remanded to allow the district
court to enter a dismissal with leave to amend.
Concurring in part and dissenting in part, Judge Tallman
agreed with the majority that the ASPA had standing to
assert its claims and should also at least be granted leave to
amend its complaint. Judge Tallman disagreed with the
majority’s conclusion that, as is, the complaint failed to state
a plausible claim that the City enacted section 25 as a
regulatory measure rather than a proprietary one. He wrote
that the complaint sufficiently alleged that section 25 was an
overly broad and facially suspect regulation of labor
relations that contravened the delicate congressional
balancing of national labor relations policy affecting key
facilities of interstate commerce.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 5
COUNSEL
Michael M. Berger (argued), Matthew P. Kanny, and Maura
Kingseed Gierl, Manatt Phelps & Phillips LLP, Los Angeles,
California, for Plaintiff-Appellant Airline Service Providers
Association.
Robert Span (argued), and Douglas R. Painter, Steinbrecher
& Span LLP, Los Angeles, California; Douglas W. Hall,
Ford and Harris LLP, Washington, D.C.; for PlaintiffAppellant Air Transport Association of America.
Richard G. McCracken (argued) and Paul L. More, Davis
Cowell & Bowe LLP, San Francisco, California; Scott P.
Lewis and David S. Mackey, Anderson & Krieger LLP,
Cambridge, Massachusetts; for Defendants-Appellees.

OPINION
FRIEDLAND, Circuit Judge:
We must decide whether the City of Los Angeles, which
operates Los Angeles International Airport (“LAX”), can
require businesses at the airport to accept certain contractual
conditions aimed at preventing service disruptions. 1 Two air
transport trade associations argue that the conditions are, in
effect, municipal regulations preempted by federal labor
law. We hold that the City may impose the conditions in its
capacity as proprietor of LAX and thus affirm dismissal of
the Complaint.

1

Because the City of Los Angeles operates LAX, we refer in this
opinion to both entities collectively as “the City.”

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6 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
Background
Airlines that operate out of LAX hire third-party
businesses to refuel and load planes, take baggage and
tickets, help disabled passengers, and provide similar
services. The City licenses those service providers using a
contract that imposes certain conditions.
One such
condition, section 25, requires service providers to enter a
“labor peace agreement” with any employee organization
that requests one. 2 If such an agreement is not finalized
within sixty days, then the dispute must be submitted to
mediation and, if mediation is unsuccessful, to binding
arbitration. Any labor peace agreement that results from this
process must include “binding and enforceable” provisions
that prohibit picketing, boycotting, stopping work, or “any
other economic interference.”
It might seem at first glance that a labor peace agreement
would be detrimental to employees’ interests because it
deprives them of labor rights. In practice, however, if an
employer may not operate without such an agreement, the
employer may need to give benefits to its employees to
induce them to enter the agreement. Employees have an
incentive to trigger negotiations toward labor peace
agreements to obtain such benefits. Indeed, here, at least one
organization of service employees advocated for inclusion
of section 25 when the City was revising its standard LAX
licensing contract.
Two trade associations who have members that operate
at LAX brought suit in the United States District Court for
2

Section 25 describes broadly the type of employee organization
that can make this request and does not require the employees to be
unionized.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 7
the Central District of California to challenge section 25:
Airline Service Providers Association (“ASPA”), an
association of third-party service providers; and the Air
Transport Association of America (“Airlines”), an
association of American airlines. The associations argue
that, because the City of Los Angeles operates LAX, the
contractual conditions in LAX’s standard licensing
agreement are effectively municipal regulations. The
associations contend that section 25, as one such
“regulation,” is preempted by two federal labor statutes—the
National Labor Relations Act (“NLRA”) and the Railway
Labor Act (“RLA”)—and by the Airline Deregulation Act
(“ADA”).
The district court dismissed the Complaint without leave
to amend. It dismissed the labor law preemption claims for
failure to state a claim and the ADA claim for lack of
standing.
Standing
The City challenges aspects of Plaintiffs’ standing, and,
in any event, we have an independent obligation to ensure
that we have subject matter jurisdiction. See, e.g., United
States v. McIntosh, 833 F.3d 1163, 1173 (9th Cir. 2016). For
the reasons that follow, we hold that the ASPA has standing
to pursue all of its claims. 3
An association like the ASPA has standing if (1) its
individual members would have standing in their own right,
3
So long as one plaintiff has standing, an appellate court has
jurisdiction to address his claims regardless of whether other plaintiffs
have standing. See, e.g., Rumsfeld v. Forum for Acad. & Inst’l Rights,
Inc., 547 U.S. 47, 52 n.2 (2006). Given our conclusion that the ASPA
has standing, we need not evaluate the Airlines’ standing.

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8 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
(2) the interests at stake in the litigation are germane to the
organization’s purposes, and (3) the case may be litigated
without participation by individual members of the
association. Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs. (TOC), Inc., 528 U.S. 167, 181 (2000) (citing Hunt v.
Wash. State Apple Advert. Comm’n, 432 U.S. 333, 343
(1977)).
To have standing in their own right, an association’s
members must have “suffered an injury in fact,” that injury
must be “fairly traceable to the challenged conduct of the
defendant,” and the injury must be “likely to be redressed”
by a decision in their favor. Spokeo, Inc. v. Robins, 136 S.
Ct. 1540, 1547 (2016).
The ASPA has alleged a sufficient injury in fact. It
alleges that its members will be forced into unwanted
negotiations that must terminate in either an agreement or
arbitral award—something virtually certain to occur given
that an organization of service employees advocated for
section 25, suggesting that employees plan to make use of
the provision. We have recognized that “[t]he economic
costs of complying with a licensing scheme can be sufficient
for standing,” Mont. Shooting Sports Ass’n v. Holder,
727 F.3d 975, 980 (9th Cir. 2013), even if “the extent of [the
alleged] economic harm is not readily determinable,” Cent.
Ariz. Water Conservation Dist. v. EPA, 990 F.2d 1531, 1538
(9th Cir. 1993). Here, ASPA members will at least have to
devote resources, and thus incur economic costs, to
participate in negotiations, mediation, and possibly even
binding arbitration over a labor peace agreement, which they

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 9
would not otherwise be required to discuss. The time spent
in those negotiations is itself a concrete injury. 4
Second, the ASPA has shown a sufficient “line of
causation” between the City’s actions and this injury. See
Allen v. Wright, 468 U.S. 737, 757 (1984), abrogated on
other grounds by Lexmark Int’l, Inc. v. Static Control
Components, Inc., 134 S. Ct. 1377 (2014). The injuries it
claims are directly linked to the City’s conduct: The City
has made section 25 a mandatory component of its standard
licensing contract for service providers at LAX, and section
25 will force service providers to spend time negotiating
about a labor peace agreement. This is a sufficient causal
connection. See Cent. Ariz., 990 F.2d at 1538 (holding that
economic injury caused by contractual obligations that
stemmed from compliance with a regulation were
sufficiently caused by the regulation to support standing).
Finally, the remedies the ASPA seeks would redress the
harm it alleges. See Spokeo, 136 S. Ct. at 1547. If, as the
Complaint requests, section 25 were enjoined on the basis of
preemption by federal labor law or the ADA, the ASPA’s
members would not suffer any adverse consequences of
complying with it. See Cent. Ariz., 990 F.2d at 1538 (“[The
plaintiff’s] economic injury is likely to be redressed by a
favorable decision since elimination of the [rule in question]
would necessarily eliminate the increased financial burden
the rule causes.”).

4

Because this injury is sufficient to support standing, we need not
consider whether the ASPA’s allegations that its members will be forced
to accede to employee demands during negotiations triggered under
section 25 could support standing.

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10 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
The ASPA’s individual members would therefore have
standing in their own right, and the first prong of the test for
associational standing is satisfied.
The second and third prongs are satisfied as well. The
ASPA alleges that it has an organizational interest “in the
consistent enforcement of unitary federal regulation of
airline industry labor relations.” The association’s asserted
purpose is therefore related to its legal claims in this action—
namely, that section 25 is preempted by federal statutes that
regulate airlines—satisfying the germaneness prong. As to
the third prong, the parties have identified no reason that the
ASPA’s members must participate individually in this case,
and neither have we. The ASPA thus meets all the
requirements for associational standing. 5
Lack of Preemption
Having concluded that the ASPA has standing, we now
turn to whether its preemption arguments state a claim on
which relief may be granted. We evaluate this question de
novo. Associated Gen. Contractors of Am. v. Metro. Water
Dist. of S. Cal., 159 F.3d 1178, 1181 (9th Cir. 1998).
“In deciding whether a federal law pre-empts a state [or
local] statute, our task is to ascertain Congress’[s] intent in
enacting the federal statute at issue.” Metro. Life Ins. Co. v.
Massachusetts, 471 U.S. 724, 738 (1985) (quoting Shaw v.
5

The district court’s contrary decision with respect to the ASPA’s
ADA claim rested largely on its conclusion that the ASPA’s members
are not subject to the ADA and, thus, that it could not assert claims that
rely on the ADA. A plaintiff’s ability to state a claim under a particular
statute is not a question of federal subject matter jurisdiction, however,
but rather a question of the merits of that claim. See, e.g., Lexmark,
134 S. Ct. at 1387 n.4.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 11
Delta Air Lines, Inc., 463 U.S. 85, 95 (1983)). The Supreme
Court has emphasized, however, that generally “pre-emption
doctrines apply only to state [or local] regulation.” Bldg. &
Constr. Trades Council of Metro. Dist. v. Associated
Builders & Contractors of Mass./R.I., Inc. (Boston Harbor),
507 U.S. 218, 227 (1993). When a state or local government
buys services or manages property as a private party would,
it acts as a “market participant,” not as a regulator, and we
presume that its actions are not subject to preemption. See
id. at 229. Only if a statute evinces an intent to preempt such
proprietary actions by a state or local government is the
presumption overcome and the action preempted. See
Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist., 498
F.3d 1031, 1041–42 (9th Cir. 2007).
For the reasons that follow, we hold first that the City
was acting as a market participant and not a regulator when
it adopted section 25. Second, because nothing in the
NLRA, RLA, or ADA shows that Congress meant to
preempt states or local governments from actions taken
while participating in markets in a non-regulatory capacity,
we conclude that section 25 is not preempted by those
federal statutes.
The City Is Acting as a Market Participant
To decide whether a state or local government is acting
as a market participant or instead as a regulator, we apply the
two-prong test first articulated in Cardinal Towing & Auto
Repair, Inc. v. City of Bedford, 180 F.3d 686 (5th Cir. 1999).
See Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d
1011, 1023 (9th Cir. 2010); accord, e.g., Engine Mfrs. Ass’n,
498 F.3d at 1041. First, is the challenged governmental
action undertaken in pursuit of the “efficient procurement of
needed goods and services,” as one might expect of a private
business in the same situation? Johnson, 623 F.3d at 1023

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12 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
(quoting Cardinal Towing, 180 F.3d at 693). Second, “does
the narrow scope of the challenged action defeat an inference
that its primary goal was to encourage a general policy rather
than [to] address a specific proprietary problem”? Id. at
1023–24 (quoting Cardinal Towing, 180 F.3d at 693). If the
answer to either question is “yes,” the governmental entity is
acting as a market participant. Id. at 1024.
Johnson offers an example of how this test works.
There, a community college district had sold bonds to fund
construction projects. Id. at 1016. As the City did here, the
college adopted an agreement governing labor conditions for
contractors working on those construction projects that
prohibited strikes, picketing, and similar labor disruptions.
Id. at 1017. The agreement also made those unions the
exclusive bargaining representatives for workers on the
project, required the use of union “hiring halls” for staffing,
established mechanisms for resolving disputes, and required
the unions to create an apprenticeship program. Id. at 1016–
17.
Several non-union apprentices and apprenticeship
committees challenged those restrictions as preempted by
the NLRA and the Employee Retirement Income Security
Act (“ERISA”). Id. We held that the college was acting as
a market participant under both prongs of the Cardinal
Towing test. Id. at 1024–29. Specifically, we determined
that the college had a proprietary interest in the efficient
procurement of construction services, including in avoiding
labor disruptions. This was true even though the college
may have spent some of its money unwisely, and even
though a private actor may not have accepted terms as
unfavorable as the college had. Id. at 1025–27. We also
concluded that the scope of the challenged agreement was
narrow in that it applied only to construction projects worth

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 13
more than $200,000 funded by the bond initiative during a
certain time period. Id. at 1028–29. Accordingly, we held
that the college was acting as a market participant and that
the restrictions were not preempted. See id. at 1024–29.
Applying that precedent here, we hold that the City
satisfies both prongs of the Cardinal Towing test and so was
acting as a market participant when it added section 25 to the
LAX licensing contract.
1. Efficient Procurement of Goods and Services
First, like the college in Johnson, the City is attempting
to avoid disruption of its business: If a private entity
operated LAX, that entity would have a pressing interest in
avoiding strikes, picket lines, boycotts, and work stoppages.
Those interests are not any less pressing simply because the
City rather than a private business operates the airport, and
labor peace agreements are one way to protect those
interests. See Boston Harbor, 507 U.S. at 231–32 (holding
that Boston’s requiring a no-strike provision in
subcontractor agreements was permissible market
participation because the city was “attempting to ensure an
efficient project that would be completed as quickly and
effectively as possible” and because “analogous private
conduct would be permitted”).
Plaintiffs urge the opposite conclusion on the ground that
the City has not directly participated in the market and has
instead dictated contract terms to others who do. The City
does, however, participate directly in a market for goods and
services. “[A]irports are commercial establishments . . .
[that] must provide services attractive to the marketplace.”
Int’l Soc’y for Krishna Consciousness, Inc. v. Lee, 505 U.S.
672, 682 (1992) (citations omitted). If the City operates the
airport poorly, fewer passengers will choose to fly into and

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14 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
out of LAX, fewer airlines will operate from LAX, and the
City’s business will suffer. It must avoid commercial pitfalls
as the proprietor of a commercial enterprise.
That fact makes this case distinguishable from, for
example, Golden State Transit Corp. v. City of Los Angeles,
475 U.S. 608 (1986). In Golden State, a plaintiff taxi
company alleged that Los Angeles had interfered with labor
negotiations by withholding the company’s license until a
strike against the company ended. See id. at 611–12. The
plaintiff argued that Los Angeles’s license decision was
preempted by the NLRA, and the Supreme Court agreed. Id.
at 615–19. The Court rejected Los Angeles’s argument that
its decision was justified by its general interest in ensuring
“uninterrupted [citywide taxi] service to the public by
prohibiting a strike.” Id. at 618. Los Angeles did not operate
the taxi service at issue in Golden State, nor did it use the
taxi company for any city functions or services. By contrast,
here, a department of the City of Los Angeles does operate
LAX, and it has taken action to protect its proprietary
interest in running the airport smoothly. 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 in order to transport city
employees.”). The City is thus participating in the air
transportation market. 6

6

Plaintiffs relatedly argue that the City is not actually procuring any
goods or services but is instead essentially offering licenses, which they
describe as a “purely regulatory function.” But a private contracting
condition may be proprietary even though it could also be called a
licensing scheme. See, e.g., Johnson, 623 F.3d at 1017 (holding that the
challenged contractual provisions in a project labor agreement were not
preempted by the NLRA even though the defendant college district
restricted contractors on the project to employing only members of a

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 15
To the extent Plaintiffs argue more broadly that the City,
as the operator of an airport, is not participating in a private
market at all, we disagree. At first blush, that argument has
some intuitive appeal because most airports in the United
States are run by or affiliated with a governmental entity.
But the same is not true internationally. See generally, e.g.,
David L. Bennett, Airport Privatization After Midway,
23 Air & Space Law. 22, 22 (2010) (noting the “trend toward
private participation in airport ownership and operation in
most other parts of the world”); Zane O. Gresham & Brian
Busey, “Do As I Say and Not As I Do”—United States
Behind in Airport Privatization, 17 Air. & Space Law. 12,
13–14
(2002)
(describing
airport
privatization
internationally and experimentation with airport
privatization in the United States). And, even domestically,
Congress has enacted a “pilot program” for privatization of
airports. See 49 U.S.C. § 47134.
Moreover, the Supreme Court and other federal appellate
courts have recognized the inherently competitive and
commercial nature of airport operations. See Int’l Soc’y for
Krishna Consciousness, 505 U.S. at 682; see also Four T’s,
Inc. v. Little Rock Mun. Airport Comm’n, 108 F.3d 909, 912–
13 (8th Cir. 1997) (holding, in response to a Commerce
Clause challenge, that a city that operated an airport was
acting as a participant in the market for airport rental car
services). Airports also compete against private modes of
transportation, like long-distance travel by train, car, or bus.
particular union, effectively offering a license to only one group). Nor
does it matter that the City would not be a party to the contracts that
included a labor peace agreement. The challenged municipal action in
Boston Harbor also involved requiring a no-strike condition in contracts
between third parties. 507 U.S. at 220–21. That did not stop the
Supreme Court from concluding that Boston was acting as a market
participant. Id. at 230–32.

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16 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
See, e.g., Randall O’Toole, Cato Inst., Pol’y Analysis
No. 680, Intercity Buses: The Forgotten Mode, (2011),
available at https://www.cato.org/publications/policyanalysis/intercity-buses-forgotten-mode
(noting
that
intercity buses were “America’s fastest growing
transportation mode” between 2007 and 2010 (citation and
internal quotation marks omitted)).
We therefore conclude that the City is acting as a market
participant under the first prong of the Cardinal Towing test.
2. Narrow Scope
The City’s actions independently qualify as market
participation under Cardinal Towing’s second prong. The
decision to adopt section 25 is narrowly tied to a “specific
proprietary problem,” Johnson, 623 F.3d at 1024 (quoting
Cardinal Towing, 180 F.3d at 693): service disruptions at
LAX, which the City manages as proprietor. Nothing in the
text of section 25 or in the Complaint’s allegations suggests
that section 25 will be enforced throughout the rest of the
City’s jurisdiction or that section 25 will hamper service
providers’ operations elsewhere.
Plaintiffs argue otherwise, asserting that section 25 is in
reality a preempted labor regulation because it gives labor
unions a powerful bargaining chip, applies broadly to all
service providers at LAX, and governs any organization that
requests a labor peace agreement. 7 We find these arguments
unpersuasive for reasons that become apparent in
considering the three cases Plaintiffs primarily rely upon to
7

The ASPA also argues that the Service Employees International
Union lobbied for section 25, demonstrating a pro-union motivation for
its adoption. As discussed infra in Part IV, such motive does not matter
to the preemption analysis.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 17
support their position. Compared to the regulations imposed
in those decisions, section 25 reaches a much narrower swath
of commercial activity and focuses on specific proprietary
needs.
First, Plaintiffs rely on Wisconsin Department of
Industry, Labor & Human Relations v. Gould Inc., 475 U.S.
282 (1986). In that case, the Supreme Court affirmed a
decision enjoining a Wisconsin law that barred all state
procurement agents from transacting with repeat NLRA
violators. See id. at 283–84. The Court held that
Wisconsin’s spending policy swept too broadly to constitute
a permissible exercise of market participation, particularly
given the lack of an obvious proprietary concern animating
the debarment scheme. Id. at 289–91. By contrast, section
25 does not govern all of the City’s contractual
relationships, 8 and the City has a clear proprietary interest in
avoiding labor disruptions of airport services.
Second, Plaintiffs cite Chamber of Commerce of the
United States of America v. Brown, 554 U.S. 60 (2008).
There, the Supreme Court analyzed a preemption challenge
against a California law that prohibited employers who
received state funds from using those funds to “assist,
promote, or deter union organizing.” Id. at 63. The Court
held that the law did not represent permissible market
participation because it was “neither ‘specifically tailored to
one particular job’ nor a ‘legitimate response to state
procurement constraints or to local economic needs.’” Id. at
70 (quoting Gould, 475 U.S. at 291). The law’s preamble
even explicitly declared that its purpose was to prevent
8

The dissent suggests that section 25 may affect employment
relationships outside LAX, but, as discussed further below, Plaintiffs
have not alleged any such effects.

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18 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
employers from supporting or opposing union organization.
Id. at 62–63. The law also imposed onerous requirements
for segregating funds and record keeping, and created a right
of action for any private taxpayer to sue suspected violators.
Id. at 72. 9 Section 25, by comparison, is limited to
addressing the needs of LAX and does not announce any sort
of regulatory policy, require complicated recordkeeping, or
create litigation risks.
Third, Plaintiffs point to Metropolitan Milwaukee
Association of Commerce v. Milwaukee County
(Metropolitan Milwaukee II), 431 F.3d 277 (7th Cir. 2005).
That case involved a Milwaukee County ordinance
governing businesses the county had hired to provide
transportation and other services to elderly and disabled
residents. Id. at 277–78. Like section 25, the Milwaukee
ordinance required those businesses to sign labor peace
agreements, but unlike section 25, it imposed several
additional conditions favorable to union organizing and did
little to avoid service interruptions. See id. at 278, 281; see
also Metro. Milwaukee Ass’n of Commerce v. Milwaukee
County. (Metropolitan Milwaukee I), 325 F.3d 879, 880–81
(7th Cir. 2003).
The Seventh Circuit held that the ordinance was
preempted by the NLRA. Metropolitan Milwaukee II,
431 F.3d at 282. It rejected the county’s argument that the
ordinance was proprietary, in large part because the
9

The dissent suggests that the broad effects the Supreme Court
discussed in Brown may have been discerned through discovery, but the
Supreme Court’s analysis focused solely on the text of the challenged
law. See 554 U.S. at 71–73. The Supreme Court made clear that effects
the law would have were obvious on its face. See Id. Here, the text of
section 25 suggests no obvious overbroad effects, and Plaintiffs have
alleged none.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 19
ordinance’s impact would not be restricted to contracts with
the county. See id. at 279–82. For example, the ordinance
prohibited contractors from scheduling meetings designed to
discourage any of their employees from joining a union,
regardless of whether those employees worked on county
contracts. Id. at 280. The Seventh Circuit also reasoned that
the county could have achieved its goal of avoiding service
interruptions by other means, see id. at 282, and that several
of the requirements it imposed focused on union organizing
in particular, see id. at 278, 280–81; see also Metropolitan
Milwaukee I, 325 F.3d at 880–81. Here, by contrast, there is
no allegation that the purposes of section 25 could be
achieved by other means or that the licensing provision will
have spillover effects on the service providers’ operations
beyond their work for LAX. Rather, the nature of the
businesses at issue—services performed at LAX—by
definition allows for natural divisions between work for the
City and work for private parties: A job is either performed
at LAX or it is not, and a strike or other disruption either
occurs at LAX or it does not. 10
These arguments are more specific instances of
Plaintiffs’ broader allegation that section 25 cannot truly be
aimed at minimizing service disruptions because it is a poor
fit for that job. Under our previous decisions, evidence that
an alternative strategy could more effectively or cheaply
accomplish the same goals “bears only on whether [a state
or local government] made a good business decision, not on
10

We disagree with the dissent that section 25 is written so broadly
as to reach the entirety of a given labor organization’s membership. In
context, it is clear that the provision in question, which refers to “binding
and enforceable provision(s) prohibiting the Labor Organization and its
members from engaging in” certain disruptive action, is meant to govern
service providers at LAX. Section 25 repeatedly refers to operations at
LAX, employees at LAX, and the LAX licensing program specifically.

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20 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
whether it was pursuing regulatory, as opposed to
proprietary, goals.” Johnson, 623 F.3d at 1025. Similarly,
we have held that a state or local government may entertain
non-economic purposes and yet rely on the market
participant doctrine. See Engine Mfrs. Ass’n, 498 F.3d at
1046 (“That a state or local governmental entity may have
policy goals that it seeks to further through its participation
in the market does not preclude the doctrine’s application, so
long as the action in question is the state’s own market
participation.”). And although, as the dissent points out, the
Seventh Circuit decided Metropolitan Milwaukee II partially
in reliance on an obvious mismatch between the county’s
asserted purpose and its means of achieving that purpose, the
same court later emphasized that lurking political motives
are an inevitable part of a public body’s actions and are not
“a reason for invalidity.” N. Ill. Chapter of Associated
Builders & Contractors, Inc. v. Lavin, 431 F.3d 1004, 1007
(7th Cir. 2005).
This is not to say that a state’s supposedly proprietary
actions cannot become regulatory if enacted or enforced
overbroadly. Preventing such overbreadth is the purpose of
the second prong of the Cardinal Towing test. See Johnson,
623 F.3d at 1023–24. Concerns about overbreadth were
largely what led the Supreme Court to strike down the statewide spending restrictions at issue in Brown and Gould. See
Brown, 554 U.S. at 70–71; Gould, 475 U.S. at 289–91. But
no state-wide restrictions—or, indeed, city-wide
restrictions—are even alleged to be at issue here. The City
has merely imposed a contract term on those who conduct
business at LAX, which the City operates, and that contract
term serves a cabined purpose. 11 We therefore conclude that
11
We briefly note our disagreement with two additional arguments
Plaintiffs advance. First Plaintiffs (and the dissent) argue that section 25

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 21
the second prong of the Cardinal Towing test is satisfied, and
that, in imposing section 25, the City has acted as a market
participant, not as a regulator.
The Presumption Is Not Rebutted by the NLRA, the
RLA, or the ADA
Having concluded that the City is acting as a market
participant, we must next consider whether there is “any
express or implied indication,” Engine Mfrs. Ass’n.,
498 F.3d at 1042 (quoting Boston Harbor, 507 U.S. at 231),
that Congress intended the NLRA, the RLA, or the ADA to
preempt actions taken by states and local governments in
their capacity as market participants. Absent such an
indication, the presumption that preemption applies only to
regulatory conduct remains in place. See id.
We begin with the NLRA. In Boston Harbor, the
Supreme Court held that the NLRA does not preempt state
does not specifically address disruptions by non-union employees. That
omission alone does not suggest that the City has advanced a pro-union
regulatory policy rather than a proprietary interest. The LAX licensing
scheme includes other protections against non-union disruptions. For
example, if the airport believes it is necessary to hire police or to take
other steps to protect the “efficient operation of LAX” in the event of a
violation of section 25 or some other legal or regulatory violation, the
service providers may have to reimburse the airport regardless of what
or who caused the disruption. Service providers also guarantee the
quality of their work, and the City may demand the removal of a service
provider’s employees or agents.
Second, Plaintiffs argue that section 25 is overbroad because it
applies to all operations at LAX. But LAX would hardly avoid service
disruptions by requiring labor peace agreements from some service
providers and not others. A contract term that applied to fewer than all
of the service providers at LAX would risk disruptions attributable to
whatever service providers were not required to accept section 25.

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22 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
or local government actions taken as a market participant.
See 507 U.S. at 231–32 (“In the absence of any express or
implied indication by Congress that a State may not manage
its own property when it pursues its purely proprietary
interests, and where analogous private conduct would be
permitted, this Court will not infer such a restriction.”); see
also id. at 227 (“We have held consistently that the NLRA
was intended to supplant state labor regulation, not all
legitimate state activity that affects labor.”). Because the
City is acting as a market participant here, Plaintiffs have
thus not stated a claim for preemption under the NLRA.
We likewise conclude that Plaintiffs have failed to state
a claim for preemption under the RLA. We look to decisions
interpreting the NLRA to ascertain the RLA’s preemptive
extent. See Bhd. of R.R. Trainmen v. Jacksonville Terminal
Co., 394 U.S. 369, 383 (1969); Air Transp. Ass’n v. City &
Cty. of San Francisco, 266 F.3d 1064, 1075–76 & n.4; Beers
v. S. Pac. Transp. Co., 703 F.2d 425, 428 (9th Cir. 1983);
see also, e.g., Hull v. Dutton, 935 F.2d 1194, 1197–99 (11th
Cir. 1991); McCall v. Chesapeake & Ohio Ry. Co., 844 F.2d
294, 301–02 (6th Cir. 1988). For that reason, relying on the
fact that the NLRA does not preempt market participation by
state or local governments, we have stated that the RLA
likewise does not preempt such conduct. See Air Transp.
Ass’n, 266 F.3d at 1076 n.4 (explaining that the “RLA would
not preempt actions taken by [a municipal government
operating an airport] as a proprietor” (citing Dillingham
Const. N.A., Inc. v. Cty. of Sonoma, 190 F.3d 1034, 1037 (9th
Cir. 1999) (addressing NLRA preemption))).
Finally, we reach the same conclusion about the ADA.
Congress enacted the ADA to deregulate “the airline
industry through ‘maximum reliance on competitive market
forces and on actual and potential competition.’” Northwest,

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 23
Inc. v. Ginsberg, 134 S. Ct. 1422, 1428 (2014) (quoting
49 U.S.C. § 40101(a)(6)). The statute expressly preempts
states and their subdivisions from “enact[ing] or enforc[ing]
a law, regulation, or other provision having the force and
effect of law related to a price, route, or service of an air
carrier.” 49 U.S.C. § 41713(b)(1).
We and the Supreme Court have interpreted the phrases
“force and effect of law” or “effect of law” in preemption
clauses in other statutes as applying to governmental action
that is regulatory in nature and thus as not preempting market
participation. See, e.g., Am. Trucking Ass’ns v. City of Los
Angeles, 133 S. Ct. 2096, 2102–03 (2013) (interpreting the
Federal Aviation Administration Authorization Act of
1994); Associated Gen. Contractors, 159 F.3d at 1182–83
(interpreting ERISA). Under these cases, we conclude that
Congress did not intend the ADA to upset proprietary
conduct like that at issue here. 12 See Am. Trucking Ass’ns,
133 S. Ct. at 2102. Plaintiffs therefore have not stated a
claim under the ADA.
*

*

*

In sum, given the allegations presented in Plaintiffs’
Complaint, we conclude that the City was acting as a market
participant when it added section 25 to its LAX licensing
contract, and that the preemption provisions of the NLRA,
the RLA, and the ADA do not apply to state and local

12

Our conclusion is bolstered by the inclusion of an express
statutory carve-out in the ADA that preserves the ability of a
governmental actor to “carry[] out its proprietary powers and rights.”
49 U.S.C. § 41713(b)(3).

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24 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
governmental actions taken as a market participant. 13 We
therefore affirm the dismissal of Plaintiffs’ preemption
claims for failure to state a claim on which relief may be
granted.
Leave to Amend
Having concluded that dismissal of the Complaint was
appropriate, all that is left for us to consider is whether the
district court erred by denying leave to amend. “Dismissal
of a complaint without leave to amend is only proper when,
upon de novo review, it is clear that the complaint could not
be saved by any amendment.” Ariz. Students’ Ass’n v. Ariz.
Bd. of Regents, 824 F.3d 858, 871 (9th Cir. 2016).
Here, Plaintiffs argue they must be permitted to amend
their Complaint to allege that the City had ulterior motives
in adding section 25 to the standard licensing contract.
Specifically, Plaintiffs contend they could add allegations
that the City wanted to encourage unionization among the
service providers’ employees. But when it comes to
preemption, “intentions are not what matters.” Am. Trucking
Ass’ns, Inc. v. City of Los Angeles, 133 S. Ct. 2096, 2103
(2013). As we have explained, “preemptive scope [does not]
turn on state officials’ subjective reasons for adopting a
regulation or agreement.” Johnson v. Rancho Santiago
Cmty. Coll. Dist., 623 F.3d 1011, 1026 (9th Cir. 2010).
Rather, it is the nature of the government’s conduct that
makes the difference for our preemption analysis. See id.
(“Federal preemption doctrine evaluates what legislation
13

In addition to its preemption arguments, the ASPA argues that
section 25 is an unconstitutional condition. But the ASPA does not
explain what constitutional right has been affected. Nor have Plaintiffs
appealed the dismissal of their constitutional claims.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 25
does, not why legislators voted for it or what political
coalition led to its enactment.” (quoting N. Ill. Chapter of
Associated Builders & Contractors, Inc. v. Lavin, 431 F.3d
1004, 1007 (7th Cir. 2005))). Amendments along these lines
would make no difference to our analysis.
But, for another reason, we conclude that this case was
terminated too soon. We cannot say with a certainty that
Plaintiffs could not identify, in an amended complaint, large
spillover effects that might substantiate their claim that, in
reality, section 25 acts as a regulation. See, e.g., Rodriguez
v. Steck, 795 F.3d 1187, 1188 (9th Cir. 2015) (noting that
leave to amend should be granted liberally, particularly
when defects in the complaint could be cured by
supplemental allegations). If, for example, Plaintiffs could
amend their complaint to allege that the City has
implemented section 25 in a manner that has imposed wideranging and burdensome restrictions on service providers’
businesses outside of LAX, that would require a different
analysis and could bring this case closer to Metropolitan
Milwaukee Association of Commerce v. Milwaukee County,
431 F.3d 277, 279 (7th Cir. 2005). Section 25 went into
force more than three years ago, so if there have been such
spillover effects, Plaintiffs should be able to allege them in
an amended complaint. 14

14

As explained above, we conclude, contrary to the dissent, that the
Complaint does not now include such allegations so does not state a
claim for relief on which discovery could be conducted.

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26 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
Conclusion
The district court’s rulings are AFFIRMED in part and
VACATED in part, and the case is REMANDED to allow
the district court to enter a dismissal with leave to amend.

TALLMAN, Circuit Judge, concurring in part and dissenting
in part:
I agree with the majority that the ASPA has standing to
assert its claims. The ASPA should also at least be granted
leave to amend its Complaint. But that is where the majority
and I part ways. Even as is, the Complaint states a plausible
claim that the City enacted section 25 as a regulatory
measure rather than a proprietary one. At this stage, we must
say that this overly broad and facially suspect regulation of
labor relations at Los Angeles International Airport
(“LAX”)—issued by the City’s airport commission
ostensibly to promote labor peace—contravenes the delicate
congressional balancing of national labor relations policy
affecting key facilities of interstate commerce. I respectfully
dissent.
I
A
It is well established that, in enacting the National Labor
Relations Act (“NLRA”), “Congress largely displaced state
regulation of industrial relations.” Wis. Dep’t of Indus.,
Labor, & Human Relations v. Gould Inc., 475 U.S. 282, 286
(1986). “The purpose of the [NLRA] was to obtain ‘uniform
application’ of its substantive rules and to avoid the
‘diversities and conflicts likely to result from a variety of

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 27
local procedures and attitudes toward labor controversies.’”
NLRB v. Nash-Finch Co., 404 U.S. 138, 144 (1971) (quoting
Garner v. Teamsters Local Union No. 776, 346 U.S. 485,
490 (1953)). To these ends, through the NLRA, Congress
erected “a complex and interrelated federal scheme of law,
remedy, and administration” and “entrusted administration
of the labor policy for the Nation to a centralized
administrative agency.” San Diego Bldg. Trades Council v.
Garmon, 359 U.S. 236, 242–43 (1959).
Two complementary preemption doctrines serve to
preserve uniformity in national labor policy. The first,
Garmon preemption, “forbids States to ‘regulate activity that
the NLRA protects, prohibits, or arguably protects or
prohibits.’” Chamber of Commerce v. Brown, 554 U.S. 60,
65 (2008) (quoting Gould, 475 U.S. at 286). The second,
Machinists preemption, “prohibits state and municipal
regulation of areas that have been left ‘to be controlled by
the free play of economic forces.’” Bldg. & Constr. Trades
Council of Metro. Dist. v. Associated Builders &
Contractors of Mass./R.I., Inc. (Boston Harbor), 507 U.S.
218, 225 (1993) (quoting Lodge 76, Int’l Ass’n of Machinists
& Aerospace Workers v. Wis. Emp’t Relations Comm’n,
427 U.S. 132, 140 (1976)).
Together, Garmon and
Machinists preempt state and local policies that would
otherwise balkanize the “integrated scheme of regulation”
and disrupt the balance of power between labor and
management embodied in the NLRA. Golden State Transit
Corp. v. City of Los Angeles (Golden State I), 475 U.S. 608,
613–14 (1986).
Similarly, the Railway Labor Act (“RLA”) established a
centralized system of labor dispute resolution for the railway
and airline industries to promote the free flow of interstate
commerce. Aircraft Serv. Int’l, Inc. v. Int’l Bhd. of

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28 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
Teamsters, Local 117, 779 F.3d 1069, 1073 (9th Cir. 2015).
Machinists and Garmon preemption also apply in the RLA
context. Bhd. of R.R. Trainmen v. Jacksonville Terminal
Co., 394 U.S. 369, 380–81 (1969).
B
As the majority correctly notes, a “market participation”
exception allows state and local policies to avoid preemption
analysis altogether if those policies serve to protect a
proprietary interest rather than regulate the labor market.
Boston Harbor, 507 U.S. at 229–30. But by focusing solely
on the market participant exception, the majority glosses
over a glaring reality: if the City had no proprietary interest
in LAX, section 25 would plainly be preempted by the
NLRA.
Section 25 requires service providers to enter into a
“labor peace agreement” (“LPA”)—a “binding and
enforceable” agreement that prohibits affected employees
“from engaging in picketing, work stoppages, boycotts, or
any other economic interference”—with any labor
organization that requests one. If a service provider and
requesting labor organization cannot reach a no-strike
agreement within sixty days, section 25 requires the parties
to submit to binding arbitration. If a service provider refuses
to abide by the terms of section 25, the City may revoke its
license to do business at the airport.
Section 25 represents precisely the type of local
interference in labor-management relations that Machinists
preemption forbids. In Golden State I, the Supreme Court
held that while the NLRA “requires an employer and a union
to bargain in good faith, . . . it does not require them to reach
agreement,” nor does it demand a particular outcome from
labor negotiations. 475 U.S. at 616; see also 29 U.S.C.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 29
§ 158(d) (providing that the duty to bargain in good faith
“does not compel either party to agree to a proposal or
require the making of a concession”). The substance of labor
negotiations, and the results therefrom, are among those
areas Congress intentionally left to the free play of economic
forces when it legislated in the field of federal labor law. See
Golden State I, 475 U.S. at 616 (describing the NLRA as
providing only “a framework for the negotiations”).
The facts of Golden State I are instructive—and Los
Angeles has been in trouble before for flouting federal labor
laws. In that case, the Supreme Court found that Machinists
preempted the City of Los Angeles’ refusal to renew a taxi
cab company’s license when it failed to reach an agreement
with striking union members. Id. at 618. By conditioning
the renewal of the taxi cab franchise on the acceptance of the
union’s demands, the City effectively imposed a timeline on
the parties’ negotiations and undermined the taxi cab
company’s ability to rely on its own economic power to
resist the strike. Id. at 615. The Supreme Court held that the
City could not pressure the taxi cab company into reaching
a settlement and thereby “destroy[] the balance of power
designed by Congress, and frustrate[] Congress’ decision to
leave open the use of economic weapons.” Id. at 619.
Like the taxi cab company in Golden State I, service
providers here face a Hobson’s choice plausibly inferred
from the allegations of the Complaint. If a service provider
refuses to negotiate an LPA with a requesting labor
organization, it loses its right to do business at LAX. But if
the service provider negotiates an LPA, the union knows full
well that it can hold out for significant concessions in
exchange for its members giving up one of their most
valuable economic weapons—the power to go on strike. If
the union is unsatisfied with the terms the service provider

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30 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
offers, the union can request mediation and binding
arbitration. Once forced to arbitrate, the tribunal will dictate
the result the service provider must accept. The threat of
binding arbitration thus seriously limits service providers’
ability to rely on their own “economic weapons of self-help”
to resist a union’s demands.
By forcing unwilling service providers to negotiate and
accept LPAs, section 25 compels a result Congress
deliberately left to the free play of economic forces. The
NLRA does not allow state and local governments to
“introduce some standard of properly balanced bargaining
power . . . or to define what economic sanctions might be
permitted negotiating parties in an ideal or balanced state of
collective bargaining.” Golden State I, 475 U.S. at 619
(alteration in original) (quoting Machinists, 427 U.S. at 149–
50). Yet that is exactly what section 25 does. In doing so, it
directly contravenes federal law.
II
A
Whether the City can enforce section 25 thus hinges
entirely on the applicability of the market participant
exception. The majority is willing to conclude—with little
examination of what the full effects of section 25 will be—
that the City’s proprietary interest in LAX immunizes
section 25 from preemption. Supreme Court precedent
cautions us against drawing such hasty conclusions,
particularly when serious questions persist about whether
section 25 advances the City’s proprietary interest.
As a preliminary matter, the Supreme Court has made
clear that not every government action escapes preemption
simply because it touches a proprietary interest. Gould,

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 31
475 U.S. at 287 (calling “an exercise of the State’s spending
power rather than its regulatory power. . . . a distinction
without a difference”). The animating concern of Gould, in
the words of Judge Posner, was that “[t]he [state’s] spending
power may not be used as a pretext for regulating labor
relations.” Metro. Milwaukee Ass’n of Commerce v.
Milwaukee County (Metropolitan Milwaukee II), 431 F.3d
277, 279 (7th Cir. 2005) (emphasis added).
The fact that the City of Los Angeles owns and operates
LAX through its municipal airport commission, and thus has
an interest in minimizing disruptions to air travel, cannot
alone qualify section 25 for the market participant exception.
Instead we must determine, by examining section 25’s
“actual content and its real effect on federal rights,” Livadas
v. Bradshaw, 512 U.S. 107, 108 (1994), whether section 25’s
“manifest purpose and inevitable effect” is to do more than
protect the City’s proprietary interest in running the airport,
see Gould, 475 U.S. at 291. 1 Because our inquiry is
informed by how section 25 might actually work in practice,
it “inevitably is fact-specific,” Roger C. Hartley,
Preemption’s
Market
Participant
Immunity—A
Constitutional Interpretation: Implications for Living Wage
and Labor Peace Policies, 5 U. Pa. J. Lab. & Emp. L. 229,
252 (2003), and deserves more than the surface-level review
undertaken by the majority.

1

To be clear, examining a challenged policy’s purpose does not
involve an investigation into policymakers’ “subjective reasons for
adopting a regulation or agreement.” Johnson v. Rancho Santiago Cmty.
Coll. Dist., 623 F.3d 1011, 1026 (9th Cir. 2010); see also Chamber of
Commerce v. Reich, 74 F.3d 1322, 1336 (D.C. Cir. 1996) (clarifying that
it was unnecessary “to question the President’s motivation in order to
determine whether the [Executive] Order” demonstrated a regulatory
purpose).

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32 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
The Supreme Court’s decision in Chamber of Commerce
v. Brown, 554 U.S. 60 (2008), illustrates the fact-sensitive
nature of our analysis. At issue in Brown was California’s
Assembly Bill 1889 (AB 1889), which prohibited certain
private employers from using state funds to “assist, promote,
or deter union organizing.” Id. at 63 (quoting Cal. Gov’t
Code §§ 16645.1–16645.7). The Court found it “beyond
dispute that California enacted AB 1889 in its capacity as a
regulator rather than a market participant.” Id. at 70. As one
obvious example, the preamble to AB 1889 announced an
explicit regulatory purpose. Id.
The heart of the Court’s market participation analysis,
however, focused not on AB 1889’s official purpose but on
its practical consequences. Significantly, although AB 1889
purported to affect only state funds, the statute’s
combination of compliance burdens and litigation risks
effectively deterred employers from using any funds, state
or otherwise, to exercise speech rights protected under the
NLRA. Id. at 72–73. In light of these realities, the Court
held that although California had a “legitimate proprietary
interest in ensuring that state funds are spent in accordance
with the purposes for which they are appropriated,” in
operation, AB 1889 “effectively reache[d] far beyond the
use of funds over which California maintains a sovereign
interest.” 2 Id. at 70–71.

2

The majority mischaracterizes my analysis of Brown. The critical
lesson from Brown is that preemption analysis requires a careful inquiry
into the actual effects of a challenged policy. Contrary to the majority’s
interpretation, the Court’s analysis did not focus “solely on the text of
AB 1889.” Rather, its ultimate preemption holding rested on how the
statute, once operationalized, would affect the real-world choices of
entities receiving state funds, and the use of funds over which the state
could claim no proprietary interest. Id. at 73 (“AB 1889’s enforcement

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 33
With respect to section 25, we must be similarly sensitive
to the ordinance’s real-world impacts. We must also
construe the allegations in the Complaint in the light most
favorable to the party resisting dismissal. Syed v. M-I, LLC,
853 F.3d 492, 499 (9th Cir. 2017). Yet the majority seems
content to decide, with little examination of how section 25
might actually operate, that section 25 serves a purely
proprietary function. Applying the Cardinal Towing test, the
majority makes a conclusory finding that, “like the college
in Johnson, the City is attempting to avoid disruption of its
business.” And with similarly scant analysis, the majority
decides that section 25 is “narrowly tied to [the City’s]
specific proprietary problem.” Distinguishing between
government as market participant and government as
regulator, however, requires a closer look at section 25’s
“actual content” and “real effect[s].” See Livadas, 512 U.S.
at 108.
B
Under the first prong of Cardinal Towing, we cannot say
that section 25 reflects the City’s interest in the “efficient
procurement of needed goods and services,” as we might
expect from a private entity. Johnson, 623 F.3d at 1023
(quoting Cardinal Towing & Auto Repair, Inc. v. City of
Bedford, 180 F.3d 686, 693 (5th Cir. 1999)). At the risk of
stating the obvious, 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
mechanisms put considerable pressure on an employer either to forgo his
‘free speech right to communicate his views to his employees,’ or else
refuse the receipt of any state funds. In so doing, the statute . . . chills
one side of the ‘robust debate which has been protected under the
NLRA.’” (citation omitted)).

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34 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
providers handling baggage, assisting passengers, refueling
aircraft, serving food and beverages, and otherwise keeping
planes operating on schedule to do business at the airport.
The City’s proprietary interest here is thus markedly
different in kind than that in cases like Boston Harbor and
Johnson, where local governments required project labor
agreements that were “specifically tailored to one particular
job.” See Boston Harbor, 507 U.S. at 232.
Furthermore, unlike the project labor agreements in
Boston Harbor and Johnson, there is no evidence that a
private operator of LAX would use LPAs as a means of
ensuring labor peace. See Metro. Milwaukee II, 431 F.3d at
282. Section 8(e)–(f) of the NLRA specifically authorizes
the type of project labor agreements at issue in Boston
Harbor and Johnson, indicating that such agreements “are a
tried and true remedy for construction stoppages owing to
labor disputes.” Id. at 281–82. Nothing in the record
suggests the same is true for LPAs in the private
marketplace.
Indeed, if the City’s true purpose here is to minimize
work stoppages at LAX, section 25 seems an ill-fitted tool
for the job. Section 25 is both too narrow and too broad as
a means of achieving its purported objective. It is too narrow
because, by its own terms, section 25 does not even apply to
service providers’ employees, but only to the members of a
labor organization that requests an LPA. Therefore, if a
service provider’s employees currently have no recognized
collective bargaining representative, those employees will
not be covered by an LPA at all. Nor does section 25 apply
to other classes of airport workers who may threaten work
stoppages. Section 25 also applies only partial deterrence:
it penalizes service providers, but not labor organizations,
for violating an LPA.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 35
At the same time, section 25 sweeps more broadly than
necessary to achieve its goal. In order for unions to forgo
their right to strike, common sense and long experience in
labor negotiations tell us we would reasonably expect that
service providers will have to make concessions favorable to
the unions. These concessions may be totally unrelated to
preventing strikes, and may or may not actually promote
labor peace. Instead of forcing service providers and labor
organizations into LPA negotiations, the City could have
used other, more targeted mechanisms to prevent labor strife.
In Metropolitan Milwaukee II, Judge Posner observed that
[t]he usual way of dealing with [service
interruptions] is to include contract terms that
by adding sticks or carrots or both give the
provider of the service a compelling
incentive to take effective measures to avoid
stoppages. The buyer can offer a premium
for timely performance and insist on the
inclusion of a stiff liquidated-damages
provision as a sanction for untimely
performance; there is also, as a further
incentive to good performance, the implicit
threat of refusing to renew the contract if
performance is unsatisfactory.
431 F.3d at 280. 3 Section 25 is far less straightforward. To
summarize, it only covers a service provider’s employees if:
3

The majority distinguishes Metropolitan Milwaukee II on the
grounds that the county ordinance at issue in that case “did little to avoid
service interruptions” and “imposed several additional conditions
favorable to union organizing,” Nothing in the record establishes,
however, that section 25 would achieve labor peace any more
effectively. And for reasons explained infra, it is reasonable to assume

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36 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
(1) those employees are already represented by a labor
organization; (2) that labor organization requests an LPA;
(3) the labor organization and service provider enter into
LPA negotiations; and (4) the service provider makes
concessions acceptable to the union, which may be totally
unrelated to preventing strikes. If a service provider’s
employees are not already unionized, once a labor
organization secures an LPA, the labor organization must
then (5) become the certified bargaining representative of the
service provider’s employees through NLRB elections.
Compared to simple, contract-based incentives, see id.,
section 25 certainly seems a roundabout way to minimize
labor disruptions at LAX.
These tailoring problems suggest that section 25’s
“manifest purpose and inevitable effect” may not be to
protect the City’s proprietary interest in the airport at all. 4
See id. (holding that tailoring problems may indicate a
regulatory purpose); see also Hotel Emps. & Rest. Emps.
Union, Local 57 v. Sage Hosp. Res., LLC, 390 F.3d 206, 214
(3d Cir. 2004) (noting that “[o]ther appellate courts that have
examined the regulator/market-participant distinction also
focus on the fit between the challenged state requirement and
that section 25’s practical effect is to impose conditions on service
providers aimed at facilitating union organizing.
4

The majority suggests that the poor fit between section 25’s actual
effects and its purported goals should play no role in our preemption
analysis. But tailoring issues are highly relevant to our evaluation of the
first prong of the Cardinal Towing test—whether a challenged policy
“reflect[s] the [government] entity’s interest in its efficient procurement
of needed goods and services.” Johnson, 623 F.3d at 1023 (quoting
Cardinal Towing, 180 F.3d at 693). This inquiry is distinct from
examining policymakers’ motives, which does not play a role in our
analysis, and the narrowness of the challenged policy’s scope, which is
relevant to Cardinal Towing prong two.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 37
the state’s proprietary interest in a particular project or
transaction” (citing Chamber of Commerce v. Reich, 74 F.3d
1322 (D.C. Cir. 1996))). If section 25 does not directly
advance the City’s proprietary interest, is it instead a pretext
for regulating labor relations? The complaint plausibly
alleges as much.
Historical experience with LPAs, which the majority
does not bother to consider, also provides useful insight into
whether section 25 reflects a proprietary interest or a
regulatory one. That experience suggests that section 25’s
true purpose is to alter the balance between labor and
management. In typical LPAs, in exchange for relinquishing
their right to strike, unions gain concessions from employers
to support unionization of the employer’s employees. See
Hartley, supra, at 246 (summarizing study of over one
hundred LPAs). For example, LPAs often require an
employer to remain neutral during union organizing drives.
Id. LPAs also often require employers to provide unions
with employees’ contact information and access to the
employer’s physical premises to assist with organizing
efforts. 5 Id. at 246–47. A review of LPAs in California
similarly found that, in most LPAs, “employers must grant
workplace access, provide employee information (names,
job titles, contact information, etc.) early in the organizing
campaign,” “refrain from making disparaging statements
5

Under the NLRA, by contrast, employers may publicly oppose
unionization and refuse to give labor organizations access to workplace
facilities. 29 U.S.C. § 158(c) (permitting noncoercive employer speech
regarding unionization); Lechmere, Inc. v. NLRB, 502 U.S. 527, 538
(1992) (upholding general rule that employer may not be compelled to
allow nonemployee union organizers onto the employer’s property for
the distribution of union literature). Section 25 thus forces service
providers to give up statutory rights that would otherwise be protected.

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38 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
about the union,” and/or “require that employers assent to
card check recognition and neutrality.” 6 Indeed, in this case,
counsel for the City admitted at oral argument that unions
would likely seek neutrality from service providers as part
of LPA negotiations. We should therefore be unsurprised
that, as the ASPA has alleged, the Service Employees
International Union (SEIU) lobbied heavily for section 25
after it tried unsuccessfully to unionize service provider
employees at LAX.
Given that LPAs are generally used to promote union
organizing, and given counsel’s own admission at oral
argument, we cannot conclude at this stage that section 25
simply reflects the City’s proprietary interest in preventing
work stoppages. Moreover, the City has failed to establish
that it enacted section 25 to respond to legitimate concerns
about work disruptions at LAX, as we might expect from a
private operator of the airport. The “manifest purpose and
inevitable effect” of section 25 thus appears to be aimed at
altering the balance of power between service providers and
organized labor. See Gould, 475 U.S. at 291.
C
Turning to the second prong of the Cardinal Towing test,
we again cannot say conclusively at this stage that section
25’s real-world impacts will be sufficiently narrow to qualify
for the market participant exception.
Even on cursory facial examination, section 25 does not
appear narrowly drawn. In Johnson, we found that the
6

John Logan, Innovations in State and Local Labor Legislation:
Neutrality Laws and Labor Peace Agreements in California, in The State
of California Labor 2003 157, 184 (Ruth Milkman ed., 2003), available
at http://www.iir.ucla.edu/publications/documents/StateofCALabor2003.pdf.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 39
challenged project labor agreement condition in that case
was narrow in scope because it was both limited in time and
limited to construction projects costing over $200,000.
623 F.3d at 1028. By contrast, section 25 applies to any
service provider at LAX, no matter how big or small the
service provider’s operations there. And section 25 is
unlimited in duration; service providers must comply with
its terms as long as they want to remain licensed to do
business at LAX.
The practical effects of section 25 must also inform our
determination of whether its scope is narrow. A challenged
policy exceeds a state’s proprietary interest if the policy
effectively reaches employer conduct “unrelated to the
employer’s performance of contractual obligations to the
state.” Boston Harbor, 507 U.S. at 228–29; see also Brown,
554 U.S. at 71. In Metropolitan Milwaukee II, for example,
the court held that a Milwaukee County ordinance was
preempted because it affected government contractors’
employees regardless of whether they performed work on
government contracts. 431 F.3d at 279. The ordinance
required government contractors to secure LPAs that would
apply to the contractors’ “employees,” without specifying
whether “employees” within the meaning of the ordinance
was limited to bargaining units that worked on county
contracts. Id. The unrestricted language left open the
possibility that an employee who performed only some or no
work for the county would be covered by an LPA, even for
a labor dispute arising out of non-county work. Id.
Here, we have no assurances—besides the word of the
City—that section 25 will have no similar spillover effects.
The majority confidently asserts that Section 25 will not
“hamper service providers’ operations elsewhere.” That
conclusion apparently rests on the fact that section 25 as a

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40 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
whole is aimed at operations at LAX. But we should be
unsurprised that section 25 focuses on LAX, given that the
airport authority lacks jurisdiction to directly regulate
service providers beyond LAX; the City clearly cannot
impose contracting conditions on service providers with
whom it has no contractual relationship. The key point,
however, is that nothing in section 25 limits private
agreements between service providers and unions from
extending beyond LAX. Nothing in section 25, for example,
dictates that LPAs shall cover only LAX bargaining units.
The ordinance provides only that an LPA must apply to a
labor organization’s “members,” regardless of whether they
perform only some or none of their work at LAX. In LPA
negotiations, therefore, labor organizations may seek
concessions that affect service provider employees well
beyond LAX. And, depending on service providers’
business arrangements, it may be impracticable for service
providers to segregate their workforces so that only
employees who work exclusively at LAX are covered by an
LPA. 7 See Metro. Milwaukee II, 431 F.3d at 279–80.
The sheer scale of LAX may also result in
spillover effects. According to the City, “LAX is the
fourth busiest passenger airport in the world,” and the
second busiest in the U.S. L.A. World Airports, General
7

Contrary to the majority’s suggestion, we have no indication that
any “natural division” between labor performed at and outside LAX
exists. It may be, for example, that some service provider employees
perform work both at LAX and at one of the many other regional airports
in the greater Los Angeles area. Should such an employee become
involved in a labor dispute, she would be bound by an LPA entered into
pursuant to section 25 regardless of whether the dispute arose at LAX or
elsewhere. This type of spillover concern was central in Metropolitan
Milwaukee II, 431 F.3d at 279–80, and the ASPA should be allowed the
opportunity to plead any such facts here.

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AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS 41
Information, LAX: Los Angeles World Airports,
http://www.lawa.org/welcome_lax.aspx?id=40 (last visited
July 14, 2017). Last year, LAX handled over 80.9 million
passengers and nearly 700,000 aircraft takeoffs and
landings. Id. In Reich, the D.C. Circuit held that an
Executive Order affecting all federal contracts over
$100,000 served as a regulation, and not market
participation, in part because the federal government is such
a large purchaser of goods and services. 74 F.3d at 1338.
Here, “given the size of [LAX’s] portion of the economy,”
labor negotiations at LAX may similarly “alter . . . behavior”
in the wider market for worldwide airline services. See id.
The ASPA should at least be allowed to plead these potential
effects.
III
If we are to give effect to Congress’ intent to “avoid the
‘diversities and conflicts likely to result from a variety of
local procedures and attitudes toward labor controversies,’”
Nash-Finch Co., 404 U.S. at 144, we cannot allow the
market participation exception to become too broad. It is not
enough to simply accept state and local governments’
assurances that they only seek to enforce labor policies as
market participants, particularly when those policies would
directly interfere with core rights protected by the NLRA,
itself the product of careful congressional balancing of
national labor policy in industries affecting interstate
commerce. Even at this early stage of litigation, an inquiry
into section 25’s “real effect on federal rights,” Livadas,
512 U.S. at 108, raises serious doubts that the City’s interest
in enforcing section 25 is merely about protecting its
proprietary interest in running Los Angeles International
Airport. At the very least, the majority rightly recognizes
that the ASPA is entitled to amend its Complaint. This case

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42 AIRLINE SERV. PROVIDERS V. L.A. WORLD AIRPORTS
should also be permitted to proceed to discovery.
respectfully dissent.

I