PP&M Towing & Recovery, Inc. v. The City and County of San Francisco, California et al

Filing 44

ORDER by Judge Thelton E. Henderson denying 24 Plaintiff's Motion for Preliminary Injunction. (tehlc3, COURT STAFF) (Filed on 5/5/2010)

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

PP&M TOWING & RECOVERY, INC., Plaintiff, v. CITY AND COUNTY OF SAN FRANCISCO, et al., Defendants. NO. C10-1466 TEH ORDER DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

United States District Court

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For the Northern District of California

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This matter came before the Court on May 3, 2010, on Plaintiff PP&M Towing &

13 Recovery, Inc.'s motion for a preliminary injunction. After carefully considering the parties' 14 written and oral arguments, the Court now DENIES the motion for the reasons discussed 15 below. 16 17 BACKGROUND 18 Plaintiff PP&M Towing & Recovery, Inc. is a California corporation that conducts

19 tow operations as P&S Towing in numerous California cities and counties, including 20 Defendant City and County of San Francisco. The San Francisco municipal code provides 21 that: "No person shall engage in or conduct business as a tow car firm within the City and 22 County of San Francisco without first obtaining a permit from the Chief of Police as 23 hereinafter provided." S.F. Police Code § 3050. The application for a permit requires that 24 certain information be provided, including vehicle information for every tow car that the 25 company will operate, evidence of insurance at or above minimum levels determined by the 26 Chief of Police rules, and a "record of all crimes of which the applicant has been convicted, 27 plead guilty, or plead no contest." Id. § 3052. The application also requires that fingerprints 28 be taken, that photographs of the applicant be provided, and that a filing fee be paid. Id.

1 § 3053. Grounds for denying a permit application include the following: lack of the required 2 amount of liability insurance; lack of "the requisite tow car equipment or facilities reasonably 3 necessary to operate a tow car business in such a manner as to adequately protect vehicles of 4 the public that are towed and stored from damage or theft"; or a prior conviction by the 5 applicant of any of an enumerated list of crimes, including theft, check fraud, driving under 6 the influence of alcohol or drugs, sex offenses, and other serious offenses such as murder. 7 Id. § 3054. Tow companies are also required to allow peace officers to inspect the 8 company's premises and vehicles, as well as to keep business records of vehicles towed for a 9 three-year period. Id. §§ 3056, 3059-60. 10 Until recently, PP&M complied with the City's permitting scheme, paying annual fees

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11 of approximately $300 for each tow vehicle in its fleet and $198 for each tow vehicle driver.
For the Northern District of California

12 Koehler Decl. ¶ 5(f). However, PP&M's most recent application for a tow permit was 13 denied on March 10, 2010. The company appealed the denial to the San Francisco Board of 14 Appeals, which held a hearing on April 14, 2010. At that hearing, PP&M sought a 15 temporary permit "to last only so long as this litigation persisted. . . . The Board of Appeals 16 did not agree." Ashworth Decl. ¶ 2. 17 During the time that PP&M has been operating in San Francisco without a permit, two

18 of the company's tow vehicles have been impounded, and the City has refused to release 19 either vehicle. According to the supervising sergeant of the San Francisco Police 20 Department's Commercial Vehicle Unit, one PP&M driver "was arrested and cited for 21 operating a tow truck without a permit" on March 30, 2010; "this matter is being prosecuted 22 in traffic court as an infraction." Haggett Decl. ¶ 5. On April 4, 2010, another driver "was 23 arrested while operating a tow truck owned by PP&M." Id. ¶ 4. This driver was charged 24 with three violations of the California Penal Code ­ brandishing a deadly weapon, possession 25 of a switchblade in a motor vehicle, and evading a police officer ­ and is scheduled to be 26 arraigned on those charges in San Francisco Superior Court on May 18, 2010. Id. The City 27 acknowledges that the tow trucks being driven during both incidents were seized and are 28 currently in the San Francisco Police Department's possession. Id. ¶¶ 4-5. 2

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PP&M's owner asserts that the company's business has dropped by more than 60%

2 since its permit has lapsed, due in part to alleged communications by the San Francisco 3 Police Department to PP&M's commercial customers that the company's operations are 4 illegal. Koehler Decl. ¶ 6(g). "Except for tows originating at or destined to a point outside 5 of the City of San Francisco, [the] company is out of business as of April 15, 2010." Id. 6 ¶ 6(l). Twelve of fourteen drivers have been furloughed, and the office staff has been 7 reduced from five to less than 1.5 full-time equivalents. Id. 8 PP&M filed this case on April 7, 2010, seeking injunctive relief barring the City from

9 enforcing the permitting scheme at issue. PP&M made clear in its reply that it seeks to 10 invalidate only those portions of the municipal code related to the permitting scheme:

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For the Northern District of California

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This lawsuit has only to do with seeking relief from the City's Municipal Code sections which presume to bar entry into the business of conducting a motor carrier business. Assuming that the City's Municipal Code sections relating to `safety', insurance, size-and-weight restrictions ad infinitum, are otherwise consonant with Congress' exemption provisions, the City can enact all of the municipal code sections that it likes.

15 Reply at 3. The company twice sought a temporary restraining order, which this Court 16 denied. However, the Court accelerated the briefing and hearing schedule on PP&M's 17 motion for a preliminary injunction that is now before the Court. 18 19 LEGAL STANDARD 20 "A plaintiff seeking a preliminary injunction must establish that he is likely to succeed

21 on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, 22 that the balance of equities tips in his favor, and that an injunction is in the public interest." 23 Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365, 374 (2008). Even if the plaintiff 24 demonstrates a strong likelihood of success on the merits, a showing that irreparable harm is 25 likely ­ and not simply possible ­ is required. Id. at 375-76. Similarly, even if a plaintiff can 26 demonstrate likelihood of success on the merits and irreparable harm, the balance of equities 27 or the public interest may require denying injunctive relief. Id. at 376. 28 3

1 DISCUSSION 2 The Court first considers whether PP&M has demonstrated a likelihood of success on

3 the merits. PP&M contends that the challenged code sections are preempted by the Federal 4 Aviation Administration Authorization Act of 1994, which provides that "a State [or] 5 political subdivision of a State . . . may not enact or enforce a law, regulation, or other 6 provision having the force and effect of law related to a price, route, or service of any motor 7 carrier . . . with respect to the transportation of property." 49 U.S.C. § 14501(c)(1). 8 However, certain statutory exceptions apply to this general preemption. For example, the 9 Act "shall not restrict the safety regulatory authority of a State with respect to motor 10 vehicles" or "the authority of a State to regulate motor carriers with regard to minimum

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11 amounts of financial responsibility relating to insurance requirements and self-insurance
For the Northern District of California

12 authorization." 49 U.S.C. § 14501(c)(2)(A). Likewise, preemption under § 14501(c)(1) 13 "does not apply to the authority of a State or a political subdivision of a State to enact or 14 enforce a law, regulation, or other provision relating to the price of for-hire motor vehicle 15 transportation by a tow truck, if such transportation is performed without the prior consent or 16 authorization of the owner or operator of the motor vehicle." 49 U.S.C. § 14501(c)(2)(C). 17 The City does not dispute that the challenged code sections fall within the scope of

18 § 14501(c)(1). Indeed, the Ninth Circuit has held that a city's "comprehensive permit 19 scheme" for tow truck operators is "preempted by the plain language of section 14501(c)(1) 20 unless an exception applies." Tocher v. City of Santa Ana, 219 F.3d 1040, 1047-48 (9th Cir. 21 2000), abrogated on other grounds by City of Columbus v. Ours Garage & Wrecker Serv., 22 Inc., 536 U.S. 424, 431-32 (2002). 23 In Tocher, the City of Santa Ana argued ­ like the City does here ­ that the safety

24 exception under § 14502(c)(2)(A) protected its permitting scheme from preemption. The 25 Ninth Circuit rejected that argument and concluded that the "permit requirements are 26 preempted and are not enforceable." Id. at 1050-52. 27 PP&M would have this Court's analysis stop here, and the tow company would be

28 correct if this portion of Tocher remained good law. However, the Tocher court adopted "a 4

1 strict construction of section 14501(c)(2)(A)" and concluded that the safety exception "only 2 exempts safety regulations promulgated by state governments, not those enacted by 3 municipalities." Id. at 1050-51. This holding has subsequently been overruled by the United 4 States Supreme Court. In Ours Garage, the Supreme Court held that "the narrowest possible 5 construction of the exception . . . is surely resistible here." Ours Garage, 536 U.S. at 440. 6 Although subsection (c)(2)(A) refers only to the "authority of a State" and not "the authority 7 of a State or a political subdivision of a State," the Court made clear that "§ 14501(c)(2)(A) 8 spares from preemption local as well as state regulation," provided that the regulation is 9 "genuinely responsive to safety concerns." Id. at 442. Tocher's contrary conclusion 10 therefore does not control the outcome of this case. See Miller v. Gammie, 335 F.3d 889,

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11 900 (9th Cir. 2003) (en banc) (holding that if a subsequent decision by a "relevant court of
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12 last resort" is "clearly irreconcilable" with a Ninth Circuit decision, then "a three-judge panel 13 of this court and district courts should consider themselves bound by the intervening higher 14 authority and reject the prior opinion of this court as having been effectively overruled"). 15 In analyzing whether a challenged law falls within the safety exception, a court should

16 focus on "whether the purpose and intent of the body passing the law at issue, whether state 17 or municipality, was truly safety." Tillison v. City of San Diego, 406 F.3d 1126, 1129 (9th 18 Cir. 2005).1 The legislative's body "expression of intent and purpose is relevant" to the 19 court's inquiry but is "not dispositive." Id. at 1130. Even if a regulation "does not explicitly 20 state that it was enacted for safety purposes," it may nonetheless fall within the safety-related 21 exception of § 14501(c)(2)(A). Tillison v. Gregoire, 424 F.3d 1093, 1105 (9th Cir. 2005). 22 For example, in a case where the Washington State Legislature did "not expressly state a 23 public safety purpose" for enacting a statute governing non-consensual towing, the Ninth 24 Circuit nonetheless found the safety exception to apply because the statute's language was 25 similar to other regulations that were "all held by courts to be passed for the public's safety. 26 Contrary to PP&M's contention at oral argument that this holding was repudiated by the Ninth Circuit's decision in American Trucking Associations, Inc. v. City of Los Angeles, 27 the latter case actually cited Tillison to set forth the legal standard governing the safety exception. Am. Trucking Ass'ns, 559 F.3d 1046, 1053-54 (9th Cir. 2009) (citing Tillison, 406 28 F.3d at 1129). 5
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1 Thus, it is reasonable to conclude that the Washington State Legislature had public safety in 2 mind when it passed [the statute in question]." Id. at 1103. However, "if too broad a scope 3 were given to the concept of motor vehicle safety, the exception would swallow the 4 preemption section itself or, at the very least, cut a very wide swath through it." Am. 5 Trucking Ass'ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1054 (9th Cir. 2009). 6 Consequently, for instance, "even if some kind of general public health concerns are (or may 7 be) involved in a statute or regulation ­ for example control of cigarette usage ­ that alone 8 does not bring the regulation within the ambit of the motor vehicle safety exception." Id. 9 (citing Rowe v. N.H. Motor Transp. Ass'n, 552 U.S. 364, 374-75 (2008)). 10 Here, there is no clear statement of legislative intent that applies to the entire

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11 permitting scheme. The legislative history indicates that the Board considered some nonFor the Northern District of California

12 safety-related reasons for passing the ordinances. The Board of Supervisors' Budget 13 Analyst, for example, reported that "the District Attorney's Office receives numerous 14 complaints regarding tow car companies, particularly related to overbilling and unreasonable 15 charges" and advised that the tow ordinances "will regulate towing charges to prevent unfair 16 practices." Dec. 19, 1996 Memo from Budget Analyst to Bd. of Supervisors Health, Pub. 17 Safety & Env't Comm. at 4 (Ex. B to Defs.' Req. for Judicial Notice). Regulations "based 18 on consumer protection rather than safety" are not covered by the safety exception under 19 § 14501(c)(2)(A). Tocher, 219 F.3d at 1052. However, the Board of Supervisors also made 20 the following safety-related findings when adopting the challenged ordinances: 21 22 23 24 25 26 (i) that there are frequent incidents of illegal towing from private property in San Francisco; and (ii) that there is a significant risk to the safety of residents and visitors when illegal towing from private property occurs at night; and (iii) that there is a risk to public health and safety when the vehicles of senior citizens and persons with disabilities are illegally towed from private property.

27 S.F. Police Code § 3055.2(a). 28 6

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Moreover, the City has presented a declaration from the Commanding Officer of the

2 San Francisco Police Department's Permit Section that discusses the direct relationship 3 between the permitting scheme and safety, and PP&M has offered no evidence in rebuttal. A 4 court may consider such evidence when determining whether "the challenged sections of the 5 City's vehicle towing ordinance affect safety concerns." Galactic Towing, Inc. v. City of 6 Miami Beach, 341 F.3d 1249, 1253 (11th Cir. 2003) (emphasis in original) (holding that 7 affidavits from the Assistant City Manager and Assistant Chief of Police were admissible and 8 relevant to considering whether the safety exception applied). In this case, the officer's 9 declaration states that the permitting scheme allows the Police Department to "screen 10 company owners and their employees to ensure they have not previously engaged in

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11 dangerous and/or criminal conduct that would increase the likelihood that they would create
For the Northern District of California

12 problems," such as towing vehicles illegally, stealing vehicles and selling them on the black 13 market, operating tow trucks in an unsafe manner, or physically or sexually assaulting 14 persons whose cars have been towed or were on a tow company's property ­ all of which 15 have been observed to occur. Coggan Decl. ¶¶ 5-6, 8. The officer also explained that 16 requiring companies to submit information about the vehicles to be used for towing 17 operations allows the Police Department to "determine whether those vehicles are safe for 18 operation" and may allow the Department "to better investigate eyewitness reports of 19 potentially improper and/or criminal activity by tow truck operators, such as unauthorized 20 tows or vehicle thefts." Id. ¶ 11. 21 Although there is no controlling authority in the Ninth Circuit concerning permitting

22 schemes for tow companies, other Circuit courts have upheld regulations similar to the ones 23 challenged here. For example, the Second Circuit upheld the City of New York's towing 24 laws, which included a licensing requirement for tow companies and operators. Ace Auto 25 Body & Towing, Ltd. v. City of New York, 171 F.3d 765 (2d Cir. 1999). "To qualify for a 26 license, a towing company must maintain liability insurance, post a surety bond or cash 27 alternative, and demonstrate that its principals have no relevant criminal history." Id. at 28 768-69. "License requirements for operators include a minimum age of 18 years, possession 7

1 of an appropriate driver's license, and lack of traffic or criminal convictions. Additional 2 rules govern the mechanical safety of tow trucks, the information displayed on trucks, 3 reporting, and recordkeeping." Id. at 769 (citations omitted). The court held that the 4 licensing requirements "are so directly related to safety or financial responsibility and impose 5 so peripheral and incidental an economic burden that no detailed analysis is necessary to 6 conclude that they fall within the § 14501(c)(2)(A) exemptions." Id. at 776. 7 Similarly, the Eleventh Circuit affirmed a district court's ruling that permitting

8 requirements for tow companies "fall under the purview of the § 14501(c)(2)(A)'s public 9 safety exception." Galactic Towing, 341 F.3d at 1253. In that case, the court reviewed 10 ordinances that required a tow company to have a permit, which required submission of an

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11 application, including proof of insurance and payment of a fee. Id. at 1251 n.2. The Fifth
For the Northern District of California

12 Circuit also upheld a local ordinance that barred "persons from receiving a wrecker driver's 13 permit to tow motor vehicles if they have a criminal history including certain specified 14 criminal convictions, documented mental illnesses or unsafe driving records." Cole v. City of 15 Dallas, 314 F.3d 730, 732 (5th Cir. 2002). The court explained: "That the criminal history 16 regulation has, at its core, concern for safety is manifest. It is difficult to imagine a 17 regulation with a more direct protective nexus or peripheral economic burden." Id. at 735. 18 PP&M did not attempt to distinguish any of the above cases and failed even to

19 acknowledge or refer to these cases in its papers or during oral argument, despite the City's 20 reliance on them in both its opposition brief and at the hearing. Instead, PP&M relied 21 heavily on Tocher, 219 F.3d 1040, for the proposition that a tow vehicle permitting scheme 22 falls outside the scope of the safety exception and is therefore preempted. However, as 23 explained above, Tocher is no longer good law on that issue. 24 PP&M has cited no other cases ­ and this Court is unaware of any ­ where a tow

25 vehicle permitting scheme has been held to be outside the safety exception. In the absence of 26 any such authority, and in light of the unrefuted evidence presented by the City that the 27 challenged ordinances are "genuinely responsive to safety concerns," Ours Garage, 536 U.S. 28 at 442, this Court concludes that PP&M has failed to demonstrate a likelihood of success on 8

1 the merits of its preemption argument. Thus, PP&M has not satisfied the first requirement 2 for a preliminary injunction, and this Court's analysis need go no further. 3 4 CONCLUSION 5 Preliminary injunctive relief would be improper because PP&M has not established

6 that it is likely to succeed on the merits of this case. Accordingly, with good cause 7 appearing, PP&M's motion for a preliminary injunction is hereby DENIED. 8 The parties are encouraged to meet and confer regarding how this case should proceed

9 in light of this order. Unless otherwise ordered, the parties shall appear for an initial case 10 management conference on July 26, 2010, at 1:30 PM, and file a joint case management

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11 conference statement on or before July 19, 2010.
For the Northern District of California

12 13 IT IS SO ORDERED. 14 15 Dated: 05/05/10 16 17 18 19 20 21 22 23 24 25 26 27 28 9 THELTON E. HENDERSON, JUDGE UNITED STATES DISTRICT COURT