International Longshore and Warehouse Union v. Port of Portland, et al

Filing 42

Opinion and Order - Defendants' Motion to Dismiss and Alternative Motions for Summary Judgment 21 , is GRANTED IN PART AND DEFERRED IN PART. Signed on 4/8/2013 by Judge Michael H. Simon. (mja)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION

INTERNATIONAL LONGSHORE AND
WAREHOUSE UNION,

Case No.: 3:12-cv-01494-SI

Plaintiff,
OPINION AND ORDER
v.
PORT OF PORTLAND,
COMMISSIONERS OF THE PORT OF
PORTLAND, in their individual and
official capacities; and BILL WYATT, in
his individual and official capacity,
Defendants.
Robert H. Lavitt, Schwerin, Campbell, Barnard, Iglitzin and Lavitt, LLP, 18 West Mercer Street,
Suite 400, Seattle, WA 98119-3871; Robert S. Remar, Eleanor Morton, and Emily M. Maglio,
Leonard Carder, LLP, 1188 Franklin Street, Suite 201, San Francisco, CA 94109. Attorneys for
Plaintiff.
Randolph C. Foster, Jeremy D. Sacks, and Nathan C. Brunette, Stoel Rives LLP, 900 S.W. Fifth
Avenue, Suite 2600, Portland, OR 97204. Attorneys for Defendants Port of Portland,
Commissioners of the Port of Portland, and Bill Wyatt.
Gregory J. Miner, Bateman Seidel Miner Blomgren Chellis & Gram, PC, 888 S.W. Fifth Avenue
Suite 1150, Portland, OR 97204. Attorney for Defendant Bruce Holte.
SIMON, District Judge.
This matter is one of six separate but related actions arising from a labor dispute at
Terminal 6 at the Port of Portland. 1 Briefly stated, the dispute concerns who may perform the

1

The other five cases are Int’l Longshore & Warehouse Union v. ICTSI Oregon, Inc.,
Case No. 3:12-cv-01058-SI (D. Or.); Pac. Mar. Ass’n v. Int’l Longshore & Warehouse Union
Local 8, Case No. 3:12-cv-01100-SI (D. Or.); Hooks v. Int’l Longshore & Warehouse Union,

work of plugging in, unplugging, and monitoring refrigerated shipping containers (the “reefer
work”) at Terminal 6. The International Longshore and Warehouse Union (“ILWU”) and the
Pacific Maritime Association (“PMA”) contend that their collective bargaining agreement
requires ICTSI Oregon, Inc. (“ICTSI”), the operator of Terminal 6 and a PMA member, to assign
the reefer work to ILWU members. ICTSI, the Port of Portland, and the International
Brotherhood of Electrical Workers (“IBEW”) Local 48 contend that other contracts require that
the reefer work be assigned to IBEW members.
Plaintiff ILWU brings this action against Defendants Port of Portland (the “Port”), the
Commissioners of the Port of Portland, in their individual and official capacities (the
“Commissioners”), and Bill Wyatt, in his individual and official capacities as Executive Director
of the Port (collectively “Defendants”). ILWU asserts two claims for relief: violation of 42
U.S.C. § 1983, based on federal preemption of state labor regulation; and violation of Article XI,
§ 9 of the Oregon Constitution. First Amended Compl. (“FAC”). Dkt. 18. Before the Court is
Defendants’ Motion to Dismiss and Alternative Motions for Summary Judgment. Dkt. 21. For
the reasons discussed below, the Court grants in part and defers in part Defendants’ motions.
BACKGROUND
The Port leases Terminal 6 at the Port of Portland to ICTSI. ILWU represents employees
working for ICTSI at Terminal 6. In spring 2012, a labor dispute arose at Terminal 6 between
ILWU, ICTSI, the Port, IBEW, and certain shipping companies (the “Carriers”). In response to
this dispute, the Port established two programs: the Carrier Program and the Rent Program
(collectively the “Programs”).

Case No. 3:12-cv-1088-SI (D. Or.); Hooks v. Int’l Longshore &Warehouse Union, Case No.
3:12-cv-01691-SI (D. Or.); and Pac. Mar. Ass’n v. N.L.R.B., Case No. 3:12-cv-02179-MO
(D. Or.).

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The Port established the Carrier Program to compensate Carriers “for losses [Defendant
Wyatt] believes were sustained as a result of the [l]abor [d]ispute.” FAC at ¶ 10. Under the
Carrier Program, Carriers Hanjin, Hapag-Lloyd, and Westwood Shipping Company received
payments from the Port for calling on Terminal 6. Hanjin received $70,000 per call; HapagLloyd received $50,000 per call; Westwood received $25,000 per call. FAC at ¶ 11. According
to minutes from the July 11, 2012, meeting of the Commissioners, Defendant Wyatt approved
the Carrier Program “because if the vessels are not calling and they have to take their cargo to
Tacoma or Seattle, it costs the region’s shippers an additional $1,000-$1,500 per load.
[Defendant Wyatt] said having the vessels calling [on] Portland is a tremendous advantage for
the shippers[.]” Dkt. 1-1 at 4. The Carrier Program began in the summer of 2012, and concluded
on August 1, 2012. Id. ILWU alleges that “at least a portion of the compensation paid to the
[C]arriers would be paid from tax revenues[.]” FAC at ¶ 12.
On January 9, 2013, the Commissioners approved a renewed and modified version of the
Carrier Program. Dkt. 39, Exs. A-B. According to an executive summary prepared for the
January 9, 2013, meeting of the Commissioners, the modified Program provides for a “$10.00
per container incentive payment to calling carriers in a not-to-exceed program amount of
$1,000,000 over an approximate 12-month period ending December 31, 2013.” Dkt. 39, Ex. B. 2
The renewed Program “is justified as a means of helping sustain the mission critical nature of the

2

Both ILWU and Defendants submitted additional briefing, declarations, and documents
after the Court held oral argument on Defendants’ motions. Dkt. 38-41. Because the additional
documents submitted by both parties form a basis of Plaintiff’s claims, the Court will consider
these documents as part of Defendants’ motion to dismiss. United States v. Ritchie, 342 F.3d
903, 908 (9th Cir.2003) (“Even if a document is not attached to a complaint, it may be
incorporated by reference into a complaint if the plaintiff refers extensively to the document or
the document forms the basis of the plaintiff’s claim.” (citations omitted)).
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container franchise to shippers in the State of Oregon and throughout the region.” Id. The
payments will be paid out of rent received from ICTSI in 2012 and 2013. Id.
Under the Rent Program, the Port states that it “provides ICTSI with rent relief to
partially offset the substantially increased operating costs and lost revenues directly attributable
to the ILWU’s misconduct.” Defs.’ Mem. at 4. Under ICTSI’s lease, the fiscal year 2012/2013
annual rent, totaling $4,664,356, was due on July 1, 2012. Dkt. 25-3, Ex. 8 (letter agreement
amending Terminal 6 lease). The Rent Program created a payment plan for the fiscal year
2012/2013 annual rent. Id. Under the this plan, ICTSI was permitted to make four installment
payments in August, September, October, and November, each for 1/12 of the total fiscal year
2012/2013 rent, and a final balloon payment for the remainder of the rent on December 31, 2012.
Id.
According to an executive summary of the agenda prepared in advance of the August 8,
2012, meeting of the Commissioners, the Port proposed the Rent Program in order to ameliorate
ICTSI’s financial losses caused by the labor dispute at Terminal 6:
The cost-sharing program . . . is a commercial initiative designed to share
half of certain increased operating costs and lost revenues sustained by
ICTSI, which are directly attributable to the labor dispute.
The Port is committed to being a partner with ICTSI through the
duration of our long-term lease. The labor situation at Terminal 6 has
resulted in a loss of business for ICTSI, financial loss and cargo diversion
and delays to the local and regional shipping community, as well as a
substantial loss of confidence in the Portland service by the local and
regional shipping community and a loss of confidence by some of the
shipping lines. . . .
In order to assist ICTSI in managing the unplanned and significant
financial losses, the Port is proposing entering into this cost-share
agreement.

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Dkt. 1-2 at 13. According to ILWU, “Defendant Wyatt recommend that the source of the
$4,664,356 of funds should come from Defendant P[ort]’s General Fund.” FAC at ¶ 13. The
Port’s August 8, 2012, executive summary states that “[t]he source of funds for this financial
commitment will come from the Port’s General Fund.” Dkt. 1-2 at 13.
The Port approved a continuation of the Rent Program for 2013. Dkt. 39, Ex. C;
Dkt. 41-2, Ex. B. According to an executive summary prepared in advance of February 13, 2013,
meeting of the Commissioners, the continuation of the Rent Program “is designed to help
maintain and grow container carrier service levels at Terminal 6.” Dkt. 39, Ex. C. The contract
between ICTSI and the Port for the renewed Rent Program expressly provides that the Port will
not use tax revenues to fund the Program: “The sole source of funds for the Rebate Payments
described above will be the Annual Rent payments paid to the Port from ICTSI under the Lease.
None of the Port’s tax revenues will be used to fund the Rebate Payments.” Dkt. 41-2, Ex. B.
STANDARDS
A.

Motion to Dismiss
A motion to dismiss for failure to state a claim may be granted only when there is no

cognizable legal theory to support the claim or when the complaint lacks sufficient factual
allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs.,
Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint’s factual
allegations, the court must accept as true all well-pleaded material facts alleged in the complaint
and construe them in the light most favorable to the non-moving party. Wilson v. HewlettPackard Co., 668 F.3d 1136, 1140 (9th Cir. 2012); Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d
992, 998 (9th Cir. 2010). To be entitled to a presumption of truth, allegations in a complaint
“may not simply recite the elements of a cause of action, but must contain sufficient allegations

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of underlying facts to give fair notice and to enable the opposing party to defend itself
effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir 2011). All reasonable inferences from
the factual allegations must be drawn in favor of the plaintiff. Newcal Indus. v. Ikon Office
Solution, 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). The court need not, however, credit the
plaintiff’s legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal, 556 U.S.
662, 678-79 (2009).
A complaint must contain sufficient factual allegations to “plausibly suggest an
entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the
expense of discovery and continued litigation.” Starr, 652 F.3d at 1216. “A claim has facial
plausibility when the pleaded factual content allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 663 (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
B.

Motion for Summary Judgment
A party is entitled to summary judgment if the “movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). The moving party has the burden of establishing the absence of a genuine
dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view
the evidence in the light most favorable to the non-movant and draw all reasonable inferences in
the non-movant’s favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir.
2001). Although “[c]redibility determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a
motion for summary judgment,” the “mere existence of a scintilla of evidence in support of the
plaintiff’s position [is] insufficient[.] ” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255

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(1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the
non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986) (quotations and citation omitted).
DISCUSSION
A.

Standing
To establish constitutional standing, a plaintiff must demonstrate three elements:
(1) injury-in-fact—plaintiff must allege concrete and particularized and
actual or imminent harm to a legally protected interest; (2) causal
connection—the injury must be fairly traceable to the conduct complained
of; and (3) redressability—a favorable decision must be likely to redress
the injury-in-fact[.]

Barnum Timber Co. v. EPA, 633 F.3d 894, 897 (9th Cir. 2011) (internal quotation marks and
citations omitted) (emphasis in original). Defendants argue that for “both its Section 1983 claim
and its constitutional claim, the ILWU has not pleaded an injury-in-fact that is ‘fairly . . .
traceable’ to the Defendants’ actions.” Defs.’ Mem. at 29 (citing Lujan v. Defenders of Wildlife,
504 U.S. 555, 560 (1992)). ILWU contends that it has suffered an injury in fact “because
Defendants . . . authorized and implemented two [P]rograms to negate the economic pressure
Plaintiff could exert on its collective bargaining partners.” Pl.’s Opp’n at 25. ILWU has alleged
that Defendants’ Programs could have the effect of blunting ILWU’s economic pressure against
both ICTSI and the Carriers. FAC at ¶¶ 9-11. Thus, the ILWU has alleged an injury-in-fact
sufficient to establish standing.
B.

Section 1983 Claim
In its first claim for relief, ILWU alleges that Defendants’ Programs violate 42 U.S.C.

§ 1983, which provides a cause of action against state and local governments their officials for
violations of a person’s federal constitutional or statutory rights. ILWU asserts that under two

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preemption principles embodied in the National Labor Relations Act (“NLRA”), 29 U.S.C. § 151
et seq., it has a right “to be free from interference and from the exercise of regulatory and other
governmental powers by public entities and public officials, such as Defendants, which have the
intent or effect of influencing the outcome of the Labor Dispute[.]” FAC at ¶ 17. In Golden State
Transit Corp. v. City of Los Angeles, the Supreme Court held that “the interest in being free of
governmental regulation of the peaceful methods of putting economic pressure upon one another
is a right specifically conferred on employers and employees by the [National Labor Relations
Act].” 493 U.S. 103, 112 (1989) (internal quotation marks and citation omitted). This federal
statutory right is enforceable under 42 U.S.C. § 1983. See Michigan Bldg. & Constr. Trades
Council, AFL-CIO v. Snyder, 846 F. Supp. 2d 766, 782 (E.D. Mich. 2012) (“In Golden State II,
the Court held that a city can be held liable under 42 U.S.C. § 1983 for violations of the
[National Labor Relations Act].”).
1.

Garmon and Machinists preemption

ILWU’s claim is founded on two preemption principles that have been derived from the
text of the NLRA. The first principle, known as Garmon preemption, was first articulated in San
Diego Bldg. Trades Council, Millmen’s Union, Local 2020 v. Garmon, 359 U.S. 236, 238
(1959). Garmon preemption “prevents States not only from setting forth standards of conduct
inconsistent with the substantive requirements of the NLRA, but also from providing their own
regulatory or judicial remedies for conduct prohibited or arguably prohibited by the Act.”
Wisconsin Dept. of Indus. v. Gould Inc., 475 U.S. 282, 286 (1986).
The second preemption principle was established in Lodge 76, International Ass’n of
Machinists & Aerospace Workers v. Wisconsin Employment Relations Commission, 427 U.S.
132 (1976) (“Machinists”), and is known as Machinists preemption. Machinists preemption

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“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 v. Assoc. Builders & Contractors of
Mass./R. I., Inc., 507 U.S. 218, 225 (1993) (“Boston Harbor”) (quoting Machinists, 427 U.S. at
140). Thus, “state or local action is preempted if it regulates the use of economic weapons that
are recognized and protected under the NLRA such that the state or local government has entered
‘into the substantive aspects of the bargaining process to an extent Congress has not
countenanced.’” New England Health Care, Employees Union, Dist. 1199 v. Rowland, 221 F.
Supp. 2d 297, 324-25 (D. Conn. 2002) (quoting Machinists, 427 U.S. at 149). “The Machinists
rule creates a free zone from which all regulation, whether federal or State, is excluded.” Golden
State, 493 U.S. at 111 (internal citation and quotation marks omitted).
Thus, the NLRA creates two protected zones that must be kept free from state regulation.
The Garmon rule creates a zone reserved for National Labor Relations Board (“NLRB”)
jurisdiction, and the Machinists rule creates a zone reserved for market freedom. Boston Harbor,
507 U.S. at 226-27 (“[T]he NLRA prevents a State from regulating within a protected zone,
whether it be a zone protected and reserved for market freedom, see Machinists, or for NLRB
jurisdiction, see Garmon.”). ILWU contends that Defendants’ Programs violates ILWU’s rights
under both Garmon and Machinists preemption.
2.

The market participant doctrine as an exception to preemption

The first step in deciding whether Defendants’ Programs are preempted by the NLRA
calls upon the Court to determine whether Defendants’ Programs are the sort of regulatory action
that is even subject to preemption. The NLRA “does not preempt actions taken by a state when it
is [sic] acts as a mere proprietor or market participant.” Dillingham Constr. Inc. v. Cnty. of
Sonoma, 190 F.3d 1034, 1037 (9th Cir. 1999). This rule is known as the “market participant

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doctrine.” Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d 1011, 1022 (9th Cir. 2010).
The Supreme Court initially developed the market participant doctrine as part of its dormant
commerce clause jurisprudence. Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 807-10
(1976); Reeves, Inc. v. Stake, 447 U.S. 429, 436-40 (1980). The doctrine is now also applied in
cases addressing whether federal law preempts state or local regulation. See, e.g., Engine Mfrs.
Ass’n v. S. Coast Air Quality Mgmt. Dist., 498 F.3d 1031, 1042-43 (9th Cir. 2007) (Clean Air
Act); Am. Trucking Ass’ns. v. City of Los Angeles, 660 F.3d 384, 398 (9th Cir. 2011), as
amended (Oct. 31, 2011), cert. granted in part, 133 S. Ct. 927 (2013) (Federal Aviation
Administration Authorization Act); Sprint Spectrum L.P. v. Mills, 283 F.3d 404, 416-20 (2d Cir.
2002) (Telecommunication Act); Associated Gen. Contractors of Am. v. Metro. Water Dist. of S.
Cal., 159 F.3d 1178, 1183-85 (9th Cir. 1998) (Employee Retirement Income Security Act).
The doctrine is also applied in cases involving claims of NLRA preemption. In Boston
Harbor, the Supreme Court explained that a state or local government may act within zones
otherwise protected by Garmon or Machinists preemption, so long as the government is acting
only as a proprietor:
A State does not regulate . . . simply by acting within one of these
protected areas. When a State owns and manages property, for example, it
must interact with private participants in the marketplace. In so doing, the
State is not subject to pre-emption by the NLRA, because pre-emption
doctrines apply only to state regulation.
Our decisions in this area support the distinction between
government as regulator and government as proprietor. We have held
consistently that the NLRA was intended to supplant state labor
regulation, not all legitimate state activity that affects labor.
Boston Harbor, 507 U.S. at 226-27 (emphasis in original).

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In “market participant cases, courts undertake ‘a single inquiry: whether the challenged
program constituted direct state participation in the market.’” Engine Mfrs., 498 F.3d at 1040
(quoting Reeves, 447 U.S. at 435 n.7). When a “state entity directly participates in the market by
purchasing goods or services,” the state’s action “falls within the market participant exception to
preemption.” Johnson, 623 F.3d at 1023. When, on the other hand, a state actor’s “‘purpose is
not the efficient procurement of goods and services, but the furtherance of a labor policy,’ a state
actor is behaving ‘in its capacity as a regulator rather than a market participant.’” Tri-M Group,
LLC v. Sharp, 638 F.3d 406, 422 (3d Cir. 2011) (quoting Chamber of Commerce of U.S. v.
Brown, 554 U.S. 60, 70 (2008)). There is no bright-line rule to determine whether state action is
preempted or permissible. Rather, the court “must consider in each specific context if the
government is acting like a private business or a governmental entity.” Selevan v. New York
Thruway Auth., 584 F.3d 82, 93 (2d Cir. 2009).
Although the applicability of the market participant exception is determined by a “single
inquiry,” the Ninth Circuit has adopted a two-part test, known as the Cardinal Towing test, to
guide that inquiry. Johnson, 623 F.3d at 1023. The Court asks:
First, does the challenged action essentially reflect the entity’s own
interest in its efficient procurement of needed goods and services, as
measured by comparison with the typical behavior of private parties in
similar circumstances? Second, does the narrow scope of the challenged
action defeat an inference that its primary goal was to encourage a general
policy rather than address a specific proprietary problem?
Cardinal Towing & Auto Repair, Inc. v. City of Bedford, 180 F.3d 686, 693 (5th Cir. 1999). As
explained by the Ninth Circuit:
[T]he first Cardinal Towing question looks to the nature of the
expenditure and protects comprehensive state policies with wide
application from preemption, so long as the type of state action is
essentially proprietary. The second question looks to the scope of the

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expenditure and protects narrow spending decisions that do not necessarily
reflect a state’s interest in the efficient procurement of goods or services,
but that also lack the effect of broader social regulation.
Johnson, 623 F.3d at 1024 (internal quotation marks and citations omitted) (emphasis in
original). State “action need only satisfy one of the two Cardinal Towing prongs to
qualify as market participation not subject to preemption.” Id.
3.

Application of the market participant doctrine to Defendants’ Programs

Defendants’ Programs satisfy both of Cardinal Towing’s guiding questions. With respect
to Cardinal Towing’s first question, the Programs reflect the Port’s interest in guaranteeing the
financial solvency of its tenant, ICTSI, rather than an effort to effect a general policy. The Port
owns Terminal 6 and leases it to ICTSI. As such, the Port has a stake in ICTSI’s financial
stability. ICTSI’s financial stability is, in turn, dependent on the Carriers’ continuing to call on
Terminal 6. The Port implemented the Programs at least in part to ameliorate the financial impact
of the labor dispute on ICTSI. FAC at ¶¶ 11, 13; Dkt. 1-1 at 4; Dkt. 1-2 at 13. It is a strong
indication that a government is acting as a market participant where the government’s action has
the effect of protecting the government’s own financial interest. 3 See Am. Trucking, 660 F.3d
at 401 (Port of Los Angeles was acting as a market participant where its actions were motivated
in part by financial interest); Boston Harbor, 507 U.S. at 231-32 (NLRA does not prohibit a state
from “manag[ing] its own property when it pursues its purely proprietary interests”).

3

There is also evidence that Defendants implemented the Programs at least in part in
furtherance of their public mission. Dkt. 39, Ex. A (Defendant Wyatt states that the Port is “a
public agency, and we have a mission here in Portland to keep container carrier access so that
shippers from this region can access international markets.”). A local government’s action in
furtherance of its public mission does not defeat application of the market participant doctrine.
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”).
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There is, however, no indication that Defendants implemented the Programs in order to
advance a general, regulatory policy. The Programs do not contain terms requiring ICTSI or the
Carriers to take any actions with respect to their business relationships with any other entities.
Nor do the Programs require ICTSI or the Carriers to alter their labor and employment policies.
There is no allegation that the Programs are intended to advance any particular policy goal
separate from generally advancing the Port’s public mission and protecting the Port’s interest in
maintaining ICTSI’s financial stability. See Cardinal Towing, 180 F.3d at 693 (“Cardinal does
not claim, and we cannot find any suggestion, that the City was doing anything else other than
setting specifications that would insure the efficient performance of the contract with the City for
City police tows. There is no indication that it was trying to generally encourage the possession
of class eight wreckers the way the state in Gould sought to encourage compliance with the
NLRA” (internal footnote omitted)).
Finally, although it is not on its own dispositive, it is worth noting that the Programs lack
a key indication of regulation: the threat of civil or criminal penalties. United Haulers Ass'n v.
Oneida-Herkimer Solid Waste Mgmt. Auth., 438 F.3d 150, 157 (2d Cir. 2006), aff'd, 550 U.S.
330 (2007) (“A governmental entity acts as a market regulator when it employs tools in pursuit
of compliance that no private actor could wield, such as the threat of civil fines, criminal fines
and incarceration.”). The Programs thus reflect Defendants’ own proprietary interests. By design
and in effect, the Programs attempt to ameliorate the financial impact of the current labor dispute
on ICTSI and, thereby, protect the Port from losing this tenant. A private property owner facing
similar circumstances could take similar actions. See Johnson, 623 F.3d at 1026-28 (college
district’s action satisfied first Cardinal Towing question where that action was comparable to
private market behavior).

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The Programs also satisfy Cardinal Towing’s second question. Several aspects of the
Programs show that they are sufficiently narrow in scope to suggest that they are intended to
address a specific, proprietary problem rather than encourage a general policy. First, both
Programs affect only a limited and discrete set of entities. The Rent Program is an amendment to
the Port and ICTSI’s lease agreement; it does not affect any of the Port’s other tenants. The
Carrier Program provides incentives only to certain Carriers that call on Terminal 6. Those
incentives are not generally available. The limited scope of the Programs thus further supports an
inference that the Programs are proprietary. See Sprint Spectrum, 283 F.3d at 420 (school
district’s actions proprietary in part because it entered into single lease agreement with respect to
a single building); Cardinal Towing, 180 F.3d at 695 (city’s contract specification proprietary in
part because they applied only to a single contract for police tows).
Second, the Programs are limited in duration. The Rent Program began in 2012 and is
currently set to run only through 2013. The Carrier Program initially operated during the summer
of 2012. In its new form, it will continue through 2013. “Narrow spending decisions tend to be
expressly limited in time[.]” Am. Trucking, 660 F.3d at 399. Together, the scope and duration of
the Programs defeat any reasonable inference that their primary goal was to advance a general
policy rather than to address a specific, proprietary problem. See Johnson, 623 F.3d at 1028-29
(project labor agreement covering a single project sufficiently narrow in scope to satisfy second
prong of Cardinal Towing test).
ILWU argues that the Programs “subsidize the labor costs and revenue losses of ICTSI
and the [Carriers] arising from ILWU’s labor dispute with ICTSI[.]” ILWU’s Opp’n at 8. ILWU
may be correct, but this argument is not a reason to reject the application of the market
participant doctrine. The fact that the Programs may influence ILWU’s labor dispute is not proof

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that the Programs are regulatory. Defendants have a valid proprietary interest in protecting their
tenant from the financial costs of a labor dispute. Hotel Emps. & Rest. Emps. Union, Local 57 v.
Sage Hospitality Res., LLC, 390 F.3d 206, 217 (3d Cir. 2004) (“[T]he City has an interest in
ensuring that labor strife does not damage the development.”). It makes no difference if, absent
application of the market participant doctrine, the Programs might be subject to NLRA
preemption. The NLRA simply “does not preempt actions taken by a state when it is [sic] acts as
a mere proprietor or market participant.” Dillingham Constr., 190 F.3d at 1037.
The Court concludes that in enacting the Programs, Defendants were acting as market
participants. Defendants, therefore, are subject to neither Garmon nor Machinists preemption.
Accordingly, ILWU’s first claim is dismissed.
C.

Article XI, Section 9 Claim
Article XI, § 9, of the Oregon Constitution provides that no “municipal corporation . . .

shall become a stockholder in any joint company, corporation or association, whatever, or raise
money for, or loan its credit to, or in aid of, any such company, corporation or association.” The
only public funds, however, that are protected by Article XI, § 9 are “tax revenues.” DeFazio v.
Washington Pub. Power Supply Sys., 296 Or. 550, 579 (1984). Public “commitments or
expenditures which incidentally benefit private entities do not violate Art. XI, § 9, unless they
entail ultimate recourse against general tax revenues or do not serve a ‘public purpose.’” Nicoll
v. City of Eugene, 52 Or. App. 379, 383, adhered to as mod. on reconsideration, 53 Or. App. 528
(1981) (citing Carruthers v. Port of Astoria, 249 Or. 329, (1968)). “When government engages
in public services or activities that generate revenues other than taxes, this court’s past decisions
have let government commit those revenues to financing its own projects or to support desired
private projects[.]” DeFazio, 296 Or. at 579. In its second claim for relief, ILWU alleges that

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Defendants have violated Article XI, § 9 because “if the Port were to exhaust its operational
revenue, the debts it incurred under the [P]rograms would be ultimately borne by the
[taxpayers].” ILWU’s Opp’n at 20; see also FAC at ¶ 19. The parties agree that a small portion
of the Port’s revenue—approximately four percent—is obtained from taxes. Defs.’ Mem. at 27
n.19.
In support of its claim, ILWU relies on two documents attached to its original complaint.
The first is the minutes from the July 11, 2012, meeting of the Commissioners. Dkt. 1-1. This
document records Defendant Wyatt’s explanation of the Carrier Program to the Commissioners.
There is no description of the source of the funds for the Carrier Program. The second document
is an executive summary prepared in advance of the August 8, 2012, meeting of the
Commissioners. Dkt. 1-2. This document describes the Rent Program. It states that the “source of
the funds for [the Rent Program] will come from the Port’s General Fund.” Id. at 13. According
to ILWU, these documents show that neither Program “explicitly prohibits the use of the Port’s
tax revenues to meet the Port’s significant financial obligations under these [P]rograms.”
ILWU’s Opp’n at 17. If either or both of the Programs did, will, or could draw on the Port’s tax
revenues, ILWU might have a valid claim under Article XI, § 9. 4

4

ILWU also argues that a local government’s expenditure made to a private entity may
violate Article XI, § 9, even if the expenditure is not payable from tax revenue, if the expenditure
is not made for a public purpose. ILWU’s Opp’n at 21. Oregon case law suggests that Article XI,
§ 9, requires expenditures made to private entities to be made for a “public purpose.” Nicoll, 52
Or. App. at 383; Thunderbird Motel, Inc. v. City of Portland, 40 Or. App. 697, 704-06 (1979).
Oregon courts have made clear, however, that the judgment about whether an expenditure is
made for a “public purpose” is “more appropriate for legislative than judicial action.” Nicoll, 52
Or. App. at 383 (quoting Carruthers v. Port of Astoria, 249 Or. 329, 341 (1968)). Thus, a court
“should invalidate expenditures only where reasonable men could not differ as to their lack of
social utility.” Id. ILWU has not alleged facts sufficient to demonstrate that reasonable persons
could not differ over whether the Port’s Programs have social utility. Thus, to the extent that
ILWU’s Article XI, § 9 claim is based on a “public purpose” theory, it is dismissed.
Page 16 – OPINION AND ORDER

Defendants argue, however, that ILWU’s claim must be dismissed because the Port has
not and will not use any of its tax revenues to fund the Programs. Defs.’ Mem. at 26. In support
of this assertion, Defendants submit the Declaration of Robert Burket, the Controller of the Port.
Dkt. 24. In his declaration, Mr. Burket states that the “payments made by the Port under the
Carrier Program have been funded completely from (and expensed against) the Port’s Marine
Division’s non-tax operating revenues.” Id. at ¶ 4. In addition, he states that all “payments under
the ICTSI Rent Program have been, or will be, funded completely from (and are expensed
against) the Port’s Marine Division’s non-tax operating revenues.” Id. at ¶ 6. If Mr. Burket is
correct that the Programs did not, will not, and cannot draw on the Port’s tax revenue, ILWU
does not have a valid claim under Article XI, § 9.
The Court cannot resolve whether ILWU has a valid claim without resorting to
Mr. Burket’s declaration. Unlike the meeting minutes and executive summaries of meetings of
the Commissioners, which form the basis of ILWU’s allegations, Mr. Burket’s declaration is
outside the scope of the pleadings. The Court, therefore, must treat Defendants’ Motion to
Dismiss and Alternative Motion for Summary Judgment as a motion for summary judgment.
Fed. R. Civ. P. 12(d) (“If, on a motion under Rule 12(b)(6) or 12(c), matters outside the
pleadings are presented to and not excluded by the court, the motion must be treated as one for
summary judgment under Rule 56.”). Once construed as a motion for summary judgment,
however, the Court must consider ILWU’s motion under Federal Rule of Civil Procedure 56(d)
for additional time to take relevant discovery. ILWU’s Opp’n at 26. See Michelman v. Lincoln
Nat’l Life Ins. Co., 685 F.3d 887, 899 (9th Cir. 2012) (“Rule 56(d) offers relief to a litigant who,
faced with a summary judgment motion, shows the court by affidavit or declaration that ‘it
cannot present facts essential to justify its opposition.’” (quoting Fed. R. Civ. P. 56(d)). The

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documents attached to ILWU’s complaint—in particular the executive summary prepared for the
August 8, 2012, meeting of the Commissioners stating that funds for the Rent Program “will
come from the Port’s General Fund”—may raise factual questions that at least entitle ILWU to
conduct appropriate discovery before the Court rules on Defendants’ motion for summary
judgment against ILWU’s second claim. The Court, therefore, defers ruling on the motion for
summary judgment until such time as ILWU has had a reasonable opportunity to conduct this
discovery. ILWU may have 60 days in which to conduct discovery relating to its second claim
and may file a supplemental response to Defendants’ motion for summary judgment within 90
days from the date of this Opinion and Order. 5
CONCLUSION
Defendants’ Motion to Dismiss and Alternative Motions for Summary Judgment,
Dkt. 21, is GRANTED IN PART AND DEFERRED IN PART. With respect to ILWU’s first
claim for relief, alleging violations of 42 U.S.C. § 1983, the Court dismisses that claim with
prejudice. With respect to ILWU’s second claim for relief, alleging violations of Article XI, § 9,
of the Oregon Constitution, pursuant to Federal Rule of Civil Procedure 12(d), the Court treats
Defendants’ motion as a motion for summary judgment and will defer ruling, pursuant to Rule
56(d). ILWU may have 60 days in which to conduct appropriate discovery relating to its second
claim and may file a supplemental response to Defendants’ motion for summary judgment within
90 days from the date of this Opinion and Order. Defendants may then respond within 14 days.
5

Also included within Defendants’ motions is a request that the Court strike ILWU’s
prayer for an award of “general and compensatory damages.” Defs.’ Mem. at 28. ILWU
concedes that it “is not seeking compensatory or punitive damages from Defendants for its . . .
Article XI, Section 9 [claim].” ILWU’s Opp’n at 22. Because the Court has dismissed ILWU’s
§ 1983 claim, ILWU no longer has a claim permitting it to recover general and compensatory
damages. See Hunter v. City of Eugene, 309 Or. 298 (1990) (no right to damages on claim
alleging violation of the Oregon Constitution). The Court, therefore, strikes ILWU’s request for
general and compensatory damages with regard to its Article XI, § 9 claim.
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Pursuant to Federal Rule of Civil Procedure 54(2)(B)(i), the Court will defer consideration of
any motion for attorney fees until after entry of judgment.
IT IS SO ORDERED.
Dated this 8th day of April, 2013.

/s/ Michael H. Simon
Michael H. Simon
United States District Judge

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