Arizona v. Walsh, CV-22-00213-PHX-JJT

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
Writing for the CourtHonorable John J. Tuchi United States District Judge
PartiesState of Arizona, et al., Plaintiffs, v. Martin J. Walsh, et al., Defendants.
Docket NumberCV-22-00213-PHX-JJT
Decision Date06 January 2023

State of Arizona, et al., Plaintiffs,
v.

Martin J. Walsh, et al., Defendants.

No. CV-22-00213-PHX-JJT

United States District Court, D. Arizona

January 6, 2023


ORDER

Honorable John J. Tuchi United States District Judge

At issue are the Motion for Preliminary Injunction (Doc. 25, “PI Mot.”) filed by the Plaintiff States of Arizona, Idaho, Indiana, Nebraska and South Carolina (collectively, “the States”), and the Response in the form of a Motion to Dismiss Or, In the Alternative, Motion for Summary Judgment (Docs. 39, 40, “MTD/MSJ”) filed by Defendants United States Secretary of Labor Martin J. Walsh, United States Department of Labor (“DOL”), the DOL Wage & Hour Division, President Joseph R. Biden, and Acting Administrator of the DOL Wage & Hour Division Jessica Looman. Plaintiffs filed a consolidated Reply in support of their Motion for a Preliminary Injunction and Response to Defendants' Motion to Dismiss Or, In the Alternative, for Summary Judgement (Doc. 48, “Resp.”), and Defendants filed a Reply in support of their Motion to Dismiss Or, In the Alternative, Motion for Summary Judgment (Doc. 53, “Reply”). Also at issue is Plaintiffs' Rule 56(d) Motion to Deny Summary Judgment or for Jurisdictional Discovery (Doc. 49), to which Defendants filed a Response (Doc. 52), and Plaintiffs filed a Reply in support (Doc. 54).

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On July 12, 2022, the Court heard the parties' arguments on Plaintiffs' Motion for Preliminary Injunction and Defendants' Motion to Dismiss Or, In the Alternative, Motion for Summary Judgment. (See Doc. 58, Transcript of Proceedings on July 12, 2022 (“Tr.”).) For the reasons set forth below, the Court denies Plaintiffs' Motion for Preliminary Injunction, grants Defendants' Motion to Dismiss Or, In the Alternative, Motion for Summary Judgment, and denies Plaintiffs' Motion for Jurisdictional Discovery.

I. BACKGROUND

On April 27, 2021, President Biden issued Executive Order (“EO”) 14026, Increasing the Minimum Wage for Federal Contractors, 86 Fed.Reg. 22,835 (April 27, 2021). Broadly, EO 14026 raised the minimum wage for federal contractors to $15 per hour by requiring agencies to include a $15 minimum-wage clause, beginning January 30, 2022, in “new contracts; new contract-like instruments; new solicitations; extensions or renewals of existing contracts or contract-like instruments; and exercises of options on existing contracts or contract-like instruments.” Id. at 22,837. EO 14026 directed the DOL to issue regulations to implement its requirements. Id. at 22,836. After a public notice and comment period, the DOL issued the Final Rule implementing the EO on November 24, 2021, and the rule took effect on January 30, 2022. 86 Fed.Reg. 67,126 (Nov. 23, 2021). On February 17, 2022, the Tenth Circuit enjoined the government from enforcing the EO as to “contracts or contract-like instruments entered into with the federal government in connection with seasonal recreational services or seasonal recreational equipment rental for the general public on federal lands,” pending an appeal from a district court's denial of a preliminary injunction in a challenge to the EO and Final Rule. Bradfordv. U.S. Dep't of Labor, No. 22-1023, Doc. 10110656538 (10th Cir. Feb. 17, 2022).

Defendants contend that EO 14026 is “unremarkable,” noting that President Obama issued a 2014 executive order establishing a minimum wage for federal contractors, the legality of which was never challenged. (MTD/MSJ at 1, 5-6.) See Exec. Order No. 13658, 79 Fed.Reg. 9851, 9853 (Feb. 12, 2014). In 2018, President Trump issued EO 13838, which provided an exemption for “seasonal recreational services” workers, including those

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providing “river running, hunting, fishing, horseback riding, camping, mountaineering activities, recreational ski services, and youth camps” and those facilitating “seasonal recreational equipment rental for the general public on Federal lands.” Exec. Order No. 13838, 83 Fed.Reg. 25,341, 25,341 (May 25, 2018). President Trump's Order otherwise left intact President Obama's order, including its continued effectiveness as to contractors who provide “lodging and food services associated with seasonal recreational services.” 83 Fed.Reg. at 25,341. The DOL implemented both presidents' executive orders through final rules, which took effect on December 8, 2014, and September 26, 2018, respectively. See 79 Fed.Reg. 60,634; 83 Fed.Reg. 48,537. In issuing their executive orders, Presidents Obama, Trump, and Biden all invoked their powers under the Federal Property and Administrative Services Act of 1949 (“FPASA” or “the Act”), 40 U.S.C. § 101 et seq.

On February 9, 2022, Plaintiffs brought suit against Defendants to challenge EO 14026 and the Final Rule. Plaintiffs raise six claims for relief, alleging that (1) under the FPASA the President lacked the authority to issue EO 14026 and the DOL lacked authority to issue the Final Rule; (2) the EO and Final Rule were issued not in accordance with law and in excess of the authority granted by the FPASA, in violation of the Administrative Procedure Act (“APA”); (3) the EO and Final Rule are arbitrary and capricious in violation of the APA; (4) the EO and Final Rule exceed the authority granted by the FPASA to the extent they apply beyond federal contracts to acquire goods and services; (5) the FPASA violates the non-delegation doctrine; and (6) the EO and Final Rule are barred by the Spending Clause of the United States Constitution. (See generally Doc. 1, Compl.)

On April 18, 2022, Plaintiffs moved for a Preliminary Injunction enjoining the enforcement of the Final Rule implementing EO 14026. (See generally PI Mot.) On May 11, 2022, Defendants responded in opposition to Plaintiffs' Motion for a Preliminary Injunction, and moved the Court to dismiss Plaintiffs' claims or, alternatively, to enter summary judgment in favor of Defendants, on the grounds that (1) the Court lacks subject matter jurisdiction over Plaintiffs' claims pertaining to subcontractors, licensees, and permittees; and (2) Plaintiffs' claims lack merit. (See generally MTD/MSJ.)

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II. LEGAL STANDARDS

A. Article III Standing

Article III courts are limited to deciding “Cases” and “Controversies.” U.S. Const. art. III, § 2. Article III requires that one have “the core component of standing.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). To have Article III standing, a plaintiff must show (1) an injury in fact that is (a) concrete and particularized and (b) actual or imminent; (2) the injury is fairly traceable to the challenged action of the defendant(s); and (3) it is likely, not merely speculative, the injury will be redressed by decision in the plaintiff's favor. Maya v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir. 2011). A complaint that fails to allege facts sufficient to establish standing requires dismissal for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). See, e.g., Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1123 (9th Cir. 2010).

B. Preliminary Injunction

To qualify for preliminary injunctive relief, a movant must demonstrate that (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of hardships tips in its favor; and (4) an injunction is in the public interest. Winter v. Natural Res. Def Council, Inc., 555 U.S. 7, 20 (2008). Alternatively, the Court may grant temporary injunctive relief where it finds both “serious questions going to the merits” and a “balance of hardships that tips sharply towards the plaintiff,” and the second and fourth Winter factors are also satisfied. All. for Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011).

C. Federal Rule of Civil Procedure 12(b)(1)

“A motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) may attack either the allegations of the complaint as insufficient to confer upon the court subject matter jurisdiction, or the existence of subject matter jurisdiction in fact.” Renteria v. United States, 452 F.Supp.2d 910, 919 (D. Ariz. 2006) (citing Thornhill Publ'g Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979)). “Where the jurisdictional issue is separable from the merits of the case, the [court]

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may consider the evidence presented with respect to the jurisdictional issue and rule on that issue, resolving factual disputes if necessary.” Thornhill, 594 F.2d at 733; see also Autery v. United States, 424 F.3d 944, 956 (9th Cir. 2005) (“With a 12(b)(1) motion, a court may weigh the evidence to determine whether it has jurisdiction.”). The burden of proof is on the party asserting jurisdiction to show that the court has subject matter jurisdiction. See Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990).

D. Federal Rule of Civil Procedure 12(b)(6)

Rule 12(b)(6) is designed to “test[] the legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A dismissal under Rule 12(b)(6) for failure to state a claim can be based on either (1) the lack of a cognizable legal theory; or (2) the absence of sufficient factual allegations to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). When analyzing a complaint for failure to state a claim, the well-pled factual allegations are taken as true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). A plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” BellAtl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678...

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