California v. U.S. Dep't of Labor, No. 2:13-cv-2069 KJMDAD

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
Writing for the CourtKimberly J. Mueller, UNITED STATES DISTRICT JUDGE
Citation155 F.Supp.3d 1089
Parties State of California, acting by and through the California Department of Transportation ; and Sacramento Regional Transit District, Plaintiff, v. United States Department of Labor; and Thomas E. Perez, in his official capacity as Secretary of Labor, Defendant.
Decision Date07 January 2016
Docket NumberNo. 2:13-cv-2069 KJMDAD

155 F.Supp.3d 1089

State of California, acting by and through the California Department of Transportation ; and Sacramento Regional Transit District, Plaintiff,
United States Department of Labor; and Thomas E. Perez, in his official capacity as Secretary of Labor, Defendant.

No. 2:13-cv-2069 KJMDAD

United States District Court, E.D. California.

Signed January 7, 2016
Filed January 8, 2016

155 F.Supp.3d 1092

Mitchell Neil Reinis, Thompson Coburn LLP, Los Angeles, CA, Stephen B. Higgins, PHV, Thompson Coburn LLP, St. Louis, MO, Kathleen E. Kraft, PHV, Thompson Coburn, LLP, Washington, DC, for Plaintiff.

Susan Ullman, Govt, U.S. Department of Justice, Ryan Bradley Parker, Govt, Washington, DC, for Defendant.

155 F.Supp.3d 1093



The California Department of Transportation (Caltrans) and the Sacramento Regional Transit District (SacRT), the plaintiffs in this action, seek an order directing the United States Department of Labor (the DOL) to certify their applications for funding under section 13(c) of the Urban Mass Transportation Act of 1964. They seek this relief in the form of a motion to enforce this court's previous order, which remanded the matter to the DOL for further proceedings. The plaintiffs also request leave to file a supplemental complaint to challenge several aspects of the post-remand proceedings. The matter was submitted for decision without a hearing. As explained below, the motion to enforce is GRANTED IN PART, and the motion for leave to file a supplemental complaint is GRANTED.


A. General Background

The general background of this case is unchanged since the issuance of this court's previous order, reported at California v. Department of Labor , 76 F.Supp.3d 1125 (E.D.Cal.2014). To summarize, under section 13(c) of the Urban Mass Transportation Act of 1964 (UMTA), codified at 49 U.S.C. § 5333(b), state and local governments seeking federal financial assistance for transit projects must obtain certification from the DOL that the interests of employees affected by any assistance granted are protected by “fair and equitable” arrangements, 49 U.S.C. § 5333(b)(1). Specifically, these arrangements must preserve the employees' “rights, privileges, and benefits (including continuation of pension rights and benefits) under existing collective bargaining agreements or otherwise.” Id. § 5333(b)(2)(A). Similarly, arrangements must include provisions “necessary for...the continuation of collective bargaining rights.” Id. § 5333(b)(2)(B).

Caltrans is an executive department of the state of California. Under authority of state law, it assists local transit agencies in their efforts to develop and operate mass transit systems, including applications for federal funds. Monterey-Salinas Transit (MST) is a local transit agency and recipient of pass-through funds from Caltrans. SacRT is a special regional transit district based in Sacramento, California. SacRT operates dozens of bus routes, light rail lines, light rail stations and park-and-ride lots, and thousands of bus stops. It relies heavily on federal funding. SacRT employs more than 900 people, about 500 of whom are represented by the Amalgamated Transit Union, or ATU. Its unionized employees participate in a defined benefit pension plan that pays an annual benefit upon retirement. Each employee's benefits are calculated as a percentage of his or her final average compensation multiplied by years of service. The plan is funded exclusively by employer contributions and earnings on plan assets.

In 2012, the Governor of California signed the California Public Employees' Pension Reform Act of 2013 (PEPRA), which was intended to reform the state's public employee pension systems and reduce the cost of funding those systems. Under PEPRA, among other provisions, employees hired after January 1, 2013 must contribute at least 50 percent of the costs of a defined benefit retirement plan, the amount of compensation usable in calculations of retirement benefits is capped, and public employees may no longer purchase non-qualified service time toward their pensions.

In November 2012, SacRT submitted an application to the Federal Transportation

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Agency for mass transit funding. The money it sought would contribute to an extension of its light rail system. The next month, the DOL notified SacRT and its unions that it intended to certify the grant under UMTA section 13(c). It invited objections and referred to PEPRA. The ATU objected, citing the effect of PEPRA on the collective bargaining of pensions and retirement issues, among other things. In January 2013, the DOL ordered the ATU and SacRT to engage in good faith discussions aimed at finding a resolution acceptable to both parties, but SacRT and the ATU were unable to reach an agreement, and the DOL eventually declined certification.

In September 2013, Caltrans sought federal funds on behalf of MST. ATU, which represents some of MST's employees, also objected to this application, citing the effects of PEPRA. The DOL also denied the Caltrans-MST application. The plaintiffs then filed this action, challenging the DOL's decisions under the federal Administrative Procedure Act (APA) and the U.S. Constitution's Spending Clause. See Am. Compl., ECF No. 59.

B. This Court's Previous Order

In December 2014, this court issued an order dismissing the Spending Clause claims, denying the DOL's motion to dismiss the APA claims, granting the plaintiffs' motion for summary judgment on the APA claims, and remanding the matter to the DOL for further proceedings consistent with the court's order. California v. Dep't of Labor , 76 F.Supp.3d at 1148.1 The court identified several aspects of the DOL's decision that violated the APA.

First, the DOL had relied reflexively on a particular decision of the D.C. Circuit, Amalgamated Transit Union v. Donovan, without accounting for factual differences between that case and this one. See 76 F.Supp.3d at 1142–43 (citing Donovan, 767 F.2d 939 (D.C.Cir.1985) ). Specifically, in Donovan, the circuit court reversed the certification of an agreement that did not permit collective bargaining on several subjects previously subject to bargaining. Donovan, 767 F.2d at 941, 943. PEPRA, by contrast, does not eliminate collective bargaining rights or grant the plaintiffs unilateral authority; rather, it changes the parameters within which collective bargaining may proceed. See 76 F.Supp.3d at 1142–43.

Second, the DOL had ignored the fact that under federal labor policy, “'[b]oth employers and employees come to the bargaining table with rights under state law that form a backdrop for their negotiations.”' 76 F.Supp.3d at 1143 (quoting Fort Halifax Packing Co., Inc. v. Coyne , 482 U.S. 1, 21, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987) ) (alteration in original). Pension reform may be part of this “backdrop,” because no provision of federal labor policy “'expressly forecloses all state regulatory power with respect to those issues, such as pension plans, that may be the subject of collective bargaining.”' Id. (quoting Malone v. White Motor Corp. , 435 U.S. 497, 504–05, 98 S.Ct. 1185, 55 L.Ed.2d 443 (1978) ).

Third, “by finding that PEPRA prevents collective bargaining over pensions, [the DOL] essentially determined that a pension is necessarily a defined benefit plan....” Id. But “nothing in PEPRA prevents bargaining over defined contribution plans, which are another form of pension.” Id. The DOL had therefore written a substantive

155 F.Supp.3d 1095

term into the parties' agreement, which it had no authority to do. Id.

Fourth, the DOL had not considered “the realities of public sector bargaining.” Id. Bargaining in the public sector differs from bargaining in the private sector. A private employer may send a single representative to the bargaining table, with the authority to make a binding agreement, whereas a public employer may not be able to make concessions or change policy absent legislative enactment. In short, “[i]n the public sector, agreement at the bargaining table may be only an intermediate, not a final, step in the decisionmaking process.” Id. at 1143–44 (quoting Robinson v. State of N.J. , 741 F.2d 598, 607 (3d Cir.1984) ).

Fifth, to conclude that PEPRA did not preserve existing collective bargaining rights of employees hired after January 1, 2013, the DOL relied on Wood v. National Basketball Association and similar cases, but it did not consider whether factual differences between those cases and this one undermined their persuasive effect. See id. at 1144–45 (citing 602 F.Supp. 525, 529 (S.D.N.Y.1984) ). In this case, unlike those on which the DOL relied, “neither ‘new’ employees nor the employers are pursuing individual agreements or are seeking some advantage outside the [collective bargaining agreement], but rather are constrained by PEPRA as a backdrop to their employment relationship.” 76 F.Supp.3d at 1145. On a related note, the DOL essentially redefined “bargaining unit” when it found that employees who had not yet been hired were covered by a collective bargaining agreement. Id.

The DOL filed an appeal, but later dismissed that appeal voluntarily. See...

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