Chamber of Commerce of U.S. v. Lockyer, No. 03-55166.

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBeezer
Citation422 F.3d 973
PartiesCHAMBER OF COMMERCE OF the UNITED STATES; California Chamber of Commerce; Employers Group; California Healthcare Association; California Manufacturers and Technology Assn.; California Association of Health Facilities; California Association of Home & Services for the Aging; Bettec Corporation; Marksherm Corporation; Zilaco Inc., Zilaco; Del Rio Healthcare, Inc.; Beverly Health & Rehabilitation Services, Inc. dba Beverly Manor Costa Mesa; Internext Group, Plaintiffs-Appellees, American Federation of Labor and Congress of Industrial Organizations, Plaintiff-Appellant, AFL-CIO & Wholesale Delivery Drivers; California Labor Federation, AFL-CIO, Intervenors-Appellants, v. Bill LOCKYER, Attorney General, in his capacity as Attorney General of the State of California; Department of Health Services; Frank G. Vanacore, as the Chief of the Audit Review and Analysis Section of the California Department of Health Services; Diana M. Bonta, Diana M. Bonta, R.N., Dr., P.h.D, as the Director of the California Department of Health Services, Defendants. Chamber of Commerce of the United States; California Chamber of Commerce; Employers Group; California Healthcare Association; California Manufacturers and Technology Assn.; California Association of Health Facilities; California Association of Home & Services for the Aging; Bettec Corporation; Marksherm Corporation; Zilaco Inc., Zilaco; Del Rio Healthcare, Inc.; Beverly Health & Rehabilitation Services, Inc. dba Beverly Manor Costa Mesa; Internext Group, Plaintiffs-Appellees, and AFL-CIO & Wholesale Delivery Drivers; California Labor Federation, AFL-CIO, Intervenors, v. Bill Lockyer, Attorney General, in his capacity as Attorney General of the State of California; Department of Health Services; Frank G. Vanacore, as the Chief of the Audit Review and Analysis Section of the California Department of Health Services; Diana M. Bonta, Diana M. Bonta, R.N., Dr., P.h.D, as the Director of the California Department of Health Services, Defendants-Appellants.
Docket NumberNo. 03-55166.,No. 03-55169.
Decision Date06 September 2005
422 F.3d 973
CHAMBER OF COMMERCE OF the UNITED STATES; California Chamber of Commerce; Employers Group; California Healthcare Association; California Manufacturers and Technology Assn.; California Association of Health Facilities; California Association of Home & Services for the Aging; Bettec Corporation; Marksherm Corporation; Zilaco Inc., Zilaco; Del Rio Healthcare, Inc.; Beverly Health & Rehabilitation Services, Inc. dba Beverly Manor Costa Mesa; Internext Group, Plaintiffs-Appellees,
American Federation of Labor and Congress of Industrial Organizations, Plaintiff-Appellant,
AFL-CIO & Wholesale Delivery Drivers; California Labor Federation, AFL-CIO, Intervenors-Appellants,
v.
Bill LOCKYER, Attorney General, in his capacity as Attorney General of the State of California; Department of Health Services; Frank G. Vanacore, as the Chief of the Audit Review and Analysis Section of the California Department of Health Services; Diana M. Bonta, Diana M. Bonta, R.N., Dr., P.h.D, as the Director of the California Department of Health Services, Defendants.
Chamber of Commerce of the United States; California Chamber of Commerce; Employers Group; California Healthcare Association; California Manufacturers and Technology Assn.; California Association of Health Facilities; California Association of Home & Services for the Aging; Bettec Corporation; Marksherm Corporation; Zilaco Inc., Zilaco; Del Rio

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Healthcare, Inc.; Beverly Health & Rehabilitation Services, Inc. dba Beverly Manor Costa Mesa; Internext Group, Plaintiffs-Appellees, and
AFL-CIO & Wholesale Delivery Drivers; California Labor Federation, AFL-CIO, Intervenors,
v.
Bill Lockyer, Attorney General, in his capacity as Attorney General of the State of California; Department of Health Services; Frank G. Vanacore, as the Chief of the Audit Review and Analysis Section of the California Department of Health Services; Diana M. Bonta, Diana M. Bonta, R.N., Dr., P.h.D, as the Director of the California Department of Health Services, Defendants-Appellants.
No. 03-55166.
No. 03-55169.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted September 12, 2003.
Opinion Filed April 20, 2004.
Petition for Rehearing Granted, Opinion Withdrawn and Resubmitted May 13, 2005.
Filed September 6, 2005.

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COPYRIGHT MATERIAL OMITTED

Page 976

Suzanne M. Ambrose, Deputy Attorney General, Sacramento, CA, for the defendants-appellants.

Scott A. Kronland, Altshuler, Berzon, Nussbaum, Rubin & Demain, San Francisco, CA, and Jonathan P. Hiatt, Washington, DC, for the intervenors-appellants.

Bradley W. Kampas, Jackson Lewis LLP, San Francisco, CA, Mark E. Reagan, Hooper, Lundy & Brookman, Inc., San Francisco, CA, and Stephen A. Bokat, National Chamber Litigation Center, Inc., Washington, DC, for the plaintiffs-appellees.

Daniel V. Yager, McGuiness Norris & Williams, LLP, Washington, DC, for the amicus curiae LPA, Inc., and Maurice Baskin, Washington, DC, for the amicus curiae Associated Builders and Contractors, Inc.

John H. Ferguson, Associate General Counsel, National Labor Relations Board Division of Enforcement Litigation, Washington, DC, for the amicus curiae National Labor Relations Board.

Appeal from the United States District Court for the Central District of California; Gary L. Taylor, District Judge, Presiding. D.C. No. CV-02-00377-GLT.

Before: BEEZER and FISHER, Circuit Judges, and ENGLAND,* District Judge.

Opinion by Judge BEEZER; Dissent by Judge FISHER.

BEEZER, Circuit Judge:


The National Labor Relations Act, as amended, 29 U.S.C. § 151 et seq., extends to employees the opportunity to render a free and informed choice about union representation. In doing so, the Act allows for robust debate of union representation issues by employers and employees alike. The question presented is whether California Assembly Bill 1889, codified at Cal. Govt.Code §§ 16645-49, ("AB 1889" or "the statute"), which bars employers from spending "state funds" on union-related speech, is preempted by the National Labor Relations Act.1

As we explain, the California statute chills employers from exercising their free speech rights that are explicitly protected by Congress under the National Labor Relations Act. In doing so, the statute undermines the delicate balance established by Congress as between labor unions and employers. In addition, the California statute interferes with the National Labor Relations Act's extension of exclusive jurisdiction to the National Labor Relations Board ("NLRB") for the adoption and enforcement of representation election rules.

Appellants California and the AFL-CIO vigorously defend the statute, arguing that California may spend its funds in a manner that it sees fit. The Supreme Court teaches, however, that the use of the state spending power is rarely a defense to state interference with the National Labor Relations Act. Wisconsin Dep't of Indus., Labor, and Human Relations v. Gould, 475 U.S. 282, 290, 290-91, 106 S.Ct. 1057, 89 L.Ed.2d 223 (1986) (emphasizing that Congress

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would not have intended to allow states to interfere with the NLRA "as long as they did so through exercises of the spending power"). The California statute is regulatory in nature, and is not focused on the police power, state procurement concerns, or local economic needs. Implementation by means of the state spending power does not save AB 1889 from preemption.

We previously filed an opinion in this case, which we withdrew upon granting appellants' Petition for Panel Rehearing. Chamber of Commerce v. Lockyer, 364 F.3d 1154 (9th Cir.2004), reh'g granted and withdrawn, 408 F.3d 590 (9th Cir.2005). Today, we decide the matter anew, and we affirm the district court's holding2 that the National Labor Relations Act preempts AB 1889.

I

Before addressing employers' speech rights and embarking upon a preemption analysis, we introduce and analyze the California statute at issue.

A

Section 16645.2(a) of the California statute prohibits a "recipient of a grant of state funds" from "us[ing] the funds to assist, promote, or deter union organizing." Similarly, section 16645.7(a) bars private employers who receive more than ten thousand dollars of state funds in a calendar year from "us[ing] any of those funds to assist, promote, or deter union organizing."

The statute defines "assist[ing], promot[ing], or deter[ring] union organizing" as "any attempt by an employer to influence the decision of its employees in this state or those of its subcontractors regarding . . . [w]hether to support or oppose a labor organization that represents or seeks to represent those employees . . . or [w]hether to become a member of any labor organization." Cal. Gov't Code § 16645(a). The statute prohibits "any expense, including legal and consulting fees and salaries of supervisors and employees, incurred for research for, or preparation, planning, or coordination of, or carrying out, an activity to assist, promote, or deter union organizing." § 16646(a) (emphasis added). The statute exempts several types of pro-union activities and expenses from the prohibition, including "[a]ddressing a grievance or negotiating or administering a collective bargaining agreement," "[a]llowing a labor organization or its representatives access to the employer's facilities or property," and "[n]egotiating, entering into, or carrying out a voluntary recognition agreement with a labor organization." §§ 16647(a), (b), (d).

The statute requires burdensome and detailed record-keeping. Employers and grantees must maintain detailed records showing that none of the funds have been used for speech regarding labor relations. §§ 16645.2(c), 16645.7(c). Those records must be produced for inspection by the Attorney General upon request. Id. The statute presumes that, where state and non-state funds are commingled, state funds were used to assist, promote, or deter union organizing. § 16646(b). The plaintiffs aptly characterize this feature as the "commingling trap," because a mere technical failure to keep records can constitute a violation even when no state funds were actually expended. The statute requires that employers and grantees certify in advance that the state funds will not be used for speech and activities that

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are related to union organizing. §§ 16645.2(c), 16645.7(b).

The enforcement provisions place heavy burdens on affected employers who accept state funds. The statute renders employers and grantees liable for treble damages (i.e., the amount of state funds that were expended in violation of the statute, plus a civil penalty equal to twice the amount of those funds). §§ 16645.2(d), 16645.7(d).

The Attorney General of California, or any private taxpayer, may file a lawsuit against a suspected violator "for injunctive relief, damages, civil penalties, and other appropriate equitable relief." § 16645.8(a). The statute awards a prevailing plaintiff, and certain prevailing taxpayer intervenors, attorney's fees and costs. § 16645.8(d). The statute does not provide for the award of any attorney's fees or costs to a prevailing employer or grantee.

B

We conclude that the California statute, which is far from the neutral enactment that appellees contend it to be, significantly undermines the speech rights of employers related to union organizing campaigns. Under the guise of preserving state neutrality, the statute operates to impel employers themselves to take a position of neutrality with respect to labor relations, in direct conflict with employers' rights as granted by the National Labor Relations Act.

By creating exacting compliance burdens, strict accounting requirements, the threat of lawsuits, and onerous penalties, the statute chills employer speech on the merits of unionism. The potential costs of litigation, plus the threat of severe penalties threaten to effectively halt employer campaigns to defeat labor organizing activity. Similar to neutrality agreements, which...

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4 practice notes
  • Chamber of Commerce of U.S. v. Lockyer, No. 03-55166.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • September 21, 2006
    ...and reh'g granted, 408 F.3d 590 (9th Cir.2005). On rehearing, a divided panel issued a second opinion, Chamber of Commerce v. Lockyer, 422 F.3d 973 (9th Cir.2005), which was in turn vacated and withdrawn from publication for reconsideration en banc. See Chamber of Commerce v. Lockyer, 435 F......
  • Healthcare Ass'n of New York State, Inc. v. Pataki, Docket No. 05-2570-cv.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • December 5, 2006
    ...F.3d 1154 (9th Cir.2004). After the district court's decision, the panel in Lockyer granted rehearing and issued a superseding opinion, 422 F.3d 973 (9th Cir.2005). The Ninth Circuit then vacated the panel opinion and granted rehearing en banc, 437 F.3d 890 (9th Cir.2006), and has just rece......
  • Aes Sparrows Point Lng, LLC v. Smith, Civil Action No. RDB-06-2478.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • January 23, 2007
    ...plaintiffs' challenge to the statute is facial is moot and need not be decided. Chamber of Commerce of the United States v. Lockyer, 422 F.3d 973, 993 (9th Cir.2005), rev'd on other grounds, 463 F.3d 1076 (9th As this Court has already held that the Zoning Amendment is clearly preempted by ......
  • Chamber of Commerce of U.S. v. Lockyer, No. 03-55166.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • February 9, 2006
    ...Upon the vote of a majority of the en banc court, the opinion and dissent filed on September 6, 2005, slip op. 12167, and appearing at 422 F.3d 973 (9th Cir.2005), are...
4 cases
  • Chamber of Commerce of U.S. v. Lockyer, No. 03-55166.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • September 21, 2006
    ...and reh'g granted, 408 F.3d 590 (9th Cir.2005). On rehearing, a divided panel issued a second opinion, Chamber of Commerce v. Lockyer, 422 F.3d 973 (9th Cir.2005), which was in turn vacated and withdrawn from publication for reconsideration en banc. See Chamber of Commerce v. Lockyer, 435 F......
  • Healthcare Ass'n of New York State, Inc. v. Pataki, Docket No. 05-2570-cv.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • December 5, 2006
    ...F.3d 1154 (9th Cir.2004). After the district court's decision, the panel in Lockyer granted rehearing and issued a superseding opinion, 422 F.3d 973 (9th Cir.2005). The Ninth Circuit then vacated the panel opinion and granted rehearing en banc, 437 F.3d 890 (9th Cir.2006), and has just rece......
  • Aes Sparrows Point Lng, LLC v. Smith, Civil Action No. RDB-06-2478.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • January 23, 2007
    ...plaintiffs' challenge to the statute is facial is moot and need not be decided. Chamber of Commerce of the United States v. Lockyer, 422 F.3d 973, 993 (9th Cir.2005), rev'd on other grounds, 463 F.3d 1076 (9th As this Court has already held that the Zoning Amendment is clearly preempted by ......
  • Chamber of Commerce of U.S. v. Lockyer, No. 03-55166.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • February 9, 2006
    ...Upon the vote of a majority of the en banc court, the opinion and dissent filed on September 6, 2005, slip op. 12167, and appearing at 422 F.3d 973 (9th Cir.2005), are...

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