Golden Gate Restaurant v. San Francisco

Decision Date30 September 2008
Docket NumberNo. 07-17372.,No. 07-17370.,07-17370.,07-17372.
Citation546 F.3d 639
PartiesGOLDEN GATE RESTAURANT ASSOCIATION, an incorporated non-profit trade association, Plaintiff-Appellee, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant, and San Francisco Central Labor Council; Service Employees International Union, Healthcare Workers-West; Service Employees International Union, Local 1021; Unite Here Local 2, Defendant-intervenors-Appellants. Golden Gate Restaurant Association, an incorporated non-profit trade association, Plaintiff-Appellee, v. City and County of San Francisco, Defendant-Appellant, and San Francisco Central Labor Council; Service Employees International Union, Healthcare Workers-West; Service Employees International Union, Local 1021; Unite Here Local 2, Defendant-intervenors.
CourtU.S. Court of Appeals — Ninth Circuit

Thomas M. Christina, Ogletree, Deakins, Nash, Smoak & Stewart, Greenville, SC, for amici International Franchise Association, National Association of Manufacturers, and Society for Human Resource Management, Michael D. Peterson, Washington, D.C., for amicus HP Policy Association.

Eugene Scalia, Gibson Dunn & Crutcher, Washington D.C., for amici Retail Industry Leaders Association and Chamber of Commerce of the United States.

Barbara Jones, Jay E. Sushelsky, Mary Ellen Signorille, AARP Foundation Litigation, Pasadena, CA, for Amicus AARP.

Edmund G. Brown Jr., Attorney General, Douglas M. Press, Senior Assistant Attorney General, Gordon Burns, Deputy Solicitor General, Karin S. Schwartz, Supervising Deputy Attorney General, Beverley R. Meyers, Sarah E. Kurtz, Hadara R. Stanton, Benjamin J. Riley, Deputy Attorneys General, for Amicus Curiae State of California.

Appeal from the United States District Court for the Northern District of California; Jeffrey S. White, District Judge, Presiding. D.C. No. CV-06-06997-JSW.

Before: ALFRED T. GOODWIN, STEPHEN REINHARDT, and W. FLETCHER, Circuit Judges.

WILLIAM A. FLETCHER, Circuit Judge:

Plaintiff Golden Gate Restaurant Association ("the Association") challenges the employer spending requirements of the newly enacted San Francisco Health Care Security Ordinance ("the Ordinance"). The Association argues that the federal Employee Retirement Income Security Act of 1974 ("ERISA") preempts the employer spending requirements of the Ordinance either because those requirements create a "plan" within the meaning of ERISA or because they "relate to" employers' ERISA plans. On December 26, 2007, the district court granted the Association's motion for summary judgment and enjoined the implementation of the employer spending requirements. Golden Gate Rest. Ass'n v. City & County of San Francisco, 535 F.Supp.2d 968, 970 (N.D.Cal.2007). On December 27, 2007, Defendant City and County of San Francisco ("the City") and Defendant-Intervenor labor unions requested that this court stay the judgment of the district court pending appeal. In an order filed January 9, 2008, we granted the stay. Golden Gate Rest. Ass'n v. City & County of San Francisco ("Golden Gate"), 512 F.3d 1112, 1114 (9th Cir.2008). We now reach the merits of the appeal. We hold that ERISA does not preempt the Ordinance.

I. Procedural History

In July 2006, the San Francisco Board of Supervisors unanimously passed the San Francisco Health Care Security Ordinance, and the mayor signed it into law. The Ordinance is codified at Sections 14.1 to 14.8 of the City and County of San Francisco Administrative Code. The Ordinance has two primary components: the Health Access Plan ("HAP"), and the employer spending requirements. The HAP1 is a City-administered health care program. It went into effect in the summer of 2007. In funding the HAP, the City "prioritize[s] services for low and moderate income persons." S.F. Admin. Code § 14.2(d) (2007). According to the City's web page, as of August 9, 2008, 27,395 persons had enrolled in the HAP.2 Persons who already have health insurance or who live outside of San Francisco are not eligible for the HAP. Instead, such persons may be entitled to establish medical reimbursement accounts with the City. As we will explain in detail below, the Ordinance also requires all covered employers to make a certain level of health care expenditures on behalf of their covered employees. The Association does not challenge the HAP. It challenges only the employer spending requirements.

The Association filed a complaint against the City on November 8, 2006, asking the district court to declare that ERISA preempts the employer spending requirements, and seeking a permanent injunction against enforcement of the provisions of the Ordinance relating to those requirements. The San Francisco Central Labor Council, Service Employees International Union (SEIU) Local 1021, SEIU United Healthcare Workers-West, and UNITE-HERE! Local 2 (collectively, "Intervenors"), successfully moved to intervene as defendants.

On April 2, 2007, the City deferred implementation of the employer spending requirements until January 1, 2008. On July 13, 2007, the parties filed cross-motions for summary judgment. On December 26, 2007, the district court entered judgment for the Association, concluding that ERISA preempts the employer spending requirements. See Golden Gate Rest. Ass'n, 535 F.Supp.2d at 979-80.

On December 27, 2007, the City and Intervenors asked the district court to stay its judgment pending appeal. The district court denied the motion. On January 9, 2008, this court filed a published order granting the City's motion for a stay of the district court's judgment pending resolution of the City's appeal. Golden Gate, 512 F.3d at 1127. Since that date, covered employers have been required to make quarterly health care expenditures.

On February 7, 2008, the Association filed an application with Justice Kennedy, as Circuit Justice for the Ninth Circuit, for an order vacating our stay of the district court's judgment. On February 21, after receiving the City's response, Justice Kennedy denied the application. The United States Secretary of Labor subsequently filed an amicus brief in this court in support of the Association.

On April 17, 2008, we heard oral argument on the merits of the City's appeal. We now reverse the judgment of the district court and remand with instructions to enter summary judgment in favor of the City and Intervenors.

II. Standard of Review

"We review de novo the district court's grant of summary judgment and, viewing the evidence in the light most favorable to the non-moving party, determine whether there are any genuine issues of material fact for trial." In re Syncor ERISA Litig., 516 F.3d 1095, 1100 (9th Cir.2008). "ERISA preemption is a question of law, which we also review de novo." Elliot v. Fortis Benefits Ins. Co., 337 F.3d 1138, 1141 (9th Cir.2003).

III. The Ordinance

The Ordinance mandates that covered employers make "required health care expenditures to or on behalf of" certain employees each quarter. S.F. Admin. Code § 14.3(a). "Covered employers" are employers engaging in business within the City that have an average of at least twenty employees performing work for compensation during a quarter, and nonprofit corporations with an average of at least fifty employees performing work for compensation during a quarter. Id. § 14.1(b)(3), (11), (12). "Covered employees" are individuals who (1) work in the City, (2) work at least ten hours per week, (3) have worked for the employer for at least ninety days, and (4) are not excluded from coverage by other provisions of the Ordinance. Id. § 14.1(b)(2).

The Ordinance sets the required health care expenditure for employers based on the Ordinance's "health care expenditure rate." Id. §§ 14.1(b)(8), 14.3(a). For-profit employers with between twenty and ninety-nine employees and non-profit employers with fifty or more employees must make health care expenditures at a rate of $1.17 per hour. For-profit employers with one hundred or more employees must make expenditures at a rate of $1.76 per hour. See City & County of San Francisco, Office of Labor Standards Enforcement, Regulations Implementing the Employer Spending Requirement of the San Francisco Health Care Security Ordinance ("ESR"), Reg. 5.2(A) (2007).3 Under the Ordinance, "[t]he required health care expenditure for a covered employer shall be calculated by multiplying the total number of hours paid for each of its covered employees during the quarter ... by the applicable health care expenditure rate." S.F. Admin. Code § 14.3(a).

Regulations implementing the Ordinance specify that "[a] health care expenditure is any amount paid by a covered employer to its covered employees or to a third party on behalf of its covered employees for the purpose of providing health care services for covered employees or reimbursing the cost of such services for its covered employees." ESR Reg. 4.1(A). A...

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