S.F. Taxi Coal. v. City & Cnty. of S.F.
| Decision Date | 09 November 2020 |
| Docket Number | No. 19-16439,19-16439 |
| Citation | 979 F.3d 1220 |
| Parties | SAN FRANCISCO TAXI COALITION; Patrick O'Sullivan; George Horbal; Alliance Cab; S.F. Town Taxi Inc. ; Sai Lee, Plaintiffs-Appellants, v. CITY AND COUNTY OF SAN FRANCISCO; San Francisco Municipal Transit Agency; Jeffrey Tumlin, Director of Transportation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Kenneth A. Brunetti and Gregory A. Rougeau, Brunetti Rougeau LLP, San Francisco, California, for Plaintiffs-Appellants.
Dennis J. Herrera, City Attorney; Wayne K. Snodgrass, Aileen M. McGrath, and James M. Emery, Deputy City Attorneys; City Attorney's Office, San Francisco, California; for Defendants-Appellees.
Before: Kenneth K. Lee and Patrick J. Bumatay, Circuit Judges, and Roslyn O. Silver,** District Judge.
Uber, Lyft, and other ride-sharing services have been a boon for commuters, but not so much for taxi drivers. Particularly hard hit are taxi drivers who recently obtained taxi permits (called "medallions") from the City of San Francisco for $250,000 — only to see ridership dry up in the face of disruptive technology. In part to aid these taxi drivers, the San Francisco Municipal Transportation Agency (SFMTA) established several rules favoring recent owners of taxi medallions over those who obtained theirs years ago. So, for example, the new rules give priority for lucrative airport pick-up rides to recent medallion owners.
Several taxi drivers, as well as groups representing them, challenged these new rules as violating equal protection, substantive due process, the California Environmental Quality Act (CEQA), and state anti-age discrimination law. The district court granted the government's motion for judgment on the pleadings, ruling that the taxi drivers failed to state plausible claims. We affirm. The rules are rationally related to the legitimate government interests of aiding beleaguered taxi drivers and easing taxi congestion at the airport. We also affirm the judgment on the CEQA and age discrimination claims, but we remand for the district court to consider granting leave to amend those claims in the event the taxi drivers can allege additional facts to support them.
The SFMTA regulates taxis in San Francisco as well as taxi traffic at San Francisco International Airport (SFO).
Importantly here, it issues taxi "medallions" to operate within the City. In 1978, San Francisco voters approved Proposition K, which established different rules depending on whether the taxi driver acquired the medallion before or after the passage of Proposition K (i.e. , "Pre-K" or "Post-K" medallions). In 2010, the SFMTA enacted regulations further changing the medallion structure, resulting in three classes: Pre-K (pre-1978), Post-K (1978 to 2010), and Purchased medallions (post-2010). The precise differences among the classes are not relevant here, other than that Purchased medallion owners paid $250,000 to the City for each medallion.
Shortly after Purchased medallion owners began ponying up a quarter-of-a-million dollars to buy taxi medallions, ride-sharing services such as Uber and Lyft disrupted the taxi industry. SFMTA retained consultants to study the changing taxi market. The report found that Purchased medallion holders faced severe financial hardship because of high debt loads joined with fare loss to ride-sharing services. It also determined that taxi drivers clustered at SFO in search of high-value fares, causing significant congestion and long wait times.
In response to the consultants’ report, SFMTA adopted numerous regulations (the "2018 Regulations"), some of which are the focus of this litigation. Pre-K medallion holders are now prohibited from picking up fares at SFO, and Post-K medallion holders are disfavored from pickups with priority given at a fluctuating ratio to Purchased medallion holders depending on demand.
The plaintiffs (the "Drivers") sued San Francisco, the SFMTA, and its director (collectively, the "City") in state court. The Drivers claimed, among other things, violations of substantive due process and equal protection under both state and federal constitutions, the California Environmental Quality Act, and anti-age discrimination law under California Government Code section 11135. The City removed to federal court and filed a motion for judgment on the pleadings. The district court granted the motion and entered judgment dismissing the case. The district court held that the challenged 2018 Regulations furthered three legitimate state interests: decrease congestion at the airport, increase taxi service within the city, and minimize financial fallout for Purchased medallion holders "who have been disproportionately crushed by the industry downturn." The court also held that the 2018 Regulations were not a "project" under CEQA. Finally, the court found the complaint lacked allegations sufficient to state a claim sounding in state anti-age discrimination law.
We have jurisdiction under 28 U.S.C. § 1291, and review judgments on the pleadings de novo. See Fajardo v. Cty. of Los Angeles , 179 F.3d 698, 699 (9th Cir. 1999). This analysis is " ‘substantially identical’ to analysis under Rule 12(b)(6)." Chavez v. United States , 683 F.3d 1102, 1108 (9th Cir. 2012) (internal citation omitted). Judgment "is properly granted when, ‘taking all the allegations in the pleadings as true, the moving party is entitled to judgment as a matter of law.’ " Gregg v. Haw., Dep't of Pub. Safety , 870 F.3d 883, 887 (9th Cir. 2017) (quoting Nelson v. City of Irvine , 143 F.3d 1196, 1200 (9th Cir. 1998) ).
The Drivers have failed to plausibly allege that the 2018 Regulations violate equal protection or substantive due process.1
Rational basis review applies to the equal protection claim here because this case does not implicate suspect or quasi-suspect classifications. See Ball v. Massanari , 254 F.3d 817, 823 (9th Cir. 2001). Under that standard, we ask "whether the legislation bears a rational relationship to a legitimate state interest." Jackson Water Works, Inc. v. Pub. Utils. Comm'n , 793 F.2d 1090, 1093–94 (9th Cir. 1986). "Where a regulation or statute affects only economic ... interests," as here, "the state is free to create any classification scheme that does not invidiously discriminate." Id. at 1093. We must uphold the law if there are " ‘plausible,’ ‘arguable,’ or ‘conceivable’ reasons which may have been the basis for the distinction." Id. at 1094 (quoting Brandwein v. Cal. Bd. of Osteopathic Exam'rs , 708 F.2d 1466, 1472 (9th Cir. 1983) ).
Here, the 2018 Regulations rationally serve legitimate purposes, and the Drivers fail to state a plausible claim otherwise. The City provides three interests motivating the 2018 Regulations: (1) reducing traffic congestion at the airport; (2) encouraging drivers to service the City; and (3) mitigating economic fallout for Purchased medallion owners.
There can be no dispute that the first two interests are legitimate. See, e.g. , Sproles v. Binford , 286 U.S. 374, 394, 52 S.Ct. 581, 76 L.Ed. 1167 (1932) (). The Drivers concede that taxi operators cluster at SFO because those riders offer high-value fares compared to trips within the City. They also admit that an oversupply of taxis at SFO leads to a shortage within the City.
The parties focus mainly on the third proffered interest — alleviating economic harm for Purchased medallion holders. The Drivers claim that the 2018 Regulations are pretext for impermissibly propping up the Purchased medallion market. But the only case cited in support is City of Cleburne v. Cleburne Living Center , 473 U.S. 432, 105 S.Ct. 3249, 87 L.Ed.2d 313 (1985). That case involved "an irrational prejudice against the mentally retarded." Id. at 450, 105 S.Ct. 3249. The Drivers, however, do not allege any similar irrational prejudices. Instead, their claim boils down to simple disagreement with the City's efforts to balance the economic benefits and burdens of a regulated industry.
The Drivers also claim that the City's actions amount to impermissible economic favoritism. For this, the Drivers cite our court's opinion in Merrifield v. Lockyer , 547 F.3d 978, 991 (9th Cir. 2008). Merrifield involved a state law requiring controllers of non-vertebrate animals to obtain a pesticide license but did not require it for those controlling vertebrate animals. See id. at 988–89. The appellant there claimed that the distinction based on the type of pest controlled violated equal protection. See id . The Merrifield court held that the law failed rational basis review because there simply was no reasonable basis for the difference in treatment: the licensing scheme "specifically singles out pest controllers like Merrifield," and was supported by "a rationale so weak that it undercuts the principle of non-contradiction." Id. at 991. The court favorably cited a Sixth Circuit decision holding that "the singling out of a particular economic group, with no rational or logical reason for doing so, was strong evidence of an economic animus with no relation to public health, morals or safety." Id. at 989 (citing Craigmiles v. Giles , 312 F.3d 220, 227–29 (6th Cir. 2002) ). The Drivers latch onto a single footnote in Merrifield to argue that the City's taxi rules do not pass muster under rational basis review: "[M]ere economic protectionism for the sake of economic protectionism is irrational with respect to determining if a classification survives rational basis review." Id. at 991 n.15.
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