Opinion ID: 2738522
Heading Depth: 3
Heading Rank: 1

Heading: Related to a Price, Route, or Service

Text: To trigger preemption under the FAAAA, a state law must relate[] to a price, route, or service of a motor carrier. 49 U.S.C. § 14501(c)(1). The phrase 'related to' . . . embraces state laws 'having a connection with or reference to' carrier 'rates, routes, or services,' whether directly or indirectly. Dan's City, 133 S. Ct. at 1778 (quoting Rowe, 552 U.S. at 370)(internal quotation marks omitted). Under this rubric, a state statute is preempted if it expressly references, or has a significant impact on, carriers' prices, routes, or services. See Morales v. Trans World Airlines, Inc., 504 U.S. 374, 388 (1992). The related to test is purposefully expansive. In Morales, the Court first explained that a statute relates to -11- prices, routes, or services if it ha[s] a connection with or reference to the same. 504 U.S. at 384. The Court held that guidelines governing airlines triggered preemption under the ADA because they expressly referenced fares, but also because they had a forbidden significant effect upon fares. Id. at 388. Congress used the same language as found in the ADA when writing the FAAAA and intended to incorporate the Morales Court's broad preemption interpretation. Rowe, 552 U.S. at 370 (quoting H.R. Conf. Rep. 103-677, at 83 (1994), reprinted in 1994 U.S.C.C.A.N. 1715, 1755). As such, the Court has applied the same sweeping test to the related to language in the FAAAA. Id. at 370-71. In Rowe, the Court held that a Maine law regulating the delivery of tobacco to customers within the state was preempted under the FAAAA, in part, because it had a 'significant' and adverse 'impact' in respect to the federal Act's ability to achieve its pre-emption-related objectives. Id. at 371-72. Recently, the Supreme Court highlighted the breadth of the test when it held that a common law claim for breach of an implied covenant relates to airlines' prices, routes, or services. Northwest, Inc. v. Ginsberg, 134 S. Ct. 1422, 1430-31 (2014). The Court's analysis focused not on the claim in the abstract, but on the underlying facts. See id. The Court found that the claim clearly has such a connection since it sought respondent's reinstatement in Northwest's frequent flyer program. -12- Id. at 1430. [T]he Northwest program is connected to the airline's 'rates' because the program awards mileage credits that can be redeemed for tickets and upgrades. Id. at 1431. The program is also connected to 'services,' i.e., access to flights and to higher service categories. Id. There is, however, a necessary limit to the scope of FAAAA preemption. We have previously noted that countless state laws have some relation to the operations of airlines and thus some potential effect on the prices charged or services provided. DiFiore, 646 F.3d at 86. State laws whose effect is only tenuous, remote, or peripheral are not preempted. See Rowe, 552 U.S. at 371 (quoting Morales, 504 U.S. at 390). In Morales, the Court thus dismissed concerns that the ADA would preempt state laws against gambling or prostitution. 504 U.S. at 390. In Rowe, the Court suggested that a state regulation that broadly prohibits certain forms of conduct and affects, say, truckdrivers, only in their capacity as members of the public (e.g., a prohibition on smoking in certain public places) would not be preempted. 552 U.S. at 375. The Attorney General argues for a categorical rule against preemption of background labor laws, drawing on certain cases. The Attorney General proffers a sensible rubric to confine FAAAA preemption: background state statutes are not preempted if they are generally applicable and not directed to a -13- particular area of federal authority. Thus, general State employment statutes and other State background laws [are] per se 'tenuous' and 'remote.' According to the Attorney General, Section 148B's definition of 'employee' is the quintessential 'background law' that applies to every industry in the Commonwealth and that arises in an area -- general employment law -- that is separate and distinct from the regulation of inter-firm competition that concerned Congress in the FAAAA. Some courts have indeed used the language of background laws as a shorthand for laws that are found to be too tenuous, remote, or peripheral to carriers' prices, routes, or services to satisfy the related to test. While we have never used that language and do not find such language particularly helpful, we describe the cases. In Dilts v. Penske Logistics, LLC, No. 12-55705, 2014 WL 4401243 (9th Cir. Sept. 8, 2014), for example, the Ninth Circuit found that generally applicable background regulations that are several steps removed from prices, routes, or services, such as prevailing wage laws or safety regulations, are not preempted. Id. at . These laws may have some effect on prices, routes, or services, but that effect is insufficient to trigger federal preemption. See id. The Ninth Circuit determined that California's meal and rest break laws were broad laws applying to hundreds of different industries with no other forbidden connection -14- with prices, routes, and services. Id. (alterations omitted) (internal quotation marks omitted). The Ninth Circuit concluded that [t]he FAAAA does not preempt California's meal and rest break laws as applied to Defendants, because those state laws are not 'related to' Defendants' prices, routes, or services. Id. at . The Attorney General also relies on S.C. Johnson & Son, Inc. v. Transport Corp. of America, Inc., 697 F.3d 544 (7th Cir. 2012).2 There, the Seventh Circuit considered the plaintiffs' claims for fraudulent misrepresentation by omission, conspiracy to commit fraud, criminal conspiracy to violate Wisconsin's bribery statute, and Wisconsin's state equivalent of the federal racketeering statute. Id. at 557-58. The Seventh Circuit held that the first two claims were preempted, as a matter of law, since they relate sufficiently to rates, routes, or services. Id. at 557. The latter two claims were not preempted since they were too tenuously related to the regulation of the prices, routes, and 2 A district court in the Northern District of Illinois recently cited S.C. Johnson & Son, Inc. v. Transport Corporation of America, Inc. when holding that a state labor law, which included the definition of an independent contractor, was not preempted under the FAAAA. Costello v. BeavEx Inc., No. 12 C 7843, 2014 WL 1289612, at , 5-7 (N.D. Ill. Mar. 31, 2014). The court found that the Illinois Wage Payment and Collection Act (IWPCA) fits the mold of a 'background law.' Id. at . The law applies to all employers and employees in Illinois and lays out guidelines for, among other things, pay periods, deductions from wages, and avenues to pursue in the event of employment disputes. Id. Like all economic regulation, the IWPCA may play[] a role in setting the market price, but [t]his is not sufficient to support preemption. Id. (citing S.C. Johnson, 697 F.3d at 558). -15- services of the trucking industry. Id. at 558-60. The Seventh Circuit characterized them as state laws of general application that provide the backdrop for private ordering. Id. at 558. Phrased another way, they were background laws that affected the costs of inputs to market transactions, such as labor, capital, or technology. Id. [L]aws that regulate these inputs operate one or more steps away from the moment at which the firm offers its customer a service for a particular price. Id. The Attorney General's proposed construct, however, runs counter to Supreme Court precedent broadly interpreting the related to language in FAAAA. In the first articulation of the test, the Morales Court dismissed the idea that a state statute must regulate or specifically address the airline industry in order to be preempted. 504 U.S. at 385-86. Besides creating an utterly irrational loophole (there is little reason why state impairment of the federal scheme should be deemed acceptable so long as it is effected by the particularized application of a general statute), this notion similarly ignores the sweep of the 'relating to' language. Id. at 386. The error of the Attorney General's test is perhaps best highlighted by the Court's recent decision concerning a state law claim for breach of an implied covenant of good faith and fair dealing. See Northwest, 134 S. Ct. at 1430-31. This generally applicable state common law claim would fail the -16- Attorney General's sensible rubric, and yet, the Court found that it clearly satisfied the related to test, id. at 1430. In addition, the Attorney General's construct is not supported by the jurisprudence in this circuit. In DiFiore, we recognized that some cases would fall beyond the scope of FAAAA preemption, but never suggested a categorical rule. See 646 F.3d at 87. More recently, in Bower v. Egyptair Airlines Co., 731 F.3d 85 (1st Cir. 2013), we held that the plaintiff's common law tort claims of interference with custodial relations, negligence, negligent infliction of emotional distress, and loss of filial consortium were preempted by the ADA since they related sufficiently to the service of an air carrier. Id. at 93, 98. We noted that a state law may be preempted even if it is indirectly or generally applicable. Id. at 95. Finally, the Attorney General's construct is contradicted by the very cases on which she relies. The Seventh Circuit disclaimed any notion of a simple all-or-nothing question. See S.C. Johnson, 697 F.3d at 550. [I]nstead, the court must decide whether the state law at issue falls on the affirmative or negative side of the preemption line. Id. A careful analysis of two of the claims at issue showed the label of background to be warranted given their tenuous effect on prices, routes, and services. See id. at 558-60. The Seventh Circuit found two other claims, for fraudulent misrepresentation by omission and conspiracy -17- to commit fraud, sufficiently related to rates, routes, or services to trigger preemption, despite their general applicability. Id. at 557. Further, in Dilts, the Ninth Circuit recognized that generally applicable statutes, broad laws applying to hundreds of different industries, could be preempted if they have a forbidden connection with prices, routes, and services. See 2014 WL 4401243, at  (alterations omitted). [T]hat is, the Ninth Circuit specified, those that do not directly or indirectly mandate, prohibit, or otherwise regulate certain prices, routes, or services [] are not preempted by the FAAAA. Id. We refuse the Attorney General's invitation to adopt such a categorical rule exempting from preemption all generally applicable state labor laws. As evidenced by Northwest, we must carefully evaluate even generally applicable state laws for an impermissible effect on carriers' prices, routes, and services. The court must engage with the real and logical effects of the state statute, rather than simply assigning it a label.
The MDA argues that Section 148B's effective ban on the use of independent contractors renders it preempted under either a facial or an as-applied challenge. The MDA argues that the FAAAA preempts Section 148B on its face due to its logical effect on the same-day delivery industry as a whole. Since individual couriers -18- necessarily act within the usual course of the business of their employers, they must be deemed employees. As such, Section 148B effectively prohibits motor carriers from engaging their couriers as independent contractors. The MDA's amicus curiae,3 the Chamber of Commerce, argues that [a] state law specifying who must provide the service -- an employee of the carrier -- is no different from regulating the service itself. The Attorney General contests the MDA's characterization of the law as one that bans the use of individual independent contractors.4 The MDA also argues that the FAAAA preempts Section 148B due to its impermissible effect on the prices, routes, and services of Xpressman. Preemption is implicated if the statute has a forbidden significant effect on even one motor carrier. See N.H. Motor Transp. Ass'n v. Rowe, 448 F.3d 66, 72-73 (1st Cir. 2006), aff'd on other grounds sub nom. Rowe v. N.H. Motor Transp. Ass'n, 552 U.S. 364 (2008). According to Xpressman, the re-classification 3 We express our appreciation to the several amici for their assistance. 4 At oral argument, the Attorney General argued that Section 148B did not operate as a bar to the classification of individual couriers as independent contractors so long as the delivery company arranged deliveries, and the courier performed the deliveries. This parses the issue too finely. On the facts presently reflected in the record, the couriers deliver packages for delivery companies. There can be no dispute that they act in the course of business for the delivery companies, even if one performs the deliveries and the other arranges the deliveries. -19- of its 58 independent couriers as employees would change the routes offered to customers, would preclude on-demand delivery services, and would drastically increase Xpressman's costs and thus its prices. The Attorney General argues that the MDA misstates or overstates this effect. The district court held that Section 148B's connection to prices, routes and services is insufficient for the FAAAA . . . to preempt it. The district court characterized Section 148B as a generally applicable wage law, and noted, [t]hat a regulation on wages has the potential to impact costs and therefore prices is insufficient to implicate preemption. The district court worried that to find the 'FAAAA preempts wage laws because they may have an indirect impact on [a motor carrier]'s pricing decisions amounts to an invitation to immunize it from all state economic regulation.' In so holding, the district court made several critical errors. First, a statute's potential impact on carriers' prices, routes, and services can be sufficient if it is significant, rather than tenuous, remote, or peripheral. We have previously rejected the contention that empirical evidence is necessary to warrant FAAAA preemption, and allowed courts to look[] to the logical effect that a particular scheme has on the delivery of services or the setting of rates. Rowe, 448 F.3d at 82 n.14. Second, this logical effect can be sufficient even if indirect, as described -20- above. Far from immunizing motor carriers from all state economic regulations, we are following Congress's directive to immunize motor carriers from state regulations that threaten to unravel Congress's purposeful deregulation in this area. Finally, the district court failed to consider the impact of the statute on carriers' routes and services, and not merely their prices. Ultimately, the district court held, the Statute's effect on Xpressman's labor costs is immaterial. Even if the impact was 'significant,' . . . this would not change the fact that the Statute does not relate to the 'movement of property.' In essence, the district court found that its holding that Section 148B did not meet the second requirement, with respect to the transportation of property, obviated the need to investigate its potential success on the first requirement. Since we conclude that the district court erred in its interpretation of the second section of the FAAAA, a determination on the first requirement is now necessary. We express no view on the sufficiency of the evidence before the district court. In opposition to the MDA's motion for summary judgment, the Attorney General had argued that it needed to conduct additional discovery in order to develop facts necessary to its opposition. See Fed. R. Civ. P. 56(d). The district court did not reach the Rule 56(d) motion. The district court ought to decide this matter in the first instance and determine whether the -21- Attorney General has met her burden of establishing the need for additional discovery under Rule 56(d).