A&A Towing, Inc. v. Nevada Transportation Authority

• Court: District Court, D. Nevada
• Decided: September 7, 2021
• Docket: 3:21-cv-00049
• Status: Unknown

Opinion

1 2 3 4 5 UNITED STATES DISTRICT COURT

6 DISTRICT OF NEVADA

7 * * * 8 A&A TOWING, INC., a Nevada Corporation Case No. 3:21-cv-00049-LRH-WGC

9 Plaintiff, ORDER

10 v.

11 TEGSCO, LLC dba AUTO RETURN, a California limited liability company; STATE 12 OF NEVADA, NEVADA TRANSPORTATION AUTHORITY; STATE 13 OF NEVADA DEPARTMENT OF PUBLIC SAFETY, HIGHWAY PATROL DIVISION, 14 DOES 1-10; ABC CORPORATIONS 1-10; XYZ CORPORATIONS 1-10. 15 Defendant. 16 17 Before the Court is Defendant State of Nevada Department of Public Safety, Highway 18 Patrol Division’s (“NHP”) motion to dismiss (ECF No. 18) Plaintiff A&A Towing, Inc.’s 19 (“A&A”) amended complaint (ECF No. 9). Defendant State of Nevada, Nevada Transportation 20 Authority (“NTA”) joined the motion to dismiss (ECF No. 20). A&A filed a response to the 21 motion (ECF No. 25), and both NHP and NTA replied (ECF Nos. 28, 34). Also pending before 22 the Court is NTA’s motion to dismiss (ECF No. 19) A&A’s amended complaint. NHP joined the 23 motion (ECF No. 21), and A&A filed a response (ECF No. 26). Lastly before the Court is 24 Defendant TEGSCO, LLC’s (“TEGSCO”) motion to dismiss (ECF No. 31) A&A’s amended 25 complaint. NTA joined TEGSCO’s motion to dismiss (ECF No. 32). A&A filed a response to the 26 motion (ECF No. 40), and TEGSCO replied (ECF No. 42). 27 For the reasons articulated below, the Court grants NHP’s and TEGSCO’s motion to 1 I. BACKGROUND 2 This case concerns various public and private entities within the State of Nevada’s 3 towing tariff scheme. The Plaintiff, A&A, is a Nevada corporation that provides towing services 4 to the public, the State of Nevada, and local law enforcement agencies. ECF No. 9, at 2. A&A 5 has brought claims against three Defendants: the NTA, NHP, and TEGSCO. 6 The first Defendant, the NTA, oversees A&A’s licensing requirements to engage as a tow 7 operator. Id. As such, the NTA administers and enforces state laws pertaining to tow operators. 8 Id. The second Defendant, NHP, is a division of the State of Nevada Department of Public 9 Safety and performs law enforcement services on Nevada highways. Id. at 3. These services 10 include the arranging for the towing of abandoned or damaged vehicles. Id. Lastly, Defendant 11 TEGSCO is a “towing management and logistics service” that provides “management, logistics, 12 and technology software” to state entities. Id. 13 The NTA and NHP are subject to various statutory requirements as agencies/contractors 14 within the State of Nevada. For example, agencies within the State of Nevada generally try to 15 determine whether a proposed regulation is likely to impose a significant economic burden upon 16 small business. See NRS 233B.0608. The same is required of rules adopted by local 17 governments. See NRS 237.030 et seq. 18 As for towing, Nevada’s statute for the creation of the tow program—NRS 706.4485— 19 requires that all tow operators “[comply] with all standards [NHP] may adopt to protect the 20 health, safety, and welfare of the public.” NRS 706.4485(e). In addition, under NRS 706.151, the 21 NTA has the regulatory authority “to relieve the undue burdens on the highways by reason of the 22 use of the highways,” to “provide for fair and impartial regulation, to promote safe, adequate, 23 economical and efficient service and to foster sound economic conditions in motor 24 transportation,” and to “discourage any practices which would tend to increase or create 25 competition that may be detrimental to the traveling and shipping public or the motor carrier 26 business within this State.” NRS 706.151. 27 /// 1 A. Nevada’s Tow Tariff Scheme 2 The NTA approves towing tariffs—i.e., fees and charges—that tow operators, like A&A, 3 charge members of the public for their tow services. ECF No. 9, at 3. In turn, the NTA oversees 4 and updates the Model Tow Tariff which standardizes which fees and charges are permitted. Id. 5 In January of 2017 at a General Session Meeting, the NTA considered an industry request 6 to adopt changes to the Model Tow Tariff. ECF No. 19-1. The change would allow law 7 enforcement tow rate “service fees” without having to file a formal tariff modification. Id. At its 8 March 2017 General Session Meeting, the NTA determined the “service fee” was “just and 9 reasonable” pursuant to NRS 706.311. ECF No. 19-2. Finally, at the April 2017 General Session 10 Meeting, the NTA amended the Model Tow Tariff to include the “service fee.” ECF No. 19-3. 11 The NTA subsequently adjusted the Model Tow Tariff to include the approved “service fee” (the 12 “Administrative Fee” hereinafter) of $25.75. ECF No. 9-1.1 The Model Tow Tariff describes the 13 Administrative Fee as being collected “pass-through and transmitted to the towing management 14 company,” and would only apply to “tows requested by law enforcement.” ECF No. 9, at 3. 15 On June 5, 2018, NHP entered into a contract with TEGSCO for a “Third Party Tow 16 Management System” (“The System”). Id. The System would serve as an intermediary between 17 tow operators and NHP tow requests. Id. NHP then notified tow operators across the State of 18 Nevada that they had to enter into a contract with TEGSCO in order to be notified of tow 19 requests. Id. at 4. NHP and TEGSCO agreed that there was no cost to the state for this 20 arrangement. Id. at 3. Instead, TEGSCO would be compensated for the use of The System from 21 the above-described Administrative Fee. Id. In essence, this meant that tow operators would 22 collect the Administrative Fee from tow customers and transmit it to TEGSCO. 23 After the Tow Operators of Northern Nevada entered into a Memorandum of 24 Understanding regarding the collection and payment of the Administrative Fee, A&A towing 25 entered into a contract with TEGSCO to be included in the tow rotation for NHP. Id. at 4. 26 TEGSCO would send invoices to A&A for the Administrative Fee based on the number of tows 27 A&A completed using TEGSCO’s technology. Id. at 4–5. If A&A—or any other tow operator— 1 failed to pay the full amount invoiced, TEGSCO would cease to include them on the tow 2 rotation. Id. at 7. This arrangement, which A&A alleges was done without proper regulatory 3 approval, is the subject of this action. 4 This action was filed on January 1, 2021, with the first amended complaint (the operative 5 complaint) being filed on March 2, 2021. ECF No. 9. A&A presents six causes of action: two 6 against NTA, two against NHP, and two against TEGSCO. A&A alleges that each Defendant 7 violated the Fourteenth Amendment of the United States Constitution as well as the Nevada 8 Constitution when they, acting under color of law, implemented the Administrative Fee to 9 benefit TEGSCO without due process. Specifically, A&A alleges the Defendants failed to 10 properly adhere to the state regulatory scheme and conduct a business impact statement before 11 approving the contracts with TEGSCO. Each Defendant’s motion to dismiss (ECF Nos. 18, 19, 12 31) is now pending before the Court. 13 II. LEGAL STANDARD 14 A party may seek the dismissal of a complaint under Federal Rule of Civil Procedure 15 12(b)(6) for failure to state a legally cognizable cause of action. See FED. R. CIV. P. 12(b)(6) 16 (stating that a party may file a motion to dismiss for “failure to state a claim upon which relief 17 can be granted[.]”). To survive a motion to dismiss for failure to state a claim, a complaint must 18 satisfy the notice pleading standard of Federal Rule 8(a)(2). See Mendiondo v. Centinela Hosp. 19 Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008). Under Rule 8(a)(2), a complaint must contain “a 20 short and plain statement of the claim showing that the pleader is entitled to relief.” FED. R. CIV. 21 P. 8(a)(2). Rule 8(a)(2) does not require detailed factual allegations; however, a pleading that 22 offers only “‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of 23 action’” is insufficient and fails to meet this broad pleading standard. Ashcroft v. Iqbal, 556 U.S. 24 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). 25 To sufficiently allege a claim under Rule 8(a)(2), viewed within the context of a 26 Rule 12(b)(6) motion to dismiss, a complaint must “contain sufficient factual matter, accepted as 27 true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Twombly, 550 U.S. at 1 the reasonable inference, based on the court’s judicial experience and common sense, that the 2 defendant is liable for the alleged misconduct. See id. at 678-679 (stating that “[t]he plausibility 3 standard is not akin to a probability requirement, but it asks for more than a sheer possibility that 4 a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with 5 a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement 6 to relief.”) (internal quotation marks and citations omitted). Further, in reviewing a motion to 7 dismiss, the court accepts the factual allegations in the complaint as true. Id. However, bare 8 assertions in a complaint amounting “to nothing more than a formulaic recitation of the elements 9 of a . . . claim . . . are not entitled to an assumption of truth.” Moss v. U.S. Secret Serv., 572 F.3d 10 962, 969 (9th Cir. 2009) (quoting Iqbal, 556 U.S. at 698) (internal quotation marks omitted). The 11 court discounts these allegations because “they do nothing more than state a legal conclusion— 12 even if that conclusion is cast in the form of a factual allegation.” Id. “In sum, for a complaint to 13 survive a motion to dismiss, the non-conclusory ‘factual content,’ and reasonable inferences 14 from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Id. 15 III. DISCUSSION 16 After a review of the various motions to dismiss, the Court has distilled three primary 17 arguments through which the Defendants argue the complaint must be dismissed: (1) NHP and 18 the NTA are entitled to Section 1983 immunity; (2) TEGSCO’s role in the tariff scheme does not 19 rise to official state action; and (3) A&A has failed to raise cognizable due process claims.2 Each 20 argument is addressed in turn. 21 A. Section 1983 Immunity 22 In the amended complaint, A&A claims that the Defendants violated the United States 23 Constitution as well as the Nevada Constitution by depriving it of its property without due 24 process of law by promulgating the tow tariff scheme without sufficient regulatory processes. 25 ECF No. 9, at 10–12. A&A raises the federal due process claim under the Fourteenth 26 Amendment via 42 U.S.C. § 1983 (“Section 1983”). Id. In NHP’s motion to dismiss—which the 27 1 NTA joined—it argues that it and the NTA are entitled to immunity because they are not a 2 “person” as required in Section 1983 claims. ECF No. 18, at 5. In its opposition to the motion, 3 A&A argues that both Defendants are still liable as they constitute “arms of the State” still 4 subject to the rigors of the Constitution. ECF No. 25, at 5. 5 Section 1983 of Title 42 of the U.S. Code is an integral piece to the enforcement of 6 federal constitutional rights. The statute authorizes private parties to sue municipalities, state and 7 local officials, and other defendants who acted under color of state law. See 42 U.S.C. § 1983. 8 Notably, Section 1983 authorizes claims for relief only against a “person” who acted under color 9 of state law. Id. Neither a state nor its officials acting in their official capacities are “persons” 10 under Section 1983, and therefore the statute does not provide a cause of action against either 11 entity. Will v. Michigan State Police, 491 U.S. 58, 71 (1989). This proposition is subject to one 12 exception: where the state official is sued for prospective injunctive relief, the action is properly 13 brought under Section 1983. Wolfe v. Strankman, 392 F.3d 358, 365 (9th Cir. 2004).3 14 Here, A&A seeks both injunctive relief and monetary relief against both NHP and the 15 NTA—political agencies of the State of Nevada, not individual officials. See Howlett v. Rose, 16 496 U.S. 356, 365 (1990) (“…the State and arms of the State, which have traditionally enjoyed 17 Eleventh Amendment immunity, are not subject to suit under § 1983 in either federal court or 18 state court.”). Therefore, because A&A has not raised claims against individual defendants in 19 their official capacity, the Court will dismiss the Section 1983 claims brought against both NHP 20 and the NTA. A&A’s argument to the contrary is unavailing considering these bedrock 21 principles of constitutional law. 22 B. State Action Doctrine 23 In its amended complaint, A&A claims that TEGSCO, a private entity, violated its due 24 process rights under both the United States Constitution and the Nevada Constitution by 25 participating in the tow tariff scheme. ECF No. 9, at 10–12. Specifically, A&A alleges that 26 3 To the Court’s knowledge, the State of Nevada has not raised an Eleventh Amendment immunity defense. Such a 27 defense would also seemingly bar the present claims against NHP and the NTA. See Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 100–01 (1984) (Eleventh Amendment immunity applies to state agencies); NRS § 1 TEGSCO “misled [State agencies] into believing their contracts with TESGSCO are not subject 2 to ordinary regulatory requirements like public hearing and comment or small business impact 3 statements.” Id. at 11. In TEGSCO’s motion to dismiss, TEGSCO argues that it is immune from 4 constitutional claims as it is a private corporation not subject to certain constitutional constraints. 5 ECF No. 31, at 4–5. In its opposition to the motion, A&A argues TEGSCO’s involvement with 6 the tow tariff scheme amounts to an act under color of state law thereby inviting constitutional 7 liability. ECF No. 40, at 2–5. 8 Both the Due Process Clauses of the Fourteenth Amendment and the Nevada Constitution 9 are traditionally viewed as protections against unconstitutional conduct of the State—not private 10 corporations. See Blum v. Yaretsky, 457 U.S. 991, 1003 (1982) (“[the Fourteenth] Amendment 11 erects no shield against merely private conduct, however discriminatory or wrongful.”) (quoting 12 Shelley v. Kraemer, 334 U.S. 1, 13 (1948)); Whitehead v. Nevada Com’n on Judicial Discipline, 13 873 P.2d 946, 974 (Nev. 1994) (“[t]he Fourteenth Amendment is a limitation on the states in the 14 interest of individuals) (citations omitted). Rather than pursue Section 1983 claims, individuals 15 who are “victimized by the tortious conduct of private parties must ordinarily explore other 16 avenues of redress.” Roche v. John Hancock Mut. Life Ins. Co., 81 F.3d 249, 253 (1st Cir. 1996). 17 Still, private corporations can be held liable in a Section 1983 action if it has exercised power 18 “possessed by virtue of state law and made possible only because the wrongdoer is clothed with 19 the authority of state law.” U.S. v. Classic, 313 U.S. 299, 326 (1941). A private corporation is 20 “clothed with the authority of state law” when it carries out a function that has been historically 21 and traditionally the “exclusive” prerogative of the state. See Flagg Bros. v. Brooks, 436 U.S. 22 149, 157–58 (1978); Jackson v. Metro. Edison Co., 419 U.S. 345, 352 (1974). 23 The Supreme Court has stressed that very few functions satisfy this “public function” 24 test. Some of these functions include necessary public goods like running elections and operating 25 a company town. See Terry v. Adams, 345 U.S. 461, 468–70 (1953) (elections); Marsh v. 26 Alabama, 326 U.S. 501, 505–09 (1946) (company town). However, more importantly, many 27 functions have failed to satisfy the demanding public function test. See, e.g., Am. Mfrs. Mut. Ins. 1 compensation benefits); Rendell-Baker v. Kohn, 457 U.S. 830, 842 (1982) (education of 2 maladjusted children); Blum v. Yaretsky, 457 U.S. 991, 993 (1982) (nursing home care); S.F. 3 Arts & Athletics, Inc. v. U.S. Olympic Comm, 483 U.S. 522, 544 (1987) (coordination of amateur 4 athletics); Hudgens v. NLRB, 424 U.S. 507, 519 (1976) (operations of a shopping mall); Jackson 5 v. Metro. Edison Co., 419 U.S. 345, 352–53 (1974) (provision of utility services); Polk County, 6 v. Dodson, 454 U.S. 312, 319 n.9 (1981) (law licenses); Moose Lodge No. 107 v. Irvis, 407 U.S. 7 163, 176–77 (1972) (liquor licenses); Columbia Broadcasting System, Inc. v. Democratic 8 National Committee, 412 U.S. 94, 120–21 (1973) (broadcast licenses). 9 So too here, the Court finds that TEGSCO did not perform a function which is 10 exclusively a prerogative of the state. TEGSCO is a government contractor that acts as an 11 intermediary between NHP and tow operators. ECF No. 9, at 2. As articulated recently by the 12 Supreme Court, “…the fact that the government licenses, contracts with, or grants a monopoly to 13 a private entity does not convert the private entity into a state actor…” Manhattan Community 14 Access Corp. v. Halleck, 139 S. Ct. 1921, 1931–32 (2019) (citations omitted). Rather, as 15 previously described, the government contractor must have subsumed “a traditional, exclusive 16 public function.” Id. at 1929. 17 A&A’s conclusory assumption that TEGSCO performs a state function because of its 18 involvement with NHP is unsupported by the law. While certainly TEGSCO coordinates with 19 NHP because of its government contract, i.e., providing software for tow dispatch, A&A points 20 to no authority that holds facilitating tow dispatch is an exclusively public function.4 To the best 21 of the Court’s knowledge, many private entities also utilize the services of third-party tow 22 dispatch companies. Transforming these companies into state actors subject to constitutional 23 constraints would discourage obtaining government licenses and contracts going forward. 24 Halleck, 139 S. Ct. at 1932. Therefore, here, the State’s allowance for TEGSCO to operate 25 within the tow tariff scheme does not make TEGSCO a state actor. 26 4 Importantly, A&A is not a tow customer and TEGSCO does not “take” vehicles at the behest of NHP. Rather, 27 TEGSCO serves as the government contractor between NHP and tow companies. Cf. Goichman v. Rheuban Motors, Inc., 682 F.2d 1320, 1322 (9th Cir.1982) (“[A] private towing company acting at the behest of a police officer and 1 In sum, securing and performing a government contract does not invite constitutional 2 liability unless the conduct itself is exclusively performed by the State. A&A does not allege 3 conduct which would satisfy this requirement. Accordingly, the Court will dismiss both claims 4 against TEGSCO. 5 C. Failure to Raise Cognizable Due Process Claims 6 In each motion to dismiss, the Defendants contend that even if this Court were to find 7 that they are not immune from suit, the amended complaint must be dismissed as A&A fails to 8 raise cognizable due process claims. In each opposition to the motions, A&A alleges that the 9 Defendants deprived it of property without due process of law by failing to adhere to Nevada’s 10 regulatory processes. That is, A&A claims the Administrative Fee led to its general loss of 11 money and efficiency, an increased risk with the use of TEGSCO’s app, and the mandatory 12 disclosure of trade secret information. ECF No. 25, at 5. A&A further claims the NTA and NHP 13 had a statutory obligation to determine whether the Administrative Fee would economically 14 burden tow operators. ECF No. 25, at 2. In each reply, the Defendants point out that A&A has 15 failed to identify a specific property interest under state law. See ECF Nos. 18, 19, 31. 16 The Due Process Clauses of both the Fourteenth Amendment and the Nevada 17 Constitution guarantee a “requisite…opportunity to be heard.” Browning v. Dixon, 954 P.2d 741, 18 743 (Nev. 1998) (citing Grannis v. Ordean, 234 U.S. 385 (1914)). This opportunity to be heard 19 involves two constitutional protections: procedural due process and substantive due process. 20 United States v. Salerno, 481 U.S. 739, 746 (1987). To prevail on a procedural due process clam, 21 a plaintiff must identify: (1) a deprivation of a constitutionally protected liberty or property 22 interest, and (2) a denial of adequate procedural protections in the process of depriving the 23 interest. Fed. Home Loan Mortg. Corp. v. SFR Investments Pool 1, LLC., 893 F.3d 1136, 1147 24 (9th Cir. 2018) (citing Brewster v. Bd. Of Educ., 149 F.3d 971, 982 (9th Cir. 1998)). “Property 25 interests are not created by the Constitution, ‘they are created and their dimensions are defined 26 by existing rules and understandings that stem from an independent source such as state law....’” 27 Cleveland Bd. Of Educ. v. Loudermill, 470 U.S. 532, 538 (1985) (quoting Board of Regents v. 1 have more than an abstract need or desire for it. They must have more than a unilateral 2 expectation of it. They must instead, have a legitimate claim of entitlement to it.” Roth, 408 U.S. 3 at 577. 4 Here, the Court finds that A&A has not identified a constitutionally protected property 5 interest in the Administrative Fee arrangement. A&A alleges that its property interests are the 6 losses associated with the collection of the Administrative Fee. However, these vaguely defined 7 losses are because of A&A’s voluntary presence on NHP’s tow on-call rotation list. A&A does 8 not cite, and the Court has not found, any Nevada law or decision indicating A&A has an 9 inherent entitlement to be or remain on the on-call tow rotation list. In addition, TEGSCO’s 10 involvement merely amounted to entering into a contract with the State. A&A has not pled any 11 facts indicating it has a property interest in how TEGSCO, a private entity, performs its services. 12 Without more, A&A does not have a cognizable due process claims against the Defendants. 13 Moreover, A&A has appeared to have misconstrued NHP and the NTA’s actions as it 14 relates to the Model Tow Tariff. As an initial matter, the Court notes that the Defendants 15 purported failure to comply with their own administrative procedure does not, itself, constitute a 16 violation of constitutional due process. See Goodisman v. Lytle, 724 F.2d 818, 820 (9th Cir. 17 1984) (“Procedural requirements ordinarily do not transform a unilateral expectation into a 18 constitutionally protected property interest.”). Even still, statutorily, NHP adopts “standards” and 19 does not create regulations. See NRS 706.4485(e) (requiring that tow operators “[c]ompl[y] with 20 all standards [NHP] may adopt to protect the health, safety and welfare of the public.”) 21 (emphasis added). Hence, NHP was under no duty to conduct a small business impact statement 22 when it required A&A to enter into a contract with TEGSCO. As for the NTA, its’ actions only 23 concerned the modification of the Model Tow Tariff so that tow operators would not have to file 24 formal tariff requests to collect the Administrative Fee. See NRS 706.321 (process by which tow 25 operators seek formal tariff approvals). The NTA held hearings and determined the modification 26 was “just and reasonable” as required by statute. See NRS 706.311 (“[e]very unjust and 27 unreasonable charge for service by any carrier or operator of a tow car is prohibited and shall be 1 || deemed unlawful.”) The NTA did not adopt regulations requiring A&A to provide TEGSCO the 2 |} Administrative Fee; rather, that was a contractual obligation between A&A and TEGSCO. 3 In sum, A&A does not allege facts raising cognizable due process claims. Therefore, the 4 || Court will dismiss both the federal and state claims brought against the Defendants. Any 5 || amendment would be futile as there is no set of facts in which the Defendants deprived A&A of 6 || an identifiable property interest. Accordingly, the Court will dismiss A&A’s amended complaint 7 || inits entirety and with prejudice. 8 || IV. CONCLUSION 9 IT IS THEREFORE ORDERED that NHP’s motion to dismiss (ECF No. 18) is 10 || GRANTED with prejudice. 11 IT IS FURTHER ORDERED that TEGSCO’s motion to dismiss (ECF No. 31) is 12 || GRANTED with prejudice. 13 IT IS FURTHER ORDERED that the NTA’s motion to dismiss (ECF No. 19) is 14 || DENIED as moot. 15 IT IS SO ORDERED. 16 DATED this 7th day of September, 2021. . 17 f f / 18 L R. HIC 19 UNITED STATES DISTRICT JUDGE

20 21 22 23 24 25 26 27 28