Golden State Transit Corp. v. City of Los Angeles

475 U.S. 608, 106 S. Ct. 1395, 89 L. Ed. 2d 616, 1986 U.S. LEXIS 90, 54 U.S.L.W. 4329, 121 L.R.R.M. (BNA) 3233

• Court: Supreme Court of the United States
• Decided: April 1, 1986
• Docket: 84-1644
• Status: Published

Opinions

Justice Blackmun

delivered the opinion of the Court.

The city of Los Angeles, Cal., refused to renew Golden State Transit Corporation’s taxicab franchise after the company’s drivers went on strike. We are asked to decide whether, under Machinists v. Wisconsin Employment Relations Comm’n, 427 U. S. 132 (1976), the city’s action is preempted by the National Labor Relations Act (NLRA), 29 U. S. C. § 151 et seq.

I

In 1980, Golden State, which operated taxicabs under the Yellow Cab name, applied to the city for a renewal of its operating franchise eventually scheduled to lapse on March 31, 1981. That franchise had first been acquired in 1977. On September 4, 1980, the city’s Board of Transportation Commissioners recommended the renewal of Golden State’s franchise — the largest, with approximately 400 cabs, of companies operating in Los Angeles — along with the franchises of 12 other taxi companies.

In October, while the franchise renewal application was pending, Golden State’s labor contract with its drivers expired. The company and the drivers, represented by Local 572 of the International Brotherhood of Teamsters, signed a short-term contract in order that operations would continue while negotiation and mediation proceeded. This interim contract was to expire at midnight February 10, 1981, the day before the City Council was scheduled to consider action on the franchise renewals.

On February 2, the Council’s Transportation and Traffic Committee endorsed franchise renewals recommended by the Board of Transportation Commissioners. The Committee’s report stated that Golden State and other companies were “in compliance with all terms and conditions of their franchise[s].” App. 39.

On February 11, the drivers struck Golden State, halting its operations. At the Council meeting that day, Teamster representatives argued against renewal of Golden State’s franchise because of the pendency of the labor dispute. The Council postponed decision on Golden State’s application until February 17, but, with possibly one exception, approved all other franchise renewal applications. At the February 17 meeting, when the union again opposed the renewal, the Council voted to extend Golden State’s franchise from March 31 to April 30, but only if the Council expressly found, on or before March 27, that the extension was in the best interests of the city.

At its March 23 meeting, the Council held a short public hearing on whether it should grant the limited extension. By this time, the labor dispute and the franchise renewal issue had become clearly intertwined. The Teamsters opposed any extension of the Yellow Cab franchise, stating that such action would simply lengthen the strike and keep the drivers out of work. It preferred to see the franchise terminated, and to have the drivers seek jobs from Golden State’s successor or from other franchise holders. As others spoke, the discussion turned to whether there was even a need for Yellow Cab, in light of the services performed by the other 12 franchised taxi companies. There were comments regarding an excess of cabs; the city’s policy at the time, however, was not to limit the number of taxi companies or the number of taxis in each fleet. Id., at 81-82.

The strike was central to the discussion. One Council member charged Golden State with negotiating unreasonably, id., at 71, while another accused the company of trying to “brea[k] the back of the union.” Id., at 66. The sympathies of the Council members who spoke lay with the union. But rather than defeat the renewal outright, the council reached a consensus for rejection of the extension with a possibility for reopening the issue if the parties settled their labor dispute before the franchise expired the following week. Four Council members endorsed this approach, and the Assistant City Attorney said that he clearly had informed the parties that this was the city’s position. Id., at 68. The Council President said: “I find that it will be very difficult to get this ordinance past (sic) to extend this franchise if the labor dispute is not settled by the end of this week. ” Id., at 75. He added: “I just think that this kind of information should be put out in the open, so everybody understands it.” Ibid. The Council, by a vote of 11 to 1, defeated the motion to extend the franchise and it expired by its terms on March 31.

II

Golden State filed this action in the United States District Court for the Central District of California, alleging that the city’s action was pre-empted by the NLRA and violated the company’s rights to due process and equal protection. It sought declaratory and injunctive relief and damages. The District Court found that it was “undisputed that the sole basis for refusing to extend [Golden State’s] franchise was its labor dispute with its Teamster drivers,” 520 F. Supp. 191, 193 (1981); that the Council had “threaten[ed] to allow Yellow Cab’s franchise to terminate unless it entered into a collective bargaining agreement with the Teamsters,” id., at 194; and that the Council had denied the company an essential weapon of economic strength — the ability to wait out a strike. On the basis of the pre-emption claim, the District Court granted Golden State’s motion for a preliminary injunction to preserve the franchise. Ibid. The Court of Appeals for the Ninth Circuit found “ample evidence” in the record to support the District Court’s finding, but nevertheless vacated the injunction. 686 F. 2d 758, 759, 762 (1982). The court reasoned that Golden State had little chance of prevailing on its pre-emption claim or on the other grounds it asserted. This Court denied Golden State’s petition for certiorari. 459 U. S. 1105 (1983).

Following litigation on unrelated issues,¹ and with the company having abandoned its equal protection claim, the District Court granted summary judgment for the city. App. to Pet. for Cert. 11a. Golden State had not moved for summary judgment in its favor. The Court of Appeals affirmed, holding that the city’s action was not pre-empted. 754 F. 2d 830 (1985). The court felt that, when the activity regulated is only a peripheral or incidental concern of labor policy, traditional municipal regulation is not pre-empted. The court found nothing in the record to suggest that the city’s nonrenewal decision “was not concerned with transportation.” Id., at 833. Moreover, to avoid undue restriction of local regulation, “only actions seeking to directly alter the substantive outcome of a labor dispute should be preempted.” Here, the city had not attempted to dictate the terms of the agreement, but had “merely insisted upon resolution of the dispute as a condition to franchise renewal.” Ibid. The Court of Appeals also rejected Golden State’s due process claim. Id., at 833-834.² Because of our concern about the propriety of the grant of summary judgment for the city in this factual and labor context, we granted cer-tiorari. 472 U. S. 1016 (1985).³

hH hH 1 — i

A

Last Term, in Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724 (1985), we again noted: “The Court has articulated two distinct NLRA pre-emption principles.” Id., at 748. See also Belknap, Inc. v. Hale, 463 U. S. 491, 498-499 (1983). The first, the so-called Garmon preemption, see San Diego Building Trades Council v. Garmon, 359 U. S. 236 (1959), prohibits States from regulating “activity that the NLRA protects, prohibits, or arguably protects or prohibits.” Wisconsin Dept. of Industry v. Gould Inc., ante, at 286. The Garmon rule is intended to preclude state interference with the National Labor Relations Board’s interpretation and active enforcement of the “integrated scheme of regulation” established by the NLRA. Ante, at 289. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S., at 748, and n. 26.

This case, however, concerns the second pre-emption principle, the so-called Machinists pre-emption.⁴ See Machinists v. Wisconsin Employment Relations Comm’n, 427 U. S. 132 (1976). This precludes state and municipal regulation “concerning conduct that Congress intended to be unregulated.” Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S., at 749.⁵ Although the labor-management relationship is structured by the NLRA, certain areas intentionally have been left “ ‘to be controlled by the free play of economic forces.’” Machinists, 427 U. S., at 140, quoting NLRB v. Nash-Finch Co., 404 U. S. 138, 144 (1971). The Court recognized in Machinists that “‘Congress has been rather specific when it has come to outlaw particular economic weapons,’” 427 U. S., at 143, quoting NLRB v. Insurance Agents, 361 U. S. 477, 498 (1960), and that Congress’ decision to prohibit certain forms of economic pressure while leaving others unregulated represents an intentional balance “ ‘between the uncontrolled power of management and labor to further their respective interests.’” Machinists, 427 U. S., at 146, quoting Teamsters v. Morton, 377 U. S. 252, 258-259 (1964). States are therefore prohibited from imposing additional restrictions on economic weapons of self-help, such as strikes or lockouts, see 427 U. S., at 147, unless such restrictions presumably were contemplated by Congress. “Whether self-help economic activities are employed by employer or union, the crucial inquiry regarding pre-emption is the same: whether ‘the exercise of plenary state authority to curtail or entirely prohibit self-help would frustrate effective implementation of the Act’s processes.’” Id., at 147-148, quoting Railroad Trainmen v. Jacksonville Terminal Co., 394 U. S. 369, 380 (1969).

B

There is no question that the Teamsters and Golden State employed permissible economic tactics. The drivers were entitled to strike — and to time the strike to coincide with the Council’s decision — in an attempt to apply pressure on Golden State. See NLRB v. Insurance Agents, 361 U. S., at 491, 496. And Golden State was entirely justified in using its economic power to withstand the strike in an attempt to obtain bargaining concessions from the union. See Belknap, Inc. v. Hale, 463 U. S., at 493, 500 (employer has power to hire replacements during an economic strike); American Ship Building Co. v. NLRB, 380 U. S. 300, 318 (1965) (at bargaining impasse employer may use lockout solely to bring economic pressure on union).

The parties’ resort to economic pressure was a legitimate part of their collective-bargaining process. Machinists, 427 U. S., at 144. But the bargaining process was thwarted when the city in effect imposed a positive durational limit on the exercise of economic self-help. The District Court found that the Council had conditioned the franchise on a settlement of the labor dispute by March 31. We agree with the Court of Appeals that this finding is amply supported by the record.⁶ The city’s insistence on a settlement is pre-empted if the city “‘[entered] into the substantive aspects of the bargaining process to an extent Congress has not countenanced.’” Machinists, 427 U. S., at 149, quoting NLRB v. Insurance Agents, 361 U. S., at 498.

That such a condition — by a city or the National Labor Relations Board — contravenes congressional intent is demonstrated by the language of the NLRA and its legislative history. The NLRA requires an employer and a union to bargain in good faith, but it does not require them to reach agreement. § 8(d), as amended, 29 U. S. C. § 158(d) (duty to bargain in good faith “does not compel either party to agree to a proposal or require the making of a.concession”); NLRB v. Jones & Laughlin Steel Corp., 301 U. S. 1, 45 (1937) (“The theory of the Act is that free opportunity for negotiation . . . may bring about the adjustments and agreements which the Act in itself does not attempt to compel”).

The Act leaves the bargaining process largely to the parties. See H. K. Porter Co. v. NLRB, 397 U. S. 99, 103 (1970). It does not purport to set any time limits on negotiations or economic struggle. Instead, the Act provides a framework for the negotiations; it “is concerned primarily with establishing an equitable process for determining terms and conditions of employment.” Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S., at 753. See also § 1, as amended, of the NLRA, 29 U. S. C. § 151 (Act achieves national policy “by encouraging the practice and procedure of collective bargaining”).

The legislative history, too, makes clear that the Act and the National Labor Relations Board were intended to facilitate bargaining between the parties. The Senate Report states: “Disputes about wages, hours of work, and other working conditions should continue to be resolved by the play of competitive forces .... This bill in no respect regulates or even provides for supervision of wages or hours, nor does it establish any form of compulsory arbitration.” S. Rep. No. 573, 74th Cong., 1st Sess., 2 (1935). Senator Wagner, sponsor of the NLRA, said that the Board would not usurp the role of free collective action. See 79 Cong. Rec. 6184 (1935). See also id., at 7574 (Sen. Wagner affirming that the Act encourages “voluntary settlement of industrial disputes”).

Protecting the free use of economic weapons during the course of negotiations was the rationale for this Court’s findings of pre-emption in Machinists and in its predecessor, Teamsters v. Morton, 377 U. S. 252 (1964). In some areas of labor relations that the NLRA left unregulated, we have concluded that Congress contemplated state regulation. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S., at 754-758; New York Tel. Co. v. New York Labor Dept., 440 U. S. 519, 540-544 (1979) (plurality opinion); id., at 547 and 549 (opinions concurring in result and concurring in judgment). Los Angeles, however, has pointed to no evidence of such congressional intent with respect to the conduct at issue in this case.⁷

Instead, the city argues that it is somehow immune from labor pre-emption solely because of the nature of its conduct.⁸ The city contends it was not regulating labor, but simply exercising a traditional municipal function in issuing taxicab franchises. We recently rejected a similar argument to the effect that a State’s spending decisions are not subject to pre-emption. See Wisconsin Dept. of Industry v. Gould Inc., ante, at 287-288. Cf. Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S., at 754-758. Similarly, in the transportation area, a State may not ensure uninterrupted service to the public by prohibiting a strike by the unionized employees of a privately owned local transit company. See Bus Employees v. Missouri, 374 U. S. 74 (1963); cf. Bus Employees v. Wisconsin Employment Relations Board, 340 U. S. 383, 391-392 (1951). Nor in this case may a city restrict a transportation employer’s ability to resist a strike. Although in each Bus Employees case the employees’ right to strike was protected by § 7, as amended, of the NLRA, 29 U. S. C. § 157, “ ‘[r]esort to economic weapons should more peaceful measures not avail’ is the right of the employer as well as the employee,” and “the State may not prohibit the use of such weapons . . . any more than in the case of employees.” Machinists v. Wisconsin Employment Relations Comm’n, 427 U. S., at 147, quoting American Ship Building Co. v. NLRB, 380 U. S., at 317. “[Fjederal law intended to leave the employer and the union free to use their economic weapons against one another.” Belknap, Inc. v. Hale, 463 U. S., at 500. We hold, therefore, that the city was preempted from conditioning Golden State’s franchise renewal on the settlement of the labor dispute.

The city, however, contends that it was in a no-win situation: having not renewed the franchise and thus permitting it to lapse, it stands accused of favoring the union; had it granted the renewal, it would have been accused of favoring the employer. But the question is not whether the city’s action favors one side or the other. Our holding does not require a city to renew or to refuse to renew any particular franchise. We hold only that a city cannot condition a franchise renewal in a way that intrudes into the collective-bargaining process.

C

“Free collective bargaining is the cornerstone of the structure of labor-management relations carefully designed by Congress when it enacted the NLRA.” New York Tel. Co. v. New York Labor Dept., 440 U. S., at 551 (Powell, J., dissenting). Even though agreement is sometimes impossible, government may not step in and become a party to the negotiations. See H. K. Porter Co. v. NLRB, 397 U. S., at 103-104. A local government, as well as the National Labor Relations Board, lacks the authority to “‘introduce some standard of properly “balanced” bargaining power’... or to define ‘what economic sanctions might be permitted negotiating parties in an “ideal” or “balanced” state of collective bargaining.’” Machinists v. Wisconsin Employment Relations Comm'n, 427 U. S., at 149-150, quoting NLRB v. Insurance Agents, 361 U. S. 477, 497-500 (1960). The settlement condition imposed by the Los Angeles City Council, as we read the summary-judgment record before us, destroyed the balance of power designed by Congress, and frustrated Congress’ decision to leave open the use of economic weapons.

In this case, the District Court and the Court of Appeals found that the city had conditioned the renewal of Golden State’s franchise on the company’s reaching a labor agreement with the Teamsters, but held that the city’s action was not pre-empted by Machinists. This was error as a matter of law. Whether summary judgment should have been entered for Golden State is a matter we do not decide, for petitioner made no motion for summary judgment on the issue of pre-emption.

The Court of Appeals’ judgment affirming the summary judgment entered for the city is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

1 Antitrust claims were asserted in a second amended complaint filed by Golden State. The District Court granted the city partial summary judgment as to these claims, 563 F. Supp. 169 (CD Cal. 1983), and the Court of Appeals affirmed. 726 F. 2d 1430 (CA9 1984). We again denied certiorari. 471 U. S. 1003 (1985).

2 One judge concurred in the majority’s due process analysis but otherwise concurred only in the judgment. As to pre-emption, he would have granted summary judgment for the city on the ground that Golden State had failed to provide evidence of the city’s motive or of the economic impact on Golden State. 754 F. 2d, at 834.

3 The city contends that the case is moot because the franchise, if renewed, would have expired on March 31, 1985. But if petitioner’s franchise renewal had been granted in 1981, petitioner would have faced a renewal procedure in 1985 rather than the more onerous task of obtaining a franchise through competitive bidding. See Tr. of Oral Arg. 25-26. But for the nonrenewal in 1981, Golden State would be more likely to have an operating franchise now. At oral argument, counsel for Golden State said the company was ready to resume operations, even though it was in Chapter 11 bankruptcy. Id., at 5. It therefore cannot be said that “[ijnterven-ing events have . . . ‘irrevocably eradicated the effects of the alleged violation.’” Los Angeles v. Lyons, 461 U. S. 95, 101 (1983), quoting County of Los Angeles v. Davis, 440 U. S. 625, 631 (1979). We conclude, therefore, that the case is not moot.

4 We do not reach the question whether the city’s action in this ease is pre-empted under Gannon, because Golden State and its supporting amici, including the NLRB, rely exclusively on the Machinists doctrine, and we find their argument persuasive.

5 Our pre-emption analysis is not affected by the fact that we are reviewing a city’s actions rather than those of a State. See Fisher v. Berkeley, ante, at 265. And the fact that the city acted through franchise procedures rather than a court order or a general law also is irrelevant to our analysis. “[J]udicial concern has necessarily focused on the nature of the activities which the States have sought to regulate, rather than on the method of regulation adopted.” San Diego Building Trades Council v. Garmon, 359 U. S. 236, 243 (1959). See Wisconsin Dept. of Industry v. Gould Inc., ante, p. 282.

6 The District Court’s finding is supported by objective factors such as what the city — through the Council and the Assistant City Attorney-told the parties, and its schedule of Council meetings. At the meeting of March 23,1981, four Council members without contradiction pointedly conveyed the settlement condition to the parties as the Council’s “bottom line” on the issue. The condition also was announced to the parties by the Council’s agent, the Assistant City Attorney, revealing that the condition was city policy. Moreover, the condition was evident from the schedule on which the Council considered the question. Golden State’s franchise issue was deferred from February 11 to the 17th, from February 17 to March 23, and from March 23 to the 31st. Only Golden State, among the franchise applicants, was subjected to a conditional 1-month extension of its franchise. The only plausible reason for these repeated short extensions is that the city was giving the franchise holder additional time to comply with a particular requirement. Yet Golden State was in compliance with all the terms of the franchise except the Council’s desire for a settlement.

7 There is no issue here that, rather than regulating the relationship between the employer and the union, the city’s action protected innocent third parties from the employer. See Belknap, Inc. v. Hale, 463 U. S. 491, 600 (1983) (third parties hired as strike replacements based on misrepresentations by the employer had state-law causes of action).

8 The Court of Appeals, in holding that the city’s action was not preempted, reasoned that what the city did involved merely a peripheral concern of federal labor law. The idea that state action may be upheld under such circumstances is part of the Garmon analysis. See Belknap, Inc. v. Hale, 463 U. S., at 498-499. Because we hold that the city directly interfered with the bargaining process — a central concern of the NLRA — we need not reach the question whether this exception applies to a Machinists ease. But see Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724, 754-758 (1985).