ArcBest II, Inc. v. Oliver

593 F.Supp.3d 957

ARCBEST II, INC., Plaintiff,

v.Nicholas OLIVER, et al., Defendants.

No. 2:21-cv-00627-KJM-AC

United States District Court, E.D. California.

Signed March 25, 2022

Kellam H. Conover, PHV, Pro Hac Vice, Thomas George Hungar, Gibson, Dunn & Crutcher LLP, Washington, DC, for Plaintiff.

Kristin A. Liska, Office of the Attorney General, San Francisco, CA, for Defendants Nicholas Oliver, Kimberly Kirchmeyer, Rob Bonta.

ORDER

Kimberly Mueller, CHIEF UNITED STATES DISTRICT JUDGE

Plaintiff asserts a California statute regulating the moving industry is preempted by federal law. Defendants move to dismiss, and both parties move for summary judgement. For the reasons explained below, the court grants the motion to dismiss in part. Additionally, the court grants plaintiff's motion for summary judgment in part and grants defendants’ motion for summary judgment in part .

I. BACKGROUND

A. Facts

Plaintiff ArcBest II, Inc., which does business as "U-Pack," is a "federally licensed ... property broker and freight forwarder." First Am. Compl. (FAC) ¶ 17, ECF No. 11. U-Pack has been operating since 1997. Id. ¶ 2. It provides a customer with a container, "arranges for [the] container to be transported to the customer's new home[,] and the customer then unloads and unpacks the contents of the container without any help from U-Pack." Id. ¶ 31. U-Pack "charges customers based on the volume of the container ... not the weight of the property transported." Id. ¶ 35. Currently, U-Pack does "not facilitate any intrastate transportation" in California. Id. ¶ 32. It would do so if the State did not threaten "enforcement actions and penalties" under the Household Movers Act, California Business & Professions Code section 19225 et seq. Id. ¶ 9.

The Bureau of Household Goods and Services (BHGS) enforces the Household Movers Act. The Household Movers Act regulates "household movers," which it defines as "every corporation or person ... engaged in ... transportation of used household goods and personal effects over any public highway in this state." Cal. Bus. & Prof. Code § 19225.5(h). Brokers who help others in arranging said transportation are also considered household movers. Id. § 19225.5(a). The Household Movers Act only covers household movers who conduct moves fully within the state.

On January 26, 2021, the BHGS sent an enforcement letter to U-Pack to "cease operating [its] business in California [and] conducting moves into this state until the required valid [BHGS] permit has been obtained to operate/advertise as a household mover in this state." Jan. 26, 2021 Letter at 1, FAC Ex. A, ECF No. 11-1. The letter informed U-Pack that "failure to comply ... may result in further enforcement action and ... increasingly severe penalties," including administrative citations, criminal charges and civil penalties. Id. at 2. Prior to this, "U-Pack's interstate transportation services ha[d] never previously been subject to regulation by ... [the BHGS]." FAC ¶ 2. U-Pack responded to the letter, claiming the Federal Aviation Administration Authorization Act (FAAAA) precluded BHGS from enforcing its regulations against U-Pack. Id. ¶ 43; Feb. 5, 2021 Letter at 4, FAC Ex. B, ECF No. 11-2. California's Department of Consumer Affairs (DCA) replied. DCA indicated it was a "misconception that the household mover ... d[id] not require a [BHGS] permit if it only conduct[ed] interstate moves" and took the position that the FAAAA does not preempt state law. Feb. 12, 2021 Letter at 1–2, FAC Ex. C, ECF No. 11-3. U-Pack again asserted it did not need a permit. See generally Mar. 18, 2021 Letter, FAC Ex. D, ECF No. 11-4.

Plaintiff filed the operative complaint against the Chief of BHGS Nicholas Oliver; Director of the DCA Kimberly Kirchmeyer; Secretary of the California Business, Consumer Services and Housing Agency Lourdes M. Castro Ramirez; Acting Attorney General Matthew Rodriquez;¹ and Governor Gavin Newsom. FAC ¶¶ 18–22. Plaintiff asserts three claims: (1) FAAAA preempts the Household Movers Act as to plaintiff's interstate services; (2) the Household Movers Act does not authorize enforcement of the statute's requirements against plaintiff as to its current interstate services; and (3) the FAAAA preempts the Household Movers Act as to plaintiff's planned intrastate services.

U-Pack originally sought a preliminary injunction against defendants, Compl. at 10–14, ECF No. 1; FAC ¶¶ 11–12, but the DCA and BHGS later issued letters saying U-Pack's interstate services were not subject to the requirements of the Household Movers Act. Apr. 15, 2021 DCA Letter, Not. of Withdrawal Ex. A, ECF No. 12-1; Apr. 15, 2021 BHGS Letter, Not. of Withdrawal Ex. B, ECF No. 12-2. As a result, U-Pack withdrew the motion. Pl. Not. of Withdrawal at 1, ECF No. 12.

The parties have filed three motions. First, defendants move to dismiss, which plaintiff opposes. Mot. to Dismiss (MTD), ECF No. 15; MTD Opp'n, ECF No. 22; MTD Reply, ECF No. 24. Second, plaintiff moves for summary judgment. Pl. Mot. Summ. J. (MSJ), ECF No. 17. Lastly, defendants move for summary judgment, Cross MSJ, ECF No. 20; Cross MSJ Opp'n, ECF No. 23; Reply, ECF No. 24.²

The court heard arguments from Thomas Hungar, appearing for plaintiff, and Kristin Liska, appearing for defendants, at a September 17, 2021 hearing held via videoconference.

B. Statutory Background

1. The FAAAA

"In 1994, Congress enacted the [FAAAA] ... so that all companies using motor carriers and air carriers received the same protections, regardless of how they were organized." California Trucking Ass'n v. Bonta , 996 F.3d 644, 655 (9th Cir. 2021) (citing H.R. Conf. Rep. No. 103-677, at 87 (1994)). "The principal purpose of the FAAAA was to prevent States from undermining federal deregulation of interstate trucking through a patchwork of state regulations." Dilts v. Penske Logistics, LLC , 769 F.3d 637, 644 (9th Cir. 2014) (citation and internal quotation marks omitted). The FAAAA directs that "no State or ... intrastate agency ... shall enact or enforce any law ... relating to [the] intrastate rates, intrastate routes, or intrastate services of any freight forwarder or broker." 49 U.S.C. § 14501(b)(1). Section 14501(c) provides "a State ... may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of ... any motor private carrier, broker, or freight forwarder with respect to the transportation of property." 49 U.S.C. § 14501(c)(1). The Supreme Court has said "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 Used Cars, Inc. v. Pelkey , 569 U.S. 251, 260, 133 S.Ct. 1769, 185 L.Ed.2d 909 (2013) (citation omitted). "[L]aws that are significantly related to rates, routes, or services, even indirectly [ ] are preempted, and those that have only a tenuous, remote, or peripheral connection to rates, routes, or services [ ] are not preempted." Dilts v. Penske Logistics, LLC , 769 F.3d 637, 643 (9th Cir. 2014) (citation omitted). This section has two express preemption exceptions that are relevant herein resolving the summary judgment motions: the safety exception³ and the household goods exception.⁴

2. Household Movers Act

In 2017, the California Legislature passed the Household Movers Act, which requires household movers to obtain a state permit for intrastate transportation of household goods. FAC ¶ 29. The BHGS enforces the Household Movers Act. The Household Movers Act regulates "household movers" which it defines as "every corporation or person ... engaged in ... transportation of used household goods and personal effects over any public highway in this state." Cal. Bus. & Prof. Code § 19225.5(h). Brokers, "person[s] engaged ... in the act of arranging ... intrastate transportation," are also considered household movers. Id. § 19225.5(a). The Household Movers Act only covers household movers who conduct moves fully within the state. The Household Movers Act forbids household movers from transporting household goods or arranging for said transportation unless the household movers receive a permit from BHGS or have a preexisting permit from the Public Utilities Commission. Id. § 19237.⁵

II. MOTION TO DISMISS

Defendants seek dismissal on the grounds that (1) plaintiff's claims regarding U-Pack's current interstate services are moot, MTD at 8; (2) three defendants have Eleventh Amendment immunity, id. at 8; and (3) requiring plaintiff to "obtain a permit for its planned intrastate services is not preempted" under the FAAAA, id. at 12. These arguments are also the basis of defendants’ cross motion for summary judgment. The court adopts to address defendants’ first two arguments under the motion to dismiss, and the third under the cross motions for summary judgment.

A. Legal Standard

A party may move to dismiss for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The motion may be granted only if the complaint lacks a "cognizable legal theory" or if its factual allegations do not support a cognizable legal theory. Hartmann v. Cal. Dep't of Corr. & Rehab. , 707 F.3d 1114, 1122 (9th Cir. 2013). The court assumes all factual allegations are true and construes "them in the light most favorable to the nonmoving party." Steinle v. City & Cnty. of San Francisco , 919 F.3d 1154, 1160 (9th Cir. 2019). If the complaint's allegations do not "plausibly give rise to an entitlement to relief," the motion must be granted. Ashcroft v. Iqbal , 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A complaint need contain only a "short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), not "detailed factual allegations," Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A court's consideration of documents attached to a complaint or incorporated...