City wins big in first round of Uber lawsuit

Today U.S. District Court Judge Robert Lasnik ruled in favor of the City of Seattle in a lawsuit filed by the US Chamber of Commerce over the city’s ordinance granting Uber and Lyft drivers the right to collectively bargain.

The Chamber of Commerce originally filed their suit a year ago, but it was tossed “without prejudice” because the law in question hadn’t gone into effect yet. They refiled it in the spring when the first Qualified Driver Representative was certified and Uber was required to turn over a list of its drivers so the QDR could contact them.

It’s also important to note that a second lawsuit has been filed against the city by a group of Uber drivers who do not wish to be represented by a QDR that gains the support of a majority of drivers.  In April, Lasnik issued a preliminary injunction preventing the city from moving forward with the ordinance. The City has appealed the injunction, and that appeal is still pending.

The City filed a Motion to Dismiss the Chamber of Commerce’s case, and today’s ruling is in response to that motion.

The City once again questioned whether the Chamber of Commerce has standing to sue as a trade association, and whether the issue is “ripe” for adjudication by the court. Lasnik found for the Chamber on both of those counts, and thus moving on to the merits of the case.

The Chamber made several claims in its lawsuit, and Lasnik addressed each of them. They’re worth walking through, because a couple of them in particular explore new territory in case law.

Does the city have immunity from federal antitrust claims?  Federal law, as it has been interpreted by the Supreme Court, says that the Sherman Antitrust Act  was not “intended to restrain state action of official action directed by a state” (by “state” it means “government body”) but only when it’s a “clearly articulated and affirmatively expressed state policy” and there is “active supervision by the state.” If you’ve ever read a City Council ordinance, you are well aware that they begin with a long list of “whereas” clauses; in this case, that preamble carried the day, because it clearly articulated the City’s policy goals in the Uber unionization law. Also, the complex process by which the city regulates the certification of driver representatives and must approve contracts demonstrates its commitment to “active supervision.” So Lasnik ruled that the City had satisfied the requirements and had immunity from antitrust laws under the Sherman Act.

Does the city have immunity under state law? The Chamber of Commerce argued that the City was violating Article XI of the State Constitution, which says authorizes local municipalities “to make and enforce within its limits all such police, sanitary and other regulations as are not in conflict with general laws.” But Lasnik found that the Chanber had not named general state law that the city ordinance was in conflict with, so he dismissed this claim as well.

Does the ordinance violate the National Labor Relations Act? The Chamber of Commerce argued two violations of the NLRA. First was that it makes a determination as to whether Uber drivers are categorized as employees or independent contractors, which the NLRA says should be decided by the National Labor Relations Board. But Lasnik found that neither the Chamber nor the city ever raised questions as to whether the drivers are employees or independent contractors; Uber has stated repeatedly that they are independent contractors, and the city has never disputed that.

Second — and this is a major point of law without legal precedent — is the question of whether the NLRA prohibits collective bargaining for independent contractors, in order to allow the free market to regulate itself. This one point cuts to the heart of the “gig economy” and has been broadly debated in legal circles while waiting for cases to present themselves (along with the broader question of whether Uber drivers really are independent contractors or employees). Lasnik ruled that the NLRA does not preempt collective bargaining for independent contractors:

The Court finds, therefore, that Congress was indifferent to the labor rights of independent contractors — just as it was to the rights of agricultural and domestic workers — because their disputes were thought to be of insufficient magnitude to affect commerce. Plaintiffs’… claim therefore fails as a matter of law.

This is a huge deal, and will undoubtedly get appealed to the 9th Circuit Court — and probably to the Supreme Court.

Is the city authorized under state law to grant collective bargaining rights to Uber drivers?  The state constitution gives the legislature the ability to grant powers to cities, and also states that the only powers it has are those granted by the legislature. The Chamber argues that the legislature did not grant powers to the City of Seattle to enable collective bargaining for Under drivers. But the City notes that the legislature explicitly grants cities broad powers to regulate for-hire and taxicab transportation services, including “any other requirement adopted to ensure safe and reliable for hire vehicle transportation services.” Because the city (thanks to the ordinance’s preamble) connects collective bargaining with “improved public health and safety outcomes,” Lasnik ruled that the city was well within its granted powers — even if the ordinance is a “novel approach” to guaranteeing that safety.

Finally, are drivers coordinators’ records “public records” subject to the Washington Public Records Act?  The Chamber argued that they are because they will be used by the city to implement the ordinance. But Lasnik found that “this argument ignores the purpose of the statute, its requirements, and common sense.”  Since the city never takes possession of the driver lists (they are passed directly from the driver coordinators to the Qualified Driver Representatives), it makes no sense to consider them public records.

Based on these findings, Lasnik found for the city and dismissed all of the claims in the lawsuit, in effect resolving the entire case.

Lasnik did, however, leave his preliminary injunction in place pending resolution of the other lawsuit by the Uber drivers — in which the city has also filed a Motion to Dismiss.   So there is no immediate result of his ruling today.  Also, we should fully expect the Chamber of Commerce to appeal this ruling immediately and begin the slow march to the Supreme Court.

It was a good day for the city. That doesn’t mean the case will keep going its way, but Lasnik’s ruling today was an important one and set a major precedent.