HARRIS v. PAC ANCHOR TRANSPORTATION

Appellant’s Answer Brief on the Merits

Cal.January 27, 2012

Iu the Supreme Court of the State of California THE PEOPLE OF THE STATE OF CALIFORNIA EXREL. KAMALAD. HARRIS, ATTORNEY LOF THE STATE OF CALIFORNIA, Case No. 8194388 Appellant, . SUPREME COURT i ry Vv. Flt PAC ANCHOR TRANSPORTATION, JAN 9, 7 2012 INC., A CORPORATION, AND | | ALFREDO BARAJAS, AN INDIVIDUAL, credertck K, oranenClerk Respondents. Deputy Court of Appeal, Second Appellate District, Case No. B220966 Los Angeles CountySuperior Court, Case No. BC397600 Hon. Elizabeth A. White, Judge ANSWERBRIEF ON THE MERITS KAMALAD. HARRIS Attorney General of California MARK BRECKLER Chief Assistant Attorney General SATOSHI YANAI . Deputy Attorney General State BarNo. 186355 300 South Spring Street, Suite 1702 Los Angeles, CA 90013 Telephone: (213) 897-0015 Fax: (213) 897-2801 Email: Satoshi.Yanai@doj.ca.gov Attorneysfor Appellant Service on the Office of the Attorney General and the District Attorney of the County of Los Angeles required by Bus. & Prof. Code Section 17209 . TABLE OF CONTENTS Page IntrOGuctiOn ......cccccceceesesecccccceesnccccccccccesssececntceseecessuseneesesenscauseeseesescestnneetnes 1 StateMent o.oo... cecceccccscccsssssssecesesssessstseceececeeeeevsssntneauaneeeseeseseessnsnaaueceseeeeesse 2 AYQUMEN0... ccsssesssssessscssecsteceessesesseeseseaesensseseevauseesevatesssecseessusssuesussssesenteses 6 I. UCL Actions Against Motor Carriers Are Not Facially Preempted by the FAAAADececcsecssesssesestessnestessesseesseees 9 A. The Plain Language of Section 14501(c)(1) Requires Courts To Consider Whether a UCL | Action Against a Motor Carrier Is Related to Prices, Routes, or S€rviCeS.........cccccctessseesssesceseseesereees 9 Il. The People’s UCL Action Is Not Preempted by the FAAAA,Because the Action Is Not Related to Prices, Routes, OF S€rviCeS. .......ccccecesesseseeessesenesseevesssecessreavecnseeeeeas 19 A. The People’s UCL Action Does Not “Refer”to Prices, Routes, Or S€rviCes.........cccccccccessssssssnsscesseeee 20 B. The People’s UCL Action Is Not “Connected With”Prices, Routes, or Services.........ccececcceeeseeees 21 1. The People’s UCL Action Does Not Compel the Use of Employee Drivers........... 22 2. Any Costs Imposed on Pac Anchoras a Consequence of the People’s UCL . Action Are Not “Connected With” Pac Anchor’s Prices, Routes, or Services Within the Meaning of the FAAAA,But Are Rather the Consequence of Pac Anchor’s Efforts to Evade its Lawful Obligations as an Employet............c:ccseeeees 23 3. The UCL Action Is Materially Indistinguishable from Its Underlying Predicate Statutes, Which Respondent Concedes Are Not Preempted...............0000 29 I. Pac Anchor’s Argumentthat the UCL Action Impermissibly Interferes Generally with the Forces of Competition Is Without Merit. 0... cccccseesessessseersseseseees 34 TABLE OF CONTENTS (continued) Page A, The FAAAA’s Preemption Focus Is Expressly Tied to Motor Carrier Prices, Routes, and SETVICES, occ eesssccsessessesseesneseseeesseessesessecerserseesnersaersaees 34 B. The People’s UCL Action Does Not Threaten To Create “Entry Controls.” 0... eeccssseeeneeneeeesve 36 C. The People’s UCL Action Does Not Threaten To Create a “Patchwork of State Regulation’”.......... 37 £05600)CESS(0)38 ll TABLE OF AUTHORITIES Page CASES Abdu-Brisson y. Delta Air Lines, Inc. (S.D.N.Y. 1996) 927 F.Supp. 109...eeseeeneeetsteerrererereenetseesnreees 15 Abdu-Brisson v. Delta Air Lines, Inc. (2nd Cir, 1997) 128 F.3d 77... ccceseeneeeteeneseeeereerneesnenenistrnneensaes 15, 26-27 Aguayo v. U.S. Bank (S.D. Cal. 2009) 658 F.Supp.2d 1226.0...ice ccseseeeeneeneeeeneeersetneennetaes 17 Aguayo v. U.S. Bank . (9th Cir. 2011) 653 F.3d 912 ooeccceseeseteeereeneseerseneeseeneeceeesneenessesaess 17 Air Trans. Assn. ofAm. v. City and County ofSan Francisco (9th Cir. 2001) 266 F.3d 1064eeeeeeenes 10, 20, 23, 25-27, 37 Am. Trucking Assn., Inc. v. The City ofLos Angeles (9th Cir. 2009) 559 F.3d 1046 oo... ceccscecsesecseceneeneerseeesaeeeseeeeeeeaees 28, 29 Am. Trucking Assn., Inc. v. The City ofLos Angeles (C.D. Cal. 2010) 2010 WL 3386436... cecesececeseeeeenecseeteneeseteneenerenes 28 American Airlines, Inc. v. Wolens (1995) 513 U.S, 219.1... 12-17, 30, 32-33 An Independent Home Support Service, Inc. v. Superior Court (2006) 145 Cal.App.4th 1418 ooo. ccccsesenecrereesereeseessseeesenesseenesnesees 35 Barber Auto Sales, Inc. v. United Parcel Services, Inc. (N.D. Ala. 2007) 494 F.Supp.2d 1290...vesseaaeesecseeennessseneess 32-33 Beyer v. Acme TruckLine, Inc. (Ct. App. La. 2001) 802 S0.2d 798icescceeseeneeeeeeeeeesseeeseseesseestens 18 Blackwell v. SkyWestAirlines, Inc. (S.D. Cal. 2008) 2008 WL 5103195 ooeeeeee eeeceeeeeereseeeeeniey 15,17 Bostain v. Food Express, Inc. (Wash. 2007) 159 Wash.2d 700... ccc eceesesesreeereeteesereesieesesesnseseesseeeaes 30 Branche v. Airtran Airways, Inc. (11th Cir, 2003) 342 F.3d 1248 ooo ceeceseeeereneseneessesereseasersereesseeanees 12 Butler v. United Air Lines, Inc. (N.D. Cal. 2008) 2008 WL 1994896 ooo eeessetseneeetsereeretenereesseseeerenes 18 Cal. Div. ofLab. Standards Enforcement v. Dillingham (1997) 519 US. 316 ..ccecccceseseeeseee decesesucetsecsevacacseseeseeaseareatensesse 20-21, 25 Californiansfor Safe and Competitive Dump Truck Trans. v. Mendonca (9th Cir. 1998) 152 F.3d 1184 wescneeeretetneeesreneesnerenss 26-28, 30 Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163 oo... cceseesscsenesneeeseeeneesneseesneesneeseeeseeseensesessenneees 4 lil Cipollone v. Liggett Group, Inc. (1992) 505 U.S. 504eeceeeesceseeceerecenerseeesseeeseeseteessseauseneeenee 6-7, 10, 35 Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995 ooceeeseereenneerneseeenssaceeachcbeeabeensaecacenees 27 Comm. on Children’s Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal.3d 197 vc eecesccsccesceseenecssnesneceensecseseseeeeenerrersereneeesseenes 4,11 Continental Airlines, Inc. v, Am. Airlines, Inc. (S.D. Tex. 1993) 824 F.Supp. 689 oo... cccicccseccececeeerseseceeecenrcsenesnertenseeees 19 Continental Airlines, Inc. v. Kiefer (Tex. 1996) 920 S.W.2d 274... cccccccsecectseeeeeereteesenesareeseteenesetsereeees 15, 18 Deerskin Trading Post, Inc. v, United Parcel Service ofAmerica, Ine. (N.D. Ga. 1997) 972 F.Supp. 665 ......cceceeseeesseeerereees ceseeseneeeeseeseaeees 32-33 Dept. ofRevenue of Oregon v. ACF Industries, Inc. (1994) 510 U.S. 332 ieeeccssersstestecessiecetreesenesseeeneeeeseseesesseneateeneneee 1,7 Dilts v. Penske Logistics LLC (S.D. Cal. 2011) 2011 WL 4975520...seveesesevseseaceseeeaeneseeeess 19 Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 377 w.cccccccscccscssesceneeseeccreceeresersesneesensesesessseeeseseeens 4,11 Fed. Express Corp. v. United States Postal Serv. (W.D.Tenn. 1999) 55 F.Supp.2d 813... ceeccesceeeeseceseesesseeereeseneeens 19 Fitz-Gerald v. SkyWest Airlines, Inc. (2007) 155 Cal.App.4th 411 oeeesseersesssseeneseeeseseeeeees 5-6, 15-17 Flaster/Greenberg P.C. v. Brendan Airways, LLC (D. N.J. 2009) 2009 WL 1652156 oieceeceeeeeneeeseeereeersecsseesseeesanens 18 Frontier Airlines, Inc. v. United Air Lines, Inc. (D. Colo. 1989) 758 F. Supp. 1399.0... ee eeeseeeseeeseesteeeeetssnsesneeeesae LO Gerawan Farming, Inc. v. Lyons (2000) 24 Cal4th 468 vocceccccccccsscsscsssecssssescescevssessscnesvesssnessssnsseseenenseetenes 24 Greer v. Fed. Express, et al. (W.D. Ky. 1999), 66 F.Supp.2d 870... ceceeessssseesseecseeseesseseseaeessesseens 18 Grieves v. Superior Court (1984) 157 Cal.App.3d 159oeeeeesteeecsneteeessreeeseesseeeseesseesererenneens 33 Hood v. Santa Barbara Bank & Trust (2006) 143 Cal.App.4th 526 ooccesseeeeseteerseeseccresesnsesseerseeseens 2,27 In re EVIC Class Action Litigation . (S.D.N.Y. 2002) 2002 WL 1766554... ceecseetsecnerereeneteererernesenenenens 19 In re JetBlue Airway Corp. Privacy Litigation (E.D.N.Y. 2005) 379 F.Supp.2d 299 oo ceesssssersecseseressssseereeertenaeees 16 In re Korean Air Lines Co., Ltd., Anti-Trust Litigation (9th Cir. 2011) 642 F.3d 685 ooeeeeeseeeeseerseeseeeneessneeecsneeneensens 19 In re Tobacco Cases II (2007) 41 Cal.4th 1257 vecessessesesssesatisnisinisniasesusnsssssaseesseceeeseeeee 31 iv KentuckyAssn. ofHealth Plans, Inc. v. Miller (2003) 538 U.S. 329icesceceenreessessesesneteessecesesaesnaeenaevsntessstsassnneseneeesees 7 Kong v. City ofHawaiian Gardens Redevelopment Agency (2002) 108 CalApp.4th 1028 oceeeceeceesseeeesenreeneeeeeetenaes Deateeneeeneees 33 Metropolitan Life Ins. Co. v. Massachusetts (1985) 471 U.S. 724icccscseeecneetceseseveceneeseseesessnecnateaaesessesaeessaeeaternages 7 Morales v. Trans World Airlines (1992) 504 U.S. 374. ceccesenseeseeecneseeessseeeeeneneens 9,11, 15-17, 20-22, 26 New Hampshire MotorTrans. Assn. v. Rowe (Ist Cir. 2006) 448 F.3d 66... eecsseccteeseeseecesecsectseesaeeaeeersesseessaeeneessns 27 New York State Conference ofBlue Cross and Blue Shield Plansv. Travelers Ins. Co. (1995) 514 OLS. 645 ooo eecceceecreeeeteeeeteaeeereeeeneenees 6-7, 10, 21, 23, 26, 34 People v. Cappuccio, Inc. . (1988) 204 Cal.App.3d 750 occ ccecesceecsecsetenressecteesesenersaeesenessaeenateaes 4,11 Perkins v. Superior Court (1981) 117 CalApp.3d Lieeeesesecnseeeesseecnerenessisesacernescrserseeesateatesnaes 5 Renteria v. K&R Trans., Inc. (C.D. Cal. 1999) 1999 WL 33268638... cc ccctscseeenecs ene creneseereseere eens 30 Rice v. Santa Fe Elevator Corp. (1947) 331 U.S. 218oeceeceecsceeeneeneeseeesessneceeesarenaeseeesneeeenetnetesneseeeenags 7 Rowe v. New Hampshire Motor Transport Assn. (2008) 552 U.S. 364eeceeeeeeneeeeeeeteeeees 8-9, 20-21, 25, 34-35, 37-38 S.G. Borello & Sons, Inc. v, Dept. ofIndustrial Relations (1989) 48 Cal.3d 341 oecsseceneeseceneeneecseesnecsrecsnetereseanessatennesneeraaters 24 State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093 oo eceesecneeeseeeneeeeieecteeseeseernaaeeeneees 4,11 Tanen v. Southwest Airlines Co. (2010) 187 CalApp.4th 1156oeeciccscccseeteseresseeseereseereetsaeeraeenes 9,19 Travel All Over the World, Inc. v. Kingdom ofSaudi Arabia (7th Cir, 1996) 73 F.3d 1423 oeceeeseeseeeseeeneteeeteeeceeeeeeeereees 12, 15, 21 W. Parcel Express v. United Parcel Service ofAm. (N.D. Cal. 1996) 1996 WL 756858 ......ccsssscessecssesseneeseseeseteeseeerestanens 18 Washington Mutual Bank v. Superior Court (2002) 95 Cal.App.4th 606 oo... ceecseeseesreceeseneeseersessseesseeseeeetenes 7,10 Western Ports Trans., Inc. v. Employment Security Dept. of Washington (Wash. App. 2002) 110 Wash.App. AAO Lo eececsssstesestecessevesseseasessseesaeeess 30 STATUTES - 12 UWS.C, §§ 21, Cb SOQ. ceeccccccccccsssnsecsseccceeceseneessaeesesaeesequisesssarestnneeeeees 17 29 U.S.C. § L144(a) oe ceccscccesecseecsaecnreeneesneesesseeensesssessaesaneessnesaeeenensaeeseaes 20 AD ULS.C. § L305(a1) ne eeeeesssesecessesneceeeetessesneessessesaeenacnrecesaseessaeeaeeateenas 13 AD ULS.C. § 14501 (C)L) cece cccccsecesceeneecnesneeseersneeneeseeesneesnateesarseeennees passim 49 U.S.C. § 14501 (c)(2) vecesveveneeeseeeeesesssusseessssusessstssessssssiusessesssesieees 29 AO ULS.C. § 14502ooleccesecesssesseessncecesseecesecenneeesssessseeceatessneseseceneeess 30 AO USS.C. § 14503 oo eeccccessesssscesssecsnscesseceeseeeessecssseeecstessseesestecsseeessesentees 30 AO ULS.C. § AI TIB(D)(4)oe ccecccsccssectecsseecseecssessesersessreseesseessessseseseents 8, 13 815 I.Comp.Stat., Act 505, § 2 oo ccecesecscecssecsecsenecssecesesseeseeeeseseasereenss 30 Bus. & Prof. Code §§ 17200, et SEQ. .....cescccestseeetessteeeereees seseetreeeeeeens passim Bus. & Prof. Code § 17203 .......ccececcssscessesessseseeseeesseeesseeessneeceneseaaeeeeseneeeees 5 Bus. & Prof. Code § 17206.......... ceeuseeceesaceessnseeecesaseeseeusecseausecerseeesceeestaeesenes 5 Civ. Code §§ 2981, @t S€Q. .ccccccsccccsscecsccsssesenscessnessaeessseesenessensesnatessnsenneess 17 Code of Civ. Proc. § 425.10(a) oo... cecscsssscesseceseneesneseceseesersessseesseeessaessressnees 5 Lab. Code § 226.00... .cccccccccccccccesssssccecessssseecessssssssnseressscsuecesecesneesessnasweed, 29 Lab. Code § 1174 ......ccccccccccsssesstretevensheeeessececnsceesccuaransesecsenaeseeeeeuunasessaaes 29 Lab. Code § 1182.12 oc icecccccccstsceseeeesseeeetereecsesesseeeceseseseeseseeseaseseneeas 5,29 Lab. Code § 1194iececceeeressessnersssresssrssssseessesnesesessesasereressatees 5, 29 Lab. Code § 3700 ........cccescesssscssscccssceeseeeeesressneecesaeessaeeeseeeseseeseneeseneeesateas 5, 29 Pen. Code § 308 occcccsscsesessseeecserssneesserssesaeseneees seveeueesseesaeeuseevseeaeeaes 3] Une.Ins. Code § 976........ccccesseccscessscceseecessceceeesesssresstecesueeeesenseseesees 4,29 Unemp.Ins. Code § 976.6.......ccceccccssesecessesseeceeeeeseessecsessneerseseeesareeaevars 4,29 Unemp.Ins. Code § 984.00... cccsccsssecessnreesevsresessstessetaresesaresseanes 4,5, 29 Unemp.Ins. Code § 986... ceecccscscsensccecssneeecesssecscseseeeseneessuaeeseneeeseeseseas 5 Unemp. Ins. Code § 13020 occcccsscecsseecesseecssecssneesnsesesseessesssseesress 4,29 REGULATIONS AO USC. Part 376 woccccccsccccsccssscsecscsescsesesscssecsesscsvevscsesesesscsesssesteesecseseseasates 24 AO ULS.C. § 376.1 2(C)(4) cccccccessccessesdeeesseceesnsecseeesenaescnsessstsestaeerseeesarensaes 25 I.W.C. Wage Order9, 8 Cal. Code of Regs. § 11090... eeeeeeeesees 5, 29 OTHER AUTHORITIES H.R. Conf. Rep. No. 103-677 (1994), reprinted in 1994 U.S. Code Cong. & Admin. News...........-. 8, 13, 36, 38 v1 INTRODUCTION The People of the State of California have a compelling interest in ensuring that California businesses comply with state requirements imposed upon employers, including the paymentofstate payroll taxes, maintenance of a workers’ compensation insurance policy, and compliance with state employmentstandards regarding minimum wages and recordkeeping. (See, e.g., Dept. ofRevenue ofOregon v. ACF Industries, Inc. (1994) 510 USS. 332, 345 [powerto tax is “central to state sovereignty”].) To further this compelling interest, the People filed this lawsuit against Pac Anchor Transportation, Inc. and Alfredo Barajas (collectively, “Pac Anchor”), alleging that Pac Anchor misclassifies its employee truck drivers as independentcontractors, thereby evading employmenttaxes, workers’ compensation insurance requirements, and compliance with basic labor standards,all in violation of the Unfair Competition Law, Business and Professions Code, Sections 17200, et seg. (“UCL”). The People allege that as a result, Pac Anchor jeopardizes the physical and financial security of its workers, undermines law-abiding competitors, and deprivesthe state of tax revenue. | Pac Anchor counters that the People’s action is preempted by the express preemption provision of the Federal Aviation Administration Authorization Act (“FAAAA”), which providesthat a state “may not enact or enforcea law... related to a price, route, or service ofany motor carrier wee (49 U.S.C. Section 14501(c)(1).) Accepting Pac Anchor’s preemption arguments would subvert free- market competition by permitting Pac Anchor to maintain an employment relationship with its drivers without having to incur the tax, insurance, and wage expenses of other employers. Such a result would undermine the state’s ability to protect the welfare ofitscitizens, to collect needed tax revenue, and to maintain alevel playing field for competing businesses. The People therefore request this Court to affirm the findings of the Court of Appeal, and remandthe case for further proceedings. © STATEMENT! Pac Anchoroperates a trucking company based in Long Beach, California. (Appellant’s Appendix (“Appx.”), Vol. I, at p, 10, lines 20-21 and 24-25.) Pac Anchorcontracts with shipping companiesto transport shipping containers from the ports of Los Angeles and Long Beach to various locations throughout Southern California, including warehouses and railroad freight depots. (Appx., Vol. I, at p. 10:21-24.) Alfredo Barajas is employed by Pac Anchor Transportation,Inc. as a manager and truck dispatcher. (Appx., Vol. I, at pp. 10:28-11:1.) Mr. Barajas is also an ownerofthe company. (Appx., Vol. I, at p. 11:1-2.) Mr. Barajas owns approximately 75 truck tractors. (Appx., Vol. I, at p. 11:2-3.) Mr. Barajas recruits drivers to drive his trucks, and enters lease agreements with the companyto utilize the trucks and drivers he supplies. (Appx., Vol. I, at p. 11:3-5.) | | | Pac Anchorintentionally misclassifiesits drivers as “independent contractors” in order to avoid the costs and obligations associated with employee drivers. (Appx., Vol. I, at pp. 11:26-12:8, 13:6-7.) Thus, Pac Anchor does not pay unemployment insurance payroll tax contributions or employmenttraining fund taxes on behalf of the drivers. (Appx., Vol. I, at p. 13:17-23.) Pac Anchor does not withhold state disability insurance taxes or incometaxes on behalfofthe drivers. (Appx., Vol. I, at p. 13:17-19, 24- 27.) Pac Anchor does not secure workers’ compensation insuranceto protect the drivers from injury. (Appx., Vol. I, at p. 13:17-19, 28.) Finally, ' On this appeal from a ruling on a motion for judgment on the pleadings,all factual allegations in the complaint are deemedtobetrue: (Hood v. Santa Barbara Bank & Trust (2006) 143 Cal.App.4th 526, 535.) Thus, the summary offacts is drawn from the allegations of the complaint. Pac Anchordoes not reimburse business expenses, ensure the payment of the state minimum wage,or provide itemized written statements of hours and pay to the drivers. (Appx., Vol. I, at pp. 13:17-19, 14:1-7.) Yet, Pac Anchor’s relationship with its drivers confirms that the drivers are, in fact, Pac Anchor’s employees. (Appx., Vol. I, at p. 13:6-7.) The drivers have no investmentof capital, and do not own the trucks they drive; instead they use trucks, tools, and equipment furnished by Pac Anchor. (Appx., Vol. I, at p. 13:15-16.) Pac Anchor can discharge the drivers without cause. (Appx., Vol. I, at p. 13:7.) The drivers are not skilled workers with substantial control over operational details, and the drivers take all necessary instruction from Pac Anchor. (Appx., Vol. I, at p. 13:7-9.) The drivers are an integrated part of Pac Anchor’strucking business, engagedinits core activity of delivering cargo. (Appx., Vol.I, at p. 13:9-11.) The drivers do not have their own businesses or their own customers, and haveno significant opportunity for profit or loss other than working more hours for Pac Anchor. (Appx., Vol. I, at p. 13:11-13.) The drivers do nothave U.S. Department of Transportation operating authority or other necessary permits and/or licenses to independently engagein the transport of cargo. (Appx., Vol. I, at p. 13:13-14.) The drivers are employed for extended periods of time. (Appx., Vol. I, at p. 13:14-15.) The Peoplefiled the action below on September 5, 2008. (Appx., Vol. I, at pp. 7, 9.) The sole cause of action contends that Pac Anchor violates the UCL byfailing to pay state payroll taxes, obtain workers’ | compensation insurance,or abide by state regulations regarding the “minimum wage, reimbursable expenses, and recordkeeping. (Appx., Vol.I, ~ at pp. 13:17-14:7.) The UCL prohibits “unfair competition,” whichis defined in pertinent part as “any unlawful, unfairor fraudulent business act or practice.” (Bus. & Prof. Code § 17200.) Becausethestatutory definition of “unfair competition” includes “unlawful” acts, the statute has been interpreted to allow a properplaintiff to “borrow” any legal requirement and makeit the basis of an unfair competition claim, as long as the violation takes place in the course of “business.” (See Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 377, 383 [“{Section 17200] ‘borrows’ violations of other laws and treats these violations, ... as unlawful practices independently actionable undersection 17200, et seq.”’]; see also State Farm Fire.& Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, 1103 [“Virtually any law — federal, state or local — can serveas a predicate for a section 17200 action”], abrogated in part on other grounds by Ce/-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 184- 185.) Thus, despite utilizing the terminology of “unfair competition,” there iS no requirement for UCLplaintiffs to invoke any anticompetitive business practice or demonstrate any'injury to competitors or consumers in order to state a claim. (See Comm. on Children’s Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal.3d 197, 209-210 [Section 17200 “not confined to anticompetitive business practice” and extendsto “any unlawfiul business practice”], emphasis in original; People v. Cappuccio, Inc. (1988) 204 Cal.App.3d 750, 760 [no need to allege harm to consumers or competitors].) In this case, the complaint alleges “unfair competition” based primarily upon a number of discrete “unlawful” acts by Pac Anchor, including failure to make payroll tax contributionsto the State Unemployment Fund and Employment Training Fund (citing Unemp.Ins, Code §§ 976 and 976.6); failure to withhold and submit employee income taxes and contributions to the State Disability Fund (citing Unemp.Ins. Code §§ 984 and 13020); failure to provide employees with itemized statements of wages and hours(citing Lab. Code § 226); failure to pay employees the minimum wage (citing Lab. Code § 1194 and Industrial Wage Commission (“I.W.C.”) Wage Order9 [8 Cal. Code of Regs. § 11090}); and failure to secure workers’ compensation insurance (citing Lab. ~ Code § 3700). Pursuant to the UCL, restitution, civil penalties, and injunctive relief are sought as remedies with respect to each of these violations. (Bus. & Prof. Code §§ 17203 and 17206.) (Appx., Vol. I, at pp. 14:27-15:12.) : Pac Anchorfiled a Motion for Judgment on the Pleadings on August 21, 2009, (Appx., Vol. I, at pp. 5, 31), which was granted on three grounds: (1) that the holding in Fitz-Gerald v. Sky West Airlines, Inc, (2007) 155 Cal.App.4th 411 (hereafter Fitz-Gerald) compelled a finding that Section 14501(c)(1) preempted all UCL actions against motorcarriers; (2) that the * Pac Anchorasserts that UnemploymentInsurance Code Section 984 and Labor Code Section 1194 are not valid underlying predicate acts for the People’s UCL claim, because neither statute imposes any duty upon employers. (Opening Brief at p. 26.) Instead, the statutes set forth the employee obligation to contribute to the State Disability Fund, and authorize an employee cause of action to recover unpaid minimum wages and overtime, respectively.. However, a valid complaint need only state _ sufficient facts “to apprise the defendant of the basis upon which the plaintiff is seeking relief.” (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6.) In this case, the complaint clearly sets forth the factual allegations that Pac Anchor engaged in unfair competition by “{flailing to withhold State Disability Insurance taxes”and “[f]ailing to ensure payment at all times of California’s minimum wage.” (Appx., Vol. I, at pp. 13:24-25 and 14:6-7.) The complaint thus effectively alleges that Pac Anchor violated Unemployment Insurance Code Section 986 [employer duty to withhold and transmit State Disability Insurance taxes] and Labor Code Section 1182.12 [setting minimum wage], respectively. Theseallegations are more than sufficient to place Pac Anchoron notice of the nature of the People’s claims. (See Code of Civ. Proc. § 425,.10(a) [complaint must contain “[a] statement of thefacts constituting the cause of action”’], emphasis added.) People’s action would increase Pac Anchor’s operational costs, and thus “related to” Pac Anchor’s prices, routes, or services within the meaning of the FAAAA;and(3) that the suit would “interfere with the forces of competition” by discouraging the use of independent contractordrivers. (Appx., Vol.II, at pp. 428-432 [Order].)° The Court of Appealreversed. In its decision, the court explicitly rejected the conclusion ofthe Fitz-Gerald court that UCL actions are facially preempted. The court further found that any relationship between the People’s action and Pac Anchor’s prices, routes, or services was only “indirect and tenuous,” and therefore the action was not preempted because it was not “related to” prices, routes, or services within the meaning ofthe FAAAA. ARGUMENT Pursuant to the Supremacy Clause of the Constitution, the laws of the United States “shall be the supreme Law of the Land.” (U.S. Const., Art. VI.) Thus,state law that conflicts with federal law is “without effect” and preempted. (Cipollone v. Liggett Group, Inc. (1992) 505 U.S. 504, 516 (hereafter Cipollone).) Federal law can preempt state law by express provision, by implication, or by a direct conflict between federal and state law. (New York State Conference ofBlue Cross and Blue Shield Plans v. Travelers Ins. Co. (1995) 514 U.S. 645, 654 (hereafter Travelers).) However, where —as here — the possibility of preemption arises from an express statutory provision,there is no need to consider any possible implied preemptive effect, since ““Congress’ enactmentof a provision defining the pre-emptive > Thetrial court’s Order actually enumerates four grounds for granting the motion. However, the fourth ground merely states that the complaint failed to state a cause of action because the complaint was both preempted per se andrelated to prices, routes, or services. reach of a statute implies that matters beyond that reach are not pre- empted.” (Cipollone, supra, 505 U.S.at p. 517.) In construing federal preemption, there is a “presumptionthat Congress does not intend to supplant state law.” (Travelers, supra, 514 U.S. at p. 654.) This is especially true in areas oftraditional state concern, such as taxes, employmentregulation, and unfair business practices. (See Travelers, supra, 514 U.S.at p. 655 [“in fields oftraditional state regulation, [citation omitted], we have worked on the ‘assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress’”] [quoting Rice v. Santa Fe Elevator Corp. (1947) 331 U.S. 218, 230]; see also Dept. ofRevenue of Oregonv. ACF Industries, Inc., supra, 510 U.S.at p. 345 [powerto tax is “central to state sovereignty”]; Metropolitan Life Ins. Co. v. Massachusetts (1985) 471 U.S. 724, 756 [noting traditional state powerto regulate child labor, minimum wages, occupational health and safety, workers’ compensation, and unemployment insurance], abrogated in part on other grounds by Kentucky Assn. ofHealth Plans, Inc. v. Miller (2003) 538 U.S. 329; and Washington Mutual Bank v. Superior Court (2002) 95 Cal.App.4th 606, 613 [consumerprotection statutes “are included in the states’ police powerand thus subject to this heightened presumption against preemption’|.) However, “tt]he purpose of Congressis the ultimate touchstone” of preemption analysis. (Cipollone, supra, 505 U.S. at p. 516.) Analysis thus begins with the text of the allegedly preemptive federal law, turning to “the structure and purpose of the Act in which it occurs” if necessary to interpret the statutory language. (7ravelers, supra, 514 US.at p. 655.) The express preemption provision found in the FAAAAprovides as follows: Except as provided in paragraphs(2) and (3), a State, political subdivision of a State, or political authority of 2 or more States 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 motorcarrier (other than a carrier affiliated with a direct air carrier covered by section 41713(b)(4)) or any motorprivate carrier, broker, or freight forwarder with respect to the transportation of property. (49 U.S.C, § 14501(c)(1) (hereafter sometimes, for simplicity, “Section 14501(c)Q)”.) The provision was enacted in 1994 to preemptstate trucking regulations and allow free-market forces to shape prices, routes, and services in the trucking industry. (Rowe v. New Hampshire Motor Transport Assn. (2008)552 U.S. 364, 367-368 (hereafter Rowe).) The statute was also intendedto “level the playing field’? between motorcarriers and air transport companies, since the air carrier industry had previously been deregulated by the Airline Deregulation Act (“ADA”). (See H.R. Conf. Rep. No. 103-677 (1994), reprinted in 1994 U.S. Code Cong. & Admin. Newsat pp. 1755, 1757 [Appx., Vol. I, at pp. 266, 268] [purpose of preemption provisions in FAAAAisto apply to both air and motorcarriers “the identical intrastate preemption of prices, routes and services”that are applicable to airlines under the ADA].) Indeed, because the express preemption provision of the ADA employs languageidentical to that found in the FAAAA,cases construing the ADA provision are consideredprecedential authority for cases involving FAAAApreemption. (See Rowe, supra, 552 US. at p. 370 {following ADA precedent in construing FAAAA preemption, noting identical language of 49 U.S.C. §§ 41713(b)(4)(A) (ADA) and 14501(c)(1) (FAAAA)].) | Section 14501(c)(1) clearly establishes a two-step analysis for determining whethera state claim is preempted: (1) the claim must be related to a price, route, or service, and (2) “the claim must derive from the enactment or enforcementofstate law.” (Tanen v. Southwest Airlines Co. (2010) 187 Cal.App.4th 1156, 1159 (hereafter Tanen).) * A claim “relates to”a price, route, or service if it has “a connection with or reference to” such a price, route, or service. (Morales vy. Trans World Airlines (1992) 504 U.S. 374, 384 (hereafter Morales), emphasis added.) The required “connection” can beindirect, yet maystill be preempted if it nevertheless has a “significant impact” ona price, route, or service. (Rowe, supra, 552 USS. at pp. 370-371, 375; see also Tanen, supra, 187 Cal.App.4that pp. 1166-1167 [relation to price, route, or service exists “either by expressly referring to them or by having a significant economic effect upon them”].) -However, state actions are not preemptedif their relation to prices, routes, or services is “too tenuous, remote, or peripheral.” (Morales, supra, 504 USS. at p. 390.) . I. UCL ACTIONS AGAINST MOTOR CARRIERS ARE NOT FACIALLY PREEMPTED BY THE FAAAA. A. The Plain Language of Section 14501(c)(1) Requires Courts to Consider Whether a UCL Action Against a Motor Carrier is Related to Prices, Routes, or Services. Pac Anchorinsists that there is no need to engage in any “narticularized analysis” of whether the People’s UCL claimsarerelated to Pac Anchor’s prices, routes, or services because “[t]he FAAAA preempts the UCL onits face.” (Opening Brief on the Merits (“Br. of Resp.”) at p. 22.) However, Pac Anchor’s proposed per se rule of preemption cannot be squared with the plain language of Section 14501(c)(1). Since “[t]he purpose of Congressis the ultimate touchstone” of preemption analysis, (Cipollone, supra, 505 U.S.at p. 516), the scope of * There is no dispute that the People’s enforcementat issue derives from “the enactment or enforcementofstate law.” preemption should hew closely to the text of the allegedly preemptive federal law. (Travelers, supra, 514 U.S. at p. 655.) This is especially true whena claim of preemption threatens to eviscerate state regulation in areas oftraditional state concern,like treatment of unfair business practices. (See Washington Mutual Bank v. Superior Court, supra, 95 Cal.App.4th at pp. 612-13 [consumerprotection entitled to presumption against preemption as an exercise ofstate “police power”].) Preemptionofthe states’ police powers should only be permittedif that is the “clear and manifest”intent of Congress. (Travelers, supra, 514 U.S. at pp. 654-655.) In the instant case, nothing in Section 14501(c)(1) supports Pac Anchor’s proposal that preemption can apply to state action without a demonstrated relationship to prices, routes, or services. | Pac Anchornevertheless posits that the People’s UCL action necessarily attempts to regulate competition, and that any effect upon “business practices”or “competition” within the motor carrier industry is necessarily “related to” motorcarrier prices, routes, or services within the meaning of the FAAAA.Tothe contrary,if a state action’s only purported relationship to a price, route, or service is indirect, then it is not preempted unless it has a “significant impact” that compels a change to a carrier’s prices, routes, or services. (See Air Trans. Assn. ofAm. v. City and County ofSan Francisco (9th Cir. 2001) 266 F.3d 1064, 1072 (hereafter ATAA v. S.F.) [local law has connection with price,route, or serviceif the law “binds the air carrier to a particular price, route, or service and thereby interferes with competitive marketforces ...”].) Thus, even accepting, arguendo,the premise that the UCL regulates “competition,” this alone would notjustify the conclusion that application of the UCL to motor carriers in every case hasa relationship to prices, routes, or services, or that any suchrelationship is always sufficiently significant to warrant categorical preemption of all UCL claims against motorcarriers. 10 Moreover, UCLactionsare not“invariably concerned”(Br. of Resp. at p. 22) with the effect of unlawful business practices upon competition. Whenasserting a UCL claim under the “unlawful” prong ofthe statute — as contrasted with the “unfair” or “fraudulent” prongs of the UCL — plaintiff need not allege any anticompetitive business practice or demonstrate any injury to competitors or consumers. (See Comm. on Children’s Television, Inc. v. Gen. Foods Corp., supra, 35 Cal.3d at pp. 209-210 [Section 17200 “not confined to anticompetitive business practice”]; People v. Cappuccio, Inc., supra, 204 Cal.App.3dat p. 760 [allegations of harm to consumers or competitors unnecessary].) While the UCL can be usedto target “unfair” | anticompetitive conduct,it also provides a cause of action against any “unlawful” conduct that takes place in the course of business. (Bus. & Prof. Code § 17200; Farmers Ins. Exchange vy, Superior Court, supra, 2 Cal.4th at p. 383.) Pac Anchor’s proposed “facial preemption” ofUCL . claims based onthe statute’s referenceto unfair competition ignores the | fact that demonstration of anticompetitive conduct is not a necessary element of a UCL claim. | Indeed, UCL claims can incorporate a wide range of independent violations of law. (See State Farm Fire & Casualty Co. v. Superior Court, supra, 45 Cal.App.4th at 1103 [Virtually any law — federal, state or local — can serveas a predicate for a section 17200 action”].) Acceptance of Pac Anchor’s facial preemption model would exclude UCL complaints against motorcarriers even if the underlying subject matter of the claim was narcotics smuggling, humantrafficking, or some other unlawful conduct patently unrelated to “prices, routes, or services.” (Cf. Morales, supra, 504 USS. at 390 [‘In concluding that the NAAGfare advertising guidelines are preempted, we donot, ... set out on a road that leads to preemption ofstate laws against gambling andprostitution as applied to airlines”’].) 1] Moreover, preemption determinations under Section 14501(c)(1) must look to the particular circumstances of the case, and their relation to prices, routes, or services — not superficial consideration of the type ofstate claim at issue. (See Travel All Over the World, Inc. v. Kingdom ofSaudi Arabia (7th Cir. 1996) 73 F.3d 1423, 1433 (hereafter Travel All Over) [“Morales does not permit us to develop broad rules concerning whether certain types of ... claims are preempted... [i|nstead, we must examine the underlying facts of each case to determine whetherthe particular claims at issue ‘relate to’ airline rates, routes, or services”]; see also Branche vy, Airtran Airways, Inc. (11th Cir. 2003) 342 F.3d 1248, 1263 fn.9 [claims “must be evaluated on a case-by-case basis to determine the connection between the action in question andairline services”.) | Pac Anchorclaims support forits “per se” approach in American Airlines, Inc. v. Wolens (1995) 513 U.S. 219 (hereafter Wolens), in which the United States Supreme Court found a claim underthe Illinois unfair - business practice statute to be preempted. Pac Anchorrelies on languagein Wolens that highlights the regulatory danger of state unfair business practice statutes that can be used to “guide and police”carrier business decisions. However, a more thorough reading of Wolens makes evident that nothing in the decision supports the adoption of anyrule offacial preemption. | Wolens involved private class actions brought by participants in American Airlines’ frequent flyer program. (Wolens, supra, 513 U.S.at p. 224.) Theplaintiffs alleged that changes madebytheairline to its frequent flyer program had devalued mileage credits already earned by passengers, and thus constituted both a violation of Illinois’s unfair business practices act and a breach of contract. (/d. at p. 225.) The Wolens Court proceeded to apply the two-step test for preemption by determining: (1) whetherthe plaintiffs’ claims “related to”prices, routes, or services; and (2) whether 12 this private action constituted an enactment or enforcementofstate law. (49 U.S.C. § 14501(c)(1); Wolens, 513 U.S.at pp. 226-227.) From the outset, the Wolens Court found the “relatedness” inquiry in the case before it to be straightforward and obvious: Plaintiffs’ claims relate to “rates,” i.e., American’s charges in the form of mileage credits for free tickets and upgrades, and to “services,” i.e., access to flights and class-of-service upgrades unlimited by retrospectively applied capacity controls and blackout dates. (Wolens, supra, 513 US.at p. 226.)° Thus, rather than finding unfair business practice claims underIllinois law to be inherently “related to” prices, routes,or services,or facially preempted, as proposed by Pac Anchor, the Wolens Court instead examinedthe specificfacts in the case before it and concludedthat both plaintiffs’ statutory and contractual claims were “related to” prices, routes, or services. (/bid.) Importantly, the passage cited by Pac Anchor wherein the Wolens Court addressed the potential for “intrusive regulation” through IIlinois’s unfair business practice statute (Wolens, supra, 513 U.S. at pp. 226-228) occurs after the Court has already determined the claims’ “relatedness” and has turnedits attention to the secondpart of the two-step inquiry, viz. a determination of whether the private class actions at issue served to “enact or enforce a law” within the meaning of the ADA(and FAAAA). The ° Wolens refers to an older version of the ADA preemption provision (49 U.S.C. § 1305(a)(1)), which used the term “rates, routes, or services.” In the current, recodified version, (49 U.S.C. § 41713(b)(4)), as well as in the current version of the FAAAA,the equivalent phrase has been restated as “prices, routes, or services.” However, this change was not intended by Congress to express any substantive change in the meaning of the provisions. (1994 U.S. Code Cong. & Admin. News,at p. 1755 [Appx., Vol. I, at pp. 266-267]; see also Wolens, supra, 513 U.S. at p. 223 fn.1 [stating that Congress intended no substantive changein substituting the word “price” for the word “rates” when recodifying the ADA].) 13 Court emphasized that while both the statutory and contract claims were based on the same conductbythe airline that wasclearly related to rates and services, the statutory claim alone imposedstate “substantive standards” upon those rates and services, rather than simply holding the airline to its bargain. (/d. at pp. 232-233.) The Court concluded that the plaintiffs’ claim based on the Illinois unfair business practices statute was preempted as an enforcementof law,but that the contract claim wasnot. (Id. at pp. 228-229.) Thus, contrary to Pac Anchor’s suggestion, it was not the regulatory “potential” of Illinois’s unfair business practice statute that established the statute’s relatedness and justified preemption. Rather, the Wolens Court had already made thefact-specific determination that all of the plaintiffs’ claims were “related” to rates and services. (Wolens, supra, 513 U.S.at p. 226.) The “regulatory” nature of the unfair businesspractice statute was only discussed for purposes of differentiating the plaintiffs’ statutory claims — which enact or enforce state law — from the plaintiffs’ contractual claims — which do not. (d. at pp. 228-229.) Stated otherwise, the Court did not consider whether an action underIllinois’s unfair business practice statute would be preempted by the ADA if it was predicated on an underlying claim unrelated to “rates, routes, or services.” 6 ° Pac Anchoralsoinsists that, rather than simply applying both steps of the two-step test demanded by the ADA,the Wolens Court “expanded the holding ofMorales” and establishéd new,alternativetests for preemption. (Br. of Resp. at p. 12.) According to Pac Anchor’s interpretation, not only can a claim be preempted becauseit is related to “prices, routes, or services,” it can also be preempted “for the independent reason that the express language of the preemptive provision andits purpose exhibit an intent by Congress to preemptstate action that interferes with the forces of competition.” (Br. of Resp. at pp. 12-13.) Were this accurate, however, the Court could simply have endedits analysis onceit foundplaintiffs’ claimsto be related to rates and services; it would not have (continued...) 14 Pac Anchoralso cites to a numberof other decisionsthat it characterizes as interpreting Wolensto find state unfair competition statutes preempted “on their face.” (See Br. of Resp., at pp. 22-25.) However, among these decisions, only F’itz-Gerald, supra, 155 Cal.App.4th 411 and the unreported Blackwell v. SkyWest Airlines, Inc. (S.D. Cal. 2008) 2008 WL 5103195 (hereafter Blackwell) actually suggest any broad rule of UCL preemption, and both decisions reach their conclusion through misinterpretation ofMorales and Wolens. In Fitz-Gerald, plaintiff flight attendants alleged that they were not provided uninterrupted meal and rest breaks, and did not receive overtime or minimum wagefor “block time” when anaircraft is immobile on the ground. (Fitz-Gerald, supra, 155 Cal.App.4th at p. 414.) Plaintiffs raised their claims in four causes of action alleging state labor law violations, as well as one cause of action under the UCL based on the underlying labor law violations. (/d. at p. 415.) The court first foundthat the claims wereall preempted under the Railway Labor Act and, alternatively, that the UCL claim was preempted by the ADA. (/d.at pp. 422-423.) However, the (...continued) . . been necessary for the Court to proceed to consider the second prong ofthe preemption standard. In fact, neither Wolens nor the other cases cited by Pac Anchorsupport the proposition that the regulatory basis for a claim suffices to justify preemption, without due regard for the actual statutory test, viz. whether the claim both relates to prices, routes, or services, and constitutes an enactment or enforcementof state law. (See Travel All Over, supra, 73 F.3d at p. 1432 [setting forth two-step test for ADA preemption]; Abdu-Brisson v. Delta Air Lines, Inc. (S.D.N.Y. 1996) 927 F.Supp. 109, 111 [same], reversed on other grounds by Abdu-Brisson v. Delta Air Lines, Inc, (2nd Cir. 1997) 128 F.3d 77 (hereafter Abdu-Brisson ID); Continental Airlines, Inc. v. Kiefer (Tex. 1996) 920 S.W.2d 274, 279 (hereafter Kiefer) [describing Wolens asfirst finding relation with rates and services prior to determining whether private action was enactment or enforcement of law].) 15 court did not find ADA preemption with respect to the four claims brought directly pursuantto state labor law. (/d. at p. 423.) Fitz-Gerald does not explicitly set forth any rule of facial preemption, but the court there clearly viewed the UCL claim as being preempted separately and apart from the labor law claims upon which the UCL claim wasbased. In its brief alternative ruling on this point (contrasting to the court’s lengthy Railway Labor Act analysis), the court simply cited Morales, Wolens, and In re JetBlue Airway Corp. Privacy Litigation (E.D.N.Y. 2005) 379 F.Supp.2d 299 (hereafter JetBlue), stating without further analysis that, “(based on these federal cases, we concludethat the ADAbarsthefifth cause ofaction for relief under the California Unfair Business Practices Act.” (Fitz-Gerald, supra, 155 Cal.App.4th at 423.) 7 . However, the federal cases cited in Fitz-Gerald do not support any conclusion that UCL claimsare facially preempted. The Supreme Court in both Morales and Wolens made specific findings that the challenged actions in those cases wererelated to airline rates, routes, or services. (See Morales, supra, 504 U.S.at p. 387 [airfare marketing guidelinesat issue “quite obviously” related to fares]; Wolens, supra, 513 U.S. at p. 226 [‘‘Plaintiffs’ claims relate to ‘rates,’ - and to ‘services,’ ...”].) Likewise, JetBlue found an unfair business practice claim to be preempted because: it represents a direct effort to regulate the manner in which JetBlue communicates with its customers in connection with reservations and ticket sales, both of which are services provided bythe airline to its customers. (JetBlue, supra, 379 F.Supp.2d at p. 315, emphasis added.) Thus, in each case, the unfair business practice claim was preempted because, the action was found — onthe facts — to relate to prices, routes, or services. These ’ This holding in Fitz-Gerald was specifically rejected by the Court of Appeal below in the instant matter. 16 decisions do not lend any support to the proposition that UCL claimsin general are preempted, and the Fitz-Gerald court erred in relying on these authorities to support such a sweepingrule. . Asin Fitz-Gerald, the court in Blackwell misconstrued case authority in articulating a broad holding of preemption. Withoutanything more than a citation to Morales, Wolens, and Fitz-Gerald, the Blackwell court concluded that, under those decisions, the UCL claim before it was preempted, simply pronouncingthat “[i]t is settled that the ADA preempts this claim.” (Blackwell, supra, 2008 WL 5103195at p. *20.) Fitz-Gerald and Blackwell thus fail to provide any reasoned support for the proposition that UCL claims against motorcarriers are facially preempted. The other cases cited by Pac Anchorare simply inapposite. Aguayo v. U.S. Bank (S.D. Cal. 2009) 658 F.Supp.2d 1226 does not even involve ADA or FAAAApreemption, but rather addressed whether a UCL claim based on the state Rees-Levering Automobile Sales Finance Act — (Civ. Code §§ 2981, et seg.) was preempted by the National Bank Act (12 USS.C. §§ 21, et seq.). (Aguayo, supra, 658 F.Supp.2dat p. 1230.) ~ Moreover,far from establishing any per se rule regarding UCLclaims,the Aguayo court understood Wolens to require that UCL claims be evaluated by examining whetherthe underlyingpredicate acts are preempted. (See id. at p. 1235 [“[T]he only direction Wolens provides this Court is to evaluate the Rees-Levering Act directly for preemption’’].) 8 While the remaining cases relied on by Pac Anchordo address preemption under the ADA or FAAAA,noneofthem supports facial ® The Aguayo court ultimately found the UCL claim to be preempted. However,this result was reversed on appeal. (See Aguayov. U.S. Bank (9th Cir. 2011) 653 F.3d 912, 928.) 17 preemption ofUCL claims.’ Instead, they uniformly present circumstances wherethe plaintiffs claims clearly implicate prices, routes, or services. (See Butler v. United Air Lines, Inc. (N.D. Cal. 2008) 2008 WL 1994896at pp. *1-*3, *6 [claim based onairline ticketing dispute preempted as attempt to regulate service]; Flaster/Greenberg P.C. v. Brendan Airways, LLC (D. N.J. 2009) 2009 WL 1652156 at p. *7 [New Jersey Fraud Act claim preempted because “the ADAexpressly preemptsstate laws when they relate to ‘rates, routes, and services”’], emphasis added; Greer v. Fed. Express, et al. (W.D. Ky. 1999), 66 F.Supp.2d 870, 872 [claim that defendantfailed to provide timely package delivery service]; Kiefer, supra, 920 S.W.2dat p. 281 [plaintiffs’ tort claims found “clearly” related to prices and services]; W. Parcel Express v. United Parcel Service ofAm. (N.D.Cal. 1996) 1996 WL 756858at p. *2 [predatory pricing claim “clearly” preempted because related to “purported pricing and service practices”].) Thus, none of these cases provide any support for the proposition that the FAAAA preempts UCL claimsperse. The additional “case after case” cited by Pac Anchoras supportingits theory of facial preemption (Br. of Resp.at p. 34) all involve specific facts that relate to prices, routes, or services. (See Beyer v. Acme Truck Line, Inc. (Ct. App. La. 2001) 802 So.2d 798, 799-800 [allegation ofprice fixing related to prices and services]; Continental Airlines, Inc. v. Am. Airlines, Inc. (S.D. Tex. 1993) 824 F.Supp. 689, 696 [allegations of predatory ” In fact, two of the cited cases — Greer v. Fed. Express, etal. (W.D. Ky. 1999) 66 F.Supp.2d 870 and Kiefer, supra, 920 S.W.2d 274 — do not even involve unfair business practice claims. (See Greer, supra, 66 F.Supp.2d at p. 872 fn.2 [plaintiffs made no unfair or deceptive trade practices claims]; Kiefer, supra, 920 S.W.2dat p. 276 [airlines only appealed finding that negligence claims were not preempted, so unfair practices claims were not before the Texas Supreme Court].) Thus, any discussion of such claimsin these decisionsis dicta. 18 pricing “would have an effect on airline rates that would be both ‘significant’ and ‘regulatory’”’]; Dilts v. Penske Logistics LLC (S.D.Cal. 2011).2011 WL 4975520 at p. *8 [meal and rest break claims would affect “the types and lengths of routes that are feasible” and “have a significant impact on ... services”]; Fed. Express Corp. v. United States Postal Serv. (W.D. Tenn. 1999) 55 F.Supp.2d 813, 818 [unfair business act claim of false advertising re services preempted “wherethat claim ... relates to that carrier ’s prices, routes, or services”|, emphasis added; Frontier Airlines, Inc. v. United Air Lines, Inc. (D. Colo, 1989) 758 F. Supp. 1399, 1409 {preempted claim of anticompetitive conduct in pricing and operation of computer reservation system services]; Jn re EVIC Class Action Litigation (S.D.N.Y. 2002) 2002 WL 1766554at p. *8 [claims that carrier operated unlawful self-insurance schemewererelated to prices and services]; In re Korean Air Lines Co., Ltd., Anti-Trust Litigation (9th Cir. 2011) 642 F.3d 685, 696-697 [claims that carrier conspired to impose surcharge on airfares “plainly related” to price]; Tanen, supra, 187 Cal.App.4th at p. 1170 [claim that gift certificates with expiration dates violated state law preempted as related to services|.) In short, there is no persuasive authority for Pac Anchor’s proposition that the UCL is categorically preempted by the FAAAA underevery circumstance in which the UCLis applied to address unlawful conductbya motorcarrier. YW. THE PEOPLE’S UCL ACTION IS NOT PREEMPTED BY THE FAAAA, BECAUSE THE ACTION IS NOT RELATED TO PRICES, ROUTES, OR SERVICES. The action by the California Attorney General to enforce the UCL is indisputably an action to “enact or enforce a law.” Accordingly appellant concedesthat if the People’s suit were “related to” Pac Anchor’s prices, routes, or services, it would be preempted. (See Tanen, supra, 187 19 Cal.App.4th at p. 1159 [preemption applies when claim relates to prices, routes, or services, and derives from enactment of enforcement of state law].) A claim is “related to” prices, routes, or services if it has a “connection with, or reference to” such prices, routes, or services. — (Morales, supra, 504 U.S. at p. 384; Rowe, supra, 552 U.S.at p. 370.) A. The People’s UCL Action Does Not “Refer”to Prices, Routes, or Services. State action makes “reference”to a price, route, or service only where _ it acts directly or immediately on the price, route, or service. (See ATAA vy. S.F., supra, 266 F.3d at p. 1071 [In ADAcase,“[p]reemption resulting from ‘reference to’ price, route or service occurs ‘[w]here a State’s law acts immediately or exclusively upon [price, route or service] ... or where the existence of [a price, route or service] is essential to the law’s operation’’] [citing Cal. Div. ofLab, Standards Enforcementv. Dillingham (1997) 519 U.S. 316, 325 (hereafter Dillingham) [same in Employee Retirement Income Security Act (“ERISA”) case]].)'° In this case, nothing aboutthe People’s UCL action or the underlying tax, insurance, or wagelawsacts “immediately and exclusively” upon prices, routes, or services, or requires the existence of anyprices, routes, or services to proceed or operate. (Cf. ATAA v. S.F., supra, 266 F.3datp. 1071 [no preemption unlessstate action directly affects price, route, or service, or requires existence of such a price, route, or service].) Pac Anchornevertheless arguesthat “the U.S. Supreme Court can hardly have meantthe reference test tobe so narrow as to require the use of '° ERISA preempts state actions that “relate to any employee benefit plan.” (29 U.S.C. § 1144(a).) Accordingly cases construing the ERISA preemption provision are considered instructive when construing the “related to” preemption language in the ADA or FAAAA. (See Morales, supra, 504 U.S, at pp. 383-384.) 20. the actual words prices, routes, and services or their synonymsfor state action to be preempted under the referencetest.” (Br. of Resp. at p. 31.) In fact, however, case authoritydemonstrates that a literal, express reference — or at the very least, a direct relation — is exactly what Congress intended the term “reference” to mean. (See Morales, supra, 504 U.S. at p. 388 [finding preemptionof airfare marketing guidelines because, interalia, “[iJn its terms, every oneofthe guidelines enumerated above bears a ‘reference to’ airfares”]; Travelers, supra, 514 U.S. at p. 656 [no preemption by “reference” to ERISA plans where state-mandated health insurance surcharges applied generally to all purchasers, making no special distinction for ERISA plans]; Dillingham, supra, S519 U.S.at p. 325 [preemption by “reference” occurs where law acts “immediately and exclusively” upon ERISAplan, or where existence of planis “essential” to law’s operation]; Travel All Over, supra, 73 F.3d at pp. 1432, 1434 [describing “reference” test as referring to whether particular claims “expressly refer” to prices, routes, or services].) Since the UCL action neither mentions prices, routes, or services, nor specifically targets them for regulation, it does not “refer” to prices, routes, or services within the meaning of the FAAAA. B. The People’s UCL Action Is Not “Connected With” Prices, Routes, or Services. State action that does not directly “refer” to prices, routes, or services may nevertheless be preempted if it has a “connection with” such prices, routes, or services. (See Rowe, supra, 552.U.S. at p. 370 [“‘[s]tate enforcementactions having a connection with, or reference to’ carrier ‘“rates, routes, or services” are preempted””] [quoting Morales, supra, 504 USS.at p. 384], emphasis in original.) Courts have found such a preempted “connection” where state action has a “significant impact” upon a price, route, or service. (See Rowe, supra, 552 U.S.at pp. 370-371 [“preemption 21 occurs at least wherestate laws have a ‘significant impact’ related to Congress’ deregulatory and pre-emption-related objectives”); Morales, supra, 504 U.S.at p: 388 [aside from express reference to fares in the airfare marketing guidelines, preemption also found because guidelines had “forbidden significant effect” upon fares].) In the instant case, however, Pac Anchorfails to demonstrate how the People’s UCL actionis “connected with” Pac Anchor’s prices, routes, or services in anything more than a “tenuous, remote or peripheral a manner.” (Cf. Morales, supra, 504 USS.at p. 390 [state actions with only a “tenuous, remote, or peripheral” effect upon prices, routes, or services.are not preempted].) 1. The People’s UCL Action Does Not Compel the Use of Employee Drivers. Pac Anchorcontendsthat the UCL action effectively compelsit to abandonthe use of independent contractor drivers in favor of using employees. Respondentreasonsthat the People are imposing an employee- based business model and thereby regulating the services that Pac Anchor chooses to provide. (/d. at p. 36.) " | In fact, nothing in the complaint seeks to impose the use of employee drivers, or to prohibit the useof independent contractors. The complaint seeks only to prohibit Pac Anchor from “having its cake and eatingit, too” by continuing to utilize employee drivers without complying with '' Pac Anchor’s argumentis ironic. The People’s complaint seeks to ensure Pac Anchor’s compliance with tax, insurance, and labor law requirements precisely because Pac Anchor’s drivers are, in fact, employees and are not independent contractors as Pac Anchorrepresents. Thus,if anything, the complaint would seem to encourage Pac Anchorto use bona fide independent contractors to avoid these employee costs. Thetruth, of course, is that Pac Anchor does not wantto treat its workforce as either employees or independent contractors, but would rather continue utilizing workers who are employeesin fact but are deliberately misclassified as independent contractors. 22 applicable state tax and employmentregulations. (Appx., Vol. I, at pp. 13:17-14:7, 14:27-15:3.) Because Pac Anchorremainsfree to utilize genuine independent contractors or employeesasit seesfit, the People’s UCLaction does not impose a “significant impact” on Pac Anchor’s choice of services to provide, and is therefore not “connected with” Pac Anchor’s “services” within the meaning of Section 14501(c)(1). (See ATAA v. S.F., supra, 266 F.3d at p. 1072 [no prohibited connection unless the state action in question “bindsthe [carrier] to a particular price, route, or service and thereby interferes with competitive market forces”]; cf., Travelers, supra, 514 U.S. at pp. 659-660 [no ERISA preemptionofstate health insurance surchargethat altered relative cost of competing health insuranceplans, _ because simply varying incentives does not compel ERISA plan to choose any particular alternative].) 2. Any Costs Imposed on Pac Anchoras a Consequenceof the People’s UCL Action Are Not “Connected With” Pac Anchor’s Prices, Routes, or Services Within the Meaning of the FAAAA, But Are Rather the Consequence of Pac Anchor’s Efforts to Evade its Lawful Obligations as an Employer. _ Pac Anchoralso claims that the costs imposed by the People’s UCL action are “connected with”its prices, routes, and services. (Br. of Resp.at p. 38.) Pac Anchorarguesthat if it has to meet its tax, insurance, and wage obligations, then it “logically will have to charge higherprices, stop servicing routes that become’cost-prohibitive, and/or stop offering services ‘that become too expensive.” (/d. at p. 38.) Pac Anchorfurtherasserts that its drivers, too, will have to “stop being motor carriers and small business owners,” and will “no longer charge prices, offer services, or service routes.” (/d. at 36.) Of course, these arguments are constructed on the flimsy premise that Pac Anchorhasa protectable, free-market choice to 23 evade its tax and insurance obligations by disguising its employeesas “independentcontractors.” _ | | For purposes of this appeal, at least, Pac Anchor’s drivers are, in fact, employees.'” (Cf. Gerawan Farming,Inc.v. Lyons (2000) 24 Cal.4th 468, 515-516 [all factual allegations of complaint deemedtrue on appeal from judgmentonthe pleadings].) In harmonywith the deregulatory purpose of the FAAAA, Pac Anchorretains the freedomto continue to employits drivers and pay the associated costs, or alternatively, to utilize genuine contractors, — i.e., drivers who operate under their own transportation license, use their own equipment, work on a short-term basis, workfor multiple clients, operate their own businesses, or demonstrate other indicia of being an actual independent contractor. (See S.G. Borello & Sons, Inc. v. Dept. ofIndustrial Relations (1989) 48 Cal.3d 341, 350- 351, 354-355 [discussing relevant factors in evaluating independent contractor status].) What Pac Anchor may not do, however,is to distort free-market forces by utilizing employee drivers, /abel them “independent contractors,” and thereby avoid paying the payroll taxes, workers’ compensation insurance premiums, and minimum wagesthat other employers mustpay. 8 '? Thus, the drivers will not be forced to “stop being motorcarriers and small business owners” because they presently are not “motorcarriers” or “small business owners” — they are employees. 'S Pac Anchor maintainsthat if a determination is madethatits drivers are employees,this “will necessarily imply a finding that the current leasing arrangement between Petitioners [Pac Anchor] anddrivers is a sham, despite the fact that such leasing arrangements are permitted and regulated by the U.S. Department of Transportation.” (Br. of Resp.at pp. 35-36 {citing 49 U.S.C. Part 376].) In fact, there is nothing fundamentally incompatible between employeestatus and federally-mandated leasing requirements: “Nothing in the provisions ... of this section is intended to affect whether the lessor or driver provided by the lessor is an independent (continued...) 24 The UCL complaint seeks to force Pac Anchor to make choicesit would rather not make, by either shouldering the expenses associated with employmentofits drivers, or relinquishing control of its drivers by entering into bona fide independent contracts with them. However, any resulting effect on Pac Anchor’sprices, routes, or services is not properly viewed as a consequenceofstate regulation, but rather as a consequence of Pac | Anchor’s choice to participate in a competitive market. (See ATAA v. SF, supra, 266 F.3d at 1074 [faced with choice to comply with city ordinance or forego economic benefit of dealing with city, “[w]hat the Airlines are truly complaining about are free market forces and their own competitive decisions”]; see also Dillingham, supra, 519 U.S.at p. 334 [State law not preempted by ERISA because “[t]he prevailing wage statute alters the incentives, but does not dictate the choices, facing ERISAplans].) Pac Anchorappears to acceptas an article of faith that the imposition of any costs is necessarily “related to”its prices, routes, and services. (Br. of Resp.at p. 38.) However,indirect regulations, like those Pac Anchor argues are encompassed bythe instant.UCLaction, are only preempted by the FAAAAifthey have a “significant impact” uponprices, routes, or services. (Rowe, supra, 552 U.S. at p. 375.) State action is only “connected with” prices, routes, or services where “the law binds the [motor] carrier to a particular price, route, or service and thereby interferes with competitive market forces.” (ATAA v. S.F., supra, 266 F.3d at p. 1072.) | Thus, not every increase in costs resulting from state action against a motor carrier is meaningfully “related to” prices, routes, or services for (...continued) contractor or an employee of the authorized carrier lessee.” (49 U.S.C. § 376.12(c)(4).) 25 purposes of FAAAA. (See Californiansfor Safe and Competitive Dump Truck Trans. v. Mendonca (9th Cir. 1998) 152 F.3d 1184, 1189 (hereafter Mendonca)[finding cost of prevailing wage law “in a certain sense is ‘related to’ [motor carrier’s| prices, routes and services,” but the relation “is not more than indirect, remote, and tenuous’’]; see also Travelers, supra, 514 US.at p. 664 [no preemption of surcharge statute, but speculating that there might exist some extraordinary circumstance where costs could be so prohibitive as to impose a “substantive mandate” on ERISAplans].) Prices, routes, and services are subject to the influence of a variety of factors in addition to cost. (See ATAA v. S.F., supra, 266 F.3d at p. 1074 [costs of regulatory compliance one of “many factors” taken into consideration byairlines in setting routes and services]; Abdu-Brisson II, supra, 128 F.3d at pp. 84-85 [rejecting direct linear relationship between costsandpricesin airline industry].) Indeed, the most important factor is the market-driven choices made by carriers themselves to adapt to changing circumstances. Although costs stemming from generally applicable state requirements mayalter the incentives of the marketplace — and might even cause somecarriers to alter prices, routes, or services as a result — the imposition of such costs are normally not preempted. (See Travelers, supra, 514 US. at p. 661 [to read preemption provision “as displacing all state laws affecting costs and charges” would ignore the limiting language of“related to” out.ofstatute]; ATAA vy. S.F., supra, 266 F.3d at p. 1074 [no preemption where carrier could opt to pay costs of compliance with city ordinance or forego route, but not compelled to do oneor the other].) Otherwise, the preemptive reach of the FAAAA would touch every conceivable state control, and crowd out any space for the types of regulations contemplated by the Supreme Court as being “too tenuous, remote, or peripheral” to warrant preemption. (Morales, supra, 504 U.S. at p. 390.) 26 Hypothetically, the “mere” imposition of costs by state regulation might be preempted if the costs were so onerous as to compel a motor carrier to alter its prices, routes, or services. (ATAA v. S.F., supra, 266 F.3d at p. 1075.) At this stage of the proceedingsin the trial court, however, no evidence or informed projection of costs or their effects is available, nor would such evidence have been permitted or considered in any event in ruling on Pac Anchor’s motion for judgmenton the pleadings. (See Hood v. Santa Barbara Bank & Trust, supra, 143 Cal.App.4th at p. 535 [on motion for judgment on the pleadings, court only considers matters appearing on theface ofthe pleadings orjudicially noticed]; Cloudv. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999 [“Presentation of extrinsic evidenceis ... not proper on a motion for judgmenton the pleadings”].) Thus, there is no reasonable basis for determining either the amountof costs likely to be imposed by the People’s UCL action, or any effect such costs would have on Pac Anchor’s prices, routes, or services. (Cf. Mendonca, supra, 152 F.3d at p. 1189 [substantial costs of state regulationstill bore only “indirect, remote, and tenuous” connection to prices, routes, and services].) In light of this information deficit, it would be premature to determine — on the basis of the pleadings alone — whether Section 14501(c)(1) should preempt the People’s action becauseof the costs itimposes. (See Abdu-Brisson II, supra, 128 F.3d at p. 84 [no finding of preemption based on pleadings because“while in the abstract [the state claimsat issue] could affect price” there was no substantiation that this was actually or likely the case].) 4 '* Pac Anchorcites New Hampshire Motor Trans. Assn. v. Rowe(st Cir. 2006) 448 F.3d 66, 82 fn.14, for the propositionthat it is not necessary to present empirical evidence in orderto establish the significant impact that regulation can have onprices, routes, or services, and that it is only necessary to demonstrate a “logical effect.” However, at best this approach (continued...) 27 Pac Anchor’s attempt to equate the People’s UCL action here with the efforts of the City of Los Angeles as described in Am. Trucking Assn., Inc. v. The City ofLos Angeles (9th Cir. 2009) 559 F.3d 1046 (hereafter ATA ID) and Am. Trucking Assn., Inc. v. The City ofLos Angeles (C.D. Cal. 2010)- 2010 WL 3386436 (hereafter ATA IV) is unavailing. Both ATA cases involved the implementation of by the Port of Los Angeles of “Concession Agreements” that imposed new requirements on port trucking firms, including a specific provision that requires motorcarriers to utilize 100% . employee drivers by the end of 2013. (ATA I, supra, 559 F.3d at p. 1049; ATA IV, supra, 2010 WL 3386436at p. *2.) In both decisions, the courts agreed that such a transition would be sufficiently costly for the carriers to “relate” to prices, routes, or services within the meaning of Section 14501(c)(1). (See ATA I, supra, 559 F.3d at p. 1056 [on consideration of preliminary injunction, employee driver provision found “highly likely” to be preempted]; A7'4 IV, supra, 2010 WL 3386436at p. *19 [“Furthermore, the record demonstrates that the employee driver provision would _ significantly affect costs of drayage services”’].) (...continued) can only suffice where the information exists to draw such a logical inference. In N.H. Motor, the court dealt with a Mainestatute that imposed penalties on carriers who knowingly delivered tobacco products to unauthorized recipients, and the court imputed knowledge if the package waslabeled as containing such products. (/d. at p. 80.) Empirical evidence of the cost of compliance was unnecessary becauseit could be logically inferred that carriers were compelledto alter their delivery procedures — i.e., “services” — to allow for inspection of packages destined for Maine recipients. (/d. at p. 81.) By contrast, where the state action is merely the imposition of unknowncosts, more specific information is necessary to gaugethe relationship to prices, routes, and services. (See Mendonca, supra, 152 F.3d at p. 1189 [substantial.costs imposed by prevailing wage statute too “indirect, remote, and tenuous” to warrant preemption].) 28 The cases are manifestly distinguishable from the instant action. The Concession Agreements would have required motorcarriers that previously utilized presumably legitimate independent contractors to abandonthat business model and begin using employees. (ATA I, supra, 559 F.3d at p. 1049.) By contrast, of course, nothing in the People’s lawsuit requires Pac Anchorto use employees — or independent contractors — and Pac Anchor retains the freedom to control whether to incur the costs of employment. 3. The UCL Action Is Materially Indistinguishable from Its Underlying Predicate Statutes, Which Respondent Concedes Are Not Preempted. Pac Anchorconcedes that most of the state laws underlying the People’s UCLaction are not preempted because they are laws of general ~ application, with only a tenuous connection with prices, routes, or services. (Br. of Resp.at p. 30.)'° This conclusion is confirmed by federalstatutes and case authorities. (See 49 U.S.C. § 14501(c)(2) [state insurance "> However, Pac Anchor maintains that Sections 4 and 7 of I.W.C. WageOrder 9 are preempted because the Wage Orderspecifically targets the transportation industry, and because Sections 11 and 12 of the Wage Order regarding meal andrest breaksare related to prices, routes, and services. (Br. of Resp. at pp. 26-30.) These argumentsare not well taken. Although the Wage Orderis directed at the transportation industry, the requirements imposed by Sections 4 and 7 (minimum wage and recordkeeping, respectively) reflect requirements generally applicableto all workers. (See Lab. Code §§ 1174 [recordkeeping] and 1182.12 [minimum wage].) As for Sections 11 and 12 of the Wage Order, even presuming that such meal andrest break provisions were preempted by the FAAAA,that would have no relevancein the instant case, where no allegations of meal and rest break violations have been made. In any event, judgment on the pleadings normally lies only against an entire-cause of action. (Fire Ins. Exchange, supra, 116 Cal.App.4th at p. 452.) Thus, even if Sections 4 and 7 of Wage Order 9 were preempted, Pac Anchor wouldstill not have been entitled to judgment on the pleadings, since Pac Anchor concedes that Labor Code Sections 226, 1194, and 3700, as well as Unemployment Insurance Code Sections 976, 976.6, 984, and 13020 are not preempted. 29 mandates on motorcarriers exempt from preemption]; 49 U.S.C. §§ 14502, 14503 [setting explicit restrictions on state taxing authority over motor carriers, thus implying nootherrestrictions and presuming generalvalidity of state taxing authority over motor carriers]; Mendonca, supra, 152 F.3d at p. 1189 [effect of California minimum prevailing wage law onprices, routes, and services too “indirect, remote, and tenuous”to justify preemption]; Renteria v. K&R Trans., Inc. (C.D. Cal. 1999) 1999 WL 33268638 at p. *4 [effect of state wage and workers’ compensation laws merely “incidental” and insufficient to relate to prices, routes, or services]; Bostain v. Food Express, Inc. (Wash. 2007) 159 Wash.2d 700, 721 fn.9 [Washington state overtime statute not preempted by FAAAA]; Western Ports Trans., Inc. v. Employment Security Dept. of Washington (Wash. App. 2002) 110 Wash.App. 440, 456-457 [no FAAAApreemption of state unemploymenttax, because “when Congress has intendedto prohibit state taxing authorities from ‘burdening’ interstate commerce, it has done so, — expressly, clearly and understandably [as in Section 14502(b)]’”].) Appellant is at a loss to understand how the People’s action against Pac Anchorunder the UCL can be preempted whenthat action is merely seeking to compel Pac Anchor’s compliance with substantive laws of general application — thatare themselves conceded not to be preempted. '6 '® Tn this respect, the UCL is distinct from most state unfair business practice statutes, including the Illinois unfair business practice statute at issue in Wolens, The UCL’s “unlawful” prong permits an action to enforce state substantive standards that are far removed from Pac Anchor’s prices, routes, or services, such as the tax and labor standards in this case. In contrast, the Illinois unfair business practice statute at issue in Wolens included no similar “unlawful” prong; claims underthat statute require a finding of “[u]nfair methods of competition [or] unfair or deceptive acts or practices...” (Wolens, supra, 513 U.S. at p. 227; 815 Il.Comp.Stat., Act 505, § 2 [attached hereto as Exhibit 1].) Although claims undereither statute will not necessarily relate to a carrier’s prices, routes, or services, (continued...) 30 Pac Anchorrelies on Jn re Ttbacco Cases IT (2007) 41 Cal.4th 1257 as an example of a UCL action that was preempted even where the underlying predicate act was not. In Tobacco CasesII, the plaintiff class alleged that advertising by tobacco companies encouragedviolation of Penal Code Section 308, which prohibits the sale of tobacco to minors, and the purchase or possession of tobacco by minors. (/d. at pp. 1263-1264.) This Court determined that the UCL class action was preempted by the Federal Cigarette Labeling and Advertising Act, which preempts state laws regarding the “advertising or promotion” of cigarettes “based on [concerns about] smoking andhealth.” (/d. at p. 1266.) However, Tobacco Cases IT is distinguishable in that it did not involve a straightforward use of the UCL’s “unlawful” prong to enforce a substantive state law. Instead, the plaintiffs relied on Penal Code Section 308 only to provide the policy rationale underlying their advertising claim. It was the plaintiffs’ effort to,enforce a state advertising policy that conflicted with federal law and compelled preemption of the UCL action, not enforcement of the Penal Code provision itself, which does not address — muchless regulate — advertising. By contrast, the instant action is a _ straightforward effort to compel Pac Anchor’s compliance with substantive state laws through the vehicle of the UCL, andthere is no basis to differentiate the UCL action here from the undisputedly non-preempted underlying predicate acts. | Nor should the Court give consideration to Pac Anchor’s argument that the UCL offers remedies distinct from the underlying statutory provisions, including injunctive relief. At this stage of the proceedings, (...continued) . ~ the narrower focusofthe Illinois statute on competitive market practices are morelikely to be so related. 31 there is no basis for believing that any injunction would extend farther than to require Pac Anchorto report and submit payroll taxes, secure a workers’ compensation insurance policy, and comply with wage and hourlaws with respect to any employee drivers. '’ Pac Anchor has concededthatthese basic requirements are not preempted. Finally, Pac Anchorcites to Barber Auto Sales, Inc. v. United Parcel Services, Inc. (N.D. Ala. 2007) 494 F.Supp.2d 1290 (hereafter Barber), and Deerskin Trading Post, Inc. v. United Parcel Service ofAmerica, Inc, (N.D. Ga. 1997) 972 F.Supp. 665 (hereafter Deerskin), for the proposition that the decision in Wolens, supra, “prohibits the award of injunctive relief against motor carriers.” (Br. of Resp., p. 22.) Both Barber and Deerskin involved breach of contract actions brought against motorcarriers that clearly. “related to” prices, routes, or services. (See Barber, supra, 494 F.Supp.2d at p. 1292 [dispute about shipping charges]; Deerskin, supra, 972 F.Supp. at p. 667 [same].) There was no dispute in either case that “routine breach of contract actions” are not preempted because they onlyreflect “privately ordered obligations” and thus do not “enact or enforce” state law. (Wolens, '” Pac Anchor submitsa Request for Judicial Notice that includes injunctions issuedin five other cases filed by the People against port trucking firms, noting that in each case, the injunction forbade any driver operating a truck “provided, owned, or leased” by the carrier from being classified as an independentcontractor. (Petitioners’ Request for Judicial Notice, at Exhs. D, F, H, J, and L.) Pac Anchorargues that these injunctions effectively prohibit the use of independent contractors, and thereby regulate the respective carriers’ services. (See Br. of Resp. p. 36.) However, Pac Anchorneglects to mention that the injunctions in each of these other proceedings were obtained by stipulation, and thus reflect an agreementbythe carriers to accept the restrictions therein, (Petitioners’ Request for Judicial Notice, at Exh. D, at pp. 1:25-2:3; Exh. F, at p. 1:23- 28; Exh. H,at pp. 1:25-2:4; Exh. J, at pp. 1:25-2:3; and Exh. L,at p. 1:22- 27.) Most importantly, the People have not sought a similar injunction in this case, and Pac Anchor would certainly have an opportunity to object if such a request is made. 32 supra, 513 U.S, at pp. 228-229, 232; Barber, supra, at p. 1293; Deerskin, supra, atp. 671.) Yet, the courts held that the injunctive relief sought was preempted becausethe relief was an “enlargement or enhancement”of the parties’ bargain based on requirements of state law, and thus an enactment or enforcement of law within the meaning of the FAAAA. (See Barber, supra, at p. 1294 [injunction is “extraordinary remedy” not normally available for breach of contract]; Deerskin, supra, at p. 673 [award of injunctive relief “would remove a contract claim from the realm of ‘routine breach of contract actions’”]; cf., Wolens, supra, at p. 233 [scope of non- preempted contract actions limited to parties’ bargain, “with no enlargement or enhancement based onstate lawsor policies externalto the agreement’].) But here, too, Pac Anchor’s authorities are distinguishable. Most importantly, as discussedearlier, in the instant case, the People’s request ‘for injunctive relief is not “related to” prices, routes, or services within the meaning ofthe FAAAA.'® Nothing in Barber or Deerskin suggests that '8 In any event, even if the People’s request for injunctive relief were found by thetrial court to be “related to” prices, routes, or services, that does not assist Pac Anchor in a motion for judgment on the pleadings. There can be no judgment on the pleadings based on a particular remedy, as long as the plaintiff is entitled to any valid remedy. (See Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 [demurrer cannotbe sustained as to “particular type of damage or remedy”]; Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 163-164 [allegations re punitive damages not subject to demurrer since such ‘damages are merely remedies incidentto a cause ofaction].) In this case, incident to their single cause of action, the People have sought not only injunctive relief, but also restitution and civil penalties — impositions that are generally not sufficient to create a “significant impact” upon, or “connection with” a carrier’s prices, routes, or services. (See discussion ante at II.B.2.) This is particularly true with respect to the People’s request for restitution, which reflects nothing more than the accrued costs of complying with undisputedly non-preempted state tax and labor law (continued...) 33 state injunctions should be preempted even wherethere is no substantial relationship to prices, routes, or services. If. PAC ANCHOR’S ARGUMENT THAT THE UCL ACTION IMPERMISSIBLY INTERFERES GENERALLY WITH THE FORCES OF COMPETITION IS WITHOUT MERIT. A. The FAAAA’s Preemption Focus Is Expressly Tied to Motor Carrier Prices, Routes, and Services. Relying on Rowe, supra, 552 U.S. 364, Pac Anchor contendsthat the People’s UCL action is preempted becauseofits interference with the forces of competition, regardless of the action’s remote relatedness to — prices, routes, and services. (Br. of Resp., pp. 39-41.) Of course, the touchstone of preemption analysis is congressional intent. (Travelers, supra, 514 U.S. at p. 655.) In this case, Section 14501(c)(1) plainly extends only to state action that is “related to ... a price, route, or service.” (49 U.S.C.§ 14501(c)(1).) Any “interference,” then,must relate to prices, routes, and services. | Pac Anchorfindssupport in Rowe’s statement that “pre-emption occurs at least where state laws havea ‘significant impact’ related to Congress’ deregulatory and pre-emption-related objectives.” (See Rowe, supra, 552 U.S. at pp. 371, 375].) Pac Anchorreads this passage as extending the preemptive reach of the FAAAA beyond prices, routes, or services, to state actions that more generally touch upon undefined “deregulatory and pre-emption-related objectives.” (Br. of Resp. at p. 16.) However, a careful reading ofRowe reveals that Congress’ “deregulatory and pre-emption-related objectives,” to which the Court (...continued) requirements. Accordingly, Pac Anchor wasnotentitled to judgmenton the pleadings based on the People’s prayer for injunctive relief, because the People also have non-preempted claims for restitution and penalties. 34 referred, are simply those identified in the language of Section 14501(c)(1): to limit state regulation affecting prices, routes, and services. Thus, in describing the “significant impact” resulting from the Mainestatute at issue, the Rowe Court described how the law would adversely affect the FAAAA’s pre-emption-related objectives by requiring carriers to provide a service that they might otherwise choose not to provide. (Rowe, supra, 552 | U.S. at pp. 371-372.) The Court later stated that “laws whose‘effect’ is ‘forbidden’ under federal law are those with a ‘significant impact’ on carrier rates, routes, or services.” (/d. at p.375.) Thus, when Rowerefers to “deregulatory and pre-emption-related objectives,” it is simply referring to the objectives of prohibiting significant state regulation ofprices, routes, or services, Pac Anchor’s efforts to find preemption beyond the plain language of the FAAAAare unavailing. “Congress’ enactment of a provision defining the pre-emptive reach of a statute implies that matters beyondthat reach are not preempted.” (Cipollone, supra, 505 U.S. at p. 517.) Section 14501(c)(1) expressly preempts only state efforts to “enact or enforce” any laws “related to a price, route, or service” of a motor carrier. (49 U.S.C. § 14501(c)(1).) Fidelity to congressional purpose requires honoring not only the general objective of the statute, but also the particular means by which Congress chose to advance that objective. In the case of Section 14501(c)(1), Congress chose precise language to define the scope of FAAAApreemption, and Pac Anchor’s attempt to create a new preemptive standard based on “interference with competition” exceeds the limits that Congress specifically set forth. (See An Independent Home Support Service, Inc. v. Superior Court (2006) 145 Cal.App.4th 1418, 1437 35 [Legislative intent may not be used to bootstrap a meaning that cannot be found in the statutory language”].) '” B. The People’s UCL Action Does Not Threaten to Create “Entry Controls.” Pac Anchor complains that the People’s UCL action would erect an “entry control” against independent contractors. (Br. of Resp. at p. 41.) By the term “entry control,” Pac Anchor apparently meansthat the UCL action threatens to establish a regulatory barrier that discriminates against the entry of independent contractors into the port trucking market. *0 Pac Anchorconcludes that the UCL action is preempted “evenif its effect is remote or tenuous”becauseestablishing an entry control “threatens Congress’ deregulatory purpose.” (/d.at p. 43.) However, the instant UCL action does not impose any requirements upon the use of independent contractor drivers that are any more onerous '? In any event, the excerpts from the legislative history selected by Pac Anchordo not argue for a broaderinterpretation of the FAAAA’s preemption provision. They reveal only that: (1) the FAAAAwasintended to parallel the deregulation ofair carriers in the ADA; (2) Congress believed “certain aspects of the State regulatory process should be preempted”; and (3) Congress viewed “State economic regulation of motor carrier operations” — 7.e., regulation of prices, routes, or services — to be problematic. (1994 U.S. Code Cong. & Admin. News,at pp. 39, 82, 85, 87 [Appx., Vol. I, at pp. 214, 266, 268, 270], emphasis added.) *° As an example of an “entry control,” Pac Anchorcites Assembly Bill 2015 (‘AB 2015”), a California enactmentthatis identified in the congressionallegislative history of Section 14501(c)(1) as state regulatory legislation that would henceforth be preempted. However, as Pac Anchor itself explains, AB 2015 (which waslater repealed) facially discriminated against the use of independent contractors by prohibiting carriers from using contractors “to generate more than ten percentof their gross intrastate revenue.” (See Br. of Resp. p. 42.) By contrast, nothing in the People’s UCLaction can be construed as placing a discriminatory burden on the use of independentcontractors. 36 than those applicable to employeedrivers. If anything, the oppositeis true, since the complaint alleges that Pac Anchor’s drivers are actually employees, andfor that reason alone Pac Anchoris subjectto payroll taxes, workers’ compensation insurance, and minimum wagestandards. (Appx., Vol. I, at pp. 13:1-14:7.) The UCL action simply demandsthat Pac Anchorabide by the uniform, generally-applicable rules governing how motorcarriers are to compensate and provide for drivers based upontheir actual status as either employees or independent contractors. It may very well provetrue that, faced with the true marketcost ofits ‘employee drivers, Pac Anchorwill reassess its business model and choose to use bonafide independentcontractors. It is similarly likely that some of Pac Anchor’s drivers will decline the significant challenges that would face them were they to become legitimate independent contractors. However, any such challenges facing Pac Anchorandits drivers will not be the result of discriminatory state regulation, but rather the result of precisely the same forces of the free market as are faced daily by other businesses and _ entrepreneurs. Pac Anchor cannotsensibly argue that it should be allowed to continue using employee drivers without taking on the financial burdens that accompany that choice. (See ATAA v. S.F., supra, 266 F.3d at 1074 [airlines not entitled to be spared the consequencesof their competitive decisions].) C. The People’s UCLAction Does Not Threaten to Create a “Patchworkof State Regulation” Finally, making a “floodgates” argument, Pac Anchorinsists that allowing the People’s UCL action to proceed will result in subjecting motor carriers to a “patchwork ofdiffering standards”across differentstates. (Br. of Resp., pp. 41, 46.) However, as recognized by the Supreme Court in Rowe, the only “patchwork”of rules that Congress ultimately elected to preemptis a network ofstate regulations that significantly impacts prices, 37 routes, or services. (See Rowe, supra, 552 U.S. at 373 [expressing concern that Mainestatute regulating delivery services “could easily lead to a patchwork ofstate service-determining laws, rules, and regulations”’], emphasis added.) Thelegislative history of the FAAAA’s preemption provision confirmsthat the “patchwork of regulation” that Congress was concerned about werethe rules of 41 states that regulated“intrastate prices, routes, and services of motor carriers.” (1994 U.S. Code Cong. & Admin. News,at pp. 1758-1759 [Appx., Vol. I, at pp. 269-270], emphasis added.) Congress wasfully awarethat states had different laws regarding taxes, insurance, labor regulation, and unfair competition. Yet Congress made noeffort to broadly preempt these types of local regulation in enacting the FAAAA. (See 1994 U.S. Code Cong. & Admin. News,at p. 1757 [Appx., Vol. I, at pp. 268-269] [“nothing in this amendment is intended to changethe application of State tax laws to motorcarriers” and “State authority to regulate ... financial fitness and insurance... 1s unchanged”].) Congress chose only to protect carriers from a “patchwork” of narrowerstate laws moresignificantly affecting prices, routes, or services. (See Rowe, supra, 552 U.S.at p. 373 [Congress intended to preempt Mainestatute that “directly regulates a significant aspect of the motorcarrier’s package pickup and delivery service” and similar“service- determining”state laws].) However genuine maybethe threat that Pac Anchorwill have to comply with a patchwork ofstate tax and labor law requirements, that was not Congress’ concern in enacting the preemption provision ofthe FAAAA. CONCLUSION Based on the foregoing, the People request this Court to affirm the decision of the Court of Appeal, and remandthis matterto thetrial court for further proceedings in accordance with this decision. 38 Dated: January 26, 2012 ~LA2009604737 51054090.doc Respectfully submitted, KAMALA D. HARRIS Attorney General of California MARK.BRECKLER Chief Assistant Attorney General Sw on SATOSHI YANAI Deputy Attorney General _ Attorneysfor Appellant 39 CERTIFICATE OF COMPLIANCE | J certify that the attached ANSWER BRIEF ON THE MERITSuses a 13 point Times New Romanfont and contains 11,210 words. Dated: January 26, 2012 KAMALAD. HARRIS Attorney General of California SATOSHI YANAI Deputy Attorney General Attorneysfor Appellant Westlaw, 815 ILCS 505/2 Page 1 Formerly cited as IL ST CH 121 1/2 262 Effective:[See Text Amendments] West's Smith-Hurd Illinois Compiled Statutes Annotated Currentness Chapter 815. Business Transactions Rg Deceptive Practices Ng Act 505. Consumer Fraud and Deceptive Business Practices Act (Refs & Annos) == 505/2. Unlawful practices; construction with Federal Trade Commission Act § 2. Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employmentof any deception, fraud, false pretense, false promise, misrepresentation or the concealment, sup- pression or omission of any material fact, with intent that others rely upon the concealment, suppression or. omission of such material fact, or the use or employmentof any practice described in Section 2 of the “Uniform Deceptive Trade Practices Act”, approved August 5, 1965, [FN1] in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby. In constru- ing this section consideration shall be given to the interpretations of the Federal Trade Commission and the fed- eral courts relating to Section 5(a) of the Federal Trade Commission Act. [FN2] CREDIT(S) Laws 1961, p. 1867, § 2. Amended by P.A. 78-904, § 1, eff. Oct. 1, 1973. Formerly Iil-Rev.Stat.1991, ch. 121 1/2, 4 262. [FN1] 815 ILCS 510/2. [FN2] 15 U.S.C.A. § 45. HISTORICAL AND STATUTORY NOTES PA. 78-904, rewrote this section. CROSS REFERENCES Funeral directors and embalmerslicensing, violations, see 225 ILCS 41/15-75. Safe and Hygienic Bed Act, violations, see 410 ILCS 68/35. Violation of assurance of voluntary compliance as prima facie evidence of violation of this act, see 815 ILCS 505/6.1. © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. DECLARATIONOF SERVICE BY OVERNIGHT COURIER Case Name: People v. Pac Anchor Transportation, Inc. etal. No.: 8194388 I declare: | 1 am employed in the Office of the Attorney General, which is the office of a memberofthe: California State Bar, at which member’s direction this service is made. I am 18 years of age or older and not a party to this matter; my business address is: 300 South Spring Street, Suite 1702, Los Angeles, CA 90013. I am familiar with the business practice at the Office of the Attorney General for collection and processing of correspondence for mailing with the United States Postal Service. In accordance with that practice, correspondence placed in the internal mail collection system at the Office of the Attorney General is deposited with the United States Postal Service that same dayin the ordinary course of business. On January 26, 2012, Icaused the original and thirteen (13) copies of the ANSWER BRIEF ‘ON THE MERITSinthis case to be delivered to the California Supreme Court, at 350 McAllister Street, San Francisco, CA 94102-4797, by Fed Ex Overnight Mail Delivery. A copyto be sent to opposing counsel by Fed Ex Overnight Mail Delivery as follows: Neil S. Lerner California Supreme Court, Sands Lerner 350 McAllister Street, 12400 Wilshire Boulevard, Suite 1300 San Francisco, CA 94102-4797 Los Angeles, CA 90025 Attorneysfor Defendants and Appellees (Federal Express Tracking #874443084630) Pac Anchor Transportation, Inc, and Alfredo Barajas (Federal Express Tracking # 868255064115) \ On January 26, 2012, I served the attached ANSWER BRIEF ON THE MERITSbyplacing a true copy thereof enclosed in a sealed envelope placed in the internal mail collection system at the Office of the Attorney General and then deposited with the United States Postal Service that same dayin the ordinary course of business addressed as follows: Clerk of the Court Appellate Coordinator - Office ofthe District Attorney L.A. County Superior Court Office of the Attorney General County of Los Angeles Stanley Mosk Courthouse Consumer Law Section 210 W. Temple Street 111 N. Hill Street 300 S. Spring Street Los Angeles, CA 90012 Los Angeles, CA 90012 Los Angeles, CA 90013-1230 Service Required Per Bus.& (by U.S. Mail) Service Required Per Bus. & Prof. Code § 17209 Prof. Code § 17209 (by U.S. Mail) (by Internal Mail) Clerk of the Court Second District Court of Appeal, Division Five 300 South Spring Second Floor, North Tower Los Angeles, CA 90013 (byInternal Mail) I declare under penalty of perjury under the laws of the State of California the foregoingis true and correct and that this declaration was executed on January 26, 2012, at Los Angeles, California. oe \JaPamela Van Kesteren CQ Declarant Signature LA2009604737 60702244.doc60702244.DOC