Golden State Transit Corporation v. City of Los Angeles

PETITIONER:Golden State Transit Corporation
RESPONDENT:City of Los Angeles
LOCATION:March Air Force Base

DOCKET NO.: 84-1644
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 475 US 608 (1986)
ARGUED: Dec 04, 1985
DECIDED: Apr 01, 1986

ADVOCATES:
John Haggerty – on behalf of the Respondent
Zachary D. Fasman – on behalf of the Petitioner

Facts of the case

Question

Audio Transcription for Oral Argument – December 04, 1985 in Golden State Transit Corporation v. City of Los Angeles

John Haggerty:

This is a situation where the City was acting in response to an application by the Petitioner for a renewal franchise to replace its franchise about to expire.

The Court was asking counsel for the Petitioner about the City’s franchising process.

The City does have a limited number of taxicab franchises.

Taxicab franchises are awarded initially through a bidding procedure when they are to be awarded.

Once a franchise is awarded, though, the city charter specifically provides that the City Council can in its discretion grant a renewal or replacement franchise to an existing franchisee.

Suppose, Mr. Haggerty, the City Council said, the only way to have labor peace in this town is to make a contract with the Teamsters Union.

Assume first that Golden State had no union contract at all.

The City Council said, the only way you can really have a continuity of service is to join up with the Teamsters Union and if you don’t do it, you don’t get… we don’t renew your license.

Could they do that?

John Haggerty:

I think there would have to be some kind of substantial evidence to support the City Council’s conclusion that that was necessary to have an effective–

Let’s assume that that is, the record shows that that’s probably correct.

John Haggerty:

–I would say yes, in that case.

The City Council can then require them to make a contract with the Teamsters Union?

John Haggerty:

I would say that if that is necessary to effectuate a transportation policy that the City Council could arguably make that a condition of the franchise.

It’s not the situation we have here, Your Honor.

It was merely happenstance in this situation that the refranchising process… proceedings took place in a totally unrelated labor dispute.

The City in this situation was acting pursuant to its police powers, and it had to make a decision one way or the other.

It had an application for renewal franchise.

If it took no action whatsoever the franchise would expire by its own terms, so that consequently if they didn’t act, as I said, there would be no franchise renewal.

You’d have the same result that we had here.

That may be so.

It depends on why they took no action.

Do you challenge the proposition that the reason the City didn’t renew was because of the strike, because of the unsettled strike?

John Haggerty:

Your Honor, the record does not reflect that that was a reason of the City Council.

That gets into–

Do you challenge it or not?

My question to you, do you challenge it?

John Haggerty:

–The City’s position was that was irrelevant.

The City never attempted to show–

My question, do you challenge that the City… do you challenge the fact that the City cancelled the franchise because of the strike?

John Haggerty:

–Your Honor, I am saying that I cannot say what the reason for the City Council–

Because the record doesn’t show, you don’t think?

John Haggerty:

–The record shows statements made by certain City Council members, but that does not indicate that was the motive of the City Council.

Warren E. Burger:

Mr. Fasman, you may proceed whenever you are ready.

Was it true that the City never challenged that that was the reason, in the preliminary injunction hearing?

Zachary D. Fasman:

Mr. Chief Justice, and may it please the Court:

John Haggerty:

What happened at the preliminary injunction hearing was that the City Council, in opposition, argued that the motive of the City Council was irrelevant and it was impossible, consequently, for us to… for the City to argue that the City Council’s motive was something else.

Zachary D. Fasman:

This case comes to the Court on certiorari from the Ninth Circuit.

John Haggerty:

Who knows what the City Council’s motive is?

Zachary D. Fasman:

The court below held that the City of Los Angeles had the right to insist that petitioner resolve a peaceful labor dispute with the Teamsters in order to retain in business.

John Haggerty:

As this Court has said many times, just because you may have two or three legislators make certain statements, that doesn’t reflect that the legislative body as a whole acted for that particular reason.

Zachary D. Fasman:

In so holding, the Ninth Circuit made a fundamental error.

How many people on the Council of Los Angeles?

Zachary D. Fasman:

It failed to appreciate that management as well as labor is free to resist its opponent’s bargaining demands and rely upon its economic strength in a labor dispute.

John Haggerty:

There’s 15 people.

Zachary D. Fasman:

If the city had told our striking drivers that their licenses would not be renewed until they went… unless they went back to work within a week, I am confident the Ninth Circuit would not have missed the point, where the conflict between such demand and the right to strike is patent and unmistakeable.

Fifteen?

Zachary D. Fasman:

A host of this Court’s opinions protect those economic prerogatives of organized labor from local government interference.

John Haggerty:

Yes, 15.

Zachary D. Fasman:

Put the fact that we were the object of the city’s coercion rather than our drivers should have made absolutely no difference in either analysis or results.

What about the district court’s findings?

Zachary D. Fasman:

This Court’s opinions have always emphasized that both management and labor have the right to disagree and to rely upon their economic strength in the course of a labor dispute.

Didn’t the district court find it as a fact?

Zachary D. Fasman:

Neither party has a monopoly on economic weapons, and neither has a greater or lesser right to disagree at the collective bargaining table.

John Haggerty:

The district court was somewhat ambiguous, but arguably the district court did make such a finding.

Mr. Fasman, may I inquire about the present status of your client.

John Haggerty:

I should also point out that the city did, in opposition to the motion for preliminary injunction, contrary to what petitioner has argued in the reply brief, contend that the city did have a rational basis for denying the franchise.

Has the franchise period now totally expired?

Los Angeles issues quite a few licenses, isn’t that right, to other businesses?

Zachary D. Fasman:

The franchise that we were seeking at the time would have granted us rights to operate through March 31st of 1986.

John Haggerty:

Well, they issue business licenses but they don’t go through–

And so, is this case moot as a result?

Could they withhold a business license, if we rule with you here could they withhold a business license from a place that has a strike?

Zachary D. Fasman:

I don’t think so, Justice O’Connor.

John Haggerty:

–No, because in this situation I think you have the City acting pursuant to a particular transportation policy, to make sure that there was a healthy taxicab industry, and I–

Zachary D. Fasman:

We were put out of business in 1981 and prevented from operating at that time.

Well, what about a healthy restaurant industry?

Zachary D. Fasman:

We’re still out of business because we don’t have a franchise.

John Haggerty:

–I don’t think transportation policy, in other words, to have an effective transportation or taxicab system operating on the streets of the city is the same as a restaurant business.

Was bankruptcy filed?

John Haggerty:

When a person utilizes a taxicab they’re not able to pick and choose.

Zachary D. Fasman:

Bankruptcy was filed.

John Haggerty:

They have to rely on, as a practical matter, on the first taxicab they hail, the first taxicab they take when they come out of the airport.

Has that proceeded?

John Haggerty:

They don’t know what condition that taxicab is in, whether it has adequate insurance or not, and the courts have said that the regulation of taxicabs is a very unique power of the city insofar as they are using the public streets for a public purpose.

What’s the status of the bankruptcy?

John Haggerty:

In this particular case, I think the key in the analysis of it is, it does not fit into the vast majority of cases that the Supreme Court has decided relating to labor pre-emption.

Zachary D. Fasman:

I don’t know exactly the status of the bankruptcy.

John Haggerty:

This is not a Garment case, insofar as the City is not attempting to regulate or control activities that are protected or arguably protected or prohibited, or arguably prohibited under the National Labor Relations Act, and neither is it a Machinists case.

Zachary D. Fasman:

The bankruptcy has proceeded to some extent, but I honestly don’t know exactly what the status of it is at this time.

John Haggerty:

In this case the court… I’m sorry, the City, in taking its action, was acting on a franchise renewal.

So, what saves this case from mootness, then?

John Haggerty:

It was not directly regulating contact or activity meant to be immune under the National Labor Relations Act.

Zachary D. Fasman:

Well, I think the fact is, first, that we continue to suffer the effects of the denial of the franchise.

John Haggerty:

So, I do not think that this is a Machinists case.

Zachary D. Fasman:

We are still out of business.

John Haggerty:

I think the proper test is that when exercising a routine governmental power which has an incidental or indirect effect on a party to a labor dispute, the proper test is that based on objective evidence, is the action taken reasonably connected to the effectuation of the legitimate governmental goal, and in this case the facts support that particular test.

Zachary D. Fasman:

We are prepared to go back into business if we can get a franchise, number one.

John Haggerty:

I think it is the City’s business to have a good taxicab system.

Zachary D. Fasman:

Number two, as we pointed out in our reply brief–

John Haggerty:

At the time the City Council acted on this matter, the Petitioner had been on strike for 40 days.

Is it a Chapter 11?

John Haggerty:

There was uncontested evidence presented to the City Council at the hearing that there was sufficient taxicab services without the operation of Petitioner’s taxicabs.

Zachary D. Fasman:

–It’s a Chapter 11, yes.

Then why should they grant a license, ever, to anybody?

Zachary D. Fasman:

Number two, as we pointed out in our reply brief, we believe that we have a viable damage claim for being put out of business over these last five years, and that, we think, saves us from mootness as well.

John Haggerty:

Well, if there was no further need for taxicabs, they wouldn’t.

Zachary D. Fasman:

It seems to me, though, that the ultimate answer to mootness is that the city’s argument appears to be that, if we have granted you a franchise in 1981 as we should have, you might not have lived up to the terms of that franchise.

You mean, they didn’t need the 400 cabs of Golden State?

Zachary D. Fasman:

You might not have been qualified for renewal and therefore you might be out of business anyway.

John Haggerty:

That’s what the evidence at the Council showed, and contrary to what the Petitioner said, the record does not show that with the Petitioner’s non-operation that additional cabs came onto the streets.

Zachary D. Fasman:

I think that type of hypothetical argument is really stretching a long way to get mootness into a case where we’re ready to resume our business at this point.

John Haggerty:

In fact, as Petitioner indicated, shortly thereafter, I think Petitioner said ten days after the grant of the preliminary injunction, the City Council imposed a freeze on taxicabs.

Zachary D. Fasman:

The Ninth Circuit in its decision seemed not only confused by the difference between management and labor, but it also seemed confused because the city drove us out of business by refusing to renew our franchise.

They just put a limit on the number of cabs each company could have?

Zachary D. Fasman:

A decision not to renew a franchise is no more sacrosanct than a decision not to grant a driver’s license, or to deny unemployment compensation, or to grant the damage remedy.

John Haggerty:

Each company could have, that’s correct.

Excuse me for interrupting you again, but I’m reminded in looking at my notes that I believe the only thing that your client sought below was injunctive relief on the pre-emption claim and not damages and not due process or any other claim.

But they didn’t say that they wouldn’t grant any more licenses to others?

So, what relief of an injunctive nature would possibly help now, with an expired franchise?

John Haggerty:

It didn’t say that, but before they could they would have to go through a bidding procedure.

Zachary D. Fasman:

Well, first of all, it seems to me that a federal court can tell the city to issue the franchise that it improperly denied.

Yes.

Zachary D. Fasman:

The city has authority to issue franchises for up to ten years.

John Haggerty:

And the testimony before the City Council, from the president of an independent drivers’ association, was that with the non-operation of the Petitioner’s taxicabs the doormen at the major hotels stated that the quality of the service had improved, and that drivers for the first time in two and a half years were able to make a decent minimal living.

Zachary D. Fasman:

There was nothing inherent about the five year franchise.

Mr. Haggerty, the case comes on summary judgment.

Zachary D. Fasman:

They could have issued us a franchise that would have gone through 1990 in the first place.

Are you saying to us that we can assume that even if the strike had been settled that the franchise would not have been renewed?

Zachary D. Fasman:

Secondly, the characterization of the complaint as to deny a damage remedy on the pre-emption claim is not one with which we agree.

John Haggerty:

That’s what I’m saying, Your Honor.

Zachary D. Fasman:

We think that we do have a viable damage remedy under 1983 for being put out of business.

On summary judgment, we can say the strike had absolutely nothing to do with the decision?

But that wasn’t before the Court?

John Haggerty:

I think as a matter of law that, based on the tests I have suggested, because I said this does not come, I believe, within the Machinists case as counsel has argued, because here you have the City exercising a legitimate police power, namely acting on the request for the renewal of a franchise.

Zachary D. Fasman:

Pardon?

And they would have exercised it in the came way even if there had been no strike?

That was not claimed or sought?

John Haggerty:

Well, again that’s asking me to speculate.

Zachary D. Fasman:

Oh, certainly it was, certainly.

John Haggerty:

I don’t know, again, what the–

Zachary D. Fasman:

It’s claimed.

Well, but the record… on summary judgment you take the facts against you, as I understand it.

Zachary D. Fasman:

We pleaded the case under 1983.

John Haggerty:

–That’s correct.

Zachary D. Fasman:

We think there are three independent counts in each one, supported damage claim, although as the city properly notes, we did not seek certiorari in the due process or equal protection violations themselves.

John Haggerty:

But I think, based on the facts in this case, there was sufficient evidence in the record to support the Council’s action to not renew the franchise insofar as the record shows that there were sufficient cabs operating on the city streets without these particular taxicabs.

Zachary D. Fasman:

But we think there have always been three claims in the lawsuit.

What if the surplusage was the motivating background here?

Why not solve that by pointing out the damage claim?

Then, we wouldn’t have any pre-emption issue at all, would we?

Zachary D. Fasman:

Pardon?

If they said, we’ve got enough taxicabs and the boys aren’t making a good living and they’re cluttering up the streets so we’re not going to give you a franchise for your 400 cabs, then there wouldn’t be any labor question at all, would there, Labor Act question?

Pointing out the damage claim to me, so I can see it.

John Haggerty:

If they had made a specific finding that is correct, but there was no specific fining.

Is it in the appendix?

You are suggesting that was the reason?

Zachary D. Fasman:

Yes, sir.

John Haggerty:

No, I’m just saying… I’m not suggesting that was the reason.

Zachary D. Fasman:

The complaint is.

John Haggerty:

I’m saying there’s evidence… first of all, I should say that I’m not arguing what the motive of the Council was or was not.

Zachary D. Fasman:

The complaint is in the appendix.

John Haggerty:

What I’m arguing–

So, you just ask damages for violation of federal statute?

Therefore you’re saying that whatever the motive was, it was right?

Zachary D. Fasman:

Exactly.

John Haggerty:

–That based on the record in this case, the evidence before the City Council indicating there were sufficient cabs on the street, that the Council acted properly in not renewing the franchise.

Zachary D. Fasman:

The second cause is damages for violation of civil rights.

John Haggerty:

And the debate before the Council shows that the Council members were very concerned about the effect of their action.

Zachary D. Fasman:

Page 13 of the joint appendix notes the property rights that we are talking about, and they include its ability or our ability to freely bargain with the union, and its business.

John Haggerty:

There is discussion by the Council members, lengthy discussions, about the desire to act in the public interest, and the Council members even state in their the Council members never even stated in their remarks–

Zachary D. Fasman:

That, I think, lies at the heart of it, that we lost our business.

That certainly is asking for affirmance on a completely different ground, and that would have been an awfully easy way for the City to dispose of the whole case, from the time of the preliminary injunction hearing on up to any of the courts.

You point out, $10,000.

But you never took that position before, did you?

Zachary D. Fasman:

$10 million.

John Haggerty:

–Oh, yes.

Yes, $10 million.

John Haggerty:

The City most certainly has… I took the position–

Profitable company.

Well, certainly the courts below didn’t find that.

Zachary D. Fasman:

In any event, we believe that the case is not moot for those reasons.

John Haggerty:

–The district court did not find that, but in the first court of appeals decision reversing or vacating the granting of the preliminary injunction, the court pointed out that the motive for the City Council was irrelevant.

Zachary D. Fasman:

We were… I mean, realistically we were driven out of business for refusing to settle the strike.

John Haggerty:

Petitioner argued that the motive of the Council was to assist the Teamsters, and it was the City’s position that that was irrelevant.

Zachary D. Fasman:

We’re still out of business.

John Haggerty:

Who knows what the motive was, and since the City was in no position to claim that the Council’s motive was something different, the City wasn’t in a position to contradict that and say the motive was such and such as opposed to what the Petitioner has urged.

Zachary D. Fasman:

This was the largest taxicab company in the city of Los Angeles.

Well, do you see a difference, Mr. Haggerty, between saying that the reason the City cancelled the franchise or refused to renew the franchise was because Golden State was in a labor dispute, that’s point one, and to say that the City cancelled or refused to renew the franchise because it wanted to help the Teamsters in that labor dispute?

Zachary D. Fasman:

It was operating 400 taxicabs.

John Haggerty:

Yes, Your Honor, because I think the record… based on what the Council did, there was no assistance to the Teamsters because the drivers were put out of work as well.

Zachary D. Fasman:

And I have a client who would go back into business today and who thinks that he’s been improperly treated and thinks that the city should compensate him for that, and I don’t think that’s an extraordinary proposition nor do I see how a mootness count arises in that situation, at least not a viable one.

Let me just go back to this other point a moment.

Zachary D. Fasman:

Nothing in the… as I was saying, the Ninth Circuit seemed also confused because of the franchise issue in this case, but nothing about a franchise.

Isn’t it correct that the court of appeals, as the basis for its decision, assumed that the City insisted upon a renewal… I mean, insisted upon a resolution of the labor dispute as a condition of renewing the franchise?

Zachary D. Fasman:

Nothing in the inherent nature of a franchise in the Court’s opinions, in logic, indicates that the denial of a franchise or the exercise of local franchising authority should be treated any differently for pre-emption purposes.

John Haggerty:

The court of appeals made that statement but I believe that was a gratuitous statement.

Zachary D. Fasman:

Franchising, it seems to me… refusing to renew or extend our franchise in this case was merely the means by which the city imposed its will upon us and drove us out of business for failing to settle the labor disputes within the time allotted.

John Haggerty:

I do not believe it was necessary for the court of appeals’ decision.

Well, what if, Mr. Fasman, the City of Los Angeles proposed to let a large contract and in reviewing the four final bidders said of three of them, you three have a history of strikes and labor disputes.

John Haggerty:

The court of appeals also said the city was pursuing–

The fourth doesn’t.

What you are saying is, they could have decided the case in some other way?

Otherwise your bids are all equal so we’re going to take the person who doesn’t have a history of strikes and labor disputes.

John Haggerty:

–That’s right, that the City was pursuing a legitimate transportation policy.

Zachary D. Fasman:

Well, Justice Rehnquist, it seems to me that when you’re talking about letting a contract you’re talking about something different than we have here.

Yes, but on summary judgment, and if there’s some evidence supporting the proposition that if they went to trial they contend they could prove that the only reason for the non-renewal was the labor dispute, don’t we have to assume they can prove that?

Zachary D. Fasman:

Remember, this is a franchise where all the city is doing is certifying that we’re qualified to do business with the general public of the city of Los Angeles.

This is a summary judgment case.

It would be different if the City said, we’re going to only franchise one taxi company and you had four competitors of the kind I’ve just described, it could then say, well, take the one without the history of union troubles?

John Haggerty:

But again, in the test I suggested to the Court I think it’s a question whether or not there was substantial evidence in the record to support the conclusion that the City was acting to further a legitimate governmental purpose, namely transportation purpose, because based on the evidence–

Zachary D. Fasman:

No, I don’t think it could, any more than it could say, we’ll take the one that is not organized because when you have a union involved there’s the possibility of work stoppages.

Is that just a long way of saying the question is whether, not doing business with a company that has a labor dispute is a legitimate governmental purpose?

Well, then why doesn’t your reasoning carry over to the letting of a contract?

John Haggerty:

–No, that is not a long way of saying it because it would be up to the Petitioner through objective evidence in opposition to the motion for summary judgment to show that there was not substantial evidence supporting the proposition–

Zachary D. Fasman:

Well, I think the contractual difference is this, that when you let a contract it seems to me that the city’s remedy power in a contractual situation does not go to the company’s viability.

Well, they have offered some such evidence and it seems to me on summary judgment, we have to assume that everything they offer is true and everything you offer is not true.

Zachary D. Fasman:

It’s one thing to say, I don’t have a right to do the city’s business, but I still have a right to exist.

I mean, we just have to resolve all factual disputes against you, don’t we?

Zachary D. Fasman:

I still have a right to sell my goods to people down the street.

John Haggerty:

–All factual disputes, but I believe as a matter of law, if the evidence is such in the record to show… and I’m repeating myself, I realize that there was a legitimate transportation purpose, then that is sufficient.

Zachary D. Fasman:

I still have a right to sell… to put my taxicabs out.

John Haggerty:

As to the argument made by the Petitioners as to the effect test, and the question as to whether or not the granting of this franchise was any different than the granting of a contract, that arguably the granting of a major contract could bring pressure upon an employer just as the granting of a franchise.

Zachary D. Fasman:

It’s another thing for the city to say, you have a history or strikes, or you’re organized, or you have a strike right now and therefore you’re out of business, you no longer are authorized to do business in this city.

John Haggerty:

Since we’re talking about congressional intent here, the argument made by the petitioners as to the effect test, and as to the question as to whether or not the granting of this franchise was any different than the granting of a contract, that arguably the granting of a major contract could bring pressure upon an employer just as the granting of a franchise.

Zachary D. Fasman:

And it seems to me, that’s the critical difference.

John Haggerty:

Since we’re talking about congressional intent here, I don’t think there is any distinction made by the Congress as far as the granting of a franchise and the granting of a contract.

Zachary D. Fasman:

What they’re doing here, it seems to me, is merely defining what I call the naked public interest and saying that the public interest of the City of Los Angeles is that companies that do business with us cannot have strikes.

John Haggerty:

You could have a situation where the City was going to grant a franchise for the collection of garbage.

Zachary D. Fasman:

And that is not, that do business with us, that do business within the city, that service our consumers, cannot have strikes.

John Haggerty:

If there was a strike and it was in evidence that the collection would not occur, certainly the City would be justified in not granting that franchise if they realized that the garbage collection would not result.

Zachary D. Fasman:

And, that’s a decision that I think Congress has foreclosed.

John Haggerty:

The City was in a situation here that no matter what it did the argument could be made that the City was pre-emptive.

Zachary D. Fasman:

Congress has said there shall be strikes and the public shall tolerate the disruption and inconvenience that sometimes flows from strikes.

John Haggerty:

If it had not renewed the franchise the union… I’m sorry, if it had renewed the franchise the union could come back and argue that by renewing the franchise, using the argument of petitioner that the City was actually assisting the employer in is labor dispute, and consequently the city would be pre-empted under those circumstances as well.

Well, but I would think again, logically your argument carries over the contract situation.

John Haggerty:

In fact, if the City had taken no action whatsoever, using petitioner’s argument, the City would have been pre-emptive.

Maybe the City of Los Angeles is required by federal labor policy to just tolerate strikes on the part of people it contracts with.

John Haggerty:

But again, I don’t believe that the pre-emption doctrine mandates that the City grant the franchise, and yet the non-granting of the franchise… or, I’m sorry, not taking any action on the franchise would have had the same effect as the action that the Council took.

Zachary D. Fasman:

Well, no.

I think the petitioner can see that if the City Council had said, look, we are either going to renew your franchise because we think you’ve been doing a fine job, or we’re not going to renew your franchise because we think you’ve been doing a very poor job.

Zachary D. Fasman:

It seems to me that the City of Los Angeles has remedies, just as the federal government has remedies.

That would be permissible even in the middle of a labor dispute.

Zachary D. Fasman:

If you don’t perform your contract they can sue for consequential damages.

John Haggerty:

I don’t believe that petitioner does concede that, at least in the petition.

Zachary D. Fasman:

They can invoke a host of other remedies.

John Haggerty:

That is not petitioner’s argument.

Zachary D. Fasman:

But they can’t say, you’re out of business.

John Haggerty:

Petitioner is arguing based on the Machinists test that an action that the City would take, affecting a party to a labor dispute, is pre-emptive.

By my hypothesis, the City of Los Angeles is turning down three out of four contracts in advance because they have a history of strikes and labor trouble.

John Haggerty:

So, in the hypothetical you gave, Justice Rehnquist, I believe based on petitioner’s argument that the City would be pre-empted in that situation as well because it would have the same effect.

Zachary D. Fasman:

That’s in the contract setting.

Well, in that case once someone gets in a labor dispute, they’re prohibited from having any dealings, I take it, with a public body, if what you say is petitioner’s position is right.

Yes.

I didn’t think it went that far.

Zachary D. Fasman:

Where they’re trying to accomplish some finite goal, build a building.

John Haggerty:

Well, if you use an effects test as petitioner does, I believe that is petitioner’s argument.

Right.

John Haggerty:

Getting to the issue of mootness, I should point out that in the record… it’s not in the joint appendix but in 103 of the record, the issues of law as raised by the petitioner on page 16, they indicate that there’s two issues of law and the first issue is whether or not the defendant’s denial of the plaintiff’s franchise renewal was contrary to a compelling Congressional direction to deprive local governments of the power to interfere with public utilities engaged in collective bargaining disputes, and therefore in violation of the supremacy clause of the Constitution.

Zachary D. Fasman:

By a time certain.

John Haggerty:

Petitioner does not argue in… at least as far as what they claim are the issues in this case, that the violation or the non-granting of the tax-exempt franchise and the alleged violation of the supremacy clause was also a violation of the Civil Rights Act.

Zachary D. Fasman:

I would have more trouble with that, but I don’t think that’s this case.

John Haggerty:

So, in conclusion, I believe it’s a situation that no matter what the City did in this case, it would have had an incidental effect on the labor dispute and the City was within its regulatory power to take the action that it did insofar as there was sufficient evidence, I believe, in the record to show that the Council was acting for an appropriate transportation purpose.

Zachary D. Fasman:

I honestly don’t know how I would come out on that.

Do you have anything further, Mr. Fasman?

Zachary D. Fasman:

But I think there’s a clear distinction, at least to me, between a situation where they’re just saying, you can go out, you’re authorized to operate in the marketplace, and where the City has some finite goal, building a building, building a swimming pool before the Olympics where timely performance is an element of what they’re doing.

You have three minutes remaining.

Zachary D. Fasman:

That’s not what we have here.

Mr. Chief Justice, just two or three quick points.

What we have here is merely a company that was seeking to continue serving the consumers of Los Angeles, and that seems to me a determinative difference in this case.

Justice Rehnquist, I certainly do concede, and we’ve conceded in the reply brief the point that you brought up, we don’t contend that any action the City takes that affects the substantive outcome of a labor dispute is forbidden.

The criminal point for us about this case is that the City, at the bebest of the Teamsters Union, forced us to choose between our position in collective bargaining and remaining in business, and it’s our position that that choice cannot be imposed consistently with the federal labor laws.

We’ve got an action here that affects the labor process, the bargaining process itself.

Our labor laws are premised upon a notion of private industrial dispute settlement, the process of free and voluntary collective bargaining, in which management and labor resolve their disputes free from government interference, is the keystone of the federal scheme to promote industrial peace.

If the question were, are the teamster drivers at Golden State making $400 instead of $500, we wouldn’t be here.

Does Los Angeles have a limited number of taxicabs, or do they just give a franchise to any company that comes along that shows it’s able to operate taxicabs?

Zachary D. Fasman:

The point is, my client was prevented from bargaining in good faith and from using the economic weapons that Congress put at its disposal, and that’s the key issue from our point of view.

At the time, Justice White, there were 13 companies that held franchises for the City of Los Angeles.

And if the Los Angeles City Council had said, we know that Golden State is in a labor dispute but nonetheless we’ve been dissatisfied with their performance for a couple of years and we’re going to terminate them right now, that would be okay if that’s their real motive?

Zachary D. Fasman:

When this occurred there was no limit upon the number of cabs that we could put on the street.

Zachary D. Fasman:

Sure, no problem.

Did the City say, well, we’ve got enough cabs now, no one else need to apply?

Zachary D. Fasman:

We don’t have any trouble with that.

They never did say that at this time.

And it relates to the hypothetical that you mentioned earlier.

Indeed, a year before this dispute–

I mean, the marketplace continues to operate whether there’s a labor dispute or not.

I suppose the City is certainly entitled to make sure that there are enough cabs in town to do the job.

Zachary D. Fasman:

In the action, what happens in the marketplace has an impact, of course, on the substantive outcome but it doesn’t have any impact upon the bargaining process itself.

–I think they probably are, no question.

Our point is simply this.

And if you’re the largest taxicab company in town and you’re on strike, and they have to replace you if there are going to be enough cabs, and if they have a limit on the number of cabs, it certainly changes the flavor of the case.

Zachary D. Fasman:

If one party to a labor dispute can go to the state or local government and have its opponent legislated out of existence, which is what happened here, there’s no impetus for compromise, settlement.

Well, it may change the flavor of the case but I don’t think that they can, because we’re on strike say, we’ve replaced you, you need never come back.

There’s no impetus for bargaining at all.

It seems to me there are alternative ways to deal with that.

Bargaining doesn’t exist in these situations.

And in this case, the other companies that were in business, the 12 other companies and the two independent associations who were operating 400 cabs between them, had complete authority to increase their fleet size as they saw fit.

Congress understood that.

They could put people back on the street, and that apparently is what happened because the evidence before the City Council indicated that there were no complaints because of the strike, that the other operators had picked up the slack, were running their cabs two and three shifts.

Congress closed the doors to the City Council chamber for just this reason and said to management and labor, you folks have to look for solutions to your problems at the bargaining table from each other and not from government, and that is what happened here.

There is at least one city that the cabs are limited.

Warren E. Burger:

Thank you, gentlemen.

Zachary D. Fasman:

Pardon me?

Warren E. Burger:

The case is submitted.

There is at least one city, New York, where there’s a limit.

Zachary D. Fasman:

I understand–

You have to have a medallion.

After about 50 years they decide to–

Zachary D. Fasman:

–I understand.

Zachary D. Fasman:

I understand.

And the City did issue seals in this case, but the number of seals at the time of this dispute was not limited.

I ought to add that there were maximum fleet size limits in the cab industry in Los Angeles before this dispute, and after this dispute there were maximum fleet size limits imposed.

But at the time of the dispute it was open season.

In fact, there was a maximum fleet size limit imposed in this case ten days after the preliminary injunction was granted.

The legislative history of the Wagner Act, it seems to me, completely supports our position that neither party is required to agree with demands made at the bargaining table.

The Wagner Act is based upon, premised upon the notion of freedom of contract.

The notion of freedom of contract, voluntary agreement, was made explicit in Section 8-D of Taft-Hartley which itself states that the duty to bargain does not compel either party to agree to a proposal or require the making of a concession.

This Court held in Machinists that state or local attempts to force the parties to an agreement are as inconsistent with the federal scheme as are such attempts by the Board.

This Court’s opinions also clearly recognize that management and labor are both entitled to rely upon their economic strength in a labor dispute.

In 1935 Congress expressly granted labor the right to strike, implicitly granted management corresponding rights including the right to replace, the right to lock out, and Congress thereby struck a balance between the interests of management, labor, employees and the general public.

–Mr. Fasman, incidentally, was any unfair labor practice charge filed?

Zachary D. Fasman:

No, Justice Blackmun, there was never any unfair labor practice charge filed, although as we’ve made clear the Teamsters did come before the City Council and complain that we were bargaining in bad faith, but they never took that to the Board.

Over the last 50 years Congress has gone back and has revised the economic balance that I’ve mentioned earlier.

It has in 1947, it outlawed secondary boycotts.

In 1959 it put limits on recognition of picketing.

But, Congress has never varied from the fundamental premise that management and labor are entitled to engage in economic warfare and that the national interest requires that the public tolerate disruption that arises from strikes and labor disputes.

Indeed, each time Congress has considered the question it has reaffirmed its original decision that there should be free collective bargaining and free resort to economic weaponry by management and labor.

In 1947 Congress defeated proposals to impose a regime of compulsory arbitration upon local utilities including local transportation companies.

In 1974 when Congress amended the Act to include hospitals, it rejected attempts to ban strikes in hospitals and to impose instead a regime of compulsory arbitration, and indeed went so far as to preclude attempts by Members of the Senate to exempt their own state compulsory arbitration laws in the hospital setting from the range of federal pre-emption.

At each and every juncture over the last 50 years Congress has reaffirmed its original judgment that there shall be strikes and that government coercion in the bargaining process is antithetical to our labor system.

The City’s action here is ultimately inconsistent with that repeated congressional judgment.

An employer simply is not free to disagree with the union if it’s got to compromise its disagreement in order to avoid legislative extinction.

It is not free to conduct economic warfare if it’s got to settle a labor dispute by a fate certain in order to remain in business.

Congress has determined that the resolution of labor disputes is to be resolved by the free play of economic forces, and that just simply did not happen here.

The Ninth Circuit created a pre-emption test to avoid this result that is equally inconsistent with the intent of Congress.

The court below held that the City’s conduct would not be pre-emptive unless the City attempted to dictate the terms of a collective bargaining agreement or attempted to directly alter the substantive outcome of a labor dispute.

Now, it’s true, of course, that attempts to dictate a collective bargaining agreement, to alter the outcome of a labor dispute, if I understand what that means, are antithetical to the labor laws, but in limiting pre-emption to those two circumstances the Ninth Circuit failed to understand that Congress was ultimately interested in the bargaining process itself and that interest in the bargaining process, reflected in this Court’s unanimous decision last term in Metropolitan Life Insurance versus Massachusetts, where the Court stresses that the interest of Congress lay not with the substantive terms that the parties might negotiate in a labor agreement but rather with creating a fair and balanced bargaining process by which the parties could resolve their disputes.

The States may have some latitude in setting–

Mr. Fasman, does your argument really come down to this, that Congress in effect has said that this particular economic weapon shall not be regulable either by the federal government or by the States?

Zachary D. Fasman:

–Exactly.

Is that what it comes down to?

Zachary D. Fasman:

Exactly, exactly.

It’s a classic Machinists case where we have the right, it seems to me, to disagree with the union.

We have the right to resist their strike.

Those are key elements of the collective bargaining system that we have and they’re not regulable by the NLRB or by the state and local governments.

This fits right, directly in the middle of the Machinists case.

There is absolutely no–

Machinist involved a state regulation directed at regulation of labor conduct.

This is just a decision of the City of Los Angeles not to renew a franchise.

It isn’t quite the same thing.

Zachary D. Fasman:

–Well, it isn’t quite the same thing, but again I think the distinction that you’re drawing between direct and indirect regulation, while understandable, has not fazed the court before.

The courts always looked, it seems to me, to the effect of the city’s regulation.

If you’re right that indirect… direct doesn’t mean anything, then the previous contractor’s example would surely fall too.

Zachary D. Fasman:

No, I don’t think so.

I don’t think so.

Because the point that I was making was, the congressional interest is in the bargaining process itself, and it seems to me that when you deny a franchise because of what happens in the bargaining process, you’ve got a somewhat different case than the contract case that you’re talking about.

Is there any question in the case that the reason the franchise was denied, was not renewed, was because you were on strike?

Zachary D. Fasman:

I don’t believe there is.

That is, there is a factual dispute that has been raised.

Didn’t the Ninth Circuit assume that that was the case?

Zachary D. Fasman:

The Ninth Circuit… I don’t know if it’s an assumption.

The Ninth Circuit clearly said it, and twice, and there is ample evidence in the record to support that.

It’s plainly not clearly erroneous.

Indeed, the finding of the district court, the initial district court finding that this is what happened, was affirmed twice by the Ninth Circuit and I think the attempt to inject a factual argument at this point in the case is plainly wrong for the reasons we’ve outlined in the reply brief.

Let me add one final thought.

On that point, Mr. Fasman, I didn’t really understand what the second Ninth Circuit opinion did adopt.

It said something to the effect that nothing in the record indicates the City’s decision was not concerned with transportation, kind of a double negative there.

I didn’t know what they meant, and I didn’t know whether that was overturning the earlier district court finding that a city’s decision to decline to renew the franchise was based solely on the strike, or what.

Zachary D. Fasman:

Well, first of all, Justice O’Connor, that is not what the Ninth Circuit said.

Zachary D. Fasman:

What the Ninth Circuit said was, and I quote from page 7-A of the petition, nothing in the record indicates that the City’s refusal to renew or extend Golden State’s franchise until an agreement was reached and operations resumed was not concerned with transportation, no difficulty in seeing what they’re saying.

They’re saying that the decision not to renew, not to extend until you settle the strike might have been concerned with transportation, and on the next–

Well, it was just a bit ambiguous, and might have been intended to suggest that there were too many taxicabs and so their decision was based on trying to improve the transportation situation.

Zachary D. Fasman:

–Well, that’s certainly… I have to say that I’m sort of puzzled by the Ninth Circuit opinion myself, but I will note that in footnote one of that opinion, on page 4-A of the petition, the appendix to the petition, there’s an explicit statement by the Ninth Circuit saying, we uphold… essentially, we uphold for a second time the finding of the district court in the injunction proceedings, that one effect of this conduct was to change the balance of bargaining power between the parties.

Judge Norris took the position that your client simply had not introduced any evidence to support its factual contentions under the NLRA.

Zachary D. Fasman:

That, Justice Rehnquist, is the most mysterious aspect of the Ninth Circuit opinion.

I truly… I mean, I can understand a lot of things about the Ninth Circuit opinion but, I mean this is a case where if you admit, as I think Judge Norris does, that the reason for denying the franchise is the strike, it seems to me that at that point it becomes a res ipsa loquitur case.

I don’t know how you get around the effect of that conduct on the parties.

Well, the district court found it as a fact?

Zachary D. Fasman:

Yes, it did, on the preliminary injunction, affirmed on appeal, affirmed a second time on appeal over the dissent of Judge Norris who then came up with his theory that we hadn’t shown effect.

I’m not entitled to show you how I would show effect, outside of what we’ve shown in the record here.

Mr. Chief Justice, may I come back to the question, what fact did the district court find that justifies your position, what fact or facts?

Judge Norris said that you have not proved the basis for the claim that you made.

Zachary D. Fasman:

Justice Powell, what the district court found was that at the time it went to the preliminary injunction stage, it was undisputed that our franchise had been denied because of the strike.

The City didn’t even contest it.

The district court found that?

Zachary D. Fasman:

Yes, twice in its opinion.

Well, you don’t need to read it to me.

Zachary D. Fasman:

Well, it does say two different times, in Judge Haupt’s opinion, and it’s cited in our brief–

In the findings of fact of the district court, I didn’t see any specific findings that support your position that there are inferences that can be drawn from the letter written to the Mayor and members of the Council, from certain statements that were made at the Council hearing, but no factual finding.

Zachary D. Fasman:

–I think in the preliminary injunction hearing there was in fact a factual finding and indeed the court says twice, in its opinion it is undisputed that the reason this was denied was because of the strike and that changed the balance of bargaining power in the labor dispute.

That is what had the effect on the labor dispute, and I think that’s clear in the opinion.

The case is on summary judgment, isn’t it?

Zachary D. Fasman:

Yes, it was, cross motions for summary judgment.

Mr. Chief Justice, with the Court’s permission I’d like to reserve for rebuttal.

Warren E. Burger:

Mr. Haggerty.

John Haggerty:

Mr. Chief Justice, and may it please the Court.