ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
For more than twenty five years, the City and County of San Francisco has required City contractors, as a condition of doing business with the City, to pledge that they will not discriminate against their employees on the basis of sexual orientation. That policy is not challenged in this lawsuit and is not addressed by this order. In 1996 and 1997, the City took steps to make the nondiscrimination requirements more concrete, enacting an ordinance barring the City from contracting with companies whose employee benefit plans discriminate between employees with spouses and employees with domestic partners. These nondiscrimination requirements apply to the contractors' activities throughout the United States. The issue before the Court is whether the City has reached beyond the limits of its power within the federal system of government 1) by applying these nondiscrimination requirements specifically to employee benefit plans, and 2) by attempting to regulate City contractors' conduct throughout the United States. On both counts, the answer largely is yes. Congress has explicitly restricted local governments' ability to regulate employee benefit plans. Moreover, the United States Constitution prevents local governments from regulating commerce that takes place entirely in other States. These two principles largely invalidate the Ordinance.
The Court disposes of the legal challenges to the Ordinance as follows. First, the City properly exercised the power given it under the California Constitution to enact the Ordinance. Second, the Board of Supervisors did have the power under the San Francisco City Charter to enact the Ordinance as it applies to the San Francisco International Airport. Third, however, the Ordinance violates the United States Constitution because it impermissibly regulates out-of-State conduct that is not related to the purpose of a contract with the City. Fourth, the Ordinance is preempted by the Employee Retirement Income Security Act (ERISA) insofar as it affects ERISA plans providing ERISA-covered benefits and insofar as the Ordinance is applied to Airport contracts. ERISA-covered benefits include health and pension plans, family medical leave an bereavement leave, but do not include memberships and membership discounts, moving expenses, or free or discounted airline travel benefits. Fifth, the Ordinance as applied to Airport contracts is not preempted by the Airline Deregulation Act (the ADA) unless the burden of complying with the otherwise-valid portions of the Ordinance is so onerous that air carriers would practically be forced to stop using the Airport. Finally, the Ordinance is not preempted by the Railway Labor Act (the RLA), the federal law regulating labor relations in the air transportation industry. The Court construes the regulations implementing the Ordinance so as to avoid the only possible conflict with this law, and thus rejects this preemption argument.
In sum, the Ordinance is unconstitutional as applied to out-of-State conduct that is unrelated to the purpose of a City contract. It is federally preempted as applied to Airport contracts insofar as it affects ERISA plans providing ERISA-covered benefits. With respect to other benefits, the Ordinance is also federally preempted if the burden of complying with the otherwise-valid portions of the Ordinance practically forces air carriers to stop using the Airport.
Plaintiffs move for summary judgment on all of their claims that the San Francisco Ordinance is invalid, except on their claim that it violates the dormant Commerce Clause because it imposes an undue burden on interstate commerce. (Docket # 60-1)
Defendants oppose Plaintiffs' motions for summary judgment and move for summary judgment on all of Plaintiffs' claims, including their claim that the Ordinance violates the dormant Commerce Clause. (Docket # 63-1) Defendants also request that the Court deny or continue Plaintiffs' motions for summary judgment pursuant to Federal Rule of Civil Procedure 56(f) because Defendants have not had an adequate opportunity to depose Plaintiffs' declarants or complete discovery. Plaintiffs oppose Defendants' motions and their application for a Rule 56(f) continuance. The Court grants Plaintiffs' motions for summary judgment in part, grants Defendants' motions for summary judgment in part, and denies summary judgment as to the remaining issue.
I. The Parties
Defendant City and County of San Francisco (the City) owns and operates San Francisco International Airport (the Airport), which is located in San Mateo, California, outside the City's borders. As of the summer of 1997, sixty nine airlines operated at the Airport, including forty regularly-scheduled passenger airlines, seventeen cargo airlines, eight seasonal or charter airlines, and four commuter airlines.
The San Francisco City Charter (the Charter) confers on Defendant Airport Commission power over the "construction, management, supervision, maintenance, extension, operation, use and control of all property [at the Airport], as well as the real, personal and financial assets which are under the Commission's jurisdiction." Charter § 4.115. The Charter confers on the City's Board of Supervisors the power to set overall objectives for the Airport Commission to follow, and to prescribe "other powers and duties" for the Commission in addition to those specifically enumerated in the Charter. Charter § 4.102(1), (8). The Charter generally prohibits interference by members of the Board of Supervisors in the administration of City commissions, but this section specifically exempts legislation regarding administrative matters "other than specific contract and personnel decisions." Charter § 2.114.
Defendant Human Rights Commission (the HRC) of the City holds power under the Charter to "implement the provisions of ordinances prohibiting discrimination in all contracts and subsequent subcontracts, franchises, leases, concessions or other agreements for or on behalf of" the City, which includes the power to promulgate implementing regulations. Charter § 4.107(6), (7).
Plaintiff Air Transport Association (the ATA) is the principal trade organization for airlines based in the United States. One of its purposes is to advocate the industry's positions before State and local governments and in the courts. As of the summer of 1997, sixteen members of ATA flew into the Airport, including United Airlines (United) and Federal Express.
Plaintiff Airline Industrial Relations Conference (AIRCON) is another airline trade organization formed to exchange labor relations information and advocate for the industry in government, judicial and agency proceedings relating to labor relations. As of the summer of 1997, fifteen members of AIRCON flew into the Airport, including United and Federal Express.
II. The Ordinance and the Implementing Regulations
Since 1972, the San Francisco Administrative Code has barred the City from contracting with companies that discriminate on the basis of sexual orientation. See S.F. Admin. Code Chap. 12B. In a series of legislative actions beginning in the fall of 1996 and extending through the spring of 1997, the City's Board of Supervisors passed ordinances amending Chapter 12B. These amendments (collectively referred to hereinafter as the Ordinance) restrict the City from contracting
with companies that do not provide benefits to their employees' domestic partners to the same extent they provide benefits to employees' spouses.
Specifically, the Ordinance bars any company that discriminates in the provision of benefits "between employees with domestic partners and employees with spouses, and/or between the domestic partners and spouses of such employees, where the domestic partnership has been registered with a governmental entity pursuant to state or local law authorizing such registration." S.F. Admin. Code § 12B.1(b). The Ordinance also requires that every City contract incorporate language whereby the prime contractor agrees that it will not discriminate in the provision of employee benefits during the term of the contract. Id. at § 12B.2(b). The Ordinance applies to any employee benefits, but it includes a non-exclusive illustrative list: "bereavement leave, family medical leave, health benefits, membership and membership discounts, moving expenses, pension and retirement benefits or travel benefits." Id. at §§ 12B.1(b), 12B.2(b).
The Ordinance provides that a potential contractor will not be deemed to discriminate in the provision of benefits in two situations. First, if a contractor's actual cost of providing a certain benefit for the domestic partner of an employee exceeds that of providing the benefit to a spouse and the contractor provides the benefit on the condition that the employee pay the excess cost, the contractor is not deemed to discriminate. Id. The same rule applies if the cost of providing benefits for spouses exceeds that of providing benefits for domestic partners. Id. Second, if a contractor is unable to provide a certain benefit that it provides to employees' spouses also to employees' domestic partners or vice versa, despite taking reasonable measures to do so, but the contractor provides the affected employees with a cash equivalent of the benefit, the contractor is not deemed to discriminate. Id.
The Ordinance's nondiscrimination requirements apply to:
(i) any of a contractor's operations within San Francisco;