United States District Court, Northern District of California, San Jose Division
April 13, 2000
WANDA HOTT, AN INDIVIDUAL D/B/A RAY'S TOWING, PLAINTIFF,
CITY OF SAN JOSE AND BILL LANSDOWNE, DEFENDANTS.
The opinion of the court was delivered by: Fogel, United States District Judge.
ORDER GRANTING MOTION TO
DISMISS WITHOUT LEAVE
Towing company brought action seeking to prevent city from enforcing
regulations relating to towing industry, under which city sought to
revoke towing license. On city's motion to dismiss, the District
Court, Fogel, J., held that ordinance prohibiting towing companies from
engaging in fraud was not preempted by federal law. Motion granted.
1. Evidence 43(4)
Court would take judicial notice of documents filed in state court
actions that were relevant to matter at hand. Fed. Rules Evid.Rule 201,
2. Automobiles 62 Municipal Corporations 53 States 18.61
Federal law preempts state and local regulation of towing-industry
rates, routes, and service, but does not preempt local regulations that
concern safety when such regulations are authorized by state statute.
U.S.C.A. Const. Art. 6, cl. 2; 49 U.S.C.A. § 14501(c)(2)(A).
3. Automobiles 62 Municipal Corporations 53
Municipal ordinance prohibiting towing companies from intentionally
engaging in fraudulent business practices was not preempted by federal
law; ordinance related to safety concerns, not economic interests, and
was authorized by state law. U.S.C.A. Const. Art. 6, cl. 2; 49 U.S.C.A.
§ 14501(c)(2)(A); West's Ann.Cal.Vehicle Code § 21100.
This case and the related case of SYLDYLD, Inc. v. City of San Jose,
No. C 99 20928 JF EAI (N.D. Cal. filed Sept. 13, 1999), present a
challenge to Defendant City of San Jose's regulation of the towing
industry. Plaintiff Wanda Hott previously requested a temporary
restraining order and a preliminary injunction to prevent the enforcement
of the City's regulations; the Court denied those requests. Defendants*fn1
now move for dismissal of this case, arguing that Plaintiff has failed to
state a claim upon which relief can be granted and that she cannot amend
her. Complaint to state a viable claim. Defendants also request that the
Court take judicial notice of various documents filed in two cases in two
California state courts. Plaintiff opposes the motion and takes no
position on the request for judicial notice. The Court has read the moving
and responding papers; the matter was submitted without oral argument on
April 10, 2000. For the reasons set forth below, both the request for
judicial notice and the motion to dismiss will be granted.
Plaintiff owned and operated a for-hire motor-carrier business known as
Ray's Towing in the City of San Jose for more than twenty-five years.
Ray's Towing transports disabled and illegally parked motor vehicles by
means of tow trucks.
Defendant City instituted an administrative action against Ray's Towing
following a police investigation. In May 1999, the Deputy Chief of Police
held an administrative hearing to determine whether Hott's tow-car
license should be revoked. Both Plaintiff and the City submitted
evidence. The Deputy Chief of Police issued a decision on May 26, 1999,
revoking Hott's license, after determining that Ray's Towing
intentionally engaged in unlawful, illegal, dishonest, fraudulent,
deceitful, and unfair business practices in San Jose, in violation of
several provisions of the California Vehicle Code and the San Jose
Municipal Code. For example, the Deputy Chief of Police found clear and
convincing evidence of fraud in that Ray's Towing routinely charged dolly
fees when dollies were not used.
Hott appealed to the City's Appeals Hearing Board. On July 22, 1999,
the Appeals Hearing Board upheld the revocation of Hott's license. San
Jose Appeals Hearing Board Resolution 99-65 (1999). Hott then filed a
Petition for Writ of Administrative Mandamus in the California Superior
Court for the County of Santa Clara, seeking judicial review of the
Appeals Hearing Board's resolution. Hott argued that the City's regulatory
scheme was preempted by federal statute. The Superior Court (Nichols, J.)
held a hearing on the writ on August 20, 1999, in which the parties
argued the preemption issue. That same day, based on oral argument as
well as briefs submitted previously, the Superior Court issued an order
denying the writ. Hott filed the present action on August 23, 1999. The
Court denied Hott's request for a temporary restraining order on August
25, 1999. The Court subsequently denied Hott's motion for a preliminary
injunction on September 16, 1999.
On September 1, 1999, the San Jose Police Permits Unit issued a
temporary tow-car business permit to Leona and Louis Del Prete to operate
Ray's Towing. Hott and the Del Pretes had signed a Letter of Intent on
July 21, 1999, for the sale of Ray's Towing to the Del Pretes.
This Court has jurisdiction of, inter alia, "all civil actions arising
under the Constitution, laws, or treaties of the United States."
28 U.S.C. § 1331. This type of jurisdiction is known as
federal-question jurisdiction. The Court also has jurisdiction of "any
civil action or proceeding arising under any Act of Congress regulating
commerce or protecting trade and commerce against restraints and
monopolies . . . ." 28 U.S.C. § 1337. These provisions provide the
asserted statutory bases for the Court's exercise of jurisdiction in the
The United States Supreme Court has stated that the "vast majority" of
cases for which such jurisdiction exists "are those in which federal law
creates the cause of action." Merrell Dow Pharmaceuticals Inc. v.
Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986).
Although the federal statute at issue in the instant action,
49 U.S.C. § 14501, does not create an express cause of action for its
violation, a federal statute can create an implied right of action. See
J.I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423
(1964). It is not at all clear that the statute at issue in the instant
litigation creates such an implied right of action. Cf, e.g., Nashoba
Communications Ltd. Partnership No. 7 v. Town of Danvers, 893 F.2d 435
(1st Cir. 1990). Nevertheless, because Plaintiffs action also is based
directly on the Supremacy Clause of the United States Constitution, U.S.
Const. art. VI, cl. 2., the Court concludes that it has subject-matter
jurisdiction of the instant litigation at least to the extent that
Plaintiff seeks equitable relief. See Skaw v. Delta Air Lines, Inc.,
463 U.S. 85, 96 n. 14, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983); Bud Antle,
Inc. v. Barbosa, 45 F.3d 1261, 1269 (9th Cir. 1994); Air Transport Ass'n
of America v. City and County of San Francisco, 992 F. Supp. 1149,
1180-81 (N.D.Cal. 1998).
III. REQUEST FOR JUDICIAL
Defendants request that the Court take judicial notice of various
documents filed in Hott v. City of San Jose Police Dep't Permits Unit,
No. CV 783654 (Super Ct. Cal., Santa Clara County, Aug. 17, 19 & 20,
1999) (memoranda regarding petition for writ of administrative
mandamus), as well as an order filed in City and County of San Francisco
v. Servantes, No. 997-979 (Super.Ct.Cal., San Francisco County, Nov. 4,
1999) (Order Denying Defendants' Motion in Limine Regarding Preemption).
Plaintiff takes no position on Defendants' request. Pursuant to Federal
Rule of Evidence 201, the Court may take judicial notice of papers filed
in other courts. See Burbank-Glendale-Pasadena Airport Auth. v. City of
Burbank, 136 F.3d 1360, 1364 (9th Cir. 1998). The documents proffered by
Defendants are relevant to the present matter. Accordingly, the Court
will grant Defendants' request.
IV. LEGAL STANDARD OF REVIEW
The issue to be decided on a motion to dismiss is not whether a
plaintiffs claims have merit but whether the moving defendant has shown
beyond doubt that the plaintiff can prove no set of facts entitling him
or her to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99,
2 L.Ed.2d 80 (1957). The court's review is limited to the face of the
complaint, documents referenced by the complaint and matters of which the
court may take judicial notice. See Levine v. Diamanthuset, Inc.,
950 F.2d 1478, 1483 (9th Cir. 1991); In re Stac Electronics Securities
Litigation, 89 F.3d 1399, 1405 n.4 (9th Cir. 1996); MGIC Indem Corp. v.
Weisman, 803 F.2d 500, 504 (9th Cir. 1986). Ordinarily, a complaint may
be dismissed as a matter of law for only two reasons: (1) lack of a
cognizable legal theory or (2) insufficient facts under a cognizable
legal theory. See Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530,
533-34 (9th Cir. 1984) (citing 2A J. Moore, Moores Fed. Practice ¶
12.08 at 2271 (2d ed. 1982)). When a court considers a motion to
dismiss, all allegations of the complaint are construed in the
plaintiff's favor. See Sun Savings & Loan Ass'n v. Dierdorff 825 F.2d 187,
191 (9th Cir. 1987). For a motion to dismiss to be granted, it must
appear to a certainty that the plaintiff would not be entitled to relief
under any set of facts that could be proved. See Wool v. Tandem
Computers, Inc., 818 F.2d 1483, 1439 (9th Cir. 1987). Motions to dismiss
generally are viewed with disfavor under this liberal standard and are
rarely granted. See Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th
Where state law conflicts with federal law, the state law is preempted
and without effect. See U.S. Const. art. VI, cl. 2; Cipollone v. Liggett
Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992).
Hott argues that the City's regulation of the towing industry is
preempted by federal law. The relevant section reads:
[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 price, route, or service of any motor carrier
. . . with respect to the transportation of property.
49 U.S.C. § 14501(c)(1).
The City responds that its regulations are authorized by an exception
to this provision. The exception reads that the paragraph quoted above
shall not restrict the safety regulatory authority
of a State with respect to motor vehicles, the
authority of a State to impose highway route
controls or limitations based on the size or weight
of the motor vehicle or the hazardous nature of the
cargo, or the authority of a State to regulate motor
carriers with regard to
minimum amounts of financial responsibility relating
to insurance requirements and self-insurance
49 U.S.C. § 14501(c)(2)(A).
The United States Court of Appeals for the Second Circuit recently
addressed this same issue in Ace Auto Body & Towing, Ltd. v. City of New
York, 171 F.3d 765 (2d Cir. 1999). Ace Auto Body dealt with a situation
similar to the present case but involving the towing industry in and near
New York City. The plaintiffs, members of the tow-truck industry and
their affiliates in and near New York City, filed an action challenging
New York City's regulation of the tow-truck industry. The regulations
required a towing company to obtain a license. In order to qualify for a
license, a towing company was required to maintain liability insurance,
post a surety bond, and demonstrate that the principals had no relevant
criminal history. Additional rules governed the mechanical safety of tow
trucks, the information displayed on the trucks, reporting, and record
keeping. See id. at 768-69.
The Second Circuit found that requirements regarding licensing, the
displaying of information, reporting, record keeping, criminal history,
insurance, and the posting of bond by towing companies, as well as a
requirement that they maintain their own storage and repair facilities,
were within the safety-regulation and financial-responsibility exemption
of 49 U.S.C. § 14501(c)(2)(A). The court declared that "Most of these
requirements are so directly related to safety or financial
responsibility and impose so peripheral and incidental an economic burden
that no detailed analysis is necessary to conclude that they fall within
the § 14501(c)(2)(A) exemptions." 171 F.3d at 776. The Second Circuit
therefore held that 49 U.S.C. § 14501(c) does not preempt such
regulations. See 171 F.3d at 779; see also Servantes (Order Denying
Defendants' Motion in Limine Regarding Preemption) (holding that San
Francisco's towing regulations are not preempted).
In the present case, the requirements imposed on the tow-truck industry
by San Jose are similar to, although perhaps less onerous than, those
imposed by New York City and upheld in Ace Auto Body. Like New York, San
Jose requires prospective tow-truck business owners to provide proof of
liability insurance and relevant criminal history. Other subsections of
the San Jose Municipal Code set forth requirements for the displaying of
information, reporting and record keeping. San Jose Municipal Code §
6.66.060 has a permit/licensing procedure that requires a prospective
towing-company owner to file an application including general information
regarding the name and address of the owner or owners. San Jose Municipal
Code § 6.66.140 requires an applicant for a towing-business permit to
show evidence of insurability as a condition of issuing the permit. These
permit requirements are for the purpose of regulating safety and are of
the same nature as the requirements in New York City which were upheld in
Ace Auto Body.
In Ace Auto Body, the Second Circuit differed from the opinion of a
sister circuit in R. Mayer of Atlanta, Inc. v. City of Atlanta,
158 F.3d 538 (11th Cir. 1998), on which Plaintiff relies heavily. R.
Mayer also dealt with a situation similar to the present case, but
involving the towing industry in and near Atlanta. The Eleventh Circuit
held that the safety exception to federal preemption found in
49 U.S.C. § 14501(c)(2)(A) did not apply to the regulations enacted
by the City of Atlanta to govern its municipal towing industry because
the exception applies only to states, not to municipalities. See 158 F.3d
However, Ace Auto Body recognized that where a state has delegated its
in this area to its subdivisions, the exception applies, and the
subdivisions' regulations are not preempted. See 171 F.3d at 775-76;
H.R. Conf. Rep. No. 103-677, at 84, 85, reprinted in 1994 U.S.C.C.A.N.
1756, 1757; New Orleans Towing Ass'n, Inc. v. City of New Orleans, No.
Civ. A. 99-3131, 2000 WL 193071, at 8-11 (E.D.La. Feb.15, 2000); AJ's
Wrecker Service, Inc. v. City of Dallas, Nos. 97-1311D, 97-2398D, 1998 WL
185521, at 3 (N.D. Tex. April 15, 1998); Harris County Wrecker Owners for
Equal Opportunity v. City of Houston, 943 F. Supp. 711, 726-27 (S.D.Tex.
1996). California has made such a delegation: "Local authorities may
adopt rules and regulations by ordinance or resolution regarding the
following matters: . . . . (g) Licensing and regulating the operation of
tow truck service or tow truck drivers whose principal place of business
or employment is within the jurisdiction of the local authority . . . ."
Cal. Veh.Code § 21100. Thus, under California law, San Jose has the
authority to enact safety regulations for companies, such as Ray's
Towing, that are based in San Jose.
Plaintiff cites Harris County Wrecker as additional support for her
argument that San Jose's tow-truck regulations are preempted. In Harris
County Wrecker, tow-truck owners sued the City of Houston, arguing that
Houston's tow-truck ordinances were preempted by
49 U.S.C. § 14501(c)(1). The court considered this section in light
of the exception in 49 U.S.C. § 14501(c)(2)(A). See 943 F. Supp. at
725-26. The court determined that, based upon the facts unique to that
case, the city's ordinances were not related to safety because they
attempted to limit the number of business tow-car permits issued. Since
they did not fit within the safety exception, they were preempted. See
943 F. Supp. at 732. However, the present case is distinguishable from
Harris County Wrecker. Unlike Houston, San Jose does not attempt to
restrict the number of tow-truck companies; thus, unlike Houston's, San
Jose's regulations are not economic in nature. Indeed, the court in
Harris County Wrecker implicitly approved of regulations such as San
Jose's. See id.
Plaintiff also relies upon the reasoning of the United States Supreme
Court in Morales v. Trans World Airlines, Inc., 504 U.S. 374, 112 S.Ct.
2031, 119 L.Ed.2d 157 (1992). Morales addressed language in a statute
dealing with aviation that parallels the federal-preemption statutory
language dealing with motor carriers. The Court concluded that state
guidelines of airlines' advertisements of fares are preempted. However,
the aviation statute discussed in Morales does not contain a safety
exception. Morales thus provides no guidance in interpreting the safety
exception at issue in this case, and it is therefore distinguishable.
Federal law preempts state and local regulation of
towing-industry rates, routes, and service. It does not preempt local
regulations that concern safety when such regulations are authorized by
state statute. The provisions of the San Jose Municipal Code that are at
issue in the present case relate to safety concerns, not economic
interests, and are authorized by the California Vehicle Code. Thus, they
are not preempted, and Plaintiff has failed to state a claim upon which
relief can be granted. Because the sole basis of the present lawsuit is
Plaintiff's preemption argument, no purpose would be served by giving
Plaintiff leave to amend her Complaint. Accordingly, the Court will
dismiss this case without leave to amend and with prejudice. The Court
need not consider other issues raised by the parties.
The Court ORDERS: Defendants' Request for Judicial Notice is GRANTED
and Defendants' Motion to Dismiss is
GRANTED without leave to amend and with prejudice.