Labor & Employment Law Daily Wrap Up, STATE-LAW CLAIMS—N.D. Cal.: Court denies San Francisco’s motion to dismiss in Airlines for America healthcare lawsuit, (Feb 27, 2025)

By George Basharis, J.D.

A federal judge has ruled that the airline trade group has standing to challenge San Francisco’s Healthy Airport Ordinance requiring enhanced healthcare benefits for airport workers.

A federal district court in California has denied the City and County of San Francisco’s motion to dismiss key claims in a lawsuit brought by Airlines for America, a trade organization representing major U.S. airlines. The ruling allows the trade group to proceed with its challenge to San Francisco’s Healthy Airport Ordinance (HAO), which requires airlines at San Francisco International Airport (SFO) to provide enhanced healthcare benefits to certain employees (Airlines for America v. City and County of San Francisco, No. 21-cv-02341-EMC (N.D. Cal. Feb. 25, 2025)).

City ordinance. Airlines for America filed its lawsuit just ten days after the HAO ordinance went into effect. The trade organization, whose members include Alaska Airlines, American Airlines, Delta Air Lines, FedEx Corporation, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, and United Airlines, alleged that the ordinance is preempted by federal law and violates constitutional protections against impairing contracts.

The HAO, enacted by San Francisco’s Board of Supervisors in November 2020, amended the city’s existing Health Care Accountability Ordinance (HCAO) to create additional standards for minimum medical insurance coverage that must be offered to covered employees under the airport’s Quality Standards Program (QSP). This program has existed since 1999 and establishes contractual requirements for employers at the airport.

Under the HAO, airlines must either provide “platinum” healthcare plans to covered employees and their dependents with no cost-sharing or pay $9.50 per hour per employee into a city-administered health care reimbursement fund called the “City Option.” The ordinance defines covered employees as those requiring airfield operations area access or who are directly involved in passenger and facility security and safety.

The legal challenge. The trade group’s lawsuit initially included claims that the HAO was preempted by the Airline Deregulation Act of 1978, the Employee Retirement Income Security Act of 1974 (ERISA), and the Railway Labor Act. The organization also alleged violations of the Contracts Clauses of both the U.S. and California constitutions. In June 2024, the trade group voluntarily dismissed its claim regarding the Airline Deregulation Act, leaving the other claims intact.

The city filed a partial motion to dismiss three of the trade group’s claims—ERISA preemption, violation of the U.S. Constitution’s Contracts Clause, and violation of the California Constitution’s Contracts Clause—arguing that the trade group lacked associational standing to bring these claims on behalf of its member airlines. The city also sought to dismiss the trade group’s request for monetary relief.

Associational standing. The court rejected the city’s arguments and found that the trade group has associational standing to bring all of its claims and seek monetary relief. Associational standing requires that: (1) the organization’s members would have standing to sue in their own right; (2) the interests the organization seeks to protect are germane to its purpose; and (3) neither the claims asserted nor the relief requested requires individual members’ participation in the lawsuit. The city’s motion focused exclusively on the third prong, arguing that the trade group’s claims would require individualized proof from each airline. The court emphasized that the third prong is a prudential one that focuses on matters of administrative convenience and efficiency, not on elements of a case or controversy within the meaning of the Constitution.

ERISA preemption claim. The court found that the trade group also has standing to challenge the HAO under both the “reference to” and “connection with” theories of ERISA preemption. For the “reference to” theory, which examines whether a state law explicitly refers to or targets ERISA plans, the city conceded that the trade group has standing to bring a facial challenge based solely on the text of the HAO.

For the “connection with” theory, which examines whether a law impermissibly governs or interferes with ERISA plan administration, the court was persuaded by precedent from the First Circuit. The court agreed with the trade group’s argument that “if a state law is preempted as to one carrier, it is preempted as to all carriers,” noting that this approach preserves the uniformity that ERISA was designed to protect. “Therefore, a uniform determination regarding ERISA preemption best preserves the purpose of ERISA because it would be untenable for ERISA preemption to apply to one airline and not another,” according to the court.

Contracts Clause claims. The trade group next alleged that the HAO violates the Contracts Clauses of both the U.S. and California constitutions because it “substantially impairs A4A’s members’ collective bargaining agreements with their employees.” The court noted that the trade group clarified that its Contracts Clause claims concern a “qualitative, rather than financially quantitative, impairment of existing contracts.” Based on this characterization, the court found that these claims do not require individualized proof regarding the magnitude of financial impact under particular collective bargaining agreements and therefore allowed the trade group to proceed with these claims.

Monetary relief. The trade group also sought an order requiring the city to disgorge to the group or its member airlines any fees, contributions, fines, penalties, or other monetary payments collected pursuant to the HAO. The city argued that calculating disgorgement amounts would require individualized proof from each airline about covered employees, hours worked, and amounts withdrawn from the City fund. The trade group countered that this information is already in the city’s possession.

The court agreed with the trade group, finding that “calculating the disgorgement amount will not require complicated individualized proof from each member airline” because it is “a simple accounting question” involving information the city already possesses about deposits into and withdrawals from the fund.

While allowing the case to proceed, the court noted that if the trade group deviates from its stated theories or if the city faces actual hardship in discovery, the court might revisit the associational standing issue. It ordered the parties to meet and confer on discovery disputes and submit a joint statement within two weeks.

The court also directed the trade group to identify the test case for the single member airline it intends to use to prove its “connection with” argument under ERISA preemption and to identify documents it will rely on to prove its claims. This decision follows an earlier ruling by the Ninth Circuit in August 2023, which found that San Francisco was acting as a regulator, not as a market participant, when it enacted the HAO. That finding reversed the court’s initial decision that had granted the city’s motion for summary judgment.

The case is No. 21-cv-02341-EMC.

Judge: Chen, E.

Attorneys: Jason David Russell (Skadden, Arps, Slate, Meagher & Flom) for Airlines for America. Ian H. Eliasoph, San Francisco City Attorney’s Office, for City and County of San Francisco.

Companies: Airlines for America; City and County of San Francisco

Cases: StateLawClaims PensionBenefitPlans Procedure RemediesDamages CaliforniaNews