A trade group's legal challenge to a San Francisco law requiring airlines that utilize the city's airport to provide health insurance to their employees during the COVID-19 pandemic was revived by a U.S. appeals court on Tuesday.
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The 9th U.S. Circuit Court of Appeals, based in San Francisco, ruled 2-1 that the city acted as a government regulator and not a private market participant when it passed the ordinance in 2020. Airlines for America, which represents most of the largest airlines in the United States, argued that the law could be invalid under federal law if the city acted as a government regulator.
Federal law preempts any law adopted by a state or city that acts as a government regulator rather than a private market participant. The trade group's 2021 lawsuit was dismissed by a federal judge who found San Francisco to be acting as a private "market participant" when it passed the law, but the 9th Circuit reversed the decision. According to the court, the city was acting as a regulator by imposing monetary penalties of $1,000 per violation. Airlines for America welcomed the decision and expressed its intention to pursue the lawsuit.
The city's lawyers have not yet responded. San Francisco passed the law in 2020 to protect workers, many of whom lacked health insurance, and the public who use San Francisco International Airport. Airlines for America argues that the city's ordinance is preempted by a federal law regulating employee benefit plans and other laws governing airlines. The case will be returned to a San Francisco federal judge to consider the trade group's claims. Circuit Judge Mary Schroeder dissented, arguing that the city's law merely imposed new contract terms on airlines that use the airport and was not a general government regulation.