Washington Supreme Court Allows Some Claims To Proceed in Challenge to Delivery Fee Ordinance

In a recent Washington Supreme Court decision, Washington Food Industry Association v. City of Seattle,  its justices addressed a number of challenges to a Seattle ordinance that mandates food delivery companies provide more compensation to their contractors.[1] The court concluded that many—but not all—of the state and federal constitutional claims could move forward.

Background

The facts of the case begin when the COVID-19 pandemic hit the state of Washington in early 2020 and people living under stay-at-home orders dramatically increased their use of food delivery services. Seattle was no exception to this trend.[2] Those food delivery services included third-party providers such as Instacart that generally use independent contractors to fulfill orders. Asserting it was concerned about contractors’ earnings during the emergency, the Seattle City Council adopted Ordinance 126094.[3] The ordinance mandated an extra payment by the provider to the contractor of $2.50 for the first pickup or drop-off on a trip and $1.25 for each additional pickup or drop-off thereafter.[4] It also prohibited providers from reducing other compensation or earning capacity in response, and it forbade providers from passing the cost increase on to consumers.[5] The ordinance applied only during a declared civil emergency, and the COVID-19 emergency finally expired in October 2022.[6] The ordinance did not affect drivers who transport passengers, such as taxis or Uber drivers, or other food workers.[7] 

In response, the Washington Food Industry Association and Instacart’s parent company (collectively, “Instacart”) challenged the ordinance as unconstitutional under a host of state and federal constitutional provisions and as preempted under a state statute which forbids local governments from taxing groceries.[8] Among other allegations, Instacart contended that the actual motivation for the ordinance was not the pay of the drivers but to shut the services down at the behest of competing groups, especially organized labor.

The Claims

All judges at all levels rejected the statutory preemption claim. After that it gets complicated. 

The constitutional claims[9] were that the ordinance:

• Violates the Fourteenth Amendment’s Equal Protection Clause.
• Violates the Washington Constitution’s Privileges or Immunities Clause.
• Is a taking under the U.S. and Washington constitutions’ takings clauses.
• Violates the U.S. and Washington constitutions’ contracts clauses.
• Violates the U.S. Constitution and therefore makes the city liable for damages and attorneys’ fees under 42 U.S.C. § 1983.
• Exceeds the city’s police powers under art. XI, § 11 of the Washington Constitution. 

After the plaintiffs filed their complaint in the state trial court, the city moved to dismiss for failure to state a claim. The trial court allowed all constitutional claims to move forward. The city then successfully petitioned for interlocutory review at the Washington Supreme Court.

The Washington Supreme Court allowed the takings, contracts clause, § 1983, and police power claims to move forward, but it dismissed the equal protection and privileges or immunities claims.[10] Almost every claim had a different line-up of justices supporting and opposing it. Below we take the court’s holdings in the order they appear.

Equal Protection

Instacart argued the ordinance’s regulation of food delivery workers but not other similar workers was an arbitrary and therefore unconstitutional distinction under the Equal Protection Clause. In an opinion by Justice Raquel Montoya-Lewis and only joined in full by Chief Justice Steven Gonzalez, the court applied the familiar rational basis standard to the ordinance’s distinctions and concluded that permissible “bases exist for the ordinance.”[11] These included the importance of food delivery, especially for an occupation with a high number of “gig workers,” and the mitigation of person-to-person contact in “otherwise highly trafficked areas.”[12]

Privileges or Immunities

Article I, § 12 of the Washington Constitution states: “No law shall be passed granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which upon the same terms shall not equally belong to all citizens, or corporations.” The court asserted that the clause only concerns parties who put a “fundamental right of state citizenship” at issue.[13] It admitted that is has recognized the “right to remove to and carry business therein” as a fundamental right in the past, but said that right was not at issue here because the city had not entirely prohibited Instacart’s business, just regulated it.[14] With that, the court dismissed the claim.

Takings Clauses

The federal and state takings claims (analyzed on the same grounds) survived, with the court leaning heavily on the premise that takings claims are fact intensive. The complaint alleged that the ordinance “has a significant economic impact” and is “unsustainable” for Instacart.[15] Stating that the famous Penn Central[16] test would determine the takings question, the court concluded it was too early in the case to rule out which way the analysis would fall.[17]

Contracts Clauses

As with takings claims, Washington courts use the same analysis for state and federal contracts clause claims. The court concluded that it was too early to conclude Instacart could not prevail on its contract clause claims too. Invoking federal contracts clause cases, including the well-known Great Depression case Home Building & Loan Association v. Blaisdell,[18] the court stated that the test of whether the ordinance violated the contracts clauses was whether there has been “a substantial impairment of a contractual relationship”—and, if so, whether the law is nevertheless an appropriate and reasonable way to advance a significant and legitimate public purpose.[19] For these questions, the court concluded Instacart had pleaded enough to move past the city’s motion to dismiss.

Section 1983

The court also addressed the plaintiffs’ claim under 42 U.S.C. § 1983. Section 1983, originally a part of the Civil Rights Act of 1871,[20] provides a cause of action to sue any “person” who has violated someone’s rights under the U.S. Constitution and other federal law. Among the remedies it allows for are money damages and attorneys’ fees.[21] In this case, Instacart separately pleaded § 1983 as its own claim. The court simply stated that because some of their federal claims survive, the possibility of winning damages under those claims survived as well, given that the City of Seattle constitutes a “person.”[22]

Police Power

For the police power claim, a reader must skip down to Associate Chief Justice Charles Johnson’s concurrence.[23] (The author of the lead opinion, Justice Montoya-Lewis, wrote a partial dissent to argue the police power claim should be dismissed.[24]) Article XI, § 11 of the state constitution provides, “Any county, city, town or township may make and enforce within its limits all such local police, sanitary and other regulations as are not in conflict with general laws.” Associate Chief Justice Johnson agreed the equal protection and privileges or immunities claims should be dismissed but thought the claim that the ordinance exceeded the city’s police power should move forward. “The police power is broad,” he stated, “but not unlimited.”[25]

Justice Johnson highlighted a number of facts pleaded in the complaint, including the motivation to reward organized labor and the reality that there was no need for the ordinance because, with the pandemic, “compensation to drivers was at a record high.”[26] He thought these facts sufficed to allege the ordinance does not “promote the health, safety, and welfare of people.”[27] Justices Susan Owens and Mary Yu joined his concurrence.

The Dissents

What of the other opinions? Justice Debra Stephens, with whom Justice G. Helen Whitener signed on, joined most of the court’s holdings. But opposite to Justice Johnson, Justice Stephens would have dismissed the police power claim but allowed the privileges or immunities claim.[28] She argued the right to carry on a business is implicated under the clause even if one’s business is not entirely prohibited. Challenging an onerous regulation is enough.[29] Finally, Justice Sheryl McCloud, joined by Justice Barbara Madsen, said without much elaboration that she would have kept all constitutional claims other than the federal equal protection claim.[30]

Conclusion

Despite a fractured opinion featuring more than half a dozen constitutional claims and nine justices, Instacart’s challenge lives to see another day. The court remanded the case to the trial court for it to proceed with the surviving claims.

 

 

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].