Mickey Dilts v. Penske Logistics LLC

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

MICKEY LEE DILTS; RAY RIOS; and No. 12-55705
DONNY DUSHAJ, on behalf of
themselves and all others similarly D.C. No.
situated, 3:08-cv-00318-
Plaintiffs-Appellants, CAB-BLM

v.
OPINION
PENSKE LOGISTICS, LLC; and
PENSKE TRUCK LEASING CO., L.P., a
Delaware corporation,
Defendants-Appellees,

and

DOES 1–125, inclusive,
Defendants.

Appeal from the United States District Court
for the Southern District of California
Cathy Ann Bencivengo, District Judge, Presiding

Argued and Submitted
March 3, 2014—Pasadena, California

Filed July 9, 2014
2 DILTS V. PENSKE LOGISTICS, INC.

Before: Alex Kozinski, Chief Judge, Susan P. Graber,
Circuit Judge, and Jack Zouhary,* District Judge.

Opinion by Judge Graber;
Concurrence by Judge Zouhary

SUMMARY**

Federal Preemption

The panel reversed the district court’s dismissal, based on
federal preemption, of claims brought by a certified class of
drivers alleging violations of California’s meal and rest break
laws.

The panel held that California’s meal and rest break laws
as applied to the motor carrier defendants were not “related
to” defendants’ prices, routes, or services, and therefore they
were not preempted by the Federal Aviation Administration
Authorization Act of 1994.

District Judge Zouhary concurred, and wrote separately
to emphasize that the defendant failed to carry its burden of
proof on its preemption defense.

*
The Honorable Jack Zouhary, United States District Judge for the
Northern District of Ohio, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
 DILTS V. PENSKE LOGISTICS, INC. 3

COUNSEL

Deepak Gupta (argued), Brian Wolfman, Gregory A. Beck,
and Jonathan E. Taylor, Gupta Beck PLLC, Washington,
D.C.; Michael D. Singer and J. Jason Hill, Cohelan Khoury
& Singer, San Diego, California, for Plaintiffs-Appellants.

James H. Hanson (argued), Scopelitis, Garvin, Light, Hanson
& Feary, P.C., Indianapolis, Indiana; and Adam C. Smedstad,
Scopelitis, Garvin, Light, Hanson & Feary, P.C., Chicago,
Illinois, for Defendants-Appellees.

Jeffrey Clair (argued) and Stuart F. Delery, Assistant
Attorneys General, Civil Division, United States Department
of Justice; Kathryn B. Thomson, Acting General Counsel,
Paul M. Geier, Assistant General Counsel for Litigation, and
Peter J. Plocki, Deputy Assistant General Counsel for
Litigation, United States Department of Transportation; and
T.F. Scott Darling, III, Chief Counsel, and Debra S. Straus,
Senior Attorney, Federal Motor Carrier Safety
Administration, Washington, D.C., for Amicus Curiae United
States of America.

Richard Pianka, ATA Litigation Center, and Prasad Sharma,
American Trucking Associations, Inc., Arlington, Virginia;
Paul DeCamp, Jackson Lewis LLP, Reston, Virginia;
Douglas J. Hoffman, Jackson Lewis LLP, Boston,
Massachusetts; and Robin S. Conrad and Shane B. Kawka,
National Chamber Litigation Center, Inc., Washington, D.C.;
Guillermo Marrero, International Practice Group, P.C., San
Diego, California; and Andrew J. Kahn and Richard G.
McCracken, Davis, Cowell & Bowe, LLP, San Francisco,
California, for Amici Curiae.
4 DILTS V. PENSKE LOGISTICS, INC.

OPINION

GRABER, Circuit Judge:

Plaintiffs, a certified class of drivers employed by
Defendants Penske Logistics, LLC, and Penske Truck
Leasing Co., L.P., appeal from a judgment dismissing their
claims under California’s meal and rest break laws. The
district court held on summary judgment that the Federal
Aviation Administration Authorization Act of 1994
(“FAAAA”) preempts those state laws as applied to motor
carriers. Reviewing de novo the interpretation and
construction of the FAAAA and the question of federal
preemption, Tillison v. Gregoire, 424 F.3d 1093, 1098 (9th
Cir. 2005), we hold that the state laws at issue are not “related
to” prices, routes, or services, and therefore are not preempted
by the FAAAA. Accordingly, we reverse.

FACTUAL AND PROCEDURAL HISTORY

Plaintiffs Mickey Lee Dilts, Ray Rios, and Donny Dushaj
brought this class action against Defendants, which are motor
carriers, alleging that Defendants routinely violate
California’s meal and rest break laws, Cal. Lab. Code
§§ 226.7, 512; Cal. Code Regs. tit. 8, § 11090. Plaintiffs
represent a certified class of 349 delivery drivers and
installers, all of whom are assigned to the Penske Whirlpool
account. Plaintiffs work exclusively on routes within the
state of California, typically work more than 10 hours a day,
and frequently work in pairs, with one driver and one
deliverer/installer in each truck.

California law generally requires a 30-minute paid meal
break for every five hours worked, Cal. Lab. Code § 512, and
 DILTS V. PENSKE LOGISTICS, INC. 5

a paid 10-minute rest break for every four hours worked, Cal.
Code Regs. tit. 8, § 11090. Plaintiffs allege that Defendants
automatically program 30-minute meal breaks into
employees’ shifts while failing to ensure that employees
actually take those breaks and that Defendants create a
working environment that discourages employees from taking
their meal and rest breaks.

Plaintiffs initially filed this action in state court.
Defendants removed the case to federal district court under
the Class Action Fairness Act, 28 U.S.C. §§ 1332(d)(2),
1441(b), 1453. Following removal, Defendants moved for
summary judgment, claiming a preemption defense.
Defendants argued that the state meal and rest break laws as
applied to motor carriers are preempted under the FAAAA,
which provides that “States may not enact or enforce a
law . . . related to a price, route, or service of any motor
carrier . . . with respect to the transportation of property.”
49 U.S.C. § 14501(c)(1). Concluding that California’s meal
and rest break laws impose “fairly rigid” timing requirements,
dictating “exactly when” and “for exactly how long” drivers
must take breaks, and restricting the routes that a motor
carrier may select, the district court held that California’s
meal and rest break laws meet the FAAAA preemption
standard and granted summary judgment for Defendants.
Dilts v. Penske Logistics LLC, 819 F. Supp. 2d 1109,
1119–20 (S.D. Cal. 2011).1 Plaintiffs timely appeal.

1
Since Dilts was decided, eight other California district court decisions
have held that the FAAAA preempts California’s meal and rest break
laws, while four have held that it does not. The other cases that followed
Dilts are: Rodriguez v. Old Dominion Freight Line, Inc., No. CV13-
891DSF(RZx), 2013 WL 6184432, at *4 (C.D. Cal. Nov. 27, 2013);
Parker v. Dean Transp. Inc., No. CV13-02621BRO(VBKx), 2013 WL
7083269, at *9 (C.D. Cal. Oct. 15, 2013); Ortega v. J.B. Hunt Transp.,
6 DILTS V. PENSKE LOGISTICS, INC.

DISCUSSION

A. California’s Meal and Rest Break Laws

California Labor Code sections 226.7 and 512, and the
related regulations for the transportation industry
promulgated by California’s Industrial Welfare Commission
as California Code of Regulations title 8, section 11090,
together constitute the state’s meal and rest break laws.

Inc., No. CV07-08336(BRO)(FMOx), 2013 WL 5933889, at *7 (C.D. Cal.
Oct. 2, 2013); Burnham v. Ruan Transp., No. SACV12-0688AG(ANx),
2013 WL 4564496, at *5 (C.D. Cal. Aug. 16, 2013); Cole v. CRST, Inc.,
No. EDCV08-1570-VAP(OPx), 2012 WL 4479237, at *4–6 (C.D. Cal.
Sept. 27, 2012); Campbell v. Vitran Express, Inc., No. CV11-05029-
RGK(SHx), 2012 WL 2317233, at *4 (C.D. Cal. June 8, 2012); Aguiar v.
Cal. Sierra Express, Inc., No. 2:11-cv-02827-JAM-GGH, 2012 WL
1593202, at *1 (E.D. Cal. May 4, 2012); Esquivel v. Vistar Corp., No.
2:11-cv-07284-JHN-PJWx, 2012 WL 516094, at *4–6 (C.D. Cal. Feb. 8,
2012) (unpublished decisions); see also Miller v. Sw. Airlines Co., 923 F.
Supp. 2d 1206, 1212–13 (N.D. Cal. 2013) (holding California’s break
laws preempted under the analogous provision of the Airline Deregulation
Act); Helde v. Knight Transp., Inc., 982 F. Supp. 2d 1189, 1195–96 (W.D.
Wash. 2013) (applying similar analysis to Washington’s rest break
provisions and holding them preempted under the FAAAA). The cases
holding that California’s meal and rest break laws are not preempted by
the FAAAA are: Villalpando v. Exel Direct Inc., No. 12-cv-04137JCS,
2014 WL 1338297, at *12 (N.D. Cal. Mar. 28, 2014); Brown v. Wal-Mart
Stores, Inc., No. C08-5221SI, 2013 WL 1701581, at *3–4 (N.D. Cal. Apr.
18, 2013); Mendez v. R+L Carriers, Inc., No. C11-2478CW, 2012 WL
5868973, at *4–7 (N.D. Cal. Nov. 19, 2012) (unpublished decisions);
Reinhardt v. Gemini Motor Transp., 869 F. Supp. 2d 1158, 1165–67 (E.D.
Cal. 2012).

This is the first time that the question is before us. It is also before us
in Campbell v. Vitran Express, Inc., No. 12-56250, which we decide in a
memorandum disposition issued this date.
 DILTS V. PENSKE LOGISTICS, INC. 7

Employers must provide a meal break of 30 minutes for
an employee who works more than five hours a day, plus a
second meal break of 30 minutes for an employee who works
more than 10 hours a day. Cal. Lab. Code § 512(a). For
employees who work no more than six hours, the meal break
may be waived by mutual consent of the employer and
employee; for employees who work no more than 12 hours,
one of the two meal breaks may be waived by mutual
consent. Id. If the nature of the work prevents an employee
from taking an off-duty meal break, the employer and
employee may agree to an on-duty meal break by mutual
consent. Id. For transportation workers whose daily work
time is at least three and one-half hours, employers must
provide a paid rest period of 10 minutes for every four hours
“or major fraction thereof.” Cal. Code Regs. tit. 8,
§ 11090(12)(A). The regulations governing transportation
workers are consistent with those governing workers in other
industries. See id. §§ 11010–11170.

An employer may not require an employee to work during
any meal or rest period. Cal. Lab. Code § 226.7(b). An
employer must pay an employee for an additional hour of
work at the employee’s regular rate for each workday for
which a meal or rest period is not provided. Cal. Lab. Code
§ 226.7(c). “[S]ection 226.7 does not give employers a
lawful choice between providing either meal and rest breaks
or an additional hour of pay. . . . The failure to provide
required meal and rest breaks is what triggers a violation of
section 226.7.” Kirby v. Immoos Fire Prot., Inc., 274 P.3d
1160, 1168 (Cal. 2012). “The ‘additional hour of pay’ . . . is
the legal remedy . . . .” Id.

The California Supreme Court, in an opinion published
after the order on summary judgment issued in this case,
8 DILTS V. PENSKE LOGISTICS, INC.

clarified that state laws allow some flexibility with respect to
the timing and circumstances of meal breaks. Brinker Rest.
Corp. v. Superior Court, 273 P.3d 513 (Cal. 2012). In the
absence of a waiver, California law “requires a first meal
period no later than the end of an employee’s fifth hour of
work, and a second meal period no later than the end of an
employee’s 10th hour of work,” but “does not impose
additional timing requirements.” Id. at 537. “[A]n employer
must relieve the employee of all duty for the designated
[meal] period, but need not ensure that the employee does no
work.” Id. at 532. When the nature of the work makes off-
duty meal breaks infeasible, the employer and employee may,
by mutual written agreement, waive the off-duty meal break
requirement. Id. at 533 (citing California’s Industrial Welfare
Commission Wage Order No. 5). Finally, “as a general
matter, one rest break should fall on either side of the meal
break. [But s]horter or longer shifts and other factors that
render such scheduling impracticable may alter this general
rule,” and employers have flexibility in scheduling breaks
according to the nature of the work. Id. at 531 (citation,
brackets, and internal quotation marks omitted).

B. The “Related to” Test for FAAAA Preemption

In considering the preemptive scope of a statute,
congressional intent “is the ultimate touchstone.” Engine
Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist., 498 F.3d
1031, 1040 (9th Cir. 2007) (internal quotation marks
omitted). “Congress’ intent . . . primarily is discerned from
the language of the pre-emption statute and the statutory
framework surrounding it. Also relevant, however, is the
structure and purpose of the statute as a whole, as revealed
. . . through the reviewing court’s reasoned understanding of
the way in which Congress intended the statute and its
 DILTS V. PENSKE LOGISTICS, INC. 9

surrounding regulatory scheme to affect business, consumers,
and the law.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 486
(1996) (citations and internal quotation marks omitted).

“Preemption analysis begins with the presumption that
Congress does not intend to supplant state law. Although
Congress clearly intended FAAAA to preempt some state
regulations of motor carriers who transport property, the
scope of the pre-emption must be tempered by the
presumption against the pre-emption of state police power
regulations.” Tillison, 424 F.3d at 1098 (citation and internal
quotation marks omitted); Medtronic, Inc., 518 U.S. at 485;
see also Wyeth v. Levine, 555 U.S. 555, 565 (2009) (noting
that the presumption against preemption applies “in all
preemption cases” and is especially strong in areas of
traditional state regulation (internal quotation marks and
brackets omitted). Wage and hour laws constitute areas of
traditional state regulation, although that fact alone does not
“immunize” state employment laws from preemption if
Congress in fact contemplated their preemption. Cal. Div. of
Labor Standards Enforcement v. Dillingham Constr., N.A.,
519 U.S. 316, 330–34 (1997).

“Where, as in this case, Congress has superseded state
legislation by statute, our task is to identify the domain
expressly pre-empted. To do so, we focus first on the
statutory language, which necessarily contains the best
evidence of Congress’ pre-emptive intent.” Dan’s City Used
Cars, Inc. v. Pelkey, 133 S. Ct. 1769, 1778 (2013) (citation
and internal quotation marks omitted) (interpreting the
FAAAA). The FAAAA’s preemption clause provides, in
relevant part: “States may not enact or enforce a
law . . . related to a price, route, or service of any motor
carrier . . . with respect to the transportation of property.”
10 DILTS V. PENSKE LOGISTICS, INC.

49 U.S.C. § 14501(c)(1). The statutory “related to” text is
“deliberately expansive” and “conspicuous for its breadth.”
Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383–84
(1992) (internal quotation marks omitted). That said, the
FAAAA does not go so far as to preempt state laws that affect
prices, routes, or services in “only a tenuous, remote, or
peripheral manner, such as state laws forbidding gambling.”
Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364, 371 (2008)
(internal quotation marks and alteration omitted). As the
Supreme Court recently observed, “the breadth of the words
‘related to’ does not mean the sky is the limit.” Dan’s City
Used Cars, 133 S. Ct. at 1778.

Because “everything is related to everything else,”
Dillingham Constr., 519 U.S. at 335 (Scalia, J., concurring),
understanding the nuances of congressional intent is
particularly important in FAAAA preemption analysis. We
must draw a line between laws that are significantly “related
to” rates, routes, or services, even indirectly, and thus are
preempted, and those that have “only a tenuous, remote, or
peripheral” connection to rates, routes, or services, and thus
are not preempted. Rowe, 552 U.S. at 371. To better discern
congressional intent, we turn next to the legislative history
and broader statutory framework of the FAAAA. Lohr,
518 U.S. at 486.

Enacted in 1994, the FAAAA was modeled on the Airline
Deregulation Act of 1978. In 2008, the Supreme Court
summarized the history behind the FAAAA:

In 1978, Congress “determin[ed] that
‘maximum reliance on competitive market
forces’” would favor lower airline fares and
better airline service, and it enacted the
 DILTS V. PENSKE LOGISTICS, INC. 11

Airline Deregulation Act. Morales[, 504 U.S.
at 378] (quoting 49 U.S.C. App. § 1302(a)(4)
(1988 ed.)); see 92 Stat. 1705. In order to
“ensure that the States would not undo federal
deregulation with regulation of their own,”
th[e Airline Deregulation] Act “included a
pre-emption provision” that said “no State . . .
shall enact or enforce any law . . . relating to
rates, routes, or services of any air carrier.”
Morales, supra, at 378; 49 U.S.C. App.
§ 1305(a)(1) (1988 ed.).

In 1980, Congress deregulated trucking.
See Motor Carrier Act of 1980, 94 Stat. 793.
And a little over a decade later, in 1994,
Congress similarly sought to pre-empt state
trucking regulation. See Federal Aviation
Administration Authorization Act of 1994,
108 Stat. 1605–1606; see also ICC
Termination Act of 1995, 109 Stat. 899. In
doing so, it borrowed language from the
Airline Deregulation Act of 1978 and wrote
into its 1994 law language that says: “[A]
State . . . may not enact or enforce a law . . .
related to a price, route, or service of any
motor carrier . . . with respect to the
transportation of property.” 49 U.S.C.
§ 14501(c)(1); see also § 41713(b)(4)(A)
(similar provision for combined motor-air
carriers).

Rowe, 552 U.S. at 367–68.
12 DILTS V. PENSKE LOGISTICS, INC.

By using text nearly identical to the Airline Deregulation
Act’s, Congress meant to create parity between freight
services provided by air carriers and those provided by motor
carriers. Californians for Safe & Competitive Dump Truck
Transp. v. Mendonca, 152 F.3d 1184, 1187 (9th Cir. 1998).
Therefore, the analysis from Morales and other Airline
Deregulation Act cases is instructive for our FAAAA analysis
as well. The one difference between the Airline Deregulation
Act and the FAAAA is that the latter contains the additional
phrase “with respect to the transportation of property,” which
is absent from the Airline Deregulation Act and which
“massively limits the scope of preemption ordered by the
FAAAA.” Dan’s City Used Cars, 133 S. Ct. at 1778 (internal
quotation marks omitted). Here, the parties do not dispute
that the transportation of property is involved, so our analysis
turns on the “related to price, route, or service” element of the
FAAAA preemption test.

The principal purpose of the FAAAA was “to prevent
States from undermining federal deregulation of interstate
trucking” through a “patchwork” of state regulations. Am.
Trucking Ass’ns v. City of Los Angeles, 660 F.3d 384, 395–96
(9th Cir. 2011). The sorts of laws that Congress considered
when enacting the FAAAA included barriers to entry, tariffs,
price regulations, and laws governing the types of
commodities that a carrier could transport. H.R. Conf. Rep.
No. 103-677, at 86 (1994), reprinted in 1994 U.S.C.C.A.N.
1715, 1758. The FAAAA expressly does not regulate a
state’s authority to: enact safety regulations with respect to
motor vehicles; control trucking routes based on vehicle size,
weight, and cargo; impose certain insurance, liability, or
standard transportation rules; regulate the intrastate transport
of household goods and certain aspects of tow-truck
operations; or create certain uniform cargo or antitrust
 DILTS V. PENSKE LOGISTICS, INC. 13

immunity rules. 49 U.S.C. § 14501(c)(2), (3). This list was
“not intended to be all inclusive, but merely to specify some
of the matters which are not ‘prices, rates or services’ and
which are therefore not preempted.” H.R. Conf. Rep. No.
103-677, at 84, reprinted in 1994 U.S.C.C.A.N. at 1756.
Accordingly, Congress did not intend to preempt generally
applicable state transportation, safety, welfare, or business
rules that do not otherwise regulate prices, routes, or services.
Consistent with that instruction, we have held that the
FAAAA does not preempt a state’s prevailing wage law,
Mendonca, 152 F.3d at 1189, or a state law requiring that
towing services obtain express authorization to tow from
private property, Tillison, 424 F.3d at 1099–1100, and that
the Airline Deregulation Act does not preempt a generally
applicable city anti-discrimination law, Air Transp. Ass’n of
Am. v. City of San Francisco, 266 F.3d 1064, 1071 (9th Cir.
2001).

In 2008, after reviewing the relevant statutory text,
legislative history, and jurisprudence, the Supreme Court
identified four principles of FAAAA preemption: (1) “‘state
enforcement actions having a connection with, or reference
to,’ carrier ‘rates, routes or services’ are pre-empted”;
(2) “such pre-emption may occur even if a state law’s effect
on rates, routes or services ‘is only indirect’”; (3) “it makes
no difference whether a state law is ‘consistent’ or
‘inconsistent’ with federal regulation”; and (4) “pre-emption
occurs at least where state laws have a ‘significant impact’
related to Congress’ deregulatory and pre-emption-related
objectives.” Rowe, 552 U.S. at 370–71 (brackets and
emphasis omitted) (quoting the Airline Deregulation Act
analysis in Morales, 504 U.S. at 384, 386–87, 390).
14 DILTS V. PENSKE LOGISTICS, INC.

Contrary to Defendants’ argument, Rowe did not
represent a significant shift in FAAAA jurisprudence. Nor
did it call into question our past FAAAA cases, such as
Mendonca, 152 F.3d at 1187–89. See also Miller v. Gammie,
335 F.3d 889, 892–93 (9th Cir. 2003) (en banc) (holding that
a three-judge panel may ignore binding circuit precedent only
if it is “clearly irreconcilable with the reasoning or theory of
intervening higher authority”). Rowe instructs us to apply to
our FAAAA cases the settled preemption principles
developed in Airline Deregulation Act cases, including the
rule articulated in Morales that a state law may “relate to”
prices, routes, or services for preemption purposes even if its
effect is only indirect, 504 U.S. at 385–86, but that a state law
connected to prices, routes, or services in “too tenuous,
remote, or peripheral a manner” is not preempted, id. at 390
(internal quotation marks omitted). See also H.R. Conf. Rep.
No. 103-677, at 83, reprinted in 1994 U.S.C.C.A.N. at 1755
(noting that the drafters of the FAAAA did “not intend to
alter the broad preemption interpretation adopted by the
United States Supreme Court in Morales”). We applied
precisely that rule in Mendonca, 152 F.3d at 1187–89. Rowe
simply reminds us that, whether the effect is direct or
indirect, “the state laws whose effect is forbidden under
federal law are those with a significant impact on carrier
rates, routes, or services.” 552 U.S. at 375 (internal quotation
marks omitted).

Rowe concerned a Maine law requiring tobacco retailers
to use a delivery service that provided recipient verification.
The Supreme Court held that the verification requirement
interfered with the de-regulatory goals behind the FAAAA’s
preemption clause because it would “require carriers to offer
a system of services that the market does not provide[,] . . .
would freeze into place services that carriers might prefer to
 DILTS V. PENSKE LOGISTICS, INC. 15

discontinue in the future,” and would directly substitute
Maine’s “own governmental commands for competitive
market forces in determining (to a significant degree) the
services that motor carriers will provide.” 552 U.S. at 372
(internal quotation marks omitted). The Maine statute also
required that carriers provide a special checking system to
receive any shipment originating from a known tobacco
retailer. Id. at 373. The Supreme Court held that requiring
the carriers to check packages in this way would “regulate a
significant aspect of the motor carrier’s package pickup and
delivery service” and, again, could freeze into place services
that the market would not otherwise provide. Id.

In short, the Maine statute required carriers to provide or
use certain special services in order to comply with the law.
The statute was, as we have described other preempted laws,
one in which “the existence of a price, route or service [was]
essential to the law’s operation.” Air Transp. Ass’n, 266 F.3d
at 1071 (internal quotation marks and brackets omitted). In
an Airline Deregulation Act case following Rowe, we held
that, in “‘borderline’ cases” in which a law does not refer
directly to rates, routes, or services, “the proper inquiry is
whether the provision, directly or indirectly, binds the carrier
to a particular price, route or service and thereby interferes
with the competitive market forces within the industry.” Am.
Trucking, 660 F.3d at 397 (emphasis added) (internal
quotation marks and alterations omitted). Thus, laws
mandating motor carriers’ use (or non-use) of particular
prices, routes, or services in order to comply with the law are
preempted.

Laws are more likely to be preempted when they operate
at the point where carriers provide services to customers at
specific prices. In Northwest, Inc. v. Ginsberg, 134 S. Ct.
16 DILTS V. PENSKE LOGISTICS, INC.

1422, 1431 (2014), the Supreme Court held that an airline
customer’s claim against the airline for breach of an implied
covenant, stemming from the termination of his frequent flyer
account, was “related to” prices, routes, and especially
services. The Court held that, because frequent flyer credits
could be redeemed for services offered for free or at reduced
prices, the state law contract claim met the “related to” test,
id., and, because the state law claim sought to enlarge the
contractual relationship that the carrier and its customer had
voluntarily undertaken, was preempted under the Airline
Deregulation Act, id. at 1433; see also S.C. Johnson & Son v.
Transp. Corp. of Am., 697 F.3d 544, 558 (7th Cir. 2012)
(noting that Morales and Mendonca both stand for the
proposition that the Airline Deregulation Act and FAAAA do
not preempt “laws that regulate . . . inputs [that] operate one
or more steps away from the moment at which the firm offers
its customer a service for a particular price”); DiFiore v. Am.
Airlines, Inc., 646 F.3d 81, 88 (1st Cir. 2011) (the preempted
law “directly regulates how an airline service is performed
and how its price is displayed to customers—not merely how
the airline behaves as an employer or proprietor”).

On the other hand, generally applicable background
regulations that are several steps removed from prices, routes,
or services, such as prevailing wage laws or safety
regulations, are not preempted, even if employers must factor
those provisions into their decisions about the prices that they
set, the routes that they use, or the services that they provide.
Such laws are not preempted even if they raise the overall
cost of doing business or require a carrier to re-direct or re-
route some equipment. Mendonca, 152 F.3d at 1189. Indeed,
many of the laws that Congress enumerated as expressly not
related to prices, routes, or services—such as transportation
safety regulations or insurance and liability rules, 49 U.S.C.
 DILTS V. PENSKE LOGISTICS, INC. 17

§ 14501(c)(2)—are likely to increase a motor carrier’s
operating costs. But Congress clarified that this fact alone
does not make such laws “related to” prices, routes, or
services. Nearly every form of state regulation carries some
cost. The statutory text tells us, though, that in deregulating
motor carriers and promoting maximum reliance on market
forces, Congress did not intend to exempt motor carriers from
every state regulatory scheme of general applicability.
49 U.S.C. § 14501(c); see also, e.g., Rowe, 552 U.S. at 375
(holding that a state law is not preempted when it “prohibits
certain forms of conduct and affects, say, truckdrivers, only
in their capacity as members of the public”).

Nor does a state law meet the “related to” test for
FAAAA preemption just because it shifts incentives and
makes it more costly for motor carriers to choose some routes
or services relative to others, leading the carriers to reallocate
resources or make different business decisions. For example,
a San Francisco city ordinance requiring equal protection for
domestic partners did not “compel or bind the Airlines to a
particular route or service,” even though it might increase the
cost of doing business at the San Francisco airport relative to
other markets. Air Transp. Ass’n, 266 F.3d at 1074. Despite
the potential cost increase associated with using the San
Francisco airport as a result of the city ordinance, carriers
could still “make their own decisions about where to fly and
how many resources to devote to each route and service.” Id.

In short, even if state laws increase or change a motor
carrier’s operating costs, “broad law[s] applying to hundreds
of different industries” with no other “forbidden connection
with prices[, routes,] and services”—that is, those that do not
directly or indirectly mandate, prohibit, or otherwise regulate
18 DILTS V. PENSKE LOGISTICS, INC.

certain prices, routes, or services— are not preempted by the
FAAAA. Id. at 1072.

C. California’s Meal and Rest Break Laws are Not
Preempted

Although we have in the past confronted close cases that
have required us to struggle with the “related to” test, and
refine our principles of FAAAA preemption, we do not think
that this is one of them. In light of the FAAAA preemption
principles outlined above, California’s meal and rest break
laws plainly are not the sorts of laws “related to” prices,
routes, or services that Congress intended to preempt. They
do not set prices, mandate or prohibit certain routes, or tell
motor carriers what services they may or may not provide,
either directly or indirectly. They are “broad law[s] applying
to hundreds of different industries” with no other “forbidden
connection with prices[, routes,] and services.” Air Transp.
Ass’n, 266 F.3d at 1072. They are normal background rules
for almost all employers doing business in the state of
California. And while motor carriers may have to take into
account the meal and rest break requirements when allocating
resources and scheduling routes—just as they must take into
account state wage laws, Mendonca, 152 F.3d at 1189, or
speed limits and weight restrictions, 49 U.S.C.
§ 14501(c)(2)—the laws do not “bind” motor carriers to
specific prices, routes, or services, Am. Trucking, 660 F.3d at
397. Nor do they “freeze into place” prices, routes, or
services or “determin[e] (to a significant degree) the [prices,
routes, or] services that motor carriers will provide,” Rowe,
552 U.S. at 372.

Further, applying California’s meal and rest break laws to
motor carriers would not contribute to an impermissible
 DILTS V. PENSKE LOGISTICS, INC. 19

“patchwork” of state-specific laws, defeating Congress’
deregulatory objectives. The fact that laws may differ from
state to state is not, on its own, cause for FAAAA
preemption. In the preemption provision, Congress was
concerned only with those state laws that are significantly
“related to” prices, routes, or services. A state law governing
hours is, for the foregoing reasons, not “related to” prices,
routes, or services and therefore does not contribute to “a
patchwork of state service-determining laws, rules, and
regulations.” Rowe, 552 U.S. at 373 (emphasis added). It is
instead more analogous to a state wage law, which may differ
from the wage law adopted in neighboring states but
nevertheless is permissible. Mendonca, 152 F.3d at 1189.2

2
We recently noted that it was an “open issue” “whether a federal law
can ever preempt state law on an ‘as applied’ basis, that is, whether it is
proper to find that federal law preempts a state regulatory scheme
sometimes but not at other times, or that a federal law can preempt state
law when applied to certain parties, but not to others.” Cal. Tow Truck
Ass’n v. City of San Francisco, 693 F.3d 847, 865 (9th Cir. 2012). We
need not resolve that issue here. For the reasons discussed in this section,
we hold that California’s meal and rest break laws, as generally applied to
motor carriers, are not preempted.

Were we to construe Defendant’s argument as an “as applied”
challenge, we would reach the same conclusion and, if anything, find the
argument against preemption even stronger. Plaintiff drivers work on
short-haul routes and work exclusively within the state of California.
They therefore are not covered by other state laws or federal hours-of-
service regulations, 49 C.F.R. § 395.3, and would be without any hours-
of-service limits if California laws did not apply to them. See Hours of
Service of Drivers, 78 Fed. Reg. 64,179-01, 64,181 (Oct. 28, 2013)
(amending 49 C.F.R. § 395.3 to exclude short-haul drivers, in compliance
with Am. Trucking Ass’ns v. Fed. Motor Carrier Safety Admin., 724 F.3d
243 (D.C. Cir. 2013), cert. denied, 134 S. Ct. 914 (2014)). Consequently,
Defendants in particular are not confronted with a “patchwork” of hour
and break laws, even a “patchwork” permissible under the FAAAA.
20 DILTS V. PENSKE LOGISTICS, INC.

Defendants argue that California’s meal and rest break
laws are “related to” routes or services, “if not prices too,” in
six specific ways. None of those examples convinces us that
California’s laws are “related to” prices, routes, or services in
the way that Congress intended.

First, Defendants argue that the state break laws
impermissibly mandate that no motor carrier service be
provided during certain times because the laws require a
cessation of work during the break period. But the state law
requires only that each individual employee take an off-duty
break at some point within specified windows—not that a
motor carrier suspend its service. Defendants are at liberty to
schedule service whenever they choose. They simply must
hire a sufficient number of drivers and stagger their breaks
for any long period in which continuous service is necessary.

Second, Defendants argue that mandatory breaks mean
that drivers take longer to drive the same distance, providing
less service overall. But that argument equates to nothing
more than a modestly increased cost of doing business, which
is not cause for preemption, Air Transp. Ass’n, 266 F.3d at
1071; Mendonca, 152 F.3d at 1189. Motor carriers may have
to hire additional drivers or reallocate resources in order to
maintain a particular service level, but they remain free to
provide as many (or as few) services as they wish. The law
in question has nothing to say about what services an
employer does or does not provide.

Third, Defendants argue that break laws require carriers
to alter “the frequency and scheduling of transportation,”
which directly relates to services under Charas v. Trans
World Airlines, Inc., 160 F.3d 1259, 1265–66 (9th Cir. 1998)
(en banc). Charas held that, under the Airline Deregulation
 DILTS V. PENSKE LOGISTICS, INC. 21

Act, services include “such things as the frequency and
scheduling of transportation, and . . . the selection of markets
to or from which transportation is provided.” Id. Again, this
argument conflates requirements for individual drivers with
requirements imposed on motor carriers. Motor carriers may
schedule transportation as frequently or as infrequently as
they choose, at the times that they choose, and still comply
with the law. They simply must take drivers’ break times into
account—just as they must take into account speed limits or
weight restrictions, 49 U.S.C. § 14501(c), which are not
preempted by the FAAAA.

Fourth, Defendants argue that California break laws
require motor carriers to schedule services in accordance with
state law, rather than in response to market forces, thereby
interfering with the FAAAA’s deregulatory objectives. But
the mere fact that a motor carrier must take into account a
state regulation when planning services is not sufficient to
require FAAAA preemption, so long as the law does not have
an impermissible effect, such as binding motor carriers to
specific services, Am. Trucking, 660 F.3d at 397, making the
continued provision of particular services essential to
compliance with the law, Rowe, 552 U.S. at 372; Air Transp.
Ass’n, 266 F.3d at 1074, or interfering at the point that a
carrier provides services to its customers, Nw., Inc., 134 S.
Ct. at 1431. Moreover, all motor carriers in California are
subject to the same laws, so all intrastate carriers like
Defendants are equally subject to the relevant market forces.

Turning to routes, Defendants’ fifth argument is that the
requirement that drivers pull over and stop for each break
period necessarily dictates that they alter their routes. To the
extent that compliance with California law requires drivers to
make minor deviations from their routes, such as pulling into
22 DILTS V. PENSKE LOGISTICS, INC.

a truck stop, we see no indication that this is the sort of “route
control” that Congress sought to preempt. “‘[R]outes’
generally refer[s] to . . . point-to-point transport . . . [and]
courses of travel.” Charas, 160 F.3d at 1265. The
requirement that a driver briefly pull on and off the road
during the course of travel does not meaningfully interfere
with a motor carrier’s ability to select its starting points,
destinations, and routes. Indeed, Congress has made clear
that even more onerous route restrictions, such as weight
limits on particular roads, are not “related to” routes and
therefore are not preempted. 49 U.S.C. § 14501(c).

Sixth, and relatedly, Defendants argue that finding routes
that allow drivers to comply with California’s meal and rest
break laws will limit motor carriers to a smaller set of
possible routes. But Defendants, who bear the burden of
proof in establishing the affirmative defense of preemption,
PLIVA, Inc. v. Mensing, 131 S. Ct. 2567, 2587 (2011),
submitted no evidence to show that the break laws in fact
would decrease the availability of routes to serve the
Whirlpool accounts, or would meaningfully decrease the
availability of routes to motor carriers in California. Instead,
Defendants submitted only very general information about
the difficulty of finding parking for commercial trucks in
California. Although compliance with California’s meal and
break laws may require some minor adjustments to drivers’
routes, the record fails to suggest that state meal and rest
break requirements will so restrict the set of routes available
as to indirectly bind Defendants, or motor carriers generally,
to a limited set of routes, Am. Trucking, 660 F.3d at 397, or
make the provision or use of specific routes necessary for
compliance with the law, Air Transp. Ass’n, 226 F.3d at
1074. Moreover, drivers already must incorporate into their
schedule fuel breaks, pick ups, drop offs and, in some cases,
 DILTS V. PENSKE LOGISTICS, INC. 23

time to install products or wait for their partner to complete
an installation.

Finally, in an amicus brief filed at our invitation, the
Secretary of Transportation argued that: (1) state laws like
California’s, which do not directly regulate prices, routes, or
services, are not preempted by the FAAAA unless they have
a “significant effect” on prices, routes, or services; (2) in the
absence of explicit instructions from Congress, there is a
presumption against preemption in areas of traditional state
police power, including employment; and (3) there is no
showing of an actual or likely significant effect on prices,
routes, or services, and so the California laws at issue are not
preempted. See also Meal Breaks and Rest Breaks for
Commercial Motor Vehicle Drivers, 73 Fed. Reg. 79,204-01,
79,206 (Dec. 24, 2008) (determining, in an order issued by
the Department of Transportation, that the agency lacked
jurisdiction to preempt California’s meal and rest break laws
under another statute, 49 U.S.C. § 31141, because those state
laws are not “laws [or] regulations on commercial motor
safety”).

The government’s position is not controlling, because it
does not concern a statute that the Department of
Transportation is tasked with implementing, Chevron, U.S.A.,
Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984),
nor does it concern regulations on which the agency has
issued past reasoned, consistent opinions, Auer v. Robbins,
519 U.S. 452, 461–62 (1997). But three factors specific to
this issue lead us to “place some weight upon DOT’s
interpretation,” Geier v. Am. Honda Motor Co., 529 U.S. 861,
883 (2000): (1) the agency’s general expertise in the field of
transportation and regulation, (2) the fact that the position
taken in the brief represents the agency’s reasoned
24 DILTS V. PENSKE LOGISTICS, INC.

consideration of the question, and (3) the fact that the
government’s position is generally consistent with its
approach to other preemption questions concerning
California’s meal and rest break laws (although this is the
first time that the government has taken a position on
FAAAA preemption specifically).

For the reasons discussed above, we agree with the
government’s position. We find it particularly persuasive that
the Department of Transportation, which has great familiarity
with transportation regulations, sees no evidence that
California’s meal and rest break laws will significantly affect
the prices, routes, or services of motor carriers.

CONCLUSION

The FAAAA does not preempt California’s meal and rest
break laws as applied to Defendants, because those state laws
are not “related to” Defendants’ prices, routes, or services.
The district court dismissed this action on summary judgment
because of Defendants’ preemption defense, so it has not yet
considered the merits of Plaintiffs’ claims. Accordingly, we
reverse and remand for further proceedings consistent with
this opinion.

REVERSED and REMANDED.
 DILTS V. PENSKE LOGISTICS, INC. 25

ZOUHARY, District Judge, concurring:

I write separately to emphasize one aspect of this case.
As the Majority notes, Penske bears the burden of proof on its
preemption defense. See supra, at 22. But Penske did not
offer specific evidence of (for example) the actual effects of
the California law on Penske’s own routes or services.
Instead, Penske relied on a general hypothetical likelihood
that a Penske delivery driver, with limited flexibility in
traveling from point A to point B, is further restricted to
certain routes that would allow a driver to park his or her
truck and enter “off-duty” status.

Penske failed to carry its burden. I consequently express
no opinion, for example, that the possibility a “driver [must]
briefly pull on and off the road during the course of travel
does not meaningfully interfere with a motor carrier’s ability
to select its starting points, destinations, and routes.” Id.
(emphases added). Maybe so. Maybe not.

Further, the Majority incorrectly posits that Defendants
are at liberty to schedule as they choose, tempered only by
hiring more drivers and staggering breaks. Customer
demands and practicalities must also be considered. As in air
and train transportation, substitution crews may now be
needed when hours of service are reached with some expense,
delay, and impact on service. With respect to costs-of-labor,
Penske did produce specific evidence, reflecting an estimated
3.4 percent increase in annual pricing to service a relevant
account. But, without more, that minimal increase in pricing
is an insufficient basis for preempting the decades-old meal
and rest break requirement. Mendonca, 152 F.3d at 1189
(finding California’s prevailing wage requirement, which
increased a motor-carrier defendant’s prices by 25 percent,
26 DILTS V. PENSKE LOGISTICS, INC.

“in a certain sense . . . ‘related to’ [the motor carrier-
defendant’s] prices, routes and services,” but had an effect
that was “no more than indirect, remote, and tenuous”).

In short, Penske failed to demonstrate the impact of the
California law that would support a finding of preemption.