[00:00:23] Speaker 09:
The United States Court of Appeals for the Ninth Circuit is now in session.

[00:00:37] Speaker 03:
Good afternoon.

[00:00:39] Speaker 03:
And welcome to San Francisco and the James R. Browning United States Courthouse.

[00:00:46] Speaker 03:
It's a pleasure to welcome all of you here today.

[00:00:48] Speaker 03:
This is the time set for the case of Linda Olson versus State of California, Rob Bonta.

[00:00:58] Speaker 03:
And the United States of America is appearing as amicus.

[00:01:03] Speaker 03:
So if the parties are ready to proceed, you may begin.

[00:01:09] Speaker 03:
And I understand there's going to be separation of time over here, is that correct?

[00:01:14] Speaker 03:
All right, we'll talk about that when you come up.

[00:01:16] Speaker 03:
But you may begin.

[00:01:21] Speaker 01:
May it please the court, DNA evangelists on behalf of plaintiffs, I'd like to reserve 10 minutes for rebuttal, please.

[00:01:30] Speaker 01:
This case comes to the court on the pleadings with an 89 page complaint alleging in detail

[00:01:37] Speaker 01:
that the California legislature egregiously targeted my clients and irrationally discriminated against them and those who use their platforms.

[00:01:46] Speaker 01:
We alleged detailed facts establishing that we are similarly situated to others who receive favored treatment.

[00:01:55] Speaker 01:
We will have to ultimately prove those claims in order to prevail with evidence.

[00:02:00] Speaker 01:
But the question before this court right now is the pleading standard for constitutional claims in this circuit.

[00:02:08] Speaker 01:
The state is urging this court to adopt a heightened pleading standard for equal protection claims, which flies in the face of precedent and would shut the courthouse doors to all sorts of constitutional challenges.

[00:02:21] Speaker 01:
It conflicts with Rule 12, with ICBAL,

[00:02:25] Speaker 01:
in every case that we've cited, many of them, where plaintiffs have survived pleadings, challenges to rational basis claims with allegations that are far less compelling than ours.

[00:02:36] Speaker 01:
For example, the Supreme Court's decision in OLEC is incredibly important and instructive here.

[00:02:42] Speaker 01:
There, the plaintiff was allowed to go to trial

[00:02:46] Speaker 01:
in Fowler Packing, Lazy Y, Del Monte, from this circuit, from other circuits, the DS case, Andrews, all of those cases were pleadings challenges where the court said, these are enough facts for us to let this case proceed to litigation to give the plaintiff their day in court.

[00:03:03] Speaker 01:
And whether parties are similarly situated is an inherently fact-intensive question.

[00:03:09] Speaker 01:
It certainly is in this case where our complaint

[00:03:12] Speaker 01:
includes detailed allegations that must be accepted as true and in fact every reasonable inference must be drawn in our favor this court said so in lazy why and the state is disregarding the complaints well pleaded allegations it's imagining facts

[00:03:29] Speaker 01:
that are directly contrary to those allegations.

[00:03:31] Speaker 01:
It's relying on extra record materials.

[00:03:35] Speaker 01:
Law review articles and websites that aren't judicially noticeable.

[00:03:39] Speaker 01:
Those are historical facts.

[00:03:41] Speaker 04:
Angeles, could I interrupt you for a second?

[00:03:43] Speaker 04:
How do you square the argument you're making about well-pleaded allegations with the Supreme Court's admonition in FCC versus Beach Communications that

[00:03:54] Speaker 04:
All we have to do is come up with any reasonably conceivable basis to support the legislation in order to affirm it under rational basis scrutiny.

[00:04:03] Speaker 04:
So I think I understand you to say that we are to accord the allegations about similarly situated with the type of pleading allegations that we usually do.

[00:04:14] Speaker 04:
But what about the broader rational basis analysis in every conceivable basis?

[00:04:19] Speaker 04:
How do you how do you merge those two ideas together?

[00:04:22] Speaker 01:
Well, again, at the pleading stage, what matters is we have to judge the facts in this complaint.

[00:04:28] Speaker 01:
We can't contradict them.

[00:04:29] Speaker 01:
So we are bound by what's in the complaint.

[00:04:32] Speaker 01:
We can come up with hypothetical rationales.

[00:04:35] Speaker 01:
The state can introduce some sort of hypothetical rationale, but it has to be tested and measured against those allegations in the complaint.

[00:04:44] Speaker 01:
we can't invent facts that contradict the complaint.

[00:04:48] Speaker 01:
So if we look at all of the cases, what's happening is that where plaintiffs have these sorts of detailed allegations, and I would submit that I haven't seen another case that is the combination of Maryfield and Fowler and all of these very unique facts that we've pled here, where you have that, then the plaintiffs are allowed to have their day in court.

[00:05:09] Speaker 01:
And again, we can't hypothesize facts.

[00:05:12] Speaker 01:
And the Fifth Circuit's decision in St.

[00:05:14] Speaker 01:
Joseph Abbey said that very clearly, and I think it's very instructive.

[00:05:19] Speaker 01:
There, there was a trial, just like in the Craig Miles case from the Sixth Circuit.

[00:05:23] Speaker 01:
So this is the practice across the country.

[00:05:26] Speaker 01:
And what matters is

[00:05:29] Speaker 01:
the facts alleged in our complaint and the fact that the state now, before this panel, is relying on facts that are outside the complaint on websites from task... Ms.

[00:05:39] Speaker 06:
Evangelist, I guess to put a finer point on it, you've got to run the table on all three elements of the rational basis claims, similarly situated, no legitimate state purpose and no rational relationship.

[00:05:51] Speaker 06:
I think your fact question goes mostly to the similarly situated in our case law may or may not speak to whether that's a question or fact or law.

[00:06:00] Speaker 06:
But as to whether there's a rational basis, whether there's a legitimate state interest or a rational relationship, those are questions of law, aren't they?

[00:06:08] Speaker 01:
Well, here, let's look at what the state's rationale is, and we have to test it.

[00:06:14] Speaker 01:
So how this works is first, the state has to identify some rationale, and then we have the ability to test it with facts and to strike it down to show that that rationale doesn't marry up with the classification adopted.

[00:06:29] Speaker 01:
So that is a, yes, a legal question in the sense that there's no

[00:06:34] Speaker 01:
requirement that the state actually prove what was motivating the law, but the law can't adopt irrational means to serve those ends.

[00:06:42] Speaker 06:
Okay.

[00:06:42] Speaker 06:
Well, those are two different things.

[00:06:43] Speaker 06:
And to come back to Judge Sanchez's question, it does seem like we're allowed to go beyond the complaint and even beyond the state's pleadings or briefs or arguments or anything that's been said to determine whether there's a legitimate state interest.

[00:06:57] Speaker 06:
I think the last part of your answer talked about the third element here, whether there was a rational relationship and how those fit.

[00:07:04] Speaker 06:
But again, with respect to a rational relationship, can't the state move incrementally?

[00:07:11] Speaker 01:
So here, they did not move incrementally.

[00:07:13] Speaker 01:
This law was, if we look at what this law is, it was an attempt to address misclassification broadly.

[00:07:20] Speaker 01:
The state articulated the rationale that the Borrello test was inadequate.

[00:07:24] Speaker 01:
And they actually took the ABC test, which applied, and rolled it back, though, for millions of workers in hundreds of categories.

[00:07:33] Speaker 01:
So this was not incremental.

[00:07:35] Speaker 01:
But I'd like to go back to the other part of your question, which is looking at the state's interests.

[00:07:41] Speaker 01:
So states can – the government can assert all sorts of interests.

[00:07:44] Speaker 01:
In Maryfield, it was an interest in making sure that pesticides were used safely, but this court then

[00:07:50] Speaker 01:
Tested it against the facts which that case came to this court after summary judgment So it was on a factual record there was expert testimony there were state enforcement officials who testified there were lay witnesses all of those went to the similarly situated

[00:08:07] Speaker 01:
fact that the fact that the plaintiffs there were similarly situated to others who got an exemption that the stated basis for the law while it is certainly legitimate it was a legitimate stated basis but the law did not serve that where else in equal protection do we look to the facts do we look to the facts to determine whether something's a compelling state interest that's a question of law do we look to the facts to determine whether something's an important interest or substantially related

[00:08:33] Speaker 01:
That is a question of law, but whether this classification serves that purpose, whether there's a certain universe of facts.

[00:08:43] Speaker 01:
So in the Olick case, the state said that it had an interest in easements, and they demanded from the plaintiff there a 30-foot easement or 33-foot easement, and her neighbor only 17 feet.

[00:08:55] Speaker 01:
And the state could have said anything about why it could come up with any hypothetical rationale.

[00:09:01] Speaker 01:
But the facts that were alleged in that complaint were that she was exactly similarly situated to others who'd received preferential or different treatment.

[00:09:08] Speaker 01:
She received disfavored treatment.

[00:09:10] Speaker 01:
And the court unanimously let that case.

[00:09:12] Speaker 01:
go to litigation, to fact-finding, and it went to trial, and actually the bill is won.

[00:09:17] Speaker 06:
But that's a class of one where, of course, the facts are going to matter.

[00:09:19] Speaker 06:
In our own cases, say this, the facts are going to matter when you're alleging a class of one where it's executive action, but this is legislative action.

[00:09:25] Speaker 06:
We've got the text of the bill before us.

[00:09:29] Speaker 06:
Typically, we treat those as questions of law.

[00:09:32] Speaker 01:
but not whether two parties are similarly situated, Your Honor.

[00:09:35] Speaker 01:
If we look at the Who case from the Second Circuit, equal protection analysis, whether two comparators are similarly situated is fact-intensive.

[00:09:45] Speaker 01:
Lazy why.

[00:09:46] Speaker 01:
This court's decision there said that the plaintiff had a chance to rebut any asserted facts in discovery, but that at that point, the state said administrative costs were our concern.

[00:10:00] Speaker 01:
in in that case said we're concerned about administrative costs and the court said well the plaintiff has alleged facts saying that there's no difference that the classification doesn't serve that purpose and that actually they were targeted as conservationists and this court let that case go to fact discovery so again here let's look at what the state's interests are so these are really

[00:10:25] Speaker 04:
It's important that we, again, bounded by the complaint test, what they're saying.

[00:10:39] Speaker 04:
Defeats that very purpose and let me let me just I want to understand your position clearly.

[00:10:45] Speaker 04:
Do you have a do you challenge the exemptions themselves under under AB five that that that the state had a legitimate interest in creating exemptions to to the ABC test requirement.

[00:10:57] Speaker 01:
and as applied challenge and my clients claim that they were similarly situated to those who got preferential treatment and the enactment history of this law bears this out.

[00:11:06] Speaker 04:
No I'm trying to understand specifically the position is it that you are testing are you challenging the referral agency exemption as being irrational itself or the fact that there were certain industries carved out from

[00:11:20] Speaker 04:
from the application of that exemption.

[00:11:22] Speaker 04:
Both.

[00:11:23] Speaker 01:
The referral agency exemption is the starkest example and if we look at the enactment history of what happened here there's really no story other than the one that our complaint tells which is we asserted the referral agency exemption

[00:11:37] Speaker 01:
Um, and the, the district court in this very case found in denying our, our preliminary injunction requests that we would likely satisfy it.

[00:11:47] Speaker 01:
And then the state wasted no time, the legislature wasted no time in going to work to retroactively carve us out of that.

[00:11:55] Speaker 04:
Also, it carved 11 industries out from that, so why should we agree with the premise that it was meant specifically to carve one company or certain companies out when it reached a much broader group of industries?

[00:12:13] Speaker 01:
Well, the California Court of Appeals said as much in People vs. Uber and used that against us there to grant the state an injunction, which it went for right after all of this happened.

[00:12:23] Speaker 01:
I mean, the state went after us like a heat seeking missile.

[00:12:26] Speaker 01:
They wasted no time and the sponsor of AB5 said very clearly, we're going to make sure that Uber can never, never invoke this

[00:12:34] Speaker 01:
exception, this exemption for referral agencies.

[00:12:37] Speaker 01:
And the main point of our argument is others who are similarly situated were expressly given the opportunity to do that very thing.

[00:12:45] Speaker 01:
If we look at the referral agency exemption.

[00:12:50] Speaker 04:
So this is, I think, the nub of the issue.

[00:12:52] Speaker 04:
How would you test in court whether the legislature was trying to go after Uber alone or other rideshares or went after the 11?

[00:13:05] Speaker 04:
How is that a testable fact proposition that you would put before the court?

[00:13:09] Speaker 01:
The actual purpose is not what our claim hinges on.

[00:13:13] Speaker 01:
What it hinges on is the irrationality of the means adopted here.

[00:13:17] Speaker 01:
So what we would do is just like what every other case has done, we would have

[00:13:22] Speaker 01:
fact-finding we would have expert testimony just like in OLEC in Maryfield in the DS case from the 10th circuit the question was whether pit bulls are more dangerous than other dogs and the court didn't say that's a judicially noticeable legislative fact we're going to have

[00:13:38] Speaker 01:
testimony on that and there was expert testimony.

[00:13:40] Speaker 01:
We'd have workers who use these apps.

[00:13:42] Speaker 01:
We would show that Uber for dogs, preferential treatment, is no different than Uber for people.

[00:13:48] Speaker 01:
That's what we've alleged here.

[00:13:49] Speaker 01:
So the referral agency exemption is so clearly an example, but it goes more broadly than that.

[00:13:55] Speaker 01:
Delivery, it's carved out of the referral agency exemption, but newspaper delivery gets an exact, its own exemption.

[00:14:02] Speaker 01:
That's section 2783H of the labor code.

[00:14:06] Speaker 01:
And the legislature found that that industry in particular had historically misclassified workers, that groups who had been misclassified and harmed, they were losing.

[00:14:18] Speaker 01:
The newspaper industry was losing challenges under Borrello left and right.

[00:14:22] Speaker 01:
The AB5 sponsor acknowledged all of that and said, but we needed that exemption in order to get this law, which was going to target Uber, passed.

[00:14:30] Speaker 01:
So again, our claims don't hinge on the animus and the targeting here.

[00:14:34] Speaker 01:
but it is so clear after you peel away all of the other justifications, which the state has asserted.

[00:14:40] Speaker 01:
And it has thrown out a lot of them, but the actual facts in the complaint show that none of those make any sense.

[00:14:46] Speaker 01:
This classification does not serve those purposes.

[00:14:50] Speaker 01:
And so that's what we're doing at this stage.

[00:14:52] Speaker 01:
We cannot ignore paragraph 104 of the complaint.

[00:14:55] Speaker 01:
That's just one of the many paragraphs that says that the use patterns of those who got the referral agency exemption, like task rabbit,

[00:15:04] Speaker 01:
and WAG and moving is just like the work that people do using the platforms of my clients.

[00:15:13] Speaker 04:
The state makes the argument that there is a distinction between the companies and so far as TaskRabbit puts together, it's the argument of a commercial locator and creating a partnership.

[00:15:25] Speaker 04:
That the people that are brought together in order to perform that service they get to negotiate their own rates and set the other terms Whereas some of these companies set the rates for there's no negotiation going on.

[00:15:37] Speaker 04:
Why isn't that a?

[00:15:39] Speaker 04:
meaningful distinction for rational basis

[00:15:41] Speaker 01:
First of all, if that's not a historical fact that has to be tested in fact-finding and discovery, I don't know what is.

[00:15:46] Speaker 01:
I don't think any of us can say with certainty or that the state knows with certainty how any one of these apps work.

[00:15:53] Speaker 01:
We have alleged that we are similarly situated to them.

[00:15:57] Speaker 01:
And the allegations in our complaint says that these are really just the same.

[00:16:03] Speaker 01:
And I just want to point to a few more of our allegations.

[00:16:06] Speaker 11:
Council, before you move on to pointing out more examples, can I clarify your position

[00:16:11] Speaker 11:
At what point during this stage do we look at the ultimate outcome, if appropriate at all?

[00:16:19] Speaker 11:
Because as I understand it, Uber was taking the position that it doesn't matter which test applies, the outcome really ends up being the same.

[00:16:26] Speaker 11:
So it's not a misclassification, it's just really the question of how you get to a determination of whether you have the protection or not.

[00:16:35] Speaker 01:
Right.

[00:16:35] Speaker 01:
Well, it is irrational to apply to apply a different standard to us.

[00:16:39] Speaker 01:
And we don't have to admit that we fail any one of these tests in order to bring this challenge.

[00:16:44] Speaker 01:
This court just said as much in in peace, L. A. Versus Bonta.

[00:16:48] Speaker 01:
It's a Supreme Court decision in Susan B. Anthony.

[00:16:51] Speaker 01:
So we maintain that we have a right to defend ourselves under all of these standards, but that doesn't matter for these purposes.

[00:16:58] Speaker 01:
In the end, what we have alleged is that applying a totally different regime, the Borrello test, which this legislature found leads to misclassification and was insufficient in harm workers

[00:17:10] Speaker 01:
that applying that test to all of these exempted industries is irrational when we are similarly situated.

[00:17:17] Speaker 11:
And so if we look at... Right, so that's what I thought you were going to say, that it's really the application of the test at the outset.

[00:17:24] Speaker 11:
and you talked a lot about as the process goes on, there's gonna be evidence presented.

[00:17:28] Speaker 11:
I'm assuming the evidence really go to the factors, regardless of whether it's ABC or the Borrello test.

[00:17:37] Speaker 11:
When do we look at the ultimate outcome of how the factors turn out, if at all?

[00:17:43] Speaker 11:
Is it a trial summary judgment?

[00:17:44] Speaker 01:
No, that's not part of this case.

[00:17:47] Speaker 01:
That actually, the state brought an enforcement action against Uber and used

[00:17:53] Speaker 01:
used the referral agency exemption carve-out against us to get an injunction.

[00:17:58] Speaker 01:
The Court of Appeal found that the legislature targeted us and used our carve-out from that exemption against us.

[00:18:04] Speaker 01:
So we have been targeted at every point.

[00:18:07] Speaker 01:
We have a right to defend ourselves, but the outcome of any of these tests is not what shifts.

[00:18:12] Speaker 01:
Irrelevant at this stage.

[00:18:13] Speaker 01:
It is.

[00:18:14] Speaker 11:
And at all subsequent stages.

[00:18:15] Speaker 11:
That's your position.

[00:18:16] Speaker 01:
In this case, it's about

[00:18:17] Speaker 01:
is all of the factors that have been thrown out and let me just give another one.

[00:18:22] Speaker 01:
So the district court speculated that dog walkers exert more control over their work than drivers and that the relationship is more intimate.

[00:18:31] Speaker 01:
That's a speculation.

[00:18:33] Speaker 01:
The complaint alleges in paragraph 73 that drivers are free from direction and control and they have the same relationship as dog walkers do with their customers on the other gig economy platforms that are exempted

[00:18:46] Speaker 01:
That's paragraph 104.

[00:18:48] Speaker 01:
They choose where, when, and how they work.

[00:18:50] Speaker 01:
That's paragraph 15.

[00:18:52] Speaker 01:
That cannot be ignored.

[00:18:54] Speaker 03:
Again, the— But Council, it seems like under Mountain Water Company,

[00:19:00] Speaker 03:
a rational basis review expressly permits courts to consider any rational purposes.

[00:19:08] Speaker 03:
I think this is what was discussed before, but let me come back at it.

[00:19:12] Speaker 03:
Any rational purpose possibly motivating enactment of the challenge statute.

[00:19:17] Speaker 03:
And I think as the district court explained, you know,

[00:19:21] Speaker 03:
these companies are clearly different in terms of the services they offer.

[00:19:25] Speaker 03:
One does dog walking and one does dog driving, I believe.

[00:19:30] Speaker 03:
And why doesn't that provide a rational basis for allegedly disparate treatment?

[00:19:35] Speaker 01:
There is no basis for treating dog walking, moving.

[00:19:39] Speaker 01:
That was another one.

[00:19:41] Speaker 01:
Moving is exempt.

[00:19:42] Speaker 01:
That's even more dangerous than riding a bicycle to make a delivery or riding a car.

[00:19:47] Speaker 01:
That is an irrational line to draw, even if that's the legislation.

[00:19:52] Speaker 03:
somewhat well established from, I think it's Vance versus Bradley and City of New Orleans versus Dukes, that a statutory classification scheme may be both under-inclusive and over-inclusive and doesn't require mathematical exactitude.

[00:20:10] Speaker 03:
So even if the line drawing in AB 5 and its amendments are not perfect, I'm trying to figure out why is that fatal to the legislation.

[00:20:21] Speaker 01:
That case was brought by a plaintiff who said, I'm an outlier.

[00:20:24] Speaker 01:
This classification based on age is probably rational, but I personally don't fit this classification.

[00:20:31] Speaker 01:
That's not what we're claiming here.

[00:20:32] Speaker 01:
This is not a case of under inclusive versus over inclusive.

[00:20:35] Speaker 01:
We are the category.

[00:20:36] Speaker 01:
This line drawn in the referral agency exemption, for example, it's the starkest example that drew the line between Uber for people and Uber for dogs on the other side.

[00:20:45] Speaker 01:
And the state has never come up with a justification for why dogs are different from people or why moving is any less dangerous if that's the justification we have.

[00:20:55] Speaker 06:
We have allegations in our complaint that when it comes to the patterns of use it's the same paragraph 73 and 74 this evangelist the I guess if I could ask a slightly different question would prop 22 satisfy your test and

[00:21:14] Speaker 06:
Why, so if there were a challenge to Prop 22, which seems to be a carve out just going the other way, all the same interests, why is that constitutional?

[00:21:23] Speaker 01:
Prop 22 had detailed findings that the voters believed that Prop 22 was necessary to protect independent work in California, and I think it's a very rational law that was supported for all the right purposes, and that law serves that purpose.

[00:21:39] Speaker 06:
Should those be contested in court?

[00:21:43] Speaker 06:
So looking at the face of the initiative and the voters' purposes that were on the petition, can we look behind those and can those be tested in court as matters of fact?

[00:21:52] Speaker 01:
If a plaintiff brought an equal protection challenge and alleged the kind of animus and circuitous means, just like Maryfield and Fowler, I don't think they could.

[00:22:01] Speaker 01:
So I don't think that that would ever have a chance.

[00:22:05] Speaker 01:
But what we have here is such a unique law.

[00:22:09] Speaker 01:
I've never seen anything like it.

[00:22:10] Speaker 01:
This sort of pockmarked law where so many exemptions, they really undercut the whole purpose of AB 5.

[00:22:16] Speaker 01:
AB 5's purpose.

[00:22:17] Speaker 05:
If I could interrupt, could a state target a particular industry just because it's larger?

[00:22:22] Speaker 05:
So here in this case, the rideshare industry is much larger, so it poses a bigger problem in the eyes of the states.

[00:22:28] Speaker 05:
It focuses more on that as opposed to dog walking, which may be a smaller industry.

[00:22:33] Speaker 01:
It would have to be a rational law and not for some improper purpose.

[00:22:38] Speaker 01:
So we'd have to look at what the reasons were for it and what the lines were that were drawn.

[00:22:42] Speaker 01:
But if the court said, excuse me, if the legislature said we're going to just enact what's now the referral agency exemption and put on one side of the line task rabbit and handy and wag and on the other side Uber and Postmates, that would be irrational.

[00:22:57] Speaker 01:
So we've alleged- There would be irrationalism?

[00:23:00] Speaker 01:
It would be irrational.

[00:23:01] Speaker 04:
But to Judge Lee's point, the size, if the legislature's motivated by a misclassification problem, and it sees certain industries that are at higher risk of that, and this happens to be a much larger industry than other industries, perhaps deserving of more attention by the courts under the ABC test, why isn't that a rational basis to draw the line there, even if it were identical business models, just the sheer size of the different industries?

[00:23:28] Speaker 01:
That's not what we have here, though.

[00:23:30] Speaker 04:
This is not about size.

[00:23:31] Speaker 04:
Can you answer my question?

[00:23:31] Speaker 04:
Why wouldn't that be a rational line drawing exercise?

[00:23:36] Speaker 01:
Well, they would have to have rational reasons that support that distinction, that classification.

[00:23:40] Speaker 01:
And they do.

[00:23:41] Speaker 04:
So it's high risk industry, much larger size.

[00:23:44] Speaker 04:
Those are the reasons being given.

[00:23:46] Speaker 01:
Again, if there were some rational basis for that distinction, we'd have to look at it and perhaps, but I think here, if it's the problem of misclassification and a rampant problem of misclassification, if that's what they were going for here, well, my clients, they were passing the Borrello test.

[00:24:05] Speaker 01:
The newspaper industry was not.

[00:24:07] Speaker 01:
They had a bad history of failing, and yet they got a carve out that favored them.

[00:24:14] Speaker 01:
I just, I see now that my rebuttal, I'm eating into my rebuttal time.

[00:24:19] Speaker 01:
So I would like to reserve my time for rebuttal, but I also want to answer the court's questions.

[00:24:27] Speaker 03:
Let me just ask Judge Gould, do you have any questions for counsel?

[00:24:33] Speaker 03:
No.

[00:24:33] Speaker 03:
Thank you.

[00:24:34] Speaker 03:
All right.

[00:24:35] Speaker 03:
Thank you.

[00:24:53] Speaker 13:
Good afternoon, Your Honors, and may it please the Court.

[00:24:55] Speaker 13:
Samuel Harbert, appearing on behalf of the California Attorney General.

[00:24:59] Speaker 03:
Following a vigorous policy debate... Five minutes of your time is going to be yielded to the United States?

[00:25:05] Speaker 03:
That's correct.

[00:25:06] Speaker 03:
Thank you.

[00:25:07] Speaker 03:
Go ahead.

[00:25:08] Speaker 13:
Following a vigorous policy debate, California's legislature reasonably decided to class app-based drivers among the vast majority of California workers subject to the ABC test.

[00:25:17] Speaker 13:
In doing so, the legislature treated those drivers just the same as taxi drivers, bus drivers, truck drivers, construction workers, factory workers, agricultural laborers, retail sales staff.

[00:25:29] Speaker 13:
restaurant workers, janitorial workers, and many other types of laborers.

[00:25:34] Speaker 13:
The legislature adopted exemptions from the ABC test where it reasonably concluded that there was little to no risk of worker misclassification, either because the exempted work arrangements are those that have long and lawfully been treated as independent contractor relationships,

[00:25:49] Speaker 13:
or because the exempted sectors are those with barriers to entry, like educational or licensing requirements, that give workers the bargaining strength to negotiate fair wages and working conditions.

[00:26:01] Speaker 13:
Because those justifications for AB 5's exemptions are so clear on the face of the legislative history, the district court had no trouble discerning them at the pleading stage.

[00:26:12] Speaker 13:
The plaintiff's arguments for reversal would, if accepted by the court, threaten to cast a cloud of legal uncertainty over the validity of economic legislation at every level of government, which is why you have amicus briefs before you from local governments across the circuit, 16 different states, and the federal government, all urging you to affirm the district court's dismissal.

[00:26:34] Speaker 06:
Robert, I'll jump in here with trying to clarify a discussion that I had with your friend.

[00:26:42] Speaker 06:
So should we be analyzing the exemptions as a question of tailoring or state interest?

[00:26:50] Speaker 06:
There's those rationally related to a legitimate state interest.

[00:26:53] Speaker 06:
When we look at the exemptions, it's unclear to me whether the district court or whether the parties are treating that as a question of a sufficient state interest or treating the exemptions as a question of, well, the tailoring is off.

[00:27:07] Speaker 13:
Your honor, I think you could look to either, and plaintiffs' claims would not plausibly state a claim under either standard.

[00:27:14] Speaker 13:
As I understand the district court's opinion, it focused on the latter question, the rationality of the state's interests.

[00:27:20] Speaker 13:
And that's the approach you see most frequently.

[00:27:24] Speaker 06:
Well, the legitimacy of the state, as a rational basis, goes to the legitimacy of the state interest, and the tailoring goes to the rationality of the relationship to those interests.

[00:27:32] Speaker 13:
I see, Your Honor.

[00:27:33] Speaker 13:
And the district court addressed both and held that there were rational interests underlying AB 5's exemption scheme, the ones that I mentioned at the outset of my argument, and that they were legitimate because this wasn't the kind of economic protectionism that's

[00:27:52] Speaker 13:
that's seen in some cases, like the Fifth and Sixth Circuit decisions my friend on the other side cited to, or other types of impermissible animus, which this court has always described quite narrowly as irrational prejudice or the bare desire to harm.

[00:28:07] Speaker 13:
And Your Honor, if I could turn to the general pleading standard, because I want to address directly my friend's suggestion that we're asking for some kind of heightened pleading standard here.

[00:28:19] Speaker 13:
That couldn't be further from the case.

[00:28:21] Speaker 13:
We're asking the court to apply exactly the pleading standard.

[00:28:25] Speaker 13:
It's discussed in cases like the Ingalati chiropractic panel decision.

[00:28:29] Speaker 13:
which persuasively explained that in a rational basis case like this one, dismissal is required as a matter of law if the court, as the district court was able to do here, is able to perceive some conceivable rational basis for the challenge distinction at the pleading stage.

[00:28:47] Speaker 13:
As a general matter, not always, but more often than not, a court should be in a position to identify some conceivable basis at the pleading stage

[00:28:56] Speaker 13:
after looking to the complaint, the motion to dismiss briefing, the statutory text and legislative history, and the court's own common sense and judicial experience.

[00:29:07] Speaker 04:
I'd also point the court- Can I interrupt for a second?

[00:29:10] Speaker 04:
I take Ms.

[00:29:11] Speaker 04:
Evangelos's point to be that if we only relied on that, then there would not be cases like Maryfield and Fowler-Packett.

[00:29:18] Speaker 04:
And so there are certain cases that we have in our circuit where it did go to some sort of fact-finding process.

[00:29:25] Speaker 04:
What makes those cases different than this one in terms of finding a conceivable basis?

[00:29:32] Speaker 04:
Presumably one could find a conceivable basis there or here, although I know the panel in Fowler-Packing found that they couldn't come up with one.

[00:29:39] Speaker 04:
So what's the distinction here that you would draw?

[00:29:42] Speaker 13:
I think the distinction is the one you just mentioned, Your Honor, that in a case like Fowler Packing, that's really the highly unusual or rare case where the court, I mean, in Fowler Packing, which we fully accept the court's analysis there, where the court very thoughtfully explained, look, we understand the exceptionally deferential nature of rational basis review, and we're looking far and wide to all available sources to us at the pleading stage, and we just can't identify

[00:30:08] Speaker 13:
any conceivable basis other than political favoritism, which alone is not a legitimate rational basis for upholding the challenge legislation.

[00:30:18] Speaker 13:
But this case looks nothing like that because we're not even in a type of case where courts

[00:30:24] Speaker 13:
have to imagine or hypothesize some conceivable basis for the legislation, because here the rational bases are right there on the face of the legislative history materials, which is why the district court was so easily able to identify them and discuss them in its opinions in this case.

[00:30:43] Speaker 05:
Can you address Uber's point that AB5 actually rolled back protections in certain industries, which seems to undercut the state's claim that this was intended to protect workers?

[00:30:55] Speaker 13:
Of course, your honor.

[00:30:56] Speaker 13:
And nothing in AB 5 or its follow up legislation, AB 2257, which was enacted the following year.

[00:31:03] Speaker 13:
And that's what my friend on the other side is referring to and making this kind of undercutting point.

[00:31:08] Speaker 13:
Nothing in those statutes undercuts AB 5's overall purpose.

[00:31:12] Speaker 13:
The overall purpose was to ensure that

[00:31:15] Speaker 13:
in sectors of the economy, the vast majority of sectors of the economy where there was a misclassification problem, we'd adopt the ABC test to confront that problem.

[00:31:23] Speaker 13:
The legislature adopted exemptions where it reasonably determined that little to no risk of misclassification existed.

[00:31:29] Speaker 13:
And the basis for the additional exemptions that were adopted in AB 2257 was that the legislature determined

[00:31:37] Speaker 13:
These exemptions should have existed in the first place because they cover the same types of work arrangements and sectors of the economy where workers don't have a need for the protections of the ABC test, either because we're talking about things that were already lawfully treated as independent contracting arrangements, so there was no misclassification problem to be solved, or because these are workers with the types of bargaining power I mentioned at the outset of my argument,

[00:32:03] Speaker 13:
where really the classification standard is largely superfluous because workers are in a position to protect themselves against exploitation.

[00:32:11] Speaker 06:
How are we supposed to test that on the pleadings, though?

[00:32:14] Speaker 06:
Those sound like good reasons, not all of them reflected in the legislative record.

[00:32:22] Speaker 06:
But they do seem contestable.

[00:32:24] Speaker 06:
So why wouldn't we send this into discovery?

[00:32:29] Speaker 13:
Your Honor, because they're not factually contestable, I mean the standard under rational basis review isn't whether it's possible to raise some question as to the empirical validity of the legislature's determinations.

[00:32:44] Speaker 13:
What this Court has made clear in cases like Ingalati chiropractic is the only question is whether there's any conceivable basis whatsoever for the challenge distinctions.

[00:32:54] Speaker 13:
Something

[00:32:55] Speaker 13:
to show the court that the legislature wasn't acting in a purely arbitrary or irrational fashion.

[00:33:01] Speaker 13:
And this bargaining PowerPoint that I'm making, I don't think is really something that turns on factual considerations.

[00:33:07] Speaker 13:
It's really legal and common sense based.

[00:33:10] Speaker 13:
And in just the same way that it was in the FCC versus Beach Communications case, where the Supreme Court actually invoked a very similar, really strikingly similar bargaining power rationale,

[00:33:23] Speaker 13:
and you can look at its analysis and see that it was purely common sense and common knowledge based.

[00:33:27] Speaker 13:
The court wasn't relying on anything factual or in the record there.

[00:33:33] Speaker 03:
It seems that the appellants are arguing that because the legislative research describes high rates of misclassification in the app-based on-demand sector that it doesn't justify the difference or the different treatment between Uber and

[00:33:51] Speaker 03:
similar identical businesses like WAG and TaskRabbit.

[00:33:55] Speaker 03:
What's your response to that?

[00:33:58] Speaker 13:
Your Honor, so I have two responses.

[00:33:59] Speaker 13:
My main response is that that allegation simply fails at that threshold as a matter of law and the court really shouldn't be getting into the weeds of looking at any distinction between particular types of app-based businesses because rational basis review focuses on the rationality of the lines drawn by the statutory text.

[00:34:18] Speaker 13:
There's no distinction in AB 5 statutory text that purports to draw distinctions between different types of app-based businesses.

[00:34:25] Speaker 13:
The closest that my friends on the other side have come is pointing to Section 2777B2C of the labor code.

[00:34:33] Speaker 13:
And this is the provision, which appears at page 10 of the statutory addendum to the state's supplemental opening brief.

[00:34:39] Speaker 13:
This is the provision that withholds the generally applicable referral arrangement exemption from businesses in 10 enumerated sectors, including but not limited to the transportation and delivery sectors.

[00:34:51] Speaker 13:
And the rational basis for that carve-out provision was the legislature was really reasonably worried about the risk of abuse of the exemption by businesses in sectors that had a prevalent misclassification problem before AB 5 was enacted.

[00:35:06] Speaker 13:
My second main response though, and really I don't think the court even needs to get here, is that even if the court hypothetically were to look at the distinction between apps like WAG and TaskRabbit on the one hand and Uber on the other, there would be a rational, conceivable basis for a legislative body to draw that distinction because the reasons detailed in our supplemental opening brief

[00:35:28] Speaker 13:
TaskRabbit and WAG are a far greater resemblance than does Uber to the types of mere commercial matchmaking arrangements that have long and properly been regarded as non-employer referral arrangements under California law.

[00:35:46] Speaker 03:
And then how do you respond to the plaintiff's allegations of animus?

[00:35:51] Speaker 03:
Because it seems like they are arguing that that's the sole motivating factor for the carve outs.

[00:36:00] Speaker 13:
That is their allegation, Your Honor, and it fails as a matter of law for two independent reasons.

[00:36:05] Speaker 13:
The first is that plaintiffs haven't pointed to anything in their complaint that resembles what this Court has consistently described as animus, which is a bare desire to harm or irrational prejudice.

[00:36:17] Speaker 13:
All they've pointed to are a handful of statements from legislators expressing the entirely reasonable policy-based view

[00:36:24] Speaker 13:
that Uber and similar companies were engaged in worker misclassification prior to AB5's enactment.

[00:36:30] Speaker 13:
Now, I respect the fact that my friends disagree with that policy-based view, as the California voters ultimately did.

[00:36:37] Speaker 13:
But that disagreement does not render the legislators' views irrational.

[00:36:42] Speaker 13:
It certainly does not plausibly suggest that legislators were motivated by prejudice or animus.

[00:36:49] Speaker 13:
And the second reason, an independent reason, why their theory of animus is legally baseless is that in rational basis cases like this one, where you don't have allegations of invidious discrimination against a suspect class, like a racial or ethnic minority, what this court has made clear in cases like Boardman and Gallinger and Animal Legal Defense Fund is that allegations of animus are legally immaterial so long as there are some

[00:37:16] Speaker 13:
independent, conceivable, rational basis to support the challenge aspects of the statute.

[00:37:21] Speaker 13:
And here there is, as detailed by the district court, the limestone.

[00:37:26] Speaker 05:
If I can ask a related question.

[00:37:27] Speaker 05:
Suppose, hypothetically, there's a different law, but we question the state's purported rationale for the law.

[00:37:38] Speaker 05:
It seems dubious.

[00:37:39] Speaker 05:
But under rational basis, a court can infer a rational basis for it, even if the state never proffered that reason.

[00:37:45] Speaker 05:
and then suppose that there's strong evidence, an email chain saying sponsor the bill, conferred with the governor and said we're gonna target these industries because they're our political enemies and we're gonna create exemptions for these other industries because the CEO of the company is a big donor who's gonna form our super PAC.

[00:38:02] Speaker 05:
So yeah, we can infer a rational basis, but there's strong evidence that the legislature was motivated by illegitimate goals.

[00:38:10] Speaker 05:
What do we do in that case?

[00:38:12] Speaker 13:
Your Honor, I mean, I think the upshot of this court's precedent in this area, like Boardman, like Gallinger, like Animal Legal Defense Fund, is those allegations would be legally immaterial if the state were able to articulate some other plausible, conceivable basis for the distinctions.

[00:38:28] Speaker 05:
I think it would be... We don't credit that, but we can infer, you know, potentially the court can infer a legitimate purpose for it, even if it's different from what the state purported to be.

[00:38:39] Speaker 13:
Your Honor, again, I don't think that hypothetical looks anything like what plaintiffs have alleged here for the reasons I was just discussing a moment ago, but taking the hypothetical, I think that the independent rational basis would be sufficient to sustain the legislation.

[00:38:55] Speaker 13:
And there's a good reason for that, which is that we generally want to defer to

[00:39:00] Speaker 13:
And I think it's important that we really refer and respect the judgments that legislators make when crafting economic policy.

[00:39:06] Speaker 13:
This is a core area.

[00:39:09] Speaker 07:
Would your answer to that question be the same if the hypothetical, instead of super PAC friends,

[00:39:19] Speaker 07:
say a $500,000 bribe to the committee chair, that there are rational bases, but a crime was committed in getting the legislation passed, would your answer as to equal protection still be the same?

[00:39:35] Speaker 13:
Your honor, it's possible in that scenario the court would want to carve out some new or novel doctrine.

[00:39:41] Speaker 13:
I'm not aware of any basis for it, and I think what this court's precedents consistently suggest is that wouldn't be an equal protection claim.

[00:39:49] Speaker 13:
Of course, as your honor pointed out, it would be a crime, and it would be deterred and presumably prosecuted under the state's or the federal criminal laws.

[00:40:01] Speaker 03:
So Assemblymember Gonzalez's remarks, what do we make of them?

[00:40:06] Speaker 13:
Your Honor, we're happy for the Court to look at them and see, as we've detailed in our supplemental reply brief, that they really just don't suggest the type of unconstitutional animus that my friends on the other side have suggested.

[00:40:22] Speaker 13:
I mean, the reliance on a number of her statements

[00:40:26] Speaker 13:
It's very selective in plaintiff's complaint and briefing before the court.

[00:40:30] Speaker 13:
When you look at the full context, you'll see that this was a hotly contested issue in California, of course.

[00:40:36] Speaker 13:
And so the rhetoric is sometimes a little bit heated, but the underlying substance is consistent with the reasonable policy-based view that Uber and similar companies were engaged in misclassification prior to AB5's enactment.

[00:40:50] Speaker 13:
That's just not anything that plausibly suggests animus.

[00:40:57] Speaker 10:
Even if it did, would it matter?

[00:40:59] Speaker 10:
Would it matter if the sponsor of the bill and say 10 or 15 other legislators were targeting a company or had animus?

[00:41:07] Speaker 10:
Does that necessarily translate to the entire legislation in the passage of it?

[00:41:13] Speaker 13:
Your honor no I don't think it would under this court's precedents like Borgman and Gallanger and the Supreme Court's repeated admonition in cases like beach communications that subjective legislative motivations just aren't constitutionally relevant in the rational basis context in less.

[00:41:29] Speaker 13:
You have plausible allegations of something like discrimination against a suspect class that can, of course, be different under the equal protection clause.

[00:41:37] Speaker 13:
But now, and another reason why those types of motive allegations are disfavored in the law, not just under equal protection doctrine, but more generally in the Supreme Court has discussed this in cases like O'Brien.

[00:41:48] Speaker 13:
is that it can be really hard to figure out how to attribute individual legislator motives to the legislative body as a whole.

[00:41:56] Speaker 13:
So as Your Honor noted, maybe there would be five, six, 15 legislators, but there are dozens of legislators in the California Assembly and Senate, and figuring out exactly what they were thinking as a collective body is not something that's generally going to be possible.

[00:42:12] Speaker 13:
And in the rational basis context, we just don't allow those claims from the get-go.

[00:42:18] Speaker 13:
Your honors, if I could turn to plaintiffs complaint in this case I think plaintiffs Council suggested this earlier this afternoon that we're disregarding the complaint.

[00:42:28] Speaker 13:
We're happy to talk about the complaint, it is 89 pages long, but

[00:42:33] Speaker 13:
The problem for cleanups is it features very little in the way of legally relevant information.

[00:42:38] Speaker 13:
So much of it focuses on the legally baseless allegations of animus that fail for the reasons I was just discussing.

[00:42:45] Speaker 13:
Other portions extensively discuss exemptions like AB5's music and entertainment related exemptions that have little or nothing to do with the app-based driving sector.

[00:42:57] Speaker 13:
And then other portions rely on

[00:43:00] Speaker 13:
misinterpretations of AB 5's statutory text and for that reason they fail as a matter of law.

[00:43:06] Speaker 13:
So for example, my friend suggested that the legislature has exempted a number of workers in other high misclassification sectors.

[00:43:13] Speaker 13:
Now, even if that allegation were plausible, I think it would fail as a matter of law for the reason that Chief Judge Murguia suggested, which is that

[00:43:22] Speaker 13:
Lines under rational basis review need not be drawn with mathematical precision, but the claims fail anyway because they're inconsistent with the statute.

[00:43:32] Speaker 13:
So take, for example, my friend's suggestion that AB5 exempts a lot of construction workers.

[00:43:39] Speaker 13:
If you look at the actual exemption, which is at California Labor Code, Section 2781, you'll see that it's exceedingly narrow in scope.

[00:43:47] Speaker 13:
It only applies to the relationship between a subcontracting business, like a drywall company or a painting company, and a general contracting business.

[00:43:55] Speaker 13:
It does not apply to the relationship between those businesses and their workers who are subject to the ABC test, just like app-based drivers.

[00:44:02] Speaker 13:
And to take one other example that I heard my friend mention several times this afternoon, which is the newspaper distribution sector.

[00:44:11] Speaker 13:
As the district court persuasively explained at pages five and six of the excerpts of record, that exemption was based on the fact that there's long been a regulation in California prescribing a special worker classification standard for businesses in that industry.

[00:44:27] Speaker 13:
The legislature reasonably determined certainly rationally decided that in light of that special standard that's been on the books for several decades those businesses developed reliance interests that justified giving them a little bit more time to come into compliance with the ABC test.

[00:44:44] Speaker 13:
which is why the legislature prescribed a time-limited exemption, not a permanent exemption, and it's set to expire later this year.

[00:44:52] Speaker 13:
So once you've set aside all of those types of legally irrelevant or immaterial or erroneous claims in the complaint, you're not left with a whole lot.

[00:45:02] Speaker 13:
And what's left just doesn't plausibly call into question the rationality of the justifications for AB-5's exemptions that were discussed in detail by the district court.

[00:45:12] Speaker 10:
They sufficiently alleged that they were similarly situated to wag and the other companies that they're saying are the comparators.

[00:45:22] Speaker 13:
Your honor, I don't think so for a couple of reasons.

[00:45:25] Speaker 13:
The main one is the reason I discussed a few minutes ago, which is that for purposes of rational basis review,

[00:45:33] Speaker 13:
The court should look to the rationality of the lines drawn in the statutory text and nothing in the text of a B five, including the referral arrangement exemption draws a line between different types of app based businesses right it's an exemption that cars out 10 lot broader sectors of the economy.

[00:45:52] Speaker 13:
like transportation and delivery, but not just transportation and delivery.

[00:45:56] Speaker 13:
And of course, even those provisions aren't specific to app-based businesses.

[00:46:00] Speaker 13:
They apply to non-app-based transportation businesses like taxicab companies, just the same as they do to Uber, or to non-app-based delivery companies like FedEx or pizza delivery services, just the same as they apply to delivery-based apps like Postmates or Uber Eats.

[00:46:18] Speaker 13:
So that's the main reason.

[00:46:21] Speaker 13:
Beyond that, your honor, I mean, even if the court were to look to the distinction between TaskRabbit and WAG, they haven't sufficiently alleged that they're similarly situated.

[00:46:29] Speaker 13:
They certainly haven't plausibly alleged that there's no conceivable basis for distinguishing between them because you just look at the core features of these apps, which are not reasonably subject to dispute.

[00:46:42] Speaker 13:
Things like TaskRabbit allows service providers to set or negotiate their own rates.

[00:46:47] Speaker 13:
Uber doesn't allow that.

[00:46:48] Speaker 13:
TaskRabbit and WAG allow customers to browse listings and pick their own service provider, much like you do when browsing the yellow pages to choose a plumber or another independent contractor to hire.

[00:47:02] Speaker 13:
So for those reasons, again, I don't think are reasonably subject to dispute.

[00:47:06] Speaker 14:
So do we need to look outside the pleadings to differentiate plaintiff's business from those services that AB 5 doesn't regulate, or is all of it evident from the pleadings?

[00:47:19] Speaker 13:
So two responses.

[00:47:20] Speaker 13:
I don't think you need to look outside the pleadings because that comparison fails as a matter of law, because it's not something in the statutory text.

[00:47:28] Speaker 13:
And rational basis review focuses on the statutory text.

[00:47:31] Speaker 13:
I'd point the court, for example, to its en banc decision in the Lipscomb matter, which discusses this principle in some detail.

[00:47:39] Speaker 13:
If you hypothetically want to look to that distinction, I suppose you might need to look to a few extra record sources to determine how TaskRabbit and WAG works, because the complaint really is quite bare and conclusory on this score.

[00:47:54] Speaker 13:
But even my friends on the other side acknowledge in their supplemental briefing that it's appropriate for courts to look to extra record sources as to issues that aren't reasonably subject to dispute.

[00:48:06] Speaker 13:
And courts have wide latitude to do that in the rational basis context because the Supreme Court has made clear in cases like Vance and Beach Communications and Nordlindger versus Hahn, rational basis review generally turns on legislative facts, not historical or adjudicative facts.

[00:48:23] Speaker 13:
But I do want to make very clear that we're not asking the court to look to any such extra record sources here because we think the court can focus on the lines drawn by the statute.

[00:48:34] Speaker 13:
And the legislative history materials alone provide ample basis for upholding the rationality and legitimacy of the lines drawn by the statute itself.

[00:48:44] Speaker 13:
And plaintiffs have acknowledged, readily acknowledged, that it's entirely appropriate for courts to look to the legislative history at the pleading stage.

[00:48:57] Speaker 13:
Finally, Your Honors, if I could just briefly touch on the question of the Maryfield decision.

[00:49:05] Speaker 13:
I think my friends on the other side have suggested that this case is largely indistinguishable.

[00:49:12] Speaker 13:
I think that's just plainly not right.

[00:49:15] Speaker 13:
As this Court has explained in cases like San Francisco Taxi Coalition and American Society of Journalists,

[00:49:21] Speaker 13:
And the premise of Maryfield was that there was simply no rational legitimate basis whatsoever for the line drawn by the legislature at issue there.

[00:49:29] Speaker 13:
And here there is for the reasons very thoughtfully discussed by the district court's opinions in this case.

[00:49:38] Speaker 13:
If there are no further questions, Your Honors, we'd respectfully ask the court to affirm the district court's dismissal.

[00:49:43] Speaker 03:
Let me ask if Judge Gould, do you have any questions for counsel?

[00:49:49] Speaker 02:
Thank you.

[00:49:49] Speaker 02:
I have no questions.

[00:49:51] Speaker 03:
Thank you very much.

[00:50:08] Speaker 12:
May it please the court, Nicholas Crown, for the United States.

[00:50:11] Speaker 12:
I'd like to begin by thanking the court for allowing us to participate in today's conversation.

[00:50:16] Speaker 12:
I'd like to make two core points.

[00:50:18] Speaker 12:
The first is the federal government is here because we have a substantial interest in the proper application of rational basis review in the context of economic legislation.

[00:50:27] Speaker 12:
And that's an important substantive point that this is rational basis review of economic legislation.

[00:50:32] Speaker 12:
There are no allegations that there is discrimination because of a particular trait or a suspect classification.

[00:50:38] Speaker 12:
or that the case implicates fundamental rights, or that it discriminates against out-of-state commerce or new residents.

[00:50:44] Speaker 08:
Does the fact that we're reviewing this issue while operating under a 12b6 standard change our analysis?

[00:50:52] Speaker 12:
It doesn't, and that's actually the second question, or the second point I wanted to make.

[00:50:56] Speaker 12:
It does not.

[00:50:57] Speaker 12:
The rule 12b6 standard, I think, has been well settled in this context.

[00:51:02] Speaker 12:
We've pointed to the Hahn case from the Supreme Court,

[00:51:06] Speaker 12:
That actually came up in a demurrer.

[00:51:08] Speaker 12:
We've got the case from the D.C.

[00:51:12] Speaker 12:
Circuit, the Sanchez decision, which I think plainly sets out what the standard is.

[00:51:17] Speaker 12:
I think this court's decision as well in the Angelo di Chiropractic.

[00:51:21] Speaker 12:
There actually the court took pendant jurisdiction and reached out to reverse the denial of a 12b6 motion.

[00:51:28] Speaker 12:
So I don't think the standard changes.

[00:51:29] Speaker 12:
And there are actually two points.

[00:51:31] Speaker 12:
that I heard my friend representing the plaintiffs say today that I wrote down and I think they underscore the fundamental problem with their case.

[00:51:40] Speaker 12:
The first thing counsel said was that the state has to identify a rationale, and the second was that it has to be tested in fact-finding.

[00:51:49] Speaker 12:
Now, I hesitate to say that the Supreme Court has said the exact opposite, but I think we get as close as you can in this circumstance, and that's the Beach Communications case at page 315 of that opinion.

[00:52:01] Speaker 12:
On the first point about whether the state has to identify a rationale, the Supreme Court said, we never require a legislature to articulate its reasons for enacting a statute.

[00:52:13] Speaker 12:
It also said it is entirely irrelevant for constitutional purposes, whether the conceived reason, that is, the reasons conceived by a court for the challenge distinction actually motivated the legislature.

[00:52:26] Speaker 06:
Mr. Crown, I wonder, back to your first point,

[00:52:31] Speaker 06:
Of course, rational basis applies to all manner of other sorts of classifications, certain forms of alienage classifications, bodily autonomy questions now.

[00:52:43] Speaker 06:
It's across the board.

[00:52:45] Speaker 06:
It's not just economic.

[00:52:47] Speaker 06:
And so I'm wondering what else from the United States standpoint would it take to see in a pleading to establish animus against a group that is protected only by rational basis?

[00:52:58] Speaker 12:
Right, and I think on the animus question, the way that the Supreme Court has discussed animus, sometimes it's referred to prejudice, I think that's how it was formulated in footnote four of Caroline Products, it's usually been a shorthand for invidious discrimination based on a suspect classification or discrimination based on a particular trait.

[00:53:15] Speaker 12:
So when we're talking about rational basis review, that would implicate cases like Romer or Moreno.

[00:53:20] Speaker 12:
That's, I think, worlds apart from the purely economic legislation that we're dealing with here.

[00:53:25] Speaker 12:
And I want to underscore another point about animus.

[00:53:29] Speaker 06:
On the economic, is it because companies don't have the inherent traits in the way that some of the classes in these other cases do, or what?

[00:53:38] Speaker 12:
I think that could be part of it.

[00:53:39] Speaker 12:
The other is I think this is just bread and butter economic legislation.

[00:53:42] Speaker 12:
This is what legislators have to do.

[00:53:45] Speaker 12:
I think when they are regulating particular industries, they have to draw lines.

[00:53:50] Speaker 12:
And as Chief Judge Mergia pointed out, it's not always going to have mathematical precision.

[00:53:54] Speaker 12:
You've got to have some law on the books, and sometimes it's going to be over or under inclusive.

[00:53:59] Speaker 12:
But that's particularly different, I think, from the types of traits that the Supreme Court has referenced when it has talked about animus.

[00:54:07] Speaker 12:
On that point regarding animus, I think it's important to note that it has to be unconstitutional animus.

[00:54:15] Speaker 12:
And that just doesn't capture particular individual legislators out of an entire legislative body who think that there's a particularly unscrupulous actor and as part of enacting law to address a perceived problem, they focus on particular actors that they think are inherently causing the problem.

[00:54:33] Speaker 12:
And even if we take the allegations

[00:54:36] Speaker 12:
that are in the complaint regarding animus as legally relevant and we don't think they are here.

[00:54:40] Speaker 12:
I think the Supreme Court again has made very clear that it's it's really tough to attribute motivations of a single or even a handful of legislators to the entire legislative body.

[00:54:52] Speaker 12:
And I think it's telling that in arguing that this court should look at the individual statements of particular legislators, the plaintiffs don't cite any cases involving rational basis review where a court ever did that.

[00:55:04] Speaker 12:
Instead, they cite cases dealing with straight up statutory interpretation questions.

[00:55:09] Speaker 12:
That's the Federal Energy Administration case dealing with the scope of statutory authority or the Kenna case out of this court.

[00:55:15] Speaker 12:
dealing with the meaning of a sentencing statute, or they've cited a case dealing with the establishment clause in the so-called lemon test, which again has nothing to do with rational basis review.

[00:55:26] Speaker 12:
So we think for those reasons, those arguments are inapposite.

[00:55:30] Speaker 12:
This court doesn't even need to look at the allegations of animus because the proper question here is whether this court can conceive any rational basis supporting the law.

[00:55:40] Speaker 03:
It appears the plaintiffs rely on Maryfield.

[00:55:43] Speaker 03:
Do you want to talk about Maryfield?

[00:55:45] Speaker 12:
Right.

[00:55:45] Speaker 12:
I don't think Maryfield really is instructive here.

[00:55:48] Speaker 12:
I think it's a case-specific application of the same principles that we've been talking about today as well.

[00:55:54] Speaker 12:
The court was still very clear what the judiciary's job is, and that's to conceive or attempt to conceive of any rational basis supporting the legislation.

[00:56:04] Speaker 12:
regardless of any alleged facts in the complaint.

[00:56:07] Speaker 12:
And in that case-specific circumstance, the court just wasn't able to do so.

[00:56:12] Speaker 11:
Let me follow up on that last point that you're raising, because there's been a lot of discussions today about whether there are sufficient allegations of a similarly situated comparator and is

[00:56:25] Speaker 11:
wag for dogs, like Uber for people, which to me, you know, if you go down that path, that's more suggestive of some sort of fact finding and perhaps not the best way to resolve it on a 12b6 stage.

[00:56:40] Speaker 11:
But let's assume that for purposes of argument that we accept that there are appropriate similarly situated comparators alleged.

[00:56:48] Speaker 11:
Once we accept that, well,

[00:56:51] Speaker 11:
The legislator can handle the problem in a piecemeal fashion and can tackle the source of the biggest contributor to misclassification problems.

[00:56:59] Speaker 11:
That's the end of the analysis, right?

[00:57:01] Speaker 11:
Do we need to go any further than that?

[00:57:03] Speaker 12:
I think that's exactly right.

[00:57:04] Speaker 12:
And one of the questions earlier to my friend on the other side, I think, put it as, don't you have to run the table on all the elements of rational basis review?

[00:57:12] Speaker 12:
That's probably more artful than I would have put it myself.

[00:57:14] Speaker 12:
I think that's exactly right.

[00:57:15] Speaker 12:
showing that you have a comparator who's similarly situated is a necessary condition to state a claim in this context.

[00:57:22] Speaker 12:
And I think the problem with the plaintiff's argument is that they're confusing that as a sufficient condition.

[00:57:27] Speaker 12:
So even if they have a comparator who's similarly situated, they still have to show that there is no rational basis underlying the line drawing that the legislature undertook.

[00:57:39] Speaker 12:
I think that's what Boardman stands for.

[00:57:40] Speaker 12:
I think that's a core problem with

[00:57:43] Speaker 12:
the argument that they've somehow gotten past the 12b6 stage because they've alleged a comparator.

[00:57:49] Speaker 12:
It just doesn't matter.

[00:57:50] Speaker 12:
And I do think, for the reasons my friend from California stated, their alleged comparators don't quite fit the bill.

[00:57:57] Speaker 12:
The last thing I just wanted to say, I think there were some questions dealing with hypotheticals regarding animus or other things that the plaintiffs could have alleged.

[00:58:05] Speaker 12:
And the question was, well, what if those other allegations and the reasons supporting the statute would be contestable?

[00:58:13] Speaker 12:
And I think that actually is the point.

[00:58:16] Speaker 12:
As soon as the court realizes that any of the arguments that the plaintiffs have made here are contestable, or in the court's words in beach communications, whether those reasons are arguable, the analysis is at an end.

[00:58:30] Speaker 12:
If the court can conceive of any contestable, arguable basis to support this statute, the judicial inquiry is at an end, and we think for that reason the court should affirm the district court's well-reasoned decision.

[00:58:43] Speaker 03:
Thank you, Mr. Crown.

[00:58:45] Speaker 03:
Judge Gold, do you have any questions for Mr. Crown?

[00:58:48] Speaker 02:
No.

[00:58:50] Speaker 02:
No questions.

[00:58:51] Speaker 03:
Thank you.

[00:58:52] Speaker 03:
Thank you.

[00:59:00] Speaker 01:
Thank you.

[00:59:00] Speaker 01:
Well, first, I'll begin with the fact that

[00:59:03] Speaker 01:
It is everything that this is a pleadings challenge and it absolutely matters because we cannot ignore the facts in our complaint, which both the state and the United States do not want to grapple with here.

[00:59:16] Speaker 01:
The state really has no response to Mary Field.

[00:59:19] Speaker 01:
I'll start with that.

[00:59:20] Speaker 01:
The state here has

[00:59:22] Speaker 01:
asserted a rationale for AB 5, but the means that were adopted actually undercut the very purpose.

[00:59:28] Speaker 01:
Let's remember that dynamics applied to everybody.

[00:59:32] Speaker 01:
It applied across the board, and the legislature did not expand it.

[00:59:35] Speaker 01:
It rolled it back for millions of workers.

[00:59:37] Speaker 01:
So it's the same thing.

[00:59:38] Speaker 01:
And in Maryfield, that was not decided on the pleadings.

[00:59:41] Speaker 01:
There was evidence.

[00:59:42] Speaker 01:
It was a summary judgment record.

[00:59:45] Speaker 01:
there was expert testimony that the two parties, one who was favored and the other who got the bad treatment, that they were similarly situated.

[00:59:56] Speaker 01:
Expert testimony, lay testimony, that's what we've alleged enough to get there to.

[01:00:01] Speaker 01:
And in Maryfield,

[01:00:03] Speaker 01:
Again, there was a very clear example of the means adopted.

[01:00:07] Speaker 01:
This is the fit between the means and the purpose.

[01:00:10] Speaker 01:
And again, we can hypothesize purposes, and the state can have valid purposes that it can invoke.

[01:00:16] Speaker 01:
It's allowed to invoke really any legitimate purpose, but we've got to test that purpose.

[01:00:22] Speaker 01:
And in Maryfield, the purpose there was safety of pesticides.

[01:00:26] Speaker 01:
And this court did not hesitate to say, well, if that's

[01:00:29] Speaker 01:
the purpose, which we'll credit because it doesn't have to be the actual purpose, but it's a purpose that's legitimate.

[01:00:35] Speaker 01:
But the classification that's adopted actually doesn't serve that purpose because those who are more likely to use pesticides are the ones who got an exemption.

[01:00:44] Speaker 01:
And that's what we've alleged here.

[01:00:46] Speaker 01:
We have facts.

[01:00:46] Speaker 01:
Let's talk about education and licensing.

[01:00:49] Speaker 01:
they say, oh, very different, those who got an exemption have higher education, have to meet licensing requirements.

[01:00:55] Speaker 01:
We allege in paragraph 69 and 73, detailed allegations about education requirements and licensing, drivers have to go through licensing, CPUC regulations, and so forth, and it's no different from others who got an exemption.

[01:01:10] Speaker 01:
Dog walkers don't need special licensing.

[01:01:13] Speaker 01:
So that just falls apart, and all of those

[01:01:17] Speaker 01:
justifications that have been asserted, none of them can justify the arbitrary line drawn between moving, dog walking, and home repair.

[01:01:27] Speaker 01:
You can be a referral agency in that area, and you can invoke it, and you can have your day in court, but we cannot because we are delivery and courier, and there is no question here what was going on.

[01:01:39] Speaker 01:
The kind of animus here, which we don't have to prove to win, but the kind of animus here, the sheer vitriol

[01:01:46] Speaker 01:
with which the legislature came after us.

[01:01:49] Speaker 01:
It wasn't just the sponsor.

[01:01:50] Speaker 01:
It was the speaker of the assembly.

[01:01:53] Speaker 01:
It was Wix and Rendon and Gonzalez.

[01:01:57] Speaker 01:
There were so many, and no one spoke up on the other side.

[01:02:00] Speaker 01:
It's very clear what was going on, and I've never seen anything like it.

[01:02:03] Speaker 01:
And in Fowler, this court said, there, again, a pleadings challenge, you can go to discovery, and that case

[01:02:11] Speaker 01:
was allowed to get past the pleadings challenge where the state said we have a legitimate interest in carving out of this safe harbor those parties who have litigation pending against them who had ghost worker claims because that's something we're very concerned about and this court had no problem saying well wait a minute the lines you drew actually don't serve that purpose while that's a valid purpose

[01:02:33] Speaker 01:
Judge Johnstone, going back to your point, yes, there can be a valid purpose articulated, but if the means do not serve that purpose, if the lines drawn are arbitrary and the classification does not make any sense, which is what we have here, what happened in Maryfield, what happened in Fowler, then that's how we win.

[01:02:49] Speaker 06:
Well, isn't Maryfield a little different in that it doesn't, Maryfield, as you say, it cut, at least our decision suggested it cut the opposite way.

[01:02:58] Speaker 06:
Here, it's just pulling back.

[01:03:02] Speaker 06:
Right, the undermining, it's not even a lack of regulation.

[01:03:06] Speaker 06:
It's simply a different test for classification.

[01:03:08] Speaker 01:
The very purpose for AB5 is that the Borrello test was no good.

[01:03:12] Speaker 01:
That's what the legislature said, and then it rolled it back.

[01:03:14] Speaker 06:
Right, of course, we're not bound to even that formulation of what we think the interest is.

[01:03:19] Speaker 06:
So it's not that the legislature is leaving all of these other industries unregulated, inconsistent.

[01:03:27] Speaker 06:
If the purpose is to avoid misclassification, there are two ways to avoid it.

[01:03:32] Speaker 06:
They're going to avoid it some ways with these industries and some ways with these industries.

[01:03:37] Speaker 01:
No, here the purpose of this law, again, was all about what tests were going to apply.

[01:03:41] Speaker 01:
And the state said that we need the ABC test because Borrello is not good enough.

[01:03:47] Speaker 01:
But then it went to work and rolled back.

[01:03:49] Speaker 01:
the ABC test, so that is exactly contrary to the stated purpose here.

[01:03:54] Speaker 01:
And the Carvel.

[01:03:55] Speaker 06:
It would be different if they legislated on a blank slate, so that instead of changing the status quo, they simply reached out and said, we're gonna start, we have no classification test whatsoever for these areas.

[01:04:08] Speaker 06:
We're gonna start in on these industries.

[01:04:10] Speaker 06:
We've decided we're gonna proceed incrementally and apply this test to these industries, and we're not gonna apply any, we're just gonna go common law for the rest.

[01:04:19] Speaker 01:
Well, of course, that's not what happened here, not even close.

[01:04:22] Speaker 01:
And if they had a basis, a rational basis for the lines drawn in that statute, then that would be a completely different case.

[01:04:29] Speaker 01:
What we have here is, I mean, and I can't answer that, unfortunately, in the abstract without knowing the facts.

[01:04:33] Speaker 01:
Well, it's the same lines.

[01:04:33] Speaker 06:
It's just about what's on the other side of the line, right?

[01:04:36] Speaker 06:
Where what's happening on your side of the line is identical.

[01:04:40] Speaker 06:
Does it matter what's happening on the other side?

[01:04:41] Speaker 01:
It always matters what's happening on the other side.

[01:04:43] Speaker 01:
That's a whole purpose of equal protection analysis.

[01:04:46] Speaker 01:
It matters who the comparator is.

[01:04:48] Speaker 01:
That's a hotly disputed factual question.

[01:04:50] Speaker 01:
I found it very surprising that anyone could say that how TaskRabbit works and WAG works.

[01:04:57] Speaker 01:
and all of these apps work is something that we all can just know.

[01:05:01] Speaker 01:
We don't know that without discovery and fact development and there's certainly no justification that's been articulated yet for treating Uber for dogs differently from Uber from people and we have, I want to point to some of

[01:05:16] Speaker 01:
the other allegations in the complaint.

[01:05:18] Speaker 01:
Paragraph 73, 77, and 104 are critical.

[01:05:23] Speaker 00:
Just the size of the industry is a difference.

[01:05:26] Speaker 00:
Isn't that just the difference that legislature could say, this industry is so large, we're going to identify these particular parameters?

[01:05:33] Speaker 00:
Why isn't that enough?

[01:05:35] Speaker 01:
That's not what they did here though.

[01:05:36] Speaker 01:
Again, and equal protection analysis, this court's job at this stage is not to, we don't have to think about and test alternative legislative schemes and whether they would be constitutional.

[01:05:48] Speaker 01:
We just have to look at this scheme.

[01:05:50] Speaker 01:
This pockmarked arbitrary circuitous law that was passed by the legislature, there is no way I can divine a rhyme or reason to the way the lines were drawn here.

[01:06:00] Speaker 01:
It does matter.

[01:06:01] Speaker 01:
And in so many cases, I want to talk about FCC versus beach communications because the state loves to cite that.

[01:06:08] Speaker 01:
And that actually was not a pleadings challenge.

[01:06:11] Speaker 01:
And I don't, the court did not say there that in a pleadings challenge, you can contradict the facts in a complaint.

[01:06:19] Speaker 01:
And of course in OLEC,

[01:06:20] Speaker 01:
The Supreme Court said the exact opposite there.

[01:06:23] Speaker 01:
Ms.

[01:06:23] Speaker 01:
Olek was allowed to have her day in court and to go to trial.

[01:06:26] Speaker 01:
And the court did not say, well, we can imagine that there might be some other use near her that requires a bigger easement, or maybe she doesn't have as many pets, or maybe her lot is bigger than her neighbors.

[01:06:38] Speaker 01:
And therefore, that could be a hypothetical, imaginary rationale and imaginary set of facts.

[01:06:43] Speaker 01:
that would defeat her claim.

[01:06:44] Speaker 01:
And we know that just because it was a class of one case doesn't change the analysis.

[01:06:48] Speaker 01:
The Supreme Court said that.

[01:06:49] Speaker 01:
Same test.

[01:06:50] Speaker 01:
It's just the comparators there are Olek and her neighbors.

[01:06:54] Speaker 01:
And she had an opportunity to rebut those allegations.

[01:06:57] Speaker 01:
This court said that in Lazy Lion Lacy.

[01:06:59] Speaker 01:
Can I ask?

[01:07:00] Speaker 04:
You keep saying it's not what the state did.

[01:07:03] Speaker 04:
But the test that keeps getting restated is any conceivable basis.

[01:07:09] Speaker 04:
Why, so how would you conceptualize what that means for purposes of how we analyze it?

[01:07:16] Speaker 04:
What does no conceivable basis mean in your argument?

[01:07:20] Speaker 01:
It means we take all of the potential conceivable bases that have been discussed and here asserted by the state in their briefing and by the district court, perhaps for these purposes,

[01:07:31] Speaker 01:
I think it's improper for them to bring things up at the last minute now that they never mentioned before, but in any event, it doesn't matter.

[01:07:38] Speaker 01:
The result's the same.

[01:07:39] Speaker 01:
Any conceivable basis, does this classification serve that basis?

[01:07:43] Speaker 01:
That's where the work is.

[01:07:45] Speaker 01:
The work is there.

[01:07:46] Speaker 02:
Council's Judge Gould, if I could interject the question.

[01:07:50] Speaker 02:
Why does a conceivable basis have to be asserted by the government?

[01:07:56] Speaker 02:
I thought that test meant asked whether we can conceive of a rational basis.

[01:08:06] Speaker 01:
And that's right, Judge Gould.

[01:08:08] Speaker 01:
I don't hear any other conceivable basis that we have not rebutted here, but we have an opportunity.

[01:08:15] Speaker 01:
First of all, we have to judge that conceivable basis against the allegations in the complaint.

[01:08:21] Speaker 01:
And I have not heard anything here that can be adopted or even accepted

[01:08:26] Speaker 01:
taking as true the allegations in this complaint.

[01:08:30] Speaker 01:
And certainly in Fowler and in Maryfield, there were lots of rationales thrown around, and none of them withstood rational analysis.

[01:08:40] Speaker 01:
They were arbitrary.

[01:08:41] Speaker 01:
And here, that's what we are alleging, that it's totally arbitrary to draw this line between dog walkers and movers and home repair.

[01:08:50] Speaker 01:
They're the same in bargaining power.

[01:08:51] Speaker 01:
They have the same relationship with their clients.

[01:08:54] Speaker 01:
The workers who use those platforms

[01:08:56] Speaker 01:
who use Uber and Postmates also have relationships with their clients like Mr. Perez and Ms.

[01:09:01] Speaker 01:
Olson who run independent businesses.

[01:09:04] Speaker 01:
We have lots of allegations about how the control that workers have is the same for all of the relevant purposes.

[01:09:13] Speaker 01:
The difference is dogs versus people with WAG, but of course that's not a basis that justifies applying a different test to that app and that type of referral agency than it does

[01:09:26] Speaker 01:
here.

[01:09:26] Speaker 01:
I haven't heard anything that would justify it because WAG was also subject to lawsuits alleging misclassification.

[01:09:33] Speaker 01:
And other industries, growth industries like construction and others who the legislature cited in enacting AB 5, actually they got exemptions.

[01:09:44] Speaker 01:
So they received preferential treatment and the exemptions undercut

[01:09:49] Speaker 01:
that very purpose.

[01:09:50] Speaker 01:
And so rational basis review does apply broadly.

[01:09:53] Speaker 01:
The state and the United States here would have this court enact a heightened pleading standard that would shut the door on plaintiffs in all manner of rational basis cases.

[01:10:04] Speaker 01:
And there's no basis for that.

[01:10:06] Speaker 01:
And cases like Fowler, Maryfield, Lazy-Y, Lacey, Del Monte, OLEC, and so many others, Moreno would not have come out the way they did.

[01:10:13] Speaker 01:
Ms.

[01:10:13] Speaker 03:
Evangelist, do you want to make your concluding sentence?

[01:10:16] Speaker 01:
Thank you, Judge Wayne.

[01:10:17] Speaker 01:
I think Judge McGee, excuse me.

[01:10:20] Speaker 01:
That is the last point I wanted to raise.

[01:10:23] Speaker 01:
Thank you.

[01:10:24] Speaker 03:
Okay.

[01:10:24] Speaker 03:
Thank you very much, Ms.

[01:10:27] Speaker 03:
Evangeliz, Mr. Harbor, and Mr. Crown.

[01:10:30] Speaker 03:
We really appreciate your oral argument presentations today.

[01:10:33] Speaker 03:
It's very enlightening and helpful.

[01:10:36] Speaker 03:
The case of Lydia Olson versus State of California, Rob Bonta, is now submitted, and we are adjourned.

[01:10:44] Speaker 03:
Thank you.

[01:10:49] Speaker 03:
This court for this session stands adjourned.