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Appeal No 09-55440 Brief of DefendantsAppellees Rental Car Companies

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					       Case: 09-55440       09/18/2009      Page: 1 of 44       DktEntry: 7067662




                                Appeal No. 09-55440
                                  IN THE
                      UNITED STATES COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

                  In re: TOURISM ASSESSMENT FEE LITIGATION

                     THOMAS J. COMISKEY, ISABEL S. COHEN,
                 on behalf of themselves and all others similarly situated,

                                                       Plaintiffs-Appellants

                                            vs.

       AVIS BUDGET GROUP, INC., VANGUARD CAR RENTAL USA, Inc.,
    DOLLAR THRIFTY AUTOMOTIVE GROUP, INC., HERTZ CORPORATION,
ENTERPRISE RENT-A-CAR, FOX RENT A CAR, INC., CALIFORNIA TRAVEL AND
TOURISM COMMISSION, DALE E. BONNER, in his capacity as Secretary of Business,
Transportation and Housing for the State of California, COAST LEASING CORP., a Texas
                 corporation, PAYLESS CAR RENTAL SYSTEM, INC.,
                                                       Defendants-Appellees.

  On Appeal from the United States District Court for the Southern District of California
                               Hon. Michael M. Anello
                        Case No. 08-CV-01796-MMA-WMC


            Brief of Defendants/Appellees Rental Car Companies


                                                   Gregory D. Call
                                                   J. Daniel Sharp
                                                   Jennifer S. Romano
                                                   FOLGER LEVIN & KAHN LLP
                                                   Embarcadero Center West
                                                   275 Battery Street, 23rd Floor
                                                   San Francisco, CA 94111
                                                   Telephone: (415) 986-2800
                                                   Facsimile: (415) 986-2827

                                                   Attorneys for Defendants/Appellees
                                                   ENTERPRISE HOLDINGS, INC. and
                                                   VANGUARD CAR RENTAL USA, LLC
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          CORPORATE DISCLOSURE STATEMENT [FRAP 26.1]
      Corporate Disclosure Statements have previously been filed for each of the

Defendants/Appellees who join in this brief: Avis Budget Group, Inc., Vanguard

Car Rental USA, LLC (formerly known as Vanguard Car Rental USA, Inc.),

Dollar Thrifty Automotive Group, Inc., The Hertz Corporation, Enterprise

Holdings, Inc. (formerly known as Enterprise Rent-A-Car Company), and Fox

Rent a Car, Inc. (collectively the “Rental Car Defendants”).
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                                              TABLE OF CONTENTS

                                                                                                                        Page

JURISDICTIONAL STATEMENT .................................................................................. 1
STATEMENT OF ISSUES PRESENTED FOR REVIEW............................................... 1
STATEMENT OF FACTS................................................................................................. 2
                   A.        The California Legislature Created the California Travel and
                             Tourism Commission to Further the State’s Policy of
                             Promoting Travel To and Within the State ....................................... 2
                   B.        In 2006, the Legislature Amended the Tourism Marketing Act
                             with Respect to the Assessments Imposed on Car Rental
                             Companies......................................................................................... 4
                             1.        2006 Amendments to the Tourism Marketing Act ................ 4
                             2.        2006 Amendments to California Civil Code § 1936.01 ........ 6
                   C.        Plaintiffs Comiskey and Cohen Traveled to Los Angeles,
                             Rented Cars, and Paid an Assessment Pursuant to the
                             Tourism Marketing Act..................................................................... 8
STATEMENT OF THE CASE .......................................................................................... 8
STANDARD OF REVIEW.............................................................................................. 12
SUMMARY OF ARGUMENT........................................................................................ 13
ARGUMENT.................................................................................................................... 16
                   A.        The District Court Properly Dismissed Plaintiffs’ Federal
                             Claims Against The Rental Car Defendants Because There Is
                             No State Action By the Rental Car Defendants .............................. 16
                             1.        The Proper Defendants for Plaintiffs’ Claims Are the
                                       Governmental Defendants.................................................... 16
                             2.        The Conduct of the Rental Car Defendants Is Not
                                       “State Action” ...................................................................... 17
                                         a.     Lobbying the California Legislature Is Not
                                                “State Action” and is Protected by the Noerr-
                                                Pennington Doctrine .................................................. 19
                                         b.     Paying the Tourism Assessment In Compliance
                                                with California Government Code §13995.65.5
                                                Is Not “State Action” ................................................. 24



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                                              TABLE OF CONTENTS
                                                  (continued)
                                                                                                                       Page

                                         c.     Exercising the Option to Pass Through the
                                                Amount of the Tourism Assessments to
                                                Consumers Pursuant to California Government
                                                Code §13995.65(f) Is Not “State Action”.................. 29
                      B.     The District Court Did Not Abuse Its Discretion by Declining
                             to Exercise Supplemental Jurisdiction Over Plaintiffs’ State
                             Law Claims ..................................................................................... 32
                      C.     The District Court Did Not Abuse Its Discretion in Denying
                             Leave to Amend the Complaint ...................................................... 32
CONCLUSION ................................................................................................................ 33
RELATED CASES........................................................................................................... 34


29055\2115\667877.2




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                                         TABLE OF AUTHORITIES

                                                                                                                     Page

                                                         CASES

Am. Mfrs. Mut. Ins. Co. v. Sullivan,
   526 U.S. 40, 143 L. Ed. 2d 130, 119 S. Ct. 977 (1999).......................................passim
Bass v. Parkwood Hosp.,
   180 F.3d 234 (5th Cir. 1999) ...................................................................................... 18
Boulware v. Nevada, Dep’t of Human Res.,
   960 F.2d 793 (9th Cir. 1992) ................................................................................ 21, 23
Brown v. Lucky Stores, Inc.,
   246 F.3d 1182 (9th Cir. 2001) .................................................................................... 13
Brown v. Philip Morris Inc.,
   250 F.3d 789 (3d Cir. 2001)........................................................................................ 24
Burton v. Wilmington Parking Authority,
   365 U.S. 715, 6 L. Ed. 2d 45, 81 S. Ct. 856 (1961).................................................... 26
City of Columbia v. Omni Outdoor Adver., Inc.,
   499 U.S. 365, 111 S.Ct. 1344, 113 L.Ed.2d 382 (1991)............................................. 23
Clark v. County of Placer,
   923 F. Supp. 1278 (E.D. Cal. 1996)............................................................................ 29
Crissman v. Dover Downs Entm’t,
   289 F.3d 231 (3d Cir. 2002)........................................................................................ 25
E. R.R. Presidents Conference v. Noerr Motor Freight, Inc.,
   365 U.S. 127, 5 L. Ed. 2d 464, 81 S. Ct. 523 (1961)............................................ 21, 22
Evers v. County of Custer,
   745 F.2d 1196 (9th Cir. 1984) .................................................................................... 22
Flagg Bros., Inc. v. Brooks,
   436 U.S. 149 (1978).................................................................................................... 28
Garfinkle v. Superior Court,
   21 Cal. 3d 268, 146 Cal. Rptr. 208 (1978).................................................................. 32
Gompper v. VISX, Inc.,
   298 F.3d 893 (9th Cir. 2002) ........................................................................................ 7
Gritchen v. Collier,
   254 F.3d 807 (9th Cir. 2001) ...................................................................................... 31
Hadges v. Yonkers Racing Corp.,
   918 F.2d 1079 (2d Cir. 1990)...................................................................................... 25
Hafer v. Melo,
   502 U.S. 21, 116 L. Ed. 2d 301, 112 S. Ct. 358 (1991)........................................ 16, 17
Howerton v. Gabica,
   708 F.2d 380 (9th Cir. 1983) ...................................................................................... 18
Jackson v. Metropolitan Edison Co.,
   419 U.S. 345, 42 L. Ed. 2d 477, 95 S. Ct. 449 (1974).................................... 27, 28, 31
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                                           TABLE OF AUTHORITIES
                                                 (continued)
                                                                                                                         Page

Lee v. Katz,
    276 F.3d 554 (9th Cir. 2002) ..................................................................................... 28
Life Ins. Co. of North America v. Reichardt,
    591 F.2d 499 (9th Cir. 1979) ..................................................................................... 31
Lugar v. Edmondson Oil Co., Inc.,
    457 U.S. 922, 102 S.Ct. 2744, 73 L.Ed.2d 482 (1982)............................................... 17
Manistee Town Ctr. v. Glendale,
    227 F.3d 1090 (9th Cir. 2000) ........................................................................ 15, 21, 22
Perkins v. Londonderry Basketball Club,
    196 F.3d 13, 21 ........................................................................................................... 26
Platt Elec. Supply, Inc. v. EOFF Elec., Inc.,
    522 F.3d 1049 (9th Cir. 2008) .................................................................................... 33
Rendell-Baker v. Kohn,
    457 U.S. 830, 73 L. Ed. 2d 418, 102 S. Ct. 2764 (1982)...................................... 16, 28
Shames v. The Hertz Corporation et al.,
    Ninth Circuit Case No. 08-56750 ........................................................................... 8, 34
Single Moms, Inc. v. Montana Power Company,
    331 F.3d 743 (9th Cir. 2003) ................................................................... 15, 21, 22, 23
Sutton v. Providence St. Joseph Med. Ctr.,
    192 F.3d 826 (9th Cir. 1999) .......................................................................... 15, 17, 25
Tulsa Prof’l Collection Servs., Inc. v. Pope,
    485 U.S. 478, 99 L. Ed. 2d 565, 108 S. Ct. 1340 (1998)............................................ 31
United Haulers Ass’n, Inc. v. Oneida-Herkimer Solid Waste Mgmt. Auth.,
    550 U.S. 330, 167 L. Ed. 2d 655, 127 S. Ct. 1786 (2007)......................................... 16
United Mine Workers v. Pennington,
    381 U.S. 657, 14 L. Ed. 2d 626, 85 S. Ct. 1585 (1965).............................................. 21
Voigt v. Savell,
    70 F.3d 1552 (9th Cir. 1995) ...................................................................................... 32
Zivkovic v. Southern Cal. Edison Co.,
    302 F.3d 1080 (9th Cir. 2002) .................................................................................... 13

                                        FEDERAL STATUTES
28 U.S.C. § 1367(c)(3) ..................................................................................................... 32
42 U.S.C. § 1983 .......................................................................................................passim

                                                 STATE STATUTES
Cal. Civ. Code
   § 1936.01....................................................................................................... 6, 7, 18, 20
   § 1936.01(a)(1).............................................................................................................. 6
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                                           TABLE OF AUTHORITIES
                                                 (continued)
                                                                                                                           Page

Cal. Gov’t Code
   § 13995.......................................................................................................... 1, 2, 18, 20
   § 13995.1(b) .................................................................................................................. 2
   § 13995.1(d)(7) ............................................................................................................. 3
   § 13995.40..................................................................................................................... 3
   § 13995.40(b) .......................................................................................................... 3, 29
   § 13995.40(b)(2) ......................................................................................................... 29
   § 13995.40.5(a) ........................................................................................................... 29
   § 13995.45......................................................................................................... 3, 19, 28
   § 13995.41..................................................................................................................... 3
   § 13995.50..................................................................................................................... 2
   § 13995.51(a)(2)............................................................................................................ 3
   § 13995.52..................................................................................................................... 4
   § 13995.60..................................................................................................................... 3
   § 13995.60(b) ................................................................................................................ 4
   § 13995.65(f)........................................................................................... 5, 7, 14, 19, 30
   § 13995.65.5.......................................................................................................... 14, 19
   § 13995.65.5(a) ............................................................................................................. 5
   § 13995.71......................................................................................................... 3, 24, 28
   § 13995.72............................................................................................................... 3, 24
   § 13995.92................................................................................................................. 3, 5
   § 13995.92(a) ................................................................................................................ 5

                            UNITED STATES CONSTITUTION
U.S. Const. amend. I..................................................................................................... 9, 11
U.S. Const. amend. XIV ............................................................................................. 10, 11
U.S. Const. art. I § 3, cl. 3 ............................................................................................ 9, 12

                                 CALIFORNIA CONSTITUTION
Cal. Const. art. I, § 2(a) ................................................................................................ 9, 12
Cal. Const. art. I, § 3(a) ............................................................................................... 9, 12
Cal. Const. art. I, § 7......................................................................................................... 10
Cal. Const. art. IV, § 16 ................................................................................................... 10
Cal. Const. art. XIX, § 2 ..................................................................................................... 9

                        RULES AND OTHER AUTHORITIES
Federal Rule of Civil Procedure 12(b) ............................................................................. 12
Federal Rule of Civil Procedure 12(b)(6)................................................................... 10, 22
Federal Rule of Civil Procedure 59(e).............................................................................. 11
10 Cal. Code Reg. § 5350(bb) ............................................................................................ 5

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                        JURISDICTIONAL STATEMENT
      The Rental Car Defendants accept the jurisdictional statement of

Plaintiffs/Appellants Thomas Comiskey and Isabel Cohen.

           STATEMENT OF ISSUES PRESENTED FOR REVIEW
      The Rental Car Defendants object to the Statement of Issues in Appellants’

Opening Brief because it is argumentative and mischaracterizes the decision of the

District Court. Insofar as the Rental Car Defendants are concerned, the issue to be

decided is the following:

             Did the Plaintiffs allege facts, either in their Consolidated

             Amended Complaint or their proposed Second Amended

             Complaint, supporting the conclusion that the Rental Car

             Defendants are subject to liability as “state actors” or acting

             “under color of state law” in connection with the Passenger

             Car Rental Industry Tourism Assessment Program

             contained in California’s Tourism Marketing Act, Cal.

             Gov’t Code §§ 13995 -13995.118?

This brief will not address the constitutionality of the Tourism Marketing Act. The

constitutional merits of the legislation are addressed by the Appellees who are

affiliated with the State of California, i.e., Dale E. Bonner, in his official capacity
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as Secretary of Business, Transportation and Housing for the State of California,

and the California Travel and Tourism Commission.

                            STATEMENT OF FACTS

      A.      The California Legislature Created the California Travel and
              Tourism Commission to Further the State’s Policy of Promoting
              Travel To and Within the State
      California is a large state that lays claim to redwood forests, mountains,

wine country, major cities renowned for art and entertainment, and beaches where

the sun shines all year round. Tourists, whether they are in-state residents or out-

of-state visitors, bolster the state’s economy by supporting approximately 928,700

jobs and generating approximately $93 billion in spending as of 2008. [Excerpt of

Record (“ER”) 254] The California Legislature has deemed the promotion of

travel “to and within California” to be an important state policy. [ER 271-272;

Cal. Gov’t Code § 13995.1(b); see id. § 13995.50]

      Fourteen years ago, the California Legislature enacted the California

Tourism Marketing Act (the “Tourism Marketing Act”) to promote “travel to and

within” California. [See ER 263, citing Cal. Gov’t Code §§ 13995 et seq.] The

legislation was enacted “in the exercise of the police powers of this state for the

purpose of protecting the health, peace, safety, and general welfare of the people of

this state.” Cal. Gov’t Code § 13995.50.




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      The Tourism Marketing Act created a nonprofit public benefit corporation

called the California Travel and Tourism Commission (“CTTC”). [ER 263; Cal.

Gov’t Code § 13995.40] The CTTC is comprised of (1) the Secretary of the

California Department of Business, Transportation and Housing (“the Secretary”),

who serves as chairperson, and (2) 36 representatives from various private

industries serving the travel and tourism markets, 12 of whom are appointed by the

governor with the remainder elected by the various industries. [ER 268-269; Cal.

Gov’t Code § 13995.40(b)] The sole purpose of the CTTC is to “increase the

number of persons traveling to and within California.” [ER 274; § 13995.41] The

CTTC accomplishes this purpose by “generic promotions” touting the state’s

attractions. Cal. Gov’t Code § 13995.1(d)(7). The CTTC is required to prepare an

annual written marketing plan, which must be reviewed and approved by the

Secretary, whose decisions may only be overridden by a three-fifths vote of all

CTTC commissioners. Id. § 13995.45.

      Funding for the CTTC comes from assessments imposed on members of

each travel-related industry. [ER 273; Cal. Gov’t Code §§ 13995.51(a)(2),

13995.60, 13995.92.] The assessment is a personal debt of each company within

the travel-related industries. Cal. Gov’t Code § 13995.71. Such companies are

subject to penalties for failure to pay the assessments. Id. § 13995.72.




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      The continued existence of the CTTC is subject to a periodic referendum by

the industries represented on the CTTC. [ER 272; Cal. Gov’t Code § 13995.60(b);

see id. § 13995.52]

      B.    In 2006, the Legislature Amended the Tourism Marketing Act
            with Respect to the Assessments Imposed on Car Rental
            Companies

      In 2006, the California Legislature passed Assembly Bill 2592 (“AB 2592”).

This legislation (1) amended the Tourism Marketing Act by designating the

“passenger car rental industry” as a separate and distinct “industry category” and

increasing the assessments to car rental companies, and (2) amended state law

concerning the use of itemized billing statements and rate quotations by car rental

companies. These amendments are described below.

             1.       2006 Amendments to the Tourism Marketing Act
      AB 2592 amended the Tourism Marketing Act by adding the Passenger Car

Rental Industry Tourism Assessment Program (“the Tourism Assessment

Program”), which took effect on January 1, 2007. [ER 275] Under the Tourism

Assessment Program, the “passenger car rental industry” became a separate

industry category under the Tourism Marketing Act and rental car companies were

required to pay an increased assessment to the Secretary for each rental transaction




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that commences at an airport or at a hotel subject to transient occupancy tax. 1 [ER

275, citing Cal. Gov’t Code § 13995.65.5(a); Cal. Gov’t Code § 13995.92(a)]

Thus, the assessment is collected on transactions involving both intra-state and

inter-state travelers.2 The increased amount of the assessments imposed on the car

rental companies required by the Tourism Assessment Program would

substantially increase the funding of the CTTC. [ER 131:26]

      The Tourism Assessment Program specifically provides that rental car

companies may, but are not required to, “pass on some or all of the assessment to

customers” by itemizing the amounts on the customers’ bills. Cal. Gov’t Code

§ 13995.65(f).

      The implementation of the Tourism Assessment Program was contingent

upon the industry’s approval of a referendum submitted by the CTTC making the

“passenger car rental industry” a separate industry category and setting the level of

assessments to be imposed on rental car companies. Id. § 13995.92.




      1
       Previously, rental car companies were included within the “Transportation
and Travel Services” industry category and paid an assessment similar to the
amounts paid by the other companies in that industry category. See Cal. Gov’t
Code §§ 13995.20(e), (f).
      2
        No assessment is collected when the rental is a temporary replacement of
an individual’s primary vehicle due to maintenance, repairs, physical damage or
theft. [ER 276, citing 10 Cal. Code Reg. § 5350(bb)]



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             2.     2006 Amendments to California Civil Code § 1936.01
      Car rental companies are subject to regulation by the State of California.

One such regulation enacted in the 1990s requires car rental companies to advertise

and charge a “bundled rate,” i.e., a price that includes not only the company’s

rental charge but also certain associated governmental fees imposed on the rental

transaction. [ER 142; see Cal. Civ. Code § 1936.01] The most significant fee is an

Airport Concession Fee, charged to rental car companies for each rental transaction

at airport locations and paid to individual airport authorities. [See id.] The

purpose of the Airport Concession Fee is to help recoup the cost of constructing

and operating an airport and related facilities for the benefit of the traveling public.

See Cal. Civ. Code § 1936.01(a)(1). Typically, the Airport Concession Fee is in

addition to rent and other charges imposed on rental car companies for the

privilege of operating a commercial tenancy on or around an airport.

      As Plaintiffs alleged, the car rental companies were opposed to state

regulations compelling the use of a “bundled rate.” [See ER 142] Bundled rates

obscure the fees imposed by governmental entities, create a false impression with

consumers that the car rental companies are charging excessive rental rates,

decrease the demand for rental cars, and therefore impose a substantial burden on




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the rental car companies’ businesses. 3 The alternative to charging a “bundled rate”

is to separately state and collect from the customer the amount of the company’s

rental charge and of each government fee assessed on the rental transaction. [See

id.] A governmental fee that is separately stated and collected from the customer’s

bill is sometimes referred to as a “pass through.” [ER 143]

      In adopting the 2006 amendments to the Tourism Marketing Act, the

California Legislature made a legislative judgment that it would not be fair or

publicly beneficial to require rental car companies to charge “bundled rates” while

also shouldering a substantially increased assessment to help fund the CTTC. [See

ER 142-146] During the drafting of AB 2592, representatives of the car rental

industry expressed views supportive of this legislative judgment. [Id.] In

AB 2592, the California Legislature enacted statutory language relaxing the

requirement that car rental companies charge “bundled rates” for airport

transactions. [ER 146; see Cal. Gov’t Code § 13995.65(f); Cal. Civ. Code

§ 1936.01] Under the amended statute, car rental companies would be permitted,

but not required, to charge customers in a manner that separately identifies the

company’s rental rate and any government fees such as the Airport Concession Fee

and the assessment under the Tourism Marketing Act. [Id.]


      3
       The facts are recited as alleged by the Plaintiffs/Appellants. See Gompper
v. VISX, Inc., 298 F.3d 893, 896 (9th Cir. 2002).




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         C.    Plaintiffs Comiskey and Cohen Traveled to Los Angeles, Rented
               Cars, and Paid an Assessment Pursuant to the Tourism Marketing
               Act
         Plaintiffs/appellants Thomas J. Comiskey and Isabel S. Cohen are travelers

who flew from the east coast to Los Angeles International Airport after the

Tourism Assessment Program took effect. [ER 266] Comiskey rented a car from

Budget Rent a Car, and Cohen rented a car from Hertz. [Id.] Both Plaintiffs paid

the Tourism Assessment passed through to them when renting a passenger car.

[Id.] Both Comiskey and Cohen “vehemently object” to speech that promotes

travel to and within California. [ER 280:1] They then initiated this case in federal

court.

                           STATEMENT OF THE CASE
         Plaintiffs/appellants Comiskey and Cohen filed separate actions alleging that

a portion of California’s Tourism Marketing Act, Cal. Gov’t Code §§ 13995 -

13995.118, is unconstitutional. [ER 86] The Comiskey and Cohen actions were

consolidated in the Central District of California as In Re Tourism Assessment Fee

Litigation, and Plaintiffs filed a Consolidated Amended Complaint (“Complaint”).

[ER 262-299] The case was then transferred to the Southern District of California

where a related case was pending. [ER 86; see Shames v. The Hertz Corporation

et al., Ninth Circuit Case No. 08-56750 (alleging antitrust violations against car




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rental companies relating to charges to consumers for airport concession fees and

the tourism assessment at California airports)]

      The Complaint does not challenge the constitutionality of all assessments

collected under the Tourism Marketing Act. [ER 275] Plaintiffs seek to invalidate

only the Tourism Assessment Program that was added by AB 2592 effective

January 1, 2007. [Id.] Suit is brought on behalf of Comiskey, Cohen, and “other

similarly situated out-of-state visitors.” [ER 264]

      The Defendants are (1) Dale E. Bonner in his official capacity as the

Secretary of Business, Transportation, and Housing for the State of California,

(2) the CTTC, and (3) all of the major car rental companies that operate in the

United States, which are required by California statutes to pay assessments to the

Secretary for the purpose of funding the CTTC’s marketing activities (“the Rental

Car Defendants”). [ER 266-269]

      The Complaint as initially filed alleges eight claims for relief:

      1.     Violation of the First and Fourteenth Amendments of the U.S.
             Constitution (free speech/association) [ER 280-282]

      2.     Violation of Article I, § 2(a) and § 3(a) of the California Constitution
             (free speech/association) [ER 282-284]

      3.     Violation of Article I, § 8, cl. 3 of the U.S. Constitution (Commerce
             Clause) [ER 284-286]

      4.     Violation of 42 U.S.C. § 1983 (civil rights) [ER 286]

      5.     Violation of Article XIX, § 2 of the California Constitution (motor
             vehicle revenues) [ER 287-88]



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      6.     Violation of Article IV, § 16 of the California Constitution (uniform
             operation of general laws) [ER 288-290]

      7.     Violation of the Equal Protection Clause of the 14th Amendment of
             the U.S. Constitution [ER 290-91]

      8.     Violation of Article I, § 7 of the California Constitution (equal
             protection) [ER 291-92]

Plaintiffs request an injunction against the collection or expenditure of funds

pursuant to the Tourism Assessment Program and a declaratory judgment that the

statute is unconstitutional. [ER 292-293] Plaintiffs also seek certification of a

class of car renters for an accounting and refund of all amounts collected by the

CTTC under the Tourism Assessment Program, and an award of attorneys’ fees on

behalf of the putative class. [ER 292-293]

      The Defendants filed three separate motions to dismiss. [ER 329; Docket

Entries 9, 11, 12] The Rental Car Defendants filed a joint motion to dismiss under

Federal Rule of Civil Procedure 12(b)(6) arguing that the Rental Car Defendants

are not state actors and do not act under color of state law, and therefore are not

subject to liability for Plaintiffs’ claims. [See ER 17:21-24, 18:6-7] The CTTC

and the Secretary filed separate motions arguing that Plaintiffs lacked standing and

that the Tourism Assessment Program is constitutional. [See ER 12:4-10]

      The District Court granted all of the motions to dismiss finding that

(1) Plaintiffs, as consumers, lacked prudential standing to challenge the

constitutionality of assessments imposed on car rental companies, (2) the Rental




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Car Defendants are not state actors, (3) the Tourism Marketing Act provides for

“government speech” that does not violate the First Amendment, (4) the

assessments that were passed through to Comiskey, Cohen, and other customers do

not impermissibly discriminate against interstate travelers or burden interstate

commerce, (5) the California Legislature had a rational basis for imposing the

assessments on some rental car transactions and not others, and thus did not violate

equal protection, (6) Plaintiffs’ claim under 42 U.S.C. section 1983 was derivative

of the constitutional claims and failed for the same reasons, and (7) Plaintiffs’ state

law claims would be dismissed in the court’s discretion for lack of federal subject

matter jurisdiction. [ER 6-27] The District Court ordered the federal

constitutional claims dismissed with prejudice, and declined to exercise

supplemental jurisdiction over Plaintiffs’ claims under the California Constitution.

[ER 27] Judgment was entered. [ER 5]

      Plaintiffs sought relief from the District Court under Federal Rule of Civil

Procedure 59(e) and leave to file a Second Amended Complaint. [ER 85-261]

Plaintiffs’ Proposed Second Amended Complaint abandoned the state and federal

equal protection claims and was limited to five of the same claims for relief that

the District Court had ordered dismissed:

      1.     Violation of the First and Fourteenth Amendments of the U.S.
             Constitution (free speech/association) [ER 171-173]




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      2.     Violation of Article I, § 2(a) and § 3(a) of the California Constitution
             (free speech/association) [ER 173-174]

      3.     Violation of Article I, § 8, cl. 3 of the U.S. Constitution (Commerce
             Clause) [ER 174-176]

      4.     Violation of 42 U.S.C. § 1983 (civil rights) [ER 176-177]

      5.     Violation of Article XIX, § 2 of the California Constitution (motor
             vehicle revenues) [ER 177-178]

[ER 130-180] The Proposed Second Amended Complaint alleges that the Tourism

Assessment Program was the product of a conspiracy, agreement, or concerted

action among the Defendants. [ER 131, 142] The proposed pleading alleges that

members of the rental car industry had lobbied the California Legislature, offering

to support the Tourism Assessment Program in exchange for legislation relaxing

regulations that imposed “bundling requirements” on rental car transactions. [ER

142-145] The District Court found that Plaintiffs had failed to identify any error in

the Court’s original ruling, and declined to reconsider and amend its prior order.

[ER 1-4]

                            STANDARD OF REVIEW
      Appellees agree that the District Court’s dismissal of Plaintiffs’ claims under

Federal Rule of Civil Procedure 12(b) is reviewed de novo. See Appellant’s

Opening Brief (“AOB”) at 22.

      The District Court’s decision to dismiss state law claims brought under the

court’s supplemental jurisdiction once the original federal claims have been




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dismissed is reviewed for abuse of discretion. Brown v. Lucky Stores, Inc., 246

F.3d 1182, 1187 (9th Cir. 2001).

      The District Court’s decision to deny Appellants’ request for leave to amend

is reviewed for an abuse of discretion. See Zivkovic v. Southern Cal. Edison Co.,

302 F.3d 1080, 1087 (9th Cir. 2002) (affirming the district court’s denial of leave

to amend).

                          SUMMARY OF ARGUMENT
      The Rental Car Defendants’ argument can be summarized in five words:

“This is not our fight.” The constitutional protections that Plaintiffs seek to invoke

apply only to States and persons acting under “color of state law.” The Rental Car

Defendants are private parties who have been burdened with a statutory obligation

to pay assessments to a state-created entity, the CTTC. While all tourism-related

businesses may benefit if the Tourism Assessment Program succeeds in increasing

the number of travelers to and within California, the Rental Car Defendants have

no direct stake in vindicating the State of California’s constitutional authority to

promote its economy through the imposition of assessments on tourism-related

businesses operating within the state.

      To state a constitutional claim, “the party charged with the deprivation [of

constitutional rights] must be a person who may fairly be said to be a state actor.”

American Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 50, 143 L. Ed. 2d 130, 119




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S. Ct. 977, 989 (1999) (quotation omitted). The Court examines the “specific

conduct” that allegedly violates the plaintiff’s constitutional rights and determines,

based on alleged facts, whether the specific conduct is attributable to the State. Id.

The specific conduct of the Rental Car Defendants that is challenged by Appellants

falls into three categories: (1) entering into a “conspiracy” with state legislators

“to draft, enact, and effectuate legislation” whereby the rental car industry would

pay substantially increased assessments under the Tourism Marketing Act in

exchange for relaxation of “bundling” requirements for airport car rental

transactions, see AOB at 11-14, 50-57, (2) paying assessments to the Secretary in

compliance with California Government Code § 13995.65.5, and (3) passing

through the amount of the assessments to customers, as permitted by California

Government Code § 13995.65(f). Settled authority compels the conclusion that

this conduct is not state action.

      What Plaintiffs label “conspiracy” is simply lawful petitioning activity,

protected by the First Amendment under the Noerr-Pennington doctrine. Plaintiffs

claim that the industry successfully lobbied the California Legislature to relax the

“bundling” regulation for airport rental transactions for the duration of the Tourism

Assessment Program. See AOB at 50-57. But Plaintiffs’ focus on this alleged

“quid pro quo” fails to support a cognizable constitutional claim. As a matter of

law, lobbying activity is a protected First Amendment right, and under the Noerr-




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Pennington doctrine, use of the pejorative label “conspiracy” cannot transform the

exercise of a constitutional right into a constitutional violation. See Manistee

Town Ctr. v. Glendale, 227 F.3d 1090, 1092 (9th Cir. 2000); Single Moms, Inc. v.

Montana Power Company, 331 F.3d 743, 748-49 (9th Cir. 2003). Indeed, the

“bundling” issue is a red herring. Whether or not state regulations require car

rental companies to charge their customers “bundled” or “unbundled” rates is an

issue of state law that has no federal constitutional significance. The State of

California’s constitutional power to promote its economy by imposing assessments

on travel-related businesses does not depend on whether the state also permits or

forbids car rental companies to itemize their customers’ bills.

      Further, neither the payment of assessments to the Secretary, nor “passing

through” the assessments to customers, is sufficient to transform privately-owned

rental car companies into “state actors.” The fact that a private party acted “‘with

knowledge of and pursuant to’” a state statute is not sufficient to burden that

private actor with constitutional obligations. Sullivan, 526 U.S. 40, 50. Merely

collecting statutory assessments and passing them on to a state-created entity does

not convert a private party into a state actor. See Sutton v. Providence St. Joseph

Med. Ctr., 192 F.3d 826, 838-39 (9th Cir. 1999). Moreover, participation in the

CTTC does not somehow transform the Rental Car Defendants into state actors

and make them liable for the constitutionality of legislation passed to fund the




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promotion of California tourism. The Rental Car Defendants are no more “state

actors” than any other travel-related business that has collected and paid

assessments to the Secretary for the past 14 years under the Tourism Marketing

Act.

                                   ARGUMENT

       A.    The District Court Properly Dismissed Plaintiffs’ Federal Claims
             Against The Rental Car Defendants Because There Is No State
             Action By the Rental Car Defendants

             1.     The Proper Defendants for Plaintiffs’ Claims Are the
                    Governmental Defendants
       The U.S. constitutional provisions under which Plaintiffs sue (the First

Amendment, Fourteenth Amendment, and Commerce Clause) apply to acts of the

State—not private parties. See, e.g., United Haulers Ass’n, Inc. v. Oneida-

Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330, 338, 167 L. Ed. 2d 655, 127 S.

Ct. 1786, 1792 (2007); Rendell-Baker v. Kohn, 457 U.S. 830, 837, 73 L. Ed. 2d

418, 102 S. Ct. 2764, 2769 (1982). Likewise, Plaintiffs’ claim under 42 U.S.C.

section 1983 is cognizable only against parties “who carry a badge of authority of a

State and represent it in some capacity, whether they act in accordance with their

authority or misuse it.” Hafer v. Melo, 502 U.S. 21, 28, 116 L. Ed. 2d 301, 112 S.

Ct. 358, 363 (1991) (quotation omitted).

       Here, Plaintiffs named the government official (the Secretary) and the state-

created entity (the CTTC) who are statutorily responsible for collecting the




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Tourism Assessment and publishing the pro-California speech to which Plaintiffs

supposedly object. See id. at 25 (“Suits against state officials in their official

capacity therefore should be treated as suits against the State.”) The complete

relief that Plaintiffs seek in their Complaint can only be provided by these two

Defendants. Naming the private rental car companies as Defendants adds nothing

to the substance of Plaintiffs’ case, and merely increases the number of parties

from whom the Plaintiffs may demand a settlement.

             2.     The Conduct of the Rental Car Defendants Is Not “State
                    Action”
      When a plaintiff alleges a constitutional claim against a private party, this

Court starts with the presumption that private conduct does not constitute

governmental action. Sutton, 192 F.3d at 835 (sustaining dismissal under Fed. R.

Civ. P. 12(b)(6)). For private conduct to constitute governmental action,

“something more” must be present. Id. (citing Lugar v. Edmondson Oil Co., Inc.,

457 U.S. 922, 939, 102 S.Ct. 2744, 73 L.Ed.2d 482 (1982)). Courts have

articulated four “factors or tests” to identify and describe what constitutes

“something more” in different contexts: (1) public function, (2) joint action,

(3) governmental compulsion or coercion, and (4) governmental nexus. See id.

(citations omitted). However, because of the myriad circumstances in which

constitutional claims may arise, “state action” cannot be identified by application

of any rigid or mechanistic formula. Id. (quoting Howerton v. Gabica, 708 F.2d



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380, 383 (9th Cir. 1983)). In each case, the Court must examine the specific

factual allegations in the complaint to determine whether the private conduct that

allegedly violates the plaintiffs’ constitutional rights “is fairly attributable to the

state.” Id. (quoting Bass v. Parkwood Hosp., 180 F.3d 234, 242 (5th Cir. 1999)).

      Here, Plaintiffs seek to subject the Rental Car Defendants to liability for the

enactment and implementation of the statutory Tourism Assessment Program,

California Government Code section 13995 et seq. This fact alone distinguishes

literally all of the cases cited in Appellants’ Opening Brief. None of the cases

cited by Appellants involved a private defendant accused of lobbying the State

(which Plaintiffs here label “conspiracy”) to enact legislation that allegedly

deprived the plaintiff of his or her constitutional rights. Similarly, none of the

cases cited by Appellants involved a private defendant whose alleged

constitutional tort was collecting and paying assessments to the State in

compliance with a duly enacted statute.

      The specific conduct by the Rental Car Defendants of which Appellants

complain falls into three categories:

             Successfully lobbying the California Legislature to relax the

              “bundling” regulations of California Civil Code § 1936.01 for the

              duration of the Tourism Assessment Program [ER 142-146; see also

              ER 269:26-28];




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             Paying assessments to the Secretary in amounts that are proportional

              to each company’s rental transactions at airports and hotels, as they

              are required to do in compliance with California Government Code §

              13995.65.5 [ER 275-276]; and

             Passing through the amount of the assessments to rental car customers

              such as Comiskey and Cohen, as permitted by California Government

              Code § 13995.65(f) [ER 264:20-21].

Notably, the Plaintiffs do not, and cannot, allege that the Rental Car Defendants

engage in the “pro-California” speech to which the Plaintiffs “vehemently object.”

[See ER 280] The promotion of travel to and within California is an activity of the

CTTC and the Secretary, an activity in which they have been engaged since the

Tourism Marketing Act was first enacted in 1994. [ER 272:19-27; see Cal. Gov’t

Code § 13995.45] As set forth below, the specific conduct of the Rental Car

Defendants – whether their activities are viewed separately or in the aggregate –

cannot reasonably be labeled “state action” under applicable precedents.

                    a.     Lobbying the California Legislature Is Not “State
                           Action” and Is Protected by the Noerr-Pennington
                           Doctrine
      The heart of Plaintiffs’ “state action” argument against the Rental Car

Defendants is the assertion that the California Legislature’s passage of AB 2592 in

2006 was the product of a “conspiracy” between California legislators and the




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Rental Car Defendants to violate the constitutional rights of out-of-state travelers

such as Plaintiffs Comiskey and Cohen. See AOB at 11 (“[D]efendants entered

into a conspiracy to draft, enact, and effectuate legislation which would benefit

each of them at the expense of non-resident renters’ constitutional rights.”)

Plaintiffs’ theory of the case is that the California State Legislature agreed to a

“quid pro quo” with the passenger car rental industry: If the industry acquiesced in

the allegedly unconstitutional Tourism Assessment Program in California

Government Code §§ 13995 et seq., the State Legislature would relax the “bundled

rate” regulation for airport rental transactions in California Civil Code § 1936.01.

Id.; see AOB at 52 (“The importance of the pass-through and unbundling

provisions to the RCDs cannot be overstated.”) In short, the “specific conduct”

that forms the basis of Plaintiffs’ constitutional complaint consists of the Rental

Car Defendants’ communications with state legislators about the content of

proposed and existing legislation.

      It is a bedrock principle of federal constitutional law that the First

Amendment to the U.S. Constitution provides all citizens, including corporate

citizens, the right to express their views to their government officials about what

the law should be. When a plaintiff in a civil lawsuit attempts to predicate civil

liability on a defendant’s exercise of this First Amendment constitutional right, the

Noerr-Pennington doctrine protects the defendant: a defendant’s First Amendment




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activities “cannot form the basis of section 1983 liability.” Boulware v. Nevada,

Dep’t of Human Res., 960 F.2d 793, 800 (9th Cir. 1992); Manistee, 227 F.3d at

1092 (“Noerr-Pennington immunity applies to claims under 42 U.S.C. § 1983 that

are based on the petitioning of public authorities”); Single Moms, Inc., 331 F.3d at

743.

       Rooted in the First Amendment and judicial experience that the threat of

civil liability chills political speech, the Noerr-Pennington doctrine originated in

two U.S. Supreme Court cases holding defendants immune from antitrust liability

based on the defendants’ “attempt to persuade the legislature or the executive to

take particular action with respect to a law.” E. R.R. Presidents Conference v.

Noerr Motor Freight, Inc., 365 U.S. 127, 136, 5 L. Ed. 2d 464, 81 S. Ct. 523, 530

(1961); United Mine Workers v. Pennington, 381 U.S. 657, 660-61, 14 L. Ed. 2d

626, 85 S. Ct. 1585 (1965). Noerr-Pennington immunity applies even where the

defendant is seeking a result that would otherwise violate existing law:

             The right of the people to inform their representatives in
             government of their desires with respect to the passage or
             enforcement of laws cannot properly be made to depend
             upon their intent in doing so. It is neither unusual nor
             illegal for people to seek action on laws in the hope that
             they may bring about an advantage to themselves and a
             disadvantage to their competitors.

Noerr, 365 U.S. at 139. Thus, Appellants’ argument that the Rental Car

Defendants had self-serving “motives” for endorsing the Tourism Assessment




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Program (AOB at 11, passim) is constitutionally irrelevant—a red herring. In fact,

it is this type of self-serving behavior that the Noerr-Pennington doctrine is

designed to protect. See Pennington, 381 U.S. at 670 (“Noerr shields . . . a

concerted effort to influence public officials regardless of intent of purpose”);

Noerr, 365 U.S. at 139 (explaining in the antitrust context that “[a] construction of

the Sherman Act that would disqualify people from taking a public position on

matters in which they are financially interested would thus deprive the government

of a valuable source of information and, at the same time, deprive the people of

their right to petition in the very instances in which that right may be of the most

importance to them”).

      This Circuit first applied the Noerr-Pennington doctrine to a claim under 42

U.S.C. section 1983 in Evers v. County of Custer, 745 F.2d 1196 (9th Cir. 1984).

Since then, this Court has applied the doctrine on many occasions to preclude

constitutional claims against defendants alleged to have engaged in “state action”

in the form of lobbying governmental officials to enact or amend legislation. E.g.,

Manistee, 227 F.3d at 1092; Single Moms, 331 F.3d 743 at 748-49.

      In Single Moms, like this case, the District Court granted a motion under

Federal Rule of Civil Procedure 12(b)(6) to dismiss a complaint alleging that

corporate defendants had engaged in “state action” by lobbying a state legislature

to enact a statutory scheme that allegedly infringed upon the plaintiffs’




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constitutional rights. Single Moms, 331 F.3d 743 at 746. This Court affirmed the

dismissal, holding that lobbying activity by a private party does not amount to

“state action.” Id. at 747 (“When state legislators consider, draft, and vote for a

statute even if they do so with a constituent’s help--they are legitimately executing

the duties of their offices, not acting for the state with private parties in a ‘joint

activity.’”). This Court further held that, under the Noerr-Pennington doctrine,

lobbying activity could not, as a matter of law, form the basis for a section 1983

claim:

                 If we deemed citizens’ lawful and protected efforts to
                 influence government ‘state action,’ then citizens could
                 be held liable whenever their political activities played a
                 role in government action later determined to have been
                 unconstitutional. Such a holding would create a new
                 category of state action (lobbying) and a new battlefield--
                 the nation's courtrooms--in political contests. Such a
                 holding also would have a chilling effect on legitimate
                 political expression in derogation of the First
                 Amendment.

Id. at 748-49.4



        The Noerr-Pennington doctrine is subject to a “sham” exception, which
         4


applies where defendants “use the governmental process-as opposed to the
outcome of that process-as an anticompetitive weapon.” Boulware, 960 F.2d at 797
(citing City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 111 S.Ct.
1344, 1351, 1355, 113 L.Ed.2d 382 (1991)). The “sham” exception is irrelevant
here because there is no conceivable set of facts under which Plaintiffs Comiskey
and Cohen could allege that they suffered constitutional harm caused by the Rental
Car Defendants’ lobbying activities in the legislative process, as distinct from the
outcome of that process.



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       The Rental Car Defendants raised the Noerr-Pennington doctrine in the

District Court. [E.g., ER 74:17-19] The District Court cited and relied on the

Single Moms case in its order of dismissal. [ER 20] Yet Appellants’ Opening

Brief fails to address the Noerr-Pennington doctrine, and does not cite or discuss

Single Moms or any of the authorities that Appellees have cited in this subsection

of this brief.

                    b.    Paying the Tourism Assessment in Compliance With
                          California Government Code § 13995.65.5 Is Not
                          “State Action”
       To the extent Plaintiffs challenge the Rental Car Defendants’ mere payment

of the assessment to the State, this conduct is not “state action.” As the District

Court accurately noted, “The RCDs [Rental Car Defendants], not out-of-state

travelers or other customers, are regulated by the Program and they are the entities

required to pay the fee assessed on the industry under the Program.” [ER 16:12-

15, citing Cal. Gov’t Code § 13995.72]. The assessments are a personal debt of

each rental car company. Cal. Gov’t Code § 13995.71. A private party’s

compliance with revenue-raising statutes, however, does not amount to action

“under color of State law.” See Brown v. Philip Morris Inc., 250 F.3d 789, 800-03

(3d Cir. 2001) (holding private party’s collection of a cigarette tax from consumers

was insufficient to constitute “federal action” in a Bivens claim, which is “the

federal equivalent of the § 1983 cause of action against state actors”); Hadges v.




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Yonkers Racing Corp., 918 F.2d 1079, 1080 (2d Cir. 1990) (if generation and

payment of tax revenues were sufficient, “the actions of every successful

corporation within the State would qualify as state action”); see also Crissman v.

Dover Downs Entm’t, 289 F.3d 231, 244 (3d Cir. 2002) (“[I]t would be a radical

concept if the state’s receipt of funds from private actors were to convert them into

state actors.”).

       In Sutton v. Providence St. Joseph Medical Center, 192 F.3d 826, this Court

recognized and applied the principle that a private corporation does not engage in

“state action” by complying with a statute that requires the corporation to collect,

on behalf of the government, money or information from individual citizens.

There, a private hospital was required by statute “to withhold certain income taxes

and social security taxes and file a report with the Internal Revenue Service”

identifying each employee by social security number. Id. at 831. The plaintiff

objected, for religious reasons, to providing his social security number. Id. at 830.

The Sutton plaintiff argued that the hospital acted “under color of law” by

complying with statutes requiring employers to collect social security numbers

from employees and report them to the government. Id. at 837-38. This Court

held that the hospital’s compliance with statutory requirements was not “state

action” that would subject the hospital to liability under 42 U.S.C. section 1983.

See id. at 843.




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               To accept Plaintiff’s argument would be to convert every
               employer--whether it has one employee or 1,000
               employees--into a governmental actor every time it
               complies with a presumptively valid, generally applicable
               law, such as an environmental standard or a tax-
               withholding scheme. Private employers would then be
               forced to defend those laws and pay any consequent
               damages, even though they bear no real responsibility for
               the violation of rights arising from the enactment of the
               laws.

         Id. at 838-39.

         Here, just like the hospital in Sutton, the privately owned and operated car

rental companies are not transformed into agencies of the State whenever they

comply with a duly enacted statute requiring the payment of assessments to the

State.

         Appellants argue that the payment of assessments should be regarded as

“state action” under the “symbiotic test” and “joint action test” because the State

“profited from the discriminatory activity.” AOB at 54. This argument is wide of

the mark because no court has ever equated the government’s collection of a tax

through assessments with “profit.” Rather, the cases examine whether the State

“knowingly shared in the profits spawned by the [private entity’s] discriminatory

conduct.” See, e.g., Perkins v. Londonderry Basketball Club, 196 F.3d 13, 21 (1st

Cir. 1999) (finding no state action in operation of youth sports league).

         The seminal case applying the “profit” factor was Burton v. Wilmington

Parking Authority, 365 U.S. 715, 6 L. Ed. 2d 45, 81 S. Ct. 856 (1961), in which the



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Court held that a restaurant that discriminated against patrons based on race could

be enjoined under the Fourteenth Amendment from further discriminatory conduct

because the restaurant operated in a building owned and leased by a Delaware

agency. The Court reasoned that the restaurant’s landlord-tenant arrangement with

the state agency formed a “symbiotic relationship” whereby the agency would use

public funds to maintain the restaurant’s building and in turn would receive

revenues from the restaurant and its customers. Id. at 723-24. The Supreme Court

found that “profits earned by discrimination not only contribute to, but also are

indispensable elements in the financial success of a governmental agency.” Id. at

724. The Court narrowly tailored the holding to the facts of the case: “what we

hold today is that when a State leases public property in the manner and purpose

shown to have been the case here, the proscriptions of the Fourteenth Amendment

must be complied with by the lessees as certainly as though they were binding

covenants” written in to the lease itself. Id. at 725. And the Court has reiterated

the limited applicability of Burton in subsequent opinions. See Jackson v.

Metropolitan Edison Co., 419 U.S. 345, 357-58, 42 L. Ed. 2d 477, 95 S. Ct. 449,

457 (1974) (the Burton court limited its “actual holding to lessees of public

property”); accord Sullivan, 526 U.S. at 57 (“Burton was one of our early cases

dealing with ‘state action’ under the Fourteenth Amendment, and later cases have

refined the vague ‘joint participation’ test embodied in that case.”).




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      Here, the State of California is not a landlord and has no connection

whatsoever to the business of the Rental Car Defendants except by enacting

statutes and promulgating regulations. The State does not share profits with the

Rental Car Defendants. The Rental Car Defendants owe the assessments as a

personal debt to the state without regard to whether the Rental Car Defendants

operate at a profit or loss. Cal. Gov’t Code § 13995.71.

      Nor is there merit to Appellants’ suggestion that the Rental Car Defendants

have been “endowed by the State with powers or functions governmental in

nature.” AOB at 57, quoting Lee v. Katz, 276 F.3d 554, 554-55 (9th Cir. 2002).

The Rental Car Defendants merely pay assessments, which is not a “public

function.” See Rendell-Baker, 457 U.S. at 842 (state action only exists where

private actors are engaged in activity that has been “traditionally the exclusive

prerogative of the State”) (quoting Jackson, 419 U.S. at 353); Flagg Bros., Inc. v.

Brooks, 436 U.S. 149, 158 (1978) (“While many functions have been traditionally

performed by governments, very few have been exclusively reserved to the

State.”). The actual promotion of “state tourism” – the only arguably “public

function” in this case – is carried out by the CTTC and the Secretary. [ER 272:19-

27; see Cal. Gov’t Code § 13995.45]5


      5
       Moreover, Appellants do not allege, and cannot reasonably contend, that
the Rental Car Defendants are the “alter ego” of the CTTC, which is governed by
(Continued…)



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                    c.    Exercising the Option to Pass Through the Amount of
                          the Tourism Assessments to Customers Pursuant to
                          California Government Code § 13995.65(f) Is Not
                          State Action
      The Rental Car Defendants’ independent decisions to “pass through” to their

customers some or all of the assessment required by the Tourism Assessment

Program is not conduct attributable to the State.

      The Supreme Court held in Sullivan that private conduct performed with

mere state authorization does not give rise to a claim against a private party for

violation of Section 1983. See Sullivan, 526 U.S. at 53-54. There, the plaintiff

alleged a “facial” or “direct” challenge to the State of Pennsylvania’s workers’

compensation statutes, which permitted insurers to withhold payment of medical

benefits whenever the insurer requested a “utilization review,” regardless of

whether the request was legitimate. Id. at 45-46, citing 34 Pa. Code § 127.452(a).

Under Pennsylvania’s statutes, the insurer’s request for “utilization review” would

be resolved by an independent party through a process administered by the State’s

Worker’s Compensation Bureau. Id. at 46, citing Pa. Code § 127.453. The

37 commissioners, including the Secretary, that represent the breadth of the
tourism industry. See Cal. Gov’t Code § 13995.40(b). The rental car industry is
limited to no more than six of the 24 elected commissioner positions, and the 12
appointed commissioners should represent “the diverse elements of the tourism
industry.” Id. §§ 13995.40.5(a), 13995.40(b)(2); cf. Clark v. County of Placer, 923
F. Supp. 1278 (E.D. Cal. 1996) (cited at AOB 47-48) (private, nonprofit Placer
County Fair Association was “the alter ego of the county under civil rights suit
jurisprudence”).




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defendants in Sullivan included State officials as well as private insurers who had

withheld medical benefits in accordance with the Pennsylvania statutes. Id. at 50,

47-48. The plaintiffs alleged that the private insurers were “state actors” because

the State’s statutes “authorized” and “encouraged” the private insurers to withhold

payments and specified the exact manner for the insurers to do so. Id. at 53-55.

      In Sullivan, the Supreme Court held that the State’s establishment of the

“utilization review” procedure and its extensive regulation of the private insurers

did not transform the private insurers into “state actors.” Id. at 58. The specific

conduct that was the gravamen of the Plaintiffs’ constitutional complaint – the

insurer’s decision to invoke the “utilization review” process and withhold payment

in any particular case – was made by the insurer without any involvement by the

State. Id. The fact that the State had created the “utilization review” procedure

itself, and was extensively involved in regulating the system, did not mean that the

insurer’s conduct was “fairly attributable to the State.” Id.

      Like the private insurers in Sullivan who elected to invoke the “utilization

review” procedure under Pennsylvania law, each rental car company in the

marketplace makes its own decision whether to invoke the “pass through” option

that is available under California Government Code § 13995.65(f). The State’s

role in creating the statutory option to permit the Rental Car Defendants to “pass

through” the assessment constitutes nothing more than “state inaction, or more




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accurately, a legislative decision not to intervene” in the challenged conduct.

Sullivan, 526 U.S. at 53. Each of the rental car companies operates with no

“‘overt, significant assistance of state officials’” in making billing decisions. The

government’s mere regulation of the Rental Car Defendants and authorization to

pass on the assessments to customers are insufficient as a matter of law to

constitute action by the State or conduct “under color of State law.” See id. at 54

(quoting Tulsa Prof’l Collection Servs., Inc. v. Pope, 485 U.S. 478, 486, 99 L. Ed.

2d 565, 108 S. Ct. 1340, 1345 (1998)); see also Jackson, 419 U.S. at 350 (“The

mere fact that a business is subject to state regulation does not by itself convert its

action into that of the State for purposes of the Fourteenth Amendment”); Gritchen

v. Collier, 254 F.3d 807, 812-14 (9th Cir. 2001) (holding police officer’s threat to

file defamation suit was not state action despite state law authorizing defamation

suit); Life Ins. Co. of North America v. Reichardt, 591 F.2d 499, 501-02 (9th Cir.

1979) (holding Section 1983 claim against insurance commissioner for

discriminatory insurance policies failed for lack of state action despite State’s

approval of the insurer’s policy forms).

      In the court below, both the Rental Car Defendants and the District Court

cited and relied on analysis of state action laid out by the Supreme Court in

Sullivan. [ER 19-20] Appellants’ Opening Brief ignores the Sullivan case

altogether.




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      B.     The District Court Did Not Abuse Its Discretion by Declining to
             Exercise Supplemental Jurisdiction Over Plaintiffs’ State Law
             Claims
      Under 28 U.S.C. 1367(c)(3), a district court has discretion to decline to

exercise supplemental jurisdiction over state claims if it has dismissed the federal

claims over which it had original jurisdiction. See Voigt v. Savell, 70 F.3d 1552,

1565 (9th Cir. 1995). The district court did not have original jurisdiction over

Plaintiffs’ claims alleging violations of the California Constitution. Like Plaintiffs’

federal constitutional claims, Plaintiffs’ claims under the California Constitution

are only applicable to acts of the State. See, e.g., Garfinkle v. Superior Court, 21

Cal. 3d 268, 281-82, 146 Cal. Rptr. 208, 217 (1978). The District Court could

reasonably have dismissed these claims with prejudice as to the Rental Car

Defendants. The District Court’s decision to dismiss these claims without

prejudice was certainly not an abuse of discretion.

      C.     The District Court Did Not Abuse Its Discretion in Denying Leave
             to Amend the Complaint
      Appellants make a perfunctory argument that the District Court erred by

denying leave to amend (AOB at 59), but fail to demonstrate any error in the

District Court’s ruling. The record contains Plaintiffs’ proposed Second Amended

Complaint, which alleges all of the facts on which Plaintiffs rely to support their

claim that the Rental Car Defendants are “state actors.” [ER 130-180; see AOB at

59 (contending that Second Amended Complaint “cured all defects found by the



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court”).] Appellants’ Brief does not identify any additional facts that could be

pleaded that are not already before this Court.

      Plaintiffs challenge the constitutionality of the 2006 amendments to the

Tourism Marketing Act. The proper defendants to defend the legislation are the

State and the CTTC. The Rental Car Defendants do not become state actors by

lobbying the State Legislature to change the law, or by acting in compliance with

duly enacted state statutes. Appellants’ reliance on the defendants’ lobbying

activities as the basis for alleging a “conspiracy” that meets the “state action”

requirement is legally erroneous. Based on the well-settled Noerr-Pennington

doctrine, Plaintiffs have not and cannot allege any facts that would make the

private rental car defendants responsible for defending the constitutionality of state

legislation. The District Court properly dismissed Plaintiffs’ claims against the

Rental Car Defendants with prejudice. Platt Elec. Supply, Inc. v. EOFF Elec., Inc.,

522 F.3d 1049, 1054 (9th Cir. 2008) (“A district court . . . does not abuse its

discretion in denying leave to amend where amendment would be futile.”

(quotation omitted)).

                                  CONCLUSION
      For the foregoing reasons, the Rental Car Defendants respectfully request

that the judgment of the District Court be affirmed.




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                                 RELATED CASES
       Shames v. The Hertz Corporation et al., Ninth Circuit Case No. 08-56750

(“Shames”), is a putative class action in which the plaintiffs allege antitrust

violations relating to charges to consumers for airport concession fees and the

tourism assessment at California airports. The case involves many of the same

defendants and the same statutes that are involved in this case, but raises antitrust

claims rather than constitutional issues. The District Court found that the Shames

case was related to this one, although the cases were not consolidated.

Dated: September 18, 2009                               Respectfully submitted,

FOLGER LEVIN & KAHN LLP                       KIRKLAND & ELLIS, LLP

By:         s/ J. Daniel Sharp                By:    s/ Corey C. Watson (with permission)
      Gregory D. Call                               Corey C. Watson
      J. Daniel Sharp                               Kevin M. Askew
      Embarcadero Center West                       777 S. Figueroa Street Suite 3700
      275 Battery Street, 23rd Floor                Los Angeles, CA 90017
      San Francisco, California 94111               Tel.: (213) 680-8400
      Tel.: (415) 986-2800
      Fax: (415) 986-2827                     Counsel for Appellee
                                              AVIS BUDGET GROUP, INC.
      Jennifer S. Romano
      1900 Avenue of the Stars, 28th Floor
      Los Angeles, California 90067
      Tel.: (310) 556-3700
      Fax: (310) 556-3770

Counsel for Appellees
ENTERPRISE HOLDINGS, INC, and
VANGUARD CAR RENTAL USA, LLC




                                             34
        Case: 09-55440    09/18/2009    Page: 42 of 44    DktEntry: 7067662



JONES DAY                                 WERTZ McDADE WALLACE MOOT &
                                          BROWER

By: s/ Jeffrey A. LeVee (with permission) By: s/ John H. Stephens (with permission)
    Jeffrey A. LeVee                          John H. Stephens
    555 South Flower Street                   945 Fourth Avenue
    Fiftieth Floor                            San Diego, California 92101
    Los Angeles, California 90071             Tel: (619) 233-1888
    Tel.: (213) 489-3939
                                          Counsel for Appellee
Counsel for Appellee                      FOX RENT A CAR D/B/A PAYLESS
DOLLAR THRIFTY AUTOMOTIVE                 RENT-A-CAR
GROUP, INC.




O’MELVENY & MYERS LLP


By: s/ Michael F. Tubach (with permission)
    Michael F. Tubach
    Ryan J. Padden
    Two Embarcadero Center, 28th Floor
    San Francisco, CA 94111-3823
    Tel.: (415) 984-8700

    Richard G. Parker
    1625 Eye Street, NW
    Washington, D.C. 20006
    Tel.: (202) 383-5300

Counsel for Defendant
THE HERTZ CORPORATION




                                         35
        Case: 09-55440      09/18/2009     Page: 43 of 44     DktEntry: 7067662



                         CERTIFICATE OF COMPLIANCE

      I certify that, pursuant to Federal Rule of Appellate Procedure 32(a)(7)(C) and

Ninth Circuit Rule 32-1, the attached answering brief is proportionately spaced, has a

typeface of 14 points or more and contains 7,643 words.



Dated: September 18, 2009                          FOLGER LEVINS & KAHN LLP

                                                            s/ J. Daniel Sharp

                                                            J. Daniel Sharp
                                                   Attorneys for Defendant-Appellee
                                                  ENTERPRISE HOLDINGS, INC. and
                                                 VANGUARD CAR RENTAL USA, LLC




                                            36
         Case: 09-55440      09/18/2009     Page: 44 of 44     DktEntry: 7067662



                             CERTIFICATE OF SERVICE

I hereby certify that on September 18, 2009, I electronically filed the foregoing with the
Clerk of the court for the United States Court of Appeals for the Ninth Circuit by using
the appellate CM/ECF system.

Participants in the case who are registered CM/ECF users will be served by the appellate
CM/ECF system.

I further certify that some of the participants in the case are not registered CM/ECF users.
I have mailed the foregoing document by First-Class Mail, postage prepaid, or have
dispatched it to a third party commercial carrier for delivery within 3 calendar days, to
the following non-CM/ECF participants:

Julia Azrael                                      Jules Brody
Law Office of Julia Azrael                        Stull, Stull & Brody
5200 Lankershim Blvd., Suite 850                  6 East 45th Street, Suite 500
N. Hollywood, CA 91601                            New York, NY 10017
John S. Curtis                                    Richard G. Parker
Law Office of Julia Azrael                        O’Melveny & Myers LLP
5200 Lankershim Blvd., Suite 850                  1625 Eye Street, N.W.
N. Hollywood, CA 91601                            Washington, DC 20006
Glenn A. Stein                                    John H. Stephens
O’Melveny & Myers LLP                             Wertz McDade Wallace Moot & Brower
Times Square Tower                                945 Fourth Avenue
7 Times Square                                    San Diego, CA 92101
New York, NY 10036
Joseph H. Weiss
Weiss & Lurie
551 Fifth Ave., Suite 1600
New York, NY 10176

                                                           s/ J. Daniel Sharp
                                                    Attorneys for Defendant-Appellee
                                                   ENTERPRISE HOLDINGS, INC. and
                                                  VANGUARD CAR RENTAL USA, LLC




                                             37

				
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