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`Case 3:21-cv-05502-EMC Document 36 Filed 11/05/21 Page 1 of 36
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`GIBSON, DUNN & CRUTCHER LLP
`JOSHUA S. LIPSHUTZ, SBN 242557
`jlipshutz@gibsondunn.com
`555 Mission Street, Suite 3000
`San Francisco, CA 94105-0921
`Telephone:
`415.393.8200
`Facsimile:
`415.393.8306
`
`MICHAEL HOLECEK, SBN 281034
`mholecek@gibsondunn.com
`333 South Grand Avenue
`Los Angeles, CA 90071-3197
`Telephone:
`213.229.7000
`Facsimile:
`213.229.7520
`
`Attorneys for Plaintiffs
`DOORDASH, INC. and GRUBHUB INC.
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
`
`
`DOORDASH, INC. and GRUBHUB INC.,
`
`CASE NO. 21-CV-05502-EMC
`
`Plaintiffs,
`
`v.
`
`CITY AND COUNTY OF SAN FRANCISCO,
`
`Defendant.
`
`
`
`PLAINTIFFS’ OPPOSITION TO
`DEFENDANT’S MOTION TO DISMISS
`
`Hearing Date: December 16, 2021
`Hearing Time: 1:30 p.m.
`Hearing Place: Courtroom 5 – 17th Floor
`Hon. Edward M. Chen
`
`Action Filed: July 16, 2021
`FAC Filed: Oct. 1, 2021
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`PLAINTIFFS’ OPPOSITION TO DEFENDANT’S MOTION TO DISMISS
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`CASE NO. 21-CV-05502-EMC
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`Case 3:21-cv-05502-EMC Document 36 Filed 11/05/21 Page 2 of 36
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`TABLE OF CONTENTS
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`TABLE OF AUTHORITIES ................................................................................................................ ii
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`PRELIMINARY STATEMENT ........................................................................................................... 1
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`FACTUAL ALLEGATIONS................................................................................................................ 1
`
`A.
`
`B.
`
`C.
`
`D.
`
`The Role Of Commissions Charged By Third-Party Platforms ................................... 1
`
`The Mayor Caps Delivery Commissions In Response To The COVID-19
`Pandemic ....................................................................................................................... 3
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`The Board Passes The Temporary Ordinance ............................................................... 3
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`The Board Makes The Commission Cap Permanent .................................................... 4
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`LEGAL STANDARD ........................................................................................................................... 5
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`ARGUMENT ........................................................................................................................................ 6
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`A.
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`Plaintiffs State A Claim For Violation Of The Contract Clause ................................... 6
`
`1.
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`2.
`
`Step One: The Ordinance Substantially Impairs Plaintiffs’
`Contracts ........................................................................................................... 6
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`Step Two: The Ordinance Does Not Appropriately Or Reasonably
`Advance A Significant And Legitimate Public Purpose ................................... 9
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`B.
`
`C.
`
`D.
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`E.
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`F.
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`Plaintiffs State A Claim For Violation Of The Takings Clause.................................. 13
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`Plaintiffs State A Claim For Violation Of San Francisco’s Police Power .................. 17
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`Plaintiffs State A Claim Under The Due Process And Equal Protection
`Clauses ........................................................................................................................ 19
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`DoorDash State A Claim For Violation Of The First Amendment ............................ 22
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`If The Court Grants Any Part Of The City’s Motion, It Should Grant
`Leave To Amend ......................................................................................................... 25
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`CONCLUSION ................................................................................................................................... 25
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`TABLE OF AUTHORITIES
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`CASES
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`Adamson Companies v. City of Malibu,
`854 F. Supp. 1476 (C.D. Cal. 1994)................................................................................................18
`
`Allied Structural Steel Co. v. Spannaus,
`438 U.S. 234 (1978) ............................................................................................................6, 7, 9, 13
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`Alpha Energy Savers, Inc. v. Hansen,
`381 F.3d 917 (9th Cir. 2004) .....................................................................................................23, 24
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`Am. Fed. of State, Cnty. & Mun. Emps. v. City of Benton,
`513 F.3d 874 (8th Cir. 2008) ...........................................................................................................11
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`Animal Legal Def. Fund v. Otter,
`118 F. Supp. 3d 1195 (D. Idaho 2015), aff’d in relevant part ........................................................21
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`Animal Legal Def. Fund v. Wasden,
`878 F.3d 1184 (9th Cir. 2018) .........................................................................................................21
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`Apartment Ass’n of L.A. Cnty., Inc. v. City of L.A.,
`10 F.4th 905 (9th Cir. 2021)............................................................................................................13
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`Ariz. Dream Act Coal. v. Brewer,
`757 F.3d 1053 (9th Cir. 2014) .........................................................................................................21
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`Ariz. Students’ Ass’n v. Ariz. Bd. of Regents,
`824 F.3d 858 (9th Cir. 2016) ...............................................................................................22, 23, 24
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`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) ..........................................................................................................................5
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`Association of Equipment Manufacturers v. Burgum,
`932 F.3d 727 (8th Cir. 2019) ...........................................................................................7, 10, 11, 12
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`Balistreri v. Pacifica Police Dep’t,
`901 F.2d 696 (9th Cir. 1988) ...........................................................................................................25
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`Birkenfeld v. City of Berkeley,
`17 Cal. 3d 129 (1976) .....................................................................................................................18
`
`Blair v. Bethel Sch. Dist.,
`608 F.3d 540 (9th Cir. 2010) .....................................................................................................22, 25
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`Boardman v. Inslee,
`978 F.3d 1092 (9th Cir. 2020) .........................................................................................................21
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`TABLE OF AUTHORITIES
`(continued)
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`Brown v. Hovatter,
`561 F.3d 357 (4th Cir. 2009) ...........................................................................................................22
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`Brown v. Legal Found. of Wash.,
`538 U.S. 216 (2003) ........................................................................................................................17
`
`Cal. Build. Indus. Ass’n v. City of San Jose,
`61 Cal. 4th 435 (2015) ....................................................................................................................11
`
`California Grocers Association v. City of Long Beach,
`2021 WL 3500960 (C.D. Cal. Aug. 9, 2021) ....................................................................................8
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`Capp v. Cnty. of San Diego,
`940 F.3d 1046 (9th Cir. 2019) .........................................................................................................23
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`CDK Glob. LLC v. Brnovich,
`461 F. Supp. 3d 906 (D. Ariz. 2020) ...............................................................................................12
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`Chang v. United States,
`859 F.2d 893 (Fed. Cir. 1988) .........................................................................................................16
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`City of Cleburne v. Cleburne Living Ctr.,
`473 U.S. 432 (1985) ........................................................................................................................21
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`City of Las Vegas v. Foley,
`747 F.2d 1294 (9th Cir. 1984) .........................................................................................................24
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`Classic Cab, Inc. v. Dist. of Columbia,
`288 F. Supp. 3d 218 (D.D.C. 2018) ................................................................................................15
`
`Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal.,
`508 U.S. 602 (1993) ..................................................................................................................15, 16
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`Connolly v. Pension Benefit Guaranty Corp.,
`475 U.S. 211 (1986) ..................................................................................................................14, 15
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`Craigmiles v. Giles,
`312 F.3d 220 (6th Cir. 2002) ...........................................................................................................20
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`Cycle City, Ltd. v. Harley-Davidson Motor Co.,
`81 F. Supp. 3d 993 (D. Haw. 2014) ................................................................................................11
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`Desoto CAB Co. v. Picker,
`228 F. Supp. 3d 950 (N.D. Cal. 2017) ......................................................................................21, 25
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`Duquesne Light Co. v. Barasch,
`488 U.S. 299 (1989) ........................................................................................................................22
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`Case 3:21-cv-05502-EMC Document 36 Filed 11/05/21 Page 5 of 36
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`TABLE OF AUTHORITIES
`(continued)
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`Eldridge v. Block,
`832 F.2d 1132 (9th Cir. 1987) .........................................................................................................25
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`Energy Reserves Grp., Inc. v. Kan. Power & Light Co.,
`459 U.S. 400 (1983) ....................................................................................................................6, 17
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`Foman v. Davis,
`371 U.S. 178 (1962) ........................................................................................................................25
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`Fortune Players Group, Inc. v. Quint,
`2016 WL 7102735 (N.D. Cal. Dec. 6, 2016) ..................................................................................23
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`Fraternal Order of Police Hobart Lodge Number 121, Inc. v. City of Hobart,
`864 F.2d 551 (7th Cir. 1988) ...........................................................................................................25
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`Great Atl. & Pac. Tea Co. v. Town of E. Hampton,
`997 F. Supp. 340 (E.D.N.Y. 1998) .................................................................................................17
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`Hawaii Hous. Auth. v. Midkiff,
`467 U.S. 229 (1984) ........................................................................................................................14
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`Hawkeye Commodity Promotions, Inc. v. Miller,
`432 F. Supp. 2d 822 (N.D. Iowa 2006) ...........................................................................................16
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`Hernandez v. City of Hanford,
`41 Cal. 4th 279 (2007) ..............................................................................................................11, 21
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`Hettinga v. United States,
`677 F.3d 471 (D.C. Cir. 2012) ........................................................................................................22
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`Home Building & Loan Ass’n v. Blaisdell,
`290 U.S. 398 (1934) ........................................................................................................................10
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`Hotel & Motel Asssociation of Oakland v. City of Oakland,
`344 F.3d 959 (9th Cir. 2003) ...........................................................................................................21
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`HRPT Properties Tr. v. Lingle,
`715 F. Supp. 2d 1115 (D. Haw. 2010) ................................................................................11, 12, 13
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`Huskey v. City of San Jose,
`204 F.3d 893 (9th Cir. 2000) ...........................................................................................................24
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`Image Media Advert., Inc. v. City of Chi.,
`2017 WL 6059921 (N.D. Ill. Dec. 7, 2017) ....................................................................................15
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`Inman v. Hatton,
`2018 WL 1100959 (N.D. Cal. Mar. 1, 2018) ..................................................................................25
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`TABLE OF AUTHORITIES
`(continued)
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`Justesen’s Food Stores v. City of Tulare,
`12 Cal. 2d 324 (1938) ...............................................................................................................17, 20
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`Kawaoka v. City of Arroyo Grande,
`17 F.3d 1227 (9th Cir. 1994) ...........................................................................................................24
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`In re Kazas,
`22 Cal. App. 2d 161 (1937) ...........................................................................................12, 17, 19, 20
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`Keystone Bituminous Coal Ass’n v. DeBenedictis,
`480 U.S. 470 (1987) ........................................................................................................................13
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`Koala v. Khosla,
`931 F.3d 887 (9th Cir. 2019) ...........................................................................................................24
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`Laurel Park Cmty., LLC v. City of Tumwater,
`698 F.3d 1180 (9th Cir. 2012) .........................................................................................................15
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`Lazy Y Ranch Ltd. v. Behrens,
`546 F.3d 580 (9th Cir. 2008) ...............................................................................................19, 20, 21
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`Lefrancois v. Rhode Island,
`669 F. Supp. 1204 (D.R.I. 1987) .......................................................................................................9
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`In re Levenson,
`560 F.3d 1145 (9th Cir. 2009) .........................................................................................................19
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`Lingle v. Chevron U.S.A. Inc.,
`544 U.S. 528 (2005) ........................................................................................................................14
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`Litmon v. Harris,
`768 F.3d 1237 (9th Cir. 2014) .........................................................................................................21
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`Lockary v. Kayfetz,
`917 F.2d 1150 (9th Cir. 1990) .........................................................................................................19
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`Loretto v. Teleprompter Manhattan CATV Corp.,
`458 U.S. 419 (1982) ........................................................................................................................14
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`Lynch v. United States,
`292 U.S. 571 (1934) ........................................................................................................7, 13, 14, 15
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`McDougal v. Cty. of Imperial,
`942 F.2d 668 (9th Cir. 1991) ...........................................................................................................14
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`MCH Financial L.P. v. City of San Rafael,
`714 F.3d 1118 (9th Cir. 2013) .........................................................................................................16
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`TABLE OF AUTHORITIES
`(continued)
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`Melendez v. City of N.Y.,
`__ F.4th __, 2021 WL 4997666 (2d Cir. Oct. 28, 2021) .................................................7, 10, 12, 13
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`Merrifield v. Lockyer,
`547 F.3d 978 (9th Cir. 2008) ...............................................................................................19, 20, 21
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`N.J. Retail Merchants Ass’n v. Sidamon-Eristoff,
`669 F.3d 374 (3d Cir. 2012) ..............................................................................................................7
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`N.Y. State Ass’n of Counties v. Axelrod,
`78 N.Y.2d 158 (1991) .....................................................................................................................19
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`N.Y. State Land Title Ass’n, Inc. v. N.Y. State Dep’t of Fin. Servs.,
`169 A.D.3d 18 (1st Dep’t 2019)..........................................................................................13, 18, 19
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`Nat’l Wildlife Fed’n v. ICC,
`850 F.2d 694 (D.C. Cir. 1988) ........................................................................................................22
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`Nekrilov v. City of Jersey City,
`2021 WL 1138360 (D.N.J. Mar. 24, 2021) .....................................................................................16
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`New York v. Cohen,
`5 N.E.2d 835 (N.Y. 1936) ...............................................................................................................17
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`Nieves v. Hess Oil Virgin Islands Corp.,
`819 F.2d 1237 (3d Cir. 1987) ............................................................................................................9
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`Northwest Grocery Association v. City of Seattle,
`2021 WL 1055994 (W.D. Wash. Mar. 18, 2021) ...........................................................................11
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`Novell, Inc. v. Microsoft Corp.,
`505 F.3d 302 (4th Cir. 2007) ...........................................................................................................13
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`Olson v. California,
`2020 WL 6439166 (C.D. Cal. Sept. 18, 2020) ..................................................................................8
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`Olson v. California,
`2020 WL 905572 (C.D. Cal Feb. 10, 2020) ....................................................................................21
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`OSU Student All. v. Ray,
`699 F.3d 1053 (9th Cir. 2012) ...........................................................................................................6
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`Penn Central Trans. Co. v. N.Y. City,
`438 U.S. 104 (1978) ........................................................................................................................14
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`Pension Benefit Guar. Corp. v. R.A. Gray & Co.,
`467 U.S. 717 (1984) ..........................................................................................................................9
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`TABLE OF AUTHORITIES
`(continued)
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`Pinnacle Armor, Inc. v. United States,
`648 F.3d 708 (9th Cir. 2011) .............................................................................................................5
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`Pro-Eco, Inc. v. Bd. of Comm’rs,
`57 F.3d 505 (7th Cir. 1995) .............................................................................................................15
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`Rancho de Calistoga v. City of Calistoga,
`800 F.3d 1083 (9th Cir. 2015) .........................................................................................................16
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`Reddy v. Litton Indus. Inc.,
`912 F.2d 291 (9th Cir. 1990) ...........................................................................................................25
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`Romer v. Evans,
`517 U.S. 620 (1996) ........................................................................................................................19
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`Ross v. City of Berkeley,
`655 F. Supp. 820 (N.D. Cal. 1987) .................................................................................................12
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`Ruckelshaus v. Monsanto Co.,
`467 U.S. 986 (1984) ........................................................................................................................14
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`RUI One Corp. v. City of Berkeley,
`371 F.3d 1137 (9th Cir. 2004) .........................................................................................................21
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`San Francisco Taxi Coal. v. City & County of S.F.,
`979 F.3d 1220 (9th Cir. 2020) .........................................................................................................11
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`Santos v. City of Houston,
`852 F. Supp. 601 (S.D. Tex. 1994) .................................................................................................20
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`Smith v. Pelican Bay State Prison,
`2016 WL 285062 (N.D. Cal. Jan. 25, 2016) ...................................................................................25
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`Snake River Valley Elec. Ass’n v. PacifiCorp,
`357 F.3d 1042 (9th Cir. 2004) .........................................................................................................13
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`Somers v. Apple, Inc.,
`729 F.3d 953 (9th Cir. 2013) .............................................................................................................6
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`St. Joseph Abbey v. Castille,
`712 F.3d 215 (5th Cir. 2013) ...........................................................................................................18
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`State Bd. of Dry Cleaners v. Thrift-D-Lux Cleaners,
`40 Cal. 2d 436 (1953) ...................................................................................................12, 17, 18, 19
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`Storer Cable Commc’ns v. City of Montgomery,
`806 F. Supp. 1518 (M.D. Ala. 1992) ................................................................................................9
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`TABLE OF AUTHORITIES
`(continued)
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`Sveen v. Melin,
`138 S. Ct. 1815 (2018) ..................................................................................................................6, 9
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`Taylor v. United States,
`959 F.3d 1031 (Fed. Cir. 2020) .......................................................................................................16
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`TCF National Bank v. Bernanke,
`643 F.3d 1158 (8th Cir. 2011) ...................................................................................................21, 22
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`Thornton v. City of St. Helens,
`425 F.3d 1158 (9th Cir. 2005) .........................................................................................................21
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`Tuttle v. N.H. Med. Malpractice Joint Underwriting Ass’n,
`992 A.2d 624 (N.H. 2010) ................................................................................................................9
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`Twin City Candy & Tobacco Co. v. A. Weisman Co.,
`276 Minn. 225 (1967) .....................................................................................................................19
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`Ulrich v. City & County of San Francisco,
`308 F.3d 968 (9th Cir. 2002) .....................................................................................................24, 25
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`United Healthcare Ins. Co. v. Davis,
`602 F.3d 618 (5th Cir. 2010) .......................................................................................................9, 16
`
`United States v. Apple, Inc.,
`791 F.3d 290 (2d Cir. 2015) ............................................................................................................15
`
`United States v. Carolene Prods. Co.,
`304 U.S. 144 (1938) ........................................................................................................................18
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`United States v. O’Brien,
`391 U.S. 367 (1968) ........................................................................................................................24
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`United States v. Wilde,
`74 F. Supp. 3d 1092 (N.D. Cal. 2014) ............................................................................................21
`
`Vinatieri v. Mosley,
`787 F. Supp. 2d 1022 (N.D. Cal. 2011) ..........................................................................................25
`
`Winston v. City of Syracuse,
`887 F.3d 553 (2d Cir. 2018) ............................................................................................................20
`
`Wolff v. McDonnell,
`418 U.S. 539 (1974) ........................................................................................................................20
`
`STATUTES
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`S.F. Admin. Code § 5300(d) .................................................................................................................11
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`PLAINTIFFS’ OPPOSITION TO DEFENDANT’S MOTION TO DISMISS
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`CASE NO. 21-CV-05502-EMC
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`Case 3:21-cv-05502-EMC Document 36 Filed 11/05/21 Page 10 of 36
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`TABLE OF AUTHORITIES
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`S.F. Police Code § 5312 ..........................................................................................................................4
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`RULES
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`Fed. R. Civ. P. 15(a)(2) .........................................................................................................................25
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`CONSTITUTIONAL PROVISIONS
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`Cal. Const. art. I, § 7 .............................................................................................................................19
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`Cal. Const. art. I, § 19 ...........................................................................................................................13
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`U.S. Const. amend. V ............................................................................................................................13
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`U.S. Const. amend. XIV .......................................................................................................................19
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`U.S. Const. art. I, § 10 .............................................................................................................................6
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`Case 3:21-cv-05502-EMC Document 36 Filed 11/05/21 Page 11 of 36
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`PRELIMINARY STATEMENT
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`When San Francisco lawmakers imposed a permanent price cap on the commissions that
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`third-party platforms like DoorDash and Grubhub may charge restaurants for their services (the
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`“Ordinance”), they touted it as a first-of-its-kind law expressly intended to shift revenues from third-
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`party platforms to restaurants. Now that the Ordinance has been challenged in court, the City tries to
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`recast it as run-of-the-mill regulation. But as Mayor London Breed said when she refused to sign the
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`Ordinance, this unprecedented price cap is “unnecessarily prescriptive in limiting the business models
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`of the third-party organizations, and oversteps what is necessary for the public good.” Rather than
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`advance the public health, safety, or welfare, the Ordinance forces third-party platforms to subsidize
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`restaurants—an unconstitutional transfer of money from one group of businesses to another.
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`Under the U.S. Constitution and California’s limitations on local governments, the Ordinance
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`fails for many reasons. The Ordinance substantially interferes with thousands of contracts between
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`Plaintiffs and San Francisco restaurants, without compensating Plaintiffs, and without advancing a
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`significant and legitimate public purpose, such as the public health, safety, or welfare. The complaint
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`also alleges, and the facts will prove, that the City passed the Ordinance to punish DoorDash for
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`engaging in protected First Amendment activity—namely, its support of Proposition 22. Thus,
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`Plaintiffs state claims under the Contract Clause, Takings Clause, Due Process and Equal Protection
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`Clauses, and First Amendment, as well as California’s police power limitations. The Court should
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`deny the City’s motion to dismiss.
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`FACTUAL ALLEGATIONS
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`A.
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`The Role Of Commissions Charged By Third-Party Platforms
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`Plaintiffs operate third-party platforms that connect restaurants with consumers who wish to
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`purchase food and have it delivered to them or be ready for pickup. Dkt. 25 ¶ 15. Plaintiffs compete
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`with numerous other third-party platforms in San Francisco and elsewhere, as well as with restaurants
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`that deliver food themselves. Id. ¶ 16. This industry is dynamic, constantly evolving, and
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`historically free of government regulation, including pricing controls. Id. ¶¶ 16, 21, 30–31.
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`The rise of third-party platforms has resulted in the expansion of restaurants’ consumer base.
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`Dkt. 25 ¶ 17. Consumers who otherwise would not have discovered or patronized a restaurant but for
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`Case 3:21-cv-05502-EMC Document 36 Filed 11/05/21 Page 12 of 36
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`Plaintiffs’ platforms use those platforms to purchase food from that restaurant to be delivered or
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`picked up. Id. Some restaurants choose to use Plaintiffs’ platforms to facilitate deliveries by
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`couriers. And many restaurants pay Plaintiffs to perform services like marketing, order processing,
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`customer support, and technology and product development. Id. ¶ 18. Restaurants are free to
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`perform any of these services on their own. Id. ¶¶ 17–18.
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`Plaintiffs cover their costs by charging commissions to restaurants. Dkt. 25 ¶ 19. Plaintiffs’
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`operational costs include (but are not limited to) platform development, maintenance, and operation;
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`marketing; technology procurement and development; restaurant-dedicated product procurement and
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`development; delivery courier onboarding; facilitating courier payment; customer service specialists;
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`and platform safety. Id. ¶ 20. Plaintiffs compete with each other and many other companies, and
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`thus have powerful market-based incentives to offer the best overall value to restaurants. Id. ¶ 21.
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`Third-party platforms have helped restaurants during the COVID-19 pandemic by showcasing
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`them to new customers. Dkt. 25 ¶¶ 22–23. This resilience in the restaurant industry comes despite
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`difficulties unrelated to third-party platforms, including large rent increases, shortage of workers, and
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`skyrocketing wholesale food prices (all of which persist in San Francisco). Id. ¶ 25. By increasing
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`restaurants’ customer base, third-party platforms help mitigate these difficulties. Id. Indeed, in
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`almost all cases, a restaurant’s revenue increases when it joins one or more of Plaintiffs’ platforms.
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`Id. ¶ 26. Nearly two-thirds of restaurants surveyed reported increases in profits during the pandemic
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`because of DoorDash. Id. Restaurants that partnered with DoorDash were eight times more likely to
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`survive the pandemic than those that did not, and 75% of restaurants agree that Grubhub increases the
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`amount customers spend at their restaurant. Id. ¶ 32.
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`Plaintiffs have contracts with thousands o