Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 1 of 47
`
`
`
`
`
`
`
`
`
`
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`DOORDASH, INC., et al.,
`
`Plaintiffs,
`
`v.
`
`CITY AND COUNTY OF SAN
`FRANCISCO,
`
`Defendant.
`
`
`
`
`
`
`
`Case No. 21-cv-05502-EMC
`
`
`ORDER GRANTING IN PART AND
`DENYING IN PART DEFENDANT’S
`MOTION TO DISMISS FIRST
`AMENDED COMPLAINT
`
`Docket No. 28
`
`
`
`Plaintiffs DoorDash, Inc. (“DoorDash”) and Grubhub Inc. (“Grubhub”) (collectively,
`
`“Plaintiffs”) filed this action against Defendant City and County of San Francisco (the “City”)
`
`alleging that an enacted ordinance—which caps the commissions that third-party platforms, such
`
`as Plaintiffs, can charge restaurants to 15%—is unlawful. See Docket No. 1 (“Complaint or
`
`Compl.”). After the City filed its motion to dismiss the Complaint, Plaintiffs filed their First
`
`Amended Complaint. See Docket No. 25 (“FAC”). Pending before the Court is the City’s motion
`
`to dismiss Plaintiffs’ First Amended Complaint. See Docket No. 28 (“Mot.”). For the following
`
`reasons, the Court GRANTS IN PART and DENIES IN PART the City’s motion to dismiss.
`
`A.
`
`Factual History
`
`I.
`
`BACKGROUND
`
`Around February 25, 2020, Mayor London Breed declared a state of emergency in San
`
`Francisco due to COVID-19. FAC ¶ 35. In March 2020, the City issued a shelter-in-place order.
`
`Id. ¶ 36. On April 10, 2020, Mayor Breed promulgated the Ninth Supplement to Mayoral
`
`Proclamation Declaring the Existence of a Local Emergency Dated February 25, 2020 (“April
`
`2020 Order”), which temporarily capped the commissions that third-party platforms could charge
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 2 of 47
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`restaurants to 15%. Id. ¶ 39. The intent of the April 2020 Order was to ensure that the City’s
`
`restaurants were protected during the COVID-19 pandemic. Id. ¶ 40.
`
`Beginning in 2019 and throughout 2020, DoorDash and other industry participants
`
`publicly supported Proposition 22, a state-wide ballot measure, which would make clear that
`
`workers who use platforms such as those of Plaintiffs are independent contractors without certain
`
`benefits. Id. ¶ 46. Many members of the City’s Board of Supervisors (the “Board”) publicly
`
`opposed Proposition 22. Id. ¶¶ 47(a), 50. On November 3, 2020, California voters passed
`
`Proposition 22 by a margin of over 17 percentage points. Id. ¶¶ 46, 48.
`
`A week later, on November 10, 2020, the Board codified the temporary commission cap
`
`from the April 2020 Order and enacted Article 53 to the San Francisco Police Code (the
`
`“Ordinance”). Id. ¶ 55. On November 20, 2020, Mayor Breed approved the Ordinance. Id. The
`
`provision at issue here in the Ordinance is the imposition of a 15% cap on the commissions that
`
`certain third-party delivery service companies may charge restaurants (the “Commission Cap”).
`
`Id. ¶ 57. The Ordinance explains that the Commission Cap is an “important step[] to ensure that
`
`restaurants can thrive in San Francisco and continue to nurture vibrant, distinctive commercial
`
`districts.” FAC, Ex. D (“S.F. Police Code”) § 5300(j).
`
`Specifically, the Ordinance’s findings state that restaurants “are vital to the character and
`
`community fabric of San Francisco” and are “important engines of the local economy, providing
`
`jobs and serving as commercial anchors in neighborhoods across the City.” Id. § 5300(a). The
`
`findings note that “in recent years, the City’s restaurant industry has been in decline” and “the
`
`number of restaurant closures has exceeded the number of new restaurants in the City for at least
`
`the past five consecutive years” according to data from the Department of Public Health. Id.
`
`§ 5300(b). According to the City, this decline “coincides with the rapid rise of third-party food
`
`delivery services, businesses that process food delivery and pickup orders through mobile apps
`
`and websites.” Id. § 5300(d). One consumer market outlook publication found that “revenue in
`
`the U.S. ‘platform-to-consumer delivery’ market was $8.7 billion in 2019, a nearly 10% increase
`
`over the same segment’s valuation in 2018” and market research shows that “approximately
`
`15.9% of all U.S. residents utilized third-party food delivery services at least once in the past year,
`
`2
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 3 of 47
`
`
`
`many on a regular basis.” Id.
`
`The Ordinance states that “This booming market is highly concentrated in just a handful of
`
`businesses” and as of “November 2019, just four third-party food delivery services controlled
`
`approximately 98% of the entire market.” Id. “The increasing market dominance of a small
`
`number of third-party food delivery services companies has resulted in increasingly difficult
`
`economic conditions for City restaurants, which must contract with these companies if they wish
`
`to access the growing share of customers who rely on delivery platforms to obtain meals.” Id.
`
`§ 5300(e). Because of the platforms’ market dominance, the Ordinance explains that they are able
`
`to “use this leverage to extract high fees from restaurants—typically totaling 30% of an order
`
`total—and thereby diminish restaurants’ already-narrow profit margins.” Id. § 5300(f). For
`
`example, “[s]ample contracts used by leading third-party food delivery services companies reflect
`
`that these companies commonly charge restaurants a 10% per-order fee for ‘delivery services,’ the
`
`most logistically demanding and resource-intensive service they provide to restaurants” and
`
`impose additional fees “totaling as much as 20% of the order cost for what are described as
`
`‘marketing’ or ‘logistics’ services.” Id. § 5300(g).
`
`As a result, the Ordinance explains that “[c]apping the fees third-party food delivery
`
`services companies can charge restaurants” would prohibit these companies from “restricting
`
`restaurant pricing,” among other things, “to ensure that restaurants can thrive in San Francisco and
`
`continue to nurture vibrant, distinctive commercial districts.” Id. § 5300(j). It states that because
`
`“leading third-party food delivery services companies currently charge a 10% per-order fee for the
`
`most resource-intensive aspect of their business – delivery services – and that these companies
`
`report high profit margins from all aspects of their business operations” “a 15% fee cap on
`
`per-order fees” is “a reasonable step to protect restaurants from financial collapse without unduly
`
`constraining third-party food delivery services’ businesses.” Id.
`
`The Commission Cap applies to “third-party food delivery services,” defined as “any
`
`website, mobile application or other internet service that offers or arranges for the sale of food
`
`and/or beverages prepared by, and the same-day delivery or same-day pickup of food and
`
`beverages from, no fewer than 20 separately owned and operated food preparation and service
`
`3
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 4 of 47
`
`
`
`establishments.” FAC ¶ 59 (quoting S.F. Police Code § 5301). It does not apply to “any
`
`restaurant that meets the definition of a formula retail use under section 303.1 of the Planning
`
`Code,” i.e., any restaurant that “has eleven or more other retail sales establishments in operation”
`
`and that “maintains two or more of the following features: a standardized array of merchandise, a
`
`standardized façade, a standardized décor and color scheme, uniform apparel, standardized
`
`signage, a trademark or a servicemark.” Id. ¶ 61.
`
`Originally, the Commission Cap had a sunset date of sixty days after the amendment or
`
`termination of the pandemic “Stay Safer At Home” order or any subsequent order allowing
`
`restaurants to resume at 100% capacity. Id. ¶ 62. But in June 2021, the Board of Supervisors held
`
`meetings to discuss removing the Ordinance’s sunset provision and making it permanent. Id. ¶ 64.
`
`Plaintiffs allege that in “voting for the permanent cap,” Supervisor Aaron Peskin publicly stated,
`
`“DoorDash, Uber Eats, Postmates all contributed to the most expensive ballot measure in history,
`
`Prop 22, to gut employee protections.” Id. ¶ 69. On the same day, he posted the following on
`
`Facebook:
`
`
`“In another first among major American cities, San Francisco just
`passed my legislation setting a permanent 15% cap on delivery fees
`charged by DoorDash, UberEats, Grubhub and Postmates to
`independent restaurants. Third-party food delivery saw exponential
`growth during the pandemic, while SF restaurants incurred $400M
`in rent debt. 70,000 Bay Area hospitality workers lost their jobs,
`while Big Tech spent $220M to pass Prop 22, the most anti-worker
`initiative in California history. We will continue to push back
`against companies who demonstrate blatant disregard for small
`businesses, workers and neighborhoods. Correcting this imbalance is
`a long-term project.”
`
`Id. The FAC also alleges that Supervisors Ahsha Safai and Catherine Stefani made statements
`
`about third-party platforms at this time but they do not explicitly discuss DoorDash’s support of
`
`Proposition 22. See id. ¶¶ 64(b), 70(a)–(c). On June 10, 2021, the Board voted unanimously to
`
`repeal the sunset date. Id. ¶ 71. Mayor Breed declined to sign the sunset repeal measure,
`
`explaining that she had “concerns about making [the Commission Cap] legislation permanent” and
`
`that the Ordinance “is unnecessarily prescriptive in limiting the business models of the third-party
`
`organizations, and oversteps what is necessary for the public good.” Id. ¶ 74. On June 29, 2021,
`
`the Ordinance became effective without Mayor Breed’s signature. Id. ¶ 73.
`
`4
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 5 of 47
`
`
`
`B.
`
`Procedural History
`
`On July 16, 2021, Plaintiffs filed this action against the City and on September 10, 2021,
`
`the City filed a motion to dismiss the Complaint. See Compl.; Docket No. 20. On October 1,
`
`2021, Plaintiffs filed their First Amended Complaint alleging violations of (1) the Contract Clause
`
`of the U.S. Constitution, 42 U.S.C. § 1983, and the California Constitution; (2) the Takings Clause
`
`of the Fifth and Fourteenth Amendments to the U.S. Constitution and Article I, Section 19 of the
`
`California Constitution; (3) Article IX, Section 7 of the California Constitution; (4) the Due
`
`Process Clause of the U.S. Constitution and Article I, Section 7 of the California Constitution;
`
`(5) the Equal Protection Clause of the U.S. Constitution and the California Constitution; and
`
`(6) the First Amendment of the U.S. Constitution and Article I, Sections 2 and 3 of the California
`
`Constitution for DoorDash. Docket. No. 25. Three days later, the City withdrew its original
`
`motion to dismiss and on October 15, 2021, the City filed the present motion to dismiss the FAC.
`
`The motion hearing took place on December 16, 2021. Docket No. 54 (“Hearing Tr.”).
`
`II.
`
`APPLICABLE LEGAL STANDARD
`
`Federal Rule of Civil Procedure 8(a)(2) requires a complaint to include “a short and plain
`
`statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A
`
`complaint that fails to meet this standard may be dismissed pursuant to Rule 12(b)(6). See Fed. R.
`
`Civ. P. 12(b)(6).
`
`To overcome a Rule 12(b)(6) motion to dismiss after the Supreme Court's decisions in
`
`Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007),
`
`a plaintiff's “factual allegations [in the complaint] must . . . suggest that the claim has at least a
`
`plausible chance of success.” Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014) (internal
`
`quotation marks omitted). The court “accept[s] factual allegations in the complaint as true and
`
`construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St.
`
`Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). But “allegations in a
`
`complaint . . . may not simply recite the elements of a cause of action [and] must contain sufficient
`
`allegations of underlying facts to give fair notice and to enable the opposing party to defend itself
`
`effectively.” Levitt, 765 F.3d at 1135 (quoting Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.
`
`5
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 6 of 47
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`2011)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the
`
`court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
`
`Iqbal, 556 U.S. at 678. “The plausibility standard is not akin to a ‘probability requirement,’ but it
`
`asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting
`
`Twombly, 550 U.S. at 556).
`
`If the court dismisses pleadings, it “should grant leave to amend even if no request to
`
`amend the pleading was made, unless it determines that the pleading could not possibly be cured
`
`by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).
`
`A.
`
`Judicial Notice
`
`III.
`
`DISCUSSION
`
`As a preliminary matter, the parties dispute whether the Court should take judicial notice
`
`of 28 exhibits. See Docket Nos. 29 (“JNR”), 37 (“Opp. JNR”). A court may take judicial notice
`
`of “matters of public record” without converting a motion to dismiss into a motion for summary
`
`judgment. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). But a court may
`
`not take judicial notice of a fact that is “subject to reasonable dispute.” Fed. R. Evid. 201(b); see
`
`also Lee v. City of Los Angeles, 250 F.3d 668, 689–90 (9th Cir. 2001) (holding that the district
`
`court erred by taking judicial notice of disputed matters in public records, specifically facts in
`
`dispute as to an extradition hearing and waiver). Under Federal Rule of Evidence 201, a court
`
`“may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally
`
`known within the trial court’s territorial jurisdiction; or (2) can be accurately and readily
`
`determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b).
`
`Courts also do not take judicial notice of facts that are irrelevant. See Khoja, 899 F.3d at 1000 n.5.
`
`In addition, a defendant “may seek to incorporate a document into the complaint if the
`
`plaintiff refers extensively to the document or the document forms the basis of the plaintiff’s
`
`claim.” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998, 1002 (9th Cir. 2018). “[U]nlike
`
`judicial notice, a court may assume [an incorporated document’s] contents are true for purposes of
`
`a motion to dismiss under Rule 12(b)(6).” Khoja, 899 F.3d at 1003. But “it is improper to assume
`
`the truth of an incorporated document if such assumptions only serve to dispute facts stated in a
`
`6
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 7 of 47
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`well-pleaded complaint. This admonition is, of course, consistent with the prohibition against
`
`resolving factual disputes at the pleading stage.” Id.
`
`The City requests that the Court take judicial notice of 28 exhibits, which fall into the
`
`following categories: (1) a resolution adopted by the Board (“Ex. A”); (2) a proposed advisory of
`
`the New York State Liquor Authority (“NYSLA”) (“Ex. T”); (3) the Plaintiffs’ public SEC filings
`
`(“Exs. B–D”); (4) news articles (“Exs. E–S, U–Y”); and (5) campaign finance records related to
`
`the Proposition 22 campaign maintained by the California Secretary of State (“Exs. Z–BB”).
`
`Docket No. 30 (“Goldman Decl.”) ¶¶ 2–29. Plaintiffs object to most of the exhibits and argue that
`
`the City’s requests improperly seek judicial notice of the truth of disputed facts in public records
`
`or of facts that are not relevant to the motion to dismiss.1 Opp. JNR at 1 (objecting to the request
`
`for judicial notice of Exs. B–Y and seeking the limited judicial notice of Exs. Z–BB).
`
`One of Plaintiffs’ main arguments is that the Court should deny the City’s request for
`
`judicial notice of any documents related to the foreseeability of regulation impacting Plaintiffs’
`
`commissions under the Contract Clause analysis because the question of foreseeability of
`
`regulation is a disputed fact. Opp. JNR at 4. The City disagrees and relies on two cases to argue
`
`that the question of foreseeability of regulation is a question of law. Reply at 1; see, e.g., Olson v.
`
`California, 2020 WL 6439166, at *11 (C.D. Cal. Sept. 18, 2020) (holding that the parties should
`
`have foreseen the regulation at issue could alter their contract obligations because “courts have
`
`opined, as early as 2015, that Uber drivers could plausibly be considered employees despite
`
`contractual language.”); All. of Auto. Mfrs., Inc. v. Currey, 2014 WL 2219219, at *4 (D. Conn.
`
`May 28, 2014) (noting that the question of foreseeability under the Contract Clause analysis is a
`
`“legal question”). But these cases show that the legal question of foreseeability relies on the
`
`determination of certain facts, e.g., existing regulation or laws at the time, court opinions, or the
`
`
`1 The Court rejects the City’s assertion that Plaintiffs’ opposition to its request for judicial notice
`should be stricken because they filed a separate 10-page opposition from the 25-page opposition to
`the City’s motion to dismiss, thereby violating Local Rule 7-3(a), which provides that “[a]ny
`evidentiary and procedural objections to the motion must be contained within the brief or
`memorandum.” Docket No. 49 (“Reply”) at 1. The City’s request for judicial notice was
`separately filed from its motion to dismiss and so the Plaintiffs may also separately file its
`opposition to the request for judicial notice.
`
`7
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 8 of 47
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`history of regulation in an industry. See infra Part III.B.1. In this case, it is undisputed that there
`
`is no history of regulating the commissions of third-party delivery apps. Mot. at 6. The City
`
`instead argues that because the Plaintiffs were aware that the industry could be regulated, based on
`
`articles and their own statements, the regulation was foreseeable. Id. Plaintiffs dispute whether
`
`these articles and their own statements prove that the regulation was foreseeable. Docket No. 36
`
`(“Opp.”) at 7–9. But the question of foreseeability is separate from the question of judicial notice.
`
`The Court therefore will take judicial notice of these statements or articles for the reasons
`
`explained below.
`
`Turning to the exhibit categories, the Board resolution opposing Proposition 22, referenced
`
`in paragraph 47(a) of the FAC, is subject to judicial notice as a matter of public record and is
`
`relevant to DoorDash’s retaliation claim. JNR at 1 (citing Cath. League for Religious & C.R. v.
`
`City & Cty. of San Francisco, 464 F. Supp. 2d 938, 941 (N.D. Cal. 2006) (Patel, J.) (taking
`
`judicial notice of multiple resolutions by the San Francisco Board of Supervisors)); see Goldman
`
`Decl., Ex. A. Plaintiffs do not object, but they contend that it cannot be offered for the truth of
`
`any statements within it. Opp. JNR at 8; Lee, 250 F.3d at 689–90. Because the Board resolution
`
`contains some disputed facts, e.g., accusing Plaintiffs of exploiting their employees for profit, the
`
`Court GRANTS judicial notice of Exhibit A, but not for the truth of any statements within it that
`
`are subject to reasonable dispute. See Khoja, 899 F.3d at 1003.
`
`In contrast, the proposed Advisory in the Agenda of the NYSLA is not subject to judicial
`
`notice. JNR at 1; see Goldman Decl., Ex. T. Although it is a matter of public record, it does not
`
`appear in the FAC and absent a showing that Plaintiffs were aware of the matter which had
`
`nothing to do with San Francisco, it is irrelevant to the resolution of the motion to dismiss. Opp.
`
`JNR at 8. The City “fails to explain how a proposed action by the New York State Liquor
`
`Authority is relevant to Plaintiffs’ ability to foresee action taken by the San Francisco Board of
`
`Supervisors,” absent Plaintiffs’ specific knowledge of the New York matter. Id. (emphasis in
`
`original). The Court DENIES the request for judicial notice of Exhibit T.
`
`Third, the Plaintiffs’ SEC filings are subject to judicial notice because they are matters of
`
`public record and “are relevant to the foreseeability of regulation that could impact the
`
`8
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 9 of 47
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`commissions charged by third-party delivery service companies and to what Plaintiffs
`
`communicated about the risks of investment, which bears on their regulatory taking claim.” JNR
`
`at 2; see Goldman Decl., Exs. B–D. The City asserts that judicial notice of Plaintiffs’ own
`
`statements in their SEC filings is appropriate to establish their awareness and “does not require
`
`this Court to assume that any statement is true.” Reply at 2. Courts have judicially noticed
`
`documents with a party’s own statements to establish awareness. See, e.g., Watkins v. United
`
`States, 854 F.3d 947, 949–50 (7th Cir. 2017) (taking judicial notice of another complaint filed by
`
`the plaintiff, which established that the plaintiff was statutorily barred from bringing her medical
`
`malpractice suit because there was no plausible dispute that the plaintiff was unaware of the
`
`previous filing); Turner v. Boldt, No. 97-CV-1616-SI, 1997 WL 564052, at *2 (N.D. Cal. Aug. 26,
`
`1997) (granting judicial notice of plaintiff’s own documents which demonstrate that she was
`
`aware of a settlement more than one year before she filed the personal injury action).
`
`Plaintiffs contend that courts, including the Ninth Circuit, have refused to take judicial
`
`notice of SEC filings, “even if they might otherwise fall within Federal Rule of Evidence 201,
`
`when the only purpose for which the filing is offered is to establish a disputed fact.” Opp. JNR at
`
`3. They rely on Khoja, where the Ninth Circuit denied a request for judicial notice of investor call
`
`transcripts submitted to the SEC because “[r]easonable people could debate what exactly this
`
`conference call disclosed” about what investors knew. Khoja, 899 F.3d at 1003; see also
`
`Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344, 1354 (7th Cir. 1995) (upholding
`
`district court’s refusal to take notice of SEC filing in a discrimination suit because “there was
`
`considerable argument over the significance of the 10–K form” and “the fact in question [how
`
`many employees the company had for the purposes of establishing punitive damages] was not
`
`capable of accurate and ready determination by resort to the 10-K”). But in this case, the
`
`statements at issue are the Plaintiffs’ own statements about the status of regulation in their
`
`industry. See, e.g., Goldman Decl., Ex. B at 22 [26/183] (Grubhub noting that it was subject to
`
`“evolving” laws including those that “may cover . . . pricing” and other issues); Goldman Decl.,
`
`Ex. C at 36 [40/266] (DoorDash stating that “[r]egulatory and administrative bodies may enact
`
`new laws or promulgate new regulations that are adverse to our business . . . including . . . by
`
`9
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 10 of 47
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`attempting to regulate the commissions businesses like ours agree to with merchants.”); Goldman
`
`Decl., Ex. D at 59–60 [71–72/371] (DoorDash noting that its “business is subject to a variety of
`
`U.S. laws and regulations, including those related to . . . pricing and commissions, many of which
`
`are unsettled and still developing” and acknowledging that commission caps could be “retained
`
`after the COVID-19 pandemic subsides.”). There is no dispute that Plaintiffs made these
`
`statements, and they are relevant to the question of foreseeability. The Court therefore GRANTS
`
`the request for judicial notice of the Plaintiffs’ SEC filings, not for the truth of the statements
`
`therein but to establish their awareness as it relates to the question of foreseeability.
`
`Fourth, newspaper publications and information on publicly accessible websites can be
`
`subject to judicial notice to show what information was in the public realm and not for the truth of
`
`the statements. JNR at 2; see Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d
`
`954, 960 (9th Cir. 2010) (“Courts may take judicial notice of publications introduced to ‘indicate
`
`what was in the public realm at the time, not whether the contents of those articles were in fact
`
`true.’”); see Goldman Exs. E–S, U–Y. Plaintiffs concede that judicial notice to establish that these
`
`articles were in the public realm is proper. Opp. JNR at 6. These documents are also relevant to
`
`question of whether the regulation impacting Plaintiffs’ commissions was foreseeable. JNR at 2;
`
`see FAC ¶ 30. The City also asserts that the documents are relevant to the question of whether the
`
`Ordinance is reasonable. JNR at 2. It explains that the Court does not need to assume the truth of
`
`the facts in the articles because “a court is required to defer to legislative judgments, [and
`
`therefore] it may not engage in judicial factfinding or evaluate the wisdom of policy choices,”
`
`which is further supported by the fact that “the FAC does not contain plausible allegations to
`
`establish that legislators would not believe [the articles] to be true.” JNR at 2. The Court
`
`GRANTS the request for judicial notice of the articles but only for the purpose of establishing that
`
`they were in the public realm because they are relevant to the questions of foreseeability and the
`
`Ordinance’s reasonableness.
`
`Finally, public campaign contributions filed with the California Secretary of State are
`
`subject to judicial notice. JNR at 2–3 (citing Riel v. City of Santa Monica, 2014 WL 12694159, at
`
`*3 (C.D. Cal. Sept. 22, 2014)); Goldman Decl., Exs. Z–BB. These documents are relevant to
`
`10
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 11 of 47
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`DoorDash’s retaliation claim because they show substantial contributions by Instacart, a grocery
`
`delivery service, and rideshare service, Lyft, which are not impacted by the Commission Cap.
`
`JNR at 3. The documents may also be relevant because they show that other delivery app services
`
`such as Delivery.com, Slice, ChowNow, EatStreet, MealPal, Olo, Relay, or Ritual did not make
`
`public campaign contributions to Proposition 22. The Court therefore GRANTS the request for
`
`judicial notice of public campaign contributions.
`
`B.
`
`Contract Clause
`
`Plaintiffs allege that the Ordinance violates the Contract Clause of the federal and
`
`California constitutions because the Ordinance substantially impairs their existing contracts with
`
`restaurants that include commission rates above 15% and the Ordinance does not have a
`
`significant or legitimate public purpose. FAC ¶¶ 86, 89.
`
`The Contract Clause of the U.S. Constitution provides that “No State shall . . . pass any . . .
`
`Law impairing the Obligation of Contracts . . . .” U.S. Const., art. I, § 10, cl. 1. It “restricts the
`
`power of States to disrupt contractual arrangements.” Sveen v. Melin, 138 S. Ct. 1815, 1821
`
`(2018). The California Constitution also prohibits the Legislature from enacting a “law impairing
`
`the obligation of contracts.” Cal. Const., art. I, § 9.
`
`To determine when a law violates the Contract Clause, the Supreme Court has “long
`
`applied a two-step test” where (1) the threshold issue is whether the state law has “operated as a
`
`substantial impairment of a contractual relationship” and (2) if such factors show a substantial
`
`impairment, whether the law is drawn in an “appropriate” and “reasonable” way to advance “a
`
`significant and legitimate public purpose.” Sveen, 138 S. Ct. at 1821–22. “The California
`
`Supreme Court uses the federal Contract Clause analysis for determining whether a statute violates
`
`the parallel provision of the California Constitution.” Campanelli v. Allstate Life Ins. Co., 322
`
`F.3d 1086, 1097 (9th Cir. 2003).
`
`1.
`
`Whether the Ordinance is a Substantial Impairment of a Contractual Relationship
`
`Turning to the threshold issue, the substantial impairment inquiry “has three components:
`
`whether there is a contractual relationship, whether a change in law impairs that contractual
`
`relationship, and whether the impairment is substantial.” In re Seltzer, 104 F.3d at 236. The City
`
`11
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:21-cv-05502-EMC Document 60 Filed 03/23/22 Page 12 of 47
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`only challenges the third component, whether the impairment is substantial. Mot. at 5.
`
`“In answering that question,” the Supreme Court “has considered the extent to which the
`
`law undermines the contractual bargain, interferes with a party’s reasonable expectations, and
`
`prevents the party from safeguarding or reinstating his rights.” Sveen, 138 S. Ct. at 1817. There is
`
`no substantial impairment when the contract is in a regulated industry and the challenged law was
`
`“foreseeable as the type of law that would alter contract obligations.” Energy Rsrvs. Grp., Inc. v.
`
`Kansas Power & Light Co., 459 U.S. 400, 416 (1983). Courts consider whether the law “invades
`
`an area never before subject to regulation by the State” and hold that the impairment is substantial
`
`when laws “work[] a severe, permanent, and immediate change” to contractual rights. Allied
`
`Structural Steel Co. v. Spannaus, 438 U.S. 234, 247, 250 (1978).
`
`The FAC alleges, and the City does not dispute, that the relationship between restaurants
`
`and third-party platforms has historically not been subject to government regulation. FAC ¶ 30.
`
`But the City asserts that the Plaintiffs knew “that they were operating in a growing industry in
`
`which regulation was unsettled and developing, including with respect to laws impacting their
`
`commissions.” Mot. at 6. For example, in its April 7, 2014, IPO prospectus, Grubhub noted that
`
`it was subject to “evolving” laws governing the Internet and e-commerce, including those that
`
`“may cover . . . pricing” as well as other issues. Goldman Decl., Ex. B at 22 [26/183]. In a draft
`
`registration statement to the SEC