Monterey Mechanical Co. v. Wilson

• Decision Date: 03 September 1997
• Docket Number: No. 96-16729,96-16729
• Citation: 125 F.3d 702
• Parties: 97 Cal. Daily Op. Serv. 7099, 97 Daily Journal D.A.R. 11,464 MONTEREY MECHANICAL CO., Plaintiff-Appellant, v. Pete WILSON; Gray Davis; Curt Pringle; Delaine Easton; Barry Munitz; Roland E. Arnall; Marian Bagdasarian; William D. Campbell; Ronald L. Cedillos; Jim Considine; Martha C. Fallgatter; Bernard Goldstein, Jr.; James H. Gray; William Hauck; Joan Otomo-Corgel, Dr.; Ralph R. Pesqueira; Ali C. Razi; Ted J. Saenger; Michael D. Stennis; Anthony M. Vitti; Stanley T. Wang; Frank Y. Wada, Individually and as Trustee of the California State University; Swinerton and Walberg Co., a California Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 702

125 F.3d 702

97 Cal. Daily Op. Serv. 7099, 97 Daily Journal

D.A.R. 11,464

MONTEREY MECHANICAL CO., Plaintiff-Appellant, v. Pete WILSON; Gray Davis; Curt Pringle; Delaine Easton;

Barry Munitz; Roland E. Arnall; Marian Bagdasarian;

William D. Campbell; Ronald L. Cedillos; Jim Considine;

Martha C. Fallgatter; Bernard Goldstein, Jr.; James H.

Gray; William Hauck; Joan Otomo-Corgel, Dr.; Ralph R.

Pesqueira; Ali C. Razi; Ted J. Saenger; Michael D.

Stennis; Anthony M. Vitti; Stanley T. Wang; Frank Y.

Wada, Individually and as Trustee of the California State

University; Swinerton and Walberg Co., a California

Corporation, Defendants-Appellees.

No. 96-16729.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 10, 1997.

Decided Sept. 3, 1997.

Marcia L. Augsburger, McDonough, Holland & Allen, Sacramento, CA, for plaintiffs-appellants.

Karen L. Robinson, California State University, Legal Division, Long Beach, CA, for defendants-appellees.

Dana M. Rudnick and Barbara Gadbois Gibbs, Giden, Locher & Acret, Los Angeles, CA, for defendants-appellees.

Anthony T. Caso, Pacific Legal Foundation, Sacramento, CA, for defendant-appellee.

Appeal from the United States District Court for the Eastern District of California; Edward J. Garcia, District Judge, Presiding. D.C. No. CV-96-01279-EJG.

Before: O'SCANNLAIN, LEAVY and KLEINFELD, Circuit Judges.

KLEINFELD, Circuit Judge:

We review denial of a preliminary injunction, regarding a state program setting goals for ethnic and sex characteristics of construction subcontractors.

FACTS

California Polytechnic State University, San Luis Obispo (the University) solicited bids for a utilities upgrade. This construction project, expected to take almost two years, will connect all buildings to a central heating and air conditioning plant and install a new electrical distribution system. Monterey Mechanical, the plaintiff-appellant, submitted the low bid, $21,698,000.00, but did not get the job. The second lowest bidder, Swinerton and Walberg, won the contract, with a bid $318,000 higher than Monterey Mechanical's.

Monterey Mechanical's bid was disqualified because the company did not comply with a state statute. The statute requires general contractors to subcontract percentages of the work to minority, women, and disabled veteran owned subcontractors, or demonstrate good faith efforts to do so. The required "goals" are "not less than" 15% for minority business enterprises, 5% women, 3% disabled veteran. Cal. Public Contract Code § 10115(c). To count towards fulfilling the goal, a subcontractor must be at least 51% owned and controlled by members of those classes. Cal. Public Contract Code § 10115.1(e).

There were two ways Monterey Mechanical might have complied with the statute. It could have used minority, women and disabled veteran business enterprises for the designated 23% (15% plus 5% plus 3%) "of the contract dollar amount." Its bid was $21,698,000, so compliance by this means would require subcontracting $4,990,540 to subcontractors of the designated classes.

Alternatively, Monterey Mechanical could comply by demonstrating "good faith effort" to meet the "goals." The statute requires a bidder using "good faith" as its means of qualifying to contact government agencies and organizations to identify potential subcontractors in the designated classes, advertise in papers "focusing on M/W/DVBEs," ¹ and solicit bids from "potential M/W/DVBE subcontractors and suppliers." The contractor must document its efforts within two days following the opening of the bids, so as a practical matter the solicitation must be fully accomplished prior to bidding. Dates, times, organizations contacted, contact names, and phone numbers are "needed to corroborate the information."

Monterey Mechanical did not fully comply with the statute by either method. Its President acknowledges that "Monterey is not eligible for classification as an MBE or a WBE." It did not subcontract out the required 23% of the contract amount. ² Nor did Monterey Mechanical fully comply with the "good faith" requirement. Monterey Mechanical contacted state and federal agencies and minority and women organizations, advertised to minority and women owned firms, and invited and considered bids from them. But it did not document contact with the University physical planning and development office to identify minority, women, and disabled veteran business enterprises.

Swinerton and Walberg, which won the contract, did not subcontract out at least 23% of the work to firms in the designated classes (and does not claim to be a minority, women, or disabled veteran enterprise). It differed materially from Monterey Mechanical only in that it fully complied with the "good faith" requirement. Unlike Monterey Mechanical, it provided documentation of its contact with the University physical planning and development office to identify minority, women, and disabled veteran business enterprises.

When the University rejected Monterey Mechanical's bid as non-responsive, Monterey Mechanical requested whatever disparity study California State University had used to justify the goals for the designated classes. The University replied that there was no such study. It took the position that because Monterey Mechanical protested the contract award, then sued the University's trustees and Swinerton and Walberg for a declaratory judgment, injunction, and damages. The theory of the lawsuit is that the statute that caused Monterey Mechanical to lose the contract violates the Equal Protection Clause of the United States Constitution.

the "goal requirements" of the scheme "do not involve racial or gender quotas, set-asides or preferences," the University needed no such disparity documentation.

The district judge denied the preliminary injunction. Monterey Mechanical has appealed. The denial was based on a legal conclusion that Monterey Mechanical had a low probability of success on the merits. ³ No findings of fact were made, nor were any necessary, because there was no dispute as to any of the facts. The facts recited above, from the documents submitted by the parties, are uncontested.

ANALYSIS

We have jurisdiction to review "[i]nterlocutory orders ... refusing ... injunctions" under 28 U.S.C. § 1292(a)(1). While we review its decision not to enter a preliminary injunction for an abuse of discretion, the district court is deemed to abuse its discretion when it "bases its decision on an erroneous legal standard." American-Arab Anti-Discrimination Comm. v. Reno, 70 F.3d 1045, 1062 (9th Cir.1995). Thus an abuse of discretion is established if the district court applied the incorrect substantive law. International Molders' and Allied Workers' Local Union No. 164 v. Nelson, 799 F.2d 547, 551 (9th Cir.1986). ⁴

A. Standing.

The district court concluded that Monterey Mechanical lacked standing. Because Swinerton and Walberg was not a women or minority business enterprise, ⁵ and all general contractors, not just non-minority non-women contractors, were bound by the same requirements, the district court concluded that unconstitutional discrimination, even if it existed, did not cause Monterey Mechanical to lose the contract. The idea is that if the government does not discriminate against A, but requires that A discriminate against B, B has standing but A does not. Appellees ⁶ do not argue that Monterey Mechanical lacked standing. We nevertheless consider standing sua sponte, because it goes to jurisdiction. "Standing is a question of law reviewed de novo." Snake River Farmers' Assn. v. Department of Labor, 9 F.3d 792, 795 (9th Cir.1993).

The issue of standing is controlled by Northeastern Florida Contractors v. Jacksonville, 508 U.S. 656, 113 S.Ct. 2297, 124 L.Ed.2d 586 (1993). That was another contracting set-aside case. The plaintiff made no showing that it or any of its members would have received particular contracts but for the challenged set-aside ordinance. The Court held that to establish standing in challenges to set-aside laws, a bidder need only demonstrate that a discriminatory policy prevents it from competing on an equal footing, not that the discrimination caused its failure to win a contract:

When the government erects a barrier that makes it more difficult for members of one group to obtain a benefit than it is for members of another group, a member of the former group seeking to challenge the barrier need not allege that he would have obtained the benefit but for the barrier to establish standing. The "injury in fact" in an equal protection case of this variety is the denial of equal treatment resulting from the imposition of the barrier, not the ultimate inability to obtain the benefit.... And in the context of a challenge to a set-aside program, the "injury in fact" is the inability to compete on an equal footing in the bidding process, not the loss of a contract.... To establish standing, therefore, a party challenging a set-aside program like Jacksonville's need only demonstrate that it is able and ready to bid on contracts and that a discriminatory policy prevents it from doing so on an equal basis.5

Id. at 666, 113 S.Ct. at 2303.

Monterey Mechanical was prevented by the statute from competing on an equal footing with general contractors in the designated classes. Had it been a minority or women business enterprise (or both), and proposed to keep those classes' work rather than subcontract it out, it would have been excused to that extent from both the subcontracting and "good faith" requirements. See Cal. Public Contract Code §§ 10115(c), 10115.2.

We construed Northeastern Florida Contractors in Bras v. California Public Utilities Commission, 59 F.3d 869 (9th Cir.1995). We held that in a challenge to an affirmative action program, "plaintiffs did not have to prove that they would lose any bids or identifiable contracts in order to sustain actual injury." Id. at 873. "An injury results not...