Arrington v. Associated General Contractors of America

Decision Date21 August 1981
Parties28 Empl. Prac. Dec. P 32,399 Richard ARRINGTON, Jr., in his capacity of Mayor of the City of Birmingham, et al. v. ASSOCIATED GENERAL CONTRACTORS OF AMERICA, Alabama Branch, Inc., et al. 80-261.
CourtAlabama Supreme Court

James K. Baker, City Atty., Birmingham, for appellants.

T. M. Conway and Thomas A. Carraway of Rives, Peterson, Pettus, Conway, Elliott & Small, Birmingham, for appellees.

PER CURIAM.

Plaintiffs sought declaratory and injunctive relief from the operation of City of Birmingham Ordinance 77-257, as amended by Ordinance 79-140. Plaintiffs' suit challenges the amended ordinance as violative of state and federal statutes, as well as

state and federal constitutional provisions. Defendants' appeal is from a decree which adjudges the amended ordinance invalid and enjoins its enforcement. We affirm.

HISTORY OF THE CASE

In 1974, the Birmingham City Council adopted Ordinance 74-2, which required assurance of nondiscriminatory employment practices by those contracting with the City of Birmingham. Ordinance 74-2 was amended on May 3, 1977, by Ordinance 77-81 to include a requirement that, within thirty days of an award of a city contract, the contracting party provide an analysis of its workforce by race, sex, and national origin. Additionally, the amended ordinance authorized the mayor to "promulgate such additional rules and regulations as he (might) determine to be reasonably necessary to insure compliance with or to promote the objectives of" the amended ordinance.

In October 1977, former Birmingham Mayor David Vann, pursuant to the authority granted in Ordinance 77-81, instructed the city engineer to include in the bid specifications for city contracts a requirement that the general or prime contractor agree to expend at least ten percent of the contract amount with certain minority subcontractors or suppliers. The specification had its genesis in the 1977 Public Works Employment Act, popularly known as the PWEA, 42 U.S.C. § 6701, et seq. (Supp. III 1979). The PWEA required that a local government unit awarded PWEA funds assure that at least ten percent of the contract amount would be expended with minority business enterprises.

On November 30, 1977, Associated General Contractors of America, Alabama Branch, Inc., along with several contractors doing business in the Birmingham area, brought suit against Birmingham, its mayor, and other city officials, seeking to have declared invalid Ordinance 77-81 and the mayor's regulation requiring the ten percent minority commitment. Additionally, plaintiffs sought an order preliminarily enjoining defendants' enforcement of the ordinance and the mayor's regulation. Plaintiffs' complaint alleged that the city's ordinance and regulation violated the due process and equal protection guarantees of the federal and state constitutions, federal statutes forbidding discrimination on account of race, and the state competitive bid law. After a hearing, the circuit court entered an order denying plaintiffs' motion to preliminarily enjoin enforcement of Ordinance 77-81, but granting plaintiffs' motion to preliminarily enjoin enforcement of the mayor's regulation.

Nine days after the circuit court declared the mayor's regulation void and enjoined its enforcement, the Birmingham City Council adopted Ordinance 77-257. Later, on August 28, 1979, the Council amended the ordinance to change certain bid requirements and to provide further for waiver of the ordinance provisions. Shortly thereafter, following the election of Richard Arrington, Jr., to succeed David Vann as Mayor of Birmingham, plaintiffs sought to permanently enjoin the enforcement of Ordinance 77-257, as amended, by amending their complaint of November 30, 1977, to put at issue the validity of the amended ordinance and to substitute the then appropriate city officials as parties defendant.

The amended complaint charged that the ordinance violated the equal protection and due process guarantees of the state and federal constitutions, as well as 42 U.S.C. §§ 1981 and 1983 (1976 Ed.); 42 U.S.C. §§ 2000d to d-4 (1976 Ed.); and the Alabama Competitive Bid Law, Code 1975, § 41-16-50 (Supp.1980). Defendants put at issue each count of plaintiff's complaint, and after a hearing on the merits, the trial court, with findings of fact and conclusions of law, found for plaintiffs and permanently enjoined enforcement of the challenged ordinance. This appeal resulted.

THE CHALLENGED ORDINANCE

Ordinance 77-257, as amended by Ordinance 79-140, 1 commences with a finding that, due to historical patterns and practices of racial discrimination, minority business enterprises (MBE) have not obtained an A "minority business" is defined by the ordinance to be any business enterprise in which minority group members hold at least fifty percent ownership or, in the case of a publicly owned business, one in which at least fifty-one percent of the stock is owned by minority group members. "Minority group members," as used in the ordinance, means United States citizens who are Blacks, Spanish speaking, Orientals, Indians, Eskimos, or Aleuts. For all construction contracts let by the City and exceeding the amount of $20,000, the ordinance sets a goal of fifteen percent to be expended with bona fide MBE contractors, subcontractors, or suppliers of goods or services. The ordinance requires that a contractor make a good faith effort to meet the fifteen percent goal. However, the inclusion with the contractor's bid of a specific plan to expend at least ten percent of a contact amount with MBEs is accepted as sufficient evidence of a good faith effort to meet the fifteen percent goal.

equitable share of contracts or subcontracts let by the City of Birmingham. The ordinance further finds that official policies of overt discrimination against minorities have ceased, but that existing policies and programs of the City have not eliminated the lingering effects of such past discrimination. As set forth in the ordinance, the purpose of the enactment was to "encourage, facilitate and effect greater participation by minority business enterprises in construction contracts let by the city."

Any bid not accompanied by a list of proposed MBE subcontractors is considered nonresponsive, unless accompanied by a request for a waiver. Under the ordinance provisions, a contractor may be granted a waiver of the MBE participation requirements for the following reasons:

(1) Lack of a qualified MBE in the Birmingham Standard Metropolitan Statistical Area.

(2) Inability to obtain reasonably competitive prices from available MBEs in the Birmingham Standard Metropolitan Statistical Area.

(3) Failure of MBEs to give notice of their desire to participate as subcontractors with respect to a specific contract.

Each time a contractor makes a request for payment under the contract, he must submit a signed writing which lists his participating minority subcontractors, the work they performed and the amounts paid to them. Finally, the ordinance provides that a contractor's noncompliance with ordinance terms constitutes a breach of the contract by the contractor.

FINDINGS OF THE TRIAL COURT

The circuit court found as follows:

The evidence shows that it is the practice of the Plaintiff contractors not to make an open solicitation of subcontractor bids but to deal and subcontract with firms seeking subcontract work from the contractor or to seek prices from subcontractors with whom the contractor has had experience... as to quality of work, performance and ability to obtain bonds. Since the implementation of the Ordinance, it has been shown the procedures required by the City have been time consuming at a cost to the contractor but without meaningful interest or participation by potential MBEs, if in fact available.

The Ordinance and City procedure have established the pre-bid conference to be a "hiring hall" to bring prospective contract bidders and qualified MBEs together so that each may become aware of the other's interest in a particular contract to be let and to provide information to all as Notwithstanding this procedure, the evidence has shown that few, if any, MBEs actually attend the pre-bid conferences. This non-attendance, however, has not resulted in the automatic granting of waivers. Instead, the City has required a detailed demonstration by the contractor that a qualified MBE is not available. The Ordinance has been interpreted by the administering city officials to require 10% MBE commitment and participation. This practice has resulted in the Ordinance being a mandatory quota with a waiver provision instead of a goal. A close reading of the interaction of the Ordinance provisions leads to a similar conclusion.

to generalities of the proposed construction. If no MBE gives written notice of a desire and ability to participate in respect to the contract discussed at the pre-bid conference, all contractors are entitled to an MBE waiver in accordance with the Ordinance.

It has further been shown that the affirmative action aspects of the Ordinance and its administration have created MBE brokerage businesses. The sole participation in City contracts of these businesses is to provide a business entity or front as an MBE who receives a subcontract, generally for materials, adds a commission and, thereafter, subcontracts ... the purchase to a bona fide subcontractor or supplier. This practice has been brought to the attention of the administering City officials, but no evidence has been presented that this abuse has been stopped or attempted to be stopped. These MBE commission brokers are a fraud on the legitimate minority businesses and the taxpaying public.

COMPETITIVE BID LAW CLAIMS

Plaintiffs assert that Ordinance 77-257, as amended, conflicts with Code 1975, § 41-16-50 (Supp.1980), which provides in part:

§ 41-16-50. Contracts for which competitive bidding required; manner of awarding contracts...

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