ASSOCIATED GEN. CONTR., CAL. v. SECRETARY OF COM., US

• Citation: 441 F. Supp. 955
• Decision Date: 02 November 1977
• Docket Number: Civ. No. 77-3738-AAH.
• Court: U.S. District Court — Central District of California
• Parties: ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, a nonprofit corporation, Engineering Contractors Association, a nonprofit corporation, American Subcontractors Association, a nonprofit corporation, Los Angeles County Chapter, National Electrical Contractors Association, Inc., a nonprofit corporation, Steve P. Rados, Inc., a corporation, Griffith Company, a corporation, Gordon H. Ball, Inc., a corporation, Stoddard Enterprises, a sole proprietorship, and Granite Construction Company, a corporation, Plaintiffs, v. SECRETARY OF COMMERCE OF THE UNITED STATES DEPARTMENT OF COMMERCE, U. S. Department of Commerce, Los Angeles County, a body corporate and politic, Los Angeles County Board of Supervisors, Los Angeles Flood Control District, Los Angeles County Engineer, Facilities Department of Los Angeles County, City of Los Angeles, a Municipal Corporation, Los Angeles City Council, Department of Recreation and Parks of the City of Los Angeles, and Department of Public Works of the City of Los Angeles, Defendants.

441 F. Supp. 955

ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, a nonprofit corporation, Engineering Contractors Association, a nonprofit corporation, American Subcontractors Association, a nonprofit corporation, Los Angeles County Chapter, National Electrical Contractors Association, Inc., a nonprofit corporation, Steve P. Rados, Inc., a corporation, Griffith Company, a corporation, Gordon H. Ball, Inc., a corporation, Stoddard Enterprises, a sole proprietorship, and Granite Construction Company, a corporation, Plaintiffs, v. SECRETARY OF COMMERCE OF THE UNITED STATES DEPARTMENT OF COMMERCE, U. S. Department of Commerce, Los Angeles County, a body corporate and politic, Los Angeles County Board of Supervisors, Los Angeles Flood Control District, Los Angeles County Engineer, Facilities Department of Los Angeles County, City of Los Angeles, a Municipal Corporation, Los Angeles City Council, Department of Recreation and Parks of the City of Los Angeles, and Department of Public Works of the City of Los Angeles, Defendants.

Civ. No. 77-3738-AAH.

United States District Court, C. D. California.

November 2, 1977.

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Ronald A. Zumbrun, John H. Findley and Sandra R. Johnson, Pacific Legal Foundation, Sacramento, Cal., and Lawrence H. Kay, Associated Gen. Contractors of California, Sacramento, Cal., for plaintiffs.

Peter H. Kane, Asst. U. S. Atty., Los Angeles, Cal., and Deborah P. M. Seymour, Trial Atty., Employment Section, Civ. Rights Div., U. S. Dept. of Justice, Washington, D. C., for federal defendants, Secretary of Commerce of the United States, and Dept. of Commerce.

Richard L. Landes, Deputy County Counsel, Los Angeles, Cal., for county defendants, Los Angeles County, Los Angeles County Bd. of Supervisors, Los Angeles Flood Control Dist., Los Angeles County Engineer and the Facilities Dept. of Los Angeles County.

John F. Haggerty, Asst. City Atty., Los Angeles, Cal., for city defendants, City of Los Angeles, Los Angeles City Council, Dept. of Recreation and Parks of the City of Los Angeles, and Dept. of Public Works of the City of Los Angeles.

DECISION AND ORDER (GRANTING DECLARATORY AND INJUNCTIVE RELIEF AGAINST "RACE QUOTA" SYSTEM FOR FEDERAL GRANTS TO LOCAL LOS ANGELES AGENCIES)

HAUK, District Judge.

This matter arises upon plaintiffs' complaint for declaratory and injunctive relief based upon the alleged unconstitutionality of Section 103(f)(2) of the Public Works Employment Act of 1977, Pub.L.No.95-28, 91 Stat. 116-121, 42 U.S.C. § 6705(f)(2), which requires that 10 percent of the amount of each federal grant applied for under the Act be expended for "minority business enterprises."¹ The Act has been implemented by rules and regulations² issued by the Secretary of Commerce under the authority given to him in the original Local Public Works Capital Development and Investment Act of 1976, 42 U.S.C. §§ 6701-6735, which was amended by the Public Works Employment Act of 1977. Plaintiffs seek declaratory judgments that the Department of Commerce and Secretary of Commerce's (Federal Defendants) enforcement of the minority business enterprises provisions of Pub.L.No.95-28 and the regulations promulgated thereunder, as well as the policies of the City and County of Los Angeles and their agencies named defendants (Local Defendants) of devising, approving, advertising, and awarding bids in accordance with the provision of the statute and regulations, violated and violate plaintiffs' rights under the Fifth Amendment to the United States Constitution. Plaintiffs also sought injunctive relief, by way of a temporary restraining order, order to show cause why a preliminary injunction should not be granted, and a permanent injunction, restraining all defendants from enforcing and complying with the said minority business enterprises provisions.

After the October 6, 1977, initial hearing, this Court issued its temporary restraining order, extended it for an additional ten days, and set the hearing on the preliminary injunction for October 31, 1977. On October 21, 1977, the Federal Defendants filed a motion for summary judgment, for which motion an application shortening time to notice the motion to October 31, 1977, was properly made and approved. See Local Rules 3(e) and 3(f), Central District of California. The Local Defendants and the plaintiffs have orally made and joined in the motion for summary judgment by their own motions and counter motions for summary judgment, whereupon the Court proceeded to hear and rule by consolidating the hearing on the preliminary injunction with the hearing on the merits on the permanent injunction, by way of hearing the motions and counter motions for summary judgment. Fed.R.Civ.P., Rule 65(a)(2).

I STATUTORY BACKGROUND

The Local Public Works Capital Development and Investment Act of 1976, Pub.L.No.94-369 (July 22, 1976), 90 Stat. 999-1012, 42 U.S.C. §§ 6701-6735, with its authorization of $2 billion (42 U.S.C. § 6710) (hereinafter "LPW Act"), for the implementation of which Congress appropriated $2 billion in Pub.L.No.94-447 (Oct. 1, 1976), was enacted for the purposes of alleviating the problem of nationwide unemployment and stimulating the national economy by assisting state and local governments to build badly needed public facilities. See H.R.Rep.No.94-1077 re Pub. L.No.94-369, 94th Cong., 2d Sess. (1976).³ The program was to be administered by the Secretary of Commerce acting through the Economic Development Administration (hereinafter "EDA"), which distributed program funds for construction of public works projects to state and local government applicants. In order to expedite the initiation of construction projects contemplated by the LPW Act, Congress provided that the Secretary shall make a final determination upon each application within 60 days of receipt, with failure to take action within the prescribed period deemed to be approval 42 U.S.C. § 6706; that the Secretary shall prescribe any rules and regulations deemed necessary to carry out the provisions of the LPW Act within 30 days of its enactment 42 U.S.C. § 6706; and that on-site labor must begin within 90 days of project approval if funds are available 42 U.S.C. § 6705(d). Between October 26, 1976, and February 9, 1977 ("Round I"), approximately 2000 projects were approved and the appropriate Federal grants made, exhausting the $2 billion originally authorized and appropriated.

On May 13, 1977, Congress enacted the Public Works Employment Act of 1977, 91 Stat. 116-121, Pub.L.No.95-28 (hereinafter the "PWE Act"),⁴ amending the LPW Act. The PWE Act (denoted "Round II") was designed to correct certain inadequacies of Round I and to increase funding for public works projects. By the PWE Act of 1977, a total of $6 billion was authorized to be expended in carrying out Round I and Round II under the provisions of the PWE Act, Pub.L.No.95-28, § 109 (May 13, 1977), of which an additional $4 billion was appropriated by Congress, Pub.L.No.95-29, Chap. III (May 13, 1977).⁵ Congress remained aware of the importance of the infusion of Federal funds into the depressed construction industry, H.R.Rep.No.95-20, 95th Cong., 1st Sess. 1-2 (1977),⁶ and, seeking to avoid any unnecessary delay in the implementation of the PWE Act, added the provision in the PWE Act that the Secretary shall not consider any application submitted subsequent to December 23, 1976, Pub.L.No. 95-28, § 107(h)(1) (May 13, 1977), in addition to retaining those deadlines originally set forth in 42 U.S.C. §§ 6705(d), 6706.

Included in the PWE Act was the following provision:

"(2) Except to the extent that the Secretary determines otherwise, no grant shall be made under this Act for any local public works project unless the applicant gives satisfactory assurance to the Secretary that at least 10 per centum of the amount of each grant shall be expended for minority business enterprises. For purposes of this paragraph, the term `minority business enterprise' means a business at least 50 per centum of which is owned by minority group members or, in case of a publicly owned business, at least 51 per centum of the stock of which is owned by minority group members. For the purposes of the preceding sentence, minority group members are citizens of the United States who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and Aleuts." Pub.L.No.95-28, 91 Stat. 117, Sec. 103(f)(2).⁷

This Minority Business Enterprises ("MBE") provision was introduced on the House floor during debate and was intended ostensibly to remedy the situation in which "The average percentage of minority contracts, of all Government contracts, in any given fiscal year is 1 percent—1 percent." 123 Cong.Rec. p. H-1437-8 (daily ed. February 24, 1977).⁸ Economic Development Administration Guidelines for implementation of the MBE provision indicate that "when prime contractors are selected through competitive bidding, the Grantee state or local government must require that each bid include a commitment to use at least 10 percent of the contract funds for MBEs . . .. In the case of projects involving more than one contract . . . some of the contractors may themselves be MBEs . . .." MBE Guidelines,⁹ pp. 8, 9.

Among the rules and regulations promulgated by the Secretary pursuant to his authority to prescribe necessary regulations 42 U.S.C. § 6706 is the provision that the MBE requirement may be waived as to any grant for which the Assistant Secretary determines that the ten percent set-aside cannot be filled by minority businesses located within a reasonable trade area. Reg. 317.19(b)(2), 42 Fed.Reg. 27432, 27434-5 (May 27, 1977.¹⁰ And the EDA Guidelines elaborate to some extent:

"The Grantee must demonstrate that there are not sufficient, relevant, qualified minority business enterprises whose market areas include the project location to justify a waiver. The Grantee must detail in its waiver request the efforts the Grantee and

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