Associated General Contractors of California, Inc. v. City and County of San Francisco, 85-2420

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBefore HUG, BEEZER and KOZINSKI; KOZINSKI
Citation813 F.2d 922
Parties42 Empl. Prac. Dec. P 36,894, 55 USLW 2547 ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, INC., et al., Plaintiffs-Appellants, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant-Appellee, and San Francisco Black Chamber of Commerce, et al., Intervenors-Defendants/Appellees.
Docket NumberNo. 85-2420,85-2420
Decision Date23 March 1987

Page 922

813 F.2d 922
42 Empl. Prac. Dec. P 36,894, 55 USLW 2547
San Francisco Black Chamber of Commerce, et al.,
No. 85-2420.
United States Court of Appeals,
Ninth Circuit.
Argued and Submitted June 13, 1986.
Decided March 23, 1987.

Page 923

John H. Findley, Sacramento, Cal., for plaintiffs-appellants.

Mara E. Rosales, San Francisco, Cal., for defendant-appellee.

Robert L. Harris, San Francisco, Cal., William C. McNeill, III, Oakland, Cal., for intervenors-defendants/appellees.

Appeal from the United States District Court for the Northern District of California.

Before HUG, BEEZER and KOZINSKI, Circuit Judges.

KOZINSKI, Circuit Judge:

We consider a challenge to an ordinance of the City and County of San Francisco (the city) giving various preferences to minority-owned, women-owned and locally-owned business enterprises (MBEs, WBEs and LBEs). The district court upheld the ordinance, rejecting claims that it violates the city's charter, federal civil rights laws and the equal protection clause of the fourteenth amendment.

Page 924


On April 2, 1984, after numerous hearings and considerable debate, the San Francisco Board of Supervisors enacted Chapter 12D of the City's Administrative Code (the ordinance). The ordinance was designed to increase the participation of MBEs, WBEs and LBEs in municipal contracting, and thereby to alleviate the "historic discrimination against minorities and women, often officially sanctioned and enforced by government from the inception of our Republic to the present." Ordinance Sec. 12D.2(1).

The ordinance employs four principal methods. First, it requires each city department to set aside 10 percent of its purchasing dollars for MBEs and 2 percent for WBEs. Id. Sec. .8(B)(2). Second, it gives MBEs, WBEs and LBEs a 5 percent bidding preference for those contracts put out to bid. 1 Id. Sec. .8(B)(3). Third, it requires each city department to establish a yearly goal for the percentage of contracting dollars to go to MBEs, WBEs and LBEs. For certain public works contracts, a prospective prime contractor must submit a bid that meets or exceeds the department's goal by distributing among appropriate subcontractors the requisite percentage of the contract's value. Id. Sec. .9(B)(1). Finally, the ordinance establishes as an overall goal that 30 percent of the city's contracting dollars shall go to MBEs and 10 percent to WBEs. Id. Sec. .3. The ordinance is to remain in effect until that goal is reached. See id. Sec. .15(A).

Appellants sued seeking declaratory and injunctive relief. Their motion for a preliminary injunction was denied on November 5, 1984. They appealed that decision but, before this court could rule, the district court heard the parties' cross-motions for summary judgment and granted that of the appellees. Associated Gen. Contractors v. City & County of San Francisco, 619 F.Supp. 334, 335 (N.D.Cal.1985). The preliminary injunction appeal was then dismissed, appellants pursuing instead their appeal from the district court's decision on the merits. 2

Contentions of the Parties

Appellants mount their attack on three fronts. First, they argue that, as to contracts valued over $50,000, the preferences violate a San Francisco City Charter provision requiring that contracts be awarded to "the lowest reliable and responsible bidder." S.F. Charter Sec. 7.200 (1986). 3 Next, they contend that the preferences for MBEs violate three separate federal civil rights statutes: 42 U.S.C. Secs. 1981, 1983, 2000d (1982). Finally, they argue that all the preferences violate the equal protection clause of the fourteenth amendment of the United States Constitution. Appellees forcefully dispute each of these contentions.


The district court had jurisdiction over the federal claims pursuant to 28 U.S.C. Secs. 1331, 1343(a)(3), and pendent jurisdiction over the state law claim. See UMW v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). We have jurisdiction under 28 U.S.C. Sec. 1291.



A. Appellants claim that, by compelling city departments to accept bids that

Page 925

are not the lowest, the ordinance violates S.F. Charter Sec. 7.200 which provides:

When the expenditure for any public work or improvement shall exceed the sum of fifty thousand dollars ($50,000), the same shall be done by contract, except as otherwise provided in this charter. The head of the department in charge of or responsible for the work for which a contract is to be let, or the purchaser of supplies in the case of purchases of materials, supplies and equipment, shall let such contract to the lowest reliable and responsible bidder.... [Emphasis added.]

In Inglewood-Los Angeles County Civic Center Authority v. Superior Court, 7 Cal.3d 861, 500 P.2d 601, 103 Cal.Rptr. 689 (1972), the California Supreme Court interpreted California Government Code section 25454, a provision very similar to charter section 7.200. It held that the term "responsible"

has reference to the quality, fitness and capacity of the low bidder to satisfactorily perform the proposed work. Thus, a contract must be awarded to the lowest bidder unless it is found that he is not responsible, i.e., not qualified to do the particular work under consideration.

Id. at 867, 500 P.2d at 604, 103 Cal.Rptr. at 692 (citations omitted). In reaching this result, the court relied on cases interpreting similar language in other statutes and, in one case, West v. City of Oakland, 30 Cal.App. 556, 159 P. 202 (1916), a city charter. We followed Inglewood in overturning a school district's plan for accepting higher bids from minority contractors, stating that "[w]e do not think that the California Supreme Court would construe the term ... differently from the construction it gave the same language in Inglewood; the statutes are virtually identical." Associated Gen. Contractors v. San Francisco Unified School Dist., 616 F.2d 1381, 1385 (9th Cir.1980) (Unified School District ). We have found no California case interpreting the term "responsible" any other way.

Despite these seemingly compelling authorities, the district court adopted a much more expansive construction of charter section 7.200, concluding that "the concept of responsibility is sufficiently flexible to embody other legitimate municipal concerns such as the remedying of past discrimination." 619 F.Supp. at 336. 5 The district court purported to follow the reasoning of Southwest Washington National Electrical Contractors Association v. Pierce County, 100 Wash.2d 109, 667 P.2d 1092 (1983), which interpreted the term responsible to mean "socially responsible." 6 In the Washington Supreme Court's view, a business that failed to meet affirmative action goals was socially irresponsible. Id. at 115, 667 P.2d at 1095-96. The district court also reasoned that its interpretation of the term responsible "is clearly consistent with the two purposes generally underlying competitive bidding statutes: 1) to protect the general public from cronyism or collusion in the awarding of contracts and, 2) to provide a fair forum for potential bidders." 619 F.Supp. at 337 (citing Southwest Washington, 100 Wash.2d at 116, 667 P.2d at 1096).

We are unable to approve the district court's interpretation of the term "responsible" in San Francisco charter section 7.200. First, and most fundamentally, the district court was led astray by following

Page 926

inapposite authorities and ignoring pertinent ones. Southwest Washington expressly rejected Ninth Circuit precedent, 100 Wash.2d at 115, 667 P.2d at 1096; the district court was not free to follow suit. Unified School District and the California cases on which it relies construed language very similar to that in charter section 7.200. The district court was required to follow Ninth Circuit precedent in applying California law as California courts construe it. And California courts have uniformly construed the term "lowest responsible bidder" to mean the bidder who can be expected to successfully complete the contract for the lowest price. 7

Moreover, we find the district court's reasons for following Southwest Washington unpersuasive. Its assertion that a broad reading of the term "responsible" is consistent with the purposes underlying competitive bid statutes misconstrues those purposes. The first purpose enumerated by the district court--protecting the public from cronyism and collusion--is much too narrow. Competitive bid statutes are designed to protect against a variety of ills that might befall the government procurement process: sloth, lack of imagination or carelessness on the part of those who award public contracts; inadequate notice to potential bidders, causing contracting officers to act on the basis of ignorance or misinformation; and, perhaps most important of all, insufficient competition to assure that the government gets the most work for the least money. See generally J. Whelan & R. Pasley, Cases & Materials on Federal Government Contracts 175-81 (1975).

The second purpose cited by the district court--"to provide a fair forum to potential bidders"--is far too broad. Nothing in charter section 7.200, or in any other competitive bid statute of which we are aware, assures that contractors will be treated fairly in any and all respects. The provision assures only that responsible contractors who submit the lowest bid will be awarded the contract. Under the district court's interpretation, there is no limit to the type of fairness a city could seek to achieve, defeating the charter's mandate that contracts be awarded to the lowest bidder. 8

Finally, the district court's ruling goes far beyond even the logic of Southwest Washington. The Washington Supreme Court there held that a bidder is responsible if he awards a...

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