Associated General Contractors of California, Inc. v. Coalition for Economic Equity

• Decision Date: 06 December 1991
• Docket Number: No. 90-16582,90-16582
• Citation: 950 F.2d 1401
• Parties: 57 Empl. Prac. Dec. P 41,114, 60 USLW 2436 ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, INC., a nonprofit California corporation, Plaintiff-Appellant, v. COALITION FOR ECONOMIC EQUITY, et al., Defendants-Intervenors-Appellees. City and County of San Francisco, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1401

950 F.2d 1401

57 Empl. Prac. Dec. P 41,114, 60 USLW 2436

ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, INC., a nonprofit California corporation, Plaintiff-Appellant, v. COALITION FOR ECONOMIC EQUITY, et al Defendants-Intervenors-Appellees City and County of San Francisco, Defendants-Appellees.

No. 90-16582.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 15, 1991.

Decided Dec. 6, 1991.

John H. Findley, Pacific Legal Foundation, Sacramento, Cal., for plaintiff-appellant.

William C. McNeill, III, Employment Law Center, San Francisco, Cal., for intervenors-appellees.

Mara E. Rosales, Deputy City Atty., San Francisco, Cal., for defendants-appellees.

Theodore Hsien Wang, San Francisco Lawyers' Committee for Urban Affairs; Judith Kurtz, Equal Rights Advocates, San Francisco, Cal.; and Esteban Lizardo, Mexican-American Legal Defense and Educational Fund, Los Angeles, Cal., for defendants.

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

Before FLETCHER, THOMPSON and O'SCANNLAIN, Circuit Judges.

FLETCHER, Circuit Judge:

We confront once again the tension between the efforts of the City and County of San Francisco ("the City") to ameliorate the effects of past discrimination in City contracting processes on disadvantaged groups and the constraints imposed by the Fourteenth Amendment's guarantee of equal treatment to all citizens, as well as other provisions of state and federal law. Appellant, Associated General Contractors of California, Inc. ("AGCC"), appeals the district court's denial of its motion for a preliminary injunction enjoining the enforcement of San Francisco's Minority/Woman/Local Business Utilization Ordinance--II, No. 175-89 ("1989 Ordinance") insofar as it applies to prime construction contracts. 748 F.Supp. 1443. We affirm.

FACTS

The challenge to San Francisco's use of racial and gender preferences to remedy discrimination in city contracting dates back more than seven years. In April 1984, the San Francisco Board of Supervisors (the "Board") passed the Minority/Women/Local Business Utilization Ordinance, No. 139-84 ("1984 Ordinance"), which required the City to set aside designated percentages of its contracting dollars to minority-owned business enterprises ("MBEs") and women-owned business enterprises ("WBEs"). In addition, the 1984 Ordinance required that MBEs, WBEs and locall-owned business enterprises ("LBEs") receive a five percent bidding preference to be taken into account when the City calculated the low bid on city contracts.

AGCC, an organization of contractors engaged in the building and construction industry, which has a substantial number of members who are not within the classes granted preferences by the 1984 Ordinance Shortly after our decision in AGCC I, the Supreme Court considered a similar minority set-aside plan in City of Richmond v. J.A. Croson Co., 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989). In that decision, a deeply divided Supreme Court struck down the racial set-aside plan adopted by the city of Richmond, Virginia. ¹ At the same time, however, the Court confirmed that municipalities could employ race-conscious remedies to redress discrimination in certain circumstances. Id. at 509, 109 S.Ct. at 729 (Rehnquist, C.J., O'Connor, J., White, J., Kennedy, J.); Id. at 511, 109 S.Ct. at 730 (Stevens, J.); Id. at 528, 109 S.Ct. at 739 (Marshall, J., Brennan, J., Blackmun, J.). Prior to Croson, the City had been investigating continued discrimination in city contracting. In that capacity, it had received, among other information, testimony from 42 witnesses, and written submittals from 127 minority, women, local, and other business representatives. Subsequently, in an attempt to determine whether Croson's criteria for permitting race-conscious ordinances were met with respect to San Francisco, the City held an additional ten public hearings, commissioned two statistical studies, and sought written submissions from the public. Out of this process emerged the 1989 Ordinance now before this court. It became effective on July 1, 1989 and may be cited as SF Admin.Code, Ch. 12D.

                challenged the implementation of the 1984 Ordinance in court.   In reviewing the ordinance, this circuit upheld the provisions favoring WBEs and LBEs against AGCC's constitutional challenge but invalidated the provisions favoring MBEs.  AGCC v. City and County of San Francisco, 813 F.2d 922, 928-44 (9th Cir.1987), petition dismissed, 493 U.S. 928, 110 S.Ct. 296, 107 L.Ed.2d 276 (1989) (AGCC I ).   In addition, we ruled that all bidding preferences, insofar as they applied to contracts over $50,000, violated San Francisco City Charter section 7.200, which required that contracts over $50,000 be given to the "lowest reliable and responsible bidder."  Id. at 927-928
                

Rather than providing the set-asides mandated by the 1984 Ordinance, the 1989 Ordinance gives bid preferences to prime contractors who are members of groups found disadvantaged by previous bidding practices. Specifically, the Ordinance provides a five percent bid preference for LBEs, WBEs, and MBEs. Because the WBE and MBE preferences are treated cumulatively with the LBE preferences under the ordinance, local MBEs and WBEs become eligible for a ten percent total bid preference, representing the cumulative total of the five percent preference given LBEs and the 5% preference given MBEs and WBEs. § 12D.8(B)(2). The Ordinance defines "MBE" as an economically disadvantaged business that is owned and controlled by one or more minority persons. § 12D.5. "Minority" is defined to include Asians, Blacks, and Latinos. "WBE" is defined as an economically disadvantaged business that is owned and controlled by one or more women. "Economically disadvantaged", insofar as the term applies to public works construction contracts, is defined as a business whose average gross annual receipts in the three fiscal years immediately preceding its application for certification as a MBE do not exceed fourteen million dollars. The Ordinance allows non-MBEs and non-WBEs to benefit from the bid preferences given these groups by extending a five percent preference to those who engage in a joint venture with a local MBE or WBE provided the MBE's or WBE's participation is between 35% and 51%. § 12D.8(B)(2). Those who engage in a joint venture with a local MBE or WBE whose participation is 51% or more, receive Subsequent to the passage of the 1989 Ordinance, the Board enacted Ordinance No. 424-89, which raised the threshold for competitive bidding for city contracts previously set at $50,000 by section 7.200 of the San Francisco City Charter, to $10,000,000 ("the competitive bidding threshold ordinance"). Ordinance No. 424-89 was enacted pursuant to an amendment to the city charter passed the prior year, by which the electorate authorized the Board of Supervisors to increase or decrease the competitive bidding threshold. After the implementation of the new bid threshold ordinance, contracts valued at over $10,000,000 would still be subject to the city charter's "lowest reliable and responsible bidder" requirement. Contracts below that level presumably would be subject to the new bid preference system.

                a ten percent preference.   Id.  A waiver of the bid preference is provided where no MBE or WBE is available to provide the necessary goods or services.  §  12D.13
                

Soon after the effective dates of the 1989 Ordinance and the competitive bidding threshold ordinance, AGCC filed this action and sought a preliminary injunction. The motion for preliminary injunction challenges both the constitutionality of the MBE provisions of the 1989 Ordinance insofar as they pertain to public works construction contracts and the validity under state law of the competitive bidding threshold ordinance. ² In a well-reasoned opinion, the district court denied the motion for preliminary injunction. Although the district court held that the alleged violation of the constitutional rights of AGCC's members would, if meritorious, produce irreparable injury, it found that plaintiffs were unlikely to prevail on their constitutional claim. It rejected AGCC's charter claim based on its finding that AGCC had failed to demonstrate the requisite possibility of irreparable injury. AGCC now appeals the district court's denial of its motion for preliminary injunction to this court.

DISCUSSION

Because the grant or denial of a preliminary injunction lies within the discretion of the district court, our review of the denial of a preliminary injunction is limited. Johnson Controls, Inc. v. Phoenix Control Sys., 886 F.2d 1173, 1174 (9th Cir.1989); Big Country Foods, Inc. v. Board of Educ., 868 F.2d 1085, 1087 (9th Cir.1989). We will reverse the denial of a preliminary injunction only if the district court abused its discretion or relied on an erroneous legal premise or clearly erroneous findings of fact. Johnson Controls, 886 F.2d at 1174; Sports Form, Inc. v. United Press Int'l, Inc., 686 F.2d 750, 752 (9th Cir.1982). We review de novo the correctness of the legal standards employed by the district court in evaluating the plaintiff's likelihood of success on the merits.

I. AGCC's STANDING TO PURSUE THIS ACTION

As an initial matter, Appellees-Intervenors The Coalition for Economic Equity, et al. ("Intervenors"), argue that this case fails to present a case or controversy for Article III purposes because AGCC lacks standing to sue on behalf of its members. This issue was not raised below. However, because a "threshold question in every federal case" is "whether the plaintiff has made out a 'case or controversy' between himself and the defendant within the meaning of Article III," Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975), this issue must be resolved before we may review the district court's denial of the motion for preliminary injunction. See also Jenkins v. McKeithen, 395 U.S....