Associated General Contractors of California v. San Francisco Unified School Dist.

Citation616 F.2d 1381
Decision Date11 February 1980
Docket Number77-3124 and 77-3764,77-2750,Nos. 77-2507,s. 77-2507
Parties24 Empl. Prac. Dec. P 31,422, 27 Cont.Cas.Fed. (CCH) 80,416 ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, et al., Plaintiffs-Appellees, v. SAN FRANCISCO UNIFIED SCHOOL DISTRICT; San Francisco Board of Education, et al., Defendants, and National Association of Minority Contractors and Minority Contractors Association of Northern California, Intervenors-Appellants. ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, et al., Plaintiffs-Appellees, v. SAN FRANCISCO UNIFIED SCHOOL DISTRICT; San Francisco Board of Education, et al., Defendants-Appellants, and National Association of Minority Contractors, and Minority Contractors Association of Northern California, Intervenors.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Stephen V. Bomse, San Francisco, Cal., for intervenors-appellants.

H. LeRoy Cannon, San Francisco, Cal., for defendant-appellant.

James A. Carter, Allan Yannow, San Francisco, Cal., on brief; James P. Watson, Los Angeles, Cal., for plaintiffs-appellees.

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

Before CHOY and HUG, Circuit Judges, and RICHEY, District Judge. *

CHOY, Circuit Judge:

Associated General Contractors (AGC) sued to challenge the "affirmative action policy" adopted by the San Francisco Board of Education (Board). Under the policy, bidders for construction contracts let by the San Francisco Unified School District (School District) must be minority general contractors or must utilize minority subcontractors for 25% in dollar volume of the contract work. 1 AGC asserts that this policy violates 42 U.S.C. §§ 1981 and 1983 and the Fourteenth Amendment, and California law as well.

The district court held that such a set-aside for minority contractors on public works was illegal, except as to projects funded with federal money given on condition that 10% or more of the money would go to minority contractors. We agree.

I. Statement of the Case

The Board of Education adopted a resolution in March 1977 finding a present need for an affirmative action policy to overcome the effects of past discrimination in the awarding of School District construction subcontracts. The Board then adopted the policy outlined above. It applied to general contractors bidding on all school construction projects worth over $100,000. Relief from the policy was available only when the Board was satisfied that an ineligible contractor had "taken every possible measure to comply" with the policy, or that it was "not practicable in the best interests of the District to require compliance in the specific case."

The policy declared that noncomplying contractors were not "responsible bidders" under California Education Code § 15951 (now § 39640). That statute requires school construction contracts to be awarded to the "lowest responsible bidder."

The district court enjoined the School District from enforcing the policy, on the ground that "responsibility" under the state law referred only to a bidding contractor's financial and physical ability to do the work. The court forbade the School District to award contracts to other than the "lowest responsible bidder" merely because the lowest bidder was of the wrong parentage and refused to accede to the School District's views on socially desirable subcontracting. Associated General Contractors v. San Francisco Unified School District, 431 F.Supp. 854 (N.D.Cal.1977) (refusing to dissolve preliminary injunction; permanent injunction entered later).

At about the same time, the federal government granted the School District $8,000,000 in public works funds under the Public Works Employment Act of 1977, Pub.L.No. 95-28, 42 U.S.C. §§ 6701-6710, which requires that the recipient entity give "satisfactory assurance to the Secretary (of Commerce) that at least 10 per centum of the amount of each grant shall be expended for minority business enterprises," 42 U.S.C. § 6705(f)(2).

The Board then adopted a second affirmative action policy, nearly identical to the first (including a minority set-aside of 25%, rather than the federally-required minimum of 10%) except that it applies only to projects financed with Public Works Employment Act funds.

AGC applied for a contempt order to vindicate the earlier injunction. The district court dismissed the proceeding without prejudice. However, it issued an order changing the Board's 25% minority participation requirement on federally-aided projects to a 10% requirement. The court then modified its earlier injunction so as not to prohibit the new policy, as altered.

The intervening Minority Contractors appeal from the entry of the permanent injunction against the first affirmative action policy; the School District and the Board appeal from the reduction from 25% to 10% of the set-aside in projects funded through the Public Works Employment Act.

II. Issues

This appeal raises five issues: (1) whether the district court had jurisdiction to test under state law the validity of the Board's policy; (2) whether the manner in which the court reduced the set-aside on Public Works Employment Act projects violated due process; (3) whether California Education Code § 39640 prohibits the Board's affirmative action policy; (4) if state law does prohibit it, whether the state law is unconstitutional as applied to do so; and (5) if the affirmative action policy is not prohibited by any valid state law, whether the policy itself violates the Constitution.

A. Jurisdiction

The district court had jurisdiction to enter its injunction and order. AGC's attacks on the set-aside policy based on the Fourteenth Amendment and 42 U.S.C. §§ 1981 and 1983 2 are substantial federal claims so substantial that the Supreme Court has agreed to hear similar claims this term in Fullilove v. Kreps, 584 F.2d 600 (2nd Cir. 1978), cert. granted sub nom. Fullilove v. Kluztnick, 441 U.S. 960, 99 S.Ct. 2403, 60 L.Ed.2d 1064 (1979). Thus 28 U.S.C. § 1331 provided jurisdiction over the federal claims. The district court also had pendent jurisdiction over the state-law question whether the Board had authority under state law to adopt and enforce its affirmative action policy. See Hagans v. Lavine, 415 U.S. 528, 536, 94 S.Ct. 1372, 1378, 39 L.Ed.2d 577 (1974). And, as it did here, the district court could properly deal with the state question first, particularly when that course avoided a very difficult constitutional question (the Fullilove question). See id. at 543, 94 S.Ct. at 1382.

B. Due Process

The School District and the Board are the only parties appealing the district court's downward revision of the minority set-aside in the second affirmative action policy (relating to federally-funded projects). They originally complained that the manner in which this was done deprived them of their due process rights to notice and opportunity to be heard. However, in their reply brief they explicitly "abandoned and dismissed that portion of this appeal which . . . (a)lleges denial of due process on hearing In Re Contempt."

Even if we did not hold them to this waiver, we would find no due process violation. The effect of what the district court did was to create an exception to the injunction, not to broaden its coverage. The illegality of a 25% set-aside, to the extent not required by federal law, was law of the case; extensive reargument was not required.

C. Authority Under State Law

The district court held that under state law the affirmative action program was void because the Board had no authority to adopt it. A federal court's role in such a case is to give state laws the construction it believes the highest state court would give them. In this inquiry we give substantial deference to the opinion of a district court sitting in the state. Lewis v. Anderson, 615 F.2d 778, 781 (9th Cir. 1979); Smith v. Sturm, Ruger & Co., 524 F.2d 776, 778 (9th Cir. 1975). We agree with the district court.

The authority of school boards in California derives from California Education Code § 35160, which authorizes the adoption of any program that is not in conflict with the purposes for which school districts are established and "is not in conflict with or inconsistent with, or preempted by, any law."

Because the Board's affirmative action program conflicts with California Education Code § 39640, we hold that § 35160 does not authorize it. Section 39640, the "low bid law," reads:

The governing board of any school district shall let any contracts involving an expenditure of more than eight thousand dollars ($8,000) for work to be done or more than twelve thousand dollars ($12,000) for materials or supplies to be furnished, sold, or leased to the district, to the lowest responsible bidder who shall give such security as the board requires, or else reject all bids. This section applies to all materials and supplies whether patented or otherwise.

While no California court has considered the issue whether a school board may adopt a program such as the one at issue here consistent with § 39640, the California Supreme Court has circumscribed the meaning of "lowest responsible bidder" in another context.

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 court held that California Government Code § 25454, a statute requiring that counties award public contracts to the "lowest responsible bidder," did not embody a concept of "relative superiority" which would allow the county to award the contract to the next-to-lowest bidder because he was "more qualified" than the lowest bidder. The court said, "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." 7 Cal.3d at 867, 500 P.2d at 604, 103 Cal.Rptr. at 692 (emphasis added). Cf. Raymond v. Fresno...

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