Associated General Contractors v. San Francisco, C89-4554 TEH.

• Decision Date: 09 October 1990
• Docket Number: No. C89-4554 TEH.,C89-4554 TEH.
• Court: U.S. District Court — Northern District of California
• Parties: ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, INC., Plaintiff, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant, Coalition for Economic Equity, San Francisco Hispanic Chamber of Commerce, Asian, Inc., San Francisco Black Chamber of Commerce, Defendants-intervenors.

748 F. Supp. 1443

ASSOCIATED GENERAL CONTRACTORS OF CALIFORNIA, INC., Plaintiff, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant, Coalition for Economic Equity, San Francisco Hispanic Chamber of Commerce, Asian, Inc., San Francisco Black Chamber of Commerce, Defendants-intervenors.

No. C89-4554 TEH.

United States District Court, N.D. California.

October 9, 1990.

Ronald A. Zumbrun, John H. Findley, Sharon L. Browne, Pacific Legal Foundation, Sacramento, Cal., James W. Polk, Associated Gen. Contractors of CA, Inc., West Sacramento, Cal., for plaintiff.

Eva Jefferson Patterson, San Francisco Lawyers, Committee for Urban Affairs, San Francisco, Cal., Robert L. Harris, Charles Houston Bar Assoc., Oakland, Cal., Judith E. Kurtz, Shayna I. Marshall, Equal Rights Advocates, San Francisco, Cal., William C. McNeill, III, Employment Law Center, San Francisco, Cal., for defendants.

MEMORANDUM AND ORDER DENYING PRELIMINARY INJUNCTION

THELTON E. HENDERSON, District Judge.

This matter comes before the Court on plaintiff's motion for a preliminary injunction. Having given careful consideration to the parties' written and oral presentations, and having reviewed the extensive administrative record, the Court concludes that plaintiff has not satisfied the standard for imposing interim injunctive relief. The discussion below constitutes the Court's findings of fact and conclusions of law, as required by Fed.R.Civ.P. 52(a).

I. BACKGROUND

Once again, this Court is called upon to judge the constitutionality of San Francisco's efforts to improve the opportunities for minority entrepreneurs to participate in city contracting. This continuing endeavor began over ten years ago with the passage of legislation prohibiting city contractors from discriminating against their employees on the basis of, among other things, race or color, and requiring them to take steps to integrate their work force. SF Admin. Code Ch. 12B. The Human Rights Commission of San Francisco ("HRC") subsequently concluded that further steps were necessary and adopted regulations requiring city prime contractors to award a portion of their subcontracts to minority business enterprises. SF Admin.Code, Ch. 12B(9). Then in 1982, the San Francisco Board of Supervisors — responding to complaints that minority and women owned businesses were still finding it difficult to break into the ranks of the city's prime contractors — directed the HRC to conduct hearings into the matter, make findings, and propose remedial legislation, if warranted. This process ultimately led to adoption of the Minority/Women/Local Business Utilization Ordinance, 139-84 ("1984 Ordinance") in April of 1984. SF Admin.Code, Ch. 12(D).

This five year legislation required the city to set aside ten percent of its contracting dollars for minority-owned business enterprises ("MBEs") and two percent for women-owned business enterprises ("WBEs"). It also provided MBEs, WBEs and locally owned businesses ("LBEs") a five percent bidding preference to be taken into account when the city purchaser calculated the low bid. Id. at Ch. 12(D).8(B). To further encourage use of MBEs and WBEs, the legislation set an overall "goal" that 30 percent of city contract dollars would be earned by MBEs and ten percent by WBEs. Id. at Ch. 12D.3.

The 1984 Ordinance quickly drew a constitutional attack from the Associated General Contractors of California ("AGCC"), an organization whose members are primarily white, male contractors engaged in the building and construction industry.¹ The challenge was vindicated in part by the Ninth Circuit Court of Appeals, which found the remedies favoring women and locally owned businesses constitutionally sound but invalidated the race based provisions as offending the equal protection guarantees of the fourteenth amendment. AGCC v. City and County of San Francisco, 813 F.2d 922, 928-944 (9th Cir.1987) (hereafter "AGCC-I"). The Court also ruled that all three preferences violated San Francisco City Charter section 7.200, which required that contracts over $50,000 be let to the "lowest reliable and responsible bidder." Id. at 927-928. This restriction, the Court found, compelled the city to award contracts based solely on the lowest bid, and without consideration of any other factors. Id. at 925-26. The city filed a petition for rehearing and suggestion for rehearing en banc, which stayed the Ninth Circuit's mandate. However, before any action was taken on the petition, the legislation expired in June of 1989, and the appeal was subsequently dismissed as moot.

Meanwhile, in January of 1989, a divided United States Supreme Court² struck down a similar ordinance that had been adopted by the city of Richmond, Virginia. City of Richmond v. J.A. Croson Co., 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989). However, in so doing, the Court confirmed that municipalities are empowered to employ race conscious remedies in the area of public contracting, if the remedy chosen is narrowly tailored to serve a compelling state interest. The Croson decision prompted the city of San Francisco to conduct additional hearings and commission statistical studies to determine whether a race conscious remedy would, in fact, serve a compelling state interest, as Croson required.³ Concluding that it would, based on evidence of discrimination against MBEs by the city and private contractors, the city fashioned a remedy that it believed to be sufficiently "narrowly tailored" to pass constitutional muster. The result was the Minority/Women/Local Business Utilization Ordinance — II, No. 175-89, unanimously passed by the Board of Supervisors on May 22, 1989,⁴ and signed into law one week later by the Mayor. SF Admin.Code, Ch. 12D (hereafter the "1989 Ordinance").

Substantially reduced in scope from its predecessor, and based on a stronger factual predicate, the 1989 Ordinance does not set aside any amount of city contract dollars for minority or women owned enterprises.⁵ Rather, its remedial focus is "bid preferences" for prime contractors; preferences which, the city asserts, are designed to provide M/W/LBEs with a "competitive plus" to compensate for past discriminatory practices. Specifically, it provides a five percent bid preference for LBEs and a ten percent bid preference for local MBEs and WBEs — the latter representing a 5 percent locality preference plus a 5 percent preference based on MBE or WBE status. SF Admin.Code Ch. 12D.8(B)(2).⁶ The 1989 Ordinance also allows persons to benefit from preferences who would not otherwise qualify by joint venturing with an M/WBE. Thus, a non M/WBE that joint ventures with a local M/WBE, whose participation is between 35 and 51 percent, benefits from a five percent bid preference. Where the local M/WBE's participation is 51 percent or more, the preference increases to ten percent. Id.

In November 1989, the San Francisco Board of Supervisors also amended (per Ordinance No. 424-89) section 7.200 of the city charter. The amendment increased the dollar threshold for applying the "lowest reliable and responsible bidder" requirement from $50,000 to 10 million dollars. As a result, the city's charter only requires acceptance of the lowest bid in contracts involving more than 10 million dollars.⁷ See Plaintiff's Memorandum in Support of TRO, Exh. 1. Absent this amendment, even a new MBE ordinance that could withstand constitutional scrutiny under Croson would have little practical impact, for it would apply only to contracts under $50,000, in light of the Ninth Circuit's decision in AGCC-I.

On December 18, 1989, the Associated General Contractors of California filed the instant action which is a facial constitutional challenge to the MBE provisions of the 1989 Ordinance, insofar as they pertain to public works construction contracts.⁸ The action also contends that the legislation raising the $50,000 threshold to ten million, with respect to the city Charter bidding provision, is invalid under state law. By this motion, brought pursuant to Fed.R. Civ.P. 65, plaintiff seeks to preliminarily enjoin San Francisco from enforcing the bidding preferences to the extent plaintiff contends they are unconstitutional or invalid under state law.

"District courts have broad discretion to grant or deny preliminary injunctive relief." Squaxin Island Tribe v. State of Washington, 781 F.2d 715, 724 (9th Cir. 1986); 11 Wright and Miller, Federal Practice and Procedure, § 2948 at 427. However, to guide this discretion, the Ninth Circuit has devised a test which requires the balancing of the merits of the case against competing equitable considerations. Thus, the moving party must demonstrate either (1) a combination of probable success on the merits and the possibility of irreparable injury, or (2) that serious questions are raised and the balance of hardships tips sharply in its favor. These formulations "are not different tests but represent two points on a sliding scale in which the degree of irreparable harm increases as the probability of success on the merits decreases." Big Country Foods, Inc. v. Bd. of Educ. of the Anchorage School Dist., 868 F.2d 1085, 1088 (9th Cir.1989). However, under either formulation, the moving party "must demonstrate a significant threat of irreparable injury, irrespective of the magnitude of the injury." Id.

II. EQUITABLE CONSIDERATIONS

Should members of AGCC fail to win a city contract due to the allegedly invalid preferences, plaintiff does not seriously dispute that any lost profits could not be remedied by a money judgment. In addition, at argument, plaintiff conceded that no AGCC member was currently asserting denial of a contract due to the MBE provisions.⁹ Plaintiff also asserts that members are deterred from bidding because of the five percent MBE bidding preference. However, only one member of plaintiff has come forward with such a complaint. See Hodgson Decl.

Given the above, plaintiff's pecuniary interest can be adequately protected by...