Coral Const. v. City & Co. of San Francisco

• Decision Date: 24 February 2004
• Docket Number: No. A101842.,A101842.
• Citation: 10 Cal.Rptr.3d 65,116 Cal.App.4th 6
• Court: California Court of Appeals Court of Appeals
• Parties: CORAL CONSTRUCTION, INC., Plaintiff and Appellant, v. CITY AND COUNTY OF SAN FRANCISCO et al., Defendants and Respondents.

10 Cal.Rptr.3d 65

116 Cal.App.4th 6

CORAL CONSTRUCTION, INC., Plaintiff and Appellant, v. CITY AND COUNTY OF SAN FRANCISCO et al., Defendants and Respondents.

No. A101842.

Court of Appeal, First District, Division 4.

February 24, 2004.

Rehearing Denied March 19, 2004.

John H. Findley, Stephen R. McCutcheon, Jr., Arthur B. Mark, III, Pacific Legal Foundation, for Appellant.

Dennis J. Herrera, San Francisco City Attorney, Wayne K. Snodgrass, Teresa L. Stricker, Sherri Sokeland Kaiser, Deputy City Attorneys, G. Scott Emblidge Moscone, Emblidge & Quadra for Respondent.

RIVERA, J.

I. INTRODUCTION

Coral Construction, Inc., (Coral) filed this action against the City and County of San Francisco and other individual defendants (collectively, City) challenging the constitutionality of City's Minority/Women/Local Business Utilization Ordinance (the Ordinance). In essence, Coral alleges that the Ordinance's provisions granting preferential treatment to women- and minority-owned businesses in bids for City contracts violates article I, section 31 of the California Constitution (Proposition 209). On summary judgment, City successfully challenged Coral's standing to sue for injunctive and declaratory relief, on the ground that Coral had failed to prove it would be bidding on an identifiable City contract subject to the Ordinance in the reasonably near future. We conclude that Coral's standing to challenge the ordinance does not depend upon the identification of a specific contract on which it will bid in the near future, and accordingly, we reverse.

II. BACKGROUND FACTS AND PROCEDURAL HISTORY

A. The Ordinance¹

The Ordinance is codified in chapter 12D.A. of the San Francisco Administrative Code. Its relevant provisions are summarized by the director of San Francisco's Human Rights Commission (HRC):

"Under section 12D.A.9(A) (`Bid Discount Program'), City departments must give specified percentage discounts to bids ... submitted by businesses certified by the HRC as minority business enterprises (`MBEs'), woman business enterprises (`WBEs'), local business enterprises (`LBEs'), as well as joint ventures with appropriate level of MBE, WBE or LBE participation. [¶] Under section 12D.A.17 (`Subcontracting Program'), bidders for certain types of prime City contracts must demonstrate their good faith efforts to provide certified MBEs and WBEs an equal opportunity to compete for subcontracts. A bidder may comply with the Subcontracting Program by documenting its good faith efforts to inform MBEs and WBEs of subcontracting opportunities. Bidders who show that they plan to use MBE and WBE subcontractors at a level one would expect absent discrimination need not document their good faith efforts."² Any prime contract bid that fails to comply with the subcontracting program is declared nonresponsive.

B. Coral's Work and Bidding History

Coral is a "specialty highway contractor" whose primary work involves the installation of road and freeway signage as well as guardrails and other safety appurtenances.³ Virtually all of Coral's work is in the public sector. Although headquartered in Oregon, Coral performs a large percentage of its work in California, including in the Bay Area. During the five years prior to the filing of this action (1997 to 2001) an average of 40 percent to 50 percent of Coral's total revenues came from its work in California. For the same five years, the gross revenues from Coral's work for City have comprised approximately 5 percent of Coral's total revenue.

In 2002 Coral acquired a controlling interest in D.C. Hubbs Construction, Inc., a California public works contractor. As a result, Coral now has the capability to do additional types of work, in particular, airport construction work. According to Jay Minor, Coral's chief operating officer, "[t]his acquisition increases Coral's opportunities for bidding on and for performing public works projects in California (including [City's] public construction projects) and does so with less subcontracting of work out to other firms."

Coral has been bidding on City's projects since 1996. In 1996 Marinship Construction Services was awarded a bid for work at the new international terminal at the San Francisco International Airport; Coral was the subcontractor for signs and sign structures. In 1997 Coral bid as a subcontractor for work on the relocation of McDonald Road, but the prime contract bid was unsuccessful. In 1997 Coral was also the subcontractor on a successful bid by Kulchin Condon Associates for work on the inbound/outbound terminal ramps at the airport. In 2000 Coral was invited to negotiate a supplemental contract for additional work in the terminal areas. The negotiations were successful, and Coral completed the additional work "on a fast-track schedule in time for the opening of the new terminal in the Summer of 2000."

In 2000 the airport put out to bid a project for additional signage at the airport (contract No. 5904.A). Two companies submitted bids: Coral and Agnotti & Reilly. Coral's bid did not include any subcontractors because Coral intended to do all of the work with its own crew.⁴ Coral was the low bidder; however, its bid was rejected as nonresponsive. The project manager wrote: "Specifically, Coral's bid failed to demonstrate compliance with subcontracting goals in that it failed to list its MBE/WBE subcontractors in its bid.... Coral also failed to demonstrate that it made sufficient good faith efforts to utilize MBE/WBE subcontractors by its failure to submit adequate Good Faith Efforts documentation.... The MBE & WBE goals for this contract are 11% and 5% respectively." The bid was awarded to Agnotti & Reilly, whose bid exceeded Coral's by 22 percent.⁵

After filing this action in September 2000, Coral continued to consider and to bid on projects in San Francisco.⁶ In 2001 Coral submitted a subcontract bid to JMB Construction for additional work at the San Francisco International Airport. Coral was accepted as the subcontractor and JMB was awarded the contract. Although Coral purchased the materials necessary to complete the work, in March 2002 this portion of the project was cancelled. The project manager stated that the cancellation occurred solely due to the post-September 11 declining economy and the resultant decline in airport revenues.

In January 2002 Coral purchased the plans and specifications for another airport project (taxiway Z bypass), but chose not to submit a bid for various reasons, including the relatively short workday count, Coral's work commitments on other projects, and the high (17 percent) disadvantaged business enterprise (DBE) goal (applying a federal regulation, not City's Ordinance) set forth in the bid documents. In June 2002 Coral bought the plans and specifications for two projects: the Lake Merced-John Muir Drive fishing pier and parking lot and the light rail transit project on Third Street. Coral declined to bid on the smaller Lake Merced project, but was solicited to submit bids as a subcontractor for the light rail project (also governed by federal regulations rather than the Ordinance). Coral submitted bids to 13 potential prime bidders and was the subcontractor on two of the three "apparent" low bids.⁷

C. Additional Facts

In his declaration opposing summary judgment Jay Minor states Coral is "ready, willing, and able and is continuing to bid on all appropriate and available opportunities that arise within its specialty areas of work in the San Francisco Bay Area. Specifically, Coral is awaiting further opportunities to bid on City projects at the Airport and within the City. When such opportunities arise, Coral is ready, willing, and able and intends to bid again and work on such projects...." Coral's work meets all professional standards and "[City] ha[s] never rejected any of Coral's ... work on [its] projects for failure to perform in a professional and workman-like manner, for failure to perform to contract specifications, for inadequate bonding or insurance, for lack of appropriate licensing, or for inability to perform."

Minor further avers that Coral is placed at a severe competitive disadvantage when it bids on City contracts because, inter alia, its contract bids are not entitled to the discounts that apply to WBE and MBE contractors and subcontractors, and if it complies with the Ordinance, its expenses are increased by the cost of outreach to MBE's and WBE's. Further, the Ordinance requires Coral to use MBE and WBE subcontractors rather than its own employees or other subcontractors of its own choosing, and to discriminate against non-WBE and -MBE enterprises who may want to participate as subcontractors. Minor states Coral is placed at risk of liability for such discrimination.

D. City's Evidence

City presented voluminous declarations and exhibits demonstrating the following facts:

All of Coral's contracts or bids have been for erecting and installing large, overhead roadway signs. As of the date Coral filed its complaint, City "only rarely" let contracts that involved the kind of signage work performed by Coral, and no MBE's or WBE's were certified to do this kind of work. Coral never competed directly with a WBE or MBE either as a prime contractor or as a subcontractor. Coral has bid on only one prime contract let by City.

Before filing its complaint Coral had bid as a subcontractor on three City projects, but these bids were under the pre-1998 ordinance. Coral did not submit bids for signage work included in three department of public works (DPW) projects let for bids in the three-year period from 1997 to 2000. D.C. Hubbs has never submitted a bid on any City contracts. Certain City contracts are not subject to the Ordinance (e.g., contracts funded by state or federal funds contracts for emergency services or construction, and contracts for over $10 million).

City also presented evidence that the next three to five years (i.e., 2002-2007) would produce few, if any,...