Coral Constr., Inc. v. City of S.F.

• Decision Date: 02 August 2016
• Docket Number: A138901
• Parties: CORAL CONSTRUCTION, INC., et al., Plaintiffs and Appellants, v. CITY AND COUNTY OF SAN FRANCISCO, et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

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

A138901

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOUR

August 2, 2016

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(County of San Francisco Nos. 319549 & 421249)

This litigation began over a decade ago when, in 2001, Coral Construction, Inc. (Coral) filed a complaint against the City and County of San Francisco and various other related parties (collectively, the City), alleging that a City ordinance mandating race- and gender-based preferences in public contracting violated Proposition 209, codified in section 31 of article I of the California Constitution. Since that time, the matter has spawned two appellate court decisions and an opinion from the California Supreme Court. (See Coral Construction, Inc. v. City and County of San Francisco (2007) 149 Cal.App.4th 1218 (Coral II), review granted and opn. superseded by Coral Construction, Inc. v. City and County of San Francisco (2010) 50 Cal.4th 315 (Coral Construction); Coral Construction, Inc. v. City and County of San Francisco (2004) 116 Cal.App.4th 6 (Coral I).) Most recently, the Supreme Court remanded the case to the trial court for further proceedings to determine the constitutionality of the challenged ordinance in accordance with the analytical framework set forth in its opinion. (Coral Construction, supra, 50 Cal.4th at pp. 335-338.) Instead, the trial court—noting that the ordinance at issue had since been repealed—concluded that "it is now speculative to say that the City will enact race-or gender-conscious legislation in the future" and therefore dismissed the litigation as moot. Because we agree with the trial court that no justiciable controversy remains, we affirm.

I. BACKGROUND

A. The Early Ordinances, Proposition 209, and the Commencement of this Action

Between 1984 and 2004 (when its continued enforcement was enjoined), the City operated under several iterations of its Minority/Women/Local Business Utilization Ordinance (Ordinance). In its various forms, the Ordinance called for race- and gender-conscious remedies to ameliorate the effects of past discrimination on minority-owned business enterprises (MBE's) and women-owned business enterprises (WBE's) in the awarding of City contracts. (Coral II, supra, 149 Cal.App.4th at p. 1225.) In Coral Construction, the Supreme Court admirably summarized the early history of the Ordinance and related developments in the law of preferences as follows:

"The City's first MBE/WBE ordinance, adopted in 1984, set aside specified percentages of public contracting dollars for MBE's and WBE's. The ordinance also gave bid discounts, which required the City's contracting authorities to treat bids by MBE's and WBE's as if they were lower than they in fact were. Both the set-asides and the bid discounts afforded MBE's and WBE's a competitive advantage over other bidders.

"In 1989, the United States Court of Appeals for the Ninth Circuit held the City's 1984 ordinance violated the federal equal protection clause (U.S. Const., 14th Amend.) in giving preferences based on race, and that it also violated the City's own charter in several respects. (Associated General Contractors of California v. City & County of San Francisco (9th Cir. 1987) 813 F.2d 922, 944.) Shortly thereafter, the United States Supreme Court determined that Richmond, Virginia's MBE set-asides violated equal protection. (City of Richmond v. J. A. Croson Co. (1989) 488 U.S. 469, 498-506 [102 L.Ed. 2d 854, 109 S. Ct. 706] (Croson).) The legislative findings supporting Richmond's program did not show the requisite ' "strong basis in evidence for [the city's] conclusionthat remedial action was necessary." ' (Id., at p. 500, quoting Wygant v. Jackson Board of Education (1986) 476 U.S. 267, 277 [90 L. Ed. 2d 260, 106 S. Ct. 1842] (plur. opn. of Powell, J.).) Four justices suggested, however, that in 'the extreme case' not presented in Croson, 'some form of narrowly tailored racial preference might be necessary' as a remedy 'to break down patterns of deliberate exclusion.' (Croson, at p. 509 (plur. opn. of O'Connor, J.).)

"Responding to these judicial decisions, San Francisco's Board in 1989 passed a new ordinance eliminating set-asides but retaining bid discounts and other preferences for MBE's and WBE's. When an organization of businesses sued to enjoin the ordinance's enforcement, the City argued the equal protection clause required preferences as a remedy for discrimination. The federal district court declined to issue interim relief because the plaintiffs had failed to demonstrate a sufficient likelihood of success on the merits. (Associated General Contractors v. San Francisco (N.D.Cal. 1990) 748 F. Supp. 1443, 1456.) The Ninth Circuit affirmed. (Associated General Contractors of California v. Coalition (9th Cir. 1991) 950 F.2d 1401, 1418.)" (Coral Construction, supra, 50 Cal.4th at pp. 320-321.)¹

Thereafter, effective November 6, 1996, the California electorate adopted Proposition 209, the California Civil Rights Initiative, adding article I, section 31, to the California Constitution (section 31). (Cal. Const., art. I, § 31; Coral II, supra, 149 Cal.App.4th at p. 1225.) Section 31 prohibits state and local governments from discriminating against, or granting preferential treatment to, "any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting." (Cal. Const., art I, § 31, subds. (a) & (f).) Certain actions, however, are exempted from the mandate of section 31. (Id., subds. (b)-(e).) Thus, for instance, the legislation does not apply if the action at issue isrequired to maintain eligibility for federal funds. (Id., subd. (e).) Further, the statute also contains a standard savings clause, which provides that "[i]f any part or parts of this section are found to be in conflict with federal law or the United States Constitution, the section shall be implemented to the maximum extent that federal law and the United States Constitution permit." (Id., subd. (h).) Under this language, if race- or gender-conscious remedies are required under the federal equal protection clause to remedy intentional discrimination, they would be exempted from the strictures of section 31. (See Hi-Voltage Wire Works, Inc. v. City of San Jose (2000) 24 Cal.4th 537, 567 (High-Voltage).)

Events impacting the Ordinance in the wake of Proposition 209 were summarized by the Coral Construction Court as follows:

"At the time the voters adopted section 31, the MBE/WBE ordinance then in effect was set to expire on October 31, 1998. Before the ordinance expired, the City's Board and its Human Rights Commission (HRC) conducted investigations for the stated purpose of 'gaug[ing] the effectiveness of the prior [MBE/WBE] Ordinances . . . and to assess the need for further and continuing action.' (S.F. Admin. Code, former § 12D.A.2.) The Board found that MBE's and WBE's were receiving a smaller share of City contracts than would be expected based on their availability, and that '[t]his poor utilization [could not] be attributed to chance' and was, instead, 'due to discrimination by the City and discrimination in the private market.' (S.F. Admin. Code, former § 12D.A.2.2.) In legislative findings setting out the basis for this conclusion, the Board cited its own statistical studies, similar studies by other governmental entities in the San Francisco Bay Area, testimony and oral histories recounting anecdotes of discrimination, 'social science materials concerning discrimination against women and minorities in the Bay Area and in public contracting,' and data showing that 'the decision makers in the City contracting process—the City department heads and general and deputy managers—have been and continue to be overwhelmingly Caucasian males' operating under an ' "old boy network." ' (S.F. Admin. Code, former § 12.D.A.2 (findings 1, 15).)

"Based on these findings, the Board in 1998 adopted a new ordinance preservingbid discounts for MBE's and WBE's, and requiring prime contractors either to use MBE and WBE subcontractors at levels set by the HRC or to make good faith efforts to do so through preferential outreach efforts targeted at such businesses. (S.F. Admin. Code, former §§ 12D.A.4, 12D.A.5, 12D.A.17.)

"In 2000, while San Francisco's 1998 ordinance was still in effect, we held that section 31 invalidated the City of San Jose's public contracting program because it mandated participation goals for, and preferential outreach efforts directed to, MBE's and WBE's. (Hi-Voltage, supra, 24 Cal.4th 537, 562-565.) Section 31 does not tolerate, we explained, race- and gender-conscious preferences the equal protection clause does not require but merely permits. (See Hi-Voltage, at p. 567.) Like the plurality in Croson, supra, 488 U.S. 469, however, we held out the possibility that the federal equal protection clause might sometimes require race-conscious remedies to remedy intentional discrimination. (Hi-Voltage, at p. 568 ['Where the state or a political subdivision has intentionally discriminated, use of a race-conscious or race-specific remedy necessarily follows as the only, or at least the most likely, means of rectifying the resulting injury.']; see Croson, at p. 509 (plur. opn. of O'Connor, J.).)

"In 2001, plaintiff Coral commenced the action now before us in the San Francisco Superior Court, seeking declaratory and injunctive relief against the 1998 ordinance. The ordinance was set to expire in 2003. (S.F. Admin. Code, former §...