S.D. Myers v. City & County of San Francisco

• Decision Date: 14 June 2001
• Docket Number: No. 99-16397,PLAINTIFF-APPELLANT,DEFENDANTS-APPELLEES,99-16397
• Citation: 253 F.3d 461,2001 WL 664233
• Parties: (9th Cir. 2001) S.D. MYERS, INC.,, v. CITY AND COUNTY OF SAN FRANCISCO AND SAN FRANCISCO HUMAN RIGHTS COMMISSION,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 461

253 F.3d 461 (9th Cir. 2001)

S.D. MYERS, INC., PLAINTIFF-APPELLANT, v. CITY AND COUNTY OF SAN FRANCISCO AND SAN FRANCISCO HUMAN RIGHTS COMMISSION, DEFENDANTS-APPELLEES.

No. 99-16397

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted November 14, 2000

Filed June 14, 2001

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Kevin H. Theriot, Esq., American Center for Law and Justice, Lawrenceville, Georgia, for the plaintiff-appellant.

Dennis Aftergut, Chief Assistant City Attorney, Deputy City Attorneys, City Hall, San Francisco, California, for the defendants-appellees.

Matthew A. Coles, Esq., American Civil Liberties Union, New York, New York, for the amicus.

Robert Kim, Esq., American Civil Liberties Union Foundation of Northern California, San Francisco, California, for the amicus.

Jennifer C. Pizer, Esq., Lambda Legal Defense and Education Fund, Inc., Los Angeles, California, for the amicus.

Appeal from the United States District Court for the Northern District of California Claudia Wilken, District Judge, Presiding D.C. No. CV-97-04463-CW

Before: J. Clifford Wallace, Raymond C. Fisher, and Johnnie B. Rawlinson, Circuit Judges.

Wallace, Circuit Judge

S.D. Myers, Inc. (Myers) appeals from a summary judgment in favor of the City and County of San Francisco (City). Myers argues that Chapter 12B of the San Francisco Administrative Code (Ordinance) is invalid under the dormant Commerce Clause, Due Process Clause, and California law. The Ordinance requires contractors with the City to provide nondiscriminatory benefits to employees with registered domestic partners. Myers also asserts that the district court erred when it determined that Myers lacked standing to argue that the Ordinance is preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§§§ 1001 et seq. The district court had jurisdiction under 28 U.S.C.§§§§ 1331, 1343, and 1367. We have jurisdiction pursuant to 28 U.S.C.§§ 1291. We affirm, but remand for the district court's consideration an issue raised for the first time in this appeal.

I.

For nearly thirty years, the City has pledged not to do business with entities that discriminate on the basis of sexual orientation. See Air Transport Ass'n of America v. City & County of San Francisco, 992 F. Supp. 1149, 1156-57 (N.D. Cal. 1998). In the spring of 1997, the City, in an effort to enhance that promise by adding concrete requirements, enacted the Ordinance, which provides as follows:

No contracting agency of the City, or any department thereof, acting for or on behalf of the City and County, shall execute or amend any contract . . . with any contractor that discriminates in the provision of bereavement leave, family medical leave, health benefits, membership or membership discounts, moving expenses, pension and retirement benefits or travel benefits as well as any [other] benefits . . . between employees with domestic partners and employees with spouses, and/or between the domestic partners and spouses of such employees, where the domestic partnership has been registered with a governmental entity pursuant to State or local law authorizing such registration . . . .

Ordinance §§ 12B.1(b).

The Ordinance states that this requirement of nondiscrimination extends to

(i) any of a contractor's operations within San Francisco; (ii) a contractor's operations on real property outside of San Francisco owned by the City or which the City has a right to occupy if the contractor's presence at that location is connected to a contract or property contract with the City; [and] (iii) where the work is being performed by a contractor for the City within the United States.

Id. §§ 12B.1(d). If a contractor is found to have breached these nondiscrimination requirements, the City may impose a $50 penalty per day for each employee affected by the discrimination and may terminate or suspend the contract, in whole or in part. Id. §§ 12B.2(h). In addition, the breaching contractor may be deemed an "irresponsible bidder" and be barred from contracting with the City for up to two years. Id. §§ 12B.2(i).

In 1997, Myers, an Ohio-based corporation, bid on a servicing contract for City-owned electrical transformers located in Tuolomne County, California. The City notified Myers that the company was the low bidder on the contract, but that in order to be a "responsive bidder," Myers was required to certify its willingness to comply with the Ordinance. Myers declined to certify because compliance with the Ordinance was contrary to the religious and moral principles adhered to by the corporation. Upon Myers's failure to issue the required certification, its bid was rejected by the City.

Myers filed suit urging that the Ordinance be held invalid under the Commerce Clause, Due Process Clause, ERISA, and California law and prayed for relief in the form of a declaratory judgment, an injunction, and money damages. On cross-motions for summary judgment, the district court upheld the Ordinance, except as to a provision, not at issue in this appeal, which required contractors to abide by the Ordinance at "any of a contractor's operations elsewhere within the United States." See Air Transport Ass'n , 992 F. Supp. at 1163-64. In a companion case, the district court determined that ERISA preempted the Ordinance as to benefits"covered by ERISA and provided through ERISA plans." Id. at 1180. However, the district court did not extend this ruling to Myers because it held that Myers did not have standing to argue ERISA preemption. The district court reasoned that a decision in Myers's favor grounded in ERISA would not redress the injury to Myers in light of its stipulation that"Myers is unwilling to comply with any of the City's equal benefits requirements, even if Myers' unwillingness to comply means that Myers would consequently be ineligible for the award of a City contract."

II.

The district court's entry of summary judgment and its resolution of state and federal constitutional issues are reviewed de novo. See Salve Regina College v. Russell, 499 U.S. 225, 231 (1991); Valley Bank of Nevada v. Plus System, Inc., 914 F.2d 1186, 1189 (9th Cir. 1990). We will affirm if the district court applied the correct substantive law and the evidence reveals no genuine issue of material fact when viewed in the light most favorable to the party opposing summary judgment. See Valley Bank, 914 F.2d at 1189.

A.

In reviewing challenges to local regulations under the Commerce Clause, we follow a two-tiered approach:

[1] When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-ofstate interests, we have generally struck down the statute without further inquiry. [2] When, however, a statute has only indirect effects on interstate commerce and regulates evenhandedly, we have examined whether the State's interest is legitimate and whether the burden on interstate commerce clearly exceeds the local benefits.

Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579 (1986) (internal citations omitted); see also NCAA v. Miller, 10 F.3d 633, 638 (9th Cir. 1993). The "central rationale" of the dormant Commerce Clause"is to prohibit state or municipal laws whose object is local economic protectionism, laws that would excite those jealousies and retaliatory measures the Constitution was designed to prevent." C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 390 (1994).

"Impact on out-of-state residents figures in the equation only after it is decided that the city is regulating the market rather than participating in it, for only in the former case need it be determined whether any burden on interstate commerce is permitted by the Commerce Clause." White v. Mass. Council of Constr. Employers, Inc., 460 U.S. 204, 210 (1983); see also J.F. Shea Co. v. City of Chicago, 992 F.2d 745, 748 (7th Cir. 1993). For purposes of this appeal, we assume, without deciding, that the City is regulating rather than participating in the market through its enforcement of the Ordinance.

1.

Myers first contends that the Ordinance is facially invalid under a first tier inquiry because it "directly regulates interstate commerce." NCAA, 10 F.3d at 638. "Direct regulation occurs when a state law directly affects transactions that take place across state lines or entirely outside of the state's borders." Valley Bank, 914 F.2d at 1189-90 (internal quotations omitted). The Supreme Court has emphasized that the "practical effect" of a challenged statute is"the critical inquiry" in determining whether that statute constitutes direct regulation. Healy v. Beer Inst., 491 U.S. 324, 336 (1989); see also Valley Bank, 914 F.2d. at 1190. "[P]ractical effect . . . must be evaluated not only by considering the consequences of the statute itself, but also by considering how the challenged statute may interact with the legitimate regulatory regimes of other States . . . ." Healy, 491 U.S. at 336; see also NCAA, 10 F.3d at 639-40; Valley Bank, 914 F.2d at 1191-92.

In order to prevail on this facial challenge to the Ordinance, Myers must meet a high burden of proof; it must "establish that no set of circumstances exists under which the [Ordinance] would be valid. The fact that[the Ordinance] might operate unconstitutionally under some conceivable set of circumstances is insufficient to render it wholly invalid." United States v. Salerno, 481 U.S. 739, 745 (1987). Myers asserts we should not apply Salerno and argues that Salerno has been undermined by recent Supreme Court cases. In place of Salerno, Myers would have us craft a new standard, based upon language in Planned Parenthood v. Casey, 505 U.S. 833, 895 (1992), that would hold a law to be facially unconstitutional when it would operate as a substantial obstacle to an otherwise lawful course of action in a large fraction of relevant cases.

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