City of Cleveland v. State

90 N.E.3d 979

2017 Ohio 8882

CITY OF CLEVELAND, Plaintiff–Appellee

v.STATE of Ohio, Defendant–Appellant

No. 105500

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

RELEASED AND JOURNALIZED: December 7, 2017

Mike DeWine, Ohio Attorney General, By: Zachery P. Keller, Bridget C. Coontz, Assistant Attorneys General, 30 East Broad Street, 16th Floor, Columbus, Ohio 43215, ATTORNEYS FOR APPELLANT

Frederick T. Bills, David T. Patterson, Weston Hurd L.L.P., 10 West Broad Street, Suite 2400, Columbus, Ohio 43215, Amicus Curiae, For American Council of Engineering Companies of Ohio

Patrick A. Devine, Ice Miller, Arena District, 250 West Street, Suite 700, Columbus, Ohio 43215, Amicus Curiae, For Ohio Contractors Association

Barbara A. Langhenry, City of Cleveland Director of Law, By: Gary S. Singletary, Elizabeth M. Crook, L. Stewart Hastings, Assistant Directors of Law, 601 Lakeside Avenue, Room 106, Cleveland, Ohio 44114, ATTORNEYS FOR APPELLEE

Eve V. Belfance, Director of Law, By: Brian D. Bremer, Akron Law Department, 161 S. High Street, Suite 202, Akron, Ohio 44308, Amicus Curiae, For City of Akron

Joseph F. Scott, Scott & Winters, The Caxton Building, 812 E. Huron Road, Suite 490, Cleveland, Ohio 44115, Amicus Curiae, For The Campaign to Defend Local Solutions, Legal Scholars, and the International Municipal Lawyers Association

BEFORE: S. Gallagher, J., Keough, A.J., and Celebrezze, J.

JOURNAL ENTRY AND OPINION

SEAN C. GALLAGHER, J.:

{¶ 1} Defendant-appellant state of Ohio ("the State") appeals the trial court's judgment and order granting a permanent injunction that enjoined the State from enforcing 2016 Ohio H.B. No. 180 ("H.B. 180") and R.C. 9.49, which was subsequently designated R.C. 9.75 (herein referred to as " R.C. 9.75"). Upon review, we affirm the decision of the trial court. We find that the enactment of R.C. 9.75 was not a valid exercise of the legislature's authority pursuant to Ohio Constitution, Article II, Section 34 (hereafter referred to as " Article II, Section 34") and that the statute unconstitutionally infringes upon the municipal home-rule authority guaranteed by Ohio Constitution, Article XVIII, Section 3 (herein referred to as " Article XVIII, Section 3").

I. Background

2003—The Cleveland Ordinance

{¶ 2} Cleveland Codified Ordinances ("C.C.O.") Chapter 188, which is commonly called the Fannie Lewis Law, was enacted in 2003. The Fannie Lewis Law imposes local hiring requirements on public construction contracts over $100,000 by requiring that a minimum of 20 percent of the total construction work hours be performed by Cleveland residents, and that no fewer than 4 percent of those resident work hours be performed by low-income persons. C.C.O. Sections 188.02(a)(1), 188.01(g). The restriction does not apply to out-of-state workers because it "excludes the number of hours of work performed by non-Ohio residents." C.C.O. Section 188.01(c). The ordinance requires a contractor to pay a certain monetary amount for noncompliance and affords the city other remedies. C.C.O. Section 188.05. At the time of its passage, C.C.O. Chapter 188 comported with state laws.

{¶ 3} Cleveland City Council passed the Fannie Lewis Law because it believed the employment of Cleveland residents on construction projects funded, in part or in whole, with city assistance would help alleviate unemployment and poverty in the city of Cleveland. Although the efficacy of legislative policy decisions are largely irrelevant to judicial review, we note that the results of the Fannie Lewis Law have been largely favorable to Cleveland residents and low-income workers. The stipulated evidence presented to the court demonstrated that Cleveland residents averaged 21 percent of the hours worked on local Cleveland-financed construction contracts during the period 2013 to 2016. Over that period, Cleveland residents earned more than $34 million in wages. Of the 897,870 hours worked by Cleveland residents during this period, 100,638 hours were performed by low-income persons.

2014—Ohio Contractors Association Case

{¶ 4} Other Ohio cities, including Cincinnati, Columbus, and Akron, also impose local hiring requirements on public construction contracts. In 2014, the Ohio Contractors Association ("OCA") filed a complaint for injunctive and declaratory relief, alleging that the city of Akron's Local Hiring and Workforce Participation Policy violates the equal protection provision of both the United States Constitution and the Ohio Constitution. Ohio Contrs. Assn. v. Akron , N.D.Ohio No. 5:14CV0923, 2014 WL 1761611 (May 1, 2014). The federal court rejected the equal protection challenge, finding in part that "[Akron's] Local Hiring Policy does not create a competitive disadvantage for OCA members, all of whom currently stand on equal footing under the Policy with each other and with other contractors." Id. at *7. Subsequent to the federal court's decision, R.C. 9.75 was enacted.

2016—Enactment of R.C. 9.75

{¶ 5} In 2016, the General Assembly enacted what is now R.C. 9.75. R.C. 9.75 prohibits public authorities from requiring contractors on public improvement projects to employ a certain percentage of individuals who reside within a defined geographical area. R.C. 9.75 also prohibits the use of bid award bonuses or preferences to a contractor as an incentive to meet the local hiring requirements.

{¶ 6} R.C. 9.75(B) states as follows:

(1) No public authority shall require a contractor, as part of a prequalification process or for the construction of a specific public improvement or the provision of professional design services for that public improvement, to employ as laborers a certain number or percentage of individuals who reside within the defined geographic area or service area of the public authority.

(2) No public authority shall provide a bid award bonus or preference to a contractor as an incentive to employ as laborers a certain number or percentage of individuals who reside within the defined geographic area or service area of the public authority.

{¶ 7} In enacting the statute, the General Assembly referenced the right of an individual to choose where to live and Article II, Section 34, by recognizing the following:

(A) The inalienable and fundamental right of an individual to choose where to live pursuant to Section 1 of Article I, Ohio Constitution ;

(B) Section 34 of Article II, Ohio Constitution, specifies that laws may be passed providing for the comfort, health, safety, and general welfare of all employees, and that no other provision of the Ohio Constitution impairs or limits this power, including Section 3 of Article XVIII, Ohio Constitution.

2016 Ohio H.B. No. 180, Section 3.

{¶ 8} The General Assembly also indicated that the statute was enacted to address a matter of statewide concern and to provide for the general welfare of all employees:

The General Assembly finds, in enacting section 9.49 of the Revised Code in this act, that it is a matter of statewide concern to generally allow the employees working on Ohio's public improvement projects to choose where to live, and that it is necessary in order to provide for the comfort, health, safety, and general welfare of those employees to generally prohibit public authorities from requiring contractors, as a condition of accepting contracts for public improvement projects, to employ a certain number or percentage of individuals who reside in any specific area of the state.

2016 Ohio H.B. No. 180, Section 4.

2016—City of Cleveland Case

{¶ 9} On August 23, 2016, plaintiff-appellee the city of Cleveland ("the City") filed a verified complaint for declaratory judgment, temporary restraining order, and injunctive relief. The City also filed a motion for temporary restraining order and for preliminary and permanent injunction. The City challenged the constitutionality of R.C. 9.75, claiming the General Assembly improperly invoked Article II, Section 34 in enacting the statute and that the statute unconstitutionally infringes upon the City's home-rule authority.

{¶ 10} After the State responded, an expedited hearing was held and the trial court granted a preliminary injunction. The parties filed a joint stipulation waiving further argument or submission of evidence. Thereafter, the trial court granted the City's motion for permanent injunction upon considering all evidence from the preliminary injunction hearing and the pleadings and other filings of the parties.

{¶ 11} In a detailed opinion, the trial court found that "H.B. 180 was improperly enacted [under Article II, Section 34 ] because it does not provide for the comfort, health, safety, and welfare of employees; rather, H.B. 180 seeks only to dictate the terms by which municipalities may contract for workers in construction projects within their realm." The trial court then proceeded to consider whether the statute unconstitutionally interfered with the City's home-rule authority. The trial court applied the three-part test to determine whether a state statute takes precedence over a local ordinance and found in favor of the City on its claims.

{¶ 12} The trial court granted the City's motion for a permanent injunction and enjoined the State from enforcing R.C. 9.75, finding as follows:

(1) The General Assembly's reference to Article II, Section 34 of the Ohio Constitution as a justification for enacting H.B. 180 is improper, not well taken, and unconstitutional.

(2) H.B. 180 violates the Ohio Constitution by infringing upon the City's Home Rule powers of local self-government.

(3) H.B. 180 is not a general law and violates the Ohio Constitution by infringing upon the City's Home Rule authority to adopt and enforce within the City's limits such local police, sanitary and other similar regulations, as are not in conflict with general laws.

This appeal followed.

II. Assignments of Error

{¶ 13} The State presents the following two assignments of error for our review:

1. The trial court erred by ruling that R.C. 9.75 falls outside the General Assembly's power

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