Coral Constr. Inc v. City And County Of San Francisco

50 Cal.4th 315

235 P.3d 947

113 Cal.Rptr.3d 279

CORAL CONSTRUCTION, INC., Plaintiff and Respondent,

v.CITY AND COUNTY OF SAN FRANCISCO et al., Defendants and Appellants.

Schram Construction, Inc., Plaintiff and Respondent,

v.City and County of San Francisco et al., Defendants and Appellants.

No. S152934.

Supreme Court of California

Aug. 2, 2010.

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Dennis J. Herrera, City Attorney, Wayne K. Snodgrass, Danny Chou, Sherri Sokeland Kaiser and James M. Emery, Deputy City Attorneys; Moscone, Emblidge & Quadra, G. Scott Emblidge, Rachel J. Sater, Robert D. Sanford, San Francisco, Michael P. Brown; Meyers, Nave, Riback, Silver & Wilson, Mara E. Rosales, Joseph M. Quinn, Oakland, and K. Scott Dickey, San Francisco, for Defendants and Appellants.

Lewis, Feinberg, Lee, Renaker & Jackson, Bill Lann Lee, Vincent Cheng and Lindsay Nako, Oakland, for Council of Asian American Business Associations, Association of Asian American Attorney and CPA Firms, Chinese for Affirmative Action, Asian American Justice Center, Asian Law Caucus and Asian American Bar Association of the Greater Bay Area as Amici Curiae on behalf of Defendants and Appellants.

Nancy Ramirez, San Jose, Nicholas Espiritu; Sonnenschein Nath & Rosenthal, Christopher E. Prince, Shirin Soleman, Los Angeles, Demian L. Pay and Manuel Alvarez, Jr., for Mexican American Legal Defense and Educational Fund as Amicus Curiae on behalf of Defendants and Appellants.

Bingham McCutchen, Michael Isaku Begert, Karen Lu, East Palo Alto, Rianne E. Nolan, Renee M. DuPree, Nancy M. Wang, Elizabeth M. Hall; Sujal J. Shah, San Francisco; Lawyers' Committee for Civil Rights and Oren Sellstom for Coalition for Economic Equity as Amicus Curiae on behalf of Defendants and Appellants.

Frank C. Newman International Human Rights Clinic and Constance de la Vega as Amici Curiae on behalf of Defendants and Appellants.

Pacific Legal Foundation, John H. Findley, Sharon L. Browne, Alan W. Foutz and Paul J. Beard II, Sacramento, for Plaintiffs and Respondents.

Gordon M. Fauth, Jr., and Michael J. Meyer for Asian American Legal Foundation as Amicus Curiae on behalf of Plaintiffs and Respondents.

Law Office of Anthony T. Caso and Anthony T. Caso, Sacramento, for American Civil Rights Institute as Amicus Curiae on behalf of Plaintiffs and Respondents. WERDEGAR, J. Article I, section 31 of the California Constitution (section 31) forbids a city awarding public contracts to discriminate or grant preferential treatment based on race or gender. (See generally Hi-Voltage Wire Works, Inc. v. City of San Jose (2000) 24 Cal.4th 537, 101 Cal.Rptr.2d 653, 12 P.3d 1068 ( Hi-Voltage ).) Here, a city whose public contracting laws expressly violate section 31 challenges its validity under the so-called political structure doctrine, a judicial interpretation of the federal equal protection clause. (U.S. Const., 14th Amend.; see generally Washington v. Seattle School Dist. No. 1 (1982) 458 U.S. 457, 102 S.Ct. 3187, 73 L.Ed.2d 896 ( Seattle ) and Hunter v. Erickson (1969) 393 U.S. 385, 89 S.Ct. 557, 21 L.Ed.2d 616 ( Hunter ).) We conclude section 31 does not violate the political structure doctrine.

I. Background

For the last 26 years, defendant City and County of San Francisco (City) has preferentially awarded public contracts to minority-owned business enterprises (MBE's) and women-owned business enterprises (WBE's). The City's Board of Supervisors (Board) has mandated these preferences in a series of ordinances adopted over time, justifying each with legislative findings purporting to show continuing discrimination by the City against MBE's and WBE's. The details of the program have evolved, partly in response to changes in the law governing the validity of such preferences. Plaintiffs Coral Construction, Inc. (Coral) and Schram Construction, Inc. (Schram) challenge the 2003 version of the ordinance ¹ as unconstitutional under section 31.

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. ( Assoc. Gen. Contr. of Cal. v. City & County of S.F. (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. ( Richmond v. J.A. Croson Co. (1989) 488 U.S. 469, 498-506, 109 S.Ct. 706, 102 L.Ed.2d 854 ( Croson).) The legislative findings supporting Richmond's program did not show the requisite “ ‘strong basis in evidence for [the city's] conclusion that remedial action was necessary.’ ” ( Id., at p. 500, 109 S.Ct. 706, quoting Wygant v. Jackson Board of Education (1986) 476 U.S. 267, 277, 106 S.Ct. 1842, 90 L.Ed.2d 260 (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, 109 S.Ct. 706 (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 Gen. Contractors of Cal. v. Coalition (9th Cir.1991) 950 F.2d 1401, 1418.)

The voters approved Proposition 209 at the November 1996 general election, thus adding section 31 to article I of the state Constitution. Section 31 declares that the state, including its political subdivisions, “shall not discriminate against, or grant 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.” (§ 31, subd. (a).) The next year, the Ninth Circuit held section 31 did not violate the federal equal protection clause, as interpreted in the political structure cases (e.g. Seattle, supra, 458 U.S. 457, 102 S.Ct. 3187, and Hunter, supra, 393 U.S. 385, 89 S.Ct. 557), and vacated a preliminary injunction against section 31's enforcement issued by the district court. ( Coalition for Economic Equity v. Wilson (9th Cir.1997) 122 F.3d 692, 711 ( Wilson ), vacating judg. in (N.D.Cal.1996) 946 F.Supp. 1480.)

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.) 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 preserving bid 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, 101 Cal.Rptr.2d 653, 12 P.3d 1068.) 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, 101 Cal.Rptr.2d 653, 12 P.3d 1068.) Like the plurality in Croson, supra, 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854, 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, 101 Cal.Rptr.2d...