HI-VOLTAGE WIRE WORKS, INC., et al., Plaintiffs and Respondents, v. CITY OF SAN JOSE, et al., Defendants and Appellants.
-- May 26, 1999
Joan Gallo, City Attorney, George Rios, Assistant City Attorney, Glenn D. Schwarzbach and Robert Fabela, Deputy City Attorneys, Attorneys for Defendants and Appellants.Sharon L. Browne, Deborah J. LaFetra and Mark T. Gallagher, Sacramento, Attorneys for Plaintiffs and Respondents.Morrison & Foerster, Alan Cope Johnston, Su W. Hwang, Cynthia L. Lopez, Katherine A. Zonana and Sharyn K. Funamura, Palo Alto, Attorneys for amici curiae United Minority Business Entrepreneurs and Santa Clara County Black Chamber of Commerce on behalf of Appellants.Louise H. Renne, City Attorney, Mara E. Rosales, Ellen M. Forman and Teresa L. Stricker-Croley, Deputy City Attorneys, Attorneys for amici curiae City and County San Francisco on behalf of Appellants.Moscone, Emblidge & Quadra and G. Scott Emblidge, San Francisco, Attorneys for amici curiae Counties of Alameda and Marin, and Cities of Albany, Berkeley, Los Angeles, Oakland, Redlands, Sacramento and San Pablo on behalf of Appellants.Beth H. Parker, Attorney for amicus curiae Equal Rights Advocates on behalf of Appellants.Eva J. Paterson, San Francisco, and Oren Sellstrom, Attorneys for amicus curiae Lawyers' Committee for Civil Rights of the San Francisco Bay Area on behalf of Appellants.Edward Chen, Attorney for amicus curiae American Civil Liberties Union Foundation of Northern California on behalf of Appellants.William McNeill, III and Julian Gross, San Francisco, Attorneys for amicus curiae Employment Law Center on behalf of Appellants.
California Constitution, article I, section 31, added by Proposition 209 in November 1996, prohibits governmental entities from discriminating against or granting “preferential treatment” to any individual or group based on race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. At issue in this case is a municipal program designed to increase participation by minority and women businesses in public construction projects. The superior court determined that the program violated article I, section 31, because it accorded an advantage to certain subcontractors based on their race or sex. The court therefore enjoined the City of San Jose (“City”) from implementing its program. The City appeals. We agree with the superior court's conclusion and therefore affirm the judgment.
I. History of the Nondiscrimination Program
Before the adoption of Proposition 209, the City required contractors performing city construction contracts to maintain affirmative action programs to ensure equal opportunity in employment and subcontracting. In 1983 the City established a program to encourage participation in public works projects by Minority Business Enterprises (MBEs) and Women Business Enterprises (WBEs).1 For each contract the City set a “participation goal” which was based on the “availability and ability of the MBE and WBE to do the work to be contracted.” A construction contract would be awarded to the “lowest responsible bidder,” where a “responsible bidder” by definition had met or exceeded the MBE/WBE participation goal or demonstrated “reasonable efforts to obtain MBE/WBE participation.” “Reasonable efforts” by the contractor entailed documenting the steps taken, including at least the following: written notice to at least four MBE/WBEs soliciting their interest in the project; follow-up contact to determine whether these MBE/WBEs were interested; and written reasons justifying rejection of an MBE's or WBE's low bid.
In 1989, following the decision of the United States Supreme Court in City of Richmond v. J.A. Croson Co. (1989) 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854,2 the City suspended the MBE/WBE program and commissioned a “Disparity Study” to determine whether there was a statistically significant disparity in the number of contracts and subcontracts awarded to MBE/WBE firms and the dollar value of those contracts. The resulting report, issued in 1990, concluded that the number of contracts awarded was not significantly different from the number expected based on the availability of MBE/WBE contractors,3 but there was a significant disparity in the amounts awarded to MBE subcontractors.
In response to the Disparity Study, the City adopted the “MBE/WBE Construction Program” to encourage contractors to engage in non-discriminatory subcontracting. The requirements of the new program, like those of 1983, involved MBE/WBE participation goals and documentation of steps taken by the contractor to meet those goals (“good faith efforts”). These elements remained substantially the same until the adoption of Proposition 209.
California voters passed Proposition 209 during the general election of November 5, 1996, thereby adding article I, section 31, to the state Constitution. Subdivision (a) of article I, section 31, provides: “The state 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.”
After the passage of Proposition 209, the City undertook measures to implement the proscriptions of the new constitutional provision through a new program, the “Nondiscrimination/ Nonpreferential Treatment Program Applicable to Construction Contracts in excess of $50,000.” The Office of Affirmative Action/Contract Compliance was renamed the Office of Equality Assurance. The new program, adopted through Resolution No. 67002, reaffirmed that discriminatory practices still existed in construction contracting, as found in the 1990 Disparity Study, and it attempted to “ensure that the historical discrimination is not perpetuated” and “clarify” the City's policy against discrimination and preferences in the subcontracting of City construction projects. Shortly after respondents filed this lawsuit, the program was modified by Resolution No. 67005. The parties thereafter stipulated that the program described in Resolution No. 67005 (hereafter, “the Program”) was the one at issue in the litigation.
The stated purpose of the Program is to prohibit discrimination and preferences in the subcontracting of City construction contracts. Contractors bidding on City construction projects are required at the time they submit their bids to demonstrate that they have not discriminated or given preference to any subcontractors based on race, sex, color, age, religion, sexual orientation, disability, ethnicity, or national origin.
There are two alternative methods by which contractors can fulfill this requirement: “Documentation of Outreach” and “Documentation of Participation.” The “Outreach” option entails keeping written records of three steps undertaken to obtain MBE/WBE subcontracting bids. The contractor must first send written notice, or “solicitation letters,” to four certified MBE/WBEs for each trade area identified for the project.4 He or she must then follow up the solicitation letter by contacting those MBE/WBE firms to ascertain their interest in participating in the project.5 Finally, the contractor must negotiate in good faith with any interested MBE/WBE and not “unjustifiably” reject an MBE/WBE bid. The contractor documents compliance with this step by specifying the reason for rejecting any MBE/WBE bid.
The second method of demonstrating nondiscrimination in the selection of subcontractors allows the contractor to invoke an “evidentiary presumption” of nondiscrimination by listing a sufficient number of the MBE/WBE participants in the bid. If the bid includes at least the number of MBE/WBE subcontractors that would be expected “in the absence of discrimination,” then the City presumes no discrimination has occurred.6 For each project the City determines the percentage of MBE/WBE firms that would be expected absent discrimination according to a number of factors, including the number of potential subcontracting opportunities and the number of available MBE/WBE firms.
If a contractor fails to document strict compliance with either of these two options, his or her bid is deemed “nonresponsive” and is rejected, as it is considered not to be a “responsible” bid.7 Every bidder, including MBE/WBE businesses and contractors not planning to subcontract any of the work, is subject to the Program requirements.
II. The Litigation
Respondents Allen Jones, a city taxpayer, and Hi-Voltage Wire Works, a general contracting firm, challenged the City's program as a violation of article I, section 31. In 1997 Hi-Voltage Wire Works, doing business as Power Providers, was the apparent low bidder on a circuit switcher upgrade project for a water pollution control plant. Hi-Voltage intended to use its own work force, however, and therefore failed to satisfy the conditions outlined in Resolution No. 67002. The City rejected its bid.
In their complaint respondents alleged that Resolution No. 67002 required contractors to accord “unlawful preferences” to minority and women subcontractors by giving them “special assistance and information” that non-MBE/WBE subcontractors were not entitled to receive. Respondents sought declaratory relief and an injunction to prevent the City from continuing the Program.
Both parties moved for summary judgment. Relying on Monterey Mechanical Co. v. Wilson (9th Cir.1997) 125 F.3d 702, the superior court found both components of the Program to constitute a classification based on race and sex, in violation of article I, section 31.
A. Framework of the Analysis
The sole issue before us is the facial validity of the City's construction contracting program under article I, section 31. To address this question we must examine the provision itself to determine whether the “evidentiary presumption” and “outreach” features of the Program amount to discrimination or “preferential treatment” favoring MBE/WBEs.
We are not asked to pass judgment on the validity of article I, section 31, under the United States Constitution. (See Coalition for Economic Equity v. Wilson (9th Cir.1997) 122 F.3d 692.) Nor is there any dispute over the applicability of this provision to the conduct of respondent Hi-Voltage Wire Works. The City does not contend, for example, that a contractor's solicitation of subcontracting bids for City construction projects does not occur “in the operation of” public contracting. And it has not contested respondents' standing to challenge the implementation of the Program as unlawful discrimination or preferential treatment within the meaning of article I, section 31.8 On their part respondents do not question the statistical underpinnings of the City's conclusion that the Program is necessary to eliminate the disparity in subcontracting opportunities between MBE/WBE and non-MBE/WBE businesses.9 Finally, “[w]e do not consider or weigh the economic or social wisdom or general propriety of the initiative. Rather, our sole function is to evaluate article [I, section 31,] legally in the light of established constitutional standards.” (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 219, 149 Cal.Rptr. 239, 583 P.2d 1281.)
Our analysis is thus confined to the question of whether the Program compels prime contractors to give MBE/WBE subcontractors “preferential treatment” or to “discriminate against” non-MBE/WBE firms.10 While this question is a straightforward one, the answer is not. The purpose of the Program-to eradicate and prevent discrimination in public projects-clearly comports with the constitutional prohibition. In the City's view, the only means of achieving this objective is to require each bidding contractor to take concrete steps to prove he or she is not discriminating against minority or women subcontractors. To invalidate its Program may leave public entities without an effective means of assuring minority and women businesses equal bidding opportunity in public works projects, and it thus may indirectly promote discrimination by prime contractors. On the other hand, if a public entity attempts to correct discrimination against ethnic minorities and women by preferring MBE/WBE businesses over non-MBE/WBE businesses, it contravenes the constitutional proscription of article I, section 31. In effect, the adoption of article I, section 31, places governments seeking to eradicate discrimination in a no-win situation.
Nevertheless, we are bound to interpret the law as it is written. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 301, 58 Cal.Rptr.2d 855, 926 P.2d 1042.) It is not within the province of this court to rewrite a law or alter its boundaries to embrace an act or policy not reflected in its plain language. As justified as the Program may be, it nonetheless cannot survive if its ends are achieved by contravention of a constitutional mandate.
Thus, in order to determine the lawfulness of the Program, we must determine whether the language of article I, section 31, accommodates the methods used by the City to accomplish its goal of eradicating private discrimination in public projects. Our paramount objective in undertaking this analysis is to construe the provision in a manner that effectuates the voters' intent (Board of Supervisors v. Lonergan (1980) 27 Cal.3d 855, 863, 167 Cal.Rptr. 820, 616 P.2d 802; In re Lance W. (1985) 37 Cal.3d 873, 889, 210 Cal.Rptr. 631, 694 P.2d 744), in light of “our solemn duty to jealously guard the initiative power, it being one of the most precious rights of our democratic process.” (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, 248, 149 Cal.Rptr. 239, 583 P.2d 1281, internal quotation marks omitted.) Accordingly, we examine article I, section 31, to discern the purpose of the electorate in passing Proposition 209.
B. Construction of Article I, Section 31
Since a constitution is a “ ‘mere framework,’ ” it is “ ‘necessarily couched in general terms' ” and therefore must be construed “ ‘liberally and on broad general lines, so that it may accomplish in full measure the objects of its establishment․’ [Citation.]” (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d at pp. 244-245, 149 Cal.Rptr. 239, 583 P.2d 1281.) As with legislative enactments, interpreting a constitutional provision adopted by initiative must begin with its text. The words of the provision must be read in context and given their ordinary and popular meaning. (Id. at p. 245, 149 Cal.Rptr. 239, 583 P.2d 1281; Halbert's Lumber, Inc. v. Lucky Stores, Inc. (1992) 6 Cal.App.4th 1233, 1239, 8 Cal.Rptr.2d 298.) If a term has more than one meaning, the one that best promotes the underlying purpose of the provision should be adopted. (Winnett v. Roberts (1986) 179 Cal.App.3d 909, 918, 225 Cal.Rptr. 82.)
Only if the language remains uncertain is it appropriate to resort to extrinsic interpretive aids to determine the voters' understanding and intent. (ITT World Communications, Inc. v. City and County of San Francisco (1985) 37 Cal.3d 859, 868, 210 Cal.Rptr. 226, 693 P.2d 811; Board of Supervisors v. Lonergan, supra, 27 Cal.3d at p. 866, 167 Cal.Rptr. 820, 616 P.2d 802.) In such cases we may consider the ballot pamphlet-including the Attorney General's summary, arguments, and the legislative analyst's comments-because we presume the voters considered these materials in deciding whether to approve the measure. (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d at p. 245-246, 149 Cal.Rptr. 239, 583 P.2d 1281; San Francisco Taxpayers Assn. v. Board of Supervisors (1992) 2 Cal.4th 571, 579-580, 7 Cal.Rptr.2d 245, 828 P.2d 147.)
The language under scrutiny in this case is contained in subdivision (a) of article I, section 31: “The state 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.” (Emphasis added.) Subdivision (f) clarifies that the term “state” includes any city or other “governmental instrumentality of or within the state.”
Proposition 209 was written in broad terms. There does not appear to be any specialized meaning of “discriminate” or “preferential treatment” in the text of the initiative itself. Read in their natural and ordinary sense, these terms suggest that in awarding public contracts, any advantage given to a person or group based on ethnicity, race, or sex is constitutionally prohibited.
Relying on Lungren v. Superior Court (1996) 48 Cal.App.4th 435, 55 Cal.Rptr.2d 690 (“Lungren ”), the City argues article I, section 31, has a narrower reach. In Lungren, opponents of Proposition 209 asserted that the ballot title, label, and summary were misleading because they failed to identify the initiative as a prohibition of affirmative action. The superior court agreed, but the Third District reversed, holding that the Attorney General had not misled the public because he had merely incorporated the essential terms of the text into the ballot title and summary. To use the words “affirmative action” would have been “overinclusive” because “[m]ost definitions of the term would include not only the conduct which Proposition 209 would ban, i.e., discrimination and preferential treatment, but also other efforts such as outreach programs.” (Id. at p. 442, 55 Cal.Rptr.2d 690.)
The City seizes on this sentence as confirmation that outreach programs are not prohibited by article I, section 31. The first option in the Program, “Documentation of Outreach,” is therefore still valid in the City's view. We disagree.
We believe the Lungren court's comment regarding the scope of affirmative action was unnecessary and overreaching. The term “outreach” itself is broad enough to encompass various approaches to affirmative action. No violation of Proposition 209 would be incurred by an outreach strategy that did not entail preferential treatment of individuals in the categories identified by Proposition 209. Preferential treatment of an individual in a targeted category, however, is still preferential treatment regardless of the label used to describe it. “We look to the economic realities of the program rather than the label attached to it.” (Bras v. California Public Utilities Com'n (9th Cir.1995) 59 F.3d 869, 874.) Thus, we disagree with the Third District's gratuitous suggestion that “outreach” would not be prohibited by Proposition 209.11
We reject the City's assertion that we are compelled to incorporate the Lungren remark about outreach into our construction of the provision by a presumption that judicial constructions of terms are intended by voters in adopting initiatives. “Generally, the drafters who frame an initiative statute and the voters who enact it may be deemed to be aware of the judicial construction of the law that served as its source.” (In re Harris (1989) 49 Cal.3d 131, 136, 260 Cal.Rptr. 288, 775 P.2d 1057.) And where the language of legislation uses terms that have been judicially construed, “ ‘the presumption is almost irresistible’ that the terms have been used in the precise and technical sense which had been placed upon them by the courts. [Citations].” (People v. Weidert (1985) 39 Cal.3d 836, 845-846, 218 Cal.Rptr. 57, 705 P.2d 380 [internal quotations omitted]; Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 22, 26 Cal.Rptr.2d 834, 865 P.2d 633.) These principles are inapplicable to the comments of the Lungren court regarding the scope of Proposition 209.
First, whether the term “affirmative action” encompasses outreach programs was not a central issue before the Lungren court. The court did not purport to decide whether Proposition 209 barred outreach programs; its suggestion that “most definitions” of “affirmative action” would be broad enough to include outreach at most implied that outreach efforts in general were not precluded by the initiative. The presumption that a certain meaning attaches to words used in an initiative applies to terms that have been used “in the precise and technical sense which had been placed upon them by the courts.” (People v. Weidert, supra, 39 Cal.3d at pp. 845-846, 218 Cal.Rptr. 57, 705 P.2d 380.) There was no such “precise and technical” meaning given to the words “affirmative action” or “outreach” when the initiative was drafted and adopted; on the contrary, the Lungren court characterized the term “affirmative action” as “amorphous.” (48 Cal.App.4th at p. 443, 55 Cal.Rptr.2d 690.) Secondly, this initiative was not derived from an existing law that had already been judicially construed and which thus provided guidance as to the meaning of similar terms used in the initiative. Third, as we have discussed above, the inference in Lungren that outreach would be permitted by Proposition 209 conflicts with its terms. In these circumstances, we cannot presume that the voters intended a distinction between “outreach” and “preferential treatment” based on the dicta contained in the Lungren opinion.
The Lungren court did not undertake to define “discrimination” or “preferential treatment” because these were “words of common understanding.” (Id. at p. 441, 55 Cal.Rptr.2d 690; see also Kidd v. State of California (1998) 62 Cal.App.4th 386, 407, 72 Cal.Rptr.2d 758 [“clear language” of Proposition 209 forbids supplemental certification programs].) Because there is no indication that any special meaning was attached to these terms, we presume they were used in their ordinary and popular sense. Thus, we regard “preferential treatment” as any treatment “offering or constituting an advantage.” (See Webster's Third New Internat. Dict. (1981) p. 1787.)
In adopting this simple definition, we reject the City's more circumscribed view of “preferential treatment” as necessarily involving quotas, set-asides, and “plus factors” used in the selection of individuals. Preferences, according to the City, refer to “programs involving race in the selection process wherein the nonpreferred race is excluded from receiving a concrete opportunity.” We find no support for these restrictions in the language of article I, section 31. Nowhere in the provision does it indicate that a “loss of a concrete opportunity” is a sine qua non of an unlawful preference. Nor is there any definition of the proscribed conduct in terms of quotas, goals, and set-asides. We are not authorized to add qualifying terms to a statutory or constitutional provision. “ ‘The [C]onstitution is to be interpreted by the language in which it is written, and courts are no more at liberty to add provisions to what is therein declared in definite language than they are to disregard any of its express provisions.’ ” (Delaney v. Superior Court (1990) 50 Cal.3d 785, 799, 268 Cal.Rptr. 753, 789 P.2d 934; Powers v. City of Richmond (1995) 10 Cal.4th 85, 93, 40 Cal.Rptr.2d 839, 893 P.2d 1160.)
The ballot materials supplied with Proposition 209 do not convince us that the voters intended any special meaning of its terms.12 The Legislative Analyst described the purpose of the initiative as eliminating those programs that involve “preferential treatment,” however that term might be defined in subsequent court rulings. The Legislative Analyst did not suggest that governments would be restricted from granting preferences only in actual hiring or other “concrete opportunities.” On the contrary, in discussing the impact on educational programs, the Legislative Analyst predicted that outreach and other assistance programs based on sex, race, or ethnicity “probably would be affected” by passage of Proposition 209. (Legislative Analysis, Ballot pamp., Prop. 209, p. 31.) The analysis mentioned participation goals and “good-faith effort” requirements as examples, not defining criteria, of prohibited programs. Consistent with the broad language of the text, it suggested that the measure “would eliminate affirmative action programs used to increase hiring and promotion opportunities for state or local government jobs, where sex, race, or ethnicity are preferential factors in hiring, promotion, training, or recruitment decisions. In addition, the measure would eliminate programs that give preference to women-owned or minority-owned companies on public contracts.” State and local governments could expect to save money, the Analyst explained, because they would not reject a low bidder who had failed to demonstrate a good-faith effort to obtain participation by minorities and women.
Likewise, the arguments in favor of Proposition 209 reflected the supporters' antipathy toward any program that involved discrimination or preferences. Set-asides and quotas were mentioned as examples of “unfair” and “costly” reverse discrimination, not defining characteristics of the conduct supporters sought to preclude.
The proponents of the initiative did not suggest that any program called “outreach” would remain intact. Rather, the focus of that outreach would be the factor that determined its validity. The advocates for Proposition 209 sought to dispel “the myth that ‘minorities' and women cannot compete without special preferences.” On the contrary, they urged, “[n]ot every white person is advantaged. And not every ‘minority’ is disadvantaged.” (Ballot pamp., argument in favor of Proposition 209.) If Proposition 209 passed, supporters assured voters, an affirmative action program would be allowed to continue as long as it did not “discriminate, or prefer, because of race or sex.” (Ballot Pamp., argument in favor of & rebuttal to argument against Proposition 209.)
We must conclude, therefore, that the term “preferential treatment” in article I, section 31, viewed in its ordinary, natural sense, refers to any kind of treatment favoring one group or individual over another. The prohibition is not limited to set-asides, quotas, and “plus factors,” but extends to all preferences granted to the target groups.13
Similarly, we must reject the City's attempt to impose semantic constraints on the term “discrimination” by resorting to the equal protection clauses of the state and federal Constitutions (U.S. Const., amend.14) and Titles VI and VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000d, et. seq.). The City reasons as follows: Under federal law, race-conscious affirmative action is not unlawful discrimination under limited conditions; the Program constitutes race-neutral affirmative action; therefore, the Program is permissible under article I, section 31. The fallacy of this argument is readily apparent. First, the City's secondary premise is faulty, since, as discussed below, the Program is not race neutral. Secondly, article I, section 31, does not permit discrimination whenever federal standards are met; all discriminatory treatment based on the identified categories is prohibited. In this respect the state constitutional provision “provides greater protection to members of the gender and races otherwise burdened by the preference.” (Coalition for Economic Equity v. Wilson, supra, 122 F.3d at p. 709, fn. 18.) For the same reason, whether the Program is justified because it is narrowly tailored to serve a compelling state interest is irrelevant.
For purposes of analysis under article I, section 31, we consider only whether the City “discriminates” within the commonly understood meaning of that term. Accordingly, the Program is unconstitutional if it treats subcontractors differently according to criteria other than individual merit. (See Webster's Third New Internat. Dict., supra, p. 648.)
C. Validity of the Program under Article I, Section 31
Taking a broad view of the language of article I, section 31, we proceed to examine the constitutionality of the City's Nondiscrimination/Nonpreferential Treatment Program. As described earlier, the Program provides two methods of demonstrating nondiscrimination: Documentation of Outreach and Documentation of Participation. A contractor who meets the Evidentiary Presumption by including a set percentage of MBE/WBE firms in the bid fulfills the Documentation of Participation option and thus is exempt from the Documentation of Outreach requirement. Fulfillment of either option enables the City to presume that a contractor “has not discriminated in listing subcontractors.”
1. The “Outreach” Option
According to the City, the first option available to contractors is only “focused outreach,” a “race-neutral” method of “expand[ing] the pool” of subcontractors qualified to bid on the subcontract. Because the Program does not use race in the selection of contractors or establish participation goals, quotas, or good-faith compliance efforts, it does not involve a preference within the meaning of article I, section 31.
The City's position falls with its underlying assumptions. As discussed earlier, a program is not necessarily race-neutral merely because it is labeled “focused outreach” or avoids mentioning “goals” and “quotas.” If it accords an advantage to certain individuals based on their race, color, ethnicity, sex, or national origin, it runs afoul of article I, section 31. If outreach is provided to all groups, or targets groups not specifically identified in article I, section 31, it is constitutional.
The Program is not defective for encouraging contractors to include MBE/WBEs in soliciting subcontractor bids. But the Documentation of Outreach option goes beyond that. It requires a prime contractor not only to notify four MBE/WBE subcontractors of his or her interest in bidding on the contract, but to follow such “solicitation letters” by personally contacting those firms to ascertain their interest in participating. Then the contractor must negotiate with those MBE/WBEs who are interested in the project. Contractors are thus required to give personal attention to and consideration of minority and women businesses that need not be given to non-MBE/WBEs. Furthermore, the contractor may not “unjustifiably reject as unsatisfactory bids prepared by any minority or women business enterprises.” This requirement alone grants a distinct preference to MBE/WBE businesses. (Compare Domar Electric, Inc. v. City of Los Angeles, supra, 9 Cal.4th at p. 168, 36 Cal.Rptr.2d 521, 885 P.2d 934 [failure to meet minority participation level did not disqualify any bidder from consideration]; Domar Electric, Inc. v. City of Los Angeles (1995) 41 Cal.App.4th 810, 818, 48 Cal.Rptr.2d 822.)
2. Documentation of Participation
By complying with the Documentation of Participation option a bidding contractor is entitled to an “evidentiary presumption” that he or she is not discriminating in selecting subcontractors. The presumption is based on the number of MBE/WBE subcontractors listed in the bid. If that number meets the percentage of the MBE/WBE firms “that would be expected to be included in the Base Bid amount of any contract in the absence of discrimination,” then the City presumes the contractor has not excluded MBE/WBE subcontractors from the competitive bidding process.
The City devotes an extensive portion of its argument to the assertion that the evidentiary presumption is not a goal. Because the purpose of the participation option is only to “screen” for discrimination, “not to have contractors achieve some predetermined objective,” the City maintains that this aspect of the Program cannot be discriminatory or preferential. That the Program is not goal oriented, the City suggests, is further demonstrated by “[t]he fact that the Program relies on a ‘burden shifting’ analysis similar to that commonly used to determine discrimination in a number of other contexts.” Finally, the City insists that the Program does not involve a goal because there is no “economic pressure” or “real economic incentive” to use MBE/WBE subcontractors.
In order to find the evidentiary presumption to be consistent with article I, section 31, we would have to accept the premise that discrimination turns upon the government's intent in creating or implementing its program. But the provision does not admit of such construction. Neither the text of Proposition 209 nor its accompanying ballot materials suggest that a violation occurs only when the government intentionally discriminates or grants preferences. The “burden-shifting” analysis is also inapposite here; notwithstanding the term “presumption,” the bidding contractor clearly has the burden of demonstrating nondiscrimination in the solicitation of subcontracting bids. Failure to provide documentation of compliance invariably results in outright rejection of the bid.14 This feature is not comparable to the methods of proving discrimination in the contexts of employment and jury selection, which allow for prima facie evidence of intentional discrimination to be rebutted by the defendant. (See, e.g., Wards Cove Packing Co. v. Atonio (1989) 490 U.S. 642, 109 S.Ct. 2115, 104 L.Ed.2d 733 [proof of disparate impact of employment practice shifts burden to employer to prove business necessity]; Castaneda v. Partida (1977) 430 U.S. 482, 97 S.Ct. 1272, 51 L.Ed.2d 498 [prima facie case of intentional discrimination in grand jury selection supported by statistical disparity]; People v. Wheeler (1978) 22 Cal.3d 258, 148 Cal.Rptr. 890, 583 P.2d 748 [burden-shifting analysis of bias in prosecutors' use of peremptory challenges to remove prospective jurors].)
For the same reason the City cannot rely on its assertion that the Program does not involve goals because there is no economic incentive or pressure to list MBE/WBE subcontractors in the bid. If the contractor does not comply with the Participation option, either he or she must fulfill the Outreach requirements 15 or the bid will be rejected. Clearly the contractor has a strong economic motive to list MBE/WBEs in the bid or to document efforts to obtain their participation.
The City compares this case to Associated Pennsylvania Constructors v. Jannetta (M.D.Pa.1990) 738 F.Supp. 891, where a federal district court in Pennsylvania upheld a similar program against an equal protection challenge. In the Pennsylvania program, bidders were required to submit documentation showing MBE/WBE participation by subcontractors, manufacturers, and suppliers. Failure to submit the required information resulted in rejection of the bid as nonresponsive. If the bidder met the prescribed minimum levels for MBE/WBE participation, the contractor was presumed not to have discriminated. If the bid reflected a failure to meet the minimum levels of MBE/WBE participation, a further review was conducted to determine whether the bidder had discriminated. If the review resulted in a finding that discrimination had occurred, the bidder was deemed not responsible and the bid was rejected.
The plaintiffs alleged that the state's “participation objectives” created a “quota system” that classified participants according to race and sex. (Id. at p. 892.) The district court disagreed, finding the state policies to be “screening devices,” not classifications based on quotas or goals. (Id. at p. 893.) Consequently, the court found that strict scrutiny of the regulations was not required.
In reaching this conclusion the district court emphasized that failure to attain the minimum levels did not determine the outcome of the bidding process, because the follow-up investigation might reveal no discrimination and the bidder then would still remain a candidate for the contract. This feature distinguishes the Pennsylvania program from that of San Jose. Here the consequence of failure to meet the MBE/WBE participation levels is rejection of the bid, unless the contractor has complied with the alternative Outreach option.
The Jannetta court concluded, without citation of authority, that the state's policies did not require strict scrutiny because they involved no remedial set-asides or goals, but only sought “to ensure no current discrimination.” (Id. at p. 893, italics omitted.) Whatever the merit of this distinction in an equal protection analysis, it has no application to this case. Under article I, section 31, a method of “ensuring no current discrimination” is prohibited if it entails preferences or discrimination based on race, color, sex, ethnicity, or national origin.
In our view, requiring contractors to use a minimum number of minorities and women necessarily involves the kind of discrimination and preferential treatment that the voters intended to prohibit by adopting Proposition 209. Whether denominated a “screening device” or a goal, the Documentation of Participation option cannot serve as a viable alternative to the Documentation of Outreach requirement.
The question is not whether the Program is narrowly tailored to serve a compelling governmental interest, as the City suggests,16 but more simply whether the City has discriminated against or granted preferential treatment to individuals based on their race, sex, color, ethnicity, or national origin. Article I, section 31, does not offer a loophole for discrimination based on the government's objectives, even when those objectives are themselves consistent with the provision. As the United States Supreme Court emphasized in Croson, supra, “the mere recitation of a ‘benign’ or legitimate purpose for a racial classification is entitled to little or no weight. [Citation.] ․ Racial classifications are suspect, and that means that simple legislative assurances of good intention cannot suffice.” (City of Richmond v. Croson, supra, 488 U.S. at p. 500, 109 S.Ct. 706; see also Adarand Constructors, Inc. v. Pena, supra, 515 U.S. at p. 226, 115 S.Ct. 2097 [good motives insufficient when government employs an explicit racial classification system]; Monterey Mechanical Co., Wilson, supra, 125 F.3d at p. 711 [differential treatment does not depend on whether the purpose of the classification is attractive].)
Thus, it is the conduct, not the underlying intent, that determines whether governmental activity complies with this constitutional mandate. Those cases on which the City relies in arguing that the Program is narrowly tailored to serve a compelling governmental interest are inapposite.
We agree with the superior court's determination that the Program is “very similar” to a California statutory scheme invalidated in Monterey Mechanical Co. v. Wilson, supra, 125 F.3d 702. (Pub. Contract Code, §§ 10115-10115.2.) That scheme required state agencies to establish goals (“numerically expressed objective[s]”) to encourage participation by MBE/WBE businesses; contracts were to be awarded to low bidders who either met those goals or demonstrated good faith efforts to do so. The Court of Appeals for the Ninth Circuit found the statute to be an unconstitutional classification under the Equal Protection clause because (1) it required contractors to provide advertisements and information to MBE/WBE subcontractors and to solicit and consider their bids, whereas non-MBE/WBE subcontractors were not entitled to this treatment; and (2) an MBE/WBE bidder could avoid this requirement by keeping the work for itself.17 (Id. at pp. 710-711.)
As the City points out, the court in Monterey Mechanical Co., supra, 125 F.3d 702 was not reviewing a program in the context of article I, section 31, nor was the statutory program identical to the one before us. Nevertheless, the Ninth Circuit's opinion supports the conclusions that (1) requiring personal contact with members of specified groups may be regarded as unequal treatment; (2) participation goals need not be rigid quotas to warrant judicial scrutiny; and (3) whether an unlawful classification has occurred is not determined solely by its underlying intent.
3. Effect of Title VI on the Validity of the Program
Subdivision (e) of article I, section 31 (hereafter “subdivision (e)”), qualifies the proscriptions of subdivision (a) as follows: “Nothing in this section shall be interpreted as prohibiting action which must be taken to establish or maintain eligibility for any federal program, where ineligibility would result in a loss of federal funds to the state.”
The City contends that this provision must be interpreted to allow nondiscrimination programs to be implemented whenever a history of disparity has been demonstrated. Any other interpretation of subdivision (e), it warns, would expose it to liability under Title VI of the Civil Rights Act of 1964 (“Title VI”). (42 U.S.C. § 2000d.) The City would thus lose its federal funding and be subjected to private lawsuits, and article I, section 31, would be unenforceable to the extent that it conflicts with federal law. The City urges that it must be permitted to “respond proactively” to the Disparity Study by implementing remedial programs, rather than waiting for an adjudication of liability under federal law.
We are not persuaded. The City has not demonstrated an inevitable conflict between article I, section 31, and federal requirements for compliance with Title VI. Neither Title VI nor its implementing regulations impose a duty on public entities to implement remedial affirmative action programs that result in discrimination or preferential treatment. To the extent that a federal statute or regulation does require special treatment of MBE/WBEs, the Program is inapplicable by its terms.18
The City is caught in a difficult position. Unquestionably it is attempting to achieve an important objective-to eliminate the historical underrepresentation of minority- and women-owned businesses in public projects. The immediate purpose of the Program-to counteract preferences and discrimination in the use of subcontractors-is consistent with this overall objective and with the constitutional mandate. But ironically, the means the City employs to accomplish that purpose only defeat it, as they constitute prohibited preferential treatment to certain groups based on characteristics identified by article I, section 31. However desirable the City's efforts to eradicate discrimination, they may not contravene the intent of the voters as expressed in the plain language of this provision. Because minority- and women-owned businesses enjoy special treatment under the Program, they receive an advantage over other businesses. Such advantage is prohibited under the broad terms of article I, section 31. The superior court correctly ruled that the Program is unconstitutional.
The judgment is affirmed.
1. An MBE was defined as a business that was at least 51 percent owned and controlled by one or more minority persons, with “minority” defined in the City's municipal code. A WBE had to be “at least 51 percent owned by a woman or women who also control and operate it.”
2. In Croson the United States Supreme Court held that government programs designed to remedy past discrimination are permissible only if relevant empirical evidence demonstrates the existence of disparate treatment of eligible minority businesses within a particular industry. An “amorphous claim” of past societal injury or discrimination in the industry is insufficient to justify racial quotas. (Id. at pp. 500-502, 109 S.Ct. 706.)
3. The lack of statistical significance in these data suggested an improvement in MBE participation since the 1980's, when there was a statistically significant disparity in the number of MBE contracts awarded. Subsequently the City set forth explicit certification criteria for eligibility as an MBE/WBE enterprise.
4. The Program describes this step as “written notice by certified mail return receipt requested, or by FAX transmittal, of his or her interest in bidding on the contract to not less than four (4) minority or women business enterprises in each appropriate trade or area of work or supply identified by the City or substituted by the contractor at least 10 calendar days prior to the opening of bids.” A copy of the letter must accompany the bid.
5. To comply with Step 2, the contractor must contact the MBE/WBE firms to which the notices have been sent “to determine with certainty whether these enterprises [are] interested in proposing to perform specific items of the project. The bidder shall document the name of an individual employee of each MBE/WBE firm with whom the bidder spoke concerning the project or the date and time of at least three (3) attempts during regular business hours to contact each MBE/WBE firm. The bidder shall document such follow-up contacts by using the Chart that is attached as Chart 2.”
6. Credit may be obtained toward this number through the use of truckers and suppliers as well as subcontractors.
7. The City is required by its charter to award a public works contract in excess of $50,000 to the “lowest responsible bidder.” (S.J.Charter, § 1217.) Any contractor who discriminates or grants a preference based on the identified categories is “deemed not to be a responsible bidder.”
8. See Monterey Mechanical Co. v. Wilson, supra, 125 F.3d at pages 706-707 [contractor has standing where government requires or encourages it to discriminate]; Adarand Constructors, Inc. v. Pena (1995) 515 U.S. 200, 115 S.Ct. 2097, 132 L.Ed.2d 158, [prime contractor had standing upon showing that he would bid on future contracts offering incentives for hiring disadvantaged subcontractors].
9. According to one commentator, disparity studies vary widely in the quality of the sampling methods, measures, and analysis employed. (La Noue, Who Counts?: Determining the Availability of Minority Businesses for Public Contracting after Croson, 21 Harv. J.L. & Pub. Policy 793 [recommending use of bidder data as measure of availability to perform subcontracting work rather than “headcount approach” taken by consulting firms].)
10. It is not necessary to analyze the distinction between these two concepts. It may be that “ ‘preferential treatment’ is just the flip side of ‘discrimination.’ ” (Volokh, The California Civil Rights Initiative: An Interpretive Guide (1997) 44 UCLA L.Rev. 1335, 1339.) Or, to avoid surplusage and redundancy of language we may be compelled to view them as discrete events. (See, e.g., Gotanda, et. al., Legal Implications of Proposition 209-The California Civil Rights Initiative (1996) 24 Western St. U. L.Rev. 1, 21-22; Spann, Proposition 209 (1997) 47 Duke L.J. 187, 207-208.) The comparative merit of these positions is not relevant here. For purposes of this appeal, we will assume, as the City contends, that discrimination and preferential treatment are not necessarily two ends of a single spectrum.
11. Justice Sims's concurring opinion took a more prudent approach. He would have avoided reaching the question of “whether the term ‘affirmative action’ would be overinclusive or whether the term could be fairly used to describe the initiative had the Attorney General chosen to do so.” (48 Cal.App.4th at p. 443, 55 Cal.Rptr.2d 690.)
12. Although we find no ambiguity in the term “preferential treatment” when the term is given its ordinary meaning, “we shall test our construction against those extrinsic aids that bear on the enactors' intent.” (Powers v. City of Richmond, supra, 10 Cal.4th at p. 93, 40 Cal.Rptr.2d 839, 893 P.2d 1160.)
13. Domar Electric, Inc. v. City of Los Angeles (1994) 9 Cal.4th 161, 36 Cal.Rptr.2d 521, 885 P.2d 934, does not instruct otherwise. The Supreme Court in that case was not interpreting the language of a provision like article I, section 31. In any event, the court did not, as the City suggests, define “outreach” by contrasting it with “set-asides, bid preferences and contracting goals,” nor did it restrict the definition of “preference” or “discrimination” to deprivation of concrete opportunities. Likewise, the numerous federal cases on which the City relies in advancing its narrow definition of “preferential treatment” and “discrimination” are inapposite in this context.
14. Although a finding of non-responsibility allows a low bidder an opportunity to present evidence that he or she is qualified, the City will not delay a project to permit such a hearing. Instead, it simply declines to consider any nonresponsive bids. The “presumption” is applied to the successful bidder, who may be subject to “debarment” if he or she is later found to be not responsible.
15. We do not view these requirements as involving at most “minimal administrative cost[s].” The Outreach option requires more than merely sending out written notices. All three steps-written notice, personal contact, and negotiation-must be documented in order to demonstrate compliance.
16. As noted earlier, we are not asked to determine whether the Program would survive a challenge under the Equal Protection clause of the federal Constitution. We express no opinion regarding the outcome of such a challenge. (See generally Ayres & Vars, When does Private Discrimination Justify Public Affirmative Action ? 98 Columbia L.Rev. 1577.) Moreover, the City conceded below that this case did not raise the issue of whether article I, section 31, prohibited preferences even in a program narrowly tailored to meet a compelling state interest. Consequently, the superior court did not decide the question.
17. In this respect the case before us is distinguishable. The Program requires all bidders to comply with the outreach and participation conditions, including MBE/WBE contractors and those not planning to subcontract the work.
18. Section VI of the Program states: “In the event that a particular City public works contract is funded or required to be approved in whole or in part by the State or Federal government and any provision contained herein is inconsistent with any applicable state or federal statutes, rules or regulations, orders or controlling policies pertaining to such funding or approval, to the extent that any such provision is inconsistent, it shall not apply to the contract. To the extent a federal project requires an MBE/WBE Program, the Program set forth in Resolution # 67001, rather than this Nondiscrimination/ Nonpreferential Treatment Program, shall be applicable.”
COTTLE, P.J., and PREMO, J., concur.