9th Circuit upholds Caltrans' preferences on contracts for ethnic groups, women

Published: Wednesday, Apr. 17, 2013 - 12:00 am | Page 3A
Last Modified: Wednesday, Apr. 17, 2013 - 8:36 am

A state Transportation Department contracts program that gives preferential treatment to firms owned by members of disadvantaged ethnic groups and women does not run afoul of the U.S. Constitution, a federal appellate court ruled Tuesday.

U.S. District Judge John A. Mendez of Sacramento got it right in 2011 when he rejected a constitutional challenge to the program by the Associated General Contractors of America, a three-judge panel of the 9th U.S. Circuit of Appeals declared.

The circuit panel dismissed an appeal by the contractors' association of Mendez's decision, saying the association "did not identify any of its members who have suffered or will suffer harm … and therefore (the association) has not established that it has … standing to bring suit."

But, the three judges added, even if the Associated General Contractors had legal standing, its appeal would fail because there is strong "evidence of discrimination within the California transportation contracting industry" and the Caltrans program is "narrowly tailored to benefit only those groups that actually suffered discrimination."

That finding echoes Mendez's conclusions two years ago in the lower court.

The contractors claim the program, begun in 2009, unlawfully provides race- and sex-based preferences on certain contracts to firms owned by African Americans, American Indians, Asian Pacific Americans and women.

Not so, said Mendez, holding that the agency's statistical and anecdotal evidence shows the four groups have been subjected to discrimination in the transportation construction industry and the Caltrans program benefits only those groups.

Attorney Ralph Kasarda, who represents AGC, said Tuesday that he and his client are disappointed they got the same reception at the appellate court.

"Such a preference is unconstitutional because it can never be narrowly tailored on both construction and engineering contracts in such a large and diverse state as California," Kasarda said in an email response to a request for comment.

"For instance," he added, "prime contractors must favor subcontractors who trace their heritage to China, Japan, or South America, but disfavor male subcontractors whose national origins are from Pakistan, India, Bangladesh, Maldives, Nepal and Sri Lanka. The Caltrans program offends all notions of equality and fairness."

Kasarda said he and his client are discussing "the possibility of filing a petition for rehearing" before an enlarged circuit panel or seeking review of the matter by the U.S. Supreme Court.

The opinion was authored by Senior Circuit Judge Jerome Farris, with Circuit Judges Sidney R. Thomas and N. Randy Smith concurring.

They cited a 2005 federal statute enabling states that receive federal transportation funds to set up a program like California's "in response to pervasive and ongoing discrimination." The act mandates that 10 percent of federal funds distributed to participating states and municipalities be "expended on disadvantaged business enterprises." Those firms are defined as small businesses owned or controlled by socially and economically disadvantaged individuals."

Caltrans receives up to $3 billion annually from the federal government for transportation projects.

While the contractors' appeal was pending, Caltrans commissioned a new disparity study to update its preference program as required by federal regulations. The agency then submitted a modified program that is nearly identical to the 2009 program, except it now includes Latinos and sets an overall goal of 12.5 percent of its contract expenditures going to disadvantaged persons' companies.

Call The Bee's Denny Walsh, (916) 321-1189.

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