Appeal from the United States District Court for the Northern District of California. D.C. No. CV-89-4454-TEH. Thelton E. Henderson, District Judge, Presiding.
Before: Betty B. Fletcher, David R. Thompson and Diarmuid F. O'Scannlain, Circuit Judges. Opinion by Judge Fletcher; Concurrence by Judge O'Scannlain.
We confront once again the tension between the efforts of the City and County of San Francisco ("the City") to ameliorate the effects of past discrimination in City contracting processes on disadvantaged groups and the constraints imposed by the Fourteenth Amendment's guarantee of equal treatment to all citizens, as well as other provisions of state and federal law. Appellant, Associated General Contractors of California, Inc. ("AGCC"), appeals the district court's denial of its motion for a preliminary injunction enjoining the enforcement of San Francisco's Minority/Woman/Local Business Utilization Ordinance - II, No. 175-89 ("1989 Ordinance") insofar as it applies to prime construction contracts. We affirm.
The challenge to San Francisco's use of racial and gender preferences to remedy discrimination in city contracting dates back more than seven years. In April 1984, the San Francisco Board of Supervisors (the "Board") passed the Minority/Women/Local Business Utilization Ordinance, No. 139-84 ("1984 Ordinance"), which required the City to set aside designated percentages of its contracting dollars to minority-owned business enterprises ("MBEs") and women-owned business enterprises ("WBEs"). In addition, the 1984 Ordinance required that MBEs, WBEs and locally- owned business enterprises ("LBEs") receive a five percent bidding preference to be taken into account when the City calculated the low bid on city contracts.
AGCC, an organization of contractors engaged in the building and construction industry, which has substantial numbers of members who are not within the classes granted preferences by the 1984 Ordinance, challenged the implementation of the 1984 Ordinance in court. In reviewing the ordinance, this circuit upheld the provisions favoring WBEs and LBEs against AGCC's constitutional challenge but invalidated the provisions favoring MBEs. AGCC v. City and County of San Francisco, 813 F.2d 922, 928-44 (9th Cir. 1987), petition dismissed, 110 S. Ct. 296 (1989) (AGCC I). In addition, we ruled that all bidding preferences, insofar as they applied to contracts over $50,000, violated San Francisco City Charter section 7.200, which required that contracts over $50,000 be given to the "lowest reliable and responsible bidder." Id. at 927-928.
Shortly after our decision in AGCC I, the Supreme Court considered a similar minority set-aside plan in City of Richmond v. J.A. Croson Co., 488 U.S. 469, 102 L. Ed. 2d 854, 109 S. Ct. 706 (1989). In that decision, a deeply divided Supreme Court struck down the racial set-aside plan adopted by the city of Richmond, Virginia.*fn1 At the same time, however, the Court confirmed that municipalities could employ race-conscious remedies to redress discrimination in certain circumstances. Id. at 509 (Rehnquist, C.J., O'Connor, J., White, J., Kennedy, J.); Id. at 511 (Stevens, J.); Id. at 528 (Marshall, J., Brennan, J., Blackmun, J.). Prior to Croson, the City had been investigating continued discrimination in city contracting. In that capacity, it had received, among other information, testimony from 42 witnesses, and written submittals from 127 minority, women, local, and other business representatives. Subsequently, in an attempt to determine whether Croson 's criteria for permitting race-conscious ordinances were met with respect to San Francisco, the City held an additional ten public hearings, commissioned two statistical studies, and sought written submissions from the public. Out of this process emerged the 1989 Ordinance now before this court. It became effective on July 1, 1989 and may be cited as SF Admin. Code, Ch. 12D.
Rather than providing the set-asides mandated by the 1984 Ordinance, the 1989 Ordinance gives bid preferences to prime contractors who are members of groups found disadvantaged by previous bidding practices. Specifically, the Ordinance provides a five percent bid preference for LBEs, WBEs, and MBEs. Because the WBE and MBE preferences are treated cumulatively with the LBE preferences under the ordinance, local MBEs and WBEs become eligible for a ten percent total bid preference, representing the cumulative total of the five percent preference given LBEs and the 5% preference given MBEs and WBEs. § 12D.8(B)(2). The Ordinance defines "MBE" as an economically disadvantaged business that is owned and controlled by one or more minority persons. § 12D.5. "Minority" is defined to include Asians, Blacks, and Latinos. "WBE" is defined as an economically disadvantaged business that is owned and controlled by one or more women. "Economically disadvantaged", insofar as the term applies to public works construction contracts, is defined as a business whose average gross annual receipts in the three fiscal years immediately preceding its application for certification as a MBE does not exceed fourteen million dollars. The Ordinance allows non-MBEs and non-WBEs to benefit from the bid preferences given these groups by extending a five percent preference to those who engage in a joint venture with a local MBE or WBE provided the MBE's or WBE's participation is between 35% and 51%. § 12D.8(B)(2). Those who engage in a joint venture with a local MBE or WBE whose participation is 51% or more, receive a ten percent preference. Id. A waiver of the bid preference is provided where no MBE or WBE is available to provide the necessary goods or services. § 12D.13.
Subsequent to the passage of the 1989 Ordinance, the Board enacted Ordinance No. 424-89, which raised the threshold for competitive bidding for city contracts previously set at $50,000 by section 7.200 of the San Francisco City Charter, to $10,000,000 ("the competitive bidding threshold ordinance"). Ordinance No. 424-89 was enacted pursuant to an amendment to the city charter passed the prior year, by which the electorate authorized the Board of Supervisors to increase or decrease the competitive bidding threshold. After the implementation of the new bid threshold ordinance, contracts valued at over $10,000,000 would still be subject to the city charter's "lowest reliable and responsible bidder" requirement. Contracts below that level presumably would be subject to the new bid preference system.
Soon after the effective dates of the 1989 Ordinance and the competitive bidding threshold ordinance, AGCC filed this action and sought a preliminary injunction. The motion for preliminary injunction challenges both the constitutionality of the MBE provisions of the 1989 Ordinance insofar as they pertain to public works construction contracts and the validity under state law of the competitive bidding threshold ordinance.*fn2 In a well-reasoned opinion, the district court denied the motion for preliminary injunction. Although the district court held that the alleged violation of the constitutional rights of AGCC's members would, if meritorious, produce irreparable injury, it found that plaintiffs were unlikely to prevail on their constitutional claim. It rejected AGCC's charter claim based on its finding that AGCC had failed to demonstrate the requisite possibility of irreparable injury. AGCC now appeals the district court's denial of its motion for preliminary injunction to this court.
Because the grant or denial of a preliminary injunction lies within the discretion of the district court, our review of the denial of a preliminary injunction is limited. Johnson Controls, Inc. v. Phoenix Control Sys., 886 F.2d 1173, 1174, 12 U.S.P.Q.2D (BNA) 1566 (9th Cir. 1989); Big Country Foods, Inc. v. Board of Educ., 868 F.2d 1085, 1087 (9th Cir. 1989). We will reverse the denial of a preliminary injunction only if the district court abused its discretion or relied on an erroneous legal premise or clearly erroneous findings of fact. Johnson Controls, 886 F.2d at 1174; Sports Form, Inc. v. United Press Int'l, Inc., 686 F.2d 750, 752 (9th Cir. 1982). We review de novo the correctness of the legal standards employed by the district court in evaluating the plaintiff's likelihood of success on the merits.
I. AGCC'S STANDING TO PURSUE THIS ACTION
As an initial matter, Appellees-Intervenors The Coalition for Economic Equity, et. al. ("Intervenors"), argue that this case fails to present a case or controversy for Article III purposes because AGCC lacks standing to sue on behalf of its members. This issue was not raised below. However, because a "threshold question in every federal case" is "whether the plaintiff has made out a 'case or controversy' between himself and the defendant within the meaning of Article III," Warth v. Seldin, 422 U.S. 490, 498, 45 L. Ed. 2d 343, 95 S. Ct. 2197 (1975), this issue must be resolved before we may review the district court's denial of the motion for preliminary injunction. See also Jenkins v. McKeithen, 395 U.S. 411, 421, 23 L. Ed. 2d 404, 89 S. Ct. 1843 (1969) (opinion of Marshall, J.) (standing issue governs appellate jurisdiction as well as trial court jurisdiction).
In order for an organization to have representational standing to sue on behalf of its members, it must meet the three-pronged test set out by the Supreme Court in Hunt v. Washington Apple Advertising Comm'n, 432 U.S. 333, 53 L. Ed. 2d 383, 97 S. Ct. 2434 (1977).*fn3 The organization must establish that "(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit." Id. at 343. The second prong of the test is not at issue here; the interest of AGCC in preserving favorable conditions for bidding by its members is clearly germane to the organization's purpose. See Complaint at Par. 3 ("AGCC exists for the purpose, among others, of fostering, promoting, and protecting the common interests of its member contractors and subcontractors in the construction industry in California."). However, the first and third prongs of the test raise issues that we must now resolve.
The Intervenors argue that no AGCC member would have standing individually to bring these claims because no member has asserted a sufficient risk of injury. The Intervenors point out that the record evidence indicating that any of AGCC's members will suffer injury stemming from the 1989 Ordinance is limited to a declaration from one AGCC member stating that the ordinance has discouraged him from bidding on San Francisco contracts and AGCC's more general assertions that the ordinance could cause its members to lose contracts for which they are bidding.*fn4 The Intervenors contend that such assertions are insufficient to confer standing upon any of AGCC's members, and therefore upon AGCC.
It has long been "established principle that to entitle a private individual to invoke the judicial power to determine the validity of executive or legislative action he must show that he has sustained or is immediately in danger of sustaining a direct injury as the result of that action . . . . " Ex parte Levitt, 302 U.S. 633, 634, 82 L. Ed. 493, 58 S. Ct. 1 (1937). This requirement is necessary to ensure that federal courts reserve their judicial power for " 'concrete legal issues, presented in actual cases, not abstractions.' " United Pub. Workers v. Mitchell, 330 U.S. 75, 89, 91 L. Ed. 754, 67 S. Ct. 556 (1947) (quoting Electric Bond & Share Co. v. Securities & Exchange Comm'n, 303 U.S. 419, 443, 82 L. Ed. 936, 58 S. Ct. 678 (1938)). To meet this requirement, "[a] hypothetical threat is not enough." Id. at 90.
A long line of Supreme Court cases delineate the type of injury or risk of injury deemed so remote or hypothetical as to be insufficient to confer standing. In Laird v. Tatum, 408 U.S. 1, 33 L. Ed. 2d 154, 92 S. Ct. 2318 (1972), for example, the Supreme Court held that no case or controversy existed on respondent's challenge to the Department of the Army's program involving surveillance of civilian political activities. Respondents in that case admitted that there was no indication that the Army had the respondents' political activities under surveillance or that it contemplated such surveillance in the foreseeable future; they claimed, however, that the knowledge that the Army might do so "chilled" their political expression. The Court noted that, while it had previously found a case or controversy to exist merely from the chilling effect of governmental regulations,
in none of these cases, however, did the chilling effect arise merely from the individual's knowledge that a governmental agency was engaged in certain activities or from the individual's concomitant fear that, armed with the fruits of those activities, the agency might in the future take some other and additional action detrimental to that individual. Rather, in each of these cases, the challenged exercise of governmental power was regulatory, proscriptive, or compulsory in nature, and the complainant was either presently or prospectively subject to the regulations, proscriptions, or compulsions that he was challenging.
The respondents do not meet this test; their claim, simply stated is that . . . the very existence of the Army's data-gathering system produces a constitutionally impermissible chilling effect upon the exercise of their First Amendment rights. . . . Allegations of a subjective "chill" are not an adequate substitute for a claim of specific present objective harm or a threat of specific future harm . . . .
Id. at 11, 13-14 (emphasis in original). Similarly, in United Public Workers v. Mitchell, 330 U.S. 75, 91 L. Ed. 754, 67 S. Ct. 556 (1947), the Supreme Court found no case or controversy presented where plaintiffs sought an injunction to prohibit the government from enforcing the Hatch Act's bar on political activity by government employees, 18 U.S.C. § 61h, but had neither yet violated the act by participating in political activity nor asserted firm plans to do so in the future. Id. at 86-91; see also, e.g., City of Los Angeles v. Lyons, 461 U.S. 95, 101-05, 75 L. Ed. 2d 675, 103 S. Ct. 1660 (1983) (plaintiff previously subjected to police stranglehold lacked standing to seek injunctive relief because no showing that he was likely to be exposed to future police brutality); O'Shea v. Littleton, 414 U.S. 488, 497, 38 L. Ed. 2d 674, 94 S. Ct. 669 (1974) (plaintiffs challenging alleged discriminatory bail-setting, jury selection, and sentencing lacked standing to seek injunction because no showing that they were likely to be arrested and subjected to the challenged practices); Golden v. Zwickler, 394 U.S. 103, 108-09, 22 L. Ed. 2d 113, 89 S. Ct. 956 (1969) (plaintiff previously convicted for distributing anonymous handbills in past election campaign but whose being subjected to statute in future was "most unlikely" lacked standing to seek declaratory relief for future campaigns).
We believe that the injury asserted here is sufficient to confer standing on AGCC. In all cases in which the Supreme Court denied standing because the injury was too speculative there was either little indication in the record that the plaintiffs had firm intentions to take action that would trigger the challenged governmental action, or little indication in the record that, even if plaintiffs did take such action, they would be subjected to the challenged governmental action. Here, by contrast, the record indicates that AGCC members have firm intentions to bid for San Francisco city contracts, and that the application of the ordinance to such city bids is compulsory in nature. See Coral Const. Co. v. King County, 941 F.2d 910, 929-30 (9th Cir. 1991). The mere fact that AGCC members cannot play on an even field against MBEs subjects them to a legally cognizable injury: "as a result of the objectively unequal bidding process under the preference method of awarding contracts, an injury results not only when [a non-MBE] actually loses a bid, but every time the company simply places a bid." Id. at 930. Moreover, the chill alleged by AGCC to result from the ordinance, because the ordinance is compulsory in nature, must also be deemed a legally cognizable injury. Cf. Del Percio v. Thornsley, 877 F.2d 785, 787 (9th Cir. 1989) (plaintiff's "generalized claim that [challenged] statute's very existence has an inhibiting effect on her exercise of her rights", in absence of likelihood that statute will be applied to plaintiff, insufficient to confer standing). Accordingly, we find that AGCC meets the first prong of the Hunt test.*fn5
Neither do we find that the third prong of the Hunt test, the requirement that the suit not demand "the participation of individual members," bars AGCC from standing in this court. We have previously found this requirement to be met when the claims proffered and relief requested do not demand individualized proof on the part of its members. Compare United Union of Roofers v. Insurance Corp. of America, 919 F.2d 1398, 1400 (9th Cir. 1990) (denying standing because "individual Union members will have to participate at the proof of damages stage") with Alaska Fish & Wildlife Fed'n v. Dunkle, 829 F.2d 933, 938 (9th Cir. 1987) (allowing standing "because the [organization] seeks declaratory and prospective relief rather than money damages [and thus] its members need not participate directly in the litigation"). Because ...