Posted on September 15, 2004

PLF Again Trumps SMUD over Utility’s Race-Based Contracting Program

Pacific Legal Foundation, Sep. 14

Sacramento,CA: Pacific Legal Foundation today announced an important legal victory in state court on behalf of race and sex equality for all Californians. The Third District Court of Appeal ruling in the case of C & C Construction v. Sacramento Municipal Utility District (SMUD) upheld PLF’s trial court victory in January, 2002. This is the first appellate court opinion to interpret Proposition 209’s federal funding exception. [Article I, § 31(e) of the California Constitution, the federal funding exception,” provides: “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 appellate court held that SMUD’s voluntary race-based public contract program that gave price advantages to bids submitted by minority contractors violated Proposition 209, the 1996 initiative that bans government discrimination in public education, public employment, and public education. The court rejected SMUD’s defense that it was exempt from Proposition 209’s prohibitions because its race-based program was necessary “to establish or maintain eligibility” for federal funding. The court held that under the plain language of this exception, SMUD failed to produce evidence that it would be ineligible for a federal program and lose federal funds as a consequence.

“This is a very important decision ensuring the vitality of Proposition 209,” said Sharon Browne, the lead PLF attorney. “With Prop. 209, the people of California wanted to end racially driven programs and policies that are unfair, divisive, and unnecessarily expensive to taxpayers,” said Browne. “This decision upholds the law and the intent expressed by the people.”

Browne said, “Quite simply, the SMUD program pays some people more than others based upon their race. The program gives preferences to minority-owned prime contractors by calculating their bids as being 5% lower than what they actually are.”

PLF argued that prime contractors are necessarily forced to discriminate in favor of minority subcontractors by SMUD’s race-based quotas and recruitment requirements. The court rejected SMUD’s attempt to justify this program on the basis of a study showing a disparity in SMUD’s contracting between minority-owned and majority-owned businesses.

PLF represents C & C Construction, Inc., a general contracting firm. C & C has bid on SMUD contracts and was forced to compete under the discriminatory program. The trial court agreed that SMUD’s program violated Proposition 209 and invalidated it. SMUD appealed this ruling.