PACIFIC LEGAL FOUNDATION. Case 2:09-cv JAM-GGH Document 1 Filed 06/11/2009 Page 1 of 22

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1 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of SHARON L. BROWNE, No. RALPH W. KASARDA, No ANTONIO J. SENAGORE, No. Pacific Legal Foundation Sacramento, California Telephone: ( - Facsimile: ( - Attorneys for Plaintiff Associated General Contractors of America, San Diego Chapter, Inc. UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA ASSOCIATED GENERAL CONTRACTORS OF AMERICA, SAN DIEGO CHAPTER, INC., a nonprofit California corporation, v. Plaintiff, CALIFORNIA DEPARTMENT OF TRANSPORTATION; WILL KEMPTON, individually, and in his official capacity as Director of the California Department of Transportation; and OLIVIA FONSECA, individually, and in her official capacity as Deputy Director of the California Department of Transportation, Defendants. COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

2 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of INTRODUCTION. Since 0, the California Department of Transportation (Caltrans has been operating a race neutral Disadvantaged Business Enterprise (DBE program for its federally funded highway construction program. On or about March, 0, Caltrans began injecting race, sex, and ethnicity into public contracting decisions by implementing the Disadvantaged Business Enterprise (DBE Goal and Methodology for Federal Fiscal Year 0 (0 DBE Program. The 0 DBE Program requires that a certain percentage of contracts on federally funded transportation projects be awarded on the basis of race- and sex-based preferences. Specifically, prime contractors must either hire an African American, Native American, Asian Pacific, or woman-owned firm, or demonstrate good faith efforts to obtain the required DBE participation. Male-owned nonminority, Hispanic American, and Subcontinent Asian American businesses are not included in the race-conscious portion of the program. Plaintiff Associated General Contractors of America, San Diego Chapter, Inc. (AGC San Diego, brings this challenge seeking declaratory and injunctive relief against the California Department of Transportation, Will Kempton, Director of the California Department of Transportation, and Olivia Fonseca, Deputy Director of the California Department of Transportation, on the grounds that the DBE program is unlawful and unenforceable because it violates the Fourteenth Amendment to the United States Constitution, the plain language of U.S.C.,, Title VI of the Civil Rights Act of, as amended, U.S.C. 00d, and Article I, section, of the California Constitution. JURISDICTION AND VENUE. This action arises under the Fourteenth Amendment to the United States Constitution; U.S.C.,, 00d; and Article I, section, of the California Constitution. The Court has jurisdiction of the federal law claims under U.S.C. (federal question, and (a (redress deprivation of civil rights, and jurisdiction of the state law claim under U.S.C.. Declaratory relief is authorized by the Declaratory Judgment Act, U.S.C /// /// - -

3 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of. Venue is proper in this Court pursuant to U.S.C. (e because a defendant in the action resides in this district, and because a substantial part of the events or omissions giving rise to Plaintiff s claims occurred or will occur in this district. PARTIES. Plaintiff Associated General Contractors of America, San Diego Chapter, Inc. (AGC San Diego, is the San Diego Chapter of Associated General Contractors of California, Inc. AGC San Diego is a nonprofit California corporation, with headquarters in San Diego, California. Since its organization in, AGC San Diego has been dedicated to improving the construction industry by educating the industry to employ the finest skills, the latest technology, and advocating building the best quality projects for owners, both public and private. One of AGC San Diego s principal aims and objectives is the establishment and maintenance of fair and nondiscriminatory competitive bidding practices for public construction projects, including those funded by federal monies. AGC San Diego s members include construction firms that have submitted bids both as prime or general contractors and as subcontractors on projects receiving federal funds through Caltrans. AGC San Diego members have submitted bids in the past, and they are ready, willing, and able and are continuing to submit bids for future contracts that are, or will be, subject to Caltrans 0 DBE Program. But, many of AGC San Diego s members are not members of the race and sex classes granted preferences by Caltrans 0 DBE Program and they are not permitted by these programs to have their bids for contracts considered on the same equal basis as those members of race and sex classes preferred by this program. In order for these members of AGC San Diego to comply with the requirements of Caltrans 0 DBE Program, which grants preferences on the basis of race or sex, their project expenses are increased by the cost of performing good faith efforts to businesses owned by minority and women and they are placed in a competitive disadvantage. Further, Caltrans 0 DBE Program requires them to use minority-owned and women-owned subcontractors rather than their own employees or other subcontractors of their own choosing, and forces them to discriminate against businesses not owned by women or minorities who are not of the preferred racial groups who may want to participate as subcontractors. These members of AGC San Diego are placed at risk of liability for such - -

4 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of discrimination. Further, Caltrans 0 DBE Program remains in full force and effect and will continue to be enforced with respect to all bids to which it applies. AGC San Diego along with Associated General Contractors of California submitted comments to Caltrans on September, 0, stating that the race- and sex-conscious measures Caltrans was contemplating were not justified by the Availability and Disparity Study of June, 0, and if adopted, would violate the federal and state Constitutions. AGC San Diego has a legitimate and substantial interest in the public right at issue in this proceeding and in having the Defendants comply with both the federal and state Constitutions. Members of AGC San Diego are within the class of persons directly and beneficially interested in the Defendants faithful performance of their legal duties under the federal and state Constitutions. The interests of AGC San Diego and its members have been, are, and will be directly, adversely, and irreparably affected by Defendants race- or sex-conscious contracting provisions contained in Caltrans 0 DBE Program. Accordingly, AGC San Diego brings this action for and on behalf of itself and its members in order to vindicate their individual rights.. Defendant California Department of Transportation (Caltrans is a department within the California Business, Transportation and Housing Agency (Cal. Gov t Code and is responsible for planning, designing, building, operating, and maintaining California s state road system. Generally, Caltrans has the duties prescribed by California Streets and Highways Code sections 0-, among others. Caltrans receives and administers federal funds for highway construction under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU, U.S.C., et seq., and its implementing regulations at Title Code of Federal Regulations Part. Caltrans has a duty to comply with the Constitutions of the United States and California by not engaging in discrimination or granting preferential treatment to individuals or groups on the basis of race, sex, color, ethnicity, or national origin in the operation of public contracting pursuant to the Fourteenth Amendment to the United States Constitution; U.S.C.,, 00d; and Article I, section, of the California Constitution.. Defendant Will Kempton is the Director of Caltrans. Mr. Kempton is an officer of the State of California with the duty to abide by the United States and California Constitutions. As such, Mr. Kempton has a duty to enforce the Constitutions of the United States and California - -

5 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of by not engaging in discrimination or granting preferential treatment on the basis of race, sex, color, ethnicity, or national origin in the operation of public contracting pursuant to the Fourteenth Amendment to the United States Constitution; U.S.C.,, 00d; and Article I, section, of the California Constitution. Mr. Kempton is being sued individually, and in his official capacity as the Director of Caltrans.. Defendant Olivia Fonseca is a Deputy Director of Civil Rights for Caltrans. Ms. Fonseca is responsible for implementing Caltrans Disadvantaged Business Enterprise Program. As such, Ms. Fonseca has a duty to enforce the Constitutions of the United States and California by not engaging in discrimination or granting preferential treatment on the basis of race, sex, color, ethnicity, or national origin in the operation of public contracting pursuant to the Fourteenth Amendment to the United States Constitution; U.S.C.,, 00d; and Article I, section, of the California Constitution. Ms. Fonseca is being sued individually and in her official capacity as a Deputy Director of Caltrans. ALLEGATIONS THE SAFE, ACCOUNTABLE, FLEXIBLE, EFFICIENT TRANSPORTATION EQUITY ACT: A LEGACY FOR USERS. On August, 0, President George W. Bush signed into law the SAFETEA-LU. U.S.C., et seq. SAFETEA-LU authorizes the federal surface transportation spending programs for highways, highway safety, and transit for the five-year period 0-0. SAFETEA-LU authorizes the United States Department of Transportation (USDOT and the Federal Highway Administration to distribute funds to states each year for the financing of state construction projects.. Plaintiff is informed and believes, and on that basis alleges, that Congress will pass a similar replacement bill during its 0 session.. Under SAFETEA-LU, the USDOT administers and enforces a minority preference program. Pub. L. -, title, (b of SAFETEA-LU is entitled Disadvantaged Business Enterprises. That section does not establish a nationwide disadvantaged business enterprise program centrally administered by the USDOT. Rather, SAFETEA-LU delegates to each state that - -

6 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of accepts federal transportation funds the responsibility for implementing a DBE program that comports with SAFETEA-LU.. Section (b((b of SAFETEA-LU provides that the term [s]ocially and economically disadvantaged individuals shall have the meaning as that term has under Section (d of the Small Business Act, U.S.C. (d, and relevant subcontracting regulations issued pursuant to SAFETEA-LU. Section (d of the Small Business Act, U.S.C. (d creates a presumption that socially and economically disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and other minorities, or any other individual found to be disadvantaged by the [Small Business Administration] pursuant to section (a of the Small Business Act. Under Section (b((b of SAFETEA-LU, women also are presumed to be socially and economically disadvantaged individuals.. Section (b( of SAFETEA-LU provides: Except to the extent that the Secretary determines otherwise, not less than percent of the amounts made available for any program... shall be expended through small business concerns owned and controlled by socially and economically disadvantaged individuals.. Thus, under Section (b(, SAFETEA-LU presumes that not less than % of the amounts made available for any federally funded highway transportation project shall be expended by small businesses owned by women, Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and other minorities, or any other individual found to be disadvantaged by the Small Business Administration.. Section (b( of SAFETEA-LU provides that if an entity receiving federal funds under SAFETEA-LU cannot comply with Section (b(, because a federal court has found that section to be unconstitutional, the entity is still eligible to receive federal funds. TITLE CODE OF FEDERAL REGULATIONS PART. The implementing regulations for the disadvantaged business enterprise preference program are found at Title Code of Federal Regulations ( C.F.R. Part,.-., as amended, June, 0. See Fed. Reg., (June, 0. These regulations do not purport to parallel constitutional requirements. - -

7 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of. A DBE is defined as a small business owned and controlled by one or more individuals who are socially and economically disadvantaged. C.F.R... Under Section., as amended in the Federal Register on June, 0, states receiving federal funds for highway construction projects must rebuttably presume that members of the designated groups identified in.(a are socially and economically disadvantaged. Fed. Reg.,,,. The SAFETEA-LU regulations presume that Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, Subcontinent Asian Americans, and women are socially and economically disadvantaged. C.F.R..(a.. The SAFETEA-LU presumption of social and economic disadvantage is rebutted where the individual has a personal net worth of more than $0,000 (excluding the value of home and business or a preponderance of the evidence demonstrates that the individual is not in fact socially and economically disadvantaged. C.F.R..(b. Firms owned and controlled by someone who is not presumed to be disadvantaged (i.e., a white male can qualify for DBE status if the individual can demonstrate that he is in fact socially and economically disadvantaged. C.F.R..(d.. The SAFETEA-LU regulations delineate a two-step process that a state must follow to set a DBE utilization goal that reflects its determination of the level of DBE participation [that] would [be] expect[ed] absent the effects of discrimination. C.F.R..(b. In establishing this goal, a state must first calculate the relative availability of DBEs in its local transportation contracting industry. C.F.R..(c. One acceptable means of making this determination is by dividing the number of ready, willing, and able DBEs in a state by the total number of ready, willing, and able firms. C.F.R..(c(.. Under step two, a state must examine all available evidence in its jurisdiction to determine if the base figure should be adjusted upward or downward. C.F.R..(d. According to C.F.R..(d(, the many types of evidence to be considered when adjusting the base figure include evidence from disparity studies, and the current capacity of DBEs to perform work (as measured by the volume of work DBEs have performed in recent years. A state may also consider statistical disparities in the bonding and financing industries relative to DBEs, - -

8 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of as well as the present effects of past discrimination. C.F.R..(d(-(. The final, adjusted figure represents the proportion of federal transportation funding that a state must allocate to DBEs during the forthcoming fiscal year. C.F.R..(e(. A state must submit its DBE program to the USDOT for review by August of each year. C.F.R..(f(.. The SAFETEA-LU regulations expressly prohibit states from apportioning their DBE utilization goal among different minority groups (e.g., allocating % to Black Americans, % to Hispanic Americans, 0% to Asian Americans, etc.; rather, an undifferentiated goal that encompasses all minority groups is required. C.F.R..(h. A state must meet the maximum feasible portion of this goal through race-neutral means, including informational and instructional programs targeted toward all small businesses. C.F.R..(a-(b. Under the SAFETEA-LU regulations, a state must use race-conscious contract goals to achieve any portion of its DBE utilization requirement that cannot be attained through these race-neutral means. C.F.R..(d. Prime contractors to whom a state awards federally funded transportation contracts must undertake good faith efforts to satisfy a contract s DBE utilization goal by allocating the designated percentage of funds to DBE firms. C.F.R..(a.. The good faith standards that contractors must satisfy are found in Appendix A to Part, Title, Code of Federal Regulations. Among the types of actions that recipients of federal funds, such as Caltrans, are to consider in determining whether a bidder has made good faith efforts to hire DBEs, are the following: ( soliciting through all reasonable and available means the interest of all certified DBEs who have the capability to perform the work of the contract; ( where appropriate, breaking out contract work items into smaller units to facilitate DBE participation, even when the prime contractor might otherwise prefer to perform these work units with its own forces; ( providing DBEs with adequate information about the plans; ( not rejecting DBEs as being unqualified without conducting a thorough investigation of their capabilities; ( making efforts to assist DBEs in obtaining bonding, lines of credit, or insurance; ( making efforts to assist DBE s in obtaining necessary equipment, supplies, and materials; and ( effectively using the services of available minority/women community organizations, /// - -

9 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of contractors groups, and state or federal minority/women business assistance offices. C.F.R. pt., app. A.. The standards used to determine whether contractors have used good faith efforts to hire DBE subcontractors state the fact that there may be some additional costs involved in finding and using DBEs is not in itself sufficient reason for a bidder s failure to meet the contract DBE goal, as long as such costs are reasonable. Also, the ability or desire of a prime contractor to perform the work of a contract with its own organization does not relieve the bidder of the responsibility to make good faith efforts. Prime contractors are not, however, required to accept higher quotes from DBEs if the price difference is excessive or unreasonable. C.F.R. pt., app. A, subd. IV.D.. Thus, in meeting the good faith standards, prime contractors are expected to incur additional costs, and are required to accept reasonably higher bids from DBEs, and are allowed to reject only those DBE bids that are considered excessive or unreasonable. No guidance is given on the difference between a reasonably higher bid and an unreasonably or excessively higher bid. This ambiguity results in bidders discriminating against subcontractors who are not of the preferred race and sex even if they were more reliable, had the lowest bid, or were best qualified.. Following the Ninth Circuit Court of Appeals decision of Western States Paving Co., Inc. v. Wash. State Dep t of Transp., 0 F.d (th Cir. 0, USDOT revised its DBE requirements for those states located in the Ninth Circuit. In Western States, although Washington s DBE program was approved by USDOT, 0 F.d at, the Ninth Circuit specifically held that Washington s DBE program was not narrowly tailored to further Congress remedial objective, and that [t]he exact connection between means and ends that is a prerequisite to the use of racial classifications is demonstrably absent from Washington s DBE program. Western States, 0 F.d at 0. In response to the Western States decision, USDOT advised states not having evidence of discrimination or its effect on DBEs to implement only race-neutral goals. See U.S. Dep t of Transp., Fed. Highway Admin., Office of Civil Rights, Questions and Answers Concerning Response to Western States Paving Company v. Washington State Department of Transportation, available at htm (last visited May, 0. In this regard, Plaintiff is not challenging the federal - -

10 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of government s decision to approve Caltrans DBE program. Rather, Plaintiff alleges the federal approval is immaterial and cannot save an unconstitutional program. ARTICLE I, SECTION, OF THE CALIFORNIA CONSTITUTION. On November,, the people of California amended their Constitution by adopting Proposition to add Article I, section. The relevant provision of Section declares: 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. Cal. Const. art. I, (a.. Section extends not only to state agencies, but also to all instrumentalities of state government, including the Defendants. Section l(f defines the state as: [T]he state itself, any city, county, city and county, public university system, including the University of California, community college district, school district, special district, or any other political subdivision or governmental instrumentality of or within the state. Cal. Const. art. I, (f.. In Hi-Voltage Wire Works, Inc. v. City of San Jose, Cal. th, (00, the California Supreme Court held that a municipal contracting scheme that required preferential treatment on the basis of race or sex violated this provision. Because Section treats municipal contracting programs identically as state contracting programs, a statewide program that allows preferential treatment on the basis of race or sex likewise violates Section.. Section is similar to, but not synonymous with, the Equal Protection Clause of the Federal Constitution. Under equal protection principles, state actions that rely upon suspect classifications must be tested under strict scrutiny to determine whether there is a compelling governmental interest. Section allows no compelling state interest exception. Hi-Voltage, Cal. th at. Section prohibits discrimination against or preferential treatment to individuals or groups regardless of whether the governmental action could be justified under strict scrutiny. C & C Constr., Inc. v. Sacramento Mun. Util. Dist., Cal. App. th, (0 (quoting Connerly v. State Pers. Bd., Cal. App. th, (0. /// - -

11 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of. Section contains an exception to its prohibition against race- and sex-based discrimination and preferences. Subdivision (e of Section authorizes race-based governmental 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. Cal. Const. art. I, (e. In order for a governmental agency to meet this exception, it must have substantial evidence that it will lose federal funding if it does not use race-based measures and must narrowly tailor those measures to minimize race-based discrimination. C & C Constr., Cal. App. th at.. The adoption, implementation, and enforcement of contracting policies and programs that violate the California Constitution, more particularly described below, infringes on the rights and interests of Plaintiff AGC San Diego. CALTRANS DISCRIMINATORY 0 DBE GOALS AND METHODOLOGY 0. As a condition for receiving federal financial assistance for highway construction under SAFETEA-LU, Caltrans adopted a DBE program. In 0, Caltrans DBE program had a race-conscious component, but after the decision from the Ninth Circuit Court of Appeals in Western States, Caltrans adopted a wholly race-neutral program because it lacked the necessary showing of discrimination against minority-owned contracting firms to support a race-conscious DBE program. Cal. Dep t of Transp., Civil Rights, Frequently Asked Questions: Disadvantaged Business Enterprise (DBE Race-Conscious/Race-Neutral Program, available at ca.gov/hq/bep/documents/dbefaq0-0.pdf (last visited May, 0. On May, 0, Defendant Will Kempton sent a letter to the Transportation Construction Community stating that with regret Caltrans was suspending all race-conscious requirements and implemented a wholly race-neutral DBE program. The letter encouraged voluntary compliance of the DBE program while an availability study and a disparity study was prepared. Id. A true and correct copy of the May, 0, letter is attached hereto as Exhibit and incorporated herein by reference. At no time was Caltrans in jeopardy of losing federal funding.. In 0, Caltrans conducted an Availability and Disparity Study in an effort to restore its race-conscious DBE program. The disparity study purportedly examined affected DBE - -

12 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of firms that were ready, willing, and able to perform work. The complete study can be found on the Caltrans Web site. BBC Research & Consulting for Cal. Dep t of Transp., Availability and Disparity Study, Final Report, June, 0, available at Avail_Disparity_Study_Final_Rpt.pdf (last visited May, 0.. On August, 0, Caltrans submitted for approval to the USDOT its Overall Annual DBE Goal and Methodology for FFY 0. The submittal identified an overall DBE goal of.%, to be achieved in equal proportion from race-neutral and race-conscious measures, and further requested a waiver to implement race-conscious goals of limited application to four identified groups: African American, Asian Pacific American, Native American, and Caucasian women owned firms. Hispanic American, Subcontinent Asian American, and male-owned nonminority businesses were not included in the race-conscious portion of the program. On November, 0, Caltrans changed its waiver request to implement a race-conscious goal to African American, Asian-Pacific American, Native American, and women owned firms of all races, excluding businesses owned by nonminority males and male-owned Hispanic American and male-owned Subcontinent Asian American businesses.. On August, 0, USDOT approved Caltrans waiver request to implement race-conscious goals to African American, Asian Pacific American, Native American, and women owned firms. However, Caltrans did not receive approval from USDOT on the goal and methodology.. In August, 0, Caltrans submitted to USDOT for approval its Overall Annual DBE Goal and Methodology for FFY 0 (0 DBE Program. A true and correct copy of the 0 DBE Program is attached hereto as Exhibit, and is incorporated herein as if set forth fully in the body of this Complaint. In continued reliance upon the 0 Availability and Disparity Study, the 0 DBE Program maintains the overall DBE goal of.% to be achieved in equal proportion by race-neutral and race-conscious measures. Exhibit at,. The 0 DBE Program limits the race-conscious measures to African American, Asian Pacific American, Native American, and women owned contractors and subcontractors. Id. at. The race-conscious portion /// - -

13 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of of the program excludes nonminority-male owned businesses and Hispanic American male-owned businesses and Subcontinent Asian American male-owned businesses. Id. at.. According to the 0 DBE Program, The race-conscious goal will be achieved by: Setting a DBE goal on individual contracts based upon the type of work included in each contract and on the availability of the four targeted groups capable of performing such work. Using the good-faith effort standards to justify award when the goal is not met. Encouraging prime bidders to use other DBEs, whenever possible, as a race-neutral component.. The 0 DBE Program identifies race-neutral measures Caltrans intends to pursue. The race neutral measures include business outreach and communication, technical assistance, improved contracting process and data collection, monitoring, and reporting. Id. at. However, the race-neutral measures do not include the enforcement of any antidiscrimination laws. Id. at Attachment C.. On February, 0, FHWA conditionally approved Caltrans 0 DBE Program that requires Caltrans to move from its current race-neutral contracting policy to a race-conscious policy. A true and correct copy of the February, 0, letter from Walter C. Waidelich, Jr., California Division Administrator FHWA, to Will Kempton, is attached hereto as Exhibit, and is incorporated herein by reference.. On March, 0, Caltrans announced to the Transportation Construction Community, and all California cities, counties, metropolitan planning organizations, and regional transportation planning agencies that Caltrans and all local agencies receiving federal funds must implement the race-conscious DBE program for FY 0. A true and correct copy of the March, 0, letter from Denix D. Anbiah, Chief of Caltrans Division of Local Assistance, to All Cities, et al., is attached hereto as Exhibit and incorporated herein by reference. A true and correct copy of the March, 0, letter from Will Kempton to the Transportation Construction Community is attached hereto as Exhibit and incorporated herein by reference. Under the 0 DBE Program, Plaintiff s members and other prime contractors must either hire African American, - -

14 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of Native American, Asian Pacific American, or women owned firms or demonstrate good-faith effort[s] to obtain the required DBE participation. Exhibit at. On April, 0, USDOT gave full approval to Caltrans to implement its 0 DBE Program. A true and correct copy of the April, 0, letter from Walter C. Waidelich, Jr., California Division Administrator, FHWA, to Will Kempton, is attached hereto as Exhibit, and is incorporated herein by reference.. Plaintiff is informed and believes, and on that basis alleges, that Defendants do not believe that any of Caltrans officials or subrecipients of federal aid has engaged in discrimination. Nor do Defendants believe that any segment of prime contractors contracting with Caltrans has engaged in discrimination. 0. Plaintiff is informed and believes, and on that basis alleges, that Caltrans will continue to rely on the 0 Availability and Disparity Study in submitting annual DBE goals and methodology in the future to USDOT. The continued operations of Defendants in the proposal, implementation, and enforcement of the 0 DBE Program are unlawful and are contrary to the obligations of Defendants respective public offices and the trusts and duties arising therefrom. INJUNCTIVE RELIEF ALLEGATIONS. Plaintiff incorporates by reference and realleges each and every allegation set forth in paragraphs through 0 of this Complaint.. Defendants have proposed and are implementing the 0 DBE Program, which sets an overall DBE goal of.% to be achieved in equal proportion by race-neutral and race-conscious measures. If an injunction does not issue enjoining these Defendants from implementing and enforcing the race-conscious measures of the 0 DBE Program, Plaintiff will be irreparably harmed in that Plaintiff and its members will be discriminated against on the basis of race and sex under the 0 DBE Program in their bidding on contracts as prime contractors and subcontractors, and Plaintiff and its members will be required to grant unlawful preferences to preferred minority- and women-owned businesses in solicitation and award of subcontracts, exposing them to potential liability under both U.S.C., as a quasi-governmental actor, and Article I, section, of the California Constitution, or be denied contracts on the basis that they did not comply with an unconstitutional program. - -

15 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of. If not enjoined by this Court, Defendants will continue to administer, implement, utilize, rely on, or enforce a discriminatory DBE program now and in the future unless restrained in derogation of the rights of Plaintiff.. Pecuniary compensation to Plaintiff or other victims of such continuing discrimination would not afford adequate relief, or it would be extremely difficult to ascertain the amount of compensation that would afford adequate relief.. Restraint of Defendants is necessary to prevent a multiplicity of judicial proceedings on these same or similar issues.. Accordingly, injunctive relief is appropriate. DECLARATORY RELIEF ALLEGATIONS. Plaintiff incorporates by reference and realleges each and every allegation set forth in paragraphs through of this Complaint.. An actual and substantial controversy exists between the Plaintiff and the Defendants as to their respective legal rights and duties. Plaintiff contends that the establishment, administration, reliance, and implementation of Defendants 0 DBE Program race-conscious goals violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution; U.S.C.,, 00d; as well as Article I, section, of the California Constitution. Plaintiff contends, among other things, that Caltrans reliance on the 0 Availability and Disparity Study for its DBE goals is flawed in that the disparity study does not prove racial discrimination, that Caltrans has failed to exhaust race-neutral alternatives before resorting to race-conscious methods, Caltrans has failed to properly calculate the race neutral share in its 0 DBE program, the 0 DBE program presumes all members of the preferred racial groups and women are socially disadvantaged without requiring a showing that they have suffered discrimination within the state, and the disparity study has conceptual flaws regarding availability and capacity of DBE firms. Plaintiff is informed and believes, and therefore alleges, that the Defendants dispute that its race-conscious requirements are unconstitutional.. There is a present justiciable controversy between the parties regarding the constitutionality of Defendants race- and sex-based requirements. Plaintiff s members include - -

16 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of construction firms that have been, are, and will be directly, adversely, and irreparably affected by Caltrans 0 DBE Program and Caltrans continuing administration, implementation, reliance, and enforcement of a discriminatory DBE program now and in the future. A judicial determination of rights and responsibilities arising from this actual controversy is necessary and appropriate at this time. FIRST CLAIM FOR RELIEF VIOLATION OF FOURTEENTH AMENDMENT AGAINST DEFENDANTS (Caltrans 0 DBE Goal and Methodology 0. Plaintiff incorporates by reference and realleges each and every allegation set forth in paragraphs through of this Complaint.. The Equal Protection Clause of the Fourteenth Amendment to the United States mandates that, [n]o State shall... deny to any person within its jurisdiction the equal protection of the laws. U.S. Const. amend. XIV,. The Fourteenth Amendment protects persons, not groups, and all governmental action based on race must be subjected to detailed judicial scrutiny to ensure that the personal right to equal protection of the laws has not been infringed.. Defendant Caltrans 0 DBE Program, on its face, sets a participation goal of.%, of which.% is to be achieved through race-conscious measures. Plaintiff is informed and believes, and therefore alleges, that Defendants proposed and are enforcing this goal, although Defendants 0 Availability and Disparity Study is deficient, and Defendants have no evidence of intentional discrimination on the part of Caltrans, private contractors, or anywhere in the California transportation construction industry to satisfy strict scrutiny.. In Western States, the Ninth Circuit held that race-conscious goals can be applied only where the effects of discrimination are present. Western States, 0 F.d at 0. Caltrans establishment and implementation of its 0 DBE goals as a condition to receive federal funding, without evidence of intentional discrimination in the California transportation contracting industry, and which require contractors to use race- and sex-based preferences as a factor in the award and performance of contracts, is a violation of the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. - -

17 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of. Further, Caltrans 0 DBE Program is not narrowly tailored because Caltrans lacks evidence that those preferred minority groups and women have actually suffered discrimination within the State. Among other things, the 0 Availability and Disparity Study Caltrans relies upon is flawed in that the disparity study does not prove racial discrimination; Caltrans has failed to exhaust race-neutral alternatives before resorting to race-conscious methods; Caltrans has failed to properly calculate the race neutral share in its 0 DBE Program; the 0 DBE Program presumes all members of the preferred racial groups and women are socially disadvantaged without requiring a showing that they have suffered discrimination within the state; and, the disparity study has conceptual flaws regarding availability and capacity of DBE firms. Thus, the DBE Program provides certain preferred minorities- and women-owned businesses who have not encountered discriminatory barriers with an unconstitutional competitive advantage at the expense of nonminorities male-owned businesses and businesses owned by male Hispanic American and male Subcontinent Asian American businesses who are not included in the raceconscious portion of the program in violation of the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. SECOND CLAIM FOR RELIEF VIOLATION OF U.S.C. AGAINST DEFENDANTS (Caltrans 0 DBE Goal and Methodology. Plaintiff incorporates by reference and realleges each and every allegation set forth in paragraphs through of this Complaint.. At all times mentioned herein, Plaintiff has been a person within the meaning of U.S.C... Defendants have adopted Caltrans 0 DBE Program setting a participation goal of.%, of which.% is to be achieved through race-conscious measures. Plaintiff is informed and believes, and therefore alleges, that Defendants proposed and are enforcing this goal, although Defendants 0 Availability and Disparity Study is deficient, and Defendants have no evidence of intentional discrimination on the part of Caltrans, private contractors, or anywhere in the transportation construction industry, to satisfy strict scrutiny. - -

18 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of. Plaintiff desires to submit bids for public construction contracts that are subject to Caltrans 0 DBE Program. Plaintiff will be denied equal access to said contracts solely on account of their race and sex. This denial results in irreparable injury to Plaintiff and has left Plaintiff without an adequate remedy at law. As designed, implemented, and enforced, Caltrans 0 DBE Program intentionally discriminates against nonminority, male-owned businesses by subjecting them to unequal and disadvantageous treatment in their competition for federally funded construction contracts, and requires and encourages prime contractors to discriminate against others all to the present and continuing injury of the Plaintiff, its members, and the general public. Caltrans 0 DBE Program likewise grants a preference to certain businesses based upon the business owners race, sex, or ethnicity. Defendants 0 DBE program discriminates against and grant preferences on the basis of race in violation of the provisions of U.S.C.. THIRD CLAIM FOR RELIEF VIOLATION OF U.S.C. AGAINST DEFENDANTS (Caltrans 0 DBE Goal and Methodology. Plaintiff incorporates by reference and realleges each and every allegation set forth in paragraphs through of this Complaint. 0. At all times mentioned herein, Plaintiff has been a citizen of the United States or other persons within the meaning of U.S.C... At all times mentioned herein, Defendants have been a person acting under color of law of the State of California within the meaning of U.S.C... Defendant Caltrans 0 DBE Program intentionally subjects nonminority, male-owned businesses; Hispanic American, male-owned businesses; and Subcontinent Asian, male-owned businesses to unequal and disadvantageous treatment in their competition for federally funded construction contracts, by discriminating against them and granting preferences to African American, Asian Pacific American, women, and Native American businesses all to the present and continuing injury of the Plaintiff, its members, and the general public. Caltrans 0 DBE Program likewise grants a preference to certain businesses based upon the business owners race, sex, or ethnicity. - -

19 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of. Defendants policy and practice of intentionally discriminating and granting preferences based upon race in the award of public contracts, through the implementation and enforcement of the 0 DBE Program, exceeds Defendants authority and intentionally deprives Plaintiff and its members of their rights, privileges, or immunities secured by the Constitution and laws of the United States under color of state law. FOURTH CLAIM FOR RELIEF VIOLATION OF U.S.C. 00d AGAINST DEFENDANTS (Caltrans 0 DBE Goal and Methodology. Plaintiff incorporates by reference and realleges each and every allegation set forth in paragraphs through of this Complaint.. At all times mentioned herein, Plaintiff has been a person within the meaning of Title VI of the Civil Rights Act of, U.S.C. 00d.. Title VI prohibits any person in the United States from being subjected to discrimination under any program or activity receiving federal funds, on the basis of race, color, or national origin. U.S.C. 00d.. As designed, implemented and enforced, Caltrans 0 DBE Program subjects nonminority, male-owned business; Hispanic American male-owned businesses; and Subcontinent Asian American male-owned businesses to discriminatory, unequal and disadvantageous treatment in their competition for federally funded highway construction contracts, and requires and encourages prime contractors to discriminate them on the basis of race, color, or national origin.. The contracts awarded by Defendants through the 0 DBE Program, including all of those which are awarded based upon DBE participation, are funded by federal financial assistance programs. The Defendants implementation and enforcement of the 0 DBE Program, which intentionally discriminates and grants preferences on the basis of race, color, and national origin, thus violates U.S.C. 00d. /// /// /// - -

20 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of FIFTH CLAIM FOR RELIEF VIOLATION OF ARTICLE I, SECTION, OF THE CALIFORNIA CONSTITUTION AGAINST DEFENDANTS (Caltrans 0 DBE Goal and Methodology. Plaintiff incorporates by reference and realleges each and every allegation set forth in paragraphs through of this Complaint. 0. Article I, section, of the California Constitution prohibits state and local governments including Defendants from granting preferential treatment to, or discriminating against, any group or individual on the basis of race, color, ethnicity, sex, or national origin in the operation of public contracting.. As designed, administrated, implemented, and enforced, Caltrans 0 DBE Program subjects nonminority, male-owned businesses; Hispanic American, male-owned businesses; and Subcontinent Asian American, male-owned businesses to discriminatory, unequal, and disadvantageous treatment in their competition for federally funded construction contracts, and requires and encourages prime contractors to discriminate against others all to the present and continuing injury of the Plaintiff, its members, and the general public. Caltrans 0 DBE Program likewise grants a preference to certain businesses based upon the business owners race, sex, or ethnicity. Caltrans race- and sex-based discriminatory and preferential policies consist of the establishment of goals for the percentage of contract awards that should be directed to businesses owned by preferred minorities and women-owned business enterprises, the enforcement of goals for participation of preferred minority-owned and women-owned business enterprises, recruitment, or good faith effort requirements for the participation of preferred minority-owned and women-owned businesses, and the punishing of prime contractors by refusing to consider bids that fail to satisfy the quota or good faith effort requirements for preferred minority-owned and women-owned business enterprises.. Section (e authorizes race-based governmental action in order to establish or maintain eligibility for any federal program, where ineligibility would result in a loss of federal funds to the state. Cal. Const. art. I, (e. However, in order for Caltrans to meet this exception, it must have substantial evidence that it will lose federal funding if it does not use - -

21 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of race-based measures and must narrowly tailor those measures to minimize race-based discrimination. C & C Constr., Cal. App. th at. Plaintiff is informed and believes, and upon such belief alleges, that Caltrans 0 DBE Program does not meet the requirements of Section (e in that it does not have substantial evidence that it will lose federal funding if it does not use race-based measures and that those measures are not narrowly tailored to minimize race-based discrimination. PRAYER FOR RELIEF WHEREFORE, based on the allegations above, Plaintiff respectfully requests judgment as follows:. A declaration that the Disadvantaged Business Enterprise Amended Goal and Methodology, Federal Fiscal Year 0 program adopted by the California Department of Transportation; Will Kempton, Director of the California Department of Transportation; and Olivia Fonseca, Deputy Director of the California Department of Transportation, is unconstitutional, invalid, and unenforceable to the extent that it grants preferential treatment on the basis of race, sex, color, ethnicity, or national origin while discriminating against nonminority- and male-owned businesses, and businesses owned by male Hispanic Americans and male Subcontinent Asian Americans on the basis of race, sex, color, ethnicity, or national origin in violation of the Fourteenth Amendment to the United States Constitution; U.S.C.,, 00d; and Article I, section, of the California Constitution.. For a preliminary and permanent prohibitory injunction enjoining the California Department of Transportation; Will Kempton, Director of the California Department of Transportation; and Olivia Fonseca, Deputy Director of the California Department of Transportation; their agents, employees, officers, and representatives from adopting, enforcing, attempting, or threatening to enforce the Disadvantaged Business Enterprise Amended Goal and Methodology, Federal Fiscal Year 0, program, or any other disadvantaged business enterprise program, insofar as the program discriminates against or grants preferential treatment to any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public contracting now and in the future. - -

22 Case :0-cv-0-JAM-GGH Document Filed 0//0 Page of. For legal costs, expenses, and attorneys fees.. For such other relief as the Court deems proper and just. DATED: June, 0. Respectfully submitted, SHARON L. BROWNE RALPH W. KASARDA ANTONIO J. SENAGORE By s/ralph W. Kasarda RALPH W. KASARDA Attorneys for Plaintiff - -