The opinion
KOZINSKI, Circuit Judge,
dissenting.
In San Bernardino Physicians’ Services Medical Group v. County of San Bernardino, 825 F.2d 1404 (9th Cir.1987), we held that “[i]t is neither workable nor within the intent of section 1983 to convert every breach of contract claim against a state into a federal claim.” Id. at 1408 (footnote omitted). While we recognized that any contract with the state gives rise to what could be characterized as a property interest, we held that this alone is not a basis for invoking the protections of due process. Rather, the interest in question must fall within a narrow category that might fairly be characterized as a civil right, id. at 1409 , a right in public employment being the quintessential example. Id. (citing Board of Regents v. Roth, 408 U.S. 564 , 92 S.Ct. 2701 , 33 L.Ed.2d 548 (1972) and Perry v. Sindermann, 408 U.S. 593 , 92 S.Ct. 2694 , 33 L.Ed.2d 570 (1972)). San Bernardino said that “construction contracts [and] purely material supply contracts”-contracts like the one we have here-do not create rights protected by the due process clause. Id. at 1410.
The majority abandons San Bernardino’s nuaneed framework in favor of a categorical approach that turns every right to receive payment on a public works contract into a property right protected by due process: “G & G’s interest arises from its public works contract; it has a property interest in being paid in full for the construction work it has completed.” Maj. op. at 595. The opinion thus conflicts with San Bernardino, as well as the opinions of two other circuits. See Mid-American Waste Systems, Inc. v. City of Gary, 49 F.3d 286, 291 (7th Cir.1995); Walentas v. Lipper, 862 F.2d 414, 418 (2d Cir.1988); S & D Maintenance Co. v. Goldin, 844 F.2d 962, 966 (2d Cir.1988).
It is also very bad policy. The state here is engaged in a commercial activity where it holds no special sway over other parties by virtue of its regulatory powers. In carrying out its project, the state has bargained for the construction to be done according to plan, on schedule, and consistent with health and safety codes; these are ordinary terms just like the ones private parties put into their construction contracts. The state has also bargained for a more exotic term, namely that contractors and subcontractors pay a prevailing wage to their employees. While this differs from what ordinarily appears in private construction contracts, it is not an exercise of the state’s regulatory power; rather, it is a term that any private party could equally well put into its contract. If the contractor or subcontractor doesn’t like the term, he can refuse to do business with the state. 1
Here the state determined that G & G did not comply with its prevailing wage obli *603 gation, and thus withheld payments. This is no different from a builder’s refusal to make progress payments when he discovers (or believes he discovers) a failure of performance on any other term of a standard construction contract, for example, that the plumbing isn’t up to code. Withholding payments under such circumstances is the standard remedy. If the subcontractor believes he has met his obligations, he may resort to his remedies under his contract with the general contractor who, in turn, may seek relief from the state or assign his right to do so to the subcontractor. It’s a run-of-the-mill contract dispute just like thousands routinely handled by the state courts without federal intervention.
In lieu of this common sense. solution-whieh also complies with binding precedent-the majority invokes the full panoply of federal due process, including the requirement of a hearing before the state may withhold payments for what it believes is defective performance under the contract. While the opinion addresses only the prevailing wage term, its logic carries much farther: If the state discovers any other type of breach — for example, failure to complete the project on time or to comply with applicable safety codes — it must provide an advance hearing before it may withhold payment. This gravely burdens the state’s most potent remedy for dealing with recalcitrant contractors and subcontractors. 2 Why the state should be saddled with this yoke when it engages in the purely commercial activity of construction — a burden not suffered by private builders — is beyond me. 3 San Bernardino clearly teaches that commercial contract rights must be vindicated in state court using state remedies. By ignoring this teaching the majority creates not just an intra-circuit and inter-circuit conflict but also a wholly unwarranted burden on the thousands of states, counties, cities and special use districts governed by our law.. Government is too unwieldy already; there is no justification for adding this heavy layer of red tape. I respectfully dissent.
. That the prevailing wage term appears in the California Labor Code doesn't matter. No one is forced to comply unless he agrees to do business with the state.
. The right to a predeprivation hearing discourages states from cracking down on inefficient, incompetent and corrupt contractors, since such contractors remain on the job (with a right to continuing payment) until the hearing is completed. "Any gains the agency anticipated from terminating inefficient or incompetent contractors or from stopping a project that had lost its value to the state might be consumed by payments during the hearing process and related litigation.” Leonard Kreynin, Note, Breach of Contract as a Due Process Violation: Can the Constitution Be a Font of Contract Law?, 90 Colum. L. Rev. 1098 , 1099 (1990).
. We can! always expect the government to act with unbounded compassion, patience and generosity. Indeed, when the government is acting as a commercial entity, taxpayers cajole it to act with all the ferociousness the marketplace demands. Certain limits must always apply: The government cannot, for example, use public works contracts to discriminate. on the basis of race or sex. But when the government bargains over the commercial terms of the contract it should enjoy the same ability as private builders to draw up the deal as iL.likes and seek the best price and the best terms the marketplace allows.