Appendix — Cleveland Construction Construction Construction, Inc. v. City of Cincinnati, Ohio (No. 08-601)
Supreme Court brief2008
Ask Donna
What actually matters in this document.
Text
2
A
A
y
'.
’.
é.
S
t
7
9
1
’
la
APPENDIX A
THE SUPREME COURT OF OHIO
No. 2007-0114
[Filed August 6, 2008]
Cleveland Construction, Inc.
We
City of Cincinnati, and Timothy
Riordan, Bernadine Franklin, Nate
Mullaney, Alicia Townsend, Kathi Ranford,
and Valley Interior Systems, Inc.
Nee eee ee”
RECONSIDERATION ENTRY
Hamilton County
It is ordered by the Court that appellee’s motion for
reconsideration and motion to clarify court/decision in
this case are denied.
(Hamilton County Court of Appeals: Nos. C050749,
C050779, and C050888)
ls/
THOMAS J. MOYER
Chief Justice
2a
APPENDIX B
SUPREME COURT OF OHIO
No. 2007-0114
[Filed May 21, 2008]
CLEVELAND CONSTRUCTION, INC.,
APPELLEE,
CITY OF CINCINNATI,
)
)
)
v. )
)
)
APPELLANT, ET AL. )
)
Public contracts — Bidding — Unsuccessful bidder has
no constitutionally protected property interest in public
contract — City properly exercised its discretion in not
awarding contract to bidder who failed to comply with
requirements of invitation to bid.
(No. 2007-0114 — Submitted January 9, 2008 —
Decided May 21, 2008.) APPEAL from the Court of
Appeals for Hamilton County, Nos. C-050749,
C-050779, and C-050888, 2006-Ohio0-6452.
SYLLABUS OF THE COURT
No property interest is created when a city properly
exercises its discretion and does not award a contract
3a
to a party deemed not to have complied with the
requirements of the invitation to bid.
LANZINGER, J.
{fl 1} This discretionary appeal was accepted on the
issues of whether an unsuccessful bidder may have a
constitutionally protected property interest in a public
contract and whether it may assert damages for lost
profits in an action alleging violation of its procedural
due process rights under Section 1983, Title 42,
U.S.Code. We hold that because appellant, city of
Cincinnati, did not abuse its discretion in failing to
award the drywall contract to appellee, Cleveland
Construction, Inc., no property interest in the contract
ever existed; without a property interest, there is no
due process violation.
I. Background
{fl 2} This case arises out of the expansion of the
Cincinnati Convention Center in the early 1990s, a
large-scale public project with an estimated budget of
$145 million. As part of the planning for the expansion
project, the city had planned to set aside 30 percent of
the overall work for small business enterprises
(“SBEs”). To achieve this goal, the city reserved a
varying percentage of work for SBEs in each of the 35
contracts ultimately awarded for the project. All
contract bidders for the project were apprised of this
requirement in the documents accompanying the
formal invitation to bid. The percentage for the
contract to install drywall that was reserved for SBEs
was 35 percent. The documents stated that failure to
4a
satisfy the 35 percent requirement could result ~in
rejection of a bid.
{{_ 3) The drywall contract for the project was bid
twice. None of the bids submitted in the initial round
of bidding fulfilled the SBE requirement, and as a
result, all bids were rejected by the city. A second
round of bidding was held, and three bids were
submitted. Two of those bids, submitted by Valley
Interior Systems, Inc. (“Valley”) and Kite, Inc.,
provided that at least 35 percent of the work would be
performed by SBEs. Cleveland Construction failed to
meet the 35 percent requirement, but did submit the
lowest bid. The city ultimately awarded the contract to
Valley, the lowest bidder who also satisfied the SBE
requirement.
{7 4} Arguing that as the low bidder it had a
protected property interest in the drywall contract,
Cleveland Construction filed suit seeking damages for
lost profits and injunctive relief to prevent Valley from
proceeding on the drywall contract for the project. The
trial court.denied the injunctive relief, but later held
that Cleveland Construction had a constitutionally
protected interest in the drywall contract and that the
city had deprived it of that interest without providing
due process of law. The trial court awarded Cleveland
Construction attorney fees and costs, but granted a
directed verdict in favor of the city on Cleveland
Construction’s claim for lost profits.
{{1 5} Cleveland Construction appealed, and the city
filed a cross-appeal. The First District Court of
Appeals affirmed the trial court’s judgment finding a
protected property interest and awarding attorney
5a
fees, but reversed the lower court’s directed verdict
and remanded the case for trial on damages. We
accepted the city’s discretionary appeal.
II. Legal Analysis
{71 6} Because Cleveland Construction alleges a
violation of procedural due process under Section 1983,
Title 42, U.S.Code, we must consider federal] rather
than state law in this case. “The elements of, and the
defenses to, a federal cause of action are defined by
federal law.” Howlett v. Rose (1990), 496 U.S. 356, 375,
110 S.Ct. 2430, 110 L.Ed.2d 332. Cleveland
Construction must first establish that it had a
constitutionally protected property interest before it
may claim a violation of procedural due process rights.
Bd. of Regents of State Colleges v. Roth (1972), 408
U.S. 564, 569-570, 92 S.Ct. 2701, 33 L.Ed.2d 548.
Although the company alleges that it had such an
interest in the drywall contract, it is well settled that
a constitutionally protected property interest exists
only when a claimant has “more than an abstract need
or desire for it. [The claimant] must have more than a
unilateral expectation of it. [The claimant] must,
instead, have a legitimate claim of entitlement to it.”
Id. at 577, 92 S.Ct. 2701, 33 L.Ed.2d 548.
Furthermore, not all benefits rise to the level of
entitlements; a “benefit is not a protected entitlement
if government officials may grant or deny it in their
discretion.” Town of Castle Rock, Colorado v. Gonzales
(2005), 545 U.S. 748, 756, 125 S.Ct. 2796, 162 L.Ed.2d
658.
{7 7} The Sixth Circuit Court of Appeals has held
that a property interest in a public contract is created
6a
in two situations: one, when a bidder is actually
awarded a contract and then deprived of it; and two,
when a governmental entity has limited discretion in
awarding the contract yet abuses that discretion.
United of Omaha Life Ins. Co. v. Solomon (C.A.6,
1992), 960 F.2d 31, 34. Because Cleveland
Construction was never actually awarded the contract
and then deprived of it, the company has a property
interest only if the city had no discretion to reject
Cleveland Construction’s bid or the city had such
limited discretion that failing to award the contract to
Cleveland Construction amounted to an abuse of
discretion.
{7 8} To determine whether the city had the
discretion to deny Cleveland Construction the drywall
contract, we must look both to the city’s municipal
ordinances and the language of the relevant bid
documents. In awarding contracts, the city retains
broad discretion to accept and reject bids generally.
Cincinnati Municipal Code 321-43 states that “[t]he
City purchasing agent, City manager, or any other
duly authorized contracting officer may reject any bid
for any reason or all bids for no reason if acceptance of
the lowest and best bid is not in the best interests of
the City.” (Emphasis added.)
{f1 9} In this case, the city’s bid package, which
contained the invitation to bid and the bidding
requirements, siinilarly reserved the right of the city
to “reject any and all bids or parts of any bid * * * and
not award a contract” and to “consider all elements
entering into the question of determining the
responsibility of the bidder.” The documents also
stated that “[alny bid which is incomplete * * * or
7a
which contains * * * irregularities of any kind, may be
cause for rejection of [the] bid.” The invitation to bid
also informed potential bidders that they “will be
subject to the provisions of the City of Cincinnati * * *
Small Business Enterprise Program. Failure of a
bidder to comply with these requirements may be
cause for rejection of the bid.”
{91 10} Clearly, the Cincinnati Municipal Code and
the bidding documents are united in emphasizing the
city’s broad discretion to grant or deny contracts. In
fact, the city is not required to award a contract at all
if it is dissatisfied with any of the submitted bids.
{jl 11} In bidding the drywall contract, the city
exercised its considerable discretion to reject the entire
first round of bids because none of the bids conformed
to the SBE requirements. Cleveland Construction’s bid
was among those rejected, and the company did not
challenge the city’s decision.
{{i 12) The First District Court of Appeals held,
however, that the broad discretion granted to the city
in awarding the drywall contract was not unlimited
and that the city had abused its discretion in denying
Cleveland Construction the contract. In so holding, the
court relied upon Cincinnati Municipal Code 321-
37(c)(4). That section states that “[iJn the event that
the selection of the lowest and best bidder is based
primarily upon [SBE requirements], the contract
award may be made subject to the following limitation:
the bid may not exceed an otherwise qualified bid by
ten (10%) percent or Fifty Thousand Dollars
($50,000.00), whichever is lower.”
8a
{% 13} Both the First District and Cleveland
Construction interpret this section to mean that when
the SBE requirements are the deciding factor in
awarding a contract, a qualified bid may still be
rejected if it exceeds the next lowest qualified bid by
ten percent or $50,000, whichever is lower.
{{ 14} The First District’s interpretation is only
one possible interpretation of this section, however.
The other, advanced by the city, is that Cincinnati
Municipal Code 321-37(c)(4) is merely a limitation that
the city may impose upon a contract at its discretion
(“the contract award may be made subject to” a cap).
The cap is not required, according to the city, and it
may impose the cap or not, relying only on its own
judgment. To support its argument, the city cites
Cincinnati Municipal Code 321-1-M, which provides
that “may” is always used as a permissive term. Thus,
when Section 321-37(c)(4) of the code states that an
award may be limited by a cap, the city contends, the
cap must be viewed as discretionary and not
mandatory. Additionally, the cit y code provides that
bids may be rejected for an y reason or for no reason.
Cincinnati Municipal Code 321-43. The city argues
that the First District’s conclusion ignores both of the
above sections and thwarts what is cleacly a theme in
the code and in the bidding documents: that the city
may take into account any number of factors in
considering bids and is in no event required to award
a contract to an y particular bidder.
{9 15} Nevertheless, it is unnecessary for us to
resolve the question of which interpretation is correct
in order to determine whether Cleveland Construction
had a property interest in the drywall contract. Even
9a
if we were to accept the First District’s conclusion that
Cincinnati Municipal Code 321-37(c)(4) limits the city’s
discretion to award a contract to a higher bidder when
the award is made based upon SBE considerations,
that conclusion does not mean that the city must
award the contract to the lowest bidder, which in this
case is Cleveland Construction. Simply because the
city might be prohibited from accepting a specific bid
does not mean that it loses its discretion to reject other
bids for any reason. Even if the city had abused its
discretion by awarding the drywall contract to Valley,
it does not follow that it also abused its discretion by
denying the contract to Cleveland Construction.
{ff 16} The outcome of this case would be different
if the contract and relevant municipal ordinances said
that the contract would be awarded to the “lowest
bidder.” Instead, they said that the contract would be
awarded to the “lowest and best bidder.” (Emphasis
added.) Cincinnati Municipal Code 321-37(a). And
even the lowest and best bid may be rejected if the bid
“is not in the best interests of the city.” Cincinnati
Municipal Code 321-43.
{i 17} Given the extensive discretion of the city in
considering bids, Cleveland Construction had no
property right in the drywall contract at issue in this
case. No property interest is created when a city
properly exercises its discretion and does not award a
contract to a party deemed not to have complied with
the requirements of the invitation to bid. Because the
cit y did not abuse its discretion, no property interest
in the contract ever existed.
10a
III. Conclusion
{7 18} Because we hold that Cleveland
Construction did not have a property interest in the
drywall contract, it is unnecessary for us to address
the remaining proposition of law regarding whether a
disappointed bidder can recover lost profits in an
action under Section 1983, Title 42, U.S.Code. A
property interest is a necessary prerequisite to
maintaining a Section 1983 action for deprivation of
procedural due process. Roth, 408 U.S. at 569-570, 92
S.Ct. 2701, 33 L.Ed.2d 548.
{W% 19} The judgment of the court of appeals is
therefore reversed, and judgment is entered for the
city.
Judgment reversed.
MOYER, C.J., and LUNDBERG STRATTON,
O’CONNOR, O’DONNELL, and CUPP, JJ., concur.
PFEIFER, J., dissents and would affirm the
judgment of the court of appeals.
LUNDBERG STRATTON, J., concurring.
{J 20) I agree that Cleveland Construction, Inc. did
not have a property interest in the drywall contract
awarded by the city of Cincinnati. I write to
emphasize that I reach that conclusion on the narrow
facts of this case. State law mandates only that public
contracts of this magnitude be awarded to the “lowest
and best bidder.” R.C. 735.05. The Cincinnati
Municipal Code also requires the city to select the
lla
“lowest and best bidder,” but provides the city with
broad discretion to “reject any bid for any reason.”
Cincinnati Municipal Code 321-37 and 321-43. In
addition, the city’s bid package gave the city broad
discretion to reject a bid. Based upon these explicit
factors in this case, I must concur with the majority.
However, in cases involving other cities and under
other circumstances, the outcome ma y be different.
{1 21} The Cincinnati City Council, in accordance
with the city code, established the process for
awarding city contracts, and the city of Cincinnati
afforded broad discretion to determine the “lowest and
best bidder” for the city. “Generally, courts in this
state should be reluctant to substitute their judgment
for that of city officials in determining which party is
the ‘lowest and best bidder.” Cedar Bay Constr., Inc.
v. Fremont (1990), 50 Ohio St.3d 19, 21, 552 N.E.2d
202. However, such broad discretion without real
parameters also may give rise to opportunities for
abuse, unfairness, or partiality in the bidding process.
Yet a bidder in such a case faces insurmountable
obstacles in challenging the bid because the discretion
is so broad. Nevertheless, efforts to improve the city’s
bidding procedures must be directed toward the city’s
governing body or to the Genera] Assembly to establish
stricter requirements in the bidding process under
R.C. 735.05. Therefore, I reluctantly concur.
Statman, Harris & Eyrich, L.L.C., W. Kelly
Lundrigan, and Elizabeth L. Hutton, for appellee.
Julia L. McNeil, Cincinnati City Solicitor, and
Richard Ganulin and Mary Frances Clark, Assistant
City Solicitors, for appellant.
12a
Stephen L. Byron, Adam J. Rosplock, and John
Gotherman, urging reversal for amicus curiae Ohio
Municipal League.
Thomas R. Winters, First Assistant Attorney
General, William P. Marshall, Solicitor General, and
Susan M. Sullivan and Ara G. Mekhjian, Assistant
Solicitors, urging reversal for amicus curiae state of
Ohio.
Michael R. Gareau & Associates Co., L.P.A., and
David M. Gareau, urging affirmance for amicus curiae
Pacific Legal Foundation.
Ross, Brittain & Schonburg Co., L.P.A., and Alan
G. Ross, urging affirmance for amicus curiae Northern
Ohio Chapter of Associated Builders and Contractors.
;
;
Pp
l3a
SUPREME COURT OF OHIO
No. 2007-0114
[Filed May 21, 2008]
Cleveland Construction, Inc.,
Vv.
City of Cincinnati, and Timothy Riordan,
Bernadine Franklin, Nate Mullaney,
Alicia Townsend, Kathi Ranford, and
Valley Interior Systems, Inc.
i i a
JUDGMENT ENTRY
APPEAL FROM THE COURT OF APPEALS
This cause, here on appeal from the Court of
Appeals for Hamilton County, was considered in the
manner prescribed by law. On consideration thereof,
the judgment of the court of appeals is reversed, and
judgment is entered for the city, consistent with the
“opinion rendered herein.
It is further ordered that costs are assessed
pursuant to S.Ct.Prac.R XI(5) and that a mandate be
sent to the Court of Common Pleas for Hamilton
County to carry this judgment into execution and that
a copy of this entry be certified to the Clerk of the
Court of Appeals for Hamilton County for entry.
14a
(Hamilton County Court of Appeals: Nos. C050749,
C050779, and C050888)
THOMAS J. MOYER
Chief Justice
l5a
APPENDIX C
SUPREME COURT OF OHIO
No. 2007-0114
[Filed December 12, 2007]
Cleveland Construction, Inc.,
v.
City of Cincinnati, and Timothy Riordan,
Bernadine Franklin, Nate Mullaney,
Alicia Townsend, Kathi Ranford, and
Valley Interior Systems, Inc.
ee i a a
ENTRY
This cause is pending before the Court as an appeal
from the Court of Appeals for Hamilton County. Upon
consideration of appellant’s motion for leave to add
proposition of law to pending appeal and memorandum
in support,
It is ordered by the Court that the motion is denied.
(Hamilton County Court of Appeals; Nos. C050749,
C050779, and C050888)
THOMAS J. MOYER
Chief Justice
17a
APPENDIX D
SUPREME COURT OF OHIO
2007-0114
[Filed May 2, 2007]
Cleveland Construction, Inc.
Appellant/Cross-Appellee,
We
City of Cincinnati, et al
Appellees/Cross-Appellants.
Nee eee eee ee”
Hamilton App. Nos. C-050749, C-050779, and
C-050888, 2006 Ohio 6452, 864 N.E.2d 116.
Cleveland Constr., Inc. v. City of Cincinnati, 2006
Ohio 6452, 864 N.E.2d 116, 2006 Ohio App. LEXIS
6410 (Ohio Ct. App., Hamilton County, 2006)
JUDGES: O’Donnell, J., would accept the appeal.
Lanzinger, J., would accept the appeal. Pfeifer and
Cupp, JJ., dissent.
OPINION:
APPEAL ACCEPTED FOR REVIEW
18a
Discretionary appeal accepted on Proposition of
Law Nos. I and III.
O’Donnell, J., would accept the appeal on Proposition
of Law No. I only. Lanzinger, J., would accept the
appeal on Proposition of Law No. III only. Pfeifer and
Cupp, JJ., dissent.
at iS a el PR i ef kk &
pete Bet Se,
19a
APPENDIX E
IN THE SUPREME COURT OF OHIO
CASE NO. 07-0114
APPEAL NO. C050749, APPEAL NO. C050779
APPEAL NO. C050888
(Consolidated)
[Filed January 22, 2007]
CITY OF CINCINNATI
Defendant-Appellant
Vv.
CLEVELAND CONSTRUCTION, INC.
Plaintiff-Appellee
ee ae ae ee a a a
COURT OF APPEALS
FIRST APPELLATE DISTRICT
CASE NO. A-0402638
MEMORANDUM IN SUPPORT OF
JURISDICTION OF DEFENDANT-
APPELLANT CITY OF CINCINNATI
JULIA L. MCNEIL (0043535)
City Solicitor
20a
RICHARD GANULIN (0025642C)
MARY FRANCES CLARK (0077497)
Assistant City Solicitors
CITY OF CINCINNATI
801 Plum Street, Room 214
Cincinnati, Ohio 45202
Telephone: (513) 352-3329
Facsimile: (513) 352-1515
richard.ganulin @cincinnati-oh.gov
mary.clark @ cincinnati-oh.gov
Attorneys for Defendant-Appellant
City of Cincinnati
W. KELLY LUNDRIGAN (0059211)
GARY E. POWELL (0037546)
MANLEY BURKE
225 West Court Street
Cincinnati, Ohio 45202
Telephone: (513) 721-5525
Facsimile: (513) 721-4268
wkl.@manleyburke.com
gpowell@manleyburke.com
Attorneys for Plaintiff-Appellee
Cleveland Construction, Inc.
eek
IIT.
2la
TABLE OF CONTENTS
EXPLANATION OF WHY THIS CASE ISA
CASE OF PUBLIC AND GREAT GENERAL
I i thee ck so ake eee pean de
STATEMENT OF THE CASE AND FACTS .
ARGUMENT IN SUPPORT OF
PROPOSITIONS OF LAW ..............
Proposition of Law No. I
Under Ohio law, a disappointed bidder for a
City of Cincinnati public contract does not
have a constitutionally protected property
eabonmes Ges Gee Gaeermes 2... wt ee
Proposition w No. 2
To prove a deprivation of its right to
procedural due process, a disappointed
bidder with a constitutionally protected
property interest in a public contract must
establish that the government entity did not
provide sufficient notice and opportunity to
ES Aig iaitl a Oe a's 00a 08s oes ed Oe
Proposition of Law No. 3
A disappointed bidder for a public contract
in Ohio cannot recover lost-profit damages in
a 42 U.S.C. 1983 action alleging a
deprivation of procedural due process ....
i
10
22a
Proposition of Law No. 4
A plaintiff does not have standing to seek an
injunction against file operation of a
municipal corporation unless the plaintiff
pleads and proves a concrete and imminent
TTC TET TEC RE Ore
Proposition of Law No. 5
A subcontracting outreach program is not
impermissibly race-based or gender-based
when all bidders have an equal opportunity
to comply with the subcontracting outreach
program and the program does not create a
~~ PEST YC SEP CRE YT Cenere.
* * eK *
a
23a
APPENDIX F
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
APPEAL NO. C-050749, C-050779, C-050888
[Filed January 18, 2007]
CLEVELAND CONSTRUCTION, INC.
Appellant/Cross-Appellee,
VS.
CITY OF CINCINNATI, et al.
)
)
)
)
)
)
Appellees/Cross-Appellants. )
)
ENTRY GRANTING MOTION
TO STRIKE APPLICATION
FOR RECONSIDERATION
This cause came on to be considered upon the
application of the appellees/cross-appellants for
reconsideration, the motion of the appellant/cross-
appellee to strike the application as untimely filed,
and the response of appellees/cross-appellants to the
motion to strike.
24a
The Court finds that the motion to strike the
application for reconsideration is well taken and is
hereby granted.
To The Clerk:
Enter Upon the Journal of the Court on Jan 18 2007
per order of the Court.
By: /s/
Acting Presiding Judge .
(Copies sent to all counsel)
:
:
;
4
25a
APPENDIX G
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
APPEAL NOS. C-050749, C-050779, C-050888
TRIAL NO. A-0402638
[Filed December 8, 2006]
CLEVELAND CONSTRUCTION, INC.,
Plaintiff-Appeliant/
Cross-Appellee,
vs.
CITY OF CINCINNATI,
Defendant-Appellee/
Cross-Appellant,
)
)
)
)
)
)
)
)
)
)
and )
)
TIMOTHY RIORDAN, )
)
BERNADINE FRANKLIN, )
)
NATE MULLANEY )
)
ALICIA TOWNSEND, )
)
)
KATHI RANFORD,
26a
and
VALLEY INTERIOR SYSTEMS, INC.,
Defendants-Appellees.
ee a a ee
JUDGMENT ENTRY
This cause was heard upon the appeal, the record,
the briefs, and arguments.
The judgment of the trial court is affirmed in part,
reversed in part, and cause remanded for the reasons
set forth in the Opinion filed this date.
Further, the court holds that there were reasonable
grounds for this appeal, allows no penalty and orders
that costs are taxed under App. R. 24.
The court further orders that 1) a copy of this
Judgment with a copy of the Opinion attached
constitutes the mandate, and a) the mandate be sent
to the trial court for execution under App. R. 27.
To The Clerk:
Enter upon the Journal of the Court on
December 8, 2006 per Order of the Court.
By: /s/Hildebrandt
Presiding Judge
27a
APPENDIX H
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
APPEAL NOS. C-050749, C-050779, C-050888
TRIAL NO. A-0402638
[Filed December 8, 2006]
CLEVELAND CONSTRUCTION, INC.,
Plaintiff-Appellant/
Cross-Appellee,
vs.
CITY OF CINCINNATI,
Defendant-Appellee/
Cross-Appellant,
and
TIMOTHY RIORDAN,
BERNADINE FRANKLIN,
NATE MULLANEY,
ALICIA TOWNSEND,
ee ee ee ee ee ee
28a
KATHI RANFORD,
and
VALLEY INTERIOR SYSTEMS, INC.,
Defendants-Appellees.
Nee eee eee ee ee”
Civil Appeals From: Hamilton County Court of
Common Pleas.
Judgment Appealed From Is: Affirmed in Part,
Reversed in Part, and Cause Remanded.
Date of Judgment Entry on Appeal: December 8, 2006
SYLVIA SIEVE HENDON, Judge.
OPINION
{¥1} This case arose from the city of Cincinnati’s
rejection of a bid by Cleveland Construction Co. for
drywall work on the expansion and renovation of the
Cincinnati Convention Center. At the heart of the
dispute was the city’s implementation of its small
business enterprise (SBE) program.
{42} Cincinnati Municipal Code (CMC) 321-37
required the city to award a construction contract to
the lowest and best bidder. The ordinance set forth a
non-exhaustive list of factors that the city purchasing
agent could consider in determining the lowest and
best bid. One of the factors that could be considered
was a contractor’s compliance with the rules and
29a
regulations of the city’s SBE Subcontracting Outreach
Program.’
{J3} Where a lowest-and-best determination was
based primarily on the contractor’s subcontracting-
outreach compliance, the ordinance had a built-in cap.
The contract award could be made, “subject to the
following limitation: the bid could not exceed an
otherwise qualified bid by ten (10%) percent or Fifty
Thousand Dollars ($50,000.00), whichever is lower.”
The cap was apparently intended to strike a balance
between the city’s efforts to include small businesses
in public contracts and the city’s interest in protecting
its taxpayers from excessive costs.
{44} On December 23, 2003, the city issued an
invitation to bid on the Cincinnati Convention Center
Expansion and Renovation Project, entitled “Bid
Package C/TC-09A Drywall.” The city required bidders
to show that they had made a good-faith effort to
obtain the participation of SBEs on the project. For the
drywall-contract bids, the city established a mandatory
SBE-participation goal of 35%. Bidders were notified
that their failure to meet the SBE-participation goal
could cause a bid to be rejected as nonresponsive. The
city received bids until February 5, 2004.
{"¥5} On February 11, 2004, Kathi Ranford, a
contract-compliance officer, reported to Bernadine
Franklin, the city’s purchasing agent, that none of the
* CMC 321-37(c4).
2 CMC 321-37(c).
30a
three bidders for the project’s drywall contract had
complied with the 35% SBE-participation requirement.
According to Ranford, Cleveland had submitted a bid
with 3% SBE participation, Valley Interior Systems
had submitted a bid with 34% SBE participation, and
Kite, Inc., had submitted a bid with no SBE
participation. In that round of bidding, Cleveland’s bid
had been the lowest-dollar bid.
{{6} Because none of the bidders had achieved the
full 35% SBE-participation goal, the city conducted an
emergency rebidding for the drywall contract. On
February 24, 2004, Ranford notified Franklin that
Cleveland had submitted a re-bid for $8,889,000, with
10% SBE participation, and that Valley had submitted
a re-bid for $10,135,022, with 40% SBE participation.
{{7} The city’s office of contract compliance
deemed Cleveland’s bid to be unacceptable due to its
failure to achieve 35% SBE participation. In all other
respects, however, Cleveland’s bid had been found
acceptable according to the city’s purchasing division.
{18} Following a review of the acceptability of the
bids, Franklin issued a recommendation to Timothy
Riordan, an assistant city manager, that the drywall
contract be awarded to Vailey. Franklin’s
recommendation stated, “Pursuant to Section 321-37
of the Municipal Code, the bid submitted by [Valley]
has been determined to be the lowest and best bid.”
{{9} Valley’s new bid exceeded Cleveland’s new
bid by $1,246,022, well over the $50,000 or 10% cap in
CMC 321-37. Nonetheless, on March 3, 2004, the city
awarded the drywall contract to Valley and instructed
3la
Valley to commence work under the terms of the
contract.
Cleveland Files Suit
{10} Three weeks later, on March 30, 2004,
Cleveland brought an action for injunctive relief and
damages against the city, several city employees, and
Valley. Cleveland asked the court to restrain the city
and Valley from proceeding on the drywall contract
and to order the city to award the contract to
Cleveland.
{¥11} In addition, Cleveland sought declarations by
the court that (1) the city’s award of the contract
violated CMC 321-37; (2) the city’s drywall contract
with Valley was void; (3) the city’s SBE program was
unconstitutional and in violation of Section 1983, Title
42, U.S.Code; (4) the city had deprived Cleveland of a
property interest; (5) Cleveland was the lowest and
best bidder; and (6) the city’s delegation of discretion
to its purchasing agent under the SBE subcontracting-
outreach program was void.
{{12} Finally, Cleveland sought compensatory and
punitive damages, as well as attorney fees and costs.
{{13} The trial court denied Cleveland’s motion for
a temporary restraining order. Later, upon motion, the
trial court dismissed the city employees from the
action.
{714} In June 2005, the case proceeded to a jury
trial. At the close of Cleveland’s case, the trial court
directed a verdict in favor of the city and Valley on
32a
Cleveland’s claims for lost profits. Cleveland’s
remaining claims for injunctive and declaratory relief
and attorney fees were tried to the bench, by
agreement of the parties.
{¥15} Atthe conclusion of the trial, the court found
that the city had violated CMC 321-37 by awarding the
drywall contract to Valley rather than to Cleveland. As
a result, the court held, the city had abused its
discretion in a manner that had denied Cleveland the
contract in violation of its federally protected due-
process rights and in violation of Section 1983.
{16} The court held that the city’s SBE program
rules and guidelines created race- and gender-based
classifications that rendered the program facially
unconstitutional. The court further found that the city
had pressured and encouraged bidders. including
Cleveland, to draw upon race- and gender-based
classifications, in violation of Cleveland’s rights under
Section 1983. But the court held that Cleveland had
failed to establish that the denial of the drywall
contract was the result of the race- and gender-based
classifications; rather, it held that the denial had been
the result of the city’s preference for small businesses.
{{17} The court rendered a declaratory judgment
that precludes the city from awarding future contracts
to a bidder that exceeds the cap set forth in CMC 321-
37 if the bid selection is based primarily on the
bidders’ compliance with the SBE subcontracting-
outreach program.
{{18} Thecourt permanently enjoined the city from
maintaining or applying race-or gender-based
33a
classifications in its SBE rules and guidelines, absent
a formal determination that such _ race-based
provisions were narrowly tailored and necessary to
fulfill compelling governmental interests, or that such
gender-based provisions were substantially related to
genuine and important governmental] objectives.
({§19} Finally, the court entered judgment in favor
of Cleveland as the prevailing party, and against the
city, for Cleveland’s reasonable attorney fees and costs
pursuant to Section 1988, Title 42, U.S. Code. The
court also entered judgment in favor of Valley.
{720} On appeal, Cleveland argues that the trial
court erred by (1) directing a verdict in favor of the city
on Cleveland’s damage claims; (2) refusing to declare
Valley’s drywall contract to be void or to prohibit
performance under the contract; (3) ruling that
Cleveland could not elicit testimony from Valley’s
subcontractors with respect to post-contract events; (4)
denying Cleveland’s motion for a new trial; (5)
granting the motions to dismiss individual city
employees; and (6) making findings concerning
causation of damages.
{21} In its cross-appeal, the city argues that the
trial court (1) erred by applying CMC 321-37; (2)
lacked jurisdiction over Cleveland’s claims for
injunctive relief; (3) erred by concluding that the city
had deprived Cleveland of its right to procedural due
process; (4) erred by ruling that portions of the city’s
SBE program created constitutionally impermissible
race- and gender-based classifications; and (5) erred by
awarding attorney fees to Cleveland. We first address
the city’s assignments of error.
34a
The Application of CMC 321-37
{{22} In its first assignment of error, the city
argues that the trial court erred by applying CMC 321-
37 in its analysis of Cleveland’s claims. The city
contends that Franklin had not applied the provisions
of CMC 321-37 in her review of bids for the project
because the ordinance had not been in place at the
time the project’s “procurement process” was planned.
{{23} The record reflects that CMC 321-37 had
been adopted in _ specific contemplation of the
convention center project. By its terms, the ordinance
had been enacted as an emergency measure due to the
city’s “immediate need to proceed with the bidding of
the Convention Center and major development
projects.” The ordinance specifically applied to the
award of construction contracts that exceeded
$100,000. And the ordinance had gone into effect
before the project’s bid solicitation, and well before the
award of the drywall contract. So Franklin’s selection
of the lowest and best bidder was subject to CMC 321-
37.
{424} The city argues that “[e]ven though Valley’s
bid was $1.2 million more than Cleveland’s, the project
was well within the budget.” This argument fails to
take into account that “among the purposes of
competitive bidding legislation are the protection of
the taxpayer [and the] prevention of excessive costs.”*
The fact that the project was under budget was of
* Danis Clarkco Landfill Co. v. Clark Cty. Solid Waste Mgmt Dist.,
73 Ohio St.3d 590, 602, 1995 Ohio 301, 653 N.E.2d 646.
35a
questionable relevance and was certainly not
dispositive of the legality of the bid-selection process.
{{25} The city argues that even if Franklin had
applied CMC 321-37 to the drywall-contract bids, the
ordinance’s cap would not have come into play because
Cleveland’s bid was not an “otherwise qualified” bid.
But the city acknowledges in its brief that “[t)he trial
evidence established that Cleveland lost because its
drywall bid failed to reserve at least 35% of the work
for small business enterprises as the bid documents
required.” In other words, but for its SBE
noncompliance, Cleveland’s bid was qualified. Where
the sole reason that Cleveland’s bid was rejected was
its noncompliance with the SBE subcontracting-
outreach program, Cleveland was an “otherwise
qualified” bidder. Under these circumstances, Valley’s
SBE-comphant bid could not have exceeded
Cleveland’s bid by the $50,000 or 10% cap.
({26} Accordingly, we hold that the trial court
properly considered and applied CMC 321-37. We
overrule the city’s first assignment of error.
Cleveland’s Standing
i(27} In its second assigninent of error, the city
argues that the trial court lacked jurisdiction over
Cleveland’s claims for injunctive relief. The city
contends that the possibility that Cleveland might bid
on a city contract in the future did not create a risk
that it would again be subject to a deprivation of
rights.
36a
{28} In Ohio, it is well established that standing
to challenge the constitutionality of a legislative
enactment exists where a litigant “has suffered or is
threatened with direct and concrete injury in a manner
or degree different from that suffered by the public in
general, that the law in question has caused the
injury, and that the relief requested wil! redress the
injury.” *
{{29} In the context of a constitutional challenge to
a set-aside program, the “injury in fact” is the inability
to compete on an equal footing in the bidding process,
and not necessarily the loss of a contract. So to
establish standing, a party challenging a set-aside
program need only demonstrate that it is able and
ready to bid on contracts and that a discriminatory
policy prevents it from doing so on an equal basis.°
{730} At trial, the city specifically stipulated that
Cleveland intended and was able to bid on future city
construction projects. And the city’s discriminatory
policies would have affected Cleveland’s ability to
compete fairly. So Cleveland had sufficient standing to
seek injunctive relief against the city. We overrule the
city’s second assignment of error.
* State ex rel. Ohio Acad. of Trial Lawyers v. Sheward, 86 Ohio
St.3d 451, 469-470, 1999 Ohio 123, 715 N.E.2d 1062.
° Northeastern Fla. Chapter of Associated Gen. Contractors of Am.
v. Jacksonville (1993), 508 U.S. 656, 666, 113 S. Ct. 2297, 124 L.
Ed. 2d 586.
)
EE ee ee ee
.
37a
Deprivation of a Property Interest
{31} In its third assignment of error, the city
argues that the trial court erred by concluding that the
city had deprived Cleveland of a right to procedural
due process.
{¥32} One of the proscriptions of the Fourteenth
Amendment is the deprivation of a person’s property
interests without due process of law.® In a due-process
challenge based upon such a deprivation, we must first
determine whether a protected property interest was
at stake.
{{33} Property interests “are created and their
dimensions are defined by existing rules or
understandings that stem from an independent source
such as state law-rules or understandings that secure
certain benefits and that support claims of entitlement
to those benefits.”’ A person has a property interest in
a benefit, such as a public contract, if the person has a
legitimate claim of entitlement to it. A person’s
unilateral expectation of a benefit is not enough.?
® Bd. of Regents v. Roth (1972), 408 U.S. 564, 569-570, 92 S. Ct.
2701, 33 L. Ed. 2d 548.
"Id. at 577, 92 S. Ct. 2701.
® Cleveland Constr. v. Ohio Dept. of Admin. Servs., GSA (1997),
121 Ohio App. 3d 372, 394, 700 N.E.2d 54.
® Roth, supra, at 577, 92 S. Ct. 2701.
38a
{34} The Sixth Circuit Court of Appeals has held
that a disappointed bidder may establish a legitimate
claim of entitlement to a public contract in one of two
ways. A bidder can either show that it actually was
awarded the contract and then deprived of it, or that
the government abused its limited discretion in
awarding the contract to another bidder.*®
{{35} Generally, municipalities are vested with
broad discreticn in matters related to public contracts.
But that discretion is not limitless." For example, a
municipality “may by its actions commit itself to follow
rules it has itself established.””* :
{{36} In the context of lowest-and-best-bidder
determinations, Ohio courts are reluctant to substitute
their judgment for that of city officials.’ But where
city officials abuse the discretion vested in them,
courts will intervene.’* An abuse of discretion
“connotes more than an error of law or of judgment; it
implies an unreasonable, arbitrary, or unconscionable
attitude. * * * ‘Arbitrary’ means ‘without adequate
© United of Omaha Life Ins. Co. v. Solomon (C.A.6, 1992), 960
F.2d 31, 34; Enertech Elec. v. Mahoning County Commrs. (C.A.6,
1996), 85 F.3d 257, 260.
" Danis, supra, at 604, 1995 Ohio 301, 653 N.E.2d 646.
2 Id. at 603, 1995 Ohio 301, 653 N.E.2d 646.
'3 See Cedar Bay Constr., Inc. v. Fremont (1990), 50 Ohio St.3d 19,
552 N.E.2d 202.
"* Id. at 21-22, 552 N.E.2d 202.
39a
determining principle; * * * not governed by any fixed
rules or standard.’ * * * ‘Unreasonable’ means
‘irrational.”””*
{737} In this case, the city had established a “fixed
rule” with respect to the award of a contract based
primarily upon the bidder’s subcontracting-outreach
program compliance. In that instance, CMC 321-37
required the city to apply the ordinance’s cap.
{938} But, here, the evidence demonstrated that
the city had arbitrarily ignored the cap in awarding
the contract to Valley. Thus, we agree with the trial
court that the city’s failure to follow the directive of its
own ordinance constituted an abuse of discretion that
resulted in a deprivation of Cleveland’s property
interest in the contract award. We overrule the city’s
third assignment of error.
SBE Program Provisions Were
Facially Unconstitutional
{¥39} In its fourth assignment of error, the city
argues that the trial court erred by ruling that
elements of the rules and guidelines in the city’s SBE
program created constitutionally impermissible race-
and gender-based classifications. The city contends
that the program was a lawful “outreach” program
that encouraged contractors to use “good faith efforts”
to promote opportunities for minorities and females.
'® Dayton, ex rel. Scandrick v. McGee (1981), 67 Ohio St.2d 356,
359, 423 N.E.2d 1095 (emphasis added).
40a
{740} The Fourteenth Amendment requires strict
scrutiny of all race-based action by state and local
governments.” Racial classifications must serve a
compelling government interest and must be narrowly
tailored to further that interest.’’ Gender-based
classifications, by contrast, require an “exceedingly
persuasive” justification.”
{741} At trial, the city did not put forth any
argument or evidence to demonstrate that its SBE
program could withstand such heightened scrutiny.
Instead, the city relied on its assertion that increased
scrutiny should not apply in the first instance because
its SBE program created neither race- nor gender-
based classifications.
(¥42} On appeal, the city acknowledges that it had
predetermined estimates of the availability of
minorities and females for each trade represented in
the convention center project. But the city argues that
its availability estimates were for informational
purposes only, and that bidders were required to do
nothing in response.
{¥43) Racial or gender classifications may arise
- from a regulation’s strict requirements, such as
6 Richmond v. J.A. Croson Co. (1989), 488 U.S. 469, 109 S. Ct.
706, 102 L. Ed. 2d 854.
Adarand Constructors v. Pena (1995), 515 U.S. 200, 235, 115 S.
Ct. 2097, 132 L. Ed. 2d 158.
8 United States v. Virginia (1996), 518 U.S. 515, 533, 116 S. Ct.
2264, 135 L. Ed. 2d 735.
Ce ee ey ee”! Fa? een ae ea” ese
4la
mandated quotas or set-asides. But rigid mandates are
not a prerequisite to a finding of a racial
classification." Where regulations pressure or
encourage contractors to hire minority subcontractors,
courts must apply strict scrutiny.”
{144} For example, in Adarand Constructors v.
Pena,” the United States Supreme Court considered
federal regulations that provided financial incentives
to bidding contractors to hire minority subcontractors.
The regulations did not require contractors to use
minority subcontractors. But contractors would receive
additional compensation if they did so. The court held
that, to the extent that the regulations provided
incentives to contractors to use _ race-based
classifications, the regulations were subject to strict
scrutiny.”
{745} In determining whether strict scrutiny must
be applied to the city’s SBE program, we must look
behind its ostensibly neutral labels such as “outreach
program” and “participation goals.” The program’s
rules and guidelines “are not immunized from scrutiny
because they purport to establish ‘goals’ rather than
—>
'® Bras v. Calif. Pub. Utils. Comm. (C.A.9, 1995), 59 F.3d 869.
2° See Lutheran Church-Missouri Synod v. FCC (C.A.D.C., 1998),
332 U.S. App. D.C. 165, 154 F.3d 487; Monterey Mechanical Co. v.
Wilson (C.A.9 1997), 125 F.3d 702; Safeco Ins. Co. of America v.
White House (C.A.6, 1999), 191 F.3d 675.
" (1995), 515 U.S. 200, 115 S. Ct. 2097, 132 L. Ed. 2d 158.
22 Id. at 224, 115 S. Ct. 2097.
42a
‘quotas.’[Courts] look to the economic realities of the
program rather than the label attached to it.””
{46} Under the city’s SBE rules and guidelines,
all bidders were required to use “good faith efforts” to
promote opportunities for minority- and women-owned
businesses (MBEs and WBEs) to the extent of their
availability as determined by the city. With respect to
the drywall portion of the project, the city estimated
that the availability of MBEs was 13.09%, and that it
was 1.05% for WBEs.
{¥47} Bidders were required to provide detailed
descriptions of the techniques used to obtain
participation of MBEs and WBEs. The city would then
evaluate each bidder’s documented efforts to achieve
participation of MBEs and WBEs. If that review
determined that a bid’s utilization percentage for
MBEs and WBEs was lower than the estimated
availability for those groups, the bid would be flagged
for a discrimination investigation.
{{48} Where the city’s SBE program required
documentation of a bidder’s specific efforts to achieve
the participation of minority subcontractors to the
extent of their availability as predetermined by the
city, the program undeniably pressured bidders to
implement racial preferences.** Therefore, the
program’s rules must be subject to strict scrutiny. To
the extent that the rules pressured bidders to hire
*® Bras, supra, at 874.
* Safeco Inc., supra, at 692, citing Lutheran, supra, at 491.
43a
women-owned subcontractors, the city was required to
demonstrate an “exceedingly persuasive” justification
for the differential treatment.
{149} Given that the city effectively conceded that
it could not justify race- or gender-based classifications
under either standard of heightened scrutiny, the trial
court properly determined that those elements of the
program that caused bidders to use racial- or gender-
based preferences were unconstitutionally
impermissible.
Award of Attorney Fees
{{50} In its fifth assignment of error, the city
argues that the trial court erred by awarding attorney
fees to Cleveland. The city contends that Cleveland
was not entitled to the award because it was not a
prevailing party.
{51} A “prevailing party” is one who “succeed[s]
on any significant issue in litigation which achieves
some of the benefit the parties sought in bringing
suit.”” To be a “prevailing party,” there must have
been “a court-ordered ‘change [in] the legal
relationship” between the parties.” In this regard, a
* Hensley v. Eckerhart (1983), 461 U.S. 424, 433, 103 S. Ct. 1933,
76 L. Ed. 2d 40.
°° Buckhannon Bd. v. W. Va. Dept. of Health & Human Res.
(2001), 532 U.S. 598, 604, 121 S. Ct. 1835, 149 L. Ed. 2d 855.
44a
declaratory judgment may serve as the basis for an
award of attorney fees.”’
{752} But the entry of a declaratory judgment ina
party’s favor does not automatically render that party
a prevailing party under Section 1988.” “In all civil
litigation, the judicial decree is not the end but the
means. At the end of the rainbow lies not a judgment,
but some action (or cessation of action) by the
defendant that the judgment produces-the payment of
damages, or some specific performance, or the
termination of some conduct. Redress is sought
through the court, but from the defendant. This is no
less true of a declaratory judgment suit than of any
other action. The real value of the judicial
pronouncement - what makes it a proper judicial
resolution of a ‘case or controversy’ rather than an
advisory opinion - is in the settling of some dispute
which affects the behavior of the defendant towards the
plaintiff .” (Emphasis in original.)”
{{53} We hold that the trial court did not abuse its
discretion in ordering attorney fees. Cleveland
successfully challenged the unconstitutional race- and
gender-based provisions of the city’s SBE program. As
a result, the city will no longer be permitted to apply
those provisions against Cleveland or other bidders on
*" Hewitt v. Helms (1987), 482 U.S. 755, 761, 107 S. Ct. 2672, 96 L.
Ed. 2d 654.
* Rhodes v. Stewart (1988), 488 U.S. 1, 109 S. Ct. 202, 102 L. Ed.
2d 1.
*® Hewitt, supra, at 761, 107 S. Ct. 2672.
45a
city contracts. In that regard, Cleveland was a
prevailing party because the judgment had a distinct
efiect on the city’s behavior. Accordingly, we overrule
the city’s fifth assignment of error.
Directed Verdict
{954} In its complaint, Cleveland sought damages
for the loss of profits that it would have realized had it
been awarded the drywall contract. Cleveland now
argues in its first assignment of error that the trial
court erred by directing a verdict in favor of the city on
its lost-profits claim.
{155} In considering a motion for a directed
verdict, a trial court must construe the evidence most
strongly in favor of the party against whom the motion
is made.” In doing so, if the court “finds that upon any
determinative issue reasonable minds could come to
but one conclusion upon the evidence submitted and
that conclusion is adverse to such party, the court
shall sustain the motion and direct a verdict for the
moving party as to that issue.”
{{56} “A motion for directed verdict * * * does not
present factual issues, but a question of law, even
though in deciding such a motion, it is necessary to
review and consider the evidence.” Because a
” Civ.R. 50(A)4).
*' Civ.R. 50(AX4).
*? Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 95 Ohio
St.3d 512, 2002 Ohio 2842, 769 N.E.2d 835, 94, quoting O’Day v.
46a
question of law is presented, we apply a de novo
standard of review to a directed verdict.”
{{57} Cleveland acknowledges that the Ohio
Supreme Court’s recent decision in Fairlawn uv.
Cementech™ resolves its claim for damages under state
law. In Cementech, the court held that when a
municipality violates competitive-bidding laws in
awarding a competitively bid project, a disappointed
bidder cannot recover its lost profits as damages.
{158} But in addition to its claim for damages
under state law, Cleveland sought damages under
federal law, Section 1983, Title 42, U.S.Code, for the
city’s deprivation of its property interest in the drywall
contract. Under Section 1983, a party who has been
deprived of a federal right under the color of state law
may seek relief through “an action at law, suit in
equity, or other proper proceeding for redress.”
{459} The basic purpose of a Section 1983 damage
award is to compensate persons for injuries caused by
the deprivation of constitutional rights. For this
reason, no compensatory damages may be awarded in
Webb (1972), 29 Ohio St.2d 215, 280 N.E.2d 896, paragraph three
of the syllabus.
33 Cleveland Elec. Illum. Co. v. Pub. Util. Comm., 76 Ohio St.3d
521, 523, 1996 Ohio 298, 668 N.E.2d 889.
* 109 Ohio St.3d 475, 2006 Ohio 2991, 849 N.E.2d 24.
*® Carey v. Piphus (1978), 435 U.S. 247, 253-254, 98S. Ct. 1042, 55
L. Ed. 2d 252.
47a
a Section 1983 suit without proof of actual injury.*
The level of a person’s compensatory damages under
Section 1983 is ordinarily determined according to
principles derived from the common law of torts.”
{960} In Adarand Constructors v. Pena, the
United States Supreme Court considered whether a
rejected bidder had standing to seek injunctive relief
against future application of a minority set-aside
program. In doing so, the Court presumed that the
rejected bidder was entitled to seek damages for the
lost contract:
{61} “Adarand, in addition to its general prayer
for ‘such other and further relief as to the Court seems
just and equitable,’ specifically seeks declaratory and
injunctive relief against any future use of
subcontractor compensation classes. * * * Before
reaching the merits of Adarand’s challenge, we must
consider whether Adarand has standing to seek
forward-looking relief. Adarand’s allegation that it has
lost a contract in the past because of a subcontractor
compensation clause of course entitles it to seek
damages for the loss of that contract [.)” (Emphasis
added.)
*® Memphis Community Sch. Dist. v. Stachura (1986), 477 U.S.
299, 306, 106 S. Ct. 2537, 91 L. Ed. 2d 249.
* Id. at 306-307, 106 S. Ct. 2537.
%6 (1995), 515 U.S. 200, 115 S. Ct. 2097, 132 L. Ed. 2d 158.
48a
{162} Those damages may include a disappointed
bidder’s lost profits.* In W.H. Scott Constr. Co., Inc. v.
Jackson,*° the Fifth Circuit Court of Appeals
considered an equal-protection challenge to a policy
encouraging minority participation in city construction
projects. The court upheld an award of lost profits to a
rejected bidder who had sought damages from the city
under Section 1983.
{{63} Similarly, in Hershell Gill Consulting
Engineers, Inc. v. Miami-Dade Cty., Fla.,*’ the court
held that a county was liable to the plaintiffs under
Section 1983 for any compensatory damages resulting
from its unconstitutional affirmative-action programs.
The court held that the plaintiffs’ damages could
include their lost profits, but that the plaintiffs in that
case had failed to prove that any actual losses had
resulted from the unconstitutional programs.”
{764} In this case, the trial court concluded that
Cleveland’s failure to adduce evidence concerning the
degree of completion of the drywall contract precluded
Cleveland from proceeding on its claim for money
damages. The court reasoned that Cleveland’s
damages were speculative, not due to a failure of proof
as to Cleveland’s anticipated profits, but due to the
3° See Flores v. Pierce (C.A.9, 1980), 617 F.2d 1386, 1392;
Chalmers v. Los Angeles (C.A.9, 1985), 762 F.2d 753.
“(C.A.5, 1999), 199 F.3d 206.
“' (S.D.Fla.2004), 333 F. Supp. 2d 1305.
* Id. at 1339.
49a
court’s misapprehension that Cleveland’s damage
claim was wholly dependent on its claim for injunctive
relief.
{165} Certainly, the status of the drywall project
would have been relevant to a determination of any
injunctive relief the court may have awarded, but that
evidence was not critical to Cleveland’s claim for
Section 1983 damages. In effect, the trial court’s entry
of a directed verdict on the damage claim precluded
Cleveland from seeking redress, even though
Cleveland could have waited to file suit until the
drywall contract had been completed. The issuance of
a directed verdict on the issue of Section 1983 damages
before the contract’s completion had the absurd result
of denying redress because of Cleveland’s diligence in
asserting its claims.
{{66} We recognize that a plaintiff seeking redress
under Section 1983 is required to mitigate its
damages.** But once the plaintiff has presented
evidence of damages, the defendant has the burden of
establishing the plaintiffs failure to properly mitigate
damages.“ So once Cleveland presented evidence of
damages, the burden of proof on the issue of mitigation
was on the city.
{767} Because a jury could have concluded that
Cleveland had established all the elements of its
*® Meyers v. Cincinnati (C.A.6, 1994), 14 F.3d 1115, 1119.
“ Id., citing Rasimas v. Michigan Dept. of Mental Health (C.A.6,
1983), 714 F.2d 614.
50a
Section 1983 claim for damages, we hold that a
directed verdict in favor of the city was unwarranted.
Consequently, we sustain Cleveland’s first assignment
of error in part, reverse the entry of the directed
verdict on the Section 1983 damage claim, and remand
the case for a new trial on the issues of liability and
damages with respect to Cleveland’s lost-profits claim
under Section 1983.
{{68} Because Cleveland’s fourth and_ sixth
assignments of error relate to the trial court’s
dismissal of its damage claims, we address the
assignments out of order. Cleveland argues that the
trial court erred by denying its motion for a new trial,
given the court’s erroneous dismissal of its damage
claim under Section 1983. Cleveland also contends
that the trial court erred by making “a finding that,
essentially, amountled] to a directed verdict on the
issue of proximate causation of Cleveland’s damages in
addition to that given at trial.” For the reasons set
forth in our disposition of Cleveland’s first assignment
of error, we sustain the fourth and sixth assignments
of error.
The Denial of Injunctive Relief
{{69} In its second assignment of error, Cleveland
argues that the trial court erred by refusing to declare
the drywall contract unenforceable and by failing to
enjoin performance of the contract. Cleveland contends
that the trial court should have enjoined performance
of the contract despite the fact that substantial work
had been completed on the project.
5la
{70} An appellate court need not consider an issue
where the court becomes aware of an intervening event
that has rendered the issue moot.*° The duty of an
appellate court is to decide actual controversies
between parties and to render judgments that may be
carried into effect.“° “Thus, when circumstances
prevent an appellate court from granting relief in a
case, the mootness doctrine precludes consideration of
those issues.”*’ For example, in the context of appeals
involving construction projects, Ohio courts have held
that an appeal is rendered moot where the appellant
fails to obtain a stay of execution of the trial court’s
judgment and construction commences.
{{71} In this case, there is no dispute that the
convention center project, which was substantially
completed at the time that the trial court denied the
injunction, is now completed in its entirety. At no point
in the proceedings did Cleveland obtain a stay of the
*’ Cincinnati Gas & Elec. Co. v. PUC of Ohio, 103 Ohio St.3d 398,
2004 Chio 5466, 816 N.E.2d 238, at 715, citing Miner v. Witt
(1910), 82 Ohio St. 237, 238, 92 N.E. 21, 8 Ohio L. Rep. 71.
‘© Miner, supra, at 238, 92 N_E. 21.
*? Schwab v. Lattimore, 166 Ohio App. 3d 12, 2006 Ohio 1372, 848
N.E.2d 912, at 410.
“® Schuster v. Avon Lake, 9" Dist. No. 03CA008271, 2003 Ohio
6587, at 13; Pinkney v. Southwick Invs., L.L.C., 8 Dist. Nos.
85074 and 85075, 2005 Ohio 4167; Bd. of Commrs. v. Saunders,
2™ Dist. No. 18592, 2001 Ohio 1710; Smola v. Legeza, 11" Dist.
No. 2004-A-0038, 2005 Ohio 7059; Redmon v. City Council, 10"
Dist. No. O5AP-466, 2006 Ohio 2199.
52a
trial court’s denial of its request for a temporary
restraining order. In fact, as the trial court pointed
out, Cleveland did not pursue preliminary injunctive
relief for an entire year. Instead, Cleveland acceded to
several continuances. In denying Cleveland’s motion
for a preliminary injunction, the trial court noted the
following:
{¥72} “The court at this time will deny Cleveland’s
motion for injunctive relief pending trial. The parties’
desires with regard to the scheduling of this case have
been solicited on a regular basis. After the action was
removed to and returned from federal court, Cleveland
opted not to seek a prompt hearing on [a] preliminary
injunction, but sought rather to engage in the
extended discovery reflected in the voluminous
materials relating to the summary judgment motions.
Cleveland then waited to the final day of the
dispositive motion period - almost one year after the
action was filed and roughly three months prior to the
scheduled June 20, 2005 trial date - to pursue its
preliminary injunction request.”
{773} At this point, we can not render a judgment
that could be carried into effect with respect to the
performance of the drywall contract. Even if we
concluded (which we expressly do not) that the trial
court had erred in failing to enjoin the contract’s
performance, our opinion would only be advisory in
nature. Consequently, we decline to address the
assignment of error on its merits.
53a
Evidentiary Rulings
{174} In its third assignment of error, Cleveland
argues that the trial court erred by ruling that it could
not elicit testimony from Valley’s subcontractors about
events that had occurred after the city had awarded
the contract to Valley. In support of its argument,
Cleveland directs us to its examination of one of
Valley’s subcontractors, Marti Stouffer-Heis, owner of
MS Construction Consultants.
{{75}) “Relevant evidence” is defined by Evid.R. 401
as “evidence having any tendency to make the
existence of any fact that is of consequence to the
determination of the action more probable or less
probable than it would be without the evidence.”
Evid.R. 402 provides that relevant evidence is
admissible, subject to enumerated exceptions, and that
evidence that is not relevant is not admissible.
Although the terms of Evid.R. 402 are mandatory, a
trial court is vested with broad discretion in
determining whether evidence is relevant.*® A
reviewing court is, therefore, limited to a
determination of whether the trial court abused its
discretion in admitting or excluding the disputed
evidence.”
*° See Cincinnati v. Banks (2001), 143 Ohio App. 3d 272, 287, 757
N.E.2d 1205; Siuda v. Howard, 1" Dist. Nos. C-000656 and C-
000687, 2002 Ohio 2292, 425.
*° See Banks, supra.
54a
{776} Cleveland’s attorney attempted to elicit
testimony from Stouffer-Heis about the city’s post-
award enforcement of its SBE program. Counsel asked
whether Stouffer-Heis had been able to perform her
described “{llogistics, project coordination” tasks at the
construction site, and whether the city had performed
any investigation upon submission of her request to be
certified as an SBE supplier.
{77} The trial court indicated that it would allow
testimony by a subcontractor with respect to the
current status of the uncompleted project. And the
court expressly permitted counsel to question Stouffer-
Heis about whether she had been certified as an SBE
supplier prior to the contract award. But the court
instructed counsel to otherwise restrict his questioning
to matters that had occurred prior to the contract
award to Valley, because Cleveland’s complaint had
been predicated on the rejection of its bid.
{78} We find no abuse of discretion by the trial
court in ruling that testimony related to post-award
program enforcement was irrelevant and inadmissible. -
We overrule Cleveland’s third assignment of error.
Dismissal of City Employees
{779} In its fifth assignment of error, Cleveland
argues that the trial court erred when it granted the
individual defendants’ motion to dismiss. The trial
court dismissed Cleveland’s claims against city
employees Riordan, Franklin, Mullaney, Townsend,
and Ranford in their “personal and individual
capacities,” on the basis of qualified immunity.
Cleveland had also sued the employees in their “official
55a
capacities.” Because the trial court did not explicitly
dismiss the claims against the employees in their
official capacities, we treat the official-capacity claims
as claims against the city.”
{80} The doctrine of qualified immunity generally
shields public officials performing discretionary
functions from liability for civil damages to the extent
that their conduct does not violate clearly established
statutory or constitutional rights of which a reasonable
person would have known.”
{{81} The doctrine recognizes the strong public
interest in protecting public officials from the costs of
defending against claims. A_ public official’s
entitlement to avoid the burdens of litigation “is an
immunity from suit rather than a mere defense to
liability; and like an absolute immunity, it is
effectively lost if a case is erroneously permitted to go
to trial.” To this end, a ruling on the issue of qualified
immunity should be made as early as possible in the
proceedings, before the commencement of discovery.”
°! See Asher Investments, Inc. v. Cincinnati (1997), 122 Ohio App.
3d 126, 137, 701 N.E.2d 400; Norwell v. Cincinnati (1999), 133
Ohio App. 3d 790, 729 N.E.2d 1223.
* Harlow v. Fitzgerald (1982), 457 U.S. 800, 818, 102 S. Ct. 2727,
73 L. Ed. 2d 396.
*° Mitchell v. Forsyth (1985), 472 U.S. 511, 526, 105 S. Ct. 2806, 86
L. Ed. 2d 411.
—
* Id.
;
.
|
a
56a
“[A] quick resolution of a qualified immunity claim is
essential.”™
{{82} “Where a defendant official is entitled to
qualified immunity, the plaintiff must plead facts
which, if true, describe a violation of a clearly
established statutory or constitutional right of which
a reasonable public official, under an objective
standard, would have known. The failure to so plead
precludes a plaintiff from proceeding further, even
from engaging in discovery, since the plaintiff has
failed to allege acts that are outside the scope of the
defendant’s immunity.”
{783} In this case, Cleveland alleged that the city
employees had violated its rights to due process and
equal protection by failing to apply the cap in CMC
321-37 and by rejecting its bid as nonresponsive after
applying provisions of a race-conscious program. These
allegations were insufficient as a matter of law to
describe a violation of a _ clearly established
constitutional right. As demonstrated by the complex
nature of the issues already discussed, the individual
defendants could not have reasonably known that their
actions were unconstitutional. Accordingly, we
overrule Cleveland’s fifth assignment of error.
*° Will v. Hallock (2006), 546 U.S. 345, 126 S. Ct. 952, 960, 163 L.
Ed. 2d 836.
* Sait Lick Bancorp v. FDIC (May 30, 2006), C.A.6 No. 05-5291,
_. F.3d __, 187 Fed. Appx. 428, citing Kennedy v. Cleveland
(C.A.6, 1986), 797 F.2d 297, 299.
57a
Conclusion
In conclusion, we reverse the trial court’s entry of
a directed verdict on Cleveland’s claim for lost profits
under Section 1983. We remand the cause for a new
trial on the issues of liability and damages under
Section 1983. In all other respects, the trial court’s
judgment is affirmed.
Judgment accordingly.
HILDEBRANDT, P.J., and PAINTER, J., concur.
58a
APPENDIX I
COMMON PLEAS COURT
HAMILTON COUNTY, OHIO
CASE NO: A0402638
[Filed October 7, 2005]
Cleveland Construction, Inc.,
Plaintiff,
Vv.
City of Cincinnati, et al.,
Defendants.
ee
ENTRY DENYING PLAINTIFF'S
MOTION FOR A NEW TRIAL
This matter comes before the court on Plaintiffs
motion for a new trial based on Plaintiffs position that
“the Court’s ruling dismissing Cleveland’s damage
remedy [relating to claimed lost profits and uncertain
bid preparation costs] was error....” Plaintiffs motion
for a new trial at 5. Plaintiffs position here clearly is
not precluded by Plaintiff's earlier observation (in the
fee award context) that: “As the Court (and the City)
realize, cases where lost profits have been awarded in
competitive bidding scenarios involving equal
protection challenges are practically nonexistent. Most
59a
cases involving successful equal protection challenges
to programs such as the one at issue here result in
relief of exactly the same nature as that granted here.”
Reply Memorandum in Support of Motion of Plaintiff
for Award of Attorney Fees and Costs (August 22,
2005) at 7. Nonetheless, for reasons already set forth
by the court, including those discussed in the court’s
post-trial entry of July 13, 2005, the court does not
find Plaintiffs argument here well taken. The motion
is denied.
SO ORDERED.
/s/
Judge Nelson, Judge
cc: Kelly Lundrigan, 225 West Court Street,
Cincinnati, OH 45202
Leonard Weakley, Jr., One West Fourth Street,
Suite 900, Cincinnati, OH
David Barth, 537 East Pete Rose Way, Suite
400, Cincinnati, OH 45202
te Oe date Le ee! lai Bee te he et ee ee tie | 9 i ate a
60a
APPENDIX J
COURT OF COMMON PLEAS
HAMILTON COUNTY, OHIO
Case No. A0402638
[Filed August 29, 2005]
Cleveland Construction,
Plaintiff,
Vv.
City of Cincinnati, et al.,
)
)
)
)
)
)
Defendants. )
)
FINAL JUDGMENT ENTRY
This final judgment entry is based on and
incorporates in full the court’s post-trial entry of July
13, 2005.
As set forth in that prior entry, the court finds and
adjudges that:
1) Defendant the City of Cincinnati (“the City”)
violated the requirements of Cincinnati
Municipal Code Section 321-37 (“Bid; Award to
Lowest and Best”) in awarding the Convention
Center drywall contract at issue to Defendant
2)
6la
Valley Interior Systems, Inc. (“Valley”) rather
than to Plaintiff Cleveland Construction, Inc.
(“Cleveland Construction”) when the award was
“based primarily upon” compliance with the
City’s Subcontracting Outreach Program and
Valley’s bid exceeded Cleveland Construction’s
by $1,246,022.00. That additional cost exceeded
the $50,000 cap established by Code Section
321-37, and the City acknowledged that
Cieveland Construction was otherwise qualified
to perform the work. In making its award, the
City abused its discretion in a manner that
harmed the public and denied Cleveland
Construction the contract in violation of
Cleveland Construction’s federally protected.
due process rights and in violation of 42 U.S.C.
Section 1983.
The City’s Small Business Enterprise program
Rules and Guidelines as in effect at the time of
contract award and trial create race and gender
based classifications for which the City claims
no compelling governmental interest and offers
no basis to satisfy any appropriate intermediate
scrutiny review. The program is to that extent
unconstitutional on its face. Further, in the
process of soliciting bids in this matter, the City
did pressure and encourage bidders, including
Plaintiff, to draw upon race and sex-based
classifications that the City concedes could not
withstand the heightened level of review that
the court finds mandated by governing law. The
City in that regard violated Cleveland
Construction’s rights under 42 U.S.C. Section
1983. However, Cleveland Construction failed to
62a
establish that the City’s race and sex based
classifications (as opposed to the City’s small
business preference) resulted in the loss of the
contract at issue.
Further, the court enters a declaratory judgment,
in favor of Cleveland Construction and against the
City, that City Code Section 321-37(c) in its current
form provides, among other things, that where the
City elects to enter into a construction contract on the
basis of the “lowest and best” bid, and where that
selection is based primarily upon the City’s
determination uf the bidders’ relative compliance with
the City’s SBE Subcontracting Outreach Program
rules and regulations, the City may not award the
contract to a bidder whose bid amount exceeds an
otherwise qualified bid by ten percent or fifty thousand
dollars.
The court also enters a declaratory judgment, in
favor of Cleveland Construction and against the City,
that the City’s SBE Rules and Guidelines as of the
date of trial, and as promulgated by the City as official
policy pursuant to City ordinance, contain race and sex
based classifications that violate the equal protection
clause of the United States Constitution.
The court also enters judgment against the City by
permanent injunction prohibiting the City from
maintaining or applying any iteration of the SBE
Rules and Guidelines provisions specified at pages 13-
14 of the court’s July 13, 2005 post-trial entry, or any
substantially comparable provisions making race or
gender based classifications through similar
formulations, absent a formal, public determination by
63a
the City establishing that such provisions are, in the
case of racial classifications, narrowly tailored to
advance a compelling governmental interest, or, in the
case of gender classifications, substantially related to
genuine and important governmental objectives. The
court notes that the City acknowledged during this
litigation that it was not in a position to make such
showings. For the reasons set forth in its July 13, 2005
entry, the court does not enjoin drywall work (well
under progress at this stage) with regard to the
Convention Center project.
The court also enters judgment in favor of
Cleveland Construction, as the prevailing party and
against the City, for its reasonable attorney fees and
costs pursuant to 42 U.S.C. Section 1988, in the
amount of $433,290.00. In arriving at that figure, the
court has declined to award fees for certain
preliminary and post-trial activities and for certain
matters relating to potential expert witness testimony
on matters not directly relevant to the issues
presented to the court. The court has reviewed
Cleveland Construction’s fee application in light of
prevailing standards (see, e.g., Grycza v. Steger [6™
Dist. App. 1994], 97 Ohio App. 3d 82, 84 [“ordinarily a
prevailing plaintiff should recover its attorneys fees”];
Buckhannon Bd. and Care Home, Inc. v. W. Va. Dept
Health and Human Resources {2001], 532 U.S. 598;
Morscott, Inc. v. City of Cleveland [6" Cir. 1991 ], 936
F.2d 271 [absent special circumstances, trial court
“must” award fees to the prevailing plaintiff]), and
with regard for the degree of success obtained through
judicially enforceable remedies that alter the
contemplated future legal relationship of the parties.
The court does not find the City’s memorandum in
64a
opposition to any fee award persuasive (including the
City’s less than full account of its shifting positions on
whether its own Rules and Guidelines even had been
formally promulgated, cf City’s May 11, 2005 brief at
13 arguing that the Rules and Guidelines as attached
to Cleveland Construction’s amended complaint “do
not have the force of law” and are not “official policy” -
a matter of significance to both prongs of Plaintiffs
action).
Court costs as recorded by the Clerk of Courts are
assessed to the Defendants to be shared equally
between them. Although Valley’s legal arguments did
not prevail to the (very considerable) extent that they
mirrored the arguments of the City on those issues as
to which the court awards judgment to Plaintiff
Cleveland Construction against the City, the court
awards no separate relief against Valley and enters
judgment for Valley to that effect for the reasons
stated in the July 13, 2005 post-trial entry.
This is a final order and there is no just cause for
delay. The Clerk of Courts is directed to serve notice of
this final judgment upon the parties in accordance
with the civil rules.
SO ORDERED
/s/
Fred Nelson
Judge
cc: Kelly Lundrigan, 225 West Court Street,
Cincinnati, OH 45202 (fax: 721-4268)
Ie Pye ened his Ls Sgn Areande SEN yt DF Ve AEA TD SE LARS NORD oe ee Give ae ener ie eae, ee ee
65a
4 Leonard Weakley, Jr., One West Fourth Street,
Suite 900, Cincinnati, OH 45202 (fax: 381-9206)
4 David Barth, 537 East Pete Rose Way, Suite 400,
| Cincinnati, OH 45202 (fax: 852-8222)
66a
APPENDIX K
COMMON PLEAS COURT
HAMILTON COUNTY, OHIO
CASE NO: A0402638
[Filed July 13, 2005]
Cleveland Construction, Inc.,
Plaintiff,
We
City of Cincinnati, et al.,
Defendants
ee ee
ENTRY
This matter proceeded to a trial on the merits of
Plaintiffs case combined with an evidentiary hearing
on Plaintiffs Motion for Preliminary Injunction
pursuant to Civil Rule 65(B)(2) and under a schedule
referenced in the court’s May 13, 2005 Entry Denying
Defendants’ Motions for Summary Judgment and
Denying Plaintiffs Motion for Partial Summary
Judgment and [preliminary] Injunctive Relief [SJ
Entry]. That prior entry sets forth in some detail the
legal context of this action, which arises from a dispute
relating to drywall work for the expansion and
renovation of Cincinnati’s Convention Center. A jury
67a
was impaneled to address certain issues in the case,
after the court granted the motion of Defendant, the
City of Cincinnati, for a directed verdict with regard to
Plaintiff, Cleveland Construction, Inc.’s, claim for lost
profits, as referenced below, the parties agreed that
the litigation should proceed as a trial to the court and
the jury was discharged by the consent of all sides (a
matter as to which Plaintiff subsequently took some
issue). The trial now has concluded, and the court has
heard the evidence and counsels’ closing arguments
and also has reviewed the final materials presented in ,
writing.
I. The City violated its Code requirement, that a
determination to award a City contract primarily on
the basis of compliance with the City’s Subcontractor
Outreach Program (designed to favor subcontracting to
small businesses), not cost taxpayers more than
$50,000 .00 beyond the amount submitted in a lower
and otherwise qualified bid.
The evidence is clear and the parties agree that in
the determinative second round of bidding to perform
the drywall work, the bid submitted by Plaintiff
Cleveland Construction, Inc. (“Cleveland,” or
“Plaintiff’) was lower by $1,246,022.00, than the bid
submitted by Defendant, Valley Interior Systems, Inc
(“Valley”) Nonetheless, Defendant City of Cincinnati
(“the City”) awarded the drywall contract to Valley as
the “lowest and best” bidder, because Valley agreed to
subcontract at least 35% of the work to small business
enterprises (“SBEs”) while Cleveland did not.
Defendants have maintained throughout this litigation
that Plaintiff Cleveland was excluded from contract
consideration because it failed to meet the City’s SBE
68a
requirement. The evidence provides no indication of
other infirmities in Cleveland’s bid or capacity to
perform the work, and the City previously had
conceded that Cleveland was otherwise qualified to
perform the work, see SJ Entry at 10. The court finds
that the City’s 35% SBE requirement was the only
reason that the City awarded the contract to Valley
rather than to Cleveland, despite the one and a
quarter million dollar difference between the bids.
The City’s Code section 321-37, “Bid, Award to
Lowest and Best,” provides in part:
“(a) Selection of Lowest and Best in Award of City
Contracts. Except where otherwise provided by
ordinance, the city purchasing agent shall award a
contract to the lowest and best bidder ...
(c) Factors to be Considered Other factors that the
city purchasing agent may consider in determining
the lowest and best bid include, but are not limited
to [prior performance, prevailing wage history,
compliance with nondiscrimination rules, and]
(4) Information concerning compliance with the
‘SBE Subcontracting Outreach Program’ rules and
regulations issued by the city manager pursuant to
section 323-31
In the event that the selection of the lowest and best
bidder is based primarily upon factors 3 or 4 above,
the contract award may be made subject to the
following limitation: the bid may not exceed an
otherwise qualified bid by ten (10%) percent or Fifty
Thousand Dollars ($50,000.00), whichever is lower,”
(emphasis added).
69a
As the court noted in its SJ Entry, the language of
321-37 establishes that “information concerning
compliance” with the Citys SBE Subcontracting
Outreach Program rules and regulations is a “[flactor”
that “may” be considered as the City determines the
lowest and best bid. If the lowest and best bid is indeed
selected “based primarily” on that factor, the City may
proceed to award the contract “subject to the following
limitation: the bid may not exceed an otherwise
qualified bid by ten (10%) percent or Fifty Thousand
Dollars ($50,000.00), whichever is lower,” 321-37(c)(4).
In that context, the phrase “otherwise qualified bid”
can reasonably be read only to mean a bid that is
qualified except that it is not in “compliance” with the
SBE Subcontracting Outreach Program “factor”. The
bid not selected “primarily” because of the SBE
Subcontracting Outreach Program factor must
“otherwise” be qualified in order to trigger the required
calculation with regard to whether the contract award
may be made as selected on that basis. As the court
also observed in its SJ Entry at 15, the City
Administration, through then Assistant City Manager
Rashid Young, advised Cincinnati City Council’s Law
and Public Safety Committee prior to enactment of
this 10%/$50,000.00 cap that, “[w]Jhat this ordinance
allows us to do is be clear about when it is appropriate
to award a bid to a SBE compliant [bidder] if they are
not the lowest. This ordinance would allow us to award
a bid if the bid is $50,000.00 or less difference away
from the lowest bid. We had an example where the
SBE-compliant bidder was some nine hundred
thousand dollars in excess of the lowest bid, and it
doesn’t make a lot of sense to spend nine hundred
thousand dollars more to comply with the regulations
70a
of SBE.” This explanation of a taxpayer protection
rationale for the cap is fully consistent with the Code
language that Cincinnati Council promptly adopted.
The 321-37(c) cap protecting Cincinnati taxpayers
from having to pay more than $50,000.00 extra (extra,
that is, beyond the amount established by a lower and
otherwise qualified bid) for the benefit of SBE
Subcontracting Outreach Program compliance was
adopted in specific contemplation of the Convention
Center project; it took effect only months before the
contract at issue was awarded. See Plaintiffs trial
exhibit 13-A (noting that “this ordinance is an
emergency measure. The reason for the emergency is
the immediate need to proceed with the bidding of the
Convention Center and major development projects,
which may be impacted by Section 321-37 of the
Cincinnati Municipal Code.”)
The court parsed the language of 321-37 at some
length in its SJ Entry (pages 10-23), and incorporates
here that statutory construction. As earlier observed,
the cap applies specifically (and exclusively) to
instances where a higher bid is accepted because of
“information concerning compliance with ‘SBE
Subcontractor Outreach Program rules,’ issued
pursuant to 323-31 [Subcontracting Outreach
Program’]” Code 321-37(c). (The Code’s reference to
program “rules” rather than to the program itself
reflects a rather unusual drafting approach through
which City Council adopted its Subcontracting
Outreach Program simply by reference to a
consultant’s recommendations and _ through
authorization of administratively promulgated rules in
J7la
the absence of any further legislative definition of the
Program Code 323-31.)
Until the eve of trial, the City had maintained that,
despite the clear instruction of Code Section 323-31
requiring that the “City Manager shall issue rules and
regulations to carry out the meaning and purpose of
the Subcontracting Outreach Program,” the City had
not formally promulgated its Small Business
Enterprise Program Rules and Guidelines containing
Subcontracting Outreach Program rules. See, e.z.,
City’s March 11, 2005 Memo Opposing Plaintiffs MSJ
at 13. At trial, however, the City stipulated that the
Small Business Enterprise Program Rules and
Guidelines introduced as Plaintiffs exhibit 17 are
what they purport to be and were, in fact, adopted as
of April 1, 2003. Those Rules and Guidelines set forth
at pages 4-22 the “Components of the [City’s] SBE
Program,” including (at 9-14) the “Subcontracting
Outreach Program”.
As established by the City, the “Subcontracting
Outreach Program applies to City-funded construction
contracts of $100,000.00 or more,” Jd. at 9. Further,
the “Subcontracting Outreach Program requires
bidders to make subcontracting opportunities available
to a broad base of qualified subcontractors and achieve
a minimum of 20% (which may be higher for
construction of buildings) SBE _ subcontractor
participation. To be eligible for award of this project,
the SBE bidder must subcontract a minimum
percentage of its bid to qualified available SBE
subcontractors,” Id. (emphasis added). See also
Plaintiffs trial ex. 5, the “legislative recommendation”
that City Council adopted by reference in establishing
a
72a
the SBE Subcontractor Outreach Program and in
authorizing promulgation of rules and regulations
therefore (“Failure to comply with the City’s
Subcontracting Outreach Program will cause a bid to
be rejected Terms and conditions of this
Subcontracting Outreach Program apply to City-
funded construction projects of $100,000.00 or more”).
Thus, the Subcontracting Outreach Program is a
subset of the City’s broader Smal] Business Enterprise
Program, it applies to all City construction projects
costing $100,000.00 or more, and it incorporates
requirements that a certain “minimum percentage” of
a bid go to qualified SBEs. With regard to covered
projects, the Subcontracting Outreach Program
establishes mechanisms for assuring a more firm
particularized, and project-specific SBE requirement
than the aspirational city-wide annval “goal” of 30%
SBE participation set forth at Section 323-7 of the
Code. See also, e.g., trial testimony of City consultant
Rodney Strong (mandatory aspect of Subcontracting
Outreach Program minimum percentage
requirements).
Having considered all of the evidence adduced, the
court finds by clear and convincing evidence that the
award of the contract at issue here was “based
primarily” upon “information concerning compliance
with the ‘SBE Subcontracting Outreach Program’ rules
and regulations issued pursuant to section 323-31.”
Valley won the contract on re-bid because it exceeded
the 35% SBE participation figure that the City
established for this project under the SBE
Subcontracting Outreach Program, while Cleveland
did not. Plaintiffs trial exhibit 32, for example, is a
City bid document issued to the bidders on this project
73a
and setting forth the applicable “SUBCONTRACTING
OUTREACH PROGRAM SUMMARY.” That program
summary prominently featured the “SBE Goals Per
Trade Contract Cincinnati Convention Center,”
establishing that “All bidders are required to meet the
goal stated for the individual trade contract Drywall
35%.” The Subcontracting Outreach Program, to the
extent of its legislative formulation, was in place at the
time of bid solicitation and the contract award (and
was to be applied to construction contracts of
$100,000.00 or more). See also, e.g., Riordan trial
testimony and Plaintiffs trial ex. 56 (1/21/03 memo
contemplating application to Convention Center
project of legislation containing Subcontracting
Outreach Program authority). In place later, but also
in effect by the time of bid solicitation and award, was
the $50,000.00 taxpayer protection cap on the amount
that the program could cost the City on any one
contract -- and that limitation was part of a package
enacted specifically in contemplation of the Convention
Center project. That the cap was not in place during
initial planning stages of the project does not obviate
its mandate once enacted.
Thus, the court finds that the City did violate a
specific prohibition of its own municipal Code in
awarding the drywall contract to Valley as the “lowest
and best bidder” over Cleveland in order to favor small
business enterprise subcontracting despite the
additional cost to taxpayers of some $1,246,022.00 (an
excess expenditure of $1,196,022.00 beyond what the
321-37 cap permits). Cincinnati’s local rules limit the
discretion of contracting officials in awarding such
contracts where the officials purport to be determining
the “lowest and best” bid. Where the City publicly
T4a
determines that a lowest and best bid is not “in the
best interest of the city,” it may reject such a bid for
that reason, see e.g., Code 321-67, but the law requires
that it do so plainly and openly (and for some
legitimate, non-arbitrary reason, see City of Dayton; ex
rel Scandrick v. McGee {1981], 67 Ohio St 2d 356).
Where no such other rationale exists and the City
purports to award a contract on the basis of the
“lowest and best” bid, it is constrained by the
standards it has established at 321-37, including the
cost cap for awards where the lowest and best
determination is based primarily on Subcontracting
Outreach Program rules.
In determining whether the City abused its
discretion under Ohio law and deprived Plaintiff
Cleveland of a constitutionally protected property
interest without due process of law by awarding the
contract in a manner contrary to governing Code, the
court refers to its discussion of the applicable legal
standards from its SJ Entry: “The meaning of the
term ‘abuse of discretion’ ... connotes more than an
error of law or judgment, it implies an unreasonable,
arbitrary or unconscionable attitude.’ ‘Arbitrary’
means ‘without adequate determining principle, ***
not governed by any fixed rules or standard’.
‘Unreasonable’ means ‘irrational” Cedar Bay
Construction, Inc. v. City of Fremont et al., 50 Ohio St.
3d 19, 22, citations omitted. Moreover, “courts in this
state should be reluctant to substitute their judgment
for that of city officials in determining which party is
7 the ‘lowest and best bidder.’ [IJn the absence of
evidence to the contrary, public officers land]
administrative officers, within the limits of the
jurisdiction conferred by law, will be presumed not to
iil
75a
have acted illegally.” Jd. at 21. Discretion for
determining the lowest and best bid “is not vested in
the courts and the courts cannot interfere in the
exercise of this discretion unless it clearly appears that
the city authorities in whom such discretion has been
vested are abusing the discretion.” Jd. at 21 (citation
omitted). See also, e.g., Greater Cincinnati Plumbing
Contractors’ Association v. City of Blue Ash (1* Dist.
1995), 106 Ohio App. 3d 608, 613-14 (a charter city’s
discretion in accepting lowest and best bid “is similar
to the discretion provided under genera! state law
{citing R.C.735.05], “Competitive bidding provides for
‘open and honest competition in bidding for public
contracts and [saves] the public harmless, as well as
bidders themselves, from any kind of favoritism or
fraud in its varied forms”).
For a property interest in the award of a public
contract to inhere, “one must have more than a
unilateral expectation, rather, one must instead have
a legitimate claim of entitlement to such a contract.”
Cleveland Construction, Inc. v. Ohio Department of
Administrative Services (10" Dist. 1997), 121 Ohio
App. 3d 372, 394. Thus, “a disappointed bidder to a
government contract may establish a legitimate claim
of entitlement protected by due process by showing
that local rules limited the discretion of officials as to
whom the contract should be awarded,” and that
discretion was abused in depriving the bidder of the
award, Id. at 394-95 (no abuse of discretion found), see
also, e.g., Enertech Electrical, Inc. v. Mahoning Co
Commissioners (6™ Cir. 1996), 85 F.3d 257, 260. (“A
constitutionally protected property interest in a
publicly bid contract can be demonstrated [if a bidder
can show] that, under state law, the County had
76a
limited discretion, which it abused, in awarding the
contract’, no abuse of discretion found), Peterson
Enterprises, Inc. v. Ohio Department of Mental
Retardation (6" Cir. 1989), 890 F.2d 416 (“if the board
had limited discretion under local rules as to whom
should be awarded the contract, then Plaintiff might
have a protected property interest in the award if he
were the beneficiary of the state law mandate,” no
property interest where state guidelines were
nonexhaustive), cf. United of Omaha Life Ins. Co. v.
Solomon (6" Cir. 1992), 960 F.2d 31, 34 (“Michigan law
neither requires that the lowest bidder be awarded a
state contract nor creates a property interest in
disappointed bidders on state contracts”), Cementech,
Inc. v. City of Fairlawn (Ohio 9™ Dist. App.), 2005 WL
844948 (disappointed bidder whom jury found had
submitted lowest and best bid may qualify for money
damages when project is already complete), but see,
Miami Valley Contractors, Inc. v. Montgomery Co. (2"4
Dist. App.), 1996 WL 303591 (“as best we can
determine, this jurisdiction has never recognized a
constitutionally protected property interest of a
disappointed bidder on a public works project”), Miami
Valley Contractors, Inc. v. Oak Hill (4" Dist. App.
1996), 108 Ohio App. 3d 745, 752 (no abuse of
discretion found, “we can find no support for the
proposition that a second- or third-place finisher in a
lowest and best bidder determination acquires a
constitutionally protected property right”).
Having heard the evidence at trial, the court finds
that the City did abuse its discretion in a manner that
harmed the public and denied Cleveland the contract
award, and that Cleveland did have a “legitimate
claim of entitlement” sufficiently clear under the Code
T7a
(with its 321-37 cost cap) to establish a due process
violation. The City established a “fixed rule,” in the
language of Cedar Bay, that it then ignored when it
awarded the contract to Valley based primarily on SBE
attainment, despite the City Code’s instruction that
such SBE requirements should not cost the taxpayers
more than $50,000 per contract. Cf. Greater Cincinnati
Plumbing Contractors’ Ass’n. v. City of Blue Ash (1*
Dist. App. 1995), 106 Ohio App. 3d 608, 614
(“Competitive bidding provides ior ‘open and honest
competition in bidding for public contracts and [saves]
the public harmless, as well as bidders themselves,
from any kind of favoritism or fraud in its various
forms’,” quoting Cedar Bay), Scandrick, $7 Ohio St. 2d
at 360. (“While municipal governing bodies are
necessarily vested with wide discretion, such
discretion is neither unlimited not unbridled. The
presence of standards against vhich such discretion
may be tested is essential, otherwise, the term ‘abuse
of discretion’ would be meaningless”), Mechanical
Contractors Ass’n. of Cincinnati v. University of
Cincinnati (10 Dist. App. 2001), 141 Ohio App. 3d
333, 343 (public entitles should not be at liberty “to
violate laws intended to benefit the public” in
contracting), Cementech, 2005 WL 844948.
IT. The City’s Small Business Enterprise Program,
as reviewed in light of its SBE Rules and Guidelines,
contains elements that create race and gender based
classifications for which the City claims no compelling
governmental interest. The program is to that extent
unconstitutional. As applied in this case, however,
those unconstitutional elements did not cause
Cleveland to lose the contract award, rather, Valley
was awarded the contract because of its higher SBE
78a
subcontracting percentage as calculated without regard
to race or gender.
Plaintiff asserts and the City concedes that
Plaintiff intends and is positioned to bid on future City
contracts and that it has standing to mount an equal
protection clause challenge to the City’s SBE program
as that program currently is constituted.
Very significantly to this assessment, the City has
stipulated that it lacks the necessary factual basis to
withstand any “strict scrutiny” review of its SBE
program. If any part of the SBE program must comply
with strict scrutiny standards in order to survive
constitutional challenge, the City agrees that such
elements must be invalidated as unconstitutional at
this time. That is, the City concedes that it is not ina
position to prove any “compelling governmental
interests” that could sustain a racial classification
program no matter how “narrowly tailored.” The City
also has failed to present or argue any significant
evidence showing that its program could satisfy any
“intermediate scrutiny” review.
Justice O’Connor has set forth the determination by
the United States Supreme Court that ...“the
Fourteenth Amendment requires strict scrutiny of all
race-based action by state and local governments,”
Adarand Constructors, Inc. v. Pena (1995), 515 U.S.
200, 222, citing Richmond v J.A. Croson Co. (1989),
488 U.S. 469. “A free people whose restitutions are
founded upon the doctrine of equality’ should tolerate
no retreat from the principle that government may
treat people differently because of their race only for
the most compelling reasons. Accordingly, all racial
;
;
tf
79a
classifications, imposed by whatever federal, state, or
local government actor, must be analyzed by a
reviewing court under strict scrutiny. In other words,
such classifications are constitutional only if they are
narrowly tailored measures that further compelling
governmental interests,” Jd. at 227, see also, e.g.,
Grutter v. Bollinger (2003), 539 U.S. 306, 326 (strict
scrutiny required for all governmentally imposed
racial classifications), Monterey Mech Co. v. Wilson,
125 F.3d 702, 713 (9 Cir. 1997)(“burden of justifying
different treatment by ethnicity or sex is always on the
government”). Given the City’s stipulations on
standing and strict scrutiny, the court is required to
examine whether the City’s SBE program imposes
classifications subject to such heightened review.
Plaintiff points to nothing in the Constitution or
laws of the United States or of the State of Ohio that
creates a heightened standard of judicial review for a
governmental program that simply favors small
business enterprises at the expense of larger
competitors. The issue here is not classification by size,
but rather by race or gender.
Further, the law does not prohibit governmental
entities from recording statistics relating to race or
gender, or from tracking the progress of groups as
identified by such categories, or from seeking to
ascertain whether any impermissible, discriminatory
barriers are hampering the advancement of
individuals within groups as defined by race or gender.
Thus, for example, the fact that the City reviews
statistics relating to contract awards to Minority
Business Enterprises (“MBEs,” as defined at 323-1-M)
or Women’s Business Enterprises (“WBEs,” as defined
80a
at 323-l-W) pursuant to 323-17 (“City Maintained
Records and Reports”) itself does not establish a
requirement of heightened scrutiny. See, e.g., Croson,
488 U.S. at 492 (plurality op. of O’Connor, J.) (“a state
or local subdivision has the authority to eradicate the
effects of private discrimination within its own
legislative jurisdiction ... and can use its spending
powers to remedy private discrimination, if it
identifies that discrimination with the particularity
required by the Fourteenth Amendment”). Even the
identification of specified “MBE/WBE annual
participation goals,” to be used in conjunction with
“monitor[ing], track[ing], and report[ing]” purposes
alone, as set forth in 323-7(a), without further
mechanism to promote or effectuate or encourage
others to meet such goals in any particular context,
may not threaten cognizable injury to this Plaintiff. Cf.
Safeco Ins. Co. v. City of White House, Tenn. (6" Cir.
1999), 191 F.3d 675, 690, 692 (cited in filings made by
both parties and in City’s proposed jury instructions)
(“Outreach efforts may or may not require strict
scrutiny,” citing authority for proposition that such
scrutiny generally does not apply to outreach efforts
targeting particular race).
However, “where ‘outreach’ requirements operate
as a sub rosa racial preference - that is, where their
administration ‘indisputably pressures’ contractors to
hire minority subcontractors — courts must apply
strict scrutiny” Safeco, 191 F.3d at 692. The City’s
Small Business Enterprise Program Rules and
Guidelines, disavowed by the City as unofficial until
the eve of trial and then acknowledged as formally
promulgated as of April 1, 2003, see Plaintiffs trial
exhibit 17, contain a number of such elements when
8la
reviewed as a complete program. The City’s Rules and
Guidelines state, for example, that:
1)
2)
3)
“all bidders are required to use good faith efforts
to promote opportunities for Women and
Business Enterprises to participate in to the
extent of their [governmentally specified]
availability, contracting. Prior to the award of
any contract related to construction services or
professional services, the City shall evaluate
each bidder’s documented efforts to achieve the
participation of minority and women business
enterprise firms.” Rules and Guidelines,
Plaintiffs trial exhibit 17, at 5 (emphasis
added), cf. Virdi v. Dekalb Co School Dist (11
Cir. 2005), 2005 WL 1389942 (nonbinding
“goals” for “minority vendor involvement” linked
to specific notice and advertising outreach
programs are racial classifications subject to
strict scrutiny).
“Upon its successful completion, the Non-
Discrimination Program [component of the SBE
program] will result in utilization of minority
and women owned firms to the extent of their
[governmentally specified] availability.” Rules
and Guidelines at 6 (emphasis added).
“The City will evaluate efforts made by bidders
to promote opportunities for minority and
women owned firms to compete for business as
subcontractors and/or material or equipment
suppliers at the time of bidding. If the
evaluation determines that a bidder has failed
to achieve levels of minority and women
4)
5)
6)
82a
business enterprise participation as might be
reasonable on the basis of objective data
regarding availability and capacity of such
business, the bidder shall be subject to an
inquiry by the Office of Contract Compliance.”
Id. at 6 (emphasis added), cf. MD/DC/DE
Broadcasters Assn. v. Fed. Communications
Com. (D.C. Cir. 2001), 236 F.3d 13 (potential
investigation of recruitment efforts based on
applicant pool numbers is a “powerful threat”
giving rise to strict scrutiny review).
“Bidders [operating under the Subcontracting
Outreach Program] should be able to include
the participation of minority and female firms
at the levels of availability determined in the
City of Cincinnati Disparity Study. “Rules and
Guidelines at 9 (referencing a study that the
City concedes does not reflect a compelling
governmental interest in pursuing a program of
racial classification).
“(Using form 2007,] [ojfferor will provide a
detailed description of the techniques used to
obtain participation of minority and women
owned business enterprise ... “ Jd. at 43.
“Utilizing the bidder’s utilization form (Form
2003) and total bid amount, the actual
utilization percentage is caiculated. This is
accomplished by taking the amount of the
subcontracts awarded to minority and women-
owned businesses and dividing by the total bid
amount If this amount is equal to the estimated
availability, then no further inquiry is needed.
a
-
7)
8)
83a
If the actual utilization is less than the
estimate, then further inquiry is warranted.
The contract administrator must look at the
bidder’s solicitation form and contact the
minority and women-owned businesses listed on
the form to verify that they were contacted by
the bidder and what their response was. The
administrator must also review the good faith
efforts taken by the bidder. The burden is on the
bidder to explain the low utilization percentage.
If the contract administrator determines that
the contractor under-utilized minority and/or
women-owned businesses based on the actual
[government specified] availability percentage,
and that the bidder’s good faith efforts were
inadequate and there is no _ legitimate
explanation for the under-utilization, then the
matter is turned over to the investigative unit
for a discrimination investigation.” Jd. at 46; ¢f.
MD/DC/DE Broadcasters, supra.
[From tl.» “Pre-bid/Outreach Session Script for
Contract Administrator”] “Bidders are required
to show that they’ve made a good faith effort to
get the maximum practical participation of
minority and women-owned businesses on this
project. [I|f it is feasible that the work can be
broken into two or more smaller units, then it
should be done so as to permit maximum
participation, based on the _ availability
estimate.” Rules and Guidelines at 49
(emphasis added).
Every bidder is to submit a “Statement of Good
Faith Efforts” certifying that, “we have utilized
84a
the following methods to obtain the maximum
practicable participation by small, minority and
women-owned business enterprises on this
project.” Id. at Form 2007 (emphasis added).
As constituted, therefore, to include the officially
promulgated Rules and Guidelines authorized and
required by Code 323-5, the City’s Small Business
Enterprise Program contains a variety of elements
through which the City makes classifications by race
and sex and “indisputably pressures” contractors to
recruit and use subcontractors on those terms. This
case is different from many other cases involving
government race and sex classifications in that the
City advances no evidence to suggest that these
elements of its program could withstand the
heightened scrutiny applied under U.S. Supreme
Court precedents. The constitutional inquiry is
foreshortened because the City concedes that it cannot
satisfy any strict scrutiny review of its program. Thus,
the program is unconstitutional on its face to the
extent that the City engages in classification by race or
sex with regard to City contracting in construction
projects. To that extent, as identified above, Plaintiff
prevails on its facial challenge under 42 U.S.C. Section
1983.
With regard to the application of those
unconstitution. 1 program elements to the facts of this
case, the court 10tes that there is no evidence that any
bidder on the contract at issue was privy to the Rules
and Guidelines document itself. The court further
notes, however, that both Cleveland and Valley did, in
fact, (and without protest by Cleveland until after the
contract was awarded to Valley) submit form 2007
85a
(“Statement of Good Faith Efforts”) certifying their
efforts “to obtain the maximum practicable
participation by small, minority and women-owned
business enterprises on this project.” See, e.g.,
Plaintiffs trial ex. 28. Those certifications were made
after all bidders were provided the “Subcontracting
Outreach Program Summary” sheet for the project
that included this directive from the City. “You will
also find on the cover of this bid document an
Availability Determination [of “13.09% Minority
/1.05% Female” for the drywall work, see Availability
Estimation Sheet at Plaintiffs trial ex. 28]. These
figures are percentages based on a review of the City’s
vendor list and certified minority and women-owned
businesses.
Bidders should be able to include minority and
female firms at the level of availability indicated.”
Plaintiffs trial exhibit 32 (emphasis added). The City
also informed bidders through Addendum 3 to the bid
documents that “If the availability estimates are not
met, it does not mean that the bid will be deemed non-
responsive However, we expect the utilization of
SBEs to be reflective of the availability estimates.” See
Plaintiffs trial exhibit 70.
Thus, in the process of soliciting bids, the City did
in those respects pressure and encourage bidders to
draw upon race and sex-based classifications that the
City concedes could not withstand any appropriate
heightened review on the facts to which the City is
privy. The trial elicited no testimony, however, that
the City in fact gave weight to bidders’ compliance
with MBE or WBE availability estimates in making
the contract award with regard to subcontracting
86a
percentages, Plaintiff failed to establish that City
officials looked beyond whether drywall bidders met
the City’s 35% SBE requirement. Indeed, Plaintiffs
own chief estimator on the project did testify that in
seeking to gain the contract award, his focus in this
area was on boosting his company’s small business
enterprise inclusion rate, and not on attaining any
particular MBE or WBE percentages. Valley did not
meet the specified WBE percentage, and no evidence
was presented at trial that the City rejected any
Convention Center bid on the basis of MBE or WBE
availability estimates. The evidence indicates that the
City awarded the contract to Valley, and not to
Cleveland, because Valley’s bid complied with the
City’s requirement that 35 percent of the work go to
small business enterprises and Cleveland’s bid did not.
With regard to the unlawful discrimination
component of the case, therefore, Plaintiff here is
much in the posture of the plaintiff in the case that it
cites of Virdi v. Dekalb County School District (11™
Cir. 2005), 2005 WL 1389942. There, the federal court
of appeals determined that a school district’s
aspirational “goals” for minority involvement in
contracting, coupled with specific mechanisms for
public outreach, created racial classifications that were
not narrowly tailored to meet strict scrutiny review,
“the program is facially unconstitutional.” The court
held that, “[nJevertheless, the District is still entitled
to judgment on Virdi’s intentional discrimination claim
While the [program’s] goals themselves are
unconstitutional, they do not constitute evidence that
Virdi himself was discriminated against. Virdi has
failed to establish a causal connection between the
unconstitutional aspect of the [program] and his
87a
alleged injury. Moreover, there is insufficient other
evidence to impose liability upon the District for
damages to Virdi for intentional discrimination.”
Similarly here, Cleveland has not established that the
City’s race and sex based classifications (as opposed to
the City’s small business preference) resulted in the
loss of the contract award. Cf. Florida General
Contractors v. Jacksonville (1993), 508 U.S. 656
(traceability requirement).
Nor has Plaintiff met its burden of proof to
establish that the City’s stated policy to favor small
businesses (to the extent that the practice does not
cost taxpayers more than $50,000.00 per major
construction contract) is in reality a sham to mask
invidious discrimination. The court notes as an aside
that the City’s policy of encouraging small business
participation well predates the Subcontracting
Outreach Program components of which Plaintiff
complains. Further, the court observes. that
Cincinnati’s City Council, at the urging of the
Administration, has indeed opted to limit application
of Subcontracting Outreach Program small] business
preferences to circumstances in which such
preferences would not add more than $50,000.00 to the
cost of a contract. While that newly enacted taxpayer
protection cap was not observed in this instance, the
evidence does not establish that the provision was
ignored as part of a scheme to further race or sex
based distinctions, and the fact that the cap was
adopted by Code certainly does 1ot further the
intentional discrimination theory. Moreover, for
example, the City’s rejection of all the initial drywall
bids, including Valley’s, does not bolster the theory
that the City’s stated preference for SBEs was used
88a
here as a “sham” to mask improper considerations of
race or sex. Further still, evidence was adduced that
the City did award other contracts on the Convention
Center project to bidders who did not include any MBE
or WBE participation.
In short, Plaintiff has demonstrated that the City’s
SBE program contains certain race and sex based
classifications that cannot pass constitutional muster
as constituted at this time; Plaintiff has not
established, however, that those aspects of the
program caused Plaintiff to lose award of the drywall
contract at issue in this case. Cf. Texas v. Lesage, 528
U.S.18 (1999) (“where a plaintiff challenges a discrete
governmental decision as being based on an
impermissible criterion and it is undisputed that the
government would have made the same decision
regardless, there is no cognizable injury warranting
relief under [Section] 1983” on an ‘as applied’
challenge).
Ill. Having prevailed on its abuse of discretion / due
process Section 1983 claims and on its claim that
specific portions of the City’s SBE Rules and
Guidelines are unconstitutional on their face,
Cleveland is entitled to certain declaratory and
injunctive relief. Cleveland also is entitled to its
reasonable attorney’s fees under 42 U.S.C. Section
1988. Cleveland did not establish, however, that the
court should use its equitable powers to enjoin ongoing
work with regard to the Convention Center project
itself.
The injunctive and declaratory relief sought by
Cleveland involve both the administration of future
89a
City construction contracts and the disposition of the
current Convention Center drywall project.
Plaintiff is entitled to a declaration that City Code
Section 321-37(c) in its current form provides, among
other things, that where the City elects to enter into a
construction contract on the basis of the “lowest and
best” bid, and where that selection is based primarily
upon the City’s determination of bidders’ relative
compliance with the City’s SBE Subcontracting
Outreach Program rules and regulations, the City may
not award the contract to a bidder whose bid amount
exceeds an otherwise qualified bid by ten percent or
Fifty Thousand Dollars. The City Administration
professed to know the meaning of that Code subsection
at the time it was considered by Council; the court
trusts that now that further attention has been drawn
to the existence of the subsection (and to the high cost
to taxpayers of ignoring it), and now that the City has
acknowledged the status of its Subcontracting
Outreach Program rules and regulations, no injunctive
mandate with regard to future contracts is necessary
with regard to that provision of law. Plaintiff
Cleveland further is entitled to a declaration that the
conduct of the City in ignoring the cost cap deprived
Cleveland of a property interest without due process of
law.
Plaintiff also is entitled to a declaration that the
City’s SBE Rules and Guidelines in their current form
contain certain race and sex based classifications as
enumerated above that, in light of the City’s admission
that it cannot now offer a compelling governmental
interest to satisfy “strict scrutiny” review as required
by governing United States Supreme Court precedent,
90a
violate the equal protection clause of the U.S.
Constitution. The court will enjoin the City from
applying those specified Rules and Guidelines
provisions to any City construction project absent a
formal determination and public showing by the City
that such provisions are narrowly tailored to advance
a compelling governmental interest of the sort that the
City concedes it cannot now establish. Now that the
City has acknowledged the status of its Rules and
Guidelines, and now that these particular
classifications have been identified, and the City has
conceded that it is unable to meet any strict scrutiny
review, the City is expected to take prompt steps to
remove all unconstitutional provisions from its Rules
and Guidelines. In this regard, the court is heartened
by the City’s stated commitment in the Rules and
Guidelines (at page 8) to ensure that, “Businesses
awarded City contracts shall prohibit discrimination
against any person or business on the basis of race,
color, sex, religion, disability or national origin. Such
businesses shall develop a policy statement to be
communicated regularly to all persons and entities
involved in the performance of their contracts, and
shall conduct their contracting and purchasing
programs so as to discourage any discrimination and
to resolve all allegations of discrimination.”
In considering Cleveland’s request for injunctive
relief with regard to the Convention Center drywall
contract at issue, the court is mindful that, “A party
seeking a permanent injunction must show [that it has
‘a right to relief under the applicable substantive law,’]
that the injunction is necessary to prevent irreparable
harm and that the party does not have an adequate
remedy at law. [Such] party must ordinarily prove the
9la
required elements by clear and convincing evidence”
Procter & Gamble Co. v. Stoneham (1* Dist. App.
2000), 140 Ohio App. 3d 260, 267. The merits of
Cleveland’s claims, including its showing that the City
abused its discretion in disregarding the $50,000.00
cost cap under Code Section 321-37, have been
discussed above.
Regarding the question of an adequate remedy at
law, the court observes that the Defendants’ consistent
position up to and into trial was that Plaintiff is
limited in this action solely to its requests for
injunctive and declaratory relief, and that money
damages are not an appropriate remedy for Plaintiffs
claims. See, e.g., Citys May 27, 2005 pretrial
statement at 2 (“The City also challenges Cleveland’s
ability to recover its alleged ‘lost profits”), City’s
Motion in Limine to Preclude Plaintiff from Presenting
Evidence of Lost Profits; City’s June 13, 2005 Reply to
Response to the Motion in Limine Regarding Lost
Profits (“Because Cleveland’s only claim is for
injunctive relief, Cleveland also is not entitled to a jury
trial. Cleveland’s constitutional rights, and any claim
for redress, can be handled through an action in equity
by filing and seeking injunctive relief. Not only does an
action for injunctive relief protect Cleveland, but it
also protects the taxpayers from having to pay twice
for a public project”), Citys June 20, 2005
Memorandum Citing Additional Authority on the
Recovery of Lost Profits (“in Ohio lost profits are not
available and only injunctive relief available to the
plaintiff’).
The court agreed with the City that lost profits are
not a remedy available under Ohio law to a
92a
disappointed bidder on a public contract See, e.g.,
O’Rourke Construction Co. v. Cincinnati Metropolitan
Housing Authority (1" Dist. App. 1982), 1982 WL 8613 ©
at n.5 (“We can find no award of damages from public
funds even though the contract was given to another
bidder as the result of abuse of discretion.”); Hardrives
Paving & Constr., Inc. v. Niles (1994), 99 Ohio App. 3d
243, 247-48 (“The fact that injunctive relief is available
generally indicates that a monetary award is not
available for lost profits. [I)}f we were to allow
appellant to receive monetary damages, only the
bidders would be protected because the public would
have to pay the contract price of the successful bidder
plus the lost profits of an aggrieved bidder. However,
if injunction is the sole remedy, both the public and the
bidders themselves are protected.”), Cavanaugh Bldg.
Corp. v. Cuyahoga Cty. Bd. Of Commrs. (8 Dist. App.
2000), 2000 WL 86554. The court disagreed with the
City’s proposition, however, that it “must apply state
law for purposes of defining the scope of damages
under [federal Section] 1983,” cf. City’s June 16, 2005
Motion to Clarify at 2, and concluded that violations of
federal law under Section 1983 can give rise to money
damages including lost profits where injunctive relief
alone would not make a plaintiff whole. See, e.g., Carey
v. Piphus (1978), 435 U.S. 247, 257-58 (“damages
awards under Section 1983 should be governed by the
principle of compensation” as developed by the
common law of torts, where common law does not
provide full compensation, “the task will be the more
difficult one of adapting common-law rules of damages
to provide fair compensation for injuries caused by the
deprivation of a constitutional right.”).
93a
The City’s newly adopted assertion at closing that
project-specific injunctive relief is precluded because
Plaintiff had a complete damages remedy available at
law thus rings a bit hollow The court granted a
directed verdict for the City on the lost profits issue
because Plaintiff - which consistently had sought a
combination of money damages and injunctive relief,
including project-specific injunctive relief, see, e.g.,
Amended Complaint and Plaintiffs May 27, 2005
pretrial statement at 2 (seeking remedies including
damages, declaratory relief, and “injunctive relief
against the City and Valley with regard to the
application of the SBE Program to the award of the
drywall contract at issue”) - failed in its case in chief to
provide any evidence whatsoever with regard to the
drywall project status or the potential availability of
injunctive relief on any balance of the contract, at the
close of Plaintiffs case, therefore, there was no factual
basis on which assess available damage remedies or on
which to instruct the jury to calculate any lost profits
for drywall work already completed. See, e.g., Ohio
cases supra establishing precedence of injunctive relief —
as opposed to money damages in public bid contracts,
see also, e.g., Milwaukee Co. Pavers Assn. v. Fiedler
(W.D. Wisc. 1989), 707 F. Supp. 1016, 1032 (lawsuit
challenging “disadvantaged business” preference in
construction contracts. “Plaintiffs would be entitled to
money damages [for the alleged federal constitutional
violations] only if their motion for a preliminary
injunction were denied, they were to succeed
ultimately on the merits of their claim, and the state
construction projects were to have proceeded so far that
they could not reasonably be re-let under non-
discriminatory bidding conditions,” {emphasis added]).
The court did not rule and does not find that Plaintiff
94a
had available a fully adequate remedy at law. It is true
that no evidence as to the current status of the drywall
work (and as to whether there remains any significant
portion of that drywall project left for potential
injunction) was presented until the City and Valley
put forward proof on that subject as part of their
defense cases; such evidence now is before the court,
however, for any appropriate consideration.
In light of the equitable nature of the remedy
sought, and especially given the public nature of the
project at issue, the court also should consider whether
the public interest would be served or harmed by an
injunction and whether third parties would be unduly
injured by such a remedy. “(CJaution should be
exercised in granting injunctions, and especially so in
cases affecting a public interest where the court is
asked to interfere with or suspend the operation of
important public works or to control the action of
another department of government.” White v. Long (1*
Dist. App. 1967), 12 Ohio App. 2d 136, 140, see also,
e.g., Leaseway Centers v. Dept. of Adm. Serv. (10 Dist.
App. 1988), 49 Ohio App. 3d 99, 106 (quoting White),
Cleveland Construction, Inc. v. Ohio Dep’t. of Adm. *
Serv. (10 Dist. App. 1997), 121 Ohio App. 3d 372, 383
(same).
Certainly there is a powerful public interest in
requiring governmental entities to follow the law.
Courts across this state have found that interest
especially strong in the context of “protecting the
integrity of the [public] bidding process.” Cf.
Cementech, 2005 WL 844948 (9“ Dist. App.) (noting
that where available, “the preferred method of
resolving bidding disputes is injunctive relief, as that
95a
relief would prevent double payment [for the same
project] and better serve the integrity of the bidding
process”), Hardrives Paving, 99 Ohio App. 3d at 247-48
(“if injunction is the sole remedy, both the public and
the bidder themselves are protected”), Cedar Bay, 50
Ohio St. 3d at 21 (“The intent of competitive bidding,
under either the state statutes or a municipal charter,
is ‘to provide for open and honest competition in
bidding for public contracts and to save the public
harmless, as well as bidders themselves, from any kind
of favoritism or fraud in its varied forms.”).
Against such considerations the court weighs the
potential harm to the public that could be caused by
disruption of the ongoing Convention Center work.
Defense witnesses testified that the Convention Center
project as a whole is approximately sixty percent
complete. The drywall work will be roughly 50 percent
done by the end of July and is on a “critical path” in
which delays could significantly affect other parts of
the project. Defendants argue, in effect, that the
savings that the City might obtain if it were ordered to
shift the remaining drywall work from Valley to
Cleveland at Cleveland’s bid price are likely to be
surpassed by additional costs arising fri delay claims
and lost Convention Center business. See, e.g.,
McKillup testimony that potential delay claims could
reach into the millions of dollars). Although
Defendants couple this argument with the contention
that Cleveland delayed unduly in seeking to press its
preliminary injunction claim, thereby allowing the
project to reach a more delicate juncture, the court is
constrained to note that the City seems to have
contributed to any perceived need for extensive and
lengthy discovery by taking positions such as its
96a
longstanding denial, only now abandoned, that it had
not officially promulgated SBE Rules and Guidelines
at all.
Valley is prepared to perform the balance of the
drywall work and, with its subcontractors, would lose
any expected remaining profits if the project is
enjoined. Valley also presented testimony that a
premature end to its contract would mean a loss of
work for certain employees in light of the additional
worker contingent recently added to the endeavor.
Against that very real concern, the court notes that
Valley would not have won the contract or been paid
for any of the work had the contract been awarded in
keeping with the $50,000.00 cost cap, and that Valley
and its subcontractors appear to have been well
compensated for the work they have performed
relative to the significantly lower (and “otherwise
qualified”) bid submitted by Cleveland.
The court finds that equity would not be served by
Cleveland’s proposal that Valley be made to disgorge
money it already has earned for work already done.
Testimony at trial indicates that Valley followed the
rules set forth by the City in bidding on the contract,
and that it has borne substantial contractual risks
associated with its undertaking. The court does not
deem Valley’s contract with the City void ab initio, and
it would be inequitable to strip Valley of the
compensation it has been given for the work it has
undertaken pursuant to contract.
Further, Cleveland provided no _ testimony
whatsoever during its case in chief either with regard
to the current status of the Convention Center project
~~. Fs
|
97a
or with regard to Cleveland’s own current ability to
complete the work without delay and disruption to a
major City undertaking. On rebuttal, Cleveland
offered no testimony to dispute Defendants’ position
that the Convention Center drywall work is on a
“critical path” that is extremely time-sensitive and as
to which disruptions would impede other contractors
and interfere with planned Convention Center events
and broader City interests surrounding the City’s
economic development program. Cleveland did not
offer credible assurances by a witness conversant with
the scope of work and the project’s current status that
Cleveland could take over the job at this stage without
undue and costly disruption. The court continues to
believe that a Plaintiff in an action of this nature is not
entitled to manufacture heightened claims to lost
profits by eschewing serious efforts toward injunctive
relief at any stage in the process.
Considering the testimony that was _ given,
including the rebuttal testimony, the court finds that
an injunction interfering with the ongoing Convention
Center construction work has not been shown to be
appropriate upon examination of all appropriate
equitable considerations. The court reaches this
conclusion reluctantly in light of the course that this
litigation took, but it finds that the public interest is a
weighty factor in this case involving a major public
undertaking, see, e.g., White, 12 Ohio App. 2d 136, and
that the public interest at this juncture is best served
by the combination of declaratory and non-project
specific relief outlined above. The court further finds
that Cleveland is the prevailing party on its Section
1983 due process claim and on its reasonable
98a
attorney’s fee under 42 U.S.C. Section 1988. Costs will
be assessed against Defendants jointly.
The court will ask the parties to confer, if they
wish, on a judgment entry to propose to the court in
very short order reflecting these determinations. The
court also asks the parties to confer on a date for a
hearing on the amount of Cleveland’s attorney’s fee.
/s/_
Judge Nelson
‘
a
|
;
,
99a
APPENDIX L
COMMON PLEAS COURT
HAMILTON COUNTY, OHIO
CASE NO: A0402638
[Filed June 28, 2005]
Cleveland Construction, Inc.,
Plaintiff,
Vv.
City of Cincinnati, et al.,
Defendants.
ee ee ee ee a ee
ENTRY GRANTING DEFENDANT CITY OF
CINCINNAT?S MOTION FOR PARTIAL
DIRECTED VERDICT, DENYING DISMISSAL
OF EQUAL PROTECTION CLAIM,
WITHHOLDING JUDGMENT ON DEFENDANT
VALLEY’S 41(B)(2) MOTION, AND NOTING
STIPULATION THAT REMAINING ISSUES
ARE TO BE DETERMINED BY THE COURT
WITHOUT A JURY
For the reasons expressed on the record of today’s
date, the Court grants Defendant City’s Motion For A
Directed Verdict solely on the issues of lost profit and
bid preparation cost.
:
:
|
:
is a he Es a ee ei en
100a
The Court denies Defendant City’s Motion for
dismissal of Plaintiffs equal protection claim relating
to the administration of the contract at issue in this
case.
The Court defers a ruling on Defendant Valley’s
motion to dismiss under Rule 41(B)(2) and will
withhold judgment on such issues until the close of all
evidence.
All parties having stated that the remaining issues
in this action are appropriate for determination by the
Court alone without jury verdict, the jury is discharged
with the consent of all parties with regard to all issues
remaining in this action. The case will proceed as a
trial to the bench with regard to Plaintiffs claims for
declaratory and injunctive relief and attorney fees.
SO ORDERED.
/s/
Fred Nelson, Judge
101la
APPENDIX M
COMMON PLEAS COURT
HAMILTON COUNTY, OHIO
CASE NO: A0402638
[Filed June 20, 2005]
Cleveland Construction, Inc.,
Plaintiff,
Vv.
City of Cincinnati, et al.,
Defendants.
Nee ee eee
ENTRY
Pursuant to Civil Rule 65(B)(2) and previously
determined with the parties as reflected on the
Amended Case Scheduling Order of October 8, 2004,
the hearing on Plaintiffs request for preliminary
injunctive relief is combined with the trial on the
merits of the case as scheduled to begin on June 20,
2005.
SO ORDERED.
/s/
Judge Nelson
102a
APPENDIX N
COURT OF COMMON PLEAS
HAMILTON COUNTY, OHIO
Case No. A0402638
[Filed May 18, 2005]
Cleveland Construction,
Plaintiff,
vs.
City of Cincinnati, et al.,
)
)
)
)
)
)
Defendants. )
)
ENTRY DENYING DEFENDANTS’ MOTIONS
FOR SUMMARY JUDGMENT AND DENYING
PLAINTIFF’S MOTION FOR PARTIAL
SUMMARY JUDGMENT AND
INJUNCTIVE RELIEF
Introduction
This matter comes before the court on the motion of
Plaintiff Cleveland Construction, Inc. (“Cleveland”) for
partial summary judgment and for injunctive relief,
and countervailing motions for summary judgment by
Defendants the City of Cincinnati (“the City”) and
Valley Interior Systems, Inc. (“Valley,” which has
103a
associated itself with the City’s legal position for
purposes of its motion). The court in keeping with the
requests of the parties conducted a nonevidentiary
hearing on the motions, and has reviewed the
arguments of counsel, the pleadings and briefs, and
the evidence filed of record.
The case involves a dispute related to drywall work
needed for the expansion and renovation of
Cincinnati’s Convention Center. The parties agree that
in a second round of bidding to perform the drywall
work, Cleveland offered to do the job for $8,889,000
and Valley submitted a bid of $10,135,022. Although
Cleveland’s bid was lower than Valley’s by roughly one
and a quarter million dollars, the City awarded the
drywall contract to Valley as the lowest bidder that
met the Citys Small Business Enterprise program
(“SBE”) criteria. The City states that Valley got the
contract because it was prepared to make greater use
of small business subcontractors than could Cleveland.
Cleveland subsequently filed this lawsuit, alleging
among other matters that the City’s SBE program “is
a sham to allow the City to use racial and gender-
based quotas illegally,” and asserting that in awarding
the contract to Valley, the City violated Cleveland’s
equal protection rights and ignored its own municipal
code in violation of due process. After a hearing at
which this court denied Cleveland’s motion for a
temporary restraining order, Defendants removed the
case to federal court; in due course, the action was
remanded here, the court dismissed certain individual
defendants, and the parties engaged in extended
discovery. Cleveland elected not to pursue application
for a preliminary injunction until the filing of the
104a
instant motions, which include the summary judgment
issues to which the court now turns.
Summary Judgment Standard
Summary judgment is appropriate when it is clear
from the facts established in the pleadings and
evidential materials of record, as viewed in the light
most favorable to the party or parties opposing the
motion, that: “(1 ) no genuine issue of fact remains to
be litigated; (2) the moving party is entitled to
judgment as a matter of law; and (3) the evidence
demonstrates that reasonable minds can come to but
one conclusion, and that conclusion is adverse to the
party opposing the motion.” See, e.g., Sauter v. One
Lytle Place (1* Dist. App. 2005), 2005-Ohio-1183, citing
Civil Rule 56(C). Ifa party seeking summary judgment
meets its initial burden of identifying a basis for the
motion together with those parts of the record that
“demonstrate the absence of a genuine issue of
material fact on the essential element(s) of the ...
nonmoving party’s claims ...., the nonmoving party
then has a reciprocal burden ... to set forth specific
facts showing that there is a genuine issue for trial ....”
Dresher v. Burt (1996), 75 Ohio St.3d 280, 293.
Equal Protection Issues
At this stage -in the litigation, Cleveland argues
that the City’s SBE program as designed (to include
certain “Rules and Guidelines”) and as applied here
amounts to a race-conscious awards scheme that the
City cannot justify under prevailing constitutional
norms. (Plaintiff at this point does not argue that the
City has required improper considerations of gender,
105a
perhaps because Valley’s successful bid did not reflect
subcontracting percentages for women-owned firms
that approached the City’s availability estimates.) The
City is frank to respond that it lacks a factual
predicate that could satisfy “strict scrutiny” review of
a race-conscious program, but argues that its SBE
approach as designed and as undertaken here is race-
neutral, rationally based, and _ constitutionally
unexceptionable. The record as presented to date
reflects genuine issues of material fact that preclude
summary judgment for any side on this part of the
dispute.
The City’s municipal code provides’ that
“Cincinnati's Annual Goal for SBE participation shall
be 30% of the city’s total dollars spent for construction
... Services ....” Cincinnati Municipal Code (“Code”) at
323-7(a). The Code defines a Small Business
Enterprise with regard to gross revenues and number
of employees; the SBE definition itself does not include
factors of race or gender. Code 323-1 -S. The record
here may suggest that the City pursues the 30% SBE
goal on a project by project basis, establishing different
percentages for different project components in order
to arrive at the overall 30% figure. The parties agree
that with regard to the drywall element of the
Convention Center project, the goal was that 35% of
subcontracting dollars go to SBEs. See also, e.g., Small
depo. at Ex. 5 (Citys “Subcontracting Outreach
Program Summary” sets Drywall “Goal[ ] For Bid
Package C” at 35%).
Standing alone, that SBE goal does not on its face
implicate any considerations of race or gender, and the
court does not understand Plaintiff to argue that a
106a
program undertaken to ensure participation of small
businesses is subject to heightened scrutiny simply
because it may have the ancillary effect of broadening
participation for people in groups as defined by race or
gender. Plaintiff argues, however, that the program
must be assessed in light of ‘Minority Business
Enterprise/Women’s Business’ Enterprise’
“participation goals of 30% [for] construction
services [,to be] monitored, tracked internally, and
reported annually to city council along with annual
SBE participation rates,” as also established in Code
323-7(a), and in light both of “availability estimates”
provided by the City to reflect percentages of minority
and female controlled subcontractors available for hire
in the region, and of SBE “Rules and Guidelines” that
imply or direct a race-conscious focus for the program.
The City responds that this project, by its terms,
involved only SBE goals; that availability estimates, in
and of themselves, do not establish any particular
hiring requirements; and that the Rules and
Guidelines never were officially promulgated and have
not been applied, at least in full, to this project.
It is undisputed that in the course of the bidding
process, the City was asked why it had provided
prospective bidders with an “Availability Estimation
Sheet ... Subcontractor Outreach Program (CMC 323-
31) noting availability estimates for drywall
subcontractors of “13.09% Minority” and “1.05%
Female.” See Amended Complaint at Ex. B and City’s
MSJ at page 8. The inquiry, disseminated along with
the answer to all prospective bidders, continued: “I
thought this project only deals with SBEs. Please
clarify.” The City responded: “This project does deal
with SBEs. However, the City of Cincinnati’s Disparity
107a
Study found that Minorities and Females were
underutilized in city contracting projects. .... The
minority and female business owner would also have
to be certified with the City as a Small Business
Enterprise. If the availability estimates are not met, it
does not mean that the bid will be deemed non-
responsive. However, we expect the utilization of SBEs
to be reflective of the availability estimates.” Amended
Complaint at Ex. H; City’s MSJ at 8.
The City submits that this arguably rather opaque
answer demonstrates that the drywall bids were
governed exclusively by SBE considerations without
regard to MBE/WBE concerns. The City points, also, to
evidence indicating that a first round of bidding
resulted in no contract award because Valley, while
exceeding the MBE availability estimate, did not
satisfy the 35% SBE goal. The City further notes
testimony of its representatives to the effect that
availability estimates did not factor into its bid
evaluation, and argues that a stated desire to calculate
and track project participation by race does not itself
trigger strict scrutiny under such precedent as Reed v.
Agilent Technologies, 174 F. Supp. 176 (D. Del. 2001).
The City, in short, cites to testimony of its
representatives that Cleveland was disqualified
because it did not meet the 35% SBE goal, and that
considerations of race simply did not enter into the
determination. See, e.g., purchasing agent Franklin
depo. at 46; Ranford at 68 (“when I looked at a bid I
did not look at the availability estimation, all I was
concerned about was Small Business Enterprise”).
Cleveland contends that the City’s answer on the
relevance of availability estimates should not be
108a
construed as advising bidders that the City will not
consider race or gender in evaluating bids. Moreover,
Cleveland points to Valley’s certification of MBE
percentages in its winning Subcontractor Utilization
Plan, to language in the required Statement of Good
Faith Efforts (form 2007, certifying use of any
“methods to obtain the- maximum practicable
participation by small, minority and women-owned
business enterprises”), and to language in the
Subcontracting Program Outreach Summary stating
that “[blidders should be able to include minority and
female firms at the level of availability indicated.” See,
e.g., Strawser depo. ex. 3; Small depo. ex. 5.
Moreover, Cleveland emphasizes a document titled:
“City of Cincinnati/Small Business Division/Office of
Contract Compliance/Small Business Enterprise
Program/Rules and Guidelines.” See Townsend depo.
ex. 19. That document recites, among other things,
that “[iJf ... evaluation determines that a bidder has
failed to achieve levels of minority and women
business enterprise participation as might be
reasonable on the basis of objective data regarding
availability and capacity of such businesses, the bidder
shall be subject to an inquiry by the Office of Contract
Compliance.” Furthermore, the document states, that
Office is to examine bid forms to determine “the
amount of the subcontracts awarded to minority and
women-owned businesses .... If the bidder’s utilization
is the same as or greater than the actual availability
percentage, then the city can accept the bidder’s
utilization as being in compliance with the program.
The burden is on the bidder to explain the low
utilization percentage. If the contract administrator
determines that the contractor under-utilized minority
109a
and/or women-owned businesses based on the actual
availability percentage, and that the bidder’s good
faith efforts were inadequate and there is no
legitimate explanation for the under-utilization, then
the matter is turned over to the investigative unit for
a discrimination investigation.” Townsend depo. ex. 19
at 6, 45-46.
For the purposes of these motions, the City does not
really argue that such provisions in the “Rules and
Guidelines” document are permissible as mechanisms
to prevent intentional discrimination by contractors.
Rather, the City contends that “[tlhe Rules and
Guidelines ... were never signed by the City Manager
and do not have the force of law,” and that “certain
portions of the ‘Rules and Guidelines’ have not been
used” in the bid solicitation and evaluation process.
See City’s memo opposing Plaintiffs MSJ at 13; see
also Lemmie depo; Ranford depo. at 68, 70-73 (City
engaged in no evaluation of MBE participation).
Code section 323-31 instructs the City Manager to
promulgate rules and regulations for the SBE
Subcontracting Outreach Program; the City Manager,
however, has testified that, “I have not promulgated
rules and regulations under this section.” Lemmie
depo. at 10. The City also notes that there is no
evidence in the record that the Rules and Guidclines
document was made available or known to any bidder
prior to the award of the contract at issue; that is, the
current record does not reflect that the document
directly could have caused any bidder to take race into
account in submitting a proposal. The City in effect
disavows any problematic portions of the document by
arguing that those sections never have controlled the
110a
policy of the City or its contractors. On the state of the
record to date, that appears to be a genuine issue of
material fact (although the court does observe that the
City has admitted that the Rules and Guidelines “are
... part of the Small Business Enterprise Program,” see
City’s Response to Interrogatory 17(D) at 6).
Viewing the evidence in the light most favorable to
the non-moving party, and given that the Rules and
Guidelines document was prepared for and available
to City staff, and served to some extent as “working
documents used by staff,” Lemmie depo. at 11 and
Stark depo. ex. 6, (and considering, too, presumptions
of regularity that generally inform review of
governmental! actions), the court cannot conclude for
summary judgment purposes that the principles
embodied in the Rules and Guideline document played
no part in the determinations at issue here. By the
same standard, with all reasonable inferences drawn
in favor of the Defendants in evaluating Cleveland’s
summary judgment motion, the court cannot find as a
matter of undisputed fact that certain sections of the
Rules and Guidelines cited above entered into the
City’s decision. The status of the “Rules and
Guidelines,” and the issue of to what extent and effect,
if any, they were used here or may support other
reasonable inferences regarding Cleveland’s claim that
the SBE program is run as a “sham” to mask a race-
conscious awards program, remain questions of
arguably material fact.
In light of the City’s response to the bidder inquiry
about the relevance of availability estimates, viewed in
conjunction with the bid documents and Code
mandates and the Rules and Guidelines document,
llla
and the testimony of City officials, the court similarly
concludes under the summary judgment standard that
a question of fact remains as to whether the City did
intelligibly and accurately communicate to the bidders
that this drywall project was to be administered under
SBE principles without regard to considerations of
race (as Defendants maintain was the case and which
Plaintiff strongly disputes). Moreover, the court notes
as an aside that the record indicates arguably
conflicting testimony regarding the _ subjective
impressions of the bidders on this score.
In short, whether or not the City has engaged here
in a race-conscious contracting program of the sort
that would require “strict scrutiny” review depends on
a determination of facts that remain at issue when
reasonable inferences are drawn in favor of the non-
moving parties on each of the summary judgment
motions. Cf. Safeco Ins. v. City of White House, Tenn.
(6 Cir. 1999), 191 F.3d 675, 692 (“Outreach efforts
may or may not require strict scrutiny” [citing
authority that such heightened review “is generally
inapplicable’ to outreach efforts that target one race],
“But ... where their administration ‘indisputably
pressures’ contractors to hire minority subcontractors
[,] courts must apply strict scrutiny”).
The City argues, however, that Cleveland lacks
standing to pursue its equal protection claims in any
event because it did not meet the 35% SBE standard
and therefore could not have been awarded the
contract regardless of any other considerations. Cf.
Florida General Contractors v Jacksonville (1993), 508
U.S. 656 (traceability requirement). The court finds
below however, that the City’s Code in some instances
112a
precludes award of a contract based primarily on SBE
Subcontractor Outreach Program considerations where
the winning bid is more than $50,000 higher than the
bid of an otherwise qualified contractor rejected for not
meeting the SBE goal. Under these circumstances,
where the City agreed to pay well more than one
million dollars extra in order to achieve 35%
participation by small businesses in the drywall
project, the undisputed facts do not establish for
summary judgment purposes that Cleveland would
have been out of the running for the award had the
City applied its SBE rules in the context of the Code as
written. Thus, Defendants’ standing argument fails at
this point in the process for reasons even beyond
Cleveland’s contention that the SBE program itself is
wholly a sham to mask impermissible race-conscious
awards.
The court therefore denies the motions for
summary judgment of all three parties with regard to
Cleveland’s equal protection claims.
Due Process Issues
Defendants concede that Cleveland’s bid to perform
the drywall work on the City’s Convention Center
project was $1,246,022.00 lower than Valley’s. City’s
MSJ Memo at 7 (“Valley’s bid was for $10,135,022.00
while Cleveland’s bid totaled $8,889,000.00”); Valley’s
MSJ (adopting “all the same grounds” as City).
Defendants also affirm that “Cleveland’s bid was
excluded from consideration because it failed to meet
the SBE requirements,” City’s MSJ Memo at 7, and
they point to no other infirmities in Cleveland’s bid or
capacity to perform the work. Cf. Franklin depo. at 21-
1122
22, 29, 62, 88 (City purchasing agent believes that all
three bidders met non-SBE bid specifications and that
those bids were acceptable to the purchasing
department; no issues with Cleveland’s prior
performance).
Code section 321-37, “Bid; Award to Lowest and
Best” provides in part:
“(a) Selection of Lowest and Best in Award of City
Contracts: Except where otherwise provided by
ordinance, the city purchasing agent shall award a
contract to the lowest and best bidder. ...
(c) Factors to be Considered: Other factors that the
city purchasing agent may consider in determining
the lowest and best bid include, but are not limited
to: [prior performance; prevailing wage history;
compliance with nondiscrimination rules; and]
(4) Information concerning compliance with the
‘SBE Subcontracting Outreach Program’ rules and
regulations issued by the city manager pursuant to
... section 323-31.
In the event that the selection of the lowest and best
bidder is based primarily upon factors 3 or 4 above,
the contract award may be made subject to the
following limitation: the bid may not exceed an
otherwise qualified bid by ten (10%) percent or Fifty
Thousand Dollars ($50,000.00), whichever is lower.”
(emphasis added)
ll4a
Cleveland contends that in awarding the contract
to Valley despite the fact that Valley’s bid was more
than $50,000 higher than Cleveland’s (by more than
1.2 million dollars), the City abused its discretion and
thereby deprived Cleveland of a constitutionally
protected property interest without due process of law.
Defendants argue that Cleveland was not the lowest
and best bidder because it failed to reach the SBE goal
without regard to Subcontracting Outreach Program
rules. See City’s memo in op. at 22; Valley’s memo in
op. at 10 (“Code section 321-37 does not apply ...
because Cleveland was not an otherwise qualified
bidder eligible for consideration «under 321-37”).
For a property interest in the award of a public
contract to inhere, “one must have more than a
unilateral expectation; rather, one must instead have
a legitimate claim of entitlement to such a contract.”
Cleveland Construction, Inc. v. Ohio Department of
Administrative Services (10™ Dist. 1997), 121 Ohio
App. 3d 372, 394. Thus, “a disappointed bidder to a
government contract may establish a legitimate claim
of entitlement protected by due process by showing
that local rules limited the discretion of ... officials as
to whom the contract should be awarded” and that
discretion was abused in depriving the bidder of the
award. Id. at 394-95 (no abuse of discretion found); see
also, e.g., Enertech Electrical, Inc. v. Mahoning Co.
Commissioners (6 Cir. 1996), 85 F.3d 257, 260 (“A
constitutionally protected property interest in a
publicly bid contract can be demonstrated .... [if a
bidder can show] that, under state law, the County
had limited discretion, which it abused, in awarding
the contract’; no abuse of discretion found); Peterson
Enterprises, Inc. v. Ohio Department of Mental
115a
Retardation (6" Cir. 1989), 890 F.2d 416 (“if the board
had limited discretion under local roles as to whom
should be awarded the contract ..., then Plaintiff might
have a protected property interest in the award if he
were the beneficiary of the state law mandate;” no
property interest where state guidelines were
nonexhaustive); cf. United of Omaha Life Ins. Co. v.
Solomon (6 Cir. 1992), 960 F.2d 31, 34 (“Michigan ...
law neither requires that the lowest bidder be awarded
a state contract nor creates a property interest in
disappointed bidders on state contracts”); Cementech,
Inc. v. City of Fairlawn (Ohio 9™ Dist. App.), 2005 WL
844948 (disappointed bidder whom jury found had
submitted lowest and best bid may qualify for money
damages when project is already complete); but see,
Miami Valley Contractors, Inc. v. Montgomery Co. (2"°
Dist. App.), 1996 WL 303591 (“as best we can
determine, this jurisdiction has never recognized a
constitutionally protected property interest of a
disappointed bidder on a public works project”); Miami
Valley Contractors, Inc. v. Oak Hill (4" Dist. App.
1996), 108 Ohio App. 3d 745, 752 (no abuse of
discretion found; “we can find no support for the
proposition that a second- or third-place finisher in a
lowest and best bidder determination acquires a
constitutionally protected property right”).
“The meaning of the term ‘abuse of discretion’ ...
connotes more than an error of law or judgment; it
implies an unreasonable, arbitrary or unconscionable
attitude’ .... ‘Arbitrary’ means ‘without adequate
determining principle; *** not governed by any fixed
rules or standard.’ .... ‘Unreasonable’ means
‘irrational’.” Cedar Bay Construction, Inc. v. City of
Fremont et al., 50 Ohio St.3d 19, 22, citations omitted.
1l6a
Moreover, “courts in this state should be reluctant to
substitute their judgment for that of city officials in
determining which party is the ‘lowest and best
bidder.’ .... [I[]n the absence of evidence to the contrary,
public officers [and] administrative officers ..., within
the limits of the jurisdiction conferred by law, will be
presumed ... not to have acted illegally.” Id. at 21.
Discretion for determining the lowest and best bid “is
not vested in the courts and the courts cannot interfere
in the exercise of this discretion unless it clearly
appears that the city authorities in whom such
discretion has been vested are abusing the discretion’.”
Id. at 21 (citation omitted). See also, e.g., Greater
Cincinnati Plumbing Contractors’ Association v. City
of Blue Ash (1*Dist. 1995), 106 Ohio App. 3d 608, 613-
14 (a Charter city’s discretion in accepting lowest and
best bid “is similar to the discretion provided under
general state law [citing R.C. 735.05]; “Competitive
bidding provides for ‘open and honest competition in
bidding for public contracts and [saves] the public
harmless, as well as bidders themselves, from any kind
of favoritism or fraud in its varied forms’”).
If the bid in the instant case was awarded in
violation of the explicit $50,000/10% cap established by
321-37(c)(4), the award would be an abuse of discretion
and Cleveland would have a “legitimate claim of
entitlement” sufficiently clear to give rise to a due
process claim. Violation of that precise standard as
established by ordinance would move Cleveland’s
interest in the contract beyond the “mere ‘unilateral
expectation” of receiving the award under a regime in
which the relevant ordinance provides non-exhaustive
guidelines limiting discretion, cf. Peterson Enterprise,
890 F.2d 416; Cleveland Construction, 121 Ohio App.
117a
3d at 394, and into that rare context in which a
disappointed bidder may assert a constitutionally
protected property interest. This is the basis on which
Cleveland advances the second part of its motion for
partial summary judgment. See Motion at 2 (seeking
judgment based on an asserted “property interest in
the contract”). Under the summary judgment
standard, the court thus turns to the question of
whether any genuine issue of material fact exists as to
whether the City breached its 321-37(e)(4) cap.
The language of 321-37 establishes. that
“information concerning compliance” with the City’s
SBE Subcontracting Outreach Program rules and
regulations is a “[flactor” that “may” be considered as
the City determines the lowest and best bid. If the
lowest and best bid is selected “based primarily” on
that factor, the City may proceed to award the contract
“subject to the following limitation: the bid may not
exceed an otherwise qualified bid by ten (10%) percent
or Fifty Thousand Dollars ($50,000.00), whichever is
lower.” 321-37(c)(4).
In that context, the phrase “otherwise qualified bid”
can reasonably be read only to mean a bid that is
qualified except that it is not in “compliance” with the
SBE Subcontracting Outreach Program “factor”. The
bid not selected “primarily” because of the SBE
Subcontracting Outreach Program factor must
“otherwise” be qualified in order to trigger the required
calculation with regard to whether the contract award
may be made as selected on that basis.
Cleveland points to legislative history for 321-37
indicating that the City Administration took the
118a
position and advised Cincinnati’s City Council that the
ten-percent/$50,000.00 cap would apply to any
purchasing contract affected by SBE compliance
issues. Assistant City Manager Rashid Young advised
Council’s Law and Public Safety Committee on
November 25, 2003 that “{w]hat this ordinance allows
us to do is be clear about when it is appropriate to
award a bid to a SBE compliant [bidder] if they are not
the lowest. This ordinance would allow us to award a
bid if the bid is $50,000 or less difference away from
the lowest bid. .... We had an example where the SBE-
compliant bidder was some nine hundred thousand
dollars in excess of the lowest bid and ... it didn’t make
a lot of sense to spend nine hundred thousand dollars
more to comply with the regulations of SBE.” Young
depo. and ex. 1.
By its terms, however, the cap applies specifically
(and exclusively) to instances where a higher bid is
accepted because of “information concerning
compliance with ‘SBE Subcontractor Outreach
Program rules’ ... issued ... pursuant to 323-31.” Code
321-37(c4) (emphasis added). As used in the
legislative text, the reference to an “SBE
Subcontractor Outreach program” does not appear
coextensive with the broader “Small Business
Enterprise Program” itself. Thus, for example: Chapter
323 as a whole is titled “Small Business Enterprise
Program,” while section 323-31 specifically is titled
“Subcontracting Outreach Program;” and Section 323-5
directs the City Manager to “issue and enforce
regulations to carry out the meaning and purpose of
the small business enterprise program authorized by
this chapter,” while Section 323-31 directs the City
Manager to “issue and enforce rules and regulations to
119a
carry out the meaning and purpose of the
Subcontracting Outreach Program, substantially in
conformance with the content of Part II, Section I, the
‘Legislative Recommendation Report To The City of
Cincinnati’ dated December 17, 2002, prepared by
Griffin & Strong, P,C..”
As Cleveland observes: “A basic rule of statutory
construction requires that ‘words in statutes should
not be construed to be redundant, nor should any
words be ignored.’ ... No part lof a statute] should be
treated as superfluous unless that is manifestly
required, and the court should avoid that construction
which renders a provision meaningless or inoperative.”
D.A.B.E., Inc. v. Toledo-Lucas County Board of Health
(2002), 96 Ohio St.3d 250-256 (citations omitted); see
also Cleveland’s MSJ Motion/Memo at 39. Council
enacted 323-31 directing enforcement of regulations
f
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.