Appendix — City of Cincinnati, Ohio v. Cleveland Construction Construction Construction, Inc. (No. 07-113)
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APPENDIX A
SUPREME COURT OF OHIO
2007-0114
[Filed May 2, 2007]
Cleveland Construction, Inc.
Appellant/Cross-Appellee,
V.
City of Cincinnati, et al
Appellees/Cross-Appellants.
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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
2a
Discretionary appeal accepted on Proposition of Law Nos.
J and Ill.
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.
APPENDIX B
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
i i i i i ed
COURT OF APPEALS
FIRST APPELLATE DISTRICT
CASE NO. A-0402638
MEMORANDUM IN SUPPORT OF JURISDICTION OF
DEFENDANT-APPELLANT CITY OF CINCINNATI
4a
JULIA L. MCNEIL (0043535)
City Solicitor
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
wk].@manleyburke.com
gpowell@manleyburke.com
Attorneys for Plaintiff-Appellee
Cleveland Construction, Inc.
kok ok &
TABLE OF CONTENTS
EXPLANATION OF WHY THIS CASE IS A
CASE OF PUBLIC AND GREAT
GENERAL INTEREST
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 interest in that
contract
Proposition of Law 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 be heard
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
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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 injury in fact
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 preference
* KK KK
APPENDIX C
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,
CITY OF CINCINNATI, et al.
Appellees/Cross-Appellants.
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VS. )
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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.
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/ (Copies sent to all counsel)
Acting Presiding Judge
APPENDIX D
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,
KATHI RANFORD,
and
VALLEY INTERIOR SYSTEMS, INC.,
Defendants-Appellees.
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
APPENDIX E
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,
KATHI RANFORD,
and
VALLEY INTERIOR SYSTEMS, INC.,
Defendants-Appellees.
——
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
{41} 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.
{€2} 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
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regulations of the city’s SBE Subcontracting Outreach
Program.’
{43} 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 three bidders for the
project’s drywall contract had complied with the 35% SBE-
participation requirement. According to Ranford, Cleveland
' CMC 321-37(c)(4).
? CMC 321-37(c).
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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.
{48} 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 Valley. 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 Valley to commence
work under the terms of the contract.
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Cleveland Files Suit
{410} 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.
{411} 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.
{412} Finally, Cleveland sought compensatory and
punitive damages, as well as attorney fees and costs.
{413} The trial court denied Cleveland’s motion for a
temporary restraining order. Later, upon moiion, the trial
court dismissed the city employees from the action.
{414} 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 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.
{415} At the conclusion of the trial, the court found that
the city had violated CMC 321-37 by awarding the drywall
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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.
{416} 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.
{417} 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.
{418} The court permanently enjoined the city from
maintaining or applying race-or gender-based 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.
{419} 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
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Section 1988, Title 42, U.S. Code. The court also entered
judgment in favor of Valley.
{420} On appeal, Cleveland argues that the trial court
erred by (J) 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.
The Application of CMC 321-37
{422} 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.
{423} The record reflects that CMC 321-37 had been
adopted in specific contemplation of the convention center
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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.
{924} 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 questionable relevance and was certainly not
dispositive of the legality of the bid-selection process.
{425} 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 ¢rywall 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,
* 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.
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Valley’s SBE-compliant bid could not have exceeded
Cleveland’s bid by the $50,000 or 10% cap.
{426} 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
{427} In its second assignment 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.
{428} 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 will redress the
injury.” *
{429} 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
* State ex rel. Ohio Acad. of Trial Lawyers v. Sheward, 86 Ohio
Si.3d 451, 469-470, 1999 Ohio 123, 715 N.E.2d 1062.
20a
is able and ready to bid on contracts and that a discriminatory
policy prevents it from doing so on an equal basis.”
{430} 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.
Deprivation of a Property Interest
{431} Inits 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.
{933} 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
> 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.
° Bd. of Regents v. Roth (1972), 408 U.S. 564, 569-570, 92 S. Ct.
270i, 33 L. Ed. 2d 548.
2la
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.’
{434} 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.’
{435} Generally, municipalities are vested with broad
discretion 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.” !”
{436} In the context of lowest-and-best-bidder
determinations, Ohio courts are reluctant to substitute their
” 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.
'© 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.
22a
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 determining principle; * * * not governed by any
fixed rules or standard .’ * * * ‘Unreasonable’ means
‘irrational.’”!
{437} 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.
{9438} 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
{439} In its fourth assignment of error, the city argues
that the trial court erred by ruling that elements of the rules
'5 See Cedar Bay Constr., Inc. vy. Fremont (1990), 50 Ohio St.3d
19, 552 N.E.2d 202.
'* Id. at 21-22, 552 N.E.2d 202.
'? Dayton, ex rel. Scandrick v. McGee (1981), 67 Ohio St.2d 356,
359, 423 N.E.2d 1095 (emphasis added).
23a
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.
{440} 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.”
{441} 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.
{442} 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
'© Richmond v. J.A. Croson Co. (1989), 488 U.S. 469, 109 S. Ct.
706, 102 L.. Ed. 2d 854.
'7 Adarand Constructors v. Pena (1995), 515 U.S. 200, 235, 115
S. Ct. 2097, 132 L. Ed. 2d 158.
'§ United States v. Virginia (1996), 518 U.S. 515, 533, 116 S. Ct.
2264, 135 L. Ed. 2d 735:
24a
for informational purposes only, and that bidders were
required to do nothing in response.
{443} Racial or gender classifications may arise from a
regulation’s strict requirements, such as 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.”
{944} 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.”
{445} 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
'° Bras v. Calif. Pub. Utils. Comm. (C.A.9, 1995), 59 F.3d 869.
0 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.
71 (1995), 515 U.S. 200, 115 S. Ct. 2097, 132 L. Ed. 2d 158.
? Id. at 224, 115 S. Ct. 2097.
25a
“are not immunized from scrutiny because they purport to
establish ‘goals’ rather than “quotas.’[Courts] look to the
economic realities of the program rather than the label
attached to it.”
{446} 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.
{447} 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.
{448} 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 women-owned subcontractors, the city was
> Bras, supra, at 874.
** Safeco Inc., supra, at 692, citing Lutheran, supra, at 491.
26a
required to demonstrate an “exceedingly persuasive”
justification for the differential treatment.
{449} 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
{450} 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.
{4513} 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 declaratory judgment may serve as the basis for
an award of attorney fees.”
> Hensley v. Eckerhart (1983), 461 U.S. 424, 433, 103 S. Ct.
1933, 76 L. Ed. 2d 40.
6 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.
2? Hewitt v. Helms (1987), 482 U.S. 755, 761, 107 S. Ct. 2672, 96
L. Ed. 2d 654.
27a
{452} But the entry of a declaratory judgment in a 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.)”
{453} 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 city contracts. In that regard,
Cleveland was a prevailing party because the judgment had a.
distinct effect 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
*8 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
28a
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.
{455} 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.”*
{456} “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 question of law is presented, we
apply a de novo standard of review to a directed verdict.®
{457} Cleveland acknowledges that the Ohio Supreme
Court’s recent decision in Fairlawn v. Cementech™ resolves
*® Civ.R. 5O(A)(4).
3! Civ.R. SO(A)(4).
Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 95 Ohio
St.3d 512, 2002 Ohio 2842, 769 N.E.2d 835, “4, quoting O’Day
v. Webb (1972), 29 Ohio St.2d 215, 280 N.E.2d 896, paragraph
three of the syllabus.
3 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.
29a
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.
{458} 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 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.*’
{460} In Adarand Constructors v. Pena,*® the United
States Supreme Court considered whether a rejected bidder
had standing to seek injunctive relief against future application
*® Carey v. Piphus (1978), 435 U.S. 247, 253-254, 98 S. Ct. 1042,
55 L. Ed. 2d 252.
°° 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.
** (1995), 515 U.S. 200, 115 S. Ct. 2097, 132 L. Ed. 2d 158.
30a
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:
{461} “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.)
{462} 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.
{463} 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’
9 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.
3la
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.*
{464} 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 court’s misapprehension that Cleveland’s damage
claim was wholly dependent on its claim for injunctive relief.
{465} 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.
{466} 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
** Id. at 1339.
* Meyers v. Cincinnati (C.A.6, 1994), 14 F.3d 1115, 1119.
32a
to properly mitigate damages.“ So once Cleveland presented
evidence of damages, the burden of proof on the issue of
mitigation was on the city.
{467} Because a jury could have concluded that
Cleveland had established all the elements of its 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.
{468} 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,
amount[ed] 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
{469} In its second assignment of error, Cleveland argues
that the trial court erred by refusing to declare the drywall
* Id., citing Rasimas v. Michigan Dept. of Mental Health (C.A.6,
1983), 714 F.2d 614.
33a
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.
{470} 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
*° Cincinnati Gas & Elec. Co. v. PUC of Ohio, 103 Ohio St.3d
398, 2004 Ohio 5466, 816 N.E.2d 238, at 415, 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 43; 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. OSAP-466, 2006 Ohio 2199.
34a
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 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:
{472} “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.”
{473} 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.
Evidentiary Rulings
{974} In its third assignment of error, Cleveland argues
that the trial court erred by ruling that it could not elicit
35a
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.”
{476} 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 trer described “[ljogistics, project
coordination” tasks at the construction site, and whether the
city had performed amy imvestigation upon submission of her
request to be certified as an SBE supplier.
{477} The trial court indicated that it would allow
testimony by a subcontractor with respect co the current status
® See Cincinnati v. Banks (2001), 143 Ohio App. 3d 272, 287, 757
N.E.2d 1205: Siuda v. Howard, i“ Dist. Nos. C-000656 and C-
000687, 2002 Ohio 2292, €25.
© See Banks, supra.
36a
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.
{478} 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
{479} 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
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.”
{480} The doctrine of qualified immunity generally
shields public officials performing discretionary functions
from liability for civil damages to the extent that their conduct
>' See Asher Investments, inc. v. Cincinnati (1997), 122 Ohio App.
3d 126, 137, 701 N.E.2¢ 400; Norwell v. Cincinnati (1999), 133
Ohio App. 3d 790, 729 N.E.2d 1223.
37a
does not violate clearly established statutory or constitutional
rights of which a reasonable person would have known.”
{481} 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.” “[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
* Harlow v. Fitzgerald (1982), 457 U.S. 800, 818, 102 S. Ct.
2727, 73 L. Ed. 2d 396.
3 Mitchell v. Forsyth (1985), 472 U.S. 511, 526, 105 S. Ct. 2806,
86 L. Ed. 2d 411.
4 Id.
** Will v. Hallock (2006), 546 U.S. 345, 126 S. Ct. 952, 960, 163
L. Ed. 2d 836.
38a
allege acts that are outside the scope of the defendant’s
immunity.”*°
{483} 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.
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.
*© Salt Lick Bancorp v. FDIC (May 30, 2006), C.A.6 Ne. 05-5291,
__ F.3d ___, 187 Fed. Appx. 428, citing Kennedy v. Cleveland
(C.A.6, 1986), 797 F.2d 297, 299.
APPENDIX F
COMMON PLEAS COURT
HAMILTON COUNTY, OHIO
CASE NO: A0402638
[October 7, 2005]
Cleveland Construction, Inc.,
Plaintiff,
City of Cincinnati, et al.,
Defendants.
)
)
)
)
)
)
)
)
ENTRY DENYING PLAINTIFF’S MOTION
FOR A NEW TRIAL
This matter comes before the court on Plaintiff's motion
for a new trial based on Plaintiff's position that “the Court’s
ruling dismissing Cleveland’s damage remedy [relating to
claimed lost profits and uncertain bid preparation costs] was
error....” Plaintiff's motion for a new trial at 5. Plaintiff's
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 cases
involving successful equal protection challenges to programs
40a
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 Plaintiff's argument here well taken. The motion is
denied.
SO ORDERED.
Judge Nelson, Judge
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
APPENDIX G
COURT OF COMMON PLEAS
HAMILTON COUNTY, OHIO
Case No. A0402638
[Filed August 29, 2005]
Cleveland Construction,
Plaintiff,
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 Valley Interior Systems, Inc.
(“Valley”) rather than to Plaintiff Cleveland
42a
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 Cleveland 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 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 issuc.
43a
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 of 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 judginent 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 the City establishing that such provisions
are, in the case of racial classifications, narrowly tailored to
advance a compelling goverrtmental 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
44a
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 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 Plaintiff's
action).
Cow costs as recorded by the Clerk of Courts are
asses. te the Defendants to be shared equally between them.
Although Valley’s legal arguments did not prevail to the (very
45a
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)
Leonard Weakley, Jr., One West Fourth Street, Suite
900, Cincinnati, OH 45202 (fax: 381-9206)
David Barth, 537 East Pete Rose Way, Suite 400,
Cincinnati, OH 45202 (fax: 852-8222)
46a
APPENDIX H
COURT OF COMMON PLEAS
HAMILTON COUNTY, OHIO
CASE NO.: A040263
[Filed August 19, 2005]
CLEVELAND CONSTRUCTION, INC.,
Plaintiff,
-:
CITY OF CINCINNATI, et al.,
Defendants.
AGREED ENTRY
It is agreed by counsel for the City and Cleveland
Construction Company that the hearing scheduled for August
19, 2005 at 1:30 p.m. for Cleveland’s Motion for legal fees
is hereby moved to a report hearing on August 26, 2005 at
2:30 p.m. as counsel has agreed to submit the issue on briefs
to the Court. All other agreements and prior Orders or Entries
stay in effect. Counsel for Cleveland Construction Company
will submit its Reply Brief on or before August 22, 2005.
/s/
Judge Nelson
HAVE SEEN:
Julia L. McNeil, Esq. #0043535
City Solicitor
/s/
Leonard A. Weakley, Jr., Esq. #0000152
Christopher J. Aluotto, Esq. #0059555
Attorneys for the City of Cincinnati
RENDIGS, FRY, KIELY AND DENNIS LLP
One West Fourth Street, Suite 900
Cincinnati, Ohio 45202
Phone: 513-381-9269 / Fax: 513-381-9206
E-mail: lweakley@rendigs.com
cja@rendigs.com
and
Julie F. Bissinger, Esq. #0012055
Chief Counsel
Trial Attorneys for the City of Cincinnati
Assistant City Solicitor
Room 214, City Hall
801 Pium Street
Cincinnati, Ohio 45202
Phone: 513-352-3346
/s/
[Per Telephone Authorization of 8/19/05}
Kelly M. Lundrigan, Esq.
Manley Burke
225 West Court Street
Cincinnati, Ohie 45202-1098
Copies Sent to:
Kelly M. Lundrigan, Esq.
Manley Burke
225 West Court Street
Cincinnati, Ohio 45202-1098
Julie F. Bissinger, Esq.
Chief Counsel
Room 214, City Hall
801 Plum Street
Cincinnati, Ohio 45202
Julia LaRita McNeil, Esq.
Assistant City Solicitor
Room 214, City Hall
801 Plum Street
Cincinnati, Ohio 45202
Fred A. Ungerman, Jr., Esq.
Coolidge Wall Womsley & Lombard
33 W. First Street
Suite 600
Dayton, Ohio 45402
David L. Barth, Esq.
Cors & Bassett, LLC
537 East Pete Rose Way, Suite 400
Cincinnati, Ohio 45202
APPENDIX I
IN THE COURT OF COMMON PLEAS
HAMILTON COUNTY, OHIO
Case No. A0402638
[Filed August 11, 2005]
Cleveland Construction, Inc.,
Plaintiff,
V.
City of Cincinnati, et al,
Defendants.
)
)
)
)
)
)
)
)
ENTRY
The Plaintiff issued a subpoena to Rendigs, Fry, Kiely &
Dennis, L.L.P for billing records related to this litigation.
The City of Cincinnati filed a Motion to Quash the subpoena.
The Court, after carefully considering the matter, and after
hearing arguments from counsel, made on August 4, 2005,
grants the City of Cincinnati’s Motion to Quash as expressed
on the record of the hearing.
| /s/
Date Judge Nelson
HAVE SEEN:
Robert E. Manley (0000849)
W. Kelly Lundrigan (0059211)
Gary E. Powell (0037546)
MANLEY BURKE
A LEGAL PROFESSIONAL ASSOCIATION
225 W. Court Street
Cincinnati, Ohio 45202
Attorneys for Cleveland Construction, Inc.
Leonard A. Weakley, Jr. (0000152)
Rendigs, Fry, Kiely & Dennis, L.L.P.
One West Fourth Street, Suite 900
Cincinnati, Ohio 45202
Attorney for City of Cincinnati
APPENDIX J
COURT OF COMMON PLEAS
HAMILTON COUNTY, OHIO
Case No. A0402638
[Filed July 20, 2005]
Cleveland Construction, Inc.,
Plaintiff,
City of Cincinnati, et al,
Defendants.
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ENTRY
By agreement of the parties, a hearing on attorneys fees
in this matter is established for August 9, 2005 at 3:00 p.m..
The parties request and agree that a final judgment entry be
deferred until a result is reached on fees after that hearing.
Plaintiff will file its Application for fees and costs by July 29,
2005, and serve Defendants in person or by telefax by that
date. The City agrees to observe and abide by the injunctive
restraint indicated in the Court’s post-trial entry of July 13,
2005 pending final judgment entry. The fee hearing relates to
a determination of Plaintiff's fees to be paid by the City.
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/s/
Judge Fred Nelson
Attorney (0059211)
/s/Leonard A. Weakley, Jr. atty for the City of Cincinnati
Attorney
/s/David L. Barth tty for Defendant Valley Interior
Systems, Inc.
APPENDIX K
COMMON PLEAS COURT
HAMILTON COUNTY, OHIO
CASE NO: A0402638
[Filed July 13, 2005]
Cleveland Construction, Inc.,
Plaintiff,
V.
City of Cincinnati, et al.,
Defendants
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ENTRY
This matter proceeded to a trial on the merits of Plaintiff's
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 Plaintiff's 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 was impaneled to address certain issues in the
case. after the court granted the motion of Defendant, the City
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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 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
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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).
As the court noted in its SJ Entry, the language of 321-37
establishes that “information concerning compliance” with the
City’s SBE Subcontracting Outreach Program rules and
regulations is a “[f]actor” 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
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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]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 $50,000.00 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 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 Plaintiff's trial
S7a
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 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.g., City’s
March 11, 2005 Memo Opposing Plaintiff's 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
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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,” /d. 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. 7o 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 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 Smail 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 annual “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).
59a
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.
Plaintiff's trial exhibit 32, for example, is a City bid
document issued to the bidders on this projeci 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 Plaintiff's 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 iis mandate once
enacted.
Thus, the court finds that the City did violate a specific
prohibition of its own municipal Code in awarding the drywall
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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 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
6la
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.” /d. 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 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’”).
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, /d. 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
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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™ 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 Chio
App. 3d 745, 752 (no abuse of discretion found, “we can find
no suppce’ 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 (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
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taxpayers more than $50,000 per contract. Cf. Greater
Cincinnati Plumbing Contractors’ Ass'n. v. City of Blue Ash
(i* Dist. App. 1995), 106 Oh» 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), »<andrick, 67 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 which 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.
Il, 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
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.
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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 in a 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 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,” /d. a’ 227, see also,
e.g., Grutter v. Bollinger (2003), 539 U.S. 506, 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
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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
imperinissible, 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 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
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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 Plaintiff's trial
exhibit 17, contain a number of such elements when reviewed
as a complete program. The City’s Rules and Guidelines
state, for example, that:
1) “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,
Plaintiff's 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).
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2) “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 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,] [o]fferor will provide a detailed
description of the techniques used to obtain
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participation of minority and women owned business
enterprise ... “ /d. at 43.
“Utilizing the bidder’s utilization form (Form 2003)
and total bid amount, the actual utilization percentage
is calculated. 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. 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.”
Id. at 46; cf. MD/DC/DE Broadcasters, supra.
[From the “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
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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 the
following methods to obtain the maximum practicable
participation by small, minority and women-owned
business enterprises on this project.” /d. 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 unconstitutional
program elements to the facts of this case, the court notes 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
70a
did, in fact, (and without protest by Cleveland until after the
contract was awarded to Valley) submit form 2007
(“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., Plaintiff's 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 Plaintiff's
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.” Plaintiff's 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 Plaintiff's 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
percentages, Plaintiff failed to establish that City officials
looked beyond whether drywall bidders met the City’s 35%
Tila
SBE requirement. Indeed, Plaintiff's 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 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
72a
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 bus.nesses (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 not 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 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
73a
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 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
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(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 de rived 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, 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
75a
contracting and purchasing programs so as to discourage aiiy
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 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 Plaintiff's
claims. See, e.g., City’s 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”),
16a
City’s 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 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
77a
compensation for injuries caused by the deprivation of a
constitutional right.”).
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 Plaintiff's 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
Plaintiff's 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 had available a fully adequate remedy at law. It
78a
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. “(C]aution
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 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,
79a
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 from 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
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.
80a
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 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
Sla
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
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
APPENDIX L
COMMON PLEAS COURT
HAMILTON COUNTY, OHIO
CASE NO: A0402638
[Filed June 28, 2005]
Cleveland Construction, Inc.,
Plaintiff,
City of Cincinnati, et al.,
Defendants.
)
)
)
V. )
)
)
)
)
ENTRY GRANTING DEFENDANT CITY OF
CINCINNATY’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.
83a
The Court denies Defendant City’s Motion for dismissal
of Plaintiff's 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
Plaintiff's claims for declaratory and injunctive relief and
attorney fees.
SO ORDERED.
/s/
Fred Nelson, Judge
APPENDIX M
COMMON PLEAS COURT
HAMILTON COUNTY, OHIO
CASE NO: A0402638
[Filed June 20, 2005]
Cleveland Construction, Inc.,
Plaintiff,
V.
City of Cincinnati, et al.,
Defendants.
)
)
)
)
)
)
)
)
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 Plaintiff's 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
APPENDIX N
COURT OF COMMON PLEAS
HAMILTON COUNTY, OHIO
Case No. A0402638
[Filed May 13, 2005]
Cleveland Construction,
Plaintiff,
City of Cincinnati, et al.,
Defendants.
)
)
)
VS. )
)
)
)
)
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 associated itself with the
City’s legal position for purposes of its motion). The court in
86a
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 drywail contract to Valley as the lowest
bidder that met the City’s 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
tempcrary 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 instant motions, which include the summary
judgment issues to which the court now turns.
87a
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). If a 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, 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
88a
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 (City’s “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 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
89a
“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 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
90a
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 1 was concerned about was Small Business Enterprise”).
Cleveland contends that the City’s answer on the
relevance of availability estimates should not be 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
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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 and/or women-
owned businesses based on the actual availability percentage,
and thai the bidder’s good faith efforts were inadequate and
ihere 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 “[t]he 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 Plaintiff's 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
92a
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 Guidelines
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 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”
93a
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, 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
94a
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 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 21-22,
95a
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)
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),
96a
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. Jd. 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 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),
97a
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. 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.’ ....
[iJn 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.” /d. 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’.” /d. at
98a
21 (citation omitted). See also, e.g., Greater Cincinnati
Plumbing Contractors’ Association yv. 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. 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 secoud 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 2nd 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
99a
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 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
100a
Subcontractor Outreach Program rules’... issued ... pursuant
to 323-31.” Code 321-37(c)(4) (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 carry out the meaning and purpose of
the Subcontracting Outreach Program, substantially in
conformance with the content of Part IJ, 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 [of 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 for the
“SBE Subcontracting Outreach Program” in 2003, while
leaving in place the separate 323-5 directive as enacted in
1999 to enforce regulations for the SBE program itself. If the
Subcontracting Outreach Program and the overall SBE
program were identical, a double instruction on enforcement
would be unnecessary and redundant. The specific reference
1Ola
in 321-37(c)(4) to the SBE Subcontracting Outreach Program
thus appears to comprehend something less than the SBE
program as a whole (a conclusion strengthened by the
structure of Chapter 323).
The distinction between the “SBE Subcontractor Outreach
Program” and the overall SBE program may not be terribly
complex. The Griffin & Strong Report referenced and to
some extent incorporated by Code section 323-31
(“Subcontracting Outreach Program”) itself makes clear that
“(t]he Subcontracting Outreach Program applies to City-
funded construction contracts of $100,000 or more,” except
where the City “in advance” specifically waives such
requirements. Lemmie Depo. Ex. 2 (December 17, 2002
Griffin & Strong Report at 3, 5). That is also the deposition
testimony offered by City representatives. See, e.g., Ranford
depo, at 78 (“Those are for contracts that are in excess of
$100,000”). That distinction, applying the Subcontracting
Outreach Program to contracts in excess of $100,000, both
would explain the implication in the Code that the SBE
Subcontracting Outreach Program is only a subset of the SBE
program overall, and could vindicate the City
Administration’s representation to Council through Mr.
Young that 323-31 would preclude the City from paying, for
example, “nine hundred thousand dollars more to comply
with the regulations of SBE”: it gives a widely applicable
meaning to the $50,000/10% cap, while also making clear
that the cap applies only to relatively large contracts.
The record before the court further reflects that at least
some elements of the SBE Subcontractor Outreach Program
were applied to the bids at issue. As City contract compliance
officer Ranford has testified: “The Subcontracting Outreach
Program was applied to convention center bids. If you have
any of those bid documents, you will see the Subcontracting
102a
Outreach Program. Those are for contracts that are in excess
of $100,000.” Ranford depo. at 78; see also id. at 60 (“we
had the Subcontracting Outreach Program on all convention
center projects and they were in excess of $100,000. So we
followed how that worked, the goals. The goals were set.”),
83 (“The Subcontracting Outreach Program was used for
convention center”), 100 (“Q: “There’s a listing of the forms
that you reviewed ... for the bidders in this case? A: These
were the same documents that were the Subcontracting
Outreach Program, yes.”).
The record now before the court also reflects that the very
bid requirement document that specified the 35% SBE
participation figure was headed in all capital letters:
“SUBCONTRACTING OUTREACH PROGRAM
SUMMARY/CONVENTION CENTER PROJECT.” See,
e.g., Small depo. ex. 5; Butler depo. ex. 1, tab 4, p.7. That
document continued, in part: “SBE GOALS PER TRADE
CONTRACT ..., BID PACKAGE C: All bidders are required
to meet the goal stated .... Drywall .... 35%.” The Outreach
Program Summary also stated that the “SBE bidder must
clearly indicate on Form 2003 the percentage of work that
represents their SBE participation percentage as a Prime
related to the completion of the scope of work.”
Substantial evidence in the record suggests, too, that the
City treated that 35% figure as a mandatory requirement. See,
e.g, Townsend depo. at 83 (“You’re determined not to be in
compliance if you did not meet the goal, yes”), 106. Indeed,
the City bases its Motion with respect to Cleveland’s equal
protection claims on the assertion that the SBE goal was
mandatory, although Cleveland takes somewhat of a contrary
positaon, cf. Cleveland’s Reply Memo in support of MSJ at
2, citing prior Townsend testimony. Whereas the rest of the
Code relating to SBE matters speaks in terms of goals not
103a
expressed as inflexible threshold requirements, the
Subcontracting Outreach Program as referenced in 321-37 and
323-31 “requires bidders to ... achieve a minimum of 20%
(which may [be] higher for construction of buildings) SBE
subcontractor participation.” December 17, 2002 Griffin &
Strong Report 7 (noting elsewhere that City can waive
requirement in advance under the program). Significantly, at
the same time that the Code was amended to include the
Subcontracting Outreach Program language (including the
cost cap), Council also deleted Code language otherwise
requiring bidders to submit (less rigorous) “written assurance
of commercially useful SBE participation in their bids” and to
make “good faith” efforts to meet SBE participation levels.
See former Code sections 323-27 and 323-29, as repealed by
the same ordinance that established 232-31 incorporating the
more mandatory regime of the Griffin & Strong report.
That mandatory approach also is largely consistent with
the “Subcontracting Outreach Program” section of the Small
Business Enterprise Prograr; Rules and Guidelines that,
although not signed by the City Manager, nonetheless
provided guidance to City employees in certain respects. See,
e.g., Townsend depo. ex. 19 (“Rules and Guidelines”) at 9
(“Subcontracting Outreach Program, CMC 323-31: The
Subcontracting Outreach Program applies to City-funded
construction contracts of $100,000 or more. At the City’s sole
discretion, these requirements may be waived in advance ....
The Subcontracting Outreach Program requires bidders to ...
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 ... SBE
subcontractors”); see also Lemmie depo. at 11 (“Rules and
Guidelines” were “working documents used by staff in the
office”); Ranford depo. at 78, 80 and ex. 34 and G (“Rules
104a
and Guidelines” page 10, Subcontracting Outreach Program
with regard to coverage of projects over $100,000 and
mandatory nature of SBE figures was used for contract
compliance review in convention center program, whereas
Nondiscrimination MBE sections of Rules and Guidelines
were not). The court observes, however, that Cleveland’s
position that “the City has ... decided that good faith efforts
[to achieve SBE compliance] do not matter and does not look
at them,” Cleveland’s MSJ Memo at 33, argues that certain
elements of the Subcontracting Outreach section of the Rules
and Guidelines were disregarded in pursuit of higher SBE
figures, see Ranford depo. ex. G at 11 (good faith
exceptions).
The City Manager’s failure formally to promulgate rules
and regulations for the Subcontracting Outreach Program
under 323-37, of course, can provide no justification for any
failure to abide by the $50,000/10% cost cap established by
321-37. Code 323-31 requires the issuance of such rules:
“The City Manager shall issue roles and regulations to carry
out the meaning and purpose of the Subcontracting Outreach
Program....” Failure to provide required regulations may
compound an abuse of discretion; it does not mitigate such an
abuse. See, e.g., City of Dayton, ex rel. Scandrick v. McGee,
67 Ohio St.2d 356, 360 (1981) (“The presence of standards
against which such discretion may be tested is essential;
otherwise, the term ‘abuse of discretion’ would be
meaningless”); cf. Lemmie depo. at 11 (“[a]t this time we
have no plans” to issue any SBE rules and regulations other
than those cited above as “working documents used by
staff.”).
Similarly, the City’s perhaps unusual approach to
legislative drafting - codifying the Subcontractor Outreach
Program through statutory references to a consultant’s report,
105a
rather than by direct recitation of standards and requirements
- cannot permit the City to ignore the cost cap that Council
did specifically enact in 321-37. Had the legislative
recommendations concerning the Subcontractor Outreach
Program as set forth in Part II, Section I of the Griffin &
Strong report referenced in 323-31 been adopted in a more
Straightforward fashion, the connection between the
Subcontractor Outreach Program and a generally required
SBE figure of 20% or higher would be more publicly visible.
That connection is not nullified simply because it may be
obscured by the indirect approach of the Code.
Code section 321-37(c)(4) envisions that “[i]nformation
concerning compliance” with the SBE Subcontracting
Outreach Program may be the primary basis for the selection
of the lowest and best bidder (in which event, the cost cap
applies). Defendants do not dispute that award of the contract
to Valley was “based primarily” on “compliance” with the
35% SBE figure set forth in the SUBCONTRACTING
OUTREACH PROGRAM SUMMARY. See, e.g., Franklin
depo. at 28-29 (“Q: ... do you remember any factor other
than SBE compliance that was a primary factor in deciding
who got the bid award in this situation? A: No. ....Q: ... do
you recall there being any factor that made a difference
primarily one way or the other other than the SBE number?
A: No.”). Although the title of that bid requirements
document may not be dispositive, it does not appear to weigh
in Defendants’ favor.
Defendants plainly have not established that they are
entitled to summary judgment on Cleveland’s due process
claim or on the remaining elements of Cleveland’s Amended
Complaint.
106a
The closer issue is whether Cleveland is entitled to
judgment on the due process portion of its motion. When the
evidence is reviewed in the light most favorable to
Defendants, as the summary judgment standard requires for
this evaluation, the court cannot find that reasonable minds
could come only to the conclusion that Cleveland had been
divested of a property right in violation of due process of law.
A question remains for the finder of fact as to whether the
City legitimately designated Valley as the lowest and best
bidder based on factors other than information concerning
compliance with the Subcontracting Outreach Program. That
is, an arguable question of fact remains as to whether the 35%
SBE figure invoked by the City derived from the
Subcontracting Outreach Program itself (with its generally
mandatory 20% SBE threshold) or from efforts by the City on
top of the Subcontractor Outreach Program to approach the
overall 30% SBE goal contained elsewhere in the Code.
The City’s 30% SBE goal was created prior to the
Subcontractor Outreach Program and continues in effect today
in a Code section separate from that containing the
Subcontractor Outreach Program. Code 323-7 (“The city of
Cincinnati’s Annual Goal for SBE participation shall be 30%
of the city’s total dollars spent for construction ...”). The
parties have not specifically identified in their briefing the
particular genesis of the 35% drywall SBE figure that was
used for Convention Center bids, and the court does not find
the facts on that matter established beyond peradventure. That
the Subcontracting Outreach Program applies to contracts
over $100,000 and generally requires at least 20% SBE
participation need not necessarily mean to a finder of fact that
the higher goal of 30% SBE participation stated elsewhere in
the Code could not have provided a sufficiently distinct basis
for the City’s evaluation.
107a
The facts do make clear that the City insisted upon a re-
bid after the initial bidding round in which Valley came very
close to but did not meet the 35% figure (while very
considerably exceeding the 20%-level designated by the
Subcontracting Outreach Program); in the end, Valley
achieved 40% SBE participation to Cleveland’s 10% -- a
difference of 400%. The record also includes testimony that
the Convention Center project is the only recent City project
for which SBE goals were set at higher than the 20%
Subcontractor Outreach figure. See Ranford depo. at 84.
The City has broad discretion to determine what
constitutes the lowest and best bid. See 321-37; 321-65
(award to the “most advantageous” offeror, “taking into
consideration price and evaluation factors set forth in the
request for proposals”; here the contract was awarded on
“lowest and best” basis); cf. Cedar Bay Construction, 50 Ohio
St.3d at 21. Construing all the facts in the light most
favorable to the Defendants for summary judgment purposes,
the court determines that a reasonable finder of fact could
decide that the cost cap provision is not triggered because the
City arrived at its award for reasons substantially enough
beyond the Subcontracting Outreach Program as to make
“information concerning compliance” with that program
something less than the primary basis for the award. That is
an issue for trial next month.
The court therefore denies all motions for summary
judgment in this matter.
108a
Cleveland's Motion for Injunctive Relief
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 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.
Moreover, Cleveland has provided no evidence
whatsoever to meet its burden of proving (by clear and
convincing evidence) various elements required to win
injunctive relief. For example, the court has been presented
with no evidence, apart from the McKillip affidavit provided
by the City, as to the current status of the Convention Center
drywall project, the equitable balance of harms among the
parties, and important factors affecting the public interest.
The trial date now is not much more than one month away;
the evidence adduced there surely will help inform any
decisions with regard to injunctive relief. The court in the
exercise of its equitable powers will await that necessary
information as presented by the parties in an orderly manner
at trial.
SO ORDERED
/s/
Fred Nelson,
Judge
109a
Kelly Lundrigan, 225 West Court Street, Cincinnati,
OH 45202 (fax: 721-4268)
Leonard Weakley, Jr., One West Fourth Street, Suite
900, Cincinnati, OH 45202 (fax: 381-9206)
David Barth, 537 East Pete Rose Way, Suite 400,
Cincinnati, OH 45202 (fax: 852-8222)
APPENDIX O
C
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