Opinion ID: 1119982
Heading Depth: 1
Heading Rank: 1

Heading: constitutionality of preference statute

Text: Although its amended notice of appeal in the Superior Court referred solely to state constitutional provisions, Equitable now asserts an equal protection claim under the Fourteenth Amendment. We have held the federal equal protection clause and the state privileges and immunities clause (Const. art. 1, § 12) are substantially identical. Olsen v. Delmore, 48 Wn.2d 545, 295 P.2d 324 (1956). While the State objects to considering the equal protection claim as not raised by Equitable in the trial court, we believe the issue should be addressed. In other contexts, the United States Supreme Court has stated that government, like private individuals and businesses, enjoys the unrestricted power to produce its own supplies, to determine those with whom it will deal, and to fix the terms and conditions upon which it will make needed purchases. Perkins v. Lukens Steel Co., 310 U.S. 113, 127, 84 L.Ed. 1108, 60 S.Ct. 869 (1940). See also Heim v. McCall, 239 U.S. 175, 191, 60 L.Ed. 206, 36 S.Ct. 78 (1915). The State asserts that equal protection guaranties are not applicable when the state acts in its proprietary capacity as a purchaser of goods. Relying on Heim, other state courts have upheld statutory in-state purchasing preferences against both equal protection and commerce clause challenges. See, e.g., City and County of Denver v. Bossie, 83 Colo. 329, 266 P. 214 (1928) (the state may buy of whom it will); State ex rel. Collins v. Senatobia Blank Book & Stationery Co., 115 Miss. 254, 76 So. 258 (1917) (rejecting equal protection challenge to a statute prohibiting state contracting with nonresident bidders). While the vitality of the proprietary rationale is questioned from time to time, its use continues. See Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 49 L.Ed.2d 220, 96 S.Ct. 2488 (1976) (invokes proprietary rationale to forego traditional commerce clause analysis). In 1972, the Supreme Court summarily affirmed a lower federal court ruling which (1) distinguished state purchases in its proprietary capacity from other state functions, and (2) upheld a statute requiring in-state government printing against commerce clause and equal protection challenges. American Yearbook Co. v. Askew, 339 F. Supp. 719 (M.D. Fla.), aff'd, 409 U.S. 904, 34 L.Ed.2d 168, 93 S.Ct. 230 (1972). The district court in American Yearbook Co. recognized the authority of states to prescribe conditions under which work of a public character will be performed. See also Phoenix v. Superior Court, 109 Ariz. 533, 514 P.2d 454 (1973). In this case, we need not go so far as to hold that because a contract is public and requires expenditure of public funds the legislature may, without reasonable basis, grant a preference. Here, as later discussed, a reasonable basis exists for the preference sufficient to withstand constitutional attack. Equitable next attempts, relying on its out-of-state incorporation, to characterize itself as an alien. It uses this premise to assert that the preference statute's classification of in-state and out-of-state shipbuilding firms is based upon a suspect class, i.e., alienage. Therefore, the argument goes, the statute must be subjected to the rigors of strict scrutiny. [4] It is true, strict scrutiny is appropriate when a classification is based on a suspect category or infringes upon a fundamental right. Nielsen v. State Bar Ass'n, 90 Wn.2d 818, 585 P.2d 1191 (1978); see generally L. Tribe, American Constitutional Law § 16-22 (1978). It is also true, Equitable may be designated a foreign corporation. Equitable, however, is not an alien for purposes of equal protection analysis. In the context of suspect categories, alienage refers to non-United States citizenship. Graham v. Richardson, 403 U.S. 365, 29 L.Ed.2d 534, 91 S.Ct. 1848 (1971). Further, nonresidency and out-of-state citizenship have not been deemed suspect classifications for equal protection purposes. See generally L. Tribe, supra, § 6-33, at 411. [5] We conclude the preference statute is most closely allied with economic legislation requiring only rational basis scrutiny. See Lynden Transp., Inc. v. State, 532 P.2d 700 (Alaska 1975). The rational basis inquiry involves a 3-part test: (1) Does the classification apply alike to all members within the designated class? (2) Does some basis in reality exist for reasonably distinguishing between those within and without the designated class? (3) Does the classification have a rational relation to the purpose of the challenged statute? Yakima County Deputy Sheriff's Ass'n v. Board of Comm'rs, 92 Wn.2d 831, 601 P.2d 936 (1979). There is a strong presumption of constitutionality in economic acts of the legislature and the burden of refutation is on the challenger. Aetna Life Ins. Co. v. Washington Life & Disability Ins. Guar. Ass'n, 83 Wn.2d 523, 528, 520 P.2d 162 (1974). [6] In considering whether the classification passes constitutional muster, we consider the purposes of the challenged statute. The plain object of the act is the procurement of ferries. It provides a procedure whereby public funds shall be expended for a public purpose. The primary interest is that of the public. An identifiable underlying policy is that of granting a preference to those who contribute to the economy through construction activities within the state. RCW 47.60.670, as we interpret it, grants a preference for constructing vessels within the state. Ferry construction activities are exempt from state sales tax and use tax. Laws of 1977, 1st Ex. Sess., ch. 166, §§ 6, 7, p. 616, 620, amending RCW 82.08.030 and 82.12.030. Lost revenues from the tax exemption are partially offset if the shipbuilding activities occur within the state thereby generating secondary economic activity. The lower price preference partially compensates for the revenue loss if the vessels are constructed elsewhere. Finally, construction of ferries within the state strengthens state and local economies. Out-of-state construction results in increased inspection costs and greater potential for delay. We are convinced that a rational relation exists between the purposes of RCW 47.60.670 and its classifications of in-state and out-of-state shipbuilding firms. See Schrey v. Allison Steel Mfg. Co., 75 Ariz. 282, 255 P.2d 604 (1953); cf. Lynden Transp., Inc. v. State, supra (strikes down classification granting privilege to resident corporation with principal office and majority of shareholders in state). We find no violation of equal protection guaranties. Equitable also asserts that RCW 47.60.670 is further constitutionally infirm in that it represents a special law granting corporate powers or privileges in violation of Const. art. 2, § 28(6). Under this constitutional prohibition, a special law is one which arbitrarily separates some person, place or thing from those upon which it would otherwise operate. The focus is upon what the law excludes. YMCA v. Parish, 89 Wash. 495, 154 P. 785 (1916). If nothing is excluded that should be included, the law is a general enactment. When the only limitation is a legitimate classification of the law's objects, it is a general law. Aetna Life Ins. Co. v. Washington Life & Disability Ins. Guar. Ass'n, supra . As stated above, in our view, the preference classification is valid. Further, the preference statute relates to particular bidders as a class and not particular bidders of a class. Assuming Equitable has adequately raised and presented this assignment of error, RCW 47.60.670 does not separate out a particular person or entity for special treatment and does not fall within the proscription of the cited constitutional provision.