Court Opinion

ID: 4356544
Source: CourtListenerOpinion
Date Created: 2019-01-07 19:02:21.964463+00
Date Added: 2024-06-11T14:46:24.247341
License: Public Domain

Filed 1/7/19
               CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                SECOND APPELLATE DISTRICT

                        DIVISION SEVEN

INTERNATIONAL BROTHERHOOD                 B282971
OF TEAMSTERS, LOCAL 848, et al.,
                                          (Los Angeles County
       Plaintiffs and Appellants,         Super. Ct. No. BS159367)

       v.

CITY OF MONTEREY PARK,

       Defendant and Respondent;

FIRST TRANSIT, INC.,

        Real Party in Interest and
        Respondent.

      APPEAL from a judgment and an order of the Superior
Court of Los Angeles County, Amy D. Hogue, Judge. Reversed
and remanded with directions.
      Bush Gottlieb, David E. Ahdoot, Kirk M. Prestegard, Julie
Gutman Dickinson and Ira L. Gottlieb for Plaintiffs and
Appellants.
      Reed Smith, Jesse L. Miller, James M. Neudecker and
Dennis Peter Maio for Defendant and Respondent and for Real
Party in Interest and Respondent.
            _______________________________________
                       INTRODUCTION

     The City of Monterey Park contracts with private
companies to operate its municipal bus system. The City
conducted a bid on the contract and gave MV Transportation, the
incumbent contractor, a preference under Labor Code section
1072, 1 which requires a public agency conducting a bid for a
public transit service contract to give a 10-percent bidding
preference to a contractor that, in its bid, agrees to retain the
employees of the prior contractor for at least 90 days. The City
also gave a 10-percent preference under section 1072 to First
Transit, even though First Transit did not state in its bid it
would retain the employees of MV Transportation for at least 90
days. The City awarded the contract to First Transit.
       Three employees of MV Transportation and their union
filed a petition for a writ of mandate and a complaint for
declaratory relief, alleging the City breached its duty under
section 1072 to award the bidding preference only to contractors
who declare in their bids they will retain existing employees for
at least 90 days. The trial court found there was no such duty
under the statute, sustained the City’s demurrer to the petition
and complaint without leave to amend, and entered judgment in
favor of the City.
       This appeal raises the issue whether the words “shall
declare as part of the bid” in section 1072, subdivision (a), mean
the bidder must state in its bid whether it will retain the
employees of the prior contractor for 90 days. It also raises the
issue whether, if the public agency (or “awarding authority”)
gives the statutory preference to bidders who do not agree in

1     Undesignated statutory references are to the Labor Code.

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their bids to retain the employees of the prior contractor for at
least 90 days, a bidder who makes the commitment is really
getting a statutory preference. We answer these questions yes
and no, respectively, and reverse.

      FACTUAL AND PROCEDURAL BACKGROUND

       According to the allegations of the operative second
amended petition for writ of mandate and complaint for
declaratory relief, which on demurrer we accept as true (Heckart
v. A-1 Self Storage, Inc. (2018) 4 Cal.5th 749, 753), International
Brotherhood of Teamsters, Local 848, represented employees of
MV Transportation, which operated the City’s fixed-route bus
system. Jose Baza, Ruth Villafuerte, and Isabel Martin were
employed by MV Transportation as bus operators. When the City
solicited new bids for the bus system contract, MV
Transportation and First Transit were two of three bidders. MV
Transportation stated in its bid it would retain existing
employees for at least 90 days, and the City awarded MV
Transportation a 10-percent bidding preference under section
1072. First Transit did not state in its bid whether it would
retain existing employees for at least 90 days. The City
nevertheless awarded First Transit a 10-percent bidding
preference under section 1072.
       International Brotherhood of Teamsters, Local 848, Baza,
Villafuerte, and Martin (collectively, the Union) filed a petition
for writ of mandate and complaint for declaratory relief against
the City and First Transit. The Union alleged the City violated
its mandatory duties under section 1072 when it awarded First
Transit a 10-percent preference. The Union sought a peremptory

                                 3
writ of mandate ordering the City to rescind or set aside the
contract with First Transit and to either issue a new request for
bids or reevaluate the bids previously submitted. In its
declaratory relief cause of action, the Union sought declarations
that (1) compliance with section 1072 “requires a clear
declaratory statement in any bid, which sets forth whether or not
the bidder will retain the employees,” and “a substantiated
factual determination by the awarding authority that any bidder
granted the [s]ection 1072 [p]reference has affirmatively declared
in its bid that it agrees to retain the employees of the prior
contractor for a period of not less than 90 days”; (2) because First
Transit failed to comply with section 1072, subdivision (a), its
proposal was void and First Transit was disqualified; and (3)
because the City failed to comply with section 1072, subdivision
(b), its contract with First Transit “shall be rescinded and
without legal effect.”
        The City demurred, and the trial court sustained the
demurer without leave to amend. The court concluded the City
had discretion to award the 10-percent bidding preference under
section 1072 to a contractor who did not declare in the bid it
would retain qualified existing employees for at least 90 days.
The trial court ruled: “A bidder who fails to state in its bid that it
will retain prior employees may nevertheless communicate to the
City its willingness to retain some or all of the employees of the
prior contractor or subcontractor. In such a situation, the City
has discretion as to whether or not it will confer a 10 [percent]
preference.” The trial court entered judgment in favor of the
City, and the Union timely appealed.

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                          DISCUSSION

       A.     Standard of Review
       “On review from an order sustaining a demurrer, ‘we
examine the complaint de novo to determine whether it alleges
facts sufficient to state a cause of action under any legal theory,
such facts being assumed true for this purpose.’” (Committee for
Green Foothills v. Santa Clara County Bd. of Supervisors (2010)
48 Cal.4th 32, 42; see SJJC Aviation Services, LLC v. City of San
Jose (2017) 12 Cal.App.5th 1043, 1051 [“[w]e review the petition
and complaint de novo ‘to determine whether it alleges facts
stating a cause of action under any legal theory’”]; Jones v.
Omnitrans (2004) 125 Cal.App.4th 273, 277 [“[o]n appeal from a
dismissal entered after an order sustaining a demurrer to a
petition for writ of mandate, we review the order de novo,
determining independently whether the petition states a cause of
action as a matter of law”].) “We deem to be true all material
facts that were properly pled, as well as all facts that may be
inferred from those expressly alleged.” (Jones, at p. 277.) “‘“[I]t
is error for a . . . court to sustain a demurrer when the plaintiff
has stated a cause of action under any possible legal theory.”’”
(Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185,
1201; see SJJC Aviation Services, at p. 1051 [“[o]ur review is
governed by settled standards, which apply equally whether a
demurrer challenges a complaint or a petition”]; Jones, at p. 277
[demurrer to a petition for writ of mandate].)

      B.    The Bidding Preference Under Section 1072
      Section 1072, subdivision (a), states: “A bidder shall
declare as part of the bid for a service contract whether or not the

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bidder will retain the employees of the prior contractor or
subcontractor for a period of not less than 90 days, as provided in
this chapter, if awarded the service contract.” Section 1072,
subdivision (b), states: “An awarding authority letting a service
contract out to bid shall give a 10-percent preference to any
bidder who agrees to retain the employees of the prior contractor
or subcontractor pursuant to subdivision (a).” 2 The successor
contractor does not have to retain unqualified employees.
(§ 1072, subd (c)(2).) Section 1073 enforces these provisions by
providing that an employee who is not offered employment or is
discharged by a contractor who has agreed to retain employees
for at least 90 days may file a civil action for reinstatement, back
pay, and injunctive relief. An awarding agency may on its own
motion, or upon request by a member of the public, terminate a
service contract made pursuant to section 1072 if the contractor
has substantially breached the contract. (§ 1074.)

2      The parties have not explained what it means to give a 10-
percent preference to a bidder. It appears to mean that, for
purposes of determining the lowest bid, the public agency reduces
by 10 percent a bid submitted by a contractor that receives the
preference under section 1072. (See, e.g., City of Scottsdale v.
Deem (1976) 27 Ariz.App. 480, 482, 556 P.2d 328, 329 [a bid in
the amount of $357,716, if granted a 5-percent preference, was
the low bid as compared to one for $356,686]; Annot., Validity,
construction, and effect of requirement under state statute or
local ordinance giving local or locally qualified contractors a
percentage preference in determining lowest bid (1991) 89
A.L.R.4th 587 [“[a] bid preference statute . . . can entitle a
qualifying contractor to the award of a contract even though the
contractor has not submitted the lowest bid,” and “[s]uch a law
may deem the bid of a qualifying contractor as being the lowest
bid where it is within a prescribed percentage of the lowest bid”].)

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       The legislative history explains the reason for the bidding
preference under section 1072. “[A]pproximately 30 percent of
public transit service is provided by private companies who
contract with local government agencies. Such contracts typically
last for only a few years and when they are up for renewal, the
contractor is typically underbid by a new contractor.” (Sen. Com.
on Labor and Industrial Relations, Analysis of Sen. Bill No. 158
(2003-2004 Reg. Sess.) as amended Mar. 24, 2003, pp. 1-2.) This
“revolving door” in public contracting negatively impacts existing
employees who are not retained by the new contractor and harms
“the economic well-being of the state as such employees often
have to rely on public services just to get by.” (Sen. Rules Com.,
Off. of Sen. Floor Analyses, Analysis of Sen. Bill No. 158 (2003-
2004 Reg. Sess.) as amended Apr. 2, 2003, pp. 3, 4.) To address
the “significant economic dislocation” (§ 1070, subd (a)) of
employees who are not retained and the resulting burden on
government services and taxpayers (§ 1070, subd. (b)), the
Legislature established a bidding preference for contractors
bidding on public transit service contracts who agree to retain
qualified existing employees for at least 90 days. (§§ 1070, subd.
(c), 1072, subd. (b).) The legislation provides a measure of job
security by giving retained employees 90 days to prove their
worth to the new contractor or to seek other employment. (See
Enrolled Bill Rep. on Sen. Bill No. 158 (2002-2003 Reg. Sess.)
prepared for Governor Gray Davis (Oct. 6, 2003).)
       The law is having its intended effect. The California
Teamsters Public Affairs Council, which sponsored legislation in
2016 to extend the incentive to solid waste collection and
transportation contracts, reported to the Legislature: “‘The
current law for transit service contracts has been in effect for

                                7
nearly fifteen years. It has stabilized the industry, allowing
drivers to retain work. There have been no reported cases of
litigation on the issue, which is a strong indication of how
smoothly this law has functioned. As a practical matter, in the
vast majority of cases, all of the bidders take the preference,
which results in no difference in the cost to the contracting entity
but avoids needless job displacement.’” (Assem. Com. on Local
Gov., Analysis of Assem. Bill No. 1669 (2015-2016 Reg. Sess.) as
amended Mar. 8, 2016, p. 3.)

      C.      Statutory Construction
      “Legal questions [arising at the pleading stage] include the
interpretation of a statute and the application of a statutory
provision to facts assumed to be true for purposes of the
demurrer.” (Gutierrez v. Carmax Auto Superstores California
(2018) 19 Cal.App.5th 1234, 1242; accord, Villery v. Department
of Corrections & Rehabilitation (2016) 246 Cal.App.4th 407, 413;
see California Building Industry Assn. v. State Water Resources
Control Bd. (2018) 4 Cal.5th 1032, 1041 [“[w]e review questions of
statutory construction de novo”].) “Our primary task ‘in
interpreting a statute is to determine the Legislature’s intent,
giving effect to the law’s purpose. [Citation.] We consider first
the words of a statute, as the most reliable indicator of legislative
intent.’” (California Building Industry Assn., at p. 1041)
“‘“‘Words must be construed in context, and statutes must be
harmonized, both internally and with each other, to the extent
possible.’”’” (Tuolumne Jobs & Small Business Alliance v.
Superior Court (2014) 59 Cal.4th 1029, 1037; see California
Building Industry Assn., at p. 1041 [“[w]e construe the statute’s
words in context, harmonizing statutory provisions to avoid

                                 8
absurd results”].) “‘We interpret relevant terms in light of their
ordinary meaning, while also taking account of any related
provisions . . . to determine what interpretation best advances
the Legislature’s underlying purpose.’” (In re R.T. (2017) 3
Cal.5th 622, 627; accord, Los Angeles County Bd. of Supervisors v.
Superior Court (2016) 2 Cal.5th 282, 293.)

      D.    The Trial Court Erred in Sustaining the Demurrer
      “Code of Civil Procedure section 1085, providing for writs of
mandate, is available to compel public agencies to perform acts
required by law. [Citation.] To obtain relief, a petitioner must
demonstrate (1) no ‘plain, speedy, and adequate’ alternative
remedy exists [citation]; (2) ‘a clear, present, . . . ministerial duty
on the part of the respondent’; and (3) a correlative ‘clear,
present, and beneficial right in the petitioner to the performance
of that duty.’ [Citations.] A ministerial duty is an obligation to
perform a specific act in a manner prescribed by law whenever a
given state of facts exists, without regard to any personal
judgment as to the propriety of the act.” (People v. Picklesimer
(2010) 48 Cal.4th 330, 339-340; see Kavanaugh v. West Sonoma
County Union High School Dist. (2003) 29 Cal.4th 911, 916 [“‘[a]
ministerial act is an act that a public officer is required to
perform in a prescribed manner in obedience to the mandate of
legal authority and without regard to his own judgment or
opinion concerning such act’s propriety or impropriety, when a
given state of facts exists’”].)
      The parties agree section 1072 imposes a mandatory duty
on the City, but disagree about the nature of that duty. The City
argues the duty under section 1072, subdivision (b), is only to
“give a 10 percent preference to any bidder who agrees to retain

                                   9
the employees of the prior contractor.” The City contends,
however, it has discretion to award the preference under section
1072 to bidders like First Transit, even though First Transit’s bid
did not include an agreement to retain MV Transportation’s
qualified employees for at least 90 days. In other words, the City
argues section 1072 requires the public agency to give the
10-percent preference to bidders who agree to retain qualified
employees for at least 90 days, but allows the public agency, in its
discretion, to give the same preference to bidders who do not.
The Union contends section 1072, subdivision (b), means that
only a contractor who agrees to retain employees for at least 90
days is entitled to the 10-percent preference under section 1072.
The Union has the better argument.
       The statutory language is unambiguous. Section 1072,
subdivision (a), requires a bidder to state in its bid whether it will
retain employees for at least 90 days. To be eligible for the
preference, the contractor must state in its bid that it will retain
the employees. Section 1072, subdivision (b), prescribes what a
public agency must do when a bidder, “pursuant to subdivision
(a),” agrees in its bid to retain employees for at least 90 days:
award the 10-percent preference. A bidder must comply with
subdivision (a) before a public agency can give the bidder the
preference under subdivision (b); that is what the words
“pursuant to” in subdivision (b) mean. Nothing in the statutory
language authorizes a public agency to give the section 1072
preference to a bidder who did not make the declaration required
by section 1072, subdivision (a), “as part of the bid.” The public
agency does not have to award the contract to a bidder with the
10-percent preference under section 1072, subdivision (b), but the
public agency can only give the 10-percent preference to a bidder

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whose bid qualifies under section 1072, subdivision (a), and First
Transit’s bid did not. 3 Contrary to the trial court’s ruling, the
statute does not allow a public agency to award a preference
under section 1072 to a contractor who communicates its
willingness to retain employees other than in its bid. The trial
court erred in interpreting section 1072, subdivision (b), to give
the City discretion to give First Transit the preference when it
did not comply with subdivision (a). (See People v. Tindall (2000)
24 Cal.4th 767, 772 [“‘“[w]here the statute is clear, courts will not
‘interpret away clear language in favor of an ambiguity that does

3      The trial court appears to have confused discretion to
award the preference with discretion to award the contract. The
court stated to counsel for the Union: “It just seems to me that
the language [of the statute] doesn’t go far enough for me to agree
with you that a city is prohibited from doing business with a
party that’s not going to keep on the old employees or from
paying a premium.” Counsel for the Union explained in response:
“The statute doesn’t disqualify the City from doing business with
employers who don’t want to retain the prior employees. It
doesn’t even prevent the City from granting the bid[ ] to First
Transit under these facts, but it does [impose] a duty on the
City. . . .” The trial court was also concerned that a bidder would
have to keep current employees “who have extensive records of
discipline.” Section 1072, subdivision (c), however, does not
require a successor contractor to retain an employee where there
is “reasonable and substantiated cause” relating to the
“employee’s performance or conduct while working under the
prior contract or the employee’s failure of any controlled
substances and alcohol test, physical examination, criminal
background check required by law as a condition of employment,
or other standard hiring qualification lawfully required by the
successor contractor.”

                                 11
not exist’”’”]; Frog Creek Partners, LLC v. Vance Brown, Inc.
(2012) 206 Cal.App.4th 515, 524 [same].)
       The City’s interpretation of section 1072 would undermine
the Legislature’s purpose in enacting the statute. (See Gutierrez
v. Carmax Auto Superstores California, supra, 19 Cal.App.5th at
p. 1250 [“the court must adopt the interpretation that best
effectuates the legislative intent or purpose”]; Merced Irrigation
Dist. v. Superior Court (2017) 7 Cal.App.5th 916, 925 [courts
must “select the construction that comports most closely with the
apparent intent of the Legislature, with a view to promoting
rather than defeating the general purpose of the statute”].)
Section 1072 incentivizes bidding contractors to declare they will
retain existing employees for at least 90 days by giving those
contractors a preference in the bidding process. To allow the City
to give a preference under section 1072, subdivision (b), to
contractors who do not comply with section 1072, subdivision (a),
would eliminate the incentive for contractors to retain employees,
exactly the opposite of the Legislature’s stated goal. A bidding
contractor would have no reason to agree to retain employees for
at least 90 days as part of its bid if a public agency could give the
same preference to a contractor who did not make the same
agreement. After all, if everyone gets a 10-percent preference,
then no one is getting a 10-pecent preference.
       The City also relies on the trial court’s finding that First
Transit’s failure to comply with section 1072, subdivision (a), was
an “inconsequential variance” that did not preclude the City from
considering First Transit’s bid. The court stated the Union did
not allege that First Transit’s noncompliance affected the amount
of the bid or gave First Transit “a benefit not allowed other
bidders” or that First Transit “would not have been awarded the
contract had it been required to comply with” section 1072,
subdivision (a). The trial court cited Konica Business Machines

                                 12
U.S.A., Inc. v. Regents of University of California (1988) 206
Cal.App.3d 449, which held that a public entity may consider a
bid that deviates from bid specifications so long as the variance is
inconsequential. (Id. at p. 454; see DeSilva Gates Construction,
LP v. Department of Transportation (2015) 242 Cal.App.4th 1409,
1422-1423; Bay Cities Paving & Grading, Inc. v. City of San
Leandro (2014) 223 Cal.App.4th 1181, 1188; Ghilotti Construction
Co. v. City of Richmond (1996) 45 Cal.App.4th 897, 904.) A
variance is inconsequential if it “cannot have affected the amount
of the bid or given a bidder an advantage or benefit not allowed
other bidders . . . .” (Ghilotti Construction, at p. 904; see DeSilva
Gates Construction, at pp. 1422-1423 [“[i]t is well established that
‘“a bid which substantially conforms to a call for bids may, though
it is not strictly responsive, be accepted if the variance cannot
have affected the amount of the bid or given the bidder an
advantage or benefit not allowed other bidders,”’” italics
omitted].)
       The Union, however, did not allege First Transit’s bid
deviated from the City's specifications, substantially or
otherwise. The Union alleged First Transit received a statutory
preference to which it was not entitled because it did not comply
with the statutory prerequisite. First Transit has not cited any
cases treating a failure to comply with a statutory requirement as
(or analogous to) a variance from bidding specifications. Thus,
because the Union did not claim First Transit’s bid deviated from
the City’s specifications, the Union did not have to allege First
Transit’s noncompliance with section 1072, subdivision (a),
affected the amount of the bid or gave First Transit an advantage
or benefit other bidders did not receive. In any event, whether a
variance is inconsequential is a question of fact, subject to review
for substantial evidence, that is not properly decided on
demurrer. (See MCM Construction, Inc. v. City and County of

                                 13
San Francisco (1998) 66 Cal.App.4th 359, 375; Ghilotti
Construction, supra, 45 Cal.App.4th at pp. 903, 906; Konica
Business Machines U.S.A., Inc., at pp. 453-454.)

                         DISPOSITION

      The judgment is reversed. The matter is remanded with
directions for the trial court to vacate its order sustaining the
demurrer without leave to amend and to enter a new order
overruling the demurrer. The Union is to recover its costs on
appeal.

             SEGAL, J.

We concur:

             PERLUSS, P. J.

             ZELON, J.

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