30 Cal. App. 5th 1105
Cal. Ct. App. 5th2019Background
- Monterey Park contracted private companies to operate its municipal bus system; MV Transportation was incumbent.
- Labor Code §1072 grants a 10% bidding preference to bidders who "shall declare as part of the bid" that they will retain prior contractor’s employees for at least 90 days.
- MV stated in its bid it would retain employees and received the §1072 preference; First Transit did not include that declaration but the City nonetheless granted First Transit the 10% preference and awarded the contract to First Transit.
- Three MV employees and their union (the Union) petitioned for writ of mandate and declaratory relief, alleging the City violated §1072 by awarding the preference to First Transit who failed to make the required bid declaration.
- Trial court sustained City’s demurrer without leave to amend, reasoning the City had discretion to grant the preference even if the bidder hadn’t declared retention in the bid.
- Court of Appeal reversed, holding §1072(a)’s “shall declare as part of the bid” is mandatory and a bidder must make that declaration in its bid to be eligible for the 10% preference under §1072(b).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1072(a)’s phrase "shall declare as part of the bid" requires the retention commitment to appear in the bid itself | §1072 requires the bidder to state in the bid whether it will retain prior employees for 90 days; absent that declaration a bidder is ineligible for the preference | City: §1072(b) only requires awarding the preference to bidders who agree to retain employees, and the agency may in its discretion give the preference to bidders who didn’t declare it in the bid | Court: Yes — the declaration must be in the bid; §1072(b) applies "pursuant to subdivision (a)." |
| Whether the City may grant the §1072 preference to a bidder who communicates willingness outside the bid | The Legislature intended an incentive to induce in-bid commitments; allowing outside communications would frustrate that purpose | City: agency discretion to consider nonconforming communications; deviation may be "inconsequential" | Court: No — permitting outside commitments would eliminate the statutory incentive and conflict with clear statutory text. |
| Whether First Transit’s failure to comply is an "inconsequential variance" that permits awarding the preference anyway | Union: failure to meet statutory prerequisite is not merely a bid variance and need not be pleaded as affecting bid amount | City: trial court suggested noncompliance was an inconsequential variance | Court: Union need not plead an "inconsequential variance" defense; whether a variance is inconsequential is factual and not resolved on demurrer; statutory requirement controls. |
| Appropriate remedy after demurrer | Union sought writ rescinding contract and reevaluation or rebid | City upheld award and demurrer | Court reversed demurrer ruling and remanded to overrule demurrer; remand for further proceedings (Union recover costs on appeal). |
Key Cases Cited
- Heckart v. A-1 Self Storage, Inc., 4 Cal.5th 749 (California Supreme Court) (demurrer: pleadings assumed true on review)
- Committee for Green Foothills v. Santa Clara County Bd. of Supervisors, 48 Cal.4th 32 (California Supreme Court) (standards for demurrer review)
- Aryeh v. Canon Business Solutions, Inc., 55 Cal.4th 1185 (California Supreme Court) (demurrer requires stating a cause of action under any theory)
- People v. Tindall, 24 Cal.4th 767 (California Supreme Court) (clear statutory language governs construction)
- Konica Business Machines U.S.A., Inc. v. Regents of Univ. of California, 206 Cal.App.3d 449 (Cal. Ct. App.) (inconsequential variance doctrine in bidding context)
- Ghilotti Construction Co. v. City of Richmond, 45 Cal.App.4th 897 (Cal. Ct. App.) (bid variance standard)
- DeSilva Gates Construction, LP v. Dept. of Transportation, 242 Cal.App.4th 1409 (Cal. Ct. App.) (bid substantial-conformance and inconsequential variance principles)