Subcontractors Trade Ass'n v. Koch ( 1983 )

— Order, Supreme Court, New York County (Ryp, J.), entered December 8, 1982, which dismissed the complaint, without prejudice and with leave to replead, reversed, on the law, and a declaration is made in favor of plaintiffs that Executive Order No. 53 and its implementing rules and regulations are unconstitutional, unlawful and unenforceable, without costs. This is a proceeding brought by 17 trade associations for an order declaring Executive Order No. 53 (EO 53) and its implementing rules and regulations to be unconstitutional, illegal and unenforceable. Section 1 of EO 53 sets forth its purpose as follows: “Section 1. Purpose, It shall be the purpose of this Order to promote the development of business and employment within economic development areas of the City of New York by ensuring that small enterprises conducting business in such areas, or employing economically disadvantaged persons, receive a greater share of all construction contracts awarded by the City of New York.” Sections 3 and 4 thereof are particularly relevant and are repeated in their entirety: “§ 3. Construction Contracting. All contracting agency heads shall, consistent with the requirements of applicable City, State and Federal law, seek to ensure that not less than ten percent of the total dollar amount of all contracts awarded for construction projects during each fiscal year shall be awarded to locally based enterprises. § 4. Construction Subcontractors. A contracting agency shall, consistent with the requirements of applicable City, State and Federal law, include in every contract to which it becomes a party such terms and conditions as the Bureau may by regulation direct to provide as follows, (a) If any or all of the contract is subcontracted, not less than ten percent of the total dollar amount of the contract shall be awarded to locally based enterprises; except, where less than ten percent of the total dollar amount of the contract is subcontracted, such lesser percentage shall be so awarded, (b) The contractor shall not discriminate unlawfully on the basis of race, creed, color, national origin, sexual orientation or affectional preference in the selection of subcontractors.” The térm “locally based enterprise” (LBE) was initially defined in EO 53. Later it was redefined by the Bureau of Labor Services in rule 53.12 M. The definition of LBE found in rule 53.12 M is as follows: “M. ‘LBE’: a locally based enterprise which (i) at the time of the bidding on a contract: (a) has been in business for 3 tax years or more and received in the preceding 3 tax years gross receipts averaging $500,000 or less on an annual basis; or (b) has been in business for less than 3 tax years and earned during that period gross receipts averaging $500,000 or less on an annual basis; or (c) has been in business for less than 1 tax year and has earned in that period an amount which when annualized is equal to $500,000 or less on an annual basis; and (ii) in the preceding tax year or, where the business has existed for less than a year, in such portion of the year, has: (a) earned at least 25 percent of its gross receipts from work performed on construction projects located in economic development areas; or (b) employed a work force of which at least 25 percent were economically disadvantaged persons.” The first issue presented is whether a justiciable controversy is presented under CPLR 3001. The defendants maintain that no dispute has actually arisen under EO 53. Nonetheless the plaintiff trade associations are directly affected by and subject to EO 53. Therefore, they have the present.standing and the present right to challenge the constitutionality and legality of that executive order (Matter ofFullilove v Beame, 48 NY2d 376; Matter ofBroidrick v Lindsay, 39 NY2d 641). The second issue is whether a declaration should be made in favor of the plaintiffs. On two prior occasions, executive orders have been declared unconstitutional because the executive branch was improperly attempting to exercise legislative power to effectuate “affirmative action” (Matter ofFullilove v Beame, supra; Matter ofBroidrick v Lindsay, supra). EO 53 and its implementing rules and regulations are but another undisguised attempt on the part of the executive branch to mandate unconstitutional “quotas”. Sections 3 and 4 of EO 53 also violate subdivision 1 of section 103 of the General Municipal Law and subdivision b of section 343 of the New York City Charter. Those sections of EO 53 unlawfully permit LBE’s to escape the competitive bidding provisions that control on both the State and municipal levels. Moreover, section 9 of EO 53 and rule 53.41 violate subdivision 1 of section 103 of the General Municipal Law insofar as they allow LBE’s to proceed without posting proper security for their work. For the foregoing reasons, EO 53 and the implementing rules and regulations are declared to be unconstitutional, unlawful and unenforceable. Concur — Murphy, P. J., Silverman and Bloom, JJ.