July 28, 2015

Los Angeles court redefines discrimination under Proposition 209

By Meriem L. Hubbard Senior Attorney

In early May, the Los Angeles Court of Appeal issued a decision in Cesar Baez v. California Public Employees’ Retirement System.  The decision is, for the most part, unremarkable.  But there is one controversial section that, contrary to existing case law, severely limits protections adopted by the voters in Proposition 209 in 1996.

In this case, Cesar Baez and his two partners were hired by the California Public Employees’ Retirement System (CalPERS) to manage two $500 million investment funds through two new entities that would be co-owned with CalPERS.  Baez is Latino, as is one of his partners; the other is African-American.  The state Attorney General determined that Baez was associated with individuals under investigation for seeking to influence the award of CalPERS contracts.  CalPERS told Baez’s partners that they would not be awarded a third fund to manage if Baez continued to actively participate in the existing entities.  Baez withdrew from both entities, and sued CalPERS and its chief investment officer.

The lawsuit alleged numerous claims of wrongdoing, including a claim for discrimination on the basis of race.  Proposition 209 prevents the state and its political subdivisions from “discriminat[ing] against, or grant[ing] preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin” in the operation of public employment, education, or contracting.

The Baez court ruled that the words “discriminate” and “preferential treatment” in Proposition 209 are ambiguous, and that “the sole intent behind Proposition 209 was to eliminate affirmative action and other preferential treatment programs.”  Under this definition, discrimination that does not involve preferences, is not covered by Proposition 209.   This is the first court to so rule.

California state courts have consistently held that “discriminate” and “preferential treatment” mean different things, and that the voters’ intent was clear.  In High-Voltage Wire Works, Inc. v. City of San Jose, a PLF case decided in 2000, the Supreme Court explained that, Proposition 209 was enacted to prohibit discrimination and to provide opportunity for all, when both the state and federal court had abandoned these concepts for “entitlement based on group representation.”

In its role as the primary defender of Proposition 209, PLF submitted a letter urging the California Supreme Court to depublish the Baez decision.  Eugene Volokh, a constitutional scholar and law professor at UCLA, joined with PLF.  If our request is granted, the opinion will not appear in the official records of cases that can be cited as legal precedent.

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