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Hill v. County of Sacramento

July 30, 2009


The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge


Plaintiff Ann Hill ("Hill") seeks a preliminary injunction that would allow her to continue operating her Java City coffee business in Terminal A of the Sacramento International Airport after expiration of the sublease into which she entered with HMS Host International, Inc. ("Host"). The sublease expires midnight on July 31, 2009. Hill argues the County of Sacramento ("the County"), which owns and operates the Airport and contracted with Host to provide food and beverage concessions at the Airport, should be prevented from excluding her minority owned business from Terminal A, since the exclusion is because she is an African American. Hill argues this exclusion violates the federal Equal Protection Clause and Title VI of the Civil Rights Act. Title VI proscribes excluding a person from participation in "any program or activity receiving Federal financial assistance" "on the ground of race." 42 U.S.C. §2000d. The County receives Federal financial assistance to operate the Airport. Further, the Equal Protection Clause can be violated by purposeful racial discrimination. Regents of University of California v. Bakke, 438 U.S. 265, 287 (1978)(explaining Title VI's prohibition against racial discrimination is coextensive with that of the Equal Protection Clause).

Hill also seeks an order compelling the County to comply with duties Hill asserts are mandatory and enforceable by her under California Code of Civil Procedure Section 1085; specifically, Hill argues the County has failed to comply with public duties embodied in federal regulations prescribed in 49 C.F.R. Parts 23 and 26.

Host decided against renewing its lease with Hill and to replace Hill's business with a Starbucks store that Host anticipates will generate more revenue than Hill's business has generated. This is shown in the amended contract Host entered with the County in which Hill's business is identified as an under performing business compared to other revenue generating businesses at the Airport.

The County and Host entered into an amended contract that resulted in Host eliminating businesses from Terminal A which failed to generate the desired revenue. The County had previously entered into a contract with Host under which Host was to provide, both directly and through sublease with various food service providers, food and beverage concessions at the Airport. (Stanton Decl. at ¶ 2.) That contract authorized Host to "decide on the type of food and beverage concepts to provide in the leased space at the Airport." (Id. at ¶ 3.) Host's lease payments to the County "are based upon an agreed percentage of gross revenues of the sub-leases that Host has under contract . . ." (Id.) "In 2007, the County and Host began negotiating [the] amended contract [at issue], a purpose of which was to provide an extension to Host for its lease so that it could continue to sublease space to food and beverage vendors in Terminal A, but to also permit [the] County to begin the process of entering into lease agreements for the providing of food and beverage services for a new structure, Terminal B. This new terminal is scheduled, at the present time, to open in January 2012. Additionally, as part of the amendment, Host agreed to make substantial capital improvements to refresh and update the concepts available to the customers at the Airport in order to increase revenue flow, and ultimately, the revenue percentages paid to Sacramento County under the lease with Host.

As part of its plan to increase revenue, Host wanted, and agreed, to change three under performing vendors that Host had under contract in Terminal A. These entities included Mrs. Hill's Java City, TCBY Yogurt, and Manchu Wok. TCBY was a frozen yogurt business, and Manchu Wok sold Asian food. This changeover was a term requested by Host, not the County, as part of its plan to increase revenue flows in response to the County's stated desire to increase food and beverage revenues, and was ultimately incorporated in the terms of [an] amendment to the contract.

The reason for these changes was because these entities were the lowest revenue producers of all of the food and beverage vendors under lease with Host based upon an analysis of revenue per enplaned passenger over the relevant time period. Ms. Hill's Java City was the second worst performer for four of the five past years. As a result, Host, not Sacramento County, decided it needed to replace Ms. Hill's Java City with a Starbucks Coffee outlet, which was one of the highest per passenger revenue producers in Terminal A.

(Stanton Decl. at ¶¶ 5-7.)

The amended contract into which the County and Host entered removed from Host the exclusive leasing rights it had previously been granted at the Airport, and subjected Host to liquidated damages if it did not take action to develop new business concepts that would generate more revenue. This contract obligated Host to invest $3,500,000 to develop the new business concepts that would generate more revenue. (Caso Decl. Ex. A.) If Host failed to have the new concepts under construction by July 1, 2007, Host agreed to pay the County a penalty of $15,000 per month per venue that was not under construction as compensation for the reduced revenues received from the non-updated food venue. (Id.)

After the contract was so amended, Host started to negotiate with Hill to buyout the remaining 18 months of her sublease, and made monetary offers to her. (Stanton Decl. ¶ 10.) Hill countered with a request for $1,076,000. (Id. at Ex. D.) Host countered this request with a $500,000 offer, which expired January 25, 2008. (Id.) Hill did not accept this buyout offer.

Hill filed a discrimination complaint with the Federal Aviation Administration ("FAA") on January 31, 2008. (Id. at Ex. E.) Hill alleged in that complaint that the Airport had harassed and discriminated against her because of her race in violation of the Disadvantaged Business Enterprises ("DBE") program regulation (49 C.F.R. Part 23); specifically the FAA states Ms. Hill alleged the following:

1. The Airport allowed HMS Host to harass and discriminate against her because of her race (African-American) in violation of the DBE program regulation 49 CFR Part 23. She stated that some examples of the alleged discrimination are: HMS Host told her that she was only at the airport because she is a DBE and that she merely had a "job", not a business; and they made her employees feel uncomfortable while at work.

2. The Airport is not in compliance with FAA DBE program regulations as required by 49 CFR Part 23[,] [and] provided [the following] ...

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