Appendix — S. J. Groves & Sons Co. v. Fulton County

Supreme Court brief1991

Ask Donna

What actually matters in this document.

Text

Supreme Court, U.S,

; ~~ FILED

91-1562 APR g 1991

No. | OMiCE OF THE CLERK

IN THE

Supreme Court of the United States

OcTOBER TERM, 1990

S.J. GROVES & SONS COMPANY AND

JASPER CONSTRUCTION COMPANY,

Petitioners,

FULTON COUNTY, GEORGIA,

Respondent.

APPENDIX OF PETITIONERS

W. Henry PARKMAN

Counsel of Record

TERRENCE LEE CROF1

C. WiLsoN DuBose

GRIFFIN COCHRANE & MARSHALL

4700 IBM Tower - One Atlantic Center

1201 West Peachtree Street, N.W.

Atlanta, Georgia 30309

(404) 874-3000

Attorneys for Petitioners S.J.

Groves & Sons Company and Jasper

Construction Company

April 199]

‘?*

TABLE OF CONTENTS

A. S.J. Groves & Sons Co. v. Fulton County,

FID Pd FECA IGN GE TGF) 00.22 20sensessecoreseresenes la

B. S.J. Groves & Sons Co. v. Fulton County,

696 F. Supp. 1480 (N.D. Ga. 1987) ........:.cceeeeees 1b

C. Order of United States District Court for the

Northern District of Georgia dated

I IS GUD dassacicnanscsntevenesonsavensssaszvonsesosense 1c

D. Order of United States District Court for the

Northern District of Georgia dated

Fg SRR SY EER OURO 1d

E. Order of United States District Court for the

Northern District of Georgia dated

IE ile I itarannstinticntenstaanarictansionmnniccitiaaasseses le

F. Part 23 — Participation by Minority Business

Enterprise in Department of Transportation

Programs, 49 C.F.R. §§ 23.01-23.55 00... 1f

G. Policy Statement - Fulton County 1982 MBE

FIONIIY siscnicicccncninnnnatinnsadscandssniminanntbonbntonsantnianiaisens 1g

err i

a at

es 1 et FY

- 2

Appendix A

S.J. GROVES & SONS COMPANY and

Jasper Construction Company,

Plaintiffs-Appellees,

FULTON COUNTY,

Defendant-Appellant,

U.S. Department of

Transportation, Defendant.

S.J. GROVES & SONS COMPANY and

Jasper Construction Company,

Plaintiffs-Appellees,

FULTON COUNTY,

Defendant-Cross-Claim

Plaintiff-Appellant.

S.J. GROVES COMPANY and Jasper

Construction Company,

Plaintiffs-Appellees,

Vv.

FULTON COUNTY,

Defendant-Cross-Claim

Plaintiff-Appellant,

United States Department of Transportation and

James H. Burnley, IV, Secretary, United States

Department of Transportation, Defendant-

Cross-Claim Defendants-Appellees.

S.J. GROVES & SONS COMPANY and

Jasper Construction Co., Inc.,

Plaintiffs-Appellees,

Vv.

FULTON COUNTY,

Defendant-Appellant,

United States Department of Transportation,

James H. Burnley, IV, Secretary, United States Depart-

ment of Transportation, Defendants-Appellees.

Nos. 86-8105, 88-8536, 88-8573 and 88-8700.

United States Court of Appeals,

Eleventh Circuit.

Jan. 7, 1991.

Appeals from the United States District Court for the

Northern District of Georgia.

Before KRAVITCH and COX, Circuit Judges, and

DYER, Senior Circuit Judge.

COX, Circuit Judge:

I. FACTS AND PROCEDURE

A. Facts

The Federal Aviation Administration (FAA) of the De-

partment of Transportation (DOT) has designated Fulton

County Airport (also known as Brown Field) a “reliever”

airport. This means that it is an alternative destination for

freight and cargo flights away from the primary passenger

airport in the area, Hartsfield International Airport. In 1981,

the FAA determined that the instrumented runway at Ful-

ton County Airport was in “rapidly deteriorating condi-

tion.” District Court Order, Sept. 30, 1985, R.6-103-2. The

FAA threatened to close the runway, which would have re-

sulted in the airport losing its status as a reliever airport. Id.

In order to avoid this result, the Fulton County Board

of Commissioners decided that the runway should be re-

paired. The County applied for a grant from the FAA under

the Airport and Airway Development Act of 1970, as

amended (AADA). Under a program created by that statute,

the federal government would fund ninety percent of the

project, the state of Georgia would fund five percent, and

Fulton County would fund five percent. As a condition of

receiving the grant, Fulton County was required to develop

and submit for approval to the FAA an MBE (Minority

Business Enterprise)! program for the project. The program

had to meet the requirements set forth in regulations pro-

mulgated by the Department of Transportation (the DOT

regulations). These regulations are set out at 49 C.F.R. §

23.1-23.55.

Fulton County developed an MBE program (the

specifics of the program are discussed in Part III of this

opinion), and the FAA approved it and awarded the funds

to the County. Once the funds were received, the County

invited bids from contractors. S.J. Groves & Sons, Co.

(Groves)? submitted a timely bid of $818,432.40, the lowest

' Minority Business Enterprise (MBE) is defined in slightly cifferent

ways, depending on the statute or program at issue. For purposes of this

opinion, we will use the definition found at 49 C.F.R. § 27.5:

a small business concern ... which is owned and controlled

by one or more minorities or women.

? Jasper Construction Company is a wholly-owned subsidiary of Groves.

Both are Minnesota corporations with their principal place of business in

Minneapolis, Minnesota.

bid the County received. The Groves bid included MBE

participation of 4.15%. The County Commission awarded

the contract to Groves, on condition that it make a good

faith effort to increase the level of its proposed MBE partiei-

pation. The extent of Groves’s good faith efforts to increase

MBE participation is disputed. The County Commission

decided Groves had not in good faith attempted to increase

MBE participation and awarded the contract to the second-

lowest bidder, Dickerson, Inc., whose bid contained an MBE

participation level of 10%. The award was again condi-

tioned on good faith efforts to increase MBE participation.

Dickerson was able to increase MBE participation to 16%

within two days. The Commission then permanently

awarded the contract to Dickerson.

B. Procedural History

The protracted procedural history of this case began in

August 1982 when Groves, after an unsuccessful attempt to

obtain equitable relief, filed a complaint against Fulton

County in the district court for the Northern District of

Georgia. Subject matter jurisdiction was grounded in diver-

sity.

Subsequently, the district court permitted Groves to

file five amended complaints. Groves alleges the following:

Count I — Fulton County breached its promise as contained

in the invitation to bid by not awarding the contract to the

lowest bidder; Count II — Fulton County had no authority

to promulgate the MBE program because it conflicts with

the Georgia low-bid statute, and the MBE program is there-

fore invalid; Count II] — the MBE program is unconstitu-

3 “MBE participation” is defined by reference to the total dollar value of a

bid in relation to the dollar value proposed to be sublet to MBEs.

tional under the Georgia Constitution; Count IV — the MBE

program violates Title VI of the Civil Rights Act of 1964;

Count V — the MBE program violates the equal protection

component of the Fourteenth Amendment of the federal

Constitution; Count VI — Fulton County’s 1984 MBE reso-

lution,‘on its face, violates the equal protection component

of the Fourteenth Amendment; Count VII — the 1984 MBE

Resolution, on its face, violates the Georgia low-bid statute;

Count VIII -— the 1984 MBE Resolution, on its face, violates

Title VI.§ Counts IX and X — the DOT regulations violate,

inter alia, the equal protection component of the Fifth

Amendment of the federal Constitution.‘ Groves seeks

damages on Counts I through V and equitable relief on

Counts VI through X.

* Counts VI, VII and VIII were originally facial attacks on Fulton

County’s 1979 MBE Resolution. The 1979 Resolution “called for a goal of

twenty percent participation by [MBEs] in all county and procurement

contracts.” District Court Order, Sept. 30, 1985, R. 6-103-1. After the

County replaced the 1979 Resolution with the 1984 MBE Resolution, .

Groves amended its complaint to reflect the change. Fulton County de-

veloped the 1982 program challenged in this appeal “solely to comply

with the regulatory requirements|; the program is] not related in any way

to the 1979 Resolution.” Id. at 3.

* Jasper Construction Company is a plaintiff in Counts VI through VIII

because of its alleged involvement in Fulton County construction work

and the alleged injury to it caused by the 1984 MBE Resolution.

® Although the Fifth Amendment does not contain an equal protection

clause, its due process clause incorporates the equal protection element

prohibiting racial discrimination to the same extent as the equal protec-

tion clause contained in the Fourteenth Amendment prohibits such dis-

crimination. Washington v. Davis, 426 U.S. 229, 239, 96 S.Ct. 2040, 2047, 48

L.Ed.2d 597 (1976).

The district court, over the course of several years,’ is-

sued three separate orders in this case. Each order resulted

from cross-motions for summary judgment. These orders

are now before us on interlocutory appeal. Following is a

brief summary of the district court’s resolution of each

count. More detailed discussion of the district court’s find-

ings and orders will accompany our discussion of the is-

sues.

First, the district court denied summary judgment on

Count I because Groves’s good faith efforts to meet the MBE

requirements on the airport project contract are disputed.

Second, the court granted summary judgment in favor of

Groves on Counts VI through VIII because the court found

that “the actions of Fulton County in enacting the airport

program and the 1984 [MBE] Resolution violate Georgia’s

low-bid statute.” District Court Order, Sept. 30, 1985, R. 6-

103-24. The County was enjoined from enforcing the 1984

Resolution. Next, the court held the DOT regulations violate

the equal protection component of the Fifth Amendment

and are therefore unconstitutional. Therefore, summary

judgment was entered in favor of Groves on Counts IX and

X.* Finally, the district court granted summary judgment for

” The delays in this case seem to have been caused primarily by extensive

discovery and by the district court’s prudent request for additional brief-

ing on the effect of the Eleventh Circuit's opinion in H.K. Porter Co. v.

Metropolitan Dade County, 825 F.2d 324 (11th Cir.1987), vacated, 489 U.S.

1062, 109 S.Ct. 1333, 103 L.Ed.2d 804 (1989), on this case. The district court

decided Porter did not affect its disposition of the issues in this case. See

District Court Order, Apr. 22, 1988, R. 3-188-6. The Supreme Court subse-

quently vacated our opinion in Porter. H.K. Porter Co. v. Metropolitan Dade

County, 489 U.S. 1062, 109 S.Ct. 1333, 103 L.Ed.2d 804 (1989).

§ The DOT dismissed its appeal of this order after the Supreme Court

rendered its decision in City of Richmond v. ].A. Croson Co., 488 U.S. 469,

Groves on Counts II, IV and V. Because the DOT regulations

are unconstitutionai, the court ruled, they cannot preempt

the Georgia low-bid statute. Further, Fulton County had no

other defense to its violation of the state statute, and the

court consequently held the County liable to Groves.’*

lI. PARTIES’ CONTENTIONS AND ISSUES

ON APPEAL

Essentially, Groves complains of two things Fulton

County has done. First, Groves claims the County’s 1984

MBE Resolution is not authorized by state or federal law

and puts Groves at a disadvantage in bidding on Fulton

County public works projects. Therefore, the injunction

preventing enforcement of the resolution should be

affirmed. Second, Groves claims it should have been

awarded the airport paving contract pursuant to the

Georgia low-bid statute. Fulton County awarded the

contract to another bidder, Groves asserts, based on an

unconstitutional MBE program that the County had no

authority to enact.

Fulton County argues that Groves lacks standing to

challenge the 1984 Resolution and that regardless, the reso-

lution is constitutional. The County further contends that it

is authorized by the low-bid statute to take compliance with

MBE requirements into account in awarding contracts. Fi-

nally, the County asserts that even if it did violate the low-

bid statute, it has a valid defense that prohibits a finding of

liability to Groves.

109 S.Ct. 706, 102 L.Ed.2d 854 (1989). Therefore, Fulton County is the only

appellant in this case.

* The court found it unnecessary to reach the Georgia constitutional

question and denied summary judgment on Count III.

We are called upon in this appeal to resolve the follow-

ing issues. First, does Groves have standing to challenge the

County’s 1984 MBE Resolution, and if it does, is the resolu-

tion constitutional. Second, in awarding the 1982 airport

project contract to a bidder other than Groves, did the

County violate the Georgia low-bid statute. Finally, if the

County did transgress state law, does it have a valid defense

to the violation.

III. DISCUSSION

Summary judgment is appropriate “if the pleadings,

depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving

party is entitled to judgment as a matter of law.” Fed.R.

Civ.P. 56(c).

A. The 1984 MBE Resolution

In 1979, Fulton County enacted a resolution that called

for a goal of twenty percent participation by MBEs in all

county contracts (the 1979 MBE Resolution). The County

Commission decided to update the resolution and directed

Clarence Reid, the County’s affirmative action officer, to

conduct a study of MBE participation in Fulton County con-

tracts. After conducting personal meetings, compiling data

and reviewing similar programs instituted by other local

governments, as well as by the Metro Atlanta Rapid Transit

Authority, the Reid study corcluded that MBE participation

in County contracts was disproportionately low. The cause

of the problem, according to the study, was systemic racial

discrimination.

In 1984, the County Commission ordered the County

Manager to develop an MBE program to replace the 1979

MBE Resolution. The County enacted such a program on

June 6, 1984 (the 1984 MBE Resolution). The program re-

tained the twenty percent MBE participation goal. Groves

asserts the district court was correct in awarding declaratory

and injunctive relief in Groves’s favor. Groves asserts the

1984 Resolution injures it and is unconstitutional and

therefore the district court’s order awarding declaratory and

injunctive relief in Groves’s favor should be affirmed.

1. Standing

Fulton County contests Groves’s standing to attack the

1984 MBE Resolution. Standing is a jurisdictional prereq-

uisite to a suit in a federal court. Valley Forge Christian Col-

lege v. Americans United for Separation of Church & State, Inc.,

454 U.S. 464, 475-76, 102 S.Ct. 752, 760-61, 70 L.Ed.2d 700

(1982). The district court determined Groves has standing to

“challenge the resolution. See R. 6-103-27.

There is no dispute regarding the facts relevant to the

standing question. We therefore must review the law of

standing and determine if Groves has standing to challenge

the 1984 Resolution under the facts of this case. A litigant

has standing when the party has “alleged such a personal

stake in the outcome of the controversy as to assure that

concrete adverseness which sharpens the presentation of

issues upon which the court so largely depends for the

illumination of difficult constitutional questions... .” Baker

v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663

(1962).

The Supreme Court has developed an analytical

framework that is useful in solving standing questions. Un-

der this framework, the standing doctrine has two compo-

nents: “irreducible” constitutional requirements and pru-

dential considerations. Valley Forge Christian College, 454 U.S.

at 472, 102 S.Ct. at 758; FDIC v. Morley, 867 F.2d 1381, 1386

(11th Cir.1989), cert. denied, — U.S. —, 110 S.Ct. 75, 107

L.Ed.2d 41 (1990). To satisfy the standing doctrine’s consti-

tutional component, a litigant must demonstrate three ele-

ments. First, the party must have suffered an actual injury

or show the imminence of such injury. Valley Forge Christian

College, 454 U.S. at 472, 102 S.Ct. at 758; E.F. Hutton & Co. v.

Hadley, 901 F.2d 979, 984 (11th Cir.1990); Morley, 867 F.2d at

1386. Second, the injury must be “fairly traceable to the

challenged conduct.” Valley Forge Christian College, 454 U.S.

at 472, 102 S.Ct. at 758; E.F. Hutton, 901 F.2d at 984; Morley,

867 F.2d at 1386. Third, the party must demonstrate that a

favorable decision likely will redress the injury. Valley Forge

Christian College, 454 U.S. at 472, 102 S.Ct. at 758; E.F. Hutton,

901 F.2d at 984; Morley, 867 F.2d at 1386.

After satisfying the constitutional component of the

standing doctrine, a party must show that “prudential con-

siderations do not favor judicial restraint from hearing such

action.” Morley, 867 F.2d at 1386. The Supreme Court has

listed three considerations that discourage judicial action

despite a party’s satisfaction of all three constitutional re-

quirements: (1) assertion of a third party’s rights; (2) allega-

tion of a generalized grievance instead of an injury peculiar

to the litigant; and (3) assertion of an injury outside the

statute’s or constitutional provision’s zone of interests. Val-

ley Forge Christian College, 454 U.S. at 474-75, 102 S.Ct. at 759-

60; Morley, 867 F.2d at 1386.

a. Actual or Imminent Injury

Groves contends the existence of the 1984 Resolution

presents two threatened injuries sufficient to satisfy consti-

10a

tutional requirements. The district court found that Groves

is a large, national contractor that can often complete con-

tracts with little or no subcontracting. District Court Order,

Sept. 30, 1985, R. 6-103-26. Therefore, Groves argues, forcing

compliance with the 1984 Resolution’s criteria, including its

20% MBE participation goal, will require unnecessary sub-

contracting. Groves’s first claimed injury, then, is a threat-

ened loss of potential profits. If Groves were awarded a Ful-

ton County construction contract, Groves asserts its profit

margin on that contract would be smaller than Groves’s

profit margins on contracts with government entities that

do not have MBE programs. Groves’s second claimed injury

is a “lost opportunity, strictly on the basis of race, to com-

pete equally with other contractors for Fulton County pro-

jects.” Appellee’s Brief, No. 86-8105 at 9.

To have standing, a litigant must have suffered or be in

imminent danger of suffering a “distinct and palpable

injury” instead of an “abstract” or “conjectural” injury. Allen

v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 3324, 82 L.Ed.2d

556 reh’g denied, 468 U.S. 1250, 105 S.Ct. 51, 82 L.Ed.2d 942

(1984) (citations omitted); Morley, 867 F.2d at 1387. The in-

jury or threat of injury “must be both ‘real and immediate,’

not ‘conjectural’ or ‘hypothetical.’ ” Pollar: v. Cockrell, 578

F.2d 1002, 1006 (5th Cir.1978) (quoting O'Shea v. Littleton, 414

U.S. 488, 494, 94S.Ct. 669, 675, 38 L.Ed.2d 674 (1974)).'°

Groves’s second claimed injury, lost opportunity to

compete on an equal basis with other bidders, is not a cog-

nizable Article III injury. Nothing in the 1984 Resolution

‘0 In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en

banc), this court adopted as binding precedent all decisions of the former

Fifth Circuit handed down prior to October 1, 1981.

lla

prevents Groves from bidding on any Fulton County con-

tract under the same terms as any other bidder. Therefore,

Groves is able to compete with other bidders on an equal

basis. Were we to agree with Groves’s reasoning regarding

this so-called injury, then bidders subject to any universally

applicable requirements (e.g. time of bid, manner of bid,

place of bid) would allege injury sufficient to satisfy the

standing requirement.

We reach the same conclusion, for different reasons,

regarding Groves’s first claimed injury, loss of potential

profits. We find the Supreme Court's opinion in Warth v.

Seldin, 422 U.S. 490, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975),

controlling on this point. In-_Warth, Rochester Home

Builders Association (Home Builders) sought to intervene in

a suit challenging the town of Penfield’s zoning ordinance.

Home Buildings alleged that the zoning ordinance “had de-

prived some of its members of ‘substantial business oppor-

tunities and profits.’ ” Id. at 515, 95 S.Ct. at 2213. The Court

decided that Home Builders did not have standing to seek

equitable relief. “The complaint refers to no specific project

of any of its members that is currently precluded either by

the ordinance or by [the town of Penfield’s] action in enforc-

ing it. There is no averment that any member has applied to

[Penfield] for a building permit or a variance with respect to

any current project.” Id. at 516, 95 S.Ct. at 2214.

Similarly, Groves has pointed to no contract it was de-

nied because of the 1984 Resolution. Nor has Groves alleged

it has ever bid for a single contract that was subject to the

resolution. Groves points to Fulton County’s denial of the

airport project contract because of the 1982 MBE Program.

Because the district court found that the 1982 Program was

in no way related to the 1984 Resolution (District Court Or-

12a

der, Sept. 30, 1985, R.6-103-3), this allegation is insufficient

to satisfy the injury requirement of the standing doctrine.

The case law cited by Groves is likewise anavailing.

Some of these cases involve situations where contracts were

set aside for minority bidders only. See Investment Co. Insti-

tute v. FDIC, 815 F.2d 1540, 1543 (D.C.Cir.), cert. denied, 484

U.S. 847, 108 S.Ct. 143, 98 L.Ed.2d 99 (1987) (FDIC rule dealt

petitioners competitive injury by allowing insured non-

member banks to enter the securities field indirectly

through subsidiaries and affiliates); Ray Baillie Trash Haul-

ing, Inc. v. Kleppe, 477 F.2d 696, 699-701 (5th Cir.), reh’g de-

nied, 478 F.2d 1403 (5th Cir.1973), cert. denied, 415 US. 914,

94 S.Ct. 1410, 39 L.Ed.2d 468 (1974) (SBA program at issue

authorized SBA to set aside contracts for placement with

small businesses owned by disadvantaged persons; plaintiff

not allowed to compete for contract in question; recipient of

contract received premium price not available to non-disad-

vantaged businesses). That is not the case here; the 1984

Resolution permits Groves to bid for all Fulton County

contracts. Other cases cited by Groves present much more

concrete injuries than the injury Groves asserts in this case.

See Uzzell v. Friday, 592 F.Supp. 1502, 1514 (M.D. N.C.1984)

(plaintiffs had standing because they were denied the op-

portunity to compete on an equal basis with other members

of the student body); Rhode Island Chapter, Associated Gen.

Contractors of America, Inc. v. Kreps, 450 F.Supp. 338, 346-47

n. 3 (D.R.I.1978) (some contractors lost contracts they would

have been awarded but for the MBE program); Wright Farms

Constr., Inc. v. Kreps, 444 F.Supp. 1023, 1027 (D.Vt.1977)

(plaintiff presented uncontroverted evidence that but for the

MBE program, it would have received public works con-

tracts).

13a

The only case Groves cites that directly supports its po-

sition is Contractors Association of Eastern Pennsylvania v. Sec-

retary of Labor, 442 F.2d 159 (3d Cir.), cert. denied, 404 U.S.

854, 92 S.Ct. 98, 30 L.Ed.2d 95 (1971). That case is of ques-

tionable authority, however, for two reasons. First, it pre-

dates Warth. Second, the opinion cites Abbott Laboratories v.

Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), to

support the proposition that contractors who have nct bid

on projects that are subject to MBE requirements and have

not identified specific projects they wish to bid on may still

establish standing. However, Abbott Laboratories, in the

standing context, stands for the proposition that a drug

manufacturer need not expose itself to FDA sanctions in or-

der to establish standing. Id. at 154, 87 S.Ct. at 1518. Groves

is not in a similar position of having to expose itself to po-

tential sanctions in order to establish standing."

Because Groves fails to satisfy the first constitutional

requirement of standing, injury, a discussion of the other

two constitutional requirements, causation and redressabil-

ity, is unnecessary. Likewise, an examination of the standing

doctrine’s prudential component would be superfluous. We

will vacate the district court’s order and judgment on

Counts VI through VIII and remand with instructions to

dismiss the claims presented by those counts for lack of

1! Groves also cites Associated General Contractors of California v. Secretary

of Commerce, 441 F.Supp. 955 (C.D.Cal.1977), vacated, Los Angeles County v.

Associated Gen. Contractors, 438 U.S. 909, 98 S.Ct. 3132, 57 L.Ed.2d 1153

(1978). There, the complaining contractors had not bid on any projects,

but had at least identified specific projects they wished to bid on. Id. at

963. To the extent the cited case stands for the proposition that under cir-

cumstances similar to this case contractors need not bid on any project in

order to show injury, we think the case was incorrectly decided.

l4a

standing. We now proceed to a discussion of Groves’s claim

that Fulton County violated the Georgia low-bid statute by

creating the 1982 MBE program and relying on it in not

awarding the airport project contract to Groves.

B. The 1982 MBE Program

Fulton County does not contest Groves’s standing to

challenge the 1982 MBE Program. Nor could it because

Groves clearly has standing to attack the program because it

was denied the contract for the airport project because of its

alleged failure to make a good faith attempt to meet the

program’s MBE goals. The district court found that Fulton

County developed the 1982 Program for one purpose only:

to comply with DOT regulations in order to obtain a grant

under the AADA. District Court Order, Sept. 30, 1985, R.6-

103-3. Fulton County’s claim that the 1982 Program is valid

is therefore bottomed on its assertion that the DOT regula-

tions are constitutional.

1. The DOT Regulations

A good summary of the DOT regulations is found in

the district court’s March 30, 1987, order, S.]. Groves & Sons

Co. v. Fulton County, 696 F.Supp. 1480, 1482-83

(N.D.Ga.1987):

DOT’s regulation entitled “Participation by Mi-

nority Business Enterprise in Department of

Transportation Programs” is found at 49 C.F.R. §

23.01 et seq.'* The regulation defines minority as

follows:

2 On May 17, 1979, DOT issued a Notice cf Proposed Rule Making

(NPRM) for the MBE regulation. 44 Fed.Reg. 28928. A final rule was is-

sued March 31, 1980. 45 Fed.Reg. 21172. On March 3, 1981, DOT issued an

15a

“Minority” means a person who is a citizen or

lawful permanent resident of the United States

and who is:

(a) Black (a person having origins in any

of the black racial groups of Africa);

(b) Hispanic (a person of Mexican,

Puerto Rican, Cuban, Central or South

American, or other Spanish culture or

origin, regardless of race);

Brazilian, or other Portuguese culture or

origin, regardless of race);

(d) Asian American (a person having

origins in any of the original peoples of

the Far East, Southeast Asia, the Indian

subcontinent, or the Pacific Islands);

(e) American Indian and Alaskan Native

(a person having origins in any of the

original peoples of North America); or

(f) Members of other groups, or other

- individuals, found to be economically

and socially disadvantaged by the Small

Business Administration under section

8(a) of the Small Business Act, as

amended (15 U.S.C. § 637(a)).

NPRM to amend one provision of the MBE regulation. 46 Fed.Reg. 16282.

The regulation was promulgated in its present form as a final rule on

April 27, 1981. 46 Fed.Reg. 23457.

l6a

49 C.F.R. § 23.5. “Minority business enterprise” or

“MBE” is defined as “a small business concern ..

which is owned and controlled by one or more

minorities or women.” Id.

The MBE regulation requires recipients of DOT

funds (state and local governments) to implement

an MBE program incorporating certain specific

features. The regulation does not set a uniform

percentage goal but leaves it to the recipients to

do so. Among the required components of MBE

programs are the following:

(a) A policy statement expressing a

commitment to use MBEs in all aspects

of contracting to the maximum extent

feasible;

(b) The designation of an MBE liaison

officer;

facilitate MBE participation in

contracting, including the following:

(1) arranging solicitations, time

for the presentation of bids,

quantities, specifications, and

delivery schedules so as to

fecilitate the participation of

MBEs;

(2) providing assistance to MBEs

in Overcoming barriers such as

the inability to obtain bonding,

17a

financing, or technical assistance;

and

(3) carrying out information and

communications programs on

contracting procedures and

specific contracting opportunities

in a timely manner, with such

programs being bilingual where

appropriate.

(d) Encouraging the use of banks owned

or controlled by minorities or women;

(e) Making an MBE directory available

to bidders;

(f) Certification of the eligibility of MBEs

by the recipient, to ensure that the MBE

program benefits only firms owned and

controlled by minorities;

(g) Establishing percentage goals for the

dollar value of work to be awarded to

MBEs, including overall goals and goals

on each specific prime contract with

subcontracting possibilities; overall

goals are to be based on a projection of

the number and types of MBEs likely to

be available to compete for contracts;

goals for specific contracts are to be

based on the known availability of

qualified MBEs; and

(h) A requirement that bidders who do

not meet the MBE contract goals satisfy

18a

the recipient that the bidder has made

“good faith efforts” to meet the goals."*

See 49 C.F.R. § 23.45.

Finally, the regulation includes a provision

allowing exemptions from the above-listed

requirements if “the particular situation is

exceptional” and if “the modified program

complies substantially” with the regulations. Id. §

23.41(f).

2. The 1982 MBE Program Violates the Georgia Low-

Bid Statute

The district court decided that Georgia law does not

give Fulton County the authority “to enact race-conscious

contracting requirements.” District Court Order, Sept. 30,

1985, R.6-103-12. Our review of Georgia law leads us to the

same conclusion.

Fuiton County argues that its 1982 MBE Program

“merely adds another element of responsiveness and re-

sponsibility that must be satisfied by a bidder in the com-

petitive bidding process,” (Appellant's Brief in No. 86-8105

at 37)"* and that the County had authority to enact the pro-

gram.

The Georgia low-bid statute provides as follows:

13 The regulation does not define what constitutes “good faith efforts,”

but instead leaves the determination to the recipient. In Appendix A to

subpart C of the regulation DOT provides a list meant to suggest the

kinds of efforts recipients might consider.

4 The County actually makes this argument in connection with its 1984

Resolution. Logically, however, the County is obliged to make the same

argument with regard to the 1982 Program.

19a

Whenever it becomes necessary to build or repair

any courthouse, jail, bridge, causeway, or other

public works in any county, the county governing

authority shall cause the same to be built or re-

paired by letting out the contract therefor to the

lowest bidder, at public outcry, before the court-

house door, after having advertised the letting of

the contracts, ... provided that such county au-

thorities shall have authority to reject any and all

bids at the public letting. If, in their discretion, the

public interest and economy require it, the county

authorities may build or repair any public build-

ings, bridges, causeways, or other public property

in the county by contract or sealed proposals, ...

O.C.G.A. § 36-10-2 (Supp.1990)."

No Georgia case has dealt directly with the issue of a

county’s authority to enact an MBE program. However, one

Georgia case involves an analogous situation. Georgia

Branch, Associated General Contractors of America, Inc. v. City

of Atlanta, 253 Ga. 397, 321 S.E.2d 325 (1984), involved a

challenge to Atlanta’s MBE program. The Atlanta program,

except for differences in MBE participation goals, was very

simiiar to the Fulton County MBE program at issue here. A

group of contractors attacked the program as violative of

Georgia and federal law. A unanimous Supreme Court of

Georgia decided that the City lacked authority to enact such

a program, and therefore avoided reaching the plaintiffs’

constitutional claims. In so doing, the court interpreted a

provision in the Atlanta City Charter, Ga.Cede Ann. § 6-402,

1S Effective March 30, 1989, the word “responsible” was inserted after the

word “lowest” in the first sentence.

20a >

that required the awarding of public works contracts to the

“lowest and/or best bidder.” The court stated that “the leg-

islative purpose [of the requirement] was to further the

cause that contracts be awarded without favoritism to ob-

tain reasonable quality at the lowest cost.” Id. at 399, 321

S.E.2d at 328. Because the Atlanta MBE program conflicted

with this purpose (i.e., it sometimes required the awarding

of a contract, on the basis of race, to a bidder who was not

the lowest qualified bidder) the program was declared void.

Id.

The County argues that Georgia Branch is distinguish-

able because the opinion did not discuss the Georgia low-

bid statute and because the low-bid statute contains differ-

ent language than the Atlanta Charter provision at issue in

Georgia Branch. We have already indicated that no Georgia

case is directly on point, but for several reasons we believe

Georgia Branch gives us a good indication of how a Georgia

court would rule on this question. First, the Supreme Court

of Georgia did not discuss the Georgia low-bid statute in

Georgia Branch for the obvious reason that it is inapplicable

to cities—it applies to counties only. Second, the language

“lowest and/or best bidder” is quite similar to “lowest bid-

der.” Third, in reaching its conclusion, the court in Georgia

Branch discussed another Georgia case and several cases

from other jurisdictions which had dealt with somewhat

different language, in some instances language closer to the

language found in the Georgia low-bid statute. See Associ-

ated Gen. Contractors of California v. San Franctsco Unified

School Dist., 616 F.2d 1381 (9th Cir.1980) (“lowest responsi-

ble bidder”); Arrington v. Associated Gen. Contractors of Amer-

ica, Alabama Branch, 403 So.2d 893 (Ala.1981), cert. denied, 455

U.S. 913, 102 S.Ct. 1265, 71 L.Ed.2d 453 (1982) (same); City of

21a

Inglewood-L.A. County Civic Center Auth. v. Superior Court, 7

Cal.3d. 861, 103 Cal. Rptr. 689, 500 P.2d 601 (1972) (same);

Hilton Constr. Co. v. Rockdale County Bd. of Educ., 245 Ga. 533,

266 S.E.2d 157 (1980) (“the responsible bidder submitting

the lowest acceptable bid”).

The County also argues that the low-bid statute, by its

terms, allows the County to reject “any and all bids”; there-

fore, the County may reject a bid based on a failure to meet

MBE requirements. This argument is again refuted by

Georgia case law. Manly Building Co. v. Newton, 114 Ga. 245,

40 S.E. 274 (1901), is the seminal case discussing the low-bid

statute. The Manly court noted that the original statute had

no provision in it for rejecting any and all bids, nor did it

allow for sealed bids. Id. at 249, 40 S.E. at 276.-In 1881, the

statute was amended to add these provisions. Id. at 249-50,

40 S.E. at 276. A unanimous Georgia Supreme Court in dis-

cussing the meaning of the statute noted:

The plain meaning of the first section of the act as

amended is, that county authorities may, after due

advertisement, cause a court-house to be built by

letting out the contract therefor to the lowest bid-

der at public outcry before the court-house door,

or they may advertise for sealed proposals for the

erection of the building, and let the contract

thereunder. They may do either in the first in-

stance; or they may, if they have undertaken to let the

contract to the lowest bidder before the court-house

door and have rejected all bids, then proceed to adver-

tise for sealed proposals.

Id. at 251, 40 S.E. at 277 (emphasis added). The court went

on to explain:

22a

ee ee

The provision allowing the county to reject any

and all bids was found to be necessary, we sup-

pose, because of the fact that, by a combination

between bidders at a public letting, the county

might be forced to pay a price largely beyond the

value of the work, ... hence for the protection of a

county, came the enactment of the provision giv-

ing the right to reject any and all bids at such let-

ting.

Id. at 250, 40 S.E. at 276. Therefore, the purpose of the “any

and all” provision was to protect a county against collusion

by contractors at a public letting. The provision was not in-

tended to allow a county to reject sealed low bids submitted

by qualified contractors.

Indeed, the purpose of the statute, we believe, is the

same as the Atlanta City Charter provision construed in

Georgia Branch: to “insure the interest of the public in having

contracts awarded without favoritism so that projects will

be done . . . without excessive cost, and constructed at the

lowest price consistent with the reasonable quality and ex-

pectation of completion.” Georgia Branch, 253 Ga. at 399, 321

S.E.2d at 327 (quoting City of Inglewood-L.A. County Civic

Center Auth. v. Superior Court, 7 Cal. 3d 861, 103 Cal. Rptr.

689, 692, 500 P.2d 601, 605 (1972). Other Georgia cases have

similarly emphasized that the purpose of the statute is to

obtain quality work at the lowest possible cost. See, e.g.,

Mark Smith Constr. Co. v. Fulton County, 248 Ga. 694, 285

S.E.2d 692 (1982); Hilton Constr. Co. v. Rockdale County Bd. of

Educ., 245 Ga. 533, 266 S.E.2d 157 (1980).

23a

The County makes a final argument that it had author-

ity to enact the program under its home rule charter, which

is found in the Georgia Constitution. It reads as follows:

The governing authority of each county shall have

legislative power to adopt ... resolutions ... for

which no provision has been made by general law

and which is not inconsistent with this constitu-

tion or any local law applicable thereto.

Ga. Const. art. IX, § 2, par. 1. Because provision has been

made by general law for the letting of public works con-

tracts, and the Fulton County MBE Program conflicts with

that general law, the home rule charter does not authorize

the County to enact the program.

Finally, we note that in 1986 the Georgia legislature en-

acted O.C.G.A. § 36-10-2.1, which permits Georgia counties

of a certain size to consider compliance with an MBE

program as an element of a bidder's responsibility."* Fulton

County argues the enactment of this statute affirms the

County’s authority to take MBE compliance into account in

letting contracts prior to 1986. Groves asserts the enactment

of the statute proves the County did not have such authority

before 1986. We agree with neither position. The enactment

of a statute by a Georgia legislature in 1986 sheds no light

on the intent of a nineteenth-century Georgia legislature.

3. Fulton County’s Defenses

Because Fulton County had no authority to enact the

1982 MBE Program, by awarding the airport project contract

to Dickerson, Inc., instead of Groves, the lowest responsible

the new statute.

24a

bidder, the County violated the state low-bid statute. The

County may escape liability if it has a defense to its viola-

tion of state law. Fulton County offers three defenses: pre-

emption, reliance on presumptively valid federal regula-

tions, and constitutional estoppel.

a. Preemption

The County’s first defense to its violation of the

Georgia low-bid statute is that the DOT regulations, upon

which tlie 1982 MBE Program was based, preempt the state

statute. Of course, when Congress acts pursuant to its dele-

gated powers, conflicting state law must yield. See generally

J. Nowak, R. Rotunda, J. Young, Constitutional Law (3d ed.

1986) § 9.1. Further, regulations promulgated pursuant to a

congressional delegation of authority can also preempt state

law. See Fidelity Fed. Sav. & Loan Ass’n v. De La Cuesta, 458

U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982).

However, only measures that are constitutional may

»~reempt state law. The Supremacy Clause, from which the

preemption doctrine derives;see id. at 152, 102 S.Ct. at 3022,

provides that: “This Constitution, and the Laws of the

United States which shall be made in pursuance thereof ... shall

be the supreme Law of the Land ...” U.S. Const. art. VI, cl. 2

(emphasis added). Chief Justice Marshall stated that “[t'he

appropriate application of that part of the clause which con-

fers the same supremacy on laws and treaties, is to such acts

of the State legislatures as do not transcend their powers,

but, though enacted in the execution of acknowledged State

powers, interfere with, or are contrary to the laws of

Congress, made in pursuance of the Constitution ...” Gibbons v.

Ogden, 22 US. (4 Wheat.) 1, 211, 6 L.Ed. 23 (1824) (emphasis

added). See also Pacific Gas and Elec. Co. v. State Energy Re-

sources Conservation & Dev. Comm'n, 461 U.S. 190, 203, 103

ae ee

S.Ct. 1713, 1722, 75 L.Ed.2d 752 (1983) (“It is well established

that within constitutional limits Congress may preempt state

authority ...”) (emphasis added); Jones v. Rath Packing Co.,

430 U.S. 519, 525, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604 reh’g

denied, 431 U.S. 925, 97 S.Ct. 2201, 53 L.Ed.2d 240 (1977)

(same); Rollins Environmental Services (FS), Inc. v. Parish of St.

James, 775 F.2d 627, 634 (5th Cir.1985) (same). To hold that

Congress could preempt state laws by enacting unconstitu-

tional acts would be directly contrary to deeply rooted

principles of Federalism.’7 Consequently, we conclude that

Fulton County’s preemption defense is only available if the

DOT regulations are constitutional.

1. The Constitutionality of the DOT Regulations

As an initial matter, we must dispose of two questions

of authority: Congress’s authority to enact the program em-

bodied in the DOT regulations and the DOT’s authority to

create such a program. These initial inquiries are mandated

both by Supreme Court precedent, see Fullilove v. Klutznick;

448 U.S. 448, 476-77, 100 S.Ct. 2758, 2773-74, 65 L.Ed.2d 902

(1980), and by precedent in this circuit, see South Florida

Chapter of the Associated Gen. Contractors of America, Inc. v.

Metropolitan Dade County, 723 F.2d 846, 852 (11th Cir.), reh’g

denied, 729 F.2d 1468, cert. denied, 469 U.S. 871, 105 S.Ct. 220,

83 L.Ed.2d 150 (1984).

The first question is answered by Fullilove. There, the

Supreme Court decided that Congress had “employed an

amalgam of its specifically delegated powers” in enacting

an MBE program similar to the MBE program contained in

'7 We do not agree that, “like Tinker Bell, [federalism] must be close to

expiring because no one believes in it anymore.” The Third Death of Fed-

eralism, 3 Const’| Commentary 293, 294 (D. Bryden & Farber, eds.).

26a

the DOT regulations. Fullilove, 448 U.S. at 473, 100 S.Ct. at

2772. The answer to the second question is unfortunately

not as Clear.

Federal regulations have no less preemptive effect than

federal statutes. Fidelity Fed. Sav. & Loan Ass'n v. De La

Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664

(1982). However, regulations must not be “unreasonable,

unauthorized, or inconsistent with” the statute that autho-

rizes them. Free v. Bland, 369 U.S. 663, 668, 82 S.Ct. 1089,

1093, 8 L.Ed.2d 180 (1962). “What is important is that the

reviewing court reasonably be able to conclude that the

grant of authority contemplates the regulations issued.”

Chrysler Corp. v. Brown, 441 U.S. 281, 308, 99 S.Ct. 1705, 1721,

60 L.Ed.2d 208 (1979).

The DOT identifies eight sources of authority for the

regulations:

(1) Section 905 of the Railroad Revitalization and

Regulatory Reform Act of 1976;

(2) Title VI of the Civil Rights Act of 1964;

(3) Section 30 of the Airport and Airway Devel-

opment Act of 1970;

(4) The Urban Mass Transportation Act of 1964;

(5) The Federal Property and Administrative Ser-

vices Act of 1949;

(6) Title 23 of the U.S. Code (relating to federal

highways and highway safety);

(7) Executive Order 11625;

(8) Executive Order 12138.

27 a

49 C.F.R. § 23.1(b).

Whether some of these sources of “authority” could be

construed to allow the DOT to enact an affirmative action

program is questionable, at the very least. However, we

need address only the Airport and Airway Development

Act of 1970 (AADA) because we conclude section 30 of the

Act authorizes the DOT to enact its MBE program. That

section provides:

The Secretary shall take affirmative action to assure

that no person shall, on the grounds of race, creed,

color, national origin, or sex, be excluded from

participating in any activity conducted with funds

received from any grant made under this chapter.

The Secretary shali promulgate such rules as the

Secretary deems necessary to carry out the purposes of

this section and may enforce this section, and any

rules promulgated under this section, through

agency and department provisions and rules

which shall be similar to those established and in

effect under Title VI of the Civil Rights Act of

1964.

49 U.S.C.App. § 2219 (emphasis added).

For two reasons we believe the quoted passage may be

fairly interpreted as a congressional delegation of the power

to enact a program such as the MBE Program at issue here.

First, the actual language of the statute indicates a broad

delegation of power to the DOT to create regulations neces-

sary to ensure there is no discrimination by recipients of

federal funds under the AADA. Second, the statute en-

dorses rules similar to those established under Title VI of

the Civil Rights Act of 1964, 42 U.S.C. § 2000d, and those

28 a

rules condone, and in some cases require, race-conscious

regulations and/or action. See 49 C.F.R. § 21.5(b)(7).

Having decided that the DOT acted within the bounds

of properly delegated congressional authority in creating

the MBE regulations, we next must determine the proper

standard by which to evaluate the constitutional validity of

the DOT regulations. The district court relied on the plural-

ity opinions in Wygant v. Jackson Board of Education, 476 U.S.

267, 106 S.Ct. 1022, 90 L.Ed.2d 260, reh’g denied, 478 US.

1014, 106 S.Ct. 3320, 92 L.Ed.2d 728 (1986), and U.S. v.

Paradise, 480 U.S. 149, 107 S.Ct. 1053, 94 L.Ed.2d 203 (1987),

to conclude that the strict scrutiny standard “applies to

racial classifications that operate against non-minorities.”

S.J. Groves & Sons Co., 696 F.Supp. at 1485 and n. 8. Our

assessment of relevant case law tells us that the resolution of

the proper standard to be applied to the DOT regulations is

difficult. After wading through the morass of often

conflicting majority, plurality and dissenting opinions that

deal with race-conscious affirmative action programs issued

by the members of the Supreme Court, we conclude that the

district court, quite understandably, applied the incorrect

standard.

In Fullilove, 448 U.S. 448, 100 S.Ct. 2758, 65 L.Ed.2d 902

(1980), the Supreme Court reviewed the constitutionality of

an MBE program contained in section 193(f)(2) of the Public

Works Employment Act of 1977. The principal opinion in

Fullilove, written by Chief Justice Burger, id. at 472, 100 S.Ct.

at 2771, although stating that the program must be subject

to “close examination,” did not explicitly set out the appli-

29a

cable standard."* Instead, in upholding the constitutionality

of the program the opinion noted the unique remedial au-

thority of Congress under section five of the Fourteenth

Amendment and the deference to which Congress is entitled

when it acts pursuant to that provision, id. at 472 & 483, 100

S.Ct. at 2771 & 2777, the abundant evidence available to

Congress of past discrimination in the construction indus-

try, id. at 458-67, 100 S.Ct. at 2764-69, and the provision for

waivers of the MBE requirements where no MBEs were

available or where an MBE sought to unfairly take advan-

tage of its position by charging exorbitant prices. Id. at 487-

88, 100 S.Ct. at 2779-80.

A plurality of the Court in Wygant employed strict

scrutiny in analyzing the constitutionality of a local school

board’s policy of extending preferential protection against

lay-offs to minority employees. Wygant, 476 U.S. at 273-74,

106 S.Ct. at 1846-47. In Local 28 of Sheet Metal Workers’ Inter-

national Association v. EEOC, 478 U.S. 421, 106 S.Ct. 3019, 92

L.Ed.2d 344 (1986), the constitutionality of a court-ordered

affirmative action program was at issue. A plurality of the

Court noted that “[w]e have not agreed ... on the proper

test to be applied in analyzing the constitutionality of race-

conscious remedial measures ... We need not resolve the

'8 In analyzing fragmented Supreme Court opinions where no single de-

cisional rationale has gained approval of the majority of the Court, lower

federal courts should view the Court's holding “as that position taken by

those Members who concurred in the judgments on the narrowest

grounds.” Marks v. United States, 430 U.S. 188, 193, 97 S.Ct. 990, 993, 51

L.Ed.2d 260 (1977) (quoting Gregg v. Georgia, 428 U.S. 153, 169 n. 15, 96

S.Ct. 2909, 2923 n. 15, 49 L.Ed.2d 859 (1976)). Following this rule, the

opinion written by Chief Justice Burger is the principal opinion in

Fullilove.

30a

dispute here, since we conclude that the relief ordered in

this case passes even the most rigorous test...” Local 28, 478

US. at 480, 106 S.Ct. at 3052. A plurality of the Court came

to the same conclusion in Paradise, where the constitutional-

ity of a court-ordered promotion scheme was at issue.

“[A]lthough this Court has consistently held that some ele-

vated level of scrutiny is required when a racial or ethnic

distinction is made for remedial purposes, it has yet to reach

consensus on the appropriate constitutional analysis.[] We

need not do so in this case, however, because we conclude

that the relief ordered survives even strict scrutiny analy-

sis...” Paradise, 480 U.S. at 167, 107 S.Ct. at 1064. In short, at

least until 1989, no five members of the Supreme Court had

agreed (at least in the same case) upon the proper standard

for reviewing affirmative action programs.”

19 The variety of standards put forth by the various members of the Court

is somewhat astonishing. See, e.g., Paradise, 480 U.S. at 187 n. 2, 107 S.Ct. at

1075 n. 2 (Powell, J., concurring) (“all government imposed affirmative

action plans must be closely scrutinized”); id. at 197, 107 S.Ct. at 1080

(O’Connor, J., dissenting) (rejecting version of strict scrutiny applied by

plurality because it “adopts a standardless view of ‘narrowly tailored’ far

less stringent than that required by strict scrutiny.”); Wygant, 476 U.S. at

274, 106 S.Ct. at 1847 (Powell, J., plurality opinion) (means chosen must

be narrowly tailored to achieve a compelling governmental interest); id. at

284, 106 S.Ct. at 1852 (O’Connor, J., concurring) (same); id. at 301-02, 106

S.Ct. at 1861 (Marshall, J., dissenting) (remedial use of racial measures is

permissible if it serves “ ‘important governmental objectives’ ” and is

“substantially related to achievement of those objectives’” (quoting Uni-

versity of California Regents v. Bakke, 438 U.S. 265, 359, 98 S.Ct. 2733, 2783,

57 L.Ed.2d 750 (1978)); id. at 313, 106 S.Ct. at 1867 (Stevens, J., dissenting)

(both public interest served by racial classification and means employed

must justify adverse effects on the disadvantaged group); Fullilove, 448

U.S. at 507, 100 S.Ct. at 2789 (Powell, J., concurring) (review should not be

Strict in theory and fatal in fact); id. at 491, 100 S.Ct. at 2781 (Burger, J.,

3la

Oe, ee

In City of Richmond v. ].A. Croson Co., 488 U.S. 469, 109

S.Ct. 706, 102 L.Ed.2d 854 (1989), a majority of the Court

seemed to settle on a strict scrutiny standard for all gov-

ernment measures containing racial classifications. In Cro-

son, the court held an MBE program developed by Rich-

mond unconstitutional. Croson, 488 U.S. at 505, 109 S.Ct. at

727. Justice Scalia noted his agreement with the Court’s con-

clusion that “strict scrutiny must be applied to all govern-

mental classification by race, whether or not its asserted

purpose is ‘remedial’ or ‘benign.’ ” Id. at 520, 109 S.Ct. at 735

(Scalia, J., concurring). Several commentators agreed that a

single standard had finally been settled on.”°

principal opinion) (“Any preference based on racial or ethnic criteria

must necessarily receive a most searching examination to make sure that

it does not conflict with constitutional guarantees”); id. at 537, 100 S.Ct. at

2805 (Stevens, J., dissenting) (“Racial classifications are simply too perni-

cious to permit any but the most exact connection between justification

and classification”); Bakke, 438 U.S. at 291, 98 S.Ct. at 2748 (1978) (Powell,

J., joined by White, J.) (“Racial and ethnic distinctions of any sort are

inherently suspect and thus call for the most exacting judicial

examination”).

20 See, e.g., Freeman, Antidiscrimination Law: The View from 1989, 64

Tul.L.Rev. 1407, 1432 (1990) (“remedial racial classifications are

henceforth to be treated as ‘suspect’ and subjected to the same ‘strict

scrutiny’ applied in racial discrimination cases.”); Fried, Affirmative Action

After City of Richmond v. J.A. Croson Co.: A Response to the Scholars’

Statement, 99 Yale L.J. 155, 156 (1989) (“For the first time a majority of the

Court holds unequivocally that racial classifications ... must pass strict

scrutiny and be justified by a compelling governmental purpose”);

Rosenfeld, Decoding Richmond: Affirmative Action and the Meaning of

Constitutional Equality, 87 Mich.L.Rev. 1729, 1731 (1989) (“a majority on

the Court for the first time has settled on a single standard-the strict

scrutiny test”); Sullivan, City of Richmond v. J.A. Croson Co.: The Backiash

Against Affirmative Action, 64 Tul.L.Rev. 1609, 1611 (1990) (“the Court

32a

If Croson were the Supreme Court's latest word on this

question, we would probably agree that the district court, in

applying the strict scrutiny standard to the DOT regula-

tions, had proceeded correctly. However, Croson is not the

Court’s most recent treatment of affirmative action. On the

final day of the Court’s last Term, Metro Broadcasting, Inc. v.

FCC, __ U.S.___, 110 S.Ct. 2997, 111 L.Ed.2d 445 reh’g

denied, __~*U.S. __, 111 S.Ct. 15, 111 L.Ed.2d 829, was

decided. Although the issue is hardly free of doubt, our

reading of Metro Broadcasting leads us to conclude that the

Supreme Court would utilize an intermediate level of

scrutiny in evaluating the DOT regulations. With the benefit

of the opinion in Metro Broadcasting, which of course was

decided after the district court issueq its orders in this case,

we conclude that the district court qrred in subjecting the

regulations to the most stringent strict\scrutiny standard.

In Metro Broadcasting, the Court considered the ques-

tion “whether certain minority preference policies of the

Federal Communications Commission violate the equal

protection component of the Fifth Amendment.” /d. at__,

110 S.Ct. at 3002. One of the challenged policies awards an

enhancement for minority ownership and participation in

management in evaluating applications for new broadcast

licenses. Id. at __, 110 S.Ct. at 3004-05. The second chal-

lenged policy allows distress sales to be resolved with a

noncompetitive hearing, if the buyer is a minority enter-

prise. Id. at ___, 110 S.Ct. at 3005. The Court upheld both

policies, applying intermediate scrutiny in doing so. Id. at

invalidated the Richmond plan under a standard of strict scrutiny upon

which a majority coalesced.”); see also Washington, Minor Set-Aside

Programs After City of Richmond v. J.A. Croson Co., 19 Stetson L.Rev. 833,

841-42 (1990).

33a

alee

___, 110 S.Ct. at 3002. The Court held “that benign race-con-

scious measures mandated by Congress[]-even if those

measures are not ‘remedial’ in the sense of being designed

to compensate victims of past government or societal dis-

crimination-are constitutionally permissible to the extent

that they serve important governmental objectives within

the power of Congress and are substantially related to

achievement of those objectives.” Id at ___, 110 S.Ct. at

3008-09.

The majority opinion” made it clear that Croson “does

not prescribe the level of scrutiny to be applied to a benign

racial classification employed by Congress.” Id. at ____, 110

S.Ct. at 3009. The opinion instead relied on Fullilove, assert-

ing that a “majority of the court in Fullilove did not apply

strict scrutiny to the race-based classification at issue.” Id. at

___, 110 S.Ct. at 3008. A clear demarcation between affirma-

tive action programs developed by state and local govern-

ments and those developed at the direction of Congress was

drawn. “It is of overriding significance in these cases that

the FCC’s minority ownership programs have been specifi-

cally approved-indeed mandated-by Congress.” Id.

Therefore, it seems to us that the Court has created a

dual inquiry for evaluating affirmative action programs.

First, we must determine whether a state or local govern-

ment has developed the program, or whether Congress has

authorized the program’s creation. If the former, a court

must strictly scrutinize the program. That is, the means cho-

7 Justice Brennan wrote the majority opinion; he was joined by Justices

White, Marshall, Blackmun and Stevens. Justice Stevens also filed a con-

curring opinion, but specifically joined both the opinion and judgment of

the Court. See Metro Broadcasting, __. U.S. at __, 110 S.Ct at 3028

(Stevens, J., concurring).

34a

sen must be narrowly tailored to achieve a compelling gov-

ernmental interest. If the latter, however, then an intermedi-

ate level of scrutiny is appropriate. The program must serve

an important governmental interest and the means must be

substantially related to the achievement of that objective.

Because Congress authorized the creation of the MBE pro-

gram contained in the DOT regulations, the district court

should have applied an intermediate level of scrutiny in

evaluating the regulations. We will therefore remand the

case for reconsideration in light of the appropriate standard.

In the interest of judicial economy, however, we will ad-

dress the County’s other defenses.

b. Reliance

Fulton County’s next defense is that it should not be

held liable for violating the Equal Protection Clause when,

in creating the 1982 MBE Program, it was only relying on

presumptively valid federal regulations. The short answer

to this defense is that the County is not being held liable for

the violation of any federal right. Rather, its potential

liability is based on violation of the Georgia low-bid statute.

The question remains, however, whether Fulton County’s

reliance on what it believed were constitutional federal

regulations is a defense in this suit.

We note initially that we have trouble allowing a local

government to plead reliance on federal regulations when

the local government voluntarily relied on those regulations.

Fulton County argues as though the federal government

forced it to apply for a grant under the AADA. Obviously,

the County could have chosen other means to raise the

funds to repair the Brown Field runway. On the other hand,

the County argues that as far as it was aware, the AADA

35a

——————————————————

grant program and the accompanying DOT regulations that

the County was required to comply with in order to qualify

for the grant, were valid exercises of federal authority. Pre-

sumably then, the County’s argument is actually that it has

a right to rely on federal regulations (at least until they are

declared invalid) to preempt conflicting state law.

The County’s defense is foreclosed by the recent

Supreme Court decision in American Trucking Ass’ns v.

Smith, __ U.S. ___, 110 S.Ct. 2323, 110 L.Ed.2d 148 (1990). In

that case, five justices rejected the notion that “the constitu-

tionality vel non of [a statute or regulation] turns on whether

state officials in a particular state could have anticipated

that such a [statute or regulation] would violate the Consti-

tution ....” Id. at ____, 110 S.Ct. at 2345 (Stevens, J., dissent-

%ing).” As Justice Scalia explained,

To hold a governmental act to be unconstitutional

is not to announce that we forbid it, but that the

Constitution forbids it; and when, as in this case,

the constitutionality of a state statute is placed in

issue, the question is not whether some decision

of ours “applies” in the way that a law applies; the

‘question is whether the Constitution, as inter-

preted in that decision, invalidates the statute.

Since the Constitution does not change from year

to year; since it does not conform to our decisions,

but our decisions are supposed to conform to it;

the notion that our interpretation of the Constitu-

tion in a particular decision could take prospective

form does not make sense.

2 The four dissenters and Justice Scalia (concurring in the judgment)

took this position.

36a

Id. at __, 110 S.Ct. at 2343 (Scalia, J., concurring in judg-

ment) (emphasis in original).

Therefore, the DOT regulations if they indeed are un-

constitutional, were unconstitutional when Fulton County

relied on them. We are without power to declare them

constitutional “in the interim,” as the County urges. There is

simply no authority on which to do so. |

Additionally, we would have difficulty simply declar-

ing the regulations unconstitutional, and then not applying

that declaration even to the parties before the court. Such a

decision would approach an advisory opinion, in violation

of the Article III case or controversy requirement.”

c. Constitutional Estoppel

Fulton County’s final defense* is that Groves is

estopped from attacking the constitutionality of the DOT

regulations. Under the doctrine of constitutional estoppel,

one may not “retain the benefits of [statute or regulation]

while attacking the constitutionality of one of its

provisions.” U.S. v. San Francisco, 310 U.S. 16, 29, 60 S.Ct.

749, 756, 84 L.Ed. 1050 reh’g denied, 310 U.S. 657, 60 S.Ct.

1071, 84 L.Ed. 1420 (1940). The district court rejected this

defense because Groves has received no benefits under the

AADA, because it found Fahey v. Mallonee, 332 U.S. 245, 67

S.Ct. 1552, 91 L.Ed. 2030 (1947), relied upon the County,

See U.S. Const., art. III, § 2.

* Fulton County also requests that we create a qualified immunity

against liability for violation of state law when a local government relies

on federal regulations that have not yet been declared unconstitutional.

The County cites authority for the creation of this new form of qualified

immunity, and we decline to create it out of thin air.

37 a

distinguishable and because the DOT regulations do not

and are not designed to benefit non-MBE firms.

We agree with the district court. First it is clear that the

DOT regulations were not intended to benefit non-MBE

firms; precisely the opposite is true-such firms are burdened

by the regulations. Second, even if the regulations were in-

tended to benefit Groves and similar bidders, there has been

no showing that Groves ever received any contract under _

the AADA that was subject to the DOT regulations. The dis-

trict court’s order was limited to declaring subpart C of the

regulations unconstitutional; it did not apply to subpart D

which relates to highway development. Consequently, any

contracts bid on or performed that were subject to subpart

D of the regulations are irrelevant to this case.

Fahey is not analogous. That case involved a

shareholders’ derivative suit in which a savings and loan

association created under an act of Congress sought to

challenge the constitutionality of that same act. The

Supreme Court refused to hear the suit. “It would be diffi-

cult to imagine a more appropriate situation in which to ap-

ply the doctrine that one who utilizes an Act to gain advan-

tages of corporate existence is estopped from questioning the

validity of its vital conditions.” Fahey, 332 U.S. at 256, 67

S.Ct. at 1557 (emphasis added). As the Supreme Court noted

in response to an invocation of the doctrine of constitutional

estoppel similar to the one we deal with here, “[a]ppellants

obviously are not creatures of any statute, and we doubt

that plaintiffs are generally forbidden to challenge a statute

simply because they are deriving some benefit from it.”

Kadrmas v. Dickinson Public Schools, 487 U.S. 450, 456-57, 108

S.Ct. 2481, 2486, 101 L.Ed.2d 399 (1988).

38a

We conclude, therefore, that the district court correctly

found that the reliance and constitutional estoppel defenses

offered by Fulton County are not viable defenses in this

case. As noted, however, we will remand the County’s pre-

emption argument to the district court for reevaluation.

IV. CONCLUSION

We VACATE the district court’s order and judgment

granting relief on Counts VI through VIII and REMAND

with instructions to dismiss the claims asserted in those

counts for lack of standing. We VACATE the district court’s

judgment in favor of Groves on the remaining claims and

REMAND for reconsideration of the County’s preemption

defense consistent with this opinion.

39a

Appendix B

S.J. GROVES & SONS COMPANY and

Jasper Construction Co., Plaintiffs,

Vv.

FULTON COUNTY, et al., Defendants.

Civ. A. No. C82-1895A.

United States District Court,

N.D. Georgia,

Atlanta Division.

March 30, 1987.

ORDER

FORRESTER, District Judge.

L INTRODUCTION.

A. Background.

This action challenging the constitutionality of the

Federal Department of Transportation’s Minority Busi-

ness Enterprise (MBE) rule is before the court on cross

motions by the plaintiffs and the federal defendants for

summary judgment on counts IX and X of the plaintiffs’

fifth amended complaint. The federal defendants are the

United States Department of Transportation and Eliza-

beth H. Dole, the Secretary of the United States Depart-

ment of Transportation (hereinafter referred to jointly as _

“DOT”). The plaintiffs are S.J. Groves & Sons Company

and Jasper Construction Company, Minnesota corpora-

tions with their principal place of business in Minneapo-

lis, Minnesota. Jasper Construction Company is a wholly

owned subsidiary of S.J. Groves & Sons Company.

According to the plaintiffs’ complaint, defendant

Fulton County issued an invitation to bid for the con-

struction of base, pavement, and related work at Fulton

County Airport-Brown Field in Atlanta. The invitation

advised bidders of Fulton County’s goals for MBE partici-

pation and promised the contract to the lowest responsi-

ble bidder who met the MBE goals or made good faith ef-

forts to do so. The plaintiffs’ timely bid, submitted in May

of 1982, was the lowest bid received. The plaintiffs

contend that they made a good faith effort to meet the

MBE goals but failed. Fulton County awarded the contract

to another bidder whose assurance of MBE participation

percentage was greater than the plaintiffs’.

The plaintiffs sued Fulton County for breach of con-

tract, arguing in Counts I through V that the county’s re-

jection of the plaintiffs’ bid violated Georgia’s low-bid

statute, O.C.G.A. § 36-10-2, and that the MBE program vio-

lated the Georgia Constitution (Art. I, Sec. 1, Par. 2), Title

VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d), and

the equal protection clause of the fourteenth amendment.

Counts VI through VIII of the complaint challenge a June

6, 1984 resolution of the Fulton County Board of Com-

missioners that reenacted an MBE affirmative action pro-

gram. The resolution was challenged under the state low-

bid statute, the equal protection clause of the fourteenth

amendment, and Title VI.!

' Jasper Construction Company is a plaintiff in counts six through

eight because of its present involvement in construction work in At-

lanta and the alleged detriment caused to it by the county’s MBE reso-

lution.

In an order filed September 30, 1985 this court

granted summary judgment to the plaintiffs on counts VI

through VIII concerning the 1984 resolution. The court

denied the plaintiffs’ motion for summary judgment on

count I because the plaintiffs’ good faith effort to meet the

MBE goals was disputed. In addition, the defendant Ful-

ton County claimed federal preemption of Georgia’s low

bid statute, O.C.G.A. § 36-10-2, by the United States De-

partment of Transportation regulation, if valid. The court

agreed with Fulton County that the state statute would be

preempted if the regulation were valid and deferred the

motions as to counts II through V pending joinder of the

federal defendants and resolution of the regulation’s va-

lidity. The plaintiffs’ Fifth Amended Complaint added

counts IX and X, alleging that the federal defendants’

promulgation of the MBE regulation violated, inter alia,

the equal protection component of the fifth amendment.

B. Framework for Analysis.

As the court noted in its September 30, 1985 order,

“the validity under federal law of a voluntarily-enacted

affirmative action plan which permits race-conscious re-

lief turns on application of the standards set out in South

Florida Chapter of the Associated General Contractors of

America v. Metropolitan Dade County, Florida, 723 F.2d

846, 851 (11th Cir.1984) [reh’g denied, 729 F.2d 1468, cert.

denied, 469 U.S. 871, 105 S.Ct. 220, 83 L.Ed.2d 150 (1984)].”

Order, at 31. In South Florida Chapter, the Eleventh Cir-

cuit set out a three-step analysis for affirmative action

plans enacted by governmental bodies. Under that analy-

sis, the court must ensure:

(1) that the governmental body have the au-

thority to pass such legislation; (2) that adequate

findings have been made to ensure that the

governmental body is remedying the present ef-

fects of past discrimination rather than advanc-

ing one racial or ethnic group’s interests over

another; and (3) that the use of such classifica-

tions extend no further than the established

need of remedying the effects of past discrimina-

tion.

723 F.2d at 851-52 (original emphasis). The last two steps

parallel the two-pronged examination utilized by a plu-

rality of the Supreme Court in Wygant v. Jackson Board

of Education, 476 U.S. 267, 106 S.Ct. 1842, 1846, 90 L.Ed.2d

260 (1986):

First, any racial classification “must be justified

by a compelling governmental interest.” Sec-

ond, the means chosen by the State to effectuate

its purpose must be “narrowly tailored to the

achievement of that goal.”

Accordingly, the court will outline the regulation at issue

here and will then proceed to analyze its validity accord-

ing to the South Florida Chapter framework.

C DOT's MBE Regulation.

DOT’s regulation entitled “Participation by Minority

Business Enterprise in Department of Transportation

Programs” is found at 49 C.F.R. § 23.01 et seq.? The regu-

lation defines minority_as follows:

2 On May 17, 1979 DOT issued a Notice of Proposed Rule Making

(NPRM) for the MBE regulation. 44 Fed.Reg. 28928. A final rule was is-

“Minority” means a person who is a citizen

or lawful permanent resident of the United

States and who is:

(a) Black (a person having origins in

any of the black racial groups of

Africa);

(b) Hispanic (a person of Mexican,

Puerto Rican, Cuban, Central or South

American, or other Spanish culture or

origin, regardless of race);

Brazilian, or other Portuguese culture

or origin, regardless of race);

(d) Asian American (a person having

origins in any of the original peoples

of the Far East, Southeast Asia, the In-

dian subcontinent, or the Pacific Is-

lands); or

(e) American Indian and Alaskan Na-

tive (a person having origins in any of

the original peoples of North Amer-

ica.)

(f) Members of other groups, or other

individuals, found to be economically

and socially disadvantaged by the

Small Business Administration under

sued March 31, 1980. 45 Fed.Reg. 21172. On March 3, 1981 DOT issued

an NPRM to amend one provision of the MBE regulation. 46 Fed.Reg.

16282. The regulation was promulgated in its present form as a final

rule on April 27, 1981. 46 Fed.Reg. 23457.

“

section 8(a) of the Smafi Business Act,

as amended (15 U.S.C. § 637(a)).

49 C.F.R. § 23.5. “Minority ness enterprise” or “MBE”

is defined as “a small businesg$ concern ... which is owned

and controlled by one or mgre minorities or women.” Id.

The MBE regulation/ requires recipients of DOT

funds (state and local governments) to implement an-

MBE program incorporating certain specific features. The

regulation does not set a uniform percentage goal but

leaves it to the recipients to do so. Among the required

components of MBE programs are the following:

(a) A policy statement expressing a commitment

to use MBEs in al! aspects of contracting to the

maximum extent feasible;

(b) The designation of an MBE liaison officer;

MBE participation in contracting, including the

following:

(1) arranging solicitations, time for the

presentation of bids, quantities, specifi-

cations, and delivery schedules so as to

facilitate the participation of MBEs;

(2) providing assistance to MBEs in

overcoming barriers such as the inabil-

ity to obtain bonding, financing, or

technical assistance; and

(3) carrying out information and

communications programs on con-

tracting procedures and specific con-

tracting opportunities in a timely man-

ner, with such programs being bilin-

gual where appropriate.

(d) Encouraging the use of banks owned or con-

trolled by minorities or women;

(e) Making an MBE directory available to bid-

ders;

(f) Certification of the eligibility of MBEs by the

recipient, to ensure that the MBE program bene-

fits only firms owned and controlled by minori-

ties;

(g) Establishing percentage goals for the dollar

value of work to be awarded to MBEs, including

overall goals and goals on each specific prime

contract with subcontracting possibilities; over-

all goals are to be based on a projection of the

number and types of MBEs likely to be available

to compete for contracts; goals for specific con-

tracts are to be based on the known availability

of qualified MBEs; and

(h) A requirement that bidders who do not meet

the MBE contract goals satisfy the recipient that

the bidder has made “good faith efforts” to meet

the goals.

3 The regulation does not define what constitutes “good faith efforts,”

but instead leaves the determination to the recipient. In Appendix A

to subpart C of the regulation DOT provides a list meant to suggest the

kinds of efforts recipients might consider. A determination of whether

the instant plaintiffs’ actions constituted good faith efforts is not neces-

See 49 C.F.R. § 23.45.

Finally, the regulation includes a provision allowing

exemptions from the above-listed requirements if “the

particular situation is exceptional” and if “the modified

program complies substantially” with the regulations. Id.

§ 23.41(f).

Il. WHETHER THE REGULATION WAS AN EXER-

CISE OF VALIDLY DELEGATED AUTHORITY.

Substantive agency regulations have the “force and

effect of law,” and therefore preempt state statutes, only

when they are “rooted in a grant of [legislative] power by

the Congress and subject to limitations which that body

imposes.” Chrysler Corp. v. Brown, 441 U.S. 281, 302, 99

S.Ct. 1705, 1718, 60 L.Ed.2d 208 (1979). “[I]t is necessary to

establish a nexus between the regulations and some

delegation of the requisite legislative authority by

Congress.” Id. at 304, 99 S.Ct. at 1719. “What is important

is that the reviewing court reasonably be able to conciude

that the grant of authority contemplates the regulations

issued.” Id. at 308, 99 S.Ct. at 1721.4

In the preface to the regulation, 49 C.F.R. part 23, che

Secretary of Transportation identifies eight sources of

authority for the regulation:

Sec. 905 of the Railroad Revitalization and

Regulatory Keform Act of 1978 (45 U.S.C. 803);

sary to the resolution of the present motions, since the complaint pre-

sents a facial challenge to the regulation.

* The Court concluded in Chrysler Corp. that the statutes relied on by

the Secretary of Defense did not authorize the regulations at issue

there. 441 U.S. at 303-12, 99 S.Ct. at 1718-23.

eae

Sec. 30 of the Airport and Airway Development

Act of 1970, as amended (49 U.S.C. 1730); Sec. 19

of the Urban Mass Transportation Act 1964, as

amended (Pub.L. 95-599); Title 23 of the

U.S.Code (relating to highways and highway

safety); Title 6 of the Civil Rights Act of 1964 (42

U.S.C. 2000d et seq.); the Federal Property and

Administrative Services Act of 1949 (49 U.S.C.

471 et seq.); Executive Order 11625; Executive

Order 12138, unless otherwise noted.

One district court has held that none of the eight

statites or Executive Orders cited constitutes a delegation

of congressional authority to DOT. Central Alabama

Paving, Inc. v. James, 499 F.Supp. 629 (M.D. Ala.1980). An-

other district court rejected all but the Executive Order as

the source of the agency’s authority. M.C. West Inc. v.

Lewis, 522 F.Supp. 338 (M.D. Tenn.1981).5 The present case

is unlike Central Alabama Paving and M.C. West,

however, in that the construction project being funded by

5 Though this court’s resolution of the source of authority issue, infra,

makes extended discussion of Executive Order 11625 unnecessary, the

court notes that there are serious problems with relying on the Execu-

tive Order as the requisite source of authority. Fitst, the Executive Or-

der does not authorize any efforts not then in effect. The Executive Or-

der, which is directed primarily to the Secretary of Commerce, merely

directs that “[e]ach Federal department or agency shall, within con-

straints of law . . . , continue all current efforts to foster and promote

minority business enterprises.” Section 3(e) (emphasis supplied). It is

undisputed that DOT had no race-conscious MBE programs in effect at

the time the Executive Order was issued. Second, the Executive Order

could not authorize any efforts, even if then in effect, that were with-

out congressional authorization. The Executive Order must itself be

—s

DOT is an airport rather than a highway. The most

obvious possible source of authority for the MBE

regulation, at least as applied to airport programs, is the

Airport and Airway Improvement Act of 1982, 49

U.S.C.App. §§ 2201 et seq., originally known as the Air-

port and Airway Development Act (AADA) of 1970. Sec-

tion 30 of the AADA, now 49 U.S.C.App. § 2219, provides:

The Secretary shall take affirmative action to as-

sure that no person shall, on the grounds of

race, creed, color, national origin, or sex, be ex-

cluded from participating in any activity con-

ducted with funds received from any grant

made under this chapter. The Secretary shall

promulgate such rules as the Secretary deems

necessary to carry out the purpose of this section

and may enforce this section, and any rules

promulgated under this section, through agency

and department provisions and rules which

shall be similar to those established and in effect

under title VI of the Civil Rights Act of 1964.

(Emphasis supplied).

The language emphasized above is much broader

than the statutory language found wanting in Central Al-

abama Paving and M.C. West. For example, the court in

Central Alabama Paving analyzed the language of section

905 of the Railroad Revitalization and Regulatory Reform

Act (RRA) of 1976, 45 U.S.C. § 803. The court concluded

that the RRA was not a “conscious conferral of authority”

by Congress because “nothing in the Railroad Revitaliza-

congressionally authorized. See Chrysler Corp., 441 U.S. at 304, 99 S.Ct.

at 1718.

10b

tion Act confers on DOT the authority to further the

statute’s general anti-discrimination provisions by what-

ever means it deems efficacious.” 499 F.Supp. at 638. Here,

the AADA does grant such broad authority to effectuate

the Act’s purposes, and those purposes explicitly include

preventing race discrimination. The language of the

AADA is also quite different from the “thou-shalt-not

discriminate laws” discussed, and rejected as statutory A

bases for DOT’s MBE regulation, in M.C. West, 522

F.Supp. at 345.

There is a further difference between the AADA and

statutes that fail to provide a nexus between the MBE

regulation and a delegation of congressional authority.

The AADA authorizes “rules which shall be similar to

those established and in effect under title VI of the Civil

Rights Act of 1964.” 49 U.S.C. § 2219. The Title VI regu-

lations, which were in force in their present form at the

time § 30 of the AADA was adopted in 1976 and are now

found at 49 C.F.R. § 21.1 et seq., explicitly condone race

conscious remedies:

This part does not prohibit the consideration of

race, color, or national origin if the purpose and

effect are to remove or overcome the conse-

quences of practices or impediments which

have restricted the availability of. or participa-

tion in, the program or activity receiving Fed-

eral financial assistance, on the grounds of race,

color, or national origin. Where prior discrimi-

natory practice or usage tends, on the grounds of

race, color, or national origin, to exclude indi-

viduals from participation in, to deny them the

benefits of, or to subject them to discrimination

11b

under any program or activity to which this part

applies, the applicant or recipient must take af-

firmative action to remove or overcome the ef-

fects of the prior discriminatory practice or us-

age.

49 C.F.R. § 21.5(b)(7) (emphasis added).

Given the broad language of the civil rights section

of the AADA, the difference between the language of the

AADA and that of other statutes that fail to satisfy the

Chrysler Corp. standard, and the statute’s approval of

regulations incorporating race consciousness, the court

concludes that DOT’s MBE regulation is rooted in a grant

of congressional authority and therefore does have “the

force and effect” of law* to the extent that the regulation is

constitutional. A fair reading of this section would in-

dicate congressional delegation of the power to require

racial classification, preference or set aside by a recipient

of federal funds if found necessary to: remove or over-

come the effects of past discrimination. The remaining

questions include whether the discrimination must have

been that of the DOT or of the recipient and whether the

“effect” is only difficulty or barriers confronted by extant

® The AADA’s grant of authority satisfies the Chrysler Corp. standard,

i.e., this court reasonably is able to conclude that the AADA contem-

plates DOT’s MBE regulation, but it is still true that the statute does not

specifically authorize race-conscious remedies such as MBE goals.

DOT’s adoption of such a remedy should therefore be more carefully

scrutinized for constitutional validity than a regulation pursuant to an

express congressional directive to adopt such a remedy. See Note, Prin-

ciples of Competence: The Ability of Public Institutions to Adopt Re-

medial Affirmative Action Plans, 53 U.Chi.L. Rev. 581, 600 (1986)

(hereinafter referred to as “Note”).

12b

MBEs or by the small population of MBEs caused by past

societal discrimination.

III. WHETHER THE REGULATION IS CONSISTENT

WITH THE FIFTH AMENDMENT.

The Supreme Court recently addressed the constitu-

tionality of race conscious remedies in Wygant v. Jackson

Board of Education, 476 U.S. 267, 106 S.Ct. 1842, 90 L.Ed.2d

260 (1986).” The plurality opinion in Wygant, written by

Justice Powell and joined by three other justices, made it

clear that “strict scrutiny” applies to racial classifications

that operate against non-minorities. Jd. at 1846. The plu-

rality opinion also set out the proper framework for anal-

ysis of such cases:

“Any preference based on racial or ethnic crite-

ria must necessarily receive a most searching

examination to make sure that it does not con-

flict with constitutional guarantees.” There are

two prongs to this examination. First, any racial

classification “must be justified by a compelling

governmental interest.” Second, the means

chosen by the State to effectuate its purpose

? The court held in Wygant that a school board’s policy of extending

preferential protection against lay-offs to minority employees violated

the equal protection clause of the fourteenth amendment.

® For recognition that a majority of the Supreme Court now seeks to

review race-conscious affirmative action, plans under a standard of

strict scrutiny, see Note, 53 U.Chi.L.Rev. at 581 n. 1, 622 Note 174. See

also United States v. Paradise, 480 U.S. 149, 164-70, 107 S.Ct. 1053, 1063-

66, 94 L.Ed.2d 203 (1987), where a different plurality applied strict

scrutiny without deciding whether that analysis is always appropriate

to affirmative action programs.

13b

must be “narrowly tailored to the achievement

of that goal.”

Id. (citations omitted).

DOT contends that the two-pronged “searching ex-

amination” is unnecessary in this case because the MBE

regulation is not a preference based on racial or ethnic cri-

teria. According to DOT,

The regulation, as amended, does not mandate

prime contractors to award contracts or subcon-

tracts on the basis of race or gender. Rather, it

requires that such contractors engage in good

faith efforts to recruit and consider for subcen-

tracting possibilities those MBEs who re quali-

fied and available to compete. Its function is to

provide assurance that contractors do not dis-

criminate against MBEs, not to require discrim-

ination in their favor.

Federal Defendants’ Memorandum in Opposition to

Plaintiffs’ Motion for Summary Judgment and in Support

of Federal Defendants’ Cross Motion for Summary

Judgment, at 8 (footnote omitted). It concedes, however,

that the regulation requires a recipient to establish an

overall goal for the entire MBE program or for a specific

grant or for an individual contract if it has subcontracting

possibilities. Id. at 5.

DOT’s argument is equivalent to the “goal” versus

“quota” word game engaged in by the parties in Univer-

sity of California Regents v. Bakke, 438.U.S. 265, 98 S.Ct.

2733, 57 L.Ed.2d 750 (1978). In his opinion holding un-

constitutional the university’s speciai admissions pro-

14b

gram, Justice Powell rejected the version of DOT’s argu-

ment presented in that case:

This semantic distinction is beside the point: the

special admissions program is undeniably a clas-

sification based on race and ethnic background.

To the extent that there existed a pool of at least

minimally qualified minority applicants to fill

the 16 special admission seats, white applicants

could compete only for 84 seats in the entering

class, rather than the 100 open to minority ap-

plicants. Whether this limitation is described as

a quota or a goal, it is a line drawn on the basis

of race and ethnic status.

Id. at 289, 98 S.Ct. at 2747 (footnote omitted).

Here, as in Bakke, if the program goals are met non-

MBEs are effectively prevented from competing for all

available subcontracts, although MBEs may. Further, the

affirmative steps contemplated for contractors and re-

cipients mean that MBEs compete on a much more fa-

vorable basis. See 49 C.F.R. Part 23, Subpart C, Appendix A

(“Guidance Concerning Good Faith Efforts”). DOT’s MBE

program “involves a purposeful, acknowledged use of

racial criteria,” id. at 289 n. 27, 98 S.Ct. at 2747 n. 27, and is

therefore a “classification based on race.” Significantly,

DOT’s argument that its MBE program does not create a

racial preference was flatly rejected in both previous

challenges to the program. See M.C West, 522 F.Supp. at

343 (“the setting of goals and standards for compliance, be

they compulsory or good faith standards, for the

expenditure of federal funds to the benefit of a certain

group of individuals is a preference”); Central Alabama

15b

Paving, 499 F.Supp. at 636 (“[T]hese regulations . . . accord

a preference to one group of citizens based on race”).°

A. Whether the Regulation was Justified by a Com-

pelling Governmental Interest.

A governmental body may have a compelling inter-

est in remedying prior discrimination, and that interest

may serve to justify its imposition of race conscious pro-

grams, Wygant, 106 S.Ct. at 1847 (plurality opinion), but

only in certain circumstances. As Justice Powell wrote in

Wygant: |

This Court never has held that societal discrim-

ination alone is sufficient to justify a racial clas-

sification. Rather, the Court has insisted upon

some showing of prior discrimination by the

governmental unit involved before allowing

limited use of racial classifications in order to

remedy such discrimination.... [T]he relevant

analysis in cases involving proof of discrimina-

tion by statistical disparity focuses on those

disparities that demonstrate such prior govern-

mental discrimination.

* DOT attempts to distinguish Central Alabama Paving as a decision

concerned exclusively with the “conclusive presumption” provision

of the regulation, which has since been amended and replaced by the

“good faith efforts” requirement. But that characterization of Central

Alabama Paving is simply wrong. The plaintiffs in that case challenged

both the conclusive presumption provision and the regulation’s re-

quirement of an overall fixed percentage goal. 499 F.Supp. at 633. The

court concluded that “these regulations,” not one or the other provi-

sion of the regulations, “accord a preference to one group of citizens

based on race.” Id at 636.

16b

Id. (emphasis supplied). Justice O’Connor, concurring,

“agree[d] with the Court that a governmental agency’s

interest in remedying ‘societal’ discrimination, that is,

discrimination not traceable to its own actions, cannot be

deemed sufficiently compelling to pass constitutional

muster under strict scrutiny.” Id. at 1854.'°

_ © Though the parties have not raised this issue, the court notes that

some of the plurality’s language in Wygant seems to describe the

“findings” issue as a question of fact rather than of law. See 106 S.Ct. at

1848 (“The trial court must make a factual determination that the em-

ployer had a strong basis in evidence for its conclusion that remedia!

action was necessary”); id. at 1849 n. 5 (“The very nature of appellate

review requires that a factfinder determine whether the

igovernmental body] was justified in implementing a remedial

plan.... [T]he requirement of such a determination by the trial court is

not some arbitrary barrier set up by today’s opinion. Rather, it is a

necessary result of the requirement that race-based state action be

remedial”). If the question whether DOT has made adequate findings

is a question of fact, it cannot be resolved in the context of the present

summary judgment motions because the issue is certainly in dispute.

However, the Supreme Court has never before treated the findings

issue purely as a question of fact for the trial court. Instead, the court

has itself made the necessary determination. See Fullilove v.

Klutznick, 448 U.S. 448, 473, 100 S.Ct. 2758, 2772, 65 L.Ed.2d 902 (1980)

(Opinion of Burger, C.J.); id. at 502-06, 100 S.Ct. at 2787-89 (Powell, J.,

concurring); University of California Regents v. Bakke, 438 U.S. 265,

307-10, 98 S.Ct. 2733, 2757-59, 57 L.Ed.2d 750 (1978) (Opinion of Powell,

J.). The courts of appeals also treat the findings issue as a question of

law that requires an appellate determination independent from the

district court’s conclusions. See, e.g., ].A. Croson Company v. City of

Richmond, 779 F.2d 181, 188-90 (4th Cir.1985), vacated on other

grounds, 478 U.S. 1016, 106 S.Ct. 3327, 92 L.Ed.2d 733 (1986). Finally,

other district courts have resolved the findings issue, in similar cases,

at the summary judgment stage. See Associated General Contractors v.

City and County of San Francisco, 619 F.Supp. 334, 340 (N.D. Cal.1985);

17b

The “showing of prior discrimination required by

the plurality in Wygant need not be the equivalent of a

judicial determination that such discrimination existed.

Instead,

[the governmental body] must insure that, be-

fore it embarks on an affirmative action pro-

gram, it has convincing evidence that remedial

action is warranted. That is, it must have suffi-

cient evidence to justify the conclusion that

there has been prior discrimination.

Id. at 1848. See also id. at 1855-56 (O’Connor, J.,

concurring) (requiring the government to “act on the

basis of information which gives them a sufficient basis

for concluding that remedial action is necessary”); South

Florida Chapter, 723 F.2d at 852 (requiring “adequate

findings to ensure that the county was acting to remedy

the effects of past discrimination rather than advancing

one group’s interest over another based on a perceived

need not founded in fact”).

The “showing” or “findings” of prior discrimination

relied on by DOT in its decision to formulate MBE regu-

lations consist of the foillowing:"'

(1) Comments received by DOT in response to

the May 17, 1979 NPRM for the MBE regulation,

Michigan Roadbuilders Association, Inc. v. Milliken, 571 F.Supp. 173,

177-87 (E.D. Mich.1983), appeal dismissed, 742 F.2d 1456 (6th Cir.1984).

This court will follow the traditional characterization of the findings

issue and will treat it as a question of law amenable to resolution at the

summary judgment stage.

"! Neither the authorizing stautes nor the regulations contain any

findings of prior discrimination, and DOT does not contend otherwise.

18b

the March 31, 1980 final rule, and the March 12,

1981 proposed amendment to section 23.45 of

the MBE regulation;

(2) “Appendix II,” a narrative description of the

evidence supporting the regulation prepared as

an appendix to 2 DOT brief filed in M.C West v.

Lewis, 522 F.Supp. 338, and various agency and

commission reports referenced in “Appendix

Il;”

(3) Data referenced in the preambles to the May

17, 1979 NPRM, the March 31, 1980 final rule,

and the regulatory evaluations attached

thereto.'?

Very little of the material contained in the three

listed sources even remotely resembles “findings” of

prior discrimination by DOT or its recipients.'® First, the

'2 Most, if not all, of these documents in the three categories are con-

tained in the plainfiffs, Composite Exhibits 29 and 30. The above de-

scription of the thousands of pages contained in Exhibits 29 and 30, and

DOT's identification of the documents as its “findings” comes from

DOT's February 25, 1986 letter to the plaintiffs, attached as Exhibit C to

Plaintiffs’ Motion for Summary Judgment on Counts IX and X, and

from Piaintiffs’ Statement of Undisputed Material Facts in Support of

their Motion for Summary Judgment on Counts IX and X at 42.

‘3 The correct focus is on prior discrimination by DOT or recipients of

DOT funds because the AADA’s authorization for affirmative action

by DOT, if such authorization exists at all, extends only to “activities!

conducted with funds received” under the AADA. 49 U.S.C. § 2219. By

no stretch of the imagination does the statute authorize DOT to at-

tempt to remedy ail discrimination or even all discrimination in the

construction industry. See Note 53, U.Chi.L.Rev. at 604 note 103 (the

distinction between societal discrimination and discrimination by the

19b

comments received by DOT in response to its NPRM, fi-

nal rule, and proposed amendment cannot serve as

findings of prior discrimination. By definition the com-

ments followed DOT's drafting and public proposal of the

MBE regulation; the comments cannot serve as the basis

of a regulation that had already been drafted. Nor were

the comments the basis of any changes in the regulation

relevant to the present case.'* The most that could be ar-

gued is that the comments might serve to confirm DOT's

suspicion that prior discrimination had existed. However,

DOT has not made such an argument and has provided

the court with no analysis or description of the content of

the comments. It is reasonable to assume that a substan-

tial percentage of the comments opposed the concept of

MBE goals and that another substantial percentage was

concerned primarily with details of the regulation, such

as definitions and paper work requirements, and not the

regulation’s underlying justification. Absent any indica-

tion from DOT that any of the comments provided evi-

dence of prior discrimination by DOT, this court cannot

assume that such evidence is in there somewhere.'S

governmental body is “a consequence of the differences in authority

commonly seen among government bodies”).

'* The one amendment promulgated by DOT substituted the present

“good faith efforts” provision for the original “conclusive presump-

tion” provision. The latter req ‘red that if any contractor offering a

reasonable price met the recipient's MBE goal, the recipient was to pre-

sume conclusively that all other bidders were ineligible for failure to

exert sufficient efforts to reach the MBE goal. See Central Alabama

Paving, 499 F.Supp. at 632, citing 45 Fed.Reg. 21188.

'S The court in M.C West, 522 F.Supp. at 347-48, reached the opposite

conclusion without reciting any reason to believe that the comments

received actually supported DOT’s conclusion that the regulation was

20 b

Second, though some of the evidence presented in

“Appendix II” is more probative than the comments dis-

cussed above, the evidence is far too weak to justify race

conscious remedial measures.'* In the nineteen-page

document, the court could find only four pieces of infor-

mation that had any tendency at all to support a conclu-

sion that DOT or its recipients had previously discrimi-

nated in letting government contracts. The first is the

statistic, attributed to Senator Brooke, 123 Cong.Rec. 7156

(1977), that less than one percent of federal contract dol-

lars goes to MBEs. Appendix II, at 12. Even assuming the

statistic is accurate, it is incomplete, overbroad, and out-

dated. It is incomplete because it does not give the corre-

sponding ratio of MBE contractors to non-MBE contrac-

tors competing for federal dollars.'’ It is overbroad be-

warranted by prior discrimination. Instead, the court justified its ac-

ceptance of the “Notice and Comment Adversary-Like Process” as suf-

ficient “findings” primarily because the findings reviewed in

Fullilove. 448 U.S. 448, 100 S.Ct. 2758, were unspecific. However, as the

opinions in Fullilove made clear, DOT is required to compile a more

specific record than is Congress. See, e.g., 448 U.S. at 478, 100 S.Ct. at

2774 (Opinion of Burger, CJ.) and the discussion infra at 1489-90.

‘© The court assumes, and DOT has not indicated otherwise, that

“Appendix II” synthesizes the strongest evidence of prior discrimina-

tion from the hundreds of pages of reports it references. Therefore,

only the evidence actually discussed in Appendix II will be dealt with

here.

'? The school board in Wygant relied on similarly mis-matched statis-

tics. See 106 S.Ct. at 1857 (O'Connor, J., concurring) (disparity between

percentage of minorities on teaching staff and percentage of minorities

in student body not probative of employment discrimination; relevant

statistic is percentage of minorities available in relevant labor pool).

See also J]. Edinger & Son, Inc. v. City of Louisville, 802 F.2d 213 (6th

Cir.1986) (city’s reliance on general population statistics not sufficient

21b

cause it is not limited to DOT contracts under the AADA

or even to DOT contracts generally, but instead includes

all federal contract dollars. It is outdated because statistics

only two years later show that, for DOT contracts at least,

MBEs were receiving 2.7 percent. See 45 Fed.Reg. 21172,

21174.

The other arguably probative pieces of evidence in

Appendix II are drawn from a report of the U.S. Com-

mission on Civil Rights entitled “Minorities and Women

as Government Contractors” (May 1975). The report re-

lates the following: (1) 44.8% of 125 owners (104 minority,

21 women) interviewed by the Commission “felt” that

federal contracting officers imposed more stringent crite-

ria on MBEs and WBEs during the bidding and selection

process; (2) “several contracting officers” interviewed by

the Commission made remarks against MBEs indicating

that they may not exercise their discretion in favor of

MBEs and “a few contracting officers” expressed the belief

that MBEs are sloppy, inefficient, lacking in business

acumen and knowledge of government processes, or just

a lot of extra bother; and (3) state and local contracting of-

ficers “in general” believe that MBEs cannot be relied on

to perform but lack evidence in support of the belief. /d. at

21-22, 107.

For a number of reasons, the above information is, at

best, weak evidence of prior discrimination by DOT or its

recipients. The research is outdated, having been con-

ducted between 1973 and 1975. Id. at VII. It is not limited

to support preference to minority-owned businesses on city contracts).

Compare United States v. Paradise, 480 US. 149, 179, 107 S.Ct. 1053,

1071, 94 L.Ed. 2d 203 (1987).

22b

to DOT contracting but apparently includes all federal

agencies. The statistical validity or representativeness of

the sample population is never discussed, and it is n.ore

anecdotal than statistical, with ambiguous generalizations

such as “several,” “a few,” and “in general.” A “feeling”

by less than half of those interviewed is subject to the

same criticism the Commission levels at the “belief” of

state and local contracting officers —both are unsupported

by any evidence.

Other “evidence” recited in Appendix II provides ab-

solutely no support for an inference of prior discrimina-

tion by DOT or its recipients. Instead, the evidence is pri-

marily of societal discrimination not traceable to DOT's

actions and not included in the AADA’s authorization of

affirmative action by DOT. A few examples of such evi-

dence, and brief analysis of each, follow:

1) Statistics on the disparit. between the percentage

of MBEs and their percentage share of gross business

receipts for the nation, Appendix II at 2, are too broad to

reveal anything about discrimination in the letting of

DOT contracts;"*

2) Statistics on the same disparity in the construction

industry, id, are similarly too broad;

3) Remarks by legislators attributing such disparities

to discrimination, without supporting evidence and

without specifying who was doing the discriminating, id,

at 5-6, establish only societal discrimination, not

discrimination by DOT; and

8 As discussed in note 17, supra, the school board in Wygant relied on

similarly mis-matched statistics.

4) “The operation of subtle forces” — such as a lack of

equity capital, difficulty in securing financing, inability to

obtain bonding, lack of adequate management and

operational skills, and the state of the economy, id, at 7-9

— is, at most, a form of societal discrimination beyond

DOT’s competence or authority to address.

Third, the data referenced in the preambles to the

May 17, 1979 NPRM and the March 31, 1980 final rule do

not provide “a strong basis in evidence for [DOT’s] con-

clusion that remedial action was necessary.” The pream-

bles contain only two arguably relevant statistics. One

Statistic reveals a disparity between the percentage of all

businesses in the United States owned by minorities

(three percent) and MBE participation in all DOT finan-

cial assistance (two percent in 1979, up from one percent

in 1977). 45 Fed.Reg. at 21174 (final rule); 44 Fed.Reg. 28929

(NPRM). The second statistic reveals a disparity between

the percentage of all businesses in the United States

owned by MBEs (three percent) and the percentage of

DOT grants going to MBEs in 1979 (MBEs received

$360,456,000 of $13,300,000,000, or 2.7 percent). Statistical

disparities may serve as circumstantial evidence of dis-

crimination but cannot, standing alone, establish discrim-

ination unless “the statistical evidence of racially dispro-

portionate impact is so strong as to permit no inference

other than that the results are the product of a racially

discriminatory intent or purpose.” McCleskey v. Kemp,

753 F.2d 877, 889 (11th Cir.1985), cert granted, 478 U.S.

1019, 106 S.Ct. 3331, 92 L.Ed.2d 737 (1986). The disparities

identified above simply are not so large that they preclude

every inference other than that DOT or its recipients had

discriminated in their contracting. Indeed, DOT itself

24b

’

identified a number of reasons, other than discrimina-

tion, for the disparities, including the financing, bonding,

and experience problems discussed in connection with

Appendix II. See 45 Fed.Reg. 28929.

In addition to its reliance on the three categories of

“findings” of discrimination discussed above, DOT points

to the decision in M.C. West, 522 F.Supp. 338, as support

for its argument that the MBE requirement is based on

sufficient findings of prior discrimination. The court in

M.C. West agreed with DOT that its MBE regulation was

supported by adequate findings for two reasons. The first,

that the “Notice and Comment adversary-like process . . .

is sufficient for an agency to make findings in support of

its rule changes,” id. at 347, has already been dealt with.

See n. 15 and accompanying text supra.

The second reason given by the court in M.C. West

was that “findings of discrimination by the Congress .. .

regarding other similar legislation” were a sufficient basis

for DOT’s MBE regulation. Id. at 349. The “other similar

legislation” referred to was the Public Works Employ-

ment Act (PWEA) of 1977, 42 U.S.C. § 6701 et seq. The

PWEA was upheld by the Supreme Court in Fullilove v.

Klutznick, 448 U.S. 448, 100 S.Ct. 2758, 65 L.Ed.2d 902

(1980).

At first glance, the result in Fullilove seems to favor

DOT’s argument that its findings in this case were suffi-

cient, because Congress’s findings in support of the

PWEA were scanty. Justice Powell, in his concurring

opinion in Fullilove, implied that the legislative history

of the PWEA, standing alone, did not contain sufficient

findings of prior discrimination. Id. at 502-03, 100 S.Ct. at

25b

2787. However, because Congress is a legislative body, the

Court looked beyond the legislative history of the particu-

lar act and examined “the total contemporary record of

congressional action dealing with the problems of racial

discrimination against mincrity business enterprises.” /d.

at 503, 100 S.Ct. at 2787.

DOT now argues essentially that Congress’s scanty

findings in support of the PWEA are also sufficient sup-

port for its own MBE regulation. The flaw in DOT’s “if it’s

good enough for Congress, it’s good enough for DOT” ar-

gument is that DOT is not Congress. DOT is an adminis-

trative agency whose authority is much more limited and

whose procedures are subject to much more scrutiny than

are the power and procedures of Congress. Three of the

six majority justices in Fullilove repeatedly emphasized

that their decision to uphold the PWEA was based in

large part on two considerations: first, “the legislative

authority of Congress” specifically delegated by the Con-

stitution, particularly section five of the fourteenth

amendment; and second, the electoral accountability of

Congress as a “politically responsive branch[ ] of Govern-

ment.” Id. at 480, 490, 100 S.Ct. at 2776, 2781 (opinion of

Burger, C.J.). The difference in authority and accountabil-

ity between Congress and non-legislative bodies had di-

rect bearing on the necessary extent of supporting find-

ings: “Congress, of course, may legislate without compil-

ing the kind of ‘record’ appropriate with respect to judi-

cial or administrative proceedings.” Id. at 478, 100 S.Ct. at

2774 (emphasis added)."*

19 The special authority of Congress, under section 5 of the fourteenth

amendment, to remedy the effects of prior discrimination, also ex-

26 b

Justice Powell also recognized the distinction:

Congress is not an adjudicatory body called

upon to resolve specific disputes between com-

peting adversaries. Its constitutional role is to be

representative rather than impartial, to make

policy rather than to apply settled principles of

| law.... The creation of national rules for the

governance of our society simply does not entail

)

the same concept of record making that is ap-

propriate to a judicial or administrative pro-

ceeding.

| Id. at 502, 100 S.Ct. at 2787 (emphasis supplied). In fact,

Justice Powell explicitly noted that “the discriminatory

activities [addressed by the PWEA] were not identified

with the exactitude expected in judicial or administrative

adjudication.” id. at 506, 100 S.Ct. at 2789 (emphasis

added). At another point, Justice Powell wrote,

The degree of specificity required in the findings

of discrimination and the breadth of discretion

in the choice of remedies may vary with the

nature and authority of a governmental body.

Id. at 515-16 n. 14, 100 S.Ct. at 2794 n. 14. Justice Powell

concluded by reiterating that the result in Fullilove de-

pended on Congress’s unique status:

plains the absence in Fullilove of findings that Congress had engaged

in prior discrimination. Cf. Wygant, 106 S.Ct. at 1847 (requiring “some

showing of prior discrimination by the govenmental unit involved”).

Unlike administrative agencies and other non-elected governmental

bodies with limited authority, Congress has the authority both to find

and to remedy the constitutional or statutory violations of others. See

Bakke, 438 U.S. at 307-10, 98 S.Ct. at 2757-59 (Opinion of Powell, J.).

27b

[T]he issue here turns on the scope of congres-

sional power, and Congress has been given a

unique constitutional role in the enforcement

of the post-Civil War Amendments.

Id. at 516, 100 S.Ct. at 2794.

Likewise, the Eleventh Circuit has noved the justices’

emphasis on the nature of the governmental body

adopting the affirmative action program:

Both Chief Justice Burger and Justice Powell's

opinions stress the fact that the statute in

Fullilove was passed by Congress and should

therefore be judged with deference to Congress’

broad powers .... Their emphasis on the fact that

the Court was reviewing a congressional statute

suggests that constitutionally acceptable means

of redressing past discrimination vary with the

powers of the government body enacting the

legislation.

South Florida Chapter, 723 F.2d at 851. See also Central

Alabama Paving, 499 F.Supp. at 634 (declining to follow

Fullilove and striking down DOT’s MBE regulation be-

cause an agency, rather than Congress, was requiring dis-

parate treatment based on race).

The minimum teaching of Fullilove is that an

agency’s “findings” of prior discrimination must be at

least somewhat more substantial than those made by

Congress for the PWEA.”° As the foregoing discussion

% See Note 53, U.Chi.L.Rev. at 618-20:

There is less reason to defer to the agency because, unlike

Congress, the agency does not have direct or co-equal

28 b

—

makes clear, DOT’s “findings” for the MBE regulation are

no more substantial than were Congress’s in Fullilove.

Therefore, DOT has failed to establish a compelling gov-

ernmental interest to justify its racial classification.”

B. Whether the Regulation is Narrowly Tailored.

The Eleventh Circuit has formulated the “narrowly

tailored” standard as follows:

Legislation employing benign racial preferences

. must incorporate sufficient safeguards to al-

low a reviewing court to conclude that the pro-

gram will be neither utilized to an extent nor

continued in duration beyond the point needed

to redress the effects of the past discrimination....

[T]he program must be structured in such a way

that it is subject to reassessment and will be

implemented in a manner that is flexible

authority to define constitutional violations. This

difference between congressional and direct legislative

authority suggests that more particularized findings should

be required before agencies can adopt remedial plans....

Such findings could include specific identification of those

who discriminatcd or were discriminated against, and

might include detailed statistical information.

(Footnote ommitted).

21 The following cases have upheld MBE programs imposed by state

legislative bodies: South Florida Chapter, 723 F.2d 846 (11th Cir.1986)

(county commission); {.A. Croson Company, 779 F.2d 181 (4th Cir.1985)

(city council); Associated General Contractors v. City and County of

San Francisco, 619 F.Supp. 334 (N.D.Cal.1985) (city and county board of

supervisors); Michigan Roadbuilders Association, Inc v. Milliken, 571

F.Supp. 173 (E.D.Mich.1983) (state legislature). See also cases cited in

Note 53 U.Chi.L. Rev. at 594, notes 60-66.

29 b

enough to account for changing needs and cir-

cumstances.

Id. at 852. The Supreme Court apparently has adopted a

similar standard, which is discussed infra, at 1494-95.

Careful comparison of the affirmative action plans

upheld by the Supreme Court in Fullilove and by the

Eleventh Circuit in South Florida Chapter reveals critical,

and constitutionally fatal, shortcomings in the MBE regu-

lation at issue here.?? The MBE set aside in Fullilove

shared certain characteristics with DOT’s MBE regulation,

including detailed definitions of MBEs that allow

“weeding out” sham MBEs and a waiver where “best ef-

forts” did not succeed in meeting the MBE goal. Compare

448 US. at 487-88, 100 S.Ct. at 2779-80 (Opinion of Burger,

C.J.) with 49 C.F.R. § 23.53 and § 23.45(h)(2). But the MBE

program in Fullilove went further than DOT’s MBE

regulation. Fullilove’s MBE program provided two addi-

tional assurances “that misapplications of the program

[would] be promptly and adequately remedied adminis-

tratively.” Id. at 487, 100 S.Ct. at 2779. It provided an ad-

ministrative complaint procedure for reporting “unjust

participation” by enterprises that were not bona fide

22 It may be that an MBE goal or set-aside established by a non-legisla-

tive body (other than a court) can never be narrowly tailored enough

to pass constitutional muster. See Fullilove, 448 US. at 515 n. 14, 100

S.Ct. at 2794 n. 14, where Justice Powell wrote:

My view that this set-aside is within the discretion of

Congress does not imply that other methods are

unavailable to Congress. Nor do I conclude that use of a

set-aside always will be an appropriate remedy or that the

selection of a set-aside by any other governmental body

would be constitutional.

30b

MBEs and provided for a special waiver “to avoid dealing

with an MBE who was attempting to exploit the remedial

aspects of the program by charging an unreasonable price,

i.e., a price not attributable to the present effects of past

discrimination.” Id. at 488, 100 S.Ct. at 2780. DOI’s MBE

program provides neither safeguard.

Other characteristics of the MBE program in

Fullilove provided additional “assurance that application

of racial or ethnic criteria [would] be limited to accom-

plishing the remedial objectives of Congress.” Id. at 487,

100 S.Ct. at 2779. First, the program’s definition of an MBE

was limited to “those whose competitive position is im-

paired by the effects of disadvantage and discrimination.”

Id. at 471, 100 S.Ct. at 2771 (Opinion of Burger, C.j.); see

also id. at 487, 100 S.Ct. at 2779 (Congress’s objective was to

assure “legitimate participation by disadvantaged MBEs”)

(emphasis supplied). The MBE definition’s insistence on

minority status and disadvantage helped to ensure that

the PWEA’s MBE program was not over-inclusive, be-

stowing “a benefit on businesses identified by racial or

ethnic criteria which cannot be justified on the basis of

competitive criteria or as a remedy for the present effects

of identified prior discrimination.” Id. at 486, 100 S.Ct. at

2779.4 Second, the program in Fullilove was “a pilot pro-

23 It seems to this court that requiring actual disadvantage is an essen-

tial ingredient in today’s environment. Since the days of the civil

rights struggles in the sixties two things at least have changed. First,

many of the recipients are governed by “minorities,” as is the case with

Fulton County. Second, there are many more MBEs that are well fi-

nanced and professionally accomplished. To insist, for example, that

black leaders should give favor to well-situated black businessmen

31b

ject, appropriately limited in extent and duration, and

subject to reassessment and re-evaluation by the Congress

prior to any extension or re-enactment.” Id. at 489, 100

S.Ct. at 2780 (footnote omitted). The PWEA, enacted in

May 1977, authorized $4 billion to fund “Round II” of the

Economic Development Administration’s program of

grants to local public works projects. All of the federal

money was to be committed to grantees by September 30,

1977. Id. at 511 n. 10, 100 S.Ct. at 2792 n. 10 (Powell, J., con-

curring). The PWEA’s limited duration satisfied the

justices’ concern that “a race conscious program will not

last longer than the discriminatory effects it is designed to

eliminate.” Id. at 513, 100 S.Ct. at 2792-93. See also Local 28

of the Sheet Metal Workers International Association v.

EEOC, 478 U.S. 421, 477, 106 S.Ct. 3019, 3051, 92 L.Ed. 2d 344

(1986) (court-ordered affirmative action plan scheduled to

end as soon as the percentage of minority union mem-

bers approximated the percentage of minorities in the lo-

cal labor force).

By contrast, DOT’s MBE regulation does not nar-

rowly define MBEs to include only disadvantaged mi-

nority businesses. Nothing in the reguiation would pre-

vent the award of a subcontract to a firm owned by non-

disadvantaged minorities, even if that firm’s bid exceeded

the bids of non-minority firms, so long as the firm’s bid

was lower than any other minority firms’ bids. In fact, the

regulation may require that result. The regulation is

therefore over-inclusive in a way that the regulation at

issue in Fullilove was not. While the over-inclusiveness,

standing alone, may not invalidate the regulation, it is

does infinitely more to legitimize cronyism that to remedy any vesti-

gial effect of discrimination in some locales.

32b

additional evidence that DOT’s MBE regulation is not

narrowly tailored.*

Also, DOT’s MBE regulation has no durational limit

and is subject to little or no re-evaluation by the agency or

by Congress. The arguments of amici curiae the Progres-

sive Alliance and the Joint Entrepreneurial Traders Asso-

ciation (PA/JETA) to the contrary are unpersuasive. The

fact that the AADA implements an appropriations statute

that must be reenacted periodically does not ensure suffi-

cient congressional oversight of the MBE program. For

one thing, the MBE program is not contained in the

AADA itself but in a regulation that cites the AADA as

one of several sources of authority. As a result, Congress

is likely to debate only the appropriations statute, not the

implementing statute and not the regulation that claims

authorization under the implementing statute. More-

over, the period between enactments is substantially

longer than was the case for the PWEA—the AADA was

** DOTs definition of “minority” may itself be over-inclusive and not

sufficiently narrowly tailored. Three justices in Wygant criticized a

similar definition of-minority:

The Board’s definition of minority to include blacks,

Orientals, American Indians, and persons of Spanish

descent . . . further illustrates the undifferentiated nature of

the plan. There is no explanation of why the Board chose

to favor these particular minorities or how in fact

members of some of the categories can be identified.

Moreover, respondents have never suggested—much less

formally found-that they have engaged in prior,

purposeful discrimination against members of each of

these minority groups.

106 S.Ct. at 1852 n. 13 (Opinion of Powell, J.). DOT’s definition of mi-

nority is subject to substantially the same criticisms.

33b

originally enacted in 1970; it was amended in 1976, in part

to include a civil rights provision; and the AAIA was

adopted in 1982 and is funded through October 1, 1987.

See 26 U.S.C. § 9502(d)(1)(A).

The amici’s argument that the regulation is subject

to periodic review by DOT is disingenuous. Amici point

to DOT’s characterization of the April 27, 1981 final rule

as an “interim” measure and its indication that it would

later prepare a comprehensive revision of the entire MBE

rule. Amici fail to point out, however, that DOT was de-

scribing as “interim” only its amendment to the contract

award mechanism substituting the present “good faith ef-

fort” provisions for the “conclusive presumption” ap-

proach challenged in Central Alabama Paving, 499

F.Supp. 629. Amici also ignore the fact that almost six

years after the April 27, 1981 final rule, no comprehensive

revision has occurred.

Finally, amici PA/JETA argue that the regulation’s

provision for case-by-case exemptions, 49 C.F.R. §

233.41(f), assures adequate opportunity for re-evaluation

of the regulation. Amici offer no evidence on the

frequency with which exemptions are requested or

granted, nor do they offer any indication of what types of

situations DOT will consider “exceptional” and therefore

proper for exemption. In any event, it is clear that the

exemption provision does not extend to wholesale

revision of the MBE program.

The lack of adequate safeguards in DOT’s MBE pro-

gram is also illustrated by comparison with the MBE pro-

gram upheld in South Florida Chapter. The county ordi-

nance in South Florida Chapter required that any pro-

34b

posed MBE set aside or goal pass through three levels of

administrative review, including the county manager, a

three-member Contract Review Committee, and the

board of county commissioners. 723 F.2d at 853. In addi-

tion, the board of county commissioners was required

annually to “reassess the continuing desirability and via-

bility of the program.” Id. The county manager was re-

quired to monitor continually the program’s use, to re-

port its findings periodically, and to provide an annual

report to the board for use in its annua! review. Id. at 853-

54. It is readily apparent that DOT’s MBE program incor-

porates virtually no safeguards like those found in South

Florida Chapter.

Because DOT’s MBE program lacks “adequate assur-

ances that the .. . program will not be used to an extent

nor continue in duration beyond the point necessary to

redress the effects of past discrimination,” id. at 854, it is

not narrowly tailored to its stated objective and violates

the equal protection component of the fifth amendment.

DOT’s MBE regulation also fails to satisfy the

“narrowly tailored” standard applied by a plurality of the

Supreme Court in United States v. Paradise, 480 U.S. 149,

107 S.Ct. 1053, 94 L.Ed.2d 203 (1987).*Justice Brennan

described the standard as follows:

In determining whether race-conscious reme-

dies are appropriate, we look to several factors,

including the necessity for the relief and the ef-

ficacy of alternative remedies; the flexibility and

28 The standard was articulated by Justice Brennan in an opinion

joined by three other Justices, citing previous opinions by a total of

five Justices. 480 U.S. at 171, 107 S.Ct. at 1067.

35b

duration of the relief, including the availability

of waiver provisions; the relationship of the

numerical goals to the relevant labor market;

and the impact of the relief on the rights of third

parties.

Id. 480 U.S. at 171, 107 S.Ct. at 1067.

DOT’s MBE regulation was not necessary to remedy

the effects of prior discrimination by DOT. First, no such

discrimination was ever established. See supra, at 1487-91.

Second, any societal discrimination revealed by DOT's

“findings” could be remedied just as effectively, if not

more effectively, by other measures. For example, an

MBE regulation does little to remove the barriers posed

by “subtle forces” such as a lack of equity capital, difficulty

in securing financing, inability to obtain bonding, and

lack of adequate management and operational skills. See

supra, at 1489. More effective measures would be targeted

directly at the underlying causes, not merely the visible

result, and might include vigorous enforcement of

existing laws prohibiting discrimination in financing and

bonding and the government provision of training in

how to obtain government contracts. Agency-imposed

discrimination bypasses the original problems and creates

its own new problems, including encouraging citizens to

classify themselves and others in terms of their race

rather than their individual merit.

As discussed in detail earlier, the MBE regulation is

not sufficiently flexible or of acceptable duration. The

regulation does not compare any more favorably with the

remedy approved in Paradise than with those approved

in Fullilove and South Florida Chapter. The one-for-one

36 b

promotion requirement in Paradise was sufficiently flexi-

ble primarily because its term of application was con-

trolled by the Department of Public Safety against which it

was imposed. 480 U.S. at 179, 107 S.Ct. at 1071. The re-

quirement was to be enforced only until the Depariment

adopted a non-discriminatory system of promotions,

something the Department had been enjoined to do and

had promised to do. In its actual application, the re-

quirement was suspended after one round of promotions.

Id. The regulation at issue here does not approach the re-

quirement in Paradise in terms of flexibility cr duration.

The third and fourth factors in Paradise are of little

significance in this case. The regulation does not itself set

any numerical goals but instead requires recipients to “set

goals that are practical and related to the potential avail-

ability of MBEs in desired areas of expertise.” 49 Fed.Reg. §

23.45(g)(1). At least in its application, the regulation there-

fore requires the proper relationship between numerical

goals and the relevant market.* The impact of the relief

on the rights of third parties in this case is indistinguish-

able from that of the MBE program approved in

Fullilove, which the Court held did not “impermissibly

deprive[ ] non-minority businesses of access” to govern-

ment contracting opportunities. 448 U.S. at 484, 100 S.Ct.

at 2777.

Finally, there is some doubt that the goals provision

is addressed at all to an identifiable residual effect of dis-

crimination. As noted earlier, three percent of the na-

tion’s businesses were minority owned in 1979 and 2.7

26 It is still true, however, that in its justification (i.e, DOT's

“findings”) the regulation mismatches statistics. See supra, nn. 17-18.

37b

percent of DOT funds went to MBEs that year. In the em-

ployment context it is doubtful if this level of disparity

would be found sufficient to justify race-conscious hiring

or promotion. Compare United Steel Workers of America

v. Weber, 443 U.S. 193, 198-99, 99 S.Ct. 2721, 2724-25, 61

L.Ed.2d 480 (1979) (1.83 percent black employees where

thirty-nine percent of work force in the area was black). In

any event it seems clear that the goals would be dispensed

with once parity was reached. Weber, 443 U.S. at 208-09, 99

S.Ct. at 2730; Sheet Metal Workers, 478 U.S. at 477, 106

S.Ct. at 3051. The same analysis is appropriate here. The

aim of affirmative action in the employment cases is to

put minorities into jobs and paths of advancement pre-

viously closed to them. The thought is that, with the pas-

sage of time and the continuation of affirmative outreach

programs, stereotypes will be broken down and minori-

ties will have equal opportunities for promotion. For an

entrepreneur, goals and quotas should last only so long as

necessary for those with venture capital to feel assured

that backing an MBE is a risk not made unreasonable

solely because of artificial barriers such as race or sex, long

enough for today’s would-be entrepreneurs to have some

experience in the kind of work heretofore denied them,

and long enough that the presence of MBEs in the field is

not so rare as to be remarkable. Whether we have reached

this point the court cannot say, but we have progressed

sufficiently to say that the matter is not beyond debate.

The DOT regulation ought to be monitoring concerns

such as these in considering whether to continue the

“goals” portion of its affirmative action program with ev-

ery recipient or at all. The regulation’s failure to address

these concerns is an additional reason that the regulation

cannot be described as narrowly tailored.

38 b

IV. CONCLUSION.

In summary, DOT’s MBE regulation is rooted in a

grant of legislative authority by Congress, the AADA of

1976, and therefore would have the force and effect of law

if it were constitutional. However, the regulation is un-

constitutional because it violates the fifth amendment’s

equal protection component. First, the regulation is not

justified by a compelling governmental interest. DOT

lacked a strong basis in evidence for its conclusion that

remedial action was necessary because the “findings” it

relied on in developing the regulation do not even begin

to demonstrate that DOT or its recipients had in the past

discriminated in letting contracts. Second, even if the

regulation is supported by adequate findings of prior dis-

crimination, it is not narrowly tailored to remedy the ef-

fects of that discrimination. The regulation gives little as-

surance that it will not be misapplied and gives virtually

no assurance that its operation will be limited to accom-

plishing its remedial objective

For the foregoing reasons, the plaintiffs’ motion for

summary judgment on counts IX and X of their com-

plaint is GRANTED. The federal defendants’ motion for

summary judgment on the same counts is DENIED.’

27 The Supreme Court's recent decision in Johnson v. Transportation

Agency, Santa Clara County, 480 U.S. 616, 107 S.Ct. 1442, 94 L.Ed.2d 615

(1987), has no application to these motions. Johnson decided “only the

issue of the prohibitory scope of Title VII”; no constitutional issue was

either raised or addressed in that case. Id. at 620 n. 2, 107 S.Ct. at 1446 n,

39 b

Appendix C

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

S.J. GROVES & SONS COMPANY,

and JASPER CONSTRUCTION

COMPANY,

Plaintiffs,

vs. : CIVIL ACTION

NO. C82-1895A

FULTON COUNTY, GEORGIA,

Defendant.

ORDER

This action, in which plaintiffs challenge certain of the

defendant's actions as being in violation of both state law

and the plaintiffs’ constitutional rights, is before the court

on cross motions for summary judgment. Oral argument

has been held, at the request of the parties, and the motions

are now ripe for decision. There are myriad issues raised by

this case, but the resolution of the issues is not particularly

complicated. Due to the volume of questions to be decided,

however, the court will subdivide its discussion of this case.

A. THE FACTS.

The defendant Fulton County, in 1979, enacted a reso-

lution which called for a goal of twenty percent participa-

tion by minority business enterprises (hereinafter MBEs) in

all county procurement and other contracts. The plaintiffs

before this court, large non-minority owned construction

companies, never bid on any county project governed by

the 1979 Resolution. Clarence Reid Second Affidavit, 73.

However, in 1982, the plaintiff S.J. Groves & Sons presented

a bid on a runway resurfacing project at the Fulton County

Airport Brown Field (hereinafter Brown Field).

The background to the runway resurfacing project at

the airport is as follows. Brown Field is a designated

“reliever” airport for the Atlanta metropolitan area, which

means that it is a designated alternative destination for

freight and cargo flights away from the primary passenger

airport in the area, Hartsfield International. Wendell

Phillips Affidavit, 791-4. The instrumented runway at

Brown Field, as of 1981, was determined to be in a rapidly

deteriorating condition, and the Federal Aviation

Administration (hereinafter FAA) threatened to close down

the runway, which would result in Brown Field losing its

designation as a reliever airport. Id. Therefore, the Fulton

County Board of Commissioners determined that it would

be necessary to renovate the runway. In order to do this,

Fulton County applied for a grant from the Federal Aviation

Administration of the Federal Department of

Transportation, pursuant to the Airport and Airway

Development Act of 1970, as amended. Under that program,

the federal government would fund ninety percent of the

airport renovation, while the state of Georgia would fund

five percent, and Fulton County would fund five percent.

As a condition of receiving the FAA grant, Fulton

County was required to prepare and submit for approval by

the FAA a minority business enterprise program for the pro-

ject. 49 C.F.R. §23.1 et seq. In compliance with the afore-cited

regulation, Fulton County prepared an MBE program for

the Brown Field project, which called for bidders to achieve

a twenty percent minority, and two percent female, partici-

pation in the project. See 49 C.F.R. §23.45(g). A contractor

who was unable to meet those goals, however, could still be

awarded the contract upon satisfying Fulton County that a

good faith effort to meet those goals had been made. 49

C.F.R. §23.45(h). The regulations provide that meeting the

goals, or making a good faith effort to meet the goals, is a

condition of Fulton County’s receiving the DOT-assisted

contract. 49 C.F.R. §23.45(h)(3). The program which was de-

veloped by Fulton County, submitted to, and approved by

the FAA, was developed solely to comply with the regula-

tory requirements, and was not related in any way to the

1979 Resolution. Clarence Reid Second Affidavit, 12;

Samuel Brownlee Depo., p. 8; Wendell Phillips Depo., pp. 6-

12; Clarke Sharpe Affidavit, {75-7, 12-13; Wendell Phillips

Affidavit, 76-8. The numbers selected by the county,

twenty percent minority and two percent women, were

based upon the availability of MBEs in the area, taking into

account prior successes with MBE programs, including

those of the city of Atlanta, and the Metropolitan Atlanta

Rapid Transit Authority (hereinafter MARTA). See 49 C.F.R.

§23.45(g)(1); Clarence Reid First Affidavit, 74.

As noted above, the only Fulton County project on

which the plaintiffs have ever bid was this runway project.

Clarence Reid Third Affidavit, 42. However, the plaintiffs

have received several state contracts, which were funded by

the federal government, subject to the provisions of 49

C.F.R. §23.45, and the plaintiffs have met the MBE goals on

those projects. Alton G. Wiggers Affidavit, 74. The bid

which plaintiffs submitted on the Brown Field project was

the lowest dollar bid received by the county, at $818,432.40. |

The MBE participation percentage given by the plaintiff was

4.15%, a number which was not documented as required by

the bid specifications. The second lowest bid received by the

county was one from Dickerson, Inc., at $840,960.00, with an

MBE participation level of ten percent. The third lowest bid

received was that of a joint venture entitled APAC-Georgia

& Randolph, Inc., at $873,499.90, with an MBE participation

level of twenty-two percent. At the County Commission’s

regular meeting on July 7, 1982, the county conditionally

awarded the contract to S.J. Groves & Sons, provided that

Groves make a good faith effort to increase its minority

participation. Commissioner Reginald Eaves offered to as-

sist the plaintiffs in finding eligible MBEs to take over part

of the work, and the Commission additionally instructed

the plaintiff to meet with Clarence Reid, the county’s affir-

mative action coordinator.

At this point, the facts become disputed. Joseph

Villadsen, the area engineer for S.J. Groves & Sons, con-

tacted Clarence Reid, and according to Villadsen, explained

that because Groves had its own asphalt plant and trucks,

the heart of the contract, which was paving, was exempt

from any subcontracting consideration. Reid thereafter, ac-

cording to Villadsen, agreed to send Villadsen a list of MBEs

who handled the type of work called for by the project, and

Villadsen thereafter sent letters to all of the MBEs on that

list. According to Villadsen, he received only five responses,

four of which indicated that the minority business did not

perform the type of work necessary, and the fifth one of

which was for sealing the runway, at a price more than four

times Groves’ bid price. Thereafter, on August 3, 1982,

Villadsen called Reid to explain that he had been unable to

increase his MBE participation from more than 4.15%. Reid

said that to him, after hearing what Villadsen had to say

about the efforts he had taken, it sounded as if Groves had

used a good faith effort, and Villadsen should send a letter

to the county manager explaining what actions he had

taken. Villadsen Depo., pp. 9, 25-28, 32, 34-35, 37, 44, 51-52,

60.

According to Clarence Reid, he and Villadsen dis-

cussed what portions of the contract could be subcontracted

tc MBEs, and Reid tried to convince Villadsen that perhaps

he should use minority subcontractors on some of the por-

tions of the contract which Villadsen considered to be ex-

empt from subcontracting. Additionally, according to Reid,

he suggested that Villadsen attempt to obtain minority

business participation in provision of such things as office

supplies and equipment repair, in order to increase the per-

centage. Reid sent Villadsen a list of contractors who, in

Reid’s opinion, might be able to help Villadsen increase his

minority participation. Reid thereafter heard nothing from

Villadsen tor a month, when Villadsen called back and

stated that he was still at 4.15% minority participation, and

would be unable to increase it. According to Reid, Villadsen

did not tell him what efforts he had made to increase the

participation, other than having written several minority

contractors on Reid’s list, and obtaining back only four or

five responses. Villadsen did not say what, if any, negotia-

tions or additional efforts he had taken with the minority

enterprises who contacted him. Additionally, according to

Reid, on both occasions when he spoke to Villadsen,

Viiladsen threatened that to subcontract the work on this

project would require Villadsen to lay off his minority em-

ployees. Reid First Affidavit , 7912-13; Reid Depo., pp. 98-

101, 104-107, 114, 116. Villadsen denied making the threat-

ening remarks regarding minority employees. Villadsen

Depo., pp. 37-60.

Furthermore, according to Reid, he had received a

telephone call the same day Villadsen made his second call

from Wendell Phillips, Fulton County’s manager at Brown

Field, who related that the FAA was getting concerned that

if work did not begin on the airport project before the on-

slaught of winter weather, the airport runway would be

closed. Therefore, Phillips urged Reid that the matter

should be brought up before the County Commission

meeting on the next day. According to Reid, he passed this

information on to Villadsen, and told Villadsen that he

should set out in a letter to the county manager all of the ef-

forts he had taken to increase his minority participation, and

get the letter to Mr. Brownlee (the county manager) that

day, August 3, 1982. Reid Depo., pp. 104-116. Villadsen de-

nies that Reid urged him to act with any speed. Villadsen

Depo. at 60.

Contrary to Villadsen’s testimony, Reid testified that

he did not think that Groves had used good faith efforts; in-

deed, he drafted a memorandum to Sam Brownlee saying

so. This memorandum, dated August 3, 1982, is contained

in the minutes of the Board of Commissioners August 4,

1982 meeting. In it, Reid relates his determination that

Groves had not used good faith efforts to increase minority

participation based upon four factors: (1) the fact that

Groves exempted the heart of the contract from subcontract-

ing considerations; (2) that Groves did not follow up Reid’s

suggestions for increasing minority participation; (3)

Villadsen’s threats to lay off minority employees; and (4)

Reid stated that he had contacted the state of Georgia con-

tract compliance officials, who stated that it was very diffi-

cult to make Groves meet their minority requirements on

state contracts. Alice Smith First Affidavit, Exhibit G. See

also Reid Depo., pp. 125-43.

At the August 4, 1982 meeting, based largely upon the

Reid memorandum, the County Commission determined

that the plaintiff had not used good faith efforts to increase

its minority participation, thus voiding the conditional

award of the contract to Groves. Michael Lomax First

Affidavit, 93. Commissioners Eaves, Farris, Roach,

Williams, and Lomax, all testified on deposition that they

had made their own determinations that Groves had not

used good faith efforts, based upon the memorandum from

Clarence Reid. Eaves Depo., pp. 14-15; Farris Depo., pp. 48-

49; Roach Depo., pp. 32-33; Williams Depo., pp. 41-50;

Lomax Depo., pp. 5, 7, 9, 21-22. Additionally, Eaves testified

that one of the factors governing his determination of no

good faith was the fact that although he had offered his as-

sistance, plaintiffs never requested it. Eaves Depo., pp. 6-7;

9-15. Thereafter, the County Commission conditionally

awarded the contract to the second lowest bidder,

Dickerson, Inc., which had an MBE participation level of ten

percent in its bid. The award was conditioned upon

Dickerson’s good faith efforts to increase its minority partic-

ipation, and the Board empowered Lomax, together with

Brownlee and Reid, too determine whether those good faith

efforts were made. Two days following the conditional

award of the contract, Dickerson informed Reid that it had

increased its minority participation from ten percent to six-

teen percent.

Lomax, Reid, and Brownlee determined that a six per-

cent increase in two days constituted a good faith effort on

the part of Dickerson, and Lomax signed the contract

awarding the project to Dickerson, Inc.

7¢

Thereafter, the plaintiff brought the instant action in

which plaintiff asserted certain breach of contract, and

breach of duties under state law claims against the defen-

dant, and later amended that complaint to add a facial

challenge under the Federal Constitution to the 1979

Resolution discussed above. Discovery proceeded, and

cross motions for summary judgment were filed. Thereafter,

on June 6, 1984, the county replaced in toto the 1979

Resolution with what this court will term the 1984

Resolution. Plaintiffs promptiy moved to amend their

complaint to delete the challenge to the 1979 Resolution,

and replace it with a challenge to the 1984 Resolution, a

motion which this court granted.

The facts underlying the passage of the 1984

Resolution, which are undisputed, are as follows. The

County Commission ordered Clarence Reid, the county’s

affirmative action officer, to conduct a study of minority

business participation in Fulton County. The Reid study

was conducted by personal meetings, compilation of data,

and looking to other local governments and MARTA for

their experience with minority businesses. Sixth Reid

Affidavit, 14. The ultimate conclusion of the Reid study was

that minority businesses participate in county purchasing

and contracting at a disproportionately low level given mi-

nority population in the county, and that this difference is

due to systemic racial discrimination, which has been in ex-

istence for a period of years. Sixth Reid Affidavit, 17.

Based upon the Reid study, and the volumes of docu-

ments which supported it (see Plaintiffs’ Exhibit 28), the

County Commission on April 4, 1984, directed the county

manager to develop a minority business enterprise pro-

gram.

Based upon the statistics and information, as well as

the remainder of the information contained in Plaintiffs’

Exhibit 28, the county on June 6, 1984 enacted the 1984 mi-

nority business participation resolution, which kept in place

the goal of twenty percent minority participation and con-

tracting. That program is subject to continual administrative

review, and additionally may be changed by the Board of

Commissioners at any time. Sixth Reid Affidavit, ¢411,15.

The plaintiffs’ amended complaint alleges that the 1984

Resolution injures them, seeks declaratory relief that it is

unconstitutional, and requests injunctive relief against its

enforcement. The second affidavit of Joseph Villadsen, at

paragraph six, clarifies that the injuries alleged by the

plaintiffs, from the 1984 Resolution, are that it adversely af-

fects their competitive position vis-a-vis other bidders, it

discourages them from bidding on county projects, and it

threatens the plaintiffs with the loss of future profits and

overhead. Based upon that alleged injury, plaintiffs seek to

have the 1984 Resolution declared invalid. The amended

complaint is cast in eight counts. Count I alleges that the

County has breached its promise as contained in the invita-

tion to bid on the airport project; Count II alleges that the

county has breached its duty under O.C.G.A. §36-10-2, to

award the public works contract on the airport to the lowest

bidder; Count III alleges a violation of the due process

clause of the state constitution, as respects the airport pro-

gram; Count IV is a challenge pursuant to Title VI (42 USC

§2000d, et seq.) to the airport program; Count V challenges

the airport program under the equal protection clause of the

United States Constitution; Count VI is an equal protection

challenge to the 1984 Resolution; Count VII challenges the

1984 Resolution as being in violation of O.C.G.A. §36-10-2

(the low bid statute); and Count VIII challenges the 1984

Resolution as being violative of Title VI (42 USC §2000d, et

seq.).

B. THE PENDING MOTIONS.

As is apparent from the foregoing discussion of plain-

tiffs’ third amended complaint, the actions of Fulton County

which are challenged in this lawsuit are two: first, the en-

actment of the airport program in 1982; and second, the en-

actment of the MBE resolution in 1984. The court will ad-

dress arguments relating to each of these separately.

However, indeference to the prudential rule that courts

avoid deciding constitutional questions when they can, the

court first addresses plaintiff's state law claim relating to

O.C.G.A. §36-10-2.

1. The Low-Bid Statute.

The plaintiffs’ motion for summary judgment chal-

lenges the validity of both the airport program and the 1984

Resolution under O.C.G.A. §36-10-2. The defendant has

filed a cross-motion for summary judgment, asserting that

neither program violates the low-bid statute, and arguing in

the alternative that even if the airport program violates the

statute, the statute is preempted by the federal regulations

requiring the program. The preemption argument is dis-

cussed below. For the present, the court considers whether a

county in the state of Georgia has authority, under state

law, to enact race-conscious contracting requirements. The

court concludes that it does not. The court would note at the

outset that this is, by no means, an easy determination for

this court. The question is a close one, and probably should

be certified to the Supreme Court of Georgia. The court can-

not merely abstain from deciding it, however, because reso-

10¢

lution of the federal constitutional issues will depend upon

whether the county had“authority” under state law to enact

the programs. See South Florida Chapter of the Associated

General Contractors of America vs. Metropolitan Dade County,

Florida, 723 F.2d 846, 850 (11th Cir.), reh. denied, 729 F.2d

1468, cert. denied, US. 105 S. Ct. 220

(1984).

Georgia’s low-bid statute provides as follows:

Whenever it becomes necessary to build or repair

any courthouse, jail, bridge, causeway, or other

public works in any county, the county governing

authority shall cause the same to be built or

repaired by letting out the contract therefor to the

lowest bidder, at public outcry, before the court-

house door, after having advertised the letting of

the contracts, ... provided that such county

authority shall have the authority to reject any

and all bids at the public letting. If, in their

discretion, the public interest and economy

require it, the county authorities may build or

repair any public buildings, bridges, causeways,

or other public property in the county by contract

or sealed proposals, ...

O.C.G.A. §36-10-2. The language of this statute is quite

clear, and presents counties with two means by which they

can arrange for contracting to repair or build public works.

First, the county could have, by public outcry outside the

courthouse door, a verbal “auction,” at which they may re-

ject the bids received. Alternatively, the county may choose

to let the contract by sealed bids or proposals.

There is only one case in Georgia which has construed

the overall meaning of this statute, and it was decided

shortly after this statute was amended. In Manly Building Co.

vs. Newton, 114 Ga. 245 (1901), the court noted that the

original statute had no provision in it for rejecting any and

all bids, nor did it allow for sealed bids or proposals. 114

Ga. at 249. In 1881, the Act was amended to add this lan-

guage:

Provided, that such county authority shall have

authority to reject any and all bids at said public

letting; and if in their discretion the public interest

and economy require it, such county authorities

may build or repair any public buildings, bridges,

causeways, or other public property in the county,

by contract or sealed proposals, to be invited

under the same provisions as to specifications and

like information as are provided in this act.

114 Ga. at 249-50. The Georgia Supreme Court in Manly was

called upon to construe the overall meaning of the statute.,

In a unanimous Georgia Supreme Court decision, the Court

held that the meaning of the statute is as follows:

The plain meaning of the first section of the act as

amended is, that county authorities may, after due

advertisement, cause a court-house to be built by

letting out the contract therefor to the lowest

bidder at public outcry before the court-house

door, or they may advertise for sealed proposals

for the erection of the building, and let the

contract thereunder. They may do either in the

first instance; or they may, if they have undertaken

to let the contract to the lowest bidder before the court-

12¢

house door and have rejected all bids, then proceed to

advertise for sealed proposals.

114 Ga. at 251 (emphasis supplied).

The Georgia Supreme Court’s construction of this

statute, which is binding on this court, states that the statute

means, with respect to the “shall have authority to reject

any and all bids at the public letting’ language, that the

county may only reject all bids, if, in their opinion, those

who bid at the public letting before the court-house door

have increased the price of the contract beyond its value.

The Supreme Court noted as follows:

The provision allowing the county to reject any

and all bids was found to be necessary, we

suppose, because of the fact that, by a

combination between bidders at a public letting,

the county might be forced to pay a price largely

beyond the value of the work, and therefore be

subject to imposition; hence, for the protection of

a county, came the enactment of the provision

giving the right to reject any and all bids at such

letting.

114 Ga. at 250. The construction of Georgia’s low-bid statute

given by the Supreme Court of Georgia in the Manly case

has been unaltered by the passage of time. No subsequent

case has cast any form of shadow on that construction.

Indeed, a local law which was passed in 1941, applica-

ble to all county purchasing, merely gives added weight to

the interpretation placed upon O.C.G.A. §36-10-2 by the

Supreme Court in Manly. In an act by the General Assembly

entitled “County Purchasing Department,’”’ the General

13¢

Assembly provided that as to county purchasing of sup-

plies, materials and equipment, '

such work or labor or supplies, materials or

equipment shall be procured only by contract on

public letting founded on sealed bids ... The terms

of such contracts, subject to such regulations and

in conformity with law, shall be settled by the

county attorney as an act of preliminary

specification to a proposal for bids. The agency

letting the contract may reject all bids if it shall deem it

for the interest of the county so to do; if not, it shall,

without other consent or approval, award the contract

to the lowest responsible bidder.

1941 Georgia Laws, p. 411. This provision, applicable to all

counties, on its face contemplates rejection of all bids, or

acceptance of the lowest responsibie bid. It places no dis-

cretion in the hands of the county to reject the lowest bid,

alone, and accept the next lowest.’

The county has argued that its home rule charter pro-

vides authority for the enactment of a race-conscious affir-

mative action program, which may not necessarily mean

award of a given contract to the lowest dollar bidder. The

home rule provision is found at Article IX, Section 2,

The court acknowledges that the plaintiff in this case is a construction

contractor. However, the challenge is to the 1984 Resolution as a whole,

and the 1984 Resolution also governs purchasing of supplies, materials

and equipment.

? The court acknowledges defendant's argument regarding the meaning

of “responsive” or “responsible.” This subject will be addressed below in

this discussion.

14¢

Paragraph 1 of the Georgia Constitution, and reads as fol-

lows:

The governing authority of each county shall have

legislative power to adopt clearly reasonable

ordinances, resolutions, or regulations relating to

its property, affairs, and local government for

which no provision has been made by general law and

which is not inconsistent with this constitution or any

local law applicable thereto.

Georgia Constitution Article IX, Section 2, Paragraph 1(a)

(emphasis added). The county’s argument is true, only

insofar as the regulation it has enacted does not conflict

with local law, the constitution, or general law. To the ex-

tent, however, that the Resolution does conflict with general

law, such as the low-bid statute, it is the Resolution which is

void. Georgia Branch, Associated General Contractors of

America, Inc. vs. City of Atlanta, 253 Ga. 397, 399 (1984).

Therefore, the Home Rule Charter will provide authority for

the county’s action only if, as a matter of Georgia law, the

Resolution does not conflict with general law.

In Georgia Branch, supra, the city of Atlanta’s MBE pro-

gram, virtually identical to that of the county in this case,

but for the percentages, was invalidated by the Supreme

Court of Georgia . The purported authority for the city’s ac-

tion, inter alia, was the city of Atlanta’s Home Rule Charter,

which, in pertinent part, reads exactly the same as Fulton

County’s. O.C.G.A. §36-35-3(a). Thus, the defendant's effort

to distinguish the Georgia Branch case on the grounds that

there was no Home Rule Charter involved is unavailing.

Prior to discussing defendant’s reasons why the

Georgia Branch case is purported to be distinguishable, it is

15¢

helpful to examine the Georgia Branch case, its legal bases,

and the cases it cites. As noted above, the city of Atlanta had

enacted an ordinance for MBE participation which con-

tained approximately the same limitations as the Resolution

in this case. Fulton County has not suggested that the ordi-

nance at issue in Georgia Branch was materially different

from the one enacted by Fulton County. The Georgia

Supreme Court, in a unanimous opinion, founded its inval-

idation of the ordinance on state law, avoiding federal

constitutional questions. The court began by observing that

under the city of Atlanta’s charter, the city was required to

make all contract awards to the “lowest and/or best bid-

der.’’ 253 Ga. at 398. The court acknowledged that the con-

cept of awarding a contract to the “lowest bidder” does not

mean that the contract must be awarded to an unqualified

bidder. Citing a case from the California Supreme Court, the

Supreme Court of Georgia noted that the purpose of the

charter requirement of awarding a contact to the “lowest

and/or best bidder” is to award public contracts without

favoritism, and without excessive cost, at the lowest price

consistent with reasonable quality and expectation of com-

pletion. 253 Ga. at 399, citing City of Inglewood-L.A. County

Civic Center Authority vs. Superior Court, 103 Cal. Rep. 601,

500 p.2d 601 (1972). The Georgia Supreme Court stated the

California Supreme Court's holding as follows: “’Lowest re-

sponsible bidder’ means the lowest bidder must be awarded

the contract unless found not qualified. Beyond that, there

was to be no award based upon degree of qualification.’

253 Ga. at 399. In other words, the Georgia Supreme Court

in Georgia Branch rejected the argument that the word

“responsible” could incl

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.