Petition for Writ of Certiorari — Ellis v. Card

Supreme Court brief1992

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‘s Suprome Court, U.S. |

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JUL 9 1992

OFFWE OF THE CLERK

=———— --—

In The

Supreme Court of the United States

October Term, 1992 .

“

STEPHEN B. ELLIS

THE HONORABLE SAMUEL K. SKINNER

Secretary of Tran portation

Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Tenth Circuit

‘

PETITION FOR WRIT OF CERTIORARI

WittiAM PERRY PENDLEY*

Topp S. WELCH

MOUNTAIN STATES LEGAL FOUNDA

1660 Lincoln Street, Suite 2300

Denver, Colorado 80264

felephone: (303) 861-0244

*Counsel of Record

j , > » Doatitrano

Attorneys for Petitioner

COCKLE AW BRIEF PRINTING CO RX 6964

OR CALL COLLECT (402) 342 2831

ISSUE PRESENTED

Whether the Fourteenth Amendment requires a state,

in implementing a federal race-based, set-aside program

~ which permits the state to opt out of the race-based

program — to conduct the inquiry set forth in City of

Richmond v. ].A. Croson, Co., 488 U.S. 469 (1989)?

LIST OF PARTIES

Mr. Stephen B. Ellis (Mr. Ellis) was Plaintiff in the

United States District Court for the District of Utah and

Appellant before the United States Court of Appeals for

the Tenth Circuit.

The following were Defendants in the United States

District Court for the District of Utah and Appellees

before the United States Court of Appeals for the Tenth

Circuit: Samuel Skinner, in his official capacity as Secre-

tary of Transportation (Mr. Skinner has since been

replaced in his official capacity by Andrew H. Card, Jr.);

Robert E. Farris, in his official capacity as the Administra-

tor, Federal Highway Administration, United States

Department of Transportation (Mr. Farris has since been

replaced in his official capacity by Thomas D. Larson);

Louis N. MacDonald, in his official capacity as the

Regional Administrator, Federal Highway Administra-

tion; Eugene Findlay, individually, and in his official

capacity as Director of the Department of Transportation

of the State of Utah; and Mario Blanco, individually, and

in his official capacity as Civil Rights Coordinator of the

State of Utah Department of Transportation.

TABLE OF CONTENTS

Page

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CONSTITUTIONAL PROVISIONS INVOLVED...... 2

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REASONS FOR GRANTING THE WRIT ........... 7

ITT.

THE DECISION OF THE TENTH CIRCUIT

COURT OF APPEALS RAISES IMPORTANT

CPPS GPU GRAUOIRR, CORIO. ccc ccs asec cwees

A TRUE, DIRECT, INTOLERABLE AND IRREC-

ONCILABLE CONFLICT EXISTS BETWEEN

THE DECISION BELOW AND DECISIONS

RENDERED BY THIS HONORABLE COURT ..

THE TENTH CIRCUIT COURT OF APPEALS

COMMITTED ERROR BY ITS MISAPPLICA-

TION OF THE DECISIONS OF THIS HONOR-

ABLE COURT IN FULLILOVE V. KLUTZNICK

AND CITY OF RICHMOND V. J.A. CROSON,

CO. AND IS CLEARLY ERRONEOUS.........

Es aay Pair ie kee ka a Ne RRA SAAN Oe KOON

TABLE OF AUTHORITIES

CASES

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

Es Deipaeretet tne o ats ARE eR Ree ane re ys

Fullilove v. Klutznick, 448 U.S. 448, (1980)........

Mountain States Tel & Tel. Co. v. Pueblo of Santa

FR SE 0 as SN he OA SOAR REE

Peyiet t. Tee, S50 Ua Bee (IMG Re «eee ke es

Wygant v. Jackson Board of Education, et al., 476 U.S.

er SOU eo rcs caer ca ea aes ken

CONSITITUTIONAL PROVISION

The Fourteenth Amendment to the U.S. Constitu-

STATUTES

ERIS PI oe wove vases

§ 105(f) of the Surface Transportation Assistance

PED WE THe CHEOAIRD: ies aa ceve varndeaneegeees

§ 106(c) of the Surface Transportation and Uni-

form Relocation Assistance Act of 1987

ee PIN ral cos. Sik kanes neue cae ese pee

Section 8(d) of the Small Business Act, 15 U.S.C.

ey SEs ts ecb scree eeeeaees eaters

REGULATIONS

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Page

passim

eae 2

In The

Supreme Court of the United States

October Term, 1992

STEPHEN B. ELLIS,

Petitioner,

VS.

THE HONORABLE SAMUEL K. SKINNER,

Secretary of Transportation, et al.,

Respondents.

Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Tenth Circuit

PETITION FOR WRIT OF CERTIORARI

OPINIONS BELOW

Review is sought of the opinion of the Tenth Circuit

Court of Appeals, dated April 10, 1992, appearing at

pages App. 25 to App. 35 of the Appendix. The unre-

ported opinion, dated October 15, 1990, and the Order of

the District Court, dated November 21, 1990, appear at

pages App. 1 to App. 22 of the Appendix and at pages

App. 23 to App. 24 of the Appendix, respectively.

JURISDICTION

Petitioner seeks review of the opinion and judgment

issued by the Tenth Circuit Court of Appeals on April 10,

1992. The Supreme Court has jurisdiction to review this

opinion pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL PROVISIONS INVOLVED

The Fourteenth Amendment to the U.S. Constitution

is at issue in this Petition for Writ of Certiorari.

STATUTES INVOLVED

Statutes involved in this appeal are § 105(f) of the

Surface Transportation Assistance Act of 1982 (STAA)

and § 106(c) of the Surface Transportation and Uniform

Relocation Assistance Act of 1987 (STURAA).

STATEMENT OF THE CASE

On July 9, 1987, Mr. Ellis challenged, in the United

States District Court for the District of Utah, the lawful-

ness of the implementation, by the Department of Trans-

portation of the State of Utah (UDOT), of the

Disadvantaged Business Enterprise (DBE) program for

federally-funded highway projects promulgated in accor-

dance with section 105(f) of STAA, section 106(c) of

STURAA, and the U.S. Department of Transportation

(DOT) implementing regulations at 49 C.F.R. Part 23. Mr.

Ellis sought a declaratory judgment and permanent

injunction asserting that the federal DBE program, as

applied by the UDOT, is unconstitutional under the Equa:

Protection Clause of the Fourteenth Amendment of the

United States Constitution.

Cross Motions for Summary Judgment were filed on

November 13, 1989, and oral arguments conducted on

June 8, 1990. On November 21, 1990, a Final Order was

issued by the District Court granting Summary Judgment

to the U.S. Government and denying Summary Judgment

to Mr. Ellis.

Mr. Ellis filed a notice of appeal with the Tenth

Circuit Court of Appeals on January 15, 1991. The matter

was decided upon the briefs in an opinion dated April 10,

1992. This Petition for Writ of Certiorari follows.

STATEMENT OF FACTS

Mr. Ellis, a 76 year-old white male, has been engaged

in specialty highway landscape subcontracting in the

State of Utah since 1968. In 1983, he was honored as the

Utah Associated General Contractors’ “Subcontractor of

the Year.”

In 1980, the State of Utah first experimented with a

race-based, set-aside program which set “goals” under

which 2% to 3% of all contracting dollars were to be

awarded to minority-owned or women-owned firms. In

1982, STAA was enacted by Congress, and in 1983, the

UDOT implemented that program. Section 105(f) of STAA

provides:

Except to the extent that the Secretary deter—

mines otherwise, not less than 10 per centum of

the amounts authorized to be appropriated

under this act shail be expended with small

business concerns owned and controlled by

socially and economically disadvantaged individuals

as defffted by section:8(d) of the Small Business

Act (15 U.S.C. section 637(d)) and relevant sub-

contracting regulations promulgated pursuant

thereto.

(Emphasis added.)

Section 8(d) of the Small Business Act creates a pre-

sumption that certain racial groups are composed of

“socially and economically disadvantaged individuals,”

including “Black Americans, Hispanic Americans, Native

Americans, Asian-Pacific Americans, or Asian-Indian

Americans and any other minorities.” 49 C.F.R. § 23.62.

STAA had separate “goals” for Minority Business

Enterprises (MBEs) and Women Business Enterprises

(WBEs) of 10% and 1%, respectively. The STAA program

of awarding contracts based upon race continued with

the passage, in 1987, of STURAA which combined the

MBE and WBE “goals” into a single DBE “goal” of 10

percent.

As a result of the express provisions of STAA and

STURAA and the presumptions of the Small Business

Act, the federal government has established a race-based,

set-aside program for the awarding of federal contracts.

Under STAA and STURAA, each state receiving fed-

era’ highway construction funds must establish a 10%

DBE plan. However, each state may apply to the DOT for

a waiver of the federal 10% race-based, set aside. The

ability of States, to which the 10% race-based, set aside

did not apply, to seek and to obtain a waiver from the

DOT was a condition precedent to the passage of STAA

and STURAA by Congress. !

! During consideration by the 95th Congress of the Public

Works Employment Act of 1977 (PWEA) —- whose 10% minority

set-aside provision was the exact language adopted in STAA

and STURAA - floor debate makes clear that the set-aside was

not intended to apply where local history and conditions were

unsuitable. Congressman Mitchell of Maryland, who spon-

sored the 10% set-aside amendment, engaged in the following

floor colloguy with Congressman Kazen of Texas:

MR. KAZEN All right. What happens in the

rural areas where there are no

minority enterprises? Will the 10

percent be held up in order to

bring minority enterprises from

somewhere else where there is

no unemployment into a place

where there is unemployment

and there is no minority enter-

prise?

MR. MITCHELL In response to the gentleman’s

question, the answer is ‘No.’ .. . |

would not expect to take my

minority contractors from Mary-

land into Idaho to meet that

State’s requirement. That will not

be an issue.

MR. KAZEN ...[W]here there are no minority

enterprise contractors then this

provision would not be in effect;

am | correct?

MR. MITCHELL That is absolutely correct, and

that is done by administrative

(Continued on following page)

The UDOT implemented the federal DBE program in

accordance with STAA, STURAA and DOT’s implement-

ing regulations. However, the UDOT never sought a

waiver from the 10% race-based, set-aside despite the fact

that less than 8% of Utahans are recognized minorities

and that less than 2% of the firms available for sub-

contract work in Utah are minority-owned businesses.’

As a result of the UDOT 10% race-based, set-aside

program, lower-bidding, non-minority subcontractors

have been denied work solely on the basis of their race.

On at least two occasions Mr. Ellis suffered such discrimi-

nation.

Mr. Ellis commenced this action in an effort to obtain

relief, and to put an end to the use by the UDOT of what

Mr. Ellis considers to be an unconstitutional use of a race-

based, set-aside program.

(Continued from previous page)

action already on the books with

all the agencies.

123 Cong. Rec. 1437 (Feb. 24, 1977).

2 In 1984, the Utah Department of Employment Security

determined that Utah had a total population of 1,613,000, of

which the total minority population was 122,360, or about

7.6%. The “1987 Utah Contractor Directory,” reveals that of the

6200 firms available for subcontract work in Utah only 106, or

less than 2%, are DBEs.

REASONS FOR GRANTING THE WRIT

I. THE DECISION OF THE TENTH CIRCUIT COURT

OF APPEALS RAISES IMPORTANT CONSTITU-

TIONAL ISSUES.

This is an important challenge to the constitutionality

of the implementation by a state of a race-based, set-aside

program adopted by the U.S. Government. As a result,

this is an important matter of first impression as to the

exact relationship between the decisions of this Court in

Fullilove v. Klutznick, 448 U.S. 448 (1980) and City of

Richmond v. ].A. Croson, Co., 488 U.S. 469 (1989).

Fullilove upheld the ability of Congress to adopt race-

based, set-aside programs. Croson struck down a race-

based, set-aside program adopted by a city. Unanswered

in both cases is the question posed by the instant petition:

what duties does the Constitution impose upon a state in

the implementation of a federal race-based, set-aside pro-

gram?

In Fullilove, in response to a facial challenge of a race-

based, set-aside program upon which the program in the

instant petition was based, this Court upheld the consti-

‘tutionality of that federal program. However, this Court

did so, in large part, because the federal statute contained

a provision permitting a state to obtain a “waiver” from

the application of the race-based, set-aside federal pro-

gram.

A waiver provision, similar to the waiver provision

at issue in Fullilove, exists in STAA and STURAA, the

statutes implemented by the UDOT. However, notwith-

standing the presence of the waiver provision, the UDOT

did not initiate any inquiry into whether the 10% race-

based, set-aside program was constitutionally permissible

in the State of Utah, and therefore whether a waiver

should be obtained. Instead, the UDOT simply imple-

mented that 10% race-based, set-aside program.*

The question posed by this petition is whether the

State of Utah, in its implementation of a federal race-

based, set-aside program, must comply with the U.S.

Constitution. That is, must the State of Utah, as a result of

the Fourteenth Amendment, determine whether the racial

quotas are justified by “a compelling governmental inter-

est” and whether the means chosen to effectuate that

compelling interest are “narrowly tailored to the achieve-

ment of that goal,” that is, “limited in scope and dura-

tion.” Wygant v. Jackson Board of Education, et al., 476 U.S.

267, at 285 (1986).4

* The UDOT program is strictly a race-based program

since the only basis for qualifying as a so-called “DBE” is race.

For example, UDOT’s DBE status application form does not

include any reference to social or economic disadvantage.

(Information for Determining Disadvantaged Business Enter-

prise Eligibility) Thus, the UDOT continues to presume, with-

out any factual basis, that every minority, regardless of

economic condition, is a qualified DBE. It is immaterial to the

UDOT whether the minority was subjected to any state-spon-

sored discrimination.

4 This is particularly the case in light of the command of

this Court that the government has the burden of demonstrat-

ing that its use of a race-based classification is narrowly tai-

lored so as to serve a compelling governmental interest. Plyler

v. Doe, 457 U.S. 202, 217 (1982). Such a duty seems to compel an

initial inquiry.

In the instant case, the District Court upheld the

constitutionality of the implementation by the UDOT of

the federal 10% race-based, set-aside program simply

because the UDOT was participating in a federal pro-

gram. The Court concluded that the UDOT was a “junior

partner” of the federal government. As a result, the Dis-

trict Court held that the UDOT was not required to take

further steps in implementing a race-based, set-aside pro-

gram.

The analysis of the District Court is flawed. The State

of Utah is not shielded from the provisions of the Consti-

tution simply because Congress adopted a race-based,

set-aside program. While such a program - like the pro-

gram in Fullilove — may be upheld as constitutional in a

facial challenge, the program does not survive an “as

applied” challenge. Obviously, an aspect of the applica-

tion of the program is whether it is constitutional.

Croson commands that a governmental unit conduct

an inquiry in order to ascertain that its adoption and

implementation of a race-based program meets the

requirements of the Constitution.° While Congress may

meet its constitutional duty in the adoption of a statute

which uses race as the basis for government decision

making — by the inclusion of a waiver provision which

> As this Court made clear in Croson, a state must: (1)

search for and find a history of state-sponsored discrimination;

(2) assert the compelling state interest sought to be served by

the race-based remedy; and (3) narrowly tailor the race-based

remedy both as to: (a) the beneficiary of the racial bias, that is,

applying the remedy to one who has been a victim of such

state-sponsored discrimination; and (b) the duration of the use

of the race-based remedy. Croson, 488 U.S. 469 (1989).

permits states to opt out of such a program — that does

not mean that the provisions of the Fourteenth Amend-

ment are forever thereafter irrelevant.

This Court has reviewed the proper use of the waiver

provision at issue in the instant petition. In fact, as noted

in Croson, it was the presence of the waiver provision

which ensured the constitutionality of the Public Works

Employment Act (PWEA) when challenged, facially, in

Fullilove. Thus, the waiver provision does not exist for

administrative tidiness and nicety, but to ensure that the

only basis that permits resort to a race-based standard -

that is, to remedy prior state-sponsored discrimination -

is not corrupted. This Court held that the waiver provi-

sion was to be used to prevent the unconstitutional appli-

cation of the race-based remedy set forth in the PWEA.7

The legislative history of the waiver provision makes

it clear that it was to be used to prevent the very abuse

which is taking place in Utah.®

While STAA and STURAA permit the State of Utah to

determine whether a race-based remedy is needed in

Utah, and if needed, whether it should rise to the federal!

level of 10%, it is the Fourteenth Amendment of the U.S.

Constitution which compels the State of Utah to make

that decision in a constitutional manner. The constitu-

tional method is set forth in Croson. The failure of the

6 Croson at 489.

Fullilove, at 481-482.

The legislative history set forth in footnote 1 describes

the abuse which concerned Congress.

UDOT to investigate the constitutional applicability of

the federal 10% quota and the failure of the State of Utah

to apply for a waiver of that 10% quota would no doubt

be subject to the denunciation leveled by Justice O’Con-

nor against the City of Richmond:

Given the existence of an individualized

procedure, the city’s only interest in maintain-

ing a quota system rather than investigating the

need for remedial action in particular cases

would seem to be simple administrative conve-

nience. But the interest in avoiding the bureau-

cratic effort necessary to tailor remedial relief to

those who truly have suffered the effects of

prior discrimination cannot justify a rigid line

drawn on the basis of a suspect classification.

* * *

Under Richmond’s scheme, a successful Black,

Hispanic, or Oriental entrepreneur from any-

where in the country enjoys an absolute prefer-

ence over other citizens based solely on their

race. We think it obvious that such a program is

not narrowly tailored to remedy the effects of

prior discrimination.?

Yet for the District Court to read the waiver provision

as it has is to render the waiver provision a nullity. It is

an “elementary canon of construction that a statute

should be interpreted so as not to render one part inop-

erative.” Mountain States Tel & Tel. Co. v. Pueblo of Santa

Ana, 472 U.S. 237, 249 (1985). The District Court has

rendered the waiver provision of no force and effect. In

an ironic and lamentable twist the waiver provision, the

9 Croson, at 508.

strength and force of which permitted this Court to

uphold the constitutionality of the PWEA, has now been

rendered a puny and inconsequential nonentity.

Finally, the District Court’s application of the waiver

provision creates a “Catch-22” which makes it impossible

for any court to apply the commands of the Equal Protec-

tion Clause of the Fourteenth Amendment. Thus, statutes

like STAA and STURAA pass constitutional muster in a

facial challenge because the Congress has included a

waiver provision under which an implementing state

may seek an exemption from the race-based remedy of

those statutes. At the same time, any attempt to ensure

that a state applies the waiver provision in a constitu-

tional manner — that is, in accordance with Croson — will

be frustrated because the court can - as did the District

Court here — declare that the state is a “junior partner” of

Congress and need not apply for the waiver. This is

surely not what this Court intended by its ruling in

Fullilove, and it is exactly what this Court forbade in its

ruling in Crocon.

This Court must grant certiorari in order to end the

Constitutional abuse now sanctioned by the decision

below.

Il. A TRUE, DIRECT, INTOLERABLE AND IRREC-

ONCILABLE CONFLICT EXISTS BETWEEN THE

DECISION BELOW AND DECISIONS RENDERED

BY THIS HONORABLE COURT.

The Tenth Circuit Court concludes erroneously that

there is an inexorable conflict between Fullilove and

Croson, and that, in order to rule, it had to decide whether

it was the holding of this Court in Fullilove or Croson

which applied.!°

The Tenth Circuit Court thus misapprehends the

holdings of this Court in Fullilove and Croson. Fullilove

and Croson are not inconsistent and, in fact, must be read

together in order to properly address the instant matter.

Fullilove was only a facial challenge to a federal pro-

gram that was yet to be implemented.!! This Court in

Fullilove held that the statute was facially constitutional,

in large part, because of the waiver provision which

ensured that the program would not be applied where

constitutionally impermissible. Since the challenge was

only a facial one, this Court in Fullilove could not answer

whether the program would be constitutional as imple-

mented.

Croson, on the other hand, stands for the proposition

that the program must be constitutional both facially and

as applied and that governmental entities embarking

upon a race-based program must adhere to the require-

ments of the Fourteenth Amendment.

The Tenth Circuit Court of Appeals relied, for its

decision, upon the holding of this Court in Fullilove,

concluding that Croson was inapplicable.'* Yet Fullilove

10 App. at 29.

1 Fullilove at 480.

12 To resolve this appeal, we must decide whether

failure to seek an administrative waiver places this

case squarely within the parameters of the Supreme

(Continued on following page)

provides no support for the proposition that a federal

program — even if facially constitutional — is also constitu-

tional, as applied. Fullilove expressed no opinion as to

whether the program would be upheld in an “as applied”

challenge.

Fullilove certainly does not stand for any proposition

which would permit the manner in which the UDOT

implemented the federal program to be upheld: that is

without regard to the racial composition of the State of

Utah; without regard to the racial composition of the

contractors in the Utah highway construction industry;

without regard to whether there had been any history of

state-sponsored discrimination in Utah; and without

regard to the tailoring of the race-based remedy.

The assertion that Fullilove provides the guiding prin-

ciples by which this matter must be resolved fails for

three reasons. First, Fullilove stands only for a proposition

totally irrelevant in the instant matter, that is, the ability

of the U.S. Congress under certain, limited circumstances

to adopt a race-based remedy. The ability of the U.S.

Congress to adopt such a statute is not at issue here.

What is at issue is the manner in which that program is

implemented by a state, in this case, the State of Utah,

and the UDOT.

(Continued from previous page)

Court’s decision in Croson. . . . Therefore, we must

decide whether Utah’s failure to seek a waiver is

equivalent to a local government enacting its own

set-aside program, thus implicating the fact-finding

requirements of Croson.

App at 32. See also the Decision of the District Court, App. at 6.

Second, Fullilove was only a facial challenge. The test

of whether the waiver provision would permit a statute,

similar to the one challenged in Fullilove, to survive an

“as applied” constitutional challenge would have to

await another case. This is that case.

Third, according to Croson, Fullilove not only declined

to address the issue of whether states could implement

race-based programs by piggy-backing on the findings

made by Congress, this Court held that states could not

do so.!3 Thus, the Tenth Circuit Court of Appeals, by

upholding the constitutionality of the manner in which

the UDOT has implemented the race-based, set-aside pro-

gram challenged here, has refused to do what this Court -

in Fullilove, impliedly, and in Croson, expressly — said

must be done next, that is, determine whether the imple-

mentation of a race-based, set-aside program such as was

upheld in Fullilove will survive constitutional challenge.

Mr. Ellis concedes that his petition is a matter of first

impression for this Court, in that it has not been

answered fully by either Fullilove, or Croson. However, for

the Tenth Circuit Court to conclude that Mr. Ellis’ situa-

tion can be dispensed with simply by reference to Full-

ilove is in error. Fullilove says only that Congress can do

what it did with the adoption of STAA and STURAA.

Croson, on the other hand, says that the Fourteenth ‘

Amendment applies to local governments in the adoption

of race-based programs. Unanswered by either, and beg-

ging an answer, is the question of whether the Constitu-

tion applies to the implementation by a state of a

13 Croson at 504.

federal program, particularly a federal program based, as

are STAA and STURAA, upon general nationwide find-

ings.

In light of the true and direct conflict in the reading

of Fullilove and Croson, by the Tenth Circuit Court of

Appeals, this Court must grant Mr. Ellis’ petition.

Ill. THE TENTH CIRCUIT COURT OF APPEALS

COMMITTED ERROR BY ITS MISAPPLICATION

OF THE DECISIONS OF THIS HONORABLE

COURT IN FULLILOVE V. KLUTZNICK AND

CITY OF RICHMOND V. J.A. CROSON, CO. AND

IS CLEARLY ERRONEOUS.

By its application of the federal 10% quota, the UDOT

acted without regard to the factual situation in Utah. The

UDOT failed to determine whether there had been any

history of state-sponsored discrimination, failed to con-

sider the racial make-up of Utah, and failed to consider

the relevant labor force that was either the “victim” of

any alleged discrimination or the beneficiary of the pro-

posed remedy. Simply put, the UDOT failed to comply

with the mandate of Croson.

Croson compels the UDOT to make specific findings

of past state-sponsored discrimination.'4 Yet the District

Court concludes that Fullilove “suggests that no state

findings are necessary.” !°

14 Croson at 504.

1S App. at 14.

Since the UDOT - like the City of Richmond - failed

to make specific findings of past state-sponsored discrim-

ination, “[i]Jt is almost impossible to assess whether

the... [set-aside program] is narrowly tailored to remedy

prior discrimination since it is not linked to identified

discrimination in any way.”!®

The District Court implied that there is a difference

between a state “implementing” a program and a state

“enacting” a program. Thus, the District Court concludes

that while Croson will not permit a local government to

enact a race-based program without compliance with the

Constitution, it is permissible to merely “implement”

such a program. Such a conclusion allows local govern-

ments to be shielded from the Constitution as a result of

the most general, amorphous, nonspecific, national “find-

ings” ascertained by Congress.!7

Rather than a careful and cautious reading of the

very limited language of this Court in Fullilove, the Dis-

trict Court adopted a bold and broad interpretation that

extends Fullilove far beyond its very narrow meaning. The

inapplicability of the federal 10% race-based, set-aside

provision to the State of Utah — at least the UDOT has set

forth no data to demonstrate that the 10% race-based, set-

aside is applicable to Utah — and the sanctioning of the

use of that 10% quota in Utah by the District Court and

16 Croson, at 507.

17 Although the consiitutionality of STAA and STURAA

are not at issue here, it is worth noting that the definition of a

disadvantaged minority was set forth by Congress in 1968.

the Tenth Circuit, is the very abuse cautioned against by

Justice Stevens in his dissent in Fullilove.'8

The 10% federal race-based, set-aside program is

being implemented in a state which has no documented

history of discriminating on the basis of race, in a state

with less than 8% minority population, and in a state

with less than 2% minority representation in the highway

subcontracting industry in which Mr. Ellis is engaged.

How such a program can be deemed to be “narrowly

tailored” as to both “scope and duration” strains credu-

lity.!9

The UDOT, by eschewing the federal waiver provi-

sion specifically adopted for states such as Utah has

failed to “narrowly tailor” the race conscious relief which

it has implemented, contrary to both Fullilove and Croson.

As a result, the petition of Mr. Ellis must be granted.

18 Fullilove at 546.

19 The timelessness of the UDOT program was revealed

during discovery from the Defendants in charge of that pro-

gram. In their words, “[t]he DBE program is here to stay.”

Response to First Set of Interrogatories by Defendants, Eugene

Findlay, Mario Blanco and UDOT, Answer to Interrogatory

Number 25.

CONCLUSION

For all the above reasons, this Court should grant the

petition of Mr. Ellis in this matter and review the erro

neous decision of the United States Court of Appeals for

the Tenth Circuit.

Respectfully submitted,

WILLIAM PERRY PENDLEY*

Topp S. WELCH

MOuNTAIN STATES LEGAL FOUNDATION

1660 Lincoln Street, Suite 2300

Denver, Colorado 80264

Telephone: (303) 861-0244

*Counsel of Record

Attorneys for Petitioner

App. 1

IN THE UNITED STATES DISTRICT COURT

DISTRICT OF UTAH - CENTRAL DIVISION

STEPHEN B. ELLIS,

re Case No. 87-

Plaintiff, C-0616C

VS.

SAMUEL SKINNER, in his ap ieienssbobordindat

official capacity as the Secretary, Paige nied

United States Department of ‘

Transportation; ROBERT E. (Filed ~

FARRIS, in his official capacity Oct. 15, 1990)

as the Deputy Administrator,

Federal Highway Administration,

United States Department of,

Transportation; LOUIS N.

MACDONALD, in his official

capacity as the Regional

Administrator, Federal Highway

Administration; EUGENE

FINDLAY, individually and in

his official capacity as Director

of the Utah Department of

Transportation, and MARIO

BLANCO, individually and in

official capacity as Civil Rights

Coordinator, Utah Department of

Transportation,

Defendants.

This case involves a challenge to the constitutionality

of the federal Disadvantaged Business Enterprise

(“DBE”) program as applied in Utah. Presently pending

App. 2

are cross motions for summary judgment under a Joint

Stipulation of Facts.!

Plaintiff, Stephen Ellis, a white*male landscape con-

tractor, seeks a declaratory judgment and permanent

injunction against officials of the federal Department of

Transportation (“DOT”) and the Utah Department of

Transportation (“UDOT”) on the ground that the federal

DBE program as applied by the State of Utah is uncon-

stitutional under the equal protection clause of the Four-

teenth Amendment of the United States Constitution.

Defendants’ Motion for Summary Judgment seeks a rul-

ing that the federal DBE program and Utah's plan partici-

pating in that program are constitutional in all respects.?

For purposes of the cross motions for summary judg-

ment, the parties have stipulated that the federal statutes

and implementing regulations are facially lawful and

constitutional.?

' On August 18, 1988, plaintiff previously filed a motion

for summary judgment challenging the constitutionality of the

Utah DBE program both on its face and as applied. However,

consideration of that motion was deferred pending the

Supreme Court’s decision in Richmond v. ].A. Croson Co., 109

S.Ct. 706 (1989). After the Croson decision, the pending cross

summary judgment motions were filed.

2 The federal defendants, t.e. defendants Skinner, Farris,

and MacDonald, submitted briefs in connection with their

Motion for Summary Judgment. The state defendants, 1.e.

defendants Findlay and Blanco, simply joined in the federal

defendants’ Motion.

3 In his Complaint, plaintiff challenges the federal DBE

program both on its face and as it has been applied by the State

(Continued on following page)

App. 3

BACKGROUND

The federal program for socially and economically dis-

advantaged business enterprises was promulgated by Con-

gress under Section 105(f) of the Surface Transportation

Assistance Act of 1982 (“STAA”), and section 106(c) of the

Surface Transportation and Uniform Relocation Assistance

Act of 1987 (“STURAA”). As a condition to receiving federal

highway funds, STAA and STURAA require states to set

aside at least 10% of all federally-aided highway contracts to

DBEs.* The federal statutes permit states to use a DBE set-

aside of less than 10% upon application to and approval by

the Secretary of Transportation as set forth in DOT regula-

tions. See 49 C.F.R. §§ 23.64(e), 23.65 and 49 C.F.R. Part 23,

Subpart D, Appendix D (1989).

(Continued from previous page)

of Utah. The Complaint claims that the DBE program as

administered by both federal and state authorities has violated

plaintiff’s due process and equal protection rights guaranteed

by the Fifth Amendment, the equal protection clause of the

Fourteenth Amendment, 42 U.S.C. §§ 1983, 2000(d), and Article

1 section 2 of the Utah Constitution.

4 Section 105(f) of the STAA and section 106(c) of the

STURAA both provide:

Except to the extent that the Secretary determines other-

wise, not less than 10 per centum of the amounts

authorized to be appropriated under this Act shall

be expended with small business concerns owned

and controlled by socially and economically disad-

vantaged individuals as defined by section 8(d) of

the Small Business Act (15 U.S.C. section 637(d)) and

relevant subcontracting regulations promulgated

pursuant thereto.

Pub. L. No. 97-424 § 105(f), 96 Stat. 2097, 2100; Pub. L. No.

100-17 § 106(c), 101 Stat. 132, 145 (emphasis added).

App. 4

Federal DBE regulations establish a rebuttable pre-

sumption that small businesses owned and controlled by

women and minorities (including Black Americans, His-

panic Americans, Native Americans, Asian-Pacific Amer-

icans, or Asian-Indian Americans and others) are DBEs.

49 C.F.R. § 23.62 (1989). Businesses that are presumed to

be disadvantaged are subject to decertification of their

DBE status if the participating state determines that they

are not in fact disadvantaged. On the other hand, busi-

nesses that are not presumed to be disadvantaged may be

certified as DBEs by the Small Business Administration or

by the state upon a sufficient showing.

Utah participates in the federal DBE program and

has adopted a DBE plan that mirrors the federal statutory

and regulatory structure in every significant respect,

including the annual goal requirement that 10% of all

federally funded UDOT contracts be awarded to disad-

vantaged business enterprises as defined by federal law.

Utah has never sought a waiver from the annual 10% set-

aside, nor has the State made any findings of past dis-

crimination in Utah’s public construction industry. The

State has a Civil Rights Coordinator who oversees imple-

mentation of the DBE program, and the State has pub-

lished a directory in which 106 small businesses are listed

as eligible to bid as DBEs on federally assisted UDOT

construction projects. Some of these DBEs are located

outside of the State. Utah’s DBE program requires all DBE

firms to recertify annually. The Stipulation of Facts does

not set forth the percentage of “disadvantaged” transpor-

tation contractors that do business in Utah. However, the

parties have stipulated that Utah has a minority popula-

tion that is approximately 7.6% of the general population.

App. 5

Two DBE goals are used in the DBE program: the

annual goal (the 10% goal); and individual contract goals

that UDOT establishes for DBE participation as sub-

contractors in specific prime contracts, which also is usu-

ally set by UDOT at 10%. See 49 C.F.R. Part 23, Subpart D,

Appendix A; UDOT DBE plan, p. 10. Through bid speci-

fications, UDOT advises bidders (prime contractors) of

the terms and conditions upon which contracts will be

awarded. Determination of whether the prime contractor

has complied with the DBE contract goal is made by the

UDOT Civil Rights Coordinator and the Assistant Direc-

tor of UDOT. Plaintiff is only challenging the 10% annual

goal of UDOT. The State has frequently granted waivers

from the DBE goal on specific projects.

According to the Stipulation of Facts, plaintiff sub-

mitted the lowest bids for two subcontracting jobs, but

the contracts in each case were awarded to DBEs who

submitted higher bids. In the jirst contract, Albert Low-

dermilk, Inc., was awarded the prime contract which

contained a DBE requirement of 10%. Plaintiff submitted

a subcontract quote to Lowdermilk of $13,250 and a DBE

quoted $18,750. Nevertheless, Lowdermilk awarded the

subcontract to the DBE in order to fulfill the 10% require-

ment. In the second contract, W.W. Clyde and Company

was awarded the prime contract which also had a DBE

requirement of 10%. Plaintiff quoted $131,204 on a sub-

contract and a DBE quoted $134,286. Again, the DBE was

awarded the subcontract. The Stipulation of Facts does

not indicate whether plaintiff petitioned the State for a

waiver from the 10% set-aside requirement on these par-

ticular projects.

App. 6

ANALYSIS

Plaintiff challenges the constitutionality of Utah’s

implementation of the DBE program established under

STAA and STURAA. Plaintiff requests a declaratory judg-

ment and a permanent injunction against Utah’s DBE

program until the state makes the findings outlined in the

recent Supreme Court case of City of Richmond v. J.A.

Croson, Co., 109 S.Ct 706 (1989). In Croson, the Supreme

Court declared that a minority business program enacted

by the city of Richmond, Virginia, was unconstitutional

because the city failed to justify the use of suspect classi-

fication under equal protection strict scrutiny analysis.

Plaintiff seeks to require the State of Utah to follow

Croson by making findings of state sponsored discrimina-

tion and to seek a waiver of the annual 10% DBE set-aside

goal from the Secretary of Transportation. The defendants

argue, on the other hand, that Utah’s DBE program was

established pursuant to federal law and is constitutional

under the Supreme Court’s earlier decision in Fullilove v.

Klutznick, 448 U.S. 448 (1980). For reasons explained here-

after, the court agrees with defendants that this case is

properly analyzed under Fullilove, not Croson; that the

State is not required to make findings of past discrimina-

tion in connection with its participation in the DBE pro-

gram; and that there is an insufficient factual basis for the

court to compel the State to seek a waiver from the 10%

set-aside.

I. THE FULLILOVE AND CROSON DECISIONS

In Fullilove v. Klutznick, 448 U.S. 448 (1980), the

Supreme Court rejected a facial challenge to the constitu-

tionality of a federal affirmative action program which

App. 7

required that 10% of federal funds granted for local pub-

lic works projects be used to procure services from minor-

ity business enterprises (“MBE”). The statute at issue in

Fullilove was section 103(f)(2) of the Public Works

Employment Act of 1977 and attending regulations pro-

mulgated by the Secretary of Commerce. Both parties in

this case acknowledge that the Department of Transporta-

tion’s DBE affirmative action program at issue in the

instant case was modeled after the MBE program upheld

in Fullilove.°

Foremost in the court’s analysis and approval of the

10% set-aside program in Fullilove was the fact that it was

a program enacted by Congress. The Court stated:

A program that employs racial or ethnic criteria,

even in a remedial context, calls for close exam-

ination; yet we are bound to approach our task

with appropriate deference to the Congress, a

co-equal branch charged by the Constitution

with the power to provide for the . . . general

Welfare of the United States” and “te enforce, by

appropriate legislation” the equal protection

guarantees of the Fourteenth Amendment.”

Id. at 472 (citations omitted).

> Section 105(f) the STAA, at issue in this case, was mod-

eled after and has the same legislative purpose as section

103(f)(2) of the Public Works Employment Act of 1977 — the act

found to be facially constitutional by the Supreme Court in

Fullilove. See 128 Cong. Rec. H8954 (daily ed. Dec. 6, 1982); 128

Cong. Rec. S14211 (daily ed. Dec. 8, 1982). Both set-aside

programs also refer to § 8 of the SBA Act, 15 U.S.C. § 637,

regarding the definition of disadvantaged businesses.

App. 8

After tracing the legislative history of the Commerce

Department’s MBE program, the Court in Fullilove first

determined that the remedial objectives of that legislation

were within the enforcement power of Congress under

section 5 of the Fourteenth Amendment “insofar as that

program pertains to the actions of state and local

grantees.” Id. at 478. The Court noted that although Con-

gress did not make specific “findings” of past discrimina-

tion in public procurement practices, the Court was

“satisfied that Congress had abundant historical basis

from which it could conclude” such a finding. Id. In an

earlier part of Chief Justice Burger’s opinion for the Full-

ilove Court, it was noted that the sponsor of the 10% set-

aside program had cited Congress to “the marked statisti-

cal disparity that in fiscal year 1976 less than 1% of all

federal procurement was concluded with minority busi-

ness enterprises, although minorities comprised 15-18%

of the population.” Id. at 459 (citation omitted).®

Next, the Fullilove Court held that the Congress’s use

of racial and ethnic criteria, in a “limited way,” and “as a

Inc. v. Federal Communication Comm'n, 111 L.Ed.2d 445 (1990),

also upheld the constitutionality of a federal affirmative action

program — both facially and as applied. That case involved an

FCC program granting preferences to minority broadcast

license applications. The Court upheld the FCC’s preference

policies because “they bear the imprimatur of longstanding

congressional support and are substantially related to the

achievement of the important governmental objective of broad-

cast diversity.” Id. at 485. Metro Broadcasting is not directly

applicable to the affirmative action program at issue in the

instant case inasmuch as the preference program in that case

did not entail state participation.

App. 9

condition attached to a federal grant” was narrowly tai-

lored to the achievement of the remedial objective of the

set-aside program. Id. at 480. The Court emphasized that

the program contained a waiver provision, virtually iden-

tical to the waiver provision at issue in the instant case,

whereby a state or a general contractor could be given a

set-aside goal of less than 10%, upon “demonstration

that, despite affirmative efforts, this [10%] level of partici-

pation cannot be achieved without departing from the

objectives of the program.” Id. at 482 (citations omitted).”

The Fullilove Court also noted that the set-aside program

contained “an administrative mechanism, including a

complaint procedure, to ensure that only bona fide MBE’s

are encompassed by the remedial program,” such as in

the instant case. Id. (citations omitted).

Nine years after the Fullilove decision, the Supreme

Court decided City of Richmond v. J.A. Croson Co., 109 S.Ct.

706 (1989). In Croson the Court held that a set-aside

program enacted by the City of Richmond failed to pass

7 Justice Powell’s concurrence in Fullilove also emphasized

the importance of the waiver provision:

Although the set-aside is pegged at a reasonable

figure, its effect might be unfair if it were applied

rigidly in areas of the country where minority group

members constitute a small percentage of. the popu-

lation. To meet this concern, Congress enacted a

waiver provision into § 103(f)(2).

448 U.S. at 514 (Powell, J., concurring). See footnote 9, infra,

quoting regulation which sets forth the applicable factors in

connection with any application for waiver of the congression-

ally mandated 10% set-aside requirement, and accompanying

footnotes 9 and 10.

App. 10

constitutional muster under strict scrutiny equal protec-

tion anclysis. In that case, the City of Richmond had

established a 30% set-aside for minority business enter-

prises on all city construction projects. The plaintiff,

Croson, issued a plumbing subcontract bid as part of a

renovation project of the city jail. In order to meet the

30% set-aside, the prime contractor determined that the

plumbing fixtures would have to be provided by an MBE.

One MBE expressed interest in the plumbing subcontract

and submitted an untimely bid that was over $6,000

higher than Croson’s bid. Croson requested a waiver of

the 30% set-aside. The waiver request was denied and the

city decided to rebid the project. Thereafter, Croson filed

an action under 42 U.S.C. section 1983 arguing that the

Richmond ordinance was unconstitutional on its face and

as applied.

In holding that Richmond’s 30% set-aside program

was unconstitutional, the Court in Croson distinguished

the city’s program from the federal affirmative action

program upheld in Fullilove. The Court noted that states

and municipalities have some power to remedy the

effects of prior discrimination, 109 S.Ct. at 706, but the

Court held that a program of a state or political subdivi-

sion is not entitled to the same deference as a congres-

sional program because Congress, unlike the states, has

special remedial power under the Fourteenth Amend-

ment:

That Congress may identify and redress the

effects of society-wide discrimination does not

mean that, a fortiori, the States and their political

subdivisions are free to decide that such

App. 11

remedies are appropriate. Section 1 of the Four-

teenth Amendment is an explicit constraint on

state power, and the States must undertake any

remedial efforts in accordance with that provi-

sion.

109 S.Ct at 719. In order for states or municipalities to

enact affirmative action programs, the Croson Court

required such entities to make specific findings of past

discrimination:

While the States and their subdivisions may

take remedial action when they possess evi-

dence that their own spending practices are

exacerbating a pattern of prior discrimination,

they must identify that discrimination, public or

private, with some specificity before they may

use race-conscious relief. Congress has made

national findings that there has been societal

discrimination in a host of fields. If all a state or

local government need do is find a congres-

sional report on the subject to enact a set-aside

program, the constraints of the Equal Protection

Clause will, in effect, have been rendered a nul-

lity.

Id. at 727 (citation omitted).

Il. UNDER FULLILOVE, UTAH IS NOT REQUIRED TO

MAKE FINDINGS

Plaintiff argues that in order for Utah’s DBE program

to be constitutional, the state must comply with the strin-

gent fact finding requirements outlined by the Supreme

Court in Croson as quoted above. Plaintiff contends that

“{[w]hen the Utah Department of Transportation chose to

implement STAA and STURAA, the baton passed from

App. 12

the U.S. Government to the State of Utah,” and at that

instant it became incumbent upon the State to make the

findings outlined in Croson. Plaintiff's Mem. at 5. Speci-

fically, plaintiff argues that the [sic] before the State can

participate in the STURAA program

it would have to find specific evidence of past

state sponsored discrimination and, if it found

such discrimination, it would have to then

determine that there was a ‘compelling govern-

mental interest’ in using race conscious relief,

and finally, in order to fulfill that governmental

interest, it would have to chose a means that

was ‘narrowly tailored’ to remedy the effects of

such state sponsored discrimination.

Id. Inasmuch as the State of Utah has not made any of

these finding [sic] under Croson, plaintiff contends that

Utah’s DBE program violates the equal protection guar-

antees of the Fourteenth Amendment.

Defendants argue, on the other hand, that the

Supreme Court’s decision in Fullilove, not Croson, controls

the decision in this case. Defendants note that the chal-

lenged DBE program is congressionally authorized and

mandated for all states which are recipients of federal

transportation funds, and that Utah's participation in this

federally enacted affirmative action program does not

convert the program into a state program necessitating

independent Croson-type findings of past discrimination.

The parties have stipulated that Utah’s DBE program

tracks or complies with the federal DBE statutes and

regulation in every significant respect. For purposes of

the pending cross motions for summary judgment, plain-

tiff has further stipulated that the federal DBE statutes

App. 13

and implementing regulations are constitutional on their

face, and that these statutes and regulations were mod-

eled after the substantially similar federal-state 10% set-

aside program upheld by the Supreme Court in Fullilove.

Defendants maintain that “the Croson decision reaffirms

the constitutionality of the affirmative action program

challenged here, and leaves intact the application of Full-

ilove to Congressionally-mandated programs.” Defen-

dants’ Mem. at 18.

The court agrees with the defendants that Utah’s

participation in the federally enacted DBE program does

not make it incumbent upon the State to make indepen-

dent factual findings in order for the program to be

constitutional. In enacting STAA and STURAA, Congress

already has made a nationwide determination that the

set-aside program was necessary to help remedy the

effects of past discrimination. In Fullilove, the Supreme

Court indicated that great deference is afforded to Con-

gressional determinations in this regard. 448 U.S. at 472.

This deference to congressionally enacted affirmative

action programs was reaffirmed by Justice O’Connor’s

opinion for the Court in Croson, and it was the basis from

which the program enacted by the City of Richmond in

that case was distinguished. 109 S.Ct. at 718-20. This case

would be properly analyzed under Croson if the State of

Utah had enacted a DBE program based on its own

initiative. However, the only reason the State has its DBE

program is because Congress required it to have such a

program as a condition for the State to receive federal

highway funds. The City of Richmond in the Croson case

adopted its 30 percent set-aside program on its own

App. 14

accord, and not in connection with any federal financing

. arrangement.

Not only is the affirmative action program in Croson

distinguishable from the federal set-aside program in

place in Utah, but in Fullilove the Supreme Court deter-

mined that an almost identical set-aside program entail-

ing state participation satisfied equal protection scrutiny.

The STAA and the STURAA are Acts of Congress which

outline the requirements for interstate transportation pro-

jects performed by state entities with the assistance of

federal funds. In essence, the Utah Department of Trans-

. portation is a junior partner to the U.S. Department of

Transportation, and it may properly rely on the findings

of Congress. See Milwaukee County Pavers Ass‘n. v. Fiedler,

710 F.Supp. 1532, 1545-46 (W.D.Wis. 1989) (where state

STURAA program was enacted pursuant to a federal-

state legislative framework, the state may rely on the

findings of Congress).

Although Fullilove only involved a facial challenge to

the Department of Commerce's set-aside program, there

is nothing in Fullilove to suggest that states which elect to

participate in the program by accepting federal funds are

thereby obligated to make findings of past discrimination

in addition to the determination already made by Con-

gress and the President. In fact, the Court’s emphasis that

Congress initiated the set-aside program pursuant to sec-

tion 5 of the Fourteenth Amendment, and that the Court

should afford deference to the unique remedial powers of

Congress, suggests that no state findings are necessary.

Chief Justice Burger stated for the Fullilove Court:

App. 15

It is fundamental that in no organ of govern-

ment, state or federal, does there repose a more

comprehensive remedial power than in the Con-

gress, expressly charged by the Constitution

with competence and authority to enforce equal

protection guarantees. Congress not only may

induce voluntary action to assure compliance with

existing federal statutory or constitutional anti-

discrimination provisions, but also, where Congress

has authority to declare certain conduct unlawful, it

may, as here, authorize and induce state action to

avoid such conduct.

448 US. at 483-84 (citations omitted, emphasis added); see

also id. at 478 (MBE legislation was lawfully enacted

under § 5 of the Fourteenth Amendment “insofar as that

program pertains to the actions of state and local

grantees”).

The court is unaware of any authority in support of

plaintiff’s contention that states which participate in the

federal DBE program are required to make the findings

required of the City of Richmond in the Croson case. In

fact, all other federal courts that have considered this

issue have held that such a result would violate the

Supreme Court’s decision in Fullilove, and Fullilove is still

the law with regard to federally enacted set-aside pro-

grams involving state participation. See Harrison & Bur-

rowes Bridge Constructors, Inc. v. Cuomo, 1990 U.S.Dist.

LEXIS 10010 (August 2, 1990); Tennessee Asphalt Co. v.

Farris, Civ. No. 3-85-1176, Slip Op. (D. Tenn. June 14,

1990); Milwaukee County Pavers Ass’n. v. Fiedler, 731

F.Supp. 1395, 1410 (W.D.Wis. 1990); Cone Corp. v. Florida

Dept. of Transp., 1989 U.S. Dist. LEXIS 16743, 16752 (N.D.

Fla. August 1, 1990); Carpenter v. Dole, 1988 WL 156282

App. 16

(E.D.N.C.) (June 16, 1988). For the foregoing reasons, this

court holds that Utah’s DBE program is properly

analyzed under Fullilove, not Croson, and that the State of

Utah is not required under the Fourteenth Amendment to

make additional findings of past discrimination or other-

wise as a participant in this federal-state program.

Ill. UTAH IS NOT PRESENTLY REQUIRED TO SEEK A

WAIVER

As discussed earlier, STAA and STURAA contain a

waiver provision whereby a state can petition the Secre-

tary of Transportation for an annual DBE set-aside figure

other than the standard 10% amount. A similar waiver

provision was regarded as significant in the Supreme

Court’s decision to uphold the constitutionality of the

10% set-aside program in Fullilove. It is undisputed in this

case that Utah has not requested a waiver from the

annual 10% set-aside requirement.

Plaintiff contends that the waiver provision was

made part of the federal DBE program as a constitutional

safety valve — to enable states to adjust the set-aside

percentage according to their particular circumstances.

Thus, plaintiff argues that Utah’s adherence to the annual

10% set-aside figure,® without regard to the fact that Utah

® Plaintiff does not appear to allege that the set-aside goals

for the specific projects in which he submitted bids were inap-

propriately set by the State. See 49 C.F.R. § 23.45(g) and Appen-

dix A to § 23.45 (regulations regarding seeking exemption from

specific contract DBE goal). Rather, plaintiff's arguments are

directed towards the State’s failure to seek a waiver from the

(Continued on following page)

ee ~~

App. 17

has a low minority population as compared with many

other states, renders Utah’s DBE program not “narrowly

tailored” and unconstitutional as applied.

Plaintiff’s argument in [sic] not without some force.

At first blush, it would seem reasonable to conclude that

Utah should not be required to implement the same

degree of affirmative action relief to disadvantaged busi-

nesses doing business in this State as compared with

those states with a higher per capita minority population.

However, plaintiff has failed to demonstrate that the 10%

set-aside figure is inappropriate for Utah as determined

by the waiver requirements set forth in the federal regu-

lations implementing the federal DBE program - which

regulations plaintiff has stipulated are facially valid.

The regulations governing waiver are set forth in in

[sic] 49 C.F.R. §§ 23.64(e), 23.65, and 49 C.F.R. Part 23,

Subpart D, Appendix D (1989). Regulation 23.65 requires

a petitioning state to justify why it should be entitled to a

set-aside goal of less than 10%. One clear import of this

regulation is that in order for a state to obtain federal

approval of a waiver request, the state must demonstrate

(Continued from previous page)

federal government of the annual 10% set-aside goal. See 49

C.F.R. §§ 23.64(e), 23.65, Appendix D to 49 C.FR. part. 23,

Subpart D (regulations governing waiver of annual state set-

aside goal).

App. 18

that it has been unable to attain the 10% level.? In addi-

tion, this waiver condition was acknowledged by the

° Regulation 23.65 provides:

Content of justification.

An FHWA or UMIA or FAA recipient requesting

approval of an overall goal of less than ten percent

shall include information on the following points in

its justification. Guidance concerning this informa-

tion is found in Appendix D.

(a) The Recipient’s efforts to locate disadvan-

taged businesses;

(b) The recipient’s efforts to make disadvan-

taged businesses aware of contracting opportunities; ©

develop disadvantaged businesses;

(d) Legal or other barriers impeding the partic-

ipation of disadvantaged businesses at least a ten

percent level in the recipient’s DOT-assisted con-

tracts, and the recipient’s efforts to overcome or

mitigate the effects of these barriers;

(e) The availability of disadvantaged busi-

nesses to work on the recipient’s DOT-assisted con-

tracts;

(f) The size and other characteristics of the

minority population of the recipient’s jurisdiction,

and the relevance of these factors to the availability

or potential availability of disadvantaged businesses

to work on the recipient’s DOT-assisted contracts;

and

(g) A summary of the views and information

concerning the availability of disadvantaged busi-

nesses and the adequacy of the recipient’s efforts to

increase the participation of such businesses pro-

vided by the persons and organizations consulted by

the recipient under § 23.64(f)(3).

49 C.F.R. § 23.65 (1989); see also 49 C.F.R. § 23, Subpart D,

Appendix D.

App. 19

Supreme Court in both Fullilove and Croson. Chief Justice

Burger wrote in Fullilove that waiver of the 10% set-aside

«<an be granted upon “demonstration that, despite affir-

mative efforts, this level of participation cannot be

achieved without departing from the objectives of the

program.” 448 U.S. at 482. Justice Powell’s concurring

opinion in Fullilove stated that “[t]he factors governing

issuance of a waiver include the availability of qualified

minority contractors in a particular geographic area, the

size of the locale’s minority population, and the efforts

made to find minority contractors.” Id. at 514. Referring

to the Fullilove MBE program, Justice O’Connor’s opinion

in Croson explained that “a waiver could be sought where

minority businesses were not available to fill the 10%

requirement. ...” 109 S.Ct. at 718. An undisputed fact in

this case is that UDOT consistently has been able to meet

the 10% set-aside goal.'° Under these circumstances,

requiring the state to seek a waiver would be a futile act.

The only evidence that plaintiff has set forth in urg-

ing the court to require the State to seek a waiver is the

stipulated fact that Utah’s minority population is approx-

imately 7.6% of Utah’s total population. This statistic is

only relevant insofar as it bears upon the total number of

disadvantaged businesses that are available to bid on

10 See Exhibits 1 and 2 to defendants’ Motion for Summary

Judgment. Also, on numerous occasions UDOT has granted a

prime contractor’s application for a waiver from the project

set-aside goal based upon the contractor’s good faith efforts to

achieve the goal. Responses Nos. 5 & 6 by defendants Findlay

and Blaco, UDOT, to plaintiff’s Second Set of Interrogatories.

App. 20

UDOT transportation contracts.!! DBEs include not just

businesses owned and controlled by minorities, but also

businesses owned and controlled by women and by any

other persons who can demonstrate that they are eco-

nomically and socially disadvantaged. Further, nothing in

the statutes or regulations prohibits out-of-state busi-

nesses from bidding on projects as DBEs so long as those

businesses have been certified as bona fide DBEs by the

state receiving the bids. Of course, if out of state DBE

bids are unreasonably high, because of added costs or for

other reasons, a waiver could be sought and would be

granted as to such bids. See Fullilove, 448 U.S. at 469-71.

Unless and until there is evidence demonstrating that an

insufficient number of disadvantaged businesses are

available to work on Utah DOT-assisted contracts at the

10% level, this court is of the view that the State is not

obligated to seek a waiver from the federal 10% annual

set-aside requirement.

As was true of the set-aside program upheld in Full-

ilove, significant provisions of the Utah DBE program

help ensure minimum impact upon non-DBEs and that

only bona fide subcontractors qualify as DBEs. DBEs

interested in federally assisted Utah contracts must cer-

tify their DBE ‘status with UDOT annually. Businesses

that are not owned and controlled by minorities or

11 Cf. City of Richmond v. J.A. Croson Co., 109 S.Ct. 706, 725

(1989) (“when special qualifications are required to fill particu-

lar jobs, comparisons to the general population (rather than to

the smeller group of individuals who possess the necessary

qualifications) may have little probative value”) (quoting

Hazelwood School Dist. v. United States, 433 U.S. 299, 308, n.13

(1977)).

App. 21

women can still qualify as a DBE if they can demonstrate

that they are economically and socially disadvantaged.

Finally, under appropriate circumstances already dis

cussed, the State as well as individual contractors can

seek a waiver of the 10 percent set-aside figure. Accord-

ingly, the court concludes that the federal DBE program

as applied in Utah is sufficiently narrowly tailored to

meet legitimate governmental objectives and that it does

not violate the equal protection guarantees of the Four-

teenth Amendment.

Based on the foregoing, defendants’ Motion for Sum-

mary Judgment is GRANTED and plaintiff’s Motion for

Summary Judgment is DENIED. Counsel for defendants

are directed to prepare a form of Judgment consistent

with this Memorandum Decision and Order and lodge

the same with the court after compliance with local rule

13(e).

IT IS SO ORDERED.

DATED: OCTOBER 15th, 1990.

/s/ J. Thomas Greene

J. THOMAS GREENE

UNITED STATES

DISTRICT JUDGE

COPIES TO:

App. 22

DEE B. BENSON

UNITED STATES ATTORNEY

GLEN R. DAWSON

ASSISTANT U.S. ATTORNEY

U.S. Courthouse

350 South Main Street

Salt Lake City, Utah 84101

(801) 524-5682

JOHN R. DUNNE

ASSISTANT ATTORNEY GENERAL

RICHARD S. UGELOW

ATTORNEY

Civil Rights Division

Employment Litigation Section

U.S. Department of Justice

P.O. BOX 65968

Washington, D.C. 20035-5968

(202) 514-3414

App. 23

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH

CENTRAL DIVISION

STEPHEN B. ELLIS,

Plaintiff,

SAMUEL SKINNER, in his official

capacity as the Secretary, United

States Department of

Transportation; THOMAS D.

LARSON, in his officiai capacity a

the Deputy Administrator, Federal

Highway Administration, United

States Department of

Transportation; LOUIS N.

MACDONALD, in his official

capacity as the Regional

Administrator, Federal Highway

Administration; EUGENE

FINDALY, individually and in his

official capacity as Director of

the Utah Department of

Transportation; and MARIO

BLANCO, individually and in

Official capacity as Civil Right

Coordinator, Utah Department of

Transportation,

Defendants.

)

]

)

CIVIL

ACTION

NO.

87-C-0616G

ORDER

JUDGMENT

(Filed

Nov. 21, 1990)

App. 24

In accordance with this Court’s Memorandum Deci-

sion and Order dated October 15, 1990, it is hereby

Ordered, Adjudged and Decreed as follows:

1. The motion of the federal defendants dated

November 13, 1989, arid joined by the state defendant, for

summary judgment as to all claims_is GRANTED.

2. The plaintiff's motion for summary judgment,

dated November 13, 1989, as to all claims is DENIED.

3. The plaintiff's action is DISMISSED with preju-

dice.

Entered this 21 day of November, 1990:

/s/ J. Thomas Greene

UNITED STATES DISTRICT

JUDGE

Agreed and Consented to:

/s/ William Perry Pendley

WILLIAM PERRY PENDLEY

GARY N. HERBERT

TODD S. WELCH

Mountain States Legal Foundation

Suite 2300

1660 Lincoln Street

Denver, Colorado 80203

JAMES B. LEE

185 South State Street

P.O. Box 11898

Salt Lake City, Utah 84147

Attorneys for Plaintiff

App. 25

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

STEPHEN B. ELLIS,

Plaintiff,

)

SAMUEL SKINNER, in his official )

capacity as the Secretary, United )

States Department of )

Transportation; THOMAS D. )

LARSON, in his official capacity ad

the Deputy Administrator, Federal }

Highway Administration, United

-~States Department of

Transportation; LOUIS N.

MACDONALD, in his official

capacity as the Regional

Administrator, Federal Highway

Administration; EUGENE

FINDALY, individually and in his

official capacity as Director of

the Utah Department of

Transportation; and MARIO

BLANCO, individually and in

official capacity as Civil Rights

Coordinator, Utah Department of

Transportation,

No. 91-4013

(Filed

Apr 10, 1992)

Defendants-Appellees.

ee ee ee ee oe ee ee i

App. 26

APPEAL FROM THE UNITED STATES

DISTRICT COURT FOR THE

DISTRICT

OF UTAH

(D.C. No. 87-C-0616G)

Submitted on the briefs:

William Perry Pendley and Todd S. Welch, Mountain

States Legal Foundation, Denver, Colorado, on the briefs

for Plaintiff-Appellant.

Dee V. Benson, United States Attorney; R. Paul Van Dam,

Attorney General for the State of Utah; Leland D. Ford,

Assistant Attorney General for the State of Utah; John R.

Dunne, Assistant Attorney General, Department of Jus-

tice, Civil Rights Division, Washington, D.C.; David K.

Flynn and Thomas E. Chandler, Attorneys, Department of

Justice, Civil Rights Division, Washington, D.C., for

Defendants-Appellees.

Before MCKAY, Chief Judge, MCWILLIAMS, Circuit

Judge, and BROWN, District Judge.'

MCKAY, Chief Judge.

' The Honorable Wesley E. Brown, District Judge for the

United States District Court for the District of Kansas, sitting

by designation.

App. 27

After examining the briefs and appellate record, this

panel has determined unanimously that oral argument

would not materially assist the determination of this

appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The

case is therefore ordered submitted without oral argu-

ment.

Appellant Stephen Ellis appeals an order of the dis-

trict court granting summary judgment in favor of the

appellees. On appeal, Ellis raises three arguments. First,

he contends that the district court erred in holding that

the proper standard for decision is Fullilove v. Klutznick,

448 U.S. 448 (1980), rather than City of Richmond v. J.A.

Croson, Co., 488 U.S. 469 (1989). Second, Ellis argues that

the district court erred in holding that the Surface Trans-

portation Assistance Act of 1982, Pub. L. No. 97424,

§ 105(f), 96 Stat. 2097, 2100 (STAA) and the Surface Trans-

portation and Uniform Relocation Assistance Act of 1987,

Pub. L. No. 100-17, § 106(c), 101 Stat. 132, 145 (STURAA),

as applied to him by the Utah Department of Transporta-

tion (UDOT), are constitutional. Third, he asserts that the

district court erred in holding that the UDOT was not

required to make findings of past state-sponsored dis-

crimination before implementing the disadvantaged busi-

ness enterprise (DBE) program. We exercise jurisdiction

under 28 U.S.C. § 1291 and affirm.

BACKGROUND

Ellis, a white male landscape subcontractor, sought

declaratory and permanent injunctive relief against offi-

cials of the federal Department of Transportation and

UDOT on the ground that the federal DBE program as

App. 28

applied by the State of Utah violates the Equal Protection

Ciause of the Fourteenth Amendment. Both the appellant

and the appellees filed cross motions for summary judg-

ment with the district court. For purposes of the cross

motions, the parties stipulated that the federal statutes

and their implementing regulations are facially lawful

and constitutional.

The DBE program established by STAA, and renewed

by STURAA, requires states - as a prerequisite to the

receipt of federal funds — to set aside at least ten percent

of all federally aided highway contracts to DBEs. Federal

regulations require each participating state to set annual

goals for DBE participation. 49 C.F.R. § 23.64. The regula-

tions permit a state to set its annual goal at less than ten

percent DBE participation if the state can document its

efforts to meet the statutory ten-percent requirement and

can provide information justifying a lesser goal. Id.

§§ 23.64, 23.65. The regulations also provide that once the

state has set an annual goal, it must set levels of DBE

participation for each project. Id. § 23.45(g). The state may

award a project to bidders that fail to meet the project’s

DBE goal if the bidder can demonstrate its good faith

efforts to obtain DBE participation. Id. § 23.45(h).

Utah has chosen to participate in the federal DBE

program. For purposes of the summary judgment motion

under review, the parties have stipulated that Utah’s DBE

plan “mirrors the federal statutory and regulatory struc-

ture in every significant respect.”

Before ruling on the summary judgment motion, the

district court found that Fullilove v. Klutznick, 448 U.S. 448

(1980) — and not City of Richmond v. ].A. Croson Co., 488

emia

App. 29

U.S. 469 (1989) - governed this case. Accordingly, the

district court concluded that neither the State of Utah nor

UDOT was required to make the specific factual findings

mandated by Croson in order to comply with the Equal

Protection Clause of the Fourteenth Amendment. Further,

the district court found that, pursuant to federal regula-

tions, the State of Utah could seek a waiver of the ten-

percent set aside only if it could demonstrate that it was

unable to comply with the ten-percent requirement.

Because Utah had been able to comply with the set-aside

goal, the district court found that “requiring the State [of

Utah] to seek a waiver would be a futile act.” Therefore,

the court granted summary judgment in favor of the

appellees.

DISCUSSION

This appeal turns on the question of whether the

district court erred in applying the Supreme Court’s deci-

sion in Fullilove instead of the Court’s Croson decision to

the facts of this case. Ellis asserts that the district court

should have applied the rationale in Croson and required

the State of Utah to make specific factual findings justify-

ing its failure to seek a waiver of the ten-percent set-aside

goal.

In Fullilove, the Supreme Court examined whether

the minority business enterprise (MBE) provision of the

Public Works Employment Act of 1977, Pub. L. No. 95-28,

91 Stat. 116 (PWEA) violated the Equal Protection

App. 30

Clause.? In rejecting a facial challenge to the constitu-

tionality of the Act, the Court found that the remedial

objectives of the legislation were within the enforcement

power of Congress under section five of the Fourteenth

Amendment. 448 U.S. at 478. Although Congress did not

make specific “findings” of past discrimination in public

procurement practices, the Court felt “satisfied that Con-

gress had abundant historical basis from which it could

conclude” such a finding. Id.

Most importantly for purposes of this appeal, the

Court emphasized that the MBE program contained

waiver and exemption provisions. Id. at 482, 487. A

waiver provision allowed the grantee of a general con-

tract to request a set-aside goal of less than ten percent

upon “demonstration that, despite affirmative efforts,

this [ten-percent] level of participation cannot be

achieved without departing from the objectives of the

program.” Id. at 482. Because such a waiver provision

created a method for rebutting the assumptions underly-

ing the MBE program, the waiver provision was “signifi-

cant” to the conclusion that the Act passed constitutional

muster.?

2 Similar to STAA and STURAA, the PWEA requires that,

absent an administrative waiver, at least ten percent of federal

funds granted for local public works projects must be used by

the state or local grantee to procure services or supplies from

businesses owned by minority group members.

3 In his concurrence, Justice Powell also emphasized the

importance of the waiver provision. See 448 U.S. at 514 (Powell,

J., concurring).

App. 31

In Croson, the Supreme Court examined a set-aside

program enacted by the City of Richmond. The City of

‘Richmond established a thirty-percent set aside for

minority business enterprises on city construction pro-

jects. After the set-aside program had been established,

Croson issued a plumbing subcontract bid to a general

contractor hired to renovate the city jail. Only one MBE

expressed interest in the plumbing subcontract and sub-

sequently submitted an untimely bid that was more than

$6,000 higher than Croson’s bid. Croson filed a 42 U.S.C.

§ 1983 action after the city denied his request to waive the

set-aside requirement.

Examining the thirty-percent set-aside program, the

Court held that the City of Richmond's set-aside plan

failed to pass constitutional muster under a strict scrutiny

equal protection analysis. In reaching this conclusion, the

Court distinguished the city’s program from the PWEA,

which was upheld in Fullilove. In a plurality opinion,

Justice O’Connor noted that although states and munici-

palities have some power to remedy the effects of prior

discrimination, 109 S. Ct. at 720, a program of a state or

political subdivision is not entitled to the same deference

as a congressional program because Congress, unlike the

states, has special remedial power under the Fourteenth

Amendment. Id. at 719. Thus, in order for states or munic-

ipalities to enact affirmative action programs, the Croson

Court required such entities to make specific findings of

past discrimination sufficient to demonstrate a compel-

ling governmental interest in apportioning public con-

tract opportunities to minority businesses.

aca ie

App. 32

On appeal, Ellis contends that in order for Utah’s

implementation of the federal program to pass constitu-

tional muster, Utah must comply with the stringent fact-

finding requirements outlined in Croson. Essentially, Ellis

argues that the State of Utah must justify its failure to

seek an administrative waiver of the ten percent set-aside

goal by satisfying the fact-finding requirements of Croson.

To resolve this appeal, we must decide whether fail-

ure to seek an administrative waiver places this case

squarely within the parameters of the Supreme Court's

decision in Croson. We begin by emphasizing that Ellis,

for the purposes of the summary judgment motion under

review, stipulated that both the federal statutes and their

implementing regulations are facially constitutional. On

appeal, Ellis only contends that Utah’s implementation of

the federal plan — specifically Utah’s failure to seek a

waiver from the ten-percent annual goal is unconstitu-

tional. Therefore, we must decide whether Utah’s failure

to seek a waiver is equivalent to a local government

enacting its own set-aside program, thus implicating the

fact-finding requirements of Croson.

Our decision turns on the procedures for seeking and

obtaining an administrative waiver. STAA and STURAA

both contain a waiver provision whereby a state can

petition the Secretary of Transportation for an annual

DBE set-aside figure other than the standard ten-percent

goal.4 The regulations governing the procedure for

obtaining an administrative waiver can be found in 49

C.F.R. §§ 23.64(e), 23.65, and 49 C.F.R. Part 23, Subpart D,

4 Both parties agree that Utah has not requested a waiver

from the annual 10% set-aside requirement.

App. 33

Appendix D. Section 23.64(e) requires that a state take

several steps to seek a waiver, including compliance with

the requirements of § 23.65. Section 23.65 requires a state

to include with its waiver request information justifying

the state’s entitlement to a set-aside goal of less than ten

percent.

In its well-reasoned opinion, the district court found

that “[o]ne clear import of this regulation [§ 23.65] is that

in order for a state to obtain federal approval of a waiver

request, the state must demonstrate that it has been

unable to attain the 10% level.” After reviewing § 23.65

and Appendix D, we agree. Appendix D specifies that

[t]he justification has two basic elements. First,

the recipient should show that it is doing as much as

it can to increase disadvantaged business. participa-

tion to at least a ten percent level. Second, the

recipient should show that, given the availabil-

ity of disadvantaged businesses, the requested

goal is the reasonable expectation for the level

of disadvantaged business participation that

these efforts are likely to obtain.

(Emphasis added.) Thus, § 23.65 clearly requires that a

state demonstrate its inability to obtain a ten-percent

level of participation by DBEs before it can qualify for a

waiver of the ten-percent set-aside goal. In addressing

this same issue, the Sixth Circuit stated:

Further, while it is true that Tennessee may opt

not to participate in the federal program at all, if

the state decides to accept highway funds, it

must meet the 10% DBE requirement, or fulfill

the federal requirements for a variance by show-

ing 10% participation is not possible despite

good faith efforts. In other words, and contrary

App. 34

to the plaintiffs’ frequent assertions, Tennessee

has no discretion to either accept the 10% DBE

requirement or apply for a variance. Rather, it

may only apply for a variance by establishing

under federal standards that it cannot comply

with the 10% requirement.

Tennessee Asphalt Co. v. Farris, 942 F.2d 969, 975 (6th Cir.

1991); see also Milwaukee County Pavers Assn v. Fiedler, 922

F.2d 419 (7th Cir.), cert. denied, 111 S. Ct. 2261 (1991).5

Because it is undisputed that Utah has been able to meet

the ten-percent DBE set-aside requirement, we follow the

Sixth and Seventh Circuits and hold that Utah, given the

federal regulations, would not be able to obtain a waiver

of the ten-percent set-aside goal.

When Utah “fails” to seek a waiver, it simply follows

the procedures set forth in the federal statute’s imple-

menting regulations. Moreover, because Ellis stipulated

° Plaintiff argues that a State is not to apply the ten-

percent set-aside goal unless the State finds that the purposes

of the STAA are directly applicable to it. This argument mis-

construes the nature of Congress’s statutory mandate. Con-

trary to plaintiff’s characterization of the statutory DBE

program, Congress affirmatively mandated that participating

States meet the ten-percent requirement, but left open the

possibility for an administrative waiver:

Except to the extent that the Secretary determines

otherwise, not less than 10 percent of the amounts

authorized to be appropriated under [the Act] shall

be expended with small business concerns owned

and controlled by socially and economically disad-

vantaged individuals.

101 Stat. at 145.

——7=_-_

' |

App. 35

- that these regulations are constitutional, we are com-

pelled to conclude that the State of Utah is simply obey-

ing a congressional command. We agree with the Seventh

Circuit’s analysis in Milwaukee County:

Insofar as the state is merely complying with

federal law it is acting as the agent of the federal

government and is no more subject to being

enjoined on equal protection grounds than the

federal civil servants who drafted the regula-

tions. . . . If the state does exactly what the

statute expects it to do, and the statute is con-

ceded for purposes of the litigation to be consti-

tutional, we do not see how the state can be

thought to have violated the Constitution.

922 F.2d at 423; see also Tennessee Asphalt, 942 F.2d at 975

(“since ‘Congress [can] mandate state and local compli-

ance with [a] set-aside program under its § 5 power to

enforce the Fourteenth Amendment,’ Croson, 488 U.S. at

487, 109 S. Ct. at 718, a state’s compliance with the

mandates of a federal scheme is nothing more than com-

pliance with federal law”). Thus, the Croson decision does

not apply to this appeal, and the State of Utah is not

required to make factual findings to justify its inability to

seek a waiver of the ten-percent set-aside goal.

AFFIRMED.

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