Appendix — Johnson v. Associated General Contractors of Ohio, Inc.
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no.__99 976 de ; 4amy
In the Supreme Court of the Uftited States qr»,
C. SCOTT JOHNSON, DIRECTOR, DEPARTMENT OF
ADMINISTRATIVE SERVICES;
REGINALD WILKINSON, DIRECTOR OF
REHABILITATION AND CORRECTION,
Petitioners,
Vv.
_ ASSOCIATED GENERAL CONTRACTORS OF OHIO,
INC.; ASSOCIATED GENERAL CONTRACTORS OF
NORTHWEST OHIO, INC.,
Respondents.
ON PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
APPENDIX TO THE
PETITION FOR A WRIT OF CERTIORARI
BETTY D. MONTGOMERY
Attorney General of Ohio
EDWARD B. FOLEY
State Solicitor
JUDITH L. FRENCH*
Assistant Attorney General
*Counsel of Record
REBECCA L. THOMAS
Assistant Solicitor
30 East Broad Street, 17 F'.
Columbus, OH 43215-3428
(614) 466-2872
, —_ i
TABLE OF CONTENTS
APPENDIX A (U.S. Court of Appeals Opinion,
Gated June 1, 2000) 00 la
APPENDIX B-1 (U.S. District Court, Southern
District of Ohio, Eastern Division Opinion
and Order, dated May 20, 1999)........c.ccc0000-...... 19a
APPENDIX B-2 (U.S. District Court, Southern
District of Ohio, Eastern Division Order,
dated November 2, 1998) .0..........cccccccceseoseseceseses., 92a
APPENDIX B-3 (transcript of oral bench ruling,
dated October 26, 1908) ooo. .oocccceccccecscccs. 95a
APPENDIX B-4 (U.S. Court of Appeals Order
denying rehearing, dated August 24, 2000)....... 108a
APPENDIX C (Ohio Revised Code Ann. Bee ti iia. 110a
APPENDIX D (Ohio Revised Code Ann. 123.151) ....112a
la
APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
No. 98-4393
ASSOCIATED GENERAL CONTRACTORS OF OHIO,
INC.; ASSOCIATED GENERAL CONTRACTORS OF
NORTHWEST OHIO, INC.,
Plaintiffs-Appellees,
a.
SANDRA A. DRABIK, DIRECTOR, DEPARTMENT OF
ADMINISTRATIVE SERVICES;
REGINALD WILKINSON, DIRECTOR OF
REHABILITATION AND CORRECTION,
Defendants-Appellants.
Appeal from the United States District Court
for the Southern District of Ohio at Columbus.
No. 98-00943—James L. Graham, District Judge.
Argued: January 28, 2000
Decided and Filed: June 1, 2000
Before: KENNEDY, RYAN, and BOGGS, Circuit Judges.
ARGUED: Judith L. French, OFFICE OF THE
ATTORNEY GENERAL OF OHIO, Columbus, Ohio, for
Appellants. _ Kevin R. McDermott, SCHOTTENSTEIN,
ZOX & DUNN, Columbus, Ohio, for Appellees. ON
BRIEF: Judith L. French, Karen L. Killian, OFFICE OF
THE ATTORNEY GENERAL OF OHIO, Columbus, Ohio,
for Appellants. Kevin R. McDermott, SCHOTTENSTEIN,
ZOX & DUNN, Columbus, Ohio, for Appellees. James L.
2a
Hardiman, HARDIMAN, BUCHANAN, HOWLAND &
TRIVERS, Cleveland, Ohio, Michele R. Comer, Cleveland,
Ohio, Norman C. Amaker, LOYOLA UNIVERSITY OF
CHICAGO SCHOOL OF LAW, Chicago, Illinois, Vincene
Verdun, OHIO STATE COLLEGE OF LAW, Columbus,
Ohio, for Amici Curiae.
OPINION
BOGGS, Circuit Judge. Associated General
Contractors of Ohio, and Associated General Contractors
of Northwest Ohio (“Plaintiffs-Appellees”), representing
Ohio building contractors, sued to stop the award of a
construction contract for the Toledo Correctional Facility
to a minority-owned business (“MBE”), in a bidding
process from which non-minority-owned firms were
statutorily excluded under Ohio’s Minority Business
Enterprise Act (“MBEA”). Plaintiffs-Appellees claimed
the MBEA is unconstitutional, in that it violates the
Fourteenth Amendment’s Equal Protection Clause. The
district court agreed, and permanently enjoined the state
from awarding any construction contracts thereunder.
Defendant-Appellant Sandra Drabik, Director of the Ohio
Department of Administrative Services (“DAS”), which
coordinates and manages state construction projects, and
other Defendants-Appellants, appeal the district court’s
order. We affirm.
I
Ohio passed the Minority Business Enterprise Act
(“MBEA”) in 1980. This legislation set aside five percent,
by value, of all state construction projects for bidding by
certified MBEs exclusively. O.R.C. § 123.151(C)(1).
Other provisions govern subcontracting to MBEs of work
awarded under this scheme. Ohio defines an MBE as a
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venture owned and controlled, to the extent of fifty-one
percent, for at least one year previous, by “members of
one of the following economically disadvantaged groups:
Blacks, American Indians, Hispanics, and Orientals.”
O.R.C. § 122.71(E). Other provisions establish procedures
for certification and listing as an MBE; in what follows,
“MBE” will be understood to refer to such officially
certified businesses. As of October 1998, DAS maintained
a list of 1,180 MBEs.
Pursuant to the MBEA, DAS decided to set aside,
for MBEs only, bidding for construction of the Toledo
Correctional Facility’s Administration Building, which
represents twenty percent of the total project’s value of
$50 million. Non-MBEs, many of whom are members of
the plaintiff trade associations, will thus be excluded on
racial grounds from bidding on that aspect of the project,
and will be restricted in their participation as
subcontractors. MBEs are, of course, free to bid on, and
participate fully in, non-set-aside as well as set-aside
contracts.
This court ruled in 1983 that the MBEA was
constitutional, see Ohio Contractors Ass’n v. Keip, 713
F.2d 167 (6% Cir. 1983), overruling Judge Kinneary’s
judgment in the district court that Ohio’s scheme was
unconstitutional on its face, see Ohio Contractors Ass’n v.
Keip, No. C-2-82-446 (S.D. Oh. Dec. 15, 1982).
Subsequently, the Supreme Court, in two landmark
decisions, explained and applied at length the criteria of
strict scrutiny under which such racially preferential set-
asides were to ve evaluated. See City of Richmond uv. J.A.
Croson Co., 488 U.S. 469 (1989); Adarand Constructors,
Inc. v. Pena, 515 U.S. 200 (1995). This court had already,
in Michigan Road Builders Ass’n v. Miliken, 834 F.2d 583
(6% Cir. 1987), taken note of the trend developing both in
the Supreme Court and Circuit Courts (which was to
culminate in Croson and Adarand) to apply the Equal
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Protection Clause strictly to racial discrimination in
government contracting. Michigan Road Builders
departed from the more relaxed treatment that Keip had
accorded to equal protection challenges to state
contracting disputes. See id. at 598 (Lively, CJ.,
dissenting). Croson also noted that same evolution in this
Circuit. See 488 U.S. at 477.
Ohio’s MBEA was passed after many years, during
the 1970s, of executive and administrative agency task
force consideration of complaints regarding, and statistics
concerning, minority group participation in_ state
construction contracts. These, and the legislative
hearings and debates that immediately preceded passage
of the MBEA, are detailed by Judge Kinneary in his 1982
decision striking down that act.
In the light of Croson and Adarand, the district
court in this case returned to the prescient standards
under which the MBEA had been invalidated in 1982.
Reviewing the evidence, Judge Graham, at the close of a
hearing held on October 26, 1998 to consider the state’s
request for a six-month continuance (which was denied),
cites Judge Kinneary’s 1982 analysis, which anticipated
that of Croson, with complete approval. Judge Graham
found the MBEA patently unconstitutional: “I am
mindful of the fact that it is certainly unusual for a court
to declare a state statute which has such far-reaching
effects unconstitutional from the bench, but I cannot
imagine any clearer case than this for the
unconstitutionality of the state statute.”
The district court also referred to a 1997 ruling
from the Ohio Court of Appeals on the MBEA. In that
case, a business owner of Lebanese descent, who was
denied certification as an MBE on the grounds he was not
an Oriental, claimed his right to equal protection was
violated by the MBEA as applied to him. The Court of
Sa
Appeals affirmed the trial court’s ruling that the MBEA’s
per-se race classification is unconstitutional. That ruling
has since been overturned by the Ohio Supreme Court,
which, in a lengthy review of minority set-aside
jurisprudence, concluded that the MBEA was
constitutional. See Ritchey Produce Co. v. State of Ohio
Dep't of Administrative Services, 1997 WL 629965 (Ohio
App. 10 Dist. Oct. 7, 1997), rev'd, 85 Ohio St.3d 194, 707
N.E.2d 871 (1999). At the time of the district court’s
ruling, Ritchey was still pending in the Ohio Supreme
Court. Hence, Ohio argued that the district court should
have abstained from making a decision. A motion to that
effect was filed with the district court, which denied it
after an extensive consideration of abstention doctrine.
This appeal also argues that the district court’s denial of
the abstention motion was error.
Il
A
“The constitutionality of a statute is a question of
law, reviewable de novo.” Hadix v. Johnson, 144 F.3d
925, 938 (6 Cir. 1998) (citing United States v. Brown, 25
F.3d 307, 308 (6 Cir.), cert. denied, 513 U.S. 1045
(1994)).
Croson reaffirmed the “strict scrutiny” standard of
review adopted by the Court for preferential programs
based on racial or ethnic criteria in Wygant v. Jackson Bd.
of Educ., 476 U.S. 267, 274 (1986). See Croson, 488 U.S.
at 494. This requires that such a program be “narrowly
tailored” to satisfy a “compelling governmental interest.”
476 U.S. at 274 (quoting Fullilove v. Klutznik, 448 U.S.
448, 480 (1980) (“narrowly tailored”); Pallmore v. Sidoti,
466 U.S. 429, 432 (1984) (“compelling governmental
interest”)). Adarand reiterated this standard for “all
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racial classifications imposed by whatever federal, state,
or local governmental actor... .” See 515 U.S. at 227.
In discussing this issue, it is important to identify
precisely the compelling state interest that might be able
to overcome the general presumption against racial
classification. It is clear that a government “has a
compelling interest in assuring that public dollars . . . do
not serve to finance the evil of private prejudice.” Croson,
488 U.S. at 492. However, statistical disparity in the
proportion of contracts awarded to a particular group,
standing alone, does not demonstrate such an evil. It is
an unfortunate aspect of reality that there is never more
than 100% of anything; thus, raising the percentage
allocated to some portion of the total population
necessarily means a corresponding reduction in what is
available to other portions.
There is no question that remedying the effects of
past discrimination constitutes a compelling
governmental interest. See Croson, 488 U.S. at 503;
United Black Firefights Ass’n v. City of Akron, 976 F.2d
999, 1010-11 (6 Cir. 1992). However, to make this
showing, a state cannot rely on mere speculation, or
legislative pronouncements, of past discrimination.
Rather, the Supreme Court has told us that the state
bears the burden of demonstrating a “strong basis in
evidence for its conclusion that remedial action was
necessary” by proving either that the state itself
discriminated in the past or was a passive participant in
private industry’s discriminatory practices. Croson, 488
U.S. at 486-92, 500.
Thus, the linchpin of the Croson analysis, for
present purposes, is not simply its mandating of strict
scrutiny, the requirement that a program be narrowly
tailored to achieve a compelling government interest, but
above all its holding that governments must “identify
Ta
discrimination with some specificity before they.may use
race-conscious relief;” explicit “findings of a constitutional
or statutory violation must be made.” 488 U.S. at 497.
In ruling against the State of Ohio in 1982, Judge
Kinneary had held that the evidence presented by state
studies from the middle and latter 1970s was inadequate
to support a conclusion of _ specific historical
discrimination calling for remediation, such as might
justify the MBEA. More recently, this court has ruled
that seventeen-year old evidence of discrimination is “too
remote to support a finding of compelling government
interest to justify the affirmative action plan,” and struck
down a continuing affirmative action program for female
firefighters on the ground that outdated evidence does not
reflect “prior unremedied or current discrimination.”
Brunet v. City of Columbus, 1 F.3d 390, 409 (6% Cir.
1993), cert. denied, 510 U.S. 1164 (1994). The MBEA
suffers from the same defect.
Moreover, Judge Kinneary anticipated Croson’s
insistence cn explicit findings in the following
observation:
In all the documentary evidence relating to
the progress of [the MBEA] through the
legislature, including drafts of bills,
Legislative Service Commission summaries,
and transcripts of floor debate, there is not
one clear, unambiguous statement of a
finding of discrimination to be found.
When, in 1983, this court overturned Judge
Kinneary’s ruling in that case, we did so out of deference
to the legislature, giving it the benefit of the doubt that
implicit factfinding of discrimination underlay the MBEA.
See Keip, 713 F.3d at 170-71. But the Supreme Court has
since required more. See Miller v. Johnson, 515 U.S. 900,
8a
923 (1995) (holding legislation adopting racial distinctions
to be entitled to no deference); Croson, 488 U.S. at 499
(holding mere assertions of legislative purposes
insufficient).
Proponents of racially discriminatory systems such
as the MBEA have sought to generate the necessary
evidence by a variety of means. See, eg., George
Stephanopoulos & Christopher Edley, Jr., Affirmative
Action Review: Report to the President (July 19, 1995),
repr. in BNA Daily Labor Report, 139 DLR S-1, 1995.
However, such efforts have generally focused on mere
“underrepresentation”—a lesser percentage of contracts
awarded to a particular group than that group’s
percentage in the general population. See, e.g., id. at §
9.1.2 (reporting that, in 1986, “minority business received
only . . . 2.7 percent of the prime contract dollar” and
characterizing that situation, without further analysis, as
“discrimination”); Croson, 488 U.S. at 479-80 (noting that
Richmond’s set-aside scheme relied on findings that only
.67% of prime city construction contracts had been
awarded to minority firms, in a city with a 50% African-
American population). Raw statistical disparity of this
sort is part of the evidence offered by Ohio in this case.
See JA IV at 45 (Defendant’s Memorandum in Opposition
to Plaintiffs Motion for a Preliminary Injunction). But
such evidence of mere statistical disparities has been
firmly rejected as insufficient by the Supreme Court,
particularly in a context such as contracting, where
special qualifications are so relevant. See Croson, 488
U.S. at 501-02. And although Ohio’s most “compelling”
statistical evidence compares the percentage of contracts
awarded to minorities to the percentage of minority-
owned businesses in Ohio—thus marshaling stronger
statistics than the statistics in Croson—it is still
insufficient. The problem with Ohio’s statistical
comparison is that the percentage of minority-owned
businesses in Ohio (7% as of 1978) did not take into
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account how many of those businesses were construction
companies of any sort, let alone how many were qualified,
willing, and able to perform state construction contracts.
The statistical evidence that the Ohio legislature
had before it, when the MBEA was enacted, consisted of
four broad categories of data. The first was statistical
evidence gathered by DAS for the years 1957 to 1979.
This showed that only 0.21 percent of all state
- construction contracts wert to “identifiable minority
businesses.” Brief of Defendants-Appellants at 14. The
second was a DAS study, cited in Keip, 713 F.2d at 171,
showing that from 1959 to 1975, of the $1.14 billion paid
out by the state in general construction contracts, only
0.24% went to minority businesses. Jd. at 15. The third
was 1977 report, issued by the Ohio Legislative Budget
Office, detailing Ohio Department of Transportation
(“ODOT”) construction contracts garnered by minorities,
showing figures of 0.13, 0.3, and 0.18 percent for the years
1975, 1976, and 1977, respectively. Ibid. Fourth, a 1978
task force established by the Ohio Attorney General to
study the problem concluded that during 1975-77
minority businesses comprised seven percent of all Ohio
businesses, but minority businesses received only 0.5
percent of ODOT purchasing contracts. Jd. at 15-16.
Ohio contends that “[t]his is precisely the kind of
statistical data lacking in Croson.” Id. at 18. Though this
was more data than was submitted in Croson, it is not
sufficient under that standard.
The deficiencies of the data are glaringly clear.
Much of it is severely limited in scope (ODOT contracts)
or is irrelevant to this case (ODOT purchasing contracts).
As noted previously, the data does not distinguish
minority construction contractors from minority
businesses generally, and a fortiori makes no attempt to
identify minority construction contracting firms that are
ready, willing, and able to perform state construction
10a
contracts of any particular size. And although Ohio
insists that its program is “narrowly tailored,” id. at 20-
28, it concedes that “AGC showed that the State had not
performed a recent study.” Id. at 19.
Even statistical comparisons that might be
apparently more pertinent, such as with the percentage of
all firms qualified, in some minimal sense, to perform the
work in question, would also fail to satisfy the Court’s
criteria. If MBEs comprise 10% of the total number of
contracting firms in the state, but only get 3% of the
dollar value of certain contracts, that does not alone show
discrimination, or even disparity. It does not account for
the relative size of the firms, either in terms of their
ability to do particular work or in terms of the number of
tasks they have the resources to complete. Any time two
non-minority firms merge, or a minority firm splits in
two, the total proportion of minority contracting firms in
the state increases; but it would be ludicrous to imagine
that such alteration affects the overall degree of
discrimination.
The only cases found to present the necessary
“compelling interest” sufficient to “justifly] a narrowly
tailored race-based remedy” are those that expose, as in
the case of the Alabama Department of Public Safety in
1987, “pervasive, systematic, and obstinate
discriminatory conduct,” Adarand, 515 U.S. at 237 (citing
United States v. Paradise, 480 U.S. 149 (1987)). Ohio has
made no such showing.
A second and separate hurdle for the MBEA is its
failure of narrow tailoring. Adarand teaches that a court
called upon to address the question of narrow tailoring
must ask, “for example, whether there was ‘any
consideration of the use of race-neutral means to increase
minority business’ participation’ in government
contracting, Croson, [488 U.S.] at 507 ... or whether the
lla
program was appropriately limited such that it ‘will not
last longer than the discriminatory effects it is designed
to eliminate,’ Fullilove, [448 U.S.] at 513... .” Adarand,
515 U.S. at 237-38. A narrowly-tailored set-aside
program must be “linked to identified discrimination.”
Croson, 488 U.S. at 507. Its criteria and measures of
success must be particularized, not reduced to rigid
quotas driven by “simple administrative convenience.” Id.
at 508. It must also not suffer from “overinclusiveness.”
Id. at 506.
To begin with the last-named factor in narrow
tailoring analysis, the MBEA suffers from defects both of
over- and underinclusiveness. By lumping together the
groups of Blacks, Native Americans, Hispanics, and
Orientals (and leaving unclear the exact extent of the last
two designations), the MBEA may well provide preference
where there has been no discrimination, and may not
provide relief to groups where discrimination might have
been proven. Thus, the MBEA is satisfied if contractors
of, let us say, Thai origin, who might never have been
seen in Ohio until recently, receive 10% of state contracts,
while African-Americans receive none. Obviously, other
possible examples of this sort can be readily imagined. As
the Supreme Court remarked, invalidating Richmond’s
set-aside program, if it were “narrowly tailored’ to
compensate black contractors for past discrimination, one
may legitimately ask why they are forced to share this
‘remedial relief with an Aleut citizen who moves to
Richmond tomorrow?” Croson, 488 U.S. at 506.
In addition to the foregoing problems, Ohio’s own
“underutilization” statistics suffer from a fatal conceptual
flaw, as the district court noted: they do not report the
actual use of minority firms; they-only report the use of
minority firms who have gone to the trouble of being
certified and listed among the state’s 1,180 MBEs. While
it might be true that most or all of the relevant firms
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would have sought to take advantage of the special
minority program, there is simply no examination of
whether contracts are being awarded to minority firms
who have never sought such preference, whether from
principle, oversight, calculation of the worth of the
program, or for some other reason, and who have been
awarded contracts in open bidding.
Narrow tailoring also implies some sensitivity to
the possibility that a program might someday have
satisfied its purposes. As previously noted, a race-based
preference program must be “appropriately limited such
that it ‘will not last longer than the discriminatory effects
it is designed to eliminate.” Adarand, 515 U.S. at 238
(quoting Fullilove v. Klutznick, 448 U.S. 491, 513 (1980)).
The district court in this case took note of the outdated
character of any -evidence that might have been
marshaled in support of the MBEA and added that even if
such data had been sufficient to justify the statute twenty
years ago, it would not suffice to continue to justify it
forever. During the debate over the bill in 1980, an
amendment had been offered to include a three-year
“sunset” provision; this was defeated. The MBEA has
remained in effect for twenty years and has no set
expiration. This despite, at best, marginally adequate
evidence of discrimination from 1975, 1978, and 1979. As
quoted above, supra, at 9, Ohio concedes this deficiency.
Finally, as mentioned above, one of the factors
Croson identified as indicative of narrow tailoring is
whether non-race-based means were considered as
alternatives to the goal. See 488 U.S. at 507. Yet, as the
district court noted in an opinion written to accompany its
denial of a motion to stay its judgment pending this
appeal, the historical record contains no evidence “that
the Ohio General Assembly gave any consideration to the
use of race-neutral means to increase minority
participation in state contracting before resorting to race-
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based quotas.” Associated Gen’l Contractors of Ohio, Inc.,
et al. v. Drabik, et al., 50 F.Supp.2d 741, 764 (S.D. Oh.
1999).
B
The district court’s denial of a motion for
continuance, and its decision to consolidate the
preliminary injunction hearing with a hearing on the
merits, pursuant to Fed. R. Civ. P. 65(a)(2), were based on
its findings of fact, and its view of the sufficiency of the
evidence presented; it deemed the additional evidence
that the state sought time to muster unlikely to be
relevant. A district court’s determinations of relevancy
are subject to review for abuse of discretion. See United
States v. Seago, 930 F.2d 482, 494 (6 Cir. 1991). The
denial of a motion for continuance is also reviewed for
abuse of discretion. See United States v. Martin, 740 F.2d
1352, 1360 (6% Cir. 1984) (citing Avery v. Alabama, 308
U.S. 444 (1940)). “To determine if there has been abuse,
we look to see if the defendant suffered any actual
prejudice as a result of the denial, [and] whether
additional time would have produced more witnesses or .
added something to the defendant’s case.” Ibid.
We also review for abuse of discretion a district
court’s decision to consolidate a hearing for a preliminary
injunction with a trial on the merits. See, e.g., Berry v.
Bean, 796 F.2d 713, 719 (4% Cir. 1986); Northern
Kentucky Chiropractic v. Ramey, No. 95-5645, 1997 WL
35571, at *2 (6 Cir. Jan. 29, 1997). The district court, in
consolidating the preliminary injunction hearing with a
trial on the merits, denied the state’s request for
additional time to gather evidentiary support for the
MBEA. But the MBEA has been in existence for almost
twenty years, while Croson was decided eleven years, and
Adarand more than four years, ago. Ohio provides no
14a
specifics as to the avenues it would pursue to marshal the
statistics it apparently never thought relevant until now.
The district court found that the supplementation
of the state’s existing data which might be offered given a
six-month’s continuance would not sufficiently enhance
the relevance of the evidence to justify the delay. As
Appellees point out in their Brief at 50-51, under Croson,
the state must have had _ sufficient evidentiary
justification for a racially conscious statute in advance of
its passage; the time of a challenge to the statute, at trial,
is not the time for the state to undertake factfinding. See
Croson, 488 U.S. at 504 (requiring that governmental
entities “must identify that discrimination . . . with some
specificity before they may use race-conscious relief”
(emphasis added)).
The district court also noted that the state had
admittedly been lax, to say the least, in maintaining the
type of statistics that would be necessary to undergird its
affirmative action program. The proper maintenance of
current statistics is relevant to the requisite narrow
tailoring of such a program, in order to judge its
appropriate limits. But, as noted above, the state does
not even know how many minority-owned businesses are
not certified as MBEs, and how many of them have been
successful in obtaining state contracts. The court’s review
of these deficiencies showed a firm grasp of the evidence
that had been offered. Therefore, it cannot be said that
the district court abused its discretion in denying the
motion for a continuance or in consolidating the
preliminary injunction hearing with a trial on the merits
pursuant to Fed. R. Civ. P. 65(a)(2).
The district court’s findings of fact, though made
from the bench, are sufficient to permit this court to
weigh the merits of the ruling and this appeal; oral
findings of fact are explicitly contemplated by Fed. R. Civ.
15a
P. 52(a). However, we note that in a case of this
importance it would have been helpful had the district
court reduced to a contemporaneous writing the reasoning
behind its decision of November 2, 1998. Its written
ruling of May 20, 1999, denying a motion for the stay of
its decision pending appeal, is not an adequate substitute.
See Associated Gen’l Contractors of Ohio, Inc., et al. v.
Drabik, et al., 50 F. Supp.2d 741 (S.D. Oh. 1999).
C
The State of Ohio argues that the district court
should have abstained from exercising its jurisdiction in
this case, on Pullman grounds, given the pendency before
the Ohio Supreme Court of Ritchey. We are not
persuaded.
Pullman abstention is derived from a case in which
a Fourteenth Amendment Equal Protection Clause
challenge to a Texas railroad personnel regulation was
held to have been prematurely adjudicated in federal
court, since a state court’s consideration might have
rendered the regulation invalid on state law grounds and
rendered the federal constitutional question moot. See
Railroad Comm’n of Texas v. Pullman Co., 312 U.S. 496
(1941). The Pullman abstention doctrine requires that
“when a federal constitutional claim is premised on an
unsettled question of state law, the federal court should
stay its hand in order to provide the state courts an
opportunity to settle the underlying state law question
and thus avoid the possibility of unnecessarily deciding a
constitutional question.” Harris County Comm’rs Court v.
Moore, 420 U.S. 77, 83 (1975).
A district court’s denial of a motion to abstain is
reviewed by this court de novo. See McDonald v. Village
of Northport, Mich., 164 F.3d 964, 967-68 (6 Cir. 1999)
(citing Traughber v. Beauchane, 760 F.2d 673, 676 (6%
16a
Cir. 1985) (“Because theories of state and federal law, and
expressions of federalism and comity, are so interrelated
in the decision to abstain such dispositions are elevated to
a level of importance dictating de novo appellate
review.”)). Abstention is, however, “a limited exception to
the ‘virtually unflagging’ obligation of federal courts to
exercise the jurisdiction given them.” Id. at 968 (citing
Colorado River Water Conservation Dist., 424 U.S. 800,
813, & 817 (1976)).
Ritchey, the state case in favor of which the district
court declined to abstain, concerned the refusal of the
state to certify as an MBE a produce company wholly
owned by Namid Ritchey, a naturalized native of
Lebanon. Ritchey wanted preference, or if not, wanted no
one to get preference. After several rounds of DAS
administrative rulings, appeals therefrom, and a final
determination by the Director of DAS that Ritchey
Produce was not certifiable as an MBE because Namid
Ritchey was not “Oriental,” Ritchey took his case to the
Ohio courts. The questions presented were (a) whether
the MBEA is constitutional, and (b) whether a person of
Lebanese origin qualifies as an “Oriental.” The common
pleas court, adopting the magistrate judze’s
recommendations, held that the race-based MBE program
was unconstitutional, and that MBE certification could
only survive strict scrutiny by being recast in terms of
economic disadvantage. Ohio appealed, whereupon the
Ohio Court of Appeals held that “the state’s MBE
program is a race per-se classification” that violates the
Equal Protection Clause, and did not reach the second
question of Ritchey’s racial status. 1997 WL 629965, at
*3. One judge concurred in the judgment, but on the
grounds that Ritchey was, indeed, an Oriental. See id. at
*3-4 (Tyack, J., concurring). The Ohio Supreme Court
reversed the lower court’s holding that the MBEA was
unconstitutional, and also found “that the term
‘Orientals,’ as that term is used in R.C. 122.71(E1), does
17a
not include people of Lebanese ancestry.” 85 Ohio St.3d
at 272; 707 N.E.2d at 927. It then took note of the
apparent conflict between its ruling and that of the
federal district court. It sought to minimize the conflict,
by insisting that its holding that the MBEA is
constitutional was a narrow one:
We specifically wish to avoid a direct
conflict between the case at bar and the
specific requirements of Judge Graham’s
order in Associated Gen. Contrs. of Ohio,
Inc. Thus, we limit our holding today to the
area of state procurement contracting. We
do so in the interests of state and federal
judicial comity and because the facts of the
case at bar are amenable to a limited
holding.
85 Ohio St.3d at 274; 707 N.E.2d at 928.
Although Ritchey involved not state construction
set-asides but the preference for MBEs in purchasing
contracts, the statistics and the rationale underlying both
those MBE programs are the same, and _ the
constitutionality of the overall MBE scheme was before
the state court, as it was before the district court. A
federal court owes no duty to abstain in deference to a
state court when a federal constitutional question is at
issue. See England v. Louisiana Bd. of Medical
Examiners, 375 U.S. 411, 415-16 (1964) (noting the
“primacy of the federal judiciary in deciding questions of
federal law”). Moreover, even if the Ohio Supreme Court
could have avoided the federal constitutional question in
Ritchey by a decision on state law grounds, i.e., that
Ritchey is not “Oriental,” such a decision would not
render moot the federal constitutional issue presented in
the instant case. We note, in closing, that our opinion is
not reconcilable with Ritchey, despite the Ohio Supreme
18a
Court’s attempt to distinguish the cases. See 50
F.Supp.2d at 744.
Ill
For the foregcing reasons, the judgment of the
district court is AFFIRMED.
19a
APPENDIX B-1
The Associated General Contractors of Ohio,
Inc., et al.,
Plaintiffs,
vs.
Sandra Drabik, et al.,
Defendants.
Case No. C2-98-943
UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF OHIO, EASTERN DIVISION
50 F. Supp. 2d 741; 1999 U.S. Dist. LEXIS 7696
May 20, 1999, Decided
May 20, 1999, Filed
JUDGES: JAMES L. GRAHAM, United States District
Judge.
OPINION BY: JAMES L. GRAHAM
OPINION AND ORDER
1.
On November 2, 1998, this court struck down Ohio
Revised Code §123.151, which provides race-based
preferences in the award of state construction contracts,
holding that it violated the Equal Protection Clause of the
United States Constitution. Two weeks earlier, the
United States [**2] District Court for the Northern
20a
District of Ohio, likewise, found this Ohio law
unconstitutional when it was relied upon to support a
state mandated set-aside program adopted by the
Cuyahoga Community College. See F. Buddie
Contracting, Ltd. v. Cuyahoga Community College
District, 31 F. Supp.2d 571 (N.D. Ohio 1998). The state
defendant’s appealed this court’s decision to the United
States Court of Appeals for the Sixth Circuit. Thereafter,
the Supreme Court of Ohio held, in the case of Ritchey
Produce Co., Inc. v. State of Ohio, Department of
Administrative Service, 85 Ohio St.3d 194, 707 N.E.2d
871 (1999), decided on April 7, 1999, that Ohio Rev. Code
§125.081, which provides race-based preferences in the
state’s purchase of nonconstruction-related goods and
services, is constitutional.
While this court’s decision related to construction
contracts and the Ohio Supreme Court’s decision related
to other goods and services, the decisions cannot be
reconciled. The state relied on the same evidence and the
same legal arguments to justify both programs. Indeed, ——
both statutes were enacted as part of a 1980 Minority
Business Enterprise (“MBE”) Act. In Ritchey Produce, the
Ohio Supreme Court, without elaboration, simply noted
that its conclusions were “at odds” with the rationale of
this court’s order of November 2, 1998.
The action of the Supreme Court of Ohio in
deciding Ritchey Produce, while the fundamental issues
relating to the constitutionality of Ohio’s 1980 MBE
Program were pending before the United States Court of
Appeals for the Sixth Circuit, has created an unfortunate
tension between the state and federal judicial systems.
This court, however, while it has the highest respect for
the Supreme Court of Ohio, is not bound by state court
decisions on issues involving the United States
Constitution. While the state courts have the jurisdiction
to decide such issues, the federal courts have primacy in
21a
deciding questions of federal law. See England v.
Louisiana State Board of Medical Examiners, 375 U.S.
411, 415-16 (1964).
It is all the more unfortunate that the Ohio
Supreme Court undertook to decide whether the state of
Ohio had a compelling interest to grant race-based
preferences when the plaintiff in Ritchey Produce had
chosen not to contest that issue and there was no party
before the court who was effectively litigating the
interests of Ohio’s non-minority businesses on that
critically important issue. This court believes that
deciding extremely important constitutional issues in a
vacuum of the adversarial process can—and in the
Ritchey Produce case did—lead to error.
In the aftermath of this court’s decision and the
decision of the Northern District of Ohio in Buddie
Contracting, the state of Ohio dismantled its system of
race-based preferences in all state purchasing; not only
construction, but goods and services as well. Now, as a
result of the Ohio Supreme Court’s decision in Ritchey
Produce, the state is in the process of reestablishing its
clearly unconstitutional fifteen percent race-based quota
in goods and services.
On April 8, 1999, the state defendants moved this
court to stay its order of November 2, 1998 in light of the
Ohio State Supreme Court’s decision in Ritchey Produce.
The state’s motion has given this court the opportunity to
reconsider its decision of November 2, 1998, and to
carefully examine the reasons given by the Supreme
Court of Ohio for reaching the opposite result in Ritchey
Produce. This court has reached the firm conclusion that
its original decision was correct, and that a stay of its
order would only serve to perpetuate a blatantly
unconstitutional program of race-based benefits. This
court is convinced that Ritchey Produce was wrongly
22a
decided by the Ohio Supreme Court. The court will begin
by summarizing its reasons for these conclusions and will
discuss them in greater detail in the following sections of
this Opinion and Order.
Ritchey Produce was wrongly decided because:
1. Ohio’s program of race-based
preferences in the award of state contracts
is unconstitutional because it is unlimited
in duration. Adarand Constructors, Inc. v.
Pena, 515 U.S. 200, 238 (1995) (A race-
based remedy must be appropriately
limited such that it “will not last longer
than the discriminatory effects it is
designed to eliminate.”).
2. A program of race-based benefits
cannot be supported by evidence of
discrimination which is now over twenty
years old. Brunet v. City of Columbus, 1
F.3d 390, 409 (6% Cir. 1993), cert. denied
sub nom Brunet v. Tucker, 510 U.S. 1164
(1994) (Fourteen-year-old evidence of
discrimination “too remote to support a
compelling governmental interest.”)
3. The state court found that there was
a “severe numerical imbalance in the
amount of business the state did with
minority-owned enterprises,” Ritchey
Produce, 85 Ohio St.3d at 262, 707 N.E.2d
at 919, based on its uncritical acceptance of
essentially worthless calculations contained
in a_ twenty-one-year-old report, which
miscalculated the percentage of minority-
owned businesses in Ohio and
misrepresented data on the percentage of
23a
state purchase contracts they had received,
all of which was easily detectable by
examining the data cited by the authors of
the report. See pp. 6-7, and Section IV (e),
infra.
4. The state court failed to recognize
that even the incorrectly calculated
percentage of minority-owned businesses in
Ohio (6.7 percent) bears no relationship to
the 15 percent set-aside goal of the Ohio
Act. United States v. Paradise, 480 U.S.
149, 171 (1987). (In assessing the
appropriateness of race-conscious relief,
courts have generally looked to several
factors, including the relationship of the
goals to the relevant market.).
5. The state court applied a clearly
incorrect rule of law when it announced
that Ohio’ program of race-based
preferences in state contracting must be
upheld unless it is clearly unconstitutional
beyond a reasonable doubt. The Supreme
Court of the United States has said, to the
contrary, that all racial classifications are
highly suspect and must be subjected to
strict judicial scrutiny. City of Richmond v.
J.A. Croson, 488 U.S. 469, 494 (1989);
Adarand, 515 U.S. at 236.
6. The evidence of past discrimination
which the Ohio General Assembly had in
1980 did not provide a firm basis in
evidence for a race-based remedy. Croson,
488 U.S. at 500 (The state must have a
“strong basis in evidence for its ‘conclusion
that remedial action was necessary.”).
24a
In Ritchey Produce, the Supreme Court of Ohio
summarized its understanding of the evidence the Ohio
legislature had when it enacted the MBE Act of 1980 as
follows:
When Ohio’s General Assembly enacted the
1980 MBE program, the General Assembly
had a wealth of evidence before it. The
evidence considered by the General
Assembly included past judicial decisions
confirming the existence of discrimination
in state contracting and establishing the
state’s acquiescence in such discriminatory
practices, executive findings of
discrimination in state contracting
opportunities, administrative findings of
the need for affirmative action, testimony of
opponents and proponents of minority set-
asides, and a host of relevant statistical
evidence showing the severe numerical
imbalance in the amount of business the
state did with minority-owned enterprises.
The evidence that was before the General
Assembly showed, inter alia, a _ gross
statistical disparity between the number of
qualified MBEs in Ohio and the number of
contracts awarded to Ohio’s minority
businesses. The 1978 task force report
indicated, among other things, that
minority businesses constituted
approximately seven percent of all Ohio
businesses, but that minority businesses
were receiving less than one-half of one
percent of state purchasing contacts. A
study by ODAS also indicated a disparity in
the general construction contracts awarded
25a
to minority businesses, as did a report
issued by Legislative Budget Office.
Ritchey Produce, 85 Ohio St.3d at 262, 707 N.E.2d at 919.
This description of the evidence bears little
resemblance to the actual facts. The past judicial
decisions considered by the General Assembly consisted of
two cases. The first was a 1967 federal court decision
which involved discrimination by labor unions against
black construction workers. The court did not consider,
much less make any findings on the issue of
discrimination in the award of state contracts. The
second case was an unreported, unappealed decision of an
Ohio trial court in a case which was tried before the
requirements of strict scrutiny were established by the
Supreme Court of the United States, and which was tried
on the theory, since rejected by the nation’s highest Court,
that evidence of past societal discrimination was
sufficient to support race-based remedies. The court
found that “there exists in the awarding of state contracts
a discrimination against [specified minority owned
businesses],” but neglected to say when, how, or by whom
the discrimination was practiced, and failed to find, as the
law now requires, that the state itself had been an active
or passive participant in it. See Ohio Building Chapter,
AGC v. Jackson, Franklin C.P. Nos. 78CV-05-2343 and
79CV-01-247 (September 28, 1979), filed herein as State’s
Exh. E, p. 5.
There are no “executive findings of discrimination
in state contracting opportunities,” Ritchey Produce, 85
Ohio St.3d at 262, 707 N.E.2d at 919, in the materials
cited by the Ohio Supreme Court. The only executive
order referred to in Ritchey Produce is a 1972 order of
Governor Gilligan which relates to equal opportunity in
employment, not the award of state contracts. Likewise,
this court has not found any administrative findings of
26a
discrimination in the award of state contracts in the
materials cited by the Ohio court.
There was no evidence of the number of MBEs in
Ohio which were qualified to enter into contracts to sell
goods and services to the state. Instead, there was only
evidence of the total number of all minority-owned
businesses in Ohio, eighty percent of which did not have
even one employee and which included large numbers of
sole proprietorships, such as barber shops, beauty shops,
shoe repair shops, neighborhood carry-outs, and other
“mom and pop”-type operations with no employees—
businesses which would have neither interest in, nor
ability to perform contracts to supply goods and services
to the state of Ohio. There was no evidence of a “gross
statistical disparity” between the number of qualified
MBEs in Ohio and the contracts awarded to them. There
was, in fact, no data on the percentage of all state
purchasing contracts awarded to minority-owned firms.
The Ohio Supreme Court relied on a statement in the
1978 report of the Attorney General’s Task Force On
Minorities In Business that minority businesses “received
less than one-half of one percent of all state purchase
contracts” from 1975 to 1977, and overlooked the fact that
the data cited by the authors of the report did not include
all state purchase contracts, but only Department of
Transportation construction contracts.! See Section IV
(e), infra.
The assertion that minority businesses constituted
approximately seven percent of all Ohio businesses was
1There [were] no data on the number of minority-owned
firms which were qualified to undertake prime contracts for the
construction of roads and bridges in the mid-1970s, but they
were probably few in number. Perhaps they were in fact less
than one-half of one percent of all such firms—if so, there would
have been no disparity in the percentage of the contracts they
received.
27a
the result of a gross statistical error, also overlooked by
Ohio’s high court, in which the total number of Ohio
minority-owned businesses, including those with and
without employees, was compared with the total number
of Ohio businesses with employees—a classic case of
comparing apples to oranges. See Section IV (e), infra.
The ODAS and Legislative Budget Office (“LBO”)
studies cited by the court reported only the percentage of
the dollar value of prime construction contracts awarded
to minority-owned firms. They contained no information
on the number of qualified minority-owned construction
firms. These studies did not even attempt to show a
disparity between the percentage of the contract dollars
awarded to minority firms and the number of such firms.
Justice Douglas, speaking for all of the justices,
except Justice Cook, who concurred only in the Court’s
judgment, assured the citizens of Ohio that the court’s
Ritchey Produce decision was based “upon a careful
review of the state’s arguments.” Ritchey Produce, 85
Ohio St.3d at 254, 707 N.E.2d at 914. He called the
above-described evidence a “wealth of evidence.” Id. at
262, 707 N.E.2d at 919. Quite clearly, it is not. A careful
analysis of the material referred to by the state court
demonstrates, to the contrary, that it is wholly
insufficient to support the state court’s conclusion.
In Ritchey Produce, the Ohio Supreme Court called
Ohio’s MBE program a “benign or remedial race-based
measure[.|]” Ritchey Produce, 85 Ohio St.3d at 274, 707
N.E.2d at 928. The evidence in the instant case, however,
revealed that far from being benign, this program, which
was supposedly intended to remedy past discrimination
against minority businesses, has instead become an
instrument of reverse discrimination against non-
minority businesses. The problem here begins with the
fact that the set-aside goals of the Ohio MBE Act bear no
28a
relationship to the number of minority businesses which
are ready, willing, and able to enter into contracts with
the state. In the present case, the state conceded that
only those businesses with at least one employee would be
likely to have the interest or ability to supply goods and
services to the state of Ohio. Based on the census data
available to the Ohio General Assembly in 1980, minority-
owned businesses with at least one employee constituted
only one percent of such Ohio businesses. Even this
figure probably overstates the percentage of MBEs
qualified to provide some of the services covered by the
Act. For example, firms seeking prime construction
contracts must be able to provide performance bonds.
But, accepting this number as a hypothetical estimate of
the availability of MBEs, it follows that the percentages
set aside for them are at least five times what they should
have been for prime construction, seven times what they
should have been for construction subcontracting, and
fully fifteen times what they should have been for other
goods and services.
In order to achieve these unrealistic goals, state
agencies have resorted to 100 percent set-asides in certain
trades, services, and commodities, thereby completely
excluding non-minority firms from the opportunity to sell
their goods and services to these agencies. For example,
for a number of years, it was the policy of The Ohio State
University to reserve 100 percent of its painting contracts
for minority firms. The University’s list of categories of
goods and services reserved solely for minority-owned
firms was ultimately expanded to almost forty. For these
tradesmen and businessmen, the University’s policy was,
“Whites and other non-minorities need not apply.”
Even worse is the fact, revealed by the evidence in
this case, that the state does not consider these
unrealistically high goals as in any way limiting the
percentage of state purchases to be set aside for minority-
29a
owned businesses. In fact, the state has encouraged its
purchasing departments to exceed those goals and, in
many instances, they have done so.
Finally, it is sadly apparent that the assumption
that dollars set aside for minority firms would flow to
economically disadvantaged businesses is probably
unfounded. A 1995 study of state affirmative action
programs revealed that eighty percent of the dollar value
of all contracts set aside for minority firms were awarded
to only five percent of the MBEs registered in the
program. Statewide, a mere handful of minority-owned
businesses, about eighty firms, received eighty percent of
the dollar value of the contracts set aside that year. In
1995, the state set aside 228.3 million dollars in state
contracts for bidding by minority firms only and another
fifty-six million dollars was set aside by the state’s
colleges and universities. In the instant case, Ohio’s
Department of Rehabilitation and Correction set aside a
ten million dollar contract for the construction of an
administration building at a new prison being built in
Toledo, Ohio, and was prepared to award that contract to
the Sherman R. Smoot Company, a minority-owned firm
which is listed among the nation’s 400 largest
construction companies, with 1997 revenues reported in
excess of 110 million dollars.
When financially rewarding state contracts are
allocated on the basis of race, some business owner loses,
not because her bid was too high or because he was less
qualified, but because of the color of his or her skin. The
loser, whether he be white or, as in the case of Mr.
Ritchey, Lebanese, or whatever race he may be, may
never in his lifetime have harbored a discriminatory
thought. The economic needs of his business may be no
less, or perhaps even much more than that of the business
owner of the preferred race who receives the desired
contract. It is precisely because this kind of an
(me re ee
30a
affirmative action program places the burden of paying
for past discrimination, not upon society as a whole, but
upon individual business owners who may have never
been guilty of discrimination, that such programs are
disfavored by the courts. This is why the Supreme Court
warned in Croson:
Absent searching judicial inquiry
into the justification for such race-based
measures, there is simply no way of
determining what classifications are
“benign” oor “remedial” and what
classifications are in fact motivated by
illegitimate notions of racial inferiority or
simple racial politics. . . .
* * *
Classifications based on a race carry
a danger of stigmatic harm. Unless they
are strictly reserved for remedial settings,
they may in fact promote notions of racial
inferiority and lead to a politics of racial
hostility. ...
Croson, 488 U.S. at 493.
In Adarand, Justice Thomas observed:
So-called “benign” discrimination
teaches many that because of chronic and
apparently immutable handicaps,
minorities cannot compete with them
without their patronizing indulgence.
Inevitably, such programs’ engender
attitudes of superiority or, alternatively,
provoke resentment among those who
t
3la
believe that they have been wronged by the
government’s use of race. . . .
Adarand, 515 U.S. at 241.
Ohio’s program of race-based quotas in state
contracting is anything but benign.
Il.
It is now well settled that all racial classifications
imposed by federal, state, or local government must be
analyzed under strict scrutiny; they must serve a
compelling state interest and they must be “narrowly
tailored” to serve that interest. Adarand Constructors,
Inc. v. Pena, 515 U.S. 200 (1995); City of Richmond v. J.A.
Croson Co., 488 U.S. 469 (1989). In order to show a
compelling state interest, the government actor must
have a “strong basis in evidence for its conclusion that
remedial action was necessary,” Croson, 488 U.S. at 500.
This requires evidence that the government actor itself
was an active or passive participant in the discrimination.
See Croson, 488 U.S. at 490-493.
Approximately two years after it became law, the
constitutionality of the construction contract provisions of
the Ohio MBE Act was challenged in an action filed in
this court. See Ohio Contractor’s Ass‘n v. Keip, Case No.
C-2-82-446 (S.D. Ohio, December 15, 1982). In Keip, the
state of Ohio produced all of the evidence it had to show
that the Act was supported by a compelling state interest
to remedy the effects of past discrimination against
minority contractors. Judge Kinneary reviewed and
analyzed that evidence in a thirty-five page opinion.
Although the law was then unsettled as to the standard of
review, Judge Kinneary’s legal analysis closely resembles
the analysis the United States Supreme Court would
later adopt, i.e., strict scrutiny. See, e.g., Adarand;
32a
Croson. He considered and applied the relevant elements
of the “narrow tailoring” requirement of strict scrutiny,
including duration, burden on non-minority contractors,
flexibility, and consideration of less intrusive means. He
found “scant support” for the existence of a compelling
state interest to justify a race-based remedy. He
concluded that regardless of the existence of a sufficient
state interest, the Ohio MBE Act was, nevertheless,
constitutionally defective because it was not reasonably
tailored to the goal of remedying prior discrimination.
See Keip, S.D. Ohio No. C-2-82-446, pp. 28-34. On appeal,
the Sixth Circuit Court of Appeals, in a split decision,
upheld the Ohio Act. See Ohio Contractors Ass’n v. Keip,
713 F.2d 167 (6t Cir. 1983). Judge Engle filed a strongly-
worded dissent in that case. When the Sixth Circuit
decided Keip, it applied the wrong standard of review. At
that time, the court was applying a relaxed standard of
review, an error which was corrected by the Supreme
Court of the United States when it reversed the Sixth
Circuit in Wygant v. Jackson Board of Education, 476
U.S. 267 (1986). In Michigan Road Builders Association,
Inc. v. Milliken, 834 F.2d 583, 587 (6 Cir. 1987), affd,
489 U.S. 1061 (1989), the appellate court acknowledged
that it had applied the wrong standard of review in its
earlier cases including, specifically, Keip. “The Supreme
Court left no doubt that the standard of review previously
employed by this circuit in racial and ethnic affirmative
action cases was inappropriate.” Jd. at 588. See also
Aiken v. City of Memphis, 37 F.3d 1155, 1162 (6 Cir.
1994).
The Ohio MBE Act of 1980 has [led] a charmed
existence for nearly twenty years. It should have died in
1982 when Judge Kinneary found it unconstitutional in
Keip, but it survived when the state appealed because the
Sixth Circuit applied the wrong standard of review.
Later, its supporters took courage when it received
favorable mention in Croson. In Croson, Justice
33a
O’Connor, speaking for the Court, rejected the proposition
that a finding of disparity in the award of city
construction contracts could be based on a disparity
between the percentage of contracts awarded to minority
firms and the percentage of the minority population of the
city, noting that the city of Richmond “does not even know
how many MBE’s in the relevant market are qualified to
undertake prime or subcontracting work in public
construction contracts.” 488 U.S. at 502. She referred to
Keip, 713 F.2d 167, noting that, in Keip, the Sixth Circuit
had relied “on the percentage of minority businesses in
the State compared to the percentage of state purchasing
contracts awarded to minority firms. ...” Jd. (emphasis
in original). It is not clear whether Justice O’Connor was
saying this was sufficient, or simply that it was better
than what the city of Richmond had done. In light of her
statement that the city of Richmond did not even know
how many firms in the relevant market were qualified to
undertake public construction contracts, it is clear that
she did not mean that a set-aside program for
construction contracts could be supported by a disparity
analysis based on all minority-owned businesses. If
Justice O’Connor was suggesting that a set-aside program
for other kinds of state purchasing could be supported by
disparity between the number of minority-owned
businesses and the percentage of state purchase contracts
awarded to them, she certainly was not aware that the
state of Ohio’s calculation of the percentage of minority
businesses in Keip was completely wrong. Ironically, the
situation here is even worse than it was in Croson, where
the city of Richmond attempted to justify a set-aside goal
of thirty percent on the grounds that minorities
constituted fifty percent of the city’s population. Here,
Ohio’s goal of fifteen percent for goods and services is
completely unexplained, but it does bear a rather
suspicious correlation to the minority population of the
state, which is about twelve percent of all Ohio citizens.
Bureau of the Census, U.S. Dep’t of Commerce, Pub. No.
34a
1990 CP-1-37, 1990 Census of Population: General
Population Characteristics, Ohio 37-27 (1992). So, in
Richmond, a contracting goal which was twenty
percentage points less than the city’s minority population
was struck down, while here, the state seeks to justify a
set-aside which actually exceeds the percentage of the
minority population of the state.
In the trial of the instant case, when the state was
called upon to produce evidence of a compelling state
interest, it announced that it would defend the
constitutionality of the Ohio MBE Act on the basis of the
record made in 1982, in the trial of Keip. The state
conceded that it had no additional evidence of
discrimination against minority contractors, and admitted
that during the nearly two decades the Act has been in
effect, it has made no effort to determine whether there is
a continuing need for a race-based remedy. In the trial of
this case, the state presented no evidence that it had been
an active or passive participant in discrimination against
minority firms in the award of prime construction
contracts, or that it had participated directly or indirectly
in discrimination by prime contractors in the award of
subcontracts. Indeed, the state officials most likely to be
aware of such discrimiuation, if it existed, said that to the
best of their knowledge, there was none. The state relied
entirely on the evidence which the General Assembly had
in 1980, which is now over twenty years old and far too
stale to support the continued existence of a program of
race-based preferences.
After hearing the evidence in the case and after
reviewing Judge Kinneary’s analysis of the evidence the
state produced almost seventeen years ago in the trial of
Keip, the unconstitutionality of Ohio’s MBE Act was so
clear to this court that it declared the Act
unconstitutional from the bench at the conclusion of its
35a
October 1998 hearing. See Bench Decision October 28,
1998, Tr. 351-367.
Ill.
An analysis of Ritchey Produce should begin with
these important observations: 1) the plaintiff never
challenged the state’s compelling interest for a race-based
remedy; and 2) no trial was held in which the state was
called upon to produce evidence to support a compelling
interest for a race-based remedy. In Ritchey Produce, the
plaintiff did not directly challenge the constitutionality of
the set-aside program; instead, it sought to participate in
the program. Ritchey Produce claimed that it was an
economically disadvantaged business enterprise and that
the Ohio statute should be interpreted broadly enough to
benefit any business, regardless of race, which could show
that it was economically disadvantaged. Ritchey Produce
argued in the alternative that it was entitled to
participate in the program because it was solely owned by
a person of Lebanese descent, and that such persons are
Orientals and entitled to the benefits of the program
because of their race. Ritchey Produce never challenged
the state’s compelling interest to clothe the four classes of
minorities mentioned in the statute with a presumption of
economic disadvantage. In its brief in the Supreme Court
of Ohio, Ritchey Produce said:
. . . Ritchey Produce did not challenge the
MBE §ssstatute’s_ validity, but instead
challenged how ODAS reversed its policy
and decertified Ritchey Produce based on
race per se. As the lower courts never
considered either a record or arguments on
the validity of the State’s underlying
interest in creating its MBE program, the
State improperly raises these issues before
this Court.
36a
Merit Brief of Appellee Ritchey Produce Company, Inc., p.
9, Addendum C, filed herein April 14, 1999.
Nadin F. Ritchey, the sole shareholder of Ritchey
Produce, is a naturalized American citizen who was born
in the country of Lebanon. In 1990, he applied to the Ohio
Department of Administrative Services (“ODAS”) to have
his business certified as a minority-owned enterprise. He
indicated on his application that his company was an
“Oriental” business. He was granted an MBE certificate
and was awarded a two million dollar set-aside contract
to supply fresh fruit and vegetables to state institutions.
Ritchey’s MBE certificate was renewed annually until
1995, when ODAS notified him that his application was
rejected on the grounds that he was not a member of any
group recognized as a minority business enterprise under
Ohio Rev. Code §122.71(E)(1). Ritchey filed an
administrative appeal asserting that anyone born in a
country east of the Mediterranean should be considered
Oriental. In the alternative, Ritchey argued that the
agency’s “reinterpretation” of the word “Oriental” should
not be applied retroactively because this would
unconstitutionally impair his existing contract with the
state of Ohio. The hearing examiner rejected both of
these arguments and Ritchey appealed to the Common
Pleas Court of Franklin County. There, Ritchey conceded
that he was not Oriental and argued instead that Ohio’s
set-aside program should be construed to benefit any
business which can show that it is economically
disadvantaged. He argued that §122.71(E)(1) merely
created a rebuttable presumption that any business
falling within the four specified racial classifications is
economically disadvantaged. Ritcheys appeal was
initially heard by a magistrate who agreed with his
argument and also concluded that the Supreme Court’s
decision in Adarand required that the focus of the Ohio
statute must be on economic disadvantage and not race
37a
per se. See Appendix to Brief of Appellant State of Ohio,
Addendum B, filed herein April 14, 1999. The state of
Ohio filed objections to the magistrate’s decision, causing
it to be reviewed by Common Pleas Judge Daniel T.
Hogan. Judge Hogan adopted and affirmed the
magistrate’s decision, agreeing that Adarand required
that Ohio’s MBE program should be open to any citizen,
regardless of race, who could establish that his or her
business was economically disadvantaged. See Appendix
to Brief of Appellant State [**28] of Ohio, Addendum B,
filed herein April 14, 1999. The state appealed Judge
Hogan’s decision. to the Franklin County Court of
Appeals. The court of appeals, like the court below, did
not address the issue of whether the state had shown a
compelling state interest to justify its set-aside program.
Agreeing with Judge Hogan, the court of appeals held
that the program was not “narrowly tailored.” The court
of appeals reasoned that the statute was both under-
inclusive and over-inclusive because there may be
economically disadvantaged businesses which are
excluded simply because of their race, while at the same
time others which are not economically disadvantaged are
eligible to participate because of their race. See Appendix
to Brief of Appellant State of Ohio, Addendum B, filed
herein April 14, 1999.
Because Ritchey conceded that the state of Ohio
had a compelling interest to grant race-based preferences
to the four specified minorities, the state was not called
upon to present any evidence to support its set-aside
program. As a result, there was no evidentiary record
which the Supreme Court of Ohio could review to
determine whether the state had demonstrated a “strong
basis in evidence for its conclusion that remedial action
was necessary.” Croson, 488 U.S. at 510 (quoting Wygant,
476 U.S. 267 at 277). When the state appealed to the
Supreme Court of Ohio, that court had several options
available to it. Like the lower courts, it could have
38a
limited its decision to the interpretation of Ohio’s MBE
Act and the “narrowly tailored” element of strict scrutiny,
particularly whether Adarand required all affirmative
action plans to be based on economic disadvantage. The
Ohio Supreme Court’s rulings that Ohio’s MBE Act was
based on race per se and that Adarand did not prohibit a
race-conscious remedial program would have resolved all
of the issues raised by Ritchey Produce. Thus, the court
could have deferred consideration of the crucial issue of
whether the state had a compelling interest for a race-
based remedy until it had a litigant before it who was
effectively advocating the interests of Ohio’s non-minority
businesses by challenging the state’s evidence of a
compelling interest. On the other hand, if the court felt
that it was necessary to decide the issue of compelling
state interest, it had a second option, namely to remand
the case to the trial court for a trial in which the state
would be called upon to produce its evidence of a
compelling state interest.
The Ohio Supreme Court did not exercise either of
these options. Instead, it undertook to decide whether
Ohio’s program of race-based preferences in state
contracting was supported by a compelling state interest.
In the absence of an evidentiary record, it undertook to
decide this issue by examining historical information it
was able to glean from the state’s briefs. Thus, Ohio’s
high court based its decision, not on a factual record
developed in an adversarial hearing, but on information it
gathered from the state’s briefs.2_ This approach cannot
2Justice Douglas, speaking for the Ohio Supreme Court,
with the exception of Justice Cook, who concurred in the
judgment only, stated:
Indeed, upon a careful review of the state’s
arguments in this case, it clear [sic] to us that
the General Assembly had a “strong basis” in
evidence to support its conclusion that Ohio’s
39a
be reconciled with the requirement of strict scrutiny. As
Justice Powell said in Wygant:
Evidentiary support for the conclusion that
remedial action is warranted becomes
crucial when the remedial program is
challenged in court.... In such a case, the
trial court must make a factual
determination that the employer had a
strong basis in evidence for its conclusion
that remedial action was necessary. The
ultimate burden remains with [the plaintiff]
to demonstrate the unconstitutionality of
an affirmative-action program. But unless
such a determination is made, an appellate
court reviewing a challenge by nonminority
employees to remedial action cannot
determine whether the race-based action is
justified as a remedy (for _ prior
discrimination. ...
Wygant, 476 U.S. at 277-278. See Brunet, 1 F.3d at 405
(“The District Court did not err in placing a burden of
production upon the City and the .. . plaintiffs to show
evidence of past discrimination(.]”). See also Aiken, 37
F.3d at 1162 (“The party defending the plan bears the
burden of producing evidence that the plan is
constitutional.”)
program was necessary to redress a pattern of
discriminatory exclusion of minorities from
state contracting opportunities and, thus, had a
compelling governmental interest for adopting
the MBE program.
Ritchey Produce, 85 Ohio St.3d at 254, 707 N.E.2d at 914
(emphasis added).
IV.
In Ritchey Produce, the Supreme Court of Ohio
found that the state “had a ‘strong basis in evidence’ for
finding that remedial action was necessary to ameliorate
the effects of identified racial discrimination in which the
state itself had either actively or passively participated.”
Ritchey Produce, 85 Ohio St.3d at 260, 707 N.E.2d at 918.
The “evidence” the court relied upon in reaching this
conclusion consisted of two court decisions, statistical
information, a January 1972 executive order issued by
Ohio Governor, John J. Gilligan, and a 1978 report by a
Task Force On Minorities In Business, established by
Ohio Attorney General, William J. Brown.
a) Ethridge v. Rhodes
The first court decision the Ohio Supreme Court
relied upon was Ethridge v. Rhodes, 268 F.Supp. 83 (S.D.
Ohio 1967). Ethridge was a class action brought on behalf
of black construction workers who had been denied
admittance to labor unions for the construction trades.
Plaintiffs sought to enjoin the state of Ohio from entering
into construction contracts with companies which limited
their hiring to members of unions which had excluded
blacks. The court found that the state was aware of a
pattern of discrimination by the unions in membership
and referral of black tradesmen, and that the state was
aware that its efforts to eliminate this discrimination had
been ineffectual. The court found that the siate had
become a joint participant in a pattern of racially
discriminatory conduct “by placing itself in a position of
interdependence with private individuals . . . acting under
contract with unions that bar Negroes... .” Id. at 87.
Ethridge may be relevant as corroborative
evidence of the state’s role as a passive participant in
discrimination againc! blacks, but it is not probative on
4la
the issue of whether the state had discriminated against
minority-owned firms in the award of state construction
contracts. Ethridge involved discriminatory membership
practices of labor unions, not the award of state
construction contracts. While it might be argued that
discrimination by labor unions may have contributed to a
paucity of black construction firms in the 1970s, the
Supreme Court of the United States has held that
speculation about the results of past societal
discrimination may not be used to justify race-based
preferences in the award of public contracts. See Croson,
488 U.S. at 499.
b) Governor Gilligan’s Executive Order
In January 1972, Ohio’s then governor, John J.
Gilligan, issued an executive order directing all state
agencies to eliminate discriminatory barriers to
employment. This executive order was directed against
employment discrimination by contractors performing
public works contracts for the state of Ohio, and was
apparently issued to fulfill the requirements of a
preliminary consent order entered as part of the
settlement of the case of Welch v. Rhodes, Civil No. 67-249
(S.D. Ohio 1967), which sought to expand the injunction
entered in Ethridge. In Ritchey Produce, the Supreme
Court of Ohio stated that “the purpose of this order was,
among other things, to increase minority participation in
state contracting opportunities.” Ritchey Produce, 85
Ohio St.3d at 255, 707 N.E.2d at 915. This is true only in
the sense that the order sought to increase the hiring of
minorities by firms engaged in state contracting. The
order says nothing about the award of state construction
contracts. It contains no findings that the state had
discriminated in the award of construction contracts.
Indeed, it is completely silent on that issue. Thus,
- Governor Gilligan’s Executive Order of January 27, 1972,
like the decision in Ethridge, has no probative value on
42a
the issue of whether the state of Ohio had a compelling
interest to remedy discrimination in the award of state
construction contracts.
There is a further reference to Governor Gilligan
in Ritchey Produce. The court noted that Governor
Gilligan had testified in the trial of Keip, where he said
that, during his administration, he was aware of the
difficulties experienced by minority businesses and small
businesses in obtaining state contracts, and that the
cause of the difficulty was “the existence of ‘an old boys’
club sort of relationship’ between state officials and a
number of established and reputable firms with a good
deal of experience that ‘tended to get the lion’s share of
the business.” Ritchey Produce, 85 Ohio St.3d at 256, 707
N.E.2d at 915. However, Judge Kinneary’s opinion in
Keip further states that “based on his responses to
questioning at trial, Governor Gilligan was not aware of,
nor did he cause any investigation into, allegations that
state officials discriminated against minority contractors
during his administration.” Keip, S.D. Ohio No. C-2-82-
446, p. 11.8
c) Ohio Building Chapter, AGC v. Jackson
The second court decision relied upon in Ritchey
Produce was Ohio Building Chapter, AGC, which arose
out of a legal challenge to minority set-aside provisions -
contained in a_ biennial capital improvements
appropriation bill passed by the Ohio General Assembly
in September 1977. This bill contained no findings that
the state had discriminated against minority contractors.
In an unreported decision, Common Pleas Judge George
3Governor Gilligan’s testimony in Keip was given in
October, 1982. There is no evidence that he provided any
testimony to the Ohio Legislature during its deliberations
which culminated in the enactment of Ohio’s set-aside program
in 1980.
43a
Tyack upheld the constitutionality of the bill. Judge
Tyack did not render separate findings of fact and
conclusions of law. A transcript of the testimony and
other evidence he relied upon is no longer available. In a
six-page decision, Judge Tyack’s only reference to
discrimination in the award of state contracts was one
cryptic sentence:
This court finds from the _ evidence
submitted that there exists in the awarding
of state contracts a discrimination against
the minority groups specified in Sub House
Bill No. 618.
Ohio Building Chapter, AGC, Franklin C.P. Nos. 78CV-
05-2343 and 79CV-01-247, filed herein as State’s Exh. E.
Judge Tyack’s decision was handed down on September
28, 1979, one day before the expiration of the biennial
appropriation which contained the challenged set-aside
provisions. Not surprisingly, there was no appeal.
It is impossible to determine from Judge Tyack’s
decision what evidence he relied upon or just what he
meant when he said “there exists . . . a discrimination.”
He did not identify the discriminator or discriminators. It
is particularly significant that he did not make an express
finding that the state of Ohio was a participant in the
discrimination.
Although there is no transcript of the evidence
adduced in Ohio Building Chapter, AGC, the briefs filed
by the parties are available and they do shed some light
on what the evidence was. In a section of the plaintiffs
brief entitled “The Facts,” the following statements
appear:
The Department of Administrative
Services admists [sic] that it maintains no
44a
records with respect to the race, sex, or
ethnic backgrounds of those who submit
bids for construction contracts. Nor does it
have any records with respect to the owners
of the stock when the bidder is a
corporation.
* * *
Although there is some evidence
that employees of the Department of
Administrative Services know relatively
few Minority Business Enterprises who
have successfully competed for public
contracts, there has been an abundance of
evidence that most contractors who qualify
as MBEs are relatively small and lack the
financial resources necessary to compete
and perform state jobs. Financial resources
are necessary because the contractor must
bear the cost of labor and materials for at
least 30 days and must provide the
statutory bonds. These same factors affect
most contractors who are not MBEs from
competing and performing state work.
There has been no evidence of prior
discrimination by the _ state against
contractors who qualify as MBEs.
The defendant has not’ even
attempted to show “a _ compelling
governmental interest for classification”
except for blacks. The evidence falls far
short of what is required to show a
compelling interest there for [sic] it has
focused on problems with labor unions and
employment, not with black contractors
being denied the right to bid by the state.
45a
Brief of Plaintiffs, Franklin C.P. Nos. 78CV-05-2343 and
79CV-01-247, filed herein as Defendant State of Ohio
Third Submission of Materials, Addendum K, Item 10, pp.
2-3. The state’s case on the issue of the constitutionality
of the set-aside provisions of the bill was presented by
special counsel, Otto Beatty, Jr. In his brief, Mr. Beatty
did not challenge the plaintiffs characterization of the
evidence before the court as quoted above. His own
summary of the evidence was as follows:
Plaintiff will not deny that minority
business enterprises engaged in
construction contracting (that is, the open
class who are beneficiaries of Defendants
[sic] actions now before the Court) receive
now, and have received in the past, little or
no business from the state. This is further
evidenced by the statistics and data
prepared by Mr. Burton D. Cooper, EEO
Program Supervisor for the Department of
Administrative Services and submitted as
Defendant’s Exhibits K-1, K-2, K-3, K-4, K-
5, L, M, N, O, and P. Plaintiffs cannot deny
that these minority businesses have in the
past been, and are still today, victims of
direct and indirect invidious discrimination.
This discrimination may have been part of a
general, diffused commercial and societal
pattern of discrimination. Nevertheless,
such discrimination is in_ direct
contradiction to the spirit, language, and
policy of the laws of Ohio.
Supplemental Brief of Special Counsel, Franklin C.P.
Nos. 78CV-05-2343 and 79CV-01-247, Defendant State of
Ohio Third Submission of Materials, Addendum K, Item
11, pp. 3-4. Mr. Beatty continued, as follows:
———————————oEO
46a
Defendants have already shown in
testimony and documentary’ evidence
presented before the Court, that the
numbers of minorities in the construction
trades in the State of Ohio has been, and is
exceedingly low. Furthermore, defendants
have shown that this dilemma was not due
to a lack of qualified minorities but rather
to technical discriminatory road blocks such
as inability to obtain surety bonds and
contracts, which effectively closed
employment opportunities to minority
contractors. ...
Supplemental Brief of Special Counsel, supra, p. 16. At
page 19 of his brief, Mr. Beatty argued as follows:
The plaintiffs would have the Court
to believe that the state’s affirmative action
— Set Aside Program cannot be justified by
any need to overcome past discrimination
because the State of Ohio has not been
found to have engaged in discrimination.
That proposition is erroneous for two
reasons: first, the State is not limited to
correcting the effects of its own
discrimination, but it can take into account
the consequences of discrimination
elsewhere in society; second, institutions or
governmental bodies need not await judicial
determinations before attempting to
overcome their own discrimination.
It would make no sense to conclude
that the State can take race or gender into
account only to compensate for its own
discrimination. Although in some cases a
remedy may be needed to break down a
discriminatory pattern in the
Ee ee ee ee ey
47a
administration and award of a state’s public
works program, whether the State
previously practiced discrimination of this
sort is not a necessary part of the
justification for a special affirmative action
or set-aside program.
Supplemental Brief of Special Counsel, supra, pp. 19-20.
The briefs of counsel are just as instructive for what they
do not say as they are for what they do say. They do not
refer to any anecdotal evidence of discrimination by state
contracting officers, or by any prime contractors, banks,
or lending companies. They do not refer to any disparity
studies which undertook to determine the number of
minority firms qualified to perform state construction
contracts, what percentage they were of all such firms,
and how that number compared to the percentage of state
construction contracts they received. Mr. Beatty’s brief
refers only to the fact that minority-owned businesses had
received little or no business from the state, and that the
number of minorities in the construction trades in Ohio
was “exceedingly low.” He argues that these firms were
the victims of unspecified “direct and indirect invidious
discrimination” which was “part of a general, diffused
commercial and societal pattern of discrimination,” and
“technical discriminatory road blocks such as inability to
obtain surety bonds and contracts.” Supplemental Brief of
Special Counsel, supra, pp. 3-4, 16.
The statistical evidence presented in Ohio
Building Chapter, AGC, was reviewed by Judge Kinneary
during the Keip trial. See Keip, 8.D. Ohio No. C-2-82-446,
pp. 15-16. The Supreme Court of Ohio relied upon Judge
Kinnearys summary of this evidence. See Ritchey
Produce, 85 Ohio St.3d at 255, 707 N.E.2d at 915. The
statistical evidence was compiled and presented by
Burton Cooper, an Equal Employment Opportunity
(“EEO”) program supervisor with the Department of
48a
Administrative Services. Cooper’s statistics indicated
that, during the twenty-two year period from 1957 to
1979, minority contractors were awarded roughly 0.21
percent of the dollar amount of certain categories of prime
capital improvement contracts. While Cooper’s
calculations showed that minority contractors obtained a
very small portion of these contracts, he did not
determine the number of minority firms who were ready,
willing, and able to perform such contracts, or what
percent of the total number of all such firms they
represented. Without this information, it would be
impossible to say whether minority firms received more or
less than their fair share of the contracts. Burton’s
calculations represent only the first step in a statistical
analysis of possible discrimination in the award of state
prime capital improvement construction contracts.
Standing alone, they have no probative value on the issue
of discrimination in the award of such contracts.
From the above analysis, it is apparent that Ohio
Building Chapter, AGC was tried on the theory that a
program of race-based benefits could be supported by
evidence that minorities had received only a small
percentage of state contracts, that minority firms were
disadvantaged as a result of past societal discrimination,
and that it was not necessary to show that the state was a
participant in the discrimination. The law was not
settled when Ohio Building Chapter, AGC was tried.
Indeed, the United States Court of Appeals for the Sixth
Circuit was incorrectly applying a relaxed standard of
review to race-based remedies until 1986 when the
Supreme Court of the United States reversed the Sixth
Circuit in Wygant. The evidence offered in Ohio Building
Chapter, AGC would not satisfy the requirements of strict
scrutiny, and Judge Tyack’s 1979 decision has little or no
probative value.
49a
d) 1978 Report of the Ohio Attorney
General’s Task Force on Minorities
in Business
In 1978, Ohio Attorney General William J. Brown
established a Task Force On Minorities In Business to
examine the relationship between state government and
minority business. The task force was directed to review
state laws, practices, and services relating to minority-
owned businesses, and to recommend legislative,
administrative, and fiscal measures to enhance assistance
to small businesses in general and to minority-owned
businesses in particular. In October 1978, the task force
issued its final report. The task force report contains
various findings concerning the problems faced by small
businesses in general, and minority businesses in
particular. Under the heading “Capital Formation and
Financing,” the report states:
. . Minority entrepreneurs often enter
their business ventures with limited, if any,
equity. As a result, these business owners
must seek financing from alternate funding
sources to sustain their business activities.
However, the Task Force found that there
are no effective financing sources available
for Ohio minority businesses.
Banking institutions are the
traditional source of business borrowing.
Banks prefer to lend funds for short term
use to an enterprise which has an
established earnings record or is fully
collateralized by assets which are easily
converted into cash. On the other hand, the
typical credit needs of a minority business
are for long term, low cost, unsecured or
inadequately secured financing. As a
consequence, the requirements and needs of
50a
the banking industry and the minority
entrepreneur are usually incompatible—
and minority businesses have been unable
to secure a significant number of bank
loans.
Attorney General of Ohio Task Force Report: Final
Report (hereinafter “Final Report”), filed herein as State’s
Exh. F, pp. 8-9.
Opportunities for minority
businesses to broaden their markets are
frustrated by such problems as their non-
competitive size, lack of capital and
inexperience.
Final Report, p. 13.
Bg * *
The public hearing testimony
indicated that minority entrepreneurs are
faced with the unique problems of minority
businesses as well as traditional problems
which befall most small businesses. Many
minority businesses are located in the high
crime, high unemployment and low income
urban areas of the State. These factors lead
to uncertain and _ unstable business
environments.
Final Report, p. 15.
The task force reviewed state contract
procurement statistics and procedures and reported that:
Sla
Statistics reveal that minority
businesses received less than one-half of
one percent (.5%) of all State purchase
contracts from 1975 to 1977; yet seven
percent (7%) of Ohio businesses are
classified as minority. Ohio minority
businesses are receiving less than one-
fourteenth (1/14) of their proportionate
share of State contracts.
Final Report, p. 17.
Noting that state contracts are awarded to the
bidder who submits the “lowest and best bid” the task
force recommended that the standard be changed to
“lowest, best, and most responsive” to permit “an even
greater latitude in the employment of relevant contract
award criteria other than price.” Final Report, p. 17. The
task force also recommended that the dollar limit on non-
competitive bidding be raised from $300 to $5,000, in
order to increase minority business participation. Final
Report, p. 18.
The task force pointed to public hearing testimony
which indicated that “[m]Jost black businessmen don’t
have the knowledge . . . to know where to go to find
[State] contracts.” Final Report, p. 18. The task force
concluded:
This lack of knowledge concerning
the availability of State contracts is a factor
which contributes to the low contract
procurement percentages reflected in
minority business statistics. . . .
Final Report, p. 18.
a TE IT Se ee ee a ee NE
52a
In the realm of bidding procedures, the task force
concluded that the state should alter its means of
preparing contract specifications by breaking contracts
down “into smaller, multiple sizes.” Final Report, p. 19.
In the area of bonding, the task force found:
In order to procure a state contract,
one must be able to acquire bonding, an
insurance against contract failure. As a
result, if one is unable to secure bonding,
this individual is also unable to secure a
State contract. Minority businesses have
faced severe difficulties in obtaining
bonding... .
* * *
Four major problem areas which
contribute to the inability of the minority
contractor to secure bonding are:
1) unsatisfactory financial
statements
2) improper estimating techniques
3) creditor liens (claims on the
property of a contractor)
4) lack of knowledge of the total
bonding process.
The above cited conditions are typical
problems which cause the surety industry
to deny bonding to minority businesses.
In addition, the extensive and
complex paperwork which must be
processed in order to acquire bonding
presents problems for the minority
entrepreneur. One witness stated that
there are approximately sixteen different
forms which must be completed before a
$3a
business person can acquire a bond. Many
minority entrepreneurs do not have the
technical expertise and managerial skills to
complete this paperwork.
Final Report, pp. 19, 20.
The task force recommended that the state
establish a program to offer bonds and bonding technical
assistance to minority entrepreneurs, and that the state
adopt a statutory enforcement mechanism to guarantee
equal bonding policies.
In the realm of capital acquisition, equity and
debt, the task force found that “small minority businesses
are often unable to bring together sufficient financial
resources due to the lack of an established earnings track
record and business credibility.” Final Report, p. 23. The
task force final report states:
The public hearing record indicates
that minority businesses have been unable
to successfully secure a significant number
of bank loans. Numerous witnesses
testified that they believed that the
minority entrepreneur’s inability to acquire
bank loans was due to the banking
industry’s discriminatory lending practices.
In rebuttal, witnesses from banking
institutions denied that Ohio bankers
engaged in discriminatory practices. Bank
representatives asserted that because their
primary public responsibility must be to
safeguard the funds of their depositors,
they do not extend substantial lines of
credit unless there is a high probability that
the credit will be repaid in a relatively short
period of time.
54a
Optimally, a banker would prefer to
lend funds for short term use to an
enterprise which has an_ established
earnings record and is fully collateralized
by assets which are easily converted into
cash. On the other hand, the typical credit
needs of a minority business person are for
long term, low cost, unsecured or
inadequately secured financing. These
inconsistent requirements and needs,
between the banking industry and the
minority entrepreneur, cause banking
institutions to be an inadequate and
illusory source of financing for minority |
business.
Final Report, p. 24. The task force recommended that the
state of Ohio create an agency which would be able to
make long-term direct loans to minority business
enterprises and guarantee long-term loans by banks and
other financial institutions to minority business
enterprises.
The Attorney General’s task force appears to have
conducted a serious and thorough study of the problems
facing small and minority businesses in Ohio in the
1970s. While it identified a variety of obstacles to the
success of minority businesses, its report is devoid of any
findings that racial discrimination played a role in the
inability of minority businesses to obtain a larger share of
state contracts.
e) Statistical Information
The statistical evidence of discrimination the Ohio
Supreme Court relied upon to uphold the Ohio MBE Act
consisted of:
55a
8 Data prepared by ODAS for the
defense of Ohio Building Chapter,
AGC v. Jackson;
2. Data compiled by the Legislative
Budget Office;
3. Disparity calculations extracted
from Keip and the 1978 report of the
Attorney General’s Task Force On
Minorities In Business.
See Ritchey Produce, 85 Ohio St.3d at 257-58, 707 N.E.2d
at 916-17.
3 Data prepared by ODAS for the defense of Ohio
Building Chapter, AGC v. Jackson
The statistical data which the state offered in
defense of the temporary set-aside program challenged in
Ohio Building Chapter, AGC was prepared in 1978 by
Burton D. Cooper, EEO Program Supervisor for ODAS.
Keip, S.D. Ohio No. C-2-82-446, p. 15. Cooper compiled
records from the State Architect’s Office of five categories
of capital improvement contracts awarded by the state
from 1957 to 1979. Id. He sought to determine the
portion of such contracts that were awarded to MBEs.
However, ODAS did not have records of the race or ethnic
background of the firms that submitted bids for
construction contracts. In an attempt to determine which
firms were minority-owned, Cooper consulted a roster of
minority contractors which ODAS had started keeping in
1976, and he asked for names of known minority firms
from unofficial sources such as the Urban League and
NAACP. Id. at p. 15 n.10. Cooper calculated the dollar
value of all of the contracts awarded in the five categories
during the twenty-two year period and determined that
56a
identifiable minority firms received roughly 0.21 percent
of that amount.
Cooper's calculations have some obvious
limitations. First, they do not represent all prime
construction contracts awarded by ODAS during the
years in question; instead, they represent only those in
the five categories he selected. Second, although his
calculations covered a period of twenty-two years, official
records on the identity of minority-owned firms were kept
only during the last three years of the period he studied.
The identity and number of minority-owned firms in the
1950s and 1960s was unknown. Some of Cooper’s data
was twenty years old when he compiled it, far too stale to
support a finding of present discrimination.
There is no indication that Cooper ever attempted
to determine the number of minority-owned construction
firms that were ready, willing, and able to enter into
prime construction contracts with the state, or what
percentage they represented of the total number of such
firms. Thus, the percentage of prime capital
improvement contracts awarded to identifiable MBEs is
meaningless. Without data on the availability of
minority-owned firms, it is impossible to say whether they
received more or less than their proportionate share of
those contracts.
Finally, Cooper did not attempt to calculate the
amount of state construction dollars which flowed to
minority-owned subcontractors during the period studied.
2. The Legislative Budget Office Data
The statistical information compiled by the
Legislative Budget Office (“LBO”) resulted from a “small
scale” investigation of minority participation in state
construction which was done in 1977 at the request of
S7a
Representative C.J. McLin. Keip, S.D. Ohio No. C-2-82-
446, p. 16. The investigation was limited to a study of
Department of Transportation prime _ construction
contracts for the years 1975, 1976 and 1977. Id. These
figures showed minority participation to be 0.13 percent,
0.3 percent, and 0.18 percent for the three years
respectively. Jd. The data did not include any
information on the number of MBE firms ready, willing,
and able to perform road construction work for the state
of Ohio, or what percentage they represented of the total
number of such firms. It did not include any information
on subcontracting.
3. Calculations based on 1972 census data
reported in Keip and the Attorney General’s
Task Force on Minorities in Business
The report of the Attorney General’s Task Force on
Minorities in Business states:
Statistics reveal that minority businesses
received less than one-half of one percent
(.5%) of all State purchase contracts from
1975 to 1977; yet seven percent (7%) of Ohio
businesses are classified as minority.
Final Report, p. 17.
The report, at page 17 note 2, cites the LBO data
as the source for the percentage of all state purchase
contracts awarded to minority businesses, but the LBO
study related only to construction contracts awarded by
the Department of Transportation. See Keip, S.D. Ohio
No. C-2-82-446, p. 16. Thus, the report misrepresents the
data, transforming a calculation of the percentage of
Department of Transportation construction contracts into
the percentage of all state purchase contracts. The
Supreme Court of Ohio accepted and relied upon this
58a
misstatement of the data. In fact, it does not appear that
the state had any data on minority businesses’ share of all
state purchase contracts, data which was absolutely
essential to any finding of disparity in the award of such
contracts.
The report cites 1972 Census Bureau statistics as
the source of the percentage of minority-owned business
in Ohio. It is apparent that the state relied on the same
information seventeen years ago in the trial of Keip.
These statistics [the ODAS and LBO
studies} were available to the General
Assembly when it was considering Am. Sub.
H.B. 584, as were U.S. Department of
Commerce statistics indicating that
minority businesses constituted
approximately 6.7 percent of the total
number of Ohio business enterprises.
Keip, S.D. Ohio No. C-2-82-446, p. 16. See also Final
Report, p. 13.
In Ritchey Produce, the Supreme Court of Ohio
relied on the 1972 census data which it gleaned from
Judge Kinneary’s decision in Keip, 85 Ohio St.3d at 258,
707 N.E.2d 871 at 916 (“...minority businesses
represented approximately 6.7 percent of the total
number of Ohio businesses.”) (citing Keip, S.D. Ohio No.
C-2-82-446, pp. 15-16), and from the report of the
Attorney General’s task force on minorities, 85 Ohio St.3d
at 258, 707 N.E.2d at 917 (“...minority-owned businesses
accounted for approximately seven percent of all Ohio
businesses.”) (citing Final Report).
The 1972 census data, published by the U.S.
Department of Commerce, includes a Bureau of the
Census special report entitled “1972 Survey Of Minority-
59a
Owned Business Enterprises,” as well as reports on all
businesses, regardless of race or ethnicity, which are
published for each state under the title “County Business
Patterns 1972.” These are public documents of which a
court may take judicial notice. See Mitchell v. Rose, 570
F.2d 129, 132 n.2 (6 Cir. 1978), cert. granted, 439 U.S.
816 (1978), rev’d on other grounds, 443 U.S. 545 (1979).
They are available at any public library. See Appendix A
to this Opinion and Order.
The 1972 survey of minority-owned business |
enterprises indicates that in 1972 there were a total of
11,877 minority-owned businesses in Ohio. This is
approximately the number reported in the report of the
Attorney General’s task force. See Final Report, p. 13
(reporting 11,183 minority-owned businesses). This |
number includes all minority-owned firms, both those
with employees and those without employees. Over
eighty percent of these firms (9,895 firms) did not have
employees. The 1972 census data available for the total
number of all business enterprises in Ohio was the total
number of firms with employees: 165,732. The report of
the Attorney General’s task force rounds this number up
to 166,000. Final Report, p. 13. It is apparent that the
calculations of the percentage of minority-owned firms in
Ohio which the Ohio Supreme Court relied upon in
Ritchey Produce were based on these numbers (11,153 is
6.7 percent of 166,000; and 11,877 is 7 percent of
165,732). It is also apparent that these calculations are a
classic case of comparing apples to oranges. The total
number of all minority-owned firms with and without
employees was compared with the total number of all
firms with employees. This calculation yields a number
which is completely useless for determining whether
minority-owned firms received a proportionate share of
state purchasing contracts. Yet, these calculations were
the ones relied upon by the Supreme Court of Ohio in
upholding the Ohio MBE Act. This shows the folly of
ae ee
60a
attempting to determine whether the state had a firm
basis in evidence for a remedial program of race-based
preferences in a case where the only “evidence” available
was the arguments in the state’s briefs.
The statistical evidence the court relied upon was
fatally flawed and formed no basis for a finding that
minority-owned firms received less than their
proportionate share of state contracts. The relevant
universe of minority businesses is not all minority
businesses in the state of Ohio, but only those willing and
able to enter into contracts with the state of Ohio. In the
case of a set-aside program in state construction, the
relevant universe is minority-owned construction firms
willing and able to enter into state construction contracts.
Dr. Merelyn Bates-Mims, Deputy Director of the
Department of Administrative Services, Equal
Opportunity Division, testified in the October 1998
hearing before this court that the total universe of Ohio
minority business enterprises would include:
carryout [sic] shops and beauty shops and
the kinds of things, kinds of small
businesses that you regularly find in
minority communities which may not at all
be interested or able to take advantage of
the large volume kinds of contracts that are
available in a _ state procurement
opportunity.
* * *
. and so there are many, many small
very, very, very small, one-person show
kind of operations in minority communities.
I don’t know what percentage make up that
22,000 of those kinds of businesses.
6la
Associated General Contractors of America v. Drabik,
Trial Transcript, pp. 144, 145. In her testimony, Dr.
Bates-Mims was referring to 1990 census data on the
number of minority businesses in Ohio. Justice O’Connor,
speaking for the Court, said in Croson:
There is no doubt that “where gross
statistical disparities can be shown, they
alone in a proper case may constitute prima
facie proof of a pattern or practice of
discrimination” under Title VII. But it is
equally clear that “when _ special
qualifications are required to fill particular
jobs, comparison to the general population
(rather than to the smaller group of
individuals who possess the necessary
qualifications) may have little probative
value.”
* * *
In this case, the city does not even know
how many MBE’s in the relevant market
are qualified to undertake prime or
subcontracting work in public construction
projects.
Croson, 488 U.S. at 501, 502. Special qualifications were
and are necessary to bid on prime construction contracts
for the state of Ohio. As the 1978 report of the Ohio
Attorney General’s Task Force On Minorities In Business
explained, those qualifications include adequate capital,
credit, and the ability to obtain bonding. Here, as in
Croson, the state did not know how many MBEs in the
relevant market were qualified to undertake prime or
subcontracting work in public construction projects.
62a
Since at least the turn of the century, Ohio law has
required that contracts for public works be awarded on
the basis of competitive bidding. See Carmichael v.
McCourt, 6 CC(NS) 561, 17 CD 775 (1905). Section
123.15 of the Ohio Revised Code provides that, except in
cases of extreme public exigency or emergency, any
contract for the performance of labor, furnishing of
materials, or the construction of any structures or
buildings in excess of $500 must be advertised in a
newspaper of general circulation in or contiguous to the
county where the contract is to be let, and where the work
is to be performed, and that “such contracts shall be
awarded to the lowest responsive and responsible
bidder. ...” If the state awards a contract to a firm that
did not submit the lowest bid, it can be and often is sued
by the lowest bidder. The courts of Ohio have not
hesitated to grant appropriate relief where the
disappointed bidder can show that it was the lowest
responsive and responsible bidder. Thus, any MBE who
was the lowest responsive and responsible bidder on a
state construction contract could seek immediate relief in
an Ohio court.
It is also the policy of the state to require
competitive bidding in the award of contracts for the
purchase of non-construction goods and _ services.
Although the policy varies somewhat from agency to
agency, in general it is the rule that purchases between
$300 and $2,000 are informally bid competitively by such
means as seeking telephone bids from three registered
vendors, or mailing bids to a selected number of
registered vendors with formal competitive bidding for
purchases in excess of $2,000, wherein bid requests are
mailed to all vendors registered for the products or
services. See Final Report, p. 18.
Since state contracts are awarded on the basis of
competitive bidding, overt discrimination in the award of
63a
contracts by state officials should be relatively easy to
detect and remedy. There is little or no opportunity for
the kind of subjective decision making which can mask
intentional discrimination. Indeed, ironically, one of the
suggestions made in the October 1978 Final Report of the
Ohio Attorney General’s Task Force On Minorities In
Business was to increase the opportunity for subjective
decision making in the award of state contracts so that
state contracting officials would have the discretion to
award more contracts to minority firms. See Final
Report, p. 17. This is not to say that such a system is
impervious to manipulation, but it does suggest that proof
that the state itself is discriminating in the award of such
contracts would require some evidence that competitive
bidding requirements were being’ ignored or
circumvented. No such evidence was offered in the
instant case and no such evidence was mentioned in
Ritchey Produce.
In the foregoing discussion, this court has
examined all of the information which the Supreme Court
of Ohio relied upon to uphold Ohio’s set-aside program in
state purchasing. In Ritchey Produce, the Supreme Court
of Ohio referred to this evidence variously as “a wealth of
evidence,” 85 Ohio St.3d at 262, 707 N.E.2d at 919, and “a
vast array of statistical evidence,” 85 Ohio St.3d at 261,
707 N.E.2d at 919, and concluded that the General
Assembly had a “strong basis’ in evidence to support its
conclusion that Ohio’s program was necessary to redress a
pattern of discriminatory exclusion of minorities from
state contracting opportunities .. . ,” 85 Ohio St.3d at 254,
707 N.E.2d at 914. This court respectfully disagrees. In
1980, when the Ohio General Assembly adopted its
minority set-aside program, the evidence that minority
firms had received less than their fair share of state
contracts because of a pattern of racial discrimination in
which the state was an active or passive participant was,
in the judgment of this court, non-existent. This court
64a
does not believe that, by any stretch of the imagination, it
can be said that this evidence satisfies the requirement
which the Supreme Court of the United States
established in Wygant, 476 U.S. at 277, and reiterated in
Croson, 488 U.S. at 500, that race-based remedies must
be supported by a “strong basis in evidence for [the]
conclusion that remedial action was necessary.”
In order to support a compelling state interest for
race-based preferences, the evidence of past
discrimination must be reasonably current. Where
evidence is “too remote to support a compelling
governmental interest to justify the affirmative action
plan,” it must be struck down. Brunet, 1 F.3d at 409. In
Brunet, the court found that fourteen-year-old evidence of
discrimination was too remote. Id. at 409. In Hammon v,
Barry, 264 U.S. App. D.C. 1, 826 F.2d 73, 76-77 (D.C. Cir.
1987), the Court of Appeals for the District of Columbia
Circuit found that discriminatory conduct occurring
eighteen years prior to the institution of an affirmative
action plan was insufficient to justify the plan. In Detroit
Police Officers Association v. Young, 989 F.2d 225, 228 (6th
Cir. 1993), the Court of Appeals for the Sixth Circuit
terminated a nineteen-year-old affirmative action plan
because “it no longer serves the same compelling state
interests as it once did under the changed circumstances
of almost two decades.”
In Ritchey Produce, the Supreme Court of Ohio
found that Ohio had a compelling interest for granting
race-based preferences in state contracting, relying on
twenty-year-old historical information it took from the
state’s briefs. Ohio’s high court seems to have been
entirely oblivious to the age of the “evidence” it relied on.
Information which is over two decades old can not form
the basis for a compelling state interest to redress past
discrimination.
65a
V.
The second branch of the strict scrutiny analysis is
whether the program at issue is “narrowly tailored.” In
United States v. Paradise, 480 U.S. 149, 171, (1987)
(citing Sheet Metal Workers’ Int'l Ass’n v. Equal
Employment Opportunity Comm’n, 478 U.S. 421, 481
(1986)), the Court identified four factors to be considered
in determining whether race-conscious remedies are
appropriate: “the necessity for the relief and the efficacy
of alternative remedies; the flexibility and duration of the
relief . . .; the relationship of the numerical goals to the
relevant labor market; and the impact of the relief on the
rights of third parties.”
a) Consideration of race-neutral alternatives
In Croson, the Court held that the Richmond plan
failed the “narrowly tailored” test because the city did not
give iny consideration to the use of race-neutral means to
increase minority business participation in_ city
contracting. Croson, 488 U.S. at 507. The Court noted
that:
Many of the barriers to minority
participation in the construction industry
relied upon by the city to justify a racial
classification appear to be race neutral. If
MBE’s disproportionately lack capital or
cannot meet bonding requirements, a race-
neutral program of city financing for small
firms would, a fortiori, lead to greater
minority participation.
Id.
In Ritchey Produce, the Supreme Court of Ohio
found that: “Ohio’s MBE program was enacted only after
66a
a host of earlier efforts designed to increase minority
participation in state contracting opportunities had failed
to eliminate the effects of racial discrimination in the area
of state contracting.” 85 Ohio St.3d at 267, 707 N.E.2d at
923. In so finding, the court referred to Part IV of its
opinion, wherein it enumerated the historical information
concerning the evidence of discrimination possessed by
the Ohio General Assembly when it enacted the 1980
MBE Act, and which this court has examined and
described in detail. Far from finding a “host of earlier
efforts to increase minority participation in state
contracting opportunities[,]” this court found in the
materials cited by the Ohio Supreme Court only one, to
wit: the provisions of the biennial appropriation bill
challenged in Ohio Chapter, AGC,-a limited race-
conscious program which lasted only two years.
This court has been unable to find any evidence in
the historical record that the Ohio General Assembly gave
any consideration to the use of race-neutral means to
increase minority participation in state contracting before
resorting to race-based quotas. The Supreme Court of
Ohio referred to the failure of various methods, such as
goals set by executive orders and administrative
regulations. Id. at 267-68, 707 N.E.2d at 923. The only
executive order referred to in Part IV of the Ohio
Supreme Court’s Ritchey Produce opinion is the January
27, 1972 executive order by former Ohio governor, John J.
Gilligan. This executive order does not create any specific
programs to assist minority contractors, nor does it
impose specific requirements on any state agency. It is
essentially an hortatory order which encourages all state
departments, agencies, commissions, and employees
under the governor’s jurisdiction to “rigorously take
affirmative action to insure equality of opportunity in the
internal affairs of state government, as well as their
relations with the public, including those persons and
organizations doing business with the State.” Executive
67a
Order of January 27, 1972, filed herein as State’s Exh. A,
p. 4. The only substantive aspects of the order relate to
the adoption of rules and regulations on equal
employment opportunity in state and state-assisted
construction projects, and the creation by the Director of
the Department of Public Works of a new division for
equal employment opportunity within that department.
The focus of the order is on employment, not on the award
of contracts. The order contains no numerical or other
tangible goals of any kind.
The Final Report of the Ohio Attorney General’s
Task Force On Minorities In Business, issued in October
1978, identified a number of specific obstacles to small
and minority-owned businesses seeking state contracts.
They included lack of information about state contracting
opportunities; lack of bonding capacity; lack of capital and
financing; as well as lack of basic management,
marketing, and accounting skills. The task force
concluded that previous state projects to assist minority
businesses “are ineffective, fragmented and limited in
scope.” Final Report, p. 27. The Attorney General
recommended various programs to remove these
impediments, including the establishment of a state
alternative bonding program of last resort; the
improvement of the system of disseminating information
regarding the availability of state contracts; the creation
of a department of minority business development to
provide a variety of services, including management and
technical assistance, procurement and bid -packaging
assistance, bonding underwriting and bonding technical
assistance, and direct loan and loan guarantee financing.
All of these recommendations could have been
implemented on a race-neutral basis before resorting to
race-conscious relief. There is no indication that the Ohio
General Assembly ever considered doing so. When the
General Assembly did adopt programs providing lending
and bonding assistance, they were part of the same race-
68a
conscious program which contains the set-aside quotas
here under attack and they were limited to the members
of the four specified racial minorities. The failure to
consider race-neutral means was fatal to the set-aside
program in Croson, and the failure of the state of Ohio to
consider race-neutral means before adopting the MBE Act
of 1980 likewise dooms Ohio’s program of race-based
quotas.
b) Flexibility
The Ohio Supreme Court held in Ritchey Produce
that Ohio’s MBE program satisfied the “flexibility” prong
of the “narrowly tailored” analysis, because all set-aside
requirements are to be met “approximately” and because
the waiver provisions of the program have been applied in
a flexible manner. See Ritchey Produce, 85 Ohio St.3d at
268, 707 N.E.2d at 924. The evidence presented in the
instant case, however, shows that there is no justification
for concluding that the word “approximately,” in the set-
aside statute results in flexibility. Indeed, to the
contrary, the evidence in the instant case revealed that in
the case of construction, the state has used the word
“approximately” to justify exceeding the set-aside goals,
but never for reducing or eliminating them. So, instead of
allowing flexibility to ameliorate harmful effects of the
program, the imprecision of the statutory goals has been
used to justify bureaucratic decisions which increase its
impact on non-minority businesses.
In July 1995, an MBE improvement team,
consisting of employees from eight cabinet agencies and
the governor’s office, evaluated the success of the Ohio
MBE program and reported that “the state has met and
exceeded the construction goals for many years.” State
Sponsored Equal Opportunity Programs in Ohio, March
28, 1996, Appendix I, Final Report of the MBE
Improvement Team, July 1995, filed herein as Plaintiffs
69a
Exh. 1, p. A-10. During the ten-year period from fiscal
year 1988 through fiscal year 1997, the percentage of the
dollar value of prime construction contracts set aside for
exclusive bidding by minority firms ranged from a low of
7.0 percent to a high of 9.40 percent. See Plaintiff's Exhs.
2 through 10.
The number and dollar amounts of contracts to be
set aside for exclusive bidding by minority contractors is
determined separately by each of the agencies or
departments of state government, and by each of the state
colleges and universities. Some of these agencies have
often far exceeded the five percent quota mandated by the
MBE statute. For example; in fiscal year 1996-97, 20.0
percent of the forty-five million dollars budgeted for prime
construction contracts by the Department of Public Safety
was set aside for bidding by minority firms only. And, in
the same year, 12.2 percent of the seventy million dollar
budget of the Department of Rehabilitation and
Correction was set aside for minority bidders only. See
Plaintiffs Exh. 10, p. 10. All of these percentages relate
to contracts set aside for bidding which are restricted to
minority-owned firms. They do not include the additional
contracts which minority-owned firms are awarded in free
competition in the open market. The evidence in the
instant case showed that, as one would expect, minority
firms do compete for these contracts and are often
successful, but the state does not keep records on the
dollar value of the contracts minority firms obtain
through free competition. The set-aside goals are not
adjusted for the dollar amount of contracts awarded on
the open market.
In Croson, the Supreme Court held that the
Richmond plan was not “narrowly tailored” observing
that:
70a
Since the city must already consider
bids and waivers on a case by case basis, it
is difficult to see the need for a rigid
numerical quota... .
Croson, 488 U.S. at 508. Justice O’Connor, writing for the
Court, noted that the congressional scheme upheld in
Fullilove v. Klutznick, 448 U.S. 448 (1980), allowed for a
waiver of the set-aside provision where an MBE’s higher
price was not attributable to the effects of past
discrimination. Id. She went on to note that, unlike the
program upheld in Fullilove:
[t]he Richmond Plan’s waiver system
focuses solely on the availability of MBE’s;
there is no inquiry into whether or not the
particular MBE seeking a racial preference
’ has suffered from the effects of past
discrimination by the city or prime
contractors.
Given the’ existence of an
individualized procedure, the city’s only
interest in maintaining a quota system
rather than investigating the need for
remedial action in particular cases would
seem to be’ simple administrative
convenience. But the interest in avoiding
the bureaucratic 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.
Id. The same defects exist in the Ohio plan. The waiver
system for prime contracts focuses solely on the
availability of MBEs. The awarding agency may remove
the contract from the set-aside program and open it for
bidding by non-minority contractors if no certified MBE
Tla
submits a bid, or if all bids submitted by MBEs are
considered unacceptably high. But in either event, the
agency is then required to set aside additional contracts
to satisfy the numerical quota required by the statute.
With respect to subcontracting, the Ohio plan allows for
administrative modification or waiver only if the prime
contractor is unable to locate qualified MBEs after
making a good faith effort. In neither instance is any
consideration given to whether the particular MBE
seeking a racial preference has suffered from the effects of
past discrimination by the state or prime contractors.
Cc) Duration of the relief
One critical prong of the “narrowly tailored” test is
limited duration. Such a program must be “appropriately
limited such that it ‘will not last longer than the
discriminatory effects it is designed to eliminate.”
Adarand, 515 U.S. at 238 (quoting Fullilove, 448 U.S. at
513 (Powell, J., concurring)). In Detroit Police Officers
Association, 989 F.2d at 228, the Sixth Circuit Court of
Appeals stated that:
[llimiting the duration of a race-conscious
remedy which clearly impacts adversely
upon the plaintiffs is a keystone of a
narrowly tailored plan as may be seen by
recent Supreme Court decisions.
See also Middleton v. City of Flint, Michigan, 92 F.3d 396,
413 (6% Cir. 1996), cert. denied, 520 U.S. 1196 (1997)
(remedial plan for promotion of police sergeants which
lasted nine years was not “narrowly tailored”).
In Ritchey Produce, the Ohio Supreme Court
responded to the duration element of the “narrow
tailoring” requirement of strict scrutiny, and found that
element satisfied because “the program is now and has
72a
always been subject to continuing reassessment and
review by the General Assembly.” Ritchey Produce, 85
Ohio St.3d at 269, 707 N.E.2d at 925. This, quite
obviously, begs the question. The 1980 MBE Act is
unlimited in duration. When the Act was passed, an
attempt to include a three-year sunset provision by
amendment was defeated. See Keip, S.D. Ohio No. C-2-
82-446, p. 9. While it is true that the Ohio General
Assembly has revisited the provisions of Ohio’s MBE Act
on six separate occasions since 1980, those revisitings
have been limited to minor adjustments. Ritchey
Produce, 85 Ohio St.3d at 269-70, 707 N.E.2d at 925.
There is no evidence that, at any time during the nearly
two decades the Act has been in effect, the General
Assembly has ever reconsidered whether a compelling
state interest exists which would justify the continuation
of a race-based remedy. One of the exhibits in the instant
case was the affidavit of Lynn R. Wachtman, a member of
the Ohio House of Representatives who has served
continuously since 1985. Mr. Wachtman’s affidavit
states:
5. During my tenure in the General
Assembly legislation which sought to
substantially modify or repeal race based
set asides has been introduced. On no
occasion did any such legislation advance
for serious consideration of passage. It is
my opinion that it would be politically
impossible for any legislation substantially
altering or repealing R.C. §123.151 to be
passed in the General Assembly of Ohio.
There are significant interest groups
represented in the legislative process that
have the ability and political influence to
effectively block such legislation.
Wachtman Aff. P5, Plaintiffs Exh. 27. -
73a
In retrospect, Judge Engle’s dissenting opinion in
Keip seems almost prophetic:
. .. Ohio’s Minority Business Enterprise Act
is fatally flawed by its failure to incorporate
any durational limitations upon its
operation. In its present form, this act
presents a very real danger of fostering a
dependency upon favoritism which is
inimical to general principles of equality
and, I believe, to the commands of the
Equal Protection Clause.
Keip, 713 F.2d at 176.
If an originally permissible race-conscious
remedy continues to operate after fulfilling
its objective of redressing past
discrimination, it becomes an impermissible
racial preference.
The Ohio MBE Act contains
absolutely no durational limitation and
thus threatens to outlive its legitimate
purpose.
I do not view this requirement as an
incidental concern. I am unable to agree
with the majority that the absence of any
durational limits may be safely overlooked
because it is “incredible” that a popularly
elected legislature would suffer the
continuance of such a law beyond the period
of constitutional need. On the contrary, I
find it entirely credible that such a law may
remain in force well beyond the elimination
74a
of discriminatory effects. It is precisely this
danger which has occasioned such emphasis
in the courts upon some _ distinct
termination or “sunset” provision.
Id. at 176, 177. The Ohio MBE Act of 1980 fails the
“narrowly tailored” test because it is unlimited in
duration.
d) The Relationship of the goals to the
relevant market
In Ritchey Produce the Supreme Court of Ohio
found that the numerical goals of the Ohio MBE Act
“have a direct relationship to Ohio’s_ contracting
market(,]” 85 Ohio St.3d at 268, 707 N.E.2d at 924, citing
its earlier discussion of the statistical evidence which
purportedly showed that “minority-owned businesses
accounted for approximately seven percent of all Ohio
businesses,” 85 Ohio St.3d at 258, 707 N.E.2d at 917.
Assuming it was true that MBEs_ constituted
approximately seven percent of all Ohio businesses (which
it was not), the court does not explain how this would
justify setting aside over twice that amount, or fifteen
percent, of the state’s business for minority firms. A goal
which exceeds the percentage of available minority firms
by over 100 percent bears no relationship to the relevant
market, and fails this element of the “narrowly tailored”
requirement of strict scrutiny.
But, in reality, the situation in Ohio is worse
because it is likely that minority firms ready, willing, and
able to perform state purchasing contracts are much less
than seven percent of all of such firms in Ohio. As
discussed above, the census data relied on by the state
and accepted by the Supreme Court of Ohio arrived at the
seven percent figure by comparing the number of minority
firms with and without employees to all firms with
75a
employees. If one were to use the census data for an
“apples to apples” comparison of all MBE firms with
employees (1,984) to all firms with employees (165,732), it
would show that minority firms represent only 1.2
percent of all Ohio firms. Using this estimate of
availability, it is apparent that the fifteen percent set-
aside quota would be well over ten times what it should
be.
Setting excessive and unreasonable goals which
have no relation to the availability of minority-owned
firms inevitably results in the sort of reverse
discrimination against non-minority firms described in
the following subsection of this opinion.
The state presented no evidence of the availability
of minority-owned construction firms which are qualified
to enter into prime construction contracts with the state
of Ohio, nor any evidence of the availability of minority-
owned firms which are qualified to perform subcontract
work on state construction projects. There is no evidence
that the prime contract goal of five percent or the
subcontracting goal of seven percent have any
relationship to the relevant market.
The goals of the Ohio MBE Act are not related to
the relevant market and the Act fails this element of the
“narrowly tailored” requirement of strict scrutiny.
e) Impact on the rights of non-minorities
The Ohio Supreme Court ended its analysis of
whether the Ohio MBE Act was “narrowly tailored” by
concluding that “the burdens imposed on non-MBEs by
virtue of the set-aside requirements are relatively light.”
Ritchey Produce, 85 Ohio St.3d at 270, 707 N.E.2d at 925.
The evidence presented here and elsewhere indicates
otherwise.
76a
The potential for arbitrary selection and the
“bunching” of set-aside selections resulting in the
exclusion of non-minority contractors from the
opportunity to bid on a substantial portion of a large state
agency’s purchase contracts was one of the potential
dangers of Ohio’s set-aside scheme which Judge Kinneary
noted in his decision in Keip nearly seventeen years ago:
In determining which contracts will
be set aside for minority bidding only, each
state agency acts autonomously and
exercises complete discretion. Individual
agencies’ practices in this regard can and do
lead to essentially arbitrary selections. The
factor of arbitrariness aside, however, some
agencies have found it difficult or
impossible to avoid “bunching” or
concentrating their set-aside selections into
a few particular areas for which there are
minority businesses available to bid.
Particularly with respect to procurement
contracts, the vast majority of which are let
by the Department of Administrative
Services, there are frequently no certified
minority vendors willing or able to bid on
certain types of goods. In order to achieve
its 15 percent quota under the Act, the
Department is forced to set aside
disprvportionately large contracts for goods
that minority vendors can deliver. In fiscal
year 1982, the Department decided to set
aside 100 percent of its contracts to_
purchase coal for the State of Ohio, and
thus, non-minority coal producers were
entirely denied the opportunity to sell any
coal to the State.
77a
Keip, S.D. Ohio No. C-2-82-446, pp. 17, 18. The evidence
in the instant case revealed that the practices criticized
by Judge Kinneary have continued for almost two
decades. For a period of time, the Department of
Rehabilitation and Corrections was satisfying its set-
aside obligations by reserving all or nearly all of its
plumbing contracts for minority bidders. Other state
departments and agencies were engaging in similar
practices. See Plaintiffs Exh. 14. As a result, non-
minority contractors in various trades were effectively
excluded from the opportunity to bid on any work for
large state agencies, departments, and institutions solely
because of their race.
In 1994, a non-minority painting contractor which
had enjoyed success in obtaining painting contracts with
The Ohio State University filed suit-in this court alleging
that its revenues from painting contracts with the
University had markedly declined, and that it had
received none at all after 1991, as a result of the
University’s decision to set aside all of its painting
contracts for minority bidders only. See Henry Painting
Co. v. The Ohio State University, Case No. C-2-94-0196
(S.D. Ohio). In its complaint, Henry Painting challenged
the constitutionality of the Ohio MBE Act facially and as
applied. Depositions and exhibits filed in Henry Painting
revealed that, in the early 1980s, The Ohio State
University had difficulty satisfying its fifteen percent
minority set-aside requirement for the purchase of goods
and services and, rather than attempting to raise
minority participation in each category of goods and
services, it began establishing 100 percent set asides for
certain goods and services, including painting, carpeting,
electrical work and supplies, janitorial services and
supplies, office supplies, stock form-paper, and painting
services. Thus, Henry Painting Company was effectively
excluded from bidding on painting contracts for The Ohio
State University because of the race of its owner. Over
78a
time, the list of trades, services, and commodities which
the University barred non-minorities from bidding on
grew to thirty-seven.
While Henry Painting Company’s motion for
summary judgment was pending, the University settled
the case by paying $300,000 and entering into a consent
decree in which it agreed to discontinue its practice of
setting aside 100 percent of all painting contracts for
minority bidders. This settlement avoided a decision on
the constitutionality of the 1980 MBE Act and it
preserved the University’s policy of setting aside 100
percent of other categories of goods and services for
bidding by minorities only.
The evidence in Henry Painting showed that the
University encouraged its various departments to exceed
the fifteen percent set-aside requirement for goods and
services. It issued a vendor’s information booklet to
purchasing agents, which stated, inter alia:
The University’s goal is to exceed the 15%
state requirement. ... It is important that
each department contribute according to
their potential and not stop once the 15%
figure is reached.
Henry Painting, Plaintiffs Motion for Summary
Judgment, Exh. E.
In the instant case, Dr. Merelyn Bates-Mims,
Deputy Director of ODAS, Equal Opportunity Division,
testified that there is no limit to the percentage of the
dollar value of the purchasing contracts that any state
agency department or institution may set aside for
minority bidding, and there are no provisions for
monitoring the set-asides to determine whether they
conform in any way to the percentage of qualified MBEs
79a
in the relevant market. The University apparently has
little concern about the impact these policies may have on
non-minority vendors. Pamela S. Clark, manager of the
University’s Minority Business Development Program,
gave the following deposition testimony:
Mr. Carvin:
Q. Is there anybody at Ohio State
University who has evaluated the
effectiveness or fairness of the
affirmative action program, so far as
you know?
Ms. Clark:
A. Not that I am aware of.
Mr. Carvin:
Q. Does that trouble you at all?
Ms. Clark:
A. No, Mr. Carvin, it doesn’t.
Henry Painting, Plaintiffs Motion for Summary
Judgment, Exh. E.
The evidence in Henry Painting revealed that
between the years 1992 and 1995, the University far
exceeded its five percent set-aside requirement for
construction services by awarding over twenty percent of
its construction budget to minority firms: twenty-eight
percent in 1992; twenty percent in 1994; and twenty-
seven percent in 1995. Henry Painting, Plaintiffs Motion
For Summary Judgment, Exh. N.
Since the early 1980s, The Ohio State University
has been saying to many different kinds of trades and
businesses: “Whites and other non-minorities need not
apply.” The evidence strongly suggests that other large
80a
state agencies and institutions have likewise completely
excluded non-minorities in various trades and businesses
from the opportunity to sell their goods to them.
The plaintiff in Ritchey Produce may be yet
another example of this kind of arbitrary concentration of
set-aside selections. It appears that this small produce
company in Zanesville, Ohio was able to obtain a two
million dollar contract to supply fresh fruits and
vegetables to state institutions as a result of being
certified as a minority business enterprise by the ODAS.
This, no doubt, represents a substantial part, perhaps
even 100 percent, of the state’s requirements. Mr.
Ritchey is no longer able to bid on that two million dollar
contract because of his race. Indeed, like Henry Painting
Company, he may now be completely precluded from
selling his product to the state of Ohio. Ironically, he
could have kept that contract if he had been born in India
instead of Lebanon. See DLZ Corp. v. Ohio Dept. of
Admin. Servs., 102 Ohio App.3d 777 (Ohio App. 10 Dist.
1995, 658 N.E.2d 28) (finding that Asian-Indians are
“Orientals” within the meaning of the Ohio set-aside
statute). The absurd and arbitrary nature of such a
scheme of racial classifications was well-stated by Judge
Hogan, the trial judge in Ritchey Produce:
Working our way north and west
from India we first come to Pakistan, then
Iran, then Iraq, then Syria, and fizally
Lebanon. If Asian Indians are “Oriental”,
shall we exclude Pakistanis separated from
India only by the Great Indian Desert? And
if Pakistanis are “Oriental”, shall we
exclude Iranians who share a common
border with Pakistan? And if Iran is
“Oriental”, shall we exclude Iraq separated
from Iran only by the Zagros Mountains?
And if Iraq is “Oriental”, shall we exciude
8la
t
Syria for the Euphrates River flows through
both countries? And finally if Syria is
“Oriental”, how can its contiguous neighbor
Lebanon be anything but “Oriental”?
This Court can think of few things
more repugnant to our constitutional
system of government than the construction
of a statute that would exclude a group of
United States’ [sic] citizens and residents of
Ohio from a State program, the sole criteria
for exclusion being the side of a river, a
mountain range, or a desert their ancestor
decided to settle.
The evidence in the instant case revealed that, in
1995, eighty percent of the dollar value of all set-aside
contracts went to only five percent of the certified MBE
contractors. Report to the Governor, State Sponsored
Equal Opportunity Programs In Ohio, filed herein as
Plaintiffs Exh. 12, p. 3. These firms include highly
successful MBE firms such as the intervenor herein, the
Sherman R. Smoot Corp., which is listed among the top
four hundred contractors in the nation with revenues of
$110.7 million in 1997. Plaintiffs Exh. 15.
In light of the concerns expressed by Judge
Kinneary in his 1982 decision in Keip, the evidence
presented in Henry Painting, and the evidence in the
instant case, it appears that Ohio’s MBE Act which was
created ostensibly to remedy past discrimination against
minority-owned firms in the sale of goods and services to
the state of Ohio has become a tool for reverse
discrimination against non-minority firms.
82a
f) Random inclusion of minority groups
The Ohio MBE Act provides race-based benefits to
four specific minority groups: blacks, American Indians,
Hispanics and Orientals. R.C. 122.71(A)(1).
In Ritchey Produce, the Ohio Supreme Court
acknowledged that “the United States Supreme Court
specifically warned against the ‘random inclusion’ of
minority groups in an MBE set-aside plan.” Ritchey
Produce, 85 Ohio St.3d at 266, 707 N.E.2d at 922. It went
on to say that “the information that was considered by the
General Assembly at the time Ohio’s MBE program was
first adopted in 1980 included information concerning the
four specific minority groups specified in the [MBE
statute].” Id. at 265, 707 N.E.2d at 922. However, the
only information the court cited in support of this
statement was one sentence in Judge Tyack’s 1979
decision in Ohio Building Chapter, AGC discussed supra.
There is not the slightest hint in the briefs filed in that
case that the parties had any information about the
number of black, Hispanic, Oriental or American Indian-
owned construction firms, or the respective shares of the
total capital improvement expenditures they received.
None of the statistical information discussed in Part IV of
the Ritchey Produce opinion breaks down the percentage
of all firms that were owned by specific minority groups or
the dollar amounts of contracts received by firms in
specific minority groups. There is no indication that this
kind of information was included in the statistical data
which the Ohio General Assembly possessed in 1980.
In Croson, the Supreme Court noted that “it may
well be that Richmond has never had an Aleut or Eskimo
citizen.” Croson, 488 U.S. at 506. Similarly, it may well
be that in 1980, no American Indian-owned construction
firm had ever sought to perform a prime construction
contract for the state of Ohio. The apparent random
83a
inclusion of racial groups that, as a practical matter, may
never have suffered from discrimination in the
construction industry in Ohio “strongly impugns the
[states’] claim of remedial motivation.” Croson, 488 U.S.
at 506.
VI.
The Ohio Supreme Court concluded its. Ritchey
Produce opinion with the statement that “Ohio’s MBE
program should be upheld unless it is clearly
unconstitutional beyond a reasonable doubt.” Ritchey
Produce, 85 Ohio St.3d at 274, 707 N.E.2d at 928. The
proposition that a program of race-based benefits should
be upheld unless it is “clearly unconstitutional beyond a
reasonable doubt” appears to be a novel one in equal
protection jurisprudence. Ohio’s high court cites no
precedent to support this proposition of law, and it is
difficult to reconcile it with pronouncements contained in
various opinions of the Supreme Court of the United
States which have become settled law:
Racial and ethnic distinctions of any sort
are inherently suspect and thus call for the
most exacting judicial examination.
Regents of the Univ. of California v. Bakke, 438 U.S. 265,
291 (1978) (Powell, J., joined by White, J.).
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.
Fullilove, 448 U.S. at 491.
84a
The history of racial classifications in this
country suggests that blind judicial
deference to legislative or executive
pronouncements of necessity has no place in
equal protection analysis.
Croson, 488 U.S. at 501.
[A]lny person, of whatever race, has the
right to demand that any governmental
actor subject to the Constitution justify any
racial classification subjecting that person
to unequal treatment under the strictest
judicial scrutiny.”
Adarand, 515 U.S. at 224.
CONCLUSION
In determining whether to grant a stay pending
appeal, the court should consider the same four factors
that are traditionally considered in evaluating the
granting of a preliminary injunction. Michigan Coalition
of Radioactive Material Users, Inc. v. Griepentrog, 945
F.2d 150, 153 (6% Cir. 1991), rev’d on other grounds, 954
F.2d 1174 (6% Cir. 1992) (citing Frisch’s Restaurant, Inc.
v. Shoney’s Inc., 759 F.2d 1261, 1263 (6% Cir. 1985); In re
DeLorean Motor Co., 755 F.2d 1223, 1228 (6 Cir. 1985)).
These well known factors are: “1) the likelihood that the
party seeking the stay will prevail on the merits of the
appeal; 2) the likelihood that the moving party will be
irreparably harmed absent a stay; 3) the prospect that
others will be harmed if the court grants the stay; and 4)
the public interest in granting the stay.” Griepentrog, 945
F.2d at 153.
This court believes that it is very unlikely that the
state will prevail on the merits of its appeal. The state
85a
will not sustain any irreparable injury if a stay is not
granted. If the court grants the stay, there is a great
likelihood that others will be harmed, specifically non-
minority businesses which seek to do business with the
state will be harmed by being excluded from the
opportunity to bid on state contracts solely because of
their race. These same non-minority businesses have
suffered from the effects of an illegal and unreasonable
program of race-based quotas for nearly twenty years,
and this court believes that it would be intolerable to
permit that harm to continue for one more day. The
public interest in this case is represented by the
principles embodied in the Equal Protection Clause of the
Fourteenth Amendment to the United States
Constitution. In this case, the public interest would not
be served but instead violated if the court were to grant
the requested stay.
The motion for stay pending appeal is denied.
It is so ORDERED.
JAMES L. GRAHAM
United States District Judge
DATE: May 20, 1999
86a
1972
SURVEY OF MINORITY-OWNED
BUSINESS ENTERPRISES
Bureau of the Census
Special Report
With
Geographic All firms paid employees
Line division State, Firms Gross Firms Employees
Number and industry receipts
(number)\($1,000\number)\(number)
Middle Atlantic 44,309 1,735,232 7,658 38,254
New York 23,844 882,578 3,798 20,259
Construction 1,468 60,434 227 1,819
Manufacturing 615 69,864 280 3,629
Transportation and1,812 36,386 165 836
public utilities
Wholesale trade 584 127,890 194 890
Retail trade 6,513 334,134 1,515 5,881
Finance, insurance,1,179 55,246 188 1,604
and real estate
Selected services 10,163 179,106 1,196 5,412
Other industries 205 3,422 15 125
Industries not 1,305 14,096 18 63
classified
New Jersey 8,762 365,706 1,523
Construction 784 36,576 166
Manufacturing 166 25,840 87
Transportation and1,134 35,213 123
public utilities
Wholesale trade 166 47,208 56
Retail trade 2,465 149,258 552
Finance, insurance, 303 17,105 45
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
87a
and real estate
Selected services 3,042 47,153
Other industries 134 1,807
Industries not -— 568 5,746
classified
Pennsylvania 8,903 408,948
Construction 752 40,652
Manufacturing 166 23,823
Transportation and 639 18,582
public utilities
Wholesale trade 129 38,554
Retail trade 2,750 201,765
Finance, insurance, 300 21,238
and real estate
Selected services 3,768 59,672
Other industries 77 1,309
Industries not 322 3,353
classified
Not allocated 2,800 78,000
by State
East North 47,304 2,066,662
Central
Ohio 11,877 394,574
Construction 1,188 48,002
Manufacturing 151 23,519
Transportation and1,341 30,537
public utilities
Wholesale trade 107 23,897
Retail trade 3,363 184,621
Finance, insurance, 709 14,869
and real estate
Selected services 4,396 62,607
Other industries 148 2,270
700
364
3,492
486
2,440
19
34
1,000
9,661 55,454
1,984 10,792
212
52
119
44
892
67
573
10
1,331
834
461
286
4,385
(D)
3,124
32
88a
Industries not 472
classified
Indiana 3,831
Construction 393
Manufacturing 50
Transportation and 396
public utilities
Wholesale trade 51
Retail trade 1,176
Finance, insurance, 152
and real estate
Selected services 1,369
44
198
Other industries
Industries not
classified
Illinois 15,475
Construction 845
Manufacturing 308
Transportation and 906
public utilities
Wholesale trade 300
Retail trade 5,829
Finance, insurance, 816
and real estate
Selected services 5,548
Other industries 131
Industries not 792
classified
Michigan
Construction 715
Manufacturing 152
Transportation and 788
public utilities
Wholesale trade
9,483
121
4,252
151,496
16,840
4,558
10,190
21,380
67,119
3,151
25,548
1,187
1,522
788,948
50,897
84,226
30,150
78,693
370,306
48,561
116,156
2,734
7,225
481,772
37,648
35,071
18,871
57,954
(D)
4,695
649
215
(D)
(D)
1,813
103
1,445
31
(D)
3,060 19,929
177
126
102
108
1,515
163
840
7
22
- 1,446
2,110
800
611
7,826
1,863
5,153
64
56
2,070 12,772
135
73
88
49
948
960
660
605
69
70
71
72
73
89a
Retail trade 3,187
Finance, insurance, 559
and real estate
Selected services 3,437
Other industries 148
Industries not 378
classified
individual companies.
242,020 1,040 5,553
18,135 75
65,495
2,661 12
3,917 10
Withhold to avoid disclosing figures for
2 Not calculated for national sample.
596
588 3,394
28
26
Line
—
mm CO OC -1 GD Or m CO dO
- ©
COUNTY BUSINESS PATTERNS
The State, by Industry: 1972
With paid employees Without paid
employees
Gross Average Average FirmsGross Average
Number receipts employees receipts
per firm per firm
($1,000 number) $1,0000\ number) $1,000 $1,000)
1,198,921 5 157
619,822 5 163
45,211 8 199
65,887 13 235
20,196 5 122
116,587 5 601
215,184 4 142
46,364 9 247
106,100 5 89
1,112 8 74
3,181 4 177
36,651
20,046
1,241
335
1,647
390
4,998
991
8,967
190
1,287
per firm
536,311 15
262,756 13
15,223 12
3,977 12
18,190 11
11,303 29
118,950 24
8,882 9
73,006 8
2,310 12
10,915 8
receipts receipts
253,436
25,497
112,270
11,079
oO or
24,505
19,775
43,906
98,859
14,454
25,768
566
106
—
1,135
15,438
3,302
50,399
2,651 ©
21,385
1,241
5,640
—
— Ow dS P ~] OTe
279,763
24,507
22,158
9,896
34,646
136,244
18,513
32,539
469
789
129,185
16,145
1,665
8,684
3,908
65,521
2,725
27,133
840
2,564
6
6
4
7
6
5
7
5
3
4
—
32 45,900 32,100
33 1,539,113
or)
527,549
34 276,402
35 34,296
36 22,433
37 15,358
38 22,595
39 =: 132,310
40 (D)
41 38,541
42 940
43 (D)
118,172 12
13,706 14
1,086 11
15,179 12
1,302 21
52,311 21
(D) (D)
24,066 6
1,330 10
(D) (D)
= _
WALT AIRAATHA
-
66
67
68
69
70
71
72
73
112,387
12,519
4,265
(D)
(D)
49,349
1,849
17,681
455
(D)
600,842
39,876
81,138
18,499
72,966
268,920
41,603
76,415
733
672
369,120
27,911
33,839
9,754
55,820
183,672
13,089
43,095
1,350
590
-ao-,
Saaaa
wWOOoDe OD wO=~180 =~)
—_
—_
Onmwcnns wdew=1
9la
145
130
213
(D)
(D)
137
84
84
76
(D)
196
225
644
181
676
178
255
91
105
31
178
207
464
111
1,139
177
175
73
113
59
3,056
297
30
369
25
815
130
1,158
38
194
12,415
688
182
804
192
4,314
653
4,708
124
70
7,413
580
79
700
72
2,147
484
2,849
134
368
39,108
4,321
293
(D)
(D)
17,770
1,302
7,867
732
(D)
188,106
11,021
3,068
11,651
5,707
101,386
6,958
39,741
2,001
6,553
112,652
9,737
1,232
9,117
2,134
58,348
5,046
22,400
1,311
3,327
D Withhold to avoid disclosing figures for
individual companies.
2 Not calculated for national sample.
13
15
10
(D)
(D)
22
10
7
19
(D)
15
16
17
14
30
24
11
8
16
9
15
17
16
2s.
30
27
10
~
10
9
92a
APPENDIX B-2
UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF OHIO, EASTERN DIVISION
The Associated General Contractors of Ohio,
Inc., et al.,
Plaintiffs,
vs.
Sandra Drabik, et al.,
Defendants.
Case No. C2-98-943
JUDGE JAMES L. GRAHAM
ORDER
This action seeks declaratory and injunctive relief
challenging the constitutionality of Ohio Revised Code
Section 123.151. This action arises out of a set-aside
contract sought to be awarded by defendants in
connection with the construction of the Administration
Building at the Toledo Correctional Institution. A
preliminary injunction hearing was consolidated with a
trial on the merits under Rule 65(a)(2) of the Federal
Rules of Civil Procedure and trial to the Court
commenced on October 26, 1998. Based upon the reasons
set forth in the Court’s findings and conclusions
announced from the bench on October 28, 1989; it is
hereby
ORDERED, ADJUDGED AND DECREED
93a
1. Ohio Revised Code Section 123.151 and all
rules, regulations and practices promulgated thereunder,
which provide for and implement racial or ethnic
preference provisions for the awarding of State
construction contracts and State construction
subcontracts violate the Equal Protection Clause of the
Fourteenth Amendment to the United States Constitution
and are therefore, invalid, null and void;
2. Ohio Revised Code Section 123.151 violates the
rights of plaintiffs’ members under the Fourteenth
Amendment to the United States Constitution and the
laws of the United States, including 42 U.S.C. §§ 1981
and 1983;
3. The defendants Sandra Drabik, Director of the
Ohio Department of Administrative Services, and
Reginald Wilkinson, Director of the Ohio Department of
Rehabilitation and Corrections, are enjoined from
awarding the set-aside contract for the construction of the
Administration Building at the Toledo Correctional
Institution unless and until the race and ethnicity
requirements of said contract are removed;
4. The defendants Sandra Drabik, Director of the
Ohio Department of Administrative Services, and
Reginald Wilkinson, Director of the Ohio Department of
Rehabilitation and Corrections, and their representatives,
agents, successors and employees, and all persons acting
in concert or participation with them, are enjoined from
implementing or enforcing the provisions of Ohio Revised
Code § 123.151 and all rules, regulations and practices
promulgated thereunder which provide for racial or ethnic
preferences for the awarding of state construction
contracts and subcontracts.
5. The plaintiffs are prevailing parties under 42
U.S.C. § 1988 and may seek an award of reasonable
94a
attorney fees in an amount to be determined by the Court;
and
6. The plaintiffs are entitled to recover their costs
herein.
It is so ORDERED.
JAMES L. GRAHAM
United States District Judge
DATE: October 30, 1998
95a
APPENDIX B-3
UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF OHIO, EASTERN DIVISION
The Associated General Contractors of Ohio,
Inc., et al.,
Plaintiffs,
vs.
Sandra Drabik, et al.,
Defendants.
Case No. C2-98-943
PROCEEDINGS
BEFORE THE HONORABLE JAMES L. GRAHAM,
UNITED STATES DISTRICT JUDGE, SITTING AT
COLUMBUS, OHIO, ON WEDNESDAY, OCTOBER 28,
1998.
APPEARANCES:
KEVIN McDERMOTT
TROY MORRIS
On behalf of the Plaintiff.
DARIUS KANDAWALLA
JUDITH FRENCH
On behalf of the Defendant.
DONALD LEACH
JOHN YOUNG
On behalf of the Intervenor.
JUDGE’S DECISION
EEK HK KF
THE COURT: Counsel, I want to take several
minutes to reflect on your arguments, also to review my
notes. So we are going to stand in recess for the next
several minutes. I have been informed, Mr. Leach, that
you have a commitment and you will have to leave at
10:00.
MR. LEACH: Yes, for approximately an hour. It
is a family commitment.
THE COURT: You are certainly excused, and you
may feel free to leave when you are required to do so.
MR. LEACH: Thank you.
THE COURT: Mr. Cessner, you may recess court.
(Short recess).
THE COURT: Counsel, thank you for your
patience.
KREAEKE EES
THE COURT: Now, let’s begin then with the legal
standards that apply to a case of this kind. The Court has
consolidated the hearing on the motion for a preliminary
injunction with the hearing on the merits of this case, and
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the Court is prepared to render a decision on both issues
this morning and to rule on the plaintiffs request for
injunctive relief, not only on a preliminary but on a
permanent basis, and decide this case on its merits.
Now, let me begin with just a general discussion of
the equal protection clause. The equal protection clause
guarantees that no state shall deny to any person within
its jurisdiction the equal protection of laws. That is the
precise language of the Fourteenth Amendment of the
United States Constitution. The central purpose of this
clause is to prevent the states from purposefully
discriminating between individuals on the basis of race.
Thus, preferences based on racial criteria must receive a
most searching examination to make sure that they do
not conflict with constitutional guarantees, and many of
these phrases will be familiar to counsel because they
come directly from landmark decisions of the United
States Supreme Court.
All governmental classifications by race are subject
to strict scrutiny regardless of whether they are
supported by a remedial or benign purpose. That of
course was the pronouncement of the Supreme Court in
the case of City of Richmond versus J.A. Croson.
The party defending the plan bears the burden of
producing evidence that the plan is constitutional, while
the party challenging the plan retains the ultimate
burden of proving its unconstitutionality. Now, it is true
that, in general, state laws are entitled to a presumption
of validity. But not all legislation is entitled to the same
presumption of validity. The presumption is not present
when a state has enacted legislation whose purpose or
effect is to create classes based upon racial criteria since
racial classifications in a constitutional sense are
inherently suspect.
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Now, a government actor does have a compelling
state interest when its concern is remedying past
discrimination, but the government actor must have a
strong basis in evidence of past discrimination on the part
of the governmental entity and the need for remedial
action. A mere assertion by the governmental entity that
remedial action is required is not sufficient. The state
actor must produce evidence that the identified effects
were caused by past discrimination, and that the effects
are of sufficient magnitude to justify the program, and
that the program was adopted to remedy the identified
present effect of past discrimination. Blind judicial
deference to legislative or executive pronouncements of
necessity has no place in the equal protection analysis.
The existence of societal discrimination alone can’t
support a racial classification. Rather, there must be
some showing of prior discrimination by the governmental
unit either as an active or passive participant.
Now, the second branch of strict scrutiny or the
second branch of the strict scrutiny analysis is whether
the program at issue is narrowly tailored, and limitations
on the duration of a race-conscious remedy is one of the
keystones of a narrowly tailored plan.
Now, the State of Ohio has failed to produce any
evidence in this proceeding of past discrimination against
minority-owned business enterprises in state contracting.
The plaintiff produced a number of witnesses, including
officers and agents of the State of Ohio, who are directly
involved in the award of state construction contracts who
said that they are not aware of any unfairness or racial
discrimination in the award of state construction
contracts. The plaintiffs produced the statistical reports
compiled by the state agency charged with the
responsibility for maintaining statistics which show the
percentage of awards of state contracts to certified
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minority business enterprises. And even though those
statistics fail to include the entire universe of minority-
owned enterprises, even the limited universe reflected in
these reports would fail to establish any disparity in the
award of state construction contracts to minority business
enterprises. Indeed, they would suggest just the opposite:
Namely that minority business enterprises are receiving
not only their fair share, but sometimes more than their
statistically proportionate share of state construction
contracts.
In the face of this evidence, the state has totally
failed to show the existence of past discrimination in the
award of state construction contracts in which the state
was either an active or passive participant.
Now, the constitutionality of this particular state
statute was the subject of previous litigation in this
Court, and I refer, of course, to the Keip case, and the
state has tendered as evidence supporting the statute the
entire record in the Keip case. Now, the Court has not yet
received the entire record in the Keip case, but the Court
has sufficient information about the Keip case to be able
to analyze what effect that record would have in the
present case.
The trial court’s decision in the Keip case is one of
the exhibits in this record, and of course the judgment of
the trial court was reversed by the Sixth Circuit Court of
Appeals. However, it is clear that in the Keip case, the
Sixth Circuit did not apply the correct standard. It did
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