Rothe Development Corp. v. U.S. Dept. of Defense

• Citation: 49 F.Supp.2d 937
• Decision Date: 27 April 1999
• Docket Number: Civil Action No. SA-98-CA-1011-EP.
• Parties: ROTHE DEVELOPMENT CORPORATION, Plaintiff, v. THE UNITED STATES DEPARTMENT OF DEFENSE, and the United States Department of the Air Force, Defendants.
• Court: U.S. District Court — Western District of Texas

49 F.Supp.2d 937

ROTHE DEVELOPMENT CORPORATION, Plaintiff, v. THE UNITED STATES DEPARTMENT OF DEFENSE, and the United States Department of the Air Force, Defendants.

Civil Action No. SA-98-CA-1011-EP.

United States District Court, W.D. Texas, San Antonio Division.

April 27, 1999.

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David Franklin Barton, The Gardner Law Firm, San Antonio, for Rothe Development Corporation.

Britannia Hobbs Hardee, United States Attorney, San Antonio, Richard S. Ugelow, Employment Litigation Section Civil Right Division, U.S. Department of Justice, Washington, DC, Janie Allison Sitton, Stephen J. Curran, for United States Department of Defense, the United States Department of the Air Force.

Terry Dean Kernell, Mayer, Brown & Platt, Houston, Scott T. Nonaka, Mayer, Brown & Platt, New York, NY, for Asian American Legal Defense and Education Fund, National Asian Pacific American Legal Consortium, Asian Law Caucus, Inc., Asian Pacific American Legal Center.

ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

PRADO, District Judge.

On this date the Court considered cross motions for summary judgment in the above-styled and numbered cause, filed on February 26, 1999. In addition, the Court considered the brief and accompanying materials filed by amici curiae, Plaintiff's motion to strike portions of Defendants' summary judgment evidence, and Plaintiff's motion to strike Defendants' letter brief. After careful consideration, the Court will grant Defendants' motion for summary judgment, deny Plaintiff's motion for summary judgment, deny Plaintiff's motion to strike Defendants' summary judgment evidence, including the Department of Commerce's Benchmark Study, and grant Plaintiff's motion to strike Defendants' letter brief.

INTRODUCTION

Plaintiff, San Antonio-based Rothe Development Corporation, was denied a contract with the United States Department of Defense (DoD) to operate and maintain the Network Control Center and the Switchboard Operations functions at Columbus Air Force Base in Mississippi. The parties agree that Rothe lost the bid for the contract solely as a result of the application of an evaluation preference designed to favor "socially and economically disadvantaged persons." Rothe was the low bidder, but, pursuant to the statutory preference, the DoD increased all bids submitted by non-qualifying companies by ten percent. As a result of that action, the contract went to International Computer and Telecommunications, Inc. (ICT), a business owned by Korean-American David Sohn.

Rothe sued the Government in this Court, requesting that a temporary restraining order be issued to stay the contract until the matter could be resolved. Upon agreement from the parties that the case could be tried on motions, before the expiration of the current contract, the Court denied the request for a restraining order.

In its motion, Rothe complains that the application of the preference violated its right to equal protection under the Fifth Amendment to the United States Constitution. The Government responds that the preference satisfies the strict scrutiny standard established by the United States Supreme Court in Adarand v. Pena, 515 U.S. 200, 115 S.Ct. 2097, 132 L.Ed.2d 158 (1995) — that the preference is narrowly tailored to satisfy a compelling government interest.

THE STATUTORY SCHEME AT ISSUE

Section 1207 of the National Defense Authorization Act of 1987 (the 1207 program) sets a statutory "goal" of five-percent participation by economically and socially disadvantaged businesses in DoD contracts. See 10 U.S.C. § 2323. The 1207 program points to section 8(d) of the Small Business Act in order to define economically and social disadvantaged businesses. See 10 U.S.C. § 2323(a)(1)(A); 15 U.S.C. § 637(d). That provision states that a business is "small" if it is independently owned and operated and is not dominant in its field of operation, and if its number of employees or annual gross receipts falls below a predetermined level. 15 U.S.C. § 632(a)(1)-(3). The business is deemed to be owned and controlled by a socially and economically disadvantaged person if such person owns at least fifty-one percent of the business and controls the business's management and daily operation. 15 U.S.C. § 637(d)(3)(C)(i)(ii). To qualify, an individual must have a net personal worth of under $750,000, excluding the value of his or her business and personal residence. 13 C.F.R. § 124.106(b)(2) (1998).

Under the Small Business Act, certain groups, including Black Americans, Hispanic Americans, Asian Pacific Americans, and other minorities, are presumed to be both economically and socially disadvantaged. See 15 U.S.C. § 637(d)(3)(C).¹ That presumption may be rebutted by a contracting officer, a failed bidder, or the Small Business Administration (SBA). 48 C.F.R. § 219.302-70 (1997). Presumptively disadvantaged individuals are still required to meet the personal worth requirement.

In addition, other individuals, not members of the groups given the statutory presumption, may offer proof that they have been socially disadvantaged because of their color, ethnicity, gender, physical handicap, or "residence in an environment isolated from the mainstream of American society." 13 C.F.R. § 124.105(c)(1)(i) (1998). If such an individual can demonstrate that this disadvantage has adversely affected his or her status in the business community, he or she is considered to be economically and socially disadvantaged.

The 1207 program authorizes the DoD to apply a price-evaluation adjustment of ten percent in order to attain the five-percent contracting goal. 48 C.F.R. subpart 219.10 (1997); id. §§ 252.219-7000 & -7006. Under that provision, the DoD may raise the bids of non-SDBs by ten percent in order to give bidding SDBs a preference. Bidding SDBs may waive the evaluation preference. 48 C.F .R. § 219.7002(a).

EQUAL PROTECTION AND AFFIRMATIVE ACTION

The Constitution guarantees that the government will treat similarly situated individuals similarly. See U.S. CONST. amends. v. and XIV; Plyler v. Doe, 457 U.S. 202, 216, 102 S.Ct. 2382, 72 L.Ed.2d 786 (1982). While this protection applies, with varying degrees of severity, to government classifications of all kinds, when a government seeks to treat similarly situated individuals differently from one another on the basis of their race or ethnicity, the government's action is reviewed with the most stringent judicial scrutiny.² See Craig v. Boren, 429 U.S. 190, 213 n. 1, 97 S.Ct. 451, 50 L.Ed.2d 397 (1976) (Stevens, J., concurring); Loving v. Virginia, 388 U.S. 1, 7, 87 S.Ct. 1817, 18 L.Ed.2d 1010 (1967); McLaughlin v. Florida, 379 U.S. 184, 192-93, 196, 85 S.Ct. 283, 13 L.Ed.2d 222 (1964); Korematsu v. United States, 323 U.S. 214, 216, 65 S.Ct. 193, 89 L.Ed. 194 (1944); United States v. Carolene Prods., 304 U.S. 144, 152-53 n. 4, 58 S.Ct. 778, 82 L.Ed. 1234 (1938). Under this level of review, a governmental classification is unconstitutional unless it is narrowly tailored to a compelling interest.

Applying this standard, courts helped ensure that governments did not unconstitutionally discriminate against disadvantaged or oppressed minorities in this country. Confronted with invidious discrimination against traditionally oppressed minorities, courts demanded that governments justify all race-based classifications in order to ensure equal treatment. However, in the latter half of the twentieth century, as state and federal governmental agencies attempted to respond to the overwhelming effects of over a century of racial oppression and discrimination by enacting remedial, race-based programs, efforts to ensure such treatment became more complicated. While it seemed obvious that a government action attempting to oppress a disadvantaged minority should be subjected to the most stringent review, it was not so obvious, at least to some judges, what should be done with a government action attempting to remedy oppression by enacting programs or policies pursuant to what has been called "benign" discrimination. See Michael J. Klarman, An Interpretive History of Modern Equal Protection, 90 MICH. L. REV. 213, 256-57 (1991) (early equal protection analysis failed to address constitutional status of affirmative action programs); see Fullilove v. Klutznick, 448 U.S. 448, 492, 100 S.Ct. 2758, 65 L.Ed.2d 902 (1980), overruled, in part, Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 115 S.Ct. 2097, 132 L.Ed.2d 158 (1995). The Court resolved the issue, at least as it pertained to state and local governments, in City of Richmond v. Croson, 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989), by holding that state and local remedial actions that favored one race over another would be subject to strict scrutiny, even though those actions did not disfavor a historically disadvantaged group. Croson, 488 U.S. at 494, 109 S.Ct. 706. However, the Court left unresolved what level of scrutiny should be applied to the actions of the federal government.

The failure to resolve that issue was understandable. What may be required of a state actor, seeking to resolve arguably limited and parochial problems, could be different from what the courts would require of a national lawmaking body. See id. at 490, 109 S.Ct. 706; Fullilove, 448 U.S. at 483, 100 S.Ct. 2758. Congress is responsive to a national electorate. Moreover, Congress exists, in part, to address the problems of the nation as a whole, in areas where the Constitution authorizes congressional action. Therefore, it seemed possible that Congress should be given broader berth in its attempts to address nationwide patterns and practices of discrimination.

In spite of these considerations, a majority of the Supreme Court, in Adarand, overruled Fullilove to the extent that the latter case endorsed a more lenient level of scrutiny for federal remedial action. Adarand, 515 U.S. at...