Contractors Ass'n of Eastern Pennsylvania, Inc. v. City of Philadelphia

• Citation: 6 F.3d 990
• Decision Date: 07 October 1993
• Docket Number: 92-1887,Nos. 92-1880,s. 92-1880
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
• Parties: 62 Empl. Prac. Dec. P 42,579, 3 ADD 1117, 4 NDLR P 268 CONTRACTORS ASSOCIATION OF EASTERN PENNSYLVANIA, INC.; General Building Contractors Association, Inc.; Associated Master Painters & Decorators of Philadelphia, Inc.; Employing Bricklayers Association of Delaware Valley, Inc.; Interior Finish Contractors Association, Inc.; Mechanical Contractors Association of Eastern Pennsylvania, Inc.; Roofing and Sheet Metal Contractors Association, Inc.; Sub-Contractors Association of Delaware Valley, Inc.; National Electrical Contractors Association, Inc. v. CITY OF PHILADELPHIA; Elizabeth Reveal, as Director of Finance for the City of Philadelphia; Curtis Jones, Jr., as Director of the Minority Business Enterprise Council; United Minority Enterprise Associates, Inc. United Minority Enterprise Associates, Inc., Intervening Defendant in district court, Appellant in 92-1880. City of Philadelphia, Elizabeth Reveal, as Director of Finance for the City of Philadelphia, and Curtis Jones, Jr., as Director of the Minority Business Enterprise Council, Appellants in 92-1887.

Page 990

6 F.3d 990

62 Empl. Prac. Dec. P 42,579, 3 ADD 1117,

4 NDLR P 268

CONTRACTORS ASSOCIATION OF EASTERN PENNSYLVANIA, INC. General Building Contractors Association, Inc.; Associated Master Painters & Decorators of Philadelphia, Inc. Employing Bricklayers Association of Delaware Valley, Inc. Interior Finish Contractors Association, Inc.; Mechanical Contractors Association of Eastern Pennsylvania, Inc. Roofing and Sheet Metal Contractors Association, Inc.; Sub-Contractors Association of Delaware Valley, Inc.; National Electrical Contractors Association, Inc. v. CITY OF PHILADELPHIA; Elizabeth Reveal, as Director of Finance for the City of Philadelphia; Curtis Jones, Jr., as Director of the Minority Business Enterprise Council; United Minority Enterprise Associates, Inc. United Minority Enterprise Associates, Inc., Intervening Defendant in district court, Appellant in 92-1880. City of Philadelphia, Elizabeth Reveal, as Director of Finance for the City of Philadelphia, and Curtis Jones, Jr., as Director of the Minority Business Enterprise Council, Appellants in 92-1887.

Nos. 92-1880, 92-1887.

United States Court of Appeals, Third Circuit.

Argued June 17, 1993.

Decided Oct. 7, 1993.

Robert T. Vance, Jr. (argued), Vance, Jackson, Simpson & Vance-Lewis, Philadelphia, PA, for appellant, United Minority Enterprise Associates, Inc.

Judith E. Harris (argued) and E. Jane Hix, Office of City Sol., Philadelphia, PA, for appellants, City of Philadelphia, Elizabeth Reveal, as Director of Finance for the City of Philadelphia, and Curtis Jones, Jr., as Director of the Minority Business Enterprise Council.

John J. McAleese, Jr. (argued) and John H. Widman, McAleese, McGoldrick & Susanin, King of Prussia, PA, for appellees, Contractors Ass'n of Eastern Pennsylvania, Inc., Gen. Bldg. Contractors Ass'n, Inc., Employing Bricklayers Ass'n of Delaware Valley, Inc., and Sub-Contractors Ass'n of Delaware Valley, Inc.

Before: SCIRICA, COWEN and GARTH, Circuit Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

In this action, nine associations of construction contractors challenge on equal protection grounds a City of Philadelphia ordinance creating preferences in City contracting for businesses owned by racial and ethnic minorities, women, and handicapped persons. The district court granted summary judgment to the Contractors, holding they had standing to bring this lawsuit and invalidating the Ordinance in all respects. Contractors Association v. City of Philadelphia, 735 F.Supp. 1274 (E.D.Pa.1990). In an earlier opinion, we affirmed the district court's ruling on standing but vacated summary judgment on the merits because the City had outstanding discovery requests. Contractors Association v. City of Philadelphia, 945 F.2d 1260 (3d Cir.1991). On remand after discovery, the district court again entered summary judgment for the Contractors. We will affirm in part, vacate in part, and reverse in part.

I. Facts and Procedural History

A.

In 1982, the Philadelphia City Council enacted an ordinance to increase participation in City contracts by minority-owned and women-owned businesses. Phila.Code Sec. 17-500. In its present form, ¹ the Ordinance establishes "goals" for the participation of "disadvantaged business enterprises." Sec. 17-503. "Disadvantaged business enterprises" (DBEs) are defined as those enterprises at least 51 percent owned by "socially and economically disadvantaged individuals," defined in turn as: those individuals who have been subjected to racial, sexual or ethnic prejudice because of their identity as a member of a group or differential treatment because of their handicap without regard to their individual qualities, and whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.

Sec. 17-501(11). The Ordinance further provides that racial minorities and women are rebuttably presumed to be socially and economically disadvantaged individuals, Sec. 17-501(11)(a), but that a business which has received more than $5 million in City contracts, even if owned by such an individual, is rebuttably presumed not to be a DBE, Sec. 17-501(10).

The Ordinance sets goals for participation of DBEs in city contracts: 15 percent for minority-owned businesses, 10 percent for women-owned businesses, and 2 percent for businesses owned by handicapped persons. Sec. 17-503(1). The Ordinance applies to all City contracts, which are divided into three types--vending, construction, and personal and professional services. Sec. 17-501(6). The percentage goals relate to the total dollar amounts of City contracts and are calculated separately for each category of contracts and each City agency. Sec. 17-503(1).

To implement the program, the Ordinance established a Minority Business Enterprise Council and authorized it to promulgate regulations to ensure the goals are met by city agencies in awarding prime contracts and by private contractors in awarding subcontracts. Sec. 17-504(2)(e), (f), (i). The Ordinance specifies that, in developing regulations, the Council must consider: including DBEs on solicitation lists, assuring DBEs are solicited whenever they are potential contractors, structuring contract requirements to permit maximum participation by DBEs, and "investigating and making recommendations concerning the use of the Sheltered Market process, under which contracts would be set-aside so that only DBEs could bid for them." Sec. 17-504(2)(f). The regulations provide that "the contractor's efforts to meet [the] goals shall be considered an element of responsiveness to the bid," and require each contractor to submit a "Schedule for Participation" of DBEs in the contract at issue or to request a waiver if the contractor is unable to meet the goals after a good faith effort. Regulations Sec. 6.1.

The Ordinance also directed the Council to (1) develop a certification procedure for DBEs to prevent fraudulent or "front" DBEs from abusing the program, Sec. 17-504(2)(a); (2) grant exemptions for individual contracts or classes of contracts where there is "an insufficient number of DBEs ... to ensure adequate competition and an expectation of reasonable prices on bids," Sec. 17-505(1); (3) grant waivers to contractors who are unable to meet the percentage goals after a good faith effort, as determined by the Council, Sec. 17-505(3); (4) "recommend contractual language which provides that compliance with DBE participation requirements is material to the City contract," Sec. 17-504(2)(h); and (5) develop and recommend remedies, including but not limited to, termination of the contract in the event a contractor fails to comply with the program, Sec. 17-506(a).

B.

On April 14, 1989, nine contractors associations brought suit in the Eastern District of Pennsylvania against the City of Philadelphia and two city officials, challenging the Ordinance as a facial violation of the Equal Protection Clause of the Fourteenth Amendment. ² United Minority Enterprise Associates, Inc. (UMEA) intervened as a defendant. After the City moved for judgment on the pleadings contending the Contractors lacked standing, the Contractors moved for summary judgment on the merits.

The district court granted the Contractors' motion. It ruled the Contractors had standing, based on affidavits of individual association members alleging they had been denied contracts for failure to meet the DBE goals despite being low bidders. 735 F.Supp. at 1283 & n. 3. Turning to the merits of the Contractors' equal protection claim, the district court held that City of Richmond v. J.A. Croson Co., 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989), required it to apply the strict scrutiny standard to review the sections of the Ordinance creating a preference for minority-owned businesses. Under that standard, a law will be invalidated if it is not "narrowly tailored" to a "compelling government interest." Wygant v. Jackson Board of Educ., 476 U.S. 267, 274, 106 S.Ct. 1842, 1847, 90 L.Ed.2d 260 (1986). Applying Croson, the district court struck down the Ordinance because the City had failed to adduce sufficiently specific evidence of past racial discrimination against minority construction contractors in Philadelphia to establish a "compelling government interest." 735 F.Supp. at 1295-98. The court also held the Ordinance was not "narrowly tailored," emphasizing the City had not considered using race-neutral means to increase minority participation in City contracting and had failed to articulate a rationale for choosing 15 percent as the goal for minority participation. Id. at 1298-99. The court held the Ordinance's preferences for businesses owned by women and handicapped persons were similarly invalid under the less rigorous intermediate scrutiny and rational basis standards of review. Id. at 1299-1309.

On appeal, we affirmed the district court's ruling on standing but vacated its judgment on the merits as premature because the Contractors had not responded to certain discovery requests at the time the court ruled. 945 F.2d 1260 (3d Cir.1991). We remanded so discovery could be completed and explicitly reserved judgment on the merits. Id. at 1268. On remand, all parties moved for summary judgment, and the district court reaffirmed its prior decision, holding discovery had not produced sufficient evidence of discrimination in the Philadelphia construction industry against businesses owned by racial minorities, women, and handicapped persons to withstand summary judgment. The City and UMEA appeal. ³

II.

This appeal presents three sets of questions: whether and to what extent the Contractors have standing to challenge the Ordinance, which standards of equal protection review govern the different sections of the Ordinance, and whether these standards justify invalidation of the Ordinance in whole or in part. We will address...