707 N.E.2d 871 (Ohio 1999), 97-2435, Ritchey Produce Co., Inc. v. Ohio Dept. of Adm. Serv.

Docket Nº97-2435.
Citation707 N.E.2d 871, 85 Ohio St.3d 194, 1999-Ohio-262
Opinion JudgeDouglas, J.
Party NameRITCHEY PRODUCE COMPANY, INC., Appellee, v. STATE OF OHIO, DEPARTMENT OF ADMINISTRATIVE SERVICES, Appellant.
AttorneyBricker & Eckler, L.L.P., Luther L. Liggett, Jr. and Kimberly J. Brown, Columbus; and William D. Joseph, for appellee., Betty D. Montgomery, Attorney General, Judith L. French and Darius N. Kandawalla, Assistant Attorneys General, for appellant., Squire, Sanders & Dempsey, L.L.P., Frederick R. Na...
Judge PanelMOYER, C.J.,and RESNICK, FRANCIS E. SWEENEY, Sr., PFEIFER and LUNDBERG STRATTON, JJ., concur.
Case DateApril 07, 1999
CourtSupreme Court of Ohio

Page 871

707 N.E.2d 871 (Ohio 1999)

85 Ohio St.3d 194, 1999-Ohio-262

RITCHEY PRODUCE COMPANY, INC., Appellee,

v.

STATE OF OHIO, DEPARTMENT OF ADMINISTRATIVE SERVICES, Appellant.

No. 97-2435.

Supreme Court of Ohio.

April 7, 1999

Submitted Nov. 10, 1998.

Page 872

SYLLABUS BY THE COURT

1. The provisions of R.C. 125.081 requiring that approximately fifteen percent of the state's purchasing contracts be set aside for competitive bidding by minority business enterprises only and the provisions of R.C. 122.71(E) [85 Ohio St.3d 195] defining "minority business enterprise" with explicit reference to race are constitutional as applied to deny minority-business-enterprise status to a business owned and controlled by a person of Lebanese ancestry.

2. Ohio's Minority Business Enterprise Program as it relates to the state's purchasing contracts is sufficiently narrowly tailored to pass constitutional muster.

Page 873

This appeal concerns an administrative order issued by the Ohio Department of Administrative Services ("ODAS"), appellant, denying recertification of appellee, Ritchey Produce Company, Inc., as a minority business enterprise ("MBE") for purposes of Ohio's MBE set-aside program. See R.C. 122.71(E)(1), 123.151, and 125.081. The facts of this appeal are as follows.

Ohio's MBE set-aside program mandates that certain percentages of the state's construction and procurement contracts are to be set aside for competitive bidding by MBEs only. The MBE program for state construction contracts operates in a straightforward manner.

From all of the contracts to be awarded by ODAS under R.C. 123.15 and R.C. Chapter 153, the Director of Administrative Services must "select a number of contracts with an aggregate value of approximately five per cent of the total estimated value of contracts to be awarded in the current fiscal year." R.C. 123.151(C)(1). The director must then "set aside the contracts so selected for bidding by minority business enterprises only." Id. To the extent that any state agency other than ODAS is authorized to enter into construction contracts, those agencies are bound by a similar five-percent set-aside requirement. R.C. 123.151(D)(1). The bidding procedures for set-aside contracts are the same as for all other contracts awarded by ODAS under R.C. 123.15 and R.C. Chapter 153 (or by any other state agency), except that only MBEs certified and listed by the Equal Employment Opportunity Coordinator are qualified to bid. R.C. 123.151(C)(1) and 123.151(D)(1). Each contractor awarded a contract is required to "make every effort to ensure that certified minority business subcontractors and materialmen participate in

Page 874

the contract." R.C. 123.151(C)(2)(a). ODAS may not, however, enter into any contract authorized under R.C. 123.15 or R.C. Chapter 153, including any contract set aside under R.C. 123.151(C)(1), unless the contract contains a provision stipulating that the contractor, to the extent that it subcontracts work, "will award subcontracts totaling no less than five per cent of [85 Ohio St.3d 196] the total value of the contract to minority businesses certified under division (B) of this section and that the total value of both the materials purchased from minority businesses certified under division (B) of this section and of the subcontracts awarded * * * to such minority businesses will equal at least seven per cent of the total value of the contract; except that in the case of contracts specified in division (A) of section 153.50 of the Revised Code * * * [a different stipulation is required]." R.C. 123.151(C)(2)(b). 1 The same requirements apply in the case of construction contracts that are set aside by state agencies other than ODAS. R.C. 123.151(D)(2).

With respect to state procurement contracts for supplies and services, etc., the MBE set-aside program also operates in a straightforward manner. Specifically, from the purchases ODAS is required to make through competitive selection, the director must "select a number of such purchases, the aggregate value of which equals approximately fifteen per cent of the estimated total value of all such purchases to be made in the current fiscal year." R.C. 125.081(A). The director must then "set aside the purchases selected for competition only by minority business enterprises, as defined in division (E)(1) of section 122.71 of the Revised Code." Any agency of the state other than ODAS, the legislative and judicial branches, boards of elections, and the adjunct general that is authorized to make purchases is likewise bound by a fifteen-percent set-aside requirement. R.C. 125.081(B). The competitive selection procedures for purchases set aside under R.C. 125.081(A) and (B) are the same as for any other purchases made by ODAS, or by a state agency other than ODAS, except that only MBEs certified and [85 Ohio St.3d 197] listed by the Equal Employment Opportunity Coordinator are qualified to compete. R.C. 125.081(A) and (B).

R.C. 123.151(B)(1) provides that "[t]he director of administrative services shall make rules in accordance with Chapter 119. of the Revised Code establishing procedures by which minority businesses may apply to the equal employment opportunity coordinator for certification as minority business enterprises." R.C. 123.151(B)(2) provides that the coordinator "shall approve the application of any minority business enterprise that complies with the rules adopted under this division." Additionally, the statute provides that any person adversely affected by an order of the coordinator denying certification may appeal from the order as provided in R.C. Chapter 119. The statute also requires the coordinator to prepare and maintain a list of certified MBEs.

Page 875

R.C. 122.71(E)(1) defines "[m]inority business enterprise" for purposes of the MBE program. R.C. 122.71 provides:

"As used in sections 122.71 to 122.83 of the Revised Code:

"* * *

"(E)(1) 'Minority business enterprise' means an individual, partnership, corporation, or joint venture of any kind that is owned and controlled by United States citizens, residents of Ohio, who are members of one of the following economically disadvantaged groups: Blacks, American Indians, Hispanics, and Orientals.

"(2) 'Owned and controlled' means that at least fifty-one per cent of the business, including corporate stock if a corporation, is owned by persons who belong to one or more of the groups set forth in division (E)(1) of this section, and that such owners have control over the management and day-to-day operations of the business and an interest in the capital, assets, and profits and losses of the business proportionate to their percentage of ownership. In order to qualify as a minority business enterprise, a business shall have been owned and controlled by such persons at least one year prior to being awarded a contract pursuant to this section."

Supplementing the statute, a rule promulgated by the Director of Administrative Services further defines these terms and, among other things, establishes the application and certification requirements for Ohio MBEs. See Ohio Adm.Code 123:2-15-01. The rule requires that "[a]ny minority business enterprise that desires to bid on a contract under division (C)(1) or (D)(1) of section 123.151 of the Revised Code or under division (A) or (B) of section 125.081 of the Revised Code or to be a minority business subcontractor or materialman under division (C)(2) or (D)(2) of section 123.151 of the Revised Code shall first apply with the equal employment opportunity coordinator of the department of administrative services for certification as a minority business enterprise." Ohio Adm.Code [85 Ohio St.3d 198] 123:2-15-01(B). Certification may be granted for a period not exceeding one year and, thus, successful applicants must reapply annually for MBE recertification. Ohio Adm.Code 123:2-15-01(C). The rule defines "minority business enterprise" as "an individual, partnership, corporation, or joint venture of any kind that is owned and controlled by United States citizens, residents of Ohio, who are and have held themselves out as members of the following economically disadvantaged groups: Blacks, American Indians, Hispanics, and Orientals." Ohio Adm.Code 123:2-15-01(A) . 2 For purposes of the rule, " 'Orientals' means all persons having origins in any of the original people of the Far East, including China, Japan and Southeast Asia." Ohio Adm.Code 123:2-15-01(A)(9).

Nadim F. Ritchey ("Ritchey") is the sole shareholder of Ritchey Produce Company, Inc. ("Ritchey Produce"), appellee. Ritchey Produce is a wholesale supplier of fruits and vegetables. Ritchey, who was born in Lebanon, is a naturalized citizen of the United States and is a resident of Ohio. In 1990, Ritchey filed an application seeking MBE certification for Ritchey Produce. On the front page of the application, Ritchey indicated that he is a member of a racial or ethnic group identified as "Oriental." However, on the second page of the application form, Ritchey stated that his national origin is the country of Lebanon and that he is Lebanese. In August 1991, Ritchey Produce received MBE certification for the twelve-month period

Page 876

beginning August 31, 1991, and was granted recertification as an MBE in each of the three succeeding years. During the period of certification, appellee was awarded an R.C. 125.081(A) set-aside contract by ODAS covering the state's requirements for fresh fruits and vegetables from July 1995 through September 1997.

In 1995, Ritchey filed an application for recertification of Ritchey Produce as an MBE. The company's then-current MBE certification was set to expire October 31, 1995. However, during the recertification process, the State Purchasing Office advised the ODAS Equal Opportunity Center that Ritchey is Lebanese and that therefore Ritchey Produce might not have been properly certified as an...

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