SJ Groves & Sons Co. v. Fulton County

Citation696 F. Supp. 1480
Decision Date30 March 1987
Docket NumberCiv. A. No. C82-1895A.
PartiesS.J. GROVES & SONS COMPANY and Jasper Construction Co., Plaintiffs, v. FULTON COUNTY, et al., Defendants.
CourtUnited States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia

Geoffrey Stephen Parker, Southeastern Legal Foundation, Inc., Atlanta, Ga., amicus.

Peter A. Wade, Griffin, Cochrane, Marshall & Elger, Atlanta, Ga., for plaintiffs.

Paul Webb, Jr., Keith Mark Wiener, Webb & Daniel, Atlanta, Ga., for defendants.

Nina Loree Hunt, Office of U.S. Atty., Atlanta, Ga., for cross-defendant.

ORDER

FORRESTER, District Judge.

I. INTRODUCTION.
A. Background.

This action challenging the constitutionality of the Federal Department of Transportation's Minority Business Enterprise (MBE) rule is before the court on cross motions by the plaintiffs and the federal defendants for summary judgment on counts IX and X of the plaintiffs' fifth amended complaint. The federal defendants are the United States Department of Transportation and Elizabeth H. Dole, the Secretary of the United States Department of Transportation (hereinafter referred to jointly as "DOT"). The plaintiffs are S.J. Groves & Sons Company and Jasper Construction company, Minnesota corporations with their principal place of business in Minneapolis, Minnesota. Jasper Construction Company is a wholly owned subsidiary of S.J. Groves & Sons Company.

According to the plaintiffs' complaint, defendant Fulton County issued an invitation to bid for the construction of base, pavement, and related work at Fulton County Airport-Brown Field in Atlanta. The invitation advised bidders of Fulton County's goals for MBE participation and promised the contract to the lowest responsible bidder who met the MBE goals or made good faith efforts to do so. The plaintiffs' timely bid, submitted in May of 1982, was the lowest bid received. The plaintiffs contend that they made a good faith effort to meet the MBE goals but failed. Fulton County awarded the contract to another bidder whose assurance of MBE participation percentage was greater than the plaintiffs'.

The plaintiffs sued Fulton County for breach of contract, arguing in Counts I through V that the county's rejection of the plaintiffs' bid violated Georgia's low-bid statute, O.C.G.A. § 36-10-2, and that the MBE program violated the Georgia Constitution (Art. I, Sec. 1, Par. 2), Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d), and the equal protection clause of the fourteenth amendment. Counts VI through VIII of the complaint challenge a June 6, 1984 resolution of the Fulton County Board of Commissioners that reenacted an MBE affirmative action program. The resolution was challenged under the state low-bid statute, the equal protection clause of the fourteenth amendment, and Title VI.1

In an order filed September 30, 1985 this court granted summary judgment to the plaintiffs on counts VI through VIII concerning the 1984 resolution. The court denied the plaintiffs' motion for summary judgment on count I because the plaintiffs' good faith effort to meet the MBE goals was disputed. In addition, the defendant Fulton County claimed federal preemption of Georgia's low bid statute, O.C.G.A. § 36-10-2, by the United States Department of Transportation regulation, if valid. The court agreed with Fulton County that the state statute would be preempted if the regulation were valid and deferred the motions as to counts II through V pending joinder of the federal defendants and resolution of the regulation's validity. The plaintiffs' Fifth Amended Complaint added counts IX and X, alleging that the federal defendants' promulgation of the MBE regulation violated, inter alia, the equal protection component of the fifth amendment.

B. Framework for Analysis.

As the court noted in its September 30, 1985 order, "the validity under federal law of a voluntarily-enacted affirmative action plan which permits race-conscious relief turns on application of the standards set out in South Florida Chapter of the Associated General Contractors of America v. Metropolitan Dade County, Florida, 723 F.2d 846, 851 (11th Cir.1984) reh'g denied, 729 F.2d 1468, cert. denied, 469 U.S. 871, 105 S.Ct. 220, 83 L.Ed.2d 150 (1984)." Order, at 31. In South Florida Chapter, the Eleventh Circuit set out a three-step analysis for affirmative action plans enacted by governmental bodies. Under that analysis, the court must ensure:

(1) that the governmental body have the authority to pass such legislation; (2) that adequate findings have been made to ensure that the governmental body is remedying the present effects of past discrimination rather than advancing one racial or ethnic group's interests over another; and (3) that the use of such classifications extend no further than the established need of remedying the effects of past discrimination.

723 F.2d at 851-52 (original emphasis). The last two steps parallel the two-pronged examination utilized by a plurality of the Supreme Court in Wygant v. Jackson Board of Education, 476 U.S. 267, 106 S.Ct. 1842, 1846, 90 L.Ed.2d 260 (1986):

First, any racial classification "must be justified by a compelling governmental interest." Second, the means chosen by the State to effectuate its purpose must be "narrowly tailored to the achievement of that goal."

Accordingly, the court will outline the regulation at issue here and will then proceed to analyze its validity according to the South Florida Chapter framework.

C. DOT's MBE Regulation.

DOT's regulation entitled "Participation by Minority Business Enterprise in Department of Transportation Programs" is found at 49 C.F.R. § 23.01 et seq.2 The regulation defines minority as follows:

"Minority" means a person who is a citizen or lawful permanent resident of the United States and who is:
(a) Black (a person having origins in any of the black racial groups of Africa);
(b) Hispanic (a person of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish culture or origin, regardless of race);
(c) Portuguese (a person of Portuguese, Brazilian, or other Portuguese culture or origin, regardless of race);
(d) Asian American (a person having origins in any of the original peoples of the Far East, Southeast Asia, the Indian subcontinent, or the Pacific Islands); or
(e) American Indian and Alaskan Native (a person having origins in any of the original peoples of North America.)
(f) Members of other groups, or other individuals, found to be economically and socially disadvantaged by the Small Business Administration under section 8(a) of the Small Business Act, as amended (15 U.S.C. § 637(a)).

49 C.F.R. § 23.5. "Minority business enterprise" or "MBE" is defined as "a small business concern ... which is owned and controlled by one or more minorities or women." Id.

The MBE regulation requires recipients of DOT funds (state and local governments) to implement an MBE program incorporating certain specific features. The regulation does not set a uniform percentage goal but leaves it to the recipients to do so. Among the required components of MBE programs are the following:

(a) A policy statement expressing a commitment to use MBEs in all aspects of contracting to the maximum extent feasible;
(b) The designation of an MBE liaison officer;
(c) Affirmative action techniques to facilitate MBE participation in contracting, including the following:
(1) arranging solicitations, time for the presentation of bids, quantities, specifications, and delivery schedules so as to facilitate the participation of MBEs;
(2) providing assistance to MBEs in overcoming barriers such as the inability to obtain bonding, financing, or technical assistance; and
(3) carrying out information and communications programs on contracting procedures and specific contracting opportunities in a timely manner, with such programs being bilingual where appropriate.
(d) Encouraging the use of banks owned or controlled by minorities or women (e) Making an MBE directory available to bidders;
(f) Certification of the eligibility of MBEs by the recipient, to ensure that the MBE program benefits only firms owned and controlled by minorities;
(g) Establishing percentage goals for the dollar value of work to be awarded to MBEs, including overall goals and goals on each specific prime contract with subcontracting possibilities; overall goals are to be based on a projection of the number and types of MBEs likely to be available to compete for contracts; goals for specific contracts are to be based on the known availability of qualified MBEs; and
(h) A requirement that bidders who do not meet the MBE contract goals satisfy the recipient that the bidder has made "good faith efforts" to meet the goals.3

See 49 C.F.R. § 23.45.

Finally, the regulation includes a provision allowing exemptions from the above-listed requirements if "the particular situation is exceptional" and if "the modified program complies substantially" with the regulations. Id. § 23.41(f).

II. WHETHER THE REGULATION WAS AN EXERCISE OF VALIDLY DELEGATED AUTHORITY.

Substantive agency regulations have the "force and effect of law," and therefore preempt state statutes, only when they are "rooted in a grant of legislative power by the Congress and subject to limitations which that body imposes." Chrysler Corp. v. Brown, 441 U.S. 281, 302, 99 S.Ct. 1705, 1718, 60 L.Ed.2d 208 (1979). "It is necessary to establish a nexus between the regulations and some delegation of the requisite legislative authority by Congress." Id. at 304, 99 S.Ct. at 1719. "What is important is that the reviewing court reasonably be able to conclude that the grant of authority contemplates the regulations issued." Id. at 308, 99 S.Ct. at 1721.4

In the preface to the regulation, 49 C.F. R. part 23, the Secretary of Transportation identifies eight sources of authority for the regulation:

Sec. 905 of the Railroad Revitalization and Regulatory Reform Act of 1978 (45 U.S.C. 803); Sec. 30 of the Airport and Airway
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