Adarand Constructors, Inc. v. PeŃa, Civ A. No. 90-K-1413.

• Decision Date: 02 June 1997
• Docket Number: Civ A. No. 90-K-1413.
• Citation: 965 F.Supp. 1556
• Parties: ADARAND CONSTRUCTORS, INC., a Colorado Corporation, Plaintiff, v. Frederico PEŃA, Secretary of the Department of Transportation, Rodney E. Slater, Administrator of the Federal Highway Administration, Vincent F. Schimmoller, Administrator of Region VIII of the Federal Highway Administration, and Larry C. Smith, Division Engineer of the Central Federal Lands Highway Division, Defendants.
• Court: U.S. District Court — District of Colorado

965 F.Supp. 1556

ADARAND CONSTRUCTORS, INC., a Colorado Corporation, Plaintiff, v. Frederico PEŃA, Secretary of the Department of Transportation, Rodney E. Slater, Administrator of the Federal Highway Administration, Vincent F. Schimmoller, Administrator of Region VIII of the Federal Highway Administration, and Larry C. Smith, Division Engineer of the Central Federal Lands Highway Division, Defendants.

Civ A. No. 90-K-1413.

United States District Court, D. Colorado.

June 2, 1997.

As Amended June 4, 1997.

Todd S. Welch, Mountain States Legal Foundation, Denver, CO, for plaintiff.

Marisa J. Demeo, Charles E. Leggott, Marybeth Martin, U.S. Department of Justice, Civil Rights Division, Employment Litigation Section, Washington, DC, Stephen D. Taylor, Assistant U.S. Attorney, Denver, CO, Lisa MacPhee, Edward V.A. Kussy, Federal Highway Administration, Department of Transportation, Washington, DC, for defendants.

Franklin Lee, Craig Thompson, Minority Business Enterprises, Washington, DC, William C. McNeill, Julian A. Gross, The Employment Law Center, San Francisco, CA, Robert Golten, Boulder, CO, Court Amicae.

MEMORANDUM DECISION ON REMAND

KANE, Senior District Judge.

Following remand from the United States Supreme Court and the Tenth Circuit Court of Appeals, Plaintiff Adarand Constructors, Inc., a highway construction company, seeks declaratory and permanent injunctive relief against Frederico Peńa, Secretary of the Department of Transportation (DOT), Rodney E. Slater, Administrator of the Federal Highway Administration (FHA), Vincent F. Schimmoller, Administrator of Region VIII of the FHA, and Larry C. Smith, Division Engineer of the Central Federal Lands Highway Division (CFLHD).¹ Adarand asserts the race-conscious subcontracting compensation clause (SCC) program used by the CFLHD is unconstitutional, violating the due process and equal protection guarantees of the Fifth and Fourteenth Amendments, as well as the civil rights, privileges and immunities secured by the laws of the United States, and the provisions of Title VI, § 601 of the Civil Rights Act of 1964, 42 U.S.C. § 2000d.

Pending are the parties' cross-motions for summary judgment following remand. See Adarand Constructors, Inc. v. Peńa (Adarand III), 515 U.S. 200, 237, 115 S.Ct. 2097, 2118, 132 L.Ed.2d 158 (1995). In remanding the case, the Supreme Court held that all programs imposing race-based classifications must be adjudicated under the "strict scrutiny" standard. Id. at 227, 115 S.Ct. at 2113. "In other words, such classifications are constitutional only if they are narrowly tailored measures that further compelling governmental interests." Id.

While the Court ruled on the proper standard to be applied to the case at bar, it declined to render an opinion on the underlying merits. It opted instead to "remand the case to the lower courts for further consideration in light of the principles we have announced." Id. In explaining its decision to remand, the Court noted that certain "unresolved questions" involving the "complex regulatory regimes implicated by the use of subcontractor compensations clauses" needed to be addressed. It submitted to the lower courts the question of "whether any of the ways in which the government uses subcontractor compensation clauses can survive strict scrutiny." Id. at 240, 115 S.Ct. at 2119.

The prudence of remanding this case to the trial court is difficult to perceive. Both parties have stipulated to the absence of any dispute of material fact (Cross Mot. Summ. J. Tr., Dec. 20, 1996 at 29-30), and the "unresolved questions" posed by Justice O'Connor in Adarand III concern only issues of statutory construction relating to "the details of the complex regulatory regimes" and a number of "apparent discrepanc[ies]" the Court found in the application of the statutes and regulations involved. 515 U.S. at 238-39, 115 S.Ct. at 2118.

While it is true that the decision to require strict scrutiny "alters the playing field in some important respects," id., it is equally true that the higher courts are better equipped to decide as a matter of law whether, under the proper interpretation, the statutes involved can be described as in furtherance of a compelling interest and narrowly tailored to meet that interest. As such, concerns of judicial efficiency and the desire to resolve disputes quickly would have favored the resolution of the remaining legal issues by the higher courts.

Following the remand, the Tenth Circuit Court of Appeals entered an order stating that, its own judgment having been vacated and, upon consideration of the Supreme Court's judgment, the cause was remanded to this court for further proceedings. Again, in light of the lack of a genuine issue as to any material fact, the rationale for the circuit court's remand to this trial court eludes me.

Be that as it may, the parties have briefed the issue presented upon remand, namely, whether the Defendants' use of the SCC is constitutional. An amici curiae brief has been filed by the Minority Business Enterprise Legal Defense and Education Fund, Inc. and the Mid-Peninsula Minority Contractors Association. Oral argument was heard.

Jurisdiction exists under 28 U.S.C. § 1331 and § 1343.

I grant Adarand's motion for summary judgment, and deny that of the Defendants. I issue an injunction enjoining the Defendants from administering, enforcing, soliciting bids for, or allocating any funds under the SCC program. This effectively precludes the implementation of the statutes or regulations that grant presumptive eligibility for government preference in contracting on the basis of race, i.e., the use of presumptions of social and economic disadvantage in § 8(d) of the Small Business Act, 72 Stat. 384, as amended, 15 U.S.C. § 631 et seq., (SBA) and the use of percentage goals found in and promulgated pursuant to § 644(g) of the SBA, the Surface Transportation and Uniform Relocation Assistance Act of 1987 (STURAA) and the Intermodal Surface Transportation Efficiency Act of 1991, Pub.L. No. 102-240, 105 Stat.1914 (ISTEA.)² These enactments, either per se, or through their implementing regulations, allow presumptive eligibility for a "preferred status" in federal subcontracts based on race.

I. Factual and Procedural Background³

In 1989 the CFLHD, which is part of the DOT awarded the prime contract for a highway construction project in Colorado to Mountain Gravel & Construction Company. When Mountain Gravel solicited bids from subcontractors for the guardrail portion of the contract, Adarand, a Colorado-based highway construction company, specializing in guardrail work, submitted the low bid. Gonzales Construction, owned and operated by Frankie Gonzales, also submitted a bid.

According to the prime contract, Mountain Gravel would receive additional compensation from the government if it hired subcontractors certified as small businesses controlled by "socially and economically disadvantaged individuals." Whereas Gonzales is certified as such a business, Adarand is not. Despite Adarand's low bid, Mountain Gravel awarded the subcontract to Gonzales. An affidavit of Mountain Gravel's Chief Estimator states the company would have accepted Adarand's bid were it not for the additional payment received by hiring Gonzales.

Having lost the guardrail subcontract to Gonzales, Adarand filed a complaint seeking declaratory and permanent injunctive relief against DOT and other federal officials, claiming violation of its equal protection rights by the race-based presumptions inherent in the use of subcontracting compensation clauses.

The parties filed cross-motions for summary judgment. Judge Carrigan, now retired, granted the Defendants' motion. Relying on Fullilove v. Klutznick, 448 U.S. 448, 100 S.Ct. 2758, 65 L.Ed.2d 902 (1980), he held the challenged federal program serves appropriate governmental objectives and was narrowly tailored to achieve the objectives of STAA and STURAA. Adarand Constructors, Inc. v. Skinner (Adarand I), 790 F.Supp. 240,243-45 (D.Colo.1992).

The Tenth Circuit Court of Appeals affirmed on grounds different from those relied on by Judge Carrigan. Adarand Constructors, Inc. v. Peńa (Adarand II), 16 F.3d 1537, 1539 (10th Cir.1994). It held the district court mistakenly determined the challenged program was authorized by STAA and STURAA, whereas, as stipulated for the purposes of the appeal, the SCC program is authorized by § 502 of the SBA, 15 U.S.C. § 644(g). Thus, the appeals court said, the constitutionality of STAA and STURAA was not at issue. Nevertheless, it held the analysis of the SCC program under the SBA was identical to the district court's analysis under STAA and STURAA. Id. at 1543.

Applying the "lenient standard, resembling intermediate scrutiny" adopted in Fullilove, as further developed in Metro Broadcasting, Inc. v. FCC, 497 U.S. 547, 110 S.Ct. 2997, 111 L.Ed.2d 445 (1990), to assess the constitutionality of a federal race-conscious program, the court of appeals upheld the use of SCCs. Relying on these cases, the court reasoned the federal government, acting under authority of Congress and § 5 of the Fourteenth Amendment, can legislate affirmative action programs more freely than state or local governments. Adarand II, 16 F.3d at 1545. Further, the appeals court rejected as without legal authority Adarand's argument that a federal agency such as the CFLHD must make specific findings of past racial discrimination to justify the SCC program. Id.

Whereas Judge Carrigan had found the SCC program constitutional because it was similar to that upheld in Fullilove and was narrowly tailored to achieve its remedial objectives, the circuit court concluded the program was constitutional because eligibility was not based solely on racial or ethnic status but on economic disadvantage. Id. at 1547. Further, the SCC program was "`appropriately limited in extent and duration'" as required by Fullilove in that it was subject to regular "...