BOARD OF GOV. OF UNIV. OF NC v. Dept. of Labor, No. 89-242-CIV-5-BR.

CourtUnited States District Courts. 4th Circuit. Eastern District of North Carolina
Writing for the CourtBRITT
Citation722 F. Supp. 1301
PartiesThe BOARD OF GOVERNORS OF the UNIVERSITY OF NORTH CAROLINA, The University of North Carolina at Asheville, and The North Carolina School of the Arts, Plaintiffs, v. The UNITED STATES DEPARTMENT OF LABOR, The Honorable Elizabeth Dole, Secretary of the United States Department of Labor, and the United States, Defendants.
Decision Date14 September 1989
Docket NumberNo. 89-242-CIV-5-BR.

722 F. Supp. 1301

The BOARD OF GOVERNORS OF the UNIVERSITY OF NORTH CAROLINA, The University of North Carolina at Asheville, and The North Carolina School of the Arts, Plaintiffs,
v.
The UNITED STATES DEPARTMENT OF LABOR, The Honorable Elizabeth Dole, Secretary of the United States Department of Labor, and the United States, Defendants.

No. 89-242-CIV-5-BR.

United States District Court, E.D. North Carolina, Raleigh Division.

September 14, 1989.


722 F. Supp. 1302

Thomas J. Ziko, Asst. Atty. Gen., Edwin M. Speas, Jr., Sp. Deputy Atty. Gen., North Carolina Dept. of Justice, Raleigh, N.C., for plaintiffs.

Margaret Person Currin, U.S. Atty., E.D. N.C., Raleigh, N.C., Kathrine A. Baldwin,

722 F. Supp. 1303
U.S. Dept. of Justice, Employment Litigation Section CRT Div., Washington, D.C., Jerome Davis, U.S. Dept. of Labor, Washington, D.C., for defendants

MEMORANDUM OPINION

BRITT, Chief Judge.

The Board of Governors of the University of North Carolina (UNC) and two of its constituent institutions instituted this action on 30 March 1989 against the United States Department of Labor. Plaintiffs seek relief from an order of the Secretary of Labor which could cancel all federal contracts and subcontracts which the University and all of its constituent institutions now have1 and prohibit the University from entering any further contracts. On 27 April 1989 the court granted plaintiffs' request for a temporary restraining order. Since the facts were not in dispute, the court ordered, pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure, the trial advanced and consolidated with plaintiffs' request for a preliminary injunction. The parties agreed on an expedited briefing schedule and a hearing was held on 26 June 1989. The court finds that the decision of the Secretary is contrary to law and will grant the injunctive relief sought.

I

The Secretary of Labor (the Secretary) is responsible for the enforcement of three equal employment opportunity laws applicable to federal contractors, Executive Order 11246 (Executive Order), Section 503 of the Rehabilitation Act of 1973, 29 U.S.C. § 793 (Rehab Act), and the Vietnam Era Veterans' Readjustment Assistance Act, 38 U.S.C. § 2012 (VEVRAA).2

A. Executive Order. This order provides, in part:

Except in contracts exempted in accordance with ... this Order, all Government contracting agencies shall include in every Government contract hereafter entered into the following provisions:
"During the performance of this contract, the contractor agrees as follows: "(1) The contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin."

§ 202.3 Thus, every contractor must, as a condition of doing business with the Federal Government, agree not to discriminate. Further provisions of the Order require contractors to take affirmative action to promote the employment of individuals protected under it. § 202(1). Contractors must also expressly agree to "comply with all ... of the rules, regulations, and relevant orders of the Secretary of Labor," to "furnish all information and reports required ..." and to "permit access to their books, records, and accounts ... for purposes of investigation to ascertain compliance." § 202(4)-(5). Failure to comply may result in the cancellation of contracts and debarment from further contracts. § 202(6).4

B. Rehab Act. Section 503 of this Act provides, in part:

Any contract in excess of $2,500 entered into by any Federal department or agency for the procurement of personal property and nonpersonal services (including construction) for the United States shall contain a provision requiring that, in employing persons to carry out such contract, the party contracting with the United States shall take affirmative action to employ and advance in employment qualified individuals with handicaps....

29 U.S.C. § 793(a) (Supp.1989).

C. VEVRAA. The pertinent provision of this Act provides as follows:

722 F. Supp. 1304
Any contract in the amount of $10,000 or more entered into by any department or agency for the procurement of personal property and nonpersonal services (including construction) for the United States, shall contain a provision requiring that the party contracting with the United States shall take affirmative action to employ and advance in employment qualified special disabled veterans and veterans of the Vietnam era.

38 U.S.C. § 2012(a).

A division of the Department of Labor known as the Office of Federal Contract Compliance Programs (OFCCP) enforces the contract compliance laws. It checks on compliance by periodically reviewing the facilities of the contractor. 41 C.F.R. § 60-1.20. At the beginning of a compliance review, OFCCP typically requests the contractor to submit for review the affirmative action program (AAP) for the selected facility, after which an on-site review of the facility is conducted.

OFCCP filed an administrative complaint against UNC in July 1984, alleging that one of the constituent institutions, the North Carolina School for the Arts (NCSA), had submitted a deficient AAP; that another constituent institution, the University of North Carolina at Asheville (UNC-A), had failed to submit an AAP; and that UNC had refused OFCCP access to either campus to conduct on-site reviews. On 12 December 1986, an Administrative Law Judge (ALJ) entered an order restraining UNC, NCSA and UNC-A from violating the contract compliance laws and recommended that, upon their failure to comply with the order, all federal contracts with UNC and its constituent institutions be terminated. The order also recommended that UNC and its constituent institutions be prohibited from entering into any other federal contracts until they are in compliance with the contract compliance laws. UNC filed exceptions to the ALJ's rulings with the Secretary who, on 23 January 1989, issued a Decision and Final Administrative Order directing the cancellation of all existing government contracts and debarment from future contracts unless UNC complied with the terms of the Order and the contract compliance laws within ninety days. The Secretary denied a subsequent request for a stay by Order dated 25 April 1989.

II

UNC is composed of sixteen constituent institutions.5 N.C.Gen.Stat. § 116-4. The entire system is ruled by a Board of Governors which also controls, supervises and manages the affairs of the constituent institutions. N.C.Gen.Stat. § 116-11(2). The administrative head of UNC is the President who reports to the Board of Governors. N.C.Gen.Stat. §§ 116-14. Each constituent institution has as administrative head, the Chancellor, and a Board of Trustees which has those powers and duties delegated to it by the Board of Governors. N.C.Gen.Stat. §§ 116-33 & 116-34.

By statute "the Board of Governors of the University of North Carolina shall be known and distinguished by the name of `the University of North Carolina' and shall continue as a body politic and corporate...." N.C.Gen.Stat. § 116-3. Broad corporate powers have been given to the Board of Governors. Id. Any part of the Board of Governors' authority over the affairs of the constituent institutions may be delegated to the respective Board of Trustees or, through the President, to the Chancellor of the institution. N.C.Gen.Stat. § 116-11(13).

III

Plaintiffs contend, and defendants do not deny, that, as expressly permitted by statute, the Board of Governors and the President of UNC have delegated to the constituent

722 F. Supp. 1305
institutions the power to enter into contracts without prior approval of either the Board of Governors or the President

On 27 August 1985, the parties stipulated to the accuracy of a computer printout of all federal contracts held by "institutions within the University of North Carolina" from 1 March 1981 to June 1985. This printout, a part of the administrative record, lists 521 contracts totalling $56,153,343, divided among eleven institutions.6 Five constituent institutions are listed as having no contracts.7 Listed separately, but showing no contracts, is "UNC-GENERAL ADMIN."8

IV

A. Plaintiffs. In support of their contention that the Secretary's decision is erroneous, plaintiffs advance several arguments:

(1) The Tenth Amendment prohibits federal agencies from imposing contract conditions on the states that are not precisely and unambiguously stated in legislation or properly adopted regulations;

(2) The Acts at issue in this case do not apply to the states;

(3) Only Congress may determine the extent to which units of state government are subject to the Acts at issue;

(4) The Secretary's decision exceeded her authority; and

(5) The Secretary's decision is arbitrary and capricious.

B. Defendants. In addition to offering arguments in rebuttal to plaintiffs' contentions, defendants contend that the Secretary has acted within the scope of her authority and that her decision is rational.

V

A. Standard of Review. Section 706 of the Administrative Procedure Act, 5 U.S.C. § 706, governs this court's action. The Supreme Court has said that the action of a federal agency may be set aside only if it is "`arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law' or if the action failed to meet statutory, procedural, or constitutional requirements." Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 414, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971), quoting 5 U.S.C. § 706(2)(A). Accord National Wildlife Federation v. Hanson, 623 F.Supp. 1539 (E.D.N.C.1985).

The decision of the Secretary is entitled to a presumption of regularity. Overton Park, 401 U.S. at 415, 91 S.Ct. at 823. "Where an agency is entrusted with the authority to enforce a statute, its construction of the controlling statute must be upheld if it is sufficiently reasonable; the reviewing court must not substitute its judgment for that of the agency." Trawick v. Drug Enforcement...

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3 practice notes
  • Staker v. Ainsworth, No. 870166
    • United States
    • Supreme Court of Utah
    • January 8, 1990
    ...1005, 1015, 83 L.Ed.2d 1016 (1985), overruled on other grounds as recognized in Board of Governors v. United States Dep't of Labor, 722 F.Supp. 1301 (E.D.N.C.1989)); South Carolina v. Gathers, 490 U.S. 805, ----, 109 S.Ct. 2207, 2217-18, 104 L.Ed.2d 876, 891-92 (1989) (Scalia, J., dissentin......
  • Stefanovic v. University of Tennessee, No. 3:95-cv-231.
    • United States
    • United States District Courts. 6th Circuit. Eastern District of Tennessee
    • April 8, 1996
    ...it has carefully reviewed the case relied on by plaintiffs Board of Governors of University of North Carolina v. Department of Labor, 722 F.Supp. 1301 (E.D.N.C.1989), in support of his position that, "state educational institutions are subject to VEVRA and Executive Order 11246." See Doc. 1......
  • Board of Governors of University of North Carolina v. U.S. Dept. of Labor, No. 89-3359
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • October 26, 1990
    ...campuses that had actually Page 816 entered federal contracts qualified as contractors and were subject to OFCCP's compliance reviews. 722 F.Supp. 1301. The Secretary of Labor has appealed to this As a preliminary matter, we must determine what, if any, level of deference to accord to the A......
3 cases
  • Staker v. Ainsworth, No. 870166
    • United States
    • Supreme Court of Utah
    • January 8, 1990
    ...1005, 1015, 83 L.Ed.2d 1016 (1985), overruled on other grounds as recognized in Board of Governors v. United States Dep't of Labor, 722 F.Supp. 1301 (E.D.N.C.1989)); South Carolina v. Gathers, 490 U.S. 805, ----, 109 S.Ct. 2207, 2217-18, 104 L.Ed.2d 876, 891-92 (1989) (Scalia, J., dissentin......
  • Stefanovic v. University of Tennessee, No. 3:95-cv-231.
    • United States
    • United States District Courts. 6th Circuit. Eastern District of Tennessee
    • April 8, 1996
    ...it has carefully reviewed the case relied on by plaintiffs Board of Governors of University of North Carolina v. Department of Labor, 722 F.Supp. 1301 (E.D.N.C.1989), in support of his position that, "state educational institutions are subject to VEVRA and Executive Order 11246." See Doc. 1......
  • Board of Governors of University of North Carolina v. U.S. Dept. of Labor, No. 89-3359
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • October 26, 1990
    ...campuses that had actually Page 816 entered federal contracts qualified as contractors and were subject to OFCCP's compliance reviews. 722 F.Supp. 1301. The Secretary of Labor has appealed to this As a preliminary matter, we must determine what, if any, level of deference to accord to the A......

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