O'Donnell Const. Co. v. District of Columbia

• Decision Date: 10 May 1992
• Docket Number: No. 91-7056,91-7056
• Citation: 963 F.2d 420,295 U.S.App.D.C. 317
• Parties: 58 Empl. Prac. Dec. P 41,466, 295 U.S.App.D.C. 317, 60 USLW 2709, 38 Cont.Cas.Fed. (CCH) P 76,317 O'DONNELL CONSTRUCTION COMPANY, Appellant, v. DISTRICT OF COLUMBIA, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 420

963 F.2d 420

58 Empl. Prac. Dec. P 41,466, 295 U.S.App.D.C. 317,

60 USLW 2709, 38 Cont.Cas.Fed. (CCH) P 76,317

O'DONNELL CONSTRUCTION COMPANY, Appellant, v. DISTRICT OF COLUMBIA, et al.

No. 91-7056.

United States Court of Appeals District of Columbia Circuit.

Argued Jan. 28, 1992.

Decided May 5, 1992.

As Amended May 10, 1992.

Appeal from the United States District Court for the District of Columbia (Civ. Action No. 89-01867).

Wm. Bradford Reynolds, with whom Robert C. Smith, Washington, D.C., was on the brief, for appellant.

Lutz Alexander Prager, Asst. Deputy Corp. Counsel, Office of the Corp. Counsel, with whom John Payton, Corp. Counsel, and Charles L. Reischel, Deputy Corp. Counsel, Washington, D.C., were on the brief, for appellees.

Before: MIKVA, Chief Judge, RUTH BADER GINSBURG and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge RANDOLPH.

Separate concurring statement filed by Circuit Judge RUTH BADER GINSBURG.

RANDOLPH, Circuit Judge:

The Supreme Court's decision in City of Richmond v. J.A. Croson Co., 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989), controls our disposition of this constitutional challenge to the District of Columbia Minority Contracting Act. The case comes to us on appeal from the district court's denial of a preliminary injunction. O'Donnell Constr. Co. v. District of Columbia, 762 F.Supp. 354 (D.D.C.1991). We hold that the O'Donnell Construction Company has made out a substantial case that the District is violating O'Donnell's Fifth Amendment right to equal protection of the laws and that the district court therefore should have enjoined the District, during the pendency of this suit, from enforcing the Act in a manner that deprives O'Donnell of the equal opportunity to compete for city road construction contracts.

I

O'Donnell Construction Company, a Virginia corporation with its principal place of business in the District of Columbia, is a road construction firm, performing most of its work for government agencies in the Washington area. Founded in 1985, the company's stock is owned by Arnold J. and John A. O'Donnell, both of whom are white. More than three-fourths of O'Donnell's employees are members of a minority. Affidavit of Arnold J. O'Donnell at 2 (Sept. 20, 1989). O'Donnell sued the District in 1989 under 42 U.S.C. §§ 1981 and 1983, claiming that the District's use of racial classifications in awarding road construction contracts violated the equal protection component of the Fifth Amendment. The complaint challenged both the D.C. Minority Contracting Act and the District's federally-assisted Disadvantaged Business Enterprise Program. Only the Minority Contracting Act is before us in this appeal.

For fifteen years, the District of Columbia's awarding of construction contracts has been governed by the Minority Contracting Act. The present version of the Act requires each District agency to "[a]llocate its construction contracts in order to reach the goal of 35 percent ... of the dollar volume of all construction contracts to be let to local minority business enterprises" or, as they are commonly called, MBEs. D.C.CODE ANN. § 1-1146(a)(1). District agencies must submit quarterly reports to the District's Minority Business Opportunity Commission setting forth the degree to which they have met the goal and an explanation of any failure to do so. D.C.CODE ANN. § 1-1146(a)(3)(D). The Commission has general authority to implement and enforce the Act. D.C.CODE ANN. § 1-1149.

In order to achieve the 35 percent figure in contracting agencies, the Commission--a seven-member body appointed by the Mayor--must establish, among its programs for assisting minority contractors, "a sheltered market approach to contracts." D.C.CODE ANN. § 1-1147(b). Each agency must implement the Commission's programs. D.C.CODE ANN. § 1-1146(a)(3)(A). In a sheltered market, agencies set aside contracts and subcontracts for "limited competition" in bidding among MBEs, to the exclusion of all others. Only MBEs certified by the Commission are permitted to participate in the sheltered markets. D.C.CODE ANN. § 1-1147(b). While non-minority firms are ineligible to compete in sheltered markets, MBEs are eligible to bid for both sheltered and non-sheltered contracts. The Act itself does not specify the precise portion of the District's contracts reserved for sheltered markets, but it does require each agency to allocate to the sheltered market a sufficient portion of its contracts to enable it to reach the 35 percent goal. D.C.CODE ANN. § 1-1149(3).

Under § 1-1147(c) of the Act, "[t]he prime contractor shall perform at least 50 percent of the contracting effort" and "if he subcontracts, 50 percent of the subcontracting effort" must go to MBEs. D.C.CODE ANN. § 1-1147(c) & (d).

The Act also confers upon the Commission several discretionary powers designed to increase MBE participation in District contracting. For example, in individual cases the Commission can waive bonding requirements or recommend subdividing contracts if "necessary to achieve the purposes of" the Act. D.C.CODE ANN. § 1-1149(6) & (7). The Commission is also required to monitor minority contracting problems and "make further recommendations that increase minority contractor's [sic ] participation." D.C.CODE ANN. § 1-1149(10). O'Donnell does not appear to challenge these provisions.

The favored class of "local minority business enterprises," as defined in the current Act, are local firms--those with their principal place of business in the District--in which members of a minority own or control an interest greater than 50 percent. D.C.CODE ANN. § 1-1142(2) & (3). As it now reads, the Act defines "minority" to mean "Black Americans, Native Americans, Asian Americans, Pacific Islander Americans, and Hispanic Americans, who by virtue of being members of the foregoing groups, are economically and socially disadvantaged because of historical discrimination practiced against these groups by institutions within the United States of America." D.C.CODE ANN. § 1-1142(1). Earlier versions of the Act contained somewhat different definitions and had expressly included "Eskimos" and "Aleuts." See D.C. Law 3-91, § 2(a), 27 D.C. Reg. 3280; and D.C. Law 1-95, § 3(a), 23 D.C. Reg. 9532b. The present definition was enacted in 1983. The reasons for the change are uncertain. The District of Columbia Council made no findings regarding the purpose of the amendment or the need for it.

In the district court the parties disputed how much of the District's road construction contracts were let through the Act's sheltered market procedures. O'Donnell claimed that in 1987 and 1988, 100 percent of such contracts were reserved for the sheltered market. As a firm doing only road construction, O'Donnell maintained that the District thus entirely excluded it from bidding solely because of the race of its owners. The District disputed O'Donnell's figures, claiming they were too high. The District also argued, and the district court agreed (762 F.Supp. at 365 n. 13), that the focus should not be on subsets of the industry such as road construction but on the construction industry as a whole. We need not speak to the matter. The district court made no findings about the percentage of road construction contracts set aside for MBEs and we do not believe the issue here turns on the outcome of this factual dispute.

II

Three points deserve mention before we get directly to the constitutionality of the Minority Contracting Act. In the trial court, the District argued that O'Donnell lacked standing to seek a preliminary injunction. The district court was right in rejecting this challenge on the ground that the complaint, backed up by Arnold J. O'Donnell's affidavit, alleged that the company was ready, willing and able to perform road construction work let by the District and was suffering an injury because of the MBE program, which deprived the company of the opportunity to compete on an equal footing for the District's contracts. 762 F.Supp. at 362. The District has not pursued its standing argument in this appeal and there is no need for us to say anything more on the subject. Cf. Cone Corp. v. Florida Dep't of Transp., 921 F.2d 1190 (11th Cir.1991).

The next point concerns Fullilove v. Klutznick, 448 U.S. 448, 100 S.Ct. 2758, 65 L.Ed.2d 902 (1980), in which the Supreme Court sustained a minority set-aside program enacted by Congress and, in doing so, applied a more deferential standard of review than the strict scrutiny test used in Croson. The District had contended--but does not any longer--that Fullilove, rather than Croson, supplied the standard for reviewing the Minority Contracting Act. The district court put this argument to rest. 762 F.Supp. at 363 n. 11. Fullilove relied on Congress' remedial powers derived from section 5 of the Fourteenth Amendment. Fullilove, 448 U.S. at 483, 100 S.Ct. at 2777 (plurality opinion); Croson, 488 U.S. at 488, 109 S.Ct. at 718 (plurality opinion). The District of Columbia Council does not share Congress' constitutional power. Congressional oversight of the District did not, and did not purport to, transform the Council's enactments into congressional legislation designed to enforce the Fourteenth Amendment. Croson, not Fullilove, controls.

The third point concerns the Minority Contracting Act's use of the term "goal" in referring to the 35 percent for MBEs. The Supreme Court in the Croson case referred to the City of Richmond's law as a "quota"; and the Court, in several passages, described the quota as a "rigid racial preference" or a "rigid line." 488 U.S. at 499, 508, 109 S.Ct. at 724, 728-29. The district court here placed no importance on this difference in terminology. Neither do we. Cf. Contractors Ass'n of Eastern Pa., Inc. v. City of Phila., 945 F.2d 1260, 1270-71 (3d Cir.1991) (Higginbotham, J., concurring in the judgment). As originally drafted, the bill that ultimately became...