Dynalantic Corp. v. Department of Defense

• Decision Date: 10 June 1997
• Docket Number: No. 96-5260,96-5260
• Parties: , 41 Cont.Cas.Fed. (CCH) P 77,104 DYNALANTIC CORP., Appellant, v. DEPARTMENT OF DEFENSE, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1012

115 F.3d 1012

325 U.S.App.D.C. 109, 41 Cont.Cas.Fed. (CCH) P 77,104

DYNALANTIC CORP., Appellant, v. DEPARTMENT OF DEFENSE, et al., Appellees.

No. 96-5260.

United States Court of Appeals, District of Columbia Circuit.

Argued April 18, 1997.

Decided June 10, 1997.

Appeal from the United States District Court for the District of Columbia (95cv2301).

Daniel E. Johnson, Washington, DC, argued the cause for appellant, with whom Michael T. Janik was on the brief.

Daniel F. Van Horn, Assistant U.S. Attorney, Washington, DC, argued the cause for appellees, with whom Eric H. Holder, Jr., U.S. Attorney, John D. Bates and R. Craig Lawrence, Assistant U.S. Attorneys, were on the brief.

Before EDWARDS, Chief Judge, SILBERMAN and WILLIAMS, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

Dissenting opinion filed by Chief Judge HARRY T. EDWARDS.

SILBERMAN, Circuit Judge:

Dynalantic Corporation sued the Department of Defense and the Small Business Administration seeking to enjoin the procurement, under the government's so-called 8(a) contract set-aside program, of a flight simulator contract for which Dynalantic wished to bid. The district court held that Dynalantic did not have Article III standing. We reverse.

I.

The Small Business Act sets a "Government-wide goal" that "not less than 5 percent of the total value of all prime [federal] contract and subcontract awards for each fiscal year" be awarded to socially and economically disadvantaged small business concerns. 15 U.S.C. § 644(g)(1) (1994). The Small Business Administration (SBA), under § 8(a) of the Act, is authorized to contract with other government agencies to provide goods and services, and then to subcontract that work to qualifying businesses. The Department of Defense has its own 5% goal, which it may satisfy by participating in the 8(a) program. See 10 U.S.C.A. §§ 2323(a), 2323(e)(3) (Supp.1997).

Qualifying businesses must be both "small," as defined by the statute, and 51% owned (and controlled) by individuals who are both "socially and economically disadvantaged." "Socially disadvantaged" individuals are defined as those persons who have been "subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities." 15 U.S.C. § 637(a)(5) (1994). SBA regulations presume that, "[i]n the absence of evidence to the contrary," members of certain racial or ethnic groups--including Black, Hispanic, Native, Asian Pacific, and Subcontinent Asian Americans---are socially disadvantaged. 13 C.F.R. § 124.105(b)(1) (1997). A person not a member of a listed group may still qualify as socially disadvantaged by demonstrating, "on the basis of clear and convincing evidence," that he or she personally suffers from social disadvantage which stems from color, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from mainstream American society, or other similar cause; is rooted in treatment experienced in American society; is chronic and substantial; and has negatively impacted the individual's entry into and/or advancement in the business world. Id. § 124.105(c)(1).

The Act in turn defines the "economically disadvantaged" as "those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged." 15 U.S.C. § 637(a)(6)(A). The SBA, in applying that standard, looks at an individual's personal income for at least the past two years, the total fair market value of all his assets, and his personal net worth. Under SBA regulations, individuals with a personal net worth exceeding $250,000 cannot initially qualify as economically disadvantaged, and an individual is ineligible for continued participation in the 8(a) program (participation is limited to a maximum of nine years) if the individual's net worth exceeds $750,000. See 13 C.F.R. §§ 124.106(a)(2)(i), 124.111(a)(2).

In February 1995, the SBA requested that a contract for the development for the Navy of the UH-1N Aircrew Procedures Trainer (APT)--a mobile flight simulator for the UH-1N "Huey" helicopter--be awarded through the 8(a) program. ¹ Dynalantic, a small company that has designed and manufactured flight simulators for the military, filed an administrative protest with the contracting officer, contesting the decision to award the APT under the 8(a) program. The protest and a subsequent administrative appeal were rejected, and thereafter Dynalantic filed a complaint in district court seeking declaratory and injunctive relief, claiming that the government's decision to procure the APT contract under the 8(a) program was unconstitutional under the Fifth Amendment and violated the Administrative Procedure Act.

The district court denied Dynalantic's motion for a preliminary injunction. The district court thought Dynalantic lacked standing to challenge the constitutionality of the 8(a) program and that Dynalantic had failed to meet the requirements for a preliminary injunction. Dynalantic Corp. v. United States Dep't of Defense, 937 F.Supp. 1, 9 (D.D.C.1996). The court subsequently dismissed the entire case. Dynalantic appealed both the denial of its motion for a preliminary injunction and judgment for the government on the pleadings. On October 7, 1996, we dismissed the appeal of the denial of the preliminary injunction as moot, given the dismissal of the entire action, and on January 24, 1997, we granted Dynalantic's motion to enjoin the APT procurement during the pendency of the appeal. Only a few weeks later, after Dynalantic had filed its initial appellate brief, the Navy canceled the proposed solicitation for the APT procurement.

II.

After canceling the proposed procurement, the government suggested that the case had become moot because there was "currently no plan to procure the APT through the 8(a) program or by any method involving race-conscious elements." (Emphasis added.) Since the government bears "the heavy burden of demonstrating that there is no reasonable expectation that the alleged violation will recur," Payne Enters., Inc. v. United States, 837 F.2d 486, 492 (D.C.Cir.1988) (quotations and citations omitted), we directed the government to give us further information. The government submitted an affidavit from the Director of the Aircraft Support Contracts Department, Naval Air Systems Command, who explained that the decision to withdraw the APT procurement from the 8(a) program was made because "[t]he delay caused by the pending litigation involving the [APT] procurement has led to both operational and safety concerns" (the UH-1N is the only Marine Corps aircraft for which no simulator is presently available for training), and because further delays might jeopardize the funding for the APT. The government assured us, however, that although the exact manner of the APT procurement had yet to be determined, "neither the 8(a) program nor any other race-conscious source selection procedure will be used as part of the new procurement plan." The government therefore argues that because Dynalantic's claims, both before the district court and on appeal, have been directed at the APT procurement specifically, the government's decision to withdraw the APT procurement from the 8(a) program leaves no controversy between it and Dynalantic. Any decision from us would be an advisory opinion because Dynalantic is now able to compete for the APT contract--precisely the remedy it has sought throughout this litigation.

Dynalantic is not content with the government's assurances, perhaps perceiving its specialty, constructing simulators, as particularly vulnerable to the 8(a) set-aside program. See infra pp. 114-115. It claims that its appeal qualifies for both of the exceptions to the mootness doctrine: "the common one for 'actions capable of repetition yet evading review,' and the related but narrower one addressing a defendant's voluntary cessation of the offending conduct." Clarke v. United States, 915 F.2d 699, 703 (D.C.Cir.1990) (en banc). The case is capable of repetition yet evades review, it is argued, because the government plans to continue to set aside simulator procurements under the 8(a) program, and presumably can evade review by withdrawing particular procurements from the program whenever it is seriously challenged. Alternatively, Dynalantic contends that the government, by withdrawing the APT procurement from the 8(a) program, has "manipulat[ed] the judicial process by voluntarily ceasing the complained of activity, and then seeking a dismissal of the case, thus securing freedom to return to [its] old ways." Clarke, 915 F.2d at 705 (quotations and citations omitted).

We need not decide, however, whether appellant's APT claim would fall within one of these exceptions because we grant Dynalantic's alternative request that we allow it to amend its pleadings to raise a general challenge to the 8(a) program as administered by the SBA and participated in by the Defense Department. Although we are normally hesitant to allow a plaintiff resisting a mootness claim later to assert broader claims of injury, see, e.g., Clarke, 915 F.2d at 703, here it is the government's own actions, taken after Dynalantic had litigated the case below--indeed, after we enjoined the APT procurement pending appeal--that made Dynalantic's claims regarding the APT procurement arguably moot. Moreover, although Dynalantic's complaint was directed only at the APT procurement, the parties briefed the constitutionality of the 8(a) program below (albeit in the context of the APT procurement), the district court considered the constitutionality of the 8(a) program in denying the preliminary injunction, see Dynalantic, 937 F.Supp. at 9-10, and much of the government's appellate brief is directed at the...