Dynalantic Corp. v. US Dept. of Defense, Civil Action No. 95-2301.

• Decision Date: 20 May 1996
• Docket Number: Civil Action No. 95-2301.
• Citation: 937 F. Supp. 1
• Parties: DYNALANTIC CORP., Plaintiff, v. UNITED STATES DEPARTMENT OF DEFENSE, United States Department of the Navy and United States Small Business Administration, Defendants.
• Court: U.S. District Court — District of Columbia

937 F. Supp. 1

DYNALANTIC CORP., Plaintiff, v. UNITED STATES DEPARTMENT OF DEFENSE, United States Department of the Navy and United States Small Business Administration, Defendants.

Civil Action No. 95-2301.

United States District Court, Dist. of Columbia.

May 20, 1996.

Michael Janik, Alexander Brittin, Daniel Johnson, McKenna & Cuneo, L.L.P., Washington, D.C., for Plaintiff.

Deval L. Patrick, Isabelle Katz Pinzler, Richard S. Ugelow, Jay Adelstein, Michael A. Zubrensky, U.S. Department of Justice, Civil Rights Division, Washington, D.C., Eric H. Holder, Jr., United States Attorney for D.C., Daniel Van Horn, Office of the United States Attorney, Washington, D.C., for Defendants.

James E. Anklam, Gregory Katsas, Eric Grant, Jones, Day, Reavis & Pogue, Washington, D.C., Amici curiae for the U.S. Representatives of Congress.

William C. McNeil III, Julian A. Gross, The Employment Law Center, A Project of the Legal Aid Society of San Francisco, San Francisco, CA, Amici curiae for the Employment Center.

Paralee White, Andrew Mohr, Cohen & White, Washington, D.C., Amici curiae for the Coalition for Contracting Equity.

Pamela J. Mazza, Andrew P. Hallowell, Antonio R. Franco, Piliero, Mazza & Pargament, Washington, D.C., Amici curiae for the Minority Business Summit Volunteer Committee.

Eric R. Jones, Theodore M. Shaw, Norman J. Chachkin, David T. Goldberg, Paul K. Sonn, NAACP, Legal Defense and Educational Fund, Inc., New York, NY.

MEMORANDUM OPINION AND ORDER

SULLIVAN, District Judge.

I. Introduction

On December 15, 1995, Dynalantic, Inc. ("Dynalantic" or "plaintiff") commenced the present action against the Department of Defense, the Department of the Navy, and the Small Business Administration ("SBA") hereinafter referred to aggregately as "defendants", seeking declaratory relief and an injunction to restrain defendants from limiting their solicitation of bids for procurement of at least one helicopter training simulator to firms certified under the SBA's Section 8(a) program hereinafter referred to as "the 8(a) program". Dynalantic challenges the constitutionality of relevant provisions of the Small Business Act and the implementing regulations that relate to the 8(a) program, as well as 10 U.S.C. § 2323(a), (e) and the corresponding regulations.¹ Plaintiff contends that the statutes and regulations violate the Fifth Amendment of the United States Constitution, as applied to the procurement at issue in this case. Further, plaintiff claims that the defendants' decision to restrict bids and to limit competition for the helicopter simulator contract to 8(a) participants violates the Administrative Procedure Act as well as its civil rights under 42 U.S.C. §§ 1981 and 2000d.

Presently before the Court is plaintiff's motion for a preliminary injunction. Upon consideration of the pleadings, the applicable law, oral arguments of counsel, and the record herein, plaintiff's motion is DENIED for the following reasons.

II. Factual Background

Plaintiff is engaged in the business of providing training equipment to the military. Although plaintiff qualifies as a "small business" as that term is defined by the SBA, 15 U.S.C. § 631 et seq., it has neither applied, nor otherwise been certified, to participate in the 8(a) program.

Defendant, the Department of the Navy ("the Navy"), is seeking to procure one mobile flight simulator, referred to as the UH-1N Aircrew Procedures Trainer ("APT"), with an option for a second under a contract that is not to exceed $8 million. The Navy and defendant, SBA, have agreed that the APT procurement shall be opened only for competition to firms participating in the 8(a) program. Bids for the APT contract must be submitted by May 21, 1996.²

III. SBA's Section 8(a) Program

Under the 8(a) program, the SBA may award government procurement contracts to "socially and economically disadvantaged small business concerns." 15 U.S.C. § 637(a). A small business seeking admission into the 8(a) program must be certified by the SBA as being at least 51 per cent owned and controlled by one or more individuals that satisfy the criteria for social and economic disadvantaged status. 15 U.S.C. § 637(4)(A). A business is considered small if it is independently owned and operated, not dominant in its field of operation, and satisfies certain standards in terms of number of employees and gross receipts for its particular industry. 15 U.S.C. § 632(a)(1)(2). Further, a person is considered "socially disadvantaged" for purposes of the 8(a) program if that individual has been "subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group." 15 U.S.C. § 637(a)(5); 13 C.F.R. § 124.105(a). Economically disadvantaged individuals are defined 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 8(a) program's regulations, which implement the race-neutral language of the statute, accord members of certain racial groups with a presumption of social disadvantage. 13 C.F.R. § 124.105(b). This presumption, however, is rebuttable. Id. Members of racial groups that are not presumptively socially disadvantaged may establish their social disadvantage by presenting clear and convincing evidence. 13 C.F.R. § 124.105(c). Regardless of the manner in which an applicant may demonstrate his or her social disadvantage, the 8(a) program's economic disadvantage criteria excludes from entry into the program any individual whose net worth exceeds $250,000. 13 C.F.R. § 124.106(a)(2)(i).

A business that is certified for entry into the 8(a) program may participate in the program for a maximum period of nine years. 15 U.S.C. § 636(j)(10)(C); 13 C.F.R. § 124.110(a). However, a participant in the 8(a) program may be graduated from the program before the expiry of nine years if the business substantially achieves the goals set forth in its business plan. 13 C.F.R. § 124.208(a). Further, any individual will be deemed ineligible for continued participation in the program if that individual's personal net worth exceeds $750,000. 13 C.F.R. § 124.111(a)(2)(ii).

IV. Plaintiff Lacks Standing To Challenge the Constitutionality of the Section 8(a) Program

It is a fundamental tenet of federal jurisdiction that "federal courts are under an independent obligation to examine their own jurisdiction" irrespective of whether any party raises a concern about a court's jurisdiction to resolve a case on the merits. FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231, 110 S.Ct. 596, 607, 107 L.Ed.2d 603 (1990). The doctrine of standing serves "to identify those disputes which are appropriately resolved through the judicial process." Whitmore v. Arkansas, 495 U.S. 149, 155, 110 S.Ct. 1717, 1722, 109 L.Ed.2d 135 (1990). Since standing implicates the very core of a federal court's power to consider the merits of a case, "standing can be raised at any point in a case proceeding and, as a jurisdictional matter, may be raised, sua sponte, by the court." Steffan v. Perry, 41 F.3d 677, 697 n. 20 (D.C.Cir.1994) (en banc).

For purposes of the case-or-controversy requirement of Article III, "the irreducible constitutional minimum of standing contains three elements." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992). For jurisdictional purposes, a plaintiff must demonstrate: (1) an "injury in fact," which is an invasion of a legally protected interest that is "(a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical," id. (citations, footnote and internal quotation marks omitted); (2) a causal relationship between the injury and the challenged conduct, id.; and (3) that it is likely, as opposed to speculative, "that the injury will be redressed by a favorable decision." Id.³

Plaintiff has alleged that the 8(a) program and 10 U.S.C. § 2323(a), (e) (and the corresponding regulations) are "intersecting laws ... that create a requirement-in-fact, not susceptible of waiver, consideration of merit, or determination of merit." Plaintiff's Memorandum in Support at 8. As stated previously, plaintiff maintains that these "intersecting laws" are unconstitutional as applied to the APT procurement. Nevertheless, notwithstanding plaintiff's characterization of the statutory basis upon which defendants have relied in limiting bids to 8(a) participants, plaintiff's standing to challenge the procurement here depends upon its standing to challenge the constitutionality of the 8(a) program as applied to the APT procurement.⁴ Plaintiff has conceded the marginal relevance of 10 U.S.C. § 2323 in stating the following:

"The issue whether Defendants set aside the contract under § 2323 or solely under the 8(a) program is, for purposes of this Motion, really a red herring. This is true because all agree that the APT procurement is set-aside for minority-owned 8(a) contractors to help achieve DoD's five percent goal, and no one has disputed the Navy's practice of setting aside every possible contract. Regardless of the precise statutory framework which the Defendants followed, therefore, Dynalantic is excluded from the APT competition because of the race of Dynalantic's owners."

Plaintiff's Reply to the NAACP Legal Defense and Educational Fund's Brief at 3-4 hereinafter, Plaintiff's Reply to the LDF's Brief. Since plaintiff lacks standing to challenge the constitutionality of the 8(a) program as applied to the APT procurement, it also lacks standing to challenge the constitutionality of 10 U.S.C. § 2323 which — as applied here — merely provides that the Defense Department may utilize the 8(a) program in seeking to achieve its goal for contracting with socially and economically disadvantaged businesses.

In its written submissions and...