Ervin and Associates, Inc. v. Cisneros

• Decision Date: 12 September 1996
• Docket Number: Civil Action No. 96-WM-1954.
• Citation: 939 F. Supp. 793
• Parties: ERVIN AND ASSOCIATES, INCORPORATED, Plaintiff, v. Henry CISNEROS, as Secretary of the United States Department of Housing and Urban Development; United States Department of Housing and Urban Development; Philip Lader, as Administrator of the United States Small Business Administration; United States Small Business Administration; and the United States of America, Defendants.
• Court: U.S. District Court — District of Colorado

939 F. Supp. 793

ERVIN AND ASSOCIATES, INCORPORATED, Plaintiff, v. Henry CISNEROS, as Secretary of the United States Department of Housing and Urban Development; United States Department of Housing and Urban Development; Philip Lader, as Administrator of the United States Small Business Administration; United States Small Business Administration; and the United States of America, Defendants.

Civil Action No. 96-WM-1954.

United States District Court, D. Colorado.

September 12, 1996.

Stanley L. Garnett, Brownstein Hyatt Farber & Strickland, P.C., Denver, CO, Wayne G. Travell, Daniel M. Hawke, Tucker, Flyer & Lewis, P.C., Washington, DC, for Plaintiff/Petitioner.

J. Benedict Garcia, Assistant U.S. Attorney, Denver, CO, Richard S. Ugelow, Michael Z. Zubrensky, Employment Lit. Section, U.S. Department of Justice, Washington, DC, for Defendants/Respondents.

MEMORANDUM OPINION AND ORDER

KANE, Senior District Judge.

I. BACKGROUND.

Plaintiff Ervin Associates, Inc. (Ervin) is a nonminority contractor who, over the past six years, regularly provided physical inspection services to the Department of Housing and Urban Development (HUD). In the summer of 1996, HUD set aside 30% of its physical inspection procurement for award to a single contractor through the Small Business Administration's Section 8(a) program (the "Set Aside Physical Inspection Procurement").

The 8(a) program (the "Program"), codified at 15 U.S.C. § 637, is a federal business development plan that targets "socially and economically disadvantaged small business concerns." The Small Business Administration (SBA) awards procurement contracts to Program participants to furnish articles or perform construction work for the federal government.

Ervin claims HUD's decision to establish the Set Aside Physical Inspection Procurement impairs his equal protection rights by depriving him of the opportunity to compete for the procurement on an equal footing.¹ He claims the Program's "social disadvantage" criterion is a race-based preference that must satisfy the strict scrutiny standard articulated by the Supreme Court in Adarand Constructors, Inc. v. Peña, ___ U.S. ___, 115 S.Ct. 2097, 132 L.Ed.2d 158 (1995) to pass constitutional muster. Because HUD did not and is unable to justify its decision under the Adarand standard, Ervin asserts the decision violated both his constitutional rights and the Administrative Procedure Act (the "APA"), 5 U.S.C. § 551 et seq., and must be set aside.

HUD may award the Set Aside Physical Inspection Procurement Contract as early as October 16, 1996. Ervin filed this action on August 19, 1996, seeking preliminary and permanent injunctive relief prohibiting Defendants from awarding the Physical Inspection Procurement Contract and from awarding any other contracts without first meeting the strict scrutiny requirements of Adarand. Simultaneously with his Complaint for Declaratory and Injunctive Relief, Ervin filed a Motion for Temporary Restraining Order and/or a Preliminary Injunction enjoining HUD from awarding the Set Aside Physical Inspection Procurement Contract.

Based in part on the jurisdictional defenses raised by HUD and the fact that a related action brought by Ervin is presently pending in the United States District Court for the District of Columbia, I vacated a hearing that had been set on Ervin's motion for preliminary injunction and denied Ervin's Motion for Expedited Discovery related to his request for injunctive relief. Instead, I opted to consider first the questions of standing and venue, and, if necessary, Defendants' request for transfer to the District of Columbia. Because I have decided to transfer pursuant to 28 U.S.C. § 1404(a), I will not rule on issues of standing. Suffice to say those issues are significant and possibly determinative of the action.

II. THE SBA § 8(a) PROGRAM.

Under the 8(a) Program, the SBA awards government procurement contracts to "socially and economically disadvantaged small business concerns." 15 U.S.C.A. § 637(a)(1)(B) (1996 Supp.). A business qualifies as "a small business concern" if it is "independently owned and operated," "is not dominant in its field," and meets any other criteria specified by the SBA by which a business may determined to be "small" for the purposes of the Program. Id., § 632(a)(1) & (2); see 13 C.F.R. §§ 121, 124.102 (1996). A small business concern is "socially and economically disadvantaged" if at least 51% of the business is unconditionally owned by one or more individuals who meet the criteria for social and economic disadvantaged status. Id., § 637(a)(4)(A)(i)-(ii); 13 C.F.R. § 124.103-104.

Congress has defined "socially disadvantaged individuals" as those who have been "subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group sic without regard to their individual qualities." 15 U.S.C. § 637(a)(5); see 13 C.F.R. § 124.105. "Economically disadvantaged individuals" are 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." Id., § 637(a)(6)(A); see 13 C.F.R. § 124.106.

Under the Program, individuals who are members of certain racial groups are presumptively socially disadvantaged. 13 C.F.R. § 124.105(b). The presumption is rebuttable, however, and individuals who are not members of a designated group may establish their social disadvantage with "clear and convincing evidence." Id., § 124.105(c). If an individual demonstrates his background has "negatively impacted" his "entry into" or "advancement in" the business world, the SBA will consider him "socially disadvantaged." Id., § 124.105(c)(1)(v).

However, the 8(a) Program is "not intended" to assist "socially disadvantaged individuals who have accumulated substantial wealth, who have unlimited growth potential or who have not experienced or have overcome impediments to obtaining access to financing, markets and resources." 13 C.F.R. § 124.106(a)(1)(ii). Thus, even those individuals who are presumptively socially disadvantaged or who have established social disadvantage by clear and convincing evidence must also show they are economically disadvantaged to participate in the 8(a) Program. An individual whose personal net worth exceeds $250,000 will not be considered economically disadvantaged. Id., § 124.106(a)(2)(i).

A business can remain in the Program for a maximum of nine years, but only if it continues to meet all of the eligibility requirements throughout that period. 15 U.S.C. § 636(j)(10)(C); 13 C.F.R. § 124.110(a). A participant must "graduate" or leave the program early if it has attained its business objectives as set forth in its business plan on file with the SBA. 13 C.F.R. § 124.208(a).

III. VENUE.

Defendants move to dismiss for improper venue pursuant to Rule 12(b)(3), alternatively, to transfer for improper venue under 28 U.S.C. § 1406(a) or to transfer for convenience under 28 U.S.C. § 1404(a). I find venue is proper in this court but transfer for convenience pursuant to 28 U.S.C. § 1404(a).

A. Venue Under 28 U.S.C. § 1391(e).

Ervin claims venue in this district pursuant to 28 U.S.C. § 1391(e) which states as follows in pertinent part:

A civil action in which a defendant is an officer or employee of the United States or an agency thereof acting in his official capacity or under color of legal authority, or an agency of the United States, or the United States, may, except as otherwise provided by law, be brought in any judicial district in which (1) a defendant in the action resides, (2) a substantial part of the events or omissions giving rise to the claim occurred ... or (3) the plaintiff resides.

28 U.S.C. § 1391(e).

Defendants argue venue pursuant to § 1391(e) is improper because (1) Defendants do not reside in this judicial district, but rather in Washington, D.C.; (2) although Ervin asserts "the procurements which are the subject of this Complaint are being administered from HUD's Administrative Center in Denver, Colorado," (Compl. ¶ 11), this procurement does not refute the fact that a substantial part of the events giving rise to the claims have occurred in Washington, D.C.; and (3) Ervin, a Delaware Corporation with principal place of business in Maryland, does not reside in this judicial district.

"Once venue is attacked, the plaintiff bears the burden to show proper venue." Andrean v. Secretary of the United States Army, 840 F.Supp. 1414, 1422 (D.Kan.1993). However, a party moving to transfer the case on grounds of inconvenience, bears the burden of showing the existing forum is inconvenient. Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1515 (10th Cir.1991).

Ervin argues "a substantial part of the events" giving rise to this action has occurred or will occur in Colorado. He points out HUD chose Colorado as the place in which to initiate the two physical inspection procurements at issue and conducted a "prebid conference" in Denver on July 1, 1996 attended by 45 potential bidders from various cities throughout the United States and three officials from HUD's headquarters. Further, the Contracting Officer (the contractor's main contact with the agency) resides in Colorado, and all directions, task orders, contract modifications and other events relating to the implementation of these contracts will occur from Colorado.

Ervin correctly notes the fact that some of the events concerning these procurements also occurred in Washington, D.C., is immaterial for purposes of finding venue in this district because "`if the selected district's contacts are "substantial," it should make no difference that another's are more so, or the most so.'" Merchants Nat. Bank v. Safra-Bank (California), 776 F.Supp. 538, 541 (D.Kan.1991) (quotation omitted). See also Consumers Gas & Oil, Inc. v. Farmland Indus., Inc., ...