Inc. v. Tippett

• Decision Date: 22 July 2010
• Docket Number: No. 09-1050.,09-1050.
• Parties: H.B. ROWE COMPANY, INCORPORATED, Plaintiff-Appellant, v. W. Lyndo TIPPETT, individually; P.E. Len A. Sanderson, individually; J.G. Nance, in his official capacity as Chief Engineer-Operations of the North Carolina Department of Transportation; Eugene A. Conti, Jr., in his official capacity as Secretary of the North Carolina Department of Transportation; Terry R. Gibson, in his official capacity as State Highway Administrator of the North Carolina Department of Transportation, Defendants-Appellees. NAACP Legal Defense and Education Fund, Inc., Amicus Supporting Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

615 F.3d 233

H.B. ROWE COMPANY, INCORPORATED, Plaintiff-Appellant,

v. W. Lyndo TIPPETT, individually; P.E. Len A. Sanderson, individually; J.G. Nance, in his official capacity as Chief Engineer-Operations of the North Carolina Department of Transportation; Eugene A. Conti, Jr., in his official capacity as Secretary of the North Carolina Department of Transportation; Terry R. Gibson, in his official capacity as State Highway Administrator of the North Carolina Department of Transportation, Defendants-Appellees.NAACP Legal Defense and Education Fund, Inc., Amicus Supporting Appellees.

No. 09-1050.

United States Court of Appeals,Fourth Circuit.

Argued: March 24, 2010.

Decided: July 22, 2010.

COPYRIGHT MATERIAL OMITTED.

ARGUED: Ralph William Kasarda, Jr., Pacific Legal Foundation, Sacramento, California, for Appellant. Christopher Grafflin Browning, Jr., North Carolina Department of Justice, Raleigh, North Carolina, for Appellees. ON BRIEF: Kevin Van Parsons, Smith, Parsons & Vickstrom, PLLC, Charlotte, North Carolina; James S. Burling, Sharon L. Browne, Pacific Legal Foundation, Sacramento, California, for Appellant. Roy Cooper, Attorney General of North Carolina, John F. Maddrey, Assistant Solicitor General, Tiare B. Smiley, Special Deputy Attorney General, Elizabeth Leonard McKay, Special Deputy Attorney General, North Carolina Department of Justice, Raleigh, North Carolina, for Appellees. Joshua Civin, NAACP Legal Defense & Educational Fund, Inc., Washington, D.C.; John Payton, Director-Counsel, Debo P. Adegbile, Matthew Colangelo, Joy Milligan, NAACP Legal Defense & Educational Fund, Inc., New York, New York, for NAACP Legal Defense and Education Fund, Inc., Amicus Supporting Appellees.

Before NIEMEYER and MOTZ, Circuit Judges, and JAMES A. BEATY, JR., Chief United States District Judge for the Middle District of North Carolina, sitting by designation.

Affirmed in part, reversed in part, and remanded by published opinion. Judge MOTZ wrote the majority opinion, in which Judge BEATY concurred. Judge NIEMEYER wrote a separate opinion concurring in the judgment. Judge BEATY wrote a separate concurring opinion.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

This case arises from the attempt by the people of North Carolina and their elected representatives to end racial and gender-based discrimination in state highway construction subcontracting. The State's statutory scheme-the product of extensive study and refinement in response to developments in federal law-requires prime contractors to engage in good faith efforts to satisfy participation goals for minority and women subcontractors on state-funded projects. Through these nonmandatory, project-specific participation goals, the State seeks to provide a fair opportunity for all subcontractors to compete for public work.

Denied a contract because of its failure to demonstrate good faith efforts to meet these participation goals, a prime contractor brought this action, asserting that the goals violate the Equal Protection Clause, and seeking injunctive relief and money damages. After extensive discovery and a bench trial, the district court held the challenged statutory scheme constitutional both on its face and as applied. The contractor appeals.

We do not believe that the State met its burden of proof in all respects. But we agree with the district court that the State produced a strong basis in evidence justifying the statutory scheme on its face, and as applied to African American and Native American subcontractors, and that the State demonstrated that the scheme is narrowly tailored to serve its compelling interest in remedying discrimination against these racial groups. Accordingly, for the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I.

We begin with a summary of the statutory scheme and the litigation at issue here.

A.

In 1983, the North Carolina General Assembly enacted a statute setting forth a general policy promoting the use of “small, minority, physically handicapped and women contractors” in State construction projects. N.C. Gen.Stat. § 136-28.4 (1983). The statute directed the North Carolina Department of Transportation (“the Department”) and other State agencies to “encourage and promote” this policy. Id. In 1989 and 1990, the legislature amended section 136-28.4 to set specific participation goals on State transportation construction contracts, first for minority-owned businesses (10 percent) and then for women-owned businesses (5 percent). N.C. Gen.Stat. § 136-28.4(b) (1990). The Department promulgated and implemented regulations pursuant to section 136-28.4 titled “Minority Business Enterprise and Women Business Enterprise Programs for Highway and Bridge Construction Contracts” (collectively “the Program”). 19A N.C. Admin. Code 2D.1101 (1997). The North Carolina statutory scheme largely mirrored the federal Disadvantaged Business Enterprise (“DBE”) program, with which every state must comply in awarding highway construction contracts that utilize federal funds. ¹ For example, as in the DBE program, a prime contractor in North Carolina would be excused from the specific subcontracting participation goals by demonstrating good faith efforts to attain such goals. See id. at 2D.1110; 49 C.F.R. § 26.53 (1999).

In 1991, a North Carolina prime contractor challenged in state court the constitutionality of section 136-28.4. See Dickerson Carolina, Inc. v. Harrelson, 114 N.C.App. 693, 443 S.E.2d 127 (1994), appeal dismissed, 337 N.C. 691, 448 S.E.2d 520 (1994). The contractor relied on City of Richmond v. J.A. Croson Co., 488 U.S. 469, 493-94, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989), which affirmed the principle that courts must apply strict scrutiny to all race-conscious legislation. In Croson the Supreme Court recognized that “[i]t is beyond dispute that any public entity, state or federal, has a compelling interest in assuring that public dollars, drawn from the tax contributions of all citizens, do not serve to finance the evil of private prejudice.” Id. at 492, 109 S.Ct. 706. The Court held, however, that to remedy such discrimination through race-conscious measures, a governmental entity must identify with “some specificity” the racial discrimination it seeks to remedy and present a “strong basis in evidence for its conclusion that remedial action [is] necessary.” Id. at 500, 504, 109 S.Ct. 706 (internal quotation marks omitted). ² In response to the Dickerson lawsuit, the State suspended operation of section 136-28.4.

The North Carolina General Assembly then commissioned a national research and consulting firm, MGT of America (“MGT”), to study the State's transportation construction industry. In 1993, MGT completed that study, which concluded that North Carolina minority and women subcontractors suffered from discrimination in the road construction industry and were underutilized in State contracts.

After receiving the 1993 study, the General Assembly directed the Department to reimplement the Program to achieve the goals of section 136-28.4. The Department adopted various changes that the 1993 study suggested, but it set the same overall percentage goals for participation by minority and women subcontractors. Nevertheless, in 1994 the Court of Appeals of North Carolina dismissed as moot the pending legal challenge to the statute in Dickerson, 443 S.E.2d at 132.

In 1998, the General Assembly commissioned MGT to update the 1993 study. The resulting 1998 study concluded that minority and women subcontractors remained underutilized in state-funded road construction.

B.

Four years later, in October 2002, the Department sought bids on a project to relocate a road in Iredell County, North Carolina. Pursuant to the Program, as reimplemented in 1993, the Department set participation goals for minority and women subcontractors of 10 percent and 5 percent, respectively. H.B. Rowe Co., Inc. (“Rowe”), a general contractor owned and operated by a white male, submitted the lowest bid on the project. Rowe's bid included 6.6 percent women subcontractor participation, but no minority subcontractor participation. The Department rejected Rowe's bid in favor of a slightly higher bid, which included 9.3 percent women subcontractor participation and 3.3 percent minority subcontractor participation.

The Department denied Rowe the contract because Rowe failed to demonstrate good faith efforts to attain the pre-designated levels of minority participation on the project. At the time of Rowe's submission, assertedly documenting its good faith efforts, it was one of only 13 submissions that the Department rejected. These 13 rejections constituted 1.5 percent of the 878 good faith efforts submissions that the Department had considered.

The Department determined that, with respect to good faith efforts, Rowe's submission contained discrepancies in the number of minority subcontractors Rowe solicited, did not demonstrate solicitation of enough minority subcontractors to allow for consideration of a fair number of quotes, did not adequately describe the subcontracting work available for the Iredell project, and evidenced no strategy for meeting the Department's participation goals. Rowe unsuccessfully appealed the denial to the State Highway Administrator.

In April 2003, Rowe filed this action in federal district court against the Department and several State officials, including Governor Michael F. Easley and Chief Engineer-Operations W.S. Varnedoe ³ in their official capacities, and Secretary of Transportation W. Lyndo Tippett and State Highway Administrator Len A. Sanderson in their official and individual capacities. Alleging that the statute and the defendants' actions in administering the Program violated Rowe's rights under the Equal Protection Clause of the Fourteenth Amendment, Rowe challenged the constitutionality of section 136-28.4 on its face and as applied. (Rowe also...