Milwaukee County Pavers Ass'n v. Fiedler

• Decision Date: 27 February 1989
• Docket Number: No. 89-C-0177-C.,89-C-0177-C.
• Parties: MILWAUKEE COUNTY PAVERS ASSN., a Wisconsin corporation, B.R. Amon & Sons, Inc., a Wisconsin corporation, Barricade Flasher Service, Inc., a Wisconsin corporation, Roddie Beaudoin & Son Co., a Wisconsin corporation, Boulanger Const. Co., Inc., a Wisconsin corporation, Brinkmann Engineering, Inc., a Wisconsin corporation, James Cape & Sons Co., a Wisconsin corporation, Century Fence, a Wisconsin corporation, Earth, Inc., a Wisconsin corporation, Hanz Contractors, Inc., a Wisconsin corporation, Johnson Sand & Gravel, Inc., a Wisconsin corporation, Tom Kuehne Landscape Contractor, Inc., a Wisconsin corporation, La Londe Contractors, Inc., a Wisconsin corporation, Milwaukee General Construction Co., Inc., a Wisconsin corporation, A.E. Oakes, a Wisconsin corporation, Pac-Sac Construction, a Wisconsin corporation, Paving Mix & Construction, a Wisconsin corporation, Pheifer Bros. Const. Co., Inc., a Wisconsin corporation, Reliance Construction Co., Inc., a Wisconsin corporation, Rock Road of Wisconsin, Inc., a Wisconsin corporation, Stoehr Grading Co., Inc., a Wisconsin corporation, Super Excavators, Inc., a Wisconsin corporation, Trierweiler Const. & Supply Co., Inc., a Wisconsin corporation, Vinton Construction Co., a Wisconsin corporation, and, Zignego Company, a Wisconsin corporation, on behalf of themselves and all similarly situated persons, Plaintiffs, v. Ronald R. FIEDLER, individually and in his capacity as Secretary of the Wisconsin Department of Transportation, and David Manning, individually and in his capacity as Wisconsin Department of Transportation Minority Business Programs Director, Defendants.
• Court: U.S. District Court — Western District of Wisconsin

707 F. Supp. 1016

MILWAUKEE COUNTY PAVERS ASSN., a Wisconsin corporation, B.R. Amon & Sons, Inc., a Wisconsin corporation, Barricade Flasher Service, Inc., a Wisconsin corporation, Roddie Beaudoin & Son Co., a Wisconsin corporation, Boulanger Const. Co., Inc., a Wisconsin corporation, Brinkmann Engineering, Inc., a Wisconsin corporation, James Cape & Sons Co., a Wisconsin corporation, Century Fence, a Wisconsin corporation, Earth, Inc., a Wisconsin corporation, Hanz Contractors, Inc., a Wisconsin corporation, Johnson Sand & Gravel, Inc., a Wisconsin corporation, Tom Kuehne Landscape Contractor, Inc., a Wisconsin corporation, La Londe Contractors, Inc., a Wisconsin corporation, Milwaukee General Construction Co., Inc., a Wisconsin corporation, A.E. Oakes, a Wisconsin corporation, Pac-Sac Construction, a Wisconsin corporation, Paving Mix & Construction, a Wisconsin corporation, Pheifer Bros. Const. Co., Inc., a Wisconsin corporation, Reliance Construction Co., Inc., a Wisconsin corporation, Rock Road of Wisconsin, Inc., a Wisconsin corporation, Stoehr Grading Co., Inc., a Wisconsin corporation, Super Excavators, Inc., a Wisconsin corporation, Trierweiler Const. & Supply Co., Inc., a Wisconsin corporation, Vinton Construction Co., a Wisconsin corporation, and, Zignego Company, a Wisconsin corporation, on behalf of themselves and all similarly situated persons, Plaintiffs, v. Ronald R. FIEDLER, individually and in his capacity as Secretary of the Wisconsin Department of Transportation, and David Manning, individually and in his capacity as Wisconsin Department of Transportation Minority Business Programs Director, Defendants.

No. 89-C-0177-C.

United States District Court, W.D. Wisconsin.

February 27, 1989.

Joseph W. Melli, John R. Sweeney, Philip J. Bradbury, Melli, Walker, Pease & Ruhly, Madison, Wis., for plaintiffs.

David C. Rice, Office of the Atty. Gen., Madison, Wis., for defendants.

Brady C. Williamson, Linda M. Clifford, La Follette & Sinykin, Madison, Wis., for amici curiae, Wis. Minority Contractors Assoc., Lakeside Pavers, Inc., Platt Constr. Bowles Contracting, Inc., Mews Co's., Inc., Underground Pipeline, Inc.

ORDER

CRABB, District Judge.

This is a civil action pursuant to 42 U.S.C. § 1983 in which plaintiffs challenge the constitutionality of Wis.Stat. § 84.076(1) and (2), entitled "Disadvantaged business demonstration and training program," which provides that the State of Wisconsin should reserve $4,000,000.00 in construction contracts for "disadvantaged" businesses.¹ Plaintiffs request (1) a permanent injunction against enforcement of the statute, (2) a temporary injunction enjoining bid lettings scheduled for February 21, 1989 and March 21, 1989 and execution of bids under the statute, and (3) a declaration that the statute is unconstitutional under the standards for reviewing affirmative action programs articulated recently by the United States Supreme Court in City of Richmond v. J.A. Croson, ___ U.S. ___, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989).²

Immediately upon filing, the court established a briefing schedule on plaintiffs' motion for a preliminary injunction. On February 20, 1989, after the plaintiffs had filed a brief in support of their motion but before defendants had replied, plaintiffs requested a temporary restraining order enjoining the bid letting scheduled for the following day. On February 21, 1989, the court held a hearing on the motion at which both sides argued and defendants presented two witnesses. At the conclusion of the hearing, the parties agreed that the court should consider the hearing and pending motion to be requesting a preliminary injunction in lieu of a temporary restraining order.³ Defendants were given until noon on February 22, 1989 to submit affidavits and briefs in opposition to the motion for a preliminary injunction.

The State of Wisconsin is to be lauded for its efforts to ensure that businesses owned by disadvantaged people will enjoy equal business opportunities in the construction industry. The state has enacted a thoughtfully designed program that will train disadvantaged individuals and businesses in business skills and ensure that they will be able to obtain some state construction contracts. Unfortunately, legislation that is both wise and fair from the standpoint of public policy and morality is not always constitutional. In this case, the challenged Wisconsin statute, despite its worth, is constitutionally suspect. The statute appears to classify individuals on the basis of race, national origin, and gender. The state has not yet put forward the evidentiary showing necessary to find that the classifications are constitutional. Because I find that plaintiffs have a likelihood of success on the merits of their claim and because the other prerequisites to the granting of injunctive relief have been met, plaintiffs' motion for a preliminary injunction will be granted.

Based on the undisputed affidavits and exhibits submitted by the parties and the testimony at the hearing, I find as true the following material facts for the purpose of deciding this motion.

FACTUAL FINDINGS

Plaintiffs are highway contractors doing business in Wisconsin and qualified to bid on most of the Wisconsin Department of Transportation's highway construction projects. They may not bid on projects authorized by Wis.Stat. § 84.076 because they are not disadvantaged businesses as defined by the statute.

Defendant Fiedler is Secretary of the Wisconsin Department of Transportation. Defendant Manning is Disadvantaged Business Programs Director for the department.

In 1982, Congress enacted the Surface Transportation Assistance Act of 1982, Pub.L. No. 97-424, 96 Stat. 2097, 2100. The Act required that each recipient of federal aid make reasonable efforts to award at least 10% of those funds to disadvantaged firms, that is, small firms owned and controlled by socially and economically disadvantaged individuals. The Act incorporated the definitions of social and economic disadvantage of section 8 of the Small Business Act, 15 U.S.C. § 637(d) and the regulations promulgated pursuant to it. 49 C.F.R. § 23.

In order to comply with the requirements of the Act, Wisconsin enacted a Disadvantaged Business Enterprise Program. As specified by the Act, the Wisconsin program determined which firms were disadvantaged according to the definitions and criteria established by 49 C.F.R. § 23 and then compiled a list of firms certified as disadvantaged.

Under 49 C.F.R. § 23.62, a firm is disadvantaged if it is small and is owned and controlled by individuals who are socially and economically disadvantaged. The regulation incorporates a presumption that citizens or permanent residents of the United States who are "Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, or Asian-Indian Americans" are disadvantaged. 49 C.F.R. §§ 23.62, 23.69, appendix A (analysis of §§ 23.62 and 23.69). Other groups or individuals may establish economic and social disadvantage according to the procedures and criteria established in 49 C.F.R. § 23.62 and Appendix C.

All firms seeking to be certified by the state as disadvantaged firms must apply to the Wisconsin Department of Transportation. Each application must include, among other information, the type of equipment the applicants use, ownership of the equipment, experience, bank accounts, tax records, and ownership and management of the business. The department evaluates each application individually.

Currently, approximately 180 firms are certified as disadvantaged business enterprises. A business owned by a member of a group presumed to be disadvantaged is not automatically certified by the department. The business must prove that it satisfies the size and ownership and control requirements of 49 C.F.R. § 23.

Since 1982, the Department of Transportation has decertified or denied certification to 353 firms. Approximately 75% of those firms were decertified or denied certification because the department determined that they were "fronts" and were not actually owned and controlled by disadvantaged individuals. Most of the remainder were decertified or denied because they lacked the expertise or resources to operate successfully or they did not actively pursue the certification procedure and supply all the necessary information.

The assumption that a member of a listed minority group is socially and economically disadvantaged is rebuttable. Since 1982, approximately 300 firms have applied for certification and been rejected. Approximately half of the rejected firms were owned and controlled by women. Two prominent and wealthy Black athletes applied and were rejected because the department found that they were not economically disadvantaged. A Black person who did not appear to be Black and was not considered Black by others would not be found to be socially disadvantaged.

Approximately five firms that are not owned by individuals who are members of groups that are presumptively disadvantaged have applied for certification as a disadvantaged business. One of these firms has been found to be disadvantaged. The firm is owned and controlled by a white male disabled veteran of the Vietnam War.

The Wisconsin Department of Transportation spends approximately $300-350 million per year on its highway construction projects. For the past four years, approximately 10% of the construction funds were awarded to disadvantaged firms. More than 90% of the minority firms that have received state funds have been subcontractors working under non-disadvantaged prime contractors. Of the 1,364 prime contracts let for highway projects since 1984, only 67 have been awarded to disadvantaged firms. The non-disadvantaged prime contractors have complained to the department about the inability of the disadvantaged businesses to perform satisfactorily. Disadvantaged businesses have complained to the department about their inability to compete with...