Rex Paving Corp. v. White

• Decision Date: 07 July 1988
• Court: New York Supreme Court — Appellate Division
• Parties: REX PAVING CORPORATION, Respondent-Appellant, v. Franklin E. WHITE, as Commissioner of Transportation of the State of New York, et al., Appellants-Respondents.

Page 831

531 N.Y.S.2d 831

139 A.D.2d 176

REX PAVING CORPORATION, Respondent-Appellant, v. Franklin E. WHITE, as Commissioner of Transportation of the State of New York, et al., Appellants-Respondents.

Supreme Court, Appellate Division Third Department.

July 7, 1988.

Robert Abrams, Atty. Gen. (Lawrence S. Kahn and Richard J. Dorsey, of counsel), Albany, for appellants-respondents.

Hayes & Hayes (Harry R. Hayes, III, of counsel), Albany, for respondent-appellant.

Mid-Atlantic Legal Foundation, Inc. (Martin S. Kaufman and Douglas Foster, of counsel), New York City, amicus curiae.

Gold, Farrell & Marks (Martin R. Gold, Robert P. Mulvey and Elena Salerno Flash, of counsel), New York City, for Lawyers' Committee for Civil Rights Under Law, amicus curiae.

Before MAHONEY, P.J., and KANE, WEISS, YESAWICH and MERCURE, JJ.

WEISS, Justice.

The issue before us is whether Highway Law § 85, Transportation Law § 428, and the Prison Construction Act (McKinney's Uncons.Laws of N.Y. § 6267, Laws 1983, ch. 56, as amended) empower defendants, the State Commissioners of Transportation and General Services, to promulgate and implement affirmative action programs in favor of disadvantaged business enterprises (hereinafter DBE). ¹ This concept of aiding DBEs came to fruition when Congress implemented a temporary minority business enterprise set-aside plan as part of the Public Works Employment Act (hereinafter PWEA) of 1977 (see, 42 U.S.C. § 6705[f][2] ), based upon Congressional findings that minorities were denied effective participation in public contracts at the Federal, state and local levels. The constitutionality of the PWEA was upheld in Fullilove v. Klutznick, 448 U.S. 448, 100 S.Ct. 2758, 65 L.Ed.2d 902. Subsequent legislation has continued the Federal DBE program for Federally assisted highway projects, requiring recipients of Federal transportation funds to establi DBE programs modeled after the PWEA (see, Surface Transportation Assistance Act of 1982, Pub.L. 97-424, § 105[f]; Surface Transportation and Uniform Relocation Assistance Act of 1987, Pub.L. 100-17, § 106[c] ). Today, a DBE program is mandatory for all recipients of Federal highway money (49 CFR 23.41[a] ), although the regulations allow flexibility in the actual percentage of each contract let to DBEs and allow a waiver if the contractor acts in good faith to satisfy the program goal (49 CFR 23.43[d][2]; 23.45[h] ). As the recipient of some $500 million annually, the State Department of Transportation (hereinafter DOT) is required to promulgate a DBE program in accord with Federal law. Highway Law § 85 and Transportation Law § 428(1) also compel DOT's adherence to the Federal guidelines. Accordingly, since about 1980, DOT has implemented a DBE program through standard language incorporated into all its contracts, even those not subsidized by Federal money.

The Prison Construction Act (hereinafter the Act) was enacted by the Legislature in 1983 to help finance the construction of correctional facilities (McKinney's Uncons.Laws of N.Y. § 6267, Laws 1983, ch. 56). The Act specifically requires all contracting agencies, including the State Office of General Services (hereinafter OGS), to "seek meaningful participation * * * by minority business enterprises and * * * establish measures and procedures" to ensure that DBEs receive an appropriate share of the awarded contracts (Laws 1983, c. 56, § 12(3), McKinney's Uncons.Laws of N.Y. § 6267). OGS has thus incorporated a DBE program, which mirrors the program employed by DOT, into its standard contract language, even for contracts not funded by the Act. Significantly, the DBE program is only mandatory for prison-related contracts.

In March 1987, plaintiff, a domestic corporation which supplies materials and services as both a general contractor and subcontractor for public improvement projects, commenced this action, originally designated a proceeding pursuant to CPLR article 78, seeking a declaration that defendants' DBE programs are illegal and unlawful because defendants acted without legislative authority, because defendants violated the State Administrative Procedure Act, and because the programs deny plaintiff its right to equal protection under the N.Y. Constitution. Supreme Court initially denied defendants' motion to dismiss for lack of standing and converted the proceeding to a declaratory judgment action. Thereafter, Supreme Court partially granted plaintiff's motion for summary judgment and upheld defendants' DBE programs only to the extent required by Federal law and the Act. Specifically, Supreme Court declared OGS' DBE program invalid where applied to contracts not funded by the Act ( see, Matter of Fullilove v. Beame, 48 N.Y.2d 376, 423 N.Y.S.2d 144, 398 N.E.2d 765) and invalidated DOT's program with respect to State-funded contracts on the premise that only the Legislature or Governor could promulgate affirmative action plans. Additionally, Supreme Court emphasized defendants' failure to file the programs with the Secretary of State (see, State Administrative Procedure Act § 102[2]; § 203). Defendants appeal from that portion of the order declaring their DBE programs invalid and plaintiff cross-appeals from Supreme Court's decision to uphold the programs as applied to contracts using Federal or Act funds, as well as Supreme Court's failure to address its equal protection argument.

Initially, we reject defendants' standing argument. In Matter of City of New York v. City Civ. Serv. Commn., 60 N.Y.2d 436, 470 N.Y.S.2d 113, 458 N.E.2d 354, the Court of Appeals described a three-part zone of interest test for standing to obtain review of administrative decisions as follows:

* * * (1) the interest asserted must be arguably within the zone of interest to be protected by the statutory or constitutional provisions sought to be enforced; (2) the administrative decision for which review is sought must be shown to have a harmful effect upon the party asserting standing; and (3) there must be no clear legislative intent negating review ( id., at 442-443, 470 N.Y.S.2d 113, 458 N.E.2d 354).

( See also, Matter of Bradford Cent. School Dist. v. Ambach, 56 N.Y.2d 158, 163-164, 451 N.Y.S.2d 654, 436 N.E.2d 1256; Matter of Dairylea Coop. v. Walkley, 38 N.Y.2d 6, 10-11, 337 N.Y.S.2d 451, 339 N.E.2d 865.) Here, plaintiff seeks to preserve its right to compete for public contracts on the same terms as others, an interest the Equal Protection Clause may protect (see, N.Y. Const., art. I, § 11). Second, plaintiff has sufficiently alleged that the DBE programs may have a harmful effect upon its ability to obtain contracts because of the preference to be given DBEs ( see, Matter of City of New York v. City Civ. Serv. Commn., supra, 60 N.Y.2d at 443, 470 N.Y.S.2d 113, 458 N.E.2d 354; Matter of New York State Assn. of Community Action Agency Bd. Members v. Shaffer, 119 A.D.2d 871, 874-875, 500 N.Y.S.2d 838). While the allegations of injury are concededly vague, standing need not be justified by injury-in-fact in every instance ( see, Matter of Sun-Brite Car Wash v. Board of Zoning & Appeals of Town of N. Hempstead, 69 N.Y.2d 406, 413, 515 N.Y.S.2d 418, 508 N.E.2d 130). Third, we do not perceive any legislative intent to bar review of defendants' DBE programs. Moreover, judicial review of these programs may otherwise be avoided (see, Matter of New York State Assn. of Community Action Agency Bd. Members v. Shaffer, supra, 119 A.D.2d at 875, 500 N.Y.S.2d 838; New York State Coalition for Criminal Justice v. Coughlin, 103 A.D.2d 40, 43, 479 N.Y.S.2d 850, affd. 64 N.Y.2d 660, 485 N.Y.S.2d 247, 474 N.E.2d 607). In sum, we find that the potential effect on plaintiff's ability to participate in government contracts warrants a recognition of standing to challenge defendants' DBE programs.

Plaintiff maintains that the DBE programs are illegal because defendants lacked specific legislative authorization to implement such remedial measures. Analogizing to Boreali v. Axelrod, 71 N.Y.2d 1, 523 N.Y.S.2d 464, 517 N.E.2d 1350, plaintiff asserts that defendants unlawfully usurped the lawmaking function of the Legislature. We hold otherwise. It is well established that the Executive may not mandate an affirmative action program, such as the DBEs at issue here, absent a specific legislative grant of authority ( Subcontractors Trade Assn. v. Koch, 62 N.Y.2d 422, 429, 477 N.Y.S.2d 120, 465 N.E.2d 840; Matter of Fullilove v. Beame, 48 N.Y.2d 376, 423 N.Y.S.2d 144, 398 N.E.2d 765, supra ; Matter of Broidrick v. Lindsay, 39 N.Y.2d 641, 385 N.Y.S.2d 265, 350 N.E.2d 595; Matter of Fullilove v. Carey, 62 A.D.2d 798, 406 N.Y.S.2d 888, affd. 48 N.Y.2d 826, 424 N.Y.S.2d 183, 399 N.E.2d 1203). We find that defendants promulgated the challenged DBE programs with the necessary legislative authorization. Our reasons follow.

In Highway Law § 85, the Legislature expressly authorized DOT to pursue all measures necessary to comply with the Federal aid highway acts and accompanying regulations ( see, Matter of Brown v. McMorran, 23 A.D.2d 661, 257 N.Y.S.2d 74). Notably, the State's eligibility for Federal highway funds hinges upon compliance with these regulations (see, 49 CFR 23.2, 23.41[a][1] ). One such condition is the State's implementation of a suitable DBE program (see, 49 CFR 23.41[a] ). In addition, Transportation Law § 428(1) requires DOT to comply with "federal laws relative to participation of minority and women-owned business enterprises" where Federal financial assistance is received on transportation infrastructure projects (see also, Transportation Law § 421[1], [5] ). We conclude, as did Supreme Court, that these statutory provisions provide clear legislative authorization for DOT's programs insofar as Federally funded contracts are concerned.

The further question is whether the Legislature authorized a similar DBE program for exclusively State-funded contracts. Transportation Law § 428(2) provides, with respect to State...