Richmond Transp., Inc. v. Departmental Office of Civil Rights of the U.S. Dep't of Transp.
| Decision Date | 04 February 2013 |
| Docket Number | Case No. 11-13771 |
| Parties | RICHMOND TRANSPORT, INC., MANCHIK PROPERTIES, INC., and NORTHEAST AGGREGATE, INC., Plaintiffs, v. THE DEPARTMENTAL OFFICE OF CIVIL RIGHTS OF THE U.S. DEPARTMENT OF TRANSPORTATION, JOSEPH A. AUSTIN, MICHIGAN DEPARTMENT OF TRANSPORTATION, and JACQUELINE G. SHINN, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Honorable Patrick J. Duggan
In this action, three Michigan businesses - Richmond Transport, Inc. ("Richmond"), Manchik Properties, Inc. ("Manchik Properties"), and Northeast Aggregate, Inc. ("Northeast") (collectively, "Plaintiffs") - challenge administrative decisions denying each company status as a disadvantaged business enterprise ("DBE") pursuant to a regulatory scheme defining the structure and basic characteristics of such entities. See 49 C.F.R. Part 26. Plaintiffs' Amended Complaint requests judicial review of the United States Department of Transportation's ("DOT") decision to affirm the denial of DBE certification under the under the Administrative Procedure Act ("APA"), 5 U.S.C. § 702, alleging that the denial of Plaintiffs' administrative appeals was arbitraryand capricious. Plaintiffs' Amended Complaint also asserts violations of Plaintiffs' due process and equal protection rights. Presently before the Court are Plaintiffs' Motion for Partial Summary Judgment under the APA and Defendants' Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 56. For the reasons elucidated herein, Plaintiffs' motion is denied and Defendants' motion is granted.
DOT conditions certain federal transportation funding on recipients' maintaining a disadvantaged business enterprise ("DBE") program, and has promulgated regulations defining the structure and basic characteristics of such programs. See 49 C.F.R. § 26.21. A DBE is a for-profit small business that (1) is at least 51%-owned by "one or more individuals who are both socially and economically disadvantaged[,]" and (2) "[w]hose management and daily business operations are controlled by one or more of the socially and economically disadvantaged individuals who own it." Id. § 26.5. Certain categories of individuals are presumed to be socially and economically disadvantaged, including women and a number of ethnic groups. Id. §§ 26.61(c), 36.67(a)(1).
The DBE program regulations provide a host of requirements for the administration of the program, including eligibility standards for DBE certification and procedures for determining whether an applicant firm is both owned and controlled by disadvantaged individuals. Initial DBE-eligibility determinations are made by recipients, here, the Michigan Department of Transportation ("MDOT"), but the regulations provide appropriate guidance on the process that should be employed. See id. § 26.83.
The regulations place the burden on the firm seeking certification to demonstrate that it meets the requirements concerning ownership and control by a preponderance of the evidence. Id. § 26.61(b). In determining the ownership and control issues, the recipient "must consider all the facts in the record, viewed as a whole." Id. §§ 26.69(a) and 26.71(a). Moreover, in assessing whether a potential DBE satisfies the eligibility standards, the recipient must take certain steps, including an on-site visit to the applicant's offices, interviewing the firm's principal officers, and reviewing the resumes and work histories of these officers. Id. § 26.83(c).
If the recipient denies a firm's request for DBE certification, it must provide "a written explanation of the reasons for the denial, specifically referencing the evidence in the record that supports each reason for the denial." Id. § 26.86(a). The firm may appeal the denial to DOT. Id. § 26.86(d). If a firm appeals the denial of certification, DOT requests a copy of the administrative record and renders a decision to affirm or remand based on its review of the entire administrative record. See id. § 26.89(e). DOT must affirm the recipient's decision if it is supported by substantial evidence and is consistent with the regulations' substantive and procedural provisions. Id. § 26.89(f)(1). If the recipient's decision is not supported by substantial evidence or is inconsistent with the regulations, DOT may direct the recipient to certify the firm, and the recipient is required to "take the action directed by [DOT's] decision immediately upon receiving written notice of it." Id. § 26.89(f)(2). Alternatively, if the record is unclear with respect to a significant matter, DOT may remand for further proceedings. Id. § 26.89(f)(4). DOT's decision is administratively final. Id. § 26.89(g).
Richmond, Manchik Properties, and Northeast are three Michigan corporations engaged in the trucking and sale of aggregate products. See Administrative Record ("A.R.") at 55, 1455, 1694. These businesses are related. Richmond hauls aggregate materials such as crushed rock, gravel, and sand to construction sites. See, e.g., id. at 20, 1297. Northeast purchases and provides aggregate materials for Richmond's customers. See, e.g., id. at 1298. Richmond leases trucks and construction equipment from Manchik Properties, as well as non-parties Cindy Manchik, L.L.C., Daniel Manchik, Inc., and Daniel Manchik Equipment, Inc. See, e.g., id. at 9, 68, 1299-1301.
These three interrelated businesses were at one time owned by Francis Manchik and his wife, Patricia Manchik. Id. at 2-4. Through a series of transactions occurring between 1999 and 2004, the couple transferred ownership of these businesses to their four children, Daniel Manchik, Cindy Manchik, Jody Smith, and Rhonda Perry, each of whom had been employed by these businesses for a number of years prior to obtaining ownership. Id. at 2-4, 21, 55, 1455, 1694. The three sisters each own 24.8% of Richmond and Manchik Properties, while their brother owns 25.6% of both firms. Id. at 20, 28. Each sibling owns 25% of Northeast. Id. at 1697.
Plaintiffs filed applications for DBE certification with MDOT in May 2010. MDOT subsequently performed an on-site review at Plaintiffs' offices. MDOT's Chief Deputy Director issued letters denying Plaintiffs' applications on September 28 and 30, 2010. MDOT's decisions indicated that Plaintiffs failed to meet eligibility standardsconcerning control by disadvantaged individuals and independence from non-DBE firms. See id. at 36-39. Among other evidence, the decisions noted that Daniel,1 a non-disadvantaged individual, had been President and sole director of Richmond and Manchik between September 1999 and March 2010, and served as President and sole director of Northeast between June 2004 and March 2010. (Defs.' Br. in Supp. of Mot. for Summ. J. 4.) In March 2010, two months before Plaintiffs applied for DBE certification, Jody replaced Dan as the President and sole Director of Richmond, Manchik, and Northeast. (Id.) When MDOT inquired about the reasons for the change in management structure, the responses from the four owners uniformly referenced the desire to gain DBE certification. See A.R. at 1293-94. MDOT's decisions also noted that Daniel had more direct field expertise and knowledge of the businesses' operations, while his sisters were engaged primarily in administrative functions. Id. at 37-38. Finally, Daniel and several other non-disadvantaged employees were paid more than Cindy, Jody, and Rhonda. Id. at 37. MDOT denied DBE certification, concluding that it could not determine that Plaintiffs were independent and controlled by the disadvantaged owners. Id. at 39.
Plaintiffs filed appeals with DOT on December 15, 2010. In a decision issued on September 6, 2011, DOT concluded that substantial evidence supported the decision to deny DBE certification. See id. at 1-16. Plaintiffs responded by filing this action,naming as Defendants DOT, MDOT, Shinn, and Joseph Austin, the official who issued DOT's decision, on October 21, 2011.
Plaintiffs Amended Complaint asserts four claims, of which three remain.2 Count I, brought against DOT, challenges DOT's decision under the APA, 5 U.S.C. § 701 et seq. Count II requests a declaratory judgment establishing Plaintiffs' entitlement to DBE certification. Count IV, brought against DOT and Austin, asserts violations of Plaintiffs' due process and equal protection rights.
Federal Rule of Civil Procedure 56 instructs district courts to "grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) (2012). The initial burden of proving the absence of a genuine dispute rests with the movant, Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548 (1986), who "must support the assertion by: (A) citing to particular parts of materials in the record...; or (B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact[,]" Fed. R. Civ. P. 56(c)(1)(A)-(B). While this inquiry requires the Court to construe factual disputes, and the inferences there from, in the light most favorable to the non-movingparty, only disputes over facts that might affect the outcome of the suit preclude the entry of summary judgment. Celotex, 477 U.S. at 324, 106 S. Ct. at 2553; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510 (1986).
If the moving party discharges their initial burden, the burden of defeating summary judgment shifts to the non-movant who must point to specific material facts -beyond the pleadings or mere allegation - which give rise to a genuine issue...
To continue reading
Request your trial