W.H. Scott Constr. v. City of Jackson MS

• Decision Date: 23 December 1999
• Docket Number: No. 98-60679,98-60679
• Citation: 199 F.3d 206
• Parties: (5th Cir. 1999) W.H.SCOTT CONSTRUCTION COMPANY, INC Plaintiff-Appellee, v. CITY OF JACKSON, MISSISSIPPI; HARVEY JOHNSON, In his official capacity as Mayor of the city of Jackson, MS; LOUIS E ARMSTRONG, In his official capacity as a present member of the Jackson City Council; MARGARET BARRETT, In her official capacity as a present member of the Jackson City Council; CHIP RENO, In his official capacity as a present member of the Jackson City Council; KENNETH STOKES, In his official capacity as a present member of the Jackson City Council; WILLIAM BROWN, In his official capacity as a member of the Jackson City Council; ROBERT WILLIAMS, In his official capacity as a present member of the Jackson City Council; BEN ALLEN, In his official capacity as a present member of the Jackson City Council, Defendants-Appellants
• Court: U.S. Court of Appeals — Fifth Circuit

Page 206

199 F.3d 206 (5th Cir. 1999)

W.H.SCOTT CONSTRUCTION COMPANY, INC Plaintiff-Appellee, v. CITY OF JACKSON, MISSISSIPPI; HARVEY JOHNSON, In his official capacity as Mayor of the city of Jackson, MS; LOUIS E ARMSTRONG, In his official capacity as a present member of the Jackson City Council; MARGARET BARRETT, In her official capacity as a present member of the Jackson City Council; CHIP RENO, In his official capacity as a present member of the Jackson City Council; KENNETH STOKES, In his official capacity as a present member of the Jackson City Council; WILLIAM BROWN, In his official capacity as a member of the Jackson City Council; ROBERT WILLIAMS, In his official capacity as a present member of the Jackson City Council; BEN ALLEN, In his official capacity as a present member of the Jackson City Council, Defendants-Appellants

No. 98-60679

IN THE UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

December 23, 1999

January 24, 2000

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Southern District of Mississippi

Before KING, Chief Judge, and REYNALDO G. GARZA and EMILIO M. GARZA, Circuit Judges.

KING, Chief Judge:

Defendants-Appellants City of Jackson, Mississippi, et al., appeal the district court's grant of summary judgment to Plaintiff-Appellee W.H. Scott Construction Company, Inc., in Plaintiff-Appellee's equal protection challenge to a policy encouraging minority participation in city construction contracts. We affirm.

I.

In 1985, the City of Jackson (the "City") adopted a Minority Business Enterprise Program ("MBE Program" or the "Program"). The Program, designed to remedy the effects of past discrimination, established a "goals" program for the utilization of minority-owned businesses ("MBEs"), as well as those owned by women ("WBEs"), in City contracts.¹ The Program was managed by the City's Office of Business Development ("OBD"). Initially, the minority-participation goal was 5% of all City contracts, relative to the overall City budget, including contracts for goods, services, and construction. Later the goal was increased to 15%. The Program's Liaison Officer within the OBD was charged with, among other duties, "[c]oordinat[ing] procurement activities with each City department head to ensure that the maximum amount of dollars and contracts are afforded to minority firms."

Prior to implementing the Program and the original 5% goal, the City established an advisory committee of local businesses and conducted a series of hearings to document discrimination against minority business owners. The 5% goal, however, was not based on any objective data. According to Willie Cole, manager of the OBD, it was a "guess" that was adopted because the City "felt like there was at least enough minority business out there to do five percent of business to the City of Jackson." The goal was later increased to 15% because it was found that 10% of businesses in Mississippi were minority-owned. The 15% goal applied to all areas of procurement.

After the Program's adoption, the City's Department of Public Works (the "Department") began submitting reports of its contracting activities to the OBD. In 1988, the Department established its own policy for the use of the City's goals. The Department began including a "Special Notice to Bidders No. 1" (the "Special Notice") as part of the specifications for all City construction contracts. The Special Notice encouraged prime construction contractors to include in their bids 15% participation by subcontractors certified as Disadvantaged Business Enterprises ("DBEs") and 5% participation by those certified as WBEs. The Department implemented these goals to effectuate its policy as stated in the Special Notice:

It is the policy of the City of Jackson Department of Public Works (DPW) that small business concerns (DBE/WBE)...shall have the maximum opportunity to participate in the performance of contracts financed in whole or in part with City funds. The Minority Business Enterprise Program will be implemented in such manner that participation of minorities and women will be equitably distributed throughout the construction industry.

A prime contractor could, however, support a lack of such participation with a showing of good-faith efforts to meet the goals.

The Special Notice defined a DBE as "[a] small business concern which is owned and controlled by socially and economically disadvantaged individuals." In turn, "[t]he term 'socially and economically disadvantaged individuals' has the meaning such term has under Section 8(d) of the Small Business Act (15 U.S.C. 637(d)) and relevant subcontracting regulations promulgated pursuant thereto." The Small Business Act ("SBA") defines 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 without regard to their individual qualities." 15 U.S.C. 637(a)(5). Economically disadvantaged individuals are defined as "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." 15 U.S.C. 637(a)(6)(A). Section 8 (d) of the SBA pertains to eligibility for disadvantaged status under subcontracting provisions like the one at issue in the Special Notice. It states that prime contractors are to "presume that socially and economically disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and other minorities, or any other individual found to be disadvantaged by the Administration pursuant to section 8(a) of the Small Business Act." 15 U.S.C. 637(d)(3)(C). Therefore, Sections 8(d) and 8(a) are both implicated in a determination of disadvantage.

In 1991, the Mississippi legislature passed a bill that would allow cities to set aside 20% of procurement for minority businesses. According to an affidavit submitted by Willie Cole, the Jackson City Council voted to implement the set-aside, contingent on the City's adoption of a disparity study conducted pursuant to City of Richmond v. J.A. Croson, Co., 488 U.S. 469 (1989). Cole stated that he drafted "The Minority Business Development Division Policy Document" (the "Policy Document") in 1993 for the OBD to use as a guide until such disparity study could be conducted. The Policy Document was based on research from other cities and reiterated the goal of 15% minority participation in the City's contracts.

The City finally retained a company to conduct a disparity study in 1994. The study analyzed the City's contracting activities within the Department of Public Works, as well as those within other City government departments, and concluded that the total underutilization of African-American- and Asian-American-owned firms was statistically significant. The study recommended that the City implement a range of MBE goals from 10-15%, depending on the trade at issue. The City, however, was not satisfied with the study and chose not to adopt its conclusions. Instead, the City retained its 15% MBE goal while it searched for another company to conduct a disparity study. Without adoption of the study, the City never implemented the 20% set-aside authorized by the state legislature.

In June 1997, the City advertised for the construction of the Thalia Mara Hall toilet expansion project (the "Project") through its Department of Public Works. The Department included its Special Notice in the Project's specifications. Sealed bids were opened on July 22, and Plaintiff-Appellee W.H. Scott Construction Company, Inc. ("Scott") was the lowest bidder. On July 23, Scott informed the Department of its "attempt[s] to secure DBE participation" in subcontracting for the Project, including advertisements stating that it was "requesting bids from qualified MBEs/WBEs...." Although Scott managed to get 11.5% WBE participation, it reported that the bids from DBE subcontractors had not been low bids and that, therefore, its DBE-participation percentage would be only 1%. The Director of the Department encouraged Scott to "employ a minority vendor" from whom to purchase materials in order to meet the goal.

Despite Scott's failure to meet the DBE goal, on July 28, the Department drafted a memorandum to Mayor Harvey Johnson (the "Mayor") recommending approval of the Scott bid. The memorandum noted that the Scott bid exceeded the established budget for the 1996-97 fiscal year by $33,600 and that Scott had proposed a 1% minority-participation rate. Three weeks later, Scott wrote to the Department that it would not consider the Department's suggestions for increasing its minority participation. Scott sent a copy of the letter to the Mayor. The Department and the Mayor, as well as the City's finance and legal departments, approved Scott's bid anyway, and it was then placed on the City Council's agenda.

On September 2, the City Council voted against the Scott bid without comment. The vote was 4-3, with all of the African-American Council members voting against Scott and all of the white Council members voting for Scott. After the vote, Scott's president contacted City Council member Louis Armstrong to find out why the bid was rejected. An argument ensued, and Armstrong stated, "We have been left out of the process for 400 years, we're going to do what we have to do." The City alleges that the Scott bid was rejected because it exceeded the budget established for the Project, not because Scott failed to reach the DBE participation goal.

The City subsequently combined the toilet work at Thalia Mara Hall with a renovation project, adding to the specifications and increasing the estimated cost of the project from approximately $200,000 to between $300,000 and $350,000. On December 16, 1997, the City Council awarded the combined project to Arcon...