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Case 47: Western States Paving v. Washington State DOT

Racial Preferences = Racial Discrimination
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SUMMARY:
The Western States Paving case may spell the end of racial quotas in federally-funded highway projects not only in the 9th U.S. Circuit, but eventually across the entire U.S.
RECENT NEWS:
The week of May 1, 2006 the California Transportation Authority (Caltrans) announced that it has been forced by this ruling to abandon its use of racial quotas in federally-funded construction projects!

SEE:  Caltrans Announcement

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Web Posted Feb. 20, 2006

"Washington state cannot favor minority-owned firms in awarding road-building contracts because it hasn't proved minority contractors have faced discrimination, a three-judge panel of the 9th U.S. Circuit Court of Appeals ruled [on Mon., May 9, 2005]. -- Associated Press

Case
Summary
Summary

Ninth U.S. Circuit and U.S. Map
The ruling immediately affects all nine states in the Ninth U.S. Circuit.

FORMAL CASE TITLE and CITATION:

COURT DOCKET:

Western States Paving Co., Inc.
v.
Washington State Department of Transportation; City of Vancouver, Washington; Clark County, Washington; Douglas MacDonald

United States Court of Appeals for the Ninth Circuit No. 03-35783

(District Court No. CV-00-05204-RBL)

PUBLISHED CITATION:

Western States Paving Co. v. State of Washington Dept. of Transportation, 407 F. 3d 983 (9th Cir. 2005)

Download:

Ninth Circuit Opinion in Western States Paving

(Opens new window; Adobe Acrobat Reader required)


INTRO and SUMMARY:

          Western States Paving Co., Inc. (Western States) is an asphalt and paving company in Washington State. Western States submits bids on highway construction projects in Washington State and in nearby states, both as a contractor and as a subcontractor.

          In the summer of 2000 Western States Paving Co. submitted the lowest bids on two separate Washington State highway subcontracts. But in each case, Western States' low bid was rejected in favor of a more expensive bid by a minority-owned contractor.  This occurred because applicable federal and state laws demanded that a percentage of the federal highway money used by Washington State must go to minority-owned firms.  Unfortunately, Western States Paving's owner was not one of the preferred racial, ethnic or gender classifications favored by the federal funding agency, the Federal Highway Administration (FHWA).

          In one case, Western States Paving's bid was actually $100,000 lower than that of the minority-owned firm which was awarded the subcontract.

          Western States sued in U.S. District Court, and they lost.  Western States then appealed the District Court ruling to the Ninth Circuit Court of Appeals, and the Ninth Circuit ruled in favor of Western States.

          The three judge panel of the Ninth Circuit ruled that Washington State's Dept. of Transportation had failed to prove the existence of lingering effects of past discrimination -- underutilization in quota-speak -- in the local road building biz which is legally required in order to justify the use of racial targets and goals (quotas).

Ruling affects nine western states
Nine states are affected by the Ninth U.S. Circuit Court of Appeals ruling in Western States Paving, et. al.
          Not that Adversity.Net supports that thin justification for this special brand of racial discrimination.  But the Washington State DOT failed to supply even that weak "proof" that racial preferences were required.

          The immediate impact of the Ninth Circuit's ruling created a huge shockwave throughout the bureaucracy, shaking the FHWA and its state affiliates all the way down to their race-sensitive foundations.  This ruling has continued to rumble through the race-conscious highway construction programs of all nine states within the Ninth U.S. Circuit Court's jurisdiction (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington State).

          At a practical level, the 9th Circuit ruling presents each of these nine states with a Hobson's choice:

(A) Submit statistically rigorous proof that racial discrimination exists in state highway construction in their state (beyond the thin gruel of their 2nd grade level "disparity studies" upon which they had previously relied) so that they may continue making race-based contract awards, OR...
(B) Place greater reliance, or sole reliance, upon "race neutral" means of attracting the correct number of minority contractors, OR...
(C) Cease altogether using racial criteria in the award of highway contracts.
          Option "A" will be difficult and -- assuming the nine affected states can muster meaningful, statistically rigorous proof of historical discrimination in the local / state highway biz -- this option will almost certainly result in severely reduced levels of locally-imposed racial setasides.  The reason is simple:  meeting all of the prongs of the strict scrutiny test codified in Adarand (SCOTUS 1995) will necessarily show far less, if any, "lingering effects of discrimination" which require "intrusive, remedial measures" such as racial preferences. Top


Index

          Option "B" -- using "race neutral" means of attracting the correct number of minority contractors -- is extremely unattractive because it is labor intensive and it requires the STAs (State Transportation Administrations) to actually go out in the field and encourage all contractors, regardless of race, to apply for contracts.  This represents a "hit or miss" proposition for the race-sensitive STAs and might even result in awarding contracts to more white-male-owned firms.  That is not acceptable to these diversiphiles.

          Finally, option "C" -- abandoning race as a criterion in the award of highway contracts -- is simply philosophically unacceptable to the diversiphiles who haunt the corridors of federal and state contracting agencies.

          In the recent annals of legal cases involving racial preferences in government contracting, this May 2005 ruling by the 9th U.S. Circuit Court of Appeals is almost unprecedented in its potential scope and effect on federal and state racial setasides.  This case could -- indeed, should -- have enormous consequences in curtailing this insidious form of discrimination.

          At this writing there are no fewer than three, well-funded legal advocacy groups preparing a federal lawsuit which asks the pertinent question: Why is FHWA limiting the application of the strict scrutiny standard to only these nine states instead of applying that legal standard to all 50 states?  Now THAT will be a lawsuit to watch!


FHWA HITS THE PANIC BUTTON:

          On Dec. 21, 2005, in response to the Ninth Circuit's ruling, the U.S. Federal Highway Administration (FHWA), which provides billions of our tax dollars to the state highway administrations, literally hit the panic button and issued an urgent memo to all of the nine states affected by the Ninth Circuit's ruling.

          The Dec. 21, 2005 urgent memo from FHWA to the nine states affected by the Ninth Circuit's opinion stated in part:

FHWA Urgent Memo:

          "All submissions [to FHWA regarding justification of race-based programs] made by states impacted by the Ninth Circuit Court of Appeals decision in Western States Paving Co. v. State of Washington Dept. of Transportation, 407 F. 3d 983 (9th Cir. 2005), must be forwarded to HCR [FHWA's Office for Civil Rights] for concurrence. The STAs [State Transportation Agencies] included in this category are Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

          "In Western States Paving the Court found the Washington State DBE [Disadvantaged Business Enterprise] program, as implemented, was not narrowly tailored to accomplish the remedial objectives established by Congress -- and consequently not constitutional as applied in that state -- because the State failed to produce sufficient evidence of discrimination or its effects in its transportation contracting industry to justify the use of race-conscious measures as an element of its program." [As required by Adarand (Supreme Court 1995). Ed.]

Link:  Text of Full Memo

          In that 12/21/05 memo, the nine states affected in the Ninth Circuit were required by FHWA to supply (or re-supply, or re-document as necessary) their strict scrutiny level proof of discrimination in their local highway contracting business by Jan. 31, 2006.  This meant that each of the nine affected states had only five weeks to justify -- or re-justify -- their race-based awards of federal contracting dollars.  (Can you imagine how many Christmas vacations the FHWA ruined by scrambling all the racial bean counters in all nine states to "prove" that their race-based programs are justifiable under current law?)


DISCUSSION AND DETAILS:

          The news articles about this case come in several flavors, but in one way or the other all of them echo the language of a recent Associated Press article about the Western States Paving lawsuit:

          "Washington state cannot favor minority-owned firms in awarding road-building contracts because it hasn't proved minority contractors have faced discrimination, a three-judge panel of the 9th U.S. Circuit Court of Appeals ruled yesterday."

Last known link:
Seattle Times 05-10-05 Story
Alternate link:
Seattle Times 05-10-05 Story

          Based on the 9th Circuit's decision, it appears that the federal and state minority set asides and racial preferences in Washington State, California, and the other seven states in this jurisdiction have NOT actually been based upon hard evidence of past discrimination, or upon any provable lingering effects of discrimination, in the highway construction business, which of course is exactly what Western States Paving Co., Inc. argued in their lawsuit against Washington State's DOT.
See Also:
Western States and FHWA Case 47 INDEX, below, for additional documents.
Down:  Western States Index

EXCERPTS OF 9TH CIR. OPINION:

Excerpts:

          >>pp. 3-4 of 9th opinion>> "In July 2000, Western States submitted a bid for subcontracting work on the City of Vancouver's "NE Burton Road Project." The project was financed by federal transportation funds provided to the Washington State Department of Transportation ("WSDOT") under the Transportation Equity Act for the 21st Century ("TEA-21"). In order to comply with TEA-21's minority utilization requirements, the State mandated that the city obtain 14% minority participation on the project.  [The Court noted that TEA-21's use of the word "minority" includes selected racial minorites as well as women of any race.]   The prime contractor was bound by this requirement and rejected Western States' bid in favor of a higher bid from a minority-owned firm."

          >>p. 4 of 9th circuit opinion>> "In August 2000, Western States submitted a subcontracting bid on Clark County's "Padden Parkway (East Leg)" project, which was substantially financed with TEA-21 funds. In distributing these funds to Clark County, the WSDOT imposed a 14% minority utilization requirement. The prime contractor did not select Western States, even though its bid was $100,000 less than that of the minority-owned firm that was selected. The prime contractor explicitly identified the contract's minority utilization requirement as the reason that it rejected Western States' bid.

          "Western States filed suit against the WSDOT, Clark County, and the City of Vancouver in the United States District Court for the Western District of Washington.  Western States sought a declaratory judgment holding TEA-21's minority preference program to be a violation of equal protection under the Fifth and Fourteenth Amendments of the U.S. Constitution, either on its face or as applied by the State of Washington. Western States also requested damages under 42 U.S.C. Sections 1981, 1983, and 2000(d) and relief under Washington State law.  The United States, the U.S. Department of Transportation ("USDOT"), and the Federal Highway Administration intervened to defend TEA-21's facial constitutionality. Although the federal government [intervenors] took no position regarding Western States' as-applied challenge, it acknowledged that the "state would have to have evidence of past or current effects of discrimination to use race-conscious goals." Dist. Ct. Oral Argument Tr. 48.

Adversity.Net Local Copy of Opinion (PDF):
Ninth U.S. Circuit Court Ruling

Last known US Courts link:
http://www.ca9.uscourts.gov/ca9/newopinions.nsf/
DA4A050DCFAD553288256FFC00572DFC/
$file/0335783.pdf?openelement


LAWSUIT SYNOPSIS:

          Western States sued the Washington State DOT and the City of Vancouver in April 2000 in district court because Western States argued that it had been denied the subcontract in violation of its constitutional rights due to Washington DOT's race-based (DBE) contracting goals.

          In non-legalese, the federal government essentially argued at trial that Washington State's 14% "minority utilization requirement" was locally determined and locally imposed by Washington State and therefore did not implicate the federal government (FHWA) in Western State Paving's "reverse discrimination" claim.  The feds (specifically, the FHWA) argued that they did not directly impose the 14% minority participation requirement upon the Washington State highway administration.  According to the feds, the State of Washington allegedly came up with the 14% figure all on its own, BUT Washington State did determine that their "minority participation goal" of 14% was consistent with, and based directly upon, federal (FHWA) guidelines for establishing "local minority participation goals" (including conducting superficial and statistically meaningless local "disparity studies" as justification).


DISTRICT COURT REJECTS CLAIM:

          As is typical in such cases, Western States first had to file for relief (sue) in the U.S. District Court with jurisdiction. That court was the U.S. District Court for the Western District of Washington (Tacoma); Judge Ronald B. Leighton, District Judge, Presiding.

          In September 2003 the U.S. District Court rejected Western States Paving's claim of discrimination.

          During the district court litigation no fewer than three massively funded federal agencies launched armies of taxpayer-funded lawyers to attack Western States' claim of "reverse discrimination", including the United States, the Federal Highway Administration (a division of U.S. DOT), and the U.S. Dept. of Transportation itself.

          During the U.S. District Court proceedings the feds did acknowledge that the "state [Washington] would have to have evidence of past or current effects of discrimination to use race-conscious goals".  [District Court oral arguments at Transcript p. 48.] 

          After losing at the district court level, Western States then filed an appeal to the Appellate Court with jurisdiction (in this case the Ninth U.S. Circuit Court of Appeals). Again, this is a typical route for reverse discrimination claims.


APPEALS COURT FINDS FOR WHITE-OWNED FIRM:

          In their appeal Western States Paving Co., Inc. argued again that they had been illegally discriminated against by the cascading federal, state and local "race-based" contracting requirements.

          On May 9, 2005 the Ninth U.S. Circuit Court of Appeals found that Western States Paving Co. had indeed been illegally denied access to Washington State highway construction projects.  The appellate court found that Washington State's Dept. of Transportation had failed to prove that non-white-owned highway contractors (minorities) had been historically discriminated against by the Washington State DOT.   Therefore, according to the 9th Circuit's opinion, denying the subcontracts to Western States Paving Co. was impermissible.

Sidebar:

          The state highway administrations, including Washington State, receive funding from the Federal Highway Administration (FHWA), a division of U.S. DOT. FHWA requires that the state transportation administrations accepting federal funds (which is all states) must award a minimum of 10% of their contracts to minority owned firms. FHWA describes this as "an aspirational goal", which means the FHWA denies liability for implementing racial quotas.   FHWA also claims it does not penalize the various state DOT's for awarding a percentage of contracts above or below this 10% "aspirational goal" if the state has shown a good faith effort to meet the 10% "aspirational goal".

          Through this shallow use of semantics and "non-strict quotas" (i.e., aspirational goals) FHWA has succeeded for many years in avoiding legal challenges to its discriminatory use of racial preferences (quotas).  As a key component of FHWA's strategy (indeed, most federal agencies are engaged in this same shell game) FHWA has insisted on what they think is a more legally defensible strategy of requiring that the states themselves conduct "disparity studies" to independently determine "local underutilization" of selected minorities in their contract awards.

          First and foremost, and notwithstanding the fatal flaws and lack of statistical validity, much less proof of causality, of virtually all such disparity studies, FHWA and other federal agencies have believed this one- or two-degree removal from the race-based decision process at the state level will protect them from legal action and make it more difficult for opponents of racial preferences to mount effective legal challenges against such a diffuse, multi-state set of race-based contract award criteria.  After all, it is more difficult to sue each of the 50 state departments' of transportation than it is to sue a single federal government agency.  Unfortunately, this shallow shell game has usually worked ... at least until now.

          Secondly, FHWA and all federal funding agencies which return money to the states in this way devote a great deal of lip service to "exhausting all possible race-neutral means" of ensuring that a deliberately vaguely defined correct number (or range of acceptable numbers) of preferred minorities receive their share of the state-federal contracts.  

          Government actors, such as FHWA and Washington DOT, have up until now failed in any meaningful way to implement the Adarand imperative that they exhaust every possible race neutral means of achieving "minority representation" in the ranks of contractors before using the last resort of intrusive, divisive, and limited duration racial preferences and setasides.   Their race neutral methods have fallen far short of the "strictly scrutinized, narrowly tailored, compelling government interest" standards which were definitively codified in a series of lawsuits culminating in the historic 1995 Adarand Constructors decision. Supreme Court of the United States No. 93-1841 June 12, 1995: "Adarand Constructors, Inc. v. Federico Pena, Secretary of Transportation, et al".


ADDITIONAL LANGUAGE FROM THE 9TH CIRCUIT OPINION:

          "The district court held that TEA-21's minority preference program is constitutional both on its face and as applied, and granted the defendants summary judgment on that basis. In rejecting the facial challenge, the district court determined that Congress had identified significant evidence of discrimination... >>begin p. 5 of 9th circuit opinion>>... in the transportation contracting industry and that TEA-21 is narrowly tailored to remedy such discrimination. The district court rejected Western States' as-applied challenge because it concluded that Washington's [Washington State's] implementation of TEA-21 comports with the federal program's requirements. The [district] court did not require Washington [State] to demonstrate that its minority preference program independently satisfies strict scrutiny. The district court also held that Western States' claims under Washington law are without merit. Western States timely appealed [to the Ninth U.S. Circuit Court of Appeals].

          >>end of page 5 - begin page 6 of 9th cir. opinion>> "The pertinent provision of TEA-21 provides that, "[e]xcept to the extent that the Secretary [of Transportation] determines otherwise, not less than 10 percent of the amounts [of federal highway funds] made available for any program under titles I, III, and V of this Act shall be expended with small business concerns owned and controlled ... >>begin page 6 of 9th cir. opinion>>... by socially and economically disadvantaged individuals. ... Top


Index

          "The regulations seek "[t]o create a level playing field on which [disadvantaged business enterprises] can compete fairly for DOT-assisted [funded] contracts. A disadvantaged business enterprise ("DBE") is defined as a small business owned and controlled by one or more individuals who are socially and economically disadvantaged. Although the term "socially and economically disadvantaged" is race- and sex-neutral on its face, the TEA-21 regulations presume that Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, Subcontinent Asian Americans, and women are socially and economically disadvantaged. This presumtion of disadvantage is ... >> begin page 7 of 9th cir. opinion>> ... rebutted where the individual has a personal net worth of more than $750,000 or a preponderance of the evidence demonstrates that the individual is not in fact socially and economically disadvantaged. Firms owned and controlled by someone who is not presumed to be disadvantaged (i.e., a white male) can qualify for DBE status if the individual can demonstrate that he is in fact socially and economically disadvantaged.  [Editor's note: this latter point is preposterous on its face. A white male seeking to "prove" social and economic disadvantage must submit reams of documentation and affidavits to support his claim; blacks and Hispanics are not required to submit such documentation since their skin color is considered sufficient "proof" of social and economic disadvantage.]

          "The regulations do not establish a nationwide DBE program centrally administered by the USDOT. Rather, the regulations delegate to each State that accepts federal transportation funds the responsibility for implementing a DBE program that comports with TEA-21. The regulations accordingly explain that the 10% DBE utilization requirement established by the TEA-21 statute is merely "aspirational" in nature. The statutory goal "does not authorize or require recipients to set overall or contract goals at the 10 percent level, or any other particular level, or to take and special administrative steps if their goals are above or below 10 percent."

          "The TEA-21 regulations instead delineate a two-step process that a State must follow to set a DBE utilization goal that reflects is "determination of the level of DBE participation [that] would [be] expect[ed] absent the effects of discirmination." In establishing this goal, a State must first calculate the relative availability of DBEs in its local transportation contracting industry. One acceptable means of making this determination is by dividing the number of ready, willing, and able DBEs in a State by the total number of ready, willing, and able firms. Under step two, a State is required to adjust this base figure upward or downward to reflect the proven capacity of DBEs to perform work (as measured by the volume of work allocated to DBEs in recent years) and evidence of discrimination against DBEs obtained from statistical disparity studies. A State may also consider discrimination ... >>begin p. 8 of 9th cir. opinion>> ... against DBEs in the bonding and financing industries, as well as the present effects of past discrimination. The final, adjusted figure represents the proportion of federal transportation funding that a State must allocate to DBEs during the forthcoming fiscal year. A State must submit its DBE program to the USDOT for review by August 1 of each year.

          "The TEA-21 regulations expressly prohibit States from apportioning their DBE utilization goal among different minority groups (e.g., allocating 5% to Balck Americans, 3% to Hispanic Americans, 0% to Asian Americans, etc.); rather, an undifferentiated goal that encompasses all minority groups is required. A State must meeet the maxi8mum feasible portion of this goal through RACE-NEUTRAL MEANS, [emphasis added. Editor] including informational and instructional programs targeted toward all small businesses. A state must use race-conscious contract goals to achieve any portion of its DBE utilization requirement that cannot be attained through these race-neutral means. Even when race-conscious measures are necessary, however, the regulations do not require that DBE utilization goals be included in every contract -- or that they be set at the same level in every contract in which they are used -- as long as the overall effect is to obtain that portion of the requisite DBE participation that cannot be achieved through race-neutral means.

          "Prime contractors to whom a State awards federally funded transportation contracts must undertake good faith efforts to satisfy a contract's DBE utilization goal by allocating the designated percentage of funds to DBE firms. States are prohibited from instituting rigid quotas that do not ... >>begin p. 9 of 9th cir. opinion>> ... account for a prime contractor's good faith efforts to subcontract work to DBEs.:

<<<More to be added later.  Editor.>>

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Index

DOWNLOAD:

          Download the complete Ninth U.S. Circuit Court Opinion in Western States Paving Co., Inc. v. Washington State DOT

Download the opinion
(PDF format, opens new window)


Attorney for Western States Paving:

Gary Lofland
Lofland & Associates
9 N 11th Ave.
Yakima, WA 98902-3016
Phone:     (509) 452-2828

Practice Area:  Employment Law


END Case 47:
SUMMARY:
Western States Paving v. Racial Quotas

 

Western States Paving PAGE INDEX:
Overview 2.0 2.1 2.2 2.3 2.4 2.5 News
Intro and Summary: Western States Paving Co. Legal Case Feds' DBE Goal Setting Approval Process Memo
and overview of documents
Legal Advice:
Feds' DBE Compliance Guide to the States
Pro Forma Letter:
Feds'  Acknow-
ledgement of Receipt of State DBE Goal Plan
Pro Forma Letter:
Feds' Approval of State DBE Plan
Pro Forma Legal Document:
Feds' Detailed Long Form Approval of State DBE Plan
Feds' Questions and Answers: Impact of the Western States case on DBE Programs News Stories

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*  We use the term reverse discrimination reluctantly and only because it is so widely understood.  In our opinion there really is only one kind of discrimination.