Adarand Constructors, Inc. v. Mineta, Transportation Secy.

Questions presented: (1) Whether the court of appeals misapplied the strict scrutiny standard in determining if Congress had a compelling interest to enact legislation designed to remedy the effects of racial discrimination. (2) Whether the U.S. Department of Transportations current Disadvantaged Business Enterprise program is narrowly tailored to serve a compelling governmental interest.

BY CANDICE PRATSCH, MEDILL NEWS SERVICE

In 1989, the Transportation Departments Central Federal Lands Highway Division awarded the prime contract for a Colorado highway construction project to Mountain Gravel and Construction Co., which in turn, solicited bids from subcontractors to construct the guardrails on the highway.

Adarand Constructors, Inc., a Colorado-based company specializing in guardrail work, submitted the lowest bid. But Mountain Gravel awarded the subcontract to Gonzale's Construction Company, a minority-owned small business.

Under the DOTs Disadvantaged Business Enterprise program, the government awarded financial bonuses to highway contractors that gave at least 10 percent of their subcontracts to disadvantaged businesses. Contracts for highway construction were required to include a Subcontractor Compensation Clause (SCC) that called for bonuses to contractors who hired these DBEs. Gonzale's Construction was certified as a DBE, owned and operated by socially and economically disadvantaged individuals.

Section 8 of the Small Business Act defines an individual as socially disadvantaged if he or she has been subjected to racial or ethnic prejudice because of his or her "identity as a member of group without regard to individual qualities." An economically disadvantaged individual is defined as someone 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." At the time, under Section 8, businesses owned by minorities were presumed to be disadvantaged.

In August 1990, Adarand filed suit, alleging that SCCs were unconstitutional because the race-based presumptions violate equal protection rights guaranteed by the 5th Amendment.

In 1992, a Colorado district court upheld the program as constitutional. On appeal, the 10th Circuit Court of Appeals affirmed, saying that "the SCC program [is] constitutional because it is narrowly tailored to achieve its significant governmental purpose of providing subcontracting opportunities for small [Disadvantaged Business Enterprises], as required under section 502 of the [SBA]."

In 1995, in a 5-4 opinion, the U.S. Supreme Court reversed and remanded the case back to the district court, concluding that "courts should analyze cases of this kind under a different standard of review than the one the Court of Appeals applied." In the opinion by Justice Sandra Day O'Connor, the Court limited federal affirmative action programs. According to the opinion, "federal racial classifications, like those of a state, must serve a compelling governmental interest, and must be narrowly tailored to further that interest." The Court also said that federal affirmative action programs should be subjected to a "strict scrutiny" standard.

Justice Clarence Thomas wrote a concurring opinion, saying that "In my mind, government-sponsored racial discrimination based on benign prejudice is just as noxious as discrimination inspired by malicious prejudice. In each instance, it is racial discrimination, plain and simple."

But Justices John Paul Stevens and Ruth Bader Ginsburg dissented. They said that the majority's opinion ignored the difference between oppression and assistance. In their dissent, they also said the majority's opinion, "assumes that there is no significant difference between a decision by the Congress of the United States to adopt an affirmative-action program and such a decision by a state.... It ignores important practical and legal differences between federal and state or local decision-makers."

Keeping this in mind, the district court in 1997 held the SCC program unconstitutional, saying the program was not narrowly tailored enough to meet a compelling government interest, and that it "include[ed] minority individuals who were not in fact disadvantaged and excluded non-minority individuals who were disadvantaged." The court granted summary judgment to Adarand.

As a result of the U.S. Supreme Court's decision, the Department of Transportation has amended its regulations regarding DBEs. In addition to numerous changes, the DOT currently requires that business owners applying for DBE certification must certify in a notarized document that they are socially and economically disadvantaged. To be considered economically disadvantaged, these individuals must also provide financial documents certifying that their net worth complies with federal regulations. In addition, anyone may challenge an applicants eligibility by proving that the applicant is not socially or economically disadvantaged. Also, now non-minority individuals who are socially and economically disadvantaged can apply for DBE certification.

In 1999, the 10th Circuit Court of Appeals ruled that subsequent events had rendered the case moot. Under the new regulations, Adarand applied for and was granted DBE certification by the Colorado Department of Transportation. Also, in March 2000, the DOT eliminated SCCs from highway construction contracts.

But the U.S. Supreme Court did not agree that the case was moot, and, once again, reversed and remanded the case back to the 10th Circuit.

In September 2000, the 10th Circuit heard the case, and considered the DOTs new regulations. The 10th Circuit then reversed its previous decision, saying that the "SCC program and the DBE certification programs as currently structured, though not as they were structured in 1997 when the district court last rendered judgment, pass constitutional muster: They are narrowly tailored to serve a compelling government interest."

On March 26, 2001, the U.S. Supreme Court granted certiorari in the case.

William Perry Pendley of the Mountain States Legal Foundation in Denver, Colo., who has represented Adarand since 1989, is frustrated with Congress' apparent inability to follow the dictates of the Supreme Court on affirmative action.

"Congress has so far refused to implement the [U.S.] Supreme Court's opinion in this case," Pendley said. "I'm not holding my breath."

On April 13, the Court amended its certiorari order, slightly altering the wording of the two questions it would be addressing on review.

On Nov. 27, 2001, the Court dismissed the case, stating in a per curiam opinion that the writ of certiorari had been improvidently granted.

"[U]pon full briefing and oral argument we find that the current posture of this case prevents review of that important question," the opinion stated. "To address it would require a threshold inquiry into issues decided by the Court of Appeals but not presented in the petition for certiorari."

The Court attributed this to a ""shift in the posture of the case" since the Court accepted it for review. Adarand Constructors advised the Court that it was not challenging any part of DOTs state and local procurement program, but instead was challenging only the statutes and regulations that pertain to direct procurement of DOT funds for highway construction on federal lands. In dismissing the case, the Court noted that the statutes and regulations relating to direct procurement are quite different than the statutes and regulations reviewed by the appeals court.