Minority Business Enterprise Programs to Get Closer Scrutiny: Federal Courts Will Take Up Related Issues

Article excerpt

The author will conduct a workshop on MBE programs and disparity studies at the Congress of the Cities in Minneapolis. See the Congress of Cities Program for date and room location.

In late September, the federal courts sent out a powerful signal of continuing scrutiny of minority business enterprise (MBE) programs. On September 23, the 10th Circuit Court of Appeals, in Concrete Works v. City and County of Denver, reversed and remanded a U.S. district court's decision that had given a sweeping affirmation to that jurisdiction's programs. The following Monday, the U.S. Supreme Court agreed to hear argument on Adarand v. Pena, a challenge to a federal MBE program.

The addition of Adarand to the Court's slender list for action this term was something of a surprise. Adarand, represented by the Mountain States Legal Foundation, generated press speculation that the review was intended to overturn, or more likely, restrict the growing scope of federal MBE programs. There was no conflict in the circuits at this time over federal MBE programs, but the Supreme Court has become increasingly critical of the use of racial classifications and has shown growing interest in the factual assumptions on which regulatory programs are based. Furthermore, previous supporters of affirmative action programs, Justices Brennan, Marshall, and Blackmun, have all retired, replaced by those whose views are uncertain (Ginsburg or Breyer) or in likely opposition (Thomas).

The common view of MBE law based on Fullilove v. Klutznick (1980) and City of Richmond v. Croson (1989) was that, while state and local jurisdictions would be held to a standard of strict scrutiny in their use of racial preferences in MBE programs, Congress would receive judicial deference when it decided that such preferences were necessary. In 1990, the Court, by a 5-4 decision in Metro Broadcasting v. F.C.C., upheld Congressional action that included racial preferences in the FCC licensing program. A later D.C. Circuit opinion, however, struck down a similar preference concerning women, when current Justice Clarence Thomas ruled that the FCC had not established through empirical evidence that its broadcast diversity goal was furthered by the preference. The diversity rationale is not at issue in contracting programs, but lower federal courts in a series of cases had ruled following Fullilove that Congress possessed general remedial power to create contracting preferences.

Adarand will raise at least two issues. First, how strict is the test for the Congressional use of racial classifications? The petitioners have reminded the Court that Congress was responsible for racial segregation in the District of Columbia public schools when the Court struck down that arrangement in 1954.

The second issue is whether the presumptive eligibility for preferential status for racial and some ethnic minorities as the Small Business Act is administered is constitutional. It is possible that the Court might avoid a direct confrontation with Congress by defining the concept of disadvantaged business so that economic status was the key rather than race and ethnicity? If so, that would dramatically change the mix of companies benefitted.

For cities, the 10th Circuit decision in Concrete Works may have more immediate impact. By reversing the district court's opinion upholding Denver's program, the Circuit Court has made it unlikely that future legal challenges to MBE programs will be disposed of by motions for summary judgement. The circuit, with retired Justice Byron White sitting on the panel, agreed with the plaintiffs (again, Mountain States Legal Foundation) that there were important issues of fact that could be decided only in a trial. Once a city has completed a disparity study to investigate whether there is a basis for continued MBE legislation issues about the facts in that study will almost always exist as they did in Denver.

Despite the reversal, the Circuit opinion lacks the tone of hostility to MBE programs evidenced in City of Richmond v. …