filed artba amicus brief

NO. 14-1493

UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

DUNNET BAY CONSTRUCTION COMPANY, Plaintiff-Appellant, v. GARY HANNIG, in his official capacity as Secretary of Transportation for the Illinois Department of Transportation, et al., Defendants-Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

CASE NO. 3:10-cv-03051-RM-SMJ Honorable Richard Mills

AMICUS BRIEF OF AMERICAN ROAD AND TRANSPORTATION BUILDERS ASSOCIATION

In Support of Plaintiff-Appellant

Dunnet Bay Construction Company for Reversal

Michael L. Shakman Edward W. Feldman Thomas M. Staunton MILLER SHAKMAN & BEEM LLP 180 N. LaSalle St., Suite 3600 Chicago, IL 60601 (312) 263-3700

Nick Goldstein Assistant General Counsel AMERICAN ROAD AND TRANSPORTATION BUILDERS ASSOCIATION 1219 28th Street NW Washington, DC 20007 (202) 289-4434

Attorneys for American Road and Transportation Builders Association

Case: 14-1493 Document: 14 Filed: 06/09/2014 Pages: 28

i

TABLE OF CONTENTS Identity of Amicus, Its Interest in the Case and Source of Its Authority to File the Brief ................................................................... 1 Statement Required by Fed. R. App. P 29(c)(5) ........................................................ 1 Argument ................................................................................................................... 2 1. The Opinion applies a standard that would effectively eliminate strict scrutiny review of an alleged unlawful quota and replace it with a deferential standard when a contractor attempts to challenge a state agency’s implementation of federal DBE goals. .................................................. 3 2. The Opinion erodes the federal policy permitting waivers for contractors who make “good faith efforts” to meet DBE goals. .......................... 9 3. The Opinion applies an erroneous test of standing that denies a contractor required to implement a quota system the right to challenge the quota on equal protection grounds ............................................. 15 Certificate of Compliance ........................................................................................ 24 Certificate of Service ................................................................................................ 25


ii

TABLE OF AUTHORITIES

Adarand Constructors, Inc. v. Penna, Secretary of Transportation, et al., 515 U.S. 200 (1995) ............................................................................................ 13, 18 Fisher v. Univ. of Texas at Austin, 133 S. Ct. 2411 (2013) ..................................... 13 Monterey Mechanical Co. v. Wilson, 125 F.3d 702 (9th Cir. 1997) .................. 20, 22 Northeastern Florida Chapter of Associated General Contractors of America v. City of Jacksonville, Florida, 508 U.S. 656 (1993) ...................................... 16-19, 22 Northern Contracting, Inc. v. Illinois Dept. of Transp., 473 F.3d 715 (7th Cir. 2007) ............................................................................. 4-8, 13 Ricci v. DeStefano, 557 U.S. 557 (2009) .................................................................... 3 Warth v. Seldin, 422 U.S. 490 (1975) ................................................................. 18-19 W.H. Scott Constr. Co. v. City of Jackson, 199 F.3d 206 (5th Cir. 1999) ............... 21


1

Identity of Amicus, Its Interest in the Case and Source of Its Authority to File the Brief

The 6,000 members of the American Road and Transportation Builders

Association (“ARTBA”) include public agencies, private firms and organizations that

own, plan, design, supply and construct transportation projects throughout the

country. Many are small and/or family-owned. On the construction side, ARTBA’s

membership includes prime contractors, subcontractors and suppliers, some of

which are Disadvantaged Business Enterprise firms (“DBE”). Overall, the

transportation construction industry generates nearly $380 billion annually in U.S.

economic activity and sustains 3.5 million American jobs. ARTBA’s membership

structure includes nearly three dozen affiliated chapters, each of which takes a

major interest in planning and implementing the federal DBE program by the

recipient agencies in their states or regions. This Court’s review of the opinion

below will have an impact on how ARTBA’s members bid on construction projects.

ARTBA is authorized to file this amicus brief under Fed. R. App. P. 29(a) by

consent of all parties.

Statement Required By Fed. R. App. P. 29(c)(5)

ARTBA’s counsel authored this brief. ARTBA raised funds from several

chapters to pay the legal fees and the costs of preparing this brief. No other person

contributed money intended to fund preparing or submitting the brief.


2

Argument

ARTBA files this amicus brief because several aspects of the trial court decision

granting summary judgment to the Illinois Department of Transportation (the

“Opinion”) make important changes in the law that would, if affirmed, harm the

American transportation construction industry and undermine the administration

of DBE goals:

1. The Opinion applied a deferential standard of review when a contractor

claims that a state has treated a DBE goal, required by federal law, as an unlawful

minority quota. If upheld, judicial review would turn on technical compliance with

goal-setting regulations rather than whether the goal had been unlawfully

converted to a quota.

2. The Opinion applied that same deferential review to a state agency’s

refusal to grant a waiver to a contractor who claimed to have made good faith, but

unsuccessful, efforts to meet the state’s DBE goal. A deferential standard of review

is contrary to case law applying strict scrutiny to race-based governmental

decisions. The decision adds uncertainty to review of waiver requests and allows

discrimination claims to be disposed of on an improper basis.

3. The Opinion denied standing to sue to contractors who seek to challenge

on equal protection grounds a state’s use of DBE goals as quotas in a manner that

causes otherwise qualifying bids to be rejected. It applied an erroneous theory of

standing under which contractors required to implement quota subcontracting to

obtain public works contracts lack standing to complain. Indeed, under this


3

erroneous theory, in most cases prime contractors would have no standing to

complain about losing contracts due to an unlawful subcontractor quota system.

We discuss each point below.

1. The Opinion applies a standard that would effectively eliminate strict scrutiny review of an alleged unlawful quota and replace it with a deferential standard when a contractor attempts to challenge a state agency’s implementation of federal DBE goals.

The federal DBE program seeks to encourage public contracting to DBEs, while

complying with Supreme Court decisions that generally bar racial or other quotas.

See Opinion of February 12, 2014 (“Opinion”) 65 (Dkt. #180, R.4434), quoting Ricci

v. DeStefano, 557 U.S. 557, 582 (2009) (citing prior authority). Underlying the DBE

program is a potential tension between the legitimate goal of encouraging increased

participation for all DBEs (businesses that are 51% owned by persons who meet the

definition of socially or economically disadvantaged) without violating the rules

against generalized use of racial or other quotas. The issue presented by this case is

likely to reoccur as state agencies, responding to political or other pressure, attempt

to maximize the participation of women and minorities (who are generally

presumed to be DBEs) in public works projects. The Opinion establishes an

erroneous standard of review that would, if upheld, effectively eliminate meaningful

judicial review of political manipulation of the DBE program by state agencies.

The Opinion correctly notes that “[a]ll entities receiving funds from [the Federal

Highway Administration] FHWA must have a DBE program which meets [federal]

requirements,” and correctly described the “non-mandatory, non-exclusive and non-

exhaustive actions” that may be used to determine if a contractor “took all


4

necessary and reasonable steps to achieve a DBE goal. . .” Opinion 62-63 (Dkt.

#180, R.4431-32).

But then the district court went astray by misreading the leading decision in

this Circuit, Northern Contracting, Inc. v. Illinois Dept. of Transp., 473 F.3d 715

(7th Cir. 2007), as stating the sole, and very limited, basis for review of DBE

programs. The district court applied Northern Contracting even though that case

arose in a very different context that does not exist here. Its ruling would effectively

turn what should be strict scrutiny review into a deferential exercise of

administrative agency review. The district court concluded that because the Illinois

Department of Transportation (“IDOT”) complied with the federal guidelines for

how a state agency should determine its DBE goal, a low bidder who lost a contract

because it did not meet that goal could not challenge the loss on the ground that the

state agency had converted the goal to an unlawful quota.1

Based on its reading of Northern Contracting, the Opinion described the scope of

judicial review as follows:

A state entity such as IDOT implementing a congressionally mandated program may rely "on the federal government's compelling interest in remedying the effects of past discrimination in the national construction market." . . . . In these instances, the state is acting as an agent of the federal government and is "insulated from this sort of constitutional attack, absent a showing that the state exceeded its federal authority." [Northern Contracting] . . . at 721. Accordingly, any "challenge to a state's application of federally mandated program must be limited to the question of whether the state exceeded its authority."

1 As amicus it is not the ARTBA’s role to say whether a fact-finder presented with the evidence Dunnet Bay assembled would find that DBE goals were converted to a minority quota. But as Dunnet Bay argues in its brief (Dunnet Bay Brief passim), the evidence was sufficient to permit a fact-finder to reach that conclusion.


5

Id. at 722. Therefore, the Court must determine if IDOT exceeded its authority granted under the federal rules or if Dunnet Bay's challenge is foreclosed by Northern Contracting. [Opinion 65-66 (Dkt. #180, R.4434-35); (italics added).]

The degree of deference afforded IDOT by the district court is evidenced by its

apparent determination that even if its goals operated as a de facto quota, IDOT did

not “exceed[] its authority” in refusing to award the Eisenhower Expressway project

to Dunnet Bay Construction Company because “IDOT did in fact employ a thorough

process before arriving at the [DBE goal] figure [of 22.2%].” It added:

Additionally, because the federal regulations do not specify a procedure for arriving at contract goals, it is not apparent how IDOT could have exceeded its federal authority. Any challenge on this factor fails under Northern Contracting. [Opinion 67 (Dkt. #180, R.4436).]

As amicus, ARTBA is concerned that under this standard judicial review is

reduced to a deferential and mechanical determination focused solely upon whether

an agency could document compliance with federal regulations, even in the face of

significant evidence that a goal was applied as a quota. The district court appeared

at times to slide from deferential review to no review at all, by stating “it is not

apparent how IDOT could have exceeded its federal authority.” Opinion at 67 (Dkt.

#180, R.4436).2

Dunnet Bay presented evidence that representatives of the office of the Governor

of Illinois repeatedly stated that the DBE program was intended to increase

2 ARTBA’s concern is increased by the fact that the federal regulations only describe various non-exclusive “methods a recipient [of federal funds] may use to calculate DBE availability”, and thus do not provide definitive guidance even on how to calculate goals. Northern Contracting, Inc. v. Illinois, 473 F.3d 715, 718 (7th Cir. 2007).


6

“minority” (not DBE) participation; the Governor’s office and IDOT officials publicly

stated that there was a no-waiver policy for failing to meet the goals for minority

participation (despite federal policy authorizing waivers); and the IDOT employee

with direct responsibility for DBE compliance concluded that IDOT was violating

the rules by manipulating the DBE guidelines. Opinion at 30-32, 34-36, 47-48, 50

and 52 (Dkt. #180, R.4399-4401, 4403-05, 4416-17, 4419 and 4421).

Instead of reviewing that evidence to determine if Dunnet Bay’s facts generated

an issue for trial on whether goals were treated as quotas, the district court

concluded that because “the federal regulations do not specify a procedure for

arriving at contract goals” IDOT could not have done anything wrong. Opinion at 67

(Dkt. #180, R.4436). That was a serious misapplication of Northern Contracting.

Nothing in Northern Contracting remotely suggests such a limited scope of

judicial review. In that case the Court confirmed that strict scrutiny was the

appropriate standard. 473 F.3d at 720. But the plaintiff’s claim in that case differed

significantly from the one Dunnet Bay presented in this case. In Northern

Contracting, the plaintiff challenged whether IDOT had followed the applicable

federal regulations in the three specific respects asserted by the plaintiff: failing to

calculate correctly the available number of DBEs in Illinois, failing to adjust DBE

goals for local market conditions, and failing to use race-neutral means to increase

DBE participation by awarding contracts to DBEs other than under the DBE

program. Id. at 722-23. Thus, the case was limited to whether IDOT followed the

guidance provided by non-binding federal regulations, with no suggestion that


7

quotas were involved. In Northern Contracting, the Court’s focus was solely on

IDOT’s application of federal regulations. The case presented a straightforward

review of federal regulations and their application by a state agency.

This case is different. The facts presented by Dunnet Bay, if proven, would

establish that IDOT had imposed a quota system. Thus, even if review is “limited to

the question of whether the state exceeded its authority,” Northern Contracting, 473

F.3d at 722, the quota evidence answers that question in the affirmative. If there

was a quota, the state necessarily “exceeded its authority,” regardless of any

superficial showing of compliance with the regulations.

Moreover, unlike Northern Contracting, the dispute in this case is not over

whether “the state [did] exactly what the [federal] statute expects it to do.” Dunnet

Bay was not attempting “collaterally [to] attack the federal regulations through a

challenge to IDOT’s program.” Northern Contracting, 473 F.3d at 721-22. Dunnet

Bay did not allege that IDOT misapplied specific federal regulations by using the

wrong data, for example, to create a DBE goal. Rather, it alleged that the

Governor’s office directed IDOT to apply the DBE goals for the Eisenhower

Expressway contract as an illegal minority quota, with no waivers and no tolerance

for failing to reach the goal. Once substantial evidence was presented of an

unlawful quota system, judicial scrutiny was required to be strict and searching.

The district court should not have limited itself to the federal regulatory guidance,

but instead should have closely reviewed the evidence of the de facto quota system.

Had it done so, it seems very likely that it would have found that a genuine issue of


8

fact exists as to whether IDOT created a quota, which federal law prohibits absent

special circumstances.

Rather than deferring to a state agency’s application of federal regulations as

the limit of its review, the district court should have focused on whether there was

enough evidence presented by Dunnet Bay to generate a triable issue as to whether

the minority participation goals, as applied by the Governor and IDOT, were

effectively a quota.

Unfortunately, the district court misapplied Northern Contracting to allow

review only on a deferential standard to determine if IDOT “exceeded authority”

under non-binding federal guidelines. It also appears to have allowed that standard

to control or influence its determination whether IDOT had adopted an

impermissible policy against waivers of DBE goals. See Opinion at 69 (Dkt. #180,

R.4438) (“IDOT did not exceed its federal authority by adopting a no-waiver policy”).

A less deferential standard of review could have led it to conclude that a material

factual dispute exists on the quota claim, including whether IDOT effectively

employed a no-waiver policy as a means of implementing the quota.

ARTBA’s members, from time to time, litigate disputes with state agencies that

administer federal-aid construction contracts subject to DBE guidelines. The

approach that the district court took to judicial review of such disputes, if affirmed,

will harm members of ARTBA and others who engage in such litigation by denying

meaningful review of serious allegations, and relegating the judicial function to

evaluating technical compliance with non-binding federal guidelines, while


9

disregarding evidence that the “goals” were being manipulated to implement

unlawful quotas.

2. The Opinion erodes the federal policy permitting waivers for contractors who make “good faith efforts” to meet DBE goals.

ARTBA members often bid as prime contractors on federal-aid transportation

construction projects. The federal rules for administration of the DBE program

recognize that, for legitimate market reasons, these prime contractors will not

always be able to meet DBE goals when bidding on projects. Prime contractors in

these situations are to provide documentation of their good faith efforts to meet the

goal and request a waiver from the state or local transportation agency in question.

There are federal guidelines addressing this waiver-granting process, although, as

noted, they are non-exclusive.

Waivers are a necessary part of the federal program requiring DBE participation

because of basic market realities. Within some geographic areas, there are in fact

not enough certified and available DBE firms, or an inadequate number of such

firms qualified and available to perform certain subcontracting disciplines needed

for a particular construction project. As administered by a state or local

transportation agency, a waiver process must be as objective and transparent as

possible. As participants in competitive bidding for a contract, ARTBA’s members

have a great interest in “playing by the same set of rules.” A subjective or

mysterious process for granting a good faith effort waiver severely undermines that

principle.


10

ARTBA’s members also pride themselves on providing maximum value for their

bids, which greatly benefits the project’s public owner-agency and the taxpayers. To

do so, prime contractors require as much certainty as possible in the bidding

process, including the prices of their subcontractors’ bids and the manner in which

public agencies will administer compliance for programs like DBE participation. A

prime contractor will interpret uncertainty in the waiver process as added risk and

therefore increase the overall price of its bid. Ultimately this will lead to more

expensive projects and less value for the taxpayers.

Even more importantly, a no-waiver rule also turns a goal-based DBE program

into a de facto quota. Consistent and fair administration of legally-proper waiver

principles is, therefore, important to ARTBA’s members.

In the face of substantial evidence to the contrary presented by Dunnet Bay, the

district court concluded that IDOT had neither a no-waiver policy nor a waiver

policy that was so difficult to meet that it operated as a de facto quota. The district

court granted IDOT summary judgment on the waiver issue. In reaching that

conclusion the district court appears to have mixed the question whether IDOT

applied a quota to Dunnet Bay’s bid with whether IDOT applied a quota to other

contractors on separate contracts. The district court resolved the issue factually by

concluding that because IDOT granted waivers to other contractors, it did not apply

a quota to Dunnet Bay. Opinion 68-69 (Dkt. #180, R.4437-38). 3 Dunnet Bay

3 It is important to note that the waiver the district court refers to was not granted until March 4, 2010, after Dunnet Bay filed this case (Dkt. #1, R.25) and IDOT had appeared (no Docket #, R.271). Opinion 69 (Dkt. #180, R.4438). In


11

discusses the evidence on the no-waiver issue and whether that evidence generated

a fact issue for trial. See Dunnet Bay Brief at 40-41. As amicus it would not be

appropriate for ARTBA to argue what the evidence showed.

ARTBA is concerned, however, that the district court’s treatment of the no-

waiver policy, including IDOT’s internal review of the issue, applied an erroneous

standard of review that, if affirmed, will adversely affect ARTBA members who may

seek judicial review of decisions by government agencies to deny waivers of DBE

goals.

Essentially, the district court deferred to IDOT’s internal review of the waiver

request when Dunnet Bay requested reconsideration of denial of the contract. The

district court deferred to William Grunloh, IDOT’s internal reviewer: “. . . a

reconsideration officer such as Grunloh has significant discretion and will often be

called on to make a ‘judgment call’ regarding the efforts of the bidder. “The Court is

unable to conclude that Bill Grunloh erred in determining Dunnet Bay did not

make adequate good faith efforts.” Opinion 72 (Dkt. #180, R.4441).

The district court so found despite substantial evidence from which a fact-finder

could conclude that a waiver should have been granted if there was not a quota.

That evidence included:

(a) Dunnet Bay, the low bidder, had (i) solicited hundreds of

DBEs via faxes and phone calls, (ii) attended pre-bid meetings

designed to provide outreach to DBEs, (iii) contacted appropriate

addition, the waiver was not on the contract on which Dunnet Bay had bid. Opinion 69 (Dkt. #180, R.4438).


12

minority and female organizations, and (iv) had a track record of

generating substantial DBE participation.

(b) Both IDOT and the court recognized that Dunnet Bay’s DBE

outreach efforts may have been impeded by IDOT’s failure to list

Dunnet Bay as a qualified bidder, thus discouraging DBE firms from

responding when Dunnet Bay sought DBE subcontractors.

(c) Dunnet Bay received ten quotes from DBE subcontractors

shortly after the bid opening on January 15, 2010; at least one of those

bids arrived late as a direct result of IDOT’s failure to list Dunnet Bay;

if Dunnet Bay had received those DBE subcontractor quotes earlier, it

would have almost tripled its DBE utilization.

See Opinion 19-20, 26 (Dkt. #180, R.4388-89, 4395).

Despite these facts and others, the district court upheld IDOT’s internal review

of the decision not to grant a waiver by applying the following reasoning:

The [federal] regulations refer to eight non-exhaustive factors which can be considered in assessing good faith. . . .

The factors to be considered are non-mandatory, non-exhaustive

and nonexclusive. A contractor who does not meet the goals "must show that it took all necessary and reasonable steps to achieve a DBE goal." 49 C.F.R. § Pt. 26 App. A. Based on this standard, a reconsideration officer such as [IDOT’s William] Grunloh has significant discretion and will often be called on to make a "judgment call" regarding the efforts of the bidder. Accordingly, it is not surprising that another IDOT official might disagree with the decision. The Court is unable to conclude that Bill Grunloh erred in determining Dunnet Bay did not make adequate good faith efforts. Perhaps the strongest evidence that Dunnet Bay did not take "all necessary and reasonable steps to achieve a DBE goal" is that its DBE participation was under 9% while other bidders were able to reach the 22% goal.


13

Accordingly, the Court concludes that IDOT's decision on reconsideration of the rejection of Dunnet Bay's bid was consistent with the regulations and did not exceed IDOT's authority under federal law. [Opinion 71-72 (Dkt. #180, R.4440-41); italics added.]

The district court entirely missed the point of Dunnet Bay’s evidence. If

affirmed, its reasoning would permit a state agency to treat DBE project goals as

quotas so long as another bidder met the quota and the agency employed an

internal review procedure through which the agency’s reviewing officer was given

“significant discretion” to make a “judgment call” and rejected the complaining

contractor’s waiver request. If district courts review allegations that a state agency

has used an illegal quota by deferential review of the agency’s internal

reconsideration process, the strict scrutiny standard mandated by the Supreme

Court in Adarand Constructors, Inc. v. Penna, 515 U.S. 200 (1995), and applied by

this Court in Northern Contracting will have been eliminated.4

The district court’s reasoning is wrong for several reasons. First, the extent to

which Dunnet Bay took advantage of eight federally-approved but non-binding

techniques to recruit DBE firms, or others of its own invention, to line up DBE

firms is a different issue than whether IDOT administered the DBE program as a

quota. If the fact-finder accepts Dunnet Bay’s evidence on that issue to explain why

Dunnet Bay, the low bidder, did not get the contract, then Dunnet Bay’s good faith

4 As the Supreme Court recently stated, “[s]trict scrutiny is a searching examination, and [it is] the government [that] bears the burden to prove that the reasons for any racial classification are clearly identified and unquestionably legitimate.” Fisher v. Univ. of Texas at Austin, 133 S. Ct. 2411, 2419 (2013) (citations and quotations omitted).


14

efforts or lack thereof would not change the fact that the program was being

operated as a quota. At the very least Dunnet Bay should be entitled to try to prove

to the fact-finder that under IDOT’s normal waiver practice it would have received

the waiver, and the contract.

Second, in the face of significant evidence that IDOT implemented a quota, the

district court should not have evaluated the agency’s reconsideration decision by

treating it as subject to “significant [agency] discretion” and to limit its inquiry to

whether “the rejection of Dunnet Bay's bid was consistent with the regulations . . .”

The correct approach would have been to resolve Dunnet Bay’s claim that IDOT

implemented the DBE program as a quota applying strict scrutiny, and only if that

claim were rejected should the agency’s internal decision be reviewed to determine

if Dunnet Bay did not make good faith efforts to recruit more DBEs.

Moreover, Dunnet Bay presented evidence to support its argument that the

reconsideration process was part of quota implementation. As the court noted, at

Opinion 27 (Dkt. #180, R.4396), Ms. Lyle, IDOT’s DBE compliance expert,

recommended after the reconsideration hearing that Dunnet Bay receive the waiver

and the contract. In these circumstances it was wrong to evaluate the waiver as if

the only question was whether the reconsideration officer abused his discretion.

ARTBA is also concerned with the consequences of the court’s third, and

apparently principal, reason for validating IDOT’s denial of a waiver – its

conclusion that the effectiveness of the DBE outreach goal was shown by the fact

that Dunnet Bay reached only 9% DBE participation while other bidders (and


15

Dunnet Bay on the rebid) reached 22%. In this case, the fact that a 22% “goal” was

achieved following public statements by IDOT and the Governor’s office that there

would be no waivers, and following the rejection of Dunnet Bay’s low bid for failing

to reach 22%, is fully consistent with the conclusion that everyone understood that a

quota was being applied and bidders had to meet the quota, whether lawful or not.

ARTBA is concerned that affirmance of the Opinion would set a bad precedent

by allowing an agency to insist on meeting a DBE “goal” and then asserting that

because the goal was met it proves the reasonableness of the goal, as opposed to

proving that the goal was really a quota.

3. The Opinion applies an erroneous test of standing that denies a contractor required to implement a quota system the right to challenge the quota on equal protection grounds.

An issue of great concern to ARTBA and its members is that the Opinion

effectively eliminates standing for prime contractor-members who are required to

engage in unlawful discrimination at the subcontractor level in order to prevent

rejection of their otherwise-qualifying bids.

The standing issue should have been straightforward. Dunnet Bay was the low

bidder for a $10 million contract. It alleged, and presented evidence, that IDOT

rejected its bid because of a DBE quota. It alleged that but for the allegedly

unlawful quota, it would have been awarded the contract. Therefore, it alleged a

$10 million harm directly caused by the application of an unconstitutional quota.

Standing is clear under controlling case law, and as a matter of common sense. In


16

Northeastern Florida Chapter of Associated General Contractors of America v. City

of Jacksonville, Florida, 508 U.S. 656, 663 (1993), the Supreme Court held:

The doctrine of standing is "an essential and unchanging part of the case-or-controversy requirement of Article III," . . . . It has been established by a long line of cases that a party seeking to invoke a federal court's jurisdiction must demonstrate three things: (1) "injury in fact," by which we mean an invasion of a legally protected interest that is "(a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical," . . . .; (2) a causal relationship between the injury and the challenged conduct, by which we mean that the injury "fairly can be traced to the challenged action of the defendant," and has not resulted "from the independent action of some third party not before the court," . . . .; and (3) a likelihood that the injury will be redressed by a favorable decision, by which we mean that the "prospect of obtaining relief from the injury as a result of a favorable ruling" is not "too speculative," . . . [internal citations omitted.]

Dunnet Bay alleged all three elements. It alleged that it would have been awarded

a specific contract but for IDOT’s quota. (Dkt. #1, R.33). It also alleged:

. . . [i]n that IDOT’s no-waiver policy results in a rejection of any bid as non-responsive that fails to meet the contract goal despite evidence of a bidder’s good faith efforts to do so, the 22% contract goal constitutes an unlawful quota. [Dkt. #1, R.33.]

Dunnet Bay thus alleged a direct, concrete and particularized injury to it as a result

of a racial quota in the form of its loss of a $10 million contract. In the language of

Northeastern Florida, that was an “injury in fact” that was “causally connected” to

the quota; and it would “be redressed by a favorable decision.” Its allegations met

all the standing requirements specified by the Supreme Court. That should have

been the end of the matter. Nevertheless, the district court held that Dunnet Bay

lacked standing to complain. This Court should correct that error.


17

The district court went astray by misreading standing doctrine. It muddled

concepts of discrimination (which go to the merits) with concepts of injury (which go

to standing). The Opinion asserts that because IDOT did not treat Dunnet Bay

differently than the other contractors it was bidding against, it suffered no

competitive disadvantage in relation to its peers, which thereby defeated standing.

Opinion 74-75 (Dkt. #180, R.4443-44). But that is a merits argument (and a wrong

one), not a standing argument.

Standing is clear under Northeastern Florida (and many other cases) because

the three elements of injury, causation and redressability are met. Although

labeling its analysis as a standing inquiry, the district court essentially found

instead that no equal protection violation could have occurred because Dunnet Bay

and its competitors all operated under the same standard. That cannot be correct

where the standard itself is unconstitutional.

A hypothetical illustrates the point. Assume two contractors bid on a State

contract. The State erects an unconstitutional rule: it requires the contractors to

discriminate by engaging at least 22% minority subcontractors even though that

level of participation is not supported by market-based evidence. Contractor A is

low bidder but loses out to Contractor B because it did not meet the target. Under

the district court’s logic, no equal protection violation occurred because both

contractors were forced to play under the same rules, and Contractor B had no

“competitive advantage” over Contractor A. That is incorrect. Rigging the game

with an illegal rule constitutes the equal protection violation, regardless of whether


18

all compete on equal footing under that unlawful standard. The rule divides the

competitors into two classes: those willing and able to clear the illegal hurdle, and

those not. The injury (and, hence standing) results from the application of the

illegal hurdle to deprive Contractor A (Dunnet Bay) of the contract.

In reaching the contrary conclusion, the district court erroneously concluded that

“unequal footing” was the only means to establish standing. But that is only one

way to do so. One can also establish standing where there is equal footing under an

unequal standard. In Adarand Constructors, Inc., and Northeastern Florida, supra,

the Supreme Court held that a contractor may show standing based on an “inability

to compete on an equal footing in the bidding process, . . . .” Those cases did not

purport, however, to define the only road to standing.

Northeastern Florida’s discussion of Warth v. Seldin, 422 U.S. 490 (1975), made

that clear. In language that applies here, the Court stated that “[a]n allegation that

a ‘specific project’ was ‘precluded’ by the existence of or administration of [a

program], would certainly have been sufficient to establish standing.” 508 U.S. at

668. The Court made that statement in distinguishing Warth, where it had found

no standing for contractors to object to a town’s zoning ordinance that prevented

people of low and moderate income from living in the town. In Warth, the Court

based the lack of standing upon the fact that the contractors failed to identify any

contract that was lost. Warth was otherwise factually similar to this case: in both

cases the contractors were complaining that the government’s policy effected

discrimination against someone other than the contractor-plaintiffs.


19

The Supreme Court recognized in Northeastern Florida that the contractor-

plaintiffs in Warth would have had standing if they had alleged “that a ‘specific

project’ was ‘precluded’ by the existence of or administration” of the Town’s zoning

policy. The Court thereby answered the standing issue here. Dunnet Bay clearly

alleged that it lost the Eisenhower Expressway contract because IDOT converted a

goal into a quota that it could not meet. Under Northeastern Florida’s discussion of

Warth, that afforded standing for Dunnet Bay. To conclude otherwise would

eliminate any remedy for a contractor when a government program requires the

contractor to discriminate on the basis of race in awarding subcontracts. Such a

standing rule would make no sense and would frustrate the anti-discrimination

policies of the law and adversely affect ARTBA’s members.

Contrary to the Opinion at 74-75 (Dkt. #180, R.4443-44), the fact that Dunnet

Bay itself was not singled out because of the race of its owners, or that of its

competitors, defeats neither standing nor an equal protection claim. It suffered

injury in fact as a result of an unconstitutional minority-based quota. The State

engaged in discrimination and Dunnet Bay lost a contract as a result. Under the

Northeastern Florida-Warth analysis, that is sufficient to establish standing even

though the race of Dunnet Bay’s and its competitors’ owners was not a factor in the

decision.

Dunnet Bay’s injury was not limited to the loss of the contract (although that

loss was certainly sufficient to create standing). A corollary of the point made

above (about the rules of the game being unlawful) is that the unlawful rules force


20

one to violate the law in order to compete against other bidders. Dunnet Bay was,

therefore, also injured because the quota system forces contractors into a Hobson’s

choice: either become party to unlawful discrimination or lose your chance for a

contract.

Dunnet Bay essentially complained that because of IDOT’s de facto quota it

would have had to engage in discrimination itself in favor of some subcontractors

and against others on the basis of minority status to get the Eisenhower

Expressway contract. Courts have found standing where a government program

requires a contractor to discriminate, or attempt to discriminate, against others. In

Monterey Mechanical Co. v. Wilson, 125 F.3d 702, 707 (9th Cir. 1997), the court

stated:

Even if a general contractor suffers no discrimination itself, it is hurt by a law requiring it to discriminate, or try to discriminate, against others, on the basis of their ethnicity or sex. A person required by the government to discriminate by ethnicity or sex against others has standing to challenge the validity of the requirement, even though the government does not discriminate against him.

That standard fits squarely to the facts alleged here: Assume that IDOT’s quota did

not discriminate against Dunnet Bay on the basis of its owners’ race or ethnicity, as

the district court concluded (erroneously, as discussed below). Nonetheless, by

denying Dunnet Bay standing the district court denied Dunnet Bay the opportunity

to prove that IDOT required it to discriminate against non-minority subcontractors.

Dunnet Bay has standing to challenge the quota under Monterey Mechanical

Co., supra. The district court was wrong to conclude otherwise. Under its approach,

prime contractors could never challenge government programs that require them to


21

use quotas to select subcontractors, unless they could prove they were directly

competing against a minority prime contractor. Because many ARTBA members

regularly bid for contracts and must select subcontractors for appropriate portions

of their work, they would suffer serious harm – lack of standing to sue – if the

district court’s reasoning were affirmed.

Even reading the standing requirement as the district court did – to require

direct competition by Dunnet Bay with DBE firms – Dunnet Bay’s allegations

should have afforded it standing. As the district court assumed (Opinion at 76, Dkt.

#180, R.4445), IDOT permitted general contractors that were DBEs to take

advantage of their status by performing a portion of the work directly. As a non-

DBE business, Dunnet Bay could not do the same and have it count as DBE work.

Thus, IDOT deprived Dunnet Bay of the right to compete for the contract on equal

footing with DBE prime contractors. See, e.g., W.H. Scott Constr. Co. v. City of

Jackson, 199 F.3d 206, 215-16 (5th Cir. 1999) (contractor denied the right to

compete on equal footing, and thus had standing to sue, where program permitted

DBE-qualified general contractor to use its own work to satisfy minority

participation goals and avoid good faith requirements).

The district court recognized this fact: “It is true that a hypothetical DBE might

not have had to subcontract work on the Eisenhower project, thereby providing it

with a competitive advantage over the other bidders.” But the district court

rejected the argument, stating that “Dunnet Bay has not pointed to another


22

contractor that did not have to meet the same requirements it did.” Opinion at 76

(Dkt. #180, R.4445).

Dunnet Bay was not required to prove that there was another contractor who

benefited from the challenged quota. For standing purposes, if an unlawful practice

or policy imposes a loss on the plaintiff, the plaintiff is not also required to show

who won from its loss, so long as it has a plausible basis to allege that it was the

loser. As the Court stated in Northeastern Florida:

When the government erects a barrier that makes it more difficult for members of one group to obtain a benefit than it is for another group, a member of the former group seeking to challenge the barrier need not allege that he would have obtained the benefit but for the barrier to establish standing. The “injury in fact” in an equal protection case of this variety is the denial of equal treatment resulting from the imposition of the barrier, not the ultimate inability to obtain the benefit.

508 U.S. at 666 [italics added].

Thus, both under Monterey Mechanical Co., which recognizes a contractor’s

standing to object when a government program requires it to discriminate among

subcontractors, and under Northeastern Florida, Dunnet Bay had standing.

Respectfully submitted, American Road and Transportation Builders Association By: s/ Thomas M. Staunton One of its attorneys

Dated: June 9, 2014


23

Nick Goldstein Assistant General Counsel American Road & Transportation Builders Association 1219 28th Street NW Washington, DC 20007 (202) 289-4434 Michael L. Shakman Edward W. Feldman Thomas M. Staunton Miller Shakman & Beem LLP 180 N. LaSalle Street Chicago, Illinois 60601 [email protected] [email protected] [email protected] 312-363-3700


24

CERTIFICATE OF COMPLIANCE WITH FEDERAL RULE OF APPELLATE PROCEDURE 32

This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B)

because this brief contains 6,402 words, excluding the parts of the brief exempted

by Fed. R. App. P. 32(a)(7)(B)(iii).

This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5), as

modified by Seventh Circuit Rule 32(b), and the type style requirements of Fed. R.

App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced

typeface using Microsoft Office Word 2010 in 12 point Century Schoolbook plain,

roman style font.

American Road and Transportation Builders Association By: s/ Thomas M. Staunton One of its attorneys

Dated: June 9, 2014 Nick Goldstein Assistant General Counsel American Road & Transportation Builders Association 1219 28th Street NW Washington, DC 20007 (202) 289-4434 Michael L. Shakman Edward W. Feldman Thomas M. Staunton Miller Shakman & Beem LLP 180 N. LaSalle Street Chicago, Illinois 60601 [email protected] [email protected] [email protected] 312-363-3700

Attorneys for American Road and Transportation Builders Association


25

CERTIFICATE OF SERVICE

I hereby certify that on June 9, 2014, I caused the foregoing to be electronically

filed with the Clerk of the Court for the United States Court of Appeals for the

Seventh Circuit by using the CM/ECF system. I certify that all participants in the

case are registered CM/ECF users and that service will be accomplished by the

CM/ECF system.

American Road and Transportation Builders Association By: s/ Thomas M. Staunton One of its attorneys

Dated: June 9, 2014 Nick Goldstein Assistant General Counsel American Road & Transportation Builders Association 1219 28th Street NW Washington, DC 20007 (202) 289-4434 Michael L. Shakman Edward W. Feldman Thomas M. Staunton Miller Shakman & Beem LLP 180 N. LaSalle Street Chicago, Illinois 60601 [email protected] [email protected] [email protected] 312-363-3700


filed artba amicus brief

News & Politics

equal protection

equal protection

lasalle street

transportation

northeastern

illinois 60601

bill grunloh

supreme court