Federal judge strikes down Biden’s race-based infrastructure program

A federal judge has ruled against the Biden-Harris administration’s “disadvantaged business enterprise” program, agreeing with the Wisconsin Institute for Law & Liberty that the program discriminates against businesses based on race and gender by prioritizing contracts to small businesses owned by women and certain preferred minority groups.

The Wisconsin Institute for Law and Liberty (WILL) filed the lawsuit on behalf of Mid-America Milling Company LLC in federal court in the Eastern District of Kentucky. Under the preliminary ruling, WILL states, which is a preliminary injunction while the larger case is heard, the federal government’s race and gender preferences embedded in the “disadvantaged business enterprise” (DBE) program may not be used against WILL’s clients. 

“Brick by brick, we will dismantle federal policies that discriminate against America’s small businesses and entrepreneurs,” WILL president and general counsel Rick Esenberg said. “We started this work in 2021, and we will continue to fight until all Americans receive equal treatment.”  

In the decision, released in late September, judge Gregory F. Van Tatenhove acknowledged that the court was keenly aware of past discrimination that certain groups have suffered.

“And the court is sure that the federal government has nothing but good intentions in trying to remedy past wrongs,” Van Tatenhove wrote in his decision. “But remedying those wrongs must still pass constitutional muster. The federal government cannot classify people in such a manner that violates the principles of equal protection.” 

According to WILL, the DBE program was reauthorized in November 2021 when Biden signed the Infrastructure Investment and Jobs Act. In the act, Congress mandated that 10 percent of all new surface transportation funding — over $37 billion — “shall be expended through small business concerns owned and controlled by socially and economically disadvantaged individuals.” 

“The federal DBE program is an affirmative action program that gives preference to certain companies based on race and gender,” WILL stated. “Through this program, the U.S. government finances the American transportation system, including highway construction, with a series of race and gender quotas they call ‘goals.’ In light of the court’s order, WILL’s clients will now be able compete for contracts on an equal footing, without regard to race and gender.”

The case details

In granting the preliminary injunction, Van Tatenhove wrote that the noble aspirations of the nation’s founding documents represent the most successful experiment in representative democracy the world has even known. 

“But by no means has our American experiment been perfect,” Van Tatenhove wrote. “No one could argue, for example, that our nation has always treated men and women of all backgrounds in this country equally.”

Attempting to cure this imperfect history, Van Tatenhove continued, Congress enacted the Disadvantaged Business Enterprise program, which requires the Department of Transportation to ensure that a certain portion of federal funds authorized for highway and transit projects be expended with disadvantaged business enterprises. 

“To execute this requirement, the Department of Transportation affords certain minority- and women-owned businesses a presumption of disadvantage — a rebuttable presumption — but a presumption, nonetheless,” he wrote. “These presumptions have been employed since the 1980s, but the plaintiffs say enough is enough. The court agrees.”

The judge summarized the government’s main argument, which was that the plaintiff’s injuries were not traceable to a race- or gender-based rebuttable presumption because the entirety of the DBE program is not based on race or gender. 

“The ‘practice of setting goals for DBE participation on some projects . . .’ is facially neutral because the DBE program requires only that qualifying firms be certified as disadvantaged, not that they be owned and run by individuals of a particular race or gender,” the judge wrote, quoting the government’s citations. “In other words, not every DOT contract, even those that have DBE goals, employ the race- or gender-based rebuttable presumption.”

What that means is, the government argued, even if the DBE program’s presumptions were enjoined, the program would still continue to operate with its race- and gender-neutral requirements intact, which include consideration of social and economic disadvantages, business size and structure, ownership, and wealth limits. 

“And because the plaintiffs fail to make any showings that they would qualify for the DBE program under its race- and gender-neutral requirements, ‘enjoining the presumptions would leave plaintiffs in exactly the same position and would certainly not redress their stated injury,’” the judge wrote, summarizing the government’s argument.

Pure speculation

In particular, Van Tatenhove observed, the government relied on a previous case, Cache Valley Electrical Co. v. Utah Department of Transportation. 

“In Cache Valley, an electrical subcontractor seeking contracts with the DOT sought to enjoin a predecessor of the DBE program presently at issue,” the judge wrote. “The Tenth Circuit found that the subcontractor had adequately established an injury in fact because the subcontractor was able to point to the two contracts that it lost as a result of the DBE program and showed that it would continue to apply for UDOT electrical subcontracts in the relatively near future.”

However, Van Tatenhove observed, the court reasoned that, even assuming that the subcontractor’s injury was fairly traceable to the DBE program’s rebuttable presumptions, “it would be pure speculation to conclude that invalidating the allegedly unconstitutional preferences would ameliorate plaintiff’s ability to compete in any way.”

The Cache Valley court reached its conclusions based on two determinations, Van Tatenhove explained. 

“First, that the race- and gender- based preferences are severable from the rest of the DBE program and that the DBE program would remain viable even without those preferences,” he wrote. “In other words, the race- and gender- neutral aspects of the DBE program would still exist in order to foster development in small businesses whose owners have had to overcome social and economic hardship. Thus, ‘the DBE program would continue even absent the disputed presumption, so that small businesses whose owners could prove they were disadvantaged — and thereby qualify as DBEs — would continue to have an advantage over businesses like [plaintiff] that are too large to qualify as DBEs.’”

Second, Van Tatenhove continued, the subcontractor had “adduced no evidence that the elimination of the preferences would result in any meaningful reduction in the number of qualifying DBEs.

“Because those who would have initially gained the race- or gender-based presumption in their favor might still qualify for the DBE program under the race- and gender-neutral criteria, the pool of DBE contractors might still be the same — meaning that the non-DBE plaintiff is still at a disadvantage,” he wrote. “Thus, the subcontractor was unable to establish that a favorable judicial decision striking down the rebuttable presumption would likely improve the terms of competition it faced.”

Having your cake and eating it, too

However, Van Tatenhove concluded, the government’s — and that court’s — arguments were contradictory. 

“On the one hand, they contend that enjoining the presumptions would leave the plaintiffs in exactly the same position as with the presumptions and would not redress the plaintiffs’ injury,” he wrote. “This argument relies on Cache Valley’s assumption that the absence of the race- and gender-based presumptions from the DBE program would not alter the number or identity of socially and economically disadvantaged individuals eligible to participate in DBE.”

Practically speaking, Van Tatenhove concluded, that assumption would mean that the race- and gender-based presumptions have no effect on the number of DBEs in the DBE program — in other words, the presumptions really do nothing at all. 

“On the other hand, the government contends that the race- and gender-based elements are a necessary remedial measure that serve a compelling interest — that is to say, the rebuttable presumptions really move the ball,” he wrote. “By this logic, the race- and gender-based measures do both nothing and something. The government is trying to have its cake and eat it too.”

Cache Valley held that non-DBE plaintiffs lacked standing because any anticipated redress from a favorable decision would be wholly speculative, Van Tatenhove recalled. 

“According to the Tenth Circuit, the lack of evidence showing a meaningful reduction in the number of DBEs is ‘merely hypothesizing that elimination of the presumption would improve its terms of competition,’” he wrote. “But this line of reasoning itself rests on its own hypothesis that the elimination of the rebuttal presumptions has no effect on the number of DBEs. Again, that hypothesis is counter to the government’s own position, which elucidates the necessity of the race- and gender-based elements as a means of remedying past discrimination.”

The DBE program itself calls for the use of race-conscious measures if using purely race-neutral means does not allow a recipient to achieve their contract goals for the year, Van Tatenhove asserted.

“Thus, the race- and gender-based presumption must have some impact on the number of competitors who qualify as DBEs,” he wrote. “If the presumption had no effect, then what would be its point and purpose? The presumptions must have an impact on the number of qualifying DBEs — that is why Congress has previously rejected any amendment to the DBE program that would eliminate the presumption of social and economic disadvantage for certain minority groups and women.”

In all practicality, Van Tatenhove wrote, there exists a finite pool of DOT contracts open for bidding.

“A certain percentage of these contracts must go to DBEs,” he wrote. “Businesses owned by particular racial minorities and women are given a presumption as qualifying as DBEs. Eliminating that presumption would require those minority and women owned businesses to qualify as DBEs through race- and gender-neutral means. They may or may not qualify as DBEs without the presumption, and it would be quite the stretch to hypothesize that every minority- or woman-owned business would otherwise qualify as a DBE under the program’s neutral criteria.”

Thus, van Tatenhove concluded, it is not “wholly speculative” to conclude that the number of DBEs would be reduced.

“And with less DBEs jockeying for the finite number of contracts available to bid on, the terms of competition for non-DBEs, like the plaintiffs here, inherently improves,” he wrote. “Accordingly, eliminating the race- and gender-based presumptions would redress the injury harming plaintiffs. Because the plaintiffs have established an injury resulting from the denial of equal treatment that is traceable to the DBE’s race- and gender-based presumption and redressable by a favorable decision by this court, the plaintiffs have shown a likelihood of success on standing.”

Gimme more

But that finding alone did not necessarily justify a preliminary injunction, Van Tatenhove pointed out, merely that the plaintiffs would likely succeed later on the merits of the case. A temporary injunction required more findings.

The first was whether the government could justify an exception to the Fourteenth Amendment’s equal protection guarantees “to all persons ... without regard to any differences of race, of color, or of nationality ....” 

“Any exception to the constitution’s demand for equal protection must survive strict scrutiny,” he wrote, adding that the government must first show that the racial classification is being employed to further a compelling government interest, and, if there is a compelling government interest, the government must then prove that its use of race is narrowly tailored — in other words, “necessary to achieve that interest.”

The Supreme Court, Van Tatenhove wrote, has identified only two compelling interests that permit a resort to race-based government action.

“The first is ‘remediating specific, identified instance of past discrimination that violated the constitution or a statute,’” he wrote. “The other is ‘avoiding imminent and serious risks to human safety in prisons, such as a race riot.’”

Here, the judge wrote, the government contends it has a compelling interest because the DBE program “targets and seeks to remedy past, intentional discrimination in the transportation industry — discrimination that the government has had a hand in.” 

That said, Van Tatenhove countered, remedial policies do not always justify preferential treatment based on race. To do so, he cited past cases, the policy must target a specific episode of past discrimination and cannot rest on a “generalized assertion that there has been past discrimination in an entire industry.” Second, there must be evidence of intentional discrimination in the past, and, third, the government must have had a hand in the past discrimination.

“In other words, the government must show that it actively or passively participated in the past discrimination,” he wrote.

In this case, Van Tatenhove continued, the government argues that “there is a strong basis in evidence that the DOT DBE program targets specific episodes of past, intentional discrimination in which the government participated and now seeks to remedy.”

“In support, the government cites a compelling interest report (which collected over 200 disparity studies, other reports and studies, and congressional testimony) that purports to document the past discrimination and its lingering effects on the ability of DBEs to equally compete for government contracts,” he wrote. “The government also provides statistical disparity evidence and anecdotal evidence, along with expert reports, which Congress reviewed before renewing the DBE program, that conducted regression analyses that eliminate potentially non-discriminatory reasons for the disparities.”

Hold the okra, please

Past courts have accepted that type of evidence as sufficient, Van Tatenhove wrote, but other courts have found such data to be too broad.

“Even more recently, a sister court within the Sixth Circuit considering the Small Business Association’s Section 8(a) program examined the same exhibits that the government presents here,” he wrote. “Applying [another case, Ultima], the district court concluded that the government’s evidence failed to show a compelling interest for the use of a race-based rebuttable presumption.” 

Essentially, Van Tatenhove wrote, the sister court reasoned in Ultima that the government’s evidence did not pass muster because the examples of discrimination contained within the exhibit related too broadly to the federal government’s actions in different areas of the national economy.

Van Tatenhove said he felt compelled to follow that latter line of reasoning.

“While the court is aware that its decision goes down the road less travelled, its compass is controlled by the Sixth Circuit,” he wrote. “[That case] elucidates that ‘[w]hen the government promulgates race-based policies, it must operate with a scalpel. And its cuts must be informed by data that suggest intentional discrimination.’ Although other courts have found that the government’s imprecise evidence has supported a compelling interest, this court finds, like its sister court in Ultima, that the government’s proffered proof is too dull of a scalpel.”

The court in no way doubts that racial barriers still persist when it comes to the success of minority-owned businesses, Van Tatenhove stressed. 

“But the government’s evidence here is too broad,” he wrote. “It points to societal discrimination against minority-owned businesses generally, but does not offer much evidence of past discrimination against the many groups to whom it grants a preference via the DOT’s DBE program. As [previous case law] explains, the preferences ‘for Pakistanis but not Afghans; Japanese but not Iraqis; Hispanics but not Middle Easterners — is not supported by any record evidence at all.’” 

The same is true in this case, Van Tatenhove wrote. 

“Simply compiling an extensive portfolio of studies that show disparities exist for minority-owned businesses generally speaking does not support a government imposed racial preference for only some of those groups,” he wrote. “The government’s imprecision is its fatal flaw. If it wants to grant preferences to certain groups, it must specifically show how the Department of Transportation has previously discriminated against those groups. It cannot group all minority owned businesses into one gumbo pot but then try to scoop out only the sausage and not the okra.”

Finally, Van Tatenhove found that the race-based rebuttable presumption was not narrowly tailored, no matter what, not least because it was not tethered to a foreseeable conclusion.

“The DOT’s DBE program has been around since the Cold War,” he wrote. “It was implemented during the same year that the Space Shuttle Challenger launched its maiden voyage. Star Wars: Episode VI — Return of the Jedi was the top grossing domestic movie, and Kenny Rogers’s and Dolly Parton’s “Islands in the Stream” topped the country music charts for two straight weeks. Is there actually a ‘logical end point’ for the DBE’s racial presumptions?”

Repeated Congressional approval is no cure, Van Tatenhove wrote: “Students for Fair Admissions makes clear that periodic review does not make unconstitutional conduct constitutional.”

Finally, Van Tatenhove wrote, the government’s gender-based presumptions were based on the same arguments and evidence as its race-based presumptions. 

The government also argued that, because the plaintiffs had not identified any contracts with DBE goals that are currently being let, and because of their “lengthy delay” in moving from preliminary relief, there is no imminent harm. The judge disagreed.

“But as the court previously determined, the plaintiffs have provided evidence that they regularly bid on DOT contracts,” he wrote. “The plaintiffs do not have a crystal ball to know precisely when contracts with DBE goals will be available to let. But it is not speculative to conclude that those types of contracts will become available. And when they do, the plaintiffs will be at an automatic disadvantage to certain types of competitors.”

And so the injunction was issued.

Richard Moore is the author of “Dark State” and may be reached at richardd3d.substack.com.