ROTHE DEVELOPMENT, INC., Appellant v. UNITED STATES DEPARTMENT OF DEFENSE and United States Small Business Administration, Appellees
No. 15-5176
United States Court of Appeals, District of Columbia Circuit.
September 9, 2016
Argued March 10, 2016
Further, as the District Court explained, “[b]oth Defendants and Scenic America recognize ... that all FSA lighting provisions were established consistent with customary use.” Scenic II, 49 F.Supp.3d at 71 (quoting or citing both parties’ briefing) (internal quotation marks omitted); see also Opening Br. for Appellant 36; FHWA Br. 51-52. Thus, so long as the FHWA has merely interpreted in a reasonable fashion, rather than amended, those lighting standards, that interpretation must itself be “consistent with customary use,” whether or not it is precisely the interpretation that would have been given to the standards at the time the FHWA and states first agreed upon them. Cf. Ass‘n of Am. R.Rs. v. Surface Transp. Bd., 162 F.3d 101, 107 (D.C. Cir. 1998) (“Our deference to an agency‘s reasonable interpretation of its governing statute ‘is a product both of an awareness of the practical expertise which an agency normally develops, and of a willingness to accord some measure of flexibility to such an agency as it encounters new and unforeseen problems over time.‘” (quoting Int‘l Bhd. of Teamsters v. Daniel, 439 U.S. 551, 566 n.20 (1979))).
We agree with the District Court‘s conclusion that the FHWA‘s interpretation of the FSA lighting standards is not one that “runs 180 degrees counter to the plain meaning of the FSAs,” and that it therefore “construes, rather than contradicts” the FSAs. Scenic II, 49 F.Supp.3d at 62-63, 70 (quoting Nat‘l Family Planning & Reprod. Health Ass‘n v. Sullivan, 979 F.2d 227, 235 (D.C. Cir. 1992)). Although it might be possible to read the FSA lighting standards to prohibit digital billboards, those standards do not foreclose other interpretations, including the FHWA‘s here. Because the FHWA‘s interpretation of the FSA lighting provision was reasonable, the interpretation cannot be “contrary to customary use.” Accordingly, Scenic‘s claim that the Guidance violates
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For the foregoing reasons, we affirm the District Court‘s grant of summary judgment as to Scenic‘s
So ordered.
Steven J. Lechner, Denver, CO, was on the brief for amicus curiae Mountain States Legal Foundation in support of appellant.
Michael E. Rosman, Washington, DC, was on the brief for amicus curiae Center for Individual Rights in support of appellant.
Teresa Kwong, Attorney, U.S. Department of Justice, argued the cause for appellees. With her on the brief was Mark L. Gross, Attorney, Washington, DC. R. Craig Lawrence, Assistant U.S. Attorney, entered an appearance.
Sherrilyn Ifill, New York, NY, Janai Nelson, Christina Swarns, and Daniel W. Wolff, Washington, DC, were on the brief for amici curiae NAACP Legal Defense and Educational Fund, Inc., Asian Americans Advancing Justice, AAJC, and the Leadership Conference of Civil and Human Rights in support of appellees.
Christine V. Williams was on the brief for amici curiae Native American Contractors Association, et al. in support of appellees.
Before: HENDERSON, GRIFFITH and PILLARD, Circuit Judges.
Opinion concurring in part and dissenting in part filed by Circuit Judge HENDERSON
PILLARD, Circuit Judge:
Plaintiff-Appellant Rothe Development, Inc. (Rothe) alleges that the statutory basis of the Small Business Administration‘s 8(a) business development program, Amendments to the Small Business Act,
The challenged statute authorizes the Small Business Administration (SBA) to enter into contracts with other federal agencies, which the SBA then subcontracts to eligible small businesses that compete for the subcontracts in a sheltered market.
Rothe is a small business that bids on Defense Department contracts, including the types of subcontracts that the SBA awards to economically and socially disad-
We disagree, because the provisions of the Small Business Act that Rothe challenges do not on their face classify individuals by race.2 Section 8(a) uses facially race-neutral terms of eligibility to identify individual victims of discrimination, prejudice, or bias, without presuming that members of certain racial, ethnic, or cultural groups qualify as such. That makes it different from other statutes that either expressly limit participation in contracting programs to racial or ethnic minorities or specifically direct third parties to presume that members of certain racial or ethnic groups, or minorities generally, are eligible. Congress intentionally took a different tack with section 8(a), opting for inclusive terms of eligibility that focus on an individual‘s experience of bias and aim to promote equal opportunity for entrepreneurs of all racial backgrounds.
In contrast to the statute, the SBA‘s regulation implementing the 8(a) program does contain a racial classification in the form of a presumption that an individual who is a member of one of five designated racial groups (and within them, 37 subgroups) is socially disadvantaged. See
Rothe‘s counsel‘s statements during oral argument confirm the limited scope of Rothe‘s challenge. When we asked counsel whether Rothe was challenging a racial classification that appeared “[i]n the statute or in the regulations,” he specified that Rothe was challenging the presumption “[i]n the statute.” Oral Arg. Tr. 4. We followed up: “[I]s the constitutional flaw in the statute alone, or is it in the statute and the regulations together?” Counsel for Rothe reiterated: “It‘s in the statute alone ....” Id. at 5. It is thus clear that the regulations are beyond the scope of Rothe‘s challenge. If there were any doubt, we would be obliged to read the complaint narrowly to reach the same conclusion. See Am. Fed‘n of Gov‘t Emps., AFL-CIO v. United States, 330 F.3d 513, 517-19 (D.C. Cir. 2003) (construing plaintiffs’ suit in a manner that avoided raising an equal protection problem).
I.
The central question on appeal is whether section 8(a) of the Small Business Act warrants strict judicial scrutiny. The parties and the district court seem to think it does. See Appellant Br. 10; Appellee Br. 16; Rothe, 107 F.Supp.3d at 189, 207; but see Oral Arg. Tr. 23 (Judge Griffith: “In your view does the statute create racial classifications, or is it the regulations?” Counsel for the government: “I believe it‘s the regulations ....“). That fact does not relieve us of our duty to assess independently the legal issue before us. See United States v. Bigley, 786 F.3d 11, 17 (D.C. Cir. 2015) (Brown, J., concurring in the judgment) (“‘But we are required to conduct an independent review of a legal issue, despite the government‘s concession on appeal.‘” (quoting United States v. Russell, 600 F.3d 631, 636 (D.C. Cir. 2010))); cf. The Anaconda v. Am. Sugar Refining Co., 322 U.S. 42, 46 (1944) (A party “cannot stipulate away” what “the legislation declares“).
There are at least three ways a plaintiff can plead an equal protection violation. A plaintiff may allege that the government has expressly classified individuals based on their race, see Parents Involved in Cmty. Sch. v. Seattle Sch. Dist. No. 1, 551 U.S. 701, 712, 716, 720 (2007); that the government has applied facially neutral laws or policies in an intentionally discriminatory manner, see Yick Wo v. Hopkins, 118 U.S. 356, 373-74 (1886); or that facially neutral laws or policies “result in racially disproportionate impact and are motivated by a racially discriminatory purpose,” Adarand Constructors, Inc. v. Peña, 515 U.S. 200, 213 (1995) (citing Arlington Heights v. Metro. Hous. Dev. Corp., 429 U.S. 252 (1977), and Washington v. Davis, 426 U.S. 229 (1976)). Rothe advances only the first theory—that, on its face, section 8(a) of the Small Business Act contains a racial classification. See 1 App. 68 (Compl. ¶ 1) (seeking “to obtain a declaration that the racial classification of section 8(a) of the Small Business Act, defined herein, is facially unconstitutional“). “[A]ll racial classifications imposed by government ‘must be analyzed by a reviewing court under strict scrutiny.‘” Grutter v. Bollinger, 539 U.S. 306, 326 (2003) (quoting Adarand, 515 U.S. at 227); see Fisher v. Univ. of Tex. at Austin, 133 S.Ct. 2411, 2419 (2013) (“[U]nder Grutter, strict scrutiny must be applied to any admissions program using racial categories or classifications.“).
According to Rothe, three provisions instantiate the statute‘s racial classification: (1) the statutory definition of socially disadvantaged individuals; (2) a government-wide goal of letting 5% of federal contracts to small businesses owned by socially disadvantaged individuals; and (3) the findings section of the statute, which Rothe contends includes a presumption that members of the specified racial groups are socially disadvantaged. In our view, none of the three components—separately or
A.
Rothe first alleges that
The focus on individuals who have experienced discrimination distinguishes section 637(a)(5) from the racial classification the Supreme Court considered in Regents of the University of California v. Bakke, 438 U.S. 265 (1978). There, the university‘s medical school reserved 16 of 100 spaces in its class for “disadvantaged” students. Id. at 272, 279 (opinion of Powell, J.). But under the Bakke program, an explicit factor in determining disadvantage was an applicant‘s race—not his or her individual experience of racial or ethnic discrimination. Id. at 274-75 & n.4. Thus, Justice Powell concluded, the program “was a minority enrollment program with a secondary disadvantage element” and therefore qualified as a racial classification. Id. By contrast, section 637(a)(5) does not provide for preferential treatment “based on [an applicant‘s] race—a group classification long recognized as ‘in most circumstances irrelevant and therefore prohibited,‘” Adarand, 515 U.S. at 227 (quoting Hirabayashi v. United States, 320 U.S. 81, 100 (1943)), but rather on an individual applicant‘s experience of discrimination. In other words, this is not a provision in which “the race, not the person, dictates the category.” Palmore v. Sidoti, 466 U.S. 429, 432 (1984) (describing racial classifications).
Unlike the program in Bakke, in which disadvantaged nonminority applicants could not participate, 438 U.S. at 281 n.14, section 637(a)(5)‘s plain terms permit individuals of any race to be considered “socially disadvantaged.” Contrary to our dissenting colleague‘s contention, Dissent at 75, 76-77, 78-79, 80-82 we do not believe such inclusiveness alone renders the statute race-neutral; it is necessary but not sufficient. Our key point is that the statute is easily read not to require any group-based racial or ethnic classification. The statute defines socially disadvantaged individuals as “those [individuals] who have been subjected to racial or ethnic prejudice or cultural bias,” not, as the dissent suggests, those individuals who are members of groups that have been subjected to prejudice or bias. The statute references groups, but it does so not as “a floor for participation,” Dissent at 77, but to identify an important kind of social disadvantage Congress had in mind: individ-
Of course, the SBA‘s implementation of section 637(a)(5)‘s definition may well be based on a racial classification if the regulations carry it out in a manner that, like the program in Bakke, gives preference based on race instead of individual experience. But as we have explained, Rothe has expressly disclaimed any challenge to the SBA‘s implementation of section 637(a)(5) or to any other portions of the Small Business Act. As a result, the only question before us is whether the statute itself classifies based on race. Section 637(a)(5) makes no such classification.
B.
Rothe alleges that the second component of the putative “racial classification of section 8(a)” is the “statutory goal” found at
For starters, we take issue with Rothe‘s characterization of section 644(g)(1)‘s goal as part of the 8(a) program. It is not. While contracts let through the 8(a) program may help the government as a whole to meet section 644(g)‘s objectives, section 644(g)‘s goal is not itself a part of the 8(a) program.
C.
Rothe points to a third component of the statute that it argues creates a “presumption that all individuals who are members of certain racial groups are socially disadvantaged.” 1 App. 72 (Compl. ¶ 22). According to Rothe, the racial presumption can be found at
Section 631(f), which falls under the heading “Declaration of policy,” is entitled “Findings; purpose.”
We disagree. Section 631(f)(1) is located in the findings section of the statute, not in the operative provision that sets forth the program‘s terms and the criteria for participation. Section 637(a)(5) is where Congress defined the program‘s terms. The statutory findings, by contrast, are just that—findings about the social realities that Congress believed supported providing temporary business-development training and contracting opportunity to small disadvantaged firms. Preceded by the statement “Congress finds,”
As explained above, section 637(a)(5) does not classify on the basis of ethnicity or race. Findings, like a preamble, may contribute to “a general understanding of a statute,” but, unlike the provisions that confer and define agency powers, they “are not an operative part of the statute.” Ass‘n of Am. R.Rs. v. Costle, 562 F.2d 1310, 1316 (D.C. Cir. 1977). The EPA in Costle could not rely on the statutory preamble‘s mention of “major noise sources” to limit the agency to regulating only those sources that were major in the face of operative statutory language imposing an obligation to regulate noise more generally. Id. The congressional findings here referring to specified racial and ethnic “groups that have suffered the effects of discriminatory practices” are just as inoperative for the purpose Rothe ascribes to them as was the preamble in Costle.
There are many reasons Congress might have identified certain racial groups when announcing the policy behind the 8(a) program. Congress might have wanted to offer paradigmatic examples of the problem or to send a signal of responsiveness to Americans of minority backgrounds, many of whom felt they lacked a fair shot at the American dream. But our concern in this case is not why Congress identified minority groups in section 631(f)(1), but whether,
The SBA‘s first regulation implementing the statutory definition of social disadvantage lends support to that conclusion. See
D.
The dissent points to a fourth component of the statute that it believes enacts a racial presumption subject to strict scrutiny—
All determinations made pursuant to [15 U.S.C. § 637(a)(5), which defines socially disadvantaged individuals,] with respect to whether a group has been subjected to prejudice or bias shall be made by the Administrator after consultation with the Associate Administrator for Minority Small Business and Capital Ownership Development.
According to the dissent, that provision makes membership in a particular racial or ethnic group a proxy for social disadvantage and directs the SBA to identify certain racial groups whose members will be presumed to be socially disadvantaged. Section 637(a)(8), the dissent contends, works together with section 637(a)(5)—the section defining socially disadvantaged individuals—to operationalize Congress‘s findings in section 631(f)(1). Together, our colleague contends, those components make clear that Congress created a racial presumption. See Dissent at 75-77, 78-79.
For several reasons, however, we do not read section 637(a)(8)‘s reference to groups, whether alone or together with the other parts of the statute, as creating a racial presumption triggering strict scrutiny.
Most importantly, the text of section 637(a)(8) does not create a racial presumption. It states that “[a]ll determinations made pursuant to [section 637(a)(5), which defines socially disadvantaged individuals,] with respect to whether a group has been subjected to prejudice or bias shall be made” by the SBA Administrator after consultation with the SBA official responsible for minority small business development. To be sure, that clause contemplates that the SBA will identify group-salient traits and accompanying forms of bias that it may consider when evaluating claims of social disadvantage. But we see nothing problematic about that. The definition of socially disadvantaged individuals makes reference to groups; it states that individuals who have been subject to bias because of their group-based characteristics may
As we have explained, section 637(a)(8)‘s definition of social disadvantage does not amount to a racial classification, for it ultimately turns on a business owner‘s experience of discrimination. Section 637(a)(8) shows that Congress was concerned with individuals’ experiences of disadvantage due to certain forms of cultural, ethnic, and racial prejudice. But it does not instruct the agency to limit the field to certain racial groups, or to racial groups in general, nor does it tell the agency to presume that anyone who is a member of any particular group is, by that membership alone, socially disadvantaged.
As we read the statute, it neither contains any racial classification nor mandates the SBA to employ one. Even if the statute could be read to permit the agency to use a racial presumption, the canon of constitutional avoidance directs that we not construe the statute in a manner that renders it vulnerable to constitutional challenge on that ground. See Pub. Citizen v. U.S. Dep‘t of Justice, 491 U.S. 440, 466 (1989) (“[W]here an otherwise acceptable construction of a statute would raise serious constitutional problems, the Court will construe the statute to avoid such problems unless such construction is plainly contrary to the intent of Congress.” (internal quotation marks omitted)).
The dissent believes there is only one way to understand the statute—that it imposes a racial classification—and thus does not address our responsibility to avoid constitutional problems where a reasonable statutory reading so permits. But to reach the dissent‘s view requires leaps. First, one would have to read section 637(a)(5), either on its own or in tandem with section 637(a)(8), not just to authorize but to require the agency to make group-based determinations of social disadvantage. See Dissent at 77-78. Second, one would have to believe that the language in the findings requires the agency to label all members of those particular groups disadvantaged by virtue of that membership alone. See id. at 76-77. We have identified reasons at each step to believe the opposite. And, “when deciding which of two plausible statutory constructions to adopt, a court must consider the necessary consequences of its choice. If one of them would raise a multitude of constitutional problems, the other should prevail ....” Clark v. Martinez, 543 U.S. 371, 380-81 (2005). We decline to read the statute to create a constitutional difficulty. See INS v. St. Cyr, 533 U.S. 289, 299-300 (2001).
Several contextual considerations confirm that our reading of the text is the better reading:
First, Congress affirmatively chose to jettison an express racial presumption that appeared in an earlier version of the bill. See INS v. Cardoza-Fonseca, 480 U.S. 421, 442-43 (1987) (“Few principles of statutory construction are more compelling than the proposition that Congress does not intend sub silentio to enact statutory language that it has earlier discarded in favor of other language.” (citation omitted)). The House version offered two routes to eligibility in the 8(a) program. Individuals who were “Black Americans and Hispanic Americans” were presumed to be socially and economically disadvantaged. H.R. Rep. No. 95-949, at 16 (1978). All other individuals had to demonstrate that they faced
Second, why would Congress announce a racial presumption in the roundabout way Rothe envisions when it straightforwardly enacted a racial presumption elsewhere in the Small Business Act? See Russello v. United States, 464 U.S. 16, 23 (1983) (When “Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” (citation omitted)). In section 8(d) of the Small Business Act—a provision not at issue in this case—Congress directed agencies to include in their prime contracts a clause for subcontracts that states, in part, that the “contractor shall presume that socially and economically disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and other minorities, and any other individual found to be disadvantaged by the Administration pursuant to section 8(a) of the Small Business Act.”
Other contracting programs likewise confirm that, when Congress wants to enact expressly race-based preferences, it knows how to do so. Take, for example, the
It is worth noting that Congress enacted section 8(a) in 1978, a generation before the Supreme Court held that even “benign” congressional classification by race triggers strict judicial scrutiny. It was not until 1995 that the Supreme Court held that expressly race-based preferences in federal contracting are subject to strict scrutiny. See Adarand, 515 U.S. at 227. Congress‘s use of the facially race-neutral social-disadvantage criteria in section 8(a) therefore cannot be cast as an effort to do covertly what Congress believed it could not do overtly. Rather, it is best understood as a considered effort to aid struggling entrepreneurs of all races who faced bias-induced barriers. In that respect, section 8(a) differs from expressly race-based statutes courts have subjected to strict scrutiny. See, e.g., Croson, 488 U.S. at 478 (local contracting set-aside program identified eligible businesses as those owned by “minority group members,” specifically, “[c]itizens of the United States who are Blacks, Spanish-speaking, Orientals, Indians, Eskimos, or Aleuts“); Rothe Dev. Corp. v. Dep‘t of Def., 545 F.3d 1023, 1027, 1050 (Fed. Cir. 2008) (program incorporating section 8(d)‘s express racial presumption subject to strict scrutiny); O‘Donnell Constr. Co. v. District of Columbia, 963 F.2d 420, 422 (D.C. Cir. 1992) (preliminarily enjoining program allocating 35% of D.C. contracts to “minority business enterprises,” where “minority” meant “Black Americans, Native Americans, Asian Americans, Pacific Islander Americans, and Hispanic Americans, who by virtue of being members of the foregoing groups, are economically and socially disadvantaged because of historical discrimination practiced against these groups by institutions within the United States of America“).
Third, both the Supreme Court and this court‘s discussions of the 8(a) program have identified the regulations—not the statute—as the source of its racial presumption. In Adarand, the Supreme Court noted that section 8(d) of the Small Business Act contains a race-based presumption. 515 U.S. at 207. But in describing the 8(a) program, the Adarand Court explained that the agency (not Congress) presumes that certain racial groups are socially disadvantaged and cited an SBA regulation (not the statute): “The SBA presumes that black, Hispanic, Asian Pacific, Subcontinent Asian, and Native Americans ... are ‘socially disadvantaged.‘” Id. (quoting
We said something similar in DynaLantic, 115 F.3d 1012. The question there was whether a business that was neither socially nor economically disadvantaged had standing to challenge the constitutionality of the 8(a) program, including the regulatory presumption of social disadvantage. Id. at 1013. We explained that “SBA regulations presume that, ‘[i]n the absence of evidence to the contrary,’ members of certain racial or ethnic groups—including Black, Hispanic, Native, Asian Pacific, and Subcontinent Asian Americans—are socially disadvantaged.” Id. (emphasis added) (quoting
Fourth, as noted above, in its first implementation of the statutory definition of social disadvantage on the heels of its enactment in 1978, the agency required case-by-case determinations of social disadvantage. The agency used no race-based presumption, but specifically required evaluation of the claimed social disadvantage of any individual business owner seeking to qualify for the section 8(a) program, whether or not that person was a member of a racial or ethnic minority group deemed to be socially disadvantaged. The dissent suggests that the statute‘s constitutional defect lies in its putative failure to “provide that ‘persons’ are socially disadvantaged because of their individual experiences of discrimination.” Dissent at 76. But that is precisely what the statute does provide. The agency‘s initial implementing regulation illustrates how the statute might reasonably be enforced in the race-neutral manner that the dissent believes the statute forecloses. Id.
Finally, the reality that Congress enacted section 8(a) with a consciousness of racial discrimination in particular as a source of the kind of disadvantages it sought to counteract does not expose the statute to strict scrutiny. Congress intended section 8(a) to secure “the opportunity for full participation in our free enterprise system [for] socially and economically disadvantaged persons” and to “improve the functioning of our national economy.”
Policymakers may act with an awareness of race—unaccompanied by a facial racial classification or a discriminatory purpose—without thereby subjecting the resultant policies to the rigors of strict constitutional scrutiny. The Supreme Court has specified that “race may be considered in certain circumstances and in a proper fashion .... [M]ere awareness of race in attempting to solve the problems facing inner cities does not doom that endeavor [to foster diversity and combat racial isolation] at the outset.” Tex. Dep‘t of Hous. & Cmty. Affairs v. Inclusive Cmties. Project, Inc., 135 S.Ct. 2507, 2525 (2015); see Shaw v. Reno, 509 U.S. 630, 646 (1993) (recognizing that certain forms of “race consciousness do[] not lead inevitably to impermissible race discrimination“); Parents Involved, 551 U.S. at 789 (Kennedy, J., concurring) (noting several ways of pursuing diversity in education, such as strategic site selection and targeted recruitment, unlikely to trigger strict scrutiny because those “mechanisms are race-conscious but do not lead to different treatment based on a classification that tells each student he or she is to be defined by race“).
As Justice Scalia wrote in his concurring opinion in City of Richmond v. J.A. Croson Company,
A State can, of course, act “to undo the effects of past discrimination” in many permissible ways that do not involve classification by race. In the particular field of state contracting, for example, it may adopt a preference for small businesses, or even for new businesses—which would make it easier for those previously excluded by discrimination to enter the field. Such programs may well have racially disproportionate impact, but they are not based on race.
488 U.S. 469, 526 (1989). The Supreme Court‘s ensuing affirmative action decisions confirm that point by countenancing, and characterizing as “race neutral,” alternatives designed to advance the same ends as affirmative action programs but that do not rely on racial criteria. See, e.g., Fisher, 133 S.Ct. at 2420 (“[S]trict scrutiny imposes on the university the ultimate burden of demonstrating, before turning to racial classifications, that available, workable race-neutral alternatives do not suffice.“). Congress, in crafting section 8(a), was attentive to form as it sought to pursue plainly permissible ends. The lawmakers chose to advance equality of business opportunity and respond to discrimination by conditioning participation in the program on an individual‘s experience of racial, ethnic, or cultural bias, rather than racial identity. We will not treat as constitutionally suspect an effort that avoids the hazards equal protection doctrine guards against.
E.
Because the statute does not trigger strict scrutiny, we need not and do not decide whether the district court correctly concluded that it is narrowly tailored to meet a compelling interest. Rothe, 107 F.Supp.3d at 206-11.4 We instead consider
Counteracting discrimination is a legitimate interest; indeed, in certain circumstances, it qualifies as compelling. See Shaw v. Hunt, 517 U.S. 899, 909 (1996); Croson, 488 U.S. at 492 (plurality op.) (“It is beyond dispute that any public entity, state or federal, has a compelling interest in assuring that public dollars, drawn from the tax contributions of all citizens, do not serve to finance the evil of private prejudice.“). And the statutory scheme is rationally related to that end. Congress conditioned participation in the 8(a) program on social disadvantage, defined as an individual‘s experience of discrimination or bias. See
II.
Rothe also appeals the district court‘s decisions, pursuant to Federal Rule of Evidence 702, on the admissibility of the reports and deposition testimony of the government‘s expert witnesses and the inadmissibility of the reports and deposition testimony of Rothe‘s experts. In the context of the parties’ cross-motions for summary judgment, each side proffered their expert evidence as probative of whether the government has a compelling interest that would justify use of race in determining social disadvantage under the 8(a) program. We decline to review the district court‘s admissibility determinations, for we would affirm district court‘s grant of summary judgment to the defendants even if the district court abused its discretion in making those determinations. The expert witness testimony is not necessary to, nor in conflict with, our conclusion that section 8(a) is subject to and survives rational-basis review.
III.
Finally, Rothe contends that section 8(a) is an unconstitutional delega-
Rothe‘s first argument is premised on the idea that Congress has created a racial classification. As we have explained, Congress has done no such thing. Rothe‘s alternative argument also fails. Congress‘s delegation of power to the SBA to enter into contracts with other federal agencies and subcontract with “socially and economically disadvantaged small business concerns,”
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For the foregoing reasons, we affirm the district court‘s grant of summary judgment to the government defendants.
So ordered.
Karen Lecraft Henderson
Circuit Judge, concurring in part and dissenting in part
Judges must beware of hard constructions and strained inferences; for there is no worse torture than the torture of the laws.
Sir Francis Bacon Essays, “Of Judicature,” LVI
My colleagues hold that the provisions of the Small Business Act (Act) at issue in this case are “facially race-neutral.” See Maj. Op. at 61. I disagree. And I am in good company. The appellant believes the statute contains a racial classification.1 The appellees believe the statute contains a racial classification.2 The district court held that the statute contains a racial classification.3 The Small Business Administration‘s (SBA) implementation follows from its view that the statute contains a racial clas-
But we need not take the chorus‘s word for it. Their voices simply confirm what the language of the Act makes plain enough. The majority‘s analysis, in contrast, is fundamentally flawed, assuming that a statute that does not classify exclusively on the basis of race must necessarily be “facially race-neutral.” Maj. Op. at 61-62. The majority‘s appeals to statutory context, legislative history and relevant case law likewise miss the mark. On this issue, I respectfully part company with my colleagues.6
I. Section 8(a) of the Small Business Act Contains a Racial Classification
“Most laws classify,” Pers. Adm‘r of Mass. v. Feeney, 442 U.S. 256, 271 (1979), and the Small Business Act is no exception. Indeed, the section 8(a) program at issue classifies in all sorts of ways; as an example, for certain government contracts, it offers a preference to businesses that are “small” if owned by “socially disadvantaged” individuals who are also “economically disadvantaged.” See
The first of these provisions is section 8(a)(8). It provides that “[a]ll determinations made pursuant to paragraph [8(a)(5)] with respect to whether a group has been subjected to prejudice or bias shall be made by the Administrator after consultation with the Associate Administrator for Minority Small Business and Capital Ownership Development.”
Why that is so becomes abundantly clear when sections 8(a)(5) and 8(a)(8) are considered in light of section 2(f) of the Act. Section 2(f) is worth quoting at length:
[W]ith respect to the [SBA‘s] business development programs the Congress finds—
(A) that the opportunity for full participation in our free enterprise system by socially and economically disadvantaged persons is essential if we are to obtain social and economic equality for such persons and improve the functioning of our national economy;
(B) that many such persons are socially disadvantaged because of their identification as members of certain groups that have suffered the effects of discriminatory practices or similar invidious circumstances over which they have no control; [and]
(C) that such groups include, but are not limited to, Black Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, Native Hawaiian Organizations, and other minorities ....
Like section 8(a)(8), section 2(f)(1)(B) connects social disadvantage to membership in certain “groups.”
Section 2(f) also designates “Black Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, Native Hawaiian Organiza-
In my view, then, the Congress has set a floor for participation in the section 8(a) program: members of the statutorily identified groups are deemed to be “socially disadvantaged.” See id. Under section 8(a)(8), the SBA may, over time, determine that “a group has been subjected to prejudice or bias” and add it to the running list. Id. § 637(a)(8). This is why section 8(a)(8) directs the SBA to focus on groups (not individuals) that have experienced discrimination in making its social-disadvantage decisions, id.—the Congress itself was focused on the discrimination experienced by groups in making its own findings about social disadvantage, see id. § 631(f)(1)(B)-(C). Nothing in the statute prohibits an individual from making a showing that his membership in a group not listed has made him “subject[] to racial or ethnic prejudice or cultural bias.”7 Id. § 637(a)(5). But “Black Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, [and] Native Hawaiian Organizations” are statutorily deemed to be “socially disadvantaged” under the Act because the Congress itself has declared that “members of [these] groups . . . have suffered the effects of discriminatory practices or similar invidious circumstances over which they have no control.” Id. § 631(f)(1)(B)-(C).
An example may help to illustrate the Act‘s operation. The SBA‘s implementing regulations, tracking the Act, presume that members of certain racial groups are socially disadvantaged but individuals who are “not members of [the] designated groups . . . must establish individual social disadvantage by a preponderance of the evidence.” See
I am far from the first to read the Act this way. We suggested this relationship between the statute and the race-based regulatory presumption—that the race-based statute demands race-based regulations—in DynaLantic Corp. v. Department of Defense, 115 F.3d 1012, 1017 n.3 (D.C. Cir. 1997). Although we did not decide in DynaLantic whether the statute contains a racial classification, we noted that “[t]he statute itself actually might require race-conscious regulations.” Id. (emphasis in original). We then cited
Here, the appellees’ reading of the relationship between the statute and regulations echoes our suggested reading in DynaLantic, 115 F.3d at 1017 n.3. They did not raise any no-racial-classification-in-the-statute defense in their briefs and, when asked at oral argument about a potential distinction between the regulation‘s racial presumption and the alleged lack of one in the Act, the appellees’ counsel held fast to her position that the race-based SBA regulations flow directly from the statute. See Oral Arg. Tr. 25:6–13 (“[W]hat we‘re arguing is that SBA is just carrying out what is in the statute, that Congress provided the standards in the statute, and SBA in the regulations are [sic] just applying what‘s in the statute, the standards in the statute.“); see id. at 26:3–7 (“[T]he SBA is just implementing what Congress has in the statute, so you have to see what Congress knew, and the SBA is just following what Congress has said.“).
The moral of the story is that the congressional findings set forth in section 2(f) of the Act constrain the SBA‘s discretion in making “socially disadvantaged” determinations under section 8(a)(5), see
In my view, section 8(a) contains a paradigmatic racial classification. The Congress has “distribute[d] . . . [a] benefit” to members of statutorily-designated racial groups because of their membership therein, see Parents Involved, 551 U.S. at 720,
II. The Majority Misreads Section 8(a)
I believe the majority‘s race-neutral reading is flawed in at least three major respects. First, it fails to give in pari materia reading to sections 8(a)(5), 8(a)(8) and 2(f). See Maj. Op. at 65-67. Second, it mistakenly assumes that, because a member of a non-minority race (i.e., a white) can participate in the section 8(a) program,8 the statute must be race-neutral. See Maj. Op. at 63-65. Third, the legislative history, statutory context and relevant case law it cites do not support its interpretation. See Maj. Op. at 68-72. I address each in turn.
A. Section 2(f) Should Be Given Effect
The majority discounts the significance of section 2(f) of the Act by emphasizing that it “is located in the findings section of the statute, not in the operative provision that sets forth the program‘s terms and the criteria for participation.” Maj. Op. at 66. There are several problems with this approach.
First, our precedent makes plain that, “although the language in the preamble of a statute is ‘not an operative part of the statute,’ it may aid in achieving a ‘general understanding’ of the statute.” Wyo. Out-door Council v. U.S. Forest Serv., 165 F.3d 43, 53 (D.C. Cir. 1999) (quoting Ass‘n of Am. R.Rs. v. Costle, 562 F.2d 1310, 1316 (D.C. Cir. 1977)). Indeed, we have found an agency‘s decision arbitrary and capricious when it construed a statute without addressing “important language” in congressional findings. See Ass‘n of Am. R.Rs. v. Surface Transp. Bd., 237 F.3d 676, 680-81 (D.C. Cir. 2001). Yet the majority brushes off section 2(f). See Maj. Op. at 66-67. I believe its approach conflicts with our above-cited case law.
Second, even those cases that discount reliance on congressional findings do so only if a party uses the findings to manufacture ambiguity in an otherwise unambiguous statute. See, e.g., Costle, 562 F.2d at 1316 (“Where the enacting or operative parts of a statute are unambiguous, the meaning of the statute cannot be controlled by language in the preamble.” (emphasis added)); id. (“We find the reference[s] [in the operative portion of the statute] to be unambiguous and, therefore, do not look to the preamble for guidance as to the legislative intent.“); accord Nat‘l Wildlife Fed‘n v. EPA, 286 F.3d 554, 570 (D.C. Cir. 2002); see also Jurgensen v. Fairfax Cnty., 745 F.2d 868, 885 (4th Cir. 1984) (no need to look to findings if relevant statute is “clear and unambiguous“). Despite the majority‘s protestations to the contrary, see Maj. Op. at 66-67, the language of section 8(a) is not unambiguous. See Costle, 562 F.2d at 1316. Moreover, reading sections 8(a)(5) and 8(a)(8) together with section 2(f) to create a statutory presumption that the designated groups are socially disadvantaged does not conflict with either “operative” provision. Under this reading, all three provisions say the same thing: membership in a minority group that, according to the Congress, has experienced prejudice or bias produces social disadvantage. The same is not true of the majority‘s reading, which ignores section 2(f) and fails to reconcile its hyper-individualized reading of section 8(a)(5) with the Congress‘s group-focused directive in section 8(a)(8). See Maj. Op. at 65-68.
Third, to call the congressional findings here a preamble is “somewhat of a misnomer.” Ivy Sports Med., LLC v. Burwell, 767 F.3d 81, 93 (D.C. Cir. 2014) (Pillard, J., dissenting). Traditionally, a “preamble” to a statute is a “prefatory explanation or statement” that “customarily precedes the enacting clause9 in the text of a bill, and consequently is frequently understood not to be part of the law.” NORMAN SINGER & SHAMBIE SINGER, 1A SUTHERLAND STATUTES & STATUTORY CONSTRUCTION § 20:3 (7th ed. 2008). It was just such a “preamble” the Supreme Court discussed in Yazoo & M.V.R. Co. v. Thomas, 132 U.S. 174 (1889), a case in which the Mississippi legislature had included a lengthy “whereas” statement before the enacting clause in legislation that chartered a railroad. See Act of February 17, 1882, ch. 541, 1882 Miss. Laws 838, 838. It was in that context—where “the preamble [was] no part of the act“—that the Court said it could “not enlarge or confer powers, nor control the words of the act, unless they are doubtful or ambiguous.” Yazoo, 132 U.S. at 188. In Association of American Railroads v. Costle, we applied the same rule to congres
In my view, then, we should read Costle with a grain of salt; at the very least, we should be cautious before applying the Supreme Court‘s admonition about the minimal effect of an unenacted preamble to provisions the Congress saw fit to enact into law. I read Costle to mean that enacted findings do not “control[]” if they conflict with unambiguous, so-called “operative” provisions of a particular statute, see Costle, 562 F.2d at 1316, but Costle does not hold that enacted findings are only an interpretative last resort. Instead, we must attempt to read the entire Act—including duly enacted findings—as one “harmonious whole.” See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132-33 (2000) (“It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme [and] [a] court must therefore . . . fit, if possible, all parts into an harmonious whole . . . .” (internal quotation marks omitted)).11
B. Racial Classification Is Not Affected By “Other” Classifications
My colleagues also think the statute is race-neutral because “section [8](a)(5)‘s plain terms permit individuals of any race to be considered ‘socially disadvantaged.‘” See Maj. Op. at 64. Not so. Although a white business owner can qualify for the program, he nonetheless remains at a disadvantage in establishing his eligibility relative to a member of a racial minority group. Assume an admissions policy that sets quotas for “disadvantaged” students and also presumes that both black students and students whose socioeconomic level are below a certain threshold regardless of race are “disadvantaged.” The policy plainly classifies on the basis of race; simply because it also classifies on a different, non-racial basis does not mean the race-based portions somehow become race-neutral. The same is true here. By designating members of certain racial minorities as socially disadvantaged, and using social disadvantage to separate out those who are presumed eligible to participate in the 8(a) program from those who must prove their eligibility, the Act classifies on the basis of race. See
For this reason, my colleagues’ attempt to distinguish the relevant provisions of the Act from the admissions policy at issue
The only real difference between the program in Bakke and the 8(a) program is that, although whites could apply for admission through the “special admissions program” for “disadvantaged” students in Bakke, see 438 U.S. at 274-76 & n.5, “[w]hite disadvantaged students were never considered” to be disadvantaged, id. at 281 n.14. In contrast, a white business owner may be able to establish individual social disadvantage under the section 8(a) program, at least pursuant to the terms of the Act. See
The Supreme Court‘s decision in Grutter v. Bollinger, 539 U.S. 306 (2003), drives home the point. There, the University of Michigan Law School‘s admission policy “aspire[d] to achieve that diversity which has the potential to enrich everyone‘s education and thus make a law school class stronger than the sum of its parts.” Id. at 315 (internal quotation marks omitted). The policy did not “define diversity solely in terms of racial and ethnic status“; rather, it “recognize[d] many possible bases for diversity admissions.” Id. at 316 (internal quotation marks omitted). Nevertheless, because the law school specifically considered race as one measure of diversity, id. thereby giving minority applicants an advantage in the admissions process, the Court subjected the policy to strict scrutiny, see id. at 326-27. Similarly, in the section 8(a) context, although social disadvantage can result without regard to race, race remains—by statute—a necessary part of the socially disadvantaged inquiry. See
C. Section 8(a)‘s Legislative History, Context and Case Law Do Not Support “No Racial Classification” Reading
Finally, I believe the majority‘s reading of the legislative history, statutory context and relevant case law does not support its conclusion that the relevant provisions of the Act are race neutral.
1. Legislative History
The majority claims that the Congress‘s decision to strike a more explicit race-based presumption means that the statute as finally written lacks a racial classification. See Maj. Op. at 68-69. It makes hay of the Conference Committee‘s decision to endorse what appears to be a compromise between a rebuttable presumption in favor of Black Americans and Hispanic Americans originally adopted by the House,12 see H.R. Rep. No. 95-949, at 16 (1978), and the provision the Senate adopted, directing the SBA to determine social disadvantage based on “whether the owner or owners of the applicant have been deprived of the opportunity to develop and maintain a competitive position in the economy due to cultural bias, general economic deprivation or other similar causes,” S. Rep. No. 95-1070, at 37 (1978).
But the legislative history cuts both ways. In describing the amended language, the Conference Report makes plain that the trigger point is membership in a group that has experienced discrimination (and not exclusively individual discrimination): “The amendment stat[es] that socially disadvantaged persons are those who have been subject to racial or ethnic prejudice or cultural bias (regardless of their individual qualities or personal attributes) because they have been identified as a member of certain groups that have generally suffered from prejudice or bias.” H.R. Rep. No. 95-1714, at 21-22 (Conf. Rep.) (emphases added). “In other words,” the Report goes on, “because of present and past discrimination many minorities have suffered social disadvantagement.” Id. at 22 (emphasis added).
Moreover, reading sections 8(a)(5), 8(a)(8) and 2(f) to provide a race-based classification does not require concluding that the Congress must have enacted sub silentio what it had previously rejected, see Maj. Op. at 68-69. Under the original House provision, only Black Americans and Hispanic Americans were presumed to be socially disadvantaged; an individual who was not a member of one of these two groups had to show “impediments to establishing, maintaining, or expanding a small business concern which are not generally common in kind or degree to all small business persons and which result from both social and economic causes over which such individual has no control.” H.R. Rep. No. 95-949, at 24-25. The definition of social disadvantage ultimately enacted, however, is different—it focuses on “prejudice” or “bias” experienced because of group membership,
In addition, although the Act eliminated the House‘s explicit presumption, it included the House‘s findings which formed the basis for the presumption in the first place—and rejected the Senate‘s—which did not list any racial groups. See H.R. Rep. No. 95-1714, at 21 (Conf. Rep.); see also S. Rep. No. 95-1070, at 36-37. Specifically, the Conference Committee noted that the House findings “establish the premise that many individuals are socially and economically disadvantaged as a result of being identified as members of certain groups, including but not limited to, black Americans and Hispanic Americans.” H.R. Rep. No. 95-1714, at 20 (Conf. Rep.). The Committee “adopt[ed] the House findings” and expanded the list to include Native Americans. Id. at 21. It also described the import of the House findings: “[I]n many, but not all, cases[,] status as a minority can be directly and unequivocally correlated with social disadvantagement and this condition exists regardless of the individual, personal qual
One other piece of legislative history noticeably absent from the majority‘s analysis illustrates that the Congress‘s own views on how the statute operates are consistent with my own. When the Congress originally enacted section 2(f) of the Act in 1978, it recognized only “Black Americans, Hispanic Americans, [and] Native Americans” (along with the open-ended “other minorities“) as groups that were socially disadvantaged. See Act of Oct. 24, 1978, Pub. L. 95-507, § 201, 92 Stat. 1757, 1760. Several months later, the SBA made an administrative finding that “Asian Pacific Americans” also comprised “a minority group which has members who are socially disadvantaged because of their identification as members of this group, for the purposes of eligibility for SBA‘s section 8(a) program.” Designation of Eligibility Asian Pacific Americans Under Section 8(a) and 8(d) of the Small Business Act, 44 Fed. Reg. 42,832, 42,832 (July 20, 1979). At that time, the SBA had not yet promulgated the regulatory presumption designating certain groups as presumptively disadvantaged; rather, it listed the statutorily-designated racial groups but it made disadvantage decisions on a “case-by-case” basis. See The Small Business and Capital Ownership Development Program, 44 Fed. Reg. 30,672, 30,674 (May 29, 1979). The administrative finding meant only that Asian Pacific Americans were added to the list of groups that had experienced discrimination. See id.
In 1980, however, the Congress added “Asian Pacific Americans” to the list of socially disadvantaged groups set out in section 2(f) of the Act. See Act of July 2, 1980, Pub. L. No. 96-302, § 118, 94 Stat. 833, 840. The legislative history of the 1980 Amendment is telling. A May 1980 House Small Business Committee Report states: “Present law specifies that, subject to certain specified constraints, ‘socially disadvantaged’ persons include ‘black Americans, Hispanic Americans, native Americans and other minorities.’ Therefore, these named groups are afforded a presumption of ‘social disadvantage.‘” H.R. Rep. No. 96-998, at 2 (1980) (emphases added). To repeat, at this point, the SBA had not yet promulgated any regulatory presumption of social disadvantage. See 44 Fed. Reg. at 30,674. The House Report goes on to state that the “bill would provide that Asian-Pacific Americans be afforded the same presumption of ‘social disadvantage’ as extended under present law to ‘black Americans‘, ‘Hispanic Americans‘, and ‘native Americans.‘” H.R. Rep. No. 96-998, at 3 (emphases added). The Conference Report on the final legislation similarly states, “Present law specifies that, subject to certain specified constraints, ‘socially disadvantaged’ persons include ‘Black Americans, Hispanic Americans, Native Americans and other minorities.‘” H.R. Rep. No. 96-1087, at 35 (1980) (Conf. Rep.); accord S. Rep. No. 96-703, at 10 (1980) (Senate Select Committee on Small Business report on Senate bill with virtually identical provision).13
It was on December 1, 1980—only after the legislation adding Asian Pacific Americans was enacted—that the SBA first updated its regulations—by way of an interim rule—to provide for a presumption in favor of the statutorily designated racial groups. See Definition of Social Disadvantage, 45 Fed. Reg. at 79,413–14. In doing so, it noted that “[s]ince Congress has found that Black Americans, Hispanic Americans, Native Americans, and, with the enactment of Pub. L. 96-302 on July 2, 1980, Asian Pacific Americans, are socially disadvantaged, members of those groups need not, as a general rule, present an individualized case of social disadvantage.” Id. at 79,414. The history of the relevant legislation—as well as the regulations that follow it—conforms exactly to my reading. The Congress enacted a statutory presumption of social disadvantage for members of certain racial groups, acknowledged that presumption in adding Asian Pacific Americans to its list of groups and the SBA then followed suit in implementing that presumption through race-based regulations.
2. Statutory Context
The majority also claims that the Congress‘s use of a more “straightforward[]” racial presumption in section 8(d)(3) belies my reading of section 8(a). See Maj. Op. at 69-70. Because the Congress knows how to spell out an explicit presumption as it did in section 8(d)(3)—a more explicit presumption in section 8(a) is also required. See id. I disagree. Whereas section 8(a) is a statutory directive to the SBA that sets forth an overall framework for eligibility in a government contract-preference program, see
Indeed, the majority‘s reading suggests the Congress sought to achieve different ends with these two provisions. The majority believes that, via section 8(a), the Congress wants the SBA to award prime contracts to small businesses based exclusively on the business owner‘s showing that he has personally experienced “prejudice” or “bias.” See Maj. Op. at 64; see also
3. Case Law
Finally, the majority asserts that “the Supreme Court and this court‘s discussions of the 8(a) program have identified the regulations—not the statute—as the source of its racial presumption.” Maj. Op. at 70. The assertion is only partly true. Both the Supreme Court and this court have, like my colleagues, noted that the SBA‘s implementing regulations are race-based. See Adarand, 515 U.S. at 207; DynaLantic, 115 F.3d at 1013. But the Supreme Court has never held that the Act does not contain a racial classification, nor have we.
The statements the majority plucks from Adarand do not support any negative inference. The majority claims that “[i]n describing the 8(a) program, the Adarand Court explained that the agency (not Congress) presumes that certain racial groups are socially disadvantaged and cited an SBA regulation (not the statute)” for support; thus, in my colleagues’ view, the Court must have meant that the Act does not classify on the basis of race. See Maj. Op. at 70-71. The smoking gun, it says, is the Court‘s use of the words “[t]he SBA presumes” in describing the relevant racial classification. See id. at 70-71 (quoting Adarand, 515 U.S. at 207). But other statements the Court makes in Adarand show that it was not trying to distinguish between statute and regulation. For example, after explaining that “[t]he SBA presumes” social disadvantage for certain racial groups under the section 8(a) program, the Court declared that under the “8(d) subcontracting program,” “the SBA presumes social disadvantage based on membership in certain minority groups” and the Court again cites to SBA regulations. Adarand, 515 U.S. at 207,
The same is true of DynaLantic. Although we plainly acknowledged that the regulations classify on the basis of race, see 115 F.3d at 1013, 1017, we did not hold that the statute does not. To the contrary, we were unwilling then to reach the conclusion that my colleagues now press, i.e., that the statute is race-neutral. See id. at 1017. We labeled such an interpretation “rather dubious,” id. and noted that the statute “might require race-conscious regulations” based on the congressional findings in section 2(f). Id. at 1017 n.3 (emphasis in original). Indeed, the only portion of DynaLantic that supports my colleagues’ reading is the dissent. See id. at 1019 (Edwards, J., dissenting) (“The legislation that creates the 8(a) set-aside does not define social and economic disadvantage in terms of race.“). But the dissent was a dissent for a reason—the majority was unconvinced by its reading of the statute.
In sum, neither of the cases my colleagues put forward bolsters their view of the statute; Adarand offers no help and the majority‘s conclusion in DynaLantic supports my reading of the statute, not theirs.
* * *
Although “[i]t is emphatically the province and duty of the judicial department to say what the law is,” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L.Ed. 60 (1803), we should not cast aside the consensus of those charged with drafting and implementing a particular statute without strong reasons for doing so. We are not bound by the parties’ agreement that the statute includes a racial classification. See supra nn.1-2. Nor are we bound by the district court‘s interpretation, see supra n.3, or by the longstanding view of the SBA, see supra n.4. Nor, in this case, are we bound by our DynaLantic language; the determinative jurisdictional issue there did not require deciding whether the Act contains a racial classification. See 115 F.3d at 1017-18. But when such a chorus of voices rises in favor of a particular statutory interpretation, we should be slow to turn a deaf ear. In my view, the statutory language is plain and, for the reasons stated, the majority‘s defense of its alternative reading falls short of the mark. I would hold that the challenged portions of the Small Business Act include a racial classification and would therefore subject them to strict scrutiny.
Accordingly, I respectfully dissent.