The sun appears to have set on an affirmative action lawsuit of significance to minority- and women-owned businesses with the U.S. Supreme Court's refusal late last year to review Concrete Works of Colorado v. The City and County of Denver. The Court declined to disturb a Tenth Circuit Court of Appeals ruling that upheld the constitutionality of a local government minority business enterprise (MBE) program.

The Tenth Circuit Court held that Denver's MBE subcontracting goals were justified to prevent the municipality from becoming a “passive participant” in private discrimination practiced by prime contractors, commercial lenders, suppliers, and other elements of the local marketplace. That appeal followed a 1992 decision by the district court siding with Concrete Works, a white-owned construction company that sued on the basis that Denver's MBE ordinance violated its rights under the Equal Protection Clause. When the Tenth Circuit Court reversed the lower court ruling, Denver's claims were found credible in terms of specific past or present discrimination and evidence supporting the need for remedial action appropriately addressed in its MBE program.

The Tenth Circuit's 99-page ruling provided guidance to local governments for crafting constitutionally defensible preferences for businesses that are experiencing discrimination in the private sector. The City of Denver was not required to demonstrate that it had discriminated directly against MBE firms.

Denver's MBE program was established in 1990 and set annual goals of 16 percent for construction dollars to be spent with MBE subcontractors, and 12 percent to be spent with women business enterprise (WBE) subcontractors. Applying the “strict scrutiny” standard imposed by the Supreme Court in a 1989 decision, the district court sided with Concrete Works and enjoined the City of Denver from enforcing the policy, leading to the appeal.

On appeal, the Tenth Circuit reversed the lower court ruling, in part, because it had impermissibly imposed a “burden of proof” upon the defendant, Denver, to confirm discrimination. Instead, Denver was required to meet two criteria: First, it must identify the past or present discrimination “with some specificity.” Second, it must also demonstrate that a “strong basis in evidence” supports its conclusion that remedial action is necessary. The City of Denver met this burden by sparing no expense in developing its factual predicate and in vigorously defending its MBE program through 11 years of litigation. The end result was an enormous trial record over 10,000 pages long that convinced the Tenth Circuit that Denver had established a compelling interest to remedy the effects of marketplace discrimination, and that its MBE program was narrowly tailored to remedy ongoing effects of that discrimination upon City of Denver contracting.

In building its defense, Denver relied on disparity studies and expert witness testimony. This evidence identified substantial disparities between the availability of MBEs and WBEs and Denver's use of them. The reports also found that minorities in the construction industry were less likely to be self-employed in Denver, and when they were self-employed, made less money than whites when controlling for firm size, age and other relevant factors. Denver's claims of discrimination were therefore founded upon credible, detailed studies of the public contracting industry.

The city's lawyers also presented anecdotal evidence, including testimony from an executive at a white-owned construction firm stating that he received “credible complaints” from minority- and women-owned firms that they were subject to different standards than their majority-owned counterparts. This executive also testified about racially charged graffiti, verbal, physical harassment on construction job sites, and stereotypical attitudes toward minority- or women-owned subcontractors. Trial testimony identified other forms of discrimination that undermined the growth and development of MBE firms. Despite Concrete Works' objections, the Tenth Circuit found that such evidence of general “marketplace” discrimination supported Denver's position that affirmative action was needed.

Franklin M. Lee (fml@shapirosher.com), a partner with Baltimore law firm Shapiro Sher Guinot & Sandler concentrating on the development and legal defense of procurement and public contracting policies. Adapted from a Baltimore Business Journal article.