A federal appeals court has declared unconstitutional a statute that sets a goal that five percent of defense contracting dollars be awarded to small businesses owned by the socially and economically disadvantaged.
The U.S. Court of Appeals for the Federal Circuit ruled Tuesday the statute violates the due process clause of the Fifth Amendment. A three-judge panel, voting unanimously, said Congress did not have a “strong basis in evidence” in determining that a race-conscious measure was necessary for diversity in federal defense contracts.
David Barton of the Gardner Law Group in Texas argued the case in September for San Antonio-based Rothe Development Corp., which provides Internet and telephone support at bases. Barton argued the government lacks evidence to support the statute, which pumped billions of dollars into minority-owned small businesses. “We all know that diversity is not the correct standard in procurement law,” argued Barton, who has represented Rothe Development since the company first filed suit in 1998.
Chief Circuit Judge Paul Michel, who wrote the 47-page opinion, was joined by Circuit Judge H. Robert Mayer, and District Judge Richard Stearns of the U.S. District Court for the District of Massachusetts. The bulk of the argument in September was rooted in analysis of six disparity studies that examined contracts at locations around the country—including New York City and Virginia—between 2002 and 2005.
“You’d have to prove the absence of any discrimination anywhere before you could conclude that the government would no longer be passively participating in financially supporting a corrupt system,” Michel said in court. Justice Department civil division lawyer Karen Stevens defended the studies. “I think in this case they are sufficient because there are large jurisdictions and states, several of them,” Stevens argued.
The appeals court said "without a single identified incident of discrimination by DOD or a recipient of DOD funds, the only evidence by the district court to establish a link between DOD's spending practices and discrimination is the fact that DOD 'is one of the largest buyers of goods and services in the world.'"
The Federal Circuit remanded to the U.S. District Court for the Western District of Texas to determine attorney fees, which Barton estimates to be well above $1 million over the course of 10 years. Barton is pursuing fees under the Equal Access to Justice Act.
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