Rothe Development, Inc. v. United States Department of Defense

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 10, 2016 Decided September 9, 2016
No. 15-5176
ROTHE DEVELOPMENT, INC.,
APPELLANT
v.
UNITED STATES DEPARTMENT OF DEFENSE AND UNITED
STATES SMALL BUSINESS ADMINISTRATION,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:12-cv-00744)
David F. Barton argued the cause and filed the briefs for
appellant.
Meriem L. Hubbard, Ralph W. Kasarda, and Joshua P.
Thompson were on the brief for amici curiae Pacific Legal
Foundation and Center for Equal Opportunity in support of
appellant.
Steven J. Lechner was on the brief for amicus curiae
Mountain States Legal Foundation in support of appellant.
Michael E. Rosman was on the brief for amicus curiae
Center for Individual Rights in support of appellant.
2
Teresa Kwong, Attorney, U.S. Department of Justice,
argued the cause for appellees. With her on the brief was
Mark L. Gross, Attorney. R. Craig Lawrence, Assistant U.S.
Attorney, entered an appearance.
Sherrilyn Ifill, Janai Nelson, Christina Swarns, and
Daniel W. Wolff 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 for the Court filed by Circuit Judge PILLARD.
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, Pub. L. No. 95-507, ch. 1, sec. 202(a), 92 Stat. 1757,
1761 (1978) (codified at 15 U.S.C. § 637), violates its right to
equal protection under the Due Process Clause of the Fifth
Amendment. Congress created the 8(a) program to extend
government contracting opportunities to small business
owners whose access to such opportunities was impaired by
those individuals’ experience of racial or ethnic prejudice or
3
cultural bias. Rothe contends that the statute contains a racial
classification that presumes that certain racial minorities are
eligible for the program. But, in fact, Congress considered
and rejected statutory language that included a racial
presumption. Congress chose instead to hinge participation in
the program on the facially race-neutral criterion of social
disadvantage, which it defined as having suffered racial,
ethnic, or cultural bias.
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. 15 U.S.C. § 637(a)(1)(A)-(D). Businesses
owned by “socially and economically disadvantaged”
individuals are eligible to participate in the 8(a) program. Id.
§ 637(a)(1)(B).1 The statute defines socially disadvantaged
individuals as persons “who have been subjected to racial or
ethnic prejudice or cultural bias because of their identity as a
member of a group without regard to their individual
qualities.” Id. § 637(a)(5).
Rothe is a small business that bids on Defense
Department contracts, including the types of subcontracts that
the SBA awards to economically and socially disadvantaged
businesses through the 8(a) program. Rothe does not purport
to be owned by an individual who has experienced racial or
ethnic prejudice or cultural bias, and alleges that it “cannot
participate in and has no desire to participate in the section
8(a) program.” 1 Ohio App. 74 (Compl. ¶ 33). It objects to the
program because it believes that the statute contains an
1
Businesses owned by economically disadvantaged Indian
tribes or Native Hawaiian organizations also qualify for the 8(a)
program, see 15 U.S.C. § 637(a)(4)(A), but Rothe does not
challenge that aspect of the statute.
4
unconstitutional racial classification that prevents Rothe from
competing for Department of Defense contracts on an equal
footing with minority-owned businesses.
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 13
C.F.R. § 124.103(b). This case does not permit us to decide
whether the race-based regulatory presumption is
constitutionally sound, for Rothe has elected to challenge
2
We refer to those statutory provisions collectively as “section
8(a),” after the section of the public law that originally authorized
the SBA’s contracting program, see Small Business Act of 1958,
Pub. L. No. 85-536, § 8(a)(1)-(2), 72 Stat. 384, 389-91, but
otherwise cite the codified versions of the relevant provisions. We
refer to the contracting program as a whole, including the SBA’s
regulations, as the “8(a) program.”
5
only the statute. Rothe alleged in its complaint that the
“racial classification of section 8(a) of the Small Business
Act, defined herein, is facially unconstitutional.” Compare 1
Ohio App. 68 (Compl. ¶ 1) and id. at 76-77 (claims for relief), with
W. States Paving Co. v. Wash. State Dep’t of Transp., 407
F.3d 983, 990-91 (9th Cir. 2005) (plaintiff challenged both a
statute’s race-neutral definition of social disadvantage and the
agency’s racial presumption). Rothe’s definition of the racial
classification it attacks does not include the SBA’s regulation.
See infra 7; 1 Ohio App. 71-72 (Compl.); Appellant Br. 2-3.
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).
Because the statute lacks a racial classification, and
because Rothe has not alleged that the statute is otherwise
subject to strict scrutiny, we apply rational-basis review,
which the statute readily survives. Rothe’s evidentiary and
nondelegation challenges to the decision below also fail. We
therefore affirm the judgment of the district court granting
summary judgment to the SBA and Department of Defense,
6
see Rothe Dev., Inc. v. Dep’t of Def., 107 F. Supp. 3d 183,
212-13 (D.D.C. 2015), albeit on different grounds.
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
 7
(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 Ohio 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 together—imposes an express
racial classification subject to strict scrutiny.
A.
Rothe first alleges that 15 U.S.C. § 637(a)(5)’s
“definition of the term ‘socially disadvantaged’ contains a
racial classification.” 1 Ohio App. 71 (Compl. ¶ 21). We disagree.
The statute defines socially disadvantaged individuals as
“those who have been subjected to racial or ethnic prejudice
or cultural bias because of their identity as a member of a
group without regard to their individual qualities.” 15 U.S.C.
§ 637(a)(5). That definition does not “distribute[] burdens or
8
benefits on the basis of individual racial classifications.”
Parents Involved, 551 U.S. at 720. “[T]he term ‘socially . . .
disadvantaged’ is race-[]neutral on its face . . . .” W. States
Paving Co., 407 F.3d at 988 (O’Scannlain, J.). It speaks of
individual victims of discrimination. On its face, section
637(a)(5) envisions an individual-based approach that focuses
on experience rather than on a group characteristic. Many
individuals—of all races—have experienced discrimination
on account of their race or ethnicity, and victims of
discrimination do not comprise a racial or ethnic group; a
person of any racial or ethnic background may suffer such
discrimination. And the statute recognizes that not all
members of a minority group have necessarily been subjected
to racial or ethnic prejudice or cultural bias.
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
9
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 3, 6-7, 10,
14-17, 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 6, but to identify an
important kind of social disadvantage Congress had in mind:
individuals’ experience of having suffered “racial or ethnic
prejudice or cultural bias because of their identity as a member
of a group without regard to their individual qualities.” 15
U.S.C. § 637(a)(5); see id. § 631(f)(1)(B), (C).
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.
10
B.
Rothe alleges that the second component of the putative
“racial classification of section 8(a)” is the “statutory goal”
found at 15 U.S.C. § 644(g)(1) “to award a certain percentage
of prime- and sub-contracts to socially disadvantaged small
business concerns.” 1 Ohio App. 72-73 (Compl. ¶¶ 24-25).
Section 644(g)(1) establishes several government-wide
contracting targets, including an aspirational goal that at least
five percent of the total value of the government’s prime
contract and subcontract awards for each fiscal year go to
“small business concerns owned and controlled by socially
and economically disadvantaged individuals.” 15 U.S.C.
§ 644(g)(1)(A)(iv).
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. Id. § 644(g)(1); see DynaLantic Corp. v. U.S. Dep’t
of Def., 885 F. Supp. 2d 237, 244-45 (D.D.C. 2012). Indeed,
government contracts awarded to businesses owned by
disadvantaged individuals without the benefit of programs
such as the 8(a) program—that is, contracts they win through
“unrestricted competition”—count toward section 644(g)’s
goal. See 15 U.S.C. § 644(g)(2)(E). At any rate, section
644(g)(1)’s goal is not a racial classification. Like section
8(a), it refers to “socially and economically disadvantaged
individuals”; it does not define the relevant business owners
by their race.
11
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 Ohio App. 72 (Compl. ¶ 22). According to Rothe, the racial
presumption can be found at 15 U.S.C. § 631(f)(1). Id.; see
also Pl.’s Mem. in Supp. of Mot. Summ. J. at 8, Rothe Dev.,
Inc. v. Dep’t of Def., No. 12-cv-744 (D.D.C. May 15, 2014),
ECF No. 56 (“The statute also contains an additional racial
classification in a presumption that all individuals who are
members of certain racial groups are socially disadvantaged.
[15 U.S.C.] § 631(f)(1).”). But that provision creates no
racial presumption or classification.
Section 631(f), which falls under the heading
“Declaration of policy,” is entitled “Findings; purpose.” 15
U.S.C. § 631(f). The provision states Congress’s conclusion
that it is in the nation’s interest “to expeditiously ameliorate
the conditions of socially and economically disadvantaged
groups,” id. § 631(f)(1)(D), so that socially and economically
disadvantaged persons may fully participate in the economy
and “obtain social and economic equality,” id. § 631(f)(1)(A).
See also id. § 631(f)(2)(A) (declaring that one purpose of
section 8(a) is to “promote the business development of small
business concerns owned and controlled by socially and
economically disadvantaged individuals so that such concerns
can compete on an equal basis in the American economy”). It
explains that “many [socially and economically
disadvantaged] 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.”
Id. § 631(f)(1)(B). It goes on to observe “that such groups
include, but are not limited to, Black Americans, Hispanic
12
Americans, Native Americans, Indian tribes, Asian Pacific
Americans, Native Hawaiian Organizations, and other
minorities.” Id. § 631(f)(1)(C) (emphasis added). According
to Rothe, section 631(f)(1) creates a presumption that
members of the listed groups, and racial minorities more
generally, are socially disadvantaged and are thereby eligible
to participate in the 8(a) program, absent a showing to the
contrary.
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,” id. § 631(f)(1),
they reflect Congress’s determination that many individual
business owners were socially disadvantaged because people
who would otherwise have done business with them assumed,
based on their group-related identifiers (race, ethnicity or
culture), that they had disqualifying shortcomings. Congress
reasoned that business owners, underrated due to bias or
prejudice, were likely to have been deprived of the
opportunities and experiences that help small businesses to
develop. Congress’s findings that individual business owners
may have been unfairly subjected to race-based disadvantage
do not, however, impose or necessarily contemplate any race-
based classification in the statutory response, nor do such
findings supplant the race-neutral definition of social
disadvantage found in section 637(a)(5).
As explained above, section 637(a)(5) does not classify
on the basis of ethnicity or race. Findings, like a preamble,
13
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, in doing so,
it set special terms of preference for individuals based on their
membership in a racial or ethnic minority group. Congress
did not. Put simply, the preambulatory language of section
631(f)(1), taken alone or together with section 637(a)(5), does
not create a presumption that a member of a particular racial
or ethnic group is necessarily socially disadvantaged, nor that
a white person is not.
The SBA’s first regulation implementing the statutory
definition of social disadvantage lends support to that
conclusion. See 13 C.F.R. Part 124.1-1(c)(3), 44 Fed. Reg.
30672, 30674 (1979). That regulation acknowledged the
statute’s reference to social disadvantage suffered by
14
members of statutorily identified groups, but eschewed
presumptive eligibility based on group membership. The
regulation required individualized social-disadvantage
showings. It provided that “[t]he social disadvantage of
individuals, including those within the above-named groups,
shall be determined by the SBA on a case-by-case basis,” and
further specified that “[m]embership alone in any group is not
conclusive that an individual is socially disadvantaged.” Id.
That regulation squarely contradicts the view that the statute
forecloses the SBA from requiring “that every individual
black American establish individual social disadvantage.”
Dissent at 8. It demonstrates that the statute need not be
implemented through a presumption that members of the
named racial groups are, by token of their group membership,
socially disadvantaged.
D.
The dissent points to a fourth component of the statute
that it believes enacts a racial presumption subject to strict
scrutiny—15 U.S.C. § 637(a)(8). Section 637(a)(8) states:
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
15
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 4-6,
10-11.
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 be eligible
for the program. The dissent overlooks the second sentence
of section 637(a)(8), which contemplates that “other”
determinations, unrelated to group-based characteristics, may
be made pursuant to section 637(a)(5), suggesting that the
statute allows but does not require determinations about
groups as part of section 637(a)(8)’s regulatory
implementation.
As we have explained, section 637(a)(8)’s definition of
social disadvantage does not amount to a racial classification,
16
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 7-8. 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
17
6-7. 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-Fonesca, 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 barriers to business formation, development, and
success on account of social and economic forces beyond
their control. Id. The House Committee explained that its
race-based presumption of eligibility “[was] based upon the
congressional findings” in the first part of the bill. Id. In
contrast, the Senate version of the bill had no presumption
and did not refer to any particular racial groups when defining
social and economic disadvantage. See S. Rep. No. 95-1070,
at 13-16, 25. Critically, the Conference Committee dropped
the House’s presumption from the final version of the bill and
18
opted, with section 637(a)(5)’s definition of socially
disadvantaged individuals, for language much closer to the
Senate’s version. See H.R. Rep. No. 95-1714, at 21-22. That
is, Congress ultimately kept the House’s findings that racial
minorities suffer social disadvantage but dropped the
language that transformed that observation into a
presumption. The conferees stressed that Congress was not
granting the SBA authority “merely to channel contracts at a
random pace to a preconceived group of eligibles for the sake
of social or political goals.” Id. at 21-23.
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.” 15 U.S.C. § 637(d)(3)(C)(ii).
Section 8(d)’s express, race-based presumption was part of
the Department of Transportation’s affirmative-action
program at issue in Adarand Constructors, Inc. v. Peña, to
which the Supreme Court applied strict scrutiny. 515 U.S. at
205-07, 213. Whatever Congress’s reasons for directing
private businesses to use race-based criteria under section
19
8(d)’s subcontracting clause, Congress authorized more
nuanced implementation by the agency under section 8(a).
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 Public Works
Employment Act of 1977, Pub. L. 95-28, 91 Stat. 116 (1977),
which Congress enacted just a year before section 8(a). It
required that ten percent of federal funds granted to localities
for public works projects be allocated for contracts with
“minority business enterprises,” which Congress defined as
businesses owned by “minority group members,” i.e.,
“citizens of the United States who are Negroes, Spanish-
speaking, Orientals, Indians, Eskimos, and Aleuts.” See
Fullilove v. Klutznick, 448 U.S. 448, 454 (1980) (opinion of
Burger, C.J.) (quoting 42 U.S.C. § 6705(f)(2)).3 In contrast to
section 8(d) and the Public Works Employment Act, section
8(a) benefits “socially disadvantaged” individuals, as defined
by their experience of discrimination and not just their racial
or ethnic group membership. 15 U.S.C. § 637(a)(5).
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
3
The Supreme Court in Fullilove sustained the Public Works
Employment Act’s minority set-aside provision against an equal
protection challenge on grounds that the Court in Adarand
substantially clarified. See Adarand, 515 U.S. at 236 (holding race-
based affirmative action subject to strict judicial scrutiny, and
noting that, “to the extent (if any) that Fullilove held federal racial
classifications to be subject to a less rigorous standard, it is no
longer controlling”).
20
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):
21
“The SBA presumes that black, Hispanic, Asian Pacific,
Subcontinent Asian, and Native Americans . . . are ‘socially
disadvantaged.’” Id. (quoting 13 C.F.R. § 124.105(b)(1)); see
also Fullilove, 448 U.S. at 463 (referring to “existing
administrative programs promoting minority opportunity in
government procurement, particularly those related to § 8(a)
of the Small Business Act of 1953”).
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
13 C.F.R. § 124.105(b)(1)). And we referred specifically to
the program’s “regulatory presumption.” Id. at 1017
(emphasis added).
Our conclusion that the statute lacks an express racial
classification is also consistent with the holding of
DynaLantic. Over the government’s objections, we held that
the plaintiff in Dynalantic had standing. Id. at 1013, 1018.
The government had argued that, even if the plaintiff’s
challenge to the race-based regulatory presumption
succeeded, the statutory basis for the program would stand
because it was not race-based, and the plaintiff would
continue to face competition from firms that qualified for
participation under the race-neutral statutory criteria. Id. at
1017. Therefore, the government asserted, even success on
its equal protection claim could not redress the plaintiff’s
injury. Id. We thought the government’s reading of the
22
statute was “rather dubious” and were unwilling to “assume,
certainly at [the pleading] stage of the litigation, that the
statute itself [wa]s invulnerable” to constitutional challenge.
Id.; but see id. at 1018 (Edwards, C.J., dissenting) (“The
statutory set-aside is not limited in terms of race, so it does
not prescribe a benefit that is available only to members of
racial minorities.”). But, critically, we did not reject the
government’s position; as the dissent correctly acknowledges,
Dissent at 8, there was no need to reach it. “[I]f a favorable
decision would lead only to the invalidation of the regulations
. . . , Dynalantic’s injury would still be considerably
mitigated,” so we left open the question whether 8(a) of the
statute contained a racial classification. Id. at 1017 (majority
op.); see United States v. Wade, 152 F.3d 969, 973 (D.C. Cir.
1998) (explaining that, even if an earlier opinion could be
read to reach the relevant issue, “[b]ecause that issue was not
before the court, its overly broad language would be obiter
dicta and not entitled to deference”).
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 5. But that is precisely what the
statute does provide. The agency’s initial implementing
regulation illustrates how the statute might reasonably be
23
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.” 15 U.S.C.
§ 631(f)(1)(A). To be sure, Congress foresaw that “the
primary beneficiaries of this program will be minorities.”
H.R. Rep. No. 95-1714, at 22. But Rothe does not argue that
the statute could be subjected to strict scrutiny, even if it is
facially neutral, on the basis that Congress enacted it with a
discriminatory purpose. See Pers. Adm’r of Mass. v. Feeney,
442 U.S. 256, 279 (1979). In the absence of such a claim, we
will not subject a facially race-neutral statute to strict
scrutiny. Mere foreseeability of racially disparate impact,
without invidious purpose, does not trigger strict
constitutional scrutiny. Id. (“‘Discriminatory purpose’. . .
implies more than intent as volition or intent as awareness of
consequences.”).
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 Hous. & Cmty. Affairs v. Inclusive Cmtys. Project,
24
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
25
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 whether it is supported by a rational basis. See
Ysursa v. Pocatello Educ. Ass’n, 555 U.S. 353, 358-61 (2009)
(upholding under rational-basis review a statutory provision
after determining that strict scrutiny does not apply). It
plainly is, for “it bears a rational relation to some legitimate
end.” Romer v. Evans, 517 U.S. 620, 631 (1996). The statute
aims to remedy the effects of prejudice and bias that impede
business formation and development and suppress fair
4
By the same token, we do not reach the parties’ debate over
whether to review Rothe’s facial equal protection challenge under
the standard set forth in United States v. Salerno, 481 U.S. 739, 745
(1987), or a less demanding standard. Compare Rothe Dev. Corp.
v. Dep’t of Def., 413 F.3d 1327, 1337-38 (Fed. Cir. 2005)
(explaining that Salerno’s “no set of circumstances” standard is of
“limited relevance” in analyzing a facial equal protection challenge
to which strict scrutiny applies), with Sherbrooke Turf, Inc. v.
Minn. Dep’t of Transp., 345 F.3d 964, 971 (8th Cir. 2003)
(“Appellants’ facial challenge to the DBE program requires us to
look carefully at DOT’s regulations to determine whether they may
be constitutionally applied under any set of factual circumstances.”
(citing Salerno, 481 U.S. at 746)).
26
competition for government contracts. See S. Rep. No. 95-
1070, at 2.
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 15 U.S.C. §
637(a)(5). Because “[s]mall businesses owned and controlled
by socially and economically disadvantaged individuals (most
of whom are minority) receive a disproportionately small
share of Federal purchases,” H.R. Rep. No. 100-460, at 18
(1987), the program offers those participants technical
assistance and the opportunity to bid on federal contracts in a
sheltered market. The point of such sheltered markets is to
provide disadvantaged business owners opportunities to gain
management experience and build performance records—
chances they might otherwise lose to competitors unhindered
by the disadvantages they have experienced as a result of bias
and prejudice. The program therefore provides the benefits
socially and economically disadvantaged individuals most
need to participate on fair terms in the national economy.
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
27
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 delegation of legislative power. The
Constitution “permits no delegation of [legislative] powers,
and so . . . when Congress confers decisionmaking authority
upon agencies Congress must lay down by legislative act an
intelligible principle to which the person or body authorized
to act is directed to conform.” Whitman v. Am. Trucking
Ass’ns, Inc., 531 U.S. 457, 472 (2001) (internal citations,
quotation marks, and brackets omitted). According to Rothe,
“Congress cannot delegate the power to racially classify.
Alternatively, even if Congress can delegate it, the delegation
here lacks the requisite intelligible principle.” Appellant Br.
53.
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
28
disadvantaged small business concerns,” 15 U.S.C.
§ 637(a)(1)(A) & (B), “is no broader than other delegations
that direct agencies to act in the ‘public interest,’ or in a way
that is ‘fair and equitable,’ or in a manner ‘requisite to protect
the public health,’ or when ‘necessary to avoid an imminent
hazard to the public safety,’” each of which the Supreme
Court has upheld against nondelegation challenges. Nat’l
Mar. Safety Ass’n v. Occupational Safety & Health Admin.,
649 F.3d 743, 755 (D.C. Cir. 2011) (citations omitted).
Congress’s definition of “socially disadvantaged” in
15 U.S.C. § 637(a)(5) provides further “intelligible” guidance
to the SBA to implement the 8(a) program.
***
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 3. 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
1
See Appellant’s Br. 2–3 (statutory definition of “socially
disadvantaged,” the “presumption that all individuals who are
members of certain racial groups are socially disadvantaged,” and
the “goal to award a certain percentage” of government contracts
“to socially disadvantaged small business concerns” together
“comprise ‘section 8(a)’s racial classification’ ”).
2
See Appellees’ Br. 16 (“Strict scrutiny applies because
Section 8(a) employs a race-conscious rebuttable presumption to
define socially disadvantaged individuals.”).
3
Rothe Dev., Inc. v. Dep’t of Def., 107 F. Supp. 3d 183, 207
(D.D.C. 2015) (“There is no question that ‘racial classifications’
such as the ones at issue here ‘are constitutional only if they are
narrowly tailored measures that further compelling governmental
interests.’ ” (emphasis added) (alteration and quotation marks
omitted) (quoting DynaLantic Corp. v. Dep’t of Def., 885
F. Supp. 2d 237, 250 (D.D.C. 2012))).
2
view that the statute contains a racial classification.4 And to
top it off, this court found my colleagues’ approach “rather
dubious” nearly twenty years ago.5 The chorus swells.
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
4
When the SBA first promulgated the regulatory presumption
on December 1, 1980, it stated: “Congress did not mean to bestow
8(a) program benefits indiscriminately on small business persons.”
Definition of Social Disadvantage, 45 Fed. Reg. 79,413, 79,414
(Dec. 1, 1980). “Rather, it sought to single out for special
treatment those persons who have had greatest difficulty, through
no fault of their own, in achieving a competitive position in the
business world. Hence, its designation of members of certain
minority groups as socially disadvantaged.” Id. (emphasis added).
The SBA also made plain that, in promulgating the regulation, it
“adhered to the legislative intent behind Pub. L. 95-507: that
statutorily designated racial and ethnic minorities be the primary
beneficiaries of the 8(a) program, but that other disadvantaged
individuals be eligible for the program.” Id. at 79,413 (emphasis
added).
5
That case involved a company’s standing to pursue a
constitutional challenge to the section 8(a) program. See
DynaLantic Corp. v. Dep’t of Def., 115 F.3d 1012, 1013 (D.C. Cir.
1997). The government argued “that the 8(a) statute is not itself
race-conscious; only the implementing SBA regulations are.” Id. at
1017. The majority found “the government’s statutory analysis [to
be] rather dubious.” Id. “[T]he Act,” the court went on, “includes
as a congressional finding that certain racial groups—the same
groups as are identified in [the SBA regulation]—are socially
disadvantaged.” Id. (second emphasis added) (citing 15 U.S.C.
§§ 631(f)(1)(B), (C)).
3
“facially race-neutral.” Maj. Op. at 3. 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 15 U.S.C. § 637(a).
The issue here is whether section 8(a)’s classifications are, on
their face, race neutral, see Maj. Op. at 3, or if they instead
“distribute[] burdens or benefits” on the basis of race, see
Parents Involved in Cmty. Sch. v. Seattle Sch. Dist. No. 1, 551
U.S. 701, 720 (2007). The inquiry boils down to this: Does
the Act provide members of certain racial groups an
advantage in qualifying for section 8(a)’s contract preference
6
I concur in the affirmance of summary judgment to the
government on the non-delegation issue. See Maj. Op. at 27–28.
My colleagues also conclude that we need not review the district
court’s evidentiary decisions because “[t]he 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.”
Id. at 27. Because I believe we should apply strict scrutiny rather
than rational-basis review to the challenged provisions of the Act,
however, I disagree with my colleagues on the issue. Nevertheless,
my dissent is limited to identifying the correct standard of review
rather than its application and therefore the district court’s
evidentiary holdings are beyond its scope. See infra n.8.
4
by virtue of their race? A review of its key provisions
manifests that it does.
Section 8(a)(5) is the starting point. It defines “socially
disadvantaged individuals” as “those who have been
subjected to racial or ethnic prejudice or cultural bias because
of their identity as a member of a group without regard to
their individual qualities.” 15 U.S.C. § 637(a)(5) (emphases
added). Moreover, two other statutory provisions confirm
that section 8(a)(5) of the Act (and not only the SBA’s
implementing regulations) favors certain races in qualifying
for participation in the section 8(a) program.
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.” Id. § 637(a)(8) (emphasis added).
The use of “group” here is key. Id. It confirms that the focus
of the inquiry under section 8(a)(5) is a “determination[]” of
whether an individual is “socially disadvantaged” by virtue of
his membership in a group that has suffered racial/ethnic
“prejudice” or cultural “bias.” See id. § 637(a)(5), (8). It is
group membership—and the prejudice or bias the group has
experienced—that triggers social disadvantage. See id. If, as
my colleagues conclude, see Maj. Op. at 7–9, section 8(a)(5)
instead demanded an inquiry into an individual’s own
experience of discrimination, section 8(a)(8) would read
something like “all determinations made pursuant to
paragraph [8(a)(5)] with respect to whether an individual has
been subject to prejudice or bias . . . .” But it does not.
Instead, the Congress plainly made the “group” criterion
preeminent.
5
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 . . . .
15 U.S.C. § 631(f)(1)(A)–(C) (footnote omitted).
Like section 8(a)(8), section 2(f)(1)(B) connects social
disadvantage to membership in certain “groups.” Id.
§ 631(f)(1)(B). Notably, section 2(f)—like 8(a)(8)—does not
provide that “persons” are socially disadvantaged because of
their individual experiences of discrimination. Rather, they
are socially disadvantaged “because of their identification as
6
members of certain groups that have suffered the effects of
discriminatory practices or similar invidious circumstances
over which they have no control.” Id. (emphasis added).
The message is clear—groups suffer discrimination and
therefore persons who are members of those groups are
socially disadvantaged. See id.
Section 2(f) also designates “Black Americans, Hispanic
Americans, Native Americans, Indian tribes, Asian Pacific
Americans, Native Hawaiian Organizations, and other
minorities” as “such groups” that “have suffered the effects of
discriminatory practices or similar invidious circumstances
over which they have no control.” Id. § 631(f)(1)(B)–(C).
When read in pari materia, these two provisions are crystal
clear: if an individual is a “Black American[], Hispanic
American[], Native American[], [member of an] Indian
tribe[], Asian Pacific American[], [or] [member of a] Native
Hawaiian Organization[],” the individual is “socially
disadvantaged” because those “groups” have “suffered the
effects of discriminatory practices or similar invidious
circumstances.” Id. Likewise with “other minorities”—if an
individual is a member of an unlisted minority group, he is
deemed “socially disadvantaged.” Id.
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
7
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 13
C.F.R. § 124.103(b)–(c) (prescribing “a rebuttable
7
Because section 2(f) limits the reach of groups that “have
suffered the effects of discriminatory practices or similar invidious
circumstances” to “other minorities,” 15 U.S.C. § 631(f)(1)(B)–(C),
a racial non-minority (i.e., a white) plainly cannot qualify for the
program based on “racial . . . prejudice,” id. § 637(a)(5). A white
would have to show social disadvantage based on his membership
in a minority group that has experienced “cultural bias” or “ethnic
prejudice.” Id. The legislative history provides one example—“a
poor Appalachian white person who has never had the opportunity
for a quality education or the ability to expand his or her cultural
horizons.” H.R. Rep. No. 95-1714, at 22 (1978) (Conf. Rep.). But
the fact that a white can qualify for the section 8(a) preference does
not render the statute race-neutral. See infra 15–18.
8
presumption” that members of “designated groups” “are
socially disadvantaged”). “Black Americans” currently lead
the list of designated groups, the members of which are
presumed to be socially disadvantaged. Id. § 124.103(b)(1).
Assume, however, that the SBA were to decide that black
Americans as a group are no longer subject to prejudice or
bias and therefore black Americans as a group are no longer
entitled to the regulatory presumption. Could the SBA
remove them from the list of presumed socially disadvantaged
groups and require instead that every individual black
American establish individual social disadvantage by a
preponderance of the evidence? I think not, because such
action would conflict with the congressional finding that
“Black Americans” as a group are socially disadvantaged, see
15 U.S.C. § 631(f)(1)(C), and the SBA would have exceeded
its statutory authority. Instead, congressional action would be
required to “delist” any of the statutorily designated minority
groups. See, e.g., Bowen v. Georgetown Univ. Hosp., 488
U.S. 204, 208 (1988) (“It is axiomatic that an administrative
agency’s power to promulgate legislative regulations is
limited to the authority delegated by Congress.”).
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. See 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 15
U.S.C. §§ 631(f)(1)(B) and (C), followed by a parenthetical
stating, “(congressional finding that certain racial groups are
socially disadvantaged).” Id. We found the Defense
Department’s contention to the contrary—“that the 8(a)
9
statute is not itself race-conscious”—to be “rather dubious,”
explaining that “the Act includes as a congressional finding
that certain racial groups—the same groups as are identified
in [the regulation]—are socially disadvantaged.” Id. at 1017
(emphasis in original). “In this respect,” we said, “the 8(a)
provisions are much like the program in [Regents of the
University of California v.] Bakke: ‘a minority enrollment
program with a secondary disadvantage element.’ ” Id.
(quoting Regents of the Univ. of Cal. v. Bakke, 438 U.S. 265,
281 n.14 (1978)).
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 15 U.S.C. § 637(a)(5), and those
determinations are tied—by statute—to group, not individual,
discrimination, see id. § 637(a)(8). One of those
constraints—and a critical one—is that the Congress has
10
designated certain racial groups and other minorities as
socially disadvantaged. See id. § 631(f)(1)(C). Accordingly,
if not rebutted, the SBA must presume members of those
groups are socially disadvantaged.
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; namely, they are not required to meet the
same standard in establishing their eligibility to participate in
the section 8(a) program that members of non-minority races
must satisfy. Accordingly, I agree with the parties and the
district court that we should apply strict scrutiny in
determining whether the section 8(a) program violates
Rothe’s right to equal protection of the laws.8
8
According to the majority, I “believe[] there is only one way
to understand the statute . . . and thus do[] not address our
responsibility to avoid constitutional problems where a reasonable
statutory reading so permits.” Maj. Op. at 16. But where there is
only one well-founded way to read a statute, it is emphatically not
our responsibility to avoid constitutional difficulties. See, e.g.,
McFadden v. United States, 135 S. Ct. 2298, 2306–07 (2015)
(constitutional-avoidance canon “has no application in the
interpretation of an unambiguous statute” (internal quotation marks
omitted)). Here, however, the majority’s invocation of the canon is
particularly flimsy for two reasons: First, the canon is ultimately “a
means of giving effect to congressional intent, not of subverting it,”
Clark v. Martinez, 543 U.S. 371, 382 (2005), and, not to belabor
the point, but if the Congress did not intend section 8(a) to classify
on the basis of race, one wonders why it envisioned that
“determinations [would be] made . . . with respect to whether a
group has been subjected to prejudice or bias,” see 15 U.S.C.
§ 637(a)(8), or found that certain racial groups “have suffered the
effects of discriminatory practices or similar invidious
11
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 11–14. 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, the statute must be race-neutral.
See Maj. Op. at 7–9. Third, the legislative history, statutory
context and relevant case law it cites do not support its
interpretation. See Maj. Op. at 17–23. I address each in turn.
circumstances over which they have no control,” see id.
§ 631(f)(1)(B)–(C). But second, and perhaps more fundamentally,
“the purpose of strict scrutiny is to ‘smoke out’ illegitimate uses of
race by assuring that the legislative body is pursuing a goal
important enough to warrant use of a highly suspect tool.” City of
Richmond v. J.A. Croson Co., 488 U.S. 469, 493 (1989) (plurality
opinion). Those efforts would be severely hamstrung if it were the
“responsibility,” Maj. Op. at 16, of courts to force doubtful
readings on statutes to avoid conducting that “searching
examination,” Fisher v. Univ. of Texas at Austin, 133 S. Ct. 2411,
2419 (2013). I recognize that, at times, courts have been less than
unequivocal in specifying a tier of scrutiny when greater clarity
plainly would not affect the statute’s constitutionality, see, e.g.,
Tuan Anh Nguyen v. I.N.S., 533 U.S. 53, 60–61 (2001); however, I
cannot say at this early stage whether that would be true here.
Nonetheless, recognizing that the Supreme Court, at times, has also
thought it important to specify the degree of scrutiny even when
doing so would not change the outcome, see City of Cleburne, Tex.
v. Cleburne Living Ctr., 473 U.S. 432, 435 (1985), I see little
reason to “avoid,” Maj. Op. at 16, the threshold question of how
searching our review should be.
12
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 12. 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. Outdoor 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 12–13. 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., Va., 745 F.2d 868, 885 (4th Cir. 1984) (no
13
need to look to findings if relevant statute is “clear and
unambiguous”). Despite the majority’s protestations to the
contrary, see Maj. Op. at 12–13, 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 11–16.
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 clause[9] in the text of a bill, and
consequently is frequently understood not to be part of the
law.” NORMAN SINGER & SHAMBIE SINGER, 1A SUTHERLAND
9
An enacting clause is “the part of [an] act’s body stating
precise action taken by the legislature.” NORMAN SINGER &
SHAMBIE SINGER, 1A SUTHERLAND STATUTES & STATUTORY
CONSTRUCTION § 20:6 (7th ed. 2008). The enacting clause in
federal legislation—“Be it enacted by the Senate and House of
Representatives of the United States of America in Congress
assembled”—has remained remarkably consistent throughout the
nation’s history. Compare Native American Children’s Safety Act,
Pub. L. No. 114-165, 130 Stat. 415, 415 (June 3, 2016), with Act of
June 1, 1789, ch. 1, 1 Stat. 23, 23.
14
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 congressional findings, 562 F.2d at 1316, even
though those findings appeared after the enacting clause, see
Noise Control Act of 1972, Pub. L. No. 92-574, § 2, 86 Stat.
1234, 1234.10 In doing so, we cited only one case—Yazoo.
See Costle, 562 F.2d at 1316 n.30. We never acknowledged,
however, that the preamble in the Mississippi legislation at
issue in Yazoo differed from the enacted congressional
findings in the Noise Control Act of 1972. Our cases citing
Costle have likewise not noted the critical difference,
primarily because they involved administrative, not statutory,
preambles. See, e.g., Nat’l Wildlife Fed’n, 286 F.3d at 569–
70; Wyo. Outdoor Council, 165 F.3d at 54.
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
10
The “preamble,” if any, in the Noise Control Act of 1972
more closely resembles a title, to wit: “An Act [t]o control the
emission of noise detrimental to the human environment, and for
other purposes.” Noise Control Act of 1972, Pub. L. No. 92-574,
86 Stat. 1234, 1234. The text of the law, including the enacting
clause and the findings, then follows. See id. §§ 1–18.
 15
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 9. 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
11
The majority’s various criticisms of my reading, e.g., that I
“overlook[]” certain language, Maj. Op. at 15, and that I read
“groups” to exclude “individual” experiences of discrimination, id.
at 22–23, primarily reflect that I read the statute as a whole
(including 2(f)) and my colleagues choose not to.
16
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 15 U.S.C.
§§ 631(f)(1)(B)–(C), 637(a)(5), (8).
For this reason, my colleagues’ attempt to distinguish the
relevant provisions of the Act from the admissions policy at
issue in Regents of the University of California v. Bakke, 438
U.S. 265 (1978), is largely unavailing. See Maj. Op. at 8–9.
The racial classification in Bakke was two-fold; the Medical
School of the University of California at Davis set aside
sixteen seats to be filled by “disadvantaged” students through
a “special admissions program,” 438 U.S. at 274–75, and the
“special admissions program involve[d] a purposeful,
acknowledged use of racial criteria,” id. at 289 n.27. As the
majority puts it, “an explicit factor in determining
disadvantage was an applicant’s race.” Maj. Op. at 8 (citing
Bakke, 438 U.S. at 274–75 & n.4). So, too, with the section
8(a) program. The Congress has ordered that certain
contracts be set aside for “socially disadvantaged”
individuals, 15 U.S.C. § 637(a), and has declared that
members of certain racial groups are presumed to be socially
disadvantaged, id. § 631(f)(1)(C). It cannot get much more
“explicit” than that. See Maj. Op. at 8.
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
17
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 15 U.S.C. § 637(a)(5). But the
difference is immaterial. It makes little sense to say that the
section 8(a) program is race-neutral because it only demotes
non-minority applicants rather than locking them out entirely.
Just as the Bakke program’s “purposeful . . . use of racial
criteria” in deciding who had access to certain medical-school
seats drew “a line . . . on the basis of race and ethnic status,”
438 U.S. at 289 & n.27, so too does the section 8(a)
program’s use of racial criteria in deciding who has automatic
access to certain contracts.
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 15
U.S.C. § 637(a)(5), (8); see also id. § 631(f)(1)(B)–(C). That
the program allows non-minority participation does not erase
the race-based presumption contained therein and we must,
accordingly, subject that presumption to strict scrutiny. See,
e.g., Adarand Constructors, Inc. v. Pena, 515 U.S. 213, 227
18
(1995) (“race-based rebuttable presumption” is racial
classification that “must be analyzed by a reviewing court
under strict scrutiny”); see also Grutter 539 U.S. at 322–26;
id. at 323 (“[W]hen governmental decisions ‘touch upon an
individual’s race or ethnic background, he is entitled to a
judicial determination that the burden he is asked to bear on
that basis is precisely tailored to serve a compelling
governmental interest.’ ” (emphasis added) (quoting Bakke,
438 U.S. at 299)).
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
17–18. 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
12
The presumption the House adopted read: “The [SBA]
shall presume that socially and economically disadvantaged groups
and group members include, but are not limited to, Black
Americans and Hispanic Americans.” H.R. 11318, 95th Cong.
§ 202 (1978), available at 124 CONG. REC. 7,529–30 (Mar. 20,
1978).
19
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 17–18. 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.
20
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, 15 U.S.C. § 637(a)(5), not on business-specific
impediments. Further, by using a definition of social
disadvantage that allows for both group-based and individual-
based showings of “racial or ethnic prejudice” or “cultural
bias” (also naming a handful of socially disadvantaged
groups, id. § 631(f)(1)(C), and authorizing the SBA to add
others, see id. § 637(a)(8)), the Congress signaled to the SBA
that racial minorities were not to be the only beneficiaries of
the program. In discussing the changes to the House
provision, the Congress went out of its way to make plain that
“the Conferees realize that other Americans may also suffer
from social disadvantagement because of cultural bias” and to
offer the example of the “poor Appalachian white.” See H.R.
Rep. No. 95-1714, at 22 (Conf. Rep.). Notably, this is how
the SBA came to understand “the legislative intent behind
[the Act]: that statutorily designated racial and ethnic
minorities be the primary beneficiaries of the 8(a) program,
but that other disadvantaged individuals be eligible for the
program.” Definition of Social Disadvantage, 45 Fed. Reg.
79,413, 79,413 (Dec. 1, 1980) (emphasis added).
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-
21
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 qualities of that minority person.”
Id. (emphasis added). The legislative history thus confirms
my reading of the statute’s plain meaning—that the Congress
understood its findings to designate certain racial groups as
socially disadvantaged notwithstanding the fact that its
definition of social disadvantage in section 8(a)(5) is open to
members of non-racial but nonetheless minority groups
(including whites who by location or otherwise are members
of an ethnic/cultural minority).
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
22
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
23
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 18–19.
13
The majority apparently reads the SBA’s initial 1979
regulation as set in amber, Maj. Op. at 13–14, because it gives no
weight to the fact that, just one year later, the Congress itself, in
adding Asian-Pacific Americans to the socially disadvantaged
groups, intended those groups to be “presumed” socially
disadvantaged, as the legislative history discussed above makes
clear.
24
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 15 U.S.C.
§ 637(a), section 8(d)(3) specifies contractual language the
Congress requires federal agencies to use in an effort to
ensure that prime contractors hire—as subcontractors—
businesses owned by socially and economically
disadvantaged individuals, see id. § 637(d)(3). Indeed, unlike
section 8(a), which contemplates detailed implementation by
the SBA, see id. § 637(a), section 8(d)(3)’s language is meant
to be included automatically in each contract with no
individual assessment—instead, it uses the SBA’s section
8(a)(5) determinations, see id. § 637(d)(3)(C) (“The
contractor shall presume that socially and economically
disadvantaged individuals include . . . any other individual
found to be disadvantaged by the [SBA] pursuant to section
8(a) of the Small Business Act.”). Given the different
contexts, that the Congress would use different language to
further the same overall goal should come as no surprise. See
Deal v. United States, 508 U.S. 129, 134 (1993) (“Congress
sometimes uses slightly different language to convey the
same message . . . .” (internal quotation marks omitted)).
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 8; see also 15 U.S.C. § 637(a)(5). But when it comes
to awarding contracts to subcontractors, the Congress wants
prime contractors to presume that members of certain
25
groups—the same groups listed in section 2(f) of the Act, no
less—are socially disadvantaged with no individualized
showing needed. Id. § 637(d)(3)(C). Why would the
Congress want the government to award prime contracts
using a different standard from the one it requires prime
contractors to use in subcontracting? The majority offers no
explanation. Mine, then, is the better reading—although the
contractual provision uses different language, its eligibility
inquiry program uses the racial classification provided in
section 8(a).
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 20. 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 20–21.
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 21 (quoting Adarand, 515 U.S. at
207). But other statements the Court makes in Adarand show
26
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 (emphasis added). By the
majority’s logic, this must mean that it is the SBA
regulations—and “not the statute,” Maj. Op. at 20—that
contain a racial classification under the 8(d) program. But, as
discussed, supra at 23–24, my colleagues point to the
statutory presumption in section 8(d) as the exemplar of a
statutory race-based presumption. See Maj. Op. at 18–19.
This illustrates a simple point—Adarand’s use of “the SBA
presumes,” 515 U.S. at 207, is irrelevant here. Adarand,
which considered the entirety of the SBA programs at issue—
including plainly race-based statutes and regulations—says
precious little about whether the provisions of the Act
applicable to the section 8(a) program contain a racial
classification.
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
27
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. 137, 177 (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.