Rothe Development, Inc. v. Department of Defense

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
ROTHE DEVELOPMENT, INC., )
)
Plaintiff, )
)
v. ) Civil Action No. 12-cv-0744 (KBJ)
)
DEPARTMENT OF DEFENSE, et al., )
)
Defendants. )
)
MEMORANDUM OPINION
Section 8(a) of the Small Business Act, 15 U.S.C. § 637(a) (2012), establishes a
business development program for “socially and economically disadvantaged small
business concerns[.]” Id. § 637(a)(1)(B). Plaintiff Rothe Development, Inc. (“Rothe”
or “Plaintiff”) is a small business based in San Antonio, Texas that has filed the instant
action against the Department of Defense (“DOD”) and the Small Business
Administration (collectively, “Defendants”) to challenge the constitutionality of the
Section 8(a) program on its face. (See Compl., ECF No. 1, ¶ 1.) Rothe argues that the
statute’s definition of “socially disadvantaged” small business owners, 15 U.S.C.
§ 637(a)(5), is a racial classification that violates Rothe’s right to equal protection
under the Due Process Clause of the Fifth Amendment of the United States
Constitution. (See Compl. ¶¶ 1–2.) Rothe also claims that Section 8(a) violates the
nondelegation doctrine. (See id.; see also id. ¶ 30.)
The constitutional challenge that Rothe brings in the instant case is nearly
identical to the challenge brought in the case of DynaLantic Corp. v. United States
Department of Defense, 885 F. Supp. 2d 237 (D.D.C. 2012). The plaintiff in
DynaLantic sued the DOD, the Small Business Administration, and the Department of
the Navy alleging, inter alia, that Section 8(a) was unconstitutional both on its face and
as applied to the military simulation and training industry. See DynaLantic, 885 F.
Supp. 2d at 242. The DynaLantic court disagreed with the plaintiff’s facial attack; it
explained in a lengthy opinion the reasoning behind the Court’s conclusion that the
Section 8(a) program is facially constitutional. See id. at 248–80, 283–91. Here,
Rothe relies on substantially the same record evidence and nearly identical legal
arguments, and it urges this Court to strike down the race-conscious provisions of
Section 8(a) on their face and thus to depart from DynaLantic’s holding in the context
of the instant case. (See, e.g., Mot. Hr’g Tr., Oct. 20, 2014, at 27:21 (Plaintiff’s
counsel asserting that the DynaLantic court “was just wrong”).)
Before this Court at present are the parties’ cross-motions for summary
judgment, as well as the parties’ motions to limit or exclude the proffered testimony of
each other’s expert witnesses—commonly referred to as “Daubert motions” based on
the Supreme Court’s seminal ruling on the admissibility of expert testimony in Daubert
v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). As explained fully below,
this Court concludes that Defendants’ experts meet the relevant qualification standards
under Federal Rule of Evidence 702 and offer what appear to be reliable and relevant
opinions; therefore, Plaintiff’s Daubert motion to exclude Defendants’ proffered expert
testimony will be DENIED. By contrast, this Court finds sufficient reason to doubt the
qualifications of one of Plaintiff’s experts and to question the reliability of the
testimony of the other; consequently, Defendants’ Daubert motions to exclude
Plaintiff’s expert testimony will be GRANTED. With respect to the cross-motions for
2
summary judgment, this Court agrees with the DynaLantic court’s reasoning, and thus
this Court, too, concludes that Section 8(a) is constitutional on its face. Accordingly,
Plaintiff’s motion for summary judgment will be DENIED, Defendants’ cross-motion
for summary judgment will be GRANTED, and judgment will be entered in
Defendants’ favor. A separate order consistent with this memorandum opinion will
follow.
I. BACKGROUND
A. The Section 8(a) Program
Congress enacted the Small Business Act of 1953 (“the Act”), 15 U.S.C.
§§ 631–57s, in order to encourage and develop the “capacity of small business” in
America, and thereby to promote national “economic well-being” and “security[.]”
15 U.S.C. § 631(a) (1958). Section 8(a) of the Act grants the Small Business
Administration the authority to acquire procurement contracts from other government
agencies and to award or otherwise arrange for performance of those contracts by small
businesses “whenever [the agency] determines such action is necessary[.]” Id. § 637(a).
This authority remained “dormant for a decade” after the Act’s passage, DynaLantic,
885 F. Supp. 2d at 253, but over the course of many years and after a series of
executive orders and legislative amendments, see id. at 253–57, the current Section 8(a)
program emerged with the express purpose of helping socially and economically
disadvantaged individuals who own small businesses “compete on an equal basis in the
American economy[,]” 15 U.S.C. § 631(f)(2)(A) (2012).
The Section 8(a) program provides small businesses that socially and
economically disadvantaged individuals own—the Small Business Administration refers
to such businesses as “small disadvantaged businesses” or “SDBs,” see Small
3
Disadvantaged Business Program, 73 Fed. Reg. 57,490 (Oct. 3, 2008)—with valuable
“technological, financial, and practical assistance, as well as support through
preferential awards of government contracts[,]” DynaLantic, 885 F. Supp. 2d at 243;
see also 15 U.S.C. § 636(j)(10)(A); 13 C.F.R. § 124.404. 1 SDBs can receive myriad
types of assistance and support under the Section 8(a) program, including help
“develop[ing] and maintain[ing] comprehensive business plans[,]” 15 U.S.C.
§ 636(j)(10)(A)(i); “nonfinancial services” such as “loan packaging, [] financial
counseling, [] accounting and bookkeeping assistance, [] marketing assistance, and []
management assistance[,]” id. § 636(j)(10)(A)(ii); assistance “obtain[ing] equity and
debt financing[,]” id. § 636(j)(10)(A)(iii); and the opportunity to compete for certain
government contracts that are limited to Section 8(a) program participants, see
id. § 637(a)(1)(D). Moreover, once admitted into the Section 8(a) program,
participating SDBs may stay in the program for up to nine years, provided that they
continue to meet the eligibility criteria for qualifying for—and remaining in—the
program. See id. § 636(j)(10)(C); 13 C.F.R. § 124.2. Specifically, at all times
applicants and participants must: (1) be a “small” business, as that term is defined in
13 C.F.R. § 121, see 13 C.F.R. §§ 124.101, 124.102; (2) demonstrate their business’s
potential to succeed, see id. § 124.101; and (3) have a majority owner or owners who
are current U.S. residents and citizens of good character, and who are also “socially and
economically disadvantaged” as the statute defines those terms, id.
1
A business may obtain SDB status by virtue of applying for and participating in the Section 8(a)
program—and only SDBs may participate in the Section 8(a) program—however, a small business may
also be deemed an “SDB” for purposes of government contracting without participating in the Section
8(a) program. See, e.g., Small Disadvantaged Business Program, 73 Fed. Reg. at 57,491–92. In other
words, a small business must be an SDB to participate in the Section 8(a) program, but it need not
participate in the program to be an SDB.
4
The dispute in the instant case centers on the statutory definition of “socially
disadvantaged individuals.” Section 637 of Title 15 of the U.S. Code defines
“[s]ocially 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); see also id.§ 631(f)(1)(B) (individuals may be “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”). Pursuant to the statute, “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[.]” Id. § 631(f)(1)(C).
Thus, the statute establishes “a rebuttable presumption” that members of these
particular groups, and certain other groups, are “socially disadvantaged[,]” 13 C.F.R.
§ 124.103(b)(1), and if an individual business owner is not a member of a
presumptively socially disadvantaged group, then he or she “must establish individual
social disadvantage by a preponderance of the evidence[,]” id. § 124.103(c)(1). See
also id. § 124.103(c)(2) (explaining that sufficient “[e]vidence of individual social
disadvantage” has several “elements[,]” including “[a]t least one objective
distinguishing feature that has contributed to social disadvantage” and “[p]ersonal
experiences of substantial and chronic social disadvantage in American society”).
In addition to defining “socially disadvantaged individuals[,]” the statute also
defines “[e]conomically disadvantaged individuals[.]” 15 U.S.C. § 637(a)(6)(A).
These are “socially disadvantaged individuals whose ability to compete in the free
5
enterprise system has been impaired due to diminished capital and credit opportunities
as compared to others in the same business area who are not socially disadvantaged.”
Id. Factors that determine economically disadvantaged status include “income for the
past three years[,] . . . personal net worth, and the fair market value of all assets,
whether encumbered or not.” 13 C.F.R. § 124.104(c). As explained, a small business
that can demonstrate its ability to succeed and that is owned by an individual citizen of
good character who is considered socially and economically disadvantaged within the
statutory definitions is eligible to participate in the Section 8(a) program. See
id. § 124.101.
The Section 8(a) program is but “one of a number of government-wide programs
[that are] designed to encourage the issuance of procurement contracts to” certain small
businesses, DynaLantic, 885 F. Supp. 2d at 244 (citing 15 U.S.C. § 644), including
businesses that are owned by women, businesses that are owned by service-disabled
veterans, and businesses that are located in historically underutilized business zones,
known as “HUBZones.” See 15 U.S.C. § 637(m) (establishing procurement program for
woman-owned small businesses); id. § 657f (establishing procurement program for
small businesses owned by service-disabled veterans); id. § 657a (establishing
contracting assistance and procurement program for HUBZone small businesses). As
part of the legislative scheme that governs the Section 8(a) business development
program and similar programs directed toward developing opportunities for small
businesses in America, Congress has specifically directed the President to “establish
[annual] Government-wide goals for procurement contracts awarded to [various] small
business concerns[.]” Id. § 644(g)(1)(A). With respect to SDBs in particular, Congress
6
has specified that the goal for participation “shall be established at not less than 5
percent of the total value of all prime contract and subcontract awards for each fiscal
year.” Id. § 644(g)(1)(A)(iv). 2 The participation goals with respect to other small
business programs are similar—see, e.g., id. § 644(g)(1)(A)(v) (“not less than 5
percent” for woman-owned small businesses); id. § 644(g)(1)(A)(ii) (“not less than 3
percent” for small businesses owned by service-disabled veterans); id.
§ 644(g)(1)(A)(iii) (“not less than 3 percent” for HUBZone small businesses)—and all
of the statutory targets are “aspirational” and not mandatory, DynaLantic, 885 F. Supp.
2d at 244 (quotation marks omitted).
B. Rothe’s Claim
Rothe is a Texas corporation that operates in the computer services industry and
bids on and performs government procurement contracts on a nationwide basis. (See
Affidavit of Dale Patenaude (“Patenaude Aff.”), Ex. 1 to Pl.’s Compl., ECF No. 1-1, at
3; see also Defs.’ Statement of Material Facts & Resp. to Pl.’s SOF (“Defs.’ SOF”),
ECF No. 64-2, ¶ II.23; Pl.’s Resp. to Defs.’ Statement of Material Facts (“Pl.’s SOF
Resp.”), ECF No. 68-1, ¶ I.1.) 3 Rothe employs approximately 120 individuals (see
Patenaude Aff. at 3), and it allegedly qualifies as a woman-owned small business under
the Act and its accompanying regulations (see id.; Pl.’s SOF Resp. ¶ I.1). According to
Plaintiff, Rothe derives “[a]pproximately 85-90%” of its annual gross income from
government contracts. (Patenaude Aff. at 4; see also Pl.’s Statement of Material Facts
2
This five percent goal relates to all SDBs, not just those that are Section 8(a) participants, and thus
this figure includes, but is not limited to, procurement contracts awarded to Section 8(a) program
participants. See DynaLantic, 885 F. Supp. 2d at 244–45.
3
Page numbers throughout this memorandum opinion—except for deposition page numbers—refer to
those that the Court’s electronic filing system assigns.
7
(“Pl.’s SOF”), ECF No. 55-1, ¶ 24.) Specifically, Rothe bids on and performs DOD and
military contracts that, for the most part, fit into one of the following five North
American Industry Classification System (“NAICS”) codes: Custom Computer
Programming Services (541511); Computer Systems Design Services (541512);
Computer Facilities Management Services (541513); Other Computer Related Services
(541519); and Facilities Support Services (561210). (Patenaude Aff. at 3–4.) 4 Rothe
does not participate in the Section 8(a) program and does not allege that it has ever
applied to the program or otherwise sought certification as an SDB. (See Patenaude
Aff. at 2; Pl.’s SOF ¶ 18; see also Defs.’ SOF ¶ II.18.)
Rothe filed the instant action against the DOD and the Small Business
Administration on May 9, 2012. (See Compl.) The gravamen of Rothe’s complaint is
that the Section 8(a) program “prevents Rothe from bidding on [DOD] contracts” on the
basis of race in violation of Rothe’s rights under the equal protection component of the
Due Process Clause of the Fifth Amendment (id. ¶ 2), and that the program is an
unconstitutional delegation of authority to the Small Business Administration “to make
or enact racial classifications” (id. ¶ 30). Accordingly, Rothe seeks (1) a declaratory
judgment that the definition of “socially disadvantaged individuals” as set forth in the
4
The NAICS code system “is the standard used by Federal statistical agencies in classifying business
establishments for the purpose of collecting, analyzing, and publishing statistical data related to the
U.S. business economy.” U.S. Census Bureau, North American Industry Classification System:
Introduction to NAICS, http://www.census.gov/eos/www/naics/index.html (last visited June 5, 2015). It
is a “2- through 6-digit hierarchical classification system,” meaning that “[e]ach digit in the code is
part of a series of progressively narrower categories, and the more digits in the code signify greater
classification detail.” U.S. Census Bureau, North American Industry Classification System: Frequently
Asked Questions, http://www.census.gov/eos/www/naics/faqs/faqs.html (last visited June 5, 2015). In
each code, “[t]he first two digits designate the economic sector, the third digit designates the subsector,
the fourth digit designates the industry group, the fifth digit designates the NAICS industry, and the
sixth digit designates the national industry.” Id. Some federal agencies use NAICS codes in the course
of awarding government contracts to small businesses. See, e.g., 15 U.S.C. § 644(a).
8
statutes pertaining to the Section 8(a) program is unconstitutional on its face (see
id. ¶¶ 52–54); (2) a permanent injunction that prevents Defendants from using the
“socially disadvantaged individuals” definition to exclude Rothe from bidding on
contracts reserved for Section 8(a) participants (see id. ¶¶ 56–59); and (3) an award of
reasonable attorneys’ fees, costs, and expenses (see id. ¶¶ 61–64).
Notably, as mentioned earlier, the legal claims in Rothe’s complaint are nearly
identical to the facial constitutional claim in the second amended complaint that was
filed in DynaLantic Corp. v. Department of Defense, a case that was pending in this
district when Rothe’s complaint was filed. See Second Am. Compl., DynaLantic v.
Dep’t of Defense, 885 F. Supp. 2d 237 (D.D.C. 2012) (No. 95-cv-2301) (“DynaLantic’s
Second Am. Compl.”). Given the similarity of the two cases—and also the fact that the
DynaLantic court considered and reached the merits of the constitutional claim—a brief
description of the facts, circumstances, and holding of DynaLantic is warranted.
C. DynaLantic Corp. v. Department of Defense
In DynaLantic, a small business that bid on and performed contracts and
subcontracts in the military simulation and training industry—but that did not
participate in the Section 8(a) program and was not an SDB—sued the DOD, the Small
Business Administration, and the Department of the Navy alleging, inter alia, that the
statutory provisions of Section 8(a) limiting certain contract awards to “small business
concerns owned and controlled by ‘socially and economically disadvantaged
individuals’” were unconstitutional on their face and also as applied to the industry in
which the plaintiff operated. DynaLantic’s Second Am. Compl. ¶ 9; see also
DynaLantic, 885 F. Supp. 2d at 246–47. Specifically, DynaLantic argued that the
challenged provisions prevented it and other small businesses “from competing for
9
federal procurements . . . on the basis of race, thereby ‘violat[ing] DynaLantic’s rights
under . . . the equal protection component of the Due Process Clause of the Fifth
Amendment of the Constitution.’” DynaLantic, 885 F. Supp. 2d at 247 (second
alteration in original) (quoting DynaLantic’s Second Am. Compl. ¶ 23). After
extensive discovery, briefing, and submissions by amici, the Court (Sullivan, J.) granted
summary judgment on the facial constitutional claim in favor of the government, and
granted summary judgment on the as-applied claim to DynaLantic. See id. at 248–83.
With respect to the applicable legal standards, the Court explained that to prevail
on its facial constitutional claim DynaLantic would have to “‘establish that no set of
circumstances exist[ed] under which the [challenged provisions] would be valid.’”
Id. at 249 (quoting United States v. Salerno, 481 U.S. 739, 745 (1987)). Moreover,
because constitutional validity in a particular circumstance turned on the application of
strict scrutiny to the admittedly race-conscious provisions at issue, the government
would have to show both the existence of a compelling governmental interest
underlying the challenged provisions (supported by a strong basis in evidence that race-
based remedial action was required to further such interest) and that the challenged
provisions were narrowly tailored to achieve the articulated compelling interest. See
id. at 250–51.
The Court then engaged in a detailed examination of the challenged statutory
provisions, the arguments of the parties and their amici, relevant precedent, and the
extensive record evidence, including disparity studies on racial discrimination in federal
contracting across various industries. See id. at 251–80, 283–91. Ultimately, the Court
concluded “that Congress ha[d] a compelling interest in eliminating the roots of racial
10
discrimination in federal contracting, funded by federal money[,]” and also that the
government “ha[d] established a strong basis in evidence to support its conclusion that
remedial action was necessary to remedy that discrimination” insofar as it provided
“extensive evidence of discriminatory barriers to minority business formation . . . [and]
minority business development,” as well as “significant evidence that, even when
minority businesses are qualified and eligible to perform contracts in both the public
and private sectors, they are awarded these contracts far less often than their similarly
situated non-minority counterparts.” Id. at 279. The Court also found that DynaLantic
had failed “to present credible, particularized evidence that undermined the
government’s compelling interest [or that] demonstrated that the government’s evidence
‘did not support an inference of prior discrimination and thus a remedial purpose.’”
Id. (quoting Wygant v. Jackson Bd. of Educ., 476 U.S. 267, 293 (1986) (O’Connor, J.,
concurring)).
With respect to narrow tailoring, the DynaLantic court considered several
factors, including: “(1) the efficacy of alternative, race-neutral remedies, (2) flexibility,
(3) over- or under-inclusiveness of the program, (4) duration, (5) the relationship
between numerical goals and the relevant labor market, and (6) the impact of the
remedy on third parties.” Id. at 283 (citing United States v. Paradise, 480 U.S. 149,
171 (1987) (plurality and concurring opinions)). Upon consideration of all of these
factors, see id. at 283–91, the Court concluded that “the Section 8(a) program is
narrowly tailored on its face[,]” id. at 291. Consequently, because the government had
demonstrated that Section 8(a)’s race-conscious provisions were narrowly tailored to
further a compelling state interest, the Court held that strict scrutiny was satisfied in the
11
context of “the construction industry . . . [and] in other industries such as architecture
and engineering, and professional services as well[,]” id. at 279–80, and because
DynaLantic had thus failed to meet its burden to show that the challenged provisions
were unconstitutional in all circumstances, the Court held that Section 8(a) was
constitutional on its face and entered summary judgment on the facial constitutional
claim in the government’s favor, see id. at 293. 5
The parties in DynaLantic cross-appealed to the United States Court of Appeals
for the District of Columbia Circuit in October of 2012. See Defs.’ Notice of Appeal,
DynaLantic v. Dep’t of Defense, 885 F. Supp. 2d 237 (D.D.C. 2012) (No. 95-cv-2301),
ECF No. 252; Pl.’s Notice of Cross-Appeal, DynaLantic v. Dep’t of Defense, 885 F.
Supp. 2d 237 (D.D.C. 2012) (No. 95-cv-2301), ECF No. 254. On January 31, 2014, this
Court stayed proceedings in the instant case pending resolution of the DynaLantic
appeal. (See Order, Dec. 23, 2013, ECF No. 43, at 1.) However, on February 11, 2014,
the parties in this matter notified this Court that the D.C. Circuit had dismissed
DynaLantic after the parties in that case reached a settlement and withdrew their appeal.
(See Joint Notice of Dismissal of DynaLantic & Status Report, ECF No. 47, at 1–2.)
D. Procedural History
As noted, Rothe filed its action challenging the facial constitutionality of the
Section 8(a) program on May 9, 2012, while the DynaLantic case was still pending in
5
The Court reached a different conclusion with respect to DynaLantic’s as-applied challenge.
Specifically, because “defendants concede[d] that they d[id] not have evidence of discrimination in [the
military simulation and training] industry[,]” the Court concluded that “the government ha[d] not met
its burden to show a compelling interest in remedying discrimination in [that] industry[.]” DynaLantic,
885 F. Supp. 2d at 280, 283. Consequently, the Court granted summary judgment in DynaLantic’s
favor on its as-applied challenge. See id. at 282 (“The fact that Section 8(a) is constitutional on its face
. . . does not give the [government] carte blanche to apply it without reference to the limits of strict
scrutiny. Rather, agencies have a responsibility to decide if there has been a history of discrimination
in the particular industry at issue[.]”).
12
the district court—both actions were treated as related cases and assigned to the same
district judge. That judge permitted discovery to proceed in the instant matter at the
parties’ urging (see Scheduling Order, Sept. 18, 2012, ECF No. 23, at 2; see also Pl.’s
Suppl. Resp. to the Court’s Minute Orders & Scheduling Recommendations, ECF
No. 21, at 4; Defs.’ Suppl. Resp. to the Court’s Minute Orders & Scheduling
Recommendations, ECF No. 22, at 5), and discovery continued even after the
DynaLantic opinion upholding the facial constitutionality of the Section 8(a) program
issued. The instant action was transferred to the undersigned on April 5, 2013, while
discovery was still underway. (See Minute Entry, Apr. 5, 2013; see also Am.
Scheduling Order, ECF No. 24, at 2; Minute Order, Dec. 18, 2012 (extending discovery
period); Minute Order, Mar. 25, 2013 (same).)
During the discovery period, the parties prepared and exchanged expert reports
regarding evidence of discrimination in government contracting. Defendants retained
two experts, who testified, broadly speaking, that socially disadvantaged and minority-
owned small businesses are significantly less likely, statistically, to win government
contracts than their non-minority and non-SDB counterparts (see Report of Defs.’
Expert Robert N. Rubinovitz (“Rubinovitz Report”), ECF No. 44-3, at 12; Additional
Analysis by Dr. Robert Rubinovitz (“Rubinovitz Suppl. Report”), ECF No. 44-4, at 2),
and that minority-owned businesses across the country are substantially underutilized in
government contracting—a phenomenon that, according to these experts, cannot be
explained by nondiscriminatory factors (see Report of Defs.’ Expert Jon Wainwright
(“Wainwright Report”), ECF No. 46-3, at 27, 97). Plaintiff also engaged two experts,
and Plaintiff’s experts maintained that Defendants’ experts’ conclusions were incorrect
13
largely because their data and methods were flawed. (See, e.g., Report of Pl.’s Expert
Dale Patenaude (“Patenaude Report”), ECF No. 49-2, at 2; Report of Pl.’s Expert John
Charles Sullivan (“Sullivan Report”), ECF No. 49-4, at 11–12, 23–37.)
A series of Daubert motions followed: specifically, Rothe filed a single motion
to exclude or limit the testimony of Defendants’ experts Robert Rubinovitz and Jon
Wainwright (see Pl.’s Mot. to Exclude or Limit Test. of Defs.’ Experts & Mem. in
Supp. (“Pl.’s Daubert Br.”), ECF No. 45) on the grounds that their testimony is both
unreliable and irrelevant to the factual matters at hand. Defendants filed two separate
motions to exclude the reports and testimony of Plaintiff’s experts Dale Patenaude and
John Charles Sullivan. (See Defs.’ Mot. in Limine to Exclude the Expert Reports &
Test. of Pl.’s Expert Dale Patenaude (“Defs.’ Patenaude Daubert Mot.”), ECF No. 44;
Defs.’ Mot. in Limine to Exclude the Testimony and Ops. of Pl.’s Expert John Charles
Sullivan, Esq. (“Defs.’ Sullivan Daubert Mot.”), ECF No. 46.) In essence, Defendants
contend that Plaintiff’s experts are not qualified to testify as experts and that their
proffered testimony is unreliable. (See Defs.’ Mem. in Supp. of Defs.’ Patenaude
Daubert Mot. (“Defs.’ Patenaude Daubert Br.”), ECF No. 44-1, at 9–19; Defs.’ Mem. in
Supp. of Defs.’ Sullivan Daubert Mot. (“Defs.’ Sullivan Daubert Br.”), ECF No. 46-1,
at 9–20.)
Rothe then filed a motion for summary judgment with respect to its claim that
the definition of “socially disadvantaged individual” as it appears in the Act and is used
in the context of administering the Section 8(a) program is unconstitutional on its face.
(See Pl.’s Mot. for Summ. J., ECF No. 55.) Rothe’s motion argues, first, that Section
8(a)’s definition of socially disadvantaged individuals “is unconstitutional racial
14
balancing, for which there is no compelling interest, and for which narrow tailoring is
impossible”; and second, that the definition violates the nondelegation doctrine insofar
as it “lack[s] any intelligible principle to limit the Executive’s discretion in deciding
whether racial, ethnic or cultural bias has occurred or even what constitutes a racial,
ethnic, or cultural group.” (Pl.’s Mem. in Supp. of Pl.’s Mot. for Summ. J. (“Pl.’s MSJ
Br.”), ECF No. 56, at 7.)
Defendants responded by filing a cross-motion for summary judgment (Defs.’
Cross-Mot. for Summ. J., ECF No. 64), in which Defendants maintain that “Rothe’s
facial challenge is identical to that brought and rejected in DynaLantic . . . and fails for
the same reasons” (Defs.’ Mem. in Supp. of Defs.’ Cross-Mot. for Summ. J. & Resp. to
Pl.’s Mot. for Summ. J. (“Defs.’ MSJ Br. & Resp.”), ECF No. 64-1, at 13).
Specifically, Defendants assert that (1) the government has a compelling “interest in
‘breaking down barriers to minority business development created by discrimination
and its lingering effects’” (id. (quoting DynaLantic, 885 F. Supp. 2d at 251)); (2) there
is “a ‘strong basis in evidence to support [the government’s] conclusion that remedial
action was necessary’” to further that interest (id. (quoting DynaLantic, 885 F. Supp. 2d
at 279)); and (3) the statute is narrowly tailored and “designed to minimize the burden
on non-minority firms” (id. at 14 (citing DynaLantic, 885 F. Supp. 2d at 290)).
Defendants also argue that the Section 8(a) program conforms to the nondelegation
doctrine because the statute defines “socially disadvantaged individuals” and sets forth
Congress’ relevant findings, and it also articulates the policies underlying the
program—all of which serve to guide the Small Business Administration in
implementing the program. (See id. at 90.)
15
This Court held a hearing on the parties’ Daubert and cross summary judgment
motions on October 20, 2014.
II. DAUBERT MOTIONS
This Court will address the parties’ Daubert arguments first, because “[i]f the
Court finds [an expert’s] opinions to be clearly unreliable, it may disregard his reports
in deciding whether plaintiffs have created a genuine issue of material fact.”
McReynolds v. Sodexho Marriott Servs., Inc., 349 F. Supp. 2d 30, 35 (D.D.C. 2004)
(citing Munoz v. Orr, 200 F.3d 291, 301 (5th Cir. 2000)); see also Lewis v. Booz-Allen
& Hamilton, Inc., 150 F. Supp. 2d 81, 84 (D.D.C. 2001) (addressing evidentiary
motions first, “[s]ince a motion for summary judgment requires an examination of the
entire record, including all pleadings and all admissible evidence”).
As concerns Defendants’ experts, Rothe contends that Rubinovitz’s and
Wainwright’s testimony is irrelevant because it has not been submitted to Congress (see
Pl.’s Daubert Br. at 4), and that it contains both inadmissible legal conclusions—such
as whether the strong basis in evidence requirement has been met (see id. at 10, 12)—
and unreliable opinions regarding statistical facts (see id. at 16–17 (arguing that
Defendants’ experts have analyzed contracting data using fewer than all six-digits of
only some NAICS codes such that not every industry and subsector is captured)). For
their part, Defendants contend that neither Patenaude nor Sullivan qualifies as an expert
in any field of scientific knowledge that is pertinent to the instant case (see Defs.’
Patenaude Daubert Br. at 9–12; Defs.’ Sullivan Daubert Br at 9–14), and that
Patenaude’s and Sullivan’s testimony is unreliable because both experts rely on
inaccurate data and employ methods in their critiques of Rubinovitz and Wainwright
that are speculative and scientifically unproven (see Defs.’ Patenaude Daubert Br. at
16
12–19; Defs.’ Sullivan Daubert Br. at 14–20). Defendants further contend that
Sullivan’s testimony contains impermissible legal opinions, such as whether the
disparity studies at issue are legally sufficient to justify the Section 8(a) program. (See
Defs.’ Sullivan Daubert Br. at 20.)
For the reasons that follow, this Court finds that Rubinovitz’s and Wainwright’s
expert reports are reliable and potentially helpful to the trier of fact, and thus properly
admitted, while Patenaude’s and Sullivan’s testimony fails to conform with the
applicable legal standards related to expert qualifications and reliability, and therefore
must be excluded.
A. Legal Standard For Admitting Expert Evidence
Federal Rule of Evidence 702 governs the admissibility of expert evidence. It
provides that:
A witness who is qualified as an expert by knowledge, skill,
experience, training, or education may testify in the form of
an opinion or otherwise if:
(a) the expert’s scientific, technical, or other specialized
knowledge will help the trier of fact to understand the
evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and
methods; and
(d) the expert has reliably applied the principles and
methods to the facts of the case.
Fed. R. Evid. 702. Rule 702 “imposes a special obligation on a trial judge to ‘ensure
that any and all scientific testimony . . . is not only relevant, but reliable.’” Kumho Tire
Co. v. Carmichael, 526 U.S. 137, 147 (1999) (alteration in original) (quoting Daubert,
509 U.S. at 589). Thus, federal courts have a “basic gatekeeping obligation” with
respect to expert testimony. Id.17
Rule 702 requires that an expert be qualified to testify on the basis of
“knowledge, skill, experience, training, or education[,]” and thus encompasses “not
only experts in the strictest sense of the word, e.g., physicians, physicists, and
architects, but also the large group sometimes called ‘skilled’ witnesses, such as
bankers or landowners testifying to land values.” Fed. R. Evid. 702 advisory
committee’s note (1972) (internal quotation marks and citation omitted). While “a
person who holds a graduate degree typically qualifies as an expert in his or her
field[,]” Khairkhwa v. Obama, 793 F. Supp. 2d 1, 11 (D.D.C. 2011), such formal
education is not required and “an expert may still be qualified on the basis of his or her
practical experience or training[,]” Robinson v. District of Columbia, No. 09-cv-2294,
2014 WL 6778330, at *4 (D.D.C. Dec. 2, 2014). However, “[i]f the witness is relying
solely or primarily on experience, then the witness must explain how that experience
leads to the conclusion reached, why that experience is a sufficient basis for the
opinion, and how that experience is reliably applied to the facts.” Fed. R. Evid. 702
advisory committee’s note (2000). Regardless of the basis on which a witness purports
to qualify as an expert, as part of its gatekeeping function the court must assess whether
a proposed expert possesses “a reliable basis in the knowledge and experience of [the
relevant] discipline.” Daubert, 509 U.S. at 592.
Once the court is satisfied that the witness is an expert within the meaning of
Rule 702, “[u]nder Daubert the district court is required to address two questions, first
whether the expert’s testimony is based on ‘scientific knowledge,’ and second, whether
the testimony ‘will assist the trier of fact to understand or determine a fact in issue.’”
Meister v. Med. Eng’g Corp., 267 F.3d 1123, 1126 (D.C. Cir. 2001) (quoting Daubert,
18
509 U.S. at 592). With respect to the first prong, “the district court’s focus is on the
methodology or reasoning employed.” Ambrosini v. Labarraque, 101 F.3d 129, 133
(D.C. Cir. 1996). Specifically, the court must make “a preliminary assessment of
whether the reasoning or methodology underlying the testimony is scientifically valid
and of whether that reasoning or methodology properly can be applied to the facts in
issue.” Daubert, 509 U.S. at 592–93; see also Ambrosini, 101 F.3d at 133 (“‘In short,
the requirement that an expert’s testimony pertain to “scientific knowledge” establishes
a standard of evidentiary reliability.’” (quoting Daubert, 509 U.S. at 590)).
There are several factors that courts typically consider in making a scientific
validity determination: “(1) whether the theory or technique can be and has been tested;
(2) whether the theory or technique has been subjected to peer review and publication;
(3) the method’s known or potential rate of error; and (4) whether the theory or
technique finds general acceptance in the relevant scientific community.” Ambrosini,
101 F.3d at 134 (citing Daubert, 509 U.S. at 593–94.) This “inquiry is a ‘flexible one,’
no one factor is dispositive, and the four-factor list is not exhaustive.” United States v.
Machado-Erazo, 950 F. Supp. 2d 49, 52 (D.D.C. 2013) (internal quotation marks and
citation omitted). Moreover, whatever factors a court considers, “[t]he trial judge in all
cases of proffered expert testimony must find that [the testimony] is properly grounded,
well-reasoned, and not speculative before it can be admitted.” Fed. R. Evid. 702
advisory committee’s note (2000).
The second Daubert prong relates to relevance and is fairly straightforward. See
Ambrosini, 101 F.3d at 134 (citing Daubert, 509 U.S. at 593–94). “The district court
must determine whether the proffered expert testimony ‘is sufficiently tied to the facts
19
of the case that it will aid the [factfinder] in resolving a factual dispute.’” Id. (quoting
Daubert, 509 U.S. at 591). Where, as here, a party moves to exclude expert testimony,
“[t]he party seeking to introduce expert testimony must demonstrate its admissibility by
a preponderance of the evidence.” Harris v. Koenig, 815 F. Supp. 2d 6, 8 (D.D.C.
2011) (citing Daubert, 509 U.S. at 592 n.10). “The presumption under the Rules is that
expert testimony is admissible once a proponent makes the requisite threshold showing;
further disputes go to weight, not admissibility.” Machado-Erazo, 950 F. Supp. 2d
at 52.
B. The Proffered Expert Evidence In The Instant Case
1. Rubinovitz’s Testimony Is Reliable, Relevant, And Admissible
Robert Rubinovitz holds a Ph.D. in economics from the Massachusetts Institute
of Technology and currently serves as the Deputy Chief Economist at the United States
Department of Commerce. (See Rubinovitz Report at 2.) Using regression analysis,
Rubinovitz claims to have isolated the effect of minority ownership on the likelihood of
a small business receiving government contracts. (See id. at 10–12; see also Rubinovitz
Suppl. Report at 2.) 6 Specifically, Rubinovitz used a “logit model” (Rubinovitz Report
at 10), to examine government contracting data for fiscal year 2012 that he collected
from the General Services Administration’s System for Award Management, the Federal
Procurement Data System, the Small Business Administration, and other public and
private sources (see id. at 4–9 (discussing sources)), in order to determine “whether the
data show any difference in the odds of contracts being won by minority-owned small
6
Regression analysis is a widely accepted statistical tool and a common evidentiary feature in federal
courts, particularly in the context of discrimination cases. See, e.g., Bazemore v. Friday, 478 U.S. 385,
400–01 (1986) (discussing admissibility of regression analyses in Title VII cases).
20
businesses, particularly those identified as SDBs and those that are part of the 8(a)
program, relative to other small businesses” (id. at 10). Rubinovitz controlled for other
variables that could “influence the odds of whether or not a given firm wins a contract”
(id. at 11)—such as business size, age, and level of security clearance (see id.)—and
concluded that “the odds of minority-owned small firms and non-8(a) SDB firms
winning contracts were lower than small non-minority and non-SDB firms” (id. at 12).
In particular, “the odds of an SDB firm winning a contract is roughly 11 percent lower
than other types of small businesses, while small minority-owned firms, regardless of
whether they are SDBs or in the 8(a) program, had roughly 30 percent lower odds of
winning a contract than other firms.” (Id.) In addition, Rubinovitz found that “non-
8(a) minority-owned SDBs are statistically significantly less likely to win a contract in
industries accounting for 94.0% of contract actions, 93.0% of dollars awarded, and in
which 92.2% of non-8(a) minority-owned SDBs are registered[,]” and that “[t]here is no
industry where non-8(a) minority owned SDBs have a statistically significant advantage
in terms of winning a contract from the federal government.” (Rubinovitz Suppl.
Report at 2.) This Court has considered Rothe’s objections to Rubinovitz’s testimony,
and concludes that the testimony is fully admissible under Rule 702.
First of all, Rubinovitz’s qualifications to testify as an expert are undisputed (see
Hr’g Tr. at 17:18–18:1 (Plaintiff’s counsel conceding that Defendants’ experts are
qualified)), and this Court finds that Rubinovitz is, indeed, qualified “by knowledge,
skill, experience, training, [and] education[,]” Fed. R. Evid. 702. As for the reliability
of Rubinovitz’s testimony, this Court rejects Rothe’s contention that Rubinovitz’s
expert opinion is based on insufficient data, i.e., that his analysis of data related to a
21
subset of the relevant industry codes is too narrow to support his scientific conclusions.
(See, e.g., Pl.’s Daubert Br. at 16–17.) It is well established that a court may not
exclude an expert’s otherwise reliable and relevant testimony simply because, without
more, the testimony is insufficient to prove a proponent’s entire case. See, e.g.,
McReynolds, 349 F. Supp. 2d at 35 (“‘[T]he question before [the Court] is not whether
the reports proffered by plaintiffs prove the entire case; it is whether they were prepared
in a reliable and statistically sound way, such that they contained relevant evidence that
a trier of fact would have been entitled to consider.’” (second alteration in original)
(quoting Adams v. Ameritech Servs., Inc., 231 F.3d 414, 425 (7th Cir. 2000))).
Moreover, Rubinovitz specifically addresses Rothe’s critique about his data set,
explaining that, from a mathematical perspective, excluding certain NAICS codes and
analyzing data at the three-digit level actually increases the reliability of his results.
For example, because “NAICS is a hierarchical classification system” and “industry
classifications become more narrowly defined—and more sparsely populated” as “more
digits are added to the code,” Rubinovitz explains that he opted to “use codes at the
three-digit level as a compromise[,] balancing the need to have sufficient data in each
industry grouping and the recognition that many firms can switch production within the
broader three-digit category.” (Rubinovitz Report at 5.) Rubinovitz also excluded
“[c]ertain NAICS industry groups” from his regression analyses “because of incomplete
data, irrelevance, or because data issues in a given NAICS group prevented the
regression model from producing reliable estimates[.]” (Id. at 7; see also id. at 8
(listing NAICS codes not included in analyses).) This Court finds that Rubinovitz’s
reasoning with respect to the exclusions and assumptions he makes in the analysis are
22
fully explained and scientifically sound; thus, his exclusions are not a valid basis for
concluding that his expert testimony is unreliable. Cf. Daubert, 509 U.S. at 590(“Proposed testimony must be supported by appropriate validation—i.e., ‘good
grounds,’ based on what is known.”).
Rothe also contends that, even if Rubinovitz’s testimony is reliable, it should be
deemed irrelevant to this Court’s assessment of Section 8(a)’s constitutionality because
it is new evidence, in the sense that Rubinovitz’s testimony was not before Congress at
the time it enacted or reauthorized Section 8(a). (See Pl.’s Daubert Br. at 4 (“The law
is now very clear that post-reauthorization evidence is precluded and that experts are
neither required for, nor relevant to, the required causal relationships between the
alleged data before Congress and the statutory racial classification that Congress
enacted.” (citing Rothe Dev. Corp. v. Dep’t of Defense, 545 F.3d 1023, 1031, 1040–41
(Fed. Cir. 2008))).) The issue of the relevance of post-enactment evidence is one that
has been raised repeatedly in the context of constitutional challenges to federal statutes,
see, e.g., Adarand Constructors, Inc. v. Slater, 228 F.3d 1147, 1166 (10th Cir. 2000);
Eng’g Contractors Ass’n of S. Fla., Inc. v. Metro. Dade Cnty., 122 F.3d 895, 911–12
(11th Cir. 1997); Contractors Ass’n of E. Pa., Inc. v. City of Philadelphia, 6 F.3d 990,
1003–04 (3d Cir. 1993), and “nearly every circuit to consider this question has held that
reviewing courts” need not limit themselves to the particular evidence that Congress
relied upon when it enacted the statute at issue, DynaLantic, 885 F. Supp. 2d at 257.
Thus, although Rothe is correct to point out that, where Congress “makes [a] racial
distinction [it] must have had a strong basis in evidence to conclude that remedial
action was necessary before it embarks on an affirmative action program[,]” Shaw v.
23
Hunt, 517 U.S. 899, 910 (1996) (emphasis in original) (internal quotation marks and
citation omitted); (see also Pl.’s MSJ Br. at 15), this statement of the Supreme Court
does not mean that post-enactment evidence is irrelevant to constitutional review;
indeed, as the DynaLantic court concluded, “[p]ost-enactment evidence is particularly
relevant when, as here, the statute is over thirty years old and the evidence used to
justify Section 8(a) is stale for purposes of determining a compelling interest in the
present[,]” DynaLantic, 885 F. Supp. 2d at 258. This Court agrees, and it too concludes
that Rothe’s post-enactment relevance argument is rendered even less persuasive given
the fact that the Act requires the Small Business Administration to “report annually to
Congress on the status of small disadvantaged businesses generally and the Section 8(a)
program in particular[,]” and “thus, the statute itself contemplates that Congress will
review the 8(a) program on a continuing basis.” Id. 7
This Court also disagrees with Rothe’s assertion that Rubinovitz’s testimony
should be excluded as irrelevant because it contains an inadmissible legal conclusion.
(See Pl.’s Daubert Br. at 12.) Rothe points to an excerpt from Rubinovitz’s deposition
where Rubinovitz was asked if the results of his analyses are “consistent with a finding
that SDBs face discrimination” (id. (citation omitted)), and Rubinovitz answered in the
affirmative—“[i]t would be consistent with that finding, yes” (id. (citation omitted)).
Rothe insists that such testimony “cannot properly assist the trier of fact” in
7
The Supreme Court’s opinion in Shelby County v. Holder, 133 S. Ct. 2612 (2013), which struck down
the Voting Rights Act’s formula for selecting jurisdictions subject to preclearance procedures, is not to
the contrary. In Shelby County, the Supreme Court found that Congress reverse-engineered the formula
to cover particular jurisdictions rather than base the formula on compiled record evidence, Shelby
County, 133 S. Ct. at 2629, and the Court did not even discuss, much less rule upon, the issue of the
admissibility of post-enactment evidence. Consequently, Rothe’s reliance on Shelby County in this
context is misplaced. (See, e.g., Pl.’s MSJ Br. at 16 (“The Shelby County case reversed and clearly
rejected the approval of post-enactment evidence by the D.C. Circuit Court of Appeals.”).)
24
understanding the evidence or determining facts in issue and thus is not relevant under
Daubert. (Id. at 2); see also Burkhart v. Wash. Metro. Area Transit Auth., 112 F.3d
1207, 1212 (D.C. Cir. 1997). But it is clear beyond cavil that an expert may give “his
‘opinion as to facts that, if found, would support a conclusion that the legal standard at
issue was satisfied[.]’” Kapche v. Holder, 677 F.3d 454, 464 (D.C. Cir. 2012) (quoting
Burkhart, 112 F.3d at 1212–13). And Rothe has not demonstrated that Rubinovitz did
anything more than that here. That is, Rubinovitz was not asked directly to state his
opinion on the legal issue—i.e., whether SDBs face discrimination sufficient to justify
race-based remedial action—but instead, the carefully-worded question asked
Rubinovitz to opine as to whether the results of his analysis were “consistent” (or,
presumably, inconsistent) with the presence of discrimination. (Pl.’s Daubert Br. at 12
(citation omitted).) In the absence of any binding precedents that cast doubt on the
admissibility of Rubinovitz’s answer, this Court finds that Rubinovitz’s testimony is
relevant insofar as it will assist the factfinder in determining whether the data presented
shows that the applicable legal standards in this case have been met.
In sum, Rubinovitz qualifies as an expert, and his testimony is both reliable and
relevant. Therefore, this Court will admit and consider Rubinovitz’s expert testimony
when evaluating the parties’ cross-motions for summary judgment.
2. Wainwright’s Testimony Is Reliable, Relevant, And Admissible
Defendants’ second expert witness, Jon Wainwright, is a senior vice president at
NERA Economic Consulting and holds a Ph.D. in economics from the University of
Texas at Austin. (See Wainwright Report at 7.) Wainwright represents that he has
“served as the project director and principal investigator for more than 30 studies of
business discrimination” (id.), and he has also testified before Congress regarding
25
business discrimination on several occasions (see id. at 8). Wainwright’s report in the
instant case primarily concerns disparity studies, which are studies designed to measure
the availability and utilization of minority-owned businesses (“MBEs”) in government
contracting. (See id. at 13 (“A disparity analysis of public spending is simply a
comparison of MBE utilization to MBE availability in various categories of contracting
relevant to a given agency.”).) Wainwright reviewed the results of 107 studies
conducted since the year 2000, all but 32 of which were submitted to Congress. (See id.
at 16.) Specifically, Wainwright examined the disparity indexes for these studies,
which he calculated “by dividing the respective MBE utilization percentage by its
associated MBE availability percentage, and multiplying the result by 100.” (Id. at 28.)
In his expert report, Wainwright explains that “[a] disparity index of 100 or more
indicates that MBEs are being utilized at or above their estimated availability level[,]”
while “[a] disparity index of less than 100 indicates that MBEs are being utilized below
their estimated availability level.” (Id.) Significantly for present purposes, Wainwright
states that “[a] disparity index of 80 or lower is commonly taken as a strong indicator
that discrimination is adversely affecting MBEs.” (Id. (citing 29 C.F.R. § 1607.4(d)).)
In Wainwright’s opinion, the disparity studies he examined share a “widespread finding
of substantial underutilization of MBEs throughout the United States” across several
industries. (Id. at 27.)
This Court has considered the proffered expert testimony and the relevant
admissibility factors and finds that Wainwright’s testimony is admissible. Rothe does
not contest that Wainwright is qualified to testify as an expert (see Hr’g Tr. at 17:18–
18:1), and Defendants have demonstrated that Wainwright’s testimony is both reliable
26
and relevant. In particular, Wainwright’s clearly-explained methodology appears to be
scientifically valid, and his testimony regarding such a large body of record evidence
will assist the factfinder in determining whether the data shows that the applicable legal
standards in this case have been satisfied. See Ambrosini, 101 F.3d at 134.
Rothe’s arguments to the contrary largely mirror the arguments Rothe makes in
attacking Rubinovitz’s testimony, and are similarly unpersuasive. For instance, Rothe
once again contends that post-enactment evidence is inadmissible per se. (See, e.g.,
Pl.’s Daubert Br. at 4 (“The reports—and thus the testimony—of Defendants’ experts
were never placed before or considered by Congress, which renders them irrelevant as a
matter of United States Constitutional law, and therefore inadmissible under [the]
Federal Rules of Evidence[.]” (citations omitted)).) As explained above, this Court
rejects Rothe’s argument against post-enactment evidence and adopts instead the
DynaLantic court’s holding that such evidence is not only admissible but also
particularly relevant in the circumstances presented here. See DynaLantic, 885 F. Supp.
2d at 258. Consequently, this Court also rejects Rothe’s argument that, to the extent
that Wainwright’s expert “report mixes disparity studies that were allegedly before
Congress with ones that were not[,]” Wainwright’s testimony is unreliable and
inadmissible. (Pl.’s Daubert Br. at 15.)
Rothe further maintains that Wainwright’s testimony is inadmissible because
“the final paragraph of Mr. Wainwright’s report is a legal conclusion.” (Id. at 10; see
also id. (“The Wainwright report, at best, is ultimately the same legal conclusion the
Dynalantic court drew[.]”).) In that paragraph, Wainwright concludes that (1) “the
studies submitted to Congress, taken as a whole, provide strong evidence of large,
27
adverse, and often statistically significant disparities between minority participation in
business enterprise activity and the availability of those businesses”; (2) “these
disparities are not explained solely, or even largely, by differences in factors other than
race and sex that are untainted by discrimination”; and (3) “these disparities therefore
are consistent with the presence [of] discrimination in the business market.”
(Wainwright Report at 97.) Contrary to Rothe’s assertion, Wainwright is not testifying
that Section 8(a) survives strict scrutiny; instead, he is offering his expert opinion about
what, if anything, the studies he examined demonstrate. (See, e.g., id. at 7 (explaining
that the studies “contain significant evidence of large and adverse disparities facing
minority business enterprises” and that such disparities “are consistent with the
presence of discrimination and its lingering effects in the small business contracting
environment”).) Even setting aside the fact that the appropriate remedy for an alleged
statement of legal opinion is to exclude only that particular portion of testimony, see,
e.g., Halcomb v. Wash. Metro. Area Transit Auth., 526 F. Supp. 2d 24, 27 (D.D.C.
2007) (excluding expert’s opinions only “to the extent that they are phrased in terms of
inadequately explored legal criteria or otherwise tell the [trier of fact] what result to
reach” (internal quotation marks and citation omitted)), Wainwright’s “opinion[s] as to
facts that, if found, would support a conclusion that the legal standard at issue [has
been] satisfied” may be admitted as expert testimony when all other requirements for
admissibility are met, as explained above, Kapche, 677 F.3d at 464 (internal quotation
marks and citation omitted).
Finally, Rothe argues that Wainwright’s testimony is unreliable because of
alleged flaws in the disparity studies that form the basis of Wainwright’s expert report.
28
(See Pl.’s Daubert Br. at 13–14.) Specifically, Rothe asserts that “the disparity studies
do not all classify the same industries in the same way” (id. at 13), and that “[n]o
collective inference can be drawn when the same industries are placed in different
industry groups in different studies” (id. at 14). But even if Rothe’s contentions are
correct, an attack on the underlying disparity studies does not necessitate the remedy of
exclusion; rather, it is clear that “[v]igorous cross-examination, presentation of contrary
evidence, and careful instruction on the burden of proof are the traditional and
appropriate means of attacking shaky but admissible [scientific] evidence.” Daubert,
509 U.S. at 596; see also Boyar v. Korean Air Lines Co., 954 F. Supp. 4, 7 (D.D.C.
1996) (“[I]t is not proper for the Court to exclude expert testimony merely because the
factual bases for an expert’s opinion are weak.” (internal quotation marks and citation
omitted)). In its gatekeeping function, this Court must be focused solely on the
reliability and relevance of the testimony that an expert witness proffers, and it is up to
the factfinder “to determine whether [an expert’s] opinions are suspect because facts
upon which he relied were shown to be inaccurate or unproven.” SEC v. Johnson, 525
F. Supp. 2d 70, 76 (D.D.C. 2007) (footnote omitted).
Accordingly, this Court concludes that Wainwright’s expert testimony is
admissible evidence, and the Court will consider it when assessing the pending cross-
motions for summary judgment.
3. Patenaude Is Not Qualified To Testify As A Rebuttal Expert Here
Rothe’s first expert witness, Dale Patenaude, is the vice president of Rothe and
the husband of Rothe’s president, Suzanne Patenaude. (See Patenaude Report at 2;
Patenaude Aff. at 2.) Patenaude holds an undergraduate degree in electrical engineering
from the University of Texas at Austin and has worked in government contracting—at
29
Rothe—since 1972. (See Patenaude Report at 2.) “During that time[,]” Patenaude
states, “it has been [his] job, avocation and passion to review and analyze . . . data on
small and small disadvantaged businesses for the purpose of knowing where contracts
were being distributed in order to better understand the bid process for federal
government contracts[.]” (Id.) Patenaude also states that he “operate[s] [his] own
consulting business that provides this same type of econometric analysis consulting to
other businesses to improve their business and bidding efficiencies.” (Id.)
Rothe offers Patenaude’s testimony “as a response to the errors and omissions in
the reports served by Defendants[.]” (Pl.’s Resp. to Defs.’ Daubert Mots. (“Pl.’s
Daubert Resp.”), ECF No. 49, at 1.) However, it is undisputed that Patenaude does not
have any formal education or training in statistical or econometric analysis (see Dep. of
Dale Patenaude (“Patenaude Dep.”), ECF No. 44-9, at 34:3–11), and he has never
worked with regression models prior to this case (id. at 45:12–14). Thus, Patenaude
purports to refute Rubinovitz’s testimony “by using basic addition, subtraction,
multiplication, and division[.]” (Pl.’s Daubert Resp. at 2.) Moreover, Patenaude’s
report does not address the statistical significance of any of his calculations. (See
Patenaude Dep. at 50:3–7 (“I didn’t do any statistics that required computation of
statistical significance. Mine were 100 percent significant because they weren’t
statistics.”); see also id. at 16:4–6 (conceding that Patenaude “can’t really explain”
“how statistical significance is computed”).)
Based on Patenaude’s own admissions regarding his lack of training, education,
knowledge, skill, and experience in any statistical or econometric methodology,
Patenaude is plainly unqualified to testify as an expert with respect to Rubinovitz’s or
30
Wainwright’s reports. See, e.g., Arias v. DynCorp, 928 F. Supp. 2d 10, 17 (D.D.C.
2013) (finding expert was not qualified under Rule 702, notwithstanding expert’s
“impressive credentials,” because “plaintiffs [did] not demonstrate[] how [expert’s]
academic and professional experiences ma[d]e him qualified to testify” about the
particular factual questions at issue); Sykes v. Napolitano, 634 F. Supp. 2d 1, 8 (D.D.C.
2009) (finding purported expert was not qualified under Rule 702 where expert did “not
offer ‘expert’ testimony based on his years of experience” but “[i]nstead . . . decide[d]
credibility on an incomplete written record, offer[ed] conclusions that have no basis in
fact revealed from his report, and advocate[d] for the Plaintiff rather than providing
expertise to the fact-finder”). It is also apparent that, even if Patenaude did have the
required skill and training to testify as an expert, Rothe has not shown that Patenaude’s
testimony here employs “the same level of intellectual rigor that characterizes the
practice of an expert in the relevant field[,]” Kumho Tire Co., 526 U.S. at 152, and thus
his testimony is also unreliable. Consequently, Patenaude’s expert testimony in the
instant case is inadmissible, and this Court will exclude his expert report in its entirety. 8
4. Sullivan’s Testimony Is Unreliable And Inadmissible
Rothe’s second expert witness, John Sullivan, holds a J.D. from the University of
Maryland Law School and an undergraduate degree in English and writing from Loyola
College in Baltimore, Maryland. (See Sullivan Report at 50; Dep. of John Charles
Sullivan (“Sullivan Dep.”), ECF No. 46-9, at 10:8–21.) Sullivan has published various
8
This does not mean, of course, that Patenaude is disqualified from testifying to facts within his
personal knowledge and experience, as a lay witness. See Fed. R. Evid. 602. Thus, this Court has
considered and relied upon the representations of fact regarding such matters as the scope of Rothe’s
business that are included in the Patenaude affidavit that Plaintiff submitted in conjunction with its
Complaint.
31
articles on affirmative action and government contracting (see Sullivan Report at 51),
has worked on several disparity studies with his colleague George LaNoue (see id.; see
also Sullivan Dep. at 15:21–16:1 (explaining that Sullivan and LaNoue “worked in
tandem”)), and has also testified before Congress regarding a particular disparity study
that the Commerce Department conducted in 1998 (see Sullivan Report at 53). Sullivan
acknowledges that he is neither an economist nor a statistician, and that he does not
hold a degree in either field. (See Sullivan Dep. at 9:16–10:1.)
In the proffered expert report, Sullivan purports to “apply [his] extensive
experience and research in the field of disparity studies to examine the record offered
by the government to support its 8(a) program.” (Sullivan Report at 5.) Specifically,
Sullivan criticizes the vast majority of disparity studies analyzed in Wainwright’s report
for, inter alia, examining state and local—as opposed to federal—contracting (see id. at
3), for utilizing census data (see id. at 7, 11–13), and for relying on otherwise “stale”
information (id. at 13). Sullivan also repeats Rothe’s arguments against post-enactment
evidence and against analyzing NAICS codes at anything less than the 6-digit level.
(See id. at 6 (“Studies that are not before Congress cannot be used to justify a
Congressional program.”); id. at 4 (“The proper level of analysis should be the precise
six digit NAICS level[.]”).) Ultimately, Sullivan concludes that the record in the
instant case “while hefty, is not sufficient. It does not justify the racial preferences of
the [Small Business Administration]’s 8(a) program.” (Id. at 48.)
This Court finds that, even assuming that Sullivan is qualified to testify as an
expert on disparity studies based on his experience, Rothe has failed to demonstrate by
a preponderance of the evidence that Sullivan’s testimony is reliable. See Heller v.
32
District of Columbia, 952 F. Supp. 2d 133, 141 (D.D.C. 2013) (“‘[T]he unremarkable
observation that an expert may be qualified by experience does not mean that
experience, standing alone, is a sufficient foundation rendering reliable any conceivable
opinion the expert may express[.]’” (quoting United States v. Frazier, 387 F.3d 1244,
1261 (11th Cir. 2004) (emphasis in original))). Sullivan’s preferred methodology for
conducting disparity studies—including his assertion that the only proper way to
determine the availability of minority-owned businesses is to count those contractors
and subcontractors that actually perform or bid on contracts (see Sullivan Report at
33)—appears to be well outside of the mainstream in this particular field. (See, e.g.,
Sullivan Dep. at 94:22–95:9 (Sullivan recalls only one disparity study he has ever
encountered that he “felt was done properly”)); see also Groobert v. President & Dirs.
of Georgetown Coll., 219 F. Supp. 2d 1, 9 (D.D.C. 2002) (explaining that expert
testimony may be “unreliable when an expert chooses to utilize her own unique
methodology rather than the proper analysis which is well-known and respected”
(citations omitted)). Moreover, Sullivan acknowledged during his deposition that
portions of his report were based either on mistaken assumptions (see Sullivan Dep. at
38:20–39:13 (retracting certain opinions because Sullivan “misunderstood”
Wainwright’s testimony)) or on speculation (see id. at 42:21–43:11 (admitting that he
“did not do any math” and was “speculating” when he concluded that the availability
percentages in certain disparity studies were “‘likely overstated’”)). And Rothe has not
shown that Sullivan’s critique of Wainwright’s testimony is otherwise reliable. See
Romero v. ITW Food Equip. Grp., LLC, 987 F. Supp. 2d 93, 105–06 (D.D.C. 2013)
(excluding expert testimony based on speculation as unreliable).
33
Therefore, this Court cannot find that Sullivan’s proffered testimony “is properly
grounded, well-reasoned, and not speculative[.]” Fed. R. Evid. 702 advisory
committee’s note (2000); see also Heller, 952 F. Supp. 2d at 140 (“The trial judge has
‘considerable leeway in deciding in a particular case how to go about determining
whether particular expert testimony is reliable.’” (quoting Kumho Tire Co., 526 U.S. at
152)); Groobert, 219 F. Supp. 2d at 8 (“General acceptance in the community is an
important factor in evaluating an expert’s methodology and courts particularly
emphasize this Daubert factor when reliability focuses on experience.” (citing Kumho
Tire Co., 526 U.S. at 158)); Ambrosini, 101 F.3d at 134 (“[T]he Daubert analysis . . .
focuses on the court’s ‘gatekeeper’ role as a check on ‘subjective belief’ and
‘unsupported speculation.’” (quoting Daubert, 509 U.S. at 590)).
Consequently, this Court will exclude Sullivan’s testimony from its
consideration of the parties’ cross-motions for summary judgment.
III. CROSS-MOTIONS FOR SUMMARY JUDGMENT
The plaintiff in DynaLantic asserted (as Rothe does here) that the race conscious
provisions of Section 8(a) rendered the statute unconstitutional on its face, and the
DynaLantic court fully and thoroughly analyzed the plaintiff’s legal position. See
DynaLantic, 885 F. Supp. 2d at 251–80, 283–91. Although not binding on this Court,
DynaLantic is persuasive recent precedent from this district, and inasmuch as Rothe
seeks to re-litigate the legal issues presented in that case, this Court declines Rothe’s
invitation to depart from the DynaLantic court’s conclusion that Section 8(a) is
constitutional on its face. This Court also finds that Rothe has failed to show that there
is any genuine issue of material fact with respect to whether the Section 8(a) program
34
violates the nondelegation doctrine, as explained below; thus, this Court concludes that
Defendants are entitled to summary judgment as a matter of law.
A. Applicable Legal Standard For Summary Judgment
Federal Rule of Civil Procedure 56 makes clear that summary judgment is
appropriate only if there is “no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The court’s role in
deciding a summary judgment motion is not to “determine the truth of the matter, but
instead [to] decide only whether there is a genuine issue for trial.” Barnett v. PA
Consulting Grp., Inc., 715 F.3d 354, 358 (D.C. Cir. 2013) (internal quotation marks and
citation omitted). “A fact is material if it ‘might affect the outcome of the suit under
the governing law,’ and a dispute about a material fact is genuine ‘if the evidence is
such that a reasonable jury could return a verdict for the non-moving party.’” Steele v.
Schafer, 535 F.3d 689, 692 (D.C. Cir. 2008) (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)).
In determining whether there is a genuine dispute about material facts, the court
must view the evidence in the light most favorable to the non-moving party and draw all
reasonable inferences in that party’s favor. See, e.g., Grosdidier v. Broad. Bd. of
Governors, Chairman, 709 F.3d 19, 23-24 (D.C. Cir. 2013); see also Wiley v.
Glassman, 511 F.3d 151, 155 (D.C. Cir. 2007). The moving party may successfully
support its motion by identifying those portions of the record that it believes
demonstrate the absence of a genuine dispute of material fact. Fed. R. Civ. P.
56(c)(1)(A). The non-moving party, for its part, must show more than “[t]he mere
existence of a scintilla of evidence in support of” its position; rather, “there must be
evidence on which the jury could reasonably find for the [non-moving party].”
35
Anderson, 477 U.S. at 252. Further, the non-moving party “may not rest upon mere
allegations or denials of his pleading but must present affirmative evidence showing a
genuine issue for trial.” Laningham v. U.S. Navy, 813 F.2d 1236, 1241 (D.C. Cir. 1987)
(internal quotation marks omitted).
“The rule governing cross-motions for summary judgment . . . is that neither
party waives the right to a full trial on the merits by filing its own motion; each side
concedes that no material facts are at issue only for the purposes of its own motion.”
Sherwood v. Wash. Post, 871 F.2d 1144, 1148 n.4 (D.C. Cir. 1989) (alteration in
original) (internal quotation marks and citation omitted). “In assessing each party’s
motion, all underlying facts and inferences are analyzed in the light most favorable to
the non-moving party.” Vaughan v. Amtrak, 892 F. Supp. 2d 84, 91–92 (D.D.C. 2012)
(internal quotation marks and citation omitted).
B. The Section 8(a) Program Is Constitutional On Its Face
The Supreme Court repeatedly has noted that “[f]acial challenges are disfavored
for several reasons[,]” not the least of which is that such challenges “run contrary to the
fundamental principle of judicial restraint that courts should neither anticipate a
question of constitutional law in advance of the necessity of deciding it nor formulate a
rule of constitutional law broader than is required by the precise facts to which it is to
be applied.” Wash. State Grange v. Wash. State Republican Party, 552 U.S. 442, 450
(2008) (internal quotation marks and citation omitted); see also Gen. Elec. Co. v.
Jackson, 610 F.3d 110, 117 (D.C. Cir. 2010) (“‘A facial challenge to a legislative Act
is, of course, the most difficult challenge to mount successfully.’” (quoting Salerno,
481 U.S. at 745)). Accordingly, it is clear that plaintiffs advancing facial constitutional
challenges must satisfy certain heightened standards in order to prevail, even though
36
“the precise standard for facial challenges remains ‘a matter of dispute[.]’” Gen. Elec.
Co., 610 F.3d at 117 (quoting United States v. Stevens, 559 U.S. 460, 472 (2010)).
The parties in the instant case, like the parties in DynaLantic, disagree about
which legal standard applies to this particular facial challenge. (See Pl.’s MSJ Br. at
11–12; Defs.’ MSJ Br. & Resp. at 27–29); see also DynaLantic, 885 F. Supp. 2d at 249.
Specifically, Defendants insist that the Supreme Court’s decision in United States v.
Salerno requires Rothe to show that “no set of circumstances exists under which
[Section 8(a)] would be valid[,]” Salerno, 481 U.S. at 745, in order to prevail (see
Defs.’ MSJ Br. & Resp. at 27), while Rothe relies on the Federal Circuit’s decision in
Rothe Development Corp. v. Department of Defense, 545 F.3d at 1032, for the
proposition that Salerno’s so-called “no-set-of-circumstances” test is inapplicable here
(see Pl.’s MSJ Br. at 11–12; see also Mountain States Legal Found.’s Br. as Amici
Curiae in Supp. of Pl., ECF No. 62, at 12 (arguing that “this Court is not obligated to
follow the ‘no-set-of-circumstances’ test” because “the D.C. Circuit has not truly re-
examined [its] applicability” in light of subsequent Supreme Court precedent)).
Faced with these same conflicting positions, the DynaLantic court held that the
Salerno test applies to facial challenges to the Section 8(a) program because “the
Salerno test has been adopted by this Circuit and [continually] cited with approval[.]”
DynaLantic, 885 F. Supp. 2d at 249–50. This Court, too, is persuaded that, in order to
justify invalidating all applications of the broad statutory program at issue, Plaintiff
must satisfy Salerno’s no-set-of-circumstances test, or show that Section 8(a) lacks
“any plainly legitimate sweep” because there are not “many circumstances” in which
“the statute’s application would be constitutional[.]” Gen. Elec. Co., 610 F.3d at 117
37
(internal quotation marks and citation omitted); see also Edwards v. District of
Columbia, 755 F.3d 996, 1001 (D.C. Cir. 2014) (“To succeed in a typical facial attack,
[a plaintiff] must establish ‘that no set of circumstances exists under which [the
challenged statutory provisions] would be valid or that the statute lacks any plainly
legitimate sweep.’” (quoting Stevens, 559 U.S. at 472)).
This Court also agrees with the DynaLantic court (and the parties) that, “to the
extent that the Section 8(a) program relies on race-conscious criteria,” this Court must
employ “strict scrutiny” to determine whether its application is constitutional in a
particular circumstance. DynaLantic, 885 F. Supp. 2d at 250. As explained above, the
Section 8(a) program is specifically directed toward “socially disadvantaged
individuals” and that category of persons is presumptively determined by reference to
race. 15 U.S.C. §§ 637(a)(5); see also id. §§ 631(f)(B), 631(f)(1)(C); 13 C.F.R.
§ 124.103(b)(1). There is no question that “‘[r]acial classifications’” such as the ones
at issue here “‘are constitutional only if they are narrowly tailored measures that further
compelling governmental interests.’” DynaLantic, 885 F. Supp. 2d at 250 (quoting
Adarand Constructors, Inc. v. Peña, 515 U.S. 200, 227 (1995)). (See also Defs.’ MSJ
Br. & Resp. at 26 (“[T]he presumption of social disadvantage in the Small Business Act
is race-conscious and is subject to strict scrutiny.”); Pl.’s MSJ Br. at 9 (“It is
undisputed that the section 8(a) statute contains [a] racial classification . . . and
therefore that statutory racial classification is subject to judicial review under strict
scrutiny.”).)
The requirements for satisfying strict scrutiny—i.e., a compelling government
interest and narrow tailoring—are well established. To demonstrate a compelling
38
interest, Defendants must make two showings: “[f]irst, the government must ‘articulate
a legislative goal that is properly considered a compelling government interest.’”
DynaLantic, 885 F. Supp. 2d at 250 (quoting Sherbrooke Turf, Inc. v. Minn. Dep’t of
Transp., 345 F.3d 964, 969 (8th Cir. 2003)). Previously recognized compelling
government interests include “‘remedying the effects of past or present racial
discrimination[.]’” Id. (quoting Shaw, 517 U.S. at 909). Second, the government must
“demonstrate a strong basis in evidence supporting its conclusion that race-based
remedial action was necessary to further that interest.” Id. (internal quotation marks
and citation omitted). In so doing, the government need not “conclusively prov[e] the
existence of racial discrimination in the past or present[,]” id. (citing Wygant, 476 U.S.
at 292 (O’Connor, J., concurring)), and “[t]he government may rely on both statistical
and anecdotal evidence, although anecdotal evidence alone cannot establish a strong
basis in evidence for the purposes of strict scrutiny[,]” id. at 250–51 (citing Concrete
Works of Colo., Inc. v. City & Cnty. of Denver, 321 F.3d 950, 977 (10th Cir. 2003)). If
the government makes both showings, the burden shifts to the plaintiff “to present
‘credible, particularized evidence’ to rebut the government’s ‘initial showing of a
compelling interest.’” Id. at 251 (quoting Concrete Works, 321 F.3d at 959); see also
id. (“Notwithstanding the initial burden of initial production that rests with the
government, the ultimate burden of proof remains with the challenging party to
demonstrate the unconstitutionality of an affirmative-action program.” (internal
quotation marks, alterations, and citation omitted)).
Once a compelling interest is established, the government must further “show
that ‘the means chosen to accomplish the government’s asserted purpose [are]
39
specifically and narrowly framed to accomplish that purpose.’” Id. at 283 (alteration in
original) (quoting Grutter v. Bollinger, 539 U.S. 306, 333 (2003)). Courts consider
several factors to determine whether challenged race-conscious remedial measures are
narrowly tailored, including: “(1) the efficacy of alternative, race-neutral remedies,
(2) flexibility, (3) over- or under-inclusiveness of the program, (4) duration, (5) the
relationship between numerical goals and the relevant labor market, and (6) the impact
of the remedy on third parties.” Id. (citing United States v. Paradise, 480 U.S. 149, 171
(1987) (plurality and concurring opinions)).
With the relevant legal standards in mind and consistent with the DynaLantic
court’s reasoning and conclusion, this Court finds that there are no genuine issues of
material fact regarding the facial constitutionality of the Section 8(a) program for
several reasons. First, the government has articulated an established compelling
interest for the program—namely, remedying “race-based discrimination and its
effects[.]” (Defs.’ MSJ Br. & Resp. at 35); see also DynaLantic, 885 F. Supp. 2d at 279
(concluding that “Congress has a compelling interest in eliminating the roots of racial
discrimination in federal contracting, funded by federal money”). Defendants have also
shown a strong basis in evidence that furthering this interest requires race-based
remedial action—specifically, evidence regarding discrimination in government
contracting, which, as the DynaLantic court found, consisted of “extensive evidence of
discriminatory barriers to minority business formation, . . . [and] forceful evidence of
discriminatory barriers to minority business development,” DynaLantic, 885 F. Supp.
2d at 279. In DynaLantic, the Court further found that the government had “provided
significant evidence that, even when minority businesses are qualified and eligible to
40
perform contracts in both the public and private sectors, they are awarded these
contracts far less often than their similarly situated non-minority counterparts.” Id.
Defendants have relied upon that same evidence in the instant case, and they have also
presented expert testimony that corroborates the DynaLantic evidence—i.e.,
Wainwright and Rubinovitz have testified that minority-owned small businesses have
faced, and continue to face, significant disadvantages in government contracting that
cannot be explained by nondiscriminatory factors (see, e.g., Rubinovitz Report at 12;
Wainwright Report at 27, 97)—and Rothe has failed to rebut this evidence with credible
and particularized evidence of its own, see Wygant, 476 U.S. at 293 (O’Connor, J.,
concurring).
Furthermore, Defendants have established that the Section 8(a) program is
narrowly tailored to achieve the established compelling interest. As the DynaLantic
court discussed at great length, the Section 8(a) program satisfies all six dimensions of
narrow tailoring. First, alternative race-neutral remedies have proved unsuccessful in
addressing the discrimination targeted here. See DynaLantic, 885 F. Supp. 2d at 283–
84 (“Congress attempted to use race-neutral measures to foster and assist minority
owned businesses for at least twenty-five years prior to incorporating a race-conscious
component in Section 8(a), and these race-neutral measures failed to remedy the effects
of discrimination on minority small business owners.”). Second, the Section 8(a)
program is appropriately flexible. See id. at 285–86 (finding that Section 8(a) “imposes
no quotas at all[,] . . . provides for aspirational goals and imposes no penalties for
failing to meet them[,]” contains a rebuttable presumption of social disadvantage based
on race, and thus makes race a “relevant” but not “determinative factor” in program
41
participation). Third, Section 8(a) is neither over- nor under-inclusive. See id. at 286
(“Section 8(a) does not provide that every member of a minority group is
disadvantaged. Admittance . . . is based not only on social disadvantage, but also on an
individualized inquiry into economic disadvantage. . . . [And] a firm owned by a non-
minority may qualify as socially and economically disadvantaged.” (citation omitted)).
Fourth, the Section 8(a) program “impose[s] temporal limits on every individual’s
participation that fulfill the [durational] aspect of narrow tailoring.” Id. at 287
(discussing the program’s “strict durational limits” on participation, and the Small
Business Administration’s “continual[] reassess[ment]” of participants’ eligibility).
Fifth, the relevant aspirational goals for SDB contracting participation are numerically
proportionate, in part because “[t]he evidence presented established that minority firms
are ready, willing, and able to perform work equal to two to five percent of government
contracts in industries including but not limited to construction.” Id. at 289. And sixth,
the fact that the Section 8(a) program reserves certain contracts for program
participants “does not, on its face, create an impermissible burden on non-participating
firms.” Id. at 290; see also id. (discussing various “provisions [in Section 8(a)]
designed to minimize the burden on non-minority firms”).
Accordingly, this Court concurs with the DynaLantic court’s conclusion that the
strict scrutiny standard has been met, and that the Section 8(a) program is facially
constitutional despite its reliance on race-conscious criteria. See id. at 293. In so
holding, this Court incorporates by reference the reasoning in Parts III.A through
III.D.1.(c) and Part III.E of the DynaLantic memorandum opinion, and adopts it as its
own. See id. at 251–80, 283–91.
42
This means that Rothe’s insistence that “[S]ection 8(a)’s racial classification is
unconstitutional racial balancing, for which there is no compelling interest, and for
which narrow tailoring is impossible” (Pl.’s MSJ Br. at 7) is unavailing, and for good
reason. With respect to the compelling interest factor, Rothe does not appear to dispute
that the government has a compelling interest in eliminating discrimination in federal
contracting; instead, Rothe maintains that Defendants have failed to show a strong basis
in evidence that race-based remedial action is necessary to achieve that interest largely
because—as Rothe repeatedly has argued—post-enactment evidence is irrelevant, and
the disparity studies on which Defendants rely are flawed. (See id. at 37–43, 48–60.)
This Court has already rejected Rothe’s argument against post-enactment evidence and
adopted instead the DynaLantic court’s holding that such evidence is not only
admissible but also particularly relevant in the circumstances presented here. See
supra, Part II.B.2. And this Court also finds that “[o]n balance,” the disparity studies
on which Defendants and their experts rely “reveal large, statistically significant
barriers to business formation among minority groups that cannot be explained by
factors other than race[,]” DynaLantic, 885 F. Supp. 2d at 261, and “demonstrat[e] that
discrimination by prime contractors, private sector customers, suppliers and bonding
companies continues to limit minority business development[,]” id. at 263; see also id.
(“While the studies are not uniform in nature, methodology, or results, they contain
powerful evidence that discrimination fosters a decidedly uneven playing field for
minority business entities seeking to compete in federal contracting.” (internal
quotation marks and citation omitted)).
43
Moreover, the record evidence clearly shows “that qualified, eligible minority-
owned firms are excluded from contracting markets, and accordingly provide[s]
powerful evidence from which an ‘inference of discriminatory exclusion could arise.’”
Id. at 268 (quoting City of Richmond v. J.A. Croson Co., 488 U.S. 469, 503 (1989)). To
the extent that Rothe argues that the relevant legislative history does not support the
conclusion that Congress had a strong basis in evidence to enact the race-conscious
provisions of Section 8(a) (see Pl.’s MSJ Resp. & Reply at 19–37), this Court disagrees,
and instead concurs with the DynaLantic court’s conclusion that, “[b]ased on the
evidence before Congress with respect to both the Public Works Employment Act of
1977, and, a year later, the heavily overlapping legislative history of Section 8(a), . . .
Congress had a strong basis in evidence to conclude the use of race-conscious measures
was necessary in, at least, some circumstances.” DynaLantic, 885 F. Supp. 2d at 274.
With respect to narrow tailoring, Rothe is both factually and legally misguided
when it argues that Section 8(a)’s race-conscious provisions cannot be narrowly tailored
because they “appl[y] across the board in equal measure, for all preferred races, in all
markets and sectors.” (Pl.’s MSJ Br. at 11; see also Pl.’s MSJ Resp. & Reply at 66–
68.) This assertion is factually incorrect because, as the DynaLantic court noted, “[t]he
presumption that a minority applicant is socially disadvantaged may be rebutted if [the
Small Business Administration] is presented with credible evidence to the contrary[,]”
DynaLantic, 885 F. Supp. 2d at 285, and, indeed, “[a]ny person may present ‘credible
evidence’ challenging an individual’s status as socially or economically
disadvantaged[,]” id. at 286 (quoting 13 C.F.R. § 124.103(c)). Rothe has also failed to
cite any legal precedent that holds that Congress is categorically prohibited from
44
fashioning a race-conscious remedial statute that is unlimited in industrial or
geographic scope. In this regard, Rothe appears to be proceeding under the
misconception that “narrow” tailoring necessarily means a remedy that is laser-focused
on a single segment of a particular industry or area, rather than the common
understanding that the “narrowness” of the narrow-tailoring mandate relates to the
relationship between the government’s interest and the remedy it prescribes. See
Grutter, 539 U.S. at 333.
Rothe is also mistaken when it argues that the Section 8(a) program should be
struck down as not narrowly tailored because purported “overutilization of 8(a) firms in
Rothe’s primary NAICS codes imposes an undue burden on Rothe[.]” (Pl.’s MSJ Resp.
& Reply at 15.) With this argument, Rothe invites the Court to compare the
“percentage of total small business dollars in federal procurement that 8(a) firms in
Rothe’s NAICS codes are being awarded . . . to the overall availability of 8(a) firms in
Rothe’s NAICS codes” and argues that this comparison demonstrates that, far from
being underutilized, Section 8(a) program participants in those NAICS codes actually
receive a disproportionate share of federal contracting dollars. (Id. at 13.) Even if this
is true—and this Court has significant doubts about the accuracy of Rothe’s
calculations—Rothe’s allegations pertain to a mere five NAICS codes and at best give
rise to an as-applied critique; they are manifestly insufficient to warrant invalidation of
Section 8(a) on its face and in its entirety.
C. Section 8(a) Does Not Violate The Nondelegation Doctrine
Undaunted, Rothe also contends that, by enacting the Section 8(a) program,
Congress has unconstitutionally delegated legislative authority to the executive
branch—i.e., that Section 8(a) violates the nondelegation doctrine. (See Pl.’s MSJ Br.
45
at 40–44.) Rooted in the principle of separation of powers and derived from Article I of
the Constitution, “[t]he nondelegation doctrine prohibits Congress from making
unbridled delegations of authority” to other branches. Mich. Gambling Opp’n v.
Kempthorne, 525 F.3d 23, 34 (D.C. Cir. 2008); see also Mistretta v. United States, 488
U.S. 361, 371–72 (1989). Indeed, the Supreme Court has explained repeatedly that
Congress may only “confer[] decisionmaking authority upon agencies[,]” Whitman v.
Am. Trucking Ass’ns, 531 U.S. 457, 472 (2001), if it also provides “‘an intelligible
principle to which the person or body authorized to [act] is directed to conform[,]’” id.(first alteration in original) (quoting J.W. Hampton, Jr., & Co. v. United States, 276
U.S. 394, 409 (1928)).
Here, Rothe maintains that Section 8(a) contains insufficient guidance “to limit
the [Small Business Administration’s] discretion in deciding whether racial, ethnic or
cultural bias has occurred or even what constitutes a racial, ethnic, or cultural group.”
(Pl.’s MSJ Br. at 7.) Rothe is wrong for at least two reasons. First, Congress has
specifically defined “[s]ocially 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), and it has further explained 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[,]” id. § 631(f)(1)(B). The statute pertaining to the Section
8(a) program also supplies examples of “such groups includ[ing], but [ ] not limited to,
Black Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific
46
Americans, [and] Native Hawaiian Organizations[.]” Id. § 631(f)(1)(C). Thus,
Congress has provided clear, intelligible direction regarding who can be deemed
“socially disadvantaged” for the purpose of the statute. What is more, Congress has
provided additional context by explaining that one purpose of the Section 8(a) program
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[.]” Id.
§ 631(f)(2)(A); see also Mich. Gambling Opp’n, 525 F.3d at 30 (noting that “a
delegation need not be tested in isolation” and that courts may examine “the purpose of
the Act, its factual background and the statutory context” in addition to “the statutory
language” itself (internal quotation marks and citation omitted)). Thus Rothe’s
assertion that the statute “confers unlimited discretion to decide whether racial or ethnic
prejudice or cultural bias has occurred with respect to a given group” (Pl.’s MSJ Br. at
42 (emphasis added)) is simply incorrect.
Second, the circumstances under which the nondelegation doctrine applies to
invalidate a statute are exceedingly limited. This Court notes that the Supreme Court
has “found the requisite ‘intelligible principle’ lacking in only two statutes, one of
which provided literally no guidance for the exercise of discretion, and the other of
which conferred authority to regulate the entire economy on the basis of no more
precise a standard than stimulating the economy by assuring ‘fair competition.’”
Whitman, 531 U.S. at 474 (citing Panama Refining Co. v. Ryan, 293 U.S. 388 (1935);
A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935)). Indeed,
“[c]ourts ‘have almost never felt qualified to second-guess Congress regarding the
47
permissible degree of policy judgment that can be left to those executing or applying
the law.’” Mich. Gambling Opp’n, 525 F.3d at 30 (quoting Whitman, 531 U.S. at 474–
75).
In sum, because the statute that Congress enacted to establish the Section 8(a)
program contains specific definitions and a statement of purpose, and because it is also
well settled in this jurisdiction that “[o]nly the most extravagant delegations of
authority, [such as] those providing no standards to constrain administrative
discretion,” are to be “condemned . . . as unconstitutional[,]” Humphrey v. Baker, 848
F.2d 211, 217 (D.C. Cir. 1988), this Court concludes that Rothe has failed to show a
genuine issue of material fact as to whether Section 8(a) violates the nondelegation
doctrine. 9
IV. CONCLUSION
For the reasons discussed above, this Court concludes that the testimony of
Defendants’ expert witnesses is relevant and reliable, and the Court has considered that
testimony in its review of the parties’ cross-motions for summary judgment. By
contrast, this Court has found that one of Plaintiff’s proffered experts is not qualified to
render an expert opinion with respect to the statistical and economic analyses at issue in
this case, and the Plaintiff’s other expert witness has proffered testimony that is
9
Rothe’s reliance on Schuette v. Coalition to Defend Affirmative Action, Integration & Immigrant
Rights & Fight for Equality By Any Means Necessary, 134 S. Ct. 1623 (2014), to support its
nondelegation argument is misplaced. (See Pl.’s MSJ Resp. & Reply at 45.) Schuette concerned an
Equal Protection Clause challenge to a popularly enacted amendment to Michigan’s state constitution,
not a nondelegation challenge. See Schuette, 134 S. Ct. at 1629. Moreover, the plurality opinion in
Schuette expressed concern about (and noted the Court’s prior rejection of) “the assumption that
‘members of the same racial group—regardless of their age, education, economic status, or the
community in which they live—think alike, share the same political interests, and will prefer the same
candidates at the polls.’” Id. at 1634 (quoting Shaw v. Reno, 509 U.S. 630 (1993)). Section 8(a) makes
no such assumption.
48
unreliable and thus not admissible for purposes of this Court’s evaluation of whether
there is a genuine issue of material fact with respect to Plaintiff’s underlying
constitutional claim. Accordingly, Plaintiff’s Daubert motion is DENIED, and
Defendants’ Daubert motions are GRANTED.
The Court also concludes that, in light of the record and the legal arguments
presented in this case, and in reliance on the reasoning and holding of DynaLantic
(which this Court has adopted in relevant part), Plaintiff’s facial constitutional
challenge to the Section 8(a) program fails. Defendants have demonstrated a
compelling interest for the government’s racial classification, and the purported need
for remedial action is supported by strong and unrebutted evidence, and Defendants
have also shown that the Section 8(a) program is narrowly tailored to further its
compelling interest. Moreover, Plaintiff has failed to show either that no set of
circumstances exists in which the Section 8(a) program would be constitutional or that
the statutory program lacks any plainly legitimate sweep; therefore, there is no genuine
issue that the Section 8(a) program’s race-conscious provisions are constitutional on
their face. Thus, as set forth in the accompanying order, Plaintiff’s motion for
summary judgment is DENIED, and Defendants’ cross-motion for summary judgment
is GRANTED.
DATE: June 5, 2015 Ketanji Brown Jackson
KETANJI BROWN JACKSON
United States District Judge
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