U.S. Department
of Justice
Rothe Development v. Department of Defense
No. 16-1239
In the Supreme Court of the United States
ROTHE DEVELOPMENT, INC., PETITIONER
v.
DEPARTMENT OF DEFENSE, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF
COLUMBIA CIRCUIT
BRIEF FOR THE FEDERAL RESPONDENT IN OPPOSITION
JEFFREY B. WALL
Acting Solicitor General Counsel of Record
T.E. WHEELER, II
Acting Assistant Attorney General
DIANA K. FLYNN
TERESA KWONG
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
QUESTION PRESENTED
Whether Section 8(a)(5) of the Small Business Act, 15 U.S.C. 637(a)(5), which relates to federal
contracting with socially disadvantaged individuals, contains a race- based classification that is
subject to strict scrutiny.
(I)
TABLE OF CONTENTS Page
Opinions below .............................................................................. 1
Jurisdiction .................................................................................... 1
Statement ...................................................................................... 1
Argument....................................................................................... 5
Conclusion ................................................................................... 12
TABLE OF AUTHORITIES
Cases:
Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995)........................................................ 10, 12
Midwest Fence Corp. v. United States Dep’t of Transp., 840 F.3d 932 (7th Cir. 2016),
cert. denied, No. 16-975, 2017 WL 497345 (June 26, 2017)..................................................................... 11
Northern Contracting, Inc. v. Illinois, 473 F.3d 715 (7th Cir. 2007)...................................................................... 12
Rothe Dev. Corp. v. United States Dep’t of Def., 262 F.3d 1306 (Fed. Cir. 2001)........................................... 11
Sherbrooke Turf, Inc. v. Minnesota Dep’t of Transp., 345 F.3d 964 (8th Cir. 2003), cert. denied, 541 U.S. 1041 (2004)............................................................ 12
Western States Paving Co. v. Washington State Dep’t of Transp., 407 F.3d 983 (9th Cir. 2005), cert. denied, 546 U.S. 1170 (2006) ................................. 7, 12
Constitution, statutes, and regulations:
U.S. Const. Amend. V (Due Process Clause) ....................... 4
Small Business Act, Pub. L. No. 85-536,
72 Stat. 384 (15 U.S.C. 631 et seq.) ...................................... 1
15 U.S.C. 631 (§ 2) ............................................................. 3
15 U.S.C. 631(a) ................................................................. 2
(III)
IV
Statutes and regulations—Continued: Page
15 U.S.C. 631(f )(1) (§ 2(f)(1))......................................... 10
15 U.S.C. 631(f)(1)(A) (§ 2(f)(1)(A))................................. 2
15 U.S.C. 631(f )(1)(B) (§ 2(f)(1)(B))............................. 3, 8
15 U.S.C. 631(f )(1)(C) (§ 2(f)(1)(C))......................... 3, 8, 9
15 U.S.C. 637(a) (§ 8(a)) ......................................... passim
15 U.S.C. 637(a)(1)............................................................. 2
15 U.S.C. 637(a)(4)(A)(i) ................................................... 2
15 U.S.C. 637(a)(5) (§ 8(a)(5))......................2, 6, 7, 8, 9, 10
15 U.S.C. 637(a)(6) (§ 8(a)(6))........................................... 2
15 U.S.C. 637(a)(8) (§ 8(a)(8))..................................... 9, 10
15 U.S.C. 637(d) (§ 8(d))............................................ 10, 11
15 U.S.C. 637(d)(3)(C) ............................................... 10, 11
13 C.F.R.:
Section 124.1-1(c)(3) (1980)............................................. 10
Section 124.103 ................................................................ 11
Section 124.103(b)........................................................ 3, 11
Section 124.103(c)(1) ......................................................... 3
Section 124.104(b).............................................................. 3
Section 124.104(c) .............................................................. 3
Miscellaneous:
44 Fed. Reg. 30,674 (May 29, 1979) ..................................... 10
In the Supreme Court of the United States
No. 16-1239
ROTHE DEVELOPMENT, INC., PETITIONER
v.
DEPARTMENT OF DEFENSE, ET AL.
ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF
COLUMBIA CIRCUIT
BRIEF FOR THE FEDERAL RESPONDENT IN OPPOSITION
OPINIONS BELOW
The opinion of the court of appeals (Pet. App. 1a-64a) is reported at 836 F.3d 57. The opinion of
the district court (Pet. App. 67a-127a) is reported at 107 F. Supp. 3d 183.
JURISDICTION
The judgment of the court of appeals was entered on September 9, 2016. A petition for rehearing was
denied on January 13, 2017 (Pet. App. 128a-130a). The petition for a writ of certiorari was filed
on April 13, 2017. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).
STATEMENT
1. Congress enacted the Small Business Act (SBA), Pub. L. No. 85-536, 72 Stat. 384, in part to
“aid, counsel, assist, and protect, insofar as is possible, the interests of small-business
concerns in order to preserve free
(1)
2
competitive enterprise.” 15 U.S.C. 631(a). Through Section 8(a) of the SBA (as amended), 15 U.S.C.
637(a), Congress sought to “obtain social and economic equal- ity” of “socially and economically
disadvantaged per- sons,” and to “improve the functioning of our national economy,” 15 U.S.C.
631(f)(1)(A). Section 8(a) author- izes the Small Business Administration to limit compe- tition
for certain government contracts to small disad- vantaged businesses that have been certified by
the Small Business Administration as eligible to participate in the Section 8(a) program. 15 U.S.C.
637(a)(1). Sec- tion 8(a) defines a “socially and economically disadvan- taged small business
concern” as “any small business concern” that, inter alia, “is at least 51 per centum
unconditionally owned by * * * one or more socially and economically disadvantaged individuals.” 15
U.S.C. 637(a)(4)(A)(i).
Section 8(a)(5) of the SBA defines “[s]ocially disad- vantaged individuals” as “those who have been
sub- jected to racial or ethnic prejudice or cultural bias because of their identity as a member of
a group with- out regard to their individual qualities.” 15 U.S.C. 637(a)(5). A determination of
social disadvantage is thus made on an individualized basis—i.e., whether any particular person has
been the subject of group-based prejudice or bias, rather than being treated according to his
“individual qualities.” Ibid. Section 8(a)(6) defines “[e]conomically disadvantaged individuals” as
“those socially disadvantaged individuals whose ability to compete in the free enterprise system
has been impaired due to diminished capital and credit opportu- nities as compared to others in the
same business area who are not socially disadvantaged.” 15 U.S.C. 637(a)(6).
3
Section 2 of the SBA sets out the policies and con- gressional findings supporting the Act. 15
U.S.C. 631. As relevant here, Congress found that small business owners may be “socially
disadvantaged because of their identification as members of certain groups that have suffered the
effects of discriminatory practices or simi- lar invidious circumstances over which they have no
control.” 15 U.S.C. 631(f)(1)(B). Section 2 contains a congressional finding that the groups
that have suf- fered such discriminatory effects “include, but are not limited to, Black Americans,
Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, Native Hawaiian
Organizations, and other minorities.” 15 U.S.C. 631(f)(1)(C).
Although neither Section 2 nor Section 8(a) requires a race-based presumption of social
disadvantage, the regulations implementing the Section 8(a) program in- clude a rebuttable
race-based presumption of social dis- advantage for individuals who are members of particular
racial groups (including the groups listed in 15 U.S.C. 631(f)(1)(C)). 13 C.F.R. 124.103(b). “An
individual who is not a member of one of the groups presumed to be socially disadvantaged” may
establish eligibility to par- ticipate in the Section 8(a) program by presenting evi- dence of
social disadvantage. 13 C.F.R. 124.103(c)(1). The regulations require all applicants to the Section
8(a) program to submit a narrative describing economic disadvantage and to provide specified
financial infor- mation. 13 C.F.R. 124.104(b) and (c).
2. Petitioner is a small business that provides com- puter services, and that bids and performs on
govern- ment contracts nationwide. Pet. App. 75a. In 2012, petitioner sued the Department of
Defense (DOD) and
4
Small Business Administration, alleging that the Sec- tion 8(a) program is facially
unconstitutional because it uses a racial classification to prevent petitioner from bidding on DOD
contracts, in violation of the equal- protection component of the Due Process Clause of the Fifth
Amendment. Id. at 76a.
a. On cross-motions for summary judgment, the dis- trict court granted the government’s motion,
holding that the Section 8(a) program is facially constitutional. Pet. App. 69a, 111a-125a. The
court determined that the program is subject to strict scrutiny because it is implemented through a
presumptive racial classifica- tion. Id. at 113a. The court further held that the pro- gram
survives strict scrutiny because it uses narrowly tailored measures to further compelling
government in- terests. Id. at 113a-122a.
b. A divided panel of the court of appeals affirmed for different reasons. Pet. App. 3a-33a. At
oral argu- ment, petitioner’s counsel clarified that petitioner is pursuing a facial challenge only
to the statute, not to Section 8(a)’s implementing regulations or to the man- ner in which the
agency administers the Section 8(a) program. Id. at 6a, 11a. The court held that the statu- tory
provisions challenged by petitioner do not contain any racial classification. Id. at 7a-31a. The
court noted that, by contrast, the Small Business Administration’s “regulation implementing the
[Section] 8(a) program does contain a racial classification in the form of a pre- sumption that an
individual who is a member of one of five designated racial groups * * * is socially disadvan-
taged.” Id. at 5a. But because petitioner challenged only the statute itself on its face, the court
held that the statute is subject to rational-basis review. Id. at 6a.
5
The court further held that the statute “readily sur- vives” that standard. Ibid.1
Judge Henderson filed a separate opinion concur- ring in part and dissenting in part. Pet. App.
36a-64a. She would have held that Section 8(a) draws a racial classification and is therefore
subject to strict scrutiny. Id. at 37a, 39a. Judge Henderson did not address whether in her view
the district court had erred in upholding the challenged statutory provisions under strict
scrutiny. See id. at 44a, 64a.2
ARGUMENT
The court of appeals correctly recognized that a stat- ute, regulation, or government program is
subject to strict scrutiny if it employs a racial classification. The
1 The court of appeals also rejected petitioner’s arguments that Section 8(a) violates the
nondelegation doctrine and that the district court had abused its discretion in various evidentiary
rulings. Pet. App. 6a, 32a-33a. Petitioner does not renew those arguments before this Court.
2 Judge Henderson stated that the parties had agreed that strict scrutiny should apply. Pet. App.
44a. As relevant here, that is not correct. The government had argued in the district court that,
on its face, Section 8(a) is race-neutral and therefore subject to rational-basis review. D. Ct.
Doc. 65-1, at 22-23 (June 16, 2014);
D. Ct. Doc. 72, at 20-21 (Aug. 1, 2014). In holding that the Section 8(a) program was subject to
strict scrutiny, the district court relied on the implementation of the program through
regulations, includ- ing the rebuttable race-based presumption of social disadvantage. See Pet.
App. 72a, 113a-122a. On appeal, the government defended that presumption and the Section 8(a)
program as a whole under strict scrutiny. See, e.g., Gov’t C.A. Br. 18 (“The race-based portion of
the Section 8(a) program is facially constitutional.”) (capitaliza- tion altered). Because it was
not clear until the oral argument that petitioner was challenging only the statute, the government
did not focus on whether the statute alone, without its implementing regu- lations, is subject to a
less stringent form of review.
6
court also correctly recognized that the Small Business Administration’s implementation of the
Section 8(a) program employs a racial classification and is therefore subject to strict scrutiny.
Pet. App. 5a. The only dis- pute here is whether a single statutory provision, stand- ing
alone—Section 8(a)(5), 15 U.S.C. 637(a)(5)—reflects a racial presumption. It does not. The agency
has cho- sen to implement the statute through race-conscious means, but the statute itself leaves
the agency free to select a different course. In any event, the decision below is the first to
consider whether Section 8(a) is facially race-neutral, because other plaintiffs that have
challenged the Section 8(a) program (and similar pro- grams) have not divorced their claims from
the imple- menting regulations and the agency’s practice. Review of the narrow question presented
by petitioner is not warranted.
1. The Section 8(a) program extends government contracting opportunities to small business owners
who are socially and economically disadvantaged. The par- ties agree, and the court of appeals
recognized, that the Small Business Administration’s implementation of the Section 8(a) program is
subject to strict scrutiny, because the relevant regulation presumes that members of cer- tain
specified racial groups are socially disadvantaged. Pet. App. 5a-6a; Gov’t C.A. Br. 16. Neither
that regula- tion nor the government’s implementation of the Sec- tion 8(a) program is at issue
here, however, because petitioner’s challenge is limited to the statute itself. See Pet. 16; Pet.
App. 6a. The only question in this case is whether Section 8(a)(5)—which defines the “[s]ocially
disadvantaged individuals” who qualify for the Section 8(a) program—is race-neutral on its face and
thus sub- ject to rational-basis review.
7
a. Section 8(a)(5) provides that “[s]ocially disadvan- taged individuals are those who have been
subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a
group without regard to their individual qualities.” 15 U.S.C. 637(a)(5). That definition looks to
whether a specific individual has suf- fered prejudice or bias because of his membership in a
particular racial or ethnic group. By its terms, Section 8(a)(5) does not limit participation in
the Section 8(a) program to members of certain racial or ethnic groups. A person of any race may
qualify as a socially disadvan- taged individual if he has suffered prejudice or bias based on his
race or ethnicity. See Western States Pav- ing Co. v. Washington State Dep’t of Transp., 407 F.3d
983, 988 (9th Cir. 2005) (recognizing that the term “so- cially and economically disadvantaged” is
race-neutral “on its face,” although the regulations impose a race- based presumption), cert.
denied, 546 U.S. 1170 (2006). Petitioner selectively quotes (Pet. 17) Section 8(a)(5)
in arguing that social disadvantage is based on member- ship in one of certain specified racial or
ethnic groups. In fact, the question under Section 8(a)(5) is whether any particular applicant has
suffered prejudice on ac- count of his race or ethnicity, without regard to his individual
qualities. The provision does not identify any particular racial or ethnic groups for which
membership is sufficient to qualify one as socially disadvantaged. An individual of any race or
ethnicity may qualify if, but only if, he has suffered prejudice or bias based on his race or
ethnicity.
Petitioner argues (Pet. 28-29) that social disad- vantage is based on group membership rather than
in- dividual experience, because Section 8(a)(5) refers to
8
racial prejudice or bias “without regard to [one’s] indi- vidual qualities.” 15 U.S.C. 637(a)(5).
Petitioner sug- gests that, by including that phrase, Congress prohib- ited consideration of a
person’s individual experience and limited the focus to whether the person is a member of a
particular racial or ethnic group. Petitioner’s read- ing of Section 8(a)(5) is grammatically
incorrect. The phrase “without regard to [one’s] individual qualities” is naturally read to
describe the type of prejudice to which the person has been subjected—i.e., prejudice that stems
from one’s race or ethnicity rather than one’s per- sonal qualities. The phrase cannot be read to
eliminate the requirement that an individual has in fact “been subjected to racial or ethnic
prejudice or cultural bias.” 15 U.S.C. 637(a)(5).
b. Petitioner invokes other provisions of the SBA as well, but they also do not presumptively limit
the Section 8(a) program to members of certain racial or ethnic groups.
i. Petitioner cites the statutory findings in Section 2(f )(1)(B) and (C) of the SBA, 15 U.S.C.
631(f)(1)(B) and (C). Those provisions—which are part of a subsection titled “Findings;
purpose”—set out some of the reasons Congress chose to enact the SBA. For instance, Section 2(f
)(1)(B) states that “many” socially and economically disadvantaged “persons are socially
disadvantaged be- cause 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.” 15 U.S.C. 631(f)(1)(B). Nothing in that observation allocates benefits or burdens on the
basis of race or otherwise employs a racial classifica- tion. Section 2(f )(1)(B) does not direct
agency action or
9
alter the statutory definition of social disadvantage set out in Section 8(a)(5).
Section 2(f )(1)(C) contains a congressional finding that the groups that have suffered the effects
of past discrimination “include, but are not limited to, Black Americans, Hispanic Americans,
Native Americans, Indian tribes, Asian Pacific Americans, Native Hawai- ian Organizations, and
other minorities.” 15 U.S.C. 631(f)(1)(C). In petitioner’s view (Pet. 30), that finding creates a
presumption that every member of the enu- merated groups is a socially disadvantaged individual
under Section 8(a)(5). But nothing in Section 2(f )(1)(C) requires such a presumption or overrides
the focus in Section 8(a)(5) on whether a particular individual has been the target of racial or
ethnic prejudice. Moreover, Section 2(f)(1)(C) is not exhaustive; it does not preclude members of
other racial groups from qualifying as socially disadvantaged.
ii. Petitioner also contends (Pet. 17, 23 n.13, 33) that Section 8(a)(8) creates a race-based
presumption. Sec- tion 8(a)(8) provides that “determinations made pursu- ant to [Section 8(a)(5)]
with respect to whether a group has been subjected to prejudice or bias shall be made by the
Administrator after consultation with the Associate Administrator for Minority Small Business and
Capital Ownership Development.” 15 U.S.C. 637(a)(8). “All other determinations made pursuant to”
Section 8(a)(5) “shall be made” by the Associate Administrator under the supervision of the
Administrator. Ibid.
Section 8(a)(8) appears to contemplate that the Admin- istrator will determine that certain racial
or ethnic groups have been subjected to prejudice or bias, and thereafter the Associate
Administrator will determine whether any particular individual has incurred such
10
prejudice or bias by virtue of his membership in that racial or ethnic group. But on its face,
Section 8(a)(8) does not place any limits on the Administrator’s ability to determine which racial
or ethnic groups have been the targets of discrimination. Nor does Section 8(a)(8) require the use
of a presumption that every member of a particular racial group—even a group identified pur- suant
to Section 8(a)(8)—has individually suffered prej- udice or bias and is therefore socially
disadvantaged. Although the Small Business Administration has elected to administer Section 8(a)
through a race-based pre- sumption of social disadvantage, the SBA itself does not require that.3
c. That point is underscored by the fact that Section 8(a)’s original implementing regulations did
not contain such a presumption. See Pet. App. 16a-17a (citing 13 C.F.R. 124.1-1(c)(3) (1980); 44
Fed. Reg. 30,674 (May
3 Contrary to petitioner’s contention (Pet. 28-35), the court of ap-
peals did not disregard various canons of statutory construction. First, the court did not ignore
Section 2(f)(1) or fail to consider the statute as a whole. Petitioner disagrees with the court’s
conclusion that Section 2(f)(1) does not alter the race-neutral criteria in Section 8(a)(5), but
the court considered the interaction between those pro- visions. Second, the court did not fail to
consider “Section 8(a) in context alongside Section 8(d).” Pet. 30. Unlike Section 8(a), Sec- tion
8(d) employs an express race-based presumption of social and economic disadvantage. 15 U.S.C.
637(d)(3)(C); Adarand Construc- tors, Inc. v. Pena, 515 U.S. 200, 207 (1995). Section 8(d), which
is not at issue here, shows that Congress knows how to require a race- based presumption when it
wants to. Pet. App. 22a. Third, the court explained—in response to Judge Henderson’s dissent—that
even if Section 8(a)(5) could be construed as enacting a race-based pre- sumption, the canon of
constitutional avoidance would counsel against such a reading. Id. at 19a. The court of appeals’
use of that canon is consistent with this Court’s decisions.
11
29, 1979)); id. at 26a-27a. By contrast, the existing reg- ulations employ a race-based presumption
of social dis- advantage: they state that members of certain specified racial and ethnic groups
presumptively satisfy the statutory criteria for treatment as a socially disadvan- taged
individual. 13 C.F.R. 124.103. That race-based presumption—along with any other racial
classification employed in the implementation of the Section 8(a) program—is subject to strict
scrutiny. See Gov’t C.A. Br. 16. But as explained above, petitioner does not chal- lenge either the
relevant regulation or the government’s implementation of the Section 8(a) program. Petitioner
therefore does not challenge the race-based aspects of the Section 8(a) program.
2. No other court of appeals has addressed whether Section 8(a) is facially race-neutral. Although
other courts of appeals have considered equal-protection chal- lenges to aspects of government
contracting under the SBA, the plaintiffs in those cases challenged a provision or program that
includes an explicit race-based pre- sumption. For example, in Rothe Development Corp. v. United
States Department of Defense, 262 F.3d 1306, 1313-1314 (2001), the Federal Circuit considered a
con- stitutional challenge to the Section 8(d) program, which relates to federal subcontracting and
includes a race- based presumption of disadvantage in the statute and in the implementing
regulations. 15 U.S.C. 637(d)(3)(C); 13 C.F.R. 124.103(b).
Other courts of appeals have considered similar chal- lenges to Section 8(d) and to 13 C.F.R.
124.103(b) as im- plemented in the Department of Transportation’s con- tracting program. Midwest
Fence Corp. v. United States Dep’t of Transp., 840 F.3d 932, 936 (7th Cir. 2016), cert. denied, No.
16-975, 2017 WL 497345 (June
12
26, 2017); Northern Contracting, Inc. v. Illinois, 473 F.3d
715, 717 (7th Cir. 2007); Western States Paving Co., 407 F.3d at 988 (9th Cir.); Sherbrooke Turf,
Inc. v. Min- nesota Dep’t of Transp., 345 F.3d 964, 968 (8th Cir. 2003), cert. denied, 541 U.S.
1041 (2004). In all of those cases, the courts of appeals correctly applied strict scrutiny because
the challenged programs use race- conscious presumptions. See Adarand Constructors, Inc. v. Pena,
515 U.S. 200, 207 (1995). There is no con- flict between those decisions and the
decision below, and this Court’s review is not warranted.
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
JEFFREY B. WALL
Acting Solicitor General
T.E. WHEELER, II
Acting Assistant Attorney General
DIANA K. FLYNN
TERESA KWONG
Attorneys
JULY 2017