As we discussed in a prior update, on July 13, 2022, Plaintiff Christian Bruckner filed a lawsuit in the Federal District Court in Tampa, Florida, seeking to enjoin the Infrastructure Investment and Jobs Act’s set-aside of 10% (around $37 billion) of transportation funding for “small business concerns” owned and controlled by “socially and economically disadvantaged individuals.” On July 26, 2022, Bruckner filed a motion for preliminary injunction that seeks an “injunction prohibiting Defendants from implementing the race and gender quota in Section 11101(e)(3) of the Infrastructure Investment and Jobs Act.”

Summary: The Infrastructure Investment and Jobs Act sets aside 10% of its transportation funding for small business concerns owned and controlled by socially and ‎economically disadvantaged individuals, adopting by reference the definitions from the Small Business Act (15 U.S.C. 637(d)) for “small business concern” and “socially and economically disadvantaged individuals.” These are the same definitions that apply to the SBA’s small business programs, including the SBA’s 8(a) program.

Bruckner argues in his motion for a preliminary injunction that the Infrastructure Investment and Jobs Act’s set aside for small business concerns owned and controlled by socially and ‎economically disadvantaged individuals constitutes unconstitutional racial and gender discrimination because (1) the set aside is not responding to specific acts of discrimination, (2) it is not narrowly tailored to address discrimination, (3) the federal government has not engaged in the complained of discrimination, (4) the set aside excludes certain minorities without explanation or justification, and (5) the federal government has made no effort to tailor the set aside to “victims” of discrimination:

But Congress provides little more than vague claims which are likely based on little more than statistical disparities. The results are not tethered to a particular market nor do we know enough to assess what their remaining impact may be in these unnamed markets. We are told nothing about any federal role which must now be remediated. Whatever may be supporting these claims of “discrimination,” Defendants cannot justify this racial quota unless they point to a specific episode of past intentional discrimination that the government had a hand in. Nothing in the Congressional findings support such a claim. Were there ever an attempt to build a system of rigid racial quotas based on generalized societal discrimination, this is it.

…

Defendants make no effort to tailor their set aside to the victims of past race discrimination: they attempt to give a preference to everyone in the preferred racial categories (at the expense of innocent victims, like Bruckner) whether they are the victims of past discrimination or not.

While Bruckner referenced SBA regulations in his complaint, his motion for preliminary injunction does not directly address or attack the SBA’s regulations, including their implementation of the Small Business Act’s definition of “small business concern” and “socially and economically disadvantaged individuals.” This is notable because the court in Rothe Development, Inc. v. Department of Defense noted in dicta that the SBA regulations may not survive a challenge on the grounds that they are not a constitutionally permissible “race-based regulatory presumption.”

However, in his proposed order, Bruckner does ask the Court to find that “Plaintiffs are likely to succeed on their claim that the racial ‎qualifications in Section 11101(e)(3) are not narrowly tailored to ‎advance a compelling government interest.” (emphasis added).  The “‎racial qualifications in Section 11101(e)(3)” are the Infrastructure Investment and Jobs Act’s ‎incorporation of the Small Business Act’s definitions of “small business concern” and “socially ‎and economically disadvantaged individuals.” As such, while Bruckner’s complaint and ‎motion is focused on the Infrastructure Investment and Jobs Act, a ruling in favor of Bruckner could be used to mount an attack on the SBA’s programs that ‎seek to assist “socially and economically disadvantaged individuals,” such as the SBA’s 8(a) ‎program.  ‎

Given the potential impact on Tribe and Native Corporations, we intend to monitor ‎Bruckner and the federal government’s response. The Florida District Court has already held that the USDA’s loan forgiveness program that focuses on minorities was unconstitutional, such that Bruckner may have found a favorable tribunal at the District Court level.

The following is a more detailed summary of Bruckner’s motion.

Bruckner’s Motion for Preliminary Injunction:

Section 11101(e)(3) of the Infrastructure Investment and Jobs Act provides:

Except to the extent that the Secretary determines otherwise, not less than 10 percent of the amounts made available for any program under this division (other than section 14004), division C, and section 403 of title 23, United States Code, shall be expended through small business concerns owned and controlled by socially and economically disadvantaged individuals. (emphasis added)

In order to implement this set-aside, Section 11101(e)(2) of the Infrastructure Investment and Jobs Act adopts definitions from the Small Business Act for “small business concern” and “socially and economically disadvantaged individuals,” stating:

SMALL BUSINESS CONCERN

IN GENERAL.—The term ‘‘small business concern’’ means a small business concern (as the term is used in section 3 of the Small Business Act (15 U.S.C. 632)).

EXCLUSIONS.—The term ‘‘small business concern’’ does not include any concern or group of concerns controlled by the same socially and economically disadvantaged individual or individuals that have average annual gross receipts during the preceding 3 fiscal years in excess of $26,290,000, as adjusted annually by the Secretary for inflation.

SOCIALLY AND ECONOMICALLY DISADVANTAGED INDIVIDUALS.—The term ‘‘socially and economically disadvantaged individuals’’ has the meaning given the term in section 8(d) of the Small Business Act (15 U.S.C. 637(d)) and relevant subcontracting regulations issued pursuant to that Act, except that women shall be presumed to be socially and economically disadvantaged individuals for purposes of this subsection.

In Section 11101(e)(1) of the Infrastructure Investment and Jobs Act, Congress explained the reason for the set-aside and policy goals that Congress was attempting to implement:

DISADVANTAGED BUSINESS ENTERPRISES

FINDINGS.—Congress finds that— while significant progress has occurred due to the establishment of the disadvantaged business enterprise program, discrimination and related barriers continue to pose significant obstacles for minority- and women-owned businesses seeking to do business in Federally assisted surface transportation markets across the United States;

• the continuing barriers described in subparagraph (A) merit the continuation of the disadvantaged business enterprise program;
• Congress has received and reviewed testimony and documentation of race and gender discrimination from numerous sources, including congressional hearings and roundtables, scientific reports, reports issued by public and private agencies, news stories, reports of discrimination by organizations and individuals, and discrimination lawsuits, which show that race- and gender-neutral efforts alone are insufficient to address the problem;
• the testimony and documentation described in subparagraph (C) demonstrate that discrimination across the United States poses a barrier to full and fair participation in surface transportation-related businesses of women business owners and minority business owners and has impacted firm development and many aspects of surface transportation-related business in the public and private markets; and
• the testimony and documentation described in subparagraph (C) provide a strong basis that there is a compelling need for the continuation of the disadvantaged business enterprise program to address race and gender discrimination in surface transportation-related business.

In his motion for a preliminary injunction, Bruckner challenges the 10% set aside as unconstitutional discrimination against white males, arguing that strict scrutiny applies to the 10% set aside and that the federal government “cannot provide specific and concrete evidence supporting a compelling government interest or meet any of the settled standards of narrow tailoring.”

Specifically, Bruckner argues that Congress’s finding of general social discrimination is not an adequate basis to set aside 10% of the transportation funding in the Infrastructure Investment and Jobs Act, that Congress is not responding to any specific instances of racial discrimination, and that government must show that had become at least a ‘passive participant’ in such discrimination before it can use a set-aside program to address that discrimination.

First, Congress is not attempting to remedy a specific episode of discrimination. See Shaw, 517 U.S. at 909; Croson, 488 U.S. at 498; Adarand, 515 U.S. at 226. Congress has not pointed to a specific episode of discrimination, or even multiple “specific incidents of past discrimination,” required to satisfy strict scrutiny. Vitolo, 999 F.3d at 361. Its findings vaguely recount “discrimination and related barriers” in “federally assisted surface transportation markets across the United States.” See Infrastructure Act, § 11101(e)(1)(A). These generalized assertions of past discrimination within the transportation industry. This is not enough: “[G]eneralized assertions of past discrimination within an industry afford no logical terminus for a remedy.” Peightal v. Metro. Dade Cnty., 26 F.3d 1545, 1553 (11th Cir. 1994)….

Second, Congressional findings do not point to any “intentional” discrimination that Defendants may remedy with the 10% set aside. See Parents Involved, 551 U.S. at 702 (“remedying the effects of past intentional discrimination is a compelling interest”) (emphasis added). While Congress says that “reports” and “news stories” support claims of discrimination or, at least, differing racial outcomes, there is little indication that Congress identified anything “intentional.” Instead, Defendants will likely rely purely on statistical disparities. But “[s]tatistical disparities don’t cut it.” Vitolo, 999 F.3d at 361. Defendants must point to evidence of actual discrimination to justify their program of intentional discrimination against Plaintiffs.

Finally, congressional findings do not show that the federal government knowingly participated in discrimination. Croson, 488 U.S. at 492; Builders Ass’n of Greater Chicago, 256 F.3d at 645 (“knowingly perpetuated the discrimination”). Under Croson, Defendants must explain how they have become a “‘passive participant’ in a system of racial exclusion.” Croson, 488 U.S. at 492. No such evidence exists here. And there is no evidence of recent discrimination. E.g., Brunet v. City of Columbus, 1 F.3d 390, 409 (6th Cir. 1993) (discrimination from 14 years earlier too remote to support affirmative action program); Hammon v. Barry, 826 F.2d 73, 76-77 (D.C. Cir. 1987) (discrimination from 18 years earlier too remote). Congress first imposed a 10% racial set aside in 1977 to remedy discrimination within the construction industry. See Fullilove v. Klutznick, 448 U.S. 448, 449 (1980) (abrogated by Adarand, 515 U.S. at 235–36). It strains all credulity that the federal government has imposed racial quotas since 1977, yet somehow still knowingly participates in intentional race discrimination in the construction industry.

Citing to two prior cases in which the Florida District Court and the Sixth Circuit enjoined government programs that set aside government funds for minorities in 2021, Wynn v. Vilsack, 545 F. Supp. 3d 1271 (M.D. Fla. 2021), and Vitolo v. Guzman, 999 F.3d 353 (6th Cir. 2021), Bruckner argues Infrastructure Investment and Jobs Act’s set aside of 10% of transportation funds for socially and economically disadvantaged businesses cannot survive constitutional muster:

But Congress provides little more than vague claims which are likely based on little more than statistical disparities. The results are not tethered to a particular market nor do we know enough to assess what their remaining impact may be in these unnamed markets. We are told nothing about any federal role which must now be remediated. Whatever may be supporting these claims of “discrimination,” Defendants cannot justify this racial quota unless they point to a specific episode of past intentional discrimination that the government had a hand in. Nothing in the Congressional findings support such a claim. Were there ever an attempt to build a system of rigid racial quotas based on generalized societal discrimination, this is it.

Bruckner also argues that the Infrastructure Investment and Jobs Act set-side for socially and economically disadvantaged businesses is not sufficiently narrowly tailored to remedy the program addressed by Congress.  Arguing that “[a] race-based remedy is ‘the strongest of medicines, with many potentially harmful side-effects, and must be reserved for those severe cases that are highly resistant to conventional treatment,’” citing Eng’g Contractors Ass’n of S. Fla. v. Metro. Dade Cnty., 122 F.3d 895, 927 (11th Cir. 1997), Bruckner argues that Congress failed to meet this requirement because:

Defendants make no effort to tailor their set aside to the victims of past race discrimination: they attempt to give a preference to everyone in the preferred racial categories (at the expense of innocent victims, like Bruckner) whether they are the victims of past discrimination or not.

In support of this argument, Bruckner claims that the categories of individuals eligible to compete for the set asides is both over and under-inclusive:

What’s more, a policy cannot be said to be “necessary” if it is either overinclusive or underinclusive in its use of racial classifications. Croson, 488 U.S. at 507–08; Gratz, 539 U.S. at 273–75. In the Infrastructure Act, only the following categories are eligible for a presumption of social disadvantage, and therefore eligibility for the 10% racial quota: “Black Americans,” “Hispanic Americans,” “Native Americans,” “Asian Pacific Americans,” and “Subcontinent Asian Americans.”

To defend these racial categories, Defendants must demonstrate evidence-specific episodes of intentional discrimination against each racial category, otherwise the remedy is overinclusive. Vitolo, 999 F.3d at 361 (racial designations must be “informed by data that suggest intentional discrimination”). As the Court in Croson rightfully pondered, if the law was narrowly tailored “to compensate black contractors for past discrimination, one may legitimately ask why they are forced to share this remedial relief with an Aleut citizen who moves to Richmond tomorrow?” Croson, 488 U.S. at 506. The “random inclusion of racial groups for which there is no evidence of past discrimination in the construction industry raises doubts about the remedial nature of the Act’s program.” O’Donnell Const. Co. v. D.C., 963 F.2d 420, 427 (D.C. Cir. 1992) (citation omitted).

On the other hand, the Infrastructure Act’s racial categories will be deemed underinclusive if Defendants fail to justify the exclusion of certain racial groups. “When the government promulgates race-based policies, it must operate with a scalpel.” Vitolo, 999 F.3d at 361. Here, Defendants’ racial categories appear to be created with a meat cleaver. Under the Infrastructure Act, only individuals with ancestors from two Asian regions are deemed Asians worthy of assistance: the “Asian Pacific” region and the “Subcontinent Asian” region. 13 C.F.R. § 124.103.

Asians in other regions are excluded without any justification. For example, Asians from the Mediterranean to India are excluded (Turkey, Lebanon, Syria, Jordan, Iraq, Iran, Afghanistan, and Pakistan). Asians from the Arabian Peninsula are excluded (Saudi Arabia, Kuwait, Yemen, Oman, Qatar, Bahrain, and UAE). Asians from North Asia are also left out (Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan, Tajikistan, and Mongolia). Defendants have a lot of explaining to do. They must, for example, explain why Asians from Malaysia can participate in the set aside, yet Asians from East Timor (a bordering country) cannot.

…

If Defendants’ goal is to end discrimination against all minorities in the “Federally assisted surface transportation markets across the United States” (see Infrastructure Act, § 11101(e)(1)(A)), then why do Defendants inexplicably pick among some Asians and not others, some Africans and not others, some Central and South Americans and not others? This is not narrow tailoring.

Finally, Bruckner also complains that the Infrastructure Investment and Jobs Act fails the “narrowly tailored” test for what he characterizes as “racial discrimination” because it provides no flexibility to adjust the 10% set aside up or down and the quota does not have a deadline for expiration.

Bruckner also challenges the Infrastructure Investment and Jobs Act’s set aside on the grounds that it constitutes impermissible general discrimination.  Bruckner argues that the federal government must show that women “actually suffer[ed] a disadvantage” because of discrimination in a specific industry or field in order to justify the 10% set aside and that the set aside is “substantially related” to remediating that discrimination.  Bruckner then asserts that the government cannot meet this burden:

Here, the gender preference is granted to all women regardless of whether they are “economically disadvantaged.” So if the goal is to wipe away the effects of past gender discrimination against women, one would think that the government would only target “economically disadvantaged” women, in the same way it only targets “economically disadvantaged” minorities (or, at least some minorities). In other words, if the goal of the “economically disadvantaged” criterion is to identify actual harm from past discrimination, then the government must justify why it has excluded women from this requirement. For this very reason, the Sixth Circuit found that the gender discrimination in the Restaurant Revitalization Fund was not substantially related to the goal of helping women who suffered under prior government programs. Vitolo, 999 F.3d at 365. The same is true here: the gender preference is not substantially related to an important governmental objective.

Relief Requested. While Bruckner referenced SBA regulations in his complaint, his motion for preliminary injunction does not directly address or attack those SBA regulations, which the court in Rothe Development, Inc. v. Department of Defense noted in dicta might not survive a challenge on the grounds that it is not a constitutionally permissible “race-based regulatory presumption.”

However, Bruckner did include a proposed order with his motion for preliminary injunction.  With that proposed order, Bruckner proposes that the court to both enjoin implementation of the Infrastructure Investment and Jobs Act’s 10% set aside and find that:

The Constitution forbids “discrimination by the general government . . . against any citizen because of his race.” Gibson v. Mississippi, 162 U.S. 565, 591 (1896). “[A]ll racial classifications imposed by the government must be analyzed by a reviewing court under strict scrutiny.” Johnson v. California, 543 U.S. 499, 505 (2005) (citation omitted). “Under strict scrutiny, the government has the burden of proving that racial classifications are narrowly tailored measures that further compelling governmental interests.” Id. (citation omitted). For the reasons stated in the Court’s opinion, Plaintiffs are likely to succeed on their claim that the racial qualifications in Section 11101(e)(3) are not narrowly tailored to advance a compelling government interest. (emphasis added)

This requested relief is notable for Tribes and Alaska Native Corporations because “the racial qualifications in Section 11101(e)(3)” are the Infrastructure Investment and Jobs Act’s incorporation of the Small Business Act’s definitions of “small business concern” and “socially and economically disadvantaged individuals.” Furthermore, while Bruckner’s complaint and motion is focused on the Infrastructure Investment and Jobs Act’s 10% set aside, his argument is a general attack on racial and gender set-asides by the federal government in procurement matters based on the argument that they are not narrowly tailored to address specific acts of discrimination and impermissibly seeks to respond to general concerns about discrimination.  As such, a ruling in favor of Bruckner could be used to mount an attack on the SBA’s programs that seek to assist “socially and economically disadvantaged individuals,” such as the SBA’s 8(a) program.

Given the potential impact on Tribe and Native Corporations, we intend to monitor Bruckner and the federal government’s response. Given that the Florida District Court already held that the USDA’s loan forgiveness program that focuses on minorities was unconstitutional, Bruckner may have found a favorable tribunal for his claims, at least as the District Court level.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice ‎for your situation, you should contact an attorney.‎