2017 WL (U.S.) (Appellate Petition, Motion and Filing) Supreme Court of the United States.

Transcription

1 2017 WL (U.S.) (Appellate Petition, Motion and Filing) Supreme Court of the United States. MIDWEST FENCE CORPORATION, Petitioner, v. UNITED STATES DEPARTMENT OF TRANSPORTATION, et al., Respondents. No February 2, On Petition for a Writ of Certiorari to the United States Court of Appeals for the Seventh Circuit Petition for a Writ of Certiorari James R. Dashiell, Courtney D. Lorentz, Dashiell Law Offices, LLC, 3350 Salt Creek Lane, Suite 105, Arlington Heights, Illinois 60005, (224) , jdashiell@dashielllaw.com, for petitioner. *i QUESTIONS PRESENTED Preliminary Statement This case involves an equal protection challenge to a federal statutory/regulatory scheme to increase participation by small businesses owned by women and minorities ( DBEs ) in the receipt of federal dollars for road construction and to state- and user-funded programs that claim to follow the federal scheme. When DBE participation is deemed insufficient using only race-neutral means, the programs require the use of race-conscious measures. Questions Presented I. Are the requirements of narrow tailoring defined by the Supreme Court as held by the Ninth Circuit (Western States v. Washington State DOT, et al., 407 F.3d 983 (9th Cir. 2005)), or are they defined by the authorizing federal regulations as held by the Seventh Circuit and those circuits that follow it? See, e.g., S. Fl. Chap. of the AGC v. Broward County, 544 F. Supp. 2d 1336, (S.D. Fla. 2008) (summarizing the conflicting authority in the circuits and choosing to follow the Seventh Circuit). II. Does the Seventh Circuit give excessive deference to the federal regulations and to the state-defendants implementation of them in violation of strict scrutiny as defined by City of Richmond v. Croson, 488 U.S. 469, 501 (1989) (holding that blind judicial deference to legislative or judicial pronouncements of necessity has no place in equal protection ) and *ii Fisher v. U. of Texas, 136 S. Ct. 2198, 2208 (2016) (holding the states are entitled to no such deference in higher education)? III. When do individual contract goals of DBE participation become de facto quotas in practice, thereby violating this Court s holdings that quotas are not allowed by Equal Protection? See, e.g., Croson, 488 U.S. at 499, 507, 508 and 527. *III LIST OF PARTIES Midwest Fence Corporation Petitioner 2017 Thomson Reuters. No claim to original U.S. Government Works. 1

2 Respondents United States Department of Transportation (USDOT), the Acting Secretary * of USDOT (Elaine Chao), Federal Highway Administration (FHWA), the Acting Administrator* the FHWA (Walter C. Waidelich, Jr.), Illinois Department of Transportation (IDOT), the Acting Secretary* of IDOT (Randall S. Blankenhorn), the Illinois Toll Highway Authority (Tollway), and the Acting Members* of the Tollway Board (Bob Schillerstrom, James J. Banks, Corey Brooks, Earl Dotson Jr., Joseph Gomez, David Gonzalez, Craig Johnson, James Sweeney, and Neil Vazquez Rowland), including the Acting Governor of Illinois* (Gov. Bruce Rauner) and Acting Secretary* of IDOT (Randall S. Blankenhorn) as ex officio members of the Tollway Board. * The district court took judicial notice that the named officials have changed during the course of this litigation and are continually subject to change. (App., 53a) *iv TABLE OF CONTENTS QUESTIONS PRESENTED... LIST OF PARTIES... TABLE OF CONTENTS... TABLE OF APPENDICES... TABLE OF CITED AUTHORITIES... i iii iv ix x OPINIONS BELOW... 1 JURISDICTIONAL STATEMENT... 1 CONSTITUTIONAL, STATUTORY & REGULATORY PROVISIONS INVOLVED... 1 STATEMENT OF THE CASE... 2 I. Introduction... 2 II. Nature of the Case... 3 III. Procedural Background... 4 IV Factual Background... 4 A. Bidding... 4 B. How the Regulations Affect Midwest... 5 V. Legal Background... 7 *v REASONS FOR GRANTING THIS PETITION I. THE CIRCUITS ARE SPLIT AS TO WHETHER THE SUPREME COURT OR THE FEDERAL REGULATIONS DEFINE NARROW TAILORING IN EQUAL PROTECTION JURISPRUDENCE A. Narrow Tailoring in the Seventh Circuit Thomson Reuters. No claim to original U.S. Government Works. 2

3 1. Constitutional - Requirements Narrow Tailoring History of Case Law in the Seventh Circuit Nature of An As-applied Constitutional Challenge a. What is an as-applied challenge? b. What is the effect of a successful as-applied challenge? In the Seventh Circuit, the state meets the constitutional requirements of narrow tailoring just by complying with the federal regulations *vi 5. The Seventh Circuit precludes as-applied challenges of federal regulations B. The Circuits are Split as to Whether Compliance with the Federal Regulations Satisfies Narrow Tailoring... II. THE DEGREE OF DEFERENCE AFFORDED THE STATE IN NARROW TAILORING OF RACE-CONSCIOUS MEASURES IN PUBLIC ROAD CONSTRUCTION NEEDS RESOLUTION... A. Fisher Has Not Been Followed: Mismatch Found Troubling by the Court, but Complete Deference Given to the State B. Wygant Has Not Been Followed: The Burden on Innocent Parties Is Not Light and Diffuse The burden on innocent parties must be light The burden must be diffuse C. Croson Has Not Been Followed In Analyzing Numerous Aspects of the Programs *vii 1. The state defendants do not monitor for overconcentration of DBEs in any given type of work The court ignored Croson s analysis of overinclusion of different groups, deferring to the states evidence The circuits are split as to how states can prove disparities and how plaintiffs can rebut the states evidence... III. THE ISSUE OF WHEN CONTRACT DBE GOALS BECOME DE FACTO QUOTAS HAS NOT BEEN DECIDED BY THIS COURT... IV. THE FEDERAL QUESTIONS PRESENTED ARE OF PROFOUND NATIONWIDE IMPORTANCE A. Factual Reasons Deciding the issues presented will resolve major uncertainties in a large, nationwide program in an important industry that is costly to taxpayers Public road construction programs are fraught with political temptation Thomson Reuters. No claim to original U.S. Government Works. 3

4 *viii 3. The proper implementation of race-conscious affirmative action measures are of great importance B. Legal Reasons The regulations should not supersede the Constitution There is a split in the circuits as to whether the state is insulated from constitutional attack, if it acts within the authorizing regulations There is a split in the circuits as to how states can prove disparities and to how plaintiffs can rebut them Deference to the state has become extreme - leading to a multitude of problems in large, complex programs Confusion and the resulting uncertainty have been festering for a long time CONCLUSION *ix TABLE OF APPENDICES APPENDIX A - OPINION OF THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT, FILED NOVEMBER 4, APPENDIX B - MEMORANDUM OPINION AND ORDER OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, FILED MARCH 24, a 51a *x TABLE OF CITED AUTHORITIES CASES Adarand v. Pena, 515 U.S. 200 (1995)... 3, 11 Brown v. Board of Education, 347 U.S. 483 (1952) City of Boerne v. Flores, 521 U.S. 507 (1997)... 9, 17 City of Richmond v. Croson, 488 U.S. 469 (1989)... Concrete Works of Colo. v. City & County of Denver, 321 F.3d 950 (10th Cir. 2003)... Dunnet Bay v. Borggren, 799 F.3d 676 (7th Cir. 2015), cert. denied, 137 S. Ct. 31 (2016)... passim 29 8, 12, 13, 20 Ellis v. Skinner, 961 F.2d 912 (10th Cir. 1992) Fisher v. Univ. of Texas, 136 S. Ct (2016)... 10, 22, 24, 29 Grutter v. Bollinger, 539 U.S. 306 (2003)... 10, 11, Thomson Reuters. No claim to original U.S. Government Works. 4

5 *xi Harrison & Burrows Bridge v. Cuomo, 981 F.2d 50 (2d Cir. 1992) Marbury v. Madison, 5 U.S. 137 (1803)... 9 Milwaukee County Pavers Ass n v. Fielder, 922 F.2d 419 (7th Cir. 1991)... Monterey Mech. Co. v. Sacramento Reg. l County Sani. Dist., 44 Cal. App. 4th 1391 (1996)... 11, Northern Contracting, 473 F.3d 715 (7th Cir. 2007)... 11, 12, 19, 20 Parents v. Seattle School Dist. No. 1, 551 U.S. 701 (2007)... 11, 18, 33 Plessy v. Ferguson, 163 U.S. 537 (1896) Rothe Dev. Corp. v. DOD, 545 F.3d 1023 (2008)... 30, 36 Rust v. Sullivan, 500 U.S. 173 (1991) S. Fla. Chap. of the AGC v. Broward County, 544 F. Supp. 2d 1336 (S.D. Fla. 2008)... 12, 20, 21 *xii Selig v. Brigham Young, 531 U.S. 250 (2001)... 9, 14, 15 W. States Paving Co. v. Wash. State DOT, 407 F.3d 983 (9th Cir. 2005)... Wygant v. Jackson Bd. of Educ., 476 U.S. 267 (1986) passim STATUTES AND OTHER AUTHORITIES U.S. Const. amend. V... 1 U.S. Const. amend. XIV... 1 U.S. Const. amend. XIV U.S. Const. amend. XIV , 17, U.S.C U.S.C. 1254(1) C.F.R. part , 2, 5 49 C.F.R , C.F.R C.F.R *xiii 49 C.F.R (a)(1)... 5, Thomson Reuters. No claim to original U.S. Government Works. 5

6 49 C.F.R (e)(1)... 5, C.F.R (e)(2)... 5, C.F.R C.F.R , C.F.R (a)... 3, ILCS 500/ ILCS 500/30-15(a) ILCS *1 OPINIONS BELOW The opinion of the court of appeals (App., 1a) is reported at 840 F.3d 932. The opinion of the district court (App., 51a) is reported at 84 F. Supp.3d 705. JURISDICTIONAL STATEMENT The judgment of the court of appeals was entered on November 4, (App. 51a). This Court s jurisdiction rests on 28 U.S.C. 1254(1) CONSTITUTIONAL, STATUTORY & REGULATORY PROVISIONS INVOLVED The Fourteenth Amendment provides that no State shall deny to any person within its jurisdiction the equal protection of the laws. U.S. Const. amend. XIV 1. The Fifth Amendment provides that no person shall be deprived of life, liberty, or property, without due process of law. U.S. Const. amend. V. The relevant statutory provision is contained in Sec. 1101(b), Pub. L , 112 Stat. 107, 113, last reauthorized by P.L , effective October 1, U.S.C. 101 note (Disadvantaged Business Enterprises (3)); and the federal regulations, found at 49 C.F.R. part 26. *2 STATEMENT OF THE CASE I. Introduction This case involves constitutional challenges to race- and gender-conscious aspects 1 of three programs intended to aid women and non-white males (collectively disadvantaged business enterprises or DBEs ) in public road construction ( construction ). They are operated by the defendants, the United States Department of Transportation ( USDOT ), its administrative agency, the Federal Highway Administration ( FHWA ), the Illinois Department of Transportation ( IDOT ), and the Illinois State Toll Highway Authority ( Tollway ). Officials of the above agencies have been named individually in their official capacities Thomson Reuters. No claim to original U.S. Government Works. 6

7 1 Race and gender are collectively referred to as race. Petitioner, Midwest Fence Corporation ( Midwest ), is a small specialty contractor, specializing in guardrail and fencing. Midwest is a family business, owned and operated by the third generation of Bells, two sets of brothers, who are white males. Midwest is not a DBE. On construction projects, it bids primarily as a subcontractor, competing with other similarly-situated small contractors, including DBEs. Pursuant to the aforementioned federal statute, the USDOT and the FHWA have instituted voluminous regulations (49 C.F.R. part 26) intended to increase participation of small businesses owned by DBEs in public road construction. For states to receive federal funds for public road construction, they must establish their own *3 programs to help DBEs in accordance with the broad guidelines in the federal regulations. IDOT has instituted such a program, both for federally-assisted projects and solely state-funded projects. The Tollway is a quasi-state entity authorized by a separate statute (605 ILCS 10.1 et seq.) and is entirely user-funded. Since it receives no money from the federal government, the Tollway is neither authorized by, nor obligated to follow, the federal statute and regulations (sometimes collectively, the regulations ). Nonetheless, the Tollway also implements its own DBE program, which is based largely on the federal regulations. All three of the defendants programs are collectively referred to as the DBE programs. The DBE programs presume women and non-white males to be disadvantaged. 49 C.F.R (a). Firms owned by disadvantaged persons are deemed DBEs. All three programs use race-conscious measures to achieve DBE participation. It is well-established that for such measures to be constitutional, the state must have a compelling interest for their use; their remedy must be narrowly tailored to the interest they are designed to address; and they must be reviewed by the courts with the strictest judicial scrutiny. City of Richmond v. Croson, 488 U.S. 469 (1989); Adarand v. Pena, 515 U.S. 200 (1995). II. Nature of the Case Midwest has brought an as-applied constitutional challenge ( as-applied challenge ) to the race-based measures of the regulations and the defendants implementation of them. Midwest does not seek to end *4 the DBE programs insofar as they can be constitutionally implemented. Its concern is that the programs, as they are implemented in Illinois, are not operating in accordance with the Constitution and the requirements of narrow tailoring defined by the Supreme Court. (E.g., Croson, supra.) The result has been a grossly disproportionate burden on small, non-dbe subcontractors - especially in certain subcategories of road construction work, such as guardrail and fencing where there is overconcentration - i.e., excessive use of DBEs in a given type of work. See 49 C.F.R III. Procedural Background Cross motions for summary judgment were filed by all parties on the issue of liability only. Discovery on the damages sustained by Midwest remained open. The district court denied Midwest s motion and granted summary judgment for all three defendants. The court of appeals affirmed. IV. Factual Background A. Bidding Both IDOT s and the Tollway s construction prime contracts, with a few minor exceptions, must be awarded to the lowest 2017 Thomson Reuters. No claim to original U.S. Government Works. 7

8 responsive bidder. 30 ILCS 500/30-15(a); 30 ILCS 500/ In other words, bidding in road construction is race-neutral. Because prime contractors need to be the lowest bidder to win a contract, price is the driving factor in choosing subcontractors, absent a DBE program. With a DBE program in place, contractors also need to meet a contract goal for DBE participation ( DBE *5 goal ), or demonstrate good-faith efforts to IDOT s or the Tollway s satisfaction. 49 C.F.R & Appendix. A. The DBE goal is a percentage of the entire contract, not a percentage of the subcontract work DBEs perform. 49 C.F.R (a)(1); 26.51(e)(1)&(2); see also, App., 7a. If the prime contractor cannot meet the DBE goal, it must show, at the time of its bid, that it has made good-faith efforts and seek a front-end waiver (a waiver granted at the bidding stage) of the DBE goal. If the contractor does not meet the goal, and IDOT or the Tollway determine that good-faith efforts have not been achieved (i.e., the front-end waiver request is denied), the prime contractor does not win the contract. 49 C.F.R The decision to grant a front-end waiver is a judgment call under the regulations. 49 C.F.R. part 26, Appendix A II. There are no guidelines defining when the price difference between a DBE and the lowest non-dbe bid justifies asking for a waiver, other than the price difference has to be unreasonable. 49 C.F.R. part 26, Appendix A, IV(D)(2). No one knows what unreasonable means. Therefore, general contractors do not like to request front-end waivers, because doing so poses too much risk of losing the prime contract. Contractors would rather meet a DBE goal than risk losing a contract by asking for a front-end waiver. The cost of losing a contract is substantial: In addition to lost profits, contractors lose the hours they spent bidding. B. How the Regulations Affect Midwest Illinois DBE goals are among the highest in the nation, and because the regulations are highly discretionary, they *6 allow great leeway for the political agendas of the agencies administering the program. This was felt the most strongly by Midwest in 2010, when it filed this lawsuit. From 2009 to 2010, under the direction of then Secretary of State, Gary Hannig, Midwest s earnings from IDOT subcontracts dropped from $5,356,735 to $2,180,142. Its share of the IDOT guardrail and fencing subcontract market dropped from 20% to 8%, while DBEs share rose from 48% to 67%. From 2009 to 2010, non- DBEs market share of the guardrail and fencing subcontract market, with respect to guardrail and fencing contracts Midwest bid upon, dropped from 52% to 33%. After the Tollway implemented its DBE program, Midwest s average win rate of Tollway contracts dropped from 28.6% ( ) to 6.62% ( ). From January 1, 2006, through February 28, 2014, Midwest lost gross revenue of approximately $25.8 million, and lost profits of approximately $8.5 million, from jobs lost to higher bidding DBEs when Midwest was the low bidder. 2 2 Again, damages discovery was ongoing. Midwest was still analyzing its losses when summary judgment was granted for the defendants. The regulations do not specify how State DOTs are to set individual contract goals, which are different from overall goals. 49 C.F.R The state DOTs set their own means and methods of goal calculation. Id. In Illinois, an IDOT compliance officer in each of the state s nine districts looks at the line items in a contract that DBEs can do ( DBE-able ) to see if there are at least two DBEs in the relevant district that can perform the work. The compliance officer writes down the full-amount of each line-item that a DBE could perform, adds up the dollar *7 amounts, and calculates a percentage of the total dollar amount for the DBE participation goal. In other words, if a DBE can do the work, 100% of that line item is counted towards the goal, and 100% of DBE-able items comprise the DBE goal of the total contract. The Tollway s method of determining contract goals is similar, but it assigns a percentage of a DBE-able line items towards the DBE goal, based on a NERA Economics Consulting study table. Overall, the Tollway admits to following the majority of the federal regulations in framing its program. Midwest provided three spreadsheets which show that DBE goals have been estimated and achieved with up to 100% of guardrail and fencing dollars. When 100% of guardrail and fencing line items are estimated and achieved with DBE participation, Midwest is precluded from winning any work on that contract Thomson Reuters. No claim to original U.S. Government Works. 8

9 V. Legal Background Both the IDOT and Tollway defendants ( state-defendants ) have consistently maintained that they are insulated from any constitutional challenge if they operate within the authority delegated to the states by the regulations. (Defs. Arguments: A.37, at 31, 34, 44-45; R.367, at 2-3, 23-25, 29-30; R.436, at 22-24; R.459, 2-7, 9, 12; A.49, at 46-48; R.380, at 41-42; R.420, at 30; R.371, at 39.) 3 Their position has been affirmed by the Seventh *8 Circuit in this case and in Dunnet Bay v. Boggren, 799 F.3d 676 (7th Cir. 2015). According to Dunnet Bay, the requirements of narrow tailoring, as defined by the Supreme Court, need not be considered - only the regulations. Id. at 688 (endorsing Northern Contracting v. Illinois, 473 F.3d 715, 721 (7th Cir. 2007), which insulated a state DBE program from a constitutional attack absent a showing that the state exceeded its federal authority ) (emphasis added). 3 A corresponds to the electronic docket number in the Seventh Circuit. R corresponds to the electronic docket number in the Northern District of Illinois. In the case sub judice, the district court ruled in favor of the defendants on this issue and was affirmed by the Seventh Circuit. Midwest attempted to distinguish Dunnet Bay on appeal, because it did not involve a constitutional challenge to the regulations but rather a claim that IDOT was not operating its DBE program in compliance with the regulations. In this case, the Seventh Circuit disagreed with Midwest and took Dunnet Bay one step further by expressly holding that an as-applied constitutional challenge to the regulations is not permitted. (App., 17a-18a). The Seventh Circuit s ruling means that, consistent with other recent Seventh Circuit precedent, all a state agency must do to comply with the constitutional requirement of narrow tailoring is to comply with the admittedly broad regulations, which give great discretion to the state. Thus, in the Seventh Circuit, the regulations effectively preempt the Constitution as defined by this Court. Put another way, in the Seventh Circuit, the regulations define narrow tailoring, not this Court. The Seventh Circuit s decision runs counter to this Court s ruling in *9 City of Boerne v. Flores, 521 U.S. 507, 536 (1997) which held that the rulings of the Supreme Court, not legislative provisions authorized by 5 of the 14th Amendment, are controlling in interpreting the Constitution. If not corrected, the regulations will have greater authority than the Supreme Court and the Constitution on the issue of narrow tailoring in Equal Protection jurisprudence in the Seventh Circuit. In a peculiar footnote towards the end of its opinion (App., 45a), the Seventh Circuit appears to disclaim the defendants position that their compliance with the federal regulations satisfies the Supreme Court s requirements of narrow tailoring. (See Defs. Arguments, supra., at 7.) Nonetheless, and as further explained below, the court did not backtrack from its unequivocal holding that an as-applied constitutional challenge cannot be brought against the applicable federal statute or regulations. (App., 17a-18a.) In so doing, the court has ignored well-settled law that the Supreme Court, not regulations, defines the Constitution (Boerne, 521 U.S. at 529 & 536; Marbury v. Madison, 5 U.S. 137 (1803)) and has ignored Supreme Court precedent as to the viability of as-applied challenges to federal statutes and regulations. Selig v. Brigham Young, 531 U.S. 250, 271 (2001) (Thomas concurring). By its ruling, the Seventh Circuit has added another layer of confusion to an already complicated, and extremely important, area of constitutional jurisprudence. Clarification is needed from this Court. Given the foregoing, it is not surprising that the court gave complete deference to the States arguments, without properly applying strict scrutiny in evaluating Illinois tailoring of race-based measures to their purpose: It deferred to the statedefendants implementation *10 of their programs in determining narrow tailoring in contravention of Croson 488 U.S. at 501; it failed to follow Fisher v. Univ. of Texas by reversing the burden of proof assigned to the state-actors on narrowly tailoring race-conscious programs and not scrutinizing how the program works in practice (136 S. Ct. 2198, 2208 (2016)); it wholly ignored overwhelming evidence that the DBE programs in question disproportionately burden small, innocent subcontractors, in violation of Wygant v Jackson Bd. of Educ., 476 U.S. 267 (1986); and it refused to meaningfully evaluate whether the individual contract goals of DBE participation are de facto quotas, in practice. See e.g., Grutter v. Bollinger, 539 U.S. 306, 334 (2003). REASONS FOR GRANTING THIS PETITION 2017 Thomson Reuters. No claim to original U.S. Government Works. 9

10 I. THE CIRCUITS ARE SPLIT AS TO WHETHER THE SUPREME COURT OR THE FEDERAL REGULATIONS DEFINE NARROW TAILORING IN EQUAL PROTECTION JURISPRUDENCE. A. Narrow Tailoring in the Seventh Circuit To understand how the Seventh Circuit has concluded that the federal regulations supersede the Supreme Court s guidelines with respect to narrow tailoring, it is helpful to review the applicable constitutional law and how the case law in the Seventh Circuit on this subject evolved. 1. Constitutional Requirements - Narrow Tailoring To initiate race-conscious measures, the government must show a compelling interest and prove that the remedy *11 is narrowly tailored to that interest. Croson, 488 U.S. 469; Adarand, 515 U.S [B]lind judicial deference to legislative or executive pronouncements has no place in equal protection analysis. Croson, 488 U.S. at 501. Narrow tailoring demands the most exact connection between justification and classification. Parents v. Seattle School Dist. No. 1, 551 U.S. 701, 720 (2007). The remedy must be specifically framed to accomplish that purpose. Wygant, 476 U.S. at 280. It must not unduly burden individuals who are not members of the favored racial and ethnic groups. Bollinger, 539 U.S. at 341. The above requirements must be subject to the most exacting judicial examination. Parents, 551 U.S at History of Case Law in the Seventh Circuit There have been three previous cases presenting Equal Protection challenges to DBE programs in public road construction in the Seventh Circuit. The first was Milwaukee County Pavers v. Fiedler, 922 F. 2d 419 (7th Cir. 1991). There the court found that a contractor, who did not challenge the federal regulations, could not attack the state for doing what the regulations permitted. To hold otherwise would constitute an impermissible collateral attack on the federal regulations. Id. at 424 and 425. This was followed by Northern Contracting, 473 F. 3d 715, in which the plaintiff did not appeal a summary judgment in favor of the appropriate federal-defendants, which upheld the federal regulations. The contractor appealed a later judgment for the state-defendants following a bench trial but did not appeal the summary judgment upholding the regulations. Relying on Milwaukee Pavers, the appeals court held that the state only to had *12 to show that it acted within its federal authority to meet the narrow tailoring requirement, since the validity of the regulations was conceded by the failure to appeal the summary judgment endorsing them. The court used expansive language, describing the holding in Milwaukee County Pavers [as being] that a state is insulated from this sort of constitutional attack, absent a showing that the state exceeded its federal authority. Id. at 721. The above language has been interpreted by the defendants to mean that a state is always insulated from a constitutional attack if it is acting within the regulations. (See Defs. Arguments, supra. at 7.) As IDOT argued in this case: [T]he sole question here is whether IDOT exceeded its authority under the federal regulations. (R.459, at 7) (emphasis added). The same conclusion has been reached by other circuits who have chosen to follow the Seventh Circuit. In S. Fla. Chap. of the AGC v. Broward County, 544 F. Supp. 2d 1336, (S.D. Fla. 2008), the court summarized the circuit split as to how narrow tailoring is applied. After reviewing the differing views among the circuits, the court elected to follow the Seventh Circuit, holding: the appropriate factual inquiry in the instant case is whether or not Broward County has fully complied with the federal regulations in implementing its DBE program. Id. at Third came Dunnet Bay v. Borggren, 799 F.3d 676 (7th Cir. 2015), cert. denied 137 S. Ct. 31 (2016). The plaintiff in that case was a large general contractor, Dunnet Bay, that claimed to have lost a single IDOT contract because of the DBE program. The case was brought only against IDOT - not the federal government or any of its agencies. The case was dismissed for lack of standing. But the court gave an alternative reason for denying Dunnet Bay any *13 relief: It found that IDOT had complied with the federal regulations Thomson Reuters. No claim to original U.S. Government Works. 10

11 In doing so, the Seventh Circuit made clear just how extreme this approach really is. For example, the race-conscious measures of the programs are the DBE participation goals, which are set by IDOT on a contract-by-contract basis in nine different districts throughout Illinois. The regulations have few guidelines on how the individual contract goals are to be set. From this the Dunnet Bay court concluded: because the federal regulations do not specify a procedure for arriving at contract goals, it is not apparent how IDOT could have exceeded its federal authority in setting the contract goals involved in that case. Id. at 698. In other words, if the federal regulations are found to be facially constitutional, there can be no as-applied constitutional challenge to the state s implementation of them. If compliance with the regulations meets the narrow tailoring requirements of the Supreme Court, this allows the state to set race-conscious measures almost anyway it wants and still satisfy the socalled exacting requirement of the narrow tailoring prong of strict scrutiny. The Constitution, as it has been defined by this Court, has been pre-empted by broad, discretionary regulations. 3. Nature of An As-applied Constitutional Challenge a. What is an as-applied challenge? There are three types of constitutional challenges to statutory/regulatory requirements and the government s implementation of them: 1) a facial constitutional challenge *14 ( facial challenge ); 2) an as-applied constitutional challenge ( as-applied challenge ); and 3) a claim that the government exceeded its constitutional authority by not following a statutory/regulatory scheme at all. A statute or set of regulations is constitutional on its face if there is any set of circumstances in which they can operate within the Constitution. Rust v. Sullivan, 500 U.S. 173, 183 (1991). This is a very easy test for the government to meet. Of course, this leaves open the possibility that there are circumstances, perhaps many of them, when the facially constitutional regulations operate outside the Constitution due to a state s implementation of them or circumstances within the state. In which case, the regulations are unconstitutional as-applied. Unconstitutional as-applied is not the same as a state s failure to follow a statute or regulation. The difference was succinctly explained by Justice Thomas: an as-applied challenge is a claim that a statute, by its own terms, infringes constitutional freedoms in the circumstances of [a] particular case. Selig, 531 U.S. at 271 (Thomas concurring) (citation omitted) (emphasis in original). He contrasted this with a claim that a statute was not being applied according to its terms at all. Id. at 271. b. What is the effect of a successful as-applied challenge? If a facially valid regulation is found to be unconstitutional as-applied, it may still be entirely valid in another state that implements the same regulation in a constitutional fashion, or that presents different *15 circumstances. Public road construction is a huge, complex and varied industry. Its structure and operation can vary greatly from state to state. Therefore, one or more regulatory provisions might be unconstitutional as-applied in Illinois but remain valid in other states. 4. In the Seventh Circuit, the state meets the constitutional requirements of narrow tailoring just by complying with the federal regulations. The district court first held that the as-applied constitutional challenge did not apply to the federal regulations but only to the state s implementation of them. (App., 91a.) At first blush this may appear to be only an academic distinction. However, the district court failed to acknowledge that an as-applied challenge is not just how the state implements the regulations but whether the state can implement a given requirement at all under the set of circumstances that exist within a given state. Selig, 531 U.S. at Thomson Reuters. No claim to original U.S. Government Works. 11

12 This oversight looms large in assessing Midwest s argument that the remedy is grossly mismatched to the goal ( The Mismatch ). The regulations require the goal of DBE participation to be a percentage of total contract dollars, while the raceconscious remedy of contract goals be derived only from subcontract dollars. 49 C.F.R (a)(1); 26.51(e)(1)&(2); (see also, App., 7a.) In this fashion, the race-conscious remedy for the entire industry must come from only the smaller non-dbes who compete with, and lose business to, DBEs even when they are the low bidder. The problem is illustrated by the chart below: 2613 As the district court held that the state meets its constitutional obligations just by staying within its delegated federal authority, it dismissed this problem, because the Mismatch is required by the regulations. (App., 91a & 103a.) This Mismatch between the remedy and the goal, which the Seventh Circuit found troubling (App., 23a & 48a), arises from the requirements of the regulations and the set of circumstances that exist in Illinois: Contractors vary dramatically in terms of the size and types of work they can do. In this state, there are many large general contractors that focus on the large prime contracts, and most of the contract dollars go to, and remain with, general contractors. DBEs must be small per the regulations. 49 C.F.R Consequently, DBE s are unable to perform any but the smallest prime contracts, and they generally work as subcontractors. Thus, DBEs compete only with the smaller non-dbes, like Midwest, that generally perform subcontracts on public road projects. Yet, the regulations *17 require that the race-conscious remedy address the alleged wrongs of the entire industry only with business transferred from these smaller non-dbes. The question is not how the state implements the regulations but whether the relevant provisions can be implemented at all in Illinois. Since an asapplied challenge to the regulations is not permitted, it is literally impossible to bring an as-applied challenge to the Mismatch. Because the district court held that the state-defendants meet narrow tailoring requirements by acting within the regulations, it did not subject numerous other aspects of the DBE programs to strict scrutiny (see Sect. IV(B)(4), infra, 36-37). Its failure to do so further exacerbates the disproportionate burden already placed on the smaller, non-dbes who engage primarily in subcontracting. 5. The Seventh Circuit precludes as-applied challenges of federal regulations. The Seventh Circuit affirmed the district court without qualification and went one step further in preventing a constitutional objection to the race-conscious programs: It unequivocally held that an as-applied challenge is not permitted against the applicable federal statute and regulations. (App. 17a.) The court did not cite any legal authority for its ruling, which violates Supreme Court precedent that allows for as-applied challenges to regulations authorized by 5 of the 14th Amendment. E.g. Boerne, 521 U.S. at 529 & 536. *18 The court misstated the result of a successful as-applied challenge, claiming that Midwest argued that it would render a provision universally void. (App., 17a). In fact, Midwest argued the exact opposite, explaining how a regulatory provision could be valid in one state but unconstitutional as-applied in another state that presented different circumstances. Finding a statutory or regulatory provision unconstitutional as-applied means that it may not be implemented in an unconstitutional fashion or may not be implemented at all in certain circumstances. It is narrower than a finding of facial unconstitutionality. The court muddied its ruling with footnote 3, which concludes as follows: In terms of [prior Seventh Circuit opinions], a state or local government would exceed[] its federal authority, Northern Contracting, 473 F.3d at 721, citing Milwaukee County Pavers, 922 F.2d at , if it implemented federal law in a manner that violates the Equal Protection Clause. (App. 45a.) There are serious problems with this statement. First, it was mysteriously relegated to a footnote. Surely, the most exacting judicial examination does not set such a low bar for critical substantive rulings. Parents, 551 U.S at 740. Second, the 2017 Thomson Reuters. No claim to original U.S. Government Works. 12

13 footnote does not reflect what the district court held, which was affirmed without qualification. The district judge stated: Whether the Federal Program is unconstitutional as applied is a question of whether IDOT exceeded its authority in implementing it. (citing Northern Contracting) (App. 91a.) *19 As noted above, Northern Contracting held: a state is insulated from this sort of constitutional attack, absent a showing that the state exceeded its federal authority. Id. at 721 (emphasis added). Unless the Northern court meant that a state is insulated from this sort of constitutional attack if it follows the Constitution - a meaningless tautology - the Northern court clearly meant that the state s federal authority is that which is delegated to it by Congress and the regulations. Milwaukee Pavers, on which Northern relies, explained that Congress has authority to delegate power to the states to further Equal Protection pursuant to 5 of the 14th Amendment. Milwaukee County Pavers Ass n v. Fielder, 922 F.2d 419, 424 (7th Cir. 1991). The federal authority given the states referred to in that case is this delegated power, which was interpreted by the district court as superseding the Supreme Court s requirements for narrow tailoring. The district court left no doubt that compliance with the regulations was all that was needed for narrow tailoring. In holding that the remedy imposed only on subcontracting dollars does not impose an undue burden on small, non-dbe subcontractors, the district court held: The fact that IDOT sets contract goals as a percentage of total contract dollars does not demonstrate that IDOT imposes an undue burden on non-dbe subcontractors. To the contrary, IDOT is acting within the scope of the Federal Regulations, which require goals to be set in this manner. 49 C.F.R (1). *20 App. 103a. Notwithstanding footnote 3, the Seventh Circuit unconditionally affirmed the district court. The defendants consistently argued that all they needed to do to satisfy narrow tailoring was to comply with the regulations. (Defs. Arguments, supra, at 7.) Midwest vigorously opposed their position. The defendants won. Whatever the Seventh Circuit meant by footnote 3, the defendants have been allowed to follow only the regulations for narrow tailoring and have free license to do so in the future. Given the conflict between footnote 3 and the court s substantive holding, there is currently no clear law on the requirements of narrow tailoring in the Seventh Circuit. Furthermore, the law in the Seventh Circuit, as it currently stands, which upholds Northern and Dunnet Bay, is in conflict with the Supreme Court precedent as to the requirements of narrow tailoring (e.g., Croson, supra.) and has led to a split in the circuits. B. The Circuits are Split as to Whether Compliance with the Federal Regulations Satisfies Narrow Tailoring. Other circuits agree with the Seventh Circuit that narrow tailoring is satisfied when the state follows the regulations. See, e.g., Broward County, 544 F. Supp. 2d at 1341 (holding that it would follow the Seventh Circuit in that the appropriate factual inquiry in the instant case is whether or not Broward County has fully complied with the federal regulations in implementing its DBE program ) (emphasis added). *21 The Second Circuit has held that one cannot protest the federal program by claiming the state s implementation of it is unconstitutional. Harrison & Burrows Bridge v. Cuomo, 981 F.2d 50, 57 (2nd Cir. 1992). The Tenth Circuit has held that if a state simply follows the procedures set forth in the federal statute s implementing regulations [it] is simply obeying a congressional command. Ellis v. Skinner, 961 F.2d 912, 916 (10th Cir. 1992). However, Ellis qualified its holding in noting that the plaintiff had stipulated that the regulations were constitutional. In interpreting Ellis to mean that a state is insulated from a constitutional attack if it follows the regulations, the Broward court acknowledges no such distinction. The Ninth Circuit does not agree with the Seventh Circuit. Although the State of Washington complied with the federal regulations, the Ninth Circuit explained that it was still necessary to determine if the state s implementation of them was narrowly tailored. W. States Paving Co. v. Wash. State DOT, 407 F.3d 983, 997 (9th Cir. 2005). Similarly, the Eighth Circuit 2017 Thomson Reuters. No claim to original U.S. Government Works. 13

14 has held that even if a state complies with the regulations, its implementation must be narrowly tailored. However, that analysis was limited to analyzing the scope of the state s compelling interest - i.e. the extent of discrimination being addressed. All of these cases demonstrate the confusion as to the proper standard of review for narrow tailoring. This Court s review is urgently needed to clarify that standard. The urgency goes beyond the confusion and splits among the circuits but goes to the question of whether the Supreme Court or the federal regulations interpret the constitutional requirements of narrow tailoring. *22 II. THE DEGREE OF DEFERENCE AFFORDED THE STATE IN NARROW TAILORING OF RACE- CONSCIOUS MEASURES IN PUBLIC ROAD CONSTRUCTION NEEDS RESOLUTION Since the state-defendants only follow the federal regulations to narrowly tailor the program, there are other important aspects of the programs where narrow tailoring has been seriously compromised, and which the Seventh Circuit failed to address in its opinion. (See Sect. IV(B)(4), infra, at 36-37). In its deference to the state, the Seventh Circuit has failed to follow at least three important Supreme Court cases: Fisher, as to the burden of proof and degree of deference afforded to governments in narrow tailoring: Wygant, as to how the burden on innocent third parties must be light and diffuse; and Croson, as to how narrow tailoring should be analyzed by the courts. A. Fisher Has Not Been Followed: Mismatch Found Troubling by the Court, but Complete Deference Given to the State. Fisher held that no deference is owed to the state in determining narrow tailoring, that the state has the ultimate burden of proof with respect to narrow tailoring, and that the courts must carefully analyze how the program works in practice. Fisher, 136 S. Ct. at The Seventh Circuit never cited to Fisher and never elucidated the burden. It gave complete deference to the state on all the issues it was asked to analyze. Three important examples demonstrate the extreme deference to the state. *23 The Court found the Mismatch discussed above troubling. (App., 23a & 48a). At the same time, it stated: The theoretical possibility of a mismatch could be a problem, but we have no evidence that it actually is. (App., 49a). In fact, Midwest presented voluminous, uncontested evidence that DBEs usually work as subcontractors and cannot perform the work of large prime contractors. In addition to testimony from numerous contractors and IDOT s Chief Engineer, Midwest presented IDOT s Uniform Reports, which are sent semi-annually to the FHWA. These show that substantially less than half of all contract dollars go to subcontractors. DBEs receive no race-conscious dollars (those that come from contract goals) from prime contract dollars. The vast majority of all DBE dollars (whether achieved through race-conscious or race-neutral means) come from subcontracting. Midwest proved that all race-conscious DBE goals are satisfied with subcontracting dollars. Midwest also presented spreadsheets which show that contract goals may be estimated by the defendants, and achieved by the general contractors, using 100% of guardrail and fencing contract line items. The spreadsheets also illustrate the way actual DBE participation, which comes exclusively from subcontractor dollars, often exceeds the contract s DBE goal. Midwest proved that DBE utilization is a much higher percentage of subcontract dollars than the DBE goal set as a percentage of total contract dollars. In addition, Midwest showed that the state-defendants refuse to track data that would allow them to determine the extent of the business lost by the smaller non-dbes because of the programs. IDOT and the Tollway do not *24 even attempt to determine which contractors compete with DBEs, claiming under oath that they are not required to do so. Hence, they make no effort to identify - by category or otherwise - the non-dbes which must give up business to DBEs, even when those non- DBEs have presented the lowest bid. The defendants do not determine the total dollars that go to all subcontractors when they could easily do so, which would enable them to calculate the actual percentage of dollars that non-dbe subcontractors give up to DBEs. Midwest proved that the defendants do nothing to ensure the Mismatch does not unduly burden non-dbes like Midwest Thomson Reuters. No claim to original U.S. Government Works. 14

15 The court demanded no evidence from the defendants to rebut Midwest s evidence of the Mismatch, and the defendants presented nothing. The entire burden of proof with regard to the Mismatch was placed on Midwest. Cf. Fisher, 136 S. Ct. at This double-standard illustrates the extreme deference that was afforded the defendants. Race-conscious measures are inherently suspect, not inherently presumed valid, regardless of whose ox is being gored. The court noted that set-asides could not be used to solve the Mismatch problem, because they would be unconstitutional quotas, but it ignored the appropriate solution to the Mismatch: DBE participation goals must be a percentage of the work they can actually do - subcontracting - not of total contract dollars. *25 B. Wygant Has Not Been Followed: The Burden on Innocent Parties Is Not Light and Diffuse. 1. The burden on innocent parties must be light. Narrow tailoring requires that the burden on innocent third parties be both light and diffuse. Wygant, 476 U.S. at Nonetheless, the court made no attempt to evaluate the extent of the burden imposed on specialty contractors like Midwest. In its standing analysis, the court acknowledged that there was evidence that Midwest s damages were substantial. The court noted that Midwest alleged and offered evidence of lost bids, decreased revenue, and difficulties keeping its business afloat as a result of the DBE program and its inability to compete for contracts on an equal footing with DBEs. (App., 14a.) Discovery on damages remained open when the cross-motions for summary judgment were filed, yet the Seventh Circuit still found as a matter of law that Midwest s damages were light. (App. 24a-25a.) It found that depriving subcontractors of jobs was not as bad as a layoff - a highly debatable point, given that the same non- DBE subcontractors lose jobs to the same DBE subcontractors repeatedly, over the course of many years. There was, at the very least, a serious question of fact of whether Midwest s burden was light, especially since discovery on damages was still open. Yet the Seventh Circuit foreclosed any further inquiry by completely deferring to the state. Similarly, in disregarding the Mismatch, the court denied a factual inquiry into the *26 extent to which smaller, specialty contractors were disproportionately burdened by the program. 2. The burden must be diffuse. Nor did the court consider whether the burden is diffuse. The program, in unabashed Orwellian fashion, professes to help small business but targets smaller non-dbe specialty contractors to pay virtually the entire price. Wygant s requirement, that the burden on innocent parties be diffuse, was simply ignored by the court. C. Croson Has Not Been Followed In Analyzing Numerous Aspects of the Programs. 1. The state defendants do not monitor for overconcentration of DBEs in any given type of work. Although the regulations do not specifically require such monitoring, they do require the states to take corrective action when overconcentration is discovered. 49 C.F.R This is meaningless in Illinois, because the state-defendants do not monitor for overconcentration. Doing the absolute minimum to comply with broad regulations does not meet the rigorous requirements of narrow tailoring. The Seventh Circuit was again silent as to this issue - yet, another example of deference to the State. *27 2. The court ignored Croson s analysis of overinclusion of different groups, deferring to the states evidence Thomson Reuters. No claim to original U.S. Government Works. 15

16 The regulations provide that all persons other than white males be presumed disadvantaged. 49 C.F.R (a). The defendants own evidence showed that the multifarious groups given this presumption have different degrees of participation in public road construction relative to their availability. Despite this, the court approved granting equal advantages to all groups, giving the same remedy to differing compelling interests so that an exact fit of the remedy to those interests as envisioned by Croson is impossible. Croson, 488 U.S. at This overinclusion of groups presumed to be disadvantaged also dilutes the ability of the programs to help those groups who have actually suffered historical, institutionalized discrimination. It creates an unrealistically high estimate of DBE availability to do the work, leading to an unjustified extra burden on the innocent parties who must bear it. The overly broad presumption of disadvantage also pays no heed to Croson s, warning: The gross over-inclusiveness of Richmond s racial preference strongly impugns the city s claim of remedial motivation. Croson, 488 U.S. at 506. The severity of the overinclusion was highlighted by the Tollway s most recent disparity study, which showed utilization of only 13.41% of available Black-owned businesses. At the same time, Hispanic-owned firms were receiving % of the work they were available to perform. This clearly showed that Black-owned businesses qualify for special treatment but Hispanic-owned businesses do not. *28 Unfortunately, the Tollway s study was not released until shortly before oral argument on appeal. Midwest filed a motion for the study s inclusion in the record, which was granted by the district court. The Seventh Circuit reversed the district court s ruling to protect the district court from collateral attack! (App. 28a-29a.) The exclusion of this evidence demonstrates another case of extreme deference to the state. The Tollway was allowed to manipulate what data was reviewed by the court, and the court ignored data that would have clearly demonstrated the over-inclusiveness of the Tollway s program. 3. The circuits are split as to how states can prove disparities and how plaintiffs can rebut the states evidence. In evaluating the availability of DBEs to perform work, the state-defendants consider all contractors to be capable of performing the same amount, and same types, of work. Since DBEs must be relatively small per the regulations (49 C.F.R ), this assumption cannot be true in any state where contractors differ significantly in size. Assuming DBEs are available to perform work they cannot do necessarily yields excessive estimates of DBE availability. The exaggerated estimate of DBE availability leads to excessive DBE participation goals, which increases the burden on small, innocent companies that lose more business to meet the higher goals. It also means that the increased burden is linked to an unrealistic assumption, not to a true compelling interest, as required by narrow tailoring. The Seventh Circuit found Midwest s statistician, Dr. Jon Guryan s concerns about capacity to be speculative, *29 ignoring the uncontested testimony of differences in the amounts and types of work Illinois contractors can do. (App. 40a.) The court ignored that the regulations create differences in capacity by requiring DBEs to be small. The court also overlooked the district court s ruling that Dr. Guryan s report is admissible (App. 40a & 80a), which should have created a question of fact over the validity of the defendants disparity studies. Instead, the Seventh Circuit imposed an impossible burden on parties challenging the implementation of the regulations by requiring plaintiffs to produce their own disparity study to rebut the state s evidence. (App. 40a-41a). Such studies take years, cost hundreds of thousands of dollars, and must utilize data controlled by the state. The court s reason for imposing this burden on plaintiffs is simply that, once the state produces evidence to justify its programs, it has no further burden to show that its claimed compelling interest is not excessive in scope. Per the Seventh Circuit, it is entirely the subcontractor s burden to prove the estimates are excessive with a rebuttal study. This is deference to the state that closes the courthouse door to innocent parties wanting to challenge a state s evidence. Furthermore, it illustrates two additional issues in need of this Court s guidance: (1) What is the burden of proof for plaintiffs challenging race-conscious programs in the road construction industry, in light of Fisher, 136 S. Ct. at 2208? and (2) What qualifies as rebuttal evidence of a state s statistics? Contrary to the Seventh Circuit, other circuits have held that a state s statistics can be rebutted by showing that their methodologies and/or statistics are flawed. E.g., Concrete Works of Colo. v. City & County of Denver, 321 F.3d 950, 959 (10th Cir. 2003). *30 Only the Federal Circuit has held that capacity should be considered in calculating availability and disparities. Rothe Dev. Corp. v. DOD, 545 F.3d 1023(2008) (professing to follow only Supreme Court authority and holding that a Department 2017 Thomson Reuters. No claim to original U.S. Government Works. 16