Mid-America Milling Co. v. United States Dep't of Transp.

1

MID-AMERICA MILLING COMPANY, LLC, et al., Plaintiffs, v. UNITED STATES DEPARTMENT OF TRANSPORTATION, et al., Defendants.

No. 3:23-cv-00072-GFVT

United States District Court, E.D. Kentucky, Central Division, Frankfort

September 23, 2024

OPINION & ORDER

Gregory F. Van Tatenhove, United States District Judge

The noble aspirations of our founding documents represent the most successful experiment in representative democracy the world has even known. But by no means has our American experiment been perfect. No one could argue, for example that our Nation has always treated men and women of all backgrounds in this country equally.

Attempting to cure this imperfect history, Congress enacted the Disadvantaged Business Enterprise program, which requires the Department of Transportation to ensure that a certain portion of federal funds authorized for the highway and transit projects be expended with disadvantaged business enterprises. To execute this requirement, the Department of Transportation affords certain minority- and women-owned businesses a presumption of disadvantage-a rebuttable presumption-but a presumption, nonetheless. These presumptions have been employed since the 1980s, but the Plaintiffs say enough is enough. The Court agrees. Because these race and gender classifications violate the Constitution’s guarantee of equal protection, the pending request for a preliminary injunction will be GRANTED.

I

In 1983, the federal government enacted the Disadvantaged Enterprise (“DBE”) Program. [R. 1 at 7.] Since then, the law has required that ten percent of federal highway construction funds be paid to small businesses owned and controlled by “socially and economically disadvantaged individuals,” as that term is defined in § 8(d) of the Small Business Act (15 U.S.C. § 637). Id. at 7-8; Sherbrooke Turf, Inc. v. Minn DOT, 345 F.3d 964, 967 (8th Cir. 2003). “[S]ocially disadvantaged individuals” are “those who have been subjected to racial or ethnic prejudice or cultural bias within American society[.]” 49 C.F.R. Part 26 app. E. “Economically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired ... as compared to others in the same ... line of business who are not socially disadvantaged.” Id.

Any person may qualify as socially and economically disadvantaged regardless of their race or gender. 49 C.F.R. § 26.67(d) & app. E. But under the law, certain racial groups and women are rebuttably presumed to be disadvantaged. 49 C.F.R. § 26.5. All other applicants for DBE certification who are not presumed disadvantaged on the basis of their racial or female status must prove, by a preponderance of the evidence, that they are socially and economically disadvantaged. 49 C.F.R. § 26.67(a)(3)(i)-(d).

Under federal law, fund recipients, such as state departments of transportation, are required to have a DBE Program and must set a DBE participation goal “based on demonstrable evidence of the availability of ready, willing and able DBEs relative to all businesses ready, willing and able to participate on” federally funded contracts. 49 C.F.R §§ 26.21, 26.45(a)-(b). To the extent feasible, state-recipients of federal highway funds attempt to meet their overall goals through the use of race and gender-neutral means. 49 C.F.R. § 26.51(a). But to the extent they cannot meet their overall goals, the state must utilize “contract goals” to meet its overall goal. 49 C.F.R. § 26.51(d). On these particular contracts, the recipient sets goals for DBE subcontractor participation on specific contracts. Id. On contracts with goals, states must meet the goal for DBE participation or otherwise document that a bidder has made “good faith efforts” to meet the DBE goal. 49 C.F.R. § 26.53.

Plaintiffs Mid-America Milling, LLC and Bagshaw Trucking Inc. operate within Kentucky and Indiana. [R. 27-1 at 4.] Both Plaintiffs regularly bid on United States Department of Transportation (“DOT”) funded contracts impacted by DBE goals. Id. But neither Plaintiff receives the rebuttable presumption of disadvantage. The Plaintiffs have previously lost out on federally funded contracts to DBE firms, even when Plaintiffs’ bids were lower. Believing that they are denied the opportunity to compete for transportation contracts on equal footing, the Plaintiffs filed suit seeking a declaratory judgment and to permanently enjoin the Defendants from applying race- and gender-based classifications in the federal DBE program. Id. at 1. The Plaintiffs also seek a preliminary injunction pending the final resolution of this matter. [R. 27.] The Court turns now to that motion.

II

“A preliminary injunction is an extraordinary remedy which should be granted only if the movant carries his or her burden of proving that the circumstances clearly demand it.” Overstreet v. Lexington-Fayette Urban County Government, 305 F.3d 566, 573 (6th Cir. 2002) (citing Leary v. Daeschner, 228 F.3d 729, 739 (6th Cir. 2000) (cleaned up) (“[A] preliminary injunction involv[es] the exercise of a very far-reaching power ....”)). To issue a preliminary injunction, the Court must consider: (1) whether the movant has shown a strong likelihood of success on the merits; (2) whether the movant will suffer irreparable harm if the injunction is not issued (3) whether the issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served by issuing the injunction. Overstreet, 305 F.3d at 573 (citations omitted).

The Sixth Circuit has clarified that, “[w]hen a party seeks a preliminary injunction on the basis of a potential constitutional violation, the likelihood of success on the merits often will be the determinative factor.” City of Pontiac Retired Employees Ass’n v. Schimmel, 751 F.3d 427, 430 (6th Cir. 2014) (quoting Obama for Am. v. Husted, 697 F.3d 423, 436 (6th Cir. 2012)). Even if, however, the plaintiff is unable “to show a strong or substantial probability of ultimate success on the merits” an injunction can be issued when the plaintiff “at least shows serious questions going to the merits and irreparable harm which decidedly outweighs any potential harm to the defendant if an injunction is issued.” In re Delorean Motor Co., 755 F.2d 1223, 1229 (6th Cir. 1985).

A

Before considering the four preliminary injunction factors, the Court must examine whether the Plaintiffs have standing. The Government contends that the Plaintiffs are unlikely to succeed on their facial challenge to the DBE program because the Plaintiffs lack standing to bring their claims. Article III of the United States Constitution limits the judiciary to resolving “Cases” and “Controversies.” U.S. Const. Art. III. § 2. Theoretical questions will not suffice to confer subject-matter jurisdiction to this Court. Buchholz v Meyer Njus Tanick, PA, 946 F.3d 855, 860 (6th Cir. 2020). The standing doctrine ensures that a live dispute between adverse parties actually exists, “thereby preventing the federal courts from issuing advisory opinions.” Carney v. Adams, 141 S.Ct. 493, 498 (2020).

Standing consists of three elements. A plaintiff must have “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016). “The plaintiff, as the party invoking federal jurisdiction, bears the burden of establishing these elements.” Id. At the preliminary injunction stage, the Plaintiff must show “a substantial likelihood of standing.” Waskul v. Washtenaw Cnty. Cmty. Mental Health, 900 F.3d 250, 255 n.3 (6th Cir. 2018).

a

The Government first attacks the Plaintiffs’ standing by alleging that the Plaintiffs have failed to show that they have suffered an injury in fact. [R. 32 at 6.] Generally, an injury for purposes of standing must be “concrete and particularized” and “actual or imminent.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). A “conjectural” or “hypothetical” injury will not do. Id. Moreover, mere allegations of possible future injury are insufficient to satisfy the first standing element. Clapper v. Amnesty Int’l USA, 568 U.S. 398 409 (2013) (collecting cases). Rather, the threatened injury must be certainly impending. Id. (quotations omitted).

In an equal protection case, an injury in fact arises “[w]hen the government erects a barrier that makes it more difficult for members of one group to obtain a benefit than it is for members of another group.” Ne. Fla. Chapter, Associated Gen. Contractors of Am. v. Jacksonville, 508 U.S. 656, 666 (1993). The injury “is the denial of equal treatment resulting from the imposition of the barrier, not the ultimate inability to obtain the benefit.” Id.; see also Parents Involved in Cmty. Schs. v. Seattle Sch. Dist. No. 1, 551 U.S. 701, 719 (2007) (“[O]ne form of injury under the Equal Protection Clause is being forced to compete in a race-based system that may prejudice the plaintiff.” (citations omitted)). Thus, to satisfy the first standing element, the Plaintiffs must demonstrate that they are “able and ready to bid on contracts and that a discriminatory policy prevents it from doing so on an equal basis.” Northeastern Florida, 508 U.S. at 666.

The Plaintiffs aver that they have “a long history of participating in federally financed road-construction projects and a long history of being discriminated against by the DBE program.” [R. 1 at ¶ 8.] According to their Complaint, Mid-America and Bagshaw Trucking routinely bid for federally funded surface transportation contracts in both Kentucky and Indiana, two states that have established DBE goals in accordance with federal regulations. Id. at...