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November 2, 2000


The opinion of the court was delivered by: Grady, District Judge.


This case presents a challenge to the constitutionality of a Cook County ordinance which requires that minority- and women-owned businesses be allotted certain percentages of the dollar value of each county construction contract. Plaintiff, Builders Association of Greater Chicago, is an association of general contractors and subcontractors engaged in the demolition, building and construction industry in and around Cook County. Defendants are the County of Cook itself and certain contractor associations representing minority- and women-owned enterprises. These associations — Association of Asian Construction Enterprises, Black Contractors United, Federation of Women Contractors, Hispanic-American Construction Industry Association, and Illinois Association of Minority Contractors — were permitted to intervene, over the objection of plaintiff.*fn1

Plaintiff brings the action under 42 U.S.C. § 1983, claiming that the ordinance deprives its members of equal protection of the laws, in violation of the Fourteenth Amendment to the United States Constitution. Defendants contend that the ordinance is an appropriate response to racial, ethnic and gender discrimination in the construction industry.

After extensive discovery, the parties filed cross-motions for summary judgment, the plaintiff contending that there was no evidence of discrimination that would support the ordinance and defendants countering that there was undisputed evidence of discrimination. We concluded that a genuine factual issue was presented and denied both motions.*fn2

A three-week bench trial was held, after which the parties submitted post-trial briefs. The case is now ready for decision.


The Ordinance

The original set-aside ordinance was enacted in 1988.*fn3 The present version, Ordinance 93-0-38 (the "ordinance"), was enacted in 1993*fn4 and amended in 1994.*fn5 The ordinance requires that a minimum of 30 percent of the total value of any county construction contract be awarded to minority business enterprises (MBEs) and 10 percent to women-owned business enterprises (WBEs). To qualify as an MBE, at least 51 percent of the enterprise must be owned and controlled by one or more members of minority groups. To qualify as a WBE, at least 51 percent of the enterprise must be owned and controlled by one or more women. The M/WBE must, with certain exceptions, be located within the "Six County Region" of Cook, DuPage, Kane, Lake, McHenry or Will counties.

The ordinance refers to these percentages as "goals," but they are more than that. They are requirements for a successful bid, unless the conditions for a waiver are met.*fn6

The ordinance contains the following definition of a "minority group" member:

A "minority group" member is an individual who is one of the following:
(i) African-American or Black (persons with origins in any of the Black racial groups of Africa);
(ii) Hispanic American (persons of Spanish culture with origins from Puerto Rico, Mexico, Cuba, South or Central America, Spain, Portugal, or the Caribbean Islands regardless of race);

(iii) Native American (American Indian); or

(iv) Asian-Pacific American (persons with origins from Japan, China, the Philippines, Vietnam, Korea, Samoa, Guam, the U.S. Trust Territories of the Pacific, Northern Marianas, Laos, Cambodia, Taiwan, or the Indian subcontinent); or
(v) Any other ethnically or racially identifiable group found by the CCA [Contract Compliance Administrator] to have suffered actual racial or ethnic discrimination resulting in a competitive disadvantage or decreased opportunities to do business with the County of Cook.

The ordinance contains a number of other provisions and considerably more detail, but the foregoing summary will suffice for the present.


The Croson Case

An understanding of the evidence received at trial will be enhanced if it is considered in light of the governing law. That law is provided by the decision of the United States Supreme Court in City of Richmond v. J.A. Croson Co., 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989). Other cases will also be helpful to the analysis, but Croson is the primary reference, at least as to the set-asides for minority groups.*fn7

The Croson case was concerned with an ordinance adopted by the City of Richmond, Virginia in 1983 which "required prime contractors to whom the city awarded construction contracts to subcontract at least 30 percent of the dollar amount of the contract to one or more Minority Business Enterprises (MBE's)." 488 U.S. at 477, 109 S.Ct. 706. The ordinance defined an MBE as "[a] business at least fifty-one (51) percent of which is owned and controlled . . . by minority group members," and minority group members were defined as citizens of the United States "who are Black, Spanish-speaking, Orientals, Indians, Eskimos, or Aleuts." Id. at 478, 109 S.Ct. 706. The plan provided for waivers "where a contractor can prove to the satisfaction of the [Director of the Department of General Services] that the requirements herein cannot be achieved." Id.

J.A. Croson Company submitted a bid on a city plumbing project that did not include a minority subcontract. Croson claimed that it had been unable to obtain a qualified minority subcontractor and sought a waiver. Although Croson was the only bidder, the waiver was denied. The city rebid the project and Croson brought suit under 42 U.S.C. § 1983, alleging an Equal Protection violation. The district court held for the city, the Fourth Circuit Court of Appeals reversed, and the Supreme Court ultimately affirmed the decision of the Court of Appeals.

The Supreme Court began its discussion by distinguishing the case of Fullilove v. Klutznick, 448 U.S. 448, 100 S.Ct. 2758, 65 L.Ed.2d 902 (1980), where the Court had held constitutional a federal statute which conditioned eligibility for federal grants upon a showing that the applicant had complied with a minority set-aside requirement. Section 5 of the Fourteenth Amendment, providing that "the Congress shall have power to enforce, by appropriate legislation, the provisions of this article," was found by the Court in Fullilove to be a constitutional grant of power to Congress to enact legislation addressing society-wide discrimination. Croson at 489-91, 109 S.Ct. 706. The Court went on to say, however,

That Congress may identify and redress the effects of society-wide discrimination does not mean that, a fortiori, the States and their political subdivisions are free to decide that such remedies are appropriate. Section 1 of the Fourteenth Amendment is an explicit constraint on state power, and the States must undertake any remedial efforts in accordance with that provision.

Id. at 490, 109 S.Ct. 706.*fn8 Section 1 of the amendment, of course, is the provision that includes the Equal Protection Clause: "No State shall . . . deny to any person within its jurisdiction the equal protection of the laws."*fn9

The Croson opinion explains the relationship of the Equal Protection Clause to legislation such as the Richmond ordinance. Although the Fourteenth Amendment was adopted in the aftermath of the Civil War, and the drafters were primarily concerned with the rights of the newly-freed slaves, it does not follow that blacks alone enjoy the constitutional right to equal protection of the laws. The Court stated:

The Richmond Plan denies certain citizens the opportunity to compete for a fixed percentage of public contracts based solely upon their race. To whatever racial group these citizens belong, their "personal rights" to be treated with equal dignity and respect are implicated by a rigid rule erecting race as the sole criterion in an aspect of public decision-making.
We thus reaffirm the view expressed by the plurality in Wygant [v. Jackson Board of Education, 476 U.S. 267, 106 S.Ct. 1842, 90 L.Ed.2d 260 (1986)] that the standard of review under the Equal Protection Clause is not dependant on the race of those burdened or benefitted by a particular classification.
[O]ur interpretation of § 1 stems from our agreement with the view expressed by Justice Powell in [Regents of University of California v.] Bakke, [438 U.S. 265, 289-290, 98 S.Ct. 2733, 57 L.Ed.2d 750 (1978)] that `[t]he guarantee of equal protection cannot mean one thing when applied to one individual and something else when applied to a person of another color.'*fn10

Id. at 493-94, 109 S.Ct. 706.

The Court explained how race discrimination by a private contractor could become so identified with the government itself that the government could adopt a race-based remedy for the problem. The theory is one of vicarious responsibility for the discriminatory acts of the contractor:

As a matter of state law, the city of Richmond has legislative authority over its procurement policies, and can use its spending powers to remedy private discrimination, if it identifies that discrimination with the particularity required by the Fourteenth Amendment.
Thus, if the city could show that it had essentially become a "passive participant" in a system of racial exclusion practiced by elements of the local construction industry, we think it clear that the city could take affirmative steps to dismantle such a system.

Croson at 492, 109 S.Ct. 706. What is meant by "a system of racial exclusion practiced by elements of the local construction industry" that the city could "take affirmative steps to dismantle?" It is clear that it must be something more specific than discriminatory practices that exist in society as a whole or even in the construction industry. The Court held that the district court had erred in relying on the "the highly conclusionary statement of a proponent of the Plan that there was racial discrimination in the construction industry `in this area, and the state, and around the nation.'" 488 U.S. at 500, 109 S.Ct. 706. The Court observed: "These statements are of little probative value in establishing identified discrimination in the Richmond construction industry." Id. The Court repeated that:

While the States and their subdivisions may take remedial action when they possess evidence that their own spending practices are exacerbating a pattern of prior discrimination, they must identify that discrimination, public or private, with some specificity before they may use race-conscious relief.

Id. at 504, 109 S.Ct. 706 (emphasis added).

The Court found that the numerical disparity between the contracts awarded to minority firms and the minority population of the City of Richmond would not provide support for the ordinance, because "`[w]hen special qualifications are required to fill particular jobs, comparisons to the general population (rather than to the smaller group of individuals who possess the necessary qualifications) may have little probative value.'" Id. at 501, 109 S.Ct. 706 (quoting from Hazelwood School Dist. v. United States, 433 U.S. 299, 307-308, 97 S.Ct. 2736, 53 L.Ed.2d 768 (1977)). The Court pointed out that "the city does not even know how many MBE's in the relevant market are qualified to undertake prime or subcontracting work in public construction contracts." Id. at 502, 109 S.Ct. 706.

The Court distinguished between the kinds of action a state or local entity could take "to rectify the effects of identified discrimination within its jurisdiction." Id. at 509, 109 S.Ct. 706. If the city of Richmond could show that nonminority contractors were "systematically excluding" qualified minority contractors from subcontracting opportunities,

[T]he city could act to dismantle the closed business system by taking appropriate measures against those who discriminate on the basis of race or other illegitimate criteria. In the extreme case, some form of narrowly tailored racial preference might be necessary to break down patterns of deliberate exclusion.

Id. at 509, 109 S.Ct. 706 (citations omitted) (emphasis added). The Court noted:

The city points to no evidence that qualified minority contractors have been passed over for city contracts or subcontracts, either as a group or in any individual case. Under such circumstances, it is simply impossible to say that the city has demonstrated "a strong basis in evidence for its conclusion that remedial action was necessary." Wygant, 476 U.S. at 277, 106 S.Ct. 1842.

Id. at 510, 109 S.Ct. 706.

The Court concluded by affirming the decision of the Fourth Circuit that the Richmond ordinance violated the Equal Protection Clause:

Because the city of Richmond has failed to identify the need for remedial action in the awarding of its public construction contracts, its treatment of its citizens on a racial basis violates the dictates of the Equal Protection Clause. Accordingly, the judgment of the Court of Appeals for the Fourth Circuit is Affirmed.

Id. at 511, 109 S.Ct. 706.


The Essential Points of Croson

To summarize the Croson decision, what a governmental entity must show in order to justify a plan of minority set-asides is the following:

1. That qualified members of a minority group are being denied the opportunity to participate in contract opportunities offered by the governmental entity because of their race or ethnicity;
2. That the situation presents the "extreme case" of discrimination so systemic that action taken by the governmental unit to redress particular acts of discrimination would not suffice to prevent further discrimination against members of the victim group;
3. That there is "strong evidence" of a pattern of such racial discrimination; and
4. That the set-aside plan adopted by the governmental entity is narrowly tailored to remedy the specific pattern of discrimination found to exist.


The Law As To Gender Preferences

Croson dealt with racial and ethnic minorities, but not women. The county ordinance in this case establishes preferences for both minorities and women, so we must look to the governing law applicable to preferences for women-owned business enterprises (WBEs). The Equal Protection Clause applies, but the "strict scrutiny" required by Croson for racial preferences has not been used for gender preferences. Rather, the courts apply an "intermediate scrutiny" to determine whether the governmental preference violates Equal Protection. In United States v. Virginia, 518 U.S. 515, 532-533, 116 S.Ct. 2264, 135 L.Ed.2d 735 (1996), a case holding that Virginia's exclusion of women from the Virginia Military Institute violated equal protection, the Court described the burden involved in justifying a state-imposed gender preference:

To summarize the Court's current directions for cases of official classification based on gender: Focusing on the differential treatment or denial of opportunity for which relief is sought, the reviewing court must determine whether the proffered justification is "exceedingly persuasive." The burden of justification is demanding and it rests entirely on the State. See Mississippi Univ. for Women [v. Hogan], 458 U.S. [718], at 724, 102 S.Ct. 3331, 73 L.Ed.2d 1090. The State must show "at least that the [challenged] classification serves `important governmental objectives and that the discriminatory means employed' are `substantially related to the achievement of those objectives.'" Ibid. (quoting Wengler v. Druggists Mutual Ins. Co., 446 U.S. 142, 150, 100 S.Ct. 1540, 64 L.Ed.2d 107 (1980)).

Id. at 532-533, 116 S.Ct. 2264.

The parties in this case do not argue that there could be different results as between the preferences for minorities and the preference for women. Plaintiff argues that there is no justifiable basis for either of the preferences, and defendants contend that both preferences are amply justified by the evidence. Therefore, while recognizing that there are different levels of scrutiny for the two groups, it will not be necessary to make a separate analysis of the evidence applicable to minorities and to women. But at the end of this opinion we will return to the applicable standards and discuss how they relate to our conclusions about the county ordinance.


The Question of Post-Enactment Evidence

Before trial, plaintiff had moved for summary judgment on the basis that defendants had no evidence of race or gender discrimination that had occurred before the enactment of the ordinance. Plaintiff argued that under Croson the governmental body must make a finding that such discrimination exists and that the proposed racial and gender preferences are necessary to remedy it. The defendants conceded that they had no specific evidence of pre-enactment discrimination to support the ordinance, but argued that post-enactment evidence would be sufficient if it showed that, in the absence of the ordinance, there would be race and gender discrimination by prime contractors in their selection of subcontractors for work on county projects. To support this theory, defendant intervenors offered a number of affidavits by women and minority group members to the effect that certain prime contractors who had hired them to work on county projects had never hired them on private projects involving the same kind of work. Defendants argued that these affidavits raised a genuine factual issue as to whether, in the absence of the ordinance, there would be race and gender discrimination in the selection of subcontractors for county work.

The post-enactment question was not squarely presented to the Supreme Court in Croson, because in that case there had been no specific evidence of discrimination occurring at any time in regard to city construction contracts, either before or after the enactment of the Richmond ordinance. Thus, while the Court emphasized the need for a predicate study justifying the ordinance, it did not have occasion to address the question of whether a showing by circumstantial evidence of what would happen in the absence of the ordinance would be a sufficient predicate. While we had some doubt about the matter, there was no Seventh Circuit case holding post-enactment evidence inadmissible, and several circuits, see e.g., Engineering Contractors Assoc. v. Metro. Dade County, 122 F.3d 895, 911-912 (11th Cir. 1997) (collecting cases), had held that post-enactment evidence could be sufficient to support a race-based or gender-based preference. We therefore denied plaintiffs' motion and held that the defendants could attempt to make the necessary showing by post-enactment evidence.


The Relevance of M/WBE's Experience on Private Jobs

A related problem with defendants' expected proof was that they did not intend to show discrimination on county projects. It was clear that what they intended to show was discrimination against minority-owned and women-owned firms by prime contractors on private construction projects and then argue that these same contractors would also discriminate against them on county jobs if the ordinance was not in place to prevent their doing so.

Post-enactment evidence will usually be related to work not covered by the ordinance, since the ordinance, if effective, should result in the hiring of the required number of women and minorities. In short, the enactment of the ordinance, ideally at least, eliminates the very discrimination the governmental unit needs to show in order to justify the ordinance. If post-enactment evidence is to be used, it obviously must be found outside the construction projects covered by the ordinance. Therefore, we held that defendants would be permitted to show that, while minorities and women were hired and performed successfully on county projects, the prime contractors involved in those county projects refused to hire these same M/WBEs for comparable private work.


The Burden of Proof

Normally, of course, the plaintiff in a lawsuit has the burden of proof. But the plaintiff in this case is challenging the constitutionality of a county ordinance which the County has the burden of justifying with "a strong basis in the evidence," Croson, 488 U.S. at 500, 510, 109 S.Ct. 706. The Seventh Circuit has explained the respective burdens of the parties in a case where a plaintiff is challenging a governmental action that is subject to this heightened scrutiny:

Once the governmental entity has shown acceptable proof of a compelling interest in remedying past discrimination and illustrated that its plan is narrowly tailored to achieve this goal, the party challenging the affirmative action plan bears the ultimate burden of proving that the plan is unconstitutional.

Majeske v. City of Chicago, 218 F.3d 816, 820 (7th Cir. 2000) (citations omitted). We understand this to mean that once the governmental entity has made a prima facie showing of the necessary interest, the plaintiff has the burden of overcoming the prima facie case by the greater weight of the evidence.

It seemed that the best way to structure the trial would be to have the defendants go first with their evidence, so that the plaintiff would know what evidence it had to overcome and could focus its proof on what was genuinely at issue. The parties were agreeable to this suggestion, and the trial proceeded accordingly.

The following sections of this opinion contain what the court believes is a fair recapitulation of the evidence.


The Defendants' Evidence at Trial

Patrick McFadden

The defendants' first witness was Patrick McFadden, Cook County Purchasing Agent for the past thirteen years. He solicits bids from contractors to supply the needs of the various county departments, including any building construction contracts. He described the solicitation procedure, which includes publication of a description of the project in the Chicago Sun Times legal notice section. In addition, notices are sent to contractors and other persons who have asked to be notified of county construction projects.

When bids are received, they are reviewed for compliance with the plans and specifications for the project and for compliance with the MBE and WBE percentage requirements. The lowest bidder meeting all of these requirements is awarded the job.

Mr. McFadden was not aware of any low bidder who has been denied a contract because of failure to meet the minority and gender requirements.

Betty Hancock Perry

Betty Hancock Perry has been the Cook County Contract Compliance Administrator since 1994 and has been with the Compliance Department since 1990. Ms. Perry and her twelve staff members run the certification program for MBEs and WBEs and monitor compliance with the set-aside requirements of the ordinance. Her department also has an outreach program to recruit minority and women contractors.

When applicants for certification have been found to qualify, their names are placed in a directory of MBEs and WBEs which is available to the public. There are 900 names in the current directory, 200 of which are in the construction industry.

The Compliance Department also has responsibility for determining that bids are responsive to the set-aside requirements of the ordinance. A bidder can meet the requirements in a number of ways. An M/WBE which bids for the prime contract would obviously meet the requirements, but that is rare because M/WBEs are usually not of a size to handle a prime contract. The typical bidder for a prime contract is a "non-M/WBE," and it meets the requirements by subcontracting portions of the work to M/WBEs, joint-venturing with an M/WBE or by purchasing supplies and equipment from an M/WBE.

The department also handles any requests for waivers of the M/WBE requirements. According to Ms. Perry, waivers can be granted if M/WBEs are not available, or if it is not economically feasible to include them. If a bidder claims that a qualified M/WBE is not available, the department investigates the claim and the Waiver Committee, which meets biweekly, passes on the waiver request.

Ms. Perry is not aware of any waivers that have been granted. She testified that there has been 100 percent compliance with the set-aside requirements.

Dr. Marcus Alexis

Marcus Alexis, a professor of economics at Northwestern University, was called by the defendants to testify to certain conclusions he had drawn from information furnished by the plaintiff in discovery. The defendants had served interrogatories calling upon the members of plaintiff association to provide information as to the number of private construction contracts on which its members had used M/WBE subcontractors during the years 1990-96. Twenty-two firms responded with some information, and others responded that they had not kept records that would show whether they had used M/WBEs or on which contracts they might have been used.

Analyzing the responses of 13 contractors who provided enough information, Dr. Alexis computed that out of a total of 6,354 contracts reported, M/WBEs had been used on only 436, for a utilization rate of 6.86 percent. Of the 6,354 contracts, Interior Alterations, Inc. was the prime contractor on 5,250 or 82 percent of the contracts awarded. Interior Alterations, Inc. reported using minority subcontractors on 156 of the these contracts, for a utilization rate of 2.97 percent.

Relying upon these interrogatory responses and his previous study of M/WBE set-asides imposed by other governmental units in Cook County, Dr. Alexis concluded that there was an adequate pool of qualified minority- and women-owned businesses available for subcontracting work, but that, in the absence of the ordinance, general contractors would not hire M/WBEs on county work. Where there were no utilization requirements, as is true on most private work, there was very little utilization. Where there is a requirement, there is utilization.

Dr. Alexis opined that his findings were "consistent" with a pattern of discrimination, but he did not contend that they proved discrimination.

On cross examination, Dr. Alexis stated that his review of the discovery materials was not a statistical study and that the question of statistical significance was one he had not considered.

The intervenor defendants called a number of witnesses who testified as representatives of associations of minority- and women-owned construction businesses. These witnesses gave essentially similar testimony.

Perry Nakachi

Perry Nakachi testified as President of the Association of Asian Construction Enterprises, one of the intervening defendants. Mr. Nakachi is of Japanese-American ancestry. He is the President of NakMan Corp., a distributor of steel and other metal and fabricated parts. This company provides maintenance supplies for industry and government agencies like the County of Cook.

The Association of Asian Construction Enterprises assists its members in the development of business opportunities. The Association has fifty members, one of which is a prime contractor. The ethnicity of its members is Chinese, Japanese, Korean, Filipino and Indian.

The Association receives information on construction projects which it then distributes to its members. It receives about five notices a month from general contractors bidding on government projects with M/WBE requirements, and these notices are filed and available to the membership.

On private projects without M/WBE requirements, on the other hand, these same general contractors send no communications to the Association.

Mr. Nakachi's conclusion (received over plaintiff's objection) is that without the ordinance requiring M/WBE participation, his Association would receive no solicitations for bids on county projects.

Rafael Hernandez

Rafael Hernandez testified that he is the Executive Director of the Hispanic-American Construction Industry Association, representing Hispanics in the construction industry in the Chicago area. The membership of the organization includes contractors of Mexican, Puerto Rican, Asian, African and Caucasian ancestry. The organization gathers information about construction projects and provides the information to its members. Information is received from public agencies on a regular basis and also from private contractors. Ninety-five percent of the projects about which the organization receives information are public works. Mr. Hernandez has no explanation for this other than the M/WBE requirements applicable to public projects. Information is occasionally received from contractors on private projects, but these are projects that have M/WBE requirements.

Julie Martines-McKevitt

Julie Martines-McKevitt is the President of Federation of Women Contractors (FWC) another intervening defendant, and she also serves as the President of the Hispanic-American Construction Industry Association ("HACIA"). She is employed by Will Rent, Inc. which rents and sells construction equipment.

FWC has 100 members, consisting of small to larger women-owned firms engaged in the construction business. The organization receives notices about construction projects and passes them on to its members. Ninety-five percent of the notices relate to public jobs with WBE requirements. The majority of the notices come from the public agencies themselves, including the County of Cook.

Ms. McKevitt believes that repeal of the county ordinance would be "disastrous" for FWC's members, an insignificant number of whom do any private work. If the ordinance were ...

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