On September 23, in the latest case challenging race and gender classifications in government programs at the federal and state level, a federal District Court preliminarily enjoined the US Department of Transportation (USDOT) from utilizing rebuttable, presumptive disadvantaged eligibility criteria in the Disadvantaged Business Enterprise (DBE) program. The court, however, expressly rejected the plaintiffs’ request to impose a nationwide injunction and limited USDOT’s actions in the two states in which the plaintiffs operate – Kentucky and Indiana. USDOT’s program in all other states and territories is, currently, unaffected. Click here to read the full order.
Congress enacted the DBE program in 1983 and has reauthorized the federal law requiring that ten percent of the USDOT construction funds be paid to small businesses owned and controlled by socially and economically disadvantaged individuals. Congress identified certain racial groups and women as presumptively socially and economically disadvantaged (the “rebuttable presumption”), while other applicants for DBE status are required to prove, by a preponderance of the evidence, that they are socially and economically disadvantaged. Recipients of USDOT funding are required to have a DBE program and DBE goals, whether met through race-or gender-neutral means or through contract goals and good faith efforts.
The plaintiff companies do not qualify as “DBE” under the rebuttable presumption and complain that they are unfairly deprived of the opportunity to compete for transportation contracts on equal footing. They argue that that the DBE program’s rebuttable presumption does not meet the requirement that government actions that include racial classifications satisfy a two-step strict scrutiny analysis: (1) is the use of a race classification in furtherance of a compelling government interest and, (2) if so, is the use of race narrowly tailored to achieve that compelling interest. As such, they argue that the rebuttable presumption unconstitutionally violates the Fourteenth Amendment’s guaranty of equal protection.
In 2023, another federal District Court (in the Eastern District of Tennessee) enjoined a similar rebuttable presumption in the Small Business Administration’s 8(a) Business Development Program, holding that the SBA’s use of racial classifications was not supported with precise evidence. The Mid-America court relied on the Ultima decision, noting that although the federal government’s evidence of discrimination against minority-owned businesses exists generally, but it does not offer evidence of past discrimination against the groups to which the USDOT grants a rebuttable presumption under its DBE program. In addition, the Mid-America court found that the DBE program’s race-based rebuttable presumption is not narrowly tailored; and that the DBE program lacked a foreseeable end point. Click here to read the full order.
On September 23, 2024, U.S. District Court Judge Gregory Van Tatenhove of the Eastern District of Kentucky granted a preliminary injunction enjoining the US Department of Transportation from utilizing the presumptive disadvantaged eligibility criteria for businesses owned by women and certain minorities in connection with a consideration of a company’s eligibility to be certified as a disadvantaged business under the US Department of Transportation’s DBE program. The Court found that the plaintiffs, two companies that regularly bid on DOT-funded projects in Kentucky and Indiana, had demonstrated likelihood of success on the merits in their court action challenging the constitutionality of the DBE program’s rebuttable presumption.