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National Indus. Group Pension Plan v. Straits Steel & Wire Co.

argued: June 17, 1993.


On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civil Action No. 89-02737).

Before: Scirica, Cowen and Garth, Circuit Judges.

Author: Scirica


SCIRICA, Circuit Judge.

In this action, nine associations of construction contractors challenge on equal protection grounds a City of Philadelphia ordinance creating preferences in City contracting for businesses owned by racial and ethnic minorities, women, and handicapped persons. The district court granted summary judgment to the Contractors, holding they had standing to bring this lawsuit and invalidating the Ordinance in all respects. 735 F. Supp. 1274 (E.D. Pa. 1990). In an earlier opinion, we affirmed the district court's ruling on standing but vacated summary judgment on the merits because the City had outstanding discovery requests. 945 F.2d 1260 (3d Cir. 1991). On remand after discovery, the district court again entered summary judgment for the Contractors. We will affirm in part, vacate in part, and reverse in part.


Facts and Procedural History


In 1982, the Philadelphia City Council enacted an ordinance to increase participation in City contracts by minority-owned and women-owned businesses. Phila. Code § 17-500. In its present form,*fn1 the Ordinance establishes "goals" for the participation of "disadvantaged business enterprises." § 17-503. "Disadvantaged business enterprises" (DBEs) are defined as those enterprises at least 51 percent owned by "socially and economically disadvantaged individuals," defined in turn as:

those individuals who have been subjected to racial, sexual or ethnic prejudice because of their identity as a member of a group or differential treatment because of their handicap without regard to their individual qualities, and whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.

§ 17-501(11). The Ordinance further provides that racial minorities and women are rebuttably presumed to be socially and economically disadvantaged individuals, § 17-501(11)(a), but that a business which has received more than $5 million in City contracts, even if owned by such an individual, is rebuttably presumed not to be a DBE, § 17-501(10).

The Ordinance sets goals for participation of DBEs in city contracts: 15 percent for minority-owned businesses, 10 percent for women-owned businesses, and 2 percent for businesses owned by handicapped persons. § 17-503(1). The Ordinance applies to all City contracts, which are divided into three types -- vending, construction, and personal and professional services. § 17-501(6). The percentage goals relate to the total dollar amounts of City contracts and are calculated separately for each category of contracts and each City agency. § 17-503(1).

To implement the program, the Ordinance established a Minority Business Enterprise Council and authorized it to promulgate regulations to ensure the goals are met by city agencies in awarding prime contracts and by private contractors in awarding subcontracts. § 17-504(2)(e), (f), (i). The Ordinance specifies that, in developing regulations, the Council must consider: including DBEs on solicitation lists, assuring DBEs are solicited whenever they are potential contractors, structuring contract requirements to permit maximum participation by DBEs, and "investigating and making recommendations concerning the use of the Sheltered Market process, under which contracts would be set-aside so that only DBEs could bid for them." § 17-504(2)(f). The regulations provide that "the contractor's efforts to meet [the] goals shall be considered an element of responsiveness to the bid," and require each contractor to submit a "Schedule for Participation" of DBEs in the contract at issue or to request a waiver if the contractor is unable to meet the goals after a good faith effort. Regulations § 6.1.

The Ordinance also directed the Council to (1) develop a certification procedure for DBEs to prevent fraudulent or "front" DBEs from abusing the program, § 17-504(2)(a); (2) grant exemptions for individual contracts or classes of contracts where there is "an insufficient number of DBEs . . . to ensure adequate competition and an expectation of reasonable prices on bids," § 17-505(1); (3) grant waivers to contractors who are unable to meet the percentage goals after a good faith effort, as determined by the Council, § 17-505(3); (4) "recommend contractual language which provides that compliance with DBE participation requirements is material to the City contract," § 17-504(2)(h); and (5) develop and recommend remedies, including but not limited to, termination of the contract in the event a contractor fails to comply with the program, § 17-506(a).


On April 14, 1989, nine contractors associations brought suit in the Eastern District of Pennsylvania against the City of Philadelphia and two city officials, challenging the Ordinance as a facial violation of the Equal Protection Clause of the Fourteenth Amendment.*fn2 United Minority Enterprise Associates, Inc. (UMEA) intervened as a defendant. After the City moved for judgment on the pleadings contending the Contractors lacked standing, the Contractors moved for summary judgment on the merits.

The district court granted the Contractors' motion. It ruled the Contractors had standing, based on affidavits of individual association members alleging they had been denied contracts for failure to meet the DBE goals despite being low bidders. 735 F. Supp. at 1283 & n.3. Turning to the merits of the Contractors' equal protection claim, the district court held that City of Richmond v. J.A. Croson Co., 488 U.S. 469, 102 L. Ed. 2d 854, 109 S. Ct. 706 (1989), required it to apply the strict scrutiny standard to review the sections of the Ordinance creating a preference for minority-owned businesses. Under that standard, a law will be invalidated if is not "narrowly tailored" to a "compelling government interest." Wygant v. Jackson Board of Educ., 476 U.S. 267, 274, 90 L. Ed. 2d 260, 106 S. Ct. 1842 (1986). Applying Croson, the district court struck down the Ordinance because the City had failed to adduce sufficiently specific evidence of past racial discrimination against minority construction contractors in Philadelphia to establish a "compelling government interest." 735 F. Supp. at 1295-98. The court also held the Ordinance was not "narrowly tailored," emphasizing the City had not considered using race-neutral means to increase minority participation in City contracting and had failed to articulate a rationale for choosing 15 percent as the goal for minority participation. Id. at 1298-99. The court held the Ordinance's preferences for businesses owned by women and handicapped persons were similarly invalid under the less rigorous intermediate scrutiny and rational basis standards of review. Id. at 1299-1309.

On appeal, we affirmed the district court's ruling on standing but vacated its judgment on the merits as premature because the Contractors had not responded to certain discovery requests at the time the court ruled. 945 F.2d 1260 (3d Cir. 1991). We remanded so discovery could be completed and explicitly reserved judgment on the merits. Id. at 1268. On remand, all parties moved for summary judgment, and the district court reaffirmed its prior decision, holding discovery had not produced sufficient evidence of discrimination in the Philadelphia construction industry against businesses owned by racial minorities, women, and handicapped persons to withstand summary judgment. The City and UMEA appeal.*fn3 II.

This appeal presents three sets of questions: whether and to what extent the Contractors have standing to challenge the Ordinance, which standards of equal protection review govern the different sections of the Ordinance, and whether these standards justify invalidation of the Ordinance in whole or in part. We will address these issues in turn.



A. General Principles

Our standing inquiry has two parts: whether the Contractors have standing to challenge the Ordinance at all, and if so, whether they have standing to challenge all or just part of the Ordinance. Prior to this appeal, the parties contested only the first of these issues. In our earlier opinion, we affirmed the district court's holding that four of the nine associations had standing to challenge the Ordinance because the affidavits submitted by their members alleged injury with sufficient particularity, and because the associations satisfied the standards for associational standing. 945 F.2d at 1264-66.

The Supreme Court has since confirmed that construction contractors have standing to challenge a minority preference ordinance upon a showing they are "able and ready to bid on contracts [subject to the ordinance] and that a discriminatory policy prevents [them] from doing so on an equal basis." Northeastern Fla. Chapter of the Associated Gen. Contractors of America v. City of Jacksonville, 124 L. Ed. 2d 586, 113 S. Ct. 2297, 2303 (1993). Because the affidavits submitted to the district court establish the Contractors were able and ready to bid on construction contracts but could not do so for failure to meet the DBE percentage requirements, they have standing to challenge the sections of the Ordinance covering construction contracts.*fn4


Scope of the Issues

We next consider whether the Contractors have standing to challenge the entire Ordinance or only the provisions relating to construction contracts. Because standing seeks to ensure a party has a "personal stake in the controversy," Harris v. McRae, 448 U.S. 297, 320, 65 L. Ed. 2d 784, 100 S. Ct. 2671 (1980), courts typically only allow a party to raise his own rights rather than the rights of others, Broadrick v. Oklahoma, 413 U.S. 601, 613, 37 L. Ed. 2d 830, 93 S. Ct. 2908 (1973). This doctrine sensibly enables a court to "avoid[] . . . adjudication of rights which those not before the court may not wish to assert, and assures that the most effective advocate of the rights at issue is present to champion them," Duke Power Co. v. Carolina Environ. Study Group, 438 U.S. 59, 80, 57 L. Ed. 2d 595, 98 S. Ct. 2620 (1978). Allowing parties only to litigate their own rights is especially important in constitutional actions because the Supreme Court cautions "never to anticipate a question of constitutional law in advance of the necessity of deciding it [and] never to formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied." United States v. Raines, 362 U.S. 17, 21, 4 L. Ed. 2d 524, 80 S. Ct. 519 (1960) (quoting Liverpool, New York & Philadelphia S.S. Co. v. Commrs. of Emigration, 113 U.S. 33, 39, 28 L. Ed. 899, 5 S. Ct. 352 (1885)).

1. Severability of the Ordinance

Courts considering constitutional challenges to statutes often analyze standing problems in terms of the severability doctrine. Under this principle, when a court determines the legislature intended the challenged sections of a statute to operate independently of the unchallenged sections and finds these sections can so operate, it will consider only the challenged sections, leaving the remainder of the statute intact. See United States v. Raines, 362 U.S. at 23; 13 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 3531.9, at 585 (2d ed. 1984). Severing statutes to limit standing promotes the twin goals of avoiding unnecessary constitutional adjudication and sharpening the presentation of the issues. Singleton v. Wulff, 428 U.S. 106, 113-14, 49 L. Ed. 2d 826, 96 S. Ct. 2868 (1976).*fn5

The severability doctrine governs whether the Contractors have standing to challenge the entire Ordinance, or just those provisions of the Ordinance affecting the construction industry. As we have noted, the Contractors only have a personal interest in obtaining construction contracts because these are the only types of contracts they are "ready and able" to bid on within the meaning of Northeastern Florida, 113 S. Ct. at 2303. The Contractors do not dispute this fact but contend they should be allowed to challenge the Ordinance in its entirety, because the construction provisions are inseverable from the remainder of the statute.

Because "severability of a local ordinance is a question of state law," City of Lakewood v. Plain Dealer Pub. Co., 486 U.S. 750, 772, 100 L. Ed. 2d 771, 108 S. Ct. 2138 (1988), we look to Pennsylvania law in determining whether the Ordinance is severable. As evidenced by its general severability provision, 1 Pa. Const. Stat. Ann. § 1925 (Supp. 1991), Pennsylvania law favors severability. Commonwealth Dept. of Educ. v. First School, 471 Pa. 471, 478, 370 A.2d 702, 705 (1977).*fn6 Additionally, there is a presumption in favor of severability where, as here, the Ordinance contains a specific severability provision. § 17-508.*fn7

Equipped with these principles, we must decide whether the Ordinance's provisions on different types of contracts "are distinct and not so interwoven as to be inseparable." Saulsbury v. Bethlehem Steel Co., 413 Pa. 316, 320, 196 A.2d 664, 666 (1964). The Saulsbury standard turns largely on functional concerns. Thus, the Pennsylvania Supreme Court severed a statute authorizing financial aid to sectarian and nonsectarian private schools because the statute was "readily capable of being administered along a sectarian-nonsectarian dichotomy." First School, 471 Pa. at 479, 370 A.2d at 706. Accordingly, the court held aid could continue to be provided to nonsectarian schools despite the fact that aid to sectarian schools violated the Establishment Clause. Id. We applied similar reasoning in severing portions of the Pennsylvania Abortion Control Act in Planned Parenthood v. Casey, 978 F.2d 74, 78 (3d Cir. 1992), finding "the basic statutory scheme remains intact and can operate independently of the unconstitutional sections."

In urging the Ordinance is not severable, the Contractors rely on Wyoming v. Oklahoma, 117 L. Ed. 2d 1, 112 S. Ct. 789 (1992). There, the Supreme Court considered a Commerce Clause challenge to an Oklahoma statute requiring "all entities providing electric power for sale to the consumer in Oklahoma and generating said power from coal-fired plants located in Oklahoma [to] burn a mixture of coal that contains a minimum of ten percent Oklahoma mined coal. . . ." 112 S. Ct. at 793 n.1. The state of Oklahoma urged the Court to construe the statute as constitutional when applied to a state-owned utility under the market participant exception to the Commerce Clause, a ruling that would require severing application of the statute to private utilities. Rejecting this contention, the Supreme Court held:

there are no parts or separate provisions in the invalid [section] of the Act [because] it applies to "all entities providing electric power for sale to the consumer in Oklahoma" and commands them to purchase 10% Oklahoma-mined coal. Nothing remains to be saved once that provision is stricken. Accordingly, the Act must stand or fall as a whole.

112 S. Ct. at 803. The Contractors argue Wyoming dictates a finding of inseverability in this case because, like the statute there, the Ordinance applies to "all city contracts."

In assessing this contention, we look to the language of the Ordinance. The Ordinance provides it applies to: "all types of city contracts," § 17-502(2), and defines "Types of City Contracts" to include: "all city contracts, whether competitively bid or negotiated, according to the following classes: (a) Vending, to include material, equipment, services and supplies; (b) Construction; and (c) Personal and professional services," § 17-501(6).

These provisions reveal the Ordinance differs critically from the Oklahoma statute at issue in Wyoming. Here, the challenged and unchallenged provisions appear in different subsections, containing the "separate provisions" the Supreme Court found lacking in the Oklahoma statute. Also, the severability provision in the Ordinance is broader than that in the Oklahoma statute. The provision there only authorized severance of "any part or provision" of the statute found void, while the Ordinance directs severance of "any section, subsection, clause, sentence or phrase." § 17-508. Because the provisions dealing with non-construction contracts constitute "subsections" of the Ordinance, § 17-508 authorizes severing these provisions.

Moreover, the Ordinance makes clear that severance of the construction provisions would not prevent the non-construction provisions from continuing to operate. It expressly provides that the percentage goals for minority-owned and women-owned businesses, and businesses owned by handicapped persons, shall be "calculated by examining independently each type of City contract for each agency which lets such contracts." ยง 17-503. This language demonstrates severance is feasible and indicates City Council envisioned the Ordinance would be administered separately for each type of contract. Therefore, we hold the provisions of the Ordinance dealing with construction contracts are severable from the remainder of the Ordinance. Because the Contractors only have a personal stake in the construction contract provisions, we must ...

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