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ASSOCIATION FOR FAIRNESS IN BUSINESS v. NEW JERSEY

February 8, 2000

ASSOCIATION FOR FAIRNESS IN BUSINESS INC., A NEW JERSEY NON-PROFIT CORPORATION, PLAINTIFF,
V.
THE STATE OF NEW JERSEY, THE NEW JERSEY CASINO CONTROL COMMISSION, A PUBLIC BODY CORPORATE AND POLITIC OF THE STATE OF NEW JERSEY, JOHN J., FARMER, JR., ESQ., ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, AND JAMES R. HURLEY, CHAIRPERSON OF THE NEW JERSEY CASINO CONTROL COMMISSION, DEFENDANTS.



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

OPINION

In this case, I am called upon to decide whether the minority "set-aside" provisions of New Jersey's Casino Control Act and the implementing regulations promulgated by the Casino Control Commission are constitutional. However well intentioned the Act and the implementing regulations may be, I conclude that they do not pass constitutional muster under the current jurisprudence of the United States Supreme Court, and the law of this Circuit. For the reasons that follow, I conclude that they are unconstitutional and that Plaintiff is entitled to a preliminary injunction enjoining Defendants from enforcing the relevant portions of the Act and the regulations adopted to implement them.*fn1

I. Factual and Procedural Background

On December 9, 1999, the Association for Fairness in Business, Inc. ("the Association"), a non-profit corporation whose members contract to provide goods and services to gambling casinos in Atlantic City, New Jersey, filed a Verified Complaint and Demand for Jury Trial against the State of New Jersey, the New Jersey Casino Control Commission, the Attorney General of New Jersey, and the Chairperson of the New Jersey Casino Control Commission. See Verified Compl. & Demand for Jury Trial (filed Dec. 9, 1999). The allegations contained in the Verified Complaint challenge the minority "set-aside" provisions of the New Jersey Casino Control Act and regulations promulgated pursuant to that Act. See id.

Specifically, the Casino Control Act provides that each casino licensee "shall have a goal of expending 15% of the dollar value of its contracts for goods and services with minority and women's business enterprises." N.J.S.A. 5:12-186a; See also N.J.A.C. 19:53-5.3(c). Casino licensees must file reports with the Casino Control Commission describing their efforts to meet this goal, and may risk the imposition of penalties, including the suspension or revocation of their licenses, if the Casino Control Commission determines that they have failed to meet this goal. See N.J.S.A. 5:12-186b, 187.1; N.J.A.C. 19:53-5.7, 5.8, 6.11. The Association alleges that these minority "set-aside" provisions, among others, violate the Fifth and Fourteenth Amendments of the United States Constitution, 42 U.S.C. § 1981 and 1983, Article 1, Section 1 of the Constitution of New Jersey, and the New Jersey Law Against Discrimination, N.J.S.A. § 10:5-1, et seq. See Verified Compl. & Demand for Jury Trial. The Association seeks, among other things, a preliminary injunction enjoining the enforcement of sections 5:12-184 through 5:12-190 of the Casino Control Act and sections 19:53-1.1 through 19:53-6.12 of the regulations implementing the Casino Control Act.

On December 9, 1999, I issued an Order to Show Cause why I should not issue a preliminary injunction against the Defendants pursuant to Federal Rule of Civil Procedure 65. See Order to Show Cause (filed Dec. 9, 1999). I have jurisdiction in this case under 28 U.S.C. § 1331 and 1367. For the reasons set forth below, I shall grant the Association's application for a preliminary injunction in part and deny it in part. Specifically, I shall preliminarily enjoin the enforcement of N.J.S.A. §§ 5:12-184 through 5:12-190. I shall not enjoin the enforcement of all of the provisions contained in N.J.A.C. 19:53-1.1 through 19:53-6.12, however, because not all of those provisions are exclusively concerned with the implementation of N.J.S.A. 5:12-184 through 5:12-190. Consequently, I shall enjoin the enforcement of those Administrative Code provisions only to the extent that they implement N.J.S.A. 5:12-184 through 5:12-190.

II. Standing

Although the Association's standing to pursue its claims is not disputed by the Defendants, as a threshold matter I conclude that the Association does have standing to seek injunctive relief on behalf of its members. An association has standing to sue on behalf of its members if "(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit." Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 343, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977); see also New York State Club Ass'n v. New York, 487 U.S. 1, 9, 108 S.Ct. 2225, 101 L.Ed.2d 1 (1988) (citing Hunt, 432 U.S. at 343, 97 S.Ct. 2434); Int'l Union, United Automobile, Aerospace & Agricultural Implement Workers of America v. Brock, 477 U.S. 274, 282, 290, 106 S.Ct. 2523, 91 L.Ed.2d 228 (1986) (affirming the Hunt framework).

The final two prongs of the Hunt test are easily satisfied in this case. First, the Defendants do not dispute that the Association represents "building contractors, subcontractors, suppliers and purveyors of goods and services" or that the Association "exists for the purpose of pursuing fairness, equal opportunity, equity and free and open competition in all matters relating to the provision of goods, services and supplies to governmental entities and regulated industries with specific emphasis on casinos in Atlantic City." Verified Compl. & Demand for Jury Trial ¶ 1. It is clearly germane to the Association's stated purpose of pursuing "equal opportunity" and "free and open competition" to attempt to stop unlawful discrimination against its members in the apportionment of goods and services contracts. Second, the claims brought by the Association raise pure questions of law, most significantly whether the set-aside program in this case is unconstitutional under the Equal Protection Clause of the Fourteenth Amendment.*fn2 A claim that raises a pure question of law and does not require the presentation of individualized proof of liability or damages is precisely the type of claim that associations such as Plaintiff have standing to pursue. See Brock, 477 U.S. at 287-88, 106 S.Ct. 2523.

That being said, it is also true that the Association's members "would otherwise have standing to sue in their own right," Hunt, 432 U.S. at 343, 97 S.Ct. 2434, although this prong of the Hunt test requires a slightly more extended discussion. The standing requirements of the Constitution mandate that plaintiffs in all cases demonstrate:

An "injury in fact" — an invasion of a judicially cognizable interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; second [that] there [is] a causal connection between the injury and the conduct complained of — the injury has to be "fairly trace[able] to the challenged action of the defendant, and not . . . the result [of] the independent action of some third party not before the court." Third, [that] it [is] "likely," as opposed to merely "speculative," that the injury will be redressed by a favorable decision.

Schurr v. Resorts Int'l Hotel, Inc., 196 F.3d 486, 491 (3d Cir. 1999) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). In cases where a party seeks forward-looking relief on the ground that a minority "set-aside" program violates the Equal Protection Clause of the Fourteenth Amendment, an "injury in fact" can be demonstrated by showing that the allegedly injured party is unable to compete on an equal footing because of the program, see Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 211, 115 S.Ct. 2097, 132 L.Ed.2d 158 (1995) (citing Northeastern Fla. Chapter of the Associated Gen. Contractors of America v. Jacksonville, 508 U.S. 656, 666, 113 S.Ct. 2297, 124 L.Ed.2d 586 (1993)), and that the party is "able and ready to bid on contracts," Northeastern Fla. Chapter of the Associated Gen. Contractors of America, 508 U.S. at 666, 113 S.Ct. 2297, "sometime in the relatively near future." Adarand, 515 U.S. at 211, 115 S.Ct. 2097.

At least some of the Association's members are capable of demonstrating the "injury in fact" which is necessary to confer standing to sue and which is a prerequisite to the Association's suit on behalf of its members. The Association has submitted the affidavit of Allen A. Zappone ("Zappone"), President of two of the companies the Association represents. Zappone asserts that one of his companies, Pro Construction and Design, Inc. ("Pro"), once served the casino industry as a general contractor, but no longer does so "because of the preferences which the casinos are [are] compelled to give" to minority and women business enterprises. Aff. Supp. Order to Show Cause ¶ 4 (received Dec. 9, 1999). He claims that Pro "was told not to even bother to bid on certain contracts because the work had been set aside" for minority or women business enterprises and that at least one time "Pro was not awarded a contract, even though it was the low bidder" and despite the fact that Pro was the most qualified company to perform the contracted-for work. Id. Pro contends that the set-aside program at issue in this case was a "significant influence" in its decision to terminate its general contracting business. Id. Zappone's undisputed affidavit provides some evidence that the Association's members are unable to compete for casino industry contracts on an equal footing because of the set-aside program at issue in this case. Even without Zappone's affidavit, it is clear that the set-aside program establishes an unequal playing field in the awarding of contracts by the casino industry. While the regulations governing the set-aside program do not mandate specific contracting decisions, they undoubtedly have a "concrete effect" on whether non-minority business enterprises receive contracts from casino licensees. Cf. Schurr, 196 F.3d at 493. The Commission's regulations and the enabling statute authorizing them not only establish "goals" for casino licensees to achieve with regard to hiring minority business enterprises, they also provide for oversight by the Casino Control Commission and empower the Commission to impose penalties, including the revocation and suspension of gaming licenses, upon any casino licensee who fails to make a good faith effort in meeting these goals. Indeed, as the Court indicated in Adarand, an allegation of the equal protection of the laws of the sort involved in this case "of course alleges an invasion of a legally protected interest, and it does so in a manner that is `particularized'" to the Association's members. Adarand, 515 U.S. at 211, 115 S.Ct. 2097.

Moreover, there is sufficient evidence before the Court that the "injury in fact" in this case is "actual and imminent," further supporting the finding that the Association's members would have standing to pursue a preliminary injunction on their own behalf and that, derivatively, the Association has standing. In a Supplemental Certification, Zappone provides evidence that the second of the two companies he heads, Fabi Construction Inc. ("Fabi"), is a repeat player in the casino industry who will bid on casino contracts in the near future. See Supplemental Cert. ¶ 2. In this undisputed Supplemental Certification, Zappone indicates that for the past several years Fabi has bid on numerous casino contracts involving virtually all of the casinos in Atlantic City. See id. In just the past six months, Fabi has bid on two casino projects subject to the requirements of the set-aside program. See id. ¶ 4. Fabi intends to maintain its presence in the casino industry by bidding on "many, if not most" of the future casino construction contracts, including a $700,000,000 project called the Bogata project. Id. ¶ 5. Zappone claims that Fabi, like Pro, has been denied construction contracts despite having the best qualifications and being the lowest bidder for particular projects because the projects were set aside for minority or women business enterprises. See id. ¶¶ 2, ...


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