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