On appeal from Superior Court of New Jersey, Law Division, Atlantic County, L-2003-99.
Before Judges Wallace, Jr., Carchman and Lintner.
The opinion of the court was delivered by: Carchman, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
The Casino Reinvestment Development Authority (CRDA or Authority) and its executive director, James B. Kennedy (collectively, defendants), appeal from a Law Division judgment sustaining plaintiffs' L. Feriozzi Concrete Company's and Concetta Feriozzi's (plaintiffs) equal protection challenge to a minority business enterprise (MBE) set-aside subcontracting requirement in a prime contract let out for bid by the CRDA. We conclude that the CRDA's set-aside program cannot withstand the strict scrutiny analysis set forth in City of Richmond v. J.A. Croson Co., 488 U.S. 469, 109 S. Ct. 706, 102 L. Ed. 2d 854 (1989), because it is not narrowly tailored to achieve its intended result. Specifically, it is overinclusive as to the minorities who may benefit from the program. Because we conclude that the program fails to meet the "narrowly tailored" prong of the Croson test, we need not decide on this appeal whether the program is justified by a compelling governmental interest, including identification of the appropriate governmental unit, whether there are particularized findings in the record that the CRDA has engaged in discrimination in contracting or has become a passive participant in private discrimination in contracting, or whether the CRDA failed to sufficiently utilize race-neutral alternatives. We leave these important issues for another day.
These are the facts relevant to consideration of the narrow issue we have identified. The CRDA was created by L. 1984, c. 218 "in, but not of, the Department of Treasury." N.J.S.A. 5:12- 153(a). The Authority's purposes include maintaining public confidence in the casino gaming industry; directly facilitating the redevelopment of existing blighted areas in Atlantic City "by providing eligible projects in which casino licensees shall invest"; providing loans and other financial assistance for the acquisition, rehabilitation, construction, or repair of buildings or facilities to provide housing, commercial facilities, solid waste disposal facilities and roads, highways and bridges; and assisting commercial enterprises and local governmental units by providing financing for various projects. N.J.S.A. 5:12-160. Additionally, the CRDA is authorized to invest in eligible projects, issue bonds, guarantee obligations and enter into contracts. It is funded by charges and taxes imposed on New Jersey's casino industry. N.J.S.A. 5:12-144.1, -161.1 to .2, -173.1 to -.5.
In 1983, the Legislature enacted the Small Business Set- Aside Act. N.J.S.A. 52:32-17 to -31, L. 1983, c. 482. As part of the law, all state agencies were required to establish a goal of setting aside at least 15% of their contracts for small business. N.J.S.A. 52:32-21.
The 1984 enabling legislation creating the CRDA included a minority and women's set-aside of twenty percent. N.J.S.A. 5:12- 181b. The statute, in turn, incorporated by reference N.J.S.A. 34:1B-47 and -48, part of the enabling legislation of the New Jersey Development Authority for Small Businesses, Minorities and Women's Enterprises. Among the findings of incorporated law was that "due to a historical legacy of disregard and discrimination, minorities and women control a disproportionately small fraction of the productive resources of the State and are therefore largely excluded from the mainstream of the overall economy." N.J.S.A. 34:1B-47c. The term "minority" was broadly defined, and included:
(1) Black, which is a person having origins in any of the black racial groups in Africa; or
(2) Hispanic, which is a person of Spanish or Portuguese culture, with origins in Mexico, South or Central America, or the Caribbean islands, regardless of race; or
(3) Asian-American, which is a person having origins in any of the original peoples of the Far East, Southeast Asia, and Indian subcontinent, Hawaii, or the Pacific Islands; or
(4) American Indian or Alaskan native, which is a person having origins in any of the original peoples of North America. [N.J.S.A. 34:1B-48d.*fn1]
Minority and women's businesses were defined as businesses in which minorities or women hold 51% of the beneficial ownership, and in which the majority of the management is composed of either minorities or women. N.J.S.A. 34:1B-48e, h.
Enacted on the same date as the above legislation, L. 1985, c. 384, which amended the Small Business Set Aside Act, renamed the Set-Aside Act for Small Businesses, Female Businesses, and Minority Businesses (Set-Aside Act), N.J.S.A. 52:32-17, and established as goals for state contracting agencies that they award "at least 7% of their contracts for minority businesses and at least 3% of their contracts for female businesses" (WBE), N.J.S.A. 52:32-21a. Pursuant to these goals, "a total of at least 25% of the State's procurement contracts shall be awarded to small businesses, minority businesses, and female businesses." N.J.S.A. 52:32-21b. In addition, the law amended the legislative declarations to provide:
The Legislature declares that the existence of a strong and healthy free enterprise system is directly related to the well-being and competitive strength of small business, female business and minority business concerns and to the opportunity for small business, female business and minority business to have free entry into business, to grow and to expand; and finds that the State must ensure that a fair proportion of the State's total purchases and contracts for construction, ...