Fullilove v. Klutznick (1980)

Fullilove v. Klutznick (1980)

448 U.S. 448

The “minority business enterprise” (MBE) provision of the Public Works Employment Act of 1977 [Section 103 (f) (2)] requires that, absent an administrative waiver, at least 10 percent of federal funds granted for local public-works projects must be used by the state or local grantee to procure services or supplies from businesses owned by minority group members, defined as United States citizens “who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and Aleuts.” In fulfilling the 10 percent MBE requirements, state and local grantees and their private prime contractors are required to seek out all available, qualified MBEs, provide them with technical assistance as needed, lower or waive their bonding requirements, assist them in obtaining required working capital, and guide them through the intricacies of the bidding process. MBEs are to be awarded contracts, even though they are not the lowest bidders, if their bids reflect attempts to cover costs inflated by the present effects of prior disadvantage and discrimination. H. Earl Fullilove and other construction contractors and subcontractors filed suit for declaratory and injunctive relief in the U.S. District Court for the Southern District of New York against Secretary of Commerce Phillip M. Klutznick, as the administrator of federal programs for local public works projects, and against the state and city of New York, as actual and potential grantees of federally funded local works projects. The plaintiffs alleged that the 10 percent set-aside requirement of the MBE provision on its face violated the Equal Protection Clause of the Fourteenth Amendment and the equal protection component of the Due Process Clause of the Fifth Amendment. The district court upheld the validity of the MBE program, and the court of appeals affirmed. The Supreme Court granted certiorari.

Opinion of the Court: Burger, Powell, White.

Concurring opinion: Powell.

Concurring in the judgment: Marshall, Blackmun, Brennan.

Dissenting opinions: Stevens; Stewart, Rehnquist.

MR. CHIEF JUSTICE BURGER delivered the opinion of the Court.

We granted certiorari to consider a facial constitutional challenge to a requirement in a congressional spending program that, absent an administrative waiver, 10% of the federal funds granted for local public works projects must be used by the state or local grantee to procure services or supplies from businesses owned and controlled by members of statutorily identified minority groups. . . .

The legislative objectives of the MBE provision must be considered against the background of ongoing efforts directed toward deliverance of the century-old promise of equality of economic opportunity.

The clear objective of the MBE provision is to ensure that, to the extent federal funds were granted under the Public Works Employment Act of 1977, grantees who elect to participate would not employ procurement practices that Congress had decided might result in perpetuation of the effects of prior discrimination which had impaired or foreclosed access by minority businesses to public contracting opportunities. The MBE program does not mandate the allocation of federal funds according to inflexible percentages solely based on race or ethnicity.

. . . Our analysis proceeds in two steps. At the outset, we must inquire whether the objectives of this legislation are within the power of Congress. If so, we must go on to decide whether the limited use of racial and ethnic criteria, in the context presented, is a constitutionally permissible means for achieving the congressional objectives and does not violate the equal protection component of the Due Process Clause of the Fifth Amendment. . . . 

. . . And we have no difficulty perceiving a basis for accomplishing the objectives of the MBE program through the Commerce Power insofar as the program objectives pertain to the action of private contracting parties, and through the power to enforce the equal protection guarantees of the Fourteenth Amendment insofar as the program objectives pertain to the action of state and local grantees. . . . 

We turn first to the Commerce Power. . . .  The legislative history of the MBE provision shows that there was a rational basis for Congress to conclude that the subcontracting practices of prime contractors could perpetuate the prevailing impaired access by minority businesses to public contracting opportunities, and that this inequity has an effect on interstate commerce. Thus Congress could take necessary and proper action to remedy the situation. . . . 

In certain contexts, there are limitations on the reach of the Commerce Power to regulate the actions of state and local governments. National League of Cities v. Usery (1976). . . . To avoid such complications, we look to § 5 of the Fourteenth Amendment for the power to regulate the procurement practices of state and local grantees of federal funds. . . . A review of our cases persuades us that the objectives of the MBE program are within the power of Congress under §5 “to enforce, by appropriate legislation” the equal protection guarantees of the Fourteenth Amendment. . . .

With respect to the MBE provisions, Congress had abundant evidence from which it could conclude that minority businesses have been denied effective participation in public contracting opportunities by procurement practices that perpetuated the effects of prior discrimination. Congress, of course, may legislate without compiling the kind of “record” appropriate with respect to judicial or administrative proceedings. Congress had before it, among other data, evidence of a long history of marked disparity in the percentage of public contracts awarded to minority business enterprises. This disparity was considered to result not from any lack of capable and qualified minority businesses, but from the existence and maintenance of barriers to competitive access which had their roots in racial and ethnic discrimination, and which continue today, even absent any intentional discrimination or other unlawful conduct. Although much of this history related to the experience of minority businesses in the area of federal procurement, there was direct evidence before the Congress that this pattern of disadvantage and discrimination existed with respect to state and local construction contracting as well. In relation to the BCE provision, Congress acted within its competence to determine that the problem was national in scope.

Although the Act recites no preambulary “findings” on the subject, we are satisfied that Congress had abundant historical basis from which it could conclude that traditional procurement practices, when applied to minority businesses, could perpetuate the effects of prior discrimination. Accordingly, Congress reasonably determined that the prospective elimination of these barriers to minority firm access to public contracting opportunities generated by the 1977 Act was appropriate to ensure that those businesses were not denied equal opportunity to participate in federal grants to state and local governments, which is one aspect of the equal protection of the laws. Insofar as the MBE program pertains to the actions of state and local grantees, Congress could have achieved its objectives by use of its power under § 5 of the Fourteenth Amendment. We conclude that in this respect the objectives of the MBE provision are within the scope of the Spending Power. . . .

We now tum to the question whether, as a means to accomplish these plainly constitutional objectives, Congress may use racial and ethnic criteria, in this limited way, as a condition attached to a federal grant. . . . Congress may employ racial or ethnic classifications in exercising its Spending or other legislative powers only if those classifications do not violate the equal protection component of the Due Process Clause of the Fifth Amendment. We recognize the need for careful judicial evaluation to assure any congressional program that employs racial or ethnic criteria to accomplish the objective remedying the present effects of past discrimination is narrowly tailored to the achievement of that goal.

Again, we stress the limited scope of our inquiry. Here we are not dealing with a remedial decree of a court but with the legislative authority of Congress. Furthermore, petitioners have challenged the constitutionality of the MBE provision on its face; they have not sought damages or other specific relief for injury allegedly flowing from specific applications of the program; nor have they attempted to show that as applied in identified situations the MBE provision violated the constitutional or statutory rights of any party to this case. In these circumstances, given a reasonable construction and in light of its projected administration, if we find the MBE program on its face to be free of constitutional defects, it must be upheld as within congressional power. . . .

As a threshold matter, we reject the contention that in the remedial context the Congress must act in a wholly “color-blind” fashion. . . . It is fundamental that in no organ of government, state or federal, does there repose a more comprehensive remedial power than in the Congress, expressly charged by the Constitution with competence and authority to enforce equal protection guarantees. Congress not only may induce voluntary action to assure compliance with existing federal statutory or constitutional antidiscrimination provisions, but also, where Congress has authority to declare certain conduct unlawful, it may, as here, authorize and induce state action to avoid such conduct. . . .

A more specific challenge to the MBE program is the charge that it impermissibly deprives nonminority businesses of access to at least some portion of the government contracting opportunities generated by the Act. It must be conceded that by its objective of remedying the historical impairment of access, the MBE provision can have the effect of awarding some contracts to MBEs which otherwise might be awarded to other businesses, who may themselves be innocent of any prior discriminatory actions. Failure nonminority firms to receive certain contracts is, of course, an incidental consequence of the program, not part of its objective; similarly, past impairment of minority-firm access to public contracting opportunities may have been an incidental consequence of “business as usual” by public contracting agencies and among prime contractors.

It is not a constitutional defect in this program that it may disappoint the expectations of nonminority firms. When effectuating a limited and properly tailored remedy to cure the effects of prior discrimination, such “a sharing of the burden” by innocent parties is not impermissible. . . . The actual “burden” shouldered by nonminority firms is relatively light in this connection when we consider the scope of this public works program as compared with overall construction contracting opportunities. Moreover, although we may assume that the complaining parties are innocent of any discriminatory conduct, it was within congressional power to act on the assumption that in the past some nonminority businesses may have reaped competitive benefit over the years from the virtual exclusion of minority firms from these contracting opportunities. . . .

Another challenge to the validity of the MBE program is the assertion that it is underinclusive—that it limits its benefit to specified minority groups rather than extending its remedial objectives to all businesses whose access to government contracting is impaired by the effects of disadvantage or discrimination. Such an extension would, of course, be appropriate for Congress to provide; it is not a function for the courts. Even in this context, the well-established concept that a legislature may take one step at a time to remedy only part of a broader problem is not without relevance. . . .

It is also contended that the MBE program is overinclusive—that it bestows a benefit on businesses identified by racial or ethnic criteria which cannot be justified on the basis of competitive criteria or as a remedy for the present effects of identified prior discrimination. It is conceivable that a particular application of the program may have this effect; however, the peculiarities of specific applications are not before us in this case. We are not presented here with a challenge involving a specific award of a construction contract or the denial of a waiver request; such questions of specific application must await future cases. . . .

Congress, after due consideration, perceived a pressing need to move forward with new approaches in the continuing effort to achieve the goal of equality of economic opportunity. In this effort, Congress has necessary latitude to try new techniques such as the limited use of racial and ethnic criteria to accomplish remedial objectives; this is especially so in programs where voluntary cooperation with remedial measures is induced by placing conditions on federal expenditures. That the program may press the outer limits of congressional authority affords no basis for striking it down. . . .

. . . Any preference based on racial or ethnic criteria must necessarily receive a most searching examination to make sure that it does not conflict with constitutional guarantees. This case is one which requires, and which has received, that kind of examination. This opinion does not adopt, either expressly or implicitly, the formulas of analysis articulated in such cases as University of California Regents v. Bakke (1978). . . . However, our analysis demonstrates that the MBE provision would survive judicial review under either “test” articulated in the several Bakke opinions. The MBE provision of the Public Works Employment Act of 1977 does not violate the Constitution. Affirmed.

MR. JUSTICE POWELL, concurring.

Because the distinction between permissible remedial action and impermissible racial preference rests on the existence of a constitutional or statutory violation, the legitimate interest in creating a race-conscious remedy is not compelling unless an appropriate governmental authority has found that such a violation has occurred. In other words, two requirements must be met. First, the governmental body that attempts to impose a race-conscious remedy must have the authority to act in response to identified discrimination. . . . Second, the governmental body must make findings that demonstrate the existence of illegal discrimination. In Bakke, the Regents failed both requirements. They were entrusted only with educational functions, and they made no findings of past discrimination. Thus, no compelling governmental interest was present to justify the use of a racial quota in medical school admissions. . . .

It is beyond question . . . that Congress has the authority to identify unlawful discriminatory practices, to prohibit those practices, and to prescribe remedies to eradicate their continuing effects. The next inquiry is whether Congress has made findings adequate to support its determination that minority contractors have suffered extensive discrimination.

In my view, the legislative history of § 103(f)(2) demonstrates that Congress reasonably concluded that private and governmental discrimination had contributed to the negligible percentage of public contracts awarded minority contractors. . . .

When reviewing the selection by Congress of a race-conscious remedy, it is instructive to note the factors upon which the Courts of Appeals have relied in a closely analogous area. Courts reviewing the proper scope of race-conscious hiring remedies have considered (i) the efficacy of alternative remedies, . . . (ii) the planned duration of the remedy, . . . (iii) the relationship between the percentage of minority workers to be employed and the percentage of minority group members in the relevant population or work force, . . . and (iv) the availability of waiver provisions if the hiring plan could not be met. . . .

By the time Congress enacted § 103(f)(2) in 1977, it knew that other remedies had failed to ameliorate the effects of racial discrimination in the construction industry. . . .

The § 103(f)(2) set-aside is not a permanent part of federal contracting requirements. As soon as the PWEA program concludes, this set-aside program ends. The temporary nature of this remedy ensures that a race-conscious program will not last longer than the discriminatory effects it is designed to eliminate. It will be necessary for Congress to reexamine the need for a race-conscious remedy before it extends or re-enacts § 103(f)(2).

The percentage chosen for the set-aside is within the scope of congressional discretion. The Courts of Appeals have approved temporary hiring remedies insuring that the percentage of minority group workers in a business or governmental agency will be reasonably related to the percentage of minority group members in the relevant population. . . . Only 4% of contractors are members of minority groups, . . . although minority group members constitute about 17% of the national population. . . . The choice of a 10% set-aside thus falls roughly halfway between the present percentage of minority contractors and the percentage of minority group members in the Nation.

Although the set-aside is pegged at a reasonable figure, its effect might be unfair if it were applied rigidly in areas of the country where minority group members constitute a small percentage of the population. To meet this concern, Congress enacted a waiver provision into § 103(f)(2). The factors governing issuance of a waiver include the availability of qualified minority contractors in a particular geographic area, the size of the locale’s minority population, and the efforts made to find minority contractors. . . .

Consideration of these factors persuades me that the set-aside is a reasonably necessary means of furthering the compelling governmental interest in redressing the discrimination that affects minority contractors. Any marginal unfairness to innocent nonminority contractors is not sufficiently significant—or sufficiently identifiable— to outweigh the governmental interest served by § 103(f)(2). When Congress acts to remedy identified discrimination, it may exercise discretion in choosing a remedy that is reasonably necessary to accomplish its purpose. Whatever the exact breadth of that discretion, I believe that it encompasses the selection of the set-aside in this case.

MR. JUSTICE MARSHALL, with whom MR. JUSTICE BRENNAN and MR. JUSTICE BLACKMUN join, concurring.

. . . My resolution of the constitutional issue 111 this case is governed by the separate opinion I coauthored in University of California Regents v. Bakke (1978) . . . . In my view, the 10% minority set-aside provision of the Public Works Employment Act of 1977 passes constitutional muster under the standard announced in that opinion.

. . . In Bakke, . . . we concluded . . . that because a racial classification ostensibly designed for remedial purposes is susceptible to misuse, it may be justified only by showing “an important and articulated purpose for its use.” . . . “In addition, any statute must be stricken that stigmatizes any group or that singles out those least well represented in the political process to bear the brunt of a benign program.” . . . In our view, then, the proper inquiry is whether racial classifications designed to further remedial purposes serve important governmental objectives and are substantially related to achievement of those objectives. . . .

Judged under this standard, the 10% minority set-aside provision at issue in this case is plainly constitutional. Indeed, the question is not even a close one.

MR. JUSTICE STEWART, with whom MR. JUSTICE REHNQUIST joins, dissenting.

. . . I think today’s decision is wrong for the same reason that Plessy v. Ferguson [1896] was wrong, and I respectfully dissent.

. . . The equal protection standard of the Constitution has one clear and central meaning—it absolutely prohibits invidious discrimination by government. That standard must be met by every State under the Equal Protection Clause of the Fourteenth Amendment. . . . And that standard must be met by the United States itself under the Due Process Clause of the Fifth Amendment. . . .

Under our Constitution, any official action that treats a person differently on account of his race or ethnic origin is inherently suspect and presumptively invalid. . . . Under our Constitution, the government may never act to the detriment of a person solely because of that person’s race. The color of a person’s skin and the country of his origin are immutable facts that bear no relation to ability, disadvantage, moral culpability, or any other characteristics of constitutionally permissible interest to the government. “Distinctions between citizens solely because of their ancestry are by their very nature odious to a free people whose institutions are founded upon the doctrine of equality.” . . . In short, racial discrimination is by definition invidious discrimination.

The rule cannot be any different when the persons injured by a racially biased law are not members of a racial minority. . . . The command of the equal protection guarantee is simple but unequivocal: In the words of the Fourteenth Amendment: “No State shall … deny to any person … the equal protection of the laws.” Nothing in this language singles out some “persons” for more “equal” treatment than others. Rather, as the Court made clear in Shelley v. Kraemer [1948], . . . the benefits afforded by the Equal Protection Clause “are, by its terms, guaranteed to the individual. [They] are personal rights.” From the perspective of a person detrimentally affected by a racially discriminatory law, the arbitrariness and unfairness is entirely the same, whatever his skin color and whatever the law’s purpose, be it purportedly “for the promotion of the public good” or otherwise.

No one disputes the self-evident proposition that Congress has broad discretion under its spending power to disburse the revenues of the United States as it deems best and to set conditions on the receipt of the funds disbursed. No one disputes that Congress has the authority under the Commerce Clause to regulate contracting practices on federally funded public works projects, or that it enjoys broad powers under § 5 of the Fourteenth Amendment “to enforce by appropriate legislation” the provisions of that Amendment. But these self-evident truisms do not begin to answer the question before us in this case. For in the exercise of its powers, Congress must obey the Constitution just as the legislatures of all the States must obey the Constitution in the exercise of their powers. If a law is unconstitutional, it is no less unconstitutional just because it is a product of the Congress of the United States. . . .

On its face, the minority business enterprise (MBE) provision at issue in this case denies the equal protection of the law. . . . The statute, on its face and in effect, thus bars a class to which the petitioners belong from having the opportunity to receive a government benefit, and bars the members of that class solely on the basis of their race or ethnic background. This is precisely the kind of law that the guarantee of equal protection forbids.

The Court’s attempt to characterize the law as a proper remedial measure to counteract the effects of past or present racial discrimination is remarkably unconvincing. The Legislative Branch of government is not a court of equity. It has neither the dispassionate objectivity nor the flexibility that are needed to mold a race-conscious remedy around the single objective of eliminating the effects of past or present discrimination.

But even assuming that Congress has the power, under § 5 of the Fourteenth Amendment or some other constitutional provision, to remedy previous illegal racial discrimination, there is no evidence that Congress has in the past engaged in racial discrimination in its disbursement of federal contracting funds. The MBE provision thus pushes the limits of any such justification far beyond the equal protection standard of the Constitution. Certainly, nothing in the Constitution gives Congress any greater authority to impose detriments on the basis of race than is afforded the Judicial Branch. And a judicial decree that imposes burdens on the basis of race can be upheld only where its sole purpose is to eradicate the actual effects of illegal race discrimination. . . .

The provision at issue here does not satisfy this condition. Its legislative history suggests that it had at least two other objectives in addition to that of counteracting the effects of past or present racial discrimination in the public works construction industry. One such purpose appears to have been to assure to minority contractors a certain percentage of federally funded public works contracts. But, since the guarantee of equal protection immunizes from capricious governmental treatment “persons”— not “races,” it can never countenance laws that seek racial balance as a goal in and of itself. “Preferring members of any one group for no reason other than race or ethnic origin is discrimination for its own sake. This the Constitution forbids.” . . . Second, there are indications that the MBE provision may have been enacted to compensate for the effects of social, educational, and economic “disadvantage.” No race, however, has a monopoly on social, educational, or economic disadvantage, and any law that indulges in such a presumption clearly violates the constitutional guarantee of equal protection. Since the MBE provision was in whole or in part designed to effectuate objectives other than the elimination of the effects of racial discrimination, it cannot stand as a remedy that comports with the strictures of equal protection, even if it otherwise could. . . .

The Fourteenth Amendment was adopted to ensure that every person must be treated equally by each State regardless of the color of his skin. The Amendment promised to carry to its necessary conclusion a fundamental principle upon which this Nation had been founded-that the law would honor no preference based on lineage. Tragically, the promise of 1868 was not immediately fulfilled, and decades passed before the States and the Federal Government were finally directed to eliminate detrimental classifications based on race. Today, the Court derails this achievement and places its imprimatur on the creation once again by government of privileges based on birth.

The Court, moreover, takes this drastic step without, in my opinion, seriously considering the ramifications of its decision. Laws that operate on the basis of race require definitions of race. Because of the Court’s decision today, our statute books will once again have to contain laws that reflect the odious practice of delineating the qualities that make one person a Negro and make another white. Moreover, racial discrimination, even “good faith” racial discrimination is inevitably a two-edged sword. “[P]referential programs may only reinforce common stereotypes holding that certain groups are unable to achieve success without special protection based on a factor having no relationship to individual worth.” . . . Most importantly, by making race a relevant criterion once again in its own affairs, the Government implicitly teaches the public that the apportionment of rewards and penalties can legitimately be made according to race—rather than according to merit or ability—and that people can, and perhaps should, view themselves and others in terms of their racial characteristics. Notions of “racial entitlement” will be fostered and private discrimination will necessarily be encouraged. . . .

There are those who think that we need a new Constitution, and their views may someday prevail. But under the Constitution we have, one practice in which government may never engage is the practice of racism—not even “temporarily” and not even as an “experiment.”

For these reasons, I would reverse the judgment of the Court of Appeals.

MR. JUSTICE STEVENS, dissenting.

The ultimate goal must be to eliminate entirely from governmental decisionmaking such irrelevant factors as a human being’s race. The removal of barriers to access to political and economic processes serves that goal. But the creation of new barriers can only frustrate true progress. . . . Such protective barriers reinforce habitual ways of thinking in terms of classes instead of individuals. Preferences based on characteristics acquired at birth foster intolerance and antagonism against the entire membership of the favored classes. For this reason, I am firmly convinced that this “temporary measure” will disserve the goal of equal opportunity.

Unlike Mr. Justice Stewart and Mr. Justice Rehnquist, however, I am not convinced that the Clause contains an absolute prohibition against any statutory classification based on race. I am nonetheless persuaded that it does impose a special obligation to scrutinize any governmental decisionmaking process that draws nationwide distinctions between citizens on the basis of their race and incidentally also discriminates against noncitizens in the preferred racial classes.

. . . Rather than take the substantive position expressed in Mr. Justice Stewart’s dissenting opinion, I would hold this statute unconstitutional on a narrower ground. It cannot fairly be characterized as a “narrowly tailored” racial classification because it simply raises too many serious questions that Congress failed to answer or even to address in a responsible way. The risk that habitual attitudes toward classes of persons, rather than analysis of the relevant characteristics of the class, will serve as a basis for a legislative classification is present when benefits are distributed as well as when burdens are imposed. In the past, traditional attitudes too often provided the only explanation for discrimination against women, aliens, illegitimates, and black citizens. Today there is a danger that awareness of past injustice will lead to automatic acceptance of new classifications that are not in fact justified by attributes characteristic of the class as a whole.

When Congress creates a special preference, or a special disability, for a class of persons, it should identify the characteristic that justifies the special treatment. When the classification is defined in racial terms, I believe that such particular identification is imperative.

. . . It is up to Congress to demonstrate that its unique statutory preference is justified by a relevant characteristic that is shared by the members of the preferred class. In my opinion, because it has failed to make that demonstration, it has also failed to discharge its duty to govern impartially embodied in the Fifth Amendment to the United States Constitution.

I respectfully dissent.