7th Circuit upholds disadvantaged business enterprise program.

• Author: Ziemer, David

Byline: David Ziemer

A state does not have to demonstrate a compelling interest for using a disadvantaged business enterprise (DBE) program, the Seventh Circuit held on Jan. 8. The holding likely immunizes Wisconsin's DBE program from constitutional attack. Northern Contracting, Inc. (NCI) is a subcontractor that specializes in the construction of guardrails and fences for highway projects in Illinois. In 2000, NCI brought suit in federal court against the State of Illinois and others, alleging that Illinois' DBE program is unconstitutional. The program is the result of federal law establishing a goal that 10 percent of federal highway funds be spent with DBEs, and requiring that all recipients of federal funds have a DBE program. Illinois set a DBE goal of 22.77 percent. The court granted summary judgment in favor of Illinois, holding that the DBE program was narrowly tailored to a compelling interest -- remedying the effects of racial and gender discrimination in the highway construction market. NCI appealed, but the Seventh Circuit affirmed in a decision by Judge Ann Claire Williams. In Milwaukee County Pavers Ass'n. v. Fielder, 922 F.2d 419 (7th Cir. 1991), the court had held that the federal government's interest in remedying discrimination provided justification for a state to engage in a federally mandated DBE program. Subsequently, the U.S. Supreme Court, in Adarand Constructors v. Pena, 515 U.S. 200 (1995), reversed a lower court decision applying intermediate scrutiny to federal racial classifications, and held that strict scrutiny applies. The Seventh Circuit concluded that the holding in Adarand does not affect its decision in Milwaukee County Pavers, and a state still need not show any justification for its program, beyond Congress' determination that DBE programs serve a compelling interest. Since Adarand, both the Eighth and Ninth Circuits have held that, even absent evidence of discrimination in a given state, DBE programs serve a compelling national interest. However, both have also held that states are susceptible to as-applied challenges to whether the programs are narrowly tailored to address discrimination. Western States Paving Co., Inc. v. Washington State Dep't of Transp., 407 F.3d 983 (9th Cir. 2005), cert. denied, 126 S.Ct. 1332 (Feb. 21, 2006); Sherbrooke Turf, Inc. v. Minn. Dep't of Trans., 345 F.3d 964, 970 (8th Cir. 2003), cert. denied, 541 U.S. 1041 (2004). Like the other circuits, the Seventh Circuit...