Ruling challenges roadbuilding DBE efforts for Hoosiers and more
A major court ruling late last month shook up not just the Hoosier transportation paradigm . . . but may have also struck a major blow to diversity, equity, and inclusion efforts at the national level.
Let’s get the details out of the way.
Judge Gregory Van Tatenhove of the U.S. District Court for the Eastern District of Kentucky blocked a critical aspect of the U.S. Department of Transportation’s Disadvantaged Business Enterprise program (DBE) through his recent ruling in Mid-Am. Milling Co., LLC v. U.S. Dept. of Transp., No. 3:23-cv-00072-GFVT.
To clarify: DBEs direct at least 10% of federal transportation infrastructure funding to contracting firms owned by disadvantaged groups, like women and racial minorities. While funding stems from the Feds – most recently through the $1.2 trillion Infrastructure Investment and Jobs Act – state governments must administer the program.
That brings us to the Hoosier relevancy of this litigation . . .
On October 26, 2023, two Hoosier road contractors, 80-year-old Mid-America Milling Company, LLC (MAMCO) of Jeffersonville, and Bagshaw Trucking Inc. of Memphis, also in Clark County, filed a lawsuit against USDOT claiming that they had dealt with “reverse discrimination” because their businesses didn’t meet USDOT’s DBE goals.
MAMCO is part of Hughes Group, Inc., a heavy highway and bridge preservation company that works in a market that stretches over 30 states in any given year.
Bagshaw boasts one of the largest truck fleets in Northern Kentucky and Southern Indiana. Bagshaw works on all types of projects, including major interstate construction and restoration, airport projects, bridge repairs, industrial parks, and subdivision developments.
MAMCO tells the court that it bids for milling contracts and completes milling projects in both Kentucky and Indiana, while 40-year-old Bagshaw routinely bids for hauling contracts and restoration projects in both Kentucky and Indiana, “including federally funded surface transportation projects in this District,” for both entities. Both firms also explain that they are “qualified, willing, and able to bid on construction contracts impacted by the federal DBE program.”
Mid-America indicates that federal highway contracts comprise, on average, approximately 65% of MAMCO’s annual business, and “concludes that they have lost at least 82 contracts because of the DBE program in the state of Indiana alone since January 2022,” the judge writes. “Likewise, Bagshaw represents that federal highway contracts equaled between $3 million and $4 million of Bagshaw’s total revenue over a fourteen-month period beginning in late 2022.”
The DBE program requests that “at least 10% of dollars in federal contracts [are] awarded to women- and minority-owned firms, which are presumed to be disadvantaged.” MAMCO and Bagshaw asserted that they had “previously lost out on federally funded contracts to DBE firms, even when [their] bids were lower.”
“Presumed” is where the questions begin to arise: Does the presumption of discrimination in turn discriminate against those who do not fall into a disenfranchised category?
Judge Van Tatenhove writes: “The Court is keenly aware of the past discrimination that certain groups of people have faced in this country. And the Court is sure that the federal government has nothing but good intentions in trying to remedy past wrongs … but remedying those wrongs must still pass constitutional muster. The federal government cannot classify people in such a manner that violates the principles of equal protection.”
The linchpin to understanding this case is the scope of Judge Van Tatenhove’s ruling, which may not be fully grasped until someone tries to use the case as precedent.
The judge clarifies in his 28-page opinion that the injunction is limited to the two plaintiffs in Kentucky and Indiana, but also espouses the belief that MAMCO and Bagshaw would “likely win on the merits of their constitutional claims,” asserting that the U.S. government has not done enough to justify DBE programs.
Wisconsin Institute for Law and Liberty lawyer Daniel Lennington, who assisted the Indiana companies in filing the lawsuit, asserts that the fact that MAMCO bid on contracts in 21 states other than Kentucky or Indiana further complicates conversations about scope. Although he clarifies that an agreement would have to be explicitly reached with the U.S. government, Lennington expects that the DBE program will be “halted in the rest of the country eventually … given the ruling, we expect the permanent, nationwide relief for all companies in 2025.”
A “permanent, nationwide” ban on DBEs would likely face backlash from those who believe in the program, particularly when considering the gender- and race-based disparities that exist specifically in the transportation industry.
Equity in Infrastructure Project co-chairs John Porcari and Phillip Washington decry the ruling, telling Julian Mark and Ian Duncan of the Washington Post that the DBE program levels the contract bidding playing field for businesses owned by women and minorities while also benefiting infrastructure projects by providing more competition. Washington asserts that “in many cases, [DBE] is actually bringing up communities, it’s actually increasing generational wealth in communities.”
So, while the outcome of this litigation consists of a partial block, don’t be surprised if Judge Van Tatenhove or others escalate to a complete block the next time an affirmative action-based case crosses their desk.
How Does This Affect Hoosiers?
The Indiana Department of Transportation’s Natalie Garrett shares that “INDOT is aware of the preliminary injunction recently issued in relation to the United States Department of Transportation’s Disadvantaged Business Enterprise program.” Still, Garrett clarifies that INDOT is uncertain as to the scope of the ruling and how it may affect Hoosiers over time. “[We’re] awaiting further guidance from USDOT, which will determine any potential effects to INDOT’s programs specifically,” she updates.
Hypothetically, if USDOT decides it, INDOT could be heavily affected. Through June 2025, INDOT and the Kentucky Transportation Cabinet (KTC) participate in a DBE Exchange. This means that DBEs certified in one state can also be used “for any DOT federal aid project in the partner state.”
Worth noting, too, is Civil Rights Litigation Clearinghouse’s description of the two plaintiffs: “private companies that participate in federally financed road construction projects and are qualified, willing, and able to apply for federal highway and surface transportation contracts.” Suppose you’ve perused our INDOT projects run-down. In that case, you’re aware that such companies frequently bid on INDOT’s projects for the ability to execute them.
Without considering the Kentucky businesses, other out-of-state contractors, or any other business classification besides construction subcontractors (that eliminates air- or water-based INDOT projects along with hauling or trucking), here’s the long list of INDOT-related businesses that this ostensibly limited ruling may affect:
LL Brown LLC, US Hydrovac Inc., Kaskaskia Engineering Group, LLC, Ritschard Bros., Inc., Foso Construction, LLC, King’s Trucking & Excavation, Inc., David Cuevas Ramirez
LLC, S&J Excavation and Concrete LLC, Allied-Ott Petroleum Equipment, LLC, Vari-Tek LLC, Peyton’s Barricade & Sign Company, Rivers Resources LLC, JIRK Swope Enterprises Inc., Adamson Solutions LLC, Roger & Sons Construction Inc., H and D Landscaping and Tree Removal LLC, Plina, Inc., Javelina Construction, Inc., C&R Construction and Consulting, LLC., HCE LLC, JJ’s Concrete Construction LLC, SAGE LLC, LaPorte Construction Company, Inc., Slussers Green Thumb, Inc., Crystal Excavating, LLC, Gratus Construction, LLC, Great Lakes Electrical Maintenance, Inc., C.A. Fulkerson, LLC, C.A.S. Contracting, LLC, Hawk Enterprises, Inc., Boyd Electric LLC, Eilts Consulting Services, Inc., Summers Grading Service, LLC, Central Painting, Inc., CorGroup LLC, JBL Signals and Lighting LLC, Messier & Associates Inc., Enneking Pressure Cleaning, Inc., DWD Company LLC, Lyles Construction, Inc., U.S. Hydrovac Inc., S.A.M.M. Trucking and Excavating, Hydro Vac Services, LLC dba GroundBreakers LLC, Peyton’s Barricade & Sign Company, GLS, Inc., Eenigenburg Exteriors, Indiana Sign and Barricade, Owl Creek Farm, LLC., Solid Finish Construction, Inc., Quality Services, Inc., TC Electric, Inc. S A J Construction Services, 1st American Construction & Development, Inc., BHR LLC, Connor Fine Painting Inc., B&B Contracting, AAA Queen Bee Construction, Inc., CK United Sheet Metal & Mechanical, Inc., Reliable Solutions LLC, Crossroads Highway Products, LLC, Earth Images, Inc., Natural Construction, Inc., Busch Landscaping, LLC, Electrical Maintenance & Construction, LLC, Hyco Logistics, LLC, Kaskakia Engineering Group, LLC, CE Hughes Milling, Inc., Scruggs Construction Inc, MZ Corp, Dunes Construction LLC, Sneed Construction Inc, Satori Construction LLC, Strong Hands Service Lawn Care & Removal Enterprise LLC, Robert L. Fisher Enterprises Unlimited TK Electric, LLC, C. Lee Construction Services, Inc., White Arc Welding, Indy Pavement Services, S.C. Case Excavating, Cornerstone Construction Group LLC, Karen Haan Inc., Modern Edge LLC, Capstone Services, State Barricading, Inc., Kennedy Expressline Inc., Precision Aerial Services, LLC, Ingram & Son Trucking & Demolition, Inc., 3D Company, Inc., Myers Builders, Jenlee Electrical, LLC, Davis & Associates, Inc., Bixler Interiors LLC, Adams Building Group Inc, Tatman Sims and Pedigo Corp, Franklin Interior Systems LLC, Environ Corporation, Highway Safety Service, Inc., Cardinal Hardscapes LLC, N.I. Spanos Painting Inc., AlphaJak Sealcoating LLC, Doug & Steve Construction, Inc., John T. Camden Construction Company, Victory Trucking & Supply, Inc., McCrite Milling & Construction Co., Inc., Soteria Hauling & Excavating, Day’s Construction, Inc., MultiCraft Electric, LLC, Whitehead Construction Inc., S&S Sales and Services, Inc., Premier Disinfecting Services, Edward & Jones Concrete Inc., JND Construction, Inc., The Etica Group, Mainsource Supply LLC, Sig Media LLC, ForeSight Environmental Solutions, JQOL Inc., Indiana Traffic Services, VET Environmental Engineering, LLC, Liggon, Inc., Wilburn Construction Company, LLC, D Mofield Property Services, Inc., Byrd Enterprise of Indianapolis, The Darden Group, LLC, Dickman Trucking & Excavating, Inc., E-Z Transport, Shrewsberry & Associates, LLC, Nubian Transport Management, Inc., Lillian’s Electrical Services, LLC, EK Engineering Consultants, LLC, ATEC, Inc., Apogee Construction LLC, Patrium, C Cat, Inc., J & J Newell Concrete Contractors, Inc., KPEM, LLC, Midwest Associates of Indianapolis, LLC, K&K Dirtworks, Inc., New Life Projects, LLC, Ramon Excavating, Inc., Conco Spray Solutions, LLC, Platinum Level Construction Services LLC, XSYS, Inc., Precision Mechanical Contractors, Inc., Global Construction Transport, LLC, and HGMC Supply, Inc.
. . . We told you it’s a significant ruling! The businesses detailed for you above operate on 100% DBE credit, meaning the “full value of [their] work can be counted towards meeting DBE goals.” Plenty of other business categories operate under reduced DBE credit.
If we had limited this list any less stringently, it would have consumed pages and pages.
An aside on some immediate impact: INDOT was scheduled to host a webinar on their Overall DBE Goals on October 2, but it has been postponed to a later, undetermined date. We’ll keep an eye on this and update you if there’s any reference to this ruling.
As Judge Van Tatenhove (a Bush 43 appointee) reminds us in his opinion: “Under federal law … state departments of transportation are required to have a DBE Program and must set a DBE participation goal … on contracts with goals, states must meet the goal for DBE participation or otherwise document that a bidder has made ‘good faith efforts’ to meet the DBE goal.”
The onerous list above makes it clear that many Hoosier subcontractors participate in and benefit from the legally mandated DBE process to the point that any drastic changes could affect Indiana’s economy.
Not-So-Affirmative Action
Indiana University Clinical Associate Professor and Director of Paralegal Studies Shana Stump believes that time will tell whether this litigation sparks major change. The case seems “to be intentionally limited to [Mid-America Milling. and Bagshaw Trucking] in terms of precedent, but it looks to me like the plaintiffs are exploring broader implications of the Supreme Court’s ruling in the University of North Carolina and Harvard case on affirmative action in higher education admissions last year,” she hypothesizes to your favorite transportation newsletter.
The merits of affirmative action programs have seen other recent litigatory attacks.
There’s the landmark case Stump mentioned, in which the Supreme Court ruled that Harvard University and the University of North Carolina’s “race-conscious” admissions protocol violated the Equal Protection Clause of the Fourteenth Amendment. Many experts considered that case to be an opening of the floodgates where the sanctity of diversity, equity, and inclusion programs are concerned. MAMCO and Bagshaw also specifically alleged that DBEs and the federal regulations governing the program “violated the equal protection guarantee of the Fifth Amendment to the U.S. Constitution” and sought a “declaratory judgment that the race and gender-based classifications were unconstitutional.” In his granting of a preliminary injunction, Judge Van Tatenhove clarified his agreement that “these race and gender classifications violate the Constitution’s guarantee of equal protection.”
Within the year, a federal judge in Texas also ordered the Minority Business Development Agency to include White businesses in their services and a Tennessee judge ruled that a Small Business Administration program for minority contractors must stop operating under the assumption of certain groups being “disadvantaged.”
If We Had to Guess . . .
Judge Van Tatenhove’s choice to issue a “preliminary injunction” could easily be perceived as a lesser condemnation than other possible rulings – but it shouldn’t be. In his opinion, the judge himself quotes Overstreet v. Lexington-Fayette Urban Co. Gov’t, 305 F.3d 566, 573 (6th Cir. 2002) to clarify “[A] preliminary injunction involv[es] the exercise of a very far-reaching power … [it] is an extraordinary remedy which should be granted only if the movant carries his or her burden of proving that the circumstances clearly demand it.”
In plain English: If there wasn’t constitutional cause to question DBEs and other such programs, Van Tatenhove believes this ruling wouldn’t be appropriate. In the national conversation on whether affirmative-action programs truly assist disadvantaged populations or only serve to create new ones, rulings such as this one will be used to chart a new (legal) course. That new course will affect, per USDOT, 49,000 DBEs nationwide.
Expect additional judicial action in the next few months to clarify – or further confuse – all of this.