Case Status: Loss

Rothe v. U.S. Dept. of Defense and U.S. Small Business Administration

  • Federal Appellate Courts

CIR Files Brief in Defense of Small Business Owner

Like many government agencies, the Small Business Administration utilizes a system of racial preferences in the awarding of government contracts (called the “Section 8(a)” program). Unfortunately, when Congress created the Section 8(a) program, it failed to provide guidance to agencies on the basic question of what sort of small business owners qualify for a preference and why.  While many wealthy small business owners continue to qualify for preferences year after year, small business owners who otherwise qualify for the preference are repeatedly denied because they happen to be the wrong race.

This racial double standard became apparent when Rothe Development, Inc., a woman owned contractor, was repeatedly denied contracts for which it was otherwise qualified. Rothe sued the SBA, and after losing in the district court, appealed to the Court of Appeals for the District of Columbia arguing that the Section 8(a) program is overbroad and violates the Fifth Amendment. Relying on our district court victory in Dynalantic v. U.S. Dept. of Defense, CIR filed an amicus brief in support of Rothe.

The Section 8(a) Program of Racial Preferences Violates the Constitution

In 1978, Congress enacted a law that used racial classifications to set aside federal contracts under the Small Business Act. The law has not been reauthorized since, and aside from two amendments in the 1980s, has remained unchanged. The only guidance the law offers is that racial preferences may be awarded when “appropriate.” However, while the statute provides that preferences may be utilized when appropriate, it contains no mechanism for reviewing and removing those preferences if, after time, they cease to be appropriate. As a result, an ever increasing number of groups are added to the list of preferred races, none have ever been subtracted.

Furthermore, the Section 8(a) program is not limited to correcting past government discrimination. In past decisions the Supreme Court has held that the government can only use racial preferences to rectify wrongful discriminatory government acts. Here, since the preferences are not tied to any prior discrimination by the government, businesses like Rothe are being denied contracts in the name of discrimination that never occurred.

The Fifth Amendment Protects Businesses from Federal Racial Classifications

The Supreme Court has explained that the Fifth Amendment’s guarantee of equal protections means that “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.”

CIR’s brief argues that racial preferences that are overly broad and ambiguous, like this one, violate the Fifth Amendment rights of small business owners like Rothe who are denied government contracts simply because the owners are not one of the currently preferred races. When the government awards contracts based on race, it must be able to offer better justification than what is “appropriate.” Otherwise, regulatory ambiguity will persist and federal agencies, stuck in the past, will continue awarding contracts along racial lines that were drawn in the 1970s.

Moreover, the government repeatedly failed to meet its evidentiary burden to prove that it discriminated in contracts in the past, or that the Section 8(a) program is narrowly tailored to rectify past wrongs.

A victory in this case will build upon CIR’s earlier victory in Dynalantic v. U.S. Dept. of Defense, once again vindicating CIR’s legal battle in defense of Dynalantic’s Fifth Amendment rights.