Mountain West Holding v. The State of Montana

Filing 99

ORDER denying 44 Motion for Summary Judgment; finding as moot 48 Motion in Limine; granting 50 Motion for Summary Judgment; denying 58 Motion to Strike ; denying 64 Motion to Strike ; denying 66 Motion to Strike ; denying 79 Motion to Strike ; denying 89 Motion to Strike. Judgment shall enter in favor of Defendants and against Plaintiff. Signed by Chief Judge Dana L. Christensen on 11/26/2014. (dle)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION

MOUNTAIN WEST HOLDING CO.,
INC.,

CV 13–49–BLG–DLC

Plaintiff,

ORDER

vs.
THE STATE OF MONTANA; THE
MONTANA DEPARTMENT OF
TRANSPORTATION; and MR. MIKE
TOOLEY, THE DIRECTOR OF THE
MONTANA DEPARTMENT OF
TRANSPORTATION,
Defendants.
Before the Court are the parties’ cross-motions for summary judgment. For
the reasons explained, the Court grants Defendant’s motion for summary judgment
on all claims.
Factual and Procedural Background
Plaintiff Mountain West Holding Company (“Mountain West”) brings the
following claims against Defendants State of Montana, Montana Department of
Transportation, Mike Tooley, Director of the Montana Department of
Transportation, Patti McCubbins, MDT’s Civil Rights Bureau Chief, and Wendy
1

Stewart, MDT’s DBE Program Manager (“Defendants”): Count 1: Violation of the
Fourteenth Amendment and 42 U.S.C. § 1983, for which Mountain West seeks
declaratory and injunctive relief against the individual Defendants; Count 2:
Declaratory Relief under 28 U.S.C. § 2201 against the individual Defendants;
Count 3: Violation of Title VI, 42 U.S.C. § 2000d, for which Mountain West seeks
monetary damages against the State of Montana and the Montana Department of
Transportation; and Count 4: Injunctive Relief against the individual Defendants.
Mountain West alleges Defendants’ implementation of Montana’s Disadvantaged
Business Enterprise (“DBE”) program violated, and are likely to continue to
violate, its constitutional right to Equal Protection under the Fourteenth
Amendment.
1.

Statutory and Regulatory Background

Pursuant to the current federal highway funding bill, Moving Ahead for
Progress in the 21st Century Act (“MAP-21"), states1 receiving federal funds from
the U.S. Department of Transportation (“USDOT”) for the planning, design,
construction and repair of roads and highways must establish a state-designed and

1

The regulations refer to “recipients,” instead of states, meaning the state agency
receiving federal funds. For ease of reference, this order simply refers to “states.”
2

federally-approved DBE program that complies with federal regulations.2 See 49
C.F.R. § 26.1 et. seq. DBE programs are designed to ensure nondiscrimination in
the award and administration of USDOT funded contracts and to create a level
playing field for businesses competing for USDOT funded contracts, among other
objectives. 49 C.F.R. § 26.1. A state is not eligible to receive USDOT financial
assistance unless it is in compliance with federal regulations and USDOT
approves its DBE program. Id. at 26.21(c).
A DBE is a small business owned and controlled by socially and
economically disadvantaged individuals. MAP-21 §1101(b)(3). States creating
DBE programs “must rebuttably presume that citizens of the United States (or
lawfully admitted permanent residents) who are women, Black Americans,
Hispanic Americans, Native Americans, Asian–Pacific Americans, Subcontinent
Asian Americans, or other minorities found to be disadvantaged by the SBA, are
socially and economically disadvantaged individuals.” 49 C.F.R. § 26.67.
States must establish an “overall goal” for DBE participation in federally
assisted contracts. Id. at 26.45(a). To do this, the state must determine the base

2

As another condition of accepting federal highway dollars, states must waive Eleventh
Amendment sovereign immunity for violations of Title VI, 42 U.S.C. 2002d (“Title VI”). States
accepting federal highway dollars are thus subject to liability for monetary damages for
violations of Title VI, which prohibits discrimination based on race, color, or national origin.
3

level of availability of DBE’s in its jurisdiction, make any necessary adjustments
to the base level, and then arrive at an overall goal for DBE utilization, expressed
as a percentage of all Federal-aid highway funds the state will expend in the
forthcoming three fiscal years. Id. at 26.45(c)-(e). Overall goals “must provide
for participation by all certified DBEs and must not be subdivided into
group-specific goals.” Id. at 26.45(h). If a state establishes or implements its
goals in a way different from that provided in the regulations, then it is ineligible
to receive USDOT financial assistance. Id. at 26.45(f)(7).
States must use race- and gender-neutral means to meet their overall goals
to the maximum extent possible. Id. at 26.51(a). In order to meet any portion of
the overall goal that the state predicts it cannot achieve using race-neutral means,
the state must establish “contract goals,” which are contract-specific goals for
DBE participation on specific, USDOT-assisted contracts that have subcontracting
possibilities. Id. at 26.51(d),(e). Contract goals should be set “so that they will
cumulatively result in meeting any portion of [a state’s] overall goal [that it] does
not project being able to meet through the use of race-neutral means.” Id. at
26.51(e)(2). Contract goals “must provide for participation by all certified DBEs
and must not be subdivided into group-specific goals.” Id. at 26.51(e)(4).

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2.

Western States Paving Co. v. Washington Dept. of Transportation

In 2005, a divided three-judge panel of the Ninth Circuit decided Western
States Paving Company v. Washington State Department of Transportation. 407
F.3d 983 (9th Cir. 2005). In Western States, the Court held that a state DBE
program can be subject to an as-applied constitutional challenge, despite the facial
validity of the federal program.3 407 F.3d at 997. The Court held that whether a
state DBE program “is narrowly tailored to further Congress's remedial objective
depends upon the presence or absence of discrimination in the State's
transportation contracting industry.” Id. at 997-998. The Court further held that
“even when discrimination is present within a State, a remedial program is only
narrowly tailored if its application is limited to those minority groups that have
actually suffered discrimination.” Id. at 998.4
3.

Montana’s response to Western States

Prior to Western States, Montana had used race conscious contract goals to
meet its annual overall goal for DBE participation. Following Western States, the
Montana Department of Transportation ceased using race-conscious means in its

3

The panel was in unanimous agreement that the federal statute and regulations were
facially valid. 407 F.3d at 1003 (J. McKay concurring in part and dissenting in part).
4

As noted above, federal regulations generally prohibit subdividing overall goals or
contract goals into “group-specific goals.” 49 C.F.R. §§ 26.45(h), 26.51(e)(4).
5

award of USDOT-assisted contracts.
Montana DOT also engaged a private firm, the D. Wilson Consulting
Group, LLC, to determine whether there was evidence of discrimination in
Montana’s transportation contracting market. The D. Wilson Consulting Group
(“the Group”) studied DBE participation in USDOT-assisted contracts in Montana
for fiscal years 2000 through 2006.
The Group published the results of its study (“the D. Wilson Disparity
Study,” “Disparity Study” or “the study”) in 2009. After controlling for a variety
of factors, the Group produced an adjusted list of qualified, willing, and able
DBEs within the market area for Montana transportation contracts. Based on this
adjusted list of DBEs, the Group conducted a disparity analysis by business area to
determine the differences between the utilization of DBEs and the availability of
such firms within the relevant market area. The results indicated significant
underutilization of DBEs in all minority groups in “professional services”
contracts, significant underutilization of Asian Pacific Americans and Hispanic
Americans in “business categories combined,” slight underutilization of
nonminority women in “business categories combined,” and overutilization of all
groups in subcontractor “construction” contracts. (Doc. 54-1 at 27.)
The Group also gathered anecdotal evidence through surveys and other
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means. The anecdotal evidence suggested that various forms of discrimination
existed within Montana’s transportation contracting industry, including evidence
of an exclusive “good ole boy network” that made it difficult for DBEs to break
into the market. (Doc. 54-1 at 274-76.) Despite these findings, the Group
recommended that Montana DOT continue to monitor DBE utilization while
employing only race-neutral means to meet its overall goal. The Group
recommended that Montana DOT consider the use of race-conscious measures if
DBE utilization decreased or did not improve.
Montana followed the recommendations provided in the D. Wilson Study,
and continued using only race-neutral means in its effort to accomplish its overall
goal for DBE utilization. Based on the statistical analysis provided in the study,
Montana established an overall DBE utilization goal of 5.83%.
4.

Montana’s DBE utilization following removal of contract goals

In fiscal year 2006, Montana achieved a DBE utilization rate of 13.1%.
However, after Montana ceased using contract goals to achieve its overall goal,
the rate of DBE utilization declined sharply. In 2007, DBE utilization dropped to
5%; in 2008, it dropped again to 3%; in 2009, it dropped again to 2.5%; in 2010, it
dropped again to .8%; and in 2011, it was 2.8%.
In response to this decline, for fiscal years 2011-2014, Montana DOT
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adopted a goal methodology for DBE utilization which employed contract goals in
3.27% of its USDOT contracts, in order to achieve Montana’s overall goal of a
5.83% DBE utilization. After receiving USDOT approval for its program,
Montana implemented the use of contract goals in June of 2012. It continued to
use contract goals until the early part of 2014.
Montana DOT conducted and prepared a new Goal Methodology for DBE
utilization for federal fiscal years 2014-2016. USDOT approved of the new and
current goal methodology. The current goal methodology does not provide for the
use of contract goals to meet the overall goal. Thus, the new overall goal is
predicted to be met entirely through the use of race-neutral means. In addition,
Montana DOT is currently soliciting contractors to conduct a new disparity study
and expects to enter into a contract for completion of a new disparity study by
early 2015.
5.

Mountain West’s claims

Plaintiff Mountain West is a contractor that provides construction-specific
traffic planning and staffing for construction projects. It is owned and controlled
by white males. It does not qualify for DBE status because, under the regulations,

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it is neither socially nor economically disadvantaged.5
Mountain West seeks declaratory and injunctive relief, including
prospective relief, against the individual Defendants for alleged violations of the
Fourteenth Amendment and 42 U.S.C. § 1983. It also seeks monetary damages
against the State of Montana and the Montana Department of Transportation for
alleged violations of Title VI, 42 U.S.C. § 2000d.
Mountain West’s claim for monetary damages under Title VI is rooted in its
claim that on three occasions in 2012 it was the low-quoting subcontractor to a
prime contractor that was submitting a bid to the Montana DOT on a project that
utilized contract goals. Despite being the low-quoting bidder, Mountain West was
not awarded the contracts. Mountain West mounts an as-applied challenge to
Montana’s DBE program.
6.

The parties’ motions

In its Scheduling Order of August 29, 2013, the Court established a fully
briefed motions deadline of September 30, 2014. “Fully briefed” is defined in the
Scheduling Order and “means that the brief in support of the motion and the

5

Mountain West is not precluded from DBE status on the basis of its owners’ race alone.
Mountain West is precluded from DBE status due to its income and the income of its
shareholders. Indeed, within Montana during fiscal years 2012-2014, there were seven certified
DBEs owned by white males.
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opposing party’s response brief are filed with the court.” (Doc. 25 at 7.) Per
Local Rules, reply briefs are optional. L.R. 7.1(d)(1)(C).
Mountain West timely filed its motion for partial summary judgment on
August 26, 2014. Defendants timely filed their motion for summary judgment on
September 9, 2014. Only two other motions were timely filed: Defendants’
motion in limine (Doc. 48) filed on September 2, 2014, and Defendants’ motion to
strike expert report (Doc. 58), filed on September 16, 2014.
Despite the Court’s clear fully-briefed motions deadline, the parties have
continued to file untimely motions (and responses to the motions) without first
seeking leave of court. The list of untimely motions includes: (1) Defendants’
motion to strike (Doc. 64), filed September 29, 2014; (2) Plaintiff’s motion to
strike (Doc. 66), filed September 30, 2014; (3) Plaintiff’s motion to strike (Doc.
79), filed October 6, 2014; and (4) Plaintiff’s motion to strike (Doc. 89), filed
October 20, 2014. All of these late motions are denied as untimely filed.
Legal Standard
A party is entitled to summary judgment if it can demonstrate that “there is
no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). Summary judgment is warranted where
the documentary evidence produced by the parties permits only one conclusion.
10

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986). Only disputes over
facts that might affect the outcome of the lawsuit will preclude entry of summary
judgment; factual disputes that are irrelevant or unnecessary to the outcome are
not considered. Id. at 248. A dispute as to a material fact is “genuine” only if
there is sufficient evidence for a reasonable jury to return a verdict for the
nonmoving party. Id.
Discussion
Race conscious remedial programs must satisfy strict scrutiny. Western
States, 407 F.3d at 990. To do so, the program must be comprised of “narrowly
tailored measures that further a compelling governmental interest.” Id.6
A state implementing the facially valid federal DBE program “need not
demonstrate an independent compelling interest for its DBE program” because
when Congress passed the relevant legislation it “identified a compelling
nationwide interest in remedying discrimination in the transportation contracting
industry.” Id. at 997. Thus, in order to pass strict scrutiny a state need only
demonstrate that its program is narrowly tailored. Id.

6

Gender-conscious programs must satisfy intermediate scrutiny. Western States, 407 F.3d
at 990 n. 6. To do so, the program must be “supported by an ‘exceedingly persuasive
justification’ and substantially related to the achievement of that underlying objective.” Id.
Because Montana’s DBE program passes strict scrutiny, the Court need not engage in a separate
analysis of the program’s gender-conscious measures.
11

Under the two-prong test established in Western States, in order to
demonstrate that its DBE program is narrowly tailored, (1) the state must establish
the presence of discrimination within its transportation contracting industry, and
(2) the remedial program must be limited to those minority groups that have
actually suffered discrimination. Associated General Contractors of America, San
Diego Chapter v. California Department of Transportation, 713 F.3d 1187, 1196
(9th Cir. 2013).
States “can meet the evidentiary standard required by Western States if,
looking at the evidence in its entirety, the data show substantial disparities in
utilization of minority firms suggesting that public dollars are being poured into ‘a
system of racial exclusion practiced by elements of the local construction
industry.’” Id. at 1197 (quoting Croson, 488 U.S. 469, 492 (1989)). Moreover, as
the federal guidelines provide, narrow tailoring does not require a state to parse its
DBE program to distinguish between certain types of contracts within the
transportation contracting industry. Id. at 1199 (citing N. Contracting Inc. v.
Illinois, 473 F.3d 715, 723 (7th Cir. 2007). Likewise, a state DBE program need
not require minority firms to attest to the fact that they have been discriminated
against in the relevant jurisdiction because such a requirement is contrary to
federal regulations and would thus constitute “an impermissible collateral attack
12

on the facial validity of the federal Act and regulations.” Id. at 1200 (citing N.
Contracting, 473 F.3d at 722); see also Milwaukee County Pavers Ass’n v. Fiedler
922 F.2d 419, 423-24 (7th Cir. 1991).
Defendants assert that they are entitled to summary judgment on all claims
because Montana’s DBE program passes strict scrutiny.7 Defendants contend that
Montana’s DBE program utilized contract goals only after the Department was
presented with both statistical and anecdotal evidence of discrimination against all
minorities in its transportation contracting industry. Defendants also contend that
Montana DOT only began utilizing contract goals after statistical evidence
mounted between 2006 and 2011 suggesting that race-neutral measures were
inadequate to address the problem. The Court agrees that Montana’s DBE
program passes strict scrutiny.
Mountain West cannot create a genuine dispute about the fact that the D.
Wilson Study indicated significant underutilization of all minority groups in the
award of professional services contracts in Montana’s transportation contracting
market. Nor can it dispute that the D. Wilson Study indicated significant
underutilization of Asian Pacific Americans and Hispanic Americans in the award

7

Defendants raise various other defenses but the Court finds this issue dispositive and so
declines to address Defendants’ various other arguments.
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of contracts in business categories combined in Montana’s transportation
contracting market. Mountain West cannot dispute that the D. Wilson Study also
indicated underutilization of nonminority women in business categories
combined. Furthermore, Mountain West cannot dispute that the D. Wilson Study
documented, through surveys and otherwise, significant anecdotal evidence of
various forms of discrimination in Montana’s transportation contracting industry.
Mountain West merely disputes the validity of the findings in the D. Wilson
Study. According to Mountain West, the “D. Wilson study is flawed” because the
methods the Group used in gathering and calculating statistical and anecdotal
evidence of discrimination were flawed. (Doc. 70 at 18.) In mounting this attack
on the D. Wilson Study, Mountain West relies entirely on the expert report of one
Dr. George Lanoue.8 Of this 184-page report, Mountain West cites the Court to
two pages in the report in which Dr. Lanoue opines that the table showing DBE
utilization in business categories combined was improperly calculated.
Mountain West, however, provides no evidence indicating that the data
8

Defendants filed a motion to strike Dr. Lanoue’s expert report in which Defendants
correctly assert that the report was unauthenticated and unsworn and thus could not be considered
on a motion for summary judgment. See e.g. Canada v. Blain’s Helicopters, Inc., 831 F.2d 920,
925 (1987). In response to the motion to strike, however, Mountain West filed an affidavit of Dr.
Lanoue which, when liberally construed, minimally satisfies the requirements for authentication.
The Court therefore considers the expert report, despite its hesitation to regard the post-hoc filing
of the supporting affidavit as sufficient to authenticate the expert report. Defendants motion to
strike the expert report is denied.
14

showing significant underutilization of all minority groups in professional
services is invalid. Furthermore, contrary to Mountain West’s assertions, the D.
Wilson Study controlled for factors other than discrimination in calculating DBE
utilization. The D. Wilson Study specifically adjusted its calculation of the
availability of DBE firms based on its control for factors other than discrimination.
(Doc. 54-1 at 67-69.)
Mountain West’s attack on the D. Wilson Study also does not in any way
diminish the fact that the D. Wilson Study uncovered substantial anecdotal
evidence of discrimination in Montana’s transportation contracting market,
including evidence of a “good ole boy network.” (Doc. 54-1 at 274-276.) In
Associated General Contractors, the Court noted that “federal courts and
regulations have identified precisely [the factors associated with good ole boy
networks] as barriers that disadvantage minority firms because of the lingering
effects of discrimination.” 713 F.3d at 1197-98; see also H.B. Rowe v. Tippett,
615 F.3d 233, 251 (“such networks exert a chronic and pernicious influence on the
marketplace that calls for remedial action”).
Relative to the anecdotal evidence, Dr. Lanoue’s report merely criticizes the
sample size of the responses obtained. Mountain West also contends that the
anecdotal evidence is unreliable because Defendants have not presented affidavits
15

in support of the anecdotal evidence gathered. But, contrary to Mountain West’s
assertion, nothing in Western States requires that anecdotal survey evidence
gathered by a private firm assisting a state in preparing its goal methodology for
the state’s DBE program must be supported by affidavits. Mountain West fails to
create a genuine dispute that anecdotal evidence indicates the existence of
discrimination in Montana’s transportation contracting industry. Ultimately, as
the Court held in Associated General Contractors, “[t]he substantial statistical
disparities alone would give rise to an inference of discrimination, and certainly
. . . statistical evidence combined with anecdotal evidence passes constitutional
muster.” Associated General Contractors, 713 F.3d at 1196.
Additionally, neither Dr. Lanoue’s report nor any other evidence presented
by Mountain West, creates a genuine dispute about the fact that DBE utilization in
Montana’s transportation contracting industry dropped precipitously after 2006
when Montana ceased using contract goals. While the D. Wilson Study indicated
that Montana should utilize DBEs at a rate of 5.83%, by 2010, DBE utilization in
Montana had fallen dramatically to .8%. This undisputed fact “strongly supports
[Defendants’] claim that there are significant barriers to minority competition in
the public subcontracting market, raising the specter of racial discrimination.”
Adarand Constructors, Inc. v. Slater, 228 F.3d 1147, 1174 (10th Cir. 2000).
16

In sum, Defendants have presented sufficient evidence to demonstrate
evidence of discrimination in Montana’s transportation contracting industry.
Moreover, based on the facts that (1) statistical evidence suggests that all minority
groups in professional services are significantly underutilized, (2) there is
evidence of an exclusive “good ole boy network” within the state contracting
industry, and (3) DBE underutilization dramatically increased after 2006 when the
state ceased using contract goals, the Court concludes that Montana’s DBE
program is sufficiently narrowly tailored to address discrimination against only
those groups that have actually suffered discrimination in the state’s transportation
contracting industry.9
Montana’s DBE program survives strict scrutiny by (1) having a strong
basis in evidence of discrimination within Montana’s transportation contracting
industry and (2) being narrowly tailored to benefit only those groups that have
actually suffered discrimination. Therefore, Defendant’s implementation of its
DBE program did not violate Defendant’s constitutional rights under the
Fourteenth Amendment, nor did it violate 42 U.S.C. § 1983, or Title VI.

9

The Court notes, furthermore, that federal regulations generally prohibit a state from
subdividing either its overall goal or contract goals into “group-specific goals.” 49 C.F.R. §§
26.45(h), 26.51(e)(4). Thus, Mountain West’s claim in this respect appears to be an
impermissible collateral attack on the facially valid federal Act and regulations. See Associated
General Contractors, 713 F.3d at 1200 (citing N. Contracting, 473 F.3d at 722).
17

Mountain West fails to create a genuine dispute relative to its claims regarding
Montana’s DBE program during 2012-2014 when Defendants utilized contract
goals. It follows that Mountain West’s claims for prospective, injunctive and
declaratory relief also fail because Montana has currently ceased using contract
goals and any potential future utilization of contract goals will be based on a notyet conducted disparity study. Defendants are entitled to summary judgment on
all claims.
IT IS ORDERED that:
(1)

Defendants’ motion for summary judgment (Doc. 50) is GRANTED.

(2)

Plaintiff’s motion for summary judgment (Doc. 44) is DENIED.

(3)

Defendants’ motions to strike (Docs. 58 & 64) are DENIED.

(4)

Plaintiff’s motions to strike (Docs. 66, 79, & 89) are DENIED.

(5)

Defendants’ motion in limine (Doc. 48) is DENIED AS MOOT.

(5)

The Clerk of Court shall enter judgment in favor of Defendants and
against Plaintiff.

(6)

This case is CLOSED.

DATED this 26th day of November 2014.

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