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Orion Insurance Group v. Washington State Office of Minority & Women's Business Enterprises

United States District Court, W.D. Washington, Tacoma

August 7, 2017

ORION INSURANCE GROUP, a Washington Corporation; RALPH G. TAYLOR, an individual, Plaintiffs,
v.
WASHINGTON STATE OFFICE OF MINORITY & WOMEN'S BUSINESS ENTERPRISES; EDWINA MARTIN-ARNOLD; DEBBIE MCVICKER; PAMELA SMITH; SARAH ERDMANN; STACEY SAUNDERS, individuals, and UNITED STATES DEPARTMENT OF TRANSPORTATION, and LESLIE PROLL, an individual, Defendants.

          ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

          ROBERT J. BRYAN UNITED STATES DISTRICT JUDGE.

         Order This matter comes before the Court on the Plaintiffs' Motion for Partial Summary Judgment on Liability for Certain Causes of Action (Dkt. 48), the Federal Defendants' Motion for Summary Judgment on Administrative Procedure Act (“APA”), Equal Protection, and Void for Vagueness Claims (Dkt. 54), and the State Defendants' Cross Motion for Summary Judgment (Dkt. 58). The Court has considered the pleadings filed in support of and in opposition to the motions, including the supplemental briefing (Dkts. 76, 78 and 79), and the file herein.

         Plaintiffs, Orion Insurance Group (“Orion”), a Washington corporation, and its owner, Ralph Taylor, filed this case alleging violations of federal and state law due to the denial of their application for Orion to be considered a disadvantaged business enterprise (“DBE”) under federal law. Dkt. 1. Plaintiffs now move the Court for an order that summarily declares that the Defendants violated the APA, declares that the denial of the DBE certification for Orion was unlawful, and reverses the decision that Orion is not a DBE. Dkt. 48. The United States Department of Transportation (“USDOT”) and Leslie Proll, the Acting Director of USDOT, (collectively the “Federal Defendants”) move for a summary dismissal of all the claims asserted against them. Dkt. 54. The Washington State Office of Minority & Women's Business Enterprises (“OMWBE”), Edwina Martin-Arnold, Debbie McVicker, Pamela Smith, Sarah Erdmann, and Stacey Saunders (collectively the “State Defendants”) move for summary dismissal of all claims asserted against them. Dkt. 58. For the reasons provided herein, Plaintiffs' motion for partial summary judgment (Dkt. 48) should be denied, in part, and stricken, in part, the Federal Defendants' motion for summary judgment (Dkt. 54) should be granted, and the State Defendants' motion for summary judgment (Dkt. 58) should be granted, in part, and stricken, in part.

         I. BACKGROUND FACTS AND PENDING MOTIONS

         A. FEDERAL DBE PROGRAM

         The federal DBE program, established in the early 1980s, sets a goal of not less than ten percent of federal funds authorized to be spent on highway and transit programs be expended through “small business concerns that are owned and controlled by socially and economically disadvantaged individuals.” Surface Transportation Assistance Act, Pub. L. No. 97-424, 96 Stat. 2097 (1983); Moving Ahead for Progress in the 21st Century Act, Pub. L. No. 112-141, § 1101(b), 126 Stat. 405, 414-16 (2012); in its most recent form, Fixing America's Surface Transportation Act, Pub. L. No. 114-94, § 1101, 129 Stat. 1312 (2015). “Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities. Social disadvantage must stem from circumstances beyond their control.” 49 C.F.R. § Pt. 26, App. E. Further, “[e]conomically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged.” Id. In passing the current relevant reauthorizing legislation and the prior statutes, Congress considered and documented discriminatory hurdles faced by women and racial minorities in being awarded federally funded transportation contracts. Id., and Western States Paving Co. v. Washington State Department of Transportation, 407 F.3d 983 (9th Cir. 2005). Those hurdles include: discrimination by trade unions and financial institutions in gaining capital to begin a business; and even after a business is started, discrimination by “prime contractors, business networks, suppliers and bonding companies.” Id. Under the DBE, women and racial minorities are presumed to be “socially and economically disadvantaged.” 49 C.F.R. 26.67 (a)(1). The presumption that an individual is in a disadvantaged group, and/or is socially or economically disadvantaged, can be rebutted. Id.; 26 C.F.R. 26.63.

         The current and former statutes that created the program do “not establish a uniform national affirmative action program. Each state that receives federal funds must implement a preference program that complies with federal regulations.” Associated Gen. Contractors of Am., San Diego Chapter, Inc. v. California Dep't of Transp., 713 F.3d 1187, 1190 (9th Cir. 2013). Under the regulations, recipients of federal funds (here the State of Washington) may certify firms as eligible to participate as DBEs in accord with the federal regulations. 49 C.F.R. §§ 26.61 and 26.5. The state may also maintain its own program, as Washington does. If a firm's DBE certification application is denied, the applicant may appeal to the USDOT, where it is directed to the Office of Civil Rights. 49 C.F.R. 26.89(a) and (d).

         B. WASHINGTON'S MINORITY BUSINESS ENTERPRISE PROGRAM

         Washington has a program in which qualifying individuals or businesses can obtain a certification that they are a minority business enterprise (“MBE”) under the state regulations. OMWBE is charged with reviewing and making determinations for the state program using the applicable Washington Administrative Code (“WAC”). WAC 326-20-010, et seq. Under the state program:

The [OMWBE] presumes that citizens of the United States or lawfully admitted permanent residents who are women, African Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, Subcontinent Asian Americans, or other minorities found to be disadvantaged by the program, are socially and economically disadvantaged individuals. Applicants are required to submit a signed, notarized certification that each disadvantaged owner is, in fact, socially and economically disadvantaged.

WAC 326-20-048. Unlike in the federal DBE certification process, Washington law does not provide that the presumption (that women and the listed racial minorities are “socially and economically disadvantaged individuals”) is rebuttable.

         C. PLAINTIFF TAYLOR LEARNS OF HIS RACIAL HERITAGE

         On August 25, 2010, Plaintiff Ralph Taylor received results from a genetic ancestry test that estimated that he was 90% European, 6% Indigenous American, and 4% Sub-Saharan African. Dkt. 50-1, at 27. The test has an error rate of 3.3%. Dkt. 50-1, at 55.

         Mr. Taylor acknowledges that he grew up thinking of himself as Caucasian, but asserts that in his late 40s, when he realized he had Black ancestry, he “embraced his Black culture.” Dkt. 59-2, at 8.

         D. PLAINTIFFS APPLY FOR STATE MBE CERTIFICATION

         On April 19, 2013, Mr. Taylor submitted an application to OMWBE, seeking to have Orion, his insurance business, certified as a MBE under Washington State law. Dkt. 50-1, at 31. In the application, Mr. Taylor identified himself as Black, but not Native American. Id. His application was initially rejected (Dkt. 50-1, at 31), but after Mr. Taylor appealed the decision (Dkt. 49, at 2), OMWBE voluntarily reversed their decision and certified Orion as an MBE under the Washington Administrative Code and other Washington law (Dkt. 50-1, at 36).

         E. PLAINTIFFS APPLY FOR FEDERAL DBE CERTIFICATION

         On March 31, 2014, Plaintiffs submitted, to OMWBE, Orion's application for DBE certification under federal law. Dkt. 50-1, at 76. His application indicated that Mr. Taylor has owned Orion since 1995. Dkt. 50-1, at 76. Orion's gross receipts for the year 2013 were $1, 083, 204; for the year 2012 were $902, 191; and for the year 2011 were $878, 044. Dkt. 50-1, at 77. Orion has 15 employees. Dkt. 59-2, at 121. Orion had two loans outstanding at the time: one for $250, 000 (the balance remaining was estimated at $58, 000) and one for $75, 000 (with an estimated remaining balance of $18, 000). Dkt. 50-1, at 81. Mr. Taylor has a Bachelor of Arts degree from Washington State University (Dkt. 59-2, at 121) and a license to sell insurance (Dkt. 50-1, at 81). Mr. Taylor identified himself as Black American and Native American in the Affidavit of Certification submitted with the federal application. Dkt. 50-1, at 83. Considered with his initial submittal were the results from the August 25, 2010 genetic ancestry test that estimated that he was 90% European, 6% Indigenous American, and 4% Sub-Saharan African (Dkt. 50-1, at 27), a copy of his Washington State driver's license, which includes his picture (Dkt. 59-1, at 2), his birth certificate which did not state his ethnicity (although his parents are listed as Caucasian)(Dkt. 59-2, at 9), and a February 9, 2011 letter from Mr. Taylor's father to an unknown entity requesting that Mr. Taylor's birth certificate be changed to reflect that he is “Caucasian, African, and American Indian” (Dkt. 50-1, at 29). Mr. Taylor submitted the results of his father's genetic results, dated March 18, 2011, which estimated that he was 44% European, 44% Sub-Saharan African, and 12% East Asian. Dkt. 50-1. Mr. Taylor included a 1916 death certificate for a woman from Virginia, Eliza Ray, identified as a “Negro, ” who was around 86 years old (50-1, at 62), with no other supporting documentation to indicate she was an ancestor of Mr. Taylor.

         On May 16, 2014, OMWBE notified Mr. Taylor, that pursuant to 49 C.F.R. § 26.63, it was questioning whether he was a member of the Black American or Native American groups, and explained why it was questioning his membership. Dkt. 50-1, at 70-74. OMWBE requested that Mr. Taylor provide an additional narrative and further documentation of his membership in either or both racial groups, that he held himself out as a member of either racial group, or is considered, by the relevant community, to be a member of either racial group over a long period of time prior to his application. Dkt. 50-1, at 70-74. OMWBE further asked for any “additional narrative and/or documentation regarding how [he], as an individual, [was] socially and economically disadvantaged.” Id. Mr. Taylor was also asked to submit a form entitled “Personal Financial Statement.” Dkt. 50-1, at 70. This “Personal Financial Statement” is not in the record.

         On May 27, 2014, Mr. Taylor responded to the request by letter. Dkt. 50-1, at 55-60. He attempted to explain the differences in his DNA test results and his father's DNA test results. Dkt. 50-1, at 55-57. He asserted that, based on family names and a timeline he constructed, an “inference can be made” that the Virginia woman was related to him on his mother's side. Dkt. 50-1, at 57-58. (He discusses Ulysses S. Grant and the U.S. military's campaign of burning important buildings at the end of civil war and implies that could have caused his failure to have documents showing his relationship to this Virginia woman.) Dkt. 50-1, at 58. Mr. Taylor also pointed to a birth certificate for a paternal relative, born in 1914, whose father's race is listed as “white?” (Dkt. 50-1, at 61). Dkt. 50-1, at 60. He acknowledged that he had no documentation regarding his membership in the Native American racial group. Dkt. 50-1, at 59. Mr. Taylor stated that he considered himself to be Black based on his DNA test results, that he joined the NAACP, subscribed to Ebony magazine, and has “taken a great interest in Black social causes.” Dkt. 50-1, at 58. Mr. Taylor acknowledged that he does not know how he is perceived in the “relevant communit[ies].” Dkt. 50-1, at 59. Mr. Taylor submitted letters from two individuals who stated that they viewed him as a person of “mixed race” or “mixed heritage” (Dkts. 50-1 at 63-64). Neither of these individuals indicated with which racial group they identified or which one Mr. Taylor identified. Id. In regard to evidence that he has experienced social and economic disadvantage, Mr. Taylor refers to his answer to a similar inquiry during the State certification process for MBE status where he discusses being ill as a child, his father's return from Vietnam; and his father's subsequent abuse of alcohol and physical abuse of Mr. Taylor (Dkt. 50-1, at 108-109). Dkt. 50-1 at 60.

         On June 27, 2014, Orion's DBE application was denied because there was insufficient evidence that he was a member of a racial group recognized under the regulations, was regarded by the relevant community as either Black or Native American, or that he held himself out as being a member of either group over a long period of time prior to his application. Dkt. 50-1, at 46. OMWBE also found that even if there was sufficient evidence to find that Mr. Taylor was a member of either of these racial groups, “the presumption of disadvantage has been rebutted, ” and the evidence Mr. Taylor submitted was insufficient to show that he was socially and economically disadvantaged. Id., at 48.

         F. PLAINTIFFS APPEAL OMWBE'S DENIAL TO USDOT AND FILE A WRIT OF MANDAMUS IN THE WESTERN DISTRICT OF WASHINGTON

         Around September 22, 2014, through counsel, Mr. Taylor appealed the denial of the DBE certification to the USDOT. Dkt. 50-1, at 16-22. On September 29, 2014, USDOT acknowledged receipt of Orion's appeal, and stated that it would docket the appeal after receiving the complete administrative record. Dkt. 50-1, at 52. USDOT stated that there were several appeals pending so Plaintiffs would have to wait six months for a decision. Id. Plaintiffs were further directed to email the department if it had not contacted them after that time. Id. On October 13, 2014, USDOT received the administrative record. Dkt. 50-1, at 7. After three requests by Plaintiffs regarding the status of the appeal (Dkt. 50-1, at 10-15), in February of 2015, the USDOT acknowledged that it had received the administrative record and had docketed Orion's appeal (Dkt. 50-1, at 7).

         On April 24, 2015, Plaintiffs filed a Petition for Writ of Mandamus in an effort to get the USDOT to make a decision on the appeal. Orion Insurance Group v. Washington State Office of Minority & Women's Business Enterprises, et al. U.S. District Court for the Western District of Washington case number 15-5267 BHS. Plaintiffs asserted that their APA rights had been violated when USDOT failed to make a decision within 180 days or provide information for when a decision was forthcoming. Orion Insurance Group v. Washington State Office of Minority & Women's Business Enterprises, et al. U.S. District Court for the Western District of Washington case number 15-5267 BHS, Dkts. 1 and 15. The parties stipulated to a stay of the case, which was granted, after the USDOT committed to providing a decision by December 2015. Orion Insurance Group v. Washington State Office of Minority & Women's Business Enterprises, et al. U.S. District Court for the Western District of Washington case number 15-5267 BHS, Dkt. 15 and 16. The parties' stipulation provided that: “the parties agree that if the USDOT makes a decision by December 31, 2015, further proceedings in the above captioned matter will be rendered moot, and this case should be dismissed.” Orion Insurance Group v. Washington State Office of Minority & Women's Business Enterprises, et al. U.S. District Court for the Western District of Washington case number 15-5267 BHS, Dkt. 15, at 2. Plaintiffs voluntarily dismissed this case after the USDOT issued its decision. Orion Insurance Group v. Washington State Office of Minority & Women's Business Enterprises, et al. U.S. District Court for the Western District of Washington case number 15-5267 BHS, Dkt. 17.

         On October 15, 2015, the USDOT affirmed the denial of Orion's DBE certification, concluding that there was substantial evidence in the administrative record to support OMWBE's decision. Dkt. 50-1, at 1-6.

         G. PLAINTIFFS FILE THIS CASE

         This case was filed on July 1, 2016. Dkt. 1. Plaintiffs assert claims for (A) violation of the Administrative Procedures Act, 5 U.S.C. § 706, (B) “Discrimination under 42 U.S.C. § 1983” (reference is made to Equal Protection), (C) “Discrimination under 42 U.S.C. § 2000d, ” (D) violation of Equal Protection under the United States Constitution, (E) violation of the Washington Law Against Discrimination and Article 1, Sec. 12 of the Washington State Constitution, and (F) assert that the definitions in 49 C.F.R. § 26.5 are void for vagueness. Dkt.

         2. Plaintiffs seek damages, injunctive relief: (“[r]eversing the decisions of the USDOT, Ms. Jones and OMWBE, and OMWBE's representatives . . . and issuing an injunction and/or declaratory relief requiring Orion to be certified as a DBE, ” and a declaration the “definitions of ‘Black American' and Native American' in 49 C.F.R. § 26.5 to be void as impermissibly vague, ”) and attorneys' fees, and costs. Id.

         H. FEDERAL DEFENDANTS' MOTION TO DISMISS GRANTED, IN PART

         On November 17, 2016, the claims asserted against the Acting Director of the USDOT, in her individual capacity, were dismissed for lack of personal jurisdiction and because Plaintiffs failed to show that they were entitled to either monetary or non-monetary relief from her in her individual capacity. Dkt. 44. All Plaintiffs' claims for monetary damages against the Federal Defendants were dismissed because Plaintiffs failed to show that the United States waived its sovereign immunity on their claims for monetary damages. Id. The Plaintiffs' 42 U.S.C. § 1983 claims and 42 U.S.C. § 2000d claims asserted against the Federal Defendants were dismissed. Id. Plaintiff's claims against the Federal Defendants for violations of the WLAD and the Washington State Constitution were also dismissed. Id. Plaintiff's remaining claims against the Federal Defendants are for equitable relief for violations of the APA, equitable relief for violation of the Equal Protection Clause of the U.S. Constitution, and declaratory relief regarding the claim that the definitions of “Black” and “Native American” in the DBE's regulations are void for vagueness. Id.

         I. PENDING MOTIONS

         In their pending motion for partial summary judgment, Plaintiffs argue that the Court should consider facts beyond the administrative record. Dkt. 48. Plaintiffs move for summary judgment on their APA claims and argue that all Defendants violated the APA when they failed to give Plaintiffs the statutory presumption that he was “socially and economically disadvantaged” based on his appearance on his driver's license and based on the fact that his birth certificate did not indicate ethnicity. Id. Plaintiffs argue that the State Defendants violated the APA when they failed to give him notice of their concerns and afford Plaintiffs an in person hearing to provide information and arguments concerning why Orion should have been certified, which Plaintiffs assert was required under 49 C.F.R. § 26.87(d). Id. Plaintiffs argue that the Federal Defendants violated the APA when they failed to reverse the State's decision. Id. Plaintiffs argue that the Federal Defendants violated the APA when they failed to adhere to 49 C.F.R. § 26.89(f)(8) regarding the timeliness of a decision. Id. Plaintiffs also move for summary judgement against the State Defendants on their claims under 42 U.S.C. § 1983, 42 U.S.C. § 2000d, and the WLAD. Id.

         The State Defendants move for summary dismissal of the claims asserted against them and argue that the APA claims should be dismissed because they did not act arbitrarily and capriciously. Dkt. 58. The State Defendants assert that Plaintiffs' claims for equal protection asserted against them should be dismissed. Id. To the extent that Plaintiffs assert constitutional claims for damages or retrospective relief against the State or the individual state defendants in their official capacities, under § 1983, the State Defendants argue that they are not “persons” under the statute and so those claims should be dismissed. Id. To the extent that Plaintiff asserts § 1983 claims against the individual state defendants in their individual capacities, the State Defendants argue that those claims should be dismissed because they are entitled to either absolute or qualified immunity. Id. The State Defendants argue that Plaintiffs' claim under 42 U.S.C. § 2000d should be dismissed because there is no evidence of intentional discrimination. Id. The State Defendants argue that Plaintiffs' claim under the WLAD should be dismissed because there is no evidence of racial animus. Id. They also assert that Plaintiffs' claims under the Washington Constitution should be dismissed because Plaintiffs fail to identify a private cause of action for violation of the Washington Constitution. Id.

         The Federal Defendants also move for summary dismissal of all the remaining claims asserted against them. Dkt. 54. They argue that judicial review of the decision to deny DBE status to Orion must be confined to the administrative record. Id. The Federal Defendants assert that the APA claims should be dismissed because Plaintiffs were not improperly denied a presumption of social and economic disadvantage, Plaintiffs were not due a hearing, the Federal Defendants' decision was timely, and even if it wasn't, the claim that it was is moot, and lacks merit, and the Federal Defendants' actions were not otherwise arbitrary and capricious. Id. The Federal Defendants argue that if the Court finds that they did violate that APA, the proper remedy is remand, not an order certifying Orion as a DBE. Id. The Federal Defendants also argue Plaintiffs' claims for equal protection and void for vagueness should be dismissed for failure to state a claim and argue, that if the Court would like to take into consideration discovery responses or the administrative record, summary judgment on these claims is appropriate. Id.

         On July 10, 2017, the Plaintiffs' motion to continue the State Defendants' summary judgement motion regarding Plaintiffs' equal protection claim was granted. Dkt. 74. In that same order, the parties were notified that the Federal Defendants' motion to dismiss Plaintiffs' equal protection and void for vagueness claims was being converted into a motion for summary judgment. Id. Parties were given an extension of time to file supplemental briefing. Id. They have now done so (Dkts. 76, 77, and 79) and the motions for summary judgment are ripe for review.

         J. ORGANIZATION OF OPINION

         This opinion will first consider the Plaintiffs' motion to consider documents outside the administrative record. It will then address the parties' cross motions regarding Plaintiffs' claims under the APA, Plaintiffs' claims for violation of Equal Protection, Plaintiffs' void for vagueness claims, Plaintiffs' claims against the State Defendants pursuant to 42 U.S.C. § 1983, Plaintiffs' claims against the State Defendants for violation of 42 U.S.C. § 2000d, and, lastly, Plaintiffs' claims against the State Defendants for violations of the Washington State Constitution, and for violation of the WLAD.

         II. DISCUSSION

         A. CONSIDERING DOCUMENTS OUTSIDE THE ADMINISTRATIVE RECORD FOR APA CLAIMS

In reviewing cases under the APA,
At the district court level, extra-record evidence is admissible if it fits into one of four “narrow” exceptions: (1) if admission is necessary to determine whether the agency has considered all relevant factors and has explained its decision, (2) if the agency has relied on documents not in the record, (3) when supplementing the record is necessary to explain technical terms or complex subject matter, or (4) when plaintiffs make a showing of agency bad faith.

Ranchers Cattlemen Action Legal Fund United Stockgrowers of Am. v. U.S. Dep't of Agr., 499 F.3d 1108, 1117 (9th Cir. 2007) (internal citation omitted).

         Plaintiffs' motion to consider documents outside the administrative record (Dkt. 48) should be denied. Plaintiffs acknowledge that the third exception (supplementing the record to explain technical terms etc.) does not apply. There is no showing that any of the other exceptions apply. There is no evidence that the Defendants failed to “consider[] all relevant factors” or failed to explain their decision. There is no evidence that the Defendants “relied on documents not in the record.” Plaintiffs fail to make a “showing of agency bad faith.” There is no basis to examine evidence outside the administrative record in regard to Plaintiffs' claims under the APA.

         B. MOTION FOR SUMMARY ...


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