Written by:  Melinda Meade Meyers

There has been a critical development in the legal saga involving the challenge to the constitutionality of the Small Business Administration’s 8(a) Program that has the potential for broad-reaching implications for small disadvantaged businesses participating in this key sector of federal government contracting.  Rothe Development Inc. has filed an appeal with the U.S. Supreme Court, asking it to review the U.S. Court of Appeals for the D.C. Circuit’s ruling that Section 8(a) of the Small Business Act is constitutional on its face.  An amicus brief filed on behalf of the government in the D.C. Circuit case made a special argument about how Native American companies as a group are subject to a different legal review standard, but the Court never reached the merits of that argument.  However, the issue would likely arise again should the case come before the Supreme Court.  If the high court elects to consider the appeal, Alaska Native Corporations and Tribes should be prepared to engage in this case.

U.S. Supreme Court

Rothe, a non-minority-owned small business, is challenging Section 8(a) of the Small Business Act, which establishes a business development program for “socially and economically disadvantaged business concerns,” as facially unconstitutional because it provides race-based preferences in federal contracting.  The D.C. Circuit’s September 2016 opinion affirmed the 2015 decision of the D.C. District Court that Section 8(a) of the Small Business Act is constitutional on its face.  Ultimately, the Circuit Court held that because Rothe only attacked the Section 8(a) statute (not the SBA’s regulations implementing the 8(a) Program), and because it found that Section 8(a) itself is race-neutral, the statute did not have to pass the strict scrutiny analysis applied by the district court.  Instead, the statute only needed to pass “rational basis” analysis, which only requires that the statute bears a “rational relation” to a “legitimate end.”  This is a lower bar of analysis than applied by the district court, and the Circuit Court found that Section 8(a) easily passed this test.

After losing its case before the D.C. Circuit three-judge panel, Rothe filed a petition for rehearing en banc (by the full panel of judges) in the D.C. Circuit.  The D.C. Circuit denied that petition in January 2017.

Rothe’s Petition for a Writ of Certiorari to the Supreme Court, docketed April 17, 2017, asks the Court to consider two legal questions:

  1. Whether a statutory program that requires an agency to distribute benefits to “socially disadvantaged individuals,” and defines “socially disadvantaged” in terms of membership in certain racial minority groups, classifies on the basis of race and is thus subject to strict scrutiny.
  1. Whether a statute that may not classify exclusively on the basis of race, but uses race as a factor in determining eligibility for benefits, is subject to strict scrutiny.

The government now has three options: it can agree the Court should review the case, it can waive its right to file a response, or it can file a brief in opposition.  The government’s response is due May 17, 2017.  Rothe would have an opportunity to reply.  At the certiorari stage, amicus briefs are normally only filed by those who agree that the Court should review the case.

It is not a foregone conclusion that the Supreme Court will chose to take up the appeal.  Of the 7,000 – 8,000 certiorari petitions filed each year, the Court only hears about 80.  Four of the nine justices must vote to hear the case.  Given the current makeup of the Court, it is difficult to predict if the Court will accept the case.  However, it has been over 15 years since the Supreme Court has really considered an affirmative action case involving federal contracting.

Small disadvantaged businesses participating in this key program for federal government contracting should continue to closely monitor the progress of this petition at the Supreme Court.  Due to the potential far-reaching consequences of an adverse decision for the 8(a) Program and for federal contracting generally, Alaska Native Corporations and Tribes should strongly consider and be prepared to engage in this case through the submission of an amicus brief to the Court – as they did in the previous stages of this case – if the justices decide to grant review.

If your business would like to participate in a potential amicus process, please contact Jon DeVore or Melinda Meade Meyers at (202) 659-5800.