Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca4-09-01050/USCOURTS-ca4-09-01050-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

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PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

H.B. ROWE COMPANY, 

INCORPORATED,

Plaintiff-Appellant,

v.

W. LYNDO TIPPETT, individually; P.

E. LEN A. SANDERSON,

individually; J. G. NANCE, in his

official capacity as Chief

Engineer-Operations of the North

Carolina Department of

Transportation; EUGENE A. CONTI,

JR., in his official capacity as  No. 09-1050 Secretary of the North Carolina

Department of Transportation;

TERRY R. GIBSON, in his official

capacity as State Highway

Administrator of the North

Carolina Department of

Transportation,

Defendants-Appellees.

NAACP LEGAL DEFENSE AND

EDUCATION FUND, INC.,

Amicus Supporting Appellees. 

Appeal from the United States District Court

for the Eastern District of North Carolina, at Raleigh.

Terrence W. Boyle, District Judge.

(5:03-cv-00278-BO)

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Argued: March 24, 2010

Decided: July 22, 2010

Before NIEMEYER and MOTZ, Circuit Judges, and

James A. BEATY, Jr., Chief United States District Judge

for the Middle District of North Carolina,

sitting by designation.

Affirmed in part, reversed in part, and remanded by published

opinion. Judge Motz wrote the majority opinion, in which

Judge Beaty concurred. Judge Niemeyer wrote a separate

opinion concurring in the judgment. Judge Beaty wrote a separate concurring opinion.

COUNSEL

ARGUED: Ralph William Kasarda, Jr., PACIFIC LEGAL

FOUNDATION, Sacramento, California, for Appellant.

Christopher Grafflin Browning, Jr., NORTH CAROLINA

DEPARTMENT OF JUSTICE, Raleigh, North Carolina, for

Appellees. ON BRIEF: Kevin Van Parsons, SMITH, PARSONS & VICKSTROM, PLLC, Charlotte, North Carolina;

James S. Burling, Sharon L. Browne, PACIFIC LEGAL

FOUNDATION, Sacramento, California, for Appellant. Roy

Cooper, Attorney General of North Carolina, John F. Maddrey, Assistant Solicitor General, Tiare B. Smiley, Special

Deputy Attorney General, Elizabeth Leonard McKay, Special

Deputy Attorney General, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina, for Appellees.

Joshua Civin, NAACP LEGAL DEFENSE & EDUCATIONAL FUND, INC., Washington, D.C.; John Payton,

Director-Counsel, Debo P. Adegbile, Matthew Colangelo, Joy

Milligan, NAACP LEGAL DEFENSE & EDUCATIONAL

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FUND, INC., New York, New York, for NAACP Legal

Defense and Education Fund, Inc., Amicus Supporting Appellees.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

This case arises from the attempt by the people of North

Carolina and their elected representatives to end racial and

gender-based discrimination in state highway construction

subcontracting. The State’s statutory scheme—the product of

extensive study and refinement in response to developments

in federal law—requires prime contractors to engage in good

faith efforts to satisfy participation goals for minority and

women subcontractors on state-funded projects. Through

these nonmandatory, project-specific participation goals, the

State seeks to provide a fair opportunity for all subcontractors

to compete for public work.

Denied a contract because of its failure to demonstrate

good faith efforts to meet these participation goals, a prime

contractor brought this action, asserting that the goals violate

the Equal Protection Clause, and seeking injunctive relief and

money damages. After extensive discovery and a bench trial,

the district court held the challenged statutory scheme constitutional both on its face and as applied. The contractor

appeals.

We do not believe that the State met its burden of proof in

all respects. But we agree with the district court that the State

produced a strong basis in evidence justifying the statutory

scheme on its face, and as applied to African American and

Native American subcontractors, and that the State demonstrated that the scheme is narrowly tailored to serve its compelling interest in remedying discrimination against these

H.B. ROWE CO. v. TIPPETT 3

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racial groups. Accordingly, for the reasons that follow, we

affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I.

We begin with a summary of the statutory scheme and the

litigation at issue here.

A.

In 1983, the North Carolina General Assembly enacted a

statute setting forth a general policy promoting the use of

"small, minority, physically handicapped and women contractors" in State construction projects. N.C. Gen. Stat. § 136-28.4

(1983). The statute directed the North Carolina Department of

Transportation ("the Department") and other State agencies to

"encourage and promote" this policy. Id. In 1989 and 1990,

the legislature amended section 136-28.4 to set specific participation goals on State transportation construction contracts,

first for minority-owned businesses (10 percent) and then for

women-owned businesses (5 percent). N.C. Gen. Stat. § 136-

28.4(b) (1990). The Department promulgated and implemented regulations pursuant to section 136-28.4 titled "Minority Business Enterprise and Women Business Enterprise

Programs for Highway and Bridge Construction Contracts"

(collectively "the Program"). 19A N.C. Admin. Code

2D.1101 (1997). The North Carolina statutory scheme largely

mirrored the federal Disadvantaged Business Enterprise

("DBE") program, with which every state must comply in

awarding highway construction contracts that utilize federal

funds.1 For example, as in the DBE program, a prime contrac1Federal highway statutes require that states set aside a portion of federal highway construction funds for payment to businesses owned and

controlled by "socially and economically disadvantaged individuals." E.g.,

Surface Transportation and Uniform Relocation Assistance Act of 1987,

Pub. L. No. 100-17, § 106(c), 101 Stat. 132, 145 (1987); see also 49

C.F.R. § 26.5 (2010). Federal courts of appeal have uniformly upheld the

federal DBE program against equal-protection challenges. See, e.g., Adarand Constructors, Inc. v. Slater, 228 F.3d 1147 (10th Cir. 2000). 

4 H.B. ROWE CO. v. TIPPETT

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tor in North Carolina would be excused from the specific subcontracting participation goals by demonstrating good faith

efforts to attain such goals. See id. at 2D.1110; 49 C.F.R.

§ 26.53 (1999).

In 1991, a North Carolina prime contractor challenged in

state court the constitutionality of section 136-28.4. See Dickerson Carolina, Inc. v. Harrelson, 443 S.E.2d 127 (N.C. Ct.

App. 1994), appeal dismissed, 448 S.E.2d 520 (N.C. 1994).

The contractor relied on City of Richmond v. J.A. Croson Co.,

488 U.S. 469, 493-94 (1989), which affirmed the principle

that courts must apply strict scrutiny to all race-conscious legislation. In Croson the Supreme Court recognized that "[i]t is

beyond dispute that any public entity, state or federal, has a

compelling interest in assuring that public dollars, drawn from

the tax contributions of all citizens, do not serve to finance the

evil of private prejudice." Id. at 492. The Court held, however, that to remedy such discrimination through raceconscious measures, a governmental entity must identify with

"some specificity" the racial discrimination it seeks to remedy

and present a "strong basis in evidence for its conclusion that

remedial action [is] necessary." Id. at 500, 504 (internal quotation marks omitted).2

 In response to the Dickerson lawsuit,

the State suspended operation of section 136-28.4.

The North Carolina General Assembly then commissioned

a national research and consulting firm, MGT of America

("MGT"), to study the State’s transportation construction

industry. In 1993, MGT completed that study, which concluded that North Carolina minority and women subcontractors suffered from discrimination in the road construction

industry and were underutilized in State contracts.

After receiving the 1993 study, the General Assembly

2Applying these principles, the Croson Court found unconstitutional a

municipal "set-aside" ordinance that required general contractors to subcontract 30 percent of city projects to minorities. 488 U.S. at 477, 505. 

H.B. ROWE CO. v. TIPPETT 5

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directed the Department to reimplement the Program to

achieve the goals of section 136-28.4. The Department

adopted various changes that the 1993 study suggested, but it

set the same overall percentage goals for participation by

minority and women subcontractors. Nevertheless, in 1994

the Court of Appeals of North Carolina dismissed as moot the

pending legal challenge to the statute in Dickerson. 443

S.E.2d at 132.

In 1998, the General Assembly commissioned MGT to

update the 1993 study. The resulting 1998 study concluded

that minority and women subcontractors remained underutilized in state-funded road construction.

B.

Four years later, in October 2002, the Department sought

bids on a project to relocate a road in Iredell County, North

Carolina. Pursuant to the Program, as reimplemented in 1993,

the Department set participation goals for minority and

women subcontractors of 10 percent and 5 percent, respectively. H.B. Rowe Co., Inc. ("Rowe"), a general contractor

owned and operated by a white male, submitted the lowest bid

on the project. Rowe’s bid included 6.6 percent women subcontractor participation, but no minority subcontractor participation. The Department rejected Rowe’s bid in favor of a

slightly higher bid, which included 9.3 percent women subcontractor participation and 3.3 percent minority subcontractor participation.

The Department denied Rowe the contract because Rowe

failed to demonstrate good faith efforts to attain the predesignated levels of minority participation on the project. At

the time of Rowe’s submission, assertedly documenting its

good faith efforts, it was one of only 13 submissions that the

Department rejected. These 13 rejections constituted 1.5 percent of the 878 good faith efforts submissions that the Department had considered.

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The Department determined that, with respect to good faith

efforts, Rowe’s submission contained discrepancies in the

number of minority subcontractors Rowe solicited, did not

demonstrate solicitation of enough minority subcontractors to

allow for consideration of a fair number of quotes, did not

adequately describe the subcontracting work available for the

Iredell project, and evidenced no strategy for meeting the

Department’s participation goals. Rowe unsuccessfully

appealed the denial to the State Highway Administrator.

In April 2003, Rowe filed this action in federal district

court against the Department and several State officials,

including Governor Michael F. Easley and Chief EngineerOperations W.S. Varnedoe3

 in their official capacities, and

Secretary of Transportation W. Lyndo Tippett and State Highway Administrator Len A. Sanderson in their official and

individual capacities. Alleging that the statute and the defendants’ actions in administering the Program violated Rowe’s

rights under the Equal Protection Clause of the Fourteenth

Amendment, Rowe challenged the constitutionality of section

136-28.4 on its face and as applied. (Rowe also alleged a violation of 42 U.S.C. § 1981 (2006), which Rowe has abandoned on appeal.) Rowe sought a declaratory judgment that

the statutory scheme was invalid, an injunction against its

continued administration, and compensatory and punitive

damages.

C.

In 2004, at the State’s request, MGT prepared and issued

its third study of subcontractors employed in North Carolina’s

highway construction industry. As detailed within, the 2004

study marshaled a wealth of evidence to conclude that disparities in the utilization of minority subcontractors persisted. In

3Rowe’s initial complaint named J.D. Goins as the then Chief Engineer

of Operations at the Department. On Rowe’s motion, Varnedoe was substituted for Goins after Varnedoe became Chief Engineer. 

H.B. ROWE CO. v. TIPPETT 7

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response to this study, the General Assembly substantially

amended section 136-28.4, and the Governor signed the

amended statute into law on August 27, 2006. The new statute

modified the previous statutory scheme in five important

respects.

First, the amended statute expressly conditions implementation of any participation goals on the findings of the 2004

study. Section 136-28.4, as amended, authorizes remedial

action only in instances in which the study "show[s] a strong

basis in evidence of ongoing effects of past or present discrimination that prevents or limits disadvantaged minorityowned and women-owned businesses from participating" as

subcontractors in state-funded projects "at a level which

would have existed absent such discrimination." N.C. Gen.

Stat. § 136-28.4(b) (2010). The amended statute also requires

that the Department, "to the extent reasonably practicable,

incorporate narrowly tailored remedies identified in the

[2004] Study." Id. § 136-28.4(b1).

Second, the amended statute eliminates the 5 and 10 percent annual goals set forth in the predecessor statute. Instead,

as amended, the statute simply requires the Department to

"establish annual aspirational goals, not mandatory goals, . . .

for the overall participation in contracts by disadvantaged

minority-owned and women-owned businesses . . . [that] shall

not be applied rigidly on specific contracts or projects." Id.

The statute further mandates that the Department set

"contract-specific goals or project-specific goals . . . for each

disadvantaged minority-owned and women-owned business

category that has demonstrated significant disparity in contract utilization" based on availability, as determined by the

study. Id.

Third, the amended statute narrows the definition of "minority" to encompass only those groups that have suffered discrimination. The statute had previously defined "minority" to

include, among others, African Americans, Hispanic Ameri8 H.B. ROWE CO. v. TIPPETT

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cans, Portuguese Americans, Asian Americans, American

Indians, and Alaskan Natives. See N.C. Gen. Stat. § 136-

28.4(c) (1989) (incorporating definition of "minority" contained in 49 C.F.R. § 23.5(i) (1989)). The amended statute

replaces this list by defining "minority" as "only those racial

or ethnicity classifications identified by [the] study . . . that

have been subjected to discrimination in the relevant marketplace and that have been adversely affected in their ability to

obtain contracts with the Department." N.C. Gen. Stat. § 136-

28.4(c)(2) (2010).

Fourth, the amended statute requires the Department to reevaluate the Program over time and respond to changing conditions. Accordingly, the Department must conduct a study

similar to the 2004 study at least every five years. Id. § 136-

28.4(b). The Department must then promulgate rules "consistent with findings made in the . . . subsequent studies," id.

§ 136-28.4(b1), and must report to the General Assembly

after the release of each study "for the purpose of determining

whether the provisions of [the statute] should continue in

force and effect," id. § 136-28.4(d).

Finally, the amended statute contains a sunset provision. As

amended in 2006, the statute was set to expire on August 31,

2009. N.C. Gen. Stat. § 136-28.4(e) (2009). The General

Assembly subsequently extended the sunset provision to

August 31, 2010. N.C. Gen. Stat. § 136-28.4(e) (2010).

Several aspects of the Department-run Program remain

unchanged. For example, a prime contractor that does not

meet project-specific goals may still demonstrate compliance

by making good faith efforts to solicit minority and women

subcontractors. 19A N.C. Admin. Code 2D.1110 (2010).

In evaluating whether a bidder has made good faith efforts,

the Department considers, inter alia, whether the bidder

"[s]olicit[ed] [minority and women subcontractors] through

all reasonable and available means" and allowed sufficient

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time for them to respond; followed up on these solicitations;

selected work to be performed by minority and women subcontractors to increase the likelihood of meeting Program

goals; provided minority and women subcontractors with adequate information about the "plans, specifications, and

requirements of the contract"; negotiated in good faith with

minority and women subcontractors; accepted quotes from

minority and women subcontractors in the absence of sound

reasons to reject them; and assisted minority and women subcontractors in obtaining bonding, lines of credit, or insurance.

See 49 C.F.R. § 26 app. A, cited in 19A N.C. Admin. Code

2D.1110.

As discussed above, the good faith requirement proved permissive in practice: prime contractors satisfied the requirement in 98.5 percent of cases, failing to do so in only 13 of

878 attempts.

D.

In light of the 2006 amendments to section 136-28.4, the

defendants moved to dismiss all or part of this action on various grounds.

Initially, they contended that the 2006 amendments rendered Rowe’s attack on the statute moot. The district court

rejected this argument. The court recognized that the amended

statute did "away with many of [the] alleged shortcomings" of

its predecessor and so "undoubtedly differs from the old [statute] in material respects." H.B. Rowe Co., Inc. v. Tippett, No.

5:03-CV-278-BO at 20-21 (E.D.N.C. March 29, 2007). But

the court concluded that Rowe’s suit continued to present a

live controversy because the statutory amendments did not

resolve "the primary problem which the Plaintiff first complained of: the use of remedial race- and gender-based preferences without valid evidence of past racial and gender

discrimination." Id. at 21-22. The court reasoned that Rowe

could "[i]n that sense" contend that the amended statutory

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scheme "‘disadvantage[s] [it] in the same fundamental way.’"

Id. at 22 (quoting Ne. Fla. Chapter of Associated Gen. Contractors of Am. v. City of Jacksonville, 508 U.S. 656, 662

(1993)).

The district court did, however, dismiss all of Rowe’s

claims for damages against the State officials sued in their

individual capacities, concluding that qualified immunity

barred these claims. The court also dismissed Easley from the

suit, holding that he had no role in implementing the challenged statutory scheme. In addition, the court dismissed

Rowe’s claims against the Department, as well as its damages

claims against the individual defendants in their official

capacities, holding them barred by sovereign immunity. But

the court concluded that Rowe’s claims for declaratory and

injunctive relief against Tippett, Varnedoe, and Sanderson

survived under the doctrine set forth in Ex Parte Young, 209

U.S. 123 (1908).

After extensive discovery and a four-day bench trial at

which numerous witnesses testified and over one thousand

pages of exhibits were admitted into evidence, the district

court upheld the constitutionality of the statutory scheme in

all respects. Rowe challenges this holding on appeal.4

4Rowe also contends that the district court erred in granting qualified

immunity to the State officials. This argument fails. We agree with the district court that a reasonable state official would not have been on notice

that section 136-28.4 violated the Constitution when Rowe submitted its

bid in 2002 or filed this action in 2003. See Hope v. Pelzer, 536 U.S. 730,

739 (2002) ("[Q]ualified immunity operates to ensure that before they are

subjected to suit, officers are on notice their conduct is unlawful." (internal

quotation marks omitted)). Because the State had reevaluated the necessity

and scope of section 136-28.4 in light of Croson, and a state appellate

court then dismissed as moot the only challenge ever brought against the

statute, the "right at issue was [not] clearly established" at that time. Pearson v. Callahan, 129 S. Ct. 808, 816 (2009) (internal quotation marks

omitted). 

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II.

Keeping in mind the statutory scheme and the rulings of the

district court, we turn to the legal principles governing

Rowe’s claims. As always, on appeal from a bench trial, we

review the district court’s legal conclusions de novo and its

factual findings for clear error. See PCS Phosphate Co., Inc.

v. Norfolk S. Corp., 559 F.3d 212, 217 (4th Cir. 2009).

A.

"Racial classifications are simply too pernicious to permit

any but the most exact connection between justification and

classification." Adarand Constructors, Inc. v. Pena, 515 U.S.

200, 229 (1995) (internal quotation marks omitted). For this

reason, courts subject all racial preferences—even those

intended to benefit minority groups—to strict judicial scrutiny. Id. at 226-27; Alexander v. Estepp, 95 F.3d 312, 315 (4th

Cir. 1996).

Although imposing a substantial burden, strict scrutiny is

not automatically "fatal in fact." Adarand, 515 U.S. at 237.

After all, "[t]he unhappy persistence of both the practice and

the lingering effects of racial discrimination against minority

groups in this country is an unfortunate reality, and government is not disqualified from acting in response to it." Id.;

Alexander, 95 F.3d at 315. In so acting, a governmental entity

must demonstrate it had a compelling interest in "remedying

the effects of past or present racial discrimination." Shaw v.

Hunt, 517 U.S. 899, 909 (1996).

Thus, to justify a race-conscious measure, a state must

"identify that discrimination, public or private, with some

specificity," Croson, 488 U.S. at 504, and must have a

"‘strong basis in evidence for its conclusion that remedial

action [is] necessary,’" id. at 500 (quoting Wygant v. Jackson

Bd. of Educ., 476 U.S. 267, 277 (1986) (plurality opinion));

see also Podberesky v. Kirwan, 38 F.3d 147, 153 (4th Cir.

12 H.B. ROWE CO. v. TIPPETT

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1994). As courts have noted, "there is no ‘precise mathematical formula to assess the quantum of evidence that rises to the

Croson ‘strong basis in evidence’ benchmark.’" Rothe Dev.

Corp. v. Dep’t of Def., 545 F.3d 1023, 1049 (Fed. Cir. 2008)

(Rothe II) (quoting W.H. Scott Constr. Co. v. City of Jackson,

199 F.3d 206, 218 n.11 (5th Cir. 1999)).5 Rather, the sufficiency of the state’s evidence of discrimination "must be evaluated on a case-by-case basis." Id. (internal quotation marks

omitted).

A state need not conclusively prove the existence of past or

present racial discrimination to establish a strong basis in evidence for concluding that remedial action is necessary. See,

e.g., Concrete Works, 321 F.3d at 958. Instead, a state may

meet its burden by relying on "a significant statistical disparity" between the availability of qualified, willing, and able

minority subcontractors and the utilization of such subcontractors by the governmental entity or its prime contractors.

Croson, 488 U.S. at 509 (plurality opinion). We further

require that such evidence be "corroborated by significant

anecdotal evidence of racial discrimination." Md. Troopers

Ass’n, Inc. v. Evans, 993 F.2d 1072, 1077 (4th Cir. 1993).

Those challenging race-based remedial measures must "introduce credible, particularized evidence to rebut" the state’s

showing of a strong basis in evidence for the necessity for

5Like many of our sister circuits, we will review de novo, rather than

for clear error, the district court’s ultimate determination that the underlying facts demonstrate a "strong basis in evidence." See Concrete Works of

Colo., Inc. v. City & County of Denver, 321 F.3d 950, 958 (10th Cir.

2003); Rothe Dev. Corp. v. U.S. Dep’t of Def., 262 F.3d 1306, 1323 (Fed.

Cir. 2001); Majeske v. City of Chicago, 218 F.3d 816, 820 (7th Cir. 2000);

Contractors Ass’n of E. Pa., Inc. v. City of Philadelphia, 91 F.3d 586, 596

(3d Cir. 1996) (Contractors Ass’n II); but see Eng’g Contractors Ass’n of

S. Fla. Inc. v. Metro. Dade County, 122 F.3d 895, 903-04 (11th Cir. 1997)

(reviewing the determination for clear error). This accords with our precedent equating the compelling interest prong of strict scrutiny, a legal

inquiry, with the "strong basis in evidence" requirement. See Podberesky,

38 F.3d at 153. 

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remedial action. See Concrete Works, 321 F.3d at 959 (internal quotation marks omitted). Challengers may offer a neutral

explanation for the state’s evidence, present contrasting statistical data, or demonstrate that the evidence is flawed, insignificant, or not actionable. See Eng’g Contractors, 122 F.3d at

916; Contractors Ass’n of E. Pa., Inc. v. City of Philadelphia,

6 F.3d 990, 1007 (3d Cir. 1993) (Contractors Ass’n I); Coral

Constr. Co. v. King County, 941 F.2d 910, 921 (9th Cir.

1991). However, mere speculation that the state’s evidence is

insufficient or methodologically flawed does not suffice to

rebut a state’s showing. See Concrete Works, 321 F.3d at 991.

Finally, to satisfy strict scrutiny, the state statutory scheme

must also be "narrowly tailored" to serve the state’s compelling interest in not financing private discrimination with public funds. Alexander, 95 F.3d at 315 (citing Adarand, 515 U.S.

at 227).

B.

Precedent dictates, and the parties agree, that courts apply

"intermediate scrutiny" to statutes that classify on the basis of

gender. Adkins v. Rumsfeld, 464 F.3d 456, 468 (4th Cir.

2006); see also Miss. Univ. for Women v. Hogan, 458 U.S.

718, 724 (1982). A defender of such a statute meets this burden "by showing at least that the classification serves important governmental objectives and that the discriminatory

means employed are substantially related to the achievement

of those objectives." Hogan, 458 U.S. at 724 (internal quotation marks omitted). Of course, intermediate scrutiny requires

less of a showing than does "the most exacting" strict scrutiny

standard of review. See Clark v. Jeter, 486 U.S. 456, 461

(1988).

Although the Supreme Court has established a "strong basis

in evidence" requirement for race-conscious measures subject

to strict scrutiny, courts "work without an analogous evidentiary label from the Supreme Court" for gender-conscious pro14 H.B. ROWE CO. v. TIPPETT

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grams. Eng’g Contractors, 122 F.3d at 909. Our sister

circuits, however, provide guidance in formulating a governing evidentiary standard. These courts agree that such a measure "can rest safely on something less than the ‘strong basis

in evidence’ required to bear the weight of a race- or

ethnicity-conscious program." Id.; see also Concrete Works,

321 F.3d at 959-60; Contractors Ass’n I, 6 F.3d at 1010;

Coral Constr., 941 F.2d at 931-32.

In defining what constitutes "something less" than a "strong

basis in evidence," the courts, though diverging in their choice

of words, also agree that the party defending the statute must

"present[ ] sufficient probative evidence in support of its

stated rationale for enacting a gender preference, i.e., . . . the

evidence [must be] sufficient to show that the preference rests

on evidence-informed analysis rather than on stereotypical

generalizations." Eng’g Contractors, 122 F.3d at 910; Concrete Works, 321 F.3d at 959 ("[T]he gender-based measures

. . . [must be] based on ‘reasoned analysis rather than [on] the

mechanical application of traditional, often inaccurate,

assumptions.’" (quoting Hogan, 458 U.S. at 726)); Contractors Ass’n I, 6 F.3d at 1010; Coral Constr., 941 F.2d at 932;

see also Mich. Rd. Builders Ass’n, Inc. v. Milliken, 834 F.2d

583, 595 (6th Cir. 1987) (striking down gender-conscious

measure where the defendants "presented no evidence that

[women-owned businesses] suffered a disadvantage in competing for state contracts").

C.

When a plaintiff alleges, as Rowe does, that a statute violates the Equal Protection Clause, not only as applied, but also

on its face, the plaintiff bears a heavy burden. "The Supreme

Court has, as a policy matter, expressed a strong preference

for avoiding facial challenges." Richmond Med. Ctr. for

Women v. Herring, 570 F.3d 165, 171 (4th Cir. 2009) (en

banc). The Court "disfavor[s]" such challenges because they

"often rest on speculation," "run contrary to the fundamental

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principle of judicial restraint," and "threaten to short circuit

the democratic process by preventing laws embodying the

will of the people from being implemented in a manner consistent with the Constitution." Wash. State Grange v. Wash.

State Republican Party, 552 U.S. 442, 450-51 (2008). In its

facial challenge, therefore, a plaintiff "has a very heavy burden to carry, and must show that [a statutory scheme] cannot

operate constitutionally under any circumstance." West Virginia v. U.S. Dep’t of Health & Human Servs., 289 F.3d 281,

292 (4th Cir. 2002) (citing United States v. Salerno, 481 U.S.

739, 745 (1987)).

Of course, even if a plaintiff cannot mount a successful

facial challenge, it may nonetheless be able to demonstrate

that the application or enforcement of a statute is unconstitutional. Where substantial record evidence exists as to the

application of the challenged statutory scheme, a court has

"the concrete facts necessary" to assess such an as-applied

challenge. See Herring, 570 F.3d at 180.

III.

Bearing in mind the legal standards applicable to Rowe’s

facial and as-applied challenges, we examine the evidence

offered by the parties at trial with respect to discrimination in

public-sector subcontracting, and the district court’s findings

of fact as to that evidence.

A.

We outline first the State’s statistical evidence of discrimination in public-sector subcontracting, including its disparity

evidence and regression analysis.

1.

The 2004 study performed by MGT, the national research

and consulting firm commissioned by the State, analyzed the

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difference—or disparity—between the amount of subcontracting dollars minority- and women-owned businesses actually

won in a market and the amount of subcontracting dollars

they would be expected to win given their presence in that

market. MGT grounded its analysis in the "disparity index,"

which measures the participation of a given racial, ethnic, or

gender group engaged in subcontracting. To calculate a disparity index, MGT divided the percentage of total subcontracting dollars that a particular group won by the percent that

group represents in the available labor pool, and multiplied

the result by 100. The closer the resulting index is to 100, the

greater that group’s participation. For example, if African

American subcontractors represented 30 percent of the available labor pool and won 30 percent of the subcontracting dollars, the disparity index would be 100 or full participation.

Similarly, if African American subcontractors represented 30

percent of the available labor pool and won 15 percent of the

subcontracting dollars, the disparity index would be 50 or half

participation.

After Croson, a number of our sister circuits have recognized the utility of the disparity index in determining statistical disparities in the utilization of minority- and womenowned businesses. See, e.g., Rothe II, 545 F.3d at 1037-38;

Concrete Works, 321 F.3d at 962-63; W.H. Scott, 199 F.3d at

218; Eng’g Contractors, 122 F.3d at 914; Contractors Ass’n

I, 6 F.3d at 1005; Associated Gen. Contractors of Cal., Inc.

v. Coal. for Econ. Equity, 950 F.2d 1401, 1413-14 (9th Cir.

1991). Generally, courts consider a disparity index lower than

80 as an indication of discrimination. See Rothe II, 545 F.3d

at 1041; Eng’g Contractors, 122 F.3d at 914; see also 29

C.F.R. § 1607.4(D) (2010) (directing federal agencies to

regard a "selection rate" of lower than 80 percent as evidence

of disparate impact employment discrimination). Accordingly, MGT considered only a disparity index lower than 80

as warranting further investigation.

After calculating a disparity index for each relevant racial

or gender group, MGT tested for the statistical significance of

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the results by conducting standard deviation analysis through

the use of t-tests. As explained in the 2004 study, "[t]he t-test

determines if the relationship between availability and utilization (suggested by the disparity index value) supports a conclusion of disparity. In other words, the results of the t-test

allow us to conclude if . . . the results found in the disparity

index represent real disparity." Put simply, standard deviation

analysis "describes the probability that the measured disparity

is the result of mere chance." Eng’g Contractors, 122 F.3d at

914. MGT considered a finding of two standard deviations (a

t-value of +/- 1.96) to demonstrate "with 95 percent certainty

that disparity, as represented by either overutilization or

underutilization, is actually present." See also Eng’g Contractors, 122 F.3d at 914.

2.

The 2004 study analyzed the participation of minority and

women subcontractors in construction contracts awarded and

managed from the central Department office in Raleigh.6 To

determine utilization of minority and women subcontractors,

MGT developed a master list of contracts mainly from Statemaintained electronic databases and hard copy files. MGT

then selected from that list a statistically valid sample of contracts, and calculated the percentage of subcontracting dollars

6MGT also gathered data from construction contracts awarded and managed from the 14 Department divisions across the State, as well as from

preconstruction contracts, which involve work from engineering firms and

architectural firms on the design of highways. However, this data was

incomplete and did not allow for accurate disparity analysis. The State

concedes this point, see Appellee’s Br. 26-27, and the State’s expert testified at trial that he did not rely on this analysis in forming his opinions.

Accordingly, we omit discussion of division or preconstruction contracts

from our analysis. It is undisputed that the data for centrally-awarded contracts does not suffer from this methodological flaw. The central data also

accounts for the majority of total State highway contracting dollars

awarded during the study period, and so provides a sufficiently accurate

picture of Department contracting as a whole. 

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awarded to minority- and women-owned businesses during

the 5-year period ending in June 2003.

To estimate availability—the percentage of a particular

group in the relevant market area—MGT created a vendor list

comprising (1) subcontractors approved by the Department to

perform subcontract work on state-funded projects, (2) subcontractors that performed such work during the study period,

and (3) contractors qualified to perform prime construction

work on state-funded contracts. (The study included the latter

group because according to the State’s expert, Dr. Vincent

Eagan,7 prime contractors are qualified to perform subcontracting work and often do perform such work. Indeed, Rowe

itself performed substantial amounts of subcontracting work

on Department projects during the pendency of this litigation.) To ensure accuracy, MGT submitted its master list to

the Department for verification.

Based on the utilization and availability figures, the 2004

study returned the following disparity analysis:

7Dr. Eagan compiled research for MGT’s 2004 study and has prepared

over 30 studies in this area. Rowe stipulated that Dr. Eagan qualified as

an expert witness in this case. 

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As these figures demonstrate, prime contractors underutilized all of the minority subcontractor classifications on statefunded construction contracts during the study period. The

disparity index for each group was less than 80 and, thus,

warranted further investigation. The t-test results, however,

demonstrated marked underutilization only of African American and Native American subcontractors. For African Americans the t-value of 3.99 fell outside of two standard deviations

from the mean and, therefore, was statistically significant at

a 95 percent confidence level. In other words, there was at

least a 95 percent probability that prime contractors’ underutilization of African American subcontractors was not the

result of mere chance. For Native American subcontractors,

the t-value of 1.41 was significant at a confidence level of

approximately 85 percent. The t-values for Hispanic American and Asian American subcontractors, 0.83 and 0.80,

respectively, demonstrated significance at a confidence level

of approximately 60 percent. The disparity index for women

subcontractors found that they were overutilized during the

study period. The t-value of -3.76 demonstrated that this overutilization was statistically significant at a 95 percent confidence level.

The 2004 study also revealed that, on average, nonminority

male subcontractors won more valuable subcontracts than did

minority and women subcontractors. From 2000 to 2004, the

average subcontract awarded to nonminority male subcontractors ($272,829) yielded more than double the dollars won by

minority subcontractors ($111,106) and nearly triple the dollars won by women subcontractors ($97,682).

To corroborate the disparity data, MGT conducted a regression analysis studying the influence of certain company and

business characteristics—with a particular focus on owner

race and gender—on a firm’s gross revenues. MGT obtained

the data from a telephone survey of firms that conducted or

attempted to conduct business with the Department. The sur20 H.B. ROWE CO. v. TIPPETT

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vey pool consisted of a random sample of 647 such firms; of

this group, 627 participated in the survey.

MGT used the firms’ gross revenues as the dependent variable in the regression analysis to test the effect of other variables, including company age and number of full-time

employees, and the owners’ years of experience, level of education, race, ethnicity, and gender. The analysis revealed that

minority and women ownership universally had a negative

effect on revenue. African American ownership of a firm had

the largest negative effect on that firm’s gross revenue of all

the independent variables included in the regression model.

These findings led MGT to conclude that "for African Americans, in particular, the disparity in firm revenue was not due

to capacity-related or managerial characteristics alone."

3.

To rebut the State’s statistical evidence of public-sector discrimination, Rowe attacked the 2004 study’s methodology

and pointed to findings from the study that, according to

Rowe, undermine the State’s evidence of discrimination.

a.

Rowe argued that MGT’s availability estimate insufficiently accounted for the qualifications and willingness of

minority subcontractors to perform state-funded subcontracts.

See Croson, 488 U.S. at 510. The State estimated availability

of minority and women subcontractors in the relevant labor

pool using "vendor data"—data reflecting the number of

approved subcontractors in the State, subcontractors that performed on Department projects, and prequalified prime contractors.

Rowe’s expert, Dr. George LaNoue, testified that "bidder

data"—reflecting the number of subcontractors that actually

bid on Department subcontracts—estimates availability better

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than "vendor data." However, Dr. LaNoue acknowledged that

the State does not compile bidder data. He further conceded

that bidder data actually reflects "skew[ed]" availability in the

context of a goals program that urges prime contractors to

solicit bids from minority and women subcontractors. Furthermore, Dr. LaNoue did not contradict Dr. Eagan’s previous

testimony that the only source of bidder data available estimated a higher percentage of minority-owned businesses in

the relevant labor pool than did MGT’s vendor-based estimate. In short, neither Rowe nor its expert has demonstrated

that the vendor data used in the 2004 study was unreliable, or

that bidder data would have yielded less support for the conclusions reached.

Dr. LaNoue did suggest another measurement of availability: prime contractors’ assessments of subcontractor qualifications. However, he acknowledged that no such documentary

evidence exists in North Carolina. Moreover, when pressed,

Dr. LaNoue failed to explain how such data would not be

skewed by discriminatory barriers in the marketplace.

In short, Rowe’s challenge to the availability estimate

failed because it could not demonstrate that the 2004 study’s

availability estimate was inadequate. See Concrete Works,

321 F.3d at 991 ("[A challenger] cannot meet its burden of

proof through conjecture and unsupported criticisms of [the

state’s] evidence."). Further, Rowe presented no viable alternative for determining availability. See Sherbrooke Turf, Inc.

v. Minn. Dep’t of Transp., 345 F.3d 964, 973 (8th Cir. 2003)

("[Plaintiff] failed to establish that better data was available or

that [Defendant] was otherwise unreasonable in undertaking

this thorough analysis and in relying on its results.").

b.

Rowe next argued that alternative disparity evidence in the

2004 study disproves the existence of discrimination. Rowe

pointed to evidence that minority subcontractors participate

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on state-funded projects at a level consistent with their availability in the relevant labor pool. For example, while African

American subcontractors represented 16.45 percent of the

workforce available for Department projects, they represented

14.9 percent of the firms participating on Department subcontracts, resulting in a disparity index of only 91. The State

responded that evidence as to the number of minority subcontractors working on state-funded projects does not effectively

rebut the evidence of discrimination in terms of subcontracting dollars. The State pointed to evidence indicating that

prime contractors used minority businesses for low-value

work in order to comply with the Department’s goals. For

example, in support of this contention, the State presented

evidence from the 2004 study that African American ownership had a significant negative impact on firm revenue unrelated to firm capacity or experience. Rowe did not offer any

contrary evidence or in any other way challenge this evidence.

The State further bolstered its position by presenting evidence that minority subcontractors have the capacity to perform higher-value work. The 2004 study concluded, based on

a sample of subcontracts and reports of annual firm revenue,

that exclusion of minority subcontractors from contracts

under $500,000 "was not a function of capacity." During the

study period, well over 90 percent of the Department’s subcontracts were valued at $500,000 or less, with over 70 percent valued at or below $100,000. Further, the State’s expert,

Dr. Eagan, explained that "‘capacity’ constraints do not operate with the same force on subcontracts as they may on prime

contracts" because subcontracts tend to be relatively small.

Cf. Rothe II, 545 F.3d at 1042-45 (faulting disparity analyses

of total construction dollars, including prime contracts, for

failing to account for the relative capacity of firms). Rowe

offered no objective evidence to the contrary.

B.

In addition to the statistical evidence set forth above, the

State also presented evidence demonstrating that from SepH.B. ROWE CO. v. TIPPETT 23

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tember 1991 to April 1993, during the Program’s suspension,

prime contractors awarded substantially fewer subcontracting

dollars to minority and women subcontractors on state-funded

projects. Between 1991 and 1992, for example, the total

amount of these subcontracting dollars declined 37.7 percent.

The decline was most significant for Native American and

women subcontractors. Meanwhile, the share of subcontracting dollars awarded to nonminority male subcontractors

increased.

Rowe did not and does not argue that the actual data on

which the State relied in reaching these conclusions is flawed.

Instead, Rowe continues to argue that evidence of a decline

in utilization does not raise an inference of discrimination.

This is so, Rowe contends, because race- and genderconscious measures afford a competitive advantage that disappears when such measures cease. However, the very significant decline in utilization of minority and women

subcontractors—nearly 38 percent—surely provides a basis

for a fact finder to infer that discrimination played some role

in prime contractors’ reduced utilization of these groups during the suspension. See, e.g., Slater, 228 F.3d at 1174 (finding

that evidence of declining minority utilization after a program

has been discontinued "strongly supports the government’s

claim that there are significant barriers to minority competition in the public subcontracting market, raising the specter of

racial discrimination"); see also Sherbrooke Turf, 345 F.3d at

973-74. Such an inference is particularly compelling for

minority-owned businesses because, even during the 2004

study period, prime contractors continued to underutilize them

on state-funded road projects.

C.

1.

The State additionally relied on three sources of anecdotal

evidence contained in the 2004 study: a telephone survey, personal interviews, and focus groups.

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The telephone survey produced evidence of an informal

"good old boy" network of white contractors that discriminated against minority subcontractors. More than threequarters of African American respondents to the telephone

survey agreed that an informal network of prime and subcontractors existed in the State, as did 74 percent of Native Americans, 71 percent of Hispanic Americans, and 67 percent of

Asian Americans. Notably, more than half of African American respondents believed the network excluded their companies from bidding or winning a contract, as did 35 percent of

Native Americans, 29 percent of Hispanic Americans, and 26

percent of Asian Americans. Tellingly, nearly half of nonminority male respondents corroborated the existence of an

informal network, but only 17 percent of them believed that

the network excluded their companies from bidding or winning contracts.

A large majority of African American respondents also

reported that double standards in qualifications and performance made it more difficult for them to win bids and contracts, that prime contractors view minority firms as being less

competent than nonminority firms, and that nonminority firms

change their bids when not required to hire minority firms. A

majority of Native American respondents reported these same

inequities.

Further, 60 percent of African American respondents and

55 percent of Native American respondents believed that

prime contractors sometimes dropped minority subcontractors

after winning contracts. Nearly one-quarter of African American respondents and 29 percent of Native American respondents reported that they themselves had been dropped by a

prime contractor after the Department awarded the contract.

Only 12 percent of nonminority male respondents reported the

same.

Interview and focus-group responses echoed and underscored these reports. Several respondents indicated that prime

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contractors already know who they will use on the contract

before they solicit bids. An African American focus-group

participant stated that the "good old boy network" affects his

business because prime contractors "just pick up the phone

and call their buddies, the ones that they go deer hunting with

every Saturday morning . . . . And so, we find ourselves out

of that market completely." Another African American

respondent explained that prime contractors prefer to use

other less qualified minority-owned firms to avoid subcontracting with African American-owned firms. A Native American subcontractor reported that prime contractors use their

preferred subcontractor regardless of the bid price. Several

minority subcontractors reported that prime contractors do not

treat minority firms fairly, pointing to instances in which

prime contractors solicited quotes the day before bids were

due, did not respond to bids from minority subcontractors,

refused to negotiate prices with them, or gave minority subcontractors insufficient information regarding the project.

2.

Seeking to rebut the State’s anecdotal evidence, Rowe

again attacked the 2004 study’s methodology. Rowe contended the anecdotal data was flawed because the 2004 study

did not verify the anecdotal data and MGT oversampled

minority subcontractors in collecting the data.

As to its first contention, Rowe offered no rationale as to

why a fact finder could not rely on the State’s "unverified"

anecdotal data. Indeed, a fact finder could very well conclude

that anecdotal evidence need not—and indeed cannot—be

verified because it "is nothing more than a witness’ narrative

of an incident told from the witness’ perspective and including the witness’ perceptions." Concrete Works, 321 F.3d at

989.

Rowe’s second contention also misses the mark. As our

precedent makes clear, anecdotal evidence simply supple26 H.B. ROWE CO. v. TIPPETT

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ments statistical evidence of discrimination. See Md. Troopers, 993 F.2d at 1077. Thus, the State’s expert, Dr. Eagan,

testified that the 2004 study oversampled representatives from

these groups "to get at the problems faced by women and

minorities." Surveying more nonminority men would not have

advanced the inquiry. Moreover, Dr. Eagan testified that

although the study oversampled minority groups, the samples

were randomly selected.

To rebut the substance of the anecdotal data on which the

State relies, Rowe pointed to evidence indicating that minority subcontractors enjoy excellent or good relationships with

prime contractors. For example, 75 percent of African American respondents to the telephone survey rated their experiences with prime contractors as excellent or good, as did over

90 percent of Native American respondents. These responses

indicate that, when utilized on contracts, minority subcontractors enjoy positive experiences with prime contractors. But

they do not negate the State’s compelling anecdotal evidence

that minority subcontractors face race-based obstacles to successful bidding.

D.

After consideration of the above evidence and extensive

argument of counsel, the district court granted judgment to the

State, upholding in all respects the constitutionality of both

section 136-28.4 and the Department’s administration of the

Program.

In its written opinion, the district court found as fact that

(1) "[d]isparity ratios [in the 2004 study] . . . highlighted the

underutilization of [minority subcontractors] by prime contractors bidding on state funded highway projects"; (2) the

General Assembly relied on evidence "demonstrat[ing] a dramatic decline in the utilization of [minority subcontractors]

during the [P]rogram’s suspension"; (3) "anecdotal support

relied upon [by] the legislature confirmed and reinforced the

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general data demonstrating the underutilization of [minority

subcontractors]"; and (4) "the average contracts awarded

[women subcontractors] are significantly smaller than those

awarded [other subcontractors]." H.B. Rowe, Inc. v. Tippett,

589 F. Supp. 2d 587, 596 (E.D.N.C. 2008). Given the evidence outlined above, we cannot conclude that the district

court clearly erred with respect to any of these findings.

This, of course, does not end our inquiry. We must next

determine if these facts justify the court’s ultimate conclusion

that the North Carolina statutory scheme withstands constitutional challenge.

IV.

We first address whether the State’s statutory scheme as it

relates to minorities survives strict scrutiny review.

A.

Strict scrutiny requires that we conduct "‘the most exacting

judicial examination’" of the evidence the State put forth to

support its minority participation goals. Md. Troopers, 993

F.2d at 1076 (quoting Wygant, 476 U.S. at 273). We have

done so and conclude, for the following reasons, that the State

presented a "strong basis in evidence" for its conclusion that

the minority participation goals were necessary to remedy discrimination against African American and Native American

subcontractors.

1.

As previously explained in detail, the State’s data powerfully demonstrates that prime contractors grossly underutilized African American and Native American subcontractors

in public sector subcontracting during the study period. These

findings have particular resonance because since 1983, the

General Assembly has encouraged minority participation in

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state-funded highway projects, and yet African American and

Native American subcontractors continue to be underutilized

on such projects.

Moreover, the disparity index in the 2004 study demonstrated statistically significant underutilization of African

American subcontractors at a 95 percent confidence level, and

of Native American subcontractors at a confidence level of

approximately 85 percent. Although the probative force of the

evidence relating to African American subcontractors is

stronger than the evidence relating to Native American subcontractors, the evidence in the 2004 study for both groups

demonstrates a high likelihood of actual disparity.

The State bolstered the disparity evidence with regression

analysis demonstrating that African American ownership correlated with a significant, negative impact on firm revenue.

Further, as the district court found, the State demonstrated

that there was a "dramatic decline in the utilization of [minority subcontractors] during the [P]rogram’s suspension." H.B.

Rowe, Inc., 589 F. Supp. 2d at 596. Both Native American

and African American subcontractors experienced significant

declines in subcontracting dollars during that period.

To summarize, the State’s evidence showing a gross statistical disparity between the availability of qualified African

American and Native American subcontractors and the

amount of subcontracting dollars they win on public sector

contracts establishes the necessary statistical foundation for

upholding the minority participation goals with respect to

these groups.8See Croson, 488 U.S. at 509; id. at 502 (high8We note that the probative force of the evidence is much weaker for

businesses owned by Hispanic Americans and Asian Americans, as the

disparity figures for these groups were significant at a confidence level of

less than 60 percent. Of course, the lack of statistical significance may be

due to the small number of these minority groups in the relevant labor

pool: MGT estimated that of the 1708 firms available to perform subconH.B. ROWE CO. v. TIPPETT 29

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lighting Richmond’s inability to show "what percentage of

total city construction dollars minority firms now receive as

subcontractors on prime contracts let by the city"); cf. Cone

Corp. v. Hillsborough County, 908 F.2d 908, 915-16 (11th

Cir. 1990) (finding statistical evidence of disparity in public

sector subcontracting dollars sufficient to defeat summary

judgment); Concrete Works, 321 F.3d at 984 (finding sufficient evidence of discrimination in construction industry

despite overutilization of minority businesses on city projects

subject to goals program). Therefore, we next consider

whether the State’s anecdotal evidence of discrimination

against these two groups sufficiently supplements the State’s

statistical showing.

2.

The surveys in the 2004 study exposed an informal, racially

exclusive network that systemically disadvantaged minority

subcontractors. The State could conclude with good reason

that such networks exert a chronic and pernicious influence

on the marketplace that calls for remedial action. See Slater,

228 F.3d at 1170 ("As a result [of closed contracting networks], minority-owned firms are seldom or never invited to

bid for subcontracts on projects that do not contain affirmative action requirements." (internal quotation marks omitted)).

In Maryland Troopers, we cautioned against inferring discrimination from reports of cronyism absent evidence of

racial animus. 993 F.2d at 1077. Here, however, majorities of

African American and Native American respondents agreed

that prime contractors have higher standards for minority subtracting work on state-funded contracts, only 9 or .53 percent were owned

by Hispanic Americans, and only 7 or .41 percent, were owned by Asian

Americans. But, the fact that such small percentages of firms, making up

less than 1 percent of all available firms, were underutilized (perhaps by

chance) fails to evidence the "significant statistical disparity" Croson

requires. See Contractors Ass’n I, 6 F.3d at 1007-08. 

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contractors, view minority subcontractors as being less competent than nonminority businesses, change their bidding

practices when not required to hire minority subcontractors,

and drop minority subcontractors after winning contracts.

Together, these responses suggest strongly that the underutilization of African American and Native American subcontractors is more than a mere byproduct of misguided yet

color-blind cronyism. Rather, they indicate that racial discrimination is a critical factor underlying the gross statistical

disparities presented in the 2004 study. Unlike in Maryland

Troopers, where we found "no . . . gross statistical disparity,

corroborated by . . . anecdotal evidence," id. at 1078 (internal

quotation marks omitted), the State here presented substantial

statistical evidence of gross disparity, corroborated by disturbing anecdotal evidence. 

3.

In sum, the State has met its burden of producing a "strong

basis in evidence" for its conclusion that minority participation goals were necessary to remedy discrimination against

African American and Native American (but not Asian American or Hispanic American) subcontractors. Particularly compelling is the State’s evidence that prime contractors grossly

underutilized African American and Native American subcontractors during the study period and that these subcontractors

are disadvantaged by a racially exclusive "old boys network."

In circumstances like these, the Supreme Court has made it

abundantly clear that a state can remedy a public contracting

system that withholds opportunities from minority groups

because of their race. See Adarand, 515 U.S. at 237.

B.

To withstand constitutional scrutiny, however, the North

Carolina statutory scheme must also be narrowly tailored to

achieve the State’s compelling interest in remedying discrimination against African American and Native American subH.B. ROWE CO. v. TIPPETT 31

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contractors in public-sector subcontracting. We have

identified the following factors as relevant in evaluating

whether a state statute is narrowly tailored:

(1) the necessity of the policy and the efficacy of

alternative race neutral policies; (2) the planned

duration of the policy; (3) the relationship between

the numerical goal and the percentage of minority

group members in the relevant population; (4) the

flexibility of the policy, including the provision of

waivers if the goal cannot be met; and (5) the burden

of the policy on innocent third parties.

Belk v. Charlotte-Mecklenburg Bd. of Educ., 269 F.3d 305,

344 (4th Cir. 2001) (en banc). Finally, we consider a program’s "overinclusiveness," Croson, 488 U.S. at 506, i.e., "its

tendency to benefit particular minority groups that have not

been shown to have suffered invidious discrimination," Alexander, 95 F.3d at 316. We address each factor in turn.

1.

Narrow tailoring requires "serious, good faith consideration

of workable race-neutral alternatives," but a state need not

"exhaust[ ] . . . every conceivable race-neutral alternative."

Grutter v. Bollinger, 539 U.S. 306, 339 (2003). The 2004

study details numerous alternative race-neutral measures

aimed at enhancing the development and competitiveness of

small or otherwise disadvantaged businesses in North Carolina.

For example, the State’s Small Business Enterprise Program favors small businesses for highway construction procurement contracts of $500,000 or less. This program permits

the Department to waive the institutional barriers of bonding

and licensing requirements on such contracts. See N.C. Gen.

Stat. § 136-28.10. The Department also contracts for support

services to assist disadvantaged business enterprises with

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bookkeeping and accounting, taxes, marketing, bidding, negotiation, and other aspects of entrepreneurial development.

Indeed, Rowe identifies no viable race-neutral alternatives

that North Carolina has failed to consider and adopt. Notably,

the State has undertaken most of the race-neutral alternatives

identified by the federal Department of the Treasury in its regulations governing the federal DBE program. See 49 C.F.R.

§ 26.51(b); see also N. Contracting, Inc. v. Illinois, 473 F.3d

715, 724 (7th Cir. 2007) (upholding the constitutionality of a

program that, like this one, "use[d] nearly all of the methods

described in § 26.51(b) to maximize the portion of the goal

that will be achieved through race-neutral means"). We thus

conclude that the State gave serious good faith consideration

to race-neutral alternatives prior to adopting the challenged

statutory scheme.

Despite these race-neutral efforts, the 2004 study demonstrated that disparities continue to exist in the utilization of

African American and Native American subcontractors in

state-funded highway construction subcontracting. These persistent disparities indicate the necessity of a race-conscious

remedy. See Contractors Ass’n I, 6 F.3d at 1008 (upholding

against summary judgment an ordinance that was "enacted . . .

only after race-neutral alternatives proved insufficient to

improve minority participation in City contracting").

2.

As to the duration of the statutory scheme, the district court

found two facts particularly compelling in establishing that it

was narrowly tailored: the statute’s provisions (1) setting a

specific expiration date and (2) requiring a new disparity

study every 5 years. H.B. Rowe, Inc., 589 F. Supp. 2d at 597

(discussing N.C. Gen. Stat. § 136-28.4(b), (e)). We agree.

"The . . . program’s inherent time limit and [provisions requiring regular reevaluation] ensure that it . . . is carefully

designed to ‘endure[ ] only until . . . the discriminatory

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impact’ has been eliminated." Slater, 228 F.3d at 1179 (quoting United States v. Paradise, 480 U.S. 149, 178 (1987)).9

3.

The State has also demonstrated that the Program’s participation goals are related to the percentage of minority subcontractors in the relevant markets in the State. See N.C. Gen.

Stat. § 136-28.4(b1). The Department has taken concrete steps

to ensure that these goals accurately reflect the availability of

minority-owned businesses "on a project-by-project basis."

First, the Department generates a report detailing the type of

work that it anticipates subcontractors will perform on a particular project. Next, a goal-setting committee consults its

database of certified minority contractors in the relevant geographic area capable of performing those types of work. Consulting the report, the database, and its own members’

experience, the committee then sets a project-specific participation goal. Notably, this goal-setting process does not

mechanically require minority participation; in fact, between

July 2002 and February 2004, the committee set a goal of zero

percent minority participation on approximately 10 percent of

projects.

Rowe contends that the Department does not do enough to

evaluate the relative qualifications of minority businesses and

whether or not they are willing and able to perform services

on particular projects. However, Rowe neither explains how

the careful process currently in place falls short nor offers a

viable alternative method. See Sherbrooke Turf, 345 F.3d at

973-74; Concrete Works, 321 F.3d at 991.

9Rowe contends that the General Assembly’s one-year extension of the

statute’s sunset provision renders that provision meaningless. However, in

accord with the statute’s directive, the next disparity study was scheduled

for completion in 2009, and the extension simply allowed more time for

the completion and consideration of that study. At oral argument, counsel

for the State informed us that the newly completed 2009 disparity study

demonstrated continued underutilization of minority-owned businesses. 

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4.

As the district court recognized, the flexibility of the statutory scheme is also a significant indicator of narrow tailoring.

The Program contemplates a waiver of project-specific goals

when prime contractors make good faith efforts to meet those

goals. See 19A N.C. Admin. Code 2D.1110. Good faith

efforts essentially require only that the prime contractor solicit

and consider bids from minorities. The State does not require

or expect the prime contractor to accept any bid from an

unqualified bidder, or any bid that is not the lowest bid. Moreover, prime contractors can bank any excess minority participation for use against future goals over the following two

years. Given the lenient standard and flexibility of the "good

faith" requirement, it comes as little surprise that as of July

2003, only 13 of 878 good faith submissions—including

Rowe’s—had failed to demonstrate good faith efforts.

5.

With respect to the burden imposed by the Program, Rowe

offers two arguments in support of its contention that the Program places a substantial burden on prime contractors.

First, Rowe contends that the Program creates onerous

solicitation and follow-up requirements. However, at trial,

Rowe’s president testified that the company’s secretaries run

the solicitation program with no need for additional employees dedicated to the task.

Second, Rowe maintains that complying with projectspecific goals forces it to subcontract millions of dollars of

work that it could perform itself for less money. But Rowe

offered no evidence to support this claim. The State, on the

other hand, offered evidence from the 2004 study that prime

contractors need not subcontract work they can self-perform.

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6.

Lastly, Rowe contends that the statutory scheme is "overinclusive." By its own terms, however, the statute expressly

limits relief to "those racial or ethnicity classifications . . . that

have been subjected to discrimination in the relevant marketplace and that have been adversely affected in their ability to

obtain contracts with the Department." N.C. Gen. Stat. § 136-

28.4(c)(2). In tailoring the remedy in this way, the General

Assembly did not "random[ly] inclu[de] . . . racial groups

that, as a practical matter, may never have suffered from discrimination in the construction industry." Croson, 488 U.S. at

506. Rather, the statute contemplates participation goals only

for those groups shown to have suffered discrimination. As

such, North Carolina’s statute differs from measures that have

failed narrow tailoring for overinclusiveness. See, e.g., id.;

Associated Gen. Contractors of Ohio, Inc. v. Drabik, 214 F.3d

730, 737 (6th Cir. 2000) ("By lumping together the groups of

[African Americans], Native Americans, Hispanics, and

[Asian Americans] . . . , the [challenged statute] may well

provide preference where there has been no discrimination.").10

In sum, we have considered the relevant factors and conclude that the statutory scheme is narrowly tailored to achieve

the State’s compelling interest in remedying discrimination in

public-sector subcontracting against African American and

Native American subcontractors.

V.

We turn next to the question of whether the State’s statutory scheme with respect to women survives intermediate

scrutiny.

10Although the statute, on its face, does not name Asian Americans and

Hispanic Americans—two groups for which the State failed to provide a

strong basis in evidence—the State concedes that it certifies those groups

for inclusion in the Program. We address this infirmity in the State’s application of the Program in Part VI, infra. 

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A.

The 2004 study’s public-sector disparity analysis demonstrated that, unlike minority-owned businesses, womenowned businesses won far more than their expected share of

subcontracting dollars during the study period. In other words,

prime contractors substantially overutilized women subcontractors on public road construction projects. Moreover, MGT

calculated the overutilization of women subcontractors as statistically significant at a 95 percent confidence level.

Nevertheless, the district court found discrimination against

women-owned businesses in the public sector. The court

based its conclusion on evidence that women won subcontracts that were, on average, worth one-third of the value of

subcontracts won by nonminority males. H.B. Rowe, Inc., 589

F. Supp. 2d at 596. The State also offered evidence that prime

contractors’ awards to women subcontractors in the public

sector declined significantly during the Program’s suspension.

This evidence, although probative of discrimination, cannot

overcome far more compelling evidence from the 2004 study

demonstrating prime contractors’ more recent, statistically

significant overutilization of women-owned businesses in the

public sector. In short, the public-sector evidence as a whole

does not evince the "exceedingly persuasive justification" the

Supreme Court requires. See United States v. Virginia, 518

U.S. 515, 531 (1996).

B.

Perhaps recognizing this, the State relies heavily on

private-sector data from the 2004 study demonstrating that

prime contractors significantly underutilized women subcontractors in the general construction industry statewide and in

the Charlotte area. However, because the 2004 study provided

no t-test analysis on the private-sector disparity figures to calculate statistical significance, we cannot determine whether

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this private underutilization was "the result of mere chance."

Eng’g Contractors, 122 F.3d at 914.

Nor did the State present evidence indicating the extent to

which women-owned businesses competing on public-sector

road projects—the targets of the remedial statute—vied for

private-sector subcontracts in the general construction industry. This evidentiary gap is troubling because prime contractors overutilize women subcontractors in the public sector.

Thus, women-owned businesses may well seek less privatesector work.

The State also failed to present any anecdotal evidence

indicating that women subcontractors successfully bidding on

State contracts faced private-sector discrimination. See Md.

Troopers, 993 F.2d at 1077 (warning against inferring discrimination from statistics alone); cf. Coral Constr., 941 F.2d

at 933 (relying on a lengthy affidavit from a woman business

owner describing her success in winning public dollars, but

her failure in private-sector contracting). Missing, too, is any

evidence that prime contractors that discriminate against

women subcontractors in the private sector nevertheless win

public-sector contracts. Cf. Concrete Works, 321 F.3d at 976-

77 (relying on anecdotal evidence that general contractors that

used minority and women subcontractors on public projects

refused to use them on private projects).11

11We do not suggest that the proponent of a gender-conscious program

must always tie private discrimination to public action. See Ensley Branch,

NAACP v. Seibels, 31 F.3d 1548, 1580 (11th Cir. 1994) (holding that

intermediate scrutiny does not require showing government involvement

in discrimination); Coral Constr., 941 F.2d at 932. But see Mich. Rd.

Builders, 834 F.2d at 595 (requiring evidence of discrimination in public

sector). Rather, we simply hold where, as here, there exists substantial

probative evidence of overutilization in the relevant public sector, a state

must present something more than generalized private-sector data unsupported by compelling anecdotal evidence to justify a gender-conscious

program. 

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Moreover, the State failed even to establish the amount of

overlap between general construction and road construction

subcontracting. Although road construction involves some of

the same subcontracting work as general construction, the

dearth of evidence as to the correlation between public road

construction subcontracting and private general construction

subcontracting severely limits the private data’s probative

value in this case.

C.

Finally, the anecdotal evidence that the State did present

falls short of justifying the Program’s gender participation

goals. For example, although 53 percent of women respondents agreed that an exclusive network exists in the construction industry, only 27 percent believed that the network

excluded their firms. By contrast, 78 percent of African

American respondents and 74 percent of Native American

respondents agreed such a network exists, and 53 percent of

African American respondents and 35 percent of Native

American respondents believed that they, themselves, had

been excluded. Further, while a majority of African American

and Native American respondents believed that prime contractors held them to higher standards than nonminority

males, only 40 percent of women respondents held this view.

D.

In short, with respect to the gender participation goals, the

State cannot overcome the strong evidence of overutilization

in the public sector. The proffered private-sector data fails to

establish discrimination in the particular field in question. See

Ensley Branch, 31 F.3d at 1580-81. Further, the anecdotal

evidence indicates that most women subcontractors in North

Carolina do not experience discrimination. Accordingly, we

conclude that the State failed to present sufficient evidence to

support the Program’s current inclusion of women subcontractors in setting participation goals.

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VI.

To summarize, North Carolina has put forth strong evidence that discrimination against African American and

Native American subcontractors continues to limit their participation on state-funded highway construction contracts.

The State has a compelling interest, indeed an "absolute

duty," to remedy this injustice, affecting as it does the distribution of public funds. See Croson, 488 U.S. at 518 (Kennedy, J., concurring in part and concurring in the judgment)

(a "[s]tate has the power to eradicate racial discrimination and

its effects in both the public and private sectors, and the absolute duty to do so where those wrongs were caused intentionally by the State itself").

The State has enacted a narrowly tailored response to this

problem that addresses discrimination while respecting the

virtues of the free market. Thus, unlike the City of Richmond’s unconstitutional set-aside program in Croson, North

Carolina’s statutory scheme does not mandate that specific

percentages of subcontracting dollars always be apportioned

to minority groups or women. Rather, the statute prohibits the

Department from setting project-specific participation goals

"rigidly." N.C. Gen. Stat. § 136-28.4(b1). Instead, such goals

must be "consistent with availability of" minority and women

subcontractors. Id.; cf. Contractors Ass’n II, 91 F.3d at 607

(finding that city’s ordinance mandating across-the-board

goals for minority- and women-owned business participation,

based on percentage of minorities and women in the general

population, was not narrowly tailored). And if the realities of

the marketplace prevent a prime contractor from meeting

these project-specific goals, the State waives them on a showing of good faith efforts to solicit and consider bids from

minority and women subcontractors. Only in the rarest of

cases has a prime contractor failed to demonstrate good faith

efforts to solicit minority or women subcontractors.

Moreover, as amended in 2006, section 136-28.4 does not

authorize the Department to set project-specific participation

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goals unless the most recent disparity study, which must be

conducted at least every 5 years, demonstrates "a strong basis

in evidence of ongoing effects of past or present discrimination that prevents or limits disadvantaged [minority and

women subcontractors] from participating in [state-funded

transportation contracts] at a level which would have existed

absent such discrimination." N.C. Gen. Stat. § 136-28.4(b); cf.

Croson, 488 U.S. at 506 (faulting Richmond’s set-aside program for "random[ly] inclu[ding] . . . racial groups that . . .

may never have suffered from discrimination in the construction industry"); Rothe II, 545 F.3d at 1049 (finding statute

with across-the-board 5 percent goal of minority participation

unconstitutional on its face because it was not supported by

strong basis in evidence).

Thus, the North Carolina General Assembly has crafted

legislation that withstands constitutional scrutiny. In light of

the statutory scheme’s flexibility and responsiveness to the

realities of the marketplace, Rowe has failed to establish "that

no set of circumstances exists under which [section 136-28.4]

would be valid." Salerno, 481 U.S. at 745. Indeed, given the

State’s strong evidence of discrimination against African

American and Native American subcontractors in publicsector subcontracting, the State’s application of the statute to

these groups is certainly constitutional. Thus, Rowe has

"failed to shoulder [its] heavy burden" in challenging the

facial validity of section 136-28.4. Id.

However, because the State has failed to justify its application of the statutory scheme to women, Asian American, and

Hispanic American subcontractors, we cannot find those

applications constitutional.12 When some applications of a

statute are constitutional, but others are not, the Supreme

12We emphasize that although the 2004 study did not provide a basis to

enforce the Program with respect to these groups, we recognize the possibility that at some point in the future the State may come forth with evidence that would justify their inclusion in the Program. 

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Court has explained that courts should strive, if feasible and

consistent with the legislature’s intent, "to enjoin only the

unconstitutional applications of a statute while leaving other

applications in force." Ayotte v. Planned Parenthood of N.

New Eng., 546 U.S. 320, 329 (2006); cf. Contractors Ass’n I,

6 F.3d at 1008 (severing unconstitutional subsections of challenged statute, rather than striking down entire statute for

"overinclusiveness").

This course is entirely appropriate here. Under controlling

North Carolina law, it seems clear that "the remaining [applications] of the legislation can stand on [their] own," and that

"the General Assembly would have enacted the remainder

absent the offending portion." State v. Webb, 591 S.E.2d 505,

511 (N.C. 2004) (internal quotation marks omitted). Applying

the challenged statute only to African American and Native

American subcontractors fulfills the statute’s purpose of remedying the "ongoing effects of past or present discrimination"

in state-funded transportation contracts. N.C. Gen. Stat.

§ 136-28.4(b). We are satisfied that the General Assembly

would choose to maintain the application of the statute to

remedy discrimination against any minority that continues to

suffer it. Mindful that "a court cannot use its remedial powers

to circumvent the intent of the legislature," Ayotte, 546 U.S.

at 330 (internal quotation marks omitted), we will respect the

will of the people of North Carolina and their elected leaders.

Accordingly, we affirm the judgment of the district court

with regard to the facial validity of the statute, and with

regard to its application to African American and Native

American subcontractors. We reverse the district court’s judgment insofar as it upholds the constitutionality of section 136-

28.4 as applied to women, Asian American, and Hispanic

American subcontractors. We remand to the district court to

fashion an appropriate remedy consistent with this opinion.

AFFIRMED IN PART, REVERSED IN PART,

AND REMANDED

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NIEMEYER, Circuit Judge, concurring in the judgment:

With genuine admiration for the care with which the majority opinion addresses the principal issues—and I concur in

much of what is written—I remain troubled by contextual

issues that the majority has not addressed and that indicate an

effort by North Carolina to maintain a broad affirmativeaction program to assure minority representation and diversity

in public contracting, regardless of whether actual discrimination exists.

When we decide cases involving race-conscious and

gender-conscious government programs, we must remain

especially vigilant in recalling that such programs are presumptively unconstitutional, in violation of the Equal Protection Clause. See Shaw v. Reno, 509 U.S. 630, 643-44 (1993).

Moreover, to approve race-conscious or gender-conscious

programs simply to further a policy of diversity in public contracting perpetuates, not eliminates, discrimination. Only

when there is clear evidence of actual discrimination should

we approve a state government’s race-conscious or genderconscious considerations, and only then when the program is

designed to remedy the discrimination.

It is noteworthy that the North Carolina program in this

case was created without any evidence of discrimination.

Rather, it was initiated in the 1980s with a quota system that

was the product of policies designed to spread public contracting among minorities and women simply for the purpose

of racial and gender representation. The State only undertook

to determine whether actual discrimination existed in public

contracting when City of Richmond v. J.A. Croson Co., 488

U.S. 469 (1989), made clear that North Carolina’s program

was constitutionally infirm. As a result, North Carolina has

never had—and, indeed, never will have—the opportunity to

determine whether discrimination existed in public contracting absent the affirmative-action program’s effects on the

market. And even after concluding that discrimination did in

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fact exist, the State reinstituted the exact same quotas that it

had previously used.

To be sure, the program has changed over time, but even

the immediate past version of the North Carolina statute

required that quotas be satisfied through the participation of

a broad array of ethnic peoples, such as Portuguese Americans, Asian Americans, American Indians, and Alaskan

natives, regardless of whether evidence of discrimination

against those groups existed.

In its current form, the North Carolina statute creating the

affirmative-action program provides little to no guidance

regarding how it is to be implemented, leaving an unnerving

amount of discretion to a small number of Department of

Transportation administrators. The current statute uses the

2004 disparity study as a predicate to justify race-based and

gender-based remedial efforts and directs the Department of

Transportation to commission future studies to determine

whether future remedial efforts are necessary. Specifically,

the statute requires the North Carolina Department of Transportation to "establish annual aspirational goals, not mandatory goals, . . . [that] shall not be applied rigidly on specific

contracts or projects." N.C. Gen. Stat. § 136-28.4(b1).

But the statute does not provide any range nor give any

criteria for these goals. Instead, it authorizes the Department

to act based solely on the Department’s own interpretation of

the 2004 study and future studies that the Department itself

must commission. As a result, Department administrators, not

state legislators, are those responsible for determining which

groups qualify as "minorities," and they are statutorily authorized to make that determination when a group has been "subjected to discrimination in the relevant marketplace" and has

been "adversely affected in [its] ability to obtain contracts

with the Department." Id. § 136-28.4(c)(2) (emphasis added).

These administrators are also given the power to determine,

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in their sole discretion, adequate levels of representation in

obtaining public contracts for each minority group.

After the Department, in its discretion, adopts "aspirational

goals," it is given the additional authority to decide whether

prime contractors have made "good faith efforts" to meet the

aspirational goals, which in themselves are not to be "applied

rigidly."

The result is an amorphous exhortation to favor minorities

and women in public contracting. I question how it can be

concluded that actual discrimination is being addressed and,

if so, whether the means used can be sufficiently narrowly tailored so as to comply with the Constitution. I take little comfort from the fact that the only meaningful oversight of this

process has been review by the federal courts following years

of litigation. While the majority in this case thoroughly scrutinizes whether the implementation of this program is genuinely aimed at fighting actual discrimination in state

contracting, the fact that such review is necessary demonstrates that the State and its administrators have few if any

standards by which they ensure that their program complies

with constitutional requirements.

Our holding in this case is prime evidence of the problem.

We conclude that the state officials who used the 2004 study

to justify favoring Asian Americans, Hispanic Americans, and

women had insufficient evidence of discrimination to do so.

That finding hardly instills confidence in the State’s continued

application of ad hoc standards purportedly designed to remedy actual discrimination.

Moreover, the arbitrariness of the entire North Carolina

structure for determining when to consider race and gender is

displayed by the weakness of the statistical data on which

North Carolina officials have been willing to rely. Several

examples demonstrate this.

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First, as noted by the majority, the data in the study regarding contracts awarded by the Department’s division offices is

statistically invalid. While the majority of contract dollars

were handed out on contracts from the central office, the

division-let contracts represented approximately one-third of

the total value of state contracts. The program affords privileges to women and minorities in bidding on such contracts,

despite the fact that no evidence whatsoever indicates that

these contracts were awarded in a disparate manner.

Second, the State asserts that a decrease in subcontracts

going to minority-owned and women-owned enterprises during a period when the program was suspended indicates that,

absent preferences for minorities and women, discrimination

would take hold. But the significance, if any, in the drop in

the utilization of minorities and women during suspension of

the program is a classic chicken-and-egg problem. If the

underlying market for contracting in North Carolina was discriminatory prior to implementation of the program, then the

drop in utilization during suspension of the program may have

reflected the fact that the program had helped remedy discrimination. If, on the other hand, the underlying market was

nondiscriminatory, then the drop in utilization merely

reflected the removal of the unfair competitive advantage

given to minorities and women. See W. States Paving Co. v.

Wash. State Dep’t of Transp., 407 F.3d 983, 1000 (9th Cir.

2005).

We cannot resolve this question because no evidence exists

regarding whether disparities existed at the time the program

first began. It might be surmised that fewer minority-owned

and women-owned businesses will receive subcontracts on

Department projects if the program is suspended. But it cannot be determined whether this change would reflect a return

to a fair, competitive status quo or a discriminatory marketplace. Moreover, regardless of how we interpret the drop in

utilization during the period of the program’s suspension, it is

rather bold, and perhaps even invalid, to assume that the mar46 H.B. ROWE CO. v. TIPPETT

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ket will react to suspension of the program in the same manner that it did 20 years ago.

In addition, even if we had reason to believe that the drop

in utilization during suspension of the program indicated

potential discrimination in the marketplace in the early 1990s,

it still could not justify the continued use of race-conscious

and gender-conscious policies. Affirmative action is only

appropriate to remedy past or ongoing discrimination, not to

stave off discrimination that might hypothetically occur in the

future. See Hayes v. N. State Law Enforcement Officers Ass’n,

10 F.3d 207, 217 (4th Cir. 1993) ("[E]ven when race can be

taken into account to attain a balanced work force, racial classifications may not be employed to maintain a balanced work

force" (emphasis in original)). Should intentional discrimination appear without this program, future remedial efforts

could become appropriate. But we should not ratify the government’s use of race in perpetuity based on mere concern

that such a result might occur. Were we to do so, we would

send the terrible message that our society has been and always

will be divided by race, that racial hostility is an inevitable

consequence of a heterogeneous society, and that government

cannot escape classifying its people by the color of their skin.

Third, as the majority rightly points out, the evidence

regarding state subcontracting practices indicates that women

are grossly overutilized. The State nonetheless contends that

women too must be benefited by affirmative action. To justify

this "aspiration," the State relies on evidence of purported discrimination in the private building construction industry without demonstrating how that evidence justifies a need for

affirmative action in awarding public contracts from the

Department of Transportation. Because this evidence comes

from a wholly dissimilar contracting market, it is inappropriate to rely on it to draw inferences regarding Department contracting. Moreover, the evidence from the private building

sector is at best mixed and therefore fails to justify affording

privileges to women.

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Fourth, when considering only valid statistical evidence—

data that are actually tied to contracts awarded by the Division’s central office—the evidence fails to justify the sweep

of preferential privileges afforded to each minority group and

women in the program. While each of the minority groups

were shown to be underutilized in terms of subcontract dollars

relative to their market share, only African Americans were

underutilized at a statistically significant level. Cf. Croson,

488 U.S. at 501, 509 (inference of discrimination justifying

remedial affirmative action may only be drawn by evidence

of "gross" and "significant" disparity). The majority recognizes that Native Americans were underutilized at a confidence level of approximately .15, a result that is not, in most

conventional statistical analyses, considered statistically significant.* Similarly, the regression analysis concluding that

firm experience, capacity, and the like were not responsible

for the shortfall in contract dollars supported a finding that the

disparities were a result of race and not other factors only with

respect to African Americans. In other words, with regards to

Native Americans—as with Asian Americans and Hispanic

Americans—the study could not conclude with confidence

that the shortfall in contract dollars was not due to mere

*Here I follow the study in examining statistical significance at the .05

level. When a result is significant at the .05 level, it means that the probability of that result occurring by chance is 5% or less. See, e.g., Sherri L.

Jackson, Research Methods and Statistics: A Critical Thinking Approach

168-69 (3d ed. 2009). While statistical significance is arbitrary and imperfect, the .05 confidence level is often used in the social sciences as a

marker of when a result is a product of some external influence, rather

than ordinary variation or sampling error. See, e.g., Earl Babbie, The Practice of Social Research 483 (12th ed. 2010). 

We need not decide here whether statistical significance at the .05 level

is the bellwether by which we determine whether the State’s statistics are

sufficient to support a compelling state interest. Rather, I merely point out

that the study’s results regarding Native Americans, Hispanic Americans,

and Asian Americans do not reach the level of significance that the study

itself sets out as the standard by which one could confidently conclude that

discrimination was at work. 

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chance, a lack of firm capacity, or some other race-neutral

explanation.

The Department, perhaps recognizing these infirmities,

chose to fill the gaps in its data regarding public contracting

by relying on inapplicable and therefore invalid data from the

private sector. This demonstrates the structural weakness of

the entire program. It is indeed disquieting that the State

believes that such a flimsy approach can justify governmental

decisionmaking based on race and gender. The majority

wisely rejects the State’s approach and properly holds the

State to the burden of demonstrating a strong basis in evidence leading to an inference of discrimination in Department

subcontracting. Cf. Croson, 488 U.S. at 500. But the fact that

North Carolina has come to federal court and unrepentantly

relied on dubious—and, in some cases, completely discredited

—data to support its conjecture that discrimination is persistent in state contracting might well lead us to conclude that

the State is now more interested in seeking a post hoc justification for a program designed to engineer proportional race

and gender representation, regardless of discrimination, than

in conducting a good-faith, open-minded inquiry into whether

remedial efforts are necessary.

I do not doubt that North Carolina’s program was conceived with the benign motive of preventing discrimination in

public contracting. But its approach of making contracting

decisions in favor of minorities and women, based on the

flimsiest of evidence, runs the risk of actually creating and

perpetuating discrimination.

While I would be more inclined to strike down the entire

program as a violation of the Equal Protection Clause, I am

willing to allow, as the majority does, North Carolina the

opportunity to review and adjust its program in light of what

we have written.

Accordingly, I concur in the judgment.

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BEATY, Chief District Judge, concurring:

I concur fully in the majority opinion in this case, and I

agree wholeheartedly with the conclusion that the North Carolina Minority Business Enterprise Program, N.C. Gen. Stat.

§ 136-28.4, is constitutional on its face and as applied to African Americans and Native Americans. I add only a few additional observations. 

First, I am compelled to note that, in my view, the inequities that are still evident in public contracting with respect to

African American subcontractors are a present reminder of

past racial discrimination in North Carolina, racial discrimination that included not only enslavement and the denial of full

personhood under the Constitution in the past, but that also

included legally sanctioned exclusion from the most basic

rights of citizenship within not-too-distant memory. See

Regents of the University of California v. Bakke, 438 U.S.

265, 387-396 (1978) (Marshall, J., dissenting) (surveying the

history of racial discrimination in this country and the

Supreme Court’s role in sanctioning that discrimination in

Plessy v. Ferguson). In light of this history, the present disparities in public contracting could not be viewed as the result

of non-discriminatory market forces, nor could the statistics

showing the exacerbation of those disparities when the Program was previously suspended be viewed as reflecting a fair,

competitive status quo. Instead, in the context of history, these

disparities reflect the present effects of past discrimination,

and the State has recognized this, as discussed in the majority

opinion. In my view, the Program enacted by North Carolina

serves the highest interest of the State in attempting to remedy

this past discrimination and is fully consistent with the promise and purpose of the Fourteenth Amendment. Although

there is expectant hope that at some point the Program will no

longer be necessary to redress the present effects of this history, we cannot deny the history of discrimination or its lingering effects. 

50 H.B. ROWE CO. v. TIPPETT

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Finally, I would note that the majority opinion has held that

the Program is unconstitutional as applied to Hispanic Americans and Asian Americans, based on the lack of statistically

valid information presented by the State as to these groups.

However, as noted in the majority opinion, the State may, in

the future, include these groups within the Program if the

State undertakes additional study and determines that inclusion of these groups in the Program is warranted. Likewise,

the majority opinion has held that the evidence presented by

the State would not establish a sufficient basis to justify the

Program as to nonminority women, even using intermediate

scrutiny. However, the State may very well include nonminority women in the Program in the future if sufficient basis

exists, and in making this determination, the State may consider any underutilization of nonminority women that occurs

in the absence of the Program.

Therefore, I am pleased to concur fully in the majority

opinion in this case.

H.B. ROWE CO. v. TIPPETT 51

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