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Fullilove v. Kreps

decided: September 22, 1978.

H. EARL FULLILOVE, FRED MUNDER, JEREMIAH BURNS, JOSEPH CLARKE, GERARD A. NEUMAN, WILLIAM C. FINNERAN, JR., PETER J. BRENNAN, THOMAS CLARKSON, CONRAD OLSEN, JOSEPH DEVITTA, AS TRUSTEES OF THE NEW YORK BUILDING AND CONSTRUCTION INDUSTRY BOARD OF URBAN AFFAIRS FUND; ARTHUR GAFFNEY AS PRESIDENT OF THE BUILDING TRADES EMPLOYERS ASSOCIATION, GENERAL CONTRACTORS ASSOCIATION OF NEW YORK, INC., GENERAL BUILDING CONTRACTORS OF NEW YORK STATE, INC., AND SHORE AIR-CONDITIONING CO., INC., PLAINTIFFS-APPELLANTS,
v.
JUANITA KREPS, SECRETARY OF COMMERCE OF THE UNITED STATES OF AMERICA, THE STATE OF NEW YORK AND THE CITY OF NEW YORK, THE BOARD OF HIGHER EDUCATION AND THE HEALTH & HOSPITALS CORPORATION, DEFENDANTS-APPELLEES.



This is an appeal from an order of the United States District Court for the Southern District of New York, Werker, J., denying plaintiffs' application for a preliminary injunction restraining the defendants from implementing a federal statute requiring that 10 percent of all federal funds appropriated for specified public works projects be expended on bids tendered by minority business enterprises, and dismissing the action. Affirmed.

Before Oakes, Circuit Judge, and Blumenfeld*fn* and Mehrtens,*fn** District Judges.

Author: Blumenfeld

This is an appeal from the decision of the District Court, Werker, J., that upheld the constitutionality of section 103(f)(2) of the Public Works Employment Act of 1977 (PWEA), 42 U.S.C. § 6705(f)(2). The statute mandates that "no grant shall be made under this chapter for any local public works project unless the applicant gives satisfactory assurance to the Secretary that at least 10 per centum of the amount of each grant shall be expended for minority business enterprises." "Minority business enterprise" (MBE) is defined as "a business at least 50 per centum of which is owned by minority group members . . . ." The statute defines minority group members in racial terms: "citizens of the United States who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and Aleuts."

Appellants are several associations of contractors and subcontractors and a firm engaged in heating, ventilation and air conditioning work. Their application for a preliminary injunction on their petition for declaratory and injunctive relief to prevent the Secretary of Commerce as program administrator from enforcing the MBE provision was consolidated with a hearing on the merits. The District Court found that the provision was a constitutionally valid exercise of congressional power to remedy the effects of past discrimination in the construction industry. The District Court denied their petition and dismissed the complaint. We affirm.

I.

In 1976 Congress enacted the Local Public Works Capital Development and Investment Act of 1976, Pub.L.No.94-369 (July 22, 1976), 90 Stat. 999-1012, 42 U.S.C.

§§ 6701-6735, designed to help alleviate nationwide unemployment in the economically depressed construction industry by appropriating $2 billion for public works projects. The Secretary of Commerce was to administer the program through the Economic Development Administration (EDA), charged with distributing funds under the Act to state and local governments. Congress mandated that the program be administered expeditiously*fn1 and the Secretary approved grants for the entire appropriation by February 1977. In May 1977, Congress supplemented the initial appropriation through the Public Works Employment Act of 1977, Pub.L.No.95-28 (May 13, 1977), 91 Stat. 116-121, 42 U.S.C. §§ 6701-6736, to the extent of an additional $4 billion.

During the consideration of the PWEA on the floor of the House, the MBE requirement was introduced as an amendment to the Act. As contained in the final enactment, the provision reads:

"Except to the extent that the Secretary determines otherwise, no grant shall be made under this chapter for any local public works project unless the applicant gives satisfactory assurance to the Secretary that at least 10 per centum of the amount of each grant shall be expended for minority business enterprises. For purposes of this paragraph, the term "minority business enterprise' means a business at least 50 per centum of which is owned by minority group members or, in case of a publicly owned business, at least 51 per centum of the stock of which is owned by minority group members. For the purposes of the preceding sentence, minority group members are citizens of the United States who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos and Aleuts."

The appellants' attack is aimed only at the amendment; they do not contend that the inclusion of the amendment rendered the entire statute unconstitutional.

The question presented in this appeal is a narrow one. We are called upon to decide whether Congress acted in a constitutionally permissible manner in conditioning the receipt of federal grants for local public works projects under the PWEA upon the requirement that 10 percent of the grants be allocated to minority business enterprises.

II.

At the outset we note that when Congress seeks to exercise its spending powers, it is required to distribute federal funds in a manner that neither violates the equal protection rights of any group nor continues the effects of violations that have occurred in the past, for

" "simple justice requires that public funds, to which all taxpayers of all races contribute, not be spent in any fashion which encourages, entrenches, ...


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