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case number 15-5176.

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Brownfield and Bellman v. Appellant v. United States Department of Defense at L. Mr. Barton for the Appellant, Ms.

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Quong for the Appellees.

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I'm David Barton, representing Rothy Development Corporation.

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My clients are on the first row here, the owners of the company.

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This case started in 1968, essentially, in the unrest of 1968, as I look at the panel.

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I see a couple of people who may remember that.

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Would you like to guess which of us can?

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But I won't say.

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But anyway, it came up with no support or data at that time.

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And the reason that I mentioned that it was the unrest of 68 is that it was more emotional at that point.

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And we didn't have the rules and restrictions for doing the kind of thing that 8A does at that point.

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Whether it was correct or not, I don't know.

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But the government says now that Congress justified and tailored the statute for all time, for all possible races,

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in all possible areas in 1978, and that just doesn't make sense within what the current laws are.

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Is your argument that the statute itself creates racial classifications?

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Uh, interesting question because the statute identifies who the races are.

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And of course, as we all know, that's one of the most difficult things that anybody can do is to have a government tell you what race is who.

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Hopefully we never come to that.

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We had that problem in

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But what I'm getting is I read this statute, it's focusing on those who are disadvantaged and gives race as one example of disadvantage in the statute.

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Now when you get to the regulations, the regulations clearly create racial classifications.

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Is your challenge

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To the regulations, to the statute, or... Our challenge is to the presumption, the definition, and the goals that were set that are being given... In where?

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In the statute or in the regulations?

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In the statute.

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In the statute.

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The regulations went beyond the statute, and the fact that SBA, we would argue... But if we didn't have the regulations, hypothetically, if the regulations weren't before us, would you have the same challenge?

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I don't think we would have an 8A if the regulations were before us, because we wouldn't have the executive making rules of how they interpret what they think 8A is supposed to be doing.

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And that's one of the biggest problems that we have, is the overreach of the agency.

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So is the constitutional flaw in the statute alone, or is it in the statute and the regulations together?

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It's in the statute alone in that they did set a goal, they set the presumption, and established that it would be for certain races.

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Then what they did... Mr. Burke, can I just stop you right there, because you're asking us to officially invalidate an act of Congress, and I'd like to focus on exactly where you find

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a race-based presumption.

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And let me just focus you.

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The statute in 15 U.S.C.

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631 F identifies Black Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, and Native Hawaiian organizations and other minorities as groups that have suffered the effects of discriminatory practices.

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Just as an observation, those groups have

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suffered the effects of discrimination.

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I don't think that's really in dispute.

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And the statute in Section 8A, which is the focus of your complaint, says that the SBA is empowered, whenever it deems it necessary and appropriate, to enter into contracts with the government and to make awards to small business concerns owned and controlled by socially and economically disadvantaged individuals.

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And it says, for purposes of this section, a socially and economically disadvantaged small business is a business 51% controlled by socially and economically disadvantaged individuals.

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And then it says, and I think this is the part that you must be focusing on, it says in A5,

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Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.

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It doesn't say African Americans or Native Americans or Asian Pacific Americans who have been subjected anyway.

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So if I've been subjected as a white person to

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racial or ethnic prejudice or cultural bias because of my identity as a member of that group.

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It sounds like, at least on the face of the statute, that it's open to me as well.

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It's the regulation, as I read it, that ties it up and says, no, no, we're actually giving a presumption of disadvantage to certain groups.

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But just looking at the statute, I don't see a race-based presumption.

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Am I wrong?

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You aren't wrong, but the distinction is that there is a presumption, there is a racial designation to support a presumption for the identified minorities, and then they set a goal as to how many of those will be able to use the program.

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The government likes to use the issue that anybody who can come in and show societal or

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discrimination or economic discrimination can join.

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But the problem is that's not why the statute was enacted in the first place.

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The statute was enacted for the purpose of giving racial presumption of disadvantage to the named minorities that you read off.

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Now, it did have the tribes in there which don't apply in this case because the tribes came in under a political issue as opposed to a racial issue.

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But Native Americans are identified.

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Excuse me, you're dealing all of that with purpose now.

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Can you deal with the text?

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Because I think the question was about the text.

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What is there in subsection five that creates this racial presumption that you're talking about?

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the designation to SBA to implement what SBA thinks might be the... Where is that in the statute?

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The statute defines socially disadvantaged individuals.

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That's what you have to be to qualify for ADAY, right?

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Right.

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In terms of the statute, as Judge Pillard was pointing out, is that you have to show, you have to show that you have been the target of

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of racial or ethnic prejudice or cultural bias.

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Does it show that you have to be a racial minority?

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For example, I mean, just to clarify, so you're right that they were thinking about race, among other things.

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They had a proposal, legislative proposal, to do the kind of race-based presumption.

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If you're black, you're presumed socially disadvantaged.

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And they took that out of what they enacted.

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Because I think even then, they were sensitive to the kinds of concerns that you and your client are raising.

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So I'm asking a really formal question about where the presumption is.

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And as I read it, I see it in the regulation.

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It's not that it's not there, but where I see it is in the regulation 124.103b1.

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five groups, and within them, I think, 37 subgroups are presumptively socially disadvantaged.

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But I don't see that in the statute.

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So I'm just trying to confirm with you that that's the way you also read it.

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Well, they identified the races that they had an interest in the statute.

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Well, they said, we're worried about social disadvantage.

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We're worried about social disadvantage based on prejudice and bias.

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Here are some groups that we observe have been the target of bias.

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I don't think you would deny that.

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that members of the Hispanics have been the target of bias in our country?

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You wouldn't deny that.

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No.

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Which isn't to say it's only that.

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It isn't to say every one of them.

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But it's just, hey, we're telling the public what we're doing here, right?

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So yes, there is race mentioned.

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But a racial presumption in the statute, I don't see it.

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And I guess what I'm asking is, do you see it?

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Or are you really just saying, well, here's where they identified it?

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Well, the problem is, and you've identified it completely, is that they delegated to the SBA to do these things that you're talking about.

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That delegation's improper.

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And you say, well, I don't see it in the statute.

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No, you don't see it in the statute, because they neither made findings as they established the statute, nor did they identify the things that were supposed to be done.

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They delegated that to the SBA.

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And so is that your argument that the unconstitutional, the alleged unconstitutional activity took place when the SBA decided to use these racial presumptions?

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Yes, right.

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And I'm over my time, or I think I'm getting over my time, but it sounds interesting, and I've been up here for a long time on other ones.

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I think we're still interested in hearing from you.

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I just have one more question, although.

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Go ahead.

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This is, as I read it, a pipeline program.

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They're trying to make sure that disadvantaged businesses are given services and support and mentoring and opportunities to get on their feet and do better and then graduate out of the program.

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figure out what you think is the appropriate pool for purposes of disparity analysis.

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And you seem to say that the relevant qualified businesses would be businesses that are ready, willing, and able to do a federal contract.

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I think that Congress would say, no, we're interested in people who are not quite ready and not quite willing, not quite able because of discriminatory obstacles.

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Taking that as congressional objective, can you tell me what's wrong with the studies that are there that are looking a little more broadly at businesses that exist but that might not have bonding or access to credit?

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Well, in our briefs, as we say, the biggest problem with the studies that were introduced in this case, they apply to state and local jurisdictions.

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The program is set up to give presumptions, and it's primarily DOD contracting, because they're about 95 percent of the contracting of the federal government.

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I lost my train of thought.

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The problem that we have with the statute is, and I have to go back to delegation, Congress set no standards, but they delegated to SBA.

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So SBA has picked up with no standards.

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They've also picked up with no benchmarks to identify who the people are who are being

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inappropriately discriminated against or whatever.

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Disparate impact is the way that we get to that, but, you know, Fisher and Adarin and Croson all require a very, an almost exacting nexus between those numbers that you get in the studies.

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What type of number would they need to show to provide the evidence you think is required?

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Well, first of all, and I can kind of

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We went after the 1207 program that was mentioned in our brief previously.

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During the time of the 1207 program, right after Adiran, the government tried to put together what were called benchmarks.

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And those were numbers of the federal contracts had been given, and what races got them, and how much money, and so on.

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They found that they didn't have the numbers.

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They still don't have the numbers today.

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But they dropped that project.

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But the thing was is that,

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The 1207 program was reauthorized at different times with, we argued, not good input, and we won on there not being good input.

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So it was found facially unconstitutional.

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The interesting aspect of that is, is it had the same, there were seven

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disparity studies in that.

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So just as they started the benchmarks in 98 after Adiran, after the 1207 program, we just started seeing the studies from all over the country just being thrown into Congress without any studied reasoned argument before Congress of whether they were good, whether they fit what Congress wanted to do, or so on.

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But that's what the government comes to you today is with those studies to say, look, these show disparities.

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But the unfortunate part about that is, is that those disparities don't show discrimination.

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And that came out in the Texas case recently, the housing FHA case, that they said, you know, disparities, and this was a repeat of Atterand also, that disparities themselves don't show discrimination.

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You've got to have some good anecdotal evidence.

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of people saying, I was specifically discriminated against.

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Wait a second.

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You're saying anecdotal evidence trumps statistical evidence?

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I thought your better argument would be that there's inadequate statistical evidence here, that they're not comparing it against the right – to say that 0.7 percent of federal contracts go to minority-owned businesses when 4 percent of

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businesses in the country of minority owned.

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Isn't your best argument, that's not the right comparison because we're not looking at 4% of minority businesses.

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We need to look at minority businesses that are qualified to get this type of contract.

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I thought that was your argument.

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Did I misunderstand?

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No, that's it.

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Are you now saying anecdotes trump that?

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That's it, and you just made it for me, because that's the problem they have.

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They don't have any statistics against which they can weigh it.

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But the anecdotal is the next step on to find out if there are disparities in those statistics, how are there disparities?

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We would argue that the disparities they have are somewhat

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uh, attributable to the manner in which the studies are done.

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They always use regression analysis and and they in the government, you know, jumps on the regression analysis and they say, well, they regressed the numbers and and showed that all these people were capable and they were capable because they were small businesses, even though they couldn't do the jobs.

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And this gets off in.

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So Mr Barton, this isn't this is it.

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It isn't

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difficult area.

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As you know, the courts, with the help of counsel, have for years struggled with it.

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I appreciate that the evidence supporting this program might not suffice to show, if you were suing in a court of law, that there was unconstitutional discrimination

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So it wouldn't necessarily amount to actually, maybe it would, I don't know.

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But I don't take you to be saying it needs to be that, or am I wrong?

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Because we are familiar with what one has to prove in terms of qualitative and quantitative evidence in order to show there has been

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race-based discrimination here.

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As I read the cases, both from the Supreme Court and from our court, they require something less to show a strong basis in evidence to support affirmative action.

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And the question is, and maybe this is more a question for the government, what counts as a strong basis in evidence?

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I hear you to be saying, really, what would prove a case of unconstitutional discrimination?

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Can you satisfy me that you're not actually going that far?

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It has to be a, and the cases use the word exact over and over again, Adorand and Croason and Wigandt going all the way back.

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The cutoff from Fullilove was to get that exact connection between the numbers and the gold.

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Strong basis of evidence, is that a constitution, are you saying it has to violate the constitution or can you point to me how the standard you're proposing is something less?

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Strong basis of evidence isn't approved up

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constitutional case, or is that your position?

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It is a proved up constitutional case and you have to show that as an exact connection.

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That they have violated the constitution, therefore actually the court could come in and order them to remedy it.

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That's what you think needs to be shown before affirmative action.

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Right.

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So it needs to be overdone and start over again is the issue.

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in accordance with the cases.

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It would add or end and you get into the narrow tailoring, which one of the biggest problems with what they have is because they don't have any statistics and they don't even know where the disparities are.

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They can't narrowly tailor a program that will end at some time in the future, which brings up another issue.

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There's no sunset provision.

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In the eight a program in six thirty seven eight.

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So it can go on forever.

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The government uses it that uses the issue.

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Well, every one of the contractors is going to be out of the program in nine years.

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Well, that just means that my client is going to have another person come in in that position that's.

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going to take contracts away from him, for that one contractor's nine years.

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But it's going to go on forever.

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Am I right that part of your argument is that in 1978 and 1988, when the statute was first passed and then amended, that Congress did not have before it then any strong basis and evidence of discrimination in federal contracting?

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Is that your argument?

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Well, we talk about discrimination throughout all of this, but the real issue is they didn't even have a compelling interest.

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There was no strong basis in evidence at the time of enactment.

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Is that right?

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Is that your argument?

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The strong basis in evidence would support something that was associated with discrimination, but Congress made it completely clear – and this is in – everything that I'm saying is in the brief – but Congress made it completely clear that this was to grow businesses

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They didn't even get into the discrimination issue.

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They talked about discrimination.

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I'm not phrasing it right.

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What I'm trying to get at is a line of questions about what evidence Congress needed to have before, at the time of enactment, as opposed to evidence that's been compiled for litigation afterwards to show a strong basis.

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The issue over post-enactment evidence, that's what I want to speak about.

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And as I understand it, your position is that when we're scrutinizing

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the constitutionality of the Act in 1978, we're supposed to look at what Congress, the evidence Congress had before then, and that we can't look at evidence that's been developed afterwards.

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Am I wrong?

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Is that your argument or am I mistaken?

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For a facial challenge, that's correct.

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And unfortunately, you worked me into your area, which is the Shelby case.

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And Shelby followed on with the requirement that post enactment evidence wasn't appropriate, especially in a case the voting rights had been enacted 40 years before.

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This one's 31 years, 37 years before.

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with no statistical basis to it.

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I realize there was no statistical basis to it at that time, at least in the voting rights.

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You know, they had some basis to identify who was not getting the vote.

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They had some numbers.

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They had some statistics, but I thought so too.

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But the problem was is they couldn't, they didn't update it.

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And when they did update it, they used the same basis as they'd used 40 years before.

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That's actually what's interesting about this case is it's sort of the inverse in the sense that really the evidence is quite strong as I view it for the program today.

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And so to the extent that there are two

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points of inquiry.

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One is when the program was inaugurated, was it genuinely aimed at remedying discrimination?

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And we look for a basis for that determination.

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Is it just ongoing as discrimination is ebbing away?

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Do we today have a strong basis in evidence?

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And here I think the record on the latter is actually quite strong.

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I know you take issue with the disparity studies and you would demand more.

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But for a pipeline program that's trying to take fledgling businesses that are close to qualifying and get them to qualify, there's really quite intensive

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analysis and regression.

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I know it doesn't entirely please you, but the courts look to regression analysis precisely for its ability to isolate other potential explanatory factors, put them to one side, and say, what is left?

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Is it really race?

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Or is it some other characteristic?

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And I don't think you've pointed to other characteristics that are explaining the disparities here.

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So I think the

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The recent evidence here, we don't have the situation that we had in Shelby County.

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We have a much stronger record, no?

[00:22:50] Speaker 01:
You put me in a tough spot to have to disagree with you, so.

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That's your role.

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But the problem we have here is that there's no connection between what evidence there is.

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We would argue that the evidence is not good, and that's in the brief that

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The disparity studies that are in there don't properly rate specifically the capacity of the different businesses to perform any work at all, much less under this program and even if it's under a mentoring program or whatever.

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And that was the issue with the Rothy case that the Fed Circuit is that there are only seven

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disparity studies there.

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Here we have 107 disparity studies, but one of the big problems here, and I don't even like to get into it because this record does not need to be sent back.

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There was no analysis by either the Dynalanic court or the

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or the Rothi Court going into the details of the studies, especially the Rothi Court, because the judge in that case just adopted what Diane Lenick had said, and of course they were already short.

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But your problem is, is that there's absolutely no evidence at all to support the 8A program.

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And that gets into, even if the government does, even if the

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If Congress does have the right to somehow make findings of identified discrimination throughout the entire company, they made no findings in this case.

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They made no findings when they adopted this statute 37 years ago and then

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amended it 10 years later.

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They made no finding as to what they were after.

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However, they did make a strong statement that it was to increase business.

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The fact that they still have no evidence to support this program, this is a federal program that's being conducted on federal procurement,

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And they have the numbers that if they could support it, they need to use the numbers that they have for any disparities in their contracting.

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And the evidence in this case is specifically that the government, in answer to the question is, they've never found any discrimination in their contracting.

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They have no documented discrimination in their contracting.

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Yet they're trying to use societal numbers, which, as we all know, can't be societal.

[00:25:27] Speaker 01:
It has to be numbers that are directly related to the goal that they put in place.

[00:25:32] Speaker 01:
And the goal they put in place is that the federal government will give 5% of their contracts.

[00:25:39] Speaker 01:
And then that gets into the cases that, specifically Whitman, that says that, no it wasn't, it was.

[00:25:54] Speaker 03:
Right, Mr. Barton, over your time, we'll give you a couple minutes in reply.

[00:25:59] Speaker 01:
Okay, the Lutheran Church case is the one that

[00:26:03] Speaker 01:
found gold.

[00:26:04] Speaker 01:
And the reason I say this is because the government will say that, well, the statistics that they do have are across the country.

[00:26:12] Speaker 01:
5% is not very much.

[00:26:14] Speaker 01:
But it is a required goal.

[00:26:19] Speaker 01:
And it is coercive to the government to get that done.

[00:26:22] Speaker 01:
But the biggest problem in the case is, or the two biggest problems, is they had an improper purpose.

[00:26:28] Speaker 01:
And that was they just wanted to increase business.

[00:26:33] Speaker 03:
Mr. Barton, your time is up.

[00:26:35] Speaker 01:
I'll let you do that and apply.

[00:26:37] Speaker 01:
Thank you.

[00:26:37] Speaker 03:
Thank you.

[00:26:39] Speaker 03:
Ms.

[00:26:39] Speaker 03:
Klein?

[00:26:45] Speaker 04:
May I please support?

[00:26:46] Speaker 00:
Ms.

[00:26:46] Speaker 00:
Klein, do you want to lower it?

[00:26:48] Speaker 00:
There's a volume on the right of the podium down below.

[00:26:54] Speaker 00:
Just to make the whole podium a little bit less of a barrier and more comfortable.

[00:27:00] Speaker 04:
That's actually great.

[00:27:06] Speaker 04:
It's the first time I've seen this.

[00:27:09] Speaker 04:
May I please support?

[00:27:10] Speaker 04:
My name's Teresa Wong, and I represent the Department of Defense and the Small Business Administration.

[00:27:15] Speaker 04:
The 8A program represents the government's effort to ensure that the billions of dollars that the government spends on contracts do not make the federal government a passive participant in a system that has historically excluded minorities.

[00:27:29] Speaker 04:
The record in this case establishes that 8A has a plainly legitimate sweep and is therefore facially constitutional.

[00:27:36] Speaker 02:
Can I ask you the same question I started with your opposing counsel?

[00:27:41] Speaker 02:
In your view, does the statute create racial classifications, or is it the regulations?

[00:27:47] Speaker 04:
I believe it's the regulations, but the SPA is just... That's not an argument you've made.

[00:27:53] Speaker 02:
I would have thought that's a pretty significant distinction, given the way Supreme Court and our precedent plays out from there.

[00:28:00] Speaker 02:
I would have thought that was a huge

[00:28:02] Speaker 02:
But Congress provided- That's an argument you all must have made before in Dianne Lettick in the standing case.

[00:28:09] Speaker 02:
I'm probably not pronouncing it right.

[00:28:10] Speaker 02:
The Judge Edwards picked up on and argued.

[00:28:13] Speaker 02:
But you all haven't argued that since then.

[00:28:14] Speaker 02:
Why?

[00:28:16] Speaker 04:
I think just based on the way the cases are going, we feel that we just accept that as strict scrutiny.

[00:28:23] Speaker 02:
OK.

[00:28:24] Speaker 02:
So that's what we should do.

[00:28:25] Speaker 02:
We shouldn't give.

[00:28:28] Speaker 02:
OK.

[00:28:29] Speaker 02:
So that's what our approach should be, strict scrutiny to the statute.

[00:28:32] Speaker 02:
And you survive that.

[00:28:33] Speaker 02:
Is it your point?

[00:28:34] Speaker 00:
We do.

[00:28:35] Speaker 00:
We do.

[00:28:35] Speaker 00:
Of course there's strict scrutiny of any racial classification, but I don't take you to be conceding that the presumption is in the statute.

[00:28:43] Speaker 00:
You said there's a presumption because the statute is concerned about this.

[00:28:50] Speaker 00:
Correct me if I'm wrong, but I don't take your brief to be arguing that there is a race-based presumption in the statute.

[00:28:59] Speaker 04:
No.

[00:29:04] Speaker 04:
What we're arguing is that SBA is just carrying out what is in the statute, that Congress provided the standards in the statute and SBA in the regulations are just applying what's in the statute, the standards in the statute.

[00:29:16] Speaker 02:
Well, the distinction's a critical one, isn't it?

[00:29:18] Speaker 02:
Because based on Shaw and O'Donnell, as I read it, we're supposed to look at the information that was before

[00:29:27] Speaker 02:
the Congress or the agency who creates the racial classification.

[00:29:32] Speaker 02:
We're supposed to see if that decision-maker, that body of lawmakers, had before it adequate information.

[00:29:42] Speaker 02:
And there was a whole lot of information in 1978, and it was pretty darn weak based on our later case law.

[00:29:50] Speaker 02:
If we're saying, however, that it's the SBA's decision under the regulations, then we've got a different body of... I actually don't know what we have because it hasn't been briefed that way.

[00:30:00] Speaker 02:
We really don't have the information before us right now to decide what did the SBA know?

[00:30:06] Speaker 02:
What was the information they had?

[00:30:08] Speaker 04:
I don't think you need to ask what did the SBA know, because the SBA is just implementing what Congress has in the statute.

[00:30:15] Speaker 04:
So you have to see what Congress knew, and the SBA is just following what Congress has said.

[00:30:20] Speaker 02:
What if we were to decide that Congress didn't know enough?

[00:30:23] Speaker 02:
That there was not sufficient basis for Congress to conclude that there was a strong basis in evidence, so therefore no compelling interest?

[00:30:31] Speaker 04:
Well, we would disagree with that, but if that's true, then... Then what happens?

[00:30:36] Speaker 04:
Well, then the regulations would also be unconstitutional.

[00:30:43] Speaker 04:
But here, the record shows that Congress did have a compelling interest to enact 8A.

[00:30:51] Speaker 04:
as the Supreme Court said in Florida.

[00:30:52] Speaker 02:
What's the strong basis in evidence in 1978?

[00:30:54] Speaker 04:
In 1978, Congress had evidence that racial discrimination had created barriers for minority groups to participate fully.

[00:31:06] Speaker 02:
What was the statistical evidence?

[00:31:07] Speaker 02:
O'Donnell, we require statistical evidence.

[00:31:09] Speaker 02:
What was the statistical evidence in 1978 upon which you're not?

[00:31:12] Speaker 04:
What they knew in 1978 is that

[00:31:15] Speaker 04:
minorities owned only 3% of all businesses in the United States and received 0.7% of the federal contract dollars at the time.

[00:31:26] Speaker 02:
And granted that... That's not the right sort of comparison.

[00:31:33] Speaker 02:
You've got to show that qualified minority contractors were being discriminated against.

[00:31:41] Speaker 02:
Not that 4% of the country is owned by minority businesses and only 0.7% were awarded federal contracts.

[00:31:51] Speaker 02:
You can't show that because there are all sorts of different minority businesses that aren't in the game of getting defense contracts.

[00:31:59] Speaker 04:
Granted that the data in 1978 was not as refined or as sophisticated as more current evidence of discrimination.

[00:32:06] Speaker 02:
It wasn't legally adequate.

[00:32:07] Speaker 04:
I'm sorry?

[00:32:08] Speaker 02:
It wasn't legally adequate under our case law.

[00:32:11] Speaker 04:
under the current case law, but what we did find is that it was pretty substantial because as the Supreme Court found in Fully Love, which also involved another challenge to a federal statute, that Congress had abundant evidence in 1977 to find that... The world has changed drastically since Fully Love.

[00:32:30] Speaker 02:
very real question what precedential value it has at all.

[00:32:33] Speaker 02:
Tell me about Adirand, tell me about Croson.

[00:32:35] Speaker 02:
The world has changed since then.

[00:32:37] Speaker 02:
Tell me about O'Donnell.

[00:32:38] Speaker 02:
If you look at Adirand and O'Donnell, the statistical evidence that Congress was relying on in 1978 was inadequate.

[00:32:46] Speaker 04:
Congress had the statistical evidence that I talked about, but also a lot of anecdotal evidence that these members of these groups actually were suffering from racial discrimination, and this kind of discrimination impeded their ability to form and succeed, form minority businesses and succeed in government contracting.

[00:33:10] Speaker 04:
Supreme Court and Foley-Lev did a searching analysis of the evidence and found that this was the case and there is no doubt that at the time there was racial discrimination and at the time that racial discrimination created these barriers for minorities to be able to compete in federal contracting.

[00:33:32] Speaker 00:
I ask you if I disagree with you.

[00:33:35] Speaker 00:
Well, I'm not sure that I'm disagreeing with you or not.

[00:33:37] Speaker 00:
But if I view the statute as not creating race based presumption, but creating a presumption based on this image and saying, you know, and by the way, we think people who are disadvantaged by prejudice, some of them will be probably members of these racial minorities.

[00:33:54] Speaker 00:
But the but the regulation is where the rubber really hits the road and the regulation says,

[00:34:00] Speaker 00:
members of these groups are presumed to be socially disadvantaged.

[00:34:05] Speaker 00:
And if I, so therefore I'm looking at the regulation as the salient racial classification for purposes of this challenge, what support does it need?

[00:34:19] Speaker 00:
If I think it's adequately supported today, but maybe not when it was initially put on the books,

[00:34:27] Speaker 00:
Do I have to invalidate it and allow the agency to re-promulgate it, or what?

[00:34:35] Speaker 00:
How do I approach it?

[00:34:36] Speaker 00:
If, and I realize you may not accept it, but if you accept that analysis, why would it be adequate for the regulation to be supported by the kind of evidence that's brought out in this litigation?

[00:34:51] Speaker 00:
well i think that even if that analysis wasn't before the s p at the time regulations

[00:35:02] Speaker 04:
I think if you're using that analysis, you can still use the evidence before Congress to justify the regulation that SBA has promulgated pursuant to 8A.

[00:35:13] Speaker 00:
Fine.

[00:35:15] Speaker 00:
And the evidence you have in the litigation, the regression analysis, all the hearings that Congress has held since then, all the information the SBA has studied since then, that might help today?

[00:35:28] Speaker 00:
But do we also have to ask the origin question about the regulation?

[00:35:31] Speaker 00:
And if so, and if we find it's lacking, do we invalidate the regulation?

[00:35:38] Speaker 04:
Well, I think it's not only that we have the evidence to support the racial-based remedy today.

[00:35:45] Speaker 04:
We had it in 78, 88, and every year after that.

[00:35:50] Speaker 04:
But in terms of if you find that evidence lacking, then I think

[00:35:57] Speaker 04:
And if you find that the SBA exceeded its authority under the statute, then you would invalidate the regulation.

[00:36:07] Speaker 02:
So let me make sure I understand.

[00:36:08] Speaker 02:
You're saying if we determined that in 1978 there was not a strong basis and evidence for Congress to create the 8A regime, then you're saying the regulations that came thereafter would fall as well.

[00:36:23] Speaker 02:
They rise or fall together?

[00:36:25] Speaker 04:
Is that what you're saying?

[00:36:26] Speaker 02:
I believe so.

[00:36:27] Speaker ?:
OK.

[00:36:30] Speaker 02:
Do you think, do you think Shaw, I know it was a racial gerrymandering case, but in Shaw, the Supreme Court was pretty clear in, I think, making the point you're making now, but I haven't heard you refer to it.

[00:36:42] Speaker 02:
And Shaw said, you've got to, you've got to look at what was in front of Congress at the time of, of, of, of, of, what was in front of the legislature.

[00:36:52] Speaker 02:
at the time of enactment.

[00:36:53] Speaker 02:
That's the critical time that we look at.

[00:36:55] Speaker 02:
In other words, Congress has to have the right motive and the right purpose and the right evidence when it acts.

[00:37:04] Speaker 02:
It can't come along with reasons after it acts to support its original action.

[00:37:11] Speaker 02:
Is that your understanding of what Shaw does?

[00:37:14] Speaker 00:
uh... we we believe that we do have that evidence and i think that's so yes you know question since i talked about is a concern about whether the uh... i'm sorry uh...

[00:37:31] Speaker 00:
I'm thinking of the Vera case, the question about whether you have to have strong basis in evidence at the time.

[00:37:38] Speaker 00:
Curiously, when we look at Grutter, which is also a firm of action, obviously in a different situation, the real focus is on today.

[00:37:45] Speaker 00:
It's not whether the faculty, when it came up with that plan, had a strong basis in evidence.

[00:37:50] Speaker 00:
It's now when it's being used.

[00:37:52] Speaker 00:
Does it have a strong basis in evidence?

[00:37:54] Speaker 00:
And one thing that strikes me as different about the districting context is that the districting is done at one time.

[00:38:01] Speaker 00:
And then it's left in place.

[00:38:03] Speaker 00:
So either you have the evidence at the time of inauguration of the plan, or you don't.

[00:38:09] Speaker 00:
And that's correct.

[00:38:11] Speaker 00:
We have uses of a presumption every year.

[00:38:15] Speaker 00:
When there's a fiscal year, the SBA makes a determination.

[00:38:19] Speaker 00:
What's appropriate?

[00:38:20] Speaker 00:
What contracts can we let?

[00:38:22] Speaker 00:
Who's out there?

[00:38:23] Speaker 00:
They're constantly studying the question.

[00:38:25] Speaker 00:
It's a little bit more like the college admissions context, is it not?

[00:38:28] Speaker 04:
was true, and we believe that the court needs to look at how the program is implemented today, and that there is support for implementing the program today.

[00:38:38] Speaker 04:
So there was evidence before in 1978, and there's been evidence every year since then.

[00:38:43] Speaker 00:
I guess one question I have is sort of looking at Grutter, why isn't it just enough?

[00:38:49] Speaker 00:
Or is it?

[00:38:50] Speaker 00:
That there's, if we thought there were adequate evidence today, would that be suffice?

[00:39:00] Speaker 04:
I think some members in this room may disagree with that, but I think what you should do when you look at this program is in 1978, the legal standards were very different, but you do have evidence of discrimination at that time and that

[00:39:16] Speaker 04:
that discrimination resulted in barriers to minorities participating in federal contracting.

[00:39:22] Speaker 04:
And when you combine the record before Congress in 78 with the record that has been developed through the years, you see that there has always been support for this program, and also the current record shows that there continues to be a need for this program.

[00:39:39] Speaker 04:
There's nothing in the record to show that there's no longer a need for this program.

[00:39:48] Speaker 04:
unless the court has any more questions.

[00:39:52] Speaker 03:
Thank you.

[00:39:53] Speaker 03:
Does Mr. Bart, he has no more time.

[00:39:56] Speaker 03:
Why don't you take two minutes?

[00:40:04] Speaker 01:
She started – she ended up with starting me with a very fine point on this, and she said the record that's been developed – the record that's been developed here has been developed as a litigation technique, and I know that because I've been involved in it since 1998 when I started against the 1207 program.

[00:40:22] Speaker 01:
But there is no evidence that Congress has looked at any of these statistics in a studied way to really evaluate what they mean.

[00:40:34] Speaker 01:
statement that there was strong evidence that

[00:40:48] Speaker 01:
that to support this program with the statistics that these 107 studies have and support the fact that the businesses that they related to were businesses that wanted to do federal contracting.

[00:41:04] Speaker 01:
And that was a key

[00:41:06] Speaker 01:
position of hers.

[00:41:08] Speaker 01:
And the problem with that is there's no evidence at all that any of those people want to do federal contracting.

[00:41:13] Speaker 01:
Of course, that's the main thing that we're concerned with here.

[00:41:17] Speaker 01:
And another big issue to think about, and this kind of cuts both ways, considering that the disparities have stayed the same.

[00:41:25] Speaker 02:
Can female-owned businesses take advantage of ADA?

[00:41:30] Speaker 01:
They could if they could show that they were socially and economically disadvantaged.

[00:41:39] Speaker 01:
Considering the disparities have stayed pretty much the same, if you look at them for the period of time that we're dealing with here, then it gives you an idea, well, why are we using race-based program?

[00:41:52] Speaker 01:
Why don't we use a race-neutral program?

[00:41:55] Speaker 01:
Because it's obvious that either the numbers aren't showing discrimination because they haven't solved any problem, and the program hasn't solved any problem.

[00:42:03] Speaker 01:
So we would recommend that the government try a race-neutral program.

[00:42:10] Speaker 01:
Passive participation doesn't help any for the government's argument.

[00:42:14] Speaker 01:
That's their biggest argument because they can fall back on that without having to identify specifically a causal connection between any disparity in the program that they have for DOD.

[00:42:26] Speaker 01:
And additionally, there's really no evidence to support that either.

[00:42:30] Speaker 01:
But to close out, of those 107 studies, a significant number of them are stale, and the numbers that they say, well, the record just shows all of this over a period of time.

[00:42:41] Speaker 01:
it doesn't show anything because they don't show what's happening today.

[00:42:45] Speaker 01:
And that's the problem with this program.

[00:42:47] Speaker 01:
It doesn't evaluate what's going on today.

[00:42:51] Speaker 01:
And when the Atlantic, the Atlantic court, not the district court in the Roth case, when dining line court granted a

[00:43:00] Speaker 01:
And as applied challenge in there, they essentially condemned the program that we have because they said there were no statistics to support that there was discrimination or disparities even in the business that Dynalantic operated in.

[00:43:18] Speaker 01:
And they said that's when you identify that business, it has to be pursuant to six digit NAICS code, which is the finest level.

[00:43:25] Speaker 01:
And that's where people work.

[00:43:27] Speaker 01:
the name of their businesses, if they're called janitorial services, that's at the six-digit level.

[00:43:34] Speaker 01:
And it didn't identify that, but the most telling part of it was there were no statistics in that as-applied industry that he was dealing with, in the same way that there were no statistics completely across the board.

[00:43:51] Speaker 01:
He didn't look at the disparity studies that were there, because there were no disparity studies that applied to the DOD program.

[00:44:01] Speaker 03:
Right.

[00:44:01] Speaker 03:
Thank you.

[00:44:02] Speaker 01:
Thank you.