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United Fence & Guard Rail Corp. v. Cuomo

decided: June 26, 1989.


United Fence and Guard Rail Corp. appeals from a June 14, 1988 order of the United States District Court for the Northern District of New York (McCurn, J.), which stayed its cause of action under the Pullman abstention doctrine pending resolution of a state law issue in a concurrent state court proceeding, and held United Fence's prayer for damages barred by the Eleventh Amendment. Reversed and remanded.

Kaufman, Oakes and Cardamone, Circuit Judges.

Author: Cardamone

CARDAMONE, Circuit Judge

Appellant, a New York highway construction company, brought the instant suit in the United States District Court for the Northern District of New York (McCurn, J.) challenging as violative of the Equal Protection Clause of the Fourteenth Amendment, a New York State affirmative action program that is designed to increase the participation of disadvantaged, minority-owned, and women's business enterprises (DBEs) in federally and state-funded highway construction contracts. When the case was before the district court on cross-motions for summary judgment, it made the two rulings at issue on this appeal. It held that the plaintiff's damage claims were barred by the Eleventh Amendment; and, because the same questions are pending before the New York courts in Rex Paving Corp. v. White, 139 A.D.2d 176, 531 N.Y.S.2d 831 (3d Dep't 1988), it abstained from exercising jurisdiction and issued a stay under Railroad Comm'n v. Pullman Co., 312 U.S. 496, 85 L. Ed. 971, 61 S. Ct. 643 (1941), pending resolution of Rex Paving. Because we believe it was an abuse of the district court's discretion to abstain, we reverse and remand.


Appellant United Fence and Guardrail Corp., (United Fence) is a New York corporation engaged in the manufacture, sale and installation of guardrails, fences and related highway products. It frequently bids on construction contracts let by the New York State Department of Transportation (NYDOT). United Fence brought the instant action on March 23, 1988 pursuant to 42 U.S.C. § 1983 (1982), alleging that New York's affirmative action program -- described in some detail below -- violates the Fourteenth Amendment's Equal Protection Clause, and that appellees, as officials of the State of New York acting under color of state law, are enforcing an unconstitutional program. It sought declaratory, injunctive and monetary relief and alleged that, as a firm not certified as a DBE by the NYDOT, it had been unlawfully deprived of construction contracts due to unduly high affirmative action "goals" that were "enforced as quotas."

Appellee Mario M. Cuomo, the Governor of the State of New York, issued Executive Order No. 21 in August of 1983, thereby creating an Office of Contract Compliance and Minority and Women-Owned Business Enterprise, designed to oversee the DBE program. Appellee Franklin E. White, the Commissioner of the NYDOT, is charged with general oversight and enforcement of the affirmative action scheme at issue here, and with development of eligibility criteria for firms seeking DBE certification. See, e.g., N.Y. Comp. Codes R. & Regs. tit. 17, § 35.1 et seq. (1988) (hereinafter NYCCRR). Appellee Horace M. Flowers, since December 1986 the Director of the Transportation Affirmative Action Programs Office of NYDOT, is generally in charge of the DBE certification process and conducts periodic review of firms certified and listed in the state directory as DBEs. Until December 1986 appellee Howard L. Sheffey held the position of Director that Flowers now occupies, and is now Coordinator of Regional Affairs for NYDOT. With this brief overview of the parties, the dispute and the district court's holding, we describe the federal precursor to New York's DBE scheme, the New York program itself, and the parallel state court proceeding.

A. NYDOT's Affirmative Action Program

As part of the Public Works Employment Act (Public Works Act) of 1977, Congress included a minority business "set-aside" for certain federally-funded state and local public works projects. See, e.g., 42 U.S.C. § 6705(f)(2) (1982). Section 6705(f)(2) requires that the Secretary of Commerce ensure that at least ten percent of each grant be "expended for minority business enterprises," defined as businesses controlled by "citizens of the United States who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and Aleuts." The Supreme Court has held that this minority business set-aside does not violate the Equal Protection Clauses of the Fourteenth or the Fifth Amendments. See Fullilove v. Klutznick, 448 U.S. 448, 490-92, 65 L. Ed. 2d 902, 100 S. Ct. 2758 (1980) (plurality opinion); id. at 520-22 (Marshall, J., concurring).

Subsequent legislation, and attendant regulations, require recipients of federal transportation funds to establish DBE programs substantially modeled upon the Public Works Act. See, e.g., Surface Transportation and Uniform Relocation Assistance Act of 1987, Pub.L. No. 100-17, § 128, 101 Stat. 132, 145, reprinted in 1987 U.S.Code Cong. & Admin.News 66, 76; 49 C.F.R. §§ 23.41(a)(2) (1987) (applicants "shall implement [a minority enterprise] program"); 23.45 (minority enterprise program components and criteria); 23.61 (implementation of Surface Transportation Act § 105(f)).

As a recipient of a substantial amount of federal transportation assistance, New York has promulgated and implemented the NYDOT "Disadvantaged/Minority/Women Business Enterprise Program." See 17 NYCCRR §§ 35.1-.15 (1988). The promulgation of the state program -- mandated by the federal laws and regulations noted above -- was authorized by New York's Highway Law § 85 that requires the Commissioner of Transportation to comply with federal highway laws, and New York's Transportation Law § 428, which authorizes the Governor to establish DBE programs for federal and state highway projects. See N.Y.High.Law § 85 (McKinney 1979 & Supp. 1989); N.Y.Transp.Law § 428(2) (McKinney 1979 & Supp. 1989). By letter dated March 7, 1988 Governor Cuomo delegated to Commissioner White the power and the duty to establish the DBE program contained in Title 17. See 17 NYCCRR § 35.10.

The New York program tracks the requirements of the federal regulations to a significant degree. Compare 49 C.F.R. § 23.53 (providing eligibility criteria for minority enterprise certification), with 17 NYCCRR §§ 35.3(a) (defining a DBE owner); 35.3(b) (defining the extent to which a DBE must be owned by persons defined in § 35.3(a)). Essentially, the remedial scheme requires contractors and subcontractors to make good faith efforts to reach goals for minority business participation. See 17 NYCCRR § 35.14(f)(1)-(7) (listing the types of activities required to demonstrate good faith efforts to obtain DBE participation in public contract bidding).

These regulatory provisions have now been codified in New York Executive Law, Article 15-A, § 310 et seq. (McKinney 1982 & Supp. 1989). Article 15-A creates a Governor's Office of Minority and Women's Business Development granting to the Director of the Office broad authority "to encourage and assist contracting agencies in their efforts to increase participation" of DBEs. Id. § 311(3)(a). The legislation also details specific language that must be included in contracts, subcontracts, bids on state contracts, and proposals, in order to encourage and ensure equal employment opportunities. Id. §§ 312(1), (2). As with earlier regulatory provisions -- and like the federal scheme described above -- contract language must include provisions requiring contractors to use good faith efforts to solicit state-certified DBEs. Id. § 313(2)(a). Contractors who demonstrate such good faith efforts but nonetheless cannot comply with participation requirements may receive a waiver from the contracting agency upon written request. Id. § 313(5).

In light of our decision to remand, it is sufficient for our purposes to note that the state program is comprehensive. Review of the program, determination of its actual impact on appellant's business, and its constitutionality under the Equal Protection Clause are ...

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