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CONTRACTORS ASSN. OF EASTERN PENNSYLVANIA v. SHULT

March 13, 1970

The Contractors Association of Eastern Pennsylvania , Plaintiff, James D. Morrissey, Inc., the Conduit & Foundation Corp., Glasgow, Inc., Buckley & Company, the Nyleve Company, Erb Engineering & Constr. Co., Perkins, Kanak, Foster, Inc., and Lansdowne Constructors, Inc., Intervening Plaintiffs
v.
George P. Shultz, U.S. Secretary of Labor, et al., Defendants


Weiner, District Judge.


The opinion of the court was delivered by: WEINER

WEINER, District Judge.

The Contractors Association of Eastern Pennsylvania consisting of a group of contractors, engaging in heavy highway and utility construction and intervening contractors have sued various Federal officials and the General State Authority of the Commonwealth of Pennsylvania in an effort to strike down a regulation issued by the Department of Labor which is entitled the "Revised Philadelphia Plan". The Plan covers six construction trades *fn1" and geographically applies to Bucks, Chester, Delaware, Montgomery and Philadelphia Counties in Pennsylvania. The Philadelphia Plan became effective on September 29, 1969. It was issued on June 27, 1969, in implementation of the authority of the Secretary under Executive Order 11246 of September 24, 1965 as amended, 30 F.R. 12319, 32 F.R. 14303, 34 F.R. 12986 which required that Federal contracts and federally assisted construction contracts contain specified language obligating the contractor and his subcontractors not to discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin. The Executive Order further required the contractors and subcontractors to "take affirmative action to insure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex or national origin". Executive Order 11246, § 202(1). Failure to comply with the required contractual commitments imposes various sanctions on the contractors which include the cancellation, suspension or termination of contracts and the debarment of a contractor from further Government contracts. However, no sanction may be imposed unless efforts at voluntary resolution have failed nor without affording the contractor an opportunity for a hearing. Thus the seeds of the Philadelphia Plan were planted. Two separate orders were issued by the Department of Labor, the first on June 27 and the second on September 23, 1969. In substance, the Plan required that with respect to construction contracts in the Philadelphia area which are subject to Executive Order 11246 and where the estimated total cost of the construction project exceeds $500,000, each bidder must, in the affirmative action submitted with his bid, "set specific goals of minority manpower utilization which meet the definite standard" included in the invitation for bids. The bidder could also meet this requirement by agreeing to participate in a multi-employer affirmative action program approved by the Office of Federal Contract Compliance.

 The Department of Labor order of June 27th was based on the department's finding that although the overall minority groups representation in the construction industry in the five-county Philadelphia area was thirty (30) percent, in the six trades involved, minority representation was approximately one (1) percent. The Department of Labor concluded that the contributing factors to the small number of minority representation in these trades were due to the following:

 (a) Contractors hire a new employee complement for each construction job on the basis of referral by the construction craft unions;

 (b) The refusal of certain of these unions to admit Negroes to membership or apprenticeship programs;

 (c) A preference in work referrals to union members and to persons who had work experience under union contracts. This resulted in a departmental finding that "special measures" were necessary to provide equal employment opportunity in these six trades for federally involved construction.

 Predicated upon public hearings held in Philadelphia on August 26, 27 and 28, 1969, the September 23rd Order issued. This order established the ranges within which the contractor's minority group employment goals should be set. It provided that in the first year, employment "ranges" vary between four (4) and nine (9) percent; in the second year between nine (9) and fifteen (15) percent; in the third year between fourteen (14) and twenty (20) percent; and in the fourth and last year between nineteen (19) and twenty-six (26) percent. The mathematical formula was based on findings as to the availability of minority group persons for employment and the impact of the program on the existing labor force and a determination that a contractor could commit himself to the employment goals "without adverse impact on the existing labor force" which goals may be met through the employment by the contractor of journeymen, trainees or apprentices.

 Since the Philadelphia Plan went into effect, we have been advised that six contracts have been let involving a total cost of approximately $37 million, with Federal assistance totaling approximately $11 million. The present action is before us in connection with a grant from the Department of Agriculture to the Commonwealth of Pennsylvania in connection with the Brandywine water conservation project, involving a cost of approximately $4 million, of which approximately $1.1 million of which represents Federal assistance. Invitation for bids including the requirements of the Philadelphia Plan were issued by the General State Authority of Pennsylvania. No contracts have as yet been awarded on this project.

 This law suit is bottomed upon the plaintiffs' allegation that the Philadelphia Plan violates the Constitution and laws of the United States and the laws of the Commonwealth of Pennsylvania. In conjunction with its complaint the plaintiffs have filed a motion for a preliminary injunction and have moved for summary judgment. The defendants have countered with a motion to dismiss the complaint or in the alternative, for summary judgment.

 We will first consider the defendants' attack upon the standing of the plaintiffs to maintain this action. Defendants argue that the plaintiffs lack standing to challenge the validity of the Philadelphia Plan. They place their reliance upon the decision of the Supreme Court in Perkins v. Lukens Steel Co., 310 U.S. 113, 84 L. Ed. 1108, 60 S. Ct. 869 (1940). In Perkins, the Secretary of Labor fixed minimum wages which government contractors were required to pay their employees. The suit of the plaintiffs, iron and steel manufacturers, who bid on government contracts, for declaratory and injunctive relief was dismissed on the ground that the plaintiffs lacked standing to challenge the validity of the Secretary's directive. We, of course, do not and cannot quarrel with the edict of the Supreme Court which settled the principle that:

 
"Like private individuals and businesses, the Government enjoys the unrestricted power to produce its own supplies, to determine those with whom it will deal, and to fix the terms and conditions upon which it will make needed purchases. . . . It was not intended to be a bestowal of litigable rights upon those desirious of selling to the Government; it is a self-imposed restraint for violation of which the Government . . . but not private litigants . . . can complain." Perkins v. Lukens Steel Co., supra at 127.

 The defendants contend that the plaintiffs are in the same class of litigants described in Perkins and therefore lack standing to attack the requirements contained in Executive Order 11246. To the contrary, the plaintiffs argue that as the impact of the governmental action is greatest on them, access to the courts is permissible.

 Our examination of the record reveals that the Contractors Association is a corporation comprised of more than eighty business organizations engaged in heavy construction. Certain of its members wished to bid on the project and four of its members did bid. The plaintiff acts as spokesman for its members concerning the relationship between its members and the government.

 Undoubtedly, the force of Executive Order 11246 is focused upon contractors who desire to bid on federal or federally assisted construction contracts. Of necessity, the Order will require them to make significant changes in their every day business practices or they will be clearly exposed to the imposition of strong sanctions. In Abbott Laboratories v. Gardner, 387 U.S. 136, 153, 18 L. Ed. 2d 681, 87 S. Ct. 1507 (1967) a compendium of the most recent legal principles applicable to the kind of problem governing standing, the Supreme Court said:

 
"Where the legal issue presented is fit for judicial resolution, and where a regulation requires an immediate and significant change in the conduct of their affairs with serious penalties attached to noncompliance, access to the courts under the Administrative Procedure Act and the Declaratory Judgment Act must be permitted, absent a statutory bar or some other unusual circumstance, neither of which appears here."

 It is apparent that the legal issue that the plaintiffs have presented is fit for judicial resolution. It is also evident that the Executive Order will require significant changes in the contractors' employment practices which, under certain circumstances, may subject them to serious penalties. There remains, however, the problem of determining the circumstances under which the plaintiffs may have the necessary standing to maintain this action. The answer depends, in part, upon the breadth of a group of cases which influenced and in large measure dominated the law on this subject. Hanson v. Denckla, 357 U.S. 235, 244, 2 L. Ed. 2d 1283, 78 S. Ct. 1228 (1958) reaffirmed the principle that a person cannot invoke the jurisdiction of the court to vindicate the right of a third party. See: Liberty Warehouse Company v. Burley Tobacco Growers' Co-Operative Marketing Association, 276 U.S. 71, 72 L. Ed. 473, 48 S. Ct. ...


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