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Constructors Association of Western Pennsylvania v. Kreps


argued: January 3, 1978.


On Appeal from the United States District Court for the Western District of Pennsylvania. C.A. No. 77-1035.

Adams, Gibbons and Garth, Circuit Judges.

Author: Adams


ADAMS, Circuit Judge

The question in this case is whether the district court abused its discretion in declining to issue a preliminary injunction enjoining the United States Department of Commerce, the Commonwealth of Pennsylvania and the City of Pittsburgh from complying with a federal statute which requires 10% of all federal funds in specified public works projects to be allocated to "minority business enterprises."


In July of 1976, Congress enacted the Local Public Works Capital Development and Investment Act (LPW).*fn1 The LPW established a program to distribute two billion dollars to state and local governments for public works projects in order to stimulate the national economy. In January of 1977, legislation was introduced to provide additional funding of the LPW, denominated "Round II." Because under "Round I" only 1% of the funds allocated to state and local governments had reached minority contractors, the LPW was amended in mid-1977 to require that 10% of the amount of each LPW grant be expended in connection with contracts with "minority business enterprises" (MBEs), unless the Secretary of Commerce waives the requirement.*fn2

Under the LPW program, the City of Pittsburgh requested grants totaling $11,000,000, and the Department of Transportation, of the Commonwealth of Pennsylvania, applied for a similar amount of funds. By September 30, 1977, Pittsburgh had received approval for approximately $9,000,000 worth of projects, and the Department of Transportation had received approval of seven projects costing over $11,000,000. Since the LPW required that construction on any project begin within 90 days of the allocation of a grant, bidding for the Pittsburgh and the Department of Transportation projects proceeded on accelerated schedules.

On September 8, 1977, the Constructors Association of Western Pennsylvania, a 95-member non-profit association of heavy construction contractors, filed a complaint in the District Court for the Western District of Pennsylvania attacking the legislation on the ground that the MBE requirement discriminated against its members, who were all white, in violation of the equal protection components of the Fifth and Fourteenth Amendments. The Association sought a temporary restraining order to prohibit Pittsburgh, the Transportation Department of the Commonwealth of Pennsylvania, and the Secretary of Commerce from enforcing or taking action to solicit or to accept bids based on the MBE requirement. The Association also requested injunctive and declaratory relief.

After notice and hearing, Judge Daniel J. Snyder on September 12, 1977, denied the request for a temporary restraining order. He held a hearing on September 30, 1977, regarding the plaintiff's request for a preliminary injunction. In an opinion dated October 13, 1977, Judge Snyder denied the request for a preliminary injunction. This appeal from that denial followed.*fn3


The narrow issue before us is whether the district court abused its discretion in refusing to grant the preliminary injunction sought by the plaintiff.*fn4 Our analysis of the plaintiff's contention that such an abuse did, in fact, occur is framed initially by the factors which the district court was required to take into account in evaluating an application for a preliminary injunction. "The traditional standard for granting a preliminary injunction requires the plaintiff to show that in the absence of its issuance, he will suffer irreparable injury and also that he is likely to prevail on the merits."*fn5 More specifically, this Court has consistently identified four factors which must be examined in ascertaining the propriety of a preliminary injunction:

While these factors structure the inquiry, however, no one aspect will necessarily determine its outcome. Rather, proper judgment entails a "delicate balancing" of all elements.*fn7 On the basis of the data before it, the district court must attempt to minimize the probable harm to legally protected interests between the time that the motion for a preliminary injunction is filed and the time of the final hearing.*fn8

Thus, for example, in a situation where factors of irreparable harm, interests of third parties and public considerations strongly favor the moving party, an injunction might be appropriate "even though plaintiffs did not demonstrate as strong a likelihood of ultimate success as would generally be required."*fn9 In contrast, where the threatened irreparable injury is limited or is balanced to a substantial degree by countervailing injuries which would result to third parties, or to the public interest from the issuance of an injunction, "greater significance must be placed upon the likelihood that the party will ultimately succeed on the merits of the litigation."*fn10

This Court's analysis is further constrained by the standard of review appropriate to appellate examination of a decision to deny a preliminary injunction. Absent an obvious error of law or a serious mistake in the consideration of proof, the trial court's decision will be reversed only for an abuse of discretion.*fn11

In view of this test, we turn to an examination of the four components which guide judgment regarding the issuance of a preliminary injunction.


We accept, as did Judge Snyder, the plaintiff's contention that racial classifications by government are not to be taken lightly. Such governmental actions are in tension with fundamental ideals of our society, and run the risk of both devisiveness and oppression. Racial classifications may be upheld only in limited circumstances, and are subject, in constitutional parlance, to "strict scrutiny."*fn12

The fact that the MBE provision embodies a racial classification, however, is not sufficient to guarantee the plaintiff in this case a likelihood of success, for the courts have upheld the use of racial classification by government in attempts to remedy the effects of past discrimination. Thus, for example, in E.E.O.C. v. American Telephone and Telegraph Co.,*fn13 this Court rejected a constitutional challenge to the propriety of a consent decree which provided for the overriding of a seniority system when hiring failed to meet specified racial, sexual and ethnic "targets." We noted that the federal interest in "remedying the effect of a particular pattern of employment discrimination" and in "having all groups fairly represented in employment" was sufficient to justify the use of quotas to accomplish those goals.*fn14

Likewise, in Contractors Assn. of Erie, Pa. v. Secretary of Labor, 442 F.2d 159, 176-77 (3d Cir. 1971), we upheld the remedial use of racial employment "goals" by the executive without a prior adjudication that discrimination existed.*fn15 Most recently, in United Jewish Organizations v. Carey,*fn16 the Supreme Court sustained a deliberate use of race by government officials in drawing voting districts so as to achieve 65% majorities of nonwhite voters in such districts. Three Justices held that even aside from the commands of the Voting Rights Act, such a use of racial criteria was permissible where it produced no stigma, and "did not minimize or unfairly cancel out white voting strength."*fn17 Two other Justices held the action to be congruent with the Fourteenth Amendment because there was neither evidence of "purposeful discrimination against white voters" nor evidence that the plan "undervalued the political power of white voters" - a predicate from which such a discriminatory purpose might be inferred.*fn18 Finally, Justice Brennan expressed the opinion that "if and when a decision-maker embarks on a policy of benign racial sorting, he must weight the concerns [of the negative aspects of quotas] against the need for effective social policies promoting racial justice in a society beset by deep-rooted racial inequities." 430 U.S. 144 at 175.

From such decisions, which provide our guidance at least until the Bakke case is decided,*fn19 it is clear that Judge Snyder properly undertook a careful examination of the purposes and effects of the MBE program. Equally evident, however, is the conclusion that under such investigation, the plaintiff has not presented a strong likelihood of success on the merits. The legislative history of the MBE provision gives no indication that the drafters contemplated "purposeful discrimination" against white contractors.*fn20 Rather, the set-aside was designed to "begin to redress" what Congress perceived to be the continuing economic impact of racial discrimination.*fn21 Such a purpose might well be sufficient to allow the legislature to take notice of findings by the government in other aspects of the national anti-discrimination effort to the effect that minority contractors labor under handicaps requiring remedial action.*fn22 Moreover, the debates in connection with the MBE set aside evidence a Congressional determination that other attempts to encourage minority businesses have not proved successful.*fn23 We therefore do not consider it error for Judge Snyder to have ascertained - at least on the basis of the material submitted to him - that the challenged provision was necessary to accomplish Congress' remedial objectives.*fn24

Thus, at the level of analysis appropriate for a preliminary injunction, we cannot say that Judge Snyder erred in holding that the plaintiff failed to demonstrate a significant likelihood of succeeding on the merits.


Nor is the modest probability of plaintiff's success outweighed by a greater potential for irreparable injury to the Association and its members. At the hearing the plaintiff alleged three sources of irreparable injury to its member contractors. On examination none of these claims requires reversal of the district court's order.

First, the plaintiff asserted that its members, who are white, were deprived of the profits to be garnered from LPW construction contracts when they were forced to subcontract to meet the MBE requirements. The only example in support of this contention which was adduced at trial was the Brayman Construction Company, the recipient of a $165,000 contract to build a bridge in Mercer County. The Vice President of Brayman testified that in order to meet the minority set-aside requirement, Brayman subcontracted $15,600 of work which Brayman otherwise would have done itself to R. L. Johnson Co., a minority contractor. Since, however, Brayman owned 49% of Johnson, in effect the contract represented only $8,000 of lost business. Further, as to that $8,000, the Vice President of Brayman testified that he could make no estimate whether a profit could be anticipated.*fn25 It was not an abuse of discretion for Judge Snyder to determine that such a limited or conjectural "injury" was not sufficient to support issuance of a preliminary injunction.*fn26

Second, the plaintiff asserted that its members would be damaged by being forced to seek out and deal with minority contractors with whom they would ordinarily not do business, thereby disrupting their commercial relationships.*fn27 There is no evidence in the record that such a change in operating procedures would significantly burden the business enterprises of the Association's members. Indeed, the only "injury" alleged is precisely the result which the MBE provision seeks to accomplish: established contractors are required to admit minorities into their circle of business dealings. While such compliance with the statutory provision represents an alteration in past practices, it does not rise to the level of irreparable injury. In this connection, we note the comments in A. O. Smith Corp. v. FTC:

Any time a corporation complies with a government regulation which requires corporate action, it spends money and loses profits; yet it would hardly be contended that proof of such an injury alone would satisfy the requisite for a preliminary injunction. Rather, in cases like these, courts ought to harken to the basic principle of equity that the threatened injury must be, in some way, peculiar.*fn28

No such "peculiar" injury appears in the record here.

Finally, the plaintiff argued before Judge Snyder that inasmuch as its members would normally obtain subcontracts from LPW-type projects, such members would be irreparably damaged by being placed at a competitive disadvantage vis-a-vis minority contractors. Since the general contractors would be forced to give priority to minority contractors in order to meet the MBE set-aside, it was maintained that Association members would be unable to obtain contracts.

This contention suffers from a number of defects. While the plaintiff's scenario has some plausibility, it is without substantial support in the record that was before Judge Snyder. The only instance adduced of an MBE who obtained a subcontract as a result of the set-aside was the case of the Brayman-Johnson contract discussed above. And while there was testimony that the members of the Association had in the past obtained between 40% and 80% of the heavy and highway construction contracts let by the Commonwealth and Pittsburgh in any given year, the testimony did not indicate which of these percentages represented subcontracts for which Association members would compete with MBEs. Insofar as it is the applicant for a preliminary injunction who bears the burden of establishing irreparable injury,*fn29 neither this Court nor the trial judge would be warranted in assuming that members of the Association, rather than other contractors, bore the brunt of the enhanced competition provided by the MBEs. There is thus no evidence of the magnitude of the injury caused by such competition, if any.

Moreover, to the extent that such subcontractors would be "injured" by the statute, minority businessmen would be equally injured by an injunction against the MBE set-aside. For every contract that the Association members lose to an MBE, under the statute, MBEs would presumably lose a contract to Association members under the injunction. Thus, in view of the lack of a strong showing of probability of success on the merits, any irreparable injury that has been demonstrated is offset by the countervailing possibility of improper harm to the beneficiaries of the Act.*fn30

Finally, since under the LPW, construction of the projects was to have commenced by no later than December 29, 1977,*fn31 any additional injury that could occur prior to the federal hearing would, at least as the controversy was presented to us, be minimal.*fn32

Thus, when considered in light of the marginal showing of probable success on the merits which the plaintiff tendered, we cannot say it was an abuse of discretion for the district court to determine that plaintiff had shown no irreparable injury sufficient to justify granting a preliminary injunction.*fn33


An examination of the public interest consideration in the situation before us also supports the trial judge's exercise of discretion. The purpose of the LPW is to furnish prompt economic stimulation to a flagging economy, as well as to provide needed public works. Indeed, the Act itself stipulated that construction was to begin on funded projects no later than 90 days after a grant had been made. Delay in providing such stimulation would defeat a major purpose of the Act by depriving of their jobs individuals who might otherwise be employed, and by slowing the recovery of the economy in general.

The federal defendants argue that if the MBE provision falls, so must the entire Act, and a preliminary injunction against the MBE set-aside would deprive citizens of the economic benefits which Congress wished to confer. This is so, they maintain, because a prime purpose of the PWE was to afford relief from the unemployment which particularly afflicts minority communities.

Even if the MBE provision is severable, however, an injunction against its enforcement, at a time when projects had already been advertised, would have resulted in administrative confusion, and hence, inexorably, in delay. Such a postponement of the benefits of the Act would clearly have been against the public interest.

These considerations buttress our conclusion that Judge Snyder's determination was not an abuse of discretion.*fn34


Since we find no abuse of discretion, no error in applying the law, and no clear mistake in the consideration of the proof, the order of the district court will be affirmed.



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