Rothe Development, a small contracting business located in Texas, submitted the lowest bid on a Defense Department contract. But because the Small Business Act creates a preference for firms owned by socially or economically disadvantaged individuals, Rothe was not awarded the contract. Rothe sued the Defense Department and the Small Business Administration (SBA) alleging that the preferences violate the Equal Protection Clause.
Socially disadvantaged individuals are defined in the SBA as 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.” Rothe argued that this language, on its face, creates an impermissible racial classification, and thus requires that the court apply a more searching standard of review than the rational basis test.
In the most recent of many federal court decisions in this case, the D.C. Circuit Court of Appeals decided that the statute does not contain a racial classification, because it speaks of individual victims who have experienced discrimination. Racial classifications, according to the majority, arise when a law focuses on a group characteristic. Thus, the Court reasoned, there is no express racial classification, heightened scrutiny does not apply, and there is rational basis for the program–it provides benefits to socially and economically disadvantaged individuals.
Judge Karen Lecraft Henderson wrote a strongly worded dissent, which should increase Rothe’s chances of a grant of certiorari in the Supreme Court. Judge Henderson began her dissent by listing four reasons the majority was wrong to decide that the challenged provisions are facially race-neutral: (1) Rothe believes the statute contains a racial classification; (2) both the Department of Defense and the SBA believe the statute contains a racial classification; (3) the SBA has implemented the statute as though it contains a racial classification; and (4) nearly twenty years ago, this court found her colleagues’ approach “rather dubious.”
Rothe filed this this case in 1988. The case has been up and down the federal court system several times, and may be again. Rothe will request a rehearing of this latest opinion before the D.C. Circuit Court before considering Supreme Court review.