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February 5, 1992

JANE AUSTIN FAGAN, et al., Plaintiffs,

The opinion of the court was delivered by: THOMAS F. HOGAN

 Now pending before the Court are the parties' cross motions for summary judgment. The issues raised in the motions have been fully briefed by both parties, and the Court heard extensive oral arguments on February 3, 1992. After carefully considering all pleadings submitted on the outstanding motions, the full administrative record in this case, and the arguments made by counsel at the February 3, 1992 hearing on the motions, the Court shall grant the government's motion for summary judgment on all counts for the reasons that follow.


 Plaintiff Jane Fagan is seeking declaratory relief, injunctive relief, and damages in this action under the Small Business Act, the Administrative Procedures Act, and the fifth amendment. Essentially, she is arguing that the SBA has a de facto policy of not accepting white women in the section 8(a) program, which was designed to aid "economically and socially disadvantaged small business concerns," and that the SBA discriminated against her in not admitting her personnel recruiting business into the section 8(a) program. She alleges she was rejected because of her status as a white woman.

 Plaintiff alleges the SBA's actions in discouraging her from applying to the program and in subsequently denying her application were arbitrary, capricious and unsupported by the evidence. Additionally, she alleges that the SBA regulations that require individuals who are not presumed to be socially disadvantaged prove they are by clear and convincing evidence are inconsistent with the Small Business Administration Act. She claims the denial of her application violated the Equal Protection Clause, 42 U.S.C. § 1981 and § 2000d, SBA regulations, and was arbitrary and capricious.


 The section 8(a) program was established pursuant to section 8(a) of the Small Business Act, 15 U.S.C. § 637(a), *fn1" to assist small businesses that are owned, managed and controlled by individuals who are socially and economically disadvantaged, in an effort to enable them to become self-sufficient in the marketplace. 13 C.F.R. § 124.1(b)(1). The goal of the Small Business Act is "to increase the level of business ownership by minorities so that they have a better opportunity to become an integral part of the free enterprise system." Neuma Corporation v. Abdnor, 713 F. Supp. 1 (D.D.C. 1989).

 The SBA was granted statutory authority to develop standards for eligibility for the section 8(a) program. 15 U.S.C. § 634(b)(6) (SBA administrator granted authority to "make such rules and regulations as he deems necessary to carry out the authority vested in him"). The statute also provides that

 (7) No small business concern shall be deemed eligible for any assistance pursuant to this subsection unless the Administration determines that with contract, financial, technical, and management support the small business concern will be able to perform contracts which may be awarded to such concern under paragraph (1)(c) and has reasonable prospects for success in competing in the private sector.

 15 U.S.C. § 637(a)(7).

 The agency promulgated a series of regulations that govern the eligibility determination to enforce the congressional intent that the program be limited to eligible individuals and businesses. See 13 C.F.R. §§ 124.101-124.109. These regulations were revised in August, 1989 and are applicable to the plaintiff's January 1990 application as well as the request for reconsideration.

 The regulations provide that when an application is received in the SBA District Office, at least seven SBA Officials review the application to determine if the applicant is eligible for the section 8(a) program. The application is initially reviewed at the district level by an eligibility specialist and then is reviewed by several regional agency officials, with the Associate Administrator for Minority Small Business and Capital Ownership Development making the final determination. The regulations provide that within 30 days if the application is denied the applicant is to be notified in writing of detailed reasons for the denial, the applicant's right to request reconsideration and to submit additional documentation in support of the application. Here, the administrative record indicates that the agency complied with these regulations.

 The SBA regulations governing the determination of whether or not an applicant qualifies as "socially and economically disadvantaged" provide as follows:

 (a) General. Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identities as members of groups without regard to their individual qualities. The social disadvantage must stem from circumstances beyond their control.

 * * *

 (b) Members of designated groups.

 (1) In the absence of evidence to the contrary, the following individuals are presumed to be socially disadvantaged: Black Americans; Hispanic Americans; Native Americans . . .; Asian Pacific Americans . . .; Subcontinent Asian Americans . . .; and members of other groups designated from time to time by SBA according to procedures set forth at paragraph (d) of this section.

 * * *

 (c) Individuals not members of designated groups.

 (1) An individual who is not a member of one of the above-named groups must establish his/her individual social disadvantage on the basis of clear and convincing evidence. A clear and convincing case of social disadvantage must include the following elements:

 (i) The individual's social disadvantage must stem from his or her color, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society, or other similar cause not common to small business persons who are socially disadvantaged.

 (ii) The individual must demonstrate that he or she has personally suffered social disadvantage, not merely claim membership in a non-designated group which could be considered socially disadvantaged.

 * * *

 (v) The individual's social disadvantage must have negatively impacted on his or her entry into and/or advancement in the business world . . . [considering such factors as] denial of equal access to institutions of higher education . . . discrimination in hiring; discrimination in promotions and other aspects of professional advancement; . . . unequal access to credit or capital; . . . discrimination by potential clients; . . . and other similar factors which have impeded the individual' business development.

 The plaintiff applied for admission to the section 8(a) program in March, 1989. In her application she recounted the discrimination and abuse she had faced. The record indicates that in the plaintiff's statement to the agency she informed the agency that she was 18 when she married an alcoholic man with a violent temper. He beat her over a lengthy period, raping her and causing permanent injuries. They had four children before she sought help from the court system. The plaintiff indicates she encountered resistance from the judiciary when she attempted to have her husband arrested for battery. When her husband finally was arrested, he was released on a $ 50 bond and returned to beat her again. She fled with their children and was forced to go on welfare. Her husband was ordered to pay only $ 400 month in child support, and that amount was subsequently reduced to only $ 200 by a judge who was a member of the same hunting club as her former husband.

 The plaintiff recounts difficulty in getting credit because the accounts she had with her husband were solely in his name. She had difficulty maintaining a job, primarily because of child care issues. At one point, in the early 1970's, she worked for a small newspaper in Virginia where she encountered sexual harassment and was forced to quit. She remarried in 1975 and eventually gained employment as a personnel recruiter. She stated that she found that many companies kept male recruiters on retainer, but refused to do so for female recruiters, and that these men often delayed paying her invoices.

 In 1980, Ms. Fagan opened her own business, specializing in recruiting civilian and military scientists who develop electronics and weapons systems. She indicated that she was able to amass a number of resumes, only a few of which she submitted to the SBA. However, of the over 70 resumes she submitted, less than 8 were current, viable resumes.



 A. Review of Agency Decisions

 Judicial review of this case under the Administrative Procedure Act is limited to determining whether the agency's decision was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A); Neuma Corporation v. Abdnor, 713 F. Supp. 1 (D.D.C. 1989) (applying APA standard in 8(a) case); San Antonio General Maintenance, Inc. v. Abnor , 691 F. Supp. 1462, 1468 (D.D.C. 1987) (applying APA standard in 8(a) case). This standard requires that the court

 consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. . . . Although this inquiry into the facts is to be searchingly careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency.

 Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136 , 91 S. Ct. 814 (1971). The standard is a narrow standard whereby "a court is not to substitute its judgment for that of the agency," Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43 (1983), but must "uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned." Bowman Transportation Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 286, 42 L. Ed. 2d 447 , 95 S. Ct. 438 (1974).

 As long as the agency decision makers have given reasoned consideration to the issue and have presented a rational basis for the decisions they have made, the court cannot substitute its own judgment for that of the agency. Motor & Equipment Manufacturers Association v. Environmental Protection Agency, 201 App. ...

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