judgment. This action concerns the Department of Transportation's (DOT's) determination that the plaintiff is not eligible to participate as a Disadvantaged Business Enterprise (DBE) on federal financially-assisted projects of the Puerto Rico Highway and Transportation Authority (PRHTA). The plaintiff alleges that DOT's determination was arbitrary and capricious, an abuse of discretion, or otherwise unlawful in violation of the Administrative Procedure Act, 5 U.S.C. §§ 701-706, and the plaintiff seeks a declaratory judgment that the plaintiff is eligible to participate as a DBE on federal financially-assisted projects of the PRHTA.
This is a simple dispute over the construction of a statute. The defendant has moved for summary judgment on the ground that the statute and regulations establishing the DBE program explicitly exclude from participation those businesses, such as the plaintiff's, which have gross receipts in excess of $ 15,370,000. The plaintiff has moved for summary judgment, arguing that the same statute and regulations do not exclude the plaintiff from participation because the plaintiff has fewer than 500 employees. Upon consideration of the filings by the parties, the entire record herein, and the law applicable thereto, and for the reasons set forth below, the Court shall grant the government's Motion for Summary Judgment and deny the plaintiff's Motion for Summary Judgment. In addition, the Court shall caution the plaintiff to review Fed. R. Civ. Proc. 11(b) prior to filing litigation in the federal courts.
Plaintiff Betteroads Asphalt Corporation is a business primarily engaged in asphalt manufacturing and paving operations. Plaint's 108(h) Stmt P 8; Def's 108(h) Stmt P 2. The Puerto Rico Ports Authority certified Betteroads as a DBE for the period June 23, 1993 through June 22, 1994 and recertified the plaintiff for the period July 15, 1994 through July 15, 1995. Plaint's 108(h) Stmt P 1; Def's Ctrstmt P 1. Plaintiff applied to the PRHTA for DBE certification in 1993. Plaint's 108(h) Stmt P 2; Def's 108(h) Stmt P 3. At that time, Betteroads and its affiliate companies employed approximately 381 individuals. Plaint's 108(h) Stmt P 7; Def's 108(h) Stmt P 5. Betteroads' average annual receipts for the preceding three years were approximately $ 60 million. Def's 108(h) Stmt P 3; Record at 410, 454, 458.
By letter dated May 5, 1995, the PRHTA denied Betteroads' application for DBE certification. Betteroads filed a writ of appeal, and the PRHTA subsequently denied the appeal by letter dated November 28, 1994, on the ground that Betteroads' average annual receipts precluded Betteroads from qualifying as a small business concern under the DBE program. Plaint's 108(h) Stmt P 10; Def's Ctrstmt P 2. On April 11, 1995, Betteroads appealed the PRHTA decision to the Department of Transportation (DOT), and the DOT denied the appeal by letter dated October 13, 1995, finding that Betteroads average gross receipts between 1990 and 1992 "far exceed this Department's $ 16.6 million cap, and therefore, [Betteroads] is not considered a 'small business concern'" eligible for DBE certification. Plaint's 108(h) Stmt P 13; Def's Ctrstmt P 4.
The plaintiff filed the immediate action in this Court on November 9, 1995, seeking judicial review of DOT's determination, in addition to a declaratory judgment that plaintiff is eligible to participate as a DBE on federal financially-assisted projects of the PRHTA. The defendants filed a Motion to Dismiss or, in the alternative, for Summary Judgment on January 19, 1996. The plaintiff filed its Cross-Motion for Summary Judgment and Opposition to Defendant's Motion on February 2, 1996. The defendants filed their Opposition and Reply on February 22, 1996, and the Plaintiff filed its Reply on March 4, 1996. The Court shall now proceed to decide those motions.
I. THE COURT SHALL UPHOLD DOT'S DETERMINATION THAT THE PLAINTIFF DOES NOT QUALIFY TO PARTICIPATE AS A DBE BECAUSE THE PLAINTIFF IS NOT A "SMALL BUSINESS CONCERN" AS CLEARLY DEFINED IN THE STATUTE AUTHORIZING THE DBE PROGRAM.
The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), Pub. L. 102-240, Title I, § 1003(b), Dec. 18, 1991, 105 Stat. 1919, provides assistance to certain disadvantaged business enterprises by requiring that "not less than 10 percent of the amounts authorized to be appropriated [under this Act] shall be expended with small business concerns owned and controlled by socially and economically disadvantaged individuals." ISTEA § 1003(b)(1). The statute clearly states that in order to qualify as a "small business concern," for purposes of the ISTEA, the entity must be a small business, as defined by section 3 of the Small Business Act, and the business must not have average annual gross receipts exceeding $ 15.37 million for the three preceding years:
The term "small business concern" has the meaning such term has under section 3 of the Small Business Act (15 U.S.C. 632); except that such term shall not include any concern or group of concerns controlled by the same socially and economically disadvantaged individual or individuals which has average annual gross receipts over the preceding 3 fiscal years in excess of $ 15,370,000, as adjusted by the Secretary for inflation.
ISTEA § 1003(b)(2)(A) (emphasis added). The regulations promulgated to implement the DBE program provide the same requirement.
Therefore, unless an enterprise is a small business as described by section 3 of the Small Business Act and has average gross receipts of $ 15.37 million or less, it cannot participate in the DBE program as set forth in the ISTEA.
The plaintiff concedes that his business exceeds the $ 15.37 million average annual gross receipts limit. The plaintiff argues, however, that the Small Business Act precludes size determinations based solely on average annual gross receipts, and that such determinations must also consider the number of employees. The relevant provision of the Small Business Act states:
Unless specifically authorized by statute, no Federal department or agency may prescribe a size standard for categorizing a business concern, unless such proposed size standard . . . (ii) provides for determining -- (I) the size of a manufacturing concern as measured by . . . average employment; (11) the size of a business concern . . . on the basis of the annual average gross receipts . . . ."