United States District Court, District of Columbia
TIARE ENTERPRISES, INC. Plaintiff,
UNITED STATES DEPARTMENT OF TRANSPORTATION et al., Defendants.
MEMORANDUM OPINION [DKTS. ## 23, 27]
RICHARD J. LEON United States District Judge
Tiare Enterprises, Inc. ("plaintiff or
"Tiare") seeks to overturn a 2015 decision by the
United States Department of Transportation's Departmental
Office of Civil Rights ("USDOT") affirming an
earlier 2014 decision by the Hawaii Department of
Transportation ("HDOT") to decertify Tiare as an
Airport Concession Disadvantaged Business Enterprise
("ACDBE"). Currently before the Court are the
parties' cross-motions for summary judgment. See
PL's Mot. for Partial Summ. J. [Dkt. #23]; Defs' Mot.
to Dismiss in Part and for Summ. J. [Dkt. # 27]. Upon
consideration of the pleadings, record, and relevant law, I
find that USDOT's decision to affirm the decertification
decision was supported by substantial evidence in the
administrative record and was not arbitrary and capricious.
Accordingly, defendants' Motion to Dismiss in Part and
for Summary Judgment is GRANTED, and plaintiffs cross-motion
for summary judgment is DENIED.
Statutory and Regulatory Background
has authorized USDOT to provide project grants to eligible
airports as part of the Airport Improvement Program. 49
U.S.C. §47104. In addition to other requirements that
are not relevant here, the USDOT can only approve a grant if
it receives written assurances that "at least 10 percent
of all business at the airport selling consumer products or
providing consumer services to the public are small business
concerns . . . owned and controlled by a socially and
economically disadvantaged individual" 49 U.S.C. §
47107(e). In order to facilitate compliance with this
requirement, USDOT has promulgated detailed regulations to
carry out the Airport Concessionaire Disadvantaged Business
Enterprise ("ACDBE") program. The program, and its
implementing regulations at 49 C.F.R. Parts 23 and 26,
forth the eligibility requirements and required procedures
for firms wishing to qualify as disadvantaged business
enterprises and work at airports receiving funds under the
Airport Improvement Program.
eligibility determinations for the ACDBE program are not made
by the USDOT, but by public or private entities
("recipients") like HDOT, most of whom receive
funds from the USDOT. Recipients are required to apply the
ACDBE regulations promulgated by the USDOT when making
eligibility determinations. 49 C.F.R. § 23.31(a), §
26.83 (2011). Under the regulations, ACDBEs must be at least
51% owned and controlled by socially and economically
disadvantaged individuals. 49 C.F.R. § 23.3, §
26.69(b) (2011). Individual applicants must prove by a
preponderance of the evidence that they are in fact socially
and economically disadvantaged. 49 C.F.R. § 26.61(b).
However, citizens who are women or members of specified
ethnic minority groups are presumed to be socially and
economically disadvantaged. 49 C.F.R § 26.67 (2011).
Presumptively disadvantaged applicants need not prove their
eligibility by a preponderance, but they must certify in
writing that they are in fact disadvantaged and that
their personal net worth does not exceed $ 1.32 million.
Id.; 49 C.F.R. § 23.35. Once certified, a firm
must demonstrate annually that it still meets ACDBE status.
See 49 C.F.R. § 26.83 (i)-(j); id.
§ 23.1(d), § 26.83(a) (2011). Every year, the
ACDBE's owner must submit a sworn affidavit affirming its
continued eligibility and its ability to meet the
disadvantaged status requirement. Id. at §
2013, a recipient agency could rebut a presumption of
economic disadvantage in two ways. First, if the owner's
annual statement showed that his or her net worth exceeded
$1.32 million, the presumption was rebutted automatically. 49
C.F.R. § 26.67(b)(1) (2011). Second, if the recipient
had a "reasonable basis" to believe that the
individual was not economically disadvantaged, the recipient
could initiate proceedings to determine whether the
presumption should be rebutted and decertify the firm from
ACDBE status. Id., § 26.67(b)(2) (2011). In
order to initiate a decertification proceeding, the recipient
had to provide written notice and reasons for the proposed
decertification. Id. § 26.87(b) (2011) The
recipient had to give the firm an opportunity for an informal
hearing where the firm could respond and provide evidence and
argument in favor of continued certification. Id.
§ 26.87(d)(1) (2011). The firm could also elect to
forego a hearing and provide its response and any arguments
in writing. Id. § 26.87(d)(3). The burden of
proof during a decertification hearing was (and still is) on
the recipient agency seeking decertification, rather than the
firm who facing potential decertification; the recipient must
show by a preponderance of the evidence that the
certification standards are not met. Id. Once a
final decision is made, the recipient must provide the firm
with written notice of its decision that includes specific
references to evidence that supports each ground for
decertification. Id. § 26.87(g) (2011).
recipient formally decertifies an ACDBE, the decertified firm
may file an administrative appeal with USDOT. Id.
§ 26.89 (2011). USDOT is directed to affirm a
decertification decision unless the decision is
"unsupported by substantial evidence" or is
"inconsistent with the substantive or procedural
provisions" of the ACDBE certification regulations.
Id. § 26.89(f)(1). However, USDOT need not
overturn a decision for a procedural error unless it resulted
in "fundamental unfairness to the appellant or
substantially prejudice[d] the opportunity of the appellant
to present its case." Id. § 26.89(f)(3).
Factual and Procedural Background
Enterprises is a corporation owned and operated by Ms.
Roberta Fithian ("Fithian"). AR0481, ¶ 1.
Tiare operates concessions at airports in Hilo and Kona,
Hawaii, and has been a certified ACDBE since 1986.
Id. ¶¶ 5-6. On November 4, 2013, Fithian
filed a certified affidavit of her continued eligibility as
an ACDBE. AR0088-93. In her affidavit, she included a
personal net worth statement reporting $1, 226, 630 in
assets, $243, 044 in liabilities, and $983, 586 in personal
net worth. In November and December 2013, HDOT staff member
Julie Rawlins corresponded with Fithian and requested
additional clarification and documentation regarding her
assets and liabilities. See AR0244-25, AR0247-48,
AR0250, AR0252, AR0254-55.
December 18, HDOT sent a written notice of its intent to
decertify Tiare as an ACDBE. AR0074-78. As grounds for the
proposed decertification, the notice stated that
Fithian's personal net worth, properly calculated, was
actually $1, 782, 591; the notice asserted that she had
understated the value of her real estate and
"other" assets on her personal net worth statement,
and stated that it was not going to consider a supposed $187,
641 liability Fithian had claimed because she provided
insufficient documentation to establish its existence. Based
on this calculation, the notice stated that she had
"accumulated wealth too substantial to need the
program's assistance" and could not therefore be
regarded as economically disadvantaged. The letter indicated
that participants are required to cooperate fully with
HDOT's investigation, and that failure to cooperate could
constitute grounds for decertification; the notice did not
specifically indicate whether and how Tiare was
uncooperative. AR0078. HDOT also stated (incorrectly) that
the firm had "the burden of demonstrating by a
preponderance of the evidence that it meets [ACDBE
eligibility] requirements." AR0074. The notice concluded
by stating that Fithian could request an informal hearing
within 10 days of receipt of the letter. AR0078.
December 20, Tiare's counsel emailed HDOT and stated that
it "intend[ed] to invoke ... [an informal] hearing, but
would like to first speak with you." AR0377. On December
23, Tiare's counsel emailed HDOT again and requested an
extension to respond until January 31, 2014. AR0378. On
December 26, Rawlins replied to Tiare's counsel, stating
"I understand from your e-mail that you will be
requesting a hearing. I will forward your email to [DBE
Program Supervisor] Melanie Martin for her response regarding
that request." AR0380. On December 27, Martin responded
to Fithian's counsel and granted Tiare an extension to
January 31, 2014 to respond to the decertification notice.
AR0382. She also stated "the firm may either submit
information that may support the continued certification of
Tiare Enterprises, or request an informal hearing. . .
January 31, 2014, Fithian submitted a written response to the
decertification proposal. AR0391. Fithian asserted that
HDOT's personal net worth calculation was incorrect, and
that her actual net worth was well below with $ 1.32 million
threshold. AR0396. In addition, Fithian argued that
HDOT's reliance on guidance from USDOT's General
Counsel and its analysis in the notice was incorrect; HDOT
should have simply been focused on Fithian's personal net
worth and whether or not it rebutted the presumption of
economic disadvantage, as required in 49 C.F.R. 26.67(b).
Fithian argued that HDOT was instead bypassing the
regulations and relying on USDOT guidance that was
inapplicable to determine that she was not economically
April 2, 2014, HDOT formally decertified Tiare on the grounds
that it had "not met the burden of proof regarding its
claim of economic disadvantage" and failed to cooperate
with HDOT's requests for information. AR0424. The notice
stated that a finding of economic disadvantage could be based
on an individual's income, personal net worth, or the
fair market value of individual assets. AR0419. The notice
stated that Tiare was not economically disadvantaged because
Fithian's income placed her in the top 0.1% of wage
earners, "the strength of her personal net worth
qualifie[d her] to own numerous real estate properties in
Hawaii, " and she had "successful access to capital
and credit opportunities." AR0423-24. With respect to
cooperation, the notice stated that Fithian did not provide
bank statements or loan documents that HDOT requested to
establish the existence of $187, 641 liability had she
claimed, and did not provide a list of personal assets worth
$1, 000 or more. AR0423. On April 24, 2014, Fithian's
counsel sent a letter to HDOT, requesting an "informal
hearing at which Ms. Fithian may respond to HDOT's
proposed removal" of eligibility. AR0320. On May 6,
2014, HDOT responded, stating that the decertification was
final, that the time to request a hearing had passed, and
that Tiare could appeal to the USDOT. AR0322.
administratively appealed HDOT's decision to the USDOT,
alleging inter alia that HDOT failed to show that
Ms. Fithian was economically disadvantaged, failed to grant
an informal hearing, and failed to inform Fithian of the
correct burden of proof. AR0326. On July 27, 2015, USDOT sent
Fithian a letter formally notifying her that it affirmed
HDOT's decertification decision on the grounds that there
was substantial evidence to support HDOT's finding that
her personal net worth exceeded $1.32 million, as well ...