Transcript

IN THE SUPREME COURT OF THE UNITED STATES

CITY OF RICHMOND, Appellant v. J. A. CROSON COMPANY

No. 87-998

October 5, 1988

The above-titled matter came on for oral argument before the Supreme Court of the United States at 11:02 o'clock a.m.

APPEARANCES:

JOHN PAYTON, Washington, D.C., on behalf of the Appellant

WALTER H. RYLAND, Richmond, Virginia, on behalf of the Appellee

PROCEEDINGS

11: 02 a.m.

CHIEF JUSTICE REHNQUIST: We'll hear argument next in number 87-998, the city of Richmond v. the J. A. Croson Company.

Mr. Payton, you may proceed whenever you're ready.

ORAL ARGUMENT OF JOHN PAYTON ON BEHALF OF APPELLANT

MR. PAYTON: Mr. Chief Justice, and may it please the Court, the sole issue in this case is the constitutionality of the ordinance enacted by the Appellant, the city of Richmond, to remedy the effects of racial discrimination in its construction industry.

That ordinance, the Minority Business Utilization Plan, provided that with respect to construction contracts with the city, at least 30 percent of the dollar amount of the contract must go to minority business enterprises.

The ordinance was designed to last five years, and contained an appropriate waiver provision.

By enacting this ordinance, Richmond was attempting to address one of the most difficult problems confronting our nation and its cities and States. Identified racial discrimination is a scourge of our society. Richmond focused on discrimination in the construction industry, and proceeded to try to remedy that discrimination.

Aware of findings of the Congress regarding discrimination nationwide in the construction industry, and of this Court's decision in Fullilove, upholding Federal legislation remedying that discrimination, Richmond examined its own construction industry.

It learned that from 1978 to 1983, two-thirds of one percent of its construction dollars went to minority businesses -- this in a city that was 50 percent Black. That was not all that Richmond knew --

QUESTION: Mr. Payton, can I interrupt you there? Is that a correct statement that only two-thirds of one percent went to minority business enterprises? What about the subcontractors?

MR. PAYTON: There is no evidence in the record with regard to how subcontracting was divided up, but as the District Court found, there is no reason at all to expect that the subcontracting would have gone another way.

In fact, when Congress made its findings with respect to the construction industry, it found that the construction industry is an industry which is a business system which has precluded measurable minority participation. And the way that occurred, as the Congress identified it, was by first of all having formidable racial barriers to racial entry and advancement.

The barrier to entry has to do with how you get to be a contractor. The barrier to advancement has to do with what the Congress found, and what this Court also noted in Fullilove, is the problem of racial discrimination in the relationship between prime construction contractors and their subcontractors.

And they found that this business system operates in the following way: that a prime contractor often does business over and over again with the same group of subcontractors. And in one of the items that we cite in our brief, Glover, minority business -- minority enterprise in construction, that is a study which noted that often in that relationship, prime construction contractors and their subcontractors, often it's impossible to break in by minority contractors, even when they have the low bid. That's one of the problems that arises.

So, there is nothing in the record that says exactly what the racial breakup of subcontracting is, but the evidence with regard to prime contracting is stark and dramatic, and there is no reason, as the trial court found, to expect it to be any different.

QUESTION: But the ordinance purport to remedy that disparity, did it?

MR. PAYTON: The ordinance purported to remedy the fact that there were very few minority contractors in the construction industry.

QUESTION: It just required subs to get to a --

MR. PAYTON: Yes. The means that Richmond chose to try to remedy the discrimination that it identified was to focus on a remedy that was both modest and narrow. And The narrow focus of the remedy was to look at subcontracting. And the reason for that, is that I think that everyone would agree, that it is easier to break into the business as a subcontractor, and break into this, what I would call a closed business system, by doing work with prime contractors. And the design of this program was that by doing it that way, by having a remedy that focuses on subcontractors, that will establish relationships between majority prime contractors and minority subcontractors.

It will establish some trust, relationships, experiences, and thereby allow an expansion of the list of subs that prime contractors would be doing business with.

QUESTION: Mr. Payton, some of the cities concerned seem to be with impediments to minority participation, such as complicated bidding procedures and lack of capital and bonding requirements and so forth.

Is there any indication that the city considered any race-neutral alternatives before enacting a percentage set-aside requirement?

MR. PAYTON: Well, the city was well aware of other efforts, especially efforts by the United States Congress, to deal with this problem.

The problem that the city was faced with wasn't that there was a group of minority contractors out there who were simply having trouble with bonding requirements or bidding requirements -- not to say that those aren't problems, but they are, I think, secondary problems.

The problem was that we had a business system that had precluded measurable minority participation. The number two-thirds of one percent is insignificant. It's close to zero.

QUESTION: But we don't know what the figures were on subcontractors, as your response to Justice Stevens pointed out.

MR. PAYTON: Yes, that's correct.

And what the city was doing was to address the problem of the two-thirds of one percent selecting a remedy which is probably the best remedy to address that problem.

QUESTION: Did the -- now, the ordinance supplied also, in addition to Blacks, to Orientals, Indians and Aleut persons?

MR. PAYTON: Yes.

QUESTION: And was there evidence before the city that they had been subject to discrimination in the Richmond construction industry, do you know?

MR. PAYTON: There is no evidence in the record with regard to that.

QUESTION: And you think with the absence of all such evidence that the ordinance is valid as to those groups?

MR. PAYTON: The reason the description of minorities that exists in this ordinance is there is that it is the same description of minorities the exists in the Federal program in Fullilove, and in fact, it's the same description of minorities that exists in the Virginia code that defines what a minority business enterprise is.

I don't think that it really matters that much. There's no showing that Aleuts or some of the other groups are present in any significant numbers in Richmond, and there's certainly no claim here that someone lost some contract because of an Aleut getting a contract.

Let me go back to your first question, though, Justice O'Connor, with regard to what the City Council looked at when it was considering this.

This is not a problem that is brand new on the stage of racial problems. It's one that has been studied and studied, and there have been a lot of different remedies out there. And I guess it's important to realize that when Congress looked at this, when it enacted the 1977 legislation that was the subject of Fullilove, Congress went through a lot of other remedies that had been designed to try and deal with this problem, including laws that made underlying discrimination unlawful, including executive orders like Executive Order 11246, including executive orders like Executive Order 11246, including special efforts by various departments of the Federal Government to try to assist minority contractors -- and in the face of all these things, Richmond also had its own anti-discrimination city code. It had experience with these Federal programs, including some Federal programs that set goals that applied to minority contractors.

In the face of all this, when they looked at this in 1983, the number still is two-thirds of one percent of its construction business. So, those other alternatives, which are the ones that are normally set forth, simply weren't working. It was faced with a problem that required a different solution.

QUESTION: Although Richmond had not tried any of those other race-neutral alternatives, I take it?

MR. PAYTON: Well, that's not exactly right.

QUESTION: You're saying Congress had not, or -- but I guess Richmond --

MR. PAYTON: That's part of the Congressional remedy. In fact, the design of the statute in the Fullilove case, it's designed to administer funds through the State's two localities.

Richmond was familiar with how these programs had worked. It's a beneficiary of a lot of these National programs, and in the face of that, it knows that those programs certainly didn't affect this problem that it saw, and that it sought to remedy.

QUESTION: Do you think that State and local government have as much authority and power to act in this area as Congress does, with its express grant of authority under the Fourteenth Amendment?

MR. PAYTON: I think that State and local governments have greater responsibility -- I'll come to power in just a second. I think they have a greater responsibility. These are problems that are very difficult to solve. We haven't come up with magic bullets for racism, or vaccinations to prevent it, and localities have to deal with these problems that they see every day in their contracting dollars, for example.

And I think that it's not possible for Congress to come up with remedies that affect various localities in ways that will actually deal with these problems.

With regard to power, I think that when this Court in Fullilove made reference to Section Five of the Fourteenth Amendment, that really was to find a basis for the Congress being able to impose a program on the States. And when it looked to whether or not it could do this for itself, it didn't have to look there.

So I think Section --

QUESTION: Do you mean the commerce power wouldn't have handled it? I would have thought you could do almost anything under the commerce clause. We had to mention the Fourteenth Amendment or we would have thought, "My goodness, this is not one of those areas that the Federal Government can get into."

MR. PAYTON: Well, you may be right, Justice Scalia, but in then Chief Justice Burger's opinion, he made explicit reference to Section Five when he wanted to find a basis for power for the Congress imposing the requirements of the Public Works Employment Act on the States and, through the States, on their subdivisions.

Now, that's the way he analyzed it. He also looked at the commerce power for other parts of the Act. That may or may not -- you may or may not agree with him, but that is the way he walked through the analysis in Fullilove.

And I would say that there is no reason to believe that States and cities and any other subdivision -- as long as they make appropriate findings and have the authority under State law to do what they do --

QUESTION: Although in a sense, the Fourteenth Amendment was precisely designed to prohibit States from taking action on the basis of race, wasn't it?

MR. PAYTON: I think the Fourteenth Amendment was designed in a way to require States to treat people fairly. And I think this Court has dealt in the past, on several occasions, with whether or not States can take action that would be characterized as affirmative action, and I think the analysis is, there are disagreements on the edges, but the analysis is, if there is a sufficient on compelling State interest, and the means are sufficiently related or narrowly tailored, that it is authorized for a State to do that, and for the State's political subdivisions to do it as well.

Richmond satisfied those criteria.

QUESTION: Well, it didn't copy -- it didn't follow the Fullilove scheme entirely, did it? On Fullilove, didn't the regulations require that before any entity could take advantage of the preference, that it prove that it itself had been discriminated against?

MR. PAYTON: There are -- there is something to that effect in the Fullilove.

QUESTION: It's an expressed provision of the regulation.

MR. PAYTON: Yes. There are later Congressional actions, including the Surface Transportation Act of 1988, which don't have such explicit requirements.

QUESTION: Well, that means that we -- you're talking about Fullilove. In Fullilove, the opinion of the Court itself indicated that the only people who could take advantage of the preference were people who themselves could prove they had been discriminated against. There's nothing like that it --

MR. PAYTON: There's nothing like that.

QUESTION: There's nothing like that in Richmond. People get this preference whether or not they've ever suffered discrimination. Isn't that right?

MR. PAYTON: Yes, that is right. I think there are two responses, though.

The first response is that I believe the jurisprudence on this is that it is not necessary, or is not a fatal defect, if a plan such as this plan is overinclusive.

Second, given what we learned about the construction industry, the number of contractors that you are talking about that would not be the victims of the past discrimination is very small, if at all, and I should also say that just because a Black person manages to be a contractor in the face of this system doesn't mean that he is not a victim. That there are clear findings that there are other obstacles to his advancement, and that in some sense, because of how stark these numbers are, I would say it is fair to have a presumption that all the minority contractors were in some sense --

QUESTION: Was it -- this isn't exactly like Fullilove?

MR. PAYTON: It is not exactly like Fullilove.

QUESTION: So you have to mix.

QUESTION: Was this ordinance, Mr. Payton, reenacted in 1988?

MR. PAYTON: No, it was not.

QUESTION: So it's expired?

MR. PAYTON: It was not reenacted.

QUESTION: Well, then, its prescribed duration was five years from June?

MR. PAYTON: That's correct.

QUESTION: So it expired on June 30, 1988?

MR. PAYTON: Yes.

QUESTION: Does that raise a mootness problem?

MR. PAYTON: The 30 percent figure -- let me describe the reach of the remedy, here, and I will get to your question right away, Justice Blackmun.

Richmond's share of the construction business, the city's share of the construction business in Richmond, is only about 10 percent. Therefore, even if the 30 percent figure is a complete success, that would only have an impact on some three percent of the construction business.

Where did the 30 percent figure come from? Because there is a virtual preclusion of minority contractors from the construction industry, it isn't possible to look at that set of numbers and use it. Therefore, the 30 percent figure is a figure that is simply roughly between the two-thirds of one percent and fifty percent. That's where it comes from.

There is no magic formula or any more precise way of coming up with the 30 percent, and I guess in looking at it, it is fair to look at its impact on the entire construction industry, which I represent is very modest.

QUESTION: In this case, the old from the minority subcontractor was some $7,000 over the quotes that the prime had received from other suppliers.

Is it the most narrowly tailored remedy for correcting past discrimination?

MR. PAYTON: Well, let me --

QUESTION: To permit an increased price, and require that the increased price be paid, without a waiver?

MR. PAYTON: There are two points to this, as well. I think that the record does not support the proposition that the minority contractor's bid was going to -- would have been higher or lower or the same as the majority subcontractors's bid. This is what is in the record.

Croson, when it went to put in its bid, contacted two majority subs and received bids back from them. When it received those bids back, it had the two majority subcontractors engage on a little price war back and forth among themselves, and they adjusted their bids down, down, down, until they got the lowest bid, and then they put in that lowest bid.

When Croson received the bid from the minority subcontractor, after the bid had been submitted, it received that bid. It was higher as you just explained, but Croson never sought to negotiate with the minority subcontractor to take that price down, as it had with the majority subcontractors.

So, on this record, we don't know what the minority price would have been, if Croson had engaged in the negotiation that it did with the majority.

In a larger sense, though, I think that whether the price is higher or not raises no real Constitutional question here. It is -- Richmond can decide if it wants to pay more money in order to achieve a remedy for this past discrimination. And as between various contractors for the city's business, there is no discrimination at all. They all get judged by the same rules.

QUESTION: Well, is it a requirement then for the validity of an ordinance with such an escalation mechanism that the city absorb the excess?

MR. PAYTON: It would have.

QUESTION: Is that a requirement for the validity of the ordinance?

MR. PAYTON: No.

QUESTION: So that the costs of during past discrimination can rest on a third party?

MR. PAYTON: Well, construction is competitively bid, and if the city attaches requirements to the bids, people can choose not to bid. They can bid, they can eat some of their own profits, they can shop around and make the minority contractors take their price down -- this would be a competitive market. And it is a competitive market, also, for the minority subcontractors.

That is, if Croson identifies one, two, three subcontractors, he can negotiate with them, and take their price down. And in the end, we fully expect competitive forces to operate here, to create thriving, competitive minority contractors who begin as subs and will graduate to be --

QUESTION: But if the competitive forces were not operating, and minority subcontracting was at a premium borne by the prime contractor, that would still not impair the validity of the ordinance?

MR. PAYTON: I think not, but that is not the case we have here. The case we have here is that the prime negotiates with the sub, and he puts in a bid, and the city -- the lowest bid wins. And it's just like the market operated before. The primes have to negotiate with their subs to get their prices. In order to put in a price here, to be responsive you have to find a minority contractor. And you put in your price in the kitty, and the city takes the lowest bidder and pays the price.

Clearly, this way, the -- any increase would be borne by the city.

The design of the program is in fact to increase the number of minority contractors.

QUESTION: There was a minority contractor, a sub, who bid here?

MR. PAYTON: Yes.

QUESTION: And the only reason he didn't get it, you suggest, is that the prime really discriminated against him?

MR. PAYTON: No, I'm not suggesting that.

The prime --

QUESTION: Well, you say you didn't have an opportunity to lower his bid, and meet some lower bids.

MR. PAYTON: No, Croson took the position that the requirements imposed by this program have violated its rights, and rather than rebid this contract once the minority subcontractor had been identified, Croson chose to file this lawsuit, which is an appropriate way to proceed. And --

QUESTION: Why wouldn't the city really attain its objective in this particular case if it had just had an ordinance that forbade discrimination by prime contractors against minority subs?

MR. PAYTON: There is such an ordinance, 1981, I think, would forbid discrimination between primes and subs. I think there are a lot of other statutes out there that affect in one way or another a lot of the underlying actions in this case.

The problem that you face in the construction industry -- it is not that easy to get at this. And just to say that all those things are now unlawful -- they have been unlawful. It doesn't affect the fact that we have a closed business system. It is to affect the ramifications of this closed business system that this ordinance is necessary.

QUESTION: Well, if there had been 100, say 100 minority subs had bid this job, and all of them had been above the -- all had been high bids, shouldn't the low bid prevail?

MR. PAYTON: Well, the question is, I guess that question is whether or not under Virginia law, I don't think that's a Constitutional question, under Virginia law, it's authorized for Richmond to have an ordinance where it has an exception to taking the low bid, because it wants to remedy this discrimination in this way.

And that was litigated, and it's clear that Richmond has the authority to do that. But I don't think it raises a Constitutional question. All the primes are treated the same.

QUESTION: As I understand your answers, you want us to consider this case as if the minority contractor did not make a higher bid?

MR. PAYTON: I think --

QUESTION: And that's how we evaluate this record, and this case, and this ordinance?

MR. PAYTON: Yes, I think you can consider this as though it's a facial challenge. And I think that it's clear that the minority contractor did make a higher bid, but I think you can't draw the significance from it that you started off with -- which is that if there had been negotiations, it would have remained a higher bid.

That may be, but we don't know on this record. I think this case should be analyzed by looking at it as a facial challenge to this ordinance.

With regard to whether or not Croson --

QUESTION: Well, Croson's damages aren't -- I take it are based on the loss of the contract.

MR. PAYTON: Yes. But I was going to go to -- the only way the other part of this comes into it, the $7,000 and the higher bid -- is if there is something to whether or not Croson was improperly denied its waiver. And I think there is a finding by the District Court, which heard witnesses on this, there's a finding that the city acted absolutely reasonably. That's the District Court's description, absolutely reasonably, in denying the waiver.

QUESTION: But you say it's a facial challenge. That means that the ordinance couldn't be applied constitutionally in any conceivable circumstance.

Suppose there's -- suppose the minority contractor was asked to lower his bid, and he said, "NO, I'm not going to lower my bid, that's a low as I can go." Now, could the ordinance be constitutionally -- could the ordinance constitutionally require Croson to re-bid?

MR. PAYTON: Yes. All that would happen in that circumstance is that Croson would take the minority bid, which for the purposes of this I will concede is higher, put it in -- Croson was the only bidder on this -- Croson would have got the contract, the city would have paid the difference.

That's exactly what would have happened, and I think that raises no constitutional question at all.

QUESTION: But could he -- could -- well, so the question of re-bidding would never come up?

MR. PAYTON: That's correct. That's correct.

I'd like to reserve the rest of my time.

QUESTION: May I just clear up one thing, though? The ordinance does not require that the sub be a Richmond concern, does it?

MR. PAYTON: No, it does not.

QUESTION: It does not.

MR. PAYTON: Let me just clarify that. Under Virginia law, it is not possible for the city of Richmond, except in very, very narrow circumstances, to discriminate on the basis of where a sub or a prime comes from. And the narrow circumstance is if the bids are exactly the same.

Also, I think it is the case -- and there is no evidence to the contrary -- that the substantial portion of all the construction work done in Richmond for Richmond is by Richmond contractors and subcontractors. Construction is by its very nature a local --

QUESTION: But if out-of-State materials, the items involved here could have been purchased out of State, presumably, from a minority business enterprise in Baltimore, or North Dakota, or some place.

MR. PAYTON: Yes, they could have.

QUESTION: Thank you, Mr. Payton.

We'll hear now from you, Mr. Ryland.

ORAL ARGUMENT OF WALTER H. RYLAND ON BEHALF OF THE APPELLEE

MR. RYLAND: Mr. Chief Justice, and may it please the Court, responding to the last question which was asked of Mr. Payton, on the question of whether the city would absorb the higher bid by the minority supplier in this case, the record is quite explicit that J. A. Croson Company asked the city to do just that, and was refused by the city, on grounds that the bid could not be increased. The price could not be increased after the bids were in.

QUESTION: And so what happened? The city said re-bid?

MR. RYLAND: The city then announced that because of Croson's noncompliance with the ordinance, the contract would be re-bid.

QUESTION: So the real -- so the question is, was this ordinance constitutionally applied in this case?

MR. RYLAND: I think the threshold question which we attack is whether the council had a proper basis for adopting the ordinance in the first place.

We did argue that --

QUESTION: So you say it's a facial challenge?

MR. RYLAND: It's facial in the sense that we attack the authority to adopt the ordinance. It's not a facial challenge in that it's --

QUESTION: You're saying it couldn't be constitutionally applied in any circumstance?

MR. RYLAND: We're not contending that the ordinance could not be constitutionally applied in some circumstance.

QUESTION: But you're contending that it couldn't be applied in this circumstance?

MR. RYLAND: We're contending that in this particular case, the city had no authority to adopt it. It had no --

QUESTION: Well, but -- suppose the city, did have authority to adopt an ordinance that might do some of these things. It's your contention, isn't it, that that ordinance cannot constitutionally be applied to your situation here, where Croson was bidding on this contract?

MR. RYLAND: Yes.

QUESTION: We must infer from what you have told us, I take it, that if the -- if Croson had absorbed the $7,000 himself, he would have received the contract?

MR. RYLAND: Yes.

QUESTION: And that because of his refusal to absorb it, he did not get the contract.

MR. RYLAND: It's only because of his refusal to absorb it that he did not get the contract.

QUESTION: (inaudible)

MR. RYLAND: Essentially, what we have here is a conclusion by the city that because prime contracts were being awarded to minority businesses in a low number, that this justified the adoption of a race-conscious legal remedy to correct the situation.

In effect, it was determined that because of the low percentage of awards to minority firms, the construction industry would be required to remedy the situation by having those contractors who were owned by non-minorities contract 30 percent of their contracts to minority firms. There was no finding by the city, no evidence before City Council which would entitle City Council to infer that this societal discrimination should be remedied by the adoption of such a racial classification.

Our position is that if City Council wanted to attack societal discrimination, they could do it by adopting various means, race-neutral means on their face. The City Council had an ordinance which prohibited discrimination in the award of public contracts. It could have exercised its authority under that ordinance, and put the effort into enforcing that ordinance, that it put into administering this one, and achieved a constitutional result.

QUESTION: Did the city make any finding that it had previously discriminated against minority contractors?

MR. RYLAND: No, the transcript of the hearing before City Council was quite explicit in rejecting any contention that the city had discriminated in any way.

Clearly, no court could force the adoption of a law like Richmond's, unless the city itself had been guilty of discrimination against the groups identified in the ordinance. When a city voluntarily adopts a racial preference, it should be looked at very carefully.

The city is more likely to -- more likely than a court to be acting for a purpose not permitted by the Constitution. This is different from the situation in Fullilove, where this Court gave proper deference to the findings of Congress that it was acting for remedial purposes.

Here we have an action by a locality, and the record before the Court shows quite clearly that the reason they were adopting the ordinance was that other cities had it. That was the testimony at the hearing before City Council.

QUESTION: Well, why should we give a different presumption as to a remedial purpose for what Congress did than for what the city of Richmond did? Wouldn't they both be doing it for pretty much the same purpose?

MR. RYLAND: Not necessarily.

I think that if the Congress says it's acting for remedial purpose, because of the breadth of the national government and the breadth of national problems that it's seeking to deal with, that finding inherently has more credibility than the unsupported action of a local government in adopting what would be a mere pork barrel political dispensation of public money.

QUESTION: But what Congress adopted might be just a pork barrel thing, too, but we do give it a presumption.

MR. RYLAND: It might be, but it's less likely to be.

QUESTION: Well, I don't know what you're driving at.

Is it clear from the record in this case that we are dealing with the majority favoring the minority in the particular political unit? We've been talking about minority contractors.

MR. RYLAND: You mean whether --

QUESTION: Are these people -- do we know from the record that they are in fact a minority of the political unit that adopted this race-based law?

MR. RYLAND: I don't think that there is anything in the record per se which talks about the minority percentage in the area. It was assumed for purposes of discussion that it was approximately 50 percent. Is --

QUESTION: Do you think that we might take a different view of race-based matters where the political unit is favoring a race that's the minority, as opposed to what is the case, where a political unit favors a race that is the majority?

MR. RYLAND: Yes, one of the amicus briefs filed some Census data which showed that the actual minority percentage in Richmond was more than 50 percent. It was known that a majority of the people on City Council were Black.

We have not chosen to make an issue of that because of one of those decisions that lawyers make in representing a case. Essentially, it seemed to us that the tendency to adopt an ordinance for the wrong reason would be there any time you were dealing with a significant political interest group, without regard to whether it was in the majority or not. So we decided not to attach legal significance to the fact that they had a majority vote or council and perhaps had a majority in the population.

QUESTION: The transcript of the hearing before the City Council does show that the city is approximately 50 percent Black and 50 percent white.

MR. RYLAND: Yes, that's in the transcript.

The fact that the population was approximately 50 percent Black was used in the explanation of why the city chose the 30 percent number. And I submit that that's no justification for choosing that number, but that was the explanation given for why it was chosen.

QUESTION: Mr. Ryland, are you -- do you think that the city can only act affirmatively on the basis of remedying its own prior discrimination?

MR. RYLAND: Yes.

QUESTION: So that if the city had evidence that in fact private construction contractors were indeed discriminating against minorities, that the city would be powerless to take action to remedy that private discrimination?

MR. RYLAND: No, I would not take that position. I would think that's a different situation, when there is, where there is known discrimination, as opposed to the unidentified, amorphous concept that there is discrimination out there somewhere by somebody.

In a specific case of known discrimination, I would --

QUESTION: By private --

MR. RYLAND: By a private party.

QUESTION: Parties, against others.

MR. RYLAND: Yes, I would not --

QUESTION: So you do concede that the city would then have the power to try to remedy that?

MR. RYLAND: In proper circumstances, yes.

QUESTION: Now, that was not the view taken by the court below, was it?

MR. RYLAND: Well, in -- before the court below, there was no identified discrimination for the court to address. The court was only addressing --

QUESTION: By either the city or private parties, is that your position?

MR. RYLAND: That's correct. That's correct.

QUESTION: But there certainly was language in the opinion to the effect that the city would be powerless to remedy private discrimination.

QUESTION: And where did he get that language, do you know? What's the root of it?

MR. RYLAND: Well, I think the root of that language comes from the reference in Mygant, in the plurality opinion to remedying discrimination by the governing body.

QUESTION: But it's a plurality opinion.

MR. RYLAND: It's a plurality opinion. And the reference is in the context of this Court never having approved a race-conscious legal remedy by a state actor in the absence of discrimination by that actor.

QUESTION: The city certainly would have authority to remedy private discrimination. It's a question of what would be -- how would it remedy it? It could certainly have an ordinance forbidding private discrimination.

MR. RYLAND: Yes.

QUESTION: And then give appropriate remedies against those who are discriminating.

MR. RYLAND: Yes. If it identified --

QUESTION: But the issue is whether it itself could use its own authority to enact a set aside to remedy somebody else's discrimination.

MR. RYLAND: Precisely. Precisely. We don't take issue with the city's authority to act affirmatively in an identified case.

QUESTION: If the city's aware that a private contractor is discriminating, may it continue to deal with that contractor?

MR. RYLAND: If it were aware of the discrimination, and were aware that its continuing to deal with the contractor would further that discrimination, I think the city would be exposing itself to liability. I think it could continue to deal with the contractor, but at its peril.

QUESTION: But surely Richmond has done that in the years prior to the distant past?

MR. RYLAND: I don't believe so. I don't believe so. I don't think that we have any identified instances of discrimination by any entity against minority firms.

I think that the accusation that there is discrimination in the construction industry does not extend to the award of relief against the industry or any particular firms because of that general finding.

QUESTION: Well, if this ordinance had been enacted in the year 1870, would the chances for its being sustained be any greater than now? That's two years after the enactment of the Fourteenth Amendment.

MR. RYLAND: I understand.

I don't feel competent to answer that, Justice Kennedy, because I don't know the context of the time and what the courts would have done.

QUESTION: Well, we know about our history, we know about the context of the time, we know about slavery, we know about the necessity for the Fourteenth Amendment, and we know about the existence (a), of slavery, and (b), of discrimination after slavery ended.

MR. RYLAND: Yes. You had the Freedman's Bureau, which was established at that time specifically to provide aid to former slaves. Nobody has ever suggested that that was unconstitutional or some sort of unlawful preference. Congress was struggling with the powers of the Fourteenth Amendment.

I think that under the line of cases since Brown v. Board of Education, we do not find this Court approving race-conscious legal remedies in the absence of a shown violation. So, I would have to answer that based on recent constitutional history, the rule should have been the same in 1870.

QUESTION: And you think it's unlikely that this ordinance could have been sustained in 1870, when Blacks had been emancipated for simply, approximately six years?

MR. RYLAND: Well, you would have had a different factual situation in that regard. Certainly the Government would have been entitled to provide aid to former slaves to help them become skilled tradesmen, craftsmen, contractors able to stand on their own in the business world. There's no question about that.

For the Government to have said to white businessmen who were not former slaveowners that they had to provide the remedy to slavery, I think, raises a very different constitutional question.

I'm uncomfortable dealing with this in the abstract, because there are so many variables in there. But I don't think we had any remedies in the post-Civil War period that imposed affirmative duty on non-violators, so that's the distinction we make in this case.

A second aspect of our position is that this ordinance was not narrowly tailored to achieve a proper remedial objection. We've mentioned the fact that the 30 percent quota was pulled out of the air. The fact that it's over inclusive and that it grants preferential rights to groups that are not resident in the Richmond area, and which have never been subject to discrimination in the Richmond area, would automatically give rise to a constitutional violation as soon as one of these minority group members exercised its right to preferential treatment under the Richmond ordinance.

It's not enough to dismiss the seriousness of the problem by saying none of these groups have participated yet. Under this law, there's nothing to prevent qualified and competent minority firms from areas of the country which have not experienced discrimination to come into the Richmond area and participate under the ordinance. There's no real supervision of the administration of the ordinance to assure that it achieves a business purpose.

The 30 percent quota requirement has a problem in it, in that it's so high that it can force the award of a much higher proportion of the contract to minority firms. This has a serious impact on non-minority subcontractors who are in the same trades where there are qualified minority firms already participating.

The impact on those people can be exclusion from the marketplace, and the impact on them is as great as the impact on Croson, with the loss of its contract in this case.

QUESTION: If the figure were five percent, would you be making the same argument?

MR. RYLAND: I could not make the argument that it would force the award of a much larger percentage.

QUESTION: No, but would you be making the same basic argument?

MR. RYLAND: Yes, yes, a constitutional violation is a constitutional violation, whether it's a little one or a big one.

QUESTION: And if it were two percent, you would still be making the same argument?

MR. RYLAND: Yes.

QUESTION: So the figure, really, is meaningless?

MR. RYLAND: The figure is meaningless on the down side. The higher it gets, the more practical problems result.

QUESTION: You said exclusion from the marketplace. But even the 30 percent figure, according to your opponent, really is only three percent of the market.

MR. RYLAND: It's three percent of the market, by that computation, but for the individual subcontractor who is in competition with one eligible for the minority preference, on him that three percent is a much larger proportion of his business.

And let us not forget that the subcontractors who are competing for these jobs are not all large, wealthy firms. The subcontractors struggle without regard to race. There are many tradesmen out there who would like to be a prime contractor with a governmental entity but don't have the expertise or the skill and never will. And that's without regard to race. There are a lot of struggling business cut there, so any time you adopt a law which has the effect of denying a substantial part of the market -- of their market -- to them, the impact is quite severe.

Thank you.

QUESTION: Thank you, Mr. Ryland.

Mr. Payton, you have four minutes remaining.

REBUTTAL ARGUMENT BY JOHN PAYTON

MR. PAYTON: Thank you, Mr. Chief Justice.

Let me respond to four points. With regard to the question you raised, Justice Scalia, about isn't there a problem because Croson wasn't allowed to raise their bid at the end, the reason -- or maybe Mr. Ryland raised it -- the reason Croson wasn't allowed to raise their bid once it got the bid from its minority contractor is, under the city's procurement policies, you out in a bid, and that's it.

And when he asked permission to raise his bid in light of this, it was denied, and he was asked to re-bid. And instead of re-bidding, he filed this lawsuit. There's just no issue that raises any constitutional question out of that.

The District Court, in ruling on this waiver issue -- if I can just read what the District Court said at note 20, supplemental appendix 231 -- "Croson has not persuaded this court that any of the additional evidence it has adduced, after full discovery, that Continental" -- that's the minority sub -- "was in fact unavailable or was taking advantage of the plan to charge excessive prices.

"The city's decision was not only reasonable, but appears to have been absolutely correct" -- that is, in having the contract re-bid.

With regard to what was actually before the Richmond City Council, and what it was trying to address, it was not societal discrimination. The City Council was aware of what Congress had found, in the construction industry, and how it had described that industry, and what Congress had tried to do to remedy that. But it was also aware of what had happened in its own industry, and at the City Council hearing, it heard evidence from various of the construction trace associations, and from that it learned that there were virtually no minority members of any of the construction trade associations.

It also heard testimony from a former mayor that there was a widespread discrimination in Richmond's own construction industry. And that testimony was concurred in by the City Manager.

So, what Richmond had was a very full set of findings and understandings. There was no question that this was a remedial statute. It said so on its face, and when the issue of its remedial nature came up, it came up before all of the trace association representatives testified, and none of them took issue with that.

In the District Court, where there was fully opportunity to litigate this, the issue of whether or not there was sufficient factual predicate of discrimination was not joined by Croson. There is no rebutting testimony about the factual predicate of discrimination in this case.

With regard to whether or not there should be a different standard of proof, or scrutiny, that attaches to a Governmental body that depends on its racial composition, I guess I can only say it's the same Fourteenth Amendment and I think it's the same standards, and it applies whatever the racial composition of Richmond, whatever the racial composition of Richmond's City Council, whatever the racial composition of --

QUESTION: But at some point, don't you reach a situation -- supposing a State had 60 percent Black people in it. Would that State still be able to allow a set-aside for what they would call "minority" businesses -- i.e. Black businesses?

MR. PAYTON: Well, I can remove the word "minority" if it helps the analysis.

If the State determined that in fact its construction industry was characterized by past racial discrimination which had locked out of that business system minority contractors, I would say it's irrelevant what the minority population of that State is, as long as it makes the appropriate findings in its own locality and then goes about trying to remedy that in a way consistent with the jurisprudence of this Court.

QUESTION: But you surely wouldn't call them minority contracts?

MR. PAYTON: I will remove the word. As long as it defines that Black contractors have been locked out, it can seek that remedy. And the Constitutionality of that remedy can be litigated in District Court.

But certainly there is a sufficient basis in evidence for Richmond to do exactly what it did, and in the District Court where this was litigated, nothing was presented to rebut any of that factual finding of past discrimination -- nothing at all.

I think that this is not societal discrimination --

QUESTION: The discrimination was practiced by -- who discriminated against the minority contractors?

MR. PAYTON: I think it was a closed business system, as described by --

QUESTION: Well, that doesn't help me very much. Who? Who did the discriminating? The city?

MR. PAYTON: No, it's not the city. It's not the city. It is all aspects of the construction industry itself, from the trades -- one of the ways you become a construction contractor is to enter as a member of a trade and then leave that and become a small construction contractor. That's blocked for Black members.

QUESTION: well, I suppose you could say that about any industry.

MR. PAYTON: No, you can't.

QUESTION: In the past? Way back in the past?

MR. PAYTON: No, you can't. With the construction industry, we know a lot about what we speak here, and there have been studies and studies and judicial findings that establish that there is a closed business system in the construction industry that was being remedied by Richmond, here.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Payton.

The case is submitted.

(Whereupon, at 11:47 o'clock a.m., the case in the above-titled matter was submitted.)