Metropolitan Washington Chapter, Associated Builders and Contractors, Inc. v. District of Columbia
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Opinion
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
) METROPOLITAN WASHINGTON ) CHAPTER, ) ASSOCIATED BUILDERS AND ) CONTRACTORS, INC., et al. ) ) Plaintiffs, ) ) v. ) ) Civ. Action No. 12-853 (EGS) DISTRICT OF COLUMBIA, ) ) and ) ) VINCENT C. GRAY, in his ) official capacity as Mayor ) of the District of Columbia, ) ) Defendants. ) )
MEMORANDUM OPINION
In 1984, the District of Columbia (hereinafter “District”)
enacted the First Source Employment Agreement Act (hereinafter
“First Source Act” or “Act”), a residential preference statute
for the construction industry mandating that certain percentages
of construction jobs on projects funded in whole or in part, or
administered by the city, be filled by District residents. The
Act was amended in 2011 by the Workforce Intermediary
Establishment and Reform of First Source Amendment Act of 2011,
which was signed by Mayor Vincent C. Gray and passively approved
by Congress. The First Source Act, both as enacted and amended,
is intended to address the unique position in which the District finds itself as the only jurisdiction in the country that is
legally barred from imposing a commuter tax on non-residents who
come into the city to work. Nearly 70 percent of jobs in the
District are held by non-residents and this inability to levy a
commuter tax allegedly results in a significant financial
shortfall for the District, especially because the unemployment
rate in the District is much higher than in surrounding
jurisdictions. Plaintiffs, a non-profit commercial
organization, two construction companies, and four individuals
who live in Maryland and Virginia challenge the law as enacted
and amended as a violation of their constitutional rights. They
argue that for the purposes of judicial review of the First
Source Act, the District must be treated as if it is a state.
They contend that treating the District as a state would render
the First Source Act unconstitutional.
This case thus represents something of a twist in the long
line of cases in which the District has repeatedly confronted
the uncontroverted fact that its unique constitutional status
prevents it from enjoying benefits states take for granted. For
instance, in this nascent century alone, the District has been
told (yet again) that its citizens cannot elect representatives
with voting rights to the Congress of the United States, Adams
v. Clinton, 90 F. Supp. 2d 35 (D.D.C. 2000); cannot levy a
commuter tax, Banner v. United States, 303 F. Supp. 2d 1 (D.D.C.
2 2004); and cannot control expenditures of locally derived funds,
Council of the District of Columbia v. Gray, No. 14-655, 2014
U.S. Dist. LEXIS 68055 (D.D.C. May 19, 2014). Further, the
District is also prohibited from, inter alia, prosecuting its
own crimes, D.C. Code § 23-101(c); enacting legislation without
Congressional approval, D.C. Code §§ 1-204.04(e); 1-
206.02(c)(1); regulating its own courts or appointing its own
judges, D.C. Code §§ 1-204.33(a); and enacting zoning
regulations without submission to the National Capital Planning
Commission for review, D.C. Code § 6-641.05. These restrictions
apply to the District for the precise reason that it is not a
state, but rather an “exceptional” constitutional creation, over
which Congress retains ultimate legislative authority.
Even when the District finally gained some measure of
autonomy with the passage of the Home Rule Act in 1973, the
extent of home rule was limited; the grant of legislative
authority to the District in the Home Rule Act is cabined by the
power of Congress to determine what is in the best interest of
the District and its residents. In practice, since the
enactment of the Home Rule Act, this limited ability to
legislate has often meant that the prerogatives of the
District’s locally elected representatives are subordinate to
those of Congress. This year alone, Congress has blocked the
District’s ability to decriminalize marijuana possession, spend
3 its own money on abortions for poor residents, and has cut funds
for D.C. police officers to drive their police cruisers to and
from their homes if they live outside the District by adding
riders to the Congressional appropriations bill.1 These actions
by Congress are widely understood as further setbacks for home
rule in the District.
The Court is aware that similar state statutes, when
challenged under the Privileges and Immunities Clause of the
Constitution, have all been struck down as unconstitutional.
However, the District, unlike every other jurisdiction in the
country that imposes an income tax on its own residents, is
barred by the Home Rule Act from levying a commuter tax on
income earned by non-residents working here. While that fact
alone would result in a structural imbalance in any city, the
magnitude of the problem is unique in the District, where
approximately 70 percent of jobs are held by non-residents.
This structural imbalance is exacerbated by the fact that the
unemployment rate in the District is extremely high – higher
than both the national average and that of the entire Washington
metropolitan area – thus requiring the city to spend an
1 See Aaron C. Davis, House Republicans block funding for D.C. marijuana decriminalization, WASHINGTON POST, June 25, 2014, http://www.washingtonpost.com/local/dc-politics/house- republicans-block-funding-for-dc-marijuana- decriminalization/2014/06/25/d6854ba8-fc6e-11e3-8176- f2c941cf35f1_story.html (last accessed July 11, 2014). 4 inordinate amount of its resources on social welfare services in
an attempt to aid its un- and under- employed population.
These circumstances put the District in a different
position than other cities that have tried to enact similar
residence preference legislation. No other jurisdiction can lay
claim to being a unique constitutional community, and thus, no
other jurisdiction, by operation of our very constitutional
structure, could possibly face the challenges faced by the
District. Nevertheless, the District has not provided any
competent evidence that the First Source Act, as enacted and
amended, is a narrowly tailored means to address this unique
evil. Thus, having carefully considered the Defendants’ motion
to dismiss, the response and reply thereto, the supplemental
briefing, the applicable law, the oral argument, and the record
as a whole, Defendants’ motion to dismiss is GRANTED IN PART AND
DENIED IN PART.
I. Background
In 1984, the District enacted the First Source Employment
Agreement Act to “provide employment opportunities in entry-
level positions in District of Columbia government-assisted
projects for unemployed residents.” 31 D.C. Reg. 2545 (May 25,
1984). In 2011, the Council of the District of Columbia
unanimously amended the Workforce Intermediary Establishment and
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
) METROPOLITAN WASHINGTON ) CHAPTER, ) ASSOCIATED BUILDERS AND ) CONTRACTORS, INC., et al. ) ) Plaintiffs, ) ) v. ) ) Civ. Action No. 12-853 (EGS) DISTRICT OF COLUMBIA, ) ) and ) ) VINCENT C. GRAY, in his ) official capacity as Mayor ) of the District of Columbia, ) ) Defendants. ) )
MEMORANDUM OPINION
In 1984, the District of Columbia (hereinafter “District”)
enacted the First Source Employment Agreement Act (hereinafter
“First Source Act” or “Act”), a residential preference statute
for the construction industry mandating that certain percentages
of construction jobs on projects funded in whole or in part, or
administered by the city, be filled by District residents. The
Act was amended in 2011 by the Workforce Intermediary
Establishment and Reform of First Source Amendment Act of 2011,
which was signed by Mayor Vincent C. Gray and passively approved
by Congress. The First Source Act, both as enacted and amended,
is intended to address the unique position in which the District finds itself as the only jurisdiction in the country that is
legally barred from imposing a commuter tax on non-residents who
come into the city to work. Nearly 70 percent of jobs in the
District are held by non-residents and this inability to levy a
commuter tax allegedly results in a significant financial
shortfall for the District, especially because the unemployment
rate in the District is much higher than in surrounding
jurisdictions. Plaintiffs, a non-profit commercial
organization, two construction companies, and four individuals
who live in Maryland and Virginia challenge the law as enacted
and amended as a violation of their constitutional rights. They
argue that for the purposes of judicial review of the First
Source Act, the District must be treated as if it is a state.
They contend that treating the District as a state would render
the First Source Act unconstitutional.
This case thus represents something of a twist in the long
line of cases in which the District has repeatedly confronted
the uncontroverted fact that its unique constitutional status
prevents it from enjoying benefits states take for granted. For
instance, in this nascent century alone, the District has been
told (yet again) that its citizens cannot elect representatives
with voting rights to the Congress of the United States, Adams
v. Clinton, 90 F. Supp. 2d 35 (D.D.C. 2000); cannot levy a
commuter tax, Banner v. United States, 303 F. Supp. 2d 1 (D.D.C.
2 2004); and cannot control expenditures of locally derived funds,
Council of the District of Columbia v. Gray, No. 14-655, 2014
U.S. Dist. LEXIS 68055 (D.D.C. May 19, 2014). Further, the
District is also prohibited from, inter alia, prosecuting its
own crimes, D.C. Code § 23-101(c); enacting legislation without
Congressional approval, D.C. Code §§ 1-204.04(e); 1-
206.02(c)(1); regulating its own courts or appointing its own
judges, D.C. Code §§ 1-204.33(a); and enacting zoning
regulations without submission to the National Capital Planning
Commission for review, D.C. Code § 6-641.05. These restrictions
apply to the District for the precise reason that it is not a
state, but rather an “exceptional” constitutional creation, over
which Congress retains ultimate legislative authority.
Even when the District finally gained some measure of
autonomy with the passage of the Home Rule Act in 1973, the
extent of home rule was limited; the grant of legislative
authority to the District in the Home Rule Act is cabined by the
power of Congress to determine what is in the best interest of
the District and its residents. In practice, since the
enactment of the Home Rule Act, this limited ability to
legislate has often meant that the prerogatives of the
District’s locally elected representatives are subordinate to
those of Congress. This year alone, Congress has blocked the
District’s ability to decriminalize marijuana possession, spend
3 its own money on abortions for poor residents, and has cut funds
for D.C. police officers to drive their police cruisers to and
from their homes if they live outside the District by adding
riders to the Congressional appropriations bill.1 These actions
by Congress are widely understood as further setbacks for home
rule in the District.
The Court is aware that similar state statutes, when
challenged under the Privileges and Immunities Clause of the
Constitution, have all been struck down as unconstitutional.
However, the District, unlike every other jurisdiction in the
country that imposes an income tax on its own residents, is
barred by the Home Rule Act from levying a commuter tax on
income earned by non-residents working here. While that fact
alone would result in a structural imbalance in any city, the
magnitude of the problem is unique in the District, where
approximately 70 percent of jobs are held by non-residents.
This structural imbalance is exacerbated by the fact that the
unemployment rate in the District is extremely high – higher
than both the national average and that of the entire Washington
metropolitan area – thus requiring the city to spend an
1 See Aaron C. Davis, House Republicans block funding for D.C. marijuana decriminalization, WASHINGTON POST, June 25, 2014, http://www.washingtonpost.com/local/dc-politics/house- republicans-block-funding-for-dc-marijuana- decriminalization/2014/06/25/d6854ba8-fc6e-11e3-8176- f2c941cf35f1_story.html (last accessed July 11, 2014). 4 inordinate amount of its resources on social welfare services in
an attempt to aid its un- and under- employed population.
These circumstances put the District in a different
position than other cities that have tried to enact similar
residence preference legislation. No other jurisdiction can lay
claim to being a unique constitutional community, and thus, no
other jurisdiction, by operation of our very constitutional
structure, could possibly face the challenges faced by the
District. Nevertheless, the District has not provided any
competent evidence that the First Source Act, as enacted and
amended, is a narrowly tailored means to address this unique
evil. Thus, having carefully considered the Defendants’ motion
to dismiss, the response and reply thereto, the supplemental
briefing, the applicable law, the oral argument, and the record
as a whole, Defendants’ motion to dismiss is GRANTED IN PART AND
DENIED IN PART.
I. Background
In 1984, the District enacted the First Source Employment
Agreement Act to “provide employment opportunities in entry-
level positions in District of Columbia government-assisted
projects for unemployed residents.” 31 D.C. Reg. 2545 (May 25,
1984). In 2011, the Council of the District of Columbia
unanimously amended the Workforce Intermediary Establishment and
Reform of First Source Amendment Act of 2011 (hereinafter
5 “Amended Act”), which became effective in 2012. The law, as
enacted and amended, was to counteract the effects of the
“District’s Congressionally-imposed ban on taxing any of the
income that leaves the city,” which results in “$1 billion to $2
billion a year in lost revenue.” Council of the Dist. of
Columbia, Comm. on Hous. and Workforce Dev., “Workforce
Intermediary Establishment and Reform of First Source Amendment
Act of 2011,” B19-50, Oct. 14, 2011, at 3, available at
http://dcclims1.dccouncil.us/images/00001/20120130131015.pdf
(last accessed Jul. 4, 2014) (hereinafter “Committee Report”).
The Act is administered by the District of Columbia Department
of Employment Services (“DOES”). Plaintiffs challenge four
elements of the First Source Act as enacted and amended: (1)
employment agreements; (2) construction contracts; (3) targeted-
hiring contracts; and (4) reporting requirements. Compl. ¶ 9.
A. The First Source Employment Agreement Act of 1984
The First Source Act requires that all “beneficiaries” of a
“government-assisted project” or contract enter into an
Employment Agreement with the District that provides that the
beneficiary will first attempt to fill jobs and vacancies from
the First Source Register, on which only District residents can
be listed. Compl. ¶¶ 10-12; see D.C. Code § 2-219.03(a)(1).2
2 For the purposes of this section, all citations to the First Source Act are to the version of the Act in effect prior to 6 Under the Act, a beneficiary is defined as, inter alia, (a) the
signatory of a contract executed by the Mayor that involves
District funds or funds administered by the District, or (b) a
beneficiary of a District governmental action, including
contracts, grants, and loans, that results in a financial
benefit of $100,000 or more. Id. § 2-219.01(1)(A)-(1)(B). A
“government-assisted project” is one that is funded in whole or
in part by District funds or funds administered by the District,
and for which the District is a signatory to any contractual
agreement. Id. § 2-219.01(5).
The Act imposes additional requirements on government-
assisted projects that cost more than $100,000. For these
projects, 51 percent of new employees must be District residents
unless: (1) the beneficiary made a good faith effort to comply;
(2) the beneficiary is located outside of the “Washington
Standard Metropolitan Statistical Area” and none of the contract
is performed inside that area; (3) the beneficiary enters into a
workforce-development training program with DOES; or (4) DOES
certifies that there are not enough qualified District residents
to staff the project. Compl. ¶ 19; D.C. Code § 2-219.03(e)(3).
Beneficiaries that willfully breach an Employment Agreement may
be subject to penalties, which can include “monetary fines of 5%
February 24, 2012, the date which the amendments to the Act became effective. 7 of the total amount of the direct and indirect labor costs of
the contract.” Compl. ¶ 13 (quoting D.C. Code § 2-
219.03(e)(4)).
The Act also provides that “[w]henever the Mayor determines
that the goal of increasing employment opportunities for
District residents may be better served by establishing hiring
goals in specific job categories for specific government-
assisted projects,” the Mayor can provide for increased hiring
in specific categories by entering into agreements with
beneficiaries or their contractors and subcontractors. D.C.
Code § 2-219.03a(a). A violation of this provision of the Act
is “treated in the same manner as a violation of any other
requirement” of the Act. Id.
The Act includes reporting requirements for beneficiaries.
Every month, beneficiaries must submit a contract compliance
report to DOES. Compl. ¶ 29. This report must include, among
other things, the following for each covered project: (1) the
number of employees needed; (2) the number of current employees
transferred; (3) the number of job openings created; (4) the
number of job openings listed with DOES; (5) the number of
District residents hired during the reporting period; (6) the
cumulative number of District residents hired; (7) the total
number of employees hired during the reporting period; (8) the
cumulative number of employees hired; and (9) the name, social
8 security number, job title, hire date, residence, and referral
source information for all new hires. D.C. Code § 2-219.03(d).
Upon submission of a final request for payment from the
District, at the conclusion of a project, the beneficiary must
document compliance with the Act or submit a request for a
waiver, which includes material demonstrating good faith efforts
to comply, referrals, and job advertisements listed with DOES
and others. Id. § 2-219.03(e)(2). Failure to submit the
required data could result in the imposition of penalties,
including “monetary fines of 5% of the total amount of the
direct and indirect labor costs of the contract.” Id. § 2-
219.03(e)(4).
B. The Workforce Intermediary Establishment and Reform of First Source Amendment Act of 2011
The Council of the District of Columbia passed the
Workforce Intermediary Establishment and Reform of First Source
Amendment Act of 2011 and it was enacted by Mayor Gray on
December 21, 2011. The Amended Act was transmitted to Congress
for review, and after the expiration of the requisite 30-day
passive review period with no joint resolution of disapproval by
Congress, it became effective on February 24, 2012. Defendants’
Motion to Dismiss (hereinafter “Defs.’ MTD”) at 5-6. The
Amended Act broadens the definition of “beneficiary” and
“government-assisted project.” Like the previous version of the
9 Act, a beneficiary is defined as a signatory to a contract
executed by the Mayor that involves D.C. funds or funds
administered by the District. D.C. Code § 2-219.01(1)(A).3 For
a project valued in excess of $300,000, a beneficiary is
[a] recipient of District government economic development action including contracts, grants, loans, tax abatements, land transfers for redevelopment, or tax increment financing that results in a financial benefit of $300,000 or more from an agency, commission instrumentality, or other entity of the District government, including a financial or banking institution which serves as the repository for $1 million or more of District of Columbia funds.
Id. § 2-219.01(1)(B). A “government-assisted project or
contract” includes
any construction or non-construction project or contract receiving funds or resources from the District of Columbia, or funds or resources which, in accordance with a federal grant or otherwise, the District of Columbia government administers, including contracts, grants, loans, tax abatements or exemptions, land transfers, land disposition and development agreements, tax increment financing, or any combination thereof, that is valued at $300,000 or more.
Id. § 2-219.01(5).
The Amended Act also expands the applicability of the
Employment Agreements that each beneficiary must enter into with
the District. Under the Amended Act, Employment Agreements must
include a provision that the first source for finding employees
3 For the purposes of this Section, all citations are to the Workforce Intermediary Establishment and Reform of the First Source Amendment Act of 2011, not the original version of the Act passed in 1984. 10 to fill all jobs created by the project or contract (or any
vacancy occurring during the job) will be the First Source
Register. Id. § 2-219.03(a)(1)-(a)(2). The Employment
Agreement must also include a provision that 51 percent of
employees hired will be District residents unless the Mayor
waives the requirement. A waiver is available if (1) DOES has
certified that the beneficiary made a good faith effort to
comply; (2) the beneficiary is located outside the area; none of
the work is performed in the area; the beneficiary published
each available job in a city-wide newspaper for 7 calendar days
and DOES certifies that there are not enough applicants from the
First Source Register for the job, or the eligible applicants
are not available for part-time work or do not have the means to
travel to the job site; or (3) the beneficiary enters into
workforce development training or placement arrangement with
DOES. Id. § 2-219.03(e)(3)(A)(i)-(A)(iii).
DOES will consider a number of factors in deciding whether
a beneficiary has made a good faith effort to comply sufficient
to justify a waiver, including:
(i) Whether [DOES] has certified that there is an insufficient number of District residents in the labor market who possess the skills required to fill the positions that were created as a result of the project or contract;
(ii) Whether the beneficiary posted the jobs on the [DOES] job website for a minimum of 10 calendar days;
11 (iii) Whether the beneficiary posted each job opening or part-time work needed in a District newspaper with city-wide circulation for a minimum of 7 calendar days;
(iv) Whether the beneficiary has substantially complied with the relevant monthly reporting requirements set forth in this section;
(v) Whether the beneficiary has submitted and substantially complied with its most recent employment plan that has been approved by [DOES]; and
(vi) Any additional documented efforts.
Id. § 2-219.03(e)(3)(B). A beneficiary can choose whether the
51 percent District hiring requirement will be cumulative of all
new hires, including employees hired by subcontractors, or met
by each beneficiary or individual subcontractor. Id. § 2-
219.03(e)(1)(B)(i)-(B)(ii). The targeted hiring and reporting
requirements have not changed in the Amended Act. Compl. ¶¶ 55,
60-62.
For projects or contracts receiving $5 million or more of
government assistance, the Amended Act includes several
additional hiring, including that District residents perform:
(1) at least 20 percent of journey worker hours by trade; (2) at
least 60 percent of apprentice hours by trade; (3) at least 51
percent of skilled laborer hours by trade; and (4) at least 70
percent of common laborer hours. Id. § 2-219.03(e)(1A)(A). In
addition, bids for these projects must include “an initial
employment plan outlining the bidder or offeror’s strategy to
12 meet the local hiring requirements” as well as other information
about health and retirement plans, ongoing efforts to hire
District residents, and past compliance with the Act. Id. § 2-
219.03(e)(1A)(F)(i). The winning bidder must also submit a
revised employment plan for approval prior to the commencement
of work. Id. § 2-219.03(e)(1A)(F)(ii).
The Amended Act calls for the imposition of harsher
penalties for noncompliance. In addition to a penalty equal to
5 percent of the direct or indirect labor costs for the project
or contract for willful breach of the employment agreement, id.
§ 2-219.03(e)(4)(A), failure to meet reporting requirements or
obtain a good faith waiver could result in imposition of a
penalty equal to 1/8 of 1 percent of the direct or indirect
labor costs for the project or contract for each percentage that
the beneficiary is deficient in meeting the hiring requirements,
id. § 2-219.03(e)(4)(B). Further, two violations can result in
debarment from the award of District projects or contracts for a
period not to exceed five years. Id. § 2-219.03(e)(4)(D).
C. Effect on Plaintiffs
Plaintiffs allege that the additional requirements imposed
by the Amended Act have created a situation in which
“contractors cannot possibly comply with the Act’s hiring and
quota requirements, and they are threatened with job losses,
business failures, and debarment from government contracting.”
13 Compl. at 3. While the aim of the First Source Act is to
promote employment in the District, Plaintiffs contend that it
“uses unlawful and unconstitutional means to try to shift to a
preferred group of people — District residents — first dibs on
jobs already created.” Id. ¶ 81. They allege that the real
issue with employment in the District is not a shortage of jobs,
but rather a shortage of qualified applicants. See id.
Members of Plaintiff ABC-Metro Washington (hereinafter
“Metro Washington”), including the two Corporate Plaintiffs,
have been or will be “beneficiaries” as defined by the Act and,
as such, have allegedly been or will be “forced to deviate from
their individual-merit, level-playing-field business philosophy”
because they must assess prospective employees based on where
they live rather than their ability to do the work. Compl. ¶¶
15, 20, 41, 68, 69. According to Metro Washington, its members
typically hire a permanent workforce, as opposed to a project-
based one. Id. ¶ 15. As a result, complying with the Act
“essentially requires” its members to either withhold work from
non-District residents or decline to bid on certain projects
because of a shortage of qualified District residents. Id.
Metro Washington’s members also purportedly incur increased
recruiting, training, hiring, and supervision costs as a result
of compliance with the Act. Compl. ¶¶ 16, 17, 42, 52, 58.
14 Metro Washington alleges that but for the Act, its members would
have not have incurred these costs.
The Act has allegedly resulted in a host of other problems
for Metro Washington’s membership, including less productivity,
higher overall labor costs, decrease in morale among non-
District employees, higher legal fees, debarment for violations,
fewer projects, layoffs, and higher costs associated with
preparing bids for projects. Compl. ¶¶ 16, 17, 64, 71, 75, 76,
79. Metro Washington alleges that the Amended Act will also
make it more difficult for its members to bid on projects that
receive more than $5 million in government assistance. Id. ¶
70. Moreover, Metro Washington and the Corporate Plaintiffs
claim they will incur additional costs in training employees on
the requirements of the Act, engaging with the District
government and leadership, and public relations. The Corporate
Plaintiffs further allege that they are discriminated against
because they are unable to assign trained employees to projects
if they cannot satisfy the 51 percent District hiring
requirement. Id. ¶¶ 23, 43, 53, 59.
Metro Washington argues that in addition to the harm to its
members, its own membership will decrease as its members will be
forced to reduce the amount of business they conduct because of
the increased cost of complying with the Amended Act. Id. ¶ 75.
Furthermore, Metro Washington alleges that its members that
15 cannot afford to comply with the Act will allegedly be forced to
close, thus further reducing membership. Id. ¶ 76. According
to Metro Washington, its members are allegedly at a significant
disadvantage as compared to contractors who choose not to comply
with the Act; are not bothered by compliance; are able to secure
a waiver; or already offer retirement benefits, health plans,
and training. Id. ¶¶ 44, 54, 72. Plaintiffs claim that no
general contractor has been able to meet, on a regular basis,
the 51 percent requirement for new hires. Id. ¶ 22. According
to Plaintiffs, this is the result of a number of factors,
including: (1) an insufficient number of skilled workers who
are District residents; (2) DOES’s failure to vet and screen
candidates and provide candidates with appropriate skills for a
particular job; (3) District residents’ lack of transportation,
which makes it difficult for them to report to job-sites on
time; (4) the disproportionately high number of District
residents who fail required drug tests; and (5) the
disproportionate number of District residents who quit within
the first few weeks or are let go because of poor attendance or
performance. Compl. ¶ 22. If the Act is upheld, Metro
Washington and the Corporate Plaintiffs contend that they will
be “forced” to bid on fewer projects in the District, and will
also have to increase their prices in order to cover the cost of
compliance with the Act. Id. ¶ 85.
16 The Individual Plaintiffs cannot be listed on the First
Source Register because they are not District residents, which
they allege places them at a significant disadvantage when
competing for jobs that are subject to an Employment Agreement
as defined by the Act. Id. ¶¶ 14, 43, 53, 59. They allege that
this results in discrimination and excludes them “from
consideration as part of a team of laborers on significant
District jobs not because of their skills but simply because
they do not live in the District.” Id. ¶ 83.
II. Standard of Review
A. Rule 12(b)(1)
A federal district court may only hear a claim over which
is has subject matter jurisdiction; therefore, a Rule 12(b)(1)
motion for dismissal is a threshold challenge to a court’s
jurisdiction. On a motion to dismiss for lack of subject matter
jurisdiction, the plaintiff bears the burden of establishing
that the Court has jurisdiction. Lujan v. Defenders of Wildlife,
504 U.S. 555, 561 (1992). In evaluating the motion, the Court
must accept all of the factual allegations in the complaint as
true and give the plaintiff the benefit of all inferences that
can be drawn from the facts alleged. See Thomas v. Principi,
394 F.3d 970, 972 (D.C. Cir. 2005). However, the Court is “not
required . . . to accept inferences unsupported by the facts
alleged or legal conclusions that are cast as factual
17 allegations.” Cartwright Int’l Van Lines, Inc. v. Doan, 525 F.
Supp. 2d 187, 193 (D.D.C. 2007) (internal quotation marks and
citations omitted).
B. Rule 12(b)(6)
A motion to dismiss pursuant to Rule 12(b)(6) tests the
legal sufficiency of the complaint. Browning v. Clinton, 292
F.3d 235, 242 (D.C. Cir. 2002). In order to be viable, a
complaint must contain “a short and plain statement of the claim
showing that the pleader is entitled to relief, in order to give
the defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (internal quotation marks and citations
omitted). The plaintiff need not plead all of the elements of a
prima facie case in a complaint, Swierkiewicz v. Sorema N.A.,
534 U.S. 506, 511-14 (2002), nor must the plaintiff plead facts
or law that match every element of a legal theory. Krieger v.
Fadely, 211 F.3d 134, 136 (D.C. Cir. 2000) (citation omitted).
However, despite these liberal pleading standards, to
survive a motion to dismiss, “a complaint must contain
sufficient factual matter, accepted as true, to state a claim
for relief that is plausible on its face.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (internal quotation marks and citation
omitted); Twombly, 550 U.S. at 570. A claim is facially
plausible when the facts plead in the complaint allow “the court
18 to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556). While this standard does not amount
to a “probability requirement,” it does require more than a
“sheer possibility that a defendant has acted unlawfully.” Id.
(citing Twombly, 550 U.S. at 556).
“[W]hen ruling on a defendant’s motion to dismiss [pursuant
to Rule 12(b)(6)], a judge must accept as true all of the
factual allegations contained in the complaint.” Atherton v.
D.C. Office of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009)
(quoting Erickson v. Pardus, 551 U.S. 89, 93 (2007)). The court
must also give the plaintiff “the benefit of all inferences that
can be derived from the facts alleged.” Kowal v. MCI Commc’ns
Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). Despite this, a
court need not “accept inferences drawn by plaintiffs if such
inferences are unsupported by the facts set out in the
complaint.” Id. Further, “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements” are not sufficient to state a claim. Iqbal, 556
U.S. at 678.
“In determining whether a complaint states a claim, the
court may consider the facts alleged in the complaint, documents
attached thereto or incorporated therein, and matters of which
it may take judicial notice.” Abhe & Svoboda, Inc. v. Chao, 508
19 F.3d 1052, 1059 (D.C. Cir. 2007) (internal quotation marks and
citations omitted). Among the documents subject to judicial
notice on a motion to dismiss are “public records.” Kaempe v.
Myers, 367 F.3d 958, 965 (D.C. Cir. 2004).
III. Analysis
A. Standing
Article III restricts the power of federal courts to the
adjudication of actual “cases” and “controversies.” U.S. Const.
art. III, § 2; see also Allen v. Wright, 468 U.S. 737, 750
(1984). This requirement has given rise to “several doctrines .
. . ‘founded in concern about the proper — and properly limited
— role of the courts in a democratic society.’” Id. (quoting
Warth v. Seldin, 422 U.S. 490, 498 (1975)). “In order to
establish the existence of a case or controversy within the
meaning of Article III, [a] party must meet certain
constitutional minima,” including a “requirement that . . . [the
party] has standing to bring the action.” Gettman v. DEA, 290
F.3d 430, 433 (D.C. Cir. 2002). Indeed, standing is “an
essential and unchanging part of the case-or-controversy
requirement of Article III,” Lujan, 504 U.S. at 560, and is an
essential inquiry into whether the plaintiff is entitled to have
the Court decide the merits of the dispute, Allen, 468 U.S. at
750-51 (citing Warth, 422 U.S at 498).
20 To establish the “irreducible constitutional minimum” of
standing, a plaintiff must demonstrate three things: (1)
“injury in fact,” which is (a) concrete and particularized and
(b) actual or imminent; (2) that there is a causal connection
between the complained of conduct and the injury alleged that is
fairly traceable to the defendant; and (3) that it is likely,
and not merely speculative, that a favorable decision will serve
to redress the injury alleged. See Lujan, 504 U.S. at 560-61
(internal quotation marks and citations omitted). Where, as
here, a plaintiff seeks prospective declaratory or injunctive
relief, allegations of past harm alone are insufficient. See,
e.g., Dearth v. Holder, 641 F.3d 499, 501 (D.C. Cir. 2011).
Rather, a plaintiff seeking declarative or injunctive relief
“must show he is suffering an ongoing injury or faces an
immediate threat of [future] injury.” Id.
Plaintiffs are a trade organization, two corporations that
provide contracting services, and four individuals who work in
the construction industry. Plaintiff Metro Washington maintains
that it has both associational and organizational standing. See
Plaintiffs’ Opposition to Motion to Dismiss (hereinafter Pls.’
Opp’n) at 13. The District contends that the Individual and
Corporate Plaintiffs have failed to allege an injury in fact
sufficient to be the basis for Article III standing. Defs.’ MTD
at 17-18. Moreover, the District argues that Metro Washington
21 has failed to establish both associational and organizational
standing because the two Corporate Plaintiffs have not
established standing, and because Metro Washington has “failed
to allege any ‘direct conflict’ between its mission and the
First Source Act.” Defs.’ MTD at 18; Defendants’ Reply in
Support of Motion to Dismiss (hereinafter “Defs.’ Reply”) at 4.
1. Individual Plaintiffs
The four Individual Plaintiffs reside outside of the
District of Columbia but allegedly work on projects within the
District. They claim that the Act has “adversely affected their
ability to bid for or secure work on District projects in the
past and will likely continue to do so, and make matters worse
under the Amended Act.” Pls.’ Opp’n at 8 (emphasis in
original). They also argue that they do not “stand on an equal
footing” with other workers because they cannot register on the
First Source Register. Id. at 9. Thus, they are not part of
the hiring pool created by the Act and are at a “significant
disadvantage” in competing for jobs on projects that are subject
to the Act’s requirements. Id. at 9; see also Compl. ¶ 83 (“For
. . . the individual Plaintiffs, the impact of the Act is to
exclude them from consideration as part of a team of laborers on
significant District jobs not because of their skills or desires
but simply because they do not live in the District.”). These
22 injuries, according to the Individual Plaintiffs, are “ongoing
and imminent.” Pls.’ Opp’n at 9.
The District argues that this harm, such as it is, is not
the type of particularized injury required to support standing.
According to Defendants, the injuries that the Individual
Plaintiffs allege “are entirely derivative of alleged injuries
to their unnamed employer(s).” Defs.’ MTD at 17. The District
also argues that the Individual Plaintiffs’ claims are “fatally
attenuated” because the Complaint does not specify who they
worked for, when they worked, or where they worked. Id. at 18.
The District does not dispute that if the Individual Plaintiffs
have alleged an injury in fact, they would satisfy the remaining
standing requirements.
The majority of the requirements of the First Source Act as
enacted and amended do not directly apply to the Individual
Plaintiffs. Rather, the Act arguably impacts the bidding,
hiring, and reporting procedures for construction companies that
work on or bid for projects or contracts fully or partially
funded or administered by the District. The Individual
Plaintiffs argue that their ability to secure work is
nonetheless adversely affected by the Act’s requirements,
despite the fact that those requirements do not appear to apply
to them. See Pls.’ Opp’n at 8. They argue that this type of
injury has been found sufficient to confer standing in similar
23 cases. Id. (citing Util. Contractors Ass’n of New England, Inc.
v. City of Fall River, No. 10-10994-RZW, 2011 U.S. Dist. LEXIS
114333 (D. Mass. Oct. 4, 2011)). In Fall River, the court
considered a challenge to a local ordinance that required that a
certain percentage of workers on projects funded by local funds,
federal grants, or loans be Fall River residents. 2011 U.S.
Dist. LEXIS 114333, at *2-3. The court held that the individual
plaintiff in the case had standing because he alleged that he
could not compete fairly in the bidding process. Id. at *7-8.
According to the court, in the context of standing, it is
immaterial whether the plaintiff has actually bid on or applied
for a job at a project covered by the ordinance, rather,
“‘injury in fact is the inability to compete on an equal
footing.’” Id. at *8 (quoting Ne. Fla. Chapter of Associated
Gen. Contractors of Am. v. City of Jacksonville, Fla., 508 U.S.
656, 666 (1993)) (internal quotation marks omitted).
The Court finds that the individual Plaintiffs have alleged
a sufficient injury in fact for the purposes of Article III
standing. They have alleged a concrete injury – namely, that as
non-District residents, they cannot register for the First
Source Register and that their ability to compete for
construction jobs therefore has been and will continue to be
24 adversely impacted by the Act.4 As the Supreme Court instructed
in Lujan, “[a]t the pleading stage, general factual allegations
of injury resulting from the defendant’s conduct may suffice,
for on a motion to dismiss [courts] ‘presume that general
allegations embrace those specific facts that are necessary to
support the claim.’” 504 U.S. at 561 (quoting Lujan v. Nat’l
Wildlife Fed’n, 497 U.S. 871, 889 (1990)).
Indeed, the Individual Plaintiffs are in a similar position
as the plaintiffs found to have standing in Northeastern Florida
Chapter of Associated General Contractors of America v. City of
Jacksonville, Florida, 508 U.S. 656 (1993). There, an
association of contractors challenged a local ordinance that
“set aside” contracts for minorities and women on equal
protection grounds. In that context, the Supreme Court held
that “[w]hen the government erects a barrier that makes it more
difficult for members of one group to obtain a benefit than it
is for members of another group, a member of the former group
seeking to challenge the barrier need not allege that he would
4 The District’s argument to the contrary is unavailing. The District contends that the Act does not prohibit the individual Plaintiffs from pursuing their profession in the District or regulate their ability to engage in business in the District as non-citizens. Defs.’ MTD at 19-20. However, as the discussion of Northeastern Florida indicates, the issue is whether the Individual Plaintiffs are in a less competitive position vis a vis their District counterparts on projects covered by the First Source Act. That they are still eligible for employment on those projects does not defeat their standing. 25 have obtained the benefit but for the barrier in order to
establish standing.” Id. at 666. Instead, the “injury in fact”
is the “denial of equal treatment resulting from the imposition
of the barrier, not the ultimate inability to obtain the
benefit.” Id. In a challenge to a residential preference
statute like the First Source Act, “the ‘injury in fact’ is the
inability to compete on an equal footing in the bidding process,
not the loss of contract.” Id. (citing City of Richmond v. J.
A. Croson Co., 488 U.S. 469, 493 (1989)).
Thus, the Individual Plaintiffs have established standing
because they have demonstrated that they are able and ready to
work on projects covered by the First Source Act and that the
Act prevents them from doing so on an equal basis. Id.; see
also Dynalantic Corp. v. Dep’t of Def., 115 F.3d 1012, 1015-16
(D.C. Cir. 1997) (finding that a plaintiff that would not have
qualified for the Small Business Association’s set-aside program
and did not wish to participate in the program nevertheless had
standing because its injury was “its lack of opportunity to
compete for Defense Department contracts reserved” for firms
that could participate in the program).
The Individual Plaintiffs have also established causation
and redressability. Plaintiffs cannot be listed on the First
Source Register because only District residents can be listed.
And, but for the Act, the Individual Plaintiffs would not have
26 to contend with preferential hiring requirements for District
residents on projects valued at less than $5 million, or by
trade for certain large-scale projects for which the District’s
financial assistance is more than $5 million. It does not
defeat their standing, as the District argues, that they have
“failed to alleged [sic] any specifics as to when or how their
employment choices have been affected by any other entity’s
regulation by the District.” Defs.’ MTD at 18 (emphasis in
original).
2. Metro Washington and the Corporate Plaintiffs
Because Metro Washington is an association, it may sue in
its own right or on behalf of its members. Metro Washington
argues that it has satisfied the requirements for both
associational and organizational standing. Because the two
Corporate Plaintiffs are members of Metro Washington, the Court
will consider their standing in the context of Metro
Washington’s associational standing.
“[A]n association may have standing to assert the claims of
its members even where it has suffered no injury from the
challenged activity.” Hunt v. Wash. State Apple Adver. Comm’n,
432 U.S. 333, 342 (1977) (citations omitted). A plaintiff has
associational standing to sue on behalf of its members if: “(1)
at least one of its members would have standing to sue in his
own right, (2) the interests the association seeks to protect
27 are germane to its purpose, and (3) neither the claim asserted
nor the relief requested requires that an individual member of
the association participate in the lawsuit.” Chamber of
Commerce v. EPA, 642 F.3d 192, 200 (D.C. Cir. 2011); see also
Hunt, 432 U.S. at 343.
The Corporate Plaintiffs are both members of Metro
Washington and claim to adhere to the organization’s philosophy
of rewarding employees based on individual merit and
performance. Compl. ¶¶ 4-6. They have been beneficiaries as
defined by the Act and anticipate that they will continue to be
beneficiaries for future projects. They allege that the Act has
made it more difficult for them to bid on projects that the
District funds in whole or in part, or that it administers, and
that they have had to increase the time spent on administrative
matters as a result of their compliance with the First Source
Act. Id. ¶ 16. For instance, Plaintiff Miller and Long alleges
that its experience under the First Source Act has been that it
has to screen approximately 60 District applicants to hire 25
workers, the majority of whom are not employed six months later.
Id. It contends that this screening number is three times
higher for District residents than for residents of Maryland and
Virginia.5 Id.
5 There are no specific allegations regarding Plaintiff Hawkins Electrical Construction of D.C. 28 In addition to these administrative costs, the Corporate
Plaintiffs allege that the requirements of the Act have imposed
additional costs that they would not have incurred but for the
Act, such as decreased productivity and morale, higher legal
fees, and costs associated with meeting reporting obligations.
Id. ¶¶ 17, 33, 42. The Corporate Plaintiffs also claim that
they “suffer a competitive disadvantage in comparison to
construction companies that do not try to comply with the Act,
that do not oppose entering into Employment Agreements that link
hiring to residency, or that are able to secure waivers or
exemptions.”6 Id. ¶¶ 18, 28, 34, 44, 54. The Corporate
Plaintiffs allege that they will continue to incur such costs
into the future under the Amended Act. Id.
The Corporate Plaintiffs further allege that they have
suffered a competitive economic injury because they have
incurred costs (for training, recruiting, hiring, and
supervision) and a disruption in business as a result of
complying with the Act. Pls.’ Opp’n at 12 (referencing specific
portions of the Complaint). According to Plaintiffs, such a
showing is sufficient to establish that they have suffered
6 The Corporate Plaintiffs do not seem to be alleging that they could not secure such waivers, though they compare themselves to hypothetical contractors who are able to secure waivers where they are not.
29 injury in fact. Id. Finally, the Corporate Plaintiffs argue
that they have been injured by the prospect of incurring the
penalties in the Amended Act; however, they have not alleged
that they have paid any penalties under the Act as enacted.7
According to the Corporate Plaintiffs, however, the “District’s
voluntary decision not to enforce the First Source Act does not
defeat” their standing. Id. (citing Util. Contractors, 2011
U.S. Dist. LEXIS 114333, at *8 (holding that the fact that
defendant decided not to enforce the challenged regulation did
not defeat plaintiffs’ standing)).
In support of their argument, Plaintiffs cite to Air
Transport Association of America v. Export-Import Bank, where
the court determined that an association representing several
member airlines had alleged that its members had suffered a
competitive injury sufficient to confer standing. 878 F. Supp.
2d 42, 55-63 (2012). The Air Transport Association (“ATA”)
challenged the decision of the Export-Import Bank to provide
loan guarantees to Air India, arguing that the guarantees
violated the Export-Import Bank Act. Before reaching the
merits, the court considered whether the ATA had associational
standing to proceed on behalf of nine member airlines by
7 Nor could they, according to the District, because “the imposition of penalties for noncompliance has never occurred” and no contractor has been fined for noncompliance since the law was enacted. Committee Report at 7. 30 assessing whether its members going forward would have standing
to sue in their own right. 878 F. Supp. 2d at 54. The ATA
argued that the Bank’s allegedly unlawful loan guarantees had
injured its members in the past and that the guarantees at issue
would imminently injure its members because foreign airlines
would be allowed to borrow at cheaper rates, thus increasing
competition in international travel. Id. at 56. In deciding
whether the ATA had competitor standing, the court explained
that in order to invoke competitor standing, a plaintiff need
not show that the injury from increased competition has already
occurred. Id. at 56. To the contrary, as long as a plaintiff
can “demonstrate an ‘imminent increase in competition,’ the
court recognizes that that ‘increase . . . will almost certainly
cause an injury in fact.” Id. (quoting La. Energy & Power Auth.
v. FERC, 141 F.3d 364, 367 (D.C. Cir. 1998)). Nevertheless, the
court stressed that the increase in competition must be imminent
and not merely speculative for a plaintiff to invoke competitor
standing. Id. Thus, to demonstrate “a constitutionally
sufficient competitive injury, a plaintiff must show that the
challenged action has the clear and immediate potential to cause
competitive harm.” Id. (internal citations and quotation marks
omitted).
Plaintiffs’ reliance on Air Transport is misplaced. Unlike
the Corporate Plaintiffs here, the ATA provided detailed factual
31 information about how new planes for foreign airlines would
compete with ATA member airlines on particular routes between
India and the United States. Id. at 58-59. This argument was
supported by declarations of industry experts. Id. On the
basis of this factual showing, the court held that the ATA had
alleged an appropriate injury. Id. at 63. No Plaintiff has
made such a factual showing here. Indeed, as Defendants argue,
the Complaint fails to provide any details about specific
projects or the impact of the Act on the Corporate Plaintiffs’
costs for those projects. Defs.’ MTD at 15 n.25, 17.
Defendants argue that the injuries claimed by the Corporate
Plaintiffs are thus not only speculative, but also that they are
nothing more than allegations of future injury that cannot
satisfy the requirements of Article III standing. Defs.’ Reply
at 6. Further, the District contends the Plaintiffs’ invocation
of competitor standing, which “recognize[es] that economic
actors ‘suffer [an] injury in fact when agencies lift regulatory
restrictions on their competitors or otherwise allow increased
competition’ against them,” is legally deficient. Id. at 7
(quoting Sherley v. Sebelius, 610 F.3d 69, 72 (D.C. Cir. 2010)
(quoting La. Energy & Power Auth. v. FERC, 141 F.3d 364, 367
(D.C. Cir. 1998)). According to the District, the “First Source
Act does not ‘lift restrictions’ on plaintiffs’ competitors, or
otherwise allow increased competition against them” because the
32 “provisions of the First Source Act apply identically to all
covered entities, both within and outside the District.” Id.
Defendants are correct that the Corporate Plaintiffs have
not established a competitive injury sufficient to confer
standing, especially because the Act applies to all actors in
the market, and does not differentiate between contractors.
However, to the extent that the Corporate Plaintiffs have
alleged that they must incur additional costs to comply with the
Act, they have alleged a sufficient injury. For instance, in
Investment Co. Institute v. United States CFTC, the court found
that plaintiffs who alleged that they would face an “increased
regulatory burden and the associated costs of that regulation”
had alleged an injury in fact for the purposes of Article III
standing. 891 F. Supp. 2d. 162, 185 (D.D.C. 2012). The court
also held that a decision that invalidated the challenged
regulation would “fully redress” the injuries alleged. Id.
Similarly, here, the alleged additional administrative and other
costs alleged by the Corporate Plaintiffs are directly traceable
to their current and future compliance with the First Source
Act, and a decision by this Court invalidating the Act, thereby
removing the requirement that they incur those costs, would
directly redress their injuries. Thus, the Corporate
Plaintiffs’ allegations of mandatory compliance with the First
Source Act, and the administrative requirements that are
33 necessary for compliance, are sufficient to satisfy the
constitutional requirement of injury in fact. See Ass’n of Am.
R.R.S. v. Dep’t of Transp., 38 F.3d 582, 585-86 (D.C. Cir. 1994)
(stating that “there is undeniably a live, concrete ‘case or
controversy’; the [plaintiffs] allege that they are materially
harmed by the additional regulatory burden imposed upon them as
a result of a federal agency’s unlawful adoption of a rule, and
seek to have that rule overturned. We hold under the
circumstances that the [plaintiffs] ha[ve] standing”); Chevron
U.S.A., Inc. v. FERC, 193 F. Supp. 2d 54, 60-61 (D.D.C. 2002)
(holding that compliance with reporting obligations was
sufficient injury in fact to confer standing on plaintiffs).
Under these circumstances, the Court holds that the
Corporate Plaintiffs have standing. Therefore, because they can
bring this action in their own right; because Metro Washington
has alleged that its individual merit philosophy is germane to
its purpose; and because the participation of its members is not
required to provide them with the relief they seek, the Court
finds that Metro Washington also has associational standing to
proceed.8
8 Because the Court finds that Metro Washington has associational standing, it need not consider whether it also has organizational standing.
34 B. Privileges and Immunities Clause
Plaintiffs contend that the First Source Act violates the
Privileges and Immunities Clause of the Constitution, which
provides that the “Citizens of each State shall be entitled to
all Privileges and Immunities of Citizens in the several 9 States.” U.S. Const. art. IV, § 2, cl. 1. The Clause prevents
states from enacting legislation that would discriminate against
residents of other states in favor of their own. See Supreme
Court of New Hampshire v. Piper, 470 U.S. 274, 285 n.18 (1985).
Defendants argue that Plaintiffs have failed to state a claim
with respect to the Privileges and Immunities Clause because,
assuming that the Clause applied to the District, the First
Source Act does not violate the Clause.
As an initial matter, the parties disagree over whether the
Privileges and Immunities Clause applies to the District of
Columbia because, by its express terms, it references
“[c]itizens of each State.” U.S. Const. art. IV, § 2, cl. 1.
Because the District is not a state, it is an open question
whether the Clause applies to it. See Banner v. United States,
9 The Privileges and Immunities Clause does not apply to corporations, thus the two Corporate Plaintiffs and Metro Washington do not have standing to challenge the First Source Act under the Clause. See W. & S. Life Ins. Co. v. Bd. of Equalization of Cal., 451 U.S. 648, 656 (1981); Hemphill v. Orloff, 277 U.S. 537, 548-50 (1928). However, the Individual Plaintiffs do have standing to challenge the First Source Act under the Privileges and Immunities Clause.
35 303 F. Supp. 2d 1, 25 (D.D.C. 2004). In their motion to
dismiss, Defendants did not address the applicability of the
Clause to the District, stating instead in a footnote that:
“While the District does not concede that the Clause applies to
it, for the purposes of this Motion, the District assumes that
it does.” Defs.’ MTD at 20 n.29. Plaintiffs construed this
footnote as a concession that the Clause applied for the
purposes of Defendants’ motion to dismiss, Pls.’ Opp’n at 16
n.7, which Defendants disputed in their reply, Defs.’ MTD at 8.
On the basis of this dispute, the Court ordered supplemental
briefing on the issue of whether the Privileges and Immunities
Clause applies to the District. See March 23, 2013 Minute
Order. The parties filed supplemental responses in April 2013 -
- Defendants argued that the Clause did not apply to the
District, whereas Plaintiffs argued that it did. See Defs.’
Supp. P&I Mem.; Pls.’ Supp. P&I Mem.
The D.C. Circuit has only addressed the applicability of
the Privileges and Immunities Clause to the District on two
occasions, both prior to the enactment of the Home Rule Act in
1973. First, in Duehay v. Acacia Mutual Life Insurance Co., the
court held that the Clause was inapplicable to the District
because “[i]t is a limitation upon the powers of the states and
in no way affects the powers of Congress over the territories
and the District of Columbia.” 105 F.2d 768, 775 (D.C. Cir.
36 1939). The Circuit again found that the Clause did not apply to
the District the following year in Neild v. District of
Columbia, 110 F.2d 246 (D.C. Cir. 1940). There, citing Duehay,
the Court noted in a footnote that the “privileges and
immunities clause is a limitation upon the states only and in no
way affects the powers of Congress over the District of Columbia
or the territories.” 110 F.2d at 249 n.3. Since 1940, the
Supreme Court has found that the Clause does apply to certain
territories, though crucially, the organic acts for those
territories include a provision making the Privileges and
Immunities Clause applicable. See Chase Manhattan Bank v. South
Acres Dev. Co., 434 U.S. 236 (1978) (noting that Congress
explicitly extended the Privileges and Immunities Clause to Guam
in its Organic Act); Mullaney v. Anderson, 342 U.S. 415 (1952)
(holding that the clause applied to Alaska, which was a
territory on its way to becoming a state). The Home Rule Act
contains no similar language; and the District, unlike other
territories, is partially governed by Congress.
The District has not moved to Dismiss on the grounds that
the First Source Act is a valid residence based classification
because the Privileges and Immunities Clause is not a bar on
District action. Rather, it argues that the First Source Act is
a valid residence preference under the Privileges and Immunities
Clause. Thus, for the purposes of this motion, the Court need
37 not reach the question of whether the Privileges and Immunities
Clause applies to the District because the District has not
sought relief on that issue.
The Supreme Court has long held that the “the privileges
and immunities clause is not an absolute.” Toomer v. Witsell,
334 U.S. 385, 396 (1948). Equal treatment for citizens,
residents, and nonresidents has only been required “with respect
to those ‘privileges’ and ‘immunities’ bearing upon the vitality
of the Nation as a single entity.” Baldwin v. Fish and Game
Comm’n of Montana, 436 U.S. 371, 383 (1978). When determining
whether a particular residency classification violates the
Privileges and Immunities Clause, the court must conduct a two-
step analysis. First, the activity purportedly threatened by
the classification must be “sufficiently basic to the livelihood
of the Nation” as to fall within the “purview” of the clause.
Supreme Court of Virginia v. Friedman, 487 U.S. 59, 64 (1988)
(internal quotation marks and citations omitted). Second, if
the “challenged restriction deprives nonresidents of a protected
privilege,” it is constitutionally impermissible if “the
restriction is not closely related to the advancement of a
substantial state interest.” Friedman, 487 U.S. at 65 (citing
Piper, 470 U.S. at 284).
The first step of the analysis requires the court to
consider whether the Act burdens a privilege or immunity
38 protected by the Clause. United Bldg. & Constr. Trades Council
v. Mayor and Council of Camden, 465 U.S. 208, 218 (1984).
Because not all residency classifications are constitutionally
suspect, the court must determine whether the non-resident’s
interest is fundamental to promoting interstate harmony and thus
covered by the Clause. See Baldwin, 436 U.S. at 387 (explaining
that the protections of the Clause apply to fundamental rights,
which are those involving “basic and essential activities,
interference with which would frustrate the purposes of the
formation of the Union”). The Supreme Court has held that the
ability to pursue a common calling is “one of the most
fundamental of those privileges protected by the Clause.”
Camden, 465 U.S. at 219 (citing Baldwin, 436 U.S. at 387).
Here, Plaintiffs argue that the First Source Act
unconstitutionally impedes their ability to pursue their common
calling. Compl. ¶ 90; Pls.’ Opp’n at 16-17. Though public
employment is distinct from private employment, the Supreme
Court has recognized that employment on public works projects is
a fundamental right protected by the Privileges and Immunities
Clause. Indeed, “[t]he opportunity to seek employment with such
private employers is sufficiently basic to the livelihood of the
Nation as to fall within the purview of the Privileges and
Immunities Clause even though the contractors and subcontractors
themselves are engaged in projects funded in whole or in part by
39 the city.” Camden, 465 U.S. at 221-22. (internal quotation
marks and citations omitted). Nevertheless, this is not the end
of the inquiry – a regulation that discriminates against a
protected privilege may nonetheless be valid “where there is a
‘substantial reason’ for the difference in treatment.” Id. at
222.
Where a protected privilege or immunity is implicated by a
particular state law or regulation, the state can defeat the
challenge by demonstrating that there is “something to indicate
that non-citizens constitute a peculiar source of the evil at
which the statute is aimed.” Hicklin v. Orbeck, 437 U.S. 518,
526 (1978); see also Camden, 465 U.S. at 222. The Supreme Court
has explained that the Privileges and Immunities Clause “does
not preclude disparity of treatment in the many situations where
there are perfectly valid independent reasons for it.” Toomer,
334 U.S. at 396. In those cases where such reasons exist, the
inquiry “must be concerned with whether . . . the degree of
discrimination bears a close relation to them.” Id. Courts
must also give “due regard [to] the principal [sic] that the
States should have considerable leeway in analyzing local evils
and prescribing appropriate cures.” Id.
The District contends that the First Source Act is
necessary to counteract the grave economic disparity that it
faces as a result of its inability to levy a commuter tax on
40 non-residents, who hold 70 percent of jobs in the District.
Defs.’ MTD at 22; see also Banner, 303 F. Supp. 2d at 26. This
situation, legally mandated by Congress in the Home Rule Act,
creates a structural imbalance unlike that faced by any other
jurisdiction in the country, one which the First Source Act aims
to alleviate. Id.
Plaintiffs argue to the contrary that the District has not
provided a substantial reason for the discrimination caused by
the First Source Act. According to Plaintiffs, “more tax
revenue” is not a sufficient reason for discriminating against
non-residents. Pls.’ Opp’n at 17-19. Further, Plaintiffs claim
the Act is not narrowly tailored to combat a particular source
of evil because “nonresidents are not a peculiar source of
unemployment in the District, nor are they the source of any
other local ‘evil.’” Id. at 19 (quoting Compl. ¶¶ 93, 114).
The fact that there are more non-residents than residents
working in the District, according to Plaintiffs, is a symptom
of other social and economic ills. Id.
Plaintiffs point out that virtually every other residence
preference law that has been challenged on Privileges and
Immunities grounds has been found to be unconstitutional.
Plaintiffs are correct about the state of Privileges and
Immunities Clause jurisprudence. Every case of which the Court
is aware has found that the jurisdiction involved used the
41 residence preference law primarily as a means for economic
protectionism. Unlike the District, however, none of these
jurisdictions are legally barred from raising revenue through
the imposition of taxes, nor are they required to submit local
legislation to Congress for review.
For instance, plaintiffs challenging a Worcester,
Massachusetts law that required all contractors on public
projects to allocate 50 percent of all employee work hours to
city residents were granted a preliminary injunction against
enforcement of the law. Util. Contractors Ass’n of New England,
Inc. v. City of Worcester, 236 F. Supp. 2d 113 (D. Mass. 2002).
In finding that the plaintiffs were likely to succeed on the
merits, the court considered the constitutionality of the
ordinance. Though the city argued that adverse employment
conditions in Worcester were a substantial reason that justified
the discrimination, the court could not accept that nonresident
employees on public projects were the particular source of the
city’s employment issues. Id. at 119-20. In ruling for the
plaintiffs, the court also considered whether the law had cured
the employment problems it was enacted to remedy. Id. Similar
ordinances have also been struck down in Fall River and Quincy,
Massachusetts. See Merit Constr. Alliance V. City of Quincy,
No. 12-10458, 2012 U.S. Dist. LEXIS 54210 (D. Mass. April 18,
2012) (finding, on a motion for preliminary injunction, that a
42 city ordinance requiring that 33 percent of employees on public
agency projects be city residents would violate the Privileges
and Immunities Clause despite the city’s argument that city
residents should see a return on investment through jobs from
projects that their tax dollars were funding); Util. Contractors
Ass’n of New England v. City of Fall River, No. 10994-RZW, 2011
U.S. Dist. LEXIS 114333 (D. Mass. Oct. 4, 2011) (holding, in
granting a motion for preliminary injunction, that a city
ordinance that required 100 percent of apprentices and 50
percent of all other employees on public works projects be city
residents would be invalid, especially because the city had
offered no justification for the classification).10
10 Plaintiffs also cite to Camden, in which the Supreme Court reversed and remanded a case involving a Privileges and Immunities Clause challenge to a municipal ordinance providing that at least 40 percent of the employees of contractors and subcontractors working on city funded or administered projects be city residents. 465 U.S. at 223. The city of Camden argued that the ordinance was constitutional because it was “necessary to counteract grave economic and social ills,” including unemployment, a decline in population, and a reduction in the number of businesses located in the city. Id. at 222. According to the city, the particular evil that the ordinance was intended to address was non-Camden residents employed on city public works projects. Id. The Court did not invalidate the statute, but remanded the case for further factual findings because it could not assess the city’s justification on the record before it. Id. at 222-23. In remanding the case, the Camden Court emphasized that the fact that Camden was “expending its own funds or funds it administers in accordance with the terms of a grant” was “perhaps the crucial factor [] to be considered in evaluating whether the statute’s discrimination violates the Privileges and Immunities Clause.” Id. at 221. In the wake of Camden, one court has upheld a residence preference 43 Similarly, in W.C.M. Window Co., Inc. v. Bernardi, a three
judge panel of the Seventh Circuit ruled that an Illinois
residence based classification violated the Privileges and
Immunities Clause. 730 F.2d 486 (7th Cir. 1984). The Illinois
statute required that contractors on public works projects for
the state or municipalities employ Illinois laborers. Id. at
489. Under the law, an Illinois laborer was defined as any
worker who had been a resident of the state for at least one
year. Id. at 494. In arguing the law was constitutional, the
state failed to provide any evidence of the benefits of the
residential preference. Id. at 497-98. The court thus ruled
that because the Illinois law implicated a fundamental right
protected by the Clause, and because the state had not satisfied
its “burden of justifying the discrimination,” the law was found
to be unconstitutional. Id. at 498.
These cases, while instructive, simply do not describe the
situation presented here. The fact that the District is the
only jurisdiction in the country that cannot tax commuters11 puts
law as furthering a state’s interest in combating unemployment disparities. State v. Antonich, 694 P.2d 60 (Wy. 1985) (holding that a state residence preference law narrowly addressed the goal of reducing unemployment and therefore did not violate the Privileges and Immunities Clause). 11 The Supreme Court recognized the right of one state to tax the income of non-residents in 1920 in Shaffer v. Carter, 252 U.S. 37 (1920). The Court held that a state may levy a tax on a nonresident who holds a job or operates a business in a state so 44 it in a unique position compared to other jurisdictions that
have enacted similar legislation, and indeed, it is a particular
evil that only the District confronts.12 The Supreme Court has
made clear that “[e]very inquiry under the Privileges and
Immunities Clause must . . . be conducted with due regard for
the principle that the states have considerable leeway in
analyzing local evils and in prescribing appropriate cures,”
especially when a “government body is merely setting conditions
on the expenditure of funds it controls.” Camden, 465 U.S. at
222-23 (internal quotation marks and citations omitted); see
also Hicklin, 437 U.S. at 529. The District’s determination
that the First Source Act is an appropriate response to the
unique burden placed on the District by the Congressionally-
long as that tax is no more onerous than that levied on a state resident. Id. at 52. The Court reasoned that a non-resident had an obligation to pay for the cost of the state’s government, from which the nonresident derived a benefit. Id. at 52-53. Following the rule of Shaffer, every state in the country that levies an income tax on its own citizens imposes a tax on nonresidents who work or do business in the state. See CCH State Tax Guide ¶¶ 15-157. Some states have reciprocal agreements with surrounding states whereby each agrees not to tax the income of nonresidents. Id. 12 Plaintiffs contend that the actual source of evil that the District confronts is Congress and the ban on a commuter tax in the Home Rule Act. While the Home Rule Act may be the legal source of the ban, the effect of the ban is only felt when a nonresident holds a job in the District and carries that revenue back to his or her home state.
45 imposed commuter tax ban is therefore entitled to some
deference.13
Thus, according to the District, the inability to impose a
commuter tax is District’s unique evil; however, the Court must
determine “‘whether the degree of discrimination bears a close
relation’” to that evil. Camden, 465 U.S. at 222 (quoting
Toomer, 334 U.S. at 398). The District argues that it cannot
tax commuters by the terms of the Home Rule Act, resulting in a
particularly acute problem because approximately 70 percent of
the jobs in the District are held by commuters. Defs.’ MTD at
22. The District also argues that the unemployment rate in the
District exceeds that of surrounding jurisdictions and the
country as a whole – as of August 2011, when the amendments to
the Act were being considered, the unemployment rate in the
District as a whole was 11.1 percent. Committee Report at 3.
In some wards of the city, it was as high as 30 percent. Id.
13 At oral argument, Plaintiffs urged the Court to decide that the District cannot even determine what constitutes a local evil for the purposes of a privileges and immunities challenge. According to Plaintiffs, when Congress determined that the District could not enact a commuter tax, it apparently determined that this ban was not a local evil as well. While Congress may dictate much of what the District may do, it cannot dictate which problems the District characterizes as most severe – as local evils. See Camden, 465 U.S. at 222; Toomer, 334 U.S. at 396 (explaining that courts must give “due regard [to] the principal [sic] that the States should have considerable leeway in analyzing local evils and in prescribing appropriate cures”).
46 The unemployment rate in the Washington metropolitan area, by
contrast, was 5.3 percent in May 2012. Defs.’ MTD at 7.
According to the District, this results in a permanent
structural imbalance in the budget, whereby there is a “gap
between the cost of providing services and its capacity to raise
revenue.” Defs.’ MTD at 11 (citing a GAO report from 2003).
The District claims that the “First Source Act was enacted in an
effort to remedy the very real, significant, and well-
established structural imbalances in the District’s budget,” id.
at 12, presumably, by placing a modest thumb on the scale in
favor of District residents with respect to hiring in a narrow
subset of the District economy – construction jobs funded or
administered by the District government.
While the Court could be persuaded that the inability to
levy a commuter tax could be a peculiar evil that could justify
the residential preference in the First Source Act, the Court
finds “it impossible to evaluate the [District’s] justification
on the record as it now stands.” Camden, 465 U.S. at 223; see
also Dynalantic Corp. v. Dep’t of Def., 503 F. Supp. 2d 262, 267
(D.D.C. 2007) (denying motions for summary judgment in a case
evaluating the constitutionality of the Small Business
Association’s set aside program for small businesses owned and
controlled by disadvantaged individuals because the parties had
not demonstrated whether the asserted compelling government
47 interest had a strong basis in evidence). At this stage in the
litigation, the District has not provided sufficient substantive
evidence for the Court to determine whether the First Source
Act’s residential hiring preferences for construction projects
funding in whole or in part by the District are narrowly
tailored to address the unique evil of the District’s inability
to levy a commuter tax. This is a fact-intensive inquiry that
cannot be resolved on a motion to dismiss -- there have been no
findings of fact made in this case, nor has there been any
discovery and no declarations have been filed by anyone. And it
would not be appropriate for the Court to make factual findings
or take judicial notice of the impact of the First Source Act at
this juncture. Thus, the District’s motion to dismiss
Plaintiffs’ privileges and immunities claim is hereby denied
without prejudice.
C. Commerce Clause
Plaintiffs also argue that the First Source Act violates
the Commerce Clause, which is “an implicit restraint on state
authority, even in the absence of a conflicting federal
statute.” United Haulers Ass’n v. Oneida-Herkimer Solid Waste
Mgmt. Auth., 550 U.S. 330, 338 (2007). This restraint, known as
the Dormant Commerce Clause, prevents states from interfering
with Congress’s power to regulate interstate commerce. However,
for state action to implicate the Dormant Commerce Clause, the
48 action must take the form of regulatory activity. “Some cases
run a different course, however, and an exception covers States
that go beyond regulation and themselves ‘particpat[e] in the
market’ so as to ‘exercis[e] the right to favor [their] own
citizens over others.’” Dep’t of Revenue of Ky. v. Davis, 553
U.S. 328, 339 (2008) (quoting Hughes v. Alexandria Scrap Corp.,
426 U.S. 794, 810 (1976)). Because “[t]here is no indication of
a constitutional plan to limit the ability of States themselves
to operate freely in the free market,” Reeves, Inc. v. Stake,
447 U.S. 429, 437 (1980), the Dormant Commerce Clause is
inapplicable. “[W]hen a state or local government enters the
market as a participant it is not subject to the restraints of
the Commerce Clause.” White v. Mass. Council of Constr. Emp’rs,
Inc., 460 U.S. 204, 208 (1983), and the state may preference
local interests. Thus, “in this kind of case there is ‘a single
inquiry: whether the challenged program constitute[s] direct
state participation in the market.’” Id. (quoting Reeves, 447
U.S. at 436 n.7).
The District argues that Plaintiffs fail to state a claim
because the First Source Act does not violate the Commerce
Clause. First, the District notes that the Act only applies to
projects that are funded, in whole or in part, or administered
by the District. Thus, according to the District, the First
Source Act does not apply to wholly private transactions.
49 Defs.’ MTD at 26. Further, the District contends that through
the First Source Act, it is acting as a market participant, not
a market regulator. Thus, under Supreme Court precedent, the
Dormant Commerce Clause does not apply. Id. According to the
District, a state may act as a market participant even where it
also regulates the relevant market. Id. at 27 (citing Davis,
553 U.S. at 348).
In Hughes v. Alexandria Scrap Corp., the Supreme Court
first articulated the principle of a state as a market
participant for the purposes of the Dormant Commerce Clause.
426 U.S. 794 (1978). There, the state of Maryland used its own
funds to encourage the removal of automobile hulks from state
streets and junkyards. Id. at 796-97. The state eventually
amended the bounty statute to require different, more
cumbersome, documentation from out of state scrap processors
than in state processors. Id. at 800-01. The district court
invalidated the amendment on the grounds that it violated the
Commerce Clause. The Supreme Court reversed, first noting that
Maryland was not regulating or prohibiting the flow of
automobile hulks, but was instead entering the market to bid up
their price. Id. at 806. The Court thus held that the state
was a market participant and that “[n]othing in the purposes
animating the Commerce Clause prohibits a State, in the absence
of congressional action, from participating in the market and
50 exercising the right to favor its own citizens over theirs.”
Id. at 810.
The Supreme Court again addressed the market participant
exception in White. There, the Court considered a Boston city
ordinance that required that on all construction projects funded
in whole or part by city funds, or projects the city
administered, at least half of the work force be comprised of
city residents. 460 U.S. 204 (1982). The Court held that
“[i]nsofar as the city expended only its own funds in entering
into construction contracts for public projects, it was a market
participant and entitled to be treated as such.” Id. at 214
(citing Hughes, 426 U.S. 784). Therefore, the Dormant Commerce
Clause did not apply, and the regulation was a valid exercise of
the state’s authority. Id. at 214-15.
The District argues that the First Source Act is consistent
with this line of cases, as the “District is simply favoring the
use of District labor as a condition of the District’s purchase
of construction services.” Defs.’ MTD at 27. The relevant
market here, according to the District, is the market for
construction services, and it is insisting on using its own
residents. This choice, the District argues, “does not violate
the Commerce Clause,” nor does it “impermissibly burden
interstate commerce, as it only affects District projects in the
District.” Id. at 27-28.
51 Plaintiffs argue that the First Source Act does violate the
Commerce Clause because, contrary to the District’s claims, the
District is acting as a market regulator, not a market
participant. Pls.’ Opp’n at 22-23. In making this argument,
Plaintiffs ignore the binding precedent of Hughes, White, and
their progeny, and instead focus on cases that are wholly
inapposite. For instance, Plaintiffs argue that the First
Source Act is invalid because the 2011 amendments provide for a
period of debarment for repeated violations of the Act.
Plaintiffs cite to Wisconsin Dep’t of Indus. Labor and Human
Relations v. Gould, 475 U.S. 282 (1986), for the proposition
that the market participant exception does not apply to a state
statute that provides for debarment. However, the statute at
issue in Gould provided for debarment for repeat offenders of
the National Labor Relations Act, 29 U.S.C. § 151 et seq., a
federal statute that preempted the conflicting state statute.
475 U.S. at 289-90. Plaintiffs cite to no cases that support
their position that the District is a market regulator.
Despite their best efforts, Plaintiffs cannot credibly
dispute the fact that the District is acting as a market
participant with respect to city-funded construction projects.
The First Source Act thus plainly does not violate the Commerce
Clause. See Shayne Bros., Inc. v. District of Columbia, 592 F.
Supp. 1128, 1133-34 (holding that a District statute regarding
52 solid waste disposal that preferenced District waste providers
and provided for period of debarment after violations was not a
violation of the Commerce Clause). Accordingly, Defendants’
motion to dismiss Plaintiffs’ Commerce Clause claim is granted.
D. Equal Protection Clause14
“The Equal Protection Clause provides a basis for
challenging legislative classifications that treat one group of
persons as inferior or superior to others, and for contending
that general rules are being applied in an arbitrary or
discriminatory way.” Jones v. Helms, 452 U.S. 412, 423-24
(1981). Accordingly, courts apply strict scrutiny when the
challenged classification jeopardizes the exercise of a
fundamental right or categorizes individuals on the basis of an
inherently suspect characteristic such as race, alienage, or
national origin. See Hunt v. Cromartie, 526 U.S. 541, 546
(1999); Banner v. United States, 428 F.3d 303, 307 (D.C. Cir.
2005). However, “if a law neither burdens a fundamental right
nor targets a suspect class,” it will be upheld “so long as it
bears a rational relation to some legitimate end.” Romer v.
Evans, 517 U.S. 620, 631 (1996); Hettinga v. United States, 677
14 The Equal Protection Clause of the Fourteenth Amendment applies only to the states. Although the Fifth Amendment, which does apply to the District, does not contain an equal protection component, the Supreme Court has held that the Due Process Clause of the Fifth Amendment does contain one and that it applies to the District. Bolling v. Sharpe, 347 U.S. 497, 499 (1954). 53 F.3d 471, 478 (D.C. Cir. 2012) (“A statutory classification that
neither proceeds along suspect lines nor infringes fundamental
constitutional rights must be upheld against equal protection
challenge if there is any reasonably conceivable state of facts
that could provide a rational basis for the classification.”)
(internal quotation marks and citations omitted)). Rational
basis review is thus “highly deferential,” Calloway v. District
of Columbia, 216 F.3d 1, 9 (D.C. Cir. 2000), and it “is not a
license for courts to judge the wisdom, fairness, or logic of
legislative choices,” Heller v. Doe, 509 U.S. 312, 319 (1993).
Plaintiffs contend that they have stated an Equal
Protection claim because the First Source Act impermissibly
discriminates against the Individual Plaintiffs who do not
reside in the District. They are therefore treated differently
than similarly situated individuals on the basis of their state
of residency. Compl. ¶ 106; Pls.’ Opp’n at 25-26. Plaintiffs
concede that such a classification, based on state of residency,
should be scrutinized under rational basis review. Compl. ¶
107; see Heller v. Doe, 509 U.S. at 319-20 (explaining that “a
classification neither involving fundamental rights nor
proceeding along suspect lines . . . cannot run afoul of the
Equal Protection Clause if there is a rational relationship
between the disparity of treatment and some legitimate
governmental purpose”).
54 Plaintiffs make no real effort to defend their Equal
Protection claim. In their opposition, they state only that
“the First Source Act does not provide a rational basis for
treating nonresident employers and employees differently than
resident employers and employees.” Pls.’ Opp’n at 24. They
also argue that the District incorrectly relies on Banner, but
fail to explain how. Id. at 25-26. These conclusory
allegations are insufficient to survive a motion to dismiss.
The District is correct that Plaintiffs cannot state an
Equal Protection claim “because they cannot overcome the
presumption of rationality.” Defs.’ MTD at 31. As the District
points out, resident preferences similar to those embodied in
the First Source Act have been upheld by other courts. Id.
(citing Chance Mgmt., Inc. v. South Dakota, 97 F.3d 1107, 1115
(8th Cir. 1996) (applying rational basis review and upholding a
residency requirement for obtaining a license as a video lottery
machine operator and explaining that “the state has a legitimate
interest in insuring that the state’s substantial investment in
its video lottery business ultimately benefits the South Dakota
taxpayers. The legislature could have rationally concluded that
a residency requirement would further this interest”); Smith
Setzer & Sons, Inc. v. S.C. Procurement Review Panel, 20 F.3d
1311, 1322-24 (4th Cir. 1994) (affirming the decision of a
district court sustaining two South Carolina statutes that
55 provided for resident preferences requiring that state
educational and administrative bodies purchase South Carolina
goods if available because the statute was rationally related to
the state’s interest in “channelling tax dollars back into the
community”); Associated Gen. Contractors of Cal., Inc. v. City
and Cnty of San Francisco, 813 F.2d 922, 943 (9th Cir. 1987)
(upholding a city and county ordinance that gave preference to
locally owned businesses) overruled in other part by City of
City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989)).
Thus, the Court grants Defendants’ motion to dismiss with
respect to Plaintiffs’ Equal Protection claim; the District’s
goal of directing local funds to local residents is rationally
related to the means used by the Act.
E. First Amendment
The First Amendment protects against “compelled speech” in
two distinct areas: “true ‘compelled-speech’ cases, in which an
individual [or entity] is obliged [] to express a message he
disagrees with, imposed by the government; and ‘compelled-
subsidy’ cases, in which an individual [or entity] is required
by the government to subsidize a message he disagrees with.”
Johanns v. Livestock Mktg Ass’n, 544 U.S. 550, 557 (2005).
Plaintiffs allege that the First Source Act violates their
right to free speech under the First Amendment because it
“compel[s]” them to “express support” for the goals of the Act.
56 Compl. ¶ 112. According to the Corporate Plaintiffs, the First
Source Act forces them to “engage in speech,” such as
“compelling them to plan for and adopt policies and provide
detailed reports on their employees and on their business
practices solely on the basis of the residence of those
employees.” Pls.’ Opp’n at 27. They are also required to
submit “employment plans” to the District that are contrary to
their individual merit employment philosophy and to post various
information regarding jobs on District and newspaper websites.
Id. As a result, they argue that they are “required not merely
to fund government speech, but to themselves adopt, promote, and
be identified with it such that the speech on the issue of
residence and who should get jobs is attributed to them.” Id.
However, despite these arguments, it is clear that the
First Source Act does not require Plaintiffs to speak, in a
literal sense. They remain free to express their views opposing
the Act. The speech that they argue they are compelled to
engage in is incidental to the First Source Act’s regulation of
their conduct. Indeed, “it has never been deemed an abridgment
of freedom of speech or press to make a course of conduct
illegal merely because the conduct was in part initiated,
evidenced, or carried out by means of language, either spoken,
written, or printed.” Rumsfeld v. Forum for Academic &
Institutional Rights, Inc. (FAIR), 547 U.S. 47, 62 (2006)
57 (quoting Giboney v. Empire Storage & Ice Co., 336 U.S. 490, 502
(1949)). In FAIR, the Supreme Court held that speech compelling
a law school to send out emails informing students of military
recruiting on campus did not violate the First Amendment and
that such speech was fundamentally different from
unconstitutional compelled speech, such as “forcing a student to
pledge allegiance.” Id. Similarly, the First Source Act, which
does not dictate the conduct of the speech, does not violate the
First Amendment.
F. Due Process
1. “Void for Vagueness”
“[T]he void for vagueness doctrine addresses at least two
connected but discrete due process concerns: first, that
regulated parties should know what is required of them so they
may act accordingly; second, precision and guidance are
necessary so that those enforcing the law do not act in an
arbitrary or discriminatory way.” FCC v. Fox Television
Stations, Inc., 132 S. Ct. 2307, 2317 (2012). A law is
unconstitutionally vague if it “fails to provide a person of
ordinary intelligence fair notice of what is prohibited, or is
so standardless that it authorizes or encourages seriously
discriminatory enforcement.” United States v. Williams, 553
U.S. 285, 304 (2008). The vagueness doctrine does not require
“perfect clarity and precise guidance.” Ward v. Rock Against
58 Racism, 491 U.S. 781, 794 (1989). Regulations “cannot, in
reason, define proscribed behavior exhaustively or with
consummate precision.” United States v. Thomas, 864 F.2d 188,
195 (D.C. Cir. 1988).
Plaintiffs argue that the First Source Act is vague because
it gives “unfettered discretion” to the Mayor “to grant various
waivers, require alternatives to construction contracts, and
decide what fines to impose.” Pls.’ Opp’n at 30. According to
Plaintiffs, the language of the statute is fatal because it
states that exemptions can be made “[w]henever the Mayor
determine[s]” that such an exemption is necessary. Id. This
discretion, Plaintiffs contend, is not due to mere imprecision
in language, but rather is the result of “intentionally and
unlawfully delegating to the Mayor the authority to preempt
entire sections of the First Source Act.” Id.
Plaintiffs’ vagueness challenge to the First Source Act “is
simply a garden-variety claim of uncertainty as to how the law
will be enforced.” Defs.’ MTD at 34. While the statute grants
authority to the Mayor to grant waivers, it provides objective
guidelines for the granting of those waivers. See D.C. Code §
2-219.03(e)(3)(A)(i)-(A)(iii) (explaining that a waiver is
available if (1) DOES has certified that the beneficiary made a
good faith effort to comply; (2) the beneficiary is located
outside the area; none of the work is performed in the area; the
59 beneficiary published each available job in a city-wide
newspaper for 7 calendar days and DOES certifies that there are
not enough applicants from the First Source Register for the
job; or the eligible applicants are not available for part-time
work or do not have the means to travel to the job site; or (3)
the beneficiary enters into workforce development training or
placement arrangement with DOES). When the section of the
statute regarding the fact that the Mayor can grant a waiver is
read in conjunction with the section of the statute providing
for standards by which waivers are granted, it is clear that the
statute is not vague. See Initiative & Referendum Inst. v. U.S.
Postal Serv., 741 F. Supp. 2d 27, 40 (D.D.C. 2010) (holding that
a portion of a statute challenged as vague must be read in
context). It is simply “common sense that [officials] must use
some discretion in deciding when and where to enforce city
ordinances.” Town of Castle Rock v. Gonzales, 545 U.S. 748, 761
(2005). The First Source Act, contrary to Plaintiffs’ claims,
does not link “wholly subjective judgments without statutory
definitions, narrowing context, or settled legal meanings.”
Williams, 553 U.S. at 306.
The Due Process Clause does not prevent officials from
exercising discretion at all, but rather it prevents officials
from exercising discretion with no clear objective or standard.
See Armstrong v. D.C. Pub. Library, 154 F. Supp. 2d 67, 80-82
60 (holding that a District regulation that barred entry to public
libraries based on the appearance of entrants and allowed
library personnel to deny entrance to potential patrons with an
objectionable appearance, but providing no guidelines for the
exercise of that discretion by library officials, was void for
vagueness and thus invalid under the Due Process Clause).
Plaintiffs reading of the Due Process Clause would render city
officials incapable of exercising any discretion. Because the
Mayor has “explicit guidelines [] to avoid arbitrary and
discriminatory enforcement” of the First Source Act, it is not
unconstitutional. Big Mama Rag, Inc. v. United States, 631 F.2d
1030, 1035 (D.C. Cir. 1980).
2. Substantive Due Process
Plaintiffs also argue that their Complaint “sets forth
factual allegations that establish the violation of their
substantive due process rights under the Constitution.” Pls.’
Opp’n at 31. However, apart from this statement in their
opposition, and three paragraphs in their Complaint alleging
that the First Source Act is overbroad, burdens constitutionally
protected conduct, and applies retroactively, Plaintiffs do not
explain how their Substantive Due Process rights are violated.
Compl. ¶¶ 118-120. While Plaintiffs allege a violation of
Substantive Due Process in their complaint, they only cite cases
that relate to Procedural Due Process in their opposition to
61 Defendants’ motion to dismiss. Thus, they have provided no
basis, conclusory or otherwise, for their claim. Plaintiffs’
confused allegations are simply insufficient to state a claim.
To the extent that Plaintiffs do attempt to state a claim
for a violation of Substantive Due Process, they have failed.
Substantive Due Process constrains government conduct that is
“so egregious, so outrageous, that it may fairly be said to
shock the contemporary conscience.” Cnty. of Sacramento v.
Lewis, 523 U.S. 833, 847 n.8 (1998). In this Circuit,
Substantive Due Process “normally imposes only very slight
burdens on the government to justify its actions. . . .” George
Washington Univ. v. District of Columbia, 318 F.3d 203, 206
(D.C. Cir. 2003). The First Source Act is simply not the type
of egregious government conduct that is barred by Substantive
Due Process. See Silverman v. Barry, 845 F.2d 1072, 1080 (D.C.
Cir. 1988) (holding that to show unfairness that violates the
substantive component of the Due Process Clause, a plaintiff
must show “a substantial infringement of state law prompted by
personal or group animus, or a deliberate flouting of the law
that trammels significant personal or property rights”).
G. Contracts Clause
“Article I, § 10 of the Constitution provides in pertinent
part that ‘[n]o state shall . . . pass any . . . law impairing
the Obligation of Contracts.’” Washington Serv. Contractors
62 Coal. v. District of Columbia, 54 F.3d 811, 818 (D.C. Cir.
1995). A law that substantially impairs contractual
relationships is thus invalid if the impairment to the
contractual relationship is substantial. Id. (citing Allied
Structural Steel Co. v. Spannaus, 438 U.S. 234, 244 (1978) and
Gen. Motors Corp. v. Romein, 503 U.S. 181, 186 (1992)).
Plaintiffs have failed to state a claim pursuant to the
Contracts Clause of the Constitution. They allege that the
Amended Act “has the effect of rewriting those contracts to
include later-enacted limitations regarding hiring, and
reporting.” Compl. ¶ 128. They do not identify which contracts
would be impaired, only that some hypothetical contracts that
some Plaintiff is a party to will be impacted.15 That is not
sufficient to state a claim.
IV. Conclusion
For the reasons stated above, it is hereby ORDERED that
Defendants’ Motion to Dismiss Plaintiffs’ Complaint is GRANTED
IN PART AND DENIED IN PART; and Counts II, III, IV, V, VI, and
VII of Plaintiffs’ Complaint are hereby dismissed. A separate
order accompanies this memorandum opinion.
SO ORDERED.
Signed: Emmet G. Sullivan United States District Judge
15 At the oral argument on June 25, 2014, Plaintiffs also conceded that the Amended Act did not apply retroactively. 63 July 14, 2014
Related
Cite This Page — Counsel Stack
Metropolitan Washington Chapter, Associated Builders and Contractors, Inc. v. District of Columbia, Counsel Stack Legal Research, https://law.counselstack.com/opinion/metropolitan-washington-chapter-associated-builder-dcd-2014.