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Mathis & Sons, Inc. v. Commonwealth of Kentucky Transportation Cabinet

United States District Court, W.D. Kentucky, Louisville Division

July 18, 2017

MATHIS & SONS, INC., et al., Plaintiffs,
v.
THE COMMONWEALTH OF KENTUCKY TRANSPORTATION CABINET, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          David J. Hale, Judge United States District Court.

         Plaintiff Mathis & Sons, Inc. is a construction company that sought additional work certifications under a program run by the Kentucky Transportation Cabinet (KYTC) to promote minority-owned businesses. (Docket No. 34-1, PageID # 115) Mathis & Sons is owned by Plaintiff Maureen Mathis, an African-American woman. (D.N. 1, PageID # 2) According to Mathis & Sons, its application was treated less favorably than those of white-owned businesses. (D.N. 1; 37) The plaintiffs filed suit against KYTC and several Cabinet employees, alleging racial discrimination in violation of Title VI and 42 U.S.C. § 1983. (D.N. 1) Additionally, the plaintiffs assert state-law claims of negligence and bad faith. (Id.) The defendants have filed a motion for summary judgment, arguing that there is not sufficient evidence of racial discrimination. (D.N. 34) Because the plaintiffs have raised a genuine dispute of material fact as to whether they were discriminated against because of their race, the defendants' motion for summary judgment will be denied in part and granted in part.

         I. BACKGROUND

         Because this is a motion for summary judgment, the Court views the evidence in the light most favorable to the plaintiffs. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

         The KYTC “participates in the Federal Department of Transportation's Disadvantaged Business Enterprise (DBE) Program, which promotes non-discrimination and participation of minority owned businesses on federally funded construction projects.” (D.N. 34-1, PageID # 115 (citing 49 C.F.R. § 26.21))

         Mathis & Sons, Inc. is a “construction contracting firm” headquartered in Louisville, Kentucky. (Id.) Plaintiff Maureen Mathis is the President of Mathis & Sons. (Id.) Mathis is an African-American woman. (D.N. 1, PageID # 2) Mathis's sons, Anthony and Daryl Mathis, are also African American and work with their mother at the company. (D.N. 37, PageID # 133) In 2003, Mathis & Sons was certified as a DBE by KYTC. (D.N. 34-1, PageID # 115)

         In 2013, Mathis & Sons sought subcontracting work on the construction of two bridges as part of the Ohio River Bridges project. (D.N. 37, PageID # 133-34) The project called for DBEs to perform approximately 9% of the work. (Id., PageID # 133) After meeting with the lead contractor, Mathis & Sons submitted a proposal to perform construction work for the project. (Id., PageID # 134) The parties met again and agreed that Mathis & Sons would submit a second proposal for a larger scope of work that included consulting services. (Id.)

         To perform such services, Mathis & Sons needed “supplemental [North American Industry Classification System (NAICS)] code designations on its DBE certification reflecting Mathis & Sons' ability to perform the consulting services work outlined in the proposal.” (Id., PageID # 135) In April 2013, Mathis & Sons submitted its request for supplemental NAICS codes to the KYTC's Office of Civil Rights and Small Business Development. (Id., PageID # 135, 157) In its request for NAICS approval, Mathis & Sons informed KYTC that the lead contractor “would like to enter into an agreement with Mathis & Sons as a DBE to provide consulting services for the new construction of the Bridge project.” (Id., PageID # 135) The lead contractor confirmed that the “only thing standing in the way of [the lead contractor] entering into an agreement with Mathis” was approval of the NAICS codes. (Id.)

         When Mathis & Sons applied for its NAICS codes, Reed Hampton “was assigned as lead investigator on the matter.” (Id., PageID # 157) Hampton had worked as an investigator for KYTC's Office of Civil Rights and Small Business Development for approximately thirteen years. (Id., PageID # 156) Hampton was responsible for determining whether an applicant should be certified as a DBE and whether “certifications for existing DBEs qualified for renewal.” (Id., PageID # 156-57) Hampton also evaluated whether existing DBEs “were qualified to receive supplemental certification codes, ” such as NAICS codes. (Id., PageID # 157)

         During the investigation, Hampton was assisted by Defendant Shella Eagle. (Id., PageID # 138) After completing the investigation, Hampton and Eagle agreed that Mathis & Sons was qualified to perform the consulting work for which it was seeking NAICS code certification. (Id., PageID # 138, 158) Additionally, because Mathis & Sons' DBE certification was up for renewal in several months, Hampton included a recommendation for renewal in his report. (Id., PageID # 158) Typically, the lead investigator then submits his recommendation to the Certification Committee. (Id., PageID # 137-38) The committee usually accepts the lead investigator's recommendation. (Id.)

         After internally communicating his recommendation to his staff, Hampton took medical leave and was out for several weeks. (Id.) Hampton believed that his recommendation would be forwarded to the committee in his absence. (Id.) However, Hampton and the plaintiffs claim that “standard protocol and procedure” were not followed. (Id., PageID # 139) Instead of forwarding Hampton's recommendation to the committee, Defendant Tyra Redus, then executive director of KYTC's Office of Civil Rights and Small Business Development, allegedly directed Eagle to draft a different recommendation that called for the committee to deny Mathis & Sons' request for NAICS code certification and de-certify it from the DBE program. (Id.; D.N. 34-1, PageID # 114)

         The defendants claim that during Hampton's investigation, “KYTC investigators expressed concerns” to Redus and Defendant Melvin Bynes, a branch manager at KYTC, that Maureen Mathis did not control Mathis & Sons. (D.N. 34-1. PageID # 116) These concerns stemmed from an on-site interview, in which Mathis's sons answered the majority of the investigators' questions. (Id.)

         The new recommendation for de-certification was submitted to the committee but still listed Reed Hampton as lead investigator, making it appear as though it was his recommendation. (D.N. 37, PageID # 139-40) Hampton states that he learned that his recommendation had not been forwarded to the committee while he was out on medical leave. (Id., PageID # 158) Eagle claims that had she known that Hampton recommended approving Mathis & Sons' request for supplemental NAICS codes, she would have drafted a recommendation consistent with Hampton's opinion. (Id.)

         In July 2013, the committee met to consider Mathis & Sons' request. (D.N. 34-1, PageID # 116) Maureen Mathis testified and provided evidence of her control of the company. (Id., PageID # 117) Hampton also appeared before the committee and argued that Mathis & Sons' request for NAICS codes should be approved and the company should not be de-certified from the DBE program. (D.N. 37, PageID # 158-59) The committee requested additional information regarding control of the company and deferred a decision until its August meeting. (D.N. 34-1, PageID # 117) At the August meeting, the committee approved Mathis & Sons' request for supplemental NAICS code certification. (Id.)

         After receiving the certification, Mathis & Sons contacted the lead contractor of the Bridge Project to advise him of the update. (D.N. 1, PageID # 8) However, the contractor informed Mathis & Sons that because of the delay in obtaining the certification, the position had already been filled. (D.N. 37, PageID # 142)

         In August 2013, Hampton filed internal complaints with KYTC, alleging, in relevant part, that the DBE program treated white applicants more favorably than African-American applicants. (Id., PageID # 159, 165-66) In his internal complaint, Hampton provided several specific examples of the alleged preferential treatment. (Id., PageID # 165-66)

         Hampton's complaint was investigated by the Federal Highway Administration's Kentucky Division Office. (D.N. 40-2, PageID # 181) A civil rights specialist “conducted phone and in-person interviews with seven individuals [and] reviewed the certification files of each applicant firm identified in the complaint as well as similarly situated firms with owners who were not African-American males.” (Id.) Additionally, the specialist “analyzed a list of all DBE firms that applied for DBE certification for the past 2 years” and “compared KYTC's actions for ‘African-American' and ‘white' program applicants as to whether they were (1) certified; (2) denied; or (3) the application was withdrawn or terminated.” (Id., PageID # 182)

         The investigator concluded that there was “no evidence that the KYTC implemented its DBE Program such that it discriminated against older, African American-owned applicants through disparate treatment” or “through disparate impact.” (Id.) However, “there was a disparity between the rates that African American-owned firms were terminated or withdrawn compared to white-owned firms, ” but “the Investigator could not draw a conclusion about the disparity.” (Id.) The FHWA asked its Civil Rights Division to “work with KYTC to investigate the potential cause for this disparity.” (Id., PageID # 183)

         Mathis & Sons, Inc. and Maureen Mathis filed suit against KYTC, Shella Eagle, Tyra Redus, and Melvin Bynes, alleging racial discrimination in violation of Title VI and 42 U.S.C. § 1983, as well as state-law claims of negligence and bad faith. (D.N. 1) The defendants seek summary judgment. (D.N. 34) They argue that the plaintiffs do not have a “legitimate claim of entitlement” to assert that the company would have been awarded the project had the state not allegedly discriminated against them. (D.N. 34-1, PageID # 118-20) Next, the defendants argue that the plaintiffs' Title VI claim must be dismissed because the plaintiffs have not presented sufficient evidence of intentional discrimination. (Id., PageID # 120-24) The defendants also contend that the plaintiffs' § 1983 claim must fail because it is preempted by Title VI. (Id., PageID # 122-24) Alternatively, the individual defendants assert that they are entitled to qualified immunity, while KYTC is entitled to sovereign immunity on both the federal and state-law claims. (Id.) Finally, the defendants argue that the tort of bad faith has never been recognized in this context and thus must be dismissed. (Id., PageID # 124) The plaintiffs dispute each of these arguments. (D.N. 37)

         II. DISCUSSION

         To grant a motion for summary judgment, the Court must find that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A “dispute about a material fact is ‘genuine' . . . if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party bears the initial burden of identifying the basis for its motion and those portions of the record that “it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party satisfies this burden, the non-moving party must point to specific facts demonstrating a genuine issue of fact. Anderson, 477 U.S. at 247-48 (1986).

         In considering a motion for summary judgment, the Court must review the evidence in the light most favorable to the non-moving party, Matsushita, 475 U.S. at 586; however, “the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249. The non-moving party must present specific facts demonstrating that a genuine issue of fact exists by “citing to particular parts of materials in the record” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute.” Fed.R.Civ.P. 56(c)(1).

         A. Entitlement

         The defendants first argue that the plaintiffs' claims of racial discrimination must be dismissed because they have failed to demonstrate that they were entitled to a faster review of their NAICS application. (D.N. 34-1, PageID # 118-20) Further, the defendants contend that the plaintiffs have not shown that but for the alleged delay of their NAICS application, they would have been awarded the contract by the lead contractor of the Bridge Project. (Id.) To support their argument, the defendants assert, “a plaintiff ‘must demonstrate that it had “a legitimate claim of entitlement, ” not “a mere unilateral expectation” in the interest said to be interfered with.'” (Id., PageID # 120 (citing TriHealth Inc. v. Bd. of Comm'rs, Hamilton Cty. Ohio, 430 F.3d 783, 792 (6th Cir. 2005); Bailey v. Floyd Cty. Bd. of Educ., 106 F.3d 135 (6th Cir. 1997))).

         However, the defendants' argument and supporting case law apply in the context of procedural due process claims. In this case, the plaintiffs have not asserted a procedural due process claim. Instead, the plaintiffs have brought claims of racial discrimination pursuant to Title VI, 42 U.S.C. § 1983, and the Equal Protection Clause. (D.N. 1) Such claims do not require a plaintiff to show an entitlement. See TriHealth, Inc., 430 F.3d at 788-94 (considering the plaintiff's claim of entitlement when analyzing its Due Process claim, but not its Equal Protection claim); Nat'l Ass'n for Advancement of Colored People v. Wilmington Med. Ctr., Inc., 453 F.Supp. 330, 340 (D. Del. 1978).

         Even if the plaintiffs were required to show an entitlement, they have done so. The plaintiffs provided evidence that the lead contractor was prepared to enter into an agreement with Mathis & Sons and the only reason such an agreement was delayed was because of the DBE certification process. (D.N. 37, PageID # 135) Therefore, the defendants' argument fails.

         B. ...


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