Full opinion text
OPINION AND ORDER GRAHAM, District Judge. I. On November 2, 1998, this court struck down Ohio Revised Code § 123.151, which provides race-based preferences in the award of state construction contracts, holding that it violated the Equal Protection Clause of the United States Constitution. Two weeks earlier, the United States District Court for the Northern District of Ohio, likewise, found this Ohio law unconstitutional when it was relied upon to support a state mandated set-aside program adopted by the Cuyahoga Community College. See F. Buddie Contracting, Ltd. v. Cuyahoga Community College District, 31 F.Supp.2d 571 (N.D.Ohio 1998). The state defendant’s appealed this court’s decision to the United States Court of Appeals for the Sixth Circuit. Thereafter, the Supreme Court of Ohio held, in the case of Ritchey Produce Co., Inc. v. State of Ohio, Department of Administrative Service, 85 Ohio St.3d 194, 707 N.E.2d 871 (1999), decided on April 7, 1999, that Ohio Rev.Code § 125.081, which provides race-based preferences in the state’s purchase of nonconstruction-related goods and services, is constitutional. While this court’s decision related to construction contracts and the Ohio Supreme Court’s decision related to other goods and services, the decisions cannot be reconciled. The state relied on the same evidence and the same legal arguments to justify both programs. Indeed, both statutes were enacted as part of a 1980 Minority Business Enterprise (“MBE”) Act. In Ritchey Produce, the Ohio Supreme Court, without elaboration, simply noted that its conclusions were “at odds” with the rationale of this court’s order of November 2, 1998. The action of the Supreme Court of Ohio in deciding Ritchey Produce, while the fundamental issues relating to the constitutionality of Ohio’s 1980 MBE Program were pending before the United States Court of Appeals for the Sixth Circuit, has created an unfortunate tension between the state and federal judicial systems. This court, however, while it has the highest respect for the Supreme Court of Ohio, is not bound by state court decisions on issues involving the United States Constitution. While the state courts have the jurisdiction to decide such issues, the federal courts have primacy in deciding questions of federal law. See England v. Louisiana State Board of Medical Examiners, 375 U.S. 411, 415-16, 84 S.Ct. 461, 11 L.Ed.2d 440 (1964). It is all the more unfortunate that the Ohio Supreme Court undertook to decide whether the state of Ohio had a compelling interest to grant race-based preferences when the plaintiff in Ritchey Produce had chosen not to contest that issue and there was no party before the court who was effectively litigating the interests of Ohio’s non-minority businesses on that critically important issue. This court believes that deciding extremely important constitutional issues in a vacuum of the adversarial process can — and in the Ritchey Produce ease did — lead to error. In the aftermath of this court’s decision and the decision of the Northern District of Ohio in Buddie Contracting, the state of Ohio dismantled its system of race-based preferences in all state purchasing; not only construction, but goods and services as well. Now, as a result of the Ohio Supreme Court’s decision in Ritchey Produce, the state is in the process of reestablishing its clearly unconstitutional fifteen percent race-based quota in goods and services. On April 8, 1999, the state defendants moved this court to stay its order of November 2, 1998 in light of the Ohio State Supreme Court’s decision in Ritchey Produce. The state’s motion has given this court the opportunity to reconsider its decision of November 2, 1998, and to carefully examine the reasons given by the Supreme Court of Ohio for reaching the opposite result in Ritchey Produce. This court has reached the firm conclusion that its original decision was correct, and that a stay of its order would only serve to perpetuate a blatantly unconstitutional program of race-based benefits. This court is convinced that' Ritchey Produce was wrongly decided by the Ohio Supreme Court. The court will begin by summarizing its reasons for these conclusions and will discuss them in greater detail in the following sections of this Opinion and Order. Ritchey Produce was wrongly decided because: 1.Ohio’s program of race-based preferences in the award of state contracts is unconstitutional because it is unlimited in duration. Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 238, 115 S.Ct. 2097, 132 L.Ed.2d 158 (1995) (A race-based remedy must be appropriately limited such that it “will not last longer than the discriminatory effects it is designed to eliminate.”). 2. A program of race-based benefits cannot be supported by evidence of discrimination which is now over twenty years old. Brunet v. City of Columbus, 1 F.3d 390, 409 (6th Cir.1993), cert. denied sub nom Brunet v. Tucker, 510 U.S. 1164, 114 S.Ct. 1190, 127 L.Ed.2d 540 (1994) (Fourteen-year-old evidence of discrimination “too remote to support a compelling governmental interest.”) 3. The state court found that there was a “severe numerical imbalance in the amount of business the state did with minority-owned enterprises,” Ritchey Produce, 85 Ohio St.3d at 262, 707 N.E.2d at 919, based on its uncritical acceptance of essentially worthless calculations contained in a twenty-one-year-old report, which miscalculated the percentage of minority-owned businesses in Ohio and misrepresented data on the percentage of state purchase contracts they had received, all of which was easily detectable by examining the data cited by the authors of the report. See pp. 6-7, and Section IV(e), infra. .4. The state court failed to recognize that even the incorrectly calculated percentage of minority-owned businesses in Ohio (6.7 percent) bears no relationship to the 15 percent'set-aside goal of the Ohio Act. United States v. Paradise, 480 U.S. 149, 171, 107 S.Ct. 1053, 94 L.Ed.2d 203 (1987). (In assessing the appropriateness of race-conscious relief, courts have generally looked to several factors, including the relationship of the goals to the relevant market.). 5. The state court applied a clearly incorrect rule of law when it announced that Ohio’s program of race-based preferences in state contracting must be upheld unless it is clearly unconstitutional beyond a reasonable doubt. The Supreme Court of the United States has said, to the contrary, that all racial classifications are highly suspect and must be subjected to strict judicial scrutiny. City of Richmond v. J.A. Croson, 488 U.S. 469, 494, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989); Adarand, 515 U.S.- at 236, 115 S.Ct. 2097. 6. The evidence of past discrimination which the Ohio General Assembly had in 1980 did not provide a firm basis in evidence for a race-based remedy. Cro-son, 488 U.S. at 500, 109 S.Ct. 706 (The state must have a “strong basis in evidence for its ‘conclusion that remedial action was necessary.’ ”). In Ritchey Produce, the Supreme Court of Ohio summarized its understanding of the evidence the Ohio legislature had when it enacted the MBE Act of 1980 as follows: When Ohio’s General Assembly enacted the 1980 MBE program, the General Assembly had a wealth of evidence before it. The evidence considered by the General Assembly included past judicial decisions confirming the existence of discrimination in state contracting and establishing the state’s acquiescence in such discriminatory practices, executive findings of discrimination in state contracting opportunities, administrative findings of the need for affirmative action, testimony of opponents and proponents of minority set-asides, and a host of relevant statistical evidence showing the severe numerical imbalance in the amount of business the state did with minority-owned enterprises. The evidence that was before the General Assembly showed, inter alia, a gross statistical disparity between the number of qualified MBEs in Ohio and the number of contracts awarded to Ohio’s minority businesses. The 1978 task force report indicated, among other things, that minority businesses constituted approximately seven percent of all Ohio busi- . nesses, but that minority businesses were receiving less than one-half of one percent of state purchasing contacts. A study by ODAS also indicated a disparity in the general construction contracts awarded to minority businesses, as did a report issued by Legislative Budget Office. Ritchey Produce, 85 Ohio St.3d at 262, 707 N.E.2d at 919. This description of the evidence bears little resemblance to the actual facts. The past judicial decisions considered by the General Assembly consisted of two cases. The first was a 1967 federal court decision which involved discrimination by labor unions against black construction. workers. The court did not consider, much less make any findings on the issue of discrimination in the award of state contracts. The second case was an unreported, unap-pealed decision of an Ohio trial court in a case which was tried before the requirements 'of strict scrutiny were established by the Supreme Court of the United States, and which was tried on the theory, since rejected by the nation’s highest Court, that evidence of past societal discrimination was sufficient to support race-based remedies. The court found that “there exists in the awarding of state contracts a discrimination against [specified minority owned businesses],” but neglected to say when, how, or by whom the discrimination was practiced, and failed to find, as the law now requires, that the state itself had been an active or passive participant in it. See Ohio Building Chapter, AGC v. Jackson, Franklin C.P. Nos. 78CV-05-2843 and 79CV-01-247 (September 28, 1979), filed herein as State’s Exh. E, p. 5. There are no “executive findings of discrimination in state contracting opportunities,” Ritchey Produce, 85 Ohio St.3d at 262, 707 N.E.2d at 919, in the materials cited by the Ohio Supreme Court. The only executive order referred to in Ritchey Produce is a 1972 order of Governor Gilligan which relates to equal opportunity in employment, not the award of state contracts. Likewise, this court has not found any administrative findings of discrimination in the award of state contracts in the materials cited by the Ohio court. There was no evidence of the number of MBEs in Ohio which were qualified to enter into contracts -to sell goods and services to the state. Instead, there was only evidence of the total number of all minority-owned businesses in Ohio, eighty percent of which did not have even one employee and which included large numbers of sole proprietorships, such as barber shops, beauty shops, shoe repair shops, neighborhood carry-outs, and other “mom and pop”-type operations with no employees — businesses which would have neither interest in, nor ability to perform contracts to supply goods and services to the state of Ohio. There was no evidence of a “gross statistical disparity” between the number of qualified MBEs in Ohio and the contracts awarded to them. There was, in fact, no data on the percentage of all state purchasing contracts awarded to minority-owned firms. The Ohio Supreme Court relied on a statement in the 1978 report of the Attorney General’s Task Force On Minorities In Business that minority businesses “received less than one-half of one percent of all state purchase contracts” from 1975 to 1977, and overlooked the fact that the data cited by the authors of the report did not include all state purchase contracts, but only Department of Transportation construction contracts. See Section IV(e), infra. The assertion that minority businesses constituted approximately seven percent of all Ohio businesses was the result of a gross statistical error, also overlooked by Ohio’s high court, in which the total number of Ohio minority-owned businesses, including those with and without employees, was compared with the total number of Ohio businesses with employees — a classic case of comparing apples to oranges. See Section IV(e), infra. The ODAS and Legislative Budget Office (“LBO”) studies cited by the court reported only the percentage of the dollar value of prime construction contracts awarded to minority-owned firms. They contained no information on the number of qualified minority-owned construction firms. These studies did not even attempt to show a disparity between the percentage of the contract dollars awarded to minority firms and the number of such firms. Justice Douglas, speaking for all of the justices, except Justice Cook, who concurred only in the Court’s judgment, assured the citizens of Ohio that the court’s Ritchey Produce decision was based “upon a careful review of the state’s arguments.” Ritchey Produce, 85 Ohio St.3d at 254, 707 N.E.2d at 914. He called the above-described evidence a “wealth of evidence.” Id. at 262, 707 N.E.2d at 919. Quite clearly, it is not. A careful analysis of the material referred to by the state court demonstrates, to the contrary, that it is wholly insufficient to support the state court’s conclusion. In Ritchey Produce, the Ohio Supreme Court called Ohio’s MBE program a “benign or remedial race-based measure!.]” Ritchey Produce, 85 Ohio St.3d at 274, 707 N.E.2d at 928. ' The evidence in the instant case, however, revealed that far from being benign, this program, which was supposedly intended to remedy past discrimination against minority businesses, has instead become an instrument of reverse discrimination against non-minority businesses. The problem here begins with the fact that the set-aside goals of the Ohio MBE Act bear no relationship to the number of minority businesses which are ready, willing, and able to enter into contracts with the state. In the present case, the state conceded that only those businesses with at least one employee would be likely to have the interest or ability to supply goods and services to the state of Ohio. Based on the census data available to the Ohio General Assembly in 1980, minority-owned businesses with at least one employee constituted only one percent of such Ohio businesses. Even this figure probably overstates the percentage of MBEs qualified to provide some of the services covered by the Act. For example, firms seeking prime construction contracts must be able to provide performance bonds. But, accepting this number as a hypothetical estimate of the availability of MBEs, it follows that the percentages set aside, for them; are at least five times what they should have been for prime construction, seven times what they should have been for construction subcontracting, and fully fifteen times what they should have been for other goods and services. In order to achieve these unrealistic goals, state agencies have resorted to 100 percent set-asides in certain trades, services, and commodities, thereby completely excluding non-minority firms from the opportunity to sell their goods and services to these agencies. For example, for a number of years, it was the policy of The Ohio State University to reserve 100 percent of its painting contracts for minority firms. The University’s list of categories of goods and services reserved solely for minority-owned firms was ultimately expanded to almost forty. For these tradesmen and businessmen, the University’s policy was, “Whites and other non-minorities need not apply.” Even worse is the fact, revealed by the evidence in this case, that the state does not consider these unrealistically high goals as in any way limiting the percentage of state purchases to be set aside for minority-owned businesses. In fact, the state has encouraged its purchasing departments to exceed those goals and, in many instances, they have done so. Finally, it is sadly apparent that the assumption that dollars set aside for minority firms would flow to economically disadvantaged businesses is probably unfounded. A 1995 study of state affirmative action programs revealed that eighty percent of the dollar value of all contracts set aside for minority firms were awarded to only five percent of the MBEs registered in the program. Statewide, a mere handful of minority-owned businesses, about eighty firms, received eighty percent of the dollar value of the contracts set aside that year. In 1995, the state set aside 228.3 million dollars in state contracts for bidding by minority firms only and another fifty-six million dollars was set aside by the state’s colleges and universities. In the instant case, Ohio’s Department of Rehabilitation and Correction set aside a ten million dollar contract for the construction of an administration building at a new prison being built in Toledo, Ohio, and was prepared to award that contract to the Sherman R. Smoot Company, a minority-owned firm which is listed among the nation’s 400 largest construction companies, with 1997 revenues reported in excess of 110 million dollars. When financially rewarding state contracts are allocated on the basis of race, some business owner loses, not because her bid was too high or because he was less qualified, but because of the color of his or her skin. The loser, whether he be white or, as in the case of Mr. Ritchey, Lebanese, or whatever race he may be, may never in his lifetime have harbored a discriminatory thought. The economic needs of his business may be no less, or perhaps even much more than that of the business owner of the preferred race who receives the desired contract. It is precisely because this kind of an affirmative action program places the burden of paying for past discrimination, not upon society as a whole, but upon individual business owners who may have never been guilty of discrimination, that such programs are disfavored by the courts. This is why the Supreme Court warned in Cro-son: Absent searching judicial inquiry into the justification for such race-based measures, there is simply no way of determining what classifications aré “benign” or “remedial” and what classifications are in fact motivated by illegitimate notions of racial inferiority or simple racial politics. ... -í' -i' H* 'i» Classifications based on a race carry a danger of stigmatic harm. Unless they are strictly reserved for remedial settings, they may in fact promote notions of racial inferiority and lead to a politics of racial hostility.... Croson, 488 U.S. at 493, 109 S.Ct. 706. In Adarand, Justice Thomas observed: ... So-called “benign” discrimination teaches many that because of chronic and apparently immutable handicaps, minorities cannot compete with them without their patronizing indulgence. Inevitably, such programs engender attitudes of superiority or, alternatively, provoke resentment among those who believe that they have been wronged by the government’s use of race.... Adarand, 515 U.S. at 241, 115 S.Ct. 2097. Ohio’s program of race-based quotas in state contracting is anything but benign. II. It is now well settled that all racial classifications imposed by federal, state, or local government must be analyzed under strict scrutiny; they must serve a compelling state interest and they must be “narrowly tailored” to serve that interest. Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 115 S.Ct. 2097, 132 L.Ed.2d 158 (1995); City of Richmond v. J.A. Croson Co., 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989). In order to show a compelling state interest, the government actor must have a “strong basis in evidence for its conclusion that remedial action was necessary,” Croson, 488 U.S. at 500, 109 S.Ct. 706. This requires evidence that the government actor itself was an active or passive participant in the discrimination. See Croson, 488 U.S. at 490-493, 109 S.Ct. 706. Approximately two years after it became law, the constitutionality of the construction contract provisions of the Ohio MBE Act was challenged in an action filed in this court. See Ohio Contractor’s Ass’n v. Keip, Case No. C-2-82-446 (S.D.Ohio, December 15, 1982). In Keip, the state of Ohio produced all of the evidence it had to show that the Act was supported by a compelling state interest to remedy the effects of past discrimination against minority contractors. Judge Kinneary reviewed and analyzed that evidence in a thirty-five page opinion. Although the law was then unsettled as to the standard of review, Judge Kinneary’s legal analysis closely resembles the analysis the United States Supreme Court would later adopt, ie., strict scrutiny. See, e.g., Adarand; Croson. He considered and applied the relevant elements of the “narrow tailoring” requirement of strict scrutiny, including duration, burden on non-minority contractors, flexibility, and consideration of less intrusive means. He found “scant support” for the existence of a compelling state interest to justify a race-based remedy. He concluded that regardless of the existence of a sufficient state interest, the Ohio MBE Act was, nevertheless, constitutionally defective because it was not reasonably tailored to the goal of remedying prior discrimination. See Keip, S.D.Ohio No. C-2-82-446, pp. 28-34. On appeal, the Sixth Circuit Court of Appeals, in a split decision, upheld the Ohio Act. See Ohio Contractors Ass’n v. Keip, 713 F.2d 167 (6th Cir.1983). Judge Engle filed a strongly-worded dissent ■ in that case. When the Sixth Circuit decided Keip, it applied the wrong standard of review. At that time, the court ivas applying a relaxed standard of review, an error which was corrected by the Supreme Court of the United States when it reversed the Sixth Circuit in Wygant v. Jackson Board of Education, 476 U.S. 267, 106 S.Ct. 1842, 90 L.Ed.2d 260 (1986). In Michigan Road Builders Association, Inc. v. Milliken, 834 F.2d 583, 587 (6th Cir.1987), aff'd, 489 U.S. 1061, 109 S.Ct. 1333, 103 L.Ed.2d 804 (1989), the appellate court acknowledged that it had applied the wrong standard of review in its earlier cases including, specifically, Keip. “The Supreme Court left no doubt that the standard of review previously employed by this circuit in racial and .ethnic affirmative action eases was inappropriate.” Id. at 588. See also Aiken v. City of Memphis, 37 F.3d 1155, 1162 (6th Cir.1994). The Ohio MBE .Act of 1980 has lead a charmed, existence for nearly twenty years. It should have died in 1982 when Judge Kinneary found it unconstitutional in Keip, but it survived when the state appealed because the Sixth Circuit applied the wrong.standard of review. Later, its supporters took courage when it received favorable mention in Croson. In Croson, Justice O’Connor, speaking for the Court, rejected the proposition that a finding of disparity in the awatd of city construction contracts could be based on a disparity between the percentage of contracts awarded to minority firms and the percentage of the minority population of the city, noting that the city of Richmond “does not even know how many MBE’s in the relevant market are qualified to undertake prime- or subcontracting work in public construction- contracts”. 488 U.S. at 502, 109 S.Ct. 706. She referred to Keip, 713 F.2d 167, noting that, in Keip, the Sixth Circuit had relied “on the percentage of minority businesses in the State compared to the percentage of state purchasing contracts awarded to minority firms....” Id. (emphasis in original). It is not clear whether Justice O’Connor was saying this was sufficient, or simply that it was better than what the city of Richmond had done. In light of her statement that the city of Richmond did not even know how many firms in the relevant market were qualified to undertake public construction contracts, it is clear that she did not mean that a set-aside program for construction contracts could be supported by a disparity analysis based on all minority-owned businesses. If Justice O’Connor was suggesting that a set-aside program for other kinds of state purchasing could be supported by disparity between the number of minority-owned.businesses and the percentage of state purchase contracts awarded to them, she certainly was not aware that the state of Ohio’s calculation of the percentage of minority businesses in Keip was completely wrong. Ironically, the situation here is even worse than it was in Croson, where the city of Richmond attempted to justify a set-aside goal of thirty percent on the grounds that minorities constituted fifty percent of the city’s population. Here, Ohio’s goal of fifteen percent for goods and services is completely unexplained, but it does bear a rather suspicious correlation to the mihority population of the state, which is about twelve percent of all Ohio citizens. Bureau of the Census, U.S. Dep’t of Commerce, Pub. No.1990 CP-1-87, 1990 Census of Population: General Population Characteristics, Ohio 37-27 (1992). So, in Richmond, a contracting goal which was twenty percentage points less than the city’s minority population was struck down, while here, the state seeks to justify a set-aside which actually exceeds the percentage of the minority population of the state. In the trial of the instant case, when the state was called upon to produce evidence of a compelling state interest, it announced that it would defend the constitutionality of the Ohio MBE Act on the basis of the record made in 1982, in the trial of Keip. The state conceded that it had no additional evidence of discrimination against minority contractors, and admitted that during the nearly two decades the Act has been in effect, it has made no effort to determine whether there is a continuing need for a race-based remedy. In the trial of this case, the state presented no evidence that it had been an active or passive participant in discrimination against minority firms in the award of prime construction contracts, or that it had participated directly or indirectly in discrimination by prime contractors in the award of subcontracts. Indeed, the state officials most likely to be aware of such discrimination, if it existed, said that to the best of their knowledge, there was none. The state relied entirely on the evidence which the General Assembly had in 1980, which is now over twenty years old and far too stale to support the continued existence of a program of race-based preferences. After hearing the evidence in the case and after reviewing Judge Kinneary’s analysis of the evidence the state produced almost seventeen years ago in the trial of Keip, the unconstitutionality of Ohio’s MBE Act was so clear to this court that it declared the Act unconstitutional from the bench at the conclusion of its October 1998 hearing. See Bench Decision October 28, 1998, Tr. 351-367. III. An analysis of Ritchey Produce should begin with these important observations: 1) the plaintiff never challenged the state’s compelling interest for a race-based remedy; and 2) no trial was held in which the state was called upon to produce evidence to support a compelling interest for a race-based remedy. In Ritchey Produce, the plaintiff did not directly challenge the constitutionality of the set-aside program; instead, it sought to participate in the program. Ritchey Produce claimed that it was an economically disadvantaged business enterprise and that the Ohio statute should be interpreted broadly enough to benefit any business, regardless of race, which could show that it was economically disadvantaged. Ritchey Produce argued in the alternative that it was entitled to participate in the program because it was solely owned by a person of Lebanese descent, and that such persons aré Orientals and entitled to the benefits of the program because of their race. Ritchey Produce never challenged the state’s compelling interest to clothe the four classes of minorities mentioned in the statute with a presumption of economic disadvantage. In its brief in the Supreme Court of Ohio, Ritchey Produce said: ... Ritchey Produce did not challenge the MBE statute’s validity, but instead challenged how ODAS reversed its policy and decertified Ritchey Produce based on race per se. As the lower ■courts never considered either a record or arguments on the validity of - the State’s underlying interest in creating its MBE program, the State improperly raises these issues before this Court. Merit Brief of Appellee Ritchey Produce Company, Inc., p. 9, Addendum C, filed herein April 14,1999. Nadin F. Ritchey, the sole shareholder of Ritchey Produce, is a naturalized American citizen who was born in the country of Lebanon. In 1990, he applied to the Ohio Department of Administrative Services (“ODAS”) to have his business certified as a minority-owned enterprise. He indicated on his application that his company was an “Oriental” business. He was granted an MBE certificate and was awarded a two million dollar set-aside contract to supply fresh fruit and vegetables to state institutions. Ritchey’s MBE certificate was renewed annually until 1995, when ODAS notified him that his application was rejected on the grounds that he was not a member of any group recognized as a minority business enterprise under Ohio Rev. Code § 122.71(E)(1) Ritchey filed an administrative appeal asserting that anyone born in a country east of the Mediterranean should be considered Oriental. In the alternative, Ritchey argued that the agency’s “reinterpretation” of the word “Oriental” should not be applied retroactively because this would unconstitutionally impair his existing contract with the state of ■Ohio. The hearing .examiner rejected both of these arguments and Ritchey appealed to the Common Pleas Court of Franklin County. There, Ritchey conceded that he was not Oriental and argued instead that Ohio’s set-aside. program should be construed to benefit any business which can show that it is economically disadvantaged. He argued that ■§ 122.71(E)(1) merely created a rebuttable presumption that ■ any business falling within the four specified racial classifications is economically disadvantaged. Ritchey’s appeal was initially heard by a magistrate who agreed with his argument and also concluded that the Supreme Court’s decision in Admaná required that the focus of the Ohio statute must be on economic disadvantage and not race per se. See Appendix to Brief of Appellant State of Ohio, Addendum B, filed herein April 14, 1999. The state of Ohio filed objections to the magistrate’s decision, causing it to be reviewed by Common Pleas Judge Daniel T. Hogan. Judge Hogan adopted and affirmed the magistrate’s decision, agreeing that Adarand required that Ohio’s MBE program' should be open to any citizen, regardless of race, who could establish that his- or her business was economically disadvantaged. See Appendix to Brief of Appellant State of Ohio, Addendum B, filed herein April 14, 1999. The state appealed Judge Hogan’s decision to the Franklin County Court of Appeals. The court of appeals, like the court below, did not address the issue of whether "the state had shown a compelling state interest to justify its set-aside program. Agreeing with Judge Hogan, the court of appeals held that the program was not “narrowly tailored.” The court of appeals reasoned that the statute was both under-inclusive and over-inclusive because there may be economically disadvantaged businesses which are excluded simply because of their race, while at the same time others which are not economically disadvantaged are eligible to participate because of their race. See Appendix to Brief of Appellant State of Ohio, Addendum B, filed herein April 14,1999. Because Ritchey conceded that the state of Ohio had a compelling interest to grant race-based preferences to the four specified minorities, the state was not called upon to present any evidence to support its set-aside program. As a result, there was no evidentiary record which the Supreme Court of Ohio could review to determine whether the state had demonstrated a “strong basis in evidence for its conclusion that remedial action was necessary.” Croson, 488 U.S. at 510, 109 S.Ct. 706 (quoting Wygant, 476 U.S. at 277, 106 S.Ct. 1842). When the state appealed to the Supreme Court of Ohio, that court had several options available to it. Like the lower courts, it could have limited its decision to the interpretation of Ohio’s MBE Act and the “narrowly tailored” element of strict scrutiny, particularly whether Ada-rand required all affirmative action plans to be based on economic disadvantage. The Ohio Supreme Court’s rulings that Ohio’s MBE Act was based on race per se and that Adarand did not prohibit a race-conscious remedial program would have resolved all of the issues raised by Ritchey Produce. Thus, the court could have deferred consideration of the crucial issue of whether the state had a compelling interest for a race-based remedy until it had a litigant before it who was effectively advocating the interests of Ohio’s non-minority businesses by challenging the state’s evidence of a compelling interest. On the other hand, if the court felt that it was necessary to decide the issue of compelling state interest, it had a second option, namely to remand the case to the trial court for a trial in which the state would be called upon to produce its evidence of a compelling state interest. The Ohio Supreme Court did not exercise either of these options. Instead, it undertook to decide whether Ohio’s program of race-based preferences in state contracting was supported by a compelling state interest. In the absence of an evidentiary record, it undertook to decide this issue by examining historical information it was able to glean from the state’s briefs. Thus, Ohio’s high court based its decision, not on a factual record developed in an adversarial hearing, but on information it gathered from the state’s briefs. This approach cannot be reconciled, with the requirement of strict scrutiny. As Justice Powell said in Wygant: Evidentiary support for the conclusion that remedial action is warranted becomes crucial when the remedial program is challenged in court ... In such a case, the trial court must make a factual determination that the employer had a strong basis in evidence for its conclusion that remedial action was necessary. The ultimate burden remains with [the plaintiff] to demonstrate the unconstitutionality of an affirmative-action program. But unless such a determination is made, an appellate court reviewing a challenge by nonminority employees to remedial action cannot determine whether the race-based action is justified as a remedy for prior discrimination.... Wygant, 476 U.S. at 277-278, 106 S.Ct. 1842. See Brunet, 1 F.3d at 405 (“[T]he District Court did not err in placing a burden of production upon the City and the ... plaintiffs to show evidence of past discrimination[.]”). See also Aiken, 37 F.3d at 1162 (“[T] he party defending the plan bears the burden of producing evidence that the plan is constitutional.”) IV. In Ritchey Produce, the Supreme Court of Ohio found that the state “had a ‘strong basis in evidence’ for finding that remedial action was necessary to ameliorate the effects of identified racial discrimination in which the state itself had either actively or passively participated.” Ritchey Produce, 85 Ohio St.3d at 260, 707 N.E.2d at 918. The “evidence” the court relied upon in reaching this conclusion consisted of two court decisions, statistical information, a January 1972 executive order issued by Ohio Governor, John J. Gilligan, and a 1978 report by a Task Force On Minorities In Business, established by Ohio Attorney General, William J. Brown. a) Ethridge v. Rhodes The first court decision the Ohio Supreme Court relied upon was Ethridge v. Rhodes, 14 Ohio Misc; 43, 268 F.Supp. 83 (1967). Ethridge was a class action brought on behalf of black construction workers who had been denied admittance to labor unions for the construction trades. Plaintiffs sought to enjoin the state of Ohio from entering into construction contracts with companies which limited their hiring to members of unions which had excluded blacks. The court found that the state was aware of a pattern of discrimination by the unions in membership and referral of black tradesmen, and that the state was aware that its efforts to eliminate this discrimination had been ineffectual. The court found that the state had become a joint participant in a pattern of racially discriminatory conduct “by placing itself in a position of interdependence with private individuals ... acting under contract with unions that bar Negroes ...” Id. at 87. Ethridge may be relevant as corroborative evidence of the state’s role as a passive participant in discrimination against blacks, but it is not probative on the issue of whether the state had discriminated against minority-owned firms in the award of state construction contracts. Ethridge involved discriminatory membership practices of labor unions, not the award of state construction contracts. While it might be argued that discrimination by labor unions may have contributed to a paucity of black construction firms in the 1970s, the Supreme Court of the United States has held that speculation about the results of past societal discrimination may not be used to justify race-based preferences in the award of public contracts. See Croson, 488 U.S. at 499, 109 S.Ct. 706. b) Governor Gilligan’s Executive Order In January 1972,-Ohio’s then governor, John J. Gilligan, issued an executive order directing all state agencies to eliminate discriminatory barriers to employment. This executive order was directed against employment discrimination by contractors performing public works contracts for the state of Ohio, and was apparently issued to fulfill the requirements of a preliminary consent order entered as part of the settlement of the case of Welch v. Rhodes, Civil No. 67-249 (S.D.Ohio 1967), which sought to expand the injunction entered in Ethridge. In Ritchey Produce, the Supreme Court of Ohio stated that “[t]he purpose of this order was, among other things, to increase minority participation in state contracting opportunities.” Ritchey Produce, 85 Ohio St.3d at 255, 707 N.E.2d at 915. This is true only in the sense that the order sought to increase the hiring of-minorities by firms engaged in state contracting. The order says nothing about the award of state construction contracts. It contains no findings that the state had discriminated in the award of construction contracts. Indeed, it is completely silent on that issue. Thus, Governor Gilligan’s Executive Order of January 27, 1972, like the decision in Ethridge, has no probative value on the issue of whether the state of Ohio had a compelling interest to remedy discrimination in the award of state construction contracts. There is a further reference to Governor Gilligan in Ritchey Produce. The court noted that Governor Gilligan had testified in the trial of Keip, where he said that, during his administration, he was aware of the difficulties experienced by minority businesses and small businesses in obtaining state contracts, and that the cause of the difficulty was “the existence of an old boys’ club sort of relationship’ between state officials and a number of established and reputable firms with a good deal of experience that ‘tended to get the lion’s share of the business.’ ” Ritchey Produce, 85 Ohio St.3d at 256, 707 N.E.2d at 915. However, Judge Kinneary’s opinion in Keip further states that “[biased on his responses to questioning at trial, Governor Gilligan was not aware of, nor did he cause any investigation into, allegations that state officials discriminated against minority contractors during his administration.” Keip, S.D. Ohio No. C-2-82-446, p. 11. c) Ohio Building Chapter, AGC v. Jackson The second court decision relied upon in Ritchey Produce was Ohio Building Chapter, AGC, which arose out of a legal challenge to minority set-aside provisions contained in a biennial capital improvements appropriation bill passed by the Ohio General Assembly in September 1977. This bill contained no findings that the state had discriminated against minority contractors. In an unreported decision, Common Pleas Judge George Tyack upheld the constitutionality of the bill. Judge Tyack did not render separate findings of fact and conclusions of law. A transcript of the testimony and other evidence he relied upon is no longer available. In a six-page decision, Judge Tyack’s only reference to discrimination in the award of state contracts was one cryptic sentence: This court finds from the evidence submitted that there exists in the awarding of state contracts a discrimination against the minority groups specified in Sub House Bill No. 618. Ohio Building Chapter, AGC, Franklin C.P. Nos. 78CV-05-2343 and 79CV-01-247, filed herein as State’s Exh. E. Judge Tyack’s decision was handed down on September 28, 1979, pne.day before the expiration of the biennial appropriation which contained the challenged set-aside provisions. Not surprisingly, there was no appeal. It is impossible to determine from Judge Tyack’s decision what evidence he relied upon or just what he meant when he said “there exists ... a discrimination.” He did not identify the discriminator or discriminators. It is particularly significant that he did not make an express finding that the state of Ohio was a participant in thé discrimination. Although there is no transcript of the evidence adduced in Ohio Building Chapter, AGC, the briefs filed by the parties are available and they do shed some light on what the evidence was. In a section of the plaintiffs brief entitled “The Facts,” the following statements appear: The Department of Administrative Services admists [sic] that it maintains no records with respect to the race, sex, or ethnic backgrounds of those who submit bids for construction contracts. Nor does it have any records with respect to the owners of the stock when the bidder is a corporation. Hí # Hs jj; Although there is some evidence that employees of the Department of Administrative Services know relatively few Minority Business Enterprises who have successfully competed for public contracts, there has been an abundance of evidence that most contractors who qualify as MBEs are relatively small and lack the financial resources necessary to compete and perform state jobs. Financial resources are necessary because the contractor must bear the cost of labor and materials for at least 30 days and must provide the statutory bonds. These same factors affect most contractors who are not MBEs from competing and performing state work. There has been no evidence of prior discrimination by the state against contractors who qualify as MBEs. The defendant has not even attempted to show “a compelling governmental in-' terest for classification” except for blacks. The evidence falls far short of what is required to show a compelling interest there for [sic] it has focused on. problems with labor unions and employment, not with black contractors being denied the right to bid by the state. Brief of Plaintiffs, Franklin C.P. Nos. 78CV-05-2343 and 79CV-01-247, filed herein as Defendant State of Ohio Third Submission of Materials, Addendum K, Item 10, pp. 2-3. The state’s case on the issue of the -constitutionality of the set-aside provisions of the bill was presented by special counsel, Otto Beatty, Jr. In his brief, Mr. Beatty did not challenge the plaintiffs characterization of the evidence before the court as quoted above. His own summary of the evidence was as follows: Plaintiff will not deny that minority business enterprises engaged in construction contracting (that is, the open class who are beneficiaries of Defendants [sic] actions now before the Court) receive now, and have received in the past, little or no business from the state. This is further evidenced by the statistics and data prepared by Mr. Burton D. Cooper, EEO Program Supervisor for the Department of Administrative Services and submitted as Defendant’s Exhibits K-l, K-2, K-3, K-4, K-5, L, M, N, O, and P. Plaintiffs cannot deny that these minority businesses have in the past been, and are still today, victims of direct and indirect invidious discrimination. This discrimination may have been part of a general, diffused commercial and societal pattern- of discrimination. Nevertheless, such discrimination is in direct contradiction to the spirit, language, and policy of the laws of Ohio. Supplemental Brief of Special Counsel, Franklin C.P. Nos. 78CV-05-2343 and 79CV-01-247, Defendant State of Ohio Third Submission of Materials, Addendum K, Item 11, pp. 3-4. Mr. Beatty continued, as follows: Defendants have already shown in testimony and documentary evidence presented before the Court, that the numbers of minorities in the construction trades in the State of Ohio has been, and is exceedingly low. Furthermore, defendants have shown that this dilemma was not due to a lack of qualified minorities but rather to technical discriminatory road blocks such as inability to obtain surety bonds and contracts, which effectively closed employment opportunities to minority contractors.... Supplemental Brief of Special Counsel, supra, p. 16. At page 19 of his brief, Mr. Beatty argued as follows: The plaintiffs would have the Court to believe that the state’s affirmative action -Set Aside Program cannot be justified by any need to overcome past discrimination because the State ’ of Ohio has not been found to have engaged in discrimination. That proposition is erroneous for two reasons: first, the State is not limited to correcting the effects of its own discrimination, but it can take into account the consequences of discrimination elsewhere in society; second, institutions or governmental bodies need not await judicial determinations before attempting to overcome their own discrimination. It would make no sense to conclude that the State can take race or gender into account only to compensate for its own discrimination. Although in some cases a remedy may be needed to break down a discriminatory pattern in the administration and award of a state’s public works program, whether the State previously practiced discrimination of this sort is not a necessary part of the justification for a special affirmative action or set-aside program. Supplemental Brief of Special Counsel, supra, pp. 19-20. The briefs of counsel are just as instructive for what they do not say as they are for what they do say. They do not refer to any anecdotal evidence of discrimination by state contracting officers, or by any prime contractors, banks, or lending companies. They do not refer to any disparity studies which undertook to determine the number of minority firms qualified to perform state construction contracts, what percentage they were of all such firms, and how that number compared to the percentage of state construction contracts they received. Mr. Beatty’s brief refers only to the fact that minority-owned businesses had received little or no business from the state, and that the number of minorities in the construction trades in Ohio was “exceedingly low.” He argues that these firms were the victims of unspecified “direct and indirect invidious discrimination” which was “part of a general, diffused commercial and societal pattern of discrimination,” and “technical discriminatory road blocks such as inability to obtain surety bonds and contracts.” Supplemental Brief of Special Counsel, supra, pp. 3-4,16. The statistical evidence presented in Ohio Building Chapter, AGC, was reviewed by Judge Kinneary during the Keip trial. See Keip, S.D. Ohio No. C-2-82-446, pp. 15-16. The Supreme Court of Ohio relied upon Judge Kinneary’s summary of this evidence. See Ritchey Produce, 85 Ohio St.3d at 255, 707 N.E.2d at 915. The statistical evidence was compiled and presented by Burton Cooper, an Equal Employment Opportunity (“EEO”) program supervisor with the Department of Administrative Services. Cooper’s statistics indicated that, during the twenty-two year period from 1957 to 1979, minority contractors were awarded roughly 0.21 percent of the dollar amount of certain categories of prime capital improvement contracts. While Cooper’s calculations showed that minority contractors obtained a very small portion of these contracts, he did not determine the number of minority firms who were ready, willing, and able to perform such contracts, or what percent of the total number of all such firms they represented. Without this information, it would be impossible to say whether minority firms received more or less than their fair share of the contracts. Burton’s calculations represent only the first step in a statistical analysis of possible discrimination in the award of state prime capital improvement construction contracts. Standing alone, they have no probative value on the issue of discrimination in the award of such contracts. From the above analysis, it is apparent that Ohio Building Chapter, AGC was tried on the theory that a program of race-based benefits could be supported by evidence that minorities had received only a small percentage of state contracts, .that minority firms were disadvantaged as a result of past societal discrimination, and that it was not necessary to show that the state was a participant in the discrimination. The law was not settled when Ohio Building Chapter. AGC was tried. Indeed, the United States Court of Appeals for the Sixth Circuit was incorrectly applying a relaxed standard of review to race-based remedies until 1986 when the Supreme Court of the United States reversed the Sixth Circuit in Wygant. The evidence offered in Ohio Building Chapter, AGC would not satisfy the requirements of strict scrutiny, and Judge Tyack’s 1979 decision has little or no probative value. d) 1978 Report of the Ohio Attorney General’s Task Force on Minorities in Business In 1978, Ohio Attorney General William J. Brown established a Task Force On Minorities In Business to examine the relationship between state government and minority business. The task force was directed to review state laws, practices, and services relating to minority-owned businesses, and to recommend legislative, administrative, and fiscal measures to enhance assistance to small businesses -in general and to minority-owned businesses in particular. In October 1978, the task force issued its final report.- The task force report contains various findings concerning the problems faced by small businesses in general, and minority businesses in particular. Under the heading “Capital Formation and Financing,” the report states: ... Minority entrepreneurs often enter their business ventures with limited, if any, equity. As a result, these business owners must seek financing from alternate funding sources to sustain their business activities. However, the Task Force found that there are no effective financing sources available for Ohio minority businesses. Banking institutions are the traditional source of business borrowing. Banks prefer to lend funds for short term use to an enterprise which has an established earnings record or is fully collat-eralized by assets which are' easily converted into cash. On the other hand, the typical credit needs of a minority business are for long term, low cost, unsecured or inadequately secured financing. As a consequence, the requirements and needs of the banking industry and the minority entrepreneur are usually incompatible — and minority businesses have been unable to secure a significant number of bank loans. Attorney General of Ohio Task Force Report: Final Report (hereinafter “Final Report”), filed herein as State’s Exh. F, pp. 8-9. ‡ ‡ ‡ H* Opportunities for minority businesses to broaden their markets are frustrated by such problems as their non-competitive size, lack of capital and inexperience. Final Report, p. 13. :]s # ^ ^ :}c The public hearing testimony indicated that minority entrepreneurs are faced with the unique problems of minority businesses as well as traditional problems which befall most small businesses. Many minority businesses are located in the high crime, high unemployment and low income urban areas of the State. These factors lead to uncertain and unstable business environments. ■ Final Report, p. 15. The task force • reviewed state contract procurement statistics and procedures and reported that: ... Statistics reveal that minority businesses received less than one-half of one percent (.5%) of all State purchase contracts from 1975 to 1977; yet seven percent (7%) of Ohio businesses are classified as minority. Ohio minority businesses are receiving less than one-fourteenth $4) of their proportionate share ■ of State contracts. Final Report, p. 17. Noting that state contracts are awarded to the bidder who submits the “lowest and best bid” the task force recommended that the standard be changed to “lowest, best, and most responsive” to permit “an even greater latitude in the employment of relevant contract award criteria other than price.” Final Report, p. '17. The task force also recommended that the dollar limit on noncompetitive bidding be raised from $300 to $5,000, in order to increase minority business participation. Final Report, p. 18. The task force pointed to public hearing testimony which indicated that “[m]ost black businessmen don’t have the knowledge ... to know where to go to find [State] contracts.” Final Report, p. 18. The task force concluded: This lack of knowledge concerning the availability of State contracts is a factor which contributes to the low contract procurement. percentages reflected in minority business statistics. ... Final Report, p. 18. In the realm of bidding procedures, the’ task force concluded that the state should alter its means of preparing contract specifications by breaking contracts down “into smaller, multiple sizes.” Final Report, p. 19. In the area of bonding, the task force found: In order to procure a state contract, one must be able to acquire bonding, an insurance against contract failure. As a result, if one is unable to secure bonding, this individual is also unable to secure a State contract. Minority businesses have faced severe difficulties in obtaining bonding. ... * * * * # * Four major problem areas which contribute to the inability of the minority contractor to secure bonding are: 1) unsatisfactory financial statements 2) improper estimating techniques 3) creditor liens (claims on the property of a contractor) 4) lack of knowledge of the total bonding process. The above cited conditions are typical problems which cause the surety industry to deny bonding to minority businesses. In addition, the extensive and complex paperwork which must be processed in order to acquire bonding presents problems for the minority entrepreneur. One witness stated that there are approximately sixteen different forms which must be completed before a business person can acquire a bond. Many minority entrepreneurs do not have the technical expertise and managerial skills to complete this paperwork. Final Report, pp. 19, 20. The task force recommended that the state establish a program to offer bonds and bonding technical assistance to minority entrepreneurs, and that the state adopt a statutory enforcement mechanism to guarantee equal bonding policies. In the realm of capital acquisition, equity and debt, the task force found that “small minority businesses are often unable to bring together sufficient financial resources due to the lack of an established earnings track record and business credibility.” Final Report, p. 23. The task force final report states: The public hearing record indicates that minority businesses have been unable to successfully secure a significant number of bank loans. Numerous witnesses testified that they believed that the minority entrepreneur’s inability to acquire bank loans was due to the banking industry’s discriminatory lending practices. In rebuttal, witnesses from banking institutions denied that Ohio bankers engaged in discriminatory practices. Bank representatives asserted that because their primary public responsibility must be to safeguard the funds of their depositors, they do not extend substantial lines of credit unless there is a high probability that the credit will be repaid in a relatively short period of time. Optimally, a banker would prefer to lend funds for short term use to an enterprise which has an established earnings record and is fully collateral-ized by assets which are easily converted into cash. On the other hand, the typical credit needs of a minority business person are for long term, low cost, unsecured or inadequately secured financing. These inconsistent requirements and needs, between the banking industry and the minority entrepreneur, cause banking institutions to be an inadequate and illusory source of financing for minority business. Final Report, p. 24. The task force recommended that the state of Ohio create an agency which would be able to make long-term direct loans to minority business enterprises and guarantee long-term loans by banks and other financial institutions to minority business enterprises. The Attorney General’s task force appears to have conducted a serious and thorough study of the problems facing small and minority businesses in Ohio in the 1970s. While it identified a variety of obstacles to the success of minority businesses, its report is devoid of any findings that racial discrimination played a role in the inability of minority businesses to obtain a larger share of state contracts. e) Statistical Information The statistical evidence of discrimination the Ohio Supreme Court relied upon to uphold the Ohio MBE Act consisted of: 1. Data prepared by ODAS for the defense of Ohio Building Chapter, AGC v. Jackson-, 2. Data compiled by the Legislative Budget Office; 3. Disparity calculations extracted from Keip and the 1978 report of the Attorney General’s Task Force On Minorities In Business. See Ritchey Produce, 85 Ohio St.3d at 257-58, 707 N.E.2d at 916-17. 1. Data prepared by ODAS for the defense of Ohio Building Chapter, AGC v. Jackson The statistical data which the state offered in defense of the temporary set-aside program challenged in Ohio Building Chapter, AGC was prepared in 1978 by Burton D. Cooper, EEO Program Supervisor for ODAS. Keip, S.D. Ohio No. C-2-82-446, p. 15. Cooper compiled records from the State Architect’s Office of five categories of capital improvement contracts awarded by the state from 1957 to 1979. Id. He sought to determine the portion of such contracts that were awarded to MBEs. However, ODAS did not have records of the race or ethnic background of the firms that submitted bids for construction contracts. In an attempt to determine which firms were minority-owned, Cooper consulted a roster of minority contractors which ODAS had started keeping in 1976, and he asked for names of known minority firms from unofficial sources such as the Urban League and NAACP. Id. at p. 15 n. 10. Cooper calculated the dollar value of all of the contracts awarded in the five categories during the twenty-two year period and determined that identifiable minority firms received roughly 0.21 percent of that amount. Cooper’s calculations have some obvious limitations. First, they do not represent all prime construction contracts awarded by ODAS during the years in question; instead, they represent only those in the five categories he selected. Second, although his calculations covered a period of twenty-two years, official records on the identity of minority-owned firms were kept only during the last three years of the period he studied. The identity and number of minority-owned firms in the 1950s and 1960s was unknown. Some of Cooper’s data was twenty years old when he compiled it, far too stale to support a finding of present discrimination. There is no indication that Cooper ever attempted to det