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Kansas City defends limits on perks for companies owned by minorities, women

A pair of businesses claim the city’s addition of a personal net worth cap unfairly stripped them of their status as certified minority- and women-owned companies.

ST. LOUIS (CN) — The owners of two prominent Kansas City businesses are fighting the city in a federal appeals court after losing privileges they’ve enjoyed for 25 years because they are deemed too successful to qualify.

Mark One Electric Company Inc. and SK Design Group Inc. were included in Kansas City’s Minority and Women’s Business Enterprises Program until 2020, when a personal net worth cap of $1.32 million was put into effect. They claim the cap is unconstitutional.

The Missouri city implemented the MBE/WBE Program in 1996, designed to help women and minority-owned businesses land contracts and get on a level playing field with other competing companies. After conducting a study in 2016, the city found that while the program was still necessary, adaptations to the application process should include a personal net worth limit. That meant if business owners are worth at least $1.32 million, they would no longer qualify for the perks of the program, which include affirmative action preference in contracting bids.

The owners of Mark One and SK Design sued and argued that on top of being discriminated against for being minorities, they are now being punished for saving their money and being successful.

The city disagrees and says that narrowly tailoring the candidates based on their net worth is not only constitutional, but a crucial and logical way of maintaining the integrity of the program. For example, the city noted in a court brief, Oprah Winfrey wouldn't have a constitutional right to affirmative action benefits if legislators decided to exclude the wealthy.

Senior U.S. District Judge Howard F. Sachs dismissed the complaint last year, concluding that the city’s decision to draw a wealth line to split a minority group does not violate Mark One and SK Design's constitutional rights.

During a hearing Tuesday in St. Louis, the plaintiffs' attorney David Shultz asked a three-judge panel of the Eighth Circuit to overturn the lower court's ruling. He said his clients were being excluded from a program designed to protect the disadvantaged - which they are - and that the city has failed to prove otherwise.

An attorney for Kansas City countered that no one is entitled to the program and that the city’s main goal is to assist business owners who are discriminated against based on race and gender. But once a business is established and successful, they likely no longer require the program’s services as much as other minority-owned business who might be struggling.  

Arguments were heard by U.S. Circuit Judges James Loken, Morris Arnold and Jane Kelly. Loken and Arnold were appointed to the appeals court by George H. W. Bush while Kelly is an appointee of Barack Obama.

The judges did not set a timetable for their decision.

Mark One was founded in 1947 and passed down to Rosana Privitera Biondo and her three brothers in 1994. She has served as president while each brother has taken “vice president positions in their respective areas of expertise,” according to the company website. Biondo was selected for BizJournal's 2018 list of the 100 most powerful people in Kansas City business circles.

Past and current projects of Mark One include Kauffman Stadium, Arrowhead Stadium, Kansas Speedway, Kauffman Center for the Performing Arts, Union Station, City Hall, Ameristar and Argosy casinos, the Sprint campus, Kansas City International Airport and the Kansas City Star newspaper building.

The company has grown to over 200 employees and has an estimated annual revenue of between $52 and $78 million.

Sassan and Katereh Mahobian founded SK Design in 1989. According to their portfolio, past and current projects include St. Michael’s Veterans Center, a federal courthouse, University of Kansas Medical Center, University of Missouri's Memorial Stadium, among others.

Located in Leawood, Kansas, the company generates an estimated $1.6 million in annual revenues and employs about 20 workers.

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