UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
September 25, 1984
SCHIAVONE CONSTRUCTION CO., a New Jersey Corporation, and SIC, a Joint Venture, Plaintiffs,
NEW YORK CITY TRANSIT AUTHORITY; ELIZABETH DOLE, as Secretary of United States Department of Transportation; JIM M. MARQUEZ, as General Counsel to the United States Department of Transportation; MARIO MEROLA, as District Attorney for County of Bronx, New York; and STEPHEN R. BOOKIN, as Assistant District Attorney for County of Bronx, New York, Defendants
The opinion of the court was delivered by: SAND
LEONARD B. SAND, UNITED STATES DISTRICT JUDGE
Plaintiffs have submitted an application for a temporary restraining order and an order to show cause for a preliminary injunction enjoining defendants Mario Merola, Bronx County District Attorney, and Stephen Book in, Assistant District Attorney, from submitting to a New York State grand jury, for its consideration of possible indictment, matters relating to an allegedly false statement made by plaintiffs in documents filed with defendant New York City Transit Authority (hereinafter "the TA") pursuant to federal regulations governing plaintiffs' participation in a minority business enterprise (hereinafter "MBE") program.
Oral argument was held on September 10, 1984, at which time all defendants, other than the TA, appeared in opposition to plaintiffs' application. For the reasons stated herein, plaintiffs' application for a temporary restraining order is denied.
Plaintiff Schiavone Construction Co. (hereinafter "SCC"), a New Jersey corporation, is engaged primarily in the public works construction business in New Jersey and New York.
Plaintiff SIC is a joint venture formed in 1975 for the purpose of submitting a bid to the TA for construction of part of a New York City subway line. Plaintiffs were selected by the City to perform work on this project. The cost of the construction contract was incurred by the TA, but was funded primarily by federal grants made pursuant to the Urban Mass Transportation Act of 1964, as amended, 49 U.S.C. § 1601 et seq. (1982). Pursuant to this statute, the Department of Transportation
has issued regulations requiring that each grant recipient (here, the TA) establish a program to insure the participation of MBE's in federally funded projects. Under these requirements, the TA was required to file quarterly reports indicating the extent of MBE participation in its federally funded subway construction project. In turn, the TA required SIC to report to the TA, on a quarterly basis, the value of work which SIC subcontracted to MBE firms.
On or about January 11, 1979 and February 8, 1979, SIC entered into a subcontract with Jopel Construction & Trucking Co., a corporation which qualified as an MEE within the meaning of the applicable federal requirements. In completing its quarterly report to the TA, SIC included, as part of the value of subcontract work performed by Jopel, the fair rental value of equipment owned by SIC and made available to, and operated by, Jopel in the performance of its subcontract responsibilities. Plaintiffs maintain that the inclusion of this amount as part of the value of work subcontracted to Jopel was in full compliance with applicable federal statutory and regulatory standards and guidelines governing the operation of federally funded MBE programs.
Defendants Merola and Book in apparently concluded otherwise. On August 29, 1984, plaintiffs learned that these defendants had been and are presently engaged in presenting evidence regarding the above matter to a New York State grand jury in Bronx County.
Among the charges allegedly being considered are allegations that plaintiffs' inclusion of the aforementioned equipment rental charges as part of the value of work subcontracted to Jopel constituted knowing false statements, and that the filing of their quarterly reports with the TA was a violation of New York Penal Law § 175.35.
According to plaintiffs, the state grand jury proceeding is virtually complete and thus an indictment, if forthcoming, is imminent. It should be noted, however, that defendant Bookin represented at oral argument that the Bronx District Attorney's office has invited plaintiffs to appear before the grand jury and is still awaiting a response to this invitation.
Plaintiffs allege that the investigation of, and potential state indictment for, the charges described above constitute both a violation of their constitutional rights
as well as an improper usurpation of the "primary" jurisdiction of the DOT over these charges. Plaintiffs allege that it is the sole or primary responsibility of the DOT to investigate allegations that MEE program participants have made false statements or provided incorrect information to grant recipients, and that the state's responsibility is merely to furnish the DOT with evidence of such occurrences.
According to plaintiffs, a state prosecution of plaintiffs for making knowing false statements in their MBE program reports will necessarily entail the interpretation and application of federal regulatory standards and guidelines, tasks which should allegedly be performed in the first instance by the DOT. Plaintiffs allege that the return of an indictment against them will probably result in their immediate suspension from future bidding on public contracts in New York and New Jersey, in accordance with state law, and thus will result in substantial economic harm. Plaintiffs claim that this harm constitutes an irreparable injury which, along with the alleged likelihood of plaintiffs' prospects of success on the merits of the instant action,
entitle them to a temporary restraining order or preliminary injunctive relief.
A preliminary injunction or other temporary injunctive relief may be granted only where the plaintiff establishes (1) irreparable harm (if the requested relief is denied), and (2) either (a) the likelihood of success on the merits, or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in plaintiff's favor. See, e.g., Mattel, Inc. v. Azrak-Hamway International, Inc., 724 F.2d 357, 359 (2d Cir. 1983); Jackson Dairy, Inc. v. S.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979).
In addition, although the Supreme Court's decision in Younger v. Harris
does not appear to preclude this court from granting the relief requested by plaintiffs, see fn.4 supra, we are nevertheless mindful of the inherent federalism and comity concerns -- the respect due from one sovereign to another -- which are raised when a federal court is asked to enjoin an ongoing state criminal investigation. See Doran v. Salem Inn, Inc., 422 U.S. 922, 931, 45 L. Ed. 2d 648, 95 S. Ct. 2561 (1975); Dombrowski v. Pfister, 380 U.S. 479, 483-85, 14 L. Ed. 2d 22, 85 S. Ct. 1116 (1965). We therefore must carefully scrutinize plaintiffs' allegations to determine whether the existence of irreparable injury has in fact been adequately demonstrated. We conclude that plaintiffs have failed to satisfy this first prong of the Second Circuit's two-part test for the granting of such relief.
The critical flaw in plaintiffs' application for temporary injunctive relief, concerns both the speculative nature of the potential harm alleged, as well as the existence of adequate alternatives for redress which are substantially less intrusive than a federal court order prohibiting the state's continued investigation of plaintiffs' alleged criminal conduct. Even assuming that the requisite genuine or real threat of prosecution exists, see Steffel v. Thompson, 415 U.S. 452, 475, 39 L. Ed. 2d 505, 94 S. Ct. 1209 (1974), this fact does not inevitably lead to the conclusion that federal judicial intervention is warranted. Plaintiffs do not allege that they will be precluded from engaging in construction work pursuant to already-existing contracts, even if they are in fact indicted.
They allege only that an indictment will probably result in their suspension from future bidding for public contracts.
See Complaint paras. 42, 43. In other words, plaintiffs claim that if they are indicted, and if they seek to bid on future public contracts, and if the relevant state agencies then determine that they are no longer eligible to bid for public contracts, plaintiffs will then suffer the injury which they characterize as on irreparable injury resulting from the anticipated indictment. Thus, it is readily apparent that plaintiffs' alleged need to "discharge literally hundreds of SCC employees" upon indictment, see Complaint para. 43, certainly overstates the nature and extent of potential harm.
In addition, plaintiffs do not allege any particular harm, other than that which is normally incident to an indictment, which will arise as a direct and immediate consequence of the institution of criminal proceedings against them. Rather, the harm to plaintiffs would be more in the nature of a collateral or indirect injury which will arise only if (1) an indictment does in fact issue, and (2) the appropriate state authorities, in reliance upon the indictment, suspend plaintiffs from future bidding on public contracts. Cf. Doran v. Salem Inn, Inc., 422 U.S. 922, 45 L. Ed. 2d 648, 95 S. Ct. 2561 (1975) (enforcement of criminal statute prohibiting topless dancing in bars would itself inflict severe economic hardship on plaintiffs).
Moreover, the harm that plaintiffs might suffer as a result of an indictment against them can be remedied in a manner far more direct and less intrusive than federal court intervention in the state's criminal investigation. Specifically, plaintiffs have failed to demonstrate why they could not simply seek an injunction in state court against the state officials or agencies which are responsible for enforcing the state statutes or regulations purportedly authorizing plaintiffs' suspension from future bidding.
This alternative would both allow the state's criminal investigation to proceed in the normal course, as well as protect plaintiffs from the economic hardship which would allegedly result if an indictment in fact issues. In addition, plaintiffs may move immediately for a dismissal of any indictment that is returned on the grounds asserted herein, namely, the existence of pre-emptive federal jurisdiction over the matters under investigation.
And even if plaintiffs are eventually suspended from bidding on public contracts before such motion is made or while it is pending, the temporary suspension which plaintiffs would endure pending the resolution of such a motion falls far short of the irreparable harm which plaintiffs must show in order to obtain the extraordinary relief requested. Finally, plaintiffs have failed to demonstrate why they could not adequately protect against the danger of defendants' alleged misinterpretation of federal regulations and guidelines concerning MBE work valuation methods by obtaining transcripts of the state grand jury proceedings, if an indictment is returned, so that plaintiffs can determine for themselves whether this perceived danger did in fact materialize. Any misinterpretation which occurs could then be used in support of either (1) a motion to dismiss any state indictment which is returned as a result of defendants' allegedly erroneous interpretation, or (2) plaintiffs' assertion that it is the DOT which should determine the applicability of its regulations and guidelines in order to determine whether plaintiffs' statements in their quarterly reports were in fact false or incorrect.
In sum, plaintiffs have failed to demonstrate immediate and irreparable harm sufficient to justify the intrusive federal equitable relief sought herein. Several alternatives exist by which plaintiffs can both project their rights as well as obviate the need for federal judicial intervention in the state's ongoing criminal investigation. Therefore, regardless of whether plaintiffs are likely to succeed on the merits of this dispute,
they are not entitled to an order prohibiting the state defendants' continued investigation of plaintiffs' filing of an allegedly false statement with the TA. Plaintiffs' application for a temporary restraining order is therefore denied.
Dated: New York, New York, September 25, 1984