require a full adversarial hearing and fact finding. See Feinberg, 420 F. Supp. at 120 (holding that while notice and oral argument were necessary due process components, a suspension hearing could be limited to the presentation of written evidence). Thus, contractors facing suspension under the FAR receive all the process they are due. As a result, plaintiffs' challenge to the regulations is unlikely to succeed on this ground.
Although not decisive here, it is significant that the notice sent to contractors facing suspension is confusing at best. It states that a contractor may submit information and evidence in opposition to the suspension, but that facts set forth in the indictment are not subject to dispute. See Notice of Suspension dated July 24, 1996, Ex. A, Puccio Aff. The recipient of this notice could, quite understandably, think that the indictment was conclusive on the matter, and therefore not avail himself of the opportunity to present evidence that might rebut the indictment. The concept of notice is an empty one if the notice fails to provide meaningful notice. Absent evidence to the contrary, it does not appear that clarification of the contractor's opportunity to be heard would inflict a hardship on GSA. While the burden is on the contractor to present any evidence in opposition, the government should inform -- clearly -- the contractor that he may do so.
(c) Impartial Decisionmaker
Plaintiffs also argue that the regulations are invalid because they do not provide for an impartial decisionmaker. The basis for this claim is the fact that the same suspending official both makes the determination to suspend and considers the contractor's subsequent submissions contesting the suspension. See Suda Decl. P 3. In Goldberg v. Kelly, the Supreme Court, sketching the process to be afforded a recipient of welfare benefits, noted that "an impartial decision maker is essential." 397 U.S. 254, 271, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970) (citations omitted). The Court went on to note that while "prior involvement in some aspects of a case will not necessarily bar a welfare official from acting as a decision maker. [The caseworker] should not, however, have participated in making the determination under review." Id. The Rutiglianos assert that this requirement is not met here, since the suspending official participates in both the initial and subsequent decision processes. Plaintiffs point out that the suspending official is solely responsible for suspension decisions. This role, they argue, is contrary to the due process conception of an impartial decisionmaker. The federal defendants respond that Suda was not involved in the investigation that resulted in the Rutiglianos' indictment, and in any case, an agency official can perform a combination of functions.
These arguments conflate two distinct, but closely related concepts: combination of functions and intra-agency review. The Supreme Court has made it clear that the question of whether independent review is proper should not be confused with whether an agency can perform more than one function. See Withrow v. Larkin, 421 U.S. 35, 58 n.25, 43 L. Ed. 2d 712, 95 S. Ct. 1456 (1975). Therefore, the Rutiglianos' argument will be considered under each doctrine.
Independent review of a decision is proper where multiple levels of review exist within the agency. A clear example of the Supreme Court's application of this concept is found in Morrissey v. Brewer, 408 U.S. 471, 33 L. Ed. 2d 484, 92 S. Ct. 2593 (1972), where the Court held that due process concerns were applicable to parole revocation hearings. In discussing the scope of the process due, the Court held that a parolee facing a return to prison was to be afforded a hearing to determine that there were reasonable grounds for the revocation of parole and that this determination should be made by "someone not directly involved in the case." Morrissey, 408 U.S. at 485. Significantly, the Court characterized this hearing as the second stage of the proceedings; the first was the actual arrest and detention of the parolee. See id. The hearing conducted by one other than the parole officer (who could make the initial arrest) was not an initial determination, but rather, a review of the initial detention.
Here, however, there is no additional review within GSA; as the Rutiglianos note, the suspending official's decision is final. Therefore, the requirement that an independent official review the decision is simply not applicable in this context, because the regulations do not call for any review. The opportunity to present evidence in opposition is not a review of the decision. Moreover, as the regulations demonstrate, the subsequent proceedings -- if any occur -- cannot be fairly characterized as a review of an initial decision to suspend. The only reason to hold additional proceedings is in a case where the suspending official determines that there are disputed material facts. If material facts are disputed, the suspending official may assign the case to an ALJ for a hearing to determine these facts. This ALJ is limited to fact finding; the decision to suspend always remains with the suspending official. See FAR 9.407-3(d)(2); Suda Decl. PP 25-26. Thus, the ALJ's role is expressly limited to fact finding and cannot be considered in any sense an independent decisionmaker. Because there is no structure for review of a suspension decision within GSA, there is no need for a neutral decisionmaker to review the decision. Finally, the fact that no such review position exists within GSA is not relevant, because district court review of suspension decisions is available under the APA.
Nor do the cases the Rutiglianos cite support their argument. Plaintiffs have cited ATL, Inc. v. United States, 736 F.2d 677 (Fed. Cir. 1984), and Transco Sec., Inc. v. Freeman, 639 F.2d 318 (6th Cir. 1981). In ATL, the court found that ATL's suspension had been reviewed by a panel of high ranking Navy officials, but did not reach the validity of the regulation, which did not state whether the person recommending suspension could be the same as the suspending official. See ATL at 687. In Transco, the Court of Appeals for the Sixth Circuit did not hold that an independent decisionmaker had to review a suspension decision; rather, it held only that in making a decision to suspend, the evidence must be considered by a "high administrative official within the GSA." See Transco at 324. Thus, neither of these cases stands for the proposition that a decision to suspend a contractor must be reviewed within the suspending agency.
Alternatively, plaintiffs could be arguing that the regulations permit an unconstitutional combination of functions; plaintiffs assert that in making a suspension decision the suspending official acts as both prosecutor and judge. See Pls.' Br. at 23. As the federal defendants point out, however, the Supreme Court has indicated that a combination of functions within an agency does not constitute a due process violation. In Withrow v. Larkin, 421 U.S. 35, 43 L. Ed. 2d 712, 95 S. Ct. 1456 (1975), the Court held that a statute that gave a state medical board the power to warn, reprimand, suspend and recommend prosecution of physicians did not violate due process. In upholding the statute, the Court reversed a district court that had held that the board's combination of functions prevented it from operating as an impartial decisionmaker. See id. at 46.
The Court stated that "the contention that the combination of investigative and adjudicative functions necessarily creates an unconstitutional risk of bias in administrative adjudication . . . . must overcome a presumption of honesty and integrity . . . [sufficient to show] a risk of actual bias or prejudgment . . . ." Id. at 47. The Court analogized the agency's functions in making preliminary and subsequent determinations to the functions a judge performs:
Judges repeatedly issue arrest warrants on the basis that there is probable cause to believe that a crime has been committed and that the person named in the warrant has committed it. Judges also preside at preliminary hearings where they must decide whether the evidence is sufficient to hold a defendant for trial. Neither of these pre-trial involvements has been thought to raise any constitutional barrier against the judge's presiding over the criminal trial and, if the trial is without a jury, against making the necessary determination of guilt or innocence. Nor has it been thought that a judge is disqualified from presiding over injunction proceedings because he has initially assessed the facts in issuing or denying a temporary restraining order or preliminary injunction. It is also very typical for the members of administrative agencies to receive the results of investigations, to approve the filing of charges or formal complaints instituting enforcement proceedings, and then to participate in the ensuing hearings. This mode of procedure does not violate the Administrative Procedure Act, and it does not violate due process of law.
Id. at 56 (footnote omitted).
Although the Court did not consider the issue of whether the same administrative official could act in a combination of functions, a recent decision by the Court of Appeals for the Third Circuit held that no due process violation occurred where a single agency official had the power to perform a combination of functions. See Matter of Seidman, 37 F.3d 911, 925 (3d Cir. 1994) (holding that agency head could authorize an investigation, determine whether charges should be brought, and decide the charges, both as to the law and the facts). The Second Circuit subsequently adopted the Seidman rationale in Cousin v. Office of Thrift Supervision, 73 F.3d 1242, 1250 (2d Cir. 1996), cert. denied, U.S. , 136 L. Ed. 2d 13, 117 S. Ct. 48 (1996). To overcome the presumption of regularity established in Withrow, plaintiffs must demonstrate some form of impermissible bias or prejudice on the part of the suspending official. See Seidman, 37 F.3d at 925 ("Withrow implies . . . [that] actual bias or a likelihood of bias must appear if an otherwise valid administrative sanction is to be overturned because of a denial of due process."). The fact that the suspending official may have formed an opinion as a result of the initial investigation is not a cause for bias. See Withrow, 421 U.S. at 48 (citing FTC v. Cement Institute, 333 U.S. 683, 92 L. Ed. 1010, 68 S. Ct. 793 (1948)). Here, plaintiffs have offered no facts to support an inference of bias on the part of the suspending official. As a result, plaintiffs have not demonstrated a likelihood of success on this ground.
(d) Claims Against the Transit Authority
Plaintiffs have also sought an injunction against the NYCTA and the MTA seeking to enjoin them from awarding any contracts to other carters on the basis of the GSA suspension. Plaintiffs argue that the NYCTA relied on the federal suspension in finding them not responsible, and that this determination must be set aside inasmuch as it rests upon the product of a regulatory scheme that violates due process. The NYCTA argues that it has the discretion to award the contract to the Rutiglianos even if they are suspended by GSA; that it would have made the same determination in the absence of the GSA suspension, and that to the extent that plaintiffs allege that the NYCTA violated their due process rights, the Rutiglianos have received all the process due.
Implicit in the plaintiffs' argument that the NYCTA relied on the GSA suspension in finding them not responsible is the premise that the NYCTA could not make a different determination than GSA because the NYCTA is a recipient of federal money. Currently, the NYCTA receives approximately $ 30 million dollars from the Federal Transit Administration (this amount comprises less than one percent of the NYCTA's annual operating budget). The NYCTA agrees, as a condition for receiving this money, to abide by the relevant federal regulations, including those concerning suspended contractors. The NYCTA may retain a contractor who has been suspended by the GSA, provided it obtains both a waiver from GSA and approval from the United States Department of Transportation ("DOT"). The NYCTA may also retain the contractor without obtaining a waiver from either agency, but at the risk of forfeiting some or all of its federal funding. See Declaration of NYCTA Special Counsel Richard Schoolman attached to NYCTA's Mot. Dis. ("Schoolman Decl.") P 2. Although no information on either the number of or the difficulty of obtaining a waiver from GSA and DOT were provided, it seems reasonable to conclude that the NYCTA normally has no incentive to ignore a federal suspension.
This conclusion is supported by the correspondence from the NYCTA to the Rutiglianos. In a letter dated December 10, 1996, NYCTA Procurement Specialist Kathie Dickie informed the Rutiglianos that the NYCTA's Procurement Department would recommend that the NYCTA find them not responsible in regard to the bid they had sought. In pertinent part, the letter states that the recommendation is based on "(1) an indefinite GSA suspension . . . which would mandate rejection of your bid under applicable federal rules and (2) recent indictments against your firm as issued by The Grand Jury of New York." Ltr. from Dickie to Joseph Rutigliano dated December 10, 1996, Ex. B, Puccio Reply Aff. Subsequently, the Rutiglianos sought review of the responsibility determination by way of a bid protest with the NYCTA. The NYCTA affirmed its determination to find plaintiffs not responsible:
NYC Transit's determination to find RPS not responsible was based on the solicitation's Federal Contract Provisions which states that a certification process has been established to ensure that entities which have been debarred, suspended, or voluntarily excluded do not participate in a project with FTA assistance . . . . Since NYC Transit receives funding assistance for its operating budget, . . . these Federal Contract provisions apply. As you recognized in our several conversations, NYC Transit is limited in its discretion on this matter. Therefore, NYC Transit's decision to recommend that RPS be deemed non-responsible appears to have been reasonable and in accordance with our funding provisions, and accordingly, your protest is denied.
Ltr. from Assistant Chief Procurement Officer William DeSantis to Craig Eaton, Esq. counsel for plaintiffs dated February 12, 1997, Ex. C, Puccio Reply Aff. The NYCTA argues, however, that it would have made the same determination of non responsibility in any event, and has pointed to several facts in support of its argument, most significantly, the fact of the indictment.
Although it is not entirely clear at this time what the bases of the NYCTA's decision were, it is not necessary to make a determination regarding the validity of the arguments the NYCTA offers in its papers, for under New York law, the NYCTA has the discretion to make its finding on the basis of the indictment alone. See Schiavone Construction Co. v. LaRocca, 117 A.D.2d 440, 444, 503 N.Y.S.2d 196 (3rd Dep't 1986). The December 10th letter clearly indicates that while the GSA suspension is one factor, the indictment is another. The NYCTA is a creature of statute, and is directed, by statute, to award contracts to the lowest responsible bidder. See N.Y. Pub. Auth. Law § 1209(1) (McKinney 1994). New York's courts have noted that an indictment can provide "a rational basis for a determination that [a contractor] is not a responsible bidder." LaCorte Electrical Const. & Maint., Inc. v. County of Rensselaer, 80 N.Y.2d 232, 238, 590 N.Y.S.2d 26, 604 N.E.2d 88 (N.Y. 1992) (citing cases). Thus, the NYCTA's determination could rest solely on the indictment.
The fact that the NYCTA may have also relied on the GSA suspension does not give rise to a cognizable federal claim. Assuming, without deciding, that the NYCTA's determination that plaintiffs were not responsible implicates a liberty interest, see LaCorte, 80 N.Y.2d at 236, and that the NYCTA's determination was, in some unarticulated fashion, procedurally defective, plaintiffs do not have a cognizable due process injury in this court. The injury to the Rutiglianos is not due to a flaw in the NYCTA's procedures, but rather is the result of an individual, discretionary determination by the agency. Indeed, plaintiffs have failed to articulate any procedural deficiency in the NYCTA's decision making process; their only claim is that the NYCTA may have used the GSA suspension as a basis for its determination that the Rutiglianos were not responsible. As noted above, the NYCTA has the discretion to make a finding that a bidder is not responsible without regard to the federal suspension, and this determination is subject to review only under an arbitrary and capricious standard. See Mid-State Indus., Ltd. v. City of Cohoes, 221 A.D.2d 705, 706, 633 N.Y.S.2d 238 (3d Dep't 1995). Here, the fact of the indictment furnishes a sufficient basis for the finding of not responsible. See LaCorte, 80 N.Y.2d at 237-38. To the extent that the plaintiffs may have been injured by the NYCTA, any such injury must be the product of a single arbitrary and capricious act -- and therefore, the appropriate remedy is an Article 78 proceeding in state court.
As the Second Circuit has recently noted, procedural due process violations that flow from unauthorized, random acts, rather than established procedures, do not give rise to cognizable § 1983 claims in federal court where an adequate post-deprivation remedy such as Article 78 exists. See Hellenic American Neighborhood Action Comm. v. City of New York, 101 F.3d 877, 880-82 (2d Cir. 1996) (reversing district court's preliminary injunction to enjoin city from debarring community group), cert. dismissed, 118 S. Ct. 15, 138 L. Ed. 2d 1048 (U.S. 1997).
Here, plaintiffs' claim is likewise premised on a procedural due process violation, and so the principle articulated in Hellenic American applies with equal force: "there is no constitutional violation . . . when there is an adequate state postdeprivation procedure to remedy a random, arbitrary deprivation of property or liberty." 101 F.3d at 882 (citations omitted). Thus, to the extent that the Rutiglianos have suffered or will suffer a cognizable injury at the hands of the NYCTA, their remedy lies with the courts of New York. Therefore, plaintiffs' claims against the NYCTA must fail, and so plaintiffs' motion for a preliminary injunction against the NYCTA and the MTA is denied, and the NYCTA's (and MTA's) cross-motion to dismiss the case as against them is granted.
(e) Unfettered Discretion
Plaintiffs also assert that the regulations are unconstitutional because they give the suspending official "unfettered discretion to suspend or not to suspend an indicted contractor." Pls.' Br. at 24. Plaintiffs argue that while the regulations give the suspending official the discretion to decide whether or not to suspend a contractor, they do not provide any guidance in the application of that discretion. In support, they cite to the Feinberg decision, which found that § 1818(g) was constitutionally infirm because it did not provide adequate guidance in the application of discretion. See Feinberg v. FDIC, 420 F. Supp. 109, 117-18 (D.D.C. 1976). The federal defendants assert that the regulations do provide the suspending official with sufficient guidance, and that the Supreme Court has upheld similar standards in the Mallen case.
Plaintiffs' argument is flawed because the regulations at issue here provide significantly more guidance than those at issue in Feinberg. In Feinberg, the court found that the only check on a suspending official's discretion was the "general purpose of the statute: to insure the public's confidence in the stability of the financial institution." Feinberg, 420 F. Supp. at 117. No direction was given to the agency as to how to make that determination. This lack of guidance, coupled with the seriousness and potential duration of the deprivation, led the court to hold the statute unconstitutional. See id. at 118.
In contrast, the regulations challenged here do provide direction for determining when suspension is appropriate, and how that decision should be made. Suspension is in furtherance of the policy that agencies shall contract only with responsible contractors. See FAR 9.402. Suspension is to be imposed only when the suspending official determines that it would be in the government's interest to impose it. See id. Suspension is in the government's interest when it is made for one of the causes enumerated in 9.407-2.
Thus, contractors are to be suspended only when the suspending official determines that cause for suspension exists.
As to the determination of whether to suspend an individual contractor, the regulations provide that when considering whether suspension for one of the enumerated causes is appropriate, the suspending official is to consider the evidence against the contractor and its reliability.
Furthermore, the suspending official is directed to consider the gravity of the alleged offense. See FAR 407-1(b)(2). These directions provide significantly more guidance than the statute at issue in Feinberg. As the Feinberg court noted, the statute (§ 1818(g)) provided no guidance for the application of the agency's discretion. This is simply not the case with the FAR, which provide a suspending official with a specific standard to consider suspension (for one of the enumerated causes), and, additionally, direct the official to determine the appropriateness of a suspension in light of the government's interests, the weight to be accorded the evidence, and any mitigating or rebuttal evidence proffered by the contractor.
It is also significant that, unlike the statute at issue in Feinberg, the FAR permit a contractor to present any evidence to show that the suspension would not be in the government's interest; a critical difference, since the Feinberg court identified one of the sources of uncontrolled discretion as the fact that a person facing suspension had no opportunity to present exculpatory or mitigating evidence. See Feinberg, 420 F. Supp. at 117 n.15. It is true that the FAR also state that the suspending official need not consider any exculpatory evidence. See FAR 407-1(b)(2). If this provision were strictly applied, it might well raise serious constitutional concerns. See Feinberg, 420 F. Supp. at 117-18. Here, however, the federal defendants have indicated that they would, in fact, consider any form of credible exculpatory evidence. See Suda Decl. P 15; Tr. at 4.
Plaintiffs correctly observe that in its Mallen opinion the Supreme Court did not expressly consider the constitutionality of the regulation revised after the Feinberg decision. In its recital of the factual background, the Court discussed the Feinberg court's concern with the standardless discretion under the old version of the statute, and then went on to note that Congress had since provided the agency with more guidance. The Court did not actually consider whether the statute provided sufficient control of agency discretion; however, it appears from the discussion that the Court did, in fact, think that sufficient control over the agency's discretion was established. See FDIC v. Mallen, 486 U.S. 230, 235-36, 108 S. Ct. 1780, 100 L. Ed. 2d 265 (1988). A comparison of the pre- and post-Feinberg statutory language of § 1818(g) is relevant here, in light of the discussion in Mallen, because the language quoted by the Supreme Court in its Mallen opinion is, by implication, illustrative of a standard that provides sufficient guidance to the agency. Prior to Feinberg, § 1818(g)(1) provided in part that
Whenever any director or officer of an insured bank . . . is charged in any information, indictment, or complaint . . . with the commission of or participation in a felony involving dishonesty or breach of trust, the appropriate Federal banking agency may, by written notice . . . suspend him from office . . . .
Mallen, 486 U.S. at 233 n.3. The revised version provides:
Whenever any director or officer of an insured bank . . . is charged in any information, indictment, or complaint . . . with the commission of or participation in a crime involving dishonesty or breach of trust which is punishable by imprisonment for a term exceeding one year under State or Federal law, the appropriate Federal banking agency may, if continued service or participation by the individual may pose a threat to the interests of the bank's depositors or may threaten to impair public confidence in the bank, by written notice . . . suspend him from office . . . .