The opinion of the court was delivered by: TRAGER
Plaintiffs Rutigliano Paper Stock, Inc., George Rutigliano, and Joseph Rutigliano ("the Rutiglianos") sought a preliminary injunction enjoining various government agencies from awarding contracts to other contractors, on the ground that the procedures employed by the defendant United States General Services Administration ("GSA") pursuant to subpart 9.4 of the Federal Acquisition Regulations System ("FAR") (48 C.F.R. § 9.401-07) are unconstitutional facially and as applied. The defendant federal agencies (the United States Department of Transportation, the United States Coast Guard, and GSA, collectively, the "federal defendants") opposed the motion; the defendants Metropolitan Transportation Authority ("MTA") and New York City Transit Authority ("NYCTA") have also opposed the motion and have cross-moved to dismiss the complaint against them. On April 14, 1997, I denied the plaintiffs' motion with respect to the NYCTA. This opinion explains the basis for that denial and resolves the remainder of the pending motions.
(a) Federal Acquisition Regulations
The FAR are a set of regulations promulgated by the GSA to further the uniform regulation and procurement of government contracts. Agencies are to award contracts to responsible bidders only; suspension is a method to effectuate this policy. See FAR 9.402(a). Suspension of a contractor is a discretionary act that is to be "imposed only in the public interest for the Government's protection and not for purposes of punishment." FAR 9.402(b). A suspension may be imposed, upon adequate evidence, for a variety of causes, including the commission of a fraud or other offense that "indicates a lack of business integrity or business honesty." FAR 9.407-2(a)(7). An indictment constitutes adequate evidence.
Upon suspension, a contractor is given notice that he has the right, within thirty days after the receipt of the notice, to "submit, in person, in writing, or through a representative, information and argument in opposition to the suspension, including any additional specific information that raises a genuine dispute over the material facts." FAR 9.407-3(c)(5). Procedures for contesting suspension shall be as "informal as practicable, consistent with principles of fundamental fairness." FAR 9.407-3(b). The sole authority for suspension determinations rests with the Special Assistant for Contractor Integrity (the "suspending official"), here, Donald J. Suda. See Decl. of Donald J. Suda dated March 10, 1997 ("Suda Decl.") PP 1, 3. The suspending official also reviews any material submitted to contest the suspension determination. See id. In making his decision, the suspending official can consider any evidence that the contractor wishes to offer -- including evidence that contradicts the facts underlying the indictment -- as well as oral or written argument contesting the suspension. See Suda Decl. P 12; Tr. of Oral Argument of April 14, 1997 ("Tr.") at 3.
If the suspension is not based on an indictment and the contractor's submission raises a question as to the material facts, the contractor is afforded a full hearing before an Administrative Law Judge ("ALJ"), with an opportunity to cross-examine witnesses. See Suda Decl. P 19. If, however, the suspension is based on an indictment, "the suspending official's decision shall be based on all the information in the administrative record, including any submission made by the contractor." FAR 9.407-3(d)(1). Thus, while a contractor suspended on the basis of an indictment may submit additional evidence of any type, there are no additional fact finding proceedings. See Suda Decl P 16. GSA will, however, consider other factors, including mitigating circumstances, the gravity of the charged offense, the probability of guilt, and "well-founded claims of innocence." See id.
If imposed, a suspension "shall be for a temporary period pending the completion of investigation and any ensuing legal proceedings . . . ." FAR 9.407-4(a). A suspension shall last for twelve months, "unless an Assistant Attorney General requests its extension, in which case it may be extended for an additional 6 months. In no event may a suspension extend beyond 18 months, unless legal proceedings have been initiated within that period." FAR 9.407-4(b). A legal proceeding is "any criminal proceeding." FAR 9.403. The precise meaning of this phrase is unclear. In a letter and at oral argument, the federal defendants stated that legal proceedings are held to have commenced upon the start of trial, jury selection, or "significant pretrial action," but did not particularize this last statement further. Ltr. from Vincent Lipari, Esq. Ass't United States Att'y to court dated April 8, 1997, at 1; Tr. at 9. However, an indictment does not constitute a legal proceeding. See Tr. at 13.
The suspending official's decision, made with or without additional fact finding proceedings, is final; there is no appeal to a higher authority within the GSA. See Suda Decl. P 3. GSA decisions are, however, reviewable under the Administrative Procedure Act ("APA").
See Commercial Drapery Contractors, Inc. v. United States, 967 F. Supp. 1, 1997 U.S. Dist. LEXIS 8284, 1997 WL 68203, at *2 (D.D.C. 1997).
George Rutigliano is President and Joseph Rutigliano is Vice President of Rutigliano Paper Stock, Inc., a carting company that provides waste removal services to various governmental entities in the New York City area. On June 16, 1996, the Rutiglianos and Rutigliano Paper Stock, Inc. were indicted in New York State Supreme Court. This indictment charged the Rutiglianos with two counts of combination in restraint of trade, one count of second degree grand larceny, and seven counts of falsifying business records. See Indictment No. 5009-96, ("first indictment") attached to Pls.' Mot. for Order to Show Cause for Prelim. Inj. dated February 6, 1997 ("PI"). Subsequently, the Rutiglianos were again indicted on November 7, 1996; this indictment realleges and supersedes some of the charges in the June 1996 indictment. See Affirm. of Thomas P. Puccio, Esq. counsel for plaintiffs, dated December 7, 1996, attached to PI. As of this date, trial has not commenced on either the first or second indictment; the Rutiglianos have a motion pending in state court seeking dismissal or reassignment of their case on the ground that their right to a speedy trial has been violated.
Subsequent to the first indictment GSA informed the Rutiglianos that they would be suspended, effective July 24, 1996. The letter notice stated that the suspension was made pursuant to the FAR, that it was temporary, and that the Rutiglianos or their representative could submit "information and argument in opposition to the suspension" within thirty days. Puccio Reply Aff. dated March 28, 1997 ("Reply Aff."), Ex. A, Notice of Suspension dated July 24, 1996. The notice also stated that the Rutiglianos's names would be published in the "List of Parties Excluded from Federal Procurement and Non-Procurement Programs," and that no executive branch agency would enter into, renew, or extend a transaction that the Rutiglianos participated in, unless the head of the transacting agency granted a written exemption. See id. Attached to the notice was a "Memorandum of Decision," which recited the fact that the Rutiglianos had been indicted in New York, and that this indictment constituted adequate evidence for their suspension, pursuant to FAR 9.407-2(a)(1) and (7). The decision also stated that the suspension "is necessary to protect the Government's interests pending the completion of [the criminal proceeding]." Id. The suspension was effective immediately, and would last "pending the completion of legal proceedings . . . in New York." Id.
Subsequently, several other agencies terminated their contracts with the Rutiglianos on the basis of either the suspension or the indictment. See Affirm. of Ass't Dist. Att'y Gerald P. Conroy PP 10-18, attached to PI.
Thus, on December 10, 1996, the NYCTA notified the Rutiglianos that it would deem them "not responsible" for a solicitation that the Rutiglianos had submitted; the decision was based on the GSA suspension and the indictments. See Ltr. from NYCTA Procurement Specialist Katie Dickie to Joseph Rutigliano dated December 10, 1996, Ex. B, Reply Aff.
With respect to GSA's suspension, the Rutiglianos requested a meeting which was to have been held in October, 1996. For various reasons, the meeting was not held until January 28, 1997. Present at the hearing were Special Assistant Suda, his staff, and the Rutiglianos' counsel Craig Eaton. See Suda Decl. PP 1-7, 9-11. In his declaration, Suda states:
[GSA] told Mr. Eaton that in determining whether to continue the suspension, or to permit a waiver, we would consider any documents, review any written presentation -- in whatsoever form, whether in letter, brief, declaration or affidavit form -- and would listen to statements and factual recitations made by as many . . . persons as plaintiffs wished to present.
At the meeting, Mr. Eaton told us that his clients were innocent and had been indicted to bring pressure on other defendants to plead guilty. He provided no details to support plaintiffs' claims of innocence and, instead, told us he could not discuss the matter because of the indictment . . . .
Mr. Eaton did not address the allegations of the indictment, other than to make a conclusory protest of his clients' innocence, nor did he allude to any mitigating circumstances or remedial measures. We told Mr. Eaton that he and his clients had not provided any specific information which would provide a basis to reinstate plaintiffs.
Suda Decl. PP 12, 14, 15. Since that time, and upon this court's inquiry, plaintiffs have indicated that they would submit to GSA "affidavits[,] . . . third-party testimony and documentary evidence demonstrating, among other things, . . . [that] the allegations in the indictment against plaintiffs are false . . . ." Ltr. from Puccio dated April 11, 1997.
On January 31, 1997, plaintiffs filed this action against the federal defendants, and simultaneously moved for a temporary restraining order ("TRO") preventing the United States Coast Guard from terminating two contracts with plaintiffs. A hearing was held the same day, at which time the request for a TRO was denied, and the motion for an injunction was adjourned. Another hearing was held on February 6, 1997; again plaintiffs' motion for a TRO was denied, and plaintiffs indicated that they would add the MTA and NYCTA as defendants. At a hearing held on the motion on February 26, 1997, the parties agreed to a briefing schedule, and the hearing was adjourned until April 14, 1997, at which time oral argument was heard.
Plaintiffs sought a preliminary injunction enjoining the federal defendants from suspending or canceling any contracts between the Rutiglianos and the United States; enjoining the federal defendants from awarding any contracts, work orders or other agreements to other contractors on the basis of a suspension imposed by the defendant General Services Administration ("GSA"); enjoining the MTA and the NYCTA from suspending, canceling, or otherwise awarding a contact based on NYCTA solicitation number 9616730 ("NYCTA contract"); and enjoining GSA from either recommending cancellation, suspension or termination, or canceling, suspending, or terminating any contract between the Rutiglianos and any government agency on the basis of the GSA's decision to suspend the Rutiglianos because of the indictment.
(a) Due Process Interests
The Rutiglianos seek a preliminary injunction enjoining several government agencies from acting or awarding contracts, on the ground that the FAR, on its face, violates the Rutiglianos's due process rights. Because the Rutiglianos seek to enjoin the operation of a governmental regulation, they must demonstrate both irreparable harm and a likelihood of success on the merits. See Able v. United States, 44 F.3d 128, 131 (2d Cir. 1995) (holding that a preliminary injunction seeking to enjoin "'government action taken in the public interest pursuant to a statutory or regulatory scheme'" must show a likelihood of success) (quoting Plaza Health Laboratories, Inc. v. Perales, 878 F.2d 577, 580 (2d Cir. 1989)). Here, it is not seriously disputed that the suspension may result in irreparable injury to plaintiffs; the almost total loss of their business and inability to bid on new contracts as a result of the suspension constitutes irreparable harm that cannot be remedied by monetary damages alone. See Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1205 (2d Cir. 1970). Thus, the critical issue is whether plaintiffs can establish a likelihood of success on any of their challenges to the FAR. Because they have failed to do so, their request for an injunction is denied.
The Rutiglianos advance several arguments in support of their position that the FAR impermissibly infringe on their procedural due process rights. First, plaintiffs argue that by barring a fact finding hearing into the facts underlying the indictment, the regulations prevent plaintiffs from having a meaningful hearing. Second, plaintiffs assert that the regulations are constitutionally infirm because they do not provide a standard for the exercise of the hearing officer's discretion. Third, the regulations do not place a limit on the temporal length of the suspension. Fourth, the regulations do not provide for an impartial decisionmaker because the official who makes the initial suspension also presides ...