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JOHN GIL CONST., INC. v. RIVERSO
September 23, 1999
JOHN GIL CONSTRUCTION, INC., PLAINTIFF,
v.
MILO RIVERSO, AN INDIVIDUAL, THE NEW YORK CITY SCHOOL CONSTRUCTION AUTHORITY, NEW YORK CITY OFF-TRACK BETTING CORPORATION, THE DEPARTMENT OF INVESTIGATION FOR THE CITY OF NEW YORK AND JOHN DOES 1-10, DEFENDANTS.
The opinion of the court was delivered by: Scheindlin, District Judge.
Plaintiff John Gil Construction, Inc. ("JGC") seeks a temporary
restraining order and a preliminary injunction compelling The New
York City School Construction Authority (the "SCA", the
"authority" or "defendant") to revoke (1) its suspension of
plaintiff's prequalified bidder status; (2) its suspension of
plaintiff's right to work on SCA projects; and (3) its award to
others of two contracts upon which plaintiff was the lowest
bidder. For the reasons set forth below, plaintiff's request for
preliminary injunctive relief is denied.
Pursuant to PAL § 1734, the SCA has authority to prescreen and
prequalify contractors who desire to bid for school construction
contracts. Section 1734 provides:
[T]he authority shall establish guidelines governing
the qualifications of bidders entering into contracts
for the construction . . . [of] educational
facilities for the city board. The bidding may be
restricted to those who have qualified prior to the
receipt of bids according to standards fixed by the
authority. . . .
. . . In determining whether a prospective bidder
qualifies for inclusion on a list of pre-qualified
bidders, the authority shall consider (1) the
experience and past performance of the prospective
bidder; (2) the prospective bidder's ability to
undertake work; and (3) the financial capability,
responsibility and reliability of prospective
bidders. The authority may also consider such other
factors as it deems appropriate.
PAL § 1734(3)(a)-(b). The SCA is mandated to review and update
its list of prequalified bidders "not less than annually." PAL §
1734(3)(c).
In accordance with the above-quoted statutory grant, the SCA
promulgated guidelines governing the prequalification process for
school contractors. See Guidelines for Qualification and
Evaluation of Contractors, Subcontractors, Consultants, Vendors
and Suppliers for Contracts on All Phases of Construction,
Reconstruction, Improvement or Rehabilitation of New York City
Schools ("Guidelines"), N.Y. Comp.Codes R. & Regs. tit. 21, §
9600.1 et seq. [hereinafter "21 NYCCRR § ___"]. Under the
Guidelines, applicants for prequalification must meet a series of
minimum standards with respect to financial capacity, experience
and work history. 21 NYCCRR § 9600.3. The Guidelines also require
companies to demonstrate "integrity and ethics" in their business
practices: "Companies seeking to do business with the authority
must have a reputation for and a record of law-abiding conduct
and ethical business practices. Failure to meet this standard
will result in the applicant's disqualification for a period of
up to five years." 21 NYCCRR § 9600.3(d).*fn2 Accordingly, the
Guidelines provide that "[t]he applicant, its affiliates, or any
of its current or past owners or principals may be precluded from
working for the authority until there is a favorable resolution
of . . . a pending criminal investigation." 21 NYCCRR §
9600.3(d)(2).
The Guidelines set forth procedures the SCA must follow in
determining whether to deny or revoke a contractor's prequalified
status:
(a) In the event the authority concludes that there
may be sufficient evidence to warrant
denial/revocation of a firm's prequalification, the
authority shall notify the contractor of its proposed
denial or revocation of prequalification status, the
reasons for this denial/revocation, and the period of
disqualification.
(b) a contractor so notified may request a meeting,
at which the contractor shall have the opportunity to
present evidence that might result in reconsideration
of the authority's preliminary conclusion to
deny or revoke the contractor's prequalification.
(c) The authority shall provide to the contractor
final written notification of its determination.
21 NYCCRR § 9600.5. The SCA's determination to revoke a
contractor's prequalification status is a final decision, and the
Guidelines do not include any process for appeal of that decision
within the SCA.
Plaintiff JGC is a New York construction company that derives
100% of its revenue from government building contracts. See
Memorandum of Law in Support of Plaintiff's Request for a
Temporary Restraining Order, and Preliminary Injunction
("Pl.Mem.") at 3; 7/30/99 Affidavit of J. Garth Foley
(plaintiff's attorney) in Support of Plaintiff's Motion for
Injunctive Relief ¶ 5. In 1995, JGC applied and was selected to
be an SCA prequalified bidder. Complaint ¶ 59.*fn3 In June 1996,
JGC won a contract from another city agency, the New York City
Off-Track Betting Corporation ("OTB"). Id. ¶ 19. Two years
later, in September 1998, OTB and JGC became involved in a
billing dispute over payment for services rendered. Id. ¶¶
55-56. In October 1998, OTB notified JGC that JGC was being
investigated by the New York City Department of Investigation
("DOI").*fn4 Id. ¶ 57. Although JGC claims that it has never
received any information from OTB or DOI regarding the substance
of the allegations against it, see id. ¶¶ 1, 70, those
allegations apparently involve billing irregularities stemming
from JGC's 1996 contract with OTB.*fn5 See 3/30/99 letter from
Kenneth D. Litwack, plaintiff's attorney, to SCA, Ex. 12 to
7/30/99 Affidavit of John Gil ("Gil Aff.").*fn6
In a letter dated February 2, 1999, the SCA gave JGC notice
that because the company was under criminal investigation by OTB
and DOI, the SCA could, pursuant to its rules, suspend JGC from
working for the SCA until there was a favorable disposition of
the investigation. See Complaint ¶¶ 66-67; 2/2/99 letter from
SCA to John Gil, Ex. 10 to Gil Aff. The letter offered JGC an
opportunity to meet with SCA officials to dispute that it was
under investigation by OTB or "to bring possibly mitigating
circumstances" to the SCA's attention. 2/2/99 letter, Ex. 10 to
Gil Aff. JGC met with SCA authorities on March 5, 1999. Complaint
¶ 68. During the meeting, JGC asked the SCA to postpone its
decision regarding JGC's prequalified status, so that JGC could
meet with OTB officials. Id. ¶¶ 68-70. Plaintiff also requested
that SCA conduct a "hearing". Id. It appears that the SCA
agreed to postpone its decision regarding JGC for two weeks.
See 3/29/99 letter from SCA to Litwack, Ex. 11 to Gil Aff. By
March 29, more than three weeks after the March 5 meeting between
the SCA and JGC, the SCA had not received any additional
information or communications from JGC. Id. Accordingly, on
that date, SCA wrote to
JGC asking whether the company had gathered additional
information regarding the OTB investigation that it wished to
present. Id. SCA informed JGC that if it did not receive
additional materials by March 30 it would "proceed to make a
determination based upon the facts we have in hand." Id. In a
response letter to the SCA, JGC's attorney stated that although
JGC had met with OTB and DOI, the agencies "refused to present
[JGC] with the allegations against [it]." 3/30/99 letter from
Litwack to SCA, Ex. 12 to Gil Aff. However, JGC's attorney
offered to proceed before the SCA with a "Name Clearing hearing"
during which JGC would "present evidence that it earned every
penny it billed for at OTB and that there was no wrongdoing."
Id. A "Name Clearing hearing" was never held.
On June 1, the SCA sent JGC a letter suspending the company
from working for the SCA and removing the company from the list
of prequalified SCA bidders. See 6/1/99 letter from SCA to John
Gil, Ex. 14 to Gil Aff. On June 3, according to the Complaint,
the SCA informed JGC that JGC would not be awarded three
contracts on which JGC alleges it was the apparent lowest bidder.
See Complaint ¶¶ 76-77. On June 4, JGC submitted a letter to
the SCA asking the authority to reconsider JGC's suspension.
See 6/4/99 letter from John Gil to Milo Riverso, President and
CEO of SCA, Ex. 15 to Gil Aff. In a letter dated June 9, the SCA
stated that its decision revoking JGC's prequalified status was
final. See 6/9/99 letter from SCA to John Gil, Ex. 16 to Gil
Aff.
In July 1999, the SCA awarded two of the three contracts upon
which JGC claims it was the lowest bidder to other companies.
See 7/12/99 Notice to Proceed on Contract C000007955 and
7/20/99 Notice to Proceed on Contract C000007981, Ex. A to
8/13/99 Declaration of Soraya Berg, Attorney for Defendant SCA,
in Opposition to Plaintiff's Application for a Temporary
Restraining Order ("Berg Aff."). The two contracts are worth
approximately $1,166,000. See id. The third contract,
solicitation No. 2307-1, has been canceled. See Berg Aff. ¶
3.*fn7