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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.

    OPINION AND ORDER

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.

I. Background*fn1

A. SCA

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.

B. JGC

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

On August 2, JGC brought action against the SCA, OTB and DOI.*fn8 JGC's primary allegation is that by suspending JGC's status as a prequalified bidder, the SCA deprived JGC of property and liberty interests in violation of the Due Process Clauses of the United States Constitution and the New York State Constitution.*fn9 JGC also alleges that the SCA's actions constitute a violation of the Equal Protection Clause.*fn10 Together with its Complaint, JGC filed the instant motion for a temporary restraining order and a preliminary injunction seeking to compel ...


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