The opinion of the court was delivered by: Hon. Harold Baer, Jr., United States District Judge*fn1
This case concerns the McNamara-O'Hara Service Contract Act, 41 U.S.C. § 351 (the "SCA" or the "Act"), which requires federal service contractors to pay their employees certain minimum wages and fringe benefits. Plaintiffs Ousama Karawia and International Services, Inc. (collectively, "ISI") seek relief from an administrative order that debarred them from federal contracting for three years for violations of the Act. Before the Court are cross-motions for summary judgment filed by ISI and defendant United States Department of Labor ("DOL"). For the following reasons ISI's motion is DENIED and the DOL's motion is GRANTED.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
ISI is a California-based security company with more than 6,000 employees. (Tr. of Admin. Hearing, ("Hearing Tr.") 627:22-25.) Ousama Karawia is the owner of Karawia Industries, the holding company for International Protective Services, which does business as ISI. (Id. at 628:7-23; 631:23-25.) Mr. Karawia is also the President and CEO of both Karawia Industries and International Protective Services. (Id.) Mr. Karawia's duties include negotiating government contracts, third-party contracts and collective bargaining agreements, signing payroll checks, hiring and firing employees, supervising executives, and assigning job responsibilities. (See Decision of DOL Administrative Review Board, dated December 21, 2007 ("ARB Decision"), at ARIV00753 (citing Hearing Tr.))
ISI had several contracts to provide security services to federal agencies, including a contract with the United States General Services Administration ("GSA") for security services at federal facilities in upstate New York (the "GSA Contract"). On March 8, 1999 the DOL filed a complaint against ISI and certain of its executives, including Karawia, alleging that investigations had revealed numerous and repeated breaches of ISI's federal service contracts in violation of the SCA. (Complaint, dated March 8, 1999 (the "Initial Complaint"), ARI00001-- 07.) The DOL alleged that ISI had underpaid its employees by at least $134,756.00, although by the date the Initial Complaint was filed the full amount had been repaid. (Id.) The Initial Complaint sought to debar ISI from federal contracting for a period of three years, the statutorily prescribed penalty for violations of the SCA absent "unusual circumstances." (Id.)
In May 2001, ISI and the DOL resolved the allegations of the Initial Complaint by signing a Consent Finding and Order that required ISI to establish a compliance program that included employing a full-time ombudsman to handle all payroll complaints, retaining legal counsel with experience in wage and hour matters, and providing informational programs for employees. (Consent Findings and Order, dated May 1, 2001 ("Consent Order") ARI00010-21.) In February 2002, the GSA renewed ISI's contract for security services in upstate New York for a one-year period with optional extensions. (Contract Renewal Letter, ARI00254.)
Mr. Karawia is of Egyptian descent and ISI contends that both heightened security concerns and racial tensions in New York following the terrorist attacks of September 11, 2001 are relevant to this lawsuit. In June 2002, the State of New York filed a complaint against ISI to revoke its state license to employ security guards, alleging, inter alia, that ISI had employed unregistered security guards and failed to file employee fingerprints. (ARII00009.) At the same time, several articles in New York newspapers alleged that ISI had employed ex-convicts to guard the Statue of Liberty. (ARII00017-26.) ISI contends that the publicity prompted the State to file suit and amounted to "yellow journalistic fervor" focused on the fact that an Arab-American had been awarded the contract to guard the Statue of Liberty. (Pls' Mem. at 2, 9.)
ISI ultimately resolved the New York State licensing issues.*fn2 (See Stipulation of Settlement, dated Feb. 20, 2003, ARII00121-130.) However, during the summer of 2002 when the status of ISI's New York license was uncertain, the company sought to novate the GSA Contract to substitute a new entity as obligor. (Hearing Tr. 20:8-25.) In September of 2002, the GSA denied the proposed novation and cancelled the contract.*fn3 (Notice of Cancellation, dated Sept. 19, 2002, ARII00088-89.) ISI contends that the GSA cancelled the contract in bad faith as a result of not only the unfounded negative publicity, but also the racial animus of the GSA's Chief Contracting Technical Representative, Robert Soden, who is alleged to have directed racial slurs at Karawia in front of ISI employees at training seminars he conducted.*fn4 (Email Corresp., dated Jul. 15, 2002, ARII00002.) According to emails sent by an ISI employee to Karawia, Soden referred to Karawia as a "camel jockey" and a "sand nigger" and informed ISI employees that Karawia was under investigation and would be soon going out of business. (Id.) If true, these allegations are certainly reprehensible especially as they come from a government employee, but they do not have a causal connection with ISI's claims here.
Subsequent to the May 2001 Consent Order, and during the period of the renewed GSA Contract, the DOL continued to receive payroll complaints from ISI employees. On May 23, 2003, the DOL filed a second complaint against ISI alleging numerous and repeated violations of the SCA, including underpayments to employees in excess of $600,000. (Complaint dated May 23, 2003 (the "Second Complaint"), ARIV00002-06.) Similar to the Initial Complaint, the Second Complaint also sought to debar ISI from federal contracting pursuant to the Act. (Id.)
Following extensive discovery and several adjournments made at the requests of both ISI and the DOL, an administrative hearing was held before a DOL Administrative Law Judge ("ALJ") in November 2004 and January 2005.*fn5 In July 2005, following receipt of post-hearing briefs,*fn6 the ALJ issued a decision that found ISI had violated the SCA "an astounding number of times" after the Consent Order, which constituted "culpable neglect" precluding relief from debarment. (Decision of ALJ, dated Jul. 6, 2005 ("ALJ Decision"), ARIV00376-86.)
ISI appealed the ALJ Decision to the DOL's Administrative Review Board ("ARB"). The ARB upheld the ALJ Decision and found that the record contained ample evidence that ISI had violated the Act, including evidence that ISI had underpaid 1,943 employees a total of $631,081.07 in wages and fringe benefits. (ARB Decision, ARIV00748.) After ISI's request for reconsideration before the ARB was denied, it commenced this action in June 2008. In July 2008, the three-year period of ISI's debarment commenced when its name was added to the list maintained by the Comptroller General of persons and entities prohibited from contracting with the United States.*fn7 (See 41 U.S.C. §354(a)).
A. Appropriate Standard of Review
Although this matter is before me on cross motions for summary judgment, the familiar legal standard of Federal Rule of Civil Procedure 56 does not apply. My jurisdiction to review the ARB Decision derives from the Administrative Procedures Act, 5 U.S.C. §702, but straightforward application of the "arbitrary and capricious" and "substantial evidence" standards that typically apply to judicial review of agency determinations is also inappropriate. Rather, the statutory language that governs judicial review of administrative actions under the SCA requires that I apply a unique standard of review, the contours of which are a question of first impression in this Circuit.
The Secretary of Labor's authority to enforce the SCA-including its authority to make rules, issue orders, hold hearings, and make decisions based upon findings of fact-is governed by the hearing provisions of the Walsh-Healy Act, 41 U.S.C. §38-39, which are incorporated by reference into the SCA. 41 U.S.C. §353(a). Section 39 of the Walsh-Healy Act ("Section 39") provides that the Secretary or his authorized representative "shall make findings of fact after notice and hearing, which findings of fact shall be conclusive upon all agencies of the United States, and if supported by the preponderance of the evidence, shall be conclusive in any court of the United States." 41 U.S.C. § 39. This standard, however, "presents certain interpretative difficulties," because "in its normal iteration, the preponderance of the evidence standard . establishes a quantum of proof to be measured by the fact finder, not a standard for error-detection." Dantran v. U.S. Dep't. of Labor, 171 F.3d 58, 70 (1st Cir. 1999); see also, J.N. Moser Trucking, v. U.S. Dept of Labor, 306 F.Supp.2d 774, 781 (N.D. Ill. 2004) ("the precise standard that Congress intended is obscured by a poor choice of phrase, for 'preponderance of the evidence' customarily sets a standard of proof and not a standard of review.")
Although the Second Circuit has not addressed the issue, courts have generally agreed that the "preponderance of the evidence" language in Section 39 mandates application of a standard of review somewhat more exacting than the "substantial evidence" standard that ordinarily applies to judicial review of agency fact finding. Although they have taken different paths to reach the same answer (at times reluctantly), courts have generally held that the DOL's administrative decisions concerning the SCA should be reviewed for clear error.*fn8 See, e.g. Dantran, 171 F.3d at 70; Amcor, Inc. v. Brock, 780 F.2d 897, 899 (11th Cir. 1986); J.N. Moser Trucking, 306 F.Supp.2d at 784. In Dantran, the First Circuit settled on a clearly erroneous standard reasoning by analogy from the Seventh Circuit's adoption of that standard to judicial review of arbitral decisions under the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"). Dantran, 171 F.3d at 70. That provision specifies "there shall be a presumption, rebuttable only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct." 29 U.S.C. §1401(c). In contrast, the court in J.N. Moser, 306 F.Supp.2d at 784, found Dantran's analogy misplaced and the judicial review provision of the Individuals with Disabilities in Education Act ("IDEA," 20 U.S.C. §1415(i)(2)) a more apt comparison. That provision allows a party "aggrieved by the findings and decision" of a state administrative agency to bring an action in a district court which "shall receive the records of the administrative proceedings; shall hear additional evidence at the request of a party; and basing its decision on the preponderance of the evidence, shall grant such relief as the court determines is appropriate." 20 U.S.C. §1415(i)(2)) (internal subparts omitted). Because the Seventh Circuit has held that the "clear error" review applies to judicial review of administrative decisions under IDEA, the district court in J.N. Moser concluded that it was "constrained to apply the clearly erroneous standard" to Section 39. 306 F.Supp.2d at 784.
Although the thoughtful analysis of the courts in both Dantran and J.N. Moser is helpful to the task at hand, in my view neither of the statutory analogies they suggest is entirely apposite. On the one hand, the MPPAA, the object of Dantran's analogy, speaks of a presumption that may be overcome only by a "clear preponderance," but Section 39 neither refers to a "clear preponderance," nor speaks in terms of a presumption. On the other hand, the IDEA requires the district court to "hear additional evidence at the request of a party," and neither Section 39 nor the DOL's implementing regulations expressly permit introduction of new evidence before either the ARB or the district court.*fn9 See 29 C.F.R. §8.1(d).
The Second Circuit has not interpreted the judicial review provision of the MPPAA, but it has expounded upon the "independent" judicial review of agency decisions required by IDEA and the Supreme Court's decision in Board of Educ. of Hendrick Hudson Central School Dist., Westchester County v. Rowley, 458 U.S. 176, 206 (1982). Unlike the Seventh Circuit, the Second Circuit has held that a modified form of de novo review applies in the IDEA context: while "review is de novo, it is tinged with a significant degree of deference to the state educational agency, as we are essentially acting in an administrative-law-style capacity.'" P. ex rel. Mr. and Mrs. P. v. Newington Bd. of Ed., 546 F.3d 111, 118 (2d Cir. 2008).*fn10 Although the court must not "simply rubber stamp administrative decisions [under IDEA], they are expected to give 'due weight' to these proceedings"; "[i]ndependent judicial review 'is by no means an invitation to the courts to substitute their own notions of sound educational policy for those of the school authorities they review.'" Walczak v. Fla. Union Free Sch. Dist., 142 F.3d 119, 129 (2d Cir. 1998) (quoting Rowley, 458 U.S. at 206).
The Second Circuit has also interpreted another analogous statutory provision to similarly require a form of deferential de novo review. The Commodities Exchange Act, 7 U.S.C. §9, provides for circuit court review of orders by the Commodities Future Trading Commission ("CFTC") and requires the Court of Appeals to treat as "conclusive" the "findings of the [CFTC] as to the facts, if supported by the weight of evidence." The Second Circuit defines its own standard of review in this circumstance as follows: "Legal questions are subject to plenary review, but where a question implicates [CFTC] expertise, we defer to the [CTFC]'s decision if it is reasonable." Piccolo v. Commodity Futures Trade Comm'n., 388 F.3d 387, 389 (2d Cir. 2004). Although judicial review under the Commodities Exchange Act ...