736 F.2d 677
32 Cont.Cas.Fed. (CCH) P
72,528
ATL, INC., Appellee/Cross-Appellant,
v.
The UNITED STATES, Appellant/Cross-Appellee.
Appeal Nos. 84-762, 84-813.
United States Court of Appeals,
Federal Circuit.
May 25, 1984.
*678 Helene Goldberg,
Washington, D.C., for appellant; Richard K. Willard, Acting Asst. *679
Atty. Gen. and David M. Cohen, Director, Washington, D.C., on brief.
Herman M. Braude, Washington,
D.C., for appellee; Gerson B. Kramer and Douglas L. Patin, Washington,
D.C., on brief.
Before MARKEY, Chief Judge,
and DAVIS, KASHIWA, BENNETT and SMITH, Circuit Judges.
EDWARD S. SMITH, Circuit
Judge.
n this pre-award Government
contracts case appellant/cross-appellee, the United States Government,
appeals from an order of the United States Claims Court enjoining the United
States Department of the Navy (Navy) from awarding to any entity other
than appellee/cross-appellant ATL, Inc. (ATL), four Navy contracts on which
ATL was low bidder, until the Navy affords ATL a new and proper hearing
concerning the Navy's suspension of ATL from all Government procurement
action. ATL cross-appeals from the Claims Court order on the grounds that
the Claims Court should have ordered award of the four contracts to ATL
instead of a new hearing. We affirm in part and reverse in part. In particular,
we affirm continuation of the injunction until the Navy affords ATL a proper
proceeding, consistent with this opinion.
Issues
We face first the question
whether the Claims Court properly exercised jurisdiction over ATL's suit.
Secondly, we treat the issue whether the Claims Court correctly determined
that the Navy denied ATL due process in its suspension procedure, particularly
as regards its denial of a full hearing. Finally, we address the relief
which the Claims Court ordered, including ATL's cross-appeal.
Background
1. Events Leading to ATL's
Filing Suit
A summary of the many facts
material to this appeal is as follows: [FN1] ATL is
a Hawaiian construction contractor and a small business concern whose work
is done almost entirely with the Federal Government. In the first part
of 1983 ATL submitted what turned out to be low bids in response to four
separate Navy invitations for bids for construction work to be performed
in the Honolulu area. The Navy office issuing the bid invitations was the
Office in Charge of Construction for the Mid-Pacific Region of the United
States Navy (OICC MIDPAC or OICC), the chief of which was Navy Capt. Michael
Dallam. The bid opening dates for the contracts were in March and April
1983.
FN1.
A complete statement of the facts is contained in both the Claims Court
decision of January 6 here reviewed, ATL, Inc. v. United States, 4 Cl.Ct.
374 (1984), and the first full Claims Court decision of August 9, ATL,
Inc. v. United States, 3 Cl.Ct. 259 (1983). See also Claims Court ATL decisions
reported at 3 Cl.Ct. 49 and 52 (1983), dated July 18 and July 12.
Normally, ATL as low bidder
would expect acceptance of its bid within 60 days of its opening. However,
OICC twice requested ATL to extend the acceptance period for its first
two March bids, ultimately until July 31. Similar extension requests followed
concerning ATL's third and fourth bids. ATL also received at least two
OICC requests for further information on its technical ability to perform
some or all of the bids, which information ATL in each instance promptly
provided. Finally, having once already rebuffed ATL's request for a meeting
on the delayed awards, OICC scheduled such a meeting on July 6 to address
ATL's technical ability to perform all four awards. This meeting was held
with favorable results for ATL on three of the four contracts; the Navy
retained questions concerning ATL's technical ability to perform one of
the contracts. No mention was made at the meeting of Navy concerns about
ATL's integrity. On the same day, July 6, 1983, ATL was filing suit in
the Claims Court in Washington, D.C.
Meanwhile, unbeknownst to
ATL, since early 1983 the Naval Investigating Service (NIS) had been investigating
ATL for certain charges alleging misconduct in performance of ongoing and
prior contracts. Upon referral by the NIS, both the Federal *680
Bureau of Investigation and the U.S. attorney in Hawaii also began investigating
ATL. The charges had originally come to the attention of Captain Dallam,
who had referred them to the NIS.
As it became apparent in
March and April 1983 that ATL was low bidder on four new Navy contracts,
OICC recognized that allegations impugning ATL's integrity were in investigatory
hands beyond those of OICC, which was immediately responsible for awarding
the bids. Since by law and regulation the Navy is constrained to award
bids to "responsible" [FN2] bidders, the results of
the U.S. attorney/FBI investigation, which at that point OICC expected
in late April, were highly relevant. Accordingly, OICC focused on the "non-integrity"
aspects of its routine pre-award surveys conducted to assure the Navy that
the low bidder is indeed "responsible." Both April and May came and went,
however, and, although OICC learned that the U.S. attorney intended to
submit the ATL case to a grand jury, this had still not occurred by mid-June.
Meanwhile, OICC's routine pre-award surveys had unearthed no reason for
not
awarding ATL any of the four bids.
FN2.
Section 2305(c) of 10 U.S.C. (1982) limits awards to the "responsible"
bidder; 32 C.F.R. § 1-903.1 (1983) states that responsibility includes,
among other things, "a satisfactory record of integrity." See also ATL,
3 Cl.Ct. at 262.
By this time Captain Dallam,
as OICC chief, was personally involved in the ATL matter. Most significantly,
on June 16 he visited the U.S. attorney in Honolulu. There he learned that
the criminal investigation of ATL would continue for several months and
that an indictment was not imminent. The U.S. attorney cautioned Captain
Dallam against OICC's prematurely disclosing evidence to ATL which might
prove useful in a criminal investigation later. Accordingly, on the same
day (June 16), Captain Dallam instructed his staff attorney to prepare
the necessary papers for the captain to recommend to his superiors in Washington
that ATL be suspended from all Government contract awards for lack of integrity.
Captain Dallam did not forward
the ATL suspension recommendation to Washington until July 1. In the interim
he weighed whether suspension was the appropriate route, or whether he
should instead reject ATL's four bids for nonresponsibility due to lack
of integrity. The latter procedure would allow ATL to appeal the rejection
to the Small Business Administration (SBA). Captain Dallam met with SBA
representatives and confirmed that if he rejected ATL's bids and ATL appealed
to the SBA, the SBA would disclose to ATL the reasons and evidentiary record
for the rejection so that ATL could respond. [FN3]
Because of this, Captain Dallam decided instead to recommend suspension
so as to minimize or eliminate the need to disclose to ATL evidence which
the U.S. attorney might later use in a criminal investigation.
FN3.
See ATL, 3 Cl.Ct. at 265, and 15 U.S.C. § 637(b)(7).
2. Events After ATL Filed
Suit
ATL's complaint, filed in
the Claims Court on July 6, 1983, requested a cut- off date on the Navy's
responsibility review of ATL and, if necessary, referral to the SBA. On
July 12 the Claims Court denied ATL immediate equitable relief but set
a date for trial, July 18, at which ATL was to attempt to prove that the
Navy's delays constituted a de facto debarment or suspension. [FN4]
Before the trial, however, Adm. J.G. Williams, Jr., chief of Naval Material
in Washington, D.C., informed ATL, by letter dated July 15, that the Navy
was suspending ATL from further contracting with any Federal Government
agency. OICC immediately thereafter awarded contracts on three of the four
solicitations on which ATL had been low bidder, to other bidders. On July
18 the Claims Court preliminarily enjoined the Navy from awarding any of
these four contracts to entities other than ATL or from permitting work
by entities other than ATL to proceed. [FN5] The Claims
*681 Court ordered a trial on July 19, the result of which was a detailed
opinion of August 9, 1983, continuing the injunction and requiring the
Navy to provide ATL with a fair hearing. [FN6]
FN4.
ATL, 3 Cl.Ct. at 55.
FN5. ATL,
3 Cl.Ct. at 52.
FN6. ATL,
3 Cl.Ct. at 259.
The Navy's suspension letter
of July 15 to ATL listed nine items reflecting alleged lack of integrity,
but the chief of Naval Material subsequently continued the suspension based
on only two items, set forth in the opinion here reviewed. [FN7]
Briefly, these concerned (1) knowingly false certifications to the Government
that workers on one of the contracts were being paid wages in accordance
with the Davis-Bacon Act, and (2) receipt of payment for shaft walls to
enclose air conditioning ducts in the women's head, which walls were never
installed. As it developed, the first item involved a disgruntled subcontractor
and a question whether ATL officials, who had allegedly merely forwarded
the supposedly false certification involving that subcontractor's employees
to the Government, were aware of the alleged falsehoods. [FN8]
The second item turned out to involve such a small sum, as well as various
mitigating factors, as to make it unclear whether the Navy would have sustained
the suspension on that ground alone. [FN9]
FN7.
ATL, 4 Cl.Ct. at 376-77.
FN8. Id.
at 384.
FN9. Id.
at 385.
The July 15 suspension letter
also informed ATL that "no factfinding proceeding will be conducted as
the result of a request from the United States Attorney in Hawaii," but
that ATL could "present information in opposition to this suspension in
person, in writing, or through representation as set forth in DAR [Defense
Acquisition Regulation] 1-606.3(c)(5)." [FN10] On September
7 ATL did make a presentation to the Navy Debarment Committee, at which
the only witnesses were ATL's. Prior to this presentation ATL had requested
that the Navy present it with various facts and documents concerning the
suspension charges. [FN11] The Navy refused on the
grounds that the suspension letter sufficiently placed ATL on notice of
the charges and disclosure of further evidence would be contrary to the
U.S. attorney's request. The Navy also informed ATL, pursuant to its request,
that the members of the Navy Debarment Committee were the same individuals
who had previously recommended ATL's suspension.
FN10.
Id. at 377.
FN11.
Id.
After the September 7 proceeding,
ATL received letters dated December 2, 1983, from the chief of Naval Material
that ATL's suspension would continue, based on two of the original nine
charges. ATL amended and filed again its complaint in the Claims Court
which, in the decision of January 6, 1984, here under review, ordered that
the Navy afford ATL a "new and proper" hearing and that the injunction
continue until a suspension decision is made based on such hearing. When
the Government filed a motion to stay before this court,
[FN12] we denied the motion, on January 31, 1984, to the extent it
requested a stay of the injunction, but we granted a stay of the order
for a new hearing.
FN12.
The Claims Court had denied the Government's motion for stay pending appeal.
Id. at 390
Opinion
1. The Claims Court's Jurisdiction
[FN13]
FN13.
The parties do not contest this court's jurisdiction to review the Claims
Court's decision of January 6, including its partial grant and partial
denial of injunctive relief. 28 U.S.C. §§ 1292(c)(1) and (a)(1)
(1982).
Congress has empowered the Claims
Court to exercise jurisdiction over "any claim against the United States
founded * * * upon any express or implied contract with the United States."
[FN14]
This includes the Government's implied-in-fact contract with its bidders
to consider all bids *682 fairly and honestly.
[FN15]
The
Government contends that ATL's suit falls outside the implied-in-fact contract
concept because ATL is actually a disappointed bidder attacking the propriety
of the Navy's suspension decision. Under this theory the Government claims
that ATL should have sought relief in the appropriate district court. [FN16]
FN14.
28 U.S.C. § 1491(a)(1).
FN15.
United States v. John C. Grimberg Co., 702 F.2d 1362, 1367 (Fed.Cir.1983).
The Claims Court's power to grant equitable relief pursuant to 28 U.S.C.
§ 1491(a)(3) is limited to those claims themselves within the power
of the court. Grimberg, 702 F.2d at 1366.
FN16.
See Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C.Cir.1970),
and discussion thereof in CACI, Inc.-Fed. v. United States, 719 F.2d 1567,
1573-74 (Fed.Cir.1983).
While generally the Government
is correct that a contractor would attack a suspension in district court,
on the facts of this particular case the Government's contention does not
obtain. When ATL first filed its complaint with the Claims Court on July
6, 1983, it had no idea that OICC chief Captain Dallam had recommended
to his superiors that ATL be suspended. From ATL's point of view, it knew
only that the Navy was unduly delaying the awards of four contracts upon
which ATL had already bid and was in fact low bidder in each case. [FN17]
As the trial court has pointed out, once jurisdiction properly attaches,
the long-standing rule in the federal courts is that it cannot be ousted
by subsequent events. [FN18]
FN17.
The implied-in-fact contract theory extends only to claims brought by bidders
and is limited to the pre-award stage. Grimberg, 702 F.2d at 1367. Electro-Methods,
Inc. v. United States, 728 F.2d 1471, 1475 (Fed.Cir.1984).
FN18.
ATL, 4 Cl.Ct. at 379 and cases cited therein. Indeed, an observer with
a jaundiced eye might conclude that the Navy's nearly instantaneous award
of three of the four contracts to entities other than ATL, after ATL's
July 15 suspension, was an attempt to create such a "subsequent event"
which would make ATL's suit appear to be "post-award" and hence outside
of the Claims Court's power to award equitable relief.
In addition, the Government's
attempt to narrow the implied contract theory by contending that it does
not extend to actions performed other than by contracting officials fails
in this factual context. Even assuming that the theory were so limited,
which we do not, its application here, where the contracting official and
the official initially recommending the suspension, Captain Dallam, were
one and the same, is hardly credible. It was Captain Dallam who weighed
carefully the pros and cons of rejecting ATL's bid for nonresponsibility
versus recommending suspension. While we certainly presume that the admiral
actually informing ATL of the suspension (and its continuation) carefully
reviewed the full ATL record, Captain Dallam, as contracting official,
remains a key figure in the initiation of the suspension process.
In sum, we hold that the
Claims Court properly exercised jurisdiction in this case.
2. The Due Process Issue
Once Captain Dallam and his
superiors determined to suspend ATL rather than to reject its bids for
nonresponsibility, those persons--i.e., the Navy--likewise determined to
subject themselves to their own regulations and a body of case law prescribing
a fair method for executing such a suspension. Similarly, ATL for its part
reasonably expected a fair carrying out of the process. Exactly what process
was due ATL is something to be determined not on the validity of the general
regulations, but on the facts specifically involved. [FN19]
The Supreme Court has provided guidelines for the type of procedures which
are constitutionally acceptable, under the fifth amendment, in adverse
administrative actions, where both the governmental and private interests
that are affected must be analyzed. [FN20] More specifically,
*683 in suspension cases it is recognized that, although a citizen
has no right to a Government contract, [FN21] and
a bidder has no constitutionally protected property interest in such a
contract, [FN22] a bidder does have a liberty interest
at stake, where the suspension is based on charges of fraud and dishonesty.
[FN23]
Accordingly, the minimum requirements of due process come into play. With
this background in mind, we examine the specific areas in which the Claims
Court found the Navy to have denied ATL due process.
FN19.
See Electro-Methods, 728 F.2d at 1475 and cases cited therein. See also
ATL, 4 Cl.Ct. at 380-81 for discussion and text of pertinent Defense Acquisition
Regulations (DAR) concerning suspension, found generally at 32 C.F.R. §
1-600 et seq.
FN20.
Mathews v. Eldridge, 424 U.S. 319, 334-35, 96 S.Ct. 893, 902-03, 47 L.Ed.2d
18 (1976); see also ATL, 4 Cl.Ct. at 385, quoting the Mathews 3-part balancing
test.
FN21.
Gonzalez v. Freeman, 334 F.2d 570, 574 (D.C.Cir.1964).
FN22.
Transco Sec., Inc. v. Freeman, 639 F.2d 318, 321 (6th Cir.), cert. denied,
454 U.S. 820, 102 S.Ct. 101, 70 L.Ed.2d 90 (1981).
FN23.
Id. See also Old Dominion Dairy Prods., Inc. v. Secretary of Defense, 631
F.2d 953, 962-63 (D.C.Cir.1980).
a. The Sufficiency of the Notice
The Navy's regulation requires
it to describe the basis of the suspension charges "in terms sufficient
to place the contractor on notice without disclosing the Government's evidence."
[FN24]
Adequate
notice of the charges is, of course, part of the process that is due the
suspended contractor. The notice must be "sufficiently specific to permit
the suspended contractor to collect and present relevant evidence refuting
the charges contained therein."
[FN25] It has as well
been suggested that, where an agency may deny the contractor an adversary
hearing and allow instead mere submission of information in opposition
to the suspension, then the need for a more specific notice is especially
critical. [FN26]
We add that, in these particular
circumstances, where the Navy has "strung along" the contractor for at
least twice the normal period after bid opening, such specificity in the
notice is similarly critical, so that the contractor may rapidly prepare
a thorough rebuttal.
FN24.
DAR § 1-606.3(c)(1)(ii); ATL, 4 Cl.Ct. at 381.
FN25.
Transco, 639 F.2d at 323.
FN26.
Id. at 324.
Nevertheless, our analysis of
the Navy's notice to ATL, contrary to that of the Claims Court, causes
us to conclude that the notice does pass constitutional muster in this
first step of the suspension process. We note at the outset that the Navy's
July 15 suspension letter contained notice of nine charges against ATL
involving five separate, specified contracts. ATL succeeded in convincing
the Navy to drop seven of these nine charges. The notice concerning the
shaft wall in the women's head the Claims Court found to appear "sufficiently
specific to enable the contractor to rebut," and we do not disagree. [FN27]
This
leaves just one charge, that concerning the allegedly false payroll certifications
involving contract number N62471-78-C-1317, "Repairs to Bathrooms, Kitchens,
and Floors, Manana Marine Housing and Camp Smith Housing, Oahu, Hawaii,"
which the court below found to fail for lack of specificity.
[FN28]
FN27.
ATL, 4 Cl.Ct. at 385.
FN28.
See id. at 376-77 for partial text of charge, and at 384-85 for analysis
of deficiency of charge.
Our analysis of that one charge
shows it to specify, among other things: the contract concerned; the type
and location of work under the contract; the names of the three ATL officials,
allegedly "acting on behalf of" a named subcontractor, who certified the
wages being paid; [FN29] names of five workers allegedly
underpaid; and a letter of specified date in which ATL told OICC that it
did not handle the subcontractor's administrative affairs. Based on this
information it is reasonable to expect that *684 ATL could begin
immediately to marshal a rebuttal. It could, for instance, produce testimony
and/or affidavits from the five workers that they were indeed paid Davis-Bacon
wages. Or, it could gather testimony, affidavits, or other information
to prove that ATL indeed had no knowledge of the subcontractor's administrative
affairs. Moreover, ATL could search its own business records, or request
those of the subcontractor (if it were friendly), to locate the payrolls
for that contract and other correspondence and records which would refute
the charges. In short, unlike the vague notice of the charges analyzed
in Transco, [FN30] in this case the notice is sufficiently
specific to enable ATL to get its "ducks in a row" in preparation for a
meaningful response in the next step of the administrative suspension process.
FN29.
The trial judge was greatly impressed by the point made in open court below
that no ATL official actually signed the payment certifications, but instead
merely forwarded them to the Government. ATL, 4 Cl.Ct. at 384. In our view
notice of this point is covered by the reference to ATL officials "acting
on behalf of" the subcontractor. This introductory phrase is omitted in
the partial quotation of the charge in the opinion below. Id. at 376-77.
FN30.
Transco, 639 F.2d at 324. In Transco, not only did the first notice not
specify which contracts, among many at various locations over the years,
were involved in the alleged "billing irregularities," but a second notice
included an additional charge, misrepresentation of quality of personnel,
not included in the first. Id. at 323.
Similarly, weighing the other
factors which we must in the due process balancing analysis, [FN31]
we do not find the risk of an erroneous deprivation of ATL's interest,
at this initial point, to be so great as to require more lengthy notice.
We have, with the benefit of hindsight, pointed out ATL's successful refutation
of seven other charges, as well as the extensive knowledge, including business
records, which it could reasonably be expected to have of this contract,
especially since there apparently had been litigation previously. [FN32]
We
must also weigh the Government's interest, which at this point, while requiring
thoroughness and specificity in the notice without tipping the criminal
prosecutor's hand, should not have to include wholesale production of documents.
This is especially true where the Navy could reasonably expect ATL to have
many if not most of these documents. We therefore reverse the court below
and hold that the Navy provided ATL with sufficiently specific notice of
the charges.
FN31.
Mathews, 424 U.S. at 335, 96 S.Ct. at 903. We also bear in mind the nature
of ATL's protected interest here--a liberty, not life or property interest.
ATL is still theoretically free, in the face of the 12- or 18-month suspension,
to pursue non-government contract work. A small business choosing to put
nearly all its eggs in one Government contracts basket must be expected
to bear some responsibility for the risk that that basket could, as a result
of the contractor's misconduct, temporarily or even permanently be snatched
away--with the required procedural safeguards here at issue.
FN32.
The notice references Government "investigation" of "underpayment allegations,"
and counsel for ATL mentioned in oral argument before this court arbitration
between the subcontractor and ATL on this matter.
b. The Navy's Failure
To Provide Further Information
Having found in this instance
that the notice of the charge was sufficiently specific, we turn to the
Navy's response to ATL's two requests for further documents and evidence
prior to the September 7 proceeding before the Navy Debarment Committee.
As noted above, when the
Navy suspended ATL, it stated flatly that no fact- finding would be conducted,
pursuant to the U.S. attorney's request. Consistent with this position,
the Navy flatly denied ATL additional information or even access to basic
documents, such as the payrolls, as requested by ATL in letters of August
24 and 31. [FN33] This contrasts sharply with a recent
pre-award suspension case we have considered, Electro-Methods, Inc., in
which every bit of evidence which was before the Air Force Debarment and
Suspension Review Board, was likewise available to, and *685 rebutted
by, Electro. [FN34] In that case the Air Force also
denied Electro fact- finding, pursuant to the written advice of the Department
of Justice, but only after considerable give-and-take between the parties
in terms of both pre- and post-suspension meetings and opportunities to
submit information, had occurred. Electro's bottom line in that case was
an impossible dream, as we in effect held: Electro wanted to subpoena and
cross-examine the FBI agents involved in the ongoing criminal investigation.
FN33.
ATL, 4 Cl.Ct. at 377-78. The record does reflect, however, that the Navy
provided ATL with some 71 documents, which ATL indexed in a letter to the
Navy on August 26, and that the Navy released further documents to ATL
on September 6, pursuant to a Freedom of Information Act request by ATL.
Representatives for ATL and the Navy also met on July 26 to discuss the
suspension proceedings.
FN34.
Electro-Methods, 728 F.2d at 1473-74, 1476. Two publicly available affidavits
by FBI agents constituted the key evidence upon which the Air Force based
the suspension charges. These affidavits were attached to the Air Force's
suspension notice to Electro, along with a copy of the report recommending
suspension by the Air Force Debarment and Suspension Review Board, which
report was dated and signed by two Air Force colonels and an Air Force
assistant general counsel.
In ATL's case, we take at face
value its assertion that the July 15 suspension notice came as a bolt out
of the blue. Although the notice was sufficiently specific for ATL to prepare
for rebuttal, as we have held above, ATL's immediate and natural response
was to request more information. In short, it wanted to know what evidence
the Navy possessed to support the specified charges. Ideally, of course,
it would have liked to have known what evidence the U.S. attorney in Honolulu
possessed, just as Electro's "impossible dream" was to have examined the
FBI agents. [FN35]
FN35.
Due process cannot tip so far in favor of the suspended contractor as to
enable it to obtain a discovery not generally provided a criminal defendant.
Horne Bros. v. Laird, 463 F.2d 1268, 1271 (D.C.Cir.1972).
The Claims Court examined in
camera the Navy's file on the payroll certification charge and concluded
that the Navy could have provided "more specific information * * * as to
the substance of this charge without substantial prejudice to any future
criminal proceeding." [FN36] It is not our position
to second-guess the trial judge on his conclusion, since we have not examined
in camera this evidence. In our view, given that ATL made requests for
additional information after receiving the suspension notice, the Navy
was obligated to respond as promptly and thoroughly as it could. [FN37]
Surely
the Navy could not seriously contend, for example, that the U.S. attorney
would find his criminal investigation prejudiced by the Navy's releasing
to ATL a copy of a 3- 1/2 -year-old letter which ATL should have had in
its own files. [FN38] Similarly, at least providing
ATL the opportunity to review records in the Navy's possession, such as
payrolls, should not be burdensome or unduly revealing. Particularly where
the Navy is taking a flat-out position denying fact-finding, this type
of prompt give-and-take, step-by-step cooperative process is, at a minimum,
due the suspended contractor.
FN36.
ATL, 4 Cl.Ct. at 385.
FN37.
We recognize that the Navy made some attempt in this regard. See note 33,
supra.
FN38.
ATL, 4 Cl.Ct. at 385.
Indeed, we are struck, as no
doubt was the trial judge, by the Navy's secretive attitude here. Captain
Dallam chose to initiate suspension rather than to reject the bids for
nonresponsibility in order to avoid SBA review and release of records to
ATL. This attitude continued in the Navy's refusal to provide ATL access
to meaningful records. While certainly the Government's interest in protecting
an ongoing criminal investigation is great, [FN39] this
cannot extend to obdurate uncooperativeness where the suspended contractor's
interest likewise is great. The Navy must not allow a busy U.S. attorney
to dictate the terms of a civil investigation. Instead, these agencies
must work to "carve out" as much evidence as is reasonable for release
to the contractor. [FN40] That process was lacking
*686 here. [FN41] We therefore affirm the Claims
Court and hold that the Navy must provide ATL with such additional information,
consistent with the opinion below.
FN39.
See, e.g., Transco, 639 F.2d at 325; Horne Bros., 463 F.2d at 1271-72.
FN40.
See testimony of Jo Ann Harris, chief of the Fraud Section of the Department
of Justice:
" * * * the best procedure
is one in which the prosecutor and the suspending agency review together
the evidence to be used in a proposed suspension proceeding; they agree
on it; and then full and complete disclosure of that particular evidence
is made to the contractor, in the course of the suspension proceeding.
"In more than one case, we
have managed--using that informal system--to carve out evidence sufficient
to support a suspension; and where full disclosure of that particular evidence
did not prejudice a continuing criminal investigation, either because the
evidence we carved out was already public, or it was not the focus of the
criminal investigation." (Emphasis supplied.) Government-Wide Debarment
and Suspension Procedures: Hearings before the Subcomm. on Oversight of
Government Management of the Senate Comm. on Governmental Affairs, 97th
Cong., 1st Sess. 437 (1981).
FN41.
Indeed, with the wisdom of hindsight, we see that the Navy might have avoided
this entire litigation process had it been up front with ATL from an early
date (e.g., mid-summer 1983), pushed the U.S. attorney for maximum reasonable
disclosure of documents and information, and included this in its suspension
notice--or at least provided it shortly thereafter.
c. The Adequacy of the
Proceeding
While we hold that the Navy
failed in not being more cooperative with ATL prior to the September 7
proceeding, we do not go so far, as did the court below, to find that the
proceeding should have provided ATL "an opportunity to confront its accusers
and cross-examine witnesses." [FN42] A full-blown
trial- type hearing is not necessarily the process due a temporarily suspended
contractor with a protected liberty interest, where the Government's interest
in protecting an ongoing criminal investigation is considerable. [FN43]
The
risk of an erroneous deprivation of the contractor's interest should be
adequately safeguarded by conscientiously following the lesser, but important,
procedures outlined here. [FN44] Again, we do note
that the September 7 proceeding produced some solace for ATL, in that the
Navy subsequently dropped seven of the nine suspension charges.
[FN45]
We note also that the Navy Debarment Committee lacks subpoena powers, so
that its ability to produce ATL's accusers would be limited. [FN46]
Finally,
we note the relative promptness with which this proceeding was held after
the July 15 suspension notice, and after some give-and-take had occurred
between the Navy and ATL. The bulk of the subsequent delay in resolving
this case has occurred because of the Navy Debarment Committee's slowness
(2 months) in deciding to continue the suspension, and because of docketing,
motion analysis, argument, and reviewing in this court. We therefore reverse
the Claims Court's holding that the hearing to be held on remand must give
ATL an opportunity to confront its accusers and cross-examine witnesses.
FN42.
ATL, 4 Cl.Ct. at 385.
FN43.
Electro-Methods, 728 F.2d at 1476; Transco, 639 F.2d at 322- 23.
FN44.
Transco, 639 F.2d at 322-23; Mathews, 424 U.S. at 335, 96 S.Ct. at 903.
FN45.
We must assume, of course, that the Navy initially made the other seven
charges in good faith, even though ATL at the proceeding successfully convinced
the Navy that inadequate evidence supported those charges.
FN46.
Electro-Methods, 728 F.2d at 1476.
d. The Need for a Neutral
Tribunal
In this case the members
of the Navy Debarment Committee, before whom the September 7 proceeding
was held and whose findings formed the basis of the chief of Naval Material's
(a four-star admiral) decision to continue the suspension, were the same
persons who initially recommended ATL's suspension. [FN47]
The pertinent regulations on who is the "suspending official" are silent
as to whether those who recommend suspension and those who conduct the
fact-finding or proceeding may be one and the same. [FN48]
The court below found the Navy's practice in this case to violate due process.
[FN49]
FN47.
ATL, 4 Cl.Ct. at 389. The Navy so informed ATL, upon ATL's request, by
letter dated September 2, 1983.
FN48.
See DAR § 1-606.
FN49.
ATL, 4 Cl.Ct. at 389-90.
*687 We disagree with
the Claims Court on this point and therefore reverse, based on the specific
facts at hand. We note first that Captain Dallam in Hawaii was the line
officer who initially began the ATL suspension ball rolling when he sent
his recommendation to Washington on July 1, 1983. Captain Dallam's recommendation
was reviewed, we presume, by both the three-member Navy Debarment Committee
and by the chief of Naval Material, Admiral Williams. The same three-member
Debarment Committee conducted the September 7 proceeding and presumably
recommended continuation of the suspension to then-chief of Naval Material,
Admiral White. That committee (or the admiral) did reverse itself (or himself)
on seven of the original nine charges, since the suspension was continued
based only on the two charges here discussed.
We cannot believe that such
a triple-layer review process, ending with a four- star admiral in Washington,
D.C., constituted a rubber stamping of the Navy's original position. As
in Transco, a balancing of the factors here involved--ATL's protected liberty
interest, the risk of an erroneous deprivation of that interest, and the
Government's fiscal and administrative interest--leads us to conclude that
the process due, "the decision of a top level administrator" [FN50]
was afforded ATL. We do see no need for the Navy to have been so secretive
about its decision-making process, however, especially when we compare
this case to Electro-Methods. In that case, the board's full suspension
recommendation, signed and dated by three named Air Force officials, was
attached to the original suspension notice. [FN51]
FN50.
Transco, 639 F.2d at 322. The opinion below, in arriving at the opposite
conclusion, cites cases in which both different factual circumstances and
different protected interests were involved. See, e.g., Morrissey v. Brewer,
408 U.S. 471, 489, 92 S.Ct. 2593, 2604, 33 L.Ed.2d 484 (1972) (parole revocation);
Goldberg v. Kelly, 397 U.S. 254, 271, 90 S.Ct. 1011, 1022, 25 L.Ed.2d 287
(1970) (termination of certain welfare benefits).
FN51.
See note 34, supra. The issue whether the same three-member board which
recommended Electro's suspension could likewise, consistent with due process,
conduct the information proceeding, did not arise in that case.
In sum, of the four areas here
examined concerning the process due ATL, we have reversed the court below
on three elements--the sufficiency of the notice, the adequacy of the proceeding,
and the need for a neutral tribunal--and have affirmed on one--the Navy's
failure to provide further information. Thus the new hearing which the
Navy must grant ATL, as we discuss in part 3 of this opinion, will be "new"
only in the procedural sense that ATL will come to the proceeding better
armed with information upon which (or against which) to make its case.
3. The Relief Granted
The court below enjoined
award of the four contracts, or any work thereon, until 5 days after the
chief of Naval Material reached a new decision on ATL's suspension, after
a new and proper hearing in accordance with the Claims Court opinion. ATL
cross-appeals, contending that the Claims Court erred in denying ATL's
motion for partial summary judgment requesting immediate award of the four
contracts to ATL.
We are mindful both of the
difficulty in fashioning relief in a case such as this, and of the damaging
effect of the passage of time to ATL's interest. Over a year has now passed
since ATL submitted its four bids on the contracts here at issue. It will
not be long before ATL will have been suspended for 12 months (since July
15 of last year), [FN52] the maximum period allowable
under the pertinent regulation, unless an assistant attorney general requests
a 6-month extension. [FN53] The grant of a new hearing
to ATL, consistent with this opinion, cannot, of course, compensate for
deferred revenues and lost business activity.
FN52.
The issue whether ATL was de facto suspended from an earlier period has
not been here addressed. We note, however, that ATL did receive an Army
contract in June 1983.
FN53.
DAR § 1-606.4(b).
*688 Nevertheless, it
is not our position to judge the merits of this case--i.e., who is right
or wrong--but rather to ensure that the procedures which are followed minimize
the likelihood of one side or the other acting arbitrarily or improperly.
[FN54]
We
are likewise constrained in our review of the trial court's grant of equitable
relief to a determination whether that court abused its discretion.
[FN55]
FN54.
We note that the trial judge's in camera examination of the Navy's evidence
led him to conclude that "there may well be a substantial basis for the
charges." ATL, 4 Cl.Ct. at 389.
FN55.
Doran v. Salem Inn, Inc., 422 U.S. 922, 931-32, 95 S.Ct. 2561, 2567-68,
45 L.Ed.2d 648 (1975).
With these points in mind, we
affirm the Claims Court's granting of relief, except that the new hearing
that the Navy must hold shall be in terms consistent with part 2 of this
opinion. We likewise affirm the Claims Court's denial of ATL's request
for immediate award of the contracts to it and dismiss ATL's cross-appeal
to this effect.
AFFIRMED IN PART AND REVERSED
IN PART.
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