Scanwell Laboratories, Inc. v. Shaffer

• Decision Date: 13 February 1970
• Docket Number: No. 22863.,22863.
• Parties: SCANWELL LABORATORIES, INC., Appellant, v. John H. SHAFFER, Administrator (Acting) of The Federal Aviation Administration, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

424 F.2d 859 (1970)

SCANWELL LABORATORIES, INC., Appellant, v. John H. SHAFFER, Administrator (Acting) of The Federal Aviation Administration, et al.

No. 22863.

United States Court of Appeals, District of Columbia Circuit.

Argued October 3, 1969.

Decided February 13, 1970.

Petition for Rehearing Denied May 7, 1970.

Mr. John M. Calimafde, New York City, of the bar of the Court of Appeals of New York, pro hac vice, by special leave of court, with whom Messrs. Paul H. Blaustein, New York City, and James W. Dent, Washington, D. C., were on the brief, for appellant.

Mr. Michael C. Farrar, Atty., Dept. of Justice, with whom Messrs. Thomas A. Flannery, U. S. Atty., and Alan S. Rosenthal, Atty., Dept. of Justice, were on the brief, for government appellees. Mr. David G. Bress, U. S. Atty., at the time the record was filed, and Mrs. Ellen Lee Park, Asst. U. S. Atty., also entered appearances for government appellees.

Mr. David V. Anthony, Washington, D. C., for appellee, Cutler-Hammer, Inc.

Before BAZELON, Chief Judge, and TAMM and MacKINNON,^* Circuit Judges.

TAMM, Circuit Judge:

This is an appeal from an order entered in the district court dismissing the appellant's complaint for lack of jurisdiction. The district court was mislead by precepts which on careful examination are more rhetorical than guiding. The suit was dismissed on the ground that plaintiff lacked standing to sue; this appeal raises important questions concerning that concept.

The transaction involved resulted from the issuance by the Federal Aviation Administration of an invitation for bids (IFB) for instrument landing systems to be installed at airports to guide aircraft along a predetermined path to a landing approach. Such systems are designed to make the approach of aircraft to airports safer, a result which the FAA sought to attain by carefully circumscribing the criteria for bids in such a way as to preclude bids from producers who did not already have operational systems installed and tested in at least one location.¹

When the bids for the instrument landing systems were opened, it was discovered that appellant's was the second lowest bid. The lowest bid was entered by Airborne Instrument Laboratory, a division of Cutler-Hammer, Inc. Appellant alleged in the district court that appellee Cutler-Hammer's bid was non-responsive to the IFB in that Cutler-Hammer did not have a system installed in one location, nor did it have a certificate of performance based on an FAA flight check. Appellant therefore sought to have the action of the FAA in granting the contract to defendant Cutler-Hammer declared null and void as a violation of statutory provisions controlling government contracts and the regulations promulgated thereunder.

The Code of Federal Regulations provides:

To be considered for award, a bid must comply in all material respects with the invitation for bids so that, both as to the method and timeliness of submission and as to the substance of any resulting contract, all bidders may stand on an equal footing and the integrity of the formal advertising system may be maintained.

41 C.F.R. § 1-2.301(a) (1969) (emphasis added). The regulations go on to state that:

Any bid which fails to conform to the essential requirements of the invitation for bids, such as specifications, delivery schedule or permissible alternates thereto, shall be rejected as non-responsive.

41 C.F.R. § 1-2.404-2(a) (1969) (emphasis added).

Appellant urges that it can seek review of a contract award which is in violation of the regulations governing the issuance thereof by virtue of section 10 of the Administrative Procedure Act, 5 U.S.C. § 702 (Supp. IV 1965-68), which provides:

A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.

Appellant asserts that the action of the FAA in granting this contract to an allegedly non-responsive bidder is arbitrary, capricious and a violation of the statutory provisions governing contracting, and that it can therefore be set aside under section 10(e) of the Administrative Procedure Act, 5 U.S.C. § 706 (Supp. IV 1965-68).

I. STANDING TO SUE

Whether a frustrated bidder for a government contract has standing to sue, alleging illegality in the manner in which the contract was let, is a question of major importance and can be dealt with only on the basis of a thorough review of the law of standing. Much that can be easily recognized in this area cannot be defined except with the greatest difficulty.

Standing has been called one of the most amorphous concepts in the entire domain of the public law. That this statement is undoubtedly true is evidenced by the mental gymnastics through which the courts have passed in determining standing issues. Professor Davis describes the circuity of reasoning which surrounds these issues as follows:

A plaintiff who seeks to challenge governmental action always has standing if a legal right of the plaintiff is at stake. When a legal right of the plaintiff is not at stake, a plaintiff sometimes has standing and sometimes lacks standing. Circular reasoning is very common, for one of the questions asked in order to determine whether a plaintiff has standing is whether the plaintiff has a legal right, but the question whether the plaintiff has a legal right is the final conclusion, for if the plaintiff has standing his interest is a legally-protected interest, and that is what is meant by a legal right.²

The law of standing as developed by the Supreme Court has become an area of incredible complexity. Much that the Court has written appears to have been designed to supply retrospective satisfaction rather than future guidance. The Court has itself characterized its law of standing as a "complicated specialty of federal jurisdiction." United States ex rel. Chapman v. FPC, 345 U.S. 153, 156, 73 S.Ct. 609, 97 L.Ed. 918 (1953). One cannot help asking why this should be true. Is there something innately different about the standing questions which arise in the state courts which makes them easier of solution than their federal counterparts? Or is it true, as Professor Davis has stated, that "the difference is that the federal courts have invented a law of standing that is too complex for the federal courts to apply consistently, whereas the state courts, relatively speaking, have perceived the merits of the simple proposition that those who are in fact adversely affected should be allowed to challenge"?³

In order to answer the question whether there is a valid basis for the complexities surrounding the federal standing criteria, it will be useful to consider the early landmark cases in this area.

A. The Early Cases

The most famous early cases denying standing were the companion cases of Massachusetts v. Mellon and Frothingham v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078 (1923), in which the Court said that the Commonwealth could not sue because its own rights were not involved, and that the individual taxpayer could not sue because the interests of the taxpayer are so "comparatively minute and indeterminable" and that the taxpayer's contentions, even if proved, would have too "remote, fluctuating and uncertain" an effect on payments out of the Treasury. 262 U.S. 487, 43 S.Ct. 597, 67 L.Ed. 1078. (The overruling of Frothingham in Flast v. Cohen, 392 U.S. 83, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968), will be discussed infra.) Thus the initial criterion for establishing standing to sue was a showing that a legal right of the plaintiff was violated. As the Court pointed out in Edward Hines Yellow Pine Trustees v. United States, 263 U.S. 143, 148, 44 S.Ct. 72, 68 L.Ed. 216 (1923), the plaintiff "must show also that the order alleged to be void subjects them to legal injury, actual or threatened."

A subsequent opinion by Mr. Justice Brandeis which clarified that criterion was written the following year in The Chicago Junction Case, 264 U.S. 258, 44 S.Ct. 317, 68 L.Ed. 667 (1924). Standing was upheld therein for six competitors to challenge the validity of an Interstate Commerce Commission decision allowing the New York Central Railroad to acquire an independent terminal railroad in Chicago. The decision was attacked on the ground that there was no evidence to support a finding that the acquisition would be in the public interest as required by the statute. The Court distinguished its prior decision by stating that:

This loss is not the incident of more effective competition. Compare Edward Hines Yellow Pine Trustees v. United States, 263 U.S. 143, 148 44 S.Ct. 72, 68 L.Ed. 216. It is injury inflicted by denying to the plaintiffs equality of treatment * * *. By reason of the Interstate Commerce Act the plaintiffs, being competitors of the New York Central and users of the terminal railroads theretofore neutral, have a special interest in the proposal to transfer the control to that company.

264 U.S. at 267, 44 S.Ct. at 320. Professor Jaffe has construed this case to mean that:

Standing * * * is made to rest on a determination that an interest intended by statute to be protected has been denied that protection. It should be stated somewhat more sharply just what this did and did not mean in the context. It did not mean that there was a right that competition not be diminished. The plaintiff could not win simply by showing such diminution. It did mean that the agency was required by the statute to have regard to competition as one factor in its decision; that it must, if it disregards the effect on competition, give a reasoned explanation. It is in this sense that the "legal right" criterion is most appropriately applied as a generalizing concept to administrative law.⁴

A clear statement of the bases of this principle is found in the Court's subsequent opinion in Tennessee Elec. Power Co. v. TVA, 306 U.S. 118, 137-138, 59 S.Ct. 366, 83 L.Ed. 543 (1939):

The

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