Cincinnati Electronics Corp. v. Kleppe

• Decision Date: 31 January 1975
• Docket Number: Nos. 73--2046 and 74--1170,s. 73--2046 and 74--1170
• Citation: 509 F.2d 1080
• Parties: CINCINNATI ELECTRONICS CORPORATION, Plaintiff-Appellant, v. Thomas S. KLEPPE, Administrator, Small Business Administration, and Howard H. Callaway, Secretary of the Army, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1080

509 F.2d 1080

CINCINNATI ELECTRONICS CORPORATION, Plaintiff-Appellant, v. Thomas S. KLEPPE, Administrator, Small Business Administration and Howard H. Callaway, Secretary of the Army, Defendants-Appellees.

Nos. 73--2046 and 74--1170.

United States Court of Appeals Sixth Circuit.

Jan. 31, 1975.

Thomas S. Calder, Dinsmore, Shohl, Coates & Deupree, Cincinnati, Ohio, Robert L. Ackerly, Joseph S. Wager, Sellers, Conner & Cuneo, Washington, D.C., for plaintiff-appellant in both cases.

William W. Milligan, U.S. Atty., Grayce M. Ruehlman, Cincinnati, Ohio, Byron Trapp, Robert E. Kopp, David M. Cohen, Carla Hills, Asst. Atty. Gen., Dept. of Justice, Washington, D.C., for defendants-appellees in both cases.

Before PHILLIPS, Chief Judge, and CELEBREZZE and LIVERLY, Circuit Judges.

LIVELY, Circuit Judge.

This case presents consolidated appeals by an unsuccessful bidder for a government contract from two adverse rulings by the district court. On March 24, 1972 the Army issued invitations to bid on a multi-year procurement of radio sets. The invitations stated that 50 per cent of the total quantity would be set aside for award by negotiation to concerns located in labor surplus areas. First priority would be given to certified-eligible concerns which were also 'small business concerns.' The bids of eleven companies were opened on October 18, 1972. The apparent low bid was found to be nonresponsive and was rejected. The second low bid was that of Cincinnati Electronics Corporation (Cincinnati), and it was ultimately awarded a contract covering the non-set-aside portion of the procurement. On protest by another bidder, Cincinnati was found not to be a small business concern within the meaning of the applicable regulations. This ruling gave Cincinnati a lower priority than Sentinel Electronics, Inc. (Sentinel), and the set-aside portion of the procurement was awarded to Sentinel on June 13, 1973.

Upon being notified by the contracting officer on June 11, 1973 of his intention to award the set-aside contract to Sentinel, Cincinnati filed a protest against the award and requested the contracting officer to withhold making an award pending determination by the Small Business Administration (SBA) of the small business status of Sentinel. The protest was based upon information which Cincinnati had obtained from a trade magazine which indicated that Sentinel had entered into a 'teaming agreement' with an Israeli concern which would disqualify Sentinel for preference as a small business concern. Prior to this time both the contracting officer and another bidder had obtained from SBA rulings that Sentinel continued to qualify as a small business concern and that the arrangement with the Israeli company did not disqualify it. A similar conclusion was reached by counsel for the Comptroller General of the United States when the denial of the protest filed by another unsuccessful bidder was appealed to that officer. The contracting officer neither forwarded Cincinnati's protest to SBA nor delayed making an award of the set-aside contract as requested in the protest. This suit was then filed in the district court.

In its complaint, Cincinnati sought review both of the decision of SBA that Cincinnati was not qualified for preferential treatment as a small business concern and of the action of the Secretary of the Army, acting through the contracting officer, in refusing to forward its protest of Sentinel's small-business-concern status to SBA and in awarding the set-aside contract to Sentinel without awaiting the outcome of Cincinnati's protest. The district court did not reach the issue of Cincinnati's qualification as a small business concern because of the manner in which the case proceeded. The court entered a temporary restraining order against the defendant Callaway and set a hearing on Cincinnati's motion for a preliminary injunction. No injunctive relief was sought against the administrator of SBA, and thus the issue with respect to determination of Cincinnati's status as a small business concern was not involved in the injunction proceedings. The district court denied the motion for a preliminary injunction and filed an opinion setting forth his findings and conclusions. An appeal was taken from the order denying the injunction pursuant to 28 U.S.C. § 1292(a)(1). Thereafter the court entered a final judgment of dismissal of the defendant Callaway 'on the claims that the Contracting Officer violated the Armed Services Procurement Regulations in awarding the set-aside portion of the procurement contract to Sentinel Electronics, Inc.' In this order, the court made the required determination under Rule 54(b), Fed.R.Civ.P., that there is no just reason for delay and the alternative certification under 28 U.S.C. § 1292(b) that the order involves controlling questions of law as to which there is substantial ground for difference of opinion and an immediate appeal might materially

advance the ultimate termination of the litigation. Cincinnati filed a separate appeal from this judgment, and the two appeals were consolidated for hearing and decision. The claims in the complaint against the administrator of SBA are pending in the district court.

THE ISSUE OF STANDING

At the outset, the court is faced with the contention of the government that Cincinnati had no standing to obtain judicial review of the Army's action in awarding the set-aside portion of the procurement to Sentinel. Obviously, if this argument is correct, we will not reach the merits of the case. In Perkins v. Lukens Steel Company, 310 U.S. 113, 60 S.Ct. 869, 84 L.Ed. 1108 (1940), the Supreme Court held that bidders for government contracts have no standing in a federal court to obtain a declaratory judgment and injunction restraining officials and agents of an executive department with respect to public contracts. The Court found that no legal rights of the plaintiffs in that case had been invaded or threatened and that 'neither damage nor loss of income in consequence of the action of Government, which is not an invasion of recognized legal rights, is in itself a source of legal rights in the absence of constitutional legislation recognizing it as such.' The Court further held that such bidders do not have standing to 'vindicate any general interest which the public may have in the construction of the Act by the Secretary and which must be left to the political process. Respondents, to have standing in court, must show an injury or threat to a particular right of their own, as distinguished from the public's interest in the administration of the law.' Id. at 125, 60 S.Ct. at 875.

The Court pointed out that the Public Contracts Act, under which the plaintiffs sought to proceed, 'embodies the traditional principle of leaving purchases necessary to the operation of our Government to administration by the executive branch of Government, with adequate range of discretion free from vexatious and dilatory restraints at the suits of prospective or potential sellers. It was not intended to be a bestowal of litigable rights upon those desirous of selling to the Government; it is a self-imposed restraint for violation of which the Government--but not private litigants--can complain.' Id. at 127, 60 S.Ct. at 876. At the conclusion of the opinion, Mr. Justice Black, disclaiming that the standing issue rested upon a technicality, wrote, 'We rest it upon reasons deeply rooted in the constitutional divisions of authority in our system of Government and the impropriety of judicial interpretations of law at the instance of those who show no more than a mere possible injury to the public.' Id. at 132, 60 S.Ct. at 879. Perkins v. Lukens Steel Company has never been reversed by the Supreme Court nor alluded to in the later cases hereinafter cited dealing with the issue of standing in different contexts.

Cincinnati contends that the authority of Lukens Steel has been eroded by subsequent decisions of the Supreme Court and by congressional action. In Data Processing Service v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970), the Court pointed out that little value is to be gained from generalizations about standing to sue in the federal courts. Beyond the constitutional requirement that there be an actual 'case' or 'controversy' the first inquiry is 'whether the plaintiff alleges that the challenged action has caused him injury in fact, economic or otherwise.' If this standard is met, the court must then determine 'whether the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.' Id. at 152--153, 90 S.Ct. at 830. The Court further stated that the question of whether a plaintiff has a 'legal interest' conferred by a statute or regulation whose violation has caused him to seek judicial review of administrative action goes to the merits of the case and is not an issue in determining whether plaintiff has standing to sue.

In Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970), the Court found that a group of plaintiffs clearly belonged within the zone of interests protected by a statute because they were 'persons aggrieved by agency action within the meaning of a relevant statute,' language quoted from Section 10 of the Administrative Procedure Act (APA), 5 U.S.C. § 702. The Court cautioned that the determination of whether a particular agency action is reviewable involves the often difficult task of finding congressional intent, and that an intent to preclude judicial review may be either found in express language or inferred, but should not be lightly inferred. Id. at 166, 90 S.Ct. 832.

In Sierra Club v. Morton, 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972), and United States v. SCRAP, 412 U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973), the Supreme Court dealt with cases where plaintiffs claimed noneconomic injury...