854 F.2d 820 (6th Cir. 1988), 87-6028, Hoke Co., Inc. v. Tennessee Valley Authority

Docket Nº:87-6028.
Citation:854 F.2d 820
Party Name:HOKE COMPANY, INC. and Alley-Cassetty Coal Company, Plaintiffs-Appellants, v. TENNESSEE VALLEY AUTHORITY, Defendant-Appellee.
Case Date:August 04, 1988
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 820

854 F.2d 820 (6th Cir. 1988)

HOKE COMPANY, INC. and Alley-Cassetty Coal Company,




No. 87-6028.

United States Court of Appeals, Sixth Circuit

August 4, 1988

Argued June 9, 1988.

Rehearing Denied Oct. 4, 1988.

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Richard W. Jones, Hurt and Jones, Murray, Ky., Michael J. Zavatsky, Taft, Stettinius & Hollister, Cincinnati, Ohio, Thomas R. McCoy (argued), School of Law, Vanderbilt Univ., Nashville, Tenn., for plaintiffs-appellants.

Edward Christenbury, Gen. Counsel, Tennessee Valley Authority, Knoxville, Tenn., James E. Fox, Deputy Gen. Counsel, Robert C. Glinski, Asst. Gen. Counsel (argued), Melvin L. Harper, for defendant-appellee.

Before MARTIN, MILBURN and GUY, Circuit Judges.

RALPH B. GUY, Jr., Circuit Judge.

Plaintiff, a non-unionized contractor, filed suit against defendant Tennessee Valley Authority (TVA), seeking judicial review of TVA's decision to award a coal purchase contract to a unionized contractor. In response, TVA filed a motion to dismiss or for summary judgment. The district court granted TVA's motion and dismissed the case accordingly. 661 F.Supp. 740. Because we conclude that (1) plaintiffs lacked standing under the competitive bidding statute to challenge TVA's award of the contract to AMCA Resources, Inc. (AMCA); (2) plaintiffs' employees' first amendment right to freedom of association was not violated by TVA's decision to award the contract to the unionized contractor; and (3) TVA did not violate plaintiffs' fifth amendment right to equal protection, we affirm the lower court's order.


Plaintiff Hoke Company, Inc., is a non-union Kentucky corporation engaged in the business of mining coal for sale to various purchasers. Plaintiff Alley-Cassetty Coal

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Company is a Tennessee corporation that acts as a broker in arranging contracts for the sale of coal (the two plaintiffs will hereinafter be referred to collectively as Hoke). The defendant, TVA, is a government corporation created by Congress. The purposes and powers of TVA are set forth in the Tennessee Valley Authority Act of 1933, 16 U.S.C. Sec. 831, et seq. (the Act). Generally speaking, the purposes and powers of TVA relate to the interest of the national defense, agricultural and industrial development, improvement of navigation, and flood control. Among its many functions, TVA operates an integrated electric power system which supplies power to an area covering roughly 80,000 square miles in parts of seven states. A portion of TVA's generating capacity is supplied by coal-fired plants, and the instant dispute arises from unsuccessful contract negotiations between TVA and Hoke regarding the sale of coal by Hoke to TVA.

In the order of February 18, 1987, issued by the district court, the facts of this case are summarized in pertinent part as follows:

This action arises from unsuccessful contract negotiations between TVA and Hoke for the purchase of coal by TVA. In October of 1981, TVA solicited offers for contracts to supply coal to the Paradise Steam Generation Plant near Drakesboro, Kentucky. In accordance with TVA's procurement policy, offers were solicited by issuance of a document entitled "Requisition 62." Requisition 62 was a solicitation for a negotiated procurement rather than a competitive bid procurement. In this type of solicitation, contracts for coal are awarded on the basis of a bid arrived at after negotiations between the offerors and TVA and not as a result of a competitive bidding process. Final award of the contract was subject to approval by the TVA Board.

Among the bidders on Requisition 62 was The Hoke Company (hereinafter Hoke), a nonunion coal producer. Hoke prepared and submitted an offer of coal at $1.3022 per million BTU to TVA. This proposal apparently preliminarily satisfied the requirements and specifications set forth by TVA in Requisition 62, and thereafter, TVA entered into negotiations with Hoke. During these negotiations, Hoke claims that it raised the question of whether its nonunion status would affect TVA's consideration of Hoke's offer. Hoke claims that it informed TVA officials at that time that it did not wish to continue in the negotiations if TVA was only going to award the contract to a union producer. At each negotiation meeting, Hoke claims that it was assured by TVA officials that the contract award would not be affected by the labor affiliation or nonaffiliation of the producers.

In June of 1984, the TVA staff recommended acceptance of Hoke's bid and two other low bids to the TVA Board of Directors. On July 29, 1982, the TVA Board of Directors held a closed "agenda meeting." At this meeting, TVA Board members considered the agenda for its upcoming meeting scheduled July 17, 1982. The agenda for that meeting included the recommendation to accept Hoke's offer. After some deliberation, the Board decided to remove the recommendation from the agenda and directed the TVA staff to reconsider the amounts of coal solicited in light of TVA's coal requirements.

The TVA staff sent a revised recommendation to the Board on July 8, 1982, recommending acceptance of only AMCA Resources, Inc.'s, (AMCA's) offer under Requisition 62. AMCA, a union producer, was the lowest bidder under Requisition 62, offering to sell coal to TVA at a price of $1.1962 per million BTU. The Board approved the award of the contract to AMCA at its July 20, 1982 meeting. TVA informed Hoke of its decision by letter dated September 14, 1982.

(Emphasis in original).

Following TVA's notification to Hoke of the decision to award the contract to AMCA, Hoke filed suit against TVA in the United States District Court, Western District of Kentucky, based on Hoke's claim that the sole reason that TVA rejected

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Hoke's bid was because Hoke is a non-union coal producer. 1 In the district court, Hoke asserted the following: breach of an implied contract; promissory estoppel; violation of TVA Act Sec. 9(b), 16 U.S.C. Sec. 831h(b); violation of TVA procurement regulations; breach of public policy; violation of the equal protection clause of the fifth amendment; and violation of the first amendment. TVA filed a motion to dismiss, or in the alternative, for summary judgment. On February 18, 1987, the district court issued the order quoted above, granting TVA's motion as to each claim alleged by Hoke. 2 On appeal, Hoke claims that the district court erred when it failed to find (1) that TVA had exceeded or violated its congressional grant of authority when TVA chose not to award the contract to Hoke; (2) that Hoke had standing to assert its employees' first amendment right to freedom of association and that TVA had violated that freedom by not awarding the contract to Hoke; and (3) that TVA had violated the equal protection clause of the fifth amendment when it declined to award the contract to Hoke.


  1. TVA's authority to award the contract to AMCA.

    Hoke claims that when TVA chose to award the coal purchase contract to AMCA, a unionized coal producer, TVA was acting in a manner either beyond or in violation of its authority as delegated by Congress. 3 In the February 18, 1987, order issued by the district court, the court responded by finding that under 16 U.S.C. Sec. 831h(b), which is the TVA competitive bidding statute, 4 Hoke had no standing to

    Page 824

    make such a challenge. In reaching this conclusion, the lower court cited Perkins v. Lukens Steel Co., 310 U.S. 113, 60 S.Ct. 869, 84 L.Ed. 1108 (1940), a case in which the Supreme Court held that competitive bidding statutes are created for the protection of the government, rather than for the protection of offerors, and such statutes confer no litigable rights on disappointed offerors.

    In Lukens Steel, producers of iron and steel sought to enjoin the Secretary of Labor, and other officials and agents authorized to make purchases for the government, from imposing a minimum wage requirement, as set by the Secretary in accordance with the Public Contracts Act of June 30, 1936. 5 In concluding that plaintiffs lacked standing to raise their claim because the Public Contracts Act afforded no basis for such a claim, the Court stated:

    We find nothing in the Act indicating any intention to abandon a principle acted upon since the Nation's founding under which the legislative and executive departments have exercised complete and final authority to enter into contracts for Government purchases.

    Id. at 128, 60 S.Ct. at 877. In other words, in the absence of an indication of congressional intent to confer the right to bring suit against the government regarding its power to enter into contracts, disappointed offerors may not invoke judicial review of the government's activities in that respect.

    The district court also cited Cincinnati Electronics Corp. v. Kleppe, 509 F.2d 1080, 1086 (6th Cir.1975), wherein the Sixth Circuit stated:

    Rather, we view the present case as dealing with an exception recognized in Lukens Steel, 310 U.S. at 125, 60 S.Ct. 869 [at 875], where Congress has by "constitutional legislation" recognized the legal right of a bidder for government contracts to benefit from the policy of granting a fair share of such contracts to small business concerns. Standing is conferred by Section 10 only when a relevant statute indicates congressional intent that the person or firm seeking review comes within the zone of interests sought to be regulated or protected. Absent such a congressionally created exception, the general rule of Perkins v. Lukens Steel, supra, that a disappointed...

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