Cavalier Clothes, Inc. v. U.S., 86-1053

• Decision Date: 20 January 1987
• Docket Number: No. 86-1053,86-1053
• Parties: , 33 Cont.Cas.Fed. (CCH) 74,983 CAVALIER CLOTHES, INC., Appellant, v. The UNITED STATES, Appellee. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 1108

810 F.2d 1108

55 USLW 2440, 33 Cont.Cas.Fed. (CCH) 74,983

CAVALIER CLOTHES, INC., Appellant, v. The UNITED STATES, Appellee.

Appeal No. 86-1053.

United States Court of Appeals, Federal Circuit.

Jan. 20, 1987.

Marc Lamer, Kostos Reiter Ganister & Lamer, Philadelphia, Pa., argued for appellant.

Sylvia F. Brown, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued for appellee. With her on the brief were Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director and Thomas W. Petersen, Asst. Director. Sandra L. Guydon, Atty. Advisor and Molly Houghton Colburn, Asst. Counsel, Dept. of Justice, of counsel.

Before DAVIS, NEWMAN and BISSELL, Circuit Judges.

DAVIS, Circuit Judge.

Cavalier Clothes, Inc. (Cavalier) appeals from an order of the United States Claims Court denying injunctive relief and dismissing Cavalier's complaint for lack of equitable jurisdiction. Because we conclude that the Claims Court has jurisdiction to entertain Cavalier's complaint, we reverse and remand.

I. FACTS AND PROCEEDINGS

Facts: ¹ On September 12, 1985, the Defense Personnel Support Center (DPSC) ² issued a solicitation inviting small business firms to submit sealed bids for a contract to manufacture 38,900 women's Army coats. When bids were opened on October 25, 1985, Cavalier was the apparent low bidder. As is customary, DPSC initiated a pre-award survey ³ which was conducted by Defense Contract Administration Services (DCAS). The latter recommended against awarding the contract to Cavalier, citing Cavalier's (1) prior unsatisfactory performance of other Government contracts; (2) inability to control production scheduling; (3) inability to maintain adequate quality control; and (4) lack of financial capacity. Based on DCAS's recommendation, the contracting officer rejected Cavalier's bid as non-responsible. Because Cavalier is a small business, the contracting officer was required to refer the matter to the Small Business Administration (SBA) pursuant to 48 C.F.R. Sec. 9.104-3(e) (1985). The SBA conducted a thorough review of the matter including a plant survey and financial survey and determined that Cavalier was entitled to a Certificate of Competency (COC) enabling it to receive the contract award, notwithstanding the earlier finding of non-responsibility.

On February 18, 1986, the SBA issued the COC to Cavalier. Two days later, Cavalier received a letter from H. Landau & Company, informing appellant that Landau was rescinding its offer to lend Cavalier Proceedings: Cavalier then filed suit against the Government in the Claims Court seeking injunctive relief and asserting that the rejection of its bid was part of a de facto debarment and therefore illegal. The Government moved for summary judgment. Following oral argument the Claims Court denied injunctive relief and entered an order dismissing the case for lack of jurisdiction. In his oral opinion, Judge Mayer ruled that Speco Corp. v. United States, 2 Cl.Ct. 335 (1983) (Mayer, J.), controlled and held that the Claims Court "is not authorized to enjoin the SBA responsibility determination either directly or indirectly by acting on the decision of the contracting officer who is divested of further discretion when the SBA determines whether or not to issue a Certificate of Competency." On appeal, counsel for Cavalier argues that Speco was wrongly decided and that a contrary Claims Court decision, Related Industries, Inc. v. United States, 2 Cl.Ct. 517 (1983), should govern.

$150,000. A copy of this letter was delivered to SBA on February 20, 1986. At a February 21, 1986 meeting between SBA officials and representatives of Cavalier, the former informed Cavalier of its intention to withdraw the COC for inadequate financial support unless Cavalier, prior to February 25, 1986, provided the SBA with documentary evidence of sufficient funding from another source. Cavalier failed to do so and on February 26, 1986, the SBA withdrew the COC.

II. DISCUSSION

As we have said, in dismissing Cavalier's complaint, Judge Mayer relied on his earlier holding in Speco that, once the SBA declines to issue a COC, the contracting officer is precluded from awarding the contract to the disappointed bidder. On that view, the action sought to be enjoined is that of the SBA, and in the light of the anti-injunction provision of the Small Business Act ⁴ a necessary concomitant is that the Claims Court lacks jurisdiction to entertain the suit. According to Speco, where the SBA has finally determined that a bidder is not responsible and refuses to issue a COC:

the contracting officer is thereby disabled from awarding it the contract. Ordering the contracting officer to withhold award from another bidder with the implicit expectation that ultimately it might be made to plaintiff would be equivalent to enjoining the effectiveness of the decision statutorily reserved to the SBA.

This court has no power to enjoin the Administrator directly; it will not disingenuously enjoin him indirectly.

2 Cl.Ct. at 338 (citation omitted).

For reasons fully developed by Judge Philip Miller in Related Industries and summarized infra, we reject Speco to the extent that it deems the SBA's denial of a COC as final and unreviewable. In Related Industries, ⁵ the DPSC solicited bids for a contract for sleeping bags. Even though the small-business plaintiff was the low bidder on the contract, the contracting officer notified it that he intended to reject its bid as non-responsible and that he planned to reject any and all future bids by plaintiff. After the SBA refused to issue a COC, plaintiff sought a declaratory judgment that it was the properly qualified low bidder on the contract. In addition, plaintiff sought an injunction The Government filed (in Related Industries ) a motion to dismiss on two grounds. First, defendant there contended that because 15 U.S.C. Sec. 637(b)(7)(A) (1982) entrusts the SBA with "final disposition" of the competency certification, the SBA's determination is final and nonreviewable. Second, the defendant argued that under 15 U.S.C. Sec. 634(b)(1), supra, neither the SBA nor its Administrator may be enjoined. Related Industries expressly refused to follow Speco and rejected both grounds urged as supporting the motion to dismiss. We follow that opinion's analysis.

restraining the United States, the DPSC and others from awarding the contract to any other bidder and requiring its award to plaintiff. 2 Cl.Ct. at 519.

Finality of SBA competency determination: Section 637 of the Small Business Act as amended provides in pertinent part:

Additional Powers

(b) It shall also be the duty of the [Small Business] Administration and it is empowered, whenever it determines such action is necessary--

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(7)(A) To certify to Government procurement officers ... with respect to all elements of responsibility, including, but not limited to, capability, competency, capacity, credit, integrity, perserverance, and tenacity, of any small business concern or group of such concerns to receive and perform a specific Government contract. A Government procurement officer ... may not, for any reason specified in the preceding sentence, preclude any small business concern or group of such concerns from being awarded such contract without referring the matter for a final disposition to the Administration.

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(C) In any case in which a small business concern or group of such concerns has been certified by the Administration ... to be a responsible or eligible Government contractor as to a specific Government contract, the officers of the Government having procurement ... powers are directed to accept such certification as conclusive, and shall let such Government contract to such concern or group of concerns without requiring it to meet any other requirement of responsibility or eligibility. [Emphasis added.]

The mere fact that the statute commits the "final disposition" of the competency certification to the SBA does not immunize from judicial review the refusal to grant a COC. As Judge Miller observed, "[t]he final disposition to which the statute refers is only final with respect to a decision certifying a contractor to the procurement officer as responsible." 2 Cl.Ct. at 520. Once a contracting officer decides to deny a contract to a small business concern on the ground of nonresponsibility, that officer is required to refer the matter to the SBA. In the event the SBA disagrees and issues a COC, the certification of the small business concern as responsible is binding on the contracting officer. So construed, Sec. 637 is simply a protective statute designed to insulate the small business concern from the contracting officer's refusal to follow the SBA decision. However, contrary to Speco and the position taken by the Government on this appeal, the converse is not true. The SBA's refusal to issue a COC does not prevent the contracting officer from later reversing himself, on the basis of new evidence. ⁶

Moreover, "[t]he text or legislative history of a statute must provide 'clear and convincing' evidence of congressional intent ... before a statute will be construed to restrict access to judicial review." Related Industries, 2 Cl.Ct. at 520 (quoting Johnson v. Robison, 415 U.S. 361, 373-74, 94 S.Ct. 1160, 1169, 39 L.Ed.2d 389 (1974)). We agree that neither the language ("final disposition") nor the legislative history of Sec. 637 undermines the "normal presumption in favor of...