DONMI OF MILFORD v. US DEPT. OF HOUS. & URB. DEV., Civ. No. N-82-398.
| Decision Date | 23 June 1983 |
| Docket Number | Civ. No. N-82-398. |
| Citation | 567 F. Supp. 182 |
| Court | U.S. District Court — District of Connecticut |
| Parties | DONMI OF MILFORD, INC., Plaintiff, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; Waterbury Housing Authority, City of Waterbury, Connecticut; Waterbury Redevelopment Agency; Bessoni Brothers, Inc., Defendants. |
Daniel Y. Sachs, New Haven, Conn., for plaintiff.
Barry Stevens, Asst. U.S. Atty., Bridgeport, Conn., for defendant U.S. Housing & Urban Development.
INTERIM RULING ON MOTION TO DISMISS
This dispute arises from the award by the Waterbury Public Housing Authority ("PHA") of a contract for a federal housing project. The defendants have moved to dismiss this action, arguing that the plaintiff is without standing, that this court lacks subject matter jurisdiction, and that the plaintiff has failed to state a claim upon which relief can be granted. For the reasons set forth below, the defendants' motions must be denied.
On February 17, 1982, the PHA solicited proposals for the construction of 21 units of family housing, to be purchased by the PHA under the federal "turnkey" program, as described at 24 C.F.R. § 841.102(b). The units were to be constructed on land owned either by the City of Waterbury, Connecticut, the Waterbury Redevelopment Agency, or both.
The solicitation of proposals included a section dealing with "Special Requirements for Turnkey Projects in Waterbury," which required compliance "with all Waterbury and Connecticut Codes and Minimum Property Standards for Multi-Family Housing ... except where the standards set forth in this architectural program exceed the Minimum Property Standards." Paragraph 5 of these Special Requirements stated that "in each unit, all bedrooms shall be large enough for double occupancy under Waterbury Code (120 square feet of clear floor space)."
Nine proposals were submitted to the PHA by the March 19, 1982, deadline. The PHA rejected seven of these as unresponsive, leaving the plaintiff, Donmi of Milford, Inc., ("Donmi"), and Bessoni Brothers, Inc., ("Bessoni") as the only eligible developers. The PHA staff ranked Donmi's proposal first, when measured against predetermined criteria. On April 17, 1982, the PHA Board of Commissioners voted to transmit its recommendation to HUD that Donmi be awarded the contract.
HUD's Hartford Field Office staff reviewed Donmi's proposal, and concluded that Donmi was not in compliance with the Minimum Property Standards in three respects. Two of these objections were later withdrawn, but the proposal was held to be in noncompliance in that 2 of the 3 bedrooms in the three-bedroom unit showed net floor areas of less than 120 feet. The proposal was therefore "unresponsive" and the PHA was told to "amend its ranking" before June 18, or face the loss of funds set aside for the project. The PHA then withdrew its recommendation of Donmi and, on July 8, recommended Bessoni in its place.
Donmi does not dispute the fact that the bedrooms in question in its proposal are less than 120 square feet in size. Instead, it argues that the Waterbury building code does not require 120 square feet of area for double occupancy, and that is therefore in compliance with project standards. HUD continues to insist on the requirement of 120 square feet of clear floor space.
Donmi also alleges that its own review of Bessoni's plans and specifications reveals not less than 15 instances of noncompliance with HUD Minimum Property Standards, state codes, and PHA requirements. Donmi therefore concludes that there was no rational basis either for its disqualification, or for the designation of Bessoni as developer, and that, in the absence of such a rational basis, HUD's actions were arbitrary and capricious, and an abuse of HUD's discretion.
Donmi filed its complaint in this action on August 13, 1982, seeking a declaration that its proposal was responsive to the invitation for proposals, and that the Bessoni proposal was not responsive, and injunctive relief barring award of the contract for this turnkey project to Bessoni. Donmi has not sought an order awarding it the contract; it seeks instead only to force the defendants to consider the bids in what it considers a rational and fair manner.
On September 17, 1982, the United States moved to dismiss for lack of standing and lack of subject matter jurisdiction, and the other defendants later joined in that motion. On December 23, 1982, this court issued an interim ruling with suggestions for further briefing. On December 28, 1982, the United States filed an additional motion to dismiss under Rule 12(b)(6) for failure to state a claim. Rulings on these motions were delayed at the request of the parties pursuant to settlement negotiations. Those negotiations having faltered, the court now considers the three grounds for dismissing this action advanced by the defendants.
The defendants challenge Donmi's standing as a disappointed bidder to sue under the Administrative Procedure Act, 5 U.S.C.A. §§ 701, et seq. ("the APA"). The Second Circuit has twice refused to address the question whether the APA alone confers standing or whether some other applicable federal statute or regulation must grant standing. Spencer, White & Prentis v. United States, 641 F.2d 1061, 1065-66 (2 Cir.1981); Morgan Associates v. U.S. Postal Service, 511 F.2d 1223, 1225 n. 3 (2 Cir. 1975). The majority rule, enunciated with an extended analysis in Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C.Cir. 1970), holds that standing may be based on the APA without reference to any other statute. The Third, Fourth, Fifth, Seventh and Ninth Circuits have followed this rule. (See cases cited in Spencer, White, supra, 641 F.2d at 1065.) Only the Sixth Circuit has rejected the Scanwell rule. See Cincinnati Electronics Corp. v. Kleppe, 509 F.2d 1080 (6th Cir.1975).
The Second Circuit did not have to decide in Morgan Associates, supra, whether the more liberal Scanwell rule should be adopted in this Circuit because the merits of that case were obviously weak and the case required speedy disposition. In Spencer, White even the strict Cincinnati Electronics test was met.
Donmi argues that bidding procedures such as those promulgated by HUD for this turnkey project are designed in part to ensure that "no one competitor gets the edge on the others by shortcutting those standards," Plaintiff's brief at 15, citing Budike v. Klutznick, 510 F.Supp. 970 (D.Pa.1981). Donmi seems to imply that these HUD application procedures are the kind which can confer standing for review under the APA, under even the strict Sixth Circuit test.
If this were a correct interpretation of Cincinnati Electronics, every disappointed bidder for a government project or contract would have standing to seek review of agency action. That is precisely what the Sixth Circuit refused to hold. See Cincinnati Electronics, supra, 509 F.2d at 1086.
Thus, if Donmi is to be given standing here, it can only be under the more liberal Scanwell rule. This court is persuaded by Judge Tamm's scholarly and well reasoned opinion in that case and holds that Donmi does have standing to sue.
The plaintiff originally urged this court to find jurisdiction under any or all of the following statutes: the Tucker Act (28 U.S.C. § 1346); the Declaratory Judgment Act (28 U.S.C. §§ 2201, 2202); the Administrative Procedure Act; the "sue and be sued" provisions of 42 U.S.C. § 1404a; and the "federal question" statute, 28 U.S.C. § 1331. Donmi has since withdrawn its jurisdictional claims under the first four of these statutes and seeks to proceed only under the federal question statute.
The basic question posed by the complaint in this action is whether the defendants (especially HUD) were arbitrary and capricious in refusing to award this turnkey project to Donmi, and in awarding it instead to Bessoni. The court must decide whether this question "arises under" federal law and is therefore one over which § 1331 jurisdiction exists.
At this early stage of the case, it is not to be expected that Donmi will have precisely formulated the theories upon which it will proceed. In so far as the court can determine for purposes of this jurisdictional dispute, Donmi claims two possible bases for the court to find issues which "arise under" federal law. First, there is a question of whether the prohibition against "arbitrary and capricious" agency action in § 10 of the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701-706, applies to this case. Second, Donmi suggests that various housing statutes and regulations implicate a federal question.2 Because this court concludes that Donmi has a cause of action "arising under" the APA, it will not evaluate the claimed cause of action under the housing statutes.
The court agrees that:
13 Wright, Miller & Cooper, Federal Practice and Procedure, § 3562 at 397-8 (1975) (footnotes omitted).
Case law requires this court to ask at least three questions to determine whether an alleged cause of action "arises under" federal law. First, the court must determine whether it is the type of allegation which may serve as the basis for federal question jurisdiction. See, e.g., Wright, Miller & Cooper, supra, § 3563. The Supreme Court held, in Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977), that the APA can serve as the basis for...
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