Electro-Methods, Inc. v. U.S.
| Decision Date | 06 March 1984 |
| Docket Number | INC,No. 84-520,ELECTRO-METHOD,84-520 |
| Citation | 728 F.2d 1471 |
| Parties | 31 Cont.Cas.Fed. (CCH) 72,230 , Appellee, v. The UNITED STATES, Appellant. Appeal |
| Court | U.S. Court of Appeals — Federal Circuit |
Alexander Younger, Washington, D.C., argued for appellant. With him on brief were J. Paul McGrath, Asst. Atty. Gen. and David M. Cohen, Director, Washington, D.C.
Kenneth S. Kramer, Washington, D.C., argued for appellee.
Before MARKEY, Chief Judge, and DAVIS, KASHIWA, BENNETT, and SMITH, Circuit Judges.
In this pre-award Government contracts case appellant, the United States Government, appeals from an order of the United States Claims Court holding invalid, on the grounds that the notice was constitutionally defective, a notice of suspension from procurement action of appellee Electro-Methods, Inc. (Electro), issued by the United States Department of the Air Force (Air Force). This court on January 11, 1984, stated its decision that the Claims Court order was in error, and that this court's stay of that order would continue until this opinion was issued. We issue our opinion today, affirming the Claims Court in part but reversing on the validity of the suspension, and remand with instructions that the Claims Court vacate its order in this regard.
We face first dual issues of jurisdiction: (1) whether this court may assert jurisdiction over the Government's appeal, and, if so, (2) whether the Claims Court properly entertained jurisdiction over Electro's suit. The third and major issue we face is whether the Claims Court erred in holding that the suspension notice violated Electro's constitutional right to due process. Finally, we decide whether the Claims Court was correct in declining to refer Electro's proposed suspension to the Small Business Administration (SBA). We hold affirmatively on the two jurisdictional issues, reverse and remand with instructions to vacate on the constitutional issue, and affirm on the SBA issue.
A summary of the facts material to this appeal is as follows: 1 Electro manufactures and sells parts for jet aircraft engines. In 1982 78 percent of its total sales ($21 million out of $27 million) were directly to the United States military services, and 11 percent ($3.05 million out of $27 million) were to Pratt & Whitney Aircraft, Inc., a subsidiary of United Technologies, Inc. Pratt & Whitney also competitively bids on sales of jet aircraft spare parts to the Air Force. At the time Electro was suspended from future contracting with the Government (August 2, 1983), Electro had, by its count, bids outstanding to at least 29 Air Force solicitations on which Electro believed it was low bidder. By count of the court below, this figure was 28 as of September 26, 1983, with 13 of these being ready for award, and Electro low bidder on 3 of the 13. 2
On June 8 and June 9, 1983, the United States District Courts for the District of Connecticut and the Southern District of Florida, respectively, separately issued search warrants based in each case on an affidavit by an FBI agent, to search certain premises (including Electro's) and to seize certain property. These affidavits set forth the results of an FBI investigation, itself begun after review of the results of an investigation by the United Technologies internal security unit. The FBI's investigation had caused it to conclude that probable cause existed that Electro had improperly obtained blueprints and pricing data from Pratt & Whitney, and then bid against Pratt & Whitney in response to Air Force solicitations. A grand jury investigation is pending.
The Air Force learned of the search warrants in June 1983 from one of Electro's competitors. Thereafter, the Air Force Debarment and Suspension Review Board (board) obtained copies of the affidavits from the FBI. Electro likewise obtained copies from the respective courts. Concerned about rumors that bids on Electro's Air Force contracts were being put "on hold," counsel for Electro requested a meeting with the general counsel of the Air Force on July 11, 1983. On July 7 Electro submitted a 9-page memorandum discussing the allegations in the affidavits and stating that the results of an Air Force investigation would show none of them to be true. In connection with Electro's bids possibly being put "on hold," the memorandum discussed the applicable suspension regulations.
Counsel for both Electro and the Air Force, along with Air Force procurement officials, met on July 11, 1983. The Air Force explained in detail the suspension and debarment procedures and stated that no hold had been placed on contracts on which Electro had bid, but that the Air Force was conducting its own review of the affidavits and was considering what might be appropriate action. In such review and consideration of action the Air Force told Electro that it would use only publicly available information which could be released if the board recommended suspension, and that grand jury information would not be used. Electro in turn provided the Air Force with some relevant computer printouts and summaries and asked if it could provide further information. The Air Force told Electro it could provide whatever additional information it deemed appropriate, and on July 20, 1983, Electro did indeed provide the Air Force with follow-up information.
On July 22, 1983, counsel for Electro again met with Air Force counsel and procurement officials. At this meeting Electro's counsel presented Electro's position, including a number of documents designed to refute one of the affidavits. The Air Force stated that debarment and suspension were still under review, and that the Air Force would consider any additional information submitted. Electro supplied the Air Force with additional information (newspaper articles and a videotape) on July 25, and then on July 28 submitted an affidavit by Electro's president denying any determination of prices to be bid on contract orders for spare parts.
On July 26 and 28 the board met and considered the affidavits, all of Electro's submitted material to date, and a memorandum prepared by Air Force counsel. The board determined that "adequate evidence," akin to probable cause for a search warrant, existed of wrongdoing and recommended suspension of Electro, among others. The board forwarded this recommendation along with the entire record to the Air Force debarment and suspension official, who reviewed the material and notified Electro on August 2, 1983, that it was suspended from future contracting with any agency of the United States Government. The notice informed Electro that, within 30 days of receipt of the notice, it could submit, whether in person or in writing or through a representative, information and argument in opposition to the suspension. If this information raised a genuine factual dispute, the Air Force would conduct fact-finding, unless the Department of Justice advised that substantial interests of the Government in pending or contemplated legal proceedings would be prejudiced.
On September 6, 1983, Electro responded with an extensive written submission, including affidavits rebutting what had been alleged in the FBI affidavits, and a demand for a hearing no later than September 14, if the suspensions were not lifted by September 9. Electro declined to make a personal appearance during this period (August 2-September 6), however. On September 8 counsel for the board notified the Department of Justice of the suspension and hearing request, including Electro's demand that the hearing include an examination of the two FBI agents, among other persons. On the same day counsel for the board informed Electro that its submission had raised a "genuine dispute over facts material to the submissions," but that this did not warrant immediate termination of the suspensions. On September 26 Justice advised counsel to the board that Justice had no objection to a hearing before the board concerning material already released by the board, but that examination of the FBI agents or of data obtained by the FBI "would severely hamper an on-going criminal investigation."
Electro brought suit in the Claims Court on September 19, 1983, seeking "emergency" injunctive and declaratory relief to prevent award of contracts for jet engine spare parts on the ground that it had been unlawfully suspended under Defense Acquisition Regulation (DAR) Sec. 1-606 procedures, 32 C.F.R. Sec. 1-106 (1983). After a hearing on September 20, subsequent briefing, and argument on September 29, the Claims Court ordered, and then detailed by written opinion, 3 that the August 2, 1983, suspension of Electro was defective, invalid, and not to be given further effect, on the grounds that the notice lacked a date certain on which Electro's response could be heard. The Government filed a motion for stay of the Claims Court order pending appeal to this court. The court below denied the stay. This court on appeal first denied and then, upon reconsideration, granted the stay, docketing the case for oral argument in early January 1984. After argument this court on January 11 communicated to the parties its decision that the Claims Court order was entered in error and that this court's stay of that order would continue in effect until this opinion issued.
OpinionElectro argues that this court lacks jurisdiction to review the Claims Court order of September 29, 1983, and opinion of October 3, because, among other theories, that order and opinion do not constitute a final judgment appealable to this court. 4 Electro notes that in a subsequent Claims Court order dated October 17, 1983, in which that court denied the Government's request for a stay pending appeal, the lower court also declined to make entry of judgment because its September 29 order and October 3 opinion "do not make final disposition of plaintiff's [Electro's] complaint." The...
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