Gonzalez v. Freeman, 17765.

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Citation334 F.2d 570
Docket NumberNo. 17765.,17765.
PartiesCarmen GONZALEZ et al., Appellants, v. Orville L. FREEMAN et al., Appellees.
Decision Date07 May 1964

334 F.2d 570 (1964)

Carmen GONZALEZ et al., Appellants,
Orville L. FREEMAN et al., Appellees.

No. 17765.

United States Court of Appeals District of Columbia Circuit.

Argued November 20, 1963.

Decided May 7, 1964.

334 F.2d 571

Mr. Alan H. Kaplan, Washington, D. C., with whom Messrs. Sheldon E. Bernstein and Paul H. Mannes, Washington, D. C., were on the brief, for appellants.

Mr. Gerald A. Messerman, Asst. U. S. Atty., with whom Messrs. David C. Acheson, U. S. Atty., and Frank Q. Nebeker, Asst. U. S. Atty., were on the brief, for appellees.

Before DANAHER, BURGER and McGOWAN, Circuit Judges.

BURGER, Circuit Judge.

This is an appeal from an order granting summary judgment for appellees in an action for a declaratory judgment and injunctive relief against the Secretary of

334 F.2d 572
Agriculture and others relating to debarment of appellants from participating in certain contracts with Commodity Credit Corporation (Commodity Credit),1 one of the appellees

In January 1960, Thos. P. Gonzalez Corporation, which had a record of contractual relations with Commodity Credit for a number of years, received notice by telegram2 that the Gonzalez Corporation and its officers and affiliates, including Thomas P. Gonzalez and Carmen Gonzalez, Gonzalez and Blanco, J. F. Gonzalez Company, the American Chili Powder Company, and any corporation in which Thomas or Carmen Gonzalez was a partner or officer, were temporarily debarred from doing business with Commodity Credit pending investigation into possible misuse of official inspection certificates relating to commodities exported to Brazil by Gonzalez Corporation. Only Carmen Gonzalez, Thomas P. Gonzalez and Thos. P. Gonzalez Corporation joined as plaintiffs in the District Court action now under review.

By letter dated October 31, 1960 Commodity Credit advised appellants that the suspension would be continued until conclusion of an investigation by the Department of Justice. On May 24, 1961, Thomas P. Gonzalez, individually, was indicted on felony charges for alleged misuse of the official inspection certificates referred to in the January 1960 notice of temporary suspension. Following the receipt of the telegram announcing temporary suspension appellants presented information relevant to their position and various representations were made in their behalf by counsel to officials of appellees. On May 24, 1962, after consideration of information and arguments submitted by appellants, Commodity Credit informed appellants by letter that they were suspended for five years from the date of the original temporary suspension on January 13, 1960. The letter stated no reasons or grounds for the final debarment action.3

Meanwhile, on January 15, 1962, the indictment of May 24, 1961, charging Thomas P. Gonzalez personally with misuse of official inspection certificates, was dismissed, and Gonzalez entered a plea of guilty to a misdemeanor based essentially on the same acts. 60 STAT. 1087 (1946), as amended, 69 STAT. 553 (1955), 7 U.S.C. § 1622(h) (1958).

Appellants sought review by the Secretary of Agriculture, who declined to reconsider,

334 F.2d 573
stating: "We feel that further discussions would serve no useful purpose unless you are in a position to present new facts concerning this matter which heretofore have not been considered." Appellants offered none

Thereafter, appellants instituted the declaratory judgment action from which this appeal arises. Since January 1960, appellants have been ineligible to participate in any programs of Commodity Credit or to purchase surplus government commodities for resale. Their complaint in the District Court alleged that in appellants' course of dealings with Commodity Credit they had purchased for export under license an aggregate of more than $7,000,000 in surplus commodities, that this was a large part of their business, and that loss of this business has deprived them of more than $100,000 in profits. The chronology of this record shows that for more than two and one-half years, while under temporary and then final suspension, appellants have protested unsuccessfully against the action which made them ineligible to purchase surplus government commodities under control of Commodity Credit.

Appellants contend that the debarment is invalid for four reasons:

1. Debarment is not authorized by statute or by regulation.
2. Debarment was imposed without rules or regulations specifying grounds for debarment and establishing a procedure for debarment.
3. Debarment was imposed without notice of charges relied upon and without a meaningful opportunity to meet and refute charges.
4. Debarment of appellants was a denial of due process.

Appellants seem to concede that if the action of debarment is authorized by law, a preliminary or temporary debarment may be made in summary fashion. They contend, however, that final action of debarment imposes such serious economic injury on a contractor that debarment can be imposed only by a procedure which comports with constitutional standards of due process. The temporary suspension of January 1960 was to continue only "pending completion of an investigation" by the Department of Justice. At that point — when this investigation was completed — appellants insist, notice of charges, opportunity to be heard, and opportunity to cross-examine adverse witnesses were required.

Appellees' position is that (1) doing business with Commodity Credit is not a legally protected right and suspension of eligibility for five years gives rise to no justiciable controversy; (2) Congress has expressly precluded judicial review of Commodity Credit action; (3) appellants committed a willful act in violation of law basically destructive of the purposes and operations of Commodity Credit;4 (4) appellant Gonzalez' guilty plea to fraudulent misuse of official inspection certificates established the truth of criminal misuse of such certificates and made it unnecessary to conduct hearings to ascertain the facts on which suspension and debarment rested; (5) opportunity was afforded appellants to present evidence and arguments; (6) the sanction imposed was plainly related to the successful execution of Commodity Credit's statutory objectives and reasonably commensurate with the gravity of appellants' misconduct.

The issues which emerge from the opposing contentions can be restated as follows:

(1) Does debarment of a government contractor from eligibility for
334 F.2d 574
purchase of surplus commodities give rise to a justiciable controversy if it is alleged that debarment was imposed without due process?
(2) Did Congress provide for judicial review of the debarment process conducted by Commodity Credit?
(3) May debarment of a government contractor be imposed without express statutory authority?
(4) If Commodity Credit has legal authority to debar, can appellants be debarred:
(a) in the absence of regulations establishing standards and procedures, and
(b)in the absence of written notice of charges, evidentiary hearing and findings on charges of misconduct?


Justiciability and Standing

There can be no doubt that the invasion of some legally protected right is the predicate upon which any exercise of judicial power must rest. See Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 140-141, 71 S.Ct. 624, 95 L.Ed. 817 (1951) (principal opinion). It is equally correct, broadly speaking, to say that no citizen has a "right," in the sense of a legal right, to do business with the government. See Perkins v. Lukens Steel Co., 310 U.S. 113, 60 S.Ct. 869, 84 L.Ed. 1108 (1940). But use of such terms as "right" or "privilege" tends to confuse the issues presented by debarment action. Interruption of an existing relationship between the government and a contractor places the latter in a different posture from one initially seeking government contracts and can carry with it grave economic consequences.

The consequences of administrative termination of all right to bid or contract, colloquially called "blacklisting" and formally called suspension or debarment, will vary, depending upon multiple factors: the size and prominence of the contractor; the ratio of his government business to non-government business; the length of his contractual relationship with government; his dependence on that business; his ability to secure other business as a substitute for government business. These are some of the basic factors involved. The impact of debarment on a contractor may be a sudden contraction of bank credit, adverse impact on market price of shares of listed stock, if any, and critical uneasiness of creditors generally, to say nothing of "loss of face" in the business community.5 These consequences are in addition to the loss of specific profits from the business denied as a result of debarment. We need not resort to a colorful term such as "stigma" to characterize the consequences of such governmental action, for labels may blur the issues. But we strain no concept of judicial notice to acknowledge these basic facts of economic life.

Thus to say that there is no "right" to government contracts does not resolve the question of justiciability. Of course there is no such right; but that cannot mean that the government can act arbitrarily, either substantively or procedurally, against a person or that such person is not entitled to challenge the processes and the evidence before he is officially declared ineligible for government contracts. An allegation of facts which reveal an absence of legal authority

334 F.2d 575
or basic fairness in the method of imposing debarment presents a justiciable controversy in our view. The injury to appellants alleged in their complaint gives them standing to challenge the debarment processes by which such injury was imposed. See Copper Plumbing & Heating Co. v. Campbell, 110 U.S.App. D.C. 177, 179-180, 290 F.2d 368, 370-371 (1961)


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