Hellenic American Neighborhood Action Committee v. City of New York

Citation101 F.3d 877
Decision Date05 December 1996
Docket NumberD,No. 698,698
PartiesHELLENIC AMERICAN NEIGHBORHOOD ACTION COMMITTEE, Plaintiff-Appellee, v. The CITY OF NEW YORK, Mayor Rudolph Giuliani, City of New York Human Resources Administration, Marva Livingston Hammons, Deputy Commissioner Seth Diamond, Deputy Commissioner Violet Mitchell and City of New York Department of Youth Services, Defendants-Appellants. ocket 96-7840.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Allan M. Pepper, Kaye, Scholer, Fierman, Hays & Handler, LLP, New York City, for Plaintiff-Appellee.

Lawrence S. Kahn, Corporation Counsel of the City of New York, New York City, for Defendants-Appellants.

Before: WALKER, McLAUGHLIN, and JACOBS, Circuit Judges.

McLAUGHLIN, Circuit Judge:

Defendants appeal from an order of the United States District Court for the Southern District of New York (Sotomayor, J.) granting plaintiff's motion for a preliminary injunction.

BACKGROUND
Procurement Procedures in General

Under the New York City Charter, a bidder for a City contract must clear two hurdles. First, the bid must be "the most advantageous to the city," taking into consideration a variety of factors, including price. N.Y. City Charter § 319. Second, a bidder must be found "responsible" by the agency granting the contract. N.Y. City Charter § 313(b)(2),(3). The City Charter then requires contracts to be awarded to the "lowest responsible bidder," unless it is in the City's "best interest" to accept another bid. N.Y. City Charter § 313(b)(2).

The Procurement Policy Board (PPB) establishes standards and procedures to determine whether bidders are responsible. N.Y. City Charter § 311. The PPB Rules ("Rules") define a responsible bidder as "one which has the capability in all respects to perform fully the contract requirements and the business integrity to justify the award of public tax dollars." 9 RCNY § 5-02(b)(1). The Rules enumerate eight illustrative factors that may be considered in determining whether a bidder is responsible, including "[a] satisfactory record of business integrity." 9 RCNY § 5-02(b)(2)(vi). Each head of the City's various procuring agencies has "final approval in the award of contracts for goods, services and construction" involving his agency. 9 RCNY § 5-04(a).

The City maintains a publicly accessible computer database (VENDEX) of all bidders. 9 RCNY § 5-02(e). Any finding of nonresponsibility by an agency must be reported to the VENDEX. 9 RCNY § 5-02(h)(3). Agency contracting officers must check the VENDEX for adverse entries regarding bidders before awarding a contract. 9 RCNY § 5-02(g)(1)(i).

The Department of Investigation (DOI) is required to report to an inquiring agency if a A nonresponsibility determination is appealable within the agency from the contracting officer to the agency head, and from there to the Mayor, who may delegate this authority to the City Chief Procurement Officer. 9 RCNY § 7-03.

bidder is the subject of an investigation. 9 RCNY § 5-02(f). If an investigation is under way, an agency can request a report from the DOI on its findings. Id. The agency contracting officer and the agency head then have the discretion to determine whether the investigation warrants a finding of nonresponsibility. Id.

The City Charter states that "[n]o person or firm shall be suspended or debarred from contracting with the city or any agency of the city ... [without] reasonable notice and reasonable opportunity ... to respond at a hearing to be held on a record." N.Y. City Charter § 335(a),(b)(1). The Charter lists several grounds for debarment, including indictment or conviction, violation of contract provisions, or an agency determination of nonresponsibility. N.Y. City Charter § 335(b)(3). Sole authority for a debarment determination lies in the City's Office of Administrative Trials and Hearings (OATH). N.Y. City Charter § 335(b)(1). A debarment disqualifies a bidder from consideration for the grant of any City contract or the renewal of any existing City contract for up to five years, at the discretion of OATH. N.Y. City Charter § 335(b)(1).

Facts

Hellenic American Neighborhood Action Committee (HANAC) is a nonprofit public service City contractor that has had an unblemished record for over twenty-five years. In March 1996, City officials noticed irregularities in the grant to HANAC of a contract by the Human Resources Administration (HRA). Mayor Giuliani directed the DOI to review all HANAC contracts. The U.S. Attorney's Office also commenced an investigation of HANAC. The Mayor then ordered HRA to terminate two HANAC contracts, pursuant to a contract clause authorizing unilateral termination on thirty days' notice if the City believes it to be in its "best interests."

In early April, the Department of Youth Services ("DYS"), another City agency, notified HANAC that its proposal, too, was rejected, because DYS found HANAC nonresponsible based on the ongoing investigations. Immediately after the DYS rejection, Richard M. Bonamarte, Director of the Mayor's Office of Contracts and the City's Chief Procurement Officer, sent a letter ("Bonamarte letter") to the heads of all City agencies stating that "pending further notice, no procurement action of any kind is to be taken involving [HANAC and its affiliates] without first consulting this Office." HANAC, however, was not advised of this letter and did not learn about it until the current litigation.

In the meantime, HANAC took an administrative appeal from the termination of its HRA contracts and the DYS determination of nonresponsibility. Eventually, HANAC abandoned these efforts, finding them a "useless endeavor" in light of what it regarded as the City's blanket decision to terminate HANAC's contracts and to preclude HANAC from obtaining new ones until the investigation ended.

On April 26, 1996, HANAC commenced an Article 78 proceeding challenging only the termination of its HRA contracts, arguing that the contracts should remain in effect during a dispute resolution process alleged by HANAC to be applicable. HANAC made no claims of a de facto debarment nor did it raise any due process claims in its Article 78 proceeding. On May 8, 1996, the New York State Supreme Court dismissed the proceeding holding that the City had the right to terminate the contracts at will and that the dispute resolution procedure plaintiff tried to invoke did not apply to terminations. HANAC did not appeal.

On May 1, 1996, while its Article 78 proceeding was still pending, HANAC filed the present § 1983 suit against the City of New York and various City officials ("City") in the United States District Court for the Southern District of New York (Sotomayor, J.). This suit alleged that the City (a) deprived HANAC of its property interest in its status as an eligible City contractor by de facto debarring it from consideration for City contracts and (b) deprived HANAC of its liberty Judge Sotomayor granted the preliminary injunction, finding that the defendants' actions (a) constituted a de facto debarment, which deprived HANAC of its property interest as an eligible City contractor without due process, and (b) also deprived HANAC of its liberty interest in its reputation and good name without due process. The district court directed that HANAC be accorded a fair and reasonable opportunity to defend itself pursuant to the debarment procedures provided in the City Charter and the PPB Rules, and be given a chance to clear its name before any of HANAC's contracts could be awarded to a third party.

interest in its good name and reputation by labelling it "nonresponsible" without due process in violation of the Fourteenth Amendment. HANAC sought a preliminary injunction requiring the City to reinstate all its cancelled contracts, and enjoining the City from denying HANAC any further contracts until the outcome of the § 1983 action.

The City now appeals the injunction arguing that: (1) HANAC has no property interest in its status as a City contractor; (2) HANAC's liberty interest in its reputation was not violated by nonresponsibility findings; (3) even if HANAC suffered deprivations of property and liberty interests, the City afforded HANAC the procedures required by the Due Process Clause; (4) HANAC made no showing of irreparable harm, and (5) even if the City violated HANAC's due process rights, the remedy ordered by the district court exceeded its authority.

DISCUSSION

The district court granted HANAC a preliminary injunction on the twin grounds that the City was depriving HANAC of its property and liberty interests without due process of law. We find it unnecessary to address all of the issues raised by the defendants on appeal because the district court's grant of a preliminary injunction should be reversed on other grounds.

When reviewing alleged procedural due process violations, the Supreme Court has distinguished between (a) claims based on established state procedures and (b) claims based on random, unauthorized acts by state employees. See Hudson v. Palmer, 468 U.S. 517, 532, 104 S.Ct. 3194, 3203, 82 L.Ed.2d 393 (1984); Parratt v. Taylor, 451 U.S. 527, 541, 101 S.Ct. 1908, 1916, 68 L.Ed.2d 420 (1981), overruled on other grounds by Daniels v. Williams, 474 U.S. 327, 106 S.Ct. 662, 88 L.Ed.2d 662 (1986). In the latter case, the Due Process Clause of the Fourteenth Amendment is not violated when a state employee intentionally deprives an individual of property or liberty, so long as the State provides a meaningful postdeprivation remedy. Hudson v. Palmer, 468 U.S. at 531, 533, 104 S.Ct. at 3202-03, 3203-04. When the deprivation occurs in the more structured environment of established state procedures, rather than random acts, the availability of postdeprivation procedures will not, ipso facto, satisfy due process. Id. at 532, 104 S.Ct. at 3203; Logan v. Zimmerman Brush Co., 455 U.S. 422, 435-36, 102 S.Ct. 1148, 1157-58, 71 L.Ed.2d 265 (1982).

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