James A. Merritt and Sons v. Marsh, 86-3830

• Decision Date: 23 May 1986
• Docket Number: No. 86-3830,86-3830
• Citation: 791 F.2d 328
• Parties: , 33 Cont.Cas.Fed. (CCH) 74,391 JAMES A. MERRITT AND SONS, Appellees, v. John O. MARSH, Jr., Secretary of U.S. Department of the Army; John F. Lehman, Jr., Secretary of the U.S. Department of the Navy; Russell A. Rourke, Secretary of the U.S. Department of the Air Force, Appellants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 328

791 F.2d 328

55 USLW 2024, 33 Cont.Cas.Fed. (CCH) 74,391

JAMES A. MERRITT AND SONS, Appellees, v. John O. MARSH, Jr., Secretary of U.S. Department of the Army; John F. Lehman, Jr., Secretary of the U.S. Department of the Navy; Russell A. Rourke, Secretary of the U.S Department of the Air Force, Appellants.

No. 86-3830.

United States Court of Appeals Fourth Circuit.

Argued April 7, 1986.

Decided May 23, 1986.

Freddi Lipstein, U.S. Dept. of Justice, Washington, D.C., for appellants.

Lionel S. Lofton, Charleston, S.C., for appellees.

Before WINTER, Chief Judge, and MURNAGHAN and SPROUSE, Circuit Judges.

SPROUSE, Circuit Judge:

The South Carolina district court issued a preliminary injunction on March 7, 1986, prohibiting the Secretaries of the Army, Navy, and Air Force from suspending James A. Merritt and his company, James A. Merritt & Sons, Inc., from competing for government contracts. The Secretaries appealed and moved for summary reversal. On April 8, 1986, this court entered an order summarily reversing the district court's grant of the preliminary injunction.

Merritt is a mechanical contractor currently performing work for the Navy. On November 13, 1985, Merritt and his company were indicted for filing false claims in connection with Navy contracts. On February 21, 1986, the Navy notified Merritt that he and his company were temporarily suspended from bidding for future government contracts, pending completion of the criminal proceedings. A jury trial was scheduled for the latter part of April 1986. The suspension was issued pursuant to the Federal Acquisition Regulations, 48 C.F.R. subpart 9.4 (1985). The suspension did not affect Merritt's performance on existing government contracts.

Alleging primarily that the Acquisition Regulations are unconstitutional, Merritt brought this action and sought a temporary restraining order. ¹ He does not claim that the Secretaries failed to comply with the procedures outlined in the Acquisition Regulations; rather, he contends that the rules violate the due process clause of the fifth amendment to the federal Constitution. ² Following a hearing, the district court granted the preliminary injunction. The court noted that any harm the government would suffer in continuing to deal with Merritt would be outweighed by the harm to Merritt if the suspension were enforced.

Our review of the district court's action is guided by a line of cases beginning with Blackwelder Furniture Co. of Statesville v. Seilig Manufacturing Co., 550 F.2d 189 (4th Cir.1977). This court stated in Blackwelder that a district court's discretion in determining whether to grant interim relief "is not boundless and must be exercised within the applicable rules of law or equity." Id. at 193. Although the trial court's primary duty is to balance the harms, it must consider four factors in ruling on a request for a preliminary injunction: (1) the plaintiff's likelihood of success on the merits; (2) the likelihood of irreparable injury to the plaintiff if the injunction is denied; (3) the injury to the defendant if the injunction is granted; and (4) the public interest. North Carolina State Ports Authority v. Dart Containerline Co., 592 F.2d 749, 750 (4th Cir.1979); see Blackwelder, 550 F.2d at 194-95. The weight to be given each factor varies according to the circumstances of each case. When the balance of harms decidedly favors the plaintiff, he is not required to make a strong showing of a likelihood of success; nevertheless, there must at least be a showing that the case raises grave or serious questions. Blackwelder, 550 F.2d at 195.

Merritt's petition for a temporary restraining order alleged that the suspension would inflict irreparable harm on the company which outweighed any harm to the government. His affidavit states that forty percent of his company's business is with the military and that the suspension would result in "irrecoverable monetary losses;" leading to layoffs of an estimated fifty employees and the permanent loss of some of his most highly skilled workers. The district court accepted Merritt's prediction of the harm which would result from the suspension. The court also found that the government would suffer little or no harm from the issuance of a preliminary injunction, noting the gap between the date of the indictment and the date of the suspension. ³

The district court failed to discuss or make any finding concerning the other two factors affecting the granting of interim relief. Nothing in the district court's ruling indicates what that court considered to be the likelihood of Merritt's success on his constitutional claim, or even the seriousness of the questions raised by that claim. Importantly, Merritt is unable to cite any cases which have questioned the constitutionality of a suspension under circumstances similar to those present here. The government, on the other hand, points out that similar suspension regulations have been upheld in the face of contentions that preconviction suspensions are unconstitutional. See, e.g., Electro-Methods, Inc. v. United States, 728 F.2d 1471 (Fed.Cir.1984); Mainelli v. United States, 611 F.Supp. 606 (D.R.I.1985).

The Acquisition Regulations provide that suspension should be imposed on the basis of adequate evidence of fraud, antitrust violations, or certain other crimes, including embezzlement and theft, pending the completion of any investigation or legal proceedings. 48 C.F.R. 9.407-1(b). This "adequate evidence" requirement, when coupled with the provisions for notice and the opportunity to submit...