M. B. Guran Co., Inc. v. City of Akron

• Decision Date: 08 December 1976
• Docket Number: No. 75-2258,75-2258
• Citation: 546 F.2d 201
• Parties: M. B. GURAN COMPANY, INC., Plaintiff-Appellant, v. CITY OF AKRON et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 201

546 F.2d 201

M. B. GURAN COMPANY, INC., Plaintiff-Appellant, v. CITY OF AKRON et al., Defendants-Appellees.

No. 75-2258.

United States Court of Appeals Sixth Circuit.

Argued March 30, 1976.

Decided Dec. 8, 1976.

Norman S. Carr, Brouse & McDowell Co. L. P. A., Akron, Ohio, for plaintiff-appellant.

James R. Graves, John E. Holcomb, Asst. Law Directors, City of Akron, Akron, Ohio, for defendants-appellees.

Before CELEBREZZE, ENGEL and ADAMS ^*, Circuit Judges.

ENGEL, Circuit Judge.

The principal and, we hold, controlling issue in this appeal is whether the violation by a local community of guidelines for competitive bidding as contained in a handbook of the Department of Housing and Urban Development gives rise to an implied right of action cognizable in a federal district court against that community in favor of a disappointed contractor whose low bid was not accepted. Upon the authority of Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975) and related decisions, we hold it does not and affirm the judgment of the district court.

Of the four counts in plaintiff's amended complaint in the district court, we are concerned here only with Count IV. ¹ Count IV of the complaint invokes the federal question jurisdiction of the court under 28 U.S.C. § 1331. It alleges that the defendant City of Akron and its Board of Control, after having solicited competitive bids from contractors on an urban renewal project known as the "Cedar Street Contract", unlawfully awarded the contract to the H. M. Miller Construction Company, although the plaintiff, M. B. Guran Company, Inc., had submitted the lowest bid. Plaintiff charges that in refusing to award the contract to it as the lowest bidder, the City violated the provisions of the "Urban Renewal Handbook," issued by the Department of Housing and Urban Development. The handbook requires competitive bidding procedures of the local public authority (LPA) (in this case, the City of Akron), in carrying out federally funded urban renewal under Title I of the Housing Act of 1949, 42 U.S.C. § 1441 et seq. It is the alleged violation of handbook requirements which forms the sole basis for the invocation of the federal question jurisdiction of the district court.

In its prayer for relief under this count, Guran does not seek damages, but rather injunctive and declaratory judgment to enjoin the award of the Cedar Street contract to anyone other than Guran and to determine that the action of the Akron City Board of Control, in awarding the Cedar Street contract, was void.

The case was tried on the merits to the district court which then issued three separate opinions, each reflecting a fairly distinct reason for the court's conclusion that the defendants were not obligated under federal law to award the contract to Guran. The court's memorandum opinion of July 31, 1975, while recognizing that a federal agency may be enjoined from violating its own regulations, held that Akron was not a federal agency and hence "cannot be enjoined in this suit from violating the regulations of another entity." The court held that Akron had neither adopted the regulations of the HUD handbook, nor had it contractually committed itself to follow the low-bidder requirement. In a second opinion, filed September 2, 1975 and denying plaintiff's motion to alter or amend the judgment, the court, confronted with a post-trial joint exhibit which evidenced an agreement between the City of Akron and the United States requiring the award to be made to the lowest bidder, nevertheless found that Guran was at most an incidental beneficiary of that contract and was, therefore, not entitled to enforce it in federal court. In so finding the district court concluded that the contractual provision between Akron and HUD was not intended to benefit the contractor, but rather that its purpose was to "secure economy in the construction of public works", an interest of HUD, not of the contractor. ²

Finally, on October 1, 1975, the trial court, in denying plaintiff's motion for injunction pending appeal, Rule 62(c) Fed.R.Civ.P., rejected the plaintiff's characterization of its prior opinion on September 2 as holding that the plaintiff lacked standing to enforce the contract. The court rejected plaintiff's reliance upon Scanwell Laboratories, Inc. v. Shaffer, 137 U.S.App.D.C. 371, 424 F.2d 859 (1970) because that case involved an effort to enjoin a federal agency from violating its own regulations. The court noted that its prior opinion had in fact "presumed standing and instead concluded that on the merits, plaintiff's claims did not entitle it to judgment".

The briefs of the parties as well as the district court's opinions reveal a certain confusion over the correct legal framework needed to analyze plaintiff's claim. In resolving this threshold question, we take our cue from the Supreme Court's procedure in National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U.S. 453, 455-6, 94 S.Ct. 690, 692, 38 L.Ed.2d 646 (1974). There the plaintiff sued to enjoin a proposed discontinuance of passenger service because the discontinuance would allegedly violate the Amtrak Act, 45 U.S.C. § 501 et seq. The Court as a preliminary matter observed:

"The issue has been variously stated to be whether the Amtrak Act can be read to create a private right of action to enforce compliance with its provisions; whether a federal district court has jurisdiction under the terms of the Act to entertain such a suit; and whether the respondent has standing to bring such a suit. . . . But, however phrased, the threshold question clearly is whether the Amtrak Act or any other provision of law creates a cause of action whereby a private party such as the respondent can enforce duties and obligations imposed by the Act; for it is only if such a right of action exists that we need consider whether the respondent had standing to bring the action and whether the District Court had jurisdiction to entertain it."

Similarly here, we deem it unnecessary to decide the related questions of standing and jurisdiction but rather proceed to the controlling issue of whether the provision of the HUD Handbook for competitive bidding creates a cause of action in favor of Guran and against the City and its officers.

Section 3 of Chapter IV of the Urban Renewal Handbook provides:

After HUD clearance of the bidder to whom the contract is proposed, the contract award may be made by the LPA provided: . . . (2) The award is made to the bidder submitting the lowest bid. (Emphasis supplied)

We note at the outset that plaintiff is relying solely upon the handbook requirement and not upon any express provisions of the Housing Act or upon any regulations published in the Code of Federal Regulations. Likewise, because HUD is not a party defendant, we need not consider whether the provisions of the Administrative Procedure Act, 5 U.S.C. § 701 et seq., would redress the alleged wrong. ³

The most recent expression of when a federal right of action will or will not be implied from a violation of federal law is found in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). There the Supreme Court was called upon to determine whether a private civil action for damages in federal court in favor of the shareholders of a corporation could be premised upon their claim that the directors and officers of that corporation had violated a federal criminal statute, 18 U.S.C. § 610, prohibiting corporations from making contributions in connection with any election at which presidential and vice presidential electors are to be selected. Holding that a private right of action was not implied, the Court stated several relevant factors to be considered:

"First, is the plaintiff 'one of the class for whose especial benefit the statute was enacted', . . . that is, does the statute create a federal right in favor of the plaintiff?" (Emphasis in original)

"Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one?"

"Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff?"

"Finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the states, so that it would be inappropriate to infer a cause of action based solely on federal law?"

Cort v. Ash, supra, at 78, 95 S.Ct. at 2087.

Applying the foregoing here, it becomes apparent that no federal right of action can or should be implied.

In analyzing the Housing Act, we note the expression of Congressional interest that private industry be encouraged to participate to the fullest extent and that the housing industry's involvement will thereby contribute to a strong national economy. 42 U.S.C. § 1441. However, the class for "whose especial benefit the statute was enacted" must be the persons who inhabit inadequate housing. We deem the central purpose of the Housing Act to be "the elimination of substandard and other...