Redondo Const. Corp. v. Izquierdo, Civil No. 01-2690 (FAB).

• Decision Date: 07 February 2008
• Docket Number: Civil No. 01-2690 (FAB).
• Parties: REDONDO CONSTRUCTION CORPORATION, Plaintiff, v. Hon. Jose M. IZQUIERDO, et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

550 F.Supp.2d 257

REDONDO CONSTRUCTION CORPORATION, Plaintiff, v. Hon. Jose M. IZQUIERDO, et al., Defendants.

Civil No. 01-2690 (FAB).

United States District Court, D. Puerto Rico.

February 7, 2008.

Luis Cotto-Roman, Yolanda Benitez-Sanchez, Yolanda Benitez Law Office, San Juan, PR, for Plaintiff.

Ana M. Margarida-Julia, Department of Justice, Pedro Santiago-Rivera, Milagros Ruiz-Chaar, Reichard & Escalera, Luis A. Rivera-Cabrera, Maria del Pilar Garcia-Incera, Ricardo A. Perez-Rivera, Luis A Rivera Cabrera, PSC, Fernando Van-Derdys, F. Van Derdys Law Office, Pedro E. Ruiz-Melendez, Pedro E. Ruiz Law Office, PSC, San Juan, PR, for Defendants.

OPINION AND ORDER

BESOSA, District Judge.

Pending before the Court are Plaintiff Redondo Construction Corporation's ("RCC") Motion for Partial Summary Judgment (Docket No. 321) and Defendant the Puerto Rico Highway and Transportation Authority's ("PRHWTA") Motion for Summary Judgment (Docket No. 327). For the reasons stated below, the Court GRANTS IN PART AND DENIES IN PART RCC's Motion for Partial Summary Judgment and GRANTS PRHWTA's Motion for Summary Judgment.

I. THE FACTS¹

The origin of this case was the criminal case filed against Plaintiff RCC by the United States of America. RCC was charged with several violations of federal law, including making false statements on loan and credit applications, 18 U.S.C. § 1014, and making false statements in connection with highway projects and aiding and abetting, 18 U.S.C. § 1020.

After RCC's guilty plea, on April 16, 1999 Defendant PRHWTA suspended RCC from all of its bid procedures for a period of thirty (30) days. RCC challenged this decision within the administrative channels of the Puerto Rico Department of Transportation and Public Works (DTOP), and, later, the Puerto Rico Court of Appeals. (Opinion and Order I and III and Docket No. 104, Exh. 1, Redondo Constr. Corp. v. P.R. Highways and Transp. Auth., KLRA 9900308 (P.R. Ct. App.1999)). The parties eventually reached a Settlement Agreement on November 14, 2000 that ended the administrative process, suspended RCC from participation in bids, until December 10, 2000, allowing RCC to participate in bids from December 11, 2000 to July 31, 2002, pursuant to a monitoring plan. (Docket No. 81, ¶ 9; Docket No. 82, ¶ 11 and Docket No. 327, Exh. 2, Redondo Construction Corporation FHWA/PRHTA Monitoring Facilitation Plan, "Settlement Agreement" or "Monitoring Plan")²

On December 29, 2000, Law No. 458 was enacted. See 2000 P.R. Laws 458, amended by Law No. 84 of July 29, 2001, 2001 P.R. Laws 84, and later by Law No. 59 of January 4, 2003, 2003 P.R. Laws 59. This statute prohibits any agency director or any director of a public instrumentality from awarding a government contract to any person, natural or legal, that has been found guilty or has entered a plea of guilty in any jurisdiction in the United States. Anyone convicted of a felony is debarred from bidding on public contracts for twenty (20) years; anyone convicted of a misdemeanor is debarred for five (5) years.

On February 14, 2001, shortly after the enactment of Law No. 458, Defendant PRHWTA withdrew its consent to the Settlement Agreement because of RCC's "failure to comply with the provisions of the Monitoring Agreement and to cure such default within a reasonable period of time [sic]." PRHWTA claimed that RCC failed to comply with its obligation to deposit $25,000 in an escrow account, as agreed pursuant to the Monitoring Agreement (Docket No. 327, Exh. 4, letter from PRHWTA's Executive Director, Jose F. Lluch-Garcia to RCC dated February 14, 2001); See also, Exh. 5 Redondo Construction Corp. v. PRHWTA KLRA0400982, 2005 WL 1475931 (P.R. Ct.App. May 31, 2005, pp. 8-11)

After withdrawing its consent to the Settlement Agreement, PRHWTA requested an administrative hearing to determine the length of RCC's suspension. The DTOP granted this request and approved PRHWTA's withdrawal of the Settlement Agreement. RCC then filed a motion before the DTOP arguing that the agency had no jurisdiction to consider the matter and that the breach of contract issue was for the courts, not the agency, to consider. (Docket No. 81, Exh. 3; Docket No. 136, Opinion and Order II, p. 3) The DTOP denied RCC's request and RCC appealed. On November 12, 2002, the Puerto Rico Court of Appeals remanded the case to the DTOP, and held that the agency had proper jurisdiction and power to determine whether the withdrawal of the Settlement Agreement was lawful. (Docket No. 118, Exh. 1, Redondo Constr. Corp. v. DTOP, KLRA0200498, 2002 WL 31661987 (P.R. Ct.App.2002)).

On December 14, 2001, RCC filed the complaint in this Court requesting that Law No. 458 be found to be unconstitutional on its face and as applied to it, under various provisions of the United States Constitution, including the Due Process, Ex Post Facto³ and Double Jeopardy⁴ clauses. (Docket No. 1, ¶¶ 122-177) RCC also alleged breach of contract arising out of Defendants' failure to perform under the Settlement Agreement. (Id., ¶ 183) Plaintiff further requested injunctive and monetary relief to vindicate its claims. (Id., at 54-55) As part of this complaint, however, RCC did not claim that the breach of Settlement Agreement violated its rights under the Contracts Clause of the United States Constitution.⁵ (Id.; Docket No. 151, p. 5)

At the time this complaint was filed, administrative proceedings were pending before the DTOP on two issues also before this Court: the proper length of RCC's debarment and whether the Settlement Agreement was lawfully terminated.

On October 30, 2002, this Court dismissed RCC's claims under Due Process, Ex Post Facto, and Double Jeopardy clauses of the United States Constitution, with prejudice. (Docket No. 112) RCC's claims for deprivation of a property interest in existing contracts, however, were "re-characterized as a constitutional challenge under the Contracts Clause in the United States Constitution," and defendant's request to dismiss those claims was denied. (Id., p. 23)

After that Opinion, "the only remaining causes of action [before this court were] the potential claims under the Contracts Clause for the cancellation of existing contracts and any supplemental state law claims". (Docket No. 136, p. 4) (emphasis in original)

RCC then filed a Motion to Stay Administrative Proceedings before the Puerto Rico Highway and Transportation Authority. (Docket No. 81) The PRHWTA also filed a Motion requesting to stay the proceedings before this Court. (Docket No. 118)

On January 15, 2003, the Court denied RCC's request to stay the proceedings before the PRHWTA and granted in part and denied in part PRHWTA's request to stay the proceedings before this Court. (Docket No. 136) The Court concluded that abstention was proper under the Burford⁶ and Colorado River⁷ doctrines, finding that (1) DTOP had assumed jurisdiction over those claims on a date prior to the filing of the Complaint in this Court; (2) the proceedings before the DTOP were at a more advanced stage; (3) the administrative forum provided by the DTOP was adequate and appropriate; and (4) the proceedings dealt with important questions of public policy and state law. (Id., pp. 6-9) Because the proceedings before the administrative agency could effectively and decisively resolve those particular claims, the Court stayed "any proceedings related to Plaintiffs breach of contract claim arising out of the alleged unlawful termination of the Settlement Agreement" pending resolution of the administrative proceedings. (Id., pp. 8-9)

Important to the issues now before the Court, this Court expressed the following:

The administrative proceedings that Plaintiff is asking this Court to stay deal with the proper length of Redondo Construction's debarment and whether the PRHWTA lawfully terminated the Settlement Agreement. These are questions predominantly local in nature: the first concerns issues that go to the heart of the Government of Puerto Rico's public policies; the second is purely a question of state law. The administrative procedures available through the Department of Transportation to handle this claim are comprehensive and provide for review by the Puerto Rico Court of Appeals.... Moreover, the claims before this Court regarding the termination of the Settlement Agreement involve no questions of federal law. In its complaint, Plaintiff presents the unlawful termination of the Settlement under the cause of action for breach of contract — a question of state law. This claim, then, is distinct and independent from the remaining potential claims under the Contracts Clause for the alleged cancellation' of existing contracts. (Docket No. 136, pp. 6-7) (Emphasis added)

It is clear from this Order that this Court only reserved for adjudication "... the potential claims under the Contracts Clause for termination of existing contracts [excluding the Settlement Agreement] between Redondo Construction and the Defendants." (Id., p. 9)(emphasis in the original)

Both parties requested reconsideration of the Court's decision. The PRHWTA filed a Motion to Amend Judgment (Docket No. 115) and RCC an "Urgent Motion Requesting Reconsideration of January 14, 2003 Opinion and Order". (Docket No. 140) Among other things, RCC expressed disagreement with the court's decision to exclude the alleged breach of the Settlement Agreement under those claims "subjected to a Contract [sic] Clause analysis". (Id.)

On February 25, 2003, this Court denied both requests. (Docket No. 151) The Court noted that "Redondo has not submitted a proper Amended Complaint claiming that the breach of the Settlement Agreement violates its rights under the Contracts Clause." (Id., p. 5, n. 1) The Court further expressed, "abstention still would be warranted even if the breach of the Settlement Agreement violates its rights under the Contracts Clause. The lawfulness of PRHWTA's decision to rescind the Settlement Agreement and its...