Rutigliano Paper Stock v. U.S. Gen. Serv. Admin.

• Citation: 967 F.Supp. 757
• Decision Date: 10 June 1997
• Docket Number: Civil Action No. CV-97-514 (DGT).
• Parties: RUTIGLIANO PAPER STOCK, INC., George Rutigliano and Joseph Rutigliano, Plaintiffs, v. UNITED STATES GENERAL SERVICES ADMINISTRATION, Metropolitan Transportation Authority, New York City Transit Authority, United States Department of Transportation and United States Coast Guard, Defendants.
• Court: United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)

967 F.Supp. 757

RUTIGLIANO PAPER STOCK, INC., George Rutigliano and Joseph Rutigliano, Plaintiffs, v. UNITED STATES GENERAL SERVICES ADMINISTRATION, Metropolitan Transportation Authority, New York City Transit Authority, United States Department of Transportation and United States Coast Guard, Defendants.

Civil Action No. CV-97-514 (DGT).

United States District Court, E.D. New York.

June 10, 1997.

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COPYRIGHT MATERIAL OMITTED

Thomas P. Puccio, New York City, Craig A. Eaton, Brooklyn, NY, for Plaintiffs.

Zachary W. Carter, U.S. Attorney, E.D. of N.Y. by Vincent Lipari, Brooklyn, NY, for Defendants U.S. General Services Admin., U.S. Dept. of Transp., U.S. Coast Guard.

Richard Schoolman, Office of Martin B. Schnabel, General Counsel, NYC Transit Authority, Brooklyn, NY, for Defendants New York City Transit Authority, Metropolitan Transit Authority.

MEMORANDUM AND ORDER

TRAGER, District Judge.

Plaintiffs Rutigliano Paper Stock, Inc., George Rutigliano, and Joseph Rutigliano ("the Rutiglianos") sought a preliminary injunction enjoying various government agencies from awarding contracts to other contractors, on the ground that the procedures employed by the defendant United States General Services Administration ("GSA") pursuant to subpart 9.4 of the Federal Acquisition Regulations System ("FAR") (48 C.F.R. §§ 9.401-07) are unconstitutional facially and as applied. The defendant federal agencies (the United States Department of Transportation, the United States Coast Guard, and GSA, collectively, the "federal defendants") opposed the motion; the defendants Metropolitan Transportation Authority ("MTA") and New York City Transit Authority ("NYCTA") have also opposed the motion and have cross-moved to dismiss the complaint against them. On April 14, 1997, I denied the plaintiffs' motion with respect to the NYCTA. This opinion explains the basis for that denial and resolves the remainder of the pending motions.

Background

(a) Federal Acquisition Regulations

The FAR are a set of regulations promulgated by the GSA to further the uniform regulation and procurement of government contracts. Agencies are to award contracts to responsible bidders only; suspension is a method to effectuate this policy. See FAR 9.402(a). Suspension of a contractor is a discretionary act that is to be "imposed only in the public interest for the Government's protection and not for purposes of punishment." FAR 9.402(b). A suspension may be imposed, upon adequate evidence, for a variety of causes, including the commission of a fraud or other offense that "indicat[es] a lack of business integrity or business honesty." FAR 9.407-2(a)(7). An indictment constitutes adequate evidence.¹ See id.

Upon suspension, a contractor is given notice that he has the right, within thirty days after the receipt of the notice, to "submit, in person, in writing, or through a representative, information and argument in opposition to the suspension, including any additional specific information that raises a genuine dispute over the material facts." FAR 9.407-3(c)(5). Procedures for contesting suspension shall be as "informal as practicable, consistent with principles of fundamental fairness." FAR 9.407-3(b). The sole authority for suspension determinations rests with the Special Assistant for Contractor Integrity (the "suspending official"), here, Donald J. Suda. See Decl. of Donald J. Suda dated March 10, 1997 ("Suda Decl.") ¶¶ 1, 3. The suspending official also reviews any material submitted to contest the suspension determination. See id. In making his decision, the suspending official can consider any evidence that the contractor wishes to offer — including evidence that contradicts the acts underlying the indictment — as well as oral or written argument contesting the suspension. See Suda Decl. ¶ 12; Tr. of Oral Argument of April 14, 1997 ("Tr.") at 3.

If the suspension is not based on an indictment and the contractor's submission raises a question as to the material facts, the contractor is afforded a full hearing before an Administrative Law Judge ("ALJ"), with an opportunity to cross-examine witnesses. See Suda Decl. ¶ 19. If, however, the suspension is based on an indictment, "the suspending official's decision shall be based on all the information in the administrative record, including any submission made by the contractor." FAR 9.407-3(d)(1). Thus, while a contractor suspended on the basis of an indictment may submit additional evidence of any type, there are no additional fact finding proceedings. See Suda Decl. ¶ 16. GSA will, however, consider other factors, including mitigating circumstances, the gravity of the charged offense, the probability of guilt, and "well-founded claims of innocence." See id.

If imposed, a suspension "shall be for a temporary period pending the completion of investigation and any ensuing legal proceedings. ..." FAR 9.407-4(a). A suspension shall last for twelve months, "unless an Assistant Attorney General requests its extension, in which case it may be extended for an additional 6 months. In no event may a suspension extend beyond 18 months, unless legal proceedings have been initiated within that period." FAR 9.407-4(b). A legal proceeding is "any criminal proceeding." FAR 9.403. The precise meaning of this phrase is unclear. In a letter and at oral argument, the federal defendants stated that legal proceedings are held to have commenced upon the start of trial, jury selection, or "significant pretrial action," but did not particularize this last statement further. Ltr. from Vincent Lipari, Esq. Ass't United States Att'y to court dated April 8, 1997, at 1; Tr. at 9. However, an indictment does not constitute a legal proceeding. See Tr. at 13.

The suspending official's decision, made with or without additional fact finding proceedings, is final; there is no appeal to a higher authority within the GSA. See Suda Decl. ¶ 3. GSA decisions are, however, reviewable under the Administrative Procedure Act ("APA").² See Commercial Drapery Contractors, Inc. v. United States, No. 96-2818, 1997 WL 68203, at *2 (D.D.C. Feb.12, 1997).

(b) Facts

George Rutigliano is President and Joseph Rutigliano is Vice President of Rutigliano Paper Stock, Inc., a carting company that provides waste removal services to various governmental entities in the New York City area. On June 16, 1996, the Rutiglianos and Rutigliano Paper Stock, Inc. were indicted in New York State Supreme Court. This indictment charged the Rutiglianos with two counts of combination in restraint of trade, one count of second degree grand larceny, and seven counts of falsifying business records. See Indictment No. 5009-96, ("first indictment") attached to Pls.' Mot. for Order to Show Cause for Prelim. Inj. dated February 6, 1997 ("PI"). Subsequently, the Rutiglianos were again indicted on November 7, 1996; this indictment realleges and supersedes some of the charges in the June 1996 indictment. See Affirm. of Thomas P. Puccio, Esq. counsel for plaintiffs, date December 7, 1996, attached to PI. As of this date, trial has not commenced on either the first or second indictment; the Rutiglianos have a motion pending in state court seeking dismissal or reassignment of their case on the ground that their right to a speedy trial has been violated.

Subsequent to the first indictment GSA informed the Rutiglianos that they would be suspended, effective July 24, 1996. The letter notice stated that the suspension was made pursuant to the FAR, that it was temporary, and that the Rutiglianos or their representative could submit "information and argument in opposition to the suspension" within thirty days. Puccio Reply Aff. dated March 28, 1997 ("Reply Aff."), Ex. A, Notice of Suspension dated July 24, 1996. The notice also stated that the Rutiglianos's names would be published in the "List of Parties Excluded from Federal Procurement and Non-Procurement Programs," and that no executive branch agency would enter into, renew, or extend a transaction that the Rutiglianos participated in, unless the head of the transacting agency granted a written exemption. See id. Attached to the notice was a "Memorandum of Decision," which recited the fact that the Rutiglianos had been indicted in New York, and that this indictment constituted adequate evident for their suspension, pursuant to FAR 9.407-2(a)(1) and (7). The decision also stated that the suspension "is necessary to protect the Government's interests pending the completion of [the criminal proceeding]." Id. The suspension was effective immediately, and would last "pending the completion of legal proceedings ... in New York." Id.

Subsequently, several other agencies terminated their contracts with the Rutiglianos on the basis of either the suspension or the indictment. See Affirm. of Ass't Dist. Att'y Gerald P. Conroy ¶¶ 10-18, attached to PI.³ Thus, on December 10, 1996, the NYCTA notified the Rutiglianos that it would deem them "not responsible" for a solicitation that the Rutiglianos had submitted; the decision was based on the GSA suspension and the indictments. See Ltr. from NYCTA Procurement Specialist Katie Dickie to Joseph Rutigliano dated December 10, 1996, Ex. B, Reply Aff.

With respect to GSA's suspension, the Rutiglianos requested a meeting which as to have been held in October, 1996. For various reasons, the meeting was not held until January 28, 1997. Present at the hearing were Special Assistant Suda, his staff, and the Rutiglianos' counsel Craig Eaton. See Suda Decl. ¶¶ 1-7, 9-11. In his declaration, Suda states:

[GSA] told Mr. Eaton that in determining whether to continue the suspension, or to permit a waiver, we would consider any documents, review any written presentation — in whatsoever form, whether in letter, brief, declaration or affidavit form — and would listen to statements and factual recitations made by as many ... persons as plaintiffs wished to present.

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