Schiavone Const. Co., Inc. v. Larocca

• Decision Date: 05 June 1986
• Citation: 503 N.Y.S.2d 196,117 A.D.2d 440
• Parties: In the Matter of SCHIAVONE CONSTRUCTION COMPANY, INC., Appellant, v. James L. LAROCCA, as Commissioner of the New York State Department of Transportation, et al., Respondents, and Karl Koch Erecting Company, Inc., Intervenor-Respondent. In the Matter of SCHIAVONE CONSTRUCTION COMPANY, INC., et al., a Joint Venture, Appellants, v. Frank WHITE, as Commissioner of the New York State Department of Transportation, et al., Respondents, and Morrison-Knudsen Company et al., a Joint Venture, Intervenors-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 196

503 N.Y.S.2d 196

117 A.D.2d 440

In the Matter of SCHIAVONE CONSTRUCTION COMPANY, INC., Appellant, v. James L. LAROCCA, as Commissioner of the New York State

Department of Transportation, et al., Respondents,

and

Karl Koch Erecting Company, Inc., Intervenor-Respondent.

In the Matter of SCHIAVONE CONSTRUCTION COMPANY, INC., et

al., a Joint Venture, Appellants, v. Frank WHITE, as Commissioner of the New York State

Department of Transportation, et al., Respondents,

and

Morrison-Knudsen Company et al., a Joint Venture,

Intervenors-Respondents.

Supreme Court, Appellate Division Third Department.

June 5, 1986.

Buckley, Treacy, Schaffel, Mackey & Abbate (George F. Mackey, of counsel for appellant in proceeding No. 1 and Eugene Schaffel, of counsel for appellant in proceeding No. 2), New York City.

Robert Abrams, Atty. Gen. (Richard J. Dorsey, of counsel), Albany, for respondents.

Fisher & Fisher (Andrew S. Fisher, of counsel), Brooklyn, for Morrison-Knudsen Co. and another, intervenors-respondents.

Before KANE, J.P., and CASEY, MIKOLL and LEVINE, JJ.

PER CURIAM.

On this appeal, we are asked to determine whether the decisions not to award petitioners a contract on the ground that they were not "responsible bidders", primarily because of a pending criminal indictment against petitioner Schiavone Construction Company, Inc. (Schiavone), violated procedural due process or were otherwise infected by errors of law. In April 1985, the Department of Transportation solicited bids on contract D-500191, providing for reconstruction of the bridge deck and supporting structure on the Queensboro Bridge in New York City, and contract D-250829, which provided for construction of a railroad trestle between Highbridge Yard and Harlem River Yard in New York City. Schiavone bid $40,891,591 on contract D-500191. This was the low bid by approximately $1,689,000. Schiavone and petitioner North Star Contracting Company (North Star), as a joint venture, submitted a low bid of $58,294,666.70 on contract D-250829.

Highway Law § 38(3) requires respondent Commissioner of Transportation to award contracts for the construction or improvement of State highways to "the lowest responsible bidder, as will best promote the public interest" (emphasis supplied). At the time petitioners submitted their bids, an indictment was pending in Bronx County charging Schiavone and certain of its officers with 137 counts of larceny and fraud involving the Minority Business Enterprise Program (MBE) in a public works project performed for the New York City Transit Authority in the late 1970s. Concerned about the indictment, respondent Darrell W. Harp, the chairman of the Contract Review Unit (Unit) of the Department, notified petitioners that members of the Unit wanted to meet with both of them to determine whether, in the best interest of the State, petitioners should be considered the "lowest responsible bidders" on each of the contracts in question.

With respect to contract D-500191, in April 1985, the Unit met with Schiavone's representatives and gave them an opportunity to explain the indictment. Schiavone contended that the indictment stemmed from a misinterpretation of the MBE guidelines and that it had not committed any crime. The Unit found Schiavone's contentions unpersuasive. In May 1985, the Unit determined not to award contract D-500191 to Schiavone, concluding that the indictment raised serious questions as to Schiavone's honesty, integrity, good faith and fair dealings. Likewise, with regard to contract D-250829, after a May 1985 meeting with Schiavone and North Star, the Unit determined that the joint venture was not the "lowest responsible bidder" as would best promote the public interest. Both contracts were awarded to the next lowest bidders.

Petitioners commenced two separate proceedings pursuant to CPLR article 78 seeking to annul the determinations rejecting their bids. In separate decisions, both petitions were denied. These appeals ensued. ^*

Petitioners contend that the Unit's decisions were made without affording them adequate procedural due process. To succeed on a procedural due process argument, petitioners must show the deprivation of a protected interest by procedures which were insufficient under the circumstances (see generally, Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 2660, 33 L.Ed.2d 484; 2 Rotunda, Newark & Young, Constitutional Law: Substance and Procedure § 17.2 et seq., at 202 [1986] ). Hence, the due process claim requires a twofold analysis: first, whether petitioners have a protected interest and, if so, whether the procedures afforded them were adequate.

Since a low bidder does not acquire a property right in a contract (Matter of Callanan Indus. v. City of Schenectady, App.Div., 498 N.Y.S.2d 490, 491; see, Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 250), petitioners assert that the Unit's decisions affected their liberty interests. It has previously been held that the stigma attached to branding a contractor as "nonresponsible" due to a "lack of integrity" implicates a liberty interest when the result of such a decision affects the contractor's ability to carry on its business (see, Old Dominion Dairy v. Secretary of Defense, 631 F.2d 953, 963; cf. ATL, Inc. v. United States, 736 F.2d 677). It is reasonable to assume that the refusal to award petitioners two contracts of such magnitude for the reason that they were not "responsible bidders" had a drastic effect upon their ability to carry on their business. Consequently, we hold that petitione...