Socal Contractors v. San Diego

• Decision Date: 06 May 2003
• Docket Number: No. D039275.,D039275.
• Court: California Court of Appeals Court of Appeals
• Parties: SOUTHERN CALIFORNIA UNDERGROUND CONTRACTORS, INC., Plaintiff and Appellant, v. CITY OF SAN DIEGO, Defendant and Appellant.

133 Cal.Rptr.2d 527

108 Cal.App.4th 533

SOUTHERN CALIFORNIA UNDERGROUND CONTRACTORS, INC., Plaintiff and Appellant, v. CITY OF SAN DIEGO, Defendant and Appellant.

No. D039275.

Court of Appeal, Fourth District, Division 1.

May 6, 2003.

Rehearing Denied May 20, 2003.

Review Denied Aug. 20, 2003.^*

Andrade & Associates, Richard B. Andrade, Frank A. Satalino, W. Grey Zimmerman and Natalia Desiderio, Irvine, for Plaintiff and Appellant.

Casey Gwinn, City Attorney, Anita M. Noone, Assistant City Attorney and Sim Von Kalinowski, Deputy City Attorney, for Defendant and Appellant.

AARON, J.

I INTRODUCTION

These appeals follow an administrative ruling by the City of San Diego (City) to permanently debar Southern California Underground Contractors, Inc. (SoCal) from contracting with City. The debarment was based on findings of the San Diego City Council (City Council) that So-Cal engaged in corrupt practices while administering public works contracts it had entered into with City. The trial court granted SoCal's petition for writ of administrative mandamus (Code Civ. Proc., § 1094.5), concluding that the decision to permanently debar SoCal constituted an abuse of discretion and an act in excess of City's authority because SoCal had not engaged in any practices, corrupt or otherwise, involving the "administration" of its contracts with City, but rather had engaged in such practices only in the "performance" of the contracts. Accordingly, the court ordered City to adopt its proposed alternative resolution to debar So-Cal for a period of three years. The court rejected SoCal's claim that the debarment proceeding denied SoCal its rights to procedural due process and to a fair hearing before an impartial tribunal.

In its appeal, SoCal does not challenge the sufficiency of the evidence supporting the findings upon which the debarment was based. Rather, SoCal contends it was not given a full and fair opportunity to defend itself. Specifically, SoCal maintains it was denied the right to confront and cross-examine adverse witnesses and the right to present live testimony before an impartial tribunal. City also appeals, contending the court erred in finding that SoCal had not engaged in corrupt practices involving the "administration" of contracts and that its order for permanent debarment was thus proper.

We conclude that the debarment proceeding afforded SoCal due process and a fair hearing before an impartial tribunal, and affirm the judgment in this respect. However, we further conclude that SoCal's corrupt practices involved the "administration" of City contracts so as to warrant permanent debarment. Accordingly, we reverse the judgment insofar as it imposes on SoCal a three-year debarment rather than a permanent one.

II FACTUAL AND PROCEDURAL BACKGROUND¹

SoCal is a contractor that specializes in public underground construction projects. In June 2000, while working on 11 projects for City, SoCal was debarred² for engaging in "corrupt practices involving the administration or award of a contract with the City ..." (San Diego Mun.Code,³ § 22.0803(b).) The debarment was based on City Council's findings, made after a hearing, that SoCal had engaged in a pattern of willful acts of corruption and deception, unethical and unacceptable business practices, and inadequate contract performance on numerous public works contracts with City. In the three weeks before the debarment hearing, City provided SoCal with a written factual basis and supporting evidence for the proposed debarment, and made available for review and copying all project files for the contracts upon which the proposed debarment was based. At the request of SoCal, City also made available for deposition six of its inspectors to testify as to the allegations supporting the debarment.

After the City Council rendered its decision to permanently debar SoCal, SoCal filed a petition for writ of administrative mandamus, challenging the debarment. While the writ was pending, SoCal filed a multimillion-dollar lawsuit against City in which it alleged that the debarment was illegal. In issuing the writ, the court remanded the debarment matter to the City Council for a rehearing, based upon its finding that SoCal had not been afforded adequate time to prepare a defense, and thus had been denied due process. The court ordered that another hearing be set no sooner than 45 days from the date of the court's ruling.

City scheduled the second debarment hearing for May 22, 2001, 60 days after the court's ruling. On April 9, 2001, City served SoCal with Manager's Report No. 01-168, in which the factual basis for the proposed debarment was set forth, together with supporting documents. The proposed debarment was based on the same charges that were raised in the June 2000 proceeding: (1) falsifying traffic control permits; (2) working in the public right-of-way without traffic control plans or appropriate traffic control, on numerous occasions; (3) taking water from city fire hydrants without having water meters, and using meters that were either inoperable or had been reported missing (so the use of water could not be billed); (4) misrepresenting that work had been completed, and attempting to cover up the misrepresentation; (5) submitting numerous false claims for extra work, at significantly inflated labor rates; (6) submitting false claims for inflated rates on equipment (by physically altering equipment model numbers); and (7) submitting false worker's compensation claims from City's owner-controlled insurance program.

Before the second hearing, SoCal took 13 additional depositions of City employees. City informed SoCal it could dispute the proposed debarment through a combination of submitting written materials to the City Council and making an oral presentation to the City Council. SoCal was given the right to submit unlimited written materials, including legal briefs, witness declarations and deposition transcripts. City advised SoCal that in order to ensure a full and fair opportunity to be heard before the City Council, SoCal should present its complete position in writing in advance of the hearing, together with all supporting documentation. SoCal was further informed that "[f]air opportunity for testimony will be accorded subject to the regular meeting rules and discretion of the City Council. If SoCal wishes to have written materials considered, please ensure delivery to the City Clerk in order for the City Council members to review it prior to the debarment hearing." City twice reminded SoCal that SoCal had the right to submit unlimited written materials. With regard to the right to cross-examine witnesses, City pointed out that SoCal had been afforded the opportunity to cross-examine witnesses during their depositions, and that SoCal could present this testimony at the City Council hearing through written statements, declarations and deposition transcripts.

SoCal, through its counsel, submitted nearly 400 pages of written materials to the City Clerk at 4:13 p.m. on the day prior to the scheduled debarment hearing. At the May 22, 2001 hearing, counsel for SoCal was allowed 40 minutes to present SoCal's case. The hearing was continued for one week to allow time for the members of the City Council to review SoCal's written submissions. SoCal was also permitted to, and did, submit a supplemental brief and additional deposition transcripts after the hearing. At the continued hearing on May 29, 2001, SoCal's attorney made another 40-minute oral presentation.

Following the hearings, the City Council adopted a resolution permanently debarring SoCal. The City Council made an alternative motion to debar SoCal for three years in the event a court were to overturn the permanent debarment.

SoCal filed its administrative mandamus petition in the superior court, challenging the procedural aspects of the debarment and claiming that City had acted beyond its statutory authority in permanently debarring SoCal. The court rejected SoCal's due process argument, finding that SoCal had been afforded ample opportunity to conduct discovery, present evidence and cross-examine adverse witnesses prior to the debarment hearing. The court further found that SoCal had not met its burden of showing it had been denied due process on the grounds that certain members of the City Council failed to consider SoCal's evidence, or that the City Council was biased because SoCal had filed a lawsuit against City.

However, the court granted SoCal's petition for writ of mandate on the ground that the decision to permanently debar SoCal under section 22.0803(b) for corrupt practices involving the "administration" of a contract constituted an abuse of discretion and an act in excess of City's authority. In distinguishing between the terms "administration" of a contract and "performance" of a contract as used in section 22.0803(a) and (b), the court found SoCal had not engaged in any practices, corrupt or otherwise, involving the administration of contracts. Rather, the court found, So-Cal had provided unsatisfactory "performance" under the contracts. The court concluded that SoCal's unsatisfactory performance, together with its demonstrated lack of business integrity, warranted a three-year debarment under section 22.0803(a). Accordingly, the court ordered City to vacate its decision permanently debarring SoCal, and to adopt a resolution debarring SoCal for a period of three years.

III SOCAL'S APPEAL

A. DISCUSSION

1. The Debarment Proceeding Before the City Council Satisfied the Requirements of Due Process

a. SoCal Was Not Entitled to a Full Evidentiary Hearing Before the City Council

SoCal contends the debarment proceeding before the City Council was fundamentally unfair and resulted in a denial of due process because SoCal was not allowed to present live rebuttal testimony or to cross-examine adverse witnesses. So-Cal asserts that being afforded only the opportunity to provide written submissions...