Summitt Investigative Service, Inc. v. Herman, Civ.A. 97-01008 (CKK).

Decision Date30 September 1998
Docket NumberNo. Civ.A. 97-01008 (CKK).,Civ.A. 97-01008 (CKK).
Citation34 F.Supp.2d 16
PartiesSUMMITT INVESTIGATIVE SERVICE, INC., et al., Plaintiffs, v. Alexis HERMAN, Secretary, Department of Labor, Defendant.
CourtU.S. District Court — District of Columbia

Raymond Fioravanti, Epstein, Becker & Green, P.C., Washington, DC, for plaintiffs.

Michael C. Johnson, U.S. Attorney's Office, Washington, DC, for defendant.


KOLLAR-KOTELLY, District Judge.

Plaintiffs Summitt Investigative Services, Inc. ("Summitt") and its President, Harold Wigfall, and Vice President, Michael B. Holiday, bring suit under the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2)(A), to challenge the Secretary of Labor's decision to debar them for three years from bidding on government contracts. Pending before the Court are the parties' cross-motions for summary judgment and separate briefs that address whether Count VII of the Complaint is properly before the Court. Having carefully reviewed the pleadings, arguments, and the well-developed administrative record, the Court grants the Secretary's motion for summary judgment. Moreover, the Court concludes that Plaintiffs failed to exhaust their administrative remedies with respect to Count VII, and that no exception to the doctrine of exhaustion permits them to bypass the administrative process.


On February 23, 1993, the Federal Aviation Administration ("FAA") awarded contract number DTFA03-93-C-000015 to Summitt. See 5 Administrative Record [hereinafter A.R.] 1745. Under the terms of the agreement, from March 1, 1993 through September 30, 1993, Summitt was to provide security services for the FAA Technical Center and its associated facilities in New Jersey in consideration for $383,134.92. See id. Thereafter, the contract could be extended annually for as many as four years at the rate of $656,802.56 per annum. See id. The FAA exercised its option to renew the contract on September 8, 1993. See id. At all times, the contract was subject to the provisions of the Service Contract Act, 41 U.S.C. § 351 et seq., and the Contract Work Hours and Safety Standards Act (CWHSSA), 40 U.S.C. § 327 et seq.

Summitt's inability to meet its payroll surfaced during the contract's first pay period when several paychecks issued to Summitt's employees bounced. See 3 A.R. 747; Pls.' R. 108(h) Response to Def.'s Statement of Material Fact Not in Dispute [hereinafter Pls.' R. 108(h) Response] at 1 (conceding several paychecks bounced during first pay period). Mario Maccarone, the FAA Contracting Officer, issued a cure notice, to which Summitt responded the next day with assurances that its checks would not bounce again. See 3 A.R. 750. Nonetheless, the Department of Labor's Wage and Hour Division received complaints from employees that their paychecks continued to bounce and that Summitt had been making improper deductions for a "uniform deposit." See 2 A.R. 259, 326, 361-62; Pls.' R. 108(h) Response at 1.

Summitt's financial condition reached its nadir in late September and early October of 1993. For the October 8, 1993 payroll, at least eight, and as many as half of the paychecks issued to Summitt's twenty-six employees bounced. See 5 A.R. 1614 (indicating that eight guards were issued checks returned for insufficient funds); 3 A.R. 757 (Maccarone testifying that more than half of the paychecks for this period bounced). Maccarone issued a cure notice that warned Summitt that it risked incurring an immediate default on the contract. See 5 A.R. 757. In a meeting with Summitt's Vice President, Michael B. Holiday, Maccarone negotiated a no-fault termination of the contract in which Maccarone agreed to release $56,000 on October 27, 1993 with the understanding that Summitt would use the money to pay its workers. See 3 A.R. 757-59, 906; Pls.' R. 108(h) Response at 4 (failing to contest the Secretary's Rule 108(h) Statement with respect to this fact). Although there is some dispute as to where exactly Summitt spent this $56,000, it appears that rather than paying its own employees, Summit "spent it someplace else." 5 A.R. 759 (testimony of Maccarone); Pls.' R. 108(h) Response at 4. On November 2, 1993, Summitt's employees walked off the job when the corporation failed to tender any paychecks to its employees. See 4 A.R. 1472-76, 3 A.R. 928-30; Pls.' 108(h) Response at 4 (conceding paragraphs 25-27 of Defendant's Rule 108(h) Statement). The FAA promptly notified Holiday that Summitt's failure to provide security services for the Technical Center on November 2, 1993 constituted an immediately effective default on the contract. See 4 A.R. 1472-76, 3 A.R. 928-30; Pls. R. 108(h) Response at 4.

The Department of Labor's Wage and Hour Division initiated administrative proceedings before an Administrative Law Judge (ALJ) to recover back wages owed to Summitt employees. See 1 A.R. 1-6, 23-29. After a two-day hearing, the ALJ issued a decision in which he found that Summitt, Wigfall, and Holiday violated the SCA and the CWHSSA. The ALJ further ordered Summitt and its principal officers to repay its employees $62,091.25. See 5 A.R. 1759. Despite finding that Summitt contravened the SCA and the CWHSSA, the ALJ concluded that "unusual circumstances" existed to spare Summitt, Wigfall, and Holiday from debarment. See 5 A.R. 1760-63. On administrative appeal, the Administrative Review Board ("ARB") reversed; it disagreed that there were any "unusual circumstances" to justify relieving the Plaintiffs from the debarment list. See 5 A.R. 1848-61. Plaintiffs, after retaining new counsel, petitioned the ARB for reconsideration. See 5 A.R. 1865-92. Having never raised the issue before the ALJ or the ARB, the Plaintiffs in their petition for reconsideration suggested a new ground for finding "unusual circumstances" —that the Department of Labor violated the Fifth Amendment by selectively enforcing the SCA's debarment provisions against small disadvantaged businesses, of which Summitt is one. The ARB denied the petition for reconsideration. See 5 A .R. 1909-12. With three pithy sentences, the ARB rejected the Plaintiffs' newly minted selective enforcement argument. Noting that Summitt neglected to raise this issue until its motion for reconsideration, the ARB found "absolutely no support for this allegation in the record," 5 A.R.1912, and rejected it accordingly. Plaintiffs filed the above-captioned case in this Court on May 7, 1997.

A. The Service Contract Act

The McNamara-O'Hara Service Contract Act of 1965, 41 U.S.C. § 351 et seq., mandates that those who contract to provide services to the United States must remunerate their employees with minimum wages and fringe benefits prescribed by the Secretary of Labor. 41 U.S.C. § 351(a)(1)-(2). In its attempt to regulate this contractual relationship, Congress imposed a severe sanction for those companies that deviate from the SCA's requirements: debarment from bidding on government contracts for three years. See 41 U.S.C. § 354(a). Debarment is mandatory "[u]nless the Secretary otherwise recommends because of unusual circumstances." Id.

Although debarment may often be a "severe penalty which may have serious economic impact upon a business," Mastercraft Flooring, Inc. v. Donovan, 589 F.Supp. 258, 263 (D.D.C.1984), the Act's legislative history, coupled with its 1972 amendments, demonstrate that "debarment of contractors who violate[] the SCA should be the norm, not the exception, and only the most compelling of justifications should relieve a violating contractor from the sanction." Vigilantes, Inc. v. Administrator of Wage and Hour Div., 968 F.2d 1412, 1418 (1st Cir.1992). Congress recognized that employees of government-service contractors historically "tended to be among the lowest paid people in the economy, and they tended not to be organized by trade unions." House Comm. on Educ. & Labor, Special Subcomm. on Labor, Hearing on H.R. 6244 and H.R. 6245, 92d Cong. 3 (1971) (Statement of Rep. James G. O'Hara) [hereinafter Hearing]. Because of the important interests at stake, Congress found that simply requiring violating contractors "to pay what they should have been paying to begin with," id., inadequately deterred and punished such employers. Accordingly, the 1972 amendments were drafted to ensure that § 354(a)'s debarment penalty, which until the amendments had been "the exception rather than the rule," would be "virtually automatic" and "expeditiously and rigorously applied." HOUSE SPECIAL SUBCOMM. ON LABOR, COMM. ON EDUC. & LABOR, THE PLIGHT OF THE SERVICE WORKERS UNDER GOVERNMENT CONTRACTS 12-13 (Comm. Print 1971).

Although cognizant of government contractors' rights, Congress found that the "rights of the workers performing these contract services are no less important, and deserve no less vigorous protection." Id. To that end, the statutory safety valve of "unusual circumstances" was to apply only to "situations where the violation was a minor one, or an inadvertent one" or where disbarment would be "wholly disproportionate to the offense." Hearing, supra, at 3. Maintaining fidelity to congressional design, this Circuit has held that debarment is inappropriate only where the violations are insignificant or minor because "debarment against innocent and petty violations was not intended." Federal Food Serv., Inc. v. Donovan, 658 F.2d 830, 834 (D.C.Cir.1981). Stated more bluntly, a court from this jurisdiction has observed that the unusual circumstances exception is "not intended to permit the unbounded exercise of bureaucratic benevolence." A to Z Maintenance Corp. v. Dole, 710 F.Supp. 853, 855 (D.D.C.1989).

Despite its importance, the term "unusual circumstances" is not defined in the SCA. The Secretary of Labor, however, has promulgated regulations that set forth a three-part test to assess factors that may constitute unusual circumstances. See 29 C.F.R. § 4.188(b). While the determination is to be made on a case...

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