Frequency Electronic v. US Dept Air Force

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
FREQUENCY ELECTRONICS,
INCORPORATED,
Plaintiff-Appellant,
v. No. 97-1551
UNITED STATES DEPARTMENT OF THE
AIR FORCE,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Albert V. Bryan, Jr., Senior District Judge.
(CA-97-230-A)
Argued: October 31, 1997
Decided: July 1, 1998
Before WILKINSON, Chief Judge, MICHAEL, Circuit Judge,
and BUTZNER, Senior Circuit Judge.
_________________________________________________________________
Affirmed by unpublished per curiam opinion. Senior Judge Butzner
wrote a dissenting opinion.
_________________________________________________________________
COUNSEL
ARGUED: Arnold S. Schickler, SCHICKLER & SCHICKLER,
L.L.P., New York, New York, for Appellant. Alisa Beth Klein,
Appellate Staff, Civil Division, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Harvey
S. Israelton, SCHICKLER & SCHICKLER, L.L.P., New York, New
York, for Appellant. Frank W. Hunger, Assistant Attorney General,
Helen F. Fahey, United States Attorney, Anthony J. Steinmeyer,
Appellate Staff, Civil Division, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C.; Lt. Col. Richard E. Prins, Deputy
Chief, Commercial Litigation Division, DEPARTMENT OF THE
AIR FORCE, Arlington, Virginia, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Frequency Electronics, Inc. (FEI) was suspended from eligibility
for new prime contracts with the United States on December 13,
1993. After the Air Force reviewed the suspension and decided in
early 1997 not to lift it, FEI brought this action under the Administra-
tive Procedure Act, 5 U.S.C. §§ 551-559, 701-706, seeking review of
the 1997 decision and requesting an order terminating the suspension.
The district court granted summary judgment for the government, and
FEI appeals. We affirm.
I.
FEI makes precision timing systems for use in satellites and weap-
ons systems. In the past, much of its business involved the perfor-
mance of government contracts. On November 17, 1993, a federal
grand jury in the Eastern District of New York indicted FEI and four
of its officers. The indictment charged the defendants with conspiracy
to defraud the government, making false claims to a government
prime contractor, and major fraud against the United States. The
indictment alleged that in 1988 and 1989 the defendants falsified and
inflated claims for costs, employee hours worked, and materials. Cf.
United States v. Frequency Electronics, 862 F. Supp. 834, 836-37
2
(E.D. N.Y. 1994) (denying motions to dismiss indictment). In addi-
tion to the criminal charges, the government has filed a civil suit
under the False Claims Act and has joined a qui tam suit against FEI.
These civil matters are also pending in the Eastern District of New
York.
Following the indictment, FEI submitted to the Air Force a written
report addressing the allegations. The Air Force considered the report,
met with FEI, posed questions about the situation, and received FEI's
replies to these questions. By letter dated December 13, 1993, the Air
Force Suspension Officer (AFSO) informed FEI that it was suspended
from receiving new prime contracts with the government. The letter
expressly noted that the suspension "is temporary pending the out-
come" of the criminal proceeding and that FEI was free to submit fur-
ther information demonstrating that the suspension should be lifted.
An accompanying memorandum explained that the Air Force was
concerned that FEI did not have adequate internal procedures to
ensure ethical behavior and that Martin Bloch, FEI's former president
and one of those indicted, continued to work for FEI and "retain[ed]
responsibility regarding certain classified Government contracts."
Over the next three years, FEI submitted many documents to the
AFSO in an attempt to demonstrate that it could be entrusted with
new contracts. On January 23, 1997, the AFSO informed FEI that the
suspension could not be terminated at that time because there was not
"any basis to conclude that . . . there have been changed circum-
stances since the suspension, or that FEI is presently responsible."
The AFSO again expressed concern over Bloch's involvement with
the company, stating that "there has been no bona fide change in Mar-
tin Bloch's responsibilities within FEI since the imposition of the sus-
pension." Moreover, there was "no record evidence that [an ethics and
compliance] program has been implemented or is working" at FEI.
Meanwhile, the criminal proceeding against FEI has been stalled
for reasons that are not fully explained in the record. We do know that
the district court hearing the criminal case has held hearings under the
Classified Information Procedures Act, 18 U.S.C. app. 3 ("CIPA"),
because discovery for and trial of the case may involve the disclosure
of classified information. We also know that FEI has waived its right
to a speedy trial.
3
FEI responded to the AFSO's decision not to lift the suspension by
filing this suit. It alleged that the continued suspension violated the
Federal Acquisition Regulations and deprived it of due process of
law. The district court entered summary judgment for the govern-
ment, and FEI appeals.
II.
At bottom, FEI wants us to order the government to allow it to bid
on government prime contracts. We start, then, with a look at the
terms on which the government does business generally.
A private entity can ordinarily deal with whomever it likes, even
for arbitrary or whimsical reasons. A democratic government, how-
ever, must act more rationally. The Federal Acquisition Regulations1
implement a comprehensive, evenhanded procurement procedure that
both shields the government from the corruptive (and expensive) evils
of cronyism and affords equal opportunity for budding entrepreneurs
to sell it better products at better prices.
But the principles of openness and evenhandedness do not give
companies an unqualified right to compete for government contracts.
Not only must the government be a fair and rational shopper, it may
also insist on capable, impeccably honest vendors and top quality
goods and services.
To this end, the regulations command that "[p]urchases shall be
made from, and contracts shall be awarded to, responsible prospective
contractors only." 48 C.F.R. § 9.103(a)."Responsibility" requires an
affirmative showing by the prospective contractor. See id. § 9.103(c).
_________________________________________________________________
1 General, government-wide acquisition regulations are found in Chap-
ter 1 of Title 48 of the Code of Federal Regulations, 48 U.S.C. §§ 1.000to 53.303. Each subsequent chapter of that title prescribes rules specific
to a given department or agency. Chapters 2 and 53 pertain to the Depart-
ment of Defense and the Department of the Air Force, respectively, and
supplement the general regulations of Chapter 1. While the regulations
in Chapter 2 do address debarment and suspension procedures, see 48
C.F.R. ch. 2, app. H, these regulations do not affect our analysis in this
case.
4
If the government's contracting officer does not possess "information
clearly indicating that the prospective contractor is responsible, [he]
shall make a determination of nonresponsibility." Id. § 9.103(b). Sec-
tion 9.104-1 defines "responsibil[ity]" and, in general, requires that a
contractor must have the financial and logistical ability to perform the
contract on schedule, the technical expertise to do so, and "a satisfac-
tory record of integrity and business ethics." See id. § 9.104-1(d).
Though a former or current contractor whose work has pleased the
government may have no difficulty in demonstrating its responsibility
for a prospective contract, it nevertheless must always make that dem-
onstration. "Responsibility" is a present condition and not an indelible
status. Times and circumstances change.
Even the smartest, most careful shopper occasionally falls victim
to an unscrupulous vendor. He learns from this misfortune to take his
business elsewhere, and he is not easily persuaded that the vendor's
sharp dealing was aberrational. The Federal Acquisition Regulations
adopt this prudent mindset through their suspension and debarment
provisions.
A contractor may be suspended from consideration for new con-
tracts upon "adequate evidence" of one of the seven grounds enumer-
ated in § 9.407-2(a).2 Moreover, "[i]ndictment for one of the
enumerated causes . . . constitutes adequate evidence for suspension."
Id. § 9.407-2(b). Suspension is temporary pending the outcome of the
investigation and any legal proceedings that may ensue, see id.
§ 9.407-4(a), though the suspending officer may lift the suspension
early if the contractor demonstrates its present responsibility. See id.
§ 9.407-3(d)(3); Robinson v. Cheney, 876 F.2d 152, 160 (D.C. Cir.
1989).
_________________________________________________________________
2 These grounds are (1) fraud or commission of a crime in the course
of obtaining or performing a federal contract, (2) violation of antitrust
laws relating to bids, (3) various offenses involving dishonesty or moral
turpitude (e.g., embezzlement or bribery), (4) violations of the Drug-Free
Workplace Act of 1988, (5) mislabeling an article as"Made in America,"
(6) commission of an unfair trade practice, and (7) commission of any
other offense implicating integrity or honesty in a manner that seriously
and directly affects the contractor's "present responsibility." See 48
C.F.R. § 9.407-2(a).
5
In contrast to a suspension, debarment is exclusion from govern-
ment contracting for a fixed period of time. It is imposed only after
completion of the investigation or legal proceedings against the con-
tractor. The duration of a debarment must be "reasonable" and
"[g]enerally . . . should not exceed 3 years." 48 C.F.R. §§ 9.403,
9.406-4(a); cf. id. § 9.406(b) (allowing extension of disbarment
period).
Suspended or debarred contractors are permitted to continue per-
formance of existing contracts unless the relevant agency head directs
otherwise. See id. § 9.405-1(a). The regulations are clear that the
express purpose of both suspension and debarment is remedial. They
can be "imposed only in the public interest for the Government's pro-
tection and not for purposes of punishment." Id. § 9.402(b).
An exception to the general rule underscores the public interest
nature of these provisions. An agency head can award a suspended or
debarred contractor a new prime contract if the government has a
"compelling reason" to do so, see id.§ 9.405(a), even absent a show-
ing of present responsibility. The regulations therefore recognize that
while a company's suspension or debarment is normally in the public
interest, it can also be in the public interest to award contracts to sus-
pended or debarred companies in certain compelling circumstances.
FEI argues that the AFSO's decision not to lift the suspension was
erroneous under the regulations. We may disturb the decision if it is
"arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law." 5 U.S.C. § 706(2)(A).
FEI makes three specific attacks on the AFSO's decision. First, it
asserts as a matter of law that a suspension cannot exceed three years.
The regulations do not support this argument. Only suspensions that
are unaccompanied by legal proceedings have a rigid time limit. See
48 C.F.R. § 9.407-4(b) ("In no event may a suspension extend beyond
18 months, unless legal proceedings have been initiated within that
period."). Because the regulations define "legal proceedings" to
include both criminal and civil cases and all appeals therefrom, see
id. § 9.403, the drafters of the regulations surely envisioned suspen-
sions potentially lasting far longer than three years.
6
Next, FEI contends that the suspension's length has rendered it
punitive, in violation of 48 C.F.R. § 9.402(b). We disagree. As we
discuss in more detail below, the suspension does not deprive FEI of
anything to which it is entitled. It is purely a prophylactic measure
designed to keep the government from suffering any harm at the
hands of a contractor that has been accused of wrongdoing by a credi-
ble source, namely, a grand jury. In this respect, a suspension is a
temporary measure that is used to protect the public interest until a
debarment decision can be made.
"It is the clear intent of debarment to purge government pro-
grams of corrupt influences and to prevent improper dissipa-
tion of public funds. Removal of persons whose
participation in those programs is detrimental to public pur-
poses is remedial by definition. While those persons may
interpret debarment as punitive, and indeed feel as though
they have been punished, debarment constitutes the``rough
remedial justice' permissible as a prophylactic governmental
action."
United States v. Glymph, 96 F.3d 722, 724-25 (4th Cir. 1996) (quot-
ing United States v. Bizzell, 921 F.2d 263, 267 (10th Cir. 1990)); cf.
United States v. Hatfield, 108 F.3d 67, 69-70 (4th Cir. 1997). As the
Supreme Court recently reaffirmed, "``revocation of a privilege volun-
tarily granted,' such as a debarment, ``is characteristically free of the
punitive criminal element.'" Hudson v. United States, 118 S. Ct. 488,
496 (1997) (quoting Helvering v. Mitchell, 303 U.S. 391, 399 & n.2
(1938)).3 The same is true for the temporary imposition of a suspen-
sion pending the ultimate debarment decision.
Moreover, FEI's assertion that passage of time alone has rendered
this remedial sanction punitive ignores substantial case law upholding
_________________________________________________________________
3 The Hudson Court acknowledged that debarment can deter future
misconduct and that deterrence is a traditional goal of criminal punish-
ment. See 118 S. Ct. at 496. On the other hand, the mere presence of a
deterrent effect does not render a particular remedy punitive, because
deterrence can also further purely civil aims (e.g., the prevention of fraud
against the government or, as in Hudson, the protection of the integrity
of a regulated industry). See id.7
indefinite and even permanent debarments from government pro-
grams or regulated activities against assertions that such debarments
inflict punishment. See, e.g., Hudson , 118 S. Ct. at 493-96 (neither
civil monetary sanctions nor indefinite debarment from banking
industry constituted punishment under Double Jeopardy Clause);
United States v. Borjesson, 92 F.3d 954 (9th Cir.) (indefinite debar-
ment from participating in HUD-sponsored housing programs not
double jeopardy punishment), cert. denied, 117 S. Ct. 622 (1996);
United States v. Stoller, 78 F.3d 710 (1st Cir. 1996) (indefinite debar-
ment from banking industry not punitive for double jeopardy pur-
poses); DiCola v. Food & Drug Admin., 77 F.3d 504 (D.C. Cir. 1996)
(permanent debarment from providing services to applicants for FDA
approval of drugs not punitive under Double Jeopardy Clause); Bae
v. Shalala, 44 F.3d 489 (7th Cir. 1995) (same for Ex Post Facto
Clause). Like disbarments, the imposition of a temporary, yet indefi-
nite, suspension is remedial rather than punitive in nature.
Finally, FEI directly attacks the AFSO's decision on its own mer-
its. Our review of an agency determination resting on resolution of
disputed facts is highly deferential: we may set the determination
aside only if it is "arbitrary and capricious." Marsh v. Oregon Natural
Resources Council, 490 U.S. 360, 377-78 (1989). Under this standard,
the scope of review is a narrow one. A reviewing court must
"consider whether the decision was based on a consideration
of the relevant factors and whether there has been a clear
error of judgment. . . . Although this inquiry into the facts
is to be searching and careful, the ultimate standard of
review is a narrow one. The court is not empowered to sub-
stitute its judgment for that of the agency." Citizens to Pre-
serve Overton Park v. Volpe, [401 U.S. 402, 416 (1971)].
The agency must articulate a "rational connection between
the facts found and the choice made." Burlington Truck
Lines v. United States, 371 U.S. 156, 168 (1962).
Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S.
281, 285 (1974).
The AFSO articulated two rationales for his decision, neither of
which is arbitrary and capricious on its face: (i) Bloch, one of the
8
individuals indicted, continues to play a key role in FEI's manage-
ment and its performance of existing government contracts, and (ii)
FEI has not implemented an effective internal ethics program. We
conclude that the AFSO's decision is rationally connected to the facts
and hence was not arbitrary or capricious.
As for Bloch, FEI does not seriously contest the facts found by the
AFSO. Instead, it argues that his knowledge and ability are vast and
essential to FEI's work, including its work on existing government
contracts and subcontracts. That may well be, but it is of no moment.
Knowledge is not honesty, and ability is not virtue. Bloch's indict-
ment provides the government with a sufficient reason to protect itself
from dealings with him, and the government may choose to avoid
business with him to the extent the public interest permits.4
The adequacy of FEI's internal ethics program is a somewhat dif-
ferent story. In December 1996, amidst settlement negotiations aimed
at ending the suspension, the AFSO asked the Defense Logistics
Agency to audit FEI's ethics program. This audit would involve inter-
views of FEI employees. FEI agreed to submit to the audit, but it
insisted that its lawyer be present at the employee interviews. Fearful
that the presence of FEI's counsel might dampen the candor of the
employees, rendering the "audit" worthless, the AFSO insisted that
FEI's counsel remain silent during the interviews and leave if any
employee wished to be interviewed privately. FEI would not agree to
these terms, and the audit was canceled.
In light of the pending criminal case, we can understand FEI's
_________________________________________________________________
4 In this regard, FEI asserts that it has been awarded 740 contracts for
government work since the suspension began. It does not specify how
many of these are subcontracts, to which different-- and more lenient
-- rules apply. See 48 C.F.R. § 9.405-2. The record shows only one
instance in which FEI received a prime contract, and this award followed
certification that the government had a "compelling need" to make the
award. Whether one contract or 740, the government's need does not
imply FEI's present responsibility. FEI may simply have the government
over the barrel as to certain high technologies; indeed, it touts its past
involvement in what it calls "black" programs at the highest level of
national security.
9
reluctance to give the government a free hand in conducting inter-
views of its employees. Its decision may well have been a sound piece
of legal strategy. Nevertheless, to have the suspension lifted, FEI has
the burden of demonstrating its present responsibility. If it will not,
even for sound reasons, the legal effect is the same as if it cannot
establish its present responsibility.
The decision of the AFSO is in accordance with law and is not
arbitrary and capricious.5
III.
FEI also asserts that it has been denied due process because it has
not been afforded an opportunity to present live witnesses on its
behalf or to confront its "accusers." The regulations call for a process
"that [is] as informal as is practicable, consistent with the principles
of fundamental fairness." 48 C.F.R. § 9.407-3(b)(1). Live witness tes-
timony and cross-examination of agency witnesses are prescribed
only where the suspension is not based on an indictment, and not even
then if the Department of Justice advises the agency"that substantial
interests of the Government in pending or contemplated legal pro-
ceedings based on the same facts as the suspension would be preju-
diced." See id. § 9.407-3(b)(2). In actions based on an indictment, the
suspending official may generally act on the written record, including
any submissions from the contractor. See id.§ 9.407-3(d).
The Due Process Clause does not universally mandate trial-like
formalities. "The judicial model of an evidentiary hearing is neither
a required, nor even the most effective, method of decisionmaking in
all circumstances." Mathews v. Eldridge, 424 U.S. 319, 348 (1976).
"Due" simply means adequate to the task at hand, and adequacy is
_________________________________________________________________
5 FEI also asserts that CIPA prevented it from showing the AFSO clas-
sified information that allegedly tends to exonerate it of the criminal
charges. FEI's criminal trial is the proper forum for this attempted exon-
eration. The AFSO here properly focused on factual issues relating to
FEI's present responsibility. We think that an obvious purpose of the reg-
ulation deeming an indictment "adequate evidence" for suspension is to
prevent a parallel inquiry that might prejudice the government, the con-
tractor, or both.
10
measured by the importance of the private interest at stake and by the
"``risk of error inherent in the truthfinding process as applied to the
generality of [similar] cases.'" Califano v. Yamasaki, 442 U.S. 682,
696 (1979) (quoting Mathews, 424 U.S. at 344). Our first inquiry is
therefore into the nature of FEI's interest.
A property interest in a particular governmental benefit requires a
"legitimate claim of entitlement" to that benefit. Board of Regents v.
Roth, 408 U.S. 564, 577 (1972). Because no one is entitled in advance
to the award of a government contract, FEI cannot claim a property
interest recognized by the Due Process Clause.
On the other hand, FEI's reputation may be sullied by a suspension
for misconduct. Though reputation alone is not protected by the Due
Process Clause, Paul v. Davis, 424 U.S. 693, 706-12 (1976), an injury
to reputation occasioned by the government's "alteration of some
right or status recognized by . . . law" may give rise to a protected lib-
erty interest. See Vanelli v. Reynolds School Dist. No. 1, 667 F.2d
773, 77-78 (9th Cir. 1982); see also Ferencz v. Hairston, 119 F.3d
1244, 1249 (6th Cir. 1997). Eligibility for federal contracts is such a
status. Accordingly, suspensions premised on misconduct can deprive
the contractor of a "liberty" interest protected by the Due Process
Clause. See ATL, Inc. v. United States, 736 F.2d 677, 682-83 (Fed.
Cir. 1984); Old Dominion Dairy Prods., Inc. v. Secretary of Defense,
631 F.2d 953, 961-64 (D.C. Cir. 1980). Where the suspension for
misconduct is based on a criminal indictment, however, this liberty
interest is greatly diminished, because it is unlikely that the suspen-
sion tarnishes the contractor's reputation any more than would the
indictment standing alone. See FDIC v. Mallen , 486 U.S. 230, 243
(1988).
We have previously indicated that the regulations' requirement of
"adequate evidence" of fraud or other similar crimes protects the con-
tractor's due process rights. James A. Merritt & Sons v. Marsh, 791
F.2d 328, 330 (4th Cir. 1986) (reversing preliminary injunction and
ruling that due process challenge to regulation was not likely to suc-
ceed on merits). As we explained:
A decision to issue an indictment is made by a deliberative
public body acting as an arm of the judiciary, operating
11
under constitutional and other legal constraints. The Consti-
tution does not require the government to wait for the out-
come of the criminal proceeding before implementing an
administrative suspension when a contractor has been
accused of fraud after the grand jury's investigation and
deliberative process. An indictment triggers a judicial pro-
cess which protects the rights of the accused while deter-
mining guilt or innocence. The formalities attendant to
issuing an indictment carry sufficient indicia of reliability to
allow the government to act to protect itself against future
dealings with someone accused of fraud.
A suspension is to be imposed "only in the public interest
for the Government's protection and not for purposes of
punishment." 48 C.F.R. 9.402(b). In this case the public
interest and the potential harm to the government coincide.
The proper expenditure of tax dollars is, of course, a pri-
mary responsibility of government. It is not only correct for
the government to question the integrity of a contractor who
has been indicted for the manner in which he carried out
military contracts, but failure to do so would be highly irre-
sponsible.
Id. at 330-31. Indeed, FEI concedes that the initial decision to suspend
it was perfectly lawful and comported with due process.
However, FEI asserts that, because suspension is temporary, the
continuance of a suspension for over three years constitutes an addi-
tional deprivation requiring additional process, that is, a trial-like
hearing.
We will accept without deciding that the premise of this argument
is correct -- the sheer duration of a temporary deprivation might trig-
ger a right to supplemental due process at some point -- though
defining the contours of any such right would be problematic. How
long is too long a temporary deprivation? Does the right to some new
process accrue in full at a bright line point or incrementally as the
deprivation continues?
We can accept this premise because the regulations are already
fully sensitive to it. The suspending officer has the power to lift the
12
suspension upon a showing of present responsibility, and the contrac-
tor has the ability to submit documentary evidence demonstrating
such responsibility. FEI's retort, of course, is that due process here
requires more than the opportunity to submit written evidence. We are
not persuaded.
As we noted above, deciding whether a process provides what is
"due" requires an examination of the nature and importance of the pri-
vate right and the risk of error inherent in the process as applied to
the generality of cases. The private right here-- the incremental
injury to reputation occasioned by the continuation of the suspension
of an indicted contractor -- is a slight one indeed.
Moreover, there is little risk of this slight interest's erroneous
deprivation through the procedure used. FEI has been indicted and
remains under indictment. It is not enough that an oral hearing might
permit an indicted contractor to establish its present responsibility in
a specific case. Due process is offended only if, in the generality of
cases, there is a sufficient risk that a contractor who could make this
showing at an oral hearing could not do so through written submis-
sions. Because we conclude that such a risk is small in the general
suspension case, we hold that the regulations do not violate due pro-
cess.
The judgment of the district court is affirmed.
AFFIRMED
BUTZNER, Senior Circuit Judge, dissenting:
I would reverse the district court's grant of summary judgment to
the Air Force and remand for further proceedings.
In November of 1993 a grand jury indicted Frequency Electronics,
Inc. (FEI) and four of its senior executives, including FEI's then
Chairman Martin Bloch, for conspiracy to defraud the United States,
fraud and making false statements. Four years later this criminal case
is still pending. On December 13, 1993, FEI, Martin Bloch, and the
three other FEI executives were suspended by the Air Force pending
13
the completion of the criminal proceeding. The suspensions were
based solely on the indictment. FEI asserts, and the Air Force does
not contest, that the government was not monetarily harmed from
FEI's alleged wrongdoing. FEI has maintained throughout its suspen-
sion that the government received full value in the contested transac-
tions.
Upon suspension, Bloch resigned as chairman and voluntarily
agreed to stop participating in any board decisions or actions. The
three other executives all resigned or were reassigned so that they had
no duties or responsibilities that related to FEI's government business.
Subsequent to the suspension, Bloch was assigned to some govern-
ment work but only when he was requested by the government or the
government's prime contractor. FEI and Bloch also voluntarily sub-
mitted proposed administrative agreements that confirmed Bloch's
isolation from FEI's government work.
Retired Major General Joseph P. Franklin, the former Commandant
of West Point and Special Assistant to the Chairman of the Joint
Chiefs of Staff, was hired in an effort to clean up the alleged problems
at FEI. FEI also confirmed its ongoing ethics program by placing over
500 pages in the administrative record that related to its ethics train-
ing and compliance program.
During this suspension, FEI has continued to work on government
projects, chiefly as a subcontractor. Between December 1993 and
December 1996, FEI's government related revenue was $49,218,000.
Almost half of that revenue came from contracts awarded to FEI after
it had been suspended. At no time during the suspension has FEI been
accused of any wrongdoing or has the government complained about
the quality of FEI's work. Additionally, the government has acknowl-
edged that FEI is essential on many government contracts and that "it
would probably require several years and at least tens of millions of
dollars to develop alternate suppliers." JA. 78-79, 2017-2019. Despite
these facts the Air Force denied FEI's request to lift the suspension.
FEI invoked the court's equitable powers when it asked the court
for a preliminary injunction against the Air Force's suspension. A
court sitting in equity has greater flexibility than a court of law. See,
e.g., International Union, United Auto., Aerospace and Agric. Imple-
14
ment Workers v. Scofield, 382 U.S. 205, 211 (1965) ("While the court
must act within the bounds of the statute and without intruding on the
administrative process, it may adjust its relief to the exigencies of the
case in accordance with the equitable principles governing judicial
action.") (quoting Ford Motor Co. v. NLRB, 305 U.S. 364, 373
(1939)). Despite the literal text of the federal acquisition regulations,
I believe that a court sitting in equity must not turn a blind eye to the
injustice of FEI's nearly five-year old suspension.
When we consider the circumstances of the case including the
length of the suspension, it is apparent that FEI's request is not incon-
sistent with the regulations. A comparison of a suspension with a
debarment discloses that the regulations do not contemplate a suspen-
sion of this length. The regulations consider a debarment more serious
than a suspension. A company can be suspended prior to receiving a
hearing of any kind, but before a company can be disbarred it must
receive notice and a hearing. 48 C.F.R. §§ 9.406-3(b), 9.407-3(b)(1).
Under the regulations the more serious sanction of a disbarment can-
not last for more than three years without a showing that the debar-
ment is necessary to protect the government's interest. 48 C.F.R.
§ 9.406-4.
When these provisions are read together, the Air Force's position,
that a suspension can run for nearly five years without a showing that
it is in the government's interest, is inequitable."The essence of
equity jurisdiction has been the power of the Chancellor to do equity
and to mould each decree to the necessities of the particular case.
Flexibility rather than rigidity has distinguished it." Hecht Co. v.
Bowles, 321 U.S. 321, 329 (1944).
Respectfully dissenting, based on these equitable principles, I
would reverse the district court's grant of summary judgment and
remand for consideration of injunctive relief.
15