BURGER, Circuit Judge.
This is an appeal from an order granting summary judgment for appellees in an action for a declaratory judgment and injunctive relief against the Secretary of
In January 1960, Thos. P. Gonzalez Corporation, which had a record of contractual relations with Commodity Credit for a number of years, received notice by telegram
By letter dated October 31, 1960 Commodity Credit advised appellants that the suspension would be continued until conclusion of an investigation by the Department of Justice. On May 24, 1961, Thomas P. Gonzalez, individually, was indicted on felony charges for alleged misuse of the official inspection certificates referred to in the January 1960 notice of temporary suspension. Following the receipt of the telegram announcing temporary suspension appellants presented information relevant to their position and various representations were made in their behalf by counsel to officials of appellees. On May 24, 1962, after consideration of information and arguments submitted by appellants, Commodity Credit informed appellants by letter that they were suspended for five years from the date of the original temporary suspension on January 13, 1960. The letter stated no reasons or grounds for the final debarment action.
Meanwhile, on January 15, 1962, the indictment of May 24, 1961, charging Thomas P. Gonzalez personally with misuse of official inspection certificates, was dismissed, and Gonzalez entered a plea of guilty to a misdemeanor based essentially on the same acts. 60 STAT. 1087 (1946), as amended, 69 STAT. 553 (1955), 7 U.S.C. § 1622(h) (1958).
Appellants sought review by the Secretary of Agriculture, who declined to reconsider,
Thereafter, appellants instituted the declaratory judgment action from which this appeal arises. Since January 1960, appellants have been ineligible to participate in any programs of Commodity Credit or to purchase surplus government commodities for resale. Their complaint in the District Court alleged that in appellants' course of dealings with Commodity Credit they had purchased for export under license an aggregate of more than $7,000,000 in surplus commodities, that this was a large part of their business, and that loss of this business has deprived them of more than $100,000 in profits. The chronology of this record shows that for more than two and one-half years, while under temporary and then final suspension, appellants have protested unsuccessfully against the action which made them ineligible to purchase surplus government commodities under control of Commodity Credit.
Appellants contend that the debarment is invalid for four reasons:
Appellants seem to concede that if the action of debarment is authorized by law, a preliminary or temporary debarment may be made in summary fashion. They contend, however, that final action of debarment imposes such serious economic injury on a contractor that debarment can be imposed only by a procedure which comports with constitutional standards of due process. The temporary suspension of January 1960 was to continue only "pending completion of an investigation" by the Department of Justice. At that point — when this investigation was completed — appellants insist, notice of charges, opportunity to be heard, and opportunity to cross-examine adverse witnesses were required.
Appellees' position is that (1) doing business with Commodity Credit is not a legally protected right and suspension of eligibility for five years gives rise to no justiciable controversy; (2) Congress has expressly precluded judicial review of Commodity Credit action; (3) appellants committed a willful act in violation of law basically destructive of the purposes and operations of Commodity Credit;
The issues which emerge from the opposing contentions can be restated as follows:
Justiciability and Standing
There can be no doubt that the invasion of some legally protected right is the predicate upon which any exercise of judicial power must rest. See Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 140-141, 71 S.Ct. 624, 95 L.Ed. 817 (1951) (principal opinion). It is equally correct, broadly speaking, to say that no citizen has a "right," in the sense of a legal right, to do business with the government. See Perkins v. Lukens Steel Co., 310 U.S. 113, 60 S.Ct. 869, 84 L.Ed. 1108 (1940). But use of such terms as "right" or "privilege" tends to confuse the issues presented by debarment action. Interruption of an existing relationship between the government and a contractor places the latter in a different posture from one initially seeking government contracts and can carry with it grave economic consequences.
The consequences of administrative termination of all right to bid or contract, colloquially called "blacklisting" and formally called suspension or debarment, will vary, depending upon multiple factors: the size and prominence of the contractor; the ratio of his government business to non-government business; the length of his contractual relationship with government; his dependence on that business; his ability to secure other business as a substitute for government business. These are some of the basic factors involved. The impact of debarment on a contractor may be a sudden contraction of bank credit, adverse impact on market price of shares of listed stock, if any, and critical uneasiness of creditors generally, to say nothing of "loss of face" in the business community.
Thus to say that there is no "right" to government contracts does not resolve the question of justiciability. Of course there is no such right; but that cannot mean that the government can act arbitrarily, either substantively or procedurally, against a person or that such person is not entitled to challenge the processes and the evidence before he is officially declared ineligible for government contracts. An allegation of facts which reveal an absence of legal authority
The next question to be resolved is whether Congress has provided for judicial review of Commodity Credit action imposing debarment of a contractor. Section 10 of the Administrative Procedure Act, 60 STAT. 243 (1946), 5 U.S.C. § 1009 (1958), under the title of "Judicial review of agency action," after carving out two areas of exception where no review is available, defines the right of review, the form of proceedings, the acts reviewable and the scope of review. The introductory sentence of Section 10 withholds from judicial scrutiny cases where "(1) statutes preclude judicial review or (2) agency action is by law committed to agency discretion"; neither exception is applicable here. Appellees contend that the challenged agency action here falls within both of these categories under 63 STAT. 1057 (1949), 7 U.S.C. § 1429 (1958):
Action challenged as a denial of due process — whether substantive in the sense of being arbitrary or by capricious classification, or procedural in the sense of denying minimum safeguards — could be immune from judicial review, if ever, only by the plainest manifestation of congressional intent to that effect. See American and European Agencies v. Gillilland, Inc., 101 U.S.App.D.C. 104, 106 at n. 4, 247 F.2d 95, 97 at n. 4, cert. denied, 355 U.S. 884, 78 S.Ct. 152, 2 L. Ed.2d 114 (1957); see generally, Hart, The Power of Congress to Limit the Jurisdiction of Federal Courts, 66 HARV.L. REV. 1362, 1386-1401 (1953). We find no such intent reflected in the statute. To the contrary, Congress must have contemplated that a claim of "inconsistency" in the Secretary's action was to be resolved by judicial review. In short, far from precluding judicial review this statute authorizes it, and "the responsibility of determining the limits of statutory grants of authority in such instances is a judicial function entrusted to the courts by Congress * * *." Stark v. Wickard, 321 U.S. 288, 310, 64 S.Ct. 559, 571, 88 L.Ed. 733 (1944).
The determination to debar a contractor does not fall within the scope of the second exception, "agency action * * * by law committed to agency discretion." The language, relied upon by appellees, relating to "final and conclusive" determinations of the Secretary has as its primary thrust the removal from judicial scrutiny of the operational policy decisions and programs of the agency, not standards of procedure for debarment. Compare Pauling v. McNamara, 118 U.S. App.D.C. ___, 331 F.2d 796 (1963), pet. for cert. filed, 32 U.S. L. WEEK 3352 (U. S. April 2, 1964) (No. 965). Appellants here do not challenge broad policy decisions, as in the Lukens Steel and Pauling cases, supra, but narrowly attack as beyond agency authority a debarment or "blacklisting" which the complaint alleges inflicted a special injury on appellants and was accomplished in a procedurally unfair and unauthorized manner. Nothing in the statute confers unreviewable finality on determinations of the Secretary as to questions of the scope of his congressional authority or of the requisite procedural safeguards. Cf. Harmon v. Brucker, 355 U.S. 579, 582, 78 S.Ct. 433, 2 L.Ed.2d 503 (1958) (per curiam).
The invasion of a legally protected right also constitutes a legal
Authority For Debarment
Congress has made no explicit provision for debarring contractors doing business with Commodity Credit. The question presented is whether Commodity Credit is powerless to terminate business relations with irresponsible, defaulting or dishonest contractors.
No regulations have been established by appellees authorizing or governing debarment for misuse of official inspection certificates relating to the commodities exported by appellants to Brazil.
Section 3(a) of the Administrative Procedure Act provides:
60 STAT. 238 (1946), 5 U.S.C. § 1002(a), (b) (1958).
The command of the Administrative Procedure Act is not a mere formality. Those who are called upon by the government for a countless variety of goods and services are entitled to have notice of the standards and procedures which regulate these relationships. Neither appellants nor others similarly situated can turn to any official source for guidance as to what acts will precipitate a complaint of misconduct, how charges will be made, met or refuted, and what consequences will flow from misconduct if found. In the contractual relationship shown by this record an experienced businessman could reasonably anticipate that some agency action might well be taken as a result of misuse of inspection certificates, but he could only speculate as to the nature of the action and the processes by which it would be effected. This condition does not accord with the provisions of the Administrative Procedure Act.
Having looked "first to petitioners' nonconstitutional claim that respondent acted in excess of powers granted * * * by Congress," Harmon v. Brucker, 355 U.S. 579, 581, 78 S.Ct. 435 (1958), we conclude that although the Act vests Commodity Credit with power to impose debarment for misuse of official inspection certificates, we cannot agree that Congress intended to authorize such consequences without regulations establishing standards and procedures and without notice of changes, hearings, and findings pursuant thereto. Absent such procedural regulations and absent notice, hearing and findings in this case, the debarment is invalid; to reach any other conclusion would give rise to serious constitutional issues. See, e. g., Greene v. McElroy, 360 U.S. 474, 507-508, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959); Bland v. Connally, 110 U.S.App. D.C. 375, 293 F.2d 852 (1961); Davis v. Stahr, 110 U.S.App.D.C. 383, 293 F.2d 860 (1961). Conceivably a summary debarment, in the nature of a temporary suspension, might be warranted for a reasonable period pending investigation;
The cases in this general area culminating in Cafeteria and Restaurant Workers Union v. McElroy, 367 U.S. 886, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961), make clear that the procedures due one person in one situation are not mechanically the same as those due another in a different context. The governmental interests on the one hand and the individual interests on the other must be balanced and the procedures established must be considered in light of various questions which courts have postulated from time to time: How was the individual likely to be hurt? What governmental interest was to be protected? How would the governmental interest be affected, if at all, by extending procedural safeguards to cover the challenged
Appellants have urged that their debarment violated due process standards. Our interpretation of the Act under which appellees administer the affairs of Commodity Credit makes unnecessary our reaching these constitutional contentions. In short, we construe, the pertinent statutory scheme as authorizing debarment but as not authorizing debarment without either regulations establishing standards and a procedure which are both fair and uniform or basically fair treatment of appellants. The scope and detail of these regulations are for the agency to resolve in the first instance. We have suggested enough on this subject to make further elaboration unnecessary.
Accordingly we remand with directions to enter summary judgment in favor of Thomas P. Gonzalez and Thos. P. Gonzalez Corporation, whose debarment was invalid because it was imposed without observance of procedural requirements and hence in excess of statutory jurisdiction and authority;
Reversed and remanded.
"Thos. P. Gonzalez Corporation, its officers, Thomas P. Gonzalez and Carmen Gonzalez, and any firms in which Thomas P. Gonzalez and Carmen Gonzalez may be a partner or officer * * * have been debarred from participating in any programs financed by Commodity Credit Corporation for a period of five years * * * effective as of January 13, 1960, the date on which the above-named firms were suspended from participating in any programs of Commodity Credit Corporation."
See note 4, infra.
"Scope of review. So far as necessary to decision and where presented the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of any agency action. It shall (A) compel agency action unlawfully withheld or unreasonably delayed; and (B) hold unlawful and set aside agency action, findings, and conclusions found to be (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (2) contrary to constitutional right, power, privilege, or immunity; (3) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; (4) without observance of procedure required by law; (5) unsupported by substantial evidence in any case subject to the requirements of sections 1006 and 1007 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or (6) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court. In making the foregoing determinations the court shall review the whole record or such portions thereof as may be cited by any party, and due account shall be taken of the rule of prejudicial error. * * *"
Debarment has long been the subject of discussion. See generally, FINAL REPORT, ADMINISTRATIVE CONFERENCE OF THE UNITED STATES, Dec. 15, 1962, p. 15; COMMITTEE ON ADJUDICATION OF CLAIMS REPORT ON DEBARMENT AND SUSPENSION OF PERSONS FROM GOVERNMENT CONTRACTING AND FEDERALLY ASSISTED CONSTRUCTION WORK, October 1, 1962; Gantt and Panzer, op. cit. supra note 5; Miller, Administrative Discretion in the Award of Federal Contracts, 53 MICH.L.REV. 781, 795-812 (1955); ATTORNEY GENERAL'S COMMITTEE ON ADMINISTRATIVE PROCEDURE, op. cit. supra note 5; Note, Notice and Hearing in Government Exclusionary Action, 110 U.Pa. L.REV. 1009 (1962); Note, The Blacklisted Contractor — Standing to Sue, 56 N. W.L.REV. 811 (1962).
Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 163, 71 S.Ct. 624 (1951) (concurring opinion of Frankfurter, J.).