The opinion of the court was delivered by: SIRICA
[EDITOR'S NOTE: The following court-provided text does not appear at this cite in 442 F. Supp.]
Consistent with the Opinion issued of even date herewith, it is by the Court, this 18th day of November, 1977,
ORDERED that all proceedings in this action be, and the same are hereby, stayed pending plaintiffs' exhaustion of their administrative remedies before the Small Business Administration; and it is
FURTHER ORDERED that the defendants, on behalf of the Small Business Administration, shall reach a final decision in the administrative proceedings within 60 days of the date of this Order; and it is
FURTHER ORDERED that plaintiffs' motion for a temporary restraining order or, in the alternative, for a preliminary injunction be, and the same is hereby, denied; PROVIDED HOWEVER that upon completion of the administrative proceedings, plaintiffs may renew their application for preliminary injunctive relief, may amend their complaint to seek judicial review of the final agency action, or may otherwise pursue the causes of action now stated in the complaint.
This is an action for declaratory and injunctive relief in connection with plaintiffs' termination from the Small Business Administration's (SBA) Section 8(a) Program. The action is presently before the Court on plaintiff's motion for a temporary restraining order or, in the alternative, for a preliminary injunction. The Court has had an opportunity to consider briefs from both sides, including plaintiffs' reply to the government's opposition, and to hear oral argument. In these circumstances, there would be no purpose served by considering the motion for a temporary restraining order prior to or separate from the motion for a preliminary injunction. For the reasons that follow, the Court has determined that the plaintiffs' application for a preliminary injunction must be denied.
The Section 8(a) Program is operated by the Small Business Administration pursuant to 15 U.S.C. § 637(a) (1970) (codifying § 8(a) of the Small Business Act). The statute authorizes the Administrator of the SBA to enter into contracts for all types of supplies and services with federal departments and agencies and to arrange for the performance of those contracts by entering into subcontracts with small business concerns. The statute gives the SBA broad discretion to determine which firms shall receive the subcontracts and, in general, to develop a program which will be responsive to the goals and policies of the Small Business Act.
In response to its statutory mandate, as well as to several subsequent congressional and presidential directives,
the SBA developed a program by which it seeks "to assist small business concerns owned and controlled by socially or economically disadvantaged persons to achieve a competitive position in the market place." 13 C.F.R. § 124.8-1(b)(1977). The SBA's section 8(a) regulations provide for eligibility in the program as follows:
(1) Social or economic disadvantage. An applicant concern must be owned and controlled by one or more persons who have been deprived of the opportunity to develop and maintain a competitive position in the economy because of social or economic disadvantage. Such disadvantage may arise from cultural, social, chronic economic circumstances or background, or other similar cause. Such persons include, but are not limited to, black Americans, American Indians, Spanish-Americans, oriental Americans, Eskimos, and Aleuts. Vietnam-era service in the Armed Forces may be a contributing factor in establishing social or economic disadvantage. 13 C.F.R. § 124.8-1(c)(1)(1977).
This action was brought by Gary D. Thomas and Human Resources Management, Inc., a close corporation of which Thomas is president and principal stockholder. In January 1975, Thomas applied for assistance under the Section 8(a) Program. Thomas based his eligibility on "'chronic economic problems' . . . resulting from the poverty of his parents and support obligations all of which 'was further aggravated by . . . service in the U.S. Army during the Vietnam Conflict.'" Complaint at 4. The application was approved and Human Resources Management was granted section 8(a) status in April of 1975. Since its acceptance into the program, the firm has obtained six government contracts
totalling almost one-half million dollars in revenue and representing 70 percent of its business. Human Resources Management has asserted that it has consistently been in compliance with all applicable rules and regulations. The government has not challenged this assertion or suggested that the company has not met the ongoing objectives and goals set forth in its section 8(a) business plan.
Sometime during September, 1977, Mr. Thomas was informed by a district SBA official that the SBA was in the process of reviewing the certification and basic eligibility of all section 8(a) firms and that no contracts would be processed by the SBA until a review of a firm's eligibility was completed. It is undisputed that this "recertification" program resulted from congressional concern over alleged abuses in the 8(a) program, for example, participation in the program by non-disadvantaged minorities and the use of minority group members as a "front" for ineligible participants.
In a statement before a Senate subcommittee, A. Vernon Weaver, Administrator of the SBA, stated that changes would be made to rectify past abuses in the program. He told the subcommittee, in July 1977, that one of his actions would be "an evaluation of each firm in the 8(a) portfolio to determine (1) whether the firm's owners qualify under the established eligibility criteria . . . ."
Soon after the July hearings, a "recertification" program for 8(a) firms was instituted. As summarized in the government's opposition to the instant motion: "On August 12, 1977, pursuant to this pledge to Congress, the Administrator sent a memorandum to all Regional Directors, instructing that each Regional Office review and approve all final action taken by each District Office within their jurisdiction with respect ...