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UNIROYAL, INC. v. MARSHALL

July 20, 1979

Uniroyal, Inc., Plaintiff
v.
F. Ray Marshall et al., Defendants.



The opinion of the court was delivered by: GREENE

This case presents the question whether a major government contractor may be debarred from existing and future government contracts for refusing to comply with demands for discovery in the context of an ongoing proceeding in which it is being charged with employment discrimination. As such, it is a case of first impression. Specifically, the action is one to review an order of the Secretary of Labor terminating plaintiff's present government contracts and declaring plaintiff ineligible for future government contracts, and it seeks an injunction against enforcement of the order.

I

 Plaintiff Uniroyal, Inc., is one of the largest manufacturers of rubber and related products in the United States and it employs some 24,000 persons. Since at least 1968, it has had contracts and subcontracts with the United States government in the amount of several million dollars each year. On July 28, 1976, a complaint issued initiating a formal administrative process charging Uniroyal with failure to comply with Executive Order 11246 which prohibits discrimination by government contractors. *fn1" The complaint alleged that Uniroyal discriminated against its female and minority employees based in its Mishawaka, Indiana, plant. After some discovery was had, Uniroyal advised the government, on May 10, 1977, that it would no longer comply with the pretrial discovery regulations issued by the Secretary of Labor because it considered them invalid.

 Concurrently Uniroyal initiated an action in the U.S. District Court for the Northern District of Indiana challenging the validity of these regulations. That court granted summary judgment to the government (Uniroyal v. Marshall, E.P.D. P 7798 (N.D.Ind.1977)), and the U.S. Court of Appeals for the Seventh Circuit affirmed, largely on exhaustion of administrative remedies grounds. Uniroyal v. Marshall, 579 F.2d 1060 (7th Cir. 1978). *fn2"

 The government meanwhile filed four motions before the Administrative Law Judge hearing the Uniroyal matter in the Department of Labor seeking to have Uniroyal's government contracts terminated because of its refusal to provide discovery. The first motion alleged that Uniroyal improperly declined to provide full and complete responses to government interrogatories and requests for production of documents and that it refused to permit the government to return to the Mishawaka plant or to inspect and photograph documents there. The second motion was based on Uniroyal's refusal to present its officers and employees for scheduled depositions; the third motion dealt with additional refusals of Uniroyal to respond to requests for admissions and accompanying interrogatories; and the fourth motion alleged that Uniroyal improperly interfered with the government's preparation of its case by interposing interested counsel in interviews by government attorneys of potential witnesses.

 Hearings were held on the debarment motions in November 1977. On April 11, 1978, the Administrative Law Judge filed a recommended debarment. In her 21-page opinion, the ALJ found that the government had sustained the first three motions but had waived its rights with respect to the fourth motion. The Secretary of Labor, on June 28, 1979, adopted the ALJ's recommendations save for her ruling on the government's fourth motion, overruled some 43 exceptions filed by Uniroyal, and held that the company had violated the Executive Order and the rules and regulations issued pursuant thereto in the four respects alleged by the government. In accordance with his findings and conclusions, he ordered Uniroyal suspended from all existing contracts "until such time that it can satisfy the Director of the (Office of Federal Contract Compliance Program) that it is in compliance with" the Executive Order and the regulations issued pursuant thereto.

 Uniroyal filed this action in this Court on July 2, 1970. After a hearing, the Court stayed execution of the Secretary's debarment order for a period of ten days. On July 12, 1979, a hearing was held on plaintiff's motion for preliminary injunction and the government's motion for summary judgment. *fn3" At that time, the Court extended the stay for an additional ten days pending its decision on the merits. *fn4"

 This case presents two principal issues *fn5" first, whether in a proceeding under the Executive Order the contractor may be required to submit to the inspection of records and documents, to answer interrogatories, and to participate in depositions; and second, if a power to compel discovery exists, whether a refusal to comply with discovery may be punished by debarment from government contracts.

 II

 There can be no serious question about the authority of the Administrative Law Judge under the Executive Order and the regulations to require Uniroyal both to permit the inspection of pertinent documents and records and to require it to participate in depositions and other discovery. At least two of the provisions of the Executive Order establish such power.

 Section 202(5) of the Order provides that:

 
The contractor will furnish all information and reports required by Executive Order No. 11246 of September 24, 1965, and by the rules, regulations, and orders of the Secretary of Labor, or pursuant thereto, and will permit access to his books, records, and accounts by the contracting agency and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations, and orders.

 Thus, if the Executive Order and the implementing regulations are valid, the discovery ordered by the Administrative Law Judge is likewise valid and binding on plaintiff. The more difficult question on this aspect of the case is whether the President had the authority to promulgate the various discovery provisions of the Executive Order. Examination and analysis of the Executive Order itself and of prior judicial decisions interpreting that Order and other delegations of agency authority compel an affirmative answer.

 The Executive Order has the force and effect of law. United States v. New Orleans Public Service, Inc. (NOPSI), 553 F.2d 459 (5th Cir. 1977), Vacated and remanded on other grounds, 436 U.S. 942, 98 S. Ct. 2841, 56 L. Ed. 2d 783 (1978); Contractors Ass'n of Eastern Pa. v. Secretary of Labor, 442 F.2d 159 (3rd Cir. 1971), Cert. denied, 404 U.S. 854, 92 S. Ct. 98, 30 L. Ed. 2d 95 (1971); Farkas v. Texas Instrument, Inc., 375 F.2d 629 (5th Cir. 1967); Farmer v. Philadelphia Electric Co., 329 F.2d 3 (3rd Cir. 1964). Regulations which are promulgated pursuant to the Order likewise have the force and effect of law, provided that they are not inconsistent with the Order or otherwise plainly unreasonable. Maryland Casualty Co. v. United States, 251 U.S. 342, 40 S. Ct. 155, 64 L. Ed. 297 (1919); Commissioner v. So. Texas Lumber Co., 333 U.S. 496, 68 S. Ct. 695, 92 L. Ed. 831 (1948); Contractors Ass'n of Eastern Pa. v. Secretary of Labor, supra.

 Executive Order 11246 and regulations promulgated pursuant thereto have survived a number of challenges to their underlying authority similar ...


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