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A TO Z MAINTENANCE CORP. v. DOLE

April 14, 1989

A TO Z MAINTENANCE CORP. and SAMUEL WILLIAMS, Plaintiffs,
v.
ELIZABETH DOLE, Secretary of the United States Department of Labor, Defendant



The opinion of the court was delivered by: RICHEY

 I. Introduction

 This case arises under the McNamara-O'Hara Service Contract Act of 1965, as amended (the "SCA"). 41 U.S.C. § 351, et seq. The SCA regulates the contractual relationship between companies that provide services to the United States and their employees. To this end, the SCA sets forth certain provisions, intended to protect the contractor's employees, which must be included in virtually every contract for services executed by the United States. *fn1" These provisions obligate the contractor to satisfy certain standards relating to minimum wages, fringe benefits, working conditions, and the like. 41 U.S.C. § 351(a)(1)-(5).

 In addition, the SCA includes provisions which address contractors' violations of these mandatory contractual standards. One such SCA provision, at issue in this action, authorizes the Comptroller General to distribute to all agencies of the United States a list of contractors found to have violated their contracts, and thus to have violated the SCA. The contractors so named are barred from contracting with the United States for a period of three years. 41 U.S.C. § 354(a). *fn2" The only exemption from this sanction is where the Secretary of Labor finds, on the facts of a given case, that "unusual circumstances" justify excusing a particular contractor from debarment. *fn3"

 The defendant in this action, A to Z Maintenance Corporation ("A to Z"), has provided services to the United States under contracts subject to the SCA since 1981. *fn4" On August 7, 1985, the Department of Labor's New York area Regional Solicitor filed an administrative complaint against A to Z. The complaint alleged that A to Z had violated various minimum wage and fringe benefit provisions of several of its contracts and of the SCA. The complaint further alleged that A to Z had failed to comply with several of the SCA's record keeping requirements. The Regional Solicitor's complaint recommended that A to Z suffer the sanction of debarment pursuant to § 354(a). A to Z answered the complaint, contending that no violations had occurred, and that even if they had, "unusual circumstances" existed such that debarment would be inappropriate.

 On March 23, 1987, Administrative Law Judge G. Marvin Bober conducted a hearing on the complaint. His decision, issued on March 14, 1988, found that A to Z had repeatedly committed serious violations of the SCA under several of its contracts, and that "unusual circumstances" did not exist under § 354(a). The Deputy Secretary of Labor affirmed ALJ Bober's determination on August 23, 1988. The Deputy Secretary thus ordered that the names of both A to Z and its President, Samuel Williams, "be placed on the list of ineligible bidders in accordance with the provisions of the [SCA]".

 A to Z promptly filed suit in this Court. A to Z's complaint primarily challenges ALJ Bober's finding, affirmed by the Deputy Secretary, that A to Z's case does not present "unusual circumstances" sufficient to avoid debarment under § 354(a). In support, A to Z contends that ALJ Bober applied an improper legal standard by giving weight to a 1980 administrative adjudication involving A to Z in which unusual circumstances were found to exist. A to Z also contends that ALJ Bober and the Deputy Secretary acted arbitrarily and capriciously by "ignoring" certain uncontroverted evidence in the record which, according to A to Z, establishes the inadvertence of the violations. Finally, A to Z contends that the Deputy Secretary applied an improper standard in affirming ALJ Bober's decision. Based upon the foregoing, A to Z asks this Court to reverse the administrative findings and to enjoin the inclusion of A to Z and Mr. Williams on the § 354(a) debarment list.

 A to Z and the Department of Labor (the "DOL") have filed cross motions for summary judgment. Although the Court is uncomfortable with the severity of the sanction in this case, *fn5" it is compelled to conclude that, based upon the undisputed facts and the underlying law, the DOL is entitled to judgment. Should it decide to do so, the DOL may include A to Z and Mr. Williams on the list of debarred contractors pursuant to § 354(a).

 II. Discussion

 1. Section 354(a) and "Unusual Circumstances"

 Section 354(a) is a particularly unforgiving provision of a demanding statute. In concept, § 354(a) is simple: If a contractor violates any provision of an employment contract that the SCA requires to be included, the DOL shall forward the contractor's name to the Comptroller General for inclusion in the debarment list. The sole exception is for cases in which the Secretary of Labor concludes that "unusual circumstances" justify exclusion from the list. Section 354(a) does not require a series of violations as a prerequisite to debarment, nor does it require that the violations be substantial or the result of intentional or otherwise culpable behavior. Instead, § 354(a) provides without qualification that "a violation" -- i.e., a single, perhaps wholly inadvertent violation -- may provide grounds for debarment.

 The Secretary's power to find "unusual circumstances" mitigates the facial harshness of § 354(a). *fn6" The Secretary's discretion in this regard, however, is not intended to permit the unbounded exercise of bureaucratic benevolence. Instead, over time, the DOL has developed a set of narrow, relatively demanding criteria which control the "unusual circumstances" determination. Originally set forth in an administrative adjudication, Washington Moving & Storage Co., No. SCA-168 (August 16, 1973), the criteria are now contained in DOL regulations. See 29 C.F.R. § 4.188(b)(3). *fn7"

 As structured in Washington Moving and § 4.188(b)(3), the "unusual circumstances" analysis contains two components. First, the decisionmaker determines the presence or absence of certain aggravating factors. These aggravating factors include a finding that the violation or violations were intentional or the product of culpable negligence. Additional aggravating factors are a history of similar violations, repeated violations of the Act, or violation or violations of a "serious nature." If any of these aggravating factors are found to be present, the Secretary cannot find "unusual circumstances"; the regulations state that if aggravating circumstances are found, "relief from debarment cannot be in order." 29 C.F.R. § 4.188(b)(3)(i) (emphasis added).

 If no aggravating factors are found, however, the analysis proceeds to the second step. Under this second step, "prerequisites to relief" are a "good compliance history, cooperation in the investigation, repayment of moneys due, and sufficient assurances of future compliance." 29 C.F.R. § 4.188(b)(3)(ii). Nevertheless, even where these prerequisites -- coupled with the absence of aggravating factors -- are shown to exist, "a variety of other factors must still be considered" before "unusual circumstances" may be found. Id. These additional factors include such matters as whether the contractor has been the subject of previous investigations, whether the contractor has committed recordkeeping violations which impeded the investigation, and whether liability turned upon the resolution of bona fide legal disputes. Id. It is significant that ...


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