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WATERHOUSE v. UNITED STATES

December 22, 1994

ROBERT L. WATERHOUSE, Plaintiff,
v.
UNITED STATES OF AMERICA, et al., Defendants.



The opinion of the court was delivered by: PAUL L. FRIEDMAN

 This case comes before the Court on defendants' motion to dismiss or in the alternative for summary judgment. For the reasons set forth below, defendants' motion for summary judgment is granted.

 I. FACTUAL BACKGROUND

 Robert Waterhouse was the Commissary Officer at Fort Belvoir, Virginia, for the Troop Support Agency. A.R. Tab A, Encl. 1. In this capacity, he was a government contractor pursuant to 48 C.F.R. § 9.403. Yassa Yoseph Yassa, owner of Bright Electric Contractors, held a contract for service and maintenance of the commissary from 1987 to 1989 and performed various commissary construction projects. During this period, Waterhouse approved purchase orders issued to Bright and approved work that Bright performed at the commissary. A.R. Tab A, Encl. 1.

 In 1988, Waterhouse accepted goods and services -- including a stove, electrical repairs and air conditioning repairs -- valued at $ 1,000 to $ 1,150 from Yassa and subcontractors of Yassa. A.R. Tab A, Encl. 1, 2. Waterhouse received the goods and services at his personal residence and admitted that he did not pay cash for them. A.R. Tab D, at 11. Waterhouse donated a 1982 Oldsmobile to Yassa's church, which he claims was in exchange for the goods and services. The church provided Waterhouse with a receipt for $ 3,684, which Waterhouse used in support of a tax deduction he took for a charitable donation. A.R. Tab A, Encl. 2; A.R. Tab D, at 33. Plaintiff maintains that he took the deduction only for the value of the car that exceeded the payment for services performed and goods received. A.R. Tab D, at 35. The car was in "junkyard" condition, was beyond repair and had to be hauled away and dumped. A.R. Tab A, Encl. 1, 2.

 On September 8, 1993, Waterhouse was served with a notice of his proposed debarment. A.R. Tab A. On October 21 and 22, 1993, plaintiff submitted written materials in opposition to his debarment, including his own affidavit. A.R. Tab B, C. On November 1, 1993, plaintiff, with the aid of counsel, presented testimony and argument before Brigadier General Thomas C. Cuthbert, the Army's debarring official, at a debarment hearing. A.R. Tab D. On December 6, 1993, plaintiff submitted a written memorandum in opposition to his debarment. A.R. Tab E.

 On January 27, 1994, General Cuthbert, the debarring official, debarred Robert Waterhouse from future contracting with the United States Army for a three-year period, effective August 31, 1993, until August 31, 1996. General Cuthbert found that the record established by a preponderance of the evidence that Mr. Waterhouse accepted illegal gratuities from Yassa and this served as the basis for the Army's decision to debar him. Decision Memorandum of Brigadier General Thomas R. Cuthbert, In the Matter of the Proposed Debarment of Robert L. Waterhouse (Jan. 27, 1994) (hereinafter "Decision"), A.R. Tab C, at 5. He found that the misconduct indicated "a lack of business integrity or honesty and is of so serious or compelling a nature that it directly affects his present responsibility to be a Government contractor or subcontractor." Decision, A.R. Tab C, at 5. He also found that Waterhouse failed to raise a material issue of fact that would require a trial-type, adversarial hearing because the preponderance of the evidence established that Waterhouse did not donate the car to Yassa.

 Plaintiff alleges that (1) he was not afforded a proper hearing and opportunity to rebut witnesses in violation of his due process rights, (2) the decision to debar him was arbitrary and capricious because the debarring official improperly determined that there were no disputed issues of material facts that required an additional hearing, and (3) the debarring official, in violation of plaintiff's substantive due process rights, failed to take into account mitigating evidence or to determine whether debarment was warranted and not "punitive" in this case.

 II. LEGAL STANDARDS

 Under the Administrative Procedure Act, a court reviewing an agency decision can set aside agency actions, findings and conclusions that it finds to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971); Robinson v. Cheney, 277 U.S. App. D.C. 393, 876 F.2d 152, 155 (D.C. Cir. 1989); Old Dominion Dairy Products, Inc. v. Secretary of Defense, 203 U.S. App. D.C. 371, 631 F.2d 953, 960 (D.C. Cir. 1980). The arbitrary and capricious standard is highly deferential and assumes the agency action to be valid; the scope of judicial review is narrow. Citizens to Preserve Overton Park v. Volpe, 401 U.S. at 416, 419.

 Summary judgment is to be granted if there is no genuine issue of material fact. Fed. R. Civ. P. 56(c). Once the moving party carries its burden of demonstrating the absence of any genuine issue of material fact, the nonmoving party must show "specific facts showing that there is a genuine issue for trial" to survive the motion. Fed. R. Civ. P. 56(e). See also Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986); Brees v. Hampton, 278 U.S. App. D.C. 176, 877 F.2d 111, 117 (D.C. Cir. 1989), cert. den. sub nom., Estate of Brees v. Hampton, 493 U.S. 1057, 107 L. Ed. 2d 951, 110 S. Ct. 867 (1990). In order to withstand defendants' motion for summary judgment in a debarment case, plaintiff must demonstrate that there is a genuine issue of material fact as to whether the debarring official's decision to suspend him was arbitrary or capricious, an abuse of discretion or not otherwise in accordance with law. Koehler v. United States, No. 90-2384, 1991 WL 277523, at * 1 (D.D.C. Dec. 9, 1991).

 III. ANALYSIS

 While plaintiff makes a variety of arguments in opposition to defendants' motion for summary judgment, they all essentially boil down to one central theme: that he was deprived of due process of law by virtue of the debarring official's determination under 48 C.F.R. § 9.406-3 that there were no genuine issues of material fact and therefore no need to give plaintiff the opportunity to appear at a second trial-type hearing under the Federal Acquisition Regulations and the Army's procedures for debarment proceedings. While plaintiff did have a hearing before the debarring official at which he testified, plaintiff maintains that he was entitled to a second hearing at which he could present witnesses and confront witnesses against him. The question is whether it was arbitrary and capricious to deny plaintiff that second hearing on the ground that he had failed to raise a genuine dispute of material fact in his pre-hearing submission, at the first hearing and in his post-hearing submission.

 Under the Federal Acquisition Regulations (the "FARs"), a government contractor may be debarred for any one of a number of reasons, including for the conviction of or civil judgment for fraud, violation of the antitrust laws, embezzlement, theft, forgery, bribery, making false statements or the commission of any other offense demonstrating a lack of business integrity or business honesty that affects the present responsibility of the government contractor. 48 C.F.R. § 9-406-2(a). The FARs expressly provide that in the case of a conviction or civil judgment debarment is effectively automatic; because another fact-finder (a judge or a jury) has already found one of the bases for debarment beyond a reasonable doubt or by a preponderance of the evidence, there is no statutory, regulatory or due process requirement of an additional hearing to establish the underlying facts. See 48 C.F.R. §§ 9.406-2(a), 9.406-3(d); cf. Old ...


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