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Friedler v. General Services Administration

United States District Court, District of Columbia

September 21, 2017




         At all times relevant to this opinion, Plaintiff Ariel Friedler was the founder and sole shareholder of Symplicity Corporation (“Symplicity”), a company that provides software solutions and information-management services to colleges, universities, and all three branches of the United States government. (See Compl., ECF No. 1, ¶¶ 6, 8.) From 2007 until 2014, Friedler was also Symplicity's President and CEO. (See Id. ¶ 6.) On September 4, 2015, Defendants United States General Services Administration (“GSA”) and Maria C. Swaby, GSA's Suspension and Debarment Official (“SDO” and, collectively, “Defendants”), debarred Friedler from all federal contracting for nearly four years for what appeared to be three distinct reasons. (See Letter from Maria Swaby to Ariel Friedler (Sept. 4, 2015) (“Final Debarment Notice”), Admin. R. (“A.R.”) 1085-89.)[1] The Final Debarment Notice stated, among other things, that Friedler had (1) been convicted of a crime (see id., A.R. 1085-86 (referring to his 2014 conviction for Conspiracy to Access a Protected Computer Without Authorization, in violation of 18 U.S.C. §§ 371 and 1030)); (2) violated Swaby's directive that he remain physically absent from Symplicity's offices during a period of suspension that GSA had imposed as a result of his conviction (see id., A.R. 1086-88); and (3) breached a specific agreement not to perform government-related work while he was suspended (see id., A.R. 1088-89). In the instant one-count complaint, Friedler maintains that Defendants' decision to debar him was arbitrary, capricious, and in violation of the law under the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701-06, because he was not given notice of all of the grounds for his debarment and an opportunity to respond to each of them prior to the agency's final debarment determination. (See Compl. ¶¶ 47-49.)

         Before this Court at present are the parties' cross-motions for summary judgment. (See Pl.'s Mot. for Summ. J. (“Pl.'s Mot.”), ECF No. 28; Mem. in Supp. of Pl.'s Mot. (“Pl.'s Mem.”), ECF No. 33; Mem. in Supp. of Defs.' Mot. (“Defs.' Mem.”), ECF No. 31.) In his motion, Friedler argues, inter alia, that his debarment was procedurally infirm because the Final Debarment Notice included two “new causes” (apart from his criminal conviction) that were raised for the first time in the context of that announcement. (See Pl.'s Mem at 7, 32-34).[2] Defendants counter that Friedler was afforded ample opportunity to oppose all of the charges against him, and that the two additional grounds referenced in the Notice were not really new “causes” for debarment; instead, Defendants say, these references were merely additional findings of fact that served to extend the term of the debarment that Friedler received as a result of his conviction. (See Defs.' Mem. at 40-41.) New grounds aside, Defendants further argue that, because Swaby was free to debar Friedler based on his prior conviction alone, the debarment determination did not violate the APA. (See Id. at 33-35.)

         For the reasons explained below, this Court finds that Defendants relied on Friedler's alleged post-conviction conduct in reaching the conclusion that he should be debarred but failed to notify him of these purported violations-a failure that is unquestionably improper under the applicable provisions of the Federal Acquisition Regulation (“FAR”). See 48 C.F.R. § 9.406-3. And because this Court cannot reasonably find that Defendants would have debarred Friedler on the basis of his criminal conviction alone, the Court cannot conclude that the agency's error in relying on the two additional grounds without providing notice was harmless. Therefore, Plaintiff's motion for summary judgment will be GRANTED, Defendants' motion for summary judgment will be DENIED, and the matter will be remanded to the agency for further proceedings not inconsistent with this Memorandum Opinion. A separate Order will follow.

         I. BACKGROUND

         A. Debarment Procedures Under The Federal Acquisition Regulation

         According to the D.C. Circuit, “[d]ebarment is an administrative action which excludes nonresponsible contractors from government contracting” and “effectuate[s] the [federal government's] policy that ‘agencies shall solicit offers from, award contracts to, and consent to subcontracts with responsible contractors only.'” Caiola v. Carroll, 851 F.2d 395, 397, 398 (D.C. Cir. 1988) (quoting 48 C.F.R. § 9.402(a)). Title 48, Chapter 1 of the Code of Federal Regulations, which is known as the FAR, sets forth the “policies and procedures governing the debarment and suspension of contractors by agencies[.]” 48 C.F.R. § 9.400(a)(1). The FAR makes clear that, because government contracts are awarded based on the contracting officer's “affirmative determination of [the prospective contractor's] responsibility[, ]” id. § 9.103(b), the focus of a debarring official's inquiry is similarly on whether the questionable contractor can demonstrate “present responsibility[.]” Id. § 9.406-1(a) (instructing that, “if a cause for debarment exists, ” the debarring official should assess whether the contractor can demonstrate “its present responsibility and that debarment is not necessary”).

         The FAR lists certain circumstances that qualify as potential causes for the debarment of a contractor, including (1) a conviction of, or civil judgment for, an “offense indicating a lack of business integrity or business honesty that seriously and directly affects [his] present responsibility[, ]” id. § 9.406-2(a)(5); and (2) “any other cause of so serious or compelling a nature that it affects [his] present responsibility[, ]” id. § 9.406-2(c). The FAR also indicates that a debarring official can take into account various facts that demonstrate a contractor's present responsibility notwithstanding the existence of a cause for debarment; these considerations include whether “the contractor brought the activity cited as a cause for debarment to the attention of the appropriate Government agency in a timely manner”; whether “the contractor cooperated fully with Government agencies during the investigation and any court or administrative action”; and whether “the contractor has implemented or agreed to implement remedial measures, including any identified by the Government.” Id. § 9.406-1(a). Thus, “[t]he existence of a cause for debarment . . . does not necessarily require that the contractor be debarred[, ]” id., and the FAR itself cautions that this “serious” sanction should be “imposed only in the public interest for the Government's protection and not for purposes of punishment[, ]” id. § 9.402(b).

         Given the severity of the debarment sanction, an agency official who is considering the debarment of a contractor must satisfy certain pre-debarment procedural requirements that are “consistent with principles of fundamental fairness.” Id. § 9.406-3(b)(1). The FAR generally requires each contracting agency to “establish procedures governing the debarment decisionmaking process[, ]” id., but section 9.406-3 also lays out a particular process that an agency must follow with respect to every contractor whose debarment is being considered. See Id. § 9.406-1(a) (mandating that the debarring official must “us[e] the procedures in [FAR] 9.406-3” to debar a contractor for any of the established causes). Chief among these procedural requirements is the mandate that, with respect to any and all debarment actions, “[a] notice of proposed debarment shall be issued by the debarring official[.]” Id. § 9.406-3(c); see also Popal v. Fiore, No. 11-cv-801, 2011 WL 6826176, at *1 (D.D.C. June 17, 2011) (“When debarment is being proposed, a notice must be sent to the contractor informing it and giving the reasons why the action is being considered.” (emphasis added)). And the FAR goes further-it specifies that the required notice of proposed debarment “shall” advise the contractor of the following specific information:

(1) That debarment is being considered;
(2) Of the reasons for the proposed debarment in terms sufficient to put the contractor on notice of the conduct or transaction(s) upon which it is based;
(3) Of the cause(s) relied upon under 9.406-2 for proposing debarment;
(4) That, within 30 days after receipt of the notice, the contractor may submit, in person, in writing, or through a representative, information and argument in opposition to the proposed debarment, including any additional specific information that raises a genuine dispute over the material facts;
(5) Of the agency's procedures governing debarment decisionmaking;
(6) Of the effect of the issuance of the notice of proposed debarment; and
(7) Of the potential effect of an actual debarment.

48 C.F.R. § 9.406-3(c). A contractor who has received the requisite notice of proposed debarment “must be allowed to submit ‘information and argument in opposition to the proposed debarment.'” Popal, 2011 WL 6826176, at *1 (quoting 48 C.F.R. § 9.406-3(b)(1)). And this opportunity is crucial, because the FAR establishes that “if a cause for debarment exists, the contractor has the burden of demonstrating, to the satisfaction of the debarring official, its present responsibility and that debarment is not necessary.” 48 C.F.R. § 9.406-1(a) (emphasis added).

         If there is a genuine dispute of material fact regarding a proposed debarment that is not based on a conviction or civil judgment, the agency must afford the contractor a hearing. See Id. § 9.406-3(b)(2)(i) (describing the circumstances under which the agency must provide “an opportunity to appear with counsel, submit documentary evidence, present witnesses, and confront any person the agency presents”). However, whether or not a hearing is held, the debarring official must ultimately review all relevant evidence and make a prompt determination regarding whether or not to proceed with the final debarment. See Id. § 9.406-3(d)(2)(i) (in cases where an evidentiary hearing is held, the debarring official reviews written findings of fact, any information and argument submitted by the contractor, and any other information in the administrative record); id. § 9.406-3(d)(1) (when the evidentiary hearing requirement does not apply, the debarring official must base her decision on “all the information in the administrative record, including any submissions made by the contractor”). Finally, if the debarring official determines that final debarment is to be imposed, the contractor must be “given prompt notice” in the form of a written statement that “[r]efer[s] to the [earlier] notice of proposed debarment[, ]” “[s]pecif[ies] the reasons for debarment[, ]” and “[s]tat[es] the period of debarment[.]” Id. § 9.406-3(e)(1).

         Significantly for present purposes, the FAR also instructs that, while a debarment “[g]enerally . . . should not exceed 3 years, ” id. § 9.406-4(a)(1), “[t]he debarring official may extend the debarment for an additional period” but only “if that official determines that an extension is necessary to protect the Government's interest[, ]” and “solely on the basis of . . . facts and circumstances” that are separate and distinct from those “upon which the initial debarment action was based[, ]” id. § 9.406-4(b). The regulations also make crystal clear that the FAR's various procedural mandates- including the notice and hearing requirements described above-apply equally regardless of whether an initial debarment term is being imposed or the debarring official is issuing an ‘extended' term of debarment. That is, although the FAR authorizes a debarring official to extend a contractor's debarment term for an “additional period” under certain circumstances, the regulations specifically state that, “[i]f debarment for an additional period is determined to be necessary, the procedures of [FAR] 9.406-3 shall be followed to extend the debarment.” Id. (emphasis added).

         B. The Facts Underlying This Case

         Friedler first conceived of Symplicity in his freshman dormitory at Northwestern University in 1996; the company is now a Delaware corporation with some 150 employees that service major contracts with private colleges and universities, all three branches of the federal government, and various components of state governments. (See Compl. ¶¶ 6-8; see also Symplicity's Government Business, A.R. 47-49.) The company's growth came under Friedler's careful stewardship. That is, Friedler is not only Symplicity's founder, he was also at times its sole shareholder, President, and CEO (see Compl. ¶ 6), and over the years, he has “overs[een] nearly every aspect of Symplicity's operations” (id. ¶ 9). Friedler also “invented nearly every product that the [c]ompany has sold[, ]” and has been the “driving creative force behind each of” the company's new product offerings. (Id.) The instant case arises from the events that preceded GSA's decision to debar Friedler (but not Symplicity) from government contracting, and the procedures that the agency followed when reaching its debarment determination. The pre-debarment period spanned several years and involved many twists and turns, the most pertinent parts of which are recounted below.

         1. Friedler's Criminal Conviction And Initial Contact With GSA

         It is undisputed that over a period of four years-from October of 2007 until October of 2011-Friedler illegally conspired with others to access password-protected computers without authorization in order to obtain information about Symplicity's business competitors in furtherance of his and his company's commercial and financial interests. (See Statement of Facts, A.R. 144-45.) Based on suspicions of such wrongdoing, the Federal Bureau of Investigation (“FBI”) conducted a search of Symplicity's Virginia headquarters and a data center hosting Symplicity's servers in early March of 2012 (see Letter from Fred Levy and Todd Canni to Maria Swaby (Aug. 11, 2014) (“Suspension Letter Response”), A.R. 484; see also Aff. in Supp. of Search Warrants, A.R. 8-29), and a criminal information was subsequently filed against Friedler (see Criminal Information, A.R. 290-98). Friedler first met with GSA debarment officials in July of 2012, a few months after the FBI's raid. During this initial meeting, Friedler discussed the pending criminal investigation and the allegations contained in the search warrant affidavit with Swaby and other GSA personnel (see Suspension Letter Response, A.R. 485), but GSA opted to take no action against Friedler or Symplicity, and the agency continued to award government contracts to the company (see id., A.R. 490).

         Two years later, in April of 2014, Friedler agreed to plead guilty to one count of conspiracy to access a protected computer without authorization, in violation of 18 U.S.C. §§ 371 and 1030. (See Plea Agreement, A.R. 527-37; see also Criminal Information, A.R. 290-98.) Then, a complex series of negotiations between GSA and Friedler-on behalf of both Symplicity and himself-ensued, the goal of which was to determine the extent to which Friedler and/or the company would be excluded from government contracting as a result of Friedler's criminal conviction. At one point shortly after Friedler signed the plea agreement (but before it was formally entered in court), Symplicity sent Swaby a letter, through its legal counsel, proposing that the business separate itself from Friedler. (See Letter from Angela Styles to Maria Swaby (May 12, 2014), A.R. 506-11.) Importantly, Symplicity's letter represented that such a severance could be accomplished by taking various formal steps, including (1) terminating Friedler's role as an officer and director of the company; (2) appointing a new CEO; and (3) implementing a Voting Trust Agreement whereby Friedler would surrender control of his shares in Symplicity to a Voting Trustee. (See id., A.R. 506, 509-10.) The letter also proposed that Symplicity enter into an Administrative Compliance Agreement (“ACA”) with GSA, and it attached the terms of a proposed contract pursuant to which Symplicity would require Friedler to remain separated from the company for three years and prohibit Symplicity employees from seeking or taking direction from him. (See id., A.R. 506, 510.) The proposed ACA also required Symplicity to secure an external monitor to provide independent verification of Friedler's separation from the company. (See id.)

         Swaby met with Friedler shortly after receiving Symplicity's proposal, primarily to discuss her concern that Friedler would be unable or unwilling to abide by the proposed terms of his separation from Symplicity. (See GSA Mem. re Summ. of May 19, 2014 Meeting with Ariel Friedler, A.R. 512.) At the meeting, which took place in May of 2014, Swaby listed several conditions that she required both Friedler and Symplicity to meet as part of the proposed agreement, and she emphasized that if Friedler or Symplicity violated the conditions, both would be debarred. (See id., A.R. 513.) For example, Swaby demanded that a truly independent Voting Trustee be appointed and that Friedler and Symplicity have no communication for the duration of any ACA. (See id.; GSA Mem. re Summ. of Nov. 6, 2014 Teleconference with Friedler's Att'ys, A.R. 504.) Swaby's concerns over the Voting Trustee's independence and Friedler's separation from the company carried into subsequent meetings as well; at one point she even instructed Symplicity and Friedler to engage an Independent Monitor in the process of appointing the trustee and verifying the trustee's independence. (See Mem. re Summ. of Nov. 6, 2014 Teleconference with Friedler's Att'ys, A.R. 504.)

         2. Friedler's Suspension And Notice Of Proposed Debarment

         In the midst of Friedler's and Swaby's ongoing negotiations over the appointment of an acceptable Voting Trustee and the other terms of Symplicity's proposed ACA, GSA formally suspended Friedler from doing business with the federal government pursuant to FAR 9.407-2(a)(9) and (c), on the grounds that Friedler “lack[ed] the present responsibility to be a Government contractor[.]” (See Letter from Maria Swaby to Ariel Friedler (May 21, 2014) (“Suspension Letter”), A.R. 285-88.) The only identified bases for the suspension-which took effect on the same day that Friedler's guilty plea was entered (see Plea Agreement, A.R. 527)-were Friedler's “alleged actions and the [resulting] Criminal Information filed against” him (Suspension Letter, A.R. 287).

         In his written response to the Suspension Letter, Friedler acknowledged that Swaby intended to debar him personally for three years, but he requested an opportunity to meet with her to avoid such debarment by demonstrating his present responsibility to GSA. (See Suspension Letter Response, A.R. 476.) Several more months of negotiations over the terms of Friedler's suspension followed, after which Friedler sent Swaby a letter and a ‘term sheet' that outlined his proposal: in exchange for the revocation of his suspension by GSA, a new Voting Trustee and Independent Monitor (both subject to GSA's approval) would be retained, and Friedler would voluntarily abstain from federal government contracting for 12 months. (See Letter from Fred Levy and Todd Canni to Maria Swaby (Nov. 5, 2014), A.R. 925-29.) Swaby rejected Friedler's proposal the very next day. (See GSA Mem. re Nov. 6, 2014 Teleconference with Friedler's Att'ys, A.R. 503.) She emphasized that Friedler had failed to appoint an acceptable Voting Trustee up to that point despite his repeated promises to do so, which, in her view, evidenced the fact that he was not yet presently responsible. (See id., A.R. 505.) Swaby also added that she would “proceed to the next stage of the process” vis-à-vis Friedler's personal debarment (i.e., issuing a notice of proposed debarment), and that if a new Voting Trustee was not promptly appointed, Symplicity, too, would receive such a notice. (Id.)

         A few weeks later, Swaby followed through on her threat to issue a Notice of Proposed Debarment directed at Friedler. (See Letter from Maria Swaby to Ariel Friedler (Nov. 26, 2014) (“Notice of Proposed Debarment”), A.R. 940-42.) The sole basis for the proposed debarment identified in the Notice was Friedler's criminal conviction and the illegal actions underlying that conviction. (See id., A.R. 941.) In this regard, the Notice specifically identified two of the FAR's enumerated causes for debarment: FAR 9.406-2(a)(5), which pertains to convictions for an “offense indicating a lack of business integrity or business honesty that seriously and directly affects the [contractor's] present responsibility[, ]” and FAR 9.406-2(c), which authorizes debarment for “any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor[.]” (See Notice of Proposed Debarment, A.R. 941.) The Notice further advised that Friedler could “submit, either in person, or in writing, or both, information and argument in opposition to the proposed debarment” within 30 calendar days, and that “[t]he determination whether or not to debar [Friedler] is discretionary and will be made on the basis of the administrative record, together with any written materials submitted for the record by the Government or [Friedler] during the period of proposed debarment.” (Id., A.R. 941-42).

         3. The Final ...

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