Peter Kiewit Sons' Co. v. U.S. Army Corps of Engineers, et al., Appellants, 714 F.2d 163 (D.C. Cir. 1983)

The Army¹  appeals from the district court's action (1) enjoining completion of its administrative debarment proceeding against appellee, and (2) ordering that appellee not be debarred.²  The court rested its action on a finding that improper congressional interference had voided the administrative proceeding ab initio. We find that the court erred in voiding the debarment proceeding and deciding the substantive issue underlying that proceeding.

Appellee Peter Kiewit Sons' Co. (Kiewit) is the largest subsidiary of Peter Kiewit Sons', Inc. (Kiewit, Inc.), a large construction company performing much of its work under contracts with the United States Government.³  In 1978, Kiewit was indicted with fifteen other firms for conspiring to rig bids on Corps contracts for riverbank stabilization work along the Missouri and Mississippi Rivers. Kiewit was convicted of a Sherman Act violation following a plea of [230 U.S.App.D.C. 74] nolo contendere.⁴  United States v. Anthony J. Bertucci Construction Co., et al., Cr. No. 78-332 (E.D. La.) .

After the 1978 indictments, the Corps continued to contract with Kiewit and the other indicted firms.⁵  In June, 1981, when the Corps learned that the last of the Bertucci defendants had been sentenced, the Corps Chief Counsel decided to recommend debarment of individual defendants to the Assistant Judge Advocate General for Civil Law, the only official empowered to order debarments.⁶ 

Reluctant to continue contracting with firms that it was about to recommend debarring, the Corps, on August 19, 1981, issued instructions to hold in abeyance any contracts on which a Bertucci defendant was low bidder.⁷  Kiewit was not given notice of this action. The district court held, and it is not challenged on appeal, that the August 19, 1981 directive was an illegal de facto debarment of Kiewit.

On August 27, 1981, the Corps opened bids on the construction of a harbor at Barbers Point, Hawaii. Kiewit was low bidder. The August 19, 1981 directive, however, prevented award of the contract.⁸  But for this directive, Kiewit would have been found presently responsible⁹  and therefore awarded the contract.

On December 10, 1981, Brigadier General Ronald Holdaway, the Assistant Judge Advocate General for Civil Law, initiated formal debarment proceedings by issuing notices of proposed debarment to each of the Bertucci contractors, including Kiewit. The notice informed Kiewit (1) that debarment was being considered, (2) that the proposed debarment was based on the Sherman Act conviction, (3) that the conviction was a ground for debarment under DAR 1-604.1(i),¹⁰  and (4) that Kiewit had the opportunity to "present information in opposition ... in person, in writing or through representation" within thirty days.¹¹ 

On December 17, 1981, the contracting officer determined that the Barbers Point contract could no longer be held in abeyance. Award of the contract to the second lowest bidder was scheduled for December 30, 1981. On December 29, Kiewit filed the instant action.

In its complaint Kiewit alleged that unwarranted congressional criticism had resulted in an abdication of agency discretion by the Corps regarding award of the Barbers [230 U.S.App.D.C. 75] Point contract. The complaint sought a declaratory judgment and an injunction restraining the Army and the Corps from denying Kiewit the Barbers Point contract, pending a hearing on Kiewit's present responsibility as a government contractor. The complaint challenged only the Barbers Point award, not the pending debarment proceedings initiated by the December 10, 1981 notice.

B. The Allegations of Congressional Interference

Throughout this period, the issue of debarment of government contractors, and of the Bertucci defendants in particular, had been a subject of interest to Senator Carl Levin of Michigan.¹²  At an Armed Services Committee hearing on July 28, 1981, the Senator questioned Deputy Secretary of Defense Carlucci about whether and why the Corps had continued doing business with the Bertucci defendants. Senator Levin followed up his questioning of the Deputy Secretary with a letter on July 31, to Secretary of Defense Caspar Weinberger, in which he asked for information on a variety of matters related to the debarment and suspension process, the status of any proceedings involving the Bertucci defendants, and contracts that had been awarded to the riverbank stabilization contractors.¹³  Secretary of the Army Marsh responded to Senator Levin's letter on September 23, 1981.

Senator Levin learned of the debarment proceedings against Kiewit and wrote to Secretary Marsh and to Deputy Secretary Carlucci on January 12, 1982 inquiring about the status of those proceedings. The Senator noted that he understood that settlement negotiations were going on with Kiewit that might involve a geographically limited debarment, and inquired whether Kiewit's participation on Corps projects in other areas of the country would "jeopardize the integrity of the procurement process and run contrary to the Government's interest."¹⁴ 

On January 25, 1982, Senator Levin was given an information paper in response to his inquiries of January 12, and attended a meeting with a number of top Army officials.¹⁵  Brigadier General Holdaway was not present.

C. The District Court and Administrative Proceedings

On December 30, 1981, the district court issued a temporary restraining order against award of the Barbers Point contract, pending a hearing on Kiewit's motion for a preliminary injunction. The court also instructed the Army to expedite the debarment proceedings, ordering them "to meet with, receive evidence from, and negotiate with Plaintiff a resolution of the proposed debarment."¹⁶  An administrative hearing was held on January 5, 1982 and settlement discussions took place.

While negotiations were proceeding in January, the government learned that two other Kiewit, Inc. subsidiaries had been convicted [230 U.S.App.D.C. 76] of bid rigging and mail fraud.¹⁷  Negotiations to settle the debarment proceedings were terminated. On February 8, 1982, the Army initiated debarment proceedings against Kiewit, Inc. as well for the bid rigging activities of Kiewit and the other Kiewit, Inc. subsidiaries.

The district court held a hearing on the merits at which the correspondence and meeting between Senator Levin and Department of Defense officials were disclosed for the first time. Claiming that these ex parte communications disclosed at trial had compromised the integrity of the administrative proceeding, Kiewit sought to void the proceeding and have the court determine the issue of responsibility underlying the debarment proceeding.

On February 26, 1982, the district court rendered its judgment, deciding (1) that the August 19, 1981 directive had been an illegal de facto debarment and was arbitrary and capricious, (2) that the Barbers Point contract should be awarded to Kiewit,¹⁸  (3) that congressional interference so tainted the debarment proceeding that it was void ab initio, (4) that the court rather than the administrative adjudicator should determine whether Kiewit should be debarred, (5) that Kiewit and Kiewit, Inc. were presently responsible, and (6) that Kiewit and Kiewit, Inc. were not to be debarred.

Unless exceptional circumstances are present, judicial review can only take place once administrative action is final and all administrative remedies have been exhausted. In voiding the ongoing administrative proceeding, the district court interrupted a process in which neither exhaustion nor finality requirements had been met. Kiewit contends that congressional interference created an exceptional situation and thus compelled this circumvention of the twin requirements of exhaustion and finality. We disagree.

It is a "long settled rule of judicial administration that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S. Ct. 459, 463, 82 L. Ed. 638 (1938) (Brandeis, J.). See McKart v. United States, 395 U.S. 185, 193, 89 S. Ct. 1657, 1662, 23 L. Ed. 2d 194 (1969). The Army's notice of proposed debarment informed Kiewit of the availability of an administrative remedy: an opportunity to "present information in opposition to this proposed debarment in person, in writing or through representation."¹⁹  In petitioning the court [230 U.S.App.D.C. 77] to resolve the debarment issue, Kiewit bypassed an administrative proceeding capable of granting the desired relief. Had Kiewit exhausted its administrative remedies, judicial review might well have proven unnecessary.²⁰ 

The exhaustion requirement seems particularly applicable in the instant case. It is premised on a recognition that "agency decisions are frequently of a discretionary nature or frequently require expertise,"²¹  and, consequently, "the agency should be given the first chance to exercise that discretion or apply that expertise."²²  The debarment regulations state explicitly that the "decision to debar is discretionary"²³  and requires an evaluation of what best "protect [s] the interest of the Government."²⁴  This initial determination of what constitutes sound business practice for the United States Department of Defense requires the "discretion" and "expertise" of an administrator. A court is poorly suited to make such a decision.

In voiding the ongoing debarment proceeding, the district court acted in the absence of any final action ripe for judicial review. As this court recently held, "ripeness is imposed to assure that the issues are 'fit for judicial resolution,' i.e., the questions are essentially legal rather than factual in nature, and the challenged agency action is sufficiently final to assure that a real controversy exists."²⁵ 

In the instant case, the question of debarment required a discretionary sifting of facts, rather than application of law. In addition, no final binding decision on debarment had been made. The proposed debarment notice merely served to initiate proceedings to consider whether debarment should be ordered. The Supreme Court recently held in FTC v. Standard Oil Co. of Cal.²⁶  that an order " [s]erving only to initiate the proceedings ... has no legal force,"²⁷  "is not a definitive statement of position,"²⁸  and is not " 'final agency action' "²⁹  ripe for review. The proposed debarment order in this case falls squarely within the range of interim actions held not ripe for review in Standard Oil.

Kiewit contends that the district court had ruled "upon final agency action --the de facto debarment."³⁰  The de facto debarment was indeed final agency action. Kiewit, however, confuses the de facto debarment--the illegal suspension without notice from August 19 to December 10--with actual debarment--an official order issued after notice and hearing. The de facto debarment could be and was reviewed by the district court. It was the basis for the award of the contract. But this illegal suspension, although final action, could not form the basis for the dissolution of the interim action, the ongoing debarment proceeding.

C. The Allegations of Congressional Interference

Exhaustion and finality requirements may be waived in "only the most [230 U.S.App.D.C. 78] exceptional circumstances."³¹  As this court has held, "allegations of agency bias or prejudgment based on ex parte communications are insufficient for injunctive relief and cannot be reviewed until the agency has made an adverse determination and an appeal has been taken raising these claims on the record as a whole."³²  Finality and exhaustion requirements may be dispensed with only "where the agency has very clearly violated an important constitutional or statutory right."³³ 

The district court held, and Kiewit now argues, that congressional interference so tainted the administrative process that Kiewit's rights were clearly and significantly violated. They rely primarily on two cases: D.C. Federation of Civic Associations v. Volpe,³⁴  the controlling case in this circuit, and Pillsbury Co. v. FTC.³⁵  Under the standards announced in these cases, Kiewit has failed to demonstrate clear interference with its due process rights.³⁶  Therefore we need not decide whether the district court's resolution of the administrative issue was a proper remedy for the alleged congressional interference,³⁷  or whether the court's decision on the merits of debarment was correct.

In D.C. Federation, the Secretary of Transportation approved construction of a bridge across the Potomac River in part because of threats by the subcommittee chairman to withhold mass transit funding unless the bridge was approved. This court held that it was impermissible for the Secretary to consider these congressional threats in arriving at his decision. Since the Secretary's action in that case was not judicial or quasi-judicial, the court noted that the test for improper interference was whether the congressional action actually affected the decision.³⁸  The court indicated that if the decision had been judicial or quasi-judicial, it could be invalidated by "the appearance of bias or pressure."³⁹  Under this standard, pressure on the decisionmaker alone, without proof of effect on the outcome, is sufficient to vacate a decision.

In either context, the proper focus is not on the content of congressional communications in the abstract, but rather upon the relation between the communications and the adjudicator's decisionmaking [230 U.S.App.D.C. 79] process. A court must consider the decisionmaker's input, not the legislator's output. The test is whether "extraneous factors intruded into the calculus of consideration " of the individual decisionmaker.⁴⁰ 

Pillsbury invalidated a Federal Trade Commission order after a Senator questioned the Commission Chairman and other Commissioners⁴¹  repeatedly about their decision in a pending case and criticized them for misapplying the antitrust laws in the case. The court held that " [t]o subject an administrator to a searching examination as to how and why he reached his decision in a case still pending before him, and to criticize him for reaching the 'wrong' decision ... sacrifices the appearance of impartiality--the sine qua non of American judicial justice."⁴² 

Pillsbury also emphasized the effect of communications on the "decisional process"⁴³  of the adjudicators. The court considered the effect of the congressional investigation "upon the mental decisional processes⁴⁴  of a commission in a case which is pending before it."⁴⁵  It noted that "the appearance of impartiality ... cannot be maintained unless those who exercise the judicial function are free from powerful external influence."⁴⁶  Pressure must be evaluated in the context of a concrete decision process.⁴⁷ 

In applying these principles to the instant case, we see nothing in the record to support a finding of actual or apparent congressional interference.⁴⁸  No evidence suggests that Brigadier General Holdaway, the ultimate decisionmaker, was influenced by or even aware of Senator Levin's communications. It was never shown that Senator Levin contacted Brigadier General Holdaway directly. Nor was it established that the Department of Defense officials who did communicate with Levin actually contacted Brigadier General Holdaway. Hence, on the record before us, we have no basis for concluding that the responsible official's "calculus of consideration" or "mental decisional processes" were clearly tainted by congressional pressure. In the absence of such a showing, we must conclude that there was no clear violation of Kiewit's due process rights to justify the district court's extraordinary interruption of the administrative process.

CONCLUSION

Congressional oversight serves as a vital control on the quality and propriety of low visibility executive decisionmaking.⁴⁹  We are mindful, however, that zealous oversight [230 U.S.App.D.C. 80] can intrude on the rights of disputants in an administrative adjudication. The stringent standards of D.C. Federation and Pillsbury protect against congressional infringement of these due process standards by requiring insulation of the decisionmaking process from congressional pressure.

In this case the congressional communications at issue were never shown clearly to have intruded into the debarment decisionmaking process. The district court's interruption of the administrative process before remedies were exhausted and in the absence of final action was therefore unwarranted. The administrative debarment hearing must be permitted to proceed. Accordingly, this case is reversed and remanded to the district court with instructions to remand the matter of Kiewit and Kiewit, Inc.'s proposed debarments to the Department of the Army. We offer no opinion on the merits of the proposed debarment, or on Kiewit's entitlement to relief in the event that a determination is made (either at the administrative level or pursuant to subsequent judicial review) that there is no adequate justification for a debarment. We simply hold that the district court erred in blocking the administrative debarment hearing.⁵⁰ 

So ordered.