Gershow Recycling Corp. v New York City Dept. of Sanitation

[*1] Gershow Recycling Corp. v New York City Dept. of Sanitation 2004 NY Slip Op 50983(U) Decided on July 1, 2004 Supreme Court, New York County Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 1, 2004
Supreme Court, New York County

Gershow Recycling Corporation, Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules

against

New York City Department of Sanitation and The City of New York, Defendants.



119413/03

Michael D. Stallman, J.

In this Article 78 proceeding, petitioner challenges a "non-responsibility determination" which precluded petitioner's eligibility for an award of two New York City Department of Sanitation (DSNY) contracts.

Petitioner, a scrap-metal salvage and recycling corporation, submitted bids in January 2000 on two DSNY contracts involving processing and marketing of recovered metal. The DSNY Agency Chief Contracting Officer determined that petitioner was ineligible for the awards because it was non-responsible based on a record of environmental crimes and violations committed by it, and an affiliate company, at petitioner's branch location. Petitioner contends that the non-responsibility determination was arbitrary and capricious, contrary to law and made in violation of law. The Court notes that in this Article 78 proceeding, petitioner seeks to annul the ACCO's decision, which is not a final determination, [see 9 Rules of the City of New York § 2-08(k)(6)], rather than the decision issued by the City's Chief Contracting Procurement Officer and Director of the Mayor's Office of Contracts, which is final, [see 9 RCNY § 2-08(m)(6)]. The Court shall deem the petition addressed to the CCPO's decision; the City consents to this.

General Municipal Law § 103(1) requires municipalities to award contracts for public work and purchases of goods or commodities, over specified minimum amounts, through a competitive sealed bid after a public advertisement process, to the "lowest responsible bidder." In addition, the New York City Charter § 313(a) and the Procurement Policy Board Rules mandate that City agencies award contracts to responsible prospective contractors only. The PPB Rules list eight factors that may be considered in determining whether a bidder is responsible, including a "satisfactory record of business integrity." See 9 RCNY §§ 2-08(b)(2).

Significantly, under the Rules, the burden is on prospective contractors to "affirmatively demonstrate" their responsibility, (9 RCNY § 2-08(a)(2)), and must do so by completing VENDEX questionnaires, which are designed to elicit background information relevant to responsibility determinations. 9 RCNY § 2-08(e)(2).

It is undisputed that petitioner disclosed on its VENDEX questionnaires that on September 22, 1994, its "affiliate," S & I Industries, Inc., had pled guilty to attempted endangering public health and safety of the environment in the second degree, and paid a fine. Petitioner stated that two principals of S & I, Louis and Ira Gershowitz, had no direct or indirect interest in petitioner, but that petitioner's president, Sam Gershowitz, was a "principal" of, and an "investor" in, S & I.

However, further investigation by The New York City Department of Investigation [*2]revealed that petitioner itself was the target of the underlying September 1994 criminal investigation which involved a complaint of large-scale soil and ground water contamination resulting from automotive fluid dumping during automobile dismantling operations at petitioner's Bay Shore location. Further, DOI reported that it was informed by the Suffolk County District Attorney's Office, that (1) these charges were resolved by a guilty plea offered by Gershow Recycling of Bay Shore, not S & I, (2) petitioner had "consistently" violated the Vehicle and Traffic Law; and (3) Louis and Ira Gershowitz had been identified in public records as operators or managers of petitioner's Bay Shore branch.

Based on the foregoing, the ACCO determined that petitioner was ineligible for awards of the contracts because it was non-responsible; petitioner was notified of this determination by letter dated May 2, 2001.

Thereafter, petitioner filed an Agency Head Appeal by letter dated June 1, 2001. In the appeal, petitioner's counsel admitted that petitioner had been indicted under the circumstances described in the ACCO determination, but claimed that the charges were subsequently dismissed against it. Counsel also denied that petitioner had failed to complete its questionnaire truthfully, and that petitioner had consistently violated the VTL. However, petitioner's counsel failed to provide any documentation to support these contentions despite the express direction in 9 RCNY § 2-08(k)(2) that supporting documentation be included in appeals to Agency Heads. Instead, petitioner's counsel advised DSNY to look up the relevant records in the Suffolk County Clerk's Office. Petitioner's counsel offered no explanation for his failure to supply such documentation himself. Petitioner's counsel also stated that he "was prepared to provide detailed response" to the finding concerning VTL violations "once it had been provided by the Department with the details and basis of such accusation." Petitioner's counsel offered no explanation as to why he was unable to obtain the records of his client's criminal violations.

By decision dated August 21, 2002, the DSNY Commissioner upheld the ACCO's finding of non-responsibility on the grounds that petitioner had "failed to provide adequate documentation that refutes information discovered during the City's background investigation."

Thereafter, on August 30, 2002 petitioner's counsel filed a appeal letter to the Mayor, which basically repeated the same arguments made to the DSNY Commissioner. Once again, counsel failed to provide any documentation in support of its contentions, despite the opportunity, and the express direction in the Rules, to do so; nor did he offer any explanation for this omission. The Mayor's Office of Contracts conducted a de novo review of petitioner's Appeal to the Mayor, and its own background investigation. Based on that review, by decision dated July 22, 2003, Maria G. Simpson, Director of MOC and the City Chief Procurement Officer determined that "Gershow's prior criminal activity, VTL violations, misleading information in its submission and Gershow's failure to provide documentary evidence to support its position, were as an adequate basis for a finding of non-responsibility," and affirmed DSNY's finding of non-responsibility. This Article 78 proceeding ensued.

In the underlying administrative proceeding, the CCPO determined that petitioner lacked the requisite responsibility to be considered for an award of two DSNY contracts; this finding was upheld by the DSNY Commissioner. The MOC, after a de novo review, reached the same conclusion. The determination was based on a well-documented record before the CCPO, which consisted of a (1) DOI report of a background investigation [FN1], (2) certified questionnaires and (3) [*3]publicly-available information concerning petitioner including records of the New York Department of State, Dun & Bradstreet reports, Department of Motor Vehicle records and a newspaper article.

The Court notes that petitioner's submission of the transcript of the dismissal of the indictment, which was never submitted to DSNY or MOC, is not properly submitted in this Article 78 proceeding. It is a basic tenet of CPLR Article 78 that review of an administrative determination is limited to the facts and record adduced before the agency.

In any event, the fact that petitioner has now submitted documentary evidence that the indictment was dismissed against it is irrelevant. The CCPO's determination did not rely on whether petitioner was convicted of crimes in connection with the contamination of soil and ground water at its branch storage facility in Bay Shore. Rather, it was based on numerous factors, such as the activities involving Gershow Recycling of Bay Shore at petitioner's Bay Shore premises, petitioner's VTL violations, petitioner's submission of misleading information and petitioner's failure to provide documentary evidence to support its position.

Petitioner also challenges the City's non-responsibility determination based on its claim that neither the Agency Head Appeal and Appeal to Mayor were not determined "promptly" as allegedly required by PPB Rules §§ 2-08(k)(3) and 2-08(m)(4). This claim is without legal basis. The Court of Appeals has consistently found that instructions in City regulations to take a particular action "promptly" "as being directory only." See, Harris & Assocs. v DeLeon, 84 NY2d 698, 703.

In any event, the petition here is devoid of any allegation, let alone evidence, of substantial, actual prejudice resulting from DSNY's and MOC's "delays."

Finally, petitioner claims that the City's determination violated its right to procedural due process in that petitioner was allegedly (i) deprived of the ability to obtain the contracts, (ii) stigmatized by being found non-responsible, and (iii) given inadequate details or notice concerning its own record of prior VTL violations. These claims are without basis.

To establish a violation of the right to procedural due process, a party must show that a government action has deprived the party of a liberty or property right without due process of law.

The determination of who is a responsible bidder involves the exercise of discretion. Thus, it is clear that contractors do not obtain a property interest in a contract merely by reason of the submission of a bid, or even the lowest bid, because the power to reject bids is discretionary. See Conduit and Foundation Corporation v Metropolitan Transportation Authority et al., 66 NY2d at 149. Petitioner fails to demonstrate a constitutionally-protected property interest in the contracts; accordingly, the due proclaims are hereby dismissed. Additionally, there has been no showing that the City's action "seriously hindered" petitioner's ability to find work in its field, any claim that the City so stigmatized petitioner as to deprive it of a liberty interest is dismissed.

Based on the foregoing record, petitioner has not demonstrated that the City's non-responsibility determination was arbitrary or capricious or contrary to law.

Accordingly, it is

ORDERED and ADJUDGED that the petition is denied and the proceeding is dismissed. [*4]

This decision constitutes the order and judgment of the Court.

Dated: July 1, 2004ENTER:

New York, New York

S/

MICHAEL D. STALLMAN, J.S.C. Footnotes

Footnote 1: Specifically, the ACCO's determination was based, inter alia, on the undisputable record of fact that a joint criminal investigation by six state, county and town agencies revealed that workers at petitioner's branch location in Bay Shore, Long Island had used forklifts to deliberately puncture the gas tanks of automobiles they were dismantling, resulting in the release of 2000 gallons of contaminated water and petroleum products, and thereby polluting the soil, ground water and storm drains at the site. Although the criminal charges filed against petitioner in connection with this, and other criminal activity, were ultimately withdrawn, the same charges were re-filed against petitioner's affiliate company, Gershow Recycling of Bay Shore, Inc., and that entity pled guilty to a reduced felony charge and paid a $100,000 fine. In addition, the principals of Gershow Bay Shore, which included petitioner's president, Sam Gershowitz, were required to personally guarantee remediation of the contaminated site as a condition of the court's acceptance of the plea agreement.