Opinion
Civil Action No. 2:04-CV-4238-LDD.
March 24, 2005
MEMORANDUM OPINION
AND NOW, this 24th day of March 2005, upon consideration of Defendant's Motion for Summary Judgment (Doc. No. 10), it is hereby ORDERED that Defendant's Motion is GRANTED.
The Court notes that plaintiffs have failed to respond to defendant's summary judgment motion, which was filed on December 30, 2004, despite the Court's granting of three extensions of the deadline for responding. (Doc. No. 11, 14, and 17).
This Court reviews the decision of the Defense Logistics Agency ("DLA") to debar plaintiffs for abuse of discretion. See 5 U.S.C. § 706(2)(A); Shane Meat Co., Inc. v. U.S. Dept. Of Defense, 800 F.2d 334, 336 (3d Cir. 1986). Applying this standard, this Court finds as a matter of law that the debarment of plaintiffs Jeffrey Leach ("Leach") and Leach Management Consulting Corporation ("LMCC") (collectively "plaintiffs") from government procurement, non-procurement, and sales programs was procedurally and substantively proper.
A. Plaintiffs received the appropriate procedural due process prior to debarment.
Procedurally, the administrative record indicates that plaintiffs received the requisite notice and opportunity to be heard prior to their final debarment. The Federal Acquisition Regulations ("FAR"), 28 C.F.R., Chapter 1, permit federal agencies to "debar" a contractor from being awarded government contracts. The FAR grants agencies the power to set "informal" procedures governing the decision-making process, consistent with principles of fundamental fairness. See 48 C.F.R. § 9.406-3(a) (2005). At a minimum, an agency must afford the contractor "an opportunity to submit, in person, in writing, or through a representative, information and argument in opposition to the proposed debarment." Id. § 9.406-3(b)(1). If and only if the contractor's submission raises a genuine dispute over facts material to the proposed debarment, the DLA must permit the contractor an "opportunity to appeal with counsel, submit documentary evidence, [and] present witnesses . . ." Id. § 9.406-3(b)(2).
The record indicates that plaintiffs received the prescribed notice and opportunity to present their opposition. See, e.g., Joseph Const. Co. v. Veterans Admin. Of United States, 595 F. Supp. 448, 451 (N.D. Ill. 1984) (due process requirements met when contractor given opportunity to present information in opposition to debarment, even without hearing). Plaintiffs received an initial notice of proposed debarment on August 19, 2003. (See Notice of Proposed Debarment, attached as Tab 3 to Def. Mot.). Plaintiffs responded to the notice on September 11, 2003, and, then, on October 20, 2003, the Suspension and Debarment Official received a letter from plaintiffs' attorney raising additional arguments and asking for a hearing to make oral presentation. (See September 11, 2003 and October 20, 2003 Letters, attached as Tabs 5, 7 to Def. Mot.). On December 18, 2003, the Associate General Counsel indicated that the case would be decided on January 19, 2004, and provided an additional thirty days to submit information and argument in opposition to the debarment. (See December 18, 2003 Letter, attached as Tab 9 to Def. Mot.). By providing this additional time, without specifying a date or time for oral argument, the December 18, 2003 letter implied that plaintiffs were not being given the opportunity to present evidence at a formal hearing because the DLA did not find a genuine dispute over facts material to the proposed debarment. (Id.). No further submissions were received, and, on January 29, 2004, the DLA's Suspension and Debarment Official issued a notice of debarment. (See Notice of Debarment, attached as Tab 10 to Def. Mot.).
Plaintiffs fail to dispute this administrative record. Nor do plaintiffs provide evidentiary support for their contention that procedural requirements of the FAR were violated. Accordingly, by enjoying and taking advantage of the opportunity to provide argumentation in writing rebutting the rationale for proposed debarment, plaintiffs received the appropriate due process under the FAR. See, e.g., Ali v. United States, 932 F.2d 1206, 1209 (N.D. Cal. 1996) (no temporary restraining order enjoining enforcement of debarment because plaintiff received all due process guarantees under regulatory framework prior to debarment, including notification of debarment in writing and opportunity to submit opposition to debarment); 10 Fed. Proc. Forms § 34:13 (2004) (opportunity to present information in opposition to debarment sufficient to satisfy due process guarantees).
B. The debarment action was not arbitrary and capricious.
Nor was the debarment an arbitrary and capricious action. The debarment followed the granting of summary judgment on the issue of liability and the entry of a final consent judgment in the case of Securities and Exchange Commission v. Jeffrey Leach, Hubert Leach, LMC Asset Corp., and Mary Leach, Docket Number 00-5928 (Savage, J.) ("SEC proceeding"). In this proceeding, the SEC alleged that plaintiff Leach, through two shell companies, including LMC Assets Corp. ("LMC"), made fraudulent mini-tender offers for shares of certain companies, and then defrauded investors out of millions in dollars by failing to pay consideration for the securities. (See Complaint in SEC proceeding, attached as Tab 2, Ex. 5 to Def. Mot.). The complaint also alleged that plaintiff Leach used the unpaid-for-shares as collateral to receive millions of dollars in cash from margin loans and to engage in other risky margin trading schemes. (Id.).
Plaintiff Leach was the President and CEO of LMC. (See Department of State Corporate Information, attached as Tab 2, Ex. 1, 2, 3, 4, and 5 to Def. Mot.).
The final consent judgment precluded plaintiff Leach from denying these allegations, or even creating the "impression" that they lacked a factual basis. (See Consent of Jeffrey Leach, attached as Tab 2, Ex. 7 To Def. Mot., at ¶ 10). It also required plaintiff Leach to pay disgorgement, prejudgment interest, and civil penalties of more than $6,000,000 dollars. (Id., at ¶ 2). At the time of the debarment decision, no payments had been made on the consent decree, and plaintiff Leach failed to list the SEC as an unsecured creditor in his Chapter 13 bankruptcy petition. (See SEC's Response and Joinder of Trustee's Objection to Confirmation of Debtor's Chapter 13 Plan, attached as Tab 2, Ex. 8 To Def. Mot.). Based upon this history of contractual and fiscal dishonesty, the financial problems facing plaintiff Leach, and plaintiff Leach's failure to provide evidence challenging the factual validity of this misconduct, the DLA did not abuse its discretion in debarring plaintiff Leach on the basis of non-responsibility. See, e.g., 28 C.F.R. § 9.406-2(c) (debarment proper when based on any cause with "so serious or compelling a nature that it affects the present responsibility of the contractor"); Leitman v. McAusland, 934 F.2d 46, 51-52 (4th Cir. 1991) (upholding debarment for anti-competitive collusive bidding); Ali, 932 F. Supp. at 1290 (no temporary restraining order enjoining enforcement of debarment when sole shareholder's company submits forged certification letter in connection with proposal for supply computer workstations).
The thrust of plaintiff Jeffrey Leach's argument was that other entities engaged in more dishonest conduct than plaintiff without being debarred and that the allegations in the SEC proceeding had not been proven in a court of law. (See September 11, 2003 and October 20, 2003 Responses to Notice of Debarment, attached as Tab 5, 7 to Def. Mot.). Both of these arguments lack merit.
It is true that LMCC was not involved in the SEC litigation. However, plaintiff Leach controls LMCC as its President and CEO. (See Department of State Corporate Information, attached as Tab 2, ex. 1, 2, 3, 4, and 5 to Def. Mot.). Furthermore, the business address for LMCC is the same business address that was used for LMC, a co-defendant and signatory to the final consent judgment in the SEC proceeding. (Id.). Accordingly, because plaintiff Leach controls LMCC as its CEO and President, it was appropriate to debar LMCC as an "affiliate" of a contractor who engaged in wrong-doing. See 48 C.F.R. § 9.406-1(b) (debarment applies to affiliates of contractor if specifically named and given written notice of proposed debarment and opportunity to respond); 48 C.F.R. § 9.403 ("business concerns, organizations or individuals" are affiliates of each other if, directly or indirectly, (i) one controls or has the power to control the other, or (ii) third party controls or has the power to control both); see also Robinson v. Cheney, 876 F.2d 152, 161 (D.C. Cir. 1989) (imposing debarment on corporation run by trustee because sole share-holder participated in scheme to bribe government officials).
Plaintiffs provide no evidence to challenge this analysis, indeed, to demonstrate that the debarment action was arbitrary and capricious. See, e.g., J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir. 1990) (summary judgment appropriate when non-movant who bears burden of proof at trial fails to come forth with evidentiary showing on each element of claim). Furthermore, the failure to respond to the defendant's summary judgment motion after three orders extending the deadline for filing a response underscores the legitimacy of defendant's motion. Consequently, this Court grants defendant's motion for summary judgment on the claims articulated in defendant's amended complaint, and dismisses the amended complaint against defendant with prejudice.
Because this Court grants defendant's motion on substantive grounds, the Court need not address the procedural argument that defendant was not served with a copy of the amended complaint within 120 days of its filing pursuant to Federal Rule of Civil Procedure 4(m). (See Def. Mot., at 7).
ORDER
AND NOW, this 24th day of March 2005, upon consideration of Defendant's Motion for Summary Judgment (Doc. No. 10), it is hereby ORDERED that Defendant's Motion is GRANTED. Judgment is hereby entered in favor of Defendant Defense Logistics Agency and against Plaintiff Jeffrey Leach and Plaintiff Leach Management Consulting Corporation. The Clerk of Court is hereby directed to close this matter for statistical purposes.