Petition for Writ of Certiorari — Facchiano v. United States Department of Labor

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Suprems Court, U.S,

‘1. FILED

FEB 20 1988

SPANIOL, JR,

aA «

y 4

In The cies coeeee =~

Supreme Court of the United States

October Term, 1988

MICHAEL FACCHIANO, JR., JOHN FACCHIANO, and

FACCHIANO CONSTRUCTION COMPANY, INC.,

Petitioners,

UNITED STATES DEPARTMENT OF LABOR, THE

SECRETARY OF LABOR, WILLIAM E. BROCK, in

his official capacity, and JAMES L. VALIN, in his offi-

cial capacity,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

FREDERICK J. Francis, ESQUIRE*

Tuomas A. Berret, Esquire

IF’rank G. SALPIETRO, EsQuIRE

Meyer, Unxovic & Scott

1300 Oliver Building

Pittsburgh, PA 15222

(412) 456-2800

Attorneys for Petitioners

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

or call collect (402) 342-2831

QUESTIONS PRESENTED

l. Whether res judicata applies to debarment pro-

ceedings instituted by a United States government agency

when another government agency has already imposed

debarment based upon the same facts and investigation.

2. Whether the court below should have decided the

purely legal issue of res judicata, rather than remanding

the case to the Department of Labor for determination

when that agency has already evinced its ‘‘special com-

petence’’ in a manner hostile to Petitioners.

LIST OF PARTIES

The parties to the proceedings below and before this

Court are:

1. Michael Faecchiano, Jr.

2. John }acchiano.

3. Facchiano Construction Company, Ine.!

4. The United States Department of Labor.

). William E. Brock, in his official capacity.

6. James L. Valin, in his official capacity.

' Pursuant to Supreme Court Rule 28.1, Petitioners state that

there are no parent companies or subsidiaries of Facchiano

Construction Company, Inc. Petitioner corporation was or is

affiliated with Facchiano, Inc. (Petitioner’s predecessor), and the

following proprietorships: Michael Facchiano, Michael Fac-

chiano Contracting and Michael Facchiano Concrete Construc-

tion.

ill

TABLE OF CONTENTS

QUESTIONS PRESENTED

LIST OF PARTIES

TABLE OF AUTHORITIES

OPINIONS BELOW

JURISDICTION

STATUTES INVOLVED

STATEMENT OF THE CASE s

REASONS FOR GRANTING THE WRIT

CONCLUSION

THE DOCTRINE OF CLAIM PRECLUSION

APPLIES TO A UNITED STATES GOVERN-

MENT AGENCY WHO INSTITUTES DE-

BARMENT PROCEEDINGS WHEN AN-

OTHER GOVERNMENT AGENCY HAS AL-

READY IMPOSED SUCH A PENALTY BAS-

ED UPON THE SAME FACTS AND IN-

VESTIGATION =

THE COURT BELOW SHOULD HAVE DE-

CIDED THE PURELY LEGAL ISSUE OF

WHETHER RES JUDICATA APPLIES BE-

CAUSE THERE ARE NO FACTS TO Bk

DETERMINED. THE QUESTION INVOLV-

ED IS ONE OF STATUTORY CONSTRUC-

TION AND THE DEPARTMENT OF LABOR

HAS ALREADY EVINCED ITS SPECIAL

COMPETENCE IN A MANNER HOSTILE

TO FACCHIANO No sa enscs

A. The Issue of Res Judicata is Strictly Legal,

and Does Not Involve the Department of

Labor’s Expertise or Fact-Finding Prowess

B. The Department of Labor’s Hostility and

Manifest Opposition to the Facchianos’ Res

Judicata Argument Militates Against Invo-

eation of Primary Jurisdiction or Exhaustion

of Remedies

Page

> SS bt

TABLE OF AUTHORITIES

Casgs:

Amercian Fire and Casualty Company v. Finn,

34] U.S. 6, 7] S.Ct. o34, Of L.Ed. 702 (1951)

Board of Education of the City School District of

the City of New York v. Harris, 629 F.2d 599

(2d Cir. 1979) |

Califano. Yamasaki. 442 US. 682, 99 S.Ct.

2945, 61 L.Ed. 2d 276 (1979)

Chicot County Drainage District yp. Baxter Stat,

Bank, 308 U.S. 371, 60 S.Ct. 317, 84 L.Ed. 329

(1940) .

Clemens v. Central Railroad Company of New

Jersey, 399 F.2d $29 (3d Cir. 1968). ee rt. den.

893 U.S. 1025, 89 S.Ct, 6333, 21 L.Ed. 567 1969)

Columbia Gas Transmission v. Alited C'}

LEML« al

Corp., 65 F.2d 903 (Sth Cir. 1981)

Davis P?. United States Stee] Company. 688 I 9d

166 (3d (ir, 1982), cert, den, 460 U.S. 1014, 103

S.Ct. 1256, 75 L.Ed 2484 (1983)

Great Northern Railway Co. v. Merchant’s Ele-

vator Ce. 259 U.S. 289, 42 S.Ct. 477, 66 L.Ed

943 (1999)

McKart +. United States, 395 U.S. 185, 89 S.Ct.

1657, 23 L.Ed.2d 194 (1969)

Nississip pi Powe Zi & Light Co. t. Unite d Gas Pip

Line Co., 539 F.2d 4192 (5th Cir. 1976)

Montana +. United States, 440 U.S l

970, 59 L.Ed.2d 210 (1979)

Nader », Allegheny Airlines, Ine., 496 U8.

Q()

96 S.Ct. 1978, 48 L.Ed.2d 643 (1976)

Porter y. Warner Holding Co.. 328 U.S. 395, 66

S.Ct. 1086, 90 L.Ed. 1332 (1946)

TABLE OF AUTH IRITIES- -Continued

Purter v. Heckli r, (71 F.2d 689 (od Cir. 1985)... 8

Sunshine Anthrocite Coal Company v. Adkins, 310

U.S. 381, 60 S.Ct. 907, 87 L.Ed. 1263 (1940) _ fe.

Tait v. Western Maryland Railroad Co., 298 U.S.

620, 53 S.Ct. (06, 77 L.Ed. 1405 Sb . : RS

United States v. Athlone Industries, Inc., 746

F.2d 977 (3d Cir. 1984)

United States ». Philadelphia National Bank, 374

U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963)... ©6149

United States v. Utah Construction and Mining

Company, 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.

me GEE TTY cg ae

Vnited States vy. Western Pacific Railroad Co.,

302 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956)......12, 13

United States v. Willard Tablet Company, 141

mag

F.2d 14] (7th Cir. 3) Oey rt: De 8

West v. Bergland. 611 F.2d 710 (8th Cir. 1979),

cert. den. 449 U.S. 831 (i980) _. sath nechstahiichinil dic kia en

STATUTES AND \fiscELLANEOUS

9 U.S.C. tie | 12

28 U.S.C. ROE on ce ee ]

28 U.S.C. s iatiah ag ee RTD Pe pak ]

28 U.S.C. §1331 ete. eat

ie re 12

Contract Work Hours and Safety Standards Act,

as amended, 40 U.S.C ¢ B27, Cb SEQ. en 2,4

Davis-Bacon Act, as amended, 40 U.S.C. § 276a,

OO pt a ies 2, 4

TABLE OF AUTHORITIES—Continued

Page(s)

Department of Housing and Urban Development,

Debarment, Suspension and Ineligibility of

Contractors and Grantees; Administrative

Sanctions, 24 C.F.R. §$ 24.0, et SOQ. cccccseecssccssnceesenee 2

Department of Labor, Labor Standards Provi-

sions Applicable to Contracts Covering Feder-

ally Financed and Assisted Construction, 29

PRS OO BO, co vcceccccuniosinnr eres aaa 2

Restatement (Second) of Judgments § 83(1)

FE vere nate I ie RO ie RR Ce Piet erase 8 x &S

Supreme Court Rule 20 fectepesctuimbdicacasaiel siadeeamaaeanes 1

re Aees mee SO Ee

Michael Facchiano, Jr., John Facchiano and Facchi-

ano Construction Company, Inc. respectfully pray that a

Writ of Certiorari issue to review the judgment and opin-

ion of the United States Court of Appeals for the Third

Cireuit entered in this proceeding on October 21, 1988 (Re-

hearing denied on November 20, 1988).

OPINIONS BELOW

The Opinion of the United States Court of Appeals

for the Third Cireuit (Appendix A, infra) is reported at

859 F.2d 1163 and was filed on October 91, 1988. The

U.S. Magistrate’s Report and Recommendation (Appendix

B, infra) was entered on December Ip, 1987. The Order

of the United States District Court for the Western Dis-

trict of Pennsylvania (Appendix C, jnfra) at Civil Action

No, 86-2711 was entered on pot 16, 1988 and is not

reported.

JURISDICTION

The judgment and opinio { of the United States Court

of Appeals for the Third Cireuit were entered on October

21, 1988. Rehearing was de nied by that court on Novem-

ber 20, 1988. The jurisdi¢tion of this Court is invoked

pursuant to 28 U.S.C. § pe This Petition is timely

filed with the Court under 28 U.S.C. § 2101(e) and Su-

preme Court Rule 20. :

STATUTES INVOLVED

The relevant statutory and regulatory provisions are:

A. The Davis-Bacon Act, as amended, 40 U.S.C.

§ 276a, et seq.

B. The Contract Work Hours and Safety Standards

Act, as amended, 40 U.S.C. § 327, et seq.

C. Department of Housing and Urban Development,

Debarment, Suspension and Ineligibility of Contractors

and Grantees; Administrative Sanctions, 24 C.F.R. § 24.0,

et seq.

D. Department of Labor, Labor Standards Provi-

SIONS Applicable to Contracts Covering Fede rally Financed

and Assisted Construction, 29 C.F.R. 65.1, et seq.

Pertinent portions of the statutory and regulatory

provisions are reproduced at Appendix D, infra.

STATEMENT OF THE CASE

This ease presents the issue of whether the Govern-

ment, which has already debarred a contractor in one agen-

ey proceeding, can bring a second agency action seeking an-

other, longer period of debarment based upon the same

conduct, without violating constitutional due process and

principles of fundamental fairness embodied in the doc-

trine of res judicata.

Petitioners, Michael Faechiano. Jr., John Faechiano

and Facchiano Construction Company. Ine. appeal from a

decision of the United States Court of Appeals for the

Third Circuit, vacating the district court’s entry of sum-

mary judgment and allowing the Department of Labor to

resume debarment proceedings against Petitioners. Peti-

tioners seek reversal of the Court of Appeal’s order and

the remand of this case with instructions for entry of

summary judgment in favor of Petitioners, on the grounds

that thev are entitled to relief as a matter of law based

on the doctrine of res judicata.

This action was brought by Michael Facehiano, Jr.,

and John Faechiano, individually and as Owners of Fac-

chiano Construction Company, Ine., and Facchiano Con-

struction Company, Ine. (hereinafter collectively referred

to as ‘‘Faecchiano’’) against the United States Department

of Labor and William E. Brock and James A. Valin, offi-

eials of the Department of Labor (hereinafter collectively

referred to as ‘‘Department of Labor’’). Facchiano sought

a permanent injunction or a writ of mandamus prohibiting

the Department of Labor from proceeding with a debar-

ment action against Faechiano on the grounds that a previ-

ous debarment action by the Department of Housing and

Urban Development (HUD) precluded the second action un-

der the doctrine of res judicata. The Department of Labor

hotly contested Facchiano’s action, and the United States

District Court for the Western District of Pennsylvania

ultimately referred the pending motions to a magistrate.

On December 16, 1987, the mavistrate filed his Report and

Recommendation, recommending that summary judgment

be entered in favor of the Department of Labor. Faechi-

ano filed timely objections to the magistrate’s Report and

Recommendation, to which the Department of Labor re-

sponded. By order dated Febrnarv 16. 1988, the district

court adopted the magistrate’s Report and Recommenda-

tion as its Opinion, thereby granting the Department of

Labor’s motion for summary judgment. An appeal fol-

lowed on Mareh 2, 1988.

Michael Facchiano, Jr., and John Facchiano were offi-

cers of Facchiano Construction Company, Ine. The cor-

poration’s business included performing projects for local

sovernments and being paid with funds received from

HUD. The contracts for such projects required that work-

ers on those projects he paid wages in accordance with the

Davis-Baeon Act, 40 U.S.C. « 276a, et seq., and the Con-

tract Work Hours and Safety Standards Act, 40 U.S.C.

§ 327, et seq.

In 1984, the government, throuch the Department of

Labor, determined that Faechiano had not been paving |

employees in accordance with the Davis-Bacon Act and the

Contract Work Hours and Safety Standards Act. and that

Faechiano had submitted weekly certified copies of pay-

rolls which falselv refleeted compliance with the applicable

laws and regulations. The matter was referred to the

(nited States Attorney for the Western District of Penn-

syIvania, and on January 24, 1985. an information was

prepared against Michael Faechiano, Jr. and Facchiano

Construction Companv. On February 22, 1985. Michael

Facchiano, Jr. and Faechiano Construction Company en-

tered a guilty plea on two counts of mail fraud as a result

of the mailing of false certifications that the wages re-

quired under the Acts had been paid.

On May 15, 1985, the eovernment. throuch HUD, filed

a complaint against Michael Faechiano, Jr. and Facchiano

Construction Company, seeking to debar them from par-

ERE ee

)

ticipation in HUD funded programs for up to three years

and suspending them immediately. The HUD action was

based on the same information which formed the basis of

the prosecution initiated by the United States Attorney.

While the administrative proceeding brought by HUD was

pending, on December 13, 1985, the government, through

the Department of Labor, also initiated debarment pro-

ceedings against Facchiano. The action brought by the

Department of Labor was grounded on the same investi-

gation which formed the basis of the Complaint previously

issued by HUD.

On March 15, 1986, an administrative law judge ap-

pointed by HUD issued an order debarring Michael Fac-

chiano, Jr. and Faechiano Construction Company from

participation in projects funded by HUD for a period of

eighteen (18) months, until November 15, 1986.2. Neither

HUD nor Facchiano sought any further administrative or

judicial review of this Order, which beeame final.

On October 2, 1986, approximately six (6) weeks be-

fore the expiration of the period of debarment ordered by

the HUD proceeding, the Department of Labor issued its

Order of Reference 86-DB, which assigned its complaint to

the Office of Administrative Law Judges for commence-

ment of the appropriate hearings.

Faechiano filed suit seeking permanent injunctive re

hef or mandamus preventing the government from going

forward with the Department of Lahor’s administrative

proceeding on the grounds that the doctrines of res judicata

and eollateral estoppel barred the action.

*Credit was given for the period of suspension which began

on May 15, 1985.

OO ————— eee

Following the grant of summary judgment in favor

of the government, Facchiano appealed to the United

States Court of Appeals for the Third Cireuit. On Octo-

ber 21, 1988, a 3-member panel of that court (Judge Rosenn

dissenting) vacated the entry of summary judgment but

ordered the case to proceed before the Department of

Labor. Petitioner’s request for rehearing was denied on

November 20, 1988.

This Petition for Writ of Certiorari followed.

—_—_————__ __. ——-(—) a

REASONS FOR GRANTING THE WRIT

Superimposing legal principles upon one’s inherent

sense of fairness is oft times difficult, but necessary to

the preservation of an orderly society. Fortunately, jus-

tice is the usual resuJt of meshing legal and equitable pre-

cepts. However, misapplication of legal principles can

abrogate justice and create undue hardship, especially

when the misapplication is coupled with the full punitive

foree of the federal government.

The United States Court of Appeals for the Third

Circuit has misapplied the law in such a way that the full

brunt of the government’s coercive and punitive powers

can now be brought to bear against persons who have al-

ready been prosecuted and punished for wrongs com-

mitted.

Under the rationale of the Third Circuit, the govern-

ment, proceeding consecutively through different agencies,

may apply identical punishments without allowing access

to the courts until administrative remedies have been ex-

hausted at the ageney level. The Third Cireuit’s Order

requiring such exhaustion of administrative remedies is in

conflict with the rationale, if not the holding, of numerous

eases, both in other Cireuits and in this Court. The ques-

tions presented for review are of profound significance to

Petitioners in this ease and to thousands of contractors

who perform services for the government. Consideration

of this matter is thus essential. Review of the issues pre-

sented would resolve these conflicts and promote the

proper application of the government’s powers, while les-

sening the unnecessary hardship that can result from the

improper exercise of such powers.

I. THE DOCTRINE OF CLAIM PRECLUSION

APPLIES TO A UNITED STATES GOVERN-

MENT AGENCY WHO INSTITUTES DEBAR-

MENT PROCEEDINGS WHEN ANOTHER

GOVERNMENT AGENCY HAS ALREADY IM-

POSED SUCH A PENALTY BASED UPON

THE SAME FACTS AND INVESTIGATION.

The general law pertaining to res judicata is well es-

tablished. The doctrine bars any further claims by the

parties or their privies based on the same cause of action

where there has been a final judement on the merits. Mon-

tana v. United States, 440 U.S. 147, 99 S.Ct. 970, 59 L.Ed.

29d 210 (1979). Res judicata prevents litigation of all

erounds for, or defenses to, recovery that were previously

available to the parties, regardless of whether they were

asserted or determined in the prior proceeding. Chicot

County Drainage District v. Baxter State Bank, 308 U.S.

371, 60 S.Ct. 317, 84 L.Ed. 329 (1940).

It is also well-settled that the doctrine of res judicata

is applicable to administrative proceedings. U’nited States

v. Utah Construction and Mining Company, 384 U.S. 394,

86 S.Ct. 1545, 16 L.Ed.2d 642 (1966). For purposes of

claim preclusion, the same parties or their privies are

necessary. E.g., Purter v. Heckler, 771 F.2d 682 (3d Cir.

1985). Agencies of the same branch of government are

in privity with each other, so that a prior decision in one

agency proceeding bars a second action brought by a dif-

ferent agency. Sunshine Anthrocite Coal Company v. Ad-

kins, 310 U.S. 381, 60 S.Ct. 907, 87 L.Ed. 1263 (1940) ; Tait

v. Western Maryland Railroad Co., 298 U.S. 620, 53 S.Ct.

706, 77 L.Ed. 1405 (1933); United States v. Willard Tab-

let Company, 141 F.2d 141 (7th Cir. 1944).

In this case, there is no dispute that the same parties

or their privies are involved, and that there was a final

judgment.’ Indeed, the court below appears to have recog-

nized the res judicata effect of a prior administrative de-

termination:

Nevertheless, ‘‘a valid and final adjudicative deter-

mination by an administrative tribunal has the same

effects under the rules of res judicata. subject to the

same exceptions and qualifications, as a judgment of

a court.’? Restatement (Second) of Judaments § 83

(1) (1982)... . Therefore, an administrative tribunal

cannot refuse to observe these preclusion principles

when they do apply.

In the ease before us, the HUD debarment was suffi-

ciently adjudicatory and final to enable appellants to

raise a preclusion defense in the later DOT, debarment.

Appellants had ample notice, and they had an oppor-

tunity to present their case to the HID ALJ in briefs

3The Department of Labor and the Department of Housing

and Urban Development are both members of the Executive

Branch of the United States Government.

and documentary evidence. Moreover, the HUD ALJ

filed a detailed opinion containing his factual findings

and rulings.

859 F.2d at 1167.

The Department of Labor’s only challenge to the appli-

eation of res judicata is an assertion that the issues

and relief sought in the HUD proceeding were dif-

ferent from the issues and relief sought in the Department

of Labor proceeding. The court below implicitly accepted

this assertion when it left the question open:

[In] this case we have a mixed question of fact in

law—whether the HUD cause of action and the DOL

eause of action are sufficiently similar to justify claim

preclusion.

859 F.2d at 1168, fn 4.4

The panel hearing Facchiano’s appeal in the court

below ignored various prior rulings of the Third Cireuit.

For example, the Third Cireuit has ruled that the fact

that different statutes or claims are involved in the actions

does not render them different ‘‘causes of action’’ for res

judicata purposes. Davis v. United States Steel Company,

688 F.2d 166 (3d Cir. 1982), cert. den. 460 U.S. 1014, 103

S.Ct, 1256, 75 L.Ed. 2484 (1983). Furthermore, the fact

that a different theory of recovery is involved or different

relief is sought in the two proceedings does not bar appli-

eation of claim preclusion. Clemens v. Central Railroad

Company of New Jersey, 399 F.2d 825 (3d Cir. 1968), cert.

den. 393 U.S. 1023, 89 S.Ct. 6333, 21 L.Fid. 567 (1969). As

the court below further explained in Davis, supra:

4The lower court’s “conclusion” is more specifically ad-

dressed, infra

More difficult is the question of identity of the causes

of action. A single cause of action may comprise

claims under a number of different statutory and com-

mon law grounds. ... Rather than resting on the spe-

cific legal theory invoked, res judicata generally is

thought to turn on the essential similarity of the un-

derlying events giving rise to the various legal claims.

688 F.2d at 171 (citations omitted) (emphasis supplied).

See also American Fire and Casualty Company v. Finn,

341 U.S. 6, 71 S.Ct. 534, 91 L.Ed. 702 (1951). As the Third

Circuit subsequently explained in the United States v.

Athlone Industries, Inc., 746 F.2d 977 (3d Cir. 1984) :

Thus, the focal points of our analysis are whether the

acts complained of were the same, whether the ma-

terial facts alleged in each suit were the same and

whether the witnesses and documentation required to

prove such allegations were the same.

746 F.2d at 984.

In the case before this Court, the proceedings before

HUD and the Department of Labor both involve a viola-

tion of the same Acts (i.e., the Davis-Bacon Act and the

Contract Work Hours and Safety Standards Act). Both

actions involved the same conduct (i.e., the failure to pay

employees the wages required by the Acts and the failure

to file accurate certifications). Both cases involved the

same wrong (i.e., the failure to follow the Acts and the

problems which occur when allegedly non-responsible con-

tractors do business with the government). Finally, iden-

tical evidence is crucial to both actions in that the same

contracts, projects, emplovees and wages are involved.

II. THE COURT BELOW SHOULD HAVE DE-

CIDED THE PURELY LEGAL ISSUE OF

WHETHER RES JUDICATA APPLIES BE-

CAUSE THERE ARE NO FACTS TO BE DE-

TERMINED, THE QUESTION INVOLVED IS

ONE OF STATUTORY CONSTRUCTION AND

THE DEPARTMENT OF LABOR HAS AL-

READY EVINCED ITS SPECIAL COMPE-

TENCE IN A MANNER HOSTILE TO FAC-

CHIANO.

A. The Issue of Res Judicata is Strictly Legal,

and Does Not Involve the Department of La-

bor’s Expertise or Fact-Finding Prowess.

While the court below noted that the “HUD debar-

ment was sufficiently adjudicatory and final to enable ap-

pellants to raise a preclusion defense . . .”, 859 I'.2d at

1167, it failed to directly address the issue, and instead

left the determination to the Department of Labor, who

would be required to “at least consider apellants’ preclu-

sion defense”. Jd. In so doing, the court refused to de-

viate, despite a persuasive dissent, from its position that

the “exhaustion of administrative remedies” doctrine must

be applied to the present case.

While both the majority and dissenting opinions in

the court below speak in terms of “exhaustion of admin-

istrative remedies,” the discussion more properly should

foeus on the closely-related doctrine of ‘‘primary juris-

diction’.

S“Exhaustion of administrative remedies’ applies where a

claim is cognizable in the first instance by an administrative

agency alone. ‘Primary jurisdiction”, on the other hand, applies

where a claim is originally cognizable in the courts, and comes

(Continued on following page)

Under the doctrine of primary jurisdiction, as a gen-

eral rule, a court should refer a matter to an administra-

tive agency for resolution, even if the matter is otherwise

properly before the court, if it appears that the matter

involves technical or policy considerations which are be-

yond the court’s ordinary competence and within the

agency’s particular field of expertise. E.g., United States

v. Philadelphia National Bank, 374 U.S. 321, 83 S.Ct. 1715,

10 L.Ed.2d 915 (1963). Primary agency jurisdiction, like

“exhaustion of administrative remedies,” is a flexible con-

cept, concerned with “promoting proper relationships be-

(Continued from previous page)

into play whenever enforcement of the claim requires the res-

olution of issues which have been placed in the special com-

petence of an administrative body. United States v. Western

Pacific Railroad Co., 352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126

(1956). There is little question that the courts have jurisdiction

over this matter. The action arose under Section 702 of the

Administrative Procedures Act, 5 U.S.C. § 551, et seq., which en-

titles a person adversely affected or aggrieved by an agency

action to judicial review thereof. In addition, jurisdiction over

the action was conferred upon the district court by 28 U.S.C.

§ 1331, which grants original jurisdiction over all civil actions

arising under the Constitution, laws, or treaties of the United

States. Third, jurisdiction was proper under 28 U.S.C. § 1361,

which grants original jurisdiction in the nature of mandamus to

compel an officer of an agency of the United States to perform

a duty. Finally, to the extent Facchiano sought an injunction

from the district court, this Court noted, in Califano v. Yamasaki,

442 U.S. 682, 99 S.Ct. 2545, 61 L.Ed.2d 276 (1979):

Absent the clearest command to the contrary from Con-

gress, federal courts retain their equitable power to issue

injunctions in suits over which they have jurisdiction.

442 U.S. at 705, 99 S.Ct. at 2559, 61 L.Ed.2d at 195. See also

Porter v. Warner Holding Co., 328 U.S. 395, 398, 66 S.Ct. 1086,

1089, 90 L.Ed 1332, 1336 (1946). The Department of Labor has

never contested jurisdiction and, in fact, has argued the case

on the merits before the district court and the Third Circuit.

tween the courts and administrative agencies charged with

particular regulatory duties.” Nader v. Allegheny Atr-

Lines, Inc., 426 U.S. 290, 303, 96 S.Ct. 1978, 1986, 48 L.Ed.2d

643, 654 (1976), quoting United States v. Western Pacific

R. Co., supra.

As with any judicially-created concept, there are Ju-

dicially-created exceptions to the application of ‘‘primary

jurisdiction.”© There is no need to apply the doctrine of

primary ageney jurisdiction when the issue involved is a

“strietly legal one” involving neither the agency’s partie-

ular expertise nor its fact-finding abilities. Board of Edu-

cation of the City School District of the City of New York

v. Harris, 622 F.2d 599, 607 (2d Cir. 1979). As the Fifth

Cireuit noted in Columbia Gas Transmission v. Allied

Chemical Corp., 65 F.2d 503 (5th Cir. 1981) :

No fixed formula exists for applying the doctrine of

primary jurisdiction. In every case, the question is

whether the reasons for the existence of the doctrine

are present and whether the purposes it serves will

be aided by its application in a particular litigation.

(citation omitted) .... It is well estabished that the

courts need not refer an issue to an agency when the

issue is strietly a legal one, involving neither the

ageney’s particular expertise or its fact-finding prow-

ess: the standards to be applied in resolving the issue

are within the conventional competence of the court

and the judgment of a technically expert body is not

likely to be helpful in the application of the standards

to the facts of the case (citations omitted). Further-

more, the

‘The exceptions to the doctrine of “primary jurisdiction”

are closely related to the exceptions to “exhaustion of admin-

istrative remedies”. The rationale for the exceptions would be

the same under either doctrine.

‘Courts should be reluctant to invoke the doctrine

of primary Jurisdiction, which often, but not al-

ways, results in added expense and delay to the

litigants when the nature of the action deems the

application of the doctrine inappropriate ae

Li mewine, when the agency’s position is sufficient-

ly clear or non-technical, or when the issue is

doles to the main litigation, courts should

be very reluctant to refer... . Finally, the court

must always balance the benefits of seeking the

agency’s aid with the need to resolve disputes

fairly, yet as expeditiously as possible.’

652 I*.2d at 519-20, fn. 15, quoting Mississippi Power &

Light Co. v. United Gas Pipe Line Co., 532 2d 412, 419

(Sth Cir. 1976).

This Court, in McKart v. United States, 395 U.S. 185,

89 S.Ct. 1657, 23 L.Ed.2d 194 (1969), has recognized that

the proper interpretation of a statute is “certainly not a

matter of discretion.’’ 3895 U.S. at 198, 89 S.Ct. at 1665,

23 L.Ed.2d at 206. When the resolution of the issue does

not require any particular expertise on the part of an ad-

ministrative body, and when judicial review “‘would not be

significantly aided by an additional administrative deci-

sion,’’ there need not be a reversion to an administrative

tribunal. 399 U.S. at 199, 89 S.Ct. at 1665, 23 L.Ed.2d

at 206.

The Court should balance the goals of the “exhaustion

of remedies” and “primary jurisdiction” doctrines against

the interests of the parties:

Except in those cases where exhaustion of admin-

istrative remedies is specifically required by statute

administrative remedies need not be pursued if the

litigant’s interests in immediate review outweigh the

government’s interests in the efficeney or adminis-

jeaties autonomy that the exhaustion doctrine is de-

/signed to further.

West v. Bergland, 611 F.2d 710, 715 (8th Cir. 1979), cert.

den. 449 U.S. 831 (1980). See also McKart v. United

States, supra. (“We must ask, then, whether there is in

‘this case a governmental interest compelling enough to

outweigh the severe burden placed on petitioner”. 3!5

U.S. at 197, 89 S.Ct. at 1664-65, 23 L.Ed.2d at 205).

The court below determined that the issue of claim

preclusion was not “strictly legal, as the term has been

applied in the exhaustion cases.” 859 F.2d at 1168. How-

ever, the court ignored its own prior rulings, rulings from

other Cireuits, and rulings of this Court in that it failed

to demonstrate how the res judicata issue depends on any-

thing other than a legal interpretation of labor statutes

and regulations. The majority did not point to any ques-

tion of fact, and indeed, as indicated supra, there is no

question of fact. It has already been determined that

Petitioners are guilty of mail fraud charges which arose

out of the determination by the Department of Laber

that they

the Davis Bacon Act and the Contract Work Hours and

have falsified reeosrds to coneeal violations o!

Safety Standards Act. The case involves nothing more

than statutory interpretation. See Great Northern Rail-

way Co. v. Merchant’s Elevator Co., 259 U.S. 295, 42 S.Ct.

477. 66 L.Ed. 943 (1922) (Where the question is one of

construction, a court can pass on it as an issue purely of

law). Nor does the court belew show that there is a gov-

ernmental interest compelling enough to outweigh the

burden placed on Petitioners, who will be foreed to suf-

fer a delay of judicial resolution of an issue that has al-

ready been argued by the parties and addressed by the

courts, as well as the added expense to be incurred in re-

scaiiieeiaeiaaaiaaie a

arguing their res judicata position in the courts following

an unfavorable determination by the Department of Labor.

B. The Department of Labor’s Hostility and

Manifest Opposition to the Facchianos’ Res

Judicata Argument Militates Against Invoca-

tion of Primary Jurisdiction or Exhaustion of

Remedies.

In addition to the foregoing, the doctrine of primary

jurisdiction should not be applied when “resort to the

agency would plainly be unavailing in light of its manifest

opposition or because it has already evinced its ‘special

competence’ in a manner hostile to Petitioner... .” Board

of Education of the City School District of the City of

New York v. Harris, supra, 662 F.2d at 607.

In conflict with the Second Cirecuit’s decision in Har-

ris, the court below failed to address the “hostility” ex-

ception to the primary jurisdiction doctrine. The facts of

the present case clearly indicate such hostility. As sue-

einetly stated in the lower court’s dissenting opinion:

Although the DOL has the power to sustain Appel-

lants’ preclusion claim, it is very unlikely that further

proceedings before it would produce such a result. In-

asmuch as the successful prosecution of the Appel-

lants by HUD for the underlying charges and HUD’s

debarment proceedings were predicated upon the

DOL’s own investigation, it is unlikely, in the very

nature of human behavior, that the DOL will be fully

objective and impartial. When the agency has already

evinced its special competence in a manner hostile to

appellants, ‘courts need not bow to the primary juris-

diction of the administrative body.”

859 F.2d at 1171. Likewise, in Harris, supra, the Second

Cireuit concluded that the administrative agency in that

ease had “evinced its special competence in a manner hos-

tile to petitioner” beeause it “fully briefed and hotly con

tested the [disputed] issue on appeal.” 622 I°.2d at 607.

Prior debarment proceedings in this case were predi-

vated upon the Department of Labor’s investigation of

Petitioners. The Department of Labor is a Respondent to

this Petition. The Department of Labor “fully briefed

and hotly contested” the issue of claim preclusion in its

lower court brief, and argued the issue before that court.

Therefore, it appears unlikely that Facchiano can receive

an objective determination on the question of res judicata

if required to present that question to the Department of

Labor for determination.

Finally, a United States magistrate and the district

court judge have already addressed the issue of res judi-

cata by delving into the merits of this case. The purposes

that the doctrine of primary jurisdiction and/or exhaus

tion of remedies serves will not be aided by its applica-

tion to Faechiano. Nor does the added cost and delay

visited upon Petitioners by invocation of those doctrines

serve the ends of justice.

CONCLUSION

For the reasons set forth above, the Petition for Writ

of Certiorari should be granted to permit a resolution of

important issues affecting Petitioners, contractors and

other persons aggrieved by multiple proceedings com

menced by the government for the same offense.

Respectfully submitted,

Meyer, Unxovic & Scorr

FREDERICK J. FRANCIS

THomas A. BERRE1

FRANK G. SALPIETRO

1300 Oliver Building

Pittsburgh, Pennsylvania 15222

(412) 456-2800

Attorne Ys for Pe titione rs

App. l

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 88-3143

MICHAEL FACCHIANO, JR., JOHN FACCHIANO, and

FACCHIANO CONSTRUCTION COMPANY, INC.,

Appellants

THE UNITED STATES DEPARTMENT OF LABOR,

THE SECRETARY OF LABOR, WILLIAM E. BROCK,

in his official capacity and JAMES L. VALIN, in his

official capacity,

Appellees

On Appeal From the United States District

Court for the Western District

of Pennsylvania

(D.C. Civil No. 86-2711)

Argued July 19, 1988

Before: HIGGINBOTHAM, BECKER and

ROSENN, Circuit Judges

[Filed October 21, 1988]

FREDERICK J. FRANCIS (Argued)

Thomas A. Berret

Meyer, Unkovie & Scott

1300 Oliver Building

Pittsburgh, PA 15222

Attorneys for Appellants

App. 2

J. ALAN JOHNSON

United States Attorney

BONNIE R. SCHLUETER (Argued)

Assistant U.S. Attorney

633 U.S. Post Office and

Courthouse

Pittsburgh, PA 15219

Attorneys for Appellees

OPINION OF THE COURT

BECKER, Circwt Judge.

Following an administrative proceeding, appellants,

Facchiano Construction Company, Inc. (‘‘Facchiano Con-

struction’’) and one of its principals, Michael Facchiano,

Jr., were debarred in 1986 by the Department of Housing

and Urban Development (‘‘HUD’’), from participating

for a period of 18 months in HUD-sponsored contracts.

This debarment was based upon the conviction of Michael

Facchiano and Faecchiano Construction on mail fraud

charges which arose out of the determination of the De-

partment of Labor (‘‘DOL’’) that they had falsified ree-

ords to conceal violations of the Davis-Bacon Act, 40 U.S.C.

§ 276a (1982), and the Contract Work Hours and Safety

Standards Act, 40 U.S.C. § 327-332 (1982) in connection

with work on HUD-sponsored contracts.

DOL thereupon sought to debar appellants, Faechiano

Construction, and its officers, Michael Facchiano, Jr.. and

John Facchiano,! from al] government contracts for a

1. DOL also sought to debar Michael Facchiano, Sr., who is not

a party to this suit.

App. 3

period of three years on the grounds of the underlying

Davis-Bacon violations. Appellants responded with a suit

in the district court for the Western District of Pennsyl-

vania seeking to enjoin the administrative proceeding on

the grounds that it was precluded by the previous debar-

ment. The district court granted summary judgment for

DOL. This appeal presents the question whether a suit for

injunctive relief will lie in the district court under these

circumstances, or whether appellants must instead, pursu-

ant to the exhaustion of administrative remedies doctrine,

present the preclusion defense in the administrative pro-

ceedings.

Although a court can enjoin administrative proceed-

ings when an ageney undertakes vexatious litigation, the

district court found that not to be the ease here, and its

finding is supported. However, the district court failed to

consider the well-established principle that administrative

tribunals are fully capable of considering preclusion de-

fenses, and it contravened the related exhaustion doctrine

by reaching the merits and determining that the HUD de-

barment in fact had no preclusive effect on the DOL debar-

ment proceeding. Therefore. while we will affirm the

grant of summary judement against apnellants insofar as

it denied injunctive relief, we will vacate the opinion of

the district court insofar as it adindicates the merits of

the preclusion issue. The agency will be able therefore to

resume its proceedines and address the issue itself.

After Facchiano Construction had performed a num-

ber of construction projects sponsored by HUD’s Com-

munity Development Block Grant program, DOL condueted

an investigation which revealed that it had been falsely

App. 4

certifying the wages paid to the employees who were work-

ing on the HUD-sponsored projects. The investigation,

completed in 1984, disclosed that the wages and overtime

pay were below those required by the Davis-Bacon Act,

40 U.S.C. § 276a (1982), and the Contract Work Hours

and Safety Standards Act, 40 U.S.C. §§ 327-332 (1982).

Because of false wage certifications sent through the mails,

Michael Facchiano, Jr. and Facchiano Construction were

indicted for mail fraud in February 1985, they waived in-

dictment and pleaded guilty. The district court required

them to make restitution of $126,000 to the employees and

fined Michael Facchiano and the Faechiano Construction

$2,000 each. Michael Faechiano also reecived a prison sen-

tence of six months followed by five years probation.

In May 1985, following the mail fraud conviction, HUD

initiated an administrative action to debar Michael Facchi-

ano, Jr. and Faechiano Construction from HUD-sponsored

contracts pursuant to 24 C.F.R. § 24.6(a)(1), (4), and (9)

(1985). Under these regulations, HUD ean debar con-

tractors who have been convicted of crimes committed in

the pursuit, the attempt to pursue, or the performance of

public or private contracts, where the conviction(s) have

put the contractors’ integrity in donbt or where the con-

duct involved is deemed ‘‘serious’’ by the Assistant Secre-

tarv of HUD. On Mav 15, 1985, HUD notified Michael

Facchiano and Facchiano Construction of its proposed de-

barment and requested submission of briefs and support-

ing material in accordance with 24 C.F.R. § 24.7(a) (1985)?

2. Although appellants requested an ora! hearing, they were not

entitled to a hearing under 24 C.F.R. § 24.5(c) (1985). App. at

33a. The HUD administrative law judge therefore based his

determinations on the documentary evidence and written briefs

submitted by the parties.

App. 5

In a final order dated March 5, 1986, the HUD admin-

istrative law judge ordered an 18-month debarment from

contracts awarded by HUD. This order was not appealed.

In December 1985, DOL notified appellants that it was

initiating its own debarment proceeding under 29 C.F.R.

§ 5.12(b)(1) (1985). This regulation enables DOL to de-

bar contractors for willfully violating the Davis-Bacon

Act and other regulatory labor standards. DOL sought to

debar appellants from all government contracts for three

vears. Rather than avail themselves of the opportunity

to contest this second deharment in the administrative

forum, appellants immediately sued in the District Court

for the Western District of Pennsylvania. seeking a per-

manent injunction or a writ of mandamus to prevent

DOL’s administrative proceedings. The district court is-

sued a preliminary injunction staying the administrative

proceedings nending the outcome of the suit. Both parties

moved for summarv judgment. and the district judge as-

signed the case to a magistrate for a report and recom-

mendation.

In their summary judgment memorandum, appellants

contended that the DOL’s proposed debarment was found-

ed on the same canse of action as the HUD debarment, and

hence was barred by principles of claim preclusion. Ac-

knowledging that the HUD debarment was based upon a

eonviction. and the DOL proceeding unon the underlying

facts the concealment of which led to the conviction, appel-

lants submitted that the distinction was without a differ-

erce and that the claims were essentially the same. In

appellants’ view DOL and HUD were privies, as agencies

in the executive branch, henee, DOT.’s claim shonld have

App. 6

been raised in the prior debarment proceeding since other-

wise the same government could repeatedly punish a con-

tractor for the same conduct.2 DOL, however, rejoined

that the HUD disbarment had no claim preclusive effect

on the DOL debarment proceeding precisely because the

mail fraud conviction and the underlying regulatory vio-

lations represented different causes of action.

The magistrate began by noting that exhaustion is not

| required when, by not observing the principles of preclu-

sion, ‘* ‘the challenged agency action presents a clear and

unambiguous violation of statutory or constitutional

rights.’ ’’? App. at 147 (quoting Susquehanna Valley Alli-

ance v. Three Mile Island, 619 F.2d 231, 245 (3d Cir. 1980),

cert. denied, 449 U.S. 1096 (1981). He found, however,

that this ease did not fall within this exception to the ex-

haustion doctrine. Then addressing the preclusion issue,

he determined that the HUD and the DOL debarments

were different in two respects: (1) the HUD deharment

was limited to HUD contracts whereas the DOL debarment

would be government wide; and (2) the HUD debarment

was based on appellants’ criminal conviction whereas the

DOL debarment would be based on the conduct underlying

the mail fraud, /.e., the violations of the Davis-Bacon Act.

The magistrate believed that. because of these differences,

the two separate aveney actions arose from different

eauses of action and subsumed different issues, and that

neither issne preclusion nor claim preclusion should apply.

3. Although appellants also relied upon issue preclusion, that

doctrine would not appear apposite. Moreover, it would appear

to be of doubtful utility to appellants since all the issues in the

HUD debarment were decided against appellants.

App. 7

The magistrate therefore recommended that injunctive re-

lief be summarily denied on the grounds that no preclusive

effect exists and that, as a consequence, appellants failed

to meet the requirements for the exception to the exhaus-

tion doctrine. Adopting the magistrate’s recommendation

and findings, the district court granted DOL’s motion for

summary judgment. This appeal followed.

The doctrine of exhaustion of remedies requires that

parties first use all prescribed administrative measures

for resolving a conflict before they seek judicial remedies.

Sec Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41,

50-52 (1938). This doctrine serves judicial economy by

preventing piecemeal judicial review of agency actions and

facilitates judicial review by allowing the administrative

tribunal to use its expertise to develop a complete factual

record. See Cerro Metal Products v. Marshall, 620 F.2d

964. 970 (3d Cir. 1980). Further, the doctrine serves to

prevent the courts from frustrating congressional deci-

sions to have certain disputes resolved originally in ad-

ministrative forums. See Babcock & Wilcox Co. v. Mar-

shall, 610 F.2d 1128, 1136 n.21 (3d Cir. 1979).

The doctrine of claim preclusion is important in the

administrative as well as the judicial context, because of

the ‘‘obvious principle that a controversy should be re-

solved once, not more than once.’? K. Davis, 4 Admin-

istrative Law Treatise §219 (2d Ed. 1983). In general,

[w]lhere an administrative forum has the essential

procedural characteristics of a court... its determina-

tions should be accorded the same finality that is ac-

corded the judgment of a court. The importance of

App. 8

bringing a legal controversy to conclusion is generally

no less when the tribunal is an administrative tribunal

than when it is a court. Hence, the rule of claim

preclusion is properly applied to administrative ad-

judications of legal claims.

Restatement (Second) of Judgment § 83 comment b (1982

Thus, there are compelling reasons for allowing the doe-

trine of claim preclusion to operate in administrative de-

terminations.

We note, however, that preclusion does not apply in

all administrative law eases. In United States v. Utah

Construction & Mining Co., 384 U.S. 394, 422 (1966), the

Supreme Court held that preclusion principles apply to

administrative proceedings [only] when the administrative

ageney in the first action was ‘‘acting in a judicial capac-

itv’? and the parties had an adequate opportunity to pre-

sent their ease. See also Bowen v. United States, 570 F.2d

1311, 1320-21 (7th Cir. 1978). Moreover, we have noted

that administrative preclusion ‘‘must be tempered by fair-

ness and equity’? and is not as rigidly enforced as pre-

elusion in judicial proceedings. Purter v. Heckler, 771

F.2d 682, 691 (3d Cir. 1985). Nevertheless ‘‘a valid and

final adjudieative determination by an administrative

tribunal has the same effeets under the rules of res judi-

eata, subject to the same exeeptions and qualifieations, as

a judgement of a court.’’? Restatement (Second) of Juda-

ments {83(1) (1982); see also K. Davis, supra, § 21:2

(detailing the development of administrative preclusion).

Therefore, an administrative tribunal cannot refuse to ob-

serve these preclusion principles when they do apply.

In the ease before us, the HUD debarment was suffi-

ciently adjudicatory and final to enable appellants to raise

App. 9

a preclusion defense in the later DOL debarment. Appel-

lants had ample notice, and they had an opportunity to

present their case to the HUD ALJ in briefs and docu-

mentary evidence. Moreover, the HUD ALJ filed a de-

tailed opinion containing his factual findings and rulings.

In re Michael Facchiano, Jr. and Facchiano Construction

Co., Inc., HUDBCA No. 85-962-D33 (March 5, 1986). Ap-

pellants do not argue that consideration of preclusion in

the administrative tribunal would lead to inequities or un-

fairness, and we pereeive none. We thus conclude that,

unless the doctrine is somehow waived, the DOL ALJ must

at least consider appellants’ preclusion defense, and con-

eomitantly that the doctrine of exhanstion prevents the

distriet court from decidine the preclusion defense in the

first instance.

IIT.

As with many legal doctrines, the doctrine of exhaus-

tion is not absolute. The doctrine exists within a court’s

diseretion rather than as a strict rule of law. See Cerro

Metal Products, 620 F.2d at 970 (‘‘Exeept when required

by statute, exhaustion of administrative remedies is not

an inexorable command, but is a matter of sound judicial

diseretion’’); K. Davis, supra, § 26:1, at 414-417. This

eourt has developed three broad exceptions to the doctrine:

We have declined to require exhaustion [1] when the

challenged agency action presents a clear and unam-

biguous violation of statutory or constitutional rights,

[2] when resort to administrative procedures is

‘‘elearlv shown to be inadequate to prevent irrepar-

able injury,’’ or [3] when exhaustion is ‘‘futile.’’

Susquehanna Valley Alliance v. Three Mile Island, 619

F.2d 231, 245 (3d Cir. 1980), cert. denied, 449 U.S. 1096

App. 10

(1981) (citations omitted).4 We address the exceptions

now, except that since there is no elaim of futility, we need

not address that exception.

The requirement of exhaustion may be waived under

the first exception in Susquehanna when an agency’s mali-

cious prosecution and disregard for the principles of pre-

elusion amount to a violation of a party’s due process.

Appellants claim that this case falls within the due process

exception to the exhaustion doctrine. They contend that

they should not be required to litigate the DOL debarment

4. The dissent argues that exhaustion may not be required

when the “issue involved is a strictly legal one, involving neither

the agency's particular expertise nor its fact finding processes.”

Board of Education v. Harris, 622 F.2d 599, 607 (2d Cir. 1979),

cert. denied, 449 U.S. 1124 (1981). The case law indicates that

this Court recognizes a legal question exception to the exhaus-

tion doctrine, however, this exception is inapposite to this case,

because the issue to be decided is not ‘‘strictly legal’’ as that

term has been applied in the exhaustion cases. Two cases in this

Circuit elaborate on what is meant by the legal question excep-

tion to the exhaustion doctrine. In Bethlehem Steel Corp. v.

EPA, 669 F.2d 903 (3d Cir. 1982), we stated that exhaustion might

not be required “where a dispute centers on legal questions

such as constitutional or statutory interpretation.”” Bethlehem

Steel, 669 F.2d at 907. See also Flying Tiger Line v. Teamsters

Pension Trust Fund, 830 F.2d 1241, 1253 (3d Cir. 1987) (stating

that “the requirements of the exhaustion doctrine are .. . not

applicable’’ when the issue is one of statutory interpretation).

In contrast, in this case we have a mixed question of fact and

law—whether the HUD cause of action and the DOL cause of

action are sufficiently similar to justify claim preclusion.

Furthermore, the body most conversant with the matter of

what constitutes a debarment cause of action for DOL is DOL.

Therefore, we also decline to apply this exception to this case,

because DOL is more expert on this issue. See Beth/ehem Steel,

669 F.2d at 907 (“[I]t is more desirable to let the administrative

process go forward without interruption than to permit the

parties to petition the courts at various intermediate stages. In

that way, the agency can... . apply any special expertise it might

possess... .”’)

App. 11

in an administrative forum because the WUD debarment

proceeding so clearly precludes other debarments by execu-

tive agencies.

The applicable principle is summarized by Professor

Moore:

[A] claim asserted in a subsequent proceeding is

barred by the res judicata effect of a prior judgment

is not itself grounds for an injunction against the

claimant. Vexatious, damaging or harassing poten-

tialities of the proceeding to be enjoined must be es-

tablished to authorize relief. Bad faith, if any, of the

party seeking relitigation, difficulties imposed by a

subsequent suit or suits on the party seeking an in-

junction, in the expense of time, money and energy

required to defend, and the effect of continued litiga-

tion on his business or reputation, are considered by

courts when asked to enjoin relitigation of matters

previously adjudged.

LB J. Moore, J. Lucas & T. Currier, Moore’s Federal Prac-

tice § 0.408[2] (1988) (footnotes omitted). In Continental

Can Co. v. Marshall, 603 F.2d 590 (7th Cir. 1979), for ex-

ample, the Court of Appeals enjoined the Occupational

Safety and Health Review Commission (‘‘OSHRC”’’) from

citing the Continental Can Company for noise level viola-

tions. In 1973, an administrative law judge had vacated

eight OSHRC citations against Continental Can because

OSHRC’s interpretation of the statutory noise reduction

standards was invalid. Despite this ruling OSHRC pro-

ceeded to litigate citations issued to sixteen other Con-

tinental Can plants under the same (invalid) interpreta-

tion. Since all of Continental Can’s eighty plants used

the same machinery as the cited plants, the court found

that Continental Can faced the possibility of relitigating

App. 12

‘the issue ‘over and over in an untold number of hear-

ings.’’’ Id. at 596 (quoting the district court). The repe-

titious litigation in this case, therefore, amounted to

‘* ‘harassment of a capricious kind’ ”’ and violated Con-

tinental Can’s due process rights. Jd. Since requiring

Continental Can to face the administrative tribunal would

only exacerbate this unconstitutional injury, the court

deemed exhaustion waived.>

The circumstances in Continental Can are distinguish-

able from those before us for three reasons. First, Con-

tinental Can faced the possibility of relitigating the same

issue an ‘‘untold’’ number of times because the OSHRC

ALJ refused to apply preclusion to the relitigated issue.

In the case at bar, there is no indication that either HUD

or DOL (or any other government ageney) would pursue

any debarment actions other than those already taken.

Moreover, DOL’s ALJ in the case at bar did not have a

chance to address appellants preclusion defense before

they sought injunctive relief. Second, although we inti-

mate no view on the underlying issue, it is undoubted that

this ease, on its face, doves not present the elements of pre-

clusion in an aggravated form as did Continental Can.

This case involves two different agencies pursuing two

debarments differing in length and scope under two dif-

ferent sets of regulations. Continental Can, on the other

hand, involved the same agency trying repeatedly to re-

5. In Babcock & Wilcox Co. v. Marshall, 610 F.2d 1128, 1138

(3d Cir. 1979) (citing Continental Can, 603 F.2d at 596), this court

recognized in dicta that exhaustion can be waived when, inter

alia, an agency’s vexatious and harassing refusal to follow issue

nreciusion, as in Continental Can, constitutes a clear and unam-

biguous violation of constitutional! rights.

App. le

litigate what was undoubtedly the same issue against the

Same company. Third, unlike the Continental Can Com

pany, appellants lost their earlier administrative proceed-

ings; therefore, DOL was not harassing a previously vin-

dicated party. See Inicrnational Harvester Co. v. Occupa-

tional Safety and Health Review Commission, 628 F.2d

J52, 986 n.4 (7th Cir. 1980) (distinguishing Continental

Can and finding no harassment because OSHA had not

repeatedly cited Harvester for conduct that was previ-

ously found lawful).

In addition to the foregoing DOWL’s action does not

rise to the level of vexatiousness because we cannot see,

nor do appellants show us, how they will be harmed by

litigating in the administrative forum. Appeilants give no

indication that the administrative action would impose in-

tolerable litigation costs. Cf. United States v. American

Honda Motor Co., 273 F. Supp. 819, 819 (N.D.IIl. 1967)

(finding repetitious litigation vexatious because it involved

subpoenas ealling for more than 6,000 pages of documents

from all over the country).

Appellants have failed to show that the DOL debar-

ment proceeding will amount to a clear and unambiguous

violation of their statutory or constitutional rights. We

find no evidence that the administrative litigation would

be any more costly than the litivation before us: in fact, we

think it more likely that the administrative litigation could

have been more efficient and economical than appellants’

pursuit of an injunction. Indeed, even if the administra

tive tribunal rejects the preelusion defense, it still might

feel no need to impose any additional penalties on the ap-

pellant. In sum, this case does not fall within the exeep

—————————aaEO

App. 14

tion to the exhaustion doctrine carved out by Continental

Can and Babcock because, even if appellants have a valid

claim preclusion defense, DOL’s action does not amount

to vexatious prosecution.

IV.

The short of it is that, rather than seeking to enjoin

the DOL debarment through collateral judicial action, ap-

pellants must first try to litigate their case before an ad-

ministrative officer. By seeking to enjoin the administra-

tive proceedings, appellants have closed off an efficient

administrative forum in which to resolve a number of is-

sues. Absent any indication of a due process violation or

vexatious prosecution, we find no reason to frustrate the

policies underlying the doctrine of exhaustion by cireum-

venting the doctrine. We wil! therefore affirm the judg-

ment of the district court insofar as it denied injunctive

relief. However, because the opinion of the district court

adjudicates the merits of the preclusion issue, we will va-

eate it so that the agency may resume its own proceedings

and address the issue.

ROSENN, Circuit Judae. dissenting.

The majority concludes that ‘‘{a]bsent any indication

of due process violation or vexatious prosecution,’’ (Maj.

Op. ut 14), it finds no reason to frustrate the policies un-

derlying the doctrine of exhaustion by enjoining the De-

partment of Labor (DOL) debarment proceedings. I be-

lieve that the exceptions to the doctrine requiring exhaus-

tion cf administrative remedies are not nearly as limited

as the majority paints them, but have a much broader and

more flexible range. Absent a statutorv mandate for ex-

App. 19

haustion of administrative remedies, there is no judicial

justification to relegate a party to administrative proce-

dures when the issue involved is only a legal one, requir-

ing neither the agency’s expertise nor any factual determi-

nations. Because that is precisely the situation in this

ease, I respectfully dissent.

The basie premises underlying the exhaustion of ad-

ministrative remedies doctrine are that (1) judicial review

may be facilitated by permitting the appropriate agency

to proeced without interruption to develop a factual record

and apply its expertise with respect to technical subject

matter, (2) administrative autonomy requires that an

aveney be afforded an opportunity to proceed without

interference from the courts when the decision involves

the exercise of discretionary powers granted by the Con-

eress or the ageney’s expertise; and (3) judicial resources

may be conserved should the ageney grant the relief

sought. IMWeKart v. United States, 395 U.S. 185, 194-95

(1969).

However, the doctrine, like most judicial doctrines, is

subject to numerous exceptions. MZceKart, 395 U.S. at 193.

As the majority correctly observes, the exhaustion doctrine

is not absolute and ‘‘exists within a court’s discretion

rather than as a strict rule of law.’’ (Maj. Op. at 10).

Therefore, the court should balanee the goals of the doc-

trine against the interests of the parties.

Except in those cases where exhaustion of administra-

tive remedies is specifically required by statute, ...

administrative remedies need not be pursued if the

litigant’s interests in immediate review outweigh the

App. 16

government’s interests in the efficiency or admin-

istrative autonomy that the exhaustion doctrine is de-

signed to further.

West v. Bergland, 611 F.2d 710, 715 (8th Cir. 1979), cert.

denied, 449 U.S. 831 (1980). The exceptional circumstances

presented by this case demand exercise of the court’s dis-

eretion.

The only issue here is whether the HUD debarment

had a preclusive effect on the later DOL debarment pro-

ceeding.! This is merely a legal question involving two

government agencies, the resolution of which requires no

administrative findings or expertise on the part of the

DOL. The facts have been stipulated and are neither tech-

nical nor complex. Nor does resolution of the legal issue

depend on the interpretation or application of the agency’s

own regulations. ‘‘It is well established that the courts

need not defer to any agency where the issue involved is

a strictly legal one, involving neither the agency’s particu-

lar expertise nor its fact finding processes.’’ Board of

Educ. v. Harris, 622 F.2d 599, 607 (2d Cir. 1979), cert.

denied. 449 U.S. 1124 (1981). Accord Borden, Inc. v. FTC,

495 F.2d 785, 787 (7th Cir. 1974); Consumers Union of

United States-a:-Cost of Living Council, 491 F.2d 1396, 1399

(T.B.C.A.), cert. denied, 416 US. 984 (1974). Because

the failure of the appellants to submit their preclusion

claim to the administrative processes of the agency only

——$———

1. | agree with the majority that “the HUD debarment was

sufficiently adiudicatory and final to enable appellants to raise

a preclusion defense in the later DOL debarment . . . . More-

over, the HUD ALI filed a detailed opinion containing his factual

findings and rulings.” Maj. op. at 9.

App. 17

deprive the DOL of the oppertunity to decide a pure legal

issue, and does not deprive it of the opportunity to speak

on matters within its realm of expertise, this case should be

treated as an exception to the doctrine of exhaustion.

Moreover, resort to administrative remedies will prob-

ably only delay judicial resolution of this same issue, there-

by frustrating the equally valid goals of judicial economy

and expediency as well as imposing unnecessary additional

expense and time on the parties. The United States Dis-

trict Court has already ruled on the issue and it has been

briefed and orally argued on appeal. Although the DOL

has the power to sustain appellants’ preclusion claim, it

is very unlikely that further proceedings before it would

produce such a result. Inasmuch as the successful prose-

cution of the appellants by HUD for the underlying

charges and HUD’s debarment proceeding were predi-

cated upon the DOL’s own investigation, it is unlikely, in

the very nature of human behavior, that the DOL will be

wholly objective and impartial. When the agency has al-

ready evinced its special competence in a manner hostile

to the appellants, ‘‘courts need not bow to the primary

jurisdiction of the administrative body.”’ Board of Edue.

v. Harris, 622 F.2d at 607.

Finally, in view of the history of the previous proceed-

ines, I believe that compelling the appellants to respond

to yet another administrative proceeding, before allowing

judicial determination of the legal issue, serves no purpose

and is unduly harsh. The Court has recognized that, un-

der certain circumstances, application of the exhaustion

App. 18

doctrine may be unacceptably harsh. In McKart, the peti-

tioner had been convicted for failure to submit to induc-

tion into the Armed Forces of the United States. The dis-

trict court held that the petitioner was barred from rais-

ing the defense of military exemption because he had failed

to exhaust the administrative remedies provided by the

Selective Service System. In holding that the failure to

exhaust his administrative remedies did not bar MeKart

from challenging the validity of his classification as a de-

fense to the criminal prosecution, the Court observed that

‘‘use of the exhaustion doctrine in criminal cases can be

exceedingly harsh.’’ MceKart, 395 U.S. at 197.

In the circumstances of this ease, although civil, com-

pelling appellants to submit to an additional ageney pro-

ceeding only for a decision on a legal issue would also be

harsh. The DOL completed its final investigation in 1984

but failed to initiate any debarment proceedings. Follow-

ing their conviction on the basis of the DOL investiga-

tion, the individual defendants were sentenced to prison,

fined, and ordered to make restitution. Appellants made

restitution in the sum of $126,000 to their employees. They

were then subjected to administrative proceedings by HUD

and debarred. Less than three months before the HUD

ALJ entered his debarment order. DOI at last decided

to commence its own debarment proceeding. It now seeks

to deprive appellants of a judicial inquiry. As in McKart,

we too must ask then, ‘‘whether there is in this case a

governmental interest compelling enough to outweigh the

severe burden paced on fapnellants].’’ Id. at 197. T see

none.

App. 19

Accordingly, I would decide the legal issue of claim

preclusion raised on this appeal and not require exhaus-

tion of remedies before the DOL. I therefore dissent.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

App. 20

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT

OF PENNSLYVANIA

MICHAEL FACCHIANO, )

JR., et al., )

)

Plaintiffs, )

) Civil Action

v. ) No. 86-2711

)

THE UNITED STATES )

DEPARTMENT OF LABOR, et al., )

)

Defendants. )

MAGISTRATE’S REPORT AND

RECOMMENDATION

l. Recommendation

It is respectfully recommended that the defendants’

motion for summary judgment be granted.

Il. Report

Presently before the Court for disposition is the de-

fendants’ motion to dismiss for lack of jurisdiction and

cross motions for summary Judgment.

The facts are basically uncontested and are set forth

in the parties joint stipulation filed on June 30 1987.

Facchiano Construction Company (‘‘the Company’’) is

a corporation engaged in the operation of a concrete con-

structing business. Michael Facchiano and John Fac-

chiano are officers of the company. During the period

App. 21

between 1982 and 1984, the company was engaged in con-

struction projects which were partially funded by the

Department of Housing and Urban Development

(““HUD’’). During the summer of 1984 the Department

of Labor (‘‘Labor’’) conducted an investigation, and de-

termined that the company had been paying its employees

less than the prevailing wages applicable under the Davis-

Bacon Act, 40 U.S.C. § 267a, et seq.; that the company had

not properly paid the amount of overtime compensation

required under the Contract Work Hours and Safety

Standards Act, 40 U.S.C. § 327 et seq. and that the com-

pany had falsified its payroll reeords to reflect compli-

ance with those Acts. Thereafter, a criminal information

was filed in this Court and on February 22, 1985, Michael

Facchiano, Jr. and the company pled guilty te two counts

of mail fraud. Michael Faechiano, Jr. was sentenced to

six months inearceration on February 22, 1985 and fines

were levied against both him and the Company. In addi-

tion, hack wages were paid to company employees.

Subsequcntly, HUD filed an administrative complaint

against Michael Facchiano and the Company seeking to

debar them from participating in HUD funded programs

and by Order dated March 15, 1986, it was directed that

they be debarred from participating in any HUD funded

project until November 15, 1986. Since no party appealed

from that decision, it became final on April 5, 1986.

In the interim, Labor also commenced a debarment

proceeding, and the plaintiffs notified Labor of the on-

going HUD proceeding. On October 2, 1986, Labor is-

sued its Order-of Reference of the matter to another Ad-

ministrative Law Judge. However, by Order of this Court

App. 22

dated June 2, 1987, further administrative action was en-

joined pending further proceedings.

The instant suit was commenced pursuant to Section

702 of the Administrative Protection Act, 5 U.S.C. § 551,

et seq., as well as 28 U.S.C. § 1331 and 1361, on December

22, 1986 by the plaintiffs seeking to enjoin Labor from pre-

ceeding with the debarment proceedings; issuance of a

writ of mandamus directing Labor to terminate the de-

barment proceedings, and such other relief as may be

deemed appropriate. The defendants have now moved to

dismiss this action and the parties have also submitted

cross motion for summary judgment.

Motion to Dismiss

In its motion to dismiss the defendants allege that

this Court lacks subject matter jurisdiction in that the

plaintiffs have failed to exhaust the available adminis-

trative remedies. This allegation is not appropriate at

the motion te dismiss stage.

The defendants contend that since the plaintiffs have

not exhausted their administrative remedies they are not

entitled to judicial relief. \JcKart v. United States, 395

U.S. 185, 193 (1969). The general rule was stated by the

Supreme Court in Myers v. Bethlehem Corp., 303 U.S. 41,

50-52 (1983) wherein it was observed:

the long settled rules of judicial administration

that no one is entitled to judicial relief for a supposed

or threatened injury until the prescribed administra-

tive remedy has been exhausted ... the rule requir-

ing exhaustion of the administrative remedy cannot

be circumvented by asserting that the charge on which

the complaint rests is groundless and that the mere

App. 23

holding of the prescribed administrative hearing

would result in irreparable damage. Lawsuits also

often prove to have been groundless; but no way has

been discovered of relieving a defendant from the

necessity of a trial to establish the fact.

However, while the requirement of exhaustion of ad-

ministrative remedies is the general rule, it is a judicially

created rule and does not affect a court’s subject matter

jurisdiction. Accordingly, the Third Circuit has recog-

nized three situation in which the requirement of exhaus-

tion may be waived. Susquehanna Valley Alliance v.

Three Mile Island, 619 F.2d 231 (sic) 3d Cir. 1980).

The first situation is ‘‘when the challenged agency

action presents a clear and unambiguous violation of stat-

utory or constitutional rights .. .’’ Susquehanna, 619 F.2d

at 245. See also, First Jersey Securities, Inc. v. Bergen,

605 F.2d 690, 697 (3d Cir. 1979). The exhaustion require-

ment may also be waived when following administrative

guidelines is ‘‘clearly shown to be inadequate to prevent

irreparable injury,’’ Babcock and Wilcox Co. v. Marshall,

610 F.2d 1128, 1188 (8d Cir. 1979), quoting American

Fed’n. of Gov’t. Employees v. Resor, 442 F.2d 993, 994-95

(3d Cir. 1971). Lastly exhaustion may be waived if re-

sorting to it would be futile. Susquehanna, 619 F.2d at

245.

In order to determine whether the plaintiffs’ com-

plaint fits within one of these exceptions, a court must

make ‘‘a careful analysis of the statutory scheme relied

on by the plaintiff, of the completeness or incompleteness

of remedies available from the agency, [and] of the pres-

ence or absence of harm pendente lite.’’ Susquehanna,

App. 24

619 F.2d at 246. However, the Third Cireuit has held

that a Rule 12(b) motion to dismiss is not the appropriate

means for securing such an analysis. /d.

Motion for Summary Judgment

The defendants contend that the plaintiffs’ present

action should be barred by the judge-made doctrine ef

exhaustion of administrative remedies. We have earlier

discussed the three generally held waivers to this doctrine.

Two of the three waivers clearly do not apply. First,

irreparable injury is not an inevitable outcome of follow-

ing administrative guidelines. The injuries envisioned

by the plaintiffs, litigation expenses and loss of business

are the normal cost of litigation. Such cost has been held

not to be ‘irreparable injury’, J/yers, supra at 51. Second,

resorting to administrative remedies would not be futile,

as the plaintiff could raise any defenses, including that of

res judicata and collateral estoppel in an administrative

hearing and on appeal. Further, it appears that the plain-

tiffs would not become ineligible to work on Department

of Labor projects until after a final ageney decision.

A third waiver could apply here, ‘*‘when the challeng-

ed agency action presents a clear and unambiguous vio-

lation of statutory or constitutional rights .. .’? Susque-

hanna, 619 F.2d at 245. When the procedure itself is

alleged to be violative of a constitutional right, exhaus-

tion has not been required. Babcock and Wilcox Co. v.

Marshall, 610 F.2d 1128, 1138 (3d Cir. 1979). For example

when the administrative procedure would subject ‘‘a party

tc ‘vexations and harassing’ prosecution by refusing to

apply collateral estoppel.’’ Babcock v. Wilcox, 610 F.2d

App. 25

at 1138, citing Continental Can Co., U.S.A. v. Marshall,

603 F.2d 590, 596 (7th Cir. 1979).

Whether the plaintiff's res judicata and collateral

estoppel arguments are valid depends on whether DOL

was bound by the prior HUD action. The plaintiffs con-

tend that the HUD debarment was based upon Section

7(1)(38) of Poliey Letter No. 82-1 issued by the Office of

Federal Procurement Policy. This letter was subse-

quently incorporated within 48 C.F.R. 9.4 et seq. Debar-

ments of contractors under this section are ‘‘effective

throughout the executive branch of the Government. . .’’

48 C.F.R. 9.406-1(c).

Neither the plaintiff nor the defendant have provided

case law to support their reading of agency debarment

policy. However, from the language of the regulation it

appears that 48 C.F.R. 9.4 et seq. refers to federal pro-

curement contracts. A contractor is defined by that requ-

lation as an individual or entity which:

(a) submits offers for, is awarded, or reason-

ably may be expected to submit offers for or be

awarded a Government contract or a_ subcontract

under a Government contract or

(b) eonducts business with the Government as

an agent or representative of another contractor.

48 C.F.R. 9.403.

So that all agencies will be aware of the debarment

of procurement contractors, the General Services Admin-

istration (GSA) is required to ‘‘[c]ompile and maintain

a current consolidated list of all contractors debarred,

suspended, or declared ineligible by agencies or by the

App. 26

General Accounting Office .. .’’? 48 C.F.R. 9.404(1) (1).

Facchiano Construction Company was not placed on such

a list. U.S. G.S.A. Consolidated List of Debarred, Sus-

pended and Ineligible Contractors, October 1986.

While 48 C.F.R. 9.4 may facially appear to be across

the board in applieation, the language of 9.406-1 limits

it applicability to debarments ‘‘for any of the causes

in 9.406-2, using the procedures in 9.406-3."’ 48 C.F.R.

9.406-1. The regulation defines debarment for its pur-

poses as an ‘‘action taken by a debarring official under

9.406 ...’? 48 C.F.R. 9.403. The regulation does not state

that ‘‘any’’ debarment by an ageney has government-

wide effect, merely that those actions taken under 9.406

have such affect.

The record here demonstrates that Faeciano (sic) Cor-

poration was debarred from participating in federal assis-

tance programs under HUD. Federal assistance programs

appear not to be covered under 48 C.F.R. 9.4 et seq. ‘*This

subpart does not apply to recipients of Federal assist-

anee.’? 48 C.F.R. 9.401. Subsequent to the HUD pro-

ceeding, in February 1986, the President signed an Execu-

tive Order authorizing the issuance of guidelines which

would provide that a debarment from an agency’s fed-

eral assistance program would work to bar the violator

from any other federal agency’s assistance program. The

(ffice of Management and Budget (OMB) set forth on

May 29, 1987, ‘‘Guidelines for Nonprocurement Debar-

ment and Suspension.’’ 52 Fed. Reg. 20360, No. 103, Doc.

84-12517. These guidelines are ‘‘similar to that eur-

rently in effect for procurement’? contracts. /d. It is

clear that nonprocurement contracts which include ‘‘both

App. 27

direct assistance [e.g., grants, cooperative agreements,

scholarships, and fellowships] as well as indirect bene-

fits [e.g., insurance and loan guarantees]’’, Jd., were not

covered by the guidelines of 48 C.F.R. 9.4 et seq.

The plaintiffs were debarred under a HUD pro-

ceeding which limited the debarment to HUD funded

projects. The applicable HUD regulation defines ‘‘de-

barment’’ in pertinent part as ‘‘exclusive from a partici-

pation in HUD programs .. .’’? 24 CFR 24.4(a) Further,

the HUD proceeding was based on the narrow fact situ-

ation ef Facchiano Construction Co. and Michael Fae-

ehiano Jr’s, criminal convictions for mail fraud. The

DOL proceeding is based on the issue of the plaintiffs’

violations of the Davis-Bacon Act, 29 C.F.R. 5.1 et seq.

If the Secretary of Labor finds a violation of Davis-Bacon

the subsequent debarment not only suspends the offending

contractor from contracts with the DOL, but also with

all other government agencies. 29 C.F’.R. 5.12(a) (2) states:

In cases arising under contracts covered by the

Davis-Bacon Act, the Administretor shall transmit to

the Comptroller General the names of the contractors

who have been found to have disregarded their

obligations to employees, and the recommendation of

the Secretary of Labor or authorized representative

regarding debarment. The Comptroller General will

distribute a list to all Federal agencies giving the

names of such ineligible person or firms, who shall

be ineligible to be awarded any contract or subcon-

tract of the United States...

It appears from this reading of the regulations that

there is an insufficient relationship between the debar-

ment proceeding brought by HUD, and the proceeding by

App. 28

DOL which the plaintiffs seek to enjoin. The only simi-

larities shown are that Facchiano Construction Company

was the defendant, an agency of the federal government

was involved, and that Facchianos’ violations of the

Davis-Bacon Act underlay the Agency actions. However,

important differences remain. The HUD action only,

and could have only, debarred Faecchiano from HUD con-

tracts, while the DOL action would have government-

wide effect. Further, the HUD action was based on a

criminal conviction, the result of Davis-Bacon violations;

the DOL action is based on the Davis-Bacon violations

themselves. For the foregoing reasons, the plaintiff’s

elaim for injunctive relief should be denied.

Summary judgment is appropriate where there no (sic)

material factual issues in dispute, and the movant is en-

titled to judgment as a matter of law. Disabled in Action

v. Sykes, F.2d (3d Cir. No. 87-1021, filed November 23,

1987.) Because there are no material factual issues in

dispute, and because it appears as a matter of law that

judgment in favor of the defendants is appropriate, it is

respectfuliy recommended that the defendants’ motion for

summary judgment be granted.

Respectfully submitted,

/s/ Ropert C. MrrcHeLui

ROBERT C. MITCHELL

United States Magistrate

Dated: December 16, 1987

App. 29

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF

PENNSYLVANIA

MICHAEL FACCHIANO, )

JR., et al., )

)

Plaintiffs, )

) Civil Actio::

v. ) No. 86-2711

)

THE UNITED STATES )

DEPARTMENT OF LABOR, et al., )

)

Defendants. _)

ORDER

AND NOW, this 16th day of Dec., 1987, the Magis-

trate’s Report and Recommendation having been filed,

IT IS ORDERED that the plaintiff shall have ten

(10) days in which to file objections to said Report and

Recommendation. Failure to file timely objections may

constitute a waiver of any appellate rights.

/s/ Rosert C. MircH eu

ROBERT C. MITCHELL

United States Magistrate

ec: ALBERT W. ScHOLLAERT, EisQuIRE

Assistant U.S. Attorney

633 U.S. Post Office & Courthouse

Pittsburgh, PA 15219

Tomas A. Berret, EsQuire

Meyer, Unkovic anp Scorr

1300 Oliver Bldg.

Pittsburgh, PA 15222

App. 30

ALFRED J. FisHsEr, Jr., ESQUIRE

US Department of Labor

Office of the Solicitor

30359 Market Street

Philadelpnia, PA 19104

App. 31

APPENDIX D

CONTRACT WORK HOURS AND SAFETY

STANDARDS ACT, 40 U.S.C. ¢ 327, et seq.

% a *

§ 328. Forty hour week; overtime compensation; con-

tractural conditions; liability of employers for

violations; withholding funds to satisfy labilities

of employers

(a) Notwithstanding any other provision of law, the

wages of every laborer and mechanic employed by any

contractor or subeontractor in his performance of work

on any contract of the character specified in section 329

of this title shali be computed on the basis of a standard

workweek of forty hours, and work in excess of such stan-

dard workweek shall be permitted subject to provisions of

this section. For each workweek in which any such laborer

or mechanic is so employed such wages shall include com-

pensation, at a rate not less than one and one-half times

the basie rate of pay, for all hours worked in excess of

forty hours in the workweek.

§ 329. Contracts subject to this subchapter; workers

covered; exceptions

(a) The provisions of this subchapter shall apply,

except as other wise provided, to any contract which may

require or invelve the employment of laborers or me-

chanics upon a public work of the United States, of any

territory, or of the District of Columbia, and to any other

contract which may require or involve the employment of

laborers or mechanics if such contract is one (1) to which

the United States or any agency or instrumentality there-

of, any territory, or the District of Columbia is a party,

or (2) which is made for or on behalf of the United States,

App. 32

any agency or instrumentality thereof, any territory, or

the District of Columbia, or (5) which is a contract for

work financed in whole or in part by loans or grants

from, or loans insured or guaranteed by, the United States

or any agency or instrumentality thereof under any stat-

ute of the United States providing

& a *

DAVIS-BACON ACT, 40 U.S.C. 6 276a, et seq.

. s 3

§ 276a-1. Termination of work on failure to pay agreed

wages; completion of work by Government

w * *

Every contract within the scope of sections 276a to

276a-5 of this title shall contain the further provision that

in the event it is found by the contracting officer that any

laborer or mechanic employed by the contractor or any

subeontractor directly on the site of the work covered by

the contract has been or is being paid a rate of wages less

than the rate of wages required by the contract to be paid

as aforesaid, the Government may, by written notice to the

contractor, terminate his right to proceed with the work

or such part of the work as to which there has been a

failure to pay said required wages and to prosecute the

work to completion by contract or otherwise, and the con-

tractor and his sureties shall be liable to the Government

for any excess costs occasioned the Government thereby.

§ 276a-2. Payment of wages by Comptroller General from

withheld payments; listing contractors violating

contracts

(a) The Comptroller General of the United States is

authorized and directed to pay directly to laborers and

mechanics from any accrued payments withheld under the

terms of the contract any wages found to be due laborers

App. 33

and mechanics pursuant to sections 276a to 276a-5 of this

title; and the Comptroller General of the United States is

further authorized and is directed to distribute a list to all

departments of the Government giving the names of per-

sons or firms whom he has fourd to have disregarded

their obligations to employees and subcontractors. No

contract shall be awarded to the persons or firms appear-

ing on this list or to any firm, corporation, partnership,

or association in which such persons or firms have an

interest until three vears have elapsed from the date of

publication of the lst containing the names of such per-

sons or firms.

* * *

DEPARTMENT OF HOUSING AND URBAN DE-

VELOPMENT, DEBARMENT, SUSPENSION AND

INELIGIBILITY OF CONTRACTORS AND GRANT-

EES; ADMINISTRATIVE SANCTIONS, 24 C.F.R.

§ 24.0, et seq.

* * o

$24.5 General.

(a) Officials who may wmitiate debarment. Any De-

barring Official may initiate debarments. No debarmeut

may be initiated against HUD-FHA approved mortgagees,

however, without approval of the Mortgagee Review

Board. A Debarring Official, acting in the public interest,

may debar a participant or contractor for any cause set

forth in § 24.6. In each case, even if the offense or viola-

tion is of a criminal, fraudulent or other serious nature,

the decision to initiate debarment shall be within the dis-

eretion of the Debarring Official and in the best interests

of the Government.

* « *

Debarment may be imposed in accordance with the

provisions of §§ 24.5 and 24.7 for:

App. 34

(a) Conviction. Conviction of, or civil judgment for,

any offense indicating lack of business integrity or hon-

esty which affects the present responsibility of a con-

tractor or participant, including but not limited to:

(1) Fraud or a criminal offense in connection with

obtaining, attempting to obtain, or performing a public

or private agreement;

(2) Bribery, embezzlement, false claims, false state-

ments, falsification or cestruction of records, forgery,

obstruction of justice, receiving stolen property, or theft;

(3) Unlawful price fixing between competitors, allo-

eation of customers between competitors, bid rigging, or

any other violation of Federal or State antitrust laws that

relates to the submission of bids or proposals.

* ca *

(1) Debarment or equivalent exclusionary action by

any public agency or instrumentality for causes substan-

tially the same as provided for in § 24.6;

* * a

(3) Conduct indicating a lack of business integrity

or honesty which affects the present responsibility of a

contractor or participant;

(4) Loss or denial of the right to do business or prac-

tice a profession under circumstances indicating a lack of

business integrity or honesty or otherwise affecting the

present responsibility of a contractor or participant;

* * *

(12) Making or causing to be made any false state-

ment for the purpose of influencing in any way an action

of the Government; or

App. 35

(13) Any other cause determined by a Debarring

Official to be of so serious or compelling a nature that it

affects the present responsibility of a contractor or par-

ticipant.

. * *

$24.8 Effect of debarrment.

(a) Contractors. In addition to exclusion from direct

or indirect participation in HUD programs, a contractor’s

debarment from procurement shall be effective through-

out the Exeeutive Branch of the Government, in accord-

ance with 48 CFR 9.406-1(¢), unless a contracting agency’s

head, or designee, states in writing the compelling rea-

sons justifying continued business dealings between that

agency and the contractor.

(b) Participants. A participant’s debarment is limit-

ed to direct or indirect participation in HUD programs.

Such participation includes receipt of any direct or indi-

rect benefit or financial assistance through grant or con-

tractual arrangements; direct or indirect benefit or assist-

ance in the form of loan guarantees or insurance; and

award of procurement contracts, notwithstanding any quid

pro quo given or whether the Department gives anything

in return.

) 24.11 Scope of debarment.

(a) Scope in general. (1) Debarment of a person or

affiliate under this part constitutes debarment of all its

subsidiaries, divisions, and other organizational elements

unless the debarment decision is limited by its terms to

one or more specifically identified individuals or organi-

zational elements or to specific types of agreements.

App. 36

(2) Conduct imputed to individuals associated with

participant. The fradulent, criminal, or other seriously

improper conduct of a contractor or participant may be

imputed to any officer, director, shareholder having a 10

percent or greater interest, partner, employee, or other

individual associated in a business context with the con-

tractor or participant who participated in, knew of, or had

reason to know of the contractor’s or participant’s con-

duct.

§ 24.31 The consolidated list of debarred, suspended, or

ineligible contractors.

(a) The Inspector General shall compile and trans-

mit to the General Services Administration (GSA) a list

of all contractors debarred, suspended, or declared inel-

igible by the Department.

* . 7

§ 24.34 Effect of sanctions.

(a) Consolidated list—(1) Debarred or suspended

contractor. Debarred or suspended contractors who are

included on the Consolidated List are excluded from re-

ceiving contracts, and HUD shall not solicit offers from,

award contracts to, or consent to subcontracts with, these

contractors, unless the Secretary or designee determines

in writing that there is a compelling reason for such ac-

tion.

ee =

App. 37

DEPARTMENT OF LABOR, LABOR STANDARDS

PROVISIONS APPLICABLE TO CONTRACTS COV-

ERING FEDERALLY FINANCED AND ASSISTED

CONSTRUCTION, 29 C.F.R. $5.1, et seq.

2 a 2

§ 5.5 Contract provisions and related matters.

* * *

(3) Payrolls and basic records.

(i1)(A) The contractor shall submit weekly for each

week in which any contract work is performed a copy of

all payrolls to the (write in name of appropriate Federal

agency) if the agency is a party to the contract, but if the

agency is not such a party, the contractor will submit the

payrolls to the applicant, sponsor, or owner, as the case

may be, for transmission to the (write in name of agency).

The payrolls submitted shall set out accurately and com-

pletely all of the information required to be maintained

under § 5.5(a)(3) (1) of Regulations, 29 CFR Part 5. This

information may be submitted in any form desired.

(B) Each payroll submited shall be accompanied by

,°

a ‘‘Statement of Compliance,’’ signed by the contractor

or subcontractor or his or her agent who pays or super-

vises the payment of the persons employed under the con-

tract and shall certify the following:

(1) That the payroll for the payroll period contains

the information required to be maintained under § 5.5(a)-

(3)(1) of Regulations, 29 CFR Part 5 and that such infor-

mation is correct and complete;

(2) That each laborer or mechanic (ineluding each

helper, apprentice, and trainee) employed on the contract

during the payroll period has been paid the full weekly

App. 38

wages earned, without rebate, either directly or indirectly,

and that no deductions have heen made either directly or

indirectly from the full wages earned, other than permis-

sible deductions as set forth in Regulations, 29 CFR

Part 3;

(3) That each laborer cr mechanic has been paid not

less than the applicable wage rates and fringe benefits or

eash equivalents for the classification of work performed,

as specified in the applicable wage determination incor-

porated ito the contract.

certification set forth on the reverse side of Optional Form

WH-347 shall satisfy the requirement for submission of

the ‘‘Statement of Compliance’’ required by paragraph

(a)(3)(11)(B) of this section.

(D) The falsification of any of the above certifica-

tions may subject the contractor or subcontractor to civil

or criminal prosecution under section 1001 of Title 18 and

section 231 of Title 31 of the United States Code.

o * -

,5.12 Debarment proceedings.

(a)(1) Whenever any contractor or subcontractor is

found by the Secretary of Labor to be in aggravated or

willful violation of the labor standards provisions of any

of the applicable statutes listed in $5.1 other than the

Davis-Bacon Act, such contractor or subeontractor or any

firm, corporation, partnership, or association in which

such contractor or subcontractor has a substantial interest

shall be ineligible for a period not to exceed 3 years (from

the date of publication by the Comptroller General of the

App. 39

name or names of said contractor or subcontractor on the

ineligible list as provided below) to receive any contracts

or subcontracts subjeet to any of the statutes listed in § 5.1.

(2) In eases arising under contracts covered by the

Davis-Bacon Act, the Administrator shall transmit to the

Comptroller General the names of the contractors or sub-

contractors and their responsible officers, if any (and any

firms in which the contractors or subcontractors are

known to have an interest), who have been found to have

disregarded their obligations to employees, and the recom-

mendation of the Secretary of Labor or authorized repre-

sentative regarding debarment. The Comptroller General

will distribute a list to all Federal agencies giving the

names of such ineligible persons er firms, who shall be

ineligible to be awarded any contract or subcontract of

the United States or the District of Columbia and any con-

tract or subeontract subject to the labor standards pro-

visions of the statutes listed in § 5.1.

a * «

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.