Petition for Writ of Certiorari — Bank of Jackson County v. Cherry

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92- 1895 APR 12 1993

CASE NO.:

OFFICE OF THE CLERK

IN THE SUPREME COURT OF THE UNITED STATES

October 1992 Term

BANK OF JACKSON COUNTY,

Petitioner,

vs.

L. JAMES CHERRY and RAYMOND G. NAEYAERT,

Respondents.

Petition for Writ of Certiorari

to the United States Court of Appeals

for the Eleventh Circuit

PETITION FOR WRIT OF CERTIORARI

JERRY W. GERDE

Counsel of Record for Petitioner

JOHNSTON, HARRIS, GERDE & JELKS, P.A.

239 East Fourth Street

Panama City, FL 32401

(904) 763-8421

On tlie

Petition: MICHEL L. STONE

PAMELA DRU SUTTON

STONE & SUTTON, P.A.

116 East Fourth Street

Panama City, FL 32401

(904) 785-7272

QUESTIONS PRESENTED FOR REVIEW

Whether The First Amendment Right To

Petition The Government For Redress

Of Grievances Clearly Forbids

Officials Of The Farmers Home

Administration (FmHA) From Debarring

The Bank Without Due Process Of Law

From Participating In FmHA Loan

Guarantee Programs, When The Purpose

Of The Debarment Is To Force The

Bank To Abandon Or Compromise Its

Position In A Civil Dispute With The

FmHA

Whether The Debarment Of The Bank

Without Due Process Of Law From

Further Participation In FmHA Loan

Guarantee Prograns, Coupled With

Allegations Of Dishonest or

Fraudulent Conduct, Infringes A

Clearly Established, Protected

Liberty Interest

Whether The Bank’s Right To Compete

On An Equal Footing With Others For

FmHA Loan Guarantees Is A Clearly

Established Property Interest Which

Cannot Be Extinguished Without Due

Process Of Law

cel ll

LIST OF ALL PARTIES

Pursuant to Supreme Court Rules

14.1(b) and 29.1, Petitioner states that

all persons and entities who were parties

to the judgment whose review is here

sought are named in the caption, and that

the Bank of Jackson County has no parent

or subsidiary corporation.

iii

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW .. . i

LIST OF ALL PARTIES ... «+ 2 e« e iii

TABLE OF CONTENTS .. + +« «© © e « « iv

TABLE OF CITATIONS .. ++ «6 « « « vii

REPORTS OF OPINIONS BELOW ...... 1

GROUNDS ON WHICH JURISDICTION

pot ¢ -) 2

CONSTITUTIONAL PROVISIONS, STATUTES

AND REGULATIONS INVOLVED . . 3

STATEMENT OF THE CASE ...... .-~ 13

I. FACTUAL BACKGROUND ... . 13

II. COURSE OF PROCEEDINGS AND

DISPOSITION BELOW... . 22

BASIS FOR FEDERAL JURISDICTION

oe a a ee ee ee er ee 26

ARGUMENT .... . 27

POINT I: The First Amendment Right To

Petition The Government For

Redress Of Grievances Clearly

Forbids Officials Of The

Farmers Home Administration

(FmHA) From Debarring The Bank

Without Due Process Of Law From

Participating In FmHA Loan

Guarantee Programs, When The

Purpose Of The Debarment Is To

POINT II:

Force The Bank To Abandon Or

Compromise Its Position In A

Civil Dispute With The

Pe. oe ae Ok ee te oe oe aT

The Debarment Of The Bank

Without Due Process Of Law From

Further Participation In FmHA

Loan Guarantee Programs,

Coupled With Allegations Of

Dishonest Or Fraudulent

Conduct, Infringes A Clearly

Established, Protected

Liberty Interest .... 39

POINT III: The Bank’s Right To Compete On

An Equal Footing With Others

For FmHA Loan Guarantees Is A

Clearly Established Property

Interest Which Cannot Be

Extinguished Without Due

Process Of Law ..... 56

soo BY (+ a 65

CERTIFICATE OF SERVICE ...... 67

Cases Page

Anderson v. Creighton, 483 U.S. 635

(1987) . * o - . - 7 . . . . 7. 7 37

Arrow Air, Inc. v. United States,

649 F. Supp. 993 (D.D.c. 1986) . 42

Art Metal-U.S.A., Inc. v. United States,

7ee F.26.i1i8% (8.¢. Gak«

1985) a a oe ee ee ee ee 59, 60

ATL, Inc. v. United States, 736 F.2d

677 (2G ...Cahs: aoe) 60624 ee Oo 42

Bank of Jackson County v. Cherry, 980

F.2d 1354 (11th Cir.

SOR a ike ot ele ee ee ee

Bank of Jackson County v. Cherry, 980

F.2d 1362, (11th Cir. 1993)

(om TOROGFANG) 2. « © + © « we ew A,

2, 25, 29, 31, 34, 36, 43, 65

Bartel v. Federal Aviation

Administration, 725 F.2d 1403 (D.C.

Gat. ae hoe 6 eee 42

Berlanti v. Bodman, 780 F.2d 296

(38 City 30s «2s eee ee Oe

Bishop v. Wood, 426 U.S. 341,

96 S.Ct. 2074, 48 L.Ed.2d

684 (1976) . «© = © © = © © © © © 44

Bivens v. Six Unknown Named Agents of the

Federal Bureau of Narcotics, 403

U.S. 388, 91 S.Ct. 1999, 29

L.Ed.2d 619 (1971) . 22, 26, 30, 65

Board of Regents v. Roth, 408 U.S. 564

Se. a Ue ee oe ee ee a ee eet

Boyd v. Adams, 518 F.2d 83 (7th Cir.

| SS eee ee

Conset Corporation v. Community Services

Administration, 655 F.2d 1291 (B.C.

ee NSS bo ew ee oe es ee ee - 42

DeLoach v. Bevers, 922 F.2d 620 (10th

Cir. 1990) a an ae” et ce et Se ek 23

Doe v. United States Department of

Justice, 753 F.2d 1092

fiets Care S905) . « « wt te 25

Gonzalez v. Freeman, 334 F.2d 570

(D.C. Cir. 1964) . 32, 57, 58, 60-63

Green v. Brantley, 719 F. Supp. 1570

(a rs er. ww ey 6 Ce 6) se we | OS

Haynesworth v. Miller, 820 F.2d 1245

eee ee hk Ki ee

Larry v. Lawler, 605 F.2d 954 (7th

ee, | eT

Losch v. Borough of Parkesburg, 736

Pome Sea (26 Cir. 2904) ...- 38

Lusby v. T.G.& Y. Stores, Inc., 749 F.2d

1423 (10th Cir. 1984), vacated for

reconsideration, ---U.S.---, 106

ee | a

MacDonald v. Musick, 425 F.2d 373 (9th

vii

Cir.), cert. denied, 400 U.S.

Sue tauren. «+ «4 © we Se Se 30

Mainelli v. United States, 611 F. Supp.

606 (D.R.I. 1985) ’* © « «6 « « 42

Matzker v. Herr, 748 F.2d 1142

(7th Cir. 1984) ‘<= “es oes oe

Mosrie v. Barry, 718 F.2d 1151 (D.C.

Cit. Reel « os we ewe eS ees

Myers & Myers, Inc. v. United States

Postal Service, 527 F.2d 1252

(2G Cat. BETS) 2 se st we th eh wlC SOU

NAACP v. Button, 371 U.S. 415 (1963) 27

Norwell v. City of Cincinnati, 414 U.S.

14 (1973) * * ° * - * * o ° . . * + * 35

Old Dominion Dairy Products, Inc. v.

Secretary of Defense, 631 F.2d

953 (D.C. Cir. 1980)

o © « © « 39-41, 43-45, 51, 53, 54

Paul v. Davis, 424 U.S. 693 (1976) . 41

Perkins v. Lukens Steel Co., 310 U.S.

113, 60 S.Ct. 869, 84 L.Ed. 1108

PR a oe ae, oe eee we ee sw

Peter Kiewit Sons’ Co. v. U.S. Army Corps

of Engineers, 534 F. Supp. 1139

(i 2 See ica c™ & Ts Se Mee tw 48

Sexton v. Ryan, 804 F.2d 26 (2d Cir.

1986) a ee ee ae Se a a ae 36

Shermco Industries, Inc. v. Secretary of

viii

the Air Force, 584 F. Supp. 76 (N.D.

Py Se) 84 esl ke ee we ew «6S

Town Of Newton v. Rumery, ---U.S.---,

107 S.Ct. 1187 (1987) ... 30, 31

Transco Securities, Inc. v. Freeman,

639 F.2d 318 (6th <7 ke

cert. denied 454 U.S. 820

Eo 8 Be or a Gey eee * |

UMW v. Illinois State Bar Ass’n, 389

U.S. 217 (1967) . 2 ® . -— «2 aa ae

Wayte v. United States, 470 U.S. 598

[owes se Ss oe ew el, 8

U.S. Constitution Page

U.S. CONST. amend. I Je £23, 27, 29, 30,

24, 36, 38

U.S. CONST. amend. V ..... a; an, 43

Statutes Page

Dewees ORC EN cs & bs 6 6 ee te 7 ee 8

Pe woretne CR yo » 6 6 ¢ + © & « 26

ee emrenee OE BOOS -% soe ee ee 26

28 U.S.C. §§ 1346(b), 2671-2680 -o « 3

28 U.S.C. §§ 2201 and 2202 ..... +4226

OE re > |

42 U.S.C. § 2432 « « w= se sven e se £6

Regulations Page

7 C.F.R. Ch. XVIII, Part 1924,

Subpart E, §§ 1924.201-1924.220

(1988) > 7 2 >. a . a . > - _ - 4, ae

7, 9, 18, 32. 36. 44

7 C.F.R. Ch. XVIII, Part 1980,

Subpart A, §§ 1980.1-1980.100

PO an ak a ac ye Oo ae eh earl See 29

Other Authorities Page

Comment, “Moving Toward a Better-Defined

Standard of Public Interest in

Administrative Decisions to Suspend

Government Contractors," 36 Am. U.

L. Rev. 693 (1987) . «©. «© «© © « « 42

Note, "Government Contracts -

Nonresponsibility Determinations -

The Federal Government Violates a

Contractor’s Due Process Liberty

Interest by Failing to Provide Prior

Notice and an Opportunity to Rebut

Charges Contained in

Nonresponsibility Determinations

Based on Lack of Integrity; Old

Dominion Dairy Products, Inc. v.

Secretary of Defense, 631 F.2d 953

(D.C. Cir. 1980)," 50 Geo. Wash. L.

Rev. 9O (i9@1) . «© «= © «© «© ome « 42

. cil

REPORTS OF OPINIONS BELOW

Opinions of the Eleventh Circuit

Court of Appeals herein are reported at:

1. Bank of Jackson County v.

Cherry, 980 F.2d 1354 (11th

Cir. Fla. 1992) (originally

reported at 966 F.2d 1406);

2. Bank of Jackson County v.

Cherry, 980 F.2d 1362 (11th

Cir. Fla. 1993) (on rehearing).

GROUNDS ON WHICH JURISDICTION INVOKED

Jurisdiction is invoked to review

the judgment on rehearing of the Eleventh

Circuit Court of Appeals, entered January

11, 1993. Bank of Jackson County v.

Cherry, 980 F.2d 1362. That opinion

replaced an earlier 2-1 opinion rendered

by the same panel and later withdrawn,

980 F.2d 1354.

The discretionary certiorari

jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1). The decision

conflicts with decisions of other United

States court of appeals on the same and

similar matters. The decision treats

important federal constitutional

questions in a way that conflicts with

applicable decisions of this Court or

deals with questions that have not been,

but should be, settled by this Court.

CONSTITUTIONAL PROVISIONS, STATUTES

AND REGULATIONS INVOLVED

I. U.S. CONST. amend. I:

Congress shall make no law

respecting an establishment of

religion, or prohibiting the free

exercise thereof; or abridging the

freedom of speech, or of the press;

or the right of the people peaceably

to assemble, and to petition the

government for a redress of

grievances.

II. U.S. CONST. amend. Vv:

No person shall be held to

answer for a capital, or otherwise

infamous, crime, unless on a

presentment or indictment of a grand

jury, except in cases arising in the

land or naval forces, or in the

militia, when in actual service, in

time of war, or public danger; nor

shall any person be subject, for the

same offence, to be twice put in

jeopardy of life or limb; nor shall

be compelled, in any criminal case,

to be a witness against himself; nor

be deprived of life, liberty, or

property, without due process of

law; nor shall private property be

taken for public use, without just

compensation.

III. 7 C.F.R. Ch. XVIII, Part 1924,

Subpart E, §§ 1924.201-1924.220 (1988),

governs suspension and debarment

proceedings undertaken by the Farmers

Home Administration. The most pertinent

provisions are here set out verbatim:

§ 1924.201 Purpose.

This subpart prescribes the

action to be taken by the Farmers

Home Administration (FmHA) when

there is need for administrative

action against any person, or any

representative or affiliate thereof.

§ 1924.202 Policy and scope.

This subpart applies to both

individual--and group-type loans or

grants in connection with any

program administered by FmHA. Any

action to be taken under this

subpart is to be corrective or for

the protection of the public

interest.

§ 1924.203 Definitions.

(a) Person. For the purposes

of this subpart a person is an

individual, unincorporated

association, trust, corporation,

partnership, or other entity, such

aS a purchaser, builder, contractor,

dealer, supplier, manufacturer,

realtor, surety, insurance company,

broker, packager, salesman, escrow

agent, sales agent, lender, holder,

engineer, architect, inspector, or

attorney, or any representative,

affiliate, or successor in interest

thereof.

(b) Debarment. Debarment is

the exclusion from participation in

any FmHA program for a reasonable

period of time commensurate with the

seriousness of the person’s offense

or failure, or the inadequacy of his

performance.

the temporary disqualification from

FmHA programs in conjunction with

debarment proceedings.

x & &

§ 1924.213 Sanctions.

(a) General. Debarment and

suspension are drastic actions which

may severely affect the economic

well-being of the persons debarred

or suspended. They shall not be

based upon an unsupported

accusation. In assessing whether

adequate evidence exists for

invoking this procedure,

consideration should be given to the

amount of credible evidence which is

available, to the existence or

absence of corroboration as to

important allegations, as well as to

the inferences which may be properly

drawn from the existence or absence

of affirmative facts.

(b) Debarment. Debarment may

be imposed by the State Director,

for a specified period of time,

generally not to exceed 3 years, |

except in more serious cases. |

Debarment may also be imposed for an |

indefinite period of time, pending

correction of the conditions which |

led to the debarment.

may be temporarily imposed by the

State Director pending the debarment

determination only when immediate

action is necessary to protect the

interest of the FmHA and its program

borrowers or grantees. The

interests of the person to be

suspended must be reasonably deemed

to be of less importance than that

of FmHA or its program participants.

Suspension must be based on adequate

evidence supporting at least one of

the grounds listed under § 1924.214.

When a debarment determination

adverse to the person is appealed,

suspension also may be imposed for

the appeal period only.

x = &

Iv. 7 C.F.R. Ch. XVIII, Part 1980,

Subpart A, §§ 1980.1-1980.100 (1988),

contains general regulations applicable

to the FmHA’s guaranteed loan programs.

Particularly pertinent here are the

following:

x * &

§ 1980.6 Definitions and

abbreviations.

x * *

(a)(14) Lender. The person or

organization making and servicing

the loan or advancing and servicing

the line of credit which is

guaranteed under the provisions of

the appropriate Subpart. The lender

is also the party requesting a

guarantee.

kx *& &

§ 1980.13 Eligible lenders.

x * &*

(b) An eligible lender is:

Any Federal or State chartered bank,

Federal Land Bank, Production Credit

Association, Bank for Cooperatives,

Savings and Loan Association,

Building and Loan Association,

mortgage company that is a part of a

bank-holding company, or an

insurance company that is regulated

by the National Association of

Insurance Commissioners. The above

entities must be subject to credit

examination and supervision by

either an agency of the United

States or a State. * * * Only

those lenders listed in this

paragraph are eligible to make and

service guaranteed loans and such

lender must be in good standing with

its licensing authority and has

[sic] met licensing, loanmaking,

loan servicing, and other

requirements of the State in which

the collateral will be located, and

the loanmaking and/or loan servicing

office requirements in paragraph

(b)(3) of this section. A lender

must have the capability to

adequately service the loan for

which a guarantee is requested.

(5) Debarment. See Part 1924,

Subpart E of this chapter.

x k& |

STATEMENT OF THE CASE

1. ¥fRCTOAL BACKGROUND

The Bank of Jackson County

[hereinafter "the Bank" or "BJC"] ie

small Northwest Florida state-chartered

bank since 1934, with offices in

Graceville and Marianna, Florida,

participated as an eligible lender in

Farmers Home Administration programs

since 1980. Twenty to twenty-five

percent of its outstanding loans were

agricultural. From 1984 through June

1988, the FmHA had guaranteed Bank of

Jackson County loans and lines of credit

totalling $1,065,990.95.

Defendant L. James Cherry was the

Florida State Director of the Farmers

Home Administration [hereinafter FmHA]

since 1985 (except for the period June

22, 1988 to December 1, 1988). As such,

he has authority over all FmHA operations

in Florida. Previously, he worked for

the FmHA in Washington, D.C. He was

admitted to the Florida bar in 1972 and

practiced law in Florida before his

employment with the FmHA. Defendant

Raymond G. Naeyaert was Florida Chief of

Farmer Programs, second only to Cherry in

all matters concerning farmers and

farming in Florida, since the early

1980s, and worked for the FmHA since

1978.

Throughout the 1980s, the Bank of

Jackson County and the FmHA had an on-

going business relationship, which

included co-participation in loans to

farmers, the Bank’s issuance of loans to

farmers guaranteed by FmHA, and the Bank

serving as a depository for the FmHA’s

treasury limited account.

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In 1982, a dispute arose between the

Bank and FmHA concerning the distribution

of funds collected for the sale of cows

repossessed from the Ferrises, dairy

farmers in Graceville, Florida, who had

borrowed money from both lenders. For

approximately four years, up to July 15,

1986, the parties attempted but were

unable to resolve the dispute over how

these funds should be divided. Between

July 15, 1986 and April 15, 1988, there

was no communication, oral or written,

between the BJC and FmHA or its agents,

concerning the Ferris cow proceeds

dispute. During this period, the Bank

and FmHA engaged, amicably, in numerous

loan transactions. Defendants Cherry and

Naeyaert were aware of no problems in

FmHA’s working relationship with the Bank

other than the dispute over the

distribution of the Ferris cow proceeds.

On April 14, 1988, Defendant

Naeyaert was present at the Holmes

County, Florida FmHA office. From his

county supervisor, J. Aubrey Sapp, he

learned of the imminent issuance of a

conditional commitment on a loan

guarantee to the Bank on a loan to. farmer

Adron Miller. Naeyaert told Sapp that

FmHA “shouldn’t be working with them

[i.e., the Bank]" because of "past

business dealings on Elmer and Shirley

Ferris." He instructed Sapp not to

issue the conditional commitment on the

Miller loan and not to issue "anything on

- « « any other case to [the] Bank of

Jackson County." The next day, Sapp

phoned Bank vice president Heisler and

informed him of Naeyaert’s instructions.

The commitment was subsequently issued to

a different bank.

On June 10, 1988, the Bank received

a letter dated June 1, 1988, from Cherry

(drafted by Naeyaert), terminating the

business relationship with the Bank and

announcing that FmHA would not enter into

any further loan guarantees of BJC loans

and would terminate its Treasury Limited

Account at the Bank. The letter cited

the Ferris cow dispute and stated:

We have honestly tried to

negotiate a settlement of this

issue to no avail. You have

steadfastly refused to

negotiate in what we consider

to be good faith.

Cherry and Naeyaert admit that they

did not follow the procedures in the FmHA

debarment and suspension regulations? in

* The general regulations in effect

at that time appear at 7 C.F.R. Ch. XVIII,

Part 1980, Subpart A, §§ 1980.1-1980.100

(continued...)

taking the action embodied in the June i,

1988 letter.

On July 11, 1988, Glenn Walden, then

Acting Director of the Florida FmHA,

signed a letter drafted by Naeyaert to

the Bank, referring to an earlier

settlement offer on the Ferris cow

proceeds dispute, and stating in part:

I am confident that when you

consider the alternatives, you

will agree to a settlement more

in line with what we are able

to accept so we may discontinue

the proposed litigation and

resume normal relations between

the bank and FmHA.

On September 9, 1988, a law suit was

+(...continued)

(1988). The regulations specifically

governing debarment and suspension of

"eligible lenders" and others appear at 7

C.F.R. Ch. XVIII, Part 1924, Subpart E, §§

1924.201-1924.220 (1988). (The

regulations were later amended and

published on April 11, 1989, at 54 Fed.

Reg. 14333.) Pertinent provisions of the

regulations are set forth verbatim at the

outset of this petition.

filed by FmHA against BJC in the United

States District Court for the Northern

District of Florida, Panama City Division

(Case No. 88-50117), alleging the Bank

converted FmHA funds comprising part of

the Ferris proceeds. The suit sought

damages including interest.

On February 28, 1989, Naeyaert

instructed FmHA Jackson County Supervisor

Charles Snell not to approve the Bank’s

application for a guarantee of a

substantial line of credit to Charles M.

Patrick, a Jackson County taxwer.

Naeyaert’s letter cited the existence of

the law suit between the United States

and BJC and the alleged failure of BJC to

negotiate in good faith.

On January 24 and March 1, 1989,

Cherry approved annual renewals of loan

guarantees originally made for three-year

terms, each of which had been entered

into prior to June 1, 1988. In each

case, Cherry stated that the renewal of

the guarantee was an exception to the

policy of not doing business with the

Bank and that that policy remained in

effect.

On May 5, 1989, Thomas W. Wilder,

President of BJC, talked in person with

L. James Cherry about the Ferris cow

litigation, in Marianna, Florida.

Wilder pointed out that Cherry’s action

had resulted in effective debarment of

the Bank from participation in the

guaranteed loan program without the

benefit of the requirements of FmHA’s own

regulations. Cherry responded that, as

soon as the case which FmHA had filed

against the Bank was settled, the Bank

would be reinstated to participation in

the guaranteed loan program.

Already, on account of the

debarment, the Bank had lost at least two

identifiable loans in the Miller ana

Patrick transactions, from which it would

have realized approximately $250,000.00,

because it was unable to command FmHA

loan guarantees.

On April 16, 1990, the U.S. District

Court rendered judgment in accounting in

U.S. v. Bank of Jackson County. The

Court found that FmHA had voluntarily

withdrawn its conversion claim against

the bank. No interest was sought at

trial and none was awarded by the Court.

The judgment for amounts allotted to FmHA

was satisfied by payment tendered twelve

days after the judgment was rendered. on

May 22, 1990, both Cherry and Naeyaert

stated at deposition that their

prohibition against BJC doing business

with the FmHA remained in effect,

notwithstanding the termination of the

litigation and satisfaction of the

judgment.

II. COURSE OF PROCEEDINGS AND

DISPOSITION BELOW

This action was commenced on May 16,

1989, with the filing of a complaint for

damages and for declaratory and

injunctive relief to redress violations

of the Bank’s First and Fifth Amendment

rights due to its debarment, without due

process of law, from the Florida FmHA’s

loan guarantee program. The damages

portion of the suit was brought against

the Florida state director of FmHA and

his chief of farmer programs,

individually, under Bivens v. Six Unknown

Named Agents of the Federal Bureau of

Narcotics, 403 U.S. 388, 91 S.Ct. 1999,

29 L.Ed.2d 619 (1971).

The defendants moved to dismiss or

in the alternative for summary judgment,

claiming, inter alia, qualified immunity.

The court, Hon. Roger Vinson, J., granted

the motion in part as to the Bank’s First

Amendment claim and denied it as to

procedural due process. Order dated

March 20, 1990. [A-77]

On July 19, 1990, the Defendants’

renewed motion to dismiss and for summary

judgment was deemed filed, and on July

23, 1990, the Bank filed its motions for

partial summary judgment on the issue of

permanent injunctive relief and for

partial summary judgment on the issue of

damages liability on the due process

claims.

On May 13, 1991, the court rendered

its Order granting the Bank’s motion for

summary judgment on its claim for

injunctive relief and ordered the

Defendants in their official capacities

to reinstate the Bank as a viable

participant in FmHA programs. [A-25] In

addition, the court granted the

Defendants’ motion for summary judgment

on the individual damages claims. Id.

The court held that the Bank had no

constitutional right to due process, that

the Defendants’ violation of their own

regulations requiring due process was not

actionable for damages, and that, in the

alternative, the individual Defendants

were qualifiedly immune because the

rights at issue were not clearly

established. Judgment accordingly was

entered on May 14, 1991.

An appeal was filed on June 11,

1991. On July 27, 1992, a panel of the

United States Court of Appeals for the

Eleventh Circuit issued its opinion

affirming, 2-1, the finding of qualified

immunity.* Bank of Jackson County v.

Cherry, 980 F.2d 1354 (11th Cir. 1992)

(originally 966 F.2d 1406).

On petition for rehearing, the same

panel adhered to its earlier decision,

amplifying its reasoning somewhat. Bank

of Jackson County v. Cherry, 980 F.2d

1362 (11th Cir., January 11, 1993).

Of this judgment the Bank here seeks

review.

Cherry and Naeyaert did not appeal

the district court’s grant of injunctive

relief requiring the reinstatement of the

Bank aS a “viable participant" in the

Florida FmHA’s guaranteed loan program.

BASIS FOR FEDERAL JURISDICTION BELOW

Jurisdiction in the district court

was premised on 28 U.S.C. §§ 1331, 2201

and 2202, 42 U.S.C. § 2412 (Equal Access

to Justice Act), and the doctrine

enunciated in Bivens v. Six Unknown Named

Agents of the Federal Bureau of

Narcotics, 403 U.S. 388, 91 S.Ct. 1999,

29 L.Ed.2d 619 (1971).

Jurisdiction in the court of appeals

was premised on 28 U.S.C. § 1291, an

appeal as of right from a final order and

judgment that disposed of all claims with

respect to all parties. The appeal was

timely taken, final judgment having been

entered on May 14, 1991, and the notice

of appeal having been filed on June 11,

1991.

ARGUMENT

POINT I: The First Amendment Right To

Petition The Government For

Redress Of Grievances Clearly

Forbids Officials Of The

Farmers Home Administration

(FmHA) From Debarring The Bank

Without Due Process Of Law From

Participating In FmHA Loan

Guarantee Programs, When The

Purpose Of The Debarment Is To

Force The Bank To Abandon Or

Compromise Its Position In A

Civil Dispute With The FmHA

The Bank was indefinitely debarred

in an attempt by Cherry and Naeyaert to

force it to come to heel ina

longstanding dispute over the Ferris cow

proceeds. The purpose was to prevent or

interfere with the Bank’s exercise of its

First Amendment rights, among which is

the right of access to the courts. NAACP

v. Button, 371 U.S. 415 (1963); UMW v.

Illinois State Bar Ass’n, 389 U.S. 217

(1967); Haynesworth v. Miller, 820 F.2d

12463 (3.6. Cie. 1967}).*

For example, the Walden letter of

July 11, 1988, drafted by Naeyaert, is

unmistakable in its coercive import:

I am confident that when you

consider the alternatives, you

will agree to a settlement more

in line with what we are able

to accept so we may discontinue

the proposed litigation and

resume normal relations between

the bank and FmHA.

Even more compelling is the testimony of

Bank President Wilder that, in a May 1989

conversation with Cherry, he pointed out

that the FmHA had debarred the Bank

without a hearing as required by FmHA

regulations. Cherry’s response was that,

as soon as the Ferris cow case was

"settled," the Bank would be "reinstated"

> The right to petition for redress

of grievances is generally subject to the

same constitutional analysis as the Free

Speech Clause. Wayte v. United States,

470 U.S. 598, 610 n.11 (1985).

aS a participant in the federally

guaranteed loan program. Wilder

affidavit, July 10, 1989, 4 24. [A-113-

114]

The Eleventh Circuit agreed that the

defendants used the debarment "as a lever

to coerce favorable settlement of the

Ferris cow dispute," a tactic which "has

no place in government." 980 F.2d at

1369. Yet the court did not reach the

question whether the government’s use of

debarment to coerce the favorable

settlement of a civil dispute

unconstitutionally infringes upon a civil

litigant’s First Amendment rights,

because it held that those rights were

not clearly established. Id. at 1371.

The court’s decision conflicts with

established law in several circuits,

which it tries, unconvincingly, to

distinguish. The District of Columbia

Circuit has squarely held that

"retaliatory prosecution constitutes an

actionable First Amendment wrong

redressable under Bivens ... ."

Haynesworth v. Miller, supra, 820 F.2d at

1255. There, the Court upheld a claim

against D.C. police, officials and the

municipality that an unmerited

prosecution had been undertaken in

retaliation for Haynesworth’s refusal to

surrender his right to challenge official

misconduct in court. Several other

circuits have reached the same

conclusion.*

* See e.g., Sexton v. Ryan, 804 F.2d

26 (2d Cir. 1986); Boyd v. Adams, 518 F.2d

83 (7th Cir. 1975); MacDonald v. Musick,

425 F.2d 373 (9th Cir.), cert. denied, 400

U.S. 852 (1970); Lusby v. T.G.& Y. Stores,

Inc., 749 F.2d 1423 (10th Cir. 1984),

vacated for reconsideration, ---U.S.---,

106 S.Ct. 40 (1985).

(continued...)

—_——— se

The court below attempted to

distinguish the retaliatory prosecution

cases on two grounds. First, the cases

involve criminal prosecution, which

"triggers an array of constitutional,

historical, and statutory considerations"

inapplicable here. 980 F.2d at 1370.

Reasonable officials, the court reasoned,

could not have seen the similarity

between the "loss of freedom" and

"lasting stigma" associated with criminal

prosecution and the consequences of

debarment. Id.

Petitioner contends the similarity

*(...continued )

Town of Newton v. Rumery, ---U.S.---,

107 S.Ct. 1187 (1987), is not to the

contrary. Rumery simply held that the

mere possibility of over-reaching should

not invalidate an agreement not to sue

where the evidence showed thatthe

agreement was entered into voluntarily,

and that the prosecutor acted reasonably

and pursued legitimate law enforcement

goals.

is striking. In the progenitor of a long

line of debarment cases, Gonzalez v.

Freeman, 334 F.2d 570 (D.C. Cir. 1964),

then circuit judge (later Chief Justice)

Burger pointed out that debarment is a

penalty that "can carry with it grave

economic consequences." 334 F.2d at

574.° Moreover, the FmHA’s own

regulations speak directly to the point:

Debarment and suspension are

drastic actions which may

severely affect the economic

well-being of the persons

Gebarred or suspended. ...

7 C.F.R. § 1924.213(a). On the question

of harm, the criminal/civil distinction

is an abstraction, itself unlikely to

occur to officials bent on penalizing the

>= In the present case, of course,

the grave economic detriment of debarment

is documented in the affidavit of Thomas

W. Wilder, July 10, 1989, FQ 18-23. [A-

109-113] The aspects of the harm suffered

by the Bank are the same as the factors

listed in Gonzalez, 334 F.2d at 574.

exercise of constitutional rights to gain

their ends.

Actually, the criminal/civil

distinction makes the present case more

compelling than the retaliatory

prosecution cases. There, the weighty

governmental interest in unfettered

prosecutorial discretion® must be

considered against the claim that an

individual’s access to’courts is being

held hostage to official potion: Here,

there is no countervailing interest at

all. The defendants have no discretion

to violate their own regulations and make

ad hoc debarment decisions. They have no

power to debar without due process.

Certainly they cannot claim the power to

7 See the discussion of factors

counseling judicial reluctance to

interfere with prosecutorial discretion in

Wayte v. United States, supra, 470 U.S. at

607-608.

do both of these things for the purpose

of punishing or preventing the exercise

of First Amendment rights.

However, the court below found a

second basis for distinguishing the

retaliatory prosecution cases in the

"many legitimate objectives" of the

officials’ "pursuit of settlement". 980

F.2d at 1370. The distinction fails.

There is a similar benefit to the public

fisc if lawsuits against the police are

deterred, yet retaliatory prosecution and

coerced waiver of claims are not

permitted on that account. As the

Seventh Circuit pointed out in Matzker v.

Herr, 748 F.2d 1142, 1150 (7th Cir.

1984):

{a]n act taken in retaliation

for the exercise of a

constitutionally protected

right is actionable .. . even

if the act, when taken for a

different reason, would have

been proper.

See also, Norwell v. City of Cincinnati,

414 U.S. 14 (1973); DeLoach v. Bevers,

922 F.2d 620 (10th Cir. 1990); Losch v.

Borough of Parkesburg, 736 F.2d 903 (3d

Cir. 1984).

The court also attempted to

distinguish precedent that did not

involve criminal prosecution. In Matzker

v. Herr, 748 F.2d 1142 (7th Cir. 1984), a

prisoner complained to a judge about

being held in segregation. In

retaliation, the prisoner claimed, a jail

official refused to transfer him to a

safer cellblock. The Seventh Circuit

held that this stated a claim for damages

against the official. See also Milhouse

v. Carlson, 652 F.2d 371 (3d Cir. 1981);

McDonald v. Hall, 610 F.2d 16 (1st Cir.

1979). Ina footnote, the court below

distinguished Matzker for the same

reasons as the retaliatory prosecution

cases, 980 F.2d at 1370-1371, although

Matzker did not involve criminal

prosecution.

Ultimately, the Eleventh Circuit’s

attempts to show that the present case is

not similar enough to established

precedent conflict with its own round

condemnation of the officials’ conduct.

If that conduct has no place in

government, surely it is because it

violates clearly established rights of

which reasonable officials have no cause

to be uncertain. Unpunished access to

court as an aspect of the First Amendment

is neither novel nor vexed. Where the

court goes astray is in its emphasis on

the criminal/civil dichotomy. It is |

clearly established that it is improper |

ee ae a ee

to penalize the exercise of First

Amendment rights; it does not matter

whether that penalty takes the form of

"Criminal" or "civil" sanction, as long

as the sanction is not de minimis. Nor

does it matter whether the precise !form

of penalty fashioned by the imagination

of overreaching officials has occurred in

the past. The only thing that matters

for purposes of qualified immunity

analysis is that the wrongfulness of the

official action be obvious:

This is not to say that an

official action is protected by

qualified immunity unless the

very action in question has

previously been held unlawful,

but it is to say that in the

light of pre-existing law the

unlawfulness must be apparent.

Anderson v. Creighton, 483 U.S. 635, 640

(1987).

Least persuasively of all, the

Eleventh Circuit held that the connection

between the debarment and the Bank’s

First Amendment rights was too attenuated

to overcome official immunity. The court

emphasized the fact that the debarment

did not in fact dissuade the Bank from

defending its position in the Ferris cow

litigation.

This misses the point entirely.

Effective redress for the violation of

rights must not depend upon acquiescing

in th2ir destruction. The First

Amendment is violated not merely when its

exercise is prevented or restricted, but

also when a penalty is paid for its

exercise. In Matzker, the penalty was

the refusal of jail officials to order a

transfer to a safer cellblock. Here, the

penalty was the debarment. The Bank’s

right to sue for damages does not depend

upon its actually having submitted to the

official lawlessness any more than

Matzker’s did.

POINT II: The Debarment Of The Bank

Without Due Process Of Law From

Further Participation In FmHA

Loan Guarantee Programs,

Coupled With Allegations Of

Dishonest Or Fraudulent

Conduct, Infringes A Clearly

Established, Protected Liberty

Interest

The court below parted company with

the other circuits in failing to find the

denial of a clearly established liberty

interest. At least since Old Dominion

Dairy Products, Inc. v. Secretary of

Defense, 631 F.2d 953 (D.C. Cir. 1980),

it has been widely understood that the

debarment of a government contractor,

when it occurs under a cloud of alleged

dishonest or fraudulent conduct,

implicates a liberty interest that is

entitled to due process protection.

Here, the Bank was charged, by the

heads of the Florida FmHA, with a lack of

integrity for failing to deal in good

faith with the government in the Ferris

cow dispute. This stigma was accompanied

by a loss of business opportunity,

namely, the refusal to entertain the

Bank’s future applications for FmHA loan

guarantees. At least two identifiable

loans were lost, from which the Bank

would have realized more than $250,000.

See Affidavit of Wilder, July 10, 1989, 4

20. [A-111-112]”’

The case is indistinguishable in

this respect from Old Dominion, supra.

7 As already pointed out, the Bank

had participated as an eligible lender in

FmHA programs since 1980. Affidavit of

Wilder, July 10, 1989, | 4. [A-98] From

1984 through June 1988, the FmHA had

guaranteed Bank loans and lines of credit

totalling $1,065,990.95. Id. | 18. [A-

109-110]

— a ee ee ae

There, a contractor was not told, before

two "non-responsibility" determinations,

that it was under investigation, and was

told only afterward that the

determinations were based on the lack of

a “satisfactory record of integrity."®

Citing Board of Regents v. Roth, 408 U.S.

564 (1972), and Paul v. Davis, 424 U.S.

693 (1976), the Court held

it is precisely the

"accompanying loss of

government employment" and the

"foreclosure from other

employment opportunity" which

is the injury resulting from

the Government defamation

complained of in this case. As

a result, we hold that a

liberty interest recognized by

the Fifth Amendment is

implicated in this case.

631 F.2d at 966.

Since Old Dominion, numerous other

° Old Dominion did not involve the

blanket proscription of future dealings

that we have here.

cases have affirmed the liberty interest

analysis. See, e.g., Transco Securities,

Inc. v. Freeman, 639 F.2d 318 (6th Cir.),

cert. denied 454 U.S. 820 (1981); ATL,

Inc. v. United States, 736 F.2d 677 (Fed.

Cir. 1984); Mainelli v. United States,

611 F. Supp. 606 (D.R.I. 1985); Shermco

Industries, Inc. v. Secretary of the Air

Force, 584 F. Supp. 76 (N.D. Tex. 1984);

Green v. Brantley, 719 F. Supp. 1570

(N.D. Ga. 1989); Peter Kiewit Sons’ Co.

v. U.S. Army Corps of Engineers, 534

F.Supp. 1139 (D.D.C. 1982); Arrow Air,

Inc. v. United States, 649 F. Supp. 993

(D.D.C. 1986); Bartel v. Federal Aviation

Administration, 725 F.2d 1403 (D.c. Cir.

1984); Conset Corporation v. Community

Services Administration, 655 F.2d 1291

(D.C. Cir. 1981).°

Admitting that "the question is a

close one," the court nonetheless

distinguished this case on two grounds:

viz., the stigmatizing allegation was

neither sufficiently publicized nor

sufficiently injurious to deprive the

Bank of its liberty. 980 F.2d at 1367.

As to publication, the Court noted

that the allegation was circulated by the

defendants only within FmHA and to its

7 See generally, Comment, "Moving

Toward a Better-Defined Standard of Public

Interest in Administrative Decisions to

Suspend Government Contractors," 36 Am. U.

L. Rev. 693 (1987); Note, “Government

Contracts - Nonresponsibility

Determinations - The Federal Government

Violates a Contractor’s Due Process

Liberty Interest by Failing to Provide

Prior Notice and an Opportunity to Rebut

Charges Contained in Nonresponsibility

Determinations Based on Lack of Integrity;

Old Dominion Dairy Products, Inc. v.

Secretary of Defense, 631 F.2d 953 (D.C.

Cir. 1980)," 50 Geo. Wash. L. Rev. 90

(1981).

lawyers. Although the Bank was obliged

to tell its borrowers of its inability to

participate in the FmHA guaranteed loan

program, the Court rejected this

potentially limitless (for who knows how

many persons the borrowers told?)

"outside" publication because the Bank

cannot say how many potential customers

it lost, nor did the defendants require

the Bank to disclose the reason for the

debarment.

More publication than this is not

required by the seminal debarment case,

Old Dominion. There, distinguishing one

of the cases relied upon by the court

here, the D.C. Circuit stated:

Although the Government

has never attempted to suggest

otherwise, we note that there

is no problem of a lack of

publication of the damaging

characterization as was present

in Bishop v. Wood, 426 U.S.

341, 96 S.Ct. 2074, 48 L.Ed.2d

684 (1976). In the present

case, the determination that

Old Dominion lacked integrity

had already been communicated

through Government channels and

would undoubtedly have been

recommunicated every time ODDPI

bid on a subsequent contract.

631 F.2d at 966 n.24. This is precisely

the kind of "in-house" but nonetheless

devastating scope of publication present

here.

Larry v. Lawler, 605 F.2d 954 (7th

Cir. 1978), an opinion relied upon by the

Old Dominion court, dealt similarly with

the publication issue. The case

concerned only intra-agency publication:

The Commission points out that

its findings will not be made

public and are made available

to the various agencies only on

a need to know basis. However,

the federal government is

composed of many different

agencies and departments, all

of which could obtain the

information under various

circumstances. In effect,

has been stigmatized

throughout the entire federal

government. He is deprived of

the opportunity to work in any

capacity for any branch of the

government.

Larry v. Lawler, 605 F.2d 954, 958 (7th

Cir. 1978) (emphasis added). See also

Doe v. United States Department of

Justice, 753 F.2d 1092, 1113 n.24 (D.C.

Cir. 1985).

Nor is it enough to say that the

Bank failed to identify the customers it

lost. We deal here, after all, with that

part of the liberty interest injury which

mimics defamation. It is a familiar

characteristic of per se defamation (as

surely this was) that general damages are

presumed, since the law has long

understood that among the pernicious

effects of this tort is the fact that

those who are influenced by the slander

to the victim’s detriment seldom stand up

to be counted.

More importantly, the Bank has no

way of knowing how many customers it lost

because they were not referred to the

Bank by FmHA.

It is not significant that the Bank

was not required to tell its customers

the reason for the debarment. Even if

the. Bank did not owe a (foreseeable)

fiduciary duty to disclose the allegation

to its farm borrowers, good sense

dictated that it do so. The unspecified

slur often does more injury than the

details. Telling its borrowers that the

Government claimed to think the Bank was

crooked, and why, was probably the Bank’s

only method of minimizing the damage,

since at least some of the farmers,

trusting their bankers, might have been

expected to believe then.

On the question of injuriousness,

the court minimized the Bank’s showing

and exaggerated the relative injury in

other debarment cases. The court stated

that FmHA continued to guaranty the

Bank’s loan renewals in Florida, that it

guaranteed all of the Bank’s Alabama

loans, and that the Bank remained free

"to do business with any of the querous

federal agencies that deal with banks."

The facts are less sanguine. FmHA

chose to renew only two loans when they

came due---and in each case the

defendants took pains to emphasize that

this was an exception to the policy of no

business, and did not mean that any

further loan renewal would be

granted.*° There was no evidence that

seine Moreover, this was not new

business. In each case, the loans had

been made before the debarment for a

three-year term, and the contract simply

called for yearly renewal upon review of

(continued...)

the Florida bank did a substantial amount

of business with Alabama' farmers.

As for the Bank’s "freedom" to deal

with other government agencies, it is an

illusion. Unlike many other government

contractors, banks are primarily local

entities, dealing with borrowers from the

local community. Obviously the Bank

could not service loans elsewhere in the

country, nor could it qualify (debarment

aside) under the FmHA’s regulations as an

"eligible lender" in far-flung places.

Banks are service institutions. They are

not purveyors of goods to multiple

government agencies. Being blacklisted

by the Department of Defense, or the

General Services Administration, for

example, would have had no effect on the

Bank. Short of attempting to extend the

2°(,,.continued)

_ the borrower’s operation.

blacklist to Alabama FmHA, with whom the

Bank did some business, Cherry and

Naeyaert did all the harm they could do.

That they did not place the Bank’s name

on a government-wide or nationwide

debarment list hardly mitigates the

damage.

The effect on the Bank of being

totally cut off from Florida farm loan |

guarantees must be gauged against the

fact that this is a small bank in rural

northwest Florida. Twenty to twenty-five

percent of its outstanding loans were

agricultural. The Bank had participated

as an eligible lender in FmHA programs

Since 1980. From 1984 through June 1988, —_—

the FmHA had guaranteed Bank loans and

lines of credit totalling $1,065,990.95.

Although, as already pointed out, it is

inherently problematic to identify

specific business losses in the debarment

situation, the Bank was able to identify

at least two loans lost in the debarment,

from which it would have realized more

than $250,000. Affidavit of Wilder, July

10, 1989, 4¥q¥ 4, 18, 20. [A-98, 109-110,

111-112] On summary judgment, all of

this went completely unrebutted by the

defendants.

The court appeared to make out an

insubstantiality determination only in

relative terms, by comparing the Bank’s

losses with the "scorched earth" of Old

Dominion and other cases. But as Judge

Godbold pointed out in his dissent from

the original panel opinion, nothing in

those cases required total destruction as

a matter of law. 980 F.2d at 1362.

Even the perception of Old Dominion,

ATL, Ind. v. United States, 736 F.2d 677

(Fed. Cir. 1984), and Transco Sec., Inc.

v. Freeman, 639 F.2d 318 (6th Cir.),

cert. denied, 454 U.S. 820 (1981), as

"total destruction" cases is problematic.

ATL was a suspension case, not a

debarment. While it is true that the

construction contractor there was "a

small business concern whose work is done

almost entirely with the Federal

Government," no attempt was made to show

that ATL was not free to engage itself

elsewhere. As the court noted:

ATL is still theoretically

free, in the face of the 12- or

18-month suspension, to pursue

non-government contract work.

A small business choosing to

put nearly all its eggs in one

Government contracts basket

must be expected to bear some

responsibility for the risk

that that basket could, as a

result of the contractor’s

misconduct, temporarily or even

permanently be snatched away --

with the required procedural

safeguards here at issue.

736 F.2d at n.31. The Bank here, of

course, and its farm borrowers, were not

free even theoretically to obtain similar

loan guaranties elsewhere.

Similarly, Transco was a suspension

case, involving a potential maximum of 18

months before a hearing was required

under the regulations there at issue.

The contractor was in the business of

providing security services, and the

opinion does not state that no private

market existed.

Old Dominion itself involved not

even suspension but nonresponsibility

determinations as to two contracts. The

contractor was a small business choosing

to supply dairy products almost

exclusively to the military. No one

would suggest that other markets for milk

were unavailable.

It may be possible to demonstrate

that the injuries in the above cases were

greater than BJC’s loss in both absolute

dollars and as a proportion of business.

However, none of those cases involved a

debarment of indefinite duration and none

involved debarment from participation in

an absolutely unique "market" for

federally-guaranteed loans, guaranties

which the Bank and its farm borrowers

were not free to seek elsewhere.

Finally, it is significant to note

that, in its more recent opinions, the

D.C. Circuit has demonstrated that it

does not read Old Dominion as imposing so

high a level of injury. In Mosrie v.

Barry, 718 F.2d 1151, 1161, 1162 (D.C.

Cir. 1983), the court said:

- - « [T]he principal recent

cases from this court in which

a government-imposed stigma was

found to have deprived the

WnnadaOe i i hi A a tale ANE wt

Pe ee ee eee eee ee we

stigmatized person of a liberty

interest involved either loss

of employment or foreclosure of

a right to be considered for

government contracts in common

with all other persons.

xk * &

An actual loss of employment or

change in legal status [is]

sufficient to qualify as a

deprivation of liberty when

accompanied by stigmatizing

remarks.

And in Doe v. United States Department of

Justice, 753 F.2d 1092 (D.C. Cir. 1985),

a case involving the discharge under

stigmatizing allegations of a DOJ

attorney, the essential requirements of

Paul’s “stigma plus" test were stated as

follows:

First, the government must be

the source of the defamatory

allegations. Second, the

resulting "stigma" must involve

some tangible change of status

vis-a-vis the government.

753 F.2d at 1108-1109 (citation omitted)

(emphasis added).

Under any reasonable standard, the

amen

nature of the Bank’s injury implicated a

protected liberty interest, just as in

the many other debarment cases. The

court’s subjection of that injury to an

unarticulated magnitude analysis was

error. It sends the unfortunate message

to officials that violation of clearly

established rights will not pierce

damages immunity unless the destruction

is total, or nearly so. To plaintiffs it

may mean that, if official lawlessness

has left them enough resources to mount

litigation, then that litigation will be

fruitless.

POINT III: The Bank’s Right To

Compete On An Equal

Footing With Others For

FmHA Loan Guarantees Is A

Clearly Established

Property Interest Which

Cannot Be Extinguished

Without Due Process Of Law

The court below gave short shrift to

the argument that debarment infringes a

property interest. It pointed out that q

the Bank has no right to cbtain FmHA loan |

guaranties, and that it therefore has no

property interest in then.

However, the Bank never claimed a

"right" to any government contract. It

did not complain of any particular

administrative decision rejecting a given

loan application. It objected to summary

debarment, or blacklisting, from all

further relationships, from eligibility

for consideration on a case-by-case

basis. All the Bank, or any government

contractor, is entitled to is a decision-

making process which makes it reasonably

probable that approval or rejection will

be based on the merits. That is what due

process is. The history of the Bank’s

dealings with the FmHA demonstrates quite

clearly, if demonstration were

necessary,** that when the FmHA made

its decisions on the merits (prior to the

debarment), the Bank reaped substantial

economic benefits. To no longer have

access to a process in which decisions

are probably made on the merits---which

is what debarment or any other

blacklisting means---is to suffer

economic detriment.

The leading case, Gonzalez v.

Freeman, 334 F.2d 570 (D.C. Cir. 1964),

recognizes the distinction between the

right to a contract and the right to

eligibility.

sc According to Gonzalez’ wise

counsel, of course, demonstration is not

necessary. See 334 F.2d at 574; see also

the Defendants’ own regulations:

"Debarment and suspension are drastic

actions which may severely affect the

economic well-being of the persons

debarred or suspended." % Geet 5

1924.213(a) (emphasis added).

AO tes May 0 lead A ae

It is .. . correct, broadly

speaking, to say that no

citizen has a "right," in the

sense of a legal right, to do

business with the government.

See Perkins v. Lukens Steel

Co., 310 U.S. 113, 60 S.Ct.

869, 84 L.Ed. 1108 (1940). But

use of such terms as "right" or

"privilege" tends to confuse

the issues presented by

debarment action. Interruption

of an existing relationship

between the government and a

contractor places the latter in

a different posture from one

initially seeking government

contracts and can carry with it

grave economic consequences.

334 F.2d at 574 (emphasis added). The

court concluded that contractors "have a

right not to be debarred except in an

authorized and procedurally fair manner

"* Fd. at 376.

Both the D.C. Circuit and the Second

Circuit have suggested that debarment

implicates a protected property interest.

In Art Metal-U.S.A., Inc. v. United

States, 753 F.2d 1151 (D.C. Cir. 1985), a

contractor brought suit under the Federal

Tort Claims Act [FTCA], 28 U.S.C. §§

1346(b), 2671-2680 (1982), seeking

damages for its unlawful de facto

debarment from government contracting.

Although the Court rejected the FTCA

action, it intimated that an action for

constitutional tort (such as the present

action) might have fared differently:

An examination of the

regulations indicates that they

essentially impose duties on

GSA officials to deal fairly

with government contractors.

Moreover, the "fairness duties"

are required of the government

aS a government under the due

process clause of the United

States Constitution, See

Gonzalez v. Freeman, 334 F.2d

570 (D.C. Cir. 1964). As Art

Metal itself recognizes, the

regulations are "designed to

protect contractors’ due

process rights, liberty

interests, and economic

interests from an arbitrary,

capricious, unfair, or

incorrect debarment." Brief for

Appellant at 33. These

constitutional rights are

guaranteed under federal law,

not local law.

753 F.2d at 1160 (emphasis added). See

also Myers & Myers, Inc. v- United States

Postal Service, 527 F.2d 1252, 1258-59

(2a Cir. 1975):

Where a federal agency takes

action to debar a private firm

from further business relations

with that agency the effect is

far different from that of

simply denying an application

for a contract. (Quotation

from Gonzalez v. Freeman,

supra, omitted]. Denial of

notice and a hearing before

debarment would "give rise to

serious constitutional issues,"

[Id., 334 F.2d 570] at 579. -

The Third Circuit adopted a similar view

in the context of a 42 U.S.C. § 1983

action against state officials. See

Berlanti v. Bodman, 780 F.2d 296 (3d Cir.

1985), where it was held that an

individual contractor had a property

interest under New Jersey law in not

being debarred from state contract

bidding.

The court below correctly pointed

out that several post-Gonzalez cases,

notably ATL, Inc. v. United States, 736

F.2d 677 (Fed. Cir. 1984), and Transco

Security, Inc. v. Freeman, 639 F.2d 318

(6th Cir. 1981), have rejected property

interest analysis in debarments.

However, in those cases, either the

action at issue fell short of the across-

the-board, indefinite-term debarment that

here occurred, or the conclusion is, we

submit, simply wrong. The error stems

from the unexamined assumption that

disqualification from consideration of

all future applications is equivalent to

denial of any one particular contract.

Gonzalez should have made it clear that

invoking the nostrum that "there is no

right to a government contract" does not

end the analysis.

A blacklist is not the same thing as

a snub. If the defendant officials had

rejected one or two of the Bank’s

applications for an FmHA loan guarantee,

the Bank would not be here. What the

defendants did, however, was to notify

the Bank that they would no longer

consider the Bank’s applications for loan

guarantees, period. The right to have

those applications considered, for

acceptance or rejection, is

unquestionably an interest of economic

value. That it is an interest protected

by the Constitution, an interest that

cannot be expropriated without "either

regulations establishing standards and a

procedure which are both fair and uniform

or basically fair treatment" was

established as early as Gonzalez. 334

F.2d at 580.

Here, 25 years after Gonzalez, the

FmHA was supposed to be operating under

regulations designed to ensure such fair

treatment. The regulations, which these

officials admittedly ignored, expressly

recognize that debarment is a "drastic"

action "which may severely affect the

economic well-being" of the person

debarred. 7 C.F.R. § 1924.213(a). Since

the debarment of the Bank had precisely

that effect, the officials should not be

immune from a suit for damages.

CONCLUSION

The Eleventh Circuit found that the

FmHA officials’ conduct has "no place in

government," and it insisted that

the message to FmHA officials

must be clear: They may not

grant or deny the opportunity

to participate in FmHA programs

without following the agency’s

regulations.

980 F.2d at 1369. Yet, by denying the

Bank a damages remedy, the court

unintentionally sends a very different

message. It tells the kind of officiais

whom only Bivens could control that they

will not be called to personal account

for the violation of clearly established

rights. To recall that message, for all

of the foregoing reasons, the judgment of

the Eleventh Circuit Court of Appeals

should be reversed.

Dated: April 6, 1993

Respectfully submitted,

2 (fone

al Pe Satten

PAMELA DRU SUTTON

MICHEL L. STONE

STONE & SUTTON, P.A.

116 East Fourth Street

Panama City, FL 32401

(904) 785-7272

JERRY W. GERDE

Counsel of Record for Petitioner

JOHNSTON, HARRIS, GERDE & JELKS, P.A.

239 East Fourth Street

Panama City, FL 32401

(904) 763-8421

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that three copies

of the foregoing Petition for Writ of

Certiorari, with separate Appendix, have

been furnished to Michael S. Raab, Esq.,

and Barbara L. Herwig, Esq., Civil

Division, Appellate Staff, U.S.

Department of Justice, Room 3631, Main

Justice Building, 10th and Pennsylvania

Avenue, N.W., Washington, D.C. 20530-

0001, to Benjamin W. Beard, Esq.,

Assistant U.S. Attorney, 114 East Gregory

Street, Pensacola, FL 32501-4972, and to

the Solicitor General, Department of

Justice, Washington, D.C. 20530, pursuant

to Supreme Court Rule 29, by U.S. Mail,

on the 9 th day of April, 1993.

Y W. |GERDE

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