Motion to Dismiss — George Campbell Painting Corp. v. Reid

Inve | _ NOV 10 1967

Supreme Court of the Ani ob Arta pom

OCTOBER TERM, 196 |

No. 673 , ?

Greorce CAMPBELL ‘PartntinG Corp., *

‘ Appellant,

against }

Wuuiam Ren, Francis V. Maniean, Ina Ss. Rossins, Mem-

bers of the New York City Housing Authority, and THE

New Yorx’Crry Hovusine AvurTHoriry,

Appellees.

. Georce CaMpBELL Parntinc Corp., ia

. —

against .

Wi11AM a Francis V.- Mapicay, Tra S. sass Mem-

bers of the New York City Housing Authority, and THE

New York aged Hovsine AUTHORITY, .

_ Appellees.

Silk: didi Diane aliens ey Mees

OF THE STATE or New York

—_——

SS

MOTION TO DISMISS BY THE ATTORNEY

GENERAL OF THE STATE OF NEW YORK:

—— : : ——— —<—

‘“

Louis J. Lerxowrrz *

oan Attorney General of the,

eee . State of New York —

a . '* [ntervenor-Appellee pro se

80 Centre Street

sae hae —_— York, New York 10013

SaMvueEL A. Firrsowrrz

First Assistant Attorney General

Brenva SoLorr

Assistant Attorney General

‘ of Counsel

<Q 249 Press of Fremont Payne, Inc., 80 Washington St., N. Y—BOwling Green 9-8153

Opinion Below ........... ST OM eis

Jurisdiction dae ecerasenvcrnccessovneyocecconcsess

Questions Presented ................ eye erent asx

Statement ....... cA Se RES 2 aa AEE

Reasons For GRANTING THE Motion To Dismiss:

I—The instant ‘case does not present a justiciable

controversy within the jurisdiction of this Court

II—The instant case doesnot present a substantial

federal question for review by this ae

Conclusion ies gaat aaa we OES Ro nl Ee Ona

Cases Crrep

Beilan v. Board. of Edueation, 307 U.S. 399 ........

Booth Fisheries v. Industrial Comm., 271 U. ass 208...

Bowles v. ‘Willingham, Se et era cednkhuasewes ‘

’ Buck v. Kuykendall, 267 U. Gl eae fa

Campbell v. City of New York, 244 N. Y. 317, 155

i EL Cluwiees i ea sina wa eas ahs eo

Fahey v. Malonee, ee a ee ee ees wee ee

Pal

Gardner v: Broderick, 20 N. Y. 2d 227, 229 N. E. 2d

"184, appeal pending No. a Se A ;

Garrity v. New Jersey, 385 U. S: 493 ...........- eee

<

4

“NI Oo NN OC

aN

| om 7 PAGE

Lerner v. Casey, 357. U. S. 468 ............... ee eeee 8,9

Nelson@. Los Angeles, 362,U.S.1 ............-- i (S

ssa sacs v. Board of Education, 350 U.S. 551 ..... 8,9

South Carolina v.: Katzenbach, 383 U. SE Gian sces 7,9

Spevack v. Klein, 385 U. PE giv et chin adsh ieee ».. 9,10

United States v. ; White, 344 U. S. 694 oe eee aeeon 6,7

| | liieninie! | :

CFR. $11,697 (OB) 02606005 cp. OD

New York Civil Practice Law and Rules, Art. 78..... 4

New York Public Authorities Law § 2601 .......... 2,5,8 -

- New York Public Authorities Law § 2603 ..... wee he

_. New York General Municipal Law, §103-d .......... ee

eS in cisicicisnn des eyessoaseen ne: 2

; MISCELLANEOUS

; +

-N. Y. State Leaisiative Annual (1989) Memorandum

of the Governor, p. 431 . sbbesdbecdSUanedabesevns i

x

eee.

| Supretie Court of the Huth States

OCTOBER TERM, 1967

&

as ae

No. 673

4.

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Georce CampBet. Parntine Corp.,

Appellant,

against

Wrisix Ren, Francis V. Mapican, Ina S. Ropsrns, Mem-

bers of the New York City Housing Authority, ond ‘THE

NEw York Ciry Housine AuTHogrIry,

hielo: .

7%

wv

Grorce CAMPBELL ‘'PaIntiInG Corp., ;

. o Appellant,

agamst :

Wuuiam Ren, Francis V. Mapican, Ina S. Rossrns,: Mem-

bers of the New York City Housing Authority, and THE

New York Crry Housine AvtTHoriry,

‘Appellees.

On APPEAL From THE Court or APPEALS

' or THE State or New York

4

4

MOTION TO DISMISS BY THE ATTORNEY

GENERAL OF .THE STATE OF NEW YORK |

Interveno appellee, Louis J. Lefkowitz, Attorney Gen-

eral of the State of New York, pursuant to Rule 16 of

the Revised Rules of the Supreme Court of the United

States, moves that this appeal from the judgment of the .

Court of Appeals of the State of New York be dismissed.

_ Opinion Below

_The opinion of the New York State Court of Appeals is. _

reported at 20 N. Y. 2d 370, 229 N. E. .2d 602, and is re-

produced in the appendix of aide s.J urisdictional

Statement at p. 18. ,

Jurisdiction

wd j

Appellant invokes. = jurisdiction of this Court under

28 U.S.C. siete e*

Statutes amvenves

-

New York State Public Authorities _— $$ 2601- 3 (Jursi-

enamel een PP. 24-27). Op a

, Questions Presented

1. Does the instant case present a justiciable contro-

versy within the jurisdiction of this Court? ;

2. Does the question of the constitutionality of Public

Authorities Law 4 2602?raise a substantial federal question —

- requiring plenary review before this Court?

Statement

- During 1964, the appellant, a closely held family corpo-

ration, entered into three painting contracts with the ap-

pellee New York City Housing Authority. Each contract

contained a standard paragraph 38 in accordance : with

Public Authorities Law § 2601, providing that, where a

person refuses to sign a waiver of immunity when re-

quested to appear before a grand jury to testify concern-

ing ‘public contracts, such person and any firm, partnership

ag

3 aa a

or corporation of which he is‘a member, partner, director

or officer ‘shall be disqualified for five years from bidding

on public contracts and any existing contracts shall be

terminated (Jurisd. Statement, p. 24). All three con-

tracts were executed on behalf-of the appellant by its

president, George Campbell, Jr., who was also a director

and stockholder of the corporation.

Early in 1965, sapeliant ’s officers, a its president,

became aware that the District Attorney of New Yor

County was. conducting an investigation before a Gran

Jury to determine whether, the crime of bid rigging o

public contracts, including those entered into by appellant,

had occurred in New York County. On March 26, 1965,

‘George Campbell, Jr. purported to resign as president and

director of the appellant corporation and to turn over"

' his shares of stock.. On the same date he bécame employed

as an ‘‘estimator’’ by the appellant corporation. -

The resignation was specifically arranged by the cor-

poration to circumvent.the express provisions of the con-

tract containing the statutory language. The complaint

alleged that Campbell became aware of the Grand Jury

' investigation of appellant corporation on March 26, 1965, °

and was adv‘*-.d by counsel that he ‘‘could expect to be

_ subpoenaed and requested to waive statutory immunity’’.

. The officers of appellant corporation were alvised by

the corporation’s counsel ‘‘of the penalty that would result

if any of us refused to waive immunity’’. Strangely, of

all the officers and directors, only Campbell, ‘“‘then only

tweny-four years of age, and having the fewest years of.

' service with the company, deemed it advisable to refuse

to waive immunity’’, and‘*he was, therefore, requested’ to

offer and did offer his resignation.

On Friday, April 9, 1965, after Mr. Campbell allegedly

had alréady been employed by appellant in his new capac-

_ity, the Board of Directors of appellant allegedly met and.

4

purported to accept his resignation. On April 13, Mr.

Campbell was served in the’ office of the corporation’s

lawyer with the subpoena. On April 14, the Grand Jury

met. In accordance with his corporate arrangement, he

refused to sign the statutory waiver of immunity and,

consequently, was not asked to testify.

By letter dated April 16, 1965, the New York County

District Attorney informed the Housing Authority that

_ Campbell had refused to sign such a waiver of immunity...

On April 21, 1965, the Authority advised appellant that,

pursuant to § 38 of the general conditions of the contracts,

the contracts were cancelled and terminated effective im-

mediately and that Mr. Campbell and the corporation were

disqualified from en business with the Authority for

five years. ;

Appellant commenced an action by way of. an order to

show cause for an order pendente lite enjoining the Hous-

ing Authority from barring or disquahfying appellant

_ from future bidding and directing restoration of its name

‘ to the qualified bidder list.. Appellee Housing Authority

cross-moved to dismiss and the’ motion was granted only. -

to the extent of staying the action pending determination

of appellant’s appeal from an order of the Supreme Court,

New York Courtty ‘granting appellees’ motion to dismiss

the petition in a proceeding pursuant to Article 78 of the ~

N. Y: Civil Practice Law and Rules. The Article 78 pro-

ceeding was for an order annulling the Housing Author-

' ity’s determination barring and disqualifying appellant _

from public contracts for five years. ‘The motion was

granted without prejudice to the commencement of a

plenary action. é' |

‘On appeat to the say oni, First Department,

-the order in the Article78 proceeding was affirmed with-_ -

out opinion (Jurisdictional Statement, p. 17). On the same

bn wb les: > -

“=

date, on cross appeals, the order in the plenary action was

modified in-an opinion which stated in pertinent part that: -

- “The complaint ‘is insufficient because plaintiff is |

_* subject to the contractual agreements it made and ©

. because of the present allegations plaintiff does not

establish a case’ for equitable relief.’? (Id. p. 17)

On consolidated appeals, the New York Court of Appeals

held that Public Authorities Law § 2601 is constitutional -

citing Matter of Gardner v. Broderick, 20 N. Y. 2d-227, 229

N. E. 24-184, appeal pending No. 635, Oct. T. 1967, decided

the same: day. The Court held the ‘disqualification to be

valid. The Court further held that the fact, that the ap-

pellant’s: officer resigned. prior to his appearance before

the Grand Jury was not.eontrolling where the resignation

was virtually contempotgneous with his refusal to sign the

waiver of immunity and where it was obvious that the sole

. purpose of the- resignation was to avoid the statutory dis-

qualification.- The Court held that while there might be

- times when the, statute would penalize a corporation which

‘*had severed its connection with the recalcitrant officer and

which has otherwise been cooperative”, the Legislature had

_ provided a procedure for the removal of such disqualifica-

tion (Public Authorities Law § 2603). The Court concluded

that ‘‘the appellant’s exclusive remedy is the procedure

outlined in that statute’’ (Jurisdictional Statement, : pp.

18-19). »

&,.

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REASONS FOR GRANTING THE MOTION

» FF DISMISS :

| I |

- The insthnt case does ‘not present a justiciable con-

-’ troversy within the jurisdiction of this Court,

Appéllants. claim that the tien in » the instant case is

- whether the assertion of the privilege against self-incrimi- |

nation may result in its disqualification from bidding on —

public contracts. Appellant is confusing any. individual

rights of Mr. Campbell with its own rights. ‘Depending. on

the facts, two basic claims might be open to Mr. Campbell ,

were he a party to this proceeding. He might allege that

his privilege against self-incrimination entitles him not to

have coerced testimony introduced against him in a crim-

inal proceeding ‘and he might allege that he has a right

not to suffer any penalty merely for having invoked the’

___privilege against self-incrimination. Since he did not tes-

tify, his first claim would not be available. Contrast Gar-

rity v. New Jersey, 385 U. S. 493. The question with re-

spect to Mr. Campbell would thus become whether or not

his disqualification was the result of his claim of the priv-

ilege against, self- incrimination or a lack of candor or some ..

other reason.

‘The corporation, however, has no interest in and can

—-elaim no derivative benefit’from Mr. Campbell’s privilege

against self-incrimination. United States v. White, 344

' U. S. 694. It thus cannot claim that any alleged impair-.

ment of Mr. Campbell’s right to exercise the privilege

gives it a right to assert the protection of his privilege for °

its own benefit. Any such right of Mr. Campbell would

result from a claim of an unfair imposition of a penalty - ©

on him. The corporation cannot substitute the imposition

of any alleged penalty on itself to complete the relation-

‘aie required before Mr. Campbell could assert such claim

.of impairment. And, of course, the corporation has no

privilege of its own to assert. United States v. White,

supra. . ;

Whatever right the corporation may claim as a result of

its having been disqualified from doing business with the

State and from cancellation of its contracts ‘can still be

made the subject of a proceeding i in the State pursuant to

Public Authorities Law § 2603. South Carolina v. Katzen,

bach, 383 U. S. 301, 333. This, indeed, was the holding of

the New York Court of Appeals. See supra, p. 5. Since -

this remedy, the exclusive remedy, as that Court held, has |

not been pursued, the décision of the New York Court of

Appeals is not final with respect to appellant corporation

i= no justiciable controversy has _ presented for reso-

lution by this Court. cao

In any event, appellant is bound by the contracts ie

signed. It was a condition of the contracts, a condition of

-which all of appellant’s officers and directors obviously —_

were well aware, that, upon the refusal of any one of them :

to testify before a Grand Jury ot os their contracts,

disqualification and cancellation ‘would ‘Yesult.' Appellant

had the option of entering into the contracts on those terms

and it cannot now overcome the fact that the contracts were «

breached: Fahey v. Malonee, 332 U. S..245; Ashwander'v..

Tennessee Valley Auhority, 297 U. S. 288, 348 (Concurring

Opinion); Booth Fisheries v. Industrial Comm., 271 U. S.

208 ;.Buck v. Kuykendall, 267 .U. S. 307; Campbell v. City :

of New ‘York, 244 N. Y. 317, 155 N. E. 628. a

ane ee > |

The j nsteah case does not present a silat fed-

eral qupstion for review by this Court. ‘

Even if appellant could assert that its disqualification by

virtue of a ee refusal to waive’ immunity vio-.,

\

lates some right of its own, its ee on the constitution-

ality of New York Authorities Law § 2601 is insubstantial.

The jurisdictional statement implies that the provision was

not inserted because of the necessity for demanding candor

on the ‘part of public employees and contractors. It thus

apparently rega as inapposite the sof Nelson v.

Los Angeles, 362 ©. S.'1; Beilan v. Board of Education,

857 U. S. 399; Lerner v. Casey, 357 U. S. d Slochiower

‘v. Board of Education, 350 U. 8. 551. Each of these cases

clearly establishes that the State may, under circumstances

substantially the same as those in the instant. case, require

testimony from its employees and contractors with respect

to their duties and contracts.

The governmental interest leading to the enactment

of the statute was very strong. The need for candor. was

obviously its motivation. In approving the legislation to

deal with the problem of contractors who refused to testify

_ about their dealings, Governor Rockefeller pointed out:

‘(Unlike a. priyate person’ who may contract with

whom he wishes, a public agency usually lets contracts _ -

by public auction and is required to accept the lowest

bid. For that reason, it would seem appropriate to

-., disqualify the bids of persons. who are unwilling to

discldse to a grand jury facts relating to some prior

contract .with the public. Likewise, it would seem

appropriate that public contracts should provide that -

the benefit ateruing under them be available only so”

long as the beneficiary is willing, when required by a °

grand jury, to disclose any information he may have

as to a public contract.’’ Memoranddm of the Gov-

-ernor, N. LY. State Legislative Annual 959), P.. 431.

The Legislature was concerned “— only with iiaiiias

low bidders, but also responsible bidders, and was ‘deter-

mined that any contract awarded would best promote the

_— interest. The Legislature has ‘affirmatively nite i

hate : ve ee ee ee Le eee

asi Nba tll

9

that it is of the highest importance that there be no col-

lusive bidding or bid rigging for ‘public*contracts. This

_ they have done by requiring that in every public contract

‘ proper assurances be incorporated by the private coh-

tracting party to that effect (See e.g. General Municipal

Law, §103-d). The New York. statute is substantially

identical with federal requirements. See 41 C.F.R. 41-1,

317 (1965) (Federal Procurement Regulations).

In order to determine whether or not bidders are re-

sponsible, public agencies must be able to insure candor

on the part of public contractors and to protect “the -

public from persons or corporations which feel they cannot

be candid in their public dealings. The provisions of

the statute are in no respect arbitrary in insisting on.

such candor.

en

Appellant’s claim that the automatic operation of the

statute deprives it of due process once more ignores the

existence of the hearing provided in the Public Authori- :

ties Law § 2603. The fact that that hearing may be ob-

tained only after disqualification does not. deprive appellant

of due process of law. See Lerner v. Casey, supra; South

; Corcline v. Katzenbach, supra; Bowles v. Willingham, 321

. Neither ‘denne v. New Jersey, 385 U.S. 493 nor Spevack

v.. Klein, 385 U. S. 411, gives substance to the issues

sought to be presented. Garrity i is inapposite because no

testimony was used. Thé Spevack case does not purport

to overrule the line of cases beginning With Slochower,

swpra, which holds that candor may be required of a public

employee. It holds only that the. privilege against self-

incrimination could not be withheld from an attorney so

that he would be denied the opportunity to challenge the

relevance to the proceeding of the documents demanded

of him. - It did not even indicate that candor could not be

required of attorneys within: the scope of the information

the State legitimately could require of them.

10

In any event, the public contractor, even more than the

public employee, must be accountable for its dealings. with ,

respect to, such public contracts, and the failure of candor

required by the contract is intolerable. See Spevack v.

Klein, supra, at 519-20 (concurring opinion). Any other

result would render meaningless the whole system of public

bidding written into law.

CONCLUSION °

For the foregoing reasons the within motion to dis- : a

miss should be granted.

Dated: New York, New York, November 871967.

Respectfully submitted, |

Louis J. LEFrkow!rz

Attorney General of the ~

‘State of New York

Intervenor-Appellee

pro. se.

is SAMUEL A. Hirsnowrrz

‘First Assistant Attorney General

Brenpa Sovorr

Assistant Attorney General

of Counsel

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