Opinion ID: 382661
Heading Depth: 2
Heading Rank: 2

Heading: Presence of Injury to a Cognizable Liberty Interest in This Case

Text: 39 The most difficult question presented here is whether the Government conduct injured a cognizable liberty interest in this case. We hold that it did. 40 Appellant claims in essence that ODDPI has a right to be free from stigmatizing governmental defamation having an immediate and tangible effect on its ability to do business. Appellant argues that the Government may not brand or stigmatize a contractor as nonresponsible due to a lack of integrity without granting the contractor notice of the specific charges against it so as to afford the contractor an opportunity to clear its name. 41 We recognize at the outset the significant effect the Government conduct had on Old Dominion in this case. A determination was made that Old Dominion lacked integrity, and that determination was communicated through official Government channels and would likely continue to be communicated every time Old Dominion bid for a contract. As a result, ODDPI lost two substantial contracts which it otherwise would have received. This sudden loss of Government work effectively put Old Dominion out of business (Tr. 165). We again note the words of Chief Justice Burger in Gonzalez v. Freeman, 334 F.2d 570, 574 (D.C. Cir. 1964), in commenting upon the effect of debarment on a Government contractor: 42 We need not resort to a colorful term such as stigma to characterize the consequences of such governmental action, for labels may blur the issues. But we strain no concept of judicial notice to acknowledge these basic facts of economic life. 43 With this in mind, we turn to consider whether the governmental action in this case, carried out with absolutely no notice to the appellant, violated due process. 44 In Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), the Supreme Court considered the circumstances in which the refusal of a public university to reemploy a nontenured university instructor implicated due process liberty interests. The Court noted that a simple refusal to rehire, without more, did not trigger due process requirements. Based on facts of that nature in that case, the Court in Roth held that the nonrenewal of the contract of the instructor, without any type of specific notice or a hearing, did not violate due process. 45 The Supreme Court emphasized, however, that: 46 The State, in declining to rehire the respondent, did not make any charge against him that might seriously damage his standing and associations in his community. It did not base the nonrenewal of his contract on a charge, for example, that he had been guilty of dishonesty, or immorality. Had it done so, this would be a different case. 47 408 U.S. at 573, 92 S.Ct. at 2707 (emphasis supplied). The Court also stated that: 48 Similarly, there is no suggestion that the State, in declining to reemploy the respondent, imposed on him a stigma or other disability that foreclosed his freedom to take advantage of other employment opportunities. The State, for example, did not invoke any regulations to bar the respondent from all other public employment in state universities. Had it done so, this, again, would be a different case. 49 Id. at 573-574, 92 S.Ct. at 2707 (emphasis supplied). These concepts were recently reaffirmed by the Supreme Court in Owen v. City of Independence, Mo., 445 U.S. 622, 633 n.13, 100 S.Ct. 1398, 1406 n.13, 63 L.Ed.2d 673 (1980). 50 The case before us is clearly the different case alluded to in Roth. Old Dominion was denied the renewal of the Okinawa contract solely on the basis of Sergeant Trevino's determination that Old Dominion lacked integrity. As stated in Roth, where a person's good name, reputation, honor, or integrity is at stake because of what the Government is doing to him, notice and an opportunity to be heard are essential. Id. 408 U.S. at 573, 92 S.Ct. at 2707, quoting Wisconsin v. Constantineau, 400 U.S. 433, 437, 91 S.Ct. 507, 510, 27 L.Ed.2d 515 (1971) (emphasis supplied). Ms. Wells' report concluded that Old Dominion's actions under the old contract show a lack of business integrity. The only reason the contractor would have for the above discrepancies would be to recoup undue monies under the contract. App. F, exhibit 5, item 2, p. 4. Officer Trevino concluded from this report that Old Dominion was fraudulently receiving undue profits under the current contract (Tr. 249). 22 Officer Barrett concluded from the report that Old Dominion had knowingly and substantially overbilled the Government (Tr. 279). There can be no doubt that Old Dominion's good name and integrity were at stake, or that Old Dominion was in effect charged with dishonesty. 51 Furthermore, it cannot be disputed that the Government action in this case effectively foreclosed Old Dominion's freedom to take advantage of other Government employment opportunities, and barred ODDPI from all public employment. As illustrated by the Yokohama contract, the determination that Old Dominion lacked integrity would follow ODDPI in any attempt to procure Government work. This is particularly true in light of the Government's admission at oral argument that the case would be no different if eight contracts had been denied. As noted above, the Government action in this case had the effect of putting Old Dominion out of business (Tr. 165). 52 These actions were taken without any amount of due process. Despite the fact that numerous conversations were conducted between ODDPI and the Government, between the time the determination was made and the time the contracts were denied, at no point was it even mentioned that the integrity of Old Dominion was in issue. Old Dominion never received any notice of the charges against it. Needless to say, ODDPI was never afforded the slightest opportunity to respond to those charges. 53 We hold that the present case parallels the situation anticipated by the Supreme Court in Roth, and that a due process liberty right was violated. To rule otherwise would drain Roth of meaning, something that the Supreme Court has taken pains not to do. See Paul v. Davis, 424 U.S. 693, 709-710, 96 S.Ct. 1155, 1164, 47 L.Ed.2d 405 (1976); Bishop v. Wood, 426 U.S. 341, 347-350, 96 S.Ct. 2074, 2078-2080, 48 L.Ed.2d 684 (1976). 54 This conclusion is consistent with other cases handed down in this Circuit. In Rolles v. Civil Service Commission, 512 F.2d 1319 (D.C. Cir. 1975), Officer Rolles of the Air Force Reserve received an administrative reprimand which alleged that he had prepared an incorrect or false voucher and had diverted an Air Force aircraft to an Air Force base for his personal benefit. The officer was given no opportunity to respond to the charges. Yet, based on those accusations, and with whirlwind speed, Rolles was transferred out of active military reserve status and, as a result, removed from the Civil Service. This court found such conduct totally repugnant to due process. Id. at 1321. Since in effect appellant was removed from his Civil Service position as a direct result of charges made by General Hoff that amounted to accusations of dishonesty, the court held that a liberty interest had been violated and that Rolles had a right to respond to the allegations and attempt to clear his name. Id. at 1325. In Mazaleski v. Treusdell, 562 F.2d 701 (D.C. Cir. 1977), this court refused to find that a due process liberty interest was implicated when a Government employee was dismissed for reasons of unsatisfactory job performance and insubordination. The court expressly stated, however, that the employee was not terminated for grounds of dishonesty, noting that dismissals in such a case have been held to affect liberty interests. Id. at 714. 55 In response to appellant's claim that a liberty interest was violated in this case, the Government argues that the injury to ODDPI was essentially an injury to reputation, not actionable in light of Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976). We find that reliance on Paul v. Davis is totally misplaced in this case. 56 In Davis, the Chief of Police in Louisville, Kentucky circulated to merchants a flyer containing the caption ACTIVE SHOPLIFTERS and five pages of mug shot photos, including that of Edward Davis. The flyer was brought to the attention of Davis' employer, who demanded an explanation. After hearing Davis' story, the employer informed Davis that he would not be fired. Nevertheless, Davis brought suit in federal district court claiming that he had been improperly stigmatized by Government action without due process of law. 57 The Supreme Court noted that Davis' complaint appeared to state a classic case of defamation. The Court held, however, that Davis had not been deprived of a liberty interest protected by the Fourteenth Amendment and actionable under 42 U.S.C. § 1983. As stated by the Supreme Court, while we have in a number of our prior cases pointed out the frequently drastic effect of the 'stigma' which may result from defamation by the government in a variety of contexts, this line of cases does not establish the proposition that reputation alone, apart from some more tangible interests such as employment, is either 'liberty' or 'property' by itself sufficient to invoke the procedural protection of the Due Process Clause. 424 U.S. at 701, 96 S.Ct. at 1160 (emphasis supplied). The Court observed that any other construction of the Fourteenth Amendment would seem almost necessarily to result in every legally cognizable injury which may have been inflicted by a state official acting under 'color of law' establishing a violation of the Fourteenth Amendment. Id. at 699, 96 S.Ct. at 1159. 23 58 We think that the cases distinguished by the Court in Paul v. Davis are much more applicable to the present case. For instance, the Court cited United States v. Lovett, 328 U.S. 303, 66 S.Ct. 1073, 90 L.Ed. 1252 (1946), where the Supreme Court held that an Act of Congress which prohibited payment of any salary to three Government employees was an unconstitutional bill of attainder. The Court in Davis highlighted the statement in Lovett that what is involved here is a congressional proscription of (these employees), prohibiting their ever holding a government job. 328 U.S. at 314, 66 S.Ct. at 1078; see 424 U.S. at 702, 96 S.Ct. at 1161. Similarly, the Court in Davis carefully reviewed the multiple opinions of the Justices in Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 71 S.Ct. 624, 95 L.Ed. 817 (1951), and concluded that at least six of the eight Justices who participated in that case viewed any 'stigma' imposed by official action of the Attorney General of the United States, divorced from its effect on the legal status of an organization or a person, such as loss of tax exemption or loss of government employment, as an insufficient basis for invoking the Due Process Clause of the Fifth Amendment. 424 U.S. at 704-705, 96 S.Ct. at 1162 (emphasis supplied). Finally, the Court in Davis considered the case of Cafeteria Workers v. McElroy, 367 U.S. 886, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961), where the Supreme Court held that the discharge of an employee of a Government contractor did not violate due process. The Court in Davis noted the passage of the opinion in McElroy where the Court stated: Finally, it is to be noted that this is not a case where government action has operated to bestow a badge of disloyalty or infamy, with an attendant foreclosure from other employment opportunity. 367 U.S. at 898, 81 S.Ct. at 1750; see 424 U.S. at 705, 96 S.Ct. 1155, 1163 (emphasis supplied in Davis ). The Supreme Court in Davis summarized these cases by stating that: 59 (t)he Court has never held that the mere defamation of an individual, whether by branding him disloyal or otherwise, was sufficient to invoke the guarantees of procedural due process absent an accompanying loss of government employment. 60 424 U.S. at 706, 96 S.Ct. at 1163 (emphasis supplied). 61 The point need not be repeated further. Contrary to the position of the Government here, it is clear that the opinion in Paul v. Davis supports the claim of ODDPI in this case. For, as amply detailed earlier, 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. 24 62