Opinion ID: 730834
Heading Depth: 1
Heading Rank: 2

Heading: facts

Text: 7 Hellenic American Neighborhood Action Committee (HANAC) is a nonprofit public service City contractor that has had an unblemished record for over twenty-five years. In March 1996, City officials noticed irregularities in the grant to HANAC of a contract by the Human Resources Administration (HRA). Mayor Giuliani directed the DOI to review all HANAC contracts. The U.S. Attorney's Office also commenced an investigation of HANAC. The Mayor then ordered HRA to terminate two HANAC contracts, pursuant to a contract clause authorizing unilateral termination on thirty days' notice if the City believes it to be in its best interests. 8 In early April, the Department of Youth Services (DYS), another City agency, notified HANAC that its proposal, too, was rejected, because DYS found HANAC nonresponsible based on the ongoing investigations. Immediately after the DYS rejection, Richard M. Bonamarte, Director of the Mayor's Office of Contracts and the City's Chief Procurement Officer, sent a letter (Bonamarte letter) to the heads of all City agencies stating that pending further notice, no procurement action of any kind is to be taken involving [HANAC and its affiliates] without first consulting this Office. HANAC, however, was not advised of this letter and did not learn about it until the current litigation. 9 In the meantime, HANAC took an administrative appeal from the termination of its HRA contracts and the DYS determination of nonresponsibility. Eventually, HANAC abandoned these efforts, finding them a useless endeavor in light of what it regarded as the City's blanket decision to terminate HANAC's contracts and to preclude HANAC from obtaining new ones until the investigation ended. 10 On April 26, 1996, HANAC commenced an Article 78 proceeding challenging only the termination of its HRA contracts, arguing that the contracts should remain in effect during a dispute resolution process alleged by HANAC to be applicable. HANAC made no claims of a de facto debarment nor did it raise any due process claims in its Article 78 proceeding. On May 8, 1996, the New York State Supreme Court dismissed the proceeding holding that the City had the right to terminate the contracts at will and that the dispute resolution procedure plaintiff tried to invoke did not apply to terminations. HANAC did not appeal. 11 On May 1, 1996, while its Article 78 proceeding was still pending, HANAC filed the present § 1983 suit against the City of New York and various City officials (City) in the United States District Court for the Southern District of New York (Sotomayor, J.). This suit alleged that the City (a) deprived HANAC of its property interest in its status as an eligible City contractor by de facto debarring it from consideration for City contracts and (b) deprived HANAC of its liberty interest in its good name and reputation by labelling it nonresponsible without due process in violation of the Fourteenth Amendment. HANAC sought a preliminary injunction requiring the City to reinstate all its cancelled contracts, and enjoining the City from denying HANAC any further contracts until the outcome of the § 1983 action. 12 Judge Sotomayor granted the preliminary injunction, finding that the defendants' actions (a) constituted a de facto debarment, which deprived HANAC of its property interest as an eligible City contractor without due process, and (b) also deprived HANAC of its liberty interest in its reputation and good name without due process. The district court directed that HANAC be accorded a fair and reasonable opportunity to defend itself pursuant to the debarment procedures provided in the City Charter and the PPB Rules, and be given a chance to clear its name before any of HANAC's contracts could be awarded to a third party. 13 The City now appeals the injunction arguing that: (1) HANAC has no property interest in its status as a City contractor; (2) HANAC's liberty interest in its reputation was not violated by nonresponsibility findings; (3) even if HANAC suffered deprivations of property and liberty interests, the City afforded HANAC the procedures required by the Due Process Clause; (4) HANAC made no showing of irreparable harm, and (5) even if the City violated HANAC's due process rights, the remedy ordered by the district court exceeded its authority.