Court Opinion

ID: 8927871
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:51:32.309017+00
Date Added: 2024-06-11T17:09:27.197024
License: Public Domain

GODBOLD, Chief Judge,
dissenting:
This is a subtle ease because of the interplay of Royal Services, Inc. v. Maintenance, Inc., 361 F.2d 86 (5th Cir.1966), which is binding upon us, traditional principles of preemption, and policies of federalism and comity. Added to this are matters of effective judicial administration involving certification of an issue to a state supreme court.
I. Royal Services, Inc.
It is unquestioned that there is no private federal cause of action for violation of the Small Business Act and the regulations thereunder. Also it cannot be questioned that heretofore Alabama has not by statute or decision incorporated into its body of tort law a right in one bidder to sue another bidder for violation of provisions of the Small Business Act. Nevertheless, plaintiff contends that the standards of conduct created by the Act, if broken, give rise to a tort action under Alabama law. Royal Services seems to me to hold to the contrary.
The plaintiff in Royal Services was a second low bidder, like plaintiff here, suing the successful bidder on the ground that the successful bidder had misrepresented to the government its status as a small business concern. Plaintiff asserted two grounds: first, that, based on Florida law, plaintiff was the third-party beneficiary of the contract between the low bidder and the government (in which contract defendant had made the alleged misrepresentation), and, second, defendant had negligently miscertified itself. On appeal plaintiff did not argue the negligence theory, and the court did not consider it.
With respect to the claim based on alleged third-party beneficiary status, the Fifth Circuit looked to Florida law to find its test for determining when there is a third-party beneficiary relationship, and found that Florida used an “intent” test. 361 F.2d at 91. The court assumed without deciding that this was the proper test to be applied. Id. To find the answer to the *965intent issue the court looked to the contract and the Small Business Act and the regulations thereunder. The court held that the construction of the Act and the regulations was a matter of federal, not state, law. The federal court examined these federal sources and, as a matter of federal law, concluded that they evidenced no intent to create a cause of action. No federal cause of action was involved in the case or under discussion; the only cause of action alleged and the only cause of action discussed was the state law cause of action for breach of contract as asserted by a third-party beneficiary. Thus, the court’s decision was that no state-law civil cause of action was intended to be created. The court said:
Did Congress by the pertinent provisions of the Small Business Act and the rules and regulations promulgated thereunder and the requirement that a bidder prior to the opening of the bids make a good faith certification respecting his status as a small-business concern manifest an intent, in the event the certification was untrue and such bidder was awarded the contract, to give a cause of action against such bidder to the next lowest bidder for loss of profits?
We shall turn now to Royal’s first contention. Clearly, there is no express provision in the Small Business Act or the rules and regulations promulgated thereunder giving a civil remedy to the second lowest bidder for loss of profits or for damages suffered because of an untrue statement made by the successful bidder in his certification respecting his status as a small-business concern, and we think no intent so to do may be implied therefrom.
The declared purpose of the Small Business Act is to preserve and expand full and free competition for the economic well-being and security of the Nation, by encouraging and developing the actual and potential capacity of small business, through aiding, counseling, encouraging, assisting and protecting the interests of small businesses. We think the purpose was public in character, viz., the preservation and expansion of full and free competition to insure the Nation’s economic well-being and security, and that there was no intent to create civil rights of action in private persons.
Id. at 92.
While the Royal Services court did not employ the word “preemption” as a word of art, its conclusions answer authoritatively the traditional steps in a preemption analysis, discussed in Part II below. The only difference between Royal Services and this case is that one second low bidder sued on a contract theory under Florida law and the other second low bidder sued on a tort theory under Alabama law. The majority correctly says that in Royal Services the court was answering the question whether in enacting the Small Business Act Congress intended to confer such a benefit on a second low bidder that it could, as third party beneficiary of the contract between the government and the low bidder, sue the low bidder. The court answered that question “No.” What is important is the reason the court gave for answering in the negative. As set out above in the quoted material from the decision, after discussing the general purposes of the Act the court gave its reason (which does not even appear in the majority opinion in this case). It was:
We think had Congress intended to give a civil remedy to the second lowest bidder against the lowest and successful bidder, because the latter made an untrue statement in his certification respecting his status as a small-business concern, it would have done so, either by express provision or by clear implication. It did not do so in the Small Business Act.
361 F.2d at 92. In short, the intent element required by Florida law for a third-party beneficiary suit was not present because Congress did not intend to give a civil remedy to the second, low bidder. The majority does not explain why it makes a difference that the state court civil remedy under examination was a suit on contract while in the present case the civil remedy under examination is a suit in tort.
*966II. Preemption
Under traditional preemption analysis, the federal law concerning right to sue for violation of the Act or the regulations preempts state law, and there can be no state cause of action. This court recently set out the steps in a preemption analysis. Automated Medical Laboratories, Inc. v. Hillsborough County, 722 F.2d 1526 (11th Cir.1984). Initially the court must ascertain whether there is “any explicit declaration of congressional design to displace state regulation.” Id. at 1530. The parties do not suggest any such declaration in the Small Business Act or in the legislative history.
Finding no explicit intent, “we must next examine Congress’s implicit intent in enacting the federal scheme.” Id. There are three tests for determining whether Congress has implicitly preempted state law, only one of which need be satisfied for preemption to exist:
First, is the federal scheme “so pervasive as to make reasonable the inference that Congress left no room for the states to supplement it.” Id. at 1531. Federal regulation of federal government contracts and procurement is pervasive and comprehensive. Among the areas regulated by statute and agency rules are who can submit bids, when they are to be submitted, whether there are to be set-asides for small businesses and minority contractors, how bids are to be evaluated, the discretion the government agency has to select among competing bids, the procedures for challenging competing bidders, and the standards for determining eligibility of bidders. As an example, 13 C.F.R. contains 41 pages of regulations on the topic “Small Business Size Standards.” These regulations determine eligibility of small businesses to bid on business contracts such as the one at issue. They provide for the initial determination of eligibility, a competitor’s method of protest, procedure for investigating informally evaluating compliance with eligibility compliance, appeals procedures, and sanctions for bidding when not eligible. 13 C.F.R. § 121 et seq. (1983). With this wide scope and specificity, it is reasonable to conclude that Congress has occupied the field and has left no room for state regulation of the federal procurement process.
Second, is the area “a field in which the federal interest is so dominant that the federal system must be assumed to preclude” state enforcement? The government interests in this area are uniquely federal. One such interest is the need to have work performed for the government on a timely basis, at the least expensive cost possible, by competent contractors. All federal procurement regulations are targeted at achieving this goal. The goal is sometimes tempered by other federal concerns such as assisting small business in gaining a share of the market and thereby promoting competition and aiding minority businesses in attaining a fair share of government contracts. But even these are federal interests, attainable under Congress’s commerce clause powers or its civil rights authority.
When Congress has these mixed goals of procurement and assistance to selected businesses, the balance to be struck between these goals is a federal question. The federal government has a strong interest in seeing that the groups prescribed for set-asides are aided, while at the same time the government's interest that its contracts be awarded and performed in an efficient manner is not injured. In choosing between certainty on eligibility for small business set-asides and speed in having contracts performed, Congress has explicitly struck that balance by specifying that a bidder’s certification will be binding on a specific contract unless a protest by a competitor is filed on a timely basis and contains adequate factual allegations concerning the bidder’s ineligibility. Congress has decided that it would rather have a business later found to be ineligible perform small business set-aside work than to delay performance by permitting late challenges. In light of these factors, it is reasonable to conclude that Congress has preempted the field on procurement contracts and eligibility for small business set-asides,
*967Third, is there a conflict between the federal scheme and the challenged state regulation? Some of the courts that have considered whether there is a private right of action under federal law against a competing bidder have addressed the issue of whether an action for damages would conflict with the federal scheme. They have concluded that it would. E.g. Savini Construction Co. v. Crooks Brothers Construction Co., 540 F.2d 1355 (9th Cir.1974); Mid-West Construction Co. Ltd. v. U.S., 181 Ct.Cl. 774, 387 F.2d 957 (1968); North-land Equities, Inc. v. Gateway Center Corp., 441 F.Supp. 259 (E.D.Pa.1977). These conclusions apply here, because there is no difference between a federal damages remedy and a state damages remedy if the ultimate question is whether such a remedy conflicts with the goals of the federal scheme.
Rogers v. Ray Gardner Flying Service, Inc., 435 F.2d 1389 (5th Cir.1970) is factually similar to the present case, but different in analysis. The result is, however, the same. Plaintiff contended that Oklahoma state law, under which negligence of a bailee of an airplane would not be imputed to the bailor, had been widened by a provision of the Federal Aviation Act that arguably imposed bailor liability. The Fifth Circuit analyzed the issue in terms of whether Congress intended to preempt the state law of bailments to the extent of expanding its scope. The court stated its disbelief that Congress would undertake to alter the tort laws of numerous states in so oblique a fashion and found no intent to supersede state laws of bailments as related to operation of airplanes. The court remanded the case for entry of summary judgment for defendant. Whether one examines preemption in an affirmative manner, asking whether the federal scheme occupies the field and therefore excludes state regulation, as I have done, or in a negative manner, as in Rogers, asking whether there is an absence of congressional intent to expand by federal statute an unoccupied area of state law, the result is the same in this case. We know from Royal Services that Congress did not intend a state right to recover based upon violation of the Act.
In Savini Construction Co., the court pointed to one of the conflicts created by a damages remedy.
Had Crooks Brothers [the low bidder] known that, depending on the post-award outcome of the size appeal, it would be subject to suit for its profits, it might well have declined to accept the award. Or, having accepted, it might have refused to continue work on the contract following the Size Appeals Board determination that it was originally ineligible to bid. Finally, although Crooks Brothers might have continued to execute the contract, serious problems of quality and speed of work could have arisen given the possible deprivation of profits at the conclusion of the project.
540 F.2d at 1359. In this case the possible harm to the low bidder is even more speculative and difficult to ascertain in advance of bidding, because, unlike Savini, the plaintiff here did not even file a size protest on a timely basis. The low bidder here had no notice of its possible liability to Tectonics until suit was filed. To permit the interjection of Alabama’s tort law to create this additional burden on federal bidders erects a hurdle to the accomplishment of the federal scheme.
Northland Equities, Inc. v. Gateway Center Corp., 441 F.Supp. 259 (E.D.Pa. 1977), concerned an attempt by an unsuccessful bidder under federal procurement procedures to assert a federal cause of action on the ground that the successful bidder had failed to comply with bid specifications. The court, in granting summary judgment for defendant, considered Savini Construction and the analogy of rejection of claims of unsuccessful bidders under the Small Business Act.
The rejection of SBA claims, despite a clear congressional expression of concern for the welfare of small businesses, strongly suggests the impropriety of creating a private action for damages under the procurement laws. By deterring unsuccessful bidders from acting at an ear*968ly date to overturn an award, such a policy would similarly frustrate existing enforcement mechanisms under the procurement statutes. Presently, an unsuccessful offeror has several available methods by which he can challenge an award which he believes was improperly made. He can file a protest with the contracting officer who is required to consider all protests submitted before or after an award is made (41 C.F.R. §§ 1-2.-407-8); he can file a protest with the General Accounting Office (GAO), where the Comptroller General must investigate the award and issue a report affirming or voiding the award (4 C.F.R. §§ 20.0-.10); and finally, he can seek judicial review of the award and injunctive relief in federal court.
441 F.Supp. at 259. Like administrative procedures are available to plaintiff in the present case. The Northland court went on to hold:
Now, years after the 1971 award to Gateway, plaintiff seeks lost profits, bid costs and punitive damages. While this court by no means wishes to condone possible fraud, neither does it want to encourage possible speculative plaintiffs to wait until a building is constructed and inhabited before attacking the propriety of the initial award. This would wreak havoc on procurement. In order to be compatible with statutory goals, a remedial scheme must guarantee that the bidder will act at a time when the proper bidder can still be selected. By telling the unsuccessful bidder that he may wait until after his competitor has performed and then sue to recover possible lost profits, the courts would provide an irresistible disincentive to his coming forth at an earlier time. Any award goes into the private pocket of the unsuccessful bidder, not into the public treasury, even though the government suffers by not having procured the most advantageous bid.
It is judicious to consider not only the ill effect on procurement, but also the strain on the effectiveness of the already burgeoning federal court system, before ascribing to Congress the intention to open up a new right of private action. Having thoroughly considered this issue, this court finds that a private cause of action for damages and lost profits under the procurement statutes cannot be implied.
441 F.Supp. at 263-64.
All three of the tests for preemption laid out in Automated Medical are satisfied in this case, though only one need be satisfied, which means that federal law preempts. 722 F.2d at 1533.
The majority follows the opinion of the Eighth Circuit in Iconco v. Jensen Const. Co., 622 F.2d 1291, 1298 (8th Cir.1980). That case affirmed a judgment in favor of the second low bidder against the low bidder, on state law grounds of fraud and unjust enrichment, based upon miscertification by the low bidder of its small business status. The Eighth Circuit held that Iowa was free to look to the Small Business Act for standards to apply in fashioning its common law. It examined the Small Business Act and found nothing in the statutory and regulatory schemes to support an implied prohibition against a state doing this. This is precisely the opposite of the finding of Congressional intent that the Fifth Circuit had reached in Royal Services. The Eighth Circuit did not overlook Royal Services. Rather it addressed Royal Services and specifically considered and rejected the holding of the Fifth Circuit that implying a private action by an unsuccessful bidder against a successful one was inconsistent with Congressional intent:
To the extent, however, that the language used in those cases [Royal Services and Savini Construction ] supports the conclusion that any private suit by an unsuccessful bidder against a successful one is inconsistent with Congressional intent and would jeopardize the proper administration of the government’s contract procurement system, we respectfully disagree for the reasons we have stated.
*969622 F.2d at 1299. Having rejected the Royal Services finding of Congressional intent, the court adopted an opposing construction of Congressional intent. Id. Moreover, the Eighth Circuit misread Royal Services as involving only the issue of whether a federal cause of action could be inferred from the Act. Id. As we have pointed out above, the case concerned the existence of a Florida cause of action. This court is bound by Royal Services. It is not free to reject it and to climb aboard a decision by another circuit that has reached an opposing conclusion and rejected Royal Services’ basis for decision as well.
III. The state law “window”
What the majority seems to say is that Alabama is free to incorporate into its tort law a cause of action for breaches of duties set out in the Small Business Act, and the decision remands the case to the district court for it to decide whether Alabama has or will make such a choice. In an abstract sense Alabama can, of course, incorporate into its tort law whatever breaches of duty it perceives accord with its state policies, so long as not barred by the Supremacy Clause. But in this instance Royal Services has decided that the federal policy is that the federal statute, statutory scheme and regulations did not intend to create a private state cause of action. If there is a non-preempted “window” left for a state-law cause of action, created as a matter of state policy, it is a narrow one- at best. Under our system of federalism, where comity is important and federal-state systems have a decent regard for each other and for each other’s views and policies, it seems to me doubtful that a state would create a new area of tort liability by incorporating into its common law of torts provisions of a federal statute when the federal court of the circuit in which the state is located has held that in enacting the statute Congress did not intend a private state cause of action. This would bring state policy into collision with federal policy. The possibility reinforces that this court’s decision on preemption is incorrect.
IV. Certification, Comity and Federalism
If this court follows neither Royal Services nor traditional preemption analysis, then this case is a paradigm for certification by this court to the Alabama Supreme Court. If that court responds that there is no state cause of action, the matter will be at an end.1 Rather than take this direct and straightforward approach the court remands to the district court for it to decide whether there is an Alabama cause of action. This is an anomalous assignment for a federal court when decision of this new state-law issue necessarily implicates the extent to which the state, as a matter of comity, wishes to give effect to expressed federal interests. Under Alabama certification procedures the federal district court can certify the cause of action question to the Alabama Supreme Court, and I hope that it will consider doing so. Should the district court decide the issue for itself without certifying to the Alabama Supreme Court, regardless of how it decides, we can predict what will happen. The case will come back to this court on a second appeal, and this court will then have to revisit the question of whether we should certify the question to the Alabama Supreme Court. Surely this additional circumlocution is unnecessary.

. If this court chose to certify, it would not need to address the preemption issue until we learn from the authoritative source, the state supreme court, whether a cause of action exists. If none exists we will not have cluttered up the law books and fly-specked the law by a discussion, which will have become hypothetical at best, concerning whether federal law preempts a non-existent state cause of action. If the Alabama court responds that there is a state cause of action, we could then address the preemption question bearing in mind the contours and scope of the cause of action that the state court has defined.