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MERRIAM v. KUNZIG

June 26, 1972

John MERRIAM
v.
Robert L. KUNZIG, Administrator, General Services Administration, et al.


Hannum, District Judge.


The opinion of the court was delivered by: HANNUM

On September 30, 1970, the defendant General Services Administration (hereafter, GSA) solicited bids for the lease of office space for several federal agencies located in the City of Philadelphia. On February 18, 1971 GSA awarded a 20 year lease to Gateway Center Corporation (hereafter, Gateway), the builder of a new office building yet to be constructed. The plaintiff, John W. Merriam (hereafter, plaintiff), is the owner of the Curtis Building, a twelve story office building located at Independence Square in Philadelphia. He, as an unsuccessful offeror of office space, has filed the present action seeking, inter alia, a declaratory judgment that the award to Gateway was illegal, an injunction prohibiting the defendants from executing the lease contemplated by the award, and an order compelling GSA to reconsider those offers, other than Gateway's, that were responsive to the original solicitation. Presently before the Court is the defendant's motion for summary judgment pursuant to Rule 56, Fed. R. Civ. P., 28 U.S.C. To deal with the legal questions raised a detailed statement of the facts underlying this controversy is required.

 HISTORY OF THE CONTROVERSY

 By Presidential directive dated March 27, 1969, the regional boundaries of the Department of Labor, Housing and Urban Development, Health, Education and Welfare, and the Office of Economic Opportunity were realigned in order to promote their efficiency and to improve their service to the general public. The City of Philadelphia was designated one of several regional headquarters for each of these agencies. GSA, charged with the responsibility of providing space for government agencies, implemented the Presidential mandate by adopting a policy requiring the realigned agencies to be headquartered in the same building where feasible. As a consequence of this policy and due to the lack of adequate government-owned office space, a need was created in Philadelphia for approximately 314,000 net usable square feet of office, storage, and related space. *fn1"

 Following an effort to develop competition in the real estate market to supply the required space, GSA conducted a market survey between January 21 and January 28, 1970. During this interval, on January 25 and again on January 28, the Government's interest in acquiring the desired amount of space was advertised in an area newspaper, the Philadelphia Inquirer. Thereafter, thirty-six persons or firms expressed an interest in supplying the Government's needs. *fn2"

 On September 30, 1970, at the direction of A.F. Sampson, Commissioner of GSA's Public Buildings Service, Solicitation for Offers No. NEG (70)-63 was issued to the plaintiff and twenty-five other prospective offerors in the metropolitan area. In response to the solicitation a total of five offers, including the plaintiff's, were received. One bid was withdrawn and another determined to be nonresponsive. Consequently, only three bids remained for GSA's consideration, the plaintiff's, Gateway Center Corporation's, and a third, not relevant to the present controversy. On February 18, 1971, Robert L. Kunzig, Administrator of GSA, upon the recommendation of Commissioner Sampson, authorized the latter to make the presently disputed award to Gateway Center Corporation. *fn3" On February 19, 1971, plaintiff protested the award to the General Accounting Office (hereafter, GAO) which, on September 16, 1971, advised his counsel that it did not feel that it could rule authoritatively on the protest at that time. *fn4" The plaintiff filed this law suit on the same date.

 On November 17, 1971, plaintiff moved for a preliminary injunction requesting that GSA be restrained from executing the Gateway lease and moved under Rule 57, Fed. R. Civ. P., 28 U.S.C., for a prompt hearing. On November 19, the defendants filed a motion for summary judgment which, in addition to seeking judgment as a matter of law, challenged the jurisdiction of this Court and the plaintiff's standing to sue. On November 23, the defendants filed answers to both of the plaintiff's motions and, in light of the jurisdictional issues raised by their motion for summary judgment, requested the Court to defer any hearing on the plaintiff's motions until the motion for summary judgment had been resolved. At a pre-trial conference on December 9, plaintiff withdrew his motion for a preliminary injunction upon the representation of the Government that no lease would be executed with Gateway until the construction of its building had been completed. Thereafter, on February 7, 1972, this Court stayed its hand for thirty days in order to allow the Comptroller General of GAO to rule on the merits of the plaintiff's protest and thereby provide the Court with the benefit of the GAO's expertise in the area of bid protests. See, M. Steinthal & Co. v. Seamans, 147 U.S. App. D.C. 221, 455 F.2d 1289 (D.C. Cir. 1971). On March 17, 1972, the Comptroller General issued his ruling. *fn5" Having the benefit of GAO's views, the Court must still resolve the questions of jurisdiction and standing raised by the defendants.

 NATURE OF THE CONTROVERSY

 The administrator of GSA is empowered to enter into lease agreements necessary for the accommodation of federal agencies by virtue of Section 210 of the Federal Property and Administrative Services Act of 1949, as amended, 40 U.S.C. § 490(h)(1) (1970):

 
"The Administrator is authorized to enter into lease agreements with any person, copartnership, corporation, or other public or private entity, which do not bind the Government for periods in excess of twenty years for each such lease agreement, on such terms as he deems to be in the interest of the United States and necessary for the accommodation of Federal agencies in buildings and improvements which are in existence or to be erected by the lessor for such purposes and to assign and reassign space therein to Federal agencies." (emphasis added)
 
"No part of any appropriation contained in this Act shall be used for the payment of rental or lease agreements for the accommodation of Federal agencies in buildings and improvements which are to be erected by the lessor for such agencies at an estimated cost of construction in excess of $200,000 or for the payment of the salary of any person who executes such a lease agreement: Provided, That the foregoing proviso shall not be applicable to projects for which a prospectus for the lease construction of space has been submitted to and approved by the appropriate Committees of Congress in the same manner as for public building construction projects pursuant to the Public Buildings Act of 1959." (Emphasis added)

 During the period presently in controversy, essentially the same restriction appeared in both the Independent Offices and Department of Housing and Urban Development Appropriation Act, 1970, Act of Nov. 26, 1969, P.L. 91-126, tit. I, 83 Stat. 229, and the Independent Offices and Department of Housing and Urban Development Appropriation Act, 1971, Act of Dec. 17, 1970, P.L. 91-556, tit. I, 84 Stat. 1449 (hereafter, I.O.A.A.).

 In April and May of 1964 informal discussions were held between representatives of the General Services Administration and the General Accounting Office in an effort to determine the impact of the foregoing restrictions upon the basic authority of the Administrator to enter into lease agreements for the accommodation of Federal agencies. GSA's purpose was to interpret the boundaries of the term "to be erected" and thereby create workable criteria by which the restriction could be observed. These discussions gave birth to what have come to be known as the "5 conditions" which, when met by a lessor of a building "to be erected", have been interpreted by GSA to relieve it from the restrictive language of the Appropriation Acts. Should the lessor of a building to be constructed at a cost in excess of $200,000 certify its compliance with the five conditions, GSA would deem the building to be in existence already and thereby eliminate the need for Congressional approval of a prospectus. The five conditions required to be met by a lessor on the date of the issuance of an invitation for bids are satisfied if:

 
"(i) Title to the site was vested in the bidder or the bidder possessed such other interest in and dominion and control over the site to enable starting construction;
 
(ii) Design was complete;
 
(iii) Construction financing fully committed;
 
(iv) A building permit for construction of the entire building, extension or addition had been issued;
 
(v) Actual construction is currently in progress or a firm construction contract with a fixed completion date has been entered into." *fn6"

 These conditions were put into effect on May 15, 1964 by a memorandum from John W. Chapman, Assistant Commissioner for Space Management, to all Regional Administrators of GSA. As of that date they were designated for inclusion in all solicitations for bids where new construction was requested or permitted. In addition to having been included in the solicitation for bids involved in the present dispute, they have been included in thirty other solicitations issued by GSA since 1964. *fn7"

 To certify its compliance with the "5 conditions" for being considered a building in existence, Gateway submitted with its offer the following documentation:

 
1. A lease from University City Science Center dated September 23, 1970, accompanied by letters from counsel for both Gateway Center Corporation and University City Science Center of the same date, stating that in their opinion the lease was a valid and binding instrument. *fn8"
 
2. Building plans and specifications. *fn9"
 
3. A letter from Allan C. Kirkman, Assistant Vice President of Provident National Bank, Philadelphia, Pa., dated September 15, 1970, committing the bank to provide a construction loan up to $12,000,000. *fn10"
 
4. A building permit issued by the City of Philadelphia Department of Licenses and Inspections dated September 30, 1970. *fn11"
 
5. A construction contract between Gateway Center Corporation and Rosemont Construction Corporation, dated September 30, 1970, for the construction of University City Gateway Building No. 1 at the Northeast corner of 36th and Market Streets, Philadelphia, Pa., per plans and specifications of Norwicki and Polillo, Architects, dated September 14, 1970. *fn12"

 In Count I of plaintiff's Complaint it is contended that GSA's acceptance of Gateway's offer was illegal because it violated the requirements of the I.O.A.A. of 1970, and that the defendants Kunzig, Sampson, and Shipp acted arbitrarily, capriciously, and unlawfully because they were instrumental in its acceptance. Specifically, it is averred that the acceptance of an offer to construct a fifteen story building costing in excess of ten million dollars and in which federal agencies will be the sole tenants, required the submission of a lease prospectus to Congress and its prior approval.

 In Count II of the Complaint the defendants are charged with arbitrarily and unlawfully interpreting the "which are to be erected by the lessor" language of the I.O.A.A. by prescribing the "5 conditions" and substituting these conditions for the statute they purport to interpret. It is averred that the defendants were not authorized to interpret the I.O.A.A., and that it constitutes a firm congressional mandate restricting GSA's authority to enter into lease agreements for the accommodation of federal agencies. The plaintiff contends that under the I.O.A.A. it was GSA's duty to determine whether or not Gateway intended to build a building independent of the prospect of a government lease, and that GSA failed to perform this duty.

 Count III, which is stated in the alternative, accepts arguendo the proposition that the defendants were authorized to use the "5 conditions" as a valid statutory interpretation of the I.O.A.A. Nonetheless, it is alleged that the defendants were derelict in their duty by accepting, without investigating, Gateway's representations. It is averred that Gateway made representations in the offer, including the documentation submitted in support thereof, purportedly certifying that the offer complied with the five conditions of the solicitation, whereas, in truth, such representations were false and intentionally misleading.

 SUBJECT MATTER JURISDICTION

 The first question to be dealt with in this controversy is whether federal jurisdiction exists. In his complaint, the plaintiff has alleged that the matter in controversy exceeds $10,000, exclusive of interest and costs. He has invoked federal jurisdiction on the basis of title 28 U.S.C. § 1331 (federal question), § 1361 (mandamus), §§ 2201, 2202 (declaratory judgment), title 41 U.S.C. § 11 (limitation on public contracts), and title 5 U.S.C. § 702 (§ 10 of the Administrative Procedure Act). Because 28 U.S.C. § 1331 definitely provides federal jurisdiction in the present case, there is no need to resolve the open question in this Circuit as to whether § 10 of the APA provides an independent source of jurisdiction in federal courts for review of agency action.

 Title 28 U.S.C. § 1331(a) provides:

 
"The district courts shall have original jurisdiction of all civil actions wherein the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and arises under the Constitution, laws, or treaties of the United States."

 Crucial to the determination of whether federal jurisdiction exists under § 1331 in the present case are the questions of whether the matter in controversy exceeds $10,000, exclusive of interest and costs, and whether the controversy "arises under" a law of the United States.

 There can be no doubt that the plaintiff has satisfied the jurisdictional amount requirement. He claims that GSA's action has caused him to suffer the loss of a prospective beneficial business relationship with the Government. Further, he claims a right to protect that prospective relationship by having GSA's allegedly illegal award to Gateway set aside. Should such a right exist, it would renew the plaintiff's prospect of a business relationship with the Government which would involve an annual amount in excess of $2,000,000. Although the value of the prospective business relationship sought to be protected by the plaintiff would not equal the amount of the lease at stake, it certainly has a value in excess of $10,000 for jurisdictional purposes.

 Similarly, there can be no doubt that the present controversy "arises under" a law of the United States. The basis for the plaintiff's suit, for which the plaintiff claims a right of redress under the APA, is GSA's asserted violation of the I.O.A.A. of 1970. Central to the plaintiff's claim is a judicial construction of the I.O.A.A. Whether or not the plaintiff is the proper party to redress GSA's possible violation of a federal law requires a determination of his standing to sue. Whether or not the plaintiff has stated a cause of action upon which relief can be granted requires a judgment on the merits. However, for a federal court to have jurisdiction, and therefore the power to enter a judgment upon the merits, it is sufficient that the plaintiff plead a right to recovery or redress directly involving a controversy respecting the construction or effect of a law of the United States. Gully v. First Nat. Bank in Meridian, 299 U.S. 109, 114, 57 S. Ct. 96, 81 L. Ed. 70 (1936). Inasmuch as a direct violation of a federal law has been pleaded in the present case, and since the claim does not appear immaterial to the law pleaded or "wholly insubstantial and frivolous", this Court has jurisdiction over the subject matter of the present litigation. Bell v. Hood, 327 U.S. 678, 682-683, 66 S. Ct. 773, 90 L. Ed. 939 (1946); State of Delaware v. Pa. N.Y. Cent. Trans. Co., 323 F. Supp. 487, 493-495 (D. Del. 1971); Pennsylvania Environmental Council, Inc. v. Bartlett, 315 F. Supp. 238, 240 n. 1 (M.D. Pa. 1970); A.G. Schoonmaker Co. v. Resor, 319 F. Supp. 933, 940 (D.D.C. 1970).

 As this case has developed, the most difficult question facing this Court has been the determination of the plaintiff's standing to sue.

 In general, the question of whether a party has standing to sue is the question of whether he has a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy. Sierra Club v. Morton, 405 U.S. 727, 92 S. Ct. 1361, 1364, 31 L. Ed. 2d 636 (1972). "The fundamental aspect of standing is that it focuses on the party seeking to get his complaint before a federal court and not on the issues he wishes to have adjudicated." Flast v. Cohen, 392 U.S. 83, 99, 88 S. Ct. 1942, 1952, 20 L. Ed. 2d 947 (1968). Like the justiciability of the issues sought to be adjudicated, questions of standing must be determined within the framework of Article III which restricts federal judicial power to "cases" and "controversies". Flast v. Cohen, supra ; Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 151, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970). As was stated in Sierra Club v. Morton, supra, 92 S. Ct. 1364-1365:

 
"Where the party does not rely on any specific statute authorizing invocation of the judicial process, the question of standing depends upon whether the party has alleged such a 'personal stake in the outcome of the controversy,' Baker v. Carr, 369 U.S. 186, 204 [82 S. Ct. 691, 703, 7 L. Ed. 2d 663], as to ensure that 'the dispute sought to be adjudicated will be presented in an adversary context and in a form historically viewed as capable of judicial resolution.' Flast v. Cohen, 392 U.S. 83, 101 [88 S. Ct. 1942, 1953, 20 L. Ed. 2d 947]. Where, however, Congress has authorized public officials to perform certain functions according to law, and has provided by statute for judicial review of those actions under certain circumstances, the inquiry as to standing must begin with a determination of whether the statute in question authorizes review at the behest of the plaintiff."

 In Sierra Club, a membership corporation composed of conservationists sought a declaratory judgment and injunction to restrain the United States Forest Service and the Department of the Interior from granting approval or issuing permits for the building of a recreational development, aspects of which allegedly violated federal laws governing the preservation of national parks, forests, and game refuges. The Sierra Club sought judicial review relying upon § 10 of the Administrative Procedure Act (APA), 5 U.S.C. § 702. The plaintiff in the present case proceeds on the same basis.

 To determine a plaintiff's standing to initiate review under § 10 of the APA, the Supreme Court referred to its analysis of the same question in the companion cases of Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184, and Barlow v. Collins, 397 U.S. 159, 90 S. Ct. 832, 25 L. Ed. 2d 192 (1970). There, two important criteria were set forth when the Court held:

 
". . . that persons had standing to obtain judicial review of federal agency action under § 10 of the APA where they had alleged that the challenged action had caused them 'injury in fact,' and where the alleged injury was to an interest 'arguably within the zone of interests to be protected or regulated' by the statutes that the agencies were claimed to have violated." 92 S. Ct. at 1365.

 Under the facts of the present case, the plaintiff has little difficulty in meeting the first criteria set forth in Data Processing and reiterated in Sierra Club. The plaintiff has alleged that the loss of a prospective beneficial business relationship has caused him irreparable damage. In each count of the complaint he alleges that he is "aggrieved and palpably injured" by the defendants' allegedly illegal action. From the facts in this case, there can be little doubt that the plaintiff has suffered the "injury in fact" necessary to provide standing to initiate review under § 10 of the APA.

 The plaintiff, however, encounters greater difficulty in demonstrating that he comes within the second criteria, that the interest he seeks to protect is "arguably within the zone of interests to be protected or regulated" by the ...


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