Opinion
B230449
08-30-2011
FEI ENTERPRISES, INC., Plaintiff and Appellant, v. LOS ANGELES COMMUNITY COLLEGE DISTRICT, Defendant and Respondent.
Law Office of Robert G. Klein and Robert G. Klein for Plaintiff and Appellant. Heyman Densmore, Roger P. Heyman and James K. T. Hunter for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BS125531)
APPEAL from a judgment of the Superior Court of Los Angeles County. Robert H. O'Brien, Judge. Affirmed.
Law Office of Robert G. Klein and Robert G. Klein for Plaintiff and Appellant.
Heyman Densmore, Roger P. Heyman and James K. T. Hunter for Defendant and Respondent.
FEI Enterprises, Inc. (FEI) appeals from the trial court's denial of its writ of mandate. Through the writ of mandate, FEI sought to set aside the Los Angeles Community College District's (LACCD) debarment of FEI from bidding, contracting or subcontracting on any LACCD project for a period of four years (the debarment order). We affirm the judgment of the trial court.
CONTENTIONS
FEI contends that: (1) LACCD lacked statutory authority to debar FEI; (2) LACCD applied the wrong standard for debarment; (3) FEI's conduct did not warrant debarment; and (4) FEI was not afforded due process.
FACTUAL AND PROCEDURAL BACKGROUND
LACCD awarded FEI a construction contract on December 17, 2008. On August 6, 2009, LACCD informed FEI that it was exercising its right to terminate the contract. FEI was instructed to demobilize and fully vacate the construction site by August 26, 2009.
On October 9, 2009, counsel for LACCD sent FEI notice of a debarment hearing to take place on December 9, 2009. The notice informed FEI of the facts and evidence which would be considered at the hearing. The evidence related to two different subjects: (1) FEI's failure to pay prevailing wages, and (2) FEI's failure to provide adequate supervision and meet safety requirements on its work for LACCD.
The evidence to be presented in the first category included: a settlement between FEI and the Department of Industrial Relations under which FEI agreed to pay $178,385.54 for failing to pay prevailing wages on a construction project for the City of Los Angeles; numerous notices of withholding issued for FEI's failure to comply with prevailing wage laws on various projects for Los Angeles Unified School District (LAUSD); a special verdict in a consolidated Los Angeles Superior Court case finding FEI liable for failure to pay dozens of workers prevailing wages on numerous LAUSD contracts and finding Gabriel Fedida, the president of FEI, guilty of malice, oppression, and/or fraud; and evidence of FEI's failure to comply with LACCD's requests that FEI provide information to verify its compliance with prevailing wage requirements.
Evidence to be presented in the second category included LACCD's requests that FEI provide proof of performance per project specification, as well as competent supervisory and managerial personnel to direct the work. In addition, there was evidence of safety violations, including an incident report documenting a worker injury on a LACCD worksite. Finally, there was documentation regarding numerous issues related to FEI's failure to perform work according to specifications and lack of timeliness on its LACCD projects.
The debarment hearing took place on December 9, 2009, before a committee of the Board of Trustees of LACCD. Each side was given two and a half hours of presentation time, including an opening statement, the presentation of documentary and oral evidence, and the cross-examination of witnesses.
On February 10, 2010, LACCD, through its Board of Trustees, issued the debarment order debarring FEI from bidding, contracting, or subcontracting on any LACCD project for a period of four years.
FEI filed a petition for writ of administrative mandamus on March 18, 2010, challenging LACCD's findings and debarment order. A hearing on FEI's petition took place on November 29, 2010, and the trial court took the matter under submission. On December 3, 2010, the court issued an order denying FEI's petition. The trial court ruled that LACCD had the authority to debar FEI; that LACCD's findings were "overwhelmingly supported by the evidence," and that FEI received due process.
On January 25, 2011, FEI filed its notice of appeal.
DISCUSSION
I. Standards of review
In an action challenging the decision of a public agency, the inquiry extends to whether there was a prejudicial abuse of discretion. (Moran v. Board of Medical Examiners (1948) 32 Cal.2d 301, 308 (Moran).)"'Abuse of discretion is established if . . . the findings are not supported by the evidence.'" (Ibid.; Code Civ. Proc., § 1094.5, subd. (b).)
Where, as here, the trial court exercised its independent judgment on the evidence, we apply the substantial evidence test to review the trial court's findings. (Bixby v. Pierno (1971) 4 Cal.3d 130, 143, fn. 10 (Bixby).) Under this test, "'"all conflicts must be resolved in favor of the respondent, and all legitimate and reasonable inferences indulged in to uphold the verdict if possible. . . . [W]hen a verdict is attacked as being unsupported, the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the conclusion reached by the jury. When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court." [Citation.] . . . .' [Citations.]" (Moran, supra, 32 Cal.2d at p. 308.) The rule is "'as applicable in reviewing the findings of a judge as it is when considering a jury's verdict.'" (Ibid.)
FEI cites TG Oceanside, L.P. v. City of Oceanside (2007) 156 Cal.App.4th 1355, for the proposition that the Court of Appeal should review the hearing officer's final decision, not the trial court's ruling. (Id. at p. 1370.) However, Oceanside is distinguishable. As explained in Bixby, where an administrative hearing involves a constitutionally-protected right, "the trial court not only examines the administrative record for errors of law but also exercises its independent judgment upon the evidence." (Bixby, supra, 4 Cal.3d at p. 143.) After the trial court has exercised such independent judgment, "an appellate court need only review the record to determine whether the trial court's findings are supported by substantial evidence. [Citations.]" (Ibid. at fn. 10.) There was no dispute below that, because a due process liberty interest was at stake, the trial court should exercise its independent judgment on the evidence in this matter. (See Golden Day Schools, Inc. v. State Dept. of Education (2000) 83 Cal.App.4th 695, 705-707 (Golden Day).) Under the circumstances, we apply the substantial evidence test to review the factual findings of the trial court.
"The . . . determination whether an administrative proceeding was fundamentally fair is a question of law . . . . [Citation.]" (Southern Cal. Underground Contractors, Inc. v. City of San Diego (2003) 108 Cal.App.4th 533, 542 (Southern Cal. Underground).)Thus, FEI's due process claims are subject to our independent review. (Ibid.)Pure questions of law are also reviewed de novo. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.)
II. LACCD's authority to debar FEI
FEI argues that in order for LACCD to debar a contractor from bidding on its contracts, there must be specific statutory authority for such action. In support of this position FEI cites Golden Day, supra, 83 Cal.App.4th 695. However, contrary to FEI's position, no such "explicit provision for debarment" existed in Golden Day. Instead, the Court of Appeal "assume[d] . . . that the Department is authorized to debar by the broad grant of administrative and rulemaking authority given it in the enabling statute." (Golden Day, at p. 703.) Thus, the authority to debar was implied, not explicit. In Gonzalez v. Freeman (1964) 334 F.2d 570 (Gonzalez), also cited by FEI, the District of Columbia Circuit Court of Appeals concluded that the power to debar "is inherent and necessarily incidental to the effective administration" (id. at p. 577) of the statutory scheme at issue in that case (the Commodity Credit Corporation Charter Act). Again, no explicit provision authorized debarment. Such authority was assumed.
In Southern California Underground, supra, 108 Cal.App.4th 533, debarment of a contractor was specifically authorized by San Diego Municipal Code section 22.0803, subdivision (b). However, the case does not suggest that such specific authority is always necessary. FEI has also cited Coca-Cola Co. v. State Board of Equalization (1945) 25 Cal.2d 918, 921, as authority for its position that specific statutory authority must authorize an agency to engage in debarment. The case is not relevant to this subject therefore we decline to discuss it.
California courts have consistently concluded that government entities have the inherent authority to debar contractors as a necessary means to carry out their obligations. Certain local government entities have the authority to bid out public works contracts, but are statutorily required to award the contract to the lowest bidder. Such government entities have the right to protect themselves from nonresponsible bidders by debarring those contractors for a specified period of time. As explained in Stacy & Witbeck, Inc. v. City and County of San Francisco (1995) 36 Cal.App.4th 1074, 1094, footnote 9 (Stacy),"competitive bidding requirements for . . . cities and counties are governed by . . . Public Contract Code section 20100 . . . and 20162 . . . [which] require contracts to be let 'to the lowest responsible bidder.' Of necessity . . . municipalities have discretion to determine which bidders are 'responsible.' [Citations.]"
LACCD is bound by the competitive bidding requirements set forth in Public Contract Code section 20651. Under that section, it must "let any contract for a public project . . . to the lowest responsible bidder . . . ." (Pub. Contract Code, § 20651, subd. (b).) Based on the authority discussed above, we conclude that LACCD has the implied authority to debar contractors that it deems nonresponsible as "a necessary means to enable . . . [it] to deal with irresponsible bidders and contractors, and to administer its duties with efficiency. [Citation.]" (Golden Day, supra, 83 Cal.App.4th at p. 704.)
FEI argues that "[t]he only guidance" on debarring a contractor from public contracts for alleged prevailing wage violations is found at Labor Code section 1777.1. This statute only applies to findings by the Labor Commissioner of a fraudulent or willful violation of certain specific provisions of the Labor Code. The statute is irrelevant to this proceeding and will not be discussed further.
III. The standard for debarment
FEI next argues that LACCD erred in relying on the definition of the term "nonresponsibility" found in City of Inglewood-L.A. County Civic Center Auth. v. Superior Court (1972) 7 Cal.3d 861 (City of Inglewood), as the appropriate standard for debarment. In City of Inglewood, the Supreme Court concluded that the term nonresponsibility "includes the attribute of trustworthiness, [but] also has reference to the quality, fitness and capacity of the low bidder to satisfactorily perform the proposed work. [Citation.]" (Id. at p. 867.) FEI argues that this definition of nonresponsibility was not an appropriate standard in this case, since a finding of nonresponsibility may disqualify a contractor from bidding on one particular project, whereas debarment precludes a contractor from bidding on any public contract for a period of years.
This standard was codified in Public Contract Code section 1103, which defines "Responsible bidder" as "a bidder who has demonstrated the attribute of trustworthiness, as well as quality, fitness, capacity, and experience to satisfactorily perform the public works contract."
FEI has not provided any authority for its proposed distinction between the standard for precluding a contractor from bidding on one project as opposed to the standard for precluding a contractor from bidding on any project for a number of years. We find no such distinction in the relevant case law. On the contrary, the cases suggest that the proper standard to be used for debarment by a government agency is the standard of nonresponsibility. (See, e.g., Stacy, supra, 36 Cal.App.4th at p. 1080 ["The crux of this appeal is whether a municipality . . . can bar a contractor from bidding on its public works projects for five years, on a declaration of irresponsibility"]; Golden Day, supra, 83 Cal.App.4th at p. 704 ["debarment . . . is . . . a necessary means to enable the contracting governmental agency to deal with irresponsible bidders and contractors"]; Southern Cal. Underground, supra, 108 Cal.App.4th at p. 542 [same].) Thus, we reject FEI's suggestion that a different standard should be applied in this case.
FEI further argues that LACCD failed to give contractors sufficient guidance in determining what behavior renders a contractor nonresponsible for the purposes of debarment. A contractor, FEI argues, must know specifically what conduct will result in debarment. Without such explicit standards, FEI argues, contractors cannot know what acts will precipitate a complaint of misconduct, and what consequences will flow from such misconduct.
FEI cites Gonzalez as support for this theory. In Gonzalez, a corporation was debarred from contracting with Commodity Credit Corporation after the corporation's named partner was indicted on felony charges of alleged misuse of official inspection certificates. (Gonzalez, supra, 334 F.2d at p. 572.) The District of Columbia Circuit Court of Appeals deemed the debarment invalid because it was imposed without observance of procedural requirements. (Id. at p. 580.) Among other things, the court found that there was insufficient guidance "as to what acts will precipitate a complaint of misconduct." While an experienced businessman could reasonably anticipate some action might well be taken as a result of misuse of inspection certificates, he could only speculate as to the nature of the action and the processes by which it would be effected. (Id. at p. 578.)
The indictment was later dismissed, and the partner entered a plea of guilty to a misdemeanor based on essentially the same acts. (Ibid.)
In addition, the court found that proper notice to the corporation had not been given, and the necessary procedural protections of a hearing and findings were not granted to the appellants. (Gonzalez, at p. 579.)
Similarly, argues FEI, it was entitled to know precisely what conduct could result in debarment.
As discussed above, the standard for debarment set forth in City of Inglewood "includes the attribute of trustworthiness," but "also has reference to the quality, fitness and capacity of the low bidder to satisfactorily perform the proposed work." (City of Inglewood, supra, 7 Cal.3d at p. 867.) Under this broad definition, a reasonable contractor should presume that conduct related to its compliance with prevailing wage requirements on public projects, as well as conduct related to its compliance with safety and security requirements on public projects, will be relevant. In other words, contractors that do not comply with prevailing wage requirements, safety requirements and security requirements may properly be found to be not only untrustworthy but also unfit or even incapable of performing to the standards demanded by a public contract.
FEI's position that it did not realize that its failure to meet these requirements might result in debarment is not convincing, and is therefore rejected. As stated by the court in Stacy, supra, 36 Cal.App.4th at page 1085, "it does not take a genius" to know that violation of prevailing wage laws and violation of safety and security requirements may subject a contractor to debarment.
IV. The weight of the evidence supported LACCD's decision
FEI next argues that the evidence did not warrant debarment. FEI points to Southern Cal. Underground as an example of the type of conduct warranting debarment. In Southern Cal. Underground, the contractor was charged with: "(1) falsifying traffic control permits; (2) working in the public right-of-way without traffic control plans or appropriate traffic control, on numerous occasions; (3) taking water from city fire hydrants without having water meters, and using meters that were either inoperable or had been reported missing (so the use of water could not be billed); (4) misrepresenting that work had been completed, and attempting to cover up the misrepresentation; (5) submitting numerous false claims for extra work, at significantly inflated labor rates; (6) submitting false claims for inflated rates on equipment (by physically altering equipment model numbers); and (7) submitting false workers' compensation claims from City's owner-controlled insurance program." (Southern Cal. Underground, supra, 108 Cal.App.4th at p. 540.)
In contrast, FEI argues, none of its conduct rose to the level of willfulness or intent to defraud found in Southern Cal. Underground. FEI insists that debarment, and its severe economic consequences, were not justified in this case.
Citing Golden Day, the Southern Cal. Underground court explained that debarment is imposed "as a result of wrongful conduct or violations of a public contract or program." (Southern California Underground, supra, 108 Cal.App.4th at p. 542.) The evidence presented at FEI's debarment hearing demonstrated both "wrongful conduct" and "violations" of the Labor Code, project labor agreements, and contractual requirements regarding safety and supervision.
The specific evidence against FEI was extensive. As explained above, the evidence fell into two categories: (1) evidence of FEI's failure to comply with the Labor Code (including prevailing wage law) and project labor agreements; and (2) evidence of FEI's failure to provide adequate supervision and to meet safety and security requirements on LACCD projects.
As to the first category, among other things, LACCD presented evidence of the following: (1) a jury found that FEI intentionally misled and deceived its workers and "'engaged in the conduct of depriving the plaintiffs of the prevailing wages with malice, oppression or fraud'"; (2) FEI was found by the State Labor Comissioner to owe back wages and penalties for Labor Code violations between 2005 and 2008 for work on multiple school sites owned by LAUSD; (3) FEI was assessed wages and penalties for nonpayment of prevailing wages on at least three different occasions on public projects; and (4) LACCD's labor compliance department has received complaints from workers on the LACCD projects that they have not been paid prevailing wages, and grievances have been filed by three different unions, all regarding FEI's failure to pay prevailing wages.
As to the second category, among other things, LACCD presented evidence of the following: (1) FEI did not have a full time superintendent on one of its LACCD projects despite the contractual requirement that it do so; (2) FEI failed to provide factory warranties, operations and maintenance materials despite the contractual requirement that it do so; (3) FEI had a number of unsecured and open work areas, unauthorized use of computers and safety problems at one of its LACCD worksites; and (4) FEI had a number of grievances filed against it by the International Brotherhood of Electrical Workers for failures to pay prevailing wages and fringe benefits, to utilize apprentices, and to utilize California Certified Electricians.
This evidence showed wrongful conduct as well as specific violations of public contracts and programs. Thus, the conduct at issue in the FEI debarment hearing was comparable to the conduct described in Southern Cal. Underground.
Further, nothing in Southern Cal. Underground, or any other case FEI has cited, suggests that a contractor's conduct must be deemed to rise to the level of severity exhibited by the contractor in that case before debarment may occur. The evidence at the debarment hearing showed that FEI disregarded the law and its contractual obligations. Such evidence was sufficient to support the trial court's determination that the debarment order was proper.
V. Due process was provided
FEI's final argument is that it was not afforded due process. In Golden Day, the court concluded that a child care contractor which was debarred from contracting with the state for three years had a due process liberty interest entitling it to a fair hearing on the decision to debar it from contract eligibility. (Golden Day, supra, 83 Cal.App.4th at p. 711.) Because debarment implicates constitutionally-protected liberty interests, FEI was entitled to due process.
The process of debarment began on October 9, 2009, when counsel for LACCD provided notice of the debarment hearing to take place on December 9, 2009. The five- page notice set forth 21 specific "facts, evidence and/or documents" which would be presented to the committee "prior to and/or at the Hearing." The notice informed FEI that it could submit any written statements, arguments or declarations that FEI believed refuted the evidence to be presented by LACCD, and informed FEI that it would be afforded the opportunity to cross-examine witnesses at the hearing.
On November 24, 2009, LACCD provided FEI with a "Revised Notice" regarding the December 9, 2009 hearing. This revised notice included information regarding the location of the hearing as well as a copy of the Board rules governing hearing procedures for debarment. Additionally, the revised notice provided "a set of the exhibits, evidence and documents which reflect upon the consideration of debarment and which will be presented to the Committee prior to and/or at the hearing."
On December 7, 2009, LACCD provided FEI with two additional exhibits and documents which LACCD intended to present at the hearing.
FEI did not submit any documents prior to the hearing, but did serve subpoenas on two witnesses. LACCD presented its documentary evidence and called four witnesses. FEI cross-examined all four LACCD witnesses, submitted its own written exhibits, and presented the testimony of eight witnesses.
The hearing lasted from 9:00 a.m. until 5:30 p.m. on December 9, 2009. The committee voted to recommend a four-year debarment to the Board of Trustees, and directed counsel to prepare a draft of findings and conclusions of law for review and approval by the committee. The Board of Trustees took public comment at its meetings on January 13 and February 10, 2010, on the issue of the recommended debarment before adopting the Committee's Report and Recommended Findings as its final order.
Despite these extensive proceedings, FEI argues that the following due process violations occurred: (1) it was not provided all the exhibits until the hearing; (2) LACCD presented their case without any foundation and based upon hearsay evidence; (3) there should have been more witnesses and more time to hear the issues at stake; (4) FEI had insufficient time to respond to the multiple and seemingly unrelated issues; and (5) after presentation, the trustees on the committee did not discuss the matter among themselves or review any documents that FEI presented, and they made their decision without deliberation.
FEI's argument fails for two reasons: first, with the exception of the last claim, FEI has not provided any citations to the record, any descriptions of the exhibits it was allegedly missing, any information about the additional witnesses that might have been presented, or why more time was necessary. Further, FEI has presented no legal authority suggesting that it was entitled to any additional procedure.
As support for its last claim -- that the trustees on the committee made their decision without deliberation -- FEI cites the conclusion of the hearing transcript. At that time, the trustees on the committee voted on their recommendation to the Board of Trustees. Counsel for FEI then asked, "A decision is going to be made?" One of the trustees clarified that the committee was only voting on a recommendation to the Board of Trustees, which would make the final decision. Counsel for FEI objected again, stating "I didn't hear anyone discussing anything. . . . I don't understand how that works." Another trustee explained that because they had all been there all day observing and asking questions, it was not necessary for them to "express every single point and why we decided this or that." FEI has presented no authority suggesting that the committee was required to present its rationale prior to taking a vote at the end of the hearing. As the committee pointed out, the Board of Trustees would be provided with additional materials as well as a proposed decision to consider before making its final decision.
In fact, FEI seeks the imposition of processes to which it is not entitled under the law. Due process is a fluid concept which "'negates any concept of inflexible procedures universally applicable to every imagineable situation.'" (Golden Day Schools, supra, 83 Cal.App.4th at p. 708.) When a government contractor is facing suspension or debarment, "the full panoply of judicial trial procedures, such as cross-examination, is not constitutionally required" to protect it. (Stacy, supra, 36 Cal.App.4th at p. 1087.) Instead, the contractor is due, at a minimum, "'notice of the charges, an opportunity to rebut those charges, and under most circumstances, a hearing.' [Citation.]" (Ibid.)
In this matter, FEI was provided with notice of the charges, copies of most--if not all--of the documentary evidence to be presented against it, an opportunity to submit its own documentary evidence, a full hearing with cross-examination, and the opportunity to make posthearing comments. Under the circumstances, FEI received more than sufficient due process.
DISPOSITION
The judgment is affirmed. LACCD is entitled to its costs on appeal. NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
CHAVEZ, J. We concur:
BOREN, P. J.
ASHMANN-GERST, J.