Federal Court Holds That it Lacks Subject Matter Jurisdiction to Review VA’s Decision to Begin Debarment Proceedings Since That Decision Is Not a Final Agency Action

Hope v. Dep’t of Veterans Affairs, 2018 U.S. Dist. LEXIS 28479 (E.D. Ark. Feb. 22, 2018)

This matter involved a motion for temporary restraining order and preliminary injunction (the “Motion”) filed by Richard Alan Hope (“Hope”) and his HVAC company, Powers of Arkansas (“Powers”), asking the District Court to prohibit the Department of Veterans Affairs (“VA”) from continuing debarment proceedings against them.  In 2012, Federal agents began investigating Hope for fraudulently presenting DAV Construction Company, Inc. as a legitimate service-disabled, veteran-owned small business in order to obtain government construction contracts.  Hope was indicted in 2016 for conspiracy to defraud, among other things.  The VA thereafter suspended Hope and Powers from government contracting based on the indictment.  The indictment was ultimately dismissed after the Court declared a mistrial.  In January of 2018, the VA lifted the suspensions, but issued notices of proposed debarment to Hope and Powers.  While debarment proceedings are pending, a contractor may not be awarded government contracts.

The Court first analyzed jurisdiction.  Absent waiver, sovereign immunity shields the VA from suit.  However, the Administrative Procedure Act (“APA”) waives sovereign immunity to allow judicial review of final agency actions.  The Court held that it lacked jurisdiction here because there was no final agency decision as to the proposed debarment.  Indeed, the VA has established procedures for debarment decisions and the proposal for debarment is only the first step.  The Court found that because the VA’s decision-making process had only just begun, and there had been no final agency action, the APA did not authorize the Court to review the merits of the proposed debarment at this time. 

The Court also rejected a “futility” argument, noting that while futility may excuse a claimant from exhausting its administrative remedies, exhaustion was not at issue here.  The Court noted that exhaustion and finality are distinct concepts.  Exhaustion relates to the steps a litigant must take.  Finality relates to completion of an action by an agency.  It is finality which creates jurisdiction and it cannot be bypassed by asserting futility.  Therefore, the VA was entitled to sovereign immunity until it reached a final decision on debarment.

Hope and Powers also argued that the VA violated their due process rights by not commencing debarment proceedings earlier, despite the ongoing investigation and criminal proceeding.  They asserted that the harm caused by this violation was complete and therefore subject to judicial review.  The Court held that since the decision of whether or when to initiate debarment proceedings is in the VA’s discretion, the Court lacked jurisdiction to review that decision.

Finally, the Court stated that even if the VA’s delay in the initiation of debarment proceedings was reviewable, Hope and Powers could not meet the threshold requirements for a due process violation, i.e., that they were “deprived of life, liberty or property, without due process of law.”  Indeed, the Court noted the delay had actually benefitted Hope and Powers, since Powers was awarded more than 150 government contracts since August of 2015, which could not have been awarded if the debarment proceedings had been initiated earlier.

To view the full text of the court’s decision, courtesy of Lexis®, click here.

Luke Nicholas Eaton

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