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(A version of this article appears in the Construction
Law Digest, published by the West Group.)
By James E. Acret
Golden
Day Schools, Inc., a non-profit corporation, was debarred
by the California Department of Education from applying
for childcare contracts for three years. Debarment followed
audits that were deemed "unacceptable."
At
plaintiff's request, a hearing was held in Sacramento to
review the order of debarment. A member of the hearing panel
was the director of the audits division, which had determined
that the audits were "unacceptable." This person
served as a member of the tribunal over plaintiff's objection.
The panel found that the audits were unacceptable and upheld
the order of debarment.
Plaintiff
filed a petition for judicial relief that was denied by
the trial court. REVERSED. Golden Day Schools, Inc. v.
State Department of Education, ___ Cal.App.4th ___,
___ Cal.Rptr.2d ___, 2000 Daily Journal D.A.R. 9935 (2000).
There was an appearance that the member was biased in favor
of the finding of his own department. "Debarment"
is a sanction that excludes an entity from doing business
with the government and is imposed upon an entity that has
engaged in wrongful conduct or has violated the requirements
of a public contract. The consequences of debarment (colloquially
called "blacklisting") may include a sudden contraction
of bank credit, adverse impact on market price of shares
of listed stock, critical uneasiness of creditors and loss
of face in the business community. In addition, an entity
loses the profits from the business denied as a result of
debarment.
The
14th Amendment protects "liberty interests," including
the right of an individual to contract, to engage in any
of the common occupations of life and generally to enjoy
the privileges recognized as essential to the orderly pursuit
of happiness by free men. A person facing debarment has
a constitutionally protected liberty interest at stake and,
therefore, is entitled to procedural due process of law.
Debarment cannot be left to administrative improvisation
on a case-by-case basis. Considerations of basic fairness
require administrative regulations establishing standards
for debarment and procedures that include notice of specific
charges, opportunity to present evidence and the right to
cross-examine adverse witnesses. A fair hearing and a fair
tribunal are basic requirements of due process.
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