Recent Appellate Court Opinion Discusses Legal Challenges To The Debarment Of Contractors By Public Bodies

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Public bodies must adhere to the principles of procedural due process when debarring a contractor from bidding on its projects. But even when a public body provides due process, it may be subject to litigation. In Blackout Seal Coating vs. Peterson, the Seventh Circuit Court of Appeals recently affirmed the Chicago Transit Authority’s debarment of Blackout Seal Coating but also outlined potential avenues that may lead to a successful action against a public body.

The CTA barred Blackout from bidding on its contracts for one year after it hired an employee who was previously barred from doing business with the CTA. Blackout brought a civil rights action against the CTA for depriving the owners of the company of occupational liberty without due process of the law. The district court dismissed the case, ruling that the “inability to work for a single employer does not deprive a person or corporation of occupational liberty.” 

On appeal, the Seventh Circuit affirmed the district court’s decision. The Court noted however, that Blackout could have asserted a claim in state court as a result of being deprived of a property interest. The Court also discussed the possibility of a libel suit in state court. The Seventh Circuit suggested that evidence to support such a claim could include rejections by other government bodies or by showing what happened to other contractors that CTA debarred.

This opinion is instructive on how governmental bodies should act in debarring a contractor. The Court stated that “the due process clause requires notice and an opportunity to respond -- people must be given some kind of notice and afforded some kind of hearing.” The Court noted that CTA gave Blackout a “notice of intent to debar” and that Blackout exercised its opportunity to respond in writing. While Blackout argued that it should have been given another opportunity to contest the debarment, the Court rejected this argument, reasoning that “the due process clause does not require an extended to-and-fro in which every internal recommendation kicks off a new round of submissions.” Thus, the U.S. Constitution requires public bodies to provide notice and an opportunity to respond before debarring a contractor. But even then, the facts of a particular case may support a claim against a public body based on state law.

* Jamel Greer, a third-year law student at Loyola University Chicago School of Law, is a Loyola Education Practicum Student. The Practicum, part of Loyola’s education law curriculum, was created to provide law students with practical experience at education law firms and organizations. Students receive academic credit for their Practicum experience.

Topics:  Bids, Contractors, Due Process

Published In: Constitutional Law Updates, Construction Updates, Government Contracting Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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