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Merriam v. Kunzig

decided: February 16, 1973.

JOHN W. MERRIAM, APPELLANT
v.
ROBERT L. KUNZIG, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, A. J. SAMPSON, COMMISSIONER, PUBLIC BUILDING SERVICE OF THE GENERAL SERVICES ADMINISTRATION, L. M. SHIPP, JR., ASSISTANT COMMISSIONER, SPACE MANAGEMENT OF THE GENERAL SERVICES ADMINISTRATION AND THE GENERAL SERVICES ADMINISTRATION OF THE UNITED STATES OF AMERICA



(D.C. Civil Action No. 71-2262). APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA.

Van Dusen, Gibbons and Hunter, Circuit Judges. Adams, Circuit Judge, dissenting sur the denial of the petition for rehearing en banc.

Author: Gibbons

Opinion OF THE COURT

GIBBONS, Circuit Judge.

This is an appeal from an order of the district court dismissing the complaint of appellant Merriam on defendants' motion for summary judgment for lack of standing. Merriam is one of two unsuccessful bidders on a solicitation for bids to furnish leasehold office space to the General Services Administration (GSA). That agency and several of its officials are defendants. Merriam seeks to have set aside an award made by GSA to Gateway Center Corporation (Gateway) for a twenty year lease of a new office building to be constructed in Philadelphia, and to have enjoined the execution of the proposed lease.

GSA's Solicitation for Offers for leasehold space was issued on September 30, 1970, to Merriam, to Gateway and to twenty-four other prospective offerors in the Philadelphia metropolitan area. Five bids were received. One was withdrawn and another was determined to be nonresponsive. On February 18, 1971, the Administrator of GSA authorized the making of the disputed award to Gateway. On February 19, 1971, Merriam, pursuant to 4 C.F.R. §§ 20.1-20.12 (1972), protested the award to the General Accounting Office, which on September 16, 1971, advised him through counsel that it could not rule authoritatively on the protest at that time.*fn1 As soon as he was so advised Merriam commenced this lawsuit. On November 17, 1971, he moved for a preliminary injunction restraining the GSA from executing a lease pending determination of the cause, and, pursuant to Rule 57, Fed. R. Civ. P., for a prompt hearing. The government defendants made a cross motion for summary judgment, raising, among others, the issue of Merriam's standing to sue. They also requested that the court defer decision on Merriam's motions until the standing issue was resolved. This, of course, would have left GSA free pendente lite to execute the disputed lease. At a pretrial conference on December 9, 1971, however, Merriam withdrew his motion for a preliminary injunction on the representation of the Government that no lease would be executed with Gateway until the construction of the proposed building had been completed. The district court soon thereafter stayed all proceedings. On February 7, 1972, over Merriam's objection, it entered an order which provided in part:

". . . because the defendant has advised the Court that the General Accounting Office is reviewing its lease construction practices, including the present bid protest, it is hereby ORDERED that the Court will stay its hand for 30 days pending receipt of the results of such review."

The General Accounting Office review was not completed until March 17, 1972. In the meantime Gateway's building was under construction, but no lease had been executed. The March 17, 1972 ruling by the Deputy Comptroller General of the United States was to the effect that the award to Gateway was improper in several respects to which more specific reference will be made hereafter, but that because Gateway had made substantial construction progress in reliance on GSA's assurance that it had complied with the governing law, the Comptroller General would not initiate any question

". . . with respect to payments under existing leases. However, we must advise that we have no alternative to raising objection to payments under any lease executed after the date of this decision without proper regard for the restriction against leasing buildings to be erected for the Government, where the restriction is operative both at the time of lease execution and at the time of payment."

The quoted language of the March 17, 1972 ruling may be understood in the context of the next preceding paragraph of the ruling, which explained that GSA's improper leasing practices were not confined to the isolated circumstances of a single lease transaction, and that the magnitude and seriousness of the problem created by GSA's administration of its leasing program required that the entire matter be referred to Congress for possible corrective legislative action. Thus, the General Accounting Office position seems to have been (1) that the award to Gateway was illegal, (2) that it would not challenge payments under existing leases, and (3) that as to leases not yet in existence it recognized that Congress could authorize future payments even though the award may have been improper. The ruling does not disclose whether the General Accounting Office was aware of the actual Gateway-GSA situation; that is, that the Government had represented that it would not execute a lease until the building was complete, and no lease had yet been executed.

The March 17, 1972 ruling was brought to the attention of the district court by stipulation. It then took up and granted the Government's motion for summary judgment, 347 F. Supp. 713, on the ground that Merriam lacked standing, as an unsuccessful bidder, to challenge an illegal award. This appeal followed.

Merriam's Legal Contention

The Solicitation by GSA was made under the authority of the Federal Property and Administrative Services Act of 1949, as amended, 40 U.S.C. § 490(h)(1):

"The Administrator is authorized to enter into lease agreements . . . which do not bind the Government for periods in excess of twenty years . . . 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. . . ."

This general leasing authority is limited, however, by a statute, 41 U.S.C. § 11(a), applicable to all public contracts:

"No contract or purchase on behalf of the United States shall be made, unless the same is authorized by law or is under an appropriation adequate to its fulfillment. . . ."

Merriam contends that the leasing authority of GSA has, since 1963, been further limited by provisions reenacted annually.*fn2 The statute in effect on September 30, 1970, was the Independent Offices Appropriations Act, 1971, Pub. L. No. 91-556, 84 Stat. 1442, which provides:

"No part of any appropriation contained in this Act shall be used for the payment of rental on 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 the Congress and approval made in the same manner as for public buildings construction projects pursuant to the Public Buildings Act of 1959 [40 U.S.C. §§ 601-15]."

In preparing the Solicitation which resulted in the disputed award, GSA recognized that it was bound by the quoted provision of the Independent Offices Appropriations Act, 1971, the obvious purpose of which was to prevent without prior congressional approval the financing of new building construction on the credit of the United States by the use of government leases.*fn3 In the Solicitation GSA made reference to the fact that each year since 1963 the lease construction prohibition had appeared in the Independent Offices Appropriations Act. It provided that if the bid were for a building to be erected by the lessor the bid must ...


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