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Polyvend, Inc. v. Puckorius

OPINION FILED OCTOBER 2, 1979.

POLYVEND, INC., APPELLEE,

v.

THEODORE PUCKORIUS, DIRECTOR OF ADMINISTRATIVE SERVICES, ET AL., APPELLANTS.



Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Arthur L. Dunne, Judge, presiding. MR. JUSTICE UNDERWOOD DELIVERED THE OPINION OF THE COURT:

Plaintiff, Polyvend, Inc., filed this declaratory judgment action in October 1977 following defendants' rejection of its bid to manufacture the 1979 multiyear motor vehicle license plates for the State of Illinois. Plaintiff's bid, which was the only one submitted on this project, was rejected by the State pursuant to section 10.1 of the Illinois Purchasing Act (Ill. Rev. Stat. 1977, ch. 127, par. 132.10-1), which became effective October 1, 1977. That section provides:

"No person or business entity shall be awarded a contract or sub-contract if that person or business entity: (a) has been convicted of bribery or attempting to bribe an officer or employee of the State of Illinois in that officer or employee's official capacity; or (b) has made an admission of guilt of such conduct which is a matter of record but has not been prosecuted for such conduct.

For purposes of this Section, where an official, agent, or employee of a business entity committed the bribery or attempted bribery on behalf of such an entity and pursuant to the direction or authorization of a responsible official thereof, the business entity shall be chargeable with the conduct."

Plaintiff challenged the statute on various constitutional grounds: (1) section 10.1 denies procedural due process of law; (2) the statute is unconstitutionally vague and indefinite; (3) the statute constitutes a bill of attainder; (4) it invalidity delegates legislative power to an administrative official; and (5) section 10.1 cannot be retrospectively applied to a prior bribery conviction. The circuit court rejected these arguments and granted defendants' motion for summary judgment. The appellate court, reaching only one of the issues, reversed and remanded, finding the statute unconstitutional on due process grounds. (61 Ill. App.3d 163.) We allowed defendants' petition for leave to appeal.

Plaintiff is an Arkansas corporation engaged in the manufacture of license plates and authorized to transact business in Illinois. Responding to an advertisement by the Illinois Department of Administrative Services for bids on the contract to manufacture the 1979 multiyear license plates, plaintiff submitted a bid in the amount of $10,390,440.40, signed by Patrick J. Stoltz as president of the plaintiff corporation. In 1974, Stoltz had pleaded guilty in Federal district court to a charge of bribery. This conviction arose out of Stoltz' activities as president of Metal Stamping Corp., the sole owner of Polyvend, and involved the bribery of an Illinois official.

In 1973, Stoltz resigned as president of the Metal Stamping Corp., and the following year Polyvend was merged into Metal Stamping Corp. The name of the corporation subsequently was changed to that of its former subsidiary, Polyvend. Despite Stoltz' resignation as president of the corporation, he apparently continued to hold a controlling interest in the firm at the time the bid was submitted. Metal Stamping Corp. was awarded the contract to manufacture the Illinois license plates in 1976 and 1977, and Polyvend was awarded the 1978 contract. Although Polyvend submitted the only bid to manufacture the 1979 plates, it was rejected by defendant pursuant to the above-quoted statutory provision. Stoltz died in December 1978.

It is fundamental that the constitutional guarantees of procedural due process only become operative where there is an actual or threatened impairment or deprivation of "life, liberty or property." (U.S. Const., amend. XIV; Ill. Const. 1970, art. I, sec. 2.) Therefore, the starting point in any procedural due process analysis is a determination of whether one of these protectable interests is present, for if there is not, no process is due. Plaintiff argues that the opportunity to contract for the sale of goods and services to the government is a legally protected property interest within the ambit of the due process clause and, therefore, cannot be eliminated without affording the would-be supplier minimal guarantees of procedural due process. With this contention, however, we disagree.

As the United States Supreme Court recognized in Board of Regents v. Roth (1972), 408 U.S. 564, 570, 33 L.Ed.2d 548, 556-57, 92 S.Ct. 2701, 2705, "the range of interests protected by procedural due process is not infinite." Following a review of the pertinent judicial decisions, the Roth court concluded that, "[t]o have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it." (408 U.S. 564, 577, 33 L.Ed.2d 548, 561, 92 S.Ct. 2701, 2709.) Stated differently, "[t]he Fourteenth Amendment's procedural protection of property is a safeguard of the security of interests that a person has already acquired in specific benefits." (Emphasis added.) 408 U.S. 564, 576, 33 L.Ed.2d 548, 560, 92 S.Ct. 2701, 2708.

We do not think it can be said that plaintiff had "a legitimate claim of entitlement" to the future State contract involved herein. This conclusion is derived from an examination of relevant State law as well as the circumstances surrounding the bid itself. As the court stated in Roth:

"Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law — rules or understandings that secure certain benefits and that support claims of entitlement to those benefits." (408 U.S. 564, 577, 33 L.Ed.2d 548, 561, 92 S.Ct. 2701, 2709.)

(See also Bishop v. Wood (1976), 426 U.S. 341, 344, 48 L.Ed.2d 684, 689-90, 96 S.Ct. 2074, 2077; Goss v. Lopez (1975), 419 U.S. 565, 572-73, 42 L.Ed.2d 725, 733-34, 95 S.Ct. 729, 735.) Section 4 of the Illinois Purchasing Act (Ill. Rev. Stat. 1977, ch. 127, par. 132.4), which concerns advertisement for bids, expressly states that "[a]ny and all bids may be rejected * * *." Furthermore, section 17, paragraph (h), of the Department of Administrative Services' Purchasing Rules and Regulations, issued pursuant to the Illinois Purchasing Act, provides that, if it appears to be in the best interest of the State, all bids may be rejected. Finally, both the advertisement for bids and the instructions to bidders in the instant case contained explicit language providing that the State reserved the right to reject any or all bids. Therefore, it seems clear that there was no intention to confer a "claim of entitlement" on bidders for government contracts. Absent such an interest, it cannot be said that the bidders have a recognizable property right within the meaning of the Federal or State constitutions.

Analogous to the contractor's interest in receiving future government contracts is the interest of an individual in government employment. In Roth an assistant professor at a State university brought an action in which he alleged that the decision of the university not to renew his teaching contract for another year violated his right to procedural due process of law. The plaintiff had been hired for a fixed term of one academic year and had no tenure rights to continued employment. The plaintiff argued that he should have been given notice of any reason for nonretention and an opportunity for a hearing. After examining the terms of the plaintiff's employment agreement with the university, however, the United States Supreme Court concluded that while he may have had "an abstract concern in being rehired" (408 U.S. 564, 578, 33 L.Ed.2d 548, 561, 92 S.Ct. 2701, 2710), he did not have a claim of entitlement to reemployment. Therefore, the plaintiff lacked the requisite property interest necessary to require the university to comply with procedural due process requirements. See also Yeley v. Bartonville Fire & Police Com. (1979), 77 Ill.2d 271.

Similarly, in the present case, despite the fact that plaintiff had been the successful bidder in 1976, 1977 and 1978, and had manufactured the State license plates in those years, it did not have a claim of entitlement or protectable property interest in the 1979 license plate contract. Each contract with the State was separate and independent from the other, and prior performance of a like contract did not give the contractor a preferred status or any other reasonable basis for concluding that it would receive future contracts. Polyvend's "unilateral expectation" that it would receive the contract to manufacture the 1979 Illinois motor vehicle license plates does not constitute a protectable property interest within the meaning of the due process clause. Board of Regents v. Roth (1972), 408 U.S. 564, 577, 33 L.Ed.2d 548, 560-61, 92 S.Ct. 2701, 2709.

In Perkins v. Lukens Steel Co. (1940), 310 U.S. 113, 84 L.Ed. 1108, 60 S.Ct. 869, the United States Supreme Court held that bidders on government contracts lack a sufficient legal interest to challenge government procurement rules and policies. Although the case was decided on principles of standing, we think the reasoning employed by the court therein is equally pertinent to the present controversy. In Perkins, the court stated:

"Like private individuals and businesses, the Government enjoys the unrestricted power to produce its own supplies, to determine those with whom it will deal, and to fix the terms and conditions upon which it will make needed purchases." (310 U.S. 113, 127, 84 L.Ed. 1108, 1114, 60 S.Ct. 869, 876.) "Courts> should not, where Congress has not done so, subject purchasing agencies of Government to the delays necessarily incident to judicial scrutiny at the instance of potential sellers, which would be contrary to traditional governmental practice and would create a new concept of judicial controversies. A like restraint applied to purchasing by private business would be widely condemned as an intolerable business handicap. It is, as both Congress and the courts> have always recognized, essential to the even and expeditious functioning of Government that the administration of the purchasing machinery be unhampered." 310 U.S. 113, 130, 84 L.Ed. 1108, 1116, 60 S.Ct. 869, 878.

See also Powell v. Jones (1973), 56 Ill.2d 70, 82.

The decisions which plaintiff relies on, and which the appellate court cited in support of its conclusion that plaintiff had a protectable property interest, are not persuasive. In Bio-Medical Laboratories, Inc. v. Trainor (1977), 68 Ill.2d 540, the plaintiff, a medical laboratory, was informed by the Director of the Illinois Department of Public Aid that it was going to be suspended from further participation in the Medicaid program. The plaintiff thereupon filed suit seeking to restrain the Director from taking such action. In response to the Director's contention that the plaintiff lacked standing to bring such an action because of the absence of a protectable interest, this court distinguished Perkins v. Lukens Steel Co. (1940), 310 U.S. 113, 84 L.Ed. 1108, 60 S.Ct. 869, by pointing out that, whereas in Perkins the government contractors were unable to demonstrate that a legal right had been threatened, this plaintiff did possess a protectable legal interest, "that being its expectation of continuing to receive Medicaid payments on behalf of the Medicaid recipients it services." 68 Ill.2d 540, 547.

This right to continuing participation in an ongoing program, which was recognized as a protectable legal right by the court, arose by virtue of the fact that the plaintiff had participated in the Medicaid program for approximately eight years prior to the decision of the Director to suspend. The program was a continuing one, not requiring annual competitive bids, in direct contrast with the present case, where plaintiff was not a participant in an ongoing, continuous program. Rather, there was simply an annual invitation to bid and a resulting annual award of the license plate contract. Being awarded the contract in a given year did not give rise to any right or interest in future State contracts, which were entirely independent matters. While plaintiff may have had "an abstract concern" in being awarded the 1979 license plate contract, it certainly did not have a legally protectable property interest and, absent such an interest, a prospective government contractor's bid does not trigger due process safeguards.

Nor are we persuaded by Gonzalez v. Freeman (D.C. Cir. 1964), 334 F.2d 570. In Gonzalez, the plaintiff corporation, which had a record of contractual relations with the Commodity Credit Corporation for a number of years, was temporarily debarred from doing business with Commodity Credit. Plaintiff was not given any grounds for the five-year debarment and was not provided an opportunity for a hearing. Although the court did determine that the plaintiff was entitled to some procedural safeguards, including notice of specific charges and an opportunity to present evidence and to cross-examine adverse witnesses, this finding was based solely upon an interpretation of the Commodity Credit Corporation Charter Act (15 U.S.C. § 714 (1970)) and the Administrative Procedure Act (5 U.S.C. § 551 et seq. (1970)). In fact, ...


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