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Shane Meat Co. v. United States Department of Defense and Defense Logistics Agency

argued: June 5, 1986.


On Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civ. No. 85-0684.

Author: Higginbotham

Before: ADAMS, WEIS, and HIGGINBOTHAM. Circuit Judges.



This is an appeal from a final judgment of the district court setting aside the determination of appellant Defense Logistics Agency ("DLA") debarring appellees Shane Meat Company and H. Ronald Shane from contracting with the executive branch of the government for a period of three years. The district court found that the DLA determination to impose the maximum three-year term of debarment was "arbitrary, capricious, and an abuse of discretion" and remanded the case to the agency with instructions to reduce the term of debarment to one year. Because we conclude that the district court exceeded its limited authority to review administrative decisions. We will reverse its judgment and reinstate the DLA determination.


Shane Meat Company ("Shane Meat") operates as a broker contracting with and between meat suppliers and institutional customers. The majority of its business is transacted with agencies of the united States government. The company employs five persons, including appellee Shane, its sole shareholder and president, and his wife.

On February 14, 1984, Shane Meat and Shane were indicted by a federal grand jury for conspiring to submit and submitting false claims to defraud the United States government. The indictment charged that contrary to the provisions of five contracts Shane Meat supplied the Defense Logistics Agency, an agency of the United States Department of Defense, with mislabeled meat containing filler material in the form of partially defatted tissue.*fn1 The DLA suspended Shane Meat and Shane from government contracting effective March 2, 1984, pending resolution of the criminal charges. on May 3, 1984, the district court dismissed the indictment and the DLA promptly terminated the suspensions without prejudice.

Subsequently, Shane Meat alone was re-indicted on substantially the same charges. The re-indictment charged one count of conspiracy to submit false statements in violation of 18 U.S.C. § 371, and five counts of submitting false statements in violation of 18 U.S.C. 1001. On December 20, 1984 Shane Meat pleaded nolo contendere to the charges and was fined $25,000, which was later reduced to $20,000. On December 28, 1984, the DLA again suspended Shane Meat and Shane pending the outcome of DLA debarment proceedings.*fn2 Shane Meat and Shane then filed a complaint in the district court challenging the suspensions and ongoing debarment proceedings. During the pendency of the complaint, Shane and counsel for the appellees met personally with William H. Carroll, Special Assistant for Contracting Integrity at the DLA, to present information and to offer arguments opposing the proposed debarments. On April 29, 1985, Carroll rendered a final administrative decision debarring Shane Meat and Shane from contracting with the federal executive branch for the maximum-allowable period of three years.*fn3

The parties thereafter filed cross-motions in the district court for summary judgment on the debarment issues. The court denied both motions, but nonetheless held that the three-year debarment period was arbitrary and capricious and remanded the case to the DLA for imposition of a one-year debarment instead. This appeal by the DLA and the Department of Defense ensued.


The issue here is whether the DLA decision to debar Shane Meat and Shane for three years could be properly set aside by the district court as "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" according to the Administrative Procedure Act, 5 U.S.C. § 706(2)(A).

The gravamen of our difference with the district court is what we deem to be its confusion regarding the standard of review in this case. The district judge does not sit as an agency official responsible for weighing evidence and making the initial debarment decision. Rather, s/he is limited in her or his authority to finding whether the agency action was "rational, based on relevant factors, and within the agency's statutory authority," Frisby v. United States Department of Housing and Urban Development, 755 F.2d 1052, 1055 (3d Cir. 1985). See also Motor Vehicle Manufactureres Association v. State Farm Mutual Automobile Insurance, 463 U.S. 29, 42-43, 77 L. Ed. 2d 443 ,103 S. Ct. 2856 (1983) (acquiescing to the stated formulation of the standard of review). Thus, to find an agency action arbitrary or capricious under § 706(2)(A), a court must first "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Citizens to Preserve Overton park v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). See also Motor Vehicle Manufactureres, 463 U.S. at 43 (same); Bowman Transportation v. Arkansas-Best Freight System, 419 U.S. 281, 285, 42 L. Ed. 2d 447, 95 S. Ct. 438 (1974) (same). However, "the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency" Citizens to Preserve Overton Park, 401 U.S. at 416. ...

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