author: OBERDORFER, District Judge.

text:
    CITYFED FINANCIAL CORP., Plaintiff, v. FEDERAL HOME LOAN BANK BOARD, Federal Savings & Loan Insurance Corporation, George S. Mann, Unicorp American Corporation and Unicorp Canada Corporation, Defendants.
    Civ. A. No. 85-2306.
    United States District Court, District of Columbia.
    Aug. 14, 1985.

      James H. Schropp, Robert E. Juceam, Stephen Lew, Robert H. Ledig, Fried, Frank, Harris, Shriver & Jacobson, Washington, D.C., for plaintiff.
    Scott B. Schreiber, A. Patrick Doyle, Robert N. Weiner, Arnold & Porter, Washington, D.C., and Steven M. Barna, Kenneth B. Forrest, Louis J. Barash, Wachtell, Lipton, Rosen & Katz, New York City, for Unicorp defendants.
    William K. Black, Denise Z. Field, James T. Lantelme, Federal Home Loan Bank Bd., Washington, D.C., for Federal Home Loan Bank Bd. and Federal Savings and Loan Ins. Corp., Norman H. Raiden, Gen. Counsel, Ralph W. Christy, Deputy Gen. Counsel, Washington, D.C., of counsel.
   MEMORANDUM

OBERDORFER, District Judge.

I.

Plaintiff CityFed Financial Corp (“CityFed”) is a publicly held savings and loan holding company incorporated under Delaware law with total assets in excess of $7 billion. Defendants Federal Home Loan Bank Board (“Board”) and the Federal Savings and Loan Insurance Corporation (“FSLIC”) are agencies of the United States Government. Defendant George S. Mann (“Mann”), an alien residing in Canada, is chairman of the board of directors and a controlling person of defendants Uni-corp Canada Corporation (“UCC”) and Uni-corp American Corporation (“UAC”), respectively a Canadian management and investment holding company and a Delaware corporation engaged in direct and indirect investment in the United States. Mann, UCC, and UAC are collectively referred to herein as “Unicorp.” Unicorp currently owns approximately 13 percent of CityFed shares (including common stock and convertible preferred stock), and seeks to increase its ownership up to 24.99 percent of shares outstanding.

The Board is the operating head of the FSLIC. As such, it is empowered to administer the provisions of the Change in Savings and Loan Control Act of 1978 (“CSLCA”) and the Savings and Loan Holding Company Amendments of 1967 to the National Housing Act (“SLHCA”). CityFed claims that the procedures followed by the Board in processing a “Notice in Change of Control” (“Notice”) filed pursuant to the CSLCA by Unicorp in connection with its acquisition of CityFed shares were inadequate. CityFed further contends that these deficiencies invalidate the Board’s June 28, 1985 determination that the period for review of the Notice had expired and that Unicorp could therefore proceed with its proposed acquisition of additional CityFed stock. As a result, CityFed claims, the Board has in effect authorized Unicorp to acquire control of CityFed without adequately investigating allegations that Uni-corp has a record of mismanagement and misconduct which, if repeated after gaining control of CityFed, would seriously injure CityFed’s depositors and the public generally.

An Order entered August 6, 1985 invalidated the June 28, 1985 determination by the Board, which determination had the effect of authorizing defendant Unicorp to acquire additional shares of plaintiff CityFed. That Order referred to a Memorandum to be filed. This is that Memorandum.

The CSLCA, the controlling statute in this case, requires a person acquiring a substantial number of shares in a savings and loan institution such as CityFed to file a prescribed notice. If the Board fails to disapprove the acquisition within sixty days after the acquirer files a notice deemed “sufficient”, the acquirer may proceed.

The Board has promulgated regulations to implement the CSLCA’s provisions. These regulations delegate to the Board’s staff responsibility for determining when a notice is complete as well as authority to terminate a review period by declaring an intent not to disapprove an acquisition. The Board has reserved to itself authority to disapprove an acquisition. Other regulations provide in substance that the 60-day review period will commence at such time as the Board has received a notice which it deems sufficient to satisfy the requirements of 12 C.F.R. § 563.18~2(e)(l). That regulation provides that a notice “shall not be deemed sufficient unless it includes all of the information required by the form prescribed by the Corporation, and any additional relevant information as the Corporation may require by specific request in connection with any particular notice.” 12 C.F.R. § 563.18-2(e)(l). (1985).

On October 1, 1984, Unicorp filed a change in control notice regarding CityFed with the Board pursuant to the CSLCA requesting authorization to acquire up to 24.99 percent of CityFed common stock. When the Board (actually the Board’s staff acting with delegated authority) rejected the notice as incomplete, Unicorp filed “amended notices” on November 1, 1984, A.R. 011345-011347; January 18, 1985, A.R. 010801-010802; and April 18, 1985, A.R. 010552-010561. At the Board’s specific request, Unicorp also filed an executed “Stipulation and Undertaking” relating to the proposed acquisition on June 27, 1985.

From time to time during this same period, CityFed submitted to the Board information and allegations relating to Uni-corp’s past practices and present intentions. The Board included much of this information in the record of its proceedings. In general, CityFed questioned whether Unicorp met appropriate standards of competence, experience, and integrity suggested by the CSLCA and urged the Board to disapprove Unicorp’s notice, as authorized by 12 U.S.C. § 1730(q)(7).

In the months that followed the filing of the October 1, 1984 Notice, the Board staff notified Unicorp several times that the Notice as submitted and amended did not in the view of the staff satisfy the requirements of Board regulations, and as a result, the 60-day review period would not commence.

The first such letter was dated October 9, 1984. A.R. 011351. A second letter, dated December 31, 1984, requested further information from Unicorp and stated that “[u]pon the filing of this required information, a determination will be made as to whether the Notice, as amended, is sufficient for purposes of commencing the 60-day period for review.” A.R. 010803. On March 8, 1985, the Board staff again advised Unicorp that it required additional information, that the Notice was not deemed complete and that the 60-day period would not commence until the additional information requested was provided. A.R. 010587-010591.

By this March 8, 1985 letter, the Board staff also requested that Unicorp execute a “Stipulation and Undertaking” (the “Stipulation”) along the lines of a draft the staff submitted to Unicorp. The letter stated that the staff would accept the execution of the Stipulation “in lieu of requiring the immediate submission of a detailed business plan which conforms to the requirements of [an earlier communication].” A.R. 010588. Significantly, the staff suggested that Unicorp attach the executed Stipulation under cover of an amended Notice. Thereafter, and up until June 27, 1985, the staff and Unicorp negotiated about the Stipulation. During the course of these negotiations, Unicorp filed two unexecuted, proposed Stipulations. A.R. 010583; A.R. 010545.

On June 17, 1985, the Board staff advised Unicorp in writing that it was extending, for ten days, the 60-day period allowed for review of a completed Notice. A.R. 010041. The Board took this action without any indication in the administrative record that they had ever notified Unicorp that its Notice had been deemed substantially complete. The letter merely described the Notice as “last amended on April 18, 1985.” On that date counsel for Unicorp wrote to the Board to transmit an executed amendment No. 3 to the Notice. A.R. at 010566. Unicorp stated in this letter that “[the] amendment responds to the inquiries in your letter of March 8, 1985, except that no Stipulation and Undertaking is filed herewith.” A.R. at 010566 (emphasis added).

On June 27, 1985, Unicorp finally submitted an executed Stipulation and Undertaking to the staff. The June 27 Stipulation and Undertaking, similar in many respects to earlier versions, generally provided that Unicorp must seek approval of the Supervisory Agent of the Federal Home Loan Bank of New York before it could: (1) materially alter or attempt to materially alter CityFed’s operations or business; (2) effect or attempt to effect a corporate reorganization of CityFed; or (3) seek to control the election of a majority of the Board of Directors. A.R. 010005A-010005B. On the following day, June 28, 1985, the Board staff notified Unicorp by letter that the 60-day period for review of its Notice had expired and, accordingly, Unicorp could proceed to acquire additional shares of CityFed. A.R. 010000.

II.

CityFed contends here that the June 27, 1985 Stipulation and Undertaking constituted “additional information ... required for review of the notice” under 12 C.F.R. § 563.18-2(e)(3), and as such its filing should have caused the 60-day review period to recommence, thus precluding Unicorp from further acquisitions for 60 days from June 27 or until the Board announced an intent not to disapprove the acquisitions. Plaintiff further contends that:

(1) a May 23, 1985 submission which it made to the Board and an inquiry made by the Board on June 25, 1985 to Canadian authorities produced “additional information ... required for its review of the notice” which, under 12 C.F.R. § 563.18-2(e)(3) should have recommenced the review period;

(2) the Board erred by initially commencing to process Unieorp’s October 1, 1984 Notice as Unicorp was allegedly already in violation of Board regulations;

(3) the Board should not have delegated the processing of this particular notice to staff;

(4) the Board’s action constituted the granting of a license which necessitated a prior hearing;

(5) the Board was required to hold a hearing to consider the applicability of the SLHCA to Unicorp’s actions; and

(6) the Board’s failure to disapprove the Notice despite the information supplied to it by CityFed indicated inadequate investigation, constituted arbitrary and capricious action, and was an abuse of discretion and otherwise not in accordance with law.

The Board contends in opposition that:

(1) plaintiff is without standing to bring this action;

(2) the June 27, 1985 Stipulation and Undertaking did not constitute “additional information ... required for review of a notice” under 12 C.F.R. § 563.18-2(e)(3);

(3) the Court lacks authority to afford the relief against the Board sought by the plaintiff;

(4) plaintiff does not have a private right of action to seek injunctive relief under the CSLCA or the SHLCA;

(5) the matters of which plaintiff complains are committed to agency discretion by law and therefore not amenable to judicial review;

(6) the Board’s delegation to staff was authorized by regulation;

(7) no hearing in regard to the notice was required under the SLHCA or § 558(c) of the Administrative Procedure Act; and

(8) the Board’s processing and ultimate determination with respect to the Notice did not constitute arbitrary and capricious action.

Defendant Unicorp echoes the Board’s contentions. Unicorp also contends that the CSLCA does not grant plaintiff a private cause of action for injunctive relief against Unicorp, and suggests further that if there is jurisdiction to review the Board’s determination, it lies with the Court of Appeals.

III.

A.

As a threshold issue, defendants challenge plaintiff’s standing to bring this action. This defense must fail. Plaintiff is a party aggrieved and adversely affected by the Board staff’s determination and its alleged failure to fulfill its duty under the CSLCA to protect a savings and loan institution and its depositors from a threatened takeover. The Administrative Procedure Act provides that “[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.” 5 U.S.C. § 702 (1976).

The plaintiff’s allegations meet Article Ill’s requirement that plaintiff show that it has personally suffered threatened injury as a result of the putatively illegal conduct of defendant and that such injury is “ ‘likely to be redressed by a favorable decision.’ ” Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982), quoting Simon v. Eastern Ken tucky Welfare Rights Org., 426 U.S. 26, 38, 96 S.Ct. 1917, 1924, 48 L.Ed.2d 450 (1976). A decision for the plaintiff sets aside the Board’s assumption that the review period ended June 27, 1985, and makes it unlawful for Unicorp to acquire more CityFed stock at least until August 26, 1985, or until the Board has acted pursuant to 12 C.F.R. § 565.18-2(g)(2). Plaintiff also meets the prudential requirement of standing that the asserted interests fall within the zone of interests to be protected by the statute in .question. Id. 454 U.S. at 475, 102 S.Ct. at 760. As our Court of Appeals has recently reiterated:

The zone of interests adequate to sustain judicial review is particularly broad in suits to compel federal agency compliance with law, since Congress itself has pared back traditional prudential limitations ... by the Administrative Procedure Act, which affords review to any person “adversely affected or aggrieved by [federal] agency action within the meaning of a relevant statute.”

FAIC Securities, Inc. v. United States, No. 84-5408, slip op. at 8 (D.C.Cir., July 26, 1985) (citations omitted).

The CSLCA is ultimately designed to serve the public interest by protecting depositors in savings and loan institutions, and the depositors clearly fall within the zone of interest contemplated by the statute. The institution has standing in these circumstances because of its fiduciary responsibility to its depositors. See GAF Corp. v. Milstein, 453 F.2d 709, 719-21 (2d Cir.1971), cert. denied, 406 U.S. 910, 92 S.Ct. 1610, 31 L.Ed.2d 821 (1972). As the Court noted in FAIC Securities, supra: “[w]e have been unable to find any case in which the Supreme Court has relied upon the plaintiff’s failure independently to meet the zone of interests tests as the basis for its refusal to accord standing for the assertion of third-party rights.” Id. at 11.

B.

Since plaintiff has standing to challenge the Board’s action under the Administrative Procedure Act and the relief granted herein should prevent further acquisitions by private defendants until after 60 days from June 28, 1985, or until the Board has pursuant to 12 C.F.R. § 563.18-2(g)(2) announced its intent not to disapprove the acquisition, it is unnecessary to resolve the issue of whether plaintiff has a private cause of action directly against Unicorp. Accordingly, the August 6 Order granted Unieorp’s motion to dismiss the complaint against the Unicorp defendants.

IV.

Having resolved the threshold challenge to plaintiff’s standing to bring this action, it is appropriate to explore the statutory and regulatory framework and its application to the contentions of the parties. The administrative record vindicates plaintiff’s contention that the Board’s June 28, 1985 determination that the 60-day period for review had expired was erroneous as a matter of law. 12 C.F.R. § 563.18-2(e)(3) mandates that the Board “will” send a letter of acknowledgement indicating the date of receipt of a notice deemed to be sufficient (emphasis added). That regulation also mandates that when a notice has been determined to be insufficient, the 60-day period for review shall commence "in its entirety upon the receipt of the additional information.” 12 C.F.R. § 563.18-2(e)(3) (1985) (emphasis added).

On several occasions between October 1, 1984 and June 28, 1985, the Board staff notified Unicorp that its Notice was insufficient. On the last such occasion, March 8, 1985, the staff advised Unicorp in writing that the Notice was “determined to be insufficient” and that “[u]pon the filing of [specific requested information], a determination will be made as to whether the Notice, as amended, is sufficient for purposes of commencing the 60-day period for review.” A.R. 010587 (emphasis added). Among the specifically requested items of information was the executed and notarized Stipulation and Undertaking which the staff was willing to accept “in lieu of requiring the immediate submission of a detailed business plan.” This executed Stipulation was not received by the Board until June 27, 1985.

The transaction detailed by Unicorp’s original and interim notices (which on March 8,1985 the Board found to be incomplete without an executed Stipulation and Undertaking) is materially different from the transaction limited by the execution of the June 27,1985 Stipulation and Undertaking. The statute requires the Board to obtain a business plan from the acquirer which would, among other things, make specific representations as to how the acquirer would conduct itself. The Stipulation and Undertaking was proposed by the Board, in lieu of a business plan, to limit Unicorp’s prerogatives with respect to assumption of control. It could only take critical steps after notifying the Board. The significance of this commitment is evidenced by Unicorp’s resistance to making it. In his April 18, 1985 letter to the Board, for example, Unicorp’s counsel stated that the enclosed amendment “responds to the inquiries in your letter of March 8, 1985 except that no Stipulation and Undertaking is filed herewith.” A.R. at 010566 (emphasis added). The fact that an executed Stipulation and Undertaking had not been filed in an amended Notice and that its contents were still the subject of debate at least as late as April 24, 1985, is demonstrated by an internal Board memorandum of that date, in which it is stated that “[t]he matter of the Stipulation and Undertaking to be signed by the Applicants has been under negotiation since our original proposal was sent to the Applicants on March 8, 1985.” Significantly, this memorandum stated the staff’s belief that “it is important that any revisions to the proposed Stipulation and Undertaking be carefully analyzed to determine the potential impact of such revisions on the effectiveness of the document as a supervisory tool.” Id.

Unicorp’s resistance to the making of this significant commitment is further demonstrated by a May 14, 1985 letter from Unicorp’s counsel to the Board, in which Unicorp transmitted yet another proposed Stipulation and Undertaking which, like its predecessors, was not an executed document. A.R. at 010545. The administrative record clarifies that Unicorp only executed and filed the final Stipulation and Undertaking after the staff purported to extend the review period for ten days. An obvious implication is that the staff could have extended the review period indefinitely until it had an executed Stipulation and Undertaking in hand.

In sum, the Board’s letter of March 8, 1985 explicitly represented that the Board considered the submission of an executed Stipulation and Undertaking to be a critical aspect of Unicorp’s Notice, without which it would not be sufficient to commence the 60-day period for review. The Board cannot now properly take the position that the Notice was “sufficient” as of April 18, 1985, when Unicorp filed an amended Notice in which it specifically declined to include the executed Stipulation required by the March 8 letter.

The conclusion that the Board was not on April 18, 1985 satisfied that it had collected all the information required for its review is bolstered by the Board’s letter of June 25, 1985, in which the Board requested from Canadian authorities certain information regarding George Mann and Unicorp. The holding that the 60-day review period did not commence on April 18, 1985 does not, however, rest on this request for additional information. The regulations are unclear as to whether additional information received by the Board after requests to sources other than the acquirer will cause the review period to recommence. The June 25 request, however, does support the conclusion that the Board was not satisfied that the information in its possession on April 18, 1985 was sufficient for it to complete its review of Unieorp’s Notice.

V.

The Board argues that the 60-day review period as imposed by Congress and implemented by regulation was only intended: (1) to put a limit on the time during which the Board could hold an acquisition in suspense; and (2) for the convenience of the Board. Thus, presumably, when the staff was satisfied that a previously incomplete notice had been completed, the staff could determine that the review period had ended and thereby clear the track for consummation of the transaction. Congress formulated this statute, however, before the Board adopted the regulation which delegated to the staff authority to determine that a notice was complete. At argument, counsel for the Board indicated that the Board itself had no formal knowledge of this very large transaction or of the staff’s processing and disposition of the Notice. For ought that appears in the record, the Board itself remains unaware of the staff’s disposition, despite vigorous efforts by CityFed to attract the Board’s attention. As a practical matter, the Court’s determination that the 60-day review period commenced, rather than expired, on June 27, 1985, creates at least an opportunity for the Board itself to look into the staff’s treatment of a potential shift in control of a $7 billion savings and loan holding company and a contest which has generated a significant amount of attention.

Moreover, a ruling that the 60-day review period recommenced upon the execution and filing of the June 27, 1985 Stipulation and Undertaking does not tie the hands of the staff or the Board. It is recognized that the Board’s regulations do not require that the staff allow a full sixty days for review of a notice once it is complete. 12 C.F.R. § 563.18-2(g)(2) indicates that the Board may, prior to the expiration of the 60-day review period, notify the acquiring person in writing of its intent not to disapprove the proposed acquisition. The letter of June 28, 1985, however, was not by its terms such a notice of intent. Instead, the letter represented that the period for review had “expired.” That conclusion was inconsistent with (1) the staff’s March 8, 1985 request for, inter alia, an executed Stipulation and Understanding without which the Notice would not be deemed sufficient to commence the 60-day review period, A.R. 010587-010588, and (2) the fact that the executed Stipulation and Understanding was not received until June 27, 1985.

If it is determined administratively that the recommenced review period should be shortened, the staff is free to announce pursuant to 12 C.F.R. § 563.18-2(g)(2) that it does not intend to disapprove the acquisition, recognizing, of course, that such a determination might be reviewable under an arbitrary and capricious standard. The Court’s holding clarifies that the staff must either conform strictly to the 60-day review period upon completion of a notice as required by the statute and regulations, or else openly announce its determination that the transaction should not be disapproved. This should remove any temptation to attempt to avert a risk of judicial review by declaring the notice period ended without having announced that it had begun.

VI.

In view of the finding that the June 27 Stipulation and Undertaking constituted additional information which recommenced the 60-day review period, it is unnecessary to resolve whether plaintiff’s May 23 submission and the Board’s June 25 request to Canadian authorities also constituted such additional information. Similarly, in view of this disposition of this matter, it is unnecessary and would be premature to address plaintiff’s contention that the Board’s failure to disapprove the Notice in spite of the information supplied to it by CityFed indicated inadequate investigation and constituted arbitrary and capricious action not in accordance with law. It will be time enough to deal with this issue when and if the Board determines and announces pursuant to 12 C.F.R. § 563.18-2(g)(2) that it has no intention to disapprove further acquisitions by Unicorp.

It is also unnecessary, in the absence of such a determination, to reach plaintiff’s claims that the Board was required under the Administrative Procedure Act or the SLHCA to hold hearings on this matter. Furthermore, plaintiff’s contention that the Board should not have delegated the processing of this Notice to staff is without merit. The regulations expressly provide for such delegation and neither the statute nor the regulations intimate that “more significant” notices are not appropriate for delegation. See 12 C.F.R. § 563.18-2(1) (1985). As has been discussed, however, the Court’s finding that the 60-day review period commenced, rather than expired, on June 27, 1985 provides additional time in which the Board itself has an opportunity to consider the determination made by staff on this significant transaction.

Plaintiff’s contention that the Board erred in commencing to process this Notice in the first instance is similarly without merit. The regulations provide that Board staff are authorized to “[determine [the] sufficiency of a notice for the purpose of commencing or recommencing the review period under paragraph (e)(3),” 12 C.F.R. § 563.18-2(l)(vi) (1985). It cannot be overemphasized, however, that the Board must abide by its own regulations relating to procedures to be followed in making that determination and conducting its review. Board staff on March 8, 1985 advised Uni-corp that its Notice was incomplete and explicitly represented that the Notice would not be sufficient to commence the review period without specific requested information which included the executed Stipulation and Undertaking. The administrative record contains no evidence that a letter acknowledging the sufficiency of the amended Notice was ever sent as required by § 563.18-2(e)(3). Instead, the staff’s letter of June 17, 1985 skipped a step and purported to extend the 60-day review period (which by Board regulations had not yet commenced) an additional ten days. Thus, the Board’s own regulations and actions require the conclusion in this case that the Notice was not complete at least until an executed Stipulation and Understanding was on file, at which time under the plain terms of 12 C.F.R. § 563.18-2(e)(3) the 60-day review period recommenced. For this reason, the Board’s contention that its conduct with respect to this Notice was “committed to agency discretion by law,” 5 U.S.C. § 701(a)(1), and therefore not amenable to judicial review, must fail.

As the Supreme Court stated in Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 167, 83 S.Ct. 239, 245, 9 L.Ed.2d 207 (1962): “[ejxpert discretion is the lifeblood of the administrative process, but ‘unless we make the requirements for administrative action strict and demanding, expertise, the strength of modern government, can become a monster which rules with no practical limits on its discretion,’ ” (quoting New York v. United States, 342 U.S. 882, 884, 72 S.Ct. 152, 153, 96 L.Ed. 662 (1951) (dissenting opinion) ).

An agency’s own regulations provide such “practical limits on its discretion.” In this case, the administrative record demonstrates both (1) an agency’s failure to follow its own regulations relating to appropriate procedures, and (2) an agency determination that implicitly and without adequate explanation contradicts its earlier findings. In such circumstances, the agency cannot attempt to avoid judicial review under 5 U.S.C. § 702 with the claim that the final decision made by the agency is one committed to its discretion by law.

In view of the disposition of this matter detailed in the Order of August 6, 1985, it would be premature to consider the question of whether a notice of intent not to disapprove the acquisition would be subject to judicial review, and, if so, whether issuance of such a notice in this case would be arbitrary, capricious and contrary to law.

For the foregoing reasons thef Order of August 6,1985, granted a declaratory judgment for plaintiff, denied its prayer for equitable relief, and dismissed the complaint as against Unicorp.

      . In this Memorandum, descriptions of actions taken by “the Board” refer more precisely to actions taken by Board staff acting under authority delegated to it by the Board pursuant to 12 C.F.R. § 563.18-2(1) (1985).

      . As expressed in the June 28, 1985 Letter from William J. Schilling, Director, Office of Examinations and Supervision, Federal Home Loan Bank Board, to Thomas J. Haggerty, Esq. A.R. 010000.

      . On July 19, 1985, this action came before the Court for a hearing on plaintiffs application for a temporary restraining order. On July 22, 1985, the Court granted plaintiff’s application, and on July 30, 1985, a hearing was held on plaintiffs motion for a preliminary injunction. Subsequently, by Order dated July 30, 1985, the Court extended the temporary restraining order to August 10, 1985 to preserve the status quo pending an expeditious adjudication of the merits. After filing briefs, exhibits and affidavits, and making extensive oral arguments, the parties on August 2, 1985 submitted this matter for decision on the merits.

      . The pertinent part of the statute provides that:
      [n]o person acting directly or indirectly or through or in concert with one or more other persons, shall acquire control of any insured institution through a purchase [note omitted], assignment, transfer, pledge, or other disposition of voting stock of such insured institution unless the Corporation [here the Board] has been given sixty days’ prior written notice of such proposed acquisition and within that time period the Corporation has not issued a notice disapproving the proposed acquisition or extending up to another thirty days the period during which a disapproval may issue.
      12 U.S.C. § 1730(q)(l) (1978).
      Section 1730(q)(6) details the requirements of such notice, indicating that a notice should contain seven identified categories of information, including, among others, the identity, business background and experience of the potential acquirer; the assets and liabilities of the proposed acquiror and the terms and conditions of the proposed acquisition. 12 U.S.C. § 1730(q)(6)(A)-(G). Beyond that, the notice must include ”[a]ny additional relevant information in such form as the Corporation may require by regulation or by specific request in connection with any particular notice,” 12 U.S.C. § 1730(q)(6)(H), thus giving the Board the ability to obtain additional information relevant to consideration of the notice.

      . See 12 C.F.R. § 563.18-2(1) (1985).

      . See 12 C.F.R. § 563.18-2(k) (1985).

      . 12 C.F.R. § 563.18-2(e)(3) also states in part:

        Receipt of Notice; effect. The period for Corporation review of any proposed acquisition will commence upon receipt by the Corporation of any notice substantially complying with the provisions of paragraph (e)(1). The Corporation will send a letter of acknowledgement to an acquiring person indicating the date of receipt of a notice deemed to be sufficient or specifying the reasons why a notice is insufficient. After the Corporation notifies the acquiring person that the notice is sufficient, the Corporation may subsequently make a determination that additional information is required for its review of the notice, and it shall notify the acquiring person that the notice is insufficient. In such case the period for Corporation review will be deemed to commence again in its entirety upon the receipt of the additional information. [Emphasis added.]

      . 12 U.S.C. § 1730(q)(7) lists certain circumstances under which the Board may disapprove a proposed acquisition, including (D): "[when] the competence, experience, or integrity of any acquiring person or any of the proposed management personnel indicates that it would not be in the interests of the depositors of the institution or in the interest of the public to permit such person to control the institution.”

      . Such a notification would have triggered commencement of the 60-day review period under Board regulation 12 C.F.R. § 563.18-2(e)(3) (1985). See discussion supra at p. 1125, n. 7.

      . As is authorized by 12 C.F.R. § 563.18-2(g), which states that "[p]rior to the expiration of the 60-day review period or any extension thereof, the [Board] may notify the acquiring person in writing of ... [i]ts intent not to disapprove the proposed acquisition.”

      . CityFed, in this May 23 submission, provided additional information supplementing earlier submissions relating to George Mann and Uni-corp and their activities in connection with Unity Bank of Canada. The May 23 letter presented allegations that George Mann was instrumental in the approval of loans to a particular borrower, which loans were chronically and seriously under-collateralized. A.R. at 010052-010455.

      . In its June 25 letter, the Board requested information from Canadian authorities regarding George Mann and Unicorp and their activities in connection with Unity Bank of Canada. See Letter from Julie L. Williams, Associate General Counsel, Director, Corporate and Securities Division, to William Kennett, Inspector General of Banks, Department of Finance (June 25, 1985). A.R. 010039.

      . The Board apparently disagrees with Unicorp on this issue, having stated on oral argument that "we believe that as with other Bank Board actions and other agency actions that aren’t specifically addressed in the ... agency statute itself, the route for review of that action would be under the APA directly in the district court.” Tr. of Hearing, July 19, 1985 at 38.

      . In which the Court upheld over appellant Federal Home Loan Bank Board’s challenge the standing of deposit brokers to challenge regulations promulgated by the FDIC and the Bank Board.

      . The legislative history clarifies Congress’ intent in the CSLCA to provide regulatory agencies with additional authority to control "fly-by-night” takeovers of financial institutions. See 124 Cong.Rec. 33,308 (1978). A primary objective of the CSLCA was to “enhance and maintain public confidence in the savings and loan industry by preventing identifiable serious adverse effects resulting from ... inadequate financial support, or unsuitable management in these institutions.” 44 Fed.Reg. 10,501-10,502 (1979).

      . In reaching this conclusion the Court relies upon the representations made by counsel for Unicorp that "No showing has been made that [Unicorp] would act in a manner inconsistent with the law____” Letter from Scott B. Schreiber to Robert E. Juceam dated August 5, 1985, at p. 2. Such a showing could, on short notice, result in further proceedings and orders.

      . See discussion supra at p. 1125.

      . 12 U.S.C. § 1730(q)(6) mandates that a notice shall contain inter alia "[a]ny plans or proposals which any acquiring party making the acquisition may have to liquidate the institution, to sell its assets or merge it with any company or to make any other major change in its business or corporate structure or management.” 12 U.S.C. § 1730(q)(6)(E) (1978).

      . Memorandum from Edward J. O’Connell, III, Assistant Director for Regional Operations, to William J. Schilling, dated April 24, 1985. A.R. at 010551 (emphasis added).

      . Letter from Julie L. Williams, Associate General Counsel, Director, Corporate and Securities Division, to William Kennett, Inspector General of Banks, Department of Finance (June 25, 1985), A.R. 010039.

      . 12 C.F.R. § 563.18—2(e)(1) (1985) (emphasis added) states that "[a] notice ... shall not be deemed sufficient unless it includes all of the information required by the form prescribed by the Corporation and any additional information [here the executed Stipulation] as the Corporation may require by specific request in connection with any particular notice."

      . These principles were reaffirmed in Motor Vehicles Manufacturers Association v. State Farm Mutual Automobile Insurance Company, 463 U.S. 29, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983), in which the Court stated that “[w]e have frequently reiterated that an agency must cogently explain why it has exercised its discretion in a given manner [citations omitted]; and we reaffirm this principle again today.” Id. at 48-49, 103 S.Ct. at 2869-2870.


source: Caselaw Access Project

license: Public Domain

text:
    S.A. HEALY COMPANY, and Vanessa General Builders, Inc., Plaintiffs, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Defendant.
    Civ. A. No. 85-1751.
    United States District Court, District of Columbia.
    Aug. 14, 1985.

      Robert G. Watt, Garry R. Boehlert, Watt, Tieder, Killian & Hoffar, Vienna, Va., for plaintiffs.
    Sara E. Lister, Gen. Counsel, Robert L. Polk, Associate Gen. Counsel, Frank R. Filiatreau, Jr., Asst. Gen. Counsel, Washington, D.C., for defendant.
    Stanley O. Sher, Billis, Sher & Jones, Washington, D.C., for amicus curiae Mergentime Corp. and Perini Corp.
   MEMORANDUM

OBERDORFER, District Judge.

I.

Plaintiffs S.A. Healy Company and Vanessa General Builders, Inc., bid as a joint venture on an Invitation to Bid (IFB) issued by the Washington Metropolitan Transit Authority (WMATA) for construction of the Greenbelt Route Shaw Station and Tunnel, extensions of WMATA’s subway system funded in part by the Urban Mass Transportation Agency of the Department of Transportation (DOT/UMTA). The IFB, Appendix B, required all bidders to participate in WMATA’s Affirmative Action Plan by subcontracting to, or participating in, a joint venture with a disadvantaged business enterprise (DBE), an enterprise owned and controlled by disadvantaged persons, which would be responsible for, and perform, at least 20 percent of the work on the contract. Healy made the low bid of $49.4 million and indicated at the time of its bid its intent to meet its affirmative action obligation by arranging for Vanessa, the minority owned partner, to perform 20 percent of the work on the contract.

Vanessa had not previously been certified as a DBE. Accordingly, WMATA’s Office of Civil Rights (CIVR) held a certification hearing. The chief executive officer of Vanessa, Mr. Ishmel Harps, Sr., and Vanessa’s president, Ishmel Harps, Jr., represented the company at the hearing. Information on the record indicated that the biggest jobs done by Vanessa in the last three years ranged from $103,000 to $600,000 undertakings. WMATA Minority Business Enterprise Disclosure Affidavit (Feb. 25, 1985). Mr. Harps, Sr., testified that out of the 35 full time employees listed in his son’s affidavit of February 5, 1985, three to four were black, the rest were white. Transcript, In the Matter of: Vanessa Builders Incorporated, before the WMATA Office of Civil Rights Business Enterprise Certification Review Board at 27. As to the company’s line of credit, Mr. Harps, Jr., testified:

No, [we do not have a line of credit] at this time. Because we can’t get a line of credit until the—in the process now of getting our records straight. I mean nobody is going to give you a line of credit.

Tr. at 83. Both the Harps’ confirm, “[w]e have no bonding.” Tr. at 48. Mr. Harps, Jr., continued: “We never had to provide bonds.” Tr. at 57. Moreover, the company has no payment bond capability. Tr. at 59. As far as liability on its projects, Vanessa has “absolutely no responsibility.” Tr. at 62. For one nine month period, the firm listed telephone expenses of only $296.54 and travel expenses of only $303. Tr. at 40. CIVR officials also questioned the validity and accuracy of the Vanessa tax returns which formed the basis of the Harps’ testimony on their finances. Tr. at 64, 92. Finally, Vanessa’s total equipment consists of one truck, two pickups, one sedan, welding machines and construction tools. Tr. at 23. Concluded one review board member:

Vanessa Builders is nothing but a broker, if you would, for large corporations trying to satisfy their minority business input. They have 14 jobs and all but one is federally funded.

Tr. at 90.

Based on the evidence received at its hearing, the CIVR refused to certify Vanessa as a qualified DBE, and thus Healy-Vanessa as a qualified joint venture, on the grounds that (1) the disadvantaged person who purported to be the president of Vanessa did not have independent control of its day-to-day operations, and (2) Vanessa did not have adequate financial structure and resources to support this contract in addition to all the other contracts that it was performing. On May 7, 1985, CIVR denied Healy-Vanessa certification as a DBE for a third reason: there was no agreement requiring Vanessa actually to perform any part of the contract work. Letter from Claude Swanson, Director CIVR, to Donald M. Zeier (May 7, 1985).

After the certification denials, the WMA-TA Contracting Officer informed HealyVanessa that although he found their bid responsive, as part of his responsibility determination he would have to conduct an inquiry into whether Healy-Vanessa’s bid represented a good faith commitment to the DBE requirement of Appendix B. Healy-Vanessa wrote to the Contracting Officer in defense of its own good faith. Healy-Vanessa also offered to substitute five DBE subcontractors already certified by WMATA to fulfill the 20 percent minority participation requirement. Healy-Vanessa had obtained these commitments prior to bid submission. Affidavit of Donald J. Zeier at 5 (May 30, 1985). The Contracting Officer, however, found Healy-Vanessa’s response not sufficient to meet the good faith requirement of Appendix B. According to the Contracting Officer:

[T]he principals of Vanessa admitted to a complete lack of bonding capacity, which showed that they did not understand that bonds were essential for a contract of this magnitude. Further, the principals had no line of credit to aid in financing the work. Moreover, the joint venture agreement does not contain any requirements for Vanessa to perform a clearly defined portion of the work as required by 49 CFR 23.53(c), nor does the joint venture agreement require any specific amount of financing by either party but permits, where there is a lack of working capital, execution of a note in satisfaction thereof____ This type of business arrangement in connection with the accomplishment of an important construction contract raised serious concerns as to whether the joint venture’s bid constituted a good faith attempt to comply with the requirements of Appendix B.

Letter from John S. Egbert, Contracting Officer, to Robert G. Watt (June 10, 1985). Consequently, the Contracting Officer found Healy-Vanessa’s bid non-responsible and awarded the contract to Mergentime Corporation and Perini Corporation, the second lowest bidder in the amount of $50,-895,000. Determination of Contractor Non-Responsibility by John S. Egbert, Contracting Officer (May 15, 1985). Mergentime-Perini has since appeared in these proceedings by leave of Court as amicus curiae. WMATA and Mergentime-Perini represent without contradiction that its contract will be performed with 20 percent participation by certified minority subcontractors. Transcript, Telephone Conference (Aug. 12, 1985).

On May 30, 1985, both Vanessa, individually, and Healy-Vanessa, as the joint venture, appealed their denials of certification to the Secretary of Transportation pursuant to 49 C.F.R. § 23.55, which sets out the procedure for appeals of denial of certification as a DBE. Healy-Vanessa also filed a protest with DOT/UMTA and, at the same time, filed a Motion For Temporary Restraining Order, Preliminary Injunction, Declaratory Judgment and Other Relief in this Court. By order of June 3, 1985, this Court denied plaintiffs’ motion for temporary restraining order, .in reliance on the representation by defendant’s counsel that it would not immediately award the contract to Mergentime-Perini. An Order of June 27,1985, stayed all proceedings awaiting initial action by DOT/UMTA. The parties continued, however, to brief the preliminary injunction motion and the summary judgment motions. On July 30, 1985, DOT/UMTA issued its decision affirming WMATA’s denial of the contract to HealyVanessa. Letter from Peter N. Stowell to Robert G. Watt (July 30, 1985). This matter is now before the Court on the parties’ cross motions for summary judgment.

II.

Healy-Vanessa advances two challenges to the WMATA decision. First, plaintiffs claim that WMATA’s inquiry into the good faith of the joint venture bid was in violation of federal law. Second, plaintiffs argue in effect that the result of WMATA’s good faith inquiry was not supported by substantial evidence.

A.

Both parties agree that the standard of review to be applied to the WMATA bid award is embodied in Steinthal & Company v. Seamans, 455 F.2d 1289 (D.C.Cir. 1971). S.A. Healy and Vanessa General Builders, Inc., A Joint Venture’s Reply to the Washington Metropolitan Area Transit Authority’s Opposition to Healy-Vanessa’s Cross-Motion for Summary Judgment (Plaintiffs’ Reply) at 21 (filed July 8, 1985); Memorandum of Points and Authorities in Support of Defendant’s Motion for Summary Judgment (Defendant’s Motion for Summary Judgment) at 7 (filed June 13, 1985). This standard provides:

[Cjourts should not overturn any procurement determination unless the aggrieved bidder demonstrates that there was no rational basis for the agency’s decision____ [The court's] inquiry must fully take into account the discretion that is typically accorded officials in the procurement agencies by statutes and regulations____ Only when the court concludes that there has been a clear violation of duty by the procurement officials should it intervene in the procurement process and proceed to a determination of the controversy on the merits.

455 F.2d at 1301, 1303.

The DOT/UMTA rejection of plaintiffs’ bid protest is not binding upon the court, but may be viewed as advisory:

The court has the last word, but it can properly seek the benefit of whatever contributions can be made by an agency whose “area of specialization” embraces problems similar to or intermeshed with those presented to the court.

Wheelabrator Corporation v. Chafee, 455 F.2d 1306, 1316 (D.C.Cir.1971) (citation omitted). The DOT/UMTA, like the GAO in Wheelabrator Corporation, is an agency of special competence. Consequently, “the court may properly take into account [the DOT/UMTA’s] concurrence [in WMA-TA’s denial of certification to Healy-Vanessa] ... although the court does have the last word.” Id.

B.

Plaintiffs’ contention that because Healy-Vanessa met the good faith standard of 49 C.F.R. § 23.45(h)(2), the Contracting Officer’s determination was in error, is vulnerable to a short answer and therefore is addressed first. Assuming, arguendo, that WMATA’s good faith inquiry was itself lawful, there is ample evidence on the record to support the Contracting Officer’s determination that because of Vanessa’s obvious lack of ability to perform 20 percent of the contract work, Healy-Vanessa as a joint venture lacked good faith in proposing Vanessa to satisfy the DBE requirement. See Tr. of CIVR Hearing. Healy knew or should have known the palpable defects in Vanessa’s qualifications. To proffer it as a 20 percent partner in a $50 million subway construction contract is, manifestly, not in good faith.

C.

Healy-Vanessa's other claim is that WMATA’s decision fails to meet the Steinthal standard because it was made in violation of federal law embodied in 49 C.F.R., Part 23, which governs the award of contracts for which contract goals have been set. Section 23.45(h) provides:

(2) If the MBE participation submitted in response to paragraph (h)(1) of this section does not meet the MBE contract goals, the apparent successful competitor shall satisfy the recipient that the competitor has made good faith efforts to meet the goals.

49 C.F.R. § 23.45(h)(2) (1985). Plaintiffs contend that WMATA violated this federal regulation by subjecting Healy-Vanessa to a “good faith efforts” test once WMATA determined that Vanessa was not a qualified DBE, instead of allowing Healy-Vanessa to substitute other certified DBE’s to meet the minority participation goals. Plaintiffs’ Memorandum of Points and Authorities in Opposition to Defendant’s Motion for Summary Judgment and in Support of Plaintiffs’ Cross-Motion for Summary Judgment (Plaintiffs’ Opposition) at 10 (filed June 25, 1985).

Specifically, plaintiffs claim that an integrated reading of subsection (h) shows that a “good faith efforts” examination is not proper if a bidder satisfies its commitment to DBE goals any time before award of the contract. Plaintiffs’ Reply at 5. Plaintiffs also cite decisions of the Comptroller General which state that a prime contractor may substitute a fresh MBE subcontractor after bid opening, but before award, when the named MBE subcontractor fails to win certification. But the prime contractors in the GAO cases cited by plaintiffs did not know that the minority subcontractors originally selected did not qualify. By contrast, Healy-Vanessa knew or should have known that Vanessa was not financially able to perform 20 percent of the work, could not make a bond, and had bids from subcontractors which it could substitute if, after bids were opened, Healy still wanted the contract. Healy’s knowledge of these facts distinguishes this case from those permitting a prime contractor to substitute a qualified minority subcontractor for another who proved, on inquiry, to be unqualified.

Plaintiffs also fail to observe that the regulation explicitly allows the recipient, here WMATA, to select the time at which DBE information is to be submitted. Subsection (h)(l)(ii) of Section 23.45 provides:

(ii) The recipient may select the time at which it requires MBE information to be submitted. Provided, that the time of submission shall be before the recipient commits itself to the performance of the contract by the apparent successful competitor.

49 C.F.R. § 23.45(h)(1)(h) (1985). Appendix B to the IFB sets out WMATA’s timetable. Under the IFB, WMATA requires each bidder to submit with its bid a “Schedule of MBE [Minority Business Enterprise] Participation” which states how the bidder plans to satisfy the DBE goals of the IFB. Appendix B provides in certain limited circumstances for substitution of another subcontractor for one named in the submitted schedule:

Except as provided herein, the successful bidder (Contractor) shall not have the work performed or the materials or supplies furnished by any individual or firm other than those named in the Schedule of DBE/WBE Participation. The Contracting Officer may permit substitution of a subcontractor for one named in unusual situations upon submission by the successful bidder (Contractor) of a complete justification therefore. The term “unusual situation” includes, but is not limited to, a subcontractor’s:
a. Failure to qualify as a DBE/WBE business enterprise.

IFB, Appendix B at 116. However, this provision in the IFB which allows substitution of a subcontractor after submission of the original DBE information is permissive, not mandatory. The Contracting Officer “may permit substitution,” but is not required to do so.

As WMATA points out, and DOT/UMTA confirms, plaintiffs’ reading of 49 C.F.R., Part 23 combined with Appendix B of the IFB also raises policy concerns. A decision setting aside WMATA’s ruling here “would permit a bidder to gain an advantage over other bidders after bids were disclosed by being able to decide whether or not to argue whether its bid was valid.” Letter from Peter N. Stowell to Robert G. Watt (July 30, 1985) at 4. For example, if Healy felt, after seeing other bids, that its bid was too low for its comfort, it would retain the practical option of forfeiting the contract by acquiescing in a challenge to Vanessa’s qualifications and not attempting to substitute the subcontractors. Moreover, if the subcontractors were substituted, there was no genuine role for Vanessa to perform. Yet it purported, even after substitution, to remain in place as a 20 percent partner in a joint venture. WMATA could reasonably conclude that this was unacceptable.

Plaintiffs seem to treat 49 C.F.R., Part 23 as authorizing a good faith inquiry only if a prime contractor fails to substitute subcontractors. Yet the regulation is not, as plaintiffs seem to argue, an “exclusionary rule.” Plaintiffs had no legal right to be free from inquiry about Vanessa’s financial responsibility, ability to make bond, and the motivation for holding back the subcontractors’ bids. WMATA had a legal right to conduct that inquiry and to act on the information developed in it to determine whether the 20 percent joint venture was genuinely capable of performing 20 percent of the work, as was represented in the bid. Thus, in making its DBE responsibility determination in this case WMATA was not violating federal law, but rather discharging its public responsibility. Nor did WMATA evade, or fail to achieve, the affirmative action objective required of it. It is uncontested that Mergentime-Perini will perform the contract with 20 percent minority participation.

In sum, the statute, itself, and the DOT’s opinion taken as a contribution from an agency with special expertise, Wheelabrator Corporation, 455 F.2d at 1316, indicate that WMATA did not violate federal law by failing to consider Healy-Vanessa’s proffered substitute DBE’s. It was within WMATA’s discretion to reject Vanessa as an irresponsible joint venture not capable of performing either its proffered role as a DBE or a role as a 20 percent prime contractor responsible for five certified subcontractors. An accompanying order will grant defendant’s motion for summary judgment and deny the cross motion filed by plaintiffs.

      . The eligibility standard for certification as a joint venture is contained in 49 C.F.R. § 23.-53(c) (1985):
      A joint venture is eligible under this part if the MBE partner of the joint venture meets the standards for an eligible MBE partner set forth above and the MBE partner is responsible for a clearly defined portion of the work to be performed and shares in the ownership, risks, and profits of the joint venture.
      Section 23.53(g) further provides:
      Except as provided in § 23.55, the denial of a certification by the Department or a recipient shall be final, for that contract and other contracts being let by the recipient at the time of the denial of certification. MBEs and joint ventures denied certification may correct deficiencies in their ownership and control and apply for certification only for future contracts.

      . According to the CIVR:
      The authority could not determine the financial structure of your company. As an example, your balance sheet of September 30, 1984 shows a negative balance in one checking account of $5,753.91 and $16,184.68 in another. However, you personally verified that you do not have a line of credit with any financial lending institution; and, therefore, you could not adequately explain overdrafts in Vanessa General Builders, Inc. bank accounts.
      Letter from Claude R. Swanson, Director CIVR, to Ishmel Harps, Jr. (April 19, 1985).

      . The difference between the determination that a bid is responsive, and that a bidder is responsible is set out in A. Metz, Inc., B-213518 84-1, CPD ¶ 386 (April 6, 1984):
      Responsiveness concerns whether a bidder has unequivocally offered to provide supplies and services in conformity with the material terms and conditions of the solicitation; responsibility refers to a bidder’s apparent ability and capability to perform the contract requirements.

        A. Metz, Inc. at 7. A bidder must pass both tests in order to be awarded a government contract. See WMATA Procurement Regulations at ¶ 7.

      . Counsel for WMATA indicated at a status conference held on August 2, 1985, that the agency had only until August 24, 1985, to make a final award of the contract to Mergentime-Perini. The Court has thus expedited consideration of this matter and expects that this ruling today will give plaintiffs sufficient time to seek emergency relief in the Court of Appeals should they so desire.

      . E.g., Richard Hoffman Corporation, B-216308, 85-1 CPD ¶ 88 (Jan. 23, 1985); A. Metz, Inc., B-213518, 84-1 CPD ¶386 (April 6, 1984); Paul N. Howard—Reconsideration, B-19915.2, 81-2 CPD ¶ 42 (July 17, 1981); Paul N. Howard Company, B-199145, 80-2 CPD ¶ 399 (Nov. 28, 1980).

      . Amicus curiae in its Response to Plaintiffs Memorandum of August 12, 1985 at 5 n. 3, succinctly distinguishes these cases:
      [I]n Paul N. Howard Company, ... the Comptroller General emphasized that the bidder was “well intentioned” and could not have known of the independent subcontractor’s lack of DBE status “until well after bid opening.” Similarly, in A. Metz, Inc., ... the Comptroller General affirmed a procuring entity’s finding that a bidder submitted sufficient evidence of good faith in attempting to meet DBE requirements prior to submitting its bid. In Richard Hoffman Corporation, ... the contractor’s shortfall in its proposal—less than one-half of one percent—was considered "too negligible a difference to cast doubt on that firm’s commitment to the MBE goal.”

      . A Dunn & Bradstreet Report on Vanessa shows the following:

      Dunn & Bradstreet Report on Vanessa General Builders, Inc. (March 29, 1985).

      8. Other grounds for substitution of a subcontractor for a named subcontractor are:
      b. Death or physical disability, if the named subcontractor is an individual.
      c. Dissolution, if a corporation or partnership.
      d. Bankruptcy.
      e. Inability to furnish a reasonable performance and payment bond.
      f. Inability to obtain, or loss of a license necessary for the performance of the particular category of work.
      g. Failure or inability to comply with a requirement of law applicable to contractors, subcontractors, or construction, alteration, or repair projects.
      h. Failure or refusal to execute the subcontract in accordance with the terms of an offer submitted to the Contractor or bidder prior to the latter's submission of its bid, but only where the Contracting Officer can ascertain with reasonable certainty the terms of such offer. In the absence of any other factors, such a failure or refusal will be considered an unusual situation only if the bidder obtained, prior to bidding, an enforceable commitment from the subcontractor involved,
      i. Failure to comply with the terms and conditions of this contract or those of its subcontract or joint venture agreement.
      IFB, Appendix B at ¶ 6.

      . Moreover, although WMATA did not address the issue in its decision, Appendix B only permits substitution of a subcontractor for a named subcontractor. It does not cover a situation where one of the prime contractors assumes responsibility for the MBE function and then proposes to subcontract. In this case, Healy proffered Vanessa as a 20 percent partner on a $50 million contract. The difference between a joint venture partner and a subcontractor is significant. Joint venture partners must “be responsible for a clearly defined portion of the work to be performed,” as well as "share[j in the ownership, risks, and profits of the joint venture." 49 C.F.R. § 23.53(c) (1985). Moreover, unlike subcontractors, joint venture partners are parties to the bid. These factors make it at least rational for WMATA to distinguish between the substitution of joint venture partners and non-party subcontractors.

      . In light of this memorandum, plaintiffs’ motion for preliminary injunction will be denied as moot.