By Pamela A. MacLean
The National Law Journal
March 16, 2009
A small business advocacy group is fighting to recoup attorney fees in its long-running battle to force the federal Small Business Administration to turn over names of big corporations that win contracts intended for small firms.
Although the group ultimately got a list of all government contractors from another agency, it wants the SBA to pay its costs, while the SBA pushed to appeal a federal judge's testy court order in the case.
The Justice Department on March 5 withdrew its appeal to the 9th U.S. Circuit Court of Appeals on behalf of the SBA, which wanted to eliminate a derisive order by a federal judge in San Francisco.
That order, issued last year by U.S. District Judge Marilyn Hall Patel, accused the agency of "bureaucratic foot-dragging" and trying to avoid liability for attorney fees in a suit by the American Small Business League, which sought the release of names of small businesses getting government contracts.
The league, based in Petaluma, Calif., has repeatedly sued the SBA under the Freedom of Information Act to get access to annual lists of names of the small businesses that receive government contracts. Federal law sets a goal of awarding 23 percent of all government contract dollars to small businesses, and the SBA tracks agency progress to meet that target.
Last year, a report by the inspector general of the Department of Interior found that contracts awarded to The Home Depot Inc., Dell Inc., Xerox Corp., John Deere & Co., Waste Management Inc., The Sherwin Williams Co., The McGraw-Hill Cos. Inc. and Starwood Hotels and Resorts Inc. counted toward the agency achieving its small business contracting goal in 2006-2007. All are Fortune 500 companies.
The SBA defines small business as independently owned and operated and not dominant in its field. Manufacturers with fewer than 500 employees and wholesalers with fewer than 100 qualify, and those with gross revenues under $6 million.
In the league's case, Patel refused the SBA's request for a summary judgment last year, but she dismissed the FOIA claim as moot after the General Services Administration provided thousands of pages of names to the league. But that has not stopped American Small Business League President Lloyd Chapman from pursuit of legal fees in the case. American Small Business League v. SBA, No. C08-829MHP (N.D. Calif.).
Chapman said he is also about to file a new suit for 2008 data and this time will insist on the records coming from SBA.
"I never got the information from the SBA," Chapman said. "The agency is required by statute to maintain the information, and to my simple way of thinking they lied when they said they didn't have it," he said.
SBA spokesman Michael Stamler said the Justice Department would not pursue the appeal on SBA's behalf because the case is moot. "This is just another publicity stunt by ASBL," he said.
"They sued us for the records but it is not our data," he said. "They are GSA documents," he said.
But that is a claim Patel specifically took to task in her order. "The court finds curious the SBA's argument that it does not 'control' the very information it needs to carry out its duties and functions," she wrote. The fact that GSA manages the raw database does not alter that the records are SBA agency records, she wrote.
Contractors in each agency check a box to indicate if the contract went to a small business, and there are 6.5 million government contracts awarded annually, Stamler said.
"We can't go through 6 million contracts in the database," he said. Asked whether the SBA had an obligation to audit or confirm the accuracy of federal agency claims that they give small businesses contracts, Stamler said, "We don't have the capacity to audit those contract entries."
Eric Benderson, head of litigation for the SBA said, "there is policing in the sense that competitors can file a challenge in the Office of Appeals," if a large company claims to qualify as a small business. To make a false claim would be fraud, he said.
As for the attorney fees, Benderson said Chapman is not entitled to them because he "didn't prevail and he got the information. We won the case and decided not to appeal."