Contractors File Suit Against New York MTA’s New Debarment Regime

On November 25, 2019, the Alliance For Fair and Equitable Contracting Today, Inc. (AFFECT) sued the Metropolitan Transportation Authority (MTA) in the Southern District of New York to enjoin and declare unconstitutional a new contractor debarment regime implemented by the New York legislature and the MTA on November 6, 2019. This new debarment regime—upon which there was no opportunity for public comment—requires, among other things, the MTA to automatically debar a contractor that fails to complete a project by a contractual deadline or claims costs in excess of a project budget, without providing the MTA discretion to even consider mitigating facts or circumstances that might impact project deadlines or budgets. This applies both prospectively to new contracts and retroactively to all contracts already in existence, including those entered into before April 2019, when the New York legislature passed the new Debarment Statute requiring the implementation of this regime. The regime also applies to a targeted contractor’s (1) “parent(s), subsidiaries and affiliates”; (2) “directors, officers, principals, managerial employees and any person or entity with a 10% or more interest in a contractor”; and (3) “any joint venture (including its individual members) and any other form of partnership (including its individual members) that includes a contractor or a contractor’s parent(s), subsidiaries, or affiliates of a contractor.” AFFECT’s lawsuit alleges this regime violates the U.S. Constitution’s Contract Clause, Supremacy Clause, Dormant Commerce Clause, procedural and substantive Due Process requirements, and the First Amendment. If not successfully enjoined, this may encourage the New York State Legislature to enact similar laws and require other state agencies to establish similar debarment regimes, and may even motivate other states to do the same.