Opinion
NO. 2013-CV-119
07-16-2014
XTL-NH, Inc. v. New Hampshire State Liquor Commission
ORDER
The Petitioner, XTL-NH ("XTL"), has brought an action against the Respondents, the New Hampshire State Liquor Commission (the "Commission") and Exel, Inc. ("Exel"), arising out of XTL's unsuccessful bid for a liquor warehousing contract. The Commission awarded a contract to another bidder, Exel, Inc. ("Exel"). XTL alleges that the bidding process by which the contract was awarded to Exel was unlawful under New Hampshire competitive bidding law. The Commission now moves for summary judgment. XTL objects. For the reasons stated in this Order, the Motion for Summary Judgment is GRANTED with respect to Count, I which seeks equitable relief. The Motion for Summary Judgment is DENIED with respect to Count II which seeks money damages. The Motion for Summary Judgment is GRANTED with respect to Count III which seeks attorney's fees.
I
To prevail on a Motion for Summary Judgment, the moving party must "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." RSA 491:8-a, III. In order to defeat summary judgment, the non-moving party "must put forth contradictory evidence under oath, 'sufficient . . . to indicate that a genuine issue of fact exists so that the party should have the opportunity to prove the fact at trial . . .'" Phillips v. Verax, 138 N.H. 240, 243 (1994) (quoting Dolan v. Maple Leaf Health Care Ctr., Inc., 119 N.H. 424, 425 (1979)). A fact is material if it affects the outcome of the litigation under the applicable substantive law. Palmer v. Nan King Rest., Inc., 147 N.H. 681, 683 (2002). In considering a party's Motion for Summary Judgment, the evidence must be considered in the light most favorable to the non-moving party, together with all reasonable inferences therefrom. Sintros v. Hamon, 148 N.H. 478, 480 (2002). Accordingly, the Court must consider the evidence in the light most favorable to XTL, with all reasonable inferences therefrom, in considering the Commission's Motion.
On November 20, 2012, the Commission awarded Exel a 20 year contract for warehousing services. The contract was the result of a bidding and evaluation process conducted entirely by the Commission pursuant to RSA 21-I: 18. According to a supporting affidavits attached to its Objection, During the bidding process, XTL was the highest scored bidder that also met all of the Commission's Requests for Proposal (the "RFP"). (Cerone Aff. ¶ 6, May 2, 2014.). XTL took no exception to the RFP, had the lowest price for the first 30 months of the contract, and was the most automated bidder. (Id.) Nevertheless, the Commission ranked XTL second in its bidder scoring hierarchy; XTL's overall score was 2.24 points less than Exel's overall score. (Id. ¶ 7.)
Exel's "proposal was non-responsive to and non-compliant with the RFP's requirements, specifications, terms, and conditions." (Id. ¶ 9, a-k) (Listing numerous non-responsive or non-compliant issues with Exel's bid). XTL alleges that the Commission subjected it to second place ranking during Phase II of the bidding process by engaging in violations of competitive bidding practices, including being biased and favoring Exel by:
[A]llowing Exel to twice submit BAFOs [Best and Final Offers] after the deadlines, allowing only Exel to improve its BAFO three months after the BAFO deadline expired and in exchange for changes to the contract, retroactively amending the RFP to allow only Exel to identify its warehouse location after the deadline for submitting complete proposals, and re-negotiating terms of the RFP and terms, provisions, and language of the contract to favor Exel and to conform to the wishes of Exel.(Id. ¶ 13, vii.)
The Commission failed to give notice to other bidders, including XTL, that it waived material requirements of the RFP for Exel and did not allow other bidders to deviate from the RFP as Exel had done. (Id. ¶ 14.) As a result of the bidding process, XTL incurred a total of $318,563.02 in costs. (Id. ¶ 15.) In addition, XTL estimates lost profits over the course of the 20 year contract to reach between $52.9 and $54.4 million. (Id. ¶ 16.)
The RFP included provisions that allowed the Commission broad discretion to waive particular requirements, so long as the alternative would be in the best interest of the Commission. (Def.'s Ex. H.) The RFP provides, in relevant part: "The NHSLC shall solely resolve any matter requiring interpretation. At its sole discretion, the NHSLC may waive Mandatory requirements and accept alternatives deemed to be in the best interests of the NHSLC." (Id., RFP § 1.7.2.) The RFP also defines "mandatory" and explains "'Mandatory' shall not limit the NHSLC, at its sole discretion, from accepting an alternative considered by the NHSLC to be equal or superior." (Id., RFP § 1.0.)
Between December 2012 and March 2013, XTL exhausted its administrative remedies in an attempt to overturn the Commission's award to Exel. After it failed to convince the Commission to overturn the award to Exel, it brought this Petition. In Count I, XTL seeks equitable relief, that the Court rescind the contract between the Commission and Exel and award it the contract, or require rebidding, on a theory of promissory estoppel. (Mot. Amend XTL's Pet. For Preliminary and Permanent Injun. and Other Equitable Relief 32-35.) Count II also asserts a promissory estoppel claim, but seeks alternative relief in the form of monetary damages for "all expenses, costs, and fees incurred in responding to the RFP and in participating in [the] bidding process," as well as lost profits. (Id. at 36.) Count III seeks attorney's fees and costs.
The Commission moves for summary judgment, arguing that sovereign immunity bars both the monetary and nonmonetary claims asserted by XTL in Counts I and II. With respect to the nonmonetary relief, the Commission argues that sovereign immunity bars these claims because the Commission's "acts of evaluating bids and selecting a vendor are not beyond the agency's authority and, as a result, to the extent Plaintiff seeks nonmonetary relief for its challenges to the procedures and judgments employed, the counts are barred as there is no statutory basis for such relief." (Def.'s Mem. Law in Support Mot. Summ J. 1.) The Commission argues RSA 541-B:19, I (b) and (c) bars XTL's monetary claims, and, to the extent they are not barred, RSA 541-B:14's statutory cap on damages limits recovery to $475,000. (Id.) The Commission also asserts that even if XTL can maintain a promissory estoppel claim, it has failed to demonstrate bad faith and thus cannot recover lost profits. Finally, the Commission argues that Count III must be dismissed as attorney's fees are not recoverable against the Commission as a matter of law.
II
Sovereign immunity protects the State "from suit in its own courts without its consent, and shields it from liability for torts committed by its officers and employees." Everitt v. General Electric Corp., 156 N.H. 202, 209 (2007) (citation and quotation omitted). The doctrine "serves two general public policy considerations: the protection of the public against profligate encroachment on the public treasury, and the need for the orderly administration of government, which, in the absence of immunity, would be disrupted if the State could be sued at the instance of every citizen." In re Estate of Raduazo, 148 N.H. 687, 692 (2002) (quotation omitted). Generally, as a State agency, the Commission is cloaked with sovereign immunity and thus enjoys immunity from suit in New Hampshire courts. A court does not have subject matter jurisdiction to hear cases against the Commission unless there is an applicable statute waiving immunity either expressly or by reasonable implication. See Chase Home for Children v. N.H. Div. for Children, Youth & Families, 162 N.H. 720, 730 (2011). Such a waiver is to be strictly construed and "must evidence a clear intent to grant a right to sue the State." Id. (citation and quotation omitted).
XTL contends that RSA 21-I:18, RSA 21-I:22-a, and RSA 21-I:22 provide remedies to bidders for violations of competitive bidding laws and therefore sovereign immunity has been impliedly waived for XTL's promissory estoppel claims. (XTL's Obj. Mot. Summ. J. 5.) But the Court need not decide this issue to determine that XTL may seek money damages, since RSA 491:8 permits breach of contract actions against the State. (XTL's Obj. Mot. Summ. J. 4.).
The Commission devotes an inordinate amount of its briefing to a prolix argument that Exel's claims for monetary damages are either barred or limited by RSA 541-B. This argument completely misses the point. RSA 541 relates to tort actions against the State, not contract claims. The Commission argues that RSA 541-B:14, I caps the damages XTL seeks to $475,000, ignoring the fact that RSA 541-B:14, I by its terms, applies to "[a]ll claims arising out of any single incident against any agency for damages in tort actions . . . ." "The statutory cap imposed by RSA 541-B:1 does not apply to damages under a breach of contract claim." Victor Virgin Constr. Corp. v. N.H. Dep't of Transp., 165 N.H. 242, 246 (2013).
RSA 491:8, grants courts jurisdiction to "enter judgment against the State of New Hampshire founded upon any express or implied contract with the state." See Chase Home for Children, 162 N.H. at 731 (finding RSA 491:8 is "a specific legislative authorization for the judiciary to enter judgment against the State of New Hampshire in contract disputes"). In Marbucco Corp. v. City of Manchester, the New Hampshire Supreme Court, citing RESTATEMENT(SECOND)CONTRACTS § 90 (1979), explicitly recognized that a bidder's reasonable reliance on a public entity's promise to award the contract to the lowest responsible bidder may entitle a bidder to damages under a theory of promissory estoppel. 137 N.H. 632-33. Promissory estoppel "serves to impute contractual stature based upon an underlying promise, and to provide a remedy to the party who detrimentally relies on the promise." Great Lakes Aircraft Co. v. Claremont, 135 N.H. 270, 290 (1992) (citing 2A CORBIN ON CONTRACTS § 196A, at 55-56 (Supp. 1991)). The New Hampshire Supreme Court has stated that "[a] promise binding under § 90 of the [RESTATEMENT (SECOND) CONTRACTS] is a contract." Jackson v. Morse, 152 N.H. 48 (2005). It follows that because RSA 491:8 permits contract actions against the State, XTL's promissory estoppel action is not barred by sovereign immunity and the Court has subject matter jurisdiction over XTL's promissory estoppel claims.
B
A disappointed bidder asserting a promissory estoppel claim is generally limited to damages it sustained by justifiable reliance on the promise to conduct a fair bidding process. Marbucco, 137 N.H. at 634. However, "[i]f a disappointed low bidder complies with all requirements of the bid instructions but it is deprived of the contract through some conduct of the awarding authority tantamount to bad faith...then the recovery of lost profits should be the measure of damages". Id. The Commission argues that XTL has failed to offer sufficient evidence of bad faith and therefore lost profits are not recoverable in Count II. The Commission also contends that XTL should be judicially estopped from claiming the Commission acted in bad faith because its original Petition does not allege such conduct.
XTL contends, inter alia, that because the Commission's motion for summary judgment did not argue judicial estoppel or lack of bad faith, Superior Court Rule 11(a) requires that these arguments not be considered. New Hampshire Superior Court Rule 11(a) requires that "[a] request for court order must be made by motion which must (1) be in writing unless made during a hearing or trial, (2) state with particularity the grounds for seeking the order, and (3) state the relief sought." While XTL is correct that the Commission's Motion did not include the judicial estoppel or bad faith arguments, the attached memorandum did. Furthermore, given that XTL has briefed these issues and has had the opportunity of oral argument, the Court finds and rules that justice requires that this rule be waived in this instance. See Super. Ct. R. 1, comment a ("A court may deviate from or modify a rule as justice requires.").
The Commission's principal contention is that XTL has failed to alleged sufficient bad faith conduct and therefore cannot recover lost profits. However, XTL has proffered the affidavit of Louis J. Cerone, President of XTL, detailing numerous occasions during the bidding process where the Commission afforded Exel preferential treatment that may constitute bad faith. (Cerone Aff. ¶ 9-13.) Construing the evidence in the light most favorable to XTL, the Court DENIES the Commission's Motion for Summary Judgment as to XTL's lost profits claim.
The Commission also asserts that XTL is judicially estopped from seeking lost profits because its initial Petition did not seek lost profits but the Amended Petition does. Judicial estoppel protects judicial integrity by preventing a party from prevailing in one phase of the case using one argument and then relying on a contradictory argument to prevail in another phase. Eby v. State, 2014 WL 2688413 (N.H. Sup. 6/13/14) *9. The purpose of the doctrine is to prevent "abuse of the judicial process, resulting in an affront to the integrity of the courts." Pike v. Mullikin, 158 N.H. 267, 270 (2009) (citations and quotations omitted).
While the circumstances under which judicial estoppel may be invoked vary, three factors typically inform the doctrine's application: (1) whether the party's later position is clearly inconsistent with the party's earlier position; (2) whether the earlier position was accepted by the court; and (3) whether the party seeking to assert a later inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.Id. (citation omitted).
Judicial estoppel does not bar XTL's claim for lost profits here. On March 12, 2013, in its Petition, XLT claimed "as of this filing, XTL-NH has insufficient evidence of the NHSLC's bad faith in this matter; thus, the potential remedy of recovering lost profits is likely not available in this case." (Pet. ¶ 116.) On July 3, 2013, XTL's Amended Petition first alleged bad faith. The Commission has failed to show any unfair advantage obtained by XTL or unfair detriment it has incurred due to XTL's amendment. Most importantly, XTL has not prevailed on its position to the Commission's detriment. Judicial estoppel does not bar XTL's lost profit claim.
III
There is more substance to the Commission's argument that XTL's request for equitable relief in Count I is barred by sovereign immunity. Again, XTL contends that the sovereign immunity is impliedly waived by New Hampshire's competitive bidding laws, RSA 21-I:18; RSA 21-I:22-a; and RSA 21-I:22-b.
RSA 21-I:18, I(b) provides: "The liquor commission is completely exempted from the provisions of this chapter, provided that the liquor commission uses competitive bidding when acquiring consumable supplies, materials, goods, and services that are necessary for, incidental to, or related to the operation of the liquor commission." Under RSA 21-I:22-a, every RFP "shall contain within the body of the document the objective criteria by which each submission will be reviewed, if there are particular requirements that will receive more weight in the review of the submission, and the standards upon which any award will be based." Similarly, RSA 21-I:22-b states, "awards which are made by the state or by a state agency . . . shall not be made on criteria that are unknown to the parties submitting bids or proposals." Although RSA chapter 21-I would not, by the terms of RSA 21-I:18, I(b), necessarily apply to the Commission, there is no serious dispute that the statutes express the general principle applicable in all cases of competitive bidding that bidders must stand on equal footing, be treated fairly, and participate in a transparent process. Marbucco, 137 N.H. at 633. However, that these general principles apply to the transaction in question does not lead to the conclusion that sovereign immunity has been waived. Waivers of sovereign immunity are strictly construed. Chase Home for Children v. New Hampshire Division for Children, Youth and Families, 162 N.H. At 730.
The New Hampshire Supreme Court has set forth its view of the remedies available to a disappointed bidder on a public contract, which must be balanced with the public interest, in Marbucco Corp.. The Court explained that "damages ordinarily should be limited to the expenses incurred by the low bidder in its fruitless participation in the competitive bidding process, i.e., its bid preparation costs." 137 N.H. at 634. The Court reasoned that permitting greater recovery "could drain the public fisc in response to mere carelessness on the part of the low level government official." Id. The Court also held that "[i]f a disappointed low bidder complies with all requirements of the bid instructions but is deprived of the contract through some conduct of the awarding authority tantamount to bad faith . . . then the recovery of lost profits should the measure of damages." Id. (citation omitted). Marbucco Corp., establishes that XTL's remedies do not include nonmonetary equitable relief.
Moreover, the New Hampshire Supreme Court has explicitly held that the waiver of sovereign immunity in RSA 491:8, extends only to suits seeking money damages for breaches of contract. Lorenz v. N.H. Admin. Office of the Courts, 152 N.H. 632, 635 (2005). "RSA 491:8 contains no reference to redress in equity and therefore requires a fortiori an interpretation which limits the consent given to actions for the recovery of damages." Id. (quotation omitted). Accordingly, the Court GRANTS, in part, the Commission's Motion for Summary Judgment with respect to XLT's claim for injunctive relief. The Court DENIES the Commission's Motion for Summary Judgment to the extent it asserts that XTL is not entitled to damages or seeks to cap the damages XTL may recover to $475,000.
III
The Commission argues that attorney's fees and costs are barred by sovereign immunity. XTL asserts that it is entitled to these under the substantial benefit exception to the sovereign immunity bar because its "claims form an action to vindicate both its own interest in setting aside a contract award based on an improper and unfair bidding process and the general public's interest in a lawful, fair, and honest competitive bidding process." (Obj. Mot. Summ. J. 23.).
"An award of attorney's fees to the prevailing party where the action conferred a substantial benefit on not only the plaintiffs who initiated the action, but on the public as well, has been recognized as an exception to the American rule that each party must bear its own attorney's fees." Claremont Sch. Dist., 144 N.H. at 595 (citations omitted). "To award attorneys' fees in such a suit to a plaintiff who has succeeded in establishing a cause of action is not to saddle the unsuccessful party with the expenses but to impose them on the class that has benefitted from them and that would have had to pay them had it brought the suit." Id. (quoting Mills v. Electric Auto-Lite, 396 U.S. at 396-97 (1970)).
It is doubtless true that there is a public interest in requiring lawful, fair, and honest competitive bidding. See Marbucco Corp., 137 N.H. at 632 ("Competitive bidding . . . serves to invite competition, guard against favoritism, improvidence, extravagance, fraud and corruption, and . . . secure the best work or supplies at the lowest price practicable." ) (quotation omitted). However, here XTL's, claim for injunctive relief may not proceed; only its damage claim may proceed. This case is therefore not one in which the public will receive a substantial benefit if XTL succeeds, because the RFP will not be re-bid, but is instead for XTL's financial benefit. This case is therefore distinguishable from Irwin Marine v. Blizzard, Inc., 126 N.H. 271, 276-77 (1985), in which the New Hampshire Supreme Court held that the substantial benefit theory was applicable in an action where an unsuccessful low bidder brought an action that voided an awarded contract. Here, since the equitable remedies sought by XTL are unavailable it is not entitled to attorney's fees under the substantial benefit theory.
For the reasons discussed above, because Count I seeks equitable remedies which are barred by Marbucco and sovereign immunity, the Commission's Motion for Summary Judgment is GRANTED with respect to Count I. The Court DENIES the Commission's Motion for Summary Judgment as to Count II, which seeks money damages. Because attorney's fees are unavailable under the substantial benefit theory, the Commission's Motion for Summary Judgment is GRANTED with respect to Count III.
SO ORDERED.
__________
Richard B. McNamara,
Presiding Justice