In re AutoFlex Fleet, Inc.

261 Md. 627

314 A.3d 711

In the MATTER OF AUTOFLEX FLEET, INC.

No. 0539, Sept. Term, 2022

Appellate Court of Maryland.

March 5, 2024

Reconsideration Denied June 3, 2024

Circuit Court for Montgomery County, Case No.: 486843V, Jeannie E. Cho, Judge

Argued by Ryan S. Spiegel, Thompson Hine LLP, Washington, DC, on brief, for Appellant.

Argued by B. Darren Bums, Carney, Kelehan, Bresler, Bennett & Scherr, LLP, Annapolis, MD (Craig S. Meuser, Carney, Kelehan, Bresler, Bennett & Scherr, LLP, Columbia, MD), on brief, for Appellee.

Argued before: Friedman, Zic, Lynne A. Battaglia (Senior Judge, Specially Assigned), JJ.^*

Zic, J.

AutoFlex, Inc. (doing business as AutoFlex Fleet, Inc.) challenges the award to a competing bidder of a $168 million contract (the "Contract") to develop and implement "a turnkey bus electrification program and all associated operational infrastructure and requirements, at or near budget neutral to Montgomery County Public Schools (MCPS) Department of Transportation (DOT)" over a 12-year period, beginning in 2022. After procurement proceedings, MCPS awarded the Contract to a newly created affiliate of Highland Electric Trucking ("HET"), which shared the address of MCPS’s existing diesel bus vendor, American Truck & Bus ("ATB"). The Contract was affirmed, first by the Montgomery County Board of Education (the "Local Board"), and then by the Maryland State Board of Education (the "MSBE" or "State Board").

In August 2021, AutoFlex petitioned for judicial review in the Circuit Court for Montgomery County, alleging that MCPS showed favoritism toward HET throughout the procurement proceedings and made material errors in evaluating and selecting HET from among the four responding proposals. During that review proceeding, AutoFlex asked the court to take judicial notice of news reports on November 16, 2021 that MCPS had publicly announced that the Director and Assistant Director of MCPS’s Department of Transportation, who managed the bus electrification procurement proceedings and evaluated all proposals, had been suspended pending referrals for criminal investigation of financial improprieties involving an unidentified MCPS vendor.

The circuit court denied AutoFlex’s request for judicial notice of the announced suspensions and criminal investigation, then affirmed the decision to award the Contract to HET.

AutoFlex noted this timely appeal, challenging both the circuit court’s judicial notice ruling and the underlying administrative decision.

While this appeal was pending, these suspensions and the investigation ripened into guilty pleas to criminal charges arising from a long-term theft scheme in which DOT Director Todd Watkins and Assistant Director Charles Ewald deliberately violated MCPS financial and procurement protocols, which in turn enabled Mr. Ewald to steal hundreds of thousands of dollars. See infra, Part I. AutoFlex now asks this Court to take judicial notice that, according to the written proffer supporting Mr. Ewald’s guilty pleas (the "Ewald Proffer"), after Mr. Watkins arranged for ATB to hold reimbursements due to MCPS in an "off-the-books account[,]" Mr. Ewald exploited his relationship with ATB and its president to misdirect payments from that account to himself.

Citing those adjudicated facts and undisputed evidence that Mr. Ewald and Mr. Watkins were integrally involved in the procurement process resulting in MCPS selecting an apparent affiliate of the exploited bus vendor as the winning bidder on the electric bus contract, AutoFlex contends that the supplemented record supports its claims of favoritism and material mistakes in evaluating the proposals and also establishes an appearance of impropriety that violates MCPS contracting requirements. In light of such evidence and errors, AutoFlex asks us to vacate the judgment, enjoin the HET Contract, and remand to the "Local Board and MCPS for further proceedings."

We hold that the circuit court erred in denying AutoFlex’s request for judicial notice on the ground that, in deciding whether to remand, the court lacked authority to consider evidence that was not in the record presented to the Local Board and MSBE. See Md. Code Ann., State Gov’t ("SG") § 10-222(h)(1); Md. Rule 5-201(d); Md. Rule 7-208(c). In addition, the court erred in concluding there was insufficient evidence to establish either the suspensions pending criminal investigation for financial misconduct involving an MCPS ven- dor or an appearance of impropriety based on them. To the contrary, the suspensions were undisputed, having been publicly announced by MCPS itself. Moreover, they were prima facie relevant to AutoFlex’s claims that MCPS acted with improper favoritism and made material mistakes in the procurement proceedings through which HET was selected as the winning bidder.

Yet we do not rely on the circuit court’s legal error in refusing to consider evidence of these suspensions because we will grant AutoFlex’s request for judicial notice of Mr. Ewald’s subsequent guilty pleas and the supporting proffer filed in the Circuit Court for Montgomery County on May 18, 2023. See Md. Rule 5-201(d)-(f). These stipulated and finally-adjudicated facts effectively supersede the previously proffered announcement that MCPS suspended Mr. Watkins and Mr. Ewald pending criminal investigation into vendor-related financial misconduct. See Md. Rule 5-201(c). In addition, under these unusual circumstances, we will take judicial notice on our own initiative of the guilty plea subsequently entered by Mr. Watkins on June 30, 2023, and the supporting proffer in that case (the ‘Watkins Proffer"). See Md. Rule 5-201(f).

As MCPS acknowledged when publicly announcing the suspensions and investigation of its top managers in the DOT, review of such finally-adjudicated facts will help in understanding whether and how their misconduct in office affected MCPS’s procurement proceedings, and then to determine appropriate next steps based upon such findings. Because the decision to affirm the Contract may be impacted by the adjudicated facts establishing that two DOT officials who were integrally involved in managing MCPS’s procurement proceedings, including evaluating and scoring all four proposals, then recommending the Contract be awarded to an affiliate of the vendor they were exploiting, we will remand for further administrative review of AutoFlex’s challenges. See SG § 10-222(h)(1); Md. Code Regs. ("COMAR") 13.A.01.05.06.C. On remand, the MSBE and the Local Board may consider whether Mr. Ewald or Mr. Watkins materially manipulated MCPS’s procurement proceedings, as AutoFlex suggests, in applying selection criteria, failing to disclose or consider AutoFlex’s status as a minority contractor, mistakenly evaluating pricing terms in the proposals, or otherwise asserting pretextual reasons for selecting HET as the winning bidder.

BACKGROUND

To facilitate review in this Court and after remand, we summarize the proceedings and pleadings here, then append a timeline of relevant events.

The Procurement Proceedings

MCPS’s Request for Proposal #9462.1 (the "RFP"), issued on August 31, 2020, sought "responses from responsible companies who have the experience, capability, equipment and services necessary to provide a turnkey budget neutral school bus electrification program for … the diesel school bus fleet[,]" by October 6, 2020. The RFP identified Mr. Ewald as "[t]he MCPS project contact[.]" On September 22, 2020, MCPS responded in writing to 26 questions from bidders, issuing a notice and erratum addendum to the RFP.

In response to the RFP, AutoFlex and three others submitted proposals for the electrification of MCPS’s bus program. These were reviewed and scored by MCPS’s "review committee," which AutoFlex later discovered was comprised of four MCPS officials, including Mr. Watkins and Mr. Ewald.¹ During an informal "debrief’ with MCPS officials, AutoFlex learned that its proposal received the lowest score among the four bidders.

Procurement Roles of Ewald and Watkins

Mr. Ewald and Mr. Watkins played significant roles in the procurement proceedings resulting in the award to HET. The RFP identified Mr. Ewald as the Project Contact. Mr. Ewald and Mr. Watkins served as two of the four evaluators of those proposals.

As the Ewald and Watkins Proffers detailed below establish, both public officials had extensive dealings with ATB, while managing the DOT’s diesel bus fleet operations under ATB’s long-term contract with MCPS. In turn, their official misconduct in those dealings, ranging from deliberate disregard of MCPS procurement and financial protocols, to theft by fraud, created incentives to favor an ATB-affiliate in the procurement process for the electric bus program.

Both Mr. Watkins and Mr. Ewald noted with approval proposals that included information from ATB. Both gave their highest scores to ATB-affiliate HET, with Mr. Watkins awarding a 79 out of 100 points, which was 39 points higher than his score for AutoFlex, based on sparse and generalized comments, including that "HET seems able to meet the timeline of first deployment next summer," when, according to AutoFlex, "Watkins had no way to know whether it would, and in fact it did not[.]" For the HET proposal, Mr. Watkins noted: "Very good proposal. Uses Thomas Built Buses." According to Mr. Watkins, HET’s "[r]esponse demonstrates considerable understanding of the turn-key and budget neutral requirements" and offered a "[p]lan for vehicles, deployment schedule, construction plan, and all-inclusive pricing" to "make this a very feasible proposal." Although HET had only "deployed to one small school district" and listed "[o]nly one reference," Mr. Watkins noted that its "[t]eam of subcontractors and financial backers seem very qualified" and its "[s]ubcontractors and Duke Energy have reliable references."

Mr. Watkins gave AutoFlex a score of 30 points, in contrast to the 70 points he scored HET, on the "Capability" factors (encompassing: ...