Neptune Swimming Found. v. City of Scottsdale

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NEPTUNE SWIMMING FOUNDATION, Plaintiff/Appellant, v. CITY OF SCOTTSDALE, Defendant/Appellee.

No. 1 CA-CV 21-0053

Court of Appeals of Arizona, First Division

March 9, 2023

Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court

Appeal from the Superior Court in Maricopa County No. CV2019-007172 The Honorable Joseph P. Mikitish, Judge

Goldwater Institute, Phoenix By Jonathan Matthew Riches Timothy Sandefur Co-Counsel for Plaintiff/Appellant

DL Hall Attorney PLLC, Scottsdale By Dennis L. Hall Co-Counsel for Plaintiff/Appellant

Scottsdale City Attorney's Office, Scottsdale By Eric C Anderson Counsel for Defendant/Appellee

Judge Jennifer M. Perkins delivered the decision of the Court, in which Presiding Judge Cynthia J. Bailey and Judge Maria Elena Cruz joined.

MEMORANDUM DECISION

PERKINS, JUDGE

¶1 Neptune Swimming Foundation ("Neptune") sought mandamus, declaratory, and monetary relief stemming from Scottsdale's failure to award Neptune a license to operate a youth competitive swimming program in Scottsdale's facilities. Neptune now challenges the superior court's entry of judgment for Scottsdale. For the following reasons, we affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 Scottsdale's Parks and Recreation Department maintains various recreational facilities, including four aquatic centers. Scottsdale opens its aquatic centers for public swimming, swim lessons, and youth competitive swimming. Youth competitive swim teams can use the aquatic centers only after the team's sponsor obtains a revocable license from Scottsdale.

¶3 Scottsdale Aquatic Center ("SAC") and Neptune operate comparable youth competitive swimming programs. SAC is the only competitive swim team Scottsdale has allowed to use its aquatic centers for over 50 years. Scottsdale and SAC entered the most recent iteration of this arrangement in 2016 when SAC received a revocable license ("2016 License"). The 2016 License contained an initial three-year term with two consecutive one-year options. The 2016 License required SAC to pay: $3 per hour for short course lap lanes, $7 per hour for long course lap lanes; $3,150 per year for office space; $1,400 per year for storage space; and additional operating fees. Scottsdale's City Council set the lap lane fee rates and increased those rates in May 2019.

¶4 In August 2017, Neptune's counsel sent Scottsdale's mayor a letter objecting to the 2016 License. Neptune asserted that the 2016 License violated the Scottsdale Charter and Arizona Constitution because "[t]he grant was made at significantly below market rates and without compliance with open bidding." Scottsdale disagreed with Neptune's assertions but developed a procurement process for the next available license.

¶5 In January 2018, Scottsdale published its Request for Proposal ("RFP"), explaining the procurement process and presenting the license terms. The RFP included a provision stating "all procurement activities . . . are in conformance with the rules and regulations of the Scottsdale Procurement Code" ("Code"). The Code directs procurement awards be made to the most advantageous bidder. Code § 2-188(c)(5). The RFP provided Scottsdale's five weighted evaluation criteria and other factors the scoring committee could consider, which included: revenue; the bidder's experience; the bidder's ability and willingness to meet the listed specifications and standards; and the quality of the bidder's proposal and other presentation materials. The RFP's bidding process description included notice that "[b]idders may be invited to make a presentation on their proposals."

¶6 Scottsdale selected three disinterested city employees to serve on the scoring committee. Only SAC and Neptune submitted bids and the scoring committee selected SAC as the most advantageous bidder; SAC received 31.75 more points than Neptune. Scottsdale provided its Notice of Intent to Award the license to SAC in March 2018. Neptune formally protested the RFP results, but Scottsdale dismissed that protest because it believed "the recommended award to [SAC] as the most advantageous Contractor . . . met all Procurement Code rules and procedures."

¶7 Neptune then notified Scottsdale that the scoring committee miscalculated the point totals. Per the corrected scores, Neptune received .75 more points than SAC. Scottsdale agreed that it miscalculated the bid totals and identified additional bid evaluation anomalies. Scottsdale then invited both SAC and Neptune to give presentations on their proposals. Neptune protested Scottsdale's decision to reconvene the scoring committee and invite the bidders to give presentations, arguing the Code required Scottsdale to instead award Neptune the license.

¶8 Scottsdale responded that the Code did not bind the RFP because it did not involve Scottsdale "purchasing materials, services, or construction and this is not a City-mandated or City-sponsored program." Scottsdale then canceled the RFP on May 11, 2018, rescinding its Notice of Intent to Award the license to SAC. Instead, Scottsdale exercised the first one-year extension option under SAC's 2016 License.

¶9 To set the fees for the extension, the Scottsdale City Council reviewed data for swim lane access in other Arizona municipalities such as fees, quality, operating expenses, and how the city and licensee divide expenses. The surveyed cities' lane pricing ranged from $1 (in Marana) to $15 (in Chandler) per lane per hour. Scottsdale set the new fee at $8 per lane per hour for the long course and $4 for the short course.

¶10 In May 2019, Neptune filed a complaint seeking a writ of mandamus compelling Scottsdale to award Neptune a license under the RFP. Neptune alternatively alleged a violation of the Gift Clause, claiming the 2016 License is not supported by adequate consideration given Neptune's bid for a higher rate per lane hour. Neptune's remaining claims asserted Scottsdale caused Neptune money damages by failing to follow the bidding process.

¶11 Neptune and Scottsdale filed competing motions for summary judgment. Neptune argued that Scottsdale abused its discretion by abandoning the RFP, thus violating the Code, and that the 2016 License violated the Gift Clause. Scottsdale argued it used the Code only as a guide, as the Code did not otherwise apply to the RFP. Scottsdale nonetheless contended that cancelling the RFP did not violate the Code. Scottsdale asserted the statute of limitations barred Neptune's Gift Clause claim and alternatively claimed the 2016 License met the Gift Clause's requirements.

¶12 The superior court granted summary judgment in Scottsdale's favor. The court found Scottsdale's decision to cancel the RFP did not violate the Code, nor was it arbitrary and capricious. The court reasoned that because the RFP sought the "most advantageous" bid, not the highest bidder, once a bidder raised concerns about the scoring committee's calculations, Scottsdale could request presentations and seek "a consensus of committee members." The court concluded that Neptune "failed to continue with the process" by objecting to the presentation invitation, and Scottsdale acted within its discretion to cancel the RFP.

¶13 The superior court found no Gift Clause violation but did not address Scottsdale's statute of limitation defense to that claim. The court ruled that the recreational services provided under the 2016 License serve a public benefit and that "[j]ust because Neptune agreed to pay more [per swim lane] does not mean that the [2016 License] is so inequitable that it amounts to a subsidy."

¶14 Neptune timely appealed, and we have jurisdiction under A.R.S. § 12-2101(A)(1).

DISCUSSION

¶15 Neptune argues the superior court erred in granting summary judgment to Scottsdale on the Gift Clause claim and upholding the contract award to SAC. We review the court's grant of summary judgment de novo, "viewing the evidence and reasonable inferences in the light most favorable to the party opposing the motion." Zambrano v. M &RC II LLC, 254 Ariz. 53, 55, ¶ 9 (2022).

I. Mootness and Statute of Limitations

¶16 Scottsdale argues that this appeal is moot because the license pursued by the swim organizations would expire by the conclusion of the appeal. Arizona courts may consider an appeal either of great public importance or an issue "capable of repetition yet evading review." Phoenix Newspapers, Inc. v. Molera, 200 Ariz. 457, 460, ¶ 12 (App. 2001). Failure to follow a city procurement code and applicability of the gift clause to situations in which the city takes a less lucrative deal is capable of repetition.

¶17 Scottsdale also argues that the statute of limitations bars Neptune's suit because Neptune had one year under A.R.S. § 12-821 to file suit, Neptune was aware of the 2016 License no later than August 8, 2017, and did not file until May 3, 2019. But Scottsdale ignores its own conduct inducing Neptune to delay suit by offering the RFP process. See Nolde v. Frankie, 192 Ariz. 276, 279-80, ¶¶ 13-14 (1998) (a defendant who induces plaintiff to delay filing suit cannot then rely on a statute of limitations "as a shield for inequity"). Scottsdale did not cancel the RFP process Neptune participated in until May 11, 2018, and Neptune filed its complaint within one year. This appeal is not moot or time barred.

II. Procurement Code

¶18 Scottsdale attempts to avoid Neptune's procurement code challenges by contending the Code applies only to purchases of materials, services, and construction made with public funds. Even if we read the Code as ordinarily inapplicable to the transactions contemplated by the RFP here, Scottsdale explicitly held out the RFP as subject to the Code. But assuming, without deciding, that the Code applies, Scottsdale abided by the...