Rochester City Lines Co. v. City of Rochester

Rochester City Lines Co., Appellant, v. City of Rochester, Respondent,First Transit, Inc., Respondent.

A17-1944

STATE OF MINNESOTA IN COURT OF APPEALS

August 6, 2018

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2016).

Affirmed

Connolly, Judge

Olmsted County District Court

File No. 55-CV-12-1003

James A. Godwin, Rick A. Dold, David L. Liebow, Godwin Dold, Rochester, Minnesota; and

Steven A. Diaz (pro hac vice), Law Office of Steven A. Diaz, Washington, D.C. (for appellant)

John M. Baker, Monte A. Mills, Katherine M. Swenson, Greene Espel PLLP, Minneapolis, Minnesota (for respondent City of Rochester)

Charles K. Maier, Richard C. Landon, Gray, Plant, Mooty, Mooty & Bennett, P.A., Minneapolis, Minnesota (for respondent First Transit, Inc.)

Considered and decided by Bratvold, Presiding Judge; Connolly, Judge; and Jesson, Judge.

UNPUBLISHED OPINION

CONNOLLY, Judge

Appellant, an unsuccessful bidder for a contract from respondent city, challenges the district court's decision after a bench trial on remand from the supreme court that the bidding process did not reflect pervasive bias either against appellant or in favor of the successful bidder, also a respondent. Appellant argues that the district court did not use the correct legal standard to evaluate a Griswold claim and that, if the district court had used the correct legal standard, appellant would have prevailed. Appellant also argues that the district court abused its discretion in denying appellant's request to amend its complaint on remand. Because the district court used the correct legal standard in deciding appellant's Griswold claim in favor of respondents and because there was no abuse of discretion in denying appellant's request to amend its complaint, we affirm.

FACTS

For 46 years, appellant Rochester City Lines Co. (RCL) contracted with respondent City of Rochester (Rochester) to provide bus service. In 2011, the Federal Transit Administration (FTA) informed Rochester that, in order to receive funds for public transit, it would be required to award future contracts based on a competitive bidding process. Rochester accordingly issued a request for proposals to operate a bus service from July 2012 through December 2016 (the 2012 RFP).

The 2012 RFP provided in relevant part that proposals would be evaluated and scored by an evaluation committee using a "best value" selection process that involved both price and qualitative components. There were four evaluation criteria: technical (40%), interviews with key management staff (30%), past performance / reference checks (20%), and financial ability (10%). Among the responsibilities of the contractor submitting the successful proposal would be "mak[ing] a good faith effort to hire employees from [Rochester's] incumbent Contractor [i.e., RCL]." Four contractors, including RCL and respondent First Transit Inc. (FT), submitted proposals.

On February 15, 2012, RCL filed a lawsuit against Rochester, seeking an injunction to halt the bidding process. The request for an injunction was denied, and the process continued.

Of the 2,000 points possible, FT received the highest score, 1,613, and RCL the lowest, 1,175. The evaluation committee recommended awarding the contract to FT, and Rochester did so on April 2, 2012. On June 6, 2012, RCL filed an amended complaint adding a Griswold claim¹ against Rochester, joining FT as a defendant, and seeking an injunction against FT's performance of the contract.

After discovery, FT and Rochester moved for summary judgment. The district court granted the motion and dismissed all of RCL's claims. RCL appealed, and this court affirmed. See Rochester City Lines, Co. v. City of Rochester, 846 N.W.2d 444, 453, 455(Minn. App. 2014) (concluding in relevant part that "RCL has failed to present sufficient evidence for a reasonable fact-finder to conclude that the bid process and award violated the principles of competitive bidding") aff'd in part, rev'd in part, and remanded, 868 N.W.2d 655 (Minn. 2015) cert. denied, ___ U.S. ___, 136 S. Ct. 849 (2016) (RCL I).² The supreme court granted review of "the appropriate standard of review for an award of a government contract through a 'best value' bidding process" and partially granted review of the dismissal of RCL's "claims of unfair bias and favoritism in awarding the contract to [FT]." RCL I, 868 N.W.2d at 657.

The supreme court resolved the first issue by holding "that the unreasonable, arbitrary, or capricious standard adopted in Griswold [v. Ramsey Cty., 242 Minn. 529, 535, 65 N.W.2d 647, 651-52 (1954)] is the appropriate standard for reviewing a city's or county's decision to award a government contract after a best-value bidding process." Id. at 661. The second issue involved four RCL claims. The supreme court affirmed the summary judgment granted for respondents on three of them: that (1) the terms of the 2012 RFP were excessive, (2) that Rochester's attorney was biased, and (3) that FT had an organizational conflict of interest. Id. at 662-64.

But the supreme court reversed the grant of summary judgment and remanded to the district court for trial on the claim that "numerous irregularities in the bidding process suggest that [Rochester's] decision to award the bus-service contract to [F.T.] wasarbitrary, capricious, or unreasonable under Griswold." Id. at 664. The supreme court concluded:

For at least two reasons, RCL has presented sufficient evidence to create a genuine issue of material fact on the question of whether [Rochester] awarded the contract to [FT] based on an unfair and biased process.

First, the record contains evidence that the interview process involved inconsistencies that might demonstrate favoritism toward [FT]. . . . .

Second, RCL produced evidence that two employees of [Rochester] who had initially agreed to serve as references for RCL later refused to do so based on advice from [Rochester]. . . . .

Evidence of these two procedural irregularities raises the specter of pervasive bias against RCL . . . . RCL is entitled to a trial on whether [Rochester] made the award arbitrarily, capriciously, or unreasonably.

. . . .

. . . . For the foregoing reasons, we affirm the judgment of the court of appeals in part, reverse in part, and remand to the district court for further proceedings consistent with this opinion.

Id. at 664-65. During the remand process, RCL moved three times to amend its complaint, primarily by adding claims for money damages. The motions were denied, by successive judges, in December 2015, in June 2016, and in January 2017.

By January 2017, a number of things had occurred: (1) the 2012-2016 contract had expired; (2) the 2016 RFP (including a process for bidders to file pre-bid protests that would be decided by the moderator) had been issued; (3) RCL had filed a pre-bid protest challenging several provisions of the 2016 RFP, including the fact that five members of the 2016 evaluation committee were "holdover members" from the 2012 evaluation committee; (4) the moderator had denied RCL's protest; (5) the contract for bus servicefrom 2017 to 2021 had been awarded to FT; and (6) RCL had sought certiorari review of the moderator's decision from this court.

On May 15, 2017, this court issued Rochester City Lines Co. v. City of Rochester, 897 N.W.2d 792, 799, 801 (Minn. App. 2017) ("hold[ing] that a best-value competitive bidding process and any contract awarded through that process are rendered unreasonable, arbitrary, or capricious by an RFP provision that creates an appearance of bias"; invalidating the 2016 RFP process and the 2016 contract "[b]ecause an appearance of bias results from [Rochester's] inclusion of the holdover members on the 2016 evaluation committee"; and declining to address whether the moderator erred in denying RCL's other pre-bid protest claims) (RCL II), rev'd, Rochester City Lines Co. v. City of Rochester, 913 N.W.2d 443, 448 (Minn. 2018) (reversing the holding that an appearance of bias invalidates a competitive bidding process and the resulting contract because Rochester forfeited the appearance-of-bias claim by not alleging appearance of bias in either its pre-bid protest or its opening brief to this court and remanding for this court to consider whether the moderator erred by denying any of RCL's other pre-bid protest claims) (RCL III).

A week after this court issued RCL II, the remand trial ordered by RCL I was held to determine whether the 2012 contract had been awarded based on an unfair and biased process, specifically on whether the interview process and the use of references were arbitrary, capricious, or unreasonable in violation of Griswold. The district court concluded that Rochester "did not award the bus-service contract to [FT] in an arbitrary, capricious, or unreasonable manner" and that "[n]either . . . Rochester nor [FT] violated the Griswold standard" and awarded judgment for them.

RCL challenges that judgment, arguing that the district court did not apply the correct legal standard, that RCL would have prevailed on the remanded issues if the correct legal standard had been applied, and that the district court abused its discretion by denying RCL's request to amend its complaint.

DECISION

I. The Correct Legal Standard

This court reviews a district court's application of the law de novo. Harlow v. State Dep't. of Human Servs., 883 N.W.2d 561, 568 (Minn. 2016).

RCL argues that the correct legal standard for evaluating whether the 2012 bidding process was arbitrary, capricious, or unreasonable, i.e., whether it violated Griswold, is whether it resulted in actual bias or in an "appearance of bias." The supreme court did not mention "appearance of bias" in RCL I; the district court did not mention "appearance of bias" in its 37-page opinion that is the subject of this appeal; and RCL did not mention "appearance of bias" in the documents it submitted before and during trial, at trial, or in the proposed findings of...