Asato v. Procurement Policy Bd.

• Decision Date: 14 February 2014
• Docket Number: No. SCAP–12–0000789.,SCAP–12–0000789.
• Parties: Lloyd Y. ASATO, Petitioner/Plaintiff–Appellee/Cross–Appellant, v. PROCUREMENT POLICY BOARD, State of Hawai‘i, Respondent/Defendant–Appellant/Cross–Appellee.
• Court: Hawaii Supreme Court

132 Hawai'i 333

322 P.3d 228

Lloyd Y. ASATO, Petitioner/Plaintiff–Appellee/Cross–Appellant,

v.PROCUREMENT POLICY BOARD, State of Hawai‘i, Respondent/Defendant–Appellant/Cross–Appellee.

No. SCAP–12–0000789.

Supreme Court of Hawai‘i.

Feb. 14, 2014.

Arthur Y. Park and John C. McLaren, Honolulu, for petitioner.

Marissa H.I. Luning, for respondent.

ACOBA, McKENNA, and POLLACK, JJ.; with RECKTENWALD, C.J., Dissenting, with whom NAKAYAMA, J., Joins.

Opinion of the Court by ACOBA, J.

We hold that Petitioner/Plaintiff–Appellee/Cross–Appellant Lloyd Y. Asato (Asato) had standing to bring a claim challenging the validity of Hawai‘i Administrative Rule (HAR) § 3–122–66 (2008), based on his status as an "interested person" pursuant to Hawai‘i Revised Statutes (HRS) § 91–7 (1993)¹ , and in order to satisfy the "needs of justice." See Life of the Land v. Land Use Comm'n., 63 Haw. 166, 176, 623 P.2d 431, 441 (1981). We also decide that HAR § 3–122–66 (2003)² is invalid because it exceeds the scope of authority given by the legislature to Respondent/Defendant–Appellee/Cross–Appellee State of Hawai‘i Procurement Policy Board (the Board). See HRS § 91–7(b) ("The court shall declare the rule invalid if it finds that it ... exceeds the statutory authority of the agency[.]"). Finally, the court did not err in declining to invalidate all contracts issued under HAR § 3–122–66, as requested by Asato.

I.

A.

On January 25, 2011, Asato filed a Complaint asserting two causes of action, one for declaratory relief (declaratory action) and one for injunctive relief (injunctive action). In his Complaint, Asato maintained that he brought the Complaint pursuant to HRS § 91–7 and that he "also had the necessary standing to prosecute this action under Federal Electric Corp. v. Fasi [ (Federal Electric ) ], 56 Haw. 57, 62, 527 P.2d 1284, 1289 (1974) and Iuli v. Fasi [ (Iuli ) ], 62 Haw. 180, 186, 613 P.2d 653, 657 (1980)" as a taxpayer.

The Complaint asserted that HAR § 3–122–66³ "is and has always been contrary to the ‘minimum of three persons' requirement [in] HRS § 103D–304(g)⁴ and is therefore invalid, and must be declared void ab initio and permanently enjoined from all further use." Further, the Complaint alleged that "[a]ccording to internet listings of contract awards on the State Procurement Office website[,] ... the previous City and County of Honolulu Administration has awarded at least twenty six (26) professional service contracts for architects and engineers or for other professionals with less than three (3) persons on the list submitted to the selection committee" and that "[a]ll contracts that have been issued based on HAR § 3–122–66 are void ab initio." Therefore, Asato's declaratory action requested that "the court declare as a matter of law that HAR § 3–122–66 has never been valid and has always been ultra vires because it is contrary to and violates the "minimum of three persons requirement in HRS § 103D–304(g) [.]"

Correlatively, Asato's injunctive action requested that "all existing contracts in which HAR § 3–122–66 was used in violation of the ‘minimum of three persons' requirement in HRS § 103D–304(g) be rescinded as being void ab initio." Asato also asked that "a preliminary injunction, and after hearing, a permanent injunction be entered enjoining and restraining [the Board] and all its agents, servants, and employees, and all others acting in concert with them, including but not limited to the administrator of the State Procurement Office, and all of his agents, servants[,] and employees, and all chief procurement officers and their agents, servants and employees in the state and county governments from utilizing HAR § 3–122–66 in the procurement of professional services under HRS § 103D–304."

On January 10, 2012, Asato filed a motion for summary judgment. Asato again contended that " HAR § 3–122–66 conflicts with HRS § 103D–304(g) and should be struck down[.]" Again, Asato asked the court to "declare that HAR § 3–122–66 has never been valid and has always been ultra vires and is void ab initio, enjoin its current and future use and declare that every government contract issued under the invalid authority of HAR § 3–122–66 is void ab initio."

On March 30, 2012, the Board filed a cross-motion for summary judgment. The Board argued that HAR § 3–122–66 was authorized by HRS § 103D–102(b)(4)(L),⁵ and therefore " HAR § 3–122–66 is a valid rule." According to the Board, Asato did not have standing as a taxpayer because he did not demonstrate that he had suffered a pecuniary loss from the enactment of HAR § 3–122–66, and Asato did not have standing under HRS § 91–7 because " HRS § 91–7 limits relief to claims from ‘interested persons' who can show an actual or threatened injury." (Citing Richard v. Metcalf, 82 Hawai‘i 249, 253, 921 P.2d 169, 173 (1996).) Finally, the Board maintained that Asato could not challenge specific contracts awarded under HAR § 3–122–66 because "[c]hallenges to the award of procurement contracts are governed exclusively by the Procurement Code." (Citing HRS § 103D–704.)

B.

On June 8, 2012, the circuit court of the first circuit (the court)⁶ issued an order granting Asato's motion for summary judgment. As to Asato's standing, the court concluded that Asato was an "interested person" under HRS § 91–7 because he "seeks to obtain a judicial declaration," and "has brought an action against the agency in circuit court and is asking us to determine whether or not this rule is valid or invalid as it violates statutory provisions or exceeds statutory authority." The court also held that the "three-part test of injury in fact" set forth in Bush v. Watson, 81 Hawai‘i 474, 918 P.2d 1130 (1996) "would have been met here."

The court explained that the first prong of the test was met because Asato demonstrated that the Board used HAR § 3–122–66 to "exempt certain procurements from requirements of HRS § 103D–304, where [Asato] assert[ed] that the administrative rule is inconsistent with the statute." The second prong was met "because the actual or threatened injury to [Asato], as a taxpayer, is directly traceable to [the Board's] actions, especially in concerning integrity of contracts using taxpayer funds." Finally, the third prong was met because "a favorable decision would require [the board] to follow the statutory mandates of HRS § 103D–304, and would result or render [sic] HAR § 3–122–66 invalid, which is the direct object of [Asato's] lawsuit."

As to the validity of HAR § 3–122–66, the court explained that "[ HRS § ] 103D–102(b)(4) lists 11 very specific goods and services exempted from the ambit of 103D," and therefore "subsection (L) ... must be read by its plain and obvious meaning—which is that the policy board must determine by rule, or [the] chief procurement officer must determine in writing, specific classes of goods or services which are available from multiple services, but for which procurement by competitive means is either not practicable nor advantageous to the State [;]" but " HAR § 3–122–66 does not do any such thing." Moreover, the court concluded that HAR § 3–122–66 could not be justified by the need to "fill a gap left in HRS § 103D–304," because "[t]he plain language of section 304 does not leave any such gaps[.]" Therefore, the court held that "that HAR § 3–122–66 is invalid[.]"

However, the court "declin[ed] to declare any contracts exempted under HAR § 3–122–66 void prior to the date that its order is filed," because "the plain reading of standing in HRS § 91–7 is that the court shall declare the rule invalid and that is all the court does."

Finally, the court ruled on Asato's request for attorney's fees pursuant to the private attorney general doctrine. It held that all three factors of the private attorney general doctrine, set forth infra, were met, and awarded Asato reasonable attorney's fees and costs.

C.

On August 15, 2012, the court entered a judgment in favor of Asato and against the Board. Then, on September 4, 2012, the court issued its order awarding attorney's fees and costs.

D.

Both Asato and the Board appealed the court's August 15, 2012 judgment. The Board also appealed the court's September 4, 2012 order awarding attorney's fees and costs. On June 27, 2013, Asato filed an application for transfer of the appeal from the Intermediate Court of Appeals (ICA) to this court. This court granted a discretionary transfer on August 1, 2013, pursuant to HRS § 602–58(b) (Supp.2012).⁷ The parties had already filed briefs with the ICA.

II.

A.

In its Opening Brief, the Board argued, inter alia, that (1) Asato did not have standing as a taxpayer because he failed to meet any of the three requirements for taxpayer standing set forth in Iuli, (2) the court erred in concluding that Asato had standing under HRS § 91–7 because Asato did not suffer injury in fact, and (3) that the court erred in concluding that HAR § 3–122–66 was invalid, because the Board was authorized to adopt HAR § 3–122–66 under HRS § 103D–102(b)(4)(L).

B.

1.

Asato filed a cross-appeal, arguing inter alia that the court erred in refusing to grant his requested relief of (1) "declar[ing] as a matter of law that HAR § 3–122–66 has never been valid and has always been void ab initio [,]"⁸ (2) "declar[ing] that every government contract issued under the invalid authority of HAR § 3–122–66 is void ab initio," and (3) "preliminarily and permanently enjoin[ing] and restrain[ing] the [Board] ... from using HAR § 3–122–66."

2.

In its Answering Brief on cross-appeal, the Board asserted that "[a] declaration of invalidity is all that is required by HRS § 91–7," and therefore the court did not err in "refusing to also declare the Rule void ab initio or ‘always ... ultra vires.’ " (Emphasis in original.) In the alternative, the Board contended that "even if Asato's position were correct," he was not entitled to the "voiding of all government contracts entered into pursuant to the Rule."

The Board explained that, first, "while HRS § 91–7 allows a circuit...