State Ctr., LLC v. Lexington Charles Ltd.

• Decision Date: 16 May 2014
• Docket Number: No. 12,Sept. Term, 2013.,12
• Parties: STATE CENTER, LLC, et al. v. LEXINGTON CHARLES LIMITED PARTNERSHIP, et al.
• Court: Maryland Court of Appeals

438 Md. 451
92 A.3d 400

STATE CENTER, LLC, et al.
v.
LEXINGTON CHARLES LIMITED PARTNERSHIP, et al.

No. 12, Sept. Term, 2013.

Court of Appeals of Maryland.

March 27, 2014.
Reconsideration Denied May 16, 2014.

[92 A.3d 411]

Julia Doyle Bernhardt, Asst. Atty. Gen. (Douglas F. Gansler, Atty. Gen. of Maryland, John J. Kuchno, Asst. Atty. Gen., Baltimore, MD), for appellants.

Michael J. Edney (Gibson, Dunn & Crutcher LLP, Washington, DC;

[92 A.3d 412]

Kenneth L. Thompson, Venable LLP, Baltimore, MD), on brief, for appellants.

Michael D. Berman (Scott A. Livingston, M. Celeste Bruce, Rifkin, Weiner, Livingston, Levitan & Silver, LLC, Bethesda, MD; Alan M. Rifkin, Rifkin, Weiner, Livingston, Levitan & Silver, LLC, Annapolis, MD), on brief, for appellees.

Argued before BARBERA, C.J., HARRELL, BATTAGLIA, GREENE, ADKINS, JOHN C. ELDRIDGE ^* (Retired, Specially Assigned), LAWRENCE F. RODOWSKY (Retired, Specially Assigned), JJ.

HARRELL, J.

Table of Contents**

[92 A.3d 413]

The State Center Project (the “Project”) is a $1.5 billion, multi-phase redevelopment project intended to replace aged and obsolete State office buildings with new facilities for State use and to revitalize an approximately 25–acre property owned by the State of Maryland in midtown Baltimore (“City”), without burdening unduly the State's capital budget. To these ends, in 2005, the State issued a public Request for Qualifications (“RFQ”) to solicit a “Master Developer” who would be granted the exclusive right to negotiate with the State to execute the entire project, which included the reconstruction of older deteriorating buildings currently on the site of the project, as well as the receipt of a 75–90 year leasehold interest. The State Center, LLC, was chosen as the Master Developer. The Maryland Department of General Services (“DGS”), the Maryland Department of Transportation (“MDOT”) and the State Center, LLC, negotiated for the Project, entering into a series of agreements between 2007 and 2010 for the purpose of completing the Project in a timely manner. These agreements, thus far, are: (1) the Master Development Agreement (“MDA”); (2) the First Amendment to the MDA (“First Amendment”); (3) two Phase I ground leases; and, (4) four approved Phase I occupancy leases.

In 2010, fifteen plaintiffs, property owners in downtown Baltimore (many with available office space for rent) and taxpayers of the State, filed suit in the Circuit Court for Baltimore City against the DGS, MDOT, and the State Center, LLC, and its subsidiaries, seeking a declaratory judgment that the formative contracts for the Project were void and an injunction to halt the Project. The result of the suit in the trial court was the voiding of the formative contracts of the Project on the grounds that they violated the State Procurement Law. On appeal, we are asked to address the Circuit Court's denials of Defendants' Motions to Dismiss and the trial court's partial grant and partial denial of their Motion for Summary Judgment. Embedded in these questions are justiciability issues of taxpayer and property owner standing; the requirements for the exhaustion of administrative remedies and, if necessary to be reached, whether a private right of action existed; and, lastly, the equitable doctrine of laches. If the resolution of any of these threshold issues is not dispositive, there waits potentially at the end of the day questions regarding the interpretation of the State Procurement Law.

I. BACKGROUND FACTS

The State Center complex, as it currently blights the skyline of midtown Baltimore, consists of five Soviet-block style buildings and approximately 1,300 parking spaces. It was built in the 1950s and 60s to house a number of State agencies. Today, it is agreed widely that these buildings are long past their useful lives. Although the State Center may be deemed fairly a “concrete wasteland,” ¹ the property has substantial re-development potential. The State Center sits next to a passenger rail station that connects the area to the rest of the city. It serves as a major employment node for the State Center offices and the Maryland General Hospital.

[92 A.3d 414]

Moreover, the Center borders many of the City's major cultural and educational institutions, and enjoys relative proximity to downtown Baltimore and the waterfront. Despite this potential, the current State Center complex, it is said, “does not form a true crossroads [between the neighborhoods] and more often forms a barrier separating neighborhoods.”

In anticipation of the need for more modern structures and the currently unrealized potential of the property, the State Center Project was conceived in 2004 during the administration of Governor Robert L. Ehrlich. In September 2005, the DGS and MDOT (hereinafter, collectively, “State Agencies”) issued a public RFQ to solicit and select a “Master Developer” for the purpose of redeveloping comprehensively the State Center complex. The RFQ envisioned, as its overarching goal, “through new TOD [Transit–Oriented Development] ² at State Center and nearby properties[,] the existing cultural and educational institutions of the Cultural Center can be enhanced and the area diversified so that it becomes one of the City's most diverse and historically significant communities and resources.” ³ The RFQ noted also that a “ significant goal” of the State was “the integration of the State Center development program with other redevelopment efforts ..., as well as other nearby properties owned by other institutions and private owners.”

The RFQ expected “[t]he Master Developer and a team [to] assemble resources and a team that can entitle, design, finance, construct, and market mixed-use, mixed-income urban TOD that supports surrounding neighborhood needs and is acceptable to the various regulatory agencies.” The prospective “Master Developer” was described in the document as “a development entity or entities with the capacity and demonstrated experience to acquire the State-owned properties and successfully handle all aspects of the development process, including planning, community involvement, design, negotiation of public/private partnerships, structuring of private and public financing sources, construction, sales and leasing, and ongoing management.” Moreover, the RFQ required the responding statements to include information on the “Project Team,” defined as “the lead developer plus any other developers and key team members such as architects, engineers, economists, contractors, bankers, etc. who are critical for consideration by the State.”

To implement this wide-range of purposes, the RFQ envisioned “sustained collaboration

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between the selected developer, State, City, neighborhood representatives, and other stakeholders in order to formulate a feasible project that can successfully accomplish a wide range of objectives.” To that end, the RFQ provided:

The State is also interested in a public private partnership with the Master Developer that results in creative approaches to development to ensure maximum return to the State and the City while minimizing direct public financial participation and development risk. To support this [public private] partnership, the State has committed to retaining the entire State workforce at the redeveloped State Center. The State will consider creative options for redevelopment of its existing buildings or occupancy in new privately owned buildings along with other private tenants.

Ultimately, the State “anticipated that the resulting project will be privately owned and managed.” The RFQ emphasized that prior experience and background were critical to the State's consideration of the responding statements submitted by applicants.

The State explained, in the RFQ, that the envisioned need for sustained collaboration was also the reason a RFQ process was being used to select a Master Developer, instead of “the more traditional” Request for Proposals (“RFP”). The RFQ emphasized that it sought responding statements “only from experienced developers of large scale urban mixed use, mixed income projects.” The RFQ re-emphasized this point in stating, “[p]rofessional service providers, building contractors or others should not respond to this RFQ.”

The RFQ provided that it “[was] not conducted under the provisions of Maryland Procurement Law (COMAR Title 21).” (Emphasis in the original.) Instead, according to the State, “[b]ecause the mixed-use real-estate development is to be privately owned and privately managed, the State's conveyance of a 75–90 year real estate leasehold interest to the Developer, with conditions for redevelopment of the site in order to achieve the State's economic development goals for the community, [fell] under the authority of § 10–305 of the State Finance and Procurement Article.” ⁴ Although professing that it was not conducted generally under the provisions of the procurement statute, the RFQ adopted the Procurement Law's protest policy, requiring that “ [p]rotests relating to this solicitation or the award of a contract must be filed in accordance with Title 15, Subtitle 2, Part III of the State Finance and Procurement Article, Annotated Code of Maryland, and COMAR Title 21 (State Procurement Regulations), Subtitle 10, Administrative and Civil Remedies.” The RFQ provided also that the selected Master Developer would be given the exclusive right to negotiate with the State for the Project, which included the public-private partnership and the comprehensive redevelopment envisioned in the RFQ. “Any formal contract becomes final only upon approval by the Maryland Board of

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Public Works [“BPW”] and, where applicable, the Federal Transit Administration and the U.S. Department of Labor.”

Four applicants, including the State Center, LLC, submitted responses to the RFQ. Pursuant to the selection procedure provided in the RFQ, the Evaluation Committee reviewed the responses, interviewed the applicants, and provided...