Carl Corp. v. State, Dept. of Educ.

Decision Date24 April 2000
Docket NumberNo. 21919.,21919.
PartiesIn the Matter of CARL CORPORATION, Petitioner-Appellant, v. STATE of Hawai`i, DEPARTMENT OF EDUCATION, Hawai`i State Library System, Respondents-Appellees, and Dynix, Inc., dba Ameritech Library Services. In the Matter of Carl Corporation, Petitioner-Appellant, v. State of Hawai`i; Board of Education, State of Hawai`i; Department of Education, State of Hawai`i; Hawai`i State Public Library System, Department of Education, State of Hawai`i, State Procurement Office, Department of Accounting and General Services, State of Hawai`i; Department of the Attorney General, State of Hawai`i, Respondents-Appellees.
CourtHawaii Supreme Court

Jeffrey S. Harris and Matt A. Tsukazaki (of Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington), on the briefs, Honolulu, for petitioner-appellant.

Russell A. Suzuki and James J.S. Chang, Deputy Attorneys General, on the briefs, Honolulu, for respondents-appellees.

Alan M. Oshima, Lawrence M. Reifurth, and Michael A. Okazaki (of Oshima Chun, Fong, & Chung), on the briefs, Honolulu, for intervenor Dynix, Inc.

MOON, C.J., LEVINSON, NAKAYAMA, and RAMIL, JJ., and Circuit Judge IBARRA, Assigned by Reason of Vacancy.

Opinion of the Court by MOON, C.J.

In this consolidated appeal,1 (1) appeal No. 21919 arises from an administrative hearing conducted pursuant to this court's remand order in Carl Corporation v. State of Hawai`i, Department of Education, 85 Hawai`i 431, 946 P.2d 1, reconsideration denied, 85 Hawai`i 431, 946 P.2d 1 (1997) [hereinafter, CARL I] and (2) appeal No. 21984 involves two protests filed by petitioner-appellant Carl Corporation [hereinafter, Carl] against the respondents-appellees State of Hawai`i; Board of Education, State of Hawai`i; Department of Education, State of Hawai`i (DOE); Hawai`i State Library System, Department of Education, State of Hawai`i (the Library); State Procurement Office, Department of Accounting and General Services, State of Hawai`i; and the Department of the Attorney General, State of Hawai`i [hereinafter, collectively, the appellees2], for actions they took prior to and following the administrative hearing conducted pursuant to this court's remand order in CARL I.

To briefly summarize, prior to CARL I, the Library and Ameritech entered into a contract [hereinafter, contract or Ameritech contract] under which Ameritech agreed to provide computer and other automation services to the Library. Carl, which had submitted a proposal on the automation project, protested the award of the contract to Ameritech and appealed the award to the Department of Commerce and Consumer Affairs (DCCA) Hearings Officer. See CARL I,85 Hawai`i at 436-38,946 P.2d at 6-8.

The DCCA Hearings Officer remanded the matter to the Library to reevaluate the competing proposals and to decide for itself whether to ratify and affirm the contract or to terminate the contract as provided for in Hawai`i Revised Statutes (HRS) § 103D-707 (1993).3 See id. at 433, 946 P.2d at 3. Thereafter, Carl appealed the Hearings Officer's decision to this court.

In CARL I, we rejected the Hearings Officer's conclusion that he lacked authority to determine whether to ratify or terminate the contract. Instead, we vacated the Hearings Officer's decision and remanded the case to the Hearings Officer for the limited purpose of holding "any necessary further hearings, followed by entry of an order . . . ratifying or terminating the contract as provided for in HRS § 103D-707."4 Id. at 461, 946 P.2d at 31.

However, following remand, the Library, under new leadership, terminated the contract pursuant to its terms. As a result of the Library's termination of the contract, the Hearings Officer closed the evidentiary hearing, ruling that the question whether to ratify or terminate the contract had been rendered moot. It is this decision by the Hearings Officer that Carl now contests in appeal No. 21919.

With respect to its companion appeal in No. 21984, Carl protests the following actions of the appellees: (1) the award of an interim contract to Ameritech to provide various library automation services; and (2) the continuation of such services under the interim contract despite Carl's protest.

Lloyd Unebasami, the Administrator of the State Procurement Office and the Chief Procurement Officer of the Library, denied both protests on the ground that he had exempted the interim contract under HRS § 103D-102(b)(5) (Supp.1998)5 and thereby removed it from the protection and procedures of the State Procurement Code [hereinafter, the Code]. Thereafter, Carl filed a request for a hearing with the DCCA. The appellees moved to dismiss Carl's request for a hearing before the DCCA Hearings Officer on the ground that Unebasami's exemption under HRS § 103D-102(b)(5) stripped the Hearings Officer of jurisdiction to consider the appeal. The Hearings Officer agreed and dismissed Carl's protests. Thereafter, Carl appealed the Hearing Officer's dismissal orders to this court in appeal Nos. 21984 and 21985.6

With respect to its appeal in No. 21919, Carl argues that: (1) the determination whether to terminate or ratify the contract belonged solely to the Hearings Officer; (2) the Library's "termination" of the contract was, in fact, a ratification of the contract;7 (3) the Hearings Officer had the authority to determine the method and manner of termination of the contract; and (4) this court has the authority to (a) terminate the contract, (b) appoint a receiver to supervise the next round of requests for proposals, (c) disqualify Ameritech from bidding on the library automation services contract in the future, and (d) award Carl its attorneys' fees and costs in the instant appeal.

Carl further argues, with respect to its appeal in No. 21984, that the Hearings Officer erred in: (5) refusing to determine the validity of the alleged exemption under HRS § 103D-102(b)(5); (6) refusing to find that the alleged exemption under HRS § 103D-102(b)(5) was invalid; and (7) dismissing the two protests by Carl of the interim contract awarded to Ameritech.

Because Carl's arguments with respect to (1), (3), and (4) above lack merit, we affirm the September 24, 1998 decision of the Hearings Officer. Moreover, we hold that the Hearings Officer correctly concluded that he did not have the authority to review the Chief Procurement Officer's exemption determination based on the clear language of HRS § 103D-102(b)(5). Accordingly, we also affirm the October 21, 1998 Orders of the Hearings Officer in appeal No. 21984.

I. BACKGROUND

The following facts and procedural history are taken from this court's decision in CARL I, the September 24, 1998 order of the Hearings Officer following remand, and the records on appeal in Nos. 21919 and 21984.

Prior to CARL I, the Hearings Officer held hearings to determine whether the award of the contract to provide automation and other services to the Library complied with the Code. The Hearings Officer found that "the entire evaluation process [by which the Library considered the competing proposals of Ameritech and Carl]" was "irretrievably flawed." CARL I, 85 Hawai`i at 457, 946 P.2d at 27. As previously indicated, rather than evaluate the competing proposals and decide whether to ratify or terminate the contract himself, the Hearings Officer ordered the Library to reevaluate the proposals and then decide for itself whether to ratify or terminate the contract. Id. at 445-46, 946 P.2d at 15-16.

Carl appealed the Hearings Officer's decision to this court, arguing, among other things, that its proposal was the most advantageous to the State and that, therefore, it should have been awarded the contract. We agreed with the Hearings Officer's conclusion that the evaluation process was "irretrievably flawed" and additionally held that the award and performance of the contract was in violation of HRS § 103D-701(f) (1993).8Id. at 450-52, 454, 946 P.2d at 20-22, 24. We observed, however, that both the Hearings Officer and this court lacked "the technical qualifications to conduct an independent evaluation of the proposals and to determine ... which proposal[, Ameritech's or Carl's,] was most advantageous to the State." Id. at 457, 946 P.2d at 27. Notwithstanding this conclusion, we determined that the Hearings Officer improperly remanded to the Library the decision whether to ratify or terminate the automation services contract. Id. Consequently, we remanded to the Hearings Officer the decision to ratify or terminate the contract. See id. at 461, 946 P.2d at 31. Additionally, we directed the Hearings Officer, in making that decision, to consider "the best interest of the State," id. at 449, 946 P.2d at 19, which included, among other things, "[t]he public interest in the integrity of the procurement code." Id. at 456, 946 P.2d at 26.

On remand, Carl urged the Hearings Officer to terminate the contract based on CARL I. The Library and Ameritech initially opposed termination in their briefs to the Hearings Officer. The Hearings Officer scheduled a hearing to allow the parties to introduce evidence on the factors that this court in CARL I directed the Hearings Officer to consider in determining the State's best interest.

Although the Library had vigorously defended the contract in CARL I and throughout Bartholomew Kane's tenure as State Librarian, a change of leadership at the Library9 resulted in an abrupt change of strategy immediately prior to the scheduled evidentiary hearing. The new State Librarian, Virginia Lowell, decided to terminate the Ameritech contract rather than continue to litigate its defense and, on September 11, 1998, filed a Notice of Intent to Terminate with the Hearings Officer.

The following day, Lowell prepared an exemption form pursuant to HRS § 103D-102(b)(5) for Unebasami's approval as the chief procurement officer of the Library. The exemption form stated that the existing Ameritech contract would be terminated and...

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