Delasoft, Inc. v. Ohio Dep't of Admin. Servs.
| Decision Date | 30 June 2020 |
| Docket Number | No. 19AP-761,19AP-761 |
| Citation | 154 N.E.3d 1099,2020 Ohio 3558 |
| Parties | DELASOFT, INC., Plaintiff-Appellant, v. OHIO DEPARTMENT OF ADMINISTRATIVE SERVICES et al., Defendants-Appellees. |
| Court | Ohio Court of Appeals |
On brief: Graff and McGovern, LPA, and Luther L. Liggett, Jr., Columbus, for appellant.
On brief: Dave Yost, Attorney General, Keith O'Korn, Hilary Damaser, Columbus, and Lidia Mowad, for appellee Ohio Department of Administrative Services.
On brief: Dave Yost, Attorney General, and L. Martin Cordero, Columbus, for appellee Ohio Department of Transportation.
On brief: McDonald Hopkins LLC, and Peter D. Welin, Columbus, for appellee BEM Systems Inc.
DECISION
{¶ 1} Delasoft, Inc. appeals from the trial court's grant of a motion to dismiss filed by Ohio's Department of Administrative Services ("DAS") on the eve of a preliminary injunction hearing and considered by the trial court upon further briefing after Delasoft had put on its preliminary injunction evidence but before the hearing was concluded. Because the trial court, like DAS, assumed that the goods and services contract at issue is a "public improvement contract" making the case subject to immediate dismissal as moot once any performance had commenced, but because the trial court did not analyze the nature of the contract to make that assessment and because evidence in the record might be construed to suggest that the contract is more akin to an agreement to sell "off the shelf" products and related services (over what is envisioned as a ten-year period) than to perform construction-type work, we will reverse the judgment of dismissal and remand the matter to the trial court for further proceedings. We are not in a position at this juncture to determine in the first instance the proper characterization of the contract for this purpose, and nothing in this decision should be construed to require any ultimate finding on that issue or as to the weighing of equities for injunctive relief; rather, the record needs to be further developed and elucidated before such determinations can be made.
{¶ 2} The facts that are clear on the record so far, however, are quite remarkable. The record as uncontested at this point suggests that Delasoft, which DAS lawyers identify as "an Asian-Indian contractor," see Appellee DAS Brief at 43, lost out on its state contract proposal, despite DAS otherwise having scored it the best bidder, because Delasoft did not promise to shift as much money to a "Minority Business Enterprise" subcontractor as did its ("non-minority," id. at 37) competitor BEM Systems, Inc.—which for that purpose invoked ... an "Asian-Indian" firm, id. at 43. Further elevating the facts to parable status, DAS seems to have given the nod to BEM on that basis without concern or regard for the fact that BEM's subcontractor Comtech will turn around and pay the lion's share of its subcontractor "MBE Set-Aside Cost Percentage" right back to BEM. See, e.g., September 6, 2019 P.I. Tr. at 183 (); id. at 93, 94 (); id. at 213 (); see also bid scoresheet recap in Delasoft Exhibit E. at 1.
{¶ 3} Delasoft complains that the whole circuitous arrangement is not authorized by any Ohio law and boils down to government race-based classification that is illegal under longstanding federal court precedent, see Complaint at ¶ 13-15 and Associated Gen. Contrs. of Ohio, Inc. v. Drabik , 214 F.3d 730 (6th Cir. 2000). DAS counters, among other things, that it is owed "deference in interpreting its [sic] statutes," and that the illegal construction contracting in Drabik arose under statutory provisions different from the purchasing provisions that DAS says authorize its conduct here and that the Supreme Court of Ohio had upheld before Drabik was decided. See Appellee DAS brief at 33, 37. The central question for us now, however, is whether the trial court erred in dismissing Delasoft's lawsuit for lack of subject-matter jurisdiction because moot as filed too late to permit any injunctive or declaratory relief under any possible merits decision and weighing of the (timing and other) equities.
{¶ 4} At least for purposes of that analysis, DAS seems to suggest, the contract at issue here should be viewed as rather in the nature of a construction contract: "Notably," DAS argues, "Ohio precedent looks merely at whether ‘construction commences’ and not at the percentage of completion of the total contract as Delasoft advocates." DAS Brief at 23-24, citing Colosseo USA, Inc. v. Univ. of Cincinnati , 1st Dist. No. C-180223, 2019-Ohio-2026, 2019 WL 2246199, ¶ 19, quoting State ex rel. Gaylor, Inc. v. Goodenow , 125 Ohio St.3d 407, 2010-Ohio-1844, 928 N.E.2d 728, ¶ 11 (), and further invoking (1) Meccon v. Univ. of Akron , 126 Ohio St.3d 231, 2010-Ohio-3297, 933 N.E.2d 231 (); (2) Control Data Corp. v. Controlling Bd. , 16 Ohio App.3d 30, 474 N.E.2d 336 (10th Dist.1983) (); and (3) Cementech, Inc. v. Fairlawn , 109 Ohio St.3d 475, 2006-Ohio-2991, 849 N.E.2d 24, ¶ 13 ().
{¶ 5} But as to whether the contract here fits this construction/public-improvement work category, the facts are not so clear and, absent a more focused trial court record, we are loathe to extend to long-term procurement contracts the contract commencement rule that Meccon carefully applied to "public improvement work." As in Modern Office Methods, Inc. v. Ohio State Univ. , 10th Dist., 2012-Ohio-3587, 975 N.E.2d 523, ¶ 23, it may be that "the instant case does not involve a state public-improvement project subject to competitive bidding laws like in Meccon , but rather a contract * * * for goods and services established using the RFP process.
* * * * This differentiates the instant case from Meccon ." See also Empower Aviation, LLC v. Butler Co. Bd. of Commrs. , 185 Ohio App.3d 477, 2009-Ohio-6331, 924 N.E.2d 862, ¶ 25 (1st Dist.) ).
{¶ 6} To put the issue in context, we turn to a closer examination of the record as it now stands.
{¶ 7} The controversy began with a Request for Proposals ("RFP") issued by DAS on behalf of the state Department of Transportation ("DOT"). "The objective of this Request for Proposal opportunity," DAS recited, "is to find a commercial off the shelf (COTS) system (or develop an online web-based permitting system if an existing software application cannot be found) that can meet [DOT's] twofold needs: 1) to purchase a web-based permitting system [meeting DOT's requirements for organizing right-of-way permits]. And 2) to provide a web-based Outdoor Advertising Control System to support the permitting process for signs and billboards * * *." RFP, Delasoft P.I. Exhibit C at 3. "The goal is to find and implement an online permitting/outdoor advertising system to provide a seamless uniform process for both external customers and internal ODOT users." Id. DAS made clear that "existing software application is preferred over application development * * *." Id. DAS envisioned a deal involving computer software licensing and service that would run over a ten-year period. P.I. Tr. at 109-10, 118 (DAS's Ms. Sanders). More technically, the RFP specified that RFP at 2, 13.
{¶ 8} The RFP recited that it was issued "under Sections 125.071 and 125.18 of the Ohio Revised Code," relating to what the Code captions "purchases by competitive sealed proposal" and to matters involving information technology, as well as pursuant to Administrative Code section 123:5-1-8 (). RFP at 2. It did not cite as authority any code section within Chapter 153 ("Public Improvements").
{¶ 9} The RFP was "not [an] MBE [Minority Business Enterprise] set-aside contract," and any qualified bidders were welcome. See Tr. at 63-64 (DAS's Sanders). Indeed, contract awardee BEM is not an MBE. Id. at 63. The RFP did, however, include an "MBE Subcontractor Plan." RFP at 21. As initially expressed, that language read: ...
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