Delasoft, Inc. v. Ohio Dep't of Admin. Servs., 22AP-85

CourtUnited States Court of Appeals (Ohio)
Writing for the CourtSADLER, J.
Citation2022 Ohio 3403
PartiesDelasoft, Inc., Plaintiff-Appellant, v. Ohio Department of Administrative Services et al., Defendants-Appellees.
Docket Number22AP-85
Decision Date27 September 2022

2022-Ohio-3403

Delasoft, Inc., Plaintiff-Appellant,
v.

Ohio Department of Administrative Services et al., Defendants-Appellees.

No. 22AP-85

Court of Appeals of Ohio, Tenth District

September 27, 2022


APPEAL from the Franklin County Court of Common Pleas C.P.C. No. 19CV-6257

On brief:

Luther L. Liggett, Jr., for appellant.

Dave Yost, Attorney General, Hilary R. Damaser, Keith O'Korn, and Stephanie Slone, for appellees Ohio Department of Administrative Services and former Director Matt M. Damschroder.

Taft Stettinius & Hollister LLP, and William J. Beckley, for appellee BEM Systems, Inc.

Dave Yost, Attorney General, and L. Martin Cordero, and Corrina V. Efkeman, for appellees Ohio Department of Transportation and Director Jack Marchbanks.

Argued:

Luther L. Liggett, Jr.

Keith O'Korn.

DECISION

SADLER, J.

{¶ 1} Plaintiff-appellant, Delasoft, Inc., appeals from judgments of the Franklin County Court of Common Pleas granting motions to dismiss Delasoft's claims filed by defendants-appellees the Ohio Department of Administrative Services ("ODAS"), Matthew

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Damschroder, the Ohio Department of Transportation ("ODOT"), Jack Marchbanks, and BEM Systems, Inc. ("BEM") (collectively, "appellees"). For the reasons that follow, we affirm.

I. FACTS AND PROCEDURAL HISTORY

{¶ 2} This appeal arises from Delasoft's challenge to the award of a state contract to BEM. The facts related to the award and Delasoft's challenge are set forth in detail in this court's decision on a prior appeal. Delasoft, Inc. v. Ohio Dept. of Adm. Servs., 10th Dist. No. 19AP-761, 2020-Ohio-3558, ¶ 6-22. For purposes of this appeal, we will briefly outline the relevant facts.

{¶ 3} In July 2018, ODAS issued a request for competitive sealed proposals ("RFP") on behalf of ODOT seeking an online system for right-of-way and outdoor advertising permits. The RFP described the system sought:

The objective of this Request for Proposal opportunity 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 the department's twofold needs: 1.) to purchase a web-based permitting system, and which demonstrates the capabilities and resources required to provide a next generation permit application system for use by ODOT. And 2.) to provide a web-based Outdoor Advertising Control System to support the permitting process for signs and billboards for ODOT. The Contractor must provide all requirements analysis configuration, installation and on-going maintenance

(Req. for Proposal at 3, Ex. A to Compl.) The RFP provided that the initial term of the contract was from the award date through June 30, 2019, and that the contract could be renewed for up to five additional two-year terms, subject to appropriation of funds by the General Assembly. The RFP was not a minority business enterprise ("MBE") set-aside contract but included an "MBE Subcontractor Plan." Delasoft at ¶ 9.

{¶ 4} Of the entities that submitted bids, only BEM and Delasoft satisfied the mandatory criteria in the RFP to have their bids scored. Id. at ¶ 11. The bids were scored based on three metrics: (1) the technical proposal, (2) the cost cap, and (3) the MBE subcontractor plan. Id. Delasoft received the higher score for its technical proposal and BEM received the higher score for its cost cap. Id. BEM also received the higher score for its proposed MBE subcontractor set-aside. BEM's bid indicated that 54 percent of its bid

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price would go to an MBE subcontractor, while Delasoft proposed a 17 percent MBE subcontractor set-aside. Id. Ultimately, BEM received the higher total score and was awarded the contract. Id.

{¶ 5} ODAS notified Delasoft, by letter on January 11, 2019, that its proposal had not been selected. Id. at ¶ 17. In response to an inquiry, on February 5, 2019, ODAS informed Delasoft that BEM had been awarded the contract as of January 14, 2019. Id. Delasoft filed a "Notice of Protest" with ODAS on April 1, 2019, asserting BEM's bid did not meet the requirements of the RFP regarding the MBE subcontractor plan. Delasoft's protest requested that ODAS cancel the award to BEM and instead award the contract to Delasoft. Id. ODAS denied Delasoft's protest on July 11, 2019.

{¶ 6} On August 2, 2019, Delasoft filed a complaint for declaratory and injunctive relief against ODAS, ODOT, and BEM. Id. at ¶ 18. Delasoft sought a declaratory judgment that the RFP process was illegal and temporary, preliminary, and permanent injunctions prohibiting an award of the contract pursuant to the RFP. Id. The trial court conducted a hearing on Delasoft's request for a temporary restraining order. The court denied the temporary restraining order because Delasoft did not file an affidavit verifying its complaint until after the hearing and because it found Delasoft failed to show a threat of irreparable injury because any injury suffered from not being awarded the contract could be remedied through monetary damages. Id. at ¶ 19. On the eve of a preliminary injunction hearing, ODAS moved to dismiss for lack of subject-matter jurisdiction, asserting injunctive relief was not available because the contract had been executed and work had begun. Id. at ¶ 21. The trial court held the preliminary injunction hearing but adjourned for further briefing on the motion to dismiss when ODAS renewed its motion at the close of Delasoft's case.

{¶ 7} On October 30, 2019, the trial court granted ODAS's motion to dismiss for lack of subject-matter jurisdiction, concluding the claims were moot because Delasoft did not act promptly after having notice of the circumstances of the contract award and performance of the contract had begun. Id. at ¶ 22. Delasoft appealed, arguing the trial court erred by dismissing for mootness because the contract was awarded using unconstitutional racial criteria. Id. at ¶ 23. As explained more fully below, this court concluded the record was insufficiently developed to determine whether the contract should be analyzed under precedents involving public improvement contracts or those

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involving public contracts for goods and services. Id. at ¶ 1, 32. We sustained Delasoft's second assignment of error in part and remanded to the trial court for further development of the record. Id. at ¶ 46.

{¶ 8} On remand, Delasoft amended its complaint, adding a claim under Title 42, Section 1983 of the United States Code for violation of its civil rights against Marchbanks, the director of ODOT, and Damschroder, the director of ODAS. Pursuant to a motion from ODAS and BEM to stay discovery, the trial court limited discovery to "evidence that is relevant to whether the contract between BEM and ODAS was a public improvement/construction type contract or a goods and services type contract." (Sept. 22, 2020 Decision & Entry at 6.) Appellees moved to dismiss the amended complaint, again asserting the claims for injunctive relief were moot because performance of the contract commenced before Delasoft filed suit, and the Section 1983 claim failed to state a claim upon which relief could be granted.

{¶ 9} The trial court conducted an evidentiary hearing "on the subjects of: (1) whether the contract or the renewal or modification of the contract between BEM and the other Defendants is a goods and services contract and whether the public improvement/construction analysis in Meccon, Inc. v. Univ. of Akron, 126 Ohio St.3d 231, 2010-Ohio-3297, 933 N.E.2d 231 applies; and (2) whether the contract between BEM and the other Defendants can be shifted to Delasoft without burdening the taxpayers to recreate BEM's work." (Feb. 16, 2021 Order at 1.) At the hearing, ODOT presented testimony from three employees who had worked on the project with BEM, BEM presented testimony from the director of its software business unit, and Delasoft presented testimony from its executive vice president.

{¶ 10} Following the hearing, on September 22, 2021, the trial court issued a decision ("the September decision") granting in part appellees' motions to dismiss for lack of subject-matter jurisdiction because it concluded Delasoft's claims for declaratory judgment and injunctive relief were moot. With respect to the Section 1983 claim, the trial court converted the motions to dismiss to a motion for more definite statement under Civ.R. 12(E) and permitted Delasoft to amend its complaint to clarify the Section 1983

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claim.[1] Delasoft filed a second amended complaint; Marchbanks and Damschroder then moved to dismiss the second amended complaint. The trial court granted Marchbanks' and Damschroder's motions to dismiss in a decision issued on January 21, 2022 ("the January decision"), concluding the second amended complaint failed to state a claim upon which relief could be granted. Delasoft timely appealed from the January decision.

II. ASSIGNMENTS OF ERROR

{¶ 11} Delasoft assigns the following as trial court error:

[1.] The trial court erred by procedurally failing to reach the merits of a goods-and-services contract awarded using unconstitutional racial criteria, declaring the case moot as in a construction contract.
[2.] The trial court erred in dismissing for mootness a challenge of an illegal public contract yet to be performed, setting an impossible threshold to protest and thus evading review.
[3.] The trial court erred by dismissing the claim of discrimination by ignoring the overt facts pleaded.

III. STANDARD OF REVIEW

{¶ 12} The standard for dismissal of a complaint for lack of subject-matter jurisdiction under Civ.R. 12(B)(1) is whether the complaint states any cause of action cognizable in the forum. Delasoft at ¶ 25. We review de novo a trial court's decision dismissing a case for lack of subject-matter jurisdiction. Id.

{¶ 13} "A motion to dismiss under Civ.R. 12(B)(6) for failure to state a...

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