Lee's Summit License, LLC v. Office of Admin.

• Decision Date: 19 January 2016
• Docket Number: WD 78694
• Parties: Lee's Summit License, LLC, et al., Respondents, v. Office of Administration, et al., Appellants.
• Court: Missouri Court of Appeals

486 S.W.3d 409

Lee's Summit License, LLC, et al., Respondents,

v.Office of Administration, et al., Appellants.

WD 78694

Missouri Court of Appeals, Western District.

OPINION FILED: January 19, 2016

Motion for Rehearing and/or Transfer to Supreme Court Denied March 1, 2016

Application for Transfer Denied May 3, 2016

Amanda J. Montee and James A. Montee, St. Joseph, MO, for Respondents.

Nicole M. Bock and James Leyton, Jefferson City, MO, for Appellants.

Before Division One: Anthony Rex Gabbert, Presiding Judge, Victor C. Howard, Judge and Cynthia L. Martin, Judge.

Cynthia L. Martin

, Judge

The Missouri Office of Administration, Division of Purchasing & Materials Management, and Department of Revenue (collectively “State”) appeal from a judgment granting a motion for judgment on the pleadings filed by Lee's Summit License, LLC (“LS License”) and James Ryan Williams (“Williams”), the plaintiffs in a declaratory judgment and injunctive relief action that challenged procedures and policies used by the State to award a contract to operate a license fee office. Because Williams did not sustain his burden to establish that he had standing to challenge inclusion of a return to state provision in the State's request for proposal, and because the trial court erroneously concluded that the inclusion of a return to state provision in the State's request for proposal was unlawful, the judgment of the trial court in favor of LS License and Williams is reversed and vacated.

Factual and Procedural Background

LS License is a Missouri limited liability company. Williams is a member of LS License. On June 5, 2009, LS License was awarded a contract by the State to operate a license fee office in Lee's Summit (“LS License Contract”). The authority for such contracts is specified by section 136.055,¹ which provides that a license fee office contractor “act[s] as an agent of the department of revenue.” Williams is designated as the contract manager under the LS License Contract.

The LS License Contract had a one-year term, expiring on June 4, 2010, with the prospect for three renewals. The LS License Contract included an amended Exhibit H, a pricing page, which addressed the “Return of Processing Fees Earned to the State” (“Return to State”) as follows:

If the offeror proposes to return to the state agency a portion of the processing fees earned, the offeror must state, in the table below, a single firm, fixed percentage of the monthly fees earned for the original contract period and for each renewal period that will be returned to the state agency. If no percentage is stated, it will be assumed that the offeror is not proposing to return a portion of the processing fees earned.

In the table that followed, LS License agreed to pay Return to State in the amount of 8% during the original contract period, and in the amounts of 6%, 5%, and 3% respectively during the three successive renewal periods.

The LS License Contract was renewed three times as anticipated. The first renewal term was from June 5, 2010, through June 4, 2011. An issued Notice of Contract Renewal confirmed that the Return to State during the first renewal term would be 6%. The second renewal term was from June 5, 2011, through June 4, 2012. An issued Notice of Contract Renewal confirmed that the Return to State during the second renewal term would be 5%. The third renewal term was from June 5, 2012, through June 4, 2013. A corresponding amendment to the LS License Contract stated that the Return to State during the third renewal term would be 3%.

At the end of the third renewal term, the State planned to re-bid the license fee office contract in Lee's Summit. In anticipation of those efforts, the State extended the LS License Contract through September 4, 2013, and then again though January 4, 2014. On each occasion, in a corresponding amendment, LS License agreed that “[a]ll ... terms, conditions, and provisions, including the monthly percentage returned to the state, shall remain the same and apply hereto during the extended period.”

The State issued request for proposal B3Z14093 to re-bid the Lee's Summit license fee office on October 25, 2013 (“RFP”). The subject of Return to State was addressed in section 3.4 of the RFP as follows:

3.4 Evaluation of Return to the State:

3.4.1 The objective evaluation of the return to the state shall be based upon the sum of the firm, fixed percentages stated on the pricing page, Exhibit A.

3.4.2 The evaluation points shall be calculated based on the following formula.

3.4.3 If Exhibit A is not completed and returned with the proposal, a percentage of zero will be assumed and no points for Return to the State will be assigned.

Exhibit A referenced in section 3.4.3 was essentially identical to Exhibit H in the LS License Contract. Exhibit A permitted an offeror responding to the RFP to insert a proposed percentage for Return to State for five time frames corresponding with the anticipated contract term, which was to commence on contract award and continue through November 27, 2017.

LS License and one other offeror, License Office Services, LLC (“License Office”), responded to the RFP. Both submitted offers that proposed percentages for Return to State on Exhibit A of the RFP.

While the two bids were being evaluated, the State twice extended the LS License Contract from January 5, 2014, through March 5, 2014, and then again from March 6, 2014 through July 5, 2014. On both occasions, corresponding amendments confirmed LS License's continued agreement to remit Return to State payments.

On May 15, 2014, the State completed its evaluation of the two offers it had received in response to the RFP. An evaluation report form awarded points in four of seven possible categories: Personnel, Method of Performance, Return to State, and MBE/WBE Certification Status. License Office received a total of 174.33 points and LS License received a total of 168.82 points, a difference of 5.51 points. In the Return to State category, License Office received 10 points and LS License received 8.44 points, a difference of 1.56 points. Without Return to State as a scored category, License Office would have remained the high bidder.

On May 15, 2014, the State awarded the Lee's Summit license fee office contract to License Office for a term beginning May 29, 2014, through November 27, 2017.

On May 22, 2014, LS License submitted a bid protest pursuant to 1 CSR 40–1.050(9)

. The bid protest letter raised eleven complaints involving the fairness of the bid process,² including complaints about the awarding of points in certain of the categories on the evaluation report form. However, the bid protest letter did not question the inclusion of a Return to State provision in the RFP and did not complain about how points were awarded for Return to State.³

While the bid protest was pending, the State extended the LS License Contract on four more occasions from July 6, 2014, through August 5, 2014; from August 6, 2014, through September 5, 2014; from September 6, 2014, through October 5, 2014; and from October 6, 2014, through February 5, 2015. On the first two occasions, corresponding amendments confirmed LS License's continued agreement to abide by all terms of its contract, including the Return to State provision. On the second two occasions, corresponding amendments confirmed that “[a]ll ... terms, conditions, and provisions” of the contract would remain the same during the extension periods, though no specific reference was made to Return to State.

On November 4, 2014, the State denied LS License's bid protest. Each of the eleven complaints raised by the bid protest letter was addressed in the State's denial letter. Because Return to State was not raised as an issue in LS License's bid protest, the State's denial letter did not address Return to State.⁴

On November 25, 2014, LS License and Williams filed a verified petition against the State seeking a declaratory judgment that the contract awarded to License Office was void, and seeking injunctive relief to enjoin implementation of the awarded contract. License Office was not named as a defendant in the lawsuit and never sought leave to intervene. On December 9, 2014, the trial court entered a temporary restraining order effective through January 5, 2015, enjoining the State “from taking any steps to implement” the License Office contract. LS License and Williams posted a $6,000 bond to support the temporary restraining order.

On December 22, 2014, LS License and Williams filed an amended petition against the State seeking judicial review of the State's “procurement that is the subject of this lawsuit” pursuant to section 536.150. [L.F. 0017, ¶ 18] The amended petition asserted six counts, each of which sought unique declarations that specific aspects of the procurement process were conducted unlawfully or arbitrarily and capriciously; each of which sought a declaration that the contract awarded to License Office was void; each of which sought to enjoin the State from implementing the contract with License Office; and some of which sought an award of attorneys' fees.⁵

After the amended petition was filed, the trial court periodically extended the temporary restraining order, causing it to remain in effect through entry of the judgment from which this appeal is taken.⁶ As a result, LS License has continued to operate the Lee's Summit license fee office throughout these proceedings.⁷

On April 21, 2015, LS License filed a motion for judgment on the pleadings on Count III of the amended petition, which sought a declaration that the Return to State provision in the RFP was unlawful and that as a result, the contract awarded to License Office was void and its implementation should be enjoined.

On May 6, 2015, the trial court entered a “final judgment” (“Judgment”). The Judgment granted the motion for judgment on the pleadings and entered judgment in favor of LS License and Williams on Count III of the amended petition. The trial court ruled that the...