N.E.R.I. Corp. v. New Jersey Highway Authority

Decision Date31 December 1996
Citation686 A.2d 328,147 N.J. 223
PartiesN.E.R.I. CORPORATION, and Joseph Neri, a Taxpayer, Plaintiffs-Appellants, and Cross-Respondents, v. NEW JERSEY HIGHWAY AUTHORITY, Defendant-Respondent and Cross-Appellant, and Sevell's Auto Body Co., Inc., Defendant-Respondent.
CourtNew Jersey Supreme Court

Harvey Fruchter, Kenilworth, and Carrie Ferraro, North Plainfield, for appellants and cross-respondents.

William Harla, Pennington, for respondent cross-appellant (DeCotiis, Fitzpatrick & Gluck, attorneys).

William J. Pollinger, Hackensack, for respondent.

The opinion of the court was delivered by

GARIBALDI, J.

The sole issue presented by this appeal is whether the New Jersey Highway Authority Act, N.J.S.A. 27:12B-1 to -26 (the Act), requires the New Jersey Public Highway Authority (Authority) to publicly bid its towing and storage contracts for the Garden State Parkway (Parkway).

I

In 1952, the New Jersey Legislature created the Authority and vested it with the power to build, operate, and maintain a safe and modern highway system. N.J.S.A. 27:12B-4. Specifically, the Authority is vested with the power to operate the Parkway. N.J.S.A. 27:12B-20. The Legislature also granted the Authority certain enumerated powers. N.J.S.A. 27:12B-5. One of those powers is "[t]o make and enter into all contracts and agreements necessary or incidental to the performance of its [the Authority's] duties and execution of its powers under this act." N.J.S.A. 27:12B-5(o).

Section 14 of the Act enables the Authority to contract with parties "desiring the use of any part" of an Authority project. N.J.S.A. 27:12B-14. In 1968, the Legislature amended the Act to require public bidding on all contracts. N.J.S.A. 27:12B-5.2. The Legislature declared that the Act, "being necessary for the welfare of the State and its inhabitants, shall be liberally construed to effect the purposes thereof." N.J.S.A. 27:12B-24.

II

Most of the facts have been stipulated. The Authority contracts with private entities to provide towing and roadside services to Parkway motorists. Each towing contractor is granted the exclusive right to service one of the Parkway's fifteen "zones" for a five-year period. In return, the Authority acquires a fixed percentage of the tower's fees that are received from motorists. The Authority's most recent Request for Proposal (RFP) entitles the Authority to the following percentages of the tower's gross receipts:

                under $12,000.00--          3%
                $12,000.00 to $16,000.00--  4%
                Over $16,000.00--           5%
                

The Authority regulates the maximum chargeable fees that a tower may charge for roadside assistance and towing services. N.J.A.C. 19:8-2.12. If a vehicle requires repair, however, fees for parts and labor are set in accordance with the current edition of Chilton's Labor Guide and Parts Manual. Ibid.

A Parkway motorist may not use a towing service other than an authorized contractor. Parkway motorists have the option of being towed to the nearest Parkway exit or to the tower's storage and repair area.

The Authority does not advertise or publicly solicit applications for towing contracts. Prior to 1990, the Authority automatically renewed towing contracts absent any complaints filed with the Authority or the State Police regarding the current towing service provider.

After this action was commenced in 1989, however, the Authority instituted an informal rating system devised by Patricia Mooney, an employee of the Authority. The "Mooney System" was designed to assist the Authority in selecting towing service providers. Under that system, interested towers submitted certain information to the Authority in a formal application. Mooney then evaluated the applications and numerically ranked each prospective tower according to certain criteria, including the availability and quality of the tower's equipment and facilities, recommendations from local police departments, and the tower's experience, safety record, and proximity to the Parkway. The applicant accumulating the greatest number of points was awarded the towing contract.

The "Mooney System" was not, however, flawless. The stated criteria for assigning numerical ranks was inconsistently applied and new applicants were not investigated. While it is unclear whether Mooney was the only Parkway employee responsible for ranking towers, her direct supervisor reviewed the tally sheets and made any adjustment that he or she deemed necessary. Under both systems of selection, the Executive Director of the Authority ultimately approved and signed all contracts.

In 1994, the "Mooney System" was refined. When towing contracts expire, the Authority now publishes a notice of the "RFP" in three newspapers announcing that the Authority is accepting sealed proposals for towing services. A six-member committee reviews, evaluates, and rates all submitted proposals. Selection criteria include, but are not limited to, the following: reliability, experience, response time, acceptance of credit cards, adequate equipment and personnel to safely handle a variety of traffic and weather conditions, location of storage and repair facilities, security of vehicles towed and stored, and maintenance of adequate liability insurance.

Each category on the evaluation form is assigned points based upon a weighted value and rated on a scale of 1 to 5. The Authority does not, and will not, provide applicants with the weighted value attributed to each category. The scale rating is multiplied by the weighted value to determine the score given by each committee member. An average score is then calculated.

The contractor accumulating the most points and meeting the Authority's qualifications is recommended. The committee then prepares contracts and forwards them to the Executive Director for approval.

Since this competitive evaluation process was established, contracts have been awarded for five zones. Each contract was awarded to the highest scoring contractor satisfying the Authority's qualifications. Of those five contracts, three were awarded to incumbents and two were awarded to new towing contractors.

Sevell's Auto Body Co., Inc. (Sevell), has exclusively provided all roadside and towing services between mile posts 132 and 145.6 since the Parkway's original opening approximately forty years ago. Because the Authority had first-hand knowledge of Sevell's performance, its contracts were renewed in 1986 and 1991 without formal application. Sevell's present contract expires November 1, 1996. 1

Plaintiff, Neri Corporation (Neri) provides towing, storage, and auto repair services. Plaintiff, Joseph Neri is the majority stockholder of Neri. In 1984, Neri submitted a formal application to the Authority, seeking the award of a 1986 towing contract covering the mile posts from 132 to 145.6. Neri's application was rejected, however, in favor of renewing Sevell's existing contract.

In 1989, plaintiffs filed an action against the Authority and the Parkway, seeking to prohibit the Authority from awarding towing licenses without public bidding; to void Sevell's towing contract; to grant the contract to Neri; and to recover attorney's fees.

In 1990, while the Authority was determining the renewal of Sevell's towing contract, it considered but again rejected Neri's 1984 application. Although the 1984 application did not contain current information, Ms. Mooney never contacted Neri for updated data. In 1991, Sevell's towing contract was renewed for a five-year period and the contract remains in effect.

In 1993, plaintiffs filed an amended complaint requesting that the court declare the contract between the Authority and Sevell void; order the Authority to require public bidding for towing contracts; direct the Authority to permit Neri to submit a bid for the contract; and place a one or three-year limit on all towing contracts.

The trial court granted plaintiffs' motion for summary judgment, finding that under N.J.S.A. 27:12B-5.2 all Parkway towing and storage contracts are subject to public bidding. Because the contract between the Authority and Sevell did not comport with the statute's formal bidding requirements, it was declared void.

The Appellate Division reversed, holding that N.J.S.A. 27:12B-5.2 does not require the Authority to publicly bid towing and storage contracts as such agreements fall within the statute's "public convenience" exception. N.E.R.I. Corp. v. New Jersey Highway Authority, 282 N.J.Super. 460, 468-69, 660 A.2d 564 (App.Div.1995). According to the Appellate Division, consideration for the personal safety of motorists justifies application of the "public convenience" exception.

The Appellate Division did, however, order the Authority to accept and evaluate proposals from competing contractors. Id. at 470, 660 A.2d 564. In addition, the Authority was required to establish a level playing field for all applicants by adopting "relevant objective criteria for the evaluation of applicants for new contracts, such as the nature and extent of required equipment, storage and repair facilities." Ibid.

We granted plaintiffs' petition for certification, 143 N.J. 323, 670 A.2d 1065 (1995), and the Authority's cross-petition for certification, id. at 324, 670 A.2d 1065, and now reverse and interpret N.J.S.A. 27:12B-5.2 to require public bidding for all Parkway towing and storage contracts.

III

The first question that requires resolution is whether N.J.S.A. 27:12B-14 (Section 14) or N.J.S.A. 27:12B-5.2 (Section 5.2) controls. The Authority contends that towing contracts fall within section 14, and therefore, section 5.2's public-bidding requirement is inapplicable. Both lower courts disagreed, the Appellate Division finding that section 14 applies only to "projects which require acquisition of an interest in Authority property, such as by easement, license or lease." N.E.R.I., supra, 282 N.J.Super. at 464, 660 A.2d 564. We agree.

In relevant part, section...

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