Thelander v. City of Cleveland

• Court: Ohio Court of Appeals
• Writing for the Court: JACKSON
• Citation: Thelander v. City of Cleveland, 3 Ohio App.3d 86, 444 N.E.2d 414, 3 OBR 100 (Ohio App. 1981)
• Decision Date: 30 July 1981
• Parties: , 3 O.B.R. 100 Theodore THELANDER et al., Appellees, v. CITY OF CLEVELAND et al., Appellants. *

Page 86

3 Ohio App.3d 86

444 N.E.2d 414, 3 O.B.R. 100

Theodore THELANDER et al., Appellees, v. CITY OF CLEVELAND et al., Appellants. ^*

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

July 30, 1981.

Syllabus by the Court

1. A prior written request by a taxpayer upon the law director of a municipality to institute an action for injunction is a mandatory jurisdictional prerequisite to the commencement of a suit for injunction by the taxpayer, unless it reasonably appeared at the time suit was filed that such request would be futile.

2. A suit brought to enjoin the execution of a lease between a municipality and a successful bidder on the ground that the bidding process was legally defective is an original suit in injunction, and is not an appeal from the decision of a governmental entity. At trial the parties are not limited to the evidence submitted or the legal arguments made before the administrative agency which approved the bid.

3. Where the city of Cleveland advertised for bids on a lease by way of concession, and omitted from the advertisement a material term, condition, or requirement contained in the ordinance authorizing the lease, the advertisement is in violation of Section 183.06 of the Cleveland Codified Ordinances, and the execution of the lease between the city and the successful bidder may be enjoined.

4. Where, six weeks after advertising for bids for a lease by way of concession, a municipality amends the specifications of the proposed lease to increase the area of the facilities to be leased by forty percent, and where the municipality subsequently amends the specifications to materially increase the minimum capital investment required of the lessee, the execution of the lease between the city and the successful bidder may be enjoined.

5. Where, in the absence of specific authorization by statute or ordinance, following the opening of bids for the lease of city-owned property, city officials contact the bidders and attempt to secure from them an additional commitment which constitutes a material alteration of their bids, the execution of the lease between the city and the successful bidder may be enjoined because such a procedure undermines and circumvents the bidding process authorized by city ordinances.

6. The Cleveland City Council lacks authority to withdraw its approval of a proposed lease by way of concession after bids on the lease have been received and opened.

Shimon Kaplan, Cleveland, for plaintiffs-appellees.

James Smith, Cleveland, for defendant-appellee.

Thomas Wagner, Cleveland, director of law, for appellants.

Thomas Dettelbach, Cleveland, for defendant-appellant ARA Services, Inc.

JACKSON, Presiding Judge.

On September 20, 1976, the Cleveland City Council enacted enabling Ordinance No. 2251-75 ¹ which authorized and directed the administration of the city of Cleveland to enter into a lease by way of concession for the operation of a restaurant, bar and cafeteria at Cleveland Hopkins Airport.

Fourteen interested parties obtained the plans and specifications from the Division of Purchases and Supplies of the city of Cleveland; three of these parties (American Merchandising Services, ITT Service Industries, and Kanner Industries) returned the plans and specifications to the city in August 1978 without submitting a bid. On August 7, 1978, the city held a pre-bidding conference at the airport, which was attended by seven of the potential bidders who had obtained plans and specifications.

The city issued five addenda to the plans and specifications prior to the date that bids were submitted. Copies of the addenda were sent to every potential bidder who had obtained the plans and specifications and who had not returned them. Consequently, the potential bidders who had returned the bids and specifications without submitting bids were not notified of the addenda. The material provisions of each of the addenda are set forth below:

(1) Addendum No. 1--July 19, 1978

The original plans and specifications had divided the fifteen-year lease into a primary and secondary term. The primary term was the period during which the successful bidder would construct the improvements called for by the specifications; the secondary term was the remainder of the fifteen-year lease. During the primary term, the lessee would pay to the city $20,000 per month. The primary term could extend no longer than five months after "commencement of the lease." During the secondary term the lessee would pay to the city twelve percent of the gross revenues from sale of non-alcoholic products and eighteen percent of gross revenues from the sale of alcoholic products, or the guaranteed minimum rent promised by the lessee, whichever was greater. The specifications specifically provided that the lease would expire ten years after "commencement of the lease," and that the lessee could, at its option, extend the lease for a single five-year period.

Addendum No. 1 divided the primary term into two parts. The new primary term was to run from commencement of the lease until occupancy of the premises by the lessee; during this period no rent would be charged. The secondary term extended until completion of the improvements called for in the specifications. The rent during the secondary term would be $20 per square foot occupied. The primary and secondary terms could not exceed five months in total. The tertiary term would run for the same period, and require the same rent, as the secondary term referred to in the original specifications.

(2) Addendum No. 2--July 19, 1978

The second addendum provides in full as follows:

"No earlier than Fifteen (15) days after the advertisement of bids in the City Record or MONDAY, AUGUST 7, 1978, at 10:00 A.M. all interested parties received bidding specifications will be invited to a pre-bidding conference at the Office of the Director of Port Control, Cleveland Hopkins International Airport, Cleveland, Ohio, 44135."

(3) Addendum No. 3--August 22, 1978

The third addendum postponed the bid due date from August 31, 1978, to October 6, 1978. The postponement of the due date was not advertised. City officials testified that everybody at the pre-bid conference requested or agreed to the postponement.

The addendum also contained answers to a list of questions raised by the parties present at the pre-bid conference. Question number thirteen (13) was as follows:

"Q. Is more square footage available for the main dining room than at present?

"A. An additional 6,000 square feet can be constructed over the moat area to the North of the present restaurant location. (See attached sketch)."

The area referred to in the answer to question thirteen was adjacent to the current restaurant, bar and coffee shop. No building or other structure currently existed in that space; utilization of that space would require the construction of a two-story structure.

(4) Addendum No. 4--Sept. 13, 1978

The most important provision of the fourth addendum was as follows:

"The following is to be added to the answer to question thirteen in Addendum # 3.

"In the event that the successful bidder elects to utilize part or all of the available area, the minimum investment in improvements acceptable to the city shall be increased by an amount determined by multiplying the additional square footage elected to be utilized by $125.00 per square foot."

(5) Addendum No. 5--Sept. 27, 1978

Addendum No. 5 required the successful bidder to hire the current employees, "subject to each employee's ability to perform his or her job satisfactorily."

The original specifications merely encouraged the successful bidder to retain the employees of the current operator of the restaurant:

"The City encourages the successful bidder, to the extent possible, to retain the employees currently employed in the food and beverage concession at the Airport and to maintain the current wage and benefits package for said employees."

The city received four bids for the lease by way of concession. Two of the bids were immediately rejected because the bidders' guaranteed minimum rent over the fifteen-year period was less than ten million dollars; the two other bidders (ARA Services, Inc. and Sky Chefs) each promised to pay a minimum rent of over twenty million dollars.

The bids were reviewed by the Department of Port Control. The review process is summarized in four memoranda from William Robinson, an employee of the department, to Mary Vodicka, Director of the Department of Port Control. ARA and Sky Chefs made an oral presentation of their bids to Mr. Robinson on October 18 and 25, 1978, respectively. At each of these post-bid conferences Mr. Robinson asked a number of questions concerning the bidders' proposals. Many of these questions elicited information which is not apparent from the bids; for example, Sky Chefs stated that it would consider expansion into the 6,000 square foot area after the first ten years of the lease, and ARA promised that the restaurant would be a unionized facility. Mr. Robinson sent memoranda to Miss Vodicka regarding each of the post-bid conferences, and sent memoranda comparing the two bids. He recommended that the lease be awarded to ARA. The main differences between the two bids are set forth below:

(a) Guaranteed Minimum Rent

Sky Chefs promised a higher guaranteed minimum rent over the fifteen-year period of the lease than ARA, but ARA offered to make higher payments during the initial six years of the agreement. The bids were as follows:

                        Rents Offered
                               ARA          Sky Chefs  High Bidder  Difference
                 1st Year  $   543,996    $   375,000      ARA      $  168,996
                 2nd Year  $   660,000    $   450,000      ARA      $  210,000
                 3rd Year  $   710,000    $   550,000      ARA      $  160,000
                 4th Year  $   810,000    $   675,000      ARA      $  135,000
                 5th Year  $   910,000    $   825,000      ARA      $   85,000
                 6th Year  $ 1,010,000    $

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