Transactive Corp. v. New York State Dept. of Social Services
| Decision Date | 03 December 1998 |
| Docket Number | No. 2,No. 1,1,2 |
| Citation | 706 N.E.2d 1180,92 N.Y.2d 579,684 N.Y.S.2d 156 |
| Parties | , 706 N.E.2d 1180, 1998 N.Y. Slip Op. 10,722 In the Matter of TRANSACTIVE CORPORATION, Appellant, v. NEW YORK STATE DEPARTMENT OF SOCIAL SERVICES et al., Respondents. (Proceeding) In the Matter of Check Cashers Association of New York, Inc., et al., Appellants, v. New York State Department of Social Services et al., Respondents. (Proceeding) (And Another Related Proceeding.) |
| Court | New York Court of Appeals Court of Appeals |
Following a competitive bidding process, the New York State Department of Social Services (DSS) awarded a contract to respondent Citicorp Services, Inc. to create and implement a new system for the distribution of public assistance benefits including food stamps, Aid to Families with Dependent Children (AFDC) payments and Supplemental Security Income (SSI) benefits. Through this new service--known as an electronic benefit transfer system (EBTS)--benefits would be transferred in a more efficient and cost-effective manner.
This appeal challenges the award of an EBTS contract to Citicorp on the basis of an alleged defective bidding process. Petitioners-appellants are Transactive Corporation, a subcontractor of Fleet Financial Group, Inc., a bidder on the project; Check Cashers, Inc., a trade association, joined by several local check cashing institutions (collectively "Check Cashers"); and Silvia Rivera, a New York benefits recipient and taxpayer. We conclude that none of the petitioners has standing to contest the award of the contract, and affirm the order of the Appellate Division, but on different grounds.
On April 6, 1995 seven States, identified as the Northeast Coalition of States, 1 entered into a Memorandum of Understanding to research, investigate, design and develop an EBTS. None of these States was obligated by the Memorandum to enter into an EBTS. Each State, however, was free to contract with a bidder for the establishment of such a system. In June 1995, New York State (as represented by DSS), joined the other States in issuing a request for proposals (RFP) and solicited offers to develop and implement a regional EBTS that would distribute social service benefits to millions of recipients of benefits in each of the seven States. The EBTS allows recipients to access their government benefits electronically by using plastic access card technology at automated teller machines and point-of-sale terminals. The EBTS technology would replace the current system whereby government benefits are distributed, in some areas, by individual attendants at local "check cashing" institutions. The State pays these "check cashers" approximately $6 per month per benefit recipient for this service. The cost savings of the EBT system is expected to total several million dollars over the life of the system.
The RFP, released on June 22, 1995, notified bidders that all proposals would be reviewed by a Technical Evaluation Committee and a Financial Evaluation Committee. The Technical Evaluation Committee, comprised of 18 members from various States, would determine whether the proposals satisfied the technical performance criteria of the RFP by reviewing each of the proposals against certain weighted criteria. The Financial Evaluation Committee would review and evaluate the cost estimates submitted by the bidders. A third committee, the Selection Committee, was designated to review the evaluation reports submitted by the Financial and Technical Evaluation Committees and to make final offers.
The deadline for notices of intention to bid was July 2, 1995. While over 20 entities indicated an intention to bid, only five--First Security Processing Services, Fleet Financial Group, Inc., Chemical Banking Corporation, Citicorp Services and Electronic Data Systems--actually submitted bids by the September 14 deadline. On November 7, 1995 a Best and Final Offer (BAFO) letter was mailed to the five bidders requiring them to submit a BAFO by November 22, 1995. On December 15, 1995, after receipt of the initial BAFO responses from the five bidders, clarification letters were sent with responses due on January 8, 1996. On February 6, 1996 the Coalition notified Citicorp of its acceptance and included a list of contingencies that had to be resolved prior to a final contract. On April 15, 1996, DSS and Citicorp entered into a seven-year contract for provision of an EBTS throughout New York State.
The contract was submitted for approval to the Comptroller, as required by State Finance Law § 112(2)(a). The State Comptroller's Office approved the contract 2 over the opposition of Check Cashers and Transactive, which filed protests. In a detailed and extensive "Determination of Bid Protest," the Office concluded that the procurement was conducted in a manner consistent with the State competitive bidding requirements.
In October 1995, Check Cashers and Rivera commenced a CPLR article 78 proceeding against DSS challenging the validity of the RFP and the contract awarded thereunder. Citicorp joined as intervenor/respondent. In May 1996, Check Cashers commenced a declaratory judgment action against DSS and Citicorp seeking similar relief. Two months later, Transactive, a subcontractor of Fleet Financial Group, Inc., also commenced a similar article 78 proceeding against DSS, and again Citicorp joined as a respondent.
Supreme Court converted Check Cashers declaratory judgment action into an article 78 proceeding and granted the petitions. It also held that Transactive had standing and that DSS had violated provisions of the State Finance Law, thereby rendering the award to Citicorp null and void.
The Appellate Division reversed and dismissed the petitions, concluding that only Transactive had standing. As to the merits of the claim, the Court held that DSS had not violated any State Finance Law requirements, that "no favoritism, fraud or corruption [was] presented here and that there [was] no material or substantial irregularity in the bidding process which undermined the fairness of the competition" (236 A.D.2d 48, 54, 665 N.Y.S.2d 701), and that the award had a rational basis. We granted leave to appeal, and affirm solely on petitioners' lack of standing.
For standing to sue, petitioners must show that they have suffered an injury in fact, distinct from that of the general public (Society of Plastics Indus. v. County of Suffolk, 77 N.Y.2d 761, 771-774, 570 N.Y.S.2d 778, 573 N.E.2d 1034). This is so since, under common law, a court is without power to right a wrong where civil, property or personal rights are not affected (id., at 772, 570 N.Y.S.2d 778, 573 N.E.2d 1034; Schieffelin v. Komfort, 212 N.Y. 520, 530, 106 N.E. 675). Moreover, petitioners must demonstrate that the injury claimed falls within the zone of interests to be protected by the statute challenged (Society of Plastics Indus. v. County of Suffolk, supra, at 774, 570 N.Y.S.2d 778, 573 N.E.2d 1034). This prerequisite ensures that a group or an individual "whose interests are only marginally related to, or even inconsistent with, the purposes of the statute cannot use the courts to further their own purposes at the expense of the statutory purposes" (id., at 774, 570 N.Y.S.2d 778, 573 N.E.2d 1034).
Because Check Cashers had no direct stake in the outcome of the bidding process, it did not suffer an injury in fact. Although it stood to lose remuneration for services performed under the pre-EBTS arrangement, that would be the case no matter who was awarded the contract. The injury suffered by Check Cashers, then, arose from the decision to have the EBTS, not from the procurement process to determine who would implement it.
Additionally, Check Cashers' alleged injury is not within the zone of interests protected by State Finance Law § 163. One of the purposes of article 11 of the State Finance Law is to protect those who bid on service contracts by insuring that the decisionmaking procedures are equitable. The procurement process of the State exists to "promote purchasing from responsive and responsible offerers *** based on clearly articulated...
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