Service Employees International Union, Local 509 v. Department of Mental Health , 476 Mass. 51 ( 2016 )

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SJC-12035
SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 509 vs.
DEPARTMENT OF MENTAL HEALTH & others.1
Suffolk. September 6, 2016. - November 22, 2016.
Present: Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, &
Budd, JJ.
Privatization Act. Commissioner of Mental Health.
Commonwealth, Contracts. Contract, Validity. Public
Employment. Laches. Practice, Civil, Judgment on the
pleadings.
Civil action commenced in the Superior Court Department on
February 15, 2012.
Following review by this court, 469 Mass. 323 (2014), the
case was heard by Janet L. Sanders, J., on motions for judgment
on the pleadings.
1
Advocates, Inc.; Alternatives Unlimited, Inc.; Bay Cove
Human Services; The Bridge of Central Mass, Inc.; Brien Center,
Brockton Area Multi Services, Inc.; Carson Center for Human
Services; Center for Human Development, Inc.; Community
Counseling of Bristol County; Community Healthlink, Inc.;
Edinburg Center, Inc.; Eliot Community Human Services, Inc.;
Fellowship Health Resources, Inc.; Mental Health Association of
Greater Lowell, Inc.; North Suffolk Mental Health Association;
Riverside Community Care, Inc.; Servicenet, Inc.; South Shore
Mental Health Center, Inc.; and Vinfen Corporation.
2
The Supreme Judicial Court granted an application for
direct appellate review.
Ian O. Russell (Katherine D. Shea with him) for the
plaintiff.
Iraida J. Álvarez, Assistant Attorney General, for
Department of Mental Health.
Carl Valvo & Ariel G. Sullivan, for Advocates, Inc., &
others, were present but did not argue.
Mark G. Matuschak & Robert Kingsley Smith, for Pioneer
Institute, Inc., were present but did not argue.
Anita S. Lichtblau & Robert E. Cowden, III, for
Massachusetts Council of Human Services Providers, Inc., &
others, amici curiae, submitted a brief.
LENK, J. This is the second time that the plaintiff labor
union appeals from dismissal of the declaratory judgment action
it first brought against the Department of Mental Health (DMH or
agency) in 2012. Service Employees International Union, Local
509 (SEIU or union) maintains that certain contracts DMH made in
2009 with private vendors are "privatization contracts" subject
to the requirements of the Pacheco Law, G. L. c. 7, §§ 52-55.
The Pacheco Law establishes certain prerequisites that agencies
must meet when seeking to enter into privatization contracts.
Because DMH had determined that the subject contracts were not
privatization contracts, however, it did not comply with those
statutory prerequisites. In bringing this action, the union
seeks, among other things, a declaration invalidating the
contracts on the basis of G. L. c. 7, § 54 (§ 54), which
3
provides that no privatization contract "shall be valid" where
an agency did not follow the necessary procedures.
In our previous decision in this case, Service Employees
Int'l Union, Local 509 v. Department of Mental Health, 469 Mass.
323, 324 (2014) (SEIU I), we rejected DMH's contention that the
union lacked standing to challenge, in a declaratory judgment
action, the agency's unilateral determination that the contracts
were not privatization contracts. While recognizing that the
Pacheco Law does not expressly provide a private right of
action, we also recognized that the Legislature did not
contemplate the situation presented there (and here), in which
an agency determines on its own that it need not comply with the
requirements of the statute. Id. at 335-336. Because
unreviewable agency decision-making on such a matter would
thwart legislative intent, we concluded that in these
circumstances "declaratory judgment is an appropriate vehicle
for relief to ensure that agencies may not evade the
requirements of the Pacheco Law with impunity." Id. at 336. We
accordingly vacated the judgment of dismissal and remanded the
case to allow joinder of necessary parties.2 Id. at 339.
2
The Superior Court judge had determined, and we agreed,
that the initial complaint did not include all necessary
parties. Service Employees Int'l Union, Local 509 v. Department
of Mental Health, 469 Mass. 323, 338-339 (2014) (SEIU I). On
remand, SEIU filed an amended complaint joining those parties.
4
While SEIU I was under advisement in this court, however,
the five-year term of the subject contracts drew to an end and,
pursuant to the provisions of those contracts, DMH exercised
options renewing them for successive one year periods.3
Following our decision in SEIU I and the amendment of the
complaint, DMH again successfully moved to dismiss the union's
declaratory judgment action, this time asserting it was moot.
The basis for the dismissal was two-fold: first, the action was
moot as to the now-expired 2009 contracts, and, second, the
remaining extant renewal contracts were immune from challenge by
virtue of G. L. c. 7, § 53 (§ 53) ("any agreement renewing . . .
a privatization contract[] shall not be considered a
privatization contract"). The union appealed, asserting, in
essence, that because the non-compliant 2009 initial contracts
are invalid under § 54, so too are any renewal contracts made
pursuant to them.
We are thus called upon to construe §§ 53 and 54 as they
apply in these unusual circumstances. Cognizant that the
Pacheco Law only contemplates the situation, unlike this one,
where an agency recognizes a potential privatization contract as
3
The 2009 contracts were for a period of five years,
expiring in 2014. They provided the Department of Mental Health
(DMH) three unilateral options to renew for periods of one year
each.
5
such and acts in compliance with the statutory requirements to
assure its validity, see, e.g., SEIU I, 469 Mass. at 329-330;
Massachusetts Bay Transp. Auth. v. Auditor of the Commonwealth,
430 Mass. 783, 784-787 (2000) (MBTA), we interpret §§ 53-54 with
that framework in mind. Fidelity to the intent and purpose of
the Legislature in enacting the Pacheco Law, evident in both the
plain language of the statute when read as a harmonious whole,
and the legislative history, requires that the protection
afforded renewal contracts by § 53 not be extended to those
renewal contracts made pursuant to timely challenged and
subsequently invalidated privatization contracts under § 54. We
accordingly vacate the judgment of dismissal.
1. Background. The following facts are taken from SEIU's
amended complaint, which, at this stage, we assume to be true,
see, e.g., Iannacchino v. Ford Motor Co., 451 Mass. 623, 636
(2008), supplemented by undisputed facts in the record.4 For
more than fifteen years, DMH had employed case managers to
provide services to individuals with mental illness. In
late 2008 and early 2009, DMH initiated a new program, the
Community Based Flexible Supports program, that was intended to
4
The allegations in the amended complaint are materially
identical to those in the initial complaint. See Service
Employees Int'l Union, Local 509 v. Department of Mental Health,
469 Mass. 323, 324,326 (2014) (SEIU I).
6
provide similar but more personalized services to DMH clients.
As part of the Community Based Flexible Supports program, DMH
entered into agreements with nineteen private organizations to
provide services substantially similar to those previously
provided by the case managers. Over the same period, DMH laid
off approximately eighty case managers. DMH unilaterally
determined that these new contracts were not "privatization
contracts" within the meaning of the Pacheco Law and therefore
did not attempt to follow any of the procedures that the law
requires when an agency intends to privatize a service.
Sometime in 2009, SEIU notified the Auditor of the
Commonwealth of DMH's intent to enter into the contracts and the
union's objections to the contracts. The Auditor's office
undertook an investigation and, in September, 2010, the
Auditor's general counsel sent DMH, SEIU, and the Attorney
General a letter and memorandum stating that the contracts
"[had] the effect . . . of privatizing services previously
performed by public employees," and therefore should have been
submitted for review prior to taking effect. The Auditor's
office told the Office of the Attorney General "to take whatever
steps [the Attorney General felt] were appropriate," but the
Attorney General's office did not take any action.
Having failed to obtain relief through administrative
channels, the union filed its initial complaint in 2012. As
7
discussed, a Superior Court judge dismissed that complaint for
lack of standing; we vacated the decision, concluding that the
union did have standing, and remanded for further proceedings.
On remand, a different Superior Court judge dismissed the
amended complaint, this time as moot; SEIU appealed, and we
granted direct appellate review.
2. Discussion. We have discussed at some length in prior
decisions the statutory framework, purpose, and history of the
Pacheco Law. See SEIU I, 469 Mass. at 329-330; MBTA, 430 Mass.
at785-787. In brief, G. L. c. 7, § 52 (§ 52), sets forth the
purpose of the law:
"The [G]eneral [C]ourt hereby finds and declares that
using private contractors to provide public services
formerly provided by state employees does not always
promote the public interest. To ensure that citizens of
the [C]ommonwealth receive high quality public services at
low cost, with due regard for the taxpayers of the
[C]ommonwealth and the needs of public and private workers,
the [G]eneral [C]ourt finds it necessary to regulate such
privatization contracts in accordance with [the rest of the
law]."
In addition to defining several key terms, the other three
sections of the law, set forth both the procedures that agencies
must follow when seeking to enter into privatization contracts
and describe the independent review process that the Auditor is
to conduct of a proposed privatization contract upon receiving
from the agency specified information and a certification of
compliance with those prerequisites.
8
Section 53 defines "privatization contract" as follows:
"[A]n agreement or combination or series of agreements
by which a non-governmental person or entity agrees with an
agency to provide services, valued at [an amount to be
adjusted for inflation, currently $500,000, or more] which
are substantially similar to and in lieu of, services
theretofore provided, in whole or in part, by regular
employees of an agency."
It excludes from the definition "[a]ny subsequent agreement,
including any agreement resulting from a rebidding of previously
privatized service, or any agreement renewing or extending a
privatization contract."5 Id. Section 54 makes plain that "[n]o
agency shall make any privatization contract and no such
contract shall be valid unless the agency [follows requisite
procedures]." This point is underscored in G. L. c. 7, § 55
(§ 55), which sets forth the consequence of the Auditor's
objection to a proposed contract: "An agency shall not make any
privatization contract [to which the auditor objects] and no
such contract shall be valid."
DMH contends that, even if the initial 2009 contracts were
deemed invalid, the now fully performed contracts should not be
deemed void. It is DMH's view that the renewal contracts would
remain unaffected even in the face of such a declaration because
5
In addition to renewal contracts, certain contracts for
services such as information technology, legal services,
consulting, engineering, or design are excluded from the
definition of "privatization contract." G. L. c. 7, § 53.
9
renewal contracts are not privatization contracts by definition,
and therefore need not comply with Pacheco Law requirements.
Accordingly, in its view, the renewal contracts cannot be set
aside by virtue of either their own noncompliance with such
requirements or that of the predecessor contracts. The union
maintains, by contrast, that the invalidity of the initial
privatization contracts requires that they be set aside as void,
that they could not give rise to validly exercised options to
renew and therefore that such renewal contracts are themselves
void. Section 53, the union argues, does not provide a safe
harbor immunizing such renewal contracts from the consequences
of predecessor agreements' invalidity.
Assuming, as we must at this stage, that the contracts DMH
entered into with private vendors in 2009 were privatization
contracts6 and that, pursuant to § 54, "no such contract shall be
valid," the questions we must resolve are these. Is the
consequence of declaring a non-compliant privatization contract
invalid to render it void and of no effect? If the answer is in
the affirmative, are renewal contracts that are entered into
6
The question whether the services provided through the
Community Based Flexible Supports program are substantially
similar to those provided by case managers, and therefore
whether the contracts were, in fact, privatization contracts
under the Pacheco Law, has not been determined, see SEIU I, 469
Mass. at 325 n.4, and we do not reach it today.
10
pursuant to the exercise of rights in an invalid contract
themselves thereby to be set aside? If the answer is in the
affirmative, does the language of § 53 nonetheless create a safe
harbor, as it were, for these renewal contracts?
We address each question in turn, interpreting the statute
"according to the intent of the Legislature, ascertained from
all its words construed by the ordinary and approved usage of
the language, considered in connection with the cause of its
enactment, the mischief or imperfection to be remedied and the
main object to be accomplished, to the end that the purpose of
its framers may be effectuated." Commonwealth v. Mogelinski,
473 Mass. 164, 169 (2015) (Mogelinski II), quoting Commonwealth
v. Clark, 472 Mass. 120, 129 (2015). We construe the Pacheco
Law in order to render it "an effectual piece of legislation,"
able to accomplish legislative aims (citation omitted). Sun Oil
Co. v. Director of Div. on the Necessaries of Life, 340 Mass.
235, 238 (1960).
a. The invalid 2009 contracts and voidness. Under the
plain language of § 54, no privatization contract made by an
agency "shall be valid" unless it is compliant with the
requirements of the statute.7 Given that the 2009 contracts are
7
Even where, unlike here, an agency acknowledges a contract
as a privatization contract and unsuccessfully attempts to
comply with those requirements by, inter alia, submitting it to
11
assumed for these purposes to be non-compliant privatization
contracts, they must be considered invalid.
Generally speaking, whether a contract made in violation of
a statute is rendered void ab initio, i.e., treated as having no
force or effect, depends upon the language of the statute and
the nature of the violation. See Baltazar Contractors, Inc., v.
Lunenburg, 65 Mass. App. Ct. 718, 720-721 (2006) (contract void
where statute declares it so or where voiding contract necessary
to accomplish statutory purpose). See also Massachusetts Mun.
Wholesale Elec. Co. v. Danvers, 411 Mass. 39, 55 (1991) (absent
statutory declaration or binding precedent "voiding ab initio .
. . applied . . . with the view of . . . effectuating public
policy").8 The language that the Legislature chose to use in
both § 54 and § 55 (that "no agency shall make any privatization
contract and no such contract shall be valid" [emphasis
the Auditor for review, the result of the Auditor's objection is
the same: "no such contract shall be valid." See G. L. c. 7,
§ 54.
8
DMH and the service providers rely on Massachusetts Mun.
Wholesale Elec. Co. v. Danvers, 411 Mass. 39, 56 (1991) to argue
against the "legal fiction" of retrospectively declaring
contracts void ab initio. While the court did caution in that
case against "unthinkingly" voiding contracts, that discussion
was with respect to the effect of an invalid contract on a third
party (citation omitted). Id. at 55. The court explained that
"limits [to retroactive voiding] . . . have their typical
application to the rights and duties of" third parties. Id. at
56, quoting Sleicher v. Sleicher, 251 N.Y. 366, 369-370 (1929).
12
supplied]) makes it unmistakably clear that the statute was
intended to be "prohibitory," so as to render any contract in
violation of it absolutely void, rather than simply "directory."
See Baltazar, 65 Mass. App. Ct. at 721.
This is especially so when viewed in light of the
Legislature's stated purpose in § 52 that, in order to protect
taxpayers, recipients of services, and workers, "it is necessary
to regulate such privatization contracts" by means of the
provisions set forth in the remainder of the statute. Were non-
compliant privatization contracts to be afforded continuing
force and effect, the result would thwart the express statutory
purpose, allowing agencies to "evade the requirements of the
Pacheco Law with impunity." SEIU I, 469 Mass. at 336. Deeming
such contracts to be void ab initio is therefore necessary to
accomplish the statute's purposes. Cf. Phipps Prods. Corp. v.
Massachusetts Bay Transp. Auth., 387 Mass. 687, 691-692 (1982)
(voiding public contracts that did not meet statutory bidding
requirements [which serve similar purpose as Pacheco Law], even
where no harm shown).
b. Status of renewal contracts. It is undisputed that the
renewal contracts were made by DMH's exercise of rights under
the 2009 contracts, which for purposes here are deemed invalid
and void. Were such invalidation to have been the result of a
declaratory judgment entered during the term of the 2009
13
contracts, we have little doubt but that such void contracts
would be deemed without force or effect, and that they would no
longer give rise to rights to renew. See, e.g., Winslow v.
Baltimore & Ohio R.R. Co. 188 U.S. 646, 657-659 (1903). The
inquiry then is whether the same result should obtain where, as
here, the options to renew were exercised before the already-
challenged 2009 contracts were declared to be invalid. We
conclude that it should.
The fact that we confront this issue at a time when the
2009 contracts have expired only underscores the highly unusual
circumstances here. As we noted in SEIU I, "the Pacheco
Law . . . provides a streamlined and time-sensitive
process . . . . [T]he . . . need for expedition in settling
questions . . . is evident." SEIU I, 469 Mass. at 337 n.12.
The statutory framework contemplates that an agency seeking to
privatize functions will follow the procedures outlined and, if
there is a challenge to the Auditor's independent review of the
proposed contract, that an action in the nature of certiorari
will be filed and adjudicated promptly, protecting the many
interests at stake. See MBTA, 430 Mass. at 786-787, 790-791.
On the other hand, "it seems plain that the Pacheco Law as
written does not contemplate the situation presented here."
SEIU I, 469 Mass. at 327.
14
In light of the fact that the parties find themselves in a
situation not expressly addressed in the statute, it is hardly
surprising that the union's challenges to DMH's unilateral
decision to forego the Pacheco procedures began by raising the
issue first with DMH and the Auditor and, thereafter, by
awaiting enforcement action from the Attorney General.
Cf. MBTA, 430 Mass. at 791 (law entrusts Auditor with "broad
grant of power"). The union brought suit in 2012 only when
those efforts proved fruitless. The union's standing to bring
the action was then litigated, and it was only in 2014, after
the 2009 contracts already had expired and DMH had exercised its
contractual options, that we clarified the procedure to be
followed in these circumstances. See SEIU I, 469 Mass. at 335-
336. We would not expect to confront such a situation again,
given that in the future the agency's determination that a
contract is not a privatization contract may be challenged
forthwith in a declaratory judgment action with injunctive
relief available. Parties entering into any such contracts, let
alone exercising rights of renewal, prior to adjudication of the
challenge, would do so at their peril.
That being said, this is not a case where the litigation
was brought to challenge renewal contracts in the first instance
on the basis that the predecessor contracts were invalid. To the
contrary, the union challenged the predecessor 2009 contracts
15
well before their expiration and now, only due to delays in
adjudication, challenges the vitality of the extant renewal
contracts. DMH and the vendors entered into those renewal
contracts fully aware of the challenges lodged to the validity
of the contracts pursuant to which the options to renew were
exercised. In essence, DMH would have the result turn on the
fortuity of the clock running out on the 2009 contracts before
the litigation concluded. We fail to see how it serves the
purpose of the Pacheco Law to permit the passage of time to be
dispositive in such circumstances. See Mogelinski II, 473 Mass.
at 169 (looking to statutory purpose). Cf. Commonwealth v.
Vega, 449 Mass. 227, 233 (2007) (courts do not interpret statute
to produce an illogical result); 2A N.J. Singer & J.D. Shambie
Singer, Statutes and Statutory Construction § 45:12 (7th ed.
rev. 2014).
The union's claim that the 2009 contracts are invalid and
that they and the resulting renewal contracts are thereby void,
gives rise to a live controversy. SEIU has a legally cognizable
interest in the outcome of a declaration as to the validity and
voidness of the 2009 contracts. Such a declaration implicates
the consequent inability of DMH effectively to have exercised
rights of renewal pursuant to such contracts and, insofar as
such a declaration would permit any such ongoing renewal
contracts to be set aside, would itself provide a remedy. In
16
these circumstances, declaratory relief is not merely advisory
and the union's claim is not moot.
c. The impact of Section 53. DMH maintains, however, that
because all subsequent agreements, including the renewal
contracts here, are not "privatization agreements," and thus are
not required to comply with §§ 54-55, they therefore are immune
from the effects of a declaration as to the invalidity and
voidness of the initial agreements pursuant to which they were
made. This reading is not supported by the plain language of
§ 53 itself, by the statute read as an harmonious whole, or by
legislative history.
We have no quarrel with the view urged by DMH that the
language of § 53 is fairly read as subjecting to statutory
requirements and review processes only new privatization
agreements, entered into after the statute became effective,
that privatize for the first time services that were until then
provided by government employees. "Any subsequent agreement"
continuing those privatized services is "not a privatization
contract." G. L. c. 7, § 53. By statutory definition, certain
new agreements, such as those involving information technology,
legal, or consulting services, also are not privatization
17
contracts.9 See id. As to subsequent agreements, of which
renewal agreements are a subset, the use of the word "any" as a
modifier is certainly consistent with the reading that all such
agreements are exempt. See Hollum v. Contrib. Retirement Appeal
Bd., 53 Mass App. Ct. 220, 223 (2001). Contrary to the
defendants' view, however, subsequent agreements are not exempt
from all challenges. By contrast, because they are not required
to comply with the rigorous strictures and review processes of
the Pacheco Law, they are exempt only from challenges based on
their own noncompliance with that law.
There is nothing in the language of § 53 that renders the
exempt categories bullet proof from challenges that may be made
to contracts as such. The exempt agreements, as any contracts,
are subject to all manner of common law contract claims, ranging
from simple breaches to issues such as fraud, unconscionability,
or the ultra vires doctrine, some of which could, if proven,
result in an agreement being rendered void. See, e.g.,
Massachusetts Mun. Wholesale Elec. Co. v. Danvers, 411 Mass. at
9
"A contract for information technology services shall not
be considered a privatization contract if an employee
organization recognized under [G. L. c. ] 150E, as the exclusive
representative of an affected employee . . . agrees to the terms
of the contract in writing. An agreement solely to provide
legal, management consulting, planning, engineering or design
services shall not be considered a privatization contract."
G. L. c. 7, § 53.
18
54 (contract void ab initio as ultra vires); Restatement 2d of
Contracts, § 7, comment b (1981) (circumstances such as fraud or
duress allow aggrieved party to void contract). Such
challenges -- not based on the renewal agreements' noncompliance
with Pacheco Law requirements -- may seek directly to set aside
an exempt contract because it is, for example, beyond the
department's authority and therefore ultra vires or the product
of fraud.
Challenges also can seek indirectly the same result as to
agreements ancillary to a void contract, because that contract
is thereby rendered incapable of giving rise to any rights or
duties. See 17A C.J.S. Contracts § 374 (2011) ("When parties to
an illegal contract attempt to extend or renew it by entering
into a new agreement, the new contract . . . is illegal and
unenforceable"). Similarly, the latter type of challenge may
affect "subsequent agreements" as the byproduct of a timely
challenge to the validity of earlier contracts under the Pacheco
Law, whether by virtue of the Auditor's objection pursuant to
§ 55, an action in the nature of certiorari challenging the
Auditor's decision, or a declaratory judgment action challenging
the agency's non-compliance with §§ 54 and 55. Nothing in the
express language of § 53 shields exempt agreements from such
claims.
19
The silence of § 53 as to whether exempt agreements are
immunized from all claims must be viewed in light of the
statutory scheme as a whole. See Pentucket Manor Chronic Hosp.,
Inc. v. Rate Setting Comm'n, 394 Mass. 233, 240 (1985) (statutes
must be construed "as a harmonious whole"). Sections 54 and 55
plainly contemplate that privatization agreements, as defined in
§ 53, that are entered into absent compliance with the
requirements set forth in those sections, will be deemed void.
To imply that § 53 draws a cloak of immunity over renewal
contracts made pursuant to a contract voided by virtue of §§ 54
and 55 would countermand the clear mandate of those sections,
i.e., that agencies must comply with the Pacheco Law when
entering into agreements to privatize services.
Nor does the legislative history support the view that the
exemption of "subsequent agreements" from the definition of
"privatization contracts" was intended to render such agreements
wholly unreviewable. We look to legislative history because
"statutes are to be interpreted, not alone according to their
simple, literal, or strict verbal meaning" (citation omitted),
Sullivan v. Chief Justice for Admin. & Mgt. of the Trial Court,
448 Mass. 15, 24 (2006), and "[u]nderstanding the intent of the
Legislature" can be "far more important than a literal
dictionary meaning." Quincy City Hosp. v. Rate Setting Comm'n,
406 Mass. 431, 449 (1990).
20
While the language of the exemption makes one purpose self-
evident -- it prevents duplicative review of already-approved
contracts -- the legislative history of the Pacheco Law suggests
one further goal. The provision was a means of dealing with
contracts that had already privatized state services prior to
the effective date of the statute. It was added as an amendment
to ensure that agreements continuing those contracts in place
after the statute became effective were not to be upended by
virtue of not having been or thereafter being in compliance with
the statutory vetting process. See Anti-Privatization Bill
Would Stall Weld Push, The Boston Globe, March 3, 1993 at 22
Senator Marc Pacheco, the bill's sponsor, explained that as to
"private services that are out there right now . . . [their]
renewal is exempt from the bill." State House News Serv. (June
16, 1993). On the other hand, nothing in the law's history
suggests that the Legislature intended to protect the renewal of
invalid contracts.
DMH contends, however, that the Legislature intended the
statute to provide a safe harbor for subsequent agreements,
including renewal contracts, in order to ensure finality and
attendant certainty for the parties to the contracts and those
they serve. On this view, § 53 functions as an implicit statute
of repose. Challenges belatedly invalidating renewal contracts
as the result of statutory noncompliance in connection with the
21
predecessor privatization contract would interfere with this
salutary goal. There is merit to this point, but it does not
justify the immunity that DMH seeks for renewal contracts. It
goes instead to the timing of such challenges.
We are mindful that the statutory scheme recognizes the
need for expedition in the review of privatization contracts.
That is apparent in the short timelines set forth in § 55 for
agency initiated review by the Auditor, and the fact that, if
challenged thereafter in an action in the nature of certiorari,
that action should be brought and adjudicated promptly. Given
this, we have indicated the need for similar dispatch in the
one-off situations, as here, prompting declaratory judgment
actions. See SEIU I, 469 Mass. at 337 n.12.
Ordinarily, we would expect that a union challenging an
agency's decision to forego Pacheco Law review for alleged
privatization contracts would bring a declaratory judgment
action promptly after the agency's decision becomes public
information.10 Ascertaining whether the agency's assessment of
the nature of the contract is correct, and therefore does not
require Pacheco Law review, is the pivotal issue requiring
10
Given the importance of speedy resolution, in many cases
even limited delay might allow the defendant agency to raise the
defense of laches. See SEIU I, 469 Mass. at 337 n.12. See also
Mosley v. Briggs Realty Co., 320 Mass 278, 283 (1946) (laches
requires delay and prejudice).
22
resolution. Ideally, suit could be brought before the contract
is made or as soon thereafter as feasible and, in most
circumstances, well before any renewal or other subsequent
agreements would be in place, with injunctive relief sought as
appropriate. The matter should be litigated and adjudicated on
an expedited basis.
To the extent that suit cannot reasonably be brought until
the contract is already in place, and in the presumably rare
instances where the initial privatization contract is of such
short duration that its renewal may take effect before the case
is adjudicated, the result of a determination that the initial
agreement is in fact a privatization agreement will be to
declare such a contract invalid and thereby void and to set
aside any renewal contracts made pursuant to it. Timeliness
issues for laches purposes are, of necessity, to be decided on a
case-by-case basis, with the guiding principle being fairness;
parties must not sit on their hands. See, e.g., West Broadway
Task Force v. Boston Hous. Auth., 414 Mass 394, 400 (1993)
(laches operates where there is "unreasonable delay").
As discussed, the case before us is sui generis in this
regard. The union brought this suit in the absence of an
express statutory remedy and after having made reasonable, if
ultimately fruitless and time consuming, administrative efforts
to challenge the initial contracts. In the face of this
23
challenge to the validity of the agreements, the agency
exercised its rights under them to renew. In these unusual
circumstances, it appears that the union did not sit on its
hands.
To construe § 53 as barring the union from seeking to set
aside the extant renewal contracts as the byproduct of a
declaration as to the invalidity of the initial contracts would
contravene the statutory mandate that noncompliance with its
requirements has significant repercussions. It would also, in
these circumstances, render meaningless the timely challenge
brought to the agency's decision not to submit the 2009 contract
to the Auditor, in essence inoculating the agency from review
and allowing it to evade the Pacheco Law with impunity by virtue
of the passage of time. As we stated in SEIU I, 469 Mass.
at 336,
"In short, it cannot be that there is no recourse
where an agency, believing the Pacheco Law is inapplicable
in a particular situation, simply opts not to comply with
its terms. The Pacheco Law could not function as the
Legislature intended if an agency could decide,
unilaterally and without input from the Auditor or the
union, that its proposed contracts did not fall within the
provisions of G. L. c. 7, § 53. Indeed, a public agency
would have little incentive to adhere to the Pacheco Law's
requirements were its decision to evade those requirements
immune from any review. DMH's belief that the Pacheco Law
does not apply to its proposed contracts cannot be
understood to inoculate it against efforts to demonstrate
otherwise. Such an approach would render the statute
toothless, confounding the Legislature's efforts to ensure
that privatization does not occur at the expense of public
welfare."
24
Here, as in SEIU I, DMH urges an interpretation of the
Pacheco Law which would insulate potential privatization
contracts from the very review that the law mandates. We do not
believe the Legislature contemplated such a result.
3. Conclusion. The judgment dismissing the amended
complaint is vacated, and the matter is remanded for further
proceedings consistent with this opinion. Given the many delays
that already have occurred, and the 2017 expiration of the
extant renewal contracts, such further proceedings are to take
place forthwith on an expedited basis.
So ordered.