Intralot, Inc. v. Vermont Department of Buildings ( 2020 )

STATE OF VERMONT
SUPERIOR COURT CIVIL DIVISION
Washington Unit Docket No. 299-9-20 Wncv
Ci
Intralot, Inc.,
Plaintiff
V.
Vermont Department of Buildings, DECISION ON MOTION
Jennifer M.V. Fitch,
Vermont Department of Liquor,
Patrick T. Delaney,
Gary Kessler,
Defendants
The State’s Motion to Dismiss and Request for Extension of Time
Plaintiff Intralot Inc. is the contractor that has been operating the Vermont lottery
system since 2010. In 2018, the Vermont Department of Buildings and Grounds Office of
Purchasing and Contracting (OPC) initiated a procurement process in preparation for the
expiration of Intralot’s contract. Intralot bid on the new contract but, following litigation, OPC
voluntarily (without compulsion by the court) withdrew the request for proposals (RFP) in favor
of starting over with a new procurement process. It issued a new RFP in 2020 in response to
which Intralot and one competitor submitted bids. OPC is scheduled to open and evaluate
those bids, and award the new contract, imminently, but it has not done so yet. Intralot is not
content with the terms of the 2020 RFP and it has filed this action, prior to any contract award,
seeking declaratory relief and an injunction essentially requiring OPC to again revise the terms
of the RFP and start the bidding over. Intralot’s motion for a preliminary injunction remains
pending and is not the subject of this decision.
The State has filed a motion to dismiss, arguing that the court lacks subject matter
jurisdiction insofar as Intralot lacks standing and has failed to exhaust its administrative
remedies.” V.R.C.P. 12(b)(1). Otherwise, it argues that the complaint fails to state a claim.
V.R.C.P. 12(b)(6). Intralot filed a timely Opposition to dismissal on October 5. Under Rule
78(b)(1), any reply by the State was due October 19.
? The State also argues that Intralot’s claims are not ripe insofar as the procurement process is not complete and
Intralot has not yet failed to win the contract. Itis unnecessary to address this argument because, in response to
it, Intralot clearly asserts that its claims have nothing to do with winning the contract. In other words, the
perceived unfairness that it is attempting to litigate in this case is independent of the outcome of the procurement
process. As the court understands intralot’s relatively abstract position, its claims in this case would be no less
viable even were the contract awarded to it. The loss it believes it is suffering relates to a claimed right to a fair
bidding procedure only—not its outcome.
The State’s Request for an Extension
On October 16, the State filed an “emergency motion for immediate Stay.” Inthe
motion, the State represents that the facts have changed since it filed its dismissal motion and
Intralot opposed it. It asserts that OPC has just determined that Intralot’s proposal materially
violates the RFP, and it now has rejected Intralot’s bid on that basis. It seeks to stay this case
but for the litigation of the dismissal motion, for which it seeks more time to file its reply,
ostensibly to incorporate the “new” facts into the standing argument it presented in its motion.
Intralot has not responded yet to the motion to stay.
The State’s motion to stay is denied regarding any extension of time for the filing of its
reply. See Bigelow v. Dep’t of Taxes, 163 Vt. 33, 37-38 (1994) (explaining that raising a new
issue for the first time in a reply brief improperly deprives the opposing party of a fair
opportunity to respond). The reply contemplated by the State would improperly assert a new
basis for dismissal, leaving Intralot no opportunity to oppose it. Thus, the court addresses here
the State’s motion to dismiss as briefed by the parties on the state of the record at the time of
that briefing, disregarding any factual representations in the motion to stay, which remains
pending otherwise.
The State’s Motion to Dismiss
The court thus turns to the State’s motion to dismiss, which is fully briefed.
Standing and exhaustion
As a preliminary matter, the court declines to address the State’s standing and
exhaustion arguments in detail at this time.2 On the current record, it is not clear that they are
a good fit for the circumstances of this case. The State relies heavily on Hinesburg Sand &
Gravel Co., Inc. v. State, 166 Vt. 337 (1997), to argue that there is no cognizable injury in this
case. Indeed, the Hinesburg Court determined that it was dealing with “a routine procurement
dispute dressed up as a civil rights claim” without any underlying “legally protected interest” to
support standing. /d. at 342. In this case, by contrast, Intralot alleges that the State has singled
it out—not its product or service as was the case in Hinesburg—and purposely acted to
disadvantage it.
The “quest for injury” when “turned back” into a search fora legally protected interest
can easily and improperly “blend imperceptibly with the common tendency to use standing
concepts to address the question whether the plaintiff has stated a claim.” 13A Wright & Miller
et al., Fed. Prac. & Proc. Juris. § 3531.4 (3d ed.); see also id. § 3531 (“The question whether the
law recognizes the cause of action stated by a plaintiff is frequently transformed into
? Intralot represents that this court a/ready has ruled on the standing issue presented here insofar as it ruled on
Standing in Intralot’s favor in a prior case against OPC, addressing a different procurement process, filed in this
court. The court reminds the parties that prior decisions in different trial court cases are only as useful here as
they are persuasive. Unless they have some preclusive effect on this case (and none has been asserted), they are
not binding, and the court will not reflexively treat them as having decided any issue presented in this case merely
because a similar issue may have been presented in a prior case.
2
inappropriate standing terms. The Supreme Court has stated succinctly that the cause-of-
action question is not a question of standing.”); Wool v. Off. of Prof. Reg., 2020 VT 44, q 11
(“The purpose of the standing doctrine is not to weed out unmeritorious claims; it is to
determine whether the ‘plaintiff's stake in the outcome of the controversy is sufficient “to
assure that concrete adverseness which sharpens the presentation of issues upon which the
court so largely depends for illumination of difficult constitutional questions.”’”). It is not clear
to the court that the State has identified a defect in standing, at least as the record of this case
has unfolded thus far.
The State’s exhaustion argument also is a poor fit, and the court declines to address it in
detail on this record. Essentially, the State argues that its RFP allowed bidders to ask questions,
seek clarification, and apparently allege unlawfulness, and it bars the assertion of any legal
claims against it in court that were not, under those REP procedures, first presented to OPC.
Beyond the facial language of the RFP itself, the State does not predicate its exhaustion
argument on any authority expressly directing or permitting OPC to restrict bidders’ access to
the courts in this fashion. Otherwise, the State’s argument creates an odd circularity because
Intralot’s chief allegation is that OPC intentionally concocted the very RFP that contains these
terms with the avowed purpose of guaranteeing that Intralot’s competitor would win, and
Intralot would lose, the contract.
Failure to state a claim upon which relief can be granted
To understand the State’s motion on Rule 12(b)(6) grounds, it is important to first
understand how Intralot styled its claims in the complaint. After 15 pages of general
allegations, the complaint describes count 1 as seeking injunctive relief, count 2 as seeking
declaratory relief, count 3 as asserting a violation of Vermont's Common Benefits Clause, and
count 4 as asserting a violation of the Equal Protection Clause. Intralot’s constitutional claims
are, essentially “class of one” claims to the effect that OPC unconstitutionally singled it out for
unfair treatment.
Intralot’s non-constitutional claims
Its counts 1 and 2 are more elusive. Injunctions and declarations are relief, not legal
Claims. Under counts 1 and 2, other than generally asserted unfairness, Intralot does not
describe any particular legal claim that might support injunctive or declaratory relief. Evidently
based on Intralot’s general allegations (the first 15 pages of the complaint), the State infers that
Intralot is claiming some breach of Administrative Bulletin 3.5 (Agency of Administration
Procurement and Contracting Procedures) or 29 V.S.A. § 903 (requisition for supplies and
materials). In its opposition, Intralot clearly says that it is not claiming any breach of Bulletin
3.5.3 Rather, it claims a breach of 29.V.S.A. § 903 and Executive Order 3-20 (Recognition and
Encouragement of Vermont Minority/Women Business Enterprises Partnership). It also cites
mandamus (Rule 75) and 3 V.S.A. § 807. No claim is stated on the asserted bases.
3 More particularly, Intralot represents that it is not claiming any actionable breach of Bulletin 3.5 but, in the same
breath, that it nevertheless views Bulletin 3.5 as the best available expression of the standards of fairness
motivating this litigation. It is unclear what actual use of Bulletin 3.5 Intralot may intend apart from asserting any
actionable breach of its terms.
3
29 V.S.A. § 903
Section 903 of Title 29 generally directs the Commissioner of Buildings and General
Services (BGS) to ensure that relevant purchases are in the best interests of the State and,
where BGS proceeds by a bidding process that does not end up best serving the State’s
interests, authorizes BGS to reject all bids and proceed by whatever other process will serve the
State’s best interests. 29 V.S.A. § 903(a).
To evaluate best interests, BGS is directed generally to consider, as relevant, the
following items:
(1) specified quality; (2) price; (3) ease of access of supply; (4) incidental
administrative costs; (5) proven reliability of bidder; (6) use of recycled materials
or products; (7) minimizing the creation, by the State, of solid waste; (8) the
extent to which the usage of the item involves the generation of pollutants; (9)
life cycle costs, if required under the State Agency Energy Plan, as implemented;
(10) the interests of the State relating to the proximity of the supplier and the
costs of transportation, and relating to the economy of the State and the need to
maintain and create jobs in the State; and (11) the use of railroads and the
increased revenues returning to the State from its railroad leasing program.
29 V.S.A. § 903(b). Other than requiring BGS to consider these items, this and related statutes
do not limit BGS’s discretion, which plainly is exceedingly broad, other than by the generally
asserted best-interests standard.
Neither § 903 nor related statutes expressly give anyone, much less a bidder or other
seller, any cause of action to enforce § 903 against the State. Similarly, nothing in § 903 implies
that it is intended to protect bidders and sellers and implicitly should be enforceable by them.
Rather, it clearly is intended to protect the best interests of the State. Intralot’s argument, that
it is somehow empowered to litigate whether the RFP actually serves the State’s best interests,
obviously and unnecessarily creates a fox-in-the-henhouse dilemma not contemplated by the
statute. Section 903 squarely commits the determination of the State’s best interests to BGS
and does not envision a bidder or seller who is disappointed with BGS (either prospectively or
retrospectively) to hijack BGS’s exercise of discretion. (the court trusts BGS has sought and
been properly advised by legal counsel, ie: the Attorney General’s office, in this, as in all
complex contract processes)
Intralot’s citation to “mandamus” and the Declaratory Judgments Act does not avoid
this critical defect in its reasoning. “A court can issue a writ of mandamus... only under
certain circumstances: (1) the petitioner must have a clear and certain right to the action
sought by the request for a writ; (2) the writ must be for the enforcement of ministerial duties,
but not for review of the performance of official acts that involve the exercise of the official’s
judgment or discretion; and (3) there must be no other adequate remedy at law.” Petition of
Fairchild, 159 Vt. 125, 130 (1992).. Section 903 gives Intralot no clear and certain right and it
imposes no ministerial duties. See Bargman v. Brewer, 142 Vt. 367, 369 (1983) (noting that a
ministerial act is one “regarding which nothing is left to discretion” (citation omitted)).
4
The Declaratory Judgment Act is similarly unavailing. Intralot is attempting to use the
Act as a proxy for a legal claim. However, the Act “allows parties who have a dispute within a
court’s jurisdiction to petition that court for declaratory relief at an early stage of the
proceedings; [it] does not increase or enlarge the jurisdiction of the court over any subject
matter or parties.” Vermont State Employees’ Ass’n, Inc. v. Vermont Crim. J. Training Council,
167 Vt. 191, 194 (1997). The Act does not create a claim where one could not exist otherwise.
To the extent that Intralot invokes it, the Administrative Procedures Act (APA) also does not
authorize a declaratory judgment action in these circumstances. The APA allows a declaratory
action to determine the “validity or applicability of a rule,” 3 V.S.A. § 807, but there is no “rule,”
3 V.S.A. § 801(b)(9), at issue in this case.
Executive Order No. 3-20
Intralot also purports to be seeking to enforce Executive Order No. 3-20. EO 3-20 was
issued in 1991 by former Governor Howard Dean. It reflects that the “Vermont
Minority/Women Business Enterprises Partnership was mandated to develop a plan to facilitate
equal access and maximum opportunity to participate in state contracting procedures... to
ensure nondiscrimination in state contracting programs.” In response, the EO generally
“prescribes [to executive branch agencies] to a free and open bidding process that affords all
businesses equal access and opportunity to compete for state contracts for goods and
services.” The EO does not also prescribe any cause of action by bidders or sellers to enforce
the EO against the State, and no accompanying legislation creates or implies any such cause of
action.
Executive Order No. 3-20 does not give Intralot a cause of action to enforce its terms
against the State. “Courts ordinarily dismiss suits to compel agencies to comply with executive
orders, even when the orders are issued pursuant to legislation. ‘Generally, in order to create a
right of action, either Congress in authorizing the executive order or the President in issuing it
must clearly establish a cause of action.” 3 Admin. L. & Prac. § 7:31 (3d ed.) (footnotes
omitted); see also In re Surface Min. Reg. Litig., 627 F.2d 1346, 1357 (D.C. Cir. 1980) (“This court
has also declared that executive orders without specific foundation in congressional action are
not judicially enforceable in private civil suits.”).
Intralot’s constitutional claims
Under both the Common Benefits Clause and the Equal Protection Clause, Intralot
asserts a “class of one” claim. It asserts that agents of OPC, in an effort to single out and harm
Intralot, and with detailed knowledge of Intralot and the only other bidder that could be
anticipated, carefully crafted the RFP to appear. nondiscriminatory on its face but to actually
include arbitrary and discriminatory provisions for no purpose other than to vindictively harm
Intralot and benefit Intralot’s competitor: These claims are somewhat abstract insofar as they
are predicated on an alleged loss of the chance to compete fairly rather than an unfavorable
outcome to the procurement process. The State argues that they altogether fail to survive Rule
12(b)(6) and should be dismissed.
In essence, the State argues that these claims are novel and extreme, exceptionally
unlikely to succeed on the merits, and therefore should be dismissed sooner rather than later.
The Vermont Supreme Court has been clear that the general pleading standard in Vermont is
especially minimal. See Bock v. Gold, 2008 VT 81, 94, 184 Vt. 575 (“the threshold a plaintiff
must cross in order to meet our notice-pleading standard is ‘exceedingly low’”); Colby v.
Umbrella, Inc., 2008 VT 20, 4 13, 184 Vt. 1 (“The complaint is a bare bones statement that
merely provides the defendant with notice of the claims against it.”). A motion to dismiss for
failure to state a claim upon which relief can be granted should be denied unless it is beyond
doubt that there exist no facts or circumstances that would entitle the plaintiff to relief.
Powers v. Office of Child Support, 173 Vt. 390, 395 (2002). Vermont’s liberal Rule 12(b)(6)
standard invites novel and extreme claims; it is not properly employed to dismiss them
prematurely. Alger v. Dept. of Lab. & Indus., 2006 VT 115, 7 12, 181 Vt. 309.
In general, class-of-one equal protection law in Vermont is seriously undeveloped. But
for a few notable exceptions, more general case law evaluating the rights of bidders on State
contracts also is undeveloped. While Intralot’s claims in this case may be novel and extreme,
the court concludes that the wiser course will be to address them on the evidence, whether in
the course of injunction proceedings, summary judgment, or at trial.
ORDER
For the foregoing reasons, the State’s motion to stay is denied with regard to an
extension of time and otherwise remains pending. The State’s motion to dismiss is granted as
to Intralot’s non-constitutional claims; it is denied as to Intralot’s constitutional claims.
Judge