Intralot, Inc. v. Vermont Department of Buildings ( 2021 )

VERMONT SUPERIOR COURT CIVIL DIVISION
Washington Unit Case No. 339-10-20 Wncv
65 State Street
Montpelier VT 05602
802-828-2091
www.vermontjudiciary.org
Intralot, Inc. vs. Vermont Department of Buildings
ENTRY REGARDING MOTION
Title: Motion for Summary Judgment MotionName for Summary Judgment
Motion# 2 (Motion: )
Filer: Bartholomew J. Gengler
Filed Date: November 16, 2020
The motion is GRANTED.
Regarding the State’s Motion for Summary Judgment and
Intralot’s Motion to Defer Decision
This case arises out of the most recent competitive procurement process by Vermont’s Office of
Purchasing and Contracting (OPC) designed to select the next contractor responsible for providing
lottery services in Vermont. The contract is valuable and long in duration (an initial 10-year term is
contemplated). OPC issued the relevant request for proposals (RFP) in 2020. Before any bids had been
submitted, Petitioner Intralot Inc., the incumbent contractor, filed suit against the State in a separate
case (No. 299-9-20 Wncv) claiming, among other things, that the terms of the RFP were intentionally
drafted to make the procurement process unfair to it, violating its state and federal equal protection
rights, and that those violations are redressable regardless of the outcome of the procurement process. 1
With that case just begun, all bidders, including Intralot, submitted their proposals. OPC, however, then
disqualified Intralot’s bid, finding that the litigation bond it had submitted materially failed to comply
with the terms of the RFP. In response to that disqualification decision, Intralot filed this Rule 75 case.
In the complaint in this case, Intralot asserts that the disqualification decision was “arbitrary and
capricious, and contrary to the plain language of the 2020 RFP.” Complaint ¶ 39. In other words, OPC
abused its discretion. It does not otherwise identify any legal basis for its claim. Intralot expressly
asserted that it sought Rule 75 review, it sought a jury trial, and it asked the court to reverse OPC’s
disqualification decision. The request for a jury trial implies that Intralot was contemplating developing
1 The section of the RFP at issue in this case is not one at issue in the other case.
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the facts anew in this proceeding rather than relying on the administrative record (presumably implying
some form of de novo review).
The State then filed a motion for summary judgment. It did not focus on the legal basis for
Intralot’s Rule 75 claim, and thus what standard of review, if any, may be available in this case. Rather,
it presumed that some form of record review is available, variously cited to different standards (all
deferential to the State) that may apply, and argued that its disqualification decision was, essentially,
reasonable or otherwise within its discretion such that the court should not disturb it.
In opposition, Intralot also did not focus on identifying any legal basis for Rule 75 review. It
argued instead that there are disputes of fact that require a jury trial (again implying some form of de
novo review), the State waived any right to disqualify Intralot’s bid, and otherwise the disqualification
decision was motivated by impermissible bias or animus against it. “These issues require factual
determinations by the jury as to the subjective motives and intent of the State, including the credibility
of State witnesses who deny these assertions.” Intralot’s Opposition to Summary Judgment 1 (filed Dec.
22, 2020). Intralot also argued in the alternative that the State’s motion jumped the gun, and the court
should defer ruling on it until Intralot has had a better opportunity to conduct discovery.
In an entry filed December 23, 2020, the court noted that, “To meaningfully perform any Rule
75 review, Intralot’s entitlement to review must be clearly identified so that, if any review is available at
all, its standards may be determined.” It thus requested that the parties brief that matter as a
component of summary judgment proceedings, and the parties did so. The State now takes the position
that no review under Rule 75 is available in this case. Intralot argues that it is entitled to review in the
nature of mandamus.
The threshold issue in this case is whether Intralot is entitled to review of OPC’s disqualification
decision, and if so, what the standard of review may be. The nature of the administrative decision at
issue is clear in the administrative record, is not disputed, and does not require any discovery or factual
determinations prior to its analysis by the court.
The decision at issue
The administrative decision at issue in this case relates to Intralot’s response to a litigation bond
requirement in the RFP. Section F.21 of the RFP required as follows:
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Each respondent must submit with the Proposal a litigation Bond in the amount of five
hundred thousand dollars ($500,000). A claim upon the Bond may be made by the
Lottery if:
1. The respondent sues the Vermont lottery, the State of Vermont, or any of their
officers, employees, representatives, other contractors, or retailers with regard
to any matter relating to this RFP, determination of responsiveness of Bidders or
the award of a contract pursuant to this RFP; and
2. The lottery or other defendant is the prevailing party in such suit.
The purpose of the Bond is to permit the Lottery or other defendants to recover
damages, including the cost of appeal relative to the additional cost in compensation to
the current bidder during implementation or conversion delay, and including reasonable
attorneys’ fees, expenses and court costs resulting from such litigation. The Litigation
Bond shall remain in effect for a period of two (2) years from the date of submission of
the Proposal.
The RFP thus clearly required a litigation bond actionable on a prevailing-party basis. In response to the
RFP, a bidder submitted this question:
. . . . It is widely accepted practice in the lottery industry (and other industries
undergoing public procurements) to include in Litigation Bonds a third condition that
would need to be satisfied before the Bond may be drawn upon, as follows:
3. A court determines that the action or any portion thereof was frivolous, or was
brought in bad faith, or was not brought upon reasonable grounds.
Would the Lottery be willing [to] add this text to the RFP requirement in order to
conform to this industry standard?
In other words, relying on an asserted industry standard, the questioner sought to substantially weaken
the prevailing-party standard to a frivolity/bad faith/no reasonable grounds standard. The response
from OPC was unequivocal: “The State will not add such condition.” Intralot acknowledged notice of
this question and answer prior to submitting its proposal.
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The litigation bond that Intralot submitted with its proposal nevertheless included the identical
third condition that weakens the standard for invoking the bond and that the State had expressly said it
would not permit.2
OPC disqualified Intralot’s bid on that basis. In an e-mail to Intralot, OPC wrote:
I am writing to inform you that the State has concluded that Intralot’s September 3,
2020 proposal was materially non-compliant with the requirements set forth in the
Request for Proposal for Lottery Gaming Services, Sales Channels and Related Systems
dated July 15, 2020. In particular, RFP Section F.21 required bidders to submit a
litigation bond consistent with two specifically enumerated conditions. Intralot added a
third condition to its litigation bond, which materially and substantially failed to comply
with the RFP’s litigation bonding requirement. Of further note, Intralot submitted its
materially non-compliant bond, despite the State expressly stating during the question
and answer period that the State would not amend the RFP to include such a limiting
third condition. As a result of such material non-compliance, the State has disqualified
Intralot’s proposal.
This is the decision that Intralot would like the court to reverse.
Whether relief in the nature of mandamus is available
Intralot argues that it is entitled to review in the nature of mandamus of OPC’s disqualification
decision because OPC abused its discretion.
When the civil rules were adopted in 1971, the extraordinary writs were abolished. V.R.C.P.
81(b). As the Reporter’s Notes reflect, “The abolition of the extraordinary writs is consistent with the
provisions of Rules 74 and 75, providing exclusive remedies for review of governmental action. All
substantive rights to relief previously available by such writs may be obtained by proceeding under
those rules.”3 Reporter’s Notes, V.R.C.P. 81. Rule 74 is the procedure that applies when there is a
2 To the extent that Intralot argues that its bond complied with RFP § F.21 or that discovery is required to make
that determination, such arguments “would require the cheerful credulity of a very young child.” State v. Green
Mt. Future, 2013 VT 87, ¶ 11, 194 Vt. 625 (quoting the trial court). Intralot’s bond unmistakably violated § F.21 by
including the banned third condition and thereby seriously undermined the protection the bond requirement
clearly was intended to provide.
3 In other words, the abolition of the writs did not eliminate the substantive relief that they provided. It merely
changed the procedures applicable to the relief they offered.
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statutory right to review of an administrative decision in superior court. V.R.C.P. 74(a); see also
Reporter’s Notes—1981 Amendment, V.R.C.P. 74 (“The rule now applies whenever a statute creates an
entitlement to seek review of, or appeal from, the decision in a proceeding determined by a state
agency, and the review or appeal is to be decided in the superior court.”).
Rule 75 is the procedure that applies to review of an administrative decision when there is no
statutory right to review, but it applies only “if such review is otherwise available by law.” V.R.C.P. 75(a).
Barring some statutory exceptions, review under Rule 75 typically is only available “as a matter of
general law by proceedings in the nature of certiorari, mandamus, or prohibition.”4 Reporter’s Notes—
V.R.C.P. 75. Rule 75 itself does not create any right to review. See Reporter’s Notes—V.R.C.P. 82
(explaining that the rules govern pleadings, practice, and procedure and do not “abridge, enlarge or
modify any substantive rights” (quoting 12 V.S.A. § 1)).
Otherwise, there is no broadly applicable right to review of an administrative decision unrelated
to a “contested case.” 3 V.S.A. § 815(a) (review of contested cases under Administrative Procedures
Act); Mason v. Thetford Sch. Bd., 142 Vt. 495, 498 (1983) (“We have held on many occasions that there is
no absolute right to appellate review of administrative decisions.”). Unlike many jurisdictions, Vermont
also has no broadly applicable statutory right authorizing bid protests challenging State procurement
processes in court.
This is not a contested case, there is no statutory right to review, and Intralot has not pleaded
(in this case) its grievance about the disqualification decision as an actionable legal claim apart from
judicial review of an administrative decision, which it expressly seeks. 5 It grounds its objection to an
alleged abuse of discretion in the law of mandamus.
“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) (emphasis added); see also State v. Forte,
159 Vt. 550, 555 (1993) (duty appropriate for mandamus must be “simple and definite”) (citation
omitted)); 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 A handful of Vermont statutes expressly provide for review under Rule 75. See, e.g., 13 V.S.A. § 5411b; 23 V.S.A.
§ 3115.
5 . The court questions whether the rules of administrative appeal apply in this very proprietary commercial
contest.
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There is, however, a branch of mandamus law in Vermont, applied rarely, that may redress an
“extreme abuse of discretion” in the right circumstances, and that is what Intralot claims here. The
Vermont Supreme Court has described the extreme-abuse exception as follows:
We have held that mandamus can, even if not granted by general law, be extended to
“extreme abuses of discretion involving refusals to act or perform duties imposed by
law.” . . . .
We recognize that mandamus review for extreme, arbitrary abuse of
administrative discretion has been considered in a variety of circumstances, from
veterinary board decisions to discretionary trial court decisions. These cases have all
required that the alleged arbitrary abuse of discretion amount to a practical refusal to
perform a “certain and clear” legal duty. Admittedly, the distinction between the failure
to fulfill a legal duty and an extreme abuse of discretion amounting to a failure to fulfill a
legal duty is opaque, as a writ of mandamus will typically be granted only when there
has been a clear failure to fulfill a legal duty.
Even assuming, however, that there is a difference between the two standards,
plaintiff misses the mark here. Plaintiff is trying to distinguish between a decision that is
wrong (and thus not subject to mandamus review) and one that is very wrong (thus
subject to mandamus review), asserting that the decision here is very wrong because it
is allegedly based on factual errors. Again, this is a distinction without a relevant
difference. Assuming we could grade error in the manner plaintiff argues, our decisions
allowing mandamus in certain circumstances are based not on the degree of error, but
instead on whether the official actor is exercising discretion at all. Moreover, in the rare
instances where this Court has extended mandamus to extreme abuses of discretion, the
legal duties being refused were clear.
Inman v. Pallito, 2013 VT 94, ¶¶ 14–16, 195 Vt. 218 (citations omitted; emphasis added). Thus, to
whatever extent mandamus may be available to review a discretionary act, there still must be a clear
and certain duty at stake, and the disputed exercise of discretion must amount to a virtual refusal to
fulfill it. See Skiff v. South Burlington School District, 2018 VT 117, ¶ 25, 208 Vt. 564 (residents’
mandamus claim against school district improperly founded on nonexistent constitutional right); Wool v.
Menard, 2018 VT 23, ¶ 15, 207 Vt. 25 (inmate’s mandamus claim that DOC failed to use competitive
bidding process properly predicated on specific, statutory obligation to use competitive bidding
process); Petition of Fairchild, 159 Vt. 125, 130 (1992) (adjacent landowners’ mandamus claim against
Town properly predicated on right to enforce relevant judicial decision and Town zoning regulations).
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In this regard, Intralot makes policy arguments as to why review should be available in this case
and otherwise cites to 29 V.S.A. § 903 and Administrative Bulletin 3.5. The policy arguments do not
point out any clear and certain duty, however, and thus might be better directed at a legislative
audience. Section 903 and Administrative Bulletin 3.5 are similarly unhelpful to Intralot.
Section 903, in pertinent part, reads as follows:
(a) When any governmental agency is in need of any of the items mentioned in this
chapter, the responsible officer thereof shall requisition therefor upon the
Commissioner of Buildings and General Services, and the Commissioner of Buildings
and General Services shall purchase the items by either advertising for bids or by
letters of inquiry and the contract for those items shall be awarded to the person
whose bid or quotation is in the best interest of the State. Subject to the provisions
of subsections (b) and (c) of this section, the Commissioner of Buildings and General
Services may reject any or all bids or quotations and with the approval of the
Secretary of Administration, procure items in such manner as may be in the best
interest of the State.
(b) When purchasing any items mentioned in this chapter, the Commissioner of
Buildings and General Services, in any determination of the best interest of the State
shall consider (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(a), (b). Thus, § 903(a) gives Buildings and General Services (BGS) (of which OPC is a part)
wide discretion “by either advertising for bids or by letters of inquiry” to make purchasing decisions
subject to a generally stated best interests standard. Subdivision (b) does not limit that discretion other
than to itemize certain issues that BGS “shall consider” when assessing the State’s best interests. That
list of items, however, is obviously both over- and under-inclusive. It clearly includes numerous items
that will be completely irrelevant to many purchases and omits many items that would be extremely
important to others, and it does not set standards by which any should be measured. More to the point,
though, § 903 nowhere creates any clear and certain duty to omit litigation bond requirements from
RFPs or to ignore bidders’ failure to comply with such requirements.
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Administrative Bulletin 3.5 is a policy of the Agency of Administration providing internal
guidance to State agencies as to procurement and contracting procedures. It is a set of practices that
apply when the State steps into the private marketplace to buy something. It is a mere policy (not a
duly promulgated rule), does not affect bidders’ substantive rights, and is not enforceable by them. See
3 V.S.A. § 845(a) (duly promulgated rules have the “force of law”). Even if it were, however, Intralot
nowhere identifies in Bulletin 3.5 any clear and certain duty to omit litigation bond requirements from
RFPs or ignore bidders’ failure to comply with such requirements.
Ultimately, Intralot uses § 903 and Bulletin 3.5 to bolster its policy argument about the details of
fairness in competition, not to find within either any clear and certain duty by which to assay the State’s
alleged abuse of discretion. There is no virtual refusal to perform a duty at issue in this case. OPC
crafted an RFP, received bids, and disqualified Intralot’s because it plainly did not comply with the RFP.
One would have to squint to see any abuse of discretion in that, much less any amounting to a refusal to
perform a clear and certain duty.
Intralot’s claim is not saved by its assertion that OPC waived RFP § F.21 or should be estopped
from enforcing it. Intralot vaguely asserts waiver and estoppel, but it has not alleged facts that could
remotely support either. A waiver is a “voluntary relinquishment of a known right.” Anderson v. Coop.
Ins. Companies, 2006 VT 1, ¶ 10, 179 Vt. 288. Equitable estoppel requires that: “(1) the party to be
estopped must know the facts; (2) the party being estopped must intend that its conduct be acted upon;
(3) the party asserting estoppel must be ignorant of the true facts; and (4) the party asserting the
estoppel must rely on the conduct of the party to be estopped to its detriment.” Town of Victory v.
State, 174 Vt. 539, 540 (2002). Intralot asserts that in a prior bid process, under a completely separate
RFP, it submitted a similarly noncompliant litigation bond and OPC never did anything about it. It does
not allege that OPC was aware of the noncompliance, that OPC confirmed that the noncompliance
would not lead to disqualification, or that OPC did anything to invite the noncompliance. Moreover,
there are no allegations that could possibly explain how previously submitting a noncompliant bond
under a different RFP could establish any waiver or estoppel permitting Intralot to do the same in a
subsequent, separate bid process. This is insufficient.
In these circumstances, Intralot’s ambition to look behind the administrative decision for which
it seeks review and to compel the testimony of any State employees or agents it deems relevant to
plumb their private motivations is groundless and irrelevant since the motive for disqualification in
these circumstances will not assist review. For that reason there is no need for further discovery.
Order
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For the foregoing reasons, Intralot’s motion to defer ruling is denied. The State’s motion for
summary judgment is granted. The State shall submit a form of judgment. V.R.C.P. 58(d).
So Ordered.
Electronically signed on 2/16/2021 2:09 PM, pursuant to V.R.E.F. 9(d)
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