Franklin Co. Sheriff’s
Office v. St. Albans City Police Dept., 2012 VT
62.
Sometimes an entire case revolves around a single
philosophical concept. This is what
makes the law difficult because legal concepts can be hard enough to grasp when
they are tied to concrete examples. But
when a court asks, “What is Unfair Competition?” it might as well say, “What is
air?” because the answers to both tend to be equally esoteric and unsatisfying
to the idle examiner who wants to wrap her arms around more than a
concept.
Today’s case has three such key concepts: 1) Legal Standing; 2) Predatory Pricing; and
3) Public Entities. Trying to define all
three as well as explain their interplay is critical to unpacking the SCOV’s
decision, but doing so is subtle work that is akin to parsing air with a knife.
Here are the facts.
In 2007, the Town of St. Albans took bids from the Franklin Sheriff’s
Office and the City of St. Albans Police Department to provide police services
to the Town. The Sheriff’s Office
presented a bid that was less than the City’s $766,000 bid. The Sheriff’s Office won and was awarded the
contract.
Three years later, the Town put the police contract out to
bid again. This time, the City presented
a re-vamped offer that came in $200,000 below the Sheriff’s bid. This was due, in part to investment that the
City had made to its police department staffing between bids and a revised
police schedule that enabled the City to do more with fewer officers. This time the City won the bid, and the
Sheriff filed a legal action against the City.
The basis of the Sheriff’s complaint is that the City’s bid
was so low that it constituted predatory pricing, which is outlawed under the
Vermont Consumer Fraud Act. Essentially,
the Sheriff argued that it would never be able to compete with such bids, that
such bids were artificially low, and that the result would be serious damage to
free and open competition and might yield a monopoly controlled by the City.
At the trial court level, the City raised three
defenses. First, it argued that the
Sheriff lacked standing to bring such a predatory pricing claim. Second, it claimed that the City was entitled
to immunity from such claims. Third, it
argued that the Sheriff’s claims did not satisfy the elements of consumer fraud
claim.
The trial court rejected the immunity defense and found that
the Sheriff had standing to bring the claim, but the trial court found that
Sheriff had failed to allege or demonstrate the elements of a consumer fraud
claim and found for the City.
Sheriff appealed the trial court order, and the City revived
all of its defenses on appeal.
The SCOV’s decision begins by noting that it has broad
discretion to uphold a trial court decision.
It can affirm for the same basis as the trial court, or it can affirm
for a completely different reason. In
this case, the SCOV never reaches the basis of the trial court’s decision because
it zeros in on the issue of standing, and this proves fatal to Sheriff’s case.
Taking a step back, it is important to understand what
standing is. Standing is a threshold
requirement of any case, which means that every plaintiff who brings a claim to
any courthouse in the United States must establish standing to bring such an
action. Most of the time, standing is so
clear that the issue is not even discussed.
For example, if you get into a car accident and sue the driver of the
car that struck you, there is no question of standing. You were involved in the accident, you suffered
the injury, Defendant’s action caused it, and you have the right to recover
from her.
Legal scholars have boiled down standing into a variety of
pat formulas, but the concept resists simple explanation. There are basically three elements to standing. There must be an actual injury that involves
the invasion of a legally protected right or privilege that is specifically
held by the plaintiff. The defendant
must be the main cause of the injury, and it cannot be attributable to some
other party. Finally, the court must
have the power to redress the injury such that if the relief available is
awarded, it will take care of the injury.
Where standing gets tricky is where the injury is more theoretical
in nature and source; where the cause is attributable to multiple parties; and
where the remedies available do not truly redress the harm claimed.
Good examples of lack of standing can be found in the
various challenges that individuals have lodged across the United States to
disqualify Barack Obama from running for or holding the presidency. In these cases, the plaintiffs have never
gotten to the merits of their claims because they have failed to establish
standing. They can point to no actual
injury or the breach of a protected right that they would specifically suffer if
Mr. Obama serves as president. They can
only claim a generalized harm that every citizen would suffer equally.
This is not enough to meet the standing requirement. It is why these lawsuits have failed and
continue to fail. It is also the same
reason why you cannot sue the government to stop spending your tax money on the
military. Not everyone gets to litigate
their grudges. If you are not the
specific party injured by Defendant’s action, then you should probably make a
documentary rather than filing a lawsuit.
The standing is not there.
The purpose of standing is to ensure that courts only
resolve actual controversies. It stops
the court from weighing in on more general policy issues. In other words standing keeps the court on
task as an office of dispute resolution and away from more theoretical
pursuits.
So the first task that the SCOV sets for itself is to
determine whether the Sheriff has suffered an injury to a protected right or
privilege. To do this, the SCOV analyzes
the nature of the relationships and bids in the context of what rights are
protected under consumer fraud.
The SCOV begins by noting that only a few entities can
provide police services. By statute, no
private entity can bid on or provide such services. Apart from the City and the Sheriff, the law would
have allowed only the State Police or another municipal entity to provide the
police services that the Town sought.
The SCOV also notes that the nature of these contracts is
discretionary. Town was not obligated to
put the contract out to bid or accept the lowest bidder. In fact, the Town’s bid process made it clear
that the Town could and would consider non-economic factors such as
past-performance in the bid process.
Because the Town, by statute, was free to accept any bid (or
to simply hire a police provider without a bid process), the Sheriff cannot
argue that the City’s low bid violated fair competition. There was no right to such a process.
The Town was the sole arbiter, and it had every right to
pick its police provider based on any criteria it saw fit so long as it
contracted with another public entity. Because
the criterion was so broad and statutorily non-existent, Sheriff has no right
or reasonable expectation to fair competition and no way to measure it.
In doing so, the SCOV rejects the Sheriff’s argument that
the Town, by adopting the public bidding process, bound itself to the standards
of the open market and by extension, the proscriptions against predatory
pricing.
In response to the Sheriff’s position, the SCOV notes that the
Consumer Fraud Act protects against predatory pricing because it is an unfair
method of competition in commerce. The
key word for the SCOV is commerce,
which is defined as the interchange of goods and commodities on the open market. Here there are no goods being exchanged, and
the market is not open. The agreement is
between governmental entities to exchange governmental services. The difference, according to the SCOV is
fatal to Sheriff’s standing. The
Consumer Fraud Act does not give rise to the rights that Sheriff claims, and
the nature of the law does not fit the nature of the bid process or the unique
services sought.
In short, none of the parties are exchanging the type of
goods in the manner that we associate with an open, commercial market and the
need for consumer fraud protection. As a
result, Sheriff lacks standing to raise these claims because the nature of the
transaction did not violate or trigger the consumer fraud rights or privileges
contained within the law.
This leaves Sheriff’s last argument that characterizes the nature
of the transaction as public entities acting in a private manner to develop and
sell services outside their statutory duty through contract.
To understand this argument, you need to be aware that
public entities are treated like private actors in some transactions. If, for example, a municipality sold a dump
truck to an individual and the dump truck was defective, the courts would treat
the municipality like a private actor—no different than you, me, or Willie
Racine—and the rights and duties would be defined without the various
protections offered to public entities.
In this case, the SCOV disagrees with the private actor
characterization. The service offered
and sought in this case is a public service.
The nature of the transaction is one public entity selling an exclusive
public service to another public entity to use as a public service. In other words, a cop is a cop is a cop. Trying to characterize the nature of the
transaction (contractual) does not alter the exclusively public quality of the
entire endeavor or create de facto participation in the public market
place.
Finally, the SCOV extends its reasoning and explanation a
little further into a discussion of the policy and purpose underlying the
claims Sheriff seeks to lodge. The SCOV
notes that a “competitor” is a statutorily created term and the protection is
extended to them to ensure that one competitor does not temporarily forgo profits
to put other, smaller competitors out of business.
But here, no entity is in danger. All three actors are public entities that will
continue regardless of the results of the contract process. Franklin County will always have a Sheriff’s
Office, and the City of St. Albans will persist. The point is that predatory price protections
will not alter this nature and will do nothing to change the inherent nature of
these public entities or eliminate one of them from the marketplace.
Regardless of the outcome, the Sheriff stays the Sheriff.
Again, this analysis only makes sense if you perceive and
understand these services as primarily public and the law of consumer fraud to
be one that protects the private marketplace.
It is enough to say that it does, but the parsing necessary to get there
in this case can leave you with a desire for something more substantial.
For those that have such feelings, it may be help to think
of the entire legal discussion as boiling down to this: consumer fraud and
anti-predatory price protections are in place to protect competition and not
competitors. Here the SCOV finds the strong
probability that, regardless of the City’s current bid, the Town will not lack
for potential bidders for future police contracts.
So in a twist on the old western motif, the Sheriff is found
to lack standing, and he will have to pack up his contracts and hit the road.
Comments
Post a Comment