Monday, September 17, 2012

Stand Down

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.  

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