Airport Fuel Services, Inc. v. Martha’s Vineyard Airport Commission, et al. (Lawyers Weekly No. 12-051-17)
COMMONWEALTH OF MASSACHUSETTS
DUKES COUNTY, ss. SUPERIOR COURT
CIVIL ACTION
- 2017-0017
AIRPORT FUEL SERVICES, INC.
vs.
MARTHA’S VINEYARD AIRPORT COMMISSION and DEPOT CORNER, INC.
MEMORANDUM OF DECISION AND ORDER ON THE PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION
This action arises out of the defendant, Martha’s Vineyard Airport Commission’s (the Commission) decision to award a lease of Lot #33 in the Airport Business Park (the Property) to the defendant, Depot Corner, Inc. (Depot), following a public bidding procedure. The Plaintiff, Airport Fuel Services, Inc. (AFS), has been the lessee of the Property pursuant to a 20 year lease that expired on March 9, 2017 (the Lease). It constructed a gas station, convenience store, and car wash on the Property and operated them over the term of its lease. In its complaint, AFS alleges that “the 2017 RFP issued by [the Commission] was misleading and an inherently unfair proposal” and seeks an order requiring the Commission to lease the Property to it, according to its bid proposal. The case is before the court on AFS’s motion for a preliminary injunction enjoining the Commission from leasing the Property to Depot.
FACTUAL BACKGROUND
The following facts are taken from the affidavits and documents submitted in support of and opposition to the motion for preliminary relief.
Under the terms of the Lease, AFS was permitted to construct the gas station, convenience store, and car wash which it operated over the Lease term. However, Section Eleven of the Lease provided that: “Lessee shall, on the last day of the term, or on earlier termination and forfeiture of the lease, peaceably and quietly surrender and deliver the Premises to Lessor at Lessor’s option free of subtenants, buildings, additions, and improvements constructed or placed thereon by Lessee.”[1]
In 2014, the Commission issued a Request for Proposal (RFP) for a lease for the Premises to commence after the expiry of the AFS Lease, but RFP was withdrawn for reasons that do not affect the court’s ruling on the issues raised by the pending motion.
On December 30, 2016, the Commission issued the RFP (which it titled: Request for Qualifications) for a new lease of the Property which is the subject of the present action. In the first section of the RFP, entitled General Information to Proposers, the Commission explained that it “may waive its rights under Section Eleven” (quoted above) to require the present lessee, AFS, to remove the buildings that it constructed on the Property. The RFP went on to state,“[t]he successful Proposer will have the opportunity to either negotiate a separate agreement for the purchase of the existing facilities with the current tenant/master lease holder or have the [Commission] exercise its rights to have the facilities removed prior to the assumption of the Premises. The successful Proper shall have no obligation to purchase the existing facilities.”
The RFP stated that the minimum rental that it would accept was $ 1.55 a square foot (resulting in an annual initial rent of $ 56,119.30). According to the form of lease attached to the RFP, this amount would adjust annually according to the CPI.
As is typical, the RFP set out the materials that a bidder had to include with its proposal for that proposal to be considered. It then went on to explain how proposals meeting the minimum standards would be evaluated: “The evaluation process will include each proposal being reviewed by the evaluation committee designated by the [Commission]. . . . The [Commission] will use the comparative criterion for each separate rating area, and based upon these criteria, will assign an overall rating to each proposal. Each of the criteria may contain ratings of: Not Advantageous, Acceptable, Advantageous or Highly Advantageous.” Five “comparative criteria” were then set out in the RFP: “Description of Operation and Statement of Experience, Responses detailing Financial Data and Business References; Response to Additional Narrative Information; General Impression of Proposal; and Proposed Lease Rental amount.”
The RFP included an Attachment 16 entitled “Sample Evaluation Form” (the Sample Form). This Attachment is somewhat confusing. It is not clear that it is a “sample,” but rather as to each “comparative criteria” the form sets out specific responses that might, at least for some categories, suggest to a reader that proposals with certain characteristics will automatically be rated as Not Advantageous, Acceptable, Advantageous, or Highly Advantageous, although it seems doubtful that this is what the Commission intended. Stated differently, the Sample Form might be read to suggest that the Committee’s evaluation of at least some of these criteria was not subjective, but rather certain bid responses would necessarily be scored in a certain way—in other words a check the box evaluation.
For example, with respect to the criterion entitled “Description of Operation and Statement of Experience,” the Sample Form states that a proposal that demonstrates “provision of specified services for 5 to 7 years” receives an evaluation of “Advantageous,” while a response of “provision of specified services for over 7 years” automatically receives the evaluation–“Highly Advantageous.” Does this mean that the Committee was not to consider how well the bidder performed the specified services in the past? In addition, was the Committee to disregard that part of the criterion that called for a “Description of Operation?”
The most confusing aspect of the Sample Evaluation Form involves criterion 6—“Proposed Rental Lease Amount.” There the Form reads, in part: “Highly Advantageous- The financial offering is one of the three highest Minimum Annual Guarantee amounts proposed.” This might suggest that if only three bids were submitted, they each exceeded the minimum bid, and the amount of rent proposed varied dramatically, they would all nonetheless be rated as Highly Advantageous: a nonsensical outcome. Among relatively, equally competent bidders, the most important distinguishing factor would appear to be the amount that the bidder was offering to pay to rent the Property.
Criteria 3 and 4, entitled “Response to Additional Narrative Information” and “General impression of proposal,” respectively clearly call for subjective evaluations. The Sample Form offers general and non-specific sample evaluations for each possible rating.
The Commission selected three individuals to constitute the evaluation committee (the Committee): Ann Crook, the Airport manager; Commission Chairman Myron Garfinkle; and Commissioner Richard Michelson. The RFP, however, made clear that the ultimate decision of whether a proposal “will prove to be advantageous to the [Commission]” was left to the Commission: “The [Commission] in its sole discretion, may select one respondent, establish of [sic] list of successful respondents, or select no respondents and deem the RFP cancelled or not awarded for any reason or for no reason.”
Four “proposers” responded to the RFP: G.J. Smith, Inc. (Smith); MVYABP Lot 34 LLC (Lot 34), Depot and AFS. Each met the minimum requirements of the RFP and were evaluated by the Committee at a meeting on March 1, 2017.[2] The Smith proposal offered $ 2.21 a square foot, by far the lowest amount of the four bidders, and its other submissions were judged weak. The Lot 134 proposal offered the highest rent, $ 5.00 a square foot. Lot 134, however, wanted to develop the Property together with an adjoining lot that it was already leasing from the Commission, an approach that the Commission did not favor. According to the Committee, the proposal also lacked detail and an adequate business plan demonstrating how it would pay this high rent. Overall, its submission was also poorly rated.[3]
AFS offered $ 3.01 per square foot which yielded an initial annual rental of $ 108,980.06. Its narrative description of its business and future plans relied heavily on its assertion that it had successfully run the gas station, car wash and convenience store on the Property for the previous 20 years, its operation was well known to the Commission, and service disruption would be eliminated if it was awarded the new lease. The Commission’s narrative evaluations expressed concern that AFS relied too heavily on being the incumbent operator and lacked a business plan describing future plans with any detail. In the aggregate, AFS received: 3 Highly Advantageous ratings, 7 Advantageous ratings, 4 Acceptable ratings and 1 rating of Not Acceptable (this was given for price).
Depot offered $ 3.49 per square foot which yielded an initial annual rent of $ 126,358.94. It received high marks for experience, as it had been operating two gas stations in Edgartown since the 1980’s, and the completeness of its submission. In the aggregate it received: 11 Highly Advantageous ratings and 4 Advantageous ratings.
On March 9, 2017, the Commission awarded the lease to Depot. The Notice of Award sent to Depot required it to sign a lease by April 15, 2017, although the start date of the lease was left open. The Notice also required Depot to inform the Commission by March 17, 2017 whether it would be entering into negotiations with AFS to acquire the improvements that AFS had made to the Property, i.e., the gas station, convenience store, and car wash. The Notice went on to say that if Depot and AFS had not executed a purchase agreement for these assets by April 15, 2017, the Commission “may” exercise its rights under Section 11 of the Lease to have AFS remove these structures (apparently including underground fuel tanks) from the Property.
On March 16, 2017, Depot offered AFS $ 250,000 for the improvements. AFS rejected this offer as too low. AFS pointed out that, in 2005, AFS had the value of its business appraised as a going concern. The appraisal estimated the value of the leasehold improvements at $ 1 million.
The Commission sent AFS a notice stating that it would give AFS until May 15, 2017 to remove the leasehold improvements. AFS then filed this action.
At oral argument, recognizing that the award of a new lease was not made until March 9, 2017, the Commission stated that it would be reasonable in giving AFS adequate time to remove the existing facilities from the Property, if AFS and Depot could not reach agreement on a purchase price.
DISCUSSION
The Standard for Issuing a Preliminary Injunction
This case is before the court on AFS’ motion for a preliminary injunction. To succeed on its motion, AFS bears the burden of showing: (1) a likelihood of success on the merits of its claim; (2) that it will suffer irreparable harm if injunctive relief is not granted; and (3) that its harm, if injunctive relief is denied, outweighs any harm that would be suffered by the Commission or Depot, if they were enjoined from executing a new lease for the Property. See Boston Police Patrolmen’s Ass’n, Inc. v. Police Dept. of Boston, 446 Mass. 46, 49-50 (2006); Packaging Indus. Group. Inc. v. Cheney, 380 Mass. 609, 616-617 (1980). Because of the nature of this dispute, which seeks to enjoin a quasi-governmental entity from conducting its business, the risk of harm to public interests must also be considered. See Commonwealth v. Mass. CRINC, 392 Mass. 79, 87 (1984); Brookline v. Goldstein, 388 Mass. 443, 447 (1983).
The court finds that, in this case, the determinative element is the first: likelihood of success on the merits.
Likelihood of Success on the Merits
AFS argues that the Commission failed to follow the requirements of G.L. c. 30B, § 6 in issuing the RFP and evaluating the bids. However, § 6 does not apply to a government agency’s disposition of land by sale or lease. Rather, § 6 governs the manner by which “a procurement officer may enter into procurement contracts for a government body. See G.L. c. 30B, § 6(a). “Procurement” involves “buying, purchasing, renting, leasing, or otherwise acquiring a supply or service. G.L. c. 30B, § 1 (definition of procurement). G.L. c. 30B, § 16 addresses the manner in which a government body may, among other things, “rent . . . real property.” § 16, unlike § 6, has very few requirements regarding the manner by which a government body must solicit bids and award leases for real estate like the Property. Indeed, most of the specific requirements in § 16 address the manner and timing of the advertisement of an RFP for the lease of land. In this case, AFS does not raise any issue concerning the manner and timing of the RFP notice. As it relates to the actual selection of a successful bidder, § 16(f) says only that: “Proposals shall be opened publicly at the time and place designated in the advertisement.” There is no question that the Commission complied with this provision.
Nonetheless, limitations exist on the exercise of an agency’s discretion to award a contract or lease to one bidder over others. In Cubic Transportation Systems, Inc. v. Massachusetts Bay Transportation Authority, 2002 WL 31957004, at *4 (Mass. Super. Ct. Dec. 12, 2002), Judge van Gestel articulately described the extent of an agency’s obligations when it issues an RFP under circumstances in which it is not required to award a bid to the highest (or lowest) bidder, as is the case here:
Government entities, like the MBTA here, are liable on an implied contract theory to abide by the limitations imposed by the entity’s bid solicitation. The implied contract obligates the bid solicitor to follow and apply those conditions. . . . When no underlying statute requires that ‘contracts [ ] be awarded to the lowest [or highest] responsible bidder [,] such a requirement is not implied, but it is to be inferred that the awarding of contracts is left to the reasonable judgment of the [ ] officers charged with responsibility therefor.” Datatrol, Inc. v. State Purchasing Agent, 379 Mass. 679, 698 n. 15 (1980). It has long been the law that determinations of this sort are for the agency to make, not the Court, in the absence of some showing of illegal or arbitrary action. See, e.g., Fred C. McClean Heating Supplies, Inc. v. Westfield Trade High School Building Committee, 345 Mass. 267, 273-74 (1963). Courts should not substitute their judgment for the judgment of the agency charged with making such discretionary decisions. Brennan v. The Governor, 405 Mass. 390, 396 (1989); Capuano v. School Building Committee of Wilbraham, 330 Mass. 494, 496 (1953).
Accordingly, in this case, the Commission was required to place all bidders on equal footing and to have had some rational basis for awarding the new lease to Depot.[4] Stated differently, the Commission could not act arbitrarily or capriciously in making its lease award decision or act in bad faith favoring one bidder over another. “A decision is not arbitrary and capricious unless there is no ground which a reasonable person might deem proper to support it.” Garrity v. Conservation Comm’n of Hingham, 462 Mass. 779, 792 (2012) (Internal citations and quotations omitted.).
In this case, the Commission seems to have borrowed some of the more rigid requirements for the solicitation of bids for procurement contracts and adapted them to an RFP for the lease of real property. For example, the practice of rating evaluation criteria as “highly advantageous, advantageous, not advantageous, or unacceptable,” and providing “reasons for the rating,” is found in G.L. c. 30B, § 6(e). Also, under §6(g) the “chief procurement officer shall determine the most advantageous proposal from a responsible and responsive offeror taking into consideration price and the evaluation criteria set forth in the request for proposals.” Notably, under G.L. c. 30B, § 5 and § 6(d), the price component of proposals is generally not to be opened until after the individuals evaluating the proposals on the basis of criteria other than price have completed their work. This latter separation of non-price and price aspects of a bid was not followed in this case, and because § 6 does not apply to this RFP for lease of the Property, it did not have to be. This does, however, allow for the possibility that the price proposals might subconsciously affect consideration of the other bid criteria.
During oral argument on the motion for preliminary relief, AFS asserted that there was no rational basis for the Committee assigning Depot higher marks on a number of the evaluation criteria than it awarded AFS. It based its argument on its contention that the Sample Form established minimum requirements that, if met, would require that a proposer receive a rating of Highly Advantageous for the criterion under consideration. In consequence, if AFS’ submission met these minimum requirements, the Committee was required to rate its bid “Highly Advantageous” and a failure to do so meant that the Committee was biased against it. For example, as to the second criterion–Description of Operation and Statement of Experience in identified business enterprise–AFS received three ratings of Advantageous, while the Depot received three ratings of Highly Advantageous. The Sample Evaluation Form, however, included the following sample finding for this criterion: “Highly Advantageous-the provision of then specified services for over 7 years.” AFS argued that it had been providing the same services on the Property for 20 years. In consequence, it was entitled to the “Highly Advantageous” rating too, nothing more was required.
Similarly, with respect to the sixth criterion—“Proposed Rental Lease amount”—the Sample Form stated as follows: “Highly Advantageous-The financial offering is one of the three highest Minimum Annual Guarantee amounts proposed.” According to AFS, although it submitted the second lowest bid, it was also one of the three highest, and, therefore, it was entitled to a rating of Highly Advantageous for this criterion as well. It simply did not matter that Depot’s rent offer was substantially greater than AFS’.
As discussed above, the inclusion of the Sample Form certainly injected some confusion into the bidding process and evaluation methods. Nonetheless, AFS’ contention that the Sample Form turned the evaluation process into one in which the Committee essentially just checked the boxes is not reasonable. The second evaluation criterion expressly included, in addition to the number of years the bidder had been providing similar services, a description of operation. Clearly, a determination of which description of operation seemed the most advantageous required the Committee to apply subjective evaluation standards. Moreover, criteria 3 and 4, quoted above, could only be evaluated on a subjective basis.
Most notably, no reasonable bidder reviewing the RFP could have anticipated that its rent proposal would be evaluated as equivalent to the others, as long as it was one of the three highest bids. Indeed, under that hypothesis, if there were only three responsible proposals received, they would all have to be graded the same no matter how disparate the proposed rents were. In this case, AFS bid $ 3.01 a square foot for the Property or $ 108,980.06 aggregate rent for the first year, while Depot bid $ 3.49 a square foot which yielded an initial annual rent of $ 126,358.94. The $ 17,378.88 difference in the first year of the new lease would be magnified over the 20 year term, as the rent increased annually according to the CPI. The Commission did not exhibit either irrationality or bias in selecting Depot’s bid over that submitted by AFS.
The court acknowledges that the attachment of the Sample Form to the RFP did not add clarity to the bidding process. Additionally, reviewing the other four evaluation criteria at the same time as the price bid could have subconsciously affected the ratings given these other criteria, i.e., a “halo effect” could have resulted. Nonetheless, where G.L. c. 30B, § 16 imposes only minimal requirements for RFP’s for leases of land, and, as between AFS and Depot, the highest bidder, by a very substantial margin, was awarded the lease, the court finds that AFS has failed to establish that it is likely to succeed in proving that the Committee acted arbitrarily, capriciously or illegally in selecting Depot. [5]
A few other points may be noted. First, as explained in note 1 above, the court is not in a position to consider whether at some point AFS had reason to believe that it was entitled to an option for an additional 20 year lease term. The Commission and AFS entered into a commercial lease in 1997 that was for a term of 20 years and contained no option for additional terms. A lease is a form of contract, and AFS is bound by the terms of the contract that it executed.[6]
Additionally, the Lease is explicit in stating that at the end of the 20 year term, the Commission can require AFS to surrender the Property to it without the improvements (the gas station, convenience store, and car wash) that AFS constructed on it. Certainly, a lease could include a provision that required the lessor to pay the lessee market value for fixtures and improvements remaining on land when the lease expired; especially where those improvements were required by the lease. However, in this case, the Lease did not contain such language. Much of AFS’ complaint is devoted to allegations that it was unfair for the RFP not to include a requirement that a bidder, other than AFS, purchase the improvements on the Property at a price acceptable to AFS. This court, however, has no authority to relieve a party from contract obligations that, in retrospect, now appear to it to have been a bad deal. Moreover, as Depot points out, AFS was in a position to make the strongest rent bid because it did not have to factor additional capital costs for purchasing or constructing a gas station and related facilities into its proposal. It was, nonetheless, outbid by Depot by more than 15%.
A court has a limited role when asked to review an agency’s decision to award a lease to one proposer over another. It cannot take into account an incumbent lessee’s complaints that the terms of the expiring lease were unfair to it. The court, also, may not substitute its judgment for that of the agency officials to whom this decision has been delegated. See, Brennan v. The Governor, 405 Mass. at 396 (where the SJC held that the court should not substitute its judgment for that of the agency officials to whom the matter is delegated, as long as there is some rational basis for their decision). A review of Depot’s and AFS’ submissions does not suggest that AFS is likely to prove an illegal or arbitrary decision on the part of the Commission.
Irreparable Injury
In Packaging Industries Group, Inc. v. Cheney, the Supreme Judicial Court explained that when deciding whether to issue a preliminary injunction, the court must consider the risk of irreparable injury in the context of the likelihood that a plaintiff’s claims will ultimately succeed on their merits: “What matters as to each party is not the raw amount of irreparable harm the party might conceivably suffer, but rather the risk of such harm in light of the party’s chance of success on the merits. Only where the balance between these risks cuts in favor of the moving party may a preliminary injunction properly issue.” 380 Mass. at 617. In this case, it is apparent that, if the Commission is not enjoined from entering into a lease with Depot, it will be impossible to return the parties to their current positions with respect to the Property. AFS and Depot will either reach agreement on a purchase price for the improvements on the Property, or the Commission will enforce its contractual right to have the Property cleared before it is surrendered. Nonetheless, balancing AFS’ likelihood of success on the merits with the issue of an irreparable injury, the court finds that AFS has not established a right to a preliminary injunction. Additionally, in theory, if AFS is able to establish that the Commission breached some statutory or common law right due it, it may recover monetary damages. See, e.g., Bradford & Bigelow, Inc. v. Commonwealth, 24 Mass. App. Ct. 349, 357-361 (1987).[7]
ORDER
For the foregoing reasons, AFS’ motion for a preliminary injunction is DENIED.
s/Mitchell H. Kaplan
Mitchell H. Kaplan
Justice of the Superior Court
Dated: April 19, 2017
[1] The affidavits submitted by the parties suggest that at one time AFS believed that it should have been entitled to an option to extend the Lease for an additional 20 year term; however, in 2006, when this issue first arose, the Commission informed AFS that it could not grant AFS a 20 year option because that right was not provided in the Lease. Regardless of whether AFS had reason to believe that it should have received an option for an additional term, it is clear that the Lease does not contain such an option, but rather clearly states that it terminates at the end of 20 years. This issue, therefore, can play no part in the court’s decision.
[2] AFS makes much of the fact that Mr. Garfinkle was out of the country on March 1, 2017; however, it appears that he participated in the meeting by skype. The court knows of no reason why remote participation would be unacceptable.
[3] Neither of these bidders has contested the Commission’s award of the lease to Depot.
[4] In its complaint, AFS asserts claims for: Declaratory Judgment, Injunction, Specific Performance Upon Implied Contract, Unjust Enrichment, and violation of Chapter 93A. Rather than address each of the counts of the complaint, some of which seem inapplicable to the issue raised by this motion for a preliminary injunction, the court will adopt the standard of review suggested in Cubic Transportation System.
[5] Had the Commission awarded the lease to the bidder that had submitted the lower rent offer, the court would be more concerned about the confusion possibly engendered by the Sample Form, which did not have the look and feel of a sample.
[6] At oral argument, AFS’ attorney did not argue that AFS had a contractual right to another term.
[7] Moreover, the court also notes that it seems unlikely that it could ever enter a final order in this case awarding the lease to AFS. If the bid process was flawed because the RFP was misleading, the appropriate relief would be to order that a new RFP issue, not simply to award the lease to AFS because of the Commission’s errors, thereby depriving Depot of its rights, especially when it was the higher bidder. A new lease will also bring substantial additional revenues to the Commission and serve the public’s interest. Leaving the incumbent in place at existing rents while the process is rebid would not be in the public’s interest. See Commonwealth v. Mass. CRINC, 392 Mass. 79, 87 (1984).