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SJC‑11224

PAUL LEDER^[1]  vs.  SUPERINTENDENT OF SCHOOLS OF CONCORD & CONCORD-CARLYLE REGIONAL SCHOOL DISTRICT & others.^[2]

Middlesex.     February 7, 2013.  ‑  May 31, 2013.

Present:  Ireland, C.J., Spina, Cordy, Botsford, Gants, Duffly, & Lenk, JJ.

School and School District.  School and School Committee, Superintendent of schools, Regional school district.  Municipal Corporations, Contracts.  Contract, Bidding for contract, Regional school district.  Injunction.  Practice, Civil, Preliminary injunction.  State Ethics Commission.  Conflict of Interest.

Civil action commenced in the Superior Court Department on August 15, 2011.

A motion for preliminary injunctive relief was heard by Garry V. Inge, J.

A petition for interlocutory review was heard in the Appeals Court by Elspeth B. Cypher, J.  The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.

Kwabena B. Abboa-Offei for the plaintiff.

Adam Simms for the defendants.

Andrew P. Botti & David K. Moynihan, for David K. Moynihan & another, amici curiae, submitted a brief.

Martha Coakley, Attorney General, & Deirdre Roney, Special Assistant Attorney General, for State Ethics Commission, amicus curiae, submitted a brief.

GANTS, J.  The issue on appeal is whether, under G. L. c. 268A, § 21 (a), as appearing in by St. 2009, c. 28, § 80, a party may obtain declaratory or injunctive relief rescinding an action taken by a municipal agency based on an alleged violation of G. L. c. 268A, § 23, where the State Ethics Commission (commission) has made no finding of a violation and where the municipal agency has not requested this relief.  We conclude that a finding of a violation of § 23 by the commission after an adjudicatory proceeding and a request for rescission by the municipal agency are both prerequisites to the filing of a complaint seeking rescission under G. L. c. 268A, § 21 (a).  Because neither prerequisite has been met in this case, we affirm the denial of the plaintiff’s motion for a preliminary injunction and remand the case to the Superior Court with instructions to dismiss the complaint.^[3]

Background.  The facts are not materially in dispute.  The plaintiff, Paul Leder, doing business as Spencer Brook Strings (SBS), operates a musical instrument sale and rental business that rents string instruments to students in various school districts throughout Massachusetts, including the Concord public schools and the Concord-Carlisle Regional School District (collectively, school district).  Since 2003, SBS has rented string instruments to students who participated in the school district’s music program.  From 2003 to 2009, the school district held an “instrumental rental night” at the middle school where parents could choose among various vendors, including SBS, for rental instruments for their children.  In the 2009-2010 school year, the school district did not hold an instrumental rental night but instead published on its Web site a list of the various musical instrument vendors and invited parents to contact the vendor from whom they wanted to rent.

In the spring of 2011, however, the school district invited vendors of string instruments to bid to rent instruments to the parents of children in the school district, and asked prospective vendors to provide with their bids, among other information, a detailed explanation of their rental program and their rental fees.  SBS alleges that it submitted the lowest bid for rental fees.  However, according to the school district, one of SBS’s references reported that the quality of service provided by SBS was inconsistent and that there were customer service issues.  The school district selected the next lowest bidder, Music and Arts (M&A), as the winning bid, after receiving positive reports from all of its references.  As a result, the school district published on the Web sites of two schools a letter with M&A’s logo that advised parents that M&A “is the music rental company for Concord Public Schools,” assured parents that M&A “will provide quality rental instruments,” gave step-by-step instructions on how to rent an instrument from M&A’s Web site, and informed parents that “[s]hould you choose NOT to rent from [M&A] you are agreeing to take the instrument rental, maintenance, purchase of lesson book and supplies, and repair into your own hands.”^[4]

In August, 2011, the plaintiff filed a verified complaint alleging that, by providing M&A with their “endorsement” and “fail[ing] to advertise SBS in the materials that [they] published for parents of children who participated in the music program in the same way that [they] advertised M&A,” the defendants had used their official positions, see note 2, supra, to secure for M&A unwarranted privileges that are of substantial value and not available to similarly situated individuals, in violation of G. L. c. 268A, § 23 (b) (2) (ii).^[5],[6]  The complaint sought declaratory and injunctive relief, and was accompanied by a motion for preliminary injunction that, among other relief, sought to enjoin the defendants from organizing any string rental nights without SBS’s participation and publishing any letters or materials to parents that promote a competitor of SBS, and that sought an order requiring the defendants to remove any online materials that indorse or promote M&A as the official rental company of the school district.

The judge denied the plaintiff’s motion for a preliminary injunction.  The judge declared that G. L. c. 268A was enacted “to prevent public officials from favoring one business over another,” but concluded that the plaintiff lacked standing because, as a musical instrument rental company, it “is clearly not part of a regulated industry.”  The plaintiff appealed from the denial of preliminary injunctive relief pursuant to G. L. c. 231, § 118.  After a single justice of the Appeals Court denied the petition for review, the case was entered in the Appeals Court; we transferred the plaintiff’s appeal to this court on our own motion.^[7]

Discussion.  In 1962, the Legislature enacted G. L. c. 268A, § 21, as part of “comprehensive legislation . . . [to] strike at corruption in public office, inequality of treatment of citizens and the use of public office for private gain.”  See Everett Town Taxi, Inc. v. Aldermen of Everett, 366 Mass. 534, 536 (1974) (Everett Town Taxi), quoting Report of the Special Commission on Code of Ethics, 1962 House Doc. No. 3650, at 18.  The original text of § 21 (a), inserted by St. 1962, c. 779, § 1, remained unchanged until 2009 and provided:

“In addition to any other remedies provided by law, any violation of section two, three, eight, or sections fifteen to twenty, inclusive, which has substantially influenced the action taken by any municipal agency in any particular matter shall be grounds for avoiding, rescinding or cancelling the action on such terms as the interest of the municipality and innocent third persons require.”

When § 21 (a) was enacted, there was no commission or other comparable entity to enforce the new ethics laws.  Instead, the 1962 legislation authorized a city or town to bring a civil action “against any person who has acted to his economic advantage in violation of said sections two, three, eight and fifteen to twenty, inclusive” and to “recover damages in the amount of such economic advantage or five hundred dollars, whichever is greater.”  G. L. c. 268A, § 21 (b), inserted by St. 1962, c. 779, § 1.^[8]

In 1974, we considered whether the Legislature intended § 21 (a) to include a private right of action and, if so, whether a taxicab company had standing to file a civil action under § 21 (a) against a city’s public officials to challenge the issuance of licenses to a competitor to operate taxicabs and taxi stands in that city.  Everett Town Taxi, supra at 534-535.  We noted that the “language of § 21 (a) is neutral on the matter, simply setting out the remedy without describing those to whom it is available.”  Id. at 535-536.  “At the least there is nothing in the language to preclude a private action; if anything, the specific reference to actions by the city or town for restitution in § 21 (b) leads to the inference that no such limitation is present in § 21 (a).”  Id. at 536.  We concluded that we needed to construe § 21 (a) to permit a private right of action “to effectuate fully the statutory purpose” of attacking public corruption.  Id.  We stated:

“In light of these objectives it is apparent that, if a right of action is denied to all private parties, there would be a frustration of the statute. . . .  Were we to construe § 21 (a) as providing an exclusively public remedy so that the sole parties eligible to move under § 21 (a) were municipal authorities, the result would be that in a municipality where those authorities were the principal parties in interest there would be no movement at all.  Thus to deny a private right of action under the statute would in some cases be to deprive the public of the protection conferred on it by the Legislature.”

Id.

We noted that the existence of a private right of action did not mean that every aggrieved business competitor had standing to bring such an action.  Id. at 538.  We recognized the general rule that “the mere fact that a plaintiff may suffer from business competition is not a sufficient injury to give him standing to sue.”  Id., and cases cited.  But we held that the aggrieved business competitor in that case had standing to sue because the general rule did not apply to competitors in a regulated industry, such as the taxicab industry, “who are attempting to challenge governmental action threatening their competitive position.”^[9]  Id., and cases cited.  Even where a plaintiff had standing to sue and even where there was a violation of one of the statutes enumerated in § 21 (a), we recognized that rescission of the governmental action may not always be appropriate.  See id. at 537 (“fact that the municipal authorities were aware of the conflict of interest, but chose to ratify the action may be entitled to some weight where the action cannot be rescinded without detriment to the municipality”).

In 2009, as part of “An Act to improve the laws relating to campaign finance, ethics and lobbying” (act), the Legislature significantly revised various provisions of G. L. c. 268A, including G. L. c. 268A, § 21.  The Legislature rewrote § 21 (a) to add the italicized language:

“In addition to any other remedies provided by law, a finding by the [state ethics] commission pursuant to an adjudicatory proceeding that there has been any violation of sections 2, 3, 8, 17 to 20, inclusive, or section 23, which has substantially influenced the action taken by any municipal agency in any particular matter, shall be grounds for avoiding, rescinding or canceling the action of said municipal agency upon request by said municipal agency on such terms as the interests of the municipality and innocent third persons require” (emphasis added).

St. 2009, c. 28, § 80.  This revision not only added § 23 to the list of violations that may justify rescission but also added two prerequisites to the filing of an action for rescission:  a finding of a violation of one of the enumerated sections by the commission pursuant to an adjudicatory proceeding, and a request for rescission by the municipal agency that took the action that the suit seeks to rescind.

The act also made significant amendments to § 21 (b), which authorized the commission itself, on a finding after an adjudicatory hearing that a person acted to his economic advantage in violation of G. L. c. 268A, §§ 2, 3, 8, 17-20, or 23, to order rescission of a municipal action pursuant to § 21 (a), to order the violator to pay to the commission on behalf of the municipality damages in the amount of the economic advantage, not to exceed $ 25,000, and to order restitution to an injured third party.  G. L. c. 268A, § 21 (b), as appearing in St. 2009, c. 28, § 80.^[10]  A consequence of these amendments to § 21 (b) is that rescission of an action by a municipal agency may be accomplished by the commission, without the need to bring a civil action, after a finding of violation of at least one of the enumerated sections in an adjudicatory proceeding, but only on the request of that municipal agency, while other remedies are available without such request.

It is interesting to note that the Legislature did not impose the two prerequisites of an adjudicatory finding by the commission and the request of the governmental entity when it rewrote G. L. c. 268A, § 9 (a), which provides for rescission of the actions of a State agency, and G. L. c. 268A, § 15 (a), which provides for rescission of the actions of a county agency.  See St. 2009, c. 28, §§ 70 & 75.^[11]  The only change to these statutes was to include § 23 among the sections whose violations could trigger rescission.  See id.  The legislative history sheds little light on the reasons for imposing these prerequisites on actions brought under § 21 (a) but not on actions brought under § 9 (a) or § 15 (a).  But the commission’s annual reports in 2007 and 2008 reflected that more than seventy per cent of the complaints alleging conflict of interest violations involved municipal employees, and more than sixty-one per cent of the complaints were dismissed by the commission, either because they were frivolous or otherwise did not justify continued investigation, or because they failed to allege a violation of G. L. c. 268A.^[12]  The Legislature reasonably could have decided that cash-strapped municipal agencies should not be burdened with the cost of defending civil actions seeking rescission of their actions where there has been no finding by the commission of a violation of one of the enumerated conflict of interest laws and where the municipal agency itself does not seek to rescind the action, especially where, with the amendments to § 21 (b), the commission may order restitution to an injured third party without the approval of the municipal agency.