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Saturday, April 20, 2013

Courting government business and sovereign immunity

One of the risks of doing business with the government is that you cannot sue them for fault, even if clearly wrong, unless you get its permission to sue. At least with the common law, a sovereign cannot be sued unless it consents to be sued. This is the law of "sovereign immunity". Fortunately, most US jurisdictions do consent, at least in a very restricted manner, to being sued in procurement matters. But you may have to hop on one foot and plea, "may it please the court", if that is one of the conditions the sovereign demands of you.

When the government allows suit, it is said to waive sovereign immunity. And it is a very strict application of legislative, or constitutionally, granted waiver. The right to sue may only be in a very particularly described case (or cause of action), in a particular court, at a particular time, and in a particular manner. Get any of those conditions wrong, and your "right" to sue he sovereign is a mirage.

I must here disclaim much knowledge of such matters. Sovereign immunity is generally in the knowledge of courts and litigators, and I do not litigate. I am a simple minded in house general commercial lawyer. So, this is more in the nature of a "heads up" than any kind of elucidation of the law of this topic. Still, I thought you might want to be aware.

Here I link to two cases, the first from Pennsylvania, and the second from Guam, each dismissing a procurement claim on the basis of sovereign immunity.  In the Pennsylvania case, the issue was which tribunal was required; in the Guam case, the issue was what form of action was required.

The following case is from the Commonwealth (State for those outside the USA) of Pennsylvania, USA. Again, I have no knowledge of Pennsylvanian law. I am guessing, but it appears to me that Pennsylvania had a long standing law relating to government contracting, particularly construction contracting, and that it more recently adopted a more comprehensive law dealing more broadly with government contracting, including for supplies, services and construction. At first blush, it looks somewhat like the ABA Model Procurement Law on which Guam's law is based.

One of the issues presented is "Does the Board of Claims have exclusive jurisdiction to determine claims arising under a contract with the Commonwealth, including the claim that a contract exists?" Please have a read of the whole case at the link and don't rely on my exposition of it; I have selectively cut and pasted and rearranged and paraphrased the opinion, so there is plenty of opportunity here for me to misstate the case. Further there are other issues of importance that I do not touch on.

The background here is that SGI (the appellant) won an RFP under the competitive sealed proposal method of source selection, and the other offeror, GTECH protested, following which the government agency (DGS) cancelled the bid.   Pennsylvania law evidently does not allow a protest of a bid which is cancelled before award. 

SGI brought this action, seeking declaratory and injunctive relief, in the Commonwealth Court's original jurisdiction, and petitioned for a preliminary injunction claiming it had received the contract, or was entitled to receive it, and sought to affirm it. The issue was whether SGI brought a cognizable claim to the Commonwealth Court, or whether it should have been brought before the administrative Board of Claims. The lower court had allowed the non-monetary claim to be brought to the Commonwealth Court rather than the Board of Claims.

The interplay of the older Board of Claims Act terms and the newer Procurement Act terms has to be considered, also, so you must read the opinion to understand that nuance. Such is the tangled web of sovereign immunity.

SCIENTIFIC GAMES INTERNATIONAL, INC. v. COMMONWEALTH OF PENNSYLVANIA, Supreme Court of Pennsylvania, Middle District, Decided March 25, 2013.
The Procurement Code establishes administrative processes to address disputes arising in the procurement setting. On account of the doctrine of sovereign immunity, however, contractors, bidders, and offerors have limited recourse and remedies.

We consider the contours of the Board of Claims' exclusive jurisdiction pertaining to procurement litigation against Commonwealth agencies. More specifically, we are asked to determine whether such jurisdiction forecloses original-jurisdiction proceedings in the Commonwealth Court.

The Procurement Code contains a scheme for resolution of disputes arising in connection with the solicitation or award of a contract, commencing with a pre-litigation process encompassing a protest procedure administered by the purchasing agency and a right of appeal to the Commonwealth Court. For post-award contract disputes, the Procurement Code establishes a claim procedure before the contracting officer, subject to review in the independent administrative board known as the Board of Claims. The Board of Claims is given "exclusive jurisdiction" to arbitrate claims arising from contracts entered into by Commonwealth agencies, except: "(d) Nonmonetary relief. — Nothing in this section shall preclude a party from seeking nonmonetary relief in another forum as provided by law."

Significantly, as well, the Procurement Code "reaffirms sovereign immunity," prescribing, with limited exceptions, that "no provision of this part shall constitute a waiver of sovereign immunity[.]" The only exceptions to this sovereign immunity waiver in the Procurement Code pertain to the protest and claim procedures described above, and to proceedings in the Board of Claims "to the extent set forth in" the chapter pertaining to legal and contractual remedies.

GTECH claims that sovereign immunity has been waived only relative to the protest, claims, and Board-of-Claims procedures specified in the Procurement Code. Thus, for jurisdiction of claims against the Commonwealth to be cognizable in judicial venues, a legislative waiver of sovereign immunity must be found elsewhere to pertain. Appellants observe, however, that neither the Commonwealth Court panel nor SGI has identified any such waiver provision.

SGI adopts the Commonwealth Court panel's position that jurisdiction was proper under Section 1724(d):"On its face, Section 1724(d) preserves parties' ability to invoke any grants of jurisdiction to any other tribunal that would extend to contract actions against Commonwealth agencies for nonmonetary relief."

We begin with the doctrine of sovereign immunity, because we agree with GTECH that it plays an important role under the Procurement Code, which is designedly structured to accord immunity, subject only to specific and limited exceptions.

The constitutionally-grounded, statutory doctrine of sovereign immunity obviously serves to protect government policymaking prerogatives and the public fisc. To a degree, it has been tempered to recognize the rights and interests of those who may have been harmed by government actors, and/or, in the contract arena, to remove a substantial disincentive for private individuals to pursue government contracts.

Understandably, some immunity applications may be distasteful to those who may discern government wrongdoing, or at least unremediated collateral injury to private concerns resulting from governmental policy changes. In light of the constitutional basis for the General Assembly's allocation of immunity, however, the area implicates the separation of powers among the branches of government also crafted by the framers.

Thus, in absence of constitutional infirmity, courts are not free to circumvent the Legislature's statutory immunity directives pertaining to the sovereign.

We recognize that some decisions of this Court may suggest that immunity is not squarely a jurisdictional matter. Notably, at the federal level at least, however, sovereign immunity is considered a core jurisdictional concern. The language of the Pennsylvania Constitution itself seems consistent with such perspective, as it relegates to the General Assembly the power to specify the manner and designate the courts in which suits against the Commonwealth may be brought.
While more general clarification of the relationship between sovereign immunity and jurisdiction may be appropriate in the arena at large, for present purposes, we regard sovereign immunity as a jurisdictional concern vis-à-vis the Procurement Code.

In this respect, we agree with GTECH that — as a matter of jurisdiction — if the General Assembly has not specifically provided by statute for such nonmonetary relief in a claim arising from a contract entered into by a Commonwealth agency under the Procurement Code, then either the claim is within the exclusive jurisdiction of the Board of Claims or it is barred by sovereign immunity.

Based on the above, we conclude that the Commonwealth Court erred in interpreting Section 1724(d) so broadly as to sanction original-jurisdiction actions in a judicial tribunal over nonmonetary claims against the Commonwealth. To the contrary, nonmonetary claims against the Commonwealth are cognizable only to the extent they fall within some "specific[]" waiver or exception to immunity. As explained, no such waiver or exception is found in Section 1724(d) of the Procurement Code, and neither the Commonwealth Court nor SGI has identified any other salient and specific waiver provision within which to bring SGI's claims.
This next case is from Guam, and one in which I had involvement at the administrative review level. An appeal of the administrative review tribunal, the Office of Public Accountability, was taken to the Superior Court, which dismissed the action on sovereign immunity grounds. The Guam Supreme Court upheld the result. (Again, there are other issues for which you need to refer to the linked case report.)

As background, for most of the history of the Guam Procurement Act, many if not most appeals to the court were by way of a writ or either mandamus or review, but also by way of an ordinary civil action. Writs are entitled to an expedited review as a "special proceeding". Civil actions take their turn and grind slowly through the system. Nothing frustrates the public, let alone the government and bidders, more than a long, drawn-out review process, especially when needed services or supplies are at stake. And, of course, big money is usually involved when a case is so important to be taken to court.

In the years leading up to this case, there were Superior Court cases, seemingly inconsistent, dismissing a civil action on the basis that a writ must be sought, or dismissing a writ on the basis that a civil action was required. One decision said, of appeals from the administrative tribunal, that not all such appeals were created equally, and if the appeal involved the merits it should be by civil action, but if procedural rules, then by writ. The appeal in this case was framed as a civil appeal, lodged as a special proceeding, and argued it should be treated as a writ of review.

The Supreme Court ruled the statutory waiver of sovereign immunity required a civil action rather than a writ. It reasoned that Guam law distinguishes between writs and civil actions, and that the waiver of sovereign immunity in 5 GCA § 5480(a) expressly referred to an "action", thus it held a "civil action" was required. It found that, since no parties were named (or necessarily required under a writ of review), the Superior Court appeal failed as a civil action. It held, that, to invoke the waiver of sovereign immunity, the appeal must be brought against the Territory of Guam or other named agency in a civil action.

The case is :
 Town House Dep't. Stores, Inc. v Dep't. of Educ., 2012 Guam 25.

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