Appeal from the Superior Court of the District of Columbia; (Hon. Stephen F. Eilperin, Trial Judge)
Before Ferren and Sullivan, Association Judges, and Pryor, Senior Judge.
The opinion of the court was delivered by: Ferren
FERREN, Associate Judge: The District of Columbia and Quality Dental Plans, Inc. (QDP) appeal from a trial court order, issued in favor of appellee Group Insurance Administration, Inc. (GIA), that preliminarily enjoined the District and QDP from performing a contract under which QDP was to administer the District's dental and vision care benefits program for non-union employees. The District also appeals the trial court's order holding it in contempt and assessing fines for failure to comply with this injunction.
Because the preliminary injunction has since expired, appellants' direct challenge to the injunction is moot. Nevertheless, we examine the injunction's validity in the course of considering whether the trial court abused its discretion in holding the District in contempt. In doing so, we must determine whether the Superior Court has the authority to order emergency relief forcing the rebidding of a public contract while the underlying bid protest is still pending before the Contract Appeals Board (CAB or Board). Although we conclude that the Superior Court has this authority, this is an extraordinary power that should only be exercised in rare instances. The particular circumstances of this case did not warrant such extraordinary action. Accordingly, having determined that the underlying injunction was invalid, we reverse and remand this case for vacation of the civil contempt order against the District.
I. FACTUAL AND PROCEDURAL HISTORY
A. The Contract Award Process
Since 1985, the District of Columbia government has provided dental and vision care benefits to all non-union employees. The District awarded the first contract to administer this program to GIA. On October 7, 1991, near the expiration of this first contract, the District issued a request for proposals (RFP) from qualified minority contractors *fn1 for a new one-year contract to administer the benefits program during calendar year 1992. The proposed contract also provided renewal options for four one-year extensions. The deadline for the submissions was November 12, 1991.
Only two firms bid on the contract: GIA and QDP. A four-person committee, headed by the District Controller, evaluated GIA's and QDP's proposals, rating them on a 110-point scale that took into account company and staff qualifications, proposed service, quality of oral presentation, and contract price. The Committee gave GIA and QDP substantially similar ratings for their qualifications, proposed services, and oral presentations. There was, however, a significant difference between the two firms' price proposals. QDP offered a price of $2.00 per participant for the first year of operation, while GIA's proposed price was $3.35 per participant. The evaluation committee recommended that the District award the contract to QDP. As a result, on January 7, 1992, the District entered into a letter agreement with QDP, authorizing QDP to begin service in accord with the terms of its proposal and providing for the parties to enter into a definitive contract within 183 days. On the same day, the District notified GIA that it had not been selected.
B. GIA'S Bid Protest and Suit for Injunctive Relief
Ten days later, on January 17, 1992, GIA filed a bid protest with the CAB requesting the Board to cancel the District's contract with QDP. The protest alleged that: QDP lacked the required expertise to perform the contract; the District had failed to apply the evaluation criteria properly; QDP had a potential conflict of interest because it was also a provider of dental services; QDP intended to subcontract most of its vision services to non-minority businesses; the District had ignored GIA's proposed 20 percent discount and therefore had misinterpreted GIA's actual price proposal.
On January 27, 1992, GIA filed an amended protest containing the additional claim that QDP was not a "responsible contractor" within the meaning of 27 DCMR § 2200.1 (1988) because QDP's Vice President, Thomas A. Parnham, had recently pled guilty to charges of conspiracy and failing to maintain proper records as required by the Employee Retirement Income Security Act, in violation of 18 U.S.C. § 371 (1988) and 29 U.S.C. §§ 1027, 1131 (1988). *fn2 Consequently, GIA alleged, the District's contract with QDP violated the District's own requirement that "the contracting officer shall . . . award contracts only to responsible contractors." 27 DCMR § 2200.1.
The District responded with an agency report to the CAB in which the District denied all of GIA's allegations and moved the Board to dismiss as untimely GIA's claim in its amended protest that QDP was not a responsible contractor. In an amended report, the District subsequently withdrew its motion to dismiss and submitted an affidavit from the District Controller stating that he had not become aware of Parnham's convictions until January 24, 1992, after he had entered into the letter agreement with QDP. The Controller averred that he had reviewed the government's statement of fact in support of Parnham's guilty pleas and had discussed the situation with QDP's president (Dr. Milton Bernard), Parnham, and Parnham's attorney. After this review, the Controller said, he had concluded that Parnham's guilty plea should not be imputed to QDP and that QDP remained a responsible contractor. In reaching this Conclusion, the Controller had taken into account the following facts: (1) the convictions were for misdemeanors, not felonies; (2) the misdemeanors only involved a failure to disclose information; (3) Parnham had not been involved in taking or accepting illegally obtained funds; and (4) the convicting court had specifically informed Parnham that the convictions did not bar him from continuing with QDP in an administrative position.
While GIA's bid protest was pending before the CAB, GIA also filed a complaint in the Superior Court on February 13, 1992, requesting declaratory and injunctive relief, including a temporary restraining order, against the District. This complaint repeated most of the allegations set forth in GIA's bid protest to the CAB. In response, the District asserted that the trial court lacked jurisdiction to hear the complaint because GIA had failed to exhaust its administrative remedies in failing to wait for the CAB to render a decision on its bid protest. The District also claimed that, even if the court had jurisdiction to hear the case, GIA had failed to make the required showing of irreparable harm. Additionally, the District submitted the same affidavit from the Controller that it had filed with the CAB. QDP joined the District and moved for leave to intervene.
After a hearing, the trial court denied GIA's request for a temporary restraining order on February 28, 1992. Expressing his reluctance to interfere with the administrative process, the trial Judge ruled that GIA should instead seek a stay of the contract from the CAB.
GIA then filed with the CAB an emergency motion for a stay of the contract. In an opinion issued on March 25, 1992, the CAB concluded that under D.C. Code § 1-1189.8 (e) (1992) it had no authority to stay performance of a contract pending its decision on a bid protest. See 39 D.C. Reg. 4491, 4497, 4503 (1992).
Armed with the Board's decision, GIA returned to the trial court two days later. This time, the trial court concluded that GIA had exhausted its administrative remedies when the CAB denied GIA's request for a stay. Accordingly, the trial court agreed to hold a hearing on GIA's motion for a preliminary injunction to halt performance of QDP's contract with the District.
Testimony and evidence submitted at the hearing disclosed that Parnham had entered his guilty pleas in July 1991 and that Dr. Bernard, QDP's president, had known of this fact at that time. After reviewing the government's statement of facts in the case against Parnham, however, Dr. Bernard had concluded that Parnham's involvement "had been limited in duration and scope" and that Parnham could "continue to perform his duties on behalf of Quality Dental and conduct himself with honesty and integrity." Accordingly, Parnham had participated fully in developing QDP's proposal to the District -- a proposal in which he was named as a principal of QDP.
On April 1, 1992, the trial court issued an order enjoining the District and QDP from taking any further steps to implement the contract between them "except for transitioning to an emergency procurement pending the Contract Appeals Board's final decision." In reaching this decision, the trial court relied on the following findings of fact and Conclusions of law.
First, the trial court concluded that, under 27 DCMR §§ 2200.3 and 2200.4 (1988), as well as under paragraphs 35 (3), 37 (1) and (2), and 38 (2) of the District's RFP, QDP was obliged to disclose the fact of Parnham's convictions. The failure to reveal this information, the court said, cast doubt not only on Parnham's integrity but also on QDP's as well. Accordingly, the court concluded that there was a substantial likelihood that GIA would succeed in its protest to the CAB.
Second, the court found that the harm faced by GIA was comparable to the harm that QDP would suffer if enjoined from performing the contract. Absent an injunction, GIA would be forced to wait until the CAB rendered a decision, which would lead to a probable delay of about a year. As a result, GIA would lose 50 percent of its then-annual revenue and might be forced to lay off as many as four employees. On the other hand, an injunction would hurt QDP financially and force it to lay off a number of employees, but it would not threaten QDP's existence.
Third, the trial court found that the public interest overwhelmingly favored the granting of an injunction, so as to send a strong message that companies seeking to do business with the District could not profit from misrepresenting their qualifications.
Finally, the court determined that, given the CAB's disclaimer of authority to issue injunctive relief while an appeal was pending before it, GIA had exhausted its administrative remedies and had no adequate remedy available to it at law.
Both the District and QDP appealed from the trial court's order (Nos. 92-CV-437 & 92-CV-477).
C. The Contempt Proceeding
After the trial court issued the injunction, the District moved for reconsideration. In denying that motion on May 13, 1992, the trial court also ordered that, "if the District does not take immediate steps to effect an emergency procurement, this Court will set the matter down for a show cause hearing why the District should not be held in contempt." On May 29, the District issued a new emergency RFP to administer its dental and vision care employee benefit program, and on June 26 the District selected Dental Providers, Inc. as the new program administrator. In the interim, however, GIA had petitioned the trial court on June 10 to issue an order to show cause why the District should not be held in contempt for failure to follow the trial court's order.
At a hearing on GIA's petition on June 19, Lorenzo McQueen, a manager in the District Controller's office, testified that the District had delayed in issuing a new RFP because it wanted to rewrite some of the specifications and to contact potential applicants who might be willing to bid on a short term contract. Seven vendors had submitted proposals, and the review committee had made a recommendation on June 17. At the time of the hearing, McQueen was conducting a background check on the winning provider.
Later, at a hearing on July 13, the District Controller corroborated much of McQueen's testimony. In particular, the Controller said that he had felt it was important, for the sake of potential bidders, to incorporate into the new RFP a statement of the situation under which this RFP was being issued. The Controller also admitted, however, that even though the District's original letter agreement with QDP had expired as of July 12 (the 183 days had run), he had signed a contract extension permitting QDP to continue to administer the District's benefit plan, so as to allow the new administrator, Dental Providers, sufficient time to gear up its operation.
On July 22, 1992, the trial court issued an order holding the District in civil contempt for failure to comply with its injunction. The trial court found, first, that the District was still using QDP's services as of July 13, 1992, notwithstanding the injunction. Second, the court found that the District could have completed the emergency procurement process and installed a new benefits administrator by May 22. Finally, the court concluded that the District had failed to demonstrate either of the two recognized defenses to civil contempt, i.e., substantial compliance or inability to comply. The court ordered the District to pay the sum of $1,500 per day to GIA for each day that the District had continued to use QDP's services between May 22 and July 13, or a total of $78,000. The court also ordered the District to pay GIA $2,000 for each day after July 13 that the District continued to use QDP. Finally, the court required the District to pay GIA's attorney fees incurred in connection with the motion for order to show cause.
The District also appeals from this order (No. 92-CV-942).
D. The Contract Appeals Board Decision
On September 2, 1992, the CAB issued a decision denying GIA's bid protest in all respects. See 40 D.C. Reg. 4485 (1992). The Board reached the following Conclusions: (1) the District's review committee had not misapplied the RFP's criteria in evaluating GIA's and QDP's proposals; (2) GIA's conflict of interest claims were too speculative to justify disturbing a contract award; (3) GIA's allegation that QDP was planning to subcontract administration of vision care benefits was unsupported by the evidence; (4) GIA's proposed 20 percent discount did not conform to the RFP's request for a single fixed price, and thus the committee did nothing unreasonable in refusing to give it full consideration; and (5) the Controller's determination that QDP was responsible was entitled to deference, absent evidence that procuring officials had a specific, malicious intent to harm GIA. See id. at 4508-19.
GIA has since filed an action in Superior Court for review of the CAB decision. That decision is not before us in this appeal.
Because of the peculiar procedural posture of this case, we begin our analysis by asking what issues are properly before us on appeal.
Ordinarily, this court has jurisdiction to hear an appeal from the grant of a preliminary injunction. *fn3 See D.C. Code § 11-721 (a)(2)(A) (1989); Wieck v. Sterenbuch, 350 A.2d 384, 386 n.1 (D.C. 1976). In this case, however, the CAB's decision denying GIA's bid protest on September 2, 1992, apparently terminated the effective period of the trial court's injunction, insofar as the court's order directed the District to take steps to rebid the contract only "pending the Contract Appeals Board's final decision." Consequently, appellants' challenge to the preliminary injunction has become moot. See, e.g., Certified Grocers of Ill. v. Produce Employees Union, Local 703, 816 F.2d 329, 330-32 (7th Cir. 1987) (where preliminary injunction lasted only until arbitrator's decision, decision rendered appeal of injunction moot); Kitlutsisti v. Arco Alaska, Inc., 782 F.2d 800, 801 (9th Cir. 1986) (appeal from preliminary injunction prohibiting drilling unless permitted by Environmental Protection Agency rendered moot by issuance of permit); see generally Vaughn v. United States, 579 A.2d 170, 175 n.7 (D.C. 1990). Although we, unlike the federal courts, are not bound by the "case or controversy" requirement of Article III of the Constitution, we ...