Argued
January 14, 2019
Procedural
History
Action
to recover damages for, inter alia, the defendant's
violation of state antitrust law, and for other relief,
brought to the Superior Court in the judicial district of
Hartford, where the court, Peck, J., denied the
defendant's motion to dismiss and granted the
defendant's motion to strike the second substituted
complaint and rendered judgment thereon, from which the
plaintiff appealed and the defendant cross appealed.
Improper form of judgment; vacated; judgment
directed.
Michael C. Harrington, with whom, on the brief, were Melissa
A. Federico and Sarah Gruber, for the appellant-cross
appellee (plaintiff).
Matthew C. Welnicki, for the appellee-cross appellant
(defendant).
Robinson, C. J., and McDonald, Mullins, Kahn and Ecker, Js.
OPINION
ROBINSON, C. J.
The
primary issue that we must resolve in this appeal is whether
allegations that a quasi-public agency engaged in a sham
competitive bidding procedure and awarded a contract to a
preselected entity for corrupt reasons and in violation of a
competitive bidding statute are sufficient to support a claim
that the agency violated the Connecticut Antitrust Act,
General Statutes § 35-24 et seq. (antitrust act). The
plaintiff, Tremont Public Advisors, LLC, is a public affairs
firm. The defendant, the Connecticut Resources Recovery
Authority, is a quasi-public agency responsible for providing
solid waste disposal and recycling services to numerous
municipalities in this state pursuant to the Connecticut
Solid Waste Management Services Act, General Statutes §
22a-257 et seq.[1] In 2011, the defendant issued a request
for proposals for the provision of municipal government
liaison services (liaison services). The plaintiff submitted
a proposal that complied with the request for proposals, but
the defendant awarded the liaison services contract to the
law firm of Brown Rudnick, LLP (Brown Rudnick), whose
proposal was noncompliant. Thereafter, the plaintiff brought
this action alleging that the defendant's request for
proposals was a sham and that the defendant had violated
General Statutes § 22a-268, [2] which, according to the
plaintiff, mandates a competitive bidding procedure for the
liaison services contract. The plaintiff further alleged that
the defendant's conduct excluded competitors for the
liaison services contract in violation of the antitrust act.
The defendant filed a motion to dismiss the second
substituted complaint, claiming, inter alia, that the
plaintiff lacked standing to bring the antitrust claim. The
defendant also filed a motion to strike, claiming that, even
if the plaintiff had standing, it had not adequately alleged
that the defendant's conduct had an adverse effect on
competition as a whole in the relevant market, proof of which
is required to establish a violation of the antitrust act,
but had alleged only that it had an adverse effect on the
plaintiff itself. The trial court denied the motion to
dismiss but granted the motion to strike and rendered
judgment in favor of the defendant. This appeal by the
plaintiff and cross appeal by the defendant
followed.[3]We conclude that the plaintiff lacked
standing to bring this action because it did not adequately
allege an antitrust injury, and, therefore, the trial court
improperly denied the defendant's motion to dismiss the
second substituted complaint. Accordingly, we affirm the
judgment in favor of the defendant.
The
record reveals the following facts that are undisputed or
that the plaintiff has alleged, which we assume to be true
for purposes of reviewing the trial court's denial of the
defendant's motion to dismiss. See, e.g., Cogswell v.
American Transit Ins. Co., 282 Conn. 505, 516, 923 A.2d
638 (2007). The plaintiff is a public affairs firm located in
Hartford, and the defendant is a quasi-public agency
responsible for implementing the statutory solid waste
management plan and providing solid waste disposal and
recycling services to numerous municipalities in the state.
The defendant is empowered to enter into contracts with
private entities "to carry out the business, design,
operating, management, marketing, planning and research and
development functions of the authority . . . .” General
Statutes § 22a-268. Section 22a-268 requires the
defendant to engage in open and competitive bidding for its
contracts with outside vendors. General Statutes §
22a-268 ("[s]uch contracts shall be entered into either
on a competitive negotiation or competitive bidding
basis”). In addition, the defendant's own
procurement policies require it to select the bidder who
submits the most responsive qualified bid or proposal and not
to award contracts to entities in which a public official has
an interest.
For
several years prior to 2011, the defendant contracted with
Brown Rudnick to provide liaison services with Connecticut
municipalities. On May 26, 2006, the defendant awarded a one
year liaison services contract to Brown Rudnick without
seeking competitive bids for the provision of the services.
On May 21, 2007, the defendant's president informed Brown
Rudnick by e-mail that renewal of the contract
“‘should not be an issue but we will have to go
through the motions of [c]ommittee approval and [b]oard
[a]pproval.' ” Several days later, on May 24, 2007,
the defendant's president sent another e-mail to Brown
Rudnick stating that the defendant would have to issue a
request for proposals for liaison services in order to"
‘help [the defendant] defend [its] choice.' ”
The e-mail also stated that Brown Rudnick would receive a
package that it was to" ‘respond to as [it had] in
the past' ” and that the defendant would extend
Brown Rudnick's existing contract on a month-to-month
basis until a new one was put into effect. On May 31, 2007,
the defendant extended Brown Rudnick's contract to June
30, 2007. The defendant later extended the contract to
September 30, 2007, and, still later, to September 30, 2008.
After the contract expired, the defendant continued to pay
Brown Rudnick pursuant to the contract terms.
On
August 18, 2009, an official employed by the defendant
informed another of the defendant's officials by e-mail
that the defendant intended to award the liaison services
contract to Brown Rudnick, but, in order to create the
impression of propriety, Brown Rudnick wanted to be
interviewed so that the defendant could say that it had"
‘check[ed] the box.' ” On November 1, 2009,
the defendant awarded a one year liaison services contract to
Brown Rudnick. On October 25, 2010, the defendant extended
the contract to October 31, 2011.
On May
23, 2011, the defendant issued a request for proposals for
the provision of liaison services for the period of November
1, 2011, through June 30, 2014. The plaintiff submitted a
proposal that complied with all of the requirements of the
request for proposals. Brown Rudnick also submitted a
proposal, which was non-compliant because it failed to
propose an hourly fee. On June 28, 2011, Paul Nonnenmacher,
the defendant's director of public affairs, sent an
e-mail to Ronald E. Gingerich, the defendant's manager of
development, environmental compliance and information
technology, reporting that he had completed his evaluation of
the responses to the request for proposals. Gingerich
responded that he would draft a memorandum to the
defendant's board of directors regarding the evaluation.
The next day, June 29, 2011, Gingerich sent an e-mail to
Matthew Hennessy, the plaintiff's managing director, in
response to an inquiry from Hennessy about the status of the
defendant's interviews with selected proposers. In that
e-mail, Gingerich indicated that the defendant had been
"delayed in initiating the review of the
proposals” and that "[n]o interviews [of the firms
that submitted proposals] are scheduled.” No interviews
were ever conducted.
On
September 12, 2011, the defendant informed the plaintiff that
the liaison services contract had been awarded to Brown
Rudnick. On September 15, 2011, two officials employed by the
defendant, one of whom had been appointed by a partner at
Brown Rudnick while acting in his capacity as an elected
state official, voted to recommend to the defendant's
board of directors that Brown Rudnick be awarded the
contract. Although the board of directors was prepared to
vote on awarding the liaison services contract to Brown
Rudnick at its September 29, 2011 meeting, the defendant
ultimately bypassed its board of directors and extended the
preexisting contract with Brown Rudnick for another year, up
to October 31, 2012. In October, 2012, the defendant
incorporated the liaison services contract into its general
legal services contract with Brown Rudnick.
Thereafter,
the plaintiff brought this action against the defendant,
alleging that the defendant had evaluated the bids to provide
liaison services in a biased manner so as to ensure that
Brown Rudnick was selected, that the public bidding process
for the liaison services contract was a sham and that the
award of the contract to Brown Rudnick without a legitimate
public bidding process violated § 22a-268 and the
defendant's own procurement policies. The plaintiff
further alleged that the defendant awarded the liaison
services contract to Brown Rudnick because Brown Rudnick
carried out lobbying activities on behalf of the defendant in
violation of General Statutes§ 1-101bb.[4] The plaintiff
claimed in count one of the complaint that this conduct
deprived the plaintiff and others of an opportunity to
compete for the liaison services contract in violation of the
anti- trust act.[5]
The
defendant moved to dismiss the complaint on the grounds that
(1) under General Statutes § 35-31 (b), [6]the antitrust act
did not apply to its conduct in entering into the liaison
services contract with Brown Rudnick because it was acting
pursuant to its statutory obligations as set forth in§
22a-268, and (2) the plaintiff lacked standing because it had
not alleged that it had suffered an antitrust injury or that
it was an efficient enforcer of the antitrust
laws.[7] The defendant also filed a motion to
strike the complaint, contending that the plaintiff had
failed to plead sufficient anticompetitive acts, a relevant
market or harm to the relevant market, but had pleaded harm
only to an individual competitor.
Relying
on Cheryl Terry Enterprises, Ltd. v. Hartford, 270
Conn. 619, 632, 854 A.2d 1066 (2004), in which this court
held that the plaintiff had standing to bring an antitrust
action against the defendant arising from the violation of a
competitive bidding law, the trial court denied the
defendant's motion to dismiss the antitrust claim. The
court granted the defendant's motion to strike, however,
on the ground that the plaintiff had not sufficiently pleaded
injury to competition asa whole in the relevant market.
Specifically, the court concluded that the plaintiff's
conclusory allegations-namely, that, "[o]ver the years,
[the defendant] has not considered any . . . bidder other
than Brown Rudnick for its [liaison services] contract, which
has resulted in the elimination of any competition, ”
and that, "[n]ot only was [the plaintiff] irreparably
damaged, but the general public was damaged by [the
defendant's] anticompetitive actions”-failed to
sufficiently allege injury to competition as a whole in the
relevant market and therefore were insufficient to support
its antitrust claim.
Thereafter,
the plaintiff filed a substituted complaint in which it again
alleged that the defendant had violated the antitrust
act.[8]
The defendant again filed motions to dismiss and to strike
the substituted complaint, in which it incorporated the
arguments that it had made in the previous motions to dismiss
and to strike. The trial court again denied the motion to
dismiss and granted the motion to strike on the grounds that
the plaintiff's new allegations also did not
"sufficiently allege an increase in prices and/or a
reduction in output” as the result of the
defendant's conduct and that the plaintiff again had
"failed to successfully plead an injury to competition
in the relevant market.” The court further concluded
that the plaintiff had not established that it was an
efficient enforcer of the antitrust laws because it had
alleged injury to a market of which it was not a member,
namely, the market of member municipalities.
The
plaintiff then filed a second substituted complaint,
alleging, for a third time, that the defendant had violated
the antitrust act.[9] Yet again, the defendant filed motions to
dismiss and to strike the second substituted complaint in
which it incorporated the arguments that it had made in its
motions to dismiss and to strike the complaint and
substituted complaint. Thereafter, the trial court, sua
sponte, ordered the parties to file supplemental briefs
addressing the following issues: (1) "Whether the court
should construe [the defendant] as the equivalent of the
state of Connecticut, and, therefore, entitled to sovereign
immunity requiring dismissal of the case for lack of subject
matter jurisdiction”; (2) “[w]hether the court
should construe [the defendant] as the equivalent of a
political subdivision of the state of Connecticut, and
therefore a special function governmental unit, under the
Local Government Antitrust Act [of 1984], 15 U.S.C. § 34
et seq. [2012], specifically, 15 U.S.C. § 35, which
provides that no damages may be recovered from a local
government in an antitrust action [and] if so, is the present
case nonjusticiable in that it is not capable of resulting in
practicable relief to the plaintiff”; and (3)
"[i]f the [defendant] is the equivalent of a political
subdivision of the state of Connecticut, is its alleged
anticompetitive behavior exempt under the foreseeability
standard set forth in . . . Lafayette v. Louisiana Power
& Light Co., 435 U.S. 389, 414-15, [98 S.Ct. 1123');">98 S.Ct. 1123,
55 L.Ed.2d 364] (1978) . . . .”[10] In its
supplemental brief in support of its motion to dismiss the
second substituted complaint, the defendant contended that
(1) it was entitled to sovereign immunity because it was
acting on behalf of the state, (2) even if it was not
entitled to sovereign immunity, it was entitled to immunity
under 15 U.S.C. § 35 because it is a political
subdivision of the state, and (3) it was exempt from the
antitrust laws under Lafayette and § 35-31 (b)
because it was carrying out the duties imposed by §
22a-268.
The
trial court concluded that the defendant was not exempt from
the antitrust act under Lafayette and § 35-31
because § 22a-268 did not require the defendant to enter
into a contract for liaison services. Although the trial
court did not expressly address the plaintiff's
contentions that it was entitled to sovereign immunity and
immunity pursuant to 15 U.S.C. § 35, it implicitly
rejected those claims. Accordingly, the court denied the
defendant's motion to dismiss.
With
respect to the defendant's motion to strike, the trial
court noted that the plaintiff had claimed that the
defendant's conduct constituted both a per se violation
of the antitrust act and a violation under the rule of
reason. See, e.g., Bridgeport Harbour Place I, LLC v.
Ganim, 303 Conn. 205, 214-15, 32 A.3d 296 (2011)
("A violation of [antitrust law] generally requires a
combination or other form of concerted action between two
legally distinct entities resulting in an unreasonable
restraint on trade. . . . If a restraint alleged is among
that small class of actions that courts have deemed to have
such predictable and pernicious anticompetitive effect, and
such limited potential for procompetitive benefit, it will be
unreasonable per se . . . . Most antitrust claims, however .
. . are analyzed under a rule of reason analysis which seeks
to determine if the alleged restraint is unreasonable because
its anticompetitive effects outweigh its procompetitive
effects.” [Internal quotation marks omitted.]). The
trial court concluded that the plaintiff had not established
a per se violation of the antitrust act because, although an
agreement between horizontal competing bidders, such as Brown
Rudnick and the plaintiff, constitutes a per se violation;
see, e.g., United States v. Koppers Co., 652 F.2d
290, 294 (2d Cir.) ("[o]ne of the classic examples of a
per se violation of [antitrust laws] is an agreement between
competitors at the same level of the market structure to
allocate territories in order to minimize competition”
[internal quotation marks omitted]), cert. denied, 454 U.S.
1083, 102 S.Ct. 639, 70 L.Ed.2d 617 (1981); an agreement
between entities with a vertical relationship, such as Brown
Rudnick and the defendant, ordinarily does not. See, e.g.,
Business Electronics Corp. v. Sharp Electronics
Corp., 485 U.S. 717, 734, 108 S.Ct. 1515, 99 L.Ed.2d 808
(1988) ("a horizontal agreement to divide territories is
per se illegal . . . while . . . a vertical agreement to do
so is not” [citation omitted]). The trial court further
concluded that the plaintiff had not adequately alleged an
antitrust injury to a relevant market because, as in the
first substituted complaint, its allegations were conclusory
and there was no allegation that the defendant's
conduct" ‘had an actual adverse effect on
competition as a whole in the relevant market of which [the
plaintiff] is a member.' ”
The
trial court also concluded that the plaintiff had not
adequately pleaded that the defendant's conduct violated
the antitrust act under the rule of reason. With respect to
the plaintiff's allegations that the defendant's
conduct had reduced the number of competitors for the liaison
services contract, that municipalities had declined to deal
with the defendant as the result of the poor quality of Brown
Rudnick's services, and that the defendant's conduct
had increased the price for liaison services, which in turn
had led to higher costs for municipalities that dealt with
the defendant, the court concluded that all of these
allegations were "conclusory and legally
insufficient” to establish a prima facie claim of an
injury to competition. Finally, the court concluded that,
even if the plaintiff had adequately pleaded an antitrust
injury, to the extent that establishing that the plaintiff is
an "efficient enforcer” of the antitrust laws is
required under state law, the plaintiff had failed to
adequately plead that element. Accordingly, the trial court
granted the defendant's motion to strike the second
substituted complaint and rendered judgment in favor of the
defendant. This appeal and cross appeal followed.
The
plaintiff contends on appeal that the trial court incorrectly
determined both that the plaintiff had not adequately pleaded
that the defendant's conduct constituted a per se
violation of the antitrust act and that the defendant's
conduct did not violate the antitrust act under the rule of
reason. In response, the defendant contends that the
plaintiff, in failing to appeal from the trial court's
granting of its motion to strike the complaint and its motion
to strike the substituted complaint, waived its right to
challenge the court's ruling under the rule of reason
standard. See Lund v. Milford Hospital, Inc., 326
Conn. 846, 850, 168 A.3d 479 (2017). The defendant further
claims that, even if the plaintiff did not waive that right,
the trial court correctly determined that the plaintiff had
failed to adequately plead an antitrust injury under both the
rule of reason and the per se standard. In its cross appeal,
the defendant contends that the trial court incorrectly
determined that (1) the plaintiff has standing to bring an
antitrust action against the defendant, (2) the
plaintiff's claim is not barred by 15 U.S.C. ยงยง
34 through 36, and (3) the defendant is not exempt from
liability under the antitrust act because it was not acting
in furtherance of its statutory obligations when it entered
into the liaison services contract with Brown Rudnick. We
agree with the defendant that the trial court correctly
determined that the plaintiff failed to plead an antitrust
injury. We ...