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Tremont Public Advisors, LLC v. Connecticut Resources Recovery Authority

Supreme Court of Connecticut

November 12, 2019

TREMONT PUBLIC ADVISORS, LLC
v.
CONNECTICUT RESOURCES RECOVERY AUTHORITY

          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 ...


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