No. 94-139

IN THE SUPREME COURT OF THE STATE OF MONTANA

1995

ISC DISTRIBUTORS, INC.,

Plaintiff and Appellant,

v.

MIKE TREVOR;

BRUCE SWICK;

DEBBIE OWEN;

ROGER FUCHS;

DAVE MARSHALL; RON HEILMAN;

RON ARMSTRONG; SHARON RANSTROM;

SHERRY HANKS; TERRY KRAMER;

JOHN DOES I THROUGH X, AND

JANE DOES I THROUGH X, individually and in ffJ >&L&. ,.

their representative capacity as employees C~~~~c OF 5'

of the State of Montana, SPATE

Defendants and Respondents.

APPEAL FROM: District Court of the Eighteenth Judicial District,

In and for the County of Gallatin,

The Honorable Larry W. Moran, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Michael E. Wheat, Cok, Wheat & Brown,

Bozeman, Montana

Thane P. Johnson, Werner, Epstein & Johnson,

Cut Bank, Montana

For Respondent:

John F. Sullivan, Hughes, Kellner,

Sullivan & Alke, Helena, Montana

Filed:

Submitted on Briefs: June 15, 1995

Decided: August 28, 1995
Justice Terry N. Trieweiler delivered the opinion of the Court.

The plaintiff, ISC Distributors, Inc., filed an amended

complaint in the District Court for the Eighteenth Judicial

District in Gallatin County, in which it alleged that the

defendants, as employees of the State of Montana, violated its

constitutional rights and acted negligently and in bad faith when

they rejected its proposal for a microcomputer term contract. The

District Court granted the defendants' motion for summary judgment

and dismissed the amended complaint. ISC appeals from the District

Court's order granting summary judgment. We affirm in part and

reverse in part the judgment of the District Court.

The issues on appeal are:

1 . Did the District Court err when it held that ISC had an

insufficient property interest upon which to base a claim that it

was denied due process of law in violation of 42 U.S.C. § 1983?

2 . Did the District Court err when it held that ISC's

complaint of arbitrary and unfair treatment was insufficient to

form the basis for a claim that it was denied equal protection of

the law in violation of 42 U.S.C. § 1983?

3 : Did the District Court err when it held that ISC could

not state a claim for damages based on its allegation that the

defendants acted negligently or in bad faith in their

administration of the Montana Procurement Act?

2
FACTUAL BACKGROWD

The District CourtEs order of summary judgment is based on the

plaintiff's uncontroverted complaint, plus additional material

provided by the defendants in support of their motion for summary

judgment. Since the allegations in the plaintiff's complaint were

assumed to be true by the District Court for purposes of its

decision, we will assume them to be true for purposes of this

opinion.

On July 26, 1990, pursuant to the Montana Procurement Act

found at §§ 18-4-101 to -407, MCA, the Montana Department of

Administration (Department) issued a Request for Proposal for

Microcomputer Term Contracts (RFP). It originally established a

deadline of August 29, 1990, for responses, however later extended

that deadline to September 12, 1990, by "Addendum #l." IX

prepared a proposal and submitted it prior to the September 12,

1990, deadline.

ISC was not awarded a contract by the Department. In its

complaint, it alleged that, contrary to the express provisions in

the RFP, the defendants issued a second addendum on September 14,

1990, extending the deadline to October 9, 1990; accepted proposals

from persons who failed to meet the September 12, 1990, deadline;

and eventually awarded the contract to one or more of those

persons.

ISC alleged that the RFP provided for contract awards to the

first and second best applicant in two categories: (1) a category

3
in which cost was to be the most heavily weighted factor; and (2) a

category in which qualifications were to be the most heavily

weighted factor. It alleged that based on the applicable criteria,

it was either firs,t or second in each category but that it was not

awarded a contract because the defendants: (1) based their awards

on criteria not included in the original RFP; (2) disclosed

contents of plaintiff's proposal to competing offerors; (3) failed

to give the plaintiff fair and equal treatment with respect to

discussion and revision of its proposals; and (4) applied

evaluation criteria in an arbitrary and capricious manner.

Based on these allegations, ISC claimed a right to recover

damages pursuant to 42 U.S.C. 5 1983 for deprivation of its

property right without due process, and for violation of its right

to equal protection of the law in violation of the Fifth and

Fourteenth Amendments to the United States Constitution. It also

asserted claims for damages based on the alleged negligence and bad

faith of the defendants during their administration of the Montana

Procurement Act.

The defendants moved to dismiss the original complaint

pursuant to Rule 12(b) (6), M.R.Civ.P. Although that motion was

briefed by both parties, it was not ruled upon by the District

Court. The defendants submitted additional information, including

an affidavit to which relevant portions of the RFP were attached,

and moved for summary judgment. After considering briefs and

arguments from both parties, the District Court granted the

4
defendants' motion for summary judgment and entered judgment for

the defendants.

The District Court concluded that ISC had not stated a claim

based on denial of its right to due process in violation of

42 U.S.C. 5 1983 because under Montana law it had no property right

which was protected. It concluded that ISC had not been denied

equal protection in violation of § 1983 because, at most, it

alleged a violation of the law, rather than an unfair or

discriminatory classification under the law. Finally, the District

Court concluded that ISC could not state a claim for damages based

on the defendants' alleged negligent or improper administration of

the Montana Procurement Act because § 18-4-242, MCA, provides the

exclusive remedy for violations of the Act, and claims for damages

are not included.

ISSUE 1

Did the District Court err when it held that ISC had an

insufficient property interest upon which to base a claim that it

was denied due process of law in violation of 42 U.S.C. § 1983?

Defendants originally moved to dismiss the complaint pursuant

to Rule 12(b) (61, M.R.Civ.P., for failure to state a claim for

which relief may be granted. Although the motion was briefed by

both parties, the District Court did not rule upon the defendants'

motion. In response to ISC's amended complaint, defendants moved

for summary judgment pursuant to Rule 56, M.R.Civ.P. The District

Court granted that motion, but during the course of its opinion

5
intermittently used language which suggested that its opinion was

based on Rule 12(b) (6). A Rule 12(b) (6) order would assume all

facts in the complaint to be true, but conclude that based on those

facts, no legally cognizable claim has been stated. In this case,

a resolution of ISC's due process claim requires consideration of

facts beyond those alleged in its complaint. It is necessary to

consider the criteria set forth in the Departmentls RFP 112-B.

Therefore, we will treat the District Court's decision as an order

granting defendants' motion for summary judgment.

We review a district court order granting summary judgment

based on the same factors considered by the district court. Cooper

V. SistersofChurify (1994), 265 Mont. 205, 207, 875 P.2d 352, 353.

Summary judgment is not appropriate unless there are no issues of

material fact and the moving party is entitled to judgment as a

matter of law. Rule 56, M.R.Civ.P.

ISC contends that because its proposal satisfied the statutory

criteria for the contracts which were ultimately awarded by the

defendants, it had a property interest in those contracts which was

denied arbitrarily and unfairly by the State in violation of ISC's

right to due process, and therefore, in violation of 42 U.S.C.

§ 1983.

42 U.S.C. § 1983 states:

Every person who, under the color of any statute,

ordinance, regulation, custom, or usage, of any State

. . subjects, or causes to be subjected, any citizen of

the United States or other person within the jurisdiction

thereof to the deprivation of any rights, privileges, or

immunities secured by the Constitution and laws, shall be

6
liable to the party injured in an action at law, suit in

equity, or other proper proceeding for redress.

The legal foundation for such a claim is best summarized as

fol.lows:

To prevail. on its due process claim Curtis must

prove that it had a definite liberty or property interest

and that such interest was, under color of state law,

abridged without appropriate process. See Board of Regents v.

Roth < 408 U.S. 564, 569-70, 92 S.Ct. 2701, 2705, 33

L.Ed.2d 548 (1972); Casiasv. CityofRaton, 738 F.2d 392, 394

(10th Cir. 1984) ; vinyardv. King, 728 F.2d 428, 430 (10th

Cir. 1984). The process requirement necessary to satisfy

fourteenth amendment procedural due process comes into

play only after plaintiff has shown that it has a

property or liberty interest. Yinyard, 728 F.2d at 430

n. 5 (citing Roth, 408 U.S. at 569-70, 32 S.Ct. at 2705).

To establish a property interest in a particular benefit,

one must have a "legitimate claim of entitlement" to it.

Roth, 408 U.S. at 571, 92 S.Ct. at 2709. n [Aln abstract

need or desire for it" or a "unilateral expectation" is

insufficient. Id.; see also Logan v. Zimmerman Brush Co. , 4 55 u s .

422, 102 S.Ct. 1148, 71 L.Ed.Zd 265 (1982). Whether such

claim of entitlement exists, and the sufficiency thereof,

is determined "by reference to state law." Bishop v. Wood,

426 U.S. 341, 344, 96 S.Ct. 2074, 2077, 48 L.Ed.2d 684

(1976). However, while the typical claim of entitlement

is based upon "specific statutory or contractual

provisions," it need not be. Casias , 738 F.2d at 394.

Rather, "[a] person's interest in a benefit is a

'property' interest for due process purposes if there are

. . . rules or mutually explicit understandings that

support his claim of entitlement to the benefit and that

he may invoke at a hearing." Perry v. Sindermann , 4 0 8 U. S .

593, 601, 92 s.ct. 2694, 2699, 33 L.Ed.2d 570 (1972).

Curtis Ambulance v. Shawnee County Board of COW+ Commissioners ( 10th Cir . 1987 ) ,

811 F.2d 1371, 1375-76.

ISC relies on a decision from the U.S. District Court for the

Western District of Pennsylvania to SUppOrt its contention that it

ha~ a property interest in the contract award that it sought

7
pursuant to the Montana Procurement Act. Three Rivers Cablevision, Inc. v. City

ofPittsburgh (W.D. Pa. 1980), 502 F. Supp. 1118. In Three Rivers, the

plaintiffs filed suit pursuant to 5 1983 for denial of its right to

due process and equal protection when the City of Pittsburgh

awarded a cable television contract in what that plaintiff

contended was a violation of the city's procurement and awards

process.

That court noted that consideration of whether due process had

been denied required a determination of: (1) whether the

deprivation complained of constituted a liberty or property

interest; and (2) the nature of the process due the complainant.

Three Rivers, 502 F. Supp. at 1128. It concluded that a party cannot

establish a proper.ty interest in a procedure itself. Therefore, a

protected interest must be found in the benefit that the

complainant seeks to have regulated by that procedure, i.e., the

award of the contract. Three Rivers, 502 F. Supp. at 1128-29. To

determine whether the plaintiff established a property interest in

that contract award, that court considered the local city code,

which provided that the city had the right to reject all bids, but

also that if a contract was awarded, it would be awarded to the

lowest responsible bidder. That court concluded that a narrowdimension property interest existed which was the right of the

lowest responsible bidder who complied with the relevant

specifications to receive the contract, once the city decided to

award a contract pursuant to the proposal process. The court held

8
that the plaintiff satisfied the requisite criteria, and was the

lowest responsible bidder. Therefore, that plaintiff had a

property interest in the contract award. Three Rivers, 502 F. Supp.

at 1130-32.

Based on the rationale set forth in ThreeRivers, ISC contends

that Montana's Procurement Act confers the requisite property

interest to state a claim for denial of due process in violation of

42 U.S.C. § 1983. It contends that pursuant to § 18-4-304(7), MCA,

the defendants' discretion for awarding the contracts in question

was limited to the criteria set forth therein; that because IX

satisfied those criteria, it had a property interest in the

contract award; and that because the defendants awarded contracts

to others in arbitrary disregard for those criteria they violated

ISC's right to due process of law.

The defendants respond that the decision in ThreeRivers is a

minority view; that the result in ThreeRivers is inconsistent with

prior Montana case law which held that unsuccessful bidders lacked

standing to challenge the award of a government contract; and that

even if this Court was to follow the ThreeRivers rationale, it is

inapplicable to the facts in this case because there was no

statutory requirement that a contract be awarded to the lowest

bidder.

The defendants correctly note that other jurisdictions

disagree whether the District Court for the Western District of

Pennsylvania was correct when it held that an unsuccessful bidder

9
can establish a property interest in a contract award which is

protected by the due process clause. Compare f’ataulu Electric Membership

f&p. v. Whitworth (11th Cir . 1992), 951 F.2d 1238, 1242-43; Anderson-Myers

C!o.,Inc. v.Roach (D. Kan. 1987), 660 F. Supp. 106, 111; with Szabo Food

Service, Inc. Y. Canteen Corp. (7th Cir. 1987), 823 F.2d 1073 , lOB1; Sowell's

MeotsandSevvices,Inc. v.Mc&vain (4th Cir. 1986), 799 F.2d 226, 22s; ARA

Services, Inc. v. School Dist. ofPhiiade@hia (E. D . Pa. 1984 ) , 5 go F . Supp. 622

629.

other courts have held that a government agency's reservation

of the right to reject any and all bids provides sufficient

discretion to preclude a constitutionally protected property

interest in a contract award. Kim Construction Co., Inc. v. Board of Trustees

(7th Cir. 1994), 14 F . 3 d 12 4 3 , 12 4 6 - 4 7 ; Teton PIunzbing and Heating CO., ~nc.

v.SchoolDist.No.1 (Wyo. 19891, 763 P.2d 843, 849-50.

However, based on the procurement statute with which we are

concerned in this case, it is not necessary that we choose between

the ThreeRivers decision and its detractors. We have previously held

in Akhtar v. Van De W&rifIg (1982), 197 Mont. 205, 218, 642 p.2d 149,

'-56, that a public official's discretion may prevent the creation

f a property right sufficient to support a claim that due process

as denied in viol.ation of 5 1983. In that case we recognized

lat:

TO have a property interest in a benefit a person

clearly must have more than an abstract need or desire

for it. He must have more than a unilateral expectation

10
of it. He must, instead, have a legitimate claim of

entitlement to it.

Akhtar , 642 P.2d at 153 (quoting Roth, 408 U.S. at 577).

Other courts have also held that a constitutionally protected

property right cannot be established based on a statutory scheme in

which the governmental agency has considerable discretion to award

or withhold a benefit. Szabo, 823 F.2d at 1080-81; Sowd’sMeats, 788

F.2d at 228-29. Absent a property interest, courts will not review

the merits of a due process claim. Kim Construch’on , 14 F.3d at 1246.

Here, ISC bases its claim on Montana's procedure for receiving

and considering "competitive sealed proposals" which is set forth

at § 18-4-304, MCA. Subsection (7) of that statute provides:

The award must be made to the responsible offeror

whose proposal is determined in writing to be the most

advantageous to the state, taking into consideration

price, including the preference in 18-l-102, and the

evaluation factors set forth in the request for

proposals. No other factors or criteria may be used in

the evaluation.

Advantageous is defined by Administrative Rule as "a judgmental

assessment of what is in the state's best interest." Rule 2.5.201,

The request for proposals in this case provided that contracts

would be awarded based upon the applicant's qualifications, a

technical evaluation, and a cost analysis. However, the RFP also

stated that the Department reserved the right to reject any

proposal based on what it concluded were the State's "best

interests."

11
While 5 18-l-102, MCA, provides a preference to residents,

that is only one factor that must be considered, and there is no

record in this case which would indicate that that preference was

misapplied.

Therefore, we conclude that unlike the procurement laws on

which the ThveeRivers decision was based, the defendants in this case

were not required to award a contract to the "lowest bidder," nor

were they absolutely required to award a contract based on any

other sufficiently objective basis that a property interest was

created which would support a due process claim pursuant to

42 U.S.C. § 1983. The defendants were simply required to award

contracts based on what they subjectively concluded was in the

State's best interest after taking into consideration various

factors, including quality, expense, and technical adequacy.

Neither the statutory nor regulatory criteria, nor the RFP, limited

the defendants' discretion to a sufficient extent to create a

property right pursuant to the ThreeRivers decision, or any of its

progeny. For that reason, and based on our prior conclusion that

a property right will not exist where there is broad discretion

involved in the award of a benefit, we affirm the District Court's

order dismissing IX's claim that it was denied due process of law

in violation of 42 U.S.C. § 1983.

ISSUE 2

Did the District Court err when it held that ISC's

complaint of arbitrary and unfair treatment was insufficient to

12
form the basis for a claim that it was denied equal protection of

the law in violation of 42 U.S.C. § 1983?

ISC contends that because it alleged that the defendants

applied the Montana Procurement Act unfairly and in a

discriminatory fashion, the District Court erred when it held that

it had not stated a claim that it was denied equal protection in

violation of 42 U.S.C. 5 1983. ISC relied on the ThreeRivers decision

to support its claim.

The State responds that violations of state law, or arbitrary

application of state law, do not give rise to a claim that the

Equal Protection Clause of the Fourteenth Amendment to the United

States Constitution has been violated. The defendants contend that

the substance of ISC's claim is that the defendants have misapplied

state law and that pursuant to the U.S. Supreme Court's decision in

Beck v. Washington ( 19 62 ) , 369 U.S. 541, 554-55, 82. S. Ct. 955, 962-63,

8 L. Ed. 2d 98, 110, misapplication of state law is not an equal

protection violation.

In Three Rivers, the Federal District Court held that unequal

application of an otherwise facially neutral bidding provision

clearly states a § 1983 claim for denial of equal protection. Three

Rivers, 502 F. Supp. at 1133.

However, we agree with the ,District Court for the Eastern

District of Pennsylvania when it held in ARA Services, Inc., that:

The function of the equa~l protection clause ‘is to

measure the validity of classifications created by state

1 3
laws. ’ Parham v. Hughes, 441 U.S. 347, 358, 99 S.Ct. 1742,

1749, 60 L. Ed. 2d 269 (1979). . . .

I .

An equal protection claim fails when it 'at most

amounts to an allegation that state law was misapplied in

[anI individual case.' Shortv. Garrison, 678 F.2d 364, 368

(4th Cir. 1982). The Supreme Court has made clear that

the misapplication of state law alone does not constitute

invidious discrimination in violation of the equal

protection clause; I[wlere it otherwise, every alleged

misapplication of state law would constitute a federal

constitutional question.' Beckv. Washington, 369 U.S. 541,

554, 555, 82 S.Ct. 955, 962-63, 8 L.Ed.Zd 98 (1962).

Although the plaintiffs have attempted to couch their

claim in equal protection language, it is clear that they

are, in essence, asserting that state law was misapplied

in their case. This Court does not find in the equal

protection clause the authority to review for

constitutional error a decision of a local or state

governmental body merely because the decision is alleged

to be arbitrary or unlawful. The contention that the

plaintiffs are members of a class of everyone who has had

the law misapplied in particular cases, even assuming it

were supported by some allegation in the complaint,

merely suggests that others might have state law, but not

federal constitutional, claims. The plaintiffs have

failed to state a claim for violation of the equal

protection clause of the Fourteenth Amendment.

ARA Services, 590 F. Supp. at 629-30.

We conclude that the plaintiff has, at most, alleged that

state law was misapplied to it as an individual in an isolated

incident. It does not allege that it has been discriminated

against as a member of any definable class, nor that state law has

been misapplied based on class distinction. For these reasons, we

conclude that as a matter of law, ISC has not stated a claim for

denial of its federal right to equal protection in violation of

42 U.S.C. § 1983, and we affirm the District Court's order granting

14
summary judgment to the defendant which dismissed ISCIS claim which

was based on the Equal Protection Clause.

ISSUE 3

Did the District Court err when it held

state a claim for damages based on its a

defendants acted negligently or in bad

administration of the Montana Procurement Act'

that ISC could not

Ilegation that the

?

faith in their

The District Court held, and the defendants ask that we

affirm, that ISC cannot recover damages based on its allegation

that the defendants administered the Montana Procurement Act in bad

faith and negligently because the exclusive remedy for

misapplication of the Act's provisions is § 18-4-242, MCA.

However, to do so would require that we ignore the plain language

of the Act,

Although 5 18-4-242, MCA,is entitled "Remedies Prior to and

After Award,' we have held that the title of a statute is

subordinate to its text in determining its effect. Manufacturing

Acceptance Corp. v. Krsul ( 19 6 8 ) , 151 Mont. 28, 35, 438 P.2d 667, 671. The

text of 5 -242 does not, in fact, provide any remedy to ISC.

Instead, it provides in relevant part that:

(1) If a solicitation or award of a contract is in

violation,of law, the decartment may apply the remedies

provided in subsections (2) and (3).

!2) ,If Prior to award it is determined that a

solicitatron or proposed award of a contract is in

violation of law, the solicitation or proposed award must

be:

(a) canceled; or

(b) revised to comply with the law.

15

_.i______
(3) (a) If after an award it is determined that a

solicitation or award of a contract is in violation of

law and the person awarded the contract has not acted

fraudulently or in bad faith, the contract may be:

(i) ratified and affirmed, provided it

determined that doing so is in the best interests of tkz

state; or

(ii) terminated, and the person awarded the contract

must be compensated for the actual expenses reasonably

incurred under the contract, plus a reasonable profit,

prior to the termination.

(b) If after an award it is determined that a

solicitation or award of a contract is in violation of

law and the person awarded the contract has acted

fraudulently or in bad faith, the contract may be:

(i) declared void; or

(ii) ratified and affirmed if such action is in the

best interests of the state, without prejudice to the

state's rights to appropriate damages.

(Emphasis added.)

Section 18-4-122, MCA, which lists the purposes of the Montana

Procurement Act states, on the other hand, that:

The underlying purposes and policies of this chapter are

to:

i5j 'ensure the fair and equitable treatment of all

persons who deal with the procurement system of the

state;

. . . .

(8) provide safeguards for the maintenance of a

procurement system of quality and integrity.

Toward that end, the Legislature has provided in 5 18-4-131,

MCA, that:

(I) Unless displaced by the particular provisions of this

chapter, the principles of law and equity, including the

Uniform Commercial Code, the law merchant, and law

relative to capacity to contract, agency, fraud,

misrepresenta,tion, duress, coercion, mistake, or

bankruptcy, supplement the provisions of this chapter,

except that writs of mandamus and prohibition issued

pursuant to Title 27, chapters 26 and 27, may not be used

as a remedy for violations of this chapter.

16
(2) This chapter requires all parties involved in

the negotiation, performance, or administration of state

contracts to act in good faith.

The District Court held that 5 18-4-242, MCA, displaced the

remedies provided for in 5 18-4-131, MCA. However, when

interpreting statutes, courts may not insert what has been omitted

or omit what has been inserted. Section l-2-101, MCA. Likewise,

courts must construe a statute based on its plain meaning. State ex

rel. Woodahl v. District Court (1973) , 162 Mont. 283, 292, 511 P.2d 318, 323.

The plain language of § 18-4-242, MCA, does not suggest that

it was intended to displace other remedies for abuse of the

procurement process which may be available based on principles of

law and equity. In fact, the plain language of § -242 suggests the

contrary. It limits remedies to those which may be taken by "the

department.l' It provides no remedy for irregularities which may

have been engaged in by "the department." Furthermore, the

remedies provided for in § -131 are much more expansive than those

provided for in § -242. It makes no sense that the Legislature

would wipe them out several sections later without ever expressly

stating that it had done so. Finally, because § -242 provides no

method of enforcement by individuals who have been adversely

affected by misapplication of Montana's Procurement Act, it does

nothing to further the purposes of the Act which are set forth in

5 18-4-122(5) and (8), MCA. It would be impossible to "ensure the

fair and equitable treatment of all persons who deal with the

procurement system" if the only party capable oft enforcing the

17
system’s requirements was the party accused of abusing those

requirements.

The defendants argue, and the District Court agreed, that

because of our prior decisions in Bakerv.State (19851, 218 Mont. 235,

707 P.2d 20, and Stateexrel.Stuewev.Hindson (1912), 44 Mont. 429, 120 P.

485, ISC lacks standing to sue for damages under the Montana

Procurement Act. However, neither case is applicable. Stuewe did

not involve a claim for damages; both cases involved claims for

mandamus, which are specifically barred by 5 18-4-131, MCA; and

neither involved a claim under Chapter 4 of the Montana Procurement

Act, which specifically preserves "legal and equitable remedies."

Stuewe involved a bid submitted to the Lewis and Clark County

Commissioners to provide services for care of the poor, sick, and

infirm. William Stuewe was an unsuccessful bidder and brought an

action in mandamus to compel the Board to rescind its award to

another bidder and award the contract to him. We held that because

the County had the authority to reject all bids, or any bid, there

was no absolute duty on the part of the Board to accept any bid,

and therefore, that mandamus will not lie to compel the County to

act. We based that holding on our conclusion that mandamus is only

available to enforce a well-defined right for which there is no

other specific legal remedy.

In Baker, the State Division of Architecture and Engineering

invited bids for the construction of the National Guard Armoxy in

Harlowton pursuant to Title 18, Chapter 2, of the Montana Code

18
Annotated. Baker was an unsuccessful bidder and brought an action

to have the award to another set aside and the contract awarded to

him. He also sought damages for misapplication of the construction

contract statutes. We held, based on our prior decision in Sletten

ConshwctionCo. v. CityofGreatFalls (1973), 163 Mont. 307, 516 P.2d 1149,

that "the discretion of the agency to award public work contracts

to the lowest bidder is not subject to judicial review under normal

circumstances" absent "bad faith, fraud, or corruption of the

department . . . .'I Baker, 707 P.2d at 24.

S&ten stood only for the broad general principle that an

unsuccessful bidder has no standing in mandamus or otherwise to

control the exercise of discretion by a governmental agency for

awarding contracts to one of several bidders. Baker is

distinguishable from this case for several reasons: (1) Chapter 2

of Title 18 pertains to construction contracts, rather than the

Montana Procurement Act, and includes no provision comparable to

§ 18-4-131, MCA, which preserves legal and equitable remedies;

(2) mandamus is specifically precluded by 5 18-4-131, MCA, and

therefore, not sought by ISC; (3) ISC's claim is based on an

alleged failure to act in good faith, which is specifically

required by § 18-4-131(Z), MCA. As noted by the Court, bad faith

was not alleged in Baker.

Section 18-4-131(l), MCA, provides that "the principles of law

. . . supplement the provisions" of the Montana Procurement Act,

and subsection (2) requires that all parties involved in the

19
,

administration of the Act "act in good faith." ISC'S claim for

damages based on its allegation of negligence is founded in

principles of law; and its claim based upon failure to act in good

faith is based on an alleged violation of the obligation

specifically imposed on the defendants by statute. We conclude

that these provisions of the Montana Procurement Act are not

displaced by the later provision in 5 18-4-242, MCA, which

authorizes the Department to pursue rescission-like remedies where

it concludes that a solicitation has been submitted or a contract

awarded in violation of law. Neither are these remedies precluded

by our prior decisions in S&ewe and Baker. For these reasons, the

judgment of the District Court which dismissed ISC's claims based

on negligence and bad faith is reversed, and this case is remanded

to the District Court for further proceedings consistent with this

opinion.

We concur:

Chief Justice
Justices

~hf~ ,

&~.s&,-

District tiurt judge Marge Johnson

sitting for Justice James C. Nelson

21
Justice Fred J. Weber dissents as follows:

I concur in the opinion's resolution of Issues I and 2. I

dissent on Issue 3, in which the opinion concludes that the

District Court erred when it held that ISC could not state a claim

for damages based on its allegations that the defendants acted

negligently or in bad faith in their administration of the Montana

Procurement Act.

Under Issue 3, the opinion sets forth the text of § 18-4-242,

MCA, in "relevant part." Such relevant part does not include

subsection (4) which I believe to be critical to the decision.

Following is the complete text of 5 18-4-242, MCA:

18-4-242. Remedies prior to and after award. (1)

If a solicitation or award of a contract is in violation

of law, the department may apply the remedies provided in

subsection (2) and (3).

(2) If prior to award it is determined that a

solicitation or proposed award of a contract is in

violation of law, the solicitation or proposed award must

be:

(a) canceled; or

(b) revised to comply with the law.

(3) (a) If after an award it is determined that a

solicitation or award of a contract is in violation of

law and the person awarded the contract has not acted

fraudulently or in bad faith, the contract may be:

(i) ratified and affirmed, provided it is determined

that doing so is in the best interests of the state; or

(ii) terminated, and the person awarded the contract

must be compensated for the actual expenses reasonably

incurred under the contract, plus a reasonable profit,

prior to the termination.

(b) If after an award it is determined that a

solicitation or award of a contract is in violation of

law and the person awarded the contract has acted

fraudulently or in bad faith, the contract may be:

(i) declared void; or

(ii) ratified and affirmed if such action is in the

bet interests of the state, without prejudice to the

state's rights to appropriate damages.

(4) In the event the matter is reviewed bv a court,

the court may apply the same remedies provided in

subsections (2) and (3). (Emphasis supplied.)

22
In analyzing the foregoing statute, the opinion states that

the plain language of § -242 does not suggest that it was intended

to displace other remedies for abuse of the procurement process

which may be available based upon principles of law and equity. It

incorrectly states that § -242 limits remedies to those which may

be taken by "the department." Finally, it states that because the

section provides no method of enforcement by individuals who have

been adversely affected by the Act, it does nothing to further the

purposes of the Act. I disagree with those conclusions when the

entire Act, and in particular subsection (4) of 5 -242, is

considered. Subsection (4) provides that in the event the matter

is reviewed by a court, the court may apply the same remedies

provided in subsections (2) and (3). Clearly a remedy was provided

to the plaintiff in this case which could have sued under § -242 to

enforce the remedies therein provided. As a result, I disagree

with the conclusion that it is impossible to ensure a fair and

equitable treatment if the only party capable of enforcing the

requirements was the party accused of abusing those requirementsthat conclusion is negated by subsection (4).

I will analyze § 18-4-242, MCA, taking into consideration the

allegations on the part of the plaintiff. Under the negligence

count of the amended complaint, the plaintiff in substance alleged

that the defendants failed to exercise ordinary care in awarding a

contract under the RFP. In substance, plaintiff contended that

defendant Swick issued a second addendum on September 14, 1990, two

days after the date of the deadline for receipt of proposals which

"extended" the deadline for proposals to October 9, 1990.

23
Apparently that is a key part of the negligent conduct claim, In

addition, plaintiff pleaded that the defendants failed to award the

contract because of their conduct in using improper evaluation

criteria, failed to ensure nondisclosure of the contents of

plaintiff's proposal, intentionally discriminated against the

plaintiff and applied evaluation criteria to plaintiff's proposal

in an arbitrary and capricious manner. In a similar manner, in

count VI of its complaint, plaintiff alleged that the action of the

defendants in sending plaintiff the RFP gave rise to a justifiable

expectation on the part of the plaintiff that defendants would act

reasonably and negotiate in good faith, pursuant to and required by

§ 18-4-131, MCA. Defendants' conduct was unreasonable and a breach

of their duty to negotiate in good faith.

I will discuss the foregoing aspects of the complaint as

provided by the Act. In doing so, I will refer to the right of

both the department and the court to apply the remedies of § -242.

Subsection (l), (and by inference made in subsection (4)) of § -

242, provide that if an award of a contract is in violation of law,

the department or the court may apply the remedies in subsection

(2) or (3). Clearly the allegations of negligence and bad faith in

the plaintiff's complaint are in violation of the principles of law

and equity and the law relative to the capacity to contract as well

as the law of fraud, all referred to in § 18-4-131, MCA. As a

result, under subsection (2) of 5 -242, if prior to the award, the

plaintiff had objected, either the department or the court could

have determined that the proposed award was in violation of law at

24
which time the proposed award would have to have been cancelled or

revised to comply with law.

In a similar manner, under subsection (3)(a) of § -242, if

after an award was made, the plaintiff had made the same

complaints, then either the department or the court could have

determined that the award was in violation of law. At that point,

if the party awarded the contract had not acted either fraudulently

or in bad faith--none of which is alleged in the complaint--the

contract may be ratified and affirmed by either the department or

the court if it is determined that it is in the best interests of

the state; or, either the department or the court may terminate the

contract and the party awarded the contract would be entitled to

actual expenses as listed.

On the other hand, under subsection (3) (b), if after the award

was made, either the department or the court determined that the

award was in violation of law and that the party awarded the

contract had acted fraudulently or in bad faith, the department or

the court may declare the contract void or ratify or affirm the

contract if it is in the best interests of the state without

prejudice to the state's rights to appropriate damages. I here

emphasize that the only provision in § -242 with regard to damages

is in subsection (3) (b), where the State is given the right to

appropriate damages if the person awarded the contract has acted

fraudulently or in bad faith.

Clearly § -242 gave the plaintiff the right to seek to enforce

its terms by plaintiff's request made to the department, or in the

alternative, by its request made to the District Court. Plaintiff

25
I

chose not to do so. As a result, plaintiff has disregarded the

provisions of § -242.

The District Court pointed out that plaintiff's argument with

regard to its claim for damages is misplaced because the principles

of law and equity which supplement the Procurement Act do not

include damage remedies, and § 18-4-131(l), MCA, begins with the

phrase which states that the general provisions of law and equity

apply "unless disulaced by the particular provisions of this

chapter . . .'I The District Court correctly concluded that § 18-4-

242, MCA, provides such a displacement. Clearly the remedies set

forth in that section apply both prior to and after award of a

contract. The District Court pointed out that plaintiff contended

that Baker recognizes a damage award is allowed in cases in which

bad faith is alleged. First of all we point out that under Baker

v. State (1985), 218 Mont. 235, 239, 707 P.2d 20, 23, this Court

stated:

The policy behind the bidding statute also precludes

any finding of standing for Baker to bring the action.

The statute's primary function is to benefit the

citizens. This premise is stated in 72 C.J.S.,

suppplement, Public Contracts 5 8 (1975) :

"Competitive bidding statutes are primarily

intended for the benefit of the public rather

than for the benefit or enrichment of bidders,

and consideration of advantages o r

disadvantages to bidders must be secondary to

the general welfare of the public . . .'I

Baker then quoted from Stuewe v. Hindson (1912), 44 Mont. 429, 437,

120 P. 485, 487, where this Court stated:

The provisions of law for lettinq contracts of this

character to the lowest bidder is for the benefit of the

public, and does not confer any right upon the lowest

bidder as such. (Emphasis in original.)

26
Finally, in Baker, this Court made the following additional

statements:

In addition, we have held that the discretion of the

agency to award public work contracts to the lowest

bidder is not subject to judicial review under normal

circumstances. Sletten Construction Co. . . . We will

not make a contract for the parties. Nor is this Court

prepared to venture that Baker would have been awarded

the contract if Edsall was not the successful bidder. In

the absence of any showing of bad faith, fraud, or

corruption of the Department, the exercise of discretion

will not be disturbed. (Emphasis supplied.)

Baker, 707 P.2d at 24. I do not find allegations in the

plaintiff's complaint sufficient to demonstrate that there was bad

faith, fraud or corruption by the Department which required that

the exercise of the Department's discretion should be disturbed.

In any event, even if there were such bad faith, fraud or

corruption, under the specific provisions of the Procurement Act

here applicable, the proper remedy was under 5 -242, as previously

discussed.

I further disagree with the opinion's conclusion that Baker is

distinguishable because Chapter 2 of Title 18, pertaining to

construction contracts, is not comparable to the Montana

Procurement Act. Under the quotation from Chapter 2, Title 18 in

Baker, it is clear that the contract must be awarded to the lowest

bidder, a much more restrictive provision than that applicable in

the Montana Procurement Act.

I would therefore affirm the conclusion of the District Court

that competitive bidding statutes are intended for the benefit of

the public rather than for the benefit or enrichment of bidders and

that to allow damage remedies would require that the public be

forced to pay twice for the same goods and services. The District

27
I

Court properly concluded that the appropriate remedies are the

rescission-like remedies contained in 5 18-4-242, MCA. I agree

with that conclusion of the District Court. I would therefore

affirm the order of the District Court which held that the amended

complaint failed to state a claim upon which relief could be

granted.

Chief Justice J.A. Turnage concurs i

District Court Judge Katherine R. Curtis,

William Leaphart,

sitting for Justice W.

concurs in the foregoing dissent.

28
I

DISTRICT JUDGE MARGE JOHNSON, specially concurring:

I specially concur in the opinion authored by Justice

Trieweiler in this matter. I agree with the reasoning in the

majority opinion, but wish to add the following points in response

to the dissenting opinion.

Sections 18-4-131, M.C.A., and 18-4-24.2, M.C.A., were enacted

into law in 1983 as part of the same Act of the Legislature. The

interpretation of S; 18-4-242 urged by the dissenters makes 9 18-4-

131(1) completely unnecessary and of no effect. The dissenters

argue that 5 18-4-242, M.C.A., affords the exclusive remedies for

violations of the Montana Procurement Act. Section 18-4-131(l)

provides:

Unless displaced by the particular provisions of this

chapter, the principles of law and equity, including the

Uniform Commercial Code, the Law Merchant, and law

relative to capacity to contract, agency, fraud,

misrepresentation, duress, coercion, mistake, or

bankruptcy, supplement the provisions of this chapter,

except that writs of mandamus and prohibition issued

pursuant to Title 21, Chapters 26 and 27, may not be used

as a remedy for violations of this chapter.

Under the interpretation offered by the dissenters, 9 18-4-242

completely displaces other provisions of law itemized in 5 18-4-

131, and also renders the final clause of that provision

unnecessary, since g 18-4-242 clearly does not permit either the

writs of mandamus or prohibition to be used for violations of the

Montana Procurement Act.

It is a fundamental rule of statutory construction, which has

long been endorsed by this Court, that it is the duty of this Court

to interpret individual sections of an act in such a manner as to

ensure coordination with the other sections of the act. Howell v.

State, 263 Mont. 275, 286-287, 868 P.2d 568 (1994). This Court

29
must presume that the legislature would not pass meaningless

legislation, and must harmonize statutes relating to the same

subject, as much as possible, giving effect to each. Crist v.

Segna, 191 Mont. 210, 212, 622 P.2d 1028 (1981). This Court must

construe subsections of a statute in a manner that will give effect

to them all, reconciling conflicting or apparently conflicting

statutory provisions and making them all operative in accordance

with the legislative intent, insofar as it is possible to do so.

Schendel v. Board of Adjustment, 237 Mont. 278, 284, 774 P.2d 379

(1989).

TO hold that 8 18-4-242, M.C.A., provides the exclusive

remedies afforded by law under the Montana Procurement Act for

violation of that Act, renders § 18-4-131(l), M.C.A., completely

unnecessary. If the legislature intended to permit no other

remedies, the legislature could and should have omitted s 18-4-131,

M.C.A. It did not choose to do so, and this Court has no authority

to do so. By doing so, this Court would be substituting its own

judgment for that of the legislature.

Additionally, S 18-4-242, M.C.A., by its own terms permissive

rather than mandatory, and is not intended to provide exclusive

remedies. Section 18-4-242(4) states that: "In the event the

matter is reviewed by a court, the court may apply the same

remedies provided in (2) and (3)." If the legislature intended the

remedies of 6 18-4-242, M.C.A., to be exclusive, it could easily

have used the word "shall" or "must", which are interpreted to be

mandatory, rather than permissive. Gaustad v. City of Columbus,

265 Mont. 279, 381-382, 877 P.2d 470, 471 (1994) (The word "may" is

commonly understood to be permissive or discretionary; in contrast,

3 0
"shall" is understood to be compelling or mandatory.) The use of

the permissive language in this statute, coupled with the enactment

at the same time of § 18-4-131, M.c.A., which lists a number of

other possible remedies, refutes the dissent's claim that $ 18-4-

242, M.C.A., completely displaces those provisions listed in 5 18-

4-131(l), M.C.A.

Finally, the dissent also argues that the Plaintiffs have no

standing 218 Mont. 235, 707 P.2d 20 (1985). It is important to

note that the Baker decision was not decided under the Montana

Procurement Act, but rather under an act that does not include the

kinds of provisions found in 5 18-4-122, M.C.A., stating the

specific purposes of the Montana Procurement Act. Baker was

therefore decided ,under common law principles of longstanding in

this state which are appropriately applied absent any legislative

statement of purpose to the contrary. Under those common law

principles, an unsuccessful bidder, regardless of the reason for

the lack of success, lacks standing to bring an action challenging

the bidding process. Section 18-4-122, M.C.A., provides the

underlying purposes and policies of the Montana Procurement Act,

which include the purposes to:

(4) Provide for increased public confidence in the

procedures followed in public procurement;

(5) Ensure the fair and equitable treatment of all

persons who deal with the procurement system of the

state;

. . .

(8) Provide safeguards for the maintenance of a procurement

system of quality and integrity. [Emphasis added].

By enacting these specified purposes into law for bidding

procedures which occur under the Act, the legislature has adopted

31
purposes not consistent with the common law rule denying "persons

who deal with the procurement system of the state" any standing to

challenge violations of the Act. Section l-2-103, M.C.A., requires

that statutes which are in derogation of the common law must be

liberally construed with a view to effect their objects and to

promote justice. Where a conflict arises between the common law

and a statute, the common law must yield.. Hansen v. Utah State

Retirement Board, _ Utah -, 652 P.2d 1332, 1337 (1982). Given

the purposes enunciated in 8 18-4-122, M.C.A., there is no basis

for applying the common law rule applied in Baker, and denying this

plaintiff standing to proceed.

Marge tihnson, District Court Judge

We concur :

32
August 29, 1995

CERTIFICATE OF SERVICE

I hereby certify that the following certified order was sent by United States mail, prepaid,

to the following named:

Michael E. Wheat, Esq.

Cok, Wheat & Brown

P.O. Box 1105

Bozeman, MT 59771-1106

Thane P. Johnson

Werner, Epstein & Johnson

P.O. Box 428

Cut Bank, MT 59427

John F. Sullivan, Esq.

Hughes, Kellner, Sullivan & Alke

P.O. Box 1166

Helena, MT 59624-1166

ED SMITH

CLERK OF THE SUPREME COURT

STATE OF MONTANA