Opinion ID: 1622303
Heading Depth: 1
Heading Rank: 1

Heading: facts and proceedings in the administrative agency and the chancery court

Text: ¶ 2. Electronic Data Systems Corporation (EDS) had served as the fiscal agent for the Mississippi Division of Medicaid (DOM) since 1994. DOM is but one of many state administrative agencies required to procure personal and professional services, such as fiscal agent services, pursuant to the State of Mississippi Personal Service Contract Procurement Regulations (PSCPR), which provides that the contracting for such services may be accomplished by (1) Competitive Sealed Bids, (2) Competitive Sealed Proposals, (3) Small Purchases, (4) Sole-Source Procurement, or (5) Emergency Procurement. [1] ¶ 3. EDS was initially awarded the DOM fiscal agent contract in 1994 using the sole-source procurement method. [2] The primary task of the DOM fiscal agent is to maintain and operate DOM's Medicaid Management Information System (MMIS), which consists of computer hardware and software used to process the numerous Medicaid claims from providers of medical care and services for the medical care and services furnished to recipients under the medical assistance program. ¶ 4. Helen Wetherbee (Wetherbee) was the DOM Executive Director until August 13, 1999. While Wetherbee was Executive Director of DOM, she was responsible for submitting to the Health Care Financing Administration (HCFA), the federal source of financial assistance, DOM's Advanced Planning Document (APD) for certain vendor services. An APD is a concise written plan of action submitted by a state division of Medicaid seeking federal funding from HCFA to determine need, feasibility and cost factors for the acquisition of automatic data processing equipment or services. The APD submitted by Wetherbee was dated May 4, 1999, and sought permission from HCFA to request proposals for Fiscal Agent services for the period January 1, 2001, through June 30, 2005. HCFA approved the DOM's APD on May 18, 1999. Upon receiving HCFA approval of its previously submitted APD, DOM prepared and issued a Request for Proposal (RFP) on July 1, 1999, inviting vendor proposals for the contract to serve as DOM's fiscal agent. [3] Three parties submitted proposals in response to the RFP, EDS (the incumbent), Unisys, and Consultec, LLC (Consultec). [4] However, none of these parties met the minimum technical scores for the RFP, and thus the procurement was cancelled by the Governor. DOM provided notice to HCFA of the cancellation of the 1999 fiscal agent procurement. EDS's contract was to expire by its terms on December 31, 2000; therefore, because no new contract was awarded from the 1999 RFP, DOM extended EDS's contract through December 31, 2001. ¶ 5. After leaving DOM, Wetherbee went to work in the private sector before accepting a position as Consultec's Account Manager in early 2001; however, employment with Consultec was contingent upon Consultec being awarded the DOM contract. As a potential account manager, Wetherbee was required to participate during portions of Consultec's preparation and presentation of materials in the oral interview process in the bid for DOM's fiscal agent contract. ¶ 6. Under a new agency administration with Rica Lewis-Payton (Lewis-Payton) serving as executive director, DOM, as required by federal regulations, submitted to HCFA the 2000 RFP for review and approval. By letter dated August 25, 2000, HCFA approved the 2000 RFP and thus, a new RFP was once again issued on September 8, 2000, seeking vendor proposals for the DOM fiscal agent contract to render services commencing on January 1, 2002. However, the new RFP was issued under the same APD which had been utilized in issuing the 1999 RFP. DOM did not submit another APD or an APD update to HCFA because, according to DOM officials, the federal funding limits had already been established. This time only EDS and Consultec submitted bids. ¶ 7. On March 9, 2001, DOM stated its intent to award the fiscal agent contract to Consultec, which would take over the fiscal agent services on January 1, 2002, while EDS would continue to serve out its contract extension. Lewis-Payton informed the Personal Services Contract Review Board (PSCRB or the Board) that there was little difference between the proposals submitted by EDS and Consultec. However, Lewis-Payton stated Consultec submitted a bid $20 million lower than that submitted by EDS. Consultec stated this bid was a rock bottom price with the expectation that it would receive additional revenue from future enhancements of the contract. ¶ 8. As required by statute, DOM sought the approval of the PSCRB. Pursuant to Miss.Code Ann. § 25-9-120(3)(b), the PSCRB has the authority and responsibility to [a]pprove all personal and professional services contracts involving the expenditures of funds in excess of One Hundred Thousand Dollars ($100,000.00). [5] The PSCRB also provides the standards for the issuance of requests for proposals, the evaluation of proposals received, consideration of costs and quality of services proposed, contract negotiations, the administrative monitoring of contract performance by the agency and successful steps in terminating a contract. Id. § 25-9-120(3)(e). The PSCRB is also statutorily obligated to [d]evelop standards with respect to contractual services personnel which require invitations for public bid, requests for proposals, record keeping and financial responsibility of contractors.... Id. § 25-9-120(3)(c). The PSCRB may, in its discretion, reserve the right to reject any or all bids. Id. ¶ 9. On March 15, 2001, the Board considered DOM's award of the fiscal agent contract to Consultec. Included as part of the minutes of the Board's meeting was a letter from EDS's counsel outlining EDS's concerns regarding Wetherbee's involvement and certain ethical violations EDS believed to have occurred which would render an award of the contract to Consultec void. [6] The gist of EDS's concerns was whether certain ethical standards had been violated due to Wetherbee having participated in the issuance of the first RFP while at DOM, only to have her future employer, Consultec, be the ultimate successful bidder for the DOM fiscal agent contract awarded pursuant to a separate RFP which was issued after Wetherbee had left DOM, but under the same APD which had received HCFA approval while Wetherbee was still at DOM. The Board determined this letter represented the only objection received regarding DOM's fiscal agent contract. The Board then inquired as to whether the Ethics Commission had been consulted regarding the issue raised in the letter. Gwen Combs, counsel for DOM, advised the Board that she had consulted with certain individuals at the Mississippi Ethics Commission. Counsel for EDS requested that the Board postpone taking any action regarding the fiscal agent contract until such time as all the parties were able to address each issue of concern with the award of the contract. However, the Board determined that DOM had complied with all rules and regulations required by the PSCRB; therefore, in the Board's opinion, no issues presented before the Board justified postponing taking action regarding the contract. At the conclusion of that portion of the meeting pertaining to this contract, the PSCRB approved DOM's award of its fiscal agent contract to Consultec. ¶ 10. On May 1, 2001, EDS filed a complaint in the Hinds County Chancery Court disputing DOM's decision to award its fiscal agent contract to Consultec. EDS filed its original complaint against DOM and Consultec alleging that by Consultec's hiring Helen Wetherbee as account manager, Consultec violated state laws as well as DOM's RFP and the PSCPR. EDS argued that as a result of this alleged improper hiring of Wetherbee, Consultec had an illegal competitive advantage with respect to other potential bidders for the fiscal agent services contract. [7] On June 4, 2001, DOM and Consultec filed separate answers denying these allegations. ¶ 11. EDS amended its complaint several times. EDS's first amended complaint included an additional claim that Consultec provided a deceptively low bid and planned to backload the contract with exorbitantly priced future enhancements. EDS's second amended complaint expanded its theory of liability to include alleged tortious actions by Consultec involving breach of duty to EDS under the Ethics in Government Law, state procurement regulations, breach of duty of good faith, tortious interference with contract and prospective business relations and negligent or intentional misrepresentations. The third amended complaint added Lewis-Payton, in her official capacity as DOM Executive Director, as a party defendant. EDS also included a charge of breach of implied contract against DOM in awarding the contract to Consultec, which EDS claimed created a situation wherein Consultec became a non-responsive bidder. ¶ 12. On July 13, 2001, Consultec moved for the issuance of a protective order precluding the disclosure of trade secrets and other confidential information which was not publicly available to EDS, its major competitor. After issuing its original order which concluded that the confidential information would be provided, but only to EDS attorneys, the chancellor issued a modified protective order finding Consultec's pricing models to be sufficiently sensitive to the competitive business in which both Consultec and EDS engaged such that it was necessary to protect them from disclosure. ¶ 13. On October 10, 2001, EDS filed a Petition for Cancellation of Fiscal Agent Contract before the PSCRB. EDS made a presentation before the Board on October 11, 2001. DOM and Consultec moved to stay the action in chancery court in light of EDS's attempt to obtain relief from the PSCRB, and EDS, therefore, withdrew its petition before the PSCRB. ¶ 14. By joint stipulation filed October 23, 2001, the scope of litigation in chancery court was narrowed as EDS and Consultec dismissed all claims and counterclaims for damages without prejudice against each other, but EDS preserved its claim for injunctive relief. Basically, EDS requested the chancery court to afford injunctive relief by prohibiting Consultec from assuming its role as fiscal agent under the newly awarded contract, and to likewise find that Wetherbee had committed various ethical violations by being involved as an employee of Consultec concerning the successful bid for DOM fiscal agent after having been involved with the initial 1999 RFP process in her then official capacity as DOM Executive Director. ¶ 15. A chancery court hearing was commenced on October 31, 2001, on the motions for summary judgment filed by EDS, DOM and Consultec, as well as EDS's motion for injunctive relief and the motions to dismiss filed by DOM and Consultec. From the opening statements of all parties, there was an issue as to whether the chancellor should conduct the hearing as an administrative appeal pursuant to the applicable statutes; however, over the course of the two day hearing, the chancellor did receive extensive sworn testimony from various witnesses. In opening statements, counsel for EDS proceeded to address all issues raised in its original complaint and amended complaints. ¶ 16. During the questioning of Rica Lewis-Payton, DOM Executive Director, she testified that once she was informed of Helen Wetherbee's proposed participation as account manager for Consultec, she discussed the matter with DOM's attorney, Gwen Combs, who in turn discussed the matter with the Ethics Commission personnel. Combs stated the Ethics Commission could not provide a written opinion on prospective employment, but advised that based on the facts presented, there were no ethical violations. ¶ 17. On December 6, 2001, the chancellor issued an order and final judgment determining that the matters before the court were essentially appellate in nature; therefore, the case would be treated as an administrative appeal. After conducting an independent review of the record, the chancellor concluded that DOM's decision to award the fiscal agent contract to Consultec was based upon substantial evidence. The chancellor found the use of the same APD was not fatal error which would require finding the contract to be void. The chancellor also found the 1999 and 2000 RFPs to be separate and distinct. ¶ 18. The chancellor next determined EDS failed to meet its burden of proof as to its claim of a due process violation in that EDS failed to establish a property interest and EDS failed to show that property interest was deprived under color of state law. The chancellor also found DOM, the office of the Governor, the State of Mississippi and Rica Lewis-Payton, in her official capacity, to be immune from suit because they were not persons subject to suit under 42 U.S.C. § 1983. The chancellor found that because there was no continuing violation of a federal law, EDS was not entitled to injunctive relief. ¶ 19. The chancellor also determined DOM made an informed decision, supported by substantial evidence, based on its best interpretation of the statutes. The chancellor found no evidence that DOM acted arbitrarily or capriciously in awarding the fiscal agent contract to Consultec. ¶ 20. The final issue before the chancellor was whether an injunction pending an appeal should be issued. The chancellor first determined EDS failed to establish that a substantial likelihood existed that EDS would prevail on the merits. The chancellor then determined EDS's argument that an injunction was necessary to prevent irreparable injury [8] lacked merit in light of the fact that EDS claimed to be entitled to monetary damages. The chancellor found that the balance of harms factor weighed in favor of DOM because the additional harm to the State if the contract was not implemented on time had to be considered as well as the unemployment of workers for both EDS and Consultec. Finally, the chancellor determined EDS failed to prove that the issuance of a preliminary injunction or injunction pending appeal would be consistent with the public interest. Based on all relevant factors, the chancellor denied EDS's motion for a preliminary injunction or injunction pending appeal. ¶ 21. On December 17, 2001, EDS timely perfected an appeal to this Court from the chancellor's adverse ruling. On December 18, 2001, EDS moved this Court for an injunction pending appeal pursuant to M.R.A.P. 8(c) to prevent Consultec's takeover of DOM's fiscal agent contract which was scheduled for January 1, 2002. On December 20, 2001, this Court, sitting in an emergency en banc session, entered an order denying EDS's motion for an injunction pending appeal. Therefore, on January 1, 2002, Consultec assumed the duties and responsibilities as DOM's fiscal agent. ¶ 22. In today's appeal, EDS raises the following six issues before this Court: 1. Whether the chancery court misapplied the standard of review in determining whether Division of Medicaid Executive Director Helen Wetherbee's involvement in DOM's 1999-2001 fiscal agent source solicitation and selection function (Selection Process) disqualified Consultec, LLC and required DOM to award the fiscal agent contract to Electronic Data Systems Corporation. 2. Whether, as a matter of law, Wetherbee acted in Consultec's behalf in connection with or in relation to a decision she made, or a particular matter or proceeding in which she participated personally and substantially, as DOM's Executive Director. 3. Whether Consultec was a non-responsive offeror. 4. Whether EDS is entitled to the fiscal agent contract and/or damages as a result of DOM's having awarded the fiscal contract to a non-responsive offeror. 5. Whether the chancery court erred in dismissing EDS's 42 U.S.C. § 1983 claims. 6. Whether the chancery court erred in refusing to permit EDS discovery regarding the costs and profit margins of Consultec. ¶ 23. DOM adds one additional issue in its Statement of Issues for this Court to consider: 7. Whether EDS failed to exhaust its remedies by timely prosecuting its appeal from the adverse decision of the Personal Service Contract Review Board. ¶ 24. For sake of clarity, the issues identified by EDS and the DOM have been restated for purposes of this opinion: