temporary restraining order - Finance & Commerce

STATE OF MINNESOTA DISTRICT COURT
COUNTY OF RAMSEY SECOND JUDICIAL DISTRICT
Taxpayers League of Minnesota and Greg
Copeland,
v.
City of St. Paul,
Plaintiffs,
Defendant.
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I. INTRODUCTION
Case Type: Other Contracts
Court File No. 62-CV-12-7982
PLAINTIFFS’ MEMORANDUM OF LAW
SUPPORTING ITS MOTION FOR A
TEMPORARY RESTRAINING ORDER
Plaintiff Greg Copeland, acting on his own behalf as a taxpayer and as a private attorney
general, and Plaintiff Taxpayers League of Minnesota, acting as a private attorney general,
respectfully ask the Court to temporarily restrain Defendant City of St. Paul (“the City”) from
executing, providing a notice to proceed, incurring any costs under, or otherwise proceeding on a
contract with Ryan Companies U.S. Inc. (“Ryan”) for work on the Lowertown Ballpark project
(“the Project”).
This public project was subject to the Uniform Municipal Contracting Law, Minn. Stat.
§ 471.435, Minn. Stat. § 412.311, St. Paul Ordinance 82.02, and Minnesota’s common law on
competitive procurement processes, yet the City entered into a design-build contract with Ryan
for this $54 million project without engaging in any type of competitive procurement process.
Literally the day after it received bond funding from the Minnesota Department of Employment
and Economic Development for the Project, the City awarded the contract for the Project to
Ryan. The City did not solicit or consider sealed bids, nor did the City solicit or consider best
value proposals. Although the exact value of the contract is not known to Plaintiffs, the City

disclosed in its application for the bond funding that it projected the construction costs of the
project to be $38.6 million. The value of the contract with Ryan for design and construction of
the Project is probably more than that amount, and it is certainly above the $50,000 threshold for
sealed bidding mandated in St. Paul Ordinance 82.02, and the $100,000 threshold for
procurement competition stated in Minn. Stat. § 471.345.
Minnesota’s public procurement law has bright line rules designed to prevent even the
appearance of impropriety. Actual fraud does not have to proved, even the mere opportunity for
fraud or favoritism is enough to taint a public contract award and render it illegal and void. See
Rochon Corp. v. City of St. Paul, 814 N.W.2d 365, 369 (Minn. Ct. App. 2012) (recently holding
St. Paul had violated public procurement law and that its construction contract was void as a
result). Here, the appearance of impropriety is clear. St. Paul handed a multi-million dollar
contract to Ryan without using any kind of process to ensure that public was getting the best
bargain or value for its money. St. Paul must be enjoined from proceeding on this illegal
contract to protect the integrity of the public procurement process and to protect the taxpayers of
St. Paul and Minnesota who are funding the Project.
This case is not fact-intensive, nor is it likely to have factual disputes. Instead it is a
matter of statutory construction that is ripe for early adjudication.
II. FACTS
On May 11, 2012, Governor Dayton signed into law H.F. No. 1752, which is now
codified as Minn. Session Laws 2012 Chapter 293. Among other things, that law appropriated
$47,500,000 from the general obligation bonds authorized by that law for the Department of
Employment and Economic Development to issue as Capital Project Grants. See Minn. Session
Laws 2012 Chapter 293, Section 21, Subd. 5. That law also established a new statute, Minn.
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Stat. § 116J.433, governing those Capital Project Grants. See Minn. Session Laws 2012 Chapter
293, Section 33.
Subdivision 3 of the new Minn. Stat. § 116J.433 states:
The commissioner shall make competitive grants to local government units for
eligible projects and public infrastructure required to support an eligible project,
which may include: predesign, design, acquisition of land or buildings,
construction, furnishing, and equipping a new or renovated building. The local
government unit may employ or contract with persons, firms, or corporations to
perform one or more or all of the functions of architect, engineer, or construction
manager with respect to all or any part of an eligible project and related public
infrastructure. The local government unit may deliver the eligible project and
related public infrastructure through either a design-build or construction
manager at-risk method. To the extent practicable and at the discretion of
the local government unit, the local government unit may have rights and
exercise powers with respect to the acquisition, construction, use, and
operation of an eligible project, as are granted under section 473.756. No
consent or approval of another political subdivision is required for the
effectiveness or the exercise by a local government unit of the rights or powers.
Minn. Session Laws 2012 Chapter 293, Section 33, Subd. 3 (emphasis added).
Minn. Stat. § 473.756, referenced in the new § 116J.433 subd. 3 quoted above is part of
the legislation enacted to enable construction of the major league baseball stadium now known as
Target Field. See Minn. Stat. § 473.75 (stating the purpose of §§ 473.75 to 473.763). Minn.
Stat. § 473.756 subd. 12 conferred certain contracting powers on the Minnesota Ballpark
Authority, a new statutory entity created specifically for the new Minnesota Twins major league
baseball stadium. See Minn. Stat. § 473.755. The statutory subdivision granting those
contracting powers to the new entity states in relevant part:
The authority may contract for materials, supplies, and equipment in accordance
with sections 471.345 and 473.754, except that the authority, with the consent of
the county, may employ or contract with persons, firms, or corporations to
perform one or more of the functions of architect, engineer, or construction
manager with respect to all or any part of the ballpark and public infrastructure.
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Minn. Stat. § 473.756 subd. 12. That statutory subdivision also conferred on the construction
manager selected by the Minnesota Ballpark Authority certain contracting powers. That
statutory subdivision states in relevant part:
The construction manager may enter into contracts with contractors for labor,
materials, supplies, and equipment for the construction of the ballpark and related
public infrastructure through the process of public bidding, except that the
construction manager may, with the consent of the authority or the team:
(1) narrow the listing of eligible bidders to those which the construction manager
determines to possess sufficient expertise to perform the intended functions;
(2) award contracts to the contractors that the construction manager determines
provide the best value under a request for proposals as described in section
16C.28, subdivision 1, paragraph (a), clause (2), and paragraph (c), which are not
required to be the lowest responsible bidder; and
(3) for work the construction manager determines to be critical to the completion
schedule, award contracts on the basis of competitive proposals or perform work
with its own forces without soliciting competitive bids if the construction
manager provides evidence of competitive pricing.
Although those statutory provisions are referred to in the bonding statute, they do not exempt the
City from common law and statutory provisions requiring sealed bidding or best-value
competitive procurement processes for contracts in excess of $100,000. Compare Minn. Stat. §
471.345 subds. 3 and 3a with Minn. Stat. § 473.756 subd. 12.
On or about June 25, 2012, the City submitted an application to the Minnesota
Department of Employment and Economic Development for a $27 million Capital Project Grant.
See Affidavit of Jeffrey Wieland Supporting Plaintiffs’ Motion for a Temporary Restraining
Order (“Wieland Aff.”) at Exhibit A. The City’s grant application states that the Lowertown
Ballpark project is expected to cost $54 million and that $38,600,000 of that amount is for
construction activities. See id. The grant application did not state how much of the total project
cost was related to design. See id.
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On September 13, 2012, the Minnesota Department of Employment and Economic
Development announced that it was awarding St. Paul a $25 million Capital Project Grant for the
Lowertown Ballpark Project. See Wieland Aff. at Ex. B and Ex. C.
The next day, September 14, 2012, the City awarded Ryan a design-build contract for the
Lowertown Ballpark Project. See Wieland Aff. at Exhibit D. The value of that design-build
contract is not yet known to Plaintiffs, but it is believed to be far in excess of $100,000 because
the City has already disclosed that the construction cost alone is projected to be $38.6 million.
See Wieland Aff. at Exhibit A.
The City awarded the design-build contract for the Project to Ryan without soliciting for
bids or proposals through an advertisement as required by St. Paul Ordinance 82.02 1 , Minn. Stat.
§ 412.311, and Minn. Stat. § 471.345. In fact, the City awarded the design-build contract to
Ryan without engaging in any kind of competitive bidding or best-value process. See Wieland
Aff. at Exhibits E, F, and G (newspaper articles reporting events related to the Project and the
City’s public position on the contract award to Ryan). The City has publicly taken the position
that the bonding bill authorizing the Capital Project Grants exempts the City from competitive
procurement process requirements. See Wieland Aff. at Exhibits E, F, and G.
Plaintiffs, suing as a taxpayer and as private attorneys general, dispute the City’s
statutory interpretation and are seeking injunctive and declaratory relief.
III. ARGUMENT
A. All five factors of the Dahlberg test support granting Plaintiffs’ motion for a
temporary restraining order.
A temporary restraining order, such as the one sought by Plaintiffs, operates to prevent
immediate, irreparable injury until a hearing can be conducted to determine the need for a
1 A copy of St. Paul Ordinance 82.02 is attached as Exhibit H to the Affidavit of Jeffrey Wieland as a convenience
for the Court.
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temporary or permanent injunction. See Minn. R. Civ. P. 65.01; Bio-Line, Inc. v. Burman, 404
N.W.2d 318, 320 (Minn. Ct. App. 1987). A temporary injunction’s purpose is to preserve the
status quo until the case is decided on the merits. Miller v. Foley, 317 N.W.2d 710, 712 (Minn.
1982); Pickerign v. Pasco Marketing, Inc., 228 N.W.2d 562, 564 (Minn. 1975).
The decision whether to grant a temporary restraining order or a temporary injunction is
committed to the sound discretion of the trial court. Eakman v. Brutger, 285 N.W.2d 95, 97
(Minn. 1979). The Court considers five factors when deciding whether to issue a temporary
restraining order or a temporary injunction:
1. the relationship between the parties before the dispute;
2. the harm the Plaintiff will suffer if relief is denied, compared with the harm
inflicted on the Defendant if the injunction is issued;
3. the likelihood that one party or the other will prevail on the merits;
4. the public interest involved, if any; and
5. the administrative burdens involved to enforce the relief requested.
Dahlberg Bros., Inc. v. Ford Motor Co., 137 N.W.2d 314, 321-322 (Minn. 1965); see also Bio-
Line, 404 N.W.2d at 321; M.G.M. Liquor Warehouse Int’l, Inc. v. Forsland, 371 N.W.2d 75, 77
(Minn. Ct. App. 1985).
These well-known five factors, often called the “Dahlberg Test,” are not applied
mechanically by Minnesota’s courts. “Likelihood of success on the merits” is the “factor of
greatest concern” when analyzing the Dahlberg Test. Ecolab, Inc. v. Gartland, 537 N.W.2d 291,
294 (Minn. 1995); see also Pacific Equip. & Irrigation, Inc. v. The Toro Co., 519 N.W.2d 911,
915 (Minn. Ct. App. 1994) (likelihood of success on the merits is “key” factor).
Federal courts construing the federal counterpart to Minn. R. Civ. P. 65.01 have held that
the “likelihood of the success on the merits” and the “balance of harm” factors receive primary
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consideration and the other three factors only receive secondary consideration. See, e.g., S&M
Constructors, Inc. v. Foley Co., 959 F.2d 97, 98 (8 th Cir. 1992) (applying equivalent federal test
for injunctive relief). Moreover, at this early stage, the Court should focus on the need to
maintain the status quo, so that the matter can be fully presented and decided on the merits.
Pacific Equip. & Irrigation, Inc., 519 N.W.2d at 915. Preserving the status quo means
preventing the expenditure of funds and the performance of work on the Project.
Plaintiffs will reorder the discussion of the Dahlberg factors so that the factor of greatest
importance – likelihood of success on the merits – is analyzed first. Thereafter, Plaintiffs will
analyze the balance of harms, the second most important Dahlberg factor, and lastly, they will
analyze the other three factors because of their secondary importance.
1. Plaintiffs will prevail on the merits.
a. Competitive procurement is mandatory on public contracts.
Under the Uniform Municipal Contracting Law, Minn. Stat. § 471.345, municipalities
like the City must generally engage in a competitive process before entering a contract that
exceeds $100,000. A “contract” under the Uniform Municipal Contracting Law is defined as “an
agreement entered into by a municipality for the sale or purchase of supplies, materials,
equipment or the rental thereof, or the construction, alteration, repair or maintenance of real or
personal property.” Minn. Stat. § 471.345 subd. 2. An agreement to construct a stadium falls
within that definition.
bidding.
The most common competitive procurement method used by municipalities is sealed
If the amount of the contract is estimated to exceed $100,000, sealed bids shall be
solicited by public notice in the manner and subject to the requirements of the law
governing contracts by the particular municipality or class thereof.
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Minn. Stat. § 471.345 subd. 3. As an alternative to sealed bidding, municipalities may award
contracts to the vendor that offers the best value determined through the competitive process
described in Minn. Stat. § 16C.28. See Minn. Stat. § 471.345 subd. 3a. It is debatable whether
the design-build delivery method is allowed under ‘best value’ procurement, but ‘best value’
procurement certainly could be applied to the design-build method if expressly authorized by
statute. See Dean B. Thomson, et al., A Critique of Best Value Contracting in Minnesota, 34
Wm. Mitchell L. Rev. 27 (2007). The new Capitol Projects
Grant statute expressly authorizes the use of design-build procurement for grant recipients.
Minn. Stat. §116J.433, Subd. 3. Therefore, ‘best value’ procurement can be used to solicit
design-build proposals for the stadium Project. Regardless of whether sealed bidding, in which
the contract is awarded to the lowest responsive and responsible bidder, or best value
procurement is used, the Uniform Municipal Contracting Law makes it clear that municipalities
must use a competitive procurement process before awarding contracts in excess of $100,000.
The Uniform Municipal Contracting Law requires competition “in the manner and
subject to the requirements of the law governing contracts by the particular municipality or class
thereof.” See Minn. Stat. § 471.345 subd. 3. Statutory cities have the option to use either sealed
bidding or best value procurement for contracts valued at more than $100,000. See Minn. Stat.
§ 412.311. If a statutory city elects to use sealed bidding, it must publish notice of bidding at
least once is an official newspaper at least ten days before the due date for bid submission. See
Minn. Stat. § 412.311 subd. 1. If the statutory city elects to use the best value method, it must
follow the procedures described in Minn. Stat. § 16C.28. See Minn. Stat. § 412.311 subd. 2.
The City has even more stringent self-imposed procurement requirements. Its ordinances require
sealed bidding on contracts valued at more than $50,000. See St. Paul Ordinance 82.02 (Wieland
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Aff. Exhibit H). The legislature deliberately mandated use of competitive procurement
processes to safeguard the public’s funds.
The basic purpose of competitive bidding is to give the public the benefit of the
lowest obtainable price from a responsible contractor. As a part of the fulfillment
of that purpose, the discretion of public officials is limited or removed so as to
avoid fraud, favoritism, improvidence, and extravagance.
Foley Bros., Inc. v. Marshall, 123 N.W.2d 387, 391 (Minn. 1963). Those statutory safeguards
are enforced by the courts. See Griswold v. Ramsey County, 65 N.W.2d 647, 651-52 (Minn.
1954) (“Irrespective of what lawful method is adopted or used in the letting of public contracts, it
is for the courts to determine whether officials in the exercise of their discretion have applied the
method used in an arbitrary, capricious, or unreasonable manner.”). Judge Rosenbaum aptly
described the lens through which public procurement cases should be viewed by the courts.
It is imperative that public bidding procedures be conducted in a carefully
controlled and wholly open manner. To this end the legislature of the State of
Minnesota has constructed and enacted into law a detailed code regulating public
bidding procedures. The case law strongly supports those procedures. Even the
slightest deviations from prescribed form are viewed with a most jaundiced eye.
United Tech. Commc’n. Co. v. Washington County Bd., 624 F. Supp. 185, 188 (D. Minn. 1985)
(internal citations omitted).
b. The City was not authorized to deviate from competitive
procurement requirements.
The City has taken the indefensible position that the bonding statute funding the Capital
Project Grants authorized the City to award a multi-million dollar contract to its favored
contractor without engaging in any type of competitive process. See Wieland Aff. at Exhibits E,
F, and G. It does not.
The bonding statute, Session Laws 2012 Chapter 293 (“the Bonding Statute”), empowers
Capital Project Grant recipients to do certain things. It empowered the City to “employ or
contract with persons, firms, or corporations to perform one or more or all of the functions of
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architect, engineer, or construction manager with respect to all or any part of an eligible project
and related public infrastructure.” Session Laws 2012 chapter 293, sec. 33, subd. 3. That
language authorized the City to hire an architect, engineer, an construction manager, but nothing
in that language expressly exempts such contracts from the statutorily mandated competitive
procurement processes. Similarly, the Bonding Statute authorized delivery of the Project
through the design-build or the construction manager at-risk methods. See id. The City elected
to use the design-build method. See Wieland Aff. Exhibit D (Ryan press release stating “Ryan
Companies has been retained by the City of Saint Paul as the Design-Builder, including
Architect of Record for the project.”). Design-build projects are required to be competitively
procured just as much as any other type of project. See, e.g., Minn. Stat. §§ 161.3410 –
161.3426 (MnDOT best-value design-build project procurement requirements). Nothing in the
language authorizing use of the design-build and construction manager at-risk project delivery
methods expressly exempts the City from competitive procurement requirements.
The City is likely relying upon the language in the Bonding Statute giving Capital Project
Grant recipients powers “as are granted under section 473.756.” See Session Laws 2012 chapter
293, sec. 33, subd. 3. Notably, Section 473.756 is part of the legislation creating and
empowering the Minnesota Ballpark Authority to build the new Twins major league baseball
stadium now known as Target Field. See Minn. Stat. §§ 473.75 – 473.759. Section 473,756
created a separate Ballpark Authority which is a state agency; the City of St. Paul is a municipal
entity. Thus, the City may only exercise the powers of the Authority as expressly granted by the
Bonding Statute. Section 473.756 empowered the new Ballpark Authority to enter contracts.
The authority may contract for materials, supplies, and equipment in accordance
with sections 471.345 and 473.754, except that the authority, with the consent of
the county, may employ or contract with persons, firms, or corporations to
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perform one or more or all of the functions of architect, engineer, or construction
manager with respect to all or any part of the ballpark and public infrastructure.
Minn. Stat. § 473.756 subd. 12. That language largely echoes the contracting power given to the
Capital Project Grant recipients in the Bonding Statute except that it explicitly refers to the
Uniform Municipal Contracting Law, section 471.345. Compare Minn. Stat. § 473.756 subd. 12
with Session Laws 2012 chapter 293, sec. 33, subd. 3. Section 473.756 requires competitive
bidding or best value procurement under §471.345. Section 473.754 requires affirmative action,
which only a public authority can implement. Thus, rather than expressly exclude a competitive
process, §473.756 expressly requires it. Section 473.756 goes on to say, “except that the
authority, with the consent of the county, may employ or contract with… corporations to perform
one or more or all of the functions of architect, engineer, or construction manager with respect to
all or any part of the ballpark…” This is not an express exemption from public procurement
processes. Instead, it merely makes clear, in a way that §471.345 does not, that the City may
also use design build procurement. Because the City (as opposed to the Authority) must obey
the Municipal Contracting Act (i.e. §471.345), the City must competitively procure the design-
builder for the Project. Because §473.756 expressly allows the use of design-build as a delivery
method, the City must use public ‘best value’ procurement methods to select that design-builder.
Indeed, the language “with the consent of the county” only makes sense when applied to
the Ballpark Authority because Hennepin County was involved with the Twins stadium. Ramsey
County is not involved in this Project. This is further proof that the Legislature, by referencing
§473.756, only intended to grant the City express right to used ‘best value’ procurement in
conjunction with the design-build delivery system.. Even if the ”with consent of the county”
clause applies to the Capital Project Grant recipients, its plain language does not include an
exemption from competitive procurement requirements. See Minn. Stat. § 645.08 (1) (“words
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and phrases are construed according to rules of grammar and according to their common and
approved usage”). The contracting language in section 473.756 explicitly demands compliance
with competitive bidding rather than authorizing an exemption from it. Finally, to Plaintiffs’
knowledge, the City has not requested the County’s permission to award this Project without a
competitive procurement, nor has the County consented to any such wholly discretionary use of
$25,000,000 of public money.
Section 473.756 subd. 12 continues by granting the construction manager hired by the
Ballpark Authority certain contracting powers. The construction manager “may enter into
contracts with contractors for labor, materials, supplies, and equipment for the construction of
the ballpark and related public infrastructure through the process of public bidding.” Minn. Stat.
§ 473.756 subd. 12 (emphasis added). The legislature not only obligated the public entity, the
Ballpark Authority, to comply with competitive procurement rules, it also imposed that
obligation on private companies hired by the Ballpark Authority! It simply makes no sense for
the legislature to require the successful design-builder to competitively bid its subtrade
contractors, but to give the City a pass on any type of competitive procurement for the selection
of the design-builder.
There is nothing in the Bonding Statute or the Ballpark Authority legislature that exempts
the Capital Project Grant recipients from the competitive procurement law. Given the
importance of those rules for the protection of the public, such an exemption must be explicit
because deviations from competitive procurement are viewed with a “most jaundiced eye.” See
United Tech., 624 F.Supp. at 188. The legislature did not show that it intended to exempt the
Capital Project Grants from competitive procurement rules, so the City is bound to those rules. It
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was not authorized to give a multi-million dollar contract to a favored contractor without using a
competitive process to ensure that the public was receiving the best bargain for its money.
2. The balance of harms favors granting injunctive relief.
The second most important Dahlberg factor favors issuance of an injunction. The
purpose of a temporary injunction or temporary restraining order is to maintain the status quo to
prevent the threat of irreparable injury. Miller, 317 N.W.2d at 712; Cherne Industrial, Inc. v.
Grounds & Assocs., 278 N.W.2d 81, 92 (Minn. 1979). The party seeking injunctive relief must
show that there is no adequate remedy at law and that the plaintiff will suffer irreparable harm.
Cherne Industrial, Inc., 278 N.W.2d at 92.
Here, the irreparable harm is the corruption of St. Paul’s public procurement system,
which damages cannot remedy. In United Tech, Judge Rosenbaum applied Minnesota law in a
bid protest and held that “the loss of a chance to participate in a fair bidding process raises a
significant threat of irreparable injury” and the “only true remedy for such injury is to issue the
injunction.” United Technologies, 624 F. Supp. at 188 (emphasis added).
The Minnesota Supreme Court recognized that maintaining the integrity of the public
procurement system is valuable. In Telephone Assocs., Inc. v. St. Louis County Board, the
Minnesota Supreme Court ruled that “proper challenges to the bid-letting process should be
encouraged.” Telephone Assocs., Inc. v. St. Louis County Board, 364 N.W.2d 378, 383 (Minn.
1985). Consequently, the court awarded the protesting contractor its bid preparation costs and its
attorneys’ fees incurred litigating the matter. See id.
On the other side of the scale, the City cannot claim that it would suffer any significant
harm by stopping work on the Project while the Court considers this lawsuit. Any harm would
have been caused by the City’s own illegal actions. In other words, the City cannot legitimately
contend that it would incur irreparable harm if it is enjoined from entering into an illegal
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contract. To deny injunctive relief because of this so-called “harm” would stand equity on its
head because the City’s “harm” will only be caused by its own decision to make an illegal
contract award. See United Techn., 624 F. Supp. at 190 (noting that denial of injunctive relief for
harm caused by defendant’s own illegal action would “stand equity on its head”).
Further, the City has publicly stated that schedule was not a driving concern on this
procurement. See Wieland Aff. at Exhibit F. No construction has yet taken place, nor is any
likely to in the next few months given Minnesota’s winter weather. See id. The City cannot
claim that it will be in any way significantly damaged by the short delay caused by judicial
scrutiny of this multi-million dollar public procurement. On the other hand, the taxpayers would
be harmed if public funds are spent on an illegal contract. The balance of harms weighs in
Plaintiffs’ favor.
3. The public interest and the relationship of the parties favor granting
injunctive relief.
The City established through the success of its application to the Minnesota Department
of Employment and Economic Development for a Capital Project Grant that construction of the
Project would benefit the public. That is not the issue in this lawsuit. The issue before the Court
in this Dahlberg analysis is whether award of a multi-million dollar contract to Ryan without
engaging in any competitive process is in the best interest of the public. It is not.
The City has publicly taken the position that schedule was not a driving consideration in
its contract award to Ryan. See Wieland Aff. at Exhibit E. Construction is not scheduled to start
until next spring. The City had time to conduct a competition for this design-build contract, but
it simply chose not to based on its existing relationship with Ryan. The City essentially
conducted a best-value analysis, without input from any competitors, and concluded that Ryan
was the best company for the job because it was involved in the early stages of the Project. The
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City failed to test that assumption by soliciting proposals from other companies to see if other
companies could offer similar or better services going forward at a better price than Ryan. That
is a fundamental breach of the City’s fiduciary duty as a custodian of the public’s money.
Competition ensures that the public gets the best bargain for its money. See Byrd v. Indep. Sch.
Dist. No. 194, 495 N.W.2d 226, 232 (Minn. Ct. App. 1993).
The Plaintiffs have a right to expect that the City will safeguard their tax dollars from
improvident expenditure, and they have a right to act if the City breaches that duty. It is well
established law that taxpayers have standing to prevent improper expenditures of public funds
and to enjoin illegal government action regarding the award or performance of public contracts.
See Arens v. Vill. of Rogers, 240 Minn. 386, 392, 61 N.W.2d 508, 513 (1953); Arpin v. City of
Thief River Falls, 122 Minn. 34, 37-38, 141 N.W. 833, 834 (1913); Le Tourneau v. Hugo, 90
Minn. 420, 425-26, 97 N.W. 115, 117-18 (1903); Schiffman v. City of St. Paul, 88 Minn. 43, 47,
92 N.W. 503, 504 (1902); Rukavina v. Pawlenty, 684 N.W.2d 525, 531 (Minn. Ct. App. 2004);
Conant v. Robins, Kaplan, Miller & Ciresi, L.L.P., 603 N.W.2d 143, 146-147 (Minn. Ct. App.
1999). Taxpayers have standing under such circumstances because the improper governmental
action will result in unwarranted, higher tax burdens, which are viewed as special injuries to each
taxpayer.
Where a taxpayer has no adequate remedy at law, he has a right in his own name
to resort to a court of equity to restrain by injunction a municipal corporation and
its officers from illegally creating debts and liabilities which will increase his
burdens of taxation; and this upon the theory that the damages which he will thus
sustain are not in common with the damages to other taxpayers, but are special,
affecting his private rights.
Schiffman, 88 Minn. at 47, 92 N.W. at 504. See also Arpin, 122 Minn. at 37-38, 141 N.W. at 834
(holding that taxpayer has standing to challenge city’s attempt to enter an illegal contract); Le
Tourneau, 90 Minn. at 425-26, 97 N.W. at 117-18 (holding that taxpayer had standing to enjoin
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execution of a contract for construction of a bridge that was let through an impermissible bidding
process).
The leading Minnesota cases developing the law of public procurement were suits
brought by taxpayers challenging improper government procurement practices. See Nielsen v.
City of St. Paul, 252 Minn. 12, 88 N.W.2d 853 (1958); Griswold v. Ramsey County, 242 Minn.
529, 65 N.W.2d 647 (1954); Coller v. City of St. Paul, 223 Minn. 376, 26 N.W.2d 835 (1947);
Hendricks v. City of Minneapolis, 207 Minn. 151, 290 N.W. 428 (1940). The Minnesota
Supreme Court plainly recognizes the importance of taxpayer enforcement of public
procurement laws. In that tradition, this taxpayer lawsuit is necessary because the City handed a
multi-million dollar contract to a favored contractor without engaging in a competitive
procurement process as is required by statute and the City’s own ordinances.
Plaintiffs also have a right to bring this lawsuit under the Minnesota Private Attorney
General Statute. Minnesota Statute 8.31 subd. 3(a) grants any person injured by violation of the
law respecting trade, commerce, or business the right to bring a civil action as a private attorney
general to seek redress for that injury. Courts have implied a requirement that private attorney
general actions must benefit the public. Davis v. U.S. Bancorp., 383 F.3d 761, 768 (8th Cir.
2004). “The duty of the attorney general’s office, and thus the purpose of any statute granting
private citizens authority to bring a lawsuit in lieu of the attorney general, is the protection of
public rights and the preservation of the interests of the state.” Ly v. Nystrom, 615 N.W.2d 302,
313 (Minn. 2000).
The public interest served in this suit is protection of the integrity of the public
procurement system. The Minnesota Supreme Court in Telephone Associates v. St. Louis County
Bd., 364 N.W.2d 378, 383 (1985), recognized the importance of that public interest and stated,
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“proper challenges to the bid-letting process should be encouraged” (emphasis added). See also
Concept Automation, Inc. v. United States, 41 Fed.Cl. 361, 370 (1998) (“the public interest in the
integrity of the competitive bidding process can only be vindicated by encouraging, or at least
not discouraging, protests of wrongful actions”) (emphasis added).
For more than 50 years, the Minnesota Supreme Court has recognized that the public has
a strong interest in maintaining the integrity of public procurements. Griswold, 65 N.W.2d at
652. The U.S. Court of Federal Claims stated the benefits of challenges to procurement
decisions in Concept Automation, Inc. v. United States, 41 Fed.Cl. 361, 366 (1998):
The purpose of the bid protest scheme is twofold. First, it is designed to
benefit the taxpayers, and hence the government, by making government
procurement both more fair and more efficient. This is so in various ways. If
contractors have an honest and fair system, they will be more willing to deal with
the government at a lower price. Also, if the government acts honestly and
rationally, the government and the taxpayers will get the best deal for their money
and needs. Finally a fair and efficient system will maximize public accountability
and allow for more rational planning for future needs. The other basic purpose is
to benefit those who do business with the government. This is partially based on
basic fairness or justice. People, whether citizens, foreigners, or even contractors,
should be treated fairly. It is also based on sound business practice. It is critical
to deal with vendors, suppliers, or customers properly. Otherwise, you may
encourage them to treat you badly.
Minnesota and federal case law are uniform that all bidders must be treated fairly and
equally in the process to award a public contract. Without assurance that bidders will be treated
equally, vendors will be discouraged from bidding on future projects. As described above, fewer
vendors means less competition and higher prices in the future. The public is entitled to
procurement processes and decisions that are transparent and comply with public bidding laws.
The public interest and the relationship of the parties heavily favors the issuance of an
injunction to ensure that St. Paul acts fairly and the public’s purse is safeguarded. Plaintiffs are
protecting both their own and the public’s interest by moving to enforce the State’s procurement
laws and the integrity of this procurement.
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4. Granting injunctive relief will not cause the Court administrative burden.
In this case, there are no administrative burdens if the Court issues a Temporary
Restraining Order. The Court would only have to issue one order: Enjoin performance of the
contract. Violations of such an order, if any, can be easily detected and offending parties are
subject to sanction. This Dahlberg Factor is not a significant factor in the Court’s analysis.
Nonetheless, there are no administrative burdens for the Court to be concerned about and this
issue should not be any impediment to the issuance of an injunction.
B. The Court is empowered to require only a nominal security bond to preserve
the ability of bidders to police public procurements.
The Court should require only a nominal bond or cash deposit. Minnesota Rule of Civil
Procedure 65.03 requires applicants for an injunction to post a security bond or other security to
mitigate the defendant’s damages if the injunction is ultimately found to be improvidently
granted. The amount of the bond or security, however, is in the full discretion of the court,
subject only to a $2,000 minimum. Minn. R. Civ. P. 65.03 (“in such sum as the court deems
proper”); Minn. Gen. R. Prac. 135 (setting $2,000 minimum); Paradata of Minnesota, Inc. v.
Fox, 356 N.W.2d 852, 855 (Minn. Ct. App. 1984) (“The trial judge has wide discretion is setting
the amount of the bond.”).
In this case, as discussed above, any damage to the City caused by the injunction would
be minimal. Moreover, any injury claimed by the City resulting from any delays could have
easily been avoided had the City followed Minnesota law. Any damages alleged by St. Paul are
self-inflicted. This Court should reject any argument by the City (or even Ryan should it seek to
intervene in this lawsuit) that delays caused by an injunction are worthy of recognition by the
Court.
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St. Paul chose to violate well-established public procurement law, so the Court should
reject any request for a bond or security that is any amount more than the two thousand dollar
minimum specified by the General Rules of Practice. The City cannot be allowed to illegally
award a contract and then claim that action insulates it from injunctive relief. See United Tech.,
624 F.Supp. at 190 (“The Court declines to reach the perverse result that the County’s wrongful
actions, if any existed, should inure to its benefit by protecting it from an otherwise justified
injunction.”). Further, imposition of a large security bond would violate the stated policy of the
Minnesota Supreme Court that challenges to the public procurement process should be
encouraged to promote the transparency and integrity of the award of public contracts. See
Telephone Associates, 364 N.W.2d at 382-83. If a large bond is required, it will the stifle
legitimate challenges to illegal procurement practices for no other reason than cost.
dispute. Those facts are:
Finally, the key facts in this case are simple and should not be subject to any
1. The City entered into a design-build contract for the Project with Ryan.
2. The value of that contract exceeds $100,000.
3. The City did not engage in either sealed competitive bidding or a best-value process
as described in Minn. Stat. § 16.C.28 before awarding the contract to Ryan.
This case hinges on statutory interpretation of the bonding statute authorizing the Capital Project
Grants, rather than determination of disputed facts. That means that the likelihood of an
improvidently granted injunction, which is what the injunction bond is designed to protect
defendants against, is very low. The court should consequently set only a nominal bond.
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IV. CONCLUSION
Plaintiffs respectfully ask the Court to grant its motion for a temporary restraining order
to enjoin any work or other performance under the illegally awarded contract. The City clearly
violated bedrock principles of fairness and corrupted the public procurement process. That
cannot be allowed to stand.
Dated: October 15, 2012 FABYANSKE, WESTRA, HART &
THOMSON, P.A.
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By: /s/ Dean B. Thomson
Dean B. Thomson (#141045)
Jeffrey A. Wieland (#387918)
800 LaSalle Avenue, Suite 1900
Minneapolis, MN 55402
(612) 359-7600
ATTORNEYS FOR PLAINTIFF