GUIDRY, J.
This writ application comes before us on remand from the Louisiana Supreme Court for briefing, argument, and full opinion. Two principal issues are raised by the application:
Finding that the district court possesses original subject matter jurisdiction over this matter and additionally finding that the district court did not abuse its discretion in denying the exception of prematurity, we deny the defendants' writ application.
This case arises out of the termination of a nearly $200 million contract between the Louisiana Department of Health and Hospitals ("DHH") and Client Network Services, Inc. ("CNSI"). The contract, entitled the Agreement for the Operation and Enhancement of the Louisiana Medicaid Management Information System through a Fiscal Intermediary Type Arrangement ("the LMMIS Agreement"), tasked CNSI with, inter alia, creating a replacement system that would process claims from Medicaid providers and issue payments to providers. The LMMIS Agreement also indicated that the Louisiana Procurement Code, La. R.S. 39:1551, et seq. ("the Procurement Code"), gave DHH the authority to enter into the contract.
The contract took effect on February 15, 2012, at which time CNSI began performing under the terms of the LMMIS Agreement. A little over a year later, on March 21, 2013, the Director of State Purchasing notified CNSI in a letter that she was terminating the LMMIS Agreement immediately for cause; the letter did not cite any reasons for the termination. Shortly thereafter, the Commissioner of Administration was quoted in The Advocate as saying: "[b]ased on consultation with the Attorney General's Office, today I am terminating the state's contract with CNSI, effective immediately." In this manner, both the Director of State Purchasing and the Commissioner took credit for the decision to terminate the contract. The Commissioner was also quoted in The Advocate as saying that, "[w]e have zero tolerance for wrongdoing, and we will continue to cooperate fully with any investigation." Soon thereafter, the Division of Administration's General Counsel made a claim against CNSI's $6 million performance bond.
After the termination of the contract was announced, a meeting of the parties was arranged at CNSI's request, and the meeting was scheduled to take place on Monday, April 29, 2013. On the Friday before the meeting, the Director of State Purchasing sent a letter to CNSI's counsel setting forth for the first time specific reasons for the termination of the contract.
After its settlement proposal was rejected, CNSI initiated this lawsuit against DHH, the Division of Administration (DOA), and the Office of State Purchasing, among other state entities and state officials (hereafter all collectively referred to as "the State Defendants") on May 6, 2013. In its petition, CNSI sought monetary damages for bad faith breach of contract and also sought a judgment declaring that the defendants lacked valid grounds to terminate the LMMIS Agreement for cause.
The State Defendants responded to the suit by filing the exceptions that are the subject of this opinion: a declinatory exception raising the objection of lack of subject matter jurisdiction and a dilatory exception raising the objection of prematurity. By the exceptions,
The provisions of the Procurement Code that the State Defendants rely upon to contend the dispute should have been submitted to the DOA before filing suit in district court are set forth in La. R.S. 39:1673, La. R.S. 39:1685, and La. R.S. 39:1691(C), which provide in pertinent part that an aggrieved contractor must file a complaint with the chief procurement officer and appeal to the commissioner before the contractor may appeal to the district court:
The chief procurement officer is the Director of the Office of State Purchasing.
The provision of the LMMIS Agreement that the State Defendants rely upon to contend that the dispute should have been submitted to the DHH Secretary for a decision before filing suit in district court provides in pertinent part that the parties to the contract (DHH and CNSI) must submit the dispute to the DHH Secretary for a decision if the dispute between the parties is not resolved by agreement:
The LMMIS Agreement also included a provision permitting, but not requiring, an aggrieved contractor to invoke the dispute resolution procedure contained in the Procurement Code after receiving the DHH Secretary's decision:
At the hearing on the exceptions and motion to strike, CNSI introduced into evidence all of the exhibits that were attached to its memorandum in opposition to the exceptions. At the conclusion of the hearing, the district court denied the State Defendants' exceptions and motion to strike. The district court found that the court possessed subject matter jurisdiction over the suit because CNSI's petition sought to invoke the district court's original jurisdiction; did not involve an issue of public law; and was a contract claim within the court's original subject matter jurisdiction.
With respect to the exception raising the objection of prematurity, the district court found that CNSI had "substantially complied" with the LMMIS Agreement and found that CNSI was not required to go through the administrative process set forth by the Procurement Code, citing the following reasons:
A written judgment conforming to this ruling was signed by the district court on November 14, 2013.
Thereafter, the State Defendants filed an application for supervisory writs, and by an action dated April 7, 2014, this Court denied the writ.
Meanwhile, the litigation has continued to proceed. Both the DOA and DHH have now asserted reconventional demands against CNSI through which they assert claims for more than $17 million. Discovery is also ongoing, despite multiple attempts by the State Defendants to stay all discovery.
The State Defendants first contend that the district court lacks original subject matter jurisdiction over this lawsuit because the Procurement Code, La. R.S. 39:1551, et seq., states that contractors in a contract dispute with the State must present the dispute to the chief procurement officer and the commissioner of administration before filing an appeal in district court.
Jurisdiction over the subject matter is the legal power and authority of a court to hear and determine a particular class of actions or proceedings, based on the object of the demand, the amount in dispute, or the value of the right asserted. La. C.C.P. art. 2. Except as otherwise provided by the Louisiana Constitution, a district court shall have original jurisdiction of all civil and criminal matters. La. Const. art. V, § 16(A). When the original jurisdiction allocated to the various courts is circumscribed by the Louisiana Constitution, the Legislature may not alter such jurisdiction by statute.
It therefore follows that if this suit constitutes a civil matter within the meaning of La. Const. art. V, § 16(A), the district court cannot be held to lack subject matter jurisdiction over CNSI's claims in the absence of constitutional authority expressly granting exclusive jurisdiction to an administrative agency or other tribunal.
The State Defendants contend that the district court lacks original subject matter jurisdiction over this suit because it is not a civil matter and, even if it is, there is constitutional authority granting exclusive jurisdiction to the administrative agency. According to the State Defendants, this contract claim is not a civil matter within the meaning of Article V, § 16(A) because it is a matter of "public law." However, the State Defendants cannot cite to this Court any case where a Louisiana court determined that a case was not a civil matter because it was a public law matter. Neither the Louisiana Supreme Court nor the First Circuit has ever held that a claim was not a civil matter within the meaning of the constitution because it involved a matter of public law.
Rather, Louisiana jurisprudence has consistently applied a historical analysis to determine whether a suit is a civil matter.
In light of the fact that this is a civil matter, the district court cannot be held to lack subject matter jurisdiction over CNSI's claims in the absence of constitutional authority expressly granting exclusive jurisdiction to an administrative agency or other tribunal.
The State Defendants contend that there are two constitutional provisions that divest the district court of its original jurisdiction over this suit. The first is La. Const. art. V, § 16(B), which provides that, "[a] district court shall have appellate jurisdiction as provided by law." According to the State Defendants, the district court is divested of its original subject matter jurisdiction because the constitution authorizes the Legislature to designate a district court's appellate jurisdiction and the Legislature, through the Procurement Code, gives the district court appellate jurisdiction over procurement disputes.
However, this argument fails because the constitutional provision does not satisfy the requisite standard; stating that the Legislature can designate a district court's appellate jurisdiction cannot be construed as expressly granting exclusive jurisdiction to an administrative agency.
The second constitutional provision cited by the State Defendants is La. Const. art. XII, § 10(C), which provides that, "the legislature ... shall provide a procedure for suits against the state, a state agency, or a political subdivision." According to the State Defendants, the Procurement Code creates just such a "procedure" within the meaning of Article XII, § 10 by establishing the process by which state contractors may file breach of contract complaints against the State. Therefore, the State Defendants contend that the district court erred by not requiring CNSI to comply with this process. However, jurisdiction and procedure are two separate concepts and Article XII, § 10 does not address jurisdiction at all. Therefore, this provision clearly does not authorize the Legislature to vest exclusive original jurisdiction over suits against the State in an agency.
Finally, attempting to wholly sidestep the requirement of constitutional authority to divest a district court of its original jurisdiction over a civil matter, the State Defendants cite two cases out of context to contend that legislative intent to assign exclusive original subject matter jurisdiction to an administrative agency is sufficient to divest a court of its original subject matter jurisdiction over a civil matter.
In
However, the
The other case cited by the State Defendants is
When the
Because we find that this breach of contract suit is a civil matter within the meaning of La. Const. art. V, § 16(A), and we further find that no constitutional provision expressly grants exclusive jurisdiction over this suit to the DOA, we find the district court possesses original subject matter jurisdiction over this suit. We therefore find no error in the district court's decision to deny the exception raising the objection of lack of subject matter jurisdiction.
Having found that the district court possesses original subject matter jurisdiction over this matter, we next proceed to the question of whether CNSI's action was nevertheless premature because it did not exhaust the Procurement Code's administrative remedies before filing suit in district court. The doctrine of primary jurisdiction governs the prematurity analysis, because we have found that the district court and the administrative agency possess concurrent original jurisdiction over this matter.
Under the doctrine of primary jurisdiction, courts generally weigh the reasons pulling in each direction and decide whether requiring exhaustion is desirable.
Pulling away from the requirement of exhaustion are a combination of such factors as irreparable injury to a party for pursuing the administrative remedy, clear absence of the agency jurisdiction, clear illegality of the agency's position, a dispositive question of law peculiarly within judicial competence, the futility of exhaustion, and expense and awkwardness of the administrative proceeding as compared with inexpensive and efficient judicial disposition of the controversy.
This Court must therefore consider the foregoing factors to ascertain whether the district court abused its discretion when it declined to invoke the primary jurisdiction doctrine.
We find that, in light of the exceptionally unique circumstances of this case, the district court did not abuse its discretion in denying the exception raising the objection of prematurity. First, the district court's concerns about futility appear well-founded as the agency that would control the administrative process in this case, the DOA, is the same agency that dictated the very events that gave rise to this lawsuit. After all, the Chief Procurement Officer wrote the letter terminating the agreement and the Commissioner publicly took credit for the decision to terminate the agreement in a statement published in The Advocate. Additionally, CNSI is not only asking the DOA to correct an erroneous decision, it is also asserting a claim against the State for millions of dollars in damages. It is therefore difficult to foresee that the Chief Procurement Officer or the Commissioner would find that their own respective actions were wrongful and subjected the State to millions of dollars in liability. Also, the DOA and DHH have sought in excess of $17 million from CNSI in their reconventional demands against CNSI.
An additional consideration is that the case has now been proceeding in district court for close to two years. To halt all proceedings in district court and require CNSI to go through the administrative procedure at this juncture, requiring untold proceedings to be rescheduled, would be a waste of judicial resources.
We also see no abuse of discretion in the district court's decision not to invoke the doctrine of primary jurisdiction because this breach of contract case requiring interpretation of the LMMIS Agreement and enforcement of its terms is neither beyond the conventional expertise of judges nor within the special competence of the DOA.
The State Defendants attempt to convince this Court that the Procurement Code contains sufficient safeguards to protect State contractors like CNSI from bias because the procedure affords them multiple levels of review. However, the State Defendants fail to mention that the first two levels of review are decided by the very same personnel who personally took responsibility for terminating the LMMIS Agreement. We also note that if CNSI is required to submit to the Procurement Code's dispute resolution procedure, the decision of the Commissioner would be afforded deference.
The State Defendants also assert that CNSI can raise concerns about bias while going through the administrative procedure by filing a motion to recuse or by alleging a due process violation on the basis of bias, citing
Finally, we find that CNSI was not required by the terms of the LMMIS Agreement to submit the dispute to the DHH Secretary for a decision before filing suit because this provision of the contract only applied if there were any "issues or provisions of the Contract in dispute between the Department and the Contractor." Given the evidence that the DOA, not DHH, terminated the contract, and the absence of evidence that there were any issues or provisions of the LMMIS Agreement in dispute between DHH and CNSI, we find this provision inapplicable.
For all these reasons, we find the district court did not abuse its discretion in overruling the exception raising the objection of prematurity.
For the above and foregoing reasons, we deny the relief requested by the defendants/applicants, State of Louisiana; State, Department of Health and Hospitals; Kathy H. Kliebert, in her capacity as interim secretary, Department of Health and Hospitals; State, Division of Administration; State, Division of Administration, Office of State Purchasing; Kristy H. Nichols, in her capacity as Commissioner of Administration; Sandra G. Gillen, in her capacity as Director of State Purchasing, and the Honorable Bobby Jindal, in his capacity as Governor, State of Louisiana, and we assess the defendants/applicants with the costs, in the amount of $10,988.50.
WELCH, J., agreeing and assigning additional reasons.
While I agree with the thoughtful analysis and result reached by the majority, I write separately to caution that a departure from the administrative process (i.e., pulling away from the requirement of exhaustion of administrative remedies) should only be permitted by district courts in unusual, extreme, or egregious circumstances. The fact that an agency will be required to review its own actions does not generally warrant a departure from the administrative process. However, in this case, the ultimate decision maker in the procurement code administrative process—the Commissioner of Administration—openly and publicly made statements against CNSI on issues that would have come before her during the administrative process and those statements clearly indicated her predisposition against CNSI with regard to the issues. Thus, requiring CNSI to go through the administrative process—or to exhaust its administrative remedies— would be a vain and useless act. Therefore, I believe that this case falls under the category of unusual, extreme, or egregious circumstances such that a departure from the administrative process is warranted.
DRAKE, J., dissents and assigns reasons.
I respectfully disagree with the majority opinion as it does not address the case of Pacificorp Capital, Inc. v. State, Division of Administration, 604 So.2d 710 (La. App. 1st Cir. 1992), which is not so dissimilar to the present case so as to be distinguishable. Secondly, La. Acts 1985, No. 52, § 1 amended La. R.S. 39:1671 to provide that a person aggrieved by a solicitation or award of a contract
For these reasons, I respectfully dissent.
HOLDRIDGE, J.
I respectfully dissent. I believe that the district court erred in denying the dilatory exception raising the objection of prematurity. The mandatory language of La. R.S. 39:1673A clearly dictates that when there is a contractual dispute between a contractor and the state, the contractor "
In these statutes, the legislature has imposed a rather simple and speedy procedure for the parties to pursue to try to resolve or settle any of the matters existing between them before proceeding to the district court. I see no undue burden on the part of CNSI in following these procedures notwithstanding the facts of this case.
In addition, to presuppose, as the majority does, that the chief procurement officer would automatically be biased simply because the state is one of the parties involved in the contract dispute effectively renders La. R.S. 39:1673 superfluous, as the state is always a party. Moreover, I believe that the statements attributed to the commissioner (not the chief procurement officer) that are relied on by the majority opinion are insufficient to bypass the legislatively-mandated procedure set forth in the Louisiana Procurement Code.
Finally, I note that the result reached by the majority opinion highlights an important issue. In
For these reasons, the balancing test set forth in