Alohacare v. Department of Human Services, State of Hawaii. , 127 Haw. 76 ( 2012 )

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Electronically Filed
Supreme Court
SCWC-29630
11-MAY-2012
10:46 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
ALOHACARE, Petitioner/Plaintiff-Appellant,
vs.
DEPARTMENT OF HUMAN SERVICES, STATE OF HAWAI#I,
Respondent/Defendant-Appellee.
NO. SCWC-29630
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(ICA NO. 29630; CR. NO. 08-1-1531)
May 11, 2012
ACOBA, DUFFY, AND MCKENNA, J.J.; WITH RECKTENWALD, C.J.,
DISSENTING, WITH WHOM NAKAYAMA, J., JOINS
OPINION OF THE COURT BY ACOBA, J.
We hold (1) that Petitioner/Plaintiff-Appellant
AlohaCare (Petitioner), a bidder for a health and human services
contract under Hawai#i Revised Statutes (HRS) 103F, may not
appeal the denial of a contract award by Respondent/Defendant-
Appellee the Department of Human Services (Respondent) under the
procedures set forth in HRS chapter 103D (pertaining generally to
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other State procurement contracts) that afford judicial review
for bidders denied protests; (2) however, as construed, HRS
chapter 103F does not prohibit judicial review of the
administrative denial of such matters and review may be afforded
under the declaratory judgment statute, HRS chapter 632. See
Alaka#i Na Keiki, Inc. v. Matayoshi, ____ Hawai#i ___, ___ P.3d
___ (2012) (Alaka#i II); (3) review and denial of a bidder’s
protest by Respondent as the purchasing agency and subsequent
denial of a request for reconsideration by the chief procurement
officer housed in a different executive agency do not assuage
separation of powers concerns between the executive and judicial
branches of government because review is accomplished only in the
executive branch of government; and (4) Petitioner is not denied
the constitutional rights of due process or equal protection by
HRS chapter 103F, inasmuch as judicial review may be obtained by
way of a declaratory judgment action.1
Applying the holding to this case, we vacate the August
12, 2011 judgment of the ICA and the January 8, 2009 judgment of
the court. We remand this case to the court for disposition
consistent with this opinion.
1
Petitioner seeks review of the August 12, 2011 judgment of the ICA
filed pursuant to its July 29, 2011 Summary Disposition Order (SDO), affirming
the Judgment and Order Dismissing AlohaCare’s Appeal for Lack of Jurisdiction
filed by the Circuit Court of the First Circuit(the court) on January 8, 2009.
The SDO was filed by Presiding Judge Daniel R. Foley and Associate Judges
Alexa D.M. Fujise and Katherine G. Leonard. The Honorable Eden E. Hifo
presided at the court.
2
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I.
In October 2007, Respondent issued a request for
proposals (RFP) to solicit providers for QUEST Expanded Access
(QExA) Managed Care Plans to eligible individuals who are aged,
blind, and disabled. Petitioner submitted a proposal, but it was
not one of the two health plans ultimately awarded a contract.2
On February 22, 2008, Petitioner lodged a protest with
the Director of Respondent, the head of the purchasing agency
described in HRS § 103F-501.3 The protest generally alleged:
(1) [Respondent] failed to properly review [Petitioner’s]
technical proposal;
(2) [Respondent] improperly utilized the technical proposals
as basis to exclude [Petitioner] from further consideration;
(3) [Petitioner’s] competitors are ineligible for Medicaid
Managed Care Contracts;
(4) The treatment of [Petitioner] violated the terms of its
settlement agreement with [Respondent]; 4
2
The essential matters following are from the record and the
submissions of the parties.
3
HRS § 103F-501 (Supp. 2007) provides in relevant part:
[§ 103F-501]. Protested awards. (a) A person who is
aggrieved by an award of a contract may protest a purchasing
agency's failure to follow procedures established by this
chapter, rules adopted by the policy board, or a request for
proposals in selecting a provider and awarding a purchase of
health and human services contract, provided the contract
was awarded under section 103F-402 or 103F-403. Amounts
payable under a contract awarded under section 103F-402 or
103F-403, and all other awards of health and human services
contracts may not be protested and shall be final and
conclusive when made.
(Emphasis added.)
4
The terms of the settlement agreement, “guaranteed no less than
equal treatment by [Respondent] as respects all other managed care entities.”
Petitioner “contends that the RFP method of treatment of the general excise
and insurance premium taxes in evaluating business proposals, and the manner
in which it was given ‘adverse findings’ in the scoring of its technical
(continued...)
3
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(5) The terms of the RFP violated the rights of the
Federally Qualified Health Centers that are members of
[Petitioner] and made [Petitioner’s] competitors ineligible for
the award.
On March 12, 2008, the protest was denied. On March
19, 2008, pursuant to HRS § 103F-502, Petitioner requested
reconsideration of the denial from the chief procurement officer
of the State Procurement Office, of the Department of Accounting
and General Services, another state agency.5 On May 19, 2008,
the chief procurement officer denied the request for
reconsideration. HRS § 103F-502(d) states that the chief
procurement officer’s decision is “final and conclusive.”
However, Petitioner then filed an appeal and request
for hearing with the Department of Commerce and Consumer Affairs
4
(...continued)
proposal, violated this ‘equal treatment’ requirement.”
5
HRS § 103F-502 (Supp. 2007) provides in relevant part:
[§ 103F-502]. Right to request reconsideration. (a) A
request for reconsideration of a decision of the head of the
purchasing agency under section 103F-501 shall be submitted
to the chief procurement officer not later than five working
days after the receipt of the written decision, and shall
contain a specific statement of the factual and legal
grounds upon which reversal or modification is sought.
(b) A request for reconsideration may be made only to
correct a purchasing agency’s failure to comply with section
103F-402 or 103F-403, rules adopted to implement the
sections, or a request for proposal, if applicable.
(c) The chief procurement officer may uphold the previous
decision of the head of the purchasing agency or reopen the
protest as deemed appropriate.
(d) A decison under subsection (c) shall be final and
conclusive.
(Emphases added.)
4
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(DCCA) but under HRS chapter 103D, specifically HRS § 103D-709.6
HRS § 103D-709 provides that a person aggrieved by determinations
of the head of a purchasing agency, or the chief procurement
officer or their designees, may request a de novo hearing before
a DCCA hearings officer to contest such determinations. DCCA
filed a Motion to Dismiss for Lack of Jurisdiction. On July 16,
2008, the DCCA hearings officer granted the motion, essentially
concluding that Petitioner was not a party to a protest made and
6
HRS § 103D-709 (Supp. 2007) provides in relevant part:
§ 103D-709. Administrative proceedings for review.
(a) The several hearings officers appointed by the director
of the department of commerce and consumer affairs pursuant
to section 26-9(f) shall have jurisdiction to review and
determine de novo, any request from any bidder, offeror,
contractor, or person aggrieved under section 103D-106, or
governmental body aggrieved by a determination of the chief
procurement officer, head of a purchasing agency, or a
designee of either officer under section 103D-310, 103D-701,
or 103D-702.
(b) Hearings to review and determine any request made
pursuant to subsection (a) shall commence within twenty-one
calendar days of receipt of the request. The hearings
officers shall have power to issue subpoenas, administer
oaths, hear testimony, find facts, make conclusions of law,
and issue a written decision not later than forty-five days
from the receipt of the request under subsection (a), that
shall be final and conclusive unless a person or
governmental body adversely affected by the decision
commences an appeal in the circuit court of the circuit
where the case or controversy arises under section 103D-710.
(c) Only parties to the protest made and decided pursuant to
sections 103D-701, 103D-709(a), 103D-310(b), and 103D-702(g)
may initiate a proceeding under this section. The party
initiating the proceeding shall have the burden of proof,
including the burden of producing evidence as well as the
burden of persuasion. The degree or quantum of proof shall
be a preponderance of the evidence. All parties to the
proceeding shall be afforded an opportunity to present oral
or documentary evidence, conduct cross-examination as may be
required, and argument on all issues involved. Fact finding
under section 91-10 shall apply.
(Emphases added.)
5
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decided under any provision of HRS chapter 103D and that
therefore a DCCA hearings officer lacked jurisdiction to hear
Petitioner’s appeal stemming from HRS chapter 103F.
Petitioner then appealed to the court under HRS § 103D-
710, which permits judicial review of a hearings officer’s
decision under HRS § 103D-709,7 HRS § 632-1, the declaratory
judgment statute,8 and Hawai#i Rule of Civil Procedure 72(a),
7
HRS § 103D-710 (Supp. 2007) provides:
§ 103D-710. Judicial review. (a) Only parties to
proceedings under section 103D-709 who are aggrieved by a
final decision of a hearings officer under that section may
apply for judicial review of that decision. The proceedings
for review shall be instituted in the circuit court of the
circuit where the case or controversy arises. . . .
(e) Upon review of the record the circuit court may affirm
the decision of the hearings officer issued pursuant to
section 103D-709 or remand the case with instructions for
further proceedings; or it may reverse or modify the
decision and order if substantial rights may have been
prejudiced because the administrative findings, conclusions,
decisions, or orders are:
(1) In violation of constitutional or statutory
provisions;
(2) In excess of the statutory authority or
jurisdiction of the chief procurement officer or head
of the purchasing agency;
(3) Made upon unlawful procedure;
(4) Affected by other error of law;
(5) Clearly erroneous in view of the reliable,
probative, and substantial evidence on the whole
record; or
(6) Arbitrary, or capricious, or characterized by
abuse of discretion or clearly unwarranted exercise of
discretion.
(Emphases added.)
8
HRS § 632-1 (1997) provides:
§ 632-1. Jurisdiction; controversies subject to. In cases
of actual controversy, courts of record, within the scope of
their respective jurisdictions, shall have power to make
binding adjudications of right, whether or not consequential
(continued...)
6
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that grants circuit courts jurisdiction of appeals allowed by
statute.9 Petitioner requested the court find that “the DCCA has
jurisdiction based on various sections of the Hawai#i Revised
Statutes, including but not limited to, sections 91-14, 103F-501,
8
(...continued)
relief is, or at the time could be, claimed, and no action
or proceeding shall be open to objection on the ground that
a judgment or order merely declaratory of right is prayed
for . . . .
Relief by declaratory judgment may be granted in civil cases
where an actual controversy exists between contending
parties, or where the court is satisfied that antagonistic
claims are present between the parties involved which
indicate imminent and inevitable litigation, or where in any
such case the court is satisfied that a party asserts a
legal relation, status, right, or privilege in which the
party has a concrete interest and that there is a challenge
or denial of the asserted relation, status, right, or
privilege by an adversary party who also has or asserts a
concrete interest therein, and the court is satisfied also
that a declaratory judgment will serve to terminate the
uncertainty or controversy giving rise to the proceeding.
Where, however, a statute provides a special form of remedy
for a specific type of case, that statutory remedy shall be
followed; but the mere fact that an actual or threatened
controversy is susceptible of relief through a general
common law remedy, a remedy equitable in nature, or an
extraordinary legal remedy, whether such remedy is
recognized or regulated by statute or not, shall not debar a
party from the privilege of obtaining a declaratory judgment
in any case where the other essentials to such relief are
present.
(Emphases added.)
9
Hawai#i Rule of Civil Procedure 72(a) provides:
(a) How taken. Where a right of redetermination or review in
a circuit court is allowed by statute, any person adversely
affected by the decision, order or action of a governmental
official or body other than a court, may appeal from such
decision, order or action by filing a notice of appeal in
the circuit court having jurisdiction of the matter. . . .
(Emphasis added.)
7
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103F-502, 103D-203,10 and 103D-709.” Petitioner also sought a
declaratory judgment under HRS § 632-1 declaring that HRS § 103F-
504,11 the “exclusivity of remedies” provision, was invalid or
unconstitutional to the extent it precluded judicial review of
protest decisions. Petitioner asked the court for orders
“reversing the decision of the Hearings Officer and declaring
that the DCCA has jurisdiction over AlohaCare’s appeal,”
“declaring that HRS 103F-504 [is] invalid or unconstitutional to
10
HRS § 103D-203 (Supp. 2007) provides in relevant part:
§ 103D-203. Chief procurement officers. (a) The chief
procurement officer for each of the following state entities
shall be:
(1) The judiciary--the administrative director of the
courts;
(2) The senate--the president of the senate;
(3) The house of representatives--the speaker of the house
of representatives;
(4)The office of Hawaiian affairs--the chairperson of the board;
(5) The University of Hawaii--the president of the
University of Hawaii;
(6) The department of education, excluding the Hawaii public
library system--the superintendent of education;
(7) The Hawaii health systems corporation--the chief
executive officer of the Hawaii health systems corporation;
and
(8) [For] [t]he remaining departments of the executive
branch of the State and all governmental bodies
administratively attached to them--the administrator of the
state procurement office of the department of accounting and
general services.
(Emphasis added.)
11
HRS § 103F-504 (Supp. 2007) provides:
[§ 103F-504.] Exclusivity of remedies. The procedures and
remedies provided for in this part, and the rules adopted by
the policy board, shall be the exclusive means available for
persons aggrieved in connection with the award of a contract
to resolve their concerns.
(Emphasis added.)
8
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the extent it purports to preclude review of the Executive
Branch’s decision,” and granting “such other relief as the Court
deems just and reasonable.”
Respondent filed a Motion to Dismiss in the court,
claiming that there was no judicial review of the executive
branch’s decision on the bid protest. Respondent contended that
(1) Petitioner had no statutory right to appeal; (2) HRS chapter
91 jurisdiction was limited to appeals from “contested cases”;
(3) Hawai#i statutes regarding health and human services
procurements did not require a contested case hearing; (4)
Petitioner had no constitutional right to a contested case
hearing on due process grounds; and (5) HRS § 103F-504 was
constitutional. The court granted Respondent’s motion on the
basis that it lacked subject matter jurisdiction under Hawai#i
Rules of Civil Procedure Rule 72(a) and entered judgment on
January 8, 2009. Citing Alaka#i Na Keiki, Inc. v. Hamamoto, 125
Hawai#i 200, 257 P.3d 213 (App. 2011) (Alaka#i I), the ICA
essentially determined that Petitioner was not entitled to
judicial review and affirmed the court’s judgment for lack of
jurisdiction. AlohaCare v. Dep’t of Human Servs., No. 29630,
2011 WL 3250430 (App. July 28, 2011).12
12
The record does not indicate whether the contracts in issue have
been completed. In the event the contracts have expired, there is no live
controversy. However, the instant case falls within an exception to the
mootness doctrine because it “‘involv[es] a legal issue which is capable of
(continued...)
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II.
In its Application for Writ of Certiorari
(Application), Petitioner presents the following questions:
1. Whether the procurement statutory scheme as
outlined in chapters 103F and 103D HRS permit judicial
review of the [e]xecutive [b]ranch decision regarding
a health procurement bid?
2. Whether the denial of judicial review of the
[e]xecutive [b]ranch decision regarding a health
procurement bid was unconstitutional pursuant to the
Hawai#i Constitution [a]rticle VI, section 1 which
grants judicial powers to the courts?
3. Whether the denial of judicial review of the
[e]xecutive [b]ranch decision regarding a health
procurement bid was unconstitutional pursuant to the
Hawai#i Constitution, [a]rticle I, section 5 which
guarantees due process and equal protection of the
laws?
III.
A.
Regarding the first question, Petitioner argues that,
read together, HRS chapters 103F and 103D permit judicial review
of the agency’s decision. Petitioner contends HRS chapter 103F
allows a dissatisfied bidder to file a protest with the head of
the purchasing agency under HRS § 103F-501, from which either
party can appeal for reconsideration to the chief procurement
officer under HRS § 103F-102. At that point, Petitioner claims,
12
(...continued)
repetition, yet evading review[,]’ . . . inasmuch as the State will continue
to award health and human services contracts . . . [but by] the time the issue
reaches this court, the contracts will most often have been awarded and fully
executed[.]” Alaka#i II, at 11 n.19 (quoting Kona Old Hawaiian Trails Group
v. Lyman, 69 Haw. 81, 87, 734 P.2d 161, 165 (1987)).
10
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the parties are “sent” by HRS § 103F-10213 to HRS chapter 103D,
which contains the definition of chief procurement officer, see
HRS § 103D-203. From this provision defining the chief
procurement officer, Petitioner asserts the parties are then
“sent” to HRS § 103D-709, which grants DCCA hearings officers
jurisdiction to review the decision of any chief procurement
officer. Although Petitioner does not say so expressly, the
implication of its argument is that it is entitled to a full
hearing before a hearings officer under HRS § 103D-709.
Petitioner contends that HRS § 103D-70114 and HRS § 103D-710
13
HRS § 103F-102 (Supp. 2007) provides in relevant part:
[§ 103F-102.] Definitions. As used in this chapter, unless
the context clearly requires otherwise:
“Chief procurement officer” means those officials designated
by section 103D-203.
(Emphasis added.)
14
HRS § 103D-701 (Supp. 2007) provides in relevant part:
[§ 103D-701.] Authority to resolve protested solicitations
and awards. (a) Any actual or prospective bidder, offeror,
or contractor who is aggrieved in connection with the
solicitation or award of a contract may protest to the chief
procurement officer or a designee as specified in the
solicitation. Except as provided in sections 103D-303 and
103D-304, a protest shall be submitted in writing within
five working days after the aggrieved person knows or should
have known of the facts giving rise thereto; provided that a
protest of an award or proposed award shall in any event be
submitted in writing within five working days after the
posting of award of the contract under section 103D-302 or
103D-303, if no request for debriefing has been made, as
applicable; provided further that no protest based upon the
content of the solicitation shall be considered unless it is
submitted in writing prior to the date set for the receipt
of offers.
(continued...)
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empower the circuit court to review the decision of the hearings
officer. According to Petitioner, a contrary interpretation
would raise due process concerns; and lead to the “absurd” result
that there would be a right to judicial review generally for
procurement contracts under chapter 103D, but not for health and
human services procurement contracts governed by chapter 103F.
B.
Respondent answers first that Petitioner has no right
to appeal under HRS chapter 91, and specifically under HRS § 91-
14(a)15, because chapter 103F does not require a “contested case”
14
(...continued)
(b) The chief procurement officer or a designee, prior to
the commencement of an administrative proceeding under
section 103D-709 or an action in court pursuant to section
103D-710, may settle and resolve a protest concerning the
solicitation or award of a contract. This authority shall be
exercised in accordance with rules adopted by the policy
board.
(Emphases added.)
15
HRS § 91-14(a) (1997) provides:
§ 91-14. Judicial review of contested cases. (a) Any
person aggrieved by a final decision and order in a
contested case or by a preliminary ruling of the nature that
deferral of review pending entry of a subsequent final
decision would deprive appellant of adequate relief is
entitled to judicial review thereof under this chapter; but
nothing in this section shall be deemed to prevent resort to
other means of review, redress, relief, or trial de novo,
including the right of trial by jury, provided by law.
Notwithstanding any other provision of this chapter to the
contrary, for the purposes of this section, the term “person
aggrieved” shall include an agency that is a party to a
contested case proceeding before that agency or another
agency.
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hearing, and therefore there is no chapter 91 jurisdiction.16
Second, Respondent argues that the legal remedies
available under HRS chapter 103D, including judicial review, do
not apply to HRS chapter 103F health and human services
procurement contracts. Respondent maintains that HRS § 103F-
10417 states that contracts to purchase health and human services
are exempt from the requirements of HRS chapter 103D, “unless a
provision of [chapter 103F] imposes a requirement of chapter 103D
on the contract or purchase,” see HRS § 103F-104. According to
Respondent, nothing in the definition of “chief procurement
officer,” HRS § 103F-102, “imposes a requirement of HRS chapter
103D on the contract or purchase,” HRS § 103F-104, in order for
HRS chapter 103D to apply to HRS chapter 103F health and human
services contracts.
Assuming that the definition of chief procurement
officer invoked HRS chapter 103D legal remedies, Respondent
asserts that the only parties who may initiate administrative
16
Petitioner, however, did not claim in its Application that HRS
chapter 91 was a basis for jurisdiction.
17
HRS § 103F-104 provides:
[§ 103F-104.] Exemption from chapter 103D. Contracts to
purchase health and human services required to be awarded
pursuant to this chapter shall be exempt from the
requirements of chapter 103D, unless a provision of this
chapter imposes a requirement of chapter 103D on the
contract or purchase.
(Emphasis added.)
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review under HRS § 103D-709 are the “parties to the protest made
and decided pursuant to [] sections . . . [103D-701, 103D-709(a),
103D-310(b),18 and 103D-702(g)19].” Respondent points out that
Petitioner was not a party to any protest made under any of those
sections, and thus cannot invoke HRS § 103D-709, which permits
DCCA hearings officers to review “any request from any bidder . .
. aggrieved by a determination of the chief procurement officer.”
Finally, Respondent argues that to incorporate the legal remedies
of HRS chapter 103D into HRS chapter 103F would be inconsistent
with the legislature’s intent to create a separate and more
streamlined process for procuring health and human services.
C.
Regarding the second question, Petitioner urges that to
the extent HRS chapter 103F prohibits judicial review of
18
HRS § 103D-310(b)(Supp. 2001) provides in relevant part:
Whether or not an intention to bid is required, the procurement
officer shall determine whether the prospective offeror has the
financial ability, resources, skills, capability, and business
integrity necessary to perform the work. For this purpose, the
officer, in the officer’s discretion, may require any prospective
offeror to submit answers, under oath, to questions . . . prepared
by the policy board. . . . Whenever it appears . . . that the
prospective offeror is not fully qualified and able to perform the
intended work, a written determination of nonresponsibility of an
offeror shall be made by the head of the purchasing agency, in
accordance with rules adopted by the policy board. The decision
of the head of the purchasing agency shall be final unless the
offeror applies for administrative review pursuant to section
103D-709.
19
HRS § 103D-702(g) (Supp. 2005) provides that “[t]he policy board
shall adopt such other rules as may be necessary to ensure that the
proceedings conducted pursuant to this section afford all parties an
opportunity to be heard.”
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executive branch decisions, it is unconstitutional. Petitioner
cites article VI, section 1 of the Hawai#i Constitution,20 which
vests the judicial power of the State in the courts; this court’s
statement in HOH Corp. v. Motor Vehicle Licensing Bd., 69 Haw.
135, 143, 736 P.2d 1271, 1276 (1987), that “[t]he administrative
agency is not empowered to pass on the validity of the statute;
nor is it qualified to pass on . . . the propriety of its own
action”; and Carl Corp. v. Dep’t of Edu., 85 Hawai#i 431, 455,
946 P.2d 1, 25 (1997), which, according to Petitioner, held that
it would be “absurd” to conclude that a hearings officer was the
only one with jurisdiction to determine whether a purchasing
agency awarded a contract in violation of the law.
Respondent rejoins that the legislature has removed
disputes involving the award of HRS chapter 103F procurement
contracts from the jurisdiction of the courts; that this court
may not override that decision because the legislature, not the
courts, define the jurisdiction of the circuit courts; and that
Petitioner cannot rely on cases such as HOH, 69 Haw. at 143, 736
P.2d at 1272, and Carl Corp., 85 Haw. at 455, 946 P.2d at 25,
20
Haw. Const. art. VI, § 1 provides:
Section 1. The judicial power of the State shall be
vested in one supreme court, one intermediate appellate
court, circuit courts, district courts and in such other
courts as the legislature may from time to time
establish. The several courts shall have original and
appellate jurisdiction as provided by law and shall
establish time limits for disposition of cases in
accordance with their rules.
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that have concluded that agencies are not empowered to review
their own actions, because the chief procurement officer is from
a state agency, separate from Respondent, and no principle bars
one agency from reviewing the decisions of another agency, such
as Respondent.
D.
Regarding the third question, Petitioner maintains that
the lack of judicial review under HRS chapter 103F violates the
equal protection guarantee of article I, section 5 of the Hawai#i
Constitution21 in that there is no rational basis for allowing
judicial review of other procurement contracts under HRS chapter
103D but prohibiting such review of health and human services
procurement contracts under HRS chapter 103F. Petitioner does
not make any argument concerning due process with respect to the
third question.
In response, Respondent declares that there is no equal
protection violation because there is a rational basis for
excluding judicial review under HRS chapter 103F, inasmuch the
legislature intended a “simpler, standardized process for the
purchase of health and human services, that was by design
21
Haw. Const. art. VI, § 5 provides:
Section 5. No person shall be deprived of life, liberty or
property without due process of law, nor be denied the equal
protection of the laws, nor be denied the enjoyment of the
person’s civil rights or be discriminated against in the
exercise thereof because of race, religion, sex or ancestry.
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separate and distinct from the public procurement code in HRS
chapter 103D.” Respondent also asserts that there is no due
process violation because Petitioner lacks any property interest
in the expectation that it might be awarded a procurement
contract. Further, Respondent maintains that even if a property
interest existed, Petitioner received all of the process that was
due to it because Petitioner received notice and an opportunity
to be heard on its protest before the purchasing agency and the
chief procurement officer.
E.
Relying on its opinion in Alaka#i I, the ICA concluded
that (1) HRS chapter 103F does not allow for judicial review of
agency decisions; (2) the absence of judicial review does not
violate article VI, section 1 of the Hawai#i Constitution; and
(3) HRS chapter 103F did not raise any due process or equal
protection concerns. AlohaCare, 2011 WL 3250430 at *1.22 Id.IV.
With respect to Petitioner’s first question, Petitioner
argues that, read together, HRS chapter 103F and HRS chapter 103D
permit it to seek judicial review of the chief procurement
officer’s decision. “[T]he fundamental starting point for
statutory interpretation is the language of the statute itself.”
22
Petitioner did not argue to the ICA that it was entitled to appeal
pursuant to HRS chapter 91. As noted, supra, Petitioner does not make that
argument in its Application either.
17
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Flores v. Rawlings Co., LLC, 117 Hawai#i 153, 158, 177 P.3d 341,
346 (2008) (citing Peterson v. Hawai#i Elec. Light Co., Inc., 85
Hawai#i 322, 327-28, 944 P.2d 1265, 1270-71 (1997)). However,
the statutory text does not support Petitioner’s contention.
As observed, HRS § 103F-104 provides that contracts to
purchase health and human services “shall be exempt from the
requirements of chapter 103D, unless a provision of [chapter
103F] imposes a requirement of chapter 103D on the contract or
purchase.” Petitioner agrees that it was bidding for a contract
involving the purchase of health and human services, and
therefore HRS § 103F-104 applies.
But Petitioner contends, in essence, that because HRS
chapter 103F looks to HRS chapter 103D for the definition of
“chief procurement officer,” and HRS § 103D-709(a) confers
jurisdiction upon hearings officers to review the decisions of
chief procurement officers, Petitioner has the right to appeal to
a hearings officer from the adverse decision of the chief
procurement officer. In turn, Petitioner maintains that because
the decisions of hearings officers are reviewable by the circuit
courts under HRS § 103D-701 and HRS § 103D-710, judicial review
is available to Petitioner.
However, HRS chapter 103D does not apply to health and
human services procurement contracts unless a specific provision
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of HRS chapter 103F “imposes a requirement” of HRS chapter 103D
on the contract. See HRS § 103F-104. HRS § 103F-501 allows a
protest to be filed with the head of the purchasing agency, and
HRS § 103F-502 permits an appeal to the chief procurement
officer. The definition of chief procurement officer is located
in HRS § 103F-102, which as noted before refers to HRS § 103D-203
for the definition of that term. But the mere fact that HRS §
103F-103 references HRS § 103D-203 for the definition of chief
procurement officer does not mean that HRS § 103F-103 “imposes a
requirement” of HRS chapter 103D on HRS chapter 103F contracts.
There is nothing in the form of a “requirement” on HRS
chapter 103F health and human services contracts in HRS § 103D-
203, which defines “chief procurement officer.” As said, the
relevant provision designates the “chief procurement officer” as
being “the administrator of the state procurement office of the
department of accounting and general services.” HRS § 103D-
203(a)(8). It does not “require” that person to engage in any
particular conduct. The pertinent “requirement” is located, not
in HRS chapter 103D, but in HRS § 103F-502, which confers
jurisdiction upon the chief procurement officer to review
decisions of the purchasing agency. Thus, HRS § 103F-103 does
not appear to impose any “requirement” of HRS chapter 103D on HRS
chapter 103F health and human services contracts, except to
“require” that the “chief procurement officer” be the same
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official under both HRS chapter 103D and HRS chapter 103F.
Moreover, as Respondent argues, HRS § 103D-709(c)
states that “only parties to a protest made and decided pursuant
to sections 103D-701, 103D-709(a), 103D-310(b), and 103D-702(f)
may initiate a proceeding under this section.” Under the express
terms of HRS § 103D-709(c), Petitioner cannot seek review of the
chief procurement officer’s decision on an HRS chapter 103F
health and human services contract pursuant to HRS chapter 103D
unless the protest was decided under one of the sections listed
in HRS § 103D-709(c). Petitioner does not contend that the chief
procurement officer made a decision pursuant to any of those
statutory provisions. Rather, Petitioner relates that it filed a
protest with the head of the purchasing agency, and then with the
chief procurement officer, under HRS § 103F-501 and HRS § 103F-
502. HRS § 103D-709(c) thus forecloses Petitioner from seeking
review of the chief procurement officer’s decision made pursuant
to HRS § 103F-501 under the procedures of HRS § 103D-709.
Petitioner nevertheless contends that judicial review
of chapter 103F contracts must be afforded because it would be
“absurd” to except health and human services contracts, when
review is available under HRS chapter 103D for other procurement
contracts. But no “absurdity” would follow inasmuch, as
explained infra, judicial review is not foreclosed by HRS chapter
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103F.23
V.
With respect to the second question, Petitioner urges
that “to the extent that [HRS c]hapter 103F restricts review of
the executive branch by executive branch officials, it is
unconstitutional.” Petitioner refers to the ICA’s conclusion
that HRS “[c]hapter 103F does not allow for judicial review”
because HRS § 103F-504 states that the protest procedure “shall
be the exclusive means available for persons aggrieved . . . to
resolve their concerns[.]” Alakai Na Keiki, Inc., 125 Hawai#i at
206-07, 257 P.3d at 219-20 (emphasis added). Petitioner reasons
that if HRS § 103F-504 bars judicial review, it is
unconstitutional because, “[a]fter all, the judicial power” is
vested on the courts by article VI, section I of the Hawai#i
Constitution. According to Petitioner, HRS chapter 103F is
invalid because “it empowers the [e]xecutive [b]ranch to
determine the propriety and legality of its own procurement
actions as a final decision without review from any other
[b]ranch of government.”
In making this claim, Petitioner is, in essence,
23
Although Petitioner appears to have abandoned the claim that it
may seek judicial review under HRS § 91-14(a), see AlohaCare, 2011 WL 3250430at *1, Respondent argues that Petitioner is not entitled to review under HRS §
91-14(a). But since Petitioner did not maintain in its Application that it
was entitled to review under HRS § 91-14(a), we do not consider that issue.
See E & J Lounge Operating Co., Inc. v. Liquor Comm’n of the City and Cty. of
Honolulu, 118 Hawai#i 320, 347, 189 P.3d 432, 459 (2008).
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invoking the separation of powers doctrine. The separation of
powers doctrine is intended “to preclude a commingling of . . .
essentially different powers of government in the same hands and
thereby prevent a situation where one department would be
controlled by, or subjected, directly or indirectly, to, the
coercive influence of either of the other departments.” Pray v.
Judicial Selection Comm’n of State, 75 Haw. 333, 353, 861 P.2d
723, 732 (1993) (internal quotation marks and citation omitted).
Petitioner advances arguments similar to those made by
the petitioner in Alaka#i II. Briefly, Petitioner asserts that
chapter 103F vests the judicial power constitutionally reserved
for the courts in an executive agency, shielding the decisions of
the agency from review. Respondent and the ICA respond that
because the legislature has the power to establish the subject
matter jurisdiction of the courts and to create or to deny
appellate review, the legislature’s alleged prohibition of
judicial review under HRS chapter 103F per se cannot present a
separation of powers issue. See AlohaCare, 2011 WL 3250430 at *1
(citing Alakai Na Keiki, Inc., 125 Hawai#i at 206-07, 257 P.3d at
219-220).
However, in Alaka#i II we said that “subject matter
jurisdiction is not determinative of whether a legislative act
that delegates judicial power to an agency violates the
separation of powers doctrine or not.” Alaka#i II, at 23
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(footnote omitted). Indeed, separation of powers concerns may
arise when the legislature vests administrative agencies with
judicial power but precludes judicial review of the agency’s
decisions. Id. at 24. Absent judicial review, the agency is
left to decide the legality of its own actions, meaning that
there is no “check” on the propriety of the agency’s actions
under the law. See McHugh v. Santa Monica Rent Control Bd., 777
P.2d 91, 102 (Cal. 1989) (explaining that delegation of judicial
power to administrative agencies is acceptable so long as there
is judicial review of the agency’s decisions operating as a
“check” on the agency’s exercise of that power); see also F.C.C.
v. Fox Television Stations, Inc., 129 S. Ct. 1800, 1823 (Kennedy,
J., concurring) (“If agencies were permitted unbridled
discretion, their actions might violate important constitutional
principles of separation of powers and checks and balances.”).
Consequently, “if the legislature delegates judicial power to an
administrative agency and precludes judicial review of the
legality of the agency’s own actions, a separation of powers
issue would arise.” See Alaka#i II, at 28.
VI.
Respondent argues, that because the head of the
purchasing agency and the chief procurement officer belong to
different agencies, disallowing judicial review does not raise
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separation of powers concerns. Respondent recognizes that in
HOH, 69 Haw. at 143, 736 P.2d at 1276, this court explained that
an administrative agency was not “empowered to pass on the
validity of the statute; nor is it qualified to pass on the
propriety of its own action,” and that in Carl Corp., 85 Hawai#i
at 455, 946 P.2d at 25, this court held that it would be “absurd”
to allow a hearings officer to determine the legality of his own
actions. However, Respondent explains that those cases are
distinguishable because, here, the purchasing agency is not
deciding on the legality of its own actions. According to
Respondent, since a request for reconsideration is made to the
chief procurement officer and that person is the administrator of
the State Procurement Office, see HRS § 103D-203, a different
agency decided the validity of Respondent’s actions.
Respondent’s argument overlooks that the doctrine of
separation of powers is derived from the distribution of power
among the three branches of government. Cf. Clinton v. Jones,
520 U.S. 681, 691 (1997) (“[T]he doctrine of separation of powers
. . . restrains each of the three branches of the Federal
Government from encroaching on the domain of the other two[.]”);
see also Hawaii Insurers Council v. Lingle, 120 Hawai#i 51, 69,
201 P.3d 564, 582 (2008) (explaining that the separation of
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powers doctrine preserves the checks and balances of our system
of government where “sovereign power is divided and allocated
among three co-equal branches”). According to Respondent, the
procedures in place empower one agency of the executive branch,
in this case, the State Procurement Office of the Department of
Accounting and General Services, to decide the legality of the
actions of another executive branch agency, in this case,
Respondent, without permitting judicial review.24 However, if
the premise underlying the separation of powers doctrine is that
one branch should not encroach upon the domain of another,
Respondent’s argument allows the executive branch to exercise
unchecked judicial power, and hence does not mitigate separation
of powers concerns. Thus, Respondent’s contention that there is
no separation of powers issue because an executive agency reviews
the decision of an executive purchasing agency is incorrect.
VII.
As indicated in Alaka#i II, the legislature vested the
purchasing agency and the chief procurement officer with judicial
power, to the extent HRS chapter 103F delegates to the purchasing
agency and to the chief procurement officer the authority to
interpret and apply HRS chapter 103F and to determine the
24
Both DHS and the State Procurement Office of the Department of
Accounting and General Services are executive agencies. See Guide to
Government in Hawai#i, Legislative Reference Bureau, 11 (December 2007),
http://hawaii.gov/lrb/gd/gdgovhi.pdf.
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legality of the agency’s actions in disputes with protesting
parties. Alaka#i II, at 29-31.
In this regard, the Hawai#i Constitution vests judicial
power in the courts. Hawai#i Const. art. VI, § 1. Under such
power, “this court is the ultimate interpreter of [the Hawai#i]
[C]onstitution, Bani, 97 Hawai#i at 291 n.4, 36 P.3d at 1261 n.4,
[and] this court is [also] the final arbiter of [Hawai#i]
statutory law.” Alaka#i II, at 31. Also, “[t]he state courts
are the final arbiters of the State’s own law.” Id. (Citing Rana
v. Bishop Ins. of Hawaii, Inc., 6 Haw. App. 1, 10, 713 P.2d 1363,
1369 (App. 1985)) (Brackets, quotation marks, and citation
omitted.). Morever “[t]he quintessential power of the judiciary
is the power to make final determinations of questions of law[.]”
Id. (Quoting Ashbury, 846 S.W.2d at 200 (other citations
omitted)).
HRS § 103F-501 allows a person aggrieved by an award of
a contract to “protest a purchasing agency’s failure to follow
procedures established by [HRS chapter 103F], rules adopted by
the policy board, or a request for proposals in selecting a
provider and awarding a purchase of health and human services
contract[.]” HRS § 103F-501(a). Petitioner filed a protest of
the contract awards pursuant to HRS § 103F-501, that alleged
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matters generally falling within the aforesaid areas, see supra.
Consequently, insofar as the purchasing agency is charged with
determining whether it failed to “follow procedures established
by [HRS § 103F-501,]” “rules . . . [] of the policy board” or the
RFP, HRS § 103F-501(a), and the chief procurement officer
determines whether the purchasing agency “fail[ed] to comply with
section 103F-402 or 103F-403[,]” both perform a judicial
function.
VIII.
A.
Having concluded that DHS and the chief procurement
officer have been vested with judicial power, it must be
determined whether decisions made by the purchasing agency in
exercising adjudicatory power are subject to judicial review. In
Alaka#i II, this court indicated there would be presumptive
judicial review of such administrative action:
This court has said that, ‘there is a policy favoring
judicial review of administrative actions.’ In re Matter of
Hawaii Government Employees’ Ass’n, Local 152, AFSCME, AFL-CIO, 63
Haw. 85, 87, 621 P.2d 361, 363 (1980) (HGEA); accord Ariyoshi v.
Haw. Pub. Emp’t Relations Bd., 5 Haw. App. 533, 538, 704 P.2d 917,
923 (App. 1985). In that regard, a civil complaint, such as the
one filed by Petitioner, ostensibly falls within the prescribed
jurisdiction of our courts. In Sherman, 63 Haw. at 58, 621 P.2d
at 349, this court explained that the legislature established the
subject matter jurisdiction of the courts in enacting HRS § 603-
21.5 and HRS § 633-27. HRS § 603-21.5 (Supp. 2005) provides in
pertinent part that the several circuit courts shall have
jurisdiction, ‘except as otherwise expressly provided by statute,’
of ‘[c]ivil actions and proceedings[.]’
According to Sherman, ‘the circuit court has jurisdiction
over all civil causes of action unless precluded by the State
Constitution or by statute.’ 63 Haw. at 58, 621 P.2d at 349.
Thus, the courts have subject matter jurisdiction over ‘civil
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actions and proceedings[,]’ and it is presumed that the courts
have jurisdiction, unless the legislature, ‘expressly[,]’ provides
otherwise by statute. HRS § 603-21.5.
Alaka#i II at 32-33 (footnote omitted).
B.
It must be decided, however, whether HRS chapter 103F
divests circuit courts of jurisdiction over appeals from an
agency decision under HRS chapter 103F. To reiterate, HRS §
103F-502(c) provides that the decision of the chief procurement
officer is to be “final and conclusive.” HRS § 103F–504 states
that, “[t]he procedures and remedies provided for in this part,
and the rules adopted by the policy board, shall be the exclusive
means available for persons aggrieved in connection with the
award of a contract to resolve their concerns.” Regarding these
same provisions, we said in Alaka#i II that (1) “the ‘final and
conclusive’ language in HRS § 103F-502(d) would not appear to
decisively absolve the purchasing agency’s decision under HRS
chapter 103F from judicial review[,]” (2) “the exclusivity of
remedy provision [in HRS § 103F-504] would not compel the
conclusion that judicial review was abrogated[,]” and (3) “the
legislative intent that ‘all persons who apply to . . . provide
[health] and human services” be afforded ‘fair and equitable
treatment’ would countenance against an intent to vest the
purchasing agency with final, unreviewable decision making power
in its own disputes, with a person who applied to provide
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services.” Alaka#i II, at 33-37. We concluded that “judicial
review would not be prohibited by HRS §§ 103F-501 [and] 103F-
504.” Id. at 37-38. Thus, judicial review of HRS chapter 103F
is not prohibited.25
IX.
In Alaka#i II, we noted that the argument could be made
that,
unlike HRS chapter 103D, HRS chapter 103F does not delineate the
nature of judicial review available. It may be argued that the
fact that HRS chapter 103D expressly provides for judicial review
while HRS chapter 103F does not, suggests that the legislature
intended to preclude judicial review under HRS chapter 103F.
Id. at 43. However, as set forth in Alaka#i II, countervailing
factors indicate judicial review is not prohibited. Thus,
judicial review would be consistent with the legislative intent
to provide a “standardized process” that would ensure the “fair
and equitable treatment of all persons who apply to, . . .
provide those services on the agencies behalf[.]”26 Alaka#i II,
25
As noted in Alaka#i II, “the existence, structure, and composition
of our judiciary is established by the Hawai#i Constitution and cannot be
altered by the legislature. This indicates that the power to administer
justice and adjudicate disputes that is conferred upon the courts is presumed
and will be available to the people of the state . . . . Inherent in that
power is, by corollary, that parties should have appropriate access to the
courts of this state in resolving disputes.” Alaka#i II, at 42.
26
In fact, barring the chief procurement officer’s decisions from
judicial review may lead to less fairness and less accountability, contrary to
the legislature’s intent in enacting HRS chapter 103F. See, e.g., Carl Corp.,
85 Hawai#i at 455, 946 P.2d at 25 (noting the “absurd[ity]” of allowing agency
officer to decide legality of his own actions); Kadia v. Gonzales, 501 F.3d
817, 819 (7th Cir. 2007) (explaining in the immigration context that judicial
review often rectifies agency error); Ronald M. Levin, Administrative
Discretion, Judicial Review, and the Gloomy World of Judge Smith, 1986 Duke
L.J. 258, 271 (1986) (“Judicial review [of agency action] for errors of law
(continued...)
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at 36 (quoting 1997 Haw Sess. Laws Act 190, § 1 at 351).
Accordingly, “after the procurement decision is ‘final’ and not
subject to further review by the administrative officer, the
protesting party should be able to maintain a declaratory
judgment action in the circuit court to contest the decision.”
Id. at 44.
HRS § 632-1 provides that declaratory judgment relief
may be granted “where the court is satisfied that antagonistic
claims are present between the parties involved[.]” Petitioner
sought a declaratory judgment against Respondent because there
were “antagonistic claims” between Petitioner and Respondent
concerning the process of awarding the contracts at issue. We
have held that, “judicial review should be available . . . by way
of declaratory action pursuant to HRS § 632-1.” Alaka#i II, at
45. Consequently, Petitioner would be able to sue to enforce HRS
chapter 103F under the declaratory judgment statute.
As discussed, nothing in HRS chapter 103F expressly
26
(...continued)
promotes accountability by enforcing statutes that are themselves the products
of a majoritarian process.”); Cass R. Sunstein, Reviewing Agency Inaction
After Heckler v. Chaney, 52 U. Chi. L. Rev. 653, 668 (1985) (contending that
the purpose of judicial review under the Administrative Procedure Act “is to
ensure governmental conformity with legal requirements”); Victor M. Hansen &
Lawrence Friedman, The Case for Congress: Separation of Powers and the War on
Terror 18-19 (arguing that adherence to the “default arrangement of separation
of powers and checks and balances” prevents tyranny, promotes accountability,
and improves decision making).
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precludes judicial review.27 The statute, hence, does not give
rise to a separation of powers issue. See discussion supra. In
sum, judicial review is available in connection with HRS chapter
103F by way of a declaratory action under HRS § 632-1.
Therefore, Petitioner’s second question, whether HRS chapter 103F
prohibits judicial review violating the separation of powers
doctrine, is answered in the negative.
X.
Regarding the third question, Petitioner contends that
the lack of judicial review in HRS chapter 103F violates due
process and equal protection. Petitioner, however, makes no
argument in his Application regarding due process. In any event,
it would appear that Petitioner has no legitimate claim of
entitlement to being awarded a contract, and therefore it does
not have a “property interest” that would serve to trigger due
process protections. See, e.g., International Brotherhood of
Painters & Allied Trades v. Befitel, 104 Hawai#i 275, 283, 88
P.3d 647, 655 (apprentices’ interest in limiting number of
authorized apprenticeship programs was not sufficient to
27
There is no conflict in concluding that judicial review is
available under HRS § 632-1. As explained, supra, there is specific language
in HRS chapter 103F stating that HRS chapter 103D does not apply to HRS
chapter 103F health and human services procurement contracts. HRS § 103F-104.
Necessarily, that means that the judicial review provision in HRS chapter 103D
does not apply to HRS chapter 103F. However, HRS § 103F-104 only bars the
application of the provisions of HRS chapter 103D. There is no language in
HRS chapter 103F otherwise prohibiting judicial review. As explained supra,
judicial review under HRS § 632-1 is allowed.
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establish property interest); see also AlohaCare v. State of
Hawaii, Dept. of Human Servs., 572 F.3d 740, 745 (9th Cir. 2009)
(Alohacare did not have a property interest in contract
eligibility under federal regulations).
Petitioner also contends that the lack of judicial
review under chapter 103F violates its right to equal protection.
An equal protection inquiry begins by ascertaining the standard
of review. See Sandy Beach Defense Fund v. City Council of City
and County of Honolulu, 70 Haw. 361, 380, 773 P.2d 250, 262
(1989) (ascertaining standard of review before inquiring whether
equal protection was violated). Unless fundamental rights or
suspect classifications are implicated, the standard of review
utilized in examining a denial of equal protection claim is the
rational basis standard. Id.Petitioner is not a member of a suspect class and does
not contend that there is a fundamental right at stake in this
case. To prevail under the rational basis standard, Petitioner
must show “with convincing clarity” that the legislature’s
classification is not rationally related to the purpose of the
challenged statute, or that the challenged classification does
not rest upon some ground of difference having a fair and
substantial relation to the object of the legislation, and is
therefore arbitrary and capricious. Sandy Beach, 70 Haw. at 380,
773 P.2d at 262.
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Whether there is a rational basis for disallowing
judicial review under chapter 103F is debatable. On the one
hand, Respondent contends that the purpose of HRS chapter 103F
was to create a more streamlined process for the purchase of
health and human services. According to Respondent, allowing
only two levels of review by executive agencies serves that
purpose. On the other hand, the goal of the statute was also to
provide a fair process for persons applying for and providing
services under health and human services procurement contracts.
See, e.g., 1997 Haw Sess. Laws Act 190, § 1 at 351 (stating that
a “simpler, standardized process” would ensure the “fair and
equitable treatment of all persons who apply to, and are paid to
provide those services on the agencies’ behalf” and to “optimize
information-sharing, planning, and service delivery efforts”).
If the legislature was attempting to create a “fairer” process
and to ensure “equitable treatment” for those who apply for HRS
chapter 103F contracts, then it would appear that there is no
rational basis for precluding judicial review. However, this
question is moot inasmuch as HRS chapter 103F, as construed, does
not prohibit judicial review through HRS § 632-1, as discussed
supra. See Alaka#i II at 45.
XI.
In conclusion, as to Petitioner’s first question, HRS
chapter 103F does not allow for review by the DCCA and by the
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circuit court pursuant to HRS chapter 103D. As to the second
question, HRS chapter 103F does not violate the separation of
powers doctrine because the chapter, as construed, does not
prohibit judicial review under the declaratory judgment statute,
HRS § 632-1. As to the third question, there is no due process
or equal protection violation since HRS chapter 103F, as
interpreted, allows for judicial review.
XII.
For the foregoing reasons, we vacate the August 12,
2011 judgment of the ICA and the January 8, 2009 judgment of the
court. We remand this case to the court for further proceedings
in accordance with this opinion.28
Edward Kemper, /s/ Simeon R. Acoba, Jr.
for petitioner
/s/ James E. Duffy, Jr.
Lee-ann N.M. Brewer,
deputy attorney general, /s/ Sabrina S. McKenna
for respondent
28
As noted supra, the record does not reflect whether the contracts
at issue have been completed. If so, the request for judicial review of
Respondent’s disposition of Petitioner’s protest may be moot.
34