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N.E.R.I. Corp. v. New Jersey Highway Authority

December 31, 1996

N.E.R.I. CORPORATION, AND JOSEPH NERI, A TAXPAYER, PLAINTIFFS-APPELLANTS, AND CROSS-RESPONDENTS,
v.
NEW JERSEY HIGHWAY AUTHORITY, DEFENDANT-RESPONDENT AND CROSS-APPELLANT, AND SEVELL'S AUTO BODY CO., INC., DEFENDANT-RESPONDENT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 282 N.J. Super. 460 (1995).

The opinion of the Court was delivered by Garibaldi, J. Chief Justice Poritz and Justices Handler, Pollock, O'hern, Garibaldi and Coleman join in this opinion. Justice Stein has filed a separate Dissenting opinion.

The opinion of the court was delivered by: Garibaldi

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

N.E.R.I. Corporation et. al. v. New Jersey Highway Authority and Sevell's Auto Body Co., Inc. (A-6/7-96)

Argued September 9, 1996 -- Decided December 31, 1996

Garibaldi, J., writing for a majority Court.

The issue in this appeal is whether the New Jersey Highway Authority Act, N.J.S.A. 27:12B-1 to -26 (the Act), requires the New Jersey Public Highway Authority to publicly bid its towing and storage contracts for the Garden State Parkway.

The New Jersey Highway Authority (Authority) contracts with private entities to provide towing and roadside services to Parkway motorists. The Authority regulates the maximum chargeable fees that a tower may charge for roadside assistance and towing services. In addition, if a vehicle requires repair, fees for parts and labor are set in accordance with the current edition of Chilton's Labor Guide and Parts Manual.

Prior to 1990, the Authority automatically renewed towing contracts absent any complaints filed with the Authority or the State Police regarding the current towing service provider. After N.E.R.I.'s action was commenced in 1989, however, the Authority instituted an informal rating system, the "Mooney System," designed to assist the Authority in selecting towing service providers. Under that system, interested towers submitted information to the Authority in a formal application. The Authority employee who devised the system then evaluated the applications and numerically ranked each prospective tower according to certain criteria. The applicant accumulating the greatest number of points was awarded the towing contract. New applicants were not investigated. Under both systems of selection, the Executive Director of the Authority ultimately approved and signed all contracts.

In 1994, the "Mooney System" was refined. When towing contracts expire, the Authority now publishes a notice of the Request for Proposal (RFP), announcing that the Authority is accepting sealed proposals for towing services. A six-member committee then reviews, evaluates and rates all submitted proposals applying various criteria. The contractor accumulating the most points and meeting the Authority's qualifications is recommended to the Executive Director for selection.

Sevell's Auto Body Co., Inc. (Sevell), has exclusively provided all roadside and towing services between mile posts 132 and 145.6 since the Parkway's opening forty years ago. Because the Authority had first-hand knowledge of Sevell's performance, its contracts were renewed in 1986 and 1991 without formal application. In 1984, Joseph Neri, the majority stockholder of N.E.R.I. Corporation, a provider of towing, storage and auto repair services, submitted a formal application to the Authority seeking the award of a 1986 towing contract covering the same mile posts Sevell had been servicing. Neri's application, however, was rejected in favor of renewing Sevell's existing contract.

In 1989, Neri filed an action against the authority and the Parkway, seeking to prohibit the authority from awarding towing licenses without public bidding; to void Sevell's towing contract; to grant the contract to Neri and to recover attorney's fees. Thereafter, in 1991, Sevell's towing contract was again renewed for a five-year period and the contract remains in effect. In 1993, Neri filed an amended complaint requesting that the court declare the contract between the Authority and Sevell void; to order the Authority to require public bidding for towing contracts; to direct the authority to permit Neri to submit a bid for the contract; and to place a one or three-year limit on all towing contracts.

The trial court granted Neri's motion for summary judgment, finding that under N.J.S.A. 27:12B-5.2 (Section 5.2) all Parkway towing and storage contracts are subject to public bidding. Because the contract between the Authority and Sevell did not comport with the statute's formal bidding requirements, it was declared void.

The Appellate Division reversed, holding that Section 5.2 does not require the Authority to publicly bid towing and storage contracts as such agreement fall within the statute's "public convenience" exception. The Appellate Division, however, ordered the Authority to accept and evaluate proposals from competing contractors and to establish relevant objective criteria for the evaluation of applicants for new contracts.

The Supreme Court granted Neri's petition for certification and the Authority's cross-petition for certification.

HELD: N.J.S.A. 27:12B-5.2 requires public bidding for all Garden State Parkway towing and storage contracts.

1. The award of towing contracts do not fall within N.J.S.A. 27:12B-14, which is narrow in scope and applies only to projects that require acquisition of an interest in Authority property, such as by easement, license or lease. (pp.8-9)

2. The Legislature intended N.J.S.A. 27:12B-5.2 to govern the Authority's power to contract in areas separate from those governed by section 14 and applies to different types of services, such as towing and storage . (pp. 9-11)

3. Even though a private contractor supplies the emergency roadside service that the Authority is required to provide motorists, that the cost of the service is passed directly to the consumer and not paid out of the state treasury does not remove the service from the application of section 5.2. (pp. 11-14)

4. Public bidding statutes exist for the primary benefit of the taxpayer and must be construed with sole reference to the public good and rigidly adhered to by courts to guard against favoritism, improvidence, extravagance, and corruption. (pp. 15-16)

5. Towing and storage contracts do not fall within Section 5.2's exemption of professional services. (pp. 16-18)

6. Statutory exceptions to public bidding requirements should be strictly construed so as not to dilute public policy or permit a public body to avoid legislative enactments. To read the "public convenience" exception broadly to exclude towing contracts from the application of Section 5.2 would substantially impair the public good safeguarded by competitive public bidding. (pp. 18-22)

7. The Legislature addressed the safety concerns of stranded motorists by providing in Section 5.2 that contracts be awarded to the "lowest responsible bidder." There are many factors bearing on the "responsibility" of the towing contract bidder. (pp. 23-25)

8. That the Legislature explicitly exempted towing contracts from public bidding in the local contracts law statute does not mean that the Legislature intended to exempt towing contracts from Section 5.2. Had the Legisilature so intended, it would have explicitly done so, as it did in N.J.S.A. 40A:11-5(1)(u). (pp. 26-27)

9. Because of the disruption that would be caused if all current towing contracts were immediately declared void, the public bidding requirements will only be applied to all new towing contracts as they terminate or that have been stayed pursuant to the Court's Order. (p. 28)

Judgment of the Appellate Division is REVERSED.

JUSTICE STEIN filed a Dissenting opinion in which he considered the Court's reading of the Authority's bidding statute to be unduly literal. In addition, Justice Stein found that the willingness on the part of the Legislature to exempt municipal and county towing contracts from mandatory competitive public bidding strongly suggested that a parallel exemption for the Authority's towing contracts would be consistent with the Legislature's objective.

CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI and COLEMAN join in this opinion. JUSTICE STEIN filed a separate Dissenting opinion.

The opinion of the Court was delivered by

GARIBALDI, J.

The sole issue presented by this appeal is whether the New Jersey Highway Authority Act, N.J.S.A. 27:12B-1 to -26 (the Act), requires the New Jersey Public Highway Authority (Authority) to publicly bid its towing and storage contracts for the Garden State Parkway (Parkway).

I

In 1952, the New Jersey Legislature created the Authority and vested it with the power to build, operate, and maintain a safe and modern highway system. N.J.S.A. 27:12B-4. Specifically, the Authority is vested with the power to operate the Parkway. N.J.S.A. 27:12B-20. The Legislature also granted the Authority certain enumerated powers. N.J.S.A. 27:12B-5. One of those powers is "to make and enter into all contracts and agreements necessary or incidental to the performance of its [the Authority's] duties and execution of its powers under this act." N.J.S.A. 27:12B-5(o).

Section 14 of the Act enables the Authority to contract with parties "desiring the use of any part" of an Authority project. N.J.S.A. 27:12B-14. In 1968, the Legislature amended the Act to require public bidding on all contracts. N.J.S.A. 27:12B-5.2. The Legislature declared that the Act, "being necessary for the welfare of the State and its inhabitants, shall be liberally construed to effect the purposes thereof." N.J.S.A. 27:12B-24.

II

Most of the facts have been stipulated. The Authority contracts with private entities to provide towing and roadside services to Parkway motorists. Each towing contractor is granted the exclusive right to service one of the Parkway's fifteen "zones" for a five-year period. In return, the Authority acquires a fixed percentage of the tower's fees that are received from motorists. The Authority's most recent Request for Proposal (RFP) entitles the Authority to the following percentages of the tower's gross receipts:

under $12,000.00 -- 3%

$12,000.00 to $16,000.00 -- 4%

Over $16,000.00 -- 5%

The Authority regulates the maximum chargeable fees that a tower may charge for roadside assistance and towing services. N.J.A.C. 19:8-2.12. If a vehicle requires repair, however, fees for parts and labor are set in accordance with the current edition of Chilton's Labor Guide and Parts Manual. Ibid.

A Parkway motorist may not use a towing service other than an authorized contractor. Parkway motorists have the option of being towed to the nearest Parkway exit or to the tower's storage and repair area.

The Authority does not advertise or publicly solicit applications for towing contracts. Prior to 1990, the Authority automatically renewed towing contracts absent any complaints filed with the Authority or the State Police regarding the current towing service provider.

After this action was commenced in 1989, however, the Authority instituted an informal rating system devised by Patricia Mooney, an employee of the Authority. The "Mooney System" was designed to assist the Authority in selecting towing service providers. Under that system, interested towers submitted certain information to the Authority in a formal application. Mooney then evaluated the applications and numerically ranked each prospective tower according to certain criteria, including the availability and quality of the tower's equipment and facilities, recommendations from local police departments, and the tower's experience, safety record, and proximity to the Parkway. The applicant accumulating the greatest number of points was awarded the towing contract.

The "Mooney System" was not, however, flawless. The stated criteria for assigning numerical ranks was inconsistently applied and new applicants were not investigated. While it is unclear whether Mooney was the only Parkway employee responsible for ranking towers, her direct supervisor reviewed the tally sheets and made any adjustment that he or she deemed necessary. Under both systems of selection, the Executive Director of the Authority ultimately approved and signed all contracts.

In 1994, the "Mooney System" was refined. When towing contracts expire, the Authority now publishes a notice of the "RFP" in three newspapers announcing that the Authority is accepting sealed proposals for towing services. A six-member committee reviews, evaluates, and rates all submitted proposals. Selection criteria include, but are not limited to, the following: reliability, experience, response time, acceptance of credit cards, adequate equipment and personnel to safely handle a variety of traffic and weather conditions, location of storage and repair facilities, security of vehicles towed and stored, and maintenance of adequate liability insurance.

Each category on the evaluation form is assigned points based upon a weighted value and rated on a scale of 1 to 5. The Authority does not, and will not, provide applicants with the weighted value attributed to each category. The scale rating is multiplied by the weighted value to determine the ...


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