Opinion
CASE NO. C06-1544 JCC.
February 6, 2007
ORDER
This matter comes before the Court on Defendants' Motion To Stay Court Proceedings To Allow Completion of State Administrative Review and Appeal Procedures (Dkt. No. 4), Plaintiff's Opposition thereto (Dkt. No. 9), Defendants' Reply (Dkt. No. 11), and Plaintiff's Surreply (Dkt. No. 13). The Court, having carefully considered all of the papers submitted and determined that oral argument is not necessary, hereby finds and rules as follows.
I. BACKGROUND AND FACTS
The Washington State Legislature enacted the Substitute House Bill ("SHB") 1680 in 2001. It is codified at Washington Revised Code sections 47.20.780, 47.20.785, and 47.60.810 through 47.60.822. The purpose of this legislation was to authorize the procurement of new auto ferries to replace the "obsolete" 1927-era Steel Electric ferries in the Washington State Ferry System fleet. To achieve this, the bill implemented a "design-build partnership" contracting process consisting of three phases, where a successful bidder would have to pass all three phases to be awarded the contract.
Phase I consists of evaluation and selection of prequalified proposers. WASH. REV. CODE § 47.60.816. Phase II consists of development of technical proposals in compliance with instructions in the request for proposals. Id. § 47.60.818. Phase III consists of submission of bids, evaluation of bids, and final awarding of the contract. Id. § 47.60.820.
In order to begin the process, Defendant Washington State Department of Transportation ("WSDOT") published a Request for Proposals ("RFP") outlining the proposal requirements and thereby launching Phase I in 2003. Plaintiff J.M. Martinac Shipbuilding Corporation ("Martinac") participated in the initial bidding process in 2003. The RFP at the time called for proposals for four new ferries with 130-auto capacity. Plaintiff Martinac successfully passed Phase I and moved on to Phase II. In 2005, WSDOT began to reconsider the capacity of the ferries, and on August 2, 2006, it published Volumes II through V of the RFP, which altered previous RFP requirements. Specifically, WSDOT changed its request for 130-auto capacity ferries to one for 144-auto capacity ferries and added new ferry design requirements.
Volume II of the RFP provided for an administrative protest procedure. On October 2, 2006, pursuant to this procedure, Plaintiff Martinac submitted an administrative protest to WSDOT regarding the amendments to the RFP. Martinac protested that WSDOT lacked legislative authority to procure 144-auto capacity ferries; that the RFP violated SHB 1680 by mandating designs and relieving the shipbuilder of significant design responsibility; and that the RFP violated SHB 1680's legislative mandate by proposing a hull form that would fail to interface with all Washington State Ferry System Terminal Facilities, specifically Keystone Harbor. On November 6, 2006, WSDOT denied all of Martinac's claims. Subsequently, Martinac filed an appeal to the Thurston County Superior Court as part of the administrative review and appeal process.
While WSDOT was in the process of replying to Martinac's administrative protest, on October 26, 2006, Martinac filed a lawsuit against Defendants, alleging federal statutory and supplemental state tort claims in King County Superior Court and requesting damages under 18 U.S.C. § 1964(c) and Washington common law. Defendants then removed the case to this Court.
In its Complaint, Plaintiff Martinac alleges that WSDOT and its high-ranking officials, also named as Defendants, were involved in a pattern of racketeering activity and a conspiracy to commit the same in the ferry procurement process, as actionable under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(c), 1962(d), and 1964(c) (First and Second Claims for Relief). As to its state tort claims, Martinac alleges fraud (Third Claim for Relief), conspiracy to commit fraud (Fourth Claim for Relief), intentional and wrongful interference with prospective economic advantage (Fifth Claim for Relief), conspiracy to commit intentional and wrongful interference with prospective economic advantage (Sixth Claim for Relief), defamation (Seventh Claim for Relief), commercial disparagement (Eighth Claim for Relief), and negligence (Ninth Claim for Relief). ( See Pl.'s Compl. 34-50 Part V, ¶¶ 103-171 (Causes of Action).)
Defendants now seek a stay of these proceedings. Defendants' position is that the claims in this lawsuit and the administrative protest appeal currently pending in Thurston County Superior Court are sufficiently similar to warrant a stay of proceedings in this Court to allow completion of the state administrative review and appeal procedures.
II. MOTION TO STRIKE
The Court begins by noting that Plaintiff's Surreply raises various objections to Defendants' Reply papers. The Court has considered each of Plaintiff's objections and finds it unnecessary to rule on them individually, because the Court did not rely on any of the objected-to material in reaching the disposition herein.
III. ANALYSIS
Defendants contend that this Court should stay the instant case pending the resolution of ongoing state administrative proceedings by (1) arguing that the doctrine of "primary jurisdiction" encourages the Court to impose a stay, (2) appealing to the Court's discretion to impose a stay, and (3) arguing that Plaintiff has failed to exhaust its administrative remedies. Because the Court finds that a discretionary stay is justified, it need not reach the other potential grounds for a stay.
A district court has broad discretion to stay proceedings incident to its power to control its own docket. Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). Thus, "[w]hen and how to stay proceedings is within the sound discretion of the trial court." Cherokee Nation of Okla. v. United States, 124 F.3d 1413, 1416 (Fed. Cir. 1997). However, the proponent of the stay must "make out a clear case of hardship or inequity in being required to go forward." Landis, 299 U.S. at 255. When considering the stay, the court "must weigh competing interests and maintain an even balance." Id. at 254-55. Moreover, it may be an abuse of discretion if a case is stayed indefinitely absent a pressing need or the opposing party is not "sufficiently protected against substantial loss or prejudice." Id. at 258.
Defendants contend that denial of a stay would bring them hardship, because they would be required to defend against similar claims both in the appeal from WSDOT's administrative decision and in federal court. It is true, as Defendants contend, that the claims in WSDOT's administrative appeal and this Court arise from the same ferry procurement process. While the mere presence of factual similarities in the two sets of proceedings is insufficient to warrant a stay, a demonstration that answering questions currently pending in the administrative appeal process will produce some finding needed to resolve this lawsuit could justify a stay. Therefore, the inquiry here focuses on what precisely in this federal RICO and common law tort case can or should be resolved by WSDOT or the state court appeal.
The elements of a civil RICO claim are "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as 'predicate acts') (5) causing injury to the plaintiff's 'business or property.'" Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996) (citing 18 U.S.C. §§ 1964(c), 1962(c)). The RICO predicate acts alleged here are federal mail fraud in violation of 18 U.S.C. § 1341 and wire fraud in violation of 18 U.S.C. § 1343. (Pl.'s Compl. 38 ¶ 116.) Plaintiff also alleges conspiracy to violate RICO, pursuant to 18 U.S.C. § 1962(d). The common law torts alleged as supplemental claims are fraud, civil conspiracy to commit fraud, intentional and wrongful interference with prospective economic advantage, conspiracy to commit the same, defamation, commercial disparagement, and negligence. In contrast, the legal issues to be decided by the pending WSDOT protest proceedings all involve determining whether WSDOT exceeded its statutory authority during the design procurement and bidding process. These are issues of Washington statutory interpretation, which do not bear on RICO claims or state tort claims as a general matter. These legal distinctions between the claims in this Court and the claims in the state system do not, however, make the administrative protest appeal irrelevant.
The critical question is whether the answers that the state system can provide regarding WSDOT's statutory authority can in any way impact the final resolution of the claims at issue here. The Court concludes that finally resolving the claims here will depend on what happens in the state appeal process. Specifically, determining the amount and scope of Plaintiff's damages could be impossible without a final determination in the protest appeal. The damages alleged here relate to (1) effort, time, and money spent on developing the 130-car ferry design, (2) injury to reputation, and (3) not being awarded the contract. (Pl.'s Compl. 34 ¶¶ 100-02.) Assuming that such damages are even available, the Court finds that at least the first of these general categories, and potentially the third, likely involve numbers that could be impacted by the questions of state law that are being addressed concurrent to these proceedings.
It appears from the motion papers that no bidder has yet been awarded the contract.
By way of example, the Court turns to the first administrative protest appeal issue — whether WSDOT had the authority to change the plan from a 130-car ferry design to a 144-car ferry design. While some determinations required under RICO, such as the intent behind the change, may not depend on the protest appeal, the impact of the change in ferry size will remain unclear while the administrative procedure remains ongoing. For instance, if WSDOT had no authority to change the plan, it presumably would reinstate the 130-car ferry plan and Martinac's lost profits and work efforts would be mitigated, because Martinac would be able to return to its 130-car plans and continue along in the bidding process. On the other hand, if WSDOT acted properly under the state statute, the RICO damages to Martinac could be larger, with the amount depending on such factors as the extent to which Martinac could prove causation for expenditures on its apparently useless 130-car design. Accordingly, the resolution of WSDOT's legal authority is relevant to at least the fifth element of a civil RICO claim — damages.
As noted supra Part I, the following questions of state law are at issue on appeal: (1) whether WSDOT had the authority to change the plan from a 130-car ferry design to a 144-car ferry design; (2) whether WSDOT had the authority to usurp design responsibility from its bidders and whether WSDOT improperly forced bidders to bear legal responsibility and risk for WSDOT's design; and (3) whether WSDOT is authorized to pursue a new build program that will not retire the obsolete Steel Electric ferries transiting Keystone Harbor and whether this program violates the legislative mandate.
The question of RICO claim ripeness is not before the Court, nor must the Court reach it, given the justification for a stay of all claims, federal and supplemental, found herein. Nevertheless, having found that the amount of damages remains uncertain in the instant case, the Court notes that the Second Circuit has held that "'a cause of action does not accrue under RICO until the amount of damages becomes clear and definite.'" Motorola Credit Corp. v. Uzan, 322 F.3d 130, 135 (2d Cir. 2003) (quoting First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 768 (2d Cir. 1994)). This holding is derived from the rule that a RICO Plaintiff "only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation." Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985) (emphasis added).
Having found that the final resolution of damages in the instant case will depend on the outcome of the administrative proceedings, the Court finds that a stay is warranted. Forcing Defendants to proceed in the instant litigation, when it is already clear that the outcome of the protest appeal will impact the final resolution of this case, would be prejudicial. Similarly, the potential prejudice to Plaintiff is minimal, particularly where, as here, the Court imposes a stay rather than dismissing or remanding to state court.
IV. CONCLUSION
For the foregoing reasons, Defendants' motion for a stay is GRANTED. This matter is hereby STAYED and it is ORDERED that this action shall be removed from this Court's active caseload until further application by the parties or order of this Court. This Court retains full jurisdiction and this Order shall not prejudice any party in this action. The parties are ORDERED to file a NOTICE with this Court when the administrative protest appeal has been litigated to its conclusion.
SO ORDERED