Heery International, Inc. v. Montgomery County

862 A.2d 976, 384 Md. 129, 2004 Md. LEXIS 777
CourtCourt of Appeals of Maryland
DecidedDecember 6, 2004
Docket15, September Term, 2004
StatusPublished
Cited by17 cases

This text of 862 A.2d 976 (Heery International, Inc. v. Montgomery County) is published on Counsel Stack Legal Research, covering Court of Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Heery International, Inc. v. Montgomery County, 862 A.2d 976, 384 Md. 129, 2004 Md. LEXIS 777 (Md. 2004).

Opinion

HARRELL, Judge.

This case represents an initiative by Heery International, Inc. (“Heery International”) and Hellmuth, Obata & Kassab-aum, P.C. (“HOK”) (sometimes collectively referred to as “Heery”) to circumvent Montgomery County’s (the “County”) administrative dispute resolution process for claims relating to local public works contracts. They seek to truncate that process on the ground that the process and the County’s designated administrative adjudicator are “palpably without jurisdiction” to decide the particular dispute in this case. Heery shall not succeed.

*133 I.

On 1 December 1989, Heery Program Management, Inc. entered into a contract with the County to provide construction management services relating to a proposed detention center in Clarksburg, Maryland. Nine years later, on 9 October 1998, that contract was assigned to the related entity of Heery International. Approximately one year earlier, HOK entered into a separate contract with the County to provide architectural and engineering services relating to the design of the detention center.

Believing that it furthered the goal of facilitating construction of the detention center, the County awarded separate contracts to various construction trade contractors rather than contracting with one prime contractor who thereafter would arrange for subcontracts with more specialized trade contractors. Under this “multi-prime” arrangement, Heery International and HOK were responsible to the County to manage the various trade contractors, including preparing detailed schedules, determining the cause of delays, and managing payment and claim matters. Before it became aware of any alleged deficiencies in Heery International’s or HOK’s performance, the County paid Heery International more than $5,680,000 and HOK more than $5,370,000, representing full payment for their services.

In a letter dated 17 July 2003, the County made a formal demand on Heery International and HOK for payment in the amounts of $2,450,959 and $3,804,163, respectively. These amounts represented damages the County allegedly suffered as a result of lost productivity and delay caused by Heery International and HOK’s mismanagement of the trade contractors. The letter also demanded that Heery International and HOK, pursuant to provisions in their respective contracts with the County, provide a legal defense and indemnify the County with regard to claims totaling over $13 million lodged by some of the trade contractors. 1 Moreover, the letter *134 demanded an additional $915,168 for the actual legal costs incurred by the County, up to that point, in defense of the trade contractors’ claims.

The letter concluded by stating that, if the claims were not resolved within thirty days, the County would file its claims with the County’s Director of the Department of Public Works and Transportation (“DPW & T”), as provided for by both Heery International’s and HK’s contracts and the Montgomery County Procurement Regulations (“Procurement Regulations”). 2 The relevant provision of the Heery International contract 3 stated:

“8. DISPUTES. Any dispute arising i under this contract which is not disposed of by agreement must be decided under The Montgomery County Code and The Montgomery County Procurement Regulations.”

Heery International and HOK, in letters dated 13 August 2003 and 12 August 2003, respectively, denied responsibility for the County’s substantive claims. They also denied that the County’s claims were subject to the dispute resolution process outlined in the Montgomery County Code (“County Code”) and Procurement Regulations. Although acknowledging that their respective contracts with the County authorized the use of the County administrative contract dispute resolution process, Heery International and HOK claimed that *135 the County Code and the Procurement Regulations applied “solely to contractor claims against the County and are inapplicable to claims by the County against a contractor.” Although the County Procurement Regulations expressly allow the County to implead other responsible contractors into the administrative process initiated against the County by a contractor, Heery International and HOK claimed that this mechanism was not relevant in their situation because the County initiated the proceeding. In support of their assertion, the contractors relied on Maryland case law that they claimed “construed identical language in the State’s procurement regulations to exclude claims that are asserted by the government.”

On 14 August 2003, the County submitted its claims to its Director of DPW & T. Four days later, Heery filed a complaint in the Circuit Court for Montgomery County seeking declaratory and equitable relief preventing the County or the Director from pursuing any remedy through the administrative dispute resolution process outlined in the County Code and Procurement Regulations. The County responded with a motion to dismiss, asserting that any question of an administrative agency’s jurisdiction should be decided in the first instance during the pertinent administrative process. On 3 November 2003, the Circuit Court denied Heery’s request for equitable relief, and entered a declaratory judgment that “the administrative agency is not ‘palpably without jurisdiction’ to adjudicate the underlying dispute.” The court also denied Heery’s request for a stay of the administrative proceedings, concluding instead that they were required to exhaust their administrative remedies before seeking judicial review or intervention.

Heery noted an appeal to the Court of Special Appeals. Before the intermediate appellate court could decide the case, this Court, on its initiative, issued a writ of certiorari, 381 Md. 324, 849 A.2d 473 (2004), in order to consider the following question, rephrased for the sake of clarity:

Did the trial court err in holding that the Montgomery County Department of Public Works and Transportation *136 was not “palpably without jurisdiction” to adjudicate a dispute brought by the County against a contractor?

II.

Chapter 11B of the County Code, in conjunction with the County’s Procurement Regulations, outlines the administrative dispute resolution process for disputes arising between contractors and the County. 4 Mont. Co.Code § 11B (2004); Mont. Co. Proc. Regs. § 14.2 (2004). Section 11B-35 of the County Code states that a “contractor must submit any dispute arising under a contract to the Director [of the Office of Procurement].” Mont. Co.Code § llB-35(a). The County Code defines a “contractor” as “any person that is a party to a contract with the County.” Id. § HB-l(f). Moreover, the Procurement Regulations define a “dispute” as a “timely complaint filed by a contractor disagreeing with a decision made by an authorized government official regarding the contract.” Mont. Co. Proc. Regs. § 2.4.40.

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Bluebook (online)
862 A.2d 976, 384 Md. 129, 2004 Md. LEXIS 777, Counsel Stack Legal Research, https://law.counselstack.com/opinion/heery-international-inc-v-montgomery-county-md-2004.