Friends of Dag Hammarskjold Plaza v City of New York Parks & Recreation

[*1] Friends of Dag Hammarskjold Plaza v City of New York Parks & Recreation 2006 NY Slip Op 51923(U) [13 Misc 3d 1220(A)] Decided on August 2, 2006 Supreme Court, New York County Stone, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 2, 2006
Supreme Court, New York County

Friends of Dag Hammarskjold Plaza and Dag Park, LLC., Petitioner,

against

City of New York Parks & Recreation, COMMISSIONER ADRIAN BENEPE, COMMISSIONER WILLIAM CASTRO, and NEW YORK MILKSHAKE COMPANY, Respondents.



108334/06

Lewis Bart Stone, J.

This proceeding was commenced by Order to Show Cause entered on June 16, 2006, by petitioners, Friends of Dag Hammarskjold Plaza ("Friends") and Dag Park, LLC ("Dag Park"), pursuant to Article 78 of the Civil Practice Law and Rules ("CPLR") against respondent, City of New York Parks Department, its Commissioner, Adrian Benepe and its Manhattan Commissioner, William Castro (collectively "Parks") and New York Milkshake Company Inc.[FN1] ("Milkshake"), to set aside an award by Parks to Milkshake of an eight-year franchise to operate a café on Dag Hammarskjold Plaza, a small city owned park located on East 47th Street between First and Second Avenues in Manhattan.

Friends, a civic group, had been instrumental in revitalizing the park from a less-than-pristine area, and continues, together with other community groups, to raise funds for the maintenance of the park, and to advocate for its maintenance and is involved with community activities in the park. Dag Park has been operating the café since 2003, at which time it took over a franchise issued earlier.

Knowing that the existing franchise expired at the end of June 2006, Parks solicited bids in late 2005 for a new eight year franchise term commencing July 1, 2006, and four qualified bids were received, one from Dag Park, one from Milkshake and one each from two other bidders. Following a review of the bids in January 2006, Parks awarded the franchise to Milkshake.

In this proceeding, Petitioners seek to set aside such award, and either require [*2]Parks to accept Dag Park's proposal or remit the matter to Parks to award the franchise to one of the three bidders other than Milkshake.

Petitioners also initially sought but later withdrew their prayer for temporary restraint against the commencement of Milkshake's operations under the new franchise. Such issue is no longer before this Court. Parks opposed Petitioners challenge on its merits and also sought to dismiss Friends from the proceeding on the grounds that Friends lacked standing to be a party to this proceeding.

At argument, the parties agreed, upon submission of this matter for decision, that this Court was to decide on the issue of Friends standing and on whether the Court should set aside Parks' award of the franchise to Milkshake, on the grounds that it was awarded in violation of law or required procedures or was made in an arbitrary and capricious fashion. The parties have agreed that the grounds on which Petitioners seek to set aside the award are grounds which may be asserted under CPLR Art. 78 and that this Court may properly make such determinations.

STANDING

Article 78 standing has traditionally been limited to persons whose interests are directly affected by the action of the body whose action is being challenged. It has been regularly held that in the context of a public bid, a qualifying bidder who has not been selected has standing to challenge the award. Here, Friends did not bid for the franchise [FN2] but has claimed standing under a series of recent cases which it claims expends the classic limitations of standing imposed in an Article 78 proceeding, viz: Committee to Preserve Brighton Beach & Manhattan Beach v. Planning Commission, 259 AD2d 26 (1st Dept. 1999), Roosevelt Island Residents Assn. v. Roosevelt Island Operating Corp., 7Misc.3d 1029(A) (Sup. Ct. NY Co. 2005) and Wild Metro v. Dept. of Parks, 6 Misc 3d 1019(A) (NY Co. Sup. Ct. 2004).

Friends' claim is without merit. Each of these cases addresses the interplay between the State Environmental Quality Review Act (Environmental Protection Law §8-0105, et seq, hereafter "SEQRA") and the City's similar Rules for Procedure for City Environmental Quality, 62 Rules of the City of New York §5-01, et seq. ("CEQR") which expand the class of persons who have standing to challenge decisions made by governmental agencies where such decisions are required to be [*3]made in conformity therewith. In each of these cases, the court found that the person claiming standing was accorded standing by reason of SEQRA or CEQR as the case may have been. In none of these cases was there any indication that the traditional limitations of standing for CPLR Article 78 purposes was otherwise modified.

Here, the process of awarding the franchise was not subject to SEQRA or CEQR requirements. Here, the Court must address Friends' claimed standing on the basis of law not involving proceedings not conducted under SEQRA or CEQR. Accordingly the rule announced in Transactive Corp. v. NYS Dept. of Social Services, 92 NY2d 579 (1998) continues as controlling precedent that a non bidder cannot challenge the award of a government contract. In that case, the Court of Appeals held that because a non-bidder "had no direct stake in the outcome of the bidding process, it did not have an injury in fact." Id. at 587. An award of a franchise is indistinguishable in this context from the award of a contract.

Accordingly, as Friends lacks standing, they are hereby ordered dismissed as a petitioner in this proceeding.

Although Friends lacks standing, Dag Park has standing to challenge the decision of Parks. Accordingly the Court must turn to the merits of this controversy.

THE FRANCHISE AWARD

Clearly, Dag Park in its attempts to set aside the franchise award to Milkshake has attempted to seize upon any basis it could conjure to invalidate such award. Parks and Milkshake argue that such approach should be condemned. To the extent such approach does not raise frivolous issues, it cannot be condemned, for Dag Park's loss of its franchise is a momentous occurrence in its commercial life. Yet similarly, the award of the franchise to Milkshake is equally momentous for Milkshake. Both are small businesses and the gain or loss of the franchise for the Dag Hammarskjold Park site is of great importance to each.

On the other hand, the City, through Parks, has the obligation to operate its park system in a manner for the benefit of all of the people and to do so in a way that is transparent and in compliance with law and to carry out City policies in connection therewith.

Finally, this Court has the obligation to review decisions of Parks in the award of its franchises within the limitation of CPLR Article 78, and not to impose its own judgment on the merits of decisions made by Parks to select franchise operators within the scope of their discretion in accordance with mandated procedures.

Parks claims that in pursuing its goals, Dag Park has sought routes other than this proceeding to block the award to Milkshake and to extend its own franchise. [*4]Some of these alternative routes have been freely acknowledged by Dag Park to have been pursued and others alleged by Parks and have been denied by Dag Park.

Dag Park has sought the intervention of elected members of the City Council to weigh in on their behalf and have urged the City Comptroller to refuse to register the franchise under his function as registrar of properly issued franchises, claiming that the franchise was not properly awarded. Dag Park has also applied for a temporary extension of its own franchise.

Parks has also alleged that Dag Park failed to quit the premises in broom clean condition and in good order with the existing improvements in working condition at the end of their franchise period as required in Dag Park's franchise agreement. Specifically, Parks claims that Dag Park removed or disabled certain machinery and abandoned rotting food on the premises. Dag Park denies these allegations.

The City Comptroller refused to register the franchise, adopting some of the claims made by Dag Park in this proceeding and also for the reason that the Comptroller disfavored the type of operation proposed by Milkshake and agreed to by Parks. In turn, Parks has advised the Comptroller that he had no power to take such action and accordingly, Parks would deem the franchise registered and effective, citing law, City regulations and court cases. The Comptroller fired back a letter taking issue with Parks. This Court cannot at this point predict whether Parks or the Comptroller will retreat from their stated positions or will litigate.

Although Milkshake's franchise began as of July 1, 2006, the registration of the franchise by the Comptroller (or the action of the Parks to "deem" it registered) was not accomplished until after such date. The physical state of the location was, by the time Milkshake was able to take possession of the site, unfit for immediate opening as debris had to be cleared and systems cleaned, repaired, replaced and made operational. While Dag Park disclaims any participation in the deterioration discovered on possession, the fact of such deterioration is not challenged.

Dag Park also, during this period, attempted to continue the operation of the café by filing an application with Parks to run it on an interim basis. Parks rejected the application.

This Court notes the above activity to acknowledge its existence. However, none of the issues raised in the above activities are yet relevant to the resolution of this proceeding before this Court.

As noted above, the loss of Dag Park's franchise was of enormous concern to Dag Park, which was entitled to take all proper steps to protect its interest. A constituent petitioning elected offices such as City Councilmen and the Comptroller [*5]for help is a protected lobbying activity under the United States Constitution.

While some activities taken to stop governmental actions may not be appropriate, this Court is unaware of any improper act of Dag Park's in seeking the support of these elected officials. As independent elected officials, they are entitled to listen to, consider and advocate for their constituents' wishes within the scope of their authority. Other than the Comptroller, there is no evidence on the record that any other elected official performed any act other than that advocacy in this controversy or had any effect on the award of the franchise to Milkshake. To the extent any such official exceeds his authority or bypassed proper advocacy channels, such official may be challenged on such behavior, as Parks has done in its letter to the Comptroller, treating his refusal to register the franchise a nullity.

While there is clearly at this time a dispute between Parks and the Comptroller, such dispute is neither before this Court in this proceeding nor a reason for this Court to refrain from deciding the issues before it. As illustrated by City of New York v. Mayor of City of New York, 2006 WL 1763537, 2006 NY Slip Op. 05157 (NY Jun 29, 2006), the Courts are open to consider and rule on disputes of this nature between he Mayoral agencies and the Comptroller when the usual process of negotiation has been exhausted and one or the other party wishes to pursue the matter.

While if the dispute between Parks and the Comptroller were to mature into a proceeding or action before the courts, some of the issues raised by the parties to this case may be issues raised in such dispute, such is no more than speculative. Further, the parties here are well represented and there is no reason why this Court at this time should not address such issues in this proceeding to the extent they are clearly raised and necessary to be resolved to resolve this dispute.

Similarly, any dispute between Parks and Dag Park as to whether Dag Park had complied with the terms of its prior franchise in connection with its obligation at the end of the franchise is not before this Court in this proceeding. Whatever Dag Park's obligations were under such former franchise, and whether it had breached such obligations, and if so, what remedies are available to Parks as a result, are issues which are not before this Court in this proceeding. Because this Court is to review Dag Park's challenge to certain aspects of Parks' process of awarding the franchise to Milkshake, were completed prior in time to the end of Dag Park's former franchise, issues surrounding what Dag Park did or did not do or even what Dag Park was or was not required to do at the end of its franchise are irrelevant to the issues to be determined here.

Finally, Dag Park's application for an interim franchise and its denial by Parks is otherwise irrelevant to this proceeding at this time. While the lack of any pending [*6]application was a factor that this Court indicated it might consider if it were to have acted upon Dag Park's initial application for interim restraint on the commencement of the new franchise pending the hearing and decisions of the issues presented in this case, Dag Park elected to withdraw its request for temporary restraint in open court when faced with the possibility that this Court, after hearing, might set bond as a condition of such restraint.

As of the time the parties argued this case, Dag Park had not applied to Parks for an interim franchise, although they did later. The Court has been subsequently informed by the parties as to such application and its denial. The Court is unaware whether Dag Park intends to challenge such denial. Further, even if challenged, such challenge is beyond the scope of issues to be determined by this court relating to the award by Parks to Milkshake which award had been made prior even to the application for interim franchise had been delivered to Parks. Thus, issues surrounding Dag Parks attempts to secure an interim franchise and Parks' rejection of the application are equally irrelevant to the proceeding and this Court's decision and order.

Considering all of the above, the assertions of Dag Park, the material submitted by the parties, and the arguments of counsel, this Court finds that Dag Park has not sustained its required burden under CPLR Art. 78 to establish adequate grounds for this Court to set aside the award of the franchise to Milkshake. The Court will now address each contention of Dag Park and set forth its findings and reasons why such contentions fail to establish any basis for relief.

Under Title 12 of the Rules of the City of New York ("RCNY") franchises and concessions may be awarded by the City in accordance with procedures set out in such Title. Such Title provides rules for the solicitation and submission and evaluations of bids, the criteria to be used in evaluation, and the process of making awards.

As a part of the process of evaluating the bids received, Parks established an express formula to weigh the five factors it would consider to evaluate the bids for the park café. These factors were (1) income to the City, (2) capital improvements (3) experience of applicant, (4) planned operators and (5) the applicant's financial capability. Although Park's formula did not equally weigh these factors, the allocation of "points" among them were only slightly enhanced or diminished. It was clearly within Park's discretion to establish criteria and the weight to be accorded each factor and the record provides no basis for this Court to find that with such factors or the weights to be accorded them were not within such discretion or were established arbitrarily or capriciously. Under the procedures, the proposals were [*7]submitted to four departmental evaluators constituting a selection committee who rated each proposal, in writing on a numeric scale on evaluation sheets which are preserved for Parks and Court review. Dag Park has no basis to complain of this system.

Dag Park's initial (and proper) request for copies of the evaluation sheets of the evaluators of the four proposals was ignored. Parks eventually responded by including such evaluation sheets, in its answering papers in this proceeding.[FN3] Dag Park also objects as to how the evaluations of these criteria were made and also asserts that the evaluators seem to have revised their initial evaluations and did not preserve their original evaluations as is required by law.

Each evaluator filled out a scoring sheet to set forth such evaluator's ratings of each proposal under each of the five categories and is signed and dated by evaluators. Four proposals and five criteria for each of four applicants resulting in a total of 80 entries. Of these 80 entries, four, involving three of the evaluators and two of the bidders show what appears to be a crossing out from an original number and the writing in of a different number. Each evaluator in his or her affidavit have attested that there is no other rating sheet. The three evaluators who made the changes confirm what changes they made which confirmations are not inconsistent with the Court's own observation of the scoring sheets. No changes were made by any evaluator of the Milkshake evaluations or in the evaluations of Sweet Concessions, another applicant. Three amendments were made to the Dag Park evaluations and one to Knish Nosh, Inc, the fourth applicant.

The summary evaluation sheet (Parks ExD) shows the final evaluators combined scores to be Dag Park - 7.225, Knish Nosh, Inc. - 7.213, Milkshake - 8.213 and Sweet Concessions 7.419.

The rules of the City for these evaluations require that where scoring is used in the evaluation process, "[a]ll original rating sheets must be retained intact and attached to the revised version, along with an explanation for the change." 12 RCNY §1-12(q)(5). This rule ensures that a clear record is preserved to assure transparency in the award of franchises or contracts and to permit appropriate review by the courts. Dag Park asserts this mandate was violated in the evaluation process leading to the award of the franchise of Milkshake, and accordingly, the Court must set the award [*8]aside.

Although none of the three evaluators who made changes in the evaluations set forth their explanation for the changes on the evaluation sheets, Parks has submitted their affidavits to set forth such reasons. Given the purpose of the requirement to keep a record for review and that the explanations are to be attached to the changed evaluation sheet, post award written reasons cannot satisfy the explanation requirement of these rules.

Notwithstanding such violation of the rules, this Court finds that such violation alone, without any credible basis of wrongdoing in connection therewith, is at most a harmless error of proceeding. De minimus non curat Lex. Although the explanation is missing, the original evaluation scores are effectively present. While the drafter of the Rules may have envisioned separate sheets with the "corrected" numbers, the actual text of the rule is not so explicit, and the original sheet, showing crossed out numbers, materially satisfies the Rules requirement to preserve any changes in evaluators' scores for review.

This Court's determination that the failure to give explanations in this case constitutes harmless error is based on a review of the changes to determine whether there is any possibility that the evaluation would have reached a different result if the scores had been re-calculated using the original ratings. After re-calculating scores using the original ratings and the weights set by Parks, the respective final combined scores of the top two applicants, Milkshake and Sweet Concessions, show no change in their relative positions. Using the "original" evaluations, as attested to in the affidavits of the evaluators, results in Dag Park coming out last rather than third. Even giving Dag Park the benefit of "10" (the highest score) wherever there was a change in Dag Park's evaluation would have only raised Dag Park's score to 7.700, still significantly below Milkshake's 8.213. Further, it should be noted that none of Milkshake's scores were crossed out, change or modified.

While this Court has been unable to find cases applying the harmless error analysis to rules of municipal contract or franchise awards, the fact that of such analysis is applied to the more sensitive case of convictions for criminal offenses, indicates that it should be applied here too. Accordingly, this Court finds that under the facts in this case, the failure of Parks to comply with the rule requiring reasons to be contemporaneously set forth for the modification of an evaluator's rating, is insufficient grounds to vacate the award.

Dag Park also contends that Milkshake should not be awarded the franchise because of its failure to comply with Vendex procedures and requirements. Vendex is a system adopted by the City to help the City avoid doing business with suppliers [*9]or franchisees who may be inappropriate by reason of their prior history of performance or past criminal or civil wrongdoing. To enable the City to make such determination, applicants to be vendors or franchisees must file forms under the Vendex system disclosing their relevant history and persons who may have a material interest in their ownership or operations.

While bidders are advised prior to the time of bidding that the Vendex process will apply, the city does not require Vendex form submission until there is a winning bidder, to minimize both the lost cost of filling out the forms to losing bidders and the city's work load in reviewing Vendex submissions for non awardees, both being rational reasons for reviewing Vendex forms after the award, which is made subject to Vendex approval.

Here, Milkshake filled out Vendex forms which, with some discussion with the city, were acceptable. Dag Park both objects to the discussion process and "errors" in Milkshake's Vendex submission, effectively to characterize them as non-conforming bids or somehow violating the award of the franchise.

As Parks' award which is challenged here preceded the Vendex, any subsequent Vendex issue is not before this Court in determining whether the award itself was properly made, the only issue before this Court in this proceeding. The decision not to enter into a franchise with Milkshake or to subsequently withdraw it is a matter of enforcement of city rules, and not an issue of the propriety of the selection process. A losing bidder has no standing to complain of city action or inaction in this area. Dag Park has brought its concerns to the attention of the City which has asserted that it finds that allegations in such area unsupported or irrelevant in making its determination whether or not to assert its request not to move forward with Milkshake's franchise.

Dag Park also objects to Parks' evaluation of Milkshake's fiscal strength. The record shows that the Principal of Milkshake and his wife have a significant equity net worth in their apartment and that she has a good paying job. As there is no requirement in the request for proposals that a franchise applicant must have money in the bank or in the firm prior to the award, it was neither arbitrary nor capricious for the evaluators to consider such funds in evaluating the financial capacity of Milkshake.

Dag Park's remaining objections are hearsay accusations of impropriety. As in an Article 78 proceeding, the Court requires more before it may act to set aside the actions of a body, as there is no more, this route too is foreclosed.

The petition is dismissed. This is the Opinion and Order of the Court. [*10]

DATED:AUGUST 2, 2006

NEW YORK, NEW YORK

Hon. Lewis Bart Stone

Justice of the Supreme Court Footnotes

Footnote 1: Named in the petition as New York Milkshake Company.

Footnote 2: Friends is a "501(c)(3)" organization "formed to lead the revitalization" of the park. They were not a bidder for the franchise and operating a café may not be permitted under their charter or under their Federal tax-exempt status ruling.

Footnote 3: As Exhibit A to the affidavits of the four evaluators. As the sheets are now before the Court and as the delay in disclosure is equally explainable as the bureaucratic imperative to drag feet when served with a disclosure request, this court does not find that Park slow response is evidence of wrongdoing, notwithstanding that the Court sympathizes with Dag Park's understandable suspicion when met with a brick wall of non disclosure.