A recent Virginia Supreme Court (VSC) decision offers important guidance – what to do and what not to do – for companies challenging a government contract awarded under the Virginia Public Procurement Act (VPPA), Va. Code §§ 2.2-4300 et See Charlottesville Area Fitness Club Operators Ass’n, et al. v. Albemarle County Board of Supervisors, et al., Nos. 110741 & 112233 (Va. Jan. 10, 2013). The decision is publicly available at the Virginia Supreme Court’s website.

In Charlottesville, the Piedmont Family YMCA, Inc. (YMCA) bid for and was awarded a lease and use agreement to construct and operate a non-profit community recreation facility on a portion of a municipal park. In addition, pursuant to the award, the YMCA was to be provided a $2.03 million payment as a capital investment in the facility. The YMCA was the only bidder on the project.

Some eighteen months after the YMCA won the bid, the plaintiffs, one of which was a health club company, brought an action against the municipalities that had made the award claiming, among other things, violation of the VPPA. Significantly, the plaintiffs brought their action against the local governmental entities under the Virginia Declaratory Judgment Act, and did not include the YMCA as a defendant. After the case was dismissed in circuit court, the plaintiffs appealed to the VSC. On appeal, the VSC refused even to consider the merits, finding that the plaintiffs’ claims failed to raise a justiciable controversy, i.e., a controversy the courts are permitted to address.

Some lessons from Charlottesville for companies that may want to challenge a Virginia government contract award are:

  1. Do not necessarily rely on the Virginia Declaratory Judgment Act as the legal basis for your challenge –The VSC intimated that declaratory relief was not proper because plaintiffs’ alleged rights had already been violated in that the lease and use agreement had been awarded and entered into eighteen months earlier. As noted by the VSC, “‘where claims and rights asserted have fully matured, and the alleged wrongs have already been suffered, a declaratory judgment proceeding, which is intended to permit the declaration of rights before they mature, is not an available remedy.’” Moreover, the VSC pointed out that VPPA did not afford plaintiffs relief; accordingly, the plaintiffs were improperly using the Virginia Declaratory Judgment Act to “to create ‘greater rights than those which they previously possessed[.]’”
  2. Name the winner of the contract as a defendant in the lawsuit –The plaintiffs in Charlottesville did not name the YMCA as a party to the lawsuit, even though they sought to enjoin the local governments from making the $2.03 million payment to the YMCA as required by the use agreement. The VSC pointed out several times in the decision that, without the presence of the YMCA in the case, a court lacked power to bind all parties to the controversy and that, in turn, meant that any judgment in the case would not be “sufficiently conclusive” – which, in turn, meant that the controversy was not justiciable.
  3. Make sure to meet the deadlines for making the challenge – The VSC questioned whether the plaintiffs could make a challenge under the VPPA because the plaintiffs had not submitted a bid and did not allege that they were eligible and qualified to perform the contract that ultimately was awarded to the YMCA. In any event, the VSC pointed out the plaintiffs failed to bring their challenge to the allegedly wrongful conduct in the procurement process within ten days as required under the VPPA.