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Unisys Corp. v. The Louisiana Office of Motor Vehicles

Court of Appeals of Louisiana, First Circuit

December 28, 2018

UNISYS CORPORATION
v.
THE LOUISIANA OFFICE OF MOTOR VEHICLES, THROUGH KAY HODGES, IN HER OFFICIAL CAPACITY AS THE COMMISSIONER OF THE LOUISIANA OFFICE OF MOTOR VEHICLES, THE LOUISIANA DEPARTMENT OF PUBLIC SAFETY AND CORRECTIONS, THROUGH MICHAEL D. EDMONSON, IN HIS OFFICIAL CAPACITY AS DEPUTY SECRETARY OF THE LOUISIANA DEPARTMENT OF PUBLIC SAFETY AND CORRECTIONS, AND THE DIVISION OF ADMINISTRATION FOR THE STATE OF LOUISIANA, THROUGH PAUL RAINWATER, IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF ADMINISTRATION

          Appealed from the Nineteenth Judicial District Court In and for the Parish of East Baton Rouge State of Louisiana Docket Number C593558 Honorable Todd Hernandez, Judge Presiding

          Keith C. Armstrong Douglas L. Grundmeyer Baton Rouge, LA Counsel for Plaintiff/Second Appellant, Unisys Corporation

          J. Wendell Clark Jamie Hurst Watts Sharon S. Whitlow MarkL. Barbe Baton Rouge, LA Counsel for Defendants/ First Appellants, Louisiana Office of Motor Vehicles and the Department of Public Safety and Corrections

          Lesia Hulbert-Batiste Baton Rouge, LA Counsel for Defendant/Appellee, Division of Administration

          BEFORE: WHIPPLE, C.J., McCLENDON, AND HIGGINBOTHAM, JJ.

          WHIPPLE, C.J.

         Plaintiff, Unisys Corporation ("Unisys"), and defendants, the Louisiana Office of Motor Vehicles, through Kay Hodges, in her official capacity as the Commissioner of the Louisiana Office of Motor Vehicles, and the Louisiana Department of Public Safety and Corrections, through Michael D. Edmonson, in his official capacity as Deputy Secretary of the Louisiana Department of Public Safety and Corrections, (jointly referred to herein as "the Department") appeal a judgment of the district court affirming the Commissioner of Administration's decision concerning Unisys's claim for damages resulting from the termination of its professional services contract with the Department. For the reasons that follow, we amend the judgment of the district court in part, render judgment, in part, and affirm as amended.

         FACTS AND PROCEDURAL HISTORY

         In December 2002, the Department contracted with Unisys for Phase II of the Next Generation Motor Vehicles ("NGMV") Project, a project to re-engineer the computer systems of the Department of Public Safety and Corrections, Office of Motor Vehicles (OMV) for management of drivers' licenses, suspensions, vehicle registration, and other related functions. In August 2004, Unisys was awarded the Phase III contract for the project, and ultimately, on April 1, 2008, the parties entered into a new "Consulting Services Contract," which incorporated Phase II and Phase III with combined project deliverables and a consolidated schedule (hereinafter "the contract").

         Thereafter, on December 15, 2008, a meeting was held between representatives of Unisys and the Department, and a decision was made to terminate the contract. By letter dated January 14, 2009, the Department confirmed the parties' mutual agreement to terminate the contract for convenience, invoking Section 4.2 of the contract.[1] The Department thereafter gave Unisys formal written notice of termination of the contract, effective thirty (30) days from the date of the letter. The Department further advised Unisys that it awaited receipt of the inventory being conducted by Unisys, that it was conducting its own inventory, and that upon completion of these inventories, the Department wished to discuss any outstanding issues, including certain Unisys statements.

         After the contract was terminated, on March 11, 2009, Unisys submitted its prepared inventory of deliverables and their completion status and requested additional payment in the amount of $8, 771, 189.00 for work purportedly "in progress" at the time of the termination.[2] Following unsuccessful negotiations between the parties, by letter dated November 6, 2009, Deputy Secretary Edmonson notified Unisys that the Department's "position" was "that the parties mutually agreed to terminate the project, and that none of the sums are due with regards to [Unisys's] claim for retainage, deliverables in progress, or the 'purported unpaid completed deliverables'." The Deputy Secretary specifically concluded that after reviewing Unisys's claim for additional payment in the amount of $1, 320, 084.00, the documentation regarding these four deliverables revealed that all of the contractual requirements for payment had not been met, thus no payment was due. The Deputy Secretary further determined that the contract did not authorize payment of retainage upon early termination of the contract, the deliverables in progress were not satisfactorily completed, the work performed by Unisys had not yielded a usable product for the Department, and the documentation regarding the four purportedly completed deliverables revealed that all contractual requirements for payment had not occurred.

         On June 2, 2010, in accordance with LSA-R.S. 39:1524 and 39:1525 of the Professional Services Procurement Code ("PSPC"), [3] Unisys sought a written decision resolving the controversy from the Commissioner of Administration.[4]Unisys asked the Commissioner to confirm that the contract was terminated for convenience by the Department and to resolve the amount of additional compensation due to Unisys for work performed up to the date of termination including, but not limited to: (a) $1, 514, 905.00 for four deliverables approved and accepted by the Department prior to the termination; (b) $2, 716, 240.00 withheld by the Department from the prior payments to Unisys for deliverables the Department approved and accepted; and (c) $4, 470, 673.00 for work that was satisfactorily completed and/or in progress at the time the Department terminated the contract. The matter was submitted to the Commissioner on the administrative record, the contracts between Unisys and the Department, and the briefs of the parties.

         On July 9, 2010, the Commissioner issued a decision concerning the three claims urged by Unisys for additional payment under the contract. The Commissioner concluded that upon termination of the contract, Unisys was entitled to payment for deliverables in progress "to the extent the work has been performed satisfactorily and approved by the Agency," and thus, that Unisys was entitled to payment for four deliverables that had been approved by the Department. The Commissioner thereby reversed the decision of the Deputy Secretary denying Unisys payment in the amount of $1, 320, 084.00, [5] but further determined that Unisys was not entitled to any further payment for the other items claimed.[6]

         Thereafter, on August 13, 2010, in accordance with LSA-R.S. 39:1526 and 49:964, Unisys filed a "Petition for Limited Judicial Review of Administrative Decision" in the Nineteenth Judicial District Court, challenging the Commissioner's denial of its claims for retainage and deliverables in progress. In its petition, Unisys specifically stated that it was not seeking review of the portion of the Commissioner's decision finding that Unisys was entitled to $1, 320, 084.00 for the deliverables approved. Instead, Unisys sought judicial review of the Commissioner's denial of its claims for: (1) the retainage withheld by the Department from the payments to Unisys for deliverables the Department approved and accepted totaling $2, 716, 240.00; and (2) work that was satisfactorily completed and/or in progress at the time the Department terminated the contract for convenience totaling $4, 470, 673.00. Unisys additionally sought attorney's fees, costs of court, and interest, including prejudgment interest.

         Unisys further asserted that the Department had no right to appeal the Commissioner's decision, and that accordingly, the part of the decision finding that Unisys was entitled to $1, 320, 084.00 for the four identified deliverables was "final and conclusive." In response, the Department filed an answer to the petition for judicial review together with a "reconventional demand," seeking "to traverse the adverse finding of the Commissioner" that Unisys was entitled to payment of $1, 320, 084.00 under the contract for deliverables approved.

         In response to the Department's reconventional demand, Unisys filed a declinatory exception of lack of subject matter jurisdiction and peremptory exceptions of no cause of action and no right of action, contending that the Department had no right of action or cause of action for judicial review of the Commissioner's decision pursuant to LSA-R.S. 39:1524, et seq. and, thus, that the district court lacked subject matter jurisdiction over the Department's request for judicial review, which had been mischaracterized as a "reconventional demand." After a hearing on the matter, the district court rendered judgment, maintaining the exception of no cause of action and dismissing the Department's reconventional demand with prejudice, stating that the court's "judicial review is hereby limited to the matters raised in the Petition filed by [Unisys]."

         The Department appealed the district court's judgment, contending that the district court erred in dismissing its reconventional demand for review of the Commissioner's entire decision, including the additional payment for retainage awarded to Unisys. On appeal, this court rendered an opinion ("Unisys I"), wherein we determined that if a contractor seeks review of a Commissioner's decision, pursuant to LSA-R.S. 39:1525, the decision does not become final and conclusive, and the district court thus has the right to review all portions of the decision. Accordingly, this court found that the district court erred in maintaining Unisys's exception of no cause of action and in dismissing the Department's request to have the district court also consider the portion of the Commissioner's decision that granted partial relief to Unisys. Thus, we reversed the decision of the district court and remanded the case to the district court for further proceedings. See Unisys Corporation v. Louisiana Office of Motor Vehicles, 2012-1578, p. 7 (La.App. 1st Cir. 6/3/13) (unpublished), writ denied, 2013-1839 (La. 11/1/13), 125 So.3d 437.

         After the matter was remanded to the district court, the Department filed its own exception of no cause of action as to Unisys's demand for a money judgment pursuant to a petition for judicial review, contending that the statutory provisions by which the Commissioner rendered her decision did not authorize the adjudication of Unisys's claims, and that there was no cause of action for an award of a money judgment against the Department. Following a hearing, the district court rendered judgment on November 16, 2015, denying the Department's exception of no cause of action.[7]

         The merits of the petition were then briefed by the parties, and on January 23, 2017, the matter was argued before the district court. At the conclusion of the hearing, the district court took the matter under advisement. On April 27, 2017, the district court issued a written "Ruling" setting forth its reasons for upholding the decision of the Commissioner. A judgment was subsequently signed by the district court on December 19, 2017, affirming the decision of the Commissioner without modification. Both the Department and Unisys now appeal the judgment of the district court.

         On appeal, the Department contends that the district court erred in: (1) denying its exception of no cause of action as to Unisys's demand for a money judgment pursuant to judicial review; and (2) affirming the Commissioner's decision that the Department should pay Unisys for the four subject invoices for deliverables totaling approximately $1.3 million.

         Unisys answered the Department's appeal, urging this court to: (1) affirm the judgment of the district court insofar as it affirmed the Commissioner's award of $1, 320, 083.00 to Unisys for four previously approved, but unpaid deliverables and to amend the judgment to expressly award this monetary sum in favor of Unisys and against the Department; (2) conduct a de novo review and reverse the district court's and Commissioner's denial of Unisys's remaining claim for retainage and render judgment in favor of Unisys for the additional $2, 911, 421.00 as payment due under the contract for unpaid retainage on deliverables previously approved; and (3) amend the district court's judgment to expressly award Unisys legal interest at the rate fixed by LSA-R.S. 9:3500 and LSA-R.S. 13:4202 from the effective date of the termination of the contract, Le., February 13, 2009, until all sums due Unisys are paid. Unisys further prayed for judgment awarding it all costs on appeal.

         Unisys also filed its own appeal of the district court's judgment reiterating the arguments previously urged in its answer to appeal and assigning as error the district court's: (1) denial of Unisys's claim for $2, 911, 061.00 in retainage payments withheld on accepted deliverables under the contract; and (2) failure to enter judgment awarding Unisys legal interest on the total amount of the payment due it from February 13, 2009 (the effective date of the termination of the contract) until paid.

         DISCUSSION

         Exception of No Cause of Action (The Department's First Assignment of Error)

         In its first assignment of error, the Department contends that the district court erred in denying the Department's exception of no cause of action as to Unisys's demand for a money judgment pursuant to judicial review.[8]

         The function of the peremptory exception raising the objection of no cause of action is to test the legal sufficiency of a pleading by determining whether the law affords a remedy on the facts alleged in the pleading. Hill v. Jindal, 2014-1757, 2014-1484 (La.App. Ist Cir. 6/17/15), 175 So.3d 988, 1000, writ denied, 2015-1394 (La. 10/23/15), 179 So.3d 600. The exception is triable on the face of the pleadings, and, for the purposes of determining the issues raised by the exception, the well-pleaded facts in the petition must be accepted as true. Hill v. Jindal, 175 So.3d at 1000. In reviewing a district court's ruling sustaining an exception raising the objection of no cause of action, appellate courts conduct a de novo review, because the exception raises a question of law, and the district court's decision is based only on the sufficiency of the petition. Torbert Land Company, L.L.C. v. Montgomery, 2009-1955 (La.App. 1st Cir. 7/9/10), 42 So.3d 1132, 1135, writ denied, 2010-2009 (La. 12/17/10), 51 So.3d 16.

         The Department contends that the relief Unisys seeks in the form of a "money judgment" is not found in the PSPC statutes and the administrative process of judicial review. The Department argues that Unisys has improperly chosen to obtain relief from the Commissioner, and through a petition for judicial review of the Commissioner's decision, without any adjudication of its claims and defenses. The Department further argues that, pursuant to Louisiana Constitution article V, § 16(A), a contract dispute constitutes a civil matter over which original jurisdiction is vested in the district courts.

         Section 6 of the contract entered into herein by the parties, entitled, "CONTRACT CONTROVERSIES," provides that "[a]ny claim or controversy arising out of the contract shall be resolved by the provisions of Louisiana Revised Statute 39:1524-26." The versions of those statutes in effect at the time the contract was confected provided as follows:

Louisiana Revised Statute 39:1524, entitled "Authority of the commissioner of admfrustration," provided:
Prior to the institution of any action in a court concerning any contract, claim or controversy, the commissioner of administration with the concurrence of the attorney general is authorized to compromise, pay, or otherwise adjust the claim by or against or a controversy with a contractor relating to a professional, personal, consulting, or social service contract entered into with the state under their respective authority, including a claim or controversy based on breach of contract, mistake, misrepresentation, or other cause for contract modification or rescission. Nothing herein shall limit the authority of the commissioner of administration, pursuant to rules and regulations to issue, negotiate, or accept changes in the terms and conditions of a contract. When authorized, such compromise, payments, or adjustments shall be promptly paid; however, subject to any limitations or conditions imposed by rule or regulation, the commissioner of administration shall charge back all or any portion of such payments to the department or departments for whose benefit the contract was let. [Emphasis added.]
Louisiana Revised Statute 39:1525, entitled "Action on contract claims," provided as follows:
This Section applies to a claim by or controversy between the state and a contractor arising out of a contract for professional, personal, consulting, or social services. If such a claim or controversy is not resolved by mutual agreement, the commissioner of administration, or his designee, shall promptly issue a decision in writing. A copy of that decision shall be mailed or otherwise furnished to the contractor, shall state the reasons for the action taken, and shall inform the contractor of his right to judicial relief as provided in this Part. The decision shall be final and conclusive unless fraudulent, or unless the contractor institutes suit pursuant to R.S. 39:1526. If the commissioner of administration, or his designee, does not issue a written decision within one hundred twenty days after written request ...

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