United States District Court, D. Oregon
DEPAUL INDUSTRIES, an Oregon non-profit corporation, Plaintiff,
CITY OF EUGENE, at al, Defendants.
OPINION AND ORDER
Michael McShane, United States District Judge
DePaul Industries is an Oregon non-profit corporation and a
“Qualified Non-Profit Agency for Individuals with
disabilities” (“QRF”) as defined under
Oregon statute ORS 279.835(5). Local governments and agencies
are mandated to contract with QRFs that provide certain
available services before considering a for-profit entity.
Industries is the only QRF listed in Lane County to provide
unarmed security services. The City of Eugene had
two contracts with DePaul Industries for unarmed security
services that had renewed annually over a twelve year period.
The contracts were not renewed in May of 2016.
alleges that Defendants created a pretext of wanting armed
security services so that the City could cancel the contracts
with DePaul Industries in order to retaliate and punish
DePaul Industries for the conduct of one of its employees.
This employee, in his capacity as a private citizen, was a
vocal critic of the City Council. As alleged, had the City
placed a bid for unarmed security services, then the City
would have been obligated by law to award the bid to DePaul
Industries. As a result of the City's deceptive conduct,
DePaul Industries lost their contracts. The complaint alleges
(1) Violation of Oregon's QRF statute, ORS 279.850 -
against the City;
(2) Violation of Oregon's Public Contracting Code, ORS
279A - against the City;
(3) Violation of Substantive Due Process - against all
(4) Violation of Procedural Due Process - against all
(5) First Amendment Retaliation - against all defendants;
(6) In the alternative, breach of contract - covenant of good
faith and fair dealing - against the City;
(7) Fraud - against the City; and
(8) Negligence - against the City.
move to dismiss the complaint for failure to state claims
upon which relief can be granted. Defendants' position is
that (1) the City lawfully followed public contracting
procedures and (2) there were no QRFs in Lane County for
armed security services.
overriding issue in this case is whether, as alleged,
Defendants acted under a scheme of deception or fraud. The
legal arguments in Defendants' motion to dismiss assume
implicitly that the Defendants were acting in good faith. At
this stage however, in accepting the allegations of material
fact as true and construing them in the light most favorable
to the non-movant, Plaintiffs have stated claims upon which
relief can be granted (with one exception).
motion to dismiss (ECF No. 9) is DENIED in part.
Plaintiff's negligence claim against the City is
dismissed with leave to amend.
Two renewable contracts
case involves two separate and renewable contracts between
DePaul Industries and the City of Eugene. Under the first
contract (the parking contract), DePaul Industries provided
unarmed security services at eleven City-owned parking
garages. Under the second contract (the library contract),
DePaul Industries provided unarmed security services at the
Downtown Eugene public library. Am. Compl. Exs. 1 & 2.
Each 12-month contract had historically been renewed.
parking contract covered eleven City parking garages to
include the garages at the Library and the Hult Center for
the Performing Arts. A different contractor provided security
services at the Hult Center itself. Am. Compl. Ex. 1 at 12,
41. The agreement and extensions on the parking contract
started on July 1 and ended on June 30 of each year.
Id. at 19-21; Stilwell Decl. ¶ 9, Ex. 4. The
library contract ran from November 30 to November 29 for some
years, but most recently ran from July 1 to June 30. Am.
Compl. Ex. 2, 49, 51, 59; Stilwell Decl. ¶ 9, Ex. 6.
City seeks new security vendor
2016, the City used the competitive bidding process
purporting to seek a vendor that could provide both armed and
unarmed security services at certain facilities. Stilwell
Decl. ¶ 3, Ex. 1 at 12, 14. On May 27, 2016 the City
published a RFP through its “ebid” system.
Stilwell Decl. ¶ 4, Ex. 2. The RFP explicitly covered:
(1) the Hult Center, (2) the Library, and (3) the parking
facilities for those two locations, as well as “other
facilities as may be covered by a resulting contract.”
Stilwell Decl. ¶ 3, Ex. 1 at 2, 12, 14. There was no
indication in the RFP that the “other facilities”
were the remaining parking facilities that were covered by
DePaul Industries parking contract.
Industries was not in a position to bid on the RFP because it
did not provide armed security services. DePaul
Industries' contracts were set to expire on June 30,
2016. The Library contract was extended for one month to July
31, 2016 and the parking contract was extended for two months
to August 31, 2016. Stilwell Decl. ¶ 9, Ex. 4 at 1, Ex.
6 at 15.
1, 2016, a City employee e-mailed DePaul Industries'
security supervisor directly in response to DePaul
Industries' request for “the open RFP for security
services.” Pallanch Decl. ¶ 3, Ex. 2. DePaul
Industries' President and CEO, Travis Pearson, received
the RFP information “soon after.” Pallanch Decl.
¶ 4, Ex. 3. DePaul Industries did not attend the
mandatory pre-closing meeting on June 2, 2016, and did not
submit a proposal. Silwell Decl. ¶¶ 3, 6-7, Ex. 1
at 2; Pallanch Decl. ¶ 4, Ex. 3. DePaul Industries did
not submit a protest to the RFP, although the RFP provided a
procedure for protesting the “[p]rocurement process or
the Solicitation Document” and notified RFP recipients
that protest exhaustion is required prior to seeking judicial
review. Stilwell Decl. ¶¶ 3, 6, Ex. 1 at 3-4.
August 1, 2016, the RFP was awarded to Advanced Security
Inc., which provides both armed and unarmed security
services. Stilwell Decl. ¶ 8, Ex. 3 at 12-14. The
contract was later amended to include the remaining eight
parking lots covered in DePaul Industries' parking
contract, in addition to the Library, the Hult Center, and
their respective parking lots. Stilwell Decl. ¶ 8, Ex. 3
at 19. DePaul Industries' final parking contract
extension expired on August 31, 2016. Stilwell Decl. ¶
9, Ex. 4 at 1.
from the City's contracting process, the City of Eugene
found itself defending a civil suit (now resolved) brought by
Mark Cosby, an employee of DePaul Industries. Mr. Cosby, as a
private citizen, sued the City in February 2016, alleging
that the City retaliated against him for exercising his First
Amendment rights. Am. Compl. ¶ 13. Mr. Cosby spoke
critically of Eugene's mayor at multiple City Council
meetings, attended protests, and reached out to a criminal
defense attorney in a case the City was investigating. Am.
Compl. ¶¶ 30-32. The City attempted to tender
defense of the Cosby suit to DePaul Industries in May 2017,
before issuing the RFP. The City relied on the
indemnification provision in the parking ...