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State v. State

Supreme Court of Alabama

July 27, 2018

Ex parte Clinton Carter, in his capacity as Director of Finance for the State of Alabama
Clinton Carter, in his capacity as Director of Finance for the State of Alabama, et al. In re: Jim Zeigler Ex parte CGI Technologies and Solutions, Inc. In re: Jim Zeigler
Clinton Carter, in his capacity as Director of Finance for the State of Alabama, et al.

          Montgomery Circuit Court, CV-16-900980



         CGI Technologies and Solutions, Inc. ("CGI"), and Clinton Carter, in his capacity as Director of the Alabama Department of Finance, separately petition this Court for a writ of mandamus directing the Montgomery Circuit Court to dismiss, for lack of subject-matter jurisdiction, an action filed by Jim Zeigler[1] challenging a contract between CGI and the State of Alabama on the basis that the contract violated Alabama's competitive-bid law. We grant the petitions and issue the writs.

         I. Facts

         On September 30, 1982, the State of Alabama, through the Department of Finance, entered into a software contract with American Management Systems, Inc. ("AMS"), that granted the State a license to install a local-government finance-system package on computers in the Finance Department ("the 1982 contract"). There is no dispute that the 1982 contract was competitively bid.

         In 2004, AMS was acquired by CGI. On November 1, 2012, the State and CGI entered into what they called "Amendment 11" to the 1982 contract. Amendment 11 extended the license for "Advantage 2 Software," which apparently was or had become part of the local-government finance-system package, for an additional 15 years. Amendment 11 was the first amendment to the 1982 contract since 1994.

         On January 1, 2013, the State and CGI entered into an agreement labeled "Amendment 12," which provided for the State to acquire what was called "the Packaged System," a program CGI was to configure, install, and maintain for the State's Medicaid agency and that included "Advantage-related enhancements." CGI began the work contracted for in Amendment 12 on January 15, 2013.

         On September 30, 2013, the State and CGI entered into "Amendment 13," which authorized the purchase of the Packaged System for configuration, installation, and maintenance across State-agency computer systems over a period of five years. The software purchase and implementation provided by Amendment 13 became known as the State of Alabama Accounting Resources System ("STAARS"). According to Zeigler's complaint, "STAARS is based on CGI's Advantage [Enterprise Resource Planning] software, which is designed and built specifically for state and local governments." The State and CGI entered into four amendments addressing STAARS between March 2014 and September 2015.

         On March 31, 2017, the State and CGI entered into a letter agreement memorializing an understanding "relative to concluding work" on STAARS. The letter agreement noted that "CGI acknowledges the State's intent to begin transition to an in-house delivery plan or to award a new contract for operational services and support for STAARS within 90 days of the date of this letter, after which, CGI will provide Disengagement Services." Also, the letter agreement recognized a "winding down" of the contractual relationship between CGI and the State, which was to conclude by September 30, 2017. Other than the "winding-down period," the State agreed that "CGI has satisfied its contractual obligations with respect to the STAARS project and software and services provided by CGI under the STAARS Contract." The agreement also stated:

"CGI acknowledges that the State of Alabama will not further amend the 1982 Memorandum of Agreement, the amendments thereto, or any existing Statements of Work thereunder, nor restart work concluded by this agreement without executing a new contract competitively awarded pursuant to the provisions of Chapter 16 of Title 41, Code of Alabama 1975."

         On September 29, 2017, Carter filed with this Court a "Supplement" to his petition in which he explained that, because of an "emergency" not anticipated by the State, the State had to enter into a further "Professional Services Contract" with CGI to extend its performance for up to 60 days beyond the original September 30, 2017, winding-down period. In other words, the State contracted for further services from CGI after October 1, 2017, but not extending beyond November 29, 2017. Carter described the need for further services as follows:

"[T]he emergency arose because the State has not been able since July 7 to end the risk of catastrophic failure in the STAARS system arising from the end of CGI's managed services by appropriate interaction between CGI and the new vendor for managed services replacing CGI [Infiniti]. The risk arises from the need to allow CGI to extract proprietary processes and trade secrets used during its provision of managed services, and enable the new vendor to become the service provider using its own knowledge, and without using CGI proprietary processes and trade secrets."

         Supplement to Carter's petition, pp. 3-4. The need for further services by CGI meant that further payments would be made to CGI.

         On December 18, 2017, Carter filed a second supplement to his petition, in which he stated:

"Defendant CGI is performing no work for the State of Alabama, and will receive no further payments for the enhancement of the CGI-licensed software known as STAARS, or for ongoing managed operational services of the STAARS system, or for the winding down process needed to conclude CGI work and transition to a new vendor. That work was completed on November 29, and the last payment related to it was made on or about December 14. Pursuant to a contract awarded by a competitive process, Infiniti is the new sole vendor providing software services for the State of Alabama."

         Second supplement to Carter's petition, p. 1.

         According to Zeigler, in December 2015 he first learned that the amendments authorizing and implementing STAARS had not been competitively bid. On July 21, 2016, Zeigler filed this action in Montgomery Circuit Court against CGI, Carter, in his capacity as finance director, the governor, and the attorney general.[2] In his original complaint, Zeigler alleged that he "has standing to bring this action in his individual capacity pursuant to § 41-16-31, Code of Alabama 1975."

Section 41-16-31, Ala. Code 1975, provides:
"Any taxpayer of the area within the jurisdiction of the awarding authority and any bona fide unsuccessful bidder on a particular contract shall be empowered to bring a civil action in the appropriate court to enjoin execution of any contract entered into in violation of the provisions of this article."

         The original complaint also referenced Zeigler, in his official capacity as State Auditor.

         On August 16, 2016, Zeigler filed an amendment to his complaint in which he sought to delete "all references to this action being brought by the Plaintiff in his official capacity as State Auditor" and to "clarify that, from this point on, this action is being prosecuted by Zeigler in his individual capacity as a taxpayer of this state, and as class action on behalf of all other taxpayers of this state." Approximately a month later Zeigler filed a second amended complaint.

         On April 18, 2017, Zeigler filed his "Third Amended Complaint," which is the operative complaint for these petitions. Zeigler's first count of the third amendment to the complaint sought a judgment declaring that the STAARS amendments were void pursuant to § 41-16-20 et al., Ala. Code 1975 (hereinafter this section and associated Code sections --including § 41-16-31 -- are referred to collectively as "the Competitive Bid Law"), [3] because the State did not engage in the competitive-bid process for the purchase, implementation, and maintenance of STAARS. Zeigler requested that the court "create a constructive trust for the benefit of taxpayers (and hence, the State of Alabama) consisting of all monies, profits and gains illegally obtained by CGI as a result of the STAARS" amendments as part of the relief in this count. Count two of that amended complaint sought a judgment declaring that the STAARS amendments violated § 29-2-41, Ala. Code 1975, [4] because the proposed amendments were not submitted to the Contract Review Permanent Legislative Oversight Committee, and that, as a result, those amendments to the 1982 contract were void. Count three asserted a claim of unjust enrichment against CGI for retaining the payments it had received from the State for STAARS. Count four sought rescission of the contract created by the STAARS amendments and restitution to recover the payments made to CGI on behalf of Alabama taxpayers. Count five asserted a claim for money had and received. In Count six Zeigler sought a permanent injunction voiding the STAARS amendments, prohibiting any further performance as to those amendments, and preventing Carter from making any further payments to CGI. Count seven sought a preliminary injunction prohibiting Carter from making any further payments to CGI under the STAARS amendments during the pendency of the action.

         On April 26, 2017, CGI filed a motion to dismiss the amended complaint. CGI contended, among other things, that the statute under which Zeigler claimed a right to bring his action, § 41-16-31, allowed for a remedy only of enjoining execution of a contract that violates the competitive-bid law, which meant that it did not permit claims of unjust enrichment or seeking restitution. CGI also contended that, under this Court's precedent, Zeigler lacked taxpayer standing to recover allegedly wrongfully expended funds. On April 29, 2017, Carter filed a motion to dismiss the amended complaint. Carter argued that Zeigler lacked standing because his original complaint failed to allege that he was a taxpayer or that his taxes were used to fund payments made ...

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