McLean Contracting Co. v. Maryland Transportation Authority

Citations: 521 A.2d 1251; 70 Md. App. 514; 1987 Md. App. LEXIS 274Docket: 797, September Term, 1986

Court: Court of Special Appeals of Maryland; March 6, 1987; Maryland; State Appellate Court

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In McLEAN CONTRACTING COMPANY v. MARYLAND TRANSPORTATION AUTHORITY, the Maryland Court of Special Appeals addressed a dispute arising from a contract to construct a drawbridge, which the Maryland Transportation Authority (MTA) had entered into with McLean Contracting Company in April 1980. After experiencing delays attributed to MTA, McLean submitted a claim for additional compensation in October 1982, citing the contract's "equitable adjustment" provision. MTA's procurement officer denied this claim in May 1985. Subsequently, McLean filed a lawsuit in the Circuit Court for Anne Arundel County, alleging breach of contract.

MTA moved to dismiss the action, asserting that McLean had not exhausted administrative remedies, as an appeal should have been made to the Maryland State Board of Contract Appeals (MSBCA) before the circuit court could consider the dispute. The circuit court, led by Judge Martin A. Wolff, agreed and dismissed the case for lack of subject matter jurisdiction, concluding that an appeal to the MSBCA was necessary.

On appeal, the court confirmed that the MSBCA has exclusive jurisdiction over disputes involving Maryland Department of Transportation contracts, particularly those entered into between July 1, 1978, and July 1, 1981. The decision underscored the legislative changes from 1976 to 1981 regarding dispute resolution procedures for DOT contracts, including the establishment of the Department of Transportation Board of Contract Appeals, which provided a pathway for contractors to resolve disputes through administrative channels prior to pursuing litigation. The appellate court affirmed the circuit court’s dismissal based on the requirement for administrative exhaustion.

Chapter 418 and its dispute resolution procedures are to be applied only prospectively, not retroactively to contracts made prior to its effective date. However, parties with existing contracts can elect to adopt these procedures. As established in Maryland Port Administration v. C.J. Langenfelder and Son, Inc., this change partially stripped circuit courts of their original jurisdiction over disputes involving Department of Transportation (DOT) contracts.

In 1980, the Maryland General Assembly enacted Chapter 775, a comprehensive procurement contract code that repealed previous provisions and introduced a new contract dispute resolution mechanism. This included the establishment of the Maryland State Board of Contract Appeals (MSBCA), which took over appeals from the now-abolished Department of Transportation Board of Contract Appeals (DOCA). The MSBCA was given jurisdiction to hear appeals related to agency decisions on state procurement contracts.

Chapter 775 requires a four-step dispute resolution process: 
1. The contractor submits a dispute to the agency procurement officer for negotiation.
2. The agency head reviews the procurement officer's decision.
3. Appeals can be made from the agency head's decision to the MSBCA.
4. The MSBCA's decision can be reviewed under the Administrative Procedure Act.

In the case of the McLean contract, which was signed before Chapter 775, the dispute resolution process outlined in Chapter 418 applied. The contract specifies that disputes unresolved by a DOT engineer are decided by the DOT Administrator, with appeals going to the DOCA. However, since the DOCA was abolished before McLean's dispute was filed, and the dispute did not automatically transfer to the MSBCA, McLean chose to appeal directly to the circuit court instead.

It is generally required that administrative remedies provided by statute be exhausted before seeking relief in court. If a statutory appeal process exists, it must typically be followed, as upheld in various Maryland case law.

A party seeking legal remedy must utilize the designated administrative procedures established by the legislature if they are adequate and available. If unsuccessful, the party must pursue judicial appeals as specified by the legislature rather than seeking general court jurisdiction. Courts have consistently ruled that when a specific remedy exists, it must be followed, and bypassing the administrative process is not permissible. The exclusivity of an administrative remedy is determined by legislative intent, with a presumption that such remedies are intended to be exclusive unless stated otherwise. When an exclusive statutory remedy includes administrative processes and judicial review, the claimant must exhaust the administrative remedies before turning to the courts. The doctrine of primary jurisdiction allows courts to defer to agencies with particular expertise, emphasizing the importance of coordinating the roles of courts and agencies when both have jurisdiction over a matter. This doctrine is relevant only when there is concurrent jurisdiction without statutory coordination. The excerpt concludes by referencing McLean's argument that a specific provision in Section 25 of Chapter 775 indicates legislative intent regarding the application of procedural provisions to existing contracts.

McLean contends that the Legislature's decision to make review by the Maryland State Board of Contract Appeals (MSBCA) optional for contracts effective before July 1, 1981, indicates that such review is merely an "alternative remedy." However, this characterization is only valid if McLean has another available remedy. Section 25 maintains existing dispute resolution procedures for contracts established before July 1, 1981. McLean asserts that the end of the Department of Contract Appeals (DOCA) left it with the right to sue the Department of Transportation (DOT) directly in circuit court. The document disagrees, stating that the dissolution of the DOCA left McLean with no remedy other than the MSBCA procedures.

The MSBCA was established to handle appeals from final agency actions regarding procurement contract disputes, with no restrictions on the contract's formation date or dispute filing. The term "contract," defined broadly by the Legislature, encompasses all state agency agreements, suggesting an intent for disputes to be resolved exclusively within the administrative framework established by the MSBCA. The transition from DOCA to MSBCA involved the transfer of responsibilities and processes without indicating a desire to allow circuit court jurisdiction over these matters. 

McLean's interpretation that the option to appeal to the MSBCA implies the existence of an alternative forum is deemed overly broad. Section 25 does not create new remedies but preserves existing rights. The right to sue the DOT in circuit court was eliminated with the creation of the DOCA, and there is no legislative intent to revive this right after its abolition. The MSBCA is viewed as the exclusive remedy for disputes involving DOT contracts, and McLean is required to exhaust this administrative remedy before seeking circuit court review under the Administrative Procedures Act.

McLean asserts that the MTA waived its right to an administrative proceeding by inducing McLean to file a lawsuit in circuit court and actively participating in those proceedings. McLean references language from MTA's Final Decision letter, which suggests an alternative route to court due to the contract being established before the Maryland State Board of Contract Appeals was created. However, the court clarifies that the administrative remedies in the contract are statutory obligations, not contractual rights. The procurement contracts drafted by the DOT adhere to statutory provisions, and McLean's reliance on cases involving waivers of arbitration rights is misplaced, as those cases pertain to contractual rights rather than statutory obligations.

The court emphasizes that the requirement for McLean to appeal to the DOCA (and later to the MSBCA) is not equivalent to an agreement to arbitrate. There is no legal basis for waiving the obligation to exhaust administrative remedies through party conduct, and parties cannot confer jurisdiction on a court lacking subject matter jurisdiction. The circuit court did not have jurisdiction over McLean's suit, and MTA's participation in the circuit court action did not grant such jurisdiction. MTA retained the right to contest the circuit court's jurisdiction at any point. Therefore, MTA's involvement did not relinquish its demand for McLean to adhere to the mandatory administrative procedures. The judgment was affirmed, with costs to be borne by McLean.

Pending a decision by the Board of Contract Appeals regarding any disputes, the Contractor must continue to perform under the Contract according to the Administrator's directives. The practice of directing contractual disputes to DOT Administrators predates the enactment of Chapter 418 and remains part of the regulations established under that law. Chapter 418 stipulates that appeals from the Administrator’s decisions must be made to the Department Board of Contract Appeals, not the circuit court, with these provisions effective from July 1, 1981. The question of whether MTA's actions affected the 30-day appeal period for McLean to file with the MSBCA is not addressed. Additionally, McLean contended that its reading of Section 25 does not undermine MTA's contractual rights. However, the circuit court's decision, which rejected McLean's interpretation of Section 25, renders it unnecessary to assess whether this rejected interpretation affects MTA's rights.