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Service Employees International Union, Local 509 v. Department of Mental Health

Supreme Judicial Court of Massachusetts, Suffolk

November 22, 2016

SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 509
v.
DEPARTMENT OF MENTAL HEALTH & others.[1]

          Heard: September 6, 2016.

         Civil action commenced in the Superior Court Department on February 15, 2012.

         Following review by this court, 469 Mass. 323 (2014), the case was heard by Janet L. Sanders, J., on motions for judgment on the pleadings.

         The Supreme Judicial Court granted an application for direct appellate review.

          Ian O. Russell (Katherine D. Shea with him) for the plaintiff. Iraida J. Alvarez, Assistant Attorney General, for Department of Mental Health.

          Carl Valvo & Ariel G. Sullivan, for Advocates, Inc., & others, were present but did not argue.

          Mark G. Matuschak & Robert Kingsley Smith, for Pioneer Institute, Inc., were present but did not argue.

          Anita S. Lichtblau & Robert E. Cowden, III, for Massachusetts Council of Human Services Providers, Inc., & others, amici curiae, submitted a brief.

          Present: Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, & Budd, JJ.

          LENK, J.

         This is the second time that the plaintiff labor union appeals from dismissal of the declaratory judgment action it first brought against the Department of Mental Health (DMH or agency) in 2012. Service Employees International Union, Local 509 (SEIU or union) maintains that certain contracts DMH made in 2009 with private vendors are "privatization contracts" subject to the requirements of the Pacheco Law, G. L. c. 7, §§ 52-55. The Pacheco Law establishes certain prerequisites that agencies must meet when seeking to enter into privatization contracts. Because DMH had determined that the subject contracts were not privatization contracts, however, it did not comply with those statutory prerequisites. In bringing this action, the union seeks, among other things, a declaration invalidating the contracts on the basis of G. L. c. 7, § 54 (§ 54), which provides that no privatization contract "shall be valid" where an agency did not follow the necessary procedures.

         In our previous decision in this case, Service Employees Int'l Union, Local 509 v. Department of Mental Health, 469 Mass. 323, 324 (2014) (SEIU I), we rejected DMH's contention that the union lacked standing to challenge, in a declaratory judgment action, the agency's unilateral determination that the contracts were not privatization contracts. While recognizing that the Pacheco Law does not expressly provide a private right of action, we also recognized that the Legislature did not contemplate the situation presented there (and here), in which an agency determines on its own that it need not comply with the requirements of the statute. Id. at 335-336. Because unreviewable agency decision-making on such a matter would thwart legislative intent, we concluded that in these circumstances "declaratory judgment is an appropriate vehicle for relief to ensure that agencies may not evade the requirements of the Pacheco Law with impunity." Id. at 336. We accordingly vacated the judgment of dismissal and remanded the case to allow joinder of necessary parties.[2] Id. at 339.

         While SEIU I was under advisement in this court, however, the five-year term of the subject contracts drew to an end and, pursuant to the provisions of those contracts, DMH exercised options renewing them for successive one year periods.[3]Following our decision in SEIU I and the amendment of the complaint, DMH again successfully moved to dismiss the union's declaratory judgment action, this time asserting it was moot. The basis for the dismissal was two-fold: first, the action was moot as to the now-expired 2009 contracts, and, second, the remaining extant renewal contracts were immune from challenge by virtue of G. L. c. 7, § 53 (§ 53) ("any agreement renewing . . . a privatization contract[] shall not be considered a privatization contract"). The union appealed, asserting, in essence, that because the non-compliant 2009 initial contracts are invalid under § 54, so too are any renewal contracts made pursuant to them.

         We are thus called upon to construe §§ 53 and 54 as they apply in these unusual circumstances. Cognizant that the Pacheco Law only contemplates the situation, unlike this one, where an agency recognizes a potential privatization contract as such and acts in compliance with the statutory requirements to assure its validity, see, e.g., SEIU I, 469 Mass. at 329-330; Massachusetts Bay Transp. Auth. v. Auditor of the Commonwealth, 430 Mass. 783, 784-787 (2000) (MBTA), we interpret §§ 53-54 with that framework in mind. Fidelity to the intent and purpose of the Legislature in enacting the Pacheco Law, evident in both the plain language of the statute when read as a harmonious whole, and the legislative history, requires that the protection afforded renewal contracts by § 53 not be extended to those renewal contracts made pursuant to timely challenged and subsequently invalidated privatization contracts under §54. We accordingly vacate the judgment of dismissal.

         1. Background.

         The following facts are taken from SEIU's amended complaint, which, at this stage, we assume to be true, see, e.g., Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), supplemented by undisputed facts in the record.[4] For more than fifteen years, DMH had employed case managers to provide services to individuals with mental illness. In late 2008 and early 2009, DMH initiated a new program, the Community Based Flexible Supports program, that was intended to provide similar but more personalized services to DMH clients. As part of the Community Based Flexible Supports program, DMH entered into agreements with nineteen private organizations to provide services substantially similar to those previously provided by the case managers. Over the same period, DMH laid off approximately eighty case managers. DMH unilaterally determined that these new contracts were not "privatization contracts" within the meaning of the Pacheco Law and therefore did not attempt to follow any of the procedures that the law requires when an agency intends to privatize a service.

         Sometime in 2009, SEIU notified the Auditor of the Commonwealth of DMH's intent to enter into the contracts and the union's objections to the contracts. The Auditor's office undertook an investigation and, in September, 2010, the Auditor's general counsel sent DMH, SEIU, and the Attorney General a letter and memorandum stating that the contracts "[had] the effect ... of privatizing services previously performed by public employees, " and therefore should have been submitted for review prior to taking effect. The Auditor's office told the Office of the Attorney General "to take whatever steps [the Attorney General felt] were appropriate, " but the Attorney General's office did not take any action.

         Having failed to obtain relief through administrative channels, the union filed its initial complaint in 2012. As discussed, a Superior Court judge dismissed that complaint for lack of standing; we vacated the decision, concluding that the union did have standing, and remanded for further proceedings. On remand, a different Superior Court judge dismissed the amended complaint, this time as moot; SEIU appealed, and we granted direct appellate review.

         2. Discussion.

         We have discussed at some length in prior decisions the statutory framework, purpose, and history of the Pacheco Law. See SEIU I, 469 Mass. at 329-330; MBTA, 430 Mass. at785-787. In brief, G. L. c. ...


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