The state Supreme Court has ruled that the state Board of Claims has exclusive jurisdiction under the Commonwealth Procurement Code to decide cases arising from contracts with the state.

Specifically at issue in the case was the meaning of the language in Section 1724(d) of the Procurement Code, which states, "Nothing in this section shall preclude a party from seeking nonmonetary relief in another forum as provided by law."

In Scientific Games International v. Commonwealth,the six-justice court unanimously overturned a Commonwealth Court ruling that parties seeking nonmonetary damages can bring contractual claims against the state in state court.

Justice Thomas G. Saylor, writing for the court, said nonmonetary actions can only be brought against the state when there exists a specific waiver or exception to statutory immunity.

Saylor said Section 1724(d) contains no such waiver or exception.

"The Procurement Code establishes administrative processes to address disputes arising in the procurement setting," Saylor said. "On account of the doctrine of sovereign immunity, however, contractors, bidders and offerors have limited recourse and remedies. Relative to controversies in matters arising from procurement contracts with commonwealth agencies, the Board of Claims retains exclusive jurisdiction (subject to all jurisdictional prerequisites), which is not to be supplanted by a court of law through an exercise of original jurisdiction."

Saylor’s opinion was joined by Chief Justice Ronald D. Castille and Justices J. Michael Eakin, Max Baer, Debra Todd and Seamus P. McCaffery.

In November 2011, a three-judge Commonwealth Court panel led by now-President Judge Dan Pellegrini overruled preliminary objections filed by defendants the state Department of General Services and the Department of Revenue — collectively referred to in the opinion as DGS — and GTECH seeking to have the suit brought by plaintiff Scientific Games International Inc. tossed out for lack of jurisdiction.

In 2010, according to Saylor, the DGS publicly solicited requests for proposal for a system that would replace the existing system by GTECH designed to allow the Department of Revenue to monitor slot machines at casinos and other venues in the state.

Several months later, representatives of Scientific Games hand-signed a contract on which the Department of Revenue entered "electronic" signatures, Saylor said.

GTECH protested the awarding of the contract to Scientific Games but DGS Deputy Secretary for Administration James Henning denied the protest with prejudice, according to Saylor.

The DGS canceled Scientific Games’ RFP, claiming it was in the state’s best interests and that the state never executed a contract with the company, Saylor said.

Scientific Games filed suit in the Commonwealth Court alleging it did in fact have a valid contract with the DGS and that the DGS had no authority to cancel the RFP based on GTECH’s protest, Saylor said.

The DGS and GTECH filed preliminary objections, claiming the Commonwealth Court lacked jurisdiction to hear the case because the Board of Claims has exclusive jurisdiction over matters involving questions of whether a contract exists as well as all matters arising out of contracts with the state, Saylor said.

The defendants pointed to the state Supreme Court’s 1989 ruling in Shovel Transfer and Storage v. Simpson, according to Saylor.

In Shovel Transfer, Saylor said in a footnote, the Supreme Court held that the Board of Claims "’is empowered to entertain all contractual claims against the commonwealth irrespective of the type of relief sought or the fact that the Board of Claims may not have the power to grant the relief requested.’"

However, the Board of Claims Act, upon which the Shovel Transfer decision was based, has since been repealed and replaced by Sections 1721-26 of the Procurement Code, including the "nothing in this section" language at issue, according to Saylor.

Nevertheless, Saylor said, the Commonwealth Court’s interpretation of Section 1724(d) as allowing original-jurisdiction claims before a judicial tribunal was overly broad.

Saylor said Section 1724(d) does not establish a substantive or jurisdictional basis for a claim, but rather simply preserves the power for other statutes that may.

"Along these lines, and at least in the absence of some other words evincing a wider application, a prescription commencing with the phrase ‘nothing in this section shall preclude’ — e.g., Section 1724(d) — cannot be read to establish a basis for judicial review or relief broader than that which is contained in the provisions of law which are to be left unprecluded (here, those provisions of law which may independently sanction claims for relief against the sovereign)," Saylor said. "From this, and since Section 1724(d) also does not itself contain any waiver of sovereign immunity, it follows that such a waiver must be found in (or specifically be associated with) the other, unprecluded provisions of law."

Saylor also rejected Scientific Games’ argument that, rather than bringing a contract claim, it was bringing a claim of statutory violation pursuant to Section 521 of the Procurement Code, which permits the cancellation of an RFP prior to the execution of a contract by all parties and prohibits challenges to those cancellations.

"Neither the Commonwealth Court panel nor [Scientific Games] has offered a persuasive reason why the legislature would have wished to foreclose protests to cancellations (which would be subject to the Commonwealth Court’s appellate review, see id. §1711.1(g)), while simultaneously sanctioning original jurisdiction actions in the Commonwealth Court to challenge such cancellations," Saylor said. "It is far more plausible, in our view, and consistent with the statutory scheme, that the General Assembly wished to rely on the immunity reaffirmed in the Procurement Code to foreclose these challenges altogether. This approach avoids protracted litigation relative to abandonment of, or re-solicitation for, a public project, when the cancellation is believed by a commonwealth agency to be in the best interests of the citizenry."

Counsel for Scientific Games, Robert W. Hayes of Cozen O’Connor in Philadelphia, said he and his client were disappointed with the ruling but noted that Scientific Games still has the ability to move forward before the Board of Claims.

A spokesman for the DGS said the department is pleased the court upheld its right to cancel RFPs without having those decisions challenged in court.

A spokesman for the Office of General Counsel said the decision "will benefit the taxpayers of Pennsylvania by allowing state agencies to avoid the expense and time of defending the same issues through multiple different appeals."

A spokeswoman for the Department of Revenue called the ruling "favorable for all commonwealth agencies" and said it "clearly defined the procurement appeals process."

Counsel for GTECH, Jayson R. Wolfgang of Buchanan Ingersoll & Rooney in Harrisburg, also could not be reached.

Zack Needles can be contacted at 215-557-2493 or zneedles@alm.com. Follow him on Twitter @ZNeedlesTLI. •

(Copies of the 32-page opinion in Scientific Games International v. Commonwealth, PICS No. 13-0718, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •