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All Towing Services LLC v. City of Orange

California Court of Appeals, Fourth District, Third Division

October 22, 2013

ALL TOWING SERVICES LLC, Plaintiff and Appellant,
v.
CITY OF ORANGE et al., Defendants and Respondents.

CERTIFIED FOR PARTIAL PUBLICATION[*]

Appeal from a judgment of the Superior Court of Orange County No. 30-2011-00456419, John C. Gastelum, Judge.

Farnell & Norman, Ronald E. Norman and Alicen D. Pittman for Plaintiff and Appellant.

Woodruff, Spradlin & Smart and David A. DeBerry; Wayne W. Winthers, City Attorney, for Defendants and Respondents.

OPINION

ARONSON, ACTING P. J.

All Towing Services LLC (All Towing) appeals from the summary judgment entered in favor of the City of Orange (city) and its city council members, Denis Bilodeau, Jon Dumitru, and Fred Whitaker on All Towing’s conflict of interest claims arising from the award of a vehicle towing contract. All Towing contends triable issues of fact prevented summary judgment. As we explain, however, All Towing failed in its opposition to summary judgment to identify any disputed facts suggesting Whitaker had a conflict of interest, and as a matter of law the $250 or more in campaign contributions Bilodeau and Dumitru received in an earlier election cycle do not create a conflict of interest. We publish our discussion of the latter issue to explain the error of a contrary statement in BreakZone Billiards v. City of Torrance (2000) 81 Cal.App.4th 1205, 1227 (BreakZone).

I

FACTUAL AND PROCEDURAL BACKGROUND

In the fall of 2010, the Orange Police Department solicited bid proposals to perform towing services for the Official Police Towing and Services Storage (OPTS) program under contract with the city (OPTS agreement, or OPTSA). Under the OPTSA, the police department calls tow operators on a rotational basis whenever it needs vehicles towed for police purposes, such as after an accident or as part of a criminal investigation. According to All Towing, the police department screened and scored the proposals it received before submitting them to the city council for a final decision and, of the seven tow companies submitting bids, All Towing earned the third highest score.

The city alerted the seven companies it would award OPTS towing contracts at a city council hearing on January 25, 2011, but All Towing regarded the meeting as a formality “where matters are routinely approved, ” and did not appear. All Towing later explained that one of its owners and the person who prepared its bid proposal, Norma Odeh, did not attend the hearing because she was caring for her mother, who died four days later. All Towing did not send anyone in her place.

The city council voted at the hearing to award OPTS contracts to five towing companies, and All Towing was not among them. The council initially awarded only four contracts, expressing reservations about one of the bidders, California Coach. But a California Coach representative addressed the council’s concerns at the meeting and, before it adjourned, the council voted 3-2 to award a fifth towing contract to the company. The council, however, did not execute the contracts immediately.

All Towing’s lawyer complained in a letter to the city soon after the council meeting that two tow operators receiving OPTS contracts had poor qualifications and that three of the five scored lower than All Towing on the police department’s screening criteria. The letter also alleged that at the OPTSA city council meeting “Councilmember Fred Whitaker mentioned that he had checked the public records and discovered that [All Towing] had a collection dispute with a large tax provider for the City of Orange (SC Fuels)” and, “[f]or that reason, Mr. Whitaker... disqualif[ied] our client from the process.” The letter complained that Whitaker failed to disclose he previously had been a vice president and general counsel for S.C. Fuels and that when he rejoined his law firm, Cummins & White, S.C. Fuels remained one of the firm’s clients.

The letter asserted a conflict of interest based on Whitaker’s association with S.C. Fuels, but also explained “Mr. Whitaker was mistaken” in assuming a connection between S.C. Fuels’ debtor and All Towing. The letter explained the debtor on the S.C. Fuels lien, American All-Star Towing, was not the same entity as All Towing, which was only doing business as American All-Star Towing. Counsel explained in a subsequent letter that the original American All-Star Towing had gone out of business in 2009, and All Towing simply purchased its assets at that time, but was not liable for the S.C. Fuels debt.

All Towing’s letters also explained that purported concerns raised at the city council meeting about the financial condition of All Towing’s owners were similarly misplaced. While an owner of the original American All-Star Towing company, Naji “Nick” Feghali, was now a manager at All Towing, a bankruptcy court discharged any individual liability he had on the S.C. Fuels debt, and All Towing’s owners and All Towing itself were “financially strong.” All Towing declared “the personal bankruptcy of [its] manager... was not a reason to disqualify the company.”

All Towing also complained that “[a]t least 2 councilmembers” received campaign contributions “from other towing companie[s] who were applying for the contract.” All Towing claimed the unnamed “councilmembers should not have participated in the voting.”

Based on All Towing’s complaints, the city council agreed to revisit the OPTS contracts. The city attorney notified the tow operators that had been approved in the previous hearing that the city council would “be reconsidering its January 25, 2011, decision to not include [All Towing] on the list of tow contractors” at a new hearing on February 22, 2011. The letter advised that while the city council “may limit its discussion to consideration of [All Towing], it is not required to do so. You may want to have a representative attend the meeting, as the ultimate decision of the City Council may have an impact on your operation.”

Whitaker recused himself at the February 22 city council hearing to avoid any appearance of a conflict involving “one of my firm’s clients, Cardlock Fuels, a member of the S.C. Fuels companies....” Counsel for All Towing reiterated at the hearing the concerns All Towing expressed in its letters, explaining again that All Towing was not the same entity as the former American All-Star Towing (All-Star). In effect, counsel explained Whitaker had no actual conflict of interest with All Towing based on his association with S.C. Fuels, since All-Star and not All Towing had failed to pay S.C. Fuels’ fuel bill, resulting in the lien. All Towing was a different entity that had simply purchased All-Star’s assets and, since All Towing had new and different owners who were financially sound and validly organized as a new limited liability company, All Towing was not merely a continuation of All-Star under a different name. But All Towing did not request that Whitaker, now apprised of the true facts, withdraw his recusal and participate in the hearing.

All Towing and two of the tow operators who were awarded OPTS contracts at the January 25 hearing suggested rescinding some of the contracts so that only a total of four tow operators would tow for the police. Each asserted they should be among the four.

After considering the matter, the four remaining city council members decided not to eliminate any of the five previously approved companies from the OPTS program. One of the council members then made a motion to include All Towing in the program, and he was joined by another council member, but council members Bilodeau and Dumitru voted against expanding the program to six tow operators. Accordingly, the motion to include All Towing failed on a 2-2 vote. Though All Towing had not wanted Whitaker included in the vote, All Towing complained that with only four members left to vote at the rehearing, All Towing labored under the burden of ...


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