BILL ANALYSIS Ó
AB 2249
Page 1
Date of Hearing: April 12, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
AB 2249
(Cooley) - As Amended March 30, 2016
As Proposed to be Amended
SUBJECT: STATE PARK CONCESSION CONTRACTS
KEY ISSUE: SHOULD A state park concessionaire BE BANNED FROM
BIDDING ON future contracts if the concessionaire uses its
contract as a basis to assert trademark rights to the names of a
state park venue?
SYNOPSIS
Earlier this year, The Ahwahnee Hotel and other Yosemite
National Park landmarks were renamed due to a legal trademark
dispute between Delaware North Company, the outgoing Yosemite
National Park concessionaire, and the National Park Service, the
federal agency responsible for managing all federal parks.
While it is unclear whether Delaware North Company has
legitimate property interests in the trademarks associated with
Yosemite Park, this bill is a reaction to the dispute, and
Delaware North Company's assertions.
As introduced, this bill raised significant legal and possibly
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constitutional concerns, including whether this bill affected
the Contract Clause, and due process rights, and whether it
amounted to an Ex Post Facto law. Given that the author has
taken amendments to apply this bill prospectively, those legal
concerns have been addressed.
Among other things, this bill, as proposed to be amended,
provides that commencing on January 1, 2017, a concession
contract awarded to a state park concessionaire shall not
provide the contracting party with any trademark in the name of
a state park venue, or its historical, cultural, or recreational
resources, and shall not serve as a basis for any legal claim
that the contracting party has such an interest. This bill also
provides that to the extent allowed by federal law, a bidder
shall not be awarded with a state park concession contract if
either (1) the bidder makes a legal claim or assertion to have a
trademark interest in the name or names associated with a state
park venue; or (2) a court has determined that the bidder made a
legal claim or assertion to have a trademark in the name of a
state or federal park venue without reasonable cause and in bad
faith. This bill also redefines a "best responsible bidder" to
include a bidder who will operate a state park concession in a
manner that protects the state's trademark rights to the names
associated with state park venues. To address concerns about
whether this bill affected existing trademark rights of state
concessionaires, this bill provides that it does not impact a
contracting party's valid trademark rights that were held before
the concession contract was awarded.
This bill previously passed out of the Assembly Committee on
Water, Parks, and Wildlife with a 15-0 vote and has support from
the California Association of Professional Scientists, the
California Association of Recreation and Park Districts, and the
California State Parks Foundation; the bill has no opposition on
file.
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SUMMARY: Permanently bars a state park concessionaire from
bidding on future contracts if the concessionaire uses its
contract as a basis to assert trademark rights to the names of a
state park venue. Specifically, this bill:
1)Provides that commencing on January 1, 2017, a concession
contract, as provided, shall not provide the contracting party
with any trademark or service mark in the name or names
associated with a state park venue, or its historical,
cultural, or recreational resources, and shall not serve as
the basis for any legal claims that the contracting party has
such an interest.
2)Provides that #1 does not constitute a change in, but is
declaratory of, existing law.
3)Provides that a contract or other agreement that violates #1
shall be void and unenforceable.
4)Provides that to the extent authorized by federal law, a
bidder shall not be awarded with a contract, as provided, if
the bidder does any of the following:
a) Makes a legal claim or assertion to have a trademark or
service mark interest in violation of #1; or
b) A court has determined that the bidder made a legal
claim or assertion to have a trademark or service mark in
the name or names associated with a state or federal park
venue, or its historical, cultural, or recreational
resources without reasonable cause and in bad faith.
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1)Requires the Department of Parks and Recreation to establish
procedures, by regulation, that provide a bidder who is denied
an award, as specified, with written notice of that denial and
an opportunity to rebut that denial in a formal hearing.
2)Requires all concession contracts, as specified, to include
the following contractual provisions:
a) A concessionaire who makes a legal claim or assertion to
have a trademark or service mark interest, as provided,
pertaining to this state's historical, cultural, or
recreational resources shall forfeit the right to bid on
future state park concession contracts to the extent
authorized by federal law.
b) In the event that a current or former concessionaire
files a federal or state trademark or service mark
application for a mark that incorporates or implies an
association with a state park venue, or its historical,
cultural, or recreational resources, and the State files a
successful opposition or cancellation with respect to such
marks, the concessionaire shall be responsible for the
State's attorneys fees, costs, and expenses associated with
that opposition or cancellation.
1)Provides that the bill shall not be construed to impact a
contracting party's valid trademark rights that were held
before the concession contract was awarded.
2)Defines "best responsible bidder" to also include a bidder who
will operate a state park concession, as provided, in a manner
that protects the state's trademark and service marks rights
to the names associated with state park venues and historical,
cultural, and recreational resources. A bidder who makes a
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legal claim or assertion to have a trademark interest in the
name or names associated with a state park venue is not a best
responsible bidder.
3)Makes various legislative findings and declarations regarding
the public interest and historical significance served by
national, state and regional parks, including Yosemite
National Park and facilities therein. States further
legislative findings and declarations regarding California
state parks held in public trust for the people of California,
and that a legal claim by an individual to a trademark right
in a name or names associated with a venue within a state park
derogates the interests of California and is indicative of the
individual's lack of fitness to serve as a steward of state
parks. Finds and declares that an agreement entered into by
any California state agency that compromises the interests of
Californians is "ultra vires" and therefore beyond that
agency's legal authority to enter.
EXISTING LAW:
1)Under the United States Constitution, provides that no state
shall pass any bill of attainder, ex post facto law, or law
impairing the obligations of contracts. (U.S. Const., art. I,
§ 10.)
2)Under the United States Constitution, provides that no state
shall deprive any person of life, liberty, or property without
due process of law. (U.S. Const., 14th Amend.)
3)Allows the Department of Parks and Recreation to enter into
contracts for the construction, maintenance, and operation of
concessions within units of the state park system, as
provided. (Public Resources Code Section 5080.03 et seq.
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Unless otherwise stated, all further statutory references are
to the Public Resources Code.)
4)States that concessions shall not be entered into solely for
their revenue producing potential. (Ibid.)
5)Requires all contracts authorizing occupancy of any portion of
the state park system for a period of more than two years be
awarded to the best responsible bidder. (Section 5080.05.)
6)Defines "best responsible bidder" to mean the bidder, as
determined by specific standards established by the
department, which, as determined by the department, will
operate the concession (1) consistent with the contract, (2)
in a manner fully compatible with, and complimentary to, the
characteristics, features, and theme of the unit in which the
concession will be operated, and (3) in the best interests of
the state and public. (Ibid.)
7)Provides that in any contract authorizing occupancy by the
concessionaire for a period of more than two years of any
portion of the state park system, the department shall prepare
an invitation to bid, as specified. (Section 5080.06.)
8)Requires the Department to provide public notice to bidders on
all proposed contracts authorizing the occupancy of property
in the state park system for a period of more than two years
as specified. (Section 5080.07.)
9)Allows the director to solicit bids, as provided, from
out-of-state bidders if the public interest would be best
served by the solicitation. (Ibid.)
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10)Requires all concession contracts, as specified, to include
certain contractual provisions. (Section 5080.18.)
FISCAL EFFECT: As currently in print this bill is keyed fiscal.
COMMENTS: Earlier this year, the United States National Park
Service - the federal agency that manages all of the nation's
parks - decided that The Ahwahnee Hotel and other Yosemite
National Park landmarks would be renamed due to a legal
trademark dispute. (Therolf, Yosemite's Famous Ahwahnee Hotel
to Change Name in Trademark Dispute, L.A. Times (Jan. 14,
2016).) It seems safe to say that when this news broke,
Californians and people across the globe were upset. As
reported by the Los Angeles Times, 24-year-old Julie Mastrine
said: "Yosemite is an iconic public asset. Its names exist in
people's hearts. It's preposterous that anyone can claim to own
them." (Ibid.)
Background on the Yosemite legal dispute. The legal dispute
between Delaware North Company and the National Park Service has
been well-publicized; indeed, some of the facts are undisputed.
For the last 23 years, the Delaware North Company was the
concessionaire operating visitor services and facilities within
Yosemite National Park under a contract with the National Park
Service. In 2015, the National Park Service rebid the expiring
contract and awarded a new 15-year concession contract to
Aramark, who was the successful bidder. After the National Park
Service awarded the new contract, Delaware North Company sued
the National Park Service for breach of contract and has
asserted compensation for various trademarks associated with
Yosemite National Park.
Briefly setting aside the debate of whether anyone should be
able to lay claim to the names and icons of our national parks,
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it is still unclear whether Delaware North Company actually has
legitimate property interests in the trademarks associated with
Yosemite Park.
Delaware North's federal complaint suggests it received its
rights from the previous concessionaire, The Curry Company. In
a federal complaint lodged with the United States Court of
Federal Claims, Delaware North Company alleges that it acquired
the trademarks and intellectual property rights from the prior
concessionaire. (Complaint, DNC Parks & Resorts at Yosemite
Inc., v. United States, No. 15-1034C (Ct.Cl. September 17, 2015)
[herein, Complaint, supra].) Delaware North Company contends
that prior to 1993, the Curry Company provided visitor services
at Yosemite for more than 100 years. (Ibid.) The Curry Company
built significant improvements in Yosemite with its own capital,
including The Ahwahnee, Yosemite Lodge, and Curry Village.
(Ibid.) The Curry Company developed and used registered and
unregistered trademarks and servicemarks in its operations,
including the Half-Dome logo design, "The Awhanee" hotel name
and logo design, and "Go Climb A Rock." (Ibid.) The Curry
Company's final concession contract included terms which
provided that if there was a successor concessionaire, the Curry
Company would be required to sell its possessory interest in its
improvements, and all other property used or held for use in
connect with its Yosemite operations. (Ibid.) Additionally,
any successor concessionaire would be required to purchase the
Curry Company's possessory interests and other property for fair
value. (Ibid.) And of course, that successor concessionaire
was the Delaware North Company.
The United States' Answer to the federal complaint does not
dispute several of Delaware North's allegations. In fact, in
the Answer filed by the United States, the United States admits
that the Curry Company registered trademarks, servicemarks, and
logos in connection with its operation including the Half-Dome
logo and "The Ahwahnee" hotel name. (Answer, DNC Parks &
Resorts at Yosemite Inc., v. United States, No. 15-1034C (Ct.Cl.
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September 17, 2015) [herein, Answer, supra].) The United States
also admits that the Curry Company was required to sell its
possessory and property interests, and that the Delaware North
Company was required to purchase those possessory and property
interests. (Ibid.)
Although the litigation is still pending, if the Delaware North
Company's allegations are true, the legal dispute would seem to
be more about the valuation of the trademark rights, and not on
the ownership. In other words, as disagreeable as it is, the
Delaware North Company might have actual and legitimate property
interests in certain trademarks associated with Yosemite.
Author's statement: Be that as it may, according to the author,
the purpose of this bill is to prevent concessionaires from
co-opting state landmarks. In support of the bill, the author
writes:
The current concessionaire of Yosemite National Park has
operated there since 1993 but recently lost the bid to
renew their contract. In response, they claimed the names
of several Yosemite landmarks as their intellectual
property. Unable to resolve the dispute, the National Park
Service has re-named such storied California venues as The
Ahwahnee Hotel, Curry Village and the Wawona Hotel as part
of this ongoing litigation.
AB 2249's impact rests on the premise that a state park's
concessionaire's business is incompatible with a trademark
or claim of ownership of park facilities which they have
been entrusted with as a steward. California's treasured
heritage sites are a part of our state's public trust and
it is self-evident that the state would never approve
giving away the inherent value associated with those
historic names and places.
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Constitutional and legal issues: Given that some of the policy
issues were discussed in the previous committee in Assembly
Water, Parks, and Wildlife, this Committee's primary focus is on
the constitutional and legal issues confronting this bill.
As a starting point, the bill, as proposed to be amended,
provides that commencing on January 1, 2017, a state park
concession contract shall not provide the concessionaire with
any trademark rights, or serve as a basis for any legal claim
that the concessionaire has such rights. Additionally, this
bill provides to the extent authorized by federal law, a bidder
shall not be awarded with a state park concession contract if
the bidder makes a legal claim or assertion to the state's
trademarks in the names associated with a state park venue, or a
court has determined that the bidder made a legal claim to have
a trademark in names associated with a state or federal park
venue without reasonable cause and in bad faith.
As introduced, this bill did not provide a commencement date,
which made the bill vulnerable to a number of legal questions,
including whether the bill violated the federal Contract Clause,
due process rights, and whether the bill amounted to an Ex Post
Facto law. As proposed to be amended, this bill includes a
prospective date which addresses many of those concerns.
Given the bill's prospective date, the bill does not appear to
implicate the Contract Clause. It is well-established that "the
Contract Clause limits the power of the States to modify their
own contracts as well as regulate those between private
parties." (United States Trust Co. v. New Jersey (1977) 431
U.S. 1, 17.) "When the state is a party, there is an additional
risk that it will employ its sovereign powers to alter the
settled terms of the contract. Although the temptation to
secure by legislation what a state has failed to achieve through
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negotiation is great, the Contract Clause commands that states
resist this temptation." (RUI One Corp. v. City of Berkeley
(9th Cir. 2004) 1137, 1158 (dis. opn. of Bybee, J.).) Because
courts are particularly concerned about States interfering with
contracts between the government and third parties, those
contracts are reviewed under a higher level of scrutiny.
(Matsuda v. City & County of Honolulu (9th Cir. 2007) 512 F.3d
1148, 1154-55.)
Given that this bill provides a prospective commencement date,
this bill does not appear to implicate the Contract Clause.
However, in light of this prospective application, the bill's
provision stating that the bill does not constitute a change in
existing law is particularly confusing. To reduce this
confusion, the author may wish to consider an amendment to
remove the provision that states that subdivision (a) is a
declaration of existing law.
Given the bill's prospective date, the bill does not appear to
trigger due process concerns associated with retroactivity.
There is always a risk that retroactive legislation violates the
Due Process Clause. Indeed, "retroactive legislation presents
problems of unfairness that are more serious than those posed by
prospective legislation, because it can deprive citizens of
legitimate expectations and upset settled transactions."
(United States v. Ubaldo-Figueroa (9th Cir. 2003) 347 F.3d 718,
727.) Given that this bill has been amended to apply
prospectively, this bill does not appear to implicate due
process concerns caused by retroactivity.
Given the bill's prospective date, the bill does not appear to
amount to an Ex Post Facto Law. The Ex Post Facto Clause
prohibits the enactment of any law which is designed as a
punishment for a past act (See Bae v. Shalala (7th Cir. 1994) 44
F.3d 489, 492). While a civil law does not generally implicate
the ex post facto law, a civil sanction - like a permanent
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debarment, may implicate ex post facto concerns if the debarment
can fairly be characterized as more than a deterrent, but as
punishment or retribution. (Ibid.) Given that this bill has
been amended to apply prospectively, this bill does not appear
to amount to an Ex Post Facto Law.
Can a State Permanently Debar a Contractor from Bidding on
Future Contracts? Under public contract law, debarment and
suspension are sanctions that exclude an individual or entity
from doing business with the government. Debarment from
eligibility to bid on contracts may violate the due process
clause of the federal Constitution depending on the level of
debarment, and on the liberty and property interests of the
contracting party. (Golden Day Sch. v. State Dep't of Educ.
(2000) 83 Cal.App.4th 694, 703.)
Permanent debarment is not unheard of. For example, the Genetic
Drug Enforcement Act requires permanent debarment for any
individual convicted of a federal felony for conduct relating to
the development or approval of any drug project under the
Federal Food, Drug, and Cosmetic Act. (Shalala, supra, at
490-491.) Generally, federal appellate courts have upheld
permanent debarment as long as those measures serve nonpunitive
and remedial goals. (Id. at 495.)
This bill, as proposed to be amended, provides that to the
extent allowed by federal law, a bidder shall not be awarded
with a state park concessions contract if: (1) the bidder
asserts a trademark interest in the names associated with a
state park venue or (2) a court has determined that the bidder
made a legal claim to a trademark in names associated with a
state or federal park venue, without reasonable cause and in bad
faith.
While it is unclear whether asserting a trademark interest is
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parallel to a federal felony to permanently bar a contractor
from bidding on a contract, this bill's inclusion of "to the
extent allowed by federal law" ensures that any forfeiture is
consistent with federal due process rights. Indeed, if due
process rights are implicated from a permanent debarment under
the factual circumstances of this bill, a temporary debarment or
suspension might be more acceptable under federal law. Of
course, "to the extent allowed by federal law" does not provide
specific details on how long a contractor could be barred.
Accordingly, it appears that the Department of Parks and
Recreation would likely need to determine what is an appropriate
debarment period that does not violate federal law.
Contractors facing permanent debarment must be entitled to due
process. It has been established that a prospective contractor
has neither a liberty interest nor a property interest in
receiving a government contract. (Golden Day Sch., supra at
704-706.) However, California law recognizes that a party who
has been dealing with the government on an ongoing basis has a
liberty interest in being considered for a contract. (Mednick
v. State Dept. of Health Care Services (2009) 175 Cal.App.4th
631, 641-642, citing Marvin Lieblein, Inc. v. Shewry (2006) 137
Cal.App.4th 700, 720.) Accordingly, if the government
determines that a contractor should be permanently denied from
being able to bid on a contract, the contractor must be given
some due process; at issue is what procedures are due.
To determine whether this particular administrative procedure is
constitutionally sufficient, a court considers the Mathews
three-part test: (1) whether the private interest will be
affected by the official action; (2) whether there is a risk of
an erroneous deprivation of such interest through the procedures
used, and the probable value, if any, of additional or
substitute procedural safeguards; and (3) whether the
Government's interest would face significant fiscal and
administrative burdens providing additional or substitute
procedurals. (Mednick, supra, at p. 644 (citing Mathews v.
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Eldridge (1976) 424 U.S. 319, 335.)
Given that several courts have determined that debarment amounts
to a significant private interest, a contractor facing debarment
should be provided a significant level of due process. (Ibid.)
This bill appears to provide sufficient deference to the
Department of Parks and Recreation to develop regulations that
would provide constitutionally-sufficient procedures to satisfy
the Mathews test. As proposed to be amended, this bill requires
the department to establish procedures, by regulation, that
provide a bidder who is denied an award, as specified, with
written notice of that denial and an opportunity to rebut that
denial in a formal hearing. While it is unclear whether the
current procedures outlined under this bill (i.e. notice and
formal opportunity to be heard) would be sufficient to satisfy
the Mathews test, this bill seems to provide the Department
sufficient deference to develop regulations to determine what is
the appropriate amount of procedures that are due to a
contractor facing permanent debarment.
As proposed to be amended, this bill takes steps to ensure that
future state park concessionaires accept and know about the
consequences of asserting state trademark interests. To ensure
that concessionaires who enter into state park concession
contracts accept and are aware of the consequences of asserting
trademark rights to the names of a state park, this bill
requires all state park concession contracts to include
provisions about permanent debarment. Additionally, this bill
requires all state park concession contracts to include a
provision about attorneys fees, costs, and expenses associated
with the State's successful cancellation of trademark rights
wrongfully asserted by a concessionaire.
To address concerns raised by existing concessionaires-like
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Candy Kitchen, this bill has been amended to ensure that it does
not infringe on existing concessionaire's valid trademark
rights. In order to address concerns raised by current
concessionaires who have valid trademarks rights, this bill, as
proposed to be amended, clarifies that nothing in the bill shall
be construed to impact a contracting party's valid trademark
rights that were held before the concession contract was
awarded.
To ensure that responsible bidders will be good public stewards
of our state parks, this bill requires responsible bidders to
operate our concessions in a manner that protects the state's
trademarks and its historical, cultural, and recreational
resources. Existing law provides that all state park concession
contracts be awarded to the best responsible bidder. A best
responsible bidder is defined as a bidder who, as determined by
the department, will operate the state park concession (1)
consistent with the contract, (2) in a manner fully compatible
with, and complimentary to, the characteristics, features, and
theme of the unit in which the concession will be operated, and
(3) in the best interests of the state and public.
In order to re-emphasize this bill's intent in protecting the
state's trademarks in the names of state park venues, this bill
redefines "best responsible bidder" to also include that the
bidder operate the concession in a manner that protects the
state's trademark and service mark rights to the names
associated with state park venues and historical, cultural, and
recreational resources. This bill also defines a bidder who
makes a legal claim or assertion to have a trademark interest in
the name or names associated with a state park venue is not a
best responsible bidder.
ARGUMENTS IN SUPPORT: California State Parks Foundation (CSPF)
supports this bill because it believes it is valuable to codify
the Department of Parks and Recreation's existing practice which
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prohibits concessionaires from trademarking state parks. CSPF
writes:
California's state parks and facilities, as well as the
assets within state parks, are public trust resources and
shouldn't be trademarked, patented, or copyrighted for
private purposes. We support the goal of AB 2249 to ensure
that concession contracts entered into by the California
Department of Parks and Recreation (DPR) do not allow for
such private benefit to be taken from these public trust
resources.
REGISTERED SUPPORT / OPPOSITION:
Support
California Association of Professional Scientists
California Association of Recreation and Park Districts
California State Parks Foundation
Opposition
None on file
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Analysis Prepared by:Eric Dang / JUD. / (916) 319-2334