Court of Claims must weigh in on timeliness of rejected bidder claim, justices rule
KEITH ARNOLD, Daily Reporter Staff Writer
The state's high court has determined the preparation costs incurred by a bidder vying for the public contract tied to construction of University of Akron's new football stadium in 2008 may be recovered as long as the rejected bidder sought - but was denied - timely injunctive relief.
The Supreme Court late last month affirmed the 10th District Court of Appeals ruling, which found that the high court's holding in Cementech Inc. v. Fairlawn, 109 Ohio St.3d 475, 2006-Ohio-2991, 849 N.E.2d 24, did not specifically address other types of money damages, such as bid-preparation costs, a plaintiff might assert.
"Upon consideration of the arguments in this case on the availability of reasonable bid-preparation costs as damages, we decline to extend the holding in Cementech to this circumstance," Justice Robert Cupp wrote for the 6-0 court.
"We reach this conclusion because the reasons articulated in Cementech for denying recovery of lost profits as damages do not carry over to the circumstances in which bid-preparation costs are sought after denial of a timely application for injunctive relief. A significant distinguishing factor in those circumstances is the lack of any other remedy for a public authority's wrongful conduct.
"If, for instance, a rejected bidder alleges that a public authority failed to comply with competitive bidding laws and promptly seeks injunctive relief to delay the public-improvement project pending resolution of the dispute, denial of the requested injunctive relief means that determination of the allegation of wrongful conduct by the public authority will not take place until much later in the litigation.
"Under our precedent, once the public-improvement work commences or is completed, the rejected bidder will not be able to perform the public contract even if the bidder demonstrates that its bid was wrongfully rejected.
"In such circumstances, the wrongfully rejected bidder is left with no remedy for the public authority's unlawful conduct, and injunctive relief will no longer serve to deter the public authority's unlawful conduct. Thus, we hold that when a rejected bidder establishes that a public authority violated state competitive-bidding laws in awarding a public-improvement contract, that bidder may recover reasonable bid-preparation costs as damages if that bidder promptly sought, but was denied, injunctive relief and it is later determined that the bidder was wrongfully rejected and injunctive relief is no longer available."
In April 2008, the University of Akron invited bids for various phases of construction work on InfoCision Stadium, court summary detailed. Meccon Inc. submitted its bid. However, in June 2008 the university awarded the HVAC and fire protection contracts on the project to a lower bidder, S.A. Communale.
Meccon subsequently filed suit in the Ohio Court of Claims, alleging the university had violated provisions of the state's competitive bidding law and the terms of the project bid proposal in making its contract awards to S.A., summary continued. Meccon sought a temporary restraining order and temporary and permanent injunctions preventing work on the project from going forward, and also asserted claims for money damages to compensate Meccon for the costs of preparing its bid and additional costs and damages.
Before the Court of Claims could hold an evidentiary hearing on the company's motion for a temporary restraining order, the university moved to dismiss the entire action on the basis that the Court of Claims did not have jurisdiction to hear the case, summary provided.
The Court of Claims granted the motion to dismiss, ruling that under the 2006 Cementech finding, a disappointed bidder on a public contract may obtain only injunctive relief - not money damages - and the Court of Claims' has jurisdiction to hear only cases in which a plaintiff asserts a justiciable claim for money damages against the state.
Meccon appealed the order dismissing its complaint and the 10th District Court of Appeals reversed and remanded the case to the Court of Claims for further proceedings, summary continued. The 10th District found that Cementech only barred disappointed bidders from suing the state to recover money damages for lost profits resulting from alleged bidding irregularities, but did not specifically address other types of money damages a plaintiff might assert, such as the bid preparation costs sought by Meccon in this case.
The university sought and was granted Supreme Court review of the 10th District's ruling.
"When Meccon filed its action for money damages and injunctive relief against the university, it filed it in the Court of Claims. The Court of Claims has exclusive, original jurisdiction over civil suits that request money damages against the state even when ancillary relief, such as an injunction or declaratory judgment, is also sought," Cupp continued, citing R.C. 2743.03(A)(1) and 2743.03(A)(2) and State ex rel. Blackwell v. Crawford, 106 Ohio St.3d 447, 2005-Ohio-5124, 835 N.E.2d 1232. "Therefore, the Court of Claims had jurisdiction to hear Meccon's claim for bid-preparation costs.
"Injunctive relief must be promptly sought as a precondition to those damages, however. ..."
Because the Court of Claims had not settled the question of whether Meccon's request for injunctive relief was timely enough, the Supreme Court determined the lower court must resolve the question.
Cupp's opinion was joined by his fellow justices, while Chief Justice Eric Brown did not participate in the decision.
The case is cited as Meccon, Inc. v. Univ. of Akron, Slip Opinion No. 2010-Ohio-3297.
Date Published: August 3, 2010