Disappointed Bidder on Public Works Project May Recover Bid Preparation Costs Under Certain Conditions

If Timely Injunctive Relief Was Sought and Bid Rejection Later Found Improper

Meccon, Inc. v. Univ. of Akron, Slip Opinion No. 2010-Ohio-3297.
Franklin App. No. 08AP-727, 182 Ohio App.3d 85, 2009-Ohio-1700. Judgment of the court of appeals affirmed, and cause remanded to the Court of Claims.
Pfeifer, Lundberg Stratton, O'Connor, O'Donnell, Lanzinger, and Cupp, JJ., concur.
Brown, C.J., not participating.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2010/2010-Ohio-3297.pdf

View oral argument video of this case.

(July 21, 2010) The Supreme Court of Ohio ruled today 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 the bidder promptly sought, but was denied, an injunction to suspend work on the project pending resolution of the bid dispute, and it is later determined that the bidder was wrongfully rejected and injunctive relief is no longer available.

The Court’s 6-0 decision, authored by Justice Robert R. Cupp, affirmed a ruling by the 10th District Court of Appeals.

In April 2008 the University of Akron invited bids for various phases of construction work on its football stadium. Meccon, Inc. submitted a bid for the heating, ventilation and air conditioning (HVAC) portion of the contract. In June 2008 the university awarded the HVAC contract and other portions of the project to another bidder, S.A. Communale. Meccon subsequently filed suit in the Ohio Court of Claims, alleging that the university had violated provisions of the state’s competitive bidding law and the terms of its own project bid proposal in making its contract awards to S.A. Communale. In its complaint, 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 other damages resulting from the university’s failure to award the HVAC contract to Meccon.

The university moved to dismiss the entire action on the basis that the Court of Claims did not have subject matter jurisdiction to hear the case. The Court of Claims granted the motion to dismiss, ruling that a disappointed bidder on a public improvement contract may obtain only injunctive relief (as opposed to money damages), and the Court of Claims has jurisdiction to hear only cases in which a plaintiff’s complaint includes a justiciable claim for money damages against the state.

Meccon appealed the order dismissing its complaint. On review, the 10th District Court of Appeals reversed and remanded the case to the Court of Claims for further proceedings. In its decision, the 10th District concluded that a disappointed bidder can recover from the state for its bid-preparation costs, and that because such costs are monetary damages, the Court of Claims did have subject-matter jurisdiction to hear all of Meccon’s claims.

The university sought and was granted Supreme Court review of the 10th District’s ruling.

Writing for a unanimous Court in today’s decision, Justice Cupp rejected the university’s contention that the Supreme Court of Ohio’s 2006 decision in Cementech Inc. v. Fairlawn precludes disappointed bidders on public improvement projects from recovering any money damages. He wrote: “In Cementech, a public authority solicited bids for a public project. In the process of awarding the contract, the public authority unlawfully rejected Cementech’s bid. The trial court awarded to Cementech bid-preparation costs but denied lost profits. Cementech appealed the trial court’s order limiting damages to the bid-preparation costs. The appellate court reversed and allowed the lost profits. In reversing the appellate court, this court held: ‘When a municipality violates competitive-bidding laws in awarding a competitively bid project, the rejected bidder cannot recover its lost profits as damages.’”

“The issue of whether bid-preparation costs could be recovered by a wrongfully rejected bidder was not answered in Cementech. 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. 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.”

Because neither the Court of Claims nor the 10th District Court of Appeals reached the disputed issue of whether Meccon’s attempt to obtain injunctive relief was filed in a “timely” manner, and that question could determine whether or not Meccon met the requirements to later seek recovery of its bid preparation costs, the Court remanded the case to the Court of Claims to address the timeliness issue.

Justice Cupp’s opinion was joined by Justices Paul E. Pfeifer, Evelyn Lundberg Stratton, Maureen O’Connor, Terrence O’Donnell and Judith Ann Lanzinger. Chief Justice Eric Brown did not participate in the Court’s deliberations or decision in this case.

Contacts
Benjamin C. Mizer, 614.466.8980, for the University of Akron.

Peter D. Welin, 614.469.3200, for Meccon, Inc.

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