Challenging Public Bid Awards in Missouri Just Got Easier, Depending on Your Perspective

United States Supreme Court Building in Washington DC, USA.As reported in this blog in October, 2015 in the post “The Making of a Supreme Court Case,” we predicted that the Missouri Supreme Court would take the case of Byrne and Jones Enterprises, Inc. v. Monroe City R-1 School District. That case involved a contractor, Byrne and Jones Enterprises (“B&J”), which was convinced that a school district had improperly rejected its bid to construct a new athletic stadium. The bid was awarded to the high bidder with whom the school district had worked very closely in the pre-construction phase. B&J asked the Supreme Court to overturn the decisions of the trial court and Missouri Court of Appeals for the Eastern District of Missouri which had ruled against it. Those courts found that contractors, as a rule, have no vested interest or private property right in a contract award and, therefore, possess no standing to challenge the award to a competing bidder. The courts reasoned that since the bidding statute was enacted for the sole benefit of the public, taxpayers were the only parties with a right to challenge a bid award.

As anticipated, the Supreme Court did, in fact, take the case and issued its opinion on July 26, 2016. Thanks to the zealous contractor, B&J, the Supreme Court overturned previous Missouri cases in deciding that unsuccessful bidders do have standing to challenge a bid award. In doing so, the Supreme Court made an important distinction. A spurned contractor does have the right to contest a bid award on the grounds that it was not afforded a fair and equal opportunity to compete in the bidding process but does not have the right to a court order compelling a school district to award the contract to it.

Although B&J won the battle, it ultimately lost the war. The court found that even though B&J was wrongfully deprived of the right to challenge the fairness of the bidding process by the trial court, the decision of the trial court dismissing B&J’s case must stand, because the case is now moot. According to the Supreme Court, even though B&J asked the trial court to enjoin the school district’s bid award to its competitor, it didn’t actually seek a temporary restraining order or a preliminary injunction hearing. While the case made its way through the court system and ultimately to the Supreme Court, construction on the stadium was completed. The Supreme Court also agreed with the trial court that the bid statute does not allow a contractor to obtain a judgment for its bid preparation costs or other damages. Therefore, B&J ended up with nothing in the end.

B&J’s dedication to its cause has opened the door for contractors to dispute bid awards in Missouri. Contractors and their attorneys must operate expeditiously. Any contractor challenging a contract award must do so promptly and must seek an injunction preventing the construction process from moving forward or risk the case becoming moot. The most that a successful challenge will accomplish is a court order requiring the school district to alter its bid process to assure that all contractors, not just the complaining contractor, have a fair and equal opportunity to compete. The complaining contractor will not be entitled to a money judgment for its bid preparation costs or attorneys’ fees.

The Border War II: Where Can I Litigate a Dispute?

map-of-america_whereThe contract is signed, the work begins, and the relationship sours. The parties “lawyer up,” and the contracts are read. Many contracts contain forum selection clauses which state the place where disagreements are to be litigated. Depending on where you reside, you can either litigate in your backyard or some inconvenient, unfamiliar, distant location.

In the U.S. Supreme Court case of Atlantic Marine Construction Co., Inc. v. U.S. District Court for the Western District of Texas, a dispute arose on a Texas construction project between a Texas subcontractor, J-Crew Management, Inc. and a Virginia-based general contractor, Atlantic Marine Construction Co. J-Crew filed suit in Texas federal court since the project and witnesses were located there. Atlantic moved to dismiss the case because the subcontract contained a provision that Virginia would be the exclusive forum for litigating disputes. The U.S. Supreme Court held that unless “exceptional circumstances” exist, the forum selection clause will be enforced. In this case, no such circumstances existed, and the subcontractor was forced to litigate the dispute in the GC’s own backyard.

In a recent Missouri case, Raydiant Technology, LLC v. Fly-N-Hog Media Group, Inc., a forum selection clause again ruled the day. The Arkansas-based company Fly-N-Hog, licensed software and equipment to Raydiant, a Missouri company. After experiencing problems with the products, Raydiant filed suit in Missouri. Fly-N-Hog moved to dismiss based on the forum selection clause which set exclusive jurisdiction for litigation in Sebastian County, Arkansas. The Missouri Court of Appeals found that there was nothing unfair or unreasonable about the agreement to litigate in Arkansas and affirmed the dismissal of the Missouri case. The court held that the forum selection clause also overcame the argument that the forum selection clause shouldn’t apply because Fly-N-Hog fraudulently induced Raydiant to enter into the contract.

So the next time you read a contract, find out if it contains a provision requiring litigation in the other parties’ domain. If it does, ask yourself whether you are comfortable crossing one or more state lines to litigate an action. Could the provision create an advantage for your opponent? Did Fly-N-Hog have an advantage litigating in Sebastian County, Arkansas? Let me hear your best, “suey pig!”