Alabama Dept. of Transp. v. Harbert Intern., Inc.

Citations: 990 So. 2d 831; 2008 WL 615912Docket: 1050271

Court: Supreme Court of Alabama; March 6, 2008; Alabama; State Supreme Court

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The Alabama Department of Transportation (ALDOT), along with Governor Bob Riley and ALDOT director Joe McInnes, appeals a trial court judgment favoring Harbert International, Inc. (Harbert) in a case seeking declaratory and mandamus relief. The Supreme Court of Alabama affirms in part, reverses in part, dismisses in part, and remands with directions.

In the early 1980s, ALDOT identified the need to replace the Cochrane Bridge over the Mobile River. A contract for this construction was awarded to S.J. Groves and Sons, which defaulted, leading to contract termination in 1988. In 1989, ALDOT awarded Harbert two contracts to complete the bridge, which involved a cable-stayed cantilever structure requiring a specific installation procedure—balanced stay stressing. This procedure, while specified in the contract, was deemed "not mandatory," allowing Harbert to propose an alternative. Harbert sought approval for a different method called out-of-balance stay stressing, which was denied by ALDOT's bridge engineer, citing contract violations.

Despite the denial, construction proceeded using the required balanced-stay-stressing method. The contract allowed ALDOT to impose liquidated damages for delays, starting at $2,000 per day, totaling $4,000 daily for both contracts. Although the bridge opened in August 1991, ALDOT suspended liquidated damages until October 1991, resuming them until February 1992. Throughout the project, ALDOT retained a portion of payments to Harbert, known as retainage, which Harbert argues should be paid at project completion.

ALDOT allegedly failed to pay $291,750 of the retainage at the trial. Harbert claimed it was required to perform extra work beyond the project’s scope and sought compensation through procedures outlined in the contract, specifically section 109.10 of the 1989 Standard Specifications. This section established a process where claims would be evaluated by a construction bureau, with further recourse to a claims committee and potentially an advisory board if dissatisfaction persisted. Harbert submitted a claim in 1992 for both the extra work and expenses related to an alleged wrongful rejection of its erection procedure. At trial, Harbert argued that ALDOT disregarded the claims-review process, instituting biased procedures, including appointing a project-involved individual to the claims committee, creating a shadow committee, and delaying claim resolutions. Harbert also contended that an advisory board was formed but disbanded before reviewing claims and that the director made decisions without advisory input. Following a lawsuit in May 1995, which was dismissed, Harbert filed another suit in November 2001 against ALDOT and several officials, seeking declarations on the misinterpretation of contract terms regarding out-of-balance stay stressing, the unlawfulness of liquidated damages, and the return of such damages and retainage. The amended complaint alleged violations of due process in administering the contract and misrepresentation by ALDOT about the review of alternate procedures. Harbert sought mandamus relief for payment of the liquidated damages, retainage, and compensation for extra work performed.

Harbert sought a writ of mandamus for a fair forum to submit its claim for extra compensation. The trial commenced in August 2005, during which Harbert moved for a judgment as a matter of law (JML) regarding counts II and III of its amended complaint, concerning retainage and liquidated damages. On September 14, 2005, the court granted this motion, ordering that all retainage held by the Alabama Department of Transportation (ALDOT) be released to Harbert and declaring that liquidated damages assessed after August 15, 1991, were illegal penalties under Alabama law. The court mandated payment of $534,000.00 plus interest from that date to Harbert.

The remaining claims were submitted to the jury, which answered 18 special interrogatories. The court treated these findings as advisory regarding equitable claims. Count I sought a declaration that Harbert's contracts allowed for alternative construction methods, which the jury affirmed. Consequently, the court ruled in favor of Harbert against ALDOT and its officials. 

Count II requested a declaration that liquidated damages imposed after August 15, 1991, were unlawful, leading to a court ruling in favor of Harbert for the return of these damages and retainage. Count III sought mandamus for the return of the same amounts, resulting in a court order for ALDOT to return $534,000.00 in liquidated damages and $291,750.00 in retainage to Harbert. The final judgment reflected these rulings in favor of Harbert against ALDOT and its officials.

Counts IV and VIII of Harbert's Amended Complaint allege the unlawful taking of property without just compensation, violating Harbert's rights under the Alabama Constitution. The jury affirmed several special interrogatories, confirming that ALDOT used Harbert's property for public purposes without paying just compensation and acted arbitrarily and in bad faith. The jury assessed the value of the taken property at $2,350,000 and awarded $8,451 to Harbert’s subcontractor, Coastal Materials of Alabama, Inc. The court ruled in favor of Harbert against ALDOT and other defendants, ordering payment of $2,350,000 and $8,451, plus interest and attorney fees.

Count V seeks mandamus relief against Joe McInnes and Bob Riley, compelling them to pay Harbert's legitimate claims for extra compensation under contracts with the State. The jury found that ALDOT had arbitrarily misinterpreted the contracts and mishandled Harbert’s claims. The court agrees with the jury's advisory findings and concludes that Harbert has exhausted administrative remedies, warranting the issuance of mandamus. The court independently determines the amounts due as $2,350,000 and $8,451 for Coastal and orders McInnes and Riley to pay a total of $2,358,451 plus interest.

Counts VI and VII, concerning fraudulent misrepresentation, resulted in a jury finding of no damages for Harbert. Count IX is rendered moot by this judgment, although Harbert could claim relief if the judgment were overturned. Count X has been withdrawn. The court also mandates payment of $1,277,646 in returned liquidated damages and retainage per the court's prior order, and $4,270,846 for Count V. For Counts VI and VII, the jury's findings lead to an award of $0 to Harbert.

Judgment has been entered in favor of Harbert for $4,823,593.00 against ALDOT, its Director Joe McInnes, and Governor Bob Riley, which includes $4,270,846.00 in damages and $552,747.00 in litigation expenses. The defendants are appealing, arguing that Harbert's lawsuit is barred by Article I, § 14 of the Alabama Constitution, which grants the State absolute immunity from being sued. This provision is described as a strong barrier against lawsuits, prohibiting both the State and its agencies from being defendants in court. The immunity extends to state officers sued in their official capacity if the action effectively targets the State. To assess whether a suit against a state officer is, in fact, against the State, factors such as the impact on state rights, the officer's role as a conduit for recovery, and the potential effect on the State treasury are considered. While state officers enjoy immunity, certain exceptions exist, such as in cases of mandamus where discretion is exhausted or when actions are illegal, fraudulent, or arbitrary. Mandamus may compel action but cannot dictate how discretion is exercised.

In Alabama law, certain causes of action are exempt from the prohibitions of § 14, as established in Aland v. Graham. These include: 1) actions to compel State officials to fulfill their legal duties; 2) actions to prevent State officials from enforcing unconstitutional laws; 3) actions to compel State officials to perform ministerial acts; and 4) actions under the Declaratory Judgments Act that seek to clarify a statute's application. Additionally, valid inverse condemnation actions and actions for injunction or damages against State officials, both in their official and individual capacities, are also excluded if they involve allegations of fraud, bad faith, exceeding authority, or legal misinterpretation. 

The court clarifies that while these are termed 'exceptions,' they are not considered actions 'against the State' for § 14 purposes. A key consideration is whether a favorable outcome for the plaintiff would affect a State contract or property right or result in monetary recovery from the State. The Alabama Department of Transportation (ALDOT), as a State agency, enjoys absolute immunity from suit, with exceptions primarily allowing actions against State officials in their representative capacities. There is some ambiguity regarding declaratory-judgment actions against the State or its agencies, which typically apply only when they seek specific legal interpretations rather than other forms of relief. Early case law indicates that the intent of a declaratory-judgment action is to provide guidance to State officers on legal interpretations.

In State v. Louis Pizitz Dry Goods Co., the court clarified that declaratory-judgment actions are not prohibited by § 14 of the Alabama Constitution, especially when a state officer faces uncertainty regarding legal interpretations or the validity of the law, which could affect the rights of others. Such a situation creates a legal controversy, allowing for remedies under the Declaratory Judgments Act. The court stated that actions seeking legal declarations against state officials do not infringe upon sovereign immunity, as established in prior cases. However, subsequent cases suggested a potential for actions against state agencies, leading to confusion.

It was concluded that the exception to sovereign immunity under § 14 applies solely to state officers acting in their official capacity, not to state agencies. As a result, the court determined it lacked jurisdiction to entertain an action against the Alabama Department of Transportation (ALDOT), ordering its dismissal from the case. The remaining appellants, including the Governor and a director, argued that claims against them were effectively claims against the state for monetary damages, which are barred by § 14. They contended that the nature of the action and the relief sought should be considered, rather than the labels used by the plaintiff, Harbert. Harbert sought a writ of mandamus for the release of liquidated damages and retainage from ALDOT. The trial court ruled that liquidated damages assessed after a specified date were illegal and void, ordering ALDOT to pay Harbert a sum plus interest, and declared the retainage as property belonging to Harbert, also ordering its immediate payment.

A writ of mandamus was issued by the trial court to compel the Governor and the director to pay liquidated damages and retainage to Harbert. On appeal, the defendants argued that the judgment was barred by § 14, which restricts suits against the state and its agencies. However, mandamus relief can be granted to compel state officers to perform a ministerial act, such as making legally required payments for contracted services. The court referenced established case law indicating that liquidated claims, which are definite and certain, can be compelled by mandamus. The precedent set in Milton Construction Co. v. State Highway Department established that even when a contract includes a void disincentive clause, the state is still obligated to pay for services rendered under valid contracts. The court affirmed that sovereign immunity does not apply when the state has accepted goods or services, thus creating a legal obligation to pay. Since Milton Construction had fulfilled its contractual obligations, the lawsuit was deemed not barred by sovereign immunity, reinforcing the right to compel payment for rendered services.

In Roquemore, the Highway Department contracted with Roquemore for hay, accepted significant deliveries, but subsequently refused to pay for the hay received. Roquemore sought a writ of mandamus to compel payment, which the court granted, stating that sovereign immunity did not apply since the Highway Department was legally obligated to pay for accepted goods. Similarly, in Milton Construction's case against the Highway Department, the court upheld a judgment requiring payment of withheld funds under a disincentive clause, affirming that sovereign immunity did not bar the action. Harbert also sought mandamus relief for funds withheld by ALDOT, which the trial court granted, noting that the defendants did not contest the unlawful application of the liquidated damages provision. The court affirmed the trial court's order for the return of these funds and the retainage to Harbert. However, counts I, IV, V, and VIII of Harbert's complaint, seeking unliquidated damages and alleging inverse condemnation, were deemed claims for breach of contract, which are prohibited under § 14. The court recognized that while mandamus can compel state officials to properly exercise discretion if abused, claims for damages against state officers in their official capacities would improperly deplete state funds, thus disallowing these counts.

In Stark v. Troy State University, the plaintiff, a university employee, claimed damages for back pay due to alleged violations of university policies by State officers. The defendants contended that the lawsuit was barred by Alabama's sovereign immunity, specifically § 14. The court held that while individual State officers' arbitrary actions could be compelled through mandamus, claims for compensatory or unliquidated damages were not permissible as they implicate the State's property rights under sovereign immunity. The court emphasized that mandamus could issue to ensure State officers fulfill their legal duties if they act capriciously, but it cannot award retroactive or compensatory damages. Consequently, counts I, IV, V, and VIII of the plaintiff's claims were dismissed due to the trial court's lack of jurisdiction to grant such relief, reaffirming the distinction between mandamus for enforcement of duties and the prohibition against claims affecting the State treasury.

Injunctive relief can be sought against a state official if the official exceeds their authority or acts illegally, in bad faith, or fraudulently. Count IX of the complaint requested a writ of mandamus to ensure Harbert received a fair process for submitting claims. The trial court deemed this count moot due to its judgment but acknowledged that Harbert could seek relief under it if the judgment is reversed on appeal. Consequently, the case is remanded for the trial court to address Count IX.

The trial court's judgment ordering ALDOT to pay damages was void, as it lacked jurisdiction over ALDOT, leading to the dismissal of that appeal. Additionally, judgments related to counts I, IV, V, and VIII, which directed the State to pay damages to Harbert, are also dismissed. The court reversed the trial court's moot ruling on Count IX, as the fairness of the claims process is now relevant due to the outcomes of counts I, IV, V, and VIII. The remaining judgment, including the order for Harbert's liquidated damages and retainage, is affirmed, and the case is remanded for further proceedings consistent with the opinion.

Justice Murdock, concurring specially, agrees with the main opinion's conclusion regarding state immunity exceptions and clarifies his understanding of those principles. He outlines six recognized exceptions to state immunity, including actions compelling officials to fulfill legal duties, enjoining unconstitutional laws, and seeking declarations under the Declaratory Judgments Act. The court notes that an action is considered against the State if a favorable outcome would directly impact state contracts or property rights.

The excerpt addresses the legal principles regarding state immunity and the potential for a plaintiff to recover damages from the State through a defendant acting as a "conduit." It examines whether a judgment against a state officer would financially impact the State treasury and the implications for liquidated damages and retainage. The text references several Alabama cases, highlighting that mandamus relief can compel state officers to fulfill legal obligations to pay liquidated sums due under contracts. It emphasizes that claims for mandamus must be liquidated, meaning they are fixed and not subject to dispute regarding liability. The excerpt clarifies that the principles of state immunity apply uniformly across different types of actions, whether legal or equitable, and there are no distinct exceptions for mandamus petitions. The discussion also indicates that the term "liquidated" refers to claims with clear, undisputed liability. Overall, it stresses the consistency of the legal framework concerning state immunity and the enforceability of liquidated claims.

The Jones Court analyzed cases involving writs of mandamus related to payment disputes under construction contracts. In Dampier, the court addressed a situation where a writ was sought to compel state officials to pay Dampier $14,325.66, noting that the services had been accepted and approved by the State. Similarly, in Hardin, the court examined whether state officials could reinterpret a contract after having approved a final payment of $15,413.76. The court concluded that their discretion was exhausted upon that approval.

The Jones Court emphasized that a writ of mandamus may be appropriate to compel action from state officials when their discretion has been fully exercised and only a ministerial act remains. However, it noted that mandamus would not compel officials to act in a specific manner if such action depends on their discretionary judgment.

In the case of Purcell, the court found that although the required work had been completed and accepted, the payment request had not yet been approved by the Highway Department. Without this approval, the court determined that mandamus could not be issued. The director of ALDOT had the responsibility to approve or disapprove payment based on his judgment of the contract's terms. Thus, the court concluded that mandamus would only apply once the discretion of state officials had been fully exhausted, as illustrated in previous cases like Roquemore, Hardin, and Dampier.

Mandamus serves as a remedy to compel state agents to fulfill their ministerial duty of paying for accepted goods or services. In the cited case, the State Highway Department was found to lack the authority to withhold payments based on a previously deemed void penalty provision. While the State defendants agree with the characterization of "liquidated" claims, their arguments primarily focus on a $2,350,000 jury verdict for extra work performed by Harbert, with little contestation regarding the trial court's judgment requiring payment of liquidated damages and retainage withheld after August 15, 1991. The State defendants fail to clarify their position on whether their obligations were disputed, which parallels prior cases where discretion was not exhausted. Additionally, they do not challenge their obligation to pay retainage or ask for a reevaluation of related precedents. The author concurs with the main opinion, stating it aligns with established principles. Harbert claimed that ALDOT employees misunderstood a proposed procedure and used withheld payments as leverage in negotiations for additional compensation. Changes in administration have led to new parties being substituted in the case, and a specific count alleging estoppel was dismissed during trial, while a judgment favoring the defendants on other counts remains unchallenged on appeal.

The trial court did not issue a judgment against the individual ALDOT employees, who are not involved in the current appeal. Count I of the complaint sought a declaration that Harbert was allowed to submit alternative erection procedures, contesting the defendants' interpretation of the contract. Count IV alleged that the defendants acted with willfulness, malice, and fraud, exceeding their authority and misinterpreting the law by rejecting Harbert's proposed erection sequence and failing to provide a proper claims process. Count V claimed that the individual defendants, in their official capacities, had a legal duty to pay Harbert for extra compensation.

The trial court determined that the State acted arbitrarily and capriciously in its contract interpretation and claims process. Inverse condemnation, defined as a taking of private property for public use without proper condemnation proceedings or compensation, was not applicable in this case. Instead, Harbert's claim for inverse-condemnation damages was interpreted as a breach of contract claim against ALDOT, resulting in damages to Harbert.

The Governor and the director argued that the trial court erred in admitting certain evidence and calculating the final award; however, they provided no authority to support these claims, rendering them unreviewable. Harbert contended that the prior claims-review process was ineffective due to the defendants' actions. If the trial court rules in favor of Harbert on count IX, it may order the Governor and director to provide a fair process for Harbert's claims, exercising its inherent powers to enforce such a judgment.

Additionally, if a state official neglects a ministerial task, it may constitute "arbitrary" action or "abuse of discretion," which can justify issuing a writ of mandamus. The term "liquidated" in the Harbert contracts refers to predetermined amounts payable to the State or deductible from payments to Harbert in the event of delays caused by Harbert.

Contractually defined "liquidated damages" for late performance, while specified as a certain sum, are not automatically recognized as undisputed amounts owed to the State, as seen in precedents like Jones, McDowell-Purcell, and State Highway Dep't v. Milton Constr. Co. Disputes regarding a contractor's late performance or entitlement to contractually specified retainage are common. In J.L. Simmons Co. v. Capital Dev. Bd., it was ruled that a contractor's claim for retainage against a state board must be filed in the Illinois Court of Claims due to sovereign immunity.

The statement that a judgment against the State would not impact its treasury is contextualized by the absence of arguments from the appellants challenging the trial court's treatment of the State's obligations regarding liquidated damages and retainage. Consequently, these obligations are treated as ministerial. The Jones case also referenced Vaughan v. Sibley, illustrating that claims against the State fall under the jurisdiction of the Board of Adjustment due to constitutional immunity.

In Milton II, the contractor's ability to recover was influenced by the procedural history of the case, where a prior ruling declared a contractual penalty void, thus eliminating the State's discretion to contest the refund of amounts due. This situation transformed the obligation into a ministerial act. The State defendants do not seek to overturn the precedents set in Milton I and Milton II.