W.G. Yates & Sons Construction Co. v. City of Waveland

Citations: 168 So. 3d 963; 2012 WL 2896207; 2012 Miss. App. LEXIS 441Docket: No. 2010-CA-01799-COA

Court: Court of Appeals of Mississippi; July 17, 2012; Mississippi; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

W.G. Yates and Sons Construction Company appeals the City of Waveland, Mississippi's decision to award the "Sewer Reconstruction Project North of Railroad Tracks" to Reynolds, Inc., arguing that the circuit court made errors in its findings. Yates contends that: (1) Reynolds was incorrectly classified as a "resident contractor" under Mississippi law; (2) Waveland was obligated to reject Reynolds's bid for not using required bid addenda; and (3) Waveland's choice to award the project to Reynolds was arbitrary and lacked substantial evidentiary support. Yates seeks a remand for a damages hearing. The court reversed the lower court’s decision, finding errors, and remanded for a compensatory damages hearing.

Waveland had advertised for competitive bids and received seven submissions, with Reynolds's bid being $9,356,601 and Yates's bid at $9,471,859. The agenda for a May 20, 2009 Board of Aldermen meeting included a motion to approve Yates as the best bidder based on the project engineer's recommendation to reject Reynolds's bid. However, this motion was tabled without a vote. Following this, Yates's counsel sent a letter objecting to the award, asserting Reynolds was a nonresident contractor and had not complied with certain bidding requirements. Conversely, Reynolds provided documentation of its corporate status and history of conducting business in Mississippi. The project engineer later recommended awarding the project to Reynolds, leading to a motion to approve Reynolds at the June 2, 2009 Board meeting.

On June 2, 2009, during a Board meeting, Yates' attorney, William R. Purdy, was denied the opportunity to address the Board regarding the award of a sewer project to Reynolds. After the meeting, Purdy raised several concerns: (1) Reynolds failed to include the required bid-preference law, (2) Reynolds used an incorrect bid form, (3) the project engineer amended Reynolds' bid, and (4) the award to Reynolds was beyond Waveland’s legal authority. Yates filed an appeal against this decision on June 11, 2009, under Mississippi Code Annotated section 11-51-75. On August 8, 2009, Yates sought a stay of construction, arguing that proceeding with the project would cause ongoing harm before the court's ruling. However, on September 27, 2009, the circuit court affirmed the Board's award to Reynolds, and on December 18, 2009, denied Yates' motion to stay. The legal standard for reviewing municipal board decisions permits de novo review for legal questions and statutory interpretations, while upholding board actions unless proven arbitrary, capricious, discriminatory, illegal, or lacking substantial evidentiary support. An action is deemed arbitrary and capricious if made without reasoned judgment or with disregard for relevant facts.

The circuit court's decision regarding whether Reynolds qualifies as a resident contractor under Mississippi Code Annotated section 31-3-21(3) is under review. The statute mandates that preference be given to resident contractors in public contract bidding, while nonresident contractors must provide their home state's laws regarding nonresident contractor treatment when bidding. A nonresident contractor's bid will be rejected if it does not include this documentation. The definition of "resident contractors" includes nonresident entities that have been qualified to conduct business in Mississippi and have maintained a permanent office in the state for at least two years prior to January 1, 1986. Waveland contends that Reynolds, as an affiliate of Layne Christensen—which it claims is a resident contractor—does not need to submit Indiana’s contractor-preference statute. However, it is agreed that Reynolds itself is not a resident contractor, as it is an Indiana corporation with its principal office located in Indiana.

Waveland argues that Reynolds's status as a resident contractor should be evaluated based on its affiliation with Layne Christensen and Layne Christensen’s business history in Mississippi. The only supporting evidence presented is an affidavit from Steven F. Crooke, Senior Vice President and General Counsel for both companies, alongside corporate documents illustrating Reynolds's corporate ties to Layne Christensen. Crooke's affidavit details that Layne Christensen has been operating in Mississippi since 1976, originally as "Layne-Western Company, Inc.," later reorganizing and changing its name to "Layne-Christensen Company." The Mississippi Supreme Court's ruling in Lawson v. Honeywell International, Inc. emphasizes that the court's role is to interpret statutes without altering their intent, focusing on clear legislative language. For a contractor to be recognized as a resident contractor under section 31-3-21(3), it must fulfill two criteria: being qualified to do business in Mississippi and having maintained a permanent full-time office there for at least two years before January 1, 1986. The circuit court upheld Waveland's award of a sewer project to Reynolds, citing Layne Christensen's qualifications and business presence. However, the court found insufficient evidence to support that Layne Christensen met the office maintenance requirement prior to 1986, as the Crooke affidavit lacked specific evidence of a full-time office's existence for the requisite duration. Thus, the court concluded that Layne Christensen does not qualify as a resident contractor under the statute.

The Waveland Board did not vote to award a contract to Yates during its May 20, 2009 meeting, and the reasons for this are unclear. On May 28, 2009, Reynolds submitted the Crooke affidavit and related corporate documents to Waveland, fourteen days after sealed bids from Yates, Reynolds, and other bidders were opened. Although it is uncertain why Reynolds submitted the affidavit, it appears intended to demonstrate compliance with statutory requirements for a resident contractor. The Crooke affidavit is the sole evidence presented by Waveland to support its claim that Layne Christensen qualifies as a resident contractor. However, the affidavit fails to provide specific evidence required by section 31-3-21(3), such as proof of a full-time office in Mississippi for the necessary statutory period. The affidavit's vague assertion that Layne Christensen has operated continuously in Jackson, Mississippi since 1976 does not meet the statute's specific requirements. If the intent was to satisfy these statutory requirements, the affidavit should have included detailed information. Moreover, Waveland's governing body was obligated to document findings confirming Reynolds as a resident contractor based on prior communications with Reynolds's counsel. The lack of such evidence undermines the circuit court's conclusion that Layne Christensen maintained a full-time office in Mississippi since 1976. The Court notes that it has not previously interpreted section 31-3-21(3) regarding resident contractor status. An opinion from the Mississippi Attorney General regarding contractor residency, which is not binding but holds persuasive value, indicated that both a nonresident contractor and its subsidiaries must have maintained a full-time office in Mississippi for two years prior to January 1, 1986, to qualify as a resident contractor under section 31-3-21.

The Attorney General stated that a governing body, such as the City of Waveland, must determine if a non-resident contractor meets the criteria set forth in section 31-3-21(3) to be classified as a resident contractor under the statute. While the governing authority's factual findings are essential, these findings are subject to court review, albeit with a deferential standard. Waveland's Board of Aldermen must document its decisions in official minutes, as established by case law, ensuring transparency and accountability. In the absence of recorded evidence showing that the Board evaluated Reynolds Construction's eligibility as a resident contractor, particularly regarding compliance with public-bid laws, the approval of the sewer project contract was deemed arbitrary and lacking substantial evidence. The minutes from the June 2, 2009 meeting did not reflect any discussion or determination regarding Reynolds' residency status, indicating procedural deficiencies in the Board's decision-making process.

The circuit court incorrectly determined that Layne Christensen operated a full-time office in Mississippi for two years before January 1, 1986, lacking substantial evidence for this finding. Consequently, Layne Christensen was not a resident contractor for the Waveland sewer project, which means Reynolds also should not have been classified as a resident contractor. As a result, Reynolds was obligated to submit Indiana's current law on non-resident contractors; failure to do so warranted the rejection of its bid per section 31-3-21(3).

Furthermore, Yates argued that Waveland should have rejected Reynolds’s bid due to non-compliance with bidding instructions, specifically the failure to use revised bid forms and bidding on the wrong size sewer pipe. Waveland contended that despite not using an addendum form, Reynolds's bid did not affect the bid's price, quantity, quality, or competitiveness, asserting its right to waive such informalities. Yates countered that only the Board of Aldermen could authorize such waivers through official minutes.

Waveland’s bidding documents required the latest addendum forms to be used, stating that failure to do so could lead to bid rejection. It allowed waivers for certain informalities if they did not compromise bid competitiveness or violate statutory provisions. The record confirms Reynolds did not use the correct addenda or bid on the specified size pipe (16 inches instead of 15 inches). Waveland's project engineer later adjusted Reynolds's original bid figures on revised forms, correcting mathematical errors. Yates objected to these corrections, arguing they did not address the fundamental issues of form and size compliance. Waveland maintained that the adjustments were minor and did not necessitate rejecting Reynolds’s bid.

Waveland argued that even if Yates’s bid on the questioned line item (the sixteen-inch pipe) was assumed to be $0.00, it would only decrease Yates’s total by $8,925.00, leaving Reynolds’s bid still $106,332.47 lower than Yates’s. Yates failed to demonstrate any economic disadvantage. Waveland acknowledged that Reynolds submitted a bid with an incorrect pipe size but characterized it as a minor typographical error that did not necessitate bid rejection. Waveland cited *Hill Brothers Construction Engineering Co. v. Mississippi Transportation Commission*, which upheld a bid award despite irregularities that were deemed immaterial and did not affect the bidding process or taxpayer interests. The circuit court noted that awarding the contract to Yates would contradict the goals of competitive bidding. However, unlike the MTC in *Hill Brothers*, Waveland did not document any factual findings in its minutes regarding whether Reynolds’s bid irregularities could be waived or the rationale for such a waiver. Instead, Waveland’s project engineer unilaterally corrected Reynolds’s bid, lacking the necessary record of findings that would support waiving the irregularities as done by the MTC.

In J.H. Parker Construction Co. v. Board of Aldermen of the City of Natchez, the court examined the City of Natchez's ability to waive bid irregularities in public contract awarding. An unsuccessful bidder contested the contract award, claiming the winning bidder did not submit a required pre-qualification statement, asserting that the city's waiver of this irregularity was improper. The court ruled that the omission did not compromise the competitive bidding process, as the winning bidder did not gain an unfair advantage. It emphasized that the city had discretion in assessing bid compliance, and absent evidence of arbitrary actions, the award to the lowest and best bidder was affirmed.

The case further addressed Waveland’s situation, where a bidder, Reynolds, failed to use bid addenda, leading to a potential irregularity. Waveland contended that this error did not affect the bid's overall price, yet the court highlighted the necessity for the governing authority to formally document any waiver of bid irregularities in meeting minutes for transparency and accountability. The absence of such documentation and findings from Waveland's Board led the court to conclude that the acceptance of Reynolds's bid was not compliant with public bidding laws. Ultimately, the circuit court's decision to uphold Reynolds's bid was deemed arbitrary and capricious, resulting in a reversal of that judgment.

Yates is seeking a remand to the circuit court for a hearing on compensatory damages following the dismissal of its appeal against the award of a sewer project to Reynolds. Yates argued that continuing construction before a ruling on its bill of exceptions would cause ongoing harm. The circuit court dismissed the appeal and denied Yates’s motion to stay the project, stating that Yates would not suffer irreparable injury because it could seek compensatory damages. Citing *City of Durant v. Laws Construction Co.*, the court emphasized that compensatory damages are the appropriate remedy for an aggrieved bidder entitled to a contract award. The circuit court was found to have erred in determining that Reynolds was a resident contractor and in concluding that Waveland was not obligated to reject Reynolds's bid for noncompliance with bidding instructions. The ruling stated that Yates, as the next lowest and best bidder, is entitled to a hearing on damages. Consequently, the circuit court’s judgment is reversed, and the case is remanded for further proceedings regarding Yates's entitlement to compensatory damages. All appeal costs are assessed to the appellee. Furthermore, the document notes that both bids were revised due to mathematical corrections, which Yates does not contest, and it indicates that the court will not address the issue of Reynolds's residency status further.