Opinion
Civil Action No. 03-2272, Section "K" (3).
August 12, 2004
Before the Court is a Motion to Dismiss Combining Various Defenses (Rec. Doc. 30) filed by defendants Jefferson Parish and the Jefferson Parish Council (collectively, the "Parish"). Having reviewed the pleadings, memoranda, and relevant law, the Court GRANTS IN PART and DENIES IN PART defendants' motion, for reasons stated infra.
I. BACKGROUND
This matter arises out of a public construction dispute. Plaintiff Siemens Building Technologies, Inc., ("Siemens"), a sub-subcontractor, bid on the Heating, Ventilating and Air Conditioning ("HVAC") portion of a public works project sanctioned by defendants. The Parish and Siemens then entered into discussions regarding the HVAC portion of the project. Thereafter, Siemens installed a HVAC system. Nevertheless, the Parish ultimately awarded the HVAC contract to Johnson Controls, Inc. ("JCI"), a company that manufactures and installs HVAC equipment. As to HVAC installation, JCI is a competitor of plaintiff Siemens. The instant lawsuit resulted.
The Complaint alleges the following facts: Jefferson Parish advertised a contract for public bidding regarding the construction of an Administrative Building for the Parish. Prior to the bidding deadline of May 16, 2002, the Parish issued Addendum No. 3, which included bidding specifications that required bidders to furnish and install an extension of JCI Metasys Facility Management Systems ("Metasys System"), the Parish's HVAC Control System. The cost of the JCI System, and of the labor in installing it, was to be included in a bidder's price. Addendum No. 3 also provided that "[a] fixed cost for the devices labeled 'proprietary' will be furnished by JCI and published in a subsequent addendum."
Seventy-two hours before the bidding deadline, the Parish issued Addendum No. 5, which purported to create a closed proprietary specification in favor of JCI. This addendum indicated a fixed price of $292,721.00 for the materials and proprietary labor that would be supplied by JCI. Addendum No. 5 also specified that the installation cost for the proprietary materials, and for the installation and supply of all non-proprietary materials, was not included in the lump sum to be given to JCI by the contractor.
Siemens alleges that, even after the Addenda were issued, there was a lack of clarity as to what portions of the project were to be proprietary and non-proprietary. Siemens further alleges that this failure to create a clear distinction between the proprietary and non-proprietary portions of the project "made it impossible for a vender other than JCI to bid only the non-proprietary portions of the project."
In March 2002, the Parish informed Siemens that it intended to create a closed proprietary specification in favor of JCI. Siemens informed the Parish that Siemens could save the Parish money by(1) either purchasing the necessary equipment from JCI and then installing that equipment for the Parish, or (2) by simply using Siemens equipment in the installation. The parties discussed whether Siemens should submit bids to the Parish regarding these proposals, and the Parish indicated that it was receptive to saving money.
After correspondence between Siemens and the Parish confirming this conversation, Siemens provided a bid to Mechanical Towers ("Towers"), a subcontractor, for a HVAC Temperature Controls system. This bid to Towers included supply of the JCI proprietary equipment specified, the supply of the non-proprietary equipment, and commissioning, totaling $377,850.000. The JCI bid for the same services was $442,000.000.
Towers incorporated Siemens' bid into a bid to Brice Building Company, Inc. ("Brice"), the general contractor. The Parish and Brice entered into a contract for the construction of the Administration Building on July 10, 2002. This contract was based on the bid Towers made to Brice, which included Siemens' bid to provide and install both the JCI equipment and all non-proprietary equipment specified.
After the contract between the Parish and Brice was executed, Siemens met with the Parish and Brice to demonstrate its system's ability to integrate with the Parish's existing JCI Metasys system. Siemens informed the Parish that using Siemens equipment would save the Parish an additional $100,256.000. During this meeting, the Parish stated that, so long as the equipment used worked with their existing JCI system, it did not matter whether Siemens or JCI equipment was used. Siemens then made a post-bid request to substitute Siemens equipment for the JCI proprietary equipment specified.
Siemens alleges that, after this meeting, JCI met with the Parish and convinced them not to use Siemens equipment in updating the HVAC system. The Parish then denied Siemens' post-bid request to substitute its equipment for JCI equipment. During continuing discussions between the Parish and Siemens, the Parish only objected to Siemens' substitution of its equipment for JCI equipment; the Parish did not object to Siemens performing the HVAC project with the JCI equipment specified.
At a meeting between the Parish, Siemens, Towers, and Brice on September 18, 2002, the Parish informed Siemens that it did not matter where Siemens acquired the JCI equipment or who installed it. The Parish did not inform Siemens that it would not be permitted to perform the HVAC project. Siemens also alleges that the Parish remained silent during discussions when Siemens indicated its intention to provide the JCI equipment for the project.
Siemens purchased the JCI proprietary equipment required for the Parish's project. On February 3, 2002, Siemens prepared a written submittal for the work to be performed by Siemens; this submittal included the JCI equipment Siemens purchased for the project. Soon after, by a letter dated February 26, 2003, the Parish's architect "returned Siemens submittal without engineering review stating that the Siemens submittal package represented a variance from the Contract Specifications and was not in compliance with the requirements outlined in Addendum No. 5." Siemens alleges that this was its first notice that it would not be permitted to perform the portion of the project involving the JCI equipment.
On March 11, 2002, Siemens issued an invoice to Towers in the amount of $134,912.00; $121,901.20 of this amount was for the JCI proprietary materials. Towers then included this amount in its April pay request to the Parish architect. The Parish architect subsequently rejected the invoice for Siemens' purchase of the JCI equipment.
Siemens obtained counsel and informed the Parish that it had "illegally bid the project with respect to the HVAC Temperature Controls system in violation of the public bid law by improperly designating the JCI equipment as a proprietary closed specification." The Parish conceded that it had illegally bid the closed specification in violation of the public bid laws. The Parish also indicated its intention to re-bid the HVAC Temperature Controls portion of the project in a proper manner. Thereafter, on May 14, 2003, the Parish adopted Resolution No. 98361, in which the Parish authorized Construction Change Directive No. 1. This Directive deleted from the public bid project the lump sum of $292,721.000 for the materials, equipment, and other proprietary work to be performed by JCI as described in Addendum No. 5. By deleting this portion of the project from the public bid, the proprietary portion of the project was no longer part of the public bid. Siemens alleges that the JCI equipment the Parish obtained from JCI for this portion of the project is the same equipment they have already purchased. Siemens further alleges that some of the equipment Siemens purchased is already installed in the Parish's Administration Building.
After Jefferson Parish deleted the HVAC Temperature Controls system portion of the project from the general contract with Brice on May 14, 2003, the Parish re-bid that portion of the project. In connection with the re-bid, the Parish issued a new set of contract specifications to prospective bidders. Like the original contract specifications, the new specifications purported to create a closed specification in favor of JCI. The deadline for submitting bids on the re-bid of the HVAC system was August 5, 2003.
During the re-bid process, Siemens requested any and all certifications which were required to be made under the Public Bid Law in order for the JCI equipment to be specified as proprietary. Siemens never received any such certifications.
Siemens submitted two bids in response to the Parish's re-bid of the HVAC Temperature Controls portion of the project: one which used the JCI equipment specified in the new contract specifications, and one which used the Siemens equipment that was of equal quality and utility to the JCI equipment specified. JCI also submitted a bid in response to the Parish's re-bid of the HVAC Temperature Controls portion of the project. Both of Siemens bids were lower than the JCI bid.
On August 6, 2003, the Parish adopted Resolution No. 99030 rejecting both of Siemens' bids and accepting the higher-priced JCI bid. The Parish subsequently entered into a contract with JCI to install the HVAC system into the Administration Building. The Parish's contract with JCI is separate and apart from its general contract with Brice and all of Brice's subcontracts for this project. Brice has no contract with JCI for this portion of the project. Pursuant to its contract with JCI, the Parish intends to have JCI provide the identical equipment Siemens already purchased at a cost of $121,901.20, most of which Siemens has already installed into the Administration Building.
Siemens filed a Complaint (Rec. Doc. No. 1) in this Court on August 12, 2003. In its Complaint, Siemens alleges counts of detrimental reliance, unjust enrichment, abuse of right, and tort. Siemens argues that it purchased JCI equipment in reliance on the Parish's conduct and words, and that because of this reliance the Parish "is bound to compensate Siemens for the cost of the JCI proprietary equipment Siemens purchased for the Administration Building." Siemens contends that since it bid for the entire project, it is now obligated to perform the non-proprietary portion of the project and that it has suffered a loss due to the Parish's deletion of the proprietary portion of the project from its public bid.
On September 24, 2003, the Parish filed a Motion to Dismiss (Rec. Doc. No. 5) alleging improper venue, lack of subject matter jurisdiction, failure to join indispensable parties, improper party in interest, and failure to state a claim upon which relief can be granted. A hearing on the matter was set for October 15, 2003, at 9:30 a.m. and the Court heard oral argument. On January 9, 2004, this Court granted Jefferson Parish's motion and dismissed Siemens' claims with prejudice (Rec. Doc. No. 12).
Siemens filed a Motion to Amend and Supplement the Complaint on January 9, 2004, which was granted by Magistrate Judge Knowles on February 4, 2004. Siemens' Amended Complaint added a claim against the Parish for illegally re-bidding the HVAC Temperature Controls system and improperly awarding the separate contract to JCI. The Amended Complaint seeks not only to nullify the new separate contract between the Parish and JCI, but also to compel the Parish to award that contract to Siemens and, alternatively, for damages including, but not limited to, the amount of Siemens' lost profits.
On March 15, 2004, Jefferson Parish filed the instant motion to dismiss on the grounds that JCI is an indispensable party under Fed.R.Civ.P. 19 and that Siemens has no right to seek damages or injunctive relief. The motion was set for hearing on April 14, 2004. That day, prior to the Court hearing said motion, counsel informed the Court that a settlement had been reached. Consequently, the Court entered an Order of Dismissal (Rec. Doc. 35) with the caveat that the case could be reopened within ninety (90) days if settlement was not consummated. On June 4, 2004, plaintiff filed a Motion to Re-open Case (Rec. Doc. 37). Thereafter, the Court reopened this matter and reset the motion at bar for hearing on July 21, 2004.
II. LAW AND ANALYSIS
Defendant's Motion to Dismiss is two-pronged. First, the Parish contends that Siemens' claims should be dismissed pursuant to Rule 12(b)(7) for failure to join an indispensable party, JCI, under Rule 19. Second, defendant claim that, pursuant to Rule 12(b)(6), plaintiff's claims should be dismissed for failure to state a claim upon which relief can be granted.
A. Rule 19 and Compulsory Joinder
Joinder under Federal Rule of Civil Procedure 19 is a two step process. First, the court must decide if the absent party is a necessary party to the action. See Fed.R.Civ.P. 19(a). Second, if the absent party is a necessary party, but its joinder is not feasible, the court must decide whether the absent party is an "indispensable" party to the action under Rule 19(b). See Fed.R.Civ.P. 19(b).
A party is "necessary" under Rule 19(a) if:
(1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (I) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest.
Fed.R.Civ.P. 19(a). When a party is "necessary," but cannot be joined in the action, the court must determine "whether in equity and good conscience the action should proceed among the parties before it . . ." Fed.R.Civ.P. 19(b). Rule 19(b) provides the following four factors for a court to consider when making its determination:
[F]irst, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.
Professors Wright and Miller note that compulsory joinder is an exception to the general practice of allowing the plaintiff to decide who shall be the parties to a lawsuit. Although courts recognize a plaintiff's traditional prerogative, they should compromise plaintiff's choice when "significant countervailing considerations" make the joinder of particular absentees desirable. 7 Charles Alan Wright, Arthur R. Miller, Mary Kay Kane, Federal Practice and Procedure, § 1602 at 19. Those "countervailing considerations" include: (1) the present defendant's interests; (2) the interests of potential but absent parties; and (3) the court's social interest in the orderly, expeditious administration of justice. 7 Wright, Miller, Kane, § 1602 at 19 (citing John W. Reed, Compulsory Joinder of Parties in Civil Actions, 55 Mich. L.Rev. 327, 330 (1957)). In Schutten v. Shell Oil Co., 421 F.2d 869 (5th Cir. 1970), the United States Fifth Circuit Court of Appeals provided the following rationale for considering compulsory joinder:
The plaintiff has the right to "control" his own litigation and to choose his own forum. This "right" is, however, like all other rights, "defined" by the rights of others. Thus the defendant has the right to be safe from needless multiple litigation and from incurring avoidable inconsistent obligations. Likewise the interests of the outsider who cannot be joined must be considered. Finally there is the public interest and the interest the court has in seeing that insofar as possible the litigation will be both effective and expeditious.Schutten, 421 F.2d at 873.
Jefferson Parish's contends that JCI is an indispensable party under Rule 19. The Court agrees. "[I]n an action to set aside a contract, all persons who are parties to the contract may be affected by the determination of the action and are indispensable parties for the purposes of Rule 19." Niagra Mohawk Power v. Tonawanda Band, 862 F. Supp. 995 (W.D.N.Y. 1994) aff'd, 94 F.3d 747 (2nd Cir. 1996). Federal courts consistently hold that a party to an agreement in dispute is an indispensable party under F. Rule Civ. P. 19(a) in a suit seeking to rescind, annul, or interpret that agreement. See, e.g., Niagra Mohawk Power, 862 F. Supp. 995; Lomayaktewa v. Hathaway, 520 F.2d 1324, 1325 (9th Cir. 1975) cert denied, 424 U.S. 903, 96 S.Ct. 1492 (1976); Moore v. Ashland Oil, 901 F.2d 1445 (7th Cir. 1990); The Torrington Co. v. Youst, 139 F.R.D. 91 (Dist. S.C. 1990); Denkmann Assoc. v. International Paper Co., 132 F.R.D. 168 (M.D.La. 1990).
In the instant matter, JCI is so situated that disposition of the action in its absence may impair or impede its ability to protect that interest, or leave the Parish subject to a substantial risk of incurring multiple or otherwise inconsistent obligations. JCI is under contract with the Parish to provide HVAC controls for the Administration Building. Siemens' Complaint seeks to take the contract away from JCI and perform the work itself. In essence, Siemens seeks a declaration that the contract between JCI and the Parish is null and void. The Court finds that JCI is an indispensable party that must be joined pursuant to Rule 19. However, the Court shall not dismiss plaintiff's claims under Rule 12(b)(7) unless JCI is shown not to be amenable to joinder. Rather, this Court shall compel the joinder of JCI under Rule 19.
B. Rule 12(b)(6) and Failure to State a Claim Upon Which Relief Can Be Granted
Federal Rule of Civil Procedure 12(b)(6) permits a defendant to seek dismissal of a complaint based on the "failure to state a claim upon which relief can be granted." To determine whether a motion to dismiss has merit, Jefferson Parish v. Lead Ind. Ass'n. Inc., 106 F.3d 1245, 1250 (5th Cir. 1997) instructs that "[t]he standard to be applied to a motion to dismiss under Federal Rule 12(b)(6) is a familiar one." When considering a motion to dismiss under Rule 12(b)(6), district courts should construe the complaint liberally in favor of the plaintiff, assuming all factual allegations to be true and resolving any ambiguities and doubts in favor of the plaintiff. Fernandez-Montes v. Allied Pilots Ass'n., 987 F.2d 278, 284 (5th Cir. 1993); see Leleux v. United States, 178 F.3d 750, 754 (5th Cir. 1999). A complaint may not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. (quoting Lowrey v. Texas A M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997)); Leffall v. Dallas Independent School District, 28 F.3d 521, 524 (5th Cir. 1994); Fernandez-Montes, 987 F.2d at 284-85. However, conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss. Fernandez-Montes, 987 F.2d at 284; Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067 (5th Cir. 1994).
In Louisiana, public construction contracts are governed by the Louisiana Public Works Act ("LPWA" or the "Act"), La.R.S. 38:2241 et seq., which provides that governing authorities entering into a contract for construction of a public work must furnish a statutory bond. La.R.S. 38:2241(a). The LPWA has been interpreted by the Louisiana Supreme Court to limit claims to those who have a contractual relationship with either the contractor or a subcontractor. Wilkin v. Dev Con Builders, Inc., 561 So.2d 66, 71 (La. 1990); Thurman v. Star Electric Supply, Inc., 307 So.2d 283 (La. 1975); American Creosote Works v. City of Monroe, 175 La. 905, 144 So. 612 (1932); J. Watts Kearny Sons v. Perry, 174 La. 411, 141 So. 13 (1932). These provisions provide "certain classes of persons not enjoying privity of contract with the general contractor or with the governing authority a claim nevertheless against the general contractor and his surety and in some instances a claim against the governing authority itself." Wilkin, 561 So.2d at 71. "The provisions also protect the public authority complying with the requirements of the statutes from expenses caused by failure of the contractor [or subcontractor] to faithfully perform the contract." Id. (citing Town of Winnsboro v. Barnard Burk, Inc., 294 So.2d 867 (La.App. 2d Cir.), writ denied, 295 So.2d 445 (1974)).
"[P]ublic contract laws are to be strictly construed such that the privileges granted are not extended beyond the statutes." State Through Div. of Admin. v. McInnis Brothers Construction, 701 So.2d 937, 944, 97-0742 La. 10/21/97 (1997) (quoting Wilkin, 561 So.2d at 71); see also American Creosote Works v. City of Natchitoches, 182 La. 641, 162 So. 206 (1935); Rester v. Moody Stewart, 172 La. 510, 134 So. 690 (1931). The LPWA is sui generis and provides exclusive remedies to parties in public construction work. The Rowley Group v. Mid-Continent Casualty, Inc., 2004 WL 614500 (E.D. La. 2004); McInnis Brothers, 701 So.2d at 944 (citing U.S. Pollution Control, Inc. v. National American Insurance Co., 663 So.2d 119, 95-153 La. App. 3rd Cir. 8/30/95 (1995)).
Louisiana Revised Statutes 38:2290-96 address the issue of closed specifications under the LPWA. La.Rev.Stat. 38:2290 provides in pertinent part:
A. No architect or engineer, either directly or indirectly, shall submit a closed specification of a product to be used in the construction of a public building or project, unless all products other than the one specified would detract from the utility of the building or except in those cases where a particular material is required to preserve the historical integrity of the building or the uniform appearance of an existing structure.
La.Rev.Stat. 38:2290(A). LPWA § 2293 addresses the effect of a closed specification violation:
A. Any contract entered into in violation of any provision of this Part shall be null and void.
B. The district attorney in whose district a violation of this Part occurs, the attorney general, or any interested party has a right of action to bring suit for appropriate injunctive relief in the district court to nullify a contract entered into in violation of this Part.
C. If a judgment of nullity is rendered in an action brought by a district attorney or by the attorney general pursuant to Subsection B hereof, the district court may award a civil penalty not in excess of ten thousand dollars against each offending party.
In the instant matter, Jefferson Parish contends that Siemens is precluded from recovery here under the LPWA. The Parish argues that Siemens, as an unsuccessful bidder on a public contract, was required to first seek injunctive relief when they knew or could have known that the contract was wrongfully awarded to JCI. See Airline Construction Company, Inc. v. Ascension Parish School Board, 568 So.2d 1029, 1035 (La. 1990). The Court disagrees with defendant's contentions.
Louisiana Revised Statute 38:2293(B), provides in pertinent part:
. . . any interested party has a right of action to bring suit for appropriate injunctive relief in the district court to nullify a contract entered into in violation of this Part [regulations of closed specifications and exclusive distribution of materials].
La.Rev.Stat. 38:2293(B). In B.F. Carvin Const. Co., Inc. v. Jefferson Parish Council, 707 So.2d 1326 (La.App. 5th Cir 1998), the court stated:
. . . seeking injunctive relief is not a prerequisite for the use of ordinary proceedings to seek nullification of a public works contract that has allegedly been wrongfully awarded.B.F. Carvin, 707 So.2d at 1327. Indeed, "[a]fter a contract is awarded a party seeking to nullify must proceed by ordinary proceeding." B.F. Carvin, 707 So.2d at 1328 (quoting Benson Construction Co., Inc. v. City of Shreveport, 592 So.2d 1307 (La. 1992)). This is the aggrieved party's "sole remedy." See B.F. Carvin, 707 So.2d at 1328. Thus, Siemens may state a claim for relief in an ordinary proceedings, such as this one.
Jefferson Parish also claims that Siemens cannot recover under the closed specification portion of the LPWA, Louisiana Revised Statute 38:2290 et seq. Specifically, the Parish avers that there is no provision in the closed specification section of the LPWA providing for damages. Again, the Court disagrees. Although damages are not ordinarily available to an unsuccessful bidder unless it timely seeks to enjoin the wrongful award of the contract, an unsuccessful bidder may still be able to recover damages if it can specifically plead why a timely suit for injunction was impossible. See B.F. Carvin, 707 So.2d at 1327 ("[w]hen damages are sought to be recovered by the unsuccessful bidder, a timely injunction must have been filed or the unsuccessful bidder must specifically plead why a timely suit for injunction was impossible."); see also Airline Constr. Co., Inc. v. Ascension Parish School Bd., 568 So.2d 1029, 1035 (La. 1990). Furthermore, the timeliness of a bidder's suit for injunctive relief depends upon the facts and circumstances of the particular case. Webb Const. Inc. v. City of Shreveport, 30,491 (La.App. 2 Cir. 5/13/98), 714 So.2d 119, 122.
Here, Siemens has plead specifically why a timely suit to enjoin was not filed. Plaintiff's Amended Complaint states that Siemens sent a letter to the Parish architect after the Parish rejected Siemens' bids and accepted the higher priced JCI bid asking the Parish to produce justification for the creation of a closed specification in favor of JCI on August 12, 2003, a mere six days after the Parish rejected Siemens' lower priced bids. The Parish architect never responded to Siemens' request. Thereafter, on August 28, 2003, Siemens attempted to obtain that same information from the Parish through a public records request. The Parish refused to produce any documents in response to Siemens' public records request. Then, Siemens again attempted to obtain the closed specification justification through a discovery request. The Parish refused to respond to Siemens' discovery request. Only after Siemens moved to compel the production of documents did the Parish produce any documents to Siemens, none of which indicated that the Parish properly created a closed specification in favor of JCI when it re-bid the HVAC portion of the Administration Building project.
The reason Siemens did not include in its original suit a challenge to the Parish's creation of a closed specification in favor of JCI and its award of the HVAC contract to JCI is that the Parish would not provide Siemens with documentation to determine whether justification for creating the closed specification existed. Indeed, Siemens states in its Amended Complaint why timely suit for injunction was impossible; therefore, plaintiff may seek damages here under the LPWA. See B.F. Carvin, 707 So.2d at 1327.
Finally, defendants aver that plaintiff's suit for injunction is now moot. Again, the Court disagrees. Contrary to the Parish's contention, it is not too late to nullify the contract the Parish illegally awarded to JCI and award that contract to Siemens. At present, the HVAC equipment that Siemens furnished and installed remains in the Administration Building. If the contract between the Parish and JCI is declared null and void and the contract is awarded to Siemens, the JCI equipment that Siemens has already installed into the Administration Building can stay in the building and plaintiff can prevent any further unnecessary delays and costs to the project. Thus, for reasons stated supra, IT IS ORDERED that the Motion to Dismiss Combining Various Defenses (Rec. Doc. 30) filed by defendants is hereby GRANTED IN PART to the extent that JCI is found to be an indispensable party under Federal Rule of Civil Procedure 19. Accordingly,
IT IS ORDERED that plaintiff shall join JCI as a defendant and attempt to commence service of process by September 12, 2004.
IT IS FURTHER ORDERED that defendants' Motion to Dismiss is hereby DENIED IN PART as to all other aspects.