Thursday, February 27, 2020
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Court of Appeal:
Judge Erred in Awarding Contractor Moneys Expended on Project Taken Away From It
Determination by a Judge in San Diego That Its Bid Was Nonconforming Precludes Los Angeles Court Superior Court From Entering $3 Million Judgment in Its Favor
By a MetNews Staff Writer
A contractor that had a public contract yanked from it while the work was underway, based on a determination that its bid was nonconforming, was improperly awarded nearly $3 million for the unpaid costs it expended on the project, holding that its fault in submitting an infirm bid bars recovery, the Court of Appeal for this district has held.
Presiding Justice Laurence Rubin wrote the opinion, which was filed Jan. 28 and certified for publication on Monday.
A judge of the San Diego Superior Court had in 2015 ordered that the contract be nullified. Los Angeles Superior Court Judge Susan Bryant-Deason in 2018 found the defendant, the California Department of Corrections and Rehabilitation (“CDCR”), is liable to Hensel Phelps Construction Company in the amount of $2,989,819.35.
She rejected CDCR’s contention, advanced in its cross-complaint, that the $3,510,180.64 it had paid Phelps should be disgorged.
Public Contract Code
The award to Phelps was made pursuant to Public Contract Code §5110. It provides that if a public contract “is later determined to be invalid due to a defect or defects in the competitive bidding process caused solely by the public entity, the contractor who entered into the contract with the public entity shall be entitled to be paid the reasonable cost, specifically excluding profit, of the labor, equipment, materials, and services furnished by the contractor prior to the date of the determination that the contract is invalid,” upon specified conditions.
Rubin stressed the word “solely.” He wrote:
“Even if we were to agree that CDCR were at fault to some degree for failing to reject Phelps’s flawed bid, it was at a minimum the combination of Phelps’s flawed bid and CDCR’s failure to reject it which resulted in an invalid contract. But Phelps can only recover under section 5110 if the invalidation was due to a defect in the bidding process caused solely by CDCR; it cannot recover if the contract was invalidated for reasons that were even partly its own fault. The San Diego trial court’s ruling establishes Phelps was at fault.”
Collateral Estoppel
He also said—in a portion of the opinion in which Justice Lamar Baker did not join—that collateral estoppel applies. The issues determined with finality by the San Diego judge were the same as those in the Los Angeles action and the parties were the same, Rubin pointed out, commenting:
“[T]he public policies of preservation of the integrity of the judicial system and promotion of judicial economy are advanced by the application of collateral estoppel. It is difficult to believe the integrity of the judicial system would be advanced if, after the San Diego court held that the contract must be invalidated for a material error in Phelps’s bid, the Los Angeles court could hold, to the contrary, that Phelps was actually blameless for the invalidation.”
Baker gave no reason for his disagreement.
Addressing the cross complaint, Rubin said:
“As CDCR never sought judgment on the pleadings on its cross-complaint; and can point to no stipulation that its cross-complaint rises and falls with the complaint, we cannot simply direct judgment in favor of CDCR.
“Although our disposition may seem hypertechnical, there is some equity to this result. The evidence reflects that some amount of the work done by Phelps was not work pursuant to the void contract, but work done to make the worksite safe after the San Diego court issued its injunction. CDCR has made no argument that Phelps performed that work as a volunteer, and is not entitled to retain any funds to compensate it for its substantial efforts returning the worksite to a safe condition.”
The case is Hensel Phelps Construction Co. v. Department of Corrections and Rehabilitation, 2020 S.O.S. 803.
The request for publication was made by the CDCR and was opposed by Phelps.
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