Willie Nelson v. City of Horn Lake, Mississippi ( 2006 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2006-CA-02122-SCT
WILLIE NELSON d/b/a NELSON PLUMBING
COMPANY
v.
CITY OF HORN LAKE ACTING BY AND
THROUGH ITS BOARD OF ALDERMEN
DATE OF JUDGMENT: 12/01/2006
TRIAL JUDGE: HON. ROBERT P. CHAMBERLIN
COURT FROM WHICH APPEALED: DESOTO COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT: CHRISTOPHER SOLOP
JOSEPH M. GIANOLA, JR.
ATTORNEYS FOR APPELLEE: JOHN D. PRICE
BILLY C. CAMPBELL, JR.
NATURE OF THE CASE: CIVIL - OTHER
DISPOSITION: AFFIRMED - 11/15/2007
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE WALLER, P.J., EASLEY AND CARLSON, JJ.
WALLER, PRESIDING JUSTICE, FOR THE COURT:
¶1. This appeal is taken from the DeSoto County Circuit Court’s order affirming the City
of Horn Lake’s decision to reject Nelson Plumbing Company’s lowest bid for construction
on the Goodman Road Sanitary Sewer Improvements project. Because we find that the City
of Horn Lake complied with Mississippi Code Annotated Section 31-7-13(d)(i), did not
violate Nelson’s due process rights, and did not act arbitrarily and capriciously in rejecting
Nelson’s lowest bid, we affirm.
FACTS
¶2. On June 1 and June 8, 2005, the Mayor and Board of Aldermen of the City of Horn
Lake (“the City”) advertised bids for the Goodman Road Sanitary Sewer Improvements
project (“the Goodman Project”). The City required that bidders have a certificate of
responsibility issued by the Mississippi State Board of Public Contractors and specified that
the contract would be awarded to “the lowest responsive, responsible Bidder.” Additionally,
the City reserved the right to conduct an investigation of the bidders’ capacity to perform the
work and reserved the right to reject any bid if the City determined that a bidder could not
carry out the obligations of the contract.
¶3. Willie Nelson d/b/a Nelson Plumbing Company (“Nelson”) is a Mississippi sole
proprietorship holding a valid certificate of responsibility for various classifications of work.
Of the five companies that submitted bids for the Goodman Project, Nelson submitted the
lowest bid in the amount of $2,294,035.50.1 Nevertheless, on September 20, 2005, the City’s
Board of Aldermen unanimously voted to award the contract for the Goodman Project to
Freeland and Lemm Construction Company (“Freeland”), who had submitted the second
lowest bid at $2,298,761.62—an amount $4,726.12 higher than Nelson’s bid.
¶4. The City justified its decision to award the contract to Freeland rather than Nelson on
two grounds. First, the City cited nine complaints it had received about Nelson from
corporate and municipal entities in Arkansas, Tennessee, and Mississippi. The complaints
1
This is the amount used in the minutes from the City’s September 20, 2005, meeting of the
mayor and Board of Aldermen. Nelson had calculated his bid at $2,294,076.50, which was
slightly higher than the City’s calculation .
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pertained to Nelson’s conduct under prior contracts, as well as payment disputes with
previous suppliers. Second, the City cited its own previous difficulties with Nelson in the
construction of City Hall. The City stated that Nelson’s failure to perform work according
to contract specifications for the City Hall project resulted in delay and caused damages to
the City and other contractors.
¶5. On September 22, 2005, Nelson submitted a letter to the mayor and city clerk
protesting the City’s decision to deny him the Goodman Project contract. Nelson stated that
he had conformed to all the requirements of the bid documents, that he held a valid certificate
of responsibility, and that the City had unlawfully awarded the contract to Freeland. On
September 23, 2005, the City responded to Nelson’s written protest by affirming its decision
to award the contract to Freeland.
¶6. On September 26, 2005, Nelson submitted a supplemental protest. Nelson alleged that
the City acted arbitrarily and capriciously in denying him the contract. Nelson also argued
that he never had an opportunity to respond to suppliers’ complaints of late payment or non-
payment and, regardless, that such complaints should not have been considered by the City.
¶7. On September 29, 2005, Nelson filed a Notice of Appeal and Bill of Exceptions in the
DeSoto County Circuit Court, appealing the City’s decision to award the Goodman Project
contract to Freeland. On April 10, 2006, Nelson filed a Motion to Compel, requesting that
the circuit court order the mayor to sign the Bill of Exceptions. On May 8, 2006, the City
filed its Designation of Appeal Record, which included its Corrections to the Bill of
Exceptions that had been signed by the mayor on April 5, 2006.
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¶8. Oral arguments were heard in the DeSoto County Circuit Court before the Honorable
Robert P. Chamberlin on November 16, 2006. On December 1, 2006, the circuit court
entered an order dismissing Nelson’s appeal and affirming the City’s decision. Nelson filed
a Notice of Appeal with this Court on December 12, 2006.
¶9. Nelson raises seven issues on appeal, which we have consolidated into five: (I)
whether the City violated Mississippi Code Annotated Section 31-7-13(d)(i) (Rev. 2005) in
awarding the Goodman Project contract to Freeland and, if not, whether the City had the right
to reject Nelson’s bid for the reasons set forth in its Resolution #09-07-05; (II) whether the
City violated Nelson’s substantive and/or procedural due process rights; (III) whether the
City acted arbitrarily and capriciously in reaching its decision to award the Goodman Project
to Freeland rather than Nelson; (IV) whether the circuit court erred in excluding an
Occupational Safety and Health Administration (OSHA) news release from the record; and
(V) whether Nelson is entitled to lost profits and attorney’s fees from the City and whether
individual members of the Board of Aldermen may be held personally liable. Because we
find issues I through IV dispositive, we do not address issue V.
STANDARD OF REVIEW
¶10. The scope of review is limited when examining the actions of a municipal board.
Sunland Publ’g Co. v. City of Jackson, 710 So. 2d 879, 881-82 (Miss. 1998). Issues I, II,
and IV are subject to a de novo standard. For questions of law, a municipal board’s decision
is reviewed de novo. See A&F Props., LLC v. Madison County Bd. of Supervisors, 933 So.
2d 296, 300 (Miss. 2006). A de novo standard is also applied to issues of statutory
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interpretation. Weiner v. Meredith, 943 So. 2d 692, 694 (Miss. 2006) (citing Austin v.
Wells, 919 So. 2d 961, 964 (Miss. 2006)).
¶11. Issue III is subject to an arbitrary-and-capricious standard of review. This Court will
not set aside the action of the governing body of a municipality unless such action is “clearly
shown to be arbitrary, capricious, or discriminatory or is illegal or without substantial
evidentiary basis.” Sunland Publ’g Co., 710 So. 2d at 882 (citing City of Jackson v. Capital
Reporter Publ’g Co., 373 So. 2d 802, 807 (Miss. 1979)). An act is arbitrary and capricious
when it is done at pleasure, without reasoned judgment or with disregard for the surrounding
facts and circumstances. Watkins v. Miss. Bd. of Bar Admissions, 659 So. 2d 561, 568
(Miss. 1995). Substantial evidence is “such relevant evidence as reasonable minds might
accept as adequate to support a conclusion or . . . more than a ‘mere scintilla’ of evidence.”
Wilkinson County Bd. of Supervisors v. Quality Farms, Inc., 767 So. 2d 1007, 1010 (Miss.
2000) (quoting Hooks v. George County, 748 So. 2d 678, 680 (Miss. 1999)).
DISCUSSION
I. Whether the City violated Mississippi Code Annotated Section 31-7-13(d)(i) in
awarding the Goodman Project contract to Freeland and, if not, whether the
City had the right to reject Nelson’s bid for the reasons set forth in its Resolution
#09-07-05.
A. Mississippi Code Annotated Section 31-7-13(d)(i) (Rev. 2005).
¶12. The City awarded the Goodman Project contract to the second-lowest bidder based
on complaints about Nelson and his conduct under previous contracts. Nelson argues that
the City’s minutes failed to include “detailed calculations” specifying costs that would have
been incurred had his lowest bid been accepted, including costs for additional supervision.
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Nelson asserts that detailed, mathematical calculations are an objective requirement essential
to protecting the integrity of the public procurement system. The City counters that the term
“calculations” does not refer to numbers, but to the governing authority’s deliberations in
reaching its final decision.
¶13. Mississippi Code Annotated Section 31-7-13(d)(i) requires a city to place on its
minutes detailed calculations and a narrative summary when accepting a bid other than the
lowest bid submitted.
If any governing authority accepts a bid other than the lowest bid actually
submitted, it shall place on its minutes detailed calculations and narrative
summary showing that the accepted bid was determined to be the lowest and
best bid, including the dollar amount of the accepted bid and the dollar amount
of the lowest bid.
Miss. Code Ann. § 31-7-13(d)(i) (Rev. 2005). The term “detailed calculations” in
Mississippi Code Annotated Section 31-7-13(d)(i) requires, at least, that “the dollar amount
of the accepted bid and the dollar amount of the lowest bid” be included in the governing
authority’s minutes.
¶14. Nelson’s bid was not rejected on considerations to which “detailed calculations” are
attributable, but for the reasons described under the “narrative summary.” When awarding
contracts, a governing authority may consider a bidder’s “responsibility” concerning matters
that relate to the prompt and efficient performance of a contract, including the bidder’s
honesty and integrity, skill and business judgment, experience and capability of performing
the contract, conduct under previous contracts, and the quality of previous work. Parker
Bros. v. Crawford, 219 Miss. 199, 208-09, 68 So. 2d 281, 284-85 (1953). When a lowest bid
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is denied based upon such considerations, as in the subject case, there will most likely be
little in the way of “detailed calculations” to include in the governing authority’s minutes.
¶15. Because the City rejected Nelson’s bid for reasons that cannot be reduced to “detailed
calculations,” the City’s minutes provided the minimal, requisite “detailed calculations”
pursuant to Mississippi Code Annotated Section 31-7-13(d)(i) by citing the dollar amounts
of the lowest bid and the accepted bid.
B. The City’s right to reject Nelson’s bid for the reasons set forth in its
Resolution #09-07-05.
¶16. The City’s advertisement for bids stated that the contract would go to “the lowest
responsive, responsible Bidder.” The term “responsible” is not limited to financial resources
and ability. Id. at 284. All matters that relate to a bidder’s prompt and efficient performance
of the contract are material to a bidder’s “responsibility,” including the bidder’s honesty and
integrity, skill and business judgment, experience and facilities for performing the contract,
conduct under previous contracts, and the quality of previous work. Id. at 284-85.
¶17. Resolution #09-07-05, as incorporated into the City’s minutes, stated that the City had
decided not to award the Goodman Project contract to Nelson based on numerous complaints
regarding his prior work and its own previous difficulties with Nelson in the construction of
City Hall. These are appropriate considerations in determining the “responsibility” of a
bidder. See id.
¶18. The City also reserved the right to investigate bidders “to determine the ability of the
Bidder to perform the work,” as well as the “right to reject any bid if the evidence submitted
by or investigation of such Bidder fails to satisfy the [City] that such Bidder is properly
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qualified to carry out the obligations of the Contract and to complete the work contemplated
therein.”
¶19. Because the City’s advertisement for bids allowed for consideration of bidders’
“responsibility” and because the City also reserved the right to investigate bidders, we find
that the City had the right to reject Nelson’s bid for the reasons set forth in Resolution #09-
07-05.
II. Whether the City violated Nelson’s substantive and/or procedural due process
rights.
¶20. Nelson argues that the City violated his constitutionally protected substantive and
procedural due process rights. Nelson maintains that he acquired a property interest in the
Goodman Project contract because he was the lowest, responsive bidder. Additionally,
Nelson argues that the City violated his procedural due process rights by not affording him
notice and a hearing.
A. Substantive due process.
¶21. For substantive due process to be implicated, there first must be a protected property
interest. University of Miss. Med. Ctr. v. Hughes, 765 So. 2d 528, 536 (Miss. 2000). This
Court has stated that a contract right constitutes an enforceable property interest. Id. (citing
Wicks v. Miss. Valley State Univ., 536 So. 2d 20, 23 (Miss. 1988)). However, federal
constitutional law determines whether a property interest “rises to the level of a
constitutionally protected interest.” Id. (citing, e.g., Memphis Light, Gas & Water Div. v.
Craft, 436 U.S. 1, 9, 98 S. Ct. 1554, 1560, 56 L. Ed. 2d 30, 39 (1978)). The United States
Supreme Court has defined “property” for the purpose of the due process clause as being
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more than a unilateral expectation, but a “legitimate claim of entitlement.” Bd. of Regents
v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 2709, 33 L. Ed. 2d 548, 561 (1972).
¶22. Nelson argues that his property interest in the Goodman Project contract attached once
he acquired status as the lowest bidder. In arguing that he has an enforceable property
interest in the Goodman Project contract, Nelson relies heavily upon Shepard v. City of
Batesville, 2007 U.S. Dist. LEXIS 1519 (N.D. Miss. January 8, 2007). In Shepard, the
federal court for the Northern District of Mississippi found that Mississippi Code Annotated
Section 31-7-13 gave the plaintiff a protected property interest in projects for which he was
the lowest and best bidder. Shepard, 2007 U.S. Dist. LEXIS at 27. However, Shepard is
distinguishable from the facts of the subject case. In Shepard, the plaintiff actually had been
awarded various contracts over a two-year period, but had been used for only one project.
Id. (“[t]here is absolutely no question that the Plaintiff was awarded the contracts . . . .”).
The City of Batesville had instead used alternate bidders without providing the plaintiff any
notice or hearing as to why he had not received the jobs. Id. at 27-28.
¶23. In contrast to Shepard, Nelson was never awarded the Goodman Project contract. The
City, in its advertisement for bids, reserved discretion to award the contract to “the lowest
responsive, responsible Bidder” and determined that Nelson did not meet such criteria.
Having never been awarded the Goodman Project contract, Nelson never had a “legitimate
claim of entitlement” to such contract. See Roth, 408 U.S. at 577; Shepard, 2007 U.S. Dist.
LEXIS at 24-25 (citing Expert Masonry, Inc. v. Boone County, 440 F.3d 336, 348 (6th Cir.
2006)(a constitutionally protected property interest in a public bid contract may arise by
9
being awarded the contract and then being deprived of it, or by the governing authority
abusing its discretion in awarding the contract)).
¶24. Because no property interest vested upon Nelson’s status as the lowest bidder, we find
that Nelson did not acquire a constitutionally protected property interest in the Goodman
Project contract. Therefore, we hold that the City did not violate Nelson’s substantive due
process rights.
B. Procedural due process.
¶25. A two-step analysis is required in analyzing procedural due process claims: “(1) does
the plaintiff have a property interest entitled to procedural due process protection; and (2) if
yes, what process is due?” Harris v. Miss. Valley State Univ., 873 So. 2d 970, 985 (Miss.
2004) (citing Bluitt v. Houston Indep. Sch. Dist., 236 F. Supp. 2d 703, 733 (S.D. Tex.
2002)). If no constitutionally protected right is at stake, then procedural due process is not
an issue. Miss. High Sch. Activities Ass'n, Inc. v. Coleman, 631 So. 2d 768, 774 (Miss.
1994) (citing Miss. High Sch. Activities Ass’n, Inc. v. Farris, 501 So. 2d 393, 396 (Miss.
1987)).
¶26. Because Nelson had no constitutionally protected right in the Goodman Project
contract, we find that procedural due process is not invoked. See id. Nevertheless, Nelson
received the requisite procedural due process provided under Mississippi law.
¶27. Mississippi bid laws do not require a hearing when a governing authority rejects a
lowest bid. Rather, Mississippi Code Annotated Section 31-7-13(d)(i) requires the governing
authority’s minutes to provide “detailed calculations and narrative summary showing that the
accepted bid was determined to be the lowest and best bid.” Miss. Code Ann. § 31-7-13(d)(i)
10
(Rev. 2005). If a party remains dissatisfied with the governing authority’s decision,
Mississippi Code Annotated Section 11-51-75 sets forth the procedure by which an aggrieved
party such as Nelson may appeal the decision. Miss. Code Ann. § 11-51-75 (Rev. 2005).
¶28. Nelson attempts to contrast the process afforded him with the process afforded the
lowest bidder in Parker Brothers. In Parker Brothers, the school board made efforts to
contact the lowest bidder prior to the board’s decision to accept the second-lowest bid.
Parker Brothers, 68 So. 2d at 282. Additionally, the board noted that the lowest bidder had
been free “at any time to present their qualifications to the Board; . . . .” Id. Yet the lowest
bidder never actually contacted the school board and no hearing was conducted prior to the
board’s decision. Id. at 282-83. Even if a hearing had been held prior to the board’s
decision, such a hearing is not required under Mississippi law. See Miss. Code Ann. §§ 11-
51-75, 31-7-13(d)(i) (Rev. 2005).
¶29. Accordingly, we find that Nelson received the requisite procedural due process under
Mississippi law.
III. Whether the City acted arbitrarily and capriciously in reaching its decision to
award the Goodman Project to Freeland rather than Nelson.
¶30. Nelson makes three arguments that the City acted arbitrarily and capriciously in
denying him the Goodman Project contract: first, that the City engaged in a “witchhunt” to
deny him the Goodman Project contract and did not investigate Freeland or other bidders;
second, that the City improperly considered his conduct under a previous contract with the
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City which dated back five years;2 and finally, that the City unlawfully considered the
complaints filed against him concerning previous payment disputes.
¶31. The record provides some evidence that the City investigated other bidders. In a
memo to the Mayor and Board of Aldermen, the city engineer stated that “[a]fter some
research on the various bidders, it appears that the City would be best served by awarding
the contract to the second [lowest] bidder, Freeland and Lemm.” The City’s investigation
was focused primarily on Nelson because he had submitted the lowest bid.
¶32. Nelson also argues that the City is time-barred when considering his past performance.
For support, Nelson cites Title 48 of the Code of Federal Regulations, Section 42.1503,
which effectively permits agencies to look back only three years on a contractor’s past
performance. 48 C.F.R. § 42.1503 (2004). However, the City was not bound by the Code
of Federal Regulations for this project, and no similar provision exists under Mississippi law.
Therefore, the City’s consideration of Nelson’s past performance was not an arbitrary and
capricious act.
¶33. Finally, Nelson argues that complaints concerning his payment disputes with previous
suppliers should not have been considered by the City because these suppliers were protected
by Nelson’s payment bond. This Court has held that where bond is given under Mississippi
Code Annotated Section 85-7-185 (Rev. 1999), the bond serves in lieu of any equity or trust
2
Nelson dates his previous contract with the City as being six years ago. However, the
record shows that the City awarded Nelson a contract for the City Hall project on December
1, 1998, and that work was performed on the contract until 2000. Thus, the contract dates
back approximately five years from September 20, 2005, the date on which the City elected
to deny Nelson the Goodman Project contract.
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in favor of materialmen and laborers. See Dickson v. United States Fid. & Guar. Co., 150
Miss. 864, 117 So. 245, 248 (1928). Even though Section 85-7-185 affords protection for
“persons furnishing labor or material,” neither this provision nor Mississippi case law
prohibits a governing authority from considering a contractor’s prior disputes with creditors.
Miss. Code Ann. § 85-7-185 (Rev. 1999). The aggregate of such disputes may bear upon the
contractor’s honesty, integrity, business judgment, conduct under previous contracts, and
pecuniary ability—all of which have been held to be appropriate considerations in awarding
a public contract. See Parker Bros., 68 So. 2d at 284-85.
¶34. Additionally, the complaints regarding Nelson were not isolated to payment disputes
with suppliers. The complaint from the City of Pine Bluff, Arkansas, alleged that Nelson had
not complied with the specifications of a contract. The complaint from Allen & Hoshall of
Memphis, Tennessee, cited dissatisfaction with Nelson’s performance on a project, stated
that a lawsuit had been filed against Nelson, and added that Nelson was not allowed on other
projects. Finally, the City’s prior difficulties with Nelson on the City Hall project were
extensively documented in the record and centered largely on Nelson’s failure to comply
with contract specifications.
¶35. While recognizing that disputes and complications are not uncommon within the
construction industry, we find substantial evidence that the City did not act arbitrarily and
capriciously in reaching its decision to award the contract to Freeland rather than Nelson.
IV. Whether the circuit court erred in excluding an Occupational Safety and Health
Administration (OSHA) news release from the record.
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¶36. In Nelson’s reply brief before the circuit court, he referenced and attached as an
exhibit a news release from the OSHA which showed that Freeland had been fined $96,400
for safety violations which resulted in the death of one of its employees. Nelson contends
that the circuit court erred by not including the news release as part of the record.
¶37. The bill of exceptions constitutes the record on appeal. Wilkinson County Bd. of
Supervisors v. Quality Farms, Inc., 767 So. 2d 1007, 1011 (Miss. 2000) (quoting Hooks v.
George County, 748 So. 2d 678, 680 (Miss. 1999)); Miss. Code Ann. § 11-51-75 (Rev.
2005). Thus, the circuit court may review only the evidence included in the bill of
exceptions. E.g. id.
¶38. Because the press release was not included in the bill of exceptions, we find that the
circuit court did not err in excluding the OSHA news release from the record.
CONCLUSION
¶39. Because we find that the City complied with Mississippi Code Annotated Section 31-
7-13(d)(i), did not violate Nelson’s due process rights, and did not act arbitrarily and
capriciously in rejecting Nelson’s lowest bid, we affirm the circuit court’s order affirming
the City of Horn Lake’s decision.
¶40. AFFIRMED.
SMITH, C.J., DIAZ, P.J., EASLEY, CARLSON, DICKINSON, RANDOLPH
AND LAMAR, JJ., CONCUR. GRAVES, J., NOT PARTICIPATING.
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