Cedroni Associates, Inc v. Tomblinson, Harburn Associates, Architects & Planners, Inc , 492 Mich. 40 ( 2012 )

Michigan Supreme Court
Lansing, Michigan
Chief Justice: Justices:
Opinion Robert P. Young, Jr. Michael F. Cavanagh
Marilyn Kelly
Stephen J. Markman
Diane M. Hathaway
Mary Beth Kelly
Brian K. Zahra
FILED JULY 27, 2012
STATE OF MICHIGAN
SUPREME COURT
CEDRONI ASSOCIATES, INC,
Plaintiff-Appellee,
v No. 142339
TOMBLINSON, HARBURN
ASSOCIATES, ARCHITECTS &
PLANNERS, INC,
Defendant-Appellant.
BEFORE THE ENTIRE BENCH
MARKMAN, J.
The issue here is whether plaintiff, the disappointed lowest bidder on a public
contract, had a valid business expectancy for the purpose of sustaining a claim of tortious
interference with a business expectancy. The trial court held that plaintiff did not have
such an expectancy, but a divided Court of Appeals panel held that a genuine issue of
material fact exists in this regard. Because we agree with the trial court and the Court of
Appeals dissent that plaintiff did not have a valid business expectancy, we reverse the
judgment of the Court of Appeals and reinstate the trial court’s order granting
defendant’s motion for summary disposition.
I. FACTS AND HISTORY
Davison Community Schools, a public school district, entered into a contract with
defendant for architectural services with regard to a construction project. As part of the
contract, defendant agreed to assist the school district with the bid selection process by,
among other things, evaluating the bids submitted by contractors and making a
recommendation to the school district regarding which contractor should be awarded the
project. Pursuant to defendant’s recommendation, the school district eventually awarded
the project to US Construction and Design Services, LLC, the contractor that had
submitted the second-lowest bid. Plaintiff, the contractor that submitted the lowest bid,
sued defendant for tortious interference with a business expectancy.1
The trial court granted defendant’s motion for summary disposition, concluding
that plaintiff did not have a valid business expectancy. In a split decision, the Court of
Appeals reversed, holding that a genuine issue of material fact existed in this regard.
Cedroni Assoc, Inc v Tomblinson, Harburn Assoc, Architects & Planners, Inc, 290 Mich
App 577; 802 NW2d 682 (2010). Judge KIRSTEN FRANK KELLY dissented, agreeing with
1
According to defendant, its decision to recommend US Construction rather than
plaintiff was predicated on the fact that the references supplied by plaintiff gave negative
feedback and US Construction had provided construction services for other projects
designed by defendant for the school district and had performed the work adequately.
According to plaintiff, on the other hand, defendant’s decision to recommend US
Construction rather than plaintiff was based on defendant’s desire “to punish [plaintiff]
for what occurred on the Holly Academy project wherein [defendant] was ultimately
replaced by another architect.”
2
the trial court that plaintiff did not have a valid business expectancy. We ordered and
heard oral argument on whether to grant defendant’s application for leave to appeal and
specifically asked the parties to
address whether the Court of Appeals erred when it determined that there
are genuine issues of material fact as to (1) whether the plaintiff, a
disappointed low bidder on a public contract, had a valid business
expectancy and (2) whether the defendant architectural firm’s
communications, made pursuant to an agreement with the contracting
school district, amounted to intentional and improper conduct sufficient to
sustain a claim of tortious interference with a business expectancy.
[Cedroni Assoc, Inc v Tomblinson, Harburn Assoc, Architects & Planners,
Inc, 489 Mich. 953, 953-954 (2011).][2]
II. STANDARD OF REVIEW
We review de novo a trial court’s decision on a motion for summary disposition.
Driver v Naini, 490 Mich. 239, 246; 802 NW2d 311 (2011).
III. ANALYSIS
The elements of tortious interference with a business relationship or expectancy
are “‘the existence of a valid business relationship or expectancy, knowledge of the
relationship or expectancy on the part of the defendant, an intentional interference by the
defendant inducing or causing a breach or termination of the relationship or expectancy,
and resultant damage to the plaintiff.’” Dalley v Dykema Gossett PLLC, 287 Mich. App.
296, 323; 788 NW2d 679 (2010), quoting BPS Clinical Laboratories v Blue Cross &
Blue Shield of Mich (On Remand), 217 Mich. App. 687, 698-699; 552 NW2d 919 (1996).
The issue here is whether plaintiff, as the lowest bidder on a public contract, had a valid
2
Because we conclude that plaintiff did not have a valid business expectancy, it is
unnecessary for us to address the second issue.
3
business expectancy. In order to establish this, “[t]he expectancy must be a reasonable
likelihood or probability, not mere wishful thinking.” Trepel v Pontiac Osteopathic
Hosp, 135 Mich. App. 361, 377; 354 NW2d 341 (1984). We agree with the trial court and
the Court of Appeals dissent that plaintiff did not have a valid business expectancy
because plaintiff had no reasonable expectation of being awarded the contract, only
“wishful thinking.”
That plaintiff as the lowest bidder on a public contract had no valid business
expectancy is supported by the longstanding rule in Michigan that a disappointed low
bidder on a public contract has no standing to sue in order to challenge the award of a
contract to another bidder. Detroit v Wayne Circuit Judge, 128 Mich. 438, 439; 87 N.W.
376 (1901) (“As a bidder, the complainant has no standing.”). In Talbot Paving Co v
Detroit, 109 Mich. 657, 660, 662; 67 N.W. 979 (1896), this Court held that “the lowest
bidder, under a contract proposed to be let by a municipal corporation, whose bid has
been rejected, [does not have] a right of action at law to recover profits which he might
have made had his bid been accepted.” This Court reached this conclusion even though
“under the charter of Detroit, it was the duty of the city to let the contract to the lowest
responsible bidder . . . .” Id. at 660. This Court held that the charter did not provide for a
private cause of action because it “was not passed for the benefit of the bidder, but as a
protection to the public.” Id. “The charter provision which required the acceptance of
the lowest responsible bid had no reference to any interest which the bidders might have
in the premises, but was passed to protect the interest of the citizens of the city.” Id. at
662 (emphasis added); see also Lasky v City of Bad Axe, 352 Mich. 272, 276; 89 NW2d
4
520 (1958) (stating that these provisions “are enacted for the benefit of property holders
and taxpayers, and not for the benefit of or enrichment of bidders”).
Given that a contractor that submits the lowest bid cannot bring a cause of action
against the municipality when its bid is rejected, even when the municipality has adopted
a charter provision that requires it to accept the “lowest responsible bidder,” it is difficult
to fathom how plaintiff’s submission of the lowest bid could have created a valid
business expectancy in light of the highly discretionary process of awarding
governmental contracts. In terms of whether a valid business expectancy is created, a
plaintiff’s expectations are entirely the same regardless of whether it alleges that the
government has wrongfully denied it the contract or, as here, that a third party has
interfered and caused a denial of the contract. In addition to the common-law rule, MCL
380.1267(6) expressly states that “[t]he board, intermediate school board, or board of
directors may reject any or all bids . . . .” As the Court of Appeals dissent explained,
“when the ultimate decision to enter into a business relationship is, by statute, a highly
discretionary decision, a plaintiff cannot establish that its ‘business expectancy’
[reflected] a reasonable likelihood or possibility and not merely wishful thinking.”
Cedroni, 290 Mich App at 623 (K. F. KELLY, J., dissenting). In light of the common-law
rule that a bidder that submits the lowest bid has no cause-of-action against the public
entity that rejects this bid and the statutory provision that allows the school district to
“reject any or all bids,” MCL 380.1267(6), a bidder on a school construction project
should know that its submission of the lowest bid does not create a reasonable probability
that the school district will award it the contract. See Lasky, 352 Mich at 276 (“[O]ne
making a bid or entering into a contract with a municipality, acts at his peril; he is
5
supposed to know the law.”); see also EBI-Detroit, Inc v Detroit, 279 Fed Appx 340, 352
(CA 6, 2008) (“Michigan courts have already rejected the idea that a disappointed bidder
has a valid business expectancy in a potential government contract.”).3
In the instant case, not only should the common-law rule and MCL 380.1267(6)
have made plaintiff aware that its submission of the lowest bid did not create a valid
business expectancy, but documents provided by the school district before plaintiff even
submitted its bid should also have made this perfectly clear. For example, both the
advertisement for bids and the instructions to bidders included in the project manual
expressly stated that the school district “reserves the right to accept or reject any or all
offers.” The school district’s fiscal management policy also stated multiple times that the
school district has the “right to reject any or all bids” and further stated that “the lowest
dollar cost bidder may not always receive award of the bid.” See Leavy v City of
3
The dissent argues that our decision to apply the “disappointed-bidder rule” to private
entities is “contrary to the purpose of the disappointed-bidder rule: to protect taxpayers.”
Post at 10. However, if this case had anything at all to do with protecting taxpayers,
plaintiff “should have proceeded by injunction to prevent the doing of the work under the
[US Construction] contract” instead of “l[ying] by, and, after the work had been done and
paid for, ask for profits which it might have made if it had been permitted to perform its
contract.” Talbot, 109 Mich at 659. By adopting MCL 380.1267(6), which allows the
school board to “reject any or all bids,” the Legislature has determined that the school
board is in the best position to “protect taxpayers,” and “[t]he law does not give to courts
the power to substitute their judgment for the honest judgment of the board.” Kundinger
v City of Saginaw, 132 Mich. 395, 405; 93 N.W. 914 (1903). Finally, as we explain in
footnote 8, we are not immunizing from liability a private entity that “acts with
dishonesty and bad faith to interfere with the governmental entity’s efforts,” post at 10
n 2; instead, we are simply holding that when the ultimate decision to enter into a
business relationship is a highly discretionary decision reposed by law within a
governmental entity, a disappointed low bidder does not have a valid business expectancy
for the purpose of sustaining a claim of tortious interference with a business expectancy.
6
Jackson, 247 Mich. 447, 450; 226 N.W. 214 (1929), quoting 3 McQuillin, Municipal
Corporations (2d ed), p 919 (“Reservation of right to reject any and all bids, where the
authorities have power to make such reservation, gives the right to let the contract to any
bidder and reject the others, although the one securing the contract is not the lowest
bidder[.]”). Finally, Clay Perkins, the superintendent of the school district, averred by
affidavit that “[w]hile [plaintiff] submitted the low bid, there was no communication of
any intent to accept [plaintiff’s] bid.” That plaintiff did, in fact, understand that it might
not be awarded the contract even though it was the lowest bidder is evidenced by a letter
written by plaintiff’s president, Richard Cedroni, to the school district, in which he stated:
We are the apparent low bidders on the Additions and Renovations
at Hill and Siple Elementary. I look forward to working with the Davison
Schools on this project and I expect you will be more than pleased with my
company’s performance and professionalism, if awarded. [Emphasis
added.]
The Court of Appeals recognized that “the submission of the lowest bid, in and of
itself, was inadequate to sustain plaintiff’s suit” and “reject[ed] any rule per se that would
allow litigation to proceed simply on the basis of proof of the lowest bid” because
submission of the lowest bid does not, by itself, create a valid business expectancy.
Cedroni, 290 Mich App at 582.4 However, the Court concluded that the school district’s
4
The dissent, on the other hand, concludes that “once a qualified bidder has submitted a
conforming bid and knows that it has provided the lowest bid, there might be a genuine
issue of material fact regarding whether the bidder’s expectation reasonably elevated
from a ‘mere hope’ to a ‘realistic expectation’ that it would be awarded the project . . . .”
Post at 5. This conclusion is simply incompatible with both MCL 380.1267(6), which
expressly states that the school board “may reject any or all bids,” and the documents
presented to plaintiff, which equally clearly state that “the lowest dollar cost bidder may
not always receive award of the bid.”
7
fiscal management policy, coupled with plaintiff’s submission of the lowest bid, did
create a valid business expectancy because the former stated that “[b]ids shall be awarded
in compliance with applicable bidding obligations imposed by law to the ‘lowest
responsible bidder.’”
“Lowest responsible bidder” is defined in the policy as a “responsible contractor,”
and “responsible contractor” is defined as a “contractor determined by the [school
district] to be sufficiently qualified to satisfactorily perform the Construction
Project . . . .” The policy then provides a list of factors for the school district to consider
in determining whether a contractor is properly characterized as a “responsible
contractor,” including “an overall review of the Responsibility Criteria,” “the input of the
District’s architect(s),” and “other relevant factors.” The “responsibility criteria” include
numerous considerations such as “projects completed within the past three (3) years”;
“experience with construction techniques, trade standards, project scheduling, cost
control, management of projects and building codes, particular to the Construction
Project”; “[r]eferences from individuals or entities that have received in the past three (3)
years, or that are currently receiving the contractor’s services, including information
regarding records of performance, job site cooperation, and long term quality standards”;
and “any additional criteria that [the school district] may deem relevant for purposes of
making a determination of contractor responsibility . . . .”
In Mago Constr Co v Anderson, Eckstein & Westrick, Inc, unpublished opinion
per curiam of the Court of Appeals, issued November 8, 1996 (Docket No. 183479), a
case involving facts similar to the instant case, the Court of Appeals affirmed the trial
court’s order granting the defendant’s motion for summary disposition. The defendant
8
was a corporation of professional consulting engineers and the plaintiff was the
disappointed lowest bidder. The plaintiff sued the defendant for, among other things,
tortious interference with a business expectancy. The Court of Appeals explained,
“Where the ultimate decision to enter into a business relationship is a highly discretionary
decision reposed within the structure of a governmental entity, it becomes more difficult
for a plaintiff to prove that it had an expectancy of doing business with the governmental
body.” Mago, unpub op at 3. The Court of Appeals concluded that the plaintiff had no
valid business expectancy because
the award of the contract was a highly discretionary governmental activity
in which “too many factors [were] in play to be able to reasonably infer
that . . . plaintiff would have obtained the desired [contract].” Moreover,
the bidding instructions clearly informed plaintiff that the lowest bidder
was not guaranteed to receive the water main improvement contract. [Id.
(citation omitted; first alteration in the original).]
Although Mago is an unpublished and therefore nonbinding opinion of the Court of
Appeals,5 and, as the dissent points out, the facts in Mago are not identical to those in the
instant case, we nevertheless find its reasoning persuasive.
In the instant case, although the school district’s fiscal management policy
provided that the contract would be awarded to the “lowest responsible bidder,” the
school district itself retained the right to choose the “lowest responsible bidder.” The
policy provided a nonexhaustive list of factors for the school district to consider,
including its architect’s input. Therefore, just as in Mago, “the award of the contract was
5
MCR 7.215(C)(1) (“An unpublished opinion is not precedentially binding under the rule
of stare decisis.”).
9
a highly discretionary governmental activity in which ‘too many factors [were] in play to
be able to reasonably infer that . . . plaintiff [by virtue alone of being the lowest bidder]
would have obtained the desired [contract].’” Id. (citation omitted; first alteration in the
original). In addition, “the bidding instructions clearly informed plaintiff that the lowest
bidder was not guaranteed to receive the . . . contract.” Id. Because the school district
retained a broad discretionary right to reject the lowest bidder, plaintiff could not have
had a valid business expectancy.6 See also Talbot, 109 Mich. 657, and Leavy, 247 Mich.
447, both of which involved city charters that contained the same “lowest responsible
bidder” requirement and yet this Court held that the lowest bidder could not sue on the
basis of not being awarded the contract. See also EBI-Detroit, Inc, 279 Fed Appx at 343,
353, in which, although the city of Detroit “made it clear that the Belle Isle Project would
be awarded to the lowest bidder who was both responsive and responsible,” the United
States Court of Appeals for the Sixth Circuit held, in an unpublished and nonbinding
opinion, that the plaintiff, who was the lowest responsive bidder, “had a ‘unilateral hope’
of winning the contract, nothing more, so its tortious interference claim cannot proceed.”
(Citation omitted; emphasis omitted.)
6
The Court of Appeals majority relied, as does the dissent in this Court, on Joba Constr
Co, Inc v Burns & Roe, Inc, 121 Mich. App. 615; 329 NW2d 760 (1982), to support its
holding that a genuine issue of material fact exists regarding whether plaintiff had a valid
business expectancy. However, given that Joba “never explained the nature of the
evidence presented [in that case] that gave rise to a legitimate business expectancy,” we
do not find Joba to be a particularly helpful decision. Cedroni, 290 Mich App at 626
(K. F. KELLY, J., dissenting). Moreover, “[t]his Court, of course, is not bound by Court
of Appeals decisions.” Catalina Mktg Sales Corp v Dep’t of Treasury, 470 Mich. 13, 23;
678 NW2d 619 (2004). Contrary to the dissent’s assertion, we do not reject Joba simply
because it is not binding authority. See post at 8 n 1. Rather, we reject Joba, and adopt
Mago, because we find the analysis of Mago to be more persuasive than that of Joba.
10
We agree with the Court of Appeals dissent that the school district’s fiscal
management policy did not afford plaintiff a valid business expectancy. The school
district determined that plaintiff was not a “responsible contractor” in this specific
circumstance, and it is not our job to second-guess this determination. See Kundinger v
City of Saginaw, 132 Mich. 395, 405; 93 N.W. 914 (1903) (“The law does not give to
courts the power to substitute their judgment for the honest judgment of the board.”);
Warda v Flushing City Council, 472 Mich. 326, 333; 696 NW2d 671 (2005) (“Whether
the council acted wisely or unwisely, prudently or imprudently, is not for the
consideration or determination of this Court.”); Leavy, 247 Mich at 450, quoting 3
McQuillin, § 1340 (“‘The court will indulge the presumption that the authorities acted in
good faith in awarding the contract.’”).
“‘The exercise of discretion to accept or reject bids [involving public contracts]
will only be controlled by the courts when necessary to prevent fraud, injustice or the
violation of a trust.’” Leavy, 247 Mich at 450, quoting 3 McQuillin, § 1340. In this case,
there is no evidence that this Court’s intervention is “necessary to prevent fraud, injustice
or the violation of a trust.” Rather, as the Court of Appeals dissent explained, plaintiff “is
simply attempting to substitute [its] own judgment for that of the school district,” and
“[w]hile plaintiff may believe its . . . judgment to be superior to that of the school board,
the statute endows the school board, not plaintiff, with the discretion to award contracts
in the school board’s best interest.” Cedroni, 290 Mich App at 625 (K. F. KELLY, J.,
dissenting).7 Because plaintiff had no valid business expectancy, and because there is no
7
The dissent states that “plaintiff presented evidence that defendant’s opinion and
recommendation regarding plaintiff’s qualifications might have been improperly
11
evidence that this Court’s involvement is “necessary to prevent fraud, injustice or the
violation of a trust,” plaintiff’s claim of tortious interference with a business expectancy
must fail as a matter of law.8
IV. CONCLUSION
For these reasons, we reverse the judgment of the Court of Appeals and reinstate
the trial court’s order granting defendant’s motion for summary disposition. As the trial
court and the Court of Appeals dissent concluded, plaintiff had no valid business
expectancy for the purposes of sustaining a claim of tortious interference with a business
expectancy.
Stephen J. Markman
Robert P. Young, Jr.
Mary Beth Kelly
Brian K. Zahra
influenced by misplaced or unsupported animosity toward plaintiff related to problems
between plaintiff and defendant on a previous project.” Post at 6. However, the only
“evidence” that plaintiff has presented to support its allegation that defendant
“improperly influenced” the school district are plaintiff’s own statements.
8
Plaintiff argues that an architect should not be immune from liability for making false
statements about a low bidder. Similarly, the dissent argues that this Court should “not
protect a private entity that dishonestly influences the governmental entity.” Post at 12.
However, we do not hold that an architect is “immune from liability” for making false
statements about a low bidder. Instead, we simply hold that when the ultimate decision
to enter into a business relationship is a highly discretionary decision reposed by law
within a public entity, a disappointed low bidder does not have a valid business
expectancy for the purpose of sustaining a claim of tortious interference with a business
expectancy.
12
STATE OF MICHIGAN
SUPREME COURT
CEDRONI ASSOCIATES, INC,
Plaintiff-Appellee,
v No. 142339
TOMBLINSON, HARBURN
ASSOCIATES, ARCHITECTS &
PLANNERS, INC,
Defendant-Appellant.
CAVANAGH, J. (dissenting).
The issue presented in this case is whether plaintiff has produced sufficient
evidence to create a genuine issue of material fact regarding whether defendant tortiously
interfered with plaintiff’s valid business expectancy. I respectfully dissent from the
majority’s decision to disregard Joba Constr Co, Inc v Burns & Roe Inc, 121 Mich. App.
615; 329 NW2d 760 (1982). Instead, I would apply Joba and affirm the judgment of the
Court of Appeals because I do not believe the “disappointed bidder” rule should be
extended to the facts of this case.
I. FACTS AND PROCEDURAL HISTORY
In 2003, Davison Community Schools decided to renovate two elementary schools
and contracted with defendant for architectural and engineering services. Under the
contract, defendant was to assist the school district during the competitive bidding
process “by reviewing and evaluating bid applications, investigating competing
contractors and their references, expressing opinions and views on contractor competence
and workmanship, and making recommendations regarding which contractor should be
awarded the project.” Cedroni Assoc, Inc v Tomblinson, Harburn Assoc, Architects &
Planners, Inc, 290 Mich. App. 577, 583; 802 NW2d 682 (2010). Jackie Hoist was
defendant’s designated representative for the project.
The school district advertised for bids. With respect to the bidding process, the
school district’s fiscal management policy (FMP) provided that the school district
reserved the right to reject any or all bids. The FMP also stated that “[b]ids shall be
awarded in compliance with the applicable bidding obligations imposed by law to the
‘lowest responsible bidder.’” The FMP defined “lowest responsible bidder” as
[t]he Responsible Contractor that has submitted a fully complete and
responsive bid that provides the lowest net dollar cost for all labor and
materials required for the complete performance of the work of the
Construction Project let for bid. Such bid must satisfy the requirements of
all applicable local, state, and federal laws, this Policy, any administrative
rules associated with this Policy developed by the Superintendent at the
Board’s direction, and bid documents used to solicit bids, and any other
guidelines and specifications required for the Construction Project.
Because a bidder with the net lowest dollar cost bid may not be a
Responsible Contractor, the lowest dollar cost bidder may not always
receive award of the bid.
The FMP defines the “Responsible Contractor” as
[a] contractor determined by the Board to be sufficiently qualified to
satisfactorily perform the Construction Project, in accordance with all
applicable contractual and legal requirements. The Board’s determination
shall be based upon: (1) an overall review of the Responsibility Criteria
listed below and the contractor’s responses, or failure to respond, to same;
(2) the contractor’s compliance with this Policy and all applicable local,
state and federal laws; (3) the input of the District’s architect(s) [here
defendant] and/or construction manager(s), if any; (4) review of the
2
contractor’s proposed subcontractors; and (5) other relevant factors
particular to the Construction Project.
It is undisputed that plaintiff was the lowest bidder, having submitted a bid that
was $50,000 less than the next-lowest bid, and plaintiff was aware that it had provided
the lowest bid. However, Hoist sent a letter to the school district recommending that the
district not accept plaintiff’s bid and instead accept the bid of the next-lowest bidder, US
Construction and Design Services, LLC. Hoist’s notes indicated that while several
references provided positive reviews of plaintiff’s work, other references provided
negative feedback and that Hoist had had personal negative experiences with plaintiff on
a previous project. Plaintiff alleges that Hoist’s notes regarding various references’
comments were untrue. Additionally, plaintiff alleges that defendant’s recommendation
that the school district reject plaintiff’s bid was born out of a desire to punish plaintiff for
a dispute between defendant and plaintiff on the previous “Holly Academy project” that
resulted in defendant’s discharge from that project. The record also includes an affidavit
and letter from plaintiff’s president, Richard Cedroni, challenging the negative opinions
in Hoist’s notes and stating that plaintiff had never been removed from a project or
received a poor review in the past.
The school board’s review committee endorsed defendant’s recommendation to
reject plaintiff’s bid, and the school district awarded the project to US Construction,
explaining that its decision was made in reliance on defendant’s recommendation.
Plaintiff filed a complaint against defendant alleging tortious interference with
prospective economic relations, arguing that it had “a legitimate expectancy in obtaining
a contract to complete work for the [school] Project,” that defendant had “wrongfully
3
persuaded the School District” to reject plaintiff’s bid, and that defendant had
“intentionally interfered with the expectant business relationship . . . by wrongfully
claiming that [plaintiff] was unqualified to perform” the necessary work. Defendant
moved for summary disposition, which was eventually granted under MCR 2.116(C)(10).
II. STANDARD OF REVIEW
This Court reviews de novo a trial court’s decision on a motion for summary
disposition de novo. Shepherd Montessori Ctr Milan v Ann Arbor Charter Twp, 486
Mich. 311, 317; 783 NW2d 695 (2010). A motion brought under MCR 2.116(C)(10) tests
the factual support for a party’s cause of action. Skinner v Square D Co, 445 Mich. 153,
161; 516 NW2d 475 (1994). A trial court may grant a motion for summary disposition
under MCR 2.116(C)(10) if the pleadings, affidavits, and other documentary evidence,
when viewed in a light most favorable to the nonmoving party, show that there is no
genuine issue with respect to any material fact. Quinto v Cross & Peters Co, 451 Mich.
358, 362; 547 NW2d 314 (1996). The trial court’s task in reviewing the motion entails
consideration of the record evidence and all reasonable inferences arising from that
evidence. Skinner, 445 Mich at 161.
III. ANALYSIS
The elements for a claim of tortious interference with advantageous business
relationships or prospective economic relations are
(1) the existence of a valid business relationship or expectancy; (2)
knowledge of the relationship or expectancy on the part of the interferer;
(3) an intentional interference causing a breach or termination of the
relationship or expectancy; and (4) resulting damage to the party whose
relationship or expectancy has been disrupted. [Joba, 121 Mich App at
634.]
4
At issue in this case is whether plaintiff had a “valid business expectancy.” To
avoid summary disposition, a plaintiff must assert “a specific and reasonable prospective
economic advantage that was interfered with.” Id. The business expectation must be
proved “with some degree of specificity” so that it is a “realistic expectation and not
merely wishful thinking,” “mere hope,” or “the innate optimism of the salesman.” Id. at
634-635 (quotation marks and citations omitted). However, a plaintiff “need not
demonstrate a guaranteed relationship” given the prospective nature of the expectation at
issue. Id. at 635 (quotation marks and citations omitted); see, also, Trepel v Pontiac
Osteopathic Hosp, 135 Mich. App. 361, 377; 354 NW2d 341 (1984).
Although it is generally difficult to claim that a bid—which, at its heart is an offer
to perform the work for a specified price—can generate a realistic expectation in the
bidder that it will be awarded the project, plaintiff did not merely submit a bid in this
case. Rather, plaintiff was informed that it was the lowest bidder. In my view, once a
qualified bidder has submitted a conforming bid and knows that it has provided the
lowest bid, there might be a genuine issue of material fact regarding whether the bidder’s
expectation reasonably elevated from a “mere hope” to a “realistic expectation” that it
would be awarded the project, especially in this case, given that the bidding materials
provided by the school district stated that the project “shall” be awarded to the “lowest
responsible bidder.” See Joba, 121 Mich App at 635 (concluding that “the lowest
qualified bidder” has a “legitimate expectancy in obtaining the contracts”).
Accordingly, given that plaintiff was aware of its status as the lowest bidder, and
keeping in mind that plaintiff “need not demonstrate a guaranteed relationship,” id.
(quotation marks and citations omitted), I believe that plaintiff might have had a valid
5
business expectation as long as plaintiff was able to establish a genuine issue of material
fact regarding whether it was a responsible bidder.
Although defendant’s investigation and opinion of plaintiff’s qualifications are
certainly valid considerations in determining whether plaintiff was a responsible bidder,
the parties presented conflicting evidence regarding plaintiff’s qualifications. While I do
not think that the mere fact that plaintiff believed that it was qualified is sufficient to
avoid summary disposition on this issue, plaintiff presented evidence that defendant’s
opinion and recommendation regarding plaintiff’s qualifications might have been
improperly influenced by misplaced or unsupported animosity toward plaintiff related to
problems between plaintiff and defendant on a previous project. Plaintiff’s evidence
included Hoist’s allegedly untrue notes regarding plaintiff’s qualifications, which
included reviews from individuals who had previously worked with plaintiff, and Richard
Cedroni’s affidavit and letter showing that plaintiff had never been removed from a
project or received a poor review in the past. This evidence establishes that plaintiff had
a realistic expectation that it would qualify as a responsible bidder. This conclusion, in
turn, gives rise to a question of material fact about whether plaintiff had a valid business
expectancy in being awarded the contract. Thus, because the evidence must be viewed in
the light most favorable to plaintiff as the nonmoving party, and because determining
whether plaintiff was “qualified” or “responsible” is largely a question of fact on which
both parties have presented conflicting evidence, I would affirm the judgment of the
Court of Appeals.
As the majority notes, however, a specific line of cases beginning with Talbot
Paving Co v Detroit, 109 Mich. 657; 67 N.W. 979 (1896), generally hold that a
6
disappointed bidder on a public contract does not have a cause of action regardless of the
bidder’s qualifications or the value of the bid offered. See, also, Kundinger v City of
Saginaw, 132 Mich. 395, 405; 93 N.W. 914 (1903) (stating that courts cannot “substitute
their judgment for the honest judgment of the [governmental entity]”). Generally, the
theory supporting this rule is that competitive bidding is designed to benefit the taxpayers
rather than the bidders. See Lasky v City of Bad Axe, 352 Mich. 272, 276; 89 NW2d 520
(1958).
Notably, however, the “disappointed bidder” rule developed by this line of cases
has generally been applied only when the plaintiff files suit against the contracting
governmental entity rather than another private entity. Indeed, in Joba, 121 Mich. App.
615, the Court of Appeals did not apply the disappointed-bidder rule in a dispute between
two private entities under circumstances very similar to this case.
In Joba, the plaintiff was the lowest bidder for a contract with the city of Detroit.
The defendant had been retained by the city to evaluate bids and make recommendations
regarding which bidders to select for certain contracts, including the contract on which
the plaintiff was the lowest bidder. The defendant recommended that the city not accept
the plaintiff’s bid because, in the defendant’s opinion, the plaintiff was unqualified to
perform the contract. However, just as in this case, there was also evidence presented
that animosity existed between the defendant and the plaintiff, partially resulting from
past interaction on a different project. The case went to trial, the jury returned a verdict
in favor of the plaintiff, and the defendant sought a directed verdict, which the trial court
denied. Accordingly, the Joba Court considered the defendant’s appeal of the trial
court’s denial of a directed verdict in the light most favorable to the plaintiff as the
7
nonmoving party, and it concluded that the “plaintiff presented sufficient evidence to
create a question of fact as to whether it was the lowest qualified bidder and thus had a
legitimate expectancy in obtaining the contracts . . . .” Id. at 635. As previously stated,
Joba did not apply the disappointed-bidder rule to the dispute between the two private
entities.
The majority, however, summarily discards Joba as not “particularly helpful,”
ante at 10 n 6, and instead relies on Mago Constr Co v Anderson, Eckstein & Westrick,
Inc, unpublished opinion per curiam of the Court of Appeals, issued November 8, 1996
(Docket No. 183479), to support its argument that the disappointed-bidder rule should
apply in this case. Mago, however, is unpersuasive for a variety of reasons. First, to the
extent that Mago is inconsistent with Joba, Joba should be given greater weight because,
as the majority concedes, “[a]n unpublished opinion is not precedentially binding under
the rule of stare decisis.” MCR 7.215(C)(1).1 Second, regardless of the relative
precedential value of the two opinions, Mago is distinguishable on its facts because,
1
I recognize that, under MCR 7.215(J), the Court of Appeals was not bound to follow
Joba, because Joba was issued before November 1, 1990. However, when faced with
two nonbinding opinions reaching different results on the same issue, the Court of
Appeals properly gave more weight to the published opinion. Moreover, Mago is
distinguishable from this case for the reasons discussed later in this opinion. Finally, the
majority’s decision to reject Joba in part because this Court is not bound by the Court of
Appeals’ opinions, see ante at 10 n 6, citing Catalina Mktg Sales Corp v Dep’t of
Treasury, 470 Mich. 13, 23; 678 NW2d 619 (2004), is perplexing given the majority’s
reliance on a single unpersuasive and unpublished Court of Appeals opinion to extend the
disappointed-bidder rule beyond its traditional scope. The majority’s conclusion that
Mago is more persuasive than Joba is equally perplexing, given that Joba is exactly on
point and consistent with the traditional scope of the disappointed-bidder rule, while
Mago is entirely distinguishable for the reasons discussed later in this opinion.
8
unlike plaintiff in this case, the plaintiff in Mago submitted a nonconforming bid.
Accordingly, Mago held that “the fact that plaintiff submitted a nonconforming bid
should have negated any expectation that it might have had regarding the possibility of
receiving the contract.” Mago, unpub op at 3.
Likewise, the majority’s reliance on an unpublished opinion of the United States
Court of Appeals for the Sixth Circuit, EBI-Detroit, Inc v Detroit, 279 Fed Appx 340
(CA 6, 2008), in support of its extension of the disappointed-bidder rule to a dispute
between two private entities is misplaced. Specifically, EBI-Detroit, 279 Fed Appx at
352-353, cited Timmons v Bone, unpublished opinion per curiam of the Court of Appeals,
issued April 23, 2002 (Docket No. 228942), p 2, which had rejected a tortious-
interference claim because the plaintiff “did not meet the minimum qualifications for
obtaining the . . . contract . . . .” Accordingly, all the cases cited by the majority in
support of its decision to extend the disappointed-bidder rule are both unpublished and
distinguishable because the plaintiffs in those cases failed to satisfy the requirements for
submitting a conforming bid. While I agree that submission of a nonconforming bid
might be insufficient, as a matter of law, to create a valid business expectancy for
purposes of a claim of tortious interference, there is nothing in the record indicating that
plaintiff’s bid in this case was nonconforming. Accordingly, the majority’s position is
without support in the caselaw. The Court of Appeals’ opinion in this case, however, is
fully supported by the directly applicable opinion in Joba.
Furthermore, unlike the majority’s holding in this case, Joba’s decision to limit the
disappointed-bidder rule to suits against governmental entities is consistent with the
purpose of that rule. Specifically, by declining to provide private entities with the same
9
protection from suit granted to governmental entities, Joba ensures that taxpayers obtain
the best price possible for public contracts, free of improper interference by private
entities. As evidenced by the facts of Joba and, potentially, the facts of this case, private
entities may be motivated to make contracting decisions for reasons that are not
consistent with the purpose of competitive bidding for government contracts. Because
these potential motivations may not result in the selection of the “lowest responsible
bidder,” they are contrary to the purpose of the disappointed-bidder rule: to protect
taxpayers.2
Finally, this Court’s opinions establishing the disappointed-bidder rule do not
mandate the majority’s result. To begin with, the rule should not apply to protect private
entities for the reasons previously discussed. Moreover, in Kundinger, 132 Mich at 405,
this Court explained that courts cannot “substitute their judgment for the honest judgment
of the [governmental entity].” (Emphasis added.) Similarly, in Leavy v City of Jackson,
247 Mich. 447, 450; 226 N.W. 214 (1929), quoting 3 McQuillin, Municipal Corporations
2
The majority misconstrues my discussion of the purpose of the disappointed-bidder
rule. See ante at 6 n 3. As stated previously, in my view the disappointed-bidder rule
should not be extended to protect private entities and, thus, should not apply in this case.
I merely discuss the purpose of the disappointed-bidder rule to show that, by extending
the rule’s protections beyond governmental entities, the majority’s holding is contrary to
the purpose of the very rule that it applies. Stated differently, the purpose underlying
competitive bidding on public contracts and the disappointed-bidder rule is to ensure that
taxpayers obtain the best possible price from a qualified contractor. I agree with the
majority that the Legislature has determined that the governmental entity is generally in
the best position to carry out that purpose. However, the governmental entity is deprived
of its ability to carry out that purpose when a private entity, such as defendant in this
case, allegedly acts with dishonesty and bad faith to interfere with the governmental
entity’s efforts.
10
(2d ed), § 1340, this Court stated that “‘[t]he court will indulge the presumption that the
authorities acted in good faith in awarding the contract.’” (Emphasis added.)
Accordingly, the disappointed-bidder rule is premised on a governmental entity’s ability
to exercise “honest” and “good faith” discretion.3
However, when a private entity intentionally provides inaccurate or misleading
information to a governmental entity and the governmental entity in turn relies on that
information in making a contracting decision, the private entity has injected dishonesty
and bad faith into the decision-making process. Accordingly, the bidding process results
in an “injustice,” and courts may intervene without impermissibly interfering with the
governmental entity’s exercise of discretion in making contracting decisions. See Leavy,
247 Mich at 450 (stating that courts may intervene in the public bidding process to
prevent an “injustice”) (quotation marks and citation omitted). Stated more simply, if
plaintiff had lost the contract in this case solely because the school district had exercised
its discretion free of improper influence and selected a bidder other than plaintiff, I would
agree that plaintiff has no claim. However, because plaintiff has established a genuine
issue of material fact in regard to whether it lost the contract because defendant acted
dishonestly and in bad faith by improperly interfering with the school district’s decision, I
3
Plaintiff’s letter to the school board, which the majority cites, see ante at 7, merely
recognizes the school district’s discretion in selecting a bidder. The letter cannot be
reasonably interpreted as implying that plaintiff consented to defendant’s alleged efforts
to improperly influence the school district’s exercise of that discretion.
11
believe that plaintiff may have a valid claim for tortious interference under Joba.4 Thus,
in my view, defendant is not entitled to summary disposition.
Accordingly, although a governmental entity is entitled to deference regarding its
discretionary selection of a bidder under this Court’s jurisprudence, that caselaw does not
protect a private entity that dishonestly influences the governmental entity. All the
various documents and statutes that the majority cites to establish the fact that the school
district in this case had the authority to reject any and all bids are rooted in deference to
the school district’s discretion in making contracting decisions. However, this case raises
the separate issue of whether the deference afforded to governmental entities should be
extended to protect private entities, even when the private entity dishonestly influences
the governmental entity’s discretion. Moreover, because this case is at the summary
disposition stage, we must view the evidence in the light most favorable to plaintiff as the
nonmoving party. Doing so, I believe that plaintiff has presented sufficient evidence to
create a genuine issue of material fact regarding whether plaintiff met the definition of
“lowest responsible bidder” as well as whether defendant’s recommendation to the school
district was the result of a personal vendetta against plaintiff. Thus, because Joba is the
4
Even the Court of Appeals dissent in this case recognized that “a plaintiff does have a
legitimate expectancy that the bid it submits will be evaluated fairly and openly and will
be subject to the same or similar scrutiny as other bids, so that the plaintiff’s bid stands
on an even playing field with all other bids.” Cedroni, 290 Mich App at 623 (K. F.
KELLY, J., dissenting) (emphasis added).
12
most relevant published opinion, and Joba’s 30-year-old holding is consistent with the
purpose of the disappointed-bidder rule, I would apply Joba and affirm the judgment of
the Court of Appeals.
Michael F. Cavanagh
Marilyn Kelly
Diane M. Hathaway
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