COURT OF APPEALS
DECISION
DATED AND FILED
May 3, 2011
A. John Voelker
Acting Clerk of Court of Appeals
Appeal No.
NOTICE
This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
A party may file with the Supreme Court a
petition to review an adverse decision by the
Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.
Cir. Ct. No. 2008CV164
2009AP3036
STATE OF WISCONSIN
IN COURT OF APPEALS
DISTRICT III
NORTH TWIN BUILDERS, LLC,
PLAINTIFF-RESPONDENT,
V.
TOWN OF PHELPS,
DEFENDANT-APPELLANT.
APPEAL from a judgment of the circuit court for Vilas County:
NEAL A. NIELSEN III, Judge. Affirmed.
Before Hoover, P.J., Peterson and Brunner, JJ.
¶1
BRUNNER, J. The Town of Phelps appeals a summary judgment
awarding North Twin Builders, LLC, compensatory damages for the Town’s
violation of WIS. STAT. § 60.47, which governs public contracts and competitive
No. 2009AP3036
bidding for towns.1 The Town asserts North Twin Builders is not entitled to
recover the costs of preparing its unsuccessful bid because it did not first obtain
injunctive relief.
We conclude that a disappointed bidder may recover bid
preparation expenses for a violation of the competitive bidding statute regardless
of whether it has sought injunctive relief. Accordingly, we affirm.
BACKGROUND
¶2
In January 2008, the Town determined its town hall needed repairs.
The Town published notices seeking bids for the project on April 2 and April 9,
2008. Bids were to be submitted to the town clerk no later than 5 p.m. on
April 14, 2008. There is no dispute that the timing of the notices violated WIS.
STAT. § 60.47(2)(b).2
¶3
During the notice period, the Town repeatedly changed the scope of
the project, including alterations to the heating, ventilating, and air conditioning
system, the support structures underneath the library, and a front concrete
stairway.
The Town’s engineering firm sent updated specifications to some
interested bidders, but not others. North Twin Builders, one interested bidder,
received the final specification changes on Saturday, April 12, two days before
bids were due.
1
John Volkmann, North Twin Builders’ owner, attempted to
All references to the Wisconsin Statutes are to the 2009-10 version unless otherwise
noted.
2
WISCONSIN STAT. § 60.47(2)(b) states that a town may not enter into a public contract
with a value of more than $25,000 unless a town official “advertises for proposals to perform the
terms of the public contract by publishing a class 2 notice under ch. 985.” WISCONSIN STAT.
§ 985.07(2), in turn, states that all notices “designated as class 2 notices require 2 insertions.”
“Insertion” means “once each week for consecutive weeks, the last of which shall be at least one
week before the act or event, unless otherwise specified by law.” WIS. STAT. § 985.01(1m)
(emphasis added).
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No. 2009AP3036
incorporate the changes into his company’s bid on Monday, April 14, but could
not obtain a cost estimate for stairway railings on such short notice. Accordingly,
North Twin Builders’ bid did not include alterations to the concrete stairway.
¶4
The Town received three bids for the project. Bids submitted by
North Twin Builders and another bidder were rejected as incomplete. At an
April 21 meeting, the town board awarded the project to the only remaining
bidder, Superior Design & Construction. The Town and Superior Design signed a
contract the same day. Work on the town hall started within a week.3
¶5
Volkmann did not learn that his company’s bid had been rejected
until April 23. In an effort to gather additional information about his company’s
failed bid, Volkmann attended town board meetings, filed public record requests,
and asked the board to review its decision. North Twin Builders ultimately filed
suit on June 10, 2008, seeking injunctive relief to prevent further work on the town
hall, and damages equal to the costs of preparing the failed bid.
¶6
On June 17, 2008, North Twin Builders filed a motion for a
temporary injunction. Before conducting a motion hearing, the circuit court held a
telephone conference with the parties, during which the Town represented that the
town hall project was significantly underway and nearing completion.4 Counsel
for North Twin Builders “essentially acknowledged that status and informally
withdrew the request for [a] restraining order ….”
Nonetheless, the court
3
The Town was apparently attempting to complete the town hall project before the
summer tourist season began.
4
No transcript of the telephone conference was made. The circuit court later made a
record of the discussion.
3
No. 2009AP3036
observed that the project had an unusually “tight window of completion from the
time that the bid was let,” and indicated that it would have granted an ex parte
restraining order if the contract had not yet been let by the Town, or if Superior
Design had not yet begun performance.
¶7
The Town filed a motion to dismiss and, later, a motion for summary
judgment. In both motions, the Town asserted that under controlling case law, a
disappointed bidder must obtain injunctive relief to halt a public project before it
can recover the cost of preparing its unsuccessful bid.
¶8
The circuit court denied both motions. It concluded that existing
case law had not yet determined whether an unsuccessful bidder could recover bid
preparation expenses without first obtaining injunctive relief. The court then
concluded that, for violations of the competitive bidding statute, the public interest
is served by allowing an unsuccessful bidder to recover the costs of preparing its
bid:
[W]hat is really most important, is making certain that
municipalities and other entities follow [the competitive
bidding statute] correctly. And therefore [recovery of bid
preparation expenses] should not turn on whether …
injunctive relief is granted …. [Costs of preparation]
should be available to an unsuccessful bidder who is
essentially acting as an advocate in the public interest to
enforce those laws.
….
[The public benefits from the] elimination of fraud and
collusion certainly, and most importantly … the public has
some assurance that it’s receiving the best work and
materials at the most reasonable price.
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No. 2009AP3036
A contrary rule, the court noted, would work particular injustice in a case like this,
where “a contract of relatively moderate amount … was let with the understanding
that the construction would commence and complete in a very brief time period.”
¶9
The parties then stipulated to the amount of damages—$3,000—and
the court entered judgment for North Twin Builders. The Town appeals the denial
of its summary judgment motion.
DISCUSSION
¶10
We review a grant of summary judgment de novo. See Tews v.
NHI, LLC, 2010 WI 137, ¶40, 330 Wis. 2d 389, 793 N.W.2d 860. Summary
judgment is appropriate where there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2).
Here, the parties agree there are no genuine issues of material fact; the sole
question is whether North Twin Builders was entitled to judgment as a matter of
law.
¶11
This appeal presents a single issue: whether North Twin Builders, as
a disappointed bidder, must first obtain injunctive relief for procedural violations
of the competitive bidding statute before pursuing as damages the costs of
preparing its failed bid. The Town, noting that North Twin Builders withdrew its
injunction request, contends three cases establish such a requirement: Aqua-Tech,
Inc. v. Como Lake Protection & Rehabilitation District, 71 Wis. 2d 541, 239
N.W.2d 25 (1976); D.M.K., Inc. v. Town of Pittsfield, 2006 WI App 40, 290
Wis. 2d 474, 711 N.W.2d 672; and PRN Associates LLC v. DOA, 2009 WI 53,
317 Wis. 2d 656, 766 N.W.2d 559.
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No. 2009AP3036
¶12
Our supreme court first discussed a disappointed bidder’s available
remedies in Aqua-Tech.
In that case, Aqua-Tech, the disappointed bidder,
obtained an ex parte injunction preventing the Como Lake district from awarding a
contract to the successful bidder. Aqua-Tech, 71 Wis. 2d at 545. The circuit
court denied Aqua-Tech’s request for a temporary injunction, and Aqua-Tech
immediately appealed and obtained a stay of the court’s order vacating the
ex parte injunction. Id.
¶13
The district urged our supreme court to affirm, arguing Aqua-Tech
had no remedy for the alleged statutory violation. Id. at 549. Our supreme court
held that a public bidding authority cannot be compelled to award the contract to
the lowest bidder. Id. at 549-50. Nor can a disappointed bidder recover lost
profits.
Id. at 553-54.
However, the court declined to entirely shield the
competitive bidding process from judicial review. Id. at 550-51. A disappointed
bidder may pursue, as an ultimate form of relief, a permanent injunction
prohibiting the contract from being awarded to another party.5 Id. at 551-52. If
successful in its claim for injunctive relief, the court held that Aqua-Tech could
also “recover as damages its reasonable and necessary expenditures in preparing
its bid, plus the costs of obtaining the bonds required by the specifications ….” Id.
at 553-54.
¶14
We do not read Aqua-Tech as tying the recovery of bid preparation
costs to the successful pursuit of injunctive relief. Aqua-Tech obtained an ex parte
injunction and a stay of the circuit court order vacating that injunction.
5
An enjoined municipality may then choose to either award the contract to the
disappointed bidder or call for new bids. Aqua-Tech, Inc. v. Como Lake Prot. & Rehab. Dist.,
71 Wis. 2d 541, 552, 239 N.W.2d 25 (1976).
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No. 2009AP3036
Accordingly, there was no need for our supreme court to determine whether AquaTech could recover bid preparation expenses without first obtaining injunctive
relief. In addition, the court’s opinion does not suggest that Aqua-Tech brought an
independent claim for bid preparation costs; the court merely permitted AquaTech to recover those costs as a component of its claim for a permanent
injunction. Aqua-Tech establishes that a disappointed bidder may recover its bid
preparation costs, but does not answer the question presented in this appeal.
¶15
The Town argues that any ambiguity in Aqua-Tech regarding the
need for injunctive relief was eliminated by D.M.K. In that case, D.M.K., the
disappointed bidder, sought damages for lost profits. D.M.K., 290 Wis. 2d 474,
¶9. Although acknowledging Aqua-Tech’s holding, D.M.K. asserted our supreme
court barred lost profits only because Aqua-Tech did not seek that form of relief.
We rejected D.M.K’s argument, holding that Aqua-Tech “reflects a consideration
of the public policy rationale underlying the competitive bidding statutes.”
D.M.K., 290 Wis. 2d 474, ¶26.
¶16
D.M.K. does not establish that a disappointed bidder must obtain
injunctive relief before recovering its bid preparation costs. Instead, our decision
focused on D.M.K.’s claim for lost profits:
By not seeking an injunction, D.M.K. has allowed the
disputed projects to go forward with other contractors and
sought to recover its purported losses with a lawsuit
seeking damages. If D.M.K. were successful in that
scenario, the Town and its taxpayers would pay D.M.K.’s
$216,000 in lost profits in addition to the contract price
paid to the contractor who performed the work. On its
face, this result fails to benefit or protect the public.
Id. We concluded that D.M.K. could recoup lost profits only by obtaining an
injunction, in which case the municipality could either relet the contract or award
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No. 2009AP3036
it to D.M.K. Id., ¶27. Our only mention of bid preparation expenses merely
echoed the ambiguous language of Aqua-Tech. Id.
¶17
The final case on which the Town relies, PRN Associates, is also not
on point. There, Prism, the disappointed bidder on a university project, sought
supreme court review of a decision dismissing as moot its petition for judicial
review of an administrative decision. PRN Assocs., 317 Wis. 2d 656, ¶28. To
determine whether Prism’s petition was moot, our supreme court examined the
two remedies Prism sought: “money damages for ‘the value of its winning
proposal’ … [and] award of the contract.” Id., ¶31.
¶18
PRN Associates’ discussion of available remedies does not establish
that a disappointed bidder must receive injunctive relief before recovering its bid
preparation costs. Following the rationale of Aqua-Tech and D.M.K., the court
rejected Prism’s claim for lost profits, concluding, “Taxpayers are not protected
when any governmental body pays twice for the performance of one contract .…”
Id., ¶38. The court also concluded Prism could not be awarded the contract
because the contract had been fully performed by the successful bidder: “It makes
no sense to award a contract for building a project which has already been
completed.” Id., ¶40. To preserve its interest in the contract, the court observed
that Prism should have sought an injunction. Id., ¶48. However, at no point did
the court condition recovery of bid preparation expenses on the successful pursuit
of an injunction.
¶19
Having concluded that existing case law does not foreclose recovery
of bid preparation expenses in the absence of an injunction, we must determine
whether such relief is consistent with the public policy underlying the competitive
bidding statute. “Statutory bidding requirements are designed to prevent fraud,
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No. 2009AP3036
collusion, favoritism and improvidence in the administration of public business, as
well as to insure that the public receives the best work or supplies at the most
reasonable price practicable.” Aqua-Tech, 71 Wis. 2d at 550. As the circuit court
recognized, the statute is designed not for the benefit of individual bidders, but for
the benefit of the public. Id.; D.M.K., 290 Wis. 2d 474, ¶26. Citing the statute’s
public purpose, our supreme court has concluded that a public bidding authority’s
exercise of discretion must be subject to judicial review. Aqua-Tech, 71 Wis. 2d
at 550-51.
¶20
Accepting the rule proposed by the Town would foreclose judicial
review in a case, like this one, where the municipality violates the competitive
bidding statute but quickly signs a contract and directs the successful bidder to
begin performance.
Generally, injunctive relief becomes unavailable when a
public contract is actually awarded to a bidder. PRN Assocs., 317 Wis. 2d 656,
¶39. In recognition of the potential harshness caused by this rule, “an injunction
may still be permissible before performance of the contract begins.” D.M.K., 290
Wis. 2d 474, ¶27 n.6. As the circuit court noted, this case presents a novel
situation in which a disappointed bidder moved quickly to preserve its remedies
but nonetheless failed to obtain an injunction before performance began.6 The
6
Bidders must “zealously protect” their interest in a public contract. Aqua-Tech, 71
Wis. 2d at 553. The bidder, who has expended time and money in preparing its bid, “is in a
particularly good position to challenge the bidding authority’s action and thereby protect the
rights of the public.” Id. As such, nothing in this opinion should be read as allowing a
disappointed bidder to unreasonably delay seeking relief. As Wisconsin courts have repeatedly
emphasized, a disappointed bidder must move quickly to preserve its interest in a public contract.
See PRN Assocs. LLC v. DOA, 2009 WI 53, ¶¶42-43, 317 Wis. 2d 656, 766 N.W.2d 559;
D.M.K., Inc. v. Town of Pittsfield, 2006 WI App 40, ¶¶26-27, 290 Wis. 2d 474, 711 N.W.2d 672;
Aqua-Tech, 71 Wis. 2d at 552. In this case, the circuit court found “that [North Twin Builders]
acted with reasonable dispatch in seeking relief.” The circuit court further observed that “under
the circumstances it would be unlikely for any member of the public to … fully appreciate,
discover, and prosecute a violation of the bid laws to any significantly faster degree than [North
Twin Builders] did here.”
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No. 2009AP3036
public interest is not served by allowing municipalities to circumvent the
competitive bidding statute by rapidly signing a contract and directing the start of
performance.
¶21
Accordingly, the circuit court correctly determined that the public
interest is served by allowing disappointed bidders to recover expenses for
preparing their failed bids even in the absence of injunctive relief. Allowing
recovery of such costs is not synonymous with requiring the public bidding
authority to “pay[] twice for the performance of one contract ….” See PRN
Assocs., 317 Wis. 2d 656, ¶38. Instead, it is a limited remedy that encourages
bidders to fulfill their role as advocates for the public interest. Allowing such
damages also encourages public bidding authorities to fully comply with statutory
bidding requirements.
By the Court.—Judgment affirmed.
Recommended for publication in the official reports.
10
