Kim Const. Co., Inc. v. Board of Trustees of Village of Mundelein

• Decision Date: 31 January 1994
• Docket Number: No. 93-1414,93-1414
• Citation: 14 F.3d 1243
• Parties: KIM CONSTRUCTION COMPANY, INC., Plaintiff-Appellant, v. BOARD OF TRUSTEES OF the VILLAGE OF MUNDELEIN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1243

14 F.3d 1243

KIM CONSTRUCTION COMPANY, INC., Plaintiff-Appellant, v. BOARD OF TRUSTEES OF the VILLAGE OF MUNDELEIN, Defendant-Appellee.

No. 93-1414.

United States Court of Appeals Seventh Circuit.

Argued Oct. 6, 1993.

Decided Jan. 31, 1994.

Stephen C. Schulte, Winston & Strawn, Chicago, IL, Michael J. Abrams, Stephen B. Sutton (argued), Gage & Tucker, Kansas City, MO, for plaintiff-appellant.

Charles F. Marino, David M. Marino (argued), Chicago, IL, for defendant-appellee.

Before PELL, MANION, and ROVNER, Circuit Judges.

MANION, Circuit Judge.

In response to an invitation for bids by the Board of Trustees of the Village of Mundelein (the "Board") for the construction of a sanitary sewer line, the Kim Construction Co. ("Kim") submitted a timely bid that met the Board's specifications for the project. Because two lower bids submitted in response to that invitation contained irregularities, the Board decided to reject all bids and call for a rebidding on the project. Kim did not participate in the rebidding. The Board subsequently awarded the contract to the lowest responsible bidder after the second round of bids. Kim then filed suit, claiming that it had been deprived of a constitutionally protected property interest without due process of law. The district court granted the Board's motion for summary judgment. We agree that Illinois law does not create the property interest that Kim seeks to vindicate, and therefore affirm.

I. Background

In March 1992, the Board ran an advertisement soliciting bids for a sanitary sewer project, which included the following provision: "The Board of Trustees reserves the right to reject any and all bids and to waive technicalities. Unless the bids are rejected for good cause, award of a contract shall be made to the lowest responsible and responsive bidder." The advertisement also specified that the project was to be funded in part by a grant from the Illinois Environmental Protection Agency (IEPA), and that the contract award would be subject to the IEPA's prior approval. Four bids, including Kim's, were submitted in response to this advertisement. After examining the bids, the village engineer determined that the two lowest bids contained irregularities, and that Kim's bid was the lowest bid which fully conformed to project specifications. Rather than waiving the irregularities and awarding the contract to the lowest bidder, the Board, with the IEPA's concurrence, rejected all bids and advertised for a second round of bidding on the project. No substantive changes were made in project specifications between the first and second round of bidding; thus both rounds were on the same project. In response to this decision, Kim asserted that the Board's action was unauthorized, and requested that it be awarded the contract as the lowest responsible and responsive bidder. Approximately two weeks later, the Board adopted a resolution confirming its rejection of all first round bids and its authorization of a rebidding on the project. Kim refused to participate in the rebidding.

At the close of the second round of bidding in September 1992, the Board awarded the contract to the lowest responsible bidder, whose bid was substantially lower than that submitted by Kim in the first round. Kim then filed an action pursuant to 42 U.S.C. Sec. 1983, seeking to prevent the Board from rejecting all first round bids and from awarding the contract to any party which submitted a second round bid. The district court denied Kim's request for injunctive relief on the basis of its failure to show that it had a reasonable chance of prevailing on the merits. Kim then filed an amended complaint seeking money damages in compensation for the losses it had incurred due to the Board's rejection of its first round bid. The district court granted summary judgment in favor of the Board. Kim appeals.

II. Analysis

Kim's claim that it was deprived of a property interest in violation of the Fourteenth Amendment requires two separate inquiries: first, whether Kim possessed a constitutionally protected property interest in the contract award, and second, whether Kim was deprived of that interest without due process. See Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 538, 105 S.Ct. 1487, 1491, 84 L.Ed.2d 494 (1985); Listenbee v. City of Milwaukee, 976 F.2d 348, 351 (7th Cir.1992). Unless Kim can establish as a matter of federal constitutional law that its claim is based on a protected property interest, the issue of whether it was afforded due process before being deprived of that interest does not arise. See Loudermill, 470 U.S. at 538, 541, 105 S.Ct. at 1491, 1492-93; Listenbee, 976 F.2d at 351; Szabo Food Service, Inc. v. Canteen Corp., 823 F.2d 1073, 1081 (7th Cir.1987), cert. dismissed, 485 U.S. 901, 108 S.Ct. 1101, 99 L.Ed.2d 229 (1988).

To have a constitutionally protected property interest in the award of a municipal contract, an individual must have a "legitimate claim of entitlement to it." Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). A property interest for purposes of the Due Process Clause is created by "existing rules or understandings that stem from an independent source such as state law--rules or understandings that secure certain benefits and that support claims of entitlement to those benefits." Id.; see Perry v. Sindermann, 408 U.S. 593, 601, 92 S.Ct. 2694, 2699, 33 L.Ed.2d 570 (1972) (an interest is "property" under the Fourteenth Amendment "if there are such rules or mutually explicit understandings that support [a] claim of entitlement...."); Cushing v. City of Chicago, 3 F.3d 1156, 1159-60 (7th Cir.1993) (same). As this court observed in Reed v. Village of Shorewood, 704 F.2d 943 (7th Cir.1983), "property is what is securely and durably yours under state ... law, as distinct from what you hold subject to so many conditions as to make your interest meager, transitory, or uncertain." Id. at 948. ¹

In the absence of an underlying property interest, the Due Process Clause does not require states to obey their own procedural rules in awarding municipal contracts. See Szabo, 823 F.2d at 1081 (citing Olim v. Wakinekona, 461 U.S. 238, 248-51, 103 S.Ct. 1741, 1747-48, 75 L.Ed.2d 813 (1983)). In Olim, the Supreme Court observed that "[p]rocess is not an end in itself. Its constitutional purpose is to protect a substantive interest to which the individual has a legitimate claim of entitlement." 461 U.S. at 250, 103 S.Ct. at 1748. Although "[a] State may choose to require procedures against deprivation of substantive rights, ... in making that choice, the State does not create an independent substantive right." Id. at 250-51, 103 S.Ct. at 1748 (citing Hewitt v. Helms, 459 U.S. 460, 471, 103 S.Ct. 864, 871, 74 L.Ed.2d 675 (1983)). Thus, in Swartz v. Scruton, 964 F.2d 607 (7th Cir.1992), we held that Olim precluded a state university professor's claim that he was arbitrarily deprived of a protected property interest in the method used to determine his merit pay increase. 964 F.2d at 610. Because "[p]rocedural interests under state law are not themselves property rights that will be enforced in the name of the Constitution," the plaintiff could not claim a property interest "in a method of calculation of merit pay." Id. (emphasis in original; internal quotation, citation omitted); see also Archie v. City of Racine, 847 F.2d 1211, 1217 (7th Cir.1988) (en banc ), cert. denied, 489 U.S. 1065, 109 S.Ct. 1338, 103 L.Ed.2d 809 (1989). By the same reasoning, in Szabo we rejected the disappointed bidder's claim that it had a constitutional right to have established competitive bidding procedures applied in a nonarbitrary manner. 823 F.2d at 1080-81. "[W]hen there is no substantive property interest there is no review of 'the merits' under the due process clause." Id. at 1081.

Whether Kim has a property interest in being awarded the municipal contract on the basis of its first round bid is determined by Illinois law. See Bishop v. Wood, 426 U.S. 341, 344 & n. 7, 96 S.Ct. 2074, 2077 & n. 7, 48 L.Ed.2d 684 (1976); Hohmeier v. Leyden Community High School Dist. 212, 954 F.2d 461, 463-64 (7th Cir.1992). In Polyvend, Inc. v. Puckorius, 77 Ill.2d 287, 32 Ill.Dec. 872, 395 N.E.2d 1376 (1979), appeal dismissed for want of substantial federal question, 444 U.S. 1062, 100 S.Ct. 1001, 62 L.Ed.2d 744 (1980), the Illinois Supreme Court held that when a state entity's advertisement for bids contains explicit language reserving its right to reject any and all bids, no bidder can claim a constitutionally protected property interest in being awarded the contract. Id. at 1379; see also Brando Constr., Inc. v. State Dep't of Transp., 139 Ill.App.3d 798, 94 Ill.Dec. 255, 258, 487 N.E.2d 1132, 1135 (1985); Northwest Disposal Co. v. Village of Fox Lake, 119 Ill.App.3d 546, 75 Ill.Dec. 8, 11, 456 N.E.2d 691, 694 (1983). This court accordingly has held that in Illinois, a disappointed bidder for a public contract lacks a property interest in the award, even if that bidder has submitted the lowest conforming bid for the project. Szabo, 823 F.2d at 1080 (citing Coyne-Delany Co. v. Capital Development Bd., 616 F.2d 341 (7th Cir.1980) (per curiam)).

To counter this result, Kim advances two arguments. First, Kim contends that Ill.Rev.Stat. ch. 24, para. 8-9-1 (1990) ² contains mandatory language requiring a municipality to award a contract "to the lowest responsible bidder after advertising for bids." In relevant part, para. 8-9-1 provides that

any work or public improvement ... shall be constructed ... by a contract let to the lowest responsible bidder after advertising for bids, in the manner prescribed by ordinance, except that any such contract may be entered into ... without advertising for bids, if authorized by a vote of two-thirds of all the aldermen or trustees then holding office;

Ill.Rev.Stat. ch. 24, para. 8-9-1 (1990). Kim maintains that because it was...