Alexander and Alexander, Inc. v. State, Div. of Admin.

• Decision Date: 31 March 1986
• Docket Number: No. 85-C-1538,85-C-1538
• Citation: 486 So.2d 95
• Parties: ALEXANDER AND ALEXANDER, INC. and Ralph W. Graham v. STATE of Louisiana, Through the DIVISION OF ADMINISTRATION; the Travelers Insurance Company, Daves Insurance Agency, Inc.; Wright Insurance Agency, Inc.; and Wright and Percy Insurance Agency, Inc.
• Court: Louisiana Supreme Court

Page 95

486 So.2d 95

ALEXANDER AND ALEXANDER, INC. and Ralph W. Graham v. STATE of Louisiana, Through the DIVISION OF ADMINISTRATION;

the Travelers Insurance Company, Daves Insurance

Agency, Inc.; Wright Insurance Agency,

Inc.; and Wright and Percy

Insurance Agency, Inc.

No. 85-C-1538.

Supreme Court of Louisiana.

March 31, 1986.

Gerald L. Walter, Jr., Schwab & Walter, Baton Rouge, for defendants-applicants.

Ledoux R. Provosty, Jr., F. Rae Swent, Provosty, Sadler & deLaunay, Alexandria, Charles McCowan, Jr., Kean, Miller Hawthorne, Baton Rouge, for plaintiffs-respondents.

CALOGERO, Justice.

The narrow issues before us at this time are whether plaintiff-respondents (Alexander and Alexander, Inc. and Ralph W. Graham) have stated a cause of action in a damage suit against defendant-relators (The Travelers Ins. Co., Daves Insurance Agency, Inc., Wright Insurance Agency, Inc., and Wright and Percy Insurance Agency, Inc.), ¹ and, assuming a cause of action is stated, whether the suit has prescribed.

Plaintiffs' lawsuit was preceded by an administrative contest over the award of a state insurance contract, including litigation between the State and these same defendants. Daves v. State, Division of Administration, Office of Risk Management, 459 So.2d 1255 (La.App. 1st Cir.1984), writ denied, 462 So.2d 1246 (La.1985). It is one of two suits brought by Alexander and Alexander, Inc. and its senior vice-president Ralph W. Graham. A mandamus suit to require the State to comply with R.S. 39:1551 et seq., including holding an administrative hearing on plaintiffs' protest of the award of a contract to defendants was dismissed on an exception of prescription. In the companion suit, which in part we review now, plaintiffs sued the State, Through the Division of Administration, Travelers Insurance Co., Daves Insurance Agency, Inc., Wright Insurance Agency, Inc. and Wright & Percy Insurance Agency, Inc. for $500,000.00 plus reasonable attorneys' fees and costs, or in respective alternatives, award to them of the contract which the Division of Administration awarded to defendants, or a voiding of the contract and ordering it rebid.

The historical facts are amply set out in the Court of Appeal opinion to which we specifically make reference here. See Alexander & Alexander, Inc. v. State, et al., 470 So.2d 976 (La.App. 1st Cir.1985).

Those facts will not be repeated except as clarity may require in the remainder of this opinion.

Exception of No Right and No Cause of Action

In the trial court defendants filed an exception of no right and no cause of action. ² The trial court maintained the exception but the Court of Appeal reversed and remanded the case for further proceedings. We granted writs primarily to review the correctness of that decision.

In essence the petition charges the Divison of Administration with arbitrary and capricious conduct and non-compliance with the provisions of the procurement code resulting in the award of an insurance contract to defendants which should have been awarded to plaintiff; that defendants' bids deviated substantially from the bid requirements or terms of the bid proposal; that the Division of Administration should have accepted plaintiffs', not defendants', bid; that after being awarded the three year contract defendants adjusted the premium upward for the second year, thus effectively increasing the State's cost under the contract to an unconscionable sum and, in fact, one which if stated at the outset would have made plaintiff low bidder and would have prompted award of the contract to plaintiff, not defendant; and that the defendant failed to perform the contract in good faith. ³ ]

In Hero Lands Co. v. Texaco, Inc., 310 So.2d 93, 96 (La.1975) we presented the following analysis of the exception of no cause of action:

The function of the peremptory exception of no cause of action is to test the legal sufficiency of the petition. The correctness of the well-pleaded allegations of fact is conceded, the issue is whether the face of the petition presents a case which legally entitles the mover to the redress sought. It is the sufficiency of the petition or motion in law which is put at issue by the exception. Rebman v. Reed, 286 So.2d 341 (La.1973); Louisiana State Board of Medical Examiners v. England, 252 La. 1000, 215 So.2d 640 (1968).

If a petition states a cause of action as to any ground or portion of the demand, the exception of no cause of action must be overruled. Louisiana & Arkansas Railway Company v. Goslkin, 258 La. 530, 246 So.2d 852 (1971); Burns v. Genovese, 254 La. 237, 223 So.2d 160 (1969); Little v. Haik, 246 La. 121, 163 So.2d 558 (1964); Elliot v. Dupuy, 242 La. 173, 135 So.2d 54 (1961); United Mine Workers v. Arkansas Oak Flooring Co., 238 La. 108, 113 So.2d 899 (1959).

In considering a petition against which an exception of no cause of action has been raised, every reasonable interpretation must be accorded its language in favor of maintaining the sufficiency of the petition and affording the litigant an opportunity to present his evidence. Eschete v. City of New Orleans, 258 La. 133, 245 So.2d 383 (1971); Erath Sugar Co. v. Broussard, 240 La. 949, 125 So.2d 776 (1961). Pleadings must be reasonably construed as to afford litigants their day in court, to arrive at the truth and to avoid a miscarriage of justice. Budget Plan of Baton Rouge, Inc. v. Talbert, 276 So.2d 297 (La.1973).

We must therefore determine if the petition in this case, by any reasonable interpretation, states a cause of action such as to entitle petitioner to the redress sought.

There are scant few cases in our jurisprudence which address the rights of an unsuccessful bidder on a public contract to recover damages. Millette Enterprises, Inc. v. State, Division of Administration and Board of Trustees of State Employees Group Benefits Program, 417 So.2d 6 (La.App. 1st Cir.1982) writ denied, 417 So.2d 363 (La.1982) held that a cause of action under Civ.Code art. 2315 exists against the State of Louisiana, Through the Board of Trustees of the State Employees Group Benefits Program where the allegations were that by design and predetermination the Board caused plaintiff to expend time, effort and money in preparing bids when there was never any chance of Milliet's being awarded the contract since the Board had determined to award the services contract to another bidder regardless of the outcome of the bid contest. Millette, supra, specifically did not determine that a cause of action existed under Civil Code art. 2315 against the successful bidder. In fact in that very case the successful bidder, Continental Assurance Company (CNA) had its peremptory exception of no cause of action sustained in the trial court and plaintiffs did not complain of that ruling on appeal.

Haughton Elevator Division v. State, Division of Administration, 367 So.2d 1161 (La.1979) is a case which entailed a suit to enjoin the letting of a bid to another. That decision of this Court spoke in dicta and in a footnote directly to the matter under consideration. The opinion recited:

The petition might be supplemented to claim damages from the awarding authority if it wrongfully awarded the contract to another bidder or even perhaps from a higher bidder who wrongfully received the contract. ⁹ (Emphasis provided)

* * *

* * *

367 So.2d at 1169.

As between bidders on a public contract there is no duty owed which may give rise to a cause of action under La.Civ.Code art. 2315. The only cause of action which an unsuccessful bidder may have against a successful bidder for damages is under La.Civ.Code art. 2324, where it is alleged and shown that the successful bidder assisted in or encouraged a wrongful act. This Court's majority in Haughton was correct, although only in dicta, when it opined that an unsuccessful bidder might be entitled to damages (by virtue of C.C. 2324 ⁴) from a higher bidder who was wrongfully awarded a contract after participating with a governmental agency in the commission of a wrongful act.

In the instant case, paragraph number 10 of the petition alleges that the terms of Bid Proposal A-18 (prepared by the State, Division of Administration) were designed to accomodate the business interests of the Travelers group and to prevent competitive bidding. This allegation may state a cause of action against the State under the rationale of Millette, supra. However, there being no allegation of any assistance, encouragement or conspiracy on the part of the Travelers group in the commission of any wrongful act with the Division of Administration, plaintiff falls short of stating any cause of action against the Travelers group.

The petition, in paragraphs number 12 and 13, alleges certain deviations from the Bid Proposal instructions on the part of the Travelers group. There is no duty owed by one bidder to any other bidder requiring precise compliance with the bid specifications in submission of a bid such as will give rise to a cause of action under Civil Code art. 2315.

Finally, paragraph number 18 of the petition alleges that the premium under the contract increased from $1,267,596.00 in year one to $5,256,987.00 in year two and that the Travelers group has failed to perform the contract in good faith. These allegations, if they state any cause of action, state a cause of action which only the State has a right to bring against the Travelers group under the contract. In fact, those issues have been litigated and finally decided in Daves v. State, Division of Administration, Office of Risk Management, 459 So.2d 1255 (La.App. 1st Cir.1984), writ denied, 462 So.2d 1246 (La.1985). These allegations do not state a cause of action against the Traveler's group.

There are no other allegations of the petition stating a cause of action. The petition is completely devoid of any contention that the Travelers group assisted or encouraged the Division of Administration in any way in any wrongful act in...