Alva Elec., Inc. v. Evansville Vanderburgh Sch. Corp.

• Decision Date: 06 March 2013
• Docket Number: No. 82A01–1201–PL–2.,82A01–1201–PL–2.
• Citation: 984 N.E.2d 668
• Court: Indiana Appellate Court
• Parties: ALVA ELECTRIC, INC., Arc Construction Co., Inc., Danco Construction, Inc., Deig Brothers Lumber & Construction Co., Inc., Empire Contractors, Inc., Peyronnin Construction Co., Inc., Weddle Brothers Construction Company, Inc., and Wink Construction, Inc., Appellants–Plaintiffs, v. EVANSVILLE VANDERBURGH SCHOOL CORPORATION and EVSC Foundation, Inc., Appellees–Defendants.

984 N.E.2d 668

ALVA ELECTRIC, INC., Arc Construction Co., Inc., Danco Construction, Inc., Deig Brothers Lumber & Construction Co., Inc., Empire Contractors, Inc., Peyronnin Construction Co., Inc., Weddle Brothers Construction Company, Inc., and Wink Construction, Inc., Appellants–Plaintiffs,

v.EVANSVILLE VANDERBURGH SCHOOL CORPORATION and EVSC Foundation, Inc., Appellees–Defendants.

No. 82A01–1201–PL–2.

Court of Appeals of Indiana.

March 6, 2013.

Jon Laramore, April E. Sellers, Shiv Ghuman O'Neill, Faegre Baker Daniels LLP, Indianapolis, IN, A.J. Manion, Manion Stigger, Evansville, IN, Attorneys for Appellants.

Patrick A. Shoulders, Dirck H. Stahl, Ziemer, Stayman, Weitzel & Shoulders, LLP, Evansville, IN, for Evansville Vanderburgh School Corporation.

Richard T. Mullineaux, Crystal G. Rowe, William F. English, Kightlinger & Gray, LLP, New Albany, IN, for EVSC Foundation, Inc.

OPINION

KIRSCH, Judge.

Eight contracting firms (“Contractors”),¹ on behalf of themselves and all similarly situated taxpayers within the district of Evansville Vanderburgh School Corporation (“School Corporation”), sued School Corporation and EVSC Foundation, Inc. (“Foundation”) for declaratory judgment and injunctive relief, claiming that School Corporation's renovation of an administration building should have been subject to the competitive bidding procedures required for a public work project under Indiana Code section 36–1–12–4 and that the actions taken to accomplish the renovation constituted an antitrust violation under Indiana Code section 24–1–2–3. Contractors filed a motion for summary judgment and School Corporation and Foundation each filed cross-motions for summary judgment. The trial court denied Contractors' motion and granted summary judgment in favor of School Corporation and Foundation.

On appeal, we address the following consolidated and restated issues:

I. Whether the issues before this court are moot;

II. Whether the trial court erred in granting summary judgment in favor of School Corporation and Foundation on Contractors' claim:

(A) under Indiana's Public Lawsuit Statute (“Public Lawsuit Statute”), Indiana Code sections 34–13–5–1 through –12, because the renovation of the administration building constituted a public work project that should have been subject to the public bidding laws of Indiana Code chapter 36–1–12; and

(B) because the combination of the six contracts used to renovate the administration building was a “scheme, contract, or combination to restrain or restrict bidding for the letting of any contract for a private or public work,” in violation of Indiana's Antitrust Act (“Antitrust Act”), Indiana Code sections 24–1–2–1 through –12.

We reverse and remand with instructions.

FACTS AND PROCEDURAL HISTORY²

School Corporation is the public school corporation in Evansville, Vanderburgh County, Indiana, which exists under the authority of Indiana Code sections 20–23–4–1 through –45. Foundation is a private, not-for-profit, public school endowment corporation “formed to provide educational resources within the meaning of Indiana Code [section] 20–47–1–2 to the ... School Corporation and to operate exclusively for charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, and for educational, charitable and scientific purposes within the meaning of Indiana Code 20–47–1–2.” Id. at 707. Contractors do business and pay taxes in Vanderburgh County and allege that the contract for the renovation project at the heart of this dispute was not awarded pursuant to public bidding laws.

In 2009, the State of Indiana announced a $6.5 million reduction in School Corporation's annual funding. Thereafter, School Corporation investigated various cost-saving initiatives. One of such initiatives involvedmoving all of School Corporation's administrative offices, which were located in multiple buildings throughout Evansville, into an existing building on Walnut Street (“the Building”) owned by School Corporation and previously used as a warehouse. According to School Corporation, the move was designed to maximize efficiency, preserve resources, and decrease School Corporation's costs in the amount of $517,360 per year. Appellants' App. at 983. To fit School Corporation's needs, however, renovation of the Building was necessary.

In December 2009, the Facilities Director for School Corporation contacted an Evansville architectural firm, Hafer Associates (“Hafer”), to inquire about the feasibility of renovating the Building for use as a school administration building, and Hafer confirmed that the renovation was feasible. On January 11, 2010, School Corporation publicly announced that it intended to relocate its administrative offices to the Building. The next day, Hafer held a meeting with officials of School Corporation to discuss School Corporation's needs, aesthetic preferences, and approximate budget. School Corporation hired Hafer to design the renovation. During the design period, Hafer, who understood School Corporation to be its sole client, held meetings on the status of the project. No one from the Foundation attended those meetings. Around June 1, 2010, Hafer mailed plans for the renovation to School Corporation. Hafer believed School Corporation would advertise the project to prospective contractors and solicit bids. School Corporation paid Hafer approximately $250,000 for the design work.³

In August 2010, after Hafer's design was finalized and sealed, School Corporation determined it did not have sufficient funds in its capital projects fund to pay for the renovation. School Corporation also determined that using the debt service fund to finance the project was an undesirable option for several reasons, including the delay and added expense involved in the issuance of bonds and the resulting need to raise taxes to obtain sufficient funds to repay the bonds.

On October 29, 2010, School Corporation officials met with representatives of Industrial Contractors, Inc. (“ICI”) to discuss the renovation of the Building. In the previous years, ICI had bid on at least ten projects for School Corporation through public bidding, but had been awarded only one project—a roofing project. School Corporation understood that, while it could not legally take on debt, ICI could finance the renovation of the Building. School Corporation “pitched” to ICI an arrangement to renovate the Building, whereby School Corporation would convey the Building to Foundation, and Foundation then would contract with ICI to renovate the Building. Appellants' Br. at 6; Appellants' App. at 293. Foundation would then pay ICI over time for the renovations. Specifically, the renovated Building would then be paid for by Foundation with a “deferred payment schedule guaranteed by [a] rent/lease agreement with [the School Corporation].” Appellants' App. at 293. School Corporation officials told ICI that this arrangement would expedite the project because Foundation was a private organization and was not subject to public bidding laws. Id. at 275. At the time of the October meeting, Foundation had neither been consulted with nor advised about the proposal.

On November 2, 2010, ICI expressed interest in performing the renovation. School Corporation did not solicit, meet with, or accept bids or proposals from any other contractor, nor did it disclose at any public meeting its decision to select ICI to perform the renovation. ICI was the only contractor School Corporation approached. By November 9, 2010, ICI was meeting with officials of School Corporation and its attorney, Patrick Shoulders (“Shoulders”), who indicated that he would provide a “bankable” term sheet to ICI. Id. at 297. Shoulders also indicated that he would work out a conflict of interest waiver so that he could represent both the School Corporation and ICI. Id. On November 12, 2010, ICI sent School Corporation a formal proposal offering to complete the project at a cost of $6,585,318, plus a finance charge totaling $608,619 over the five-year payment schedule. Id. at 19, 389. School Corporation agreed to this proposal without negotiating the price, and ICI began work on the project in December 2010. Id. at 280; Appellants' Br. at 7.

Also in December 2010, School Corporation approached Foundation about the renovation project. School Corporation explained that it needed Foundation's help with the project because School Corporation “did not have the funds and because the Foundation, unlike the School [Corporation], was not subject to public bidding laws.” Id. at 19. School Corporation explained that it would buy the Building back from Foundation once the renovation was complete. While Foundation had not participated in selecting ICI, Foundation representatives indicated that they would cooperate.

In order to facilitate the renovation of the Building, ICI, Foundation, and School Corporation, in various combinations, entered into six contracts. On December 13, 2010, after seeking advice from independent counsel, Foundation entered into an “Agreement for Purchase and Sale of Real Estate” (“Purchase Agreement”) with School Corporation, to purchase the Building from School Corporation for one dollar. Appellants' App. at 485–500. On January 5, 2011, Foundation voted to approve the acquisition of Building from School Corporation, id. at 941–42, and on January 19, 2011, School Corporation conveyed Building to Foundation by “Special Warranty Deed” (“the Warranty Deed”). Id. at 944–48.

Foundation entered into a construction contract with ICI on January 21, 2011 (“the Construction Contract”). Id. at 300–62. “The Foundation president indicated that he signed the [Construction C]ontract but that he had no involvement in negotiating the contract, and further indicated he was not aware how the School [Corporation] and ICI agreed on the payment schedule, nor did he know how the School [Corporation] chose ICI to be the contractor.” Id. at 20. Pursuant to the terms of the...