Brownsburg Community School Corp. v. Natare Corp.

• Citation: 824 N.E.2d 336
• Decision Date: 17 March 2005
• Docket Number: No. 49S02-0409-CV-406.,49S02-0409-CV-406.
• Parties: BROWNSBURG COMMUNITY SCHOOL CORPORATION, Appellant (Defendant below), v. NATARE CORPORATION, Appellee (Plaintiff below).
• Court: Supreme Court of Indiana

824 N.E.2d 336

BROWNSBURG COMMUNITY SCHOOL CORPORATION, Appellant (Defendant below), v. NATARE CORPORATION, Appellee (Plaintiff below).

No. 49S02-0409-CV-406.

Supreme Court of Indiana.

March 17, 2005.

Rehearing Denied June 2, 2005.

James S. Stephenson, Wayne E. Uhl, Indianapolis, IN, Attorneys for Appellant.

Thomas A. Pastore, Indianapolis, IN, Attorney for Appellee.

BOEHM, Justice.

We hold that the Indiana Antitrust Act does not create a civil treble damage remedy against an arm of government.

Factual and Procedural Background

The following facts are alleged in the complaint. We take them as true for purposes of this interlocutory appeal of the denial of a motion by a defendant for judgment on the pleadings.¹

The School Corporation undertook a building project for Brownsburg High School that included a fine arts addition and a swimming pool. The School Corporation hired Schmidt Associates as its architect, and Schmidt retained Spear Corporation as a pool consultant. Spear is a distributor for Myrtha Pools USA, which manufactures prefabricated pools. Specifications were published for general contractors to bid on the entire project. Included were specifications derived from language provided by Spear calling for a concrete and tile cast-in-place pool and alternate specifications for a prefabricated pool tank. Plaintiff, Natare Corporation, a supplier of prefabricated pools based in Indianapolis, claims that the specifications included language that only a Myrtha prefabricated pool could meet. In addition to the pool tank, the specifications also called for a moveable bulkhead. Natare claims that the bulkhead specifications were based on a Myrtha design and excluded Natare's product from consideration. The School Corporation responds that its specifications were drawn to get the best product at the lowest cost. We of course express no opinion on the validity of either party's allegations.

The bid documents contemplated submission of proposals that did not meet the specifications, but only if any variations from specifications were approved by the architect.² Natare attempted to gain approval of its products, including its prefabricated pool tank and moveable bulkhead, as meeting this "or equal" requirement. Schmidt responded that Natare's prefabricated pool tank with a PVC liner system was not equal to the specified panelized heat bonded PVC laminated system. Schmidt also noted that Natare had not identified any completed projects using Natare's proposed system. Schmidt ultimately also rejected the Natare bulkhead design, which utilized foam materials in the buoyancy chambers, as not equal to the specified stainless steel movable bulkhead. After this exchange, three general contractors submitted bids for the entire project. Each relied on bids for the pool from either a local contractor or Spear.

In March 2003 Natare sued the School Corporation, Schmidt, and Spear, alleging that the three had conspired to exclude Natare from consideration as a supplier for the pool and bulkhead in violation of the provision of the Indiana Antitrust Act prohibiting combinations in restraint of trade, Indiana Code section 24-1-2-3 (2004). Natare alleged that the wording of the specifications unreasonably limited competition by requiring bidding contractors to use Myrtha Pool materials and equipment supplied by Spear, and that Spear had a significant role in determining whether other products were "equal." Pursuant to Indiana Code section 24-1-27, the complaint sought treble damages, costs, and attorney fees for violations of the Indiana Antitrust Act.

The School Corporation answered the complaint and moved for judgment on the pleadings under Indiana Trial Rule 12(C), alleging that it was not a "person" as that term is used in the Indiana Antitrust Act, and, therefore, was not an entity subject to the civil treble damages remedy provided by that statute. The trial court denied the motion but granted the School Corporation's petition to certify the order for interlocutory appeal. The Court of Appeals affirmed, holding that a school corporation is a "person" who can sue and be sued under the Indiana Antitrust Act. Brownsburg Cmty. Sch. Corp. v. Natare Corp., 808 N.E.2d 148, 154 (Ind.Ct.App.2004). We granted transfer. Brownsburg Cmty. Sch. Corp. v. Natare Corp., 822 N.E.2d 975 (Ind.2004).

I. Public Purchasing

The Public Purchasing laws include provisions addressing contracts by school corporations, and requiring, inter alia, that the contract be awarded to "the lowest responsible and responsive bidder."³ Ind.Code § 5-22-7-8 (2004). Only a citizen or a taxpayer of a municipality may challenge the award of a government contract under Indiana's Public Purchasing Statute. See All-Star Constr. & Excavating, Inc. v. Bd. of Pub. Works, 640 N.E.2d 369, 370 (Ind.1994); Shook Heavy & Envtl. Constr. Group v. City of Kokomo, 632 N.E.2d 355, 358 (Ind.1994). Natare is neither a citizen nor a taxpayer of Brownsburg, and therefore has no claim under that statute. However, this Court has observed that "[o]ne need not be a citizen or a taxpayer of the municipality. . . to maintain an action for fraud or collusion in the award of a contract. Ind.Code § 24-1-2-7." All-Star, 640 N.E.2d at 370. Accord Shook, 632 N.E.2d at 358. The statutory reference is to the treble damages provision in the Indiana Antitrust Act.

II. Indiana Antitrust Act

Because Natare has no claim for damages under the Public Purchasing Statute, it seeks to bring its claim under the Indiana Antitrust Act. Ind.Code § 24-1-2-1-12 (2004). The principal issue is whether a governmental entity is subject to the private treble damages remedy provided for violation of the antitrust act.

A. The Statutory Framework

Sections 1 and 2 of the Indiana Antitrust Act, I.C. § 24-1-2-1, et seq., are comparable to the federal Sherman Act, 15 U.S.C. sections 1 and 2, respectively. Like section 1 of the Sherman Act, Indiana Code section 24-1-2-1 addresses combinations in restraint of trade. Similarly, section 2 of the Sherman Act and Indiana Code section 24-1-2-2 both deal with monopolization. Indiana has two additional provisions for which there is no federal counterpart. Section 3, I.C. § 24-1-2-3, prohibits the restraint of bidding for letting of contracts whether public or private, and Section 4, I.C. § 24-1-2-4, addresses remedies for "collusion or fraud" among contract bidders. Specifically, Section 4 of the Indiana Antitrust Act provides that in cases of "collusion or fraud. . . among the bidders at the letting of any contract or work as provided in [Section 3] . . . the principal who lets the contract ... shall not be liable for such letting or on account of said contract . . ." Section 4 thus frees the principal who lets a contract tainted by "collusion or fraud" among bidders from liability on the contract. By its terms, Section 4 applies only if there is "collusion or fraud ... as provided in [Section 3]." It thus does not prohibit any conduct. Rather, it deals with remedies for violations of Section 3.

Section 3 of the Indiana Antitrust Act does not use the term "collusion or fraud," but does prohibit certain conduct. It provides:

A person who engages in any scheme, contract, or combination to restrain or restrict bidding for the letting of any contract for private or public work, or restricts free competition for the letting of any contract for private or public work, commits a Class A misdemeanor.

I.C. § 24-1-2-3. Natare alleges that the defendants violated Section 3 by denying Natare's products "equal" status under the specifications and thereby restraining Natare's ability to bid. The School Corporation responds that because it is a governmental entity it is not subject to the Indiana Antitrust Act's criminal and civil penalties.

B. Indiana Case Law

Three appellate decisions have referred to the treble civil damage provision of the Indiana Antitrust Act in the context of a claim against a governmental entity, but none was faced with the question whether or not a remedy existed against the entity itself.

In City of Auburn v. Mavis, 468 N.E.2d 584, 585 (Ind.Ct.App.1984), the Court of Appeals affirmed a jury award of treble damages and attorney fees against the City of Auburn. Mavis was a losing bidder for a public contract to provide radio communications equipment to the Auburn Fire Department and brought an action against the City and D & L Communications, Inc. for violation of Section 3, which makes unlawful acts which operate to restrain open and free competition in bidding to obtain contracts for private or public work. Id. At trial the City of Auburn and D & L conceded that they violated this statute when they contrived to develop specifications favoring equipment sold by D & L before the City solicited bids. Id. at 586. On appeal, the City did not contend that it was immune from treble damages under the Indiana Antitrust Act. The issue, though assumed, was not debated in either the trial court or the Court of Appeals.

In Shook Heavy & Environmental Construction Group v. City of Kokomo, 632 N.E.2d 355 (Ind.1994), an unsuccessful bidder claimed that the City of Kokomo violated Indiana's Public Purchasing Statute by failing to award the contract to the lowest bidder. Kokomo had solicited bids for the construction of a municipal sludge composting facility. When the bids were opened, Kokomo awarded the contract to the lowest responsible and responsive bidder. Shook Heavy & Environmental Construction Group, a losing bidder, filed suit in federal court seeking an injunction against the award of the contract on the basis that deficiencies in the bid of the apparent low bidder caused that bidder's bid to not be lower than Shook's. Id. at 357. In response to a certified question from the federal district court, we held that because Shook was not a citizen or taxpayer of Kokomo, Shook could not challenge the award under the Public Purchasing Statute. Id. at 358. Citi...