Clark Pacific v. Krump Const., Inc.

• Decision Date: 15 October 1996
• Docket Number: No. CV-N-96-0576-ECR.,CV-N-96-0576-ECR.
• Citation: 942 F.Supp. 1324
• Parties: CLARK PACIFIC, a California general partnership, Plaintiff, v. KRUMP CONSTRUCTION, INC., a Nevada corporation; and Eric Raecke, individually and in his official capacity as Manager, Nevada Public Works Board, Defendants.
• Court: U.S. District Court — District of Nevada

942 F.Supp. 1324

CLARK PACIFIC, a California general partnership, Plaintiff, v. KRUMP CONSTRUCTION, INC., a Nevada corporation; and Eric Raecke, individually and in his official capacity as Manager, Nevada Public Works Board, Defendants.

No. CV-N-96-0576-ECR.

United States District Court, D. Nevada.

October 15, 1996.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

William A.S. Magrath, II, Timothy E. Rose, and James C. Giudici of McDonald, Carano, Wilson, McCune, Bergin, Frankovich & Hicks, Reno, NV, for plaintiff.

Jonathan L. Andrews, Attorney General's Office, Carson City, NV, for defendant Raecke.

Michael B. Springer, Reno, NV, for defendant Krump Construction.

ORDER

EDWARD C. REED, Jr., District Judge.

Introduction

This is a dispute between Clark Pacific, a construction subcontractor on a public works project, Krump Construction, the general contractor, and Mr. Eric Raecke, Manager of the Nevada Public Works Board, which is responsible for awarding public works contracts in this State. Presently before the court for decision is Plaintiff Clark Pacific's Motion for Preliminary Injunction (Doc. # 4). The court previously, by Order dated September 19, 1996 (Doc. # 10), issued a temporary restraining order against Defendants Krump Construction and Nevada Public Works Board Manager Eric Raecke, pending a hearing on the motion for preliminary injunction. The parties presented extensive evidence and argument at a hearing which commenced October 1, 1996 and concluded October 10, 1996. Having heard that evidence, and the parties' arguments, the court is now prepared to issue its ruling on the motion for preliminary injunction.

Plaintiff Clark Pacific alleges both federal question and diversity jurisdiction. 28 U.S.C. §§ 1331, 1332. Clark Pacific claims that Defendants' substitution of another construction subcontractor in its place violates its right under the Fourteenth Amendment to the United States Constitution not to be deprived of property without due process of law. Clark Pacific also claims a violation of its right under a Nevada statute not to be replaced as a public works construction subcontractor absent the existence of specific circumstances set out in that statute, and, as a citizen of California, invokes the court's diversity jurisdiction over its suit against Krump, a Nevada corporation, and Eric Raecke, a Nevada public employee.

I. Facts

From the evidence adduced to date, the court makes the following findings of fact:

In May and June of 1996 the Nevada Public Works Board solicited bids for construction work to be performed at one of Nevada's prisons, the Lovelock Correctional Center. The State planned additions to the Correctional Center consisting of new prisoner housing facilities and some modifications to the prison industries building. Only two companies bid for the prime contract; one was Clark & Sullivan, the other was Defendant Krump Construction. Under the terms of the solicitation documents, bids were to be submitted sealed, to be opened at two o'clock on the afternoon of June 18, 1996 ("bid day").

Clark Pacific, a California-based pre-cast concrete subcontractor, prepared a written bid to perform the design, manufacture, erection, alignment, welding and grouting of architectural precast concrete sandwich wall panels, interior walls, chases, floor and ceiling slabs, beams and columns for the three new prisoner housing units at Lovelock Correction Center. Early on the morning of June 18, Clark Pacific transmitted its bid form by electronic facsimile to Krump Construction and to Clark & Sullivan, omitting Clark Pacific's base price. Such is standard practice in the construction industry: Bidders on public works subcontracts withhold their base price almost until the last minute, in order to give the general contractor no pre-bid-time opportunity to "shop" the subcontractors' numbers to other subcontractors in the hope of obtaining a lower price.

Clark Pacific's bid form was transmitted to Krump at 7:23 a.m. on bid day, June 18, 1996. The Clark Pacific bid contained a number of qualifications and conditions including, of particular importance,

(1) the duration of the work to be performed by Clark Pacific. Clark Pacific's bid contemplated a period of 125 days between the issuance by Krump of its "notice to proceed" and the commencement by Clark Pacific of precast concrete panel erection, and a period of 100 days for Clark Pacific to achieve "substantial completion" of its portion of the project;

(2) a requirement that the General Contractor provide 440-volt electrical power to the construction site for the welding together of the precast concrete panels;

(3) a requirement that the General Contractor provide and maintain all-weather access roads to the construction site;

(4) a requirement that the General Contractor provide "deadmen," which are large concrete blocks designed to support temporarily the precast concrete panels until they can be welded into position.

During the morning of June 18, 1996, Mark Robison, Clark Pacific's Project Manager, phoned Rusty Heberger, Krump's Project Manager, to confirm that Krump had received and reviewed Clark Pacific's bid. Mr. Heberger told Mr. Robison that he had received the bid but had not yet reviewed it. Later the same morning Mr. Heberger telephoned Mr. Robison

(1) to determine the size of the deadmen required by Clark Pacific,

(2) to ascertain the number of coil rods required,

(3) to inquire whether Clark Pacific would stop work if progress payments were late,

(4) to discuss the liquidated damages provision of Clark Pacific's bid,

(5) confer regarding Clark Pacific's requirement that Krump provide electrical power for the welding, and

(6) to establish the maximum allowable markup to which Clark Pacific would be entitled on any orders changing the specifications on any portion of Clark Pacific's scope of work.

Mr. Robison advised Mr. Heberger that about 10,000 coil rods were needed, that he needed time to calculate the size of the deadmen, and that the maximum markup on change orders would be fifteen per cent.

At 11:34 a.m. Mr. Robison telephoned Mr. Heberger and informed him that he did not yet have the dimensions of the required deadmen, and further advised him that the provision by Clark Pacific of electrical welding power would add $20,000 to Clark Pacific's base price.

At 1:14 p.m. Mr. Robison again telephoned Mr. Heberger and advised him that Clark Pacific would reduce the number of deadmen required from 500 to 300, and that Clark Pacific required three cubic yard deadmen for exterior walls and one cubic yard deadmen for interior walls. Mr. Robison then indicated to Mr. Heberger that Clark Pacific was adding a ninth "special condition" to its bid form. Special Condition No. 9 required the General Contractor to provide temporary heat at a minimum of fifty degrees Fahrenheit to allow proper curing of the grout used to join the precast concrete panels. This condition was designed to address the problem of pouring concrete in cold weather: Winters in Lovelock, Nevada, are bitter cold too cold for concrete or grout to cure properly. The wet grout must be kept warm after it is applied to the joints between the precast panels, either by applying hot blankets to the surface of the material, or by heating the surrounding air. Mr. Robison read Special Condition No. 9 to Mr. Heberger and asked him to note it on the bid form, which Mr. Heberger did, in his own handwriting, on the bid form which had been transmitted by Clark Pacific to Krump earlier that morning.

During this conversation Mr. Heberger asked Mr. Robison if the 100 days for completion of concrete panel erection were 100 calendar days or 100 working days. Mr. Robison responded that the 100 days were calendar days, but that the 100 days did not include total completion of alignment, welding and grouting; and that "total" completion of erection would occur within approximately 30 days after substantial completion. Mr. Heberger objected and indicated that Krump would require total completion 100 days of the erection start date. Mr. Robison said he could promise Clark Pacific would try to minimize completion time, but he did not agree to revise Clark Pacific's bid to incorporate a guarantee of total completion within 100 days of the erection start date.¹

At 1:47 p.m. on June 18, 1996, only minutes before the time set by the State for opening of the sealed bids, Mr. Robison telephoned Mr. Heberger with Clark Pacific's base price in the amount of $4,625,000.00.

At 2:00 p.m. June 18, 1996, the bids were opened. Krump was determined to be the low bidder. Krump had listed Clark Pacific as its pre-cast concrete subcontractor, in accordance with the requirement of both the owner's solicitation documents and Nevada statutory law that general contractors bidding on public works construction projects list in its prime bid the name of each subcontractor to be paid at least five percent of the general contractor's total bid.

Two days later, at 4:00 o'clock p.m. on June 20, 1996, Mr. Heberger, by electronic facsimile, transmitted a handwritten letter to Mr. Robison setting forth what he described as the "basics of the contract," and indicating that a copy of the proposed subcontract with Krump would be sent to Clark Pacific the following day. Mr. Heberger's June 20 letter contained 16 adjustments to the terms of the proposed precast concrete subcontract. Five of these items later became the bones of contention between Clark Pacific and Krump; Clark Pacific objected to these adjustments on the grounds that they were inconsistent with the terms of its bid. These five items were:

(1) a $10,000.00 reduction in Clark Pacific's bid price;

(2) the transfer of the responsibility to provide deadmen, which under Clark Pacific's bid was an obligation of the general contractor, from Krump to Clark Pacific;

(3) a reduction of the period between issuance of the notice to...