Global Network Technologies, Inc. v. Regional Airport Authority of Louisville and Jefferson County

• Decision Date: 04 September 1997
• Docket Number: No. 96-4071,96-4071
• Citation: 122 F.3d 661
• Parties: 33 UCC Rep.Serv.2d 1200 GLOBAL NETWORK TECHNOLOGIES, INC., Plaintiff-Appellant, v. REGIONAL AIRPORT AUTHORITY OF LOUISVILLE AND JEFFERSON COUNTY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 661

122 F.3d 661

33 UCC Rep.Serv.2d 1200

GLOBAL NETWORK TECHNOLOGIES, INC., Plaintiff-Appellant, v. REGIONAL AIRPORT AUTHORITY OF LOUISVILLE AND JEFFERSON

COUNTY, Defendant-Appellee.

No. 96-4071.

United States Court of Appeals,

Eighth Circuit.

Submitted May 19, 1997.

Decided Sept. 4, 1997.

Anthony J. Romano, Kansas City, MO, argued (David L. Boman and C. Matt Swafford, Kansas City, MO, on the brief), for Plaintiff-Appellant.

Michael D. Risley, Louisville, KY, argued (Robert W. Griffith, Louisville, KY, on the brief), for Defendant-Appellee.

Before BEAM and LOKEN, Circuit Judges, and KYLE, ^* District Judge.

LOKEN, Circuit Judge.

The Regional Airport Authority for Louisville, Kentucky ("RAA"), issued an Invitation to Bid on a fiber optics network project at Standiford Field. Global Network Technologies, Inc. ("Global"), submitted a bid accompanied by a bid guaranty, consisting of an irrevocable standby letter of credit in the amount of $85,000 issued by Commerce Bank of Kansas City and payable to RAA as beneficiary. When Global was awarded the contract but could not obtain the requisite bonding, RAA drew on the letter of credit, and Commerce Bank honored the draw. Global reimbursed the Bank, as it was obligated to do, and then sued RAA for breach of warranty, fraud, conversion, and money had and received, alleging that RAA submitted a false signed statement in making the draw. The district court ¹ agreed that the statement was inaccurate but dismissed Global's claims on various grounds. Global appeals. We conclude that RAA's statement was not inaccurate and therefore affirm.

RAA's Invitation to Bid included a package of Contract Documents relating to the technologically complex fiber optics network contract, including a lengthy Bid Form and written "General Conditions" governing the award and execution of the contract. The Bid Form contained two terms that the successful bidder must satisfy after acceptance of its bid but before execution of the final contract:

In the event that this Bid is accepted by [RAA], the undersigned agrees to furnish all required bonds, insurance certificates and other documents, within ten (10) Calendar Days after the date a Notice of Award is given by [RAA]. Furthermore, if it is the successful bidder, the undersigned agrees to enter into a contract in the form contained in these Contract Documents within Thirty (30) Calendar Days after the date that a Notice of Award is given to such successful Bidder.

Consistent with this term, General Condition 30-05 required the successful bidder to furnish executed performance and payment bonds "[w]ithin ten (10) Calendar Days of receipt of the Notice of Award."

The Contract Documents contained overlapping provisions calling for a bid guaranty to enforce these pre-contract terms. The Invitation to Bid provided:

Each sealed Bid shall be accompanied by an irrevocable Bank Letter of Credit ... to guarantee that if the Bidder's offer results in an Award, the Bidder will enter into the Contract within thirty (30) days after Notice of Award is given.

Paragraph 2 of the Bid Form required that a letter of credit accompany the Bid and provided:

The letter of credit is to be forfeited if, in the event the Bid is accepted, the undersigned Bidder shall fail to execute the Contract and furnish satisfactory evidence of insurance and/or Performance and Material Payment Bonds under the conditions and within the time specified hereinafter....

And General Condition 30-07 provided:

Failure of the successful Bidder to provide acceptable bonds and insurance certificates and execute the Contract in accordance with the requirements outlined [above] shall be just cause for cancellation of the Award and forfeiture of the Bid Guaranty.

Read together, these Contract Documents unambiguously required each bidder to submit a letter of credit to guarantee both submission of the required bonds within ten days and execution of a final contract within thirty days.

Global submitted a Bid on RAA's Bid Form and accompanied the Bid with Commerce Bank's letter of credit, which provided that it was payable upon RAA's timely submission of a signed statement certifying that "Global Network Technologies, Inc. has failed to comply with the terms and conditions of the Invitation to Bid." OnJune 6, 1995, RAA issued a Notice of Award accepting Global's Bid. However, Global could not obtain the required bonds within ten days. After further discussions, on June 29, RAA drew on the $85,000 letter of credit. Because RAA submitted the signed statement and other documents specified in the letter of credit before its expiration date, Commerce Bank honored the draw. ²

In the district court and on appeal, Global acknowledges that it breached the General Conditions and the terms of its Bid by not providing the required bonds in ten days. Nevertheless, Global argues, RAA's draw on the letter of credit was wrongful because it falsely certified that Global had failed to comply with the Invitation to Bid. That document, Global explains, required a letter of credit payable if the successful bidder failed to sign the final contract within thirty days after receiving the Notice of Award. Because RAA drew on the letter of credit within thirty days after the Notice of Award, Global had not yet failed to comply with this condition. RAA's signed statement was therefore knowingly false.

We conclude that this interpretation of the letter of credit is far too cramped. Global would have us construe the credit as though it required a signed statement that Global had not signed the final contract within thirty days. But the term used in the credit was broader--failure to comply "with the terms and conditions of the Invitation to Bid." The Invitation to Bid explicitly required that a letter of credit "accompany" Global's "sealed Bid." Paragraph 2 of the Bid required submission of a letter of credit payable upon either of two contingencies, failure to submit bonds within ten days or failure to sign a final contract within thirty days. In our view, the most natural construction of the language used in the letter of credit is that its reference to "terms and conditions of the Invitation to Bid" included both of the bid guaranty requirements contained in the "sealed Bid."

It is obviously true that RAA's Contract Documents could have been drafted more precisely in this regard, since the Bid Form...