Ill. Mech. Sales, LLC v. Eng'rs

• Decision Date: 23 January 2015
• Docket Number: CAUSE NO. 2:14 CV 342 PPS
• Parties: ILLINOIS MECHANICAL SALES, LLC, Plaintiff, v. STEVENS ENGINEERS AND CONSTRUCTORS, Defendant.
• Court: U.S. District Court — Northern District of Indiana

ILLINOIS MECHANICAL SALES, LLC, Plaintiff, v. STEVENS ENGINEERS AND CONSTRUCTORS, Defendant.

CAUSE NO. 2:14 CV 342 PPS

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA HAMMOND DIVISION

January 23, 2015

OPINION AND ORDER

School City of Hammond solicited bids to replace a boiler at a Hammond, Indiana high school, and defendant Stevens Engineers and Constructors ("Stevens") submitted the low bid and won the job. Illinois Mechanical Sales ("IMS") claims the bidding was rigged. Using the court's diversity jurisdiction, IMS brought this suit against Stevens pursuant to Indiana's Antitrust Act, I.C. § 24-1-2-1, et seq. Stevens has now moved to dismiss the lawsuit pursuant to Federal Rule of Civil Procedure 12(b)(6) arguing IMS, as an equipment supplier, does not have standing to bring an antitrust claim. I agree with Stevens, so its motion is GRANTED.

BACKGROUND

The facts come from the complaint which I will accept as true for present purposes. School City of Hammond is a municipal corporation that owns and operates the public schools in Hammond, Indiana. Hammond wanted to replace the boilers and heating system at one of its high schools, Morton Senior High School, so it contractedwith an architecture and engineering firm, Fanning/Howey Associates, to solicit bids for the project. Accordingly, Fanning/Howey published an Advertisement for Bids on June 3, 2014. The Project Manual that accompanied the Advertisement for Bids spelled out the project's requirements and performance specifications in great detail. Of particular importance, the AFB called for contractors to submit a "base bid," using a specified IMS boiler. In addition, Fanning/Howey published an Addendum suggesting contractors make alternate bids utilizing one of five alternative boilers. Although the alternate bid gave the contractors flexibility regarding which boiler to use, the performance specifications didn't change. So whichever boiler a contractor chose, it had to meet the specifications as set out by Fanning/Howey.

Fanning/Howey received the bids on June 24, 2014. Defendant Stevens Engineers and Constructors submitted the lowest overall bid at $824,999. This was one of the alternate bids using one of the five alternative boilers. Circle R Mechanical, another contractor, came in second, with an alternate bid of $961,000. In third place was the base bid from Hayes Mechanical. The Hayes bid was $974,493 and was the lowest base bid submitted. IMS alleges that the Hayes bid was actually a joint bid with IMS.

Hammond awarded the contract to Stevens. According to IMS, the Stevens alternate bid was unresponsive because the boiler Stevens chose was missing several crucial features required in the Fanning/Howey Project Manual. IMS alleges that Stevens only won because Hammond colluded with Stevens to game the bidding process. If not for the collusion, it alleges the IMS/Hayes joint bid would have beenawarded the contract.

IMS filed suit in September 2014 against Hammond and Stevens seeking damages and a preliminary injunction [DE 1]. After briefing and a hearing, I denied IMS's motion for a preliminary injunction [DE 30], and IMS has since dismissed Hammond, leaving Stevens as the sole defendant. Stevens filed this motion to dismiss on October 2, 2014. I held an oral argument on the motion on January 9, 2015. The motion is now fully briefed and ripe for disposition.

DISCUSSION

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotation marks omitted). However, "[a] plaintiff still must provide only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief." Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir. 2008) (internal citation and quotation marks omitted). Although at this stage I still must accept all allegations as true and draw all reasonable inferences in IMS's favor, I don't need to accept threadbare legal conclusions supported only by conclusory statements. Iqbal, 129 S. Ct. at 1949.

IMS has brought this suit under two provisions of Indiana's Antitrust Act. Section 3 makes unlawful acts which operate to restrain open and free competition in bidding to obtain contracts for public and private work. I.C. § 24-1-2-3. Section 7provides that a person injured by a violation of the statute can bring a civil action seeking treble damages, costs and attorney fees. I.C. § 24-1-2-7. Indiana's Antitrust Act is patterned off of federal antitrust statutes, so Indiana courts use federal decisional law to interpret the statute. See Thompson v. Vigo County Bd. Of County Com'rs, 876 N.E.2d 1150, 1155 (Ind. Ct. App. 2007); City of Auburn Through Bd. Of Public Works & Safety v. Mavis, 468 N.E.2d 584, 585 (Ind. Ct. App. 1984). To state a claim under §§ 24-1-2-3 and 24-1-2-7, IMS has to allege 1) a violation of the antitrust statute, 2) an injury to IMS's business or property proximately caused by the violation, and 3) actual damages. Id.

Stevens advances a number of arguments for dismissal, but the crux of its case is antitrust standing. This is a different concept than Article III standing. The basic idea here is that a plaintiff alleging an antitrust claim has to allege an "injury of the type the antitrust laws were intended to prevent." Alva Elec., Inc. v. Evansville-Vanderburgh Sch. Corp., 7 N.E.3d 263, 269 (Ind. 2014) (citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). More concretely, in order to maintain an antitrust action, the plaintiff has to suffer a direct injury. Illinois Brick Co. v. Illinois, 431 U.S. 720, 747 (1977). The idea of antitrust standing is to strike a balance that incentivizes private antitrust enforcement while avoiding excessive treble damages litigation. See In re Indus. Gas Antitrust Litig., 681 F.2d 514, 519-520 (7th Cir. 1982). As a result, standing is limited to those who suffer immediate and direct injuries, while those who suffer indirect injuries are excluded. Id.

In bidding cases like this one, that means losing bidders have standing to bringan antitrust claim. See Mavis, 468 N.E.2d at 586. But suppliers to losing bidders do not. See In re Industrial Gas, 681 F.2d at 519; Southwest Suburban Bd. of Realtors, Inc., v. Beverly Area Planning Assoc., 830 F.2d 1374, 1379 (7th Cir. 1987) ("suppliers of an injured customer may not seek recovery under the antitrust law because their injuries are too indirect, secondary or remote") (citations omitted). That's because the supplier's injury is derivative of the losing bidder's injury - the antitrust violation leads to the bidder losing the bid-for job which then leads to the supplier losing a potential sale - and derivative injuries are not sufficiently direct to confer antitrust standing. See Anaren Mircrowave Inc. v. Loral Corp., 49 F.3d 62 (2nd Cir. 1995) (per curiam) (holding that a supplier to a losing bidder did not have standing to bring antitrust claim against winning bidder because the supplier's injury was derivative of the injury to the losing bidder).

Stevens argues that IMS was a supplier, not a bidder, and therefore doesn't have standing. In its Complaint, IMS alleges that it submitted a joint bid with Hayes Mechanical [DE 1 at ¶¶ 8, 37]. If I were confined to the four corners of the complaint, IMS's allegations would likely be enough to survive Stevens's motion to dismiss. Losing bidders have standing to bring...