Premier Electrical Construction Co. v. Miller-Davis Co.

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Citation422 F.2d 1132
Docket NumberNo. 17290,17312.,17290
PartiesPREMIER ELECTRICAL CONSTRUCTION COMPANY, Plaintiff-Appellant, v. MILLER-DAVIS COMPANY and St. Arnaud Electric Company, Defendants-Appellees. PREMIER ELECTRICAL CONSTRUCTION COMPANY, Plaintiff-Appellant, v. MILLER-DAVIS COMPANY, Defendant-Appellee.
Decision Date15 April 1970


A. Denison Weaver, Chicago, Ill., for appellant.

Luther C. McKinney, John C. Berghoff, Jr., Chicago, Ill., for appellee St. Arnaud Electric Co.; Chadwell, Keck, Kayser & Ruggles, Chicago, Ill., of counsel.

Owen Rall, Peter M. Sfikas, Chicago, Ill., for Miller-Davis; Peterson, Lowry, Rall, Barber & Ross, Chicago, Ill., of counsel.

Before SWYGERT, Chief Judge, KERNER, Circuit Judge, and WISE, District Judge.1

Rehearing in No. 17290 En Banc Denied April 15, 1970.

SWYGERT, Circuit Judge.

These are consolidated appeals in companion cases. No. 17312 is an appeal from judgment in favor of Miller-Davis Company after a bench trial on the merits in a breach of contract action instituted by Premier Electrical Construction Company against Miller-Davis. No. 17290 is an appeal from the dismissal on the pleadings of a treble damage anti-trust action instituted by Premier against Miller-Davis and St. Arnaud Electric Company. We affirm the judgment in favor of Miller-Davis on the contract action. We reverse the judgment dismissing Premier's antitrust complaint and remand for trial.

The Contract Action

The facts relating to the contract action are substantially as follows: In February 1966 the Atomic Energy Commission invited several general contractors, including Miller-Davis, to bid on a project at the Argonne National Laboratories, Argonne, Illinois. The Commission requested a base bid and a bid for nine alternates. The bids were to be opened at 2 p.m., March 3, 1966. The electrical portion of the contract comprised approximately one-third of the total work. Miller-Davis invited bids from several electrical subcontractors, including Premier.

On March 2, 1966, the day before the bids were to be submitted Stanley Wielgos, Premier's vice-president telephoned Paul Hunsberger, assistant division manager of Miller-Davis. Wielgos stated that premier wanted to work with Miller-Davis and requested some assurance that Miller-Davis would work with Premier if Premier was the lowest bidder on the electrical subcontract work. Hunsberger gave no assurances but asked Wielgos to call back at 12:30 on March 3, Wielgos mentioned a base bid of $450,000 to $500,000 during the March 2 conversation.

At 12:30 p.m. on March 3, Wielgos called Hunsberger. Wielgos gave Hunsberger a base bid of $274,100 and an overall bid — the base bid plus the nine alternate bids — of $494,800. Hunsberger said the bid was "very interesting." Wielgos asked, "Do we have a job if you have one?" Hunsberger replied, "If it goes in now, you have a job." Hunsberger then intimated that he would like "sizeable protection" on Premier's price. Both Weilgos and Hunsberger understood that "protection" meant that Premier would submit higher bids to Miller-Davis' competitors so that the latter would have the lowest electrical costs. The submission of inflated bids would nearly insure that Miller-Davis would be the lowest bidder on the prime contract since there was a substantial difference (about $200,000) between Premier's and the other subcontractors' bids for the electrical work. Wielgos accepted this arrangement saying, "We are banking on you getting the job and we are willing to gamble on you and you only."

At Hunsberger's suggestion Wielgos called back around 1 p.m. on March 3 to see if Premier's bid was still the lowest. Hunsberger said that it was and told Wielgos "as it stands now, you have the job." Wielgos called again at 1:30 p.m. and was told that his was still the lowest bid. Wielgos told Hunsberger that if Premier's bid was not the lowest, he wanted to submit Premier's Miller-Davis' bid to the other general contractors.

During the morning and early afternoon of March 3, Hunsberger received bids from other electrical subcontractors. Around 1:40 p.m. Hunsberger told William Sinclair vice-president and Chicago division manager of Miller-Davis, that another electrical subcontractor, St. Arnaud Electrical Company, had submitted cost figures of $225,000 on the base bid. Sinclair called Joe Abrams, electrical engineer for St. Arnaud, and asked if St. Arnaud would take the job for a base bid of $255,000. Abrams accepted this suggestion five minutes later. Sinclair incorporated St. Arnaud's electrical base bid in Miller-Davis' overall bid estimate and contacted Richard Larson, a Miller-Davis employee, who actually submitted the bid at the Argonne facilities. Miller-Davis subsequently was awarded the contract with the Atomic Energy Commission and a written contract was executed. Miller-Davis, in turn, awarded the electrical subcontract to St. Arnaud.

On March 3 and 4 Wielgos called Hunsberger several times and asked if Premier's figures had been used in the Miller-Davis' bid. Hunsberger refused to answer this inquiry. In a conversation on March 4, Wielgos angrily asked Hunsberger whether or not there had been an "agreement" between Premier and Miller-Davis. Hunsberger admitted that there had been.

On these facts the district court held that no contract was formed since the dealings between the parties did not possess the requisites of a formal contract.2 The court further held that even if a contract was formed, it, nevertheless, would be unenforceable because of the illegality of its terms. Since we affirm the district court's holding that no contract was formed, we need not consider the alternate holding that the contract was illegal.

If the rules ordinarily applicable to the formation of subcontracts are applied in this case, the communications between Premier and Miller-Davis constitute, at best, negotiations preliminary to the formation of a contract. The submission of a bid for a subcontract is an offer. 1 Corbin, Contracts § 24 (1950). Acceptance of a subcontractor's bid generally occurs only when a written contract specifically setting out the terms of the agreement is entered into by the general contractor and the subcontractor. Plumbing Shop, Inc. v. Pitts, 67 Wash.2d 514, 408 P.2d 382 (1965). The use of a subcontractor's bid by a general contractor in preparing his bid on the prime contract does not constitute acceptance of the offer, Merritt-Chapman & Scott Corp. v. Gunderson Bros. Engineering Corp., 305 F.2d 659 (9th Cir. 1962). Williams v. Favret, 161 F.2d 822 (5th Cir. 1947). Many courts have held that the same rule applies even if the general contractor is awarded the prime contract. Baird Co. v. Gimbel Bros., 64 F.2d 344 (2d Cir. 1933); but cf. Drennen v. Star Paving, 51 Cal.2d 409, 333 P.2d 757 (1958). Since Premier's bid was not used in Miller-Davis' final bid and was not accepted through the formation of a written contract, no contract was formed.

Premier argues, however, that the ordinary rules do not apply in this case. We agree that proof of business custom or evidence of express intent to the contrary can modify the general rules set out above and demonstrate that the parties intended that a contract be formed prior to the signing of a written agreement. Industrial Electric-Seattle, Inc. v. Bosko, 67 Wash.2d 783, 410 P.2d 10 (1966), cf. Traff v. Farbo, 337 Ill. App. 83, 84 N.E.2d 874 (1949). Premier has offered no evidence of business custom contrary to these rules and instead relies only upon the conversations between Wielgos and Hunsberger to demonstrate that Miller-Davis accepted Premier's bid.

Premier makes two arguments. Premier first contends that during the telephone conversations on March 3 Miller-Davis accepted Premier's bid in return for "protection" provided by Premier subject to the condition that the general contract was ultimately awarded to Miller-Davis. The district court found, and we agree, that the evidence fails to support this contention. On the contrary, those conversations indicate that both parties retained their freedom to withdraw at any time. Thus, Hunsberger repeatedly emphasized to Wielgos that Premier was entitled to nothing if a lower bid was made by another subcontractor. Wielgos understood this to be the case as evidenced by his repeated questioning of Hunsberger concerning how his bid was "holding up" and by his assertion in the 1:30 p.m. conversation on March 3 that he wished to publish his Miller-Davis' bid to other general contractors in the event that his bid was not the lowest.

Premier's second argument asserts that Premier and Miller-Davis entered into a much more complicated arrangement. In return for "protection" it is alleged that Miller-Davis orally accepted Premier's bid subject to the following conditions: that Premier was the lowest bidder; that Miller-Davis used Premier's bid in preparing its prime bid; and that Miller-Davis was awarded the prime contract. The district court found that such an agreement had been formed, relying primarily on a vague admission by Hunsberger in the telephone conversation with Wielgos on March 4. Nevertheless this agreement standing alone would be insufficient to give Premier a cause of action since St. Arnaud's bid was lower than Premier's and was used in calculating Miller-Davis' bid on the general contract. The district court found, however, that a collateral promise existed whereby Miller-Davis agreed not to inform anyone of the exact amount of Premier's bid. The court further found that this collateral promise was breached and that Miller-Davis was estopped from denying that Premier's bid was lowest. We disagree. The record contains little evidence that such a promise was made and no evidence that Miller-Davis informed St. Arnaud or anyone else of the exact amount of Premier's subcontract bid to Miller-Davis. Therefore, even if we were to...

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