Regan v. Babcock
| Decision Date | 10 February 1933 |
| Docket Number | No. 29260.,No. 29261.,No. 29257.,No. 29256.,No. 29245.,No. 29258.,No. 29227.,No. 29259.,29227.,29245.,29256.,29257.,29258.,29259.,29260.,29261. |
| Citation | 188 Minn. 192,247 N.W. 12 |
| Parties | REGAN et al. v. BABCOCK, Commissioner of Highways, et al. (STATE, Intervener). |
| Court | Minnesota Supreme Court |
Appeal from District Court, Ramsey County; Kenneth G. Brill, Judge.
Suits by John J. Regan and others against Charles M. Babcock, Commissioner of Highways, and others, and Fielding & Shepley, Incorporated, and others, in which the State of Minnesota intervened. From orders sustaining demurrers to plaintiffs' complaints and from orders denying motions to file supplemental complaints, plaintiffs appeal, and from orders overruling demurrers to and denying motion to strike out the complaint in intervention, defendants Fielding & Shepley, Incorporated, and others appeal.
Orders sustaining demurrers to plaintiffs' complaints reversed, orders disallowing supplemental complaints reversed, and orders overruling demurrers to complaint in intervention and refusing to strike out such complaints affirmed.
Briggs, Weyl & Briggs, of St. Paul, and C. J. Rockwood, of Minneapolis, for appellants.
Daggett & Redlund, of St. Paul, Cobb, Hoke, Benson, Krause & Faegre, L. M. Staples, and Donald O. Wright, all of Minneapolis, and Stearns, Stone & Mackey, of St. Paul, for respondents.
Henry N. Benson, Atty. Gen., and James E. Markham and Charles E. Phillips, Deputies Atty. Gen., for the State.
W. K. Montague, of Duluth, amicus curiæ.
These appeals involve six taxpayers' suits brought to have as many highway paving and grading contracts declared void and for injunctive relief to prevent the performance of such contracts and payment of the contract prices by the state. The contractor defendants demurred to the complaints. The demurrers were sustained and the plaintiffs have appealed. The defendants Babcock and Ellison, the highway commissioner and engineer, joined in an answer as did the defendants Pearlove, Erickson, and Wittich, commissioners of administration and finance. The state of Minnesota through the Attorney General intervened and realleged all of the allegations of the plaintiffs' complaints. The plaintiffs sought to amend their complaints by alleging knowledge by the state officers of the conspiracy on the part of the contractors, but their motion to do so was denied by the trial court. The contractors demurred to the complaints in intervention and have appealed from the orders overruling those demurrers. The contractors also moved to strike out the complaints in intervention and have appealed from the orders denying that motion.
We pass upon the allegations of the complaints upon the assumption that they are true as must be done in case of demurrer. Where, in this opinion, we state facts, they are statements of alleged facts. This will avoid the inconvenience of repeating the phrase "it is alleged." For convenience also the contracts in excess of 100,000 square yards of paving may be referred to as major projects, those involving less than that yardage as minor projects.
February 26, 1931, the Governor of Minnesota issued to the commissioner of highways an order which read as follows:
The department of highways complied with this direction and in preparation for doing the 1932 paving, published the first advertisement for bids for letting seven contracts which included the six projects covered by the six complaints here involved. These six projects each involved more than 100,000 square yards of paving. The seventh project involved less than 100,000 square yards and for convenience may hereinafter be referred to as project No. 7.
The date set for receiving bids on the seven projects was November 10, 1931. November 6, 1931, the highway department addressed all contractors which it considered eligible under its rules advising them as to whom it considered eligible for major projects and those eligible for minor projects. Ten of the contractors were stated to be eligible for the minor and twenty-four for major projects. Definite limits were placed upon the amount of paving that should be let to each during 1932. The contractors who were eligible to bid on major projects under this order conspired and colluded together for the purpose of controlling bids on all projects exceeding 100,000 yards and for the purpose of allotting among themselves all paving work to be done in the state for the year 1932, to the exclusion of all other bidders. October 26, 1931, the contractors met, and in furtherance of the conspiracy appointed a committee to apportion and allot the paving work for 1932 among themselves, and on October 30 they met again and appointed a committee of their number to assign to each contractor the project on which such contractor should be the low bidder and to fix the amount of such bids as well as that of the complimentary bids to be made by all other contractors bidding upon the project. The six contracts here involved were allotted to the six contractors who are the defendants in these actions. The highway department advised the conspiring contractors that they would be the only ones who would be permitted to bid on any one of the six major projects which were to be let on November 10, 1931. The highway department adopted the same list of eligible contractors that the conspiring contractors had previously prepared. In conformance to the suggestion of the contractors they were classified on the basis of the number of paving outfits which they might operate, each contractor being allowed fifteen miles of pavement for each mixer or outfit. The department also advised the contractors that if any change was made in the classified list of contractors all contractors would be advised. The contractors were also advised that if any contractor should be low bidder on projects exceeding the mileage for which he was listed the department would award a contract only on the basis of the mileage allotted to him.
November 9, 1931, all of the conspiring contractors met and their committee allocated to each one the amount he or it should bid in order to make certain that the one to whom each project had been allotted would be the low bidder therefor. November 10 these bids so agreed upon were made to the department of highways, and in consequence the six contractors here involved were the low bidders upon their respective projects. Such bids were greatly excessive in amount and in fact not competitive and were made for the purpose of preventing competition and to defraud the public and taxpayers of the state of Minnesota. The aggregate amount of these six bids exceeded a reasonable price for the work by over half a million dollars. No contractors who were not on the eligible list were permitted to bid on these projects. Some offered to bid but were denied the privilege. Certain contractors subsequently convinced the highway department that they were eligible and were added to its selected list. Certain contractors who were refused the right to bid were adequately financed and equipped for such work and had actually completed paving in the states of Iowa and Illinois in amounts running into millions of yards. At least six contractors who were refused the right to bid in these six paving projects on November 10, 1931, were fully qualified, competent, and equipped in every respect to satisfactorily perform and complete such contracts. The paving work for the year 1932 was so arranged that no other contractor could, under the rules of the department, qualify to bid on a major project.
Project No. 7 upon which bids were invited November 10, 1931, was less than 100,000 square yards in extent. The specifications for the pavement on this project were the same as those upon the major projects. Because of its being a minor project the bidding was open to more contractors than was the bidding on the major projects. It was in a measure competitive. It was let to McKenzie and Kileen at 91 cents per square yard of paving. For the paving on this project Nolan Brothers, one of these defendant contractors, bid 94 cents per square yard, 3 cents above the McKenzie and Kileen bid, whereas for the paving on the major project allotted to Nolan Brothers its bid was $1.44 per square yard and such bid was the low bid therefor. There was a difference of 50 cents per square yard between Nolan Brothers' bid in competition with McKenzie and Kileen and its bid on the project where it had no competition. Its bid on the larger project was more than 50 per cent. higher than on the competitive work.
It is charged in the complaint that the actual cost per mile of laying the pavement on project No. 7 was the same as on the larger projects except for the possible higher rate of overhead on No. 7. Previous contracts for like paving during the fall of 1931 had been let to Nolan Brothers and others at a price around $1 per square yard, the contractor to furnish his own steel. On the projects now before us the state supplied the steel.
The complaints in these actions were filed with the clerk of court in Ramsey county May 12, 1932, and copies served upon all defendants. May 16, 1932, the Attorney General filed the state's petition for intervention and adopted and realleged all the allegations of the plaintiffs' complaints in each action and prayed that the contracts be adjudged void and of no effect. May 25, 1932, the Attorney General together with the department of highways and the commission of administration and finance entered into an agreement with...
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