Filed: Oct. 17, 2008
Latest Update: Mar. 02, 2020
Summary: NOT RECOMMENDED FOR FULL-TEXT PUBLICATION File Name: 08a0627n.06 Filed: October 17, 2008 No. 07-1973 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT WALBRIDGE ALDINGER CO., MIDWEST ) BUILDING SUPPLIES, INC., and JOSEPH ) SHELTON, ) ON APPEAL FROM THE ) UNITED STATES DISTRICT Plaintiffs-Appellants, ) COURT FOR THE EASTERN ) DISTRICT OF MICHIGAN v. ) ) OPINION CITY of DETROIT ) ) Defendant-Appellee. BEFORE: MOORE, COLE, Circuit Judges; and GRAHAM,* District Judge. COLE, Circuit Judge. Plainti
Summary: NOT RECOMMENDED FOR FULL-TEXT PUBLICATION File Name: 08a0627n.06 Filed: October 17, 2008 No. 07-1973 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT WALBRIDGE ALDINGER CO., MIDWEST ) BUILDING SUPPLIES, INC., and JOSEPH ) SHELTON, ) ON APPEAL FROM THE ) UNITED STATES DISTRICT Plaintiffs-Appellants, ) COURT FOR THE EASTERN ) DISTRICT OF MICHIGAN v. ) ) OPINION CITY of DETROIT ) ) Defendant-Appellee. BEFORE: MOORE, COLE, Circuit Judges; and GRAHAM,* District Judge. COLE, Circuit Judge. Plaintif..
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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 08a0627n.06
Filed: October 17, 2008
No. 07-1973
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
WALBRIDGE ALDINGER CO., MIDWEST )
BUILDING SUPPLIES, INC., and JOSEPH )
SHELTON, ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
Plaintiffs-Appellants, ) COURT FOR THE EASTERN
) DISTRICT OF MICHIGAN
v. )
) OPINION
CITY of DETROIT )
)
Defendant-Appellee.
BEFORE: MOORE, COLE, Circuit Judges; and GRAHAM,* District Judge.
COLE, Circuit Judge. Plaintiffs-Appellants Walbridge Aldinger Company, Midwest
Building Supplies, Inc., and Joseph Shelton (collectively, “Plaintiffs”), filed suit in district court
alleging that Defendant-Appellee City of Detroit violated the Detroit City Code § 18-5-1 et seq. by
awarding a storm-sewer construction contract to D’Agostini & Sons, Inc./Lakeshore Engineering,
Inc. Joint Venture. The district court granted the City of Detroit’s motion for summary judgment.
On appeal, the Plaintiffs challenge the district court’s ruling that, as taxpayers in Detroit, they lack
standing to challenge the City’s decision to award the construction contract to another company. We
are not convinced, however, that sufficient facts have been adduced to determine the existence of
*
The Honorable James L. Graham, United States District Judge for the Southern District of
Ohio, sitting by designation.
No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
federal subject matter jurisdiction. Accordingly, we REVERSE the grant of summary judgment and
REMAND the case to the district court for further proceedings consistent with this judgment.
I. BACKGROUND
A. Factual History
On December 29, 2006, the City of Detroit (“City”) opened bidding for a contract to
construct the Oakwood CSO Control Facility and Pump Station, a project that included the
renovation and refurbishment of existing sanitary facilities, and the construction of a new storm and
sanitary pump station. Under Detroit City Code § 18-5-1, the City is required to award a contract
to the “lowest responsible bidder,” a term defined as the lowest bidder who demonstrates, among
other things, “[a] satisfactory record of integrity, judgment, and performance.” The lowest bidder
is determined after readjusting each bid by a two-percent equalization credit in one of two situations:
(1) where a “Detroit-based business” submits a bid on a city contract exceeding $500,000,
id. §
18-5-2(1)(d)(1), and (2) where a joint venture contains a business that is “Detroit-based,”
id. §
18-5-2(1)(d)(2).
The City received only two bids on the project. One bid, in the amount of $159,931,000, was
submitted by Walbridge Oakwood JV (“Walbridge”), a joint venture between Midwest Building
Supplies, Inc., and Walbridge Aldinger Co., a large construction company with its business
headquarters in Detroit, Michigan. The other bid, in the amount of $154,507,025, was submitted
by D’Agostini & Sons, Inc./Lakeshore Engineering, Inc. Joint Venture (“D’Agostini”). Both
bidders claimed to be joint ventures comprised of Detroit-based or Detroit-headquartered businesses,
but only Walbridge submitted a completed Detroit-based subcontractor form. And because
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No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
D’Agostini did not officially submit the required information, it did not receive the customary
two-percent equalization credit and its bid remained in the amount of $154,507,025. Even with the
two-percent credit, however, Walbridge’s revised price was still higher than that of D’Agostini, at
$156,732,380.
After reviewing the two bids, the City awarded the contract to D’Agostini. This decision
marked the beginning of a contentious exchange between Walbridge and the City as to whether the
City should have rejected D’Agostini’s bid as defective. By letter dated March 30, 2006, Walbridge
requested that the City reconsider its recommendation because D’Agostini had: (1) failed to submit
a completed subcontractor form; (2) failed to provide a joint venture agreement as required; and (3)
provided a defective bid bond. According to Walbridge, by the terms of the Bid Document
instructions, D’Agostini’s bid should have been deemed non-responsive and disqualified based on
those defects.
The City responded in writing less than a week later, rejecting Walbridge’s request for
reconsideration and reaffirming its decision to award D’Agostini the contract. The City first
explained that “‘[a] minor informality or irregularity is one that is merely a matter of form and not
of substance,’” and may be “‘corrected or waived without being prejudicial to other bidders. The
defect or variation is immaterial when the effect on price, quantity, quality, or delivery is negligible
when contrasted with the total cost or scope of the supplies or services being acquired.’” (Joint
Appendix (“J.A.”) 47) (quoting 48 C.F.R. § 14.405). The City then addressed each of Walbridge’s
concerns specifically. First, even though D’Agostini may not have properly submitted a
subcontractor form, the City noted that such a failure was a minor defect that may be waived by the
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No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
Detroit Water & Sewerage Department (“DWSD”) without being prejudicial to Walbridge. The
validity of the bid bonds were, in the City’s view, also considered minor deviations that DWSD
likewsie could waive without being prejudicial. Finally, the City also pointed out that D’Agostini’s
failure to provide the required joint venture information was irrelevant because D’Agostini did not
receive the two-percent equalization credit. In short, because the information missing from the bid
did not give D’Agostini an unfair advantage over Walbridge, the City could waive those alleged
defects.
Dissatisfied with the City’s response, Walbridge again protested the City’s decision to award
the contract to D’Agostini. By letter dated April 9, 2007, Walbridge reiterated its concern that
D’Agostini had not submitted a completed subcontractor data form, which, according to Walbridge,
allowed D’Agostini “to generate a price without soliciting any bids from local subcontractors.”
(J.A. 50.) If Walbridge were allowed that privilege, it explained, Walbridge would have been able
to generate a much lower initial bid and “shop” the numbers after the fact to find a contractor that
would agree to its reduced number. Walbridge also reasserted its complaints that D’Agostini had
failed to provide the proper joint venture information, that it failed to submit a proper bid bond, and
that D’Agostini should not be afforded status as a Detroit-based business.
The City responded to Walbridge’s second protest with much of the same—namely, that it
considered the alleged defects minor and waivable. The City also rejected Walbridge’s argument
that the missing information from D’Agostini’s bid did not put Walbridge at an unfair disadvantage,
because before the bidding occurs, all bidders have the opportunity to “shop” their bids if they so
choose. Thus, Walbridge and D’Agostini had the same opportunity to “shop” their bids. Most
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No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
importantly, the City noted that the original bid document states, in part, that the City “expressly
reserves the right to reject any or all Bids, waive any non-conformances, to issue post-Bid addenda
and re-Bid the Work without readvertising, to re-advertise for Bids, to withhold the award for any
reason the Owner determines and/or to take any appropriate action.” (J.A. 119, 180.)
On April 17, 2007, the City declared D’Agostini’s bid to be the lower responsive bid and
then requested D’Agostini to “demonstrate responsibility” by providing information on eleven
scheduled items. This list of items included a bid breakdown, certification forms, a list of
subcontractors, a schedule of manufacturers and supplies, and the appropriate financial information.
B. Procedural History
On April 19, 2007, Walbridge filed suit in the United States District Court for the Eastern
District of Michigan, seeking permanent and preliminary injunctive relief preventing the award of
the storm-sewer/sanitation contract to D’Agostini. Walbridge alleged that the substantial defects in
D’Agostini’s bid rendered the bid non-responsive, and that, because with proper equalization credits,
Walbridge was the lower equalized bidder, the City’s decision to award the contract to D’Agostini
violated Detroit City Code § 18-5-1 et seq.
The parties agree that the district court, through a series of consent judgments, has overseen
all compliance issues of the DWSD with federal and state environmental laws. The court’s oversight
includes reviewing the issuance of contracts concerning the building and maintenance of DWSD
facilities. Walbridge Aldinger Co. v. City of Detroit,
495 F. Supp. 2d 642, 642 n.2 (E.D. Mich.
2007).
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No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
The City filed a motion for summary judgment, claiming that: (1) as a disappointed bidder
on a public contract, Walbridge lacks standing to contest the award of a public contract; (2)
Walbridge does not have standing to bring a taxpayer action under Michigan law because it cannot
show that the contract award would cause any increased taxation; and (3) even if it had taxpayer
standing to sue, Walbridge’s claims fail on their merits. Walbridge filed a response arguing, among
other things, that it has both taxpayer and retail ratepayer standing to challenge the City’s contract
award under Michigan law. In reply, the City countered that Walbridge lacked both taxpayer and
ratepayer standing. After oral argument on the matter, the district court granted summary judgment
for the City based on the ratepayer standing issue, without ruling on the taxpayer standing.
Walbridge Aldinger Co.,
495 F. Supp. 2d 642. The court found that Walbridge “do[es] not have
standing to join in disputes involving the awarding of public contracts.”
Id. at 645. “As [] retail
ratepayers,” the court explained, “[Walbridge is] no different than nearly every home or business in
the entire region. Allowing [Walbridge] to have standing in this matter would essentially permit any
individual in the region to become a party to any case regarding a contract awarded by [the City] .
. . .”
Id. Walbridge timely appealed.
II. JURISDICTION
Walbridge, in its complaint, claimed jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1337.
The complaint did not assert the existence of a federal question, nor have the parties raised the issue
of subject matter jurisdiction in the district court. In its order granting summary judgment to the
City, the district court stated that it retains jurisdiction over contracts concerning the building and
maintenance of DWSD facilities pursuant to its equitable authority to oversee the City’s compliance
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No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
with a series of consent judgments, again without elaborating on the exact nature of the federal
question in this case. On appeal, the City challenges this Court’s subject matter jurisdiction.
Even if the City did not challenge the existence of subject matter jurisdiction, we are required
to satisfy ourselves of our own jurisdiction. Bender v. Williamsport Area Sch. Dist.,
475 U.S. 534,
541, 546-47,
106 S. Ct. 1326,
89 L. Ed. 2d 501 (1986). Further, we must consider the issue sua
sponte when it appears from the record that jurisdiction is lacking.
Id. As there is no diversity of
citizenship between the parties in this case, we need only examine whether the City’s bid process
obligations fall within the original “federal question” jurisdiction of the district court.
Federal question jurisdiction exists in “all civil actions arising under the Constitution, laws,
or treaties of the United States.” 28 U.S.C. § 1331. The Supreme Court has identified three
situations in which a case could “arise under” federal law: (1) if the plaintiff’s cause of action is
created by federal law; (2) if a party’s right to relief under state law requires a resolution of a
substantial question of federal law in dispute; and (3) if the claim is in substance one of federal law.
City of Warren v. City of Detroit,
495 F.3d 282, 286 (6th Cir. 2007) (citing Franchise Tax Bd. of
State of Cal. v. Constr. Laborers Vacation Trust for S. Cal.,
463 U.S. 1, 13,
103 S. Ct. 2841, 77 L.
Ed. 2d 420 (1983)). To determine the presence or absence of federal question jurisdiction, we are
governed by the well-pleaded complaint rule, which provides that such jurisdiction exists only when
a federal question is presented on the face of the plaintiff’s properly pleaded complaint. Caterpillar,
Inc. v. Williams,
482 U.S. 386, 392,
107 S. Ct. 2425,
96 L. Ed. 2d 318 (1987) (citation omitted).
The well-pleaded facts in Walbridge’s complaint do not assert a claim created by federal law.
Rather, in the complaint, Walbridge alleges that the City violated its own municipal code during the
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No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
bid process, resulting in the award of the contract to D’Agostini. It is on this basis that we must
consider the jurisdictional issue. For such jurisdiction to exist, we must conclude that the resolution
of Walbridge’s state-law claims require a resolution of a substantial question of federal law.
The Supreme Court has avoided enumerating a “single, precise, all-embracing test for
jurisdiction over federal issues embedded in state-law claims between nondiverse parties.” Grable
& Sons Metal Products, Inc. v. Darue Engineering & Mfg.,
545 U.S. 308, 314,
125 S. Ct. 2363,
162
L. Ed. 2d 257 (2005) (internal quotation marks and citation omitted). The relevant question is,
whether on the face of a plaintiff’s well-pleaded complaint, “a state-law claim necessarily raise[s]
a stated federal issue, actually disputed and substantial, which a federal forum may entertain without
disturbing any congressionally approved balance of federal and state judicial responsibilities.”
Id.
at 315. Walbridge has the burden of establishing subject matter jurisdiction. Musson Theatrical
v. Fed. Express Corp.,
89 F.3d 1244, 1248 (6th Cir. 1996). Thus, it is incumbent upon Walbridge
to advance the facts and theories necessary to establish subject matter jurisdiction. Merrell Dow
Pharmaceuticals, Inc. v. Thompson,
478 U.S. 804, 809, n. 6,
106 S. Ct. 3229, 3233, n. 6,
92 L. Ed.
2d 650 (1986) (“Jurisdiction may not be sustained on a theory that the plaintiff has not advanced.”)
(citations omitted).
Walbridge gives two reasons in support of federal question jurisdiction. First, Walbridge
claims that a federal question exists under 28 U.S.C. § 1331 because “the contracting practices of
the City’s Water & Sewerage Department fall under the ambit of the Special Administrator’s
responsibility by various Orders of this Court relating to United States v. City of Detroit, Civil
Action, 77-71100.” Complaint at 2, Walbridge Aldinger Co., et al. v. City of Detroit, 495 F. Supp.
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No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
2d 642 (No. 07-11736). Second, Walbridge claims that we have jurisdiction under 28 U.S.C. §
1361, which provides the district court with original jurisdiction over any action to compel an officer
of the United States—in this case, the Special Administrator—to perform a duty owed to the
plaintiffs.
Id.
We conclude that subject matter jurisdiction may not be sustained under 28 U.S.C. § 1361.
The district court terminated the position of the Special Administrator prior to the commencement
of this case, United States v. Michigan,
409 F. Supp. 2d 883, 890 (E.D. Mich. 2006), and therefore
there is no “officer of the United States” to compel. Accordingly, Walbridge may only sustain
federal question jurisdiction under 28 U.S.C. § 1331.
However, given the nature and length of the litigation surrounding contracts necessary to
comply with the consent decree, Walbridge has failed to meet its burden of establishing federal
question jurisdiction exists. This Court recently provided a summary of the extensive litigation
between the DSDW and the Environmental Protection Agency (“EPA”):
Thirty-one years ago, in 1977, the United States sued DWSD over DWSD’s noncompliance
with the Clean Water Act (“EPA Case”). In September 1977, the parties entered a consent decree
establishing a compliance schedule for bringing DWSD’s wastewater treatment and pollution
discharges in line with the Clean Water Act. District Judge Feikens oversaw the initial consent
decree, and he has continued to oversee the litigation surrounding DWSD and the EPA to this day.
In 1979, Judge Feikens found that DWSD was not following the compliance schedule and appointed
Coleman Young, the mayor of Detroit, as “Special Administrator” of the DWSD. United States v.
City of Detroit,
476 F. Supp. 512 (E.D. Mich. 1979). This appointment gave the mayor power to
“exercise extraordinary remedies in control, management, and operation of the Wastewater
Treatment Plant” to ensure DWSD’s compliance,
id. at 515, and allowed him “to enter into such
contracts as he deems necessary and appropriate under the circumstances, with or without
competitive bidding.”
Id. at 516.
Since the initial consent decree, DWSD has drifted in and out of compliance with the Clean
Water Act. During periods of compliance, Judge Feikens “temporarily suspended the Special
Administratorship,” only to “revive” it when “compliance with the Clean Water Act or the Consent
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No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
Judgments in this case was at risk.” United States v. Michigan,
409 F. Supp. 2d 883, 886 (E.D. Mich.
2006) (Feikens, J.). In August 1997, DWSD acknowledged that it was once again operating in
violation of EPA regulations. Judge Feikens appointed a committee to investigate DWSD’s
noncompliance. The committee issued its report in January 2000, and the court again responded
by appointing Detroit’s mayor, Dennis Archer, as Special Administrator of DWSD. The court gave
Archer the same powers it gave to Mayor Young in 1979. United States v. City of Detroit, No.
77-71100,
2000 WL 371795 (E.D. Mich. Feb.7, 2000). DWSD’s contracts were “subject to the
requirement of competitive bidding,” but the mayor could waive the bidding rules when he deemed
it “necessary.”
Id. at * 5. On December 3, 2001, the court transferred the authority of the Special
Administrator to Detroit’s new mayor, Kwame Kilpatrick.
EBI-Detroit, Inc. v. City of Detroit, No. 07-1391,
2008 WL 2130472, at *1 (6th Cir. May 22, 2008).
Moreover, at oral argument, the City’s counsel made several statements that raise factual issues
relating to the existence of federal question jurisdiction. Most notably, counsel argued that this case
is factually distinguishable from City of Warren,
495 F.3d 282, because here, unlike in Warren, the
project under contract is necessary for the City to fulfill the requirements of federal environmental
laws. Counsel also averred that the district court could determine whether the project subject to the
contract in this case is necessary for the City of Detroit to comply with the consent decree. By virtue
of its order granting summary judgment, the district court did not establish, nor have the parties on
appeal developed, the extent to which the contract or bid process at issue is required by the terms of
the consent decree or the district court’s orders related thereto, the extent the court possesses the
powers of the Special Administrator with respect to contracting and bidding decisions, and finally,
whether the court oversees the bid process. The district court should consider the allegations set
forth in Walbridge’s complaint, the terms of the consent decree, and the court’s role related to the
consent decree and bid process to determine whether such allegations raise a substantial federal
question in dispute.
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No. 07-1973
Walbridge Aldinger Co., et al. v. City of Detroit
Accordingly, we REVERSE the order granting summary judgment and REMAND this
matter to the district court for a determination, via factual findings and conclusions of law, that
federal question jurisdiction exists and for such other proceedings that are consistent with this
opinion.
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