MARKMAN, J.
The issue here is whether plaintiff, the disappointed lowest bidder on a public contract, had a valid business expectancy for the purpose of sustaining a claim of tortious interference with a business expectancy. The trial court held that plaintiff did not have such an expectancy, but a divided Court of Appeals panel held that a genuine issue of material fact exists in this regard. Because we agree with the trial court and the Court of Appeals dissent that plaintiff did not have a valid business expectancy, we reverse the judgment of the Court of Appeals and reinstate the trial court's order granting defendant's motion for summary disposition.
Davison Community Schools, a public school district, entered into a contract with defendant for architectural services with regard to a construction project. As part of the contract, defendant agreed to assist the school district with the bid selection process by, among other things, evaluating the bids submitted by contractors and making a recommendation to the school district regarding which contractor should be awarded the project. Pursuant to defendant's recommendation, the school district eventually awarded the project to U.S. Construction and Design Services, LLC, the contractor that had submitted the second-lowest bid. Plaintiff, the contractor that submitted the lowest bid, sued defendant for tortious interference with a business expectancy.
The trial court granted defendant's motion for summary disposition, concluding that plaintiff did not have a valid business expectancy. In a split decision, the Court of Appeals reversed, holding that a genuine issue of material fact existed in this regard. Cedroni Assoc., Inc. v. Tomblinson, Harburn Assoc., Architects & Planners, Inc., 290 Mich.App. 577, 802 N.W.2d 682 (2010). Judge KIRSTEN FRANK KELLY dissented, agreeing with the trial court that plaintiff did not have a valid business expectancy. We ordered and heard oral argument on whether to grant defendant's application for leave to appeal and specifically asked the parties to
We review de novo a trial court's decision on a motion for summary disposition. Driver v. Naini, 490 Mich. 239, 246, 802 N.W.2d 311 (2011).
The elements of tortious interference with a business relationship or expectancy are "`the existence of a valid business relationship or expectancy, knowledge of the relationship or expectancy on the part of the defendant, an intentional interference by the defendant inducing or causing a breach or termination of the relationship or expectancy, and resultant damage to the plaintiff.'" Dalley v. Dykema Gossett PLLC, 287 Mich.App. 296, 323, 788 N.W.2d 679 (2010), quoting BPS Clinical Laboratories v. Blue Cross & Blue Shield of Mich. (On Remand), 217 Mich.App. 687, 698-699, 552 N.W.2d 919 (1996). The issue here is whether plaintiff, as the lowest bidder on a public contract, had a valid business expectancy. In order to establish this, "[t]he expectancy must be a reasonable likelihood or probability, not mere wishful thinking." Trepel v. Pontiac Osteopathic Hosp., 135 Mich.App. 361, 377, 354 N.W.2d 341 (1984). We agree with the trial court and the Court of Appeals dissent that plaintiff did not have a valid business expectancy because plaintiff had no reasonable expectation of being awarded the contract, only "wishful thinking."
That plaintiff as the lowest bidder on a public contract had no valid business expectancy is supported by the longstanding rule in Michigan that a disappointed low bidder on a public contract has no standing to sue in order to challenge the award of a contract to another bidder. Detroit v. Wayne Circuit Judges, 128 Mich. 438, 439, 87 N.W. 376 (1901) ("As a bidder, the complainant has no standing."). In Talbot Paving Co. v. Detroit, 109 Mich. 657, 660, 662, 67 N.W. 979 (1896), this Court held that "the lowest bidder, under a contract proposed to be let by a municipal corporation, whose bid has been rejected, [does not have] a right of action at law to recover profits which he might have made had his bid been accepted." This Court reached this conclusion even though "under the charter of Detroit, it was the duty of the city to let the contract to the lowest responsible bidder...." Id. at 660, 67 N.W. 979. This Court held that the charter did not provide for a private cause of action because it "was not passed for the benefit of the bidder, but as a protection to the public." Id. "The charter provision which required the acceptance of the lowest responsible bid had no reference to any interest which the bidders might have in the premises, but was passed to protect the interest of the citizens of the city." Id. at 662, 67 N.W. 979 (emphasis added); see also Lasky v. City of Bad Axe, 352 Mich. 272, 276, 89 N.W.2d 520 (1958) (stating that these provisions "are enacted for the benefit of property holders and taxpayers, and not for the benefit of or enrichment of bidders").
Given that a contractor that submits the lowest bid cannot bring a cause of action against the municipality when its bid is rejected, even when the municipality has adopted a charter provision that requires it to accept the "lowest responsible bidder," it is difficult to fathom how plaintiff's submission of the lowest bid could have created a valid business expectancy in light of the highly discretionary process of awarding governmental contracts. In terms of whether a valid business expectancy is created, a plaintiff's expectations are entirely the same regardless of whether it alleges that the government has wrongfully denied it the contract or, as here, that a third party has interfered and
In the instant case, not only should the common-law rule and MCL 380.1267(6) have made plaintiff aware that its submission of the lowest bid did not create a valid business expectancy, but documents provided by the school district before plaintiff even submitted its bid should also have made this perfectly clear. For example, both the advertisement for bids and the instructions to bidders included in the project manual expressly stated that the school district "reserves the right to accept or reject any or all offers." The school district's fiscal management policy also stated multiple times that the school district has the "right to reject any or all bids" and further stated that "the lowest dollar cost bidder may not always receive award of the bid." See Leavy v. City of Jackson, 247 Mich. 447, 450, 226 N.W. 214 (1929), quoting 3 McQuillin, Municipal Corporations (2d ed.), p. 919 ("Reservation of right to reject any and all bids, where the authorities have power to make such reservation, gives the right to let the contract to any bidder and reject the others, although the one securing the contract is not the lowest bidder[.]"). Finally, Clay Perkins,
The Court of Appeals recognized that "the submission of the lowest bid, in and of itself, was inadequate to sustain plaintiff's suit" and "reject[ed] any rule per se that would allow litigation to proceed simply on the basis of proof of the lowest bid" because submission of the lowest bid does not, by itself, create a valid business expectancy. Cedroni, 290 Mich.App. at 582, 802 N.W.2d 682.
"Lowest responsible bidder" is defined in the policy as a "responsible contractor," and "responsible contractor" is defined as a "contractor determined by the [school district] to be sufficiently qualified to satisfactorily perform the Construction Project...." The policy then provides a list of factors for the school district to consider in determining whether a contractor is properly characterized as a "responsible contractor," including "an overall review of the Responsibility Criteria," "the input of the District's architect(s)," and "other relevant factors." The "responsibility criteria" include numerous considerations such as "projects completed within the past three (3) years"; "experience with construction techniques, trade standards, project scheduling, cost control, management of projects and building codes, particular to the Construction Project"; "[r]eferences from individuals or entities that have received in the past three (3) years, or that are currently receiving the contractor's services, including information regarding records of performance, job site cooperation, and long term quality standards"; and "any additional criteria that [the school district] may deem relevant for purposes of making a determination of contractor responsibility...."
In Mago Constr Co v. Anderson, Eckstein & Westrick, Inc, unpublished opinion per curiam of the Court of Appeals, issued November 8, 1996 (Docket No. 183479), 1996 WL 33348794, a case involving facts similar to the instant case, the Court of Appeals affirmed the trial court's order granting the defendant's motion for summary disposition. The defendant was a corporation of professional consulting engineers
Although Mago is an unpublished and therefore nonbinding opinion of the Court of Appeals,
In the instant case, although the school district's fiscal management policy provided that the contract would be awarded to the "lowest responsible bidder," the school district itself retained the right to choose the "lowest responsible bidder." The policy provided a nonexhaustive list of factors for the school district to consider, including its architect's input. Therefore, just as in Mago, "the award of the contract was a highly discretionary governmental activity in which `too many factors [were] in play to be able to reasonably infer that ... plaintiff [by virtue alone of being the lowest bidder] would have obtained the desired [contract].'" Id. (citation omitted; first alteration in the original). In addition, "the bidding instructions clearly informed plaintiff that the lowest bidder was not guaranteed to receive the ... contract." Id. Because the school district retained a broad discretionary right to reject the lowest bidder, plaintiff could not have had a valid business expectancy.
We agree with the Court of Appeals dissent that the school district's fiscal management policy did not afford plaintiff a valid business expectancy. The school district determined that plaintiff was not a "responsible contractor" in this specific circumstance, and it is not our job to second-guess this determination. See Kundinger v. City of Saginaw, 132 Mich. 395, 405, 93 N.W. 914 (1903) ("The law does not give to courts the power to substitute their judgment for the honest judgment of the board."); Warda v. Flushing City Council, 472 Mich. 326, 333, 696 N.W.2d 671 (2005) ("Whether the council acted wisely or unwisely, prudently or imprudently, is not for the consideration or determination of this Court."); Leavy, 247 Mich. at 450, 226 N.W. 214, quoting 3 McQuillin, § 1340 ("`The court will indulge the presumption that the authorities acted in good faith in awarding the contract.'").
"`The exercise of discretion to accept or reject bids [involving public contracts] will only be controlled by the courts when necessary to prevent fraud, injustice or the violation of a trust.'" Leavy, 247 Mich. at 450, 226 N.W. 214, quoting 3 McQuillin, § 1340. In this case, there is no evidence that this Court's intervention is "necessary to prevent fraud, injustice or the violation of a trust." Rather, as the Court of Appeals dissent explained, plaintiff "is simply attempting to substitute [its] own judgment for that of the school district," and "[w]hile plaintiff may believe its... judgment to be superior to that of the school board, the statute endows the school board, not plaintiff, with the discretion to award contracts in the school board's best interest." Cedroni, 290 Mich. App. at 625, 802 N.W.2d 682 (K. F. KELLY, J., dissenting).
For these reasons, we reverse the judgment of the Court of Appeals and reinstate the trial court's order granting defendant's motion for summary disposition. As the trial court and the Court of Appeals dissent concluded, plaintiff had no valid business
YOUNG, C.J., and MARY BETH KELLY and ZAHRA, JJ., concurred with MARKMAN, J.
CAVANAGH, J. (dissenting).
The issue presented in this case is whether plaintiff has produced sufficient evidence to create a genuine issue of material fact regarding whether defendant tortiously interfered with plaintiff's valid business expectancy. I respectfully dissent from the majority's decision to disregard Joba Constr. Co., Inc. v. Burns & Roe Inc., 121 Mich.App. 615, 329 N.W.2d 760 (1982). Instead, I would apply Joba and affirm the judgment of the Court of Appeals because I do not believe the "disappointed bidder" rule should be extended to the facts of this case.
In 2003, Davison Community Schools decided to renovate two elementary schools and contracted with defendant for architectural and engineering services. Under the contract, defendant was to assist the school district during the competitive bidding process "by reviewing and evaluating bid applications, investigating competing contractors and their references, expressing opinions and views on contractor competence and workmanship, and making recommendations regarding which contractor should be awarded the project." Cedroni Assoc., Inc. v. Tomblinson, Harburn Assoc., Architects & Planners, Inc., 290 Mich.App. 577, 583, 802 N.W.2d 682 (2010). Jackie Hoist was defendant's designated representative for the project.
The school district advertised for bids. With respect to the bidding process, the school district's fiscal management policy (FMP) provided that the school district reserved the right to reject any or all bids. The FMP also stated that "[b]ids shall be awarded in compliance with the applicable bidding obligations imposed by law to the `lowest responsible bidder.'" The FMP defined "lowest responsible bidder" as
The FMP defines the "Responsible Contractor" as
The school board's review committee endorsed defendant's recommendation to reject plaintiff's bid, and the school district awarded the project to U.S. Construction, explaining that its decision was made in reliance on defendant's recommendation.
Plaintiff filed a complaint against defendant alleging tortious interference with prospective economic relations, arguing that it had "a legitimate expectancy in obtaining a contract to complete work for the [school] Project," that defendant had "wrongfully persuaded the School District" to reject plaintiff's bid, and that defendant had "intentionally interfered with the expectant business relationship ... by wrongfully claiming that [plaintiff] was unqualified to perform" the necessary work. Defendant moved for summary disposition, which was eventually granted under MCR 2.116(C)(10).
This Court reviews de novo a trial court's decision on a motion for summary disposition de novo. Shepherd Montessori Ctr. Milan v. Ann Arbor Charter Twp., 486 Mich. 311, 317, 783 N.W.2d 695 (2010). A motion brought under MCR 2.116(C)(10) tests the factual support for a party's cause of action. Skinner v. Square D Co., 445 Mich. 153, 161, 516 N.W.2d 475 (1994). A trial court may grant a motion for summary disposition under MCR 2.116(C)(10) if the pleadings, affidavits, and other documentary evidence, when viewed in a light most favorable to the nonmoving party, show that there is no genuine issue with respect to any material fact. Quinto v. Cross & Peters Co., 451 Mich. 358, 362, 547 N.W.2d 314 (1996). The trial court's task in reviewing the motion entails consideration of the record evidence and all reasonable inferences arising from that evidence. Skinner, 445 Mich. at 161, 516 N.W.2d 475.
The elements for a claim of tortious interference with advantageous business relationships or prospective economic relations are
Although it is generally difficult to claim that a bid — which, at its heart is an offer to perform the work for a specified price — can generate a realistic expectation in the bidder that it will be awarded the project, plaintiff did not merely submit a bid in this case. Rather, plaintiff was informed that it was the lowest bidder. In my view, once a qualified bidder has submitted a conforming bid and knows that it has provided the lowest bid, there might be a genuine issue of material fact regarding whether the bidder's expectation reasonably elevated from a "mere hope" to a "realistic expectation" that it would be awarded the project, especially in this case, given that the bidding materials provided by the school district stated that the project "shall" be awarded to the "lowest responsible bidder." See Joba, 121 Mich. App. at 635, 329 N.W.2d 760 (concluding that "the lowest qualified bidder" has a "legitimate expectancy in obtaining the contracts").
Accordingly, given that plaintiff was aware of its status as the lowest bidder, and keeping in mind that plaintiff "need not demonstrate a guaranteed relationship," id. (quotation marks and citations omitted), I believe that plaintiff might have had a valid business expectation as long as plaintiff was able to establish a genuine issue of material fact regarding whether it was a responsible bidder.
Although defendant's investigation and opinion of plaintiff's qualifications are certainly valid considerations in determining whether plaintiff was a responsible bidder, the parties presented conflicting evidence regarding plaintiff's qualifications. While I do not think that the mere fact that plaintiff believed that it was qualified is sufficient to avoid summary disposition on this issue, plaintiff presented evidence that defendant's opinion and recommendation regarding plaintiff's qualifications might have been improperly influenced by misplaced or unsupported animosity toward plaintiff related to problems between plaintiff and defendant on a previous project. Plaintiff's evidence included Hoist's allegedly untrue notes regarding plaintiff's qualifications, which included reviews from individuals who had previously worked with plaintiff, and Richard Cedroni's affidavit and letter showing that plaintiff had never been removed from a project or received a poor review in the past. This evidence establishes that plaintiff had a realistic expectation that it would qualify as a responsible bidder. This conclusion, in turn, gives rise to a question of material fact about whether plaintiff had a valid business expectancy in being awarded the contract. Thus, because the evidence must be viewed in the light most favorable to plaintiff as the nonmoving party, and because determining whether plaintiff was "qualified" or "responsible" is largely a question of fact on which both parties have presented conflicting evidence, I would affirm the judgment of the Court of Appeals.
Notably, however, the "disappointed bidder" rule developed by this line of cases has generally been applied only when the plaintiff files suit against the contracting governmental entity rather than another private entity. Indeed, in Joba, 121 Mich.App. 615, 329 N.W.2d 760, the Court of Appeals did not apply the disappointed-bidder rule in a dispute between two private entities under circumstances very similar to this case.
In Joba, the plaintiff was the lowest bidder for a contract with the city of Detroit. The defendant had been retained by the city to evaluate bids and make recommendations regarding which bidders to select for certain contracts, including the contract on which the plaintiff was the lowest bidder. The defendant recommended that the city not accept the plaintiff's bid because, in the defendant's opinion, the plaintiff was unqualified to perform the contract. However, just as in this case, there was also evidence presented that animosity existed between the defendant and the plaintiff, partially resulting from past interaction on a different project. The case went to trial, the jury returned a verdict in favor of the plaintiff, and the defendant sought a directed verdict, which the trial court denied. Accordingly, the Joba Court considered the defendant's appeal of the trial court's denial of a directed verdict in the light most favorable to the plaintiff as the nonmoving party, and it concluded that the "plaintiff presented sufficient evidence to create a question of fact as to whether it was the lowest qualified bidder and thus had a legitimate expectancy in obtaining the contracts...." Id. at 635, 329 N.W.2d 760. As previously stated, Joba did not apply the disappointed-bidder rule to the dispute between the two private entities.
The majority, however, summarily discards Joba as not "particularly helpful," ante at 6 n. 6, and instead relies on Mago Constr. Co. v. Anderson, Eckstein & Westrick, Inc., unpublished opinion per curiam of the Court of Appeals, issued November 8, 1996 (Docket No. 183479), 1996 WL 33348794, to support its argument that the disappointed-bidder rule should apply in this case. Mago, however, is unpersuasive for a variety of reasons. First, to the extent that Mago is inconsistent with Joba, Joba should be given greater weight because, as the majority concedes, "[a]n unpublished opinion is not precedentially binding under the rule of stare decisis." MCR 7.215(C)(1).
Likewise, the majority's reliance on an unpublished opinion of the United States Court of Appeals for the Sixth Circuit, EBI-Detroit, Inc. v. Detroit, 279 Fed. Appx. 340 (C.A.6, 2008), in support of its extension of the disappointed-bidder rule to a dispute between two private entities is misplaced. Specifically, EBI-Detroit, 279 Fed.Appx. at 352-353, cited Timmons v. Bone, unpublished opinion per curiam of the Court of Appeals, issued April 23, 2002 (Docket No. 228942), p. 2, 2002 WL 745089, which had rejected a tortious-interference claim because the plaintiff "did not meet the minimum qualifications for obtaining the ... contract...." Accordingly, all the cases cited by the majority in support of its decision to extend the disappointed-bidder rule are both unpublished and distinguishable because the plaintiffs in those cases failed to satisfy the requirements for submitting a conforming bid. While I agree that submission of a nonconforming bid might be insufficient, as a matter of law, to create a valid business expectancy for purposes of a claim of tortious interference, there is nothing in the record indicating that plaintiff's bid in this case was nonconforming. Accordingly, the majority's position is without support in the caselaw. The Court of Appeals' opinion in this case, however, is fully supported by the directly applicable opinion in Joba.
Furthermore, unlike the majority's holding in this case, Joba's decision to limit the disappointed-bidder rule to suits against governmental entities is consistent with the purpose of that rule. Specifically, by declining to provide private entities with the same protection from suit granted to governmental entities, Joba ensures that taxpayers obtain the best price possible for public contracts, free of improper interference by private entities. As evidenced by the facts of Joba and, potentially, the facts of this case, private entities may be motivated to make contracting decisions for reasons that are not consistent with the purpose of competitive bidding for government contracts. Because these potential motivations may not result in the selection of the "lowest responsible bidder," they are contrary to the purpose of the disappointed-bidder rule: to protect taxpayers.
However, when a private entity intentionally provides inaccurate or misleading information to a governmental entity and the governmental entity in turn relies on that information in making a contracting decision, the private entity has injected dishonesty and bad faith into the decision-making process. Accordingly, the bidding process results in an "injustice," and courts may intervene without impermissibly interfering with the governmental entity's exercise of discretion in making contracting decisions. See Leavy, 247 Mich. at 450, 226 N.W. 214 (stating that courts may intervene in the public bidding process to prevent an "injustice") (quotation marks and citation omitted). Stated more simply, if plaintiff had lost the contract in this case solely because the school district had exercised its discretion free of improper influence and selected a bidder other than plaintiff, I would agree that plaintiff has no claim. However, because plaintiff has established a genuine issue of material fact in regard to whether it lost the contract because defendant acted dishonestly and in bad faith by improperly interfering with the school district's decision, I believe that plaintiff may have a valid claim for tortious interference under Joba.
Accordingly, although a governmental entity is entitled to deference regarding its discretionary selection of a bidder under this Court's jurisprudence, that caselaw does not protect a private entity that dishonestly influences the governmental entity. All the various documents and statutes that the majority cites to establish the fact that the school district in this case had the authority to reject any and all bids are rooted in deference to the school district's discretion in making contracting decisions. However, this case raises the separate issue of whether the deference afforded to governmental entities should be extended to protect private entities, even when the
MARILYN KELLY and HATHAWAY, JJ., concurred with CAVANAGH, J.
