Published in 2024 LAGC Magazine (v7.2)
In Lemoine Co., L.L.C. v. Ernest N. Morial Exhibition Hall Auth., 2022-0217 (La.App. 4 Cir. 4/12/23), 369 So.3d 39, the Fourth Circuit overturned a ruling by the Orleans Parish District Court concerning La. R.S. 38:2225.2.4, Construction Management At Risk, as applied on a project at the Ernest N. Morial New Orleans Convention Center. CMAR means: “a delivery method by which the owner uses a design professional, who is engaged by the owner for professional predesign or design services, or both. The owner contracts separately with a CMAR contractor to engage in the preconstruction phase. As specified in this Section, the same CMAR contractor may also provide construction services to build the project.” La. R.S. 38:2225.2.4B(1). A CMAR award may only be challenged “for fraud, bias for pecuniary or personal reasons not related to the taxpayers’ interest, or arbitrary and capricious selection by the owner.” La. R.S. 38:2225.2.4D.
But, in a four to one decision, with one concurring opinion, the Fourth Circuit found that the owner’s decision to award the project to the bidder referred to as “AECOM Hunt/Broadmoor, A Joint Venture,” was arbitrary and capricious because that entity was in fact registered as a partnership and as such was unlicensed. Had the purported “joint venture” not been registered as a partnership, then it would have qualified, according to the Fourth Circuit, because the rules pertaining to a joint venture require only that each joint venture “partner” be licensed rather than the entity itself. See Lemoine/Brasfield & Gorrie Joint Venture, LLC v. Orleans Parish Criminal Sheriff’s Office, 2010-1220 (La.App. 4 Cir. 3/30/11), 63 So.3d 1068. The court explained: “The difference between a joint venture and a partnership is that a joint venture is formed only for a particular project (venture); whereas, a partnership is formed as an ongoing entity for multiple purposes.” Thus, the court found that the determination that the entity was registered as a partnership distinguished it from being a joint venture, and as such “AECOM” was not entitled to the award of the contract.
You may recall the Louisiana Supreme Court in Broadmoor, L.L.C. v. Ernest N. Morial New Orleans Exhibition Hall Auth., 2004-0211 (La. 3/18/04), 867 So.2d 651, reasoned that: “A political entity has no authority to take any action which is inconsistent with the Public Bid Law.” However, the Louisiana Supreme Court in Lemoine Company, L.L.C. v. Ernest N. Morial Exhibition Hall Authority, 2023-00763 (La. 10/17/23), 372 So.3d 326, granted writs and overturned the Fourth Circuit. In a short per curium decision, the Court explained:
In light of the unique and extenuating circumstances presented herein, and given the time-sensitive nature of the ongoing project, the court of appeal is reversed. The judgment of the trial court, which found the Authority’s decision to award the contract to AECOM-Hunt/Broadmoor was not arbitrary and capricious, is reinstated.
Judge Weimer dissented from the Supreme Court decision because he would docket the matter for a full hearing, reasoning: “This matter presents important legal issues involving significant public works projects. While I am not suggesting the conclusion reached by my colleagues is incorrect as a matter of law, the conclusion was nonetheless reached without the opportunity to review the full record.”
Judge Genovese dissented for other reasons assigned, arguing “there was no unique and extenuating circumstances in this case,” and that claiming to be a joint venture is insufficient to change or effect its status as a partnership and thus the awarding authority’s decision was “in abject disregard of the RFQ requirements” and as such was arbitrary and capricious. Judge Genovese further offered: “Why have regulations and statutes if they are not required to be followed or enforced?”
At least with regard to CMAR projects, it would appear the legislature has returned to the standards expressed in Haughton Elevator Div. v. State, Through Div. of Admin., 367 So.2d 1161, 1165 (La.1979) defining the discretion of a public entity more broadly than did the Court in Broadmoor. The Louisiana Supreme Court in Haughton reasoned: “Louisiana follows the general rule of vesting an awarding body with discretion subject to judicial review. Courts will not substitute their judgment for the good-faith judgment of an administrative agency. Nevertheless, an awarding body’s administrative discretion must be exercised in a fair and legal manner and not arbitrarily. Consequently, the disqualification of the lowest bidder, without giving the low bidder a fair chance to disprove charges of irresponsibility, offends principles of fair play and is an arbitrary abuse of discretion inconsistent with the letter and the spirit of the Louisiana public contract law.”
Ultimately, whether awarded as design-bid-build under traditional public bid law principles or under alternative delivery methods now authorized, it is the interest of the Louisiana taxpayer that must be the paramount consideration.
Russel W. Wray is an attorney and owner of Wray & Associates (www.wraylaw.com) and practices in Louisiana.
This article is informational and should not be used as legal advice. One should independently consult with an attorney prior to relying on any of the information provided therein.
Wray & Associates © 2024