Sore Losers Don’t Always Win

Project Engineer Defeats Suit Brought by Unsuccessful Bidder

The online Urban Dictionary defines a “sore loser” as “someone who loses in a fair competition but whines about it on a constant basis, blaming everyone around them for their loss except themselves.” And for many who find themselves on the losing side of a business opportunity, litigation can become the preferred vehicle to validate their claims of “foul play.”

Such lawsuits are certainly not uncommon to project engineers and have become particularly troubling in light of the fact that many states allow third parties to bring suits against project engineers despite the lack of any contractual relationship. The theory generally advanced is that a project engineer can be held liable for supplying erroneous information to persons, such as contractors, whom the project engineer knows or should know will rely on the accuracy of the information the project engineer provides. In such a situation, the claimants are clearly identifiable, e.g., the contractors and subcontractors following the engineer’s specifications. And the analysis is fairly straightforward: did the information contain errors and was the claimant justified in relying on that information?

But project engineers are often asked to provide more than just engineering calculations and specifications. Project engineers are frequently involved in overseeing the selection of the necessary contractors/subcontractors. Unfortunately, with this added responsibility comes the potential for added liability via a “sore loser” lawsuit. These “sore loser” lawsuits are generally filed by contractors accusing the project engineer, and any number of other involved persons, of having negligently or intentionally sabotaged their efforts to win the bid for the project.

Lowest Bid as Proof

The unsuccessful bidder will often use the fact that it submitted the lowest bid as its “proof” that the project engineer erred in not accepting or recommending the acceptance of its bid. This so-called “proof” is almost never enough to maintain a claim when a privately-funded project is at issue and is generally insufficient when a publicly-funded project, subject to competitive bidding requirements, is at issue so long as there was at least some reasonable basis for the bid to have been rejected. Such reasons might include financial instability of the bidder, prior dealings with the bidder, reputation of the bidder, miscalculations in the bid, etc.

Even some of the courts who have imposed duties on project engineers to act in the interests of third parties have refused to allow these sore-loser lawsuits.

For example, in MCM Marine Inc. v. Ottawa County Road Commission, a minority-owned marine contractor sued the civil engineering firm hired by the county road commission to serve as project engineer for a water intake filtration repair project. The original project had failed and part of that failure was attributed to MCM’s involvement (as a subcontractor) in over-excavating the intake bed. Five bids were submitted for the repair project. MCM submitted its own bid and was also listed as the primary subcontractor for three of the bids submitted by other contractors. The lowest bid was submitted by a contractor who had been terminated as the contractor on the original water intake filtration project. MCM’s individual bid was the second lowest bid. The only contractor who did not intend to use MCM as a subcontractor submitted the second highest bid, and it was this contractor’s bid that was ultimately chosen (at the recommendation of the project engineer).

MCM presented evidence that the road commission told the project engineer to find reasons to support the rejection of MCM’s bid. Ultimately, the project engineer recommended that MCM’s bid be rejected because (1) MCM’s bid indicated that it would use, as its subcontractor, the company who had been terminated from the original project, (2) the county’s prior experience with MCM had been poor, and (3) MCM’s proposed work plan appeared overly sensitive to weather conditions.

MCM alleged that the project engineer violated MCM’s constitutional rights, tortiously interfered with MCM’s business expectancy, and committed malpractice. The trial court dismissed all of MCM’s claims against the project engineer and the Michigan Court of Appeals affirmed. The Court rejected the tortious interference claims because the evidence indicated that the project engineer had legitimate reasons for its recommendations given the prior experience with MCM on the original project.

With regard to the malpractice claim, the court explained that while it was “foreseeable that a project engineer’s supervision of a bid process could result in a bidder not being selected and losing the opportunity to profit from the contract[,]” this alone was not sufficient to impose a duty on the project engineer. The project engineer entered into a contract obligating it to make a recommendation to benefit the road commission and the community. The project engineer had no contractual or any other type of relationship with MCM. Therefore, the project engineer had no duty to act for the benefit of MCM or any other potential bidder.

Unsuccessful Bidders

The Michigan Court of Appeals was careful to distinguish this case from Michigan cases that have allowed third parties to sue project engineers. The court pointed out that MCM was not relying on the project engineer’s specifications or plans in the performance of an existing construction project, but rather was merely bidding to work on a project in the future.

Thus, while many courts will allow third-parties to sue project engineers for alleged errors in the specifications and plans, courts are less inclined to allow “sore loser” lawsuits brought by unsuccessful bidders against project engineers. This is particularly true where, like in MCM Marine Inc., the unsuccessful bidder cannot prove that the project engineer acted fraudulently or maliciously.

Topics Lawsuits Contractors Michigan