Opinion ID: 2092371
Heading Depth: 1
Heading Rank: 7

Heading: MBE Provisions of the Department's Contracts

Text: Counts XVI, XVII and XVIII were brought by the Attorney General and the Department against Leininger, Lo-Mar, Melesio, Robert R. Anderson Company, Lo-Mar's vice-president and director Lois Nugent, Lo-Mar's agent Betty Kitterman and James R. Nugent, who was both an agent of Lo-Mar and former vice-president of Robert R. Anderson Company. Count XVI asserted a common law fraud claim while count XVII asserted a claim under the Consumer Fraud Act. Count XVIII is not a part of this appeal. Counts XVI and XVII allege that the Department entered into two separate contracts with Anderson and one contract with Anderson and Leininger. All three contracts related to repair work on highways operated and maintained by the Department. As part of these contracts, Anderson and Leininger agreed to employ MBEs. Anderson and Leininger entered into subcontracts with Lo-Mar for work on all three primary contracts and represented to the Department that Lo-Mar was a bona fide MBE. Melesio owned 55% of the Lo-Mar stock and Lois Nugent owned the remaining 45%. The complaint alleges that Lois' husband James Nugent, a vice-president of Anderson, managed the operations of Lo-Mar. In addition, the complaint alleges that the Lo-Mar owned little or no equipment, that Lo-Mar's labor force consisted mostly of Anderson's employees, and that Lo-Mar repaid Anderson a large share of the amounts Lo-Mar received for its work on the Department contracts. Based on these facts the complaint alleges that Lo-Mar was not a bona fide MBE. The complaint further alleges that defendants' representations were made to induce the Department's reliance. Defendants argue that the complaint fails to state a cause of action for common law fraud because it does not allege any injury. For the reasons stated above, we reject this argument. Moreover, the complaint alleges that the contract contained a provision requiring a dollar-for-dollar reduction in the amount paid to the prime contractor for any amounts by which participation of bona fide MBEs fell short of the contract requirements. This contract provision clearly sets forth the damages suffered by the Department in this case. Therefore, we find counts XV and XVI state a cause of action for common law and statutory fraud respectively.