Court Opinion

ID: 899665
Source: CourtListenerOpinion
Date Created: 2013-06-11 23:38:09.650402+00
Date Added: 2024-06-11T09:06:14.986775
License: Public Domain

FILED
                            NOT FOR PUBLICATION                             JUN 11 2013

                                                                       MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

ETCO SERVICES, LLC, an Idaho limited             No. 12-35301
liability company,
                                                 D.C. No. 2:11-cv-00042-LRS
              Plaintiff - Appellant,

  v.                                             MEMORANDUM *

KILLIAN CONSTRUCTION CO., DBA
Killian Construction, Inc., a Missouri
corporation,

              Defendant - Appellee.

                   Appeal from the United States District Court
                     for the Eastern District of Washington
                    Lonny R. Suko, District Judge, Presiding

                        Argued and Submitted June 3, 2013
                               Seattle, Washington

Before: ALARCÓN, McKEOWN, and IKUTA, Circuit Judges.

       ETCO Services appeals from the district court’s order granting summary

judgment in favor of Killian Construction and denying ETCO’s motion for partial

summary judgment in this diversity action alleging that Killian violated Revised

        *
        This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Code of Washington § 39.30.060, a Washington statute prohibiting substitution of

listed subcontractors in furtherance of bid shopping or bid peddling. ETCO

contends that Killian violated the statute when it listed ETCO as a plumbing

subcontractor on a bid it submitted as a prime contractor and later substituted a

different subcontractor to perform the work in ETCO’s place. We have

jurisdiction pursuant to 28 U.S.C. § 1291 and we affirm.

                                          I

      In September 2010, Central Washington University (“CWU”) sought bids

for demolition of an existing building and construction of a new residential hall.

Killian is a Missouri corporation that acts as a general contractor on construction

projects throughout the United States. (Id. at ¶ 2.) ETCO is a subcontractor that

performs plumbing and HVAC work (Heating, Ventilation, Air Conditioning) in

Washington and Idaho. (Doc. 48 at ¶ 1.)

      On October 21, 2010, ETCO provided Killian with a subcontract bid for

Plumbing work for $5,052,000. ETCO’s bid did not include the HVAC and

Controls scopes of work. (Id. at ¶ 8.) Another subcontractor, JRT Mechanical,

provided Killian with a bid to perform all combined Plumbing, HVAC and

Controls work for the CWU project for $5,500,000. (Id. at ¶ 7.) JRT’s bid was the

lowest bid Killian received for the Plumbing, HVAC, and Controls scopes of work

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for the CWU project. (Doc. 48 at ¶ 27.) However, Killian erroneously read

ETCO’s bid as including HVAC and Controls scopes of work (which it did not), in

addition to plumbing and hydronics work, and thus considered ETCO’s bid to be

the lower of the two bids. Killian submitted a timely prime contract bid to CWU

that included ETCO’s sub-contract bid of $5,052,000 for all three scopes of work.

Killian was the low bidder for the CWU project at $19,387,000.

      On November 16, 2010, after discovering its mistake, Killian advised ETCO

that it would not be able to accept ETCO’s bid submitted on October 21, 2010,

because it did not include the required complete, combined scope of Plumbing,

HVAC and Controls. On November 29, 2010, Killian entered into a contract with

CWU to perform the required work for a total price of $19,387,000, the same

amount as Killian’s earlier October 21, 2010 bid. (Doc. 48 at ¶ 41.) On December

21, 2010, Killian entered into a subcontract with JRT to provide “all material,

equipment and labor necessary for a complete Plumbing, Hydronics and HV/AC

Systems per the Project plans and specifications” for $5,446,000.

                                         II

      The district court concluded that based on the undisputed material facts,

Killian did not violate section 39.30.060 as a matter of law because there was no

issue of material fact with respect to bid shopping or bid peddling. We review the

district court’s grant of summary judgment de novo, evaluating the evidence in the

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light most favorable to the nonmoving party. Austin v. McNamara, 979 F.2d 728,

733 (9th Cir. 1992). This court also reviews de novo a district court’s

determination of state law. Salve Regina Coll. v. Russell, 499 U.S. 225, 231

(1991).

      Section 39.30.060 provides in relevant part:

      (2) Substitution of a listed subcontractor in furtherance of bid
      shopping or bid peddling before or after the award of the prime
      contract is prohibited and the originally listed subcontractor is
      entitled to recover monetary damages from the prime contract bidder
      who executed a contract with the public entity and the substituted
      subcontractor but not from the public entity inviting the bid. It is the
      original subcontractor’s burden to prove by a preponderance of
      the evidence that bid shopping or bid peddling occurred.
      Substitution of a listed subcontractor may be made by the prime
      contractor for the following reasons:

Wash. Rev. Code § 39.30.060(2) (emphasis added).

      On its face, the statute only prohibits “[s]ubstitution of a listed subcontractor

in furtherance of bid shopping or bid peddling before or after the award of the

prime contract.” Id. (emphasis added). Since the statute also expressly places the

“burden to prove by a preponderance of the evidence that bid shopping or bid

peddling occurred” on “the original subcontractor,” it is clear that the legislature

intended to create a cause of action for subcontractors only in cases where they are

able to meet their burden of presenting evidence of bid shopping or bid peddling.

This reading of the statute is supported by its legislative history which reflects that

after the Washington Court of Appeals held in McCandlish Electric, Inc. v. Will

                                           4
Construction. Co., 25 P.3d 1057 (Wash. Ct. App.) that a 1995 version of section

39.30.060 did not provide a cause of action for subcontractors against prime

contractors who engage in bid shopping, the legislature amended the statute in

2002 to create a cause of action for subcontractors who can meet their burden of

presenting evidence of bid shopping. See McCandlish, 25 P.3d at 1062-63

(affirming trial court’s finding that defendant prime contractor had engaged in the

unethical practice of bid shopping but concluding that the 1995 version of section

39.30.060 did not provide subcontractor plaintiff with a legal cause of action

against defendant).

      While no Washington case has expressly defined bid shopping, the court in

McCandlish established what criteria courts consider in determining whether a

contractor has engaged in bid shopping. McCandlish, 25 P.3d at 1060. The

Washington Court of Appeals looked to a 1994 Attorney General Opinion which

addressed section 39.30.060 and the issue of bid shopping. It stated:

      The [Final Legislative Report] describes a form of “bid shopping” in
      which a contractor obtains quotes from subcontractors that are used in
      preparation of the contractor’s bid on the public works project. Then,
      after having been awarded the bid, the general contractor would either
      substitute another subcontractor who would be willing to do the work
      for less money (thus benefitting directly from the savings), or would
      use the threat of changing subcontractors to force the original
      subcontractor to reduce its price. This “bid shopping” practice is
      regarded as unethical by many in the building industry. Our review of
      the legislative history showed that there was support from both the
      general contractors and the specialty contractors for Substitute House
      Bill 1370. [The bill was codified as Wash. Rev. Code § 39.30.060.]

                                          5
Id. at 1061 (quoting 1994 Op. Att’y Gen. 14, at 4 n.2).

      The undisputed facts show that ETCO failed to present any evidence that

Killian engaged in bid shopping or bid peddling. ETCO acknowledged in its

pleadings that Killian’s mistake in submitting ETCO’s bid to CWU was a

“regrettable human error” that was made by the estimator at Killian. (Doc. Nos.

102 at 9; 112 at 6.) ETCO presented no evidence that Killian benefitted from its

mistake, or that Killian substituted JRT for ETCO “thus benefitting directly from

the savings” generated by JRT’s “willing[ness] to do the work for less money.”

McCandlish, 25 P.3d at 1061 (quoting 1994 Op. Att’y Gen. 14, at 4 n.2). Indeed,

Killian ultimately paid roughly $400,000 more to subcontract with JRT than it

would have paid based on the bid submitted by ETCO. As the district court

pointed out, “Killian bid the job with CWU on the assumption it would have a

subcontract with ETCO for HVAC, Plumbing and Controls in the amount of

$5,052,000. Instead, it ended up with a subcontract with JRT for those same items

(without alternates) in the amount of $5,446,000.” (Doc. No. 102 at 10.) “CWU

paid the same amount to Killian whether ETCO had been the subcontractor on

HVAC, Controls and Plumbing, or with JRT as the subcontractor on those three

scopes of work.” (Id. at 11.)

      ETCO also presented no evidence that Killian “use[d] the threat of changing

subcontractors to force [ETCO] to reduce its price.” McCandlish, 25 P.3d at 1061

                                          6
(quoting 1994 Op. Att’y Gen. 14, at 4 n.2). As the district court noted, when

Killian informed ETCO of its mistake, and that it “thought it was getting all three

scopes for $5 million and used that figure in making its prime contract bid[,] [i]n

an apparent effort to rectify the mistake, ETCO increased the price for all three

scopes to in excess of $7 million.” (Doc. No. 102 at 11.) Killian formally notified

ETCO on November 16, 2010, that it was unable to accept ETCO’s proposal and

did not enter into the contract with CWU until November 29, 2010.

      Because ETCO failed to present any evidence that Killian substituted JRT

for ETCO in furtherance of bid shopping or bid peddling in violation of Rev. Code

Wash. § 39.30.060, we affirm the district court’s ruling on that basis alone and do

not reach the merits of the district court’s alternate rulings. See Schneider v.

Vennard (In re Apple Sec. Litig.), 886 F.2d 1109, 1112 (9th Cir. 1989) (this court

may affirm a grant of summary judgment on any ground fairly supported by the

record).

      AFFIRMED.

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