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Schlumberger Industries Inc. v. Borough of Avalon

Decided: December 5, 1991.


On appeal from the Superior Court of New Jersey, Law Division, Cape May County.

King, Dreier and Gruccio. The opinion of the court was delivered by Dreier, J.A.D.


Defendant Heights Industries Inc. as intervenor,*fn1 appeals from an order of the Law Division invalidating its bid for contract No. 23, water meter replacement, of the Borough of Avalon, Cape May County. Following the rejection of the Heights bid, and at the direction of the trial court, the municipality determined to rebid the contract.

This action was instituted by Schlumberger Industries, Inc., a wholly-owned subsidiary of Schlumberger Technology Corporation, in turn a wholly-owned subsidiary of Schlumberger, Ltd., a publicly-traded corporation listed on the New York Stock Exchange. Schlumberger had been the low bidder on the water meter contract, but on advice of the Borough attorney its bid had been rejected for failure to supply an answer to the following question contained in the bidding specifications:

The full names and residences of all persons and parties interested in this proposal as principals are as follows below: (Note: for each person give the first and last names in full. Record each member of a co-partnership in the case of a corporation, give the names of the president, secretary, treasurer, manager, and directors, and state the place of the incorporation). Whether the bidder is a corporation or a partnership, give the names and addresses of all stockholders in the corporation or partnership who own 10% or more of its stock, of any class, or of all individual partners in the partnership who own a

10% or greater interest therein, as the case may be. If one or more such stockholder or partner is itself a corporation or partnership, the names and addresses of stockholders holding 10% or more of that corporation's stock, or of the individual partners owning 10% or greater interest in that partnership, as the case may be, shall also be listed.*fn2

Schlumberger has also cross-appealed from the additional determination of the trial judge that its bid was correctly rejected for its failure to answer this question. The Borough of Avalon asserts that it did not receive a notice of the cross-appeal, and Heights claims that it did not receive the Schlumberger brief within a sufficient time prior to oral argument in this matter to enable it to answer the arguments in the brief adequately.*fn3 We have decided not to adjudicate the Schlumberger cross-appeal which may be rendered moot by this decision after remand. We will, however, refer to as many issues in the cross-appeal as may be necessary for us to give an explication of our reasoning to guide the trial judge or Borough if a further remand is necessary. We have therefore attempted to clarify the import of N.J.S.A. 52:25-24.2 which requires a statement of a bidder's ownership to be supplied prior to or accompanying a bid on a public contract.

The bids were opened by the Borough on May 1, 1991, Schlumberger being the low bidder by approximately $53,000 on a contract of approximately $450,000. At the May 22, 1991 meeting of the Borough Council, the territorial manager of Schlumberger objected to the rejection of the Schlumberger bid and further objected to the awarding of the bid to Heights with the resultant loss to the municipality of $53,000. He suggested that all bids be rejected and that the project be readvertised. He explained that the ownership disclosure question was not

completed through an oversight. Another representative of Schlumberger explained that no individual owned more than 10% of the stock and that the Corporation is a six billion dollar company listed on the New York Stock Exchange. He also suggested that the matter be rebid so that the Borough could save $53,000 and that little work would be necessary in the rebidding process, since the specifications had already been prepared. A representative of Heights urged that the contract be awarded to Heights and that the cost difference might not be as great as Schlumberger suggested. When a Council member suggested that Schlumberger might be permitted to supplement the bid and provide the additional information, the Borough attorney stated "[I]t doesn't make any difference. It's not a curable defect." By a three to two vote the contract was awarded to Heights.

The trial judge heard and determined Schlumberger's action in lieu of prerogative writs on June 14, 1991. Although the judge then had before him both the Heights and Schlumberger bids, the parties before him were only Schlumberger and the Borough. The judge analyzed the authorities affecting Schlumberger's bid and agreed with the Borough Council that the bid was properly rejected. Over the Borough's objection, and without input from (or even notice to) Heights, the judge also examined the Heights bid and found that it too was substantially nonconforming to the bid specifications in that the bid bond differed materially from that required by the specifications. He determined that the Heights' defect also was not waivable. He directed that the Heights bid also "be deemed rejected and the contract be put out for rebid consistent with this opinion." After a motion for reconsideration, the judge issued a supplemental letter opinion on July 8, 1991. Significantly, this letter opinion contained the following observation:

The fact of the matter is that the Borough's position in this matter has been puzzling throughout. They admit to this court that no one in Schlumberger's chain of stock ownership owns more than 10% of the shares of the company. They further assert that failure of Schlumberger to so state is not curable. The ...

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