On appeal from Superior Court of New Jersey, Law Division, Essex County, L-6962-00.
Before Judges Baime, Carchman and Lintner.
The opinion of the court was delivered by: Carchman, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
In this public contract bidding dispute, plaintiff Muirfield Construction Co., Inc., a plumbing contractor, appeals from the denial of its protest of defendant Essex County Improvement Authority's (ECIA) award of a contract for plumbing and fire protection work at the Support Building for the County Correctional Facility to defendant, Thomas H. Barham Co., Inc. (Barham). Barham submitted a bid including a notarized Disclosure of Ownership form and affidavit attesting that 100% of its stock was owned by PSEG Energy Technologies, Inc. (PSEG). The bid failed to comply with the requirement of N.J.S.A. 45:14C- 2(h) which mandates that a licensed master plumber hold at least a 10% interest in an entity performing plumbing work in this State "[i]n order to act as "a plumbing contractor."(1) After the bids were opened, ECIA relied upon an uncertified representation from Barham and PSEG's attorney in permitting Barham to "cure" this defect. Following an action by plaintiff in the Law Division, the trial judge concluded that while Barham's bid defect was material and non-waivable, it was nevertheless curable. He thereafter dismissed the complaint. Plaintiff appeals, and we reverse, concluding that the defect was incurable and that Barham's bid should have been rejected.
The essential facts are not in dispute. On June 12, 2000, both plaintiff and Barham submitted bids for the project. Barham's bid in the amount of $4,299,000 was the low bid, while plaintiff's bid for $4,408,313 was second lowest bid. The bid documents and specifications required that each bidder submit a notarized statement of disclosure of ownership as follows:
18. Disclosure of Ownership:
The Bid must be accompanied by a notarized statement of disclosure of ownership of the Bidder if a corporation or partnership. The affidavit shall set forth the names and addresses of all shareholders in Bidder corporation who own 10% or more of its stock of any class, or general partners of the partnership who hold a 10% or greater interest therein, as the case may be. If one or more of such stockholders or partners is in itself a corporation or partnership, the stockholder owning 10% or more of that corporation's stock or the individual partner owning 10% or greater interest in that partnership, as the case may be, shall also be listed. The disclosure shall be continued until all names and addresses of every non- incorporated stockholder and individual partner exceeding 10% ownership criteria, pursuant to N.J.S.A. 52:25-24.2 are included. A copy of the required statement is attached as Exhibit III of Section III of these Bid Specifications entitled "Disclosure of Ownership Forms."
To meet that requirement, Barham submitted a statement representing that 100% of its stock was owned by PSEG. The statement was accompanied by an Affidavit of Truthfulness wherein William C. Barham, on behalf of Barham, attested to the accuracy of the bid information.
On June 13, 2000, one day after the bid opening, plaintiff protested the anticipated award to Barham as lowest bidder, asserting that Barham's bid was materially defective because Barham was not a properly licensed "plumbing contractor" as defined by N.J.S.A. 45:14C-2(h).
The protest evoked a rather informal investigatory process by ECIA. On June 16, 2000, ECIA's counsel telephoned William Barham and advised him of the protest. He then advised EICA that his brother was a licensed master plumber and owned 10% of Barham. Two weeks after the bid opening, ECIA received a letter from Barham and PSEG general counsel, Shawn P. Leyden, asserting that "[i]n actuality, PSEG . . . owns 200 shares of Common Stock, approximately 89% of Barham equity, and Thomas B. (Bert) Barham, a licensed plumber, owns 25 shares of Common Series B, which is approximately 11% of Barham equity." Leyden attributed the inaccurate Disclosure of Ownership form as a "scrivening misstatement." Based upon these unsworn statements, ECIA rejected the protest and awarded the contract to Barham. The award was then ratified by the County Executive.
In response to the final ratification, plaintiff filed an action in the Law Division seeking a stay of the execution of the contract, a declaration that Barham was not qualified for the award, and an order awarding the contract to plaintiff as the lowest responsible bidder. The trial judge granted the stay, which has continued to date, and ordered expedited discovery. Curiously, Barham resisted the discovery and filed an application for leave to appeal, which we denied.
The discovery was illuminating. It revealed that Leyden's letter detailing Bert Barham's "equity interest" in Barham was in error. Although Bert Barham owned twenty-five shares of Barham stock, PSEG, in fact, owned 225 shares. Thus, Leyden's reference to "equity" was apparently a misstatement. The discovery also revealed that Barham had submitted a series of other bids which each contained the same "scrivening misstatement" failing to reveal the required 10% interest. More significantly, the discovery established that the closing for PSEG's purchase of Barham took place on December 31, 1999. The closing documents revealed that the Barhams had transferred 100% of their stock to PSEG and did not retain any interest in Barham. Although Bert Barham indicated that a Subscription Agreement was signed and stock certificates were issued contemporaneous with the closing, neither the "Final Closing Actions" nor "Post-Closing Actions" agendas reflected such a transaction. Moreover, the "Series B" stock had the unique characteristics of being non-transferable and so otherwise restricted that it was virtually worthless. Finally, Barham's company documents chronology suggested that the Series B stock was issued between May 26, 2000 and July 17, 2000, thus raising a question as to whether the issue occurred after plaintiff's protest was filed on June 13, 2000.
The trial judge accepted plaintiff's argument that the defect was material and could not be waived, but rejected the view that the stock issue was a sham violating the spirit and intent of N.J.S.A. 45:14C-2(h). Ultimately, the judge concluded that the defect was material, but that it had been ...