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McElwee Group, LLC v. Atlantic County Utilities Authority

December 28, 2009

THE MCELWEE GROUP, LLC, PLAINTIFF-RESPONDENT,
v.
ATLANTIC COUNTY UTILITIES AUTHORITY, A GOVERNMENTAL CORPORATION, DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. C-82-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 9, 2009

Before Judges Lisa and Alvarez.

Defendant Atlantic County Utilities Authority (the Authority), a governmental corporation, appeals from summary judgment granted to plaintiff The McElwee Group, LLC (McElwee), on March 6, 2009, directing the return of a $20,000 bid bond. For the reasons that follow, we affirm.

The Authority solicited bids in accord with the Local Public Contracts Law, N.J.S.A. 40A:11-1 to -51, for work to be performed on its "City Island Sewage Treatment Facility Improvement Project." McElwee submitted its sealed bid and a $20,000 bid bond prior to the April 6, 2008 scheduled opening of sealed bids. After the Authority accepted the bid on April 7, McElwee discovered that the bid contained two errors totaling $240,000.*fn1 As a result of these errors, McElwee bid $1,522,000 instead of $1,777,200. On that same day, April 7, McElwee contacted the Authority in writing and attempted to withdraw. The Authority refused and instead submitted a proposed contract, advising that if the contract were not signed, the $20,000 bid bond would be forfeited and the contract would be awarded to the next-lowest bidder.

Because McElwee had not returned the signed contract by the specified date, the Authority awarded the project to the next-lowest bidder for "almost 1.7 million" at its next board meeting. In fact, had McElwee included the mistakenly-omitted amounts in its bid, it would have been the third-lowest bidder.

The Authority retained the bond; thereafter, McElwee filed suit seeking return of the forfeited funds.*fn2

McElwee committed two errors in preparing the bid. The first mistake was the omission of any cost for a particular item, identified as 01820, valued at $100,000, due to the Authority's "vagueness, equivocation, lack of understanding and... failure to fully inform" McElwee regarding this item. McElwee was not invited to attend a non-mandatory prebid conference, where the omission may have come to light as the specifications were reviewed in detail. The second mistake, totaling $140,000 according to the complaint, was "a calculation mistake by a McElwee employee under a time constraint to complete and submit the bid." The Authority disputes neither of the errors, nor that the omissions were innocently made.

In reliance upon the four-prong test outlined in Conduit & Foundation Corp. v. City of Atlantic City, 2 N.J. Super. 433, 440 (Ch. Div. 1949), Judge William Todd concluded McElwee established that it was entitled to rescission due to mistake. Judge Todd said:

... I am satisfied there are four basic circumstances that are necessary before [rescission] would be permitted. First, that the mistake is of great consequence so that the enforcement of the contract would be unconscionable. Second, that the mistake goes to a material feature of the contract. [Third], that the mistake [was made] notwithstanding the exercise of reasonable care. And fourth, that there's no serious prejudice to the other party aside from the loss of the bargain.

Given that these essential conditions set forth in Conduit were met, Judge Todd determined that McElwee was entitled to withdraw its bid and to the return of its bid deposit.

On appeal, the Authority asserts that Judge Todd erred because the relief he awarded McElwee, namely, the return of the bid bond, is prohibited by N.J.S.A. 40A:11-21. The statute states in pertinent part:

A person bidding on a contract for the erection, alteration or repair of a public building, structure, facility or other improvement to real property, the total price of which exceeds $100,000, shall furnish a guarantee as provided for herein.... The guarantee shall be payable to the contracting unit so that if the contract is awarded to the bidder, the bidder will enter into a contract therefor and will furnish any performance bond or other security required as a guarantee or indemnification. The guarantee shall be in the amount of 10% of the bid, but not in excess ...


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