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April 2000
(A
revised version of this article appears in The Construction
Lawyer, Volume 20, No. 2, April 2000, published by the
American Bar Association's Forum on the Construction Industry.)
By John W. Ralls
Howrey LLP
The City of Rochester, Minnesota was involved in a major
expansion of the Mayo Civic Center, including construction
of a new 25,200 square foot hall. The executive director
of the Civic Center persuaded the Rochester City Council
to approve the use of a Project Labor Agreement (PLA).
Queen City Construction, Inc. v. City of Rochester,
No. CX-99-889, 1999 Minn. App. LEXIS (Minn. App. 1999).
A non-union contractor sued the City for declaratory and
injunctive relief seeking to prevent the City from imposing
a bid specification that the low bidder must agree to sign
the PLA. The contractor argued that the PLA requirement
made it impossible for the contractor to submit a successful
bid on the project. The trial court refused the grant
a temporary injunction, and the contractor appealed.
The Minnesota Court of Appeals affirmed.
The court agreed that the contractor had no adequate remedy
at law. Minnesota's statutory law limited the contractor's
recovery, in the event it successfully challenged a contract,
to the amount spent in preparing its bid. (Minn. Stat.
§ 471.345, subd. 14 (1998).) Bid preparation costs
are small in comparison to the profit a successful bidder
would hope to earn.
The court found, however, the balance of hardships tilted
in favor of the city, which would incur substantial additional
costs in the event of a labor dispute on the job.
Turning to the merits, the court wrote, "Whether our competitive
bidding laws permit a public entity to impose a bid specification
requiring all successful bidders to sign a PLA is a question
of first impression for Minnesota appellate courts."
The contractor cited an 8th Circuit case, Glenwood Bridge,
Inc. v. City of Minneapolis, 940 F.2d 367 (8th Cir.
1991) for the proposition that the loss of a meaningful
opportunity to bid as a result of a PLA requirement constituted
a sufficient hardship to justify injunctive relief.
The court rejected the argument on the ground that a subsequent
U.S. Supreme Court decision, Building & Construction
Trades Council v. Associated Builders & Constructors
(Boston Harbor), 507 U.S. 218, 113 S.Ct. 1190, 122 L.Ed.2d.
565 (1993), rejected the "federal law basis" of the Glenwood
Bridge decision. The Court also cited other federal
decisions that found PLA's to be a rational means to avoid
delays resulting from labor difficulties.
The court acknowledged that there was a split among jurisdictions
concerning whether PLA's violate competitive bidding laws.
The court noted that Minnesota's public bidding laws do
not "enshrine unfettered competition" as their "paramount
policy," a fact that distinguishes Minnesota's laws from
those of other jurisdictions where courts have reached a
different conclusion. The court also cited evidence
that non-union contractors may and often do prevail in public
bidding on projects with PLA requirements.
The contractor also contended that the Rochester City Council
had imposed the PLA as "pay back" for the assistance provided
by organized labor in getting a ½ percent sales tax extended.
The court rejected this argument, because the arguments
presented to the city council in support of the PLA amply
supported the PLA requirement. These arguments rested
on concerns that labor disputes would have an egregious
impact on the project due to an aggressive schedule and
a tight labor market.
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For more information about the issues covered in this report, please contact John Ralls in our San Francisco office at 415-848-3362 or at rallsj@howrey.com or contact your Howrey attorney. For more information about Howrey's Construction Practice Group, click here.
©2000
Howrey LLP
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