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Horsfield Materials, Inc. v. City of Dyersville

Supreme Court of Iowa

July 5, 2013

HORSFIELD MATERIALS, INC., Appellant,
v.
CITY OF DYERSVILLE, Appellee.

Appeal from the Iowa District Court for Dubuque County, Andrea J. Dryer (trial) and Lawrence H. Fautsch (motion to compel discovery), Judges.

A materials supplier appeals from the district court's denial of declaratory and injunctive relief in an action against a municipality for alleged violations of Iowa's public bidding and open records laws.

Vernon P. Squires of Bradley & Riley, PC, Cedar Rapids, for appellant.

Douglas M. Henry and P. Christopher Williams of Fuerste, Carew, Juergens & Sudmeier, P.C., Dubuque, for appellee.

MANSFIELD, Justice.

In this case, we must decide whether an entity excluded from a city's list of preapproved material suppliers on a public construction project can obtain a declaratory judgment that such a preapproval process violated Iowa's public bidding statute and constitutional guarantees of equal protection and due process. Additionally, we must decide whether the same entity should have been granted relief under Iowa's open records law based on the city's delay in responding to an open records request.

We conclude the supplier lacked standing to challenge the preapproval process under Iowa's public bidding statute. We find the supplier did have standing to assert its constitutional claims but reject those claims on the merits. Finally, we hold the city's substantial and inadequately explained delay in responding to the supplier's open records request violated the law. For these reasons, we affirm the judgment entered by the district court dismissing the plaintiff's public bidding and constitutional claims, but reverse in part the district court's ruling that denied the plaintiff relief under the open records law.

I. Facts and Procedural Background.

Plaintiff Horsfield Materials, Inc. (Horsfield) is a construction supply business based in Epworth, about ten miles east of Dyersville. Horsfield produces and sells construction materials including aggregate (e.g., crushed stone, sand, and gravel) and ready-mix concrete. Horsfield supplies a variety of customers such as individuals, large concrete contractors, government bodies, and developers.

Horsfield has a sister company, Horsfield Construction, Inc., that does business as a construction contractor. Matthew Horsfield is the president of both firms. In 2005, Horsfield Construction became embroiled in litigation with Dyersville over a downtown pavement, sidewalk, and streetlight replacement project that Horsfield Construction had agreed to perform for the City.

This litigation concerns the Wastewater Treatment Facility Phase II Improvements, which consisted of modifications and upgrades to Dyersville's existing wastewater treatment facility. The estimated cost of the project was approximately $1.2 million. The project was largely funded as an Iowa Green Initiative through the Iowa Revolving Loan Fund, but $300, 000 of federal stimulus money was available. To qualify for these funds, the City had to issue a notice to proceed by mid-February 2010.

Because the estimated cost of the project exceeded $100, 000, the project fell under the requirements of Iowa's public construction bidding statute. See Iowa Code §§ 26.1–.15 (2009). Chapter 26 imposes certain requirements on the bidding and selection process for public construction projects, including notice, public hearing, and selection of the "lowest responsive, responsible bidder." Id. § 26.9.

Gary Sejkora, a licensed professional engineer retained by the City, finalized the proposed plans and specifications for the wastewater project on December 3, 2009. These stated that a public hearing would be held on the plans and specifications on December 21, 2009, and that the deadline for submitting bids on the project would be January 7, 2010.

Two special conditions in the specifications limited the aggregate and concrete suppliers that could be used on the project to three named companies. The relevant language stated as follows:

27. AGGREGATE SUPPLIERS: Bard Concrete, River City Stone, and Kuhlman Quarries are approved aggregate suppliers subject to compliance with material specifications. Other aggregate suppliers must obtain approval from the City and Engineer prior to bidding.
28. CONCRETE SUPPLIERS: Bard Concrete, Apex Concrete, and Flynn Ready-Mix are approved concrete suppliers subject to compliance with material specifications. Other concrete suppliers must obtain approval from the City and Engineer prior to bidding.

This was not the first time Horsfield had been excluded from a list of preapproved suppliers. Another city project in the summer of 2009 had similarly limited suppliers to specific companies other than Horsfield. Horsfield suspected that it was being "blackball[ed]" because of its sister company's involvement in litigation with the City.

Under the public hearing requirement, a city may not enter into a contract for a public improvement project "until the governmental entity has held a public hearing and has approved the proposed plans, specifications, and form of contract, and estimated total cost of the public improvement." Id. § 26.12.

On the day of the December 21 hearing, Horsfield's attorney faxed a letter to Sejkora and to the city clerk, asking for an explanation as to why other suppliers, and not Horsfield, had been preapproved. Horsfield also asked what steps it could take to become an approved supplier for the wastewater project. Additionally, the letter contained Horsfield's first open records request to Dyersville. Horsfield requested

all records that relate to, reference, or concern in any way the procedures, guidelines, publications, standards, processes, and notifications used in: 1) determining the "approved" suppliers in paragraphs 27 and 28 of the contract specifications; 2) determining that Horsfield Materials, Inc. was not an "approved" supplier, and 3) determining "approved" and "not approved" suppliers or contractors generally by the City of Dyersville, or its agents, on this and other publicly bid projects. The request includes a list of all suppliers and contractors currently "approved" and "not approved" by the City of Dyersville. This request also includes, without limitation, all communications with any supplier or contractor concerning the approval process and designation as an "approved" supplier. It also includes, without limitation, all records containing any reference or mention of Horsfield Materials, Inc., Horsfield Construction, Inc., or their agents, to the extent the records relate in any way to approval or exclusion as a supplier or contractor for this or any other project for the City of Dyersville.

Matthew Horsfield spoke at the hearing that evening, requesting that his company be named an additional preapproved supplier. The city council did not grant his request and instead, approved the plans and specifications with the existing versions of paragraphs 27 and 28.

The following day, December 22, Horsfield's attorney faxed another letter to the City, renewing the company's request to become a preapproved supplier of aggregate and concrete. Horsfield also clarified that its records request included electronic information and documents in possession of any city employee, any city council member, or the mayor.

On December 30, Matthew Horsfield emailed Sejkora, again asking to become a preapproved supplier for the wastewater project. Sejkora declined to preapprove Horsfield because "[w]e do not have any experience working with Horsfield Materials on projects comparable to the Dyersville Wastewater Treatment Facility Phase II project. Therefore, we require documentation prior to considering approval." Sejkora then referred Horsfield to an addendum issued that day that contained a new Special Condition 29. This condition allowed a general contractor to request approval of an alternative supplier for aggregate or concrete within thirty days after being awarded the contract.

Under Special Condition 29, the request for approval was required to be in writing and to include details about the proposed supplier's business such as contact information, history of the business and production facilities, and resumes of "key individuals involved." Additionally, a number of quality test results from the Iowa Department of Transportation (DOT) were required, as well as a minimum of three references from engineers, contractors, and owners that had used the supplier's products before.

Preapproved suppliers of course did not need to provide this information, but Sejkora later testified that these requirements reflected the underlying criteria for preapproval. Yet Sejkora could not recall when any of the preapproved suppliers had last submitted the aggregate or concrete quality control reports that Special Condition 29 contemplated.

Horsfield's aggregate and concrete have never been deemed unacceptable by the DOT, which certifies aggregate and concrete sources. Horsfield also maintained that the City's offer in Special Condition 29 to approve a new supplier after the contract award was not a realistic option. A general contractor would be very reluctant to antagonize the supplier whose bid it had used to gain the contract by later trying to substitute a new supplier.

That same day, December 30, Horsfield submitted an additional open records request to Dyersville, seeking "all documents and records relating in any way to Addendum No. 2 to the Contract and/or any other documents and records relating to an alternative suppliers approval process." The following day, the City provided Horsfield with thirty-nine pages of records in response to the outstanding requests.

Horsfield's attorney openly questioned whether the thirty-nine pages amounted to all the responsive documents. On January 7, 2010, the day bidding closed on the wastewater project, Horsfield again clarified the scope of its requests, pointing out that they included documents in the possession of Sejkora, even though he was not an employee of the city. Horsfield took the position that Sejkora, as engineer on this project, was the City's agent.

On January 11, 2010, the city council awarded the project to Portzen Construction, having concluded that it was the lowest responsible, responsive bidder. Portzen's bid totaled $1, 323, 537, approximately nine percent above the engineer's estimate. Horsfield never submitted information under Special ...


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