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04/14/95 SPRING HILL LIGHTING & SUPPLY COMPANY v.

April 14, 1995

SPRING HILL LIGHTING & SUPPLY COMPANY, INC.
v.
SQUARE D COMPANY, INC., ET AL.



Appeal from Mobile Circuit Court. (CV-91-3986). Michael E. Zoghby, TRIAL JUDGE.

Rehearing Denied June 23, 1995.

Hornsby, C. J., and Almon, Kennedy, Ingram, and Butts, JJ., concur. Maddox, Houston, and Cook, JJ., Dissent. Shores, J., recused.

PER CURIAM.

The plaintiff, Spring Hill Lighting, Inc., appeals from a summary judgment in favor of the defendants on Spring Hill's claims alleging fraud, intentional interference with business relations, and conspiracy. The defendants are James R. Diamond, an electrical engineer employed by the Alabama State Docks Department; David Volkert & Associates, Inc. ("Volkert"), an engineering firm that contracted with the Docks Department to design and oversee construction of the project that is the subject of this controversy; Nelson Russell, the manager of Volkert's electrical engineering department; Square D Company, Inc., a manufacturer of electrical equipment; and David M. Hartselle, Square D's senior sales representative in Mobile. Spring Hill distributes electrical equipment manufactured by Siemens Energy & Automation, Inc. The alleged fraudulent misrepresentation is the published statement that the specification of Square D equipment only set a definite standard and did not mean that the Docks would not consider for approval equipment that was equal to Square D equipment. The alleged interference with business relations consists of alleged acts by which the plaintiff says the defendants prevented Spring Hill from selling Siemens equipment for use on the Docks project at issue.

Spring Hill states the issues as being whether there was substantial evidence in support of its two substantive claims and its claim alleging that the defendants conspired to do the alleged wrongs. Diamond asserts that he is immune from liability in this action because he was performing discretionary functions on behalf of the State of Alabama; that this action is barred by certain sections of the Code of Alabama that provide for injunctive relief against contracts let in violation of the Competitive Bid Law; that there is no substantial evidence of any misrepresentation by Diamond, of any intent on his part not to perform, or of any damage proximately caused by any fraud; that there is no substantial evidence of any knowledge of a business relationship or of any conduct interfering with such a relationship; and that there is no evidence of a conspiracy to commit either of the alleged wrongs. Volkert and Russell similarly argue that the injunctive remedies provided by statute are exclusive of any remedy for damages, and that there was not substantial evidence of the alleged wrongful conduct. Square D and Hartselle make similar arguments.

In July 1990, the Alabama State Docks Department released an invitation for bids, publishing plans and specifications for rehabilitation of and additions to its Pier C in Mobile. Spring Hill submitted to E. H. Smith & Sons Electrical Contractors, Inc. ("Smith Electric"), a proposal to provide the electrical substation for the project. The substation includes high voltage switchgear, a transformer, and a low voltage or secondary switchboard. Spring Hill proposed to provide Siemens products for the substation. Smith Electric submitted a proposal to Ray Sumlin Construction Company that included Spring Hill's quotation. Sumlin included Smith Electric's proposal in its bid and was awarded the contract. Sumlin subcontracted the electrical work to Smith Electric, but Smith Electric ultimately did not buy the substation equipment from Spring Hill, because Diamond refused to accept the Siemens equipment as conforming to the specifications.

The specifications for the substation required that "The transformer shall be as manufactured by Square D or equal." The switchgear specifications also made reference to Square D equipment. Section 16.02M governed substitutions for equipment described in the specifications by manufacturer name:

"Substitution of Equipment and Materials. Equipment and materials specified herein by catalog number and/or manufacturer represents a standard of quality and design required. Any proposed substitution shall be submitted no less than ten (10) days prior to the bid date. No substitution shall be assumed as acceptable without being properly submitted to the Engineer for approval. ..."

Section SP-21 also concerned substitution of materials, stating:

"Whenever a definite material is specified by manufacturer's name and model, it is not the intention to discriminate against any equal product made by another manufacturer, which in the opinion of the Engineer will perform the same function equally as well as the material specified. It is rather the intention to set a definite standard as to class of material required for the particular application. The Contractor shall not substitute other products without first receiving written approval from the Owner or his representative."

The Docks Department issued the invitation for bids on July 8, 1990, and the bids were due on August 3, 1990. This due date was changed to August 10 when the second addendum to the specifications was issued on July 23.

Brian M. Brey, a Siemens sales representative, submitted to Volkert on July 17 a list of Siemens equipment proposed as substitutes of a quality equal to that of the named Square D equipment. Russell, on behalf of Volkert, wrote to Diamond, who was the project electrical engineer for the Pier C project, on August 6, recommending that the Siemens request be approved contingent on satisfaction of nine conditions. Also on August 6, Diamond, with Russell's approval, issued Addendum Number 4, which included the following Item Number 5:

"Reference SPECIFICATIONS, DIVISION III, Article 16.12 SWITCHGEAR. Add a new paragraph as follows:

"I. The unit substation switchgear sections which include the high voltage, transformer and secondary distribution switchboard are to be manufactured by a single source."

Although this addendum was issued only four days before the bids were due, the Docks Department did not extend the bid deadline so that proposals for substitutions offered in compliance with this addendum could meet the 10-days-prior-to-bids requirement of Section 16.02M.

On August 7, Diamond sent Brey a response to his request, stating, "Tentative approval is predicated upon successfully resolving the following," and listing the nine conditions described by Russell. Neither Russell's letter to Diamond nor Diamond's letter to Brey mentioned Item 5 of Addendum 4.

Further Discussions about approval of the Siemens equipment took place, and when those were unsuccessful Spring Hill attempted to obtain approval of a Minnesota supplier of Square D products, American Midwest Power ("AMP"). During this process, Hartselle telephoned A. W. McPhillips, a Spring Hill vice president, who gave the following deposition testimony:

"I got it from David Hartselle on the telephone one time that nothing was going to be approved but Square D. He told me he would have a last look at everything.

"Q. When did he tell you that?

"A. Telephone conversation one time shortly after the bid was let."

"....

"... We had a conversation for probably--in the neighborhood of five minutes or so. I don't recall all of it. The pertinent facts that I do recall were that Mr. Hartselle told me that there was no way in the world I would be able to buy any Square D in this town or anywhere else; that he would ensure that I couldn't. Mr. Hartselle told me that only Square D would be approved because he had final say-so on what went through there."

The AMP request was rejected, and Smith Electric canceled its order with Spring Hill and obtained Square D equipment for the substation. Spring Hill thereafter brought this action.

Spring Hill asserts that Item 5 of Addendum 4, the "single source requirement," was added for the sole purpose of preventing the approval of Siemens equipment, because Diamond and Russell were aware that Siemens transformers were manufactured by another company. Spring Hill asserts that it is immaterial that the transformer was manufactured by a company other than Siemens, because it was manufactured according to Siemens's specifications and was covered by a Siemens warranty, and because this was common practice in the industry; Russell acknowledged in a later meeting that even Square D uses transformers manufactured by a subsidiary company. Spring Hill also contends that Diamond, Russell, and Hartselle conspired from an early stage of the development of the plans and specifications to prevent the approval of any electrical equipment other than Square D. Thus, Spring Hill contends that the defendants fraudulently caused the plans and specifications to falsely represent that equipment from other manufacturers would be considered without discrimination, and that they intentionally interfered with Spring Hill's business relations with Smith Electric.

Part of Spring Hill's evidence in support of these contentions is the following deposition testimony by Eddie Smith, the president of Smith Electric:

"... I don't think it would matter what--I've been told that it didn't matter what we submitted, it wasn't going to be approved.

"Q. Who told you that?

"A. Square D man, David ...


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