Marbucco Corp. v. Suffolk Construction

• Court: Court of Appeals for the First Circuit
• Decided: January 28, 1999
• Docket: 98-1651
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No.  98-1651



            MARBUCCO CORP., d/b/a GRANITE STATE GLASS,



                      Plaintiff, Appellant,



                                v.



               SUFFOLK CONSTRUCTION COMPANY, INC.,



                       Defendant, Appellee.


APPEAL FROM THE UNITED STATES DISTRICT COURT



                FOR THE DISTRICT OF NEW HAMPSHIRE



          [Hon.  Paul J. Barbadoro, U.S. District Judge]


Before



                      Selya, Circuit Judge,

                                

                Campbell, Senior Circuit Judge,

                                

                   and Lynch, Circuit Judge.


Matthew J. Lahey, with whom McLaughlin, Hemeon & Lahey, P.A.was on brief for appellant.

     Lawrence M. Edelman, with whom Sanders & McDermott, P.L.L.C. and Patricia M. Weathersby were on brief for appellee.


January 25, 1999


CAMPBELL, Senior Circuit Judge.  The principal issue in

this appeal is whether New Hampshire law requires a disappointed

bidder to demonstrate a private subcontractor's bad faith before

the bidder may recover lost profit damages under a theory of

promissory estoppel.  The district court held that such a showing

was necessary in this case, and it instructed the jury accordingly. 

We  find no error in the court's instructions and therefore affirm.

  Appellee Suffolk Construction Company, Inc., a

Massachusetts general building contractor, was awarded a contract 

to build a new sports arena for the University of New Hampshire. 

Suffolk invited nine glass suppliers to bid on a portion of the job

that required the fabrication and installation of some of the glass

products for the arena.  Among these suppliers was Appellant,

Marbucco Corporation.  Marbucco claimed that one of Suffolk's

agents had told Marbucco's Vice-President that Marbucco's bid would

be selected so long as it was the lowest.  When Suffolk awarded the

subcontract to another glass supplier whose bid was higher than

Marbucco's, Marbucco sued in New Hampshire Superior Court, seeking

damages for its bid preparations costs and lost profits.  

  Suffolk removed the action to the district court based on

the parties' diversity of citizenship. By the time of trial,

Marbucco had abandoned its claim for bid preparation costs and

instead sought only lost profits, which it asserted to be

approximately $71,000.  Upon conclusion of the evidence, the

district court provided the following instruction to the jury

regarding Marbucco's claim:

          The Plaintiff is making a claim for damages based on what

          is known as the doctrine of promissory estoppel.  In

          order to prove a claim of promissory estoppel the

          plaintiff must [prove] by a preponderance of the evidence

          that, one: the defendant's employee made a promise to the

          plaintiff.  Two: the defendant reasonably expected that

          its employee's promise would cause the plaintiff to act

          on the promise.  Three: the plaintiff relied to its

          detriment on the defendant's promise.  Four: the

          plaintiff's reliance on the promise was reasonable under

          the circumstances.  And five: the defendant acted in bad

          faith.

          

       Marbucco contends that the district court erred in

instructing the jury that bad faith was a necessary element of its

claim, limited, as it was, to lost profits.  It contends, based on

the Supreme Court of New Hampshire's decision in Marbucco v. City

of Manchester, 632 A.2d 522 (N.H. 1993), that New Hampshire law

requires a plaintiff seeking lost profits under a promissory

estoppel theory to prove a defendant's bad faith only if the

defendant is a municipality.  We do not read City of Manchester as

necessarily so limited.  In that case, the New Hampshire court

faced what it characterized as a question of first impression:

whether a disappointed low bidder on a municipal contract could

recover money damages from the municipality for failure to award it

the contract, and if so, what measure of damages.  See id. at 524-

25.  The court ruled that damages could be recovered, noting that

"[m]unicipalities are generally subject to the same financial

consequences for their misconduct as private corporations."  Id. at

24 (citation omitted). Regarding the appropriate measure of

damages, the court stated:

          In the ordinary case, the damages that an unsuccessful

          low bidder may recover should be limited to those it

          sustained directly by reason of its justifiable reliance

          upon the municipality's promise to award the contract to

          the lowest responsible bidder submitting all essential

          information prior to the bidding deadline, if it awarded

          it at all.  Hence, damages ordinarily should be limited

          to the expenses incurred by the low bidder in its

          fruitless participation in the competitive bidding

          process, i.e, its bid preparation costs.  To permit the

          recovery of greater damages in such cases could drain the

          public fisc in response to mere carelessness on the part

          of low level government officials.  If a disappointed low

          bidder complies with all requirements of the bid

          instructions but is deprived of the contract through some

          conduct of the awarding authority tantamount to bad

          faith, however, then the recovery of lost profits should

          be the measure of damages. 

          

     Id. at 525 (citations omitted). 

  Marbucco places special emphasis on this passage in

arguing that the bad faith requirement applies only when the

defendant is a municipality.  This, we think, conflates merely one

rationale animating the City of Manchester decision with the

holding of the case itself.  To be sure, the City of Manchestercourt noted certain concerns when a municipal defendant is sued for

failing to award a competitive bid, e.g., the possibility of

damages "draining the public fisc" or the municipality's eroding

the "public confidence in government . . . [by acting] in bad

faith."  See id.  But these concerns can be understood as relating

to the particular circumstances pertaining to that case, not as

essential ingredients of the legal principle being applied.  The

legal basis of City of Manchester was, we believe, the court's

recognition -- regardless whether the subcontractor was a public or

private entity -- that bid preparation costs are the "ordinary"

remedy for a promissory estoppel claim, leaving lost profits for

exceptional cases where bad faith (or something akin to bad faith)

is proven.  The New Hampshire court cited to the Restatement

(Second) of Contracts in support of its determination that

justifiable reliance could give rise to a promissory estoppel claim

in the case of a disappointed bidder.  See Restatement (Second) of

Contracts,  90, comment d, illustrations 8 & 9; City of

Manchester, 634 A.2d at 524.  The Restatement makes no distinction

in this aspect of the law between public and private entities. 

Indeed, it would be inconsistent with the court's earlier statement

that "[m]unicipalities are generally subject to the same financial

consequences for their misconduct as private corporations" to

require public and private subcontractors to prove different

elements to recover lost profits on a promissory estoppel claim. 

In short, City of Manchester does not deter, and in fact guides,

our view that the Supreme Court of New Hampshire, if faced with the

circumstances of this case, would authorize the court below to

require Marbucco to prove Suffolk's bad faith in order to recover

its lost profits.  

  As an alternative to ruling in its favor, Marbucco asks

us to certify the question to the Supreme Court of New Hampshire. 

It is inappropriate, however, to use certification "when the course

state courts would take is reasonably clear."  Porter v. Nutter,

913 F.2d 37, 41 n.4 (1st Cir. 1990).  Accordingly, we deny the

motion to certify. 

  We also discern no error in the wording of the court's

jury instruction on the definition of the term "bad faith." 

Black's Law Dictionary defines it as "the opposite of 'good faith,'

generally implying or involving actual or constructive fraud, or a

design to mislead or deceive another, or a neglect or refusal to

fulfill some duty or some contractual obligation, not prompted by

an honest mistake as to one's rights or duties, but by some

interested or sinister motive."  Black's Law Dictionary (6th ed. 

1990), p. 139.  The Supreme Court of New Hampshire has defined it

as an "intentional disregard of a duty or an intent to injure." 

Murphy v. Financial Development Corp., 495 A.2d 1245, 1250 (N.H.

1985).  The court's instruction here was as follows: "A party acts

in bad faith if the party makes a promise with the knowledge that

the promise will not be fulfilled and with the intention of

inducing another to rely on the promise."  We believe that this

instruction adequately summarized the concept of bad faith for

purposes of the present case -- i.e., one in which a disappointed

bidder is suing a subcontractor for failing to award it a contract. 



  Marbucco does not, in fact, question the correctness of

this instruction insofar as it goes.  Rather, Marbucco wanted the

court to supplement the instruction with a follow-up instruction

allegedly more relevant to the case at hand.  The requested follow-

up instruction provided, 

          if there was a promise to award the contract to the

          qualified low bidder, [and] that the defendant was aware

          that that promise had been made and thereafter for no

          reasonable or legitimate reason chose not to award the

          contract to [Marbucco] even though it was the lowest

          qualified bidder, [then] that conduct would constitute

          bad faith.

           

       It was, however, well within the trial judge's discretion

to determine how fact-specific and detailed an instruction to give

on this matter.  Trial judges are in the best position to know when

to stop in the instructional process, there being a fine line

between adequate guidance and that which may confuse or unfairly

influence the jury.  "Bad faith" having been adequately defined, we

are unable to say that the judge abused his ample discretion by

choosing not to dilate further on the subject.  See United Statesv. Rule Industries, Inc., 878 F.2d 535, 543 (1st Cir. 1989)("The

trial court is not obligated . . . to use the precise words

proposed by one party in its instructions;  it is sufficient if the

principle of law is correctly stated."); United States v. Paredes-

Rodriguez, 160 F.3d 49, 53 (1st Cir. 1998) (trial judge's choice of

wording in the instructions is reviewed only for abuse of

discretion).   

  Affirmed.

  Motion to Certify denied.