Mello Construction, Inc. v. Division of Capital Asset Management, 84 Mass. App. Ct. 625 (December 18, 2013)

The question presented on appeal was whether a general contractor may sue the Division of Capital Asset Management (DCAM) for money damages after a discretionary decision to deny an annual application for certification to bid on public construction projects. DCAM is the Massachusetts state agency within the Executive Office of Administration and Finance established to oversee public building projects and to administer the public bidding statutes. The Appeals Court affirmed the Superior Court’s dismissal of the contractor’s complaint.

From 1985 until 2004, Mello Construction, Inc. (Mello), a general contractor specializing in large-scale public construction projects, received annual certificates of eligibility from DCAM. In October 2004, Mello submitted its annual application for certification. On August 19, 2005, DCAM issued a preliminary determination denying the application based in part on two negative contractor evaluations. As permitted by the statute (M.G.L. c. 149, §44D), Mello timely requested reconsideration and submitted additional information and documentation to DCAM, including lengthy rebuttals of the allegedly biased evaluations. On October 27, 2005, DCAM, refusing to disregard the negative evaluations, denied Mello's application for four reasons: (1) failure to achieve a minimum average project rating required for certification; (2) receipt of two failing scores on projects; (3) failure to disclose on its application the termination from another project; and (4) failure to disclose the invoking of a performance bond.

After a hearing in January 2006, the Attorney General issued a decision on April 6, 2007, affirming the denial of the application. In July 2007, Mello commenced this Superior Court action against DCAM, seeking monetary damages. On December 1, 2009, DCAM filed a motion to have the case proceed pursuant to a writ of certiorari under M.G.L. c. 249, § 4, which was allowed. The parties then filed cross motions for judgment on the pleadings. DCAM's motion for judgment on the pleadings was granted, Mello's motion was denied, and the complaint was dismissed. Mello filed a timely notice of appeal.

Under the Massachusetts competitive bidding statute, every contract for the construction of public buildings estimated to cost more than $100,000 “shall be awarded to the lowest responsible and eligible general bidder.” DCAM was charged by the Legislature with the duty of certifying bidder eligibility, and eligibility is a prerequisite to bidding on any public construction contracts. Each year, a contractor must submit a detailed application to DCAM and DCAM is required to evaluate the applicant "on the basis of the application and on relevant past performance according to procedures and criteria" mandated by statute and the regulations and guidelines prescribed by DCAM. The contractor has the burden of establishing to DCAM's satisfaction that it is competent and responsible. DCAM has wide discretion in deciding whether to issue a certificate of eligibility.

DCAM's requirements and conditions for certification are lengthy. Some events occurring within the five-year statutory look back period require the mandatory denial of an application for certification, while others constitute justifiable cause for denial. Discretionary grounds for denial include, as herein relevant, the following events: termination for cause from a building project, a record of two project ratings that fall below the passing score established in DCAM's Contractor Certification Guidelines and Procedures (guidelines) on more than one building project, and a record of an invoked performance bond. DCAM may also deny an application based on the provision of either false or misleading information or the failure to provide all required information.

This appeal turned on the meaning of "remedies at law" that an aggrieved party may seek following the exhaustion of its administrative appeal. Mello contended "the remedies at law" referred to in the second paragraph of M.G. L. c. 149, § 44D(4), was the right to bring a civil action for money damages against DCAM with a full jury trial on the merits. However, the court disagreed, noting that the Commonwealth of Massachusetts did not waive its sovereign immunity with respect to any claims arising from the denial of, or refusal to, issue a license or certificate. The court further noted that even if immunity was waived, the legislative intent necessary to infer an implied right of private action from the statute was absent in this case. The court also noted the statute provided an applicant with the remedy of an administrative appeal to the Attorney General and expressly empowered the Attorney General to institute enforcement proceedings, if warranted, against DCAM.

The court was also not persuaded by Mello's argument that a cause of action for money damages against DCAM existed at common law. The court noted that licenses are required to engage in many occupations and businesses; and the loss of a license may cause devastating financial and emotional consequences to an applicant. Nonetheless, there is no right to money damages flowing from an improper licensing action.

To learn more about this case, contact attorney Daniel Sonneborn at 617-226-3800 or by email dsonneborn@preti.com. To learn more about construction law or professional liability matters, contact any member of Preti Flaherty's Professional Liability Practice Group.