                    IN THE SUPREME COURT OF MISSISSIPPI

                                  NO. 2006-CA-02122-SCT

WILLIE NELSON d/b/a NELSON PLUMBING
COMPANY

v.

CITY OF HORN LAKE ACTING BY AND
THROUGH ITS BOARD OF ALDERMEN


DATE OF JUDGMENT:                          12/01/2006
TRIAL JUDGE:                               HON. ROBERT P. CHAMBERLIN
COURT FROM WHICH APPEALED:                 DESOTO COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT:                   CHRISTOPHER SOLOP
                                           JOSEPH M. GIANOLA, JR.
ATTORNEYS FOR APPELLEE:                    JOHN D. PRICE
                                           BILLY C. CAMPBELL, JR.
NATURE OF THE CASE:                        CIVIL - OTHER
DISPOSITION:                               AFFIRMED - 11/15/2007
MOTION FOR REHEARING FILED:
MANDATE ISSUED:




       BEFORE WALLER, P.J., EASLEY AND CARLSON, JJ.

       WALLER, PRESIDING JUSTICE, FOR THE COURT:

¶1.    This appeal is taken from the DeSoto County Circuit Court’s order affirming the City

of Horn Lake’s decision to reject Nelson Plumbing Company’s lowest bid for construction

on the Goodman Road Sanitary Sewer Improvements project. Because we find that the City

of Horn Lake complied with Mississippi Code Annotated Section 31-7-13(d)(i), did not

violate Nelson’s due process rights, and did not act arbitrarily and capriciously in rejecting

Nelson’s lowest bid, we affirm.
                                             FACTS

¶2.    On June 1 and June 8, 2005, the Mayor and Board of Aldermen of the City of Horn

Lake (“the City”) advertised bids for the Goodman Road Sanitary Sewer Improvements

project (“the Goodman Project”). The City required that bidders have a certificate of

responsibility issued by the Mississippi State Board of Public Contractors and specified that

the contract would be awarded to “the lowest responsive, responsible Bidder.” Additionally,

the City reserved the right to conduct an investigation of the bidders’ capacity to perform the

work and reserved the right to reject any bid if the City determined that a bidder could not

carry out the obligations of the contract.

¶3.    Willie Nelson d/b/a Nelson Plumbing Company (“Nelson”) is a Mississippi sole

proprietorship holding a valid certificate of responsibility for various classifications of work.

Of the five companies that submitted bids for the Goodman Project, Nelson submitted the

lowest bid in the amount of $2,294,035.50.1 Nevertheless, on September 20, 2005, the City’s

Board of Aldermen unanimously voted to award the contract for the Goodman Project to

Freeland and Lemm Construction Company (“Freeland”), who had submitted the second

lowest bid at $2,298,761.62—an amount $4,726.12 higher than Nelson’s bid.

¶4.    The City justified its decision to award the contract to Freeland rather than Nelson on

two grounds. First, the City cited nine complaints it had received about Nelson from

corporate and municipal entities in Arkansas, Tennessee, and Mississippi. The complaints




1
 This is the amount used in the minutes from the City’s September 20, 2005, meeting of the
mayor and Board of Aldermen. Nelson had calculated his bid at $2,294,076.50, which was
slightly higher than the City’s calculation .

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pertained to Nelson’s conduct under prior contracts, as well as payment disputes with

previous suppliers. Second, the City cited its own previous difficulties with Nelson in the

construction of City Hall. The City stated that Nelson’s failure to perform work according

to contract specifications for the City Hall project resulted in delay and caused damages to

the City and other contractors.

¶5.    On September 22, 2005, Nelson submitted a letter to the mayor and city clerk

protesting the City’s decision to deny him the Goodman Project contract. Nelson stated that

he had conformed to all the requirements of the bid documents, that he held a valid certificate

of responsibility, and that the City had unlawfully awarded the contract to Freeland. On

September 23, 2005, the City responded to Nelson’s written protest by affirming its decision

to award the contract to Freeland.

¶6.    On September 26, 2005, Nelson submitted a supplemental protest. Nelson alleged that

the City acted arbitrarily and capriciously in denying him the contract. Nelson also argued

that he never had an opportunity to respond to suppliers’ complaints of late payment or non-

payment and, regardless, that such complaints should not have been considered by the City.

¶7.    On September 29, 2005, Nelson filed a Notice of Appeal and Bill of Exceptions in the

DeSoto County Circuit Court, appealing the City’s decision to award the Goodman Project

contract to Freeland. On April 10, 2006, Nelson filed a Motion to Compel, requesting that

the circuit court order the mayor to sign the Bill of Exceptions. On May 8, 2006, the City

filed its Designation of Appeal Record, which included its Corrections to the Bill of

Exceptions that had been signed by the mayor on April 5, 2006.




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¶8.    Oral arguments were heard in the DeSoto County Circuit Court before the Honorable

Robert P. Chamberlin on November 16, 2006. On December 1, 2006, the circuit court

entered an order dismissing Nelson’s appeal and affirming the City’s decision. Nelson filed

a Notice of Appeal with this Court on December 12, 2006.

¶9.    Nelson raises seven issues on appeal, which we have consolidated into five: (I)

whether the City violated Mississippi Code Annotated Section 31-7-13(d)(i) (Rev. 2005) in

awarding the Goodman Project contract to Freeland and, if not, whether the City had the right

to reject Nelson’s bid for the reasons set forth in its Resolution #09-07-05; (II) whether the

City violated Nelson’s substantive and/or procedural due process rights; (III) whether the

City acted arbitrarily and capriciously in reaching its decision to award the Goodman Project

to Freeland rather than Nelson; (IV) whether the circuit court erred in excluding an

Occupational Safety and Health Administration (OSHA) news release from the record; and

(V) whether Nelson is entitled to lost profits and attorney’s fees from the City and whether

individual members of the Board of Aldermen may be held personally liable. Because we

find issues I through IV dispositive, we do not address issue V.

                               STANDARD OF REVIEW

¶10.   The scope of review is limited when examining the actions of a municipal board.

Sunland Publ’g Co. v. City of Jackson, 710 So. 2d 879, 881-82 (Miss. 1998). Issues I, II,

and IV are subject to a de novo standard. For questions of law, a municipal board’s decision

is reviewed de novo. See A&F Props., LLC v. Madison County Bd. of Supervisors, 933 So.

2d 296, 300 (Miss. 2006).      A de novo standard is also applied to issues of statutory




                                              4
interpretation. Weiner v. Meredith, 943 So. 2d 692, 694 (Miss. 2006) (citing Austin v.

Wells, 919 So. 2d 961, 964 (Miss. 2006)).

¶11.   Issue III is subject to an arbitrary-and-capricious standard of review. This Court will

not set aside the action of the governing body of a municipality unless such action is “clearly

shown to be arbitrary, capricious, or discriminatory or is illegal or without substantial

evidentiary basis.” Sunland Publ’g Co., 710 So. 2d at 882 (citing City of Jackson v. Capital

Reporter Publ’g Co., 373 So. 2d 802, 807 (Miss. 1979)). An act is arbitrary and capricious

when it is done at pleasure, without reasoned judgment or with disregard for the surrounding

facts and circumstances. Watkins v. Miss. Bd. of Bar Admissions, 659 So. 2d 561, 568

(Miss. 1995). Substantial evidence is “such relevant evidence as reasonable minds might

accept as adequate to support a conclusion or . . . more than a ‘mere scintilla’ of evidence.”

Wilkinson County Bd. of Supervisors v. Quality Farms, Inc., 767 So. 2d 1007, 1010 (Miss.

2000) (quoting Hooks v. George County, 748 So. 2d 678, 680 (Miss. 1999)).

                                       DISCUSSION

I.     Whether the City violated Mississippi Code Annotated Section 31-7-13(d)(i) in
       awarding the Goodman Project contract to Freeland and, if not, whether the
       City had the right to reject Nelson’s bid for the reasons set forth in its Resolution
       #09-07-05.

       A.     Mississippi Code Annotated Section 31-7-13(d)(i) (Rev. 2005).

¶12.   The City awarded the Goodman Project contract to the second-lowest bidder based

on complaints about Nelson and his conduct under previous contracts. Nelson argues that

the City’s minutes failed to include “detailed calculations” specifying costs that would have

been incurred had his lowest bid been accepted, including costs for additional supervision.



                                              5
Nelson asserts that detailed, mathematical calculations are an objective requirement essential

to protecting the integrity of the public procurement system. The City counters that the term

“calculations” does not refer to numbers, but to the governing authority’s deliberations in

reaching its final decision.

¶13.   Mississippi Code Annotated Section 31-7-13(d)(i) requires a city to place on its

minutes detailed calculations and a narrative summary when accepting a bid other than the

lowest bid submitted.

       If any governing authority accepts a bid other than the lowest bid actually
       submitted, it shall place on its minutes detailed calculations and narrative
       summary showing that the accepted bid was determined to be the lowest and
       best bid, including the dollar amount of the accepted bid and the dollar amount
       of the lowest bid.

Miss. Code Ann. § 31-7-13(d)(i) (Rev. 2005).          The term “detailed calculations” in

Mississippi Code Annotated Section 31-7-13(d)(i) requires, at least, that “the dollar amount

of the accepted bid and the dollar amount of the lowest bid” be included in the governing

authority’s minutes.

¶14.   Nelson’s bid was not rejected on considerations to which “detailed calculations” are

attributable, but for the reasons described under the “narrative summary.” When awarding

contracts, a governing authority may consider a bidder’s “responsibility” concerning matters

that relate to the prompt and efficient performance of a contract, including the bidder’s

honesty and integrity, skill and business judgment, experience and capability of performing

the contract, conduct under previous contracts, and the quality of previous work. Parker

Bros. v. Crawford, 219 Miss. 199, 208-09, 68 So. 2d 281, 284-85 (1953). When a lowest bid




                                              6
is denied based upon such considerations, as in the subject case, there will most likely be

little in the way of “detailed calculations” to include in the governing authority’s minutes.

¶15.   Because the City rejected Nelson’s bid for reasons that cannot be reduced to “detailed

calculations,” the City’s minutes provided the minimal, requisite “detailed calculations”

pursuant to Mississippi Code Annotated Section 31-7-13(d)(i) by citing the dollar amounts

of the lowest bid and the accepted bid.

       B.     The City’s right to reject Nelson’s bid for the reasons set forth in its
              Resolution #09-07-05.

¶16.   The City’s advertisement for bids stated that the contract would go to “the lowest

responsive, responsible Bidder.” The term “responsible” is not limited to financial resources

and ability. Id. at 284. All matters that relate to a bidder’s prompt and efficient performance

of the contract are material to a bidder’s “responsibility,” including the bidder’s honesty and

integrity, skill and business judgment, experience and facilities for performing the contract,

conduct under previous contracts, and the quality of previous work. Id. at 284-85.

¶17.   Resolution #09-07-05, as incorporated into the City’s minutes, stated that the City had

decided not to award the Goodman Project contract to Nelson based on numerous complaints

regarding his prior work and its own previous difficulties with Nelson in the construction of

City Hall. These are appropriate considerations in determining the “responsibility” of a

bidder. See id.

¶18.   The City also reserved the right to investigate bidders “to determine the ability of the

Bidder to perform the work,” as well as the “right to reject any bid if the evidence submitted

by or investigation of such Bidder fails to satisfy the [City] that such Bidder is properly



                                              7
qualified to carry out the obligations of the Contract and to complete the work contemplated

therein.”

¶19.     Because the City’s advertisement for bids allowed for consideration of bidders’

“responsibility” and because the City also reserved the right to investigate bidders, we find

that the City had the right to reject Nelson’s bid for the reasons set forth in Resolution #09-

07-05.

II.      Whether the City violated Nelson’s substantive and/or procedural due process
         rights.

¶20.     Nelson argues that the City violated his constitutionally protected substantive and

procedural due process rights. Nelson maintains that he acquired a property interest in the

Goodman Project contract because he was the lowest, responsive bidder. Additionally,

Nelson argues that the City violated his procedural due process rights by not affording him

notice and a hearing.

         A.     Substantive due process.

¶21.     For substantive due process to be implicated, there first must be a protected property

interest. University of Miss. Med. Ctr. v. Hughes, 765 So. 2d 528, 536 (Miss. 2000). This

Court has stated that a contract right constitutes an enforceable property interest. Id. (citing

Wicks v. Miss. Valley State Univ., 536 So. 2d 20, 23 (Miss. 1988)). However, federal

constitutional law determines whether a property interest “rises to the level of a

constitutionally protected interest.” Id. (citing, e.g., Memphis Light, Gas & Water Div. v.

Craft, 436 U.S. 1, 9, 98 S. Ct. 1554, 1560, 56 L. Ed. 2d 30, 39 (1978)). The United States

Supreme Court has defined “property” for the purpose of the due process clause as being



                                               8
more than a unilateral expectation, but a “legitimate claim of entitlement.” Bd. of Regents

v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 2709, 33 L. Ed. 2d 548, 561 (1972).

¶22.   Nelson argues that his property interest in the Goodman Project contract attached once

he acquired status as the lowest bidder. In arguing that he has an enforceable property

interest in the Goodman Project contract, Nelson relies heavily upon Shepard v. City of

Batesville, 2007 U.S. Dist. LEXIS 1519 (N.D. Miss. January 8, 2007). In Shepard, the

federal court for the Northern District of Mississippi found that Mississippi Code Annotated

Section 31-7-13 gave the plaintiff a protected property interest in projects for which he was

the lowest and best bidder. Shepard, 2007 U.S. Dist. LEXIS at 27. However, Shepard is

distinguishable from the facts of the subject case. In Shepard, the plaintiff actually had been

awarded various contracts over a two-year period, but had been used for only one project.

Id. (“[t]here is absolutely no question that the Plaintiff was awarded the contracts . . . .”).

The City of Batesville had instead used alternate bidders without providing the plaintiff any

notice or hearing as to why he had not received the jobs. Id. at 27-28.

¶23.   In contrast to Shepard, Nelson was never awarded the Goodman Project contract. The

City, in its advertisement for bids, reserved discretion to award the contract to “the lowest

responsive, responsible Bidder” and determined that Nelson did not meet such criteria.

Having never been awarded the Goodman Project contract, Nelson never had a “legitimate

claim of entitlement” to such contract. See Roth, 408 U.S. at 577; Shepard, 2007 U.S. Dist.

LEXIS at 24-25 (citing Expert Masonry, Inc. v. Boone County, 440 F.3d 336, 348 (6th Cir.

2006)(a constitutionally protected property interest in a public bid contract may arise by




                                              9
being awarded the contract and then being deprived of it, or by the governing authority

abusing its discretion in awarding the contract)).

¶24.   Because no property interest vested upon Nelson’s status as the lowest bidder, we find

that Nelson did not acquire a constitutionally protected property interest in the Goodman

Project contract. Therefore, we hold that the City did not violate Nelson’s substantive due

process rights.

       B.     Procedural due process.

¶25.   A two-step analysis is required in analyzing procedural due process claims: “(1) does

the plaintiff have a property interest entitled to procedural due process protection; and (2) if

yes, what process is due?” Harris v. Miss. Valley State Univ., 873 So. 2d 970, 985 (Miss.

2004) (citing Bluitt v. Houston Indep. Sch. Dist., 236 F. Supp. 2d 703, 733 (S.D. Tex.

2002)). If no constitutionally protected right is at stake, then procedural due process is not

an issue. Miss. High Sch. Activities Ass'n, Inc. v. Coleman, 631 So. 2d 768, 774 (Miss.

1994) (citing Miss. High Sch. Activities Ass’n, Inc. v. Farris, 501 So. 2d 393, 396 (Miss.

1987)).

¶26.   Because Nelson had no constitutionally protected right in the Goodman Project

contract, we find that procedural due process is not invoked. See id. Nevertheless, Nelson

received the requisite procedural due process provided under Mississippi law.

¶27.   Mississippi bid laws do not require a hearing when a governing authority rejects a

lowest bid. Rather, Mississippi Code Annotated Section 31-7-13(d)(i) requires the governing

authority’s minutes to provide “detailed calculations and narrative summary showing that the

accepted bid was determined to be the lowest and best bid.” Miss. Code Ann. § 31-7-13(d)(i)

                                              10
(Rev. 2005).    If a party remains dissatisfied with the governing authority’s decision,

Mississippi Code Annotated Section 11-51-75 sets forth the procedure by which an aggrieved

party such as Nelson may appeal the decision. Miss. Code Ann. § 11-51-75 (Rev. 2005).

¶28.   Nelson attempts to contrast the process afforded him with the process afforded the

lowest bidder in Parker Brothers. In Parker Brothers, the school board made efforts to

contact the lowest bidder prior to the board’s decision to accept the second-lowest bid.

Parker Brothers, 68 So. 2d at 282. Additionally, the board noted that the lowest bidder had

been free “at any time to present their qualifications to the Board; . . . .” Id. Yet the lowest

bidder never actually contacted the school board and no hearing was conducted prior to the

board’s decision. Id. at 282-83. Even if a hearing had been held prior to the board’s

decision, such a hearing is not required under Mississippi law. See Miss. Code Ann. §§ 11-

51-75, 31-7-13(d)(i) (Rev. 2005).

¶29.   Accordingly, we find that Nelson received the requisite procedural due process under

Mississippi law.

III.   Whether the City acted arbitrarily and capriciously in reaching its decision to
       award the Goodman Project to Freeland rather than Nelson.

¶30.   Nelson makes three arguments that the City acted arbitrarily and capriciously in

denying him the Goodman Project contract: first, that the City engaged in a “witchhunt” to

deny him the Goodman Project contract and did not investigate Freeland or other bidders;

second, that the City improperly considered his conduct under a previous contract with the




                                              11
City which dated back five years;2 and finally, that the City unlawfully considered the

complaints filed against him concerning previous payment disputes.

¶31.   The record provides some evidence that the City investigated other bidders. In a

memo to the Mayor and Board of Aldermen, the city engineer stated that “[a]fter some

research on the various bidders, it appears that the City would be best served by awarding

the contract to the second [lowest] bidder, Freeland and Lemm.” The City’s investigation

was focused primarily on Nelson because he had submitted the lowest bid.

¶32.   Nelson also argues that the City is time-barred when considering his past performance.

For support, Nelson cites Title 48 of the Code of Federal Regulations, Section 42.1503,

which effectively permits agencies to look back only three years on a contractor’s past

performance. 48 C.F.R. § 42.1503 (2004). However, the City was not bound by the Code

of Federal Regulations for this project, and no similar provision exists under Mississippi law.

Therefore, the City’s consideration of Nelson’s past performance was not an arbitrary and

capricious act.

¶33.   Finally, Nelson argues that complaints concerning his payment disputes with previous

suppliers should not have been considered by the City because these suppliers were protected

by Nelson’s payment bond. This Court has held that where bond is given under Mississippi

Code Annotated Section 85-7-185 (Rev. 1999), the bond serves in lieu of any equity or trust




2
  Nelson dates his previous contract with the City as being six years ago. However, the
record shows that the City awarded Nelson a contract for the City Hall project on December
1, 1998, and that work was performed on the contract until 2000. Thus, the contract dates
back approximately five years from September 20, 2005, the date on which the City elected
to deny Nelson the Goodman Project contract.

                                              12
in favor of materialmen and laborers. See Dickson v. United States Fid. & Guar. Co., 150

Miss. 864, 117 So. 245, 248 (1928). Even though Section 85-7-185 affords protection for

“persons furnishing labor or material,” neither this provision nor Mississippi case law

prohibits a governing authority from considering a contractor’s prior disputes with creditors.

Miss. Code Ann. § 85-7-185 (Rev. 1999). The aggregate of such disputes may bear upon the

contractor’s honesty, integrity, business judgment, conduct under previous contracts, and

pecuniary ability—all of which have been held to be appropriate considerations in awarding

a public contract. See Parker Bros., 68 So. 2d at 284-85.

¶34.   Additionally, the complaints regarding Nelson were not isolated to payment disputes

with suppliers. The complaint from the City of Pine Bluff, Arkansas, alleged that Nelson had

not complied with the specifications of a contract. The complaint from Allen & Hoshall of

Memphis, Tennessee, cited dissatisfaction with Nelson’s performance on a project, stated

that a lawsuit had been filed against Nelson, and added that Nelson was not allowed on other

projects. Finally, the City’s prior difficulties with Nelson on the City Hall project were

extensively documented in the record and centered largely on Nelson’s failure to comply

with contract specifications.

¶35.   While recognizing that disputes and complications are not uncommon within the

construction industry, we find substantial evidence that the City did not act arbitrarily and

capriciously in reaching its decision to award the contract to Freeland rather than Nelson.

IV.    Whether the circuit court erred in excluding an Occupational Safety and Health
       Administration (OSHA) news release from the record.




                                             13
¶36.     In Nelson’s reply brief before the circuit court, he referenced and attached as an

exhibit a news release from the OSHA which showed that Freeland had been fined $96,400

for safety violations which resulted in the death of one of its employees. Nelson contends

that the circuit court erred by not including the news release as part of the record.

¶37.     The bill of exceptions constitutes the record on appeal. Wilkinson County Bd. of

Supervisors v. Quality Farms, Inc., 767 So. 2d 1007, 1011 (Miss. 2000) (quoting Hooks v.

George County, 748 So. 2d 678, 680 (Miss. 1999)); Miss. Code Ann. § 11-51-75 (Rev.

2005).    Thus, the circuit court may review only the evidence included in the bill of

exceptions. E.g. id.

¶38.     Because the press release was not included in the bill of exceptions, we find that the

circuit court did not err in excluding the OSHA news release from the record.

                                       CONCLUSION

¶39.     Because we find that the City complied with Mississippi Code Annotated Section 31-

7-13(d)(i), did not violate Nelson’s due process rights, and did not act arbitrarily and

capriciously in rejecting Nelson’s lowest bid, we affirm the circuit court’s order affirming

the City of Horn Lake’s decision.

¶40.     AFFIRMED.

     SMITH, C.J., DIAZ, P.J., EASLEY, CARLSON, DICKINSON, RANDOLPH
AND LAMAR, JJ., CONCUR. GRAVES, J., NOT PARTICIPATING.




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