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COA disagrees on damages to bidder

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Indiana Court of Appeals judges disagreed today whether a company should be entitled to damages when it lowered its bid for work at a state-run hospital based on fraudulent information from another bidder.

Judges Edward Najam and Terry Crone affirmed the award of damages to Liberty Healthcare Corp. in its suit against Columbus Medical Services Organization for tortious interference with a business relationship, and for treble damages, attorneys' fees, and costs under the Crime Victims Relief Act.

Liberty and Columbus were bidding for the provision of psychiatric medical staffing services at Logansport State Hospital, which is owned by the state. At the time of the bidding, Liberty had been providing services at the hospital. During the request for proposal process, Columbus made misrepresentations and claimed doctors who worked for Liberty expressed interest in working for Columbus under the proposal. Columbus never spoke to these doctors.

As a result of a similar evaluation by the state, it requested Liberty and Columbus submit a second Best and Final Offer; Liberty had lowered its bid in order to win the contract. Columbus came in with the lower price and was awarded the contract. After the fraud was discovered, Liberty entered into a contract with the state, but was stuck at the lower bid price from the second Best and Final Offer. Liberty claimed that if it hadn't been for Columbus' fraud, it would have won the contract earlier on with a higher bid.

In Columbus Medical Services Organization LLC v. Liberty Healthcare Corp., No. 82A04-0808-CV-466, the majority agreed with the trial court's calculation of $486,497 in lost profits directly related to Columbus' fraudulent behavior. The specific amount was based on testimony from Liberty's CFO, who based his testimony on the mathematical calculation of the difference between the profits that would have been realized under the first BAFO and the profits realized under the contract that was eventually accepted by the state. The majority also acknowledged that it wasn't possible to calculate the damages with absolute certainty, but noted that tort damages don't require absolute certainty.

Chief Judge John Baker disagreed with his colleagues, believing the damage award to Liberty is too speculative. The trial court attempted to right the wrongs committed by Columbus, but there's no way of knowing what would have happened if Columbus hadn't committed fraud, been eliminated sooner, or not even participated.

"I also believe that the result reached by the majority leads to bad public policy. No one held a gun to Liberty's proverbial head and forced it to lower its bid. Liberty chose to do so. Admittedly, its decision was based on faulty, likely fraudulent, information, but it was a choice, nonetheless," he wrote.

As a matter of public policy, courts shouldn't award damages to a company that decided it was able and willing to lower its bid on a project, even if that decision was based on a competitor's fraud, he continued.

The chief judge concurred with the majority's conclusion that the Crime Victims Relief Act applied to Liberty. He would reverse the damages award, order a nominal damages award of $1 to Liberty, treble it under the CVRA to $3, and affirm the award of $473,468.04 for attorneys' fees and litigation expenses.

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  2. Hail to our Constitutional Law Expert in the Executive Office! “What you’re not paying attention to is the fact that I just took an action to change the law,” Obama said.

  3. What is this, the Ind Supreme Court thinking that there is a separation of powers and limited enumerated powers as delegated by a dusty old document? Such eighteen century thinking, so rare and unwanted by the elites in this modern age. Dictate to us, dictate over us, the massess are chanting! George Soros agrees. Time to change with times Ind Supreme Court, says all President Snows. Rule by executive decree is the new black.

  4. I made the same argument before a commission of the Indiana Supreme Court and then to the fedeal district and federal appellate courts. Fell flat. So very glad to read that some judges still beleive that evidentiary foundations matter.

  5. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

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