Alabama Supreme Court reverses order dismissing lawsuit related to Red Bay gas line expansion project

A lawsuit filed by a contractor seeking more than $800,000 against the Water Works and Gas Board of the City of Red Bay now move forward after the Alabama Supreme Court reversed a lower court order that would have resulted in the dismissal of the case.

Pinpoint Locating, Inc., filed the lawsuit in Franklin County Circuit Court alleging it was owed more than $800,000 for work performed on four public-works contracts related to a gas line replacement and expansion project in and around the City of Red Bay.

Franklin County Circuit Judge Brian Hamilton granted a Motion for Summary Judgment filed by the Water Works and Gas Board of the City of Red Bay, ruling the contracts to be void because of ‘defective advertising.’

According to court filings,  the Water Works and Gas Board of the City of Red Bay (the Board) allegedly ceased payment on the $4.4 million project that was broken into four phases: A Cast Iron Replacement Project, and Red Bay Expansion Projects Phase One, Phase Two and Phase Three.

Pinpoint was the lone contractor to bid on each phase and the Board accepted those bids and entered into four separate contracts with Pinpoint.

The Board’s decision to stop payment on the contracts was on the advice of its attorney, based on the original bid allegedly not complying with Alabama law related to bid-advertising requirements.

Pinpoint began work on the Cast Iron Replacement Project, which it completed by October 2022. Additionally, Pinpoint completed 100% of Phase Three, 72% of Phase Two and 62% of Phase One.

Those percentages were certified by Magnolia River Services, Inc., who was retained to design and manage the project and prepare specs for each phase.

In its lawsuit, Pinpoint asserts it installed 138,625 feet (more than 26 miles) of new gas lines and received $2,822 million in payments from the Board, but is still owed $811,300.52 for work it completed.

Board attorney Danny McDowell sent a letter to Pinpoint on May 6, 2023, indicating the Board could not legally make additional payments under the contracts because the advertisement for sealed bids was not compliant with Alabama law at the time.

Pinpoint alleges the Board actually stopped payment because of financial difficulty resulting from an additional $1 million in project costs resulting from Alabama Department of Transportation mandated change orders, and the alleged advertising defects were ‘a convenient legal pretext.’

After Pinpoint’s post-judgment Motion to Alter, Amend or Vacate the Court’s summary judgment was denied, it filed an appeal to the Supreme Court of Alabama.

Essentially, the Supreme Court decided that there was ‘substantial  compliance’ with the mandatory advertising requirements and ruled there was substantial evidence to create a genuine issue of fact for a trial court or jury to decide.

The Board maintains the Red Bay News, the newspaper used to advertise for bids, was not a newspaper of general circulation throughout Alabama, something required by the Code of Alabama.

That issue is properly for the trial court and/or a jury to decide, as the Supreme Court said it could ‘reasonably’ be found that the statute’s objectives were ‘substantially achieved.’

The Court’s ruling comes as potentially good news to Alabama businesses and contractors who perform work under public-works contracts, even if there are minor or technical advertising defects.

The ‘substantial compliance’ issue is a factual issue appropriate for the Court or jury to decide, making it more difficult for public entities to prevail on summary judgment motions that can lead to early dismissal of the cases. This eliminates prior precedents where a zero-tolerance approach was taken on technical advertising defects where the objectives of competitive bidding have been ‘substantially achieved.’

While the Supreme Court’s ruling now gives Pinpoint Locating, Inc., the opportunity to have its day in court, it will still have to prove its case  at trial.

According to one former Board member who spoke with the FFP last week, the Board followed the advice of its attorney not to make additional payments. Additionally, the source said Pinpoint filed its lawsuit before additional payments were due and Pinpoint demanded ‘mobilization fee’ before it would come back to perform any additional remaining work.

“That fee was astronomical. And when we reviewed some of their billing it was not correct and the engineering company wasn’t giving us reports on the work being done, so that was a factor in our decision to stop paying,” the source said.

The source said Phases One, Two and Three were to be done in that order, but the project manager decided to do Phase Three first in conflict with how they were supposed to be done.

The case will be set for trial in Franklin County Circuit Court later this year.