Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Architect, general contractor charged with bid rigging in construction of eye surgery center, (Nov 20, 2015)

By Linda O’Brien, J.D., LL.M.

An architectural firm and general contractor conspired to eliminate competition in the bidding process and delay construction of a physician’s eye surgery center in order to increase their profits from the project, according to a complaint filed in the federal district court in Brooklyn, New York (Mason v. Hyman Hayes Associates, LLC, November 19, 2015).

Dr. Benjamin Mason specializes in internal medicine and ophthalmology in Woodside, New York. In 2013, Mason retained Hyman Hayes Associates (HHA) as the architect and project manager for the construction of his eye surgery center. It was the responsibility of HHA to set the initial parameters of the project by creating the architectural design and to handle all aspects of the bidding process for the selection of a general contractor to construct the center, the complaint alleges.

According to Mason, consistent with industry practices, Mason and HHA agreed that all bids must be submitted via certified or registered mail and no bids could be submitted by email alone. In June 2013, HHA notified Mason that three bids had been received—all in the appropriate range of $3 million. Of the three bids, only Michael Anthony Contracting Corp. (MACC) sent an email stating the company had mailed a hard copy. Since the bidding process required that email submissions without a mailed-in submission would not be considered and HHA actually conducted the bidding process by email, the bidding process was allegedly set up to steer Mason to MACC.

After the completion of the bidding process, HHA failed to negotiate prices with the other two bidders. Subsequently, Mason told HHA to hold another bid for the project due to the discrepancy in the bids. HHA refused to do so, stating it was contrary to industry norms. While negotiations with MACC were being conducted, HHA requested that the payment and performance bond for the project be cancelled on the ground that it would increase the project cost.

HHA represented to Mason that the three estimates were sufficient for actual bids. However, the actual numbers in the breakdown for the project and its pricing were completely unrealistic, Mason suggested. HHA also failed to negotiate a reduction in the bid price with MACC, which is about three percent of similar projects. Ultimately, in reliance on the bidding process managed by HHA, Mason retained MACC as the general contractor. Once the project began, MACC immediately began demanding additional money and refused to continue the project even though the company had been timely paid, the complaint alleges.

The complaint also claims that HHA and MACC failed to include changes requested by the New York Department of Buildings and fire department in the bid. The collusion resulted in unnecessary change orders that profited HHA and MACC and caused significant delays to the project. Additionally, MACC repeatedly submitted false payment certifications regarding subcontractors, which resulted in the enrichment of MACC and multiple mechanics liens on the project. In August 2014, Mason terminated his relationship with MACC for its delays and failure to pay subcontractors.

Mason asserts claims for fraud, breach of contract, and violations of Sections 1 and 2 of the Sherman Act, Clayton Act, New York Donnelly Act, and Racketeer Influenced and Corrupt Organizations Act. The action seeks restitution, treble damages, interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:15-cv-06662.

Attorneys: Jeffrey Benjamin (Jeffrey Benjamin, P.C.) for Benjamin Mason.

Companies: Hyman Hayes Associates, LLC; Michael Anthony Contracting Corp.

News: Antitrust RICO NewYorkNews