Ramelli Janitorial Service, Inc. v. H&O Investments, LLC and Parish of Jefferson, Department of Drainage, 22-266 (La. App. 5 Cir. 9/21/22), 2022 WL 4363991.
Authors: Jonathan Forester and Ali Barnes
“The Louisiana Public Bid Law does not apply to service contracts.”
This case stems from a dispute over the award of a three-year maintenance assistance contract for grass cutting services in Jefferson Parish. Ramelli Janitorial Services (“Ramelli”) filed suit to challenge the award of the service contract to H&O Investments, LLC (“H&O”), arguing, in part, that La. R.S. 38:2220 should nullify the contract as it violated of public bid law. The Jefferson Parish Drainage Board (the “Parish”) filed numerous exceptions to Ramelli’s suit, to include an exception of no cause of action, all of which were denied by the trial court. The Parish appealed the denial of its exceptions to the Court of Appeal for the Fifth Circuit.
La. R.S. 38:2220 allows for the nullification of contracts for the “purchase of materials or supplies, or any contract entered into for the construction of public works.” The Court of Appeal for the Fifth Circuit noted, however, that the Supreme Court of Louisiana has held that the public bid law was intended to apply to “public works” which is defined as “contracts for building, physical improvements and other fixed construction,” and not to public service contracts. The Court of Appeal further reiterated that a petition relative to a service contract will be found to have failed to state a cause of action for recovery under the public bid laws, as service contracts are not considered to be “public works” and are not subject to public bid laws.
The Parish argued that it elected to use the competitive bidding process, as enumerated in the Louisiana Public Bid Law, to award the service contract, as it was advantageous for the award of the multi-million dollar contract. The Parish was not required to use it by state law. The Court of Appeal for the Fifth Circuit found a distinction between electing to use the public bid law’s processes versus being required to do so, and therefore found that it was improper for the trial court to find that a cause of action existed under the Louisiana Public Bid Law, which is inapplicable to service contracts. Since Ramelli’s claim sought a remedy under the public bid law, and the contract for grass cutting was a service contract, the Court of Appeal held that Ramelli did not have a cause of action. Thus, relative to the Parish’s exception of no cause of action, the trial court was found to be in error in denying the exception. This case highlights the important distinction between a public works contract and a service contract. Under a service contract for a public entity, the contractor cannot rely on Louisiana Public Bid Law.