Holley Enterprises, Inc. v. The City of Wilmington, No. 4619-VCS (Del. Ch. June 5, 2009), read letter decision here.

This short Chancery Court letter decision provides a useful summary of the standard that must be satisfied before a temporary restraining order is granted–an important instrument to have in the toolbox of the those who handle business litigation in Delaware. The temporary retraining order (TRO) was requested in this case by an unsuccessful bidder for a City contract. The statutory argument revolved around the determination of the “lowest responsible bidder” to whom the City contract was awarded.

The letter opinion discusses the prerequisites for a TRO and why they were not satisfied in this case. The court also provides a practical discussion of the statutory standard for a “lowest responsible bidder” and the discretion that governmental agencies have in determining who satisfies that statutory standard. Also of practical usefulness to Delaware contractors at both the City, County and State level are citations to authority that describe the very broad range of discretion that governmental agencies have in awarding a bid. See cases cited at footnote 9. In this particular case, the contractor involved was the subject of an indictment based on allegations in connection with public contracts in Delaware, Pennsylvania and New Jersey. Thecourt explained why this was relevant under the circumstances of this case.

In addition to reciting prior decisions that explain why courts are reluctant to second guess the decisions of governmental agencies in awarding contracts, in this particular case the court interpreted the City code as giving the City discretion to consider factors that were not expressly included in the City code when determining who a responsible bidder was. The court gives the government agency, and in this case the City, broad leeway in making these decisions and will not overturn them unless they are deemed to be arbitrary or capricious.

Arbitrary and capricious is generally equated with unreasonable or irrational behavior and is not the result of a deliberative process, and is in disregard of the facts and circumstances. The court reasoned that the decision of the City in this situation was neither arbitrary nor capricious in denying the bid award to the plaintiff.

In sum, the TRO request was denied because the contractor was unlikely to succeed on the merits and the harm to the contractor by denying the TRO would be minimal compared to the risk that the City would suffer and the harm to public safety, as well as the prejudice to contractors already awarded related contracts if the court were to grant the TRO. .