Promissory Estoppel Against a California Government Entity

In Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305, promissory estoppel was applied against a government entity where the application of that doctrine would further public policies and prevent injustice. (Kajima, supra, 23 Cal.4th at p. 315 noting that allowing promissory estoppel remedy in that case would do "rough justice" and "further certain public policies" regarding public contract bids.) In that case, a contractor was the low bidder on a project but the city wrongfully failed to award it the contract, as required by statute. (Id. at pp. 309-310.) The Supreme Court held that although the contractor could not state a breach of contract action against the city, the contractor was entitled to recover its bid preparation costs under a promissory estoppel theory. (Id. at pp. 313-321.) The court observed that the city represented it would award the contract to the lowest responsible bidder, the contractor relied on that representation, and the city thereafter violated its promise. A promissory estoppel remedy limited to recovery of bid preparation costs was appropriate under the circumstances because it would prevent injustice and further the public policy goals of deterring government misconduct in the bidding process and encouraging contractors to participate. (Id. at pp. 315-316.) The court noted it was necessary to limit the recoverable damages to bid preparation costs--rather than allowing recovery of lost profits--because the public policy of keeping the taxpayers' costs low in public contracts (the very purpose of the low-bid statutes) would be defeated by granting a broad damage remedy. (Id. at pp. 316-321.)