Concrete Tie of San Diego, Inc. v. Liberty Construction, Inc.

We must decide whether the Small Business Administration owed any duty to a minority-owned small business concern by virtue of a federal set-aside program for minority-owned government contractors.

I

Liberty Construction, Inc. (“Liberty”) is a minority-owned business determined by the Small Business Administration (“SBA”) to be a socially and economically disadvantaged small business concern (a “section 8(a) concern”) under the set-aside provisions of § 8(a) of the Small Business Act, 15 U.S.C. § 637 (a). In 1989, following the tender of several bid proposals by Liberty, Liberty entered into a subcontract with the SBA. The contract provided that Liberty would construct a “hazardous/flammable materials warehouse” for the Navy. 1 Liberty engaged two sureties, Sol Gerber and Lucille Kurtin (“the sureties”), who provided payment bonds. Essentially, the sureties agreed to pay Liberty’s laborers, suppliers, and subcontractors if Liberty failed to do so.

Liberty encountered financial difficulties after it began building the warehouse. Liberty was unable to pay its suppliers and subcontractors, some of whom filed claims against it and the sureties. Those claims were settled, but…