Facts

In 2006, Centex Homes developed the 234-home Encanto residential development in Perris (the "project"). Centex Homes contracted with LD Anderson Inc. to perform the rough grading and with Irvine Pipeline Company Inc. to install the sewer, water and storm drain lines and laterals for the project.

In 2010, Centex Homes was alerted to sink holes and numerous depressions in the streets, which ultimately resulted in Centex Homes making project-wide repairs to the street areas because investigation revealed that the street fill was not compacted to the required 90 percent relative compaction.

CLAIMANT'S CONTENTIONS:
Centex Homes claimed that LD Anderson and Irvine Pipeline Company failed to compact their rough graded fill and trench backfill to the 90 percent relative compaction required on their respective contracts, resulting in damages to the streets, curbs and gutters throughout the project.

RESPONDENTS' CONTENTIONS:
Irvine Pipeline and LD Anderson argued that neither of them could have caused any damage to the street areas because the rough graded fill and the trench backfill were left at an elevation two to three feet below the finish surface of the streets and that someone else must have damaged the streets by placing fill on top of their work.

LD Anderson (LDA) testified that it performed the rough grading in this matter. It claimed their work was monitored every day by the soils engineer, LGC. LDA claimed LGC was hired by the developer and took soils samples for determination of compaction specifications adherence. LDA claimed to have no authority to control the activities of LGC. LDA claimed to provide documentation that it received all certifications and passed all compaction tests performed by LGC. LDA alleged it provided proof that the streets were left between 2.5 and 3 feet below the level where the base rock was to be placed for the streets. LDA also argued that Plaintiff provided no testimony that LDA had breached the standard of care in the industry.

LDA further alleged that subsequent to LDA leaving the job, Irvine Pipeline Company placed all the wet utilities in the street, including sewer, water, and storm drains. LDA claimed subsequent to Irvine, Palomar Grading prepared the subgrade, and were paid an extra $55,000 to import additional dirt to the streets to bring them up to the level for the placement of base rock. LDA claimed evidence revealed that there was inadequate testing data by LGC to show that Palomar compacted the imported soils and properly compacted the base rock. LDA further contended subsequent testing revealed that Palomar's base rock did not meet specification in approximately 80 percent of its application. LDA alleged destructive testing revealed that although the asphalt did not have the last 1" cap, the asphalt placed by Palomar did not meet specification in approximately 70 percent of its application. LDA claimed there was no data available to show that there was any monitoring of the asphalt paving by LGC.

LDA claimed to provide testimony from its geotechnical engineers that the roadbed is only affected in the 3 feet from the top of the pavement. Because the specification for the roadway generally called for 3-inch of asphalt over 9-inch of base, LDA alleged the only soil affected by traffic was two feet of soil. LDA claimed that Centex chose to spend $3.4 million digging as deep as 9 feet to remove and recompact soils.

LDA claimed to provide evidence that the cause of the street distress was the streets being allowed to sit without the final one-inch cap for two years and water migrating between the gutter edge and asphalt leading to mild distress. LDA further claimed to provide testimony that repairing these conditions should have cost $200,000.

Settlement Discussions

Immediately before arbitration, Plaintiff issued a settlement demand of $2.3 million to both defendants. No offer was made by Defendants. Centex settled with the LCG in the amount of $680,000. Prior to the beginning of depositions, Centex reached a tentative settlement with Palomar, subject to good faith, in the amount of $50,000. Palomar did not participate in the depositions and did not attend the arbitration.

Damages

Plaintiff claimed cost of repair of $3,560,708 and added 15% for a total of $4,094,814. The 15% is per contract provision with Defendants providing that when Defendants do not perform repairs, Plaintiff is required to repair.

Result

Arbitrator Richard E. Buck of Cooksey, Toolen, Gage, Duffy & Woog, APC, found in favor of Centex Homes and against Irvine Pipeline Company and LD Anderson jointly and severally in the amount of $1,818,248.

Other Information

LD Anderson's post-arbitration request for an allocation of liability between Irvine Pipeline and LD Anderson was denied. Although Palomar reached settlement in this case in February, they did not file notice of good faith settlement until April 23, 2012. Anderson filed opposition to the good faith settlement, which was heard after the arbitration in this matter but before the arbitrator rendered his award. The Court denied Palomar's good faith settlement. Palomar filed a writ, which was denied. Anderson has filed an indemnity action against Palomar in Riverside Superior Court.