Facts

In August 2003, plaintiff/cross-defendant owner, entered into a construction contract with defendant/cross-complainant contractor pursuant to which contractor was to construct a 500 megawatt combined cycle power plant in a 19-month period for a lump sum fixed price of $106.8 million, subject to change orders as allowed by the contract. The power plant was to be constructed using plans and specifications prepared by the owner's engineer/architect, Utility Engineering Corp., which had not been completed at the time the construction commenced. The owner was also responsible for procuring and supplying most of the equipment and materials that would be used to build the power plant.

The construction began in October 2003. In February 2005, the owner terminated the contractor for cause asserting that the contractor had defaulted under the construction contract in multiple respects, including missing many contractual intermediate work deadlines, which resulted in the contractor being so far behind schedule that it would be unable to meet the contractually mandated construction substantial completion deadline. The owner then completed the construction of the power plant using replacement contractors. The contractor was terminated under a provision of the construction contract. The provision allowed the owner to recover the additional costs the owner incurred to complete the work that the contractor was to perform in excess of the agreed upon contract price (as adjusted for change orders) and for liquidated damages for delay.

The owner asserted causes of action for declaratory relief and breach of contract. The owner additionally sought damages under the California False Claims Act.

The contractor asserted cross-claims against the owner for breach of the construction contract claiming that the contractor was wrongfully terminated. The contractor sought damages for unpaid progress payment invoices for work performed prior to termination, compensation for extra or out-of-scope work contractor was not obligated to perform under the construction contract, and for construction inefficiencies. The contractor also asserted in its cross-complaint that it was entitled to extensions of time to meet the intermediate and construction substantial completion contract deadlines due to owner-caused critical path schedule delay. The contractor sought attorney fees.

The court granted the owner's motion for summary adjudication on its cause of action for declaratory relief based upon the owner's contention that the contractor refused the owner's direction to replace concrete that the owner alleged did not meet specifications. The trial proceeded on the issues of owner's damages and contractor's breach of contract claims against owner.

PLAINTIFF'S CONTENTIONS:
The owner contended that it properly terminated the contractor for cause under the contract; that the contractor was liable for the excess costs incurred by the owner above the lump sum fixed price (adjusted for change orders) provided in the contract; that the contractor, rather than the owner, was responsible for virtually all of the schedule delays and liquidated damages for that delay at the daily rate specified in the contract.

The owner also claimed that the contractor had submitted certain payment applications or invoices seeking payment to which the contractor was not entitled such that the contractor was liable to the owner for statutory penalties under the California False Claims Act.

DEFENDANT'S CONTENTIONS:
The contractor contended that it had been wrongfully terminated under the construction contract; that the engineering design errors, deficiencies and misfabrications, and late deliveries of the owner's supplied equipment and materials caused almost all of the problems and schedule delays experienced on the job.

The contractor also claimed that the owner interfered with the contractor's means and methods and caused other problems that created the work inefficiencies for the contractor; that the owner was liable for the invoice amounts on progress payment invoices approved but unpaid by the owner for work performed by the contractor prior to termination; that the owner had failed to timely process the contractor's many change order requests; that the contractor performed a substantial amount of out-of-scope work due to the many design errors and misfabricated and late-delivered owner-supplied equipment and materials, for which the owner had failed to issue appropriate change orders.

The contractor further contended that the owner mismanaged and was inefficient in completing the contractor's remaining scope of work following the termination; that most of the remaining work was performed by replacement contractors working on a time and materials basis; that the owner failed to properly keep track of and account for the work performed by the replacement contractors, and that the work done was outside of contractor's remaining scope of work; that the owner overpaid the replacement contractors for the work they performed; that the owner directed the replacement contractors to perform unnecessary work; and that the owner otherwise failed to act properly to mitigate the owner's damages.

The contractor also denied submitting any payment applications or invoices to owner in violation of the California False Claims Act.

Settlement Discussions

The contractor has requested that the respective settlement demands not be disclosed.

Damages

The owner sought $38,763,583 for excess costs to complete the construction; $8,195,000 in liquidated damages for the delay in the construction; $152,879 for the submission of false claims for payment under the California False Claims Act and approximately $15 million in prejudgment interest. The contractor sought $23,914,775 for the work performed and costs incurred in excess of the scope of the work agreed upon in the contract and approximately $9.5 million in prejudgment interest.

Result

The jury found in favor of the owner on its claims and awarded the owner $35,558,278 in excess costs to complete the construction; $6,590,000 in liquidated damages for the delay; and $10,000 in statutory penalties under the California False Claims Act. Additionally, the court awarded mandatory prejudgment interest upon the jury verdict to the owner in the amount of $13,048,815, resulting in a gross award for the owner of $55,207,093. The court denied the owner's claim for attorney fees. Costs have yet to be determined. The owner has filed a cost bill in excess of $1,200,000. The contractor has filed a motion to tax costs. The jury awarded the contractor $1,496,449 for its claims for additional work. That amount was reduced to $1,164,709 by the trial court to account for a credit to the contractor that the owner conceded was due and included in the owner's calculation of damages. Pending post-trials motions were set for hearing on Jan. 29, 2010.

Other Information

The contractor filed a subsequent action in federal district court asserting the same claims that the contractor asserted in state court, and the owner filed a cross-claim asserting its state court claims. The contractor's surety filed a claim against the owner in the federal court action. Both the owner's and contractor's motions for summary adjudication were granted in part and denied in part based on disputed material facts. The district court stayed the proceeding based on the Colorado River doctrine and the stay is the subject of a pending appeal. FILING DATE: Feb. 28, 2005.

Deliberation

seven weeks

Length

three months