On December 21, 2012, just before the Christmas holiday, a King County Superior Court jury awarded King County $155.8 million in damages after finding the Brightwater tunneling contractor defaulted on key contractual obligations. Brightwater is a $1.8 billion King County sewer treatment plant in Woodinville, which opened last year. The tunneling contract firm, VPFK, was a joint venture of three companies – Vinci Construction Grands Projets/Parsons RCI/Frontier-Kemper (“VPFK”).
VPFK was awarded a $212 million construction contract to bore two central Brightwater conveyance tunnels following a competitive bidding process in 2006. The VPFK contract was the second of four Brightwater contracts that built a 13 mile tunnel to carry waste water from the Brightwater plant in Woodinville to a deep-water marine outfall in Puget Sound off Point Wells. During the course of performing the tunneling, VPFK’s two tunnel-boring machines, (“TBMs”) required extensive repairs that threatened to delay completion of the project’s tunnel by up to three years. Though VPFK repaired one machine and completed the remaining .8 miles of tunnel between Kenmore and Bothell in 2011, VPFK’s two other TBMs was not repaired per an agreement between VPFK and King County. The County could not accept a lengthy delay and additional costs the contractor proposed for the repair of the second TBM and completion of the tunneling. The contractor contended that the breakdowns were due to differing site conditions and defective design, which, by the County’s contract, entitled the contractor to an equitable adjustment.
The County disagreed and hired the joint venture contractor Jay Dee/Coluccio, (“JDC”), to complete the remaining 1.9 mile tunnel between Shoreline and Lake Forest Park where VPFK’s TBM had broken down. JDC already had a TBM underground after completing the adjacent four mile tunnel between Point Wells and Shoreline. The County retained JDC on an emergency time and materials contract to complete the project. Though JDC finished excavating VPFK’s one tunnel, VPFK completed all other work under the contract .
The County then commenced an action against VPFK to recover the costs associated with project delays and design modifications that were required and sought approximately $155 million from VPFK and its bonding companies. VPFK counter-claimed for approximately $70 million contending its delays were excusable due to the differing site conditions and other circumstances that were the County’s responsibility. King County acknowledged some of the VPFK claims totaling $4.7 million were valid, the jury granted $26 million of VPFK’s counter claims for a net of over $129 million verdict in favor of the County.
After the jury verdict, the contractor’s project manager, Thierry Portafaix, was interviewed by the Seattle Times and was quoted as saying “Naturally, we are disappointed that the jury did not fully decide in our favor.” Portafaix said, “However, we believe the court made many legal and procedural rulings during the case that were erroneous and significantly affected the jury’s decision.”
Comment: We spoke with the lawyers for the County and attempted to speak to the contractors’ lawyers to get their views as well. The contractor’s attorneys provided their comment by email. The County was represented by the law firm Stoel Rives (David Goodnight and Karl Oles, lawyers). VPFK was represented by Oles Morrison Rinker Baker, PLLC (Tom Krider and Peter Ralston, lawyers). We understand that the trial court made certain legal rulings with regard to the implied warranty of the adequacy and sufficiency of the contract documents and their interpretation of differing site conditions that tied the contractors’ lawyer’s hands during litigation and affected what evidence the contractor was allowed to present at trial. Those legal rulings likely will be the subject of appeals over the next few years.
Construction jury trials are rare today, and indications are that both sides agree that the jury did a good job in comprehending and dealing with the complex construction issues. Looming on the horizon is the County’s motion for attorneys’ and experts’ fees which is rumored to be in excess of $10 million! Since the County is the prevailing party in this litigation it is likely that it will also prevail on its attorneys’ and experts’ fees request.
Our readers likely noticed, there were a lot of “Oles” mentioned in this blog. One of the County’s lawyers, Karl Oles (with the firm of Stoel Rives) is the son of Stuart Oles. Stuart Oles is a named and now retired partner of Oles Morrison Rinker Baker PLLC the firm that represented the contractor VPFK. Douglas Oles, also a son of Stuart Oles, is the older brother of Karl and a partner at Oles Morrison Rinker Baker PLLC. Douglas was not involved in the lawsuit but the outcome of this case probably made for some interesting table talk at the Oles’ family holiday dinner!