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Washington Court of Appeals Upholds $155 Million Judgment on Brightwater Contract

November 19, 2015

In a dispute spanning more than five years, Division One of the Washington State Court of Appeals recently issued a long awaited decision regarding King County’s first major expansion of its wastewater treatment system since the 1960s, the Brightwater Project.  In King County v. Vinci Construction Grands Projects, et al., the court affirmed the trial court’s rulings and upheld its $155 million judgment in favor of King County.

 

This case arose out of the $210 million contract awarded to a joint venture of three firms (the “Contractors”) for construction of the Brightwater Project’s conveyance system in 2006.  As required under Washington law, the Contractors obtained a $200 million performance and payment bond from several surety companies.  However, due to unforeseen difficulties encountered during construction, completion of the Brightwater Project’s conveyance system was significantly delayed.  As a result, the Contractors failed to meet several contractual deadlines, forcing King County to hire a different contractor to finish the remaining work under the contract.

 

In 2010, King County filed suit against the Contractors and surety companies for default under the contract.  At trial, the jury returned a $155 million verdict for King County and an award of $14 million in prevailing party attorney fees and costs under Olympic Steamship v. Centennial Insurance Co., 117 Wn.2d 37 (1991).

 

On appeal, the Court of Appeals reviewed the trial court’s rulings on four distinct issues: (1) whether the site conditions were materially different than those specified in the contract documents; (2) whether King County’s plans and specifications were defective; (3) whether King County’s recovery was limited to contractually-specified liquidated damages; and (4) whether expert testimony offered by the Contractors was properly excluded. The Contractors also challenged the trial court’s award of attorney fees and costs.

 

Differing Site Condition Claim

 

The Court of Appeals affirmed the trial court’s ruling on summary judgment that the Contractors had failed to satisfy the first two elements required to establish a differing site condition claim.  Specifically, the court held that the Contractors failed to demonstrate: (1) that the contract documents included projected conditions from which the actual conditions differed; and (2) that the Contractors reasonably relied on these contractual conditions when preparing its bid.

 

Defective Specification Claim

 

The Court of Appeals also affirmed the trial court’s ruling on summary judgment that the Contractors failed to demonstrate that King County’s plans and specifications, which called for use of a slurry tunnel boring machine (STBM), were defective.  In upholding the ruling, the court held that there was no evidence that a machine other than the STBM could effectively accomplish the tunneling work, and the Contractors failed to create a material question of fact that the STBM was defective.

 

Recovery of Liquidated Damages

 

In affirming denial of the Contractors’ summary judgment motion to limit King County’s recovery to contractually-specified liquidated damages, the court held that the contract specifically allowed King County to recover “all damages” as a result of the Contractors’ default, and therefore, that King County’s recovery was not limited to only liquidated damages.

 

Exclusion of Expert Witness Testimony

 

On appeal, the Contractors contended that the trial court erred by excluding opinion testimony from its expert regarding whether delay damages were concurrently caused by repairs to a different tunnel connected to the treatment plant.  The court held that although the trial court excluded this testimony, it did not preclude the Contractors from presenting its concurrent delay damages argument and therefore, the Contractors were not prejudiced by the exclusion.

 

Award of Attorney Fees

 

The Court of Appeals also affirmed the trial court’s award of attorney fees under Olympic Steamship and Colorado Structures, Inc. v. Insurance Co. of the West, 161 Wn.2d 577 (2007).   In Olympic Steamship, the Washington State Supreme Court held that “an insured who is compelled to assume the burden of legal action to obtain the benefit of its insurance contract is entitled to attorney fees.”  The Supreme Court extended this rule in Colorado Structures to apply to an action by an obligee to recover on a performance bond, such that a surety that wrongfully denies coverage is liable for attorney fees.

 

The Court of Appeals affirmed the award of attorney fees to King County, holding that the sureties did not acknowledge that the Contractors were in default, denied that King County was entitled to recover under the bond, and did not agree to pay under the bond.  In other words, the sureties “flatly denied coverage under the bond, forcing [King] County to compel it [by litigation] to honor its commitment to do so”, and under Colorado Structures, King County was entitled to recover its attorney fees.

 

 

 

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