Construction Litigation

Case Study

Larry Arnold of Cummins & White, LLP, obtained a defense verdict in favor of a general contractor and its performance bond surety when a subcontractor sued after it was fired from a school building project. At trial, Mr. Arnold presented substantial evidence refuting the claims, showing that work done by the subcontractor was inadequate and that many contested change orders were for corrective work required to comply with original plans.

The court ruled in favor of the general contractor and its performance bond surety. Importantly, attorneys’ fees and costs were awarded to the performance bond surety, which could be used to reimburse the general contractor for those expenses.

Background

A general contractor overseeing construction of a Southern California middle school hired a subcontractor to fabricate and install structural steel. During the course of the project, problems surfaced in connection the subcontractor’s work, including discrepancies between the subcontractor’s shop drawings and the school district plans and the subcontractor’s incorrect manufacturer of steel components. Refabrication was required, causing substantial delays and leading the school district to terminate the subcontractor.

The subcontractor had been paid approximately 75 percent of its contract price ($308,683); the general contractor had to pay a replacement subcontractor to complete the work, at a cost of $128,683.

Following its termination, the subcontractor sued the general contractor and its performance bond surety, claiming breach of contract for wrongful termination, as well as failure to pay change orders for extra work required to refabricate steel columns.

The subcontractor sought more than $500,000 in damages. The general contractor and its performance bond surety retained Larry Arnold of Cummins & White, LLP, to represent them in the suit.

Legal Strategy

At trial, Mr. Arnold presented substantial evidence and witness testimony refuting claims made by the subcontractor. Specifically, he presented evidence showing that it was the school district rather than the general contractor that terminated the subcontractor, and that the termination was justified because of the subcontractor’s failure to work in accordance with the school district’s plans and specifications.

The school district project manager provided compelling testimony that problems with the steel fabrication created a three-month delay in the project. In addition, Mr. Arnold argued that the change orders were for work that had not been approved by the school district or were for corrective work needed to comply with the school district plans and specifications.

Result/Implication

Following the bench trial, the judge found that the school district and general contractor had adequate grounds to terminate the subcontractor from the project based on mistaken fabrication of steel knife plates, and that change orders without the school district’s approval were unenforceable as per the contract terms. The court ruled that the performance bond surety would be allowed attorneys’ fees and costs, which could be used to reimburse the general contractor for those expenses.

According to Mr. Arnold, this case was a significant victory for the general contractor. “We are pleased with the results, which exonerated the company from any wrongdoing, but most importantly, because our client was able to recover attorneys’ fees and costs through its performance bond.”