On November 9, 2015, Division One of the Court of Appeals affirmed a 2012 King County trial court judgment that joint-venture tunneling contractor Vinci Construction Grands Projets/Parsons RCI/Frontier-Kemper (VPFK) was liable to King County for $144 million in damages and attorney fees.
The case arose from the Brightwater project, a wastewater treatment plant north of Woodinville with a tunnel system that conveys wastewater to the plant and treated water to a marine outfall in Puget Sound. VPFK was awarded a $212 million contract to build two segments of the 13-mile tunnel system. Unfortunately, VPFK’s two tunnel-boring machines broke down several hundred feet beneath Lake Forest Park and Bothell. The machines required extensive repairs that threatened to delay the completion of the overall project.
VPFK repaired one machine and completed one tunnel segment, but King County did not accept the lengthy delay and additional cost proposed for the repair of the second machine. King County hired Jay Dee Coluccio to complete the remaining tunnel segment between Shoreline and Lake Forest Park. The Brightwater project began full operation in late 2012.
King County sued VPFK and its sureties for approximately $156 million, based on its costs arising from project delays and design modifications. VPFK counterclaimed for approximately $70 million, arguing that its delays were excused by differing site conditions and defective project design. King County acknowledged some of VPFK’s claims totaling about $4.7 million.
After a nearly three-month trial, the jury awarded $156 million in damages to King County, offset by $26 million to VPFK for its counterclaims. The court awarded King County its attorney/expert fees in the approximate amount of $14 million, for a net judgment of $144 million.
The trial and appeal involved a number of interesting issues, two of which are summarized here.
1. The contract documents identified different soil types that contractors could expect to encounter during excavation of the tunnels. They depicted which soil types had been found in boreholes, but did not purport to show soil types between the boreholes. VPFK complained that its work was delayed because the soils frequently changed from one type to another. The question was whether this situation constituted differing site conditions under the contract. The trial court (on summary judgment) said no. The appellate court agreed, summarizing earlier cases to derive the following definition of differing site conditions:
a. the contract documents indicated certain conditions
b. the contractor reasonably relied on those indications when making its bid
c. actual conditions materially differed from those which were indicated in the contract,
d. the materially different conditions were not foreseeable.
The court concluded that VPFK had not satisfied the first two factors because the contract documents did not indicate the frequency of soil changes and VPFK did not show that its bid was calculated in reliance on any particular number of soil changes. The appellate opinion could be a good starting point for research into Washington law relating to differing site conditions.
2. The contract between King County and VPFK included no fee clause, but the trial court awarded fees to King County against VPFK’s sureties. The basis for the award was Olympic Steamship, Inc. v. Centennial Insurance Co., 117 Wn.2d 37, 811 P.2d 673 (1991), as extended from insurance companies to sureties in Colorado Structures, Inc. v. Insurance Co. of the West, 161 Wn.2d 577, 167 P.3d 1125 (2007).
The sureties argued that King County should recover no more than the fees expended for litigation efforts specifically directed against the sureties. This argument was rejected because the sureties had adopted all of VPFK’s arguments and because the various claims and defenses in the case were so interconnected that no reasonable segregation of fees could be made. The appellate opinion could be a good starting point for research into Washington law relating to Olympic Steamship fee awards against sureties.
David Goodnight and Karl Oles of Stoel Rives represented King County. Pete Ralston and Tom Krider of Oles Morrison Rinker Baker represented VPFK and the sureties.