Construction Law Insights

W.C. English, Inc. v. Rummel, Klepper & Kahl, LLP, 2021 U.S. Dist. LEXIS 197281, 2021 WL 4782274 (W.D. Va. Oct. 13, 2021)

In 2009, the Virginia Department of Transportation (“VDOT”) awarded W.C. English, Inc. (“English”) a contract to build a bridge over Interstate 81 (the “Prime Contract”). English retained Rummel, Klepper & Kahn, LLP (“RK&K”) to provide quality assurance services. The Prime Contract required an 8.5-inch concrete deck reinforced by two separate mats of crisscrossed rebars, with a 1.5-inch concrete cover between the mats and a 2.75-inch cover over the top. To create the cover, English initially installed 2.5-inch slab runners between the two mats. Along the way, a decision was made to insert 1.75-inch slab runners, which lifted the top cover to 3.75-inches instead of 2.75-inches. VDOT refused to accept the bridge. English had to demolish and rebuild the bridge at a cost of $2.8 million. English sued RK&K for damages or indemnification. A four-day trial was held. English offered testimony from its project coordinator that RK&K’s quality assurance manager instructed English to switch the slab runner from 2.5-inch to 1.75 inch, threatened to stop work and withhold payment to English if the substitution was not made, and told English employees that the shorter slab runners met the necessary specifications. English also offered evidence that RK&K conducted dry-run measurements that showed that the bridge was out of specification, but RK&K took no action and certified that the “spacing, location, and edge clearances of all reinforcing mats conform.” English’s expert opined that RK&K failed to meet its standard of care and was primarily responsible. RK&K denied instructing English to use the shorter slab runners, claimed it attempted to convince English that the concrete pour should be postponed because the dry run numbers were out of specification, claimed that English was aware the bridge was outside of specification before the concrete pour, and its expert opined that RK&K met its standard of care. After hearing evidence, the jury returned a verdict of 70% of the damages presented by English. RK&K then sought a directed verdict or a new trial.

The Court denied RK&K’s motion because the jury had ample evidence from which to make a reasonable determination of fault and the Court had no legal basis to throw out the verdict. A court may only grant a renewed motion for judgment as a matter of law if it finds a reasonable jury would not have had a legally sufficient basis to find for the party on that issue and the extraordinary remedy is only appropriate when the verdict is against the clear weight of the evidence, was based on false evidence, or would result in a miscarriage of justice. As a matter of law, the Court could not say that the evidence was insufficient to enable the jury to rationally allocate 70% of fault to RK&K. As to RK&K’s challenge to English’s damages calculation including lost office overhead costs, Virginia allows a plaintiff in a contract dispute to recover general administrative expenses that it takes to run a business that would have been absorbed by revenue producing work but for delays caused by the defendant’s breach. English’s schedule analytics expert testified there was 164 days of delay and English presented evidence of how it was using resources during this time, including how it was prudent for English to negotiate with VDOT to try to save the bridge instead of removing and rebuilding the bridge. English also presented evidence of the increase in its general administrative costs due to the delay. The Court rejected RK&K’s claim that it was entitled to a reduction in its damages award based on English’s settlement with another contractor because the jury’s award reflects RK&K’s share of responsibility alone, so Virginia Code § 8.01-35.1(A)(1) is inapplicable because it applies to when two or more persons are liable for the same injury. As to the jury’s award of $839,000 in prejudgment interest for seven years of interest, the Court held that Virginia law delegates to the factfinder complete discretion in awarding prejudgment interest.

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Concord Crossroads, LLC v. Human Capital Res. & Concepts, Inc., 2021 U.S. Dist. LEXIS 222063, 2021 WL 5323693 (E.D. Va. Nov. 16, 2021)

On March 23, 2018, Human Capital Resources and Concepts, Inc. (“HCRC”), Concord Crossroads, LLC (“Concord”), and M. Holland Group, LLC (“MHG”) entered into a teaming agreement, whereby the parties agreed that if HCRC was named the prime contractor in a contract with the United States Department of Defense (“DoD”), then HCRC would offer subcontracts to Concord and MHG. The DoD awarded HCRC the contract (the “Contract”) and HCRC was named the prime contractor. While negotiating subcontract terms, Concord provided HCRC with personnel to help HCRC perform the Contract with the understanding that Concord would be compensated when the parties reached an agreement on the subcontracts. However, negotiations broke down and Concord unsuccessfully sought compensation for 2 months of work performed by Concord’s personnel. Concord sued HCRC for unjust enrichment and fraud in the inducement.

The Court denied Concord’s Motion for Summary Judgment and HCRC’s Motion for Partial Summary Judgment because there were a substantial number of disputed material facts. For unjust enrichment, a plaintiff must establish that: (1) plaintiff conferred a benefit on the defendant; (2) defendant knew of the benefit and should reasonably have expected to pay plaintiff; and (3) defendant accepted or retained the benefit without paying for its value. The Court found that there was a disputed material fact as to the value of the benefit Concord conferred on HCRC. As to fraud in the inducement, HCRC argued there was no promise to induce performance. In Virginia, fraud must relate to a present or pre-existing fact and cannot ordinarily be predicated on unfulfilled promises or statements as to future events. A promisor may commit fraud if the promisor has no intent to perform at the time the promise is made. HCRC’s president promised to compensate Concord out of her own pocket. HCRC, itself, however, argued that Concord’s personnel simply volunteered to perform Contract work without a promise or expectation of compensation. Thus, the Court found there were disputed material facts.

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BAE Sys. Ordnance Sys. v. Fluor Fed. Sols., LLC, 2021 U.S. Dist. LEXIS 247425, 2021 WL 6134685 (W.D. Va. Dec. 29, 2021)

BAE Sys. Ordnance Sys. v. Fluor Fed. Sols., LLC, 2022 U.S. Dist. LEXIS 58432, 2022 WL 969773 (W.D. Va. Mar. 30, 2022)

The US Army Joint Munitions Command (“Army”) contracted with BAE Systems Ordnance Systems, Inc. (“BAE”) to operate and maintain the Radford Army Ammunition Plant (“RFAAP”) under a basic ordering agreement (“BOA”). Under BOA Task Order 002, BAE contracted to replace the legacy NC facility at the RFAAP with a newer one (the “NC Project”). Initially, BAE subcontracted the NC Project to Lauren Engineers & Constructors (“Lauren”), but later terminated Lauren. Despite terminating Lauren, BAE’s timeline to complete the NC Project remained unchanged and BAE was required to use Lauren’s design for the NC Project. After terminating Lauren, BAE solicited bids from other subcontractors using a Request for Proposals (“RFP”) that included a Statement of Work (“SOW”) describing the requirements of the NC Project’s design and construction. BAE gave interested bidders access to the Lauren design and other related documents and required the selected subcontractor to perform in accordance with the 85% complete Lauren design, that the Lauren design could be relied on for accuracy, and the selected subcontractor only had to complete the unfinished parts. Fluor Federal Solutions, LLC (“Fluor”) submitted a request for information (“RFI”) asking BAE about the standards referenced in the SOW. BAE allegedly responded by emphasizing the importance of the Lauren design. During the bid and review process, Fluor was unable to determine the completeness of the Lauren design but relied on BAE’s assertion that the design was 85% complete.

BAE rejected Fluor’s initial bid as being too high given what BAE had already paid Lauren for its design and told Fluor to lower its bid because the design was close to complete. Fluor lowered its price and submitted another bid proposal that outlined a firm-fixed price design/build that forecasted 32 months to complete the NC Project. BAE awarded Fluor an Undefinitized Contract Action (“UCA”) in an amount of $9 million dollars, later increased to $32 million. BAE selected the equipment systems and retained responsibility for the process design, while Fluor was responsible for the design and construction of systems to support BAE’s plans. Under the UCA, Fluor began procuring materials and physical construction before a formal subcontract was agreed upon. On December 17, 2015, BAE and Fluor agreed to a firm fixed price design and build subcontract (the “Subcontract”) in which Fluor agreed to design, construct, and partially commission the NC Project for $245,690,422.00, which included money spent already in the UCA. The Subcontract included an unforeseen contingency provision, which set aside an additional $14 million, “other than changes to the contract compensable under the Changes clause.”

Fluor did not meet its forecasted timeline. Over the subsequent 5 years, the schedule continued to be pushed out by Fluor due to various causes. At several points, the Army issued BAE show cause orders and BAE forwarded the same to Fluor. When this litigation began, Fluor was scheduled to complete its work by December 2020, 2.5 years beyond the originally agreed upon completion date.

On September 30, 2020, BAE sued Fluor for breach of contract. On May 24, 2021, Fluor counterclaimed for breach of contract, quantum meruit, and unjust enrichment. Fluor’s counterclaim alleged that Fluor was not at fault for failing to meet the agreed upon schedule and Fluor had $183 million in outstanding change proposals when the litigation was filed.

Fluor moved to dismiss BAE’s breach of contract claim related to Descope Work and breach of contract claim for recovery based on Fluor’s alleged delay. The Court denied Fluor’s motion to dismiss BAE’s breach of contract claim because BAE alleged plausible claims. The Court denied Fluor’s motion to dismiss BAE’s $9 million in concessions to the Army because BAE plausibly alleged this was a direct and not a consequential damage that BAE suffered because of Fluor’s breach of the Subcontract. The Court granted BAE’s motion to strike Fluor’s damages that exceeded the $30 million cap in the Subcontract. In Virginia, parties may limit their risk of loss through contract as long as it does not contravene public policy.

The Court also held that Virginia Code § 11-4.1:1 was inapplicable. Virginia Code § 11-4.1:1 provides that “A subcontractor … may not waive or diminish … his rights to assert claims for demonstrated additional costs in a contract in advance of furnishing any labor, services, or materials. A provision that waives or diminishes a subcontractor’s … right to assert claims for demonstrated additional costs in a contract executed prior to providing any labor, services, or materials is null and void.” Because Fluor performed work under the UCA before the Subcontract was executed, the Court held that Virginia Code § 11-4.1:1 was inapplicable. The Court’s interpretation of Virginia Code § 11-4.1:1 should be given further consideration by readers.

The Court denied BAE’s motion to dismiss Fluor’s breach of contract counterclaim related to the implied warranty of plans, designs, and specifications under the Spearin doctrine. The Court found the Subcontract to be ambiguous regarding design responsibility, allowing for a plausible implied warranty of design counterclaim.

The Court denied BAE’s motion to dismiss Fluor’s breach of contract counterclaim related to equitable adjustment of the Subcontract price. Neither the Subcontract nor the Changes provision of the FAR provide for equitable adjustment of change proposals made by Fluor that were not accepted by BAE. However, FAR 52-243-4, entitled “Changes,” incorporated by reference into the Subcontract, provides for equitable adjustment for changes required by the Contracting Officer. If BAE falls into this category for changes Fluor alleged BAE required it to make, Fluor’s counterclaim would state a plausible claim for equitable adjustment for costs incurred by Fluor to make changes required by BAE.

The Court denied BAE’s motion to dismiss Fluor’s breach of contract counterclaim related to BAE’s alleged breach of the duty of good faith and fair dealing. Fluor adequately plead that BAE breached the duty of good faith and fair dealing by misrepresenting the status of the Lauren design, interfering with Fluor’s performance of the Subcontract, and not compensating Fluor for work unilaterally implemented by BAE.

The Court dismissed Fluor’s unjust enrichment and quantum meruit claims. Because unjust enrichment claims are only appropriate in the absence of an enforceable contract, and neither party here challenged the validity or enforceability of the Subcontract, Fluor’s unjust enrichment claim had to be dismissed. The Court also found that the compensation sought by Fluor was for work covered by the Subcontract.

PLDR Law Scott Kowalski 1 PLDR Law Mark Burgin 1

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White Oak Power Constructors v. Mitsubishi Hitachi Power Sys. Ams., Inc., 2020 U.S. Dist. LEXIS 109637, 2020 WL 3414682 (E.D. Va. June 22, 2020)

The Wildcat Point Generation Facility, a nominal 1,000 megawatt combined-cycle natural gas fired power plant in rural Maryland, includes two gas turbines, associated generators, and related components supplied by Mitsubishi Hitachi Power Systems Americas, Inc. (“Mitsubishi”). The Equipment Purchase Agreement (“EPA”) between Mitsubishi and the power plant owner was subsequently assigned to the engineer-procure-construct contractor, White Oak Power Constructors (“White Oak”), a joint venture between PCL Industrial Construction Company and engineering firm Sargent & Lundy LLC. The EPA included several liquidated damages provisions under which Mitsubishi would pay for delays in document deliveries, equipment deliveries, and substantial

Krevskop v. Town Council (In re July 17, 2017 Decision of the Bd. of Zoning Appeals), 2020 Va. Cir. LEXIS 101 (Faifax Cnty. Cir. July 24, 2020)

Julia Kreyskop and Brian Joseph Buyniski (“Petitioners”) live at a home in Vienna, Virginia that was located at the corner of Scott Circle Southwest and Cottage Street. Vienna Town Code § 18-33.E requires the following setbacks: (i) 12’ on side yards bordering other buildings or dwellings; (ii) 25’ on side yards bordering a street; (iii) 35’ rear yards; and (iv) 25’ front yards. Petitioner have a rear deck. The left portion of the deck encroaches into the rear yard setback by 7.4 feet, but was permissible because taxes were paid on it in excess of 15 years. The Petitioners requested a variance so they could replace the right-hand portion of the deck with an enclosed 12.3’x14’ screened porch, which would encroach 10.8’ into the rear yard setback. In Petitioners’ application for a variance, they noted that the house was built diagonally on the lot in 1959, the lot is wider than it is deep, the corner of the house closest to the rear property line was 35.7’ away from the property line, and the other sides of the house would either violate the setback requirements or be challenging due to existing gas, cable, power lines, and other easements. On July 17, 2019, a public

Mendes v. Beahm, 2020 U.S. Dist. LEXIS 111986, 2020 WL 3473656 (W.D. Va. Jun. 25, 2020)

Plaintiff Nelson Mendes purchased waterfront property in Warren County, Virginia, in May 2017 with plans to open a tree nursery and eventually build a residence. Mendes’s contractors began to clear trees and other obstructions, and Mendes built a greenhouse himself. A month later, the Warren County Building Inspection Department (“Building Department”) issued a stop work order and instructed Mendes to obtain a land disturbance permit. When Mendes sought clarification, the Building Department informed him that a neighbor reported Mendes’s contractors removing vegetation and tossing it into the river, which prompted a Virginia DEQ site inspection. The neighbor later recanted her story and admitted her false report was a result of her being upset by

Sanders v. Wayne, 2020 Va. Cir. LEXIS 25 (Washington Cnty. Cir. Ct. Feb. 20, 2020)

According to Mark Sanders, Gregory Roberts, and Larissa Roberts (collectively, the “Plaintiffs”), Plaintiffs’ vehicle was slowing to avoid striking Joshua Mathis (“Mathis”) after Mathis, in operating the vehicle in front of Plaintiffs’ vehicle while in the course of his employment with Lakeside Ready Mix, LLC (“Lakeside”), slowed to turn left into a work zone without signaling. At that time, Guillermo Sanchez-Rivera’s (“Rivera”) vehicle and Alan Smith’s (“Smith”) vehicle collided with the Plaintiffs’ vehicle and each other. The Plaintiffs’ alleged that Mathis, Rivera, and Smith negligently and recklessly operated their vehicles by following too closely, failing to keep a proper lookout, failing to signal when turning, and stopping abruptly. With respect to the work zone, the Plaintiffs’ alleged that Orders Construction Company, Inc. (“Orders”) was under contract with the Virginia Department of Transportation (“VDOT”) as the general contractor and that Orders hired

Robinson v. McMurtrie (In re Peak 3 Constr., LLC), 2020 Bankr. LEXIS 833, 2020 WL 1696102 (Bankr. E.D. Va. Mar. 31, 2020)

In September 2015, Daniel McMurtrie (“McMurtrie”) and Peak 3 Construction, LLC (“Peak”) entered into a contract (the “Contract”) for Peak to renovate McMurtrie’s residence (the “Project”). Initial progress on the Project was delayed by incomplete demolition by a different contractor. Throughout Peak’s performance of the Project, the scope of the Project changed, with various changes and additions requested by McMurtrie, sometimes through Larry Cooper (“Cooper”), whom Peak perceived to be McMurtrie’s liaison, and sometimes through Mary Catlett (“Catlett”), the interior designer on the Project. These changes, in conjunction with the demolition delay, caused Peak to realize in mid-November that the Project could not be completed by Christmas. On February 9, 2016, Peak emailed McMurtrie outlining the job costs, both completed and remaining costs, based on the current scope of work. McMurtrie neither objected nor terminated the Contract. Peak continued work on the Project and, on February 15, 2016, sent McMurtrie a $106,432.45 invoice (the “First Invoice”).

In re Lansdowne Constr., LLC, 2020 Bankr. LEXIS 461, 2020 WL 930107 (Bankr. E.D. Va. Fed. 21, 2020)

In June 2016, 3 Boys, LLC (“3 Boys”) and Lansdowne Construction, LLC (“Lansdowne”) entered into a contract (the “Contract”) for Lansdowne to serve as a general contractor on the Rosner Stafford Toyota project in Stafford, Virginia. The Contract required Lansdowne to warrant with the submittal of an Application for Payment (“Pay App”) that all Work for which Certificates for Payment were previously issued and payments received from the Owner was free and clear of liens and claims in favor of subcontractors or material suppliers by reasons of having provided labor or materials relating to the Work. The Contract also gave the Architect the right to withhold payment if a lien was filed or likely would be filed and gave the Owner the right to issue joint checks to Lansdowne and any subcontractor or material supplier whom Lansdowne failed to pay.

Watts v. 350 Church St. LLC, 103 Va. Cir. 386 (Fairfax Cnty. Cir. Ct. Nov. 19, 2019)

Following delays in the construction of their new home, homeowners terminated their building contract and demanded that the builder return their deposit. When the builder refused, the homeowners filed suit under two theories of recovery: (i) violations of the Virginia Consumer Protection Act (“VCPA”); and (ii) unjust enrichment. The defendants counterclaimed for breach of contract. The plaintiffs moved to strike the defendants’ attorneys’ fees. At the end of a bench trial, the Court granted the plaintiffs’ motion to strike defendants’ attorneys’ fees because the defendants produced no evidence during the trial of attorneys’ fees.

Myrick v. Rare Hospitality Int'l, Inc., 2020 U.S. Dist. LEXIS 6227, 2020 WL 201050 (E.D. Va. Jan. 13, 2020)

Rachel Myrick (“Myrick”) was bit by a copperhead snake while dining at a restaurant and filed a complaint for common-law negligence against Southpoint II, LLC (“Southpoint”), W.J. Vakos & Company, and W.J. Vakos Management Company (collectively, the “Developers”). Myrick alleged that Southpoint acquired, designed, and developed a 264-acre property in Spotsylvania County (the “Property”) in 2001 and the Developers built a man-made storm water retention pond that bordered the restaurant. Myrick alleged that copperheads frequently hibernate in dens made of rocks and that the retention pond contained decorative boulders and plantings. Myrick alleged that the Developers knew or should have known that the retention pond and its surrounding

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