Babcock Scott Babcock Newsletter
March, 2009
Hard Hat Case Note
Encon Utah, LLC v. Fluor Ames Kraemer, LLC, Fireman's Fund Ins. Co., and St. Paul Fire and Marine Ins. Co., 2009 UT 7.
Robert F. Babcock and Justin E. Scott of the law firm of Babcock Scott and Babcock served as co-counsel for Plaintiff, Encon Utah, LLC , the prevailing party.
The Utah Department of Transportation ("UDOT") contracted with Fluor Ames Kraemer, LLC ("FAK") to construct the Legacy Parkway ("the project"). FAK subcontracted with Encon Utah, LLC ("Encon") to manufacture and install bridge girders for the project. The total amount Encon was to be paid under the subcontract was $6,842,342.
During the course of the project, UDOT partially terminated the project due to an injunction obtained by an environmental organization. As a result, FAK terminated Encon's subcontract. A dispute arose between the parties as to the amounts Encon was owed under the termination provision of the subcontract and Encon brought suit against FAK and the other defendants.
After a four day bench trial, the trial court entered judgment in favor of Encon and awarded Encon $1,260,778 in termination damages, $337,128.30 in prejudgment interest and $101,657.20 in attorney's fees.
FAK and the other defendants appealed the trial court's decision, claiming that the trial court's award of termination damages was excessive, that Encon was not entitled to pre-judgment interest on the judgment and that Encon was not entitled to an award of attorney's fees.
On appeal, the defendants claimed that, in determining Encon's termination damages, the trial court should have applied the termination provision of the prime contract between UDOT and FAK instead of the subcontract termination provision between ENCON and FAK, which would have reduced Encon's termination damages significantly.
The defendants argued that, because the prime contract was incorporated into the subcontract, the prime contract's termination provision controlled. The Utah Supreme Court disagreed and held that the subcontract termination provisions were controlling. The Utah Supreme Court stated that the subcontract between FAK and Encon contained a provision which specifically provided that the prime contract governed Encon only where the provisions of the prime contract related to Encon's scope of work of manufacturing, delivering, and installing bridge girders.
The defendants also claimed that Encon's damages should have been capped at approximately $200,000. The Utah Supreme Court disagreed and found that the pro rata cap referred to in the termination provision of the subcontract only applied to termination costs relating to overhead and profit on costs incurred prior to termination and not to actual costs of work performed by Encon up to the date of termination.
The defendants also claimed that the trial court erred in awarding prejudgment interest to Encon. The Utah Supreme Court found that Encon's damages, while disputed as to the amount, were subject to definitive mathematical calculation. The Utah Supreme Court held that damages are not static and can be modified prior to judgment based on evidence presented without losing the right to prejudgment interest. As a part of its decision the Court stated that were it to hold that damage figures could never change, it would foreclose the possibility of awarding prejudgment interest in nearly every case.
Last, the defendants claimed that the trial court erred in awarding Encon attorney's fees. The trial court awarded Encon attorney's fees as the prevailing party on its bond claim as provided for in Section 63G-6-505(5) of the Utah Code. The trial court concluded that Encon's bond claim was timely under the statute because Encon's action was brought within one year after the last work performed by Encon. The defendants claimed that the payment bond statute required Encon to assert its bond claim within one year of the last work for which Encon had not been paid.
The Utah Supreme Court agreed with the trial court and Encon, finding that the one year period to assert bond claims is not dependent on the date of the claimant's last unpaid work; rather, it is dependent on the date of last work performed on the project by the claimant.
In conclusion, the Utah Supreme Court unanimously affirmed the findings of the trial court, finding that Encon was entitled to $1,260,778 in termination damages, $337,128.30 in prejudgment interest and $101,657.20 in attorney's fees, for a total judgment of $1,699,563.50.
The Construction Attorney's Toolbox-Building Solutions Through Mediation
By Kent B. Scott
Introduction
Today's current economic climate challenges owners and contractors to complete projects in less time for less money. These pressures have created more demanding time schedules and monetary budgets that, in turn, have created an increased number of disputes. Another developing trend is the increased costs in time, money, efficiencies and lost opportunities taken up by these disputes. The legal fees and costs incurred in resolving disputes become a major component of the dispute. The dollars that should go into project profits are now going into the resolution of project disputes.
The creation of a construction project is both a science and an art requiring the parties to define, design, build, pay and negotiate with each other to produce the desired result. The expectations of the parties involved with a project do not always result in a meeting of the minds. Differences in what was wanted, the completion date and the price paid can give rise to conflict in many forms. Most conflicts are readily resolved, but some continue to fester and grow. Some disputes find their way into legal counsel's office where the client seeks assistance in solving the problem.
This article will discuss the basic concepts of mediation as one of the tools that is used by clients and their attorneys to resolve construction project claims.
Mediation Defined
Mediation is a procedure where two or more parties attempt to resolve their dispute with a neutral party-the mediator. The mediator remains neutral throughout the meeting. The process is confidential. No resolution can be reached without the consent of the parties. If an agreement is reached, the agreement will be binding and can be enforced by the courts.
Anatomy of a Successful Mediation
The success of a mediation is controlled mainly by the parties. Some of the critical components of a successful mediation include:
- The background and capabilities of the mediator.
- The attendance, commitment of informed people with authority to settle.
- The needs and interests of the parties.
- Whether a trial or arbitration has been scheduled.
- Commitment of the parties and their attorneys to participate.
The following is a brief outline of the events involved in a mediation:
- The parties sign a confidentiality statement.
- The attorneys prepare a short and confidential written statement for the mediator.
- The parties summarize their positions in a joint session.
- The parties go into separate confidential meetings.
- The mediator shuttles between the parties in an effort to find common ground.
- If a settlement is reached, a written agreement is created.
- If a settlement is not achieved another session may be scheduled or the mediator may offer some suggestions to consider that may assist the parties in future negotiations.
When and Where to Mediate
There is no set formula to ensure that a mediation will succeed. Mediation can be effective at any stage of the dispute: pre-litigation, during litigation, on appeal, etc. Most mediations occur after a claim has been filed and some exchange of information has taken place. The decision as to whether or when to mediate will vary with each case.
Who Should Come to the Mediation
The following is a brief summary of those who would be expected to attend the mediation:
- Legal counsel. Yes, if the party is represented.
- Client. The person with authority to settle and others with knowledge of the facts.
- Experts. Use experts carefully. Experts often complicate the settlement process. However, they may be helpful to describe and simplify technical information.
- Documents. Less is better. Summaries, graphs and charts are useful.
- Support Personnel. Associates, secretaries or assistants are discouraged. If there is a need, make advanced arrangements so all parties approve and understand their respective roles.
Making the First Move
There is no advantage for one party or the other to move the process forward. The mediator will take the time and make the effort to understand the position and interests of each party. The mediator will know when to start the process of making offers.
How Long Will the Mediation Last?
It is common to schedule mediations for either a half or one full day. More time should be scheduled for mediations that require extensive travel, multiple parties or involve complex factual or legal issues. It is best to build in a margin of "float" time for the mediation session.
Multiple day mediations have built-in challenges. The parties recess after the first day and go home to re-think their case in a light that supports their original position. Consequently, the parties begin the next day needing to "warm up" and get back into the solution/settlement mode.
Conclusion
There is no authoritative study on the success rate of mediation. However, the American Arbitration Association has reported that 85% of the mediations conducted under their administration have resulted in a settled resolution.
Mediation provides an opportunity for people to input how the process is designed and conducted. The parties are given an opportunity to confidentially express their interests and values without compromising their positions in front of the other parties. It provides the parties a sense of involvement and control over the dispute resolution process and the terms of a settlement. In fact, the mediation may be the last time where clients and their attorneys will remain in control of the resolution process.
Happy Mediating to All!
News of the Firm
- Adam T. Mow has joined the S.J. Quinney College of Law at the University of Utah as an Adjunct Professor. Adam will continue his work with our firm during his tenure.
- Robert F. Babcock has been awarded the Silver Beaver Award by the Great Salt Lake Council in recognition of his lifetime contribution to scouting. The Silver Beaver Award is one of the most prestigious award given out by the Boy Scouts of America.
- Kent B. Scott and Adam T. Mow will be among the featured speakers at the program entitled "Understanding the New Generation of AIA Standard Form Documents." This program is scheduled for one day at the Salt Lake Hilton Hotel on April 16, 2009.
- Brian J. Babcock is the current Chair of the Associated General Contractors Association's Legislative Committee. Brian continues to work with the State Senators and Representatives on all matters affecting the construction industry in the State of Utah.
- Brain J. Babcock will be giving a presentation on Construction Law Update at the Utah Bar Mid-Year Meeting in St. George in March. Brian also spoke at the joint meeting of ASCE and APWA in St. George on issues pertaining mechanics lien and payment bond claims.
- Jason Robinson, Justin Scott, Cody Wilson and others in the firm will continue to give the DOPL Continuing Education Training which is sponsored by and held at the Salt Lake offices of the Associated General Contractors. Topics covered include mechanics lien and payment bond claims, hot button contract issues, insurance issues and record keeping practices. Future presentations are scheduled for March 19, April 2, May 7, June 11 and June 25.
- Scott DeGraffenried, licensed to practice law in Arizona has recently joined the firm and taken the Utah State Bar.
