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Two recent cases from opposite ends of the country underscore the pitfalls of litigating to the bitter end. There is an old adage that one of the main benefits of settlement is that the parties get what they bargained for, but nobody really knows what they are going to get at a trial. These two cases illustrate the wisdom of that adage. 

Lakehill Investments LLC v. Pushforth Construction Company, Docket No.: 79116-8-1, Court of Appeals, Washington (2020) concerned a rather typical construction dispute between an owner and a construction contractor. The owner filed suit for breach of contract in October 2015 alleging construction defects and delays. The contractor defended, arguing that the defects were the result of non-buildable plans and the delays were largely caused by the owner. The contractor counterclaimed alleging that the owner had failed to pay it in full. 

What was not typical, however, was the scope of the dispute. Before trial, the parties produced more than 1,000,000 documents. They took 59 depositions and participated in six days of mediation. The trial lasted two months and the jury heard from two dozen witnesses, one of whom testified for six and a half days. Ultimately, the court awarded the contractor $9,624,695.80, of which more than half ($5 million) was attorneys’ fees. The owner appealed and the contractor cross-appealed. The central points of the appeal were three jury instructions that the owner argued were erroneous. The appellate court found that one of those instructions was erroneous and prejudicial. The erroneous and prejudicial claim was limited to the owner’s defective work claim. On the basis of that error, the appellate court reversed and remanded for a new trial. 

The damages originally sought by the parties are not set forth in opinion, but the amount of discovery taken and the length of trial alone indicates an expensive legal undertaking, not to mention the $5 million the contractor paid in legal fees. 

Site Enterprises v. NRG Rema, LLC Docket No. A-1852-18T4 (App Div. 2020) is a New Jersey Appellate Court case concerning enforcement of a construction lien claim involving the demolition of the Werner Generating Station. The general contractor hired the plaintiff to perform demolition work under a lump sum contract. No schedule of values was provided. 

The plaintiff commenced work, but the project was subsequently suspended and then terminated. The plaintiff was not paid and filed a construction lien claim asserting that it had completed 15% of its work. The owner and general contractor refused to pay and the plaintiff filed an enforcement action. 

The defendants argued that in light of the lump sum nature of the contract and no agreed upon schedule of values, the plaintiff’s figure of 15% completion was speculative and therefore overstated. Defendants produced an expert to substantiate their position. From an owner’s perspective, the position does not seem unreasonable. 

The plaintiff’s expert had worked exclusively for demolition companies as an estimator/project manager for 25 years. He testified that his opinion that the plaintiff had completed 15% of its contract was grounded in his experience as an estimator and his familiarity with the jobsite. He explained at trial his methodology. 

The plaintiff also produced the general contractor’s own project manager whose daily reports estimated that plaintiff had completed 16% of its work. The project manager had ceased employment with the general contractor after the project stopped. Although the defendants attacked the daily reports as inaccurate, at trial, the court found that the project manager credibly testified as to how he arrived at the percentage. 

The trial court found the lien claim valid and enforced it. Moreover, it assessed the defendants $80,188.26 in attorney fees, consisting of the legal fees that plaintiff had incurred from the date it notified the defendants that it had located the project manager and that he would appear at trial to authenticate his daily reports. The basis of the sanction was the court’s determination that the defendants should have known that their defenses had no basis under the statute once they knew that their own employee was going to appear for the plaintiff and authenticate his daily reports. 

Both of these cases involved needless expenditures of money on experts and attorneys that could have been avoided with the application of a little common sense. The defendants in the Site Enterprises matter should have folded their tents and negotiated a payoff once they learned that their former employee was going to substantiate the plaintiff’s claims. Both of the parties in the Lakehills matter spent large amounts on legal fees for a complaint that now will have to be retried unless the parties settle. 

The opinion in Lakehills makes it clear that the plaintiff was a contentious litigant. The defendants in Site Enterprises clearly held onto their position long past its viability. Both chose not to compromise. Both are paying for that choice now. Sometimes a party has no choice but to continue litigating rather than settling; but the danger, as illustrated by these two cases, is that unanticipated, expensive results can occur.

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