|City Council Meeting
City of DeBary
Subject: Proposed Settlement Agreement for C3 Construction Litigation
From: Dan Parrott, City Manager
Meeting/Hearing Date: April 2, 2014
( ) Ordinance
( ) Resolution
( ) Other
(X ) Supporting Documents/Contracts
On or about September 22, 2010, the City of DeBary (the “City”) filed suit against C3 Construction, LLC (“C3”) and American Contractors Indemnity Company (the “Surety”) to recover damages the City suffered relating to the defective construction of two capital drainage systems identified as the 58 Park Lane Project and 24 Seminole Drive Project (collectively the “Project”). In particular, the Project was defectively constructed through the selection of materials and/or workmanship that resulted in substantial cracks and leaking within the systems.
On or about December 4, 2014, the parties in this case held a court ordered all day mediation. As a result of the mediation, the parties reached a Mediated Settlement Agreement in which the City must utilize Miller Pipeline Corporation (“Miller Pipeline”) as its replacement contractor pursuant to the proposed Construction Contract for City of DeBary Park Lane and Seminole Drive Pipeline Remediation (the “Remediation Contract”). Moreover, the City will be paid $172,245.89, which is comprised of $146,382.25 payable to Miller Pipeline as its contract price to correct any and all alleged deficiencies in the Project, plus an additional $25,000.00 to cover the cost of the City’s administration and oversight of the remedial work, plus $863.64 for a performance and payment bond in accordance with
chapter 255, Florida Statutes. The mediated settlement agreement and Remediation Contract are both contingent upon City Council approval and will require separate motions.
The City filed a lawsuit against C3 and the Surety to seek relief for damages incurred as a result of the defective installation, selection, and/or workmanship associated with the drainage pipe systems installed on the Project. Substantial cracks developed in the pipelines installed in 2007, with such pipelines being intended to carry excess water from retention ponds to prevent them from overflowing. The problem was discovered soon after Tropical Storm Faye struck the City in August 2008, releasing approximately 20 to 25 inches of rain. The pipes were sold by HD Supply Waterworks, LLC (“HD Supply”) and were manufactured by James Hardie Building Products, Inc. (“Hardie Building”). The contracts for the Project warrant that “all work will be of good quality and free from faults or defects.” Investigations occurring in September 2008 revealed numerous cracks in the drainage systems, and the City made written demand upon C3 and the Surety to take corrective actions. Both C3 and
the Surety have sought to avoid any responsibility for remedial work, repairs, or replacement costs.
The City maintains that C3 and the Surety are liable for damages associated with replacing the storm water systems. The City’s complaint sets forth claims relating to breach of contract, breach of surety agreement, and breach of warranty. C3 and the Surety denied liability, asserting an “act of God” defense among others. C3 has filed third-party claims against HD and Hardie Building alleging products liability, indemnification, breach of contract, and contribution theories. Subsequently, HD filed a fourth-party claim against Hardie Building for indemnification and contribution.
In accordance with the settlement agreement, all parties have agreed that $146,382.25 be paid to the City for payment to the replacement contractor, Miller Pipeline, to correct any and all alleged deficiencies in the Project, plus an additional $25,000.00 to cover the cost of the City’s administration and oversight of the remedial work, plus $863.64 for a performance and payment bond in accordance with chapter 255, Florida Statutes. Such results in an aggregate settlement amount of $172,245.89. As a condition of the mediated settlement, the City must employ Miller Pipeline as its remedial contractor. Miller Pipeline will clean debris and install a cast-in-place pipeline within the existing pipeline. The Project was previously competitively let, and as it is a remediation project and falls under the $300,000.00
threshold set forth in section 255.20(1), Florida Statutes, the Remediation Contract does not have to be competitively re-let or follow a formal, competitive procurement process. The preceding monetary terms and conditions were reached in accordance with the mediated settlement agreement and pursuant to the Remediation Contract, which are both contingent upon City Council approval.
The pending case will be very expensive to litigate through trial and appeal considering the number of parties involved, the complexities of the issues, and the need for expert witnesses. The City expects a trial will last approximately three to four days. If this case proceeds to trial, we estimate that litigation expenses will likely exceed or be near the amount the City is attempting to collect from the Defendants, not including future appellate expenses. Litigation cost avoidance is a significant factor in the staff’s recommendation to accept the mediated settlement agreement.
The settlement funds will be held in escrow by the City Attorney’s office; therefore, if the settlement is accepted by the City Council, the money will be promptly paid to the City upon receipt and clearance of funds.
Motion to approve the Mediated Settlement Agreement and authorize its execution.
Motion to approve Remediation Contract with Miller Pipeline and authorize its execution.
City Council Action:
( ) Approved As Recommended
( ) Approved With Modification
( ) Disapproved
( ) Continued Date:
( ) Other