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County says $700,000 lawsuit ‘not real’

Construction company claims it’s owed for breach of contract
By: Jenifer Gee Journal Staff Writer
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A lawsuit claming the county owes a construction company at least $700,000 is “just not real,” according to an attorney for Placer County. Valerie Flood, supervising deputy county counsel, told the Journal that she “can’t imagine a scenario” where a civil lawsuit filed over an $8.9 million county public works facility would succeed in court and put the cash-strapped county over budget. However, the company that filed the lawsuit, Nevada Maxim Construction, is standing by its claim that the county owes it money for a variety of reasons including breach of contract, breach of good faith dealings and intentional interference with contractual relations. In the 21-page lawsuit first filed in June 2008, the company claims that the county “unreasonably failed to pay for work performed, services and materials provided and for various delays and project costs, all of which are in breach of the project contract.” The case is scheduled for a hearing in Placer County court Dec. 15. Recently a separate company has filed a claim against the county over the same project that alleges the county owes it additional money. The project The lawsuit is over construction of the Department of Public Works Cabin Creek Operation and Maintenance Facility in the Tahoe area. The multi-million-dollar project calls for the construction of a 12,832-square-foot maintenance building and a 3,307-square-foot sand storage building. The facility will house the county’s Tahoe-area road maintenance and operations as well as Tahoe Area Regional Transit operations. Prior to construction, the Department of Public Works was located on Burton Creek Drive off Highway 28 in the Tahoe-Truckee area. Once the public works department has been moved to Cabin Creek, the county plans to build a Burton Creek Justice Center on the former public works land. The project is close to completion but most likely will not open for use until the spring, according to James Durfee, director of Placer County Facility Services. Maxim claims a breach in contract While Maxim Construction owner Bob Schmitt declined to comment while the lawsuit was pending, he said he does plan to move forward with it. County officials claimed in court documents that Maxim Construction “did not perform adequate work on the project and understaffed the project.” Those inadequacies led to project delays and added expenses, the county claims. However, Maxim Construction argued in its lawsuit that the county caused delays and did not pay the company for costs incurred because of those delays. At the start of the project in late August 2006, the construction company discovered there was no permit and one wasn’t obtained until the end of September 2006. This caused an initial delay, the lawsuit claimed. Also, the Nevada-based construction company claims that the county made “unreasonable” demands for the company to perform outside its scope of work. The company said the demands forced delays in the project. The lawsuit reveals that the county suspended work on the project for 60 days. During this time construction company officials said they met with the county and “expressed their intention to terminate the contract and discontinue any further work on the project.” Maxim Construction said it wanted to end the contract because of the “county’s failure to make timely payments” to the company that included extra costs of equipment, labor and materials purchased as a “direct result” of delays. According to the lawsuit, the county “made promises and assurances” to the company that they would fully pay the claims. Flood said that claim is “inaccurate” and that kind of agreement wouldn’t have happened. Flood said that the company “threatened to walk off the job and they walked off the job.” She said the company was having financial difficulties and difficulties with subcontractors. “Sometimes entities or individuals, instead of taking responsibility for their own actions, try to find fault elsewhere,” Flood said. “That was the situation with Nevada Maxim.” The county had paid Maxim construction about $2.8 million of the money budgeted for the project at the time the partnership ended. The bond company took over and construction work continued. But last month, the bond company filed a claim – separate from Maxim’s lawsuit – against the county over the same project. Another claim is filed In October 2008, the agreement between Maxim Construction and the county ended. First National Insurance Company, the bond company, took over completion of the project and had a different construction company finish. However, on Oct. 23, First National Insurance Company filed a claim against the county alleging it owes First National $262,857.78 in payments for taking over the project and that figure includes $19,631.44 in late payments. Flood said the county will not be paying any late payments and said it is unlikely anything will come of the claim. She said the county is in the process of processing the final payment that it agreed upon with First National. Rob Unholz, Capital Improvements Manager with the county, said First National is expected to receive a payment of $937,489, which is lower than the $944,464 figure agreed on in the initial contract. Unholz said that in total, the construction portion of the project will cost $3,821,658, which is about $132,504 more than the original contract. Unholz said the extra costs are change orders to the project and typical of most construction projects. “The project is still well within budget,” Unholz said. Chris Goetscheus, a representative of the company, declined to comment on the case. Claims ‘unlikely and remote’ Durfee said he could not comment on whether the project will come in at, under or above budget until the pending litigation is complete. When asked what would happen if Maxim Construction was the victorious party, Flood said she didn’t think that would happen. “His claims are just so unlikely and remote,” Flood said. “When you understand the facts behind the claims and what went on, it’s just so unlikely to happen and so out of bounds of what’s realistic in this case.” Jenifer Gee can be reached at jeniferg@goldcountrymedia.com.