Parkcrest Builders, LLC v. Hous. Auth. of New Orleans

• Decision Date: 08 June 2018
• Docket Number: c/w 16-14118 SECTION "J"(4),c/w 16-15849 SECTION "J"(4),CIVIL ACTION No. 15-1533 SECTION "J"(4)
• Citation: Parkcrest Builders, LLC v. Hous. Auth. of New Orleans, c/w 16-14118 SECTION "J"(4), c/w 16-15849 SECTION "J"(4), CIVIL ACTION No. 15-1533 SECTION "J"(4) (E.D. La. Jun 08, 2018)
• Parties: PARKCREST BUILDERS, LLC v. HOUSING AUTHORITY OF NEW ORLEANS
• Court: U.S. District Court — Eastern District of Louisiana

PARKCREST BUILDERS, LLC v. HOUSING AUTHORITY OF NEW ORLEANS

CIVIL ACTION No. 15-1533 SECTION "J"(4)

c/w 16-14118 SECTION "J"(4)

c/w 16-15849 SECTION "J"(4)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

June 8, 2018

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This litigation arises out of a dispute over the construction of the Florida Avenue: New Affordable Housing Units in New Orleans, Louisiana (the "Project"). On March 4, 2013, the Housing Authority of New Orleans ("HANO"), the Project owner, initially entered into a contract (the "Prime Contract") with Parkcrest Builders, LLC ("Parkcrest"), the original contractor, to construct the Project. The initial contract price was $11,288,000.00 and the initial completion date was to be July 27, 2014. The relationship between HANO and Parkcrest deteriorated during the course of the Project and on April 10, 2015, HANO terminated Parkcrest prior to completion. HANO then called upon Liberty Mutual Insurance Company ("Liberty") to perform its obligations as surety for Parkcrest. On June 9, 2015, Liberty entered into a Takeover Agreement with HANO to complete the Project and retained Parkcrest as its completion contractor. The parties resumed work on the Project however, it continued to be plagued by delays and disagreements as to their cause. In May and June 2016, HANO and Liberty could not agree as to whether substantial completion had been obtained. Ultimately, HANO terminated Liberty on June 30, 2016. On October 4, 2016, HANO entered into a contract with Colmex Construction, LLC ("Colmex") to perform all necessary work to complete the Project. On March 25, 2017, HANO granted a certificate of substantial completion to Colmex. To date, the Project has still not reached final completion. Parkcrest, Liberty Mutual, and HANO dispute who is responsible for the various delays in the construction of the Project.

Parkcrest instituted this suit against HANO on May 8, 2015, shortly after the April 10, 2015 termination, alleging that HANO breached the Prime Contract by terminating Parkcrest "for convenience." (Civil Action No. 15-1533, the Principal Action.) HANO filed a counterclaim against Parkcrest alleging that delays in the project were attributable solely to Parkcrest. Shortly after the June 30, 2016 termination, Liberty intervened in the Principal Action, to allege breach of the Takeover Agreement, bad faith breach of contract, and wrongful termination against HANO. In response, HANO filed a counterclaim against Liberty Mutual alleging bad faith breach of the Takeover Agreement and fraudulent misrepresentation.¹ Consolidated with the Principal Action are two related lawsuits against Parkcrest and Liberty Mutual brought by subcontractors R&P Grass Maintenance, LLC ("R&P") and Ted Hebert, LLC ("Hebert") (Civil Action Nos. 16-15849 and 16-14118, respectively). ²

The Court held a seven-day bench trial beginning on February 20, 2018 through March 1, 2018, and at the conclusion, took the matter under advisement. Having considered all the evidence and counsels' arguments, the Court issues the following findings of fact and conclusions of law in accordance with Federal Rule of Civil Procedure52(a). To the extent any of the following findings of fact constitute conclusions of law, they are adopted as such. To the extent any of the following conclusions of law constitute findings of fact, they are adopted as such.

FINDINGS OF FACT

Civil Action No. 15-1533: The Principal Action (Parkcrest v. HANO)

I. The Prime Contract between Parkcrest and HANO

(1) On March 4, 2013, HANO entered into a contract ("Prime Contract") with Parkcrest whereby Parkcrest would serve as the contractor for the construction of the Florida Avenue: New Affordable Housing Units in New Orleans, Contract No. 13-911-05 ("Project").³

(2) The initial contract price for the Project was $11,288.000.00 and the initial completion date was to be July 27, 2014.⁴

(3) On September 27, 2013, Construction Change Directive No. 1 was issued providing Parkcrest with an additional 49 non-compensatory days to complete the Project.⁵

(4) Thus, the original completion date of the Prime Contract, as amended by Construction Change Directive No. 1, was September 14, 2014.⁶

(5) Pursuant to the Louisiana Public Works Act, on March 4, 2013, Liberty issued a statutory payment and performance bond, Bond No. 022045415 (the "Bond") in the amount of $11,288.000.00, in connection with the Project naming Parkcrest as principal and HANO as obligee.⁷

(6) The Project is intended to be used as multi-family residential housing units.

(7) The Prime Contract called for twenty-six duplex buildings consisting of fifty-two separate units (fifty-one dwelling units plus one office). The Project also called for parking, drives, a playground, and two new streets plus infrastructure and utilities to the site.⁸

(8) The General Conditions of the Prime Contract gave HANO the authority to terminate Parkcrest from the Project for cause or for convenience. ⁹

(9) Paragraph 32 of the Prime Contract defines a "for cause" termination as follows:

If the Contractor refuses or fails to prosecute the work, or any separate part thereof, with the diligence that will insure its completion within the time specified in this contract, or any extension thereof, or fails to complete said work within this time, the Contracting Officer may, by written notice to the Contractor, terminate the right to proceed with the work (or separable part of the work) that has been delayed.

(10) Paragraph 34 of Prime Contract defines a termination "for convenience":

The Contracting Officer may terminate this contract in whole, or in part, whenever the Contracting Officer determines that such termination is in the best interest of the [Public Housing Authority ("PHA")] . . .

If the performance of the work is terminated, in whole or in part, the PHA shall be liable to the Contractor for reasonable and proper costs resulting from the termination . . . .

(11) Clause 32 of the General Conditions of the Prime Contract sets forth the following:

* * *

(b) The Contractor's right to proceed shall not be terminated or the Contractor charged with damages under this clause if—

(1) The delay in completing the work arises from unforeseeable causes beyond the control and without the fault or negligence of the Contractor. Examples of such causes include . . . (ii) acts of the PHA or other governmental entity in either its sovereign or contractual capacity, (iii) acts of another contractor in the performance of a contract with the PHA . . .

* * *

(c) If, after termination of the Contractor's right to proceed, it is determined that the Contractor was not in default, or that the delay was excusable, the rights and obligations of the parties will be the same as if the termination had been for convenience of the PHA.

(12) Perez, APC ("Perez") was the architect of record for the Project.¹⁰

(13) Section A.1.2.1 of the Model Form of Agreement Between Owner and Design Professional¹¹ states that:

After receipt of a Notice to Proceed from the Owner, the Design Professional shall prepare and deliver Schematic Design/Preliminary Study Documents. These documents shall consist of a presentation of the complete concept of the Project, including all major elements of the building(s), and site design(s), planned to promote economy both in construction and in administration and to comply with current program and cost limitations. The Design Professional shall revise these documents consistent with the requirements and criteria established by the Owner to secure the Owner's written approval. Additionally, the Design Professional shall make an independent assessment of the accuracy of the information provided by theOwner concerning existing conditions. Documents in this phase shall include:

Site plan(s)

Schedule of building types, unit distribution and bedroom count

Scale plan of all buildings, and typical dwelling units

Wall sections and elevations

Outline specifications

Preliminary construction cost estimates

Project specific analysis of codes, ordinances and regulations

Three-dimensional line drawings

(14) Perez was responsible for reviewing pay applications submitted by Parkcrest for payment on the Project and recommending approval of pay applications to HANO.¹²

(15) In each certification of payment, Perez attested to HANO that "the Work has progressed as indicated, the quality of the Work is in accordance with the Contract Documents, and the Contractor is entitled to payment of the AMOUNT CERTIFIED."¹³

(16) Weekly construction progress meetings - otherwise referred to as Owner-Architect-Contractor ("OAC") meetings - were held in connection with the Project among representatives of Perez, Parkcrest, and HANO.¹⁴

(17) Perez maintained Meeting Agendas and Meeting Minutes for the foregoing weekly OAC meetings for the Project.¹⁵

(18) Integrated Logistics Support Incorporated ("ILSI") was a subconsultant of Perez and served as the engineer for the street, water, and sewerage portions of the Project.

(19) On April 3, 2013, HANO issued a Limited Notice to Proceed to Parkcrest for the Project.¹⁶

(20) When the Limited Notice to Proceed was issued, HANO still did not have approved civil infrastructure plans for the Project. Parkcrest was unable to proceed with any civil infrastructure work without an approved set of plans.

(21) The Limited Notice to Proceed did not include any electrical infrastructure¹⁷ work for the Project's residential units.

(22) The Limited Notice to Proceed only authorized Parkcrest to begin the following work, not to exceed $1,829,174:

All Work within the public Right-of-Way (ROW) on the new Independence and Pauline Streets; and within the ROW along Congress Street, Law Street, Alvar Street and N. Dorgenois Street; and the three blocks noted as the "Contractor Staging Area" on Sheet T1.3, hereafter noted as the "Work Area".

1. Initial site cleanup

2. Selective demolition

3. Selective clearing

4. Grading within the Work Area

5. Excavation

6. Trenching

7. Fill

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