Dam Lawsuit Yields Key Lesson

February 13, 2004
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GRAND RAPIDS — If you’re a contractor about to begin work on a public project, here are three things you should do.

From the very start make sure that you provide an accurate description of what you’re going to do. If a serious problem arises from the job, put all of your focus on what really caused it. And if you end up in court, be certain your expert witness doesn’t leave anything out of his or her testimony.

You’ll be dammed if you don’t.

Just ask the Foster Construction Co. of Minnesota.

Foster won a contract from the Army Corps of Engineers to build a dam that would divert water from a river so the river’s bottom could be cleaned. But the project was taking longer than expected due to a high water table that made the dredging vary from difficult to impossible.

Foster asked for more time to complete the project, hoping the water would recede. The Corps, however, denied the request. The contractor went ahead and finished the job in a timely fashion, but doing that cost the firm more money than it had bid on the project.

Foster complained that it took a bath on the dam project because the Corps refused to give the firm a long-enough extension to finish the job. Foster got short extensions from the agency, but still felt it wasn’t given an adequate amount time to do the work.

So the contractor took the Corps to court claiming an extension was reasonable because the firm had what it felt was an excusable delay due to an unforeseeable event.

Foster also asked the U.S. Court of Federal Claims for compensation to cover its loss.

The company filed the suit in 1995. The final legal decision came eight years later, last June, and to write that Foster wasn’t pleased with the result would be an understatement.

“The trial court said the high-water flows did not result in an excusable delay because these weren’t from unusually severe weather or a flood,” said Bruce Courtade, a partner at Rhodes McKee and a member of the firm’s construction law group.

“The court looked at the contract and said those terms are specifically defined in the contract and it doesn’t fit either one of those,” he added.

The trial court made that ruling in May 1998, citing the work agreement that went into effect in 1993. Foster appealed the decision to the U.S. Circuit Court, which overturned the lower court’s ruling. The higher court said the definitions of flood and severe weather in the contract did give Foster a legal argument.

The circuit court sent the suit back to the court of claims in 1999, where the firm had to go to sue for compensation.

“That decision told the court of claims that they had to review it again to see if there was an excusable delay,” said Courtade.

It took roughly four years for the review and final decision to be made by the court, and the ruling was grounded in two major points.

First, Courtade said the court determined high-water flow rates weren’t the cause of the problem. Instead, the court claimed that distinction belonged to peak water flow rates and those were within the anticipated levels the river normally has in the spring, when Foster started the dam project.

Second, the court said Foster told the Corps that the dam would hold so much water. But in reality, the dam was capable of holding up to three times the water flow that the contractor reported it would. The court went as far as to say that Foster wouldn’t have been entitled to the short extensions it received if it was known how much water the dam could really hold.

So what is the moral of this lengthy courtroom drama? Actually, there are three.

“Make sure that your expert witness is giving the court the information that it needs to make the decision in your favor,” said Courtade, adding that Foster never gave the court a way to determine what an unforeseeable water level would be, while the Corps of Engineers did.

“Make sure, from the start, that you’re providing an accurate depiction of what your project is capable of performing, ” he said, referring to how much water the dam could hold.

“Because if you don’t, that will come back to bite you.”

Lastly, even though the claim made by Foster was true — that the river’s water level was the highest it had been in 41 years — that wasn’t the reason why the job took longer to finish and why it cost the company more money.

“The problem was caused by these instantaneous peaks of water, like when you get a heavy rainfall, and the instantaneous peaks were found to be within the normal limits,” said Courtade.

“So when you’re looking to determine whether something is foreseeable or not, you have to make sure that you’re focusing on what really caused the problem.”    

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