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United States v. Flagg Building Improvements

April 30, 2009

UNITED STATES, FOR THE USE OF ELEVATOR TECHNOLOGY, A CALIFORNIA CORPORATION, PLAINTIFFS,
v.
FLAGG BUILDING IMPROVEMENTS, A CALIFORNIA CORPORATION; KOO CONSTRUCTION, A CALIFORNIA CORPORATION; TRAVELERS CASUALTY ND SURETY COMPANY OF AMERICA, A CONNECTICUT CORPORATION; AND DOES 1 THROUGH 25, INCLUSIVE, DEFENDANTS.



PRETRIAL CONFERENCE ORDER

Pursuant to court order, a Pretrial Conference was held on April 29, 2009 before Judge John Mendez. Thomas G. Trost appeared as counsel for plaintiffs; Matthew D. Pearson appeared as counsel for defendants Flagg Building Improvements and Travelers Casualty and Surety Company of America; Annie S. Amaral appeared as counsel for defendant KOO Construction. After hearing, the court makes the following findings and orders:

I. JURISDICTION/VENUE

Jurisdiction is predicated upon 40 U.S.C. § 3133 and 29 U.S.C. § 1391(b), and has previously been found to be proper by order of this court, as has venue. Those orders are confirmed.

II. JURY/NON-JURY

Both parties have demanded a jury trial.

III. STATEMENT TO BE READ TO JURY

Seven days prior to trial the parties shall submit a joint statement of the case that may be read to the jury at the beginning of jury selection.

IV. UNDISPUTED FACTS

On September 14, 2004, Defendants Flagg Building Improvements ("FBI") and K.O.O. Construction ("KOO") (hereinafter collectively "JV") were awarded a contract by the United States of America, through the United States Army Corps of Engineers for a work improvement project consisting of an emergency generator building and elevator upgrade for the American River Watershed Project and Folsom Dam modifications in Folsom, California ("Project"). On September 21, 2004, Defendants JV, as principal, and the Defendant Travelers Casualty and Surety Company of America, as surety, executed a Performance Bond for $3,659,189.00 guaranteeing the payment to all persons supplying labor and materials in the prosecution of the work provided for the Project.

On March 14, 2005, Leonard Bates, on behalf of Elevator Technology ("ET") executed a subcontract with JV for the performance of a part of the work described in the general contract between Defendants Flagg Building Improvements and K.O.O. Construction and the United States of America ("Subcontract"). The Subcontract specified that ET would furnish all labor, materials, tools, equipment and supplies necessary to install new MCE, SCR elevator controls and related equipment, included installation of controls, elevator control panels, door equipment, car and hall pushbutton fixtures, cables, wiring, and testing of the elevator located at the Project. Originally, per their agreement, ET was to be paid the sum of $247,850.00 for the work to be provided on the Project.

On March 14, 2005, a signed copy of the Subcontract was provided by ET to FBI for review and signature.

On August 18, 2005, a weekly Project performance meeting was held at the Project site, where FBI, KOO, Army Corps of Engineers (ACOE) and ET employees were present. During this meeting, FBI expressed concern as to whether the elevator portion of the Project would be completed by August 31, 2005. ET's vice president, Leonard Bates, indicated to Mr. Flagg that it would not be possible to complete the elevator portion of the Project prior to August 31, 2005 due to alleged significant delays unless ET's employees put in overtime on the Project. Mr. Flagg requested that ET's employees put in the overtime to make the Project happen, at which point, Mr. Bates informed Mr. Flagg that his employees would need to be compensated for the additional overtime.

Following the August 18, 2005 meeting, ET and its employees put in overtime from August 18th through the 31st (including working late into the night on several occasions) to ensure the elevator was ready for testing on or before August 31, 2005. As a result of this additional work and overtime, the Project was inspected by Mike Corlew, an ACOE consultant from Paul Pitfield & Associates on August 31, 2005. During this inspection, Mr. Corlew tested the elevator rope gripper approximately 30 times and found it to be satisfactory.

Upon the completion of the initial inspection, ET completed the list of punchlist items and communicated to Mr. Corlew that the Project was ready for final inspection and permit issuance as all remaining items had been addressed. Due to the impending Labor Day holiday, however, Mr. Corlew indicated he would not be able to get back out to the site for final inspection until September 6, 2005.

On September 6, 2005, Mr. Corlew returned and performed the final inspection and accepted and signed off on the completed work by ET, finding the work to be within Project specifications and compliant with all applicable codes.

On September 6, 2005, Mr. Corlew returned and performed an inspection and accepted and signed off on the work by ET. Mr. Corlew did not issue a final permit for the Project at that time.

Also on September 6, 2005, ET informed FBI that Mr. Corlew had signed off on the work by ET. It is undisputed that, based on these representations, FBI informed ET that it anticipated that ET would receive its final payment on approximately October 20, 2005, provided that ET submitted all required documentation.

On September 22, 2005, FBI issued to ET a 48 hour notice to complete its work, demanding the ET complete some very minor items and issue a credit for the governor and governor cable that was not replaced.

On September 22, 2005, ET informed KOO that it would not replace the governor or governor cable.

On August 15, 2006, after several months of investigating the rope gripper problems, the ACOE requested that the joint venture correct the installation of the rope gripper "through a redesign of3 the Rope Gripper mounting that will meet the manufacturer's criteria."5

On August 25, 2006, ET's counsel represented that ET would perform the correction.

On August 30, 2006, in response to an inquiry by ET, the Rope Gripper manufacturer, Hollister-Whitney Elevator Corporation, agreed with ET's interpretation of installation requirements for the rope gripper.

On January 16, 2007, FBI issued a Final Notice to Perform to ET in response to its failure to correct the Rope Gripper installation.

In February 2007, ET submitted a proposed modification, designed by an engineer hired by ET, of the rope gripper installation for the ACOE's approval, which submittal was approved.

ET completed its work on the Rope Gripper on April 19, 2007.

V. DISPUTED FACTUAL ISSUES

A. Plaintiffs

The following material factual issues are in dispute:

(1) when Flagg Building Improvements and KOO Enterprises executed and provided a signed copy of the subcontract to ET; (2) when the Joint Venture provided the Project Job Specification to ET; (3) whether ET completed its obligations by August 31, 2005, and if not, whether ET was excused from timely performing its obligations; (4) whether ET's installation of the rope gripper was installed per project specifications and permitted for use; (5) whether FBI was entitled to withhold payments to ET; and (6) whether FBI offered to pay ET all moneys owed within 90 days of completion of the project.

The parties dispute the exact date at which time FBI and KOO returned the executed contract to ET; ET contends the contract was not provided until June 18, 2005. Due to numerous project delays (for which the parties dispute the cause of said delays) and the failure to timely provide a copy of the job specifications to ET, ET commenced work on the project on July 7, 2005. Since beginning work on the project, ET had communicated to FBI the need for JV to request an extension from the ACOE due to the significant delays ET was experiencing not through the fault of its own.

ET's vice president, Leonard Bates, indicated to Mr. Flagg that it would not be possible to complete the elevator portion of the Project prior to August 31, 2005 due to alleged significant delays unless ET's employees put in overtime on the Project. Mr. Flagg requested that ET's employees put in the overtime to make the Project happen, at which point, Mr. Bates informed Mr. Flagg that his employees would need to be compensated for the additional overtime. Mr. Flagg affirmatively stated that he would pay the additional overtime of the ET employees for the purpose of expediting completion of the Project, which was agreed to by Mr. Bates.

Defendant FBI disputes whether upon the completion of the initial inspection, ET completed the list of punchlist items.

On September 6, 2005, Mr. Corlew performed the final inspection and accepted and signed off on the completed work by ET, finding the work to be within Project specifications and compliant with all applicable codes. Later that day, Flagg acknowledged that ET's obligations under the Subcontract had been completed based upon the fact that ET was entitled to final payment for outstanding moneys owed that FBI would be paying to ET on or about October 20, 2005.

B. Defendants

1. Whether there was sufficient time for ET to submit and have all its submittals approved in time to order and receive required materials to complete the work;

2. Whether ET's initial submittals for the Project were defective, requiring re-submittal, such that any purported delay in the approval of ET's submittals was caused by ET's own negligence, not by an other person or party;

3. Whether FBI provided complete plans and specifications for the Project to ET;

4. Whether ET was delayed by its own failure to perform the work in a timely manner, where ET agreed to start work on June 27, 2005, but did not begin work until July 7, 2005, where ET employees would regularly arrive at the project site late and/or leave early and where ET would sometimes send no employees to the project, especially on Fridays;

5. Whether ET waited until August 5, 2005, to voice any complaint about the August 31, 2005 deadline;

6. Whether FBI agreed to pay for overtime for ET to meet the August 31, 2005 deadline;

7. Whether ET was entitled to overtime compensation without a written modification, where the Subcontract proscribed additional pay for accelerating the work to meet the deadline without a written modification and where there is no written modification;

8. Whether the work performed by ET was required under ET's original scope of work and, therefore, did not constitute "extra 2 work;"

9. Whether ET's failure to meet the Project specifications, and the ACOE's refusal to accept ET's work as complete, constitutes a breach of contract sufficient to preclude any recovery by ET;

10. Whether ET's failure to meet the Project specifications, and the ACOE's refusal to accept ET's work as complete, entitled the joint venture to withhold payment;

11. Whether ET's refusal to replace the governor and governor cable constituted a breach of contract sufficient to preclude any recovery by ET;

12. Whether ET's refusal to turn on the elevator after it purportedly completed its work, attempting to force the joint venture to pay ET, constituted either a breach of contract or "unclean hands" sufficient to preclude any recovery by ET;

13. Whether ET's removal of the computer for the elevator in an attempt to force the joint venture to pay ET (an act considered criminal by the owner and the Department of Homeland Security), constituted either a breach of contract or "unclean hands" sufficient to preclude any recovery by ET;

14. Whether ET's retention of the keys to the elevator in an attempt force the joint venture to pay ET, constituted either a breach of contract or "unclean hands" ...


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