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A written subcontract called for the Subcontractor to perform certain debris removal. This work was necessitated by Hurricane Katrina.  Although the contract was only for work to be performed north of a particular highway, the subcontractor claimed that shortly after work began, it was orally requested by the prime contractor to also remove debris from south of the highway.  No written contract modification was ever requested or granted, however, and the prime later denied knowing that the Sub was performing the additional work.  During trial, it was determined that the Prime not only knew about the work, but had also included the sub’s invoices in the payment requests submitted to the owner/county government for payment.  Moreover, the Prime had received payment from the Owner for over $3 million in costs that the Sub had invoiced the Prime for the extra work, and that the Prime had forwarded to the Owner for payment.  It was held that the conduct of the Prime was so egregious that the Subcontractor was entitled to recover not only its actual costs, but also punitive damages.  The matter was thus remanded to the trial court to have a jury determine the amount of punitive damages to be awarded.  TCB Construction v. WC Fore Trucking, Inc., 2013 WL 718628 (2013).

Every week, the Sub submitted invoices to the Prime that the Prime in turn submitted to the county.  In addition, the Sub submitted “work tickets” or “truck tickets” as daily reports.  Despite the Prime claiming during trial that it didn’t know the work was being done south of the highway, the court found that testimony to be “disingenuous” especially in that the entire area north and south had to be cleaned up, and was in fact cleaned up entirely by the subcontractor whose invoices were all passed along to the County with the Prime contractor’s invoice for payment.  The Prime refused to pay the Sub almost millions of dollars that the Prime recovered from the county for work the Sub performed.

In concluding that this breach of contract justified punitive damages, the court explained that the Prime “represented to the local government that [Sub’s] invoices were accurate and that it received full benefit of TCB’s work without compensating TCB.  Moreover, an accounting firm hired by the county oversaw the entire process, and TCB was the only company removing debris in the area…. [I]t defied credibility to suggest Fore, the corporation, had no knowledge TCB was submitting invoices for work south of Highway 53.”  “TCB provided sufficient proof that [Prime] acted in bad faith, with complete disregard for TCB’s rights, seeking to reap the benefits of its contract while at the same time denying its obligations.  Based on the evidence, a reasonable, hypothetical juror could find that [Prime] had breached the contract either maliciously, by an intentional wrong, or with reckless disregard for TCB’s rights.”

For these reasons, the court remanded the matter to have a jury determine the amount of punitive damages appropriate.

 

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 15, No. 7 (July 2013).

Copyright 2013, ConstructionRisk, LLC