HomeMy WebLinkAbout8 Pacific Rim Construction Settlement Agenda Item # 8
TRUCKEE DONNER
CONSENT
To: Board of Directors
From: Michael D. Holley
Date: April 21, 2010
Subject: Approve the Settlement with Pacific Rim Construction
1. WHY THIS MATTER IS BEFORE THE BOARD
Board approval is required for expenditures in excess of$15,000.
2. HISTORY
In 2005 and 2006, the Water Department reported to the Board regarding the
condition of existing water pipelines and the need to pursue a pipeline replacement
program. The District subsequently issued a COP in 2006 and dedicated a portion of
those funds for the pipeline replacement program. Pipeline construction projects have
been undertaken each year from 2006 through 2009 using these COP funds.
The 2008 pipeline construction covered about 17,500 feet of pipeline and was broken
into three separate contracts for bidding purposes. Contract A covered work in Tahoe
Donner. Contract B covered work in Sierra Meadows and Ponderosa Palisades area.
Contract C covered work in the Glenshire area. The bid openings for all three
contracts were held on February 20, 2008. Pacific Rim Construction, Inc. (PRC) was
determined to be the low bidder on all three bids and was awarded all three contracts.
PRC began work on Contract B in May 2008. The construction of Contract B was
essentially complete in August 2008 and the Board approved a closeout change order
for Contract B in November 2008. This change order was signed by both PRC and
the District. The total change order amount was $189,100.
PRC began work on Contracts A & C in June 2008. The construction of both
contracts was completed in October 2008. In December 2008, PRC submitted
change order requests (CORs) regarding work performed on Contract A with a total of
$517,928. PRC also submitted CORs regarding work performed on Contract C with a
total of$177,817.
The District reviewed these CORs and requested additional supporting information in
a letter dated December 10, 2008. A portion of the information requested was
received by the District on December 22, 2008. The remaining information was never
delivered. Meetings were originally scheduled with PRC on December 23, 2008 and
then again on December 30 2008 to discuss the CORs for both Contracts A & C.
Those meetings were canceled by PRC. On January 27 & 28, Water Department
staff held meetings with PRC in an effort to resolve the outstanding COR issues on
both Contracts A & C. These meetings managed to resolve all of the CORs
associated with Contract C. However, of the 17 CORs on Contract A, PRC and the
District were able to reach agreement on six CORs.
On February 4, 2009, the Board approved a closeout change order for Contract A in
the amount of $249,625.04. This change order was never signed by PRC. Also on
February 4, 2009, the Board approved a closeout change order for Contract C in the
amount of$177,817. This change order was signed by both PRC and the District.
On May 13, 2009, PRC submitted a claim to the District in the amount of $2,624,127.
This claim, covering all three contracts, was for services and materials provided by
PRC that PRC asserted was due them under the contract.
PRC filed suit on October 1, 2009 against the District to force collection of their claim.
Prior to the start of what was expected to be expensive discovery in this case, all
parties involved in the suit agreed to attempt to resolve the issue through a non-
binding mediation process.
3. NEW INFORMATION
The mediation between PRC, the District, and the other involved parties took place on
March 16, 2010. During that mediation, a tentative agreement for settlement was
reached in the amount of $1,100,000. A final settlement agreement is included as
Attachment 1
The main points of the settlement are:
• The District agrees to pay the sum of $1,100,000 inclusive of those funds
previously withheld by the District.
• The District's obligation to pay the Settlement funds is subject to the Board's
approval.
• Developers shall provide the District with releases for all stop notices of record
relating to the Project in forms satisfactory to the District except for the release
of stop notice from Advanced Asphalt.
• Advanced Asphalt's shall provide the District with a Release of Stop Notice in a
form satisfactory to the District.
• Developers agrees to defend and hold harmless the District from litigation by
Sterling Bank claiming entitlement to the Settlement Funds.
4. FISCAL IMPACT
The recommended source of funding for this action is $384,705 from the 2006 COP
currently authorized for payment under the original contract and being held as a
"withhold" pending resolution of the suit, and $715,295 from Water Department
Capital Reserves.
Sufficient funds exist in both sources to pay for this action.
5. RECOMMENDATION
Authorize the Board President to sign the final settlement agreement with PRC and
authorize the transfer of $715,295 From the Water Department Capital Reserve to the
Water Department Operating fund to pay for this action.
Michael D. Holley
General Manager
ATTACHMENT 1
SETTLEMENT AGREEMENT
This Settlement Agreement ("Settlement Agreement") is entered into effective on the 16tn
day of March, 2010, by and between Advanced Companies, Inc., dba Advanced Asphalt
("Advanced Asphalt"), Pacific Rim Construction& Development, Inc. ("Pacific Rim"), Truckee
Donner Public Utility District(the "District"), and Developers Surety&Indemnity Company
("Developers") (collectively referred to as the "Parties").
I. RECITALS
WHEREAS,Pacific Rim entered into three contracts with the District on or about March 27,
2008 for the District Pipeline Replacement 2008 known as Contract A,Contract B and Contract C ;
and
WHEREAS,Developers provided its public work performance and payment bonds for each
of the Contracts: and
WHEREAS, the following entities filed stop notices with the District in the following
amounts:
Advance Asphalt $171,427.68 [Contract A]
Lakeside Specialized Transport $73,520.93 [Contract A]
A. Teichert& Son $265,850.77 [Contract A]
Western Nevada Supply $387,218.32 [Contract A]
TNT Materials $ 1,724.52 [Contract A]
Labor Claim $ 7,165.74 [Contract A]
Western Nevada Supply $ 5,754.26 [Contract B]
Labor Claim $ 1,692.69 [Contract B]
Western Nevada Supply $ 15,285.10 [Contract C]
Labor Claim $ 3,103.42 [Contract C]
Total $ 932,743.43
WHEREAS, in response to the stop notices, as required by law, the District has withheld
Contract Funds in a sum not less than 125%of the amount of the stop notices from funds which are
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due or become due under this agreement to Pacific Rim or Developers; and
WHEREAS,Advanced Asphalt filed an action in the Nevada County Superior Court for the
State of California, under the case number T09/3584C (the "Lawsuit"), against the other Parties
alleging breach of contract and other causes of action relating to alleged non-payment for services
and materials provided in conjunction with the District's 2008 Pipe Replacement Project (the
"Project"), for which Pacific Rim was the prime contractor; and
WHEREAS,Pacific Rim,the District,and Developers each deny the allegations made in the
Lawsuit; and
WHEREAS,Pacific Rim and the District have each filed cross-claims(the"Cross-Claims")
against each other for breach of contract and other claims related to the Project; and
WHEREAS,the Parties seek to expeditiously resolve all claims asserted in the Lawsuit and
the Cross-Claims without entry of judgment and without the necessity of further judicial
proceedings.
NOW THEREFORE,in view of the foregoing,and for valuable consideration,including the
mutual promises set forth below, the parties hereto agree as follows:
II. AGREEMENT
The above Recitals are contractual and not merely recitals and the agreements contained
herein and consideration transferred are to satisfy rights and obligations among the Parties.
l. Payment: In consideration of the promises, and each of them, made in this
agreement, and conditioned on the release of the stop notices set forth above and,to the extent
that any of the stop notices regarding TNT Materials and the labor claims are not released,the
hold harmless in paragraph 4 hereof by Developers, the District agrees to pay the sum of One
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Million One Hundred Thousand Dollars ($1,100,000) inclusive of those funds previously
withheld by the District(the "Settlement Funds") as follows:
a. Distribution of the Settlement Funds: The District shall pay the Settlement Funds
to the following parties in the following amounts within 10 days of the District's
Board of Directors' (the "Board") approval of this Settlement Agreement:
i. Developers shall receive a wire transfer for Seven Hundred Seventy Three,
One Hundred Twenty-Three and 70/100 ($773,123.70);
ii. Advanced Asphalt shall receive a wire transfer for One Hundred Fifty
Thousand Dollars ($150,000.00);
iii. Capurro Trucking Inc. shall receive a wire transfer or check for Ninety
Thousand Dollars ($90,000.00);
iv. Cashman Equipment Company shall receive a wire transfer or check for
Fourteen Thousand Seven Hundred and Fifty Dollars ($14,750.00);
v. The balance shall be paid via wire transfer to the Romero Park& Wiggins
P.S. ("RPW") Client Trust Account in payment of attorneys' fees and
costs incurred in the prosecution of the claim of Pacific Rim against the
District.
2. Board Approval: The District's obligation to pay the Settlement funds as set forth
in Paragraph 1 is subject to the Board's approval of this Settlement Agreement. Counsel for the
District and the District's general Manager, both attendees at the mediation during which the
Settlement Understanding was achieved, agree to put approval of this Settlement Agreement on
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the agenda of the Board's next available meeting and agree to each strongly recommend approval
of the Settlement Agreement to the Board.
3. Stop Notices: Advanced Asphalt's right to receive its share of the Settlement
Funds as set forth in Paragraph 1 is conditioned upon Advanced Asphalt's submission to the
District of a Release of Stop Notice in a form satisfactory to the District. Further, as a condition
of the payments described above in paragraphs 1.a.i and 1.a.v above, Developers shall provide
the District with releases for all stop notices of record relating to the Project in forms satisfactory
to the District except for the release of stop notice from Advanced Asphalt required by paragraph
l.a.ii from Advanced Asphalt and releases from the labor claims and TNT Materials which are
the subject of the hold harmless in Paragraph 4 hereof.
4. Developers to Indemnify: Developers agrees to defend and hold harmless the District
from litigation by Sterling Bank claiming entitlement to the Settlement Funds,or any portion thereof,
paid to Developers under this agreement or any action brought by any entity listed as a stop notice
claimant in the Recitals hereof to enforce a stop notice filed against the Contract Funds pursuant to
California Civil Code Section 3210.
Provided however, the foregoing defense and hold harmless is subject to the following
conditions: (a)the amount of indemnity shall not exceed and be limited to the total amount paid by
the District to Developers under this Agreement;(b)the District shall,as a condition precedent to the
obligations undertaken herein by Developers, tender any litigation and the defense thereof to
Developers within twenty(20)days after receipt thereof and Developers shall have the right,but not
the obligation,to resolve all such litigation and to control and defend the litigation through counsel
selected at the sole discretion of Developers.
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5. Latent Defects: While the District, Pacific Rim, and Advanced Asphalt each
agree to a mutual release of all claims between them, as is described below in more detail, the
release given to Pacific Rim by the District herein expressly excludes any claims for latent
defects in the work performed by Pacific Rim on the Project.
6. Stipulation and Order of Dismissal: Upon execution of this Settlement
Agreement, the Parties will each take whatever action is necessary to dismiss with prejudice and
without costs the claims contained in the Lawsuit and the Cross-Claims. However, Developers
agrees that this Paragraph and its contents shall in no way alter, waive, or eliminate Developers'
agreement contained in Paragraph 4 to indemnify the District from any claims brought by
Sterling Bank seeking to recover any of the Settlement Funds.
7. Attorney's Fees and Costs. The Parties agree that each party will bear its own
attorney's fees and costs in this matter.
8. Release. Except as between Developers and Pacific Rim, in further consideration
of the promises, and each of them, made in this agreement, and except as is otherwise provided
for in Paragraphs 4 and 5 of this Agreement, the Parties hereby mutually release each other and
their administrators, assigns, agents, principals, officers, directors, and attorneys, from and
against any and all suits, demands, claims, causes of action and/or liabilities of whatever kind or
nature, and in any way connected with or arising out of the Project which any of the Parties may
have against any of the other Parties including, but not limited to, all claims that were raised or
could have been raised in the Lawsuit and Cross-Complaints filed by some of the Parties. This
settlement includes all damages, injuries and/or claims of the Parties against one another whether
known or unknown, foreseen or unforeseen, and whether they are latent or occur later as a result
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of their involvement in the Project,this settlement applying to all unknown or unanticipated
damages resulting from their involvement in the Project, as well as those which are now known.
In addition, Except as between Developers and Pacific Rim, the Parties hereby waive any
rights or benefits which they may have by virtue of the provisions of California Civil Code Section
1542, which provides:
"A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if known by
him must have materially effected his settlement with the debtor. "
Thus,notwithstanding the provisions of Section 1542,and for the purpose of implementing
the full and complete release and discharge of the Released Parties specified above, except as
provided for in Paragraphs 4 and 5 above, the Parties expressly acknowledge that this Release is
intended to include in its effect,without limitation,all claims not known or suspected to exist in his
favor at the time of signing this Release, and that this Release contemplates the extinguishment of
any other such claim or claims which he has or may have against the Released Parties as specified
above. Outside of that which is provided for in Paragraphs 4 and 5 of this Settlement Agreement,the
Parties know of no actions at law or in equity or administrative proceedings currently pending which
concern allegations based on or related to the Project or any of the Parties' involvement therein,
excepting those that they have expressly agreed to dismiss.
The Parties warrant that they have read this Release, including this waiver of California
Civil Code Section 1542, and that they have consulted counsel about this Release and
specifically about the waiver of Section 1542, and that they understand the Release and the
Section 1542 waiver, and so freely and knowingly enter into this Release. The Parties
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acknowledge that they may hereafter discover facts different from and in addition to those they
now know or believe to be true regarding the matters released or described in this Release, and
they agree that the releases and agreements contained in this Release shall be and will remain
effective in all respects notwithstanding any later discovery of any such different or additional
facts. The Parties hereby assume any and all risk of any mistake in connection with the true facts
involved in the matters, disputes, or controversies described in this Release, or with regard to any
facts which are now unknown to them relating to them.
9. Representations and Warranties. The Parties hereby represent and warrant that
they have neither transferred nor assigned any of the claims contemplated in this Settlement
Agreement. The Parties also represent that the undersigned are authorized and competent to
enter into this Settlement Agreement and that they will never argue that the undersigned were not
authorized or competent to enter herein.
10. Compromise of Disputed Claim; No Admissions. Each of the Parties herein
denies, and nothing herein shall be deemed or construed to be an admission of any liability or
fault in respect to any of the allegations made or which could have been made by or against any
of the Parties to this dispute, for any purpose.
11. Ambiguities or Uncertainties. This Settlement Agreement, and any ambiguities or
uncertainties herein, shall be equally and fairly interpreted and construed without reference to the
identity of the Party or Parties who prepared this document, on the express understanding and
agreement that the Parties participated equally in the negotiation and preparation of the
Settlement Agreement, or have had equal opportunity to do so. Accordingly, the Parties hereby
waive the benefit of California Civil Code Section 1654 and any successor amended statute,
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providing that in cases of uncertainty, language of a contract should be interpreted most strongly
against the party who caused the uncertainty to exist.
12. Survival of Executory Provisions. Any and all executory provisions under this
Settlement Agreement shall survive the consummation of this Settlement Agreement and shall
continue in full force and effect until fully performed and satisfied.
13. California Law. This Settlement Agreement shall be governed by the laws of the
State of California. Any action to enforce the terms of this Settlement Agreement shall be filed
in the Superior Court of the State of California, County of Nevada. The prevailing party in any
such dispute shall be entitled to recover its actual attorney's fees and costs.
14. Counterparts. This Settlement Agreement may be executed in duplicate originals
or in counterparts, each of which shall be deemed an original, but all of which together shall
constitute one agreement. A signature transmitted by facsimile or other electronic means shall be
deemed valid and binding for all purposes.
15. Invalidity of Provision. Wherever possible, each provision in this Settlement
Agreement shall be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Settlement Agreement shall be prohibited by or invalidated by
any such law, such provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision, or the remaining provisions of
this Settlement Agreement.
16. Further Papers: The Parties agree to execute such further papers or documents as
shall be necessary or proper in order to fulfill the terms, conditions, and intent of this Settlement
Agreement.
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17. Successors: This Agreement shall be binding upon the administrators, executors,
receivers,trustees, successors, assigns, decedent's estates, of the respective Parties in order to
fulfill the terms, conditions and intent of this Settlement Agreement.
18. Time of Essence. Time is of the essence in this Agreement.
19. Taxes. Each party is responsible for paying their own tax obligations as specified
under applicable law.
20. No third party beneficiaries. There are no third party beneficiaries to this
Settlement Agreement. Specifically, but without limitation, this Agreement shall not release
Pacific Rim or any other indemnitors under any indemnity agreements in favor of Developers
executed by Pacific Rim, its officers, affiliates, employees, agents, directors, subsidiaries,
parents, assignees, assignors, and related companies from any liability to Developers.
21. Modification. The terms of this agreement may only be modified, altered or
waived by a writing executed by all of the parties released hereunder.
22. Attorney's Fees. Should any party commence an action to enforce or interpret
this agreement, the prevailing party therein shall be entitled to recover its reasonable costs and
attorney's fees incurred therein.
23. Jurisdiction. The Court shall retain jurisdiction to enforce the terms of this
Settlement Agreement pursuant to Code of Civil Procedure Section 664.6.
IN WITNESS WHEREOF,the parties have executed this Settlement Agreement.
DATED: April , 2010 Advanced Companies, Inc. dba Advanced Asphalt
By:
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Its:
DATED: April 92010 Pacific Rim Construction& Development, Inc.
By:
Its:
DATED: April , 2010 Truckee Donner Public Utility District
By:
Its:
DATED: April , 2010 Developers Surety& Indemnity Company
By:
Its:
APPROVED AS TO FORM AND CONTENT
Law Office of Justin N. Tierney
DATED: April 92010
By: Justin N. Tierney
Attorney for Advanced Asphalt
Romero Park& Wiggins P.S.
DATED: April , 2010
By: H. Troy Romero
Attorney for Pacific Rim
Porter Simon
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DATED: April , 2010
By: Peter Cuttitta
Attorney for TDPUD
DATED: April , 2010
By: Charles J. Philipps
Attorney for Developers Surety
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