Dive Brief:
- A federal judge ordered a Flatiron/AECOM joint venture to pay AECOM Technical Services $14.2 million in a dispute over the parties’ work on the $276 million C-470 Express Lanes project south of Denver.
- Los Angeles-based AECOM Technical Services served as the lead designer for the design-build project, which was commissioned by the Colorado DOT and broke ground in 2016. The GC was a joint venture comprising Broomfield, Colorado-headquartered Flatiron and Dallas-based AECOM, which is also the parent company of AECOM Technical Services.
- In two separate March 11 orders, U.S. District Court Senior Judge William Martínez, ruling in the United States District Court for the District of Colorado, provided AECOM Technical Services $8.3 million in attorney costs and $5.9 million for expert witness and other expenses, shaving down the $16 million it had initially sought.
Dive Insight:
Over the past five years, the former JV partners have been involved in a series of legal tussles after the project went over budget and fell behind schedule. In an unusual twist, the case pitted a subsidiary against a joint venture that included its parent company as well as a request for the defendant to become the plaintiff just days before the trial began.
Flatiron/AECOM originally agreed to complete the project by 2019 for $204 million, then for $237 million with change orders, but its expenditures ultimately mushroomed to over $502 million, according to The National Law Review.
Then in October 2019, AECOM Technical Services filed suit against Flatiron/AECOM, claiming breach of contract and unjust enrichment. It said it was owed $5.3 million for unpaid out-of-scope design services, according to the suit.
Flatiron/AECOM countered with three claims — breach of the teaming agreement, negligent misrepresentation and breach of the subcontract — seeking $263.5 million to recover its cost overruns and delays that it said were attributable, at least in part, to AECOM Technical Services’ allegedly “botched” preliminary design documents, per the order.
The court subsequently dismissed two of three of Flatiron/AECOM’s claims, according to the order, but the parties were set to go before a jury in February 2024 to adjudicate the matter.
Ten days before the start of the trial, Flatiron/AECOM filed an unusual motion acquiescing to pay AECOM Technical Services what it sought, Colorado Politics reported, while also seeking to become the plaintiff in the case. It simultaneously asked Martínez to dismiss AECOM Technical Services’ claim for unjust enrichment. The judge sharply denied both requests on Jan. 25, 2024 while saying the trial itself “borders on the absurd.”
Ultimately, the jury awarded AECOM Technical Services $5.26 million for its claim against Flatiron/AECOM for unpaid design services in February 2024, and rejected Flatiron’s counterclaim. The parties attempted to reach a settlement after that, but it was unsuccessful, according to the order. AECOM Technical Services asked the court to recover its legal fees, and last month, it got much of what it asked for.
Construction Dive reached out to Flatiron and AECOM for comment but did not hear back by publication time.
Over the years, both parties ended up shelling out for pricey attorneys and expert opinion testimony. The saga shows that even successful construction litigation can be a Pyrrhic victory, Christopher Ng, managing partner of Los Angeles-based construction law firm Gibbs Giden, posted on LinkedIn.
“This litigation also underscores the importance of carefully drafted preliminary services agreements with explicit liability limitations, and a reminder to parties to invest in robust dispute resolution mechanisms before positions harden,” said Ng. “The true lesson here may be the value of prevention over cure in an industry where margins rarely support protracted legal battles.”
