Loading...
HomeMy WebLinkAboutVII(A) Approval and Settlement Agreement for Ryan, inc Eastern vs City of Ocoee Agenda 7/6/04 Item VII A FOLEY FOLEY& LARDNER LLP ATTORNEYS AT LAW MEMORANDUM CLIENT-MATTER NUMBER 020377-0594 TO: Honorable Mayor and City Commissioners FROM: John P. Horan, Assistant City Attorney Paul E. Rosenthal, City Attorney CC: Gene V. Williford, Acting City Manager David A. Wheeler, Director of Public Works DATE: June 29, 2004 RE: Ryan Incorporated Eastern v. City of Ocoee Case No.: 03-CA-644 Circuit Court,Ninth Judicial Circuit In and For Orange County, Florida Request For Approval of Settlement Background On January 21, 2003, Ryan Incorporated Eastern ("Ryan") brought suit against the City of Ocoee ("City") seeking damages arising out of its performance of a contract for the construction of Maguire Road Improvements Segments 1 and 2. The amount of damages being sought by Ryan was payment of the unpaid contract balance ($261,434) and an additional $2,000,000 relating to costs for delays, disruptions and extra work required to complete the project. The work performed under the contract by Ryan began in August 2000 and was substantially completed in November 2002. It consisted of expanding approximately 2 miles of Maguire Road into a 4 or 5 lane roadway. Ryan was also required to install as part of the construction approximately 8,000 linear feet of reclaimed water main, approximately 9,500 linear feet of potable water main, approximately 3000 linear feet of sanitary force main, and approximately 1,400 linear feet of gravity sanitary sewer. At the same time Ryan was constructing the project, certain other public utilities were required to construct, relocate and/or remove certain of their facilities. Ryan has alleged that it was unable to efficiently perform the contract work within the contract schedule due to the actions or omissions of the City in administering the contract work, including the relocation of utilities owned by Florida Power Corporation, now known as Progress Energy (hereinafter referred to as "FPC"). Prior to the lawsuit being filed,the parties engaged in several mediation sessions as required by the Contract. The City denied Ryan's allegations. The City contends that Ryan's damages are simply cost overruns which were not caused by any failure of the City to perform its obligations under the contract. The City further affirmatively contends that Ryan failed to plan and coordinate its work with that of FPC and others as required by the Contract. The City filed a counterclaim against Ryan alleging that Ryan breached the Contract by, inter alia, finishing the project late and performing deficient work. The City assessed liquidated damages calculated from September 21, 2002 through November 27, 2002 (67 calendar days at $3,902/day) equaling $261,434. The City has paid Ryan a total of $9,608,113.41. Additional changes to the project approved by the Engineer brought the final contract amount to $9,869,547.41. Ryan was the original low bidder on the project with a corrected total base bid of$9,628,208.66. Ryan's bid was well within the estimate provided by the Engineer for the project. The City filed a Third Party Complaint against FPC seeking indemnification. FPC has entered into a joint defense arrangement with the City under which FPC is providing co- counsel and sharing the expenses of the litigation. FPC's indemnification obligations to the City arise out of certain agreements, the legal affect of which the parties dispute. As part of the joint defense agreement, the City and FPC have abated this third party litigation and deferred the Court's consideration of FPC's indemnification obligations concerning the City until after the case against Ryan is tried to finality or settled. Upon recommendation of counsel and after a shade session with the Commission, the City made a formal offer of judgment/proposal settlement in the case offering to waive and release the payment of all of the liquidated damages assessed against Ryan ($261,434) and pay an additional amount of$200,000. This proposal of settlement was made in January 2004 and was not accepted by Ryan. The case was originally set for trial during a period commencing April 13, 2004 through April 29, 2004, but was re-set for the trial period beginning August 10, 2004. At the suggestion of counsel of the Surety, who had not been retained and did not attend the original mediation sessions, the parties conducted an additional mediation session on June 16, 2004, which was attended by Assistant City Attorney, John Horan; Director of Public Works, David Wheeler; and two representatives of the City's Engineer, Professional Engineering Associates, Robert Rudd and Fursan Munjed. Negotiations continued thereafter until Ryan indicated on June 28, 2004 that it would accept a proposed settlement, which is described below. Proposed Settlement Ryan has agreed to accept a final payment of$600,000 to be paid as follows: City of Ocoee: $475,000 FPC: $125,000. The payment by the City represents waiving its liquidated damages and paying an additional $213,566. Ryan will be signing a release of all claims against the City, its agents and FPC and the City will be signing a release of all claims against Ryan, its Surety and FPC. 2 This settlement would result in the City paying just an additional $13,566 more than the Commission has already authorized. It will save the City the additional expense of continuing to incur attorneys' fees to prepare for trial, including paying experts and other costs. It will remove any and all risk of further litigation. FPC's payment of$125,000 will also resolve all questions of indemnity between the City and FPC, which are subject to the uncertainty and additional expense of the abated third party litigation. From a practical "big picture" viewpoint, this settlement would result in the City paying about 2% more than the amount of the Engineer's original estimate for the entire project and would approximate that estimate when you consider the time value of the money that is now being paid. The Assistant City Attorney and the Director of Public Works believe entering into this settlement is in the best interests of the City and recommend its approval. Required Commission Action Respectfully we specifically recommended that the Mayor and City Commission (i) approve the settlement of the lawsuit brought by Ryan Incorporated Eastern against the City and the third party action brought by the City against Florida Power Corporation on the basis of a $600,000 final payment by the City to Ryan Incorporated Eastern with Florida Power Corporation paying the City the amount of$125,000 to be applied towards the settlement, and (ii) authorize the Mayor, City Clerk and Assistant City Attorney John Horan to sign all documents necessary to implement the settlement, including but not limited to the releases, subject to approval of such documents by the Assistant City Attorney. JPHO/cac 3