City Center: “Are You Ready to Rumble” Expert Investigation and Case Management In Litigation Over the Biggest Privately Funded Project in U.S. History CLSA NOVEMBER 30, 2017 -- NEW YORK CITY IN ONE CORNER -- PETER SHERIDAN AND LANCE COBURN (FOR MGM/CITY CENTER) AND IN THE OTHER CORNER -- GEORGE OGILVIE (FOR PERINI BUILDING CO.)
2 Project Stats: - $9 billion cost - 16.7 mm sq.ft. - Over $1 billion in Disputed Claims
3 - Over $500 million in Lien Claims - Over 250 Unpaid Subcontractors - Hundreds of Millions in Scope Claims - “The Harmon” Loss @ $400 million
Harmon Hotel – Designed at 48 stories to be the 4 Signature Hotel and Condos “On The Boulevard”
Capped at 26 5
Demolished 6
7 Harmon Hotel and Condos: Designed by Sir Norman Foster 48 stories Demolished in 2014-2015 OWNER EXPERT INVESTIGATIONS HOTLY CONTESTED
8 Construction Stopped at Floor 26
9 ➢ Owner’s Position: Defects Caused By Contractor/Subs Stopped Harmon; C’or/Subs Not Receive Final Payments Because of Offset ($400 mm) ➢ Contractor’s Position: Insufficient and Defective Design By Engineer (rebar would not fit); Stop Due to Economics, Not Defects; Owner’s 3d Party Inspector Approved; Right To Repair; Subs Need to be Paid
10 EXPERT INVESTIGATIONS What More Than Initially Detected Was Built In Error? How Much Inspection Was Required? What Should Be Inspected And Where?
Typical Floor Above Level 4 11 LB10 Shear Wall, Typ. W11 W4 W9c W6b W7a Link Beam, Typ. W7b W9b W6a W7c W9a W10 W3 Floor Slab W13 W14 W12 W15 Column W2 W17 W16 W5 W5 Shear Wall, W1 Typ.
Typical Tower Floor Plan 12 Link Beam Locations
CONSTRUCTION DEFICIENCIES 13 ➢ Not-To-Plan construction of the link beam reinforcement was first discovered mid-2008 ➢ Subsequent investigation revealed similar link beam errors from Levels 6 to 21 ➢ Further investigation found other structural elements built Not-To-Plan As Well
14 Cap Tie • Bar Missing Tie Bar hooks cut or burned Interior ties missing GENERIC LINK BEAM CROSS SECTION AS- DESIGNED VS. EXAMPLES OF ERRORS (1-4)
Example of Defective Link Beam 15 LB11, Level 6 Reveals • Interior tie bars missing • At least 4 of 8 bottom longitudinal bars placed high
THE DOMINO CHART 16
17 As-Built versus As-Planned What Was The Cause?
18 What Was The Cause? Owner = Repeated but Different Errors Signaled Lack of Care, Lack of Oversight Contractor = Design Unbuildable (Congestion)
OBSERVATIONS 19
CONSEQUENCES 20 Wind Load – Deformed Shape As Designed (Exaggerated) = Lateral Deflection (Drift) = 8.0 inches Shear Wall W16 Link Beam LB8 and LB12 Between W17 & W16 Each Floor Level Shear Wall W17
CONSEQUENCES 21 Wind Load – Deformed Shape As Built (Exaggerated) = Lateral Deflection (Drift) = 69.9 inches Shear Wall W16 Shear Wall W17
Shear Wall and Link Beam Section 22 As-Detailed
As-Designed Shear Wall U-Bars 23
As-Built with Shear Wall 24 U-Bars Missing
SEPTEMBER 2012 ORDER RE EXTRAPOLATION 25 ➢ Five Rounds of Inspection and DT Occurred from 2008-2011 ➢ Early structural engineer-directed DT by contractor (pre-Phase 1); next three phases were court approved and tested 236 of 1680 structural elements. ➢ Locations for testing, chosen not based on a “blind draw” but “based on their structural significance,” revealed the defects were “random” (contested by Contractor) with no discernable “pattern of defects” other than defects found in the same elements (link beams, columns, floors, shear walls, etc.) ➢ Using statistical extrapolation, the Owner’s expert opined on how the Harmon would perform in a seismic event.
SEPTEMBER 2012 ORDER RE EXTRAPOLATION 26 ➢ ISSUE – None of the pre-Sept. 2012 testing had been done on randomly selected elements ➢ Nevada Rule – As a “gatekeeper” a judge in Nevada must decide if an extrapolation is based on a “statistically valid and reliable representative sample.” ➢ Court Order – “the manner in which the tested locations were chosen renders it impossible” to decide that the sample used was “a statistically valid and reliable representative sample that would be appropriate to present to a jury.”
CORRECTIONS MADE AFTER THE SEPTEMBER 27 2012 ORDER RE EXTRAPOLATION ➢ Testing Dates: Phase 4 -- March to May 2013 ➢ Sample Size Before Phase 4: 236 of 1680 ➢ Sample Size During Phase 4: 1200 (random) of 1704 ➢ 282 page Guide for Testing Locations ➢ 1500 page Protocol ➢ Results from Fourth Round Testing: 7294 Observed Defects ➢ Parties Analyzing Impact of Defects in Two Dramatically Different Ways – Owner Looking at Impact to a Completed 48 Floor Tower; Contractor Looking at Repair to a 26 Floor Tower
Phase 4 Elements Total 28
CORRECTIONS MADE AFTER THE SEPTEMBER 29 2012 ORDER RE EXTRAPOLATION ➢ Results from Fourth Round Testing: More Defects Observed than Even Prior “Extrapolation”; Random Selection Confirmed Prior Opinions ➢ Contractor Arguments: Extrapolation based on Random Test Locations, however, Owner’s mistakes permeated testing area size, recordation of results, definition of defective (out-of-tolerance versus “condition compromising the primary function of the structural element”), and emphasizing numbers as opposed to severity of defects ➢ Final Order: Testimony Allowed on Results of Phase 4 with Contractor Ability to Cross-Exam on All Prior Expert Work
ADOPTING AN EFFECTIVE CASE MANAGEMENT 30 ORDER FOR A CASE OF THIS SCALE ➢ Documents Exchanged = 28 Terabytes (28,000 Gigabytes) ➢ 200 Non-Expert Depos over 300 days ➢ 50 Expert Depos over 100 days ➢ 3.2 Million Trial Exhibits (Can You Believe It?) ➢ Critical Immediate Issue = Hundreds of Unpaid Subs ➢ Solution: Two Tracks ➢ Resolve Liens (other than Contractor) ➢ Contractor Claims vs. Owner Claims/Offsets
ADOPTING AN EFFECTIVE CASE MANAGEMENT 31 ORDER FOR A CASE OF THIS SCALE ➢ Monthly Status Conferences at which All Pending Motions are to be Heard ➢ All Related Cases Including Lien Foreclosure Consolidated for all Purposes ➢ Two Tracks Created ➢ No Discovery Except As Allowed by CMO
ADOPTING AN EFFECTIVE CASE MANAGEMENT 32 ORDER FOR A CASE OF THIS SCALE Track One Purpose = Settle Undisputed Sub Lien Claims ➢ Identify Subs Allegedly Responsible for Defects ➢ Identify Undisputed Sums Owed Subs ➢ Contractor Lists All Subs with Claims ➢ Contractor Deposits All Documents re These Claims ➢ Owner Identifies All Subs With No Defects
ADOPTING AN EFFECTIVE CASE MANAGEMENT 33 ORDER FOR A CASE OF THIS SCALE Track One Purpose = Settle Undisputed Sub Lien Claims ➢ Owner Identifies All Subs With Defects and Scope Issues ➢ Uncontested Amount Due For Each Component With No Defects ➢ Uncontested Amount Due For Each Sub ➢ Describe Defective Work, Precise Location, The Contract/CO Governing this Work ➢ Contractor Creates “Close - Out” Packages ➢ Subs with No Defect or Scope Issues File Partial SJ Motions
ADOPTING AN EFFECTIVE CASE MANAGEMENT 34 ORDER FOR A CASE OF THIS SCALE Track Two Purpose = Prepare Competing Claims for Trial ➢ Special Master Appointed to Handle All Discovery Disputes ➢ Nevada Rule 16.1 Initial Disclosures (Correlate to FRCP 16) ➢ CMO Attached Master RFPs and Commanded Exchanges of Statement of Damages and Witness List (16.1) ➢ Visual Inspections on Two Days’ Notice
ADOPTING AN EFFECTIVE CASE MANAGEMENT 35 ORDER FOR A CASE OF THIS SCALE Track Two Purpose = Prepare Competing Claims for Trial ➢ All DT Must be Approved by Court Prior to Start ➢ Limit of 120 on Additional RFPs, Rogs, and RFAs ➢ Seven Month Limit on Issuing Subpoenas to Third Parties ➢ Final Notice of Defective Work Due Six Months Later ➢ Trial Contemplated 15 months after CMO Issued
ADOPTING AN EFFECTIVE CASE MANAGEMENT 36 ORDER FOR A CASE OF THIS SCALE How Did It All Work Out? Track One : All but nine subcontractors’ claims totaling approximately $325 million settled, most within 18 months from commencement of litigation.
ADOPTING AN EFFECTIVE CASE MANAGEMENT 37 ORDER FOR A CASE OF THIS SCALE How Did It All Work Out? Track Two : Direct Owner/Contractor negotiations in 2014 settled approx. $140 million in claims. Two evidentiary hearings re Owner’s failure to comply with CMO, resulting in Owner being sanctioned for a total of $300K. Additionally, Owner ordered to pay $5.1M for attorney’s fees, expert witness fees, and costs incurred by Contractors for work that had to be duplicated or redone due to Owner’s destructive testing and extrapolation methodology.
ADOPTING AN EFFECTIVE CASE MANAGEMENT 38 ORDER FOR A CASE OF THIS SCALE How Did It All Work Out? Trial Set to Start in December 2014 Jury selection for twelve-month trial commenced on October 28, 2014. Six-week jury selection required due to pretrial media coverage. Contractor’s motion to change venue due to pretrial media coverage denied after jury selection. Case settled night before opening statements after three weeks of mediation.
39 “NO MAS!” Thanks for Listening. QUESTIONS?
Recommend
More recommend
