the Port of Houston Authority of Harris County, Texas v. Zachry Construction Corporation ( 2015 )

ACCEPTED
14-10-00708-CV
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
6/12/2015 5:04:25 PM
CHRISTOPHER PRINE
CLERK
No. 14-10-00708-CV
FILED IN
IN THE FOURTEENTH COURT OF APPEALS
14th COURT OF APPEALS
HOUSTON, TEXAS HOUSTON, TEXAS
6/12/2015 5:04:25 PM
CHRISTOPHER A. PRINE
PORT OF HOUSTON AUTHORITY OF HARRIS Clerk
COUNTY, TEXAS
v.
ZACHRY CONSTRUCTION CORPORATION
On appeal from the 151st Judicial District Court of Harris County, Texas
Trial Court Cause No. 2006-72970
ZACHRY CONSTRUCTION CORPORATION’S
SUPPLEMENTAL BRIEF OF APPELLEE
GIBBS & BRUNS, LLP REYNOLDS FRIZZELL, LLP
Robin C. Gibbs Brandon T. Allen
State Bar No. 0785300 State Bar No. 24009353
rgibbs@gibbsbruns.com ballen@reynoldsfrizzell.com
Jennifer Horan Greer 1100 Louisiana, Suite 3500
State Bar No. 00785611 Houston, Texas 77002
jgreer@gibbsbruns.com Phone: (713) 485-7200
Sydney G. Ballesteros Fax: (713) 485-7520
State Bar No. 24036180
sballesteros@gibbsbruns.com ALEXANDER DUBOSE
Michael R. Absmeier JEFFERSON & TOWNSEND LLP
State Bar No. 24050195 Douglas W. Alexander
mabsmeier@gibbsbruns.com State Bar No. 00992350
Amanda B. Nathan dalexander@adtappellate.com
State Bar No. 00784662 515 Congress Avenue, Suite 2350
anathan@gibbsbruns.com Austin, Texas 78701-3562
1100 Louisiana, Suite 5300 Phone: (512) 482-9301
Houston, Texas 77002 Fax: (512) 482-9303
Phone: (713) 650-8805
Fax: (713) 750-0903
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
1. Petitioner: Zachry Construction Corporation
Represented in the trial court and on appeal by:
Robin C. Gibbs Brandon T. Allen
State Bar No. 07853000 State Bar No. 24009353
rgibbs@gibbsbruns.com REYNOLDS FRIZZELL, L.L.P.
Jennifer Horan Greer 1100 Louisiana, Suite 3500
State Bar No. 00785611 Houston, Texas 77002
jgreer@gibbsbruns.com Phone: (713) 485-7200
Sydney G. Ballesteros Fax: (713) 485-7250
State Bar No. 24036180 Email: ballen@reynoldsfrizzell.com
sballesteros@gibbsbruns.com
Michael R. Absmeier
State Bar No. 24050195
mabsmeier@gibbsbruns.com
Amanda B. Nathan
State Bar No. 00784662
anathan@gibbsbruns.com
GIBBS & BRUNS L.L.P.
1100 Louisiana, Suite 5300
Houston, Texas 77002
Phone: (713) 650-8805
Fax: (713) 750-0903
Represented on appeal by:
Douglas W. Alexander
State Bar No. 00992350
dalexander@adtappellate.com
ALEXANDER DUBOSE
JEFFERSON &
TOWNSEND LLP
515 Congress Avenue, Suite 2350
Austin, Texas 78701-3562
Phone: (512) 482-9301
Fax: (512) 482-9303
i
2. Respondent: Port of Houston Authority of Harris County, Texas
Represented in the trial court and on appeal by:
Marie R. Yeates David E. Keltner
State Bar No. 22150700 State Bar No. 11249500
myeates@velaw.com david.keltner@kellyhart.com
Catherine B. Smith Marianne Auld
State Bar No. 03319970 State Bar No. 01429910
csmith@velaw.com marianne.auld@kellyhart.com
VINSON & ELKINS L.L.P. KELLY HART & HALLMAN LLP
1001 Fannin, Suite 2500 201 Main Street, Suite 2500
Houston, Texas 77002 Fort Worth, Texas 76102
Phone: (713) 758-4576 Phone: (817) 878-3560
Fax: (713) 615-5544 Fax: (817) 878-9760
Michael A. Heidler Bill Sims
State Bar No. 24059921 State Bar No. 18429500
mheidler@velaw.com bsims@velaw.com
VINSON & ELKINS L.L.P. VINSON & ELKINS L.L.P.
2801 Via Fortuna, Suite 100 2001 Ross Avenue, Suite 3700
Austin, Texas 78746 Dallas, Texas 75201
Phone: (512) 542-8579 Phone: (214) 220-7703
Fax: (512) 236-3217 Fax: (214) 999-7703
Karen L.T. White David H. Brown
State Bar No. 20274500 State Bar No. 03109200
karen@kltwpc.com dbrown@bkllp.com
KAREN L.T. WHITE, P.C. BROWN & KORNEGAY LLP
2777 Allen Parkway, Suite 977 2777 Allen Parkway, Suite 977
Houston, Texas 77019 Houston, Texas 77019
Phone: (832) 646-4667 Phone: (713) 528-3703
Fax: (713) 528-3701
ii
Represented in the trial court by:
Lawrence J. Fossi
State Bar No. 97280650
lfossi@fossijewell.com
FOSSI & JEWELL LLP
4203 Yoakum Boulevard, Suite 100
Houston, Texas 77006
Phone: (713) 529-4000
Fax: (713) 529-4094
iii
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL .......................................................... i
TABLE OF CONTENTS .......................................................................................iv
INDEX OF AUTHORITIES............................................................................... viii
STATEMENT OF THE CASE ............................................................................xiv
ISSUES PRESENTED........................................................................................xvii
STATEMENT OF FACTS ..................................................................................... 1
I. PHA hires Zachry to construct a wharf and understands Zachry plans
to use a freeze-wall means and methods. ..................................................... 1
II. The Contract makes Zachry solely responsible for choosing the means
and methods of construction and precludes PHA control. ........................... 4
III. PHA belatedly adds an extension to the wharf design and recognizes
only Zachry can timely build it and only with the frozen-cutoff wall. ........ 5
IV. PHA conceals its unsubstantiated “concerns” about the frozen-cutoff
wall to induce Zachry into agreeing to build the extension. ........................ 8
V. PHA waits to reject the frozen-cutoff wall until after Zachry is bound
by CO4, which plainly incorporates the frozen-cutoff wall. ...................... 11
VI. PHA issues its R&R Order, which everyone understands rejected the
frozen-cutoff wall and which Zachry makes clear to PHA constitutes a
breach. ......................................................................................................... 15
VII. PHA’s rejection of the frozen-cutoff wall forces Zachry to complete
construction in the wet. ............................................................................... 16
VIII. Working in the wet causes Zachry substantial damages for which it
sues.............................................................................................................. 21
SUMMARY OF ARGUMENT ............................................................................ 24
ARGUMENT ........................................................................................................ 26
iv
I. Ample evidence supports the jury’s breach-of-contract findings. ............. 26
A. Section 5.10 prohibited PHA’s R&R Order, and no other
Contract provision authorized it. ...................................................... 26
1. Section 5.10 forbids PHA control of Zachry’s means and
methods. ................................................................................. 26
2. Section 4.07 forbids PHA control over Zachry’s health-
and-safety plans...................................................................... 28
3. None of PHA’s other cited provisions authorize the R&R
Order. ..................................................................................... 29
4. PHA is not remediless. ........................................................... 32
5. The drilled-shaft submittal is consistent with Zachry’s
reading. ................................................................................... 32
B. PHA’s R&R Order breached CO4. .................................................. 33
C. Question 1 was proper. ..................................................................... 35
II. The jury's verdict on causation and damages is supported by the
evidence. ..................................................................................................... 35
A. Draper’s assumptions on damages were supported by the
evidence and did not vary materially from undisputed facts. .......... 36
1. Draper’s treatment of freeze-pipe removal was supported
by the evidence....................................................................... 37
2. Draper’s treatment of sheet-pile installation was
supported by the evidence...................................................... 39
B. The evidence establishes causation. ................................................. 40
1. Ample evidence supported the jury’s causation finding........ 40
2. PHA’s “Contract completion deadline” argument fails......... 41
3. PHA’s “alternative cause” argument fails. ............................ 42
C. PHA’s lack-of-authority argument does not defeat causation. ........ 43
v
III. Sections 5.41 and 5.42 do not bar Zachry’s breach-of-contract claim. ...... 45
A. The “changes” clauses are inapplicable by their terms. ................... 45
B. Alternatively, common-law and statutory rules preclude
application of the “changes” clauses here. ....................................... 48
1. The Shintech doctrine. ........................................................... 48
a. Green does not preclude application of Shintech. ....... 49
b. Technip does not preclude application of Shintech. .... 50
2. The radical-change doctrine................................................... 51
3. Section §16.071...................................................................... 52
C. The “changes” clauses were not tried. ............................................. 53
D. If the trial court erred, remand—not rendition—is required............ 54
E. Zachry’s failure to seek a §5.08 extension was irrelevant. .............. 54
IV. The trial court did not abuse its discretion in excluding PHA’s $8.6
million in alleged harms claimed as offsets. .............................................. 55
V. PHA’s “open-the-door” theory did not support admission of PHA’s
alleged harms regarding the no-damages-for-delay exceptions. ................ 58
A. The trial court properly excluded PHA’s actual-harms evidence
under Rule 403. ................................................................................ 58
B. Any error was harmless. ................................................................... 60
VI. The trial court did not err in instructing the jury as to fraud. ..................... 60
A. The Supreme Court approved the recklessness instruction. ............ 60
B. No charge error tainted the no-damages-for-delay exceptions. ....... 61
VII. The apparent-authority instructions were proper. ...................................... 62
A. Apparent authority is a fact issue. .................................................... 62
B. Zachry pleaded apparent authority. .................................................. 63
vi
VIII. PHA is not entitled to attorneys’ fees if Zachry prevails on any theory. ... 64
IX. Zachry’s recovery on its pass-through claim should be affirmed. ............. 67
A. Zachry asserts a valid pass-through claim. ...................................... 67
B. The Court correctly charged the jury on pass-through. ................... 70
C. Waiver of immunity applies to the pass-through claims.................. 70
PRAYER ............................................................................................................... 71
CERTIFICATE OF SERVICE ............................................................................. 72
CERTIFICATE OF COMPLIANCE .................................................................... 74
vii
INDEX OF AUTHORITIES
Cases
4901 Main, Inc. v. TAS Automotive,
187 S.W.3d 627 (Tex. App.—Houston [14th Dist.] 2006, no pet.) .....................65
Abraxis Petrol Corp. v. Hornburg,
20 S.W.3d 741 (Tex. App.—El Paso 2000, no pet.) ............................................41
Allison v. Service Lloyds Ins.,
437 S.W.3d 589 (Tex. App.—Houston [14th Dist.] 2014, pet. denied) ...............64
Alvarado v. Farah Mfg.,
830 S.W.2d 911 (Tex. 1992) ................................................................................55
America’s Favorite Chicken Co. v. Samaras,
929 S.W.2d 617 (Tex. App.—San Antonio 1996, writ denied) .................... 39, 40
American Airlines Employee Federal Credit Union v. Martin,
29 S.W.3d 86 (Tex. 2000) ....................................................................................52
Atwood Oceanics v. Zust Bachmeier,
2007 WL 2766192 (5th Cir. 2007) ........................................................................52
B.F.&C.M. Davis v. W.E. Callaghan Constr.,
298 S.W. 273 (Tex. Comm’n App. 1927) ............................................................51
Beneficial Personnel Servs. v. Rey,
927 S.W.2d 157 (Tex. App.—El Paso 1996, vac. w.r.m.) ...................................61
Bhatia v. Woodlands North Houston Heart Center,
396 S.W.3d 658 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) ...............67
Board of Regents v. S&G Constr. Co.,
529 S.W.2d 90 (Tex. Civ. App.—Austin 1975, writ ref’d
n.r.e.) ............................................................................................ 46, 47, 48, 49, 50
Burroughs Wellcome v. Crye,
907 S.W.2d 497 (Tex. 1995) ................................................................................36
Chapapas v. Delhi Taylor Oil,
323 S.W.2d 64 (Tex. Civ. App.—San Antonio 1959, writ ref'd n.r.e.) ...............64
viii
City of San Antonio v. Valemas,
2012 WL 2126932 (Tex. App.—San Antonio 2012, no pet.) ....................... 70, 71
County of Dallas v. Wiland,
216 S.W.3d 344 (Tex. 2007) ................................................................................54
Cox v. Humble Oil & Refining,
16 S.W.2d 285 (Tex. Comm’n App. 1929) ..........................................................64
Criswell v. European Crossroads Shopping Center,
792 S.W.2d 945 (Tex. 1990) ................................................................................48
Douglass v. Panama,
504 S.W.2d 776 (Tex. 1974) ................................................................................62
Equitable Life Assur. Society v. Ellis,
147 S.W. 1152 (Tex. 1912) ..................................................................................62
Flagship Hotel. v. City of Galveston,
117 S.W.3d 552 (Tex. App.—Texarkana 2003, pet. denied).................. 65, 66, 67
Frost Nat’l Bank v. L&F Distrib’rs,
165 S.W.3d 310 (Tex. 2005) ......................................................................... 26, 47
Ft. Worth ISD v. City of Ft. Worth,
22 S.W.3d 831 (Tex. 2000) ..................................................................................53
Galveston I.S.D. v. Clear Lake Rehab. Hosp.,
324 S.W.3d 802 (Tex. App.—Houston [14th Dist.] 2010, no pet.) ......................70
Gen. Elec. Co. v. Moritz,
257 S.W.3d 211 (Tex. 2008) ..................................................................................5
Green Int’l, Inc. v. Solis,
951 S.W.2d 384 (Tex. 1997) ................................................................................49
Hanks v. GAB Bus. Servs.,
644 S.W.2d 707 (Tex. 1982) ................................................................................50
Harris Cty. v. Inter Nos, Ltd.,
199 S.W.3d 363 (Tex. Civ. App.—Houston [1st Dist.] 2006, no pet.).................55
ix
Hayden v. State,
296 S.W.3d 549 (Tex. Crim. App. 2009) .............................................................59
Helena Chemical Co. v. Wilkins,
47 S.W.3d 486 (Tex. 2001) ..................................................................................40
Hensel Phelps Constr. v. McCarthy Bld'g,
2005 WL 1489932 (N.D. Tex. 2005) ...................................................................70
Horizon/CMS Healthcare. v. Auld,
34 S.W.3d 887 (Tex. 2000) ..................................................................................59
In re ADM Inv. Servs.,
304 S.W.3d 371 (Tex. 2010) ................................................................................64
Intercontinental Group Ptnrshp. v. KB Home Lone Star,
295 S.W.3d 650 (Tex. 2009) ......................................................................... 65, 66
Interstate Contracting Corp. v. City of Dallas,
135 S.W.3d 605 (Tex. 2004) .................................................... xxiv, 25, 68, 69, 71
Iron Mtn. Bison Ranch v. Easley Trailer Mfg.,
42 S.W.3d 149 (Tex. App.—Amarillo 2000, no pet.) ..........................................64
Kiefer v. Continental Air.,
10 S.W.3d 34 (Tex. App.—Houston [14th Dist.] 1999, pet. denied)....................35
Mann v. Fitzhugh-Straus Medina Ranch,
640 S.W.2d 367 (Tex. App.—San Antonio 1982, no writ) .................................61
McCreary v. Bay Area Bank & Trust,
68 S.W.3d 727 (Tex. App.—Houston [14th Dist.] 2001, pet. dism’d) .................26
Nat’l Env’l Serv. v. Homeplace Homes,
961 S.W.2d 632 (Tex. App.—San Antonio 1998, no writ) .................................52
North Harris County Jr. College Dist. v. Fleetwood Constr. Co.,
604 S.W.2d 247 (Tex. Civ. App.—Houston [14th Dist.] 1980, writ ref’d
n.r.e.) .....................................................................................................................49
Pace Concerts v. Resendez,
72 S.W.3d 700 (Tex. App.—San Antonio 2002, pet. denied) .............................63
x
Paramount Nat’l Life Ins. v. Williams,
772 S.W.2d 255 (Tex. App.—Houston [14th Dist.] 1989, writ denied) ...............62
Prodigy Comms. Corp. v. Agricultural Excess & Surplus Ins.,
288 S.W.3d 374 (Tex. 2009). ...............................................................................54
Provident Life & Accident Ins. v. Hazlitt,
216 S.W.2d 805 (Tex. 1949) ................................................................................53
Robinson v. Lubbering,
2011 WL 749197 (Tex. App.—Austin 2011, no pet.) .........................................55
Secure Comm. v. Anderson,
31 S.W.3d 428 (Tex. App.—Austin 2000, no pet.)..............................................55
SEECO, Inc. v. K.T. Rock,
416 S.W.3d 664 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) ...............67
Shintech, Inc. v. Group Constructors, Inc.,
688 S.W.2d 144 (Tex. App.—Houston [14th Dist.] 1985, no writ)............... 46, 49
Shupe v. Lingafelter,
192 S.W.3d 577 (Tex. 2006) ................................................................................35
Solar Soccer Club v. Prince of Peace Luth. Church,
234 S.W.3d 814 (Tex. App.—Dallas 2007, pet. denied) .....................................65
Sprague v. Sprague,
363 S.W.3d 788 (Tex. App.—Houston [14th Dist.] 2012, pet. denied) ...............57
State v. F&C Eng’g,
438 S.W.2d 647 (Tex. Civ. App.—Houston [14th Dist.] 1969, writ ref’d
n.r.e.) .....................................................................................................................47
State v. Martin Bros.,
160 S.W.2d 58 (Tex. 1942) ..................................................................................47
Structural Metals, Inc. v. S&C Elec. Co.,
590 Fed. Appx. 298 (5th Cir. 2014) ......................................................................65
Taber v. W. Union Tele. Co.,
137 S.W. 106 (Tex. 1911) ....................................................................................52
xi
Tennessee Gas Pipeline v. Technip USA Corp.,
2008 WL 3876141 (Tex. App.—Houston [1st Dist.] 2008, pet. denied) .............50
The Port of Houston Authority of Harris County v. Zachry Construction Corp.,
377 S.W.3d 841 (Tex. App.—Houston [14th Dist.] 2012, pet. filed) ........... xv, 23
Thota v. Young,
366 S.W.3d 678 (Tex. 2012) ......................................................................... 61, 62
West v. Triple B Servs., LLP,
264 S.W.3d 440 (Tex. App.—Houston [14th Dist.] 2008, no writ)......................49
Zachry Construction Corp. v. The Port of Houston Authority of Harris County,
449 S.W.3d 98 (Tex. 2014) ............... xv, 1, 5, 9, 11, 12, 15, 16, 21, 23, 27, 60, 61
Statutes
TEX. CIV. PRAC. & REM. CODE §16.071(a) ..............................................................52
TEX. LOC. GOV’T CODE §271.151(2) .......................................................................45
TEX. LOC. GOV’T CODE §271.152 ..................................................................... 45, 70
TEX. LOC. GOV’T CODE §271.153(a)(1) ...................................................................62
TEX. LOC. GOV’T CODE §271.153(a)(2) ...................................................................62
TEX. WATER CODE §60.408(i) .................................................................................45
Rules
TEX. R. CIV. P. 193.1 ................................................................................................55
TEX. R. CIV. P. 193.6 ................................................................................................55
TEX. R. CIV. P. 194.2(c) ...........................................................................................55
TEX. R. CIV. P. 194.2(d) ...........................................................................................55
TEX. R. CIV. P. 403 ...................................................................................................54
xii
Other Authorities
1 BRUNER & O’CONNOR CONSTR. LAW §4.23 .........................................................46
Brown & Rondon, TEXAS RULES OF EVIDENCE HANDBOOK §107 (2015) ...............59
Goode, Wellborn & Sharlot, 1 TEX. PRAC.: TEX. RULES OF EVID. 107.1 (3d ed.
2015) .....................................................................................................................59
McCormick, The New Code of Evidence, TEX. L REV. 661, 673 (June 1942) ........60
TEX. P.J.C. BUSINESS §105.2 (2014) ........................................................................61
TEX. P.J.C. BUSINESS §105.3B (2014) .....................................................................61
xiii
STATEMENT OF THE CASE
Nature of Case: Appellee Zachry Construction Corporation (“Zachry”), a
contractor, sued Appellant Port of Houston Authority of Harris
County, Texas (“PHA”) for damages arising out of PHA’s
breach of its contract with Zachry, pursuant to which Zachry
promised to construct a wharf and PHA promised not to
interfere with Zachry’s means and methods of construction.
Trial Court: Hon. Mike Engelhart, 151st Judicial District, Harris County.
Jury Verdict: The jury found PHA breached both §5.10 of the Bayport
Terminal Complex Phase 1A Wharf and Dredging Contract
(“the Contract”) and Change Order 4 thereto. CR59:17390-
91(A4).1 The jury further (1) awarded Zachry $18,602,697 in
damages, CR59:17392-93(A4);2 (2) found that PHA’s breach
was not excused by waiver, equitable estoppel, quasi-estoppel,
release, or fraudulent inducement, CR59:17396-99(A4);
(3) found that PHA did not fail to comply with the Contract by
withholding $600,000 for dredging from PHA’s payment on
amounts invoiced by Zachry, CR59:17402(A4); (4) with
respect to the trial court’s determination that PHA failed to
comply with the Contract by failing to pay Zachry $2.36
million that PHA withheld as liquidated damages, found
(a) PHA’s breach was excused to the extent of $970,000 that
PHA withheld from payments to Zachry for allegedly defective
fenders, and (b) PHA’s breach was not excused based on
release, CR59:17405-06(A4); and (5) found the reasonable fees
for the necessary services of PHA’s attorneys totaled
$10,697,750 for all stages of litigation and breach of contract
theories, CR59:17407-08(A4).
Judgment: Judge Engelhart rendered judgment on the verdict, awarding
1
Abbreviations in this brief are the same as in Zachry’s previously filed briefs in this case.
“PHASupp.” refers to PHA’s Post-Remand Supplemental Brief of Appellant.
2
The jury found 58.13% of these damages to be delay damages, CR59:17394(A4), but the trial
court entered an agreed order disregarding the jury’s answer, finding that 100% of those
damages were conclusively established to have been delay damages, CR60:17526.
xiv
Zachry $19,992,697 in damages, which the court calculated by
adding the $2.36 million in improperly withheld liquidated
damages the court awarded Zachry on directed verdict plus the
$18,602,697 jury award for a total of $20,962,697, and then
deducting the $970,000 offset found by the jury.
CR62:18166(A1). The court declined to award Zachry the
$600,000 that Zachry claimed PHA wrongfully withheld from
Zachry’s payments but that the jury had declined to award to
Zachry. Id. The court also declined to award PHA attorneys’
fees. CR62:18163-67(A1). The court awarded pre- and post-
judgment interest and taxable costs. CR62:18166-67(A1).
Court of
Appeals: PHA appealed, and Zachry cross-appealed. CR64:18706-11;
CR64:18925-27. A panel of the Fourteenth Court of Appeals
consisting of Justices McCally, Christopher, and Boyce heard
oral argument. In an opinion authored by Justice McCally, the
Panel reversed and rendered judgment against Zachry, holding
that (1) the no-damages-for-delay provision in §5.07 of the
Contract precluded Zachry’s damages as a matter of
law, (2) Zachry unambiguously released its claims for
liquidated damages and for $600,000 withheld for dredging
(Christopher, J., dissenting), (3) the trial court did not err in
offsetting the judgment against PHA by $970,000 for allegedly
defective wharf fenders, and (4) PHA should recover its
attorneys’ fees from Zachry. The Port of Houston Authority of
Harris County v. Zachry Construction Corporation, 377
S.W.3d 841 (Tex. App.—Houston [14th Dist.] 2012), rev’d,
449 S.W.3d 98 (Tex. 2014)(A2).
Supreme Court: In a 5-4 decision, the Supreme Court reversed the Fourteenth
Court’s judgment. Zachry Construction Corporation v. Port of
Houston Authority of Harris County, 449 S.W.3d 98, 119-20
(Tex. 2014)(A3). In an opinion authored by Justice Hecht, the
majority held that Zachry’s claim for delay damages was not
barred by governmental immunity or by the no-damages-for-
delay provision of the Contract. It also held that Zachry was
entitled to recover liquidated damages withheld by PHA, but
that there was some evidence to support the jury’s award of the
$970,000 offset for allegedly defective wharf fenders. Finally,
xv
it concluded that PHA was not entitled to attorneys’ fees.
Because PHA had raised a number of other issues, the Supreme
Court remanded the case to the Fourteenth Court for further
consideration. Id. at 120(A3).
xvi
ISSUES PRESENTED
1. Breach of §5.10. The jury’s finding in Question 1 that PHA failed to
comply with §5.10 of the Contract is supported by factually and legally sufficient
evidence, because, inter alia,
(a) §5.10 provided PHA had no “right to control” Zachry's means and
methods,
(b) no other provision of the Contract gave PHA such a right of control,
and
(c) the evidence established that PHA exercised control over Zachry’s
means and methods by issuing a revise-and-resubmit order (“R&R
Order”) in response to Zachry's frozen-cutoff wall design. See
Argument Part I.A.
2. Breach of CO4. The jury’s finding that PHA failed to comply with Change
Order 4 (“CO4”) is supported by factually and legally sufficient evidence, because,
inter alia, PHA only challenges Zachry's interpretation of the change order—not
whether PHA failed to comply with it—and the evidence established that PHA
agreed in CO4 that Zachry could use the frozen-cutoff wall embodied in the
September 9 design, thereby obviating any purported right PHA had to issue the
R&R Order. See Argument Part I.B.
xvii
3. Instruction in Question 1. The trial court did not abuse its discretion in
instructing the jury in Question 1 that it was “not being asked to decide whether
PHA failed to comply with §5.10.” See Argument Part I.C.
(a) The instruction properly clarified that the jury was being asked to
decide in Question 1 whether CO4 gave Zachry the right to use the
frozen-cutoff wall embodied in the Sept. 9 design, and if so, whether
PHA failed to comply with such a right, as distinguished from the
question whether PHA complied with §5.10, which the jury
considered in Question No. 2. See Argument Part I.C.
(b) PHA has not shown and cannot show reversible error, because the
jury found in Question 2 that PHA failed to comply with §5.10;
Zachry was entitled to a directed verdict on its claim for breach of
CO4, and Question 1 should not have been submitted; and PHA has
not otherwise shown harm. See Argument Part I.C.
4. Damages. The evidence was legally and factually sufficient to support the
jury's finding of damages in Question 3. See Argument Part II.A. And the trial
court did not abuse its discretion in refusing to exclude Draper’s testimony. See
Argument Part II.A.
xviii
5. Causation. The evidence was legally and factually sufficient to support the
jury’s finding that PHA’s failure to comply with §5.10 and/or CO4 caused
Zachry’s damages. See Argument Part II.B.
(a) Zachry offered sufficient evidence to support the jury’s finding of
causation, and expert testimony was not required. See Argument Part
II.B.
(b) PHA waived its argument that Zachry was required to prove that,
absent PHA’s breach, it would have completed all of Milestone-A in
the dry before either February 15 or May 15, 2006. See Argument
Part II.B.
(c) The trial court did not abuse its discretion in charging the jury as to
apparent authority, and PHA shows no harm. See Argument Part II.C.
6. Sections 5.41/5.42. The trial court did not err in holding that §§5.41/5.42
(and §5.52 to the extent it imposes the same requirements as §5.41) do not bar
Zachry’s breach-of-contract claim based on the R&R Order. See Argument Part
III.
(a) The plain language of §§5.41/5.42 applies to changes during the
performance of the Contract, not to PHA’s breach of contract. See
Argument Part III.A.
xix
(b) The Shintech rule precludes application of §§5.41/5.42 to bar
Zachry’s breach-of-contract claim. See Argument Part III.B.1.
(c) The radical-change doctrine precludes application of §§5.41/5.42 to
bar Zachry’s breach-of-contract claim. See Argument Part III.B.2
(d) Section 16.071 of the Texas Civil Practice and Remedies Code
precludes application of §5.42 to bar Zachry’s breach-of-contract
claim. See Argument Part III.B.3.
(e) Zachry’s compliance with §§5.41/5.42 was not tried to the jury
because the trial court ruled before trial that §§5.41/5.42 were invalid
and/or inapplicable, the jury was instructed that it could only consider
§§5.41/5.42 for state of mind, and no jury question was submitted
regarding §§5.41/5.42. Even if §5.42 could be considered to have
been tried in such circumstances, there was factually and legally
sufficient evidence that Zachry substantially complied with §5.42.
See Argument Part III.C.
(f) Because §§5.41/5.42 were inapplicable, the trial court did not abuse
its discretion in instructing the jury that, to recover its damages from
the R&R Order, Zachry was not required to obtain a §5.41 change
order or give §5.42 notice, but could consider these provisions only in
xx
assessing state of mind, and PHA shows no harm. See Argument Part
III.
(g) Even if PHA could establish error with respect to §§5.41/5.42, the
proper remedy is remand, not rendition. See Argument Part IV.D.
7. Section 5.08. The trial court did not abuse its discretion in excluding
evidence that Zachry did not seek an extension of time under §5.08 for PHA’s
breach of contract, given that §5.08 does not apply to breaches of contract and is
thus irrelevant; any probative value of such evidence is outweighed by the danger
of unfair prejudice to Zachry; and PHA has shown no harm, because the evidence
is not controlling on a dispositive, material issue, nor did it probably cause the
rendition of an improper judgment. See Argument Part IV.E.
8. Exclusion of $8.6 Million in Alleged Harms. The trial court did not abuse
its discretion in excluding PHA's claimed $8.6 million in alleged “actual harms”
claimed as offsets based on PHA’s failure to timely disclose any intent to seek
these harms as an offset defense to be deducted from Zachry’s damages award.
PHA is not entitled to a new trial to try an additional offset defense based on the
trial court’s exclusion of PHA’s claimed harms. See Argument Part IV.
9. PHA’s Open-the-Door Theory. The trial court did not abuse its discretion in
excluding a subset of PHA’s claimed actual-harms evidence with respect to the
xxi
arbitrary-and-capricious and bad-faith no-damages-for-delay exceptions despite
finding that the “door” had been “opened.” See Argument Part V.
(a) There was no misimpression to correct, because Zachry only argued
that PHA promised that it would not charge liquidated damages if the
crane-ship could dock when it arrived—not that PHA would not
charge LDs if it suffered no harm at all. See Argument Part V.A.
(b) In any event, the probative value of PHA’s actual-harms evidence in
refuting any minor misimpression would be substantially outweighed
by undue delay and the danger of unfair prejudice to Zachry. See
Argument Part V.A.
(c) Any error in excluding the evidence was harmless. See Argument
Part V.B.
10. Recklessness instruction. The trial court did not err in instructing the jury
that recklessness could support fraud based on a promise made with an intent not
to perform. And PHA shows no harm. See Argument Part VI.
(a) The Texas Supreme Court held that the trial court properly instructed
the jury as to the no-damages-for-delay exceptions, including fraud.
See Argument Part VI.A.
(b) The instruction was consistent with Texas law and the pattern charge.
See Argument Part VI.A.
xxii
(c) There is factually and legally sufficient evidence that PHA
intentionally defrauded Zachry (as PHA claims it must be defined) by
entering into CO4 with no intent to perform. See Argument Part
VI.B.
(d) Even if error, remand for a new trial is not necessary, because the
Court can be reasonably certain that the jury was not significantly
influenced by the fraud issue. See Argument Part VI.B.
(e) PHA’s evidentiary challenge to the fraud finding is limited to the
sufficiency of the evidence to show that PHA knew that CO4 included
an agreement that Zachry could use the frozen-cutoff wall, because
that was the only basis for its evidentiary challenge in its original
Brief of Appellant. See Aple.Br:48.
11. Apparent Authority Instruction. The trial court did not err in instructing the
jury on apparent authority. See Argument Part VII.
(a) Apparent authority is a fact issue, and there was factually and legally
sufficient evidence that CH2M-Hill had apparent authority. See
Argument Part VII.A.
(b) The trial court did not abuse its discretion in finding that Zachry
pleaded apparent authority. See Argument Part VII.B.
xxiii
(c) Any error in instructing the jury regarding apparent authority is
harmless. Aple.Br:73-74.
12. Attorneys’ fees. PHA is not entitled to attorneys’ fees if any judgment is
entered for Zachry in this case. See Argument Part VIII.
13. Pass-through damages. The trial court properly entered judgment allowing
Zachry to recover damages that were incurred by the subcontractor that it created
in a corporate reorganization and that performed some of the Contract work
pursuant to a “pass-through agreement” with Zachry, as authorized by Interstate
Contracting Corp. v. City of Dallas, 135 S.W.3d 605, 610 (Tex. 2004). See
Argument Part IX.
(a) Zachry asserted a valid pass-through claim. See Argument Part IX.A.
(b) The trial court did not abuse its discretion in instructing the jury with
respect to the pass-through damages. See Argument Part IX.B.
(c) Governmental immunity does not bar Zachry's pass-through claim.
See Argument Part IX.C.
14. Waiver. PHA cannot obtain reversal of the judgment based on arguments
not raised in the trial court, errors as to which PHA has shown no harm, errors
raised for the first time in its supplemental brief, and errors as to which PHA on
appeal has provided no meaningful argument and/or has not cited authority or
evidence.
xxiv
STATEMENT OF FACTS
In the Supreme Court, PHA and Zachry briefed the facts pertaining to
PHA’s multiple issues, all of which PHA raises again here. The Court observed
the evidence “was hotly disputed” and the standard of review required it to view
disputed evidence in Zachry’s favor:
In reviewing any case tried to a jury, we must view the evidence “in
the light most favorable to the verdict”—in this case a verdict for
[Zachry]—“crediting favorable evidence if reasonable jurors could,
and disregarding contrary evidence unless reasonable jurors could
not”....
Zachry, 449 S.W.3d at 101 n.3(A3). The Court recited the evidence “in that light.”
Id.
The same standard applies to this Court’s review on remand. Yet PHA
never mentions the governing standard and ignores the Supreme Court’s factual
recitations pursuant to it. As a result, PHA erroneously portrays the evidence in
the light most favorable to PHA, not Zachry.
This fact statement comports with the standard governing this Court’s
review on remand.
I. PHA hires Zachry to construct a wharf and understands Zachry plans
to use a freeze-wall means and methods.
In 1999, PHA hired DMJM to design a 1660-foot wharf. 6:8-9, 90. The
project was subsequently delayed five years. 67:40-41; PX466.0004. In 2004,
PHA hired CH2M-Hill as construction manager—PHA’s on-site representative
1
and primary point-of-contact with the project’s general contractor (ultimately,
Zachry). 6:84-86; 20:38; 44:43-44.
That same year, PHA chose Zachry to build the wharf because, among other
reasons, Zachry’s unique means and methods of construction—a frozen wall—
used fewer emissions credits, as the freeze-wall would enable Zachry to build the
wharf primarily on dry land (“in the dry”), rather than in the water (“in the wet”).
7:15-16; 39:46.
Zachry’s choice of means and methods was critical to sequencing
construction tasks. The project originally entailed installing the following
alongside the bay:
* a five-section, concrete wharf deck;
* thousands of under-deck concrete drilled shafts, or piers; and
* concrete revetment blocks protecting the under-deck soil slope. 9:25,
27-28, 59-61.
To accomplish these tasks in the dry, Zachry’s unique means and methods
entailed building a frozen, u-shaped soil berm around the construction site to hold
back the bay. 9:58-61. Zachry would sink pipes into the berm and then freeze it
by circulating sub-freezing brine through the pipes. While building the wall,
Zachry would simultaneously build the wharf in the dry behind it, drilling concrete
piers into the ground and then building the deck on top, using the ground as a
concrete form. Zachry would then excavate dirt under the wharf and among the
2
piers using dry-land equipment (e.g., bulldozers). Once the u-shaped berm was
frozen, Zachry could excavate even deeper. As it completed excavation, Zachry
would place revetment on the under-deck slope. Zachry would then breach the
freeze-wall, allowing water to reach the wharf, and then remove the remainder of
the freeze-wall in the wet. See 9:27-28, 59-73.
This plan depended on using the freeze-wall and—importantly—working in
the dry until the freeze-wall was breached: a contractor working in the wet would
never build the piers and deck before excavating, given the difficulty and cost of
excavating and placing revetment underwater, beneath the deck, and among the
piers. 9:76-77; 47:34.
By October 2003, PHA began asking Zachry about the effect of freezing soil
near piers. 7:24-27; 37:31-32; PX49.0002-3; PX67; PX116. Among other
precautions, Zachry and freeze-wall-designer Dan Mageau stated they would keep
frozen soils nine feet away from the drilled shafts “wherever possible.” PX6.006.
Thus, if it were not possible, they would not. 9:149. PHA—which had no soil-
freeze expertise—requested the nine-foot distance, which had no scientific basis.
29:62-63. Mageau, the project’s only soil-freeze expert, established through tests
provided to PHA that “one freeze-thaw cycle does not appear to reduce the shear
strength in the soil.” PX138.0014; PX7.0010; 29:106-08; see 21:112.
PHA and Zachry executed the Contract June 1, 2004. DX1. It was PHA’s
3
form contract. 6:21-24. Given its 5-year delay, PHA imposed a tight, two-year
completion deadline. 6:88; 64:22; DX1-1.0002. There was an interim deadline
(“Milestone-A”) of February 1, 2006 to finish 660 feet of wharf to allow a ship to
deliver cranes from China. 9:79.
II. The Contract makes Zachry solely responsible for choosing the means
and methods of construction and precludes PHA control.
The freeze-wall (and later, frozen-cutoff wall) was undisputedly Zachry’s
construction means and methods. 6:76; 8:90, 94; 26:123; 37:52-53. Contract
§5.10 made Zachry solely responsible for its means and methods and barred PHA
interference:
The Port Authority shall not have the right to control the manner in which
or prescribe the method by which the Contractor performs the Work. As an
independent Contractor, the Contractor shall be solely responsible for
supervision of and performance of the Work and shall prosecute the Work
at such time and seasons, in such order or precedence, and in such manner,
using such methods as Contractor shall choose....
DX1-1.0214(A13). 3 Nothing in §5.10 permitted PHA to reject Zachry’s methods.
27:26-27; pp.26-27.
PHA conceded §5.10’s purpose was to “isolat[e] the Port Authority from
having any responsibilities for the contract[or]’s means and methods,” and “keep
the responsibility and liability on [the contractor’s] side of the table.” 8:91, 93; see
6:39-42; 27:6-7. The Supreme Court recognized this “provision benefitted the
3
Emphasis added unless noted otherwise.
4
Port, insulating it from liability to which it would be exposed were it exercising
control over Zachry’s work.” 449 S.W.3d at 102 & n.4(A3)(citing Gen. Elec. v.
Moritz, 257 S.W.3d 211, 214 (Tex. 2008)).
Consistent with this purpose, nothing in the Contract gave PHA the right to
issue the October 11, 2005 revise-and-resubmit order (“R&R Order”). See pp.26-
34. To avoid any claim of control and attendant liability, PHA did not approve or
reject the main freeze-wall, but simply ensured it had been approved by a Texas
Professional Engineer (“PE”) and “accepted [it] for records.” 37:115-16; 44:90;
pp.28-29.
III. PHA belatedly adds an extension to the wharf design and recognizes
only Zachry can timely build it and only with the frozen-cutoff wall.
Nine months into the Contract—less than a year before Milestone-A—PHA
belatedly realized its 5-year-old wharf design was too short, and added a 332-foot
sixth section. PX130.0004; PX141.0016; 7:34-37. PHA concluded only Zachry
could timely build the extension within emissions limits. PX3(A28); PX224(A24);
8:22-27; 22:103-07; 45:138-40; see 7:37-40, 78; 38:34-35; PX192.002. PHA knew
Zachry was pressed to timely finish, and that PHA had to move quickly to avoid
delay. PX164, ¶9; PX172 at 3; 7:35-37, 44, 84-85; 25:50-53; 45:79.
To accommodate PHA’s belated addition, Zachry would have to modify its
methods to add a “frozen-cutoff wall” to ensure it could timely complete
Milestone-A to allow the crane-ship to dock and finish the remainder of the wharf
5
in the dry. 7:99-101; 9:138-39; 27:96; 38:51-53; PX8.0011(A20). On April 5,
2005, Zachry’s Project Manager Andy Anderson told CH2M-Hill’s Construction
Manager Andy Thiess and Design Manager Jeff Ely that Zachry’s extension
proposal was based on using a frozen-cutoff wall, which he sketched and explained
would encompass one B-row pier. PX8.0004-5, .0013(A20); 10:18-29; 21:128-30;
38:39, 46, 48-49, 61-62, 130-31. Thiess and Ely understood the frozen-cutoff wall
would also be 4.5 feet from two rows of piers, and promptly sketched and
described the wall to PHA officials, including Project Manager Jim McQueen and
Bayport Engineer Mark Vincent (who reported to Chief Engineer Steve DeWolf,
managed the project for him, and was charged with helping administer the Contract
correctly on PHA’s behalf). 7:32, 104-11; 21:104-08, 128-29; 24:120, 135-39;
38:62-63; 44:83; 45:41-46; 64:34-35; PX61.
PHA contends Thiess and Ely were not concerned about the design at the
April 5 meeting because they believed the frozen soil would impact only the single
B-row pier entirely encompassed by the frozen-cutoff wall. PHASupp:5. But Ely
and Vincent testified they were concerned because the 4.5-foot distance between
the frozen-cutoff wall and piers was half the nine-foot buffer Zachry said it would
maintain “whenever possible.”4 21:110-11, 138-39; 45:63; p.3. Furthermore,
4
PHA’s assertion that Thiess was unconcerned because he thought 4.5 feet (1½ pier diameters)
was acceptable based on a “rule of thumb” was discredited: nothing documented the “rule,” and
PHA’s geotechnical experts were unaware of it. 27:121-23; 38:68-69, 73-74.
6
Thiess, Ely, Vincent, and DeWolf knew the “freeze front” would migrate away
from the freeze-pipes and “go around” the piers 4.5 feet away (if not stopped).
7:52-53, 106-14; 10:26-27; 21:139; 25:38-39; 29:68; 37:117-18; 45:63;
PX138.0018. Ely told Vincent, Thiess, and McQueen that freezing would occur
very close to some piers, in his view potentially reducing their capacity. 22:96-97,
128-29; 23:5-8, 24.
PHA also asserts Anderson had considered a frozen-cutoff wall as an option
to help Zachry timely complete Milestone-A. PHASupp:4. However, PHA
understood the frozen-cutoff wall became “required if Zachry were going to do the
extension” and still meet the Milestone-A deadline. 7:99-101; see 9:138-39; 10:31,
112; 27:96; 28:31-32; 38:51-53; PX8.0011(A20). The reason was simple. With
the frozen-cutoff wall, Zachry could timely accommodate the crane-ship’s arrival
on one side of the cutoff-wall and still finish the remainder of the wharf, including
the extension, in the dry on the other. 10:35; 38:38; 7:100-01; 28:31-33; PX172 at
4-5. Without the frozen-cutoff wall, the addition of the sixth wharf section meant
Zachry would have to try to complete, excavate, and place revetment under the
entirety of the now-20% longer wharf by the Milestone-A deadline; at that time,
the main freeze-wall would be breached to dock the crane-ship, and Zachry would
have to finish the entire project in the wet. 9:135-36; 21:94; 28:33-34;
PX8.0011(A20).
7
IV. PHA conceals its unsubstantiated “concerns” about the frozen-cutoff
wall to induce Zachry into agreeing to build the extension.
On April 13, 2005, Zachry sent PHA a proposal to build the wharf extension
based on an “[u]ninterrupted work process” and the “[u]se of a freeze wall—cut off
wall, encompassing one (1) ‘B’ row piling.” PX9(A21); 10:111. These conditions
were unchanged by a May 18 proposal and July 11 supplemental proposal.
PX179(A22); PX219(A23).
PHA understood Zachry’s price was based on these conditions, and that the
frozen-cutoff wall in the proposals was the same one described to Thiess and Ely
on April 5. 22:22-25; 25:44-47; 38:96-97; 45:75-76. PHA also knew the frozen-
cutoff wall was Zachry’s only means and methods to timely complete the wharf.
22:125-26; 26:119-20; 38:112; 45:103-04; 46:40.
Even though PHA knew the frozen-cutoff wall was “required,” it never told
Zachry its concerns, 11:13; 22:96, 146, despite knowing quick resolution of such
concerns was critical to avoid delaying Zachry under the tight schedule.
PX46.0001; 7:43-44, 67-68; 20:53-56.
The Supreme Court recognized that PHA—afraid Zachry might decline to
build the extension—induced Zachry into entering Change Order 4 (“CO4”) to
build it by intentionally concealing PHA’s concerns about the frozen-cutoff wall:
As a practical matter, only Zachry could perform the additional work.
. . . The Port had reservations about this [frozen-cutoff wall] plan. But
the Port was also concerned that if it rejected Zachry’s plan, Zachry
8
might simply refuse to undertake the addition of a sixth section. So
the Port did not raise its concern with Zachry.
449 S.W.3d at 102-03(A3).
The Supreme Court’s conclusion was amply supported. PHA knew only
Zachry could build the extension without undue additional cost and delay. See p.5.
But Zachry was already on a tight schedule. See pp.4, 5. Adding the sixth section
meant Zachry would have to do 20% more work, p.7, though CO4 would only
extend Milestone-A by 15 days, see p.4; PX12.0004 (A30).
However, PHA had not signed CO4. 8:36; 27:40. As a result, Zachry could
not begin working on the extension, exacerbating the already-tight schedule.
PX225 at 4-5; PX226 at 3-6; PX228; PX229; PX232 at 13; 10:52-54, 68, 73;
26:68; 18:84-87; 26:93-94, 102-09. And Zachry was not contractually bound to
build it. 27:40. PHA Project Manager McQueen blamed PHA “bureaucrats” for
the delay. PX215 at 7.
Aware of Zachry’s time-crunch and that Zachry was not yet bound, PHA
“management [wa]s afraid ZCC w[ould] back out of the extension agreement.”
PX280(A29); 27:40; 45:113. PHA therefore acted to keep Zachry on the hook by
inducing it into CO4.
First, although PHA knew throughout the summer of 2005 that Zachry
projected it would not timely complete Milestone-A (because Zachry was
including an extension of time it claimed under Contract §5.08 due to a global-
9
cement shortage), PHA decided to pay Zachry anyway and delay taking any formal
action against it—such as demanding a recovery schedule—until after CO4’s
execution. PX159; PX176; PX210; PX280(A29); PX319; 18:143-49; 22:109-11;
27:36-40; 39:17-18; see p.17.
Second, PHA allayed Zachry’s concerns about the $20,000/day Milestone-A
liquidated damages (“LDs”). PHA had denied Zachry’s request to extend
Milestone-A based on the global-cement shortage. PX159; PX175; PX176; 25:60-
61. Zachry thus sought assurances that PHA would not charge LDs if the crane-
ship could dock upon arrival. 25:66-67; PX177. In that case, PHA would not be
charged demurrage—the basis for Milestone-A’s $20,000/day LDs. 45:65-66; see
also PX935 at 1, PX936 at 4; DX1-1.0021(A17). Recognizing the ship was
delayed, PHA’s Vincent told McQueen that “[a]lthough we will not put it in
writing,” McQueen should tell Zachry PHA “will not charge penalties if no
expense or loss to PHA occurs….” PX176; 28:71. McQueen complied, telling
Anderson PHA would not charge LDs if the ship could dock upon arrival (because
PHA would not be charged demurrage). 10:41; see 28:74.
Although PHA contends it promised not to charge LDs only if PHA
sustained no harm whatsoever, McQueen confirmed Zachry’s understanding: he
testified PHA acted contrary to its promise in charging LDs even though the crane-
ship docked upon arrival. 28:74; see also PX205.0002. The Supreme Court
10
correctly concluded that “[i]n negotiating [CO4], PHA had promised not to impose
[LDs]...as long as the [crane-]ship…could dock when it arrived,” but
“[n]evertheless, after the ship successfully docked,…began withholding [LDs].”
449 S.W.3d at 103(A3).
Third, despite its “concerns” about the frozen-cutoff wall it knew was
“required” to allow Zachry to meet Milestone-A, PHA did not object to it before
CO4 was signed. 11:13, 106; 19:80-81; 22:76, 96, 119. PHA instead agreed in
CO4 that Zachry could use the frozen-cutoff wall. See pp.12-13, 33-34.
V. PHA waits to reject the frozen-cutoff wall until after Zachry is bound by
CO4, which plainly incorporates the frozen-cutoff wall.
On September 9, 2005, soil-freeze expert Mageau sent Zachry the frozen-
cutoff-wall design. PX10(A25). It was identical in all material respects to the wall
discussed at the April 5 meeting and incorporated into the proposals. PX10.0001-
.0002, .0005(A25); 8:42-43, 53; 10:94-98, 111; 22:73-77; 29:123-24.
Anderson directed the design be sent to PHA “for review. Not approval—
but review.” PX267; 10:92-93. On September 12, Zachry labeled the design
“Correspondence” (not “Submittal”) and uploaded it to PHA, noting PHA could
“see what will be happening and gather questions.” PX897; 8:39; 11:33-34;
38:152, 157; 45:143. PHA knew it was not provided as a Submittal, and that
Zachry was not asking for approval, just comments. 38:152-53, 157; 45:143-44.
Like the main freeze-wall, PHA could review it for a Texas PE’s approval, but
11
could not approve, reject, or order Zachry to revise and resubmit it. 9:49-50;
11:28; 22:70-72, 93-94; 23:91-92; DX5.002; pp.5, 28-29. CH2M-Hill’s Thiess
told PHA’s McQueen internally, “[t]his isn’t going to be an approval-type thing,”
PX274 at 3(A26); 39:37-38, but recognized PHA “need[ed] due diligence to
identify and communicate any technical issues,” PX11(A27); 22:93-94.
Based on the September 9 design, PHA’s Vincent and McQueen understood
the frozen-cutoff wall “was freezing up and near the shafts.” 46:5; see 26:150-52.
CH2M-Hill’s Ely noted they needed to “verify the freeze wall won’t reduce the
capacity of the…piers.” PX11(A27). Nevertheless, PHA management on
September 14 formally recommended PHA execute CO4. PX3(A28); 26:161-63;
39:44-49; 45:147-48.
PHA finally executed CO4 on September 27. PX12.0002(A30). As the
Supreme Court recognized, CO4 gave Zachry the right to use the frozen-cutoff
wall embodied in the September 9 design:
To complete the two sections of the wharf needed by February 2006
and to continue to work ‘in the dry,’ Zachry proposed to build another
freeze-wall—a cutoff wall—through the middle of the
project....Change Order 4, using Zachry’s approach to add a sixth
section of the wharf...was finalized September 27, 2005.
449 S.W.3d at 101, n.3(A3).
CO4 provided Zachry would construct the extension “in accordance with the
attached Scope, Time and Price Modifications,” which incorporated Zachry’s
12
proposals conditioned on an “[u]ninterrupted work process” and the “[u]se of a
freeze wall—cutoff wall, encompassing one (1) ‘B’ row piling.” See pp.8, 33-34;
PX12.0001, .0004(A30); 26:112-14. PHA had reviewed the September 9 design,
which embodied the April 5 design described in the proposals, for two weeks
before executing CO4. 10:111-16, 118, 8:50-51; 22:92, 119-20; 27:37; 45:147-48;
p.34.
Although PHA’s Vincent and McQueen had known for two weeks (and
really since April 5, p.6-7) that the frozen-cutoff wall design involved freezing
near piers, Ely—on the same day PHA signed CO4—reiterated to McQueen that
frozen soils would be kept only one foot from piers, allegedly putting 23 piers “at
risk for capacity reduction.” PX286. He did so despite freeze-soil expert Mageau’s
tests proving “one freeze-thaw cycle does not appear to reduce the shear strength in
the soil.” See p.3.
On September 28, Mageau provided PHA more analyses proving that even if
soil were frozen all the way around the piers, there would be virtually no increase
in settlement. PX14.0001(A31); 22:150-51; 27:66; 29:76-77; 39:66-69. PHA
knew there was no reason for concern. 39:66-69; PX504(A36). But no one
associated with PHA would take responsibility for allowing Zachry to move
forward:
* McQueen told CH2M-Hill “I have a problem and we need an answer
ASAP,” and that Ely and Thiess had “to take the lead in resolving this
13
problem w/a solution.” PX301.
* CH2M-Hill would not opine on the design, because it did not want to incur
liability for Zachry’s methods. 23:89; 30:84-85; 46:43.
* Wharf-designer DMJM refused to review the design because it was Zachry’s
means and methods. 30:63-64; 46:41-42.
* PHA had not yet hired its geotechnical engineer, GeoTest, to review the
design, and knew GeoTest would never give a definitive answer anyway.
PX1(A32); 23:23, 75-76.
Instead, Ely surveyed CH2M-Hill’s geotechnical experts about his “concern,”
explaining he wanted to “give our client some guidance without incurring
additional liability if possible.” PX15; 22:157-61; 23:25-28. Most responders—
including some with soil-freeze experience—concluded the design presented no
concern. PX290; PX292; PX293; 23:31-47; 46:19-24. Nevertheless, Ely
disregarded these geotechnical experts, and sent PHA a memo expressing
unsubstantiated “concerns” about this geotechnical issue “from a structural
engineering, not geotechnical perspective.” PX301; 23:56-62; see PX11(A27).
PHA conceded at trial it had not determined—or even tried to determine—
that the frozen-cutoff wall was likely to adversely affect piers, 8:79-80, 89-90;
22:84; 23:97, 101-02; 24:112-14; 27:32, 80-84; 46:30-36, 58-59, although Chief
Engineer DeWolf expected his engineers to get GeoTest involved, 6:7, 10; 7:110-
14. PHA’s only information consisted of soil-freeze expert Mageau’s reports
proving freezing would have no adverse effect. 24:112-13; 27:66; 39:96; 46:27,
14
30-31, 57-59; PX14(A31); PX138.0014.
VI. PHA issues its R&R Order, which everyone understands rejected the
frozen-cutoff wall and which Zachry makes clear to PHA constitutes a
breach.
Despite knowing the tight schedule and imminent Milestone-A deadline,
pp.4, 5, 9, on October 11, 2005, PHA switched the September 9 design’s label
from “Correspondence” to “Submittal” and issued the R&R Order. PX266(A33);
11:31, 33-34; 27:82, 88-89. The order expressed concern about freezing’s effect
“on the friction resistance of the piles,” and stated “preliminary indications are
that the design may have an indeterminate affect [sic] on a significant number of
nearby shafts which may present unacceptable risk to the Port”—a concern
Vincent and McQueen admitted was “speculation.” PX266(A33); 27:84; 46:49-50.
Everyone knew the R&R Order rejected the frozen-cutoff wall. See, e.g.,
39:133-36; PX1(A32); PX2(A35); PX358.0001. PHA conceded this at trial. 4:94;
27:74; 39:135. The frozen-cutoff wall was undisputedly Zachry’s means and
methods, and Zachry had the right to use it under Contract §5.10 and CO4. See
pp.4-5, 12-13, 26-34. Yet, as the Supreme Court recognized, “[t]he practical effect
of the Port’s [R&R] order was to refuse to allow the construction of the cutoff
wall.” 449 S.W.3d at 103(A3); see 8:69-70; 21:58-59; 45:34-35; DX1-1.0219-20,
§5.22(A13) (subject of revise-and-resubmit order “may not be used for
performance of the Work”). Although PHA now claims Zachry could have offered
15
a means of mitigating the frozen-cutoff wall’s “risk,” PHA demanded a nonfrozen
alternative. PX4.0003 (“The cut-off wall…cannot be constructed using freeze-wall
technology.”); PX314 at 3-4(A34); 11:56; 23:101; 27:87-88; 68:114.
Although PHA mischaracterizes this as a “secret breach,” the Supreme Court
correctly concluded Zachry told PHA it was a breach: “Zachry protested that,
under [§]5.10…, the Port had no right to determine the method and manner of the
work, but the Port would not budge.” 449 S.W.3d at 103(A3). At the October 11
meeting where the R&R Order was delivered, Anderson immediately objected that
it was contrary to the Contract: he told PHA the design was “not a submittal that
requires approval,” but “is for information purposes only,” and Zachry’s risk to
accept. PX314 at 4, 6-7(A34); 11:33-34, 39; 18:127-28; 23:102-04; 27:88-89.
McQueen responded, “I understand.” PX314 at 7(A34). McQueen expressed
concern PHA could be liable and admitted he knew Anderson was saying PHA
violated the Contract. PX1(A32); PX287; 23:82-85; 27:48-49, 89-90, 93-94; see
also 44:82-83 (Vincent). Later on October 11, Anderson told Thiess the R&R
Order was a breach. 11:40-41. A month later, Thiess acknowledged Zachry had
claimed PHA’s “rejection of the cutoff-wall design is a breach of the change order
contract.” PX2(A35); 39:130; 68:122.
VII. PHA’s rejection of the frozen-cutoff wall forces Zachry to complete
construction in the wet.
Contrary to PHA’s claim that Zachry voluntarily switched to working in the
16
wet, the evidence establishes PHA forced Zachry to do so. First, PHA barred
Zachry from using its frozen-cutoff wall—the means and methods PHA knew was
“required” to timely complete the wharf in the dry, given the additional extension
work. See pp.7, 8, 15. Then, three days later, despite having known for months
that Zachry projected a delayed Milestone-A completion, pp.9-10, 18. Chief
Engineer DeWolf for the first time sent Zachry a letter demanding a recovery
schedule (showing Zachry would finish by the Contract deadlines, which were
conditioned on the frozen-cutoff wall) and threatening LDs. PX319; 19:29-31.
Higher-ranking PHA officials repeated this demand in October and November.
See, e.g., 40:32-33, 38-40; 46:82-83; 66:86-87; DX85; DX205.003; PX373.0003;
PX925. See also 35:6; 36:5-7.
By demanding a recovery schedule after barring Zachry’s frozen-cutoff wall,
PHA necessarily forced Zachry to begin working in the wet far earlier than it
otherwise would have. 18:115-17, 123-26; 28:31-33; see 9:137-38; 11:82-96;
19:33-50; DX404. Without the frozen-cutoff wall, neither Milestone-A nor the
remainder of the wharf could be constructed in the dry. 9:137-38; 11:85-86; p.7,
20. There was no viable alternate cutoff wall. 46:83; p.20. This demand
constituted a direction to perform additional work, because—as PHA knew,
40:131; 46:133-34; PX373.0003; PX461—building the wharf in the wet would
take far more time and money than building it in the dry, id.; 10:62; 29:40-42;
17
33:6; 47:60-61; 52:31, 102; 61:110.
Zachry refuted PHA’s assertion that Zachry voluntarily switched to working
in the wet because it could not meet the schedule using the freeze-walls. In late
September/early October, Zachry was still projecting a March 22 Milestone-A
completion. 18:116-18; DX404. But PHA knew—based on reports from PHA’s
on-site inspectors and Zachry’s scheduler—that Zachry could finish Milestone-A
by the February 15 deadline and that schedules showing a March 22 completion
were a “paperwork trail” preserving Zachry’s claim for extension of time based on
the global-cement shortage.5 PX251; PX252; PX283; 26:100-02; 45:103-05;
65:92-93, 99-100, 105; pp.9-10.
Three days after PHA’s rejection, Mageau projected Zachry could finish
Milestone-A by the February 15 deadline and certainly by March 22—before the
crane-ship’s arrival. PX320; 30:115-16; 32:105-06. And Larry Applegate, the
freeze-wall subcontractor’s president, stated on November 11, 2005 that freeze-
down Phase 1 could begin immediately with the remainder starting by
Thanksgiving. PX360.0002; 33:47, 50-54. Mageau and Anderson agreed, despite
freeze-pipe-related and other challenges Zachry faced. 18:105-11; 30:115-18;
32:100-01; PX320. This would have allowed Zachry to finish Milestone-A before
5
Anderson’s comment post-Hurricane Rita that there wasn’t “a snowball’s chance in hell of
having that wharf open by March...’cause the math don’t work,’” DX1157A, referred to Zachry’s
9-day extension request for hurricane-caused delays. 19:113-15. Adding 9 working days to the
projected March 22 date pushed completion into April. Id.
18
the crane-ship arrived. 19:43-45.
PHA points to schedules Zachry created on October 31 purportedly showing
Zachry finishing much later than projected in its October 3 schedule. But the
October 31 schedules were unfinished, non-concurrent schedules: they listed tasks
end-to-end rather than accurately reflecting concurrent performance, thereby
appearing artificially lengthy. 40:45-47, 55. See PX779.0005; PX777.0005;
PX780.0005; 18:119-23; 19:50-55; 28:11-13, 16.
More importantly, these schedules were brain-storming exercises created
after PHA’s October 11 rejection of the frozen-cutoff wall that PHA knew was
“required” to allow Zachry to meet the Milestone-A deadline. See pp.7, 8, 11.
Without the frozen-cutoff wall, it was difficult for Zachry to create schedules
without knowing its means and methods. 19:38-43; 40:69-79; 46:67. Zachry
created 38 draft schedules in an attempt to determine which construction method to
use. 11:83-87; 40:70-71; PX373. Unlike the pre-October 11 schedules, none used
a frozen-cutoff wall under the wharf—thus confirming its rejection. 18:124-25;
35:101; 46:76-82; see 28:22, 31-33.
PHA contends the schedules showed Zachry would finish soonest by
removing the main freeze-wall and working in the wet. PHASupp:12. But these
schedules were the result of PHA’s rejection of the frozen-cutoff wall—combined
with the lack of a viable alternate-cutoff wall. Zachry’s alternate-cutoff-wall
19
schedule projected a later finish date because the alternative method of building the
cutoff wall was still “unidentified,” and Zachry had to project extra time to design
it, procure materials, and build it. PX779; 40:45, 48; 46:91. Zachry quickly
determined an alternate cutoff wall was not viable, because there were serious
doubts it could be designed and no time to implement it, given the imminent
Milestone-A deadline. 19:38-50; 28:22; 46:78-79, 90-92. Indeed, when Mageau
delivered an alternate-cutoff-wall design on November 16, it was unworkable,
unsafe, and could have damaged piers. 11:50, 52-58; 19:45-50; 42:64-67, 77-79,
91-98; PX366; PX931 at 19-21; see 58:107-08.
PHA’s rejection of the frozen-cutoff wall made meeting the Contract
deadlines “an impossible task,” in light of the wharf extension. 19:57-60. Without
the frozen-cutoff wall, Zachry would now have to complete the entire main freeze-
wall, freeze it, and excavate the entire 2,000 feet of the now-extended wharf by the
Milestone-A deadline, 28:33-34—all of which would take far longer than the prior
plan of completing only the Milestone-A area. 11:45-49; 32:131-33. For this
reason, someone at Zachry noted on November 3 that—in the absence of the
frozen-cutoff wall—the main “freezewall” was “killing [the] baseline schedule.”
DX82.006; 19:56-58.
Given PHA’s rejection and recovery-schedule demands, Zachry’s only hope
of meeting the Milestone-A deadline was to use the unfrozen berm as a seawall as
20
long as possible, completing Milestone-A and excavating under the wharf as
quickly as possible, then breaching the berm for the crane-ship’s arrival and
finishing the remainder in the wet. 11:87-89. The Supreme Court correctly
concluded that, following the R&R Order, “Zachry’s only option was to finish the
western-most sections in time for the ship from China to dock, then remove the
wall altogether and continue to work ‘in the wet,’ which would delay completion
of the project and increase its cost.” 449 S.W.3d at 103(A3).
Having now deprived Zachry of its freeze-wall methods, PHA grew
concerned about its liability. 24:70-73. It met with lawyers, and on November 18
told Zachry, “[i]n accordance with...[§]5.10,” PHA had no right to interfere with
Zachry’s methods. PX18; 46:123-24. But PHA did not withdraw its rejection.
46:126. Instead, PHA insisted PHA’s lawyers choose from among the schedule
options, and they chose an in-the-wet schedule with a May 28 Milestone-A
completion date. PX367.002; PX373.0002, PX380; 19:66-71; 40:120-22, 128.
On January 16, 2006, Zachry sent PHA a letter confirming its change to
working in the wet was the “direct result” of PHA’s rejection of the frozen-cutoff
wall, recovery-schedule demands, and LD threats. PX20.0003.
VIII. Working in the wet causes Zachry substantial damages for which it
sues.
Zachry worked in the dry behind the berm as long as possible. 47:47-58.
After it was breached, Zachry completed the wharf in the wet under “nightmare”
21
conditions, excavating and placing revetment underwater beneath the deck with
almost zero visibility. 29:40-42; 40:131; 47:79.
Zachry sufficiently completed Milestone-A to allow the crane-ship to dock
upon arrival May 15, 2006. 11:117; 40:131-33; 47:68-69; PX893.0076. Yet PHA
back-charged Zachry $2.36 million in LDs from the Milestone-A deadline forward,
although PHA incurred no demurrage. 40:131-32; 45:72-73. McQueen admitted
this was contrary to his promise. 28:73-74.
In October 2008, Zachry substantially completed the project. 47:80-81;
PX578. Despite heavy losses, Zachry sought only damages caused by PHA’s
breach—the increased cost of construction as a result of PHA’s delays and forcing
Zachry to work in the wet earlier than it otherwise would have. 47:86-87.
After a three-month trial, the jury found PHA failed to comply with CO4
and §5.10, causing Zachry $18,602,697 in damages. CR59:17390-93(A4). The
judgment awarded those damages, plus $2.36 million PHA withheld as LDs, minus
a $970,000 offset for wharf fenders, for a recovery of $19,992,697, plus interest.
CR62:18166(A1).
This Court, based on its holdings that the no-damages-for-delay clause
precludes Zachry’s recovery and that PHA’s release defense barred Zachry’s
recovery of the LDs, reversed and rendered judgment that Zachry take nothing and
PHA recover $10,500,000 in attorney’s fees, plus contingent appellate fees. 377
22
S.W.3d at 865(A2).
The Supreme Court held governmental immunity did not bar Zachry’s
claims, reversed this Court’s judgment regarding the no-damages-for-delay clause
and LDs, and remanded. 449 S.W.3d at 119-20(A3).
23
SUMMARY OF ARGUMENT
The Supreme Court rejected PHA’s main appellate points—immunity, no-
damages-for-delay, and release. PHA is left with a laundry list of second-tier
arguments that largely invite this Court to revisit evidentiary disputes resolved by
the jury, issues committed to the trial court’s discretion, and issues the Supreme
Court previously decided against PHA. PHA’s invitation should be declined.
In Questions 1 and 2, the jury properly rejected PHA’s contrived reading of
CO4 and §5.10. Unlike Zachry, PHA offers no interpretation that harmonizes all
Contract provisions and satisfies PHA’s business purpose—to avoid liability from
control of Zachry’s methods. PHA’s challenge to the damages and causation
findings in Question 3 likewise ignores the substantial evidence supporting them.
Nor do Contract §§5.41/5.42 bar Zachry’s claims. These “changes” clauses
plainly allow PHA to change the scope of the Work during Contract performance.
They do not govern Zachry’s rights in the event of a PHA breach. If they did, they
would be inapplicable under common-law and statutory rules.
PHA’s remaining arguments are also without merit. The trial court did not
abuse its discretion in rejecting PHA’s eleventh-hour attempts to inject $8.6
million of claimed “harms” into the case. Furthermore, as the Supreme Court held,
the trial court properly instructed the jury on the no-damages-for-delay exceptions,
including recklessness. The trial court did not abuse its discretion in finding
24
Zachry pleaded apparent authority, and its instruction was proper. And PHA is not
entitled to attorneys’ fees so long as the judgment awards Zachry damages.
Finally, PHA’s attempt to deny Zachry pass-through recovery for the work of its
subcontractor—a Zachry entity created during corporate restructuring—
contravenes Interstate Contracting v. City of Dallas, 135 S.W.3d 605, 610 (Tex.
2004).
25
ARGUMENT
I. Ample evidence supports the jury’s breach-of-contract findings.
PHA contends the Contract and CO4 unambiguously authorized PHA to
issue the R&R Order barring Zachry’s freeze-wall means and methods. But PHA
fails to “consider the entire writing and…harmonize and give effect to all the
provisions….” Frost Nat’l Bank v. L&F Distrib’rs, 165 S.W.3d 310, 312 (Tex.
2005). Nor does PHA “construe [the] contract[] from a utilitarian standpoint
bearing in mind the particular business activity sought to be served.” Id. PHA also
ignores that specific provisions control over general. See McCreary v. Bay Area
Bank & Trust, 68 S.W.3d 727, 731-32 (Tex.App.—Houston [14th Dist.] 2001, pet.
dism’d).
Applying these principles, there is only one reasonable interpretation: PHA
had no right to issue the R&R Order. At a minimum, Zachry’s reading is
reasonable, and ample evidence supported the jury findings in Questions 1 and 2.
A. Section 5.10 prohibited PHA’s R&R Order, and no other
Contract provision authorized it.
1. Section 5.10 forbids PHA control of Zachry’s means and
methods.
Section 5.10 plainly barred PHA from controlling Zachry’s means and
methods, which undisputedly included the frozen-cutoff wall. See p.4. It stated,
“[PHA] shall not have the right to control the manner in which or prescribe the
26
method by which the Contractor performs the Work,” and that Zachry was “an
independent Contractor…solely responsible for the supervision and performance of
the Work…in such manner, using such methods as Contractor shall choose.”
DX1-1.0214(A13).
This prohibition on PHA control was not “subject to” the “proviso” at the
end of §5.10, PHASupp:1: it merely clarified that Zachry’s right to choose its
methods did not eliminate its obligation to comply with the Contract. DX1-1.0214,
§5.10(A13) (“…provided, however…the order, time, manner and methods of
prosecution shall be…in accordance with the Contract Documents”). When the
R&R Order was issued, Zachry was in compliance with the Contract; PHA does
not argue otherwise.
As discussed below, some Contract provisions allowed PHA to receive
means-and-methods-related submittals. However, none authorized PHA to
exercise control over Zachry’s methods by barring Zachry from using them and
ordering Zachry to revise them. Arguing these clauses granted PHA such control
fails to harmonize all Contract provisions and renders §5.10’s prohibition on PHA
control meaningless. It also vitiates PHA’s business purpose: “insulating [PHA]
from liability to which it would be exposed were it exercising control over
Zachry’s work.” 449 S.W.3d at 102 & n.4(A3); see pp.4-5. Finally, PHA’s
27
argument improperly gives controlling weight to general provisions relating to
submittals, like §5.22, rather than specific provisions, like §5.10.
2. Section 4.07 forbids PHA control over Zachry’s health-and-
safety plans.
Contract §4.07 required Zachry to submit a health-and-safety plan to PHA,
but made clear PHA could not control it:
Notwithstanding the Chief Engineer’s review of the health and safety
plan, the Contractor, and not the Port Authority, shall be responsible
for and have control over ensuring the safety of its personnel and its
Subcontractors…
DX1-1.0204(A13).
Zachry agreed to submit the main freeze-wall design as a shoring-safety-
plan addendum to its previously filed health-and-safety plan, “in accord[] with
Technical Specification [‘T.S.’]02161(1.3)” and “conforming to OSHA standards,
with a statement signed and sealed by a registered Professional Engineer licensed
in…Texas.” PX86; see DX1-1.0325, §1.3(A14); PX93.0007; 21:78; 6:60.
T.S.02161 required the shoring-safety plan to include details about the
Contractor’s means and methods but did not authorize PHA to control them. DX1-
1.0325, §1.3(A14). Nor could it: T.S.02161 was expressly “[s]ubject to the
General and Special Conditions,” which included §5.10 and §4.07. DX1-1.0324,
§1.1(A14). Instead of PHA approval, T.S.02161 required Zachry to obtain a Texas
PE’s approval. Id. The purpose of this review was to ensure the shoring plan
28
satisfied OSHA safety rules, so the wall would not harm workers; as PHA
witnesses testified, it did not allow PHA to approve or reject the wall based on any
purported effect on the wharf. 6:62-67; 7:62; 20:111; 27:19-21; 37:106-07. The
Texas PE’s approval ensured PHA would not be liable for Zachry’s activities.
44:90.
Consistent with §4.07 and §5.10, PHA did not “approve” the original freeze-
wall design, but rather “accepted [it] for records” based on the Texas PE’s
certification. 37:115-16, 120-21; 37:114-16; 38:5-6, 156-57; 44:100-01, 109-11;
45:32; PX88(A19). PHA’s witnesses testified PHA did not approve or reject the
original freeze-wall or safety submittals to avoid claims it controlled Zachry’s
methods and any attendant liability. 37:115; 44:95-97. No one contemplated PHA
could approve or order Zachry to revise its main freeze-wall plan: Zachry built it
and installed freeze-pipes before giving PHA the design. 44:110-11.
3. None of PHA’s other cited provisions authorize the R&R
Order.
Section 5.22. Although §5.22 allowed PHA to “review” Submittals “to
determine whether Contractor is complying with…the Contract Documents,” it did
not authorize PHA to control Zachry’s means and methods—contrary to §5.10—by
rejecting them.
Consistent with §5.10 and §4.07, §5.22 specifically forbade PHA to approve
Zachry’s safety plan or means and methods: “The Port Authority’s…review and
29
acceptance of the Contractor’s Submittals shall not constitute approval of safety
precautions or any construction means, methods….” DX1-1.0220(A13); 6:70-71.
Thus, §5.22 insulated PHA from liability for Zachry’s methods. 6:57, 71.
In contrast, §5.22 did not disclaim PHA’s right to approve Submittals
relating to matters PHA was authorized to control under the Contract: Submittals
relating to the “Work.” Section 5.22 required Zachry to provide submittals to
PHA’s Design Consultant, DMJM, “showing all materials and details of Work to
be incorporated into the Project.” DX1-1.0218(A13). “Work” was defined as “the
construction” and “services” “required by the Contract” or “pursuant to the
Contract.” DX1-1.0190, §1.42. Thus, the wharf and any contractually specified
means and methods—for example, the Technical Specification requiring a
particular method for vibrating concrete pours—would be part of the “Work” and
subject to PHA approval. 6:47, 53-55; 9:36-37; 21:33; DX1-10430. This ensured
the permanent Work (wharf) was built according to the Contract specifications.
6:58-59; 8:11.
In contrast, Zachry’s chosen means and methods—the freeze-walls—were
not required by the Contract, 20:96; 37:66, 99; 44:78, would not be part of the
Work, 21:33, 63; 27:11, and would not be required Submittals under this clause,
6:54-57, 59, 74-75; 21:71-73; 37:99. In August 2004, Thiess confirmed this:
“[r]egarding the freeze wall, we have no requirement for a submittal as it was not
30
anticipated by the designers.” PX84(A18). PHA’s designer refused to approve any
freeze-wall, because it was Zachry’s means and methods. 20:110-11; 44:95;
PX93.0007. Submittals relating to Zachry’s safety plan and methods were
controlled by §5.22’s prohibition on PHA approval.
T.S.01500. Although T.S.01500 required Zachry to protect the Work, it did
not authorize the R&R Order. DX1-1.0271, §1.1A(A15); 27:29-30. T.S.01500
was “[s]ubject to the General and Special Conditions,” DX1-1.0271, §1.1A(A15);
see DX1-1.0191, §2.02(a)(A13), including §5.10’s bar on PHA control, and §4.07
and §5.22’s prohibition of PHA approval of Zachry’s safety plans and methods.
Consistent with PHA’s goal of avoiding liability, T.S.01500 required Zachry to fix
any damage “done by, or on account of...the Contractor.” DX1-1.0278,
§1.11A.4(A15). PHA’s argument grants PHA control, destroying this protection.
Section 1.39. Nothing in §1.39 authorized PHA to order Zachry to revise
Zachry’s means and methods. It defined “Submittals” as “information provided
by [Zachry] for approval of proposed Equipment, Materials, means or methods.”
DX1-1.0189(A13). Critically, §5.22 prohibited PHA from approving Zachry’s
means and methods (as opposed to contractually specified methods). See pp.29-
31. Thus, any submission of Zachry’s methods was not “information provided by
[Zachry] for approval.” And reading §1.39’s general “Submittal” definition to
authorize the R&R Order improperly allows §1.39 to control over §5.10 and
31
§4.07’s specific prohibitions on PHA control.
4. PHA is not remediless.
PHA contends Zachry’s argument deprives PHA of any recourse if PHA
believed Zachry’s means and methods “could cause the Wharf to collapse.”
PHASupp:25. Even if such a belief could authorize the R&R Order, ample
evidence established PHA did not actually or reasonably believe the frozen-cutoff
wall could cause wharf collapse. See pp.13-15.
Furthermore, the Contract contains numerous provisions allocating to
Zachry the risk of damage from Zachry’s methods and providing PHA a remedy.
See, e.g., DX1-1.0198, .0200, .0223, .0229, .0234, §§ 3.06, 3.08, 5.36, 5.53,
6.14(A13); DX1-1.0278, §1.11A.4(A15); 9:33-35; 27:13-18, 23-25. And if PHA
were truly concerned about wharf collapse, it could terminate the Contract without
cause. DX1-1.0227, §5.47(A13). The one thing the Contract did not allow PHA
to do was control Zachry’s means and methods by issuing the R&R Order. PHA
drafted the Contract, pp.3-4, and the Court should not rewrite it to grant PHA
rights omitted from it and contrary to PHA’s business purpose.
5. The drilled-shaft submittal is consistent with Zachry’s
reading.
PHA suggests Zachry’s drilled-shaft submittal shows PHA’s right to issue
the R&R Order. PHASupp:2. But it related only to piers—which were part of the
“Work,” which PHA had the right to approve—not Zachry’s freeze-wall methods,
32
which PHA had no right to approve. See PX6; PX69; 7:45; pp.26-32. PHA
recognized this, warning “any ice…encountered during drilled-shaft construction
will be cause for rejecting the affected work”—not Zachry’s freeze-wall methods.
DX133.002
B. PHA’s R&R Order breached CO4.
PHA argues CO4 did not “delete PHA’s §5.22 right to require Zachry to
revise and resubmit Zachry’s frozen-COW design.” PHASupp:25. But §5.22
afforded no such right. See pp.29-31.
Even if PHA had such a right, ample evidence supported the jury’s finding
that PHA agreed in CO4 that Zachry could use the frozen-cutoff wall, and CO4
controls. DX1-1.0191, §2.02(a)(A13).
CO4 incorporated “Proposer’s Specifications and Proposal dated April 13,
2005, as amended by Proposals for 330 feet Wharf Extension [the May 18
proposal, 26:110-12] and as further amended by Proposer’s Supplemental Proposal
dated July 11, 2005….” PX12.0001, .0004(A30). Both the April and May
proposals were conditioned on an “[u]ninterrupted work schedule” and the “freeze
wall-cutoff wall, encompassing one (1) ‘B’ row piling”—the same one described
to PHA representatives on April 5 and memorialized in the September 9 design.
PX9(A21); PX179(A22); pp.8, 11. 6 The July 11 proposal did not delete these
6
PHA’s claim it rejected the April 13 proposal is immaterial. The May 18 proposal—which
33
conditions: it was merely a “[s]upplemental proposal” that offered “additions and
clarifications.” PX219(A23); 8:60; 10:116. PHA signed CO4 after reviewing the
September 9 design—which embodied the April 5 design described in the
proposals—for two weeks. 10:111-16, 118, 8:50-51; 22:92, 119-20; 27:37; 45:148;
p.13. 7 Thus, CO4 included PHA’s agreement that Zachry could use the frozen-
cutoff wall. See pp.12-13.
PHA concedes CO4 is at least ambiguous as to Zachry’s right to use the
frozen-cutoff wall, but argues there is “no intent evidence.” PHASupp:27. CO4’s
language incorporating the April and May proposals refutes this. Furthermore,
Zachry’s Anderson testified CO4 “included language with the frozen-cutoff wall”
and “expressly said that we had the right to use it as a result of this change order.”
15:61. PHA cites nothing for its argument CO4 did not bind the parties if it
authorized, but did not require, Zachry to use the frozen-cutoff wall.
Thus, the evidence supports the jury’s finding that CO4 authorized Zachry to
use the frozen-cutoff wall. PHA does not challenge the sufficiency of the evidence
of breach under this interpretation to support Question 1, because it cannot. See
pp.15-16.
PHA does not claim was rejected—was also conditioned on the frozen-cutoff wall.
PX179(A22). Furthermore, PHA cites nothing holding a previously rejected proposal cannot be
incorporated into an agreement.
7
PHA’s irrelevant claim that Zachry changed its theory on CO4 is disproved by PHA’s citations.
CR31:8541; 1(9/11/09):27, 80.
34
C. Question 1 was proper.
The instruction in Question 1 that the jury was “not being asked to decide
whether PHA failed to comply with §5.10” was necessary to obtain separate
findings on whether CO4 gave Zachry the right to use the frozen-cutoff wall
(Question 1) and whether §5.10 barred PHA from issuing the R&R Order
(Question 2). CR59:17390(A4). The instruction was within the court’s broad
discretion. Kiefer v. Continental Air., 10 S.W.3d 34, 37 (Tex.App.—Houston [14th
Dist.] 1999, pet. denied).
Any error was harmless. The jury found PHA breached §5.10 in Question 2;
thus, deleting the instruction from Question 1 would not have changed anything.
See id. at 38; Shupe v. Lingafelter, 192 S.W.3d 577, 579-80 (Tex. 2006).8
II. The jury's verdict on causation and damages is supported by the
evidence.
Given the evidence that PHA’s rejection of the frozen-cutoff wall, demands
for a recovery schedule, and threats of LDs caused Zachry to switch to working in
the wet, pp.16-21, the remaining issue was the quantification of the effect of the
switch (damages). 51:152-54; 52:4-10. Zachry’s damages expert, Gary Draper,
testified about that quantification; he did not also need to opine on the cause of the
switch. Id.; p.40.
8
Question 1 should never have been submitted: CO4 unambiguously authorizes Zachry to use
the frozen-cutoff wall, pp.12-13, 33-34, and PHA does not dispute breach under this reading,
p.34. Zachry was entitled to a directed verdict. CR59:17299-313.
35
Draper (a) identified the construction activities the switch impacted; (b) as to
each impacted activity, calculated the cost Zachry would have incurred absent
PHA’s breach working in the dry as long as possible; (c) compared those costs to
the costs Zachry reasonably incurred as a result of switching to the wet earlier than
it would have absent PHA’s breach; and (d) excluded all other costs. 52:4-10, 16,
26, 72-74, 103-111; 117:172, 261. Draper calculated the costs of the switch (after
excluding other costs) to be approximately $27 million. 52:7-10, 110-11. After
hearing the evidence, the jury awarded Zachry $18,602,697. CR59:17393(A4).
A. Draper’s assumptions on damages were supported by the
evidence and did not vary materially from undisputed facts.
PHA incorrectly asserts the assumptions underlying Draper’s model failed to
comply with Burroughs Wellcome v. Crye, which holds that experts may not
“assume[] facts that vary materially from the actual, undisputed facts.” 907
S.W.2d 497, 499 (Tex. 1995).
PHA ignores the substantial evidence supporting Draper’s model, and
instead asserts Draper’s dry schedule “varies drastically” from “dozens of
schedules Zachry prepared around the time of the” Port’s rejection. PHASupp:29.
But Draper scheduled a frozen-cutoff-wall methodology. 52:8. In contrast, the
schedules PHA cites were not based on a frozen-cutoff wall, because they were
created after the rejection. See PHASupp:29; p.19-20. Thus, these schedules did
not even attempt to project what Draper projected—a completion schedule using a
36
frozen-cutoff wall. Moreover, because they were drafts, they did not reflect
concurrent performance of tasks to accurately project completion dates. 11:49-50,
83-86; 18:124-25, 151-57; 19:32-60; p.19.
PHA’s other challenges to Draper’s assumptions—regarding freeze-pipe
removal and sheet-pile installation—ignore evidence supporting Draper’s
assumptions and do not show his assumptions vary materially from undisputed
evidence.
1. Draper’s treatment of freeze-pipe removal was supported
by the evidence.
PHA incorrectly asserts the “undisputed” evidence showed freeze-pipe
removal would occur prior to berm removal and in a manner that would add a
material amount of time to Draper’s overall dry schedule.
First, Draper’s dry model—consistent with the evidence—provided for
freeze-pipe removal to occur concurrently with berm removal. 53:31-32; PX320;
30:106-08, 116-17.
• Zachry’s dry approach was to remove the berm and freeze-pipes
simultaneously and using the same equipment. 53:31-32; 10:61;
DX404.004.
• PHA’s own freeze-wall expert at trial, Mageau, concluded at the time
of the R&R Order that Zachry could remove the freeze-pipes and
perform the remainder of the work by mid-February to mid-March
37
2006 so the crane-ship could timely dock—even though he was aware
of freeze-pipe issues and other challenges Zachry faced. PX320;
30:106-08, 116-17; pp.18-19.
• Draper’s schedule was consistent with the contemporaneous frozen-
cutoff-wall project schedule created by Zachry shortly before the
rejection. DX404; 18:115-18, 124.
Second, even if freeze-pipe removal would occur separately from berm
removal, it would account for no more than one day of the critical path of the
schedule: the day after pipe-removal started, Zachry would begin the more time-
consuming critical-path activity of berm removal where the pipes had been
removed. After the first day, pipe and berm removal would proceed
simultaneously. 53:29-30. Draper included sufficient “float” to accommodate this.
Id.; 54:91-93.
PHA incorrectly characterizes Draper’s testimony as “assum[ing] a thousand
freeze-pipes could be removed in one day.” PHASupp:31 (emphasis original).
PHA’s suggestion that Draper should have scheduled more than one day to remove
pipes incorrectly assumes that pipe and berm removal could not occur
concurrently. See, e.g., 53:31-32; 10:61; DX404.004.
Third, PHA cross-examined Draper on this point, and the jury’s award––
substantially less than Zachry sought––accounted for any weight the jury gave it.
38
53:29-32; America’s Favorite Chicken Co. v. Samaras, 929 S.W.2d 617, 629
(Tex.App.—San Antonio 1996, writ denied).
2. Draper’s treatment of sheet-pile installation was supported
by the evidence.
PHA contends “it is undisputed…Zachry was not ready to install…sheet pile
until after November 15—40 days later than Draper assumed.” PHASupp:31. 9
But PHA’s citations provide no support. PHA relies on Anderson’s testimony
referencing a November 15 list of remaining tasks. Neither that list nor
Anderson’s testimony references sheet-pile-installation timing for the frozen-cutoff
wall, because it was rejected a month earlier. See DX91; 16:29-31; 14:93-104.
PHA nevertheless inserts “frozen” into Anderson’s testimony “that there was work
to be done before we were ready for the [frozen] cutoff wall.” PHASupp:31. But
Anderson was discussing the status as of November 15—when Zachry was
considering the alternate-cutoff wall’s viability. See p.19-20. PHA’s argument
incorrectly assumes that, after PHA's October 11 rejection, Zachry
proceeded exactly as if PHA had not breached. See, e.g., 16:135-36; 54:91.
Even if Anderson was saying work remained as of October 11, Anderson
testified it would take “a couple of days at best.” 14:103; see 16:30. Although
Draper’s schedules showed sheet-pile installation starting October 7, it was on
9
“Sheet pile”—steel sheets—would have lined the frozen-cutoff wall berm and would have
composed Mageau’s alternate-cutoff wall. 10:21-22; 11:52-53.
39
“early start,” meaning it could start later with no impact on his analysis. 53:159-
60; 54:91-94; PX580 at 273. Indeed, his schedule’s float allowed sheet-pile
installation to be delayed until November 15 or later. Id. The evidence supports
Draper’s assumption that—absent the breach—Zachry could have accomplished
pre-freeze-down work like sheet-pile installation in time to freeze-down the walls
and complete Milestone-A before the crane-ship arrived. See pp.18-19; 52:14-15.
Third, PHA raised this issue during Anderson’s cross-examination, and the
jury’s award––less than Zachry sought––accounted for any weight the jury gave it.
16:29-31; Samaras, 929 S.W.2d at 629.
B. The evidence establishes causation.
1. Ample evidence supported the jury’s causation finding.
Contrary to PHA’s assertion, expert testimony was not required to prove
PHA’s breach caused Zachry to abandon its dry-construction methodology. See
Helena Chemical Co. v. Wilkins, 47 S.W.3d 486, 504 (Tex. 2001) (non-expert
testimony may establish causation, exclude alternative causes).
Abundant evidence supported the jury’s finding that PHA’s rejection of the
frozen-cutoff wall caused Zachry to switch to a wet-construction methodology.
See pp.16-21. Anderson and geotechnical expert Hugh Lacy testified that—in the
face of PHA’s rejection of the frozen-cutoff wall—Zachry had no viable
alternative-cutoff wall to bifurcate the project and complete the wharf in the dry
40
while still allowing the crane-ship to dock, and thus had to switch to the wet far
earlier than it otherwise would have. 19:32-50; 42:59-104; p.19-20.10
2. PHA’s “Contract completion deadline” argument fails.
PHA asserts Draper did not opine that Zachry could have met the Contract
deadlines by working in the dry with the frozen-cutoff wall. PHASupp:34-35. But
Zachry was not required to show it would have completed all its work in the dry by
the Contract deadlines to prove the R&R Order caused Zachry’s damages. The
jury could have reasonably found a causal connection between PHA’s breach and
the damages awarded based on evidence showing PHA’s breach caused Zachry to
use a wet approach for a far greater portion of the work than if Zachry had been
allowed to use the frozen-cutoff wall. 52:41-43, 94-97, 102-07; p.17-18; Abraxis
Petrol Corp. v. Hornburg, 20 S.W.3d 741, 758 (Tex.App.—El Paso 2000, no pet.).
Draper calculated that increased cost, 52:110-11, and excluded the cost of work
Zachry would have performed in the wet even with the frozen-cutoff wall, 52:41-
43, 94-98; 10:59-62. PHA’s contention that Zachry failed to prove causation
because Draper’s model assumed a small amount of work in the wet is unfounded.
But even if required, Zachry presented ample evidence it would have
completed Milestone-A in the dry by February 15, 2006, if PHA had not rejected
the frozen-cutoff wall. See, e.g., PX320; 30:115-16; PX357; 19:43-45; 18:107-11;
10
PHA’s argument that Zachry’s schedules showed Zachry finishing faster and cheaper by
abandoning its dry methodology was debunked at trial. See pp.19-20, 36-37.
41
32:100-01; PX893.0055; PX251; PX252; 26:100-02; 45:103-05; see also 29:35-36,
115-16; 123-24; pp.18-19. 11 Other evidence showed that absent PHA’s breach,
Zachry could have completed Milestone-A by May 15, 2006—the crane-ship’s
actual arrival date, see, e.g., id.; 56:96-97; pp.18-19,—and achieved final
completion by the Contract deadline, 16:102-04; PX771; 19:86-90; 18:115-18;
27:40-42; 35:57-58. PHA ignores this evidence and that Draper adopted a
conservative approach in preparing his analysis. 52:60-63.
3. PHA’s “alternative cause” argument fails.
PHA incorrectly argues Draper “failed to rule out alternative causes of
Zachry’s switch to working ‘in the wet.’” PHASupp:33. Expert testimony was not
required to rule out alternative causes. See p.40.
PHA’s suggestion Zachry was planning on eliminating the freeze-wall was
refuted by evidence establishing that, until the R&R Order, Zachry intended to use
the freeze-walls and was building the wharf and freeze-walls consistent with that
intent. See 10:99-102, 118, 124; 19:33; 35:63. Anderson testified that in the
absence of an alternative-cutoff wall, Zachry’s only option was to work in the wet.
18:151-57; 19:32-50; see also pp.17, 19-21. And geotechnical expert Lacy offered
unrebutted expert testimony that the alternative-cutoff wall design was not safe or
11
Anderson also testified about scheduling and construction progress in light of his construction
experience and first-hand observation of the work. 9:81-86, 94, 101-02, 109-110; 11:49-50, 82-
86, 91-93; 12:111; 18:64-65, 115-25, 151-57; 19:32-76. Anderson testified Zachry would have
timely completed the project with the frozen-cutoff wall. 19:43-45.
42
feasible. 42:59-104. The jury could reasonably have found that—in the absence of
a viable alternative method to bifurcate construction and allow the crane-ship to
dock—PHA’s rejection of the frozen-cutoff wall, demands that Zachry comply
with the Contract deadlines, and threats of LDs forced Zachry to switch to a
predominantly wet methodology earlier than it otherwise would have. See pp.16-
21.
Finally, PHA’s argument that Anderson offered conclusory testimony lacks
merit. Anderson was questioned for days regarding scheduling options he
analyzed after PHA’s breach. See, e.g., 11:49-50, 83-86; 18:124-25, 151-57;
19:32-45, 50-60. Anderson’s contemporaneously prepared schedules showed that,
without a frozen-cutoff wall, Zachry could only dock the crane-ship if it moved to
wet construction far earlier than planned. Id.
C. PHA’s lack-of-authority argument does not defeat causation.
PHA contends that because “Thiess had no authority [under Special
Condition §12(d)] to change Contract terms, Thiess’s R&R response could
not…have caused Zachry’s R&R damages.” PHASupp:38-39. However, §12(d) is
inapplicable: the R&R Order was not a change to the Contract, but a breach. Cf.
p.45-48.
Furthermore, PHA’s argument is based on the incorrect premise that “Thiess
issued the R&R response.” PHASupp:37. The R&R Order, which bore PHA’s
43
seal, was PHA’s decision and act; Thiess (with PHA’s McQueen) was simply
PHA’s messenger. 8:16; 46:50-51, 53-54; PX266(A33); PX314(A34); DX1-
1.0244, §12(c)(A16). The day before the R&R Order issued, PHA’s McQueen
told Thiess and Ely, “[t]he cutoff wall was rejected.” PX1(A32). Vincent
concurred. 46:39.
But even if Thiess made the R&R-Order decision, it would still have been
PHA’s act. Chief Engineer DeWolf testified he delegated his §5.22 authority to
review safety-related Submittals to PHA’s Vincent and McQueen, who were
responsible for getting CH2M-Hill’s assistance. 8:16. Apparent authority is a fact
issue. See p.62.
Moreover, other PHA acts caused Zachry’s damages. Three days after the
R&R Order’s issuance, Chief Engineer DeWolf sent Zachry a letter demanding
Zachry finish by the Contract deadlines (which were conditioned on use of the
frozen-cutoff wall) and threatening LDs. PX319; 19:29-31. DeWolf’s superiors
repeated this demand in October and November. See p.17. By demanding a
recovery schedule after barring Zachry from using its “required” frozen-cutoff
wall, PHA—not Thiess—forced Zachry to spend more money and time building
the newly extended wharf in the wet. See pp.17-18, 21-22.
The Water Code and Chapter 271 impose no bar: the Contract PHA
breached was undisputedly written and properly executed as required by PHA’s
44
cited statutes. See PHASupp:37-38 (citing TEX. WATER CODE §60.408(i); TEX.
LOC. GOV’T CODE §§271.151(2), 271.152)(A42).
III. Sections 5.41 and 5.42 do not bar Zachry’s breach-of-contract claim.
A. The “changes” clauses are inapplicable by their terms.
By their plain terms, §5.41 and §5.42 do not apply to breach-of-contract
claims for damages. Instead, they set forth procedures allowing PHA to make
changes within the scope of the Work during performance of the Contract, either
through Change Orders (§5.41) or “Changed Conditions or Contract
Interpretations” (§5.42).
Section 5.41 applies to “changes and modifications to the Contract
Documents within the general scope of the Work,” and requires a Change Order to
“stipulate the Work to be performed” and “any difference in the Contract Price.”
DX1-1.0224-25(A13). Similarly, §5.42 requires five days’ notice of any
“interpretation of the Contract” by PHA “the Contractor believes...constitutes a
change to the Contract,” “[i]f the Contractor believes it is entitled to an adjustment
in the Contract Time [or] Contract Price.” DX1-1.0225(A13). The Chief
Engineer’s determination as to whether there should be a “modification” or
“equitable adjustment” is “final and conclusive,” and the Contractor is forbidden to
“begin performing that portion of the Work affected by such interpretation” before
giving notice. Id.
45
Zachry does not assert that in forbidding Zachry to use the frozen-cutoff
wall, PHA effected “changes or modifications to the Contract Documents within
the general scope of the Work” as in §5.41, or that PHA made an “interpretation
of the Contract” that “constitutes a change to the Contract” as in §5.42. Rather,
PHA breached the Contract and CO4 by rejecting the frozen-cutoff wall. Thus,
Zachry never sought the “difference in the Contract Price” under §5.41 nor “an
adjustment in the...Contract Price” under §5.42. Rather, Zachry sought—and the
jury properly awarded—damages for PHA’s breach of the Contract. CR29:08142-
44(A8); CR59:17390-93(A4). Furthermore, §§5.41/5.42 apply only to changes
relating to “the Work,” which does not include Zachry’s means and methods. See
p.30.
Authorities recognize that “changes” clauses like §§5.41/5.42 do not apply
to claims the owner breached and is liable for damages. See, e.g., Shintech, Inc. v.
Group Constructors, Inc., 688 S.W.2d 144, 151-52 (Tex.App.—Houston [14th
Dist.] 1985, no writ) (delay damages recoverable despite “changes” clause); Board
of Regents v. S&G Constr. Co., 529 S.W.2d 90, 97 (Tex.Civ.App.—Austin 1975,
writ ref’d n.r.e.). Instead, “changes” clauses are a “vehicle to add or delete work,
substitute materials, alter geographic locations, increase or decrease quantities,
extend or reduce contract time and adjust contract price....” 1 BRUNER &
O’CONNOR CONSTR. LAW §4.23. They “necessarily exclude[] the power to
46
unilaterally change the terms of the contract or its general risk-allocation
provisions, as distinguished from the work itself.” Id. §4:23.
For example, §5.42 would apply if the specifications required “steel,” and
PHA interpreted that to mean galvanized steel, but Zachry believed black steel
complied. RR16:62. But §5.42 would not allow PHA to unilaterally change the
Contract’s General Conditions precluding PHA from interfering with Zachry’s
methods or CO4’s frozen-cutoff-wall authorization.
S&G rejected the owner’s argument that the contractor could recover for
breach only under the change-order provision, holding the argument ignored the
difference between (1) suits seeking breach-of-contract damages and (2) suits
seeking additional compensation in the absence of a breach. 529 S.W.2d at 96-97.
“Changes” clauses apply only to (2), and S&G distinguished cases (cited by PHA)
applying “changes” clauses, finding there was no breach in those cases. Id.
(distinguishing State v. Martin Bros., 160 S.W.2d 58 (Tex. 1942); State v. F&C
Eng’g Co., 438 S.W.2d 647 (Tex.Civ.App.—Houston [14th Dist.] 1969, writ ref’d
n.r.e.)).
PHA’s reading also improperly fails to construe §§5.41/5.42 in light of the
entire contract. Frost, 165 S.W.3d at 312. PHA knew how to write a condition
precedent to filing a lawsuit, but did not in §§5.41/5.42. DX1-1.0230, §5.55(A13).
Furthermore, according to PHA, every PHA breach would be a “change” PHA’s
47
Chief Engineer had the right to make under §5.41 or an
“interpretation...constituting a change” for which the Chief Engineer was the final
arbiter under §5.42. Zachry could never recover damages, because its remedy
would be a “claim for compensation” calculated under §5.43. DX1-1.0225-26,
§5.43(A13). PHA’s reading fails to give meaning to other contract clauses
recognizing PHA could have liability under the contract not only for a “claim for
compensation” but also a “claim for damages.” DX1-1.0192, §2.03(A13); see
DX1-1.0217, §5.16(A13); DX1-1.0217, §5.19(A13).
At a minimum, Zachry’s reading of §§5.41/5.42 as inapplicable to breach-
of-contract claims is reasonable. Any ambiguity should be construed against PHA
as the drafter. See S&G, 529 S.W.2d at 99; p.3-4. Furthermore, “forfeiture by
finding a condition precedent is to be avoided when another reasonable reading…
is possible.” Criswell v. European Crossroads Shopping Ctr., 792 S.W.2d 945,
948 (Tex. 1990). Even if ambiguous, §§5.41/5.42 should be construed not to
impose a condition precedent to breach-of-contract recovery.
B. Alternatively, common-law and statutory rules preclude
application of the “changes” clauses here.
1. The Shintech doctrine.
Even if §§5.41/5.42 apply to breach-of-contract claims, the trial court
correctly held that they do not bar Zachry’s claim. “[W]hen an owner breaches a
construction contract, it relinquishes its contractual procedural rights concerning
48
change orders and claims for additional costs.” Shintech, 688 S.W.2d at 151. This
Court and others have held Shintech precludes breaching owners like PHA from
invoking procedural clauses to bar contractors’ claims. See, e.g., Shintech, 688
S.W.2d at 151 (written-notice requirement); West v. Triple B Servs., LLP, 264
S.W.3d 440, 446-47 & n.4, 449-50 (Tex.App.—Houston [14th Dist.] 2008, no writ)
(30-day notice requirement); North Harris Cty. Jr. College Dist. v. Fleetwood
Constr. Co., 604 S.W.2d 247, 254 (Tex.Civ.App.—Houston [14th Dist.] 1980, writ
ref’d n.r.e.) (change-order requirement); S&G, 529 S.W.2d at 96 (same).
a. Green does not preclude application of Shintech.
PHA’s argument that Shintech does not apply if the contractor continued to
perform after the breach is incorrect: in the cases above, the contractors continued
to perform after defendants’ breaches.
Nor does Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 389 (Tex. 1997),
support PHA. In Green, the general contractor asserted the subcontractor’s lien
releases barred its claim for extra work. Id. at 388. The Supreme Court disagreed,
but for a different reason than the Court of Appeals, which had characterized the
question as a Shintech problem—whether the general contractor relinquished
procedural rights by breaching. In dictum, the Supreme Court recognized the
question in Green was instead whether “the remedy of excuse of performance”
applied—that is, whether the breaching defendant was precluded from relying on
49
its substantive right to a lien release to bar its subcontractor’s claims. The
Supreme Court did not address the Shintech rule. See id. at 389.
Green’s citation of Hanks v. GAB Bus. Servs., 644 S.W.2d 707 (Tex. 1982),
confirms the Court did not reject Shintech, but rather recognized its inapplicability
to substantive contract rights. Like Green, Hanks involved a nonbreaching
plaintiff’s failure to perform a substantive requirement: the defendant-buyer of a
business asserted the plaintiff-seller’s breach of a covenant-not-to-compete
excused the buyer’s failure to pay the full price. 644 S.W.2d at 708. Hanks relied
on S&G to hold that the nonbreaching party’s performance was not excused
because it continued to perform. Id. The Court did not disavow S&G’s application
of the Shintech rule to procedural requirements. Compare id., with S&G, 529
S.W.2d at 96.
b. Technip does not preclude application of Shintech.
Tennessee Gas Pipeline v. Technip USA Corp., 2008 WL 3876141
(Tex.App.—Houston [1st Dist.] 2008, pet. denied), is distinguishable. It involved a
provision requiring the owner to give notice of defective work. Id. at *17. As the
Court observed, if the contractor’s alleged breach based on defective work excused
the owner from giving notice of defective work, the provision would never apply,
rendering it “meaningless.” Id. at *23 n.11. The court did not disapprove but
distinguished cases—including Fleetwood—holding when an owner breaches a
50
building contract, it relinquishes procedural rights concerning change orders and
additional-cost claims. Id. Technip’s refusal to apply the Shintech rule turned not
on the fact that the provision required notice, but rather that applying the provision
as the owner argued would require “circular reasoning” rendering it “without
effect.” Id.
In contrast, applying Shintech here would not render §5.42 “without effect,”
as it would still apply in the absence of a breach to differing Contract
interpretations relating to the Work when the contractor seeks an adjustment to the
Contract Price/Time. Indeed, this Court has applied Shintech to failures to comply
with notice provisions. See, e.g., p.49.
2. The radical-change doctrine.
The trial court also concluded that §§5.41/5.42 are inapplicable to Zachry’s
claim by analogy to the radical-change doctrine. Under this doctrine, “changes”
clauses do not apply to changes “requir[ing] contractors to perform large quantities
of work, radically different in its character, nature, and cost from that originally
contemplated....” B.F.&C.M. Davis v. W.E. Callaghan Constr., 298 S.W. 273, 279
(Tex.Comm’nApp. 1927). The trial court’s analogy did not turn Zachry’s claim
for breach of the written Contract into an implied-contract claim. Besides, a
radical change can constitute a breach giving rise to damages (not quantum
51
meruit). See Nat’l Env’l Serv. v. Homeplace Homes, 961 S.W.2d 632, 635 & n.3
(Tex.App.—San Antonio 1998, no writ).
3. Section §16.071.
According to PHA, §5.42 makes giving 5-days’ notice of Zachry’s breach-
of-contract-damages claim a condition precedent to suit. However, any “contract
stipulation that requires a claimant to give notice” “within less than 90 days” “of a
claim for damages as a condition precedent to the right to sue on the contract” is
“void.” TEX. CIV. PRAC. & REM. CODE §16.071(a)(A43); see Taber v. W. Union
Tele. Co., 137 S.W. 106, 109 (Tex. 1911); Atwood Oceanics v. Zust Bachmeier,
2007 WL 2766192, *1 (5th Cir. 2007).
American Airlines Emp. Federal Credit Union v. Martin, 29 S.W.3d 86
(Tex. 2000), is distinguishable. That clause required a bank customer to give
notice of unauthorized signatures or be barred from asserting they were
unauthorized. Id. at 91-92. In contrast, PHA argues §5.42 requires Zachry to give
5-days’ notice of its breach-of-contract-damages claim and that failure to do so
bars Zachry’s claim. Plus, in PHA’s view, §5.42 gives PHA the “final and
conclusive” right to decide the correct “interpretation” and thus whether there was
a breach. Unlike American, where the clause’s purpose was to inform the bank of
unauthorized signatures, §5.42 (under PHA’s reading) has no purpose except to bar
52
Zachry’s breach-of-contract claim.12
C. The “changes” clauses were not tried.
PHA asserts that whether Zachry complied with §§5.41/5.42 was tried to the
jury, that Zachry failed to prove that it obtained a change order or gave notice, and
that rendition is appropriate. However, Zachry’s compliance with these clauses
was expressly not tried, because the court held pre-trial that §§5.41/5.42 are
inapplicable to Zachry’s claims. CR46:13299-301, 13305(A5). Zachry was not
required to continue litigating these issues. Provident Life & Accident Ins. v.
Hazlitt, 216 S.W.2d 805, 807 (Tex. 1949). Although the jury was instructed that it
may consider §§5.41/5.42 for state of mind, it was not required. See, e.g., 49:112;
CR59:17392(A4).13 Indeed, the jury was instructed Zachry was not required to
obtain a §5.41 Change Order or give §5.42 notice. CR59:17392(A4). Zachry had
no obligation to offer evidence on §§5.41/5.42. But if §5.42 notice was tried,
Zachry substantially complied. See Aple.Br:61 n.54; 11:39-40; PX2(A35);
PX314(A34); 27:89-90, 93-94; 35:95-96; p.16.
12
PHA asserts the notice period should be reformed to 90 days under Contract §3.12.
PHASupp:46 n.3. However, §3.12 is an unenforceable agreement to agree. Ft. Worth ISD v.
City of Ft. Worth, 22 S.W.3d 831, 846 (Tex. 2000); CR42:12179. PHA never sought
reformation on any other basis.
13
PHA notes the instruction also concerned §5.52. PHASupp:45 n.2. Zachry’s §§5.41/5.42
arguments apply equally to §5.52.
53
D. If the trial court erred, remand—not rendition—is required.
Even if §§5.41/5.42 could reasonably be read to govern Zachry’s recovery of
breach-of-contract damages—which Zachry disputes—the proper remedy is not
rendition, but rather remand to permit Zachry to offer evidence. County of Dallas
v. Wiland, 216 S.W.3d 344, 357 (Tex. 2007). Zachry’s reading—that these clauses
do not apply to its damages claim for breach of §5.10/CO4—is at least one
reasonable reading. Accordingly, if not resolved by rules of construction in
Zachry’s favor, a jury should resolve this dispute. Alternatively, a jury should
determine whether Zachry substantially complied with §5.42. Finally, PHA must
prove prejudice from any lack of notice. Prodigy Comms. Corp. v. Agricultural
Excess & Surplus Ins., 288 S.W.3d 374, 377-78 (Tex. 2009).
E. Zachry’s failure to seek a §5.08 extension was irrelevant.
Zachry’s failure to seek a §5.08 time extension for PHA’s breach was
irrelevant: Zachry sought damages—not a time extension—for PHA’s breach.
Requesting a §5.08 extension was not a prerequisite to damages.
Furthermore, §5.22 states, “revision and…resubmission of Submittals shall
not entitle…Contractor to any extension of time.” DX1-1.0219(A13). Zachry’s
failure to request an extension for PHA’s R&R Order thus proves nothing.
Additionally, any suggestion Zachry had to request an extension would have
caused unfair prejudice. TEX. R. CIV. P. 403. And PHA shows no harm.
54
IV. The trial court did not abuse its discretion in excluding PHA’s $8.6
million in alleged harms claimed as offsets.
PHA asserts the trial court improperly “denied PHA its offset defense” by
excluding PHA’s evidence that it allegedly suffered $8.6 million in harms from
Zachry’s performance. PHASupp:50. Parties must timely disclose their theories
of the case and amount of damages—for defenses as well as claims—or face
mandatory exclusion. TEX. R. CIV. P. 193.1, 193.6, 194.2(c), (d) & cmt.; Alvarado
v. Farah Mfg., 830 S.W.2d 911, 914 (Tex. 1992) (“The rule is mandatory, and its
sole sanction—exclusion of evidence—is automatic….”); Harris Cty. v. Inter Nos,
Ltd., 199 S.W.3d 363, 367-68 (Tex.Civ.App.—Houston [1st Dist.] 2006, no pet.)
(litigant must disclose basis for contesting damages). The interpretation of
pleadings and determination of the adequacy of disclosures are within the trial
court’s discretion. See Secure Comm. v. Anderson, 31 S.W.3d 428, 430 n.2
(Tex.App.—Austin 2000, no pet.); Robinson v. Lubbering, 2011 WL 749197, *3, 7
(Tex.App.—Austin 2011, no pet.).
The trial court did not abuse its discretion in excluding PHA’s alleged $8.6
million in harms, because as shown below, PHA’s limited disclosures of alleged
harms were made solely in connection with its attempt to prove the LD clauses
were reasonable forecasts of just compensation and thus enforceable. They did not
give Zachry notice that PHA intended to seek an $8.6 million jury finding on an
offset defense to be deducted from Zachry’s damages award. An $8.6-million-
55
offset claim would have required Zachry to conduct substantial discovery into
whether PHA sustained the harms, causation, and quantification.
From this suit’s beginning in 2006, Zachry sued for sums PHA wrongfully
withheld, including the $25,000/day LDs for Milestone-A. CR1:00005;
CR4:00934. When PHA disclosed—for the first time on June 3, 2009—that it
sustained actual damages, its disclosure was solely in the context of arguing the
LD provisions were a “reasonable forecast of just compensation because…the Port
Authority sustained actual damages in an amount that was not disproportionate to
the [LDs].” CR45:13023, ¶41(A9). The next day, PHA filed its Second Amended
Disclosures stating PHA had suffered general categories of actual damages, but
again solely in the context of arguing the LD provisions were enforceable:
The difficulty of quantifying and proving…actual damages is
one…reason[] the parties included liquidated damages provisions in
the Contract…The [LD] provisions are enforceable….The [LDs]
were a reasonable forecast of just compensation because…[PHA]
sustained actual damages in an amount that is not disproportionate to
the [LDs] ….
CR46:13076(A10).
Zachry immediately sent PHA an interrogatory on June 11 asking it to
quantify these harms. CR46:13105(A11). That PHA responded by Zachry’s July
24 deadline by quantifying more than $8 million in alleged actual harms does not
help PHA: Zachry sent its interrogatory in response to PHA’s disclosure that it
suffered harm proportional to its LDs, and PHA’s response again referenced the
56
difficulty in “know[ing] the precise nature and extent of damages,” and did not
disclose it sought to offset them against Zachry’s damages. CR46:13108(A11);
see CR46:13105-10(A11). And PHA’s general, conclusory pleadings of an offset
defense failed to notify Zachry of the amount of damages PHA sought to offset.
See PHASupp:51 (citing CR47:13428, §57).
Even if these disclosures were not limited to LDs, the trial court did not
abuse its discretion in excluding them as untimely. Trial had been scheduled to
begin July 20, 2009, and the discovery deadline had lapsed six months earlier, on
January 16. CR45:12933; CR17:04679. See Sprague v. Sprague, 363 S.W.3d 788,
800 (Tex.App.—Houston [14th Dist.] 2012, pet. denied) (continuance does not
nullify scheduling-order deadlines).
PHA later increased its claimed harms to approximately $10.5 million on
September 16, but continued to make this disclosure in the LD context.
CR46:13117-20. Nothing disclosed PHA intended to submit these harms to the
jury as an offset defense to reduce Zachry’s damages. Indeed, PHA’s September
17 draft charge did not seek any finding as to PHA’s actual damages for an offset
defense to reduce Zachry’s damages award. See CR43:12401-20(A12).
Not until the eve of trial did PHA reveal it intended to seek an $8.6 million
alleged-harms offset as a defense to reduce Zachry’s damages. (10/9/09):19-21.
The trial court correctly ruled PHA disclosed the harms only in support of the LD
57
provision, not as an offset defense. CR51:14949-51(A6). It also correctly found
PHA failed to show good cause and that injection of the $8.6 million in alleged
harms would require extensive discovery and “dramatically change the landscape
of what promises to be a lengthy and complicated trial.” CR51:14951-52(A6).
The trial court did not abuse its discretion.
V. PHA’s “open-the-door” theory did not support admission of PHA’s
alleged harms regarding the no-damages-for-delay exceptions.
A. The trial court properly excluded PHA’s actual-harms evidence
under Rule 403.
PHA contends the trial court erred in refusing to allow PHA to prove—with
respect to the bad-faith and arbitrary-and-capricious no-damages-for-delay
exceptions—that PHA suffered actual harm to rebut a purported “misimpression”
Zachry allegedly gave the jury. PHASupp:54-56. But Zachry never opened the
door to PHA’s claimed harm.
Zachry never argued PHA suffered no harm at all. Rather, Zachry argued
PHA:
(1) promised not to charge Milestone-A LDs if the crane-ship was able
to dock on arrival, but
(2) nevertheless charged LDs even though the crane-ship was able to
dock on arrival.
See, e.g., 4:51; 25:61-62, 66-68; 71:98; p.10. Zachry did not argue PHA:
(1) promised it would not charge LDs if it suffered no harm at all, but
58
(2) charged LDs even though it suffered no harm.
At most Zachry opened the door to evidence the ship was not able to dock
on arrival—evidence that did not exist, as the ship was able to dock on arrival. See
p.22. There was no misleading impression.
Moreover, any probative value of PHA’s actual-harms evidence in refuting
any minor misimpression would be substantially outweighed by undue delay and
the unfair prejudice to Zachry. 1SCR6:1116(A7). The trial court noted direct and
cross-examination of PHA witnesses would be lengthy and could devolve into a
long battle over the alleged harms, causation, and quantification. Id. Plus,
requiring Zachry to cross-examine without discovery would be highly prejudicial.
Id.
PHA incorrectly contends once evidence is deemed admissible under an
open-the-door theory, Rule 403 cannot exclude it. But PHA’s case reached no
such holding. See PHASupp:55-56 (citing Horizon/CMS Healthcare. v. Auld, 34
S.W.3d 887, 905-07 (Tex. 2000)). Authorities have concluded that “even if a party
opens the door to rebuttal evidence, the trial judge still has the discretion to
exclude the evidence under Rule 403.” Hayden v. State, 296 S.W.3d 549, 554
(Tex. Crim. App. 2009); accord Brown & Rondon, TEXAS RULES OF EVIDENCE
HANDBOOK §107, at 95 (2015); Goode, Wellborn & Sharlot, 1 TEX. PRACTICE:
TEX. RULES OF EVID. 107.1 (3d ed. 2015); McCormick, The New Code of
59
Evidence, TEX. L. REV. 661, 673 (June 1942).
B. Any error was harmless.
The case did not turn on actual-harms evidence: any misimpression was
minimal, as Zachry argued only that PHA said it would not charge LDs if the
crane-ship docked on arrival—not if PHA suffered no harm at all, p.10; PHA’s
evidence of harms from the Milestone-A delay was nonexistent, 26:16-17, 20-21,
or weak at best, 67:5-10; 70:15-27; and PHA did offer actual-harms evidence,
35:24-26; 64:44-45; 65:57-59; DX419; Aplt.Br:68. Plus, other evidence—
including PHA’s last-minute rejection of Zachry’s methods PHA knew were
“required”—supported the arbitrary-and-capricious and bad-faith findings. See
pp.5-9, 11-22.
VI. The trial court did not err in instructing the jury as to fraud.
A. The Supreme Court approved the recklessness instruction.
The Supreme Court rejected PHA’s argument—briefed in that Court—that
recklessness does not support a promise-of-future-performance-made-with-an-
intent-not-to-perform fraud: it quoted the fraud charge in full, and held “[t]he
charge correctly described the misconduct that cannot be covered by a no-
damages-for-delay provision.” Zachry, 449 S.W.3d at 104 n.7, 118(A3). In its
rehearing motion, PHA asked the Court to reconsider this holding,
PHAMot/Reh’g:25, but it declined.
60
Authorities confirm a promise with no intent to perform may be based on
either knowledge of falsity or recklessness. See Beneficial Personnel Servs. v. Rey,
927 S.W.2d 157, 167-70 (Tex.App.—El Paso 1996, vac. w.r.m.); Mann v.
Fitzhugh-Straus Medina Ranch, 640 S.W.2d 367, 371 (Tex.App.—San Antonio
1982, no writ); TEX. P.J.C. BUSINESS §§105.2, 105.3B. PHA’s first four cases do
not consider whether promise-with-no-intent-to-perform fraud can be based on
recklessness. See PHASupp:57. The last three contain no analysis, and cannot
overrule the Supreme Court’s Zachry decision. Id.
B. No charge error tainted the no-damages-for-delay exceptions.
Assuming error, PHA asserts a new trial is required because the jury might
have concluded PHA was reckless. PHASupp:57. But there is ample evidence
PHA intentionally defrauded Zachry as PHA defines it. See Zachry, 449 S.W.3d at
103(A3); pp.10-11; Aple.Br:48-50. Any error was harmless.
Furthermore, Casteel would not require retrial, because it is “reasonably
certain” the jury was “not significantly influenced” by the allegedly erroneous
fraud issue, since PHA never challenged the evidentiary sufficiency of the other
no-damages-for-delay exceptions. See Thota v. Young, 366 S.W.3d 678, 688 (Tex.
2012); Aple.Br:48-49 n.38.
61
VII. The apparent-authority instructions were proper.
A. Apparent authority is a fact issue.
Section 12(d)’s limits on Thiess’s authority to “change” the Contract are
irrelevant to Zachry’s claim PHA breached it. Cf. pp.45-48. PHA’s assertion
Thiess—not PHA—directed Zachry to work in the wet is likewise incorrect. See
p.43-44.14
Regardless, apparent authority is a fact issue even when limitations are
present. See Equitable Life Assur. Soc’y v. Ellis, 147 S.W. 1152, 1158 (Tex.
1912); Paramount Nat’l Life Ins. v. Williams, 772 S.W.2d 255, 261-62
(Tex.App.—Houston [14th Dist.] 1989, writ denied). PHA’s case merely holds that
if the only evidence regarding apparent authority is a limitation, the limit controls.
See Douglass v. Panama, 504 S.W.2d 776, 779 (Tex. 1974).
CH2M-Hill and Theiss had apparent authority to convey decisions and
information to and from Zachry on PHA’s behalf:
Q. And you had designated in your dealings with Zachry, CH2M-Hill to be
your representative for those purposes in exchanging information back and
forth…?
A. [DeWolf]: That was one of their roles, yes.
14
PHA’s additional-work argument appears limited to its incorrect causation argument. PHA
does not challenge damages under TEX. LOC. GOV’T CODE §271.153(a)(2)’s additional-work
measure. Nor could it: the Supreme Court confirmed delay damages are recoverable under
§271.153(a)(1), and PHA obtained an order finding 100% of Zachry’s damages are delay
damages. CR60:17517-18; 60:17526. The Court can be “reasonably certain” the jury was “not
significantly influenced” by the additional-work measure (which was proper anyway,
Aple.Br:50-52). See Thota, 366 S.W.3d at 688.
62
6:86; see 6:84-87; 8:44-46; 25:9-12. Other evidence proved PHA expected Zachry
to rely on CH2M-Hill communications, 6:85-86; 8:45-46; 21:34; 44:47-48;
CH2M-Hill was DeWolf's representative, 8:45-46; DX1-1.0244, §12(c)(A16);
CH2M-Hill was PHA’s primary point-of-contact with Zachry, 44:43-44; see 37:36;
and PHA executives treated CH2M-Hill like PHA staff, 46:74-75.
Additionally, the PHA-approved Construction Management Plan—posted on
the Constructware website for Zachry to view—told Zachry CH2M-Hill is “an
extension of the PHA staff,” would “act as [PHA’s] representative on site,” and
would “have all authority normally attributed to a [construction manager] acting as
owner’s agent (not at risk).” PX57.0009, §2.2(A39); see 9:46-47; 37:37-38; 44:54-
58; 47:156-57; see also 44:44; 68:101; 69:106.
Thus, even if §5.42 notice was tried, Zachry substantially complied by
giving notice to CH2M-Hill’s Thiess, whom PHA led Zachry to believe was
authorized to accept such information for PHA. See pp.62-63.
B. Zachry pleaded apparent authority.
The trial court’s determination that Zachry pleaded apparent authority was
within its “broad discretion when interpreting pleadings.” Pace Concerts v.
Resendez, 72 S.W.3d 700, 703 (Tex.App.—San Antonio 2002, pet. denied).
Zachry pleaded PHA “expressly charged and designated its Construction Manager,
CH2M-Hill, to act on its behalf on this critical cutoff-wall issue.” CR29:8137,
63
¶13(A8); see id. at 8138, ¶13 (calling CH2M-Hill “PHA’s designated agent”).
Zachry also alleged PHA took actions a non-human entity like PHA could only
take through agents. See id. at 8133-46. Because PHA did not specially except,
Zachry’s pleadings are construed “liberally…to include all claims that reasonably
may be inferred….” Allison v. Service Lloyds Ins., 437 S.W.3d 589, 592 n.2
(Tex.App.—Houston [14th Dist.] 2014, pet. denied).
Zachry’s agency allegation is not limited to actual authority. Both actual
and apparent authority are based on a principal's designation of authority; they
differ only as to whether the designation is communicated to the agent or a third
party. See In re ADM Inv. Servs., 304 S.W.3d 371, 374 (Tex. 2010). Courts have
held apparent authority alleged in the absence of those words. See, e.g., Iron Mtn.
Bison Ranch v. Easley Trailer Mfg., 42 S.W.3d 149, 157 (Tex.App.—Amarillo
2000, no pet.); Cox v. Humble Oil & Refining, 16 S.W.2d 285, 286 (Tex.Comm’n
App.1929); Chapapas v. Delhi Taylor Oil, 323 S.W.2d 64, 66 (Tex.Civ.App.—San
Antonio 1959, writ ref'd n.r.e.).
VIII. PHA is not entitled to attorneys’ fees if Zachry prevails on any theory.
PHA is not entitled to attorneys’ fees because judgment for Zachry should
be affirmed. See DX1-1.0201, §3.10(A13).
Even if Zachry does not prevail on its R&R-Order breach-of-contract theory,
PHA is not entitled to attorneys’ fees. Contract §3.10 permits PHA to recover fees
64
on the Contractor’s claim only “[i]f…Contractor does not prevail with respect to
such claim.” DX1-1.0201(A13). A party prevails if it recovers some relief on its
claim, regardless of the amount. Intercontinental Grp. Ptnrshp. v. KB Home Lone
Star, 295 S.W.3d 650, 654 (Tex. 2009); Flagship Hotel. v. City of Galveston, 117
S.W.3d 552, 564 (Tex.App.—Texarkana 2003, pet. denied). “[I]t is the judgment,
not the verdict, that we must consider in determining whether attorneys’ fees are
proper.” Intercontinental, 295 S.W.3d at 656.
Zachry brought one claim: breach of contract. CR29:08142-44. Zachry
asserted PHA breached the parties’ Contract in multiple ways, including by issuing
the R&R Order and withholding LDs. The judgment awarded Zachry one lump
sum for this breach-of-contract claim, without distinguishing between damages for
each underlying theory. CR62:18166(A1).
Indeed, Texas law holds a single claim may include multiple liability
theories, and a plaintiff prevails on that single claim if it prevails on any theory.
See, e.g., 4901 Main, Inc. v. TAS Automotive, 187 S.W.3d 627, 633-35
(Tex.App.—Houston [14th Dist.] 2006, no pet.); Flagship Hotel, 117 S.W.3d at
564-66; Solar Soccer Club v. Prince of Peace Luth. Church, 234 S.W.3d 814, 829
n.2 (Tex.App.—Dallas 2007, pet. denied); Structural Metals, Inc. v. S&C Elec.
Co., 590 Fed. Appx. 298, 305 (5th Cir. 2014). PHA’s cases defining “claim” as
65
“demand for compensation” do not address whether a claim can encompass
multiple theories. See PHASupp:61. 15
Accordingly, if Zachry obtains relief on any theory underlying its breach-of-
contract claim—for example, its judgment for improperly withheld LDs affirmed
by the Supreme Court—then Zachry prevails, and PHA is not entitled to fees.
PHA argues it should recover attorneys’ fees if it wins on the R&R claim
because it is the “main issue.” PHASupp:62-63. But the judgment determines
whether attorneys’ fees are proper. Intercontinental, 295 S.W.3d at 656. As long
as Zachry obtains relief in the judgment on its breach-of-contract claim, regardless
of theory, it prevails. See id. at 654; see Flagship, 117 S.W.3d at 564 (inquiry is
whether agreement was breached, “not the extent of the breach.”). Furthermore,
Intercontinental cast doubt on whether the prevailing party should be determined
by “main issue” analysis. See Intercontinental, 295 S.W.3d at 661; see also id. at
659 n.42.
Even if “main–issue” analysis is viable, when only one party receives
15
PHA implies that because the attorneys’-fee question segregated fees between breach-of-
contract theories, Zachry does not assert a single claim. PHASupp:61-62. Nothing required
Zachry to object to the Charge—which broke out fees by theory to avoid any need for retrial if
Zachry was incorrect—to preserve its argument that Zachry prevails if it wins any breach-of-
contract theory.
But Zachry did object. 71:72(A41) (“Attorneys’ fees should not be submitted at all….”).
As here, it argued, “regardless of what happens on the remaining breach-of-contract theories,
Zachry will have a net recovery on its breach-of-contract claim, and as a matter of law, [PHA]
cannot be the prevailing party.” Id.
66
judgment in its favor, “regardless of the amount of damages,” “courts have
concluded that party prevailed on the main issue.” Flagship, 117 S.W.3d at 564.
“Main-issue” analysis applies (if at all) in cases—like those cited by PHA—where
the Court must determine who prevails when neither party obtains relief. See
Bhatia v. Woodlands North Houston Heart Ctr., 396 S.W.3d 658, 663, 671
(Tex.App.—Houston [14th Dist.] 2013, pet. denied); SEECO, Inc. v. K.T. Rock, 416
S.W.3d 664, 666, 674 (Tex.App.—Houston [14th Dist.] 2013, pet. denied).
IX. Zachry’s recovery on its pass-through claim should be affirmed.
On January 1, 2008, Zachry reorganized. PX529; 47:123-29. Under the
new structure, Zachry subcontracted with a new Zachry entity, “the Sub,” to finish
the wharf. Id.; 47:129-31; PX643(A37); PX642(A38). The Sub employed the
same people that worked on the project pre-reorganization. 47:129. Going
forward, the Sub incurred the costs from PHA’s breach. PX642(A38);
PX643(A37); 47:132-34. Zachry must reimburse the Sub for those costs, including
any recovery in this case. Id.
A. Zachry asserts a valid pass-through claim.
PHA contends Zachry cannot assert a pass-through claim because it hired
the Sub after PHA’s breach, and thus “PHA’s…breach…did not cause Zachry to
breach the subcontract.” PHASupp:65. But nothing in the seminal case approving
pass-through agreements requires a breach by Zachry. See Interstate Contracting
67
Corp. v. City of Dallas, 135 S.W.3d 605, 619-20 (Tex. 2004) (outlining
“requirements”). Interstate requires only that Zachry “remain liable to the
subcontractor for damages sustained by the subcontractor.” Id. at 619.
Interstate also recognizes a general contractor’s decision to hire a sub to
perform work necessitated by the owner’s breach does not preclude the contractor
from recovering the cost for the sub. Id. at 611. “Otherwise, the owner could
receive a windfall because the subcontractor lacked privity with the owner and the
contractor lacked standing to sue the owner for damages suffered by the
subcontractor.” Id. at 615-16.
Here, Zachry established its continuing liability to the Sub for the costs the
jury assessed. In the Management Services Agreement (“MSA”), Zachry promised
(1) “to pay to [the Sub] the Reimbursable Costs” it incurred while performing
Services for Zachry, and (2) to pay to the Sub any payments it received from the
owner. PX643.0004, ¶3.1(A37). In the Pass-Through Agreement, Zachry
“agree[d]...it is liable to [the Sub], to present the ZCC Claims and remit any
recovery from the Port of Houston to [the Sub], in accordance with the terms of
this Agreement.” PX642, ¶1.1(A38). Testimony confirmed Zachry’s continuing
liability to the Sub. 47:127, 130-34.
The burden therefore shifted to PHA to negate this continuing liability: “If
the owner disputes that this requirement [of continuing liability] has been met, it
68
bears the burden of proving, as an affirmative defense, that the pass-through
arrangement negates the contractor's responsibility for the costs incurred by the
subcontractor.” 135 S.W.3d at 619-20 (“The owner disproves…contractor’s
continuing liability only if it can show… contractor is not obligated to remit any
recovery to…subcontractor.”).
PHA asserts Zachry might not remain liable to the Sub. PHA speculates—
incorrectly—that owners on other MSA contracts might have paid Zachry more
than the Reimbursable Costs on their contracts, and that any such excess payments
limit Zachry’s liability for Reimbursable Costs for the PHA Contract. PHA’s
argument fails to meet its burden.
First, PHA misunderstands the MSA. It unambiguously states, “Zachry
agrees to pay to Manager [the Sub] the Reimbursable Costs.” PX643.0004,
§3.1(A37). PHA incorrectly reads §3.2 to limit Zachry’s obligation to pay
Reimbursable Costs when Contract Payments exceed Reimbursable Costs. To the
contrary, it unambiguously provides the parties shall divide “such excess amounts”
in “a mutually satisfactory allocation.” Id. at §3.2(A37). Nothing in the MSA
suggests that allocation of “such excess amounts” limits Reimbursable Costs
Zachry must pay to the Sub on other contracts. Id.(A37).
Second, even if PHA reads the MSA correctly, PHA proved no other
contract “windfall” to negate Zachry’s liability for the Sub’s Reimbursable Costs
69
on this Contract.
B. The Court correctly charged the jury on pass-through.
PHA’s charge-error arguments likewise fail. Zachry unambiguously agreed
to pay the Sub Reimbursable Costs, and PHA failed to negate Zachry’s liability to
the Sub. Accordingly, the trial court properly granted a directed verdict
recognizing the pass-through agreement’s validity and Zachry’s right to recover
the Sub’s damages, and properly declined to charge the jury to include those costs
only “to the extent” Zachry agreed to reimburse the Sub for them. 71:11-13(A40);
CR59:17365-74. Nor was the Court’s instruction that the jury “should” include in
damages any Reimbursable Costs an improper comment.
C. Waiver of immunity applies to the pass-through claims.
Nor does immunity bar pass-through claims. City of San Antonio v.
Valemas, 2012 WL 2126932, *7 (Tex.App.—San Antonio 2012, no pet.); Hensel
Phelps Constr. v. McCarthy Bld'g, 2005 WL 1489932, *4 (N.D. Tex. 2005). Cf.
Galveston I.S.D. v. Clear Lake Rehab. Hosp., 324 S.W.3d 802, 810 (Tex.App.—
Houston [14th Dist.] 2010, no pet.) (“§271.152’s waiver…[applies to] a class of
suits—suits for purposes of adjudicating a claim for breach of contract subject to
[Chapter 271]—without restricting which parties can bring suit”) (emphasis
original)).16
16
The pass-through did not evade the no-assignment clause. PHASupp:63 n.6. Zachry expressly
did not assign the Contract. PX643.0001, ¶C (A37). Interstate recognized the validity of pass-
70
PRAYER
The trial court’s judgment should be affirmed.
Respectfully submitted,
By: /s/ Robin C. Gibbs
REYNOLDS FRIZZELL LLP GIBBS & BRUNS, L.L.P.
Brandon T. Allen Robin C. Gibbs
State Bar No. 24009353 State Bar No. 0785300
ballen@reynoldsfrizzell.com rgibbs@gibbsbruns.com
1100 Louisiana, Suite 3500 Jennifer Horan Greer
Houston, Texas 77002 State Bar No. 00785611
Phone: (713) 485-7200 jgreer@gibbsbruns.com
Fax: (713) 485-7520 Sydney G. Ballesteros
State Bar No. 24036180
ALEXANDER DUBOSE sballesteros@gibbsbruns.com
JEFFERSON & TOWNSEND LLP Michael R. Absmeier
Douglas W. Alexander State Bar No. 24050195
State Bar No. 00992350 mabsmeier@gibbsbruns.com
dalexander@adtappellate.com Amanda B. Nathan
515 Congress Avenue, Suite 2350 State Bar No. 00784662
Austin, Texas 78701-3562 anathan@gibbsbruns.com
Phone: (512) 482-9301 1100 Louisiana, Suite 5300
Fax: (512) 482-9303 Houston, Texas 77002
Phone: (713) 650-8805
Fax: (713) 750-0903
ATTORNEYS FOR APPELLEE, ZACHRY
CONSTRUCTION CORPORATION
through agreements as distinct from assignments. 135 S.W.3d at 616; see also Valemas, 2012
WL 2126932, *8-9.
71
CERTIFICATE OF SERVICE
I hereby certify that on the 12th day of June, 2015, a copy of the foregoing
instrument was served upon the following counsel by electronically filing with the
Clerk of Court using the TexFile electronic filing system which will send
notification of such filing to the following and via e-mail:
David E. Keltner Marie R. Yeates
State Bar No. 11249500 State Bar No. 22150700
david.keltner@kellyhart.com myeates@velaw.com
Marianne Auld Catherine B. Smith
State Bar No. 01429910 State Bar No. 03319970
marianne.auld@kellyhart.com csmith@velaw.com
KELLY HART & HALLMAN LLP VINSON & ELKINS L.L.P.
201 Main Street, Suite 2500 1001 Fannin, Suite 2500
Fort Worth, Texas 76102 Houston, Texas 77002
David H. Brown Michael A. Heidler
State Bar No. 03109200 State Bar No. 24059921
dbrown@bkllp.com mheidler@velaw.com
BROWN & KORNEGAY LLP VINSON & ELKINS L.L.P.
2777 Allen Parkway, Suite 977 2801 Via Fortuna, Suite 100
Houston, Texas 77019 Austin, Texas 78746
Karen L.T. White Bill Sims
State Bar No. 20274500 State Bar No. 18429500
karen@kltwpc.com bsims@velaw.com
KAREN L.T. WHITE, P.C. VINSON & ELKINS L.L.P.
2777 Allen Parkway, Suite 977 2001 Ross Avenue, Suite 3700
Houston, Texas 77019 Dallas, Texas 75201
Attorneys for Respondent, The Port of
Houston Authority of Harris County,
Texas
72
Joe F. Canterbury, Jr. Michael Keeley
State Bar No. 03761000 State Bar No. 11157800
jcanterbury@canterburylaw.com michael.keeley@strasburger.com
CANTERBURY ELDER GOOCH STRASBURGER & PRICE, LLP
SURRATT SHAPIRO & STEIN 901 Main Street, Suite 4400
Occidental Tower Dallas, Texas 75202
5005 LBJ Freeway, Suite 1000 Attorney for Amicus Curiae Zurich
Dallas, Texas 75244 Surety
Attorneys for Amicus Curiae
Associated General Contractors of
Texas, Inc.
/s/ Jennifer Horan Greer
Jennifer Horan Greer
73
CERTIFICATE OF COMPLIANCE
Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), I certify that this
brief contains 15,000 words. This word count excludes the words excluded from
the word count pursuant to Texas Rule of Appellate Procedure 9.4(i)(l). This is a
computer-generated document created in Microsoft Word, using 14-point typeface
for all text, except for footnotes, which are in 12-point typeface. In making this
certificate of compliance, I am relying on the word count provided by the software
used to prepare the document.
/s/ Jennifer Horan Greer
Jennifer Horan Greer
74
APPENDIX TO ZACHRY CONSTRUCTION CORPORATION'S
SUPPLEMENTAL BRIEF OF APPELLEE
Clerk's Record
1. Final Judgment dated April 28, 2010 (CR62:18163-68)
2. Port of Houston Authority of Harris County v. Zachry Construction Corporation,
377 S.W.3d 841 (Tex. App.—Houston [14th Dist.] 2012), rev’d, 449 S.W.3d 98
(Tex. 2014).
3. Zachry Construction Corporation v. Port of Houston Authority of Harris County,
449 S.W.3d 98 (Tex. 2014).
4. Charge of the Court and Verdict dated January 14, 2010 (CR59:17386-409)
5. Order on Zachry's 11 Part Motion for Pretrial Determination of Issues of Law
(Rule 166(g) Motion) dated October 5, 2009 (CR46:13296-309)
6. Order Granting in Part and Denying in Part Plaintiff's Motion to Strike the Port's
Offset and Withholding Defenses dated October 16, 2009 (CR51:14948-52)
7. Order on PHA's Request that the Court Reconsider Its November 12, 2009 Open-
the-Door Ruling Regarding the Port's Actual Harms (1SCR6:1112-17)
8. Plaintiff's Fourth Amended Petition and First Amended Answer to PHA's
Counterclaim for Attorneys' Fees (CR29:08131-48)
9. Third Amended Original Answer and Counterclaim for Attorneys' Fees
(CR45:13008-35)
10. Excerpts from The Port of Houston Authority's Second Amended Response to
Plaintiff's Request for Disclosure (CR46:13036-77)
11. The Port of Houston Authority's Objections and Responses to Zachry's Fourth Set
of Interrogatories and Fourth Request for Production (CR46:13105-16)
12. Defendant Port of Houston Authority’s Proposed Draft Jury Charge filed
September 9, 2007 (CR43:12401-20)
Exhibits
13. Contract, General Conditions (DX1-1.0177-235)
1
14. Contract, Technical Specifications, Section 02161 Trench Excavation and Shoring
Safety Plan (DX1-1.0324-29)
15. Contract, Technical Specifications, Section 01500 Temporary Facilities and
Controls (DX1-1.0271-82)
16. Contract, Special Conditions, §12 (DX1-1.0244)
17. Contract, Addendum No. 8 (DX1-1.0021)
18. Email from Thiess to Anderson dated August 1, 2004 (PX84)
19. Acceptance for Records of Main Freeze Wall Plan (PX88)
20. Transcript of April 5, 2005 Meeting (PX8)
21. April 13, 2005 Proposal for Wharf Extension (PX9)
22. May 18, 2009 Proposal for Wharf Extension (PX179)
23. July 11, 2005 Proposal for Wharf Extension and Ditch K (PX219)
24. Request for Port Commission Action for Execution of Change Order 4 Signed by
Port Facilities Director James Jackson and Chief Engineer Steve DeWolf with
origination date of July 18, 2005 (PX224)
25. September 9, 2005 Frozen Cutoff Wall Design (PX10)
26. Transcript of September 13, 2005 Weekly Construction Coordination Meeting
(PX274)
27. Email string between Andy Thiess and Jeff Ely and others dated September 14,
2005 (PX11)
28. Memorandum dated September 14, 2005 from Port Facilities Director Jackson to
Port Executive Director Kornegay recommending approval of Change Order 4
(PX3)
29. McQueen email to Thiess dated September 15, 2005 (PX280)
30. Change Order 4 (PX12)
2
31. Mageau Report on Effect of Freezing and Thawing of Cutoff Wall on Drilled
Shafts dated September 28, 2005 (PX14)
32. McQueen email to Ely dated October 10, 2005 (PX1)
33. The Port's October 11, 2005 Response to Zachry's September 9, 2005 Frozen
Cutoff Wall Design (PX266)
34. Transcript of October 11, 2005 Weekly Construction Coordination Meeting
(PX314)
35. Thiess email to Ely dated November 13, 2005 (PX2)
36. Email string between McQueen, Thiess, Ely, and others dated March 21, 22, and
28, 2007 (PX504)
37. Management Services Agreement (PX643)
38. Pass-through Agreement (PX642)
39. Excerpts from Construction Management Agreement (PX57.0001-10, 57.0033)
Reporter's Record
40. Court’s Ruling on Directed Verdict (71:8-15)
41. Objections to the Charge (71:15-73)
Statutes
42. Texas Local Government Code §271.151 through §271.160 (Vernon 2005)
43. Texas Civil Practices and Remedies Code §16.071
3
TAB 1
Final Judgment dated April 28, 2010
(CR62:18163-68)
• • P--6
9A
DCtZ·I)
CAUSE NO. 2006-72970
ZACHRY CONSTRUCTlON 1\
'S IN THE DISTR1CT COURT OF
CORPORATION nlk/a Zachry Industrial, ~
``\)
Inc. §
§
V. ~
\\ HARRTS COUNTY, TEXAS ~ \O(e~:~;
\P~
§
PORT OF HOUSTON ~ , %t\)\\\
~?\\ .
li
AUTHORITY OF HARRIS 1\
li
COUNTY, TEXAS s 151~
1
JUDICIAL DISTRICT
1"\1(\e·.
FINAL JUDGMENT
On October 20, 2009, this case was called for trial. Plaintiff Zachry Construction
' .
Corporation, now known as Zachry IndustriaL Inc., appeared through its representatives and
through its attorneys and announced ready for trial. Defendant, Port of Houston Authority of
Harris County, Texas, appeared through its representatives and through its attorneys and
announced ready for trial.
After the jury was impaneled and sworn, it heard the evidence and arguments of counsel.
After the close of the defendant's cast und the clost! of ull evidence. Zachry Construction
Corporation moved fo r a directed vcn.lict. The Court or:Jlly b'TOnted a directed verd ict on certain
issues, as stated in open court on January 14, 2009. The Charge of the Court was then submitted
to the jury, and in response, the jury made tindings that the Court received, filed, and entered of
record. The questions submitted to the jury and the jury's findings arc attached as Exhibit A to
Zachry's Motion for Judgment and Mt..,tion to Disregard Jury Findings or for JNOV with Respect
to Certain Jury Findings and im:orporat~d by retcrcnce.
After the verdict, Zachry Constructilm Corporation filed its Motion for Judgment and
Motion to Disregard Jury Findings or for JNOV with Respect to Certain Jury Findings,
speci ficall y asking the Court to disregard th~ jury's answers to Question Nos. 12.A. and 13.
!Si·€2
• •
Zachry later filed its Supplemental Motion for Judgment and to Disregard Certain Jury Findings,
specifically asking the Court to also disregard the jury's answers to Question Nos. 4 and 9, and
to disregard Question No. 5 as a basis for reducing Zachry's damages.
While the parties have extensively briefed myriad issues after the jury rendered its
verdict. the Court wishes to write briefly on the cent ral issue on which Defendant Port of
.
Houston Authority seems to havt focused, so\'creign immunity: The Court has carefully
considered the authority that the parti es presented (m this issue. The Court is not persuaded that
Texas Jaw precludes an award to Plaintiff Zachry Construction Corporation for the damages
found by the jury. The Court has read and considered. among many other cases, Tooke v. City of
Mexia, 197 S.W.3d 325 (Tex.. 2006), McKinney & Moore, Inc. \'. City of Longview, No. 14-08-
00628-CV, 2009 WL 4577348 (Tex. App. ··-Houston ll4'h Dist.] Dec.' 8, 2009, pet. fi led), and
. -
Ciry of 1/ousron v. Southern Electri<.: Sen·ices, 273 S.W.3d 739 (Tex.. App.- Houston [I 51 Dist.]
2008, pet. denied). .
The last case, Sourhern Electric. providcs guidance for the Court. The Court understands
- that the case involved a plt:a to the jurisdiction. id. at 744. and that the current matter docs not.
Nevertheless, the court in Sorahern Electric was still squarely tuced with the question of whether
a pleading of damages that were not c:Id.
•
Indeed, the court in Southern
Electric seems to have held that by pleading tor damages that were clearly outside the express
terms of the contract, the plaintiff in that case nevertheless had "alleg[ed] facts to support their
claim that the City has not paid the balance due and owed under the contract." !d. (internal
quotations omitted). Finally, contrary to the Defendant Pon of' Houston Authority's arguments.
both Southern Electric, 273 S.W.3d at 744, and Cit,v u,(Mesquite v. PKG Contracting, Inc., 263
S.W.3d 444, 448 (Tex. App.-Dallas 2008, no pet.) (both written after Tooke) seem to conclude
that section 271.153 is not jurisdictional. but merely a limitation on damages.
In the end, the Court is unwilling to find that the "balance due and owed" language in
271.153 et seq. requires that the types of damages that a contractor sues for after an alleged
- breach of contract by tht:: owner have to be expressly li sted in the contract. The Co.urt believes
that despite Defendant Port of Houston Authority's excellent briefing and arguments to the
contrary, such a finding would likely lead to absurd results. The Court can imagine contracts
expanding to include hundreds of pages of boilerplate and surplussage, drafted by battalions of
lawyers (not that the Court ~as anything against lawyers). that no one reads just to cover any ·
possible contingency, and any permutation or derivation of any such contingency. If that were
so, and if Mr. Nixon's statements in the legislative history really carried the day, then such
language could have easily been includt:d in section 271.153. It was not.
The Court believes that it understands and appreciates Defendant Port of Houston
Authority's position that the limitation on damages contained in Texas Local Gov't Code section
271 .153 et seq. is part of the limited waiver of sovc:reign immunity and thus those provisions
should be construed narro,vly. The bottom line is that. whether that position is correct or not, the
Court docs not find that this issue to be dispositive. The Court's \'iew is that the answer is in the
3
.. • •
language of sections 271 .153(a)(l) and (2). That is, the Court tinds that the damages arc direct
damages and constitute (a) the balance due and owed by the local governmental entity under the
contract as it may have been amended, including any amount owed as compensation for the
increased cost to perfonn the work as a direct result of owner-caused delays or accelera~ion; or
(2) the amount owed for change orders or additional work the contractor is directed to pcrfonn
by a local governmental entity in connection with the contract, or both. That is true whether the
section is interpreted narrowly or broadly. 1
The Court has considered Zachry Construction Corporation's motions, the Port's Motions
for JNOV, the parties responses, as well as the parties replies and sur-replies, the record in this
matter, and the jury verdict, and RENDERS jud~:,rment t{lr Zachry Construction Corporation and
against the Port of Houston Authority of Harris County. Texas, us follows:
(I) lt is ORDERED. ADJUDGED, AND DECREED that Zachry Construction
Corporation recover damages from the Port of Houston Authority of Harris County, Texas in the
sum of$19,992,697.00, which was dctennined by subtracting the jury's award of$970,000.00 in
offset damages in its answer to Question 12(A) from the other amounts awarded to Plaintiff
Zachry Construction Corporation. Further, the Court has not awarded the $600,000 withheld for
dredging work that the jury refused to award to Plaintiff;
(2) lt is further ORDERED, ADJUDGED, AND DECREED that Zat:hry
Construction Corporation recover from the Defendant Port of Houston Authority of Harri$
County, Texas prejudgment interest on that sum in the amount of $3,451 ,022.40, which is
1
The Coun is also not persuaded that any narrow reading of se~:ti on 271 .153 relates to the continued existence of
common law exceptions to the no-damages-for-dday clause in the Wharf :md Dredging Contract. This Court has
repeatedly held in this cose that thoSI! provisions are part ofTt'xas law. And, section 271.151 et seq. does not
c~pressly eliminat~ these dcfcn!les. lnd~ed, section 271 .155 would sel:'m to defeat the Port's argument that such
defenses no longer exist. Of course the kgislature was aware of tho: I:'Xi~tent'e of these defenses in Texas case law.
afld could have easily addressed them in the statutory st'heme.
4
• •
determined by taking the a•..vard of actual damages of S\9,992,697 .00, and calculating an annual
rate of interest of 5% from November 15. 2006 through the day before the entry of judgment.
April28, 2010. The total ofthcsc two ligures is $23.443.719.00;
(3) ll is ORDERED. ADJUDGED. AND DECREED that Zachry Construction
Corporation recover from the Port of Houston Authority of Harris County, Texas postjudgment
interest from the date of this Final Judgment on the total sum awarded of $23,443,719.00, at the
rate of 5% per a·nnum, compounded annually: and
(4) It is ORDERED, ADJUDGED, AND DECREED that Zachry Construction
Corporation recover all ta,able costs of court from the Port of Houston Authority.
The Court ORDERS, ADJUDGES, AND DECREES that execution shall issue for this
judgment, and that Zachry Construction Corporation is b'Tanted all writs and processes necessary
to enforce this final judgment.
All relief not expressly granted herein is DENIED.
This judgment is final. disposes of all parties, und is appealable.
API< 2 8 2010 I
I
Signed this day of April, 2010.
The Honorable Mike Engelhart
5
'·
!81S7
APPROVED AS TO FORM:
• •
'
GIBBS & BRUNS. LLP
BY: lsi Jennifer Horan Greer
Robin C. Gibbs
State Bar No. 07853000
Jennifer Horan Greer
Texas Bar No. 0078561 1
Sydney G. Ballesteros
Texas Bar No. 24036180
Michael R. Absmeicr
State Bar No. 24050195
II 00 Louisiana, Suite 5300
Houston, Texas 77002
Phone: (713) 650-8805
Fax: (713)750-0903
REYNOLDS , FRIZZELL. BLACK.
DOYLE, ALLEN & O~DHAM L. L.P.
Brandon T. Allen
State Bar No. 24009353
II 00 Louisiana, Suite 3500
Houston, Texas 77002
Phone (713) 485-7200
Fax (713) 456-2651
AITORNEYS FOR PLAINTIFF
6
TAB 2
Port of Houston Authority of Harris County v.
Zachry Construction Corporation,
377 S.W.3d 841 (Tex. App.—Houston [14th Dist.] 2012),
rev’d, 449 S.W.3d 98 (Tex. 2014).
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
377 S.W.3d 841
Court of Appeals of Texas,
Houston (14th Dist.).
The PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY, Texas, Appellant
v.
ZACHRY CONSTRUCTION CORPORATION, Appellee.
No. 14–10–00708–CV. | Aug. 9, 2012.
Synopsis
Background: Construction contractor brought action against county port authority for breach of contract. The 151st District
Court, Harris County, No.2006–72970, Mike Engelhart, J., entered judgment on jury verdict for contractor. Port authority
appealed.
Holdings: The Houston Court of Appeals, Sharon McCally, J., held that:
[1]
no-damages-for-delay clause barred damages for active interference or bad faith;
[2]
contractor released claims to recover withheld funds;
[3]
evidence supported finding that contractor breached contract as to epoxy coating of fenders; and
[4]
port authority was not required to establish that its expenditure to repair fenders was reasonable.
Reversed.
Tracy Christopher, J., filed dissenting opinion.
West Headnotes (26)
[1]
Contracts Intention of Parties
The court’s primary concern when it construes a written contract is to ascertain the parties’ true intent as expressed
in the contract.
Cases that cite this headnote
[2]
Contracts Construction as a whole
Courts must examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
a contract so that none will be rendered meaningless.
Cases that cite this headnote
[3]
Appeal and Error Cases Triable in Appellate Court
The construction of an unambiguous contract is a question of law for the court, which is reviewed de novo.
Cases that cite this headnote
[4]
Public Contracts Delay of government and liability for damages
Water Law Contracts
No-damages-for-delay clause of county port authority’s contract with construction company to build wharf barred
construction company from recovering damages on its breach of contract claim against port authority for delaying or
hindering construction, even if port’s conduct constituted arbitrary and capricious conduct, active interference, bad
faith, and fraud, where the clause covered “other fault” in addition to negligence and breach of contract, and the
clause provided for extension of time as a remedy.
Cases that cite this headnote
[5]
Contracts Freedom of contract
Contracts Public Policy in General
Parties are free to contract as they see fit, as long as their agreement does not contravene public policy.
Cases that cite this headnote
[6]
Contracts Rewriting, remaking, or revising contract
Courts do not rewrite contracts to insert provisions parties could have included or imply restraints for which they
have not bargained.
Cases that cite this headnote
[7]
Contracts Freedom of contract
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
The parties are entitled to select what terms and provisions to include in a contract before executing it and, in so
choosing, each is entitled to rely upon the words selected to demarcate their respective obligations and rights.
Cases that cite this headnote
[8]
Release Nature and requisites in general
A “release” is a writing that provides that a duty or obligation owed to one party to the release is discharged
immediately or upon the occurrence of a condition.
1 Cases that cite this headnote
[9]
Release General rules of construction
Releases are subject to the usual rules of contract construction.
Cases that cite this headnote
[10]
Release General rules of construction
As in other instances of contract construction, the court’s primary concern in interpreting a release is to ascertain the
intent of the parties at the time of the execution of the alleged release as expressed in the release.
1 Cases that cite this headnote
[11]
Release General rules of construction
To construe a release, courts may examine evidence of the circumstances surrounding the negotiation and execution
of the release.
1 Cases that cite this headnote
[12]
Release General rules of construction
To construe a release, courts may consider the deletions made by the parties in the course of drafting the instrument
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
at issue.
Cases that cite this headnote
[13]
Release General rules of construction
To construe a release, courts may consider the title of the document, but such is not dispositive.
Cases that cite this headnote
[14]
Release Scope and extent in general
For a release to be effective, it must mention the claim to be released, but the release need not specifically describe a
particular cause of action.
Cases that cite this headnote
[15]
Release General rules of construction
Release General release
Even where the parties’ agreement does not contain the term “release,” the intent of the parties controls, and the
legal effect of the instrument may be a general release.
Cases that cite this headnote
[16]
Release Release of damages for breach of contract
Documents titled “Partial Release of Lien” were releases of construction contractor’s claims against project owner
for the entire amounts stated on payment estimates submitted with monthly invoices, even though the body of the
documents contained neither the word “release” nor the word “lien,” and even though general release language that
appeared in an earlier version of the document was omitted from the documents at issue, where the documents stated
that contractor “has no further claims against” project owner “for the portion of the Work completed and listed on
the Schedule of Costs” in the respective payment estimates.
Cases that cite this headnote
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
[17]
Release General release
A broad, general release releases every potential cause of action pertaining to the subject matter.
Cases that cite this headnote
[18]
Release Scope and extent in general
Texas law requires identification of the claim to be released, not quantification.
Cases that cite this headnote
[19]
Appeal and Error Total failure of proof
Court of Appeals may not sustain a legal sufficiency, or “no evidence” point unless the record demonstrates that: (1)
there is a complete absence of a vital fact; (2) the court is barred by the rules of law or evidence from giving weight
to the only evidence offered to prove a vital fact; (3) the evidence to prove a vital fact is no more than a scintilla; or
(4) the evidence conclusively establishes the opposite of the vital fact.
2 Cases that cite this headnote
[20]
Public Contracts Evidence
Water Law Contracts
Evidence that thickness tests conducted on wharf fenders indicated that the layer of epoxy coating was much thicker
than specified by the construction contract presented “some evidence” supporting jury’s finding that construction
contractor breached its contract with county port authority.
Cases that cite this headnote
[21]
Public Contracts Evidence
Water Law Contracts
Engineer’s report stating that a layer of epoxy coating failed to penetrate into wharf fenders’ porous metalized
aluminum substrate because the layer was insufficiently thinned, and that the fenders corroded as a result, presented
“some evidence” supporting jury’s finding that construction contractor’s breach of a contract with county port
authority that specified the thickness of the coating compromised the sealing of porosity and directly caused the
fenders’ corrosion.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
Cases that cite this headnote
[22]
Public Contracts Damages and amount of recovery
Water Law Contracts
Port authority was not required to establish that its expenditure of $978,000 to repair wharf fenders that corroded
due to construction contractor’s breach of contract reflected the “reasonable and necessary” cost to repair the
fenders, where the contract itself did not require that the loss be “reasonable and necessary” for recovery.
Cases that cite this headnote
[23]
Pretrial Procedure Facts taken as established or denial precluded;  preclusion of evidence or witness
Trial court did not abuse its discretion in ruling that billing attorney’s testimony about document production was not
expert testimony, in allowing the testimony on the issue of an attorney fee award despite the fact that attorney had
not been designated as an expert.
Cases that cite this headnote
[24]
Costs Items and amount;  hours;  rate
Guidelines applicable to an attorney fee award are: (1) the time and labor required, the novelty and difficulty of the
questions involved, and the skill required to perform the legal service properly; (2) the likelihood that the acceptance
of the particular employment will preclude other employment; (3) the fee customarily charged in the locality for
similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the
client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the
experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed
or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
Cases that cite this headnote
[25]
Appeal and Error Fees
Contractor did not waive its challenge on appeal to factual sufficiency of evidence supporting attorney fee award, in
allegedly waiving challenges to attorney fees expert’s methodology.
Cases that cite this headnote
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 6
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
[26]
Costs Contracts
Factually sufficient evidence supported attorney fee award of over $10 million in attorney fees to county port
authority to defend contractor’s $30 million claims, including evidence that, rather than providing copies of
responsive documents to port authority, contractor asked the port authority’s attorneys to perform document review
at an un-air conditioned, metal container facility, and that the facility was “crammed full of boxes not organized in
any manner.”
Cases that cite this headnote
Attorneys and Law Firms
*843 David E. Keltner, Fort Worth, TX, Marie R. Yeates, Houston, TX, for Appellant.
Jennifer Horan Greer, Robin C. Gibbs, Houston, TX, for Appellee.
Panel consists of Justices BOYCE, CHRISTOPHER, and McCALLY.
*844 MAJORITY OPINION
SHARON McCALLY, Justice.
Zachry Construction Corporation (Zachry) sued the Port of Houston Authority of Harris County, Texas (the Port) for breach
of contract arising from the Bayport Terminal Complex Phase 1A Wharf and Dredging Contract. Following a three-month
jury trial, the trial court entered a final judgment, awarding Zachry damages in the amount $19,992,697, plus pre- and
post-judgment interest. The Port appeals the final judgment in eleven issues. Zachry also brings three issue on cross-appeal.
We reverse and render.
I. BACKGROUND
In 2003, the Port solicited bids to construct a wharf at the Bayport Ship Channel. The wharf consisted of five sections, each
approximately 330 feet in length. Zachry’s bid proposed building the wharf “in the dry” by using a U-shaped, frozen earthen
wall to seal out water from Galveston Bay from the construction site. Zachry proposed to freeze the wall by sinking 100–foot
pipes into the wall and circulating chilled brine through the pipes. Then, Zachry would install drilled shafts into the ground,
pour a concrete deck on top of the drilled shafts and dirt using the ground as the bottom of the concrete form, excavate the
dirt under the deck, and place revetment to stabilize the slope. After completing the wharf, Zachry would breach the freeze
wall, flooding the area, and remove the remainder of the freeze wall so that ships would be able to dock at the wharf and
unload their cargo.
An advantage of working “in the dry” instead of “in the wet” is that fewer “NOx” emission credits would be consumed. The
Port accepted Zachry’s bid because of the environmental benefits of using the freeze wall. On June 1, 2004, Zachry entered
into the Bayport Phase 1A Wharf and Dredging Contract with the Port for the construction of a 1,660–foot wharf. The Port
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
had concerns about the possible impact of the frozen soil on adjacent structures but provided in the contract that Zachry
would control the means and methods. Zachry hired RKK–SoilFreeze Technologies, which, in turn, hired Dan Mageau of
GeoEngineers, a geotechnical engineer, to design the freeze wall.
The contract also provided a strict timeline. Specifically, Zachry was to complete construction of the wharf by June 1, 2006.
Zachry was also to meet an interim deadline of February 1, 2006—Milestone A—by which a portion of the wharf would be
sufficiently complete to allow delivery of large ship-to-shore cranes that were to be shipped from China. The contract also
provided that Zachry’s sole remedy for any delay on the project was an extension of time.
In March 2005, the Port decided to extend the original wharf Zachry was constructing by 332 feet. Zachry submitted price
quotes for the wharf extension on April 13, May 18, and July 11. The Port and Zachry executed Change Order 4 for the wharf
extension on September 27, 2005. Change Order 4 extended the dates for Milestone A to February 15, 2006, and final
completion to July 15, 2006.
From Zachry’s perspective, Change Order 4 incorporated the April 13 proposal as further modified by the May 18 and July
11 proposals. So, Zachry had Mageau design a frozen cutoff wall (frozen COW), a perpendicular wall to the main freeze
wall, to split the project into two phases: a west side including Area A, and an east side. Zachry sent that September 9, 2005
frozen COW design to the Port for “review,” not “approval.” Zachry believed it had the right to use the frozen cutoff wall and
to do so with “uninterrupted work process.”
*845 From the Port’s perspective, Zachry’s September 9, 2005 frozen cutoff wall design was subject to a contractual
technical specification that provided the Port with the right to respond. Because the contract specifically provided the Port a
right to respond with a “revise and resubmit” (R & R), and because the Port had serious concerns about the design, that is
precisely what it did. The Port provided its R & R response that (1) noted preliminary indications that the design may have an
indeterminate effect on up to 14 shafts, (2) directed Zachry either to “present [an] alternative cutoff wall design” or to
“present the Port of Houston with an alternate means of mitigating risk” to the shafts, and (3) allowed Zachry to use the
frozen COW design if the shafts were protected.
Ultimately, in late November 2005, Zachry abandoned the frozen COW and switched to an “in the wet” scenario. The Port
urges the course was Zachry’s voluntary change in recognition that the freeze wall was “killing the schedule.” Zachry urges
that it was due to the Port’s rejection of the frozen COW (Zachry’s means and methods) and unwillingness to depart from the
contract deadlines.
In May 2006, the Port notified Zachry that, due to Zachry’s delay, the Port would begin withholding liquidated damages from
payments on Zachry’s monthly invoices. After withholding $2.36 million in liquidated damages, the Port voluntarily stopped
withholding liquidated damages.
In late 2006, Zachry sued the Port for breach of contract, i.e., the R & R response, by failing to comply with Change Order 4
and section 5.10 of the contract, for the difference between the cost that Zachry would have incurred had it been allowed to
complete the wharf “in the dry,” i.e., using the frozen cutoff wall, and the actual cost Zachry incurred in completing the wharf
“in the wet,” i.e., without the frozen cutoff wall. Zachry also sued the Port for withholding liquidated damages for delays in
the amount of $2.36 million, and for the Port’s withholding of $600,000 as a purported offset for alleged defective dredging
under Change Order 1. The Port filed a counterclaim for attorney’s fees under section 3.10 of the contract, which provides
that Zachry is liable for the Port’s attorney’s fees if Zachry brings a “claim” against the Port and “does not prevail with
respect to such claim.” Over two years after suing the Port, Zachry declared the wharf complete on January 26, 2009.
After a three-month trial, the case was submitted to the jury. The jury found that the Port had breached the contract by failing
to comply with Change Order 4 and section 5.10, and found compensatory damages in the amount of $18,602,697 for the
Port’s breach of the contract. These damages represented Zachry’s increased costs for switching to working in the “wet.” The
jury found that 58.13% of those damages were for delay or hindrance.
The jury did not find that the Port failed to comply with the contract by withholding $600,000 from the Port’s payment on the
amounts invoiced by Zachry for defective dredging.
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
The trial court instructed the jury that the Port had failed to comply with the contract by failing to pay Zachry $2.36 million
withheld as liquidated damages. Thus, the jury needed only to determine whether the Port was entitled to offset; the jury
found for the Port on the offset defense in the amount of $970,000 for Zachry’s defective work on the Wharf fenders.
The jury found reasonable attorney’s fees for the Port with respect to Zachry’s claim relating to Change Order 4 and/or
section 5.10: (1) $10,500,000 for trial; (2) *846 $90,000 for appeal to the court of appeals; and (3) $22,500 for appeal to the
Texas Supreme Court. The jury found reasonable attorney’s fees for the Port as to Zachry’s claim for withholding the $2.36
million as liquidated damages and the $600,000 for dredging: (1) $80,250 for trial; (2) $3,750 for appeal to the court of
appeals; and (3) $1,250 for appeal to the Texas Supreme Court.
In its final judgment, the trial court awarded Zachry damages in the amount of $19,992,697—$18,602,697 plus $2.36 million
in liquidated damages, less the $970,000 offset for the defective fenders, pre-judgment interest in the amount of
$3,451,022.40, post-judgment interest on the total sum award of $23,443,719, and taxable costs. The trial court did not award
the $600,000 withheld for defective dredging that the jury refused to award to Zachry. The trial court did not award
attorney’s fees to the Port.
In this appeal, the Port claims that the evidence is legally and factually insufficient to support the jury’s findings on breach,
causation, and damages; governmental immunity bars Zachry’s claim for R & R damages; the no-damages-for-delay clause
bars Zachry’s delay damages; Zachry’s failure to obtain a change order bars its recovery of R & R damages; Zachry’s failure
to provide written notice of a breach bars its R & R damages; governmental immunity bars Zachry’s “pass-through” claim
damages incurred by its subcontractor; the trial court abused its discretion by excluding evidence of the Port’s harms and
losses; the Port’s failure to comply with the contract by withholding liquidated damages was excused by release, as a matter
of law; the trial court erred by instructing the jury on apparent authority; and the Port is entitled to attorney’s fees.
In its cross-appeal, Zachry claims it is entitled to judgment, as a matter of law, for the $600,000 the Port withheld for
defective dredging; the evidence is legally and factually insufficient to support to support the jury’s findings that the Port did
not fail to comply with the contract with respect to the fenders; and the evidence is factually insufficient to support the jury’s
findings on the amount of the Port’s attorney’s fees.
II. ANALYSIS
A. No–Damages–for–Delay Clause
Because we find the Port’s Issue 4A dispositive of the award of R & R damages, we address it first. In Issue 4A, the Port
contends that section 5.07’s no-damages-for-delay clause bars Zachry’s R & R damages. Specifically, the Port complains that
the trial court erred by applying a common-law, tort-like “exception” to the contract’s no-damages-for-delay clause. Section
5.07—the contract’s no-damages-for-delay clause—provides:
The Contractor shall receive no financial compensation for delay or hindrance of the Work. In no event
shall the Port Authority be liable to the Contractor or any Subcontractor or Supplier, any other person
or any surety for or any employee or agent of any of them, for any damages arising out of or associated
with any delay or hindrance to the Work, regardless of the source of the delay or hindrance, including
events of Force Majeure, AND EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM,
ARISES OUT OF OR IS DUE, IN WHOLE OR IN PART, TO THE NEGLIGENCE, BREACH OF
CONTRACT OR OTHER FAULT OF THE PORT AUTHORITY. The Contractor’s sole remedy in
any such case shall be an extension of time.
*847 Question No. 3 asked the jury: “What sum of money, if any, if paid now in cash, would fairly compensate Zachry for its
damages, if any, that resulted from the Port’s failure to comply?” Relevant to this issue, the trial court instructed the jury that
the contract’s no-damages-for-delay provision precluded Zachry’s R & R damages for delay or hindrance unless the jury
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
found that such damages resulted from the Port’s “arbitrary and capricious conduct, active interference, bad faith and/or
fraud.”1 The jury found R & R damages in the amount of $18,602,697.
1
In Question No. 3, the trial court instructed the jury as follows with respect to section 5.07:
You are instructed that § 5.07 of the Contract precludes Zachry from recovering delay or hindrance damages, if any, unless
you find that the delay or hindrance damages, if any, resulted from a delay or hindrance that was the result of the Port’s
actions, if any, that constituted arbitrary and capricious conduct, active interference, bad faith and/or fraud.
Question No. 4 asked the jury: “What percentage of the damages that you found in your answer to Question No. 3 was for
delay or hindrance damages?” The jury found 58.13% of Zachry’s R & R damages resulted from delay or hindrance.
However, in an agreed motion, the Port and Zachry asked the trial court to disregard the jury’s finding that 58.13% of such
damages were the result of delay or hindrance because such finding was not supported by legally and factually evidence and,
instead, asked the trial court to find that the evidence conclusively established, as a matter of law, that the answer to Question
No. 4 is 100%. The trial court entered an agreed order disregarding the jury’s answer of 58.13% to Question No. 4 and found
that it was conclusively established, as a matter of law, that the answer to Question No. 4 is 100%.
Our primary concern when we construe a written contract is to ascertain the parties’ true intent as expressed in the
[1] [2] [3]
contract. In re Serv. Corp. Int’l, 355 S.W.3d 655, 661 (Tex.2011) (per curiam) (orig. proceeding); Epps v. Fowler, 351
S.W.3d 862, 865 (Tex.2011). “We must examine and consider the entire writing ‘in an effort to harmonize and give effect to
all the provisions of the contract so that none will be rendered meaningless.’ ” Grohman v. Kahlig, 318 S.W.3d 882, 887
(Tex.2010) (per curiam) (quoting Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex.2005)). “We begin this
analysis with the contract’s express language.” Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323,
333 (Tex.2011). The construction of an unambiguous contract is a question of law for the court, which we consider under a
de novo standard of review. Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex.2011); see also Exxon Corp. v. Emerald Oil & Gas
Co., L.C., 348 S.W.3d 194, 214 (Tex.2011) (op. on reh’g) (“Where an ambiguity has not been raised by the parties, the
interpretation of a contract is a question of law.”).
Zachry alleged that it suffered delay or hindrance damages on the project attributable to conduct by the Port, and the jury
agreed. We have long recognized that “[i]n the absence of provision to the contrary, a contractor ... is entitled to recover
damages from a contractee ... for losses due to delay and hindrance of work if it proves (1) that its work was delayed or
hindered, (2) that it suffered damages because of the delay or hindrance, and (3) that the contractee was responsible for the
act or omission which caused the delay or hindrance.” *848 City of Houston v. R.F. Ball Constr. Co., 570 S.W.2d 75, 77
(Tex.Civ.App.-Houston [14th Dist.] 1978, writ ref’d n.r.e.) (citing Anderson Dev. Corp. v. Coastal States Crude Gathering
Co., 543 S.W.2d 402 (Tex.Civ.App.-Houston [14th Dist.] 1976, writ ref’d n.r.e.)).
The Port of Houston alleged that section 5.07 is a “provision to the contrary.” The trial court rejected the Port’s construction
of section 5.07 as a blanket prohibition of delay damages. Instead, through its instruction in Question No. 3, the trial court
determined, as a matter of law, that the Port could not enforce section 5.07 to preclude delay or hindrance damages resulting
from any action by the Port that constituted arbitrary and capricious conduct, active interference, bad faith, or fraud.
Inasmuch as the delay damages constitute 100% of the damages awarded, a threshold question this court must resolve on
appeal is whether the damage award is tainted because the trial court misinterpreted the contract and engrafted common-law
exceptions onto the contractual no-damages-for-delay provision.
Generally, courts of many other jurisdictions give only a “restrained approval” of no-damages-for-delay provisions because
of their harshness. See Maurice T. Brunner, Annotation, Validity and Constructions of “No Damage Clause” with Respect to
Delay in Building or Construction Contract, 74 A.L.R. 3d 187, 201 (1976). Those courts, again generally, construe the
provisions strictly against the owner/drafter. Id. It is this strict construction that formed the genesis for common-law
exceptions to the no-damages-for-delay clause.
It is undisputed that the Texas Supreme Court has not resolved whether Texas recognizes these exceptions. See Green Int’l,
Inc. v. Solis, 951 S.W.2d 384, 387–88 (Tex.1997) (“Assuming that these ... exceptions preclude the enforcement of
no-damages-for-delay clauses, these exceptions have not been established in this case.”). However, this court is not facing the
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
application of common-law exceptions to a no-damages-for-delay clause for the first time. See R.F. Ball Constr. Co., 570
S.W.2d at 77–78. Because the parties dispute the application of our precedent,2 we explore it in depth.
2
The Port states that “[t]his Court did not hold in R.F. Ball that Texas recognizes common law ‘exceptions.’ ” On the other hand,
citing R.F. Ball, among others, Zachry states that “Texas courts have repeatedly recognized and applied the
[no-damages-for-delay] exceptions.”
In R.F. Ball, the City of Houston appealed a judgment in favor of its contractor arising from the construction of portions of
the Houston Intercontinental Airport. Id. at 76. Ball was scheduled to complete the project on April 30, 1967, but did not do
so until June 9, 1969. During the project, Ball faced “several hundred ‘Change Items’ and between eight hundred and nine
hundred ‘Clarifications.’ ” Id. The City paid direct costs associated with these changes, but did not pay indirect or impact
costs associated with the changes. Id. The types of indirect costs included disruption to the project and “general hindrance of
efficient work which inevitably resulted from the changes.” Id.
After a two-month trial, the jury awarded substantial damages to Ball and specifically found inter alia that (1) the number of
changes was greater than foreseen by the parties; (2) the unforeseen changes caused Ball’s delay; and (3) such delay was not
foreseen when the parties entered into the contract. Id.
Thus, on appeal, this court faced these jury findings and a no-damages-for-delay clause that provided, in pertinent part:
The Contractor shall receive no compensation for delays or hindrances to the *849 work, except when
direct and unavoidable extra cost to the Contractor is caused by the failure of the City to provide
information or material, if any, which is to be furnished by the City.... If delay is caused by specific
orders given by the Engineers to stop work, or by the performance of extra work, or by the failure of
the City to provide material or necessary instructions for carrying on the work, then such delay will
entitle the Contractor to an equivalent extension of time ....
Id. at 77.
As a starting point, and citing to other jurisdictions, this court acknowledged that “one of the exceptions to the application of
a [no-damages-for-delay] provision is that a delay which was not intended or contemplated by the parties to be within the
purview of the provision is not governed by it.” Id. (citing Ace Stone, Inc. v. Twp. of Wayne, 47 N.J. 431, 435, 221 A.2d 515
(1966); W. Eng’rs, Inc. v. State Rd. Comm’n, 20 Utah 2d 294, 296, 437 P.2d 216 (1968)). Referring again to other
jurisdictions, we also noted three additional generally recognized exceptions to enforcement of no-damages-for-delay
clauses.3
3
The additional exceptions we mentioned are: (1) delay resulting from fraud, misrepresentation, or other bad faith on the part of one
seeking the benefit of the provision; (2) delay that has extended such an unreasonable length of time that the party delayed would
have been justified in abandoning the contract; and (3) delay not within the specifically enumerated delays to which the
no-damages-for-delay clause applies. R.F. Ball Constr. Co., 570 S.W.2d at 77 n. 1 (citing W. Eng’rs, Inc., 20 Utah 2d at 296, 437
P.2d 216).
With this background, we examined the intent of the parties arising from the specific language of the contract. Significantly,
we specifically rejected Ball’s line of cases that held that “if the delays or their cause were beyond the contemplation of the
parties, then the [no-damages-for-delay] clause does not apply.” Id. at 78 n. 2 (“We disagree with such cases since they
preclude operation of the clause in situations where the character of the delay was unforeseen[,] the precise sort of delays the
clause is designed to cover.”). Ball obtained specific jury findings that the delay it occasioned fell directly within the
common-law exception upon which it relied. Id. at 77–78. Nonetheless, we determined that, because the
no-damages-for-delay clause was unambiguous and did not limit its application to foreseen delays, Ball could not establish a
right to compensation for the indirect costs of the delay. Id. at 78.
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
Finally, we specifically addressed the policy underlying some courts’ rejection or restriction of no-damages-for-delay
clauses: such provisions are very harsh. Id. Nevertheless, relying explicitly on the “instructive” language of the United States
Supreme Court, we explained:
“Men who take $1,000,000 contracts for government buildings are neither unsophisticated nor
careless. Inexperience and inattention are more likely to be found in other parties to such contracts than
the contractors, and the presumption is obvious and strong that the men signing such a contract as we
have here protected themselves against such delays as are complained of by the higher price exacted
for the work.”
Id. (quoting Wells Bros. Co. v. United States, 254 U.S. 83, 87, 41 S. Ct. 34, 65 L. Ed. 148 (1920)).
Thus, in R.F. Ball, we noted that the common-law exceptions to no-damages-for-delay provisions are “generally recognized”
and, further, we analyzed one of the exceptions—that the “delay which was not intended or contemplated by the parties to be
within the purview of the provision.” *850 Id. at 77. However, we did not apply the exception because the contractor “ha[d]
not established that the [no-damages-for-delay] clause was not intended to apply to unforeseen delays and hindrances and that
it was only intended to apply to foreseeable ones.” Id. at 78.
Here, the exceptions applied by the trial court addressed: “delay or hindrance that was the result of the Port’s actions, if any,
that constituted arbitrary and capricious conduct, active interference, bad faith and/or fraud.” Under R.F. Ball, then, we must
determine whether Zachry established that the no-damages-for-delay clause at issue was not intended to apply to delay or
hindrance that was the result of the Port’s actions. The plain language of the pertinent portion of the provision is as follows:
“arising out of or associated with any delay or hindrance to the Work, regardless of the source of the delay or hindrance
including events of Force Majeure, AND EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM, ARISES OUT OF
OR IS DUE, IN WHOLE OR IN PART, TO THE NEGLIGENCE, BREACH OF CONTRACT OR OTHER FAULT OF
THE PORT AUTHORITY.” Thus, the parties’ agreement states there are no damages for delay “regardless of the source.”
Further, though the parties had already stated that the source of the delay was immaterial, they gave emphasis to their intent
that delay due even in part to conduct by the Port was something they were specifically contemplating. And, as if specific
mention might be insufficient, the parties typed the matters regarding conduct by the Port in all capital letters, which set it
apart from the remainder of the paragraph. Finally, to give utmost emphasis, the parties described three categories of fault:
(1) negligence, (2) breach of contract; or (3) other fault.
[4]
We know that the delay or hindrance damages were caused, at least in part, by breach of contract. By its response to
Question Nos. 1 and 2, the jury determined that the Port breached the contract—both Change Order 4 and section 5.10 of the
contract. The jury answered Question No. 3 by finding damages “that resulted from” the breach in the amount of
$18,602,697. By the parties’ agreement regarding Question No. 4, the evidence conclusively established that 100% of those
damages are delay or hindrance damages. Thus, 100% of the delay or hindrance suffered by Zachry resulted from the conduct
of the Port, that is, breach of contract. In accord with R.F. Ball, we conclude that Zachry has failed to establish that the
no-damages-for-delay clause was not intended to apply to the Port’s breach of contract.
The jury was not asked to make a specific finding on whether the Port’s conduct “constituted arbitrary and capricious
conduct, active interference, bad faith and/or fraud.” However, we conclude that even a specific jury finding would not
interfere with the application of the no-damages-for-delay clause in this case. By the parties’ emphasis on “other fault” to the
specific exclusion of “negligence,” the parties have communicated their intent that Port conduct that rises above mere
negligence or is a departure from the standard of care does not preclude enforcement of the no-damages-for-delay clause.
Again, in keeping with R.F. Ball, we conclude that Zachry has failed to establish that the no-damages-for-delay clause was
not intended to apply to Port conduct including, arbitrary and capricious conduct, active interference, bad faith, or fraud.
As harsh as this result seems, Texas law respects the objective intent of the parties where contract provisions show that the
parties contemplated delay when entering *851 into the contract. See United States ex rel. Straus Sys., Inc. v. Associated
Indem. Co., 969 F.2d 83, 85 (5th Cir.1992) (citing R.F. Ball Constr. Co., 570 S.W.2d at 77). Here, the parties clearly
contemplated that delay, even due to the Port’s conduct, was a possibility and negotiated accordingly. Moreover, parties to a
contract might foresee or consider the possibility of delay and contractually provide for a remedy to be applied upon such
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
occurrence. Id. (citing R.F. Ball Constr. Co., 570 S.W.2d at 77). Here, the parties did just that by agreeing that, in case of
delay, Zachry’s “sole remedy in any such case shall be an extension of time.” We need not go so far as to hold, as some
courts of other jurisdictions do, that because the parties provided a remedy for delay, such remedy is the exclusive remedy.
See id. (noting courts that hold a provision in the contract for an extension of time in a case of delay amounts to an exclusive
remedy, precluding recovery of damages from the contractor).
“[T]he parties are free to contract as they see fit, as long as their agreement does not contravene public policy.” Tex.
[5] [6] [7]
State Bd. of Med. Examiners v. Birenbaum, 891 S.W.2d 333, 336 (Tex.App.-Austin 1995, writ denied) (citing Scoville v.
SpringPark Homeowner’s Ass’n, Inc., 784 S.W.2d 498, 502 (Tex.App.-Dallas 1990 writ denied)). Courts do not rewrite
contracts to insert provisions parties could have included or imply restraints for which they have not bargained. Tenneco, Inc.
v. Enter. Prods. Co., 925 S.W.2d 640, 646 (Tex.1996); see also Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 162
(Tex.2003) (“But we may neither rewrite the parties’ contract nor add to its language.”). Instead, “[p]arties to a contract are
masters of their own choices and are entitled to select what terms and provisions to include in or omit from a contract.”
Thedford Crossing, L.P. v. Tyler Rose Nursery, Inc., 306 S.W.3d 860, 867 (Tex.App.-Tyler 2010, pet. denied) (citing
Birnbaum v. SWEPI LP, 48 S.W.3d 254, 257 (Tex.App.-San Antonio 2001, pet. denied)). Specifically, “[the parties] are
entitled to select what terms and provisions to include in a contract before executing it. And, in so choosing, each is entitled
to rely upon the words selected to demarcate their respective obligations and rights. In short, the parties strike the deal they
choose to strike and, thus, voluntarily bind themselves in the manner they choose.” Natural Gas Clearinghouse v. Midgard
Energy Co., 113 S.W.3d 400, 407 (Tex.App.-Amarillo 2003, pet. denied) (citing Cross Timbers Oil Co. v. Exxon Corp., 22
S.W.3d 24, 26 (Tex.App.-Amarillo 2000, no pet.)) (emphasis in original).
Zachry argues that if we do not apply the common-law exceptions to the contract’s no-damages-for-delay clause, then the
contract would be unbreachable and illusory. Zachry asserts, for example, that the Port could force Zachry to switch its
means and methods and thereby cause serious delays in Zachry’s performance. Zachry also avers that the Port could create a
delay that lasts in perpetuity and then grant Zachry an extension of time that lasts in perpetuity, thereby breaching the
contract while leaving Zachry with no remedy. However, the parties are free to negotiate and agree upon the conditions under
which (1) the contractor will recover damages for delay, and (2) another remedy is available to the contractor for any such
delay. In June 2004, Zachry unambiguously agreed that it would perform the contract without the benefit of delay damages,
even if the delay was caused by the Port’s breach of contract, negligence, or other fault. Zachry faced significant delays;
delays it alleged—and the jury agreed—were caused by the Port’s breach of contract. In November 2005, Zachry *852
proceeded with construction “in the wet,” knowing the contract afforded no damages for delay. We cannot rewrite the
provision without depriving the Port of the benefit of the bargain the parties reached in June 2004.
Therefore, we conclude that the no-damages-for-delay clause in the parties’ contract precludes Zachry’s recovery of damages
for its R & R claim. We sustain Issue 4A.4
4
In Issue 4B, the Port further asserts that the evidence is legally and factually insufficient to support the jury’s finding of any
common law “exceptions” included in the court’s charge that could be recognized under Texas law. However, we need not address
those arguments in light of our disposition of Issue 4A.
B. Liquidated Damages
By Issue 9A, the Port also seeks reversal of the judgment for liquidated damages. The Port began withholding liquidated
damages of $20,000 per day for Zachry’s failure to meet Milestone A and the Wharf’s final completion pursuant to sections
5.05 and 5.06 of the contract.5 The trial court determined that the Port’s withholding liquidated damages constituted a failure
to comply with the contract. The Port does not appeal that ruling. Rather, the Port argues that any failure to comply with the
contract by withholding liquidated damages was excused because Zachry released such claims as a matter of law.
5
Section 5.05 is entitled “Time of Completion and Liquidated Damages,” while section 5.06 is entitled “Actual Damages in Lieu of
Liquidated Damages.” The Port does not appear to complain about the trial court’s invalidation of sections 5.05 and 5.06. Zachry
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
points out that the Port does not appeal the directed verdict that the Port breached the contract by failing to pay Zachry $2.36
million based on an invalid liquidated damages clause. In its October 5, 2009 order, the trial court held that section 5.06—the
liquidated damages provision—is an unenforceable penalty because it does not make clear that the liquidated damages are in lieu
of other damages.
The trial court charged the jury that the Port had failed to comply with the contract by withholding $2.36 million in liquidated
damages. The trial court also charged the jury in Question No. 12 that the failure to comply would be excused to the extent of
any dollar amounts as to which Zachry had released its claim for withholding liquidated damages.6 Specifically, the trial court
instructed the jury to determine “the meaning” of the “Affidavit and Partial Release of Lien for Zachry Construction
Corporation” pertaining to Payment Estimate Nos. 21–31 in the context of whether the “[f]ailure to comply by the Port is
excused” by the doctrine of release. The jury answered “No.” Thus, in order to prevail here, the Port must conclusively
establish that Zachry released its claim for sums withheld as liquidated damages.
6
The trial court instructed the jury in Question No. 12 regarding excuse as to release:
You may also find excuse if you find, by a preponderance of the evidence [,] that Zachry released its claim for the failure to
comply.
The court also instructed the jury in Question No. 12 regarding excuse as to offset and/or withholding regarding the fenders. The
jury’s finding that the Port is excused for the withholding to the extent of $970,000 for the fenders is addressed in Zachry’s
cross-appeal.
Section 6 of the contract governs the parties’ rights and responsibilities regarding payments on the agreement. Section 6.01
provides the Contractor’s obligation to create a “Schedule of Costs,” which includes the unit-price basis for all of the various
items of work that “shall be the basis for the preparation of and submission of monthly estimates.”
*853 The parties’ payment exhibits confirm this procedure for payment. Zachry submitted its monthly invoice package,
which included a “Payment Estimate—Contract Performance.” Each of Zachry’s Payment Estimate forms identified items of
work completed during the period; represented the percentage of the unit that was complete; and requested payment for the
work completed that month. By item 12, each Payment Estimate form was “presented for payment” by a representative of
Zachry. By item 13, the construction manager verified the completion status claimed for the period at issue and approved the
request for payment. Item 14 set out categories of deductions—A through N—for items such as prior payments, contractual
retainage, and “other deductions.” Items 14(C) and 14(M) are “previous liquidated damages” and “liquidated damages this
period.”
On May 10, 2006, the Port faxed a letter to Zachry stating that the Port was (1) “process[ing] [Zachry’s] March 2006 ...
invoice” and (2) deducting, from payment on that invoice, “[l]iquidated damages total[ing] $820,000, based on 41 calendar
days from February 16 through March 28, 2006 at $20,000 per calendar day.” Zachry’s March 2006 invoice corresponded to
Zachry’s Payment Estimate No. 23. By that Payment Estimate, Zachry sought a total payment of $1,885,807.26. The Port
withheld $820,000 in liquidated damages from payment on Zachry’s Payment Estimate No. 23.
Nevertheless, on May 17, 2006, Zachry signed an Affidavit and Partial Release of Lien for Zachry Construction Corporation
as follows:
ZCC hereby acknowledges and certifies that Port of Houston Authority (PHA) has made partial
payment to ZCC on all sums owing on Payment Estimate Number Twenty-three (23) and that it has no
further claims against PHA for the portion of the Work completed and listed on the Schedule of Costs
in Payment Number Twenty-three (23).
For the period February/March, 2006 through November, 2006, the Port withheld a total of $2.205 million in liquidated
damages. In connection with each of these Payment Estimate–Contract Performance forms, Zachry executed an “Affidavit
and Partial Release of Lien for Zachry Construction Corporation.” The chart that follows depicts the Payment Estimate
number, the period covered, the total liquidated damages withheld, and the date of the Affidavit and Partial Release of Lien:
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
Payment Liquidated
Estimate Period Damages Affidavit
Covered Withheld Date
No.–––7
21 1/06 No 3/27/06
22 2/06 No 4/14/06
23 3/06 $820,000 5/17/06
24 4/06 $520,000 6/7/06
25 5/06 $220,000 7/24/06
26 6/06 No 8/21/06
27 7/06 $ 35,000 9/22/06
28 8/06 $155,000 10/23/06
29 9/06 $150,000 11/20/06
30 10/06 $155,000 12/15/06
31 11/06 $150,000 1/31/07
7 The Payment Estimate numbers referenced are Zachry’s. Subsequent Partial Release and Indemnity documents reflect that the
PHA estimate numbers are not the “Payment Estimate” numbers referenced in each release.
The Port argues that, by signing the May 17, 2006 release, as well as releases covering invoices through November 2006
(Payment Estimate Nos. 23–31), Zachry, *854 as a matter of law, released its claim to $2.205 million in liquidated damages,
which the Port withheld cumulatively from payment on those invoices/Payment Estimates. Therefore, according to the Port,
any failure to comply with the contract by withholding $2.36 million in liquidated damages is excused to the extent of $2.205
million. Zachry counters that each release, styled “Affidavit and Partial Release of Lien,” unambiguously released nothing
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
more than liens.
A release is a writing that provides that a duty or obligation owed to one party to the release is discharged
[8] [9] [10]
immediately or upon the occurrence of a condition. See Nat’l Union Fire Ins. Co. of Pittsburg, Pa. v. Ins. Co. of N. Am., 955
S.W.2d 120, 127 (Tex.App.-Houston [14th Dist.] 1997), aff’d sub nom., Keck, Mahin & Cate v. Nat’l Union Fire Ins. Co. of
Pittsburg, Pa., 20 S.W.3d 692 (Tex.2000). Releases are subject to the usual rules of contract construction. Id. As in other
instances of contract construction, our primary concern is to ascertain the intent of the parties at the time of the execution of
the alleged release as expressed in the release. See generally In re Serv. Corp. Int’l, 355 S.W.3d at 661; Epps, 351 S.W.3d at
865.
To construe the release, we may examine evidence of the circumstances surrounding the negotiation and execution
[11] [12] [13]
of the release. See Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 848 (Tex.App.-Houston [14th Dist.] 2001, pet. denied); see
also Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 731 (Tex.1981) (holding the proper rule is that “evidence of
surrounding circumstances may be consulted” and, “[i]f in light of the surrounding circumstances, the language of the
contract appears to be capable of only a single meaning, the court can then confine itself to the writing”). We may also
consider “the deletions made by the parties” in the course of drafting the instrument at issue. See Houston Pipe Line Co. v.
Dwyer, 374 S.W.2d 662, 664 (Tex.1964). Finally, we may consider the title of the document, but such is not dispositive.
Enter. Leasing Co. of Houston v. Barrios, 156 S.W.3d 547, 549 (Tex.2004) (per curiam) (“Although we recognize that in
certain cases, courts may consider the title of a contract provision or section to interpret a contract, ‘the greater weight must
be given to the operative contractual clauses of the agreement.’ ” (quoting Neece v. A.A.A. Realty Co., 159 Tex. 403, 322
S.W.2d 597, 600 (1959))).8
8
Zachry points out that the word “release” appears only once—in the title, immediately followed by “of lien,” and argues that title
may be considered in determining intent.
For a release to be effective, it must “mention” the claim to be released. Victoria Bank & Trust Co. v. Brady, 811 S.W.2d
[14]
931, 938 (Tex.1991). However, the release need not specifically describe a particular cause of action. See Mem’l Med. Ctr. of
E. Tex. v. Keszler, 943 S.W.2d 433, 434–35 (Tex.1997) (per curiam).
We begin with the plain language of the release at issue. Its title is “Affidavit and Partial Release of Lien for Zachry
[15] [16]
Construction Corporation.” It states that Zachry “has no further claims against PHA for the portion of the Work completed
and listed on the Schedule of Costs” in the respective Payment Estimate. The body of the document contains neither the word
“release” nor the word “lien.”9 Yet, the plain language of the *855 sworn statement unambiguously avers that the Port has
paid “all sums owing” on the Payment Estimate at issue and that Zachry has “no further claims against PHA for the portion
of the Work completed and listed on the Schedule of Costs” in the Payment Estimate at issue. Zachry’s proposed
interpretation of these words to mean “no liens” rather than “no further claims” is not a reasonable interpretation of the
language.
9
That the body of the provision does not contain the word “release” or “lien” or traditional boilerplate associated with releases or
liens is not dispositive of our analysis. Even where the parties’ agreement does not contain the term “release,” “the intent of the
parties controls, and the legal effect of the instrument may be a general release.” Knutson v. Morton Foods, Inc., 603 S.W.2d 805,
811 (Tex.1980) (Denton, J., concurring) (citing W. PROSSER, HANDBOOK OF THE LAW OF TORTS, § 49 at 303 (4th ed.
1971)). Zachry provides and we find no authority for the proposition that an agreement cannot legally release a claim unless it uses
the word “release.” In fact, if Zachry were correct, then an agreement to “voluntarily relinquish a right known to me” could not
operate as a waiver because the magic word is not uttered. We believe such an artificial approach to construing agreements
between parties finds no support in Texas law and would be contrary to the primary purpose of contract interpretation-determining
the parties’ intent.
The parties also rely on surrounding circumstances to construe the release. Specifically, they compare the language of the
release at issue to both the prior and subsequent release forms. Even if we accept the invitation to look beyond the four
corners of the affidavit at issue, these surrounding circumstances do not support Zachry’s proposed interpretation of the
language at issue.
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
Both the prior and subsequent versions are also entitled “Affidavit and Partial Release of Lien for Zachry Construction
Corporation.” However, the text of the original or first version of the release states:
ZCC hereby acknowledges and certifies that Port of Houston Authority (PHA) has made partial payment to ZCC on all
sums owing on Payment Estimate Number [ ] and that it has no further claims against PHA for the portion of the Work
completed and listed on the Schedule of Costs in Payment Number [ ].
In consideration for such partial payment, ZCC ... does hereby waive, release, and relinquish its rights to and discharge,
release and acquit Port of Houston Authority ... from any and all causes of action, claims, demand, debts, liabilities,
expenses or costs of any kind and every character and nature whatsoever, including but not limited to any lien claims or
rights, whether known or unknown, contingent or fixed, either in or arising out of the law of contracts, torts or property
rights, whether arising under statutory law or common law, at law or in equity, with respect to the Work for which such
partial payment is made....
The third version of the release, used by the parties after the release at issue, states:
ZCC hereby acknowledges and certifies that Port of Houston Authority (PHA) has made partial payment to ZCC on all
sums owing on Payment Estimate Number [ ] and that it has no further claims against PHA for the portion of the Work
completed and listed on the Schedule of Costs in Payment Number [ ].
In consideration for such partial payment, Zachry Construction Corporation, on its own behalf and on behalf of any other
entity claiming by, through or under Zachry Construction Corporation, does hereby waive, release, and relinquish its rights
to and discharge, release and acquit Port of Houston Authority from any and all causes of action, claims, demands, debts,
liabilities, expenses or costs of any kind and every character and nature whatsoever with respect to *856 the Work accruing
or based on events occurring from the commencement of the Work through the date covered by Payment Estimate Number
[ ], including by [sic] not limited to any lien claims or rights, whether known or unknown, contingent or fixed, either in or
arising out of the law of contracts, tort or property rights, whether arising under statutory law or common law, at law or in
equity, less and except only the Outstanding Claims and other matters identified in this Partial Release and Indemnity.
Furthermore, there is pending litigation between the Port of Houston Authority and Zachry Construction Corporation under
this contract, namely, the Phase 1A Wharf and Dredging Contract. This litigation is styled Cause No.2006–72970, Zachry
Construction Corporation v. the Port of Houston Authority, pending in the 151st Judicial District Court of Harris County,
Texas (the “Lawsuit”). Each of Zachry Construction Corporation and the Port of Houston Authority agrees that Zachry
Construction Corporation’s execution of this Lien Release for pay Estimate No. [ ] does not in any way release or modify
the parties’ rights and obligations under the Phase 1A Wharf and Dredging Contract or constitute a release of any claim or
claims that the parties may present in the Lawsuit with respect to Phase 1A Wharf and Dredging Contract.
Thus, the first form included, in addition to the release language at issue here, broad, general release language that purported
to cover “all causes of action” including legal or equitable, common-law or statutory claims arising in contract, tort, or
property rights. The parties deleted this general release language from the second version of the release at issue here. And,
when litigation ensued, the parties revised the form again to reinsert general release language, but to specifically except the
claims in this suit. Still, the third version contained the release language at issue here. Thus, the “deletion” gives no support
to Zachry’s argument that the release was transformed into a mere release of lien.10
10
Zachry stresses that “the second version deleted the general release language.” (emphasis in original). Zachry contends that “[t]he
deletion of the general release language in the second lien release version—the version on which the Port relies—shows the second
version was not a general release.” Id. at 70. Zachry’s reliance upon Houston Pipe Line Co., 374 S.W.2d at 664, and Hall v. Lone
Star Gas Co., 954 S.W.2d 174, 176 (Tex.App.-Austin 1997, pet. denied), for that argument blurs an important distinction between
deletions and omissions in this context. To be precise, the language upon which Zachry focuses was not deleted in the sense of
appearing on a preprinted form and then being stricken through using an “x” or some other mark visible on the face of the
document. See, e.g., Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 466 (Tex.2011);
Houston Pipe Line Co., 374 S.W.2d at 663; Gibson v. Turner, 156 Tex. 289, 294 S.W.2d 781, 782 (1956). The language upon
which Zachry focuses was omitted from the operative version of the document but appeared in other versions. There is reason to
question how much weight properly can be given to omitted language from other versions of the document in light of the parol
evidence rule. See, e.g., Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex.2006) (“Evidence of prior policies is extrinsic
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
evidence, and thus inadmissible unless the policy is ambiguous.... And while we have looked at a prior policy in deciding between
reasonable constructions of a current one, we have never done so in lieu of construing the current one at all.”)
Further, the parties point to section 6.07 of the contract to guide the interpretation of the release. Section 6.07 required Zachry
to release any further “claim[s] for payment” as to Zachry’s prior invoice/Payment Estimate.11 It further provides, in *857
pertinent part, that such waivers and releases of liens shall provide, “at a minimum, that all amounts due and payable to the
Contractor and each such Subcontractor and Supplier, as of the date of such invoice ... have been paid in full.” Zachry relies
on the “to the extent set out in the preceding sentence” language as an indication that the contract did not require it to release
a claim that payment had not been made in full; just a release of any lien arising out of the failure to do so. The Port urges
that the subject provision unambiguously released any further claim for payment for the work accomplished and billed on the
relevant payment estimate and, thus, released any claim that there was no payment in full by virtue of a liquidated damages
offset. Zachry argues that the subject provision unambiguously released nothing more than claims for payment to assure an
effective release of liens. Once the parties eliminated the “general release language,” Zachry insists it no longer released its
breach of contract claim with each payment.
11
Section 6.07 of the contract states, in pertinent part:
As a condition precedent to the obligation of the Port Authority to make payment on any invoice, the Contractor shall supply
the Port Authority with waivers and releases of liens (including without limitation all mechanics’ and materialmens’ liens and
any other type of security interest), which waivers and releases shall be duly executed and acknowledged by the Contractor
and each Subcontractor and Supplier expecting payment from [the] Contractor in respect of such invoice in order to assure an
effective release of such liens to the maximum extent permitted by Applicable Law. The waivers and releases of liens shall
provide, at a minimum, that all amounts due and payable to the Contractor and each such Subcontractor and Supplier, as of
the date of such invoice and as of the date of the last payment received by the Contractor and each such Subcontractor and
Supplier have been paid in full and that the Contractor and each such Subcontractor and Supplier waives, releases and
relinquishes any lien (including without limitation any mechanic’s or materialman’s lien), security interest and claim for
payment to the extent set out the preceding sentence.
[17]
Zachry’s construction of version two of the release is inconsistent with the surrounding circumstances. First, as
mentioned, the only reference to “lien” is the heading of the affidavit. It cannot be limiting language, however, because it is
the same heading for each of the three versions, including the first version that Zachry admits operated as a broad release of
claims.12 Second, section 6.07 does not provide a limiting circumstance. Although section 6.07 may not require Zachry to
release anything more than liens arising from failure to make payment, even Zachry acknowledges that it released far more in
connection with version one because version one mentions claims, including liens. Similarly, version two mentions claims,
not liens, for the portion of the Work completed and listed. As such, any limitation of section 6.07 is not a limitation on our
construction of the release provision.
12
A broad, general release releases every potential cause of action pertaining to the subject matter. See Keck, Mahin & Cate, 20
S.W.3d at 698.
We conclude the provision is subject to one reasonable interpretation, that is: the provision at issue (version two) releases any
further claim for payment for work accomplished and billed by the relevant payment estimate, which also operates to release
any lien for that same work because payment is made in full. Because the general release language is omitted, the provision
does not release:
• claims arising in tort;
• claims to adjudicate property rights;
• claims for any and all causes of action, claims, demand, debts, liabilities, *858 expenses, or costs of any kind and
every character and nature whatsoever; or
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
• all claims for breach of contract.
But, even without the general release language, the specific release language of version two releases claims for breach of
contract predicated upon a failure to make payment for work accomplished, billed, and paid—in whole or in part—on a
particular payment estimate.
Our dissenting colleague concludes that the Port has failed to establish release as a matter of law because the documents at
issue are, at a minimum, ambiguous. Meticulously comparing the release documents to the Payment Estimates at issue, the
dissent urges that the release leaves open the question of what document is referenced in each release. Such asserted
ambiguity is not one argued by Zachry, however. Zachry does not urge that the releases do not match the payment estimates.
Zachry does not urge that the term Payment Estimate is ambiguous in its reference to Zachry’s payment estimates rather than
the Port’s. Zachry does not urge that the absence of evidence identifying a payment release seeking payment in the same
quantity released defeats the release. To the contrary, Zachry urges that the release is a release to the full extent of the
payment estimates; it simply urges that the release is a full release of lien, rather than a full release of payment.
[18]
Moreover, there is no ambiguity in “what exactly has been released” as the dissent suggests. The language of the release
goes beyond saying Zachry has no further claims against PHA. The release says “[Zachry] has no further claims against PHA
for the portion of the Work completed and listed on the Schedule of Costs in Payment Number –––.” (emphasis added).
It is undisputed on this record that the Port had already withheld all of the liquidated damages that it ever did withhold by the
time Zachry signed the subject release in January 2007. Thus, it released any further claim for the work that had been
completed and listed on the Schedule of Costs in Payment Estimate 31. Texas law requires identification of the claim to be
released—not quantification.
In summary, we conclude that, when Zachry signed the “Affidavit and Partial Release of Lien,” stating that the Port “has
made partial payment to ZCC on all sums owing on Payment Estimate Number Thirty (30) and that it has no further claims
against PHA for the portion of the Work completed and listed on the Schedule of Costs in Payment Estimate Number 30,”
Zachry unambiguously discharged or released the Port from any further duty or obligation to pay sums billed through
Payment Estimate No. 29. See Nat’l Union Fire Ins. Co. of Pittsburg, Pa., 955 S.W.2d at 127. The “Affidavit and Partial
Release of Lien” mentions the claims being released: “claims against PHA for the portion of the Work completed and listed
on the Schedule of Costs in Payment Estimate Number 30.” See Victoria Bank & Trust Co., 811 S.W.2d at 938. As Payment
Estimate No. 30 included offsets for liquidated damages in the sum of $2.205 million, Zachry has no further claims for
payment arising from the work completed and listed on that Payment Estimate.
We conclude that if the Port failed to comply with the contract by withholding liquidated damages, such failure was excused,
in part, as a matter of law by Zachry’s release.13 We sustain the Port’s Issue 9A.
13
The Port also raises the same release argument in response to Zachry’s issue on cross-appeal regarding the $600,000 withheld for
dredging. For the same reason we sustain the Port’s Issue 9A, we overrule Zachry’s Cross–Appeal Issue 1A and B, in which
Zachry claims that it is entitled to judgment as a matter of law on the $600,000 withheld for dredging. The jury found in Question
No. 9 that the Port did not fail to comply with the contract by withholding $600,000 for dredging. Zachry’s claim to recover the
$600,000 for dredging is barred by release as a matter of law, just the same as the $2.205 million in liquidated damages withheld
from invoice payments addressed above.
*859 C. $970,000 Offset for Defective Fenders
The Port claimed a right under section 6.05 of the contract to withhold or offset certain liquidated damage amounts because
of alleged damages related to Wharf fenders. Question No. 12A asked the jury whether the Port’s failure to comply with the
contract by withholding $2.36 million in liquidated damages was excused, in whole or part, “by offset and/or withholding”
for Zachry’s failure to comply with the contract with respect to fender corrosion.14 The jury found that the Port was entitled to
withhold or offset for fender damage in the amount of $970,000. The trial court entered judgment on Zachry’s R & R claim,
but offset the $970,000 against Zachry’s damage award.
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
14
The trial court instructed the jury in Question No. 12 regarding excuse as to offset and/or withholding:
You may find excuse if you find, by a preponderance of the evidence, that the Port is entitled to withhold for fenders under §
6.05 of the General Conditions of the Contract and/or that the Port is entitled to offset for fenders under § 6.17 of the General
Conditions of the Contract.
The Port is entitled to withhold and/or offset for fenders under these provisions if you find, by a preponderance of the
evidence, that, with respect to the fenders, Zachry failed to comply with the Contract resulting in a loss to the Port.
By its Cross–Appeal Issue 2, Zachry contends that it is entitled to judgment rendered in its favor on the $970,000 because the
evidence is legally and factually insufficient to support the jury’s findings (1) that Zachry breached the contract in
constructing the fenders, (2) that any breach caused the fenders’ corrosion and the Port’s damage, or (3) as to any amount of
damages the Port suffered as a result. Although we agree that (a) the presentation of evidence on the fenders was brief and
not emphasized with the jury; and (b) there is competing evidence on the subject, we disagree that that evidence is legally or
factually insufficient.
[19]
In reviewing the legal sufficiency of the evidence, we view the evidence in the light most favorable to the fact finding,
crediting favorable evidence if reasonable persons could, and disregarding contrary evidence unless reasonable persons could
not. City of Keller v. Wilson, 168 S.W.3d 802, 822, 827 (Tex.2005). We may not sustain a legal sufficiency, or “no evidence”
point unless the record demonstrates that: (1) there is a complete absence of a vital fact; (2) the court is barred by the rules of
law or evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence to prove a vital fact is
no more than a scintilla; or (4) the evidence conclusively established the opposite of the vital fact. Id. at 810. To evaluate the
factual sufficiency of the evidence, we consider all the evidence and will set aside the finding only if the evidence supporting
the finding is so weak or so against the overwhelming weight of the evidence that the finding is clearly wrong and unjust.
Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406–07 (Tex.1998); Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986) (per
curiam).
The Port’s Bayport engineer Mark Vincent testified about the Wharf fenders, *860 which had a life expectancy of 30 years
but corroded within 90 days. He stated that the Port incurred damages in the approximate amount of $978,000 for “recoating”
repairs. He also noted that the Port sent a warranty deficiency notice to Zachry on the fenders but Zachry refused to repair
them.
[20]
The coating at issue is governed by Technical Specification Section 09950. The jury received evidence that (a) this
specification requires Zachry to “apply 2–3 mils of the specified epoxy” coating; and (b) “[t]hickness tests conducted on the
upper portion of the fenders ranged from 18 to 26 mils including the seal coat.” From this evidence, the jury was entitled to
infer that Zachry applied coating well above the 2–3 mils level specified by the contract. Thus, the evidence is legally
sufficient to support the jury’s finding that Zachry failed to comply with the contract and, specifically, Technical
Specification Section 09950.
[21]
The jury also heard evidence that the purpose of the above technical specification on coating is “to obtain full continuity
of the epoxy and total sealing of porosity.” The fenders were to be sealed because a portion of each fender is installed under
water. By his report,15 admitted without objection, Stephen Pinney, an engineer hired by the Port to inspect the fenders,
indicated that his personal inspection revealed that the three-foot portion of the fenders submerged “failed down to the bare
steel” but that the portion of the fenders “above the splash zone” remained intact. Pinney stated that the most probable cause
of the failure is:
15
Zachry cites no case, and we find none, to support Zachry’s suggestion that if documentary evidence is “not discussed by any
witness” or “otherwise brought to the jury’s attention,” it may be discounted or disregarded on appellate review.
• the seal coat applied to the metalizing was insufficiently thinned;
• because the seal coat was insufficiently thinned, it was not able to penetrate into the porous metalized aluminum
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
substrate;
• because the seal coat did not penetrate, it remained on the surface;
• because the seal coat remained on the surface, the aluminum pores remained open;
• because the aluminum pores remained open, they filled with seawater;
• because the aluminum filled with seawater, it corroded.
This evidence is both legally and factually sufficient to support the jury’s finding that Zachry’s failure to comply with the
contract specification regarding coating compromised the sealing of porosity and directly caused the fenders’ corrosion.
[22]
Vincent also testified that the approximate cost to repair the fenders that corroded “as soon as they were put in the water”
was $978,000. Zachry urges that this testimony is legally insufficient16 because at no point does Vincent or any other witness
provide an opinion that $970,000 is the “reasonable and necessary” cost to repair the fenders. The Port counters that the cost
to repair the fenders need not be “reasonable and necessary” where, as here, the contract itself does not require that the loss
be “reasonable and necessary.”
16
Zachry also argues that, even if the damages evidence is sufficient, the court should reverse and remand for a new trial, as the trial
court failed to instruct the jury that it could only award “reasonable and necessary” damages. We address these points together.
*861 We agree with the Port and conclude that the trial court did not err with regard to the jury charge. For this court to
imply a requirement that the costs to repair be “reasonable and necessary” would be tantamount to modifying the contract.
See Aetna Cas. & Sur. Co. v. Marshall, 699 S.W.2d 896, 902 (Tex.App.-Houston [1st Dist.] 1985), aff’d, 724 S.W.2d 770
(Tex.1987); see also Simien v. Unifund CCR Partners, 321 S.W.3d 235, 248 (Tex.App.-Houston [1st Dist.] 2010, no pet.).
Zachry’s authority is inapposite as it pertains to interpreting an oral contract. See Walker & Assocs. Surveying, Inc. v. Austin,
301 S.W.3d 909, 919 (Tex.App.-Texarkana 2009, no pet.) (ascertaining the terms of an oral contract where there was “little
or no agreement reached about the level of competence of the workers provided”). Therefore, the jury’s determination of
$970,000 as the cost to repair the fender is supported by Vincent’s testimony about $978,000–worth of repairs.
We overrule Zachry’s Cross–Appeal Issue 2 regarding the Wharf fender offset award.
D. Attorney’s Fees
In Issue 11, the Port argues that it is entitled to the attorney’s fees found by the jury for the R & R and withholding claims
because the Port is entitled to judgment on those claims.
Zachry brought multiple claims or theories of the Port’s breach of the contract: the R & R claim, i.e., failure to comply with
Change Order 4 and section 5.10 of the contract, and claims for withholding $2.36 million in liquidated damages and
$600,000 for dredging. The jury determined that a “reasonable fee for necessary services of the Port’s attorneys” on
“Zachry’s Claim Relating to Change Order 4 and/or § 5.10 of the Contract” is $10,500,000 for trial; $90,000 for an appeal to
the court of appeals; and $22,500 for an appeal to the Texas Supreme Court. The jury determined that a reasonable fee for
“Zachry’s Claim for Withholding the $2.36 million as liquidated damages and the $600,000 for dredging” is $80,250 for
trial; $3,750 for an appeal to the court of appeals; and $1,250.00 for an appeal to the Texas Supreme Court.
Section 3.10 of the contract makes Zachry liable for the Port’s attorney’s fees if Zachry brings “a claim” and “does not
prevail with respect to such claim.”17 We have determined that Zachry has not prevailed with respect to “Zachry’s Claim
Relating to Change Order 4 and/or § 5.10 of the Contract.” We also have determined that Zachry has not prevailed with
respect to “Zachry’s Claim for Withholding the $2.36 million as liquidated damages and the $600,000 for dredging,” i.e., we
have sustained the Port’s Issue 9A that the Port’s withholding liquidated damages was excused by $2.205 million of the
$2.36 million damages awarded, and we have overruled Zachry’s Cross–Appeal Issue 2 on the Port’s $970,000 offset of the
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
sum awarded for liquidated damages. Having determined that Zachry did not prevail on the three claims or theories presented
to the jury, we need not determine whether Zachry brought one or two or three claims.18 We need only determine whether
*862 the sums awarded by the jury for the Port’s reasonable and necessary attorney’s fees are supported by factually
sufficient evidence.
17
Section 3.10 states:
If Contractor brings any claim against the Port Authority and Contractor does not prevail with respect to such claim,
Contractor shall be liable for all attorney’s fees incurred by the Port Authority as a result of such claim.
18
If the Port had succeeded on appeal on only the judgment for the R & R claim, Zachry claims that the Port would not be entitled to
any attorney’s fees on the R & R claim because Zachry would still have prevailed on its breach of contract claim. That is, Zachry
argues that it brought one breach of contract claim, but different theories of breach: R & R damages and withholding damages. The
Port contends that Zachry brought multiple claims, entitling the Port to the segregated attorney’s fees on the R & R claim if a
take-nothing judgment is rendered on the R & R claim, but not the withholding claims. However, because Zachry has not prevailed
on any of its “claims” or “theories,” we need not address these arguments.
By Cross–Appeal Issue 3, Zachry contends that in the event that Zachry does not prevail on any theory underlying its
breach-of-contract claim, Zachry would still be entitled to a new trial on attorney’s fees. In support of its claim for attorney’s
fees, the Port offered the testimony of its billing attorney, Karen White, and its designated attorney’s fees expert, Dan
Downey. Zachry claims that (1) the trial court erred by admitting the testimony of White because she was not designated as
an attorney’s fees expert; and (2) Downey’s testimony is factually insufficient to support the jury’s finding on the amount of
the Port’s attorney’s fees.
We first address whether the trial court erred in admitting White’s testimony. Prior to White’s testifying, the trial court ruled
that she could testify as a fact witness, but not as an expert because she had not been designated as an expert.19 That is, White
would not be allowed to testify as the reasonableness of the segregation of the attorney’s fees. Zachry complains here that
White did, in fact, provide expert testimony. The Port urges that Zachry waived any objection to White’s testimony by failing
to obtain a ruling.
19
Specifically, the trial court ordered that White could “testify as a fact witness only and without reference to these billing records,
period, the end.... And so no reference to the billing records and no opinions.” In response to Zachry’s counsel’s clarification that
White would “only testify as to the methodology by which this segregation and she [will] not be given [sic] any kind of an opinion
as to the reasonableness of segregation. That would be Mr. Downey,” the trial court responded, “Right.”
[23]
During White’s testimony, Zachry objected twice that White’s testimony was drifting into expert opinions. The first
occurred when White, after describing the document production process, stated “[w]e didn’t feel that they had produced
every document to us that they should have....” Zachry “object[ed] at this point” because White was to be “a very limited fact
witness, not an expert,” and was being tendered as a witness for the “limited purpose of segregation. That is, to tell us exactly
how the segregation of the fees was identified and determined.” The trial court overruled the objection, stating that it would
“let White testify about these subjects.” White provided further testimony on the document-production process, including the
huge volume of documents produced by each side and the process for reviewing those documents. We find the trial court did
not abuse its discretion in ruling that document-production testimony was not expert testimony.
The second objection occurred during White’s response the question: “[W]hat was your role as a billing attorney?” White
explained the process of inputting time and then stated that, “as billing attorney, then I review the bills to make sure that
everything’s properly chargeable to the client, that it’s properly....” Zachry’s counsel objected, again complaining about the
testimony in light of the trial court’s expert-opinion ruling. The trial court agreed that when White “talks about whether a
particular item was properly billable to the client,” she is offering an *863 opinion. Therefore, the Port agreed to “ask Ms.
White not to add whether something was properly billable to the client.” Thus, the trial court did not make a ruling adverse to
Zachry or otherwise deny Zachry relief.20
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
20
Although Zachry mentions the Port’s failure to disclose fee statements as a basis for excluding White’s testimony, the trial court
did not rule on this objection because the Port’s attorney withdrew the pending question. Therefore, we do not address that
argument.
We now address Zachry’s complaint that the testimony of the Port’s expert, Dan Downy, was not factually sufficient to
support the jury’s findings on attorney’s fees.21 Downey opined that the attorney’s fees incurred by the Port were reasonable
and necessary, and that the fees were properly segregated. The jury heard about the Port’s process for compiling factual data
on attorneys’ services rendered. Port paralegal Holly Gray searched the computerized records with certain search terms and
created a spreadsheet that included all of the hours and times for any entry that “had any of the terms in it.” Gray provided
that spreadsheet to Downey.
21
Downey testified that he had been a Harris County trial judge from 1988 to 1994, and had been a lawyer or judge in Texas for
about 33 years. Downey further stated that he had not testified previously as an attorney’s fees expert in any cases other than his
own and that, as a trial judge, attorney’s fees did not frequently come before him as a contested issue.
Downey identified the bases for his opinions as to the reasonableness and necessity of the Port’s legal fees. In addition to the
spreadsheet, Downey reviewed the pleading and discovery index and requested to see particular pleadings and motions “so
[he] could get a handle on what was involved.” Downey then conducted separate interviews with individual attorneys
involved in the case concerning “what their role was and how they set about performing that task.” Downey “was trying to
get a handle on how much work is involved in those tasks, to see if it makes sense and matches up with the time that they
have logged for those tasks.” Downey interviewed the attorneys more than once. Downey also interviewed the legal
assistants. The jury saw several exhibits containing Downey’s notes as well as compilations of fees by month and attorney.
Zachry’s attorney’s fees expert, William Junell, agreed that the lawsuit between Zachry and the Port amounted to an
“all-out-war between the parties for ... three years.”22 However, Junell disagreed with Downey’s opinion on the
reasonableness and necessity of the fees incurred by the Port.
22
Junell testified that he had been practicing law for over 38 years and had served as an expert witness on attorney’s fees
approximately a dozen times.
Both Junell and Downey testified about the factors applicable to an attorney’s fee award.23 The jury heard that the *864
[24]
Port’s fees were two-and-a-half times more than Zachry’s in October 2008. That “raised red flags in [Junell’s] mind.”
Downey, however, explained that the primary difference related to the review of documents. Downey was satisfied that the
work the Port lawyers performed in reviewing documents “was fair and reasonable and necessary.”
23
The factors are (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to
perform the legal service properly; (2) the likelihood that the acceptance of the particular employment will preclude other
employment; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results
obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional
relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8)
whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex.1997). This court considers those factors to be guidelines
rather than elements of proof. See Academy Corp. v. Interior Buildout & Turnkey Const., Inc., 21 S.W.3d 732, 742
(Tex.App.-Houston [14th Dist.] 2000, no pet.).
[25]
The jury also heard Junell’s criticism that Downey did not review any of the underlying bills for the 44,000 hours of
attorney time for which the Port sought recovery.24 Junell testified that “we do not have the required information that tells you
what services were rendered by what lawyers on the occasion in case and at what rate for those services.” But Downey
explained that he favored individual interviews over the actual bills because he felt it was likely that the bills contained
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
privileged information and would inadequately explain the activities of the attorneys that he needed to consider. He also
explained that he had taken out certain aspects of Port fees that he did not consider appropriate.
24
Here, the Port urges that Zachry has waived its sufficiency issue because its complaints are “waived challenges to his
methodology.” However, Zachry urges a factual sufficiency challenge to fees, not a legal sufficiency challenge. The Port cites no
case, and we find none, that holds that failure to challenge a fee expert’s methodology waives a factual sufficiency complaint on
appeal.
Ultimately, through a thorough cross-examination of Downey, Zachry made the jury aware of the weaknesses in the Port’s
attorney’s fee claim: the Port was seeking $15 million in attorney’s fees to defend Zachry’s $30 million claims; the Port had
four separate law firms defending it; Downey had not documented what tasks were performed by each attorney; and Downey
had not used actual bills to form his opinion even though that is the standard practice for attorney’s fee witnesses, and though
they would have provided some verification of the attorneys’ representation of their time spent.
[26]
We conclude that the evidence is factually sufficient to support the fee award in this case, though the evidence would also
have supported far less. The most significant concern about this award is the relationship between the fee awarded and the
amount in controversy, particularly when compared to the fees incurred by Zachry. However, this court has previously
determined, albeit on much smaller sums, that a fee award that was two times the amount in controversy was supported by
legally and factually sufficient evidence. See Bencon Mgmt. & Gen. Contracting, Inc. v. Boyer, Inc., 178 S.W.3d 198, 209–10
(Tex.App.-Houston [14th Dist.] 2005, no pet.) The relationship between the fee and the amount in controversy is merely a
factor that we examine. See USAA Cnty. Mut. Ins. Co. v. Cook, 241 S.W.3d 93, 103 (Tex.App.-Houston [1st Dist.] 2007, no
pet.). Moreover, the testimony provides sufficient evidence to support this discrepancy. Downey’s and White’s testimony
illustrated that the majority of the differential occurred in the area of discovery and, specifically, the pursuit and review of
document production. White testified that rather than provide copies of responsive documents to the Port, Zachry asked the
Port’s attorneys “to come out to the site facility and review documents there.” Thus, two Port attorneys went to an un-air
conditioned, metal container facility “crammed full of boxes not organized in any manner.” They pulled boxes outside of the
container, one at a time, “and sat under a tree in May out at the wharf site *865 and reviewed documents searching for things
that might be responsive.” While Junell testified about the volume of material reviewed by each side, he spoke of electronic
documents; thus, the jury was free to believe that the method of document production played a role in the number of hours
the Port attorneys needed to spend to accomplish the task. We conclude that the evidence is factually sufficient to support the
jury’s finding on attorney’s fees.
We overrule Zachry’s Cross–Appeal Issue 3.
III. CONCLUSION
To summarize, we hold that the application of the no-damages-for-delay clause precludes Zachry’s claim for delay or
hindrance damages on its claim for damages on its R & R claim.
We further hold that Zachry released, as a matter of law, $2.205 million of its $2.36 million claim for the Port’s withholding
liquidated damages. We further hold that the evidence is legally and factually sufficient to support the jury’s finding of the
Port’s offset of $970,000 for defective fenders. Because the amount of liquidated damages that Zachry released and the
amount of offset the jury found for defective fenders is greater than the $2.36 million that Zachry sought for the Port’s
withholding of liquidated damages, we hold that Zachry may not recover on its $2.36 million claim for withholding
liquidated damages.
We further hold that the trial court did not err in failing to rule, as a matter of law, that the Port breached the contract by
withholding $600,000 for dredging.
We further hold that the Port is entitled to recover attorney’s fees as found by the jury with respect to Zachry’s R & R claim
as follows: (1) $10,500,000 for trial, (2) $90,000 for appeal to the court of appeals, and (3) $22,500 for appeal to the Texas
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
Supreme Court; and with respect to Zachry’s withholding claims as follows: (1) $80,250 for trial, (2) $3,750 for appeal to the
court of appeals, and (3) $1,250 for appeal to the Texas Supreme Court.25
25
Having sustained the Port’s Issue 4A regarding Zachry’s delay or hindrance damages purportedly sustained as a result of the Port’s
R & R response, and Issue 9A regarding the Port’s withholding of liquidated damages, we need not address the Port’s other issues.
Further, as we do not reach the Port’s Issue 3 asserting that sovereign immunity was not waived, we need not address the concern
of amicus curiae, The Surety & Fidelity Association of America, regarding whether a local government entity is subject to the
same measure of contractual damages as any other contracting party unless such damages fall within the express limitations of
Section 271.153(b) of the Texas Local Government Code.
Thus, we reverse the judgment awarding Zachry $18,602,677 in damages on its R & R claim and $2.36 million in liquidated
damages and render judgment that Zachry take nothing on those claims. We render judgment that the Port have and recover
attorney’s fees from Zachry with respect to the R & R claim as follows: (1) $10,500,000 for trial, (2) $90,000 for appeal to
the court of appeals, and (3) $22,500 for appeal to the Texas Supreme Court; and with respect to the withholding claims: (1)
$80,250 for trial, (2) $3,750 for appeal to the court of appeals, and (3) $1,250 for appeal to the Texas Supreme Court.
Accordingly, we render judgment that the Port recover attorney’s fees and reverse and render judgment that Zachry take
nothing on its claims.
Justice CHRISTOPHER, J., dissenting
*866 TRACY CHRISTOPHER, Justice, dissenting.
I respectfully dissent from Part B of the majority’s opinion, in which liquidated damages are addressed. In my opinion, the
documents titled “Partial Release of Lien” do not release Zachry’s claim for the wrongfully withheld liquidated damages. I
would uphold the trial court’s decision that the documents are ambiguous and the jury’s decision that Zachry did not release
those damages.
The majority concludes that the documents at issue are unambiguous. I disagree. Applying the following rules of
construction, I would hold that, at most, the documents are ambiguous and that the issue was properly submitted to the jury. I
would consider what a release is, how to construe it, and the special provisions related to releases.
A. Rules of Construction
1. A release extinguishes a claim or cause of action.
A release is a writing providing that a duty or obligation owed to one party to the release is discharged immediately or on the
occurrence of a condition. See Nat’l Union Fire Ins. Co. of Pittsburg, Pa. v. Ins. Co. of N. Am., 955 S.W.2d 120, 127
(Tex.App.-Houston [14th Dist.] 1997), aff’d sub nom. Keck, Mahin & Cate v. Nat’l Union Fire Ins. Co., 20 S.W.3d 692
(Tex.2000); Restatement (Second) of Contracts § 284 (1981). A release of a claim or cause of action extinguishes the claim
or cause of action. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex.1993).
2. A release is subject to the rules governing contract construction.
Under Texas law, a release is a contract and is subject to the rules governing contract construction. See Williams v. Glash,
789 S.W.2d 261, 264 (Tex.1990) (holding that a release is a contract subject to avoidance on same grounds as any other
contract); Loy v. Kuykendall, 347 S.W.2d 726, 728 (Tex.Civ.App.-San Antonio 1961, writ ref’d n.r.e.) (treating a release as a
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
contract subject to rules governing construction thereof); RESTATEMENT (SECOND) OF CONTRACTSSSSS § 284 cmt.
c.
a. The primary concern is to ascertain the true intent of the parties.
In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed
in the instrument. Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983); Nat’l Union, 955 S.W.2d at 127. The intention of the
parties is discovered primarily by reference to the words used in the contract. Nat’l Union, 955 S.W.2d at 127. To determine
the parties’ intentions, courts should examine and consider the entire writing in an effort to harmonize and give effect to all
the provisions of the contract so that none will be rendered meaningless. Coker, 650 S.W.2d at 393; Nat’l Union, 955 S.W.2d
at 127. No single provision taken alone will be given controlling effect; rather, all of the provisions must be considered with
reference to the entire contract. Id.
b. The court may consider surrounding circumstances.
Evidence of circumstances surrounding the execution of the contract may be considered in the construction of an
unambiguous instrument, even though oral statements of the parties’ intentions are inadmissible to vary or contradict the
terms of the agreement. Med. Towers, Ltd. v. St. Luke’s Episcopal Hosp., 750 S.W.2d 820, 823 (Tex.App.-Houston [14th
Dist.] 1988, writ denied) (citing *867 Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 731 (Tex.1982)). The
circumstances help to illuminate the contractual language chosen by the parties and enable evaluation of “ ‘the objects and
purposes intended to be accomplished by them in entering into the contract.’ ” Id. (quoting Garcia v. King, 139 Tex. 578,
585, 164 S.W.2d 509, 512 (1942)). A contract should be construed by determining how the “reasonable person” would have
used and understood such language, considering the circumstances surrounding its negotiation and keeping in mind the
purposes intended to be accomplished by the parties when entering into the contract. Nat’l Union, 955 S.W.2d at 128 (citing
Manzo v. Ford, 731 S.W.2d 673, 676 (Tex.App.-Houston [14th Dist.] 1987, no writ)).
c. The court may consider other contracts pertaining to the same transaction.
Instruments pertaining to the same transaction should be read together to ascertain the parties’ intent as to the meaning of the
release, even if the parties executed them at different times and the instruments do not expressly refer to each other. See Fort
Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex.2000); In re Sterling Chems., Inc., 261 S.W.3d 805,
810 (Tex.App.-Houston [14th Dist.] 2008, no pet.); Dorsett v. Cross, 106 S.W.3d 213, 217 (Tex.App.-Houston [1st Dist.]
2003, pet. denied).
d. The court may consider deletions made by the parties.
We may also consider “the deletions made by the parties” in the course of drafting the instrument at issue. See Hous.
Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 470–71 (Tex.2011); Hous. Pipe Line Co. v.
Dwyer, 374 S.W.2d 662, 664 (Tex.1964).
e. The court may consider the document’s title.
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
We may consider the title of the document. Enter. Leasing Co. of Hous. v. Barrios, 156 S.W.3d 547, 549 (Tex.2004) (per
curiam) (“Although we recognize that in certain cases, courts may consider the title of a contract provision or section to
interpret a contract, ‘the greater weight must be given to the operative contractual clauses of the agreement.’ ” (quoting Neece
v. A.A.A. Realty Co., 159 Tex. 403, 322 S.W.2d 597, 600 (1959))). The title also can create ambiguity when it differs from
the body. See Lone Star Cement Corp. v. Fair, 467 S.W.2d 402, 404–05 (Tex.1971) (when caption of a judicial order
dismisses only one party while the body purports to dismiss an entire cause, the order is ambiguous); Forbau v. Aetna Life
Ins. Co., 876 S.W.2d 132, 138 n. 3 (Tex.1994) (title of insurance contract that is repugnant or misleading as to coverage
creates an ambiguity).
f. The court may not rewrite a contract or add to its language.
A court should not rewrite a contract or add to its language. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 162
(Tex.2003); White Oak Operating Co. v. BLR Constr. Cos., 362 S.W.3d 725, 733 (Tex.App.-Houston [14th Dist.] 2011, no
pet.).
3. Specific rules apply to releases.
In addition to these basic contract construction rules, however, we must take into account the rules that specifically apply to
releases.
a. A release must specifically mention the claim to be released.
To effectively release a claim in Texas, the releasing instrument must mention the claim to be released. See Victoria Bank &
*868 Trust Co. v. Brady, 811 S.W.2d 931, 938 (Tex.1991).
b. General releases are to be narrowly construed.
General, categorical releases are to be narrowly construed. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 422 (Tex.1984).
See also Victoria Bank, 811 S.W.2d at 938 (applying this principle in limiting the scope of release so that “any claims not
clearly within the subject matter of the release are not discharged”) (emphasis added); Baty v. ProTech Ins. Agency, 63
S.W.3d 841, 850 n. 7 (Tex.App.-Houston [14th Dist.] 2001, pet. denied) (collecting cases in which the scope of a general
release was narrowly construed).
c. Typical release language provides that the parties “release, discharge, and relinquish” claims.
Typical release language is “release, discharge, relinquish.” Derr Constr. Co. v. City of Hous., 846 S.W.2d 854, 859 (Tex.
App.-Houston [14th Dist.] 1992, no writ). See also Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 387 (Tex.1997) (contract
language that “Contractor shall not be liable to the Subcontractor for delay to Subcontractor’s work by the act, neglect or
default of Owner” is not a release because it does not extinguish a claim or establish an absolute bar to any right of action on
the released matter).
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
B. Application of the Rules to the Documents at Issue
1. There is little evidence about the parties’ intent and surrounding circumstances.
There was very little testimony at trial about the Partial Release of Liens. As to the intent of the parties and the surrounding
circumstances, we know only the following: Zachry initially signed a document (“Release Form No. 1”) containing broad
release language in the body of the document. See majority opinion, ante at 855–56. Beginning in September of 2004, Zachry
revised the release agreement, leaving only two paragraphs in the body of the document and deleting the broad release
language (“Release Form No. 2”).1 In 2007, after all of the liquidated damages had already been withheld, the Port rejected an
invoice from Zachry with the note, “not accepted at this time without proper release of lien form.” The lawyers for Zachry
and the Port then got together and came up with an acceptable release form, which once again included the broad release
language with a carve-out for all claims in this lawsuit (“Release Form No. 3”). See majority opinion, ante at 856. The Port’s
witness, Andy Thiess, called the documents “releases” but claimed that he did not know their legal effect. Zachry’s witness
Jean Abiassi claimed that the releases were only releases of liens, as could be seen by the titles of the documents and section
6.07 of the contract.
1
Although I do not think that Release Form No. 2 should be called a release at all, I will refer to it as a release as the majority has
done.
2. The releases refer to other documents.
The jury was asked to decide whether certain numbered documents released the liquidated-damages claim. Each release
refers to another document, and to understand what was being released, it was necessary to know the contents of the
referenced document. But, the record contains no testimony matching a release and the document to which it refers. The jury
received no charge instructions about how to match a release with the document to which it refers, and the referenced
documents are not attached to the exhibits in *869 the record. The absence of evidence from which to identify the document
referenced in a given release is itself a sufficient basis on which to conclude that the Port has failed to prove anything as a
matter of law. While the majority contends that Zachry failed to make these arguments, it is the Port’s burden to show exactly
what the “releases” released, in order to prevail on its point of error. The evidence presented at trial does not support the
Port’s claim as to what was released. To illustrate why this is so, I will address the specific releases at issue.
a. Release No. 23
I begin by examining the release cited by the majority as an example. Release No. 23 provides as follows:
ZCC hereby acknowledges and certifies that Port of Houston Authority (PHA) has made partial
payment to ZCC on all sums owing on Payment Estimate Number Twenty-[T]hree (23) and that it has
no further claims against PHA for the portion of the Work completed and listed on the Schedule of
Costs in Payment Number Twenty-[T]hree (23).
This release was signed May 17, 2006.
The majority contends that the language “it has no further claims against PHA” is a release. See majority opinion, ante at
855. But what exactly has been released? The agreement identifies such claims only as the claims “for the portion of the
Work completed and listed on the Schedule of Costs in Payment Estimate Number Twenty–Three (23).” In order to know
what was released you must refer to the Schedule of Costs in Payment Estimate Number Twenty–Three.
In the charge, the trial court instructed the jury, “you must decide the meaning of DX1114.012 and PX884.0159 (re Payment
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Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
estimate 23)....” As the majority notes, the Payment estimate and schedule of costs were to be prepared by Zachry under the
contract. The referenced numbers in the jury charge refer to different copies of the same document. The documents that
follow these exhibit numbers differ from one another. DX1114 is a 14–page document starting with DX1114.001 and ending
at DX1114.014. It does not include “Payment Estimate Number Twenty-[T]hree (23).” PX884 is a 307–page document,
starting with PX884.0001 and ending with PX884.0307. It also does not include “Payment Estimate Number Twenty-[T]hree
(23).” It instead includes three copies of Payment Estimate Number Twenty–Two, and then jumps to Payment Estimate
Number Twenty–Four.
There is one document, PX884.0145, that might be Payment Estimate Number Twenty–Three. Although the first page states
“Estimate 22,” the second page states “Estimate 23.” Without knowing exactly what document is referenced in the release,
how could that release be unambiguous?
That Estimate contains both typed and handwritten notations. There was no testimony as to who prepared the handwritten
notations, or when those notations were made, or whether those notations were communicated to Zachry. The typed
document has a stated date of March 25, 2006. At the bottom of the page there is a typed reference to “LIQ. DAMAGES (C +
M)” and the number $0.00 is typed in. “C” is listed above as “Previous Liquidated Damages” with a “$0.00” notation. “M” is
listed as “Liquidated Damages this period” and the typed “$0.00” is crossed out and the number “820,000” has been written
by hand. The document appears to contain the signature of Andy Thiess for the Port and the handwritten date of April 17,
2006. At the bottom of the last page of that estimate there is a handwritten notation “-(820,000) Feb. + March LD’s.”
*870 The majority puts together a letter written by the Port dated May 10, 20062 and Release No. 23 to somehow link the
liquidated-damages deduction with the release. But, the release in question does not mention this letter at all, and the letter
itself does not refer to Payment Estimate Number Twenty–Three. The notation at the bottom can hardly be considered an
unambiguous description of the Port’s liquidated-damages claim, especially without any testimony that this was even sent to
Zachry. Again, this can only raise an ambiguity that the jury resolved against the Port.
2
While the majority in footnote 10 contends that other versions of the release may violate the parol evidence rule, they somehow
consider this letter as affirmative evidence as to what was released.
b. Release No. 24
Release No. 24, signed June 7, 2006, suffers from some of the same problems. The jury was told to decide the meaning of
“DX1115.017 and PX884.0168 (re Payment Estimate 24).” DX1115 does not contain Payment Estimate Number 24. PX884
appears to contain Payment Estimate 24, but at page 884.0154. That Estimate contains both typed and handwritten notations.
There was no testimony as to who prepared the handwritten notations, when those notations were made, or whether those
notations were communicated to Zachry. The top of the typed document has a stated date of April 10, 2006. At the bottom of
the page there is a typed reference to “LIQ. DAMAGES (C + M)” and the number “$0.00” is typed in. The typed number has
been crossed out and the number 600,0003 is handwritten above it. The “C” line above for previous liquidated damages has
the typed amount “$0.00,” but on the “M” line, the typed amount “$0.00” has been crossed out and replaced with the
handwritten figure, “820,000.” The document appears to contain the signature of Andy Thiess for the Port and the
handwritten date of May 10, 2006.
3
This number does not match the majority’s chart.
All of the remaining releases suffer from the same problems. For the releases that contained handwritten notations, there was
no testimony as to who prepared the handwritten notations, when those notations were made, or whether those notations were
communicated to Zachry. Each release listed below was in the jury charge but did not have the appropriate payment estimate
attached, and there was no testimony that the documents that I am referencing below were in fact the appropriate payment
estimate.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 29
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
c. Release No. 25, dated July 24, 2006
Release No. 25 refers to Payment Estimate No. 25, which I will assume is PX884.0163. It was prepared June 7, 2006 and
apparently approved by Thiess on June 16, 2006. The first page contains the typed notation “LIQ. DAMAGES (C + M)
$0.00.” Both the “C” line and the “M” line above contain the typed amount “$0.00.” These were not crossed out.
d. Release No. 26, dated August 21, 2006
Release No. 26 refers to Payment Estimate No. 26, which I will assume is PX884.0172. It was prepared July 24, 2006. It does
not show an approval date by Thiess. The first page contains the typed notation “LIQ. DAMAGES (C + M) $0.00.” Both the
“C” line and the “M” line above contain the typed number “$0.00.” These were not crossed out.
e. Release No. 27, dated September 22, 2006
Release No. 27 refers to Payment Estimate No. 27, which I will assume is *871 PX884.0180. It was prepared August 21,
2006. It was apparently approved by Thiess on October 9, 2006. The first page contains the typed notation “LIQ. DAMAGES
(C + M) $0.00.” Both the “C” line and the “M” line above contain the typed number “$0.00.” These were not crossed out
individually, although a line is drawn through the entire summary.
f. Release No. 28, dated October 23, 2006
Release No. 28 refers to Payment Estimate No. 28, which I will assume is PX884.0188. It was prepared September 22, 2006.
It apparently was approved by Thiess on October 9, 2006. The first page contains the typed notation “LIQ. DAMAGES (C +
M) $0.00.” The “$0.00” has been crossed out and the number 2,585,291.804 has been written by hand. The “C” line contains
the typed number figure “$0.00,” which is not crossed out, but the number 2,175,291.80 has been handwritten next to it. The
“M” line contains the figure “$0.00,” which has been crossed out and the number 410,0005 has been written by hand.
4
This number does not match what the Port claimed were the withheld liquidated damages and does not match the majority’s chart
as to when the liquidated damages were actually deducted from Zachry’s payments.
5
This number does not match the chart by the majority.
g. Release No. 29, dated November 20, 2006
Release No. 29 refers to Payment Estimate No. 29, which I will assume is PX884.0197. It was prepared October 23, 2006. It
shows no approval by Thiess. The first page contains the typed notation “LIQ. DAMAGES (C + M) $0.00.” Both the “C”
line and the “M” line above contain the typed number “$0.00.” These were not crossed out.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 30
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
h. Release No. 30, dated December 15, 2006
Release No. 30 refers to Payment Estimate No. 30, which I will assume is PX884.0207. It was prepared November 20, 2006.
It apparently was approved by Thiess on November 30, 2006. The first page contains the typed notation “LIQ. DAMAGES
(C + M) $0.00.” The “$0.00” has been crossed out and the number 155,000 has been written by hand. The “C” line contains
the typed figure “$0.00,” which is not crossed out, while the “M” line contains the typed number “$0.00” with a handwritten
number of 155,000 inserted.
i. Release No. 31, dated January 31, 2007
Release No. 31 refers to Payment Estimate No. 31, which I will assume is PX884.0217. It was prepared December 15, 2006.
It apparently was approved by Thiess on January 1, 2007. The first page contains the typed notation “LIQ. DAMAGES (C +
M) $0.00.” This is not crossed out. The “C” line above contains the typed amount “$0.00,” and it has not been crossed out.
The “M” line contains the typed amount “$0.00,” but that has been crossed out and the handwritten number 150,000 inserted.
It appears that every time Zachry sent its payment estimate, it listed “$0.00” in the blank for liquidated damages. On this
record, we do not know whether the referenced payment estimate that was listed in the release was Zachry’s estimate—with
zero liquidated damages—or the Port’s estimates with its handwritten notations. On this record, the Port cannot prevail as a
matter of law.
*872 If the handwritten notations were made by Port personnel to refer to the liquidated damages in question here, then the
Port was very inconsistent in its treatment of the liquidated damages. On some documents, the Port approved a listing of
“$0.00” on Line “C” for “previous liquidated damages,” even though the Port had withheld previous liquidated damages.
Because the documents do not conclusively establish that a release occurred, I would not hold that a release occurred as a
matter of law.
The majority’s chart also cannot be supported by the actual releases themselves. Assuming that the handwritten notations
indicated a liquidated-damages deduction, those handwritten numbers do not match the amounts that the majority believes
were the actual deductions from Zachry’s invoices.
Finally, even assuming that the document included a reference to the Port’s handwritten notations, the actual release says it
has no further claims with respect to the Schedule of Costs in the Payment Estimate—in other words, that Zachry has no
further claim that the work done cost any more than was listed in its Schedule of Costs for the work done that month. Zachry
cannot later contend that the work cost more than listed on the Schedule. The release does not say that Zachry is to be bound
by any summary or deductions made by the Port, or that Zachry agrees that the deductions made by the Port are correct.
Thus, the releases violate the fundamental rule that they must mention the claim to be released—it is simply missing from the
evidence at trial. Under this evidence, we do not know what amount, if any, was allegedly released. While the majority
contends that the release does not have to identify the amount released, how else could the majority conclude that a release of
$2.205 million occurred as a matter of law?
3. Section 6.07 of the contract supports a release of liens only.
Both sides cite to the contract to support their claims. Section 6.07 of the contract states in pertinent part as follows:
As a condition precedent to the obligation of the Port Authority to make payment on any invoice, the
Contractor shall supply the Port Authority with waivers and releases of liens (including without
limitation all mechanics’ and materialmens’ liens and any other type of security interest), which
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 31
Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)
waivers and releases shall be duly executed and acknowledged by the Contractor and each
Subcontractor and Supplier expecting payment from [the] Contractor in respect of such invoice in
order to assure an effective release of such liens to the maximum extent permitted by Applicable Law.
The waivers and releases of liens shall provide, at a minimum, that all amounts due and payable to the
Contractor and each such Subcontractor and Supplier, as of the date of such invoice and as of the date
of the last payment received by the Contractor and each such Subcontractor and Supplier have been
paid in full and that the Contractor and each such Subcontractor and Supplier waives, releases and
relinquishes any lien (including without limitation any mechanic’s or materialman’s lien), security
interest and claim for payment to the extent set out the preceding sentence.
I agree with Zachry’s interpretation of this section that the two sentences show an intent to release liens and not a release of a
claim that payment had been made in full. The second sentence limits the release to the preceding sentence which is clearly
limited to liens. Even the majority concedes that this section only required Zachry to release a lien. See majority opinion, ante
at 857. But then the majority uses that against Zachry when it discusses *873 the title of the release forms, noting that
Release Form No. 1 was a broad release yet was titled “Partial Release of Lien.” Section 6.07 shows the parties’ intent to
release liens in connection with this Release Form No. 2.
4. The titles and deletions in the various forms show a limited release.
The different forms of the release show an intent by Zachry to provide a very limited release. The deletion of the broad-form
release language that was present in Release Form No. 1 shows Zachry’s intent to limit its release. The fact that the Port was
ultimately unhappy with Release Form No. 2 indicates that the Port knew that this release did not provide them any
protection at all. See Hous. Exploration Co., 352 S.W.3d at 470–71 (deletions in a contract can be considered in its
construction). While not controlling, a document’s title also can create ambiguity. See Lone Star Cement Corp., 467 S.W.2d
at 404–05. Here, however, the titles of the documents match up with the contract provision calling only for a release of lien.
5. This release violates the general rules of construction for a release.
Under general rules of contract construction, this release is, at most, ambiguous. But when the specific rules of construction
concerning releases are incorporated into the analysis, the release fails. To effectively release a claim in Texas, the releasing
instrument must mention the claim to be released. See Victoria Bank, 811 S.W.2d at 938. The releases here do not do this.
Releases must be construed narrowly, see id., yet here, the majority expands the releases’ meaning. And unlike typical
releases, the releases in this case do not use language that the parties “release, discharge, [and] relinquish” their claims. Cf.
Derr Constr. Co., 846 S.W.2d at 859 (“Release language is generally ‘release, discharge, relinquish.’ ”); MG Bldg. Materials,
Ltd. v. Moses Lopez Custom Homes, Inc., 179 S.W.3d 51, 64 (Tex.App.-San Antonio 2005, pet. denied) (same); Wallerstein
v. Spirt, 8 S.W.3d 774, 780 (Tex.App.-Austin 1999, no pet.) (same). Despite footnote 9, the majority is unable to cite any
majority opinion in which the court construed a document to be a release where the document lacked such typical release
language. See also Green Int’l, 951 S.W.2d at 387 (contract language that “Contractor shall not be liable to the Subcontractor
for delay to Subcontractor’s work by the act, neglect or default of Owner” is not a release because it neither extinguishes a
claim nor establishes an absolute bar to any right of action on the released matter).
For all of these reasons I respectfully dissent from the majority’s opinion as to the release of the liquidated damages claim.
End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 32
TAB 3
Zachry Construction Corporation v.
Port of Houston Authority of Harris County,
449 S.W.3d 98 (Tex. 2014).
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
449 S.W.3d 98
Supreme Court of Texas.
ZACHRY CONSTRUCTION CORPORATION, Petitioner,
v.
PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY, Texas, Respondent.
No. 12–0772. | Argued Nov. 6, 2013. | Decided Aug. 29, 2014. | Rehearing Denied Dec. 19, 2014.
Synopsis
Background: Construction contractor brought action against county port authority for breach of contract. The 151st District
Court, Harris County, No. 2006–72970, Mike Engelhart, J., entered judgment on jury verdict for contractor. Port authority
and contractor appealed. The Houston Court of Appeals, Sharon McCally, J., 377 S.W.3d 841, reversed and rendered
judgment for the port. Contractor sought review.
Holdings: The Supreme Court, Hecht, C.J., held that:
[1]
local Government Contract Claims Act does not waive immunity from suit on a claim for damages not recoverable under
section of Act that defines the scope of the waiver of immunity;
[2]
Act waives immunity for a contract claim for delay damages not expressly provided for in the contract;
[3]
no-damages-for-delay provision was unenforceable;
[4]
releases signed by contractor did not cover contractor’s breach of contract claims; and
[5]
evidence was sufficient to support verdict that port authority was entitled to an offset of $970,000 as damages for
contractor’s use of defective wharf fenders.
Reversed and remanded.
Boyd, J., dissented in part and filed opinion in which Johnson, Willett, and Lehrmann, JJ., joined.
West Headnotes (16)
[1]
Courts Acts and proceedings without jurisdiction
Municipal Corporations Capacity to sue or be sued in general
Governmental immunity implicates a court’s subject-matter jurisdiction over pending claims, and, without
jurisdiction, the court cannot proceed at all in any cause; it may not assume jurisdiction for the purpose of deciding
the merits of the case.
1 Cases that cite this headnote
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
[2]
Public Contracts Defenses
Local Government Contract Claims Act does not waive immunity from suit on a claim for damages not recoverable
under sections of the Act that define the scope of the waiver of immunity. V.T.C.A., Local Government Code §
271.153.
2 Cases that cite this headnote
[3]
Public Contracts Remedies of Contractors
Water Law Contracts
Local Government Contract Claims Act applied to contract between construction contractor and county port
authority for construction of a wharf. V.T.C.A., Local Government Code § 271.152.
Cases that cite this headnote
[4]
Statutes Particular Words and Phrases
As a rule, a modifier like “subject to” applies to the nearest reasonable referent in the statute.
Cases that cite this headnote
[5]
Public Contracts Defenses
Local Government Contract Claims Act waives immunity for contract claims that meet certain conditions: the
existence of a specific type of contract, a demand for certain kinds of damages, a state forum, etc. V.T.C.A., Local
Government Code §§ 271.151–271.160.
Cases that cite this headnote
[6]
Public Contracts Defenses
The waiver of immunity in Local Government Contract Claims Act for contract claims that meet certain conditions
does not depend on the outcome, though it does require a showing of a substantial claim that meets the Act’s
conditions. V.T.C.A., Local Government Code §§ 271.151–271.160.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
1 Cases that cite this headnote
[7]
Public Contracts Pleading
For a claim to be “substantial,” as required to meet pleading requirements for claim brought under Local
Government Contract Claims Act, the claimant must plead facts with some evidentiary support that constitute a
claim for which immunity is waived, not that the claimant will prevail. Tex. Loc. Gov’t Code §§ 271.151–160.
1 Cases that cite this headnote
[8]
Public Contracts Delay of government and liability for damages
Local Government Contract Claims Act waives immunity for a contract claim for delay damages not expressly
provided for in the contract. V.T.C.A., Local Government Code § 271.153.
1 Cases that cite this headnote
[9]
Damages Natural and Probable Consequences of Breaches of Contract
Damages Under circumstances within contemplation of parties
“Under the contract” is used to refer generally to damages available on a contract claim; further, parties entering into
a contract presumably contemplate that contract damages will be available if that contract is breached.
1 Cases that cite this headnote
[10]
Damages Proximate or Remote Consequences
“Consequential damages” are those damages that result naturally, but not necessarily, from the defendant’s wrongful
acts.
Cases that cite this headnote
[11]
Damages Under circumstances within contemplation of parties
Delay damages are consequential damages.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
Cases that cite this headnote
[12]
Public Contracts Delay of government and liability for damages
Generally, under Local Government Contract Claims Act, a contractor has a right to delay damages for breach of
contract; the parties are free to modify or exclude it by agreement, but unless they do, the right provided by law is as
much a part of the contract as the rights the contract expressly creates. V.T.C.A., Local Government Code §
271.153.
2 Cases that cite this headnote
[13]
Public Contracts Delay of government and liability for damages
Water Law Contracts
No-damages-for-delay provision in contract between construction contractor and county port authority for
construction of wharf was unenforceable; pre-injury waivers of future contract liability were void as against public
policy. V.T.C.A., Local Government Code § 271.153.
Cases that cite this headnote
[14]
Contracts Freedom of contract
Contracts Contravention of law in general
Contracts Public Policy in General
Freedom of contract has limits; as a rule, parties have the right to contract as they see fit, as long as their agreement
does not violate the law or public policy.
Cases that cite this headnote
[15]
Public Contracts Delay of government and liability for damages
Water Law Contracts
Releases signed by construction contractor releasing claims against port authority for the work completed in order
for contractor to obtain periodic payments did not cover contractor’s breach of contract claims against port authority
on the basis that port authority’s refused to allow contractor to construct cutoff wall, which resulted in the contractor
having to do more work in the wet, thereby delaying completion and increasing its costs, where forms were
captioned “Affidavit and Partial Release of Lien,” plainly referred only to claims for work completed, not for
liquidated damages withheld for delays due to work not completed, and contractor disputed the port authority’s right
to withhold liquidated damages from the first time it did so.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
Cases that cite this headnote
[16]
Public Contracts Damages
Water Law Contracts
Evidence was sufficient to support verdict that port authority was entitled to an offset of $970,000 as damages for
contractor’s use of defective wharf fenders, where port authority submitted evidence that the fenders, which were
supposed to last for 30 years, became corroded after only 90 days, and expert testified that this occurred because the
fenders were improperly sealed, which testimony was corroborated by lab analysis and tests.
1 Cases that cite this headnote
Attorneys and Law Firms
*100 R. Wes Johnson, The Gardner Law Firm, San Antonio, TX, for Amicus Curiae, Associated Builders and Contractors of
Texas.
Joe F. Canterbury Jr., Canterbury Stuber Elder Gooch, Surratt, Shapiro & Stein P.C., Dallas, TX, for Amicus Curiae,
Associated General Contractors of Texas, Inc.
James Corbin Van Arsdale, Vice President & General Counsel, Austin, TX, for Amicus Curiae, Associated General
Contractors–Texas Building Branch.
Robert H. Fugate, Assistant City Attorney, Arlington City Attorney’s Office, Arlington, TX, for Amicus Curiae, City of
Arlington, Texas.
Charles Steven Estee, Office of the Dallas City Attorney, Dallas, TX, Amicus Curiae, City of Dallas, Texas.
Christopher Bedford Mosley, Sr. Assistant City Attorney, Fort Worth, for Amicus Curiae, City of Fort Worth, Texas.
Malinda York Crouch, Sr. Assistant City Attorney, Houston, TX, for Amicus Curiae, City of Houston.
Robert Caput, DFW Airport, TX, for Amicus Curiae, Dallas/Fort Worth International Airport Board.
Vincent L. Marable III, Paul Webb, P.C., Wharton, TX, for Amicus Curiae, Electrical Contractors Association, National
Systems Contractors Association.
Bruce S. Powers, Assistant County Attorney, Vincent Reed Ryan Jr., Houston, TX, for Amicus Curiae, Harris County, Texas.
Hugh Rice Kelly, Austin, TX, for Amicus Curiae, Texans for Lawsuit Reform.
Jose E. De La Fuente, Lloyd Gosselink Rochelle & Townsend, P.C., Austin, TX, for Amicus Curiae, Texas Aggregates and
Concrete Association.
George S. Christian, Texas Civil Justice League, Austin, TX, for Amicus Curiae, Texas Civil Justice League.
John B. Dahill, Austin, TX, for Amicus Curiae, Texas Conference of Urban Counties.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
Heather Mahurin, Austin, TX, for Amicus Curiae, Texas Municipal League.
Richard Gary Thomas, Thomas Feldman & Wilshusen, LLP, Dallas, TX, for Amicus Curiae, The American Subcontractors
Association, Inc.
David A. Escamilla, Sherine Elizabeth Thomas, Austin, TX, for Amicus Curiae, Travis County, Texas.
Michael Keeley, Dallas, TX, for Amicus Curiae, Zurich Surety.
*101 Amanda Bowman Nathan, Sydney Gibbs Ballesteros, Robin C. Gibbs, Michael Absmeier, Jennifer Horan Greer, Gibbs
& Bruns LLP, Brandon Trent Allen, Reynolds, Frizzell, Black, Doyle, Allen & Oldham, L.L.P., Houston, TX, Douglas W.
Alexander, Alexander Dubose Jefferson & Townsend LLP, Austin, TX, for Petitioner Zachry Construction Corporation.
David E. Keltner, Marianne M. Auld, Kelly Hart & Hallman LLP, Fort Worth, TX, Catherine B. Smith, Michael A. Heidler,
Marie R. Yeates, William D. Sims Jr., Vinson & Elkins LLP, David Hurst Brown, Brown & Kornegay, LLP, Karen Tucker
White, Karen T. White, P.C., Lawrence J. Fossi, Fossi & Jewell LLP, Houston, TX, for Respondent Port of Houston
Authority of Harris County, Texas.
Opinion
Chief Justice HECHT delivered the opinion of the Court, in which Justice GREEN, Justice GUZMAN, Justice DEVINE, and
Justice BROWN joined.
The common law permits a contractor to recover damages for construction delays caused by the owner, but the parties are
free to contract differently. A contractor may agree to excuse the owner from liability for delay damages, even when the
owner is at fault. The contractor thereby assumes the risk of delay from, say, an owner’s change of plans, even if the owner is
negligent. But can a no-damages-for-delay provision shield the owner from liability for deliberately and wrongfully
interfering with the contractor’s work? Before this case, a majority of American jurisdictions—including Texas courts of
appeals, courts in all but one jurisdiction to consider the issue, and five state legislatures—had answered no. We agree with
this overwhelming view and also conclude that the answer is the same if the owner is a local governmental entity for which
immunity from suit is waived by the Local Government Contract Claims Act.1
1
TEX. LOC. GOV’T CODEE §§ 271.151–.160.
Contractors are usually paid as work progresses and, in exchange for payment, must waive liens and claims related to the
work paid for. But does such a general waiver release a claim the contractor has already asserted? Not, we think, unless the
claim is specifically mentioned or the intent to do so is clear.
Our conclusions require us to reverse the judgment of the court of appeals2 and remand the case to that court for further
proceedings.
2
377 S.W.3d 841 (Tex.App.-Houston [14th Dist.] 2012).
I3
3
The evidence in this case was hotly disputed at almost every turn. We do not pause in this rehearsal of the proceedings to note each
disagreement. In reviewing any case tried to a jury, we must view the evidence “in the light most favorable to the verdict”—in this
case a verdict for the petitioner—“crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence
unless reasonable jurors could not” and so summarize the evidence in that light. Cruz v. Andrews Restoration, Inc., 364 S.W.3d
817, 819 (Tex.2012) (citing City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex.2005)).
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 6
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
Petitioner, Zachry Construction Corporation, contracted to construct a wharf on the Bayport Ship Channel for respondent, the
Port of Houston Authority of Harris County, Texas. The wharf would be a concrete deck supported by piers, extending out
over the water. It would be used for loading and unloading ships carrying containerized goods and would be long
enough—1,660 feet—for two ships to dock stern to bow. It would be built in five sections, each 135 feet wide and 332 feet
long. The channel was to be dredged to a *102 depth of 40 feet beneath the wharf and surrounding area, and revetment placed
along the shore beneath the wharf to prevent erosion. The total cost was $62,485,733.
The contract made Zachry an independent contractor in sole charge of choosing the manner in which the work would be
conducted. Specifically, Section 5.10 of the contract provided:
The Port Authority shall not have the right to control the manner in which or prescribe the method by
which the Contractor [Zachry] performs the Work. As an independent Contractor, the Contractor shall
be solely responsible for supervision of and performance of the Work and shall prosecute the Work at
such time and seasons, in such order or precedence, and in such manner, using such methods as
Contractor shall choose....
The provision benefitted the Port, insulating it from the liability to which it would be exposed were it exercising control over
Zachry’s work.4 Still, the Port was fully engaged in reviewing Zachry’s plans and overseeing construction.
4
See, e.g., Gen. Elec. Co. v. Moritz, 257 S.W.3d 211, 214 (Tex.2008) (“Generally, an owner or occupier does not owe a duty to
ensure that independent contractors perform their work in a safe manner. But one who retains a right to control the contractor’s
work may be held liable for negligence in exercising that right.”) (citations omitted).
Zachry’s plan was innovative. It would use soil dredged from the channel to construct an 8–foot–wide earthen berm starting
from the shore at either end of the worksite, extending out toward the center of the channel, then running parallel to the shore,
forming a long, flat U-shaped wall in the channel around the construction area. Zachry would install a refrigerated pipe
system in the wall and down into the channel floor that would carry supercooled brine, freezing the wall to make it
impenetrable to the water in the channel. Zachry would then remove the water from the area between the wall and the shore.
In this way, Zachry could work “in the dry”, using bulldozers and other land equipment for the excavation and revetment
work. Another advantage to this freeze-wall approach was that it would lower diesel emissions and require fewer nitrous
oxide credits under environmental laws, giving the Port more flexibility in other construction projects. Zachry believed this
approach would make the work less expensive and allow it to be completed more quickly.
And time was of the essence to the Port. Work began in June 2004 and was to be completed in two years. But two sections of
the wharf had to be completed within 20 months—by February 2006—so that a ship from China could dock, delivering
cranes to be used on the wharf. Zachry agreed to pay $20,000 per day as liquidated damages for missing the deadlines.
Nine months into the project, the Port realized that it would need two 1,000–foot berths to accommodate the ships it
ultimately expected to service. A sixth 332–foot section would have to be added to the wharf. As a practical matter, only
Zachry could perform the additional work, and Zachry and the Port began discussions on a change order. To complete the
two sections of the wharf needed by February 2006, and to continue to work “in the dry”, Zachry proposed to build another
freeze-wall—a cutoff wall—though the middle of the project, perpendicular to the shoreline out to the existing wall, splitting
the project into two parts. Zachry would finish the west end where the ship from China would dock, remove the wall
barricading water from that area, then continue working on the east end “in the dry”.
*103 The Port had reservations about this plan. Near the shore, the cutoff wall would have to be built through the area where
piers had already been driven into the channel floor. The Port’s engineers were concerned that freezing the ground near the
piers might destabilize them, weakening the wharf and making it unsafe. But the Port was also concerned that if it rejected
Zachry’s plan, Zachry might simply refuse to undertake the addition of a sixth section. So the Port did not raise its concerns
with Zachry. Zachry, for its part, had already identified the issue, but its own engineers had concluded that any piers that
might be affected could be insulated from the frozen ground. Change Order 4, using Zachry’s approach to add a sixth section
of the wharf at a cost of $12,962,800, was finalized September 27, 2005.
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Two weeks later, the Port ordered Zachry to revise and resubmit its plans without the cutoff wall. The practical effect of the
Port’s order was to refuse to allow construction of the cutoff wall. Zachry protested that, under Section 5.10 of the contract,
the Port had no right to determine the method and manner of the work, but the Port would not budge. Zachry’s only option
was to finish the westmost sections in time for the ship from China to dock, then remove the wall altogether and continue to
work “in the wet”, which would delay completion of the project and increase its cost.
In negotiating Change Order 4, the Port had promised not to impose liquidated damages for delay as long as the ship from
China could dock when it arrived, though the Port had refused to put its promise in writing. Nevertheless, after the ship
successfully docked, the Port began withholding liquidated damages from Zachry’s payments. Eventually the Port desisted,
but not until it had withheld $2.36 million. Zachry completed the project in January 2009, more than two-and-one-half years
after the contract deadline.
In November 2006, several weeks after the Port refused to allow construction of the cutoff wall, Zachry sued. Zachry
eventually claimed some $30 million in damages from delays caused by the Port. The Port countered that Section 5.07 of the
contract precluded delay damages. That provision states:
[Zachry] shall receive no financial compensation for delay or hindrance to the Work. In no event shall
the Port Authority be liable to [Zachry] or any Subcontractor or Supplier, any other person or any
surety for or any employee or agent of any of them, for any damages arising out of or associated with
any delay or hindrance to the Work, regardless of the source of the delay or hindrance, including
events of Force Majeure, AND EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM,
ARISES OUT OF OR IS DUE, IN WHOLE OR IN PART, TO THE NEGLIGENCE, BREACH OF
CONTRACT OR OTHER FAULT OF THE PORT AUTHORITY. [Zachry’s] sole remedy in any such
case shall be an extension of time.
Zachry argued, and the trial court ultimately agreed, that such a no-delay-damages provision could not be enforced if the
Port’s intentional misconduct caused the delay.
Zachry also sought recovery of the $2.36 million in delay damages withheld by the Port. The trial court held that the
contract’s liquidated damages provisions were invalid, and the Port has not challenged that ruling on appeal. But the Port
responded that Zachry’s claim to the liquidated damages was precluded by the releases it executed to obtain the periodic
payments from which liquidated damages were withheld. The releases shared language stating:
*104 [Zachry] hereby acknowledges and certifies that [the Port] has made partial payment to [Zachry]
on all sums owing on Payment Estimate Number [–––] and that it has no further claims against [the
Port] for the portion of the Work completed and listed on the Schedule of Costs in Payment Estimate
Number [–––].5 The trial court concluded that this language did not unambiguously release Zachry’s
claim to the liquidated damages withheld and asked the jury to decide what effect it had.
5
There are releases in other forms, at least one of which specifically acknowledged, and excluded any effect on, contract claims at
issue in pending litigation between the parties. The release for Payment Estimate Number 35 provided that the parties agreed “that
Zachry Construction Corporation’s execution of this Lien Release ... does not in any way release or modify the parties’ rights and
obligations under the Phase 1A Wharf and Dredging Contract or constitute a release of any claim or claims that the parties may
present in the Lawsuit with respect to Phase 1A Wharf and Dredging Contract.”
After a three-month trial, the jury found that the Port breached the contract by rejecting Zachry’s cutoff wall design, causing
Zachry to incur $18,602,697 in delay damages.6 The jury also found that the delay “was the result of the Port’s ... arbitrary
and capricious conduct, active interference, bad faith and/or fraud.”7 The jury failed to find that Zachry had released its claim
to the $2.36 million liquidated damages the Port withheld, but found that the Port was entitled to offset $970,000 for
defective wharf fenders. The trial court rendered judgment for Zachry on the verdict.
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6
The jury was asked to find damages for “[t]he balance due and owed by the Port, if any, under the Contract, including any amount
owed as compensation for any increased cost to perform the work as a direct result of Port-caused delays, and ... [t]he amount
owed, if any, for additional work that Zachry was directed to perform by the Port in connection with the Contract.” The jury found
that the percentage of damages for hindrance or delay, as opposed to additional work, was 58.13%. The Port and Zachry have since
stipulated that 100% of the damages found by the jury were for hindrance or delay.
7
In assessing damages, the jury was instructed as follows:
You are instructed that § 5.07 of the Contract precludes Zachry from recovering delay or hindrance damages, if any, unless
you find that the delay or hindrance damages, if any, resulted from a delay or hindrance that was the result of the Port’s
actions, if any, that constituted arbitrary and capricious conduct, active interference, bad faith and/or fraud.
“Arbitrary and capricious” means willful and unreasoning action without due consideration and in disregard of the facts,
circumstances, and rights of other parties involved.
“Active interference” means affirmative, willful action that unreasonably interferes with the other party’s compliance with the
contract. “Active interference” requires more than a simple mistake, error in judgment, lack of total effort, or lack of complete
diligence.
“Bad faith” is conscious doing of a wrong for a dishonest purpose.
“Fraud” occurs when
1. a party makes a material misrepresentation,
2. the misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth and as
a positive assertion,
3. the misrepresentation is made with the intention that it should be acted on by the other party, and
4. the other party suffers injury as a result of its reliance on the misrepresentation.
“Misrepresentation” means a promise of future performance made with an intent, at the time the promise was made, not to
perform as promised, and the promise of future performance is that the Port would comply with the terms of Change Order 4.
Both the Port and Zachry appealed. The court of appeals held that the no- *105 delay-damages provision of the contract
barred Zachry’s recovery of delay damages,8 that Zachry unambiguously released its claims to $2.205 million of the
liquidated damages withheld,9 and that the Port was entitled to the $970,000 found by the jury for defective wharf fenders.10
The court reversed the judgment for Zachry and rendered judgment for the Port, awarding it the $10,697,750 in attorney fees
found by the jury.11
8
377 S.W.3d 841, 850–851 (Tex.App.-Houston [14th Dist.] 2012).
9
Id. at 857–858. The court was divided on this issue.
10
Id. at 861. Since the $155,000 in liquidated damages to which Zachry had not released its claim was completely offset by the
$970,000 for the defective fenders, Zachry recovered nothing.
11
Id. at 865. Section 3.10 of the contracts states: “If [Zachry] brings any claim against the Port Authority and [Zachry] does not
prevail with respect to such claim, [Zachry] shall be liable for all attorneys’ fees incurred by the Port Authority as a result of such
claim.”
We granted Zachry’s petition for review.12
12
56 Tex. Sup.Ct. J. 864 (Aug. 23, 2014).
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57 Tex. Sup. Ct. J. 1378
II
[1]
Zachry argues that the no-damages-for-delay provision of the contract (Section 5.07) is invalid. The Port disagrees but also
argues that even if the provision has no effect, the contract is otherwise silent on the recovery of delay damages, and the
Local Government Contract Claims Act (“the Act”)13 does not waive governmental immunity from suit for any recovery a
contract does not itself provide for. The court of appeals concluded that the no-damages-for-delay provision is enforceable
and thus found it unnecessary to reach the immunity issue.14 That approach was impermissible. Immunity “implicates a
court’s subject-matter jurisdiction over pending claims”,15 and “ ‘[w]ithout jurisdiction the court cannot proceed at all in any
cause; it may not assume jurisdiction for the purpose of deciding the merits of the case.’ ”16 We must consider first whether
the Act waives a local governmental entity’s immunity from suit on a contract claim for delay damages the contract does not
call for.
13
Tex. Loc. Gov’t Code §§ 271.151–.160.
14
377 S.W.3d at 865 n. 25. The Port asserted governmental immunity in the trial court but did not request a ruling.
15
Rusk State Hosp. v. Black, 392 S.W.3d 88, 95 (Tex.2012).
16
Fin. Comm’n of Tex. v. Norwood, 418 S.W.3d 566, 578 (Tex.2013) (quoting Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp.,
549 U.S. 422, 431, 127 S. Ct. 1184, 167 L. Ed. 2d 15 (2007) (internal quotation marks omitted) (citing Steel Co. v. Citizens for a
Better Env’t, 523 U.S. 83, 94, 118 S. Ct. 1003, 140 L. Ed. 2d 210 (1998))).
The issue has two parts. One is whether the Act’s limitations on recovery help define and restrict the scope of the waiver of
immunity. If not, those limitations have no role in determining a court’s jurisdiction over a claim.17 If so, as we conclude, the
second part of the immunity issue is whether the delay damages Zachry seeks are permitted by the Act, so that the *106
Port’s immunity from suit is waived. We conclude they are.
17
The effect of the Act’s limitations on recovery is important, though not in this case, in responding to a governmental entity’s plea
to the jurisdiction, the ruling on which is subject to interlocutory appeal. TEX. CIV. PRAC. & REM.CODE § 51.014(a)(8). If the
limitations do not determine the scope of the waiver of immunity, an assertion of a claim on a contract covered by the Act would
be enough to defeat the jurisdictional plea. Otherwise, a plaintiff would also be required to show that the damages claimed are
permitted by the Act.
A
The Act waives immunity from contract suits for local governmental entities, such as the Port.18 Section 271.152 of the
[2] [3]
Act states:
18
The Act defines a “local governmental entity” as “a political subdivision of this state, other than a county or a unit of state
government [as that term is defined elsewhere],” “including a ... special-purpose district or authority, including any ... navigation
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district....” TEX. LOC. GOV’T CODEE § 271.151(3). The Port—known until 1971 as the Harris County Houston Ship Channel
Navigation District—is a navigation district created in 1927 under the authority of article XVI, section 59 of the Texas
Constitution, with the authority to sue and be sued. Guillory v. Port of Houston Auth., 845 S.W.2d 812, 812–813 (Tex.1993); see
also Jones v. Texas Gulf Sulphur Co., 397 S.W.2d 304, 306–307 (Tex.Civ.App.-Houston 1965, writ ref’d n.r.e.) (concluding in part
that the Houston Ship Channel’s immunity from tort liability was not waived by a “sue and be sued” clause). In 1970, the Court
held that the same “sue and be sued” clause waived a navigation district’s governmental immunity from suit. Mo. Pac. R.R. Co. v.
Brownsville Navigation Dist., 453 S.W.2d 812 (Tex.1970). The Port would then have been subject to suit, and possible contract
liability, until the Missouri Pacific decision was overruled in Tooke v. City of Mexia, 197 S.W.3d 325, 328–331 (Tex.2006).
A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a
contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of
the contract, subject to the terms and conditions of this subchapter.19
19
TEX. LOC. GOV’T CODEE § 271.152 (emphasis added).
A “contract subject to this subchapter” includes “a written contract stating the essential terms of the agreement for providing
goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity”.20 The
contract between the Port and Zachry qualifies.
20
Id. § 271.151(2)(A).
The “terms and condition of this subchapter” referred to in Section 271.152 are found in the Act’s other nine sections.
Section 271.153 states:
(a) Except as provided by Subsection (c), the total amount of money awarded in an adjudication brought against a local
governmental entity for breach of a contract subject to this subchapter is limited to the following:
(1) the balance due and owed by the local governmental entity under the contract as it may have been amended,
including any amount owed as compensation for the increased cost to perform the work as a direct result of
owner-caused delays or acceleration;
(2) the amount owed for change orders or additional work the contractor is directed to perform by a local governmental
entity in connection with the contract;
(3) reasonable and necessary attorney’s fees that are equitable and just; and
(4) interest as allowed by law, including interest as calculated under Chapter 2251, Government Code.
(b) Damages awarded in an adjudication brought against a local governmental entity arising under a contract subject to this
subchapter may not include:
(1) consequential damages, except as expressly allowed under Subsection (a)(1);
(2) exemplary damages; or
*107 (3) damages for unabsorbed home office overhead.
(c) Actual damages, specific performance, or injunctive relief may be granted in an adjudication brought against a local
governmental entity for breach of a contract described by Section 271.151(2)(B).21
21
Id. § 271.153.
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57 Tex. Sup. Ct. J. 1378
Section 271.154 provides for enforcement of contractual adjudication procedures.22 Section 271.155 preserves defenses other
than immunity.23 Section 271.156 limits the Act’s waiver of immunity to suits filed in state court.24 Section 271.157 makes
clear that the waiver of immunity does not extend to tort claims.25 Section 271.158 provides that the Act only waives
immunity and does not grant it.26 And Section 271.160 precludes a finding of joint enterprise.27
22
Id. § 271.154 (“Adjudication procedures, including requirements for serving notices or engaging in alternative dispute resolution
proceedings before bringing a suit or an arbitration proceeding, that are stated in the contract subject to this subchapter or that are
established by the local governmental entity and expressly incorporated into the contract or incorporated by reference are
enforceable except to the extent those procedures conflict with the terms of this subchapter.”).
23
Id. § 271.155 (“This subchapter does not waive a defense or a limitation on damages available to a party to a contract, other than a
bar against suit based on sovereign immunity.”).
24
Id. § 271.156 (“This subchapter does not waive sovereign immunity to suit in federal court.”).
25
Id. § 271.157 (“This subchapter does not waive sovereign immunity to suit for a cause of action for a negligent or intentional
tort.”).
26
Id. § 271.158 (“Nothing in this subchapter shall constitute a grant of immunity to suit to a local governmental entity.”).
27
Id. § 271.160 (“A contract entered into by a local government entity is not a joint enterprise for liability purposes.”).
[4]
Whether the various provisions of the Act define the scope of the waiver of immunity depends on the statutory text. As a
rule, a modifier like the last “subject to” phrase in Section 271.152 applies to the nearest reasonable referent.28 The candidates
are “contract”, “claim”, “adjudicating”, and “waives”. We do not think the phrase modifies “contract”. Earlier in the
sentence, the Act is made applicable to any “contract subject to this subchapter”, and it would be needlessly redundant to
reiterate a few words later that the contract is subject to the Act’s terms and conditions.29 Nor do we think the phrase modifies
“claim”. Section 271.158,30 for example, provides only that the Act does not grant immunity and says nothing about the
nature of the claim for which immunity is waived. And we do not think the “subject to” phrase modifies “adjudicating”. If it
did, only the adjudicatory process would be governed by the Act’s terms and conditions. This reading might make sense for
the recovery limits and preservation of procedures and defenses provided in Sections 271.153,31 271.154,32 and Section
271.155,33 respectively. Those three sections relate to the litigation and adjudication *108 of a claim. But the other four
sections, limiting the Act’s coverage to suits in state court on contract claims, providing that immunity is not granted, and
precluding a finding of joint enterprise, have little, if anything, to do with the adjudication on claims. These
sections—271.156,34 271.157,35 271.158,36 and 271.160,37 respectively—relate to the scope of immunity rather than the
conduct of litigation.
28
See ANTONIN SCALIA & BRYAN A. GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 152 (2012).
29
Sultan v. Mathew, 178 S.W.3d 747, 751 (Tex.2005) (“We must avoid, when possible, treating statutory language as surplusage.”).
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57 Tex. Sup. Ct. J. 1378
30
TEX. LOC. GOV’T CODEE § 271.158.
31
TEX. LOC. GOV’T CODEE § 271.153.
32
Id. § 271.154.
33
Id. § 271.155.
34
Id. § 271.156.
35
Id. § 271.157.
36
Id. § 271.158.
37
Id. § 271.160.
The “subject to the terms and conditions” phrase in Section 271.152 incorporates the other provisions of the Act to define the
scope of its waiver of immunity. The waiver does not extend to tort suits, suits in federal court, or allow recovery beyond that
permitted by Section 271.153. But Section 271.152, as qualified by this “subject to” phrase also does not preclude other
defenses or other contractual procedures, or confer immunity or suggest joint enterprise. The “subject to” phrase most
reasonably refers to “waives”, thus making the provisions of the Act limitations on the waiver of immunity. Section 271.152
must be read as follows: “A local governmental entity ... waives sovereign immunity to suit ... subject to the terms and
conditions” of the Act.
We reached this result in Tooke v. City of Mexia38 without the analysis just laid out because it seemed obvious. The Tookes
sued the City of Mexia for breach of contract, “asserting that they had relied on a three-year term in purchasing equipment.
They claimed unspecified damages, but requested jury findings only on lost profits and attorney fees”.39 They did not claim
that the City failed to pay for work actually performed; rather, they sought recovery only for lost profits they would have
made had the contract continued—“consequential damages excluded from recovery under [Section 271.153].”40 Even though
the Tookes’ contract claim fell within Section 271.152,41 we concluded—because they did not “claim damages within
[Section 271.153’s] limitations”—that “the City’s immunity from suit on the Tookes’ claim has not been waived.”42 This was
true even though the Tookes might have proved that the City breached the contract.
38
197 S.W.3d 325 (Tex.2006).
39
Id. at 330.
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40
Id. at 346.
41
Id. at 329–330.
42
Id. at 346.
The text of Section 271.152 and our decision in Tooke ought to have settled the matter, but courts of appeals have read our
decision in Kirby Lake Development, Ltd. v. Clear Lake City Water Authority43 to retreat from Tooke. There, developers sued
an area water authority for reimbursement of part of their costs of building water and sewer facilities, which the authority had
agreed to pay out of voter-approved bond funds.44 No bonds had been approved, but the developers claimed that the water
authority had breached the contract by campaigning against approval, thereby forestalling its reimbursement obligation.45 The
water authority argued in *109 part that because no bonds had been approved, its obligation to reimburse the developers had
not been triggered, nothing was “due and owed” under Section 271.153(a)(1), and for that reason, immunity was not
waived.46 In other words, because there was no liability, there were no recoverable damages and, therefore, no waiver of
immunity. But the premise—no liability—was disputed, and if the water authority had breached the contract by opposing
bond approval, then the developers claimed only the reimbursement under the contract as damages. And such damages, we
held, were “due and owed” under Section 271.153(a)(1).47 “The purpose of section 271.153,” we explained, “is to limit the
amount due by a governmental agency on a contract once liability has been established, not to foreclose the determination of
whether liability exists.”48 We did not suggest that Section 271.153 permits a waiver of immunity from suit for a claim for
damages this Section prohibits altogether. The developers argued that they had damages recoverable under Section 273.153;49
they did not address, and we did not consider, whether immunity would have been waived for their claim of breach even if
they sought only damages not recoverable under Section 271.153. We would not have engaged in such an analysis without
acknowledging the conflict with our opinion in Tooke.50
43
320 S.W.3d 829 (Tex.2010).
44
Id. at 833–834.
45
Id. at 834 (re 2006 bond election); see also Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 321 S.W.3d 1, 5 (Tex.App.—
Houston [14th Dist.] 2008) (“Kirby III ”) (re 1998 elections), aff’d, 320 S.W.3d at 843–844.
46
320 S.W.3d at 839–840; Brief of Respondent Clear Lake City Water Authority at 38 (No. 08–1003).
47
320 S.W.3d at 839–840.
48
Id. at 840.
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49
320 S.W.3d 829, passim; Reply Brief of Petitioners Kirby Lake Development, Ltd., et al. at 11–14.
50
In Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 412–413 (Tex.2011), Sharyland contracted to build a
water-supply system for the City of Alton. Sharyland sued the City for breach, claiming damages for injury to its system caused by
contractors engaged by the City under another contract to build a sanitary sewer system. We concluded that while the claim was
covered by Section 271.152 and was therefore one for which immunity was waived, the damages sought had nothing to do with the
contract between Sharyland and the City and thus were “not a ‘balance due and owed’ under that contract” recoverable under
Section 271.153. Id. at 413. As in Kirby Lake, however, the issue whether Section 271.153 is jurisdictional did not arise, and we
did not consider it.
The Austin Court of Appeals has laid out the case for confining the scope of the Act’s waiver to Section 271.152 in its
[5] [6]
opinion in City of San Antonio v. Lower Colorado River Authority.51 LCRA reasons that immunity from suit and immunity
from liability are distinct concepts, that the former may be waived for a claim on which a governmental entity is not liable,
and that the Act serves this very purpose.52 We agree with all but the conclusion. As we have explained, Section 271.153’s
limitations on recovery are incorporated into Section 271.152 by its last “subject to” clause and are thereby conditions on the
Act’s waiver of immunity. We disagree with LCRA that this reading of the Act makes its waiver of immunity dependent on
ultimate liability. The Act waives immunity for contract claims that meet certain conditions: the existence of a specific type
of contract, a demand for certain kinds of damages, a state forum, etc. The waiver does not depend on the outcome, though it
does require a showing of a substantial claim that meets the Act’s conditions. LCRA argues that this view of the Act makes
Section 271.153 a grant of immunity, a construction precluded by *110 Section 271.158. But again, Section 271.153 does not
add immunity that Section 271.152 takes away; Section 271.152 uses Section 271.153 to further define to what extent
immunity has been waived.
51
369 S.W.3d 231 (Tex.App.-Austin 2011, no pet.).
52
369 S.W.3d at 235–238.
[7]
By “substantial” claim we mean, as we held in Texas Department of Parks and Wildlife v. Miranda, that the claimant must
plead facts with some evidentiary support that constitute a claim for which immunity is waived, not that the claimant will
prevail.53 In Tooke, the only damages claimed were precluded by Section 271.153, and therefore immunity was not waived.
Had the Tookes claimed payment for work done, immunity would have been waived, regardless of whether the Tookes could
prevail, as long as the Tookes had some supporting evidence.
53
133 S.W.3d 217, 226–228 (Tex.2004) (“When a plea to the jurisdiction challenges the pleadings, we determine if the pleader has
alleged facts that affirmatively demonstrate the court’s jurisdiction to hear the cause. We construe the pleadings liberally in favor
of the plaintiffs and look to the pleaders’ intent. If ... the issue is one of pleading sufficiency [ ] the plaintiffs should be afforded the
opportunity to amend [unless] the pleadings affirmatively negate the existence of jurisdiction.... However, if a plea to the
jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence submitted by the parties when necessary
to resolve the jurisdictional issues raised.... If the evidence creates a fact question ... the trial court cannot grant the plea to the
jurisdiction, and the fact issue will be resolved by the fact finder.” (citations omitted)).
We conclude that the Act does not waive immunity from suit on a claim for damages not recoverable under Section
271.153.54
54
We disapprove the following cases to the extent they are to the contrary: Santa Rosa Indep. Sch. Dist. v. Rigney Const. & Dev.,
LLC, No. 13–12–00627–CV, 2013 WL 2949566, at *5 (Tex.App.-Corpus Christi June 13, 2013, pet. denied) (mem.op.); Roma Ind.
Sch. Dist. v. Ewing Const. Co., No. 04–12–00035–CV, 2012 WL 3025927, at *4 (Tex.App.-San Antonio July 25, 2012, pet.
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57 Tex. Sup. Ct. J. 1378
denied) (mem.op.); Corpus Christi Indep. Sch. Dist. v. TL Mech., No. 13–11–00624–CV, 2012 WL 1073299, at *3
(Tex.App.-Corpus Christi Mar. 29, 2012, pet. denied) (mem.op.) (note, however, that the court noted that plaintiff sought only
contract damage and expressly did not claim any amount for lost profits); City of San Antonio ex rel. San Antonio Water Sys. v.
Lower Co. River Auth., 369 S.W.3d at 236–238; City of N. Richland Hills v. Home Town Urban Partners, Ltd., 340 S.W.3d 900,
909–910 (Tex.App.-Fort Worth 2011, no pet.); Jones v. City of Dallas, 310 S.W.3d 523, 527–528 (Tex.App.-Dallas 2010, pet.
denied) (note, however, that the court addressed an additional issue arising because the contract specifically provided for “lost
profits” damages); Clear Lake City Water Auth. v. MCR Corp., No. 01–08–00955–CV, 2010 WL 1053057, *10–11,
(Tex.App.-Houston [1st Dist.] Mar. 11, 2010, pet. denied) (mem.op.); Dallas Area Rapid Transit v. Monroe Shop Partners, Ltd.,
293 S.W.3d 839, 842 (Tex.App.-Dallas 2009, pet. denied) (note, however, that there was a dispute over whether there was a
“balance due and owed”); City of Houston v. S. Elec. Servs., Inc., 273 S.W.3d 739, 744 (Tex.App.-Houston [1st Dist.] 2008, pet.
denied) (note, however, that there was a dispute over whether the “balance due and owed” would include increased labor costs);
City of Mesquite v. PKG Contracting, Inc., 263 S.W.3d 444, 448 (Tex.App.-Dallas 2008, pet. denied) (note, however, that the court
pointed out that the record did not establish that the claim was solely for damages excluded by the statute, and cited Tooke ).
B
[8]
Under Section 271.153(a)(1), the “amount of money awarded ... for breach of contract” includes “the balance due and
owed ... under the contract” as amended, “including any amount owed as compensation for the increased cost to perform the
work as a direct result of owner-caused delays”.55 Section 271.153(b) precludes recovery of consequential damages, “except
as expressly allowed under Subsection *111 (a)(1)”.56 The Port contends that no balance can be due and owed under a
contract unless the contract expressly calls for payment.
55
TEX. LOC. GOV’T CODEE § 271.153(a)(1).
56
Id. § 271.153(b).
No such requirement can be found in the statute’s text. The phrase, “balance due and owed/owing”, is not defined in the Act,
and the Legislature has not used it except in three other statutes waiving governmental immunity, where it is also undefined:
the State Contract Claims Act,57 the County Contract Claims Act,58 and the State Agency Contract Claims Act.59 The word
“due” simply means “owing or payable”60 and “owing” means “unpaid”.61 A “balance due and owed ... under the contract” is
simply the amount of damages for breach of contract payable and unpaid. Direct damages for breach—“the necessary and
usual result of the defendant’s wrongful act”62—certainly qualify.
57
TEX. GOV’T CODE § 2260.003(a) (“The total amount of money recoverable on a claim for breach of contract under this chapter
may not ... exceed an amount equal to the sum of: (1) the balance due and owing on the contract price; (2) the amount or fair
market value of orders or requests for additional work made by a unit of state government to the extent that the orders or requests
for additional work were actually performed; and (3) any delay or labor-related expense incurred by the contractor as a result of an
action of or a failure to act by the unit of state government or a party acting under the supervision or control of the unit of state
government.”).
58
TEX. LOC. GOV’T CODEE § 262.007(b) (“The total amount of money recoverable from a county on a claim for breach of the
contract is limited to the following: (1) the balance due and owed by the county under the contract as it may have been amended,
including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or
acceleration; (2) the amount owed for change orders or additional work required to carry out the contract; (3) reasonable and
necessary attorney’s fees that are equitable and just; and (4) interest as allowed by law.”).
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59
TEX. CIV. PRAC. & REM.CODE § 114.004(a) (“The total amount of money awarded in an adjudication brought against a state
agency for breach of an express provision of a contract subject to this chapter is limited to the following: (1) the balance due and
owed by the state agency under the contract as it may have been amended, including any amount owed as compensation for the
increased cost to perform the work as a direct result of owner-caused delays or acceleration if the contract expressly provides for
that compensation; (2) the amount owed for written change orders; (3) reasonable and necessary attorney’s fees based on an hourly
rate that are equitable and just if the contract expressly provides that recovery of attorney’s fees is available to all parties to the
contract; and (4) interest at the rate specified by the contract or, if a rate is not specified, the rate for postjudgment interest under
Section 304.003(c), Finance Code, but not to exceed 10 percent.”).
60
See BLACK’S LAW DICTIONARY 609 (10th ed.2014).
61
Id. at 1279.
62
Basic Capital Mgmt. v. Dynex Commercial, Inc., 348 S.W.3d 894, 901 (Tex.2011) (“Consequential damages are those damages
that result naturally, but not necessarily, from the defendant’s wrongful acts. They are not recoverable unless the parties
contemplated at the time they made the contract that such damages would be a probable result of the breach. Thus, to be
recoverable, consequential damages must be foreseeable and directly traceable to the wrongful act and result from it.”) (quoting
Stuart v. Bayless, 964 S.W.2d 920, 921 (Tex.1998) (per curiam)).
Section 271.153(a)(1) does not require the “balance due and owed ... under the contract” to be ascertainable from the contract
because, for one thing, this Section expressly includes “any amount owed as compensation ... for owner-caused delays”, an
amount which cannot be determined in advance, when the contract is executed. To “include” means “[t]o contain *112 as a
part of something.”63 “[A]mount[s] owed as compensation for ... owner-caused delays”, allowed by Subsection (a)(1), are
consequential damages that are recoverable by law, not merely contractual right.64 Delay damages can be a “balance due and
owed” only if that phrase is not limited to amounts stated in the contract.65
63
See BLACK’S LAW DICTIONARY at 880; Chickasaw Nation v. United States, 534 U.S. 84, 89, 122 S. Ct. 528, 151 L. Ed. 2d 474
(2001) (“To ‘include’ is to ‘contain’ or ‘comprise as part of a whole.’ WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY
609 (1985).”).
64
See Jensen Constr. Co. v. Dallas Cnty., 920 S.W.2d 761, 770 (Tex.App.-Dallas 1996, writ denied) (“Generally, a contractor is
entitled to recover damages for losses due to delay and hindrance of work if the contractor proves: (1) its work was delayed or
hindered; (2) it suffered damages because of the delay or hindrance; and (3) the owner of the project was responsible for the act or
omission which caused the delay or hindrance. However, no damage for delay provisions may preclude recovery of delay damages
by the contractor.” (citations and internal quotation marks omitted)), overruled in part on other grounds by Travis Cnty. v. Pelzel &
Assocs., Inc., 77 S.W.3d 246, 251 (Tex.2002); Beaumont v. Excavators & Constructors, Inc., 870 S.W.2d 123, 132–134
(Tex.App.-Beaumont 1993, writ denied); Indus. Constr. Mgmt. v. DeSoto Indep. Sch. Dist., 785 S.W.2d 160, 162 (Tex.App.-Dallas
1989, no writ); Shintech Inc. v. Group Constructors, Inc., 688 S.W.2d 144, 148 (Tex.App.-Houston [14th Dist.] 1985, no writ);
City of Houston v. R.F. Ball Constr. Co., Inc., 570 S.W.2d 75, 77 (Tex.Civ.App.-Houston [14th Dist.] 1978, writ ref’d n.r.e.);
Housing Auth. of Dallas v. Hubbell, 325 S.W.2d 880, 884–885, 890–891 (Tex.Civ.App.-Dallas 1959, writ ref’d n.r.e.) (holding
NDFD clause did not bar delay damages found to have been caused by owner arbitrarily and capriciously-defined as “willful and
unreasoning action without due consideration and in disregard of the facts, circumstances, and the rights of other parties
involved”-even though NDFD clause barred delay damages “from any cause”); U.S. ex rel. Wallace v. Flintco, 143 F.3d 955,
964–965 (5th Cir.1998) (holding NDFD clause did not preclude recovery of delay damages caused by owner’s active interference
with the contractor’s performance, without considering impact of NDFD language); see generally P.V. Smith, Annotation, Right of
Building or Construction Contractor to Recover Damages Resulting from Delay Caused by Default of Contractee, 115 A.L.R. 65
(1938).
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57 Tex. Sup. Ct. J. 1378
65
The dissent argues that because an amount cannot be “due and owed” unless it is “provided for or contemplated in” the contract,
delay damages, which are expressly included in Section 271.153(a)(1), must also be “provided for or contemplated in” the contract.
Post at 113. If the premise were true, then the conclusion would follow. “A including B” usually means that A is the larger group.
But the dissent’s “provided for or contemplated in” limitation simply is not in or suggested by the text. The “including” phrase
proves the flaw in the dissent’s position: “any amount as compensation for ... delay damages” (emphasis added), which amount
may or may not be provided for in the contract, cannot be included in “the balance due and owed ... under the contract” if that
phrase is limited to amounts provided for in the contract. Of course, “any Texas city, including Athens”, to use the dissent’s
example, is limited to one, but the example, like the dissent’s statutory construction, assumes a limitation to Texas cities when that
is the very issue in dispute. A more apt example is “a city, including any named Athens”, which is a longer list.
[9]
Furthermore, Section 271.153(b) excludes from the “[d]amages awarded ... under a contract” consequential damages
except as allowed in Subsection (a)(1). If the latter provision limited recovery to amounts stated in the contract, Subsection
(b) would be surplusage: a claimant could recover all amounts stated in the contract, and all consequential damages stated in
the contract. Read together, Subsections (a)(1) and (b) allow recovery of contract damages, including delay damages, but
excluding other consequential damages. Nothing in the rest of Section 271.153 suggests that recoverable damages must be
stated in the contract.66
66
The dissent argues that damages “under” a contract are only those “provided for or contemplated in” the contract, but “under the
contract” is used to refer generally to damages available on a contract claim. See, e.g., CVN Group, Inc. v. Delgado, 95 S.W.3d
234, 244 (Tex.2002) (referring to “liability for money damages under the contract”); Great Am. Ins. Co. v. N. Austin Mun. Util.
Dist. No. 1, 950 S.W.2d 371, 373 (Tex.1997) (referring to the need for “extrinsic evidence ... to calculate damages under the
contract”). Further, parties entering into a contract presumably contemplate that contract damages will be available if that contract
is breached. See City of Houston v. Williams, 353 S.W.3d 128, 141 (2011) (“[I]t is ‘settled that the laws which subsist at the time
and place of the making of a contract ... form a part of it, as if they were expressly referred to or incorporated in its terms.’ ”) (suit
by retired firefighters based in part on city ordinances could be characterized as one for breach of contract under Section 271.152);
Wessely Energy Corp. v. Jennings, 736 S.W.2d 624, 626 (Tex.1987) (“The law[ ] existing at the time a contract is made becomes a
part of the contract and governs the transaction.”); Kerr v. Galloway, 94 Tex. 641, 64 S.W. 858, 860 (1901) (“Under a familiar
rule, frequently announced, the law enters into the contract, and becomes a part of it.”); see also Hardware Dealers Mut. Ins. Co. v.
Berglund, 393 S.W.2d 309, 315 (Tex.1965) (“Contracting parties generally select a judicially construed clause with the intention of
adopting the meaning which the courts have given to it.”). The dissent argues that limiting recovery to contractual damages is no
limit at all, but damages are but one item in a list that includes attorney fees and interest, even if not provided for in the contract.
The dissent argues that allowing recovery of contractual damages under Section 271.153(a)(1) renders subsection (2) superfluous,
but the latter provision clarifies that change orders can be the basis for recovery, even if it were argued that they were not “under
the contract”.
*113 In support of its argument, the Port cites two sentences from the remarks made by the bill sponsor introducing the Local
Government Contract Claims Act during a House committee hearing. But we have repeatedly held that “[s]tatements made
during the legislative process by individual legislators or even a unanimous legislative chamber are not evidence of the
collective intent of the majorities of both legislative chambers that enacted a statute.”67 The Port also cites our opinion in
Kirby Lake, where we stated that the reimbursement obligation stated in the contract was “due and owed”.68 But we did not
analyze the phrase, and we certainly did not suggest that damages not set out in the contract cannot be “due and owed”.69
67
Molinet v. Kimbrell, 356 S.W.3d 407, 414 (Tex.2011); accord In re Allcat Claims Serv., L.P., 356 S.W.3d 455, 466–467
(Tex.2011); Robinson v. Crown Cork & Seal Co., Inc., 335 S.W.3d 126, 191–192 (Tex.2010) (Wainwright, J., dissenting); AT&T
Commc’ns of Tex., L.P. v. Sw. Bell Tel. Co., 186 S.W.3d 517, 528–529 (Tex.2006); Gen. Chem. Corp. v. De La Lastra, 852 S.W.2d
916, 923 (Tex.1993).
68
Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 840 (Tex.2010).
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69
The dissent also relies on Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex.2011), for its argument that
recoverable damages must be “provided for or contemplated in” the contract. In that case a city contracted for construction of a
water supply system, and later the contractor sued for the cost of remediating injury to the system caused by the city’s sewer
contractors. Id. at 410–411. We concluded that the damages sought “were not those provided for or contemplated in the Water
Supply Agreement and [were] not a ‘balance due and owed’ under that contract. Nor [were] these costs the ‘direct result of
owner-caused delays or acceleration....’ ” Id. at 413. The dissent argues that the phrase, “provided for or contemplated in”, was
really intended to be a standard for determining whether an amount is “due and owed ... under” a contract. But the Court clearly
gave two independent reasons for concluding that the claimed damages were not recoverable: they were not “provided for or
contemplated in” the contract, “and” they were not “due and owed under” the contract. Sharyland’s claimed damages were not a
“balance due and owed” because they were completely unrelated to the Water Supply Agreement. And by adding, “nor” were the
damages for delay, referencing the “including” phrase in Section 157.053(a)(1), we suggested that if the damages had been for
delay, they would have been recoverable even if neither “due and owed under” nor “provided for or contemplated in” the contract.
We treated the “including” phrase in the statutory provision as stating independently that delay damages are recoverable. Instead of
supporting the dissent, Sharyland contradicts it.
*114 [10] [11] [12] More than half a century ago, we observed that “[t]he universal rule for measuring damages for the breach of
a contract is just compensation for the loss or damage actually sustained.”70 While the Legislature clearly intended to limit the
recovery of consequential damages on contract claims permitted by the Act,71 nothing in the Act suggests that the Legislature
intended to create a unique and somehow limited standard for measuring direct damages for breach of contract. Generally, a
contractor has a right to delay damages for breach of contract. The parties are free to modify or exclude it by agreement, but
unless they do, the right provided by law is as much a part of the contract as the rights the contract expressly creates.72
70
Stew. v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952).
71
“Consequential damages are those damages that result naturally, but not necessarily, from the defendant’s wrongful acts.” Basic
Capital Mgmt. v. Dynex Commercial, Inc., 348 S.W.3d 894, 901 (Tex.2011); El Paso Mktg., L.P. v. Wolf Hollow I, L.P., 383
S.W.3d 138, 144 (Tex.2012). Delay damages are consequential damages.
72
See supra note 66.
We conclude that the Local Government Contract Claims Act waives immunity for a contract claim for delay damages not
expressly provided for in the contract.73 We now turn to whether Zachry’s claim is barred by the no-damages-for-delay
provision of the contract.
73
The dissent notes that the State Agency Contract Claims Act, enacted in 2013, contains a provision similar to Section
271.153(a)(1) except that the “including” phrase permits recovery of delay damages only “if the contract expressly provides for
that compensation”. TEX. CIV. PRAC. & REM. CODE § 114.004(a)(1) (Act of May 26, 2013, 83rd Leg., R.S., ch. 1260, H.B.
586, § 1, http://www.legis.state.tx.us/tlodocs/83 R/billtext/pdf/HB00586F.pdf# navpanes= 0 (last visited August 25, 2014)). The
dissent argues that the proviso states what is implicit in Section 271.153(a)(1). But if anything, the addition of the proviso suggests
that it was not intended in the other three statutes waiving immunity from suit on contract claims.
It should also be noted that the State Contract Claims Act was amended in 2005 (Act of May 27, 2005, 79th Leg., R.S., ch. 988,
H.B.1940, § 1, 2005 Tex. Gen. Laws 3292), the same year the Local Government Contract Claims Act was adopted (Act of May
23, 2005, 79th Leg., R.S., ch. 604, H.B.2039, § 1, 2005 Tex. Gen. Laws 1548), to provide for recovery of delay damages, but did
so using the word “and” instead of “including”. Supra note 59. Using the dissent’s argument, one might contend that both
statutes intended that delay damages be recoverable whether or not provided for by contract.
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III
[13]
We held in Green International, Inc. v. Solis that a contractor may generally agree to assume the risk of construction
delays and not seek damages.74 But we noted that the court of appeals in City of Houston v. R.F. Ball Construction Co.75 *115
had listed what it called “generally recognized exceptions” to the enforcement of such agreements
74
951 S.W.2d 384, 387 (Tex.1997).
75
570 S.W.2d 75 (Tex.Civ.App.-Houston [14th Dist.] 1978, writ ref’d n.r.e.); see also Shintech Inc., 688 S.W.2d 144, 148
(Tex.App.-Houston [14th Dist.] 1985, no writ) (“a contractor is entitled to recover damages from an owner for losses due to delay
and hindrance of its work if it proves: (1) that its work was delayed or hindered, (2) that it suffered damages because of the delay
or hindrance, and (3) that the owner was responsible for the act or omission which caused the delay or hindrance”) (citing R.F. Ball
).
when the delay: (1) was not intended or contemplated by the parties to be within the purview of the provision; (2) resulted
from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision; (3) has extended
for such an unreasonable length of time that the party delayed would have been justified in abandoning the contract; or (4)
is not within the specifically enumerated delays to which the clause applies.76
76
Green, 951 S.W.2d at 387 (citing Ball, 570 S.W.2d at 77 & n. 1).
And we also noted77 that the court of appeals in Green had identified a fifth exception “based upon active interference” with
the contractor “or other wrongful conduct”, including “arbitrary and capricious acts”—“ ‘willful and unreasoning actions,’
‘without due consideration’ and ‘in disregard of the rights of other parties.’ ”78 The issues in Green did not require us to
determine whether the courts of appeals in that case and Ball were correct in their statement of the law. Zachry contends that
the second and fifth exceptions apply here.
77
Id. at 388.
78
Argee Corp. v. Solis, 932 S.W.2d 39, 63 (Tex.App.-Beaumont 1995), rev’d on other grounds sub. nom. Green Int’l, Inc. v. Solis,
951 S.W.2d 384 (Tex.1997); Housing Auth. of Dallas v. Hubbell, 325 S.W.2d 880, 891 (Tex.Civ.App.-Dallas 1959, writ ref’d
n.r.e.).
The jury found that Zachry’s delay damages resulted from the Port’s “arbitrary and capricious conduct, active interference,
bad faith and/or fraud” as those terms were defined in the charge.79 The court of appeals concluded that, assuming such
conduct fell within the second exception, the exception could not apply if the parties intended the no-damages-for-delay
provision to cover the Port’s conduct.80 The provision stated that Zachry could not recover from the Port “any damages
arising out of or associated with any delay or hindrance” to its work, even if due to the Port’s “negligence, breach of contract
or other fault”, and that its “sole remedy in any such case” would be “an extension of time.” By “other fault”, the court
concluded, the parties intended to include the kind of misconduct by the Port found by the jury in awarding damages.81 “As
harsh as this result seems,” the court explained, the parties must be bound by their agreement.82 Rejecting Zachry’s argument
that enforcing the no-damages-for-delay provision made the contract illusory, allowing the Port to delay performance in
perpetuity with impunity, the court responded simply that it would not deprive the Port of its bargain.83
79
Supra note 7.
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57 Tex. Sup. Ct. J. 1378
80
377 S.W.3d 841, 850 (Tex.App.-Houston [14th Dist.] 2012).
81
Id. at 850.
82
Id.
83
Id. at 851–852.
As a matter of textual interpretation, it is doubtful whether the rule of ejusdem generis would allow “other fault”, following
“negligence” and “breach of contract”, to include the kind of deliberate, wrongful conduct the Port was found by the jury to
have engaged in.84 That interpretation is *116 especially doubtful, given the context in which no-damages-for-delay
provisions are used. An amicus brief explains:
84
Marks v. St. Luke’s Episcopal Hosp., 319 S.W.3d 658, 663 (Tex.2010) (“[T]he principle of ejusdem generis warns against
expansive interpretations of broad language that immediately follows narrow and specific terms, and counsels us to construe the
broad in light of the narrow.”); see also ANTONIN SCALIA & BRYAN A. GARNER, READING LAW: THE
INTERPRETATION OF LEGAL TEXTS 199 (2012) (“Where general words follow an enumeration of two or more things, they
apply only to persons or things of the same general kind or class specifically mentioned”.).
Based on their years of experience, education, and training, [contractors] can assess potential delaying events when
estimating and bidding public works. For example, they can make a judgment on the quality and completeness of the plans
and specifications, determine potential delays resulting from material shortages, analyze historical weather data for
potential delays, and assess possible delays from soil conditions by studying soil testing reports furnished by most owners.
However, they cannot assess potential delays that may arise due to an owner’s direct interference, willful acts, negligence,
bad faith fraudulent acts, and/or omissions.85
85
Brief of the Associated General Contractors of Texas, Inc. as Amicus Curiae, at 2. In support of Zachry’s petition for review, we
received amicus briefs and letters from the Texas Aggregates and Concrete Association; the Texas Civil Justice League;
Associated General Contractors of Texas; Texans for Lawsuit Reform; Zurich Surety; Associated Builders and Contractors of
Texas; Associated General Contractors—Texas Building Branch; the National Electrical Contractors Association; the National
Systems Contractors Association; and the American Subcontractors Association and the American Subcontractors Association of
Texas. Amicus briefs in support of the Port have been submitted by The Texas Conference of Urban Counties; the City of Houston;
the Texas Municipal League and the Texas City Attorneys Association; Harris County; Travis County; the City of Fort Worth; the
City of Arlington; the City of Dallas; and the Dallas/Fort Worth Airport Board.
Regardless, the purpose of the second Ball exception is to preclude a party from insulating himself from liability for his own
deliberate, wrongful conduct.
[14]
We have indicated that pre-injury waivers of future liability for gross negligence are void as against public policy.86
Generally, a contractual provision “exempting a party from tort liability for harm caused intentionally or recklessly is
unenforceable on grounds of public policy.”87 We think the same may be said of contract liability. To conclude otherwise
would incentivize wrongful conduct and damage contractual relations. This conclusion is supported by lower court decisions
in Texas88 and court decisions in at least 28 American jurisdictions.89 We join this overwhelming consensus. The Port *117
argues that the cases from other jurisdictions are inapposite because those jurisdictions all recognize a party’s duty of good
faith in performing a contract, and Texas does not.90 But the law need not impose a duty of good faith on a party to prohibit
him from attempting to escape liability for his future, deliberate, wrongful conduct. The Port argues that withholding
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57 Tex. Sup. Ct. J. 1378
enforcement of a no-damages-for-delay provision is in derogation of freedom of contract. But that freedom has limits. “As a
rule, parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy.”91
Enforcing such a provision to allow one party to intentionally injure another with impunity violates the law for the reasons
we *118 have explained. The Port also argues that Zachry is a sophisticated party, a very large construction company that can
protect itself. But the law’s protection against intentional injury is not limited to the helpless. Finally, the Port argues that the
conduct found by the jury does not qualify for the exception. But the jury charge tracked the language of the second and fifth
exceptions. The charge correctly described the misconduct that cannot be covered by a no-damages-for-delay provision.
86
Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 687 (Tex.2008) (Hecht, J., concurring); Crowell v. Hous. Auth.
of Dallas, 495 S.W.2d 887, 889 (Tex.1973); see also Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 219–222 (Tex.2002)
(suggesting that, generally, a tariff or contract provision including a pre-injury waiver of liability for gross negligence or willful
misconduct may be so unreasonable as to violate public policy). Zachry also points out that we have noted that the courts of
appeals have “found a pre-injury release of gross negligence invalid as against public policy”. Memorial Med. Ctr. of E. Tex. v.
Keszler, 943 S.W.2d 433, 435 (Tex.1997).
87
RESTATEMENT (SECOND) OF CONTRACTS § 195(1) (1981).
88
Argee Corp. & Seaboard Sur. Co. v. Solis, 932 S.W.2d 39, 52–53 (Tex.App.-Beaumont 1995), rev’d on other grounds sub nom.
Green Int’l, Inc. v. Solis, 951 S.W.2d 384 (Tex.1997); see also Alamo Cmty. College Dist. v. Browning Constr. Co., 131 S.W.3d
146, 162 (Tex.App.-San Antonio 2004, pet. dism’d by agr.); City of Houston v. R.F. Ball Constr. Co., Inc., 570 S.W.2d 75, 77
(Tex.Civ.App.-Houston [14th Dist.] 1978, writ ref’d n.r.e.); Hous. Auth. of Dallas v. Hubbell, 325 S.W.2d 880, 884–885, 890–891
(Tex.Civ.App.-Dallas 1959, writ ref’d n.r.e.).
89
See, e.g., U.S. Steel Corp. v. Mo. Pac. R., 668 F.2d 435, 438–439 (8th Cir.1982) (Arkansas law); Dynalectric Co. v. Whittenberg
Constr. Co., No. 5:06–CV–00208–JHM, 2010 WL 4062787, at *8 (W.D.Ky. Oct. 15, 2010); Law Co. v. Mohawk Const. & Supply
Co., Inc., 702 F. Supp. 2d 1304, 1325–1327 (D.Kan.2010); Kiewit Constr. Co. v. Capital Elec. Constr. Co., No. 8:04 CV 148, 2005
WL 2563042, at *7–8 (D.Neb. Oct. 12, 2005); Pellerin Constr., Inc. v. Witco Corp., 169 F. Supp. 2d 568, 583–587 (E.D.La.2001);
RaCON, Inc. v. Tuscaloosa Cnty., 953 So. 2d 321, 339–340 (Ala.2006); Tricon Kent Co. v. Lafarge N.A., Inc., 186 P.3d 155,
160–161 (Colo.App.2008); White Oak Corp. v. Dept. of Transp., 217 Conn. 281, 585 A.2d 1199, 1203 (1991); Wilson Contracting
Co. v. Justice, No. 508 CIV.A.1974, 1981 WL 377680, at *1–2 (Del.Super.Ct. Jan. 22, 1981); Blake Constr. Co. v. C.J. Coakley
Co., 431 A.2d 569, 578–579 (D.C.1981); Newberry Square Dev. Corp. v. S. Landmark, Inc., 578 So. 2d 750, 752
(Fla.Dist.Ct.App.1991); MElectric Corp. v. Phil–Gets Int’l Trading Corp., No. CVA12–014, 2012 WL 6738260, at *9–11 (Guam
Dec. 27, 2012); Grant Constr. Co. v. Burns, 92 Idaho 408, 443 P.2d 1005, 1012 (1968); J & B Steel Contractors, Inc. v. C. Iber &
Sons, Inc., 162 Ill. 2d 265, 205 Ill. Dec. 98, 642 N.E.2d 1215, 1222 (1994); Owen Constr. Co. v. Iowa St. Dept. of Transp., 274
N.W.2d 304, 306–307 (Iowa 1979); State Highway Admin. v. Greiner Eng’ng Sciences, 83 Md.App. 621, 577 A.2d 363, 372
(1990); Phoenix Contractors, Inc. v. Gen. Motors Corp., 135 Mich.App. 787, 355 N.W.2d 673, 676–677 (1984); Tupelo Redev.
Agency v. Gray Corp., 972 So. 2d 495, 511–512 (Miss.2007); J.A. Jones Constr. v. Lehrer McGovern Bovis, Inc., 120 Nev. 277, 89
P.3d 1009, 1014–1016 (2004); Edwin J. Dobson, Jr., Inc. v. State, 218 N.J.Super. 123, 526 A.2d 1150, 1153
(N.J.Super.Ct.App.Div.1987); Corinno Civetta Constr. Corp. v. New York, 67 N.Y.2d 297, 502 N.Y.S.2d 681, 493 N.E.2d 905,
909–910 (1986); Daniel E. Terreri & Sons, Inc. v. Mahoning Cty. Bd. of Comm’rs, 152 Ohio App. 3d 95, 786 N.E.2d 921, 928
(2003); Guy M. Cooper, Inc. v. E. Penn Sch. Dist., 903 A.2d 608, 613–614 (Pa.Commw.Ct.2006); Ayers–Hagan–Booth, Inc. v.
Cranston Hous. Auth., No. C.A. 74–2897, 1975 WL 174130, at *2–5 (R.I.Super. Nov. 24, 1975); U.S. v. Metric Constructors, Inc.,
325 S.C. 129, 480 S.E.2d 447, 448–451 (1997); Thomas & Assoc. v. Metro. Gov’t of Nashville, No. M2001–00757–COA–R3–CV,
2003 WL 21302974, at *14 (Tenn.Ct.App. June 6, 2003); English v. Fischer, 660 S.W.2d 521, 522 (Tex.1983); W. Eng’rs, Inc. v.
State Road Comm’n, 20 Utah 2d 294, 437 P.2d 216, 217 (1968); John E. Gregory & Son, Inc. v. A. Guenther & Sons Co., 147
Wis. 2d 298, 432 N.W.2d 584, 586 (1988). But see Wes–Julian Constr. Corp. v. Commonwealth, 351 Mass. 588, 223 N.E.2d 72,
76–77 (1967). See generally Maurice T. Bruner, Annotation, Validity and Construction of “No Damage” Clause with Respect to
Delay in Building or Construction Contract, 74 A.L.R. 3d 187, 201 § 2[a] (1976) (“it is well established, apart from a single
jurisdiction, that there are certain exceptions” to NDFD clauses).
90
English v. Fischer, 660 S.W.2d 521, 522 (Tex.1983).
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57 Tex. Sup. Ct. J. 1378
91
In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129 (Tex.2004); accord Sonny Arnold, Inc. v. Sentry Sav. Ass’n, 633 S.W.2d
811, 815 (Tex.1982) (recognizing “the parties’ right to contract with regard to their property as they see fit, so long as the contract
does not offend public policy and is not illegal”); Curlee v. Walker, 112 Tex. 40, 244 S.W. 497, 498 (1922) (“The law recognizes
the right of parties to contract with relation to property as they see fit, provided they do not contravene public policy and their
contracts are not otherwise illegal.”); James v. Fulcrod, 5 Tex. 512, 520 (1851) (“That contracts against public policy are void and
will not be carried into effect by courts of justice are principles of law too well established to require the support of authorities.”).
Accordingly, we conclude that the no-damages-for-delay provision, Section 5.07 of the parties’ contract, was unenforceable.
IV
Several issues remain.
First: Zachry’s contends that it is entitled to recover the $2.36 million that the Port withheld as liquidated damages for
[15]
Zachry’s failure to meet deadlines. For each progress payment, Zachry executed a document entitled “Affidavit and Partial
Release of Lien”, which contained the following language:
[Zachry] hereby acknowledges and certifies that [the Port Authority] has made partial payment to
[Zachry] on all sums owing on Payment Estimate Number [–––] and that it has no further claims
against [the Port Authority] for the portion of the Work completed and listed on the Schedule of Costs
in Payment Estimate Number [–––].
Zachry contends that the releases covered only liens. The Port counters that the releases covered all claims for payment. The
trial court concluded that the release language was ambiguous on the issue and charged the jury to determine its effect. The
jury failed to find that the release language covered Zachry’s claims for liquidated damages withheld by the Port. The court
of appeals held that the releases unambiguously covered Zachry’s claim for liquidated damages and reversed.92 We agree that
the releases are unambiguous, but we conclude that they do not cover Zachry’s claim.
92
377 S.W.3d 841.
Section 6.07 of the contract conditioned the Port’s obligation to make progress payments on Zachry’s execution of “waivers
and releases of liens” providing “that all amounts due and payable” to Zachry and all subcontractors and suppliers “have been
paid in full” and that Zachry “waives, releases and relinquishes any lien ..., security interest and claim for payment”. The Port
argues that the releases must be construed in light of this requirement because the contract and releases are related contracts
and must be read together.93 While Section 6.07 could be read to require Zachry to release its claims for liquidated damages
withheld by the Port in order to obtain progress payments, that is not the issue. Had the Port insisted on express language to
that effect, and had Zachry refused, the interpretation of Section 6.07 would be important. Now, however, the issue is not
what releases Zachry was contractually required to execute, but the effect of the releases Zachry actually did execute.
93
City of Keller v. Wilson, 168 S.W.3d 802, 811 (Tex.2005).
The release forms were captioned “Affidavit and Partial Release of Lien”. In the form language, Zachry acknowledged
“partial payment ... on all sums owing” on a specified invoice and stated that it had “no further claims against [the Port] for
the portion of the Work completed and listed on” the invoice. The release plainly refers only to claims for work completed,
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not for *119 liquidated damages withheld for delays—work not completed. Furthermore, Zachry actively disputed the Port’s
right to withhold liquidated damages from the first time the Port did so, and that dispute was never resolved. The purpose of
progress payment releases is to ensure that the contractor will not accept payment for work performed and then insist on
additional payment for that work. Zachry’s releases can no more be interpreted to extend to its claim for liquidated damages
the Port withheld than to its claim for delay damages. The jury failed to find that the releases in fact covered Zachry’s claim.
We agree, as a matter of law.
Second: The trial court did not award Zachry the entirety of the $2.36 million in withheld payments because the jury found
that the Port was entitled to an offset of $970,000 as damages for Zachry’s use of defective wharf fenders. Zachry contends
that the evidence is legally insufficient to support the jury’s finding.
To prove its claim for the offset, the Port submitted evidence that the wharf fenders, which protect vessels from damage
during the mooring process, were supposed to last for 30 years but became corroded after only 90 days. The Port’s expert
witness testified that this occurred because the fenders were improperly sealed and, as a result, “the aluminum pores [ ]
remain[ed] open [and] filled with sea water.” A lab analysis and tests that a structural fabrication company conducted
supported the expert’s conclusion. Zachry contends that the evidence does not establish that it breached the contract because
the sealing or coating on the fenders was “thinned” at 25% in accordance with the contract specifications, and if more
thinning was required then the blame lies with the specifications and not with Zachry. Even if there were a breach of contract,
Zachry argues that the evidence does not establish that the fenders were in fact defective or that the breach caused the
damages that the jury awarded.
[16]
Viewing the evidence in the light most favorable to the verdict, we cannot agree that the evidence was legally insufficient
to support the jury’s verdict. Although Zachry submitted evidence that tended to contradict the Port’s evidence, we conclude
that there was “more than a mere scintilla” of evidence on which a reasonable jury could find that Zachry breached its
obligation to provide fenders that were supposed to last 30 years by providing fenders that began corroding within 90 days,
and that the Port sustained damages in the amount of $970,000 as a result, entitling it to an offset against the damages
recovered by Zachry.
Third: The contract provided that “[i]f [Zachry] brings any claim against the Port Authority and [Zachry] does not prevail
with respect to such claim, [Zachry] shall be liable for all attorney’s fees incurred by the Port Authority as a result of such
claim.” The jury found that the Port incurred $10.5 million in attorney fees as a result of Zachry’s claim for delay damages,
plus additional fees on appeal. Separately, the jury found that the Port incurred $80,250 in attorney fees as a result of
Zachry’s claim to recover the payments that the Port withheld as liquidated damages, plus additional fees on appeal. In light
of our holdings that Zachry prevails on both its claims for delay damages and to recover part of the withheld payments, we
reverse the court of appeals’ judgment awarding the Port attorney fees.
******
We hold that Zachry’s claim for delay damages is not barred by immunity or by the no-damages-for-delay provision of the
contract. We also hold that Zachry is entitled to recover the liquidated damages *120 withheld by the Port, but that there is
evidence to support the jury’s award of an offset. We conclude that the court of appeals erred in awarding the Port attorney
fees. We reverse the court of appeals’ judgment, and because the Port has raised a number of other issues, we remand the
case to that court for further consideration.
Justice BOYD filed a dissenting opinion, in which Justice JOHNSON, Justice WILLETT, and Justice LEHRMANN joined.
Justice BOYD, joined by Justice JOHNSON, Justice WILLETT, and Justice LEHRMANN, dissenting in part.
Chapter 271 of the Texas Local Government Code waives a local governmental entity’s immunity against suits for breach of
written contracts for goods and services, but it does so only to allow contractors to recover “the balance due and owed by the
local governmental entity under the contract.” TEX. LOCAL GOV’T CODE § 271.153(a)(1) (emphases added). The Court
holds that this waiver allows Zachry Construction Corporation to recover common law delay damages that are not part of
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“the balance due and owed ... under the contract” it entered into with the Port Authority of Houston. In fact, in this contract,
Zachry expressly agreed that the Port Authority would never owe damages for costs that Zachry incurred due to any delay or
hindrance. The Court invalidates this no-damages-for-delay clause for public policy reasons. But even after striking that
clause, the contract does not provide for or in any way contemplate that the Port Authority would pay for Zachry’s delay
costs. Because delay costs are not part of “the balance due and owed by [the Port Authority] under [this] contract,” I would
hold that Chapter 271 does not waive the Port Authority’s immunity against Zachry’s claim for delay damages, and I would
dismiss that claim for lack of jurisdiction. Because governmental immunity bars Zachry’s claim for delay damages, I would
not reach the issue of whether the no-damages-for-delay clause is void for public policy reasons. I therefore respectfully
dissent in part.1
1
For the reasons the Court explains, I agree with its holding in Part II(A) that section 271.153’s limitation on recoverable damages
is jurisdictional because chapter 271 “does not waive immunity from suit on a claim for damages not recoverable under Section
271.153.” Ante at 110. I would not reach the public policy issue in Part III of the Court’s opinion. In Part IV of its opinion, the
Court holds that Zachry can recover on its separate claim for $2.36 million that the Port Authority withheld as liquidated damages,
less a $970,000 offset for damages resulting from Zachry’s use of defective wharf fenders. Ante at 119. I agree with this portion of
the Court’s opinion, for the reasons the Court has explained. The funds that the Port Authority withheld as liquidated damages
were part of the monthly progress payments that the Port Authority agreed to make for Zachry’s services and were part of “the
balance due and owed ... under the contract.” Section 271.153 thus waives the Port Authority’s immunity against Zachry’s claim to
recover those funds, and the courts have jurisdiction to resolve that claim. The mere fact that the Port Authority denies liability on
the claim does not negate the statute’s waiver of immunity from suit for damages that are provided for or clearly contemplated
under the contract. See TEX. LOCAL GOV’T CODE §§ 271.152–.153.
I.
Governmental Immunity Against Contract Actions
As a local governmental entity, the Port Authority “enjoy[s] governmental immunity from suit, unless immunity is expressly
waived.” Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 836 (Tex.2010). Governmental immunity
*121 includes both immunity from liability, “which bars enforcement of a judgment against a governmental entity, and
immunity from suit, which bars suit against the entity altogether.” Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex.2006).
A governmental entity that enters into a contract “necessarily waives immunity from liability, voluntarily binding itself like
any other party to the terms of agreement, but it does not waive immunity from suit.” Id. Unlike immunity from liability,
immunity from suit deprives the courts of jurisdiction and thus completely bars the plaintiff’s claim. Wichita Falls State
Hosp. v. Taylor, 106 S.W.3d 692, 696 (Tex.2003).
While most damages awards justly impose the financial consequences of a party’s wrongdoing on the wrongdoer, a damages
award against a governmental entity imposes the financial consequences on innocent third parties: taxpayers. Thus, although
“[t]he doctrine of governmental immunity arose hundreds of years ago from the idea that ‘the king can do no wrong,’ ... it
remains a fundamental principle of Texas law, intended ‘to shield the public from the costs and consequences of improvident
actions of their governments.’ ” Lubbock Cnty. Water Control & Improvement Dist. v. Church & Akin, L.L.C., 442 S.W.3d
297, 300 (Tex.2014) (quoting Tooke, 197 S.W.3d at 331–32). In some circumstances, however, justice may demand that the
government compensate innocent injured parties even though innocent taxpayers must pay the bill. The challenge is in
deciding which circumstances justify a waiver of immunity to allow for such compensation.
Because this decision “requires balancing numerous policy considerations, we have consistently deferred to the Legislature,
as the public’s elected representative body, to decide whether and when to waive the government’s immunity.” Lubbock
Cnty., 442 S.W.3d at 301. The Legislature may waive the government’s immunity, and thereby “consent to suit[,] by statute
or by legislative resolution.” Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 405 (Tex.1997). The Legislature has declared that
we cannot construe a statute to waive immunity “unless the waiver is effected by clear and unambiguous language.” TEX.
GOV’T CODE § 311.034; see also Tooke, 197 S.W.3d at 328–29 (agreeing that statutory waiver of immunity must be “by
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clear and unambiguous language”). If a statute seeks to waive immunity, it “must do so beyond doubt.” Wichita Falls State
Hosp., 106 S.W.3d at 697.
For the first 154 years of Texas’ existence, parties who contracted with the government could not recover for the
government’s breach unless they first convinced the Legislature to pass a special resolution waiving immunity for their
specific claim. See Fed. Sign, 951 S.W.2d at 408 (reaffirming previous holdings that “the State is immune from suit arising
from breach of contract suits”); TEX. CIV. PRAC. & REM.CODE §§ 107.001–.005 (governing resolutions granting
permission to sue the State). Not surprisingly, this often made it difficult for governmental entities to find qualified
contractors who were willing to provide goods and services. In 1999, the Legislature enacted Chapter 2260 of the Texas
Government Code, providing an administrative procedure through which parties to certain contracts with a State agency or
department could recover damages for the agency’s breach. See TEX. GOV’T CODE §§ 2260.001–.108. Chapter 2260 did
not waive the State’s immunity, id. § 2260.006, but instead provided an alternative administrative process through which the
contractor could seek relief. See id. The statute provides this option only for parties to certain kinds of contracts, and it limits
the administrative award to $250,000 unless the Legislature *122 separately authorizes a higher award in a specific case. See
id. § 2260.105.2
2
Under chapter 2260, an administrative law judge can only award up to $250,000 for a valid breach of contract claim. See TEX.
GOV’T CODE § 2260.105. Valid claims above $250,000 are referred to the Legislature to decide, in light of appropriate policy
considerations, whether to authorize additional funds for payment of the claim. See id. § 2260.1055; Gen. Servs. Comm’n v.
Little–Tex Insulation Co., Inc., 39 S.W.3d 591, 596 (Tex.2001).
Although Chapter 2260 provides a limited avenue of relief for those who contract with State agencies and departments,3 it
provides no remedy at all for those who contract with a local governmental entity. The Legislature first addressed local
governmental entities in 2003, when it enacted a limited waiver of immunity for certain breach of contract suits against Texas
counties. See TEX. LOCAL GOV’T CODE § 262.007. Then, in 2005, the Legislature enacted the provisions of Chapter 271
that are at issue in this case, providing the same limited waiver for certain breach of contract suits against all other types of
local governmental entities. See id. §§ 271.151–.160. Most recently, in 2013, the Legislature enacted Chapter 114 of the
Texas Civil Practice & Remedies Code, providing the same limited waiver of immunity from suits for certain contract claims
against State agencies. See TEX. CIV. PRAC. & REM.CODE §§ 114.001–.013.
3
See TEX. GOV’T CODE § 2260.001(4) (defining “unit of state government”).
As it had done in Chapter 2260, the Legislature strictly limited the immunity waivers in Chapters 262, 271, and 114, not only
in terms of the types of contracts under which a party can sue, but also in terms of the types and amounts of damages the
party can recover. See TEX. LOCAL GOV’T CODE §§ 262.007(b), (c), 271.153; TEX. CIV. PRAC. & REM.CODE §
114.004. Thus, the Legislature has only recently acted to waive immunity for contract claims, and each time it has done so, it
has strictly limited the scope of that waiver. Respectful of the Legislature’s prerogative to decide whether, when, and how to
waive the State’s immunity, and mindful of our obligation to find waivers only in “clear and unambiguous language” that
leaves “no doubt,” we must carefully and strictly construe and apply these statutory limitations. I dissent in this case because
the Court’s holding that Zachry’s delay damages are recoverable under section 271.153 ignores the statute’s limitations.
II.
Section 271.153
Section 271.153 is entitled “LIMITATIONS ON ADJUDICATION AWARDS.” Id. § 271.153 (emphasis added).4 Consistent
*123 with its title, subsection (a) of section 271.153 identifies three exclusive categories of damages that a contractor can
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recover in a breach of contract suit against a local governmental entity, and subsection (b) lists three categories of damages
that contractors cannot recover. See TEX. LOCAL GOV’T CODE § 271.153(a), (b). Specifically, contractors can recover:
4
All references and citations to section 271.153 in this opinion are to the version of the statute applicable to this suit, as it existed
before amendments in 2009, 2011, and 2013. See Act of May 20, 2005, 79th Leg., R.S., ch. 604, § 1, 2005 Tex. Gen. Law 1548,
1548–49 (codified at TEX. LOCAL GOV’T CODE § 271.153(a)(1), (2) & (4)). The 2009 amendments added a fourth category of
amounts that could be included in the “total amount of money awarded” under subsection (a): “reasonable and necessary attorney’s
fees that are equitable and just.” Act of May 21, 2009, 81st Leg., R.S., ch. 1266, § 8, 2009 Tex. Gen. Law 4006, 4007 (codified at
TEX. LOCAL GOV’T CODE § 271.153(a)(3)). The 2011 amendments added the phrase “including interest as calculated under
Chapter 2251, Government Code” after “interest as allowed by law.” Act of May 17, 2011, 82nd Leg., R.S., ch. 226, § 1, 2011
Tex. Gen. Law 809, 809 (codified at TEX. LOCAL GOV’T CODE § 271.153(a)(4)). And the 2013 amendments created an
exception to this limitation on damages, permitting recovery of “[a]ctual damages, specific performance, or injunctive relief” in
certain contracts involving the sale or delivery of reclaimed water. Act of May 22, 2013, 83rd Leg., R.S., ch. 1138, § 3, 2013 Tex.
Gen. Law ––––, –––– (codified at TEX. LOCAL GOV’T CODE § 271.153(c)). None of these amendments relate to or affect the
issue in this case.
(1) the balance due and owed by the local governmental entity under the contract as it may have been amended,
including any amount owed as compensation for the increased cost to perform the work as a direct result of
owner-caused delays or acceleration;
(2) the amount owed for change orders or additional work the contractor is directed to perform by a local
governmental entity in connection with the contract; and
(3) interest as allowed by law.
Id. § 271.153(a) (stating that “total amount of money” recoverable “is limited to” these three categories of damages).
Conversely, contractors cannot recover:
(1) consequential damages, except as expressly allowed under Subsection (a)(1);
(2) exemplary damages; or
(3) damages for unabsorbed home office overhead.
Id. § 271.153(b).
The Court holds that subsection (a)(1) authorizes Zachry to recover its delay damages. While I agree that delay damages can
be part of “the balance due and owed by [a] local governmental entity under [some ] contract[s],” I do not agree that they are
part of “the balance due and owed by [the Port Authority] under [this ] contract.” To the contrary, this contract expressly
provided that the Port Authority would have no liability for any delay damages. And while I agree that “the balance due and
owed ... under the contract” can include “compensation for ... owner-caused delays,” compensation for owner-caused delays
are not part of the balance due and owed under this contract, which stated that the contractor “shall receive no financial
compensation for delay or hindrance to the Work ... EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM,
ARISES OUT OF OR IS DUE, IN WHOLE OR IN PART, TO THE NEGLIGENCE, BREACH OF THE CONTRACT OR
OTHER FAULT OF THE PORT AUTHORITY.”
A. The Balance Due and Owed Under the Contract
Chapter 271 does not define or describe what constitutes “the balance due and owed ... under the contract.” When a statute
does not give words a specific definition or technical meaning, we use their common, ordinary meaning. City of Rockwall v.
Hughes, 246 S.W.3d 621, 625–26 (Tex.2008). Typically, we look to dictionaries to determine the common meaning of
words.5 See Epps v. Fowler, 351 S.W.3d 862, 873 (Tex.2011) (Hecht, J., dissenting) (“The place to look for the ordinary
meaning of words is ... a dictionary.”). When a word has multiple common meanings, we give it the meaning most consistent
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with the statutory context *124 in which it is used. State v. $1,760.00 in U.S. Currency, 406 S.W.3d 177, 180–81 (Tex.2013);
see also TEX. GOV’T CODE § 311.011(a).
5
See, e.g., Morton v. Nguyen, 412 S.W.3d 506, 512 (Tex.2013); State v. $1,760.00 in U.S. Currency, 406 S.W.3d 177, 181
(Tex.2013); City of Hous. v. Bates, 406 S.W.3d 539, 547 (Tex.2013); In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d 168,
171–72 (Tex.2013); Tex. Dep’t of Transp. v. Perches, 388 S.W.3d 652, 656 (Tex.2012); Traxler v. Entergy Gulf States, Inc., 376
S.W.3d 742, 747 (Tex.2012).
In the context of payment obligations, the term “balance” means “the difference between the debits and credits of (an
account).” BLACK’S LAW DICTIONARY 170 (10th Ed.). The term “due” means (1) “payable; owing; constituting a debt,”
when used in relation to a “fact of indebtedness,” or (2) “immediately enforceable,” when used in relation to “the time of
payment.” Bryan A. Garner, A DICTIONARY OF MODERN LEGAL USAGE, 298–99 (2nd ed.); see also Black’s Law
Dictionary 609 (10th Ed.). The Dictionary of Modern Legal Usage notes that the second definition, “immediately
enforceable,” is “almost invariably the applicable one” today. DICTIONARY OF MODERN LEGAL USAGE at 299. And
the term “owing” means “[t]hat is yet to be paid; owed; due.” BLACK’S LAW DICTIONARY 1279 (10th Ed.); see also
DICTIONARY OF MODERN LEGAL USAGE at 633 (noting that “owed” is the preferred modern usage, over “owing”).
The difference between the terms “due” and “owed” is reflected in the fact that something can be owed but not yet due
because the date for payment or the contingency on which payment is conditioned has not yet come to pass. See
DICTIONARY OF MODERN LEGAL USAGE at 299. A “balance” that is both “due” and “owed” is thus an amount by
which an account’s debits exceed its credits that is yet to be paid and immediately enforceable. Stated another way, a balance
due and owed is a mature debt. This understanding of the phrase is consistent with both the statutory context, which relates to
recoverable monetary obligations under a contract, and with our prior use of the phrase “due and owed” or “due and owing,”
both in our construction of this statute and more generally.6
6
See, e.g., Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 840 (Tex.2010) (“The existence of a balance ‘due
and owed’ is thus incorporated within the contract—a balance that would come due when voters approve payment in a bond
election.”); Sw. Bell Tel. Co. v. Mktg. on Hold Inc., 308 S.W.3d 909, 922 (Tex.2010) (“After rigorous analysis, the trial court found
that the alleged misrepresentation on each bill—an amount due and owing for a municipal charge—‘is uniform to all members of
the class....’ ”); Bailey v. Cherokee Cnty. Appraisal Dist., 862 S.W.2d 581, 587 (Tex.1993) (“There is little question that debts,
including ad valorem taxes, that are due and owing by an individual during his lifetime are liabilities of that individual.”)
(emphasis omitted); Summers v. Consol. Capital Special Trust, 783 S.W.2d 580, 581 (Tex.1989) (“On October 1, 1983, the Sill
note became due and owing.”); Sherman v. First Nat. Bank in Ctr., Tex., 760 S.W.2d 240, 241 (Tex.1988) (“In December of 1981,
Sherman received a letter from the Bank demanding the payment of several notes, including the $75,000 real estate note which was
not due and owing at that time.”); Inwood N. Homeowners’ Ass’n, Inc. v. Harris, 736 S.W.2d 632, 641 (Tex.1987) (“The
developer, or the association, is a general creditor who ... must stand in line along with [other creditors] for payment of sums due
and owing.”).
Importantly, section 271.153 modifies the phrase “the balance due and owed” with the prepositional phrase “under the
contract.” TEX. LOCAL GOV’T CODE § 271.153(a)(1). Under the “rules of grammar,” see TEX. GOV’T CODE § 311.011,
a preposition (here, “under”) imposes a relationship between its object (here, “the contract”) and its antecedent (here, “the
balance due and owed”). See, e.g., THE CHICAGO MANUAL OF STYLE § 5.173, at 248 (16th ed.); Bryan A. Garner, THE
REDBOOK: A MANUAL ON LEGAL STYLE, 176 (2nd ed.). As a result, section 271.153(a)(1) does not allow recovery of
all amounts that may be “due and owed by the local governmental entity,” but instead limits the recovery to a due-and-owed
balance that arises “under” the written contract for goods and services *125 to which the statute applies. See TEX. LOCAL
GOV’T CODE §§ 271.151(2)(A), 271.153(a)(1). Thus, under section 271.153(a)(1), the amount recoverable “is limited to”
the amount of all mature debts owed under a qualified contract, less any credits due.
The Court, by contrast, concludes that “[a] ‘balance due and owed ... under the contract’ is simply the amount of damages for
breach of contract payable and unpaid.” Ante at 111. I do not agree that a “balance due and owed ... under a contract”
includes all common law damages regardless of whether they are contemplated in the parties’ contract. When a payment is
not provided for under the contract, but instead arises under the common law, that payment may later be due and owed under
the cort’s jud Aent, MMs not part of “the balance due and owed ... under the contract.” See TEX. LOCAL GOV’T CODE §
271.153(a)(1) (emphasis added).
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The Court’s construction of the statute is contrary to the statute’s language and its structure. First, the Court’s construction
separates the phrase “balance due and owed” from the phrase “under the contract,” and then alternatively reads each of them
out of the statute. On the one hand, the Court equates the phrase “the balance due and owed” with the phrase “damages ...
payable and unpaid,” ante at 111, and by doing so ignores the statute’s actual words. On the other hand, the Court treats the
phrase “under the contract” as if it said “under a court’s judgment,” but does so only by relying on court opinions that address
damages under a contract, not a “balance due and owed ... under a contract.” Ante at 111 n. 62, 64. We must read the two
phrases together, just as they appear in the statute, and the Court’s alternatives for each simply are not equivalents. By
equating “the balance due and owed ... under the contract” with “the amount of damages for breach of contract payable and
unpaid,” the Court shifts the focus from the mature debt that exists “under the contract” when suit is filed to prospective
liability that a Court may impose in a breach of contract action.
Second, by holding that “a ‘balance due and owed ... under the contract’ is simply the amount of damages for breach of
contract payable and unpaid,” the Court renders subsection (a)(1) a tautology. Under the Court’s construction, the amount of
damages that is recoverable for a breach of contract is “limit [ed]” to the amount of damages that is recoverable for a breach
of contract. Under that construction, the amount of damages is not “limit[ed]” at all.7
7
In response, the Court contends that the statute does “limit [ ] recovery” because “damages are but one item in a list that includes
attorney’s fees and interest, even if not provided for in the contract.” Ante at 113 n. 66. But section 271.153(a) places
“LIMITATIONS ON ADJUDICATION AWARDS” by authorizing courts to award only amounts that fall within the expressly
enumerated categories, which under the current version of the statute include:
• certain types of damages: “the balance due and owed ... under the contract” under section 271.153(a)(1) and “the amount
owed for change orders or additional work” under (a)(2);
• certain types of attorney’s fees: “reasonable and necessary attorney’s fees that are equitable and just” under (a)(3); and
• all interest allowed by law under (a)(4).
See TEX. LOCAL GOV’T CODE § 271.153. The Court’s reading of section (a)(1) does not alter the scope of recoverable
attorney’s fees or interest, it simply expands the scope of authorized damages to include all recoverable damages. Therefore, it
does not limit recoverable damages at all.
Third, the Court’s construction of subsection (a)(1) renders subsection (a)(2) superfluous. Subsection (a)(2) expressly
authorizes the recovery of “the amount owed *126 for change orders or additional work the contractor is directed to perform
by a local governmental entity in connection with the contract.” TEX. LOCAL GOV’T CODE § 271.153(a)(2). If, as the
Court holds, subsection (a)(1) authorizes the recovery of all common law damages recoverable for breach of the contract,
then subsection (a)(1) already authorizes recovery of amounts owed for change orders and additional work, and subsection
(a)(2) adds nothing to the mix.8 But if, as I contend, subsection (a)(1) only authorizes recovery of the amounts actually
provided for or contemplated within the contract (that is, “the balance due and owed ... under the contract”), then subsection
(a)(2) adds to that any amounts owed for change orders and additional work that were not originally provided for or
contemplated in the parties’ contract.
8
The Court responds that its construction does not render subsection (a)(2) superfluous because subsection (a)(2) “clarifies that
change orders can be the basis for recovery, even if it were argued that they were not ‘under the contract.’ ” Ante at 113 n. 66. But
this is exactly the point: under the Court’s construction, there is no need for such clarification because everything that the law
permits to be a basis for recovery in a breach of contract action (the only claim that can be brought under the statute) can be the
basis for recovery under the 271.153(a), regardless of whether it is “under the contract.”
Finally, under the Court’s construction of subsection (a)(1), the exception to the exclusion of consequential damages in
subsection (b)(1) would completely swallow the rule. Subsection (b)(1) provides that recoverable damages may not include
“consequential damages, except as expressly allowed under Subsection (a)(1).” Id. § 271.153(b)(1). As the Court notes,
“[d]elay damages are consequential damages.” Ante at 114 n. 71. If subsection (a)(1) authorizes the recovery of all common
law damages for breach of contract, then consequential damages, which are recoverable for a breach of contract, are
“expressly allowed under Subsection (a)(1).” And in that case, subsection (b)(1) would not exclude any consequential
damages. See TEX. LOCAL GOV’T CODE § 271.153(a)(1), (b). In short, under the Court’s construction, subsection (a),
which says recoverable amounts are “limited” to those specified in subsections (a)(1) through (a)(4), does not in fact “limit”
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 29
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
anything; and subsection (b), which says recoverable amounts “may not include” those listed in subsection (b)(1), does not in
fact exclude anything.
In addition to the language of the statute, the Court’s holding contradicts our precedent on this very point. We have addressed
section 271.1 53(a)(1) in three prior decisions, and in each of them we have held, or at least indicated, that a “balance” is
“due and owed ... under the contract” only if it is “stipulated,” “provided for,” or at least “contemplated” within the parties’
written agreement. See Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 413 (Tex.2011) (“The kind of
damages sought by Sharyland were not those provided for or contemplated in the Water Supply Agreement and are not a
‘balance due and owed’ under that contract.”); Kirby Lake, 320 S.W.3d at 840 (holding that the damages sought were part of
the balance due and owed under the contract because “the Agreements do stipulate the amount of reimbursement owed upon
approval of bond funds”); Tooke, 197 S.W.3d at 346 (holding that lost profits from additional work “are consequential
damages excluded from recovery under the statute”).
In Tooke, the Court held that the claimants could not recover after the City of Mexia prematurely terminated their service
contract because they “claim [ed] only lost profits on additional work they should have been given,” which “are
consequential *127 damages excluded from recovery under the statute.” 197 S.W.3d at 346; see TEX. LOCAL GOV’T
CODE § 271.153(b)(1). If, as the Court holds today, “a ‘balance due and owed ... under the contract’ is simply the amount of
damages for breach of contract payable and unpaid,” ante at 125, the Tookes should have been able to recover lost profits
under section 271.153(a)(1), and they should not have been excluded as consequential damages under subsection (b)(1)
because they fall within the exception for consequential damages expressly authorized under subsection (a)(1). In short, the
lost profits in Tooke were consequential damages not authorized under the parties contract, just as the Court recognizes
Zachry’s delay damages to be. Yet we held that the Tookes’ lost profits were not recoverable even though they, like Zachry’s
delay damages, were “damages ... payable and unpaid” and recoverable under the common law for breach of contract.
Similarly, in Sharyland, the contractor, the Sharyland Water Supply Corporation, sought to recover its “increased cost to
perform” its contractual duty to repair and maintain a water system, which allegedly resulted from the City of Alton’s breach
of its own contractual duties. 354 S.W.3d at 413. We held that section 271.153(a)(1) did not authorize Sharyland to recover
its increased repair and maintenance costs because “[t]he kind of damages sought by Sharyland were not those provided for
or contemplated in the Water Supply Agreement and are not a ‘balance due and owed’ under that contract.” Id.9
9
The Court notes that, in the next sentence in Sharyland, the Court stated: “Nor were these costs the ‘direct result of owner-caused
delays or acceleration....’ ” Ante at 113 n. 69 (quoting Sharyland, 354 S.W.3d at 413). The Court asserts that, by this sentence, we
treated the “including” clause at the end of subsection 271.153(a)(1) “as stating independently that delay damages are
recoverable,” and “we suggested that if [the damages sought had been for owner-caused delays], they would have been recoverable
even if neither ‘due and owed under’ nor ‘provided for or contemplated in’ the contract.” Id. The Court reads far too much into this
language. What we actually said in Sharyland was:
The kind of damages sought by Sharyland were not those provided for or contemplated in the Water Supply Agreement and
are not a “balance due and owed” under that contract. Nor are these costs the “direct result of owner-caused delays or
acceleration,” or the “amount owed for change orders or additional work the contractor [was] directed to perform by [the]
local governmental entity in connection with the contract.”
Sharyland, 354 S.W.3d at 413. We thus addressed all provisions of subsections (a)(1) and (a)(2), demonstrating that there was
no possible basis on which any of them could have authorized the recovery of the repair and maintenance costs that Sharyland
sought. See id. Sharyland did not argue that its damages were independently recoverable as “owner-caused delay damages,” and
we did not address the issue for which the Court now cites this language. See id. Instead, we simply explained that the damages
Sharyland sought did not fit within any of the descriptions in subsection (a)(1) or (a)(2). See id. And, consistent with Tooke and
Kirby Lake, we equated “the balance due and owed ... under the contract” with the amounts “provided for or contemplated” in
the parties’ agreement. See id. I address the issue of whether the “including” clause at the end of subsection (a)(1) authorizes
delay damages that are not “due and owed ... under the contract” in the next section.
In Kirby Lake, by contrast, we held that the damages the claimant sought were recoverable as “the balance due and owed ...
under the contract” because “the Agreements do stipulate the amount of reimbursement owed upon approval of bond funds.”
320 S.W.3d at 840 (emphasis added). Consistent with the language of the statute and our precedent, I would hold that section
271.153 does not authorize Zachry to recover its delay damages because those damages are not provided for or contemplated
in the parties’ agreement, *128 which instead expressly bars recovery of delay costs, and thus are not part of “the balance due
and owed by the [Port Authority] under the contract.” See TEX. LOCAL GOV’T CODE § 271.153(a)(1).
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 30
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
B. “Including Any Amount Owed as Compensation for the Increased Cost to Perform....”
Relying on the language at the end of section 271.153(a)(1), the Court asserts that “Section 272.153(a)(1) does not require the
‘balance due and owed ... under the contract’ to be ascertainable from the contract because, for one thing, this Section
expressly includes ‘any amount owed as compensation ... for owner-caused delays,’ an amount which cannot be determined
in advance, when the contract is executed.” Ante at 111. To the extent the Court is arguing that the statute authorizes recovery
of amounts that are not quantified in the contract or ascertainable at the time of contracting, I agree. Amounts need not be
quantified in the contract or ascertainable at the time of contracting to be “due and owed ... under the contract.” Delay costs,
in particular, cannot be quantified at the time of contracting because the parties cannot predict the length of the delay or how
the delay will impact the contractor’s work. But parties can, and sometimes do, agree that the owner will compensate the
contractor for owner-caused delays, and when they do, the delay costs are recoverable under the statute. Here, however, the
parties did not agree that the Port Authority would compensate Zachry for owner-caused delays; instead, they expressly
agreed that Zachry would receive “no financial compensation for delay or hindrance to the Work ... EVEN IF SUCH DELAY
OR HINDRANCE” was owner-caused.
The Court misconstrues the language at the end subsection (a)(1) to independently authorize recovery of “any amount owed
as compensation ... for owner-caused delays,” even if that amount is not part of “the balance due and owed ... under the
contract.” Ante at 111. In doing so, the Court overlooks the key word that connects these two phrases: “including.” The word
“including” in this subsection does not expand the meaning of the words that come before it (“the balance due and owed”);
rather, it limits the meaning of the words that come after it (“any [owner-caused delay damages]”) to “include” only those
owner-caused delay damages that are in fact “due and owed.” See BLACK’S LAW DICTIONARY at 766 (defining
“include” to mean “contain as part of something”). The Court thus reads subsection (a)(1) as authorizing recovery of the
balance due and owed ... under the contract and (or plus) any delay damages, when in fact the statute authorizes recovery of
“the balance due and owed ... under the contract ..., including any amount owed ” as damages for owner-caused delays. TEX.
LOCAL GOV’T CODE § 271.153(a)(1) (emphasis added).
For example, if a franchise agreement authorized a franchisee to operate “in any Texas city, including Athens,” the agreement
would permit operations in Athens, Texas, but not in Athens, Greece, or Athens, Georgia. The word “including” is not a
synonym for the word “and.” It does not expand the meaning of “any Texas city” to include Athens, Greece, or Athens,
Georgia, merely because those cities are also named “Athens.” Instead, it limits the scope of the reference to “Athens” to the
“Texas city” by that name.10 In the *129 same way, the word “including” in subsection 271.153(a)(1) does not mean “and.” It
does not expand the meaning of “the balance due and owed ... under the contract” to include “owner-caused delay damages”
that are not due and owed under the contract. Instead, it limits the scope of the reference to “owner-caused delay damages” to
those “owner-caused delay damages” that are part of “the balance due and owed ... under the contract.”
10
Or, to use the Court’s “more apt example,” see ante at 112 n. 65, the phrase “a city, including any named Athens,” includes any
city named Athens, which (as the Court notes) is “a longer list,” but it still only “includes” cities named Athens. It would not
include a corporation, or person, or pet named “Athens,” because the word “including” limits the second word “Athens” to those
that fit within the first word “city.” In the same way, the word “including” in section 271.153(a)(1) limits the second phrase “delay
damages” to those that fit within the first phrase “balance due and owed ... under the contract.” Any delay damages that are not part
of the balance due and owed under the contract are not “included” in the statute’s waiver.
The language the Legislature used in its most recent statutory waiver of immunity for breach of contract suits further
confirms this point. See TEX. CIV. PRAC. & REM.CODE § 114.004. In this statute, through which the Legislature waived
immunity for certain contract claims against state agencies just last year, the Legislature used the same language it used in
section 271.153, but added a final clause to further clarify that the amount recoverable “is limited to”:
the balance due and owed by the state agency under the contract as it may have been amended,
including any amount owed as compensation for the increased cost to perform the work as a direct
result of owner-caused delays or acceleration if the contract expressly provides for that
compensation....
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 31
Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014)
57 Tex. Sup. Ct. J. 1378
Id. § 114.004(a)(1) (emphasis added). While the Court contends that the inclusion of the emphasized language gives this
statute a meaning that is different than the meaning of section 271.153(a)(1), which does not include the emphasized
language, that contention is unsupportable within this context. The language of sections 114.004 and 271.153 (and, for that
matter, 262.007) are in all material respects the same, demonstrating that the Legislature intended to follow a uniform
approach in strictly limiting the scope of these statutory waivers of immunity. More importantly, by using the same
“including” language that appears in section 271.153, section 114.004 confirms that both statutes only permit recovery of
owner-caused delay damages that are “included” within “the balance due and owed ... under the contract.” If anything,
section 114.004(a)(1) narrows the scope of recoverable damages by requiring that the contract “expressly provide[ ] for” the
payment of such compensation.
Parties to construction contracts often allocate unquantified costs between themselves, just as Zachry and the Port Authority
did with delay costs. Zachry and the Port Authority allocated all of Zachry’s delay-related expenses and losses to Zachry,
even if the Port Authority was at fault for the delay. But parties to construction contracts sometimes choose a different
allocation, obligating an owner to reimburse the contractor for some or all owner-caused delay costs. See, e.g., MasTec N.
Am., Inc. v. El Paso Field Servs., L.P., 317 S.W.3d 431, 452 (Tex.App.-Houston [1st Dist.] 2010) (involving construction
contract in which owner agreed to compensate contractor for certain owner-caused delays) rev’d, 389 S.W.3d 802 (Tex.2012)
(holding that contract allocated all risk of unknown obstructions in construction path to contractor); Shintech Inc. v. Group
Constructors, Inc., 688 S.W.2d 144, 148 (Tex.App.-Houston [14th Dist.] 1985, no writ) (involving contract that allocated to
the owner’s account undue expenses incurred by the contractor as a result of owner-caused delays). If this contract had *130
included such a clause, I would agree that whatever portion of the delay costs the Port Authority had agreed to pay would
constitute a balance due and owed by the Port Authority under the contract, and would thus be recoverable under section
271.153(a)(1). But since the Port Authority did not agree to pay any of Zachry’s delay damages, and the contract does not
provide for or contemplate the Port Authority’s payment of such damages, those damages are not part of “the balance due and
owed ... under the contract” and thus are not recoverable under section 271.153.
III.
Conclusion
I agree with the Court that Zachry’s claim to recover installment payments that the Port Authority withheld as liquidated
damages are recoverable under section 271.153 and that Zachry did not unambiguously release that claim, but I would hold
that section 271.153 does not waive the Port Authority’s immunity against Zachry’s claim for delay damages. Based on the
language and our prior constructions of the statute, I would hold that section 271.153 permits an award of delay damages
only if those damages are provided for or contemplated in the agreement and are thus part of “the balance due and owed ...
under the contract.” Because this contract did not provide for or contemplate the Port Authority’s payment of Zachry’s delay
damages, I would hold that Zachry’s delay damages are not part of “the balance due and owed ... under the contract”; section
271.153 therefore does not authorize an award of those damages in this case; and thus section 271.152 does not waive the
Port Authority’s immunity against Zachry’s suit for such damages.
Parallel Citations
57 Tex. Sup. Ct. J. 1378
End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 32
TAB 4
Charge of the Court and Verdict dated January 14, 2010
(CR59:17386-409)
• CAUSE NO. 2006-72970
• P-24
ZACHRY CONSTRUCTION § · fN THE· DISTRICT COURT OF
0
ri CORPORATION n/k/a Zachry Industrial, §
0
N
...... , Inc. §
...
ri §
......
ri
V. § HARRIS COUNTY, TEXAS
§
PORT OF HOUSTON §
AUTHORITY OF HARRIS § p
COUNTY, TEXAS s I 51ST JUDICIAL DISTRICT ./ i
J4,y
W:~!tlJ
~11
LADIES AND GENTLEMEN OF TilE JURY:
CHARGE OF THE COURT
'"
. '.2Y; cOlo
(h:.
·~
This case is submitted to you by asking questions about the facts, which you m dec1
· from the evidence you have heard in this trial. You arc the sole judges of the credibility o c
witnesses and the weight to be given their testimony, but in matters of law, you must be
governed by the instructions in this charge. In discharging your responsibility on this jury, you
will observe all the instructions which have previously been given you. I shall now give you
additional instructions which you should ~.:arefully and strictly follow during your deliberations.
I. Do not let bias, prejudice or sympathy play any part in your deliberations.
2. In arriving at your answers, consider only the evidence introduced here
under oath and such exhibits, if any, as have been introduced for your consider:.~tion
under the rulings of the court, that is, what you have seen and heard in this courtroom,
together with the law as given you by the court. In your deliberations, you will not
consider or discuss anything that is not represented by the evidence in this case.
3. Since every answer that is required by the charge is important, no juror
should state or consider that any required answer is not important.
4. You must not decide who you think should win, and then try to answer the
questions accordingly. Simply answer the questions, und do not discuss nor concem
yourselves with the effect of your answers.
5. You will not decide the answer to a question by lot or by drawing straws,
or by any other method of chance. Do not return a quotient verdict. A quotient verdict
means that the jurors agree to abide by the result to be reached by adding together each
juror's figures and dividing by the number of jurors to get an average. Do not do any
trading on your answers; that is, one juror should not agree to answer a certain question
one way if others will agree to answer another question another way.
1738€
6.
• •
Unless otherwise instructed, you may answer a question upon the vote of
ten or more jurors. If you answer more than one question upon the vote of ten or more
jw-ors, the same group of at least ten of you must agree upon tho answers to each of those-
questions.
These instructions are given you becauseyour conduct is subject to review the same us
that of the witnesses, parties, attorneys and the judge. If it should be found that you have
disregarded any of these instructions, it will be jury misconduct and it may require another trial
by another jury; then all of our time will have been wasted.
The presiding juror or any other who observes a violation of the court's instructions shall
immediately warn the one who is violating the same and caution the juror not to do so again.
When words are used in this charge in a sense that varies from the meaning commonly
understood, you arc given a proper legal definition, which you are bound to accept in place of
any other meaning.
1\nsw<..-r "Y cs" or "No" to all questions unless otherwise instructed. A "Y cs" answer must
be based on a preponderance of the evidence unless you are othenvise instructed. If you do not
find that a preponderance of the evidence supports a "Yes" answer, then answer "No." The tem1
·'preponderance of the evidence" means the greater weight of credible evidence admitted in this
case. A preponderance of the evidence is not measured by the number of witnesses or by the
number of documents admitted in evidence. For a fact to be proved by a preponderance of the
evidence, you must find that the fact is more likely true than not true. Whenever u question
requires an answer other than "Y cs" or "No," your answer must be based on a preponderance of
the evidence unless you arc otherwise instructed.
A fact may be established by direct evidence or by circumstantial evidence or both. A
fact is established by direct evidence when proved by documentary evidence or by witnesses
who saw the act done or heard the words spoken. A fact is established by circumstantial evidence
when it may be fairly and reasonably inferred from other facts prOV(.:d.
A party's conduct includes the conduct of another who acts with the party's authority or
apparent authority. A party's knowledge includes facts known to the party acting with the other
party's authority, and which arc material lo the duties of the party acting with the other party's
authority.
Authority for another to act for a party must arise from the party's agreement that the
other act on behalf and for the benefit of the party. If a party so authorizes another to perform an
act, that other party is also authorized to do whutevcr else is proper, usual, and necessary to
perform the act expressly authorized.
Apparent authority exists if u party ( 1) knowingly permits another to hold himself out ns
having authority or, (2) through lack of ordinary care, bestows on another such indication~ of
authority that lead a reasonably prudent person to rely on the apparent existence of authority to
2
• •
his detriment. Only the acts of the party sought to be charged with responsibility for the conduct
of another may be considered in determining whether apparent authority exists.
The following definitions apply in this charge.
"The Contract" means the Bayport Terminal Complex Phase lA Wharf and Dredging
Contract. Unless otherwise specified, sections of the Contract that are used in this Charge are
from the General Conditions of the Contract. The Contract consists of the Contract Documents
as defined in §1.10 ofthe Contract.
"Port" means the Port of 1Iouston Authority of Harris County, Texas.
"Zachry'' is the Contractor under the Contract with the Port. Before January 1, 2008, it
was called Zachry Construction Corporation. From and after January I, 2008, it is called Zachry
Industrial, Inc.
"New Zachry" is Zachry's subcontractor under the Management Services Agreement, PX
643, from and after January I, 2008. From and after January 1, 2008, New Zachry is called
Zachry Construc-tion Corporation.
After you retire to the jury room, you will select your own presiding juror. The first thing
the presiding juror will do is to have this complete charge read aloud and then you will deliberate
upon your answers to the questions asked.
It is the duty of the presiding juror-
1. to preside during your deliberations,
2. to sec that your deliberations arc conducted in an orderly manner and in
accordance with the instructions in this charge,
3. to write out and hand to the bailiff any communications concerning the
case that you desire to have delivered to the judge,
4. to vote on the questions.
5. to write your answers to lhe questions in the spaces provided, and
6. to certify to your verdict in the space provided tbr the presiding juror's
signature or to obtain the signatures of all the jurors. who agree with the
verdict if your verdict is less than unanimous.
You should not discuss the case with anyone, not even with other members of the jury,
unless all of you are present and assembled in the jury room. Should anyone attempt to talk to
you about the case before the verdict is returned, whether at the courthouse, at your home, or
elsewhere, please inform the judge of this fact.
3
• •
When you have answered all the questions .you arc required to answer under the
instructions of the judge and your presiding juror has placed your answers in. the spaces provided-
and signed the verdict as presiding juror or obtained the signatures, you will inform the bailiff at
the door of the jury room that you have reached a verdict, and then you will return into court
with your verdict.
JUDGE PRESrDING
JAN 2 1 ?010
4
1
• Question No. I
•
Did the Port fail to comply with Change Order 4?
It is your duty to interpret the language of Change Order 4 and the Scope, Time, and
Price Modifications to Specifications and Proposal attached to Change Order 4.
You must decide its meaning by detcnnining the intent of the parties at the time of the
agreement. Consider all the facts and circumstances surrounding the making of the agreement,
the interpretation placed on the agreement by the parties, and the conduct of the parties.
In answering this question only, you are not being asked to decide whether the Port failed
to comply with § 5.10 of the Contract.
Furthermore, in answering this question, you are instructed that nothing in § 5.41 gave
the Port the right to issue its October 11, 2005 response to the September 9, 2005 frozen cutoff
wall design.
Answer ''yes" or ''no."
Answer: _'[1_.___£;..::...(7
_ __
5
17390
• •
Question No.2
Did the Port fail to comply with§ 5.10 ofthe General Conditions?
In answering this question, it is your duty to interpret §§ 5.10 and 5.22 and the terms
contained therein.
You must decide the meaning of these provisions of the Contract by determining the
intent of the parties at the time of the agreement. Consider all the facts and circumstances
surrounding the making of the agreement, the interpretation placed on the agreement by the
parties, and the conduct of the parties.
In determining the meaning of these provisions, you may also consider a trade custom or
usage, if any, if you find that such trade custom or usage existed. However, a trade custom or
usage, if any, cannot vary, control, impair, restrict or enlarge the express language of the
Contract. A trade custom or usage exists if it is a practice so generally or universally well known
and used in the industry that the parties to a contract are charged with knowledge of its existence
to such an extent as to raise the presumption that the parties contracted with reference to it.
Furthermore, in answering this question, you arc instructed that nothing in § 5.41 gave
the Port the right to issue its October 11, 2005 response to the September 9, 2005 frozen cutoff
wall design.
Answer "yes" or "no."
Answer: ~£';
6
1
• •
If you answered "yes'' to Question No. I and/or 2, then answer the following question.
Otherwise, do not answer the following question.
Question No. 3
What sum of money, if any, if paid now in cash, would fairly and reasonably compensate
Zachry for its damages, if any, that resulted from the Port's failure to comply?
Consider the following elements of damages, if any, and none other.
A. The balance due and owed by the Port, if any, under the Contract, including any
amount owed as compensation for any increased cost to perform the work as a
direct result of Port-caused delays, and
B. The amount owed, if any, for additional work that Zachry was directed to perform
by the Port in connection with the Contract.
You may consider amounts, if any, owed as compensation for increased cost to pertonn
the work as a direct result of Port-caused delays, if any, only if you find that such increased costs
were a natural, probable, and foreseeable consequence of the Port's failure to comply.
In determining the balance due and owed for the increased cost to perform the work
under A (above), if any, and the amount owed for additional work under B (above), if any, you
should include Reimbursable Costs as defined in Section 1.1 of the Management Services
Agreement (PX 643), incurred by New Zachry to perform Zachry's obligations under the
Contract.
You are instructed that Zachry was not required to take any of the following actions to be
able to recover damages for the Port's failure to comply: (I) obtain a written Construction
Change Directive or a fully executed Change Order from the Chief Engineer under § 5.41 or
under § 5.52 to the extent it imposes requirements consistent with §5.41; or (2) provide notice
that a Contract interpretation by the Port constituted a change to the Contract under § 5.42 and
that Zachry was entitled to an adjustment in the Contract Time and Price. You arc instructed that
you may consider §§ 5.41, 5.42, and 5.52 to the extent it imposes requirements consistent with
§5.41, only in assessing a party's state ofmind.
You are instructed that § 5.07 of the Contract precludes Zachry from recovering dt!lay or
hindrance damages, if any, unless you find that the delay or hindrance damagt!s, if any, resulted
from a delay or hindrance that was the result of the Port's actions, if any, that constituted
arbitrary and capricious conduct, active interference, bad faith and/or fraud.
"Arbitrary and capricious" means willful and unreasoning action without due
consideration and in disregard of the facts, circumstances, and rights of other parties
involved.
7
• •
"Active interference" means affirmative, willful action that unreasonably interferes with
the other party's compliance with the contract. "Active interference" requires more than
a simple mistake, error in judgment, lack of total effort, or lack. of complete diligenoo.
''Bad faith" is conscious doing of a wrong tor a dishonest purpose.
"Fraud" occurs when
1. a party makes a material misrepresentation,
2. the misrepresentation is made with knowledge of its falsity or made recklessly
without any knowledge ofthe truth and as a positive assertion,
3. the misrepresentation is made with the intention that it should be act{,"'Cl on by the
other party, and
4. the other party suffers injury as a result of its reliance on the misrepresentation.
"Misrepresentation" means a promise of future performance made with an intent, at the time the
promise was made, not to perform as promised, and the promise of future performance is that the
Port would comply with the terms of Change Order 4.
Do not add any amount for interest on damages, if any.
Do not include in your answer any amount that you find that the Port proved, by a preponderance
ofthe evidence, that Zachry could have avoided by the exercise of reasonable care.
8
• •
If you answered Question No. 3 with any amount greater than zero, then answer the
following question. Otherwise do not answer the following Question.
Question No. 4
What percentage of the damages that you found in your answer to Question No. 3
was for delay or hindrance damages?
Answer with a percentage from 0% to I 00%
Answer: :)g, f 3
--"----------
%
9
1739"4
• •
If you answered Question No. 3 with a number greater than zero, then answer the
following Question. Otherwise do not answer the following Question.
Question 5
What amount of damages that you found in Question No. 3, if any, was for Reimbursable
Costs as defined in Section l.1 of the Management Services Agreement (PX 643), incurred by
New Zachry to perform Zachry's obligations under the Contract?
Answer in dollars and cents, if any.
10
17395
• •
If you answered "yes" to Question Nos. I and/or 2, then answer the following question.
Otherwise, do not answer the following question. ·
Question No.6
Was the Port's failure to comply excused?
Answer "yes" or ''no" for each of the fo1lowing:
A. Waiver
Failure to comply by the Port is excused if compliance was waived by Zachry. Waiver is
an intentional surrender of a known right or intentional conduct inconsistent with
claiming the right.
Answer ''yes" or "no."
Answer: oo
B. Equitable estoppel
Failure to comply by the Port is excused if Zachry is equitably estopped from asserting
that f<1ilure to comply. Equitable estoppel is established if all of the following
circumstances occurred:
I. Zachry
a. by words or conduct made a false representation or ~.:oncealed material
facts when there was a duty to disclose,
b. with knowledge of the facts or with knowledge or information that would
lead a reasonable person to discover the facts, and
c. with the intention that the Port would rely on the false representation or
concealment in acting or deciding not to act; and
2. The Port
a. did not know and had no means of knowing the real !acts and
b. relied to its detriment on the false representation or concealment of
material facts.
A duty to disclose may arise when (I) a person voluntarily discloses partial information
but fails to disclose the whole truth; (2) a person makes a representation but fails to
disclose new information that .makes the earlier representation misleading or untrue; or
(3) a person makes a partial disclosure and conveys a false impression.
11
•
Answer ''yes" or "no."
•
Answer: NQ..
C. Quasi-estoppel
Failure to comply by the Port is excused if the doctrine of quasi-estoppel applies. Quasi-
estoppel bars a party from asserting, to another's disadvantage, a right inconsistent with a
position previously taken by that party. This doctrine applies when it would be
unconscionable to allow a party to maintain a position inconsistent with one in which it
had acquiesced, or from which it had accepted a benefit.
Answer "yes" or "no.''
Answer: No
D. Release
Failure to comply by the Port is excused if you find Zachry released its claims that the
Port failed to comply.
In answering this Subsection D of this Question, you must decide the meaning of
Exhibits DX1112.013 and PX884.014l (re Payment Estimate 21 ); DXlll3.013 and
PX884.0150 (re Payment Estimate 22); DXIl 14.012 and PX884.0159 (re Payment
Estimate 23); DXll 15.017 and PX884.0168 (rePayment Estimate 24); DXIII6.012 and
PX884.0177 (re Payment Estimate 25); DX1117.013 and PX884.0185 (re Payment
Estimate 26); DXI117.011 and PX884.0193 (rePayment Estimate 27); DXlll8.013 and
PX884.0203 (rc Payment Estimate 28); DX1120.020 and PX884.0213 (re Payment
Estimate 29); DXI121.013 and PX884.0223 (rePayment Estimate 30): DX1122.047 and
PX884.0233 (rePayment Estimate 31).
You must decide the meaning of the above-listed exhibits by determining the intent of the
parties at the time of the agreement. Consider all the facts and circumstances
surrounding the making of the agreement, the interpretation placed on the agreement by
the parties, and the conduct of the parties.
In determining the meaning of an agreement, you may also consider a trade custom or
usage, if any, if you find that such trade custom or usage existed. However, a trade
custom or usage, if any, cannot vary, control, impair, restrict or enlarge the express
language of the Contract. A trade custom or usage exists if it is a practice so generally or
universally well known and used in the industry that the parties to a contract are charged
with knowledge of its existence to such an extent as to raise the presumption that the
parties contracted with reference to it.
12
17397
•
Answer ''yes'' or "no." '
•
Answer: Alf)
13
17398
• •
If you answered "yes" to Question No. I, then answer the following question. Otherwise,
do not answer the following question.
Question No.7.
Was the Port's failure to comply found by you in Question No. 1 excused by Zachry's
fraudulent inducement, if any, of Change Order 4?
For purposes of this question, fraudulent inducement occurs when-
l. a party makes a material misrepresentation, or a party who has a duty to disclose
fails to disclose a material fact within the knowledge of that party,
2. the misrepresentation is made with knowledge of its falsity or made recklessly
without any knowledge of the truth and as a positive assertion, or the party knows
that the other party is ignorant of the undisclosed fact and does not have an equal
opportunity to discover the truth,
· 3. the misrepresentation is made with the intention that it should be acted on by the
other party, or the party intends to induce the other party to take some action by
failing to disclose the fact, and
4. the other party suffers injury as a result of its reliance on the misrepresentation or
as a result of acting without knowledge of the undisclosed fact.
For purposes of this question, "misrepresentation" means a false statement of fact
or a promise of future performance made with an intent, at the time the promise was
made, not to perform as promised.
A duty to disclose may arise when (1) a person voluntarily discloses partial
information but fails to disclose the whole truth; (2) a person makes a representation but
fails to disclose new information that makes the earlier representation misleading or
untrue; or (3) a person makes a partial disclosure and conveys a false impression.
Answer "yes" or ·r·"
Answer: A. Q
14
• •
If you answered "yes" to Question No. 7, then answer the following question. Otherwise,
do not answer the following question.
Question No. g
Is the Port barred from asserting its defense of fraudulent inducement?
The Port is barred from asserting its defense of fraudulent inducement if the doctrines of
waiver, quasi-estoppel, and/or ratification apply.
Answer "yes" or "no" for each of the following:
A. Waiver
Waiver is an intentional surrender of a known right or intentional conduct
inconsistent with claiming the right.
Answer "yes'' or "no."
Answer:
B. Quasi-Estoppel
Under the doctrine of quasi-estoppel, a party may not assert, to another's
disadvantage, a right inconsistent with a position previously taken by that party.
This doctrine applies when it would be unconscionable to allow a party to
maintain a position inconsistent with one in which it had acquiesced, or from
which it had accepted a benefit.
Answer "yes" or "no."
Answer:
C. Ratification
Ratification is the adoption or confirmation by a person, with full knowledge of
the fraud, and of all material facts, and with the intention, clearly manifested, of
abiding by the contract and waiving all right to assert the deception.
15
•
Answer "yes" or "no."
•
Answer:
16
• •
Question No. 9
Did the Port fail to comply with the Contract by withholding, from the Port's payment on
amounts invoiced by Zachry, the S600,000 for dredging?
Answer ''yes" or "no."
Answer: N12
17
• •
If you answered "yes" to Question No. 9, answer the following question. Otherwise, do
not answer the following question.
Question No. 10
What sum of money, if any, if paid now in cash, would fairly and reasonably compensate
Zachry for its damages, if any, that resulted from such failure to comply?
Consider the following element of damage, if any, and none other:
The balance due and owing by the Port, if any, under the Contract, resulting from the
failure to comply that you found in Question 9.
Do not add any amount for interest on damages.
Answer in dollars and cents.
Answer:
18
• •
If you answered Question No. 9 "yes," then answer the following Question. Otherwise, do not
answer the following Question.
Question No. 11
Was the Port's failure to comply excused?
The Port's failure to comply is excused if you find, by a preponderance of the evidence,
that Zachry released its claim with respect to that failure to comply.
In answering this question, you must decide the meaning of DX 1114.012 and
PX884.0159 (rePayment Estimate 23); DX1115.017 and PX884.0168 (rePayment
Estimate 24); DX1116.012 and PX884.0177 (rePayment Estimate 25); DX1117.013 and
PX884.0185 (rc Payment Estimate 26); DX1117.011 and PX884.0193 (re Payment
Estimate 27); DX1118.013 and PX884.0203 (rePayment Estimate 28); DX1120.020 and
PX884.0213 (re Payment Estimate 29); DX1121.013 and PX884.0223 (re Payment
Estimate 30); DX1122.047 and PX884.0233 (rc Payment Estimate 31 ).
You must decide the meaning ofthe above-listed exhibits by dt:termining the intent of the
parties at the time of the agreement. Consider all the facts and circumstances
surrounding the making of the agreement, the interpretation placed on the agreement by
the parties, and the conduct of the parties.
In determining the meaning of an agreement, you may also consider a trade custom or
usage, if any, if you find that such trade custom or usage existed. However, a trade
custom or usage, if any, cannot vary, control, impair, restrict or enlarge the express
language of the Contract. A trade custom or usage exists if it is a practice so generally or
universally well known and used in the industry that the parties to a contract are charged
with knowledge of its existence to such an extent as to raise the presumption that the
parties contracted with reference to it.
Answer "yes'' or "no."
Answer:
19
• Question No. 12
•
. The_Cow1 has.. determined. that. the..Eort failed. to comply.. with the Contract by-failing. to-
pay Zachry $2.36 million that the Port withheld as liquidated damages.
Was the Port's failure to comply excused, in whole or in part for any of the following
reasons?
A. Offset and/or Withholding
(i) You may find excuse if you find, by a preponderance of the evidence, that the
Port is entitled to withhold for fenders under § 6.05 of the General Conditions of
the Contract and/or that the Port is entitled to offset for fenders under § 6.17 of
the General Conditions of the Contract.
The Port is entitled to withhold and/or offset for fenders under these provisions if
you find, by a preponderance of the evidence, that, with respect to the fenders,
Zachry failed to comply with the Contract resulting in a loss to the Port.
Answer "ye~ ; · "
Answer: £;
(ii) If you answered ''yes" to the prior question A(i), then answer the following
question. Otherwise, do not answer the following question.
To what extent, in dollars and cents, is the Port's failure to comply excused by
offset and/or withholding?
Answer in dollars and cents, if any.
Answer: Cf AJ7 c:DO. {)O
1
B. Release
1. You may also find excuse if you find, by a preponderance of the evidence that
Zachry released its claim for the failure to comply.
In answering this question, you must decide the meaning of DX 1114.012 and
PX884.0l59 (re Payment Estimate 23); DXI 115.017 and PX884.0168 (re
Payment Estimate 24); DXlll6.012 and PX884.0177 (rePayment Estimate 25);
DX1117.013 and PX884.0185 (re Payment Estimate 26); DX1117.011 and
PX884.0193 (re Payment Estimate 27); DX1118.013 and PX884.0203 (re
Payment Estimate 28); DX1120.020 and PX884.0213 (re Payment Estimate 29);
DX1121.013 and PX884.0223 (rePayment Estimate 30); DX1122.047 and
PX884.0233 (rc Payment Estimate 31).
20
• •
You must decide the meaning of the above-listed exhibits by determining the
intent of the parties at the time. of. the agreement.- Consider all. the· facts and-
circumstances surrounding the making of the agreement, the interpretation placed
on the agreement by the parties, and the conduct of the parties.
In determining the meaning of an agre<.-ment, you may also consider a trade
custom or usage, if any, if you find that such trade custom or usage existed.
However, a trade custom or usage, if any, cannot vary, control, impair, restrict or
enlarge the express lan!:,'Uagc of the Contract. A trade custom or usage exists if it
is a practice so generally or universally wc11 known and used in the industry that
the parties to a contract arc charged with knowledge of its existence to such an
extent as to raise the presumption that the parties contracted with reference to it.
Answer "yes" or "no."
Answer: --1-hJ"-'O.;l.----
(ii) If you answered "yes" to the prior question B(i), then answer the following
question. Otherwise, do not answer the following question.
To what extent, in dollars and cents, is the Port's failure to comply excused by
release?
Answer in dollars and cents, if any.
D
Answer: - - - - - -
21
• •
Question No. 13
What is a reasonable fee for the necessary services of the Port's attorneys, stated in
dollars and cents?
Consider the following factors in determining the reasonableness of an attorney's fees
award:
a. the time and labor involved, the novelty and difficulty of the questions involved, and the
skill required to perform the legal services properly;
b. the likelihood that the acceptance of the particular employment will preclude other
employment by the lawyer;
c. the fee customarily charged in the locality for similar legal services;
d. the amount involved and the results obtained;
c. the time limitations imposed by the client or the circumstances;
f. the nature and length of the professional n.:lutionship with the client;
g. the experience, reputation, and ability of the lawyer or luwycrs performing the services;
and
h. whether the fcc is fixed or contingent on results obtained or unccrtuinty of collection
before the legal services have been rendered.
Answer with an amount for each of the following:
(A) Attorney's Fees as to Zachry's Claim Relating to Change Order 4 and/or §5.10 of
the Contract.
(I) For preparation and trial with respect to Zachry's claim for the Port's failure, if any,
to comply with Change Order 4 and/or §5.10 ofthc Contract.
Answer: i (UEJDO
f
1
j
1 (){)() • 01>
(2) For an appeal to the Court of Appeals with respect to Zachry's claim for the Port's
failure, if any, to comply with Change Order 4 and/or §5.1 0 of the Contract.
Answer: _!1_ OJ (200 · 00
22
• •
(3) For an appeal to the Supreme Court of Texas with respect to Zachry's claim for the
Port's failure, if any, to comply with Change Order 4 and/or §5.1 0 of the Contract.
Answer: I J:)., ~Q.(JD
7
(B) Attorney's Fees as to Zachry's Claim for Withholding the $2.36 million as
liquidated damages and the $600,000 for dredging.
(1) For preparation and trial with respect to Zachry's claims for the Port's failure, if any, to
comply with the Contract by withholding, from the Port's payments on amounts invoiced
by Zachry, the $2.36 million withheld as liquidated damages and the $600,000 withheld
for dredging.
Answer: ~ fJ01:JSO . 00
(2) For an appeal to the Court of Appeals with respect to Zachry's claims for the Port's
failure, if any, to comply with the Contract by withholding, from the Port's payments on
amounts invoiced by Zachry, the $2.36 million withheld as liquidated damages and the
$600,000 withheld for dredging.
Answer: t 3 7.5D, oO
(3) For an appeal to the Supreme Court of Texas with respect to Zachry's claims for the
Port's failure, if any, to comply with the Contract by withholding, from the Port's
payments on amounts invoiced by Zachry, the $2.36 million withheld as liquidated
damages and the $600,000 withheld for dredging.
Answer: i I, ~ f::D' ()0
23
• Certificate
•
W Cr. the. jury~ have answered. the abev6 and. foregoing· questions-as- herein- ·indicated, and-
herewith return same into court as our verdict.
(To be signed by those rendering the verdict if the jury is not unanimous.)
Jurors' Signatures Jurors' Printed Names
~ \:>o~ro'd%.,
Chad TSeicrttS
trt;s.J?) riA; (!. r;(o,rx:JQ.-/I
C4 ris L 'Je5/- U(
24
TAB 5
Order on Zachry's 11 Part Motion for Pretrial Determination of
Issues of Law (Rule 166(g) Motion) dated October 5, 2009
(CR46:13296-309)
P-14
ENTZ
CAUSE NO. 2006-72970
ZACHRY CONSTRUCTION § IN THE DISTRICT COURT OF
CORPORATION §
§ HARRIS COt:NTY, TEXAS
Y. §
§
.PORT OF HOVSTON AliTHORJTY §
OF HARRIS COUNTY, TEXAS § 151sr .JCDICIAL DISTRICT
ORDER 0~ ZACHRY'S 11 PART MOTION FOR
PRETRIAL DETERMINATION OF ISSUES OF LAW
Came on for considl.!ration Zachry Construction Corporation's (Zachry) 11 Part 1\'lo!ion
Cur Prdrii11 Dctcrmimtion of Issues of Lm. The Court. haYing considered the :-.1otion.
Defendant Port or Houston Authority's (Pili\ l Respllnse. Zachry· s Reply. and PH/\ 's Sur-Reply.
as v;cll as various follow-up kttcr briefs. is of the opinion that Zachry's Motion should be
GRANTED IN PART and DEJ'\lJ::D IN PART.
]SSU\.! ] : The C0urt hclieves it has an understanding ofthis issue having heard the
arguments lll' cnunsel at thl:.' Friday. September 11. 2009 hearing. Separate and apart !"rom the
allegation that thl.:' PliA breached the main contract's section 5.10 (means and methods)./.achry
c\lntcnds that Change Order 4 ( hL'rcin:llter ··CO-f') gave it a contractuul right to. in general. usc
the trccze cutoff wall construction method. Zachry then contends that PH/\ breached C04 by
lall'r rejecting /achry' s use of the freeze cuto±hvall construction method. The Court li nds that
within the documents that comprise the C04 contract. there is an ambiguity as to \\hat is meant
by the term "constructi0n methods" in paragraph 1. and .. similar methods'' in puragraph 9 ofthe
··scope. Time and Price Modifieutions tn Specifications und Proposar· inwrporuted into C04.
I herd~lre. the Court DENIES Pl:1intiff Zadu-y"s t'vlotinn as t\l !ssw: 1 without prejuJi~:c. :1nJ as
of this writing. intends to submit the issue to the jury.
FILED Loren Jackson
District Clerk
ocr- 5 zoog
Time~' tounty
J.'~J13hL._,
£J; Har e,..a.s
By -'>.o,-4L....::_:: .-c_==:-------
Oepuly
Issue 2: By this issue, Plaintiff asks the Court for a pretrial determination that there
was no fruuduknt inducement. The Court hereby GRANTS rhis n:quest in purl and DENIES in
part. The Courtiinds that is able to dctL·rmine as a matter of lmv that PH A's agent CH2M Ilill
had the September 9. 2009 frozen cutoff wall design in hand for at least two \Vecks before Pl li\
signL·d CO..J.. The Court hereby GRAJ'\TS a pretrial dekrmination ONLY that then: was no
fraudulent inducement as to the September 9. 2009 rrozen cutoff wall design by Plaintiff
Zachry. 1 The Court hereby DENIES the remainder of the request for prdrial determination as to
lraudulcnt inducement by Plaintiff Zachry (including. but not limited to. alleged
misrepresentations about Zachry's ability to certain meet time deadlines).
JSSUL' J: By this issue. Zachry asks lor a pretrial determination as a matter of law
that "'[ nlo pwvision in the contract gives the port a right to reject or to require revision and
resuhmittal or the contractor" s means und methods." This is an exceedingly broad request by
Zachry that could render mcaningless severn! provisions of the contract that may he read to limit
Zachry's ~..:hoices of means and methods. at least in part. PH/\ ·s response on page 40 asks the
Court to find tlwt "'the Port had the express right under the Contract to issue the ·rcYise and
resubmit' response.'" PHA 's point seems to be that it was free to ask Zachry to revise and
rcsLtbmit. but it did not order Zachry to do so nnd had no po\ver to do so. and thcrelorc it could
not han: breached the contract by simply asking. nicely, that Zachry do SLl. The Court stated at
the hearing on friday. September 11. 2009. that it did not find this Iinc tlr argument try PHA
'-
0
pL'rsuasive . .tvloreover. this line or argument seems to bc consistent with. and l\OT contrary to.
1
The Court Jo.:s not b<:lieve its findings in lssut:s I and::: arc inconsistent. Issue 1 asked abLlUl a pretrial
determin::nion of whL·thcr. as a matter of law. CO~ gave Plaintirr Zachry the unambiguous right to employ the frozen
cuto!T Wf. ( 'n .. 2t)R S.\V. 273. 27CJ (Tex. Comm·n A.pp. 1CJ27). In its briding anJ at the
September II, 2009 h~::.1ring. PI I/\ argued that the Du\'il' ( 'o. case is neither on point IK'r
controlling because it applies to a situation wh~:r~: the contractor could bL· required to perform
c
changes in the \\'ork, and the owner could unilaterally determine any ad.ju~tment in the contract
price to account for such changes. Jn contm:-;1. in this case, PHA argues, the provision is merely
:.1notice pro\·ision. not a unilateral change in the scope or quantity oJ'work provision.
;z:
The Court did not articulut~ this w~ll at the S~ptcmher 11. 2009 h~aring, but upon further
ret1e~tion and re-n:ading of the Daris Cu. case. it now understands the point that PIIA was
making: PH;\\; point is thut the Davis Co. case's "radicul change'' issue did not have to do vvith
whether a contractual notice period applied to a radical change in th~ scope of the \Vork, but
ruther. vvhethcr the radical change could h~ unilaterally imposed in the scope ol"th~ work with
littk or no change in the amount of' the C\H11p~nsation. That is. the Duris C'o. case. according to
PHA. only stands lor the proposition that an owner cannot impose radically mon: work upon the
contractor for the same price. but rath~r. such unilateral prerogative clauses only apply to minor
chang1..'S to the scope or amount of work. That. argues PI l1\. distinguishes Dul'is C'o. !"rom thi::;
case.
The Court does not see it that way. The Court still Jinds Dm·is Co. to be applicable to
this case because the clause at issue here. section 5.42. is a roundabout way of getting to the
same place. PllA argues that s~ction 5.42 is different than th~ facts of Doris Co. as section 5.42
only allows ti.!r an ~:quitablc adjustment irthcrc is a change order, which. by ddl.nitit!n, must he
agreed to by /.achry. That is to say. in the second paragraph of section 5.42. the cbusc states
that if Zachry gin:s the notice reg11rding the perceived change to the contract. the Chief" Engineer
or PHA \vill conduct un investigation and determine whether the change will necessitate a
modilicution t1.1 the contract. und if so, whether to go forward. ft: and only if, the Chicl'Engine~:.T
determines that it is a change that will require u modilication. and decides to go forward, then the
Chief' Engineer \Viii (perhaps) issue a construction ch~mgc Jirecti\'e. or recommend to the
c
Commission w1 equit11hlc adjustment to the Contract Price as applicable. I lowcvcr, iithe Chid
Engin``r detem1ines thllt thL' contractor is wrong and the change pcrc~iwd by the contractor is
not actually a chang~ requiring modi ticution. the Chief [ngi neer then will contact the contr::1ctor
and ''the determination by the Chief Engineer in such respect shall be final and conclusive." ln
z
other words. in th~ end. it is a unilateral d~krminution by PHA wheth~::r a change. large or small.
is a ch~mge requiring modi lication to the wntract. PHi\ 's argument that a change to th~ contract
price n::quirL'S a changL' L)rdcr that is, hy de!initinn. agreed to by /:1chry bas little meaning if it is
the PHA 's Chief Engineer that retains sole decision-making authority ov~:r \vhether a change
p~rceivcd by Zachry requin:s a moditication to the contract price in the tirst pbce. That is why
the Coun believes that the Dm·is Co. case is. i r not controlling. at least persuasive. analogous
authority here. i\ section like section 5.42 can only apply to non-radical changes. otherwise. just
as in the Da1·is C'o. case, it \VOtild allow the owner to unilaterally change th~ scope of the work in
signiticm1t ways without atlording any rights to the contractor.-'
further. the Court continues to find that ~:vcn ir section 5.42 applies to this cas~:. it is void
under fe:-:as Civil Practice and Remedies Code section 16.071. PIIA argues strenuously that th~:
Court errone-ously applied section 16.071 to this section and that the Texas Suprcm~ Court"s
decision in .lmcricun ..Jirlinu.\ l:.'mpluyeus Federal Credil Union\' ..\!arlin. :29 S.W.Jd 86.97-98
(TL·x. 2000) dictates thut section 5.4:2 is not void. The Court had previously read and carefully·
~onsidcrc-d the Americun Airlines case in reaching its earlier decision thut sec-tion 16.071 applie-d
to make- section 5.4:2 void. Th~ Court has now re-read the decision and still believes that that
case is not cLmtrolling here.
First, in Aml.:'rit:an Airlines, the Courl wus interpreting: the Uniform Commen:inl Code.
anJ in petrticular. section 4.406(J) \\hic-h requires a custnmc-r who rccei\es a statement and
believes u payment \vas not authorized to nutil'y the betnk "promptly ... Thus. there \\US a separut~
statutory policy requiring noti~c being giv~:n L'!Tec-t and a statutory· prohibition on recovery.
Indeed. the Supreme Court held that becaust: notice was untimely, the claimant's recovery for
This raises anoth\.'r point. WhetlH:r or not Dm·is Cu. applies or contruls section 5.-+2. Z::.~chr:-- has arg.w.:d that it is
m>L interpreting PHi\ 's alleg\.'d rejection of the l"rlv:en cutoff wall methodology as u "change." Rath\.'r, it is
interpreting. the alleged rejection us a breach of the contract. l3ecause the Court tinds section 5.42 inapplicable and
;z:
void. the Court makes no ruling. on this issut:.
(,
unauthorized payments was harred by UCC section 4.-1-06. American .-lirlines, 29 S.W.3d at 9X.
The Court slated that st>ction 16.071 on its t;Ke did not nppJy because the notice requirt>ment \.vas
not a requirement to give notice for a claim for damages. Likewise. in Community Bank & Trust.
S.S.B. \'. Fleck. 107 S.W.3d 541. 542 (Tex. 2002) the Supreme Court reaffirmed its holding in
Ami.!rimn Air/if1(:s. It noted tbut under Texas Business and CommcrCL' Code section 4. 103( a) a
bunk and its customers may agree to u specific. shorter. re::~sonablc period within \Yhich a
customer must giw not icc or unauthorized payments. Jd. The Court reitcrutcd that section
16.07 I did not apply to bank deposit agreements because the notice was nol notice l)l. a claim lor
damages. but rather. notic.: ol' the unmllhoriZL'U transactions. !d.
In contrast. in this case. then: is clearly a clause in section 5.42 that requires notice or an
interrrctation of the contract that the contractor bclicved to be a change in the contract. That
section states that '·[a]ny notice not timely made by the Contractor shull he deemed a wai\·cr by
the Contractor of its right to assert a claim in respect or such interpretation:· It is not analogous
to the Americun Airlines or Fleck cases cited abuve. As a practical matter. \vhat this clnuse says
is that Pili\ can totally rewrite the requirements of the contract anJ i!" Zachry docs not like it,
7.achry has lo gi-vc notice of its disappwval within 5 days. ~mJ the failure to do that under the
langunge quot.:d above bars their clnim. Thal is not practically different than saying that PI!/\
can hreach the contract and Zachry would have to gi vc notice of lhL· breach vvi thin fiv-e days.
That is precisely bow PI !A is treating sectinn 5.42: as u Jcl'ense to 7.achry·s claim th:1t the
rejection of the frozen cutoll'waJI design was a bre<1ch. It is. to the Court, a distinction without <.1
di rrerencc.
:v1orec)\'cr. the clause docs not rc258 S.W. 468, 4 70 (Te:-;. Co nun· n. Apr. 1924 l the court st::ncd. in
construing the predecessor statute to section 16.07 I:
The company contends that the bond in this cus~ requires. as o. condition precedent to
suit. ml.!rely a notice ·ol· any loss in respect or which liability ol· the company is claim~d.'
und that this is k~s than notice of a 'claim.' or Ci:lusc of action, fur damages. It may he; ·
but it' the force of the statute is to be avoided by requiring notice. not of the cause or
action itself. but of necessary and component parts or the cause of action. its purpose can
be too rcudily defeated. for instance. instead of using in a pro\'ision the exact words or
the law. ·notice * * * of* * * claim J'or damages.' a surety company. assuming
c~mtractual liabilities and dutiL'S. might n.:ach exactly the same result by stipulating either
for· notice of defalcation· on the one hand. or lor ·notice ol' damage' on thL' other.
Neither element would constitute the entire cause or action. but requiring notice of either
would he as effective a limitatiun as requiring ll(ltice of the whole causl' or action. The
spirit or the statute is a liberal public policy. ami excludes r a pretrial dctermin listed in footnotl' 29 on page 27 of Zachry·s Motion appear
tube puffer:-· and potenrially. therefore. not actionable. N-=vertheless. without mon: context. it is difficult lL'
determine \\·hether they rise to the level of being at:tionabk. and the Court will. fcnse(s) for PH/\ as a
result or PH/\· s dection. Zachry argues that PI IA is not entitled to he excused from
performance. and that by deciding to go l"l1mard with the contract after the alleged breach(cs) by
Zachry. it may not now assert its prior material hreach ddi;nse. Thus. argues Zachry. "in order
to ;1\·ail itself of this prior material breach dcfcnsL' und excuse its O\\ n nonperformance. the Port
nei..'Jcd to haw terminated the Contract J.i'ti.:r any such alleged breach hy Zachry."
\\iithnut penning a treatise. the Court \\ill attempt to reconcik thL· two concL·pts \'ery
briclly based upon its reading of the authorities citL'd by the parties. /\t first. the two concepts
:seem somewhat contr:..~dictury. hut this is hO\v the C oun understands them: In J.ung !I-!and
Sarings Honk. FSB \'.U.S. 503 F.Jd 1234. 1253-54 (Fed. Cir. 2007), the Court stated. ·'lw]e
have held that through its continued pcrrormancc Df the contracl. ra non-breaching party I rmay
w::~ive] any c!aim t"l1r prior material breach." (citing Barron Bannhures. inc. \'. l/niled .\'!ales.
366 F.3d 1360. 1383 (fl'd. Cir 2004)). Hut. in Gu/)ta 1'. r:a.1'1L'rn idaho Tumor institute. inc.. 140
S.\\'.3J 747.757 n. 7 (Tex. !\pp--llou~tnn [14 111 Dist.j2004. pet. denied). the court noted that
"! tl he election atrects only whether the non-bre::~ching party itsel r is then required to perrnrm
t'ully." (citing Chillunlns. Co v. f>ale & Pule Fn~crs .. inc.. 746 S.W.2d 338, 340 (Tex. App.-Austin
1988. no writ). This one does exactly the opposite by allo\.ving the liquidated damages to be a
minimum, and allowing PliJ\ to seek its actual damages instead if they exceed the liquidated
damages amount. Section. 5.06. There is no practical distinction between the contract in this
ca..'>e, and the contract in Nexstar even though in Nexstar the contract used the term "additional
compensatory and consequential damages." 1lwugh unstated in this case, the language in
section 5.06 permits the exact same approach by PJ-IA. The Court grants Zachry's request in
Issue II as a matter of law, and hereby ORDERS that the liquidated damages clause in section
5.06 is unenforceable as a matter of law.
All other relief specifically requested in Zachry's Motion for Pretrial Determination of
Issues of Law and not specifically granted herein is hereby DENTED.
c
Signed thi.s _-_5__ day of October, 2009.
Judge Mike Engelhart
14
TAB 6
Order Granting in Part and Denying in Part Plaintiff's Motion
to Strike the Port's Offset and Withholding Defenses
dated October 16, 2009
(CR51:14948-52)
P-5
STPLZ
CALISE NO. 2006-72970
ZACHRY CONSTRUCTIO!'\ § I~ THE DISTRICT COURT OF
COHPORATJON §
§ HARRlS COtJNTY, TEXAS
v. §
§
PORT OF HOUSTO~ AUTHORITY § .
FILED
Loren Jackson
OF HARRIS COl.JNTY, TEXAS § lSl sT JllOICIAL DISTRICT District Cieri<.
OCT 16 2009
ORDER GRANTlNG fN PART AND OENYlNC IN PART . 9 . (~.
PLAINTIFF'S MOTION TO STRIKE PLAII';TJFF'S MOTIO!Ql · -k``~=----­
TO STRJKE THE PORT'S OFFSET AND WITHHOLDI~G DEFIS '
Came on for consideration Plaintiff Zachry Construction Corporation ·s (Zachry) \11otion
to Strike the Port's Ofl"set and Withholding Defenses. The Court, having considered Zachry's
Motion. PI I/\· s Response. PHA ·s suppleme-ntal hricf and Zachry· s response to that supplemental
brkr. as \veil as the arguments of counsel. is of the opinion that Zachry's Motion should be
GRANTED 1!': PART and DENIED Jl'>! PART.
The Court will not go into thl? timeline of \.!Vents. as those arc spelled out in minuh: dctai·l
in the p:mies· briefs on this issue. The (Llllrt will only generally note that. in sum. PHA only
li<;;ted A~Y amounts (other than the S600.000.00 dredging issw:) of its i.ICtual damages that it
pruposetl to serve as an onset in lmc July 2009. ll owcver. the legal theory under which those
quanti 1ies were I is ted was ON I. Y the proportionality l)f its Iiquidated damages ollset daim to
actual damages. Additionally. PHA had timely disclosed $600.000.00 in actual damages much
earlier as part of an Ol'fset claim pertaining to ccnain dreJg.ing costs.
To this day. PHA has not enunciatl.!d in any discovery fl'sponse any legal thevry that it
was Sl'l?king to dcCcnsivcly offset or recoup /\NY actual damages othc.:r than the S600,000.00
amount. /.achry nlkgedly on ly karned of PI I/\ 's apparent attempt to inject first s;g million and
then $10.5 million in actual damages (as opposed to liquidated damages) as a Jefensiw daim for
otrset inl\.)rmatly. und nul through any supplcmcntati<.m nf di:-;c\1"cry. such as a supplement to a
n:quest l~)r disclosure und~r Ruk 194.::?.(c). The Court stated at a hearing that th~.: surprisl.! to
Za(;hry was not that PHA was seeking an onset. hut that it was seeking to oll'sct a long list of
it~.:mizcd actual damagc:s ns opposed to liquidated damages . It is important tn note. again. that in
quantit~· ing its "harms·· in July 2009. PHA \\'U:i not :::wting. that it would t:d;ing, to
rcc(wcr those quantities for those specific cat~.:gorics of hgories and 4ll only r~asonahly
promptly after they discovered the necessity lor such a respon:>e. That is. PI I/\ argues that they
did not know of the need to enunciate that they would be seeking actual damages as an offset.
nor the amount or those actual damuges because of this Court's denial of Zachry's Motion for
Summary .Judgment in March 2009. Further. in light of that denial. PitA conll.:nds that it did not
know that its liquidatl!d damages claim \\Ould be eliminated until Ortohcr 5. '2009 when this
Court struck their liquidatctl damages clause as in\'alid. The Court has largely dealt with these
arguments above. but will reiterate: The riling of the Motion for Summary Judgment, at the
latest. put PH/\ on notice that its liquidnted tlamng~:s clause in the contruct was not ironclad. ThL·
tiling of the (essentially) r~newcd motion w eliminate the liquidated uamag.`` claim tlll or about
July 31. '2009 should have <.:aused PHA to umemlthcir discovery responses to spt.:cititally
cnu.n<.:ime an :Jctual damages ofrset claim. ar least as an alternati\'e. Pll/\'s cont~:nrion that they
basically disclosed this theory of offset 1actual damag~s) in .July :2009 is ju.st not faetu:JIIy or
kgally correct P1 IJ\ disclosed a qunnlily of actual damages in late July ~009 !hat they were
!'JOT going tP submit to the jury as an offset. They never haw disclos~d :.1 deft:nsivc claim fur
oft``~ oftlwsl.' actual damages w date.
The hottnm line is that w inj~ct .S 10.5 million in actual damages tor ot1sc-ttlr recoupm~nl
well after all discovery deadline!> hav~: pass..:d \\.llUid dri.lrnatically change rh~ landscape l)fwhm
promises to he u lengthy and Clllllplicated tria!. It is not fair co ask either side t0 ~ngage in \\'hat
the Court pl.!rcei\'I:'S would bl! ext~nsivc discoYery (including document production. depositions.
: Agilin. n ~pt:dlic cluim fur nctual damages ilS on offset or recoupment hils. to datt'. only infornmlly hccn made. and
nQt spt:cificolly pkad or pres~ntcd in a suppknu:ntcd di!>clnsurc rl·~ponsc.
and potL'ntially adoitionul ~xpert witn~sses) on the evidentiary bases tor the amounts sought to bt:
orfset by PH/\. The results or that dist:overy ·will not be known until long atkr voir dire and
opening stakments. and the trial Court will ntH allL'W that much lluiJity anti uncertainty intL' this
triul.
It is therefore OR.DfRED that. with the cx<.:eption of the $600.000.00 umount for the
dredging matter. the S1 million or so for the fender n:furbbhing. and the $25.000.00 or so lor the
dearing and grubbing. PHA"s otl->et '"harms" or categories. a!i \veil us tht..: amounts or those
alkgcd offsets are hcrehy FXCJ.UDED from th~ trial ol.this tause. And. as with any other
claims. the Court does not hereby Jccidc that !iaid daims wilL in fact. end up being submitted to
th~ jury- -just that PHA may put on evidence of them.
It is further ORDER ED that PI It\ will immediately supplement its pleadings and
discovery responses to the extent tbat it has not Jisclosed an actual-dumagcs defensive theory of
olrsct nr recoupment.
It is further ORDERED that i'.achry will promptly propL'!:ie to tht> Court rcasonabk
discoYI.!ry that it wishes to <.:onduct nn these tht'orics and umounts ofoiTsd or recoupment.
_ 6_ da~· of October, 2009.
Signed this __1
Jm r:_ {/l/i/v'
Judge :-.'like Engelhart
TAB 7
Order on PHA's Request that the Court Reconsider Its November
12, 2009 Open-the-Door Ruling Regarding the Port's Actual Harms
(1SCR6:1112-17)
• CAUSE NO. 2006-72970
• FLk!ARE`` DfBirlcl Clertt
DEC 11 Z009
~
ZACHRY CONSTRUCTION
CORPORATION
§
§
IN THE~
§ HARRIS~O~AS
v. §
§
PORT OF HOUSTON AUTHORITY §
OF HARRIS COUNTY, TEXAS § JSJST JUDICIAL DISTRICT
ORDER ON PHA'S REQUEST THAT THE COURT RECONSIDER ITS NOVEMBER
12, 2009 OPEN-THE-DOOR RULING REGARDING THE PORT'S ACTUAL HARMS
Came on for consideration Defendant PHA 's Request that the Court Reconsider its
November 12, 2009 Open-the-Door Ruling Regarding the Port's Actual Ham1s. The Court.
having considered PHA 's Request. Plaintiffs December 10, 2009 Response, as well as PHA's
Supplement to its Request and the arguments of counsel, is of the opinion that PHA 's Request
should be DEN JED .
The issue in this Request is the application ofTe)tas Rule of Evidence 107. Underlying
the request, generally speaking, is the following aspect of this trial. Under prior rulings by this
Court, Zachry hus to prove one or more common law exceptions to the no damages for delay .
clause contained in the Wharf and Dredge contract made the basis of this suit in order to defeat
that clause. One of those common law exceptions is referred to loosely in this record as the "bad
faith exception,'' and Zachry contends that a certain promise that PHA 's Mark Vincent allegedly
made in an internal PHA e-mail, and which PitA then allegedly breached, is evidence ofbad
\()
......
0 faith on PllA 's part. The promise, according to Zachry. was essentially that, as of May 2005.
PI JA would not charge liquidated damages ifPHA suffered no actual losses or harms by the time
the Chinese crane ship--scheduled tor first February 2006 and later May 2006--arrivcd.
In contrast, PH A e<:mtends that if any such promise was made. it related not to the date
tor the Chinese crane ship's arrival. but to a broader, more onerous Milestone A deadline, and
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potentially, the fi nal completion deadline. That is. PHA 's position is that if any "promise" was
made regarding liquidated damages, it was thot no LOs would he charged if PI lA sutlered no
actual damages or harms 1hrouglz the Milestone A deadline or, possibly. the eventual fina l
completion date of January 2009. It was not, PHA argues (if any promise was made), limited to
the date of arrival of the Chinese crane ship arrival.
Thus, PHA 's position is that the discussion by Zachry of the alleged "promise" not to
charge liquidated damages at all, coupled w ith ( I) the Andy Anderson April and May 2005
letters which mention the final completion deadl ine, as well as the "milestone'' deadl ine, and (2)
Mr. Abiasi's recent testimony about ships routinely docking at the wharf during 2006 and 2007
(and possibly later), have opened the door to the introduction of evi dence by PHA of all of the
alleged "harms" (actual expenses and losses) allegedly suffered by PH A. T his discussion, PHA
contends, is necessary to rebut Zachry's bad fa ith aq,rumcnt by showing that, in fact, there 1\'ere
actual ham1s suffered by PHA. Therefore~ the arbrumcnt continues, even if thejury believes that
the promise related to the crane ship arrival or the Milestone A deadline (which PHA argues is a
much later date), PHA did in fact suffer actual harms. Thus, PH A contends, they did not hreach
any alleged promise because they indeed lzad actual harms. Indeed, they argue, if there was any
promise, they lived up to it.
Texas Rule of Evidence I 07 - Rule of Optional Completeness
Under the case law pertaining to TRE 107. the Court believes that the door was opened as
to the discussion of actual harms up to the date of the May IS, 1006 letter in which PH A
communicated that it would charge liquidated damages. It is logical to conclude that it was on
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time, or reasonably anticipated such actual harms to necessarily flow from the alleged delay.
Otherwise, it would not have decided to charge liquidated damages at that time in light of either
alleged version of the alleged promise (if there was uny promise at all).
Given this, the Court believes that the discussion of (I) the Andy Anderson letters of the
Spring of2005. and (2) Mr. Vincent's e-mail as the basis of the alleged promise not to charge
liquidated damages, and (3) Mr. Abiasi's discussion of the ships arriving rc&'Ularly after the
Chinese crane ship· .s arrival, is the same subject matter as PI!A· s alleged hann.s that were both
actually incurred, and reasonably expected to be incurred as of the date it sent the May 15. 2006
letter charging liquidated damages. See, Williams \'. State, No. 12-01-0020 1-CR, 2003 WL
356010, •s (Tex. App.-Tyler February 19. 2003, pet. ref d) (not designated for publication).
The Court also bcliev<...'S that the discussion of the promise and the other ships· arrival uftcr the
Chinese crane ship's arrival could have leH the jury with the misimpression that PHA suffered
no ac:wal harms that underlie their decision to charge liquidated damages on or about May 15.
2006. !d. Thus, the test under TRE I 07 would seem to he .satisfied. 1
1t is important to note that in response to the Court's earlier "open-the-door" oral ruling,
in which the Court stated that Zachry had opened the dollr allowing PHA to discuss evidence of
"any harms that occurred up to the date of the crane ship arrival," PHA stated that it had no
dollar amounts of any harms it had actuall y sutlcrcd as of the date that the Chinese crane ship
had arrived. Very recently, however, PHA hegan to ar&'UC that while it had not suffered out of
1
fun hcr. thflugh PHA 's counsel has pointed out thai this rea:>oning docs not seem 10 underpin C3Sl' law pertaining
to TRE 107 (but rather, it applies to case law regarding trial by cons~nt). it is worth noting that the eviden~e of the:
:;hips r~gularly arriving at th~ wharf during the ongoing con!'truction that Zachry adduced through Mr. Abiasi is
rdcvant to rebut PI! A's allegation that Zachry took far too long to complete its work. Zachry says th!! cvidem:~ of
ships arriving during construction, and Zachry's accommodation of those arriving ships. explains some llr ollllf the
delays. Thus, 10 be fair, the cvidcnvc was aT!,'Uably not adduced Ill show that Pl lA sufTcrcd no hanns because ships
could arri\'C at the wharf. Rather, it was adduced, in Zachry'!\ view, to c.1tplain the delays of which it was accused hy
PllA. So therefore, argues Zachry. it did not really OJXn the door because the cvidc:ncc: has rt:le\o·anc<: 10 somtthing
other than PHA 's alleged ha rms. PHA nonetheless argues that it do'ion.
=01114
• •
pocket losses or harms as of the date of the Chinese crane ship's arrival, it knew at that time that
it would necessarily suffer actual harms that would actually be incurred after that date. Why
PHA did not ask tor clarification of the Court's oral ruling to determine whether anticipated
harms ofwhicb it was aware as ofthc ~ate of the Chinese crane ship arrival date were included
in that ruling is unclear. Nevertheless, it is possible there is evidence of reasonably anticipated
actual harms of which PHA was aware as of the May 15, 2006 letter charging liquidated
damages. The Court has not heard this evidence as of the date ofthis Order.
To be clear, however, the Court believes that the door has only been opened to a dc1,rree.
It has onJy been opened to the extent that, if the Court were to allow the evidence to come in, it
would only do so to the point where PHA could discuss discrete categories of actual harms.
However, the Court would not al low PHA to discuss the specitic dollar amounts or quantities of
those alleged harms. Eliciting evidence of the types or categories or actual harms, the Court
believes. would allow PHA to correct any misimprcssion held by the jury that PHA suffered no
actual harms which would underlie or support its May 15, 2006 decision to charge liquidated
dum ages. There is no need to go the additional step of discussing the actual amounts of those
alleged harms.
Texas Rule of Evidence 403
Now, despite having opened the door to the discussion of the actual harms either actually
incurred as of the date of the May 15, 2006 liquidated damages letter, or those reasonably
anticipated as of that date which necessarily would have flowed from the alleged delays up to
that date, the Court believes the evidence should nevertheless be excluded under Texas Rule of
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Evidence 403. Zachry has also expressly objected to this evidence on Rule 403 grounds.
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to discuss 8 to 10 million dollars worth of alleged actual harms. Without modifying that ruling,
the main rcas~m for that decision was that the Court did not want to-at the last minute--
fundamentally alter the nature of the trial by adding many days or weeks of testimony about
whether those alleged harms were actually suffered, and in what amounts. Moreover, the Court
did not want to disrupt the trial by having the parties have to undertake substantial amounts of
discovery in the middle of what already promised to be a lengthy trial. At bottom. it would have
been unfair to inject all of that evidence of about $1 0 million worth of an offset claim by PHA
into the trial at the last moment. The Court does not believe that there is any basis to change that
ruling.
Second, undc=r Rule 403 , the Court believes that any probative value of injecting al l of the
evidence of alleged hanns into the trial would be substantially outweighed by the danger of (I)
unfair prejudice to Zachry, and (2) considerations of undue delay. In particular, not only would
it take a lot of time for the information to be elicited in the tirst place from a PHA witness. it
would necessarily require a lengthy cross-examination. That cross-examination could very
quickly devolve into a lcnhrthy battle over not only the nature of the alleged harms, but their
cause and quantitication. As stated above, the reason this information was kept out in the first
place was because of dcticicncics in PI iA 's discovery responses. For Zachry to then have to
cross-examine on this issue when it has not had a chance w conduct discovery ot' any
significance on these issues would certainly be highly prejudicial. And, all of this testimony
would take a lot of time·- we are now in the 8111 week of testimony in this trial as of this writing.
Texas Rule of Evidence I 07 is subject to Rule 403. Walters\'. State, 247 S.W.3d 204.
~
218 (Tex. Crim. App. 2007); Whipple v. State. 28 1 S. WJd 482, 500 (Tex. App.- ·EI Paso 2008.
pet. rcrd).
5
: 0\1118
• •
Jt is therefore ORDERED, ADJUDGED and DECREED that PHA's Request that the
Court Reconsider its November 12, 2009 Open-the-Door Ruling Regarding the Port's Actual
Harms is hereby DENIED.
Signed this 11 day of December, 2009.
;//#/j/;/o/'/
Judge Mike Engelhart
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TAB 8
Plaintiff's Fourth Amended Petition and First Amended Answer
to PHA's Counterclaim for Attorneys' Fees
(CR29:08131-48)
CAUSE N0,-2006·'7?970;.
L I
,. ,
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+ ..... -
,
.:
ZACHRY CONSTRUCTION § ~. fN THE DISTRICT COURT OF
CORPORA.TION n!k/a Zachry Industrial, §
Inc. ' § ' (
•-.;·
§
VS, § HARRIS COUNTY, T EX A S
§
PORT OF HOUSTON §
AUTHORITY OF HARRIS §
COUNtY, TEXAS § 15lST JUDICIAL DISTRICT
PLAINTIFF'S li'OURTH AMENDED PETITION AND
FIRST AMENDED ANSWER TO PHA'S COUNTERCLAIM FOR ATTORNEYS' FEES
TO THE HONORABLE JUDGE OF SAID COURT:
COMES NOW ZACHRY CONSTRUCTION CORPORATION n/k/a Zachry Industrial,
Inc. ("Zachry"), Plaintiff herein, and flies this its Fourth Amended Petition and First Amended
Answer against the PORT OF HOUSTON AUTl-lORITY OP HARIUS COUNTY, TEXAS
("PHA''), and in support thereof would show the Court the following:
I. Discoverv Control Plan
Zachry intends to conduct Level III discovery ln this case pursuant to Texas Rule of
Civil Procedure 190.4. Plaintiff demands a trial by jury, and has tendered the requisite fee to
tbe Clerk of this Court.
H. Parties
1. Plaintiff Zachry is a DelmvaJe corporation, ·with its principal place of business in
San Antonio, Bexar County, Texas.
2. Def'endant PHA is a Texas novigation district established under i\rticle XVI,
Section 59 of the Texas Constitution, with its prim:,ipal place of business in Houston, Harris
County, Texas. Defendant PHA has appeared .in this lawsuit and may be served through its
1
counsel of recordt David H. Brcrwn, Brown & Kornegay LLP, 2777 Allen Parkway, Stlite 977,
Houston, Texas 17019;. Karen T. White, Vinson & Elkins, L.L.P., 1001 Fannin, Suite 2500,
Houston, Texas 77002~· .L Clark Martin, Kelly Hmt & Hallman, l 000 Louisiana, Suite 4700,
Houston, Texas 77002; and Lawrence J. Fossi, Fossi & Jewell LLP. 4203 Yoakum Blvd, Suite
100, Houston, Texas 17006.
III. Venue
3. Venue is proper in this Court as Harris County is the county "in which all or
substantial part of the events ... giving rise to (this] claim occutred.'' TEX. Ctv. PRAC. &REM.
Cor>t~ ANN. § 15.002(a)(l). Venue is also proper as Harris County is the county of PHA's
"principal office in this state.'' TEX. CIV. PRAC. & REM. CODE ANN. § 15,002(a)(3). Finally,
venue is proper in this Court because Harris County is the county in which the parties have
"contracted in writing to perform. an oblfgation,H expressly naming Harris County in that 'Nriting.
Tt::X. C!v, PRAC. & REM. CODE ANN. § 15,035(a).
!V. Jurisdiction
4. Jurisdiction is proper in this Court as the amount in controversy is in excess of the
minimal judsdictional requirements of this Court. Further, this Conrl has personal jurisdictitm
over Defendant as it is a Texas navigation district located in Harris County. Texas.
5. This court has jurisdiction over this suit against PHA because the Texas
legislature has waived sovereign immunity from suit \vhh respect to breach of contract claim!l
against navigation districts such as PHA. TEx. Lac, Gov;T CODE ANN. § 271.151, et seq.
Further, it is well settled that when the State or a political subdivision contracts with private
citizens~ as PHA has done, it waives sovereign immunity from liability. See Tooke v, Ciiy of
2
lvfexlat 197 S.W.3d 32:5,332 (Tex. 2006); Gen. Servs. Comm 'n v, Little~1ex. Insulation Co., Inc.•
39 S. \VJd 591, 594 (Tex. 2001). Tl1is suit involves claims for PHA's breach of a written
contract within the Textis Legislature 1 s express waiver of sovereign immunity. TEX. Loc. Gov'T
CODE ANN. § 271.1 Bayport Phase l A Wharf and Dredging Contract (H\l·/h.arf and Dredge
Contract").1 Based on !he facts alleged below, Zachry seeks to recover damages under §§
27L153(a)(1) and (a)(2) of the Texas Local Government Code. Accordingly, PHA may not
assert sovereign immuni.ty from suit or from liability with respect to the claims asserted herein.
6. On or about June 1, 2004, af\er soliciting proposals and awarding the project to
Zachry, PHA and Zachry executed the \Vharf and Dredge Contract Pursuant to the written
\Vharf and Dredge Contract, Zachry was to construct a J 660...:foot wharf facility in Pasadena,
Tt:xas. Under the original terms of the Wharf and Dr<:dge Contruct, construction \Vas to be
completed by June 1, 2006, ln addition, by February l, 2006, Zachry wa.') to meet an intertm
deadline by which a portion of the wharf PHA had designated {"Milestone A") would be
sufficiently completed supposedly to allow the delivery of certain large ship~teH;hore cranes that
\Vere to be delivered by ship from China.
7. Shortly thereafter, Zachry began construction of the wharf: At the outset~ and as
PHA understood before it awarded Zachry the contract) Zachry's chosen construction
methodology and construction plans involved the construction of a temporary frozen shoring
1
Because the Wharf and Dredge Contract is too volurninous to physically attach to this
petition, Zachry hereby expressly incorporates by reference the copy of the Wharf and Dredge
Contract filed hy Defendant PHA as .Exh.ibit B to its Plea to the Jurisdiction and to Hs First
Special Exceptions.
3
wall {a "'freeze wall'') al until after PHA had rejected
the frozen cutoff walL Moreover, nothing in GeoTest's report would support a rejection of the
frozen cutoff wall. 1n addition, PHA's own Chief Engineer, who had the ultimate responsibility
at PHA for resolving all engineering questions on the project, admitted that PHA did not have
enough infom1ation to judge whether or not the freeze wall violated the standard of care. He also
admitted that no one at PHA had concluded that there would be an adverse impact or that the
cutoff wall design in any way violated the standard of care. Further demonstrating the Port's bad
faith, arbitrary, and capricious conduct regarding the rejection, Zachry's freeze wan experts~
GeoEngineers, provided additional research demonstrating that there was no adverse affec.t to
freezing the :soil around the drilled shafts. Consistent with the freeze \Vall expert's opinions at the
time, PllA's Construction Manager, CH2MHILL, provided the frozen cutoff wall design to its
own in-bouse geoteclmicaJ engineering experts, who returned comments confirming that the
proposed frozen cutoff \Vall design did not pose any issue. PHA's own expert .in this lawsuit has
likewise testified that the frozen cutoff wall was a viable and safe design and that he had no basis
to believe it would have any negative impact on the structure.
13. Another example of the Port's bad faith, arbitrary~ and. capricious conduct is the
fact that PHA expressly charged and designated its Construction Manager, CH2MHILL, to act
on its behalf on this critical cutoff wall issue despite the fact that PHA knew and understood that
CH2MH1LL had a poor record and was HI-equipped to deal with such an issue. Indeed, PHA had
previously admitted that CH2MHLL responded to project and design issues in a ''CYA"' mode
rather than appropriately addressing the issues. This CYA approach was evidenced again when
even after identifying any issues concerning freezing as geotedmical h1 nature, even after
7
i.
receiving CH2MHILL's senior geotechnical engineering experts' opinions stating they did not
see a problem, and even after receiving Zachry's freeze waH expert's follow~up analysis re~
confinning there was not a problem CH2MH1LL·-PHA 's designated agent on this cutoff wall
issue--communicated several problems from a "structural engineering perspective," none of
which were viable concerns, none of which were assessed prior to the Port's rejection> and all of
which were simply designed to divert any potential liability from CH2MHfLL. On October
lO~espite the unanimous approval from freeze wall experts on both. sides and notwithstanding
the fact th<\t PHA had not even hired its own geotechnical engineer to look at this issue (much
less nx:cived the result of any such review), PHA rejected the fq.:cze, walL
14. PHA 's reJection of the frozen cutoff wall constituted a breach of both Change
Order 4 and the General Conditions of the Wharf & Dredge Contract. 6 Notwithstanding PHNs
"'bail and switch" tac:tics·-including PHA 1 s delay in approving Change Order Number 4 and
subsequent improper r~jection of the frozen cutoff wall methodology stated 1n Change Order
Number 4--PHA remarkably continued to insist that Zachry complete the expanded project
vtithin the parameters set forth in Change Order Number 4.
15. Moreover, when it executed Change Order 4, PHI\. had no present intent to>
perform its requirement that Zachry be permitted the right to use the frozen cutoff wall. Texas
law clearly provides that when one enters into an agreement that it has no present intent to
perfonn, this constitutes fraud. Here, on September 27, 2005 PHA executed a contract that
pe1mitted Zachry to use the frozen cutoff waiL PHA induced Zachry to agree this contract at a
6
Alternatively, to the extent PHA contends that it only require<;l Zachry to ''revise and
resubmit" its frozen cutoff\vall design, such conduct also constituted a breach of Change Order
8
price and schedule based on a particular frozen cutoff wall design. PHA then rejected the very
desig11 that formed the basis for the contract only days after signing the agreement because it
never intended to allmv Zadrry to use the fi•ozen cutoff wall. To this day PHA denies that it ever
7
intended to approve Zachry's use the frozen cutoffv•tall \Vhen executing Change Order 4.
16, Zachry, unable to implement the agreed-upon frozen cutoff wall construction
method due to PHA 's conduct, found itself short on thne because the work needed to be
completed under the freeze. \vall approach 1 the Port had precluded the use of that approach, and
there was a crane ship that was to arrive frnm China in the near f\rture. Thus, after a review of
the alternative proposed solutions) Zachry ultimately decided it would have to forego the entire
freeze-wall construction method in order to prepare the wharf in a rnanner that would allow the
Chinese crane ships to dock and unload. Zachry therefore was forced in large part to complete.
the wharf using unanticipated "'wet'' excavation techniques. hl doing so, Zachry incurred
substantial additional costs. The completion of interim Milestone A and the entire project was
delayed as a result, as well.
17. Even though the delays were caused by PHA's breach of the Wharf ar1d Dredge
Contract, PHA has withheld and threatens to further withhold liquidated daxnages based on an
unenforceable penalty provision in the contract. First, because the purported liquidated damages
provision attempts to enforce liquidated damages vvhilc simultaneously allowing (and, indeed
calling tor) the recovery of actual damages, it is void as a matter of Texas law. Second, the
liquidated damages provision is unenforceable because PHA suffered no harm. Third, the
Number 4 and the General Conditions of the Contract
i PHA's bad-faith, fraudulent; arbitrary, and capricious conduct tKtively interfered with
9
liquidated damages provision is unenforceable because Zachry's compliance with the contractual
deadlines \Vas precluded by PHA's own errors and misconduct.
18. By its conduct, PITA has breached the Wharf and Dredge Contract in several
respects. Jn particular by precluding Zachry lrom implementing its frozen cutoff wall
constntction methodology and ultimately the entire freeze wall construction methodology, PHA
has breached Change Order 4 and Section 5. l 0 of the Wharf and Dredge Contract. See Change
Order Number 4 to Wharf and Dredge Contract; Wharf and Dredge Contract 11 5.10. PHA has
furthet breached the Wharf and Dredge Contract by \vrongful!y witltholding as "liquidated
damages'' sltms nthenvise due Zachry under the Wl1r1rf & Dredge Coutntct pursuant to an
unenforceable penalty clause and for time overruns that were themselves caused by PHA's
conduct. See Wharf and Dredge Contract, 1j 5.05, ~. 5.06, Addendum No.8 (lll·15) (purporting to
provide PHA the right to recover liquidated damag.es as a dttmage "f1oor," while also purporting
to allow recovery of actual damages if they exceed the liq\tidated~damages amount). PHA is
obligated to pay Zachry the Contract price. PHA is wrongfuLly withholding sums as purported
liquidated dan1ag135 S.W.3d 605, 607 (Tex. 2004). Under
that agreement. Zachry is obligated to remit certain recoveries to its affiliate. /d. at 619-20.
Under Texas law, PHA has waived its sovereign immunity for such claims. See Hensel Phelps
Const. Co. v. Dallas/Forth Worth intern. Airporl Bd., 2005 WL 1489932, * 4 (N.D. Tex. 2005)
("[W]hen a governmental entity~o\.vner \Vaives immunity frorn liability by entering into a
contract \'Vith a contractorf it also waives immunity fron11iabi!ity wiih respect to all pasHhrough
claims that the contractor may lawfully assert under the contract.").
Jf! Vv'ithout limitation, any applicable notice requirement under the Wharf & Dredge
Contract was satis.fied by Zachry's performance or, alternatively, under the doctrines of election
12
bee:n honored by PHA, and damage to Zachry has resulted from PHNs nmteriul breaches of the
Wharf and Dredgt! Contract Therefore. Zachry seeks damages relating to, and stemming from,
PHA's breaches of the Wharf and Dredge Contract Purswmt to Texas Rule of Civil Procedure
47, Zachry states that, based upon its current analysis and subject to the reservation of Zachry's
right to further amend and supplement its damages calculations, the ma;dnmrn amount claimed is
$31,355;41 7, excluding pre~judgment interest, post-:Judgment interest, and cosls. 11
22, As detailed above, Zachry's alleged damages have been disclosed In Section (d)
of its Sixth Amended Rule 194 Disc!.osures. Those damages generally include the following
categories of damages; ( 1) the difterence bet\veen the cost that Zachry would have Incurred had
il been a!Imved to complete the wharf "in the. dry" (i.e.• using the frozen cutoff wall) and the
actual cost Zachry incurred in completing the wharf "in the wet" (i.e., wilhout the frozen cutoff
\.vall), (2} liquidated damages and pena!Ues \Vrongfully \vithhe!d by PielA, in the amounl of
approximate!:>• $2,360,000, (3) damages in the amount of approxhnately $6()0,000 that has been
wrongfully withheld by PHA as a purported ''offset,n and (4) damages for the remainder of the
Contract Price, which the Port has refused to pay. Zachry is also entitled to interest as allowed
by laYv, including pre~ and post.:jud:;,rn1<:mt interest.
23. ln regards to the fitsi category ofdamages listed above, Zachry has designated an
expert witness, Oary W. Draper, to analyze and report on matters pertaining to the amount of
of rern.edies, waiver, estoppel, and ratification. Zachry denies that it breached the \Vharf &
Dredge Contract. ln the alternative, to the extent PHA alleges that Zachry committed any
material breach of the Wharf & Dredge Contract1 J)HA has deprived itself of the defense of prior
material breach because it elected to treat the Wharf & Dredge Contract as continuing and, in
additiont insisted that Zachry perfonn the \Vharf & Dredging Contract.
11 Because construction of the \Vharffacility is ongoing Zachry's total damages are
1
13
Zachry's economic darnagcs and the method by which those damages have been calculated. The
amount and manner in which these damages have been calculated arc set forth in Mr. Draper's
report This category of Claimed damages by Zachry concerns the damages directly flowing
from O\Vner~caused delays and hindrances resulting from the Port's breach. Alternative!)\ it
includes dtm1ages flc.1wing from the additional work that Zachry \Vas directed to perfom1 by the
Port. This additional work was Zachry having to construct the wharf in the wet rather than in the
dry after the Port rejected the cutoff walL This category of damages is recoverable under both §
271.153(a)(l) and (a)(2) of the Texas Local Govemmem Code.
24. As to the remaining categories of damages, they ktre recoverable under §
271.15J(a)(l) of the Texas Local Government Code as amounts due and ovved to Zachry under
the Contract.
VH, Ccncrtd 1)enhd
25. Pursuant to Hule 92 of the Texas Rules of Civil Procedure, Zachry generally
denies PfLf\.}s_ allegations; including \vithout limitation PHA 's Counterclaim for Attomeys' Fees.
vrn. Defenses
26. All prior and subsequent paragraphs are incorporated by reference.
27. To the extent PHA alleges in its Second Amended Answer and Counterclaim that.
it cm1 avoid liability based on the defenses listed therein, PHA is not entitled to avoid its liability
for breach of contract due to the doctrine of estoppeL
28. To the extent PHA alleges in its Second Amended Answer and Counterclaim that
it can avoid liability based on the defenses listed therein} PHA is not entitled !o avoid its liability
estimated and remain subject 10 change.
l4
for breach of contract due tO the doctrine of ratification.
29, To tl1e extent PHA alleges in its Second Amended Answer and Counterclaim that
it can avoid liability based on the defenses listed therein, PHA is not entitled to avoid its liability
for breaeh of contract due to the doctrine of waiver.
30. To the extent PHA alleges in its Second Amended Answer and Counterclaim that
it can avoid li'ibility based on the defenses listed therein, PHA is not entitled to avoid its liability
tbr breath of contract due m its election ofre.medles.
31. To the extent PHA alleges in its Second Amended Answer and Counterclai.m thm
it can avoid liability based on the defenses listed therein~ PBA is not entitled to avoid its liability
ibr breaeh of contract due to the doctrine oftmclean hands.
32. To the extenl PHA alleges in its Second Amended Answer and Counterclaim that
it can ttVoid liability basod on the d~f<:mses lisled therc.in, PHA is not entitled to avoid its liability
for breach of contract due to the doctrine ofquasi~estoppel.
33. To the extent PHA alleges in its Second Amended Answer and Counterclaim thar
h can avoid liability based on the defenses listed therein} PHA is not entitled to avoid its liability
for breach of contract as a result of PHA's ovln negUgent misrepresentations, fraudulent
inducement, fraudt bad~fahh, ~rbitrary and capricious acts, and active interference with :respect to
Zachry's work.
34. to the extent PHA alleges .in Hs Second Amended Answer and Counterclaim th~tt
it can avoid liability based em lhe defenses listed therein. PHA is not entitled to avoid its liability
for breach of contract because any alleged notice provision in the Contract is inapplicable to
Zachry's claims, and even if such a provision was applicable~ any such provision would be vojd
15
under Section 16.07l(a) of the Civil Practice and Remedies Code. See TEX. CIV. PMC. & REM.
CODE A1'-!'N. § l6.07l(n) (''[a) contract stipulation that requires a claimant to give notice of a
claim for damages as a condition precedent to the right to sue on the contract is not valid unless
the stipulation is reasonabk A stipulation that requires notification within less than 90 days is
void,")
35. Zachry denies that it made any misrepresentation to PHA. 1n the alternative, to
the extent PHA alleges Zachry falsely represented any matter (either aftirmatively or by non-
disclosure), any such delense is barred by PHA's actual kJloWledge offalsily;
36. To the extent PHA alleges in its Second Amended I\nswer and Counterclaim that
it is entitled to recover Its attomeys' fees, recovery is barred by the doctrine of ripeness. 12
37. To the extent PHA alleges in its Second Amended Answer and Counterclaim that
it is entitled to recover its attorneys~ fees, recover)' is burred because the fees PHA seeks to
recover are excessive, not reasonable, and unnecessary.
IX. Praver
38. Zachry, after f·ull trial on the tnerits before a jury of its peers, requests u. final
judgment against Defendant as follows:
a. Darn ages as al1owed by law and to the extent proven at lrial, which exceed
the minimum jurisdictional requirements of this Court;
b. Interest as provided by law, including pre- and post~judgment interest;
c. Costs of suit; and
12
Because PHA ~s counterclaim for attorneys' fees is not ripe, Zachry specifically
reserves the right to allege offsetting counterclaims for which PHA's sovereign immunity has
been waived. See Reata Consrruction Corp. v. Ci(vofDallas~ 197 S.W.3d 371 (Tex.2006).
16
d. Such other and further relief to which Zachry may be justly entitled.
Respectfully submitted,
~
By:~-~-·--···~·_,__
Robin C, Gibbs
Texas Bar No. 07853000
Brandon T. Allen
Texas Bar No. 24009353
Sydney G. Ballesteros
Texas Bar No, 24036180
Michael R. Absme1er
Texas BarNo. 24050195
1100 Louisiana, Suite 5300
Houston, Texas 77002
Telephone: 713/650~8805
Tele.copier: 713/750..0903
ATTORNEYS F'OR l'LAINTlF'F
ZACHRY CONSTRUCTfON CORP,
17
CERTIFICATE OF SERVI<:;'E
1 certify that a copy of the foregoing instrument has been served upon all counsel of
record on this: 28th day of Apri12009, in the manner so stated:
Via electronic mall
Karen T. White
Seth A. Russell
Vinson & Elkins, L.L.P.
100 I Fannin, Suite 2500
Houston, Texas 77002
Via electroulc mail
David H. Brown
Brown & Kornegay LLP
2777 Allen Piirkway, Suite 977
Houston. Texas 770 I9
Vit1 electrtmfc mail
J. Clark ivlartin
Kelly Hurl & Hallman
1000 Louisiana, Suite 4700
Houston, Texas 77002
Tlia electnmla mail
Lawrence J. Fossi
Fossi & Je\vell LLP
4203 Yoakum, Suite 100
Hpuston 1 Texas 77006
``-``~-­
Brandon T. Allen
18
TAB 9
Third Amended Original Answer
and Counterclaim for Attorneys' Fees
(CR45:13008-35)
CAUSE NO, 2006-72970
ZACHRY CONSTRUCTION !N THE DISTRICT COURT OF
§
CORPORATION,
§
§
§
§
v. § HARRIS COUNTY, T EX A S
§
, THE PORT OF HOUSTON AtJTHORITY
§
§
Defendant.
§ !51ST JUDICIAL DISTRICT
THIRD AMENDED ORIGINAL ANSWER
ANO COUNTERCLAIMFORATTOltNEYS' FEES
TO THE HONORAB'LE JlJDGE OF SAID COURT:
COrv18S NOW The Port of HbustO!l Authority of Harris County. Texas (the "Port
Authority' 1 or "Port''); Defendant, and, subject to its Plea to lhe Jurisdiction, files: it<: Third
Amended Otl&inal Answer and Counterclaim for Attorneys• Fees, and respect.fully shows the
Court as follows:
IMMUNITY
l. 111e Port Authority is a political subdivision of the .State ofTexus and i::~ therefore
prote.cfed by the sovet'eign or governmental imn1unity doctrine. The Pmt Authority is immune
ti·om suit und from liability for all causes of action and damages except as wovided by
Subchapter I r>fChaptcr 271 ofthe Texas Local Oovcmmenl Code.
GENJf,Rt'\L DENIAL
2. Pursuant to Rule 92 of the Texas R11lcs of Civil Procedure, the P()).'t Authority. Zachry
assured tho Port Authority thatthe Port could rely on Zachry as a team player~ and that Zachry
would work with the Port in a struightl'orward manner and not engage in any "claims game."
8. Regrettably, all of these representations, on which the Port Authority relied,
proved to be untruE~; At the time~ however, persuaded by these representations, the Port
Authority entered into negotiations with Zachry which culminated in the Phase !A Wharf and
Dredging Contract dated Jm1e J, 2004 (the ".(;Qptract"). Early In !he Project and in response to
the Port Authority's concerns regarding freez;ing the soil, Zachry a1>surcd the Port that the
fh:ezing would remain far enough awuy from lhe piers that it \Vould not compromise the \vharf's
structural integrity. The Port Aulhodty's concern was well justified; the drllled piers' abillty to
bear weight comes mostly from "skin friction" at the itttorface of the soil and pier down the
length of tim pier~ Freezing tl1e earth near the piers could decrease their load-bearing capacity.
In addition, the expanded volume of the soil from fn:>eidng could even move, bend, or bret~k the
piers. Zachry, which had a contractual duty to protect the cmnpletcd portions of the wharf
s!ruch1rc while it wus prosecuting its work, promised thut it would maintain at least nine feet
btSlWt1Cn the frozen soil amlthl;l:;urface of the piers.
\1. The Contract Included two crucial deadlines n.nd stipuli:lled !hat time was of the
essem~e regarding perforrnance of the Work, The iin~t was Pobmary l, 2006 (u date defined in
tho Contract as thn "Milestone A" date)~ by which Zachry agreed to have one portion of the
wharf fully completed, Tile Port Authority needed that portion of U1e wharf completed by the
Milestone A dnte so that four huge cran<'.S, which were being fabdcated in China and wert} to
ardve ln Houston by ship, could be de!lvered and assembled, and rben the cnme operators tndned
on the crnncs, in time tbr the completion of the remainder of the wlmrf. The se(.:ond was the
''I1inal Conlplction" date of June I, 2006. by which the wharf fnoilities nnd dredging work were
to be completely finished,
10. At the outset, Zachry fell behind schedule. Among other things, il was late in
mobilizing its on-site work force, submitting its concrcle mix formu!atlon 1 and preparing its
ccmcrele butch plant Th~;t ::;tart of both ctmcrclc work and the freeze wall inslallt~tion were
significantly delayed. Further, there was a series of blunders involving the freeze walL Most or
the blunders have their origin in the character and decisions of Zachry's construction manager,
Harold (Andy) Anderson.
IL Anderson wa~ not even a Zachry employee when the Contract was signed.
Znt;hry hired him several weeks later, nftcr a short and hasty search. Although the freeze wall
4
wus a cen!tn'!)lece of Zachry~s constmction phm, Anderson did not want to use it Rather than
immediately lnoving forwnrd with the freeze waH, he spem months fi:ultlessly searching for an
nltcmative1 putting the freeze wan behind schedule. He even delayed entering into a subcontract
with the freeze wall subcontractor whom Zachry had chosen " RKK SoilFreeze Technologies
("RKK"). lnde<:xl 1 Za<~hry .fitially signed the RKK subcontract) and thus freed RKK lo submit a
fi·cezc wall design, only after the date on which Znchty had l>larmed to hove the freeze wall
completely installed,
12. Anderson compounded his mistakes and delays by compromising Zachry's ability
to properly pcrfonn the freeze wall .installation. F'or example, RKK had spent a substantial
amo1n'tt of time working with Fanner Foundation, Zachry's drilling Stlboontractor which was to
install both the J)iers and the freeze pipes, to assurttthat Fanner Foundation was acquainted witl1
the ptt.>eise teehniqua't and tolerunces necessary in plndne, and installing freeze pipes. After all
this prepumtion work1 Anderson gave the tusk of installing tho freeze pipe to another, cheaper
subf being unable to satisfy the Mile.'itone A obligation (but having failed to so advise the
Port Authority), Anderson began planning to use a "cut·off \VIlli" running perpendicular from the
frliez() wall to the land, Under his plan, Zachry would attempt to divid\fi the pmjeGt in two,. If
would first excavate beneath the wharf on one side of the cut-off walt, and n:tter so excavating
would breach the main freeze wall on i'hat side so the ship carrying the cranes COtt!d dock and
unload. Tl1cn 1 Zachry would excavate on the: other side of the cut-off wall to complete the
remnimler ofit!l work.
14. Several weeks after Zachry determined that it likely would need a cut~offwall, the
Port Authority advised Zachry that the Pm·t was considering extending the w1mrf's length by 332
foot Zachry appreciated that the extension would not m.erely be u v.alunble piece of work~ but
also would offer an opportunfty tu hlivc the Port Authority pay for whatever cut~off wall Zachr)'
ultimately would build. Zacl)ry urged the Port Authority not to J)Ut the wharf extension oul Lor
proposals by other conlracwrs, but instead to add the worl<' lo Zaclu·y's Contract. Although it
knJ.>':J)luin why he was
abandoning H fi·eeze wall in vvhich Zachry ttlre.ady had invested some $9 million. He reported to
hJs m1pervisors that chitters .needed to cool the brine that would cin~uLa1e through the freeze pipes
had been "commandeered" hy FEMA in consequence ofHunicum~s Rita and Katrina. He then
attempted to {jnlist RKK in this fraud, mging RKK to report a clliller shmtage so Anderson could
Jbrward the false report to the Port Authority. Anderson threatened RKK with financial harm if
9
attempt to Zachry*s management. Zachry's management, however, never bothered to investi.gate
this shocking report. To the contrary, Zachry's management continued to rely on Anderson for
information about wbat was happening at the l3aypolt job site.
26, Appreciating that his lie about commandeered chillers would not find support,
Anderson modified tl1e lie by reporting to Zachry management tbat some chillers were available,
but not enough to operate the freeze wall adequate1y1 and in consequence the fi·eezing would take
much longer thnn planned.
27. Anderson also invented n second lie tn Zachry mtmagement: that sheet pile
required ibr the alternative cut-off wall de;Jign was unavailable, and would remain unavailable
for months. Anderson lold this He desnite knowing that the sheet. pile was available for
i:n.unedinte delivery from !ievernl different suppliers; RKK had oonfinned this fuct to Anderson.
zs. In making the decision to abandon the freeze wall, Zachry had not prepared any
cost or Cllf:,rincerlng analysis to determine whether its revised conslruclion plan, which Zachry
has somethncs referred lo as "Ptan H,jj wus sensible or, indeed, even feasible. h had not
evaluated whether il1l estimated excavation rales or o!htlf production rat(}s were realistic. It had
not determined how it would excavate bem7nth the wharf deck. It had not dctem1ined how
deeply it could snfely excavate with an unfi·ozen berm. H hod not addressed the problems
created by u,roundwater infiltration. It had$ in short, nq reliable way of evaluating the time
required fbr, tlm costs entailed by, or tl1e risks and benefils of Plan B, and no rcHable way of
c.ompadng the time, costs, risks, and benetits of Plana with those of the freeze walL
29. Representatives of Zachry nml the Port Authority had n series of meetings and
phone conversations in October, Novernber, nm1 December of 2005 to discuss the scheduling
!Q
issues. Zut1hry told the Port that it had detem1ined to abandon the main freeze wan because it
was out of time to implement the freeze wall and stilt meet the contractually required completion
dates for Milestone A and Final Completion. Zachry told the Port Authority that more water was
flowing fhnn tl1e land side than Zachry had anticipated and that it could not freeze the soil
quieldy enough, Zachry suid its schedules show~d thttt abandoning the freeze Viall and
proceeding instead \\1th Plan 13 ·-working in the dry behind a n\>tv11~ozen berm to a certfti n depth
and lh~m working ln the wet thet'eailcr •w would result iu the earliest practicable achievement of
the Miles.tnne A and Final Completion dates.
30. At no point during any of the many rneetings or convenmtions .in late 2005 did
Z.n:chty ever sta.tc or even suggest, as it much later would clairn ln this lawsuit~ that its decision to
abandon tho freeze Wti!l \VM connected with any supposed 1'rejection" of the draft cut:..offwall
design, as Zachry now ctairns in this lawsuit .Zachry made no sucl1 rmggestion because the
tnodificalions thnt the Pott Authority requested to the submittal of the draft design played no role
in Znchry;s decision to abandon the frcczo Wtill.
:l l. Bad Zachry asserted in any of the coiwersations in late :wos, a.'! it later would in
this lawsuit, that it was abandoning the ti:ee%e wall as a result of the Port Authority•s i'evise and
resubmit rc._<;ponse to the dmfl cut~off waH design submittal, that abandonment .of the freeze wall
\vas going to del11y Zachry's completkm of the project and increase Zachry's cost tb complefe1
and thut the Port was somehow responsible for the resulliog delay and increased costs to Zachry,
then there is no doubt that the entire tenol' of those cmwersnHonN would have chtmgcd~ and that
the Ptwt Authority promptly would have, at a minimum. instructed Zachry to delete the '''harf'
exlensitm from the scope of ils work under the Contract
32. Zachry's planning, estimating1 and execution have proved to be no better since it
abandoned the fi·eeze waH tl1au before it did so. Through no fault of the Port Authority! Zacluy
failed to execute the work in accordance with any of the numerous schedules it prepared for
complc!lng the project using the Plan B construction method. Zacht'y did not dec!u:ro final
completion of its work until January of2009.
33. Unbeknownst to the Port Authority, the "Zachry" entity with \Yhich the Port
Authority contractt1d apparently Cklased perfom1ing the Work on the Contract. Instead. Zacluy
ch1mged its nmne and Zachry's parent company created a new comp!l.nY to assume Zachry's
"
name - lhc name Zachry Constmction Corporation. In lnte 2007 r Zachry asked the Pmt
Authority for its oonsent to an assignment of the Contract The Port Authority responded that it
would consent to the assignment upon satisfttction by Z11chry of several reasonable conditions.
Zachry di.d nm agree to or satisfy the conditions. In fact, Zachry ignmed the Por! Authority's
response. Instead of respondit1g to the Port Authority or satisfying the conditions, on
infbrmntkm and belief., on January 1, 2008 and without knowledge of the Port Authority, the nmv
company apparently began pertbrming Zac1ny's CJbligutions ~mdcr tl1e Contract. Zachry assigned
its obligations under the Contract to the new company in breach o:f Section 3.13, apparently
ceased to employ OJHiite supervision in breacll of Section 5J 61 and apparently ceased self-
peribrming the Work and engaged a subc~)ntractor not disclosed to the Port Authority in breach
oJ Scclion 5.11 of the General Conditions.
34. Apparently, the new company (which did uot have u contract wit11 the Port
i.f". Authority but had assumed the name of Znchry) with Zachry's knowledge and at Zachry's
instruction submitted invoices for Work and signed releases to induce the Port Authority to make
payment. Zachry thereafter represented to the Port Authority that the claims in this titigntion
12
w<:r(: Zachry's claims and that all cost.'l which it sought as damages were incurred by Zachry,
Even Zachry's damages documentation- disclosed to the Port Authority only after order of the
Cow·t -· states that all costs were incurred by Zachry. They were not
35. OnAprl127, 2009, Zachry entered Into agrecntents with the new company.-. buck
dnting the effective dates of the agreements to Jmtuuxy l} 2008 - in which the new company
agreed to perform the Work f(H' no payment t1·om Zachry1 other than wlmt the Port Authority
paid to Zuchry. Tn tho event the payments from the Port Authority wen:: leas thun the amounts
incurred by the new com puny, the tR~w company agreed that Zachry had no liability to th~; new
oompatly. Zachry abo gnmtctl the new company (which l!ud no contract with the Port Amhorl!y)
the right to pursue und control this liiigation, all in the namo of Zaobry.
3(:). ]'he Port Authority pleads the 1b!lowing defenses to Zachry's pleaded causes of
actions and to Zachry's purported defenses to dtlfttnseN enrlier pled by the Port Authority:
37. Zachry is not entitled to recovery against the Port Authority for brem..:b of the
Con!rnct bcctwsr> the Pori Authority acted in acwrdmme with the Contract provisions, including,
bul not limited to the 1ight to withhold pn}•mentlt (Secliorm 6.05, 6. '! 1, S.OS, and 5.06 of the
Oermral Cnnclit.ianR) 1 the right of the C~1lcf Engineer to demand a recovery plan (Section 5.09 of
the General Conditions), the right. to review nnd respond to submittals (Section 5.22 of the
Ocneral Conditions)) ihe right to require schedules, reports and other additional information
(Section 5.25 of the General Conditions), and ln the event it has an instruction contnuy to the
Contract, the right to chtmge tlte Con!rnct (Sections SAl and 5A2 ofthc General Conditions).
38. Zachry's allegations do not constitute a breach of any of the provisions of the
Conll'acr by the Port Authority; 11u~ Port Authority's request that Zachry mitigate the risks to the
Port Authority drilled shafts by revising and resubmitting the September 9, 2005 draft cutoffwaU
design wa<> not a breach of Section 5.1 0 of the Contract or of Change Order 4; the Port
Authority's withholding of liquidated damages was not a breach of the Contract; and the Port
Authority's payment ofZachry'lllnvoices~ \Vhich Zachry characterizes as "falling to pay Zachry
the money that it was pmiodicnlly entitled to be p!lid under the Contmc! as it has come due," was
nota breach of the Contract.
39. Zachry is not entitled to recover u·om the Port Authority based on any alleged
breach by the Porl Authority ofthe Contract because Zachry has not complied with all conditions
prccudcnl It! its alleged right lo recover for such alleged breaches, :such as Zachry's failure to
provide notice of such tlahns within the time, in the fonn, or to the person required by the
Cnntract; including but not limited to the notice required by Sections 5.08, 5.18, and 5.42 of the
C3onera.l Conditions. Zachry did not timely provide notice as required by the Contract with
respect t' entirely~ requires that any such provMon be severoo
fh.Jm the Contract, the balance of (he Contract enfbn::ed, and the stricken provision refom1ed and
replaced with a valid pnwlsion. Spcciflca!ly, Section 3,12 provides that the }m re<::overing for lhe losses and damages that Zachry
alleges. Sornc ofthcsc risk-allocating contractual provisions that bar ZaeJwy,s recovery include,
but are not limited to:
16
a, Assumption of the riRk by Zachry for any lack of completeness ht the Wharf and
Dredging Contnwt Documents, including the Drawings and the Specifications,
an,d the risk of those documents not being sutnckmtly detailed and
comprehensive, Contract, Oeneml Contiitions § 2.06. Zachry failed to timely
raise v.ny cm1cems with the Contract Documents and cannot now oomptain about
their comlition.
b. A no-dnmages-for~delay or hindrant~e provision. Con!ract1 General Conditions §
5.{}7, Zaclwy cannot recover damages assuciated with delt\y in the Project or
hindrance or its perfommnce. This provision precludes Zachry's asserted
"exceptions}'
o. No cnt!tlciw;mt to an Increase in the Conttact Price except undet limited
circumstances. Contract, General Conditions §§ SA 1, 5.42, $.43 1 5.49 and 5.50.
Zuchry did not thnely and properly assert a clulrn under any of those ptovisions.
d. A specific and limited force majeure provision. Contract, General Conditions
§ US. No cntillemcnt to an extension of time except when the: circumstance
conslHutcs art event of Force Majeure and ls on the critical path. Contract,
Gcncrn.l Condilions § 5.08, Zachry has not established an event of.Force Majeut·e
entitling It to uny additional tlmc.
!.;, Tho det!nition of ConctuTentDeluy. Contract~ General Conditions § 1,08. No
entitlcrn:ent to lU1 extension of t!me if tbere Is also an event of Concumm.t Delay.
Contract} General Comliliom; § 5.08(b)(6), Zuchry caused Concurrent Delays
1llrLlter preventing it trout being entitled to tm extension of time.
f Waiver of claims for an extension of time by failure to timely and properly file a
request for time extension. Contract, General Conditions § 5.08. Zachry £.13led to
timely or properly seek any extensions oftirne.
g. Waiver of claims for changed conditions or contract interpretations that are not
timely and properly asserted, Contract~ General Conditions § 5.42. Zachry failed
to timely or properly assert any claim for changed conditions or contract
interpretations constituting a change to the Contract.
The Port Authority has not modified or waived uny of these provisions 1md is not estopped from
relying .on any ofU1ese provisions. Contract, G{meml Conditions§§ 3.09 and5.52.
42. Zachry is not entitled to recover from the Port Authority based on any alleged
breach by the Port Authority of the Contract because Zachry foiled to meet the Standard of Care
required in Section 1,37 of the Oe:neral Conditi:ons of the Wharf and Dredging Contact, which
provides that Zachry shall use 11• • • , [its] best .skill and attention, ln a good and workmanlike
manner and in the best and most expeditious and economical manner consistent with the interests
of tl1e Port Authority, shall exercise the degree of care, sklll and diligence ln the perfom:mnce of
the Work in accordance with an.d consistent with industry standards fm· similar circumstancos,
shall utilize its best skill, efforts and judgment in :furthering the interests of Pmt Authority; and
shall Lltmish eff1denl business administration nnd supervision."
43. Zachry is nol entitled to recover any damage..~ from the .Port Authority as a result
of the Port Authority's alleged breach of the Contract because Zachry tailed to comply with its
affirmative contractual obligation under the Contract to timely and accurately provide
contractually required information to the t>o1t Authmity, including but not limited to, the
l&
infornmtionrequircd by Sections 1.37, 5.03 and 5.04 of the General Conditions, the progress of
the work, und the Schedules for compl\lting the Work,
44. Zachry fs not entitled to recover from the Port Authority based on any alleged
breach by the Port Authority of the Contract because Zachry is barred by the "first breach"
doctrine because Zachry first materially brcuchcd the Contract, including but not lhnited to
Sections 5.03, 5.04, 5.09, 5.10 (including 1.37), 5.14 and 5.22 ofthe General Conditions of the
Conl'mct.
45, The Pmi Authority denic..(J that any oral statement purporting to change or modify
the Contract Documonts is binding on eithe;· the Port Authority or Zachry. The Pori. Authority
denies that any written statement purporting to change or modify the Co.ntrnct Documents; other
Uum om; from the Chief Engineer that oompHcs with the express J)rovisions fur change in the
Contract DucumentS1 is binding on either the Port Authority or Zachry.
46, The PurL Authority denies that Change Ordet' 4 includes as a term that a cutt>ff
wall mw1t be used by Znchry to pctforrn its Work, and denies that Change Ordm· 4 ittclndes rmy
torrn tlmt some pa11icular design of a cutoff waH must he mmd by Zachry to portbrm its Work.
Zachry is not entitled to recover fi·om the Port Authority bused on uny alleged breach by the Port
Authori!y of the Contract, as amended by Change Oi'det 4, as a result of troy 1nodifieation to
Zachry's September 9, 200.5 draft cutoff wall design requested by the Port Authority.
47. Zachry is not entitled to recovc~· from the Port Autlwdty based nn any alleged
breach by the Port Authority of !he Contract b<.~<.~ause Zachry did not pelform lts obligations
under the Contract :in a timely fashion. Zachry d:ld not complete the applicable portions of the
Work by Milestone A or the FiriHI Complulion dates required by the Contract Zachry did not
timely and properly request extensions oftime of such dates.
J9
48. Zachry is m:H entitled to recover an)' damages fi·om the Port Au01ority as a re$ult
of tlle Port Authority's alleged breach of the Contract because Zachry failed to properly mitigate
its alLeged damages.
49, Zachry is not entitled to recover any damages from the Port Authority as a result
of the Port Authority's alleged breach. of the Cmltrnctbecuuse Zachry owed thort Authodly, Zachry had a duty to disclose the
fucts lo tlm Port Authority; but \Vas delih~rately ~iilenr when 1t had n duty to speak. Zachry
concealed such material infonnation, knmving that the Port Authority was ignorant of the facts
and did not have unequal opportunlty to discover the facts, in order tn induce the Port Autlmrity
to take a<.:tions (such as entering i.nto Change Order 4) or rcftain from taking actions (:mch as
desisting Jrum either terminating the Contnwt or deleting the wharf extension from the scope of
Zachry's work umlcr the Contract). In taking or refraining ii·om taking such actions, the Port
Authority was !ndtJced by such concealment. The Pori Authority relied on Zachry's non~
dim::losurei and was injured as a result of acting without kn.owleuge of the tlnd!sc1oscd facts.
Such behavim· by Zachry constit~ltcs fraud by .non·disclosm:e, and is a cotttpletc defense ru1d bnr
to Zrmhry's claims in thts lawstlit.
52. Alternatively~ Zachry is not entitled to recov0r O:om the Port A\Jtliority based on
any alltlgcd hreach by the Port Authortty of the Contmet bccnuse of Zachry's negligent
misrepresentations.
53. Zachry is not entitled to tecover fHJm the Port Authority based on any ~I!egcd
breach by !he Fort Anthorily of the Contract boomme Change Order 4 is an accord and
satisf~mtlon of any "claims'> that Zachry had at that time that Change Order 4 was executed, AU
prior Hclain1s'1 of Zachry were merged i.nto 1 sub:mx:m.:d by, and extinguished through Change
Order4.
2!
54. Zachry is not entitled to recover from the Port Authority based on any alleged
bretteh by !he Poti Authorily of the Contract because the damages sought b)' Zachry arc
consequential damagewand thus barred by stat\tte and by principles of governmental irnmunily.
55. Zachry is not entitled lo recover fi•om the Port Authority based on tmy alleged
brench by the Port Authority of the Contract because Zachry ratified the P01t A uthodty 1s alleged
adio11s und inactions.
56. Zachry ls nol entitled to recover from the PQrt Authority ba.<;ed on any ailegcd
hreuch by the Pmt Authority of the Conlrac! because Zachry waived the complaints it makes in
this action and any right that il may have had to lodge a clain1 for the Port Authority's alleged
breach of' the Contract
57. Zachry is not entitled to recover from the Port Authority based on any alleged
breach by the Port Authority ofthe Contractbecause Zachry is equitably estopped from lodging
any such claim for alleged }:treach of Contract.
58. Zachry is not entilled to recover irom the Port Aut110rity 1)ased on any alleged
breach by the Port Authority of the Contract because Zachry is barred by its own inequitable
conduct and acts of eoercion that threaten the larger public interest.
59. Zachry is not entitled to recQver from the Pott Authority based 0~1 nny allege.d
breach by the Port Authority of the Contwct because Zachry i!l btm·ed by the doctrines of
promissory t~»toppel and quasi-estoppel based on Zachry's aotion~ and inactit>ns.
N
N
60. Znchry is not tmtitled to. recover from the Port Authority based nn nny alleged
breach hy the Port Authority of the Contract because Zuchry's claims arc bun-cd by the defense
of release.
22
61. Zachry is not entitled to rec.over from the Port Authority bused on any alleged
breach by the Pmt Authority ofthe Contract because Zachry's claims are barred by the defense
ofpnyment Tho account describing and itemizing the payments made by the Port Authority on
the Conlract (the breach of which forms the basis of Zachry's clnirn) is attached to this pleading,
lnbelcd Exhibit A, ~md incorporated herein by reference,
62. Zachry ls not entitled to recover from the Porr Au1horily based on any alleged
breach by the Port Authority of the Contract because ZHchry's ulnims arc barred by the defens-e
63, Zachry is not entitled to recover frorn. the Pori Authority based on any alleged
broach by the, Port Authority of the Contract bconusc Zachry acted as a volunteer, voluntarily
changing its position, not due to tiny forw or ather condnct by the Port Authority~
64, Zachry is not entitled to recover fl'Om the Pmt Authority based on any afleged
breach by tho Port Authority ofthe Contract becrmse Zn:chrts cl.aims lll'e burred by the defenso ·
of unclean hands.
65, Zachry is not entitled to recort Authority based on any alleged
breach by the .Port Authorily of the Contract because Zachry's claims lite barred by Zachry's
own bad fnith conduct, arbitrary and capl'icious acts and omlssitms, and condm;:( lacking auy
reasonable basis,
66. Zachry is not entitled to r~Jcovc:r from the Port Authority because any dnmages of
l.achry were cuus~d or C{mtributed to by its own breach of duty; fault, or misconduct, M the
breach ofduty~ fault, or misconductof others tb1· whom Zachry il:l rcspunsible iu law.
67. Zachry is not entitled t(l recover fi:mn the Pmi Aulllority by virtue nf Zachry's
treatment ofthe Contrm.:l as continuing and, in addition, Insisting that the l'ort Authority perform
23
the Contract, precluding any cf.aim by Zachry of any defense of prim· material breach, under the
doctrine of election of remedies.
68. Zachry is not entitled to recover frnm the Port Authority by reason of Zachry's
conduct that nctivcly interfered with (a) the wurk of Zrwhrts subcontraGlors, and (b) the Pod
Anlhority's rights under U1e Contract, including Zachry's obligation to provide accurate and
timely inforrnation, as mquireu by the Contract.
69, The Port Authority denies thnt it made any misrepresentations to Zachry. ln tbe
allernutivc, to the extent that Zachry alleges the Pori Authority falsely represe11ted any mutter
(either affirmatively or by non~disclosurc), any such defense is barred by Zachry's actual
knowledge of faJslty.
70, Zachry is not entitled to recover from the Port Authority on the basis of any
allt.1ged ~'pu~>S-through" claim. The aUeged injured party (a Zachry "aftl!iate" now known as
Zachry Construction Corporation) did not exist at the time of the atleged breach by the Port"
Authority ami was not injured by any action or inaction ofthe Port Authority, Further, there is
no claim the nlleged h\iured party is entitled to assert against Zachry or for whfch Zachry Is
llnbll;) thut forms the bnsis of the "posJHhrough" claint
71. Zacbry is not entitled to recover from the Port Authority on the basis of any
alleged "pas:-Hhrong:h'' claim becrxusc Zachry assigned its obligations under the Contract to the
"uffiliutc'1 in violation of Sections 3.13, Zachry and/or Zachry's parent company tm.tl...'·
74. The Port Aulhorily respectfully rese1·ves the right to file un mnJ.?nded answer in
t11is Cause in the manner authorized by the Texas Rules of Civil Procedure,
75, COMES NOW the Port Authority and rcspectfillly Hsscrts this counterclaim fbr
attorneys1 fees pursuant to Section 3J 0 of the General Conditions of the Contract, for which a
filing fee has been tendered.
JURY DElVIAND
76. T!w Polt Au!ltority hereby demands a trial by jury,
PRAYER
WHEREFORE; PREMISES CONSfDHRED, The Port of Houston Authority of Harris
County; Texas, Defendant, prnys that tho Courl enter judgment that Plaintiff take nothing, that
Plaintiff's claims be dismissed with prejudice; and that Defendant be granted judgment for its
attorneys' fees and costs of court further, to the extent that the Court domrrnines that any
provision of the Contrnct is urmnforccuble as written, Defendant prays that the Court reform such
provision in accordance with the Contraol, and that Defendant be graute,d all other and fUJ1hcr
relief: nt law or in equity1 to which Defendant may show itself enti lled.
Respectfully submitted,
A~--````
David H. Brown
Of Counsel: 8rown & Kornegay. LLP
J. Clark Martin Texas Bar No. 03109200
Texas Bar No. 13090000 2777 Allen Parkway, Suite 977
Kelly Hmt & Hallman Houston, Texas 77019
lOOO Louisiana1 Suite 4700 713.528.3703 phone
Houston, Texas 77002 713.528.3701 fax
Tel: 713.654.4600 Email: dbrown@bkJlp.com
Fl1x: 713.521.5925
Email: clark.martin@khh.cnm Co .. Cm:Jnse1:
Karen 1'. \\'bite
Texns Bar No. 20274500
Set11 A. Russell
Tex1ts BarNo. 24027943
VINSON &ELKINS L.L.P.
2500 First City Tower
1001 Fannin St.
Houston, Tex~u; 77002
Phone: 713.7$8.2388
Fax: 713.615.5902
Email; kwhite@velmv.com
Lawrence J. Fossi
Texas BarNo. 07280650
FOSS I & JEWELL LLP
4203 Yoakum Blvd N 100
Houston 1 Tt!xas 71006
Ph
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TAB 10
Excerpts from The Port of Houston Authority's Second Amended
Response to Plaintiff's Request for Disclosure
(CR46:13036-77)
Flied 09 Septemb&r 30 P4:05
Loren JackSon ~ District Olerk
Harris county
E0101J015531241
By! Wanda Chambers
ZACHRY CONSTRUCTION § In tllo Disltict Cot1rt of
CORPORATION, §
§
Phdxlliff §
§
v. § Harris County1 Texas
§
§
TBEPORTOFHOUSTON AUTHORITY §
§
Dofendt1nt § 151st Judicial District
'rlill PORT OF ROUS'fON AUTfl.OlU'fY'S
SECOND AMENDED RESPONS'E'l'O
PLAINTIFF'S lU~QUltST l.i'OR DISCLOSURE
To: Zachry Construction Corporation
By rmd through lts attorney of record
Robin C. Gibbs} Esq.
Gibbs & f:ln1ns1 LL:P
1100 Louisiana, Strite 5300
Houston1 Texas 17002
C01v1J:SS NOW, THE PORT OF HOUSTON AUTHORITY '(the uPort Aut1tority")1
Defendant in the above styled tmd m1n1hered cnusct and pursount to Tnx. R. CIV. P. 194 files this
its Second A1mmded Response to Platntlff'r.• Requestfor Disclosure,
{a) The correct nam.es of the parties to the lawsuit,
The correct name of Defendant Is Port ofHot1ston. Authotity ofii.m:ds CNtnty, Te~t.as,
Dcfoodaut undersluuds that tlvJ correct na.rne of Plulnt:iff is now Znclu-y Industrial, Tnc.•
fnn.nerly ktlow.t1 as Zachry* Conslrtmtion. Cm-pomtion.. 1t appears that the entity formerly 1mown
as Zacht-y ConRtmction. Corporation engaged in tnu1sactions such that it no longer perfrmned the
Work undet the Phase 1A Whruf und Dredging Conlrnct, witront the prior knowledge of
EXHIBIT
POOT Attl'fi(HU'l'f'l) SftOONi> AMKNDEU R~l'ONSl~ ro
ZAClUW1S RltQt.IJU;l'f l!Oll. J>tSCJ:o~Ul\t~
Defendant and ill breach, of the Contract. Defendant has tlot had an opportunity to conduct
discovery on this issue} and has only limited knowledge of the ti'ausactiorls. Defendant has no
contract with the new entity that apparently is now lmoW'li as Zachry Conslrnctio:n Corporation.
No entity has a right to mak--e claim against Defendan~ or to prosecute tbis lawsuit against
Defendant, other !:han the emtlty with wh!eh Defendant originally contracted.
None, except that Defendant maintains that tho entity against which it originally
counterclaimed remains a party to this lawsuit and ia responsible for Defendant's attorneys' fees.
(c) The legal theories and, in general, tho factual basis ofthe_Defemlaot's claims or defenses.
!~..Qnse:
The Port Authority's legat lheorios am pleaded in it~ 1'htrd Armuuletl Original Answer, as
follows:
The Pmi Authority is a political subdivision of the State of' Texas and in tllerefore
protected by tho sovereign or goverruuentul immunity doctrine. 'the Port Authority is immune
from suil tmd from llabUity for all em1sos of notion and damages except as provided by
Subchap(et I ofClmptet· 271 ofthe Texas Local Government Code.
Zachry is not entitled ttl recovery against the Port Authority for bxooch of the Contract
because the Port Authority acted in accordance with tlio Contract provisions, inchtdingt lmt not
limited to tho right to withhold payments (Sections 6.05t 6.17) 5.05, aud 5.06 of the General
Conditions), the right of the Chief Engineer to dm:mmd n re0overy plan (Section 5.09 of the
General Conditions)1 tho right tn review und respond to submittals (Section 5.22 of the General
Conditions)) the dght to rcquiro schedules, reports and other additional information (Section 5.25
l'OR'l' AlJTllORIT\'tS SUCONii AMENDE\) Rl{.'ll'ONSWfO
UctiRY'$R'I1:Qtll!lS'1' lISCLO$VRI!
ot' the General Conditions), and in tlte event it ha.~ an instruction contrary to the Contract, t11~)
right to j}hangc the Cont:ra<:t (Sections 5.41 amd 5.42 of the General Conditions).
Zachry's allegations do not constitute ll breach of any of tho provisions of the Contract by
the Port Authority, The Port Authority's re,quost that Zachry mitigate the risks to the Port
Aui:11ority drilled slu1fts by revising and re&'Ubmitling the Septembet 9~ 2005 dtaft cutoff wall
desigi:I was riot n bxeach of Section 5,10 c>f tho Contractor ofthe Contract o1· of Chnnge Order 4;
the Port AutlmrityJs withholding Dlliquidated damages was not a breach of the Contract; and tht~
Zacl1ry llle U'JOney that it was periodically entitled to be paid undcnhe Contract as itlms eome
duet was not a hxeach of tho Contract.
Zachry is not entitled to recu\ier iro.m tho Port Authorityhased ori any u11eged breach by
the Port Authority of the Contract bt'ls request that Zachry mitigate
the risks to tne Port Authority drilled shafts by 1·evising and .resubmitting the Soptomber 91 2005
dr<1ft cutoff waU design constituted a breach of Section 5.10 of the Gen~&nd Conditions {)t the
Contract; [b) that tho Port Authority's request tbat Zoohry mitigate the I'isks to the Poxt
j
!'I
\r)
Authority ddtlcd slmfls by revising and rcsub:nrltting the September 9, 2005 d:ndl cutoff \vall
t"
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f..,
·"1'
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design constituted a bteach of Chang(') Order 4; [c) thut the Port Authority's \v:ithholding of
t
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E ,. liquidated damages <.~n.stitutcd a breach of the Conf.tact; [d] that the Port Antlunity1s instructicm
i
POR'i' AUTii0Rl'I'Y1S !{ltCONl'l 1\!\'lli:NDF:o iHtSl'ONSE '1'0
u.cmw's REQUESTFon mscr,osunu;
in uccordance ·with Section 5.0.9 of the General Conditions of the Contruot explain to the Port
Authority how Zachry intended to complete the Project within tho Contract Tbne or other
exercise of the Port Authority's right under tl1e Contract constituted a broach; or [e) that the Pmt
. .
Authority breached the Contract, Section 6.02~ 6.05 or 6.17 of the General Conditions, or some
unidentified provision of the Contract in its payment of or failure to pay Zachry's invoices; in
whole or in part or within any particulm· thnet including any breach which Zachry chm·acterizes
as "failing oo pay Zauhcy the money that it was J)Ctiodically entitled to be paid under the Contract
us it hac; come due," Each of the :requir~rnents in the Contract that Zachry timely a:ud properly
11rescnt lts claims f<1r more money Dr more time is both (l) a substantive contractual condition
proocdcnt to Zaclny' s right to recover money or additional time with respect to the Contract, 1md
(2) judsdictional under the Texas Constltutio11; stall.Jtcs1 and cornm Zachry
agreed to a Milestone A date and a Final Completion date. Zachry agt'ood to liquidat<."..d damages
in the event it fhilcd to meet these dates~ Zachry failed to meet the 1\1itestone A date and tho
F1nal Completion date. Jn additio~ Zachry failed to properly petfo:tm Work and the Pott
Autlu;rity bud to J>tty unrJther contractor to correct ot mitigate harm caused by Zachrfs defective
Work. The Pm·t Authodty>s withholding of moniGs fron1 :payments to Zachry is :-.upported by
t:nforceah1e provisimm of the Contract> including tl1e dght to withhold payments (Sooti.on 6.05 of
the General Conditious), the right of offSet (Section 6.17 of the General Conditions), tbe right to
liquldutoo dm11agcs (Section 5.05 oflhe General Conditions); the right to actual damages in lieu
of liquidated damages (Section 5.06 of the General Conditions), and tho Specification mu:l
Ptoposal (seliing ftnih the ctmcept of reduction of the contract pdce for late performance). The
liquidated damages witbhekl we~t~e a reasmmble forecast of just con1pensation because !:he
Contract provided for liqttidatcd druuages in 1ieu of actual damages und because the Port
Authority sustained actttal damages ill .an amount that was not disproportioxl!lte to the 1iq11k1ated
•n
II'\
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~(). Zachry is uol entitled to recover any damages fi:om the Port Authority as a l'Cst:Ut of the
t:l.
j
!"'I
It') Port At1U10rity's alleged breach of the Contract because Zachry is 1.-nu:red by the oxprcss,
r-
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f.'!") entbrceablc provisions of the Contract n·om recovering for the losses and damages that Zachry
-;:!'
st:::1
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§'"' POI\T AtrfJlo!U'I'Y'S Bli:CONI) MmNOEIJ Rll1Sl'ONSI£ 'fO
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0 ZACHRY'S 1mQUES1' FOR rHSCLO!ltJRE
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alleges, Sonm of these rlsk.-allocatitlg contractual provisions that bar Zachry's recovery include,
but are not limited to:
~ Asswnption' of the risk by Zachry for any lack of oompleteness in the Wharf and
Dredging Cont111ct Documents, including the Drawings and the Speci'fications~ and
!he rlsk of those documents not being sufficiently detailed and oomp:rehausive.
Cnnh·act1 Genetal Crmditions § ~t06. Znoluy failed to timely mise nny com:ems with
the Contract Documents and cannot now complain about their condition.
§ 5.07. Zacbzy cannot reoover damages associated with do1ay in the Project or
hindrru1e`` of its perfo:rn.umoo. This provision precludes Zachry's assorted
~ No entitlement to an increase in tho Contract Prico exoopt undm· llmite General Conditions § 1.08. No
entitlement to an extension of tlmo if theYe is also an event of Concurrent Delay.
Contract, General Conditions§ 5.08(b)(6), 7-nchry caused Concurrent Delays further
preventing it fro~n being entitled to au extension of time.
PORT AU'J'UOJUTY' SSJWOND AMENDED lUt:Sl'ONSE TO
74\.CIIRY1S REQIIRST ~tor~ Ll!SCLOSUltll;
I} Waiver of claims for an extension of time by failure to thtl<>ly nnd properly file It
reqm;st fbr tune extension, Crmtract1 General Conditions § 5.08, Zaohry failed to
timely or J!topedy seek any extensions of tim~.
~ Waiver of claims fbr changed oonditiuns or contract interpretations that ru·e not timely
rmd properly assorted. Contract) General Condittons § 5.42. Zachry failed to timely
ot properly assert at1y claim fhr changed conditions or conu·act interpretations
constituting n change to the Contract. The Port Authority has not modified or waived
any of theso provisions and is uo1 estopped from reiying on any of these provisiooo..
Zachry is not entitled to recover from the Port Authority based on any al.leged breach by
the Port Authority ofthe Contract because Zachry failed to meet the Standard of Cnre reqt1ired in
Section 1.37 of the Genctal Conditions of~1e Contact~ wh~c11 provides that Znc1rry shall 11se ..... c
[its} be.st skill and attention, in a good ttml workrmmlike manner and in the be.st and most
expeditious and eoonon:dcal manner consi&'tent with the interests o~ th~ Port Au.thorlty, shall
exercise the degree of care~ sknl and diligence in the performance t>f the Work it;~ n.coordance
with and consistent with industry standttrds for sim.ilar citcurustauce~ort Autho:rit:ts alleged breach of the Contract bootmse Zachry failed to oori1JJ1y with. its
affirmative conh'I\CL\tfll obligation under tl1e Contract to tlm PAG~7
information required by Sections 1.31, 5.03 and 5.04 ·of the General Conditiom>t 1he progress of
the work, and tho Schedules for completing tho Work.
Zachry is not e~titled to recover fi:om the Port Authority bused on any n11eged breaoh by
the J>ort Authority of the Contract because Zachry is barred by the "fu:st breach'' doctrine
because Zachry first materiallybr(,lac1ted the Cortlract~ including but not limited to Sections 5.03,
5.04,5,09 1 5.10 (including 1,37), .5.14 and 5.22 of the G·cncrat Conditions of the Contract.
Tht;J Port Authority denies that any nrul statement purporting to change or modifY the
Contract Documents is binding on either the Port Authority or Zrtchry. The Port Authority
denies that any written stntement pilflJOrting to clumge or modify the Contract Dom1mc;-.nts$ otnel'
than one from the Chief Engineer that complies ·with the expre{ls provisions for change in the
Contmct Docun\ents) is binding on either the Port Authority or Zachry.
'l'he Port Authority dooics thai Change Orde~ 4 iuclttdes as a term that a cutoff wuli must
be used lJy Zachry to perfMm its Work, and deuies that Chnngc Order 4 includes any term that
sou1c purticulru: design of a cutoff wall must be used by Zachry to perform i~ Work. Zachry is
not etltillcd to recover from the Port Autllodty based on tuly alleged breach by U1t~l'ort Authority
of tlH> Contract, as nmcmled by Change Order 4) us u result of any modification to Zachry's
September 9, 2005 draft cutoffwall design requested by the Port Authority.
l.achxy is .11ol entitled to recover fh>m the Pmt Authoril;,Y based on any alleged breach by
th~; Port Authority of tho Contmct l>ecause Zachry did not perform its obligations under the
Contract in a timely fashion. Zachry did not complete the applicable l)Ortions of the Work by
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Milestone A or the Pina1 Complelion dates rcq\1ired by the Contrnct. Zachry did not tlmely and
properly request extensions oftlme of such clato1:.
l'ORT AU'J'!IOIU1'Y 1S SECOND AM.ENTJED llliSl'ONSB1'0
ZACHIW 1S REQUF})'Tll'OR ))]SCf,OSUR'll- PAGlt8
Zachry is not entitl<~d to recover any damages from the Port Authority a.~ a result of the
Port Authorlty's alleged breach of the Contract because Zachry failed to properly mitigate its
Zachry is not .z:ntrtled to recover any damages fipru the Port Authority as a result of the
llott Authority's aJleged breach of the Contract because Z~chry owed the Port Authodty a duty
of full disclosure under the law) which duty tlf fttll disclosure was breached by Zachey,
Zuohcy is not entitled to recover rmy damages from the Po.ct Authority t\S a n~sult of tho
Port Authority's a!legt~ breach of the Contract. bccuuac Z-achry oomnuttcd fraud and fraud in tile
i:nduccmont. In cnrmection with entering into the Contract, and ut various time.~ during tho
:pe:rfmmunoo of ita work \lllder the O::JlJlraot, including dtiring negotiation of Change Order 4l and
during its :mootmgs and cmiver{;utions with the Port Authority abo11t schedll1iug in late 2005,
Zachry made reprosenhtii(JnS ;.tension from the acope of
Zachry's work under the Contract). ln taking o:r reti:ainiug :fi:om taking such actions, the Pmt
Atlthorily wa.dty relied on Zaclu:y's non~
disclosure, nnd was h\iured as a result of a.ct!ng without knowledge of the undisclosed faots.
Such behavior by Zachry c011stitntcs fraud by non~disclmmr~, nnd is a complete defense and b~t
to Zachry's claims in this lawsuit
Alttimativc:lyr Zachry is not entitled to recover Jhnn the Port Authority bused on uuy
alleged breach by tl:l.e Port Authority of the Contract he¢auso of Zacbrts negligent
rnisreprescntntions.
Zachry is not entitled to rcm:rvcr ti·om the Port Authority based on any ul h)ged hreacl1 hy
the Port A1.1thorlty of the Contract because Change Order 4 is an accord and satisfaction of any
"claims)! that Zacl1ry lutd at that tiine that Change Order 4 was executed. AU prior "claimsll of
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..,.., Zucluy wer0 merged into1 subsumed by1 tmd exti11guished through Change Order 4.
l'Olti AU'fllO!U'I'Y 1SSffiCONOAMI£Nllg!) RESl'ONI>ltTO
ZACJIRY'S lU!:QUES'r FOR nlSCLOSURE PAGI!.lU
Zachxy is not entitle-d to recover from the Pm:t AttthOlity based on any alleged breach by
the Jtort Authority of the Contract because the damages sougbt by Zachry at'e consequential
daroag1.-.s and thus barred by statute and by principles of govemmenta! immunity.
Zachry 'is not entitled to recover from the Pm·t Authority based on any alleged breach by
the 1)01t Autbority ofthe Contract because Zachry ratified the Port Authorlty~s alleged actions
aoif inactions.
Zachry iu not entitled to recover from the Port Authority based on any alleged breach by
the Port Authority of the Ctmtract becmum Zachry waived the complaints it makes in th1s acGon
and any right that it may have llad to lodge a clmm for the Port Authority's alleged breach nf the
Contract,
Zachry is nol entitled to recover from th('< Port Authority ba.'Jcd on HtlJ aUugcd breach by
tht) Port Authority of tho Contract because Znchry is equitably estopped from. lodgi11g any such
claim for alleged breach of Contract.
Zachry is nr>t entitled to recover from the Port Authority based on tmy nllegcd breach by
the Port Authority of the Co.ntract becautte Zachry Is bam;:d by its own. inequitable conduct und
Zachry is uot eutitl.cd to rectWt1X fron1 the Port Authority based on &t\Y alleged breach by
the .Port Authority of the Contract because Zachry is ban·ed by the doctrines of promissory
Zachry is not entitled to recover from the l'ort Authority based on any alleged breach hy
t11c Port A:uthorlty of the Conlract because Zachry's claims are ba:n:ed by tht' defense ofrcleasc.
Zachry is not entitled to recover fwm the Port Authorlty based on any alleged brcfich by
the Port Authority of the Contract beuatme Zachry's claims are barred by tlw dcfunsc ofpaYJ:Ue:J:lt,
i>Oltl' AtJ't'HORtl'Y)S S&COND t\l\1-&NDEO RESl'ONS!t ·ro
ZACHR\'1SlUtQUFSl' FOR l'nS(;!,QSI)lm
Tho accmml des<.:ribing and itemizing the payments made by the Porl Authority on th<~ Contrdct
(the breach of which ibm1s the basis of Zachry's cluim) is attached to this pleading, labeled
Exhibit A, and incorporated herein by reference,
Zachry is not entitled to recover fxom the Port Authority based on any alleged bread1 by
the Port Authority of the Contract because Zachry's claims are ban:ed by the defense of c>ffset
Zachry is not entitled to recover fi:om the Pott Authority based on any alleged breach by
the Port: AuthorHy of the Cont1'act because Zachry acted as a volunteer, voluntarily changing itH
position) not due to any forcn or other conduct by the Port Authority,
Znchry is not cnlitled L\l recover from tho Port Antborlty ba:;od un any alleged brcauh by
lhe Pent Authority of Llm Contract bcoaxisc Zachry's c~ain1s are burred by tl\e defcmse of1melean
hands.
Zttchry is not ootitled to recover from the Port Authority based m1 any nllegcd breach by
dte Port A:utltority of tl1<~ Contract becrmse Zachrfs claims ate burred by Zaohry1s owu bud faith
condnc£1 arbitrary and ¢npdclous acts and omissions, and conduct lacking any rea~onable basis.
Zachry is not 011titlcd tQ recover from tho Port Atti:hority because any damages of Zachry
were caused or contdbut~d to by its oWJl breach o)" duty, Ih-ult, or misconduct, m; the breach of
dtrty, fault, or misconduct of others for whom Zachry is responsible in law.
Zacllry is not entitled to recover from the Port Authority by virtue of Zachry's trC".atmcnt
of 1ho Contract as continuing and) in addition, insi~fng tl1at tho Port Authority pedbrm tho
Contract, precluding any claim by Zachry of any defense of pdor matetinl brcftoh, under tho
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doctrine of cl ection of remcdie.s.
Zachry is not entitled to recovor from tho Port Authority by reason of Zachry's conduct
thut U!.\tivoly intt:n:fotcd with (a) th" wot'k of Zachry's subcontractors1 and (b) the Port Authority's
PORT AUT!lORlTY'S SECONJ) AMENOKO Rm:roNSft TO
ZM.!Illt\')S lt!Ul'O,!!;S'l' !ttss-throughll claim, The alleged injured party (a Zachry "a:fi.iliate" now known as Zachry
Consirnotion Cm1xn:atio.n) did not exist at the iimf> of the alloged breach by the :Port Autlmrlty
ami was not injured by any actton or tnaction of tht: .Poli. Authority. !further, there is no claim the
alleged injured l'art)' is entitled to assert against Znohry or for which Zachry is liable that forms
the basis .of the. ''11ass~tlmmgh:" clait'li.
?;uchry is not ~:;ntitled to recover from th($ Pmi Authority on fu0c basis "f any alleged
control of Zuohry in violation of 3.15> Zachry ceased to employ on~slte &"rrporvision in violation
of 5.16, ltnd Zachry ceased self~performing any of the Work and engaged a subcontractor not
disclosed to tho Port Authority in violation of Section 5.11 of the General Conditions.
Alteruatively1 the Pmi Aulhority's .imrrmnity ~om suit and liabHity precludes Zachry
from rocovoring damages for or on behalf of any other party or entity, including without
limitation those Zachry seeks pursuant to its 1)elatedly disclosed and J)led •ro:;dmately 7,000 feet of wharf~ 380
acres of contnh1Ct: yu.rdsl multiple gate facilities nnd other irtft1tstructure and improvemeots1
including a ct·uiso tenuinal. The pl'ecise nature of' each phase an.d the tixning ofits construction
depend upon a vnriety of factors, including availability of ftmds, envh·mlmental pcnnitting
limitations, md the cl1anging demands of the Port Authority's cmtomt'!~. Phuso lA was the
initia1 phasB for Bayport. The Plmso lA wharf was originnlly 1,660 linear feet. A 332~foot
extension of the dock was latcl' added by Chat1go Ord<:it' No.4.
In 2003, tho Pori Authority requested Competitive Scaled Proposals for its Phase lA
\V:hnrf a:mJ Dredging Contract c·contractH). Zachry decided to I>tlfSUC tho work for its owu
business pttrposest in an effort to move into a .n0w line p f work, mi!nely, lht7 marine construction
business. Zac1n·y :mbmitted a response nnd actively sought the Contract from tho l1 ort Authority.
In seeking the Contract, Zachry mnde many nmi varied repre~;~eutnliEl1 REIH'ONS!~TO
/',ACl\ltY'S lmQtr~l' ltOJA D!SCLOSUlUl
everything necessury to emmre that the Bnypott facility was constructed properly. Zachry
promised th0 Port Authority that, HYour Vision is Om· Pnrposen; tT011osal) Zachry's
p:roposal was selected as the preferred proposal and the proce-ss of negotiating a specific contract
began. As a result of these negotiations, under the Contract, Zachry agreed to contractual
provisions that assigned the dsk and responsibility for loss resulting from events and probLems
that :might ruise during Zacl1rts work on Project. In effect, Zachry agreed that it could handle
ru1d wot1ld boar tl1oso dsks. Zachry conveyed that the HZacley way" of doing business vrould
minirulzc the possibility oftlmt risks might occ-ur.
Modifications cont~ined specifically negotinted provision!.> providing additional benefits to
Zachry for particular risks assumed by Zuchryt such ns au il1crcase of $2A million ovcrZucllry's
ori&ri.nally proposed Contract Prl Ai'rlKN.Ol,:U !U!Sl'ONS!<;'I'O
ZACHRY)S RKQU!!:S'f li'OR l){SCLOSUR!i: PAGElS
economical manner consistent with the interests ofthe Port Authority, and would utilize its best
skill. efforts and j\idgment in furthering the interests of Port Authority. This promise and the
other '¥arious promifleil made by Zachry to the Port A11thorlty in order to obtain the \Vharf and
Dredging Contract created a special contractual relatlonsh.ip, giving rise to a duty to disclose
owed by Zachry to the Port Authority, (:liven this l'eiation.ship, Zachry's duties to tho Port
Authority htoluded a duty of honesty, candor a:nd disclosure of matcdai f:aots, inchtdi.ng facts as
to schedule mtd Zachry,s intent and hclictsr as respects matters impacting the Port Authoritts
int tltoots.
<~AreaN' by an interim Milestone Date ofFohmary lJ 2006 in order to aceommodate the axrlval
of the four Chinese container eranes and to provide sufl1cicnt tin1c for the Port Authority to
attendant cran~relatod. tflsks so that the wharf <:Vork by the tirne~ the ortme siJip
l'ORT AUTfl~)ftl'!'Y'S SECOND AMEN.OltD RltSI:ONMit TO
ucnRl''s llliQOteSl' 11oR nv>cr.osum~
arrived or else Zachry would lnter find itself working in tho wet. Ktihn represented to the Port
Authority that Zachry \Vould achieve this objective. Ku..hn also was aware of the Port Authorityts
concerns that Zaohry''s chosen soH freeze method of construction might place tl)e Port
Authority's drilled shafts at risk and agreed that Zachry would address that concern.
Before Zachry and the Port Authority signed the Contrnct1 KUhn convinced the Port
Authority to lllso award the Phase 1A Contninm' Yard Contract to Zachry. This fnct so impressed
ZachryJs San Antonio mamrgemeut that Zachry decided to remove Kuhn from l1is position of
Project Mmmgor or Sponsor for the Contract and tl1e Container Yard Contract, hri.ng him back to
San Antonio and Hssign him a business development role. Zachry conc~alcd thi.s decision from
the Port Authority for weeks.
In removing Kuhn ns Project Manager or Sponsor1 Zt~,chry removed n por,son wlio dirct:tly
participated in per~::uading the Port Authority of Zachry's ability to perform tho Contract, who
Zachcy tontoo uslmvlng the background and experience necessary to manage a project of this
Zucbry's decisiotl to remove Kuhn loft tbe Contract without a Project Manager or
conunittcd Sponaor. Zachry made this decision solely for its ow11 benefit, knowing th~tt there
wns no other qmilifioo person within the entire ZachJy orgnnizat1ou who was uva11ub1<;l to
perform the duties of Project Manager. Zachry was forced to quickly find a replacement for
Ktilm. Zachry hire
I'ORT AU'I'UflRI'rY'i! SltCOND AMENDED RESPONSE 'PO
Z4CIID X'S REQUES'l' FOR DlSCl.OSUm£
supporting l:llld mentorhlg the small business suhcoatmotots. Anderson's !)Osition was that, if he
had his wayt most ofthe subcontractors would be fired and Zachry would self~pcrform the Work.
Anderson did not belio\'o in open lines of communicnttion and dialogue with the Port Authority.
Anderson told his subcontrnctors that they were prohibited fh1m tfill'Jng to !he Port Authodty.
Anderson did not believe in fostering a working relationship with the Port Attthority, Anderson
considered the Port Authority and !he Consttootion Manager, CH2M Bill, to be 11Je "enemy."
Anderson told his staff that he "wanted to sec all ofthe heads of tl1e Port's employees on stakes
lining Port Road." Andt->rllon instructed his ~taff and snbcon.tractors to "cmsl1 the Port.t>
Anderson beHoved in ''playing the claims gam.e." When Anderson lC!lmcd of the promises that
Zachry lmd mude to the l)ort Authority to got t11c Ckmtmct, Anderson ridiculed Kulm for :making
Voldemort," tho man in the Hurry Pottt.w stories who is so evil that his mmm cannot be spoken
ulou:d, Anderson was :not truthfuL Virtually utt of this was conoouloo from thr> Port Allthority by
Zachry,
Althcmgh Anderson was the wi'ong choice for the position ofl1rojcot Marmgor1 Zachry
put him in cha.t'ge of the Contract and left him in churgo and large1ytmsupcrviscd for eighteen
months. The person at Zaelu)l who was Anderson's direct rcport1 Greg 1v!cVey1 did little to
supervise or ooutrol Anderson. Fred Lucck1 to whom McVey reported, was 1axgoly uniuvolved.
It was only at the insistence of the Port Authority that Anderson \vas <:rvontually removed from
{j
Oil t11o Projeet, after the harm that he caused became apparent. Ntwcrthcless) Zachry resisted
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removing Andenmn from the Project, and although Zucht)l later told Anderson to quit or he
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would be fired. and told McVey that ho too Heeded to leave as Zachry hod lost faith in hun,
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. Zachry}s corporate attitude even today prevents Zaclu:y from admitting that it mado a mistake in
.f.
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0
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PORT AUTUORI'f\'~S Sll:CONU J\1\ the Port A11U1ority does uot bave the rig11t to select
or prescribe Zachry's meth• and claimed it was entitled to an extension of the Co11trnct Time ~ even though :it was
clear the anticipated concxct\3 material shortages v1ere not an event that would entitle Zac.hcy to
PORT AUTHORITY'SSftCONll AMltl\'DED Rl!Sl'ONSU TO
ZACIIRY)S REQlJES'I' I•'OR DISCLOSURE t'AGJ~23
an extension of the Contract Time. The nstmction of the wharf deck in the areas of !:lu:-.sc driltoo shafts until the repair work was
completed.
Zachry's work on the under-side of the deck itself \Vas defective in many urea~. /.(lchry
engaged in tmdenleck patohiug to ropuir drilled shaft:.s1 bullnoses and voids tmder the devk,
thereby limiting and delaying underdeck excavation. Zachry began cotrecting th1s defective
work in, Jattl 2.005 and the repairs continued for 1nonths. All of tb:is repair work delayod and
ldmlcnx:l Zaolwy' ~ txnderdeck excavation.
l.achty wn.~ iate in providing required submitlais to tlJe Port AuUmrity for :review by the
l'm:t Authority and its ccmsultants. Even whtm Zachry provided the submittalsl many of the
stthmittals were iuoomplete or defective. This failure by Zachry caused delays in Zachry's: work
Zachry mude the decision1 in. order to snve mo.noy, that it would retain its soil fr{leze
subcontractor, RKK SoiiFxeeze, only to :fh:eze llt'ound three sides of th(l excavation area.. Zachry
decided that it would selr~perfbtm the cutoff of the water flowing fi'Om the fourth side, that is,
the land side. But Zachry took no action to deterrnin~ how much water: was flowing from the
land siUc into the excnvatlon area. By early 2005, lLT(J{ Soi1Freeze and its consulhmt,
GooEngincern, ·wore warning Zachry that Zachry must determine the amount of water that was
flowing n·oru the land side into the excavation area and figure-out how to control it But Zachry
did not do l!O until early November, 2005. ahnost ten mon1hs later.
•'Ott'!' AU'!'llOIU'l'Y'S SECONI> AMf£1\DED RESl'ONSlt 1'0
ZACIJRY,S REQUF.S1' 1101\ lHSCLO.\iUHl': PAGEZ4
For almost n year, Zachry's dredge work- nn important component of its Work- was
little to nonvcxistcnt. Zachry itself was not cnpubl~ of performing tl1e needoo dredging, so it
8!3bcontraoted that work to Continental Dredging, Continental Dredging's equipment was
frequently broke doW!i, a11d 1 as a result1 dredglng fell far behind scbedu'Je, Zacluy eventually
terminated Continental Dredgin& commandeered its: equipment) and filed in a ltlwsuit agalm;t
Continental Dredging.
Znchry titiled Lo timely implement its chosen means and methods ofltsing a freeze wull to
oons!Tuct a frozen berm that tvou!d allow Zachry to \1\tcavate in the dry. Zaclu:y delayed until
Febmary 24) 2005 to even sign its Stibc
70% of the l}ceze pipe failed und had to be replaced, It was not until mid to late October~ 2005,
that Zachry comvlcted the task of removing and replacing the defective pipe. Moreover,
although RKK insistod'timt before any part of the freeze wall was activated, Zachry must voucl1
fhr the p:t·opcr installation of U1e freeze pipe, Zachry insisted that RKK certify to the proper
installation, Appnrently~ neither wo1.1ld certii)',
As u result of these and oU1er omissions and failures, whic1l delayed Zachris work,
Zachry fell so far 1'ehind sohcdttlc that it was too li1te for Zacluy both to tttiHze llie freeze wall
and meet U1e interim milestone date tor Area A. As the result of its own errors and mistakes,
Zachry made the decision to abandon the fteeze >vall, exoovate to the extent possible "in lhe
dry," and then excavate in the wet. Zachry terminated RKK SoilFrc.mze's contract, and gave
false oxplanations for this decish:m, Zachry e~1gaged in rut m'bi.tral:ion, a 1>rivate lawsuit, \Vith
RKK SoilFreeze. at one point threatening the Pxesid``nt of RKK Soil Freeze that Zachry would
Zachl:y attempte<1 to conceal from tbc Pmt Authority the trutl1 as to Zachry's schednle
problem$, m1~ what wa. AMY.N!)EO RESf!QNSg'l'o
~ACilRY'SlUtQUlli>l' !>'OR DfSCLOSURE
2006. At thatthno, Zachry conceived the idea of dividing the work into two compcments througb
~
gootoobruC~tl. engineer, OeoEngincers, about clestgnjng such a cutoff \'i.1all for Zachry, which
would be paid fbr by Zachry as part of its oonstruction means and methods. Zachry instructed
RKK SoilFroeze and GeoEngineers notto discuss the-se issues witl1 the Port Authority.
Under the Contract 11s asvanled 1 the dock component oi'was comprised off'iVort Authority to award Zachry a change order that would result in
the Port Authority paying $13 Million fbr a: cut-off. v,trul that Zachry needed .in any evoot>
whefuer or not tho S<:lction 6 extension was udded to the Contract 11m.~, behind schedule to u.
degl'ee uriknown to the ]>ort Authority, Zachry affranatively sought out the dock extension, and
continued to mim:epresent thr<1ugh its schedule updat~ fhe true status and likely Mtlestmie A and
final completion dnies ofthaProject.
l'OHT t\O'JUORITV'S S!GCOND Al\11i)N.IiBD RI~Sl'ONSE TO
U..C.IDU';S UEQtJV.'H'ltOR })li)Cl,OSURit
In ti1is time frame, Andy Anderson told RKK SoilFrecze and GeoEngineors to dt;)vclop a
concept for a cutoff wall. Eventually, they developed lleveral <;.onccpts. Ouc concept was a
b~lw~n the sheet pil~ walls, wilh. the frooz:ing surrotmding one pier on Row 13, Both RKK
SoilFrooze and GeoEngineers told Zachry thnt the Pol:! Authority would have ccmoexn nbout any
use of Ute soil ii·ceze methodology ncar t11e Port Authority's drilled shafts. TbnJ.:orn for fue Port
Authority. Z.achzy told them to proceed with the 8-foot vtide sheet pile; frozen wall concept and
that Zachry "would n.m it down the Port Authority's throat.>t Zachry instructed RKK. SoilFreeze
and Goo Engineers not to discuss these i:;sues wltb the Port Authority or its consultants.
As of AprilS; 2005, RKK SoilFl'oo~e and GcoEngineers had not created a design for tho
proposed cutoff wall. GeoEngineers had no4 at that time, yetputchased fuo soflwure tlntt would
allow it to develop the design. GcoEnginccrs had not determined how the cut-off waH would be
installed or lnter removed. Indeed, at this time GeoBngi:neers had not concluded that a cutoff
wall -would even work. Nonetheless) on April 51 200.5, AJlderson appeared at a Construction
Coordination meeting and, without any prior urmouncementr minimized th(:l :pot1:'ntial impact oftt-
cutoff wa1l concept ibr which Zachry then had no de.'lign. Anderson sketched on a white board,
and :promptly erased, what Zncl1ry has since disingenuously culled the "exact design" or the
"very desigtl" fbr the cut offwul11 when in fact Znchl:>; did not submit n draft de.<>ign until some
five months later, AndersM represented to the Port Authority's consultants in. nttct1dance that
nrrooLJngwas not an issue" nnd that 40 to 50 feet of the Row B piling would be unaffected 1'lythe
freezing, This turned out to be inacv"tll:atc, glvG.n tho content ofthc subsequent cuHltt wall draft
design. Zachry mado these statements in rut e:f:1brt to induce the Port AuU~otity to proceed with a
I'Otl:f A\Y!'liQltlT\''S SltCONU AMENDED IU:Ult'ONSE 'l'O
ZACIDn:')S ltEQ'UES'l' FOR l>lSCLOStiRll:
chango order fol' tlt(} $13 Million dock extension. Zachry kn.ew that, if it told llte Port Aufhorlt:y
the truth, it would not be awarded the 332•dock extension.
On AprU 13, 2-005, Zachry submitted a price quote to the l1 or~ Authority for the
oonstructiou of the l32~feet of wharf' t11at would comprise Section 6. In !:hat price quote, Zachry
represented to the J>on Authority that "a freezewall "' cutoff wall" would be used that would
encompass only one ( 1) piling on row t•B" out of the lmnilreds of piers under the wharf deck,
Zaclrr.is 1n'ice quote provided no other written detail about its preliminary> conceptual cutoff
wall conoopt, and, if ihe cutoff wall bon~ nny ~·elatiouship to the preliminary ''-whiteboardcd"
engineering and constructahlllty issues that would be dctalh:.d for the tlJ'Bt time only some five
months lnle:r .in Zachry's September 12, 2005 submittal of a draft cutoff wul1 design. ln tmy
event, at tht) Hme of the price quote, the Port Authority's consultants thought that Zachry might
be able to n1itigatc the freezing rlsk tojust one ofthe piers. as long as whatxwcr fom1al submittal
Zachry evennmUy provided for a cutoff wall design was acct'Ptable, ln tlH~ April 5, 2005
asked .for tho trnt~H.TI'Y'l) SECOND AMENDE» R!lSP()NSR TQ
l;ACHIW'Sltll:QtiWJ'fliOR UlSCLOSUlU~ PAGE 29
representations to fue Port Authority was that Zachry wquld perform its existing work and the
change order work such that Zachry would achieve an "uninterrupted flow ofwork,u
After suln:nitting jts Aprill3, 2005 price proposal) Zachry stopped work on a cutoff wall
dcsigt11 even tl1ough Zachry needed to use a outoffwnll whether or 11ot it was awarded the dock
ext~ns:ion. A competent contractor would ha:v~ proceeded to develop a cutoff wall de.sign, timely
provided the design to l11e Port A11fuority and its consultants, and worke(t through the any
concerns of the Po1't Authodty or its consultants to arrive at a solntion.
Zauhry now makes the specious clai111 that the Port AuiliorJty had tm obligation, after the
April 5, 2005 meeting to; [1] stoll the constrnction process and, spend hundreds ofthousauds of
dollars re-designing tho Port Authority's facilities in order to make the design of the facility
comport with Z~td11y's potentiul method~ and means of cnn~iruction; ~md [2] spend the time nnd
money to ret~in commttants to revi(;lW the preliminary~ white-boarded concept. Howe'Ver; under
the Contract, Zachry had the obligation to utilize methods and means of constl·uction that
comported wilh tho Pmt Authority's design 1 not the other way aro1mcl. Moteover, if Zncbry
wished to seek a c1:iangein the Port Authority's desigtt> e,g., lengt1teuing the drilled shafts, it was
Zachry's <>hligation to submit the pro1x'sed change to the Pol't Authority~ which Zachry did not
do. Zachry n1ak('.S this false claim to conceal the fact that Zaclny misrepresontcd Uw facts to ilie
Port Authority during the April 5, 2005 meeting about a proposed C\ltof:f wall, 1md the fact that
Zachry wrongfillly delayed action to develop the cutoff \Vall design tor the Port Authority to
review,
Throughout tlte period of time extending from late April through mid-August of 2005,
Zachry repeatedly represented to the Port Authorily that the design for a proposed cutoff wall
PORT AUTtmttrn''S SECOND AIVlENOlW Rl!Sl'ONSE TO
ZACUltY 18 fU:QIJl!:S'r .li'OH DISCLOSUJU1
Wt:IS in progress. Jn fact, during this sru.nc timeframe, Zucl1ry had not authorized RKK. SoiJFreeze
and Goo Engineers to proceed \vith the creation of a de-sign.
OnMay 181 2005> Zachry submitted a revised quote to the Port Authority of$12,572>000
tor the 3321 dock extension, Once again, ln spite of the many uncertainties and unknowns
surrounding Zachry's use of the fh:eze\vail and, Ha freezewall- cut off wall/' Zachry expressly
represented to the Port Authority tlntt Zachry would achieve .mi "nu1nte1'mpted work 1Jrocess."
Ouce ag<•i:u.. Z\ichry expressly Jepresented to lhe Port Authority thut Zachry wonld utilize
Zachry's ''cu.u.ent constmction method.'' Once ngain~ Zachry expxessly represented to the Port
Authority that "a frew;,;ewal!- cutoff wall'' would encomp.ass only one "B'' ro1v pier. Zaduy did
not articulate any schedule concerns~ or impose any time limit on the Port Authority's uc.ceptanoo
of the quote, and provided no ftl\i:her detail as to the ·prelitninru:y~ conceptual. ru1d unsubnlitted
On Jt!ly ll) 2005, Zachry sent a letter to the Port Atttholity iu which Zachry for the first
time oftbred cerLain important clarifications and additions to i.he change o:rdcr being negotiated.
Zaclu:y>s !otter oruitted menticm of the still W.1S\ibrnitted 11desig,rt" for Pa freezeM'IU ~ cut off
wallt Z."tdtry stated that pricing wus based on HZCC having a Wol'king design ~md dr&wiugs for
drill shafts no la.ter thtm A11gu.st 12, 2005'; and nzcC having a workiug design and dtawiugs fo1'
tho Wharf Deck no later than November 25, 2005, 11 Prev:Jously1 .Zachry :hud not assorted any
such conditions. In its July 11, 2005 letler~ Zachry sitp..ply stated ib.at if tho Port Authority met
r.J
t;[} .,
tbe two mile.qtones enum<'rated above; then Zachry would meet fue modified date ofFebmary 15,
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01 2006 for the area required for Milestone A and that Znchry would meet the final cornpletion date
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of June l, 2006 fbr 1h.e original 1,660 f~et of wharf (i.e., Sections 1~5) and the nevt final
~
completion date of July 15, 20()() fhr the 332 feet of wharf (i.e., Seotion 6), Zachry e);:pressed no
PORT AUTUOlU1Y'S SECOND AfliillN()ED MSI'ONSI£ TO
ZACJI:RYt$ ttEQUES'l' FOn DISCLOt5Ull.B PAGE31
other schedul~ or timing cooce.rns. The Poit Authol'ity met the two deadlines expressed by
Zachry in its July 11, 2005letter.
On July 25) 2005, the Port Authority Commission approved Change Order No. 4, and on
Augnst 8, 2005, the Port Authority sent a leiter to Zuchry stating) "This letter is to serve notice to
ZCC ofPBA's intent to proceed with this change at the agreed upon cost and scope of work.,
The next day, Zachry commenced perfimning the work tmder.· Change Ordel' No. 4- and the Pol't
Authority becan1e obligated, as Zachry's management uuderstoo~ to pay Zachry for that work.
The ·Pott Authority noted tbat the Change Order had been approved by t1m Port Authority
Commission in the nmount of $12,962}800 1 that the Change Order wm1ld be in Zachry's S~u1
Antonio office lJY AuguRt 1.01 2005 for execution, and that the Change Order i.%s baing
expedited by the Pmt Authority, On Aug·ust 91 20'05 lhc Port Authority scn:t Change Order No. 4
to Zachry1s San Antonio office.
Zachry•s belate~ madc·tor~litigation contention thnt the Port Authority took an
unreasonably long time to decide to award the change order Worlc to Zachry under Change Order
No. '4 is fa1so. In Jeality, ihc;Y amount of thne required to enter into Change Order No. 4 was
reasonable. Th.erc were xnany dis(,"Ussiom.; bctweel). representatives of the Port Authority and
Zachry concerning the logistics of the proposed Change Ol'der. The extension (i. (<,,.Section 6)
was not ever1 desig!:wd when Zachry mtd the Port Authority began discussion of the proposed
Change Order, and Zachry was a\Vai·e of this fact. lJ,ort Authority Commission approval was
req\lirr.d to proceed with the design for the new Seviion 6 and then SectiOJl 6 had to be desigLted.
The Port Authority and Zachry then ncected to negotiate the tenns of a Change Order and1 if
agTe~mcnt wus reached~ tho llort Authority Gomm.isslon would then need to approve the. Chango
Order.
PORT AUTliORlT\'}S S!CCOND AMI~NDEP RI!SPONSJ!: 'l'Q
'l'.iACilltY'S lmQUES'J' FOR !llSCLOStfltE
' '
Zaclu·yts April 13 t 2005 pdcc quote was just that - a price quote, wl1iclt the Port
Authority hud no obligation to accept. If Zachry thought it took too long to agree upon tem1S for
a change order1 Zaohry had no obligation to accept the change by signing and binding itself to
C!:nlilge Order No. 4, But Zachry did so, foreclosing any such complaint On August 29, 2005,
Zachry finally signed Change Order No, 4 ami its attendant Scope, Tune and Price
Modifications, Zachry signed Change Order No, 4 and the Scope, Time and Price Modific-ations
without a.ny reservations of rights, Without any cmiditions or lin1.itations of any typo) and \vith
complete knowlooge of tho Length of time it took to flualiz.e Change Order No. 4, and vlith
CZltnplete knowledge of all of the events and actions that \Voutd be teqnirort of Zachry by Chango
Order No. 4 and the ncco1np!lllying St::ope, Time and Price Modificalion.et Change Ordel' No. 4, (J1' as a tC.'Rtlt of Hie changes req).lked of Zachry to
perform flm change spccifitJd hy Change Order No, 4~ or changes in the mctl10ds that Zachry
contemplated with respect to its original work l.ltldcr the Contract as a result ofthe wodc agreed
to in Cbaugc Order No. 4, were subsumed and pxecludcd by Change Order No. 4 and the
accompanyittg Scope, Time and Price Modificatioos.
Dm'ing t:he negotiations for Change Order No. 4, Zachry lmew Umt it conlcluut Hchieve
tht1 dates it was ugre~£lng to in Change Order No, 4, namely; completion of Area A by February
this Information fi:om the Port Authorityt internally discussing when to come cle!lll yvith the Port
Authority~ but umvilling to speak tmtlrt'ully until it kiie\v 1vhether t11c Port Authority would
award Zachry moro work. Had the Port Authority !mown the truth, it would not have entered
Change Order No. 4, In fact, Zachry misrepresented to the Port Authority during the
l!OR'r Atrl'!l0tU'l'Y1S SUCONl> AM.Ki'~S}~ TO
ZAcr!JlV1S ltEQUKST FO!t msCLOSUl~E
negotiations what Zachry could accomplish. Zachry did so to induce the Port Authority into
granting the change order work to Zachry, so that Zachry would be paid $12,9 Million fur a task
that Zachry needed anyway.
rt was not until September 121 2005 ~ aftor the Port Commission approved the awurd of
the Change Otder W~rk to Zachry, after the Port Authority issued ita letter for Zachry to proceed
vvi.th the Work, n·fter Zachry in fuct commenced the Work, and after Zachry executed Changtl
Order No. 4- that Zachty first submitted any details of a draft design fbr a cut~off wall to the
Port· Authority's Construction 1v1ana,gcr, CH2M Hill. This was GcoBnginoors' Sc.,"}Jlcmbcr 9,
2005 draft c~toffwall design.
Za.cluy pleads that the design that Zachry submitted to the Port Authority on September
12) 2005 wus "consistent with its prim· description of the frozen cutoff wa1V; This assertion is
false. In comparison to the dr~:~ft. design S\tb;rnitted on Scptcmbt\l'12t Zachry's prior explanation
to the Port Authority as to the cut..ot't' wall was misleading, Specifically, the September 2005
submittal showed a nortb!sonth cutoff wall that laterally froze far n1ore than the one ''Bn l'OW pier
tmd fi'OZe to sigtliflcantly greater depths than had been represented by Zachry in connection witl1
negotiating Chrmge Order No. 4. Znchty's September 12, 2005. submittal rcqt1ired free:r.ing the
soil around up to 23 oftho \"'' J:fQR ))JSCLOSUHE PAGE34
The Port Authority's Constructio.n Mm:mger on Sc1ptember 14~ 2005 fonvaYded the
J
subn1ittal to Jefl' Ely of CH2M Hill to cormnence review of Zachry1 s draft cutoff waH design,
Shortly thereafter, Hmrleane Rita threatened the City of Houston and the Project site, resulting in
a 9-dny extension of time later being granted to Zachry. On September 28) 2005, Zachry's
frozen soil wall designer, OeoEngineers, submitted a supplemental ri1omorandm:n containing
Incorreet assumptions, thus heightening CH2MHi11 til concerll as to whether Zachry's draft crutoff
wall design placed the Purt Authority's drilled shn:fts at risk.
On October 31 2005 ·~more than a wGl?k before thel'm:t Authority's October 11m "revise
and restibtnit" response to Zachry's sttbmittal of the draft cut~offwatl .design -w Znchry disclosed
it:; inability to mee~ its Bmwlin11 Schedule, Specifically} Zaclny projected mittf>inrt fhe Milestone
A date by 35 days, despite havh1g agreed to the February IS, 2006 Milestone A date only a
monU1 b<:fore~ when Zachry signoo the Change Otder;
In its pleadings, Zachry clmracletizeB the Port Authority's October 1111\ respQns0 that
Port Authority's wharf: us (ibait and switch.n By this accusation, Zachry accuses the Poxt
Authority of conduct committed in fact by Zachry. Thus, as patt of Zachry's Hbuit-mul-:swiich"
strategy, nftet Zachry knew the Port Authority was bound to inw Zachry almost $13 Million for
~/!\
Chunge Order 4. Zachry submitted its so-called ' 1August* pxogress schedule s!~owing that Zachry
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could not complete Area A tmtil March 22, 2006, 35 dttys aft0r the February 15, 2006 date
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(II)
tJ Zachry had corrn:nittcd to meet in order to obtain the dock cxtensiotL lfZacbry hud disclosed
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\(\ during ncg{)tiation ofChunge Order No, 4 that it intended to freeze th0 soil ru'Ound multiple piers
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closer and at great0r depths than Zachry had represented in connection with negotiating Change
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Zachry knew at the time it decided to abandon the .fretr.te wall that the changes to the
draft c:uto:ff wall design needed to mitigate the risks to the Port Autl1ority's drilled shafts could
have been a.coompHsh6d relatively quickly and simply. Also1 Zachry could have ofiered an
explenation as to how Zachry's draft cutoff wall design 1vould protect the drilled. shafts. Zuolll:y
did not attempt to implement either an available alternative cut~off wall design or to provide an
(~xphmotion aiiempti:ng to Justify tho Soptrtmher 12111 design.
As a result of tho Port Authority's October 14, 2005 reqt1est fbr a recovery plan~ Zachry
tor the fir~t time attempt11d to prepare realistic schedules, Tlmse schedules) printed out by
Zachry on or around October :31 and Nlwember l, 2005, almwed thatif7.achry continued to use
learned that t1l.tl delivery of the crru.1o ship oould not be delayed thut long, Zachry also loomed
Umt the Port Authority cxpectt'rl Zachry to constn1ot thl':l faclHty tllat Zacllry bad to agreed to
construct, that li'l, that the Port Authority was not going to accept a dock as tu whfoh Zachry
performed only pa.rt of the agreed work by l>erfor.tning only part of the agreed excavation. Also;
in this time .frmm~, Zucluy's efforts to rocrce its subcontractors to mako false statements about
the unavailability of obillers, in order to obtain un extension of the Contmct Tim.e, had failed. At
the same timJ31 Zachry learneq it would take longer to f~eeze.down and then thaw tho main freeze
wall than Zachry had u,ss~l.t1e Zachry did not state that Zaciu·yts decision to abandon. use of
!he main Ih::c-.cc wall was caused by the actions or inaelions of the llort Authority.
Znehry's hybrid CO!:tSlrnction method (Ptun B) wns :not properly engineered or scheduled.
In fact> Phm 13 did not work within the time frames represented by Zacbzy. When Zachry 1s
altern..~tive lllan l3 tumed out to require more time und expense than Zachry hoped, Zachry
sought to bltune the Port A1tlhority for the resulting cost overrun.
At vnrious times in its Work under tho Contra<:11 Zachry proposed changes to the Plans
and SpeoH1cationR that were not ibr the Port Authority's advantage tmd prcscnl:ed risk to the
f,acility but wore tor Zachry's own benoflt `` in order to make Zachry's \Vork easier> m· to reduce
tho scope of tho Work; or to reduce. the cost to Zachry of the Work. Some of the changes would
have resulted in tlw Port Authority receiving Less Mdcr t:ltc Contract than Zachry lmd agreed io
l'OR1' AUTHOlUTY'SI:!ECONO AMRNDliD rutSPONS!i:TO
MC~RY'SlU~Q~IJ£-~'1' FOR DlSCWSURR
provide. These proposed changes were not for the 'benefit of the Port A'nthoti.ty. The Poxt
Authority expended substantial time and effort analyzing some of these proposed changes in an
'
oftbrt to respond in a reasonable way.
Throughout its Work under the Contract and exte,nding into October of 20061 Zachry
~JXe<:uted partiaL releases in r the Contract. The Port Authority has
withheld reasonable an1ounts, calculated based upon tJu~ cost to correct the defective dredging
work and its consequences fron1 payments mude tq Zachry to justly compensate the l)ort
,,
Authority for actual loss suffered as a result of the defootive work.
Tho Port Authority is entitled to recover attorneys• feel§ incun:cd in defending against
Plaintiff's claims. The Port Authority hm1 produced docttm(mts showing its aHorneys' ibes
accrue<:! through March. 20091 and has designated an exp0rt who has submittetl reports regarding
~\lOR'!' AOTllOllfl'X'S St<:COND AMENDlm RESl!ONSE TO
Y.AClill\' 1j,HUCQUEf:iTFOlt l>ISCWSOR'lt
l .
the Port Authority's a.ttorneys' fees. The fnll amount of the Port Authority's attorneys 1 fees wilJ
not be know until ihe trial of.this :matte-1·is near conclusion.
(e) 11xe nmne, addnbss1 altd telephone number of persons having knowledge of relevant fucts 1
and a brief statement of enoh identified person's cormeGtion with U1e case.
Response:
Advanced Technology Science Englneedng Research eATSER")
1150 Richorest Dr.
Houston, Texas 77060
Phone: (281) 999·9961
McKinney, Gary- Lead Inspector
CenterPoint Energy
Galveston, 'l'exas
l)none: (409) 765-4086
Cell Phone: (281) 382-8578
Maxwell, Mike - CenterPoint emvloyee with whom Zachty communicated
regarding electrical reqtlirements for freezewa!I. Mr. Maxwell may be contacted
through CenterPoint's attorney> Ms. Judy Liu> at (713) 207~5465. ·
Cl~T?)Vl H1H
7600 WostTidwe11 Road
Suite 600
Houst-on, TX 77040
Phone: (713) 462~0161
Fax: (713) 462-0J 65
Bycre> Ron - E11ginecri:ng Doslgu Mru1agerl formerly with CH2M Hill, now
believed to be with 1V1offatt & Nichol in Vancouver
Curtiss, Srevc ·- Co!)struqtion Manager, ibrmody with CH2M Bill, :now believed
to be with Parsons Brinkerhoff in Virginia
Ely, Jeff·- F.ngtueering Ptojeot Manager
JoJ:mson, Bob- Program Manuger, formerly with CH2M Hill, now believed to be
with Klotz
Sethness, Doug --Program Mru1ager
l•Olt'l' AU'l'HO!UTI''S SECOND t\.MENlli;)) RESPONSE 1'0
ZACHRY'S REQt.lf:~l' XtOll. DISCLOSU!tE PAGl?,4l
TAB 11
The Port of Houston Authority's Objections and Responses to
Zachry's Fourth Set of Interrogatories and
Fourth Request for Production
(CR46:13105-16)
CAUSE NO. 2006-72970
ZACHRY CONSTRUCTION § IN THE DISTRICt' COURT OF
CORPORATION, §
§
Plaintiff §
§
~ § HARRIS COUNTY, TEXAS
§
§
THE PORT OF HOUSTON AUJHORITY §
§
Defendant § 151 ST JUDICIAL DISTRICT
T UE PORT OF HOUSTON AUTHORITY'S
OBJECTIONS Ai~ D R ESPONSES TO ZACHRY'S
FOURT II SET OF INTERROGATORIES AND FOURTH REQUEST FOR
PRODUCTION
TO THE HONORABLE JUDGE OF SAID COURT:
COMES NOW, Defendant, The Port of Houston Authority (the "Port of Houston"), and
respectfully serves its Objections und l{esponses to the Fourth Set of Interrogatories t to install fenders: estimated as $478,450.00
• l'ailure to complete clearing and grubbing on the South side of Port Road:
$25,200.00 (to be deducted from amounts due Zachry per agreement with Zachry)
• Deficient crane rail installation: inspection cost S7,460.00; future cost unknown at
this time
• Defective striping: approximately $180,000.00
o Deficient dust plan: approximately $10,000.00
• Cost for Work outside of normal hours: at least $73,536.22
C'l
• Investigate means of removing soil from under wbatf deck: at least $24,900.00
'roject and the Container Yard
C'l
project. A portion, which can be detennined from the documents produced in discovery, is
associated with the Zachry caused delay on the Phase l A Wharf & Dredging Project.
Zachry also caused the Port of Houston's engineering department to expend ao additional
approximately 3,299 man hours on the Phase lA Wharf & Dredging Project from August 2006
through Junuary 2009, which represents an expense to the Port of Houston of $220,044.98.
Other Port of Houston personnel were required to expend additional time on the Phase I A \Vharf
& Dredging Project as well, but do not keep track of their time, so a readily quantifiable amount
representing the additional increased expense to the Port of Houston on the Phase lA Wharf &
Uredging for their time is not cummtly available.
5
In addition to the additional expense incurred on the Phase 1A Wharf & Dredging Project
for extended personnel time, the time spent by the Port of Houston personnel on the Phase l A
Wharf & Dredging Project during this time period would have been spent on other projects,
resulting in additional losses to the Port of Houston. These losses of are difficult to quantify.
Zachry's failure to timely complete the Work of the on the Phase lA Wharf & Dredging
Project precluded Porl of Houston customers from using the Bayport Tenninal Complex as soon
as they otherwise could have. The steamship lines that moved from Barbours Cut Terminal to
Bayport collectively increased container volume from 77,586 vessel lifts in 2006 to 102,413
vessel lifls in 2007 (an increase of 32%). At the same time, steamship lines remaining at
Barbours Cul Tenninal filled the void left by the relocation of can·iers to Bayport, and Barbours
Cut Terminal <:ontainerizt::d cargo still incn::ttsed by 3% over the previous year. The Port of
Houston believes that the same full capacity use would have occurred if the wharf had opened on
time in July 2006. Thus, the Port of Houston lost over six months of cargo resulting in an
estimated $620,000 decrease in revenue as a result of late completion of the entirety of the work.
In addition, when the first customer began using Bayport, the customer leased a portion of the
container yard. The Port of Houston believes that it would have leased tht:: container yard earlier
had the project been completed on time in July 2006, resulting in a loss of lease revenue of
$210,000.
BC(;ause Zachry did not complete the dredging in a timely manner using mechanical
means, Zachry was allO\'led to utilize hydraulic dredging in the fall of 2006, after the project
completion deadline, to complete the dredging so that the Port of Houston could utilize the
facility upon Zachry's sufficient completion of a portion of the wharf (albeit still incomplete).
The estimated h
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STATE OF TEXAS
COUNTY OF HARRIS
Before me the undersigned Notary Public, personally appeared Mark E. Vincent, who,
being first duly sworn, did state that be is authorized to sign these Objectious and Responses to
Zachry's Fourth Set of Interrogatories on behalf of the Port of Houston Authority, that he has
read the foregoing answers to the Interrogatories and that the facts stated therein are based upon
tlle information reasonably available to him or obtained from persons thought to be
knowledgeable with respect thereto, and are true and correct to the best of his knowledge,
information and belief.
Mark E. Vincent
Sworn to and subscribed before me this ~ay of July, 2009.
e ROSA L. VILlELA
Notary Publ!o, Sll!IB of Taus
~ Commlaslon Expire•
FEBRUARY 20 2012
C"l
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TAB 12
Defendant Port of Houston Authority’s
Proposed Draft Jury Charge filed September 9, 2007
(CR43:12401-20)
Filed 09 September 17 A 11 :52
Loren Jackson - District Clerk
Harris County
ED101J015517175
By: Wanda Chambers
CACSE NO. 2006-72970
ZACHRY CO);STRLCT!O); I"" THE DISTRICT COCRT OF
CORPORATIO'-:.
Plaintiff
v. HARRIS COl0:TY. TEXAS
THE PORT OF HOCSTO?\ AUTHORITY.
Defendant 151 ST JUDICIAL DISTRICT
DEFENDANT PORT OF HOUSTON AUTHORITY'S
PROPOSED DRAFT JURY CHARGE
C0\1ES :\OW. Defendant THE PORT OF HOUSTO:\ AL.THOR!T'{ (the "Pon
Authority"). and files its preliminary proposed draft charge of the Court. A copy of the Port
Authority's preliminary draft charge is attached hereto. The Pon Authority e:\pressly reserves
the right to change. revise. add to. and:or delete instructions and/or questions as it may deem
appropriate. \lorecl\er. by submitting this preliminary draft charge. the Port Authl)rity i:; nQt
admitting that the attached questions and 1or instructions should be submitted to the jury and is
not admitting that there is any evidence to support the submission of the attached questions
and 1or instructions to the jury. The Pon Authority expressly reserves the right to assert any
objections and to make any requests (including. without limitation. no evidence objections) to
the charge submitted to the jury by the Court.
Respectfully submitted.
VI-:\SO~ & ELKI?\S L.L.P.
is! \Iarie R. '{ eates
Of Counsel: .\larie R. Yeates
.1. Clark :Vlartin Texas Bar No. 22150700
Texas Bar No. 13090000 Karen T. \\l1ite
1'-ELL Y HART & HALL\'lAN Texas Bar No. 20274500
1000 Louisiana. Suite 4 700 Bill Sims
Houston. Texas 77002-6760 Texas Bar No. 18429500
Phone: 713.654.4600 Seth A. Russell
Fax: 713 .52!.5925 Texas Bar No. 24027943
E-.\lail: clark. martin/a khh.com 2500 First City Tower
1001 Fannin St.
Hougon.Texas77002
Phone: 713.758.2388
Fax: 713.615.5902
Email: k''hite avel:m .com
bsims avdaw.com
srussell avela\\ .com
Lawrence J. Fossi
Texas Bar No. 07280650
Fossi & Je,vell LLP
4203 Yoakum Blvd .. Suite 100
Houston. Texas 77006
Phone: 713.529.4000
Fax: 713.529.4094
E-mail: lt I. 2008:
Answcr:S- - - - - - -
(iiJ Sustained on or after January I. 2008:
AnS\\er:S- - - - - -
(b) the amount owed. if any. to Zachr) tor change orders or additional \\Ork Zachry is directed
to perform by the Pon in connection '' ith the Contract.
(i) Sustained betore Januar) I. 2008:
Ans\Yer:S- - - - - - -
(iiJ Sustained on or after January I. 2008:
Answer:S- - - - - -
Ifyou anS\\ered with any amount in Question No. 4(a)(i). 4(a)(ii). 4(b)(i) and/or -1-(b)(ii). then
answer the corresponding subpart in the tollowing Question. Otherwise. do not answer the
following Question.
Question :\o. 5
\Vhat percentage of the damages. if any. t\.!und by you in Quest ion -:\ o. -1-( a)( i). -1-( a)( ii ).
..J.(b)(i) anctor -1-(b)(ii) above \\ere delay or hindrance damages?
AnS\\er each subpart below '' ith a percentage fl-om 0°/o to I 00%. Do not divide l 00°'o
among the tour subparts below. but rather anS\\er each subpm1 separately by considering
a percentage up to and including I 00% for each subpart. The sum of the answers to the
four subparts below may not total more than 400%.
(a) the balance due and owed by the Port. if any. including any amount owed as compensation
tor increased cost to pertorm the work as a direct result of owner-caused de lays
(il Sustained betore January I. 2008:
Answer: _ _ _ _ _ % as to delay or hindrance damages
( ii) Sustained on or after January 1. 2008:
Answer: _ _ _ _ _ ~/o as to delay or hindrance damages
(b) the amount owed. if any. tor change orders or additional work Zachry is directed to pert\xrfl
by the Port in connection'' ith the Contract.
( i) Sustained before January I. 2008:
AnS\Yer: _ _ _ _ _ % as to delay or hindrance damages
(ii) Sustained on or after January 1. 2008:
Answer: _____ ~/o as to delay or hindrance damages
Question No. 6
Did the Port fail to comply with the Contract by withholding, fi·om amounts invoiced by
Zachry. any of the tollcm ing'?
In answering this Question. consider all the provisions ofthe Contract.
Ans\\·er "Yes" or "1\o" for each ofthe tollo\ving:
(a) amounts withheld that the Pon labeled on the Estimates tor Contract Payment as
5600.000 offset
Answer: _ _ _ _ _ _ __
(b) amounts withheld that the Port labeled on the Estimates tor Contract Payment as
"] iq u idated damages"
Ans\\ er: - - - - - - - - - -
If your answer to Question No. 6(a) and/or Question No. 6(b) is "Yes ... then answer the
corresponding subpart of to !lowing Question. Othem ise. do not answer the fo !lowing Question.
Question :-Jo. 7
\Vas the Port's failure to comply excused'?
A. Conditions precedent
Failure to comply by the Port is excused by Zachry's previous failure. if any. to satisfy a
condition precedent to its right to recovery pursuant to the agreement. ··c ond it ions
precedent" are acts or events that are to occur after the contract is made and that must
occur bef()re there is a right to immediate performance and bet(Jre there can be a breach
of contractual duty.
(a) Answer "Yes" or ·":\o .. as to the ta i lure to comply. if any. that you I'Clund in Quest ion 6( b)
Answer: _ _ _ _ __
B. w·aiver
Failure to comply b) the Port is excused if compliance\\ as '' aived by Zachry. Waiver i~
an intent ion a I surrender of a known right or intent ion a I conduct inconsistent '' ith
claiming the right.
(a) Answer "Yes" or "i\o" .. as to the failure to comply. if any. that you found in Question 6(a)
Ans\ver· _ _ __
(b) AnS\Yer "Yes" or "\'o" as to the tailure to comply. if any. that you tound in Question 6(b)
Answer: _ _ _ _ __
C. Prior material breach
Failure to comply by the Port is excused by Zachry's pre\ ious tailure. if any. to comply
\\ ith a material obligation of the Contract.
(a) Ans,,er "Yes" or ":-Ju" .. as to the failure to comply. if any. that you tc1und in Question 6(a)
Answer: - - - -
(b) A.J1S\\er "Yes" or ":-Jo" .. as to the failure to comply. if any. that you found in Question 6(b)
Answer: _ _ __
D. Release
Failure to comply by the Po11 is excused if Zachry released the claims asserted by it 111
this lawsuit against the Port.
(a) Ans\ver ..'{es .. or ..:-.:o·· ··as to the failure to comply. if any. that you found in Question 6(a)
Ans\Yer: - - - - -
(b) Answer .. Yes .. or ...'\o .. ··as to the tailure to comply. if any. that you tound in Question 6(b)
Answer: - - - - -
E. Payment
Failure to comply by the Port is excused if the Port paid Zachry all ofthe amounts due
and owed under the Contract.
(a) AnS\\er .. Yes" or ··:\o .. as to the tailure to comply. if any. that you t"l1und in Question 6(a)
AnS\\er: - - - - - -
(b) Answer ··Yes .. or ..1\o .. as to the failure to comply. if any. that you touncl in Question 6(b)
Answer: - - - - -
:i 1
Ifyou ans\vered Question No. 6(a) and/or Question :-.:o. 6(b) ·'Yes:· and answered "-:\o" to any
corresponding subpart of Question No. 7. then answer the corresponding part of the tollo\\·ing
question. Otherwise do not anS\\er the foliO\ving question.
Question '\'o. 8
What sum of money. if any. paid no\v in cash. would t'i:tirly and reasonably compensate Zachry
tor its damages. if any. that resulted fi·om such failure to comply?
Consider only the balance clue and owed by the Port, if any. under the Contract.
Do not add any amount tor interest on damages. if any.
Do not include in your answer any amount that you find that Zachry could have avo idee! by the
exercise ofreasonable care.
Answer in dollars and cems. if any. lor each ofthe tollo,ving:
(a) amounts \Vithheld that the Port labeled on the Estimates tor Contract Payment as
S600,000 offset
(b) amounts \\·ithhe ld that the Port Iabe led on the Estimates for Contract Payment as
"liquidated damages"
Al1S\\ er:S
------------------
Question ~o. 9
What is a reasonable fee for the necessary services of the Port's attorneys. stated in
do liars and cents?
Consider the following factors in determining the reasonableness of an attorney· s fees award:
<~> the time and labor involved. the novelty and difficulty ofthe questions involved.
and the skill required to perform the legal services properly:
<~> the likelihood that the acceptance of the particular employment \\ill preclude other
employment by the la\vyer:
e the t'ee customarily charged in the locality tor similar legal services:
<~> the amount involved and the results obtained:
<~> the time limitations imposed by the client or the circumstances:
<~> the nature and length of the professional relationship'' ith the client:
<~> the experience. reputation. and ability of the lawyer or lawyers pertorming the services:
and
<~> ''hether the tee is fixed or contingent on results obtained or uncertaint) of collection
befbre the legal sen kes have been rendered.
Ans\ver \\ ith an amount\\ ith respect to each of the t\Jllo\\ ing:
(a) For preparation and trial with respect to the tailure to comply. if any. inquired about in
Question :\o. 1
Answer: S- - - - - - -
(b) For preparation and trial with respect to the failure to comply. if any. inquired about in
Question ~o. 6
Answer:
(c) For an appeal to the Coun ofA.ppeals V\ith respect to the failure to comply. ifany.
inquired about in Question \:o. I
AnS\\er: s_______
( cl) For an appeal to the Court of Appeals '' ith respect to the failure to comply. if an).
inquired about in Question :\o. 6
Answer: S- - - - - - -
(e) For an appeal to the Supreme Court ofT exas \\ ith respect to the tailure to comply. if any.
inquired about in Question :\o. I
Answer: S
(f) For an appeal to the Supreme Court of Texas \\·ith respect to the failure to comply. if any.
inquired about in Question No.6
Answer: S- - - - - - -
TAB 13
Contract, General Conditions
(DX1-1.0177-235)
\
~/I.I (
PORT OF HOUSTON AUTHORITY
GENERAL CONDITIONS
FOR CONSTRUCTION WORK ON PORT PROPERTY
TABLE OF CONTENTS
SECTION 1. DEFINITIONS OF TERMS
1.01 Addenda
1.02 Applicable Law
1.03 BldlProposal
1.04 BidfProposal Documents
1.05 Bonds
1.06 Change Orders
1.07 Chief Engineer
1.08 Concurrent Delay
1.09 Construction Change Directive
1.10 Contract Documents
1.11 Contract Price
)
1.12 Contract TIme
1.13 Contractor
1.14 Design Consultant
1.15 Drawings ..
1.16 Environmental Laws
1.17 EqUIpment and Materials
1.18 Force Majeure
1.19 Governmental Authority
1.20 Hams County Auditor
1.21 Hazardous Substances
1.22 Inspectors
1.23 Insurance Certificates
1.24 Modlficatron
General Conditions
• (Rev'd November 1, 2002) VIII· i . vii
OX 0001-1.0177
1.25 Own Forces
1.26 Port of Houston Authority
1.27 Port of Houston Authority Commission or Commission
1.28 Port Authority Indemnitees
1.29 Product Data
1.30 Project.
1.31 Purchase Orders
1.32 Purchasing Manager
1.33 Request for Information or RFI
1.34 Samples
1.35 Shop Drawings
1.36 Specifications
1.37 Standard of Care
1.38 Subcontractors
1.39 Submittals
1.40 Supplier
)
1.41 Taxes
1.42 Work
SECTION 2. CONT~CT DOCUMENTS
2.01 Intent of Drawings ar:!d Specifications
• 2.02 Precedence of Contract Documents
2.03 Interpretation of Contract Documents
2.04 Reference Specifications
2.05 Special Conditions
2.06 Examination of Drawings, Specifications, Special Conditions and Site of Work
2.07 Subsurface Data and BidlProposal Quantities
2.08 Supporting Documents - Performance & Payment Bonds
2.09 Harris County Auditor's Approval
General Conditions
(Rev'd November 1, 2002) VIII - jj - vii
OX 0001-1.0178
2.10 Pon of Houston Authority Purchase Order
SECTION 3. GENERAL PROVISIONS
3.01 Tax Exemption
3.02 Conflicts of Interest
"-
3.03 Prevailing Wage Scale
3.04 Assignment of Antitrust Causes of Action
3.05 Small Business Development Program
3.06 Contractor's Insurance Requirements
3.07 Proof of Insurance By Contractor
3.08 Indemnification By Contractor
3.09 No Estoppel or Waiver
3.10 Recovery of Attorney's Fees
3.11 Contractor's Qualifications
3.12 Severability
3.13 Successors and Assigns
3.14 No Third Party Beneficiaries
3.15 Change of Control
3.16 Governing Law
SECTION 4. REGULATORY AND SAFETY REQ.UlREMENTS
4.01 Laws to be Observed .-
-
4.02 Code Regulations.
4.03 Permits and Licenses
4.04 Barncades, Warning lights and Warnmg Signs
4.05 Sanitary Facilities
4.06 Site Health and Safety Coordinator
4.07 Health and Safety
4.08 Accident Reportmg
4.09 Fill Material Polley
General Conditions
(Rev'd November 1, 2002) VIII - iii - vii
OX 0001-1.0179
4.10 Spill Prevention Plan
4.11 Cultural Resources
4.12 Use of Explosives
4.13 Burning
4.14 Permit for Welding and Cutting
4.15 Interference with Port Operations and Navigation
4.16 Misplaced Materials
4.17 Work On or Around Port Authority Grain Elevators
4.18 Work On or Around Railroad Tracks
4.19 Discovery of Hazardous Substances
420 Disposal of Excavated Materials and Certain Other Waste
4.21 Characterization of Waste Materials
4.22 Environmental Management System
SECTION 5. PROSECUTION OF THE PROJECT
5.01 Commencement of Work
5.02 Start Date for Field Work
5.03 Planning of Work and Progress Schedule
5.04 Submittal of Updated Progress Schedule
5.05 Time of Completion and liquidated Damages
5.06 Actual Damages in Lieu of Liquid~ted Damages
5.07 No Delay Damages
5.08 Time Extensions
5.09 Lack of Satisfactory Progress
5.10 Independent Contractor
5.11 Subcontractors and Material Suppliers
5.12 Port as Third Party Beneficiary of Subcontra~ts
5.13 Port and Surety as Assignees of Subcontracts
5.14 Cooperation with the Port Authority and Others
General Conditions
(Rev'd November 1, 2002) VIII - iv - vii
OX 0001-1.0180
~ ( ,:r/
5.15 lines and Grades
5.16 Contractor's Superintendent
5.17 Contractor's Local Office
5,18 Noltce
5.19 Character and ConduCt of Workmen
5,20 Drawings and Specifications Furnished by the Port Authority
5.21 Requests for Information
5.22 Submittals 10 be Furnished by the Contractor after Award
5.23 As-Built Drawings
5.24 Progress Photographs
5.25 Additional Schedules and Reports
5.26 Matenal Storage
5.27 Material Furnished by the Port Authority
5.26 Tools and Equipment Furnished by the Contractor
5.29 Water for Construction
)
5.30 Electrical Connections
5.31 Contractor's Field Office
5.32 Field Office for Port Authority Personnel
5.33 Contractor's Obhgation to Maintain a Clean Work Site
"
5.34 Material Testing
., -
5.35 Inspection Required at Stages of Work.
5.36 Discovery of Latent Defective Work.
5.37 T est Cuts by the Port Authority
5.38 Costs of Inspections by the Port Authority
5.39 Inspection Outside of Working Day
5.40 Substandard Material or Workmanship
" .
5.41 Changes or Modifications
5.42 Claims for Changed Conditions or Contract Interpretations
General Conditions
(Rev'd November 1. 2002) VIII- v - vii
OX 0001-1.0181
5.43 Calculations of Costs of Changes or Modifications
')
;
5.44 Limitations on the Costs of Changes or Modifications
5.45 Intellectual Property Rights
5.46 Partial Utilization by the Port Authority
5.47 Termination for Convenience of the Port of Houston Authority
5.48 Termination for Cause
5.49 Right of Port Authority to Suspend the Work
5.50 Right of Port AuthOrity to Accelerate Work
5.51 Protection against Claims of Subcontractors, Laborers, Materialmen and Furnishers of
Machinery, Equipment and Supplies
5.52 AlIegatioM of Change or Waiver of Contract Terms
5.53 Warranty
5.54 Progress Meetings
5.55 Dispute Resolution. Subrnfssion to Jurisdiction, Waiver of Right to Remove and Venue
SECTION 6. PAYMENT
6.01 Schedule of Costs
)
6.02 Progress Payments
6.03 Inspector's Approval of Billings
6.04 Nonpayment for Unincorporated Material
6.05 Right to'Withhold
6.06 . Overp~yment for Defective or Over Estimated Work
6.07 Contractor's Submittal of Affidavit
6.08 Supporting Documents for Progress Payments
6.09 Final Inspection by the Contractor
6.10 Final Inspection by the Port Authority
6.11 A Finding of Incomplete Work
6.12 Conditions to Final Payment
6.13 Payment and Retainage
General Conditions
(Rev'd November 1, 2002) VIII - vi - vii
OX 0001-1.0182
,.J \y
6.14 Title to Work
615 Payment Not Waiver or Acceptance of Work
6.16 Right to Audit
6.17 Offset
-.
General Conditions
• (Rev'd November 1, 2002) VIII - vii - vii
OX 0001-1.0183
1/
GENERAL CONOmONS
FOR CONSTRUCTION WORK ON PORT AUTHORITY PROPERTY
SECTION 1. DEFINITIONS OF TERMS
Whenever in these General Conditions and in the other Contract Documents, the following terms
are used. the intent and meaning shall be interpreted as set out below.
1.01 Addenda:
Documents issued by the Port Authority after the initial BidfProposal Documents have been
issued to bidders/proposers and prior to the acceptance of bids/proposals, which documents are part of
the BidlProposal Documents.
1.02 Applicable Law:
Any and all federal, state and local statutes, laws, rules, regulations, ordinances, codes and rules
of common law pertaining to the Contractor's services, the site, the Contractor's employees and
Subcontractor's employees and/or the Work, including, without limitation (i) Environmental Laws, (ii) those
pertaining to equal opportunity, affirmative action and discrimination, and (iii) those pertaining to health or
safety, including without limitation, the Occupational Safety and Health Act of 1970 (84 U.S. Statutes
1590) as amended and any applicable state programs, rules and regulations approved or provided
thereunder.
1.03 Bid/Proposal:
The Contractor's bid/proposal submitted in connection with the Work, as such bid/proposal may be
modified and agreed to or ordered by the Port. -
1.04 Bid/Proposal Documents:
Those documents issued by the Port Authority soliciting bids/proposals, as applicable, including any
Addenda and the documents submitted by the Contractor which comprise the Contractor's BidJProposal.
1.05 Bonds:
The performance and payment bonds that the Contractor is required to furnish to the Port
pursuant to Section 2.08. -
1.06 Change Orders:
A modification of or change to the Contract Documents agreed to and executed by the Port
Authority and Contractor after Contract execution and in accordance with the Contract Documents to
revise, add to, or delete from the Work or to adjust the Contract Price or Contract Time .
1.07 Chief Engineer.
The Chief Engineer is an employee of the Port of Houston Authority. The only person in the Port
of Houston Authonty Engineering Department with authority to resolve engineering questions or
problems, agree to modifications or changes, and to - re'Sollie' olsputes Involving Contracts or
Bid/Proposals Originating from the Port of Houston AuthOrity Engineering Department, where the Port of
Houston Authority is specrflcally gillen such authority in this Contract, IS the Chief Engineer. No other
General Conditions
(Rev'd November 1, 2002) VIII - 1 - 52
OX 0001-1.0184
employee of the Port of Houston Authority Engineering Department has such authority. Any such
resolutions must be in writing and signed by the Chief Engineer. . '.
1.08 Concurrent Delay:
Delays caused in whole or in part. or contributed to by any primary. concurrent or contributorily
negligent acts or omissions by the Contractor. its Subcontractors or Suppliers. or which arise from any
other failures by Contractor or its Subcontractors or Suppliers to perform their respective obligations in
accordance with the Contract Documents. This limitation shall apply EVEN IF THE PORT AUTHORITY
OR ANY OF THE PORT AUTHORITY"S OTHER CONTRACTORS OR ANY OTHER PERSONS OR
ENTITIES FOR WHOM THE PORT AUTHORITY IS RESPONSIBLE ARE CONCURRENTLY OR
CONTRIBUTORILY NEGl:IGENT WITH RESPECT TO ITS OR THEIR OWN ACTS OR OMISSIONS.
1.09 Construction Change Directive:
A document issued by the Chief Engineer directing the Con,tractor to make a minor change in the
Work, which change shall not require any modification of the Contr~ct Price.
1.10 Contract Documents:
The Contract Documents are composed of the Contract agreement signed by the Port Authority
and Contractor. Addenda (if any), Contractor's Bid/Proposal (including documentation accompanying the
BidJProposal and any post-Bid/Proposal documentation submitted and agreed to by the Port Authority
prior to commencement of Work}. the Bonds. Insurance CertifICates. these" General Conditions. Special
Conditions. Specifications and Drawings. the Purchase Order. and Modifications. The Contrad
Documents form the Contract. This Contract represents the entire and integrated agreement between, the
parties hereto and supersedes aI/ prior negotiations, representations or agreements, either written or oral.
The Contract Documents shall not be construed to create any contractual relationship of any kind between
the Port Authority and any Subcontractor or Supplier or between any persons or entities other than the Port
Authority and Contractor.
1.11 Contract Price:
The amount set forth in the Contract agreement, as such amount may be modified by Change
Order. which the Contractor is entitled to receive for full and complete performance of the Work in
accordance with the Contract Documents.
1.12 Contract Time:
The time period set forth in the Contract for the Contractor to finally complete the Work. The
Contract Time may be expressed in number of calendar days or number of working days or by reference
to the date of completion. If the Contract Time is measured by calendar days. each and every calendar
day shall be counted against the Contract Time. If the Contract Time is measured by working days,
Saturdays, Sundays. AG.C. holidays and approved time extensions shall not be counted against the
Contract Time.
1.13 Contractor.
Contractor means the independent contractor which is. named in the Contract agreement and is
responsible for the construction of the Work. The Contractor is an independent contractor and not an
employee or agent of the Port Authority. • .'.. .' .
General Conditions
(Rev'd November 1. 2002) VIII- 2 - 52
OX 0001-1.0185
1.14 Design Consultant:
Design Consul1ant means an independent architect or engineer with responsibility for design of the
Work. The Design Consultant is an independent contractor and not an employee or agent of the Port
AuthOrity.
1.15 Drawings:
The graphic and pictorial portions of the Contract Documents showing the design. location and
dimensions of the WOrk. which Contrad Documents may indude without limitation elevations, sections.
details. schedules or diagrams.
1.16 Environmental Laws:
Any and all applicable federal, state or local statutes, laws, rules, regulations, ordinances, codes
and rules of common law now in effect (including any amendments now in effect) and any current judicial
or administrative interpretation thereof, including any judicial or adll,linistrative order, consent decree, or
judgment. relating to the environment, Hazardous Substances or exposure to Hazardous Substances,
including without limitation the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. §§ 9601, et seq.; The Hazardous Materials Transportation Act. 49 U.S.C. §§ 1801. et
seq.; The Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901, et seq.; the Federal
Water Pollution Control Act. 33 U.S.C. §§ 1201, et seq.; the Toxic Substances Control Act. 15 U.S.C.
§§ 2601, et seq.: the Clean Air Act. 42 U.S.C. §§ 7401, et seq.; the Safe Drinking Water Act, 42 U.S.C.
§§ 3808, et seq.
1.17 Equipment and Materials:
The equipment and materials to be supplied by the Contractor, its Subcontractors and Suppliers
and to be incorporated into or otherwise used in connection with the Work
.... f 1.18 Force Majeure:
Fire, flood, act of God, earthquakes, epidemic, war, riot, civil disturbance, sabotage, terrorism or
- judicial restraint, but only to the extent such event (i) is beyond the control of and cannot be reasonably
anticipated by or the effects alleviated by the Contractor and (ii) prevents the performance of the Work.
Events not specifically listed herein shall not constitute events of Force Majeure. By way of example only,
weather which is not abnprmat, even if such weather Could not be reasonably anticipated and even if
such weather prevents the performance of the Work, shall not be an event of Force Majeure.
1.19 Govemmental Authority:
Governmental Authority means (a) the United States of America or any foreign country, (b) any
state. county. municipality or other governmental subdivision within the United States of America or any
foreign country, and (el any court or any governmental department, commiSSIon, board, bureau, agency
or other instrumentality of the United States of America or any foreign country, or of any ·state. county,
municipality or other govemmental subdivision within the United States of America or any foreign country.
1.20 Harris County Auditor:
The auditing official of Harris County.
,,_, • r
General Conditions
(Rev'd November 1,2002) Vllt - 3 - 52
OX 0001-1.0186
1.21 Hazardous Substances:
~)
(i) Any hazardous materials, hazardous wastes, hazardous substances, solid waste and
toxic substances as those or simdar terms are defined under any Environmental Laws;
(ii) Any asbestos or any material which contains any hydrated mineral silicate, including
chrysolite, amosite. crocidolite, tremolite, anthophylite andlor actinolite, whether friable or non-friable;
(iii) Any poIychlorinated-biphenyis (-PCBs·), or PCB-containing materials, or fluids;
(iv) Radon;
(v) Any other hazardous, radioactive, toxic or noxious substance, material, pollutant, or solid,
liquid or gaseous waste;
(vi) Any pollutant or contaminant (including petroleum, petroleum hydrocarbons, petroleum
products, crude oil or any fractions thereof, any oil or gas exploration or production waste, any natural
gas, synthetic gas or any mixture thereof) which in its condition, Concentration or area of release could
have a significant effect on human health, the environment, or natural resources;
(vii) Any substance that, whether by its nature or its use, is subject to regulation under any
Environmental Law or with respect to which any Environmental Law or Governmental Authority requires
environmental investigation, monitoring or remediation; and
(viii) Any underground storage tanks, as defined in 42 U.S.C. Section a99-1(1)(A)(I) (including
those defined by Section 9001(1) of the 1984 Hazardous and Solid Waste AmendmenIs Ie the Resource
Conservation and Recovery Act. 42 U.S.C. Section 6901 et seq.; the Texas Water Code Annotated
Section 26.344; and Title 30 of the Texas Administrative Code Sections 334.3 and 334.4}, whether
empty, filled or partially filled with any substance.
1.22 Inspectors:
The individuals assigned 'by the Chief Engineer (which individuals may be third party contractors)
to make detailed inspections of any or all portions of the Work and materials or equipment involved in the
Contract are the Inspectors. Inspectors tlave no aulhority to change any of the terms and conditions of
the Contract. This authority is reserved for1he Chief.~gineer alone.
1.23 Insurance Certificates:
The insurance certificates that the Contractor is required to furnish to the Port pursuant to the
Contract Documents. .
1.24 Modification:
A ModifICation is (1) a written amendment to the Contract Signed by both the-Contractor and the
Port, (2) a Change Order, (3) a Construction Change Directive, or (4) a written interpretation of the Contract
Documents issued by the Chief Engineer.
1.25 Own Forces:
Actual field labor performed at the site by employees of
the Contractor under the immediate
supervision of Contractor's field superintendent. By way of example only, the follOWing is not War!<
performed by Contractor's Own Forces:
General Conditions
(Rev'd November 1,2002) VIII- 4- 52
OX 0001-1.0187
~
a. Work performed by Subcontractors or contract laborers; or
b. Work performed in the Contractor's office or anywhere other than in the field at the site,
even if performed by the Contractor's employees.
1.26 Port of Houston Authority:
The Port of Houston Authority of Harris County. Texas is a political subdivision of the State of
Texas and a body politic. The terms Port of Houston Authority. Port Authority. Port of Houston. PHA and
Port are synonymous with the Port of Houston Authority of Harris County, Texas. The Port is
independent and not a part of the government of Harris County. Texas or the City of Houston.
1.27 Port of Houston Authority Commission or Commission:
The Port of Houston AuthOrity is governed by the Commission which meets monthly and is
comprised of a chairman and six commissioners. The Commission is ,the ultimate governing authority of
all Port of Houston operations. The Contractor is hereby advised that approval by the Commission is
required for certain matters.
1.28 Port Authority Ir~demnitees:
The Port of Houston Authority and its Commissioners. directors. officers. agents and employees.
1.29 Product Data:
Manufacturers' standard schematic drawings. catalog sheets, brochures. diagrams. schedules.
performance charts. illustrations, Material Safety Data Sheets (MSDS) or any other descriptive items.
) 1.30 Project:
,/
The total Port construction project of which the Work performed under the Contract Documents may
~ the whole or a part and which may iJ'!CIude alnStnJction by the Port Authority or by separate contractors.
1.31 Purchase Orders:
A written and fu!ly-~ecuted purchase order covering the WorK and issued to the Contractor in
accordance with the Contract Documents.
1.32 Purchasin, Manager:
The purchasing manager of the Port of Houston Authority.
1.33 Request for Information or RFI:
A written request from the Contractor to the Chier Engineer requesting information in respect of or
an interpretation of a requirement or provision of the Contract Documents. Neither an RFI nor a response to
an RFI is a Contract Document.
1.34 Samples:
Physical examples which illustrate Materials. EqUipment or workmanship and establish standards
by which the Work will be judged.
General Conditions
(Rev'd November 1, 2002) VIII· 5 - 52
OX 0001-1.0188
1.35 Shop Drawings:
Drawings, diagrams, schedules and other data specially provided for the Work. by the Contractor,
its Subcontractors or Suppliers to illustrate how certain specific Work components fit together and will be
located in relation to each other.
1.36 Specifications:
The SpecifICations are that portion of the Contract Documents consisting of the written requirements
for Materials, Equipment, construction systems, standards and workmanship for the Work and performance
of related services. Specifications may be separate or set forth on the Drawings, or both.
1.37 Standard of Care:
The requirement that the Contractor shall supervise and direct the Work., using the Contractor's best
skill and attention, in a good and workmanlike manner and in the best and most expeditious and
economical manner consistent with the interests of the Port Authority, shall exercise the degree of care,
skill and diligence in the performance of the Work in accordanCe with and consistent with industry
standards for similar circumstances, shall utilize its best skill, efforts and judgment in furthering the
interests of Port Authority, and shall fumish efficient business administration and supervision.
1,38 Subcontractors:
Any person having a direct or indirect contract with the Conlractor, at any tier, for design or
engineering, or for the supply and erection of Equipment or Materials, or for the performance of a portion
of the Work. in each case forming part of the Work. No Subcontractor shall have any beneficial interest in
or be a third party beneficiary to any Port Authority contrad (including without limitation this Contrad).
1.39 Submittals:
Shop Drawings, Product Data. Samples and other information provided by the Contractor for
approval of proposed Equipment, Materials. means or methods. Submittals are not Contract Documents.
- 1.40 Supplier:
A person having a direct or indirect contract with the Contractor, at any tier, only for the supply of
Equipment or Materials forming part of the Work. .
1.41 ~:
All taxes, duties. fees or other charges levied or imposed by any country, state or any political
subdivision thereof. includIng but not limited to income, capital. sales, excise and use taxes, customs
duties, stamp duties, fees or charges. levies in respect of social welfare. health, workers' compensation,
,pension, unemployment or other similar insurances or programs, whether imposed by withholdings or
otherwise, and except as otherwise expressly provided, whether existing at the date -of ffiis Contract or
created and imposed at a later date.
. ,',
General Conditions
(Rev'd November 1,2002) VIII· 6 - 52
/
OX 0001-1.0189
1.42 lY2!!:
The construction and services required by the Contract Documents, whether commenced or not, or
completed or partially completed, and all labor, Materials, Equipment and services provided or to be
provided by the Contractor to fulfill the Contractor's obligations pursuant to the Contract Documents. The
Work may constitute the whole or a part of the Project.
END OF GENERAL CONDITIONS SECTION 1
General Conditions
(Rev'd November 1,2002) VIII-7-52
OX 0001-1.0190
~
SECTION 2. CONTRACT DOCUMENTS
2.01 Intent of Drawinas and Soecifications:
The intent of the Contract Documents is to include all items necessary for the proper execution
and completion of the Work. These General Conditions, in conjunction with the other Contract
Documents, all of which constitute a part of this Contract, are each intended to be cooperative; a
provision occurring in one is as binding as though occurring in all, and when read together are intended to
describe and provide for a finishett piece of work, complete in every detail. Work not covered in the
Contract Documents will be required to the extent it is consistent therewith and is reasonably inferable
therefrom as being necessary to produce the intended results consistent with the scope of Work as
expressed in the Contracf Documents. The organization of the specifications into divisions, sections and
articles, and the arrangement of the Drawings shall not control the Contractor in dividing llie Work among
Subcontractors or in establishing the extent of Work to be performed by any trade. Unless otherwise
stated or defined in the Contract Documents, words that have well-known technical or construction
industry meanings are used in the Contract Documents in accordance with such recognized meanings.
2.02 Precedence of Contract Documents:
(a) If there is an irreconcilable conflict between Contract Documents, the document highest
in precedence shall control, but except in such event and to avoid such conflict, every construction of
provisions shall be that each is in aid to, or supplementary to or complementary of, each other provision,
to control and secure for the Port Authority the completion of the entire Work in an expeditious, orderly
and coordinated manner. The precedence, from highest to lowest, shall be in 1he following order:
1. Permits for the Work from Governmental Authorities as may be required by law;
2. Special Conditions;
3. General Conditions;
4. Specifications;
5. Drawings.
Change Orders and approved revisions to Drawings or other Contract Documents shall take
precedence over ltems"2 through 5 above. Detailed Drawings shall take precedence over general
Drawings.
(b) Should there be <;In irreconcilable conflict of terms within the Drawings or within the
Specifications, the Contractor shall be obligated to provide the most e)(pensive combination of quality and
quantity of Work indicated. The Chief Engineer win clarify the Project requirements in the event of an above
mentioned conflict that affects the Contractor. In general,
1. figures take precedence over scale measurements;
2. large scale details take precedence over smaller scale details;
3. architectural Drawings take precedence in regard to dimensions, when in conflict with
mechanical and structural Drawings, except f9f th.e,size of the structural members;
4. specifically titled Drawings and sections of the Specifications take precedence over
indication of the item in a collateral way;
General Conditions
(Rev'd November 1, 2002) VIII- 8 - 52
OX 0001-1.0191
5. existing conditions take precedence over Drawings and Specifications for dimensions_
2.03 Interpretation of Contract Documents:
The Port Authority and Contractor recognize the possibility that errors, omissions and
discrepancies exist in the Contract Documents. Before starting each portion of the Work. the Contractor
shall carefully study and compare the various Drawings and other Contract Documents relating to that
portion of the Work. as well as the information furnished by the Port Authority, shall take field
measurements of any existing conditions related to that portion of the Work and shall observe any
conditions at the site affecting such Work_ Any errors, omissions or inconsistencies discovered by the
Contractor shall be reported promptly to the Port Authority as an RFI in such form as the Port Authority
may require.
Any such problem in the Contract Documents not brought to the attention of the Chief Engineer
prior to Contractor's submission of its BidlProposal will be resolved by the Chief Engineer in a manner
solely within the discretion of the Chief Engineer. Any such resolution shall not give rise to any claim for
additional compensation or claim for damages by the Contractor.
In the execution of the Work. the Drawings shall be accurately followed to scale giving preference
in all cases to figured dimensions over scale measurements and to details over general Drawings. Where
any discrepancy occurs between figured dimensions and scale or between details and genera! Drawings,
the Contractor shall provide notice of such discrepancy in an RFI. which RFI shall set forth the facts
constituting such discrepancy in a degree of detail acceptable to the Port. to the Inspector who shall
provide explanation and instructions as to which is to govern before the Contractor proceeds with.the
Work at issue_ In the event there is a Design Consultant for the Project, the Contractor shall send the RFI
to the Design Consultant. with a copy of the transmittal letter to the Inspector and the Chief Engineer.
Departure from the Contract Documents in the execution of the Wor1c without the Chief Engineer's prior
written order or consent will be at the Contractor's sale risk and expense and the Contractor will be
responsible for all costs attributable thereto. including without limitation all costs associated with design
) professionals. and liable for all damages caused thereby.
"
The Contractor shall not take advantage of any error or omission in the Contract Documents.
Instructions suitable to the Chief Engineer will be given by the Chief Engineer to the Contractor when
such error or omission is discovered by the Chief Engineer or when reasonably requested of the Chief
Engineer by the Contractor. At all times, the Contractor shall retain the duty- to detect or discover any
errors and omissions and make appropriate request in respect thereof. If the Contractor performs any
Work when it knew or shol!Sid have known it involves an error. inconsistency or omission in the Contract
Documents without submitting such request to the Port Authority and receiving a written order or consent
to proceed, the C9n``Qr shall be responsible for'all costs attributable to such performance, including
without limitation all cos&. assoc!.~ted with design profeSSionals, and liable for ~II damages caused
thereby.
All Materials to be incorporated in the finished Work shall be new, of the highest quality and of the
best grade of standard manufacture. When more than one Material, brand or process is specified for a
particular item of Work, the choice shall be the Contractor's. The final selection of color and- pattem shall be
made from the range available within the choice selected by the Contractor, unless the item is specified to
match a specifIC color or sample fumished. Where Materials or Equipment are specified by brand name,
trade name, or manufacturer, only products of those named manufacturers are acceptable unless equal
Materials or -Equipment of. other manufacturers are approved in writing by the Chief Engineer ~
submittal of Bids/Proposals. The Contractor shall not be allowed to ~lIPply equal or alternative Materials
or Equipment.not so approved. The judgment of the equality af"M-aterials, Equipment or products rests
_solely with the Chief Engineer, and its decision shall be final. Specified architectural, construction or
equipment details may not be regularly included as part of the named manufacturer's standard items or
Equipment, but shall be provided by the manufacturer as required for the Project or the proper functioning of
General Conditions
(Rev'd November 1, 2002) VIII- 9 - 52
OX 0001-1.0192
the Equipment.' Indicated and specified performance and Mater1aI' requirements are minimum, and are
required in addition to standard performance and accessories provided by the manufacturer:
2.04 Reference Specifications:
(a) The following codes, standards, pamphlets and specifications are hereby incorporated into
this Contract by reference as if each were set forth in full herein. except to the extent otherwise set forth
in Section 2.04{bl.
AAMA Architectural Aluminum Manufacturers Association.
AAN American AsSociation of Nurserymen.
AAR Association of American Railroads.
AASHTO American Association of State Highway and
Transportation Officials.
ACI American Concrete Institute
AFBMA Anti-Friction Bearing Manufacturers Association, Inc.
AGe Associated General Contractors of America.
AlA American Institute of Architects. h
AISC American Institute of Sleel Construction.
AISI American Iron and Sleellnstitute.
ANSI American National Standards Institute.
" API American Petroleum Institute.
AREA American Railway Engineering Association.
ASCE American Society of eM! Engineers.
ASHRAE American Society of Heating, Refrigeration and
Air Conditioning Engineers.
ASME American Society of Mechanical Engineers.
ASTM American Society for Testing and Materials.
AWWA American Water Works AsSOciation.
AWS American Welding Society.
CI Gast Iron Pipe Insti1ute.
CS Commercial Standards.
FS Federal SP,eCiflC3tions.
IEEE Institute of Electrical and Electronic Engineers.
ISA Instrument Society of America.
MBMA Metal Building Manufacturerll Association.
NBS -National Bureau of Standards.'
NEC National Ele,gtrical Code.
NEMA, _ National Electrical Manufacturers Association .
NFPA . Nationa.! Fire Protection Association.
NBFU National Board of Fire Underwriters.
OSHA Occupational Safety and Health Administration.
SAE Society of Automotive Engineers.
SSPC Steel Structures Painting CounciL
TxDOT Texas Department ofTransportation.
Ul Underwriters laboratories.
Tnese and all other specifications of trade associations, technical societieS. or of manufacturers,
refer 10 the latest edition of each which is effective on the date.of "Invitation to BIdders" or on the date of
·'nvitation to Proposers: Manufacturers' specifications ard recommendations shall be cor:tstrued to
mean those printed on container labels or in published mamlals,'6atalogues, or instruction sheets.
(b) The codes, standards, pamphlets, specifications and recommendations set forth above shall
not apply to the extent:
General, Conditions
(Rev'd November 1,2002) VIII- 10 - 52
OX 0001-1.0193
",)
1. that they provide requirements less stringent than those set forth in the Contract
Documents, the requirements of which apply as minimums only. For the avoidance of
doubt, such codes, standards, pamphlets, specifications and recommendations do not
supersede more stringent requirements set forth in the Contract Documents;
2. that they include exclusions, limitations or waivers that are inconsistent with the Contract
Documents.
2.()S Special Conditions:
Should any construction, work or condition which is not covered by these General Conditions be
anticipated on any proposed WorK, Special Conditions for such Work wDi be attached to and shall be a
part of the Contract.
2.06 Examination of Drawings, Specifications, Special Conditions and Site of Work:
In entering into the Contract. the Contractor represents and warrants that it has and shall be
deemed to have carefully examined and inspected the site and its surroundings and satisfied itself as to
the condition of all circumstances affecting the site and the Work., including without limitation the location
and nature of the Work, nature of the geotechnical conditions, ground and subsoil, the form and nature of
the site, the subsurface conditions of the site (both man made and natural), the location and character of
existing or adjacent work or structures, the Contract Documents, the extent and nature of the Work and
Materials necessary for carrying out and completing the Work., the ·general character and accessibility of
the site, Applicable Law (including without limitation labor laws), any accommodations the Contractor may
require, other general and local conditions which might affect the Work or performance of the Work, and
in general all risks and contingencies influencing or affecting the Work, and, subject to the right set forth
below to rely upon specified Port Authority supplied information, that the Contractor has assumed the risk
of such conditions and will, regardless of such conditions, the expense, or difficulty of performing the
) Work, fully complete the Work for the stated Contract Price without further recourse to the Port Authority.
The Contractor fully accepts any lack of completeness of the Contract Documents, including the
Drawings and Specifications, and verifieS that such documents were suffiCiently detailed and
Comprehensive to enable Contractor to have reliably estimated and established the Contract Price and to
perform the Work within the Contract Time.
The Contractor shaD not be entitled to any extensions of the Contract Time or to any adjustment
of the Contract Price on grounds that .!t misinterpreted or misunderstood any matter assumed by the
Contractor pursuant to this Section 2.06, nor shalt it be released from any of the risks accepted or
obligations undertaken -by-it under the Contract Documents, or on the grounds that it did not or could not
reasonably have foreseen any matter which affects the execution of the Work.. .
The Port Authority makes no representation or warranty, and hereby disclaims any such
warranty, that any information provided to the Contractor by or on behalf of the Port Authority in
connection with the Work is accurate, correct, complete, fit for its intended purpose or can be used
without infringing any patent, copyright, trademark, trade secret or other intellectual property rights of third
parties under any intellectual property rights of the world.
Notwithstanding the foregoing. in instances in which tRe Port Authority has supplied the
Contractor with geotechnical reports or in which the Specia! Conditions specify that the Contractor is
entitled to rely upon other infonnation provided by the Porr Auttioniy: the Contractor is entitled to rely
upon such information in submittIng its bid and performing the Work except to the extent that the
Contractor knows or should know in the exercise of ils Standard of Care that such information is
inadequate, Insufficient or incorrect.
General Conditions
(Rev'd November 1, 2002) VIII· 11 - 52
OX 0001-1.0194
2.07 Subsurface Data and Bid/Proposal Quantities:
The quantities shown on the Specifications and other Bid/Proposal Documents are estimates and
are for comparison of Bids/Proposals only, and while such quantities are believed to be reasonably
accurate, the Port Authority does not guarantee their accuracy.
The Contractor must make its own lake-off and base its price or prices on the results thereof. No
Change Order shall be issued on account of any excess or deficiency with respect 10 such information
whether absolute or relative in relation to quantities stated in the Specification or other BidJProposal
Documents.
Without limiting the foregoing, any information given in regard to soil data, subsurface data, test
borings, and similar conditions is to be considered approximate.
2.08 Supporting Documents - Performance & Payment Bonds:
Unless otherwise provided in the Special Conditions, each Contract at its inception shall be
covered by a performance bond and a payment bond, each for 100% of the value of the Contract Bonds
must be furnished with the executed Contract The cost of such bonds shall be bome by the Contractor
and shall be prorated over an units of the Work. No lump sum payment will be made for such costs by the
Port Authority. Front end loading to recover such costs will not be allowed. Such bonds must be
furnished on the Port Authority forms. No other forms are acceptable. Such bonds must remain in full
force for one year after final acceptance of the completed WOt1<. and cover aJI obr.gations: of the Cdntractor .
during such one year period, specifICally including all warranty obligations of the Contractor. Performance
and payment bonds must meet a\l criteria of Texas law and both must be executed by the same corporate
surety which shall be (i) duly authorized and admitted to do business in the State of Texas, (ii) licensed by
the State of Texas to issue surety bonds and (iii) listed in the current issue of the Federal Register
Department of the Treasury list. Moreover. such surety must show adequate bonding capacity for the .,,
size of the proposed Project. The Port AUthority will not accept bonds from surplus lines or Texas Uoyds
Plan insurance companies. The Port Authority shall be the sale judge of the validity and adequacy of any
bonds submitted.
2.09 Harris County Auditor's Approval:
No Contract shall become effective or bindmg .upon the Port of Houston Authority until the Harris
County Auditor, the appropnate financial officer for the Port Authority, certifieS that funds are or will be
available to meet the Contract pay requirements when due.
2.10 Port of Houston Authority Purchase Order:
The PurchaSing Manager shall prepare a Purchase Order on the form prescribed by the Port and
mail or otherwise deliver the same along with one fully eKecuted copy of all other Contract Documents to
the Contractor. The Contractor's authorization to begin Work under the Contract Documeots is subject to
the Port iSSUing a fully executed Purchase Order. If Contractor begins work prior to Issuance of a fully
executed Purchase Order, it does so at its own risk and agrees to assume all responsibility therefor, to
bear all costs attributable thereto, including without limitation all costs associated with design
profeSSionals, and to be liable for all damages caused thereby.
END OF GENERAL CONDlilONS SECTION 2
General Conditions
(Rev'd November 1,2002) VIII· 12 - 52
OX 0001-1.0195
~
I
<:/
SECnON 3. GENERAL PROVISIONS
3.01 Tax Exemption:
The Port of Houston Authority, being a political subdivision of the State of Texas, is exempt from
all sales taxes on material purchased in Texas and incorporated into a Project. The Contractor and any
Subcontractor or Supplier must have or obtain all necessarY permits and certificates to purchase and
fumish all material incorporated into the Project on a tax free basis.
3.02 Conflicts of Interest:
The Contractor and its officers, directors, shareholders, members, partners, employees or agents
are positively forbidden from giving or lending money, or any other thing of value, to the Pbrt Authority,
any Port Authority Commissioner, or to any Port officer, director, employee or agent or to any member of
the family of any of the foregoing.
Should any of the above enumerated persons connected witIJ the Port Authority have a direct or
indirect monetary interest in the Contractor's company or parent 'Company, then such person must
disclose in writing the nature and extent of such interest to the Port Authority with any Bid/Proposal
submitted.
3.03 Prevailing Wage Scale:
All onsite employees and employer's delivery persons shall be paid no less than the wages
shown and, where shown, fringe benefits shown on the Port Authority's Prevailing Wage Rate schedute,.a
copy of which is included in the Contract Documents. See such schedule for further details. However,
where there is a contract between the employer and his employees or their respective representatives
goveming fringe benefItS, the fringe benefits shall be'paid in accordance with such contract. Contractor
should be aware that Texas Government Code Chapter 2258, Prevailing Wage Rates, provides, among
other things, that
1. If the Contractor or a Subcontractor violates this law by underpayment of wages, the
Contractor must pay to the Port Authority $60.00 for each worker employed for each
calendar clay or partof the day that the worker is paid less than the wage rates required
by the this Contract.. This money becomes the property of the· Port Authority.
2. The Contractor and each of its Suhcontractors lT1ust keep a record showing:
(a) the name ard oc:a&pation or each worker employed by the Contractor or
Subcontractor in t~e construction of the Project; and
(b) the actual per diem wages paid to each worker.
These records must be open to inspection by the Port Authority at aU reason``le hours.
3. Within 30 days of receipt of a complaint, the Port AuthOrity shall make a determination
whether good cause exists to believe that the Contractor or Subcontractor has committed
a violation of the law. If good cause is found to exist that a violation has been committed,
the law requires the Port Authority to retain any amounts due under the Contract pending
a final determination.
4. If the Contractor or Subcontractor and the affected worker(s) do not reach agreement
within 14 days of notice of the Port Authority's determrnation, the issues must be
submitted to binding arbitration in accordance with the Texas General Arbitration Act.
Genera! Conditions
(Rev'd November 1,2002) VIII· 13 - 52
OX 0001-1.0196
5. Any awards made by the arbi.trator in favor of the worker(s) shan be paid out of the
Contractor's funds held by the Port Authority. If the amounts held by the Port Authority
are insufficient, the worker has a right of action against the Contractor or Subcontractor
and the surety of the Contractor or Subcontractor to recover the amount owed,
reasonable attorney's fees and court costs.
6. The Port Authority is not a party to the arbitration proceedings.
7. No officer, agent or employee of the Port Authority is liable in a civif action for any act or
omission implementing or enforcing the applicable law unless the action is made in bad
faith.
B. The Contractor is entiUed to rely on a certificate by a Subcontractor as to the payment of
all sums due to those working for and under that Subcontractor until the contrary has
been determined.
3.04 A.ssignment of A.ntitrust Causes of Action:
By submitting a Bid/Proposal or entering into a Contract with the Port Authority, the Contractor
offers and agrees to assign to the Port Authority all causes of action it may have under the Antitrust Laws
of Texas andlor Antitrust Laws of the United States. Such assignments shall be made and become
effective when the Port Authority tenders final payment to the Contractor without any further action or
acknowledgement by the parties.
3.05 Small Business Development Program:
The Port Authority has a Small Business Development Program which was created to help
implement the Port Authority's objectives of promoting economic development and business opportunities
for all sectors of the local economy. Contractor is required to use good..faith efforts to U$E! certified small
business participation goals. Contractor shall provide information regarding its small business
.participation in the form and at the times requested by the Port Authority.
The Small Business Development Program is administered by its Policies and Procedures (most
recent version). Contractor should be aware of the contents of the Small Business Development Program
Policy and Procedures. Specifically, Contractor should know that its failure to adhere to the requirements
of the Small Business O&velopment Program may result in a default and termination of the contract.
In additional to other provisiOns of the Small Business Development Program, Contractor should
be expressly aware of the oblig~tions to:
1. adhere to Port of Houston AuthOrity's Non-Discrimination Mandate:
2. submit uWization reports to the Port of Houston Authority on small busines.s participation;
3. make good-faith efforts to meet a contract small business partiCipation goal or to maintain
small business participation; and
4. adhere to the dispute resolution mechanisms of·the Small Business Development
Program.
General Conditions
(Rev'd November 1, 2002) VIII· 14 - 52
OX 0001-1.0197
3.06 Contractor's Insurance Requirements·
The Contractor shall. at all times during the performance of Work under this Contract and though
the expiration of the warranty period set forth in Section 5.53. provide and require all Subcontractors to
provide insurance coverage with companies lawfully authorized to do business in Texas and acceptable
to the Port Authority, which coverage will protect the Contractor from claims set forth below which may
arise out of or result from the Contractor's operations under the Contract Documents and for which the
Contractor may be legally liable, whether such operations are by the Contractor or a Subcontractor or by
anyone directly or in directly employed by any of them, or by anyone for whose acts any of them may be
liable, and meeting not less than the minimum requirements shown below. Such insurance is to be
provided at the sale cost of the Contractor and all Subcontractors.
Any additional coverage in kind or limits will be sel out in the Special Conditions.
Kinds of Claims:
1. claims under workers' or workmen's compensation, disability benefit and other similar
employee benefit acts which are applicable to the Contractor'S Work. to be performed;
2. claims for damages because of bodily injury, occupational sickness or disease, or death
of the Contractor's employees;
3. claims for damages because of bodily injury, sickness or disease, or death of any person
other than the Contractor's employees;
4. claims for damages insured by usual personal injury liability coverage which are
sustained (1) by a person as a result of an offense direcUy or indirectly related to
employment of such person by the Contractor, or (2) by another person;
5. claims for damages, other than to the Contractors Work itself, because of injury to or
destruction of tangible property, including loss of use resulting therefrom;
6. claims for damage~ because of bodily injury, death of a person or property damage
arising out of ownership, maintenance or use of a motor vehicle; and
7. claims involving contractual liability insurance applicable to the Contractor's
indemnification obligations under the Contract Documents.
Minimum Insurance Requirements
Kinds of Insurance: Limits of Liabili~:
A. Workers' Compensation Statutory
Texas Operations
Employer's Liability Accident $500,000 Each
Accident
Disease $500,000 Each
Employee .
DIsease $500,000 Policy
Limit
8. U. S. Longshoremen and Statutory
General Conditions
(Rev'd November 1, 2002) VIII - 15 - 52
OX 0001-1.0198
Kinds of Insurance: Limits of Liability
Harbor Workers Act
(if exposure exists)
C. Commercial General Liability $2,000,000 General
Including, but not limited to: Aggregate
1. premises/operations $2,000,000 Products/
2. independent contractors' Completed Operations
protective Aggregate
3. products and completed $1,000,000 Each Occurrence
operations $1,000,000 Personal and
4. personal injury liability with Advertising Injury
employment exclusion deleted $50,000 Fire Damage
5. contractual Uability
6. owned, non-owned and
hired motor vehicles
D. Business Automobile $1,000,000 Combined
Liability including All Owned, Single Limit Per
Hired and Non-owned Occurrence
Automobiles.
E. Umbrella Uability $2,000,000 Per OccurrenCe
$2,000,000 Aggregate
Bodily Injury and
Property Damage
F. Builder's Risk The initial Contract Price and any
On an all risk policy fOnT!
covering, without limitation, perDs of fire
subsequent modifications thereto for the
entire Work and materials stored at the site,
)
and extended coverage and physical loss stored offsite or being shipped to the site.
or damage, including without duplication on a replacement cost basis without
of coverage, theft, flood, vandalism. voluntary dedl,Jclibles.
malicious mischief, collapse, falsework,
temporary buildings and debris removal
including demolition occasioned by
enforcement of any Applicable Laws, and
covering reasonable compensation for the
Port Authority's' and D~sign Consultant's
services and reasonable expenses of the
Port Authority and Design Consultant
which are required as a result of such
loss.
3.07 Proof of Insurance By Contractor:
The Contractor shall furnish, along with the executed Contract and prior to any equipment or
personnel being brought on to the site, fully executed insu~nce forms approved by the Port of Houston
Authority, which executed forms shall provide fOf thirty ·(30) days written notice to the Port Authority
concerning any change. alteration, cancellation, non-renewal or expiration in coverage contained in the
policies or evidenced by such forms.
General Conditions
(Rev'd November 1, 2002) VIII -16 - 52
OX 0001-1.0199
The Port Authority Indemnitees shall be additional insureds under each policy except the
Worker's Compensation policy and builders risk policy. Builder's risk shall include the Port Authority as
an additional named insured.
All policies must provide for waiver of all subrogation rights against the Port of Houston Authority.
Contractor hereby waives all claims it may have against the Port to the extent any of such claims are
covered by insurance required to be furnished by Contractor or any Subcontractors hereunder, and EVEN
IF SUCH CLAIMS ARISE OUT OF. RELATE TO OR ARE BASED UPON THE PORT'S OWN
NEGLIGENCE OR OTHER FAULT.
Upon request. certified copies of original policies shall be furnished to the Port Authority.
If the Contractor fails to purchase and maintain insurance required under the Contract
Documents, the Port Authority may, but is no! obligated to, purchase such insurance on behalf of the
Contractor and shall be entitled, at the Port Authority's election, to offset the costs thereof from amounts
due Contractor or to reimbursement by the Contractor upon demand.
When any required insurance, due to the attainment of a normal expiration date or renewal date,
shall expire. the Contractor shall, prior to such expiration, supply the Port Authority with certificates of
insurance and amendatory riders or endorsements that clearly evidence the continuation of all coverage
in the same manner, limits of protection, and scope of coverage as is required by the Contract
Documents. Any renewal or replacement policies shall be in form and substance satisfactory to the Port
Authority and written by carriers acceptable to the Port Authority.
If any policy required to be purchased pursuant to the Contract Documents is subject to a
deductible, self-insured retention or similar self-insurance mechanism which limits or otherwise reduces
coverage, the deductible, self-insured retention or similar self-insurance mechanism shall be the sole
responsibility of the Contractor in the event of any loss.
3.0B Indemnification Bv Contractor:
To the maximum extent all~ed by law, the Contractor shall indemnify and hold harmless Port
~Authority Indemnitees, from and against any and all claims, demands, suits, causes of action,
settlements, liabilities, costs, expenses, fines, and judgments (including, without limitation, reasonable
and necessary court costs, experts' fees and attorney's, fees) (collectively, "Losses·), whether arising in
equity, at common law. or·by statute, including without limitation the Texas Deceptive Trade Practices Act
(as amended) or similar statute of ottter jurisdictions, or under the law of contracts, torts· (including.
without limitation, .n~gl.i9..ence and strict liability withoUt regard to fault) or property, of every kind or
character (including, without lim~ation, claims for property damage, personal injUry (including without
Irmitation emotional distress), and economic lass), arising in favor of or brought by any of the Contractor's
employees, agents, Subcontractors, Suppliers or representatives. or by any governmental agency or any
other third party, based upon, in connection with, relating to or arising out of the Work, the Contractor's
failure to comply with the Contract Documents, or the Contractor's actions or inactIons under.the Contract
Documents, including without limitation any failure to pay taxes or failure to comply WIth any Applicable
Laws, and EVEN IF ANY SUCH LOSSES ARE DUE IN PART TO ANY PORT AUTHORITY
INDEMNITEES' CONCURRENT (BUT NOT SOLE) NEGLIGENCE OR OTHER FAULT, BREACH OF
CONTRACT OR WARRANTY, VIOLATION OF STATUTE, OR STRICT L1ABIUTY WITHOUT REGARD
TO FAULT; provided, however that Contractor's obligation under this Section 3.08 SHALL NOT extend to
the percentage of damages caused by the Port's own negligence p~ other fault. breach or contract or
warranty, violation of statute, or stnct liability without regard fa fauit. .
General Conditions
(Rev'd November 1, 2002) VIII-17 - 52
OX 0001-1.0200
The indemnification obligation of this Section 3.08 shall apply regardless of the amount of
insurance coverage held by the Contractor, including without limitation any such coverage under any
worker's compensation act. disabUity act, or other act or law which would limit the amount or type of
damages, compensation, or benefits payable by or for the Contractor, and shall not be limited by any
insurance carried or provided by the Contractor in accordance with the Contract Documents or otherwise.
3.09 No Estoppel or Waiver.
The Contractor agrees that the Port Authority shall not be precluded or estopped by any action
taken or thing done, written or oral, including, but not limited to, inspections made, payments made. or
final completion of the Work, from showing that the true and correct amount and character of the work
done and materials or equipment furnished by the Contractor do not in fact conform to the Specifications
or other Contract Documents. The Contractor also agrees that the Port Authority shall not be precluded
or estopped because of any action taken or not taken, from demanding and recovering from the
Contractor any damages resulting therefrom or from the Contractor's other failure to comply with the
Contract Documents.
Furthermore, no action or failure to act by the Port Authority shall constitute a waiver of any right
or duty afforded to the Port Authority under the Contract or otherwise by law, nor shall any such action or
failure to ad constitute approval of or acquiescence in any breach thereunder, except as may be
specifically agreed to in a writing signed by the Chief Engineer.
3.16 Recovery of Attorney's Fees:
If Contractor brings any claim against the Port Authority and Contractor does- not prevail with
respect to such claim, Contractor shall be liable for all attorneys fees incurred by Ihe Port Authority as a
result of such claim.
3.11 Contractor's Qualifications:
. In entering into this Contract. Contractor represents and warrants that it has sufficient ability,
~experience and personnel to perfOf'!Tl the Work defined herein and that the representative of Contractor
executing this Contract is duly authorized to do so.
3.12 Severability:
The invalidity, illegality, or un~nforceability of any portion, clause or provision of this Contract. or
the occurrence -Q( any'. ~vent rendering any portioh. clause or provision of this Contract void, shall in no
way affect the validity or-enforcj3ability of any other portion, clause or provision of this Contract Any
invalid, illegal, unenforceable or void portion, clause or provision shall be deemed severed from this
Contract and the balance of this Contract shall be construed and enforced as if this Contract did not
contain the particular portion, dause or provision held to be invalid, illegal, unenforceable or void. The
parties further agree to reform this Contract to replace any stricken portion, clause or pr~vision with a
valid portion, clause or provision that comes as dose as possible to the intent of the stricken portion,
clause or provision. This Section 3.12 shall not prevent the entire Contract from being void should a
portion, clause or provision which is the essence of this Contract be determined to be invalid, illegal.
unenforceable or void.
3.13 Successors and "Assigns:
(a) The Port and Contractor respectively bind themselves, their partners, successors, assigns
and legal representatives to the other party hereto and to partners, successors, assigns and
General Conditions
(Rev'd November 1,2002) VIII- 18 - 52
OX 0001-1.0201
·0
legal representatives of such other party in respect of all covenants. agreements and
obligations contained in the Contract Documents.
(b) Contractor shall not assign any rights or obligations under or interest in the Contract
Documents without the prior written consent of the Executive Director of the Port or his
designee. The Port may assign its rights and obligations under and interest in the Contract
Documents in whole or in part without the consent of Contractor.
3.14 No Third Party Beneficiaries:
Except as expressly provided herein. none of the provisions of this Contract is intended for the
benefit of any other party except for the parties hereto.
3.15 Change of Control:
Contractor and any party which holds an equity or voting interest in Contractor shall not sell,
assign, convey, encumber or otherwise transfer more than twenty-five percent (25%) of the equity or
voting interest. whether it be in the form of stock, partnership interests. membership interests or other unit
of ownerShip, in Contractor without the express prior written consent of the Port.
3.16 Governing Law:
This Contract, its interpretation and any disputes relating to, arising out of or connected with this
Contract, shall be governed by the laws of the State of Texas. without regard to its conflict of law
provisions.
END OF GENERAL CONOmONS SECTION 3
General Conditions
(Rev'd November 1, 2002) VIII-19 - 52
OX 0001-1.0202
SECTION 4. REGULATORY AND SAFETY REQUIREMENTS
4.01 Laws to be Observed:
The Contractor is deemed to have made himself fammar with and at all times shall observe and
comply with all Applicable Laws, and shall, in accordance with Section 3.08, indemnify and save harmless
the Port of Houston Authority, and its Commissioners, officers, employees and agents against any claim,
demand, suit, cause of action, liatiility, cost, expense, fine, settlement or judgment arising from the
violation of, or failure by Contractor its Subcontractors, Suppliers or any of its or their employees, agents
or representatives to comp!y with any such Applicable Laws.
4.02 Code Regulations:
Where the requirements of the local building code or other Applicable Laws conflict with the
Contract Documents and such requirements are mandatory or more restrictive, such requirements shall
be followed to the same extent as if specifically set out herein in fuQ. If the Contractor observes that any
Contract Document fails in any respect to conform with Applicable Laws, Contractor shall immediately
notify the Port Authority by written RFI and identify any such failures before proceeding with any part of
the Work affected thereby. In the event a Design Consultant is utilized for the Project, the Contractor
shall send such RFI to the Design Consultant, with a copy of the transmittal letter to the Inspector and
Chief Engineer.. If the Contractor performs Work that it knows or reasonably should have known to be
contrary to or In conflict with Applicable Laws, the Contractor shaD assume full responsibility for such
Work and shall bear all costs attributable thereto, including without limitation all costs associated with
design profeSsionals, and shall be liable for all damages caused thereby.
Provisions of the Contract Documents which are more stringent than the minimum requirements
of such codes, regulations or Applicable Laws shall be followed, and no requirements of the Contract
Documents may be modified or voided because any such requirements are not specifically required by
such codes, regulations or Applicable Laws.
4.03 Permits and Licenses:
The Contractor shall procure all permits and licenses, pay all charges and fees, and give all
notices necessary and inCidental to the prosecution of the Work. This requirement shall not pertain to
permits required by the United States Army Corp of Engineers, which permits will be obtained by the Port
of Houston Authority.
4.04 Barricades, Warning Lights -and Warning Signs:
The Contractor shall be solely responsible for furnishing, erecting and maintaining suitable
barricades, warning signs, flares, barriers, cones, lights, flags, Signals, flagmen and any and all other
safety devices which are or may become necessary to adequately protect the Work. Contractor's workers
and all other parties coming onto the site.
Upon completion of the Work, all such safety devices and evidence thereof shall be immediately
removed.
4.05 Sanitary Facilities:
." .
The Contractor shall provide sanitary facilities for use of the workmen, and shall maintain such
facilities in a clean and sanitary condition until the expiration or termination of the Contract, at which time
they shall be immediately removed.
General Conditions
(Rev'd November 1, 2002) VIII- 20 - 52
OX 0001-1.0203
4.06
~
Site Health and Safety Coordinator:
v
The Contractor shall designate a qualified Site Health and Safety Coordinator (the ·SHSC") to
ensure that all Applicable Laws pertaining to health and safety are complied with and all health and safety
requirements are implemented. The SHSC shall have the authority to terminate work when any such
work or condition affecting such work or the Project is found to be unsafe. The name and qtJalifications of
the SHSC shall be furnished to the Chief Engineer for review prior to commencement of Work.
4.07 Health and Safety:
The Contractor shall submit five (5) copies of a health and safety plan for the Work to the Chief
Engineer for review at least forty-eight (48) hours prior to commencing performance of any Work at the
site. Prior 10 beginning any field work at the site, such plan shall be certified, by signature of the SHSC,
that it complies with applicable portions of OSHA standards 29 CFR 1910 and 29 CFR 1926. Such plan
shall provide, at a minimum, for safe working practices, medical surveillance. engineering safeguards,
personnel protective equipment. training. safe operating procedures, emergency planning. reporting and
sanitation. Notwithstanding the Chief Engineer's review of the health ~,nd safety plan, the Contractor. and
not the Port Authority. shall be responsible for and have control over ensuring the safety of its personnel
and its Subcontractors, agents. representatives and any other person who visits the site in connection
with the Work.
4.08 Accident Reporting:
The Contractor shall immediately report to the Port Authority's Police Department at telephone
number (713) 670-2647 and the Chief Inspector of the Port Authority any jobsite accident, injury, illness,
or environmental release. The Contractor shall submit to the Chief Inspector of the Port Authority as soon
as possible but no later than two (2) working days thereafter, a fuU written report giving the date, time,
location, description (in a degree of detail acceptable to the Chief Engineer). and personnel involved.
Such report shall be Signed by Contractor's designated SHSC.
)
4.09 Fill Material Policy:
_ The Port of Houston Authority. has adopted a policy ~ing the acceptance of fill material to be
incorporated into the Port Authority's construction Projects. Material governed by this policy shall include
soil. sand for cement stabilized sand and concrete. road base materials, sub-ballast for railroad
construction, and any other materials brought onto Port A!Jthority property for construction purposes. It is
the intent of this policy tQ.- ensure that only clean uncontaminated materials will be placed on Port
Authority property and any materials pl~ced on Port Authority property shall be subject to removal by the
Contractor at its S~E!. e1'Qense if found-not to be in complianCe with the requirements outlined herein.
Testing to determine the suitability_of materials to be used on Port Authority property shall be performed
by a testing laboratory employed by and paid by the Port of Houston Authority. The following tests shall
be performed:
A. Total Metals:
Total metals by volume shall not exceed "background" levels for the following metals as
measured by EPA Test Method 601017000 series. The assocIated required method
detection limits for each metal, as listed below, must be met by the laboratory.
General Conditions
(Rev'd November 1,2002) VIII· 21 - 52
OX 0001-1.0204
\. /
jL
METAL DETECTION METAL DETECTION . '"
LIMIT (mglkg) LIMIT (mglkg)
Antimony 0.5 lead 0.1
Arsenic 0.5 Mercury 0.1
Barium 0.5 Nickel 0.1
Beryllium 0.1 Selenium 0.5
Cadmium 0.1 Silver 0.1
Chromium 0.5 Thallium 0.5
Copper 0.1 Zinc 0.5
B. Total Petroleum Hydrocarbons:
TPH shall not exceed the Tier 1 Residential Standards defined on any of the reported
fractions as determined by Texas Test Method 1005.
C. Reuse of Soils with Concentration above Background:
If the concentration of naturally occurring metals exceeds determined background levels
set forth above or TPH·is detected. the soils are then considered as reused as defined in
the Texas Risk Rectuction Program (30 TAe 350.36). The relocation of soils containing
chemicals of concern for reuse purposes must comply with the foUowing requirements:
1. Soil must be sampled for volatile organic compounds (EPA Method 8260b).
Semivolatile Qf,9HORlNG S_-\FEn- PLA.)"!
SECTIOI\' 02161
TRENCH EXCA \'ATION AND SHORING SAFETY PLA~
PART 1 GENERAL
1.1 SECTION INCLUDES
Subject to the General and Special Conditions, this Section includes the
furnishing of a Trench Excavation and Shoring Safety Plan, including detailed
plans and specifications for a trench safety system and requirements for a safety
program for the trench system (including a plan for ingress and egress of the
trenches, manholes and structures), to be incorporated into the bid documents and
the Construction Contract, and all labor and materials for installation, inspection,
and maintenance of trench safety system.
B. Application
For any trench excavation at a depth of 5 feet or greater, provide a trench safety
system. Trench safety system is not required when (a) CO!\.'TRACTOR's
geotechnical engineer detennines that the trench excavation is to be made in
stable rock; or (b) excavations are less than five (5) feet in depth and examination
of the ground by a competent person on behalf of the CONTRACTOR provides
no indication that a cave-in should be expected. TTench safety system to be in
) accordance with details shown on CONTRACTOR's Trench Excavation and
!
Shoring Safety Plan.
c. Modifications _
All modifications to the COl'lJRACTOR'S Trench Excavation and Shoring
Safetv.... Plan or the detailed plans and specifications necessitated by the site
conditions, CONTRACTOR'S trench construction means, methods, techniques or
procedures and CONTRACTQR'S equipment to be used in construction of
jlrojict facili~ies to be submitted to the Chief Engineer. All such modifications to
be signed and sealed by a Registered Professional Engineer licensed in the State
of Texas and a statement provided stating that the modified plan and/or the
modified detailed plans and specifications for the trench safety system are
deSigned in compliance with the Contractor's Standard of Care and is in
confonnance with appropriate OSHA standards. Such modifications to
CONTRACTOR'S plan and/or the CONTRACTOR'S detailed plans and
specifications for the trench safety system to thereafter be incorporated into the
Construction Contract.
... ~" • r •
Ilf07/02 C70-1A-SOI-O-02161 - 1
OX 0001-1.0324
PORT OF HOUSTON Ap-rl-iORITY 11::...... t1N~\ .... L ~rr:.Ll["l'-rt 1 iv,'"
BAYPORT TERMINI\.. \...._ )FLEX-PHASE lA - . - '. )~XCA V ATION AND
~vRING SAfETY PL>\N.
1.2 REFERENCES
The publications listed below fonn a part of this specification to the extent referenced.
The publications are referred to in the text by basic designation only.
AMERICAN SOCIETY OF TESTING AND MATERIALS (ASTM)
,
ASTM A36/A36M 1997 Standard Specification for Carbon Structural Steel
ASTM AJ07 1997 Revision A-Standard Specification for Carbon Steel
Bolts and Studs, 60,000 psi Tensile Strength
ASTM AJ28/A328M 1996 (REV) Standard Specification for Steel Sheet Piling
ASTM A5721A572M 1997 Standard Specification for High-Strength Low-Alloy
Columbium-Vanadium Steels of Structural Quality
ASTM A588/A588M 1997 Standard Specification for High-Strength Low-Alloy
Structural Steel With 50 ksi (345 MPa) Minimum Yield
Point to 04 in. (100 mm) thick
ASTM A690/A690M 1994 Standard Specification for High-Strength Low-Alloy
Steel H-Pipes and Sheet Piling for Use in Marine
Envirorunents
AMERiCAN WELDING SOCIETi. INC. (AWS)
AWS Dl.I 1998 Structural We1ding Code - Steel
OCCUP A TION SAFETY AND HEALTH ADMINISTRATION (OSHA)
29 CFR Part 1926 1993 (Revised as of July 1, 1996 or latest Edition or revision
to) Subpart P Excavations and Applicable Subparts
1.3 SUBMI'T'fALS
The successful Contractor to submit its Proposed Trench Excavation and Shoring Safety
Plan after the Award of the Contract. The plan to incorporate detailed PLANS and
Specifications for a trench safety system confonning to OSHA standarc\s that accounts
for project site conditions, CONTRACTOR's trench construction means, methods,
techniques or procedures, the relationship of spoil to edge of trench, and
CONTRACTOR's equipment to be used in construction ofproject facilities requiring
trench systern(s), CONTRACTOR to provide a statement signed and sealed by a
Registered Professional Engineer licensed iI\ the State of Texas statmg that the Trench
Excavation and Shoring Safety Plan and the~detafled plans and specifications for the
trench safety system are designed In compliance with the Contractor's Standard of Care
11107/02 C70-IA-SOI-O-02161 - 2
OX 0001-1.0325
rVI\...J VrnVU':'lVl'V" ....... JlDVIU1 I 1.t:.\.....!7"---~1L-J"'\.. ..... ....,.1 J...,.\...-1.l 1'-",.,1. ............ 1 " -
BAYPORT TERMIN~, _.()1PLEX PHASE lA Tf(' )H EXCAVATION AND
.:?HORING SAFETY PLA..l'o.!
and is in confonnance with appropriate OSHA standards. CON'TRACTOR's plan and
the detailed PLANS and SPECIFICATIONS for the trench safety system to be
incorporated into the bid documents and the Construction ContracL
1.4 QUALITY ASSURANCE
Trench safety systems to be accomplished in accordance with the detailed Speciflcations
set out in the provisions 29 CFR, Part 1926, Subpart P. Legislation that has been
enacted by the Texas Legislature [(H.B. No. 1569)) with regard to Trench Safety
Systems, is also hereby incorporated, by reference, into these SpecificatiQns_
PART 2 PRODUCTS
2.1 MATERIALS AND/OR EQUIPMEl'-TT
A. Materials
1. Timber
Trench sheeting materials to be full size. a minimum of2 inches in
thickness, solid and sound, free from weakening defects such as loose
]mots and splits.
2. Sheet Piling
Steel sheet piling to conform to one or more of ASTM A328!328M.
ASTM A572/A572MI ASTM A690/690M material requirements.
) 3. Steel for stringers (waIes) and cross braces to confonn to ASTM A588.
4. Steel trench Boxes to be constructed of steel conforming to ASTM
A36/A36M. Connecting bolts to conform to ASTM A307. Welds to
confomi to the requirements of AWS D 1.l.
5. Miscellaneous Materials: Miscellaneous materials to be utilized to
conform to applicable ASTM standards.
PART 3 EXECUTION -:
3.1 GENERAL
Trench safety system to be constructed, installed, and maintained in accordance with the
Trench Excavation and Shoring Safety Plan as outlined in Paragraph 3 ..5A.ofthis Section.
3.2 ERECTIONfINSTALLATION/APPLlCATION AND/OR CONSTRUCTION
-A. Timber Sheeting
Timber sheeting and size of uprights-, stringers (wales), and cross bracing to be
installed in accordance with the CONTRACTOR'S plan. Place cross braces in
true horizontal position, spaced vertically, and secured to prevent slidmg, falling,
11107/02 C70-1A-SOI-0-0216J - 3
OX 0001-1.0326
PORT OF HOUSTON Al'~T,ORITY 1 r..Lnl"11" "\L..:>r L\.......ll J'-I"l." J.'-J'l .. ...,
BAYP-O.RT IERM.INA ~ 7LEX
PHASE lA . •'. :XCAVATIOl\ AND
'duRING SAFETY PLAN
or kickouts. Cross braces to be placed at each end of stringers (wales), in addition
to other locations required. Cross braces and stringers (wales) to be placed at /
splices of uprights, in addition to other locations required.
B. Steel Sheet Piling
Steel sheet piling of equal or greater strength may be used in lieu of timber trench
shoring shown in the OSHA tables (proposed standards). Drive steel sheet piling
to at least minimum depth below trench bottom as recommended by
CONTRACTOR'S Registered Professional Engineer providing design. Place
cross braces in true horizontal position, spaced vertically and secured to prevent
sliding, falling, or kickouts. Cross braces to be placed at each end of stringers
(wales), in addition to other locations required.
C. Trench Boxes
Portable trench box may be used in lieu of timber trench shoring shown in the
OSHA tables and to be designed to provide equal or greater protection than timber
trench shoring shown in the OSHA tables. In cases where top of portable trench
box will be below top of trench, the trench must be sloped to the maximum
allowable slope for the soil conditions existing on the Project. In areas where a
sloped trench will affect the integrity of existing structures, CONTRACTOR to
protect structures prior to sloping trench.
D. Trench Jacks
)
When trench jacks arc used for cross bracing and/or stringers (wales), the trench
jacks to provide protection greater than or equal to the timber cross bracing shown
in the OSHA tables {proposed standards}. Trenchjacks to be placed at each end
of stringers (wales) in addition to other locations required.
3.3 REPAIRJRESTORATION
Bed and·backfill pipe to a point at'least one (1) foot above top of pipe or other embedded
items prior to removal of any portion of trench safety system. Bedding and backfill to be
in accordance with other applicable SPECIFICATION Sections.
Backfilling and removal of trench supports to be in accordance with CONTRACTOR'S
Trench Excavation and Shoring Safety Plan. Removal of trench safety system to be
accomplished in such a manner to cause no damage to pipe or other embedded items.
Remove no braces or trench supports until all personnel have evacuated the trench.
Backfill trench to within 5 feet of natural grOUD? prior to removal of entire trench safety
system.
11/07/02 C70-1A-SOJ-0-0216J - 4
OX 0001-1.0327
.POKI OF HOUSTON/
BAYPORT TERMINA... V ~THORlTY
LEX PHASE lA
l.t:.c~r-. ,AL ::.Yt:.Ur ILA 1 JUN~
T fiEXCAVATlON AND
dORING SAFETY PLAN
3.4 FIELD QUALITI' CONTROL
A Supervision
Provide competent supervisory personnel at each trench while work is in progress
to ensure CONTRACTOR'S methods, procedures, equipment, and materials
pertaining to the "Safety systems in this Section are sufficient to meet requirements
of OSHA Standards.
B. Inspection
CONTRACTOR to make daily inspection of trench safety system to ensure that
the system meets OSHA requirements. Daily inspection to be made by competent
or
personnel. If evidence of possible cave - ins slides is apparent, all work in the
trench is to cease until necessary precautions have been taken to safeguard
personnel entering trench. CONTRACTOR to maintain permanent record of
daily inspections.
3.5 PROTECT10N
A. Maintenance of Safety System
The safety system to be maintained in the condition as shown on the Trench
Excavation and Shoring Safety Plan as designed by the CONTRACTOR's
Registered Professional ENGINEER. The CONTRACTOR to take all necessary
precaution to ensure the safety systems are not damaged during their use. If at
any time during its use a safety system is damaged, personnel to be immediately
removed from the trench excavation area and the safety system repaired. The
CONTRACTOR is to take all necessary precautions to ensure no loads, except
those_provided for in the plan., are imposed upon the trench safety system.
3.6 MEASUREMENT AND PAYMENT
A. - -Measurement
Measure "Trench Safety System" by linear foot of trench protected. Shoring of
trench at manholes and other line structures to be included in the lineal foot cost.
B. Payment
Pay for "Trench Safety System" measured as stated and as shown on Proposal.
Payment to be full compensation for all work described herein. There will be no
increase in the Contract price because of the incorporation of CONTRACTOR'S
Trench Excavation and Shoring Safet¥ Plan or CONTRACTOR'S detailed plans
and specifications for the trench safety system into the proposal documents and
the Construction Contract. There will be no increase in the Contract price because
11107/01 C70-IA-SOJ-O-02161 - 5
OX 0001-1.0328
PORT OF HOUSTON Arp--1,ORITY L cL.t1NH >\'L ;::,rCA._J.r lL-M.' H_I> h ...
BAYPORTTERMINk \...JLEXP-HASE lA . . .-', ::XCAYATIONAND
~uRING SAfETY PLAN
of modifications to Cm·rrRACTOR'S plan and/or the CONTRACTOR'5 detail
plans and specifications for the trench safety system, whether or not the result of
unforeseen or differing site or soil condltions_
C. Pay for "Design of Trench Excavation and Shonng Safety Plan" by lump sum as
shown on Proposal. Payment to be full compensation for all professIOnal services
relating to the'EONTRACTOR's Trench Safety System.
END OF SECTION
11/07/02 C70-1A-SOI-O-02161 - 6
OX 0001-1.0329
TAB 15
Contract, Technical Specifications, Section 01500
Temporary Facilities and Controls
(DX1-1.0271-82)
t'UX.! Ul" HU U ~! VI' . . ·p HU.K.J l Y - I t:.y ' )\..,AL :::.t't:.\..,lrll...h !lUI'-.::.
BAYPORT !ERMIN. (/iPLEXPHASE lA ( . ,MPORARY fACILITIES
/ AND COl\'TROLS
SECTION 01500
TEMPORARY FACILITIES AND COI':TROLS
PART 1 GENERAL
1.1 SUMMARY
A. Subject to the General and Special Conditions, tlUs Section describes temporary
facilities and necessary controls for the project including utilities, •
telecommumcations, sanitary facilities, field office, storage sheds and building,
safety requirements, first aid equipment, fire protection, security measures,
protection of the Work and property, access roads and parking, environmental
controls, disposal of trash, debris, and excavated material, pest and rodent control, _
water runoff and erosion controL
B. The facilities and controls specified in this section are considered minimum for
the Project. The CONTRACTOR may provide additional facilities and controls
for the proper execution of the Work and to meet CONTRACTOR'S
responsibilities for protect.ion of persons and property. ·
12 CONTRACTOR'S RESPONSIBILITY
Comply with applicable requirements specified in other sections of the Specifications.
)
l. Maintain and operate temporary facilities and systems to assure
continuous service.
2. Modify _and extend systems as Work progress requires.
3. Completely remove temporary materials and equipment when their use is
no longer required.
4. Restore existing facilities·used for temporary services to specified or to
original ~?ndition.
1.3 TEMPORARY. UTILITIES
A. Obtaining T ernporary Service.
1. Make arrangements with utility service companies for t~porary services.
2. Abide by rules and regulations of the utility service companies or
authorities having jurisdiction.
3. Be responsible for utility service costs Wltil the Work is substantially
complete. Included are fuel, power, light, beat, and other utility services
necessary for execution, completion ~ t~ting, and initial operation of the
Work. · •·
11 /07/02 C70- l A-SO1-0-01500- 1
ox 0001-1 .0271
PORT OF HOUSTON A'- ORITY 1J:::.LHN- '\.L ::>r.C'I...lri\..M.IAV1'"-'
BAYPORTTERMIN~ ~LEX PHASE lA ORARY FACILITIES
L ~D CO~'TROLS
B. Water ' I
1. Provide water required for and in connection with Work to be perfonned
and for specified tests of piping, equipment, devices, or for other use as
required for proper completion of the Work.
2. Provide and maintain an adequate supply of potable water for domestic
consumption by the CONtRACTOR petsonnel and Port of Houston
Authority (Port Authority) and its representatives.
C. Telecommunications
1. Provide emergency telephone service at the CONTRACTOR'S office for
use by CONTRACTOR personnel and others performing work or
furnishing services at the site.
2. Provide field office telephone system with number of incoming lines,
equal to that specified for telephone type described in Part 1.4.C.8 and one
separate line for fax machine, described in Part 1.4.0.14. Provide five,
separate Tl lines for computer modem connections and electronic data
information (EDI) communications; one line for each of the closed offices
and two lines, one each, in the main reception and conference room areas.
Provide all appropriate jacks, wiring and equipment, IUJUired for a
complete telecommunications (voice, fax and EDI) system. Cost for local
calls and other project-related calls made by such individuals and their
representatives shall be paid for by the CONTRACfOR.
D. Sanitary Facilities
)
L Provide and maintain sanitary facilities, in compliance with state and local
health authorities, for persons on the job site.
2. Enforce the use of sanitary facilities by constOlction personnel at the job
site. Such facilities shaH be enclosed. Pit-type toilets will not be
permitted. No discharge will be allowed from these facilities. Collect and
·. store sewage and waste so as not to cause a nuisance or health problem;
hav.e sewer and waste hauled off-site and properly disposed, in accordance
with applicable regulations.
3. Locate toilets near the Work site and secluded from view insofar as
possible. Keep toilets clean and supplied throughout the course of the
Work.
l I /07/02 C70- IA-SOI-0-0t500-2
ox 0001-1 .0272
ruK J Ut" t1U U::> 1 UN' '\J I.HUK.J I Y ! l:l(' ' ~'-..AL ::>t'J:.'-..U' J\...A I JU!'\':>
BAYJ?ORT TERMIN~ o-eLEX PHASE lA ( ).1PORARY FACILITIES
· 7 AND C~'TROLS
1.4 FIELD OFFJCE
A. Furnish and Locate
I. Furnish, install, and maintain a fteld office for the exclusive use of the Port
Authority. Provide main reception area, conference room (12'x10') for
project meetings and three separate closed offices (8'xJO' each) for the
Chief Engineer, Construction Manager and Inspector. Locate the office
near the Site or in a place approved by the Chief Engineer. Office to be
leveled, blocked, tied down, skirted and relocated, if necessary. Off ice to
be provided on proper foundations. Provide proper surface water drainage
and connections to all utility services. Raise grade under field office, as
necessary, to an elevation adequate to avoid flooding.
2. Provide office space ready for occupancy ten (I 0) days after date fixed in
Notice to Proceed Office to remain on the site for a minimum of 30
working days after the final acceptance of the Project Work.
3. Provide a minimum of 100 square feet of hard stand, all weather field
office entrance and parking area to accommodate parking for 10 vehicles.
Provide a hard stand, all weather wal.lcway from parking area to field office
trailer.
B. Minimum Construction
} 1. Completely weather-tight with insulated roof and walls.
2. Exterior finish and interior finish acceptable to Chief Engineer.
3. Stairs or walkway with handrail and entrance platform (4' x 4') with a mud
scraper `` door
4. Resilient floor covering
5. Screened windows with an area equal to approximately 10 percent of floor
.. area sufficient for light, view. and ventilation. Provide windows with
operable sash. Provide blinds or drapes on all windows.
6. Provide two secure. lockable exterior doors with dead bolt cylinder locks,
keyed_alike. Provide six sets of keys.
C. Mimmum Services
I. Security bars on doors and windows
2. Exterior light at entrance
3. Interior fluorescent, 110 volt lighting of 50 foot-candles at desktop height
4. Electric automatic heating to maintain 65°F in winter
5. Electric automatic cooling to maintain 75°F in summer
6. Electric power service
11/07/02 C70- l A-SO 1-0-01500-3
ox 0001-1.0273
PORT OF HOU STON A l ' 'ORITY
r
BAYPORT TERMINA~ _"PLEX PHASE IA / ORARY FACILITIES
AND COt..'TROLS
7. Minimum of two duplex ,I I 0 volt electric wall outlets in each closed ·.
office space and four duple:·. I I 0 volt electric wall o ut) ets ir. each
common area space.
8. Six telephones with intercom line, three incoming/outgoing lines. touch-
tone, conference speaker and 12-foot coiled handset cord. One telephone
v.rill be located in each closed office area; and one telephone:, each, in the:
main reception and conference room areas. One telephone instrument v.ill
be kept, as a spare, in case of installed equipment breakdown.
9. - Bottled water service with cooler capable of producing hot and cold water
10. Separate sanitary facilities with one water closet and one-lavatory and
medicine cabinet
11. Plumbing and sewers as required, protected from freezing
D. Minimum Furnishings
I. Six, steel 5-drawer desks, 30 inches by 60 inches with desk surface located
29 inches from floor
2. Six, five castor base; adjustable seat height; adjustable, height and angle,
locking seat back; adjustable arms; swivel desk chairs
3. One drafting table., three feet by six feet. witlnwo drafting stools and light
4. Three plan racks with racks to hold eight racks of drawings
5. Nine, locking, 4-drawer steel, legal file cabinets
6. Book shelving or three bookcases with a minimwn of 45 feet of shelf
space
7. Six waste baskets
8. Two tack board, 30 inches by 36 inches
9. Two carbon dioxide (1 0 pound) fire extinguishers
10. Identifying exterior sign acceptable to Chief Engineer
11. Two first-aid kit
12. Six (6) protective belm~ts (hard hats) for ~e by Port Authority and
visitors
13. Conference table. 36 inches by 96 inches and I 0 steel folding chairs
14, Fax maclllne with connecting cables
15. Paper cup dispenser with cups
16. Two paper towel dispenser with towels
17. Telephone answering machine with cormecting cables
18. Duplicator, dry type, self-feeding; capable of providing 8 Yl by 11 inch, 8
Yl by 14 inch and II by 17 inch copies; collating I0 mutilple copies;
reduction and enlargement capabilities; including maintenance service
agreement for project duration
L9 Two clothes racks
20. Other furnishings at CONT~CTOR ' s option
. ,
1110- 02 C70- lA-SOl -0 -0 I 500-4
ox 0001 -1.0274
rvt.\.! vr nvv.:>JVI' ·
BAYPORTTERMINA aLEX
· •nu.JUJ t
PHASE I A
lJ.:.\..v· '"'--"-1-
).
1
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j1PORARY FACILITIES
AND COl'o.'TROLS
.LA.....U !~r'\.Jo •"-'•'...>
E. Mamtenance
I. Schedule continuous maintenance of office, walkways, and services.
Office to be cleaned not less than once per week.
2. Provide soap, paper towels, cleansers, janitorial service and appunenances.
3. Immediately repair any damage, leaks, or defective service.
F. Provide adequate space for one set of Contract Documents in the office for ready
reference.
1.5 STORAGE SHEDS AND BUILDINGS
A. As may be necessary provide adequately ventilated, watertight storage facilities
with floor above ground level for materials and equipment susceptible to weather
damage. '
B. Storage of materials not susceptible to weather damage may be on blocks off the
ground.
C. Store materials in a neat and orderly manner. Place materials and equipment to
permit easy access for identification, inspection. and inventory.
D. Fill and grade site for temporary strucrures to provide drainage away from
temporary and existing buildings.
1.6 SAFETY REQUIREMENTS
A. Submit and follow a safety program.
B. Conduct operations in strict accord with applicable federal, state and local safety
codes and st.a.twes and with good construction practice. The CONTRACTOR is
fully ~ponsible and obligated to establish and maintain procedures for safety of
all work, persomu:_l,. and equipment involved in the Project.
c. Observe and c;omply with all applicable law governing health and safety including
without limitation the Texas Worker's Health and Safety Act (Ch.4ll of the
Texas Labor Code) and with all safety and health standards promulgated by
Secretary of Labor under Section 107 of Contract Work Hours and Standards Act,
published in 29 CFR Part 1926 and adopted by Secretary of Labor ORARY FACILITIES
AND CONTROLS
3. Notify the Chief Engineer and provide to ChiefEngineer copies of written
consent from proper parties before entering or occupying with workers,
tools, materials or equipment, privately owned land except on easements
provided for construction.
4. Assume full responsibility for the preservation of public and private
property on or adjacent to the site. If any direct or indirect damage is done
by, orbn account of, any act, omission, neglect, or misconduct in
execution of the Work by the CONTRACTOR. it is to be restored by the
CONTRACTOR to a condition equal to or better than that existing before
the damage was done.
B. Tree, Plant, and Wetland Protection. Conform to requirements specified in
Section 01015 Contractor Use ofFacilities.
C. Protection of Existing Structures
1. Underground Structures:
a Underground structures are defined to include, but not be limited to,
sewer, water, gas, and other piping; and manholes, chambers,
electrical and signal conduits, tunnels, and other existing subsurface
installations located within or adjac.cnt. to the limits of the Wort.
b. Known underground structures, including water, sewer, electric, and
telephone service connections are shown on the Drawings. This
infoanation is only approximately shown for the assistance of the
CONTRACTOR, and is not guaranteed to be correct or complete.
c. Explore ahead of trenching and excavation work and uncover
obstructing underground structures sufficiently to determine their
location, to prevent damage to them, and to prevent interruption of
utility services. Restore to original condition damages to
underground struc;ture at no additional cost to the Port Authority.
d. Necessary changes in location of the Work may be made by the
Chief Engine~r to avoid unanticipated underground structures.
e. lfperrnanent relocation of an underground structure or other
subsurface installation is required and n ot otherwise provided for in
the Contract Documents, the Chief Engineer will direct the
CONTRACTOR in writing to perform the Work, which is to be paid
for under the provisions for changes in the Contract Price as
described in Section VIII - General Conditions.·
2. Surface Structures:
Surface stru.ctures are defined as existing buildings, structures and other
constructed installations abo-ie the ground surface. Included with such
structures are their foundations or any extension below the surface.
Surface structures include, but are not limited to buildings, tanks, walls,
11 /07/02 C70- l A-SOI-0-01500-8
ox 0001-1 .0278
rur..1 vr nuu.)JVJ,.,---_,JnVl'UJ 1
BAYPORT TERMINt. i fLEX PHASE I A
bridges, roads, dams, channels, open drainage, piping, p~les , v.."ires, posts,
signs, markers, curbs, walks, guard cables, fencing, and other facilities that
are visible above the ground surface.
3. Protection of Underground and Surfac.e Structures:
a. Sup_port in place and protect from direct or indirect damage
underground and surface strucrures located within or adjacent to the
limits of the Work. Install such supports carefully and as required by
the party owning or controlling such structure.
b. Before installing structure supports, CONTRACTOR·shall satisfy
the Chief Engineer that the methods and procedures to be used have
been approved by the owner of the structure.
Avoid moving, or in any way changing, the property of public
utilities or private service corpofations without prior written consent
from a responsible official authorized by that service or public utility
to give such consent. Representatives of these utilities reserve the
right to enter within the limits of this project for the purpose of
maintaining their properties, or of making such changes or repairs to
their propeny that may be considered necessary by performance of
this Contract.
c. Notify the owners and/or operators of utilities and pipelines of the
narure of construction operations to be perfonned and the date or
·. dates on which those operations will be performed. When
construction operations are required in the immediate vicinity of
existing structures, pipelines, or utilities, give a minimum of
5 working days advance notice. Probe and flag the location of
underground utilities prior to commencement of excavation. Keep
nags in place until construction operations reach and uncover the
utility.
d. CONTRACTOR ass-umes risks attending the presence or proximity
of underground and surface structures within or adjacent to the limits
to tlfe Work, including but..not limited to, damage and expense for
direct or indirect injury caused by this Work to any strucrure.
·Immediately repair damage caused, to the satisfaction of the owner
of the damaged structure. ·
D. Protection oflnstalled Products.
1. Provide protection of installed products to prevent damage from
subsequent operations. Remove protection facilities when no longer
needed, prior to completion of Wotk.
2. Control traffic to prevent damage to ~utpment, materials, and surfaces.
.. •• • • #
11/07/02 C70-1 A-SO 1-0-01500-9
ox 0001-1 .0279
PORT OF HOUSTON AT- · 'iORlTY -
BAYPORT TERMIN~- )PLEX PHASE lA ORARY FACILITIES
AND CONTROLS
1.12 ROADS AND PAR.K.ING )
A. Designate temporary parking areas to accommodate construction personneL
When site space is not adequate, provide additional off-site parking. Locate as
approved through the submittal process.
B. Minimize use by construction traffic of ex..isting streets and drivev>'ays.
1.13 ENVIRONMEI\'TAL CONTROLS
A. Provide and maintain methods, equipment, and temporary construction as
necessary for controls over environmental conditions at the construction site and
adjacent areas.
B. Comply with statutes, regulations, and ordinances which relate to the proposed
Work for the prevention of environmental pollution and preservation of natural
resources, including but not limited to the [National Environmental Policy Act of
1969, PL91-190, Executive Order 11514.)
C. The Port Authority recognizes that construction of projects should have minimum
impact to the surrounding environment. The CONTRACTOR shall adopt
construction procedures that do not cause WliJCCessary excavation and ftlling of
the terrain, indisc:riminate destruction of vegetation, air or stream pollution, nor
the harassment or destruction of wildlife.
'I
D. Recognize and adhere .to the environmental requirements of the ProjecL I
Disturbed areas sh.all be strictly limited to boundaries established by the Contract
Documents. Particularly avoid pollution of on-site streams, sewers, wells, or
other water sources.
E. Burning of rubbish, debris, or waste materials is not permitted.
1.14 POLLUTION CONTROL
A. Provide methods, means, and facilities required to prevent contamination of soil,
water or atmosphere by discharge of noxious substances from construction
operations.
B. Provide equipment and personnel to perfonn emergency measures required to
contain any spillage, and to remove contaminated soils or liquids. Excavate and
dispose of any contaminated earth off-site and replace with suitable compacted fill
and topsoil.
C. Take special measures to prevent harmful-substances from entering public waters.
Prevent disposal of wastes, effluents, chemicals, or other such substances
11/07/02 C70- 1A-S01-0·0l500- l 0
ox 0001-1.0280
PORT OF HOUSTON r·';HORJT\' l 1:.~7 - ~1'\..1... ::>r .C.\..-.t.r ''-'"', ''-'·'J
BAYPORTTERMINk. OLEXPHASE !A )PORARY FACILITIES
C:7 AND C~TROLS
adjacent to streams, or in sanitary or storm sewers. Limit discharge of suspended
solid from Disposal Area to 300 mg/L maximum.
D. Provide systems for control of atmospheric pollutants.
1. Prevent toxic concentrations of chemicals.
2. Prevent hinmful dispersal of pollutants into the atmosphere.
E. Use equipment during construction that conforms to current federal , state, and
local laws and regulations.
1.15 NOISE CO'l\'TROL
A. Provide vehicles, equipment, and construction activities that minimize noise to the
greatest degree practicable. Noise levels shal!'conform to the latest OSHA
standards and applicable regulations and in no case will noise levels be permitted
which interfere with the operations of the Port Authority or create a nuisance in
the surrounding residential neigbborhoQds.
B. Conduct construction operations during working hours, in accordance with the
General Conditions, except as approved by Chief Engineer.
C. Select construction equipment to operate with minimum noise and vibration. If in
the opinion of the ChiefEngineer, objectional noise or vibration is produced by
equipment, rectify such conditions without additional cost to the Port Authority.
The Sound Power Level (PWL) of any equipment shall not exceed 85 db A (re:
I 0-12 watts) measured 5 feet from the piece of equipment, or the levels prescribed
by local regulations, whichever is lower. Explicit equipment noise requirements
are specified v..-iih equipment specifications.
1.16 DUST CONTROL
Control objectionable dust caased by operation of vehicles and equipment. Apply water
or use other-methods, su&ject to approval through the submittal process, which will
control the amount of dust generated. Comply with requirements specified in Section
0I532-Gene-ral Source Controls.
1.17 WATER RUNOFF AND EROSION CONTROL
A. Where required, the CONTRACTOR is to comply with the National Pollutant
D1scharge Ehmination System (NPDES} permit as stated in the [Federal
Register, Vol 57, No. 175.]
. ..
11 /07/02 C70· I A-SUI-0-0 1500-11
ox 0001-1 .0281
r vl'l. • vr nvu.:> t vt-. ~· ·• flVIU. 1 J 'C.'-nJ.,.Y '\.....1"\L... ..>r L"-U &\...on 1 l Vt."'..:J
BAYPORT TERMINi~ ·' fLEX PHASE lA · -, =>QRARY FACILITIES
--._.;, AND CONTROLS
B. In addition to the NPDES requirements, the CO?-.'TRACTOR is to: )
1. Provide methods to control Sl.uface water, runoff, subsurface water, and
water from excavations and structures to prevent damage to the Work. the
site, or adjoining properties.
2. Control fill. grading, and ditching to direct water away from excavations,
pits, tunnels, a.11d other construction areas; and to direct drainage to proper
runoff courses so as to prevent any erosion, sedimentation, or damage.
3. Provide, operate, and maintain equipment and facilities of adequate size to
control surface water.
4. Dispose of drainage water in a manner to prevent flooding, erosion, or
other damage to any portion of the site or to adjoining areas and in
confollllance with environmental requirements.
5. Retain existing drainage patterns external to the construction site by
constructing temporary earth berms. sedimentation basins, retaining areas,
and temporary ground cover as needed to control conditions.
6. Plan and execute construction and earth work by methods to control
surface drainage from cuts and fills, and from borrow and waste disposal
areas, to prevent erosion and sedimentation.
a. Keep to a minimum the area ofba:re soil exposed at ooe time.
b. Provide temporary control measures, such as berms, dikes, and
drains.
7. Construct fills and waste areas by selective pLacement to eliminate surface
silts or clays, which will erode..
8. Inspect earthwork periodically to detect any evidence of the start of
erosion. Apply corrective measures as required to control erosion.
1.18 PAYMENT
No separate payment for the work specified in this section. Such work to be considered
incidental, and payment will be included as part of the appropriate lump sum and/or unit
prices specified in the Proposal.
PART2 PRODUCTS- (NOT USED)
PART3 EXECUTION- (NOT USED)
END OF SECTION
11/07/02 C70-l A-SO 1-0-0 1500·1 2
ox 0001-1 .0282
TAB 16
Contract, Special Conditions, §12
(DX1-1.0244)
Bayport Tenninal Complex rc::ul ucu y ....... - .... - -
Phase:1A Wh2Ft and D~ \ . rya-
Sheet Title ,
U-105 8" Potable Waterline Plan -5 )
U-106 Typical Wharf Section with Potable Waterline Details
U-107 Potable Water Delails
12. Construction Manager:
(a) Independent Contractor: The Project will be administered by a Construction Manager. The
Port of Houston Authority has hired CH2M HILL as the Construction Manager for this Project. The Construction
Manager is an independent contractor, and I)ot an agent or employee, of the Port. Accordingly, the Construction
Manager cannot, among other things, enter into agreements on behalf of, make agreements on behalf of, or bind
the Port. The CH2M Hill representative shall be:
Stephen A. Curtis, P.E.
(b) Inspector: The Construction Manager shall be the Inspector for the Work and have all authority
delegated to the Inspector by the Contract Documents. '
(c) Paper Flow: One of the duties of the Construction Manager is to coordinate all paper flow for the
Project. Accordingly, all paper work (including, but not limited to, Submittals, RFls, and Change Order
documentation) required to be submitted by the Contractor to the Chief Engineer, other Port employees or to the
Design Consultant pursuant to the Contract Documents shall be submitted to the Construction Manager, attention
of the CH2M Hill individual designated above~ for distribution to the Chief Engineer, other.Port employee. and
Design Consultant, as appropriate. The Contractor shall submit the appropriate number at originals and copies of
the paper work to the Construction Manager, with copies of transmittal letters directly to the Chief Engineer and
other required individuals. Responses from the Chief Engineer, other Port employees, and Design Consultant will
be provided to the Construction Manager who, in tum, will distribute the responses to the Contractor and other
appropriate individuals. The Contractor shot.dd take into account in scheduling the Work the role of the
Construction Manager and the time required for the paper to flow through the Construction Manager. )
,_ Notwithstanding the foregoing, any notices to the Port Police or Coast Guard (including, but not
limited to, reports pursuant to General Conditions Sections 4.08, 4.10, 4.14, and 4.19) shall be made directly to
the designated individuals as set forth in the General Conditions, with a copy to the Construction Manager.
(d) Chief Engineer and Changes: The Construction Manager does not have the authority of the
Chief Engineer. For example, the ConStruction MaRager has no authority to resolve disputes, issue Construction
Change Directives: orch~mge any of the terms and conditions of the Contract, including. without limilation, issuing
Modifications or ruling on or granting time extensions or Change Orders. The Construction Manager wilt make
recommendations to the Chief Engineer, when requested, regarding any disputes. changes or Modifications.
(e) Responses to RFls: The Construction Manager shall review RFls and. In instances in which the
response to the RFI does not require a response from the Design Consultant or a Modification of any Contract
Documents, respond directly to RFls. The authority of the Construction Manager to respond to RFls shall
specifICally include RFls regarding discrepancies, errors, conflicts or omissions in the Contract Documents and
shall specifically include the authority to otherwise clarify the Contract Documents and to make decisions
regarding issues which arise in the field, in each instance so long as such responses, clarifications and decisions
do not Involve a Modification in the Contract Documents .
... ,',.
The authority of the Design Consultant to respond to RFls and submittals IS as set forth ;n the
General Conditions. Such responses shall be made through the Construction Manager.
Special Conditions
(rev'd August 1, 2002) X-60f9
OX 0001-1.0244
TAB 17
Contract, Addendum No. 8
(DX1-1.0021)
Bayport Terminal Complex Addendum No.8
Phase 1A Wharf and Dredging Co:
'-.. /
(, (Revised June 6, 2003)
D. SMALL BUSrNESS PARlleIPATION:
Small business participation for purposes of this Contract is defined as the dollar amount of the Contract, which
will be performed by one or more, approved or certified small businesses. A small business for purposes of this Contract
is a firm for which the gross revenues or number of employees averaged over the past three (3) years, inclusive of any
affiliates as defined by 13 United States Code of Federal Regulations Section 121.103, does not exceed the size
standards as defined pursuant to Section 3 of the Small Business Act (15 U.S. Code, Chapter 14A) and for which the net
worth of each owner does not exceed $750,000, excluding residence and the value of the small business.
Please check the appropriate statement(s):
1. _ I certify that _-::-::--_-:-:~_---:_ _- _ - - - is a small business as defined above.
(Name of Proposer)
2. . / I certify that the subcontractors shown on the sub-contract sheet above as certified small businesses will
perform work on this contract for $ "'2...'1....1 536. 00 0 (dollar amount of the Contract which
will be performed) of the tolal contract price, or ''3+ % of the contract work.
3. _ I certify that (name of Proposer) has made a good-faith effort to use certified
small businesses for this contract and has been unable to do so.
E. PERSONAL PROPERTY:
The above TOTAL AMOUNT PROPOSED contains $ II~ I~ 1...,;7
00 worth of tangible personal. property which is
authorized by law to be purchased tax free and which wi be incorporated into the completed project.
F. CERTIFICATION OF PROPOSAL:
The above TOTAL AMOUNT PROPOSED price shall remain firm for One Hundred Fifty (150) calendar days
after the Proposal opening date.
The undersigned agrees, if awarded the Contract, to begin the Work within ten (10) working days after issuance
of a fully executed Purchase Order by the Port Authority, and to complete such Work within Seven Hundred and Thirty
(730) calendar days after receipt of the Port Authority's purchase order; and further agrees that, should the undersigned
fail'to complete the Work within the agreed time, the Contract Price will be reduced by Five Thousand Dollars ($5,000.00)
for each and every CALENDAR day thereafter until completion of the Work. See Sections 5.05 and 5.06 of the General
Conditions.
The undersigned further agrees to meet the completion milestones specified in Section 10 of the Special
Conditions on or before the time indicated, and should the undersigned fail to complete the Work within the agreed time
the Contract Price will be reduced by the following amounts:
Area "A": Twenty Thousand Dollars ($20,000.00) for each and every CALENDAR day thereafter until
completion of the Work in Area "A".
Area "1": Four Thousand Dollars ($4.000.00) for each and every CALENDAR day thereafter until completion
of the Work in Area "1".
Area "2": Six Thousand Dollars ($6,OOO.OO) tOf each and every CALENDAR day thereafter unit completion of
the Work in Area "2".
The reductions in the Contract Price set forth in paragraph 2 and 3 above shall be assessed independently of one
another and shall be additive. .
The undersigned deposits with this proposal a Cashier's Check or Certified Check, or a Bid/Proposal Bond on the
Port Authority's form executed by a responsible corporate surety authorized to do business in Texas, In the amount of
Five Percent (57.) of the Greatest Dollars ($ 57. ) in accordance wilh the Instructions to proposers.
Cashiers or Certified Check must be drawn on a bank that is a member of the Federal Deposit Insurance Corporation
mount Bid by Principal
Specifications and Proposal
(rev'd December 1,2002) 11/ - 15
OX 0001-1.0021
TAB 18
Email from Thiess to Anderson dated August 1, 2004
(PX84)
c •
·.
f
Larry Applegate
':
From: Andrew. Thiess@CH2M.com
Sent: Sunday, August 01, 2004 5:45AM
To: ANDERSONHE@zachry.com
Subject: Freeze Wall
Tech Memo
003 - Freeze Wal
Andy,
I have brought this issue up to Gary Kuhn but have not received a response, ?nd so I will
for"1ard it to you now that you are on board.
. .
Regarding the free:z.e walL ``e have no requirement for a submittal as it was not
anticipated by the designer~. However, the Port and the engineering team are very
concerned about the freeze wall and the question has come up what ~ind of submittal we
should ask for, if any, and .-whet her we should revie1~ the design, et<.:.
Gary Kuhn and the freeze wall, guys, when they 1~ere here, indicat,ed that they hac! expect;ed
to provide a detailed submittal any\~ay._
Attached is a document that outlines the ltta"y I "Jould like to approach the freeze wall
submittal. Please review and let me know if you have any -concerns with this approach. In
particular, note that the signature of a Texas PE would be ~equired . 1 have discussed
this with the Port and they believe this requirement cannot be avoided. Please let me
kno1i if you think the approach or the- ·Texa·s PE signature will be a problem.
Note that this doc"ument is only a draft-- for your revie~ ano not ah official directive at
this time.
Andrew W. Thiess, PE, PMP
CH2M HILL
7600 W. Tidwell 3d.~ Suite ~00
Houston, TX 77040-5719 .
Tel: (713) 462- 0161
Direct: "(713) .4 62- 0169, ext' 311-
Fax (713) 462- 0165
Mob le: (832) 250- 2999
ath ess0ch2m.com . ·'
·-.
..
No. 2006-72970
ZCC EXHIBIT
RKK 00031 4
84
0084.0001
.. '·
·~
.4/Lfl 4-.t``SoA./ .- ;:J;?DjJ3i(j' !JJ.?N-~dc
J • '
l3i5M :10 ~ ·- 13v!71``-::b PlAr-f~
:::r01iJJ GJ../?5/:;o -
Issues/Concerns Pertaining to Freeze Wall Technology
Responses from GeoEngineers, Inc. (GEl) and RKK-SoilFreeze Technologies, LLC
(RKK).
1) Recognizing the large clay su·aturns that exist in the soil, particularly at the toe of
the wall, raises concern due to the lack of water in clay soils. How will this be
dealt with?
Clay actually has more moisture in its pore spaces than does sand. Because the water is
held very tightly, clay may appear to have Jess moistqre, but the water content tests verify
that it bas more than enough to freeze solid. We plan to do our own testing of samples
.. from the new borings to verify frozen strength ancl freezing parameters, but the dat::r ·
available thus far indicates that freezing should be no problem at this site give,, the : ··
conservative assumptions underlying the preliminary SoiiFreeze wall design. _{GEl/
. .
. 2) In the case of storms/h~rricanes, explain how the stmctural integrity will be .
maintained?
One issue is the integrity of the SoilFreeze w~U during a large stonn or hun-icane. The
frozen wall will"actuaJiy be embedded within the unfrozen fill that Zachry will .plilce in.· ·...
the water soon. 'There will be a20 to 30 foot wide buffer of unfrozen soil between the·
frozeri waJI and the water. The height of this new fill has not yet been determined. · . ·
However, based on recent discussion in Houston, it appears that a height of 4 to 6 feet ;_ .: · .
above nonnal sea level ':"ill be adequate for most stonns. The wall itself should be qui(e
·.
:1dequatel y protected from water action. (GEl) ,£ · ' lT:\C4? :,......_5·
.J./1-TF 11968 'La Porte, TX 77572' (281) 474-3176' (281) 474-4925. fax' www.zachry.com
ZCC-34-D50410
0009.0001
TAB 22
May 18, 2009 Proposal for Wharf Extension
(PX179)
_ e
:,'" ,~.
....
,
Ij ZACHRY
May 18,2005
Port of Houston Authority Correspondence # 723405008
Mark Vincent, P.E.
Bayport Project Engineer
P.O. Box 2562
Houston Texas, 77252-2562
Re Contract: Bayport Terminal Complex Phase lA
Wharf and Dredging Contract
Subject: Price Quote - 330 foot Wharf and Dredging Extension
Dear Mark,
As per your request we have reviewed our offer for the 330 foot Wharf extension, Zachry
Construction Corporation would like to thank you for the opportunity to review our quote for this
additional work, however after our review we have concluded that the original offer is our best price.
Lump Sum Price $12,572,000.00 **
** Price is based on:
• Current design
• Uninterrupted work process
• Current construction methods
• Delivery of the gantry cranes at the west end of the wharf
• Use of a freeze wall - cut off wall, encompassing one (1) "B" row
piling
• No outfall structure is included
• Wet Dredging will be at a unit price based on 80,000 cubic yards,
actual yardage will be determined by pre-dredge survey and adjusted at
$8.89 per cubic yard
• Wet Dredge Placement will be based on 80,000 cubic yards, actual
yardage will be determined by pre dredge survey and adjusted at $4.50
per cubic yard
Should the POH approve the use of the Geostar Fabri-form revetment system for the entire wharf
length (1990 If) a deduction of $592,281.00 for the entire wharflength (l9901f) can be taken, for
an adjusted lump sum price of$11,979,719.00
If you have any Questions please do not hesitate to contact me.
\~( \ .i., \._-----====-:>
~'Anderson
Project Manager
No. 2006·72970
Cc: File, Fred Lueck, Greg McVey ZCC EXHIBIT
179
Zachry Construction Corporation
P.O. Box 1968 -La Porte, TX 77572· (281) 474-3176· (281) 474-4925, fax· www.zachry.com
ZCC23 000488
0179.0001
TAB 23
July 11, 2005 Proposal for Wharf Extension and Ditch K
(PX219)
·.ifA\
July II, 2005
ZACHRY. .- -.......
aOp y . . .
.'
Port of Houston Authority
Jim McQueen, P.E.
Bayport Project Engineer
. P_0. Box 2562
Houston Texas, 77252-2562
Re Contract: Bayport Terminal Complex Phase lA
Wharfand Dredging Contract
., Subject: 332 foot Extension and Ditch "K"
Dear Mr. McQueen,
..' .Based on our meeting of July 8, 2005 the following additions and clarifications are ~fferedtothe
pending change order for the 332 foot extension and Ditch UK".
• The total linear feet of drill shafts in the 332 foot extension shall not exceed 2] ,266.50_
• Any additional length of drill shaft in excess of21,266.5 shall be billed at a rate of$82.00
per liner foot.
• Any reduction in the total length of drill shafts less than 21,266.5 shall be a credit to
POHA at a rate.of $43.00 per linear foot.
• . Price is based on ZCC having a working design and drawings for drill shafts no later that
8/12/05•.
• Price is based on ZCC having a working design and drawings for the Wharf Deck no later.
than 11/25/05.
• The contract completion deadline for the Bayport Terminal Complex Phase IA
Wharf and Dredging Contract shall be extended to 8/15/06.
• Price is based on a drill shaft design diameter no greater than 36"; any increase in the
design diameter over 36" will be subject to a re-quote.
• zce's quoted price for the 332 foot extension shall be increased $5,506.00 to cover the
. construction of a temporary drainage swell along the south face of the extension.
• ZCC'S quoted price for the 332 foot extension shall be increased $10,000.00 to cover the
installation of an 8' high chain link fence along the South face of the extension..
• . The dredging quantity shall be based on I ]0,000 cubic yards.
• ZCe's adjusted base price for dredging shall be $] ,446)500.00 based on a unit price of
$13.15 per cubic yard on a base dredging quantity of 110,000 cubic yards.
• Any quantity dredged in excess of the base quantity of 110,000 cubic yards shall be at a
rate of $13.1 ~ per cubic yard.
• Any quantity dredged short of the base quantity of 110,000 cubic yards) the remaining
balance of the yardage to equal 110,000 cubic yards shall be paid to zee at a rate of
$0.54 per cubic yard; this equals a credit to'POHA at a rate of$12.61 per cubic yard on
the under dredge quantity.
P.o. BOl(1968, La POJ1e.1)( 77572' (281) 474-3176' (281)'474-4925. fax ·WW'W.zachry.com
ZCC23 001492
No. 2006-72970
ZCC EXHIBIT
219
0219,0001
.'
li'ZACHRY
• Work hours for all associated work on Ditch "K" shall be 12 hours per day. 5 days per
week
• Completion time for Ditch "K" shall be 5 months from receipt of the signed change
order.
• All costs associated with inspectors and testing labs for the extended work hours for
Ditch "K" shall be the responsibility ofPOHA.
Based on the above clarifications our quote changes as follows:
• Lump sum price for Ditch UK" $ 2,215,702.00 .
• . Lump sum priceexcluding drill shafts and' dredging is s 9,772,447;()0
• Drill shafts add 21;266.5 liner feet at $82.00 per liner foot . $ 1,743,853.00 ..
.
:
~.'
• Dredging add 110,000 cubic yards at $13.15 per cubic foot .$ 1,446,500.00
Total value SI5,178,502.00
. Sincerely,
.
``'k
"And~ 0
;>
Project Manager .
cc: Fred Lueck ; 0 ••
Greg McVey
File
P.O. Box 1968· La Porte, TX 77572' (281) 474-3176· (261) 474-4925. fax' www.zachry.com
ZCC23 001493
0219.0002
TAB 24
Request for Port Commission Action for Execution of
Change Order 4 Signed by Port Facilities Director
James Jackson and Chief Engineer Steve DeWolf
with origination date of July 18, 2005
(PX224)
••, •'• , , .<-•, • ' • ,. a
!
R6est fo~ P_o rt Commission A.n
To: Executive Director
t . .·..; Subject: Category G Page Minute #
~ Execute a Change Order to Zachry Construction Award 1 of 1
Corporation for Bayport Terminal Complex Phase 1A
Wharf and Dred in - Wharf Extension
From (Deparbnent or Other Point of Origin): Origination Date: Ag9nda Dale:
artmenl Ju 18, 2005 Ju 25. 2:;:00.::;.5=----1
Depal1ment Affected:
Operations Division
Dale and ":"ype of Prior Authorizing
Commis!'ion Actlon:
Minul.e 2004-0524-013
Award
Recommendation: (Summary) Recommendallon for Authority to Execute a Change Order to Zachry
Construction Corporation for Baypor1 Terminal Complex Phase 1A Wharf and Dredging in the
Estimated Amount or $12,962,800
Amount of Funding: Executive Director Signature:
Estimated $12,962,800
Recommendation:
By Minute 2004-0524-013, the Port Commission awarded a COi'ltfac\ in the estimated amount of
$62,485, 733to Zachry Construction Corporation for Bayport Tenninal Complex Phase 1A Wharf and
.Dredging.
The initial contract provides for a 1,660-foot wharf. Projected increases in demand ft:rr containerized
cargo will require two 1,000-foot berths at terminal opening. Exte:-:ding the wharf 332 feet under the
current contract is feasible and wm assure the reQuired berths are available. Construction of the
extension can only be conducted within lhe schedule by the present Wharf and Dredging contractor
because of construction structures currently in place which cannot be removed or relocated withou1
adversely affecting on-going wharf construction.. Additionally, the current contractor's unique method
of construction is the only practicable means of achieving strict emissions requirements for this
contrac1. The contractor has submitted a proposal in the estimated amount of $12,962,800 for the 332
root wharf extension. The Engineering Department and the Phase 1A Program Manager have
reviewed the contraclo(s proposal and found it to be fair and reasonable.
It is therefore recommended that the Por1 Commission at its July 25, 2t1()5 meeting authorize a change
order in the estimated amount of $12,962.800 to the Zachry Construction Corporation contract for
Bayport T enninal Complex Phase 1A Wharf and Dredging and that such action further au1horize the
Executive Director to do any and alllhings in his opinion reasonable or necessary to g..:Ye effect to the
foregoing.
006.016.033.Z6Z
V.LM.CJL.tk PHA 0014992
ExHIBIT NO.\``
Jo... 1q -o 7 :::J1.f
No. 2006-72970
ZCC EXHIBIT
224
0224.0001
... -: ·. :· ,·· ·
·'
J'
• •
Change Order to Zacllry ConstnJ<;tlon Corporation for-
Bayport TenninaJ Complex Phase 1A Wharf and Dredging-Wharf Extension
Dascription: · Staff recommends construction of a 332' wharf extension to the
current contract. Additional work is necessary because of projected
demand for lhe terminal and anticipated ship size requires two
1,000-berths. and the current contract provides oniy 1,660 feet of
totat wharf length. Because of the current construction of the freeze _
waR and other Zachry construction processes, a wharf extension
cannot feasibly be performed by another contsactor working
ooncurrenUy. Additionally, Zachry's method of ronstructing the
wharf in the dry significantly reduced project emissions;
construction of the wharf by another contract using typical methods
would not reduce emissions to a level that would enable this and
subsequent contracts to proceed as scheduled. Estimated cost of
the wharf extension is $'12.962,800.
Engineer: DMJM-Hanis. (Non-SBE) $2,233,611
Action
Requested: E5cecut~ a Change Order lo Zachry Construction Corp.
Change Order
Estimate: Original Contract: $62,485,733.00
Change Order No. 1: $ 3,645,320.00 (Cruise Dredging)
Change Order No. 2: $ 28.111.12 (Reinforcement)
Change Order No. 3: $ 154.898.82 (BuD nose)
For HTK Only
006.016.038263
PHA0014993
0224.0002
TAB 25
September 9, 2005 Frozen Cutoff Wall Design
(PX10)
GEoENG!NEERS MEMORANDUM
PLAZA600 llUILDII'G. 600 STEWART STRoiOT, SUITE 1420, S:ATTLE. WA 93101, 'rELiOPnvNE: (206) 728-26(4, FAX' (206) 728-2732 vNNI.geoengineerS.CDm
To: Larry Applegate - SoilFreeze Technologies
Charles Rogers Zachry Construction
FROM: Daniel Mageau, P,E. - GeoEngineers
DATE: September 9, 2005
FILE: 6700-014-03
SUBJECT: Houston Bayport Phase lA Wharf
FROZEN SOIL SHORING
Draft Cutoff Wall Design
GEl Seattle: P;/6700014/02/lVlemosICU101f Wall Design.Dra11-9-905.doc
INTRODUCTION
The purpose ofthis memo is to present our draft design for a temporary cutoff wall near the middle ofthe
Phase IA wharf for the Houston Bayport project. The cutoff wall 'will allow Zachry to complete the
excavation and construction of the two-third (approximate) of the wharf so that this portion can be ready for
the Port in February 2006. The remaining eastern portion, as well as the 330-foot extension, will then be
completed after that time with the cutoff wall separating the east and west portions, The cutoff wall will be
comprised of a combination of frozen soil and steel sheet piles to provide retention of soil and groundwater
during construction and excavation. This wall will then be removed from the final grade up, in the same
fashion as the primary frozen soil shoring wall that runs east-west in front of the wharf. However, the wharf
deck will cover most of the cutoff wall and therefore, wall removal will need to be accomplished in water by
divers after both sides are excavated out. As this design is draft and presented to the construction team for
comments, some refinement of the details presented herein may be appropriate. A final version, together with
a drafted set of plans will be prepared afler comments from the construction team and Port consu ltants, as
appropriate: have been incorporated.
CUTOFF WALL DESCRIPTION
The cutoff wall 'will be located perpendicular to the wharf at drilled shaft line no. 59.5 (Station ~81+50), as
shown on the attached plan, Figure 1. Zachry has left this portion of the pile caps and decking open to allow
access for installing the cutoff wall. After the cutoff sheet piles and freeze pipe system are in place, Zachry
will complete the closure section of tbe decking.
At its deepest point near A-Line, the cutoff wall \'\1.11 need to retain soil and groundwater from the design
water level elevation of +8 feet MLL W to the bottom of the excavation (-53 feet Elevation after the keyway is
backfilled), for a total free-face height of 61 feet. South of A-Line, the height of the wall will reduce at a rate
of2H:1V, following the final grade of the slope as shown in Figure 2. The south wall will end about 4 inches
from the from the Il-line piles. The north end will be embedded WIthin the primary frozen soil shoring wall,
The sheet sheets will be AZ26 steel sections driven to depths ranging from about 6 to 15 feet below the
bottom of excavation (-9 to 18 feet below the bottom of final grade). The soil in between the two sheets will
be frozen using primarily 2 to 3 rows of freeze pipes in the 8-foot-wide wharf area plus additional rows in the
wider area between the wharf and the primary frozen soil shoring wall. A detail plan view of the sheet pile
DISCLAIMER: Any electronic form, facsimile Dr hard copy of the original document (email, text. taote, and/or figure}, if provided, and any
attachments are only a CODY of the original document. The original document is d b GeoEngineers, Inc. and will serve as the
official document of record,
lCC-40-009166
0010.0001
Memorandum to Larry Applegate(SoilFreeze) and Charles Rogers (Zachry)
September 9, 2005
Page 2
sections and the freeze pipe layout for the 8-foot zone is shown in Figure 3. These freeze pipes will extend
down to depths of 80 to 100 feet, as shown on Figure 2 to provide additional lateral support and to cut off
groundwater within the dense sand layer encountered in borings between about 55 and 75 feet in depth. The
top of the frozen ground in between the steel sheets will be at Elevation +8 feet, the same as the primary
frozen soil shoring wall. The top of the steel sheets will be at Elevation +9 feet, one foot above the soil
inside, to provide a buffer from waves and to contain brine manifold lines. A whaler consisting of a W12x79
section will be attached to the top of the wall. Steel Lies located just below the ground surface and spaced at 8
feet on center will be installed through the two sheets and whaler to provide a positive connection of the two
sheets at the top. A detail cross section at the top of the wall is shown in Figure 4.
ENGINEERING ANALYSIS
One of the key elements of til is design is to limit the horizontal wall deformation, and therefore deformation
of the soil retained behind it, to a small amount such that this movement will not adversely affect the
structural integrity of the drilled shafts that support the wharf. 1\ second key element is to limit the growth of
the frozen soil such that it does not freeze these same drilled shafts.
We completed dozens of thermal and structural finite-element analyses to evaluate the expected deformation
of the frozen soil/sheet pile cutoff wall. To optimize the thermal aspects, we used TEMP/W, a 2D finite
element thermal model program. To evaluate the deformation of the wall under various loading conditions,
we used both 2D and 3D versions of PLAXIS, a finite element soil/structure model. The 2D TEMP/Wand
the 2D PLAXIS programs are discussed in more detail in our report for tile primary frozen soil shoring wall,
dated February 4, 2005. The cutoff wall is a high, wide, stiff structural element that is essentially fixed at
each end (the frozen soil shoring wall at the north and the slope at the south). Without the embedment at the
wall ends, our 2D analyses indicate that wall horizontal movement after one side is excavated in the dry will
likely be excessive. The end effects of this wall can only be evaluated using a 3D model as discussed in a
subsequent section.
THERMAL ANALYSES
We analyzed numerous freeze pipe layouts and brine temperatures using TEMP/W to evaluate the impact on
1) the average temperature of the soil within the steel sheets and 2) the extent of frozen soil into the ground
relative to the wharf piles. The two goals are opposite. Colder brine and more freeze pipes freezes the soil
colder, which results in stronger and stiffer ground and very small wall movements, however, frozen soil
extends outward past the sheets over 5 feet, the approximate distance to the wharf piles, after 3 or 4 months of
freezing. Warmer brine and less freeze pipes and limits the extent of frozen ground so that it does not reach
the existing wharf piles, however, the frozen soil is less strong and wall movements will increase. Our
thermal analyses were completed to optimize the freeze system to satisfy both constraints.
Our analyses indicate that the optimal layout of freeze pipes is as shown approximately on Figure 5. These
results from TE\1P/W show a close-up view of an 8-fa or-wide section of wall beneath the wharf that includes
seven freeze pipes, the steel sheet and one of the existing drilled shafts. The overall layout of freeze pipes is
shown in Figure I and includes freeze pipe locations in the wider zone of the wall north of tile wharf. Most of
the 8-foot section has 2 rows of freeze pipes spaced at ~4 feet (4. J 3 feet = I per 2 AZ26 sheets) that extend
down 80 to 100 feet in depth to cut off groundwater in the dense sand and provide adequate structural
stability. Five extra freeze pipes are to be installed as a third row in tbe highest P3.1.t of the wall between A
and D lines. Our plan is to freeze down the soil in between the freeze pipes as quickly as practical using cold
brine in all three rows of freeze pipes. After 2 months or so of freezing, the outside rows will be maintained
ZCC-40-009167
0010.0002
Memorandum to Larry Applegate(SoiIFreeze) and Charles Rogers (Zachry)
September 9,2005
Page 3
to about +20F while the inside row is maintained at -20F. This limits frozen soil growth to more than 1 foot
from the wharf piles after 6 months of freeze, as shown in Figure 5. The extent of frozen ground is
progressively less with less time of freezing. To accomplish this zoned type of freeze control, SoilFreeze will
need to install two separate freezing systems for this wall. The colder freeze section will be applied to those
freeze pipes encircled on Figure 1. The single black dots on Figure I represent pipes connected to a variable
freeze system. The average ground temperature inside the sheet piles is maintained below 20F, even in the
wanner freeze section, which is needed to provide sufficient wall stiffness and strength, discussed more in the
following section.
Some modification of the brine temperatures will be needed during the project, the extent of which will
depend on the specific ground response to freezing. As with the primary wall, ground temperatures will be
monitored throughout the process so that we can change the brine temperatures as appropriate to maintain
cold temperatures inside the cutoff wall while limiting frozen soil growth outside.
After the first (west) side of the wharf is excavated, the west side of the sheet pile wall will be exposed. At
this time it will be necessary to spray the surface of the steel with foam insulation. Tile insulation is needed to
prevent the soil inside the wall from melting when this west side is filled with water.
P~SSTRUCTURALANALYSES
The frozen soil temperatures obtained from TEMP/W, discussed above, were used to obtain frozen soil
strength and stiffness values for use as input to PLAXlS 3D. 1110 problem is quite complex to model and
required nearly 10,000 elements as illustrated in Figure 6, which represents the 3D grid for this analysis. We
completed several dozen computers run varying wall geometry, frozen soil strength, sheet pile sections and
other variables in order to develop a solution that results in little wall movement and moderate wall thickness
and depth. We also performed a series of 2D PLAXIS analyses to evaluate the relationship between wall/soil
movement and the impact on the drilled shafts. These:2D analyses indicate that up to about 2 inches of soil
deflection near the piles before the onset of plastic hinging. The results of the PLAX1S J D analyses indicate
the maximum horizontal wall movement will be on the order of I inch for an eight foot wide wall that utilizes
AZ26 sections embedded as shown in Figure 2. This results in a factor of safety against plastic hinging of 2.
This deformation estimate is considered to be a conservative estimate because we did not include the positive
effect of the numerous concrete piles or the whaler on reducing soil movement in our modeling. Based on
these analyses, it is our opinion that the cutoff wall should retain soil and groundwater after excavation on one
side is completed with little wall movement which should not impact the existing wharf piles.
The cutoff wall is located in between pile rows 59 and 60, which are 20.5 feet apart. The steel sheets will be
located about 5 feet from the wharf piles along these rows. Line B has additional piles so that one of Line B
piles is located within the cutoff wall, as seen on Figure 1. To reduce the impact of the cutoff wall on this one
pile, we have included a 42" to 48" diameter casing to be installed around the Line B pile before the start of
freezing. The purpose of the casing is to protect the Line B pile as the wall moves during excavation. If it
was embedded in frozen soil, the very rigid cutoff wall movement may exert undue forces on this pile. The
collar will extend to the bottom of the excavation. The annulus between the pile and the casing will be
cleaned out by Zachry and air will remain in the annulus throughout the life of the cutoff walL As the cutoff
wall moves laterally the estimated 1 inch during excavation, the Line B pile will remain vertical and
untouched by the wall within the zone above the excavation depth.
lCC-40-009168
0010.0003
Memorandum to Larry Applegate(SoilFreeze) and Charles Rogers (Zachry)
September 9, 2005
Page 4
Attachments: Figure 1 - Plan View of Cutoff Wall
Figure 2 - Section View of Cutoff Wall
Figure 3 - Detail of Freeze Pipes and Sheet Pile Wan
Figure 4 - Section Detail near Top of Cutoff Wall
Figure 5 - Typical results from TElvlP/W Analyses
Figure 6 - Grid of PLA...XlS 3-D Model
ZCC-40-009169
0010.0004
ZCC-40-009170
0010.0005
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lCC-40-009173
0010.0008
20 21 22 23 24 25 26 27 28
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(ft)
HOUSTON BAYPORT PHASE IA - CUTOFF WALL
Description: Houston Wharf - Frozen Soil Wall
Comments: 6700-014-01 FROZEN SOIL GROWTH AFTER 6 MONTHS OF FREEZING
File Name: Houston-Divider Wall -Frost Penetration-3 Rows.taz 3 Rows of Freeze Pipes
Last Saved Date: 9/9/2005
Last Saved Time: 2:56:00 PM Inside Row Kept @-20F and 2 Outside Rows at +20F after 2 months
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TAB 26
Transcript of September 13, 2005
Weekly Construction Coordination Meeting
(PX274)
1 IN THE JUDICIAL DISTRICT COURT OF
HARRIS COUNTY, TEXAS
2
3 ZACHRY CONSTRUCTION )
CORPORATION, )
4 )
Plaintiff, )
5 )
V. )
6 )
PORT OF HOUSTON ) CAUSE NO.
7 AUTHORITY, ) 2006-72970
)
8 Defendant. )
)
9 )
)
10 )
11
12
13
14
Weekly Construction Coordination Meeting
15
Date: September 13, 2005
16
Minutes: 05:00 - 5:34
17
18
19
20
21
22
23
24
25
No. 2006·72970
ZCC EXHISIT
274
2
1 Audio Reporting Transcribed by:
2
3 JENNIFER HAYNIE
ALPHA REPORTING CORPORATION
4 236 Adams A venue
Memphis, Tennessee 38103
5 901.523.8974
6
7
Proper names and inaudibles or undiscemible
8 testimony was provided Andy Anderson.
9
10
11
12
·. 13
14
15
16
17
18
19
20
21
22
23
24
25
3
1 Date: September 13, 2005
2 Minutes: 5:00- 5:34
3 (Requested portion of weekly Construction
4 Coordination Meeting.)
5 ANDY THIESS: All right. The next
6 issue the pile redesign for the cut off wall. I
7 saw that y'all put that in yesterday. So we'll
8 get that sent off to the designers. Jim, do
9 you see any issues if the designers are
10 okay with things? This isn't going to be an
11 approval type thing, it's gonoa be a--
12 JIM MCQUEEN: No. Uh-huh. Just
13 whatever the designer wants.
14 ANDY THIESS: Okay. So that's in
15 progress. We'll leave that open.
16 (End of requested portion of Weekly Construction
17 Coordination Meeting.)
18
19
20
21
22
23
24
25
TAB 27
Email string between Andy Thiess and Jeff Ely and others
dated September 14, 2005
(PX11)
From: Ely, Jeff/HOU
S ent Wednesday, September 14,2005 12:26 PM
.• Johnson, Robert/HOU; Emsley, Laurencefi-:IOU
- <,:< ~ect FW: Sub. Item No. 00700-015.0 CutoffWall Design
Bob/Laurence:
Forgot to CC you on this .
-----Original Message-----
From: Ely, Jeff/HOU
Sent: Wednesday, September 14, 2005 1:26 PM
To: Thiess, Andrew/HOU
Subject: RE: Sub. Item No . 00700-015.0 cutoff Wall Design
Andy:
We need to tal k about this a little and decide how to proceed. As we talked
about last week,. thi s i s mostly a geotechnical p r oblem, so I think Geotest
shoul d probably take the lead, but I'm not sure if they have any budget
ava ilable.
The first thing we need to do i s verify the freeze wall won't reduce the capacity
of the permanent pier s .We for sure need Geotest f o r that.
Jeff
- ----original Message-----
From: Andrew Thiess [mailto:system@const ructware.com]
-~t: Wednesday, September 14, 2005 10:06 AM
: · ·. Ely, Jeff/HOU ·
-::' ....>ject: sub. Item No. 00700- 015.0 Cutoff Wall Design
Jeff,
Please review and coordinate response to this submi ttal.
We may not need to approve this, but we need due diligence to identify and
communicate any technical issues we may have.
Due f rom designers Sep 28.
No. 2006-72970
ZCC EXHIBIT
11
~
ExHIBIT NO. / f!Cf
11-o'--o?:rH
CH2MHILL034723
0011.0001
TAB 28
Memorandum dated September 14, 2005 from Port Facilities
Director Jackson to Port Executive Director Kornegay
recommending approval of Change Order 4
(PX3)
.·· ... ...... . . . .. .
,• .. - ... ~- ,•· ...
--:---... ( (
INTER-OFFICE MEMORANDUM
Date: September 14.2005
File: 2004..0187
To: Mr. H. T. Kornegay
From: James B. Jackson
Subject: Recommendation for Approval of Change Order No. 4 in the Estimated
Amount of $12,962,800 to Zachry Construction Corporation for Bayport
Terminal Complex Phase 1A Wharf and Dredging
By Minute 2004-0524- 13. the Port Commission awarded a contract in the estimated amount of
$62.485.733 to Zachry Construction Corporation (ZCC) for Bayport Terminal Complex Phase 1A
Wharf and Dredging.
The initial contract provides for a 1,660-foQt wharf. Projected increases in demand for
containerized cargo will require two 1,000-foot berths at terminal opening. Extending the wharf
332 feet under tpe current contract is feasible and wilt·assure the require
From: James McQueen
Cc: 'Robert.Johnson@CH2M.com'
Bee:
Received Date: 2005-09-15 06:42:00 CST
Subject: ZCC SCHEDULE
ZCC will be paid for july even though they show late and not in accordance w/Extension Agreement. Our
management is afraid ZCC will back out of the extension agreement. Do as you do on any schedule you do not
agree with Andy.
No. 2006-72970
ZCC EXHIBIT
280
P - El e 0 060 33
0280.0001
TAB 30
Change Order 4
(PX12)
County Auditor's Fonn 5107
Harris County, Texas (Rev. 2191)
Port of Houston Authority
Change Order No. ~
Increase: X Decrease: No Change:
To: Zachry Construction Corporation Contract No. : 2004-0187
Address: 527 Logwood San Anlonlo, TX 78221-1738 Dale:
Subject : PrDject - BavoDrt Tenninal CDmplex Phase 1A Wharf and Dredging Contracl
Gendemen:
The change set cut below was not contemplated in the subject contract dated 512412004 • but is necessary tor the orderly
completion of the prDject. You are authorized to proceed with the modification on the basis of payment below.
Description of Change:
ConstruCl a 332' wharf extension to the previously specified 1.660' Wharf. in accordance with the attached Scope. TIme and Price ModlficatiDns.
Original Contract Amount: $62,485.733.00 (Est.)
Basis of Payment:
PreviOUS Change Orders : $3.683,331.12 (Est.)
Item Unit Unit Price Quantity Total
Perform the above described additional war!.s-_ Eng . _ . secretary - ~1 : Eng~. . _ Bobby Kt~g .' .
~y/l}r Eng. Bobby King Eng. J. B. Jackson
``/~i.:-.~_.~r:-;-' J. B. JackBo_n
_ _~ Eng. Bobby King
(IF OVER $10,000, MUST GO TO EXECUTIVE}
1/10/05 2ng.
9/7/95. Exec. Eng. Bobby King
1,/J7jO[ Eng . Bobby King Auditor Dick Rhoads
.*1)Jr Audil:or Dick Rhoads Eng. Bobby King
'1/J7J(]) Eng. S. H. DeWolf C:mtractor
e
005.010.019068
PHA0012046
INTER-OFFICE MEMORANDUM
Date: September14.2005
File: 2004-0187
To: Mr. H. T. Kornegay
From: James B. Jackson
Subject: Recommendation for Approval of Change Order No. 4 in the Estimated
Amount of $12,962,800 to Zachry Construction Corporation for Bayport
Terminal Complex Phase 1A Wharf and Dredging .
By Minute 2004-0524-13, the Port Commission awarded a contract in the estimated amount of
$62,485,733 to Zachry Construction Corporation (ZCC) for Bayport Terminal Complex Phase 1A
Wharf and Dredging.
The initial contract provides for a 1,660-foot wharf. Projected increases in demand for
containerized cargo will require two 1·,OOO-foot berths at terminal opening. Extending the wharf
332 feet under the current contract is feasible and will assure the required berths are available.
Construction of the extension can only be conducted within the schedule by the present Wharf
and Dredging contractor because of construction structures currently in place which cannot be
removed or relocated without adversely affecting ongoing wharf construction. Additionally, the
current contractor's unique method of construction is the only practicable means of achieving
strict emissions requirements for this contract. The contractor has submitted a proposal in the
estimated amount of $12,962,800 forthe 332-foot wharf extension. The Engineering Department
and the Phase 1A Program Manager have reviewed the contractor's proposal and found it to be
fair and reasonable.
By Minute 2005-0725-18, the Port Commission authorized the issuance of a change order in the
estimated amount of $12,962,800 to Zachry Construction Corporation for the above described
changes. Accordingly, please sign the attached change order and return it to the Engineering
Department for further handling.
JBJ/SHD/MV: ~
Attachment
C: Mr. Andrew Thless, P.E. - CH2M HILL, Inc.
Mr. Forbes Baker
Mr. James Turner
Mr. Mark Vincent, P.E.
Mr. Jim McQueen, P.E.
005.010.019069
PHA0012047
0012.0003
SCOPE, TIME,AND PRICE MODIFICATIONS
TO SPECIFICATIONS AND PROPOSAL
Bayport Phase 1A Wharf and Dredging Contract
PORT OF HOUSTON AUTHORITY
P. O. Box 2562
Houston, Texas 77252-2562
Pursuant to Texas Education Code § 44.039 (t), options for a scope or time modification and any price change
associated with the modification were discussed by the PHA and Contractor. As a result of negotiation, the following
scope. time. and price modifications were made to Proposer's Specifications and Proposal dated April 13, 2005, as
amended by Proposals for 330 feet Wharf Extension and as further amended by Proposer's Supplemental Proposal dated
July 11, 2005 except Ditch K construction will not be part of this agreemenl
1. Contractor shall construct 332 linear feet of Wharf utilizing the same construction methods outlined in the original 1,660
linear feet of wharf, for a total price of $12,962,800.
2. The Proposal price includes incorporation of change orders. RFl's to the original 1,660 linear feet of wharf incorporated
through July 25, 2005.
3. PHA will furnish pile depths not later than August 12,2005. PHA shall furnish remaining wharf design documents by
November 25, 2005.
4. Change order includes construction of an additional 332 linear feet of chain link fencing with three-strand anti-climb
bars installed and, a drainage swell at the East end of the wharf extension to connect 10 the existing drainage, for an
inclusive cost not to exceed $15.500.
5. The basis of drilled shaft construction is 21,266.5 linear feet of drilled shafts at a unit cost of $82/LF for a total cost not
to exceed $1,743,853, included in the change order price. Adjustments to shaft length will be made at a rate-of $82 per
linear foot of increased shaft length or cost reduction of $43 per linear foot of shaft length reduction.
6. The 332-feel Wharf Exlension Construction and all other components of the contract shall be completed by July 15.
2006. The interim completion date to accommodate the ship-to-shore crane arrival, as per the original contract is revised
to February 15, 2006. and the length of wharf available at that time is changed to 850 linear feet, along with associated
dredging to receive the crane transport vessel. The February 15, 2005 milestone completion date requires that the
permanent power components as described in the contract documents be provided for the Ship to Shore Cranes. The
original 1660 linear feet of wharf main deck and drilled piers shall be completed by June 1,2006.
7. The contractor's proposal originally assumed only 80,000 cubic yards of dredge malerial. The dredge quantity was
revised from 80,000 to 110,000 cubic yards based upon actual survey. The Contractor will dredge and place 110,000
cubic yards of material in designated disposal areas at a rate of $13.15/cubic yard. for an increase of $1,446.500 inclusive
in the change order price. Any quantity dredged short of the base quantity of 110,000 cubic yards, the remaining balance
of the yardage to equal 110,000 cubic yards shall be paid to ZCC at a rate of $ 0.54 per cubic yard. this equals a credit to
POHA at a rate of $12.61 per cubic yard on Ihe under dredge quantity. Any quantity dredged in excess of 110,000 cubic
yards will be paid at the unit rate of $13.15/ cy_
8. The contractor will pay for all Construction Management Services to support the contractors work on the wharf
extension change outside the work days as defined in General Condition 5.03.
9. The Contractor shall construct the 332-feel wharf extension using similar methods employed in the original contract
with the effect of minimizing General Conformity emissions. Contractor shall be constrained to the General Conformity
emissions, as documented by the PHA Emissions Calculator, as follows:
Quarterly Summary
Emissions (tons)
Scope, TIme, and Price Modifications
to Specifications and Proposal
(August 1, 2002)
005.010.019070
PHA0012048
0012.0004
Q1 Q2 Q3 Q4 Q5 Q6 Q1 Q8 Q9
0.00 2.25 3.27 4.88 2.17 3.03 2.73 2.73 1.71
_edging
hart Construction 0.03 0.13 0.19 0.49 0.63 0.63 0.63 0.63 0.44
Backlands 0.00 0.09 1.15 0.00 0.00 0.00 0.00 0.00 0.00
Total 0.03 2.41 4.61 5.31 2.BO 3.66 3.36 3.36 2.15
Rolling 4 otrs 0.03 2.50 7.11 12.46 15.25 16.44 15.19 13.18 12.53
Annual Summary (tons per year)
Project Year Dredging Wharf Backlands Total
Year 1 10.40 0.84 1.24 12.48
Year 2 10.66 2.52 0.00 13.18
Year 3 1.71 0.44 0.00 2.15
Year 4 0.00 0.00 0.00 0.00
Year 5 0.00 0.00 0.00 0.00
Year 6 0.00 0.00 0.00 0.00
Year 7 0.00 0.00 0.00 0.00
Year 8 0.00 0.00 0.00 0.00
10. The all contract provisions and instructions remain in effect except as changed herein.
Vice president
Typed Title of Signator
08/29/05
Date
If Proposer is a Corporation:
Jaclyn M. Golson. Assistant Secretary
Typed Name of Corporate Secretary
Scope, Time, and Price Modifications
to Specifications and Proposal
(August 1, 2002)
005.010.019071
PHA0012049
0012.0005
If Proposer is not a Corporation:
N/A
Signature of Witness
N/A
Typed Name of Witness
APPROVED AS TO FORM:
PortAuthorityCounsel
Scope. Time. and Price Modifications
to Specifications and Proposal
(August 1. 2002)
005.010.019072
PHA0012050
0012.0006
TAB 31
Mageau Report on Effect of Freezing and Thawing of Cutoff Wall
on Drilled Shafts dated September 28, 2005
(PX14)
~ ..
'
MEMORANDUM
··.-:
.. .·. PlAV-600Eili!LDING, tiOOSTcWNIT S'lllan', SUITE'1420, SEA'Jli.E, WA 98101, H l.E'Pt
Date: Tue, 8 Dec 2009 07:38:23 -0600
To: Lawrence Fossi; Scott D. Morgan;
Mike Absmeier; Sims,Bill; Gray,
Holly
Cc: Robin C. Gibbs; zzz_Brandon
Allen; mgreer@trialgraphix.com
2
Subject: RE: One more
Larry,
There are two animations in Abiassi's demonstratives that I emailed you . We will provide you those on a
disc this morning.
-----Original Message-----
From: Lawrence Fossi [mailto:lfossi@fossijewell.com]
Sent: Tuesday, December 08, 2009 7:21AM
To: Scott D. Morgan; Mike Absmeier; Sims, Bill; Gray, Holly
Cc: Robin C. Gibbs; zzz_Brandon Allen; Sydney Ballesteros; mgreer@trialgraphix.com
Subject: RE: One more
Scott, I'm in overwhelm with all the new stuff. print hard copies if
you would & bring to court & we'll let you know.
are there movies in the Abiassi stuff, or just hard prints?
also, need a response on DX 590-594
From: Scott D. Morgan [mailto:smorgan@gibbsbruns.com]
Sent: Tuesday, December 08, 2009 7:12AM
To: Mike Absmeier; Sims, Bill; Lawrence Fossi; Gray, Holly
Cc: Robin C. Gibbs; zzz_Brandon Allen; Sydney Ballesteros; mgreer@trialgraphix.com
Subject: RE: One more
-----Original Message-----
From: Mike Absmeier
Sent: Monday, December 07, 2009 5:44 PM
To: Sims, Bill; 'Lawrence Fossi'
Cc: Robin C. Gibbs; zzz_Brandon Allen; Sydney Ballesteros; Scott D. Morgan
Subject: One more
Bill/Larry,
We would also propose adding Depo Ex. 115 as a new trial exhibit (I don't believe it's
currently in evidence). This would be PX 937. Any objection?
Thanks,
Mike
3
TAB 33
The Port's October 11, 2005 Response to Zachry's
September 9, 2005 Frozen Cutoff Wall Design
(PX266)
Submittal Item
Project [C70-1A-D01] -Bayport View Date 4/28/2006
Ph. lA- Wharf and
Dredging
Wharf and C70-1A-D01
Dredging
Nathelyne A. Kennedy & Assoc.
6100 Hillcroft
Suite 710 Submittal
Houston, TX 77081 Item No. 00700-015
Phone: (713) 988-0145
General Information
Item No. 00700-015 Revision 0
Package No. 00700.0
Rev.
Description Cutoff Wall Design
CSI Code 00700 - General Conditions Submitting Company Zachry Construction Corporation
Reference No. Copies Required
Status Returned Item Type
Responsible David Griffin (Zachry Construction Corporation)
'Team Member
· Item Notes During the proposal for the 332ft wharf extension, the cutoff wall concept was presented as
affecting one "B" row pile that would have to be encased in steel to prevent movement of the
pile. ZCC's submittal for the cutoff wall, however, indicates freezing of soil as close as one foot
from as many as 14 piles, which is inside the zone of soil that has structural impact on the
friction resistance of the piles. However, preliminary Indications are that the design may have
an indeterminate affect on a significant number of nearby shafts which may present
unacceptable risk to the Port of Houston.
Contractor must present alternative cutoff wall design, such as a cellular sheet pile wall or
grout wall, that provides the desired cutoff effect with.less risk to the structural integrity of the
wharf. Or the contractor may present the Port of Houston with an altemate means of
mitigating risk to the structural integrity of the wharf.
Primary Revise and Resubmit
Response
Submission
Notes
Dates
Material Required Lead Time (days}
Required on
Site
Approved Required Review Time (days) 20
Submittal
Required By
Submission
Due
Linked Documents
Document Type Document Description Date
Doc C70-1A-D01-01636 9/12/2005
No. 2006-72970
ZCC EXHIBIT
ZCC-EXP-0000073
266
0266.0001
Distribution
Recipient Company Method Date
Charles Rogers Zachry Construction Corporation Email: rogersc@zachry.com 10/11/2005
David Griffin Zachry Construction Corporation Email : griffindg@zachry.com 10/11/2005
David Griffin Zachry Construction Corporation Message 10/11/2005
Jeff Ely CH2M HILL Email: jelyl@ch2m.com 9/14/2005
Jeff Ely CH2M HI LL Message 9/14/2005
Rich Kl assen Zachry Construction Corporation Message 10/11/2005
Rich Klassen Zachry Construction Corporation Email: andersonhe@zachry.com 10/11/2005
ZCC-EXP-0000074
0266.0002
TAB 34
Transcript of October 11, 2005
Weekly Construction Coordination Meeting
(PX314)
1 IN THE JUDICIAL DISTRICT COURT OF
HARRIS COUNTY, TEXAS
2
3 ZACHRY CONSTRUCTION )
CORPORATION, )
4 )
Plaintiff, )
5 )
V. )
6 )
PORT OF HOUSTON ) CAUSE NO.
7 AUTHORITY, ) 2006-72970
)
8 Defendant. )
)
9 )
)
10 )
11
12
13
14
Weekly Construction Coordination Meeting
15
Date: October 11, 2005
16
Minutes: 08:40- 13:29
17
18
19
20
21
22
23
24
25
No. 2006-72970
ZCC EXHIBIT
314
2
1 Audio Reporting Transcribed by:
2
3 JENNIFER HAYNIE
ALPHA REPORTING CORPORATION
4 236 Adams Avenue
Memphis, Tennessee 38103
5 901.523.8974
6
7
Proper names and inaudibles or undiscernible
8 testimony was provided Andy Anderson.
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
.;:
~·
·:,'..
3
1 Date: October 11, 2005
2 Minutes: 8:40 - 13:29
3 (Requested portion of Weekly Construction
4 Coordination Meeting.)
5 ANDY THIESS: Then the pile
:· 6 redesign for the cut off wall. Here we go. You
7 got it. Gave you a response. You have it in
8 yourhand.
9 ANDY ANDERSON: Yeah. Now, the
10 answer to this it says that the contractor --
11 first of aU, this says "no, resubmit. 11 All
12 right. There's a number of avenues to go here.
13 Number one, they ask for an alternative cutoff
14 such as a ceUular sheet pile wall. There is a
15 cellular sheet pile wall between the freeze pipe
16 and the piles. That's the cut off wall. That's
17 the structure.
18 ANDY THIESS: I understand.
19 ANDY ANDERSON: I don't think they
20 understand.
21 ANDYTHIESS: No. Theyunderstand.
22 ANDY ANDERSON: Well, then what are they
23 talking about? The freeze pipes are contained
24 within the sheet pile wall.
25 ANDY THIESS: They're talking about
4
1 a cellular meaning like a honeycomb structure.
2 Some sort of structural sheet pile wall.
3 ANDY ANDERSON: Okay. Now, we get
4 it.
5 JOHN GLASGOW: Then we don't have to
6 freeze it.
7 ANDYTHIESS: Correct.
8 JIM MCQUEEN: Yeah. Yeah. That's
9 the concem.
10 ANDY THIESS: Or slurry or soil
11 cement or any other -- any other method of
12 putting in this wall that is not such a high
13 risk to the structure.
14 JOHN GLASGOW: DanMageau was
15 supposed to be here today, right?
16 CHARLES RODGERS: Tomorrow.
17 JOHN GLASGOW Tomorrow. And Corey
18 was going to bring that up with him and see if it
19 willfly.
20 ANDY ANDERSON: We will look at it, but two things.
21 Number one, if we want to accept the
22 risk. It's not -- it's not a submittal. It
23 is for information purposes only, okay, and
24 number two, our price is predicated on current
25 construction methods and that was clearly
5
1 defined. Now, chances are based on the price
2 of this goddamn cut off wall you know, we can design
3 something and stay within the parameters of what
4 we got.
5 ANDY THIESS: That's all the Port's
6 asking for.
7 ANDY ANDERSON: And we will look at that,
8 and we need to look at it very, very quickly.
9 ANDY THIESS: But I think ify'all
10 design something alternate, if it can be done,
11 it will be real easy--
12 JIM MCQUEEN: I want you to
13 understand the spirit of this whole thing is
14 that we -- the problem is that it jeopardizes
15 some footings on either side, piers on
16 either side.
17 There's a possibility of that, okay,
18 and there's a tisk. We know that you guys are
19 taking that, but we're not-- we're not
20 necessarily sure that we want you to take that. .
21 There's a lot of concern and we're not rejecting
22 it all together as we're not going to do it.
23 We're still throwing money at evaluation, but we
24 would like to know if there's another
25 alternative.
6
1 ANDY ANDERSON: We'll look at it. I
2 half way looked at a bin wall early on in this,
3 but to be quite honest with you, I looked at a
4 bin wall for replacement of the freeze wall
5 itself Not the cut off wall. The problem was
6 in the freeze wall was that the soil has no
7 abiJity to handle the stress of the bin wall.
8 It would just collapse.
9 Now, the cut off wall is something a little
10 something different, you know, and I need to
11 look at that. The problem I see with that is we
12 still have to design it so that it runs between
13 the piles and does not encase the pile row because
14 I'm worried about the lateral movement of the
15 wall when pressure is relived on one side and I
16 don't want to side load these piles.
17 At any rate, a semicircular cell
18 possibly could work. Now I have to, you fucking ruined my
19 whole a:ftemoon, now I'll have to sit down and .. .
20 .TIM MCQUEEN: Because we heard you
21 were out playing golf.
22 ANDY ANDERSON: That's tomon·ow. But
23 we'll look at it and see what we can do on it,
24 but I want to caution-- the designers need to
25 understand that this is not a submittal that
7
1 requires approval, and we are worlcing with you and
2 we'll come up with something else.
3 JIM MCQUEEN: We understand, or at
4 least I understand, and the latter part too, the
5 cost issue.
6 ANDY ANDERSON: I do not want to
7 have to have to readdress that issue.
8 JIM MCQUEEN: rm not-- no one
9 in our... but we just want you to look.
10 ANDY ANDERSON: I will look at it
11 very hard. Luckily Mageau is going to be here
12 tomorrow so we may actually be able get
13 something resolved quickly. He's going to be
14 here.
15 ANDY THIESS: All right.
16 (End of requested portion ofWeekly Construction
17 Coordination meeting.)
18
19
20
,. 21
22
23
24
25
TAB 35
Thiess email to Ely dated November 13, 2005
(PX2)
From: Thiess, Andrew/HOU
Sent: Sunday, November 13, 2005 06:14 PM
To: Ely, JefflHOU
Subject: RE: cutoff_walUesponse.doc
Jeff,
For business risk purposes you might state that during negotiations for the 332 ft extension, we anticipated it
being designed according to the criteria 01the original freeze wall. Based on designer input prior to design
of the original freeze wall, it was expected that the cutoff wall would be designed in a way to avoid
compromising any piers by freezing, except for one pier in Row B that was identified by ZCC beforehand.
The original freeze wall design accomodated a 6 feet setback from the nearest piers as requested by the
designers. Potential freezing of piers resulting in loss of load capacity is the basis for PHA concerns
regarding the cutoff wall design. These concerns have not been adequately addressed in the cutoff wall
submittal.
I think it would be a good idea to include this in your memo. Zachry has implied that they believe our review
and rejection of the cutoff wall design is a breach of their change order contract, as they told us there would
be a cutoff wall. They believe this gives them a claim for time. We need to make the point that we
anticipated it being designed according to the criteria of the original freezed wall. Otherwise we will have to
state this separately in another letter.
From: Ely, Jeff/HOU
Sent: Friday, November 11,20052:49 PM
To: James McQueen; Mark Vincent; Farhat, Jerry; Thiess, AndrewjHOU; Johnson, Robert/HOU
ee: Emsley, Laurence/HOU
Subject: cutofCwalLresponse.doc
All:
Please provide any comments by COB Monday, November 14. I will send this out first thing Tuesday.
Jeff
No. 2006·72970
ZCC EXHIBIT
2
1kn~
EXHIBIT NO.ll1
lo-R . . o7;:J1f
CH2MHILL029619
0002.0001
TAB 36
Email string between McQueen, Thiess, Ely, and others
dated March 21, 22, and 28, 2007
(PX504)
- -·-··--- - - -- -·------ - - - - ---- - - - - -- - -
From: James McQueen
Sent: Wednesday, March 28, 2007 07:26 AM
To: Andy Thiess: Ely, Jeff/HOU
CC: Gene Norman
Subject: RE: Phase 1A Dbl Wal
I discussed w/Jeff and he daid settlement of 1" was nothing to be alarmed about. I just believe it is in PHA
best interest to monitor.
Jim McQueen. P.E.
Project Manager
Port of Houston Authority
(713) 670-2837
FAX (713) 670-2837
i!Jl.£qU~e.D.@P..QQ_9.CQ.IJl
First in Foreign Tonnage
CONFJDENTI AL COMMUN ICATION
This message and attached materials are for the use of the addressee above and may contain
confidential information. Please do not disseminate, distribute, or copy this message unless you are
the addressee. If you receive this message in error. please immediately notify the sender by
replying to this message by phone at (7 I 3) 670-2837. Thank you.
from: Andy Thiess
Sent: Wednesday, March 28, 2007 8:24AM
To: Jeff.Eiy@ch2m.com: James McQueen
Cc: Gene Norman
Subject: RE: Phase lA Obi Wal
My understanding from o3rlier "affect of freeze wall discussions" was the entire wharf was anticipated to
sink a bit as it initially settled.
ro
L..:.JA ndrew W. Thiess, PE, PMP
Port of Houston Authority
!:Lttg://.YVY.ffl..POrt_ol.hcu?to.n.co..m
832-250-2899 cell
713-670-2442 ore
?13-670-2448 fax
athiess@poha.com
The Port Defirers !he: Goods
CONFIDENTIAL COMMUN!CA TION
This message and attached materials are for the use of the addressee above and may contain conf•dential mformation. Please do not
disseminate. distribute. or copy this message unless you are the addressee. If you rt:ceived this message- in error. please immediately notify the
sender by replying to this message or by telephone at {713) 670·2442. Thank you.
From: Jeff.Eiy@ch2m.com [mailto:Jeff.Eiy@ch2m.com)
Sent: Thursday, March 22, 2007 2:26 PM
To: James McQueen
No. 2006-72970
Cc: Gene Norman; Andy Thiess
ZCC EXHIBIT
504
CH2M HILL030890
..
0504.0001
Subject: RE: Phase lA Dbl Wal
Jim:
Can someone give me a little more detail: I'm not quite sure where these pictures are taken. However, the
doublewal settling 1" or so doesn't seem like a problem to me.
jeff
From: James McQueen [mailto:jmcqueen@poha.com]
Sent: Wednesday, March 21, 2007 4:57 PM
To: Gene Norman; Andy Thiess; Ely, Jeff/HOU
Subject: FW: Phase lA Dbl Wal
Gene can you mark measuring locations on the pavement and lets watch for a while. Andy I believe we
need to notify ZCC but we would not want them doing anything yet until we know a little more?
Jeff you have any other thoughts?
Jim McQueen. P.E.
Project Manager
Port of Houston Authority
(713) 670-2837
FAX (713) 670-2837
jmcqueen@poha.com
First in Foreign Tonnage
CONFIDENTIAL COMMUN1C AT10N
This message and attached mate1ials are for the use of the addressee above and may contain
confidential information. Please do not disseminate. distribute. or copy this message unless you are
the addressee lfyou receive this message in error. please im1nediately notify the sender by
replying to this message by phone at (7 13) 6 70-283 7. Thank you.
-----·-·------·--··-·····- - · - - -
From: Gene Norman
Sent: Wednesday, March 21, 2007 1:46 PM
To: James McQueen
Subject: Phase lA Dbl Wal
Jim,
Please see attached photos. Pictures were taken between H-line fl. Dbl Wal foundation slabs. It appears
to have settled in some areas as much as 1".
CH2MH1LL030891
0504.0002
TAB 37
Management Services Agreement
(PX643)
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement ("Agreement") is entered into effective as of
January 1, 2008 (the "Effective Date") by and between ZACHRY INDUSTRIAL, INC. , a
Delaware corporation, formerly known as Zachry Construction Corporation ("Zachry"), and
ZACHRY CONSTRUCTION CORPORATION, a Delaware corporation ("Manager"). Zachry
and Manager may be referred to in this Agreement collectively as the "Parties" and individually
as a "Party."
RECITALS
A. Prior to the Effective Date, Zachry had entered into the construction agreements
and associated documentation for certain heavy construction and building construction projects,
as described on Exhibit "A" attached hereto (the "Construction Contracts" or individually a
"Construction Contract").
B. On the Effective Date various personnel, equipment and other assets associated
with Zachry's former heavy construction division and building construction division were
transferred by Zachry to Manager as part of a corporate restructuring of Zachry along industry
segment lines ("Corporate Restructuring").
C. The Construction Contracts were not and have not been assigned or transferred to
Manager; and Zachry remains fully liable under the Construction Contracts in accordance with
their terms.
D. In conjunction with the Corporate Restructuring, Manager agreed to act as
manager for Zachry with respect to the administration, management and performance of the
Construction Contracts, each of which were associated with heavy construction and building
construction industry segments that were transferred to Manager.
E. Manager is ·experienced in the business of construction management and
administration, particularly with respect to the type of heavy construction contracts represented
by the Construction Contracts.
F. Zachry and Manager desire to memorialize the terms upon which Manager agrees
to provide certain management services with respect to performing Zachry's obligations and
work under the Construction Contracts.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, Zachry and Manager
agree as follows:
No. 2006-72970
ZCC EXHIBIT
643
MANAGEMENT SERVICES AGREEMENT PAGE I
ZCC-40-137656
0643.0001
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Certain Defined Terms. Capitalized terms used in this Agreement without other
definition herein shall have the following meanings, unless the context requires otherwise:
"Governmental Authority" means any national, federal, state or local
government, political subdivision, authority, agency, tribunal, court, judicial or other body,
public or statutory instrumentality, officer or entity, including any environmental or zoning
authority, building inspector, health or safety .inspector or fire marshal, any governmental
regulatory body or commission, any arbitrator with authority to bind a party at law, or other
regulatory bureau, authority, body or entity having legal jurisdiction over the matter or Person in
question.
"L aw" means any federal, state, local, or other constitution, charter, act, statute,
law, ordinance, code, rule, or regulation, or legislative or administrative action of any
Governmental Authority; or a final decree, judgment or order of a court. ··
"Person" means any natural person, firm, corporation, company, limited liability
company, joint stock company, general or limited partnership, trust, incorporated or
unincorporated association, joint venture, Governmental Authority or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Reimbursable Costs" means all costs incurred by the Manager for the proper
performance of the Services, including, without limitation, the verifiable actual costs of the
following, to the extent allocable to the Services: ·
(a) wages, salaries and overheads for site personnel;
(b) all out of pocket expenses paid or payable to third parties;
(c) builders risk insurance costs and bond premiums; and
(d) field office expenses.
Wages, salaries and overheads for Manager's non-site persormel, legal costs, and other
home office overhead are not Reimbursable Costs, except to the extent, and only to the extent
directly relating to the Construction Contracts from and after the Effective Date and as approved
by Zachry in its sole discretion.
1.2 Rules of Interpretation. The following rules of interpretation shall apply to this
Agreement: (i)the terms "herein," "herewith" and "hereof' are references to this Agreement,
taken as a whole; (ii) the term "includes" or "including" shall mean "including, without
limitation·"
' (iii) references to a "Section " "subsection" "clause" "Article " "Exhibit"
) ) ) ) '
"Appendix" or "Schedule" mean a Section, subsection, clause, Article, Exhibit, Appendix or
Schedule of this Agreement, as the case may be, unless in any such case the context requires
otherwise; (iv) references to a given agreement, instrument or other document shall be a
reference to that agreement, instrument or other document as modified, amended, supplemented
MANAGEMENT SERVICES AGREEMENT PAGE2
ZCC-40-1 37657
0643.0002
and restated through the date as of which such reference is made; (v) references to a Law
includes all amendments or modifications thereto, all rules and regulations promulgated under
such Law and all administrative and judicial authority exercisable thereunder; (vi) reference to a
Person include its successors and permitted assigns; and (vii) the singular shall include the plural
and the masculine shall include the feminine, and vice versa.
ARTICLE2
MANAGER SERVICES
2.1 Engagement and Services. Subject to the provisions hereof, Zachry hereby
engages and contracts Manager to manage, supervise, administer, direct, control, and perform or
cause to be performed on behalf of Zachry all of Zachry's obligations under the Construction
Contracts, including the performance of work thereunder, the administration and management of
all litigation, and the management and administration of claims, obligations of indemnity, and
other matters arising out of the Co~struction Contracts, and to perform certain other tasks, duties
or services as the Parties may from time to time agree (the "Services"). Manager hereby accepts
such engagement and agrees to perform the Services in accordance with the terms and conditions
of this Agreement.
2.2 Power of Attorney. The Parties acknowledge that in order to perform the
Services, Manager will necessarily need to act for and on behalf of Zachry on various matters in
connection with the Construction Contracts. Zachry hereby constitutes and appoints the
Manager with full power of substitution as its true and lawful representative and attorney-in-fact,
with full power and authority in its name, place and stead, (i) to execute, swear to, acknowledge,
deliver, file and record in the appropriate public offices all releases, waivers of lien, or
certificates required under such Construction Contracts; (ii) to prepare and deliver certificates or
instruments required under the Construction Contracts, prepare and deliver bills to third parties,
accept payments, execute amendments and change orders, give warranties and perform all other
contractual obligations of Zachry in connection with such Construction Contracts; (iii) to assert
any claims, or to file actions, motions, pleadings, responses to discovery, and other instruments
in connection with any claims related to such Construction Contracts, and (iv) to perform any
other acts that Manager deems appropriate or necessary to perform the Services. Zachry agrees
and acknowledges that the acts and decisions of Manager within the scope and authority of this
power of attorney and the terms of this Agreement shall bind Zachry.
2.3 Cooperation. Zachry shall fully cooperate with Manager in the performance of
the Services or in exercising its power of attorney granted in Section 2.3 above, including
executing such documents or instruments as Manager may reasonably request from time to time
in connection with the Services and the Construction Contracts. The right to abandon, settle,
compromise, waive or dismiss any right or claim under the Construction Contracts shall be
shared by Zachry and Manager.
2.4 No Partnership. This Agreement creates a contract relationship between Zachry
and Manager. Nothing in this Agreement shall be deemed to constitute Manager as a partner or
joint venturer of Zachry or Zachry's affiliates or vice versa.
MANAGEMENT SERVICES AGREEMENT PAGE3
ZCC-40-137658
0643.0003
2.5 No Assignment. Nothing in this Agreement shall be deemed to be an assignment
of the Construction Contracts to Manager. Zachry is and shall remain the contractor under each
of the Construction Contracts. As such, Zachry retains all rights, obligations and claims arising
from or in connection with the Construction Contracts, any owner under the Construction
Contracts, or any subcontractors on the projects covered by the Construction Contracts.
ARTICLE3
PAYMENTS & ACCOUNTING
3 .l Payments. Manager has and will continue to incur costs on behalf of Zachry to
perform the Services. As consideration to Manager for the performance of the Services
hereunder, and for all costs incurred by Manager in connection therewith, Zachry agrees to pay
to Manager the Reimbursable Costs. Zachry will pay-over to Manager, or Manager shall have
the right to directly receive, all payments from the owners under the Construction Contracts,
recoveries for claims thereunder, or other payments arising from the Construction Contracts
("Contract Payments"). The timing and schedule for any amounts due hereunder shall be as
mutually· agreed by the Parties from time to time in light of the particular Services and
Construction Contract.
3.2 Pavment Limitation. Notwithstanding anything in Section 3.1 to the contrary,
Zachry shall have no obligation to pay or reimburse Manager for any Reimbursable Costs in
excess of the Contract Payments. Therefore, if the Contract Payments received by Manager are
Jess than the Reimbursable Costs, Zachry will have no liability for any such shortfall. If the
Contract Payments exceed the Reimbursable Costs, the parties shall confer and agree upon a
mutually satisfactory allocation of any such excess amounts between the Parties consistent with
the intents and purposes of the Corporate Restructuring.
3.3 Accounting. Manager shall keep and maintain, books, records, accounts and
other documents sufficient to reflect accurately and completely all Reimbursable Costs incurred
pursuant to this Agreement, as well as the Contract Payments received.
ARTICLE4
TERM & TERMINATION
4.1 Term. Unless earlier terminated pursuant to Section 4.2. or Section 4.3 hereof,
the term of this Agreement shall commence on the Effective Date and continue for a period of
five (5) years, and then month-to-month thereafter, unless terminated by either Party on not less
than sixty (60) days notice.
4.2 Termination by Mutual Consent. The Parties may terminate this Agreement in
its entirety, or solely with respect to the Services, at any time upon mutual written consent.
4.3 Termination bv Either Partv for Cause. Either Party (the "First Party") may
by written notice to the other Party (the "Second Party") terminate this Agreement upon or after
the occurrence of any of the following events:
(a) In the event of the bankruptcy of the Second Party; and
MANAGEMENT SERVICES AGREEMENT PAGE4
ZCC-40-137659
0643.0004
(b) In the event of a failure by the Second Party to perform its obligations
under this Agreement in any material respect, if the Second Party does not
cure such failure within fifteen (15) days of the date of a written notice
from the First Party demanding such cure (or, if curable, within such
longer period of time up to sixty (60) days as is reasonably necessary to
accomplish such cure without material adverse effect on the First Party or
the performance of the Services).
ARTICLES
LIMITATION ON LIABILITY
5.1 Standard of Care. In providing the Services, Manager shall use the same degree
of care, skill and prudence customarily exercised by it for its own provision of services to itself
and its affiliates (and in compliance with applicable Law) to provide, or cause to be provided, the
Services. Other than as expressly set forth in this Agreement, Manager does not make any
other warranty, express or implied, with respect to the Services.
5.2 No Warranties or Guarantees. Except as expressly provided in this Agreement,
none of the Parties makes any warranties or g-uarantees to any other Party, express or implied,
with respect to the subject matter of this Agreement, and Manager hereby expressly disclaims
any implied warranty or warranties imposed by Law, including the Implied Warranties of
Merchantability and Fitness for a Particular Purpose.
5.3 No Consequential Damages. In no event, whether as a result of breach of
contract, breach of warranty, tort liability (including negligence), strict liability, indemnity or
otherwise, shall either Party or its agents be liable to the other Party for special, indirect,
punitive, exemplary or consequential damages or fiduciary liability of any nature, and each Party
hereby releases the other Party and its agents therefrom.
ARTICLE6
MISCELLANEOUS PROVISIONS
6.1 Joint Effort. Preparation of this Agreement ~as been a joint effort of the Parties
and the resulting document shall not be construed more severely against one of the Parties than
against the other.
6.2 Captions. The captions contained in this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or intent of this
Agreement or the intent of any provision contained herein.
6.3 Severabilitv. The invalidity of one or more phrases, sentences, clauses, Sections
or Articles contained in this Agreement shall not affect the validity of the remaining portions of
the Agreement so long as the material purposes of this Agreement can be determined and
effectuated.
6.4 No Waiver. Any failure of either Party to enforce any of the provisions of this
Agreement or to require compliance with any of its terms at any time during the pendency of this
Agreement shall in no way affect the validity of this Agreement, or any part hereof, and shall not
MANAGEMENT SERVICES AGREEMENT PAGES
ZCC-40-137660
0643.0005
be deemed a waiver of the right of such Party thereafter to enforce any and each of such
provisions.
6.5 F urther Assurances. Each Party agrees to execute and deliver all further
instruments and documents, and take all further action not inconsistent with the provisions of this
Agreement that may be reasonably necessary to perform the Services and to effectuate the
purposes and intent of this Agreement. In order to fully realize the benefits of the Contract
Payments, Zachry will assign to Manager accounts receivables under the Construction Contracts.
6.6 No Third Party Benefi ciary. This Agreement is not intended to, and does not,
confer upon any Person other than the Parties any rights or remedies hereunder other than the
Parties' respective affiliates. Without limiting the generality of the foregoing, nothing in this
Agreement shall be construed to create any duty to, standard of care with respect to, or any
liability to any Person who is not a Party to this Agreement.
6. 7 : Go'Verning Law. This Agreement shall be governed by and construed under the
laws of the State ofTexas, without reference to conflicts oflaws rules.
6.8 Entire Agr eement. This Agreement sets forth the full and complete
understanding of the Parties relating to the subject matter hereof as of the date hereof, and
supersedes any and all negotiations, agreements, understandings and representations made or
dated prior thereto with respect to such subject matter.
6.9 Amendments. No change, amendment or modification of this ·Agreement shall
be valid or binding upon the Parties unless such change, amendment or modification shall be in
writing and duly executed by all Parties.
6.1 0 Successors. This Agreement and the covenants and agreements herein contained
shall inure to the benefit of and be binding upon the Parties hereto, their successors and assigns.
6.11 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Agreement. In the event that this Agr~ement is
delivered by facsimile transmission or by e-mail delivery of a ".pdf' format date file, such
signature shall create a valid and binding obligation of the Party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile or ".pdf' signature
page were an original thereof.
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURES ON FOLLOWING PAGE}
MANAGEMENT SERVICES AGREEMENT PAGE6
ZCC-40-137661
0643.0006
IN WITNESS WHEREOF, each of the Parties has caused this Management Services
Agreement to be duly executed on this 27th day of April 2009 to be effective as of the Effective
Date.
ZACHRY:
ZACHRY INDUSTRIAL, INC.,
a Delaware corporation
By:
Nrune:````````````------­
Title:
MANAGER:
ZACHRY CONSTRUCTION CORPORATION,
a Delaware corporation
MANAGEMENT SERVICES AGREEMENT SIGNATURE PAGE
ZCC-40~137662
0643.0007
EXHIBIT "A"
CONSTRUCTION CONTRACTS
1. Contract for Bayport Terminal Complex Phase lA Wharf and Dredging Contract,
dated May 24, 2005, by and' between Zachry Construction Corporation and Port of Houston
Authority (File Number: 2004-0 187).
2. Contract for Bayport Terminal Complex Phase IA Container Yard, dated June 28,
2004, by and between Zachry Construction Corporation and Port of Houston Authority (File
Number: 2004-0225).
3. Contract for Bayport Cruise Terminal Complex Phase 1-Site and· Utilities, dated
November 28, 2005, by and between Zachry Construction Corporation and Port of Houston
Authority (File Nwnber: 2~05-0394).
4. Zachry Project 5922 -Project No. 15-2897, Contract No. 5494, Harte Research
Institute Building, Texas A&M University- Corpus Christi, Contract Awarded: May 14, 2003.
5. Zachry Job 7634 -- Project No. 16-2931, Contract No. 5567, Kinesiology
Facilities Texas A&M International University, Contract Awarded: January 13, 2006.
6. The Comprehensive Development Agreement with an effective date of October 1,
2004, as amended, between Zachry and the Texas Department of Transportation for the
development of an approximate 7.4-mile segment of State Highway 45 Southeast, a proposed
controlled access transportation facility extending from Interstate Highway 35 at Farm-to-Market
1327 south of Austin to SH 130/US Highway 183 in Travis County.
MANAGEMENT SERVICES AGREEMENT EXHIBIT"A"
ZCC-40-137663
0643.0008
TAB 38
Pass-through Agreement
(PX642)
CLAIMS PASS-THROUGH AGREEMENT
This Claims Pass-Through Agreement ("Agreement") is entered into effective as of
January 1, 2008 (the "Effective Date") by and between ZACHRY INDUSTRIAL, INC., a
Delaware corporation, formerly known as Zachry Construction Corporation ("Zachry"), and
ZACHRY CONSTRUCTION CORPORATION, a Delaware corporation ("ZCC"). Zachry and
ZCC may be referred to in this Agreement collectively as the "Parties" and individually as a
"Party."
RECITALS
A. Prior to the Effective Date, Zachry entered into a construction contract and
associated documentation with the Port of Houston Authority, Harris County, Texas ("Port of
Houston") for construction work related to a wharf and dredging project at the Bayport Terminal
Complex, as such construction contract ·is described on Exhibit "A" attached hereto (the
"Bayport Contract").
B. Zachry and ZCC entered into a Management Services Agreement, as of the
Effective Date ("Management Services Agreement") pursuant to which Zachry subcontracted
with ZCC to perform work and other obligations of Zachry under the Bayport Contract and other
construction contracts.
C. The Port of Houston has materially breached the Bayport Contract and Zachry
and ZCC have each suffered damages arising from or in connection with such breach giving rise
to the claims set forth in the lawsuit styled Zachry Construction Corporation n/kla Zachry
Industrial, Inc. vs. Port of Houston Authority of Harris County, Texas, Cause No. 2006-72970
rr
(District Court of Harris County, 15 Judicial District of Texas) (the "Claims").
D. The Port of Houston's breaches of the Bayport Contract have damaged Zachry
before January 1, 2008 and have directly damaged Zachry's subcontractor, ZCC, after January 1,
2008. Zachry and ZCC agree that it is in their mutual best interests for Zachry and ZCC to
pursue Claims against the Port of Houston in the name of Zachry. The Claims include those
Claims of Zachry before January I, 2008 ("Zachry Claims"), as well as the damages incurred
by ZCC from and after January 1, 2008, the effective date of the Management Services
Agreement (the "ZCC Claims"). The parties desire, therefore, to agree upon a procedure
through which they will coordinate the preparation, presentation and prosecution of the Claims
against the Port of Houston.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, Zachry and ZCC
agree as follows:
No. 2006-72970
CL.A IMS PASS-THROUGH AGREEMENT
ZCC EXHIBIT ZCC-40-137664
642
0642.0001
ARTICLE 1
PASS-THROUGH AND CLAIMS PROSECUTION
1.1 Pass-Through. Zachry agrees, and acknowledges it is liable to ZCC, to present
the ZCC Claims and remit any recovery from the Port of Houston to ZCC, in accordance with
the terms of this Agreement. ZCC agrees that the liability of Zachry to ZCC is liquidated to the
extent of the recovery against the Port of Houston for the ZCC Claims. Zachry agrees to pass
any such recovery to ZCC to the extent, and only to extent, of any amount actually recovered
from the Port of Houston. ZCC agrees that upon Zachry meeting such obligations it shall have
no further liability to ZCC arising from the ZCC Claims.
1.2 Delegation of Prosecution. Zachry agrees that ZCC may pursue the Claims
against the Port of Houston in Zachry's name. ZCC shall include in the Claims the amount of
the Zachry Claims and the ZCC Claims. ZCC shall diligently pursue the Claims. ZCC shall
have the responsibility for the preparation ef any claim, the presentation and prosecution of any
such claim, and the conduct of any litigation.
1.3 Cooperation. Zachry shall cooperate fully with ZCC including, but not limited
to, passing on the Claims to the Port of Houston and executing such documents that may be
required to further the Claims; and ZCC shall cooperate fully with Zachry. Upon request, one
party may review and copy or be provided at no cost a copy of any writings, letters, reports,
analysis, drawings, schedules, charts, photos or any other documents relating to the Claims in the
possession, custody or control of the other party.
1.4 Settlement. The right to abandon, settle, compromise or dismiss the Claims shall
be shared by ZCC and Zachry. Zachry and ZCC shall each not settle the Claims without the
other party's prior written approval.
1.5 Costs. All costs, fees and other expenses (including expert and attorney fees)
incurred by ZCC in connection with the preparation, prosecution and litigation of the Claims
shall be paid by ZCC. ZCC shall have no responsibility for any attorney fees or expenses that
Zachry may elect to incur.
1.6 Witnesses and Documents. Zachry shall provide, at no cost to ZCC, Zachry
employees as witnesses and their respective documents relating to the Claims. Zachry and ZCC
will cooperate as fully as possible in regard to witnesses and documents. Zachry will provide
any Zachry employees and witnesses, at mutually agreed times and in mutually agreed amounts
oftime so as not to hinder or delay Zachry's ongoing operations.
1. 7 C laims Payment. Zachry and ZCC shall direct that any payment on the Claims
shall be paid to ZCC in accordance with this Agreement.
1.8 Services Agreement. The parties expressly acknowledge that the Management
Services Agreement shall remain in full force and effect except to the extent that any provisions
of the Management Services Agreement are inconsistent with or superseded by the terms of this
Agreement.
CLAIMS PASS-THROUGH AGREEMENT PAGE2
ZCC-40-137665
0642.0002
ARTICLE2
MISCELLANEOUS PROVISIONS
2.1 Joint Effort. Preparation of this Agreement has been a joint effort of the Parties
and the resulting document shall not be construed more severely against one of the Parties than
against the other.
2.2 Severability. The invalidity of one or more phrases, sentences, clauses, Sections
or Articles contained in this Agreement shall not affect the validity of the remaining portions of
the Agreement so long as the material purposes of this Agreement can be determined and
effectuated.
2.3 Further Assu rances. Each Party agrees to execute and deliver all further
instruments and documents, and take all further action not inconsistent with the provisions of this
Agreement that may be reasonably necessary to perform the Services and to effectuate the
purposes and intent of this Agreement.
2.4 No T hird Party Beneficiary. This Agreement is not intended to, and does not,
confer upon any Person other than the Parties any rights or remedies hereunder other than the
Parties' respective affiliates. Without limiting the generality of the foregoing, Nothing in this
Agreement shall be construed to create any duty to, standard of care with respect to, or any
liability to any Person who is not a Party to this Agreement.
2.5 Governing Law. This Agreement shall be governed by and construed under the
laws of the State of Texas, without reference to conflicts of laws rules.
2.6 Entire Agreement. This Agreement sets forth the full and complete
understanding of the Parties relating to the subject matter hereof as of the date hereof, and
supersedes any and all negotiations, agreements, understandings and representations made or
dated prior thereto with respect to such subject matter.
2.7 Amendments. No change, amendment or modification of this Agreement shall
be valid or binding upon the Parties unless such change, amendment or modification shall be in
writing and duly executed by all Parties.
2.8 Successors. This Agreement and the covenants and agreements herein contained
shall inure to the benefit of and be binding upon the Parties hereto, their successors and assigns.
2.9 Rules of Interpretation. The terms "herein," "herewith" and "hereof' are
references to this Agreement, taken as a whole. The term "includes" or "including" shall mean
"including, without limitation." References to a "Section," "subsection," "clause," "Article,"
"Exhibit," "Appendix" or "Schedule" mean a Section, subsection, clause, Article, Exhibit,
Appendix or Schedule of this Agreement, as the case may be, unless in any such case the context
requires otherwise. References to a given agreement, instrument or other document shall be a
reference to that agreement, instrument or other document as modified, amended, supplemented
and restated through the date as of which such reference is made. References to a Law includes
all amendments or modifications thereto, all rules and regulations promulgated under such Law
and all administrative and judicial authority exercisable thereunder. Reference to a Person
CLAIMS PASS-THROUGH AGREEMENT PAGE3
ZCC-40-137666
0642.0003
include its successors and permitted assigns. The singular shall include the plural and the
masculine shall include the feminine, and vice versa. References to "days" shall mean calendar
days, unless the context specifies otherwise.
2.10 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Agreement. In tJ?.e event that this Agreement is
delivered by facsimile transmission or by e-mail delivery of a ".pdf' format date file, such
signature shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile or ".pdf' signature
page were an original thereof.
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SIGNATURES ON FOLLOWING PAGE}
CLAIMS PASS- THROUGH AGREEMENT PAGE4
ZCC-40-137667
0642.0004
IN WITNESS WHEREOF, each of the Parties has caused this Claims Pass-Through
Agreement to be duly executed on the 27'11 day of April 2009, to be effective as of the Effective
Date.
ZACHRY:
ZACHRY INDUSTRIAL, INC.,
a Delaware corporation
ZCC:
ZACHRY CONSTRUCTION CORPORATION,
a Delaware corporation
By: ~j~
Name: Qg,y i d P.f.Clchry
Title: 'Pr,.nd.e.rt± an d. Ch,·e:.£ liY,cvl1ve. d.#."ur
CLAIMS PASS-THROUGH AGREEMENT SiGNATURE PAGE
ZCC-40-137668
0642.0005
EXHIBIT "A"
BAYPORT CONTRACT
1. Contract for Bayport Terminal Complex Phase lA Wharf and Dredging Contract,
dated May 24, 2005, by and between Zachry Construction Corporation and Port of Houston
Authority (File Number: 2004-0 187).
CLAIMS PASS-THROUGH AGREEMENT EXH!BIT"A"
ZCC-40-137669
0642.0006
TAB 39
Excerpts from Construction Management Agreement
(PX57.0001-10, 57.0033)
Bayport Terminal Complex
Phase lA
Construction Management Plan
Prepared for
Port of Houston Authority
Executives Offices
111 East Loop North
Houston, TX 77029
June 1,2004
No. 2006-72970
ZCC EXHIBIT
57
CH2MHILL
0057.0001
BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN
Table of Contents
1.0 Introduction 1
1.1 Purpose 2
1.2 Project Description 2
2.0 Staffing Plan 3
2.1 Project Organization 4
2.2 Construction Manager 4
2.2.1 Construction Manager Level of Authority .4
2.3 Lead Inspector 5
2.4 Civil/Structural/Electrical Inspectors 6
2.5 Office Engineer 6
3.0 Communications Plan 7
3.1 Community Outreach 8
3.2 Complaints 8
3.3 Constructware® 8
3.4 Directory of Personnel 9
3.5 Flow of Communications 9
3.5.1 Formal Communications 9
3.5.2 Informal Communications 9
3.6 Meetings 10
3.6.1 Pre-Construction Conference 10
3.6.2 Pre-Installation Conference 12
3.6.3 Weekly Construction Coordination Meeting 13
3.6.4 Monthly Progress Review Meeting 13
3.6.5 Safety Task Assessments and Tool Box Meetings 13
3.6.6 Unscheduled Meetings 13
3.7 Notifications 13
3.8 Reporting 14
3.8.1 Weekly Progress Report.. 14
3.8.2 Monthly Progress Report 14
3.9 Stakeholder Communication 15
3.10 Third Party Communications 15
4.0 Field Work Plan 16
4.1 Administrative and Technical Support 17
4.2 Air Emissions 17
4.3 Audits 17
4.4 Claims 17
4.5 Contract Modifications 18
4.6 Daily Inspection Diaries 19
4.7 Deficient Construction Materials and Workmanship 19
4.8 Delays and Time Extensions 19
4.9 Dispute Resolution 20
4.10 Equipment and Materials 20
I
0057.0002
BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN
4.11 Equipment / Material Storage 20
4.12 Equipment Start-Up and Testing 21
4.13 Field Office 21
4.14 Field Orders 21
4.15 Filing System 21
4.16 Fill Material Policy 22
4.17 Forms & Reports 22
4.18 Inspection and Testing 22
4.19 Light 22
4.20 Noise 23
4.21 Notices to be Posted by Contractor 23
4.22 Permits 23
4.23 Progress Payment Requests 23
4.24 Progress Photographs 24
4.25 Record Drawings 24
4.26 Requests for Information 25
4.27 Safety 25
4.27.1 CM Field Staff Safety 25
4.27.2 Contractor Safety 26
4.27.3 Visitor Safety 27
4.28 Schedule 27
4.28.1 Baseline Progress Schedule 27
4.28.2 Progress Schedule Updates 27
4.28.3 Phase 1A Milestone Schedule 28
4.29 Spare Parts 28
4.30 Submittals 28
4.31 Surveying Information and Support 29
4.32 Staff Training and Start-Up Support 29
4.33 Technical Specification Reference Standards 29
4.34 Visitors Log 29
4.35 Warranty / Guarantee Data 30
5.0 Quality Assurance Plan 31
5.1 Quality Assurance Procedure for Construction 32
6.0 Risk Mitigation Plan 33
6.1 Contract. 34
6.1.1 Budget 34
6.1.2 Schedule 34
6.1.3 Scope 34
6.2 Electronic Data 34
6.2.1 Assure-It Database 34
6.2.2 Constructware® 35
6.3 Environmenta1. 36
6.3.1 Air 36
6.3.2 Cultural Resources 36
II
0057.0003
BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN
6.3.3 Hazardous Materials 36
6.3.4 Light 37
6.3.5 Noise 37
6.3.6 Spills 37
6.3.7 Water Quality 37
6.3.8 Wildlife 38
6.4 Facilities 38
6.4.1 Computers 38
6.4.2 Electric Carts 39
6.4.3 Field Office 39
6.4.4 Personal Digital Assistants .40
6.5 Hard-Copy Data 40
6.5.1 Final Redline As-Built Drawings, Submittals and CCD .40
6.5.2 Operation and Maintenance Manuals .40
6.5.3 Photos 41
6.5.4 Product Data and Shop Drawings .41
6.5.5 Project Vertical Files (Correspondence, Logs, etc.) .41
6.6 Human Resources 41
6.6.1 CH2M HILL Program Staff .41
6.6.2 CM Field Staff 41
6.6.3 Contractors 42
6.6.4 Designers of Record 43
6.6.5 PHA 3rd Party Inspection and Testing Firms .43
6.7 Public 44
6.7.1 Activists 44
6.7.2 Bayport Channel Users 44
6.7.3 Media 44
6.7.4 Port Road Users 44
6.7.5 Terrorism 45
6.8 Stakeholder Management 45
6.9 Unidentified Risks 45
7.0 Closeout Plan 46
7.1 Substantial Completion and Punch List.. .47
7.2 Final Completion 47
7.3 Closeout Modification 47
7.4 Final Payment Request 48
7.5 Construction Completion Report .48
7.6 Documents and Records Turnover .48
7.7 Archives 48
III
0057.0004
BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN
Attachments
Attachment 1- Construction Management Team Organizational Chart
Attachment 2 - CM Field Staff Responsibilities Matrix
Attachment 3 - Workflow Charts: Change Orders, RFIs, Submittals
Attachment 4 - Weekly and Monthly Progress Report Checklists
Attachment 5 - CH2M HILL Construction Claims Manual
Attachment 6 - Field File Numbering System and Checklist
Attachment 7 - Construction Management Forms and Reports
Attachment 8 - Construction Inspection Checklists
Attachment 9 - CH2M HILL Bayport Phase lA Field Safety Instructions
Attachment 10 - Quality Assurance Procedure for Construction
IV
0057.0005
1.0 Introduction
0057.0006
BAYPORT TERMINAL COMPLEX PHASE 1A CONSTRUCTION MANAGEMENT PLAN
1.1 Purpose
The purpose of this Construction Management Plan (CMP) is to provide the framework for
construction management consistency, continuity, quality control, timeliness and teamwork
for successful completion of Phase 1A of the Port of Houston Authority's (PHA) Bayport
Terminal Complex.
The CMP will outline common procedures to be utilized by the Construction Management
Team (CMT), which consists of CH2M HILL Program and Construction Management (CM)
staff, PHA representatives, contractors and the Designers of Record (DOR) for the Phase 1A
construction contracts. The CMP will be the reference document providing continuity for
all CMT members involved in Phase 1A construction. It will define the construction
contracts' specific quality assurance requirements, consolidate current construction
management field policy for easy reference and retrieval, and outline the relationships of
the various functions to be performed by the CMT members. The CMT members will use
the CMP as a guidance document to ensure Phase 1A of the Bayport terminal complex is
built to the highest available standards of quality and in accordance with the general and
technical provisions of each Phase 1A contract.
1.2 Project Description
CH2M HILL is providing Program and Construction Management services to PHA for the
initial development phase of the estimated $1.2 billion Bayport Terminal Complex. The Port
of Houston is the busiest port origination/ destination on the United States Gulf. The Port is
the world's sixth largest port and is the number one u.s port in foreign tonnage,
transshipping more than 150 million tons of cargo annually. At ultimate build-out, the
Bayport Terminal Complex will be the largest container transshipment facility in the United
States and include inter-modal rail transfer facilities, cruise terminals and associated
commercial developments supporting both the container and cruise terminals.
CH2M HILL acts as the Port's primary contact for the initial project development phase,
providing oversight, communication and coordination for multiple facility design and
construction contracts. Phase lA, the initial development, consists of the design and
construction of 1,660 linear feet of reinforced concrete container wharf supported by
reinforced concrete drilled piers; reinforced concrete tangent bulkhead wall;
access/berthing dredging and on-site disposal of dredged materials; clearing, grubbing and
earthwork; heavy duty reinforced concrete and asphalt paved container handling, storage
and transfer yard; signage and pavement markings; electrical substation, transmission and
distribution utilities; elevated water storage tank, fire and potable water transmission and
distribution lines; storm water drainage lines and storm water pollution prevention
facilities; sanitary sewer, pumping station and force mains; site lighting; site
security/monitoring, fire alarm/ detection, communications and electronic data utilities;
temporary and Amenities buildings; and associated construction activities.
2
0057.0007
2.0 Staffing Plan
3
0057.0008
BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN
2.1 Project Organization
The Bayport Terminal Complex Phase 1A CMT will serve as the construction administration
and management representatives for PHA. The CMT, in this role, will coordinate all
construction activities and services required for the successful completion of Phase 1A
construction. The on-site CM Field Staff will consist of a Construction Manager (CM), an
Office Engineer, a Lead Inspector, and Civil/Structural/Electrical Inspectors. This staff will
be provided by CH2M HILL and its sub-consultants. The CMT also includes PHA project
management and construction administration staff; Designers of Record (DaR) for each
construction contract; CH2M HILL construction administrative and technical support staff;
PHA construction materials testing firms; and any other involved parties performing
construction related activities and services.
The CM will report directly to PHA's Bayport Project Manager, Chief Engineer, Project
Engineer, and Chief Inspector as well as the CH2M HILL Program Manager (PM). The CM
will coordinate and oversee the daily activities of the CM Field Staff, 3rd party testing
laboratory personnel, 3rd party surveyors, 3rd party inspectors and auditors, and other
CMT members involved in the construction work. The CM is directly responsible for the
coordination and oversight of the CM Field Staff.
The CMT organizational chart is shown on Attachment 1, "Construction Management Team
Organizational Chart." The individual roles and responsibilities of the CM Field Staff are
shown on Attachment 2, "CM Field Staff Responsibilities Matrix."
2.2 Construction Manager
The CM shall act as the PHA's representative on site during construction of Phase 1A. The
CM shall be the Inspector for the work and have all authority delegated to the Inspector by
the contract documents. The CM will coordinate the activities of all contractors and DOR
performing work on site during Phase 1A construction, and will be responsible for
implementation of the Staffing Plan, Communications Plan, Field Work Plan, Quality
Assurance Plan, Risk Mitigation Plan, and Closeout Plan as described in this CMP.
2.2.1 Construction Manager Level of Authority
As an extension of the PHA staff, the CM will have all authority normally attributed
to a CM acting as owner's agent (not at risk) on a construction project. The CM will
have the authority to inspect, monitor and control activities on the project site as
necessary to protect PHA's liability with regard to project scope, schedule, quality,
security, and permit compliance, in accordance with industry-standard practice.
The CM will not have any authority to make changes to any provisions of the PHA-
Contractor construction contract documents in regard to costs (increase or decrease
in contract price); time for completion (accelerated or extended contract completion
4
0057.0009
BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN
time); or quality of in-place work (lessen or increase the contract quality
requirements for construction materials and/ or workmanship).
The CM will have the authority to control communications and documentation
contributing to the permanent project record, clarify and interpret construction
contract documents, and make on-site field administrative/ engineering/ quality
assurance decisions, subject to the limitations outlined above. The CM will promote
harmonious communication, cooperation and coordination between all contractors
and construction activities. The CM will investigate on-site field
deficiencies/ discrepancies/ problems and resolve them, if no changes to the
construction contract cost, time for completion and/ or construction materials and/ or
workmanship are required. If the resolution of an on-site field
deficiency/discrepancy/problem requires a change to the contract cost, time for
completion and/ or quality of construction materials and/ or workmanship, the CM
will investigate and make recommendations to the Port of Houston Authority's
Chief Engineer for resolution.
The CM will provide no direction related to the Contractor's construction means,
methods, procedures, safety, sequencing and/ or techniques. The CM will observe
and report on the Contractor's construction safety, workmanship and materials, as it
relates to quality assurance and the in-place construction work being in conformance
with Construction Contract Documents (CCD) (i.e., construction contract General
and Special Conditions, drawings, technical specification sections and approved
Contractor submittals).
2.3 Lead Inspector
The Lead Inspector will be responsible for the construction documentation and quality
assurance of multiple construction contracts awarded for Phase lA. The Lead Inspector will
report to the CM and will oversee and direct the work efforts of the Inspectors. The Lead
Inspector will be expected to maintain complete, up-to-date and detailed knowledge of all
pertinent construction contract documents; administrative and technical submittals; change
orders; field orders; progress schedules; drawings; plans; technical specifications; and
administrative status reports. The Lead Inspector will observe and monitor the contractors'
planning and execution of the work and perform quality assurance inspections of materials
and workmanship to assure compliance with the CCD. The Lead Inspector will act as
liaison between the contractors, Inspectors and PHA's construction inspection and materials
testing personnel. The Lead Inspector will be responsible for the use and implementation of
Personal Digital Assistants (PDA's) for field inspection activities; use of the proprietary
Assure-It database for analysis and reporting of QA/QC data; preparation of daily, weekly,
and monthly construction progress reports; making recommendations on contractors'
progress payment requests and invoices; maintaining a daily log and photos of the
contractors' construction activities, staffing, equipment, and materials; documenting
contractor performance and safety issues; and resolving on-site construction conflicts.
5
0057.0010
BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN
4.28.3 Phase 1A Milestone Schedule
The CM Field Staff will create and maintain an overall Phase lA Milestone Schedule
based on the Contractors' approved baseline Progress Schedules.
The CM will use the contractors' accepted Progress Schedule Updates to update the
Phase lA Milestone Schedule on a monthly basis, or more frequently, as requested
by the PHA.
4.29 Spare Parts
CM Field Staff will take possession of all spare parts to be provided by construction
contractors, in accordance with the requirements of the project CCD. Contractors will tag
(CH2M HILL Standard Spare Parts Identification Tag-Form No. 399) all spare parts to be
turned over to the CM Field Staff. This turnover action will be documented (CH2M HILL
Standard Spare Parts Transfer Form-Form No. 289) by the contractor and CM Field Staff.
CM Field Staff will prepare and maintain a record (CH2M HILL Standard Spare Parts
Transfer Log-Form No. 404) of all spare parts transfers.
4.30 Submittals
The Contractor for each Phase lA construction contract will be responsible for developing a
list of submittals required by the CCD. Submittals lists will be reviewed by the CM for
completeness. A static electronic copy of each Submittal List will be posted in
Constructware®.
All submittals requiring action to be taken by a reviewing/ approving party will be
submitted by the contractor (PHA General Conditions Section 5.20 "Submittals to be
Furnished by the Contractor after Award") to the CM using Constructware®. The
Contractor will be responsible for following any electronic submittal with hard copy
materials, if any, sent to the appropriate party for review.
The CM will distribute these submittals to the appropriate reviewing party. Once the
reviewing party has reviewed, approved or indicated the actions to be taken by the
contractor to obtain approval, the submittal will be returned to the contractor through the
CM. The reviewing party will electronically annotate all reviewed contractor submittals,
indicating action(s) to be taken by the contractor: no exception taken; make corrections
noted; rejected; revise and resubmit; or submit specified item. The review notation will
include places for the reviewer's electronic signature and date of signature.
Informational submittals will also be submitted by the contractor through the CM in the
same manner as described above.
The CM Field Staff will document, distribute, file and log all submittals using
Constructware®.
28
0057.0033
TAB 40
Court’s Ruling on Directed Verdict
(71:8-15)
8
Plaintiff's Motion for Directed Verdict
1 denied.
2 MS. YEATES: Thank you, Your Honor.
3 THE COURT: Now, would you give me a
4 moment with respect to Zachry's motion? I just want to
5 make a couple of quick notes.
6 Okay. Ms. Greer, or Mr. Gibbs, whoever.
7 PLAINTIFF'S MOTION FOR DIRECTED VERDICT
8 MR. GIBBS: Yes, Your Honor. At this
9 time, Your Honor, the Plaintiff, Zachry Construction
10 Corporation reurges its motion for directed verdict at
11 the close of the Defendant's case and the close of all
12 the evidence.
13 We filed with you our motion on Monday,
14 January the 11th. I think we gave you a copy on
15 January the 11th. And it was filed January the 13th.
16 And we reurge that motion for instructed
17 verdict, and we also urge the argument Zachry made at
18 the hearing on January the 13th, 2009 (sic) on the
19 record, yesterday, as part of our motion for directed
20 verdict.
21 THE COURT: All right. I'd like to go
22 through the table of contents of that motion, if you
23 have a copy.
24 MR. GIBBS: We do, Your Honor.
25 THE COURT: And also ask that -- if
9
Plaintiff's Motion for Directed Verdict
1 Ms. Greer wants to -- only because we all worked on the
2 jury charge together -- and the things that I'm
3 prepared to grant with respect to your directed verdict
4 are essentially what's in the jury charge.
5 And so -- at this point, so if we could
6 go through that, point by point. And you maybe could
7 bring to the Court's attention the ones that you think
8 that are granted by virtue of the current language of
9 the jury charge.
10 MS. GREER: Do you want me to -- well, I
11 know a couple of things off the top of my head, then
12 maybe can I take half a minute to look through it?
13 THE COURT: Please.
14 MS. GREER: Okay. Your Honor, we
15 believe that you have ruled -- or we would ask you to
16 rule on directed verdict that Zachry is entitled as a
17 matter of law to recover the damages sustained by New
18 Zachry on the pass-through claim.
19 We believe that's what you've instructed
20 the jury, and we would ask you to grant our directed
21 verdict on that issue.
22 THE COURT: Okay.
23 MS. YEATES: And obviously, Your Honor,
24 we oppose that motion.
25
10
Plaintiff's Motion for Directed Verdict
1 COURT'S RULING
2 THE COURT: Very good. Okay. And I
3 have ruled on that, and I will grant that aspect of
4 your motion.
5 MS. GREER: And then, Your Honor, we've
6 also moved for directed verdict on Zachry's failure to
7 comply a claim for the Port's failure to pay $2.36
8 million in the liquidated damages.
9 We believe that you have instructed the
10 jury in --
11 THE REPORTER: Are the mikes on?
12 MR. GREER: -- Question No. 12 that the
13 Court has determined that the Port failed to comply
14 with the contract by failing to pay Zachry $2.36
15 million that the Port has withheld of liquidated
16 damages.
17 THE COURT: Would you grab the
18 microphone, please?
19 (Discussion off the record)
20 THE REPORTER: I'm sorry, I'm having a
21 little trouble hearing you, can you speak up?
22 MR. GREER: Yes.
23 And we would ask you to grant a directed
24 verdict to Zachry on that basis.
25 THE COURT: All right. Go ahead, yes.
11
Plaintiff's Motion for Directed Verdict
1 MS. YEATES: We also oppose that motion,
2 Your Honor.
3 COURT'S RULING
4 THE COURT: Very good. What I've put in
5 the jury charge and what I'm prepared to grant is that
6 I have determined that the Port has failed to comply
7 with the contract by failing to pay Zachry $2.36
8 million that the Port withheld as liquidated damages.
9 Insofar as you have asked for that in a
10 directed verdict, I'm granting that aspect of your
11 motion.
12 MS. GREER: Okay. Thank you,
13 Your Honor.
14 I believe that's all, Your Honor.
15 THE COURT: All right. I was -- so if
16 you would look at the table of contents with me for a
17 moment. I was looking at -- in the table of contents
18 Roman numeral -- Page Number Roman Numeral II, where
19 you have Roman Numeral V -- 5, where it says, Zachry is
20 entitled to a directed verdict on its right to recover
21 damages sustained by New Zachry.
22 Is that covered by what I've previously
23 set?
24 MS. GREER: Yes, Your Honor, that is the
25 portion of the directed verdict motion starts on Page
12
Plaintiff's Motion for Directed Verdict
1 69, that is the portion, that part, Part 5, Roman V is
2 the part that we believe that you have granted a
3 directed verdict motion on in the jury charge, and we
4 ask that you confirm that you granted directed verdict
5 on the arguments made therein.
6 THE COURT: All right. It goes on to
7 say in subparts A -- in Subpart A of that -- in the
8 table of contents or in the motion, The direct verdict
9 is proper because the Port has met the burden to prove
10 that Zachry is not liable to New Zachry and has -- and
11 has not met that burden -- excuse me, because the Port
12 has the burden of proof that Zachry is not liable to
13 New Zachry and has not met that burden.
14 I guess my ruling is as a matter of law
15 that I find that the -- there's a valid pass-through
16 claim and any objections or legal arguments to the
17 contrary by the Port are overruled.
18 MS. GREER: Okay. Thank you,
19 Your Honor.
20 THE COURT: Does that satisfy what
21 you're asking for?
22 MS. GREER: Well, we're asking you to
23 rule as a matter of law that New Zachry,
24 notwithstanding the Port's arguments to the contrary,
25 has the right to -- that Zachry, notwithstanding the
13
Plaintiff's Motion for Directed Verdict
1 Port's arguments to the contrary, has the right to
2 recover New Zachry's damages as a matter of law in this
3 lawsuit.
4 THE COURT: Right. I think that's what
5 I've granted. I will grant that part of your motion.
6 MS. GREER: Thank you, Your Honor.
7 THE COURT: And I know the Port is
8 opposed to that.
9 MS. YEATES: (Moving head up and down)
10 THE COURT: And I've granted with
11 respect -- I indicated with respect to Roman Numeral VI
12 on Page Roman Numeral III with respect to the $2.36
13 million, and you've moved with respect to the clearing
14 and grubbing, and I'm not speaking for the Port, but
15 it's my understanding that the Port has essentially
16 abandoned that claim in that there was not evidence
17 that the 25,000 or so for clearing and grubbing has
18 been paid?
19 MS. YEATES: That's correct, Your Honor.
20 THE COURT: All right. So I'm granting
21 that part of Zachry's motion.
22 The Port, in our charge conference, we
23 talked about the defense of both release and waiver,
24 and it's my understanding that the Port's contention
25 has been that the waiver argument, not the affirmative
14
Plaintiff's Motion for Directed Verdict
1 defensive waiver but with respect to I guess the
2 liquidated damages claim?
3 MS. YEATES: Right, Your Honor. With
4 respect to the liquidated damages, we took away or out
5 of the charge, Your Honor took it out, and we're only
6 arguing release.
7 THE COURT: All right. So I guess I
8 will grant a directed verdict then with respect to the
9 waiver aspect of the release argument?
10 MS. GREER: If they're going to abandon
11 it, I think that's sufficient. But --
12 THE COURT: Are you -- do you want to
13 abandon it on the record or what?
14 MS. YEATES: No, Your Honor. The point
15 was that we wanted the charge to be submitted as
16 release as opposed to release and waiver. And that's
17 what Your Honor has done with respect to the liquidated
18 damages.
19 MS. GREER: My understanding was that
20 they aren't seeking submission of waiver because it
21 brought (inaudible) -- well, I'm not going to
22 characterize why they're doing it, but that they are
23 not asking you to submit it is my understanding.
24 MS. YEATES: Your Honor, I won't be
25 objecting or requesting waiver instruction with respect
26 to liquidated damages.
15
Defendant's Objections to the Court's Charge
1 COURT'S RULING
2 THE COURT: All right. Then I will make
3 no ruling.
4 And I believe, unless you would bring my
5 attention to anything else that we've spoken about with
6 respect to the jury charge, the rest of the motion for
7 directed verdict will be denied.
8 MS. GREER: It is all I can think of
9 right now, Your Honor.
10 THE COURT: Keep your voice up, please.
11 MS. GREER: That's all I can think of
12 right now, Your Honor.
13 MS. YEATES: Your Honor, I think we're
14 ready to do the charge objections.
15 THE COURT: Okay. Let's hear the charge
16 objections.
17 (At the bench, on the record)
18 DEFENDANT'S OBJECTIONS TO THE COURT'S CHARGE
19 MS. YEATES: Your Honor, the Defendant
20 makes its objections to the Court's charge in the
21 presence of the Court and opposing counsel and the
22 court reporter and before the charge has been read to
23 the jury.
24 After we finish making our objections,
25 Your Honor, we get a ruling, then we'll be tendering
TAB 41
Objections to the Charge
(71:15-73)
15
Defendant's Objections to the Court's Charge
1 COURT'S RULING
2 THE COURT: All right. Then I will make
3 no ruling.
4 And I believe, unless you would bring my
5 attention to anything else that we've spoken about with
6 respect to the jury charge, the rest of the motion for
7 directed verdict will be denied.
8 MS. GREER: It is all I can think of
9 right now, Your Honor.
10 THE COURT: Keep your voice up, please.
11 MS. GREER: That's all I can think of
12 right now, Your Honor.
13 MS. YEATES: Your Honor, I think we're
14 ready to do the charge objections.
15 THE COURT: Okay. Let's hear the charge
16 objections.
17 (At the bench, on the record)
18 DEFENDANT'S OBJECTIONS TO THE COURT'S CHARGE
19 MS. YEATES: Your Honor, the Defendant
20 makes its objections to the Court's charge in the
21 presence of the Court and opposing counsel and the
22 court reporter and before the charge has been read to
23 the jury.
24 After we finish making our objections,
25 Your Honor, we get a ruling, then we'll be tendering
16
Defendant's Objections to the Court's Charge
1 requested instructions to the Court for the Court's
2 consideration.
3 THE COURT: Yes, ma'am.
4 MS. YEATES: Our first objection is to
5 the agency instructions and the preliminary
6 instructions in the charge, Your Honor. Because those
7 instructions we believe erroneously include the
8 apparent authority theory.
9 As Your Honor knows, we believe there's
10 no pleading to support the apparent authority theory
11 and there's been no trial by consent and there's no
12 trial amendment. So we believe that theory should not
13 be in the charge and we object to including it in the
14 charge.
15 Your Honor, I'll ask you to rule on all
16 of them at the end, Your Honor.
17 THE COURT: Oh, all right.
18 MS. YEATES: We believe the apparent
19 authority in the charge is erroneous as a matter of
20 law, Your Honor, because with respect to CH2M Hill's
21 actual authority, Zachry was undisputedly on notice of
22 the limitations of that actual authority.
23 And under Douglass versus Panama, that
24 means the apparent authority theory cannot apply in
25 this case.
17
Defendant's Objections to the Court's Charge
1 We also object to instructing the jury
2 on apparent authority because the Port is a public
3 entity that can only contract --
4 THE COURT: Slow down a little bit.
5 MS. YEATES: Can only contract in
6 writing and therefore apparent authority cannot apply
7 as a matter of law. I believe you've heard all these.
8 Furthermore, Your Honor, inclusion of
9 the apparent authority theory will improperly allow the
10 jury to believe that CH2M Hill --
11 THE COURT: Ms. Yeates, you got to slow
12 down just a little.
13 MS. YEATES: Okay. Well, I'm sorry,
14 Your Honor, my team is anxious.
15 Inclusion of the apparent authority
16 theory in the charge will improperly allow the jury to
17 believe that CH2M Hill could have apparent authority
18 based on some conduct by the Port that held CH2M Hill
19 out as the Port's agent.
20 In order, you see, Your Honor, to allow
21 -- so that Zachry can argue that they could recover
22 additional work directed by the Port, which is the
23 Texas 271 -- Section 271 of the government code
24 standard.
25 THE COURT: Local government code,
18
Defendant's Objections to the Court's Charge
1 right?
2 MS. YEATES: Right, Your Honor. And I'm
3 bringing that to the Court's attention because that
4 demonstrates the harmful error in including apparent
5 authority instruction in the charge.
6 THE COURT: Yes.
7 MS. YEATES: We also object, Your Honor,
8 to the instruction concerning the imputation of
9 knowledge, which is included in the Court's agency
10 instructions.
11 That's the instruction that starts, A
12 party's knowledge includes facts known to the party,
13 etcetera. The PJC authorizes no such instructions. As
14 Your Honor knows, we found no Texas case that
15 authorizes such an instruction, and so we object to
16 including it in the charge.
17 Your Honor, we also object to the
18 absence from the charge of an instruction that an agent
19 can be an agent for a party for one purpose but not
20 other purposes.
21 That instruction is supported by the law
22 and the evidence. We don't believe it's submitted by
23 implication from other instructions. And the addition
24 of that instruction is necessary in order for the
25 Court's instructions on agency to be substantially
19
Defendant's Objections to the Court's Charge
1 correct.
2 Because in this case, a central fact
3 issue presented is whether CH2M Hill was the Port's
4 agent for certain purposes but not the Port's agent for
5 other purposes. In order properly to answer the
6 question, we believe the jury needs this instruction.
7 At the conclusion of our objections, the
8 Port will tender Defendant's Requested Instruction No.
9 1, which would state that that other party may be
10 authorized to act on behalf of a party for some
11 purposes, while not being authorized to act on behalf
12 of that party for other purposes.
13 And the Port objects to the omission
14 from the Court's charge of that instruction.
15 The Port also objects to the omission
16 from the charge, Your Honor, of an instruction charging
17 the jury that in this case, authority for another to
18 act for the Port can arise only from a written
19 agreement made by the Port that allows the other party
20 to act on behalf of and for the benefit of the Port.
21 And again, our argument there,
22 Your Honor, is that the Port can only contract in
23 writing, and therefore it could only can have an agent
24 by writing.
25 The Port will be tendering Defendant's
20
Defendant's Objections to the Court's Charge
1 Requested Instruction No. 2, which will state in this
2 case, authority for another to act for the Port can
3 arise only from a written agreement made by the Port
4 that allows the other party to act on behalf and for
5 the benefit of the Port.
6 Furthermore, the Port objects to the
7 inclusion in the charge of apparent authority because
8 as a matter of law that theory cannot apply to the Port
9 given the Port's status as a governmental entity with
10 governmental immunity, and so we object on that basis
11 too, Your Honor.
12 Moving to the definition of New Zachry,
13 Your Honor, that's in there because of Your Honor's
14 pass-through ruling.
15 And obviously, we object to the ruling,
16 Your Honor, and to -- well, I'll be objecting to those
17 parts of the charge that go to the ruling because we
18 believe that New Zachry is not the Plaintiff in the
19 case and that Zachry does not have a valid pass-through
20 claim for all the reasons that we argued in our motion
21 to strike, which Your Honor overruled.
22 And principally, Your Honor, you'll
23 remember that's because New Zachry was created and
24 retained by Zachry to be the subcontractor only after
25 the breach occurred and therefore the Port's breach
21
Defendant's Objections to the Court's Charge
1 could not have caused the damages to New Zachry in this
2 context.
3 So we object to the New Zachry
4 definition, and we'll be objecting to the other
5 instructions on that basis.
6 Your Honor, in your instructions, you
7 instruct multiple times concerning ambiguity and trade
8 custom. We've talked about that.
9 It's our belief that those instructions,
10 because they appear multiple times in the charge,
11 should be in the preliminary instructions one time in
12 the front of the charge.
13 I'm particularly concerned about this
14 with respect to trade/usage because it's our position
15 that there is no evidence to raise a fact issue on the
16 legal standard from when a trade custom or usage
17 arises.
18 And that by instructing the jury
19 multiple times on that, the Judge -- the Court
20 improperly comments on the weight of the evidence by
21 nudging or telling the jury that the Court thinks,
22 Well, there must be a trade custom or usage because I'm
23 asking about it several times in the charge.
24 And we believe that because the trade
25 custom or usage relates to the ambiguity instruction,
22
Defendant's Objections to the Court's Charge
1 the proper thing to do would be to take the ambiguity
2 instruction and trade custom and usage and put them
3 both in the front of the charge.
4 THE COURT: Slow down. If you want this
5 on the record, you've got to slow down.
6 MS. YEATES: Okay.
7 And if you put it in the front of the
8 charge, Your Honor, you would lead the instruction by
9 saying, In answering questions that require you to
10 decide the meaning of an agreement, you must decide the
11 meaning by determining the intent of the parties at the
12 time of the agreement, and then continue with the
13 Court's instructions on ambiguity.
14 Your Honor, the Port further objects to
15 the inclusion instruction in the charge on trade custom
16 and usage because, as I've stated, Your Honor, there's
17 no evidence to raise an issue on that.
18 Your Honor, I've talked about the
19 ordering of the questions in the charge and we object
20 to the fact that the charge does not have the excuse
21 questions in each cluster following liability.
22 We think that's the appropriate, proper
23 way to do it and we object to not doing it that way,
24 Your Honor.
25 On Question No. 1, I think our only
23
Defendant's Objections to the Court's Charge
1 objection there at this point is that the Port is
2 charging the jury as to what the jury may consider in
3 deciding Question No. 1, and that's the ambiguity
4 instruction. And again, we think that should be in the
5 front of the charge.
6 Your Honor, moving to Question No. 2 --
7 oh, I'm sorry, also on Question No. 1, the Court
8 instructs the jury not to consider Section 5.10 with
9 respect to breach of 5.10. And the Port objects to the
10 Court giving that instruction.
11 THE COURT: I thought we -- didn't we
12 change that?
13 MS. YEATES: No. It's limited to
14 breach, Your Honor. But remember my position was it
15 shouldn't be in there at all.
16 That's Ms. Greer's concern that there
17 could be an irreconcilable conflict between the two
18 findings.
19 THE COURT: How -- did we change the
20 wording of that though? What question is it?
21 MS. YEATES: It's Question 1.
22 MS. GREER: 1.
23 I think what you had in the draft last
24 night was, In answering this question only, you're not
25 being asked to decide whether the Port failed to comply
24
Defendant's Objections to the Court's Charge
1 with Section 5.10 of the contract.
2 MS. YEATES: And, you know,
3 Your Honor --
4 THE COURT: Question 1?
5 MS. YEATES: Right. Well, that's
6 just --
7 THE COURT: Oh, yeah. Yeah.
8 MS. YEATES: -- Ms. Greer's concern
9 about irreconcilable findings, Your Honor.
10 But we believe the instruction will
11 mislead and confuse the jury into believing that the
12 jury cannot consider Section 5.10 in determining
13 whether the Port failed to comply with Change Order 4.
14 And we believe that's error, Your Honor,
15 erroneous because Change Order 4 incorporates the rest
16 of the contract to the extent the rest of the contract
17 is not in conflict with Change Order 4.
18 Therefore, at the conclusion of these
19 objections -- well, we object to having the instruction
20 in there at all.
21 But at the inclusion of the objections,
22 we'll be requesting Defendant's Requested Question No.
23 3, which states, However, you may consider Section 5.10
24 in determining whether the Port failed to comply with
25 Change Order 4. You may consider it in deciding
25
Defendant's Objections to the Court's Charge
1 Question 1.
2 And we think if you're going to give
3 that instruction that's in the charge, Your Honor, that
4 this additional instruction would also be required.
5 And again, this is something we
6 discussed last night.
7 MS. GREER: Our response would be a
8 comment on the weight of the evidence.
9 MS. YEATES: Right.
10 THE COURT: What?
11 MS. GREER: Our response to that
12 argument was that it would be a comment on the weight
13 of the evidence designed to nudge the jury.
14 And in fact, it would tell the jury to
15 adopt the position that Section 2.02, Precedence
16 Provision, as a matter of law does not cause Change
17 Order 4 to trump the general conditions and the
18 technical specifications, 5.10, all those.
19 MS. YEATES: And of course, our
20 position, Your Honor, is if we're going to point the
21 jury in the instruction you're giving and tell them not
22 to consider whether 5.10 is breached, that that leads
23 the jury to believe they're not supposed to look at
24 5.10.
25 THE COURT: I understand.
26
Defendant's Objections to the Court's Charge
1 MS. YEATES: Okay.
2 Your Honor, on the next instruction I
3 would like to go to under Question 1 is the instruction
4 that states, Furthermore, in answering this question
5 only, you are instructed that nothing in Section 5.41
6 gave the Port the right to issue its revise and
7 resubmit.
8 We believe this instruction is erroneous
9 because it's based on an incorrect construction and
10 interpretation of the contract.
11 It's not -- we don't believe it's a
12 proper -- restatement of what the Court's ruling was
13 intended to go to with respect to your ruling on the
14 meaning of 5.41.
15 And we thought the Court's ruling was
16 going to the point that Zachry was not required to
17 obtain a written change directive or change order in
18 order to recover. And so we believe this instruction
19 goes beyond what we thought the point of the Court's
20 pretrial ruling was.
21 Furthermore, we believe it's erroneous
22 as a matter of law as explained in all our previous
23 objections to the Court's instructions concerning 5.41.
24 And the Court's instruction is based on
25 the erroneous application, we believe, of the so-called
27
Defendant's Objections to the Court's Charge
1 radical change doctrine, and on the Shintech and
2 Columbia Gas line of cases.
3 And we believe those are inapplicable
4 here because Section 3.09 of the contract, you'll
5 recall, provides that no action or failure to act by
6 the Port can constitute a waiver of a right of the Port
7 under the contract.
8 Moreover, here, the Port didn't
9 relinquish its contractual procedural rights under
10 Section 5.41 even in the event of a breach because the
11 Port's procedural rights under 5.41 go directly to the
12 breach issue, and that's the legal rationale of the
13 Technip case that we've discussed.
14 I believe you've heard these arguments,
15 Your Honor.
16 Also, under the Texas Water Code and
17 other provisions of Texas law, the Port is statutorily
18 prohibited from making any binding contract that's not
19 in writing. And that's exactly what Section 4.1 (sic)
20 is going to when it says, If a contractor is going to
21 do additional work, he has to get a written change
22 order.
23 MS. GREER: That's --
24 THE COURT: 4.1 or 5.41?
25 MS. YEATES: I'm sorry, 5.41. I
28
Defendant's Objections to the Court's Charge
1 apologize, Your Honor.
2 THE COURT: I just wanted your record to
3 be clear.
4 MS. YEATES: Thank you, Your Honor.
5 Furthermore, the Court's instruction is
6 erroneous as a matter of law because the Port has
7 governmental immunity, which is waived only to the
8 extent permitted by Chapter 271 of the Texas Local
9 Government Code.
10 And we believe Section 5.41 goes
11 directly to whether the amount sought by Zachry comes
12 within that waiver of immunity. The Shintech and
13 Columbia Gas line of cases are not attempting to deal
14 with the situation of governmental immunity.
15 Even if the radical change doctrine or
16 the Shintech line of law applied, they would not make
17 Section 5.41 relevant to whether the Port had the right
18 to revise and resubmit.
19 We believe Section 5.41 does not go to
20 that issue, and that is why we believe the instruction
21 given in connection with Question No. 1 is erroneous as
22 a matter of law.
23 And -- now, Your Honor, it also, the
24 instruction on 5.41 also, we believe, constitutes an
25 impermissible comment --
29
Defendant's Objections to the Court's Charge
1 THE COURT: Slow down.
2 MS. YEATES: And impermissible comment
3 on the weight of the evidence serving to tilt or nudge
4 the jury to find in Zachry's favor. And the
5 instruction, we believe, is not correct or helpful to
6 the jury.
7 Your Honor, I would now like to, with
8 respect to Question 1, simply reurge our matter of law
9 arguments that we believe we've made to you previously
10 on why the Port believes that it is correct as a matter
11 of law that Change Order 1 didn't -- Change Order 4 did
12 not entitle Zachry to use the frozen cutoff wall.
13 And we've argued all those things,
14 Your Honor, in opposition to the Port's Rule 166(g)
15 motion, and so I'm not going to repeat them here. It's
16 just a law argument.
17 Your Honor, on Question No. 2, we again,
18 have the instruction on ambiguity and trade/usage.
19 And again, we object to including it multiple times in
20 the charge.
21 The Port objects to the instruction
22 under Question No. 2 telling the jury that it may
23 decide the meaning of Section 5.10 and 5.22 by
24 considering trade usage or custom.
25 Your Honor, as you know, there's -- the
30
Defendant's Objections to the Court's Charge
1 PJC says it's not even clear, it's an appropriate
2 instruction in the charge. And most importantly,
3 Zachry has not adduced evidence to meet the legal
4 standard to raise a fact issue on whether there's any
5 trade custom or usage. So we would object on that
6 basis.
7 We further object to this instruction
8 concerning 5.41 given in connection with Question 2.
9 We believe it's based on an incorrect construction and
10 interpretation of the contract. And therefore, is not
11 a proper restatement of the Court's prior rulings with
12 regard to Section 5.41.
13 We continue to assert all the
14 objections, Your Honor, that we've made during trial to
15 Your Honor's instructions with respect to Section 5.41.
16 Two hours of sleep last night.
17 MS. GREER: Quit bragging.
18 (Laughing)
19 MS. YEATES: And so I'm not going to
20 repeat all of our arguments that I just made a minute
21 ago about why the Shintech line doesn't support the
22 ruling or why the radical change doctrine doesn't the
23 ruling. I won't repeat any of that.
24 And we believe again, that this
25 instruction would be an impermissible and harmful
31
Defendant's Objections to the Court's Charge
1 comment on the weight, serving to tilt or nudge the
2 jury to find in favor of Zachry.
3 And then I would like to go on now to
4 Question No. 3 on the statutory measure of damages, we
5 agree that Your Honor's instruction is correct, that
6 that is the statutory measure.
7 Our objection here is we believe
8 Zachry's adduced no proof of amounts due and owing
9 under the contract. That's our argument.
10 And therefore, I want to assert it here
11 that we think it's error to ask Question No. 3 because
12 we believe Zachry has no evidence to raise a fact issue
13 that would allow the submission of the statutory
14 measure of damages.
15 Your Honor, we also with respect to the
16 statutory measure of damages, Subpart B in the
17 instruction under Question No. 3, the Port objects
18 because, among other reasons, outside of the written
19 executed change order, the Port cannot direct work for
20 Zachry -- cannot direct Zachry to do additional work.
21 And there is no evidence that Zachry was
22 directed by the Port to do additional work. And
23 therefore, we object to the submission of the second
24 prong of Section 271 because we think there's no
25 evidence to raise the issue and there's no evidence of
32
Defendant's Objections to the Court's Charge
1 a written executed change order.
2 Your Honor, now we come to the
3 pass-through instructions and I'm not going to repeat
4 all the arguments we made before, Your Honor, but
5 obviously, we believe the pass-through instruction,
6 which is the instruction under Question 3, telling the
7 jury that they should include reimbursable costs
8 incurred by New Zachry.
9 We believe that instruction is improper
10 because we don't think there is a valid -- legally
11 valid, pass-through claim in this case for all the
12 reasons we stated in our motion to strike the
13 pass-through claim.
14 Your Honor, we also object to the way --
15 telling the jury in the pass-through instruction that
16 the jury should include reimbursable costs.
17 We believe that that's an impermissible
18 comment on the weight, nudging the jury to find for
19 Zachry and we think it should say the jury may include
20 reimbursable costs.
21 To make the instruction correct, the
22 Court would need to add the following sentence at the
23 end of the instruction.
24 THE COURT: This is question?
25 MS. YEATES: This is Question 3, the
33
Defendant's Objections to the Court's Charge
1 pass-through instruction.
2 THE COURT: Okay. Let me get there.
3 MS. YEATES: The instruction that we
4 think would have to be added is, You may include such
5 reimbursable costs only to the extent that Zachry
6 agreed, in the management service agreement, to pay New
7 Zachry such reimbursable costs.
8 At the conclusion of the objections,
9 Your Honor, I'll request that instruction as
10 Defendant's Requested Instruction No. 4.
11 And we believe omitting that instruction
12 makes the pass-through instruction legally defective
13 and erroneous as a matter of law because the
14 fundamental premise of a pass-through claim is that the
15 Plaintiff asserting the claim has to prove the
16 liability of that Plaintiff contractor to the
17 subcontractor.
18 And we believe that's what our requested
19 instruction goes to.
20 Your Honor, you have instructions on
21 Section 5.41, 5.42 and 5.52 and that's under Question 3
22 and that's the instruction which begins, You are
23 instructed that Zachry was not required to take certain
24 actions.
25 We believe the instruction is incorrect
34
Defendant's Objections to the Court's Charge
1 as a matter of law. I'm going to separately object to
2 this on 5.40 -- as to the extent it goes to 5.41, on
3 the one hand, 5.52, on the other hand and 5.42, on the
4 other hand.
5 The Port continues to assert and does
6 not waive all the objections that we've previously
7 raised to the Court's instructions concerning -- given
8 to the jury already -- concerning 5.41.
9 And for all the reasons I've already
10 articulated, Your Honor, concerning how the radical
11 change doctrine doesn't apply, Shintech line of cases
12 doesn't apply, all those arguments I've already made as
13 to why we believe Your Honor's ruling on Section 5.41
14 is in error, we believe all those reasons make the
15 instructions with respect to this instruction also in
16 error.
17 And we believe the instructions and
18 impermissible comment on the weight of the evidence,
19 the effect would be to tilt or nudge the jury to find
20 for Zachry.
21 The Court's instruction concerning 5.41
22 not requiring a written change order is particularly
23 harmful to the Port because the measure of damages in
24 the charge allows the jury to recover for additional
25 work that Zachry was directed to perform.
35
Defendant's Objections to the Court's Charge
1 And under Section 5.41 the requirement
2 of a written change order before the contractor is
3 entitled to be paid for additional work is precisely
4 what Section 5.41 is designed to require. And so that
5 is why we believe the instruction and the Court's
6 ruling with respect to 5.41 is harmful error in the
7 case.
8 And we also believe Your Honor's already
9 charged the jury with respect to what they should
10 consider on 5.41 and that they should not be charged in
11 this instruction again.
12 Your Honor, with respect to your
13 instruction on 5.52, here under Question 3, it applies
14 5.52 to the extent 5.52 makes requirements consistent
15 with Section 5.41.
16 And so, therefore, we would just say all
17 of the same objections that we asserted against the
18 instruction on 5.41 also apply with respect to 5.42
19 (sic).
20 And now that takes me to the objections
21 with respect to the instruction on Section 5.42. And
22 the Port objects to those instructions because again,
23 Your Honor, we believe the Court's ruling on Section
24 5.42 is erroneous as a matter of law.
25 We've already explained that we think
36
Defendant's Objections to the Court's Charge
1 the radical change doctrine doesn't apply to 5.42. And
2 we believe that 5.42 is not invalid under Section
3 16.071 of the Remedies Code because it's not the kind
4 of notice provision that comes within that section
5 under the American Airlines case. And nor does
6 Shintech or Columbia Gas line of cases make 5.42
7 inapplicable in this case.
8 So we, for all the reasons we previously
9 have asserted in our objections to Your Honor's
10 instructions given to the jury on Section 5.42, we
11 object to this instruction on 5.42 included in the
12 Court's charge under Question No. 3.
13 Your Honor, your -- the sentence that
14 you have in the instruction that says, You are
15 instructed that the jury may consider Sections 5.41,
16 5.42 and 5.52 with respect to assessing a party's state
17 of mind, we believe that that instruction repeats what
18 Your Honor has said during trial.
19 To the extent the instruction has been
20 expanded to include 5.52, we would just assert against
21 that instruction, Your Honor, all of the objections
22 that we previously have made to Your Honor's
23 instruction given during trial with respect to the
24 instruction.
25 However -- I think I know where Jenny is
37
Defendant's Objections to the Court's Charge
1 going -- we believe the instruction needs to be in the
2 charge because of the Court's previous instruction
3 given on these provisions under Question 3.
4 And having decided to instruct the jury
5 under Question 3 with respect to what 5.41, 5.42 and
6 5.52 do not require Zachry to do to recover damages.
7 We do believe it's necessary at this point for
8 Your Honor to repeat the instruction.
9 My problem is, the instruction that Your
10 Honor has given earlier, we objected to because we
11 think it's based on an erroneous ruling -- reading and
12 interpretation and error of law as to those sections --
13 MS. GREER: You're saying you only
14 requested that instruction about state of mind because
15 the Judge is putting in the first instruction --
16 MS. YEATES: Right. Right. It's
17 necessary in the charge because of the first
18 instruction.
19 MS. GREER: Okay.
20 MS. YEATES: Your Honor, on the NDFD
21 exceptions, no damages for delay exceptions,
22 Your Honor, we object to submitting to the jury the
23 instructions concerning those exceptions to the no
24 damages for delay or hindrance provision.
25 Specifically, those are the instructions
38
Defendant's Objections to the Court's Charge
1 concerning arbitrary and capricious conduct, bad faith,
2 etcetera. Your Honor, Texas doesn't recognize these
3 common law exceptions, and we believe that even if
4 Texas did recognize those exceptions, the language of
5 this particular Section 5.07, no damages for delay
6 clause would preclude application of those exceptions.
7 And there is no evidence and no legally
8 insufficient evidence of damages resulting from a delay
9 or hindrance that could of possibly have been caused by
10 any conduct, egregious conduct of the Port constituting
11 arbitrary and capricious conduct, bad faith, active
12 interference or fraud as defined in the Court's charge
13 under Question No. 3.
14 Also, Your Honor, and I mentioned this
15 to you in the informal charge conference, Your Honor,
16 we object to the instruction concerning the no damages
17 for delay provision, Section 5.07 because that
18 instruction omits the requirement that the Port -- any
19 egregious conduct of the Port, arbitrary and
20 capricious, bad faith, active interference or fraud,
21 that that conduct must be the sole cause of any delay
22 or hindrance damages.
23 A major fact issue in this case is who
24 caused Zachry to be delayed so behind schedule? If --
25 we believe, under the law, Your Honor, if the delay was
39
Defendant's Objections to the Court's Charge
1 also caused by Zachry, then that delay, even if
2 contributed to by the Port's alleged egregious conduct,
3 cannot constitute an exception to the no damages for
4 delay or hindrance provision.
5 We believe the Court's instructions are
6 defective because they incorrectly omit the sole cause
7 requirement.
8 To correct that omission, the language
9 in the Court's instruction under Question 3 should be
10 modified so that the language refers to a delay or
11 hindrance that was solely the result of the Port's
12 actions, if any, that constituted arbitrary and
13 capricious conduct, etcetera.
14 And we object to the omission of the
15 word solely in the Court's instruction under Question
16 No. 3.
17 Your Honor, with respect to the active
18 interference definition in Question No. 3, the Port
19 objects to that instruction defining active
20 interference because the instruction omits the words
21 taken to before the words unreasonably interfere.
22 We believe the instruction should
23 properly be worded, Active interference means
24 affirmative, willful action taken to unreasonably
25 interfere.
40
Defendant's Objections to the Court's Charge
1 We believe those words are necessary
2 because to constitute active interference, a party has
3 to intend to interfere.
4 MS. GREER: Wait a second. I thought
5 you agreed that it would be to interfere if you got the
6 second sentence of that instruction. That it would be
7 that unreasonably interferes -- let me get back to my
8 question.
9 I thought the agreement was that you
10 would not object to active interference means
11 affirmative, willful action that unreasonably
12 interferes with the other party's compliance with the
13 contract. You would agree to that, if the Judge
14 submitted active interference requires more than a
15 simple mistake, error in judgment, lack of total
16 effort, or lack of complete diligence.
17 MS. YEATES: Your Honor, the first
18 sentence, as stated, allows an act that we didn't
19 intend to be interference to constitute interference
20 without scienter intention, and so I have to object to
21 that. I can't let that -- no, I object to that.
22 Your Honor, the fraud definition
23 includes recklessness in Question No. 3. Your Honor,
24 we talked about this in our informal charge conference.
25 Our position is that under Texas law
41
Defendant's Objections to the Court's Charge
1 from the Texas Supreme Court, fraud, as a promise with
2 no intent to perform, can only be intentional fraud;
3 and therefore, we believe it's error to include the
4 reckless fraud instruction in that question.
5 Now, we turn to Question No. 4, and,
6 Your Honor, we asked for this question, we believe it
7 should be in the charge under Casteel. I'm just
8 pointing out that the only reason we asked for it is
9 because Your Honor is allowing Zachry to submit the
10 pass-through damages.
11 And I don't want my failure to object to
12 that question to somehow waive my argument that we
13 believe there's no valid pass-through claim in that
14 case.
15 Similarly, Your Honor, with respect to
16 the break out question, I believe I just talked about
17 the pass-through, that's actually break out question --
18 it's Question No. 5. But I have a similar point to
19 make on Question No. 4, the break out question for
20 delay or hindrance.
21 We asked for that question but I don't
22 want -- we need it because Your Honor has included
23 delay or hindrance in the damages, but obviously, we
24 don't waive our position that delay or hindrance
25 damages are just not recoverable as a matter of law by
42
Defendant's Objections to the Court's Charge
1 asking Your Honor to give the break out instruction
2 that -- that breaks out under Casteel the dollars that
3 represent the delay or hindrance damages.
4 Your Honor, I now want to turn to
5 Question No. 6, Subsection D, the release instruction,
6 which again includes the ambiguity and trade custom or
7 usage.
8 Again, we object to repeating these
9 instructions over and over again in the charge. And
10 particularly with respect to the releases, Your Honor,
11 that we do not believe there's any evidence to raise
12 the legal standard for what constitutes a trade custom
13 or industry usage. And we believe it's an improper
14 comment on the weight of the evidence.
15 With respect to Question No. 8, which is
16 Zachry's counter-defenses, Your Honor, we talked about
17 this last night. We believe that the waiver
18 instruction, because this is waiver of fraud, should
19 require an additional instruction that would say, With
20 respect to fraud, waiver requires full knowledge of the
21 fraud, and all material facts, and must be made with
22 the intention, clearly manifested, of abiding by the
23 contract and waiving all right to assert deception.
24 And so we'll be requesting that,
25 Your Honor, as Requested Instruction No. 5. Because we
43
Defendant's Objections to the Court's Charge
1 believe that's necessary to make the definition correct
2 with respect to waiver of fraud.
3 On quasi-estoppel the Port objects to
4 Question No. 8 to the extent that it inquires whether
5 the Port is barred from asserting fraud in the
6 inducement because of quasi-estoppel.
7 We believe as a matter of law, the
8 doctrine of quasi-estoppel does not apply to bar the
9 defense of fraudulent inducement. It cannot be, as a
10 matter of law, that it's unconscionable for a party to
11 assert that it was defrauded.
12 The Port further objects to the
13 instruction on quasi-estoppel given in connection with
14 Question 8 because it fails to tell the jury that the
15 party to be estopped must have taken its previous
16 position with full knowledge of the fraud and all
17 material facts.
18 We'll be tendering Defendant's Requested
19 Instruction No. 6, which would state that with respect
20 to the fraud, the prior position previously taken by
21 the party to be estopped must have been taken with full
22 knowledge of the fraud and all material facts and must
23 have been taken with the intention, clearly manifested,
24 of abiding by the contract and not asserting the other
25 party's deception.
44
Defendant's Objections to the Court's Charge
1 And we object to the omission of this
2 sentence from the instruction on quasi-estoppel.
3 Finally, Your Honor, with respect to
4 ratification in the charge, the instruction concerning
5 ratification in Question 8 states -- refers to the
6 Port.
7 With respect to the counter-defense, the
8 Port is not making an affirmative claim for fraud. And
9 so at the end of that instruction on ratification it
10 currently says, All right to recover for the deception,
11 and what we were doing is asserting a defense.
12 And so we think it should say, All right
13 to assert the deception, and not all right to recover
14 for the deception since we're not seeking to recover
15 for the deception.
16 MS. GREER: Your Honor, we would need to
17 change that because Ms. Yeates dictated that
18 instruction to you yesterday for what would be an
19 appropriate instruction for ratification, so we would
20 agree that that should go in there then --
21 MS. YEATES: And I apologize for this,
22 Your Honor, we caught this in the middle of the night
23 last night. And I think --
24 THE COURT: So which question?
25 MS. GREER: Question No. 8.
45
Defendant's Objections to the Court's Charge
1 MS. YEATES: Question 8, ratification,
2 Subsection C. We believe it should say, All right to
3 assert the deception, not all right to recover for the
4 deception.
5 And I'm nearly finished, Your Honor.
6 THE COURT: Wait. Waiving all right to
7 assert?
8 MS. YEATES: Assert the deception.
9 THE COURT: Assert the thought?
10 MS. YEATES: Assert the deception.
11 THE COURT: Okay.
12 MS. YEATES: Your Honor, the Port
13 further objects to the instruction concerning
14 quasi-estoppel because we believe it's wrong and that
15 if fails to tell the jury -- I did that? Okay.
16 And then on Question No. 9 -- oh, we did
17 that already.
18 Your Honor, on Question No. 11 in the
19 Court's charge, the excuse question, we've objected to
20 instructing multiple times in the charge on ambiguity
21 and trade custom, so we object again here to that.
22 And the Port -- now, I want to turn to
23 Question No. 12. The question that tells the jury --
24 oh, this is the instruction in the Court's charge and
25 Your Honor's directed verdict that the Court has
46
Defendant's Objections to the Court's Charge
1 determined that the Port failed to comply with the
2 contract by failing to pay.
3 And I just want to make the point there,
4 Your Honor, that obviously, we disagree with the
5 Court's ruling that you made on Sections 5.05 and 5.06.
6 And so we have to object to that instruction, and we do
7 object.
8 MS. GREER: My understanding is you
9 don't object to the fact that he is giving the
10 instruction, only to the fact --
11 MS. YEATES: I object to the ruling
12 giving rise to the instruction --
13 MS. GREER: Exactly.
14 MS. YEATES: -- and the instruction
15 wouldn't be in the charge but for the ruling. And but
16 for that ruling, Your Honor, we would be submitting --
17 Your Honor would be submitting in the charge failure to
18 comply questions and damages questions.
19 MS. GREER: But given his ruling, it's
20 an appropriate way to open the -- the excuse question.
21 MS. YEATES: Okay. Your Honor, the Port
22 objects --
23 MS. GREER: Is that correct?
24 MS. YEATES: Your Honor -- Jenny, I'm
25 not required to stipulate what you want me to say.
47
Defendant's Objections to the Court's Charge
1 The Port objects to instructing the jury
2 -- I didn't object on that basis, you're okay.
3 The Port objects to instructing the jury
4 in connection with Question 12 on trade custom and
5 usage for the same reasons I've said, Your Honor --
6 THE COURT: Slow down.
7 MS. YEATES: -- and so I won't repeat
8 them. The repetition objection and the no evidence to
9 raise trade custom.
10 Your Honor, can I get a ruling on all of
11 my objections, are they all overruled?
12 COURT'S RULING
13 THE COURT: Yes.
14 MS. YEATES: Thank you, Your Honor.
15 And at the conclusion of the objections,
16 I now need to request and hand to Your Honor
17 Defendant's Requested No. 1 -- Defendant's Requested
18 Instructions No. 1, 2, 3, 4, and 5 and 6. All of which
19 we discussed in our objections, Your Honor.
20 And I tender them to Your Honor for
21 ruling and ask Your Honor, If you are going to refuse
22 them, Your Honor, if you would mark them refused and
23 sign each copy for me?
24 THE COURT: Okay. I am refusing these
25
48
Plaintiff's Objections to the Court's Charge
1 instructions. I am marking them refused and signing
2 them and they will be made part of the record.
3 MS. YEATES: Okay. And, Your Honor,
4 could we be permitted to take them to the clerk to be
5 filed or would you get them . . .
6 THE COURT: She was here. I will hand
7 them to Veronica, our clerk, as soon as she comes back
8 and I will ask her to file them and also I will ask her
9 to give copies to both sides.
10 MS. YEATES: Thank you, Your Honor.
11 MS. GREER: Your Honor, may I speak?
12 THE COURT: Yes.
13 Oh, Carolyn, do you need a break? You
14 okay?
15 THE REPORTER: No, I'm fine.
16 THE COURT: Okay. Just go slow.
17 PLAINTIFF'S OBJECTIONS TO THE COURT'S CHARGE
18 MS. GREER: Your Honor, Zachry
19 Construction Corporation --
20 THE COURT: Wait. I tell you what, move
21 this way and speak louder, please.
22 MS. YEATES: Here, let's change places.
23 MS. GREER: Your Honor, Zachry
24 Construction Corporation, in the presence of the Court,
25 opposing counsel and before the jury charge has been
49
Plaintiff's Objections to the Court's Charge
1 read to the jury, presents the following objections to
2 the Court's charge.
3 First, in the admonitory instructions,
4 Zachry is entitled to instruction that states, A
5 party's knowledge includes knowledge of facts that the
6 party acting with the other party's authority has
7 reason to know and that are material to the duties of
8 the party acting with the other party's authority.
9 This is from the Restatement of Third of
10 agency, Section 5.03. And the Williams versus Jennings
11 case, 755 S.W.2d 874, 883, that's Houston. 1988, writ
12 denied.
13 Zachry will separately request its
14 Proposed Issue No. 1 on this issue.
15 With respect to Question No. 1
16 pertaining to Change Order 4, Zachry would object that
17 Change Order 4 unambiguously includes an agreement that
18 Zachry could use the frozen cutoff wall design embodied
19 in the September 9, 2005 design.
20 Accordingly, the issue of the proper
21 interpretation of Change Order 4 should not be
22 submitted to the jury, instead the jury should be
23 instructed as to its meaning.
24 Specifically, the jury should be
25 instructed in the Court's Question No. 1, You are
50
Plaintiff's Objections to the Court's Charge
1 instructed that Change Order 4 includes an agreement
2 that Zachry could use the frozen cutoff wall design
3 embodied in the September 9, 2005 design.
4 Zachry will separately request its
5 Proposed Issue No. 2 on the proper interpretation of
6 Change Order 4.
7 Furthermore, if the Court does not
8 instruct the jury that Change Order 4 includes an
9 agreement that Zachry could use the frozen cutoff wall
10 design embodied in the September 9, 2005 design, then
11 the jury should be instructed that if they agree with
12 that interpretation, then the general conditions and
13 technical specifications give the Port no right to
14 issue its October 11, 2009 (sic) response.
15 As a matter of law, if the jury finds
16 that the Port agreed in Change Order 4 that Zachry
17 could use the frozen cutoff wall design embodied in the
18 September 9, 2005 design, then under the order of
19 precedence provision of the contract, change orders
20 take precedence over general conditions and technical
21 specifications. That's General Conditions Section
22 2.02(a).
23 The general conditions therefore could
24 not give the Port the right to issue the October 11,
25 2005 response with respect to a design that it had
51
Plaintiff's Objections to the Court's Charge
1 already agreed to in Change Order 4.
2 The Port (sic) should therefore instruct
3 the jury, If you find that Change Order 4 included in
4 agreement that Zachry could use the frozen cutoff wall
5 design embodied in the September 9, 2005 design, then
6 in answering this question only, you are instructed
7 that nothing in the general conditions or the technical
8 specifications of the contract including but not
9 limited to General Conditions Section 5.22, 5.41, 5.42
10 and 5.52, gave the Port the right to issue its October
11 11, 2005 response to the September 9, 2005 frozen
12 cutoff wall design.
13 Zachry will separately request its
14 Proposed Issue No. 3 on this issue.
15 Alternatively, Zachry would be entitled,
16 consistent with this Court's prior rulings concerning
17 the exclusion of Section 5.42 and 5.52 as well as their
18 inapplicability on their face as a matter of law, to
19 create a right in the Port to issue the October 11,
20 2009 (sic) response.
21 Zachry would be entitled to an
22 instruction that adds Section 5.42 and 5.52 to the
23 instruction that the Court is already giving the jury,
24 such that the instruction would now say, In answering
25 this question, you are instructed that nothing in
52
Plaintiff's Objections to the Court's Charge
1 Section 5.41, 5.42 or 5.52 gave the Port the right to
2 issue its October 11, 2005 response to the September 9,
3 2005 frozen cutoff wall design.
4 Zachry objects to the absence of this
5 instruction, and will tender a proposed instruction
6 separately. It will be Proposed Issue No. 4.
7 Although Zachry has proposed that the
8 prior instructions be included in the Court's Question
9 No. 1, because that is how the Court has stated it will
10 submit Change Order 4 issues.
11 Zachry believes the issues of the proper
12 interpretation of Change Order 4 and the failure to
13 comply with Change Order 4 should be submitted
14 separately, rather than in one question as submitted by
15 the Court, for the reasons discussed below.
16 Doing so would simplify the issues and
17 make clear to the jury that there are two separate
18 questions, interpretation and breach, that the jury
19 should answer.
20 Zachry will separately tender a proposed
21 instruction on these questions. They will be Proposed
22 Instructions Nos. 5 and 6.
23 Furthermore, combining the
24 interpretation and failure to comply issues into one
25 question obscures the basis for the jury's answers.
53
Plaintiff's Objections to the Court's Charge
1 That is, Zachry contends that the unambiguous language
2 of Change Order 4 includes an agreement that Zachry
3 could use the frozen cutoff wall design embodied in the
4 September 9, 2005 design.
5 Zachry has also proven as a matter of
6 law that the Port breached its agreement that Zachry
7 could use the frozen cutoff wall design embodied in the
8 September 9, 2005 design.
9 And so the issue of whether the Port
10 failed to comply with Change Order 4 should not be
11 submitted either.
12 If the jury answers no to the Court's
13 Question No. 1, the Court of Appeals will not be able
14 to determine whether one, the jury rejected Zachry's
15 interpretation but found that the Port did not breach
16 Change Order 4, or two, accepted Zachry's
17 interpretation but found that the Port did not breach
18 Change Order 4.
19 By combining an invalid question, the
20 interpretation of Change Order 4, which should be
21 decided as a matter of law by the Court, with a
22 separate question, whether that agreement was breached,
23 which also should be decided as a matter of law by the
24 Court, the charge obscures the basis for the jury's
25 decision, thus preventing the appellate court from
54
Plaintiff's Objections to the Court's Charge
1 determining whether the jury based its verdict on an
2 improperly submitted ground.
3 This is the Crown Life versus Casteel
4 case, 22 S.W.3d 378, pinpoint 390. Under Casteel, when
5 there is uncertainty as to the legal or evidentiary
6 validity of a jury issue, the issue should be submitted
7 separately.
8 That's Casteel and also Harris County
9 versus Smith, 96 S.W.3d 230, pinpoint 236. Where the
10 Court said, And in a case such as this one, asking the
11 jury to record its verdict as to each element of
12 damages when there is doubt as to the legal sufficiency
13 of the evidence will permit the losing party to
14 preserve error without complicating the charge or the
15 jury's deliberation.
16 Now, moving to Question No. 2 regarding
17 breach of Section 5.10. As a matter of law, nothing in
18 the unambiguous language of Section 5.10 gave the Port
19 the right to issue its October 11, 2005 response.
20 The jury should therefore be instructed
21 in Question No. 2 that nothing in Section 5.10 gave the
22 Port the right to issue its October 11, 2005 response.
23 The jury should not be instructed to determine the
24 meaning of Section 5.10.
25 Zachry will separately request its
55
Plaintiff's Objections to the Court's Charge
1 Proposed Issue No. 7 on this issue.
2 As a matter of law, nothing in the
3 unambiguous language of Section 5.22 gave the Port the
4 right to issue its October 11, 2005 response.
5 The jury should therefore be instructed
6 in Question No. 2 that nothing in Section 5.22 gave the
7 Port the right to issue its October 11, 2005 response.
8 The jury should not be instructed to determine the
9 meaning of Section 5.22.
10 Zachry will separately request its
11 Proposed Issue No. 8 on this issue.
12 The burden of proof with respect to the
13 Port's right to issue its October 11, 2005 response
14 under Section 5.22 is erroneously placed on Zachry.
15 Section 5.22 is an affirmative defense
16 in which the Port bears the burden of proof.
17 THE COURT: Slow down.
18 MS. GREER: Sorry.
19 Texas law is clear that, quote --
20 THE COURT: Not that slow.
21 MS. GREER: Huh?
22 THE COURT: Not that slow.
23 MS. GREER: Okay. I'm running out of
24 steam.
25 Quote, the burden of proving the
56
Plaintiff's Objections to the Court's Charge
1 happening of a contingency which, by the terms of the
2 contract, would discharge the party from liability or
3 any default or refusal to perform on the Plaintiff that
4 would excuse the performance of the Defendant, is on
5 the party who seeks to avoid the contract or excuse a
6 failure to perform it on that ground.
7 That's the Howell versus Kelly case from
8 the 1st Court of Appeals in Houston, 534 S.W.2d 737,
9 pinpoint 739 to Page 740.
10 And then from the 14th Court of Appeals
11 case, the Johnson versus McKinney American, Inc. --
12 I'll give you this.
13 9 S.W.3d 271, Page 280. The jury charge
14 erroneously places the burden on Zachry to disprove the
15 Port's right to issue its October 11, 2005 revise and
16 resubmit under Section 5.22.
17 The Section 5.22 should be submitted as
18 an excuse question, placing the burden of proof on the
19 Port.
20 Alternatively, if the Court refuses to
21 ask about Section 5.22 separately from Section 5.10, as
22 in the Court's charge, the placement of the burden on
23 the Port should be accomplished by instruction.
24 In Question No. 2, Zachry is entitled,
25 consistent with the Court's prior rulings concerning
57
Plaintiff's Objections to the Court's Charge
1 the exclusion of Section 5.42 and Section 5.52, as well
2 as their inapplicability on their face as a matter of
3 law to create a right in the Port to issue the October
4 11, 2009 (sic) response.
5 Zachry is entitled to an instruction
6 that adds Section 5.42 and 5.52 to the instructions the
7 Court is already giving the jury. Such that it would
8 say, In answering this question, you're instructed that
9 nothing in Section 5.41, 5.42 or 5.52 gave the Port the
10 right to issue its October 11, 2005 response to the
11 September 9, 2005 frozen cutoff wall design.
12 Zachry objects to the absence of this
13 instruction, and Zachry will separately request its
14 Proposed Issue No. 9 on this issue.
15 Furthermore, the issue of Section 5.10
16 and Section 5.22 should be submitted separately. By
17 combining the Port's affirmative defense under Section
18 5.22 as Zachry's affirmative claim under Section 5.10,
19 the jury charge obscures the basis for the jury's
20 answer.
21 Zachry has strong arguments as to why as
22 a matter of law the unambiguous language of Section
23 5.10 and Section 5.22 gave the Port no right to issue
24 its revise and resubmit response.
25 As well as why the Port's October 11,
58
Plaintiff's Objections to the Court's Charge
1 2005 -- 9 -- 5, 2005 response violated Section 5.10 and
2 Section 5.22 as a matter of law. And the contract.
3 Because Zachry's claim for breach of
4 Section 5.10 is combined with the Port's affirmative
5 defense under Section 5.22, and because the question of
6 the proper interpretation and breach of these clauses
7 is part of a single question, the charge obscures the
8 basis for the jury's decision.
9 Thus preventing the appellate court from
10 determining whether the jury based its verdict on an
11 improperly submitted ground. This is again, the
12 Casteel case I cited earlier and Harris County versus
13 Smith.
14 It will be difficult to show on appeal,
15 if the jury answers no to Question No. 3 -- Question
16 No. 2, whether it did so based on its interpretation of
17 Section 5.10 or 5.22 or whether it believed there was a
18 right to revise -- issue a revise and resubmit, but
19 that it was not shown that the Port had no reasonable
20 basis on which to exercise that right.
21 Question No. 3, damages for breach of
22 contract with respect to the frozen cutoff wall breach.
23 Zachry objects to the instruction that you may consider
24 amounts, if any, owed as compensation for increased
25 cost to perform the work as a direct result of
59
Plaintiff's Objections to the Court's Charge
1 Port-caused delays, if any.
2 Only if you find that such increased
3 costs were a natural, probable and foreseeable
4 consequence of the Port's failure to comply, if any.
5 The Port has never cited a single case for the
6 proposition that these damages are consequential
7 damages, and the sovereign immunity statute itself in
8 no way supports this proposition.
9 The element of damages itself in
10 Question No. 3, which is taken from the sovereign
11 immunity statute, Section 271.153, provides that the
12 increased cost to perform the work must be a direct
13 result of Port-caused delays, which shows they must be
14 direct rather than consequential.
15 Moreover, damages resulting from
16 owner-caused delays are necessarily those which
17 naturally and necessarily flow from a wrongful act and
18 are presumed to have been foreseen or contemplated by
19 the party as a consequence of his wrongful act, and
20 thus are not consequential damages.
21 That's the Anderson Development Corp.
22 case versus Coastal States Crude Gathering, 543 S.W.2d
23 402, pinpoint 404 to 405.
24 Zachry objects to the instruction that
25 you are instructed that you may only consider 5.41,
60
Plaintiff's Objections to the Court's Charge
1 5.42 and 5.52 to the extent it imposes requirements
2 consistent with Section 5.41 only in assessing a
3 party's state of mind.
4 This instruction is an instruction that
5 was originally made as a limiting instruction to limit
6 the scope of the admissibility of evidence of these
7 clauses. The purpose of the jury charge is to inform
8 the jury of the controlling law.
9 As the pattern jury charge makes clear,
10 the Court must instruct the jury as to its resolution
11 of the meaning of any disputed contract provisions.
12 This is Texas Pattern Jury Charge Section 101.7 in the
13 comments.
14 Nothing authorizes the Court to point
15 out the significance of a particular type of evidence
16 in the jury charge.
17 By giving this instruction, the Court
18 comments on the weight of the evidence and nudges the
19 jury towards the Port's theory.
20 In other words, by giving this
21 instruction, the Court embraces the Port's theory that
22 these clauses can somehow be relevant to Zachry's, or
23 for that matter, the Port's state of mind after the
24 rejection of the frozen cutoff wall occurred on October
25 11, 2009 (sic).
61
Plaintiff's Objections to the Court's Charge
1 Even though the Court has held that
2 these provisions are inapplicable to bar Zachry's
3 damage claim.
4 The Court suggests to the jury that
5 these provisions are relevant to the party's state of
6 mind and cause undue attention to the Port's theory of
7 the case.
8 Furthermore, the instruction is
9 erroneous. The Port's or Zachry's subjective state of
10 mind is irrelevant where, as here, the Court has
11 construed these clauses as a matter of law.
12 Parole evidence of the party's belief
13 about the meaning of the clauses should not be admitted
14 to vary the Court's construction of these clauses. The
15 instruction simply allows the Port to evade the Court's
16 legal rulings about the inapplicability of these
17 clauses.
18 Zachry objects to the inclusion in the
19 definition of active interference of the sentence,
20 Active interference requires more than a simple
21 mistake, error in judgment, lack of total effort or
22 lack of complete diligence.
23 This instruction is repetitive of the
24 first sentence, which states that active interference
25 means affirmative, willful action that unreasonably
62
Plaintiff's Objections to the Court's Charge
1 interferes with the other party's compliance with the
2 contract.
3 The second sentence adds nothing as all
4 these matters are covered by the definition of active
5 interference in the first sentence. The addition of
6 the second sentence simply emphasizes the Port's
7 claimed theory of the case to the jury, and is
8 therefore a comment on the weight of the evidence and a
9 nudging instruction designed to encourage the jury to
10 adopt the Port's view of the facts.
11 Under Texas charge practice, the charge
12 may not define a term like active interference in more
13 general terms and then list specific examples of what
14 the Port believes to be active interference. This is
15 akin to marshaling one's evidence in the jury charge.
16 Zachary objects to the inclusion of the
17 Port's mitigation defense as well. As the Texas
18 Supreme Court has held, under mitigation principles,
19 the long-standing law of this state requires a claimant
20 to mitigate damages if it can do so with trifling
21 expense or reasonable exertions.
22 That's the Gunn Infiniti versus O'Byrne
23 case, 996 S.W.2d 854, Page 857 for the pinpoint.
24 As a result, the jury should be
25 instructed that a party is only required to avoid
63
Plaintiff's Objections to the Court's Charge
1 damages if it can do so with trifling expense or
2 reasonable exertions.
3 Zachry will separately request its
4 Proposed Instruction No. 10 on this issue.
5 Zachry also objects to the definition of
6 bad faith. It imposes too high of a burden. Rather,
7 bad faith in the contract context is dishonesty of
8 believe or purpose.
9 This is from the Restatement Second of
10 Torts Section 205, comment d and also appears in
11 Black's Law Dictionary 8th edition, Page 149.
12 Zachry will request its Proposed
13 Instruction No. 11 on this issue.
14 Question Number 4, percentage delay and
15 hindrance damages. Zachry objects to Question No. 4,
16 which asks about the percentage of Zachry's damages
17 that were due to delay.
18 The Port has lost its argument that the
19 no damages for delay clause is a complete bar to
20 Zachry's damages. It is not entitled to a question
21 inquiring as to the amount of delay damages just in
22 case they lose at trial but win on appeal.
23 There are myriad alternative issues that
24 the parties may be curious about, that does not mean
25 they are submitted. Only issues that are raised by the
64
Plaintiff's Objections to the Court's Charge
1 written pleadings and the evidence, and that's quote,
2 are submitted. That's Texas Rule of Civil Procedure
3 278.
4 Furthermore, only controlling issues
5 that are essential to a right or action or defense are
6 submitted. That's Paul Mueller Company versus Alcon
7 Labs, 993 S.W.2d 851, Page 854.
8 A controlling issue is one that requires
9 a factual determination to render a judgment in the
10 case. And that's also supported by Rule 277, which
11 provides that the Court shall submit such instructions
12 and definitions as shall be proper to enable the jury
13 to render a verdict. Question No. 4 is not such an
14 issue.
15 Zachry also objects to Question No. 4
16 because it refers to delay or -- delay and hindrance
17 damages. Section 508 of the general conditions bars
18 delay or hindrance damages.
19 You know what, this is one that we might
20 want to talk about. I forgot about that.
21 So to the extent the instruction is
22 given at all, it should track Section 5.08. That is
23 also how it is referred to in Question No. 3.
24 I'm not sure if that was intentional.
25 MS. YEATES: Right. Your Honor, we
65
Plaintiff's Objections to the Court's Charge
1 would agree to change that. On Question No. 4 it
2 should say delay or hindrance damages. Could we change
3 that?
4 THE COURT: One moment.
5 All right. I am changing that to delay
6 or hindrance. Question 4.
7 Okay. How much more?
8 MS. GREER: I can talk faster. About
9 three pages.
10 THE COURT: All right.
11 MS. GREER: She had 25.
12 Okay. Question No. 5 on reimbursable
13 costs. Okay. Zachry also objects to Question No. 5,
14 which asks what amount of damages the jury found in
15 Question No. 3 were for New Zachry's reimbursable
16 costs.
17 Again, the Port's not entitled to a
18 question on this issue just in case they lose at trial
19 but win on appeal.
20 The Court has held that Zachry is
21 entitled to recover New Zachry's reimbursable costs as
22 a matter of law. Accordingly, the amount of this cost
23 is not a controlling issue that should be submitted.
24 Question No. 6, excuse for the Port's
25 failure to comply. The affidavits and partial releases
66
Plaintiff's Objections to the Court's Charge
1 of lien are unambiguously only lien releases, and so
2 Zachry objects that the issue should not be submitted
3 at all.
4 Furthermore, to the extent that the
5 Court concludes that the partial lien releases are
6 ambiguous and that there are other reasonable
7 constructions of the partial lien releases besides
8 Zachry's construction, which Zachry vigorously
9 disputes, then the interpretation of the releases the
10 Port previously advanced is at least one reasonable
11 construction.
12 And we dispute it's reasonable, but if
13 you think that there's more than our instruction, then
14 it's at least one reasonable construction.
15 In the Port Authority's motion for
16 partial summary judgment based on partial release
17 executed by Zachry, the Port sought only partial
18 summary judgment to the extent of the damages released.
19 And contended that the lien releases
20 were only partial releases of liens. If the
21 interpretation of the partial lien releases is
22 submitted to the jury at all, the jury should be given
23 the opportunity to make this finding.
24 As Question No. 6 is drafted, the jury
25 can only conclude that the release was a complete
67
Plaintiff's Objections to the Court's Charge
1 release of Zachry's claim or not a release at all. The
2 jury's improperly precluded from finding that it is a
3 partial release and the amount of damages it releases.
4 Question No. 7, Port's defense of
5 fraudulent inducement to Change Order 4. The
6 instruction regarding fraud is erroneous because it
7 fails to require that the reliance be justifiable.
8 It's the Ernst & Young versus Pacific Mutual Life case,
9 551 S.W.3d 573, 577, Texas Supreme Court.
10 The instruction regarding fraud should
11 not be submitted because there is no evidence that
12 Change Order 4 was fraudulently induced because the
13 Port knew the truth, that Zachry was behind on the
14 schedule.
15 Furthermore, because the Port knew the
16 truth, it could not have relied actually or
17 justifiably.
18 Legal bars also preclude the assertion
19 of the Port's defense of fraud, including that the Port
20 ratified the fraud, the merger clause bars any reliance
21 by the Port as a matter of law, and the election of
22 remedies doctrine bars the Defense because the Port
23 retains valuable benefits under the contract.
24 The submission of the fraud question is
25 extreme -- and we've moved for directed verdict, so you
68
Plaintiff's Objections to the Court's Charge
1 have those arguments but -- the submission of the fraud
2 question is extremely prejudicial to Zachry because its
3 mere presence in the jury charge suggests to the jury
4 that the Court believes there's some evidence that
5 Zachry committed fraud or some potential basis on which
6 the Port could --
7 THE REPORTER: Some what?
8 MS. GREER: I'm sorry. Potential basis.
9 THE COURT: Potential basis.
10 MS. GREER: On which the Port could
11 recover for fraud against Zachry. Such a perception
12 that Zachry could be a fraudfeasor is highly damaging
13 and --
14 THE COURT: Fraudfeasor?
15 MS. GREER: Fraudfeasor. Highly
16 damaging and an improper comment on the weight of the
17 evidence.
18 Getting close.
19 THE COURT: Is that a real word?
20 MS. GREER: Question No. 8 --
21 (Laughing)
22 MS. GREER: Zachry's -- Question No. 8,
23 Zachry's defenses to the Port's --
24 THE COURT: Wait. In Ms. Greer's
25 defense, she probably got about a half an hour of sleep
69
Plaintiff's Objections to the Court's Charge
1 last night.
2 MS. GREER: You nailed it.
3 Okay. Question No. 8, Zachry's defenses
4 to the Port's fraudulent inducement defense. Zachry
5 contends that the Port's fraudulent inducement defense
6 is barred as a matter of law under the election of
7 remedies doctrine and therefore should not be
8 submitted.
9 However, to the extent that the Court
10 determines that it is not an issue, that it can be
11 decided as a matter of law, then Zachry is entitled to
12 the submission of its election of remedies defense.
13 Zachry objects to its omission.
14 Zachry will separately request its
15 Proposed Instruction No. 12 on this issue.
16 Question No. 9, withholding of the
17 $600,000. The instruction regarding the withholding of
18 the $600,000 in payment from Zachry is erroneous
19 because it is incomplete.
20 The instruction fails to give the jury
21 any guidance as to the basis on which the Port was
22 purportedly entitled to withhold the $600,000. It does
23 not direct the jury to the withholding clause that the
24 question is apparently referring to, Section 6.05.
25 It does not direct the jury to the
70
Plaintiff's Objections to the Court's Charge
1 obligation under the contract that Zachry purportedly
2 breached.
3 Zachry will separately request its
4 Proposed Instruction No. 13 on this issue.
5 Question No. 9 also erroneously places
6 the burden of proof on Zachry. The burden of proving
7 withholding, like offset, is on the party asserting it.
8 That's the U.S. versus Use and Benefit
9 of D'Agostino Excavators, Inc., versus Heyward-Robinson
10 Company case that we've previously given you. 430 F2d
11 1077, 1085 to 86, out of the 2nd Circuit.
12 And by analogy, offset is an affirmative
13 defense under the Brown versus American Transfer case,
14 601 S.W.2d 931, pinpoint 936.
15 And also by analogy, proof of the right
16 to withhold liquidated damages is an affirmative
17 defense under the Borders versus KRLB case, 727 S.W.2d
18 357, Page 360 pinpoint.
19 It is a matter of avoidance under Rule
20 94. Consistent with this law, Section 6.05
21 and likewise, Section 6.7 by their plain terms impose
22 the burden of proof on the Port.
23 Indeed, Texas law provides that, as I
24 stated before under the Howell versus Kelly case and
25 the Johnson versus McKinney American case, the burden
71
Plaintiff's Objections to the Court's Charge
1 of proof on the happening of a contingency that would
2 discharge parties from liability is on the party
3 seeking to avoid liability.
4 Indeed, the Port -- I'm almost done --
5 indeed, the Port has previously and repeatedly taken
6 the position that it has the burden of proof on
7 withholding and offset.
8 And we've cited you the places where
9 they've done that in Plaintiff Zachry Construction
10 Corporation's motion to strike the Port's
11 late-disclosed 10.5 million-dollar offset and
12 withholding defenses and to exclude any evidence in
13 support thereof at Pages 23 through 24 and Footnote 16.
14 Question No. 11, excuse for the Port's
15 failure to pay $600,000. The affidavits and partial
16 releases of lien are unambiguously only lien
17 releases --
18 THE COURT: Slow down. Slow down.
19 MS. GREER: -- and so the issue should
20 not be submitted at all.
21 Question No. 12, failure to comply by
22 withholding the $2.36 million in liquidated damages.
23 Question No. 12.A, point, little Roman
24 II should ask the jury what sum of money, if paid now
25 in cash, would fairly and reasonably compensate the
72
Plaintiff's Objections to the Court's Charge
1 Port for its damages, if any, that resulted from
2 Zachry's failure to comply that you find answer to
3 Question No. 12.A?
4 The question should then define the
5 element of damages to be considered as the reasonable
6 and necessary cost of repairing the wharf fenders.
7 Otherwise, the jury is receiving no guidance as to what
8 it is they're supposed to determine or how they're
9 supposed to quantify damages.
10 Zachry will separately submit its
11 Proposed Instruction No. 14 on this issue.
12 Question No. 13, attorneys' fees.
13 Attorneys' fees should not be submitted at all because
14 Zachry, as a matter of law, will prevail on its breach
15 of contract claim because the releases are
16 unambiguously lien releases.
17 Accordingly, the Port at most could
18 deduct the sum for the wharf fenders, approximately, 1
19 million from the $2.36 million in damages. Although
20 Zachry disputes that they should be deducted at all.
21 Accordingly, regardless, of what happens
22 on the remaining breach of contract theories, Zachry
23 will have a net recovery on its breach of contract
24 claim, and as a matter of law, the Port cannot be the
25 prevailing party.
73
Plaintiff's Objections to the Court's Charge
1 And for the foregoing reasons, Zachry
2 objects to the Court's charge and would like a ruling
3 on our objections.
4 COURT'S RULING
5 THE COURT: Okay. Then aside from the
6 couple of small changes we made as we went, your motion
7 is denied.
8 MS. GREER: And I'm offering you the --
9 THE COURT: Or your -- excuse me.
10 MS. GREER: -- requested instructions,
11 and if they are refused, would you mark them refused?
12 THE COURT: Yes. And I will make them
13 part of the record and ask that the clerk provide
14 copies.
15 MS. GREER: Thank you very much,
16 Your Honor.
17 MS. YEATES: Thank you, Your Honor.
18 THE COURT: And for the record,
19 according to Black's Law Dictionary fraudfeasor is in
20 fact a word.
21 MS. GREER: I've heard it before.
22 THE COURT: All right. So now we are up
23 to -- Carolyn, you probably need a break.
24 Okay. I'm going to print out the jury
25 charge then and we'll get copies made for the jury.
TAB 42
Texas Local Government Code §271.151 through §271.160
(Vernon 2005)
§ 271.121 PROPERTY ACQUiSITION, SALE, OR LEASE
Title 8
Research References
Treatises and Practice Aids
Brooks, 23 Tex. Prac. Series§ 12.14A, Com-
petitive Bidding-"Best Value" Bidding.
[Sections 2 71.122 to 271.150 reserved for expansion]
SUBCHAPTER I. ADJUDICATION OF CLAIMS ARISING
UNDER WRITTEN CONTRACTS WITH LOCAL
GOVERNMENTAL ENTITIES
§ 2 71.151. Definitions
In this subchapter:
(1) "Adjudication" of a claim means the bringing of a civil suit and
prosecution to final judgment in county or state court and includes the
bringing of an authorized arbitration proceeding and prosecution to final
resolution in accordance with any mandatory procedures established in the
contract subject to this subchapter for the arbitration proceedings.
(2) "Contract subject to this subchapter" means a written contract stating
the essential terms of the agreement for providing goods or services to the
local governmental entity that is properly executed on behalf of the local
governmental entity.
(3) "Local governmental entity" means a political subdivision of this state,
other than a county or a unit of state government, as that term is defined by
Section 2260.001, Government Code, including a:
(A) municipality;
(B) public school district and junior college district; and
(C) special-purpose district or authority, including any levee improve-
ment district, drainage district, irrigation district, water improvement
district, water control and improvement district, water control and preser-
vation district, freshwater supply district, navigation district, conservation
and reclamation district, soil conservation district, communication district,
public health district, emergency service organization, and river authority.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
§ 271.152. Waiver ofimmunity to Suit for Certain Claims
A local governmental entity that is authorized by statute or the constitution to
enter into a contract and that enters into a contract subject to this subchapter
waives sovereign immunity to suit for the purpose of adjudicating a claim for
breach of the contract, subject to the terms and conditions of this subchapter.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
548
PURCHASING & CONTRACTING AUTHORITY § 271.153
Ch. 271
Historical and Statutory Notes
Section 2 of Acts 2005, 79th Leg., ch. 604 not been waived with respect to the claim be-
provides: fore the effective date of this Act. A claim that
arises under a contract executed before the ef-
"Sections 271.152, 271.153, and 271.154, Lo- fective date of this Act and with respect to
cal Government Code, as added by this Act, which sovereign immunity has been waived is
apply to a claim that arises under a contract governed by the law in effect on the date the
executed before the effective date [Sept. 1, contract was executed, and the former law is
2005] of this Act only if sovereign immunity has continued in effect for that purpose."
Library References
Municipal Corporations 0::>254.
Westlaw Topic No. 268.
C.J.S. Municipal Corporations § 946.
§ 271.153. Limitations on Adjudication Awards
(a) The total amount of money awarded in an adjudication brought against a
local governmental entity for breach of a contract subject to this subchapter is
limited to the following:
(1) the balance due and owed by the local governmental entity under the
contract as it may have been amended, including any amount owed as
compensation for the increased cost to perform the work as a direct result of
owner-caused delays or acceleration;
(2) the amount owed for change orders or additional work the contractor
is directed to perform by a local governmental entity in connection with the
contract; and
(3) interest as allowed by law.
(b) Damages awarded in an adjudication brought against a local governmen-
tal entity arising under a contract subject to this subchapter may not include:
(1) consequential damages, except as expressly allowed under Subsection
(a)(l );
(2) exemplary damages; or
(3) damages for unabsorbed home office overhead.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
Historical and Statutory Notes
Section 2 of Acts 2005, 79th Leg., ch. 604 not been waived with respect to the claim be-
provides: fore the effective date of this Act. A claim that
arises under a contract executed before the ef-
"Sections 271.152, 271.153, and 271.154, Lo- fective date of this Act and with respect to
cal Government Code, as added by this Act, which sovereign immunity has been waived is
apply to a claim that arises under a contract governed by the law in effect on the date the
executed before the effective date [Sept. 1, contract was executed, and the former law is
2005] of this Act only if sovereign immunity has continued in effect for that purpose."
Library References
Municipal Corporations 0::>254.
Westlaw Topic No. 268.
C.J.S. Municipal Corporations § 946.
549
§ 271.154 PROPERTY ACQUISITION, SALE, OR LEASE
Title 8
§ 2 71.15 4. Contractual Adjudication Procedures Enforceable
Adjudication procedures, including requirements for serving notices or en-
gaging in alternative dispute resolution proceedings before bringing a suit or an
arbitration proceeding, that are stated in the contract subject to this subchapter
or that are established by the local governmental entity and expressly incorpo-
rated into the contract or incorporated by reference are enforceable except to
the extent those procedures conflict with the terms of this subchapter.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
Historical and Statutory Notes
Section 2 of Acts 2005, 79th Leg., ch. 604 not been waived with respect to the claim . b.e-
provides: fore the effective date of this Act. A claim that
arises under a contract executed before the ef-
"Sections 271.152, 271.153, and 271.154, Lo- fective date of this Act and with respect to
cal Government Code, as addeci by this Act, which sovereign immunity .~s been waived is
apply to a claim that arises under a contract governed by the law in effecCoii the daie-tlie
executed before the effective date [Sept. 1, contract was executed, and the former law is
2005] of th.!!;.~_C:L~l}h~_if_§g"er.ejgn immunity has_ continued in effect for that purpose."
Library References
Municipal Corporations ~254.
Westlaw Topic No. 268.
C.J.S. Municipal Corporations§ 946.
§ 271.155. No Waiver of Other Defenses
This subchapter does not waive a defense or a limitation on damages
available to a party to a contract, other than a bar against suit based on
sovereign immunity.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
§ 271.156. No Waiver oflmmunity to Suit in Federal Court
This subchapter does not waive sovereign immunity to suit in federal court.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
§ 2 71.15 7. No Waiver of Immunity to Suit for Tort Liability
This subchapter does not waive sovereign immunity to suit for a cause of
action for a negligent or intentional tort.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
Library References
Municipal Corporations ~723.
Westlaw Topic No. 268.
C.J.S. Municipal Corporations §§ 661 to 663.
550
PURCHASING & CONTRACTING AUTHORITY § 271.901
Ch. 271
§ 271.158. NoGrantoflmmunitytoSuit
Nothing in this subchapter shall constitute a grant of immunity to suit to a
local governmental entity.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
§ 271.159. No Recovery of Attorney's Fees
Attorney's fees incurred by a local governmental entity or any other party in
the adjudication of a claim by or against a local governmental entity shall not
be awarded to any party in the adjudication unless the local governmental
entity has entered into a written agreement that expressly authorizes the
prevailing party in the adjudication to recover its reasonable and necessary
attorney's fees by specific reference to this section.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
Library References
Municipal Corporations G:o>254.
Westlaw Topic No. 268.
C.J.S. Municipal Corporations§ 946.
§ 271.160. Joint Enterprise
A contract entered into by a local government entity is not a joint enterprise
for liability purposes.
Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.
[Sections 2 71.161 to 2 71.900 reserved for expansion]
SUBCHAPTER Z. MISCELLANEOUS PROVISIONS
§ 271.901. Procedure for Awarding Contract if Municipality or District
Receives Identical Bids
(a) If a municipality or district is required to accept bids on a contract and
receives two or more bids from responsible bidders that are identical, in nature
and amount, as the lowest and best bids, the governing body of the municipality
or district shall enter into a contract with only one of those bidders and must
reject all other bids.
(b) If only one of the bidders submitting identical bids is a resident of the
municipality or district, the municipality or district must select that bidder. If
two or more of the bidders submitting identical bids are residents of the
municipality or district, the municipality or district must select one of those
bidders by the casting of lots. In all other cases, the municipality or district
must select from the identical bids by the casting of lots.
(c) The casting of lots must be in a manner prescribed by the mayor of the
municipality or the governing body of the district and must be conducted in the
551
TAB 43
Texas Civil Practices and Remedies Code §16.071
V.T.C.A., Civil Practice & Remedies Code § 16.071 Page 1
Effective:[See Text Amendments]
Vernon's Texas Statutes and Codes Annotated Currentness
Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle B. Trial Matters
Chapter 16. Limitations
Subchapter D. Miscellaneous Provisions
§ 16.071. Notice Requirements
(a) A contract stipulation that requires a claimant to give notice of a claim for damages as a condition precedent to the
right to sue on the contract is not valid unless the stipulation is reasonable. A stipulation that requires notification
within less than 90 days is void.
(b) If notice is required, the claimant may notify any convenient agent of the company that requires the notice.
(c) A contract stipulation between the operator of a railroad, street railway, or interurban railroad and an employee or
servant of the operator is void if it requires as a condition precedent to liability:
(1) the employee or servant to notify the system of a claim for damages for personal injury caused by negligence; or
(2) the spouse, parent, or child of a deceased employee or servant to notify the system of a claim of death caused by
negligence.
(d) This section applies to a contract between a federal prime contractor and a subcontractor, except that the notice
period stipulated in the subcontract may be for a period not less than the period stipulated in the prime contract, minus
seven days.
(e) In a suit covered by this section or Section 16.070, it is presumed that any required notice has been given unless
lack of notice is specifically pleaded under oath.
(f) This section does not apply to a contract relating to the sale or purchase of a business entity if a party to the contract
pays or receives or is obligated to pay or receive consideration under the contract having an aggregate value of not less
than $500,000.
CREDIT(S)
© 2013 Thomson Reuters. No Claim to Orig. US Gov. Works.
V.T.C.A., Civil Practice & Remedies Code § 16.071 Page 2
Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985. Amended by Acts 1991, 72nd Leg., ch. 840, § 3, eff. Aug. 26,
1991.
Current through Chapters effective immediately through Chapter 65 of the 2013 Regular Session of the 83rd Legis-
lature
(c) 2013 Thomson Reuters. No Claim to Orig. US Gov. Works.
END OF DOCUMENT
© 2013 Thomson Reuters. No Claim to Orig. US Gov. Works.