Construction - Creative Settlement of Hotly Contested Defective Work Claim

Our client was the painting contractor under a multi-prime delivery system for the construction of an athletic facility at a large Midwestern university. The client was owed several hundred thousand dollars in contract money and extras, and after negotiations failed, filed suit. The university contended that there were significant paint failures, and asserted a multi-million dollar counterclaim. Although we were reasonably confident about our position, we also recognized that the cost of proceeding to trial, when combined with the risk of an adverse judgment, made this case an obvious candidate for settlement. But we needed to decide how to position the case for settlement, particularly in light of the fact that some of the paint was in fact failing. So we decided to take a very aggressive posture in discovery, hoping that we could quickly and efficiently move to settlement discussions. Our focus during depositions was to essentially do a "beat down" on all critical issues--for example, we had compelling evidence that the failures were associated with improper design by the university's architect and improper material fabrication by another prime contractor; both of these points were developed during our depositions of the other side. We also attacked the university's claimed damages, and were able to show that they were wildly overstated. We figured that if we made these points during discovery, the university would reassess its own position, and might be interested in discussing a reasonable settlement; at the very least, we were developing compelling advocacy for trial.

When depositions were completed, several things became clear. First, the university was willing to talk about a reasonable settlement. Second, despite the appearance of the paint on this job, the university had worked with our client on other jobs, believed the client did excellent work, and in fact was interested in having our client perform the necessary remedial work.

The upshot was that we entered into a settlement agreement where the client was paid its outstanding contract balance and a substantial portion of its extras. Moreover, the client and university agreed on a significant change order by which the client will perform all of the necessary remedial work.

So we went from a hotly contested case involving allegations of defective workmanship to the client receiving a change order to perform the remedial work. It was an "out of the box settlement", and was probably the only way this dispute could have been resolved short of going to trial. The settlement took a tremendous amount of hard work, and both parties were forced to put aside their hard feelings to come up with a resolution that was ultimately fair to all.

It is not often that we will see this sort of settlement. Cases sometimes need to be tried. But we try to analyze each case on its own terms and come up with the most logical resolution, taking into account the dynamics of that case. From the outset, we recognized that taking an aggressive approach to depositions and essentially "showing all our cards" was the most likely way to achieve the client's goals. And the settlement agreement demonstrated that we chose the correct path.