Plan Sheets + Red Lines – August 2019

In Dallas, a Court Case

In June, a case involving a very big engineering firm was moved from state court in Dallas County to US District Court for the Northern District of Texas, Dallas Division. The case, which originated in 2017, has the Big Firm facing a number of allegations, including racial discrimination, retaliation, fraudulent inducement, and breach of contract, from a former joint venture partner, which we’ll call the Little Firm. The Big Firm has denied the claims. Moreover, the defendant asserts that the plaintiff in the case, the Little Firm, sealed its own doom by repeatedly submitting problematic invoices, and that it repeatedly breached contract protocol by communicating directly with the joint venture’s client, the Texas Department of Transportation.

“Plaintiff’s alleged losses and damages, if any, are the result of, and directly related to, plaintiff’s own conduct, actions and/or failure to act, and not of the Defendant’s conduct, actions or failure to act. Plaintiff’s own acts or omissions were the sole proximate cause or a proximate cause of their damages, if any,” the Big Firm said in one of its filings.

The case was moved from state to federal court because the Little Firm filed a third amended state petition in May adding a new plaintiff, the Little Firm’s owner, and new allegations tied to that person as an individual. The Little Firm’s founder was not party to the original complaint, which was filed by the firm itself. Nonetheless, the Little Firm and its founder are seeking monetary damages of more than $1 million, in addition to punitive, compensatory, and other damages. Trial is currently set for January 2021 at the federal building in Dallas.

So, let’s go back to the beginning. It’s 2015, and the Big Firm, the Little Firm, and a third firm formed a joint venture before bidding on and winning a five-year, $20 million contract with TxDOT, according to court documents. Under the terms of the agreement, as the joint venture’s sponsor, The Big Firm was supposed to get 80 percent of the contract work, and the two smaller firms were supposed to get 10 percent each. But in the court filings, the Little Firm claims that it and the other small firm, both certified Disadvantaged Business Enterprises, were essentially cut out of the work, with the Big Firm getting the lion’s share of TxDOT payouts. According to the complaint, from the beginning of the contract the Big Firm began “assigning the work to itself and some of the subcontractors in excess of the contractually limited entitlement of 80%.”

On top of the alleged problems with the contract and billing, the plaintiff also contends that its minority employees were “subjected to racially disparate treatment/harassment” from the Big Firm’s employees, with instances including denial of access to equipment and office space, and rude comments. This treatment of its employees, the Little Firm claims, only heightened the frequency of the complaints it made about the Big Firm. According to court filings, the Big Firm finally terminated the Little Firm from the joint venture in summer 2017. A few weeks later, the Little Firm sued for breach of contract, and amended the complaint a few months later to include the allegations of racial discrimination and retaliation. A year after the initial filing, the complaint was amended a second time, and included the Little Firm’s take on the state of affairs: “No non-minority company was similarly mistreated by [the Big Firm].”

In subsequent filings, the Big Firm tells a completely different story. In a sworn affidavit from one of the firm’s division vice presidents, the employee says the Little Firm started out, and remained on, the wrong foot. Shoddy invoices, billing for overhead instead of engineering services, and going around the joint venture’s sponsor – the Big Firm – to communicate directly with TxDOT officials, were the norm for the Little Firm, according to court documents. And it’s that behavior, not the minority status of the Little Firm and its owner, that led to the sacking in 2017. Furthermore, the Big Firm says it acted in “good faith, without any improper motive, purpose or means, and/or without any hatred, ill will, malice, intent to injure, or reckless disregard of the rights of the plaintiffs.”

Some joint ventures work out, and some end up in court. As we all know, partnerships can “go south” at anytime for any reason. Obviously, this case is a bit different. You have a really Big Firm, one of the largest DOTs in the United States, and a Little Firm that claims it’s been wronged. This case promises drama. It will eventually go to trial and a jury will decide who’s right and who’s wrong, or if it was all just one big misunderstanding. On the other hand, this case could get settled long before jury selection begins, avoiding a messy public spectacle for a lot of people. Our bet is on the latter.          

If you know of an interesting or off-kilter story taking place in the AEC industry, please contact C+S at rmassey@zweiggroup.com.