The award to the veteran Houston contractor includes $2.2 million in compensatory damages and $6.6 in punitive damages. Head has ruled that Safety Steel Service "failed to meet key deadlines and commitments on three major construction projects" in and around Corpus Christi, TX, in 1995 and 1996. He has faulted Safety Steel for "the admission of breach of contract, with clear evidence of misrepresentation, deceptive trade practices, and fraud." Safety Steel is a division of CMC Steel Fabricators and its parent, Commercial Metals of Dallas.
Harrop had completed the projects - four to five months late - but the effort has put the company out of business. "Harrop expended all its resources to overcome the problems and complete the projects," David Peden, attorney for Harrop, told GlobeSt.com. "At that point, Harrop had lost its bondability and didn't have the capital to go on. But this award could put them back in business."
Will it set a precedent for other disputes between contractors and subcontractors? Peden thinks that is "certainly a possibility. Lawyers try what we tried all the time without success. We succeeded because our facts were very strong." In other words, this case could generate lawsuits previously thought doomed for failure.
In 1994, Harrop had won two time-critical construction contracts with the US Navy to build the Advanced Firefighting Training Facility and the Fleet Mind Warfare Center at the Naval Air Station in Ingleside, TX. Concurrently, Harrop had signed a contract with Texas A&M University-Corpus Christi to build the Center for Environmental Science Studies office, laboratory and boat storage building, plus a vehicle maintenance facility. The three projects totaled $22 million.
Harrop had hired Safety Steel to deliver specified steel for all three projects. Scheduled completion dates for the projects, as a result of late and incorrect steel deliveries, had not been met.
"The evidence proved that Safety Steel knowingly misrepresented itself and its production capabilities to Harrop, saying that they could handle projects of this magnitude on time," says Peden, a partner in the law firm of Greenberg Peden P.C. in Houston, who had represented Harrop. "From the beginning, they concealed important information about their production capabilities. They concealed from Harrop that their facilities were already committed to a huge project in Michigan and that they would not be able to complete Harrop's projects on time. Instead, they told Harrop that their shop was empty."
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