Recent Court Order Excluding Expert Testimony Offers Useful Reminders and Lessons for Construction Litigants

Amandeep S. Kahlon | Bradley Arant Boult Cummings

Construction claims often feature supporting testimony from design and/or scheduling experts, and exclusion of that testimony either by disqualification of the expert or a finding that the testimony is otherwise inadmissible can prove fatal to your claim or defense. States may vary in their requirements for admissibility of expert evidence, but most states follow some variant of Federal Rule of Evidence 702. Rule 702 provides that an expert may testify in the form of an opinion or otherwise if:

(a) The expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) The testimony is based on sufficient facts or data;
(c) The testimony is the product of reliable principles and methods; and
(d) The expert has reliably applied the principles and methods to the facts of the case.

The recent district court order in American Contractors Indemnity Co. v. Reflectech, Inc. granting a motion to strike an expert demonstrates the importance of satisfying the requirements for admission of expert evidence under Rule 702 and other like statutes. In that case, a surety sought indemnity for payment on bonds issued to a subcontractor that defaulted on a roofing subcontract. The surety investigated the general contractor’s claim for default against the subcontractor, settled with the general contractor for approximately $400,000, and then filed suit against the subcontractor for breach of their general indemnity agreement.

The defendant subcontractor proffered an expert to opine on the adequacy of the surety’s investigation and the appropriateness of payment of the general contractor’s bond claims. In moving to strike this expert, the surety argued (1) the expert should be disqualified due to lack of experience, and (2) the expert testimony was inadmissible because it was not based on sufficient facts or data as required under Rule 702(b). The court focused on the second prong of the surety’s argument in granting the motion to strike.  The court found that the expert’s opinion was not based on sufficient facts or data because of several admissions from the expert during his deposition. Specifically, the surety persuaded the court with the following facts derived from the expert’s deposition testimony:

  • The expert admitted he never visited the project site and interviewed only one individual, the owner of the subcontractor, before drafting his expert report;
  • The expert admitted he never reviewed the surety’s records regarding the general contractor’s claim and did not know what information the surety’s investigation uncovered because that information was never provided to him;
  • The expert testified that the surety’s records would have been helpful in forming his expert opinion (the subcontractor was unable to provide any explanation for failure to provide this material to the expert when it had been produced by the surety); and
  • The expert stated that he did not review the settlement portion of the general indemnity agreement, which he had opined was unconscionable.

The facts relied upon by the court highlight the importance of selecting and managing experts in construction disputes. When selecting an expert, a party should be mindful of the expert’s prior testifying experience and his or her approach to investigating a claim or subject area for which an opinion is required. A party should also ensure its expert receives and reviews all the documents and information necessary to formulate his or her opinion. To be successful, this process requires an active dialogue with the expert throughout the course of a matter.  For example, document productions from other parties and deposition testimony from witnesses will uncover additional information an expert may need to support his or her opinions. Consistent engagement with an expert will help avoid outcomes such as that encountered by the roofing subcontractor in this case and should help a party better develop its claims or defenses as a matter proceeds.

Contractor Learns You Need an Expert to Join “Battle of the Experts”

Matthew DeVries | Best Practices Construction Law

It kind of goes without saying, but you should probably bring your expert to a dispute if there is going to be a battle of the experts. One contractor recently learned this lesson to the tune of $65,000.

In Appeal of BES Construction, LLC, ASBCA 60608 (Oct. 23, 2019), the contracting officer awarded the contractor approximately $135,000 in delay damages for a 172 days in compensable delays on a renovation project on a base in South Carolina.  The contractor appealed the decision, seeking approximately $609,000 in delay damages. On appeal, the government presented expert testimony establishing that the contractor was only entitled to 25 days of delay damages or approximately $69,000.  Inexplicably, the contractor did not present any expert testimony and relied solely on the opinion of the owner of the company.

Rejecting the contractor’s claim on appeal, the Board reasoned:

[T]o prevail on its claims for additional costs allegedly incurred because of the late completion of a fixed-price government construction contract, the contractor must show that the government’s actions affected activities on the critical path, and where the delays of the government and the contractor are concurrent, the contractor must establish its delay apart from that attributable to the government. BES points to no such critical path analysis of its own, even though it concedes that “[t]he project encountered delays that are arguably attributable to both BES and the government”. And although BES relies heavily on the contracting officer’s decision to justify an award, our review is de novo, and the contracting officer’s award is not a floor, because once an action is brought following a contracting officer’s decision, the parties start before the Board with a clean slate. Nevertheless, we view the opinion of the government’s expert as a concession by the government that BES is owed $69,483.88 in delay costs.

Ultimately, the Board viewed this case as involving “particular and perhaps unusual circumstances” and credited the expert testimony of the government’s witness–the only scheduling expert witness in the case..

So what? This case presents two good lessons for contractors.  First, if you find that the contracting officer’s decision appears to be well reasoned, you should carefully review every detail of your claim before pursuing an appeal. Remember, in these circumstances the appeal is de novo, which means it is a clean slate on the proof. Second, and more importantly, if you are going to pursue a claim involving delay damages, the burden will ultimately be in your hands to show how the delays affected the critical path, that the delays were not concurrent with contractor-related delays, and that you have an expert to support your claims.  In other words, don’t show up to a battle of the experts without an expert.

Guessing as to your Construction Damages is not the Best Approach

David Adelstein | Florida Construction Legal Updates | August 24, 2019

Arbitrarily guessing as to your construction damages is NOT the best approach.  Sure, experts can be costly.  No doubt about it.  Having an expert versus guessing as to your construction damages caused by another party’s breach of contract is a no brainer.  Engage an expert or, at a minimum, be in a position to competently testify as to your damages caused by another party’s breach of contract.  Otherwise, the guessing is not going to get you very far as a concrete subcontractor found out in Patrick Concrete Constructors, Inc. v. Layne Christensen Co., 2018 WL 6528485 (W.D. New York 2018) where the subcontractor could not competently support its delay-related damages or change orders and, equally important, could not support that the damages were proximately caused by the general contractor’s breach of the subcontract.

In this case, the concrete subcontractor entered into a subcontract to perform concrete work for a public project. The project was delayed and the general contractor was required to pay liquidated damages to the owner.  Not surprisingly, the subcontractor disputed liability for delays and sued the general contractor for all of its delay-related damages “in the form of labor and materials escalation, loss of productivity, procurement and impact costs, field and home office overhead, idle equipment, inability to take on other work, lost profits, and interest.”  Patrick Concrete Constructors, 2018 WL at *1.

The general contractor moved for summary judgment as to the plaintiff’s delay-related damages – the subcontractor’s damages were nothing but guesses and the subcontractor could not prove the general contractor was the cause of the subcontractor’s damages.

The portion of the deposition transcript of the subcontractor’s president that may have also been its corporate representative as to damages is telling:

Q: After today’s exercise, do you believe you’re entitled to [$]681,740 under those items [regarding change orders]?

A: No.

Q: What amount [are] you entitled to?

A: I don’t know. I’d have to work it up.

Q: So as of right now, with my one chance to depose you, the person on damages, you can’t give me a figure that you’re actually entitled to?

A: No. We just ripped all these figures apart, so now I got to go back and refigure.

With regard to the amount of damages sought for “extra costs,” Bell [the President of subcontractor] testified as follows:

Q: Okay. Then you have – you total everything here, total of everything except for the Amount Due on Contract and Outstanding Change Order heading. So that [$]915[,000] basically added up everything under Extra Costs Not Submitted all the way down to Extra Equipment?

A: Yes.

Q: You’re asking for [$]915[,000] in this. Do you believe that’s actually what you’re entitled to today?

A: Well, like I said, we were – like you said, we have to do some adjustments here.

Q: Okay. Adjustments downward, correct, sir?

A: Yes.

Q: Can you tell me today what you think you’re actually entitled to?

A: No.

And, there was more.  The subcontractor could not locate its original estimate for the job, which is important for any loss of productivity or inefficiency claim – or any claim dealing with added labor and equipment usage. The subcontractor could not identify payroll records, time cards, vendor invoices, or anything to justify the damages it sought.  The subcontractor guessed as to labor hours without the back-up substantiating the labor hours and, equally important, could not establish it incurred the guesstimated labor hours caused by the general contractor.

In essence, Plaintiff [subcontractor] concedes that it cannot provide the Court with an “intelligent estimate without speculation or conjecture,” for either category of damages. Because Plaintiff has failed to make a factual showing sufficient to establish that the “extra costs” and “change orders” damages are capable of being proved with reasonable certainty, summary judgment dismissing these claims is appropriate.

***

Here, Plaintiff asserts that Defendant [general contractor] breached the Subcontract by delaying the Project, and that Defendant’s delay caused it to sustain damages. However, Plaintiff has admitted that Defendant was not responsible for all of the delay, and that Plaintiff and its reinforcing bar subcontractor contributed to the delay as well. Because, by Plaintiff’s own admission, it contributed to the damage-causing delays, it is required to allocate the amount of delay and resultant damages between, at a minimum, itself and Defendant.

Patrick Concrete Constructors, 2018 WL at *4.

Nevada Legislative Update: August 2019

Edward Garcia and Brittany Walker | Holland & Hart | August 30, 2019

CONSTRUCTION

AB 421 amends the laws governing residential construction defects. Key changes include extending the statute of repose from six to ten years and no longer requiring an expert to be present at an inspection concerning an alleged construction defect. Proponents of this legislation stated that it will protect Nevada’s homebuyers and encourage homebuilders to build to a higher standard. Opponents of this legislation stated that it will increase costs to new homebuyers and exacerbate the affordable housing issues facing Nevada.

AB 440 requires contractors who build new, single family residences to provide a disclosure of the purchaser’s rights and a one-year warranty from punch list completion that guarantees all home systems, workmanship, materials, plumbing, electrical and mechanical systems, appliances installed by the contractor, fixtures, equipment, and structural components.

SB 397 authorizes a licensed contractor to perform work in other license classifications which he or she does not have a license for when: (1) the value of the work is less than $1,000 and does not require a permit; and (2) the work is not of a type performed by a plumbing, electrical, refrigeration, or air-conditioning contractor. Essentially, this bill provides a handyman exception for contractors to perform work outside the scope of their license, which will help consumers by allowing a contractor to complete a small project which he or she does not typically perform.

Introducing Charlie Campbell as Advise & Consult’s Newest Expert Witness

Charlie Campbell has extensive experience in large loss / catastrophe situations. He has worked as Director of J.S. Held preparing estimates and bid specifications for more than 500 buildings in over 110 locations throughout Florida after Hurricanes Hugo and Andrew.

Charlie has also handled wildfires in California and flooding in the mid-west and in 1994 was heavily involved in the Northridge earthquake.

Charlie also has international experience working in Africa spending more than a month inspecting and writing estimates of building damaged along the front lines of civil war zone areas.

Prior to his time with J.S. Held, Charlie was a general contractor that specialized in restoration work. He also has worked as an adjuster and catastrophe manager for Allstate Insurance.

With Advise & Consult, Charlie will be based in Ohio and covering the states of Ohio, Kentucky, Tennessee, West Virginia and Indiana – along with large loss cases throughout the United States. As you can tell, he has many valuable and unique talents that he can bring your clients in your next construction defect and/or insurance dispute case.