(The names, project and issues presented in this assignment are not related to any real individuals, companies or projects.)
Parties: Owner – Shinbone Suites, LLP (SSL)
Partner A – Liberty Valance, Inc. (LVI)
Partner B – Ransom Stoddard, LLP (RSL)
Retail Operator – Peter Erickson, LLC (PEL)
Architect – Dutton Peabody Architects, Inc. (DPA)
Contractor – Buck Langhorn, Inc. (BLI)
Project: Seven Story Apartment Building, 192 Units
Concrete Frame, Brick & Glass Exterior, Retail on Ground Level, plus
Two Levels of Underground Parking
Located in Shinbone, Texas
Design & Construction Issues
Partners A and B entered into a limited liability partnership (LLP) for developing a seven story
apartment building in Shinbone, Texas. Partner B has a construction division that contracted
with the LLP to design and construct the apartment building with one level of retail on the
ground floor. Buck Langhorn, Inc. (BLI) hired and directed Dutton Peabody Architects (DPA)
in providing architectural, structural and MEP design services: a Design-Build delivery method.
Shinbone Suites, LLP contracted with BLI using an AIA Document A141, “Standard Form of
Agreement Between Owner and Design-Builder”, with the AIA Document A201, “General
Conditions of the Contract for Construction”, as part of the contract documents.
In the LLP agreement, Partner A agreed to purchase the first floor Retail component of the
project from partner B’s construction division, BLI, for the predetermined amount of
$10,000,000.00. BLI guaranteed the completion date and cost of $45,000,000 for the project to
the LLP entity. As the project progressed, Partner A met with DPA and their consultants,
directing them to make various changes without RSL’s representatives being present. DPA
proceeded with Partner A’s revisions and issued the revised plans to BLI. Partner B and BLI
were very surprised by Partner A’s actions without their input, but in the spirit of cooperation
proceeded with the work. BLI received estimates from the subcontractors, totaling more than
$4,000,000, and submitted the price for the revisions to the partners. Partner A was not happy
with the pricing and pushed for BLI to absorb any extra costs using BLI’s contingency. BLI’s
contingency could not absorb the entire $4 MM. The partners and BLI worked out the issues and
BLI with the work continued. Several other issues surfaced, such as adding a 4,000 square feet
mezzanine level in the retail space. Partners A and B, and BLI finally agreed to a $2,000,000
change order and a modest, two week time extension. The change order was signed by all
parties and the work progressed.
Partner A owned the adjacent property and provided sitework for the entire development past the
property lines of Shinbone Suites. BLI and Partner A had several disputes about access to the
site and the delays caused by Partner A’s subcontractors.
When the mezzanine was added, DPA reviewed the additions with the city’s plan examiner and
the examiner said BLI did not need a revised permit since the mezzanine would be considered
part of the retail finish out. DPA relayed the city examiner’s decision, in writing, to the partners
and BLI, who proceeded with the work. The building inspector stated that he would observe the
CE/CM 4304 & CE/CM 5378 Design Project, SUM. 2020
2 of 3
installation of the mezzanine and only required the revised structural plans, adding the
mezzanine, be on site for review. The structural framing for the mezzanine was approved by the
building inspector.
Partner A negotiated a contract for leasing the retail space with Peter Erickson, LLC (PEL), with
the understanding the retail shell would be ready for finish out in July by RSL’s contractor, BLI,
in time for them to open in November and not miss the holiday season sales. Partner A was also
an equity partner in PEL’s business. Early occupancy of the condos began in December and
completed the next April. BLI worked diligently to complete the retail shell by July and
accomplished most of the work except for the storefronts and exterior doors. It was a very dry
year and the retail shell was accessible for beginning the mechanical, electrical and plumbing
(MEP) rough-ins in July. PEL even hired BLI’s drywall subcontractor to start building the walls
in July along with a third-party MEP sub, hired by PEL, who also started working in July
installing air conditioning equipment.
PEL was responsible for providing their own design and construction documents, therefore they
hired an architect and design firm, but they hired DPA under a different agreement from the
BLI/DPA contract. PEL was solely responsible for managing their architect and ensuring the
plans would be ready in time for obtaining a building permit. PEL’s manager, Link Appleyard,
was not a proficient manager and not diligent in making decisions which delayed completion of
the construction documents. The CDs were not submitted for permitting until October 25th
.
PEL’s contractor did not obtain the finish-out building permit until November 7th
. PEL and
Partner A claim that BLI’s delay in enclosing the retail space with storefronts and doors until
September caused the delay in completing and opening the retail store until the next March.
Also, PEL and Partner A claim that adding the mezzanine without updating the base building
permit caused a delay in the issuance of PEL’s finish-out permit.
Legal Posturing & Claims for Damages
Partner A and PEL claim damages from BLI for delaying the start of work for the retail finish
out due to the late installation of the windows and doors, plus the delay in acquiring PEL’s
finish-out building permit. Partner A and PEL filed separate suits against BLI because of the
claimed delay in the amount of $6,000,000 each, totaling $12,000,000, citing lost rent from the
retails space and lost business during the holiday season and anticipated profits.
BLI claims that the space was ready in time for finish out and that PEL’s contractor started work
in the shell as scheduled. Also, BLI claims the delay in PEL obtaining a finish-out building
permit was not their fault since they were told to proceed with the mezzanine work by DPA, the
city plan reviewer and the partners. Also, BLI did not contract with DPA for the design of Peter
Erickson, LLC’s finish-out.
Since PEL did not open in time for the holiday season, Partner A refused to buy the retail
component from Partner B and BLI for the $10,000,000 as previously agreed. Partner B files
suit against Partner A for the $10,000,000 and for BLI’s extended general conditions due the
design change delays, totaling $12,000,000.
Instructions
Review the documents mentioned in the case outline. Develop your reports keeping in mind the
questions and issues noted below, plus the Contract Documents and the interrelationships
between the parties. Choose which path you would like to take in representing one of the parties
CE/CM 4304 & CE/CM 5378 Design Project, SUM. 2020
3 of 3
by selecting “Group A” or “Group B”. A 50/50 mix of “As” and “Bs” between all students.
Group A
Assume your group has been hired by Partner A and PEL to be an Expert Witness for their
complaint and defense. You must back up all of your conclusions by referencing the appropriate
documents and paragraphs. Opinions may be expressed in your report and will be based on your
professional experience.
Group B
Assume your group has been hired by Partner B and BLI to be an Expert Witness for their
lawsuit against Partner A and PEL and in their defense. You must back up all of your
conclusions by referencing the facts of the case and the appropriate documents, and paragraphs.
Opinions may be expressed in your report will be based on your professional experience.
Present your findings in report format, considering the following Issues and Questions below:
(These are “thought provoking” questions to help in developing your report and not to be
answered like taking a quiz.)
- Are Partner A and PEL justified in suing Partner B and BLI? Why or why not?
- Do Partner B and BLI have any contractual obligations to Partner A and PEL?
- Are Partner B and BLI justified in suing Partner A?
- How would BLI prove they will incur additional general conditions due to changes in the
work? - Should BLI have proceeded with the mezzanine without a revised building permit?
- Should BLI have proceeded with Partner A’s design changes without written approval?
- Did the start of PEL’s contractors work in the shell retail space constitute acceptance of
the shell for finish out? - Does PEL have reason to blame BLI for delaying the completion of the retail store until
March? - What other dispute resolution options are available to the parties besides litigation and
why may these alternatives be more appealing? - Did DPA have a conflict of interest by working for both BLI and PEL?
Report Outline
Your reports should include the following topics at a minimum:
• Introduction
• Executive Summary
• Background & Methodology – facts of the case and how you approached the problem
• Opinions & Conclusions (detailed explanation and reference to related documents)
• References/Bibliography
• Resumes of Experts – you may be creative in drafting your individual resumes