Daniel P. Scholz

The firm represented a general contractor in a dispute with a subcontractor on a public works construction project.  Disputes arose because the subcontractor failed to provide certified payroll documentation, bonds, and failed to meet schedule requirements.  Due to these problems, the general contractor withheld funds from the subcontractor.  The subcontractor sued the general contractor and its sureties for breach of contract, fraud, and prompt payment penalties.  As part of its claim, the subcontractor asserted a claim for over $8 million in lost profits allegedly caused by the general contractor.  During litigation, the firm discovered the subcontractor’s California contractor’s license had been suspended during a period of the project because the subcontractor had let its workers’ compensation coverage expire and had failed to obtain new coverage. Unbeknownst to the general contractor, the subcontractor worked without insurance, exposing both its employees and the general contractor to significant risk. The subcontractor was able to obtain a meaningless workers’ compensation insurance policy years after the work had been performed and convinced the California State License Board (CSLB) to retroactively reinstate its license.

The case proceed to trial.  At trial, the firm was able to prove the license reinstatement request to the CSLB was fraudulent.  The subcontractor claimed its lack of workers’ compensation insurance was due to circumstances beyond its control.  However, the firm proved coverage had been cancelled because of a payment dispute between the subcontractor and the workers’ compensation insurance carrier.  Further, the firm proved the subcontractor knew its coverage was canceled and its license was suspended by the CSLB, but continued to perform work on the project with a suspended license and no workers’ compensation insurance.  As a result of the firm’s efforts, the trial court found the subcontractor was not properly licensed and was barred from any recovery.  Additionally, the trial court awarded the firm’s client all of its attorneys’ fees and costs to defend the lawsuit.  The subcontractor appealed.

The Fourth District Court of Appeal agreed with the firm and affirmed the judgment in favor of the general contractor.  The court recognized that the subcontractor was not duly licensed at all times and its false representations to the CSLB to obtain reinstatement were insufficient to avoid the consequences of Business and Professions Code section 7031.

A copy of the published decision can be viewed here.

Am. Bldg. Innovation Lp v. Balfour Beatty Constr. (Sep. 3, 2024, Nos. G062471, G062965) ___Cal.App.5th___ [2024 Cal. App. LEXIS 543]

Counsel: Jason R. Thornton, Daniel P. Scholz, and Scott M. Bennet

The firm played central role in representing the lead developer and operator in negotiation of a $204 Million Design-Build-Operate Maintain contract for a seawater reverse osmosis desalination plant.  Under the contract, the firm’s client will develop, permit, pilot, design, and construct the facility during the first 44 months of the project, and after commissioning, will operate and maintain the plant for the following 20 years and potentially during two five-year optional extensions.

Counsel: Daniel P. Scholz and Matthew D. Seeley

The firm represented the prime contractor in a claim by a school district that the installed window system was defective.  The firm reviewed the installation of the windows to confirm the product and method of installation complied with the contract documents.

The firm took an aggressive position that the design was defective and was the sole reason for the window system failure.  After multiple-rounds of meetings and a mediation, the firm was able to successfully negotiate a settlement with no out-of-pocket payment by the prime contractor and the cost of replacement and repair covered by the project architect.

Counsel: Jeffrey B. Baird and Daniel P. Scholz

The firm defended a prime contractor and its surety from a lawsuit brought by one of its key multi-scope subcontractors, on a project for the construction of a new classroom building.  During the project, the prime contractor withheld certain payments from the subcontractor due to the subcontractor’s failure to satisfy conditions precedent to payment and other performance related issues.  At the conclusion of the project, the subcontractor filed suit for the subcontract balance.  In addition, the subcontractor asserted a lost profit and goodwill damages claim of approximately $9,000,000.00, and sought punitive damages.

As a result of its investigation, the firm discovered the subcontractor had made misrepresentations to the Contractors State License Board (“CSLB”) during the project about the number of workers on its payroll and its workers’ compensation insurance.  As a result, the subcontractor’s license was invalid and all of its claims were barred as a matter of law.  At trial, after several years of high stakes litigation, the court found the subcontractor had indeed misrepresented facts to the CSLB, invalidating its license, and providing the prime contractor with a complete defense to the subcontractor’s claims.  The subcontractor’s claims were dismissed in their entirety, and the prime contractor received a seven figure judgment, representing 100 percent of the attorneys’ fees incurred in the litigation and over 97 percent of the costs.

Counsel: Jason R. Thornton, Daniel P. Scholz, and Scott M. Bennett

The firm’s client was the second-low bidder on a public works contract for a Southern California city.  In determining the lowest bidder, the city failed to apply its Local Business Preference Program adjustment to the client’s bid.  The city’s program allowed for a 5 percent reduction to bids submitted by qualified local businesses.  Application of the Local Business Preference Program’s 5 percent reduction to the client’s bid made it the lowest bid.

ATTORNEY INVOLVEMENT GETS THE CITY’S ATTENTION.

The client initially protested the unfavorable contract award themselves.  After the city failed to respond, the client turned to Finch, Thornton & Baird, LLP.

The firm’s attorneys successfully protested the city’s decision not to apply the 5 percent reduction to the client’s bid.  By identifying the intent behind the city’s Local Business Preference Program, the client’s qualifications for the program, and the city’s failure to strictly follow its municipal code, the city had no option but to accept the protest — and our client’s bid.  Without so much as a hearing on the matter, the city reversed course and awarded the contract to the firm’s client.

Counsel: Daniel P. Scholz and Matthew D. Seeley

The firm represented a high-end luxury hotel in a dispute over the balance owed on a substantial remodeling project.  The project was a cost-plus contract which took over a year to complete.  Concerned about the contractor’s final billing, the hotel hired the firm to perform a detailed audit of the contractor’s submitted costs.

The firm delivers efficient, cost-effective result.

As our audit revealed numerous discrepancies and disallowed costs — including the contractor’s unapproved use of an affiliated subcontractor which affiliation the contractor did not disclose  – the case proceeded to mediation.  Based on our initial evaluation, it appeared the contractor may have been using its affiliated subcontractor for unnecessary work.  At mediation, the contractor agreed to reduce its final billing by over $700,000.00, with the hotel paying no additional monies to the contractor.

Counsel: Daniel P. Scholz

The firm represented a lease-leaseback contractor performing work for the Torrance Unified School District.  A third party filed a lawsuit against the contractor and the District claiming multiple lease-leaseback agreements were illegal and seeking repayment from the contractor of all sums it had been paid by the District.  The amount in controversy exceeded $109,000,000.00.

ON REMAND, THE CASE WENT TO TRIAL.

On remand, following the initial appeal in this matter, the case went to trial on a single cause of action alleging a conflict of interest.  We defended the case based on the plaintiff’s lack of diligence causing the action to become moot as the school construction projects at issue all completed prior to trial.  Following a bench trial, the trial court granted judgment in favor of the firm’s client.  The third party challenger appealed.

SECOND DISTRICT COURT OF APPEAL AFFIRMS JUDGMENT IN FAVOR OF CLIENT.

The Second District Court of Appeal again agreed with the firm’s client and affirmed the judgment in favor of Balfour Beatty and the District.  The court recognized the plaintiffs’ failure to timely prosecute the reverse validation action allowed the challenges to the agreements to become moot, requiring dismissal.

Validation and reverse validation actions serve an important function in quickly determining the legality of the award of certain public entity contracts.  Timely determination of validity is a key public policy.  This important decision impacting lease-leaseback contractors and public entities confirms prompt resolution of the claims is required.

A copy of the published decision can be viewed here.

(2020) 49 Cal.App.5th 814

Counsel: Jason R. Thornton and Daniel P. Scholz

The Firm represented a lease-leaseback contractor performing work for the Mt. Diablo Unified School District.  A third party filed a lawsuit against the contractor and the District challenging the lease-leaseback on multiple legal theories.  Following prior litigation and an earlier appeal in this case, the plaintiff was left with the sole claim the contract was illegal because of California Government Code section 1090’s prohibition against conflicts of interest.

Specifically, the third party alleged the contractor had an illegal conflict of interest because the contractor had performed preconstruction services prior to lease-leaseback construction services.  The firm brought a motion for summary judgment seeking to enter judgment in favor of the contractor.  The trial court rejected plaintiff’s claim and granted the contractor’s motion entering judgment in its favor.

The First District Court of Appeal agreed with the contractor and upheld the motion for summary judgment in a published appellate opinion.  This is an important published decision as the Court rejected the plaintiff’s claim that it was a conflict of interest to enter into a lease-leaseback agreement for the project after the contractor had provided preconstruction services on the same project.

A copy of the published decision can be viewed here.

2019 WL 6336264

Counsel: Jason R. Thornton and Daniel P. Scholz

The firm represented the prime contractor in a claim by a school district that the installed window system was defective.  The firm reviewed the installation of the windows to confirm the product and method of installation complied with the contract documents.

The firm took an aggressive position that the design was defective and was the sole reason for the window system failure.  After multiple-rounds of meetings and a mediation, the firm was able to successfully negotiate a settlement with no out-of-pocket payment by the prime contractor and the cost of replacement and repair covered by the project architect.

Counsel: Jeffrey B. Baird and Daniel P. Scholz

The firm represented the prime contractor in a dispute with an electrical subcontractor over the performance of work on a special operations facility for the United States Military involving $12 million in claims.

Default determined. Swift action taken.

The firm assisted in the investigation of the subcontractor’s performance and improper workmanship — including the subcontractor’s responsibility for project delay —and determined the subcontractor was in default of its subcontract obligations.  The subcontractor was terminated, which allowed the firm’s client to finish the project efficiently and avoid potential liability to the project owner for significant delay damages.

The subcontractor filed suit in federal court against the firm’s client for wrongful termination.

Money saved. Time saved, too.

Armed with the details obtained through our investigation of the subcontractor, the firm negotiated a settlement of the case for less than 50 percent of the estimated cost to defend.  This allowed the client to smoothly close out the project and avoid an anticipated two years of litigation and devotion of personnel costs and involvement.

Counsel: Jeffrey B. Baird and Daniel P. Scholz

The firm represented the prime contractor in a dispute with a Fortune 500 multi-national owner over construction of a flagship retail store.  The project was delayed — resulting in increased costs due to the delay and inefficiencies.  Each party claimed the other was responsible.  The dispute involved $28 million in claims between the parties.

Rigorous research and analysis made all the difference.

The firm sued the owner for the increased costs.  The owner initially refused to discuss a reasonable settlement and cross-complained against the client.  Pressure from the firm’s successful demurrer to the owner’s cross-complaint and substantiation of the client’s claims through analysis of terabytes of project records produced the desired effect.  Prior to costly depositions — and well short of trial — the firm obtained a favorable monetary settlement for the client.

Counsel: Jeffrey B. Baird, Louis J. Blum, and Daniel P. Scholz

The firm’s subcontractor client was served with a Civil Wage and Penalty Assessment by the California DLSE relating to a lower-tier subcontractor’s work at the San Diego Airport. The assessment included potential liability of over $100,000, for alleged unpaid prevailing wages, substantial Labor Code penalties, liquidated damages and interest. The firm successfully asserted the innocent general contractor “safe harbor” defense under the California Labor Code and was able to convince the DLSE to not assess any penalties against the firm’s client. The firm’s efforts saved our client significant costs as well as minimized its labor history for future public work prequalifications.

Counsel: Jeffrey B. Baird and Daniel P. Scholz

The firm’s client was the low bidder for a San Diego Unified School District contract. The client had inadvertently failed to provide the correct license number for one of its listed subcontractors. The client provided the District with the correct number within 24 hours. However, the District found the client’s bid non-responsive and rejected it. The firm protested the District’s rejection based on California law that allows contractors to remedy such bid errors within 24 hours. Through the firm’s knowledge of bidding laws and persuasion, the District accepted the firm’s protest and rescinded its rejection of the client’s bid. The firm’s client was then awarded the $3 million project.

Counsel: Jeffrey B. Baird and Daniel P. Scholz

The firm represented a company against the company’s former high-ranking officer and other former employees who resigned abruptly to form a competing business. These former employees used removable hard drives, flash drives, and jump drives to copy sensitive company information and customer lists in violation of the law and non-solicitation and non-compete obligations. The firm filed a lawsuit alleging information theft, trade secret misappropriation, breach of the duties of loyalty and confidentiality, and related claims. With an aggressive and fast-moving litigation strategy, including the use of forensic computer experts who analyzed and imaged thousands of computer files and devices, the firm uncovered the full extent of the corporate espionage and brought it to an end. Ultimately, the firm obtained a court order requiring a complete inventory of all stolen documents and computer files, and forced the former employees to destroy all their ill-gotten computer equipment and files. In the process, the firm successfully defended our client against a counterclaim for unfair business practices.

Counsel: Chad T. Wishchuk and Daniel P. Scholz

The firm represented the purchaser of an automotive related property against the seller for costs related to remediation of hazardous materials found on the site during construction. The firm prepared and presented the claim to the uninsured seller and obtained a full recovery.

Counsel: P. Randolph Finch Jr., Jeffrey B. Baird and Daniel P. Scholz

The firm defended a contractor in an employment discrimination lawsuit filed by a former employee. The lawsuit alleged disability discrimination, failure to accommodate, failure to engage in the interactive process, wrongful termination, and the failure to pay prevailing wages. The former employee sought over $250,000 in alleged lost wages, plus punitive damages and attorneys’ fees. The firm removed the case to federal court and convinced the judge to dismiss the punitive damages claims. Prior to significant discovery, the firm was able to negotiate a settlement for a small fraction of the amount initially demanded. This saved the firm’s client valuable time and expense that can now be better used productively in growing the contractor’s business.

Counsel: Chad T. Wishchuk and Daniel P. Scholz

The firm’s client was sued for alleged construction deficiencies on a commercial building that was substantially completed more than 10 years ago. The firm successfully demurred to the action on the basis that the claim was barred by the 10-year statute of repose. As a result, the client was dismissed by both the owner and developer in exchange for a waiver of costs.

Superior Court Case No. 30-2013-00639696-CU-BC-CJC

Counsel: David W. Smiley, and Daniel P. Scholz

The firm defended a contractor against a class action lawsuit based on alleged violations of wage and hour and prevailing wage laws.  The lawsuit was brought on behalf of over 400 current and former employees.  An object of the litigation was to force the contractor to sign a union contract.  The lawsuit sought over $5 million in damages plus attorneys’ fees and Labor Code penalties.

The firm successfully removed the lawsuit from state court to federal court, limited initial discovery, and successfully defended the plaintiffs’ attempts to remand the lawsuit to state court.  To avoid costly depositions, a class certification motion, other discovery, and trial, the firm participated early in conferences with a federal magistrate judge.

By addressing the issues and claims early in the litigation, the firm successfully defended the contractor from labor organization efforts and obtained a settlement agreement from plaintiffs including full releases of all claims for the prior four years.  The firm provided an efficient and quick resolution of the complex matter, saving the client time and money.

Counsel: Jeffrey B. Baird and Daniel P. Scholz

The firm’s client was the general contractor on a local public works project.  The general contractor contended the project was delayed and disrupted by the public owner, the project architect and the project’s construction manager.  The general contractor claimed that the public owner’s sole source specifications were illegal and caused the delays to the project. 

[expand title=”Read More” swaptitle=”Less”]The public owner claimed liquidated damages and that certain work items were either improperly or insufficiently completed and sought approximately $500,000 from the general contractor.  The firm represented the contractor in settlement conferences and mediation.  As a result of the firm’s efforts, the public owner released its claims against the contractor for liquidated damages and backcharges and agreed to pay the contractor $675,000 to resolve the claims.  The firm’s knowledge of legal limitations on public works specifications, project delay, and extra work claims allowed the general contractor to succeed in its claims without a lawsuit against the public owner, allowing the contractor to minimize its claims history.

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