Puyallup suffers another loss in contentious road-work case, on hook for attorney’s fees
The City of Puyallup must pay attorney fees in a lawsuit involving a road project near the South Hill Mall that has already cost taxpayers millions, the state Supreme Court ruled Thursday.
An attorney for Conway Construction, the company that sued Puyallup and won after the city terminated its contract, said the fees are in excess of $1.5 million.
The unanimous Supreme Court ruled that the terms of the contract entitle the company to those attorney fees. The high court also upheld the trial court’s decision that determined the termination was one of convenience, which means more costs for the city than if the company had defaulted.
It also found Puyallup “is not entitled to an offset for any defective work discovered after termination,” Justice Steven C. González wrote, because the city didn’t give the company notice required by the contract and an opportunity to fix the problems.
“We are pleased with the unanimous court decision to side with a local small business and affirm the trial court’s decision. Conway Construction is finally made whole again, five years later,” Joe Straus, an attorney for Conway Construction, said in a statement. “This ruling pushes cities to work with contractors to resolve perceived issues before taking the drastic step to terminate a contract. The contract termination could have driven our client out of business had Conway not stood up and fought this decision.”
The press release from Straus’ law firm, Schwabe, Williamson & Wyatt, said Puyallup previously paid Conway $1,359,273 for the underlying judgment.
“Obviously it’s a disappointing outcome for the city,” City Attorney Joe Beck said Thursday. “We certainly would not have pursued this if we thought that this was a forgone conclusion by any stretch of the imagination. We really thought that we were in the right on this issue.”
The project in question was the widening of 39th Avenue Southwest from 11th to 17th streets southwest. The city hired Conway to do the work in 2015, then terminated them and started withholding payments in March 2016. The city argued Conway’s work was defective. The company disputed the various violations but worked to address them and has said it offered to redo the work for free.
Conway ultimately sued, and the trial court and a three-judge panel of Division I of the state Court of Appeals ruled that the city must pay the rest of the construction contract. However, the Court of Appeals said the city should not have to pay the attorney fees.
The company and the city both asked the Supreme Court to weigh in.
“From the city’s perspective, we simply were seeing very bad work, very unsafe work, and that was borne out by the need to replace much of the work and the finding by the state (Department of Labor and Industries) that Conway was operating in an unsafe manner,” Beck said. “But in the end, the Supreme Court is the final word and they made the decision they made, and we have no choice but to abide by it.”
‘Bound by the terms of the contract”
A key point was whether the termination was one of convenience or for default — essentially at will or for cause, such as Conway failing to meet the requirements of the contract.
“These two forms of termination result in different financial consequences for the contractor,” González wrote. “Here, the contract specifies that under a termination for default, the contractor must pay any extra costs the City incurs to complete the project, including a new contractor’s higher prices, and payments are withheld until the project is finished. Under the termination for convenience clause, however, the contractor is entitled to be paid for actual work performed until the date of termination.”
The justices agreed with the lower courts that the termination was one of convenience.
“The contract allows termination based on defective work only if the contractor ‘neglects or refuses to correct rejected work,’” González wrote. “Conway took steps to remedy the defaulting conditions, reached out to the City to determine whether these efforts were sufficient, and repeatedly requested a meeting,” which the then-city engineer refused.
Because it was a termination for convenience, the high court upheld the trial court’s finding that Puyallup wasn’t entitled to an offset for defective work discovered after the city let the company go.
The justices acknowledged what that decision means for Puyallup.
“We recognize that this result may seem unfair,” González wrote. “If the City had given Conway notice and an opportunity to cure, the City may have been able to prove that the defects indeed resulted from deficient work, rather than deficient plans or specifications, and the City would likely have been able to recover the cost of the defective work. But our decision today is bound by the terms of the contract.”
Beck told The News Tribune: “In this case we had to redo, tear out and rebuild the vast majority of the work that Conway Construction company had done. ... I can tell you it seems very unfair to the city.”
The News Tribune reported in 2018 that the city paid Conway $1.4 million before the contract was terminated, $2.68 million to another contractor to finish the work, and at that time $644,000 to outside attorneys to represent the city, in addition to the trial court’s judgment.
This story was originally published July 9, 2021 at 5:00 AM with the headline "Puyallup suffers another loss in contentious road-work case, on hook for attorney’s fees."
