FOR IMMEDIATE RELEASE
June 1, 2005
Placerville,
CA . . . The United States Court of Appeals for the Ninth Circuit has upheld a
key ruling made nearly a year ago in El Dorado Irrigation District’s (EID)
ongoing litigation against Traylor Brothers Inc. (TBI) over TBI’s defective
construction of a major EID facility.
Last June, Federal District Court Judge
Lawrence Karlton made a preliminary ruling that EID was within its rights to
terminate its construction contract with TBI for the Mill-Bull Tunnel, a
two-mile structure that conveys water to EID customers and the District’s
Project 184 powerhouse. EID terminated the contract because of TBI’s poor
performance. TBI immediately appealed to the Ninth Circuit, where a three-judge
panel unanimously affirmed Judge Karlton’s ruling a week ago on May 25.
In September 2002, the tunnel emerged from the
mountain above Kyburz several months later than scheduled, approximately six
feet too low, and about twelve feet too far east. EID subsequently discovered
that TBI had drilled the tunnel as much as eleven feet low by May 2002, then
actually ran it uphill for most of the remaining length, claiming all the while
that construction was proceeding satisfactorily. In April 2003, EID sued TBI for
breach of contract, violation of California’s False Claims Act, and fraud. EID
seeks more than $9 million in damages.
Judge Karlton’s original decision made it
clear that TBI faces substantial liability to EID. Based on the evidence before
him, the Judge found that TBI appeared to have “no chance of prevailing on the
merits” in the case. He called “unconvincing” TBI’s argument that it
fixed the tunnel’s defects with remedial work. Judge Karlton also found a
substantial public benefit in requiring TBI to disclose this contract
termination when the company bids on future public construction projects.
During
proceedings before the Ninth Circuit panel last month, Senior Judge Ferdinand
Fernandez compared TBI’s performance to a contractor who promises to build “a
mansion,” but constructs “a chicken house” instead. In response to TBI’s
argument that the as-built Mill-Bull Tunnel met basic contract requirements
because water can flow through it, Judge Fernandez asked TBI’s counsel whether
he would make the same argument if TBI had provided “10,000 munchkins with
cups” to transport the water.
With
the Ninth Circuit ruling, the case returns to Judge Karlton’s court, where he
will hold hearings on procedural matters in June and July.
* * * *
For
more information, contact Thomas Cumpston, EID General Counsel, at
