Parkcrest Builders, LLC v. Housing Authority of New Orleans

Filing 537

FINDINGS OF FACT AND CONCLUSIONS OF LAW: (1) Parkcrest is not liable to HANO; (2) Liberty is not liable to HANO; (3) HANO is liable to Liberty in the amount of $437,851.60 plus reasonable attorney's fees; (4) Parkcrest is liable to Hebert in the amount of $103,193.08 plus reasonable attorney's fees; and (5) Liberty's Rule 52 Judgment on Partial Findings (Rec. Doc. 485 ) is GRANTED. Hebert's claims against Liberty are DISMISSED with prejudice. The Court awards prejudgment interest at the Louisiana rate and postjudgment interest at the federal rate, from the date of judicial demand until paid. Within 14 days, the parties shall submit to the Court a proposed form for a final judgment in accordance with these findings and conclusions. Signed by Judge Carl Barbier. (Reference: All Cases) (gec)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PARKCREST BUILDERS, LLC

CIVIL ACTION

VERSUS

No. 15-1533
c/w 16-14118 and 16-15849

HOUSING AUTHORITY OF NEW
ORLEANS

SECTION “J”(4)

FINDINGS OF FACT AND CONCLUSIONS OF LAW
This litigation arises out of a dispute over the construction of the Florida Avenue:
New Affordable Housing Units in New Orleans, Louisiana (the “Project”). On March 4,
2013, the Housing Authority of New Orleans (“HANO”), the Project owner, initially
entered into a contract (the “Prime Contract”) with Parkcrest Builders, LLC (“Parkcrest”),
the original contractor, to construct the Project.

The initial contract price was

$11,288,000.00 and the initial completion date was to be July 27, 2014. The relationship
between HANO and Parkcrest deteriorated during the course of the Project and on April
10, 2015, HANO terminated Parkcrest prior to completion. HANO then called upon
Liberty Mutual Insurance Company (“Liberty”) to perform its obligations as surety for
Parkcrest. On June 9, 2015, Liberty entered into a Takeover Agreement with HANO to
complete the Project and retained Parkcrest as its completion contractor. The parties
resumed work on the Project however, it continued to be plagued by delays and
disagreements as to their cause. In May and June 2016, HANO and Liberty could not agree
as to whether substantial completion had been obtained. Ultimately, HANO terminated
Liberty on June 30, 2016. On October 4, 2016, HANO entered into a contract with Colmex
1

Construction, LLC (“Colmex”) to perform all necessary work to complete the Project. On
March 25, 2017, HANO granted a certificate of substantial completion to Colmex. To
date, the Project has still not reached final completion. Parkcrest, Liberty Mutual, and
HANO dispute who is responsible for the various delays in the construction of the Project.
Parkcrest instituted this suit against HANO on May 8, 2015, shortly after the April
10, 2015 termination, alleging that HANO breached the Prime Contract by terminating
Parkcrest “for convenience.” (Civil Action No. 15-1533, the Principal Action.) HANO
filed a counterclaim against Parkcrest alleging that delays in the project were attributable
solely to Parkcrest. Shortly after the June 30, 2016 termination, Liberty intervened in the
Principal Action, to allege breach of the Takeover Agreement, bad faith breach of contract,
and wrongful termination against HANO. In response, HANO filed a counterclaim against
Liberty Mutual alleging bad faith breach of the Takeover Agreement and fraudulent
misrepresentation. 1 Consolidated with the Principal Action are two related lawsuits against
Parkcrest and Liberty Mutual brought by subcontractors R&P Grass Maintenance, LLC
(“R&P”) and Ted Hebert, LLC (“Hebert”) (Civil Action Nos. 16-15849 and 16-14118,
respectively). 2
The Court held a seven-day bench trial beginning on February 20, 2018 through
March 1, 2018, and at the conclusion, took the matter under advisement.

Having

considered all the evidence and counsels’ arguments, the Court issues the following
findings of fact and conclusions of law in accordance with Federal Rule of Civil Procedure

1

The Court dismissed HANO’s fraudulent misrepresentation claim on June 5, 2017. (Rec. Doc. 207.)
R&P’s lawsuit (Civil Action No. 16-15849) settled shortly after the commencement of trial. (Rec. Doc.
472.)

2

2

52(a). To the extent any of the following findings of fact constitute conclusions of law,
they are adopted as such. To the extent any of the following conclusions of law constitute
findings of fact, they are adopted as such.
FINDINGS OF FACT
Civil Action No. 15-1533: The Principal Action (Parkcrest v. HANO)
I.
(1)

The Prime Contract between Parkcrest and HANO
On March 4, 2013, HANO entered into a contract (“Prime Contract”) with

Parkcrest whereby Parkcrest would serve as the contractor for the construction of the
Florida Avenue: New Affordable Housing Units in New Orleans, Contract No. 13-911-05
(“Project”). 3
(2)

The initial contract price for the Project was $11,288.000.00 and the initial

completion date was to be July 27, 2014. 4
(3)

On September 27, 2013, Construction Change Directive No. 1 was issued providing

Parkcrest with an additional 49 non-compensatory days to complete the Project. 5
(4)

Thus, the original completion date of the Prime Contract, as amended by

Construction Change Directive No. 1, was September 14, 2014. 6

3

Stipulated Fact. See Exhibit 9, Prime Contract.
Stipulated Fact.
5
Stipulated Fact. See Exhibit 27, Change Order No. 1.
6
Stipulated Fact.
4

3

(5)

Pursuant to the Louisiana Public Works Act, on March 4, 2013, Liberty issued a

statutory payment and performance bond, Bond No. 022045415 (the “Bond”) in the
amount of $11,288.000.00, in connection with the Project naming Parkcrest as principal
and HANO as obligee. 7
(6)

The Project is intended to be used as multi-family residential housing units.

(7)

The Prime Contract called for twenty-six duplex buildings consisting of fifty-two

separate units (fifty-one dwelling units plus one office). The Project also called for
parking, drives, a playground, and two new streets plus infrastructure and utilities to the
site. 8
(8)

The General Conditions of the Prime Contract gave HANO the authority to

terminate Parkcrest from the Project for cause or for convenience. 9
(9)

Paragraph 32 of the Prime Contract defines a “for cause” termination as follows:
If the Contractor refuses or fails to prosecute the work, or any separate part
thereof, with the diligence that will insure its completion within the time
specified in this contract, or any extension thereof, or fails to complete said
work within this time, the Contracting Officer may, by written notice to the
Contractor, terminate the right to proceed with the work (or separable part
of the work) that has been delayed.

(10)

Paragraph 34 of Prime Contract defines a termination “for convenience”:

7

Stipulated Fact. “[W]hen a public entity enters into a contract in excess of $25,000.00 for the construction,
alteration, or repair of any public works, the contractor is required to post a bond ‘in a sum of not less than
fifty percent of the contract price for the payment by the contractor or subcontractor to claimants as defined
in R.S. 38:2242.’” Pierce Foundations, Inc. v. Jaroy Const., Inc., 2015-0785 (La. 5/3/16), 190 So. 3d 298,
301(citing La. R.S. 38:2241(A)(2)).
8
See Exhibit 2323, Watts Report, at 1.
9
Exhibit 2 at bates 238-39, General Conditions.

4

The Contracting Officer may terminate this contract in whole, or in part,
whenever the Contracting Officer determines that such termination is in the
best interest of the [Public Housing Authority (“PHA”)] . . .
If the performance of the work is terminated, in whole or in part, the PHA
shall be liable to the Contractor for reasonable and proper costs resulting
from the termination . . . .
(11)

Clause 32 of the General Conditions of the Prime Contract sets forth the following:
***
(b)
The Contractor’s right to proceed shall not be terminated or the
Contractor charged with damages under this clause if—
(1) The delay in completing the work arises from unforeseeable
causes beyond the control and without the fault or negligence of the
Contractor. Examples of such causes include . . . (ii) acts of the PHA
or other governmental entity in either its sovereign or contractual
capacity, (iii) acts of another contractor in the performance of a
contract with the PHA . . .
***
(c)
If, after termination of the Contractor’s right to proceed, it is
determined that the Contractor was not in default, or that the delay was
excusable, the rights and obligations of the parties will be the same as if the
termination had been for convenience of the PHA.

(12)

Perez, APC (“Perez”) was the architect of record for the Project. 10

(13)

Section A.1.2.1 of the Model Form of Agreement Between Owner and Design

Professional 11 states that:
After receipt of a Notice to Proceed from the Owner, the Design
Professional shall prepare and deliver Schematic Design/Preliminary Study
Documents. These documents shall consist of a presentation of the complete
concept of the Project, including all major elements of the building(s), and
site design(s), planned to promote economy both in construction and in
administration and to comply with current program and cost limitations.
The Design Professional shall revise these documents consistent with the
requirements and criteria established by the Owner to secure the Owner’s
written approval. Additionally, the Design Professional shall make an
independent assessment of the accuracy of the information provided by the

10
11

Stipulated Fact.
Exhibit 88 at 4, A/E Services Contract with HANO.

5

Owner concerning existing conditions. Documents in this phase shall
include:
Site plan(s)
Schedule of building types, unit distribution and bedroom count
Scale plan of all buildings, and typical dwelling units
Wall sections and elevations
Outline specifications
Preliminary construction cost estimates
Project specific analysis of codes, ordinances and regulations
Three-dimensional line drawings
(14)

Perez was responsible for reviewing pay applications submitted by Parkcrest for

payment on the Project and recommending approval of pay applications to HANO. 12
(15)

In each certification of payment, Perez attested to HANO that “the Work has

progressed as indicated, the quality of the Work is in accordance with the Contract
Documents, and the Contractor is entitled to payment of the AMOUNT
CERTIFIED.” 13
(16)

Weekly construction progress meetings – otherwise referred to as Owner-

Architect-Contractor (“OAC”) meetings – were held in connection with the Project among
representatives of Perez, Parkcrest, and HANO. 14
(17)

Perez maintained Meeting Agendas and Meeting Minutes for the foregoing weekly

OAC meetings for the Project. 15

12

Stipulated Fact. See in globo Pay Applications, Exhibit 455.
See e.g., Exhibit 1138, at bates 15294, Architect Application and Certification for Payment.
14
Stipulated Fact.
15
Stipulated Fact.
13

6

(18)

Integrated Logistics Support Incorporated (“ILSI”) was a subconsultant of Perez

and served as the engineer for the street, water, and sewerage portions of the Project.
(19)

On April 3, 2013, HANO issued a Limited Notice to Proceed to Parkcrest for the

Project. 16
(20)

When the Limited Notice to Proceed was issued, HANO still did not have approved

civil infrastructure plans for the Project. Parkcrest was unable to proceed with any civil
infrastructure work without an approved set of plans.
(21)

The Limited Notice to Proceed did not include any electrical infrastructure 17 work

for the Project’s residential units.
(22)

The Limited Notice to Proceed only authorized Parkcrest to begin the following

work, not to exceed $1,829,174:
All Work within the public Right-of-Way (ROW) on the new Independence
and Pauline Streets; and within the ROW along Congress Street, Law Street,
Alvar Street and N. Dorgenois Street; and the three blocks noted as the
“Contractor Staging Area” on Sheet T1.3, hereafter noted as the “Work
Area”.
1.
Initial site cleanup
2.
Selective demolition
3.
Selective clearing
4.
Grading within the Work Area
5.
Excavation
6.
Trenching
7.
Fill and backfill
8.
Manholes and structures
9.
Site storm utility drainage piping, including laterals a minimum of
five feet (5’) beyond property line in full pipe-length increments

16

Stipulated Fact; See Exhibit 11, Limited Notice to Proceed.
Mark Bacques, a senior engineer associate at Entergy, testified at trial that “electrical infrastructure” is the
overhead or underground electrical facilities such as power lines, transformers, and so on.
17

7

10.
11.
12.
13.
14.
15.
16.
17.
18.

19.
(23)

Pipe culverts
Water mains, valves and laterals up to and including the water meter
boxes, which are included as part of the Work Area
Sanitary sewer mains and laterals up to and including the cleanouts,
which are included as part of the Work Area
Street lighting power distribution systems including accessories such
as pull boxes
Street lighting foundations
Concrete paving (including curbs)
Concrete drive aprons up to the property line
Connection of all elements of Work to existing elements at Congress
Street, Law Street, Alvar Street and N. Dorgenois Street.
General Conditions associated with the Work within the Work Area,
including, but not necessarily limited to:
a. Building Permits
b. Field office trailer
c. Storage containers
d. Temporary facilities
e. Field office compound and staging area
f. Temporary fencing
g. Site maintenance
h. Coordination with utility companies
Implementation of the Storm Water Pollution Prevention Plan (SWPPP)

Mike Stewart, the Vice President of Parkcrest and superintendent of the Project for

the duration of Parkcrest’s involvement, testified that despite receiving this Limited Notice
to Proceed, Parkcrest was unable to begin work on most of these items because HANO had
not received its approved set of plans from the Department of Public Works (“DPW”). 18
(24)

HANO issued a Full Notice to Proceed on June 7, 2013 for the Project. 19

(25)

Numerous material delays on the Project were caused by issues and parties out of

Parkcrest’s control, including but not limited to, the re-design of the water and sewer lines,

18
19

Stewart Testimony.
Stipulated Fact; Exhibit 13.

8

delayed supply of permanent power, re-design of site street lighting, installation of gas
meters, and the roof vent re-design.
(26)

These delays were caused by HANO, Perez, and other third parties outside the

control of Parkcrest, such as the Sewerage and Water Board of New Orleans (“SWB”) and
Entergy.
II.

The Delays
A. Entergy’s Redesign and Installation of Power Poles

(27)

Entergy was a separate, co-prime contractor for the Project due to a separate prime

contract between Entergy and HANO for the installation of the electrical infrastructure.
(28)

Parkcrest did not have a contract with Entergy but was responsible for coordinating

with all the utility companies to coordinate their work with Parkcrest’s work on-site.
(29)

On August 14, 2013, Parkcrest emailed HANO a list of utility contacts and its utility

infrastructure schedule which provided the time frames that Parkcrest needed each utility
to be completed. 20
(30)

Generally, with respect to the electrical infrastructure, gas installation, and power

pole work, testimony revealed that a proposed layout would be submitted to Entergy, then
Entergy would create a design and would invoice HANO for the estimated cost of the work.

20

Exhibit 217, Parkcrest email to HANO dated August 14, 2013.

9

Once HANO paid that cost, then Entergy would mobilize its construction crews to come
install the work. 21
(31)

As of June 3, 2013, Entergy had yet to install temporary power poles at the Project

site, despite Parkcrest’s attempt to coordinate with Entergy for their installation.
(32)

Without temporary power, Parkcrest was not able to perform its work on the

Project.
(33)

Entergy was responsible for the design and installation of the street power poles at

the Project.
(34)

As of December 19, 2013, Entergy’s power pole location design was six months

overdue. 22
(35)

In early January 2014, HANO approved payment for Entergy to commence work

on pole relocation activities.
(36)

Entergy was not on the Project site to stake the location of the power poles until

February 5, 2014.
(37)

In late February 2014, approximately nine months later than Parkcrest planned to

start site electrical work, Entergy began installing the new poles.

21
22

Mark Bacques testimony.
Project meeting dated 12/19/13.

10

(38)

Entergy had to re-design the power pole design in March 2014 because it did not

match the electrical site plans in the Project drawings. 23
(39)

By April of 2014, Entergy completed its installation of temporary power poles at

the Project.
(40)

Parkcrest’s expert in schedule analysis and construction, Tom Finnegan, opined

that “Entergy’s work related to the relocation of the power poles was delayed due to delays
in Entergy’s design phase and proposal submission, work related to removing the existing
power poles, and additional time needed to repair damaged work.” 24
(41)

Delay in relocation of the power poles delayed other Entergy work, including

providing site lighting and supplying permanent power to the site. 25
B. Entergy’s Design of Underground Utilities/Delay in Providing Permanent
Power
(42)

Entergy was responsible for the design of the electrical infrastructure at the Project,

including the design of the underground electrical utilities.

23

HANO email to Entergy dated 3/11/14.
Exhibit 2324, Finnegan Report, at 11.
25
Stewart testified that HANO was responsible for the Entergy related delays because (1) HANO delayed
payment related to the relocation of the power poles and (2) HANO delayed executing a Right-of-Way
agreement and paying for design work and infrastructure, which prevented Entergy from installing the
electrical infrastructure until September 2014.
24

11

(43)

HANO was responsible for contracting with and paying Entergy for the design and

construction of that infrastructure, which is required before permanent power is available.
(44)

In August 2013, Parkcrest provided HANO with the contract information and the

action items required for HANO to obtain permanent power to the site.
(45)

One of the first steps in the process required HANO to enter into a Right of Way

Agreement (“ROW Agreement”) with Entergy prior to Entergy installing its infrastructure.
(46)

Entergy did not submit a design for the underground electrical infrastructure on the

Project to HANO until March 7, 2014.
(47)

Entergy then submitted a revised design for the underground electrical

infrastructure on the Project to HANO on March 25, 2014.
(48)

Perez had no authority to revise Entergy’s design of the Project’s underground

electrical infrastructure.
(49)

Despite having no authority to alter Entergy’s underground electrical infrastructure,

HANO nevertheless sought Perez’s input on the design. Specifically, on March 25, 2014,
HANO requested that Perez review Entergy’s revised design for the underground electrical
infrastructure.
(50)

HANO did not seek to obtain approval for the ROW Agreement between HANO

and Entergy to allow Entergy to begin installation of the underground electrical distribution
infrastructure for the Project until Perez reviewed Entergy’s revised design for the
underground electrical infrastructure.
12

(51)

The ROW Agreement between HANO and Entergy was not executed by HANO

until May 5, 2014. 26
(52)

Under the terms of the ROW Agreement, Entergy contracted to install the

underground electrical distribution infrastructure.
(53)

Accordingly, no contract was in place with Entergy to install the underground

electrical infrastructure at the time of issuance for either the Limited Notice to Proceed or
the Full Notice to Proceed.
(54)

Parkcrest is not a party to the ROW Agreement.

(55)

Accordingly, as a non-party, Parkcrest had no contractual ability to control

Entergy’s work pursuant to the ROW Agreement or force compliance with that contract.
(56)

Moreover, HANO contractually granted Entergy eight (8) weeks from the

execution of the ROW Agreement to begin the work and up to three (3) months to complete
the installation of the underground infrastructure. Accordingly, HANO potentially gave
Entergy until September 30, 2014 to complete that work. 27
(57)

As of the date of the execution of the ROW Agreement, Parkcrest was still under a

contractual obligation to complete the Project by September 14, 2014.

26

Stipulated Fact.
Eight weeks from May 5, 2014, the date of the ROW Agreement’s execution, was June 30, 2014, and three
months from that date was September 30, 2014.
27

13

(58)

Nevertheless, the electrical underground infrastructure was required to be complete

before Parkcrest could begin certain other aspects of work on the Project.
C. Entergy’s Installation of Underground Utilities for the Project/Delay in
Providing Permanent Power
(59)

As of June 1, 2014, Entergy’s work on the underground electrical distribution

infrastructure had not yet begun on the Project. 28
(60)

On June 5, 2014, HANO notified Entergy by email that “the general contractor is

preparing to submit a delay claim” because Entergy had still not begun the installation of
the underground electrical distribution infrastructure.
(61)

On June 30, 2014, because Entergy had still not begun the installation of the

underground electrical distribution infrastructure, HANO notified Entergy “that continued
delays are affecting the critical path” of the Project.
(62)

On July 7, 2014, HANO’s Project Manager, Hollie DeHarde, and HANO’s

Construction Manager, Patrick Kennedy, 29 co-authored an internal memorandum
analyzing the impact of the known Entergy-related delays as of that date (“Entergy
Memorandum”). 30

28

Stipulated Fact.
Patrick Rowan Kennedy, HANO’s Construction Manager for the duration of the Project, was assigned to
oversee and act as the owner’s representative on the site. His responsibilities included reviewing the progress
of the work, providing updates to Jennifer Adams, HANO’s Director of Development and Modernization,
and assisting in reviewing change orders.
30
Exhibit 2314, HANO Internal Entergy Memorandum dated 7/7/14.
29

14

(63)

According to the Entergy Memorandum, as of July 7, 2014, the Project was twenty-

one (21) days behind schedule because of Entergy-related delays, Entergy’s underground
infrastructure work had not yet begun, and the “contractor is unable to proceed with certain
aspects of the project without infrastructure on site.” 31
(64)

In August 2014, Entergy finally reported onsite and began electrical utility

installation work.
(65)

Entergy did not complete the installation of its underground utilities and provide

power to the site until September 16, 2014, two days after Parkcrest’s contract completion
date of September 14, 2014. 32
(66)

Until Entergy was complete with its underground utility installation, Parkcrest was

unable to complete multiple critical items at the project, including but not limited to
pouring concrete or completing the final grade.
D. Kitchen Electrical Outlet Re-Design
(67)

Although Entergy completed the installation of the electrical infrastructure on

September 16, 2014, permanent power necessary to commence the interior work was
further delayed by HANO’s re-design of the kitchen electrical outlets. 33
(68)

In order for the units to receive permanent power, Parkcrest needed electric meters

installed. However, electric meters could not be installed until the units passed all electrical

31

Exhibit 2314, HANO Internal Entergy Memorandum dated 7/7/14.
Parkcrest email to HANO dated 1/5/15.
33
Exhibit 2324, Finnegan Report, at 24.
32

15

inspections, and the inspections could not be completed until all electric outlets, including
the kitchen outlets, were completed. 34
(69)

In August 2014, while performing work on the kitchens, Parkcrest’s electrical

subcontractor noticed a conflict between the proposed location of the electrical outlets and
the kitchen backsplashes in the units.
(70)

Parkcrest immediately notified Perez of the design error. HANO insisted that

Parkcrest submit a formal Request for Information (“RFI”) requesting direction from Perez
on August 15, 2014 on how to proceed instead of just informally resolving what was a
relatively simple issue. 35
(71)

On September 8, 2014, HANO and Perez changed the design of the outlets and

backsplashes to resolve the design conflict.
(72)

On November 17, 2014, three months after Parkcrest first raised the issue, HANO

executed Change Order No. 4, which incorporated the design change and directed Parkcrest
to install the redesigned kitchen outlets and backsplashes. 36

34

Stewart Testimony.
Exhibit 275, RFI 99. Requests for Information (RFIs) are formal requests for information or direction sent
by the contractor to the architect regarding issues that arise during construction.
36
Exhibit 848, Change Order No. 4; Stewart testified that the design conflict could have easily been resolved
in a matter of days and that the formalities unnecessarily delayed Parkcrest’s progress on this work.
35

16

(73)

Parkcrest installed the re-designed outlets and obtained approved inspections on or

about November 20, 2014. 37 Parkcrest then had to wait for Entergy to inspect the units
and install electric meters before permanent power was provided.
(74)

Entergy completed its installation of all electrical meters on the Project on January

5, 2015. 38
(75)

The meters were required for several critical Parkcrest interior activities, such as

installation of vinyl plank flooring and the completion of the HVAC system installation.
Finnegan opined that the delays to permanent power did not allow Parkcrest to complete
interior finishes prior to April 10, 2015. 39
E. Entergy Gas Meter Installation Delay
(76)

As early as mid-October 2014, Parkcrest was ready for Entergy to begin installing

gas meters and requested Entergy to begin this work. 40
(77)

Similar to permanent power, only HANO could contract with Entergy for these

services.
(78)

In December 2014, Entergy informed Parkcrest that they could not start the work

until the gas accounts were set up.

37

Project meeting dated 11/20/14.
Exhibit 2324, Finnegan Report, at 25; HANO email to Parkcrest dated 1/9/15
39
Exhibit 2324, Finnegan Report, at 25.
40
Exhibit 2324, Finnegan Report, at 28.
38

17

(79)

It was HANO’s responsibility to secure the gas accounts with Entergy. HANO had

set up electrical account for the units, but did not realize it was required to make a separate
and additional request for service for these gas accounts.
(80)

HANO did not set up its gas service accounts until January 2015. 41

(81)

For reasons outside of Parkcrest’s control, Entergy did not begin installing gas

meters until April 7, 2015 and even then would only install 20 per week. 42
(82)

Entergy did not complete its gas meter installation until after Parkcrest was

terminated from the Project.
F. HANO and Entergy’s Delays Involving Street Lights
(83)

A portion of Parkcrest’s scope of work included work to refurbish, relocate, and

replace light poles at the Project site.
(84)

HANO wanted to reuse some of the pre-existing light poles for aesthetic reasons,

but Parkcrest could not proceed with the pole foundations until DPW approved of the plans
to reuse those light poles. 43
(85)

Parkcrest originally planned to begin the site lighting work in February 2014;

however, discussions of revisions to the light pole design among Entergy, HANO, Perez,
and other parties continued into May 2014.

41

Project meeting dated 1/22/15.
HANO email to Parkcrest dated 3/26/15; Project meeting dated 4/2/15; Stewart Testimony.
43
Stewart Testimony.
42

18

(86)

Due to delays related to Entergy’s work on providing permanent power to the site

and continuous reviews and revisions of the site lighting plans, Parkcrest could not begin
installation of light pole bases until November 2014, roughly eight months later than it
originally planned. 44
(87)

This delay was outside of Parkcrest’s control and affected the critical path of the

Project.
(88)

Parkcrest continued to address DPW issues from January 2015 through termination

in April 2015. 45
G. Roof Vent Redesign Delay
(89)

On January 7, 2014, Parkcrest issued RFI 56 requesting information on a ventilation

system for the roofs because Perez’s design at that time did not allow a venting mechanism
in the roof system. 46
(90)

Perez responded to RFI 56 on January 29, 2014, stating that roofing system did not

permit or require venting. 47
(91)

In accordance with this direction, Parkcrest completed installation of all the roofs

in April 2014 with no venting system.

44

Exhibit 2324, Finnegan Report, at 13; Parkcrest email to HANO dated 8/6/14.
Exhibit 2324, Finnegan Report, at 13.
46
Stewart Testimony; Exhibit 334, RFI 56.
47
Exhibit 334, RFI 56.
45

19

(92)

In October 2014, six months after the installation of the roofs was complete, some

of the asphalt shingles on one of the buildings were observed to be “buckling.”
(93)

In the following weeks, in conjunction with an investigation into the cause of the

buckling of shingles, Atlas, the shingle manufacturer, informed Parkcrest that it would not
honor its warranty if the attic was not ventilated.
(94)

Perez responded that the attic was part of the conditioned space and that the

warranty should not be voided. 48
(95)

Discussions continued, but in January 2015, Atlas advised the parties that the lack

of ventilation would void the applicable warranties, due to excessive condensation and heat
build-up in the attic. 49
(96)

Expert testimony established that Perez’s design of the attic was a breach of the

applicable standard of care. 50
(97)

Parkcrest suggested a potential solution to the design issue, installation of ridge

vents, which was approved by Atlas to meet the warranty requirements in February 2015. 51

48

Exhibit 620.
Exhibit 745, Atlas letter dated 1/12/15.
50
Exhibit 2323, Watts Report, at 5.
51
Project meeting dated 2/5/15.
49

20

(98)

Perez issued a Request for Proposal (“RFP”) for Parkcrest to install the proposed

venting on February 20, 2015, and Parkcrest submitted its proposal for the work on March
2, 2015. 52
(99)

Parkcrest subsequently submitted additional information regarding its proposal on

April 8, 2015. 53
(100) HANO did not respond to Parkcrest’s proposals until after Parkcrest’s termination
and after Liberty had taken over the Project. 54
H. The Revised Sewerage and Water Board Plans
(101) The Project was also delayed as a result of late approval by the Sewerage and Water
Board (“SWB”) of redesigned site plans and unforeseen difficulties in locating the utility
tie-ins for the Project.
(102) Per Parkcrest’s utility schedule, the installation of water and sewer lines was
planned to start in May 2013 and to be completed in September 2013, for a planned
duration of approximately four months.
(103) Perez, through ILSI, provided Civil Site Drawings, C3.00 and C3.20, indicating
where the utility tie-ins should be located throughout the Project.

52

Parkcrest letter to HANO dated 6/17/15.
Parkcrest letter to HANO dated 6/17/15.
54
Stewart Testimony.
53

21

(104) Ultimately, the utility tie-ins on Alvar Street were not where the plans depicted
them to be.
(105) Parkcrest was required to perform exploratory digging to locate the utility tie-ins
on Alvar Street and Congress Street for the Project.
(106) Beginning in June 2013, Durr Construction, LLC (“Durr”), the original site work
subcontractor, struggled to locate the utility tie-ins/existing sewer and water lines as shown
in the utility plans.
(107) In June 2013, Parkcrest asked HANO for copies of the Project infrastructure “asbuilts” for guidance on the location of the tie-ins. 55 A HANO internal email shows that
Kennedy had the infrastructure as-builts from 2003 but specifically withheld the documents
from Parkcrest due to his concern over possible differences between the as-builts and the
drawings submitted for bid. Specifically, Kennedy stated, “I do not want to give any
ammunition for change orders if it is not necessary.” 56
(108) Parkcrest was never provided the as-builts while it was performing exploratory
digging or at any time prior to its April 10, 2015 termination. 57
(109) In November of 2013, HANO and Parkcrest met with SWB to discuss site utility
tie-ins on Alvar Street for the Project. 58

55

Exhibit 218, June 26, 2013 email from Kennedy to DeHarde.
Exhibit 218, June 26, 2013 email from Kennedy to DeHarde.
57
Exhibit 940, Project 2003 infrastructure as-builts. It was not until July 7, 2015 that Perez emailed the 2003
as-builts to Parkcrest, after the Takeover Agreement was executed and after Parkcrest had been terminated.
58
Stipulated Fact.
56

22

(110) After eventually locating the existing utilities on Alvar and Congress Streets,
Parkcrest issued RFI No. 51 on December 12, 2013, seeking direction on several design
issues, including how to tie into the existing utility connections. 59
(111) HANO, its representatives, Parkcrest, and SWB met in both January and February
2014 to discuss the issues, and HANO’s design team acknowledged that re-designed
drawings would be required. 60
(112) ILSI did not substantively respond to RFI No. 51 until February 27, 2014, wherein
Nick Clark, the civil and structural engineer of record for ILSI, acknowledged that the
utility tie-in plans for Alvar and Congress Streets had to be revised per the results of
Parkcrest’s exploratory digging and re-submitted for approval to SWB.
(113) In late February of 2014, ILSI provided SWB with copies of the amended Civil Site
Drawings, C3.00 and C3.20, relating to utility tie-in locations for Alvar and Congress
Streets. 61
(114) SWB had to stamp and re-approve ILSI’s amended Civil Site Drawings before
Parkcrest could begin the utility tie-in work.
(115) Between March of 2014 and September of 2014, testimony revealed that Parkcrest
made every reasonable effort to obtain the revised, stamped drawings from SWB.

59

Exhibit 2324, Finnegan Report, at 14; Exhibit 942, RFI No. 51 dated 12/13/13.
See ILSI email to HANO and Parkcrest dated 1/13/14.
61
Stipulated Fact.
60

23

(116) SWB eventually approved of the re-designed tie-in plans for Alvar and Congress
Street, which were stamped by SWB on September 3, 2014. 62
(117) Receiving revised civil drawings 15 months into the Project dramatically changed
how the utility connections had to be installed such that Parkcrest was forced to find a
replacement contractor to perform the work.
(118) Parkcrest entered into a time and materials contract with Ted Hebert, LLC
(“Hebert”) to complete the Alvar and Congress Street sewer and water line work.
(119) After receiving the stamped drawings, further issues arose with respect to Hebert’s
placement of the Alvar Street sewer line within HANO’s property requiring comment by
SWB. 63
(120) As of Parkcrest’s termination on April 10, 2015, the Alvar Street water and sewer
tie-in issues had not been resolved.
(121) With respect to Congress Street, Hebert experienced difficulty in January and
February 2015 with the sewer line installation, 64 but the work was ultimately completed in
March 2015 prior to termination. 65

62

Stipulated Fact.
The issues concerning Ted Hebert’s placement of the Alvar Street Sewer line are discussed in detail infra
at 70.
64
Project meeting dated 2/5/15.
65
Exhibit 2324, Finnegan Report, at 15.
63

24

I. Flatwork, 66 Gutters, Windows
(122) The completion of the street and sidewalk flatwork was dependent upon the
installation of the underground utilities, which was delayed due to SWB’s redesign work. 67
(123) The installation of exterior gutters and downspouts was incomplete as of
Parkcrest’s termination on April 10, 2015 due to the delays to final grading, which was in
turn delayed by Entergy and SWB underground infrastructure delays. 68
(124) As of Parkcrest’s termination on April 10, 2015, nearly all window leak issues had
been resolved, but Parkcrest had not been able to satisfy all of HANO’s unreasonable
requests regarding the windows.
III.

Notice of Default and Parkcrest Termination

(125) Parkcrest repeatedly updated HANO of the delays it was experiencing at the Project
and HANO was aware of all delays experienced by Parkcrest.
(126) Parkcrest did not fail to provide a contract performance schedule timely and as
necessary. It also did not fail to maintain a critical path schedule 69 or to coordinate with
utilities as necessary. 70

66

The Court understands “flatwork” to generally mean work concerning the concrete that rests on the ground,
such as, driveways and sidewalks.
67
Exhibit 2324, Finnegan Report, at 15, 17.
68
Exhibit 2324, Finnegan Report, at 31; See Stewart Testimony.
69
See Finnegan Testimony and OAC meeting minutes.
70
Additionally, it was impractical for Parkcrest to maintain a grade within six inches throughout the extended
period of time that Entergy had to complete the underground infrastructure while Parkcrest was also expected
and attempting to complete other work on the Project. The evidence established that Parkcrest merely needed

25

(127) On September 12, 2014, Parkcrest issued written notification to HANO of the
following delays: (1) the supply of permanent power infrastructure to the Project worksite;
(2) delay related to site lighting; (3) delays in obtaining accounts for gas meters which were
installed by Entergy; (4) issues related to roof design and ventilation; and (5) a design
change made to the sewer system. 71
(128) In the notice, Parkcrest also stated that the extent and total impact of these delays
was unknown because many of the aforementioned issues were out of Parkcrest’s control.
(129) The delays - and the fact that they were out of Parkcrest’s control - had been
discussed at OAC meetings prior to this written notice. 72
(130) On September 15, 2014, HANO sent Parkcrest a Notice of Default. 73
(131) On April 10, 2015, HANO terminated Parkcrest from the Project and made demand
upon Liberty to complete the Project. 74
(132) Gregory Fortner, the executive director at HANO, made the decision to terminate
Parkcrest without consulting any HANO representative regularly involved in the Project.75
(133) As of April 10, 2015, the Project was 93.8 percent complete. 76

a half day’s notice to achieve the grade prior to Entergy arriving on site and that Parkcrest communicated
that fact accordingly.
71
Exhibit 350; Exhibit 17, Letter from Parkcrest to HANO dated 9/12/14.
72
Stewart Testimony.
73
Stipulated Fact.
74
Exhibit 22, Notice of Final Default and Termination to Parkcrest dated 4/10/15.
75
Testimony of Gregory Fortner.
76
Exhibit 455, Pay Application 22; See Exhibit 2324, Finnegan Report, at 36. This percentage is based off
of Pay Application 22 (dated February 26, 2015), which was the last pay application submitted by Parkcrest

26

(134) As of April 10, 2015, Entergy had not completed its gas meter installation for the
Project.

It was impossible for Parkcrest to complete the Project without Entergy

completing its gas meter installation.
(135) As of April 10, 2015, the issue of the Alvar street water and sewer tie-ins remained
unresolved. 77

In turn, the exterior work that remained included certain flatwork,

landscaping, and fencing, which were impractical, if not impossible, to complete without
the resolution of the sewer and water issues.
(136) As of April 10, 2015, neither HANO nor Perez had authorized Parkcrest to begin
the installation of roof vents for all 52 units of the Project. It was impossible for Parkcrest
to complete the Project without installing roof vents for the 52 units at the Project. 78
(137) The record revealed that Parkcrest performed sufficient project management,
quality control, and supervision of the work on the Project. 79
(138) Any delays attributable to Parkcrest were concurrent with other Project delays not
attributable to Parkcrest, such as roof vent installation and delivery and installation of gas
meters. 80

prior to its April 2015 termination. Finnegan opined that Pay Application 22 provides the clearest detail into
the work completed by Parkcrest prior to its termination on April 10, 2105. See also Stewart Testimony.
77
Project meetings dated 4/2/15 and 6/18/15.
78
Exhibit 2324, Finnegan Report, at 36.
79
See e.g., Brad Fisher testimony.
80
Exhibit 2324, Finnegan Report, at 32.

27

(139) On April 10, 2015, Liberty was notified of Parkcrest’s termination from the Project
and immediately began its investigation into the Project and termination of Parkcrest.
IV.

From Termination of Parkcrest through Execution of the Takeover
Agreement

(140) On June 1, 2015, Liberty, HANO, and Parkcrest executed the Interim Takeover
Agreement for the Project and Parkcrest began performing the work required by the Interim
Takeover Agreement, including cleaning and securing the Project site.
(141) On June 9, 2015, Liberty and HANO executed the Takeover Agreement for the
Project. 81
(142) Utilizing its sole discretion under the Takeover Agreement, Liberty hired Parkcrest
to serve as the “Completion Contractor" to complete the work under the Takeover
Agreement. 82
(143) At the time of Liberty Mutual’s takeover, HANO had paid Parkcrest $9,909,046.57,
and the remaining balance on the Contract was $1,363,318.43.
(144) Rudy Dominguez, surety claims counsel for Liberty, testified that hiring Parkcrest
as the Completion Contractor was the most cost-effective and efficient means of
completing the Project. 83

81

Stipulated Fact; Exhibit 23, Takeover Agreement.
Stipulated Fact; Exhibit 24, Completion Contract between Parkcrest and Liberty dated 6/9/15.
83
Dominguez testimony.
82

28

(145) Paragraph 1 of Takeover Agreement states that
Surety agrees to arrange for the performance of all work needed to
complete the Project in accordance with the terms and conditions of the
Contract. The terms and conditions of the Contract with any amendments,
modifications, or change orders as of the date of this Agreement, are
incorporated by reference and, except as set forth herein, shall govern the
rights and liabilities of the parties hereto. However, neither the
incorporation of the Contract nor any of the Contract documents included
by reference therein shall abridge, reduce, diminish, or modify in any way
any of the rights, limitations, defenses, and/or claims available to Surety nor
shall any provision therein or herein diminish, increase or expand in any
way the obligations and/or responsibilities of the Surety beyond those
required of the Surety under the Louisiana Public Works Act (La. R.S.
38:2181, et seq., La. R.S. 38:2211, et seq., and La. R.S. 38:2241, et seq.)
(“Public Works Act”).
(146) Paragraph 2 of the Takeover Agreement limits Liberty’s liability to the penal sum
of its Bond. 84
(147) Per Paragraph 5 of the Takeover Agreement, Liberty agreed to complete the work
by August 7, 2015, with completion of the work as “substantial completion” under La. Rev.
Stat. § 38:2241.1. 85
(148) The Takeover Agreement specifies that if Liberty did not bring the Project to
substantial completion by August 7, 2015, liquidated damages would accrue at a rate of
$1,189.00 per day until the work was substantially complete.
(149) HANO released Liberty from any claim to liquidated damages accruing between
April 10, 2015 and August 7, 2015 under the Takeover Agreement.

84
85

See Rec. Doc. 207 at 19, Court’s Order and Reasons dated 6/5/17.
Exhibit 23, Takeover Agreement.

29

V.

From Execution of the Takeover Agreement through HANO’s
Termination of Liberty from the Project

(150) After execution of the Takeover Agreement, Liberty and Parkcrest immediately
took steps to remobilize at the Project.
(151) Within weeks of returning to the site, HANO directed Liberty to demolish
previously constructed and approved balconies for 13 of the 26 buildings at the Project,
which would have resulted in months of additional delay to the Project. Ultimately, HANO
withdrew this improper directive. 86
(152) On June 26, 2015, more than 18 months after Parkcrest originally raised the issue
in RFI 56, Perez issued a formal request for proposal for Liberty to install roof vents at the
Project. 87

86

See Exhibit 27, Construction Change Directive. Specifically, the record revealed that Parkcrest submitted
a proposal for “value engineered balconies,” which called for different and less expensive materials from
those stated in the Contract. HANO approved the “value engineered balconies” in the first change order
(executed 10/9/13). Because less expensive materials were used, Parkcrest gave HANO a $22,300 credit.
On July 13, 2015, after returning to the Project following the April 10, 2015 termination, HANO demanded
that the balconies be demolished and reconstructed in accordance with the original contract documents. See
Exhibit 1083, ASI 15, dated 7/13/15. Stewart testified that it took a “tremendous” effort to explain everything
to HANO again, to convince them that this was unnecessary, and that the “value engineered balconies” had
previously been approved. HANO eventually rescinded its order for the demolition of the balconies in ASI
18. See Exhibit 1084, ASI 18, dated 10/1/15. ASI 18 also stated that the balconies in Buildings 23 and 25
“remain rejected” based on a separate deficiency - the concrete was poured while it was raining. HANO
based its rejection on the findings within an ILSI memorandum concerning the balconies. However, this
memorandum does not support HANO’s determination that the balconies are deficient. ILSI concluded from
its review of the concrete that “the concrete was placed properly and should have adequate strength”. ILSI
merely recommended periodically monitoring the balconies for cracks. See Exhibit 114, ILSI Memorandum
dated 7/7/14.

30

(153) On August 13, 2015, HANO executed Change Order No. 6, directing Liberty to
install roof vents and allowing Parkcrest through November 8, 2015, over two months past
the August 7, 2015 completion date, to complete this work. 88
(154) On August 14, 2015, HANO issued a Notice of Default to Liberty alleging that
Liberty had failed to complete the work within the time specified in the Takeover
Agreement. 89
(155) On November 25, 2015, Brad Fisher of Parkcrest requested punch list inspections
for Buildings 1-16. 90
(156) On December 1, 2015, Fisher requested punch list inspections for Buildings 1726. 91
(157) On December 11, 2015, Fisher again requested punch list inspections beginning
December 14, 2015 and substantial completion of the Project as of December 21, 2015. 92
(158) As of December 15, 2015, Mark Clayton, the primary project manager for Perez
and acting architect for the Project, performed a punch list inspection for the exterior of
Building 1. Clayton stopped his review upon discovering deficiencies in the exterior of
Building 1.

88

Exhibit 25, Change Order No. 6 dated 6/30/15; see Finnegan Testimony.
Exhibit 1256, Notice of Default dated 8/14/15.
90
Exhibit 375, Email from Parkcrest dated 11/25/15.
91
Exhibit 376, Email from Parkcrest dated 12/1/15.
92
Stipulated Fact; Exhibit 378, Email from Parkcrest dated 12/11/15.
89

31

(159) Two weeks later, on December 30, 2015, Clayton formally notified HANO that he
reviewed Parkcrest’s work on Building 1 and that the work was not ready for substantial
completion.
(160) Although he served as the acting architect on the Project, Mark Clayton was not,
and never has been, a licensed architect.
(161) The City of New Orleans Departments of Safety and Permits (the “City” or “DSP”)
is “[t]he officer or other designated authority charged with the administration and
enforcement” of the applicable building codes.
(162) By December 31, 2015, the City had inspected the Project and found that the work
performed by Parkcrest “was completed in compliance with the applicable provisions of
the New Orleans Amendments to the International Building Code and Comprehensive
Zoning Ordinance.”
(163) By December 31, 2015, the DSP had issued Certificates of Occupancy and
Completion for all 52 units. 93
(164) The Date of Full Availability (“DOFA”) is the “last day of the month in which
substantially all (95 percent or more) of the units in a public housing
project are available for occupancy.” 94

93
94

Stipulated Fact “under different phrasing.” See Exhibits 30 to 80.
See 24 CFR 905.108.

32

(165) HANO represented to the U.S. Department of Housing and Urban Development
(“HUD”) that the DOFA for the Project was December 31, 2015. 95
(166) As proof that substantially all of the units were available for occupancy, HANO
submitted the 52 Certificates of Occupancy for the Project to HUD.
(167) As of December 31, 2015, the Project could be occupied and used for its intended
purpose as a multi-family residential dwelling.
(168) Liberty did not receive a Preliminary Punchlist Evaluation until January 6, 2016. 96
(169) Beginning in late December 2015, Parkcrest repeatedly requested substantial
completion punch list inspections from HANO and Perez on all 52 units. For a majority
of the units, Parkcrest had to make a minimum of three requests through March and April
2016 before HANO or Perez performed an inspection or provided a punchlist therefrom. 97
(170) On March 23, 2016, Perez approved Pay Application No. 31T for the Project
recommending payment in the amount of $32,475.96. 98
(171) Perez’s Architect’s Certificate for Payment for Pay Application No. 31T also
indicated the Project was 99.3 percent complete.

95
Stipulated Fact “under different phrasing.” Exhibit 2318, HANO Notice of Date of Full Availability to
HUD dated 2/29/16.
96
Exhibit 759, Clayton email to Parkcrest dated 1/6/16.
97
Exhibit 613, Parkcrest internal spreadsheet for punchlist inspection requests dated 6/9/16.
98
Stipulated Fact.

33

(172) On April 20, 2016, HUD determined that the Project had achieved DOFA on
December 31, 2015. 99
(173) On May 6, 2016, Clayton attempted to inspect Buildings 1-5, but did not make it
past the exterior of Building 1 after noticing deficiencies.
(174) HANO and Perez did not complete most of the punch list inspections until May 9,
2016.
(175) On May 17, 2016, after making little to no progress with HANO to get the Project
accepted, Liberty informed HANO by letter that it considered the Project to be substantially
complete. 100
(176) On or about May 20, 2016, HANO stated that it refused to accept the Project as
substantially complete. 101
(177) On May 26, 2016, Perez executed the Architect’s Certificate for Payment for Pay
Application No. 33T recommending payment in the amount of $25,959.74 for the
Project. 102
(178) Perez’s Architect’s Certificate for Payment for Pay Application No. 33T indicated
the Project was 99.68 percent complete. 103

99

Stipulated Fact.
Stipulated Fact; Exhibit 2302, Liberty letter to HANO dated 5/17/16; Dominguez testimony.
101
Stipulated Fact.
102
Stipulated Fact.
103
Exhibit 455, at 423, Pay Application 33T.
100

34

A. The June 9, 2016 Punchlists and the Red Line Items
(179) On June 9, 2016, Clayton sent a letter to HANO stating that he was unable to grant
substantial completion. 104
(180) On June 9, 2016, Clayton reissued punchlists for ten (10) of the buildings and
provided, for the first time, punch lists for the remaining sixteen (16) buildings. 105
(181) Liberty and Parkcrest’s expert architect with a specialty in publically-owned, multifamily housing design and contract administration, Jerry Watts, opined that the long delay
in issuing these punchlists was a breach in the standard of care and that architects normally
issue punch lists within seven to ten days after inspection is performed. 106
(182) Parkcrest’s expert in schedule analysis and construction, Tom Finnegan, opined
that “HANO/Perez’s delayed issuance of punchlist documents was the critical driver of
delay between [Parkcrest’s] receipt of Final Certificates of Occupancy and Completion
from the City of New Orleans in November and December and the June 29, 2016
termination.” 107
(183) The June 9, 2016 punchlists consisted of approximately 700 pages of allegedly nonconforming items.

104

Stipulated Fact.
Exhibit 417, Punchlist dated 6/9/15.
106
Exhibit 2323, Watts Report, at 8.
107
Exhibit 2324, Finnegan Report, at 3 ¶ 13.
105

35

(184) The “red line items” – items listed in red font in the June 9, 2016 punchlists constituted the exclusive list of items that HANO claims prevented it from granting
substantial completion. 108
(185) The June 9, 2016 punchlists were vague, repetitive, and contained many items that
had already been completed by Parkcrest prior to June 2016. 109
(186) The red line items did not prevent substantial completion because either all the
corrective work had been completed prior to June 2016, the City had accepted the work, or
the items would not have otherwise prevented the intended use of the units, i.e.,
occupancy. 110
(187) Upon notification of non-complying work, Parkcrest and Liberty immediately
developed a plan of action and quickly corrected the non-complying issues. 111

108

See Rec. Doc. 467, Order Granting Liberty’s Motion in Limine to Limit HANO’s Use of Non-Red Items
(Rec. Doc. 235) and Parkcrest’s Motion in Limine on Punch List Items (Rec. Doc. 233); see also Rec. Doc.
206, Order on Motion to Compel. Items that are not red line items, and therefore did not prevent HANO
from granting substantial completion, include HVAC issues and final DPW acceptance.
109
Stewart testimony; Exhibit 2323, Watts Report at 6-8. Watts opined that Perez wrongly listed a multitude
of items on the June 9, 2016 punchlists including: hardiplank siding work, water heater stands, front porch
balcony edge and fascia lights, plumbing and mechanical issues (HVAC grilles/registers, air balance, dirt in
water lines, insulate attic water lines), electrical issues (missing panel, load centers, missing light and
receptacles, GFI outlets, breakers).
110
Exhibit 2323, Watts Report at 9, 10. For example, the following red line items were either completed
prior to June 2016, accepted by the Authorities with Jurisdiction prior to June 2016, or otherwise would not
have prevented or interfered with occupation of the units: issues with step handrail height being inconsistent
or out of allowable range; issues with the step riser height or tread depth being non-compliant with the code;
missing electrical outlets; UFAS (Uniform Federal Assessability Standards) issues of non-compliant sink
aprons and wall cabinet heights; incorrect porch slope; bar top height measured at 34 1/8” on living room
side; building envelope voids; water heater function; issues involving the interior stairs being code noncomplaint; gas function; and handrail installation.
111
Stewart Testimony; Watts Testimony and Report.

36

(188) The Contract Document Specifications provide that the General Contractor, at his
option, may turn over portions of the work in phases. HANO and Perez wrongfully denied
Parkcrest and Liberty this option.
(189) On June 13, 2016, HANO inquired as to whether Liberty would extend insurance
and security for the Project. 112
(190) On June 14, 2016, Liberty sent HANO a letter in which Liberty reaffirmed its
position that the Project was substantially complete, 113 however, Liberty agreed to extend
insurance and security for the Project through July 1, 2016. 114
(191) Parts of the Project to be dedicated for public use – such as streets, curbs, catch
basins, sidewalks, and streetlights – require DPW acceptance. ILSI is required to inspect
and provide a recommendation to the DPW regarding whether the DPW should accept the
streets and other site work on the Project (“DPW Site Work”).
(192) Ronald Shumann, an ILSI engineer, performed the inspection in June 2016 for the
DPW Site Work and created a punchlist (the “ILSI punchlist”) with items that he identified
as not meeting the contract construction plans and specifications or otherwise deficient in
some manner. 115

112

Exhibit 246, HANO email to Liberty dated 6/13/16.
Stipulated Fact.
114
Exhibit 421, Liberty letter to HANO dated 6/14/16.
115
Exhibit 426, Shumann email to Clayton with punch list dated 6/22/16. The ILSI punchlist items included
nonconforming sidewalk intersections, ADA ramps at street intersections, curbs, gutters, catch basins, street
work, driveways, sidewalks, and grading of the site.
113

37

(193) Based on the ILSI punchlist, Shumann did not recommend acceptance to the DPW
and broadly estimated the cost to complete the ILSI punch list at $500,820.00. 116
(194) Liberty received the ILSI punchlist and the punchlist for building 7 on June 22,
2016. 117
(195) On June 30, 2016, HANO directed Liberty by letter to relinquish keys and control
of the Project to HANO. 118
(196) On June 30, 2016, HANO terminated Liberty and Parkcrest from the Project. 119
(197) Prior to terminating Liberty, HANO did not inquire as to whether Liberty would
extend insurance and security for the Project as it had previously. 120
(198) In fact, approximately two weeks earlier, on June 15, 2016, HANO determined that
it would not allow Liberty to extend insurance and security for the Project again. 121 Liberty
had no knowledge of that decision. 122
(199) HANO has not paid Liberty or Parkcrest in full for the work performed on the
Project through June 30, 2016.

116

Exhibit 426 at bates 5013, Shumann email to Clayton with punch list dated 6/22/16. Exemplifying some
of the strange circumstances surrounding this case, testimony revealed that a DPW representative performed
an inspection of the DPW Site Work and subsequently sent Parkcrest/Liberty an email stating that DPW had
accepted the streets. However, this email failed to comply with the formalities for DPW acceptance.
117
However, by Court order, DPW acceptance was not required for substantial completion because it was
not a red line item nor did it prevent the units from being inhabited as intended. See supra note 108.
118
Stipulated Fact; Exhibit 81, HANO termination letter to Liberty dated 6/29/16.
119
Exhibit 81, HANO termination latter to Liberty dated 6/29/16.
120
Exhibit 430, Liberty response to termination letter.
121
Exhibit 420, HANO email dated 6/15/16.
122
Dominguez testimony.

38

(200) HANO refused to accept the Project as substantially complete on or before June 30,
2016. 123
(201) Watts opined that the Project was substantially complete in December 2015,
“certainly on or before June 30, 2016”, and that HANO/Perez wrongfully denied granting
substantial completion. 124
(202) The Court finds that the Project was substantially complete by December 31, 2015.
(203) Parkcrest and Liberty dutifully prosecuted the work at all times.
(204) The testimony and evidence revealed that HANO became nearly impossible to
satisfy, at least as Parkcrest and Liberty were concerned.
(205) Some of the punchlist items that HANO claimed prevented substantial completion
bordered on the ridiculous. For example, one punchlist item stated that an electrical outlet
did not function. However, witness and expert testimony revealed that the outlet merely
needed to be reset and the solution was the equivalent to pushing a button. 125 Another item
stated that there was an open “J” box in the attic of one of the units. Not only was this item
corrected before the City Inspections in December 2015, but it was unreasonable for it to
be considered an item that would prevent occupancy because the correction simply
required adding a simple cover to the box. Additionally, one punchlist item was that the
gas lines were not operational. 126 Stewart testified that the gas had been turned off as a

123

Stipulated Fact.
Exhibit 2323, Watts Report, at 9.
125
Exhibit 417, at 36; see also Stewart Testimony.
126
Exhibit 417, at 7 and 319.
124

39

safety precaution while the Project was still under construction. All that was required to
remedy this item was merely turning a valve and it should not have been included as a
punchlist item.
(206) Watts testified that the architect’s contract administration and the owner’s
contributions to the Project impeded Parkcrest’s efforts and ability to complete the work. 127
(207) HANO’s efforts were often unhelpful, vague, and overly burdensome, which made
Parkcrest and Liberty’s efforts to finalize the Project more difficult, time-consuming, and
unreasonably tedious. For example, throughout the June 9, 2016 punchlists, Perez/HANO
would often list a general item or defect, such as a window or a tile, without giving
Parkcrest any idea about which window or tile to which it was referring. 128 Stewart
testified that these vague descriptions required Parkcrest to check every single window or
tile and that he often found that that these defects did not exist at all. With respect to the
concrete steps, when Parkcrest received the June 9, 2016 punchlists, it undertook a
“monumental effort” to survey and try to comply with the measurements on every step and
riser on the Project. ILSI/Perez complained that the concrete steps were not uniform and
were required to have a 6” riser and 11” tread. 129 Watts opined that the code established a
maximum riser height for residential steps at 7 ¾” and a minimum tread depth of 10”,
which properly takes into account varying jobsite conditions. 130 Nevertheless, Parkcrest
produced a detailed spreadsheet of the entire site, identified all the riser heights, and

127

Watts testimony.
See Exhibit 417, at 288, 291.
129
See 10/22/13 report 90 from ILSI.
130
Exhibit 2323, Watts Report, at 4.
128

40

corrected or was in the process of correcting the non-conforming steps prior to the June
2016 termination. Thirty-one of these corrections were 1/8” or less and the majority of the
other corrections were ¼” inch or less. Additionally, Kennedy testified that he spent two
hours each day creating daily field reports with detailed updates on the progress of
Parkcrest’s work and corresponding photographs. However, Kennedy failed to share a
single one of these field reports with Parkcrest. Stewart testified that such reports would
have better identified HANO’s issues and greatly assisted Parkcrest’s completion of the
Project.
(208) Generally, an item that has been approved and certified by the architect for payment
by the owner should not be rejected. According to Watts, the subsequent rejection of
approved items demonstrates an unacceptable standard of care in the project design and
contract administration.
(209) The manner and extent to which HANO enforced certain contract provisions and
compliance with the code was unreasonable and overly burdensome under the
circumstances. HANO determined that items that were not in strict compliance with the
code prevented substantial completion despite the fact that the City, the Authority with
Jurisdiction over code issues, had already approved of them. Testimony established that
the only reason for an owner to enforce the code is to ensure that the Project will pass City
inspections and not prevent Certificates of Occupancy from being obtained. 131 Moreover,

131

There was no evidence that any non-code compliant work created a potential life or safety hazard.

41

even when items complied with the code, HANO demanded strict compliance with certain
contract specifications that, like demanding code compliance for items that had already
passed City inspection, served no justifiable purpose. For example, HANO required a
consistent 36” height on all handrails. The code allows for a 34” minimum and 38”
maximum height which, as expert testimony revealed, reflects normal construction
tolerances and allows slight exceptions to exact dimensions. 132 Parkcrest specifically
confirmed with the architect that a handrail height between 34” and 38” would be
acceptable on the Project per the code regulation. 133 However, subsequently, HANO
decided to enforce the contract documents requiring consistent heights of 36” and Clayton
deferred to HANO’s decision. 134

Watts opined that strict enforcement of this 36”

measurement in contravention of normal construction tolerances was “excessive.” 135 The
handrails were compliant because they were approved by the City prior to issuing the
Certificates of Occupancy. Stewart testified that he also personally went around the entire
Project and measured every handrail to ensure that they were within the 34” and 38” range.
(210) HANO and Clayton maintained an irregular and questionable relationship as owner
and architectural design professional.

Watts’ expert opinion confirmed that in the

construction industry, it was unusual for the Owner’s representative to dictate instructions
to the design professional on how to approve or reject work. 136 The record reveals that
HANO usurped the role of the design professional at many critical moments on the Project.

132

Exhibit 2323, Watts Report.
Exhibit 594, Mark Clayton email to Parkcrest dated 12/19/14.
134
Stewart testimony.
135
Exhibit 2323, Watts Report, at 5.
136
See Clayton testimony; Exhibit 2323, Watts Report, at 5.
133

42

For example, HANO generally requested to review meeting minute entries before Clayton
forwarded them to the rest of the construction team. 137 In one particular instance, Kennedy
directed Clayton to “be very careful with the language pertaining to Entergy work” in the
meeting minutes because Kennedy expected that Parkcrest was going to use it as a part of
a delay claim. 138 Other instances include Kennedy drafting the June 9, 2016 letter for
Clayton to send to Parkcrest stating that he could not grant substantial completion;
Kennedy instructing Clayton as to which punchlists he should release to Parkcrest and
which ones he should hold back; 139 Kennedy providing Clayton with the protocol for
certain concrete placement, which Clayton then copied and pasted into a document with
the Perez letterhead; 140 and Kennedy drafting an email regarding the punch list process,
which Clayton copied and pasted nearly verbatim before forwarding it to Parkcrest. 141
(211) It was unnecessary for Parkcrest to file official delay claims against HANO because
the record demonstrates that the weekly OAC meetings and multitude of communications
between the parties provided HANO with sufficient notice of any delays. 142
VI.

HANO and Colmex Contract to Complete

(212) Following the termination of Liberty, HANO sought to relet the Project.

137

Exhibit 296, Kennedy email to Clayton dated 7/8/15.
Exhibit 239, Kennedy email to Clayton dated 10/9/14.
139
Exhibit 244, Kennedy email to Perez dated 6/9/16; Exhibit 417, Punchlists dated 6/9/16.
140
Exhibit 1673, Kennedy email to Clayton dated 10/24/13.
141
Exhibit 405, Clayton email to Parkcrest dated 4/20/16; Exhibit 406, Kennedy email to Clayton dated
4/20/16.
142
Stewart also testified that Parkcrest did not file an official delay claim against HANO in the interest of
encouraging a harmonious and collective effort to simply finish the Project as soon as possible.
138

43

(213) HANO began culling down the punchlists issued to Parkcrest/Liberty to develop a
revised scope of work for prospective bidders.
(214) On August 12, 2016, HANO issued the “Invitation for Bids for Completion and
Corrective Work at Florida Avenue New Affordable Housing Unites, IFB # 16-912-41,”
(“Re-bid Documents”). 143
(215) HANO accepted Colmex Construction, LLC’s (“Colmex”) bid, having received no
other bids. 144
(216) On October 4, 2016, HANO and Colmex executed a contract for the “Completion
and Corrective Work at Florida New Affordable Housing Units,” Contract No.: 16-912-41
(the “Colmex Completion Contract”), in the amount of $1.7 Million.145
(217) On November 16, 2016, Colmex was directed to proceed with the work on the
Project. 146
(218) No work was performed on the Project between July 1, 2016 and November 15,
2016, a period of over four months. 147
(219) HANO and Colmex executed Change Order No. 1, dated November 16, 2016, in
which the Colmex Completion Contract time was extended by eight (8) days. 148

143

Stipulated Fact.
Stipulated Fact.
145
Stipulated Fact.
146
Stipulated Fact; Exhibit 87, Colmex Notice to Proceed dated 11/15/16.
147
Adams testimony.
148
Stipulated Fact.
144

44

(220) HANO issued Change Order No. 1 because Colmex needed additional time to
obtain payment and performance bonds for the Project. 149
(221) HANO allowed for phased substantial completion in connection with Colmex’s
work on the Project. 150
(222) On March 25, 2017, HANO issued a certificate of substantial completion to Colmex
in connection with Colmex’s work on the Project. 151
(223) The record shows that HANO relaxed its requirements for Colmex to achieve
substantial completion by moving certain items to the final completion phase.
(224) When HANO granted substantial completion to Colmex on March 25, 2017,
HANO did not require that Colmex obtain final approval of streets, catch basins, sidewalks,
curbs, ADA ramps, street lights and/or street signage from the DPW. 152
(225) On or about April 6, 2017, Change Order No. 3 was executed after additional “latent
defects” were discovered by Colmex during its work on the Project. Change Order No. 3
increased the Colmex Completion Contract by $111,990.25 bringing the total cost to
$1,779,908.85. 153

149

Stipulated Fact.
Stipulated Fact.
151
Stipulated Fact; Exhibit 450, G704 Certificate of Substantial Completion dated 3/25/17.
152
Stipulated Fact “under difference phrasing.”
153
Exhibit 2375, Colmex Change Order No. 3 dated 4/6/17.
150

45

(226) HANO paid Colmex nearly $1.8 Million to complete a Project that was 99 percent
complete on June 30, 2016.
(227) As of the date of trial, the Project had still not reached final completion because
DPW has not accepted the work on the Project.
CONCLUSIONS OF LAW
Civil Action No. 15-1533: The Principal Action (Parkcrest v. HANO)
(1)

The substantive law of Louisiana applies in this matter. Klaxon Co. v. Stentor Elec.

Mfg. Co., 313 U.S. 487 (1941); Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
(2)

The terms of the Prime Contract and the Takeover Agreement form the law between

the parties. Corbello v. Iowa Prod., 850 So. 2d 686, 693 (La. 2003); see also Luv N' Care,
Ltd. v. Groupo Rimar, 844 F.3d 442, 447 (5th Cir. 2016) (citing Barrera v. Ciolino, 636 So.
2d 218, 222 (La. 1994)).
(3)

Because the terms of the Prime Contract and the Takeover Agreement are clear and

unambiguous, Louisiana law requires that they be interpreted according to their terms
without further inquiry as to the parties’ intent. Frischhertz Elec. Co.. Inc. v. Housing Auth.
of New Orleans, 534 So. 2d 1310, 1312 (La. App. 4 Cir. 1988), writ denied. 536 So. 2d
1236 (La. 1989); see also La. Civ. Code art. 2046.

46

I.
(4)

The Termination of Parkcrest – April 10, 2015
The clear and unambiguous language of Clause 32 of the Prime Contract, which

provides that Parkcrest’s right to proceed shall not be terminated or Parkcrest charged with
damages under this clause if the delay in completing the work arises from unforeseeable
causes beyond the control and without the fault or negligence of Parkcrest, must be enforced
as written. See e.g., Roger Johnson Const. Co. v. Bossier City, 330 So. 2d 338, 340 (La.
App. 2d Cir. 1976) (applying “[t]o unforeseeable cause beyond the control and without the
fault or negligence of the Contractor” as written).
(5)

Because HANO claims the right to terminate Parkcrest, notwithstanding the

language of Clause 32 of the Prime Contract, HANO bears the burden of proving that its
termination of Parkcrest was proper. F.H. Paschen, S.N. Nielsen & Assocs., LLC v. Se.
Commercial Masonry, Inc., 2015 WL 7015389, at *2 (E.D. La. Nov. 12, 2015) (citing
Vignette Publications, Inc. v. Harborview Enterprises, Inc., 799 So. 2d 531, 534 (La. App.
4 Cir. 2001)) (“The burden of proof in an action for breach of contract is on the party
claiming rights under the contract.”).
(6)

Generally, the Court finds Liberty and Parkcrest’s witnesses more credible and

gives their testimony greater weight than HANO’s witnesses. For example, DeHarde and
Kennedy repeatedly insisted at trial that HANO was not responsible for a single day of
delay despite the fact that even HANO’s own internal discussions state otherwise.154

154

On July 7, 2014, DeHarde and Kennedy stated in a memorandum that the Project was 21 days behind
schedule due to the Entergy delays. See Exhibit 2314, Entergy Memorandum dated 7/4/14; see also Exhibit
2374, Kennedy email dated June 20, 2014, acknowledging that Parkcrest cannot proceed with its work

47

Furthermore, at trial Kennedy demonstrated a general lack of knowledge and experience
with respect to a construction project of this magnitude and complexity. 155 Stewart, on the
other hand, demonstrated a thorough understanding of the events and complicated
construction issues at play. 156
(7)

The Court also gives significant weight to Parkcrest and Liberty’s highly qualified

expert witnesses in this complex construction litigation. 157
(8)

Entergy constituted a separate prime contract with HANO as a matter of Louisiana

law. Executive House Building, Inc. v. Demarest, 248 So. 2d 405, 410 (La. App. 4 Cir.
1971) (“The word ‘contractor,’ as used in connection with the building trades, means the
person who contracts directly with the owner of the property to erect or construct a building
or other structure or improvement belonging to the owner.”).
(9)

As a result of using two prime contractors – Entergy and Parkcrest – HANO owed

Parkcrest an implied duty of cooperation and non-hinderance so that the work between the
two of them could be effectively coordinated. 5 Bruner & O'Connor Construction Law §

because of the Entergy delays, that this work is critical, and that HANO will incur delay claims if the Entergy
does not deliver soon.
155
At one point during cross-examination, Kennedy was unable to read certain civil infrastructure plans, the
accuracy of which were critical to delay issues in this case.
156
Stewart also testified that he has experience on similar projects and has never not finished a project prior
to this one.
157
The expert witnesses included Jerry Watts, Liberty and Parkcrest’s expert architect with a specialty in
publically-owned, multi-family housing design and contract administration; Tom Finnegan, Parkcrest’s
expert in schedule analysis and construction; and Lin Heath, Liberty and Parkcrest’s expert and certified cost
professional. At trial, the Court excluded the testimony and report of James Brandon English, who HANO
offered as a civil and structural engineering expert regarding the project schedule, the coordination of the
construction, and substantial completion. The Court determined that there were several problems with
allowing Mr. English’s testimony including HANO’s failure to comply with the Court’s Scheduling Order
and the fact that Mr. English did not have the expertise to opine on the main issues for which he was being
tendered.

48

15:55 (“The owner's implied duties of cooperation and nonhindrance demand the owner's
active and affirmative exercise of its contract rights under all of the prime contracts in order
to coordinate and facilitate timely completion of the project.”); see also Nat'l Safe Corp. v.
Benedict & Myrick, Inc., 371 So. 2d 792, 795 (La. 1979) (“[N]ot all obligations arising out
of contract need be explicitly stated. Into all contracts, therefore, good faith performance is
implied. Furthermore, everything that by equity is considered incidental to the particular
contract, or necessary to carry it into effect, is also a part of all agreements.”).
(10)

HANO breached this duty by: (1) failing to timely execute the ROW Agreement

with Entergy; (2) then giving Entergy longer than Parkcrest’s September 14, 2014
completion date to begin and complete Entergy’s work; and (3) failing to have Entergy start
its work at an earlier time. Id.
(11)

HANO’s failures with respect to Entergy also caused unforeseen delays to the

Project within the meaning of Clause 32 of the Prime Contract that were beyond the control
and without the fault or negligence of Parkcrest. See Katz v. Judice, 252 So. 2d 532, 538
(La. App. 4 Cir.), writ denied, 259 La. 1049, 254 So. 2d 461 (1971) (“In the present case it
would appear that the actions of the plaintiff in creating the situation which originally
delayed performance on the job . . .”); Farnsworth v. Sewerage & Water Bd. of New
Orleans, 139 So. 638 (La. 1932) (finding that contractor's delay in completing job of
improving drainage pumping station for sewerage board was caused by the board, for which
contractor could not be penalized under contract).
(12)

Accordingly, each day of delay to the Project caused by HANO is “excused.” Id.;

see also Sitman & Burton v. Lindsey, 48 So. 646, 646 (La. 1908)(“Plainly a party cannot
49

claim damages for a default which his own default has caused, or for the nonperformance
of a contract with reference to which he himself is in default.”).
(13)

The clear and unambiguous language of Clause 32 of the Prime Contract, which

provides that delays arising out of acts of HANO and acts of another contractor in the
performance of a contract with HANO constitute unforeseeable causes beyond the control
and without the fault or negligence of Parkcrest, must be enforced as written. 5 Bruner &
O'Connor Construction Law § 15:55 (“Where an owner, by itself or through a construction
manager acting as the owner's agent, awards multiple prime contracts for the construction
of a project, the owner retains responsibility to coordinate the work of all contractors and,
unless otherwise clearly provided in the contract, is liable for delay caused by one contractor
to another.”).
(14)

Entergy, as a separate contractor in the performance of its contract with HANO,

caused unforeseen delays to the Project by (1) delaying the start of its work on the Project,
and (2) delaying its design of the Project’s electrical infrastructure, within the meaning of
Clause 32 of the Prime Contract that were beyond the control and without the fault or
negligence of Parkcrest. Id.
(15)

Entergy’s delay in supplying temporary power to the Project caused unforeseen

delays to the Project within the meaning of Clause 32 of the Prime Contract that were
beyond the control and without the fault or negligence of Parkcrest. See e.g., King Bros.
Bldg. Contractors v. McCullen, 393 So. 2d 413, 415 (La. App. 1 Cir. 1980) (finding that the
unavailability of certain material caused delay not the fault of the contractor).

50

(16)

Perez’s Contract with HANO obligated it to (1) “prepare and deliver . . . all major

elements of the building(s), and site design(s)” on the Project; and (2) “make and
independent assessment of the accuracy of the information provided by the Owner
concerning existing conditions” for the Project, and these unambiguous terms should be
applied as written.
(17)

The unambiguous definition of “Architect” in the Prime Contract, which stated that

“[t]he Architect shall serve as a technical representative of the Contracting Officer,” vested
Perez with the authority to act on HANO’s behalf, and should be applied as written.
(18)

Perez also owed a duty to Parkcrest and Liberty to take reasonable steps to ensure

the Project plans and specifications were as accurate as possible. Standard Roofing
Company of New Orleans v. Elliot Construction Co., 535 So. 2d 870 (La. App. 1 Cir. 1988),
writ denied, 537 So.2d 1166, 1167 (La. 1989) (“An architect is deemed to know that his
services are for the protection of the owner's interest, as well as the protection of other third
parties who have no supervisory power whatsoever and must rely on the architect’s expertise
in providing adequate supervision, plans, and specifications.”).
(19)

Perez breached its duty to Parkcrest and Liberty, as the utility tie-ins for the Project

were not located where they were depicted on Civil Site Drawings, C3.00 and C3.20, and
no evidence has been adduced that Perez took any steps to ensure the accuracy of its plans
in this regard despite actual knowledge that the utility tie-ins would likely not be located
where Perez had indicated. See Milton J. Womack, Inc. v. House of Representatives of State,
509 So. 2d 62, 67 (La. App. 1 Cir. 1987) (architect held liable to general contractor for
failing to discover hidden condition at site for inclusion in its plans, despite actual
51

knowledge that the information the accurate had relied upon in producing its plans was
likely inaccurate).
(20)

The Project was substantially hindered by the fact that it was not supervised by a

qualified architect. Clayton testified that he was not, and never has been, a licensed
architect. The record revealed that Clayton was generally ineffective in his role as Project
architect and exacerbated various problems on the Project. 158
(21)

Accordingly, Perez, as HANO’s agent, caused unforeseen delays to the Project

within the meaning of Clause 32 of the Prime Contract that were beyond the control and
without the fault or negligence of Parkcrest. Cupit v. Hernandez, 48 So. 3d 1114, 1119 (La.
App. 2d Cir. 2010) (“A contractor is not the guarantor of the sufficiency of plans and
specifications drawn by another, and if he complies with those plans and specifications, he
is entitled to immunity under La. R.S. 9:2771.”).
(22)

At the very least, the differing site conditions as between the utility tie-ins depicted

on Civil Site Drawings, C3.00 and C3.20 and their actual location at the Project site caused
unforeseen delays to the Project within the meaning of Clause 32 of the Prime Contract that
were beyond the control and without the fault or negligence of Parkcrest. Id.; see also Luria

158

The issues concerning Clayton’s performance were also recognized by HANO. An internal email dated
September 4, 2015 revealed that HANO found portions of Perez’s work on the Project deficient, stating that
the meeting minutes, inter alia, were consistently issued at the last minute and lacking in detail, the RFI
responses were often incomplete, and “ [Clayton] has not had the time to perform reviews of the Work.” See
Exhibit 288. In a subsequent email dated September 30, 2015, HANO discusses the draft of a letter to Perez
requesting that supplemental forces be sent to assist Clayton because “it is obvious that he is often
overwhelmed and could use some help.” See Exhibit 287.

52

Bros. & Co. v. U.S., 369 F.2d 701 (1966) (low bearing capacity of soils discovered during
foundation excavation resulted in delay due to foundation redesign and "trial and error"
excavation method by which suitability of soils was verified).
(23)

HANO’s agent, ILSI, also caused unforeseen delay to the Project within the meaning

of Clause 32 of the Prime Contract in its delayed response to RFI No. 51 that was beyond
the control and without the fault or negligence of Parkcrest. See Popich v. Fid. & Deposit
Co. of Md., 231 So. 2d 604, 613 (La. App. 4 Cir. 1971) (finding in part that project was
delayed as a result of owner’s rejection and reorder of certain materials, which was not the
fault of the contractor).
(24)

SWB’s delay in approval of the revised Civil Site Drawings, C3.00 and C3.20 until

September 3, 2014 also caused unforeseen delays to the Project within the meaning of
Clause 32 of the Prime Contract that were beyond the control and without the fault or
negligence of Parkcrest. See e.g., Farnsworth, 139 So. at 638 (delays caused by sewerage
board are not the fault of the contractor).
(25)

To the extent HANO contends the foregoing claims of delay were not properly

preserved under the notice provision of Clause 32 of the General Conditions, HANO waived
the ability to rely on the notice provision through its consistent actions acknowledging the
existence of the foregoing delays. Nat Harrison Assocs., Inc. v. Gulf States Utilities Co.,
491 F.2d 578, 583 (5th Cir. 1974) (citing Pamper Corporation v. Town of Marksville, 208
So.2d 715 (La. App. 3d Cir. 1968)) (noting that “a written notice provision in a contract
may be waived” in Louisiana where “the consistent actions of the two parties may be found
to constitute a ‘waiver’ of this provision.”).
53

(26)

To the extent HANO contends the foregoing claims of delay were not properly

preserved under the notice provision of Clause 32 of the General Conditions, such an
interpretation of the Prime Contract violates La. Rev. Stat. § 38:2216(H). See La. Rev. Stat.
§ 38:2216(H) (“Any provision contained in a public contract which purports to waive,
release, or extinguish the rights of a contractor to recover cost damages, or obtain equitable
adjustment, for delays in performing such contract, if such delay is caused in whole, or in
part, by acts or omissions within the control of the contracting public entity or persons acting
on behalf thereof, is against public policy and is void or unenforceable.”).
(27)

The clear and unambiguous language of Clause 32 of the Prime Contract, which

provides that if after Parkcrest is terminated, it is determined that Parkcrest was not in
default, or that the delay was excusable, the rights and obligations of the parties will be the
same as if the termination had been for convenience, must be enforced as written. See
Parkcrest Builders, LLC v. Hous. Auth. of New Orleans, No. 16-14118, 2017 WL 3394033,
at *3 (E.D. La. Aug. 8, 2017)(applying Clause 32 of the Prime Contract as written).
(28)

Because the delays caused by Entergy on the Project were excusable, Parkcrest was

not in default on September 15, 2014 when HANO placed it in default, by operation of
Clause 32 of the Prime Contract.
(29)

Because the delays caused by HANO, either directly or through its design

professional on the Project were excusable, Parkcrest was not in default on September 15,
2014 when HANO placed it in default, by operation of Clause 32 of the Prime Contract.

54

(30)

Because the delays caused by SWB on the Project were excusable, Parkcrest was

not in default on September 15, 2014 when HANO placed it in default, by operation of
Clause 32 of the Prime Contract.
(31)

The delayed redesign of the kitchen outlets; delayed installation of the Project’s gas

meters by Entergy; and delayed roof vents caused unforeseen delays to the Project within
the meaning of Clause 32 of the Prime Contract that were beyond the control and without
the fault or negligence of Parkcrest.
(32)

In accordance with Clause 32 of the Prime Contract, because the delays to the Project

were excusable (including the delays caused by the delayed redesign of the kitchen outlets;
delayed installation of the Project’s gas meters by Entergy; and delayed roof vents on the
Project), Parkcrest was not in default on April 10, 2015 when HANO placed it in default
and terminated it from the Project.
(33)

Because Parkcrest was not actually in default when HANO placed it in default,

Parkcrest’s termination must be converted to one for convenience by operation of Clause
32 of the Prime Contract.
(34)

The clear, unambiguous language of Clause 33 of the Prime Contract, which

provides that to the extent that Parkcrest’s delay or nonperformance is excused under
another clause in the Prime Contract, liquidated damages shall not be due to HANO, must
be applied as written. Frischhertz Elec. Co.. Inc., 534 So. 2d at 1312; see also La. Civ. Code
art. 2046.

55

(35)

Because Parkcrest’s delays were excused under Paragraph 32 of the Prime Contract,

HANO is not due liquidated damages stemming from its default of Parkcrest on September
15, 2014, by operation of Clause 33 of the Prime Contract. See La. Civ. Code art. 2008 (“An
obligor whose failure to perform the principal obligation is justified by a valid excuse is also
relieved of liability for stipulated damages.”).
(36)

The clear, unambiguous language of Clause 34 of the Prime Contract, which

provides that, in the instance of a termination for convenience, HANO is liable to Parkcrest
for the reasonable and proper costs resulting from such termination, must be applied as
written. Frischhertz Elec. Co.. Inc., 534 So. 2d at 1312; see also La. Civ. Code art. 2046.
(37)

As a matter of Louisiana law, Clause 32 of the Prime Contract is void and

unenforceable to the extent it waives, releases or extinguishes Parkcrest’s delay claims if
HANO, or those acting on HANO’s behalf, contributed in whole or in part to the claimed
delays. See La. Rev. Stat. § 38:2216(H) (“Any provision contained in a public contract
which purports to waive, release, or extinguish the rights of a contractor to recover cost
damages, or obtain equitable adjustment, for delays in performing such contract, if such
delay is caused in whole, or in part, by acts or omissions within the control of the contracting
public entity or persons acting on behalf thereof, is against public policy and is void or
unenforceable.”).
(38)

As a result of the prohibition against the contractual waiver of claims in La. Rev.

Stat. § 38:2216(H), HANO is precluded from asserting that Parkcrest is not entitled to
extensions of time or other equitable adjustment for concurrent delays. Parkcrest may still
assert claims for additional time as a result of delays to the Project that were contributed to
56

in part or in whole by HANO, or those acting on its behalf, notwithstanding the fact that
Parkcrest may have contributed to the delay as well.
(39)

Moreover, HANO, as the party seeking to recover delay damages, has an affirmative

duty to show that its actions did not constitute a concurrent cause for the delays. James
Construction Group, L.L.C. v. State, Department of Transportation and Development, 977
So. 2d 989, 995 (La. App. 1 Cir. 2007) (“Our thorough examination of the documentation
offered in support of DOTD's motion for partial summary judgment fails to support JCG's
assertion that genuine issues of material fact exist as to DOTD's contribution to the delays
that occurred in the project. To the contrary, DOTD's supporting documents establish that
the delays for which stipulated damages were assessed against JCG were not attributable to
DOTD.”); see also Blinderman Const. Co. v. United States, 695 F.2d 552, 559 (Fed. Cir.
1982) (quoting Coath & Goss, Inc. v. United States, 101 Ct. Cl. 702, 714–15 (1944);
Commerce International Co. v. United States, 338 F.2d 81, 90 (1964)) (“Where both parties
contribute to the delay ‘neither can recover damage, unless there is in the proof a clear
apportionment of the delay and the expense attributable to each party.’”).
(40)

HANO cannot carry this burden, as its actions, or the actions of those acting on its

behalf, constituted at a minimum, a concurrent cause for the Project delays. Id.
(41)

An owner waives its right to reject or is estopped from rejecting any work

subsequent to inspection and approval by its representatives. See e.g., P. Oliver & Son v.
Bd. of Com’rs of Lake Charles Harbor and Terminal Dist., 148 So. 12 (La. 1933). Here,
HANO and/or its representatives closely monitored, inspected, and approved of Parkcrest’s
work at various junctures only to subsequently reject the same work later in the Project.
57

HANO’s subsequent rejection of this work led to extreme inefficiencies, delays, and
increased costs. HANO hired another contractor (Colmex) to perform much of the same
work which HANO initially accepted and then belatedly rejected. HANO may not rely on
such work as evidence of a failure to reach substantial completion.
(42)

To the extent any delay to the Project is deemed a concurrent delay, HANO’s

termination of Parkcrest’s right to proceed with the work on April 10, 2015 constituted a
breach of the Prime Contract.
(43)

In regards to Parkcrest’s claim that HANO is liable to it for the reasonable and proper

costs resulting from its wrongful termination as provided in Paragraph 34 of the Prime
Contract, Parkcrest has failed to present any evidence to support the existence or amount of
those costs. As such, Parkcrest is not entitled to recover any costs as a result of the wrongful
termination.
II.
(44)

The Termination of Liberty – June 30, 2016
Because HANO’s termination of Parkcrest was wrongful, a breach of the Prime

Contract, and must be considered a termination for convenience, Liberty’s performance
obligations therefore were not triggered under the Bond. Pub. Bldg. Auth. of City of
Huntsville v. St. Paul Fire & Marine Ins. Co., 80 So. 3d 171 (Ala. 2010) (finding that a
termination for convenience by the public entity in that case insufficient to trigger the
surety’s performance bond obligations).
(45)

As a matter of Louisiana law, therefore, HANO is not entitled to damages under the

Takeover Agreement, as enforcing its terms under the circumstances presented herein would
58

constitute an unlawful cause. La. Civ. Code art. 1968 (“The cause of an obligation is
unlawful when the enforcement of the obligation would produce a result prohibited by law
or against public policy.”).
(46)

As a result, HANO is not entitled to stipulated damages arising under the Takeover

Agreement. La Civ. Code art. 2006 (“Nullity of the principal obligation renders the
stipulated damages clause null.”).
(47)

Louisiana Revised Statute § 38:2241.1, in turn, defines the meaning of “substantial

completion” as “as the finishing of construction, in accordance with the contract documents
as modified by any change orders agreed to by the parties, to the extent that the public entity
can use or occupy the public works or use or occupy the specified area of the public works
for the use for which it was intended.” La. R.S. § 38:2241.1
(48)

As a matter of Louisiana law, whether the Project achieved “substantial completion”

“is a factual determination to be made by the trial court.” O & M Const., Inc. v. State, Div.
of Admin., 576 So. 2d 1030, 1035 (La. App. 1 Cir. 1991)).
(49)

The test for substantial completion of the Project under La. Rev. Stat. § 38:2241.1

is whether construction has been completed in accordance with the contract documents to
the extent that the Project could be used for its intended purpose as a multi-family residential
dwelling. La. R.S. § 38:2241.1(B). 159

159

La. R.S. § 38:2241.1(B) provides:
“Substantial completion” is defined for the purpose of this Chapter, as the finishing of
construction, in accordance with the contract documents as modified by any change orders

59

(50)

Substantial completion can be obtained prior to final completion and does not

require total satisfaction of the contract specifications. All Seasons Const., Inc. v. Mansfield
Hous. Auth., 920 So. 2d 413, 416 (La. App. 2d Cir. 2006) (citing O & M Const., Inc. v.
State, Div. of Admin., 576 So. 2d 1030, 1035 (La. App. 1 Cir. 1991)) (noting that that
substantial completion “can result even though deficiencies exist.” “The extent of the defect
or non-performance, the degree to which the purpose of the contract is defeated, the ease of
correction, and the use or benefit of the work performed to the owner are all factors that
may be considered to determine when substantial completion occurred.”).
(51)

Strict adherence with the contract specifications pertains to the final completion

phase; the primary consideration for substantial completion, as it is defined in state law and
generally in the industry, is whether it may be used for its intended purpose.
(52)

In the event of a conflict between the terms of the Prime Contract and Takeover

Agreement, the unambiguous terms of the Takeover Agreement provide that the Takeover
Agreement shall prevail, and these terms should be applied as written. Frischhertz Elec.
Co. Inc., 534 So. 2d at 1312; see also La. Civ. Code art. 2046.
(53)

As matter of Louisiana law, the Takeover Agreement could not be terminated once

Liberty had achieved substantial completion of the Project. See La. Civ. Code art. 2014

agreed to by the parties, to the extent that the public entity can use or occupy the public
works or use or occupy the specified area of the public works for the use for which it was
intended. The recordation of an acceptance in accordance with the provisions of this
Section upon substantial completion shall be effective as an acceptance for all purposes
under this Chapter.
La. R.S. § 38:2241.1(B).

60

(“A contract may not be dissolved when the obligor has rendered a substantial part of the
performance and the part not rendered does not substantially impair the interest of the
obligee.”).
(54)

Following the issuance of the Certificates of Occupancy, there was no evidence that

any non-code compliant work created a potential life or safety hazard or otherwise prevented
the units from being occupied.
(55)

HANO certified to the U.S. Department of Housing and Urban Development

(“HUD”) that the Date of Full Availability (“DOFA”) of the Project was December 31,
2015. The DOFA is defined under federal regulation as “[t]he last day of the month in
which substantially all (95 percent or more) of the units in a public housing
project are available for occupancy.” 160
(56)

Building codes are enforced by the Authorities having Jurisdiction - here, the New

Orleans Department of Safety and Permits - not by the Owner or Architect. 161
(57)

The Court finds that the Project was substantially complete as of December 31, 2015,

as it could be used for its intended purpose as a multi-family residential dwelling at that
time. The record demonstrates that by December 31, 2015, construction had progressed to
the point that the owner could use the Project for its intended purpose. By December 31,
2015, all 52 units had Certificates of Occupancy and Completion issued by the City.

160

See 24 CFR § 905.108.
Exhibit 2323, Watts Report, at 10. The Department of Safety and Permits, City of New Orleans, is charged
with administering and enforcing building code ordinances within the city limits. Chapter 7, Home Rule
Charter of the City of New Orleans.
161

61

December 31, 2015 is also the date that DOFA had been reached as represented by HANO
and confirmed by HUD. Expert testimony also supports a finding of substantial completion
as of December 31, 2015. 162
(58)

HANO breached the Takeover Agreement when it terminated Liberty from the

Project on June 30, 2016 after substantial completion had been achieved. See La. Civ. Code
art. 2014.
(59)

As a result of HANO’s breach of the Takeover Agreement, Liberty’s performance

thereunder is excused, and HANO is not entitled to recover any damages it contends it
incurred to complete the Project after Liberty’s termination. Commerce Ins. Agency, Inc. v.
Hogue, 618 So.2d 1048, 1052 (La. App. 1 Cir. 1993) (“where one party substantially
breaches a contract, the other party to it has a defense and an excuse for nonperformance.”);
Sitman & Burton v. Lindsey, 123 La. 53, 54, 48 So. 646, 646 (1908) (“Plainly a party cannot
claim damages for a default which his own default has caused, or for the nonperformance
of a contract with reference to which he himself is in default.”).
(60)

Any delay in completing the Project during the Takeover period was the result of

unforeseeable causes beyond the control and without the fault or negligence of
Parkcrest/Liberty. See e.g., E. C. Ernst, Inc. v. Manhattan Const. Co. of Texas, 551 F.2d
1026, 1042-1043 (5th Cir. 1977), opinion modified on reh'g, 559 F.2d 268 (5th Cir. 1977)
(designer found liable for delay in rendering interpretation).

162

Watts Report and Finnegan Report.

62

(61)

Whether directly or through its design professional, HANO’s conduct throughout

the Takeover period and the Project as a whole - including, inter alia, its unreasonable and
uncooperative administration of the Project - constituted a prevailing cause of delay to the
Project’s completion. For example, the roof vent design issue was first raised in October
2014, but remained unresolved by HANO/Perez until August 13, 2015, some ten months
later. Parkcrest’s expert in schedule analysis and construction, Tom Finnegan, noted that
Change Order No. 6 gave Parkcrest until mid-November to complete the roof vent redesign
work and that Certificates of Occupancy were issued to two-thirds of the units within days
of that completion. 163 The redesign, which required Parkcrest to cut multiple ridge vents
into the roofs of all 52 units, was only necessary in order to remedy the roof design errors
made by HANO’s design team. Parkcrest had previously installed all 52 roofs based on
these faulty design plans; therefore, this belated, remedial work constituted a substantial
burden on Parkcrest as it attempted to finish the remaining work on the Project. HANO
was fully aware of the significant scope of work that was required to remedy the design
defect. And yet, not only did HANO reject Parkcrest’s request to modify the contract
completion date after it took over ten months to provide Parkcrest with a solution, but the
very next day, on August 14, 2015, HANO placed Liberty/Parkcrest in default.

163

The language of Change Order No. 6 provides that the roof vent redesign work would not prevent HANO
from granting substantial completion. However, it is axiomatic that a roof is a basic and necessary
consideration in whether a housing unit is suitable for occupancy and that roofs with holes in them would
prevent a finding that the units could be used for their intended purpose. Expert testimony stated that the
roof vent design was required in order to have completed roofs that could be warranted by the roofing
manufacturer and that as such, the work was critical to receiving Certificates of Occupancy and substantial
completion. Testimony revealed that HANO internally made the decision that regardless of whether or not it
obtained certificates of occupancy and regardless of whether or not the buildings are declared to be
substantially complete, HANO was not going to put tenants into the buildings until the roof vent redesign
work was complete. See Adams testimony.

63

(62)

HANO/Perez’s approximate six-month delay between the request by Parkcrest and

Liberty for substantial completion and the provision of punch lists constituted a delay in
completing the work arising from unforeseeable causes beyond the control and without the
fault or negligence of Parkcrest.
(63)

As a result of HANO/Perez’s six month delay in providing punch lists for the

Project, HANO is not entitled to liquidated damages encompassing that time. La. Civ.
Code art. 2008 (“An obligor whose failure to perform the principal obligation is justified
by a valid excuse is also relieved of liability for stipulated damages.”).
(64)

The amount of an owner’s damages in a claim for breach of construction contract

can be limited to the diminution in value suffered from the defective or non-conforming
work if repairing the defective or non-conforming work would be economically wasteful.
HANO is precluded from seeking recovery of the Colmex Completion Contract sum from
Parkcrest or Liberty. In light of the minor work remaining when Liberty/Parkcrest were
terminated in June 2016, executing a contract with Colmex was economically wasteful.
(65)

Once the Project was substantially complete, HANO was required to give

Liberty/Parkcrest notice and an opportunity to repair any defective and/or non-conforming
work before hiring a third party completion contractor. 164 Thus, HANO cannot recover

164
See Exhibit 459, General Conditions Section 23(a). Parkcrest/Liberty warranted “that work performed
under this contract conforms to the contract requirements and is free of any defect in equipment, material, or
workmanship performed by the Contractor.” If the warranty is breached, they have a duty to “remedy . . .
failure to conform, or any defect” at their expense.

64

the amount of the Colmex Completion Contract because it did not provide such notice or
an opportunity for Parkcrest to repair the warranty work that it hired Colmex to perform.
(66)

HANO’s alleged damages arising from Colmex’s work on the Project must be

restricted to the amount of any diminution in value that HANO proves it suffered as a result
of Parkcrest and/or Liberty’s work.
(67)

HANO’s refusal to grant substantial completion to Liberty/Parkcrest and its

subsequent contract with Colmex was unjustified and economically wasteful. By
terminating Liberty/Parkcrest from the Project on June 30, 2016, HANO took a Project that
was nearly completely finished and caused approximately four and one-half months of
further delay until the rebid process was complete and another contractor remobilized. In
addition to the delay, the rebid and change in contractor greatly increased the cost to final
completion, approximately $1.8 million in additional costs and expenses, and yet the
Project has still failed to reach final completion to date. If HANO had instead allowed
Parkcrest and Liberty to complete the Project, it would not have cost HANO anything
beyond the original contract price.
(68)

HANO bears the burden of proving the existence of all defective and/or non-

conforming work as well as the necessity and the cost of all repairs for said defective or
non-conforming work once Parkcrest and Liberty prove that the Project was substantially
complete. Foster v. Jackson, 339 So. 2d 865 (La. App. 3d Cir. 1976).
(69)

HANO failed to meet its burden of proving the existence, necessity, and cost of any

defective and/or non-conforming work after Parkcrest and Liberty established that the
65

Project was substantially complete by December 31, 2015. The Court gives very little
weight to the testimony of HANO’s witnesses who often provided only vague and
conclusory statements regarding the cause of the defects, the necessity of the repairs, and
their cost. 165
(70)

During Colmex’s completion period, HANO significantly lowered its standard for

acceptance of work to complete the Project. For example, when HANO granted Colmex
substantial completion on March 25, 2017, HANO did not require formal DPW acceptance
and removed many of the red line items that were required for Parkcrest to obtain
substantial completion.
(71)

The unambiguous terms of the Takeover Agreement provide that the prevailing

party thereunder is entitled to its reasonable attorney’s fees, and that provision must be
applied as written. Frischhertz Elec. Co. Inc., 534 So. 2d at 1312; see also La. Civ. Code
art. 2046.
(72)

HANO is liable to Liberty for Liberty’s reasonable attorney’s fees, costs and interest

due to HANO’s breach of the Takeover Agreement.
(73)

HANO seeks damages for Parkcrest’s alleged Section 3/DBE/WBE penalty, which

constitutes stipulated damages for nonperformance under Louisiana law. See La. Civ. Code

165

See infra, ¶ 83 at pp. 69-70.

66

art. 2005 (“Parties may stipulate the damages to be recovered in case of nonperformance,
defective performance, or delay in performance of an obligation.”).
(74)

Every contractor working on contracts partially or wholly funded by HUD is

required, per HANO’s policy, to award ten percent of the contract value to Section 3
enterprises, 20 percent to Disadvantaged Business Enterprises (DBE’s), and five percent
to Woman Business Enterprises (WBEs). 166 If the contractor fails to meet these minimum
standards, then he may be required to contribute two percent of the total contract amount
to HANO’s Section 3 Training Fund. 167
(75)

HANO is not entitled to recover any amount of the alleged Section 3/DBE/WBE

penalty based upon Parkcrest’s full or partial compliance with the requirements among
other circumstances.

See La. Civ. Code art. 2011 (“Stipulated damages for

nonperformance may be reduced in proportion to the benefit derived by the obligee from
any partial performance rendered by the obligor.”). Jennifer Adams testified that this is
the first time that HANO has assessed the full two percent penalty. In one prior instance,
HANO reversed its decision to assess the full two percent penalty after a single intervening
phone call from the Mayor’s Office. 168 Although Parkcrest was approximately 50 percent
in compliance, testimony revealed that Parkcrest demonstrated a concerted effort and
substantial commitment to complying with the minimum requirements. 169 Parkcrest not
only hired a former HANO employee to specifically run its compliance efforts, but

166

Exhibit 2, at 194.
Exhibit 2, at 202
168
Adams testimony.
167

67

Parkcrest also held job fairs on the site prior to beginning work on the Project in an effort
to hire the requisite subcontractors. 170
(76)

HANO is not entitled to recover utility payments or additional design services

allegedly arising from the delay of Parkcrest or Liberty due to its breaches of the Prime
Contract and Takeover Agreement.
(77)

Lin Heath, Liberty and Parkcrest’s expert and certified cost professional, opined

that $166,596.92 was the value of the remaining work as of Liberty’s June 30, 2016
termination based on the scope of the undisputed punch list work. 171
(78)

Liberty is owed the remaining contract balance at the time Liberty was terminated

by HANO on June 30, 2016. The total contract price ($11,394,172.02) minus the amount
HANO paid to date ($10,789,723.50) equals a contract balance of $604,448.52. 172 From
that contract balance, HANO is entitled to an offset of $166,596.92 for the value of the
undisputed punch list work that remained incomplete at the time of the June 30, 2016
termination, which yields a total contract balance of $437,851.60 owed to Liberty.
(79)

The Court finds that HANO has failed to establish an accurate or reasonable cost

for any defective or non-conforming work performed by Parkcrest. For instance, the record
established that much of HANO’s documentation regarding the Project, especially the
punchlists and other documents concerning costs, often reflected HANO’s attempt to

170

HANO was aware of Parkcrest’s efforts and even advertised the job fairs.
Exhibit 2324, Heath Report; See Exhibit 454.
172
Heath initially stated in his report that the amount HANO paid to date through Pay Application 31T was
$10,763,763.76. Subsequent testimony revealed that an additional $25,959.74 had been paid by HANO
which lowered the contract balance from $630,408.26 to $604,448.52. See Dominquez and Heath Testimony.
171

68

inflate costs and other expenses as much as possible. For example, in an email between
Guy Barcelona 173 and Clayton regarding the cost to correct the minor height discrepancies
of the handrails, Barcelona directs Clayton to assume that the cost to correct the railings is
for all new railings, despite the fact that the railings merely needed an adjustment for height.
In another instance, despite stating in the ILSI punchlist that all of the light poles and light
pole bases needed to be replaced for an estimated cost of $227,200.00, Shumann
acknowledged that he believed only 16 required removal. 174 Ultimately, not a single one
of these light poles or bases were replaced by Colmex, and Shumann still recommended
DPW acceptance and HANO accepted the work as substantially complete all the same.175
Perez’s evaluation of incomplete work averaged approximately $27,000 per building.
However, according to Watts, a more realistic cost is $3,000 per building. Watts explained
that the difference is due to HANO including punchlist items that were completed prior to
June 2016 and also to the extremely high values that Perez assigned to the incomplete or
“non-conforming” work. The Industry Standard, according to Watts, is two times the
estimated value, while here, the assigned cost was in some cases ten times the actual cost
to fix the problem. 176

173
When Kennedy left HANO for another job opportunity beginning in July 2016, Guy Barcelona replaced
him as HANO’s construction manager on the Project.
174
Exhibit 436 at bates 5083, Shumann initial punch list.
175
Shumann testimony.
176
With respect to the Colmex Completion Contract, testimony revealed that HANO did not require Colmex
to verify or document the actual cost of the completion/corrective work it performed.

69

Civil Action No.: 16-14118 (Ted Hebert v. Parkcrest and Liberty) 177
FINDINGS OF FACT
(1)

Ted Hebert, LLC (“Hebert”) filed suit against Parkcrest and Liberty for their failure

to pay Hebert for work that it performed on the Project prior to Parkcrest’s termination on
April 10, 2015.
(2)

Turning back to December 2014, 178 the underground infrastructure work was out

of sequence, which complicated the work that needed to be completed. With all of the
other utility lines already in place (e.g., electric, gas, cable), the sewage and water work on
Congress and Alvar Streets now much more costly, labor-intensive, and time-consuming
to perform. As a result, Durr refused to complete the work.
(3)

Consequently, Parkcrest brought in Ted Hebert, LLC (“Hebert”) as a replacement

sewer and water subcontractor pursuant to an oral time and materials contract. Hebert
mobilized to begin work on December 10, 2014 and was instructed to furnish and install
all sewer and water utilities on Congress and Alvar Street. 179
(4)

There was no fixed price associated with the oral agreement between Parkcrest and

Hebert. There was also no agreed upon time for when invoices had to be submitted by
Hebert for payment.

177

At trial, the Court severed Hebert’s claims against Parkcrest and Liberty related to the Guste Project.
(Rec. Doc. 478.)
178
See supra at 24, the Prime Contract phase.
179
McKinney testimony.

70

(5)

Parkcrest did not provide Hebert with a time frame or calendar date for which

Hebert was to complete the work on Congress Street and Alvar Street either before or
during construction. Given the circumstances, Parkcrest merely requested that the sewer
and water work be completed “as soon as possible.” 180
(6)

When Scott McKinney, Hebert’s superintendent, arrived on site in December 2014,

Stewart provided him with the September 2014 stamped and approved SWB Civil
Drawings for Congress and Alvar Streets. 181
(7)

The updated civil drawings incorrectly identified the underground utility

connections on Alvar Street and Congress Street.
(8)

Prior to Parkcrest’s termination on April 10, 2015, Hebert was able to complete the

installation of the water and sewer utilities on Congress Street and the owner and architect
accepted Hebert’s work.
(9)

Hebert did not complete the water and sewer utility work on Alvar Street before

April 10, 2015 due to various complications stemming from the inaccurate Civil Drawings.
(10)

McKinney testified that for Congress Street, the tie-ins for the sewer lines were not

located where depicted, and the location, amount, and size of the water services were
likewise incorrect.

180
181

McKinney testimony.
See exhibit 349, Congress and Alvar civil drawings stamped and dated 9/3/14.

71

(11)

McKinney could not locate the existing sewer main line on Alvar Street as depicted

on the Civil Drawings.
(12)

The 2003 as-builts depicted a manhole on the corner of Alvar Street that was not

shown on the Civil Drawings provided to McKinney. McKinney testified that if he had
the as-builts at that time and assuming the stubs were located where depicted, Hebert could
have completed the work on both streets in a substantially shorter amount of time
(approximately 2-4 weeks).
(13)

Compounding the difficulty in locating the utility tie-ins based on the inaccurate

Civil Drawings, McKinney testified that whoever originally constructed Alvar Street 182
failed to stamp the curb with certain marks (“W” or “S”) that would have identified the
location of utility infrastructure tie-ins. These stamps are a DPW requirement.
(14)

McKinney informed Stewart that he found only broken/abandoned sewer pipe at

the location depicted by the civil drawings on Alvar Street.
(15)

Ultimately, it was discovered that the sewer line on Alvar was not broken or

abandoned.
(16)

To the extent that Parkcrest failed to request CCTV videos during the exploratory

digging phase prior to April 10, 2015, the evidence did not demonstrate that such videos
would have helped locate the utility tie-ins any faster without accurate drawings.

182

Parkcrest was not the original contractor for Alvar and Congress Streets.

72

(17)

After discussing the issue with the SWB, McKinney suggested to Stewart that a

parallel or “side sewer” line could be installed in lieu of the “broken” main sewer line.
(18)

Stewart authorized McKinney to install the side sewer line outside the servitude

and on the property of HANO as long as SWB approved of the plan. SWB subsequently
inspected and signed off on the “side sewer” line.
(19)

At the OAC Meeting held on November 14, 2013, HANO informed Parkcrest that

HANO did not want SWB lines on HANO property. 183
(20)

Representatives for HANO, Perez, and/or ILSI were present during Hebert’s

installation of the side sewer line and did not object until the line was nearly finished. 184
(21)

HANO and the Professionals of Record issued a notice of defective work to

Parkcrest relative to the “side sewer” on the Project on February 25, 2015. 185
(22)

On March 2, 2015, Parkcrest submitted RFI No. 119 concerning the “side sewer”

line and requested information on how to proceed. 186
(23)

On April 10, 2015, HANO terminated Parkcrest and made demand upon Liberty to

complete the Project.

183

Exhibit 1661, Meeting Minutes #34 dated 11/14/13.
McKinney testimony.
185
Exhibit 802, ILSI Report dated 2/25/15.
186
Exhibit 799, RFI 119 dated 3/2/15.
184

73

(24)

The Notice of Final Default and Termination issued by HANO to Parkcrest on April

10, 2015 in connection with the Project was recorded in the mortgage records for Orleans
Parish on April 10, 2015.
(25)

Hebert never returned to the Project after April 10, 2015.

(26)

On April 15, 2015, Hebert provided Parkcrest with all of the invoices for the work

performed on Congress Street and Alvar Street totaling $103,193.08. 187
(27)

Theodule Hebert, IV (“Trey”) testified that Hebert was unable to provide receipts

on some of this material due its office flooding in 2016, which resulted in the loss of a
significant amount of documents. Trey’s testimony further revealed that Hebert has
submitted similar invoices to Parkcrest on other projects without any objection from
Parkcrest.
(28)

Hebert’s 30 percent overhead and 15 percent profit markup is reasonable within the

industry. 188
(29)

Stewart testified that typically, once invoices have been submitted, Hebert would

be paid 45 to 60 days after he, HANO, and Perez certified that the work was completed. 189
(30)

HANO paid Parkcrest and/or Liberty for Hebert’s work on the Project. 190

187

Exhibit 948, Hebert’s invoices to Parkcrest dated 4/15/15.
Theodule Hebert III testimony.
189
Stewart testimony.
190
Stewart testimony.
188

74

(31)

To date, Parkcrest has failed to pay Hebert any of the invoiced amount. The date

of recordation of Hebert’s sworn statement of amount due is February 19, 2016. 191
(32)

On June 13, 2016, Ted Hebert, LLC (“Hebert”) filed a state petition against

Parkcrest and Liberty seeking payment under the Bond on the Project, plus attorneys’ fees
and costs.
(33)

At trial, Stewart testified that he would pay Hebert for the water lines that were

properly installed on Congress. 192
CONCLUSIONS OF LAW
(1)

At the conclusion of Hebert’s case-in-chief at trial, Liberty moved for a Rule 52

Judgment on Partial Findings, arguing that Hebert’s claims against the bond are prescribed
under the Louisiana Public Works Act (“LPWA”). 193
(2)

Louisiana Revised Statute 38:2247 provides, in pertinent part:
Nothing in this Part shall be construed to deprive any claimant, as defined
in this Part and who has complied with the notice and recordation
requirements of R.S. 38:2242(B), of his right of action on the bond
furnished pursuant to this Part, provided that said action must be brought
against the surety or the contractor or both within one year from the
registry of acceptance of the work or of notice of default of the
contractor . . . .

191

Exhibit 949, Hebert Sworn Statement of Amount Due recorded 2/19/16.
Stewart testimony.
193
The Court took the Rule 52 motion under advisement and ordered briefing on the issue. See Rec. Docs.
485, 487, 492.
192

75

La. R.S. § 38:2247 (emphasis added). Therefore, under La. R.S. § 38:2247 of the LPWA,
a subcontractor claimant must assert its claims against a public works surety within one year
of recordation of either (1) acceptance of the project or (2) notice of default of the general
contractor.
(3)

Liberty argues that the prescriptive period for Hebert’s claims provided by La. R.S.

§ 38:2247 was triggered on April 10, 2015 – the date Parkcrest’s default and termination
was recorded in the public record – which in turn makes Hebert’s lawsuit untimely, as it
was filed more than a year from that date on June 13, 2016.
(4)

Hebert argues that La. R.S. § 38:2247 requires claimants to bring suit within one

year from either the registry of acceptance of the work or notice of default of the contractor.
Hebert contends that it had one year from either Parkcrest’s original default on September
15, 2014 or the issuance of the Certificate of Substantial Completion on March 25, 2017.
(5)

Hebert filed its state petition against Parkcrest and Liberty on June 13, 2016.

Therefore, Hebert’s claim on the bond is prescribed unless March 25, 2017, the date HANO
granted substantial completion, is an applicable triggering date for the prescriptive period
on Hebert’s claim to begin to run.
(6)

This case involves particularly unique circumstances which, at first glance, appear

to complicate the prescriptive issue before the Court. For instance, this case involves
multiple notices of default and terminations, an original contractor that was both the
General Contractor and then brought back as the Completion Contractor, a surety that took
over the Project for the purpose of completion and then was terminated, the same bond
76

remained in place for both the original contract and the takeover contract, and despite
serving as both the General Contractor and the Completion Contractor, the original
contractor never completed the Project or obtained substantial completion.
(7)

As noted by the parties, the case law on the applicable statute is exceedingly scarce

and there are no cases that have directly addressed the applicable triggering date under
these circumstances. However, despite the complicated facts of this case and the lack of
precedent, the provisions of the LPWA must be applied based on the clear statutory
language provided. See Pierce Foundations, Inc. v. Jaroy Const., Inc., 2015-0785 (La.
5/3/16), 190 So. 3d 298, 303 (“When a law is clear and unambiguous, and its application
does not lead to absurd consequences, it shall be applied as written, with no further
interpretation made in search of the legislative intent.”).
(8)

Statutory interpretation commences with the language of the statute and progresses

with the assumption that each statutory term has “a particular, non-superfluous meaning.”
Bailey v. United States, 516 U.S. 137, 145–46 (1995); First Nat’l Bank of Boston v.
Beckwith Machin. Co., 94–2065 (La. 2/20/95), 650 So. 2d 1148 (noting that courts should
give effect to all parts of a statute and not adopt a construction making any part superfluous
or meaningless, if that result can be avoided).
(9)

Because the Louisiana Public Works Act is “in derogation of common rights, it is

stricti juris[,] and liability of a surety may not be expanded beyond the Act.” Martin
Marietta Materials of La., Inc., v. U.S. Fid. & Guar. Co., 940 So. 2d 152, 156 (La. App.
2d Cir. 2006) (citing La. R.S. § 38:2241(C)).

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(10)

Hebert’s payment on the bond claim against Liberty is time-barred because March

25, 2017, the date of acceptance, is not the applicable triggering date for Hebert’s claim.
As a matter of course, an acceptance of work generally occurs after a notice of default. If
the facts establish that a notice of default has been entered against the general contractor,
then the date of the recordation of that notice of default must be the triggering date for the
one-year prescriptive period or else that provision has no purpose. Hebert’s interpretation
essentially provides it with the option of choosing the later date, the date of acceptance, as
the trigger date for its claims; however, such an interpretation effectively renders the
statute’s notice of default provision meaningless. Courts are bound to give effect to all
parts of a statute and cannot give a statute an interpretation that makes any part superfluous
or meaningless, if that result can be avoided. Langlois v. East Baton Rouge Parish School
Bd., 99–2007 (La. 5/16/00), 761 So. 2d 504. Therefore, in order to give meaning to all
parts of the applicable statute and to avoid rendering the notice of default provision
superfluous, the Court finds that the notice of default is the only applicable triggering date
in this case.
(11)

The evidence shows that Hebert had one year from the date of recordation of

Parkcrest’s final notice of default and termination, April 10, 2015, within which to file its
claim. The Court’s conclusion is further supported by the fact that Hebert only performed
work on the Project as a subcontractor for Parkcrest. Moreover, it is undisputed that Hebert
performed no work after the April 10, 2015 termination and had no connection with
Colmex, the contractor that obtained the Certificate of Substantial Completion. Therefore,
the March 25, 2017 date may not be relied upon for the purposes of extending the time to

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file suit. After the default and termination of Parkcrest was properly recorded, Hebert was
put on notice that it needed to timely file its claim within one year in order to preserve its
claim on the bond. Hebert’s payment on the bond claim against Liberty is time-barred, as
it was initiated on June 13, 2016, more than a year from April 10, 2015, the trigger date for
the one-year prescriptive period of its claim.
(12)

A claim for breach of contract and a claim under the open account statute are

considered distinct causes of action. Cambridge Toxicology Grp., Inc. v. Exnicios, 495
F.3d 169, 174 (5th Cir. 2007) (citing Operational Tech. Corp. v. Envtl. Contractors, Inc.,
665 So. 2d 14, 15 (La. App. 3d Cir. 1995)).
(13)

“The ‘time and materials’ contract is a form of open-ended cost reimbursement

contract under which the contractor is paid merely for furnishing construction resources of
labor and materials without significant performance risk. Remuneration is computed (1)
on direct labor or equipment hours at specified fixed hourly rates that include wages, direct
costs, field overhead, general administrative expenses and profit, and (2) on materials at
cost, including, if appropriate, material handling cost as part of material cost.” § 2:29.
Types of Contracts—Time and materials, and force account, 1 Bruner & O'Connor
Construction Law § 2:29.
(14)

Louisiana Revised Statute § 9:2781, Louisiana’s Open Account Statute, provides

for claims on an open account, in pertinent part, as follows:
A.
When any person fails to pay an open account within thirty days
after the claimant sends written demand therefor correctly setting forth the
amount owed, that person shall be liable to the claimant for reasonable
attorney fees for the prosecution and collection of such claim when
judgment on the claim is rendered in favor of the claimant. Citation and
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service of a petition shall be deemed written demand for the purpose of this
Section. If the claimant and his attorney have expressly agreed that the
debtor shall be liable for the claimant's attorney fees in a fixed or
determinable amount, the claimant is entitled to that amount when judgment
on the claim is rendered in favor of the claimant. Receipt of written demand
by the person is not required.
D.
For the purposes of this Section and Code of Civil Procedure
Articles 1702 and 4916, “open account” includes any account for which a
part or all of the balance is past due, whether or not the account reflects one
or more transactions and whether or not at the time of contracting the parties
expected future transactions. “Open account” shall include debts incurred
for professional services, including but not limited to legal and medical
services. For the purposes of this Section only, attorney fees shall be paid
on open accounts owed to the state.
La. R.S. § 9:2781.
(15)

The Louisiana Supreme Court has cautioned that the open account statute must be

construed “strictly . . . because the award of attorney fees is exceptional and penal in
nature.” Cong. Square Ltd. P'ship v. Polk, 10-317, 2011 WL 837144, at *4–5 (E.D. La.
Mar. 4, 2011) (citing Frank L. Beier Radio, Inc. v. Black Gold Marine, Inc., 449 So. 2d
1014, 1015 (La. 1984)). “With this principle in mind, the courts—while acknowledging
that an agreement necessarily underlies an open account—have consistently drawn the
distinction between open accounts and ordinary contracts.” Id. (citations omitted).
(16)

Whether an agreement constitutes an open account turns primarily on questions of

an agreement’s determinacy. An open account, as opposed to an ordinary contract,
generally leaves undetermined key aspects of the obligation such as the time period during
which services will be rendered or the total cost of the services for which a party may be
liable. Wood Materials LLC v. Berkley Ins. Co., 17-10955, 2018 WL 560473, at *3 (E.D.
La. Jan. 24, 2018); Ormet Primary Aluminum Corp. v. Ballast Techs., Inc., 436 F. App’x.
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297, 301 (5th Cir. 2011) (“As the obligation in question constituted an open account
because of its undetermined total, and as Ormet has complied with all requirements of the
Louisiana Open Accounts Statute, it is entitled to attorneys' fees.” ). Further, as the Fifth
Circuit has pointed out, “[a] hallmark of an open account is that [t]he total cost, unlike a
contract, is generally left open or undetermined, although the rate for specific services may
be fixed, such as an hourly rate.” Ormet Primary, 436 F. App’x. at 301 (internal quotation
marks omitted) (alteration in original); see also Wood Materials LLC, 2018 WL 560473 at
*3 (“In short, an open account, as its name indicates, is an account that is open to future
modification, one that is left open for ongoing debit and credit entries . . . and that has a
fluctuating balance until either party finds it convenient to settle and close, at which time
there is a single liability.”).
(17)

A contract is an agreement embodying “a concurrence in understanding [of] the

terms.” Cong. Square Ltd. P'ship, 2011 WL 837144 at *4–5 (citations omitted). While an
open account, as its name indicates, is an account that is “open to future modification,” one
“that is left open for ongoing debit and credit entries . . . and that has a fluctuating balance
until either party finds it convenient to settle and close, at which time there is a single
liability,” Id. “An open account has been compared to a credit account,” and a line of credit
is an indicium of an open account. Id.
(18)

The time and materials agreement between Hebert and Parkcrest constituted an

open account. Testimony established that the sewer and water utility work was to be
performed on credit as Hebert expended time, labor, and materials to render professional
services. Also, the total price was an undetermined amount as was the amount of work
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and the amount of time that would be required to complete the sewer and water utilities.
See Frey Plumbing Co., Inc. v. Foster, 07-1091 (La. 2/26/08), 996 So. 2d 969 (finding a
plumbing company’s suit to recover amount for plumbing and tunneling services
constituted a claim on an open account).
(19)

As a general rule, attorney fees are not due and owing a successful litigant unless

specifically provided for by contract or by statute. Louisiana courts construe such statutes
strictly because the award of attorney fees is exceptional and penal in nature. Accusess
Envtl., Inc. v. Walker, 15-0008 (La. App. 1 Cir. 12/17/15), 185 So. 3d 69, 74.
(20)

Hebert’s failure to provide supporting documentation for the invoices it submitted

to Parkcrest does not defeat its claim for amounts past due. Testimony revealed that the
relevant documentation was lost in a recent flood of Hebert’s office. Additionally,
testimony further revealed that Parkcrest raised no issue or complaint of Hebert’s lack of
supporting documentation in the parties’ past course of dealings. Parkcrest’s argument
that HANO’s involvement distinguishes those past dealings from the situation at hand is
unavailing.

HANO has already paid Parkcrest the full amount for Hebert’s work.

Therefore, Parkcrest may not rely on HANO’s more stringent documentation requirements
to justify its own refusal to pay Hebert. There is no real dispute that Hebert expended the
time and materials that it has invoiced Parkcrest for on the Project.
(21)

In light of the complications that arose in the sewer work, which could have been

prevented if HANO had provided accurate drawings or at least not deliberately withheld
relevant documents, the Court finds Parkcrest and Hebert not at fault for the delays
associated with the Alvar Street construction. Although HANO informed Parkcrest in 2013
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that it did not want SWB lines on HANO property, the Court also finds that the fact that
HANO, Perez, and/or ILSI representatives were present during the installation of the side
sewer line on HANO property and failed to object until the line was nearly finished further
diminishes Parkcrest/Hebert’s culpability for any delay.
(22)

It is clear that the delays related to the sewer and water utility work were not

caused by the negligence or mismanagement of Parkcrest or Hebert.

The record

demonstrates that Parkcrest and at least three different subcontractors all had great
difficulty in completing this portion of the work and that such difficulty was caused by the
lack of accurate civil drawings compounded by the complexity and scope of the Project.
(23)

To the extent Hebert was negligent in its performance as the water and sewer

subcontractor, Parkcrest is not entitled to damages or an offset because Parkcrest approved
of and accepted Hebert’s course of action. Also, McKinney’s statement that the Alvar
Street sewer line was broken/abandoned was an incorrect statement but not an intentional
misrepresentation.
(24)

Hebert completed the scope of its work on the Project to the extent that it worked

towards completing the sewer and water lines as soon as possible under a time and
materials agreement. The fact that Hebert did not return to the Project to complete the
sewer and water lines after termination did not constitute a breach of contract under the
terms of the agreement.
(25)

La. R.S. § 9:2781(C) provides: “[I]f the demand is made by citation and service of

a petition, the person shall be entitled to pay the account without attorney fees by delivering
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payment to the claimant or the claimant's attorney within ten days after service of the
petition in city courts and fifteen days after service of the petition in all other courts.” La.
R.S. § 9:2781(C).
(26)

Hebert has complied with the requirements of the Louisiana Open Accounts

Statute, as it caused written demand to be made upon Parkcrest, more than 30 days prior to
receiving a judgment in its favor.
(27)

Because all services rendered and material provided by Hebert were delivered upon

an open account and Parkcrest failed to pay on that open account within the applicable time
period, in addition to the full amount of the claim, Hebert is entitled to reasonable
attorney’s fees under the Louisiana Open Accounts Statute for the prosecution and
collection of such a claim.
CONCLUSION
Based on the foregoing Findings of Fact and Conclusions of Law,
(1)

Parkcrest is not liable to HANO;

(2)

Liberty is not liable to HANO;

(3)

HANO is liable to Liberty in the amount of $437,851.60 plus reasonable attorney’s

fees;
(4)

Parkcrest is liable to Hebert in the amount of $103,193.08 plus reasonable

attorney’s fees; and
(5)

Liberty’s Rule 52 Judgment on Partial Findings (Rec. Doc. 485) is GRANTED.

Hebert’s claims against Liberty are DISMISSED with prejudice.

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A court sitting in diversity awards prejudgment interest according to state law,
which in Louisiana is the interest rate set out in La. R.S. § 9:3500, but calculates
postjudgment interest according to the federal rate, see 28 U.S.C. § 1961. Accordingly,
the Court awards prejudgment interest at the Louisiana rate and postjudgment interest at
the federal rate, from the date of judicial demand until paid.
Within 14 days, the parties shall submit to the Court a proposed form for a final
judgment in accordance with these findings and conclusions.
New Orleans, Louisiana, this 8th day of June, 2018.

_________________________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

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