Klein & Wilson

$2 million battle over steam pipe leak moved to federal court

One of the intricacies about construction litigation is determining who is liable when construction defects or deficiencies are found. Because most general contractors enter into contracts that agree to guarantee their work, but also agree to defend other subcontractors, engineering firms or similar companies, one might assume that the liability would usually fall upon the general contractor. It all depends on the contract that was signed, though, and one example of this is the current legal wrangling in progress in the Yolo County Superior Court in California.

In 2005, the University California at Davis contracted with Frank M. Booth, Inc. to have improvements done to the roads and utilities. This included a new steam pipe line that was quite sophisticated. It included an alarm system that would sound when there was a leak. About five or six years after the system was installed, the alarm sounded. The university, however, didn't let the general contractor know about the alarm or leak for 18 months.

Booth had signed a contract with Thermacor Process L.P., which is based out of Texas, for the materials and labor for the steam line project. Part of the contract was that Thermacor would agree to defend Booth and an engineering firm out of Oakland, California, McGuire and Hester. When UC Davis wanted Booth to take care of the leak, Booth turned to Thermacor, who denied the indemnity claim in the contract.

UC Davis filed a lawsuit in Yolo County Superior Court against McGuire and Lester for $2 million in damages. Thermacor was sued by Booth after they refused to defend the contractors in Yolo County Superior County. Thermacor then moved to have the case shifted to federal court because Booth is based out of Marysville, California, and Thermacor is located in Texas. The judge agreed. This is where the case stands right now.

As you can see, contract disputes can become very complex, and they require experienced business law attorneys to determine who is liable. If your business is in the midst of such a dispute, the right attorney can ensure your company's interests are protected.

Source:  appeal-democrat.com, "Marysville company in $2 million legal battle" Harold Kruger, Sep. 05, 2013

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