Verdicts / Settlements - Plaintiffs

Slope failure repair and bank fraud

Facts

In 1994, heavy rains caused a landslide that damaged three expensive custom homes in Bel Air. Defendant California Federal Bank (Cal Fed) acquired through foreclosure sales two of the homes, as their owners abandoned them after they were damaged. Cal Fed, as the new owner of the homes, entered into an agreement with the owner of the third home and hired plaintiff Weber Madgwick Inc., a grading and demolition contractor, to perform slope repairs for a lump sum price. The plaintiff's surety issued a performance bond for the job. Shortly after grading began, however, plaintiff Weber Madgwick discovered ground water. The plaintiff claimed it made several requests to adjust the contract price, given the new information. Cal Fed hired another contractor. The plaintiff claimed Cal Fed then told the plaintiff's surety that the plaintiff had abandoned the job and demanded the surety complete the project at no cost to Cal Fed. Plaintiff Weber Madgwick Inc. brought this action against Cal Fed, based on breach of contract and fraud.

Contentions

The plaintiff contended that the defendant bank invented false grounds for throwing it off the project after it realized there would be huge cost overruns; tried to force the plaintiff's surety to complete the job to avoid having to pay the extra costs; and, after wrongfully terminating the contract, submitted fraudulent claims to the Contractor's State License Board and to the plaintiff's surety, claiming the plaintiff had abandoned the job and failed to pay its subcontractors. The plaintiff also contended that the defendant bank wrongfully told the plaintiff's bank that the plaintiff had forged a joint payment check issued by the defendant bank months before; and that the false statement caused the plaintiff's bank to freeze the plaintiff's accounts for 31 days, nearly putting the plaintiff out of business. The defendant contended that the plaintiff had agreed to a "maximum cost contract" and was not entitled to any extra costs; that the plaintiff abandoned the project; failed to control erosion, thereby endangering neighboring property owners, who had complained to Cal Fed about the manner in which plaintiff performed the work and that the plaintiff breached the contract and owed the defendant $370,918. The defendant also contended that plaintiff improperly deposited a two-party check without obtaining the signature of the subcontractor to whom the check was made.

Damages

The plaintiff asked the arbitrators for $487,859 damages for breach of contract, $127,399 compensatory damages for fraud, and $700,000 punitive damages, totalling $1,315,258. The defendant asked the jury for an award of $370,918 against the plaintiff.

Settlement Discussions

The plaintiff made a C.C.P. §998 settlement demand for $500,000. The defendants made a settlement offer of $125,000, followed by an offer of $160,000 at trial. The defendant sought to have the dispute mediated, which request was rejected by the plaintiff.

Arbitration

The arbitration was held in February 1999, before Michael J. Bayard, Edward J. Costello and Kenneth C. Gibbs of the American Arbitration Association, resulting in the reported award.

Other Information: The award was reached approximately three years and four months after the case was filed.