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October 30, 2014

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City found at fault in tennis court defects case

Arbitrators award contractor total of $2 million; each side spent more on attorney fees

Image

Steve Marcus

A crack surrounds a net pole in one of the 23 courts at the city’s Darling Memorial Tennis Center.

Darling Memorial Tennis Center

State-appointed arbitrators have found that Las Vegas managers “knew from the beginning” that their plans for the Darling Memorial Tennis Center were defective — long before the center’s cracked courts launched a costly four-year legal dispute.

In a 2-1 decision, which appears to resolve the most expensive arbitration in Las Vegas government history, the panel found that the city owes APCO Construction about $2.13 million.

The majority ruling ripped the city’s handling of the project at several levels. Singled out for criticism were the Building and Safety Department, which did not fully approve the plans before they were put out for bids, and then-Public Works Department chief Richard Goecke, who ordered that the plans be bid upon despite recognizing that the incomplete and faulty plans would result in problems.

“From the panel’s decision on APCO’s claim, it is clear that the city actively interfered and failed to cooperate with APCO in overcoming the problems created by the plans, which they knew from the beginning were defective and would interfere with APCO’s performance.”

The Sun first reported on the troubles in October 2005, noting that all 23 courts in the less-than-two-month-old center had cracked. The city blamed the contractor.

APCO sued the city for $7 million in 2005, claiming negligence because it had ignored the company’s concerns about design flaws. The city filed a counterclaim asserting that the 23 cracked courts weren’t built properly and blaming APCO, the general contractor. The city demanded the same amount, $7 million, to fix the courts.

According to the majority arbitrators, Gary Barr, a construction project representative with the Public Works Department, and other city staff members “acknowledged that there was not a time during the project that these problems were not impacting and delaying the project.”

But according to the arbitrators, mid-level staff members such as Barr were mostly not at fault.

“This interference and lack of cooperation was not on the part of the city’s field personnel but on the part of the city’s management,” the majority arbitrators wrote. “Even though the field personnel advised city management of the problems with performance and the need to grant time extensions, management refused to give any extensions ...”

The arbitrators found that the city’s misguided efforts may have been the result of pressure from the councilman in whose ward the tennis center is located — Larry Brown, now a Clark County commissioner.

The center was a “high-profile project” for Brown, stated the arbitrators, Thomas Wilson and William Haug. He and his staff “were putting pressure on the City’s Public Works Department and the Office of Architectural Service ... to get the project bid as soon as possible,” they wrote.

Brown didn’t return two calls for comment.

Goecke, who retired as the city’s long-time public works chief in 2005, said he couldn’t recall his role in the tennis center project.

Barr referred questions to City Attorney Brad Jerbic.

The arbitrators awarded APCO $2.41 million, and the city $280,000, which will be taken out of what it owes APCO. The award to APCO includes $1.15 million that both sides agreed the city owes APCO for work the city had not paid for. That leaves $980,000 the city owes APCO for damages.

The arbitrators declined to make either side pay the other’s rather substantial attorney fees. As of August the city had paid more than $3.3 million to Harrison, Kemp & Jones to handle the case. APCO has spent more than $4 million in legal fees, according to the city.

The City Council will take up the matter at its Wednesday meeting, and can accept the arbitrators’ ruling or appeal it to a state District Court judge. It appears more likely the council will accept it, as Jerbic now says he will recommend.

Responses to the ruling were predictable. Jerbic said the arbitrators’ minority opinion — which largely backed the city’s claims and found it deserved $5.86 million in damages — should have been the majority view.

He also discounted the notion that this was a big win for APCO. “They sued us for $7 million, and they’re getting $1 million,” he said.

“This really has been a long and painful process,” said Jerbic, who added that although several issues could be appealed, it’s in the city’s interest to put the matter behind it. “We look forward to it being finished,” he said.

Randy Nickerl, APCO’s division manager, said, “We knew we were in the right.”

Nickerl said he was disappointed the arbitrators did not award APCO attorney fees.

“Eighty percent of our attorney fees were spent defending ourselves against their frivolous claims, so it would have been nice to be reimbursed for those,” Nickerl said.

The minority arbitrator, James Olson, had a different take.

Wilson and Haug, Olson wrote, “fault the City entirely for the project while simultaneously absolving APCO of any liability.” This view is by and large misguided, he asserted.

The majority gave too much credence to the unreliable, hearsay testimony of APCO employees, Olson wrote, while unfairly discounting the testimony of one city engineering consultant as being biased because he worked for the city.

Two of APCO’s claims, he wrote, “were unsubstantiated and cost the city millions to litigate.”

Although APCO is pleased with the ruling, company managers said gloating is not in order. After all, the city has continued to award it contracts — including for the $11.5 million interior of the mob museum.

“We have a good relationship with the city, and we want to maintain that,” Nickerl said. “So we’re just moving on.”

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