Judge sides with Chicago-based contractor in lawsuit

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A federal court has sided with Walsh Construction in a dispute with a subcontractor stemming from a hospital expansion in Lake Geneva.

Chicago-based Walsh Construction became embroiled with a subcontractor, North American Mechanical, of Windsor, over work performed on a $45 million expansion of Mercy Walworth Hospital and Medical Center in Lake Geneva. Walsh, the general contractor on the project, enlisted North American Mechanical to install fuel-oil, heating-and-cooling, mechanical-piping, plumbing and medical-gas systems for more than $3.9 million, according to court documents.

The complaint, which was filed in 2012, alleges that North American was not paid for more than $1 million worth of change orders that kept the subcontractor on the site for 479 days longer than expected. North American also demanded an additional $1.8 million for what it alleges to be mismanagement that increased the time and resources spent on the project.

In siding with Walsh Construction on Monday, a federal judge noted that North American had signed a form waiving any remedy for any claims it made on the project. The court also reasoned that the $1.8 million in labor inefficiencies that North American sought were not caused by gross negligence or deliberate wrongdoing on Walsh’s end, so North American could not claim damages.

“Although there is evidence that Walsh arguably mismanaged the Project,” according to Monday’s decision, “its conduct did not rise to the level of fraud, bad faith, or inexcusable ignorance or incompetence.”

Walsh, according to North American’s version of events, had insisted that the subcontractor perform the planned plumbing and heating-and-cooling work out of sequence even though North American officials had warned that the work could not be done efficiently or, in some cases, at all because of incomplete contributions from other subcontractors. North American officials said they had also warned Walsh that additional expenses would result performing work out of sequence.

Walsh responded by contending that it had not breached its subcontract with North American. Walsh argued that the change orders North American alleged to have executed were never approved by the project owner.

Also, Walsh contended that North American had signed paperwork waiving Walsh’s liability for most of the changed work and that North American’s claims regarding delays on the job site were not made within the seven days required by the contract the subcontractor had entered into with Walsh. In some cases, according to Walsh, North American made allegations about delays years after the alleged delays had first occurred.

Walsh also contended that, because of language in the subcontract, it is not liable for the $1.8 million resulting from the alleged project mismanagement. Even if it were liable, the company argued, the claim stemmed from “unreliable and unadmissable” expert opinions.

Besides generally siding with Walsh, the federal court also refused to grant North American its request for $2.8 million in damages because of questions concerning how North American had arrived at that figure. However, the federal court did grant North American $7,320.64 plus $1,115.70 in interest for seven approved changes that Walsh had not paid. Follow @erikastrebel