PG&E Corporation v. AECOM Technical Services, Inc..

Background

This construction dispute arose from the Burney K2 Replacement Project, which involved replacing a natural-gas compressor unit and making upgrades at a compressor station near Burney, California. AECOM agreed with PG&E to serve as the project’s design-builder and prime contractor, and AECOM later entered into a subcontract with JH Kelly for construction work.

JH Kelly alleged that the project changed substantially from the work it had bid on, creating additional work and difficult conditions. It also alleged that AECOM failed to follow the subcontract’s change-order requirements and pay for the changed work. AECOM denied those allegations and counterclaimed against JH Kelly. PG&E and AECOM had previously settled and dismissed their claims against each other with prejudice; the opinion addresses the remaining dispute between JH Kelly and AECOM.

The parties filed several motions under the evidence rules governing expert testimony. The court explained that expert testimony must come from a qualified witness, assist the factfinder, rely on sufficient facts or data, and use reliable principles and methods. The court also emphasized that weaknesses affecting an expert’s credibility or the weight of the testimony generally should be explored through cross-examination rather than exclusion.

AECOM’s Motions

Greg McKinnon. AECOM sought to exclude JH Kelly’s forensic-accounting expert, Greg A. McKinnon. McKinnon calculated a subcontract balance of $6,265,276 and offered opinions about project cost overruns. The court found his testimony relevant to both JH Kelly’s breach-of-contract claim and its prompt-payment claim, and found that his construction-accounting expertise could help the jury track the parties’ complicated billings. The court also found his opinions sufficiently supported by his billing analysis and experience. AECOM’s motion was denied.

Gerald Zamiski. AECOM sought to exclude JH Kelly’s expert testimony concerning the GOV-2 leaking gas valve. The court found that Zamiski could testify about the possible cause of the leak and responsibility for it, even though he had not physically inspected or laboratory-tested the valve. The valve remained in underground use after PG&E decided not to remove it, and the court found that Zamiski could use his specialized experience and review of the available evidence to assess the issue. The court also held that his opinions about factual causation did not improperly state a legal conclusion.

The court did exclude one portion of Zamiski’s proposed testimony. Zamiski could not testify that the GOV-2 valve was “functional and does not require removal,” because that opinion was based mainly on the fact that PG&E had left the valve in use and was not adequately supported by specialized knowledge. AECOM’s motion was otherwise denied, including its challenges concerning testimony about the POV-166 back-charge and allegedly redacted notes.

William Ibbs. AECOM sought to exclude JH Kelly’s loss-of-productivity expert, William Ibbs. Ibbs used four methods to calculate delay-and-disruption damages: the measured-mile method, Ibbs Curves, Mechanical Contractors Association of America factors, and modified total cost. The court acknowledged that several criticisms of Ibbs’s assumptions and calculations had force, including his use of a self-inflicted loss figure for subcontractor and staff costs and his application of a measured-mile calculation from one type of work to other project activities. But the court concluded that these criticisms went to the weight of the testimony, not its admissibility.

The court also rejected AECOM’s arguments that the Ibbs Curves method categorically failed the applicable expert-evidence standards and that the MCAA factors method was categorically improper. The court found enough support for Ibbs’s representation that the Ibbs Curves method had been published and peer-reviewed, and found no basis to exclude the MCAA analysis. AECOM’s motion was denied in its entirety.

JH Kelly’s Motions

Denise Martini. JH Kelly sought to exclude portions of Denise Martini’s testimony about PG&E’s overhead and indirect expenses. The court agreed that Martini lacked a basis to testify about whether PG&E’s costs were reasonable in themselves or whether AECOM was legally entitled to recover them. But the court found that AECOM had retained Martini for the narrower purpose of confirming whether PG&E’s costs were supported by underlying documents and assessing whether PG&E’s cost methods were reasonable and consistent with industry practice. JH Kelly’s motion was denied.

Larry Smith. JH Kelly sought to exclude AECOM expert Larry Smith’s testimony concerning fusion-bonded-epoxy-coated pipe. The court found Smith sufficiently qualified based on his experience with underground coated-steel-pipe installation, coating thickness, and holiday testing. The court also rejected challenges based on duplicate data entries, alleged mishandling of the pipe, and Smith’s lack of a separate cost analysis. JH Kelly’s motion was denied.

Anthony Gonzales. JH Kelly challenged AECOM expert Anthony Gonzales’s opinions about backcharges, changed work, and JH Kelly’s damages. The court excluded Gonzales’s opinions that JH Kelly was not entitled to recover post-project-completion damages, change-management-support fees, or costs for changed work because of untimely or insufficient notice under the subcontract. The court found those opinions to be contract interpretation and therefore improper legal opinions for an expert witness.

The court rejected JH Kelly’s other challenges to Gonzales’s analysis, including objections to his assumptions, methodology, and treatment of changed-work and productivity-loss damages. Those objections concerned the weight of his testimony and could be addressed through competing evidence and cross-examination. JH Kelly’s motion was granted as to the specified contract-related opinions and denied on all other grounds.

Ted Scott. JH Kelly sought to exclude portions of AECOM expert Ted Scott’s analysis assigning project delays among PG&E, AECOM, and JH Kelly. The court found Scott’s opinions sufficiently based on his schedule-analysis experience, project documents, schedules, and testimony from people with knowledge of the project events. The court treated JH Kelly’s objections to Scott’s assumptions and conclusions as challenges to the weight of the testimony rather than its admissibility. JH Kelly’s motion was denied.

Disposition

The court denied AECOM’s motion concerning Greg McKinnon; denied AECOM’s motion concerning Gerald Zamiski except that Zamiski could not testify that the GOV-2 valve was functional and did not require removal; and denied AECOM’s motion concerning William Ibbs in its entirety. The court denied JH Kelly’s motions concerning Denise Martini, Larry Smith, and Ted Scott. The court granted in part and denied in part JH Kelly’s motion concerning Anthony Gonzales: it granted the motion as to the specified opinions about contract-based limits on JH Kelly’s recovery and denied it on all other grounds.