Fisk Electric Company v. Webcor Builders, Inc.

Background

The dispute concerns the Transbay Transit Center Project. In 2009, the Transbay Joint Powers Authority entered into a prime contract with the Webcor/Obayashi Joint Venture (WOJV). WOJV was to provide pre-construction services, act as construction manager/general contractor, and manage or administer subcontracts. WOJV later entered into a subcontract with Fisk Electric Company for electrical work.

Fisk sued, among others, the WOJV defendants, primarily alleging breach of contract. Fisk alleged that it was not paid for extra work resulting from changes to the project or for some work covered by the original subcontract. Fisk also alleged that WOJV failed to complete prerequisite work needed for Fisk to perform on time and improperly removed portions of Fisk’s subcontracted work and assigned them to other contractors.

Requested Amendment

Fisk moved for leave to file a third amended complaint. The proposed amendment would add a claim for damages based on an alleged violation of California Public Contract Code section 4107. That statute generally provides that a prime contractor may not replace a subcontractor listed in the original bid except in specified circumstances, and may not allow the subcontract to be performed by someone else without the required consent of the awarding authority.

The proposed claim was based on Fisk’s existing allegations that WOJV improperly removed portions of the subcontract and assigned that work to other contractors. Under Federal Rule of Civil Procedure 15, courts should generally allow amendment when justice requires, considering factors such as undue delay, bad faith, repeated failure to correct deficiencies, prejudice, and whether the amendment would be futile.

Arguments About Futility

The WOJV defendants argued that the proposed amendment would be futile for two reasons. First, they argued that section 4107 is concerned with protecting the public and subcontractors from bid shopping and bid peddling, neither of which was alleged. Second, they argued that a statutory “substitution” requires a subcontractor to be terminated, removed, and replaced, which did not happen because Fisk completed its work on the project.

The court rejected both arguments at the amendment stage. It stated that the text of section 4107 does not limit the statute to situations involving bid shopping or bid peddling. The court also concluded that the statute does not require a subcontractor to be formally terminated or completely removed from a project. If a substantial portion of the contracted work is taken away and given to another subcontractor, the subcontractor may have been substituted and effectively terminated as to that portion of the work.

The court relied in part on a California appellate decision involving a subcontractor that performed and was paid for some work but was not given another category of work for which it had been listed. The court noted that the decision did not suggest that a section 4107 claim requires the subcontractor to be entirely removed from the project.

The court did not decide precisely what amount or type of work removal would qualify as a statutory substitution. It stated that the question should be considered in a factual context and rejected only the defendants’ position that complete and formal removal is always required.

Disposition

The court granted Fisk’s motion for leave to amend and directed Fisk to immediately file its proposed amended complaint. The court stated that the apparent nonfutility of the statutory claim was sufficient for the parties to continue settlement discussions, but it did not decide whether the claim could ultimately succeed.

The court did not permit Fisk, at that stage, to file a motion for summary judgment or summary adjudication on the statutory claim. Fisk could not file such a motion without leave of court. The order disposed of Docket No. 137. The opinion does not identify the judge by name.