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City of Tillamook Wastewater Treatment facility.

On Oct. 26, the Oregon Court of Appeals affirmed a 2012 lower court ruling that found the City of Tillamook in breach of contract for not paying Astoria-based Big River Construction $1.5 million for work performed to expand the city’s wastewater treatment facility.

Case history

The lawsuit stems from the 2007 expansion and upgrade of the city’s wastewater treatment plant, completed in March of 2010.

The $16 million project was initially slated for completion in June of 2009. According to Big River, major problems with the project’s engineering and incomplete design work led to eight additional months of labor, for which the city failed to compensate the company.

The city countered that Big River was paid what it was owed because both parties agreed if the project was not done on time, the contractor would compensate the city. The defense added that Tillamook granted Big River the time needed to complete the extra construction, and much of the original contract work was not finished by the contracted June 2009 deadline.

“Both parties agreed that if they didn’t finish the project on time, (the contractor) would pay the city,” said an attorney for the city during the 2012 closing arguments. “They just want more.”

Big River attorney Darien Loiselle argued despite significant setbacks, the construction company had finished 97 percent of the contracted work on deadline and without defect. He added that the city and its residents were benefiting from the facility’s operation.  

“The city to this day has beneficial use of this plant without incident,” he stated in 2012, adding that when issues with the project arose, they were not addressed by the city in a timely manner, despite multiple attempts to meet with city officials.

The 2012 jury ruled in Big River’s favor and said the city owed the firm $1.5 million for work performed. Tillamook appealed that decision, which it lost last week.

Recent ruling

The Oct. 26 judgment supports the previous jury’s determination and denied Tillamook’s counter claims — finding that Big River is owed substantial damages and ordered a bond claim against the company be released.

That bond claim, in place since 2011, has hurt the company’s public works program and negatively impacted its bottom line, according to Mike Sarin, Big River Construction president.

“As a local Oregon coast contractor, this lengthy legal challenge has put a strain on our business,” Sarin said. “We held up our end of the bargain and are ready to move forward. This case has limited our ability to compete for public works projects for over five years.”

The court also remanded for additional findings for damages. Interest and attorneys fees extend the damages to over $3 million to date, according to Loiselle.

 “We’re pleased with the court’s findings,” he said. “We’re hopeful that the city will accept these facts. Every day delayed, the interest is continuing to accrue.”

The city’s legal counsel, Roger Lenneberg, stated:

“The court  of appeals opinion affirmed, in part, and reversed , in part, the trial court decision in the Big River case. While the court affirmed the jury decision that the city breached the agreement the damages award and attorney fees award were vacated entirely. The case will now go back to the trial court so the jury can determine how much, if any, contractor is entitled to recover in damages. The city is evaluating it options.”

How will the city pay?

Immediately following the 2012 verdict and before the appeal, city officials met in an executive session to begin talks on how to move forward. At that time, Tillamook City Manager Paul Wyntergreen said he was unsure whether the settlement would cause the city to raise sewer rates to its customers.

With the recent decision, city officials are still unsure about rate hikes and executive sessions are underway again. While sewer rates were raised to help pay for the expansion, officials would not comment on whether fees would go up to pay for any damages owed to Big River.  

“The (jury’s) decision is very convoluted,” said Tillamook Mayor Suzanne Weber. “There’s a lot of information in the judgment that we are going to process. So, I don’t feel comfortable saying anything more than that at this time.”

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