513 S.W.3d 543
Tex. App.2016Background
- In 2004 Zachry contracted with the Port of Houston to build a 1,660-foot wharf using a soil-freezing ("in the dry") method; the Port selected Zachry in part for the environmental benefits of that method.
- Change Order 4 (Sept. 27, 2005) expanded the wharf by 332 feet; Zachry proposed a perpendicular frozen cutoff wall to allow phased "in the dry" work so a crane shipment could be accommodated by Milestone A.
- The Port returned Zachry’s frozen-cutoff-wall submission with a "revise and resubmit" (R&R) response, expressing concerns about effects on existing shafts; Zachry ultimately abandoned the cutoff wall and switched to "in the wet."
- Zachry sued for breach, seeking as damages the increased costs of working "in the wet" plus withheld liquidated damages; the jury found breach and awarded roughly $19.99 million (including liquidated damages less an offset for defective fenders).
- On initial appeal this court rendered judgment for the Port; the Texas Supreme Court reversed on immunity, enforceability of the no-damages-for-delay clause, release of liquidated damages, and attorney-fee issues, and remanded for further consideration of remaining Port arguments.
- On remand the Fourteenth Court of Appeals considered Port challenges to liability, damages/causation, condition-precedent notice provisions, exclusion of Port offset evidence, jury instructions (fraud and apparent authority), pass-through recovery, and attorney-fees; the court affirmed the judgment for Zachry.
Issues
| Issue | Plaintiff's Argument (Zachry) | Defendant's Argument (Port) | Held |
|---|---|---|---|
| Whether the Port breached by issuing R&R that controlled Zachry’s means/methods (§5.10 vs §5.22) | §5.10 made means/methods Zachry’s responsibility; frozen cutoff wall was Zachry’s chosen means and not subject to §5.22 revise/resubmit | §5.22 allowed Port to require revise/resubmit of submittals (including safety plans) and thus to reject the frozen cutoff wall | Jury finding of breach under §5.10 supported; evidence legally sufficient — affirm |
| Whether Zachry’s damages model and expert (Draper) were legally sufficient | Damages measured as difference between actual "in the wet" costs and hypothetical "in the dry" costs; methodology tied to contemporaneous plans and schedules | Model rested on incorrect factual assumptions (pipe removal, sheet-pile timing) making expert opinion unreliable | Model admissible; jury discounted amounts; evidence legally sufficient — affirm |
| Whether expert testimony was required to prove causation between Port’s breach and Zachry’s damages | Non-expert testimony (project managers, geotechnical evidence) established Port-caused delay and foreseeability of resulting costs | Port contended expert proof was necessary (citing non-contract precedents) | No blanket rule requiring expert in breach-of-contract causation; evidence legally sufficient — affirm |
| Whether procedural notice provisions (§5.41/5.42) were conditions precedent barring Zachry’s claim | Sections govern contractual change procedures, not breaches of owner control; also 5.42 would be a <90‑day pre-suit notice and conflict with Tex. Civ. Prac. & Rem. Code §16.071; owner who breaches cannot invoke procedural protections | Port argued failure to comply with notice/change procedures bars R&R claim | Court held §§5.41/5.42 inapplicable as pleaded and, in any event, Port’s breach prevents reliance on those procedural bars; §16.071 issues noted — affirm |
| Whether trial court abused discretion excluding Port’s late-disclosed offset evidence | Zachry argued Port failed to timely disclose offset theory and amounts; trial court excluded most categories as discovery sanction and under Rule 403 | Port argued disclosures sufficiently put Zachry on notice and later evidence was admissible (also contended Zachry opened the door) | Exclusion not an abuse: Port failed to show good cause; limited exception for items with timely disclosure; limited opening of door did not overcome prejudice/403 concerns — affirm |
| Whether fraud instruction in no-damages-for-delay exception improperly allowed reckless conduct to qualify as fraud | Zachry relied on Supreme Court’s prior holding approving the charge formulation | Port argued the fraud definition improperly allowed reckless misrepresentations to satisfy exception | Law-of-the-case: Supreme Court already approved the charge language; no error — affirm |
| Whether apparent authority instruction was improper (CH2M Hill) | Zachry pleaded and produced evidence that CH2M Hill acted as Port’s representative and that Zachry relied on CH2M communications | Port argued Zachry failed to plead apparent authority and CH2M lacked power to issue R&R | Pleadings adequate (no special exception) and evidence supported submission; instruction proper — affirm |
| Whether Zachry could recover subcontractor (pass-through) costs incurred after corporate reorganization | Zachry relied on Management Services Agreement and Pass-Through Agreement showing Zachry’s continuing liability to subcontractor and obligation to remit recoveries | Port argued pass-through barred because subcontractor employed after breach and immunity concerns | Interstate pass-through doctrine applies; evidence Zachry remained liable to Sub; governmental immunity did not bar pass-through here — affirm |
Key Cases Cited
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal-sufficiency standard and viewing evidence in light most favorable to verdict)
- Zachry Constr. Corp. v. Port of Houston Auth. of Harris Cty., 449 S.W.3d 98 (Tex. 2014) (Supreme Court reversed earlier appellate judgment; held LGCCA waived immunity and addressed enforceability of no‑damages‑for‑delay exception)
- Interstate Contracting Corp. v. City of Dallas, 135 S.W.3d 605 (Tex. 2004) (recognizing and authorizing contractor pass‑through claims)
- Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342 (Tex. 2006) (contract interpretation—ascertaining parties’ intent)
- Gen. Elec. Co. v. Moritz, 257 S.W.3d 211 (Tex. 2008) (principle that owner who retains right to control contractor’s work may be liable for negligent exercise of that right)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (contract construction — harmonize provisions so none are rendered meaningless)