Zachry Construction Corporation v. Port of Houston Authority of Harris County, Texas
449 S.W.3d 98
| Tex. | 2014Background
- Zachry Construction won a contract to construct a 1,660-foot wharf for the Port of Houston Authority, with five sections and liquidated damages of $20,000 per day for delays.
- Section 5.10 of the contract made Zachry an independent contractor, allowing the Port to review plans but not control the work methods.
- Zachry proposed a freeze-wall plan to work dry, including a sixth section; Change Order 4 approved, then two weeks later the Port ordered redesign without the cutoff wall.
- Port withdrew or withheld approximately $2.36 million in delay-related payments after ship docking; Zachry sued in November 2006 for delay damages and related claims; trial and jury found Port liable for delay damages and bad-faith conduct.
- The Texas Court of Appeals held that the contract’s no-damages-for-delay provision precluded recovery and that some liquidated damages were released by progress-pay releases; the Supreme Court granted review to resolve immunity and contract-interpretation questions under the Local Government Contract Claims Act.
- The Court held that the Local Government Contract Claims Act waives immunity for delay damages not expressly provided for in the contract, and that the no-damages-for-delay clause is unenforceable against deliberate wrongful conduct; the case is remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the LGCC Act waives immunity for delay damages not expressly provided in the contract | Zachry: immunity waived for damages recoverable under 271.153(a)(1) including delay damages | Port: immunity remains; damages not provided by contract fall outside waiver | Yes, immunity waived for delay damages not expressly provided for in the contract |
| Whether the no-damages-for-delay clause is enforceable against Port’s deliberate misconduct | Zachry: NDFD clause cannot bar recovery for willful, arbitrary interference | Port: parties intended broad NDFD coverage excluding delay damages | No; NDFD clause unenforceable when delay caused by Port’s deliberate wrongful conduct |
| Whether progress-pay releases bar Zachry’s claim for liquidated damages withheld | Zachry: releases do not unambiguously release liquidated damages | Port: releases cover all claims tied to payments | Releases are unambiguous but do not cover liquidated damages withheld; offset and recovery addressed separately |
| Whether the jury’s offset for defective fenders supports reduction of withheld damages | Zachry: offset unsupported; may overstate liability | Port: offset supported by evidence of defective fenders | Evidence supports a $970,000 offset for defective fenders |
Key Cases Cited
- Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) (immunity limitations; balance due under contract; damages capacity)
- Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829 (Tex. 2010) (balance due and owed under contract; reimbursement under bond funds)
- Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex. 2011) (whether damages are provided for or contemplated; balance due and owed)
- City of Houston v. R.F. Ball Constr. Co., 570 S.W.2d 75 (Tex. Civ. App. 1978) (early articulation of no-damages-for-delay limitations)
- Green Int’l, Inc. v. Solis, 951 S.W.2d 384 (Tex. 1997) (exceptions to NDFD clauses; active interference)
- Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) (reaffirmed jurisdictional limits on immunity)