On September 10, 2018 APR Construction Inc., a small business from La Mesa, won a $202,000 jury verdict against the City of San Diego, which fired them from the Central Avenue Mini Park and Skate Plaza project in June 2015.
The story began in 2011 when the Mid-City CAN Youth Council started a campaign to bring a skate park to City Heights. Neighborhood youth wanted a place to skate, free of interference from cars, cops and property owners. The City Heights Recreation Council jumped on board along with City officials.
In 2013, an $846,000 grant from the California Department of Housing and Community Development was designated to add a skate plaza (mini skate park) to existing plans to build a mini park on a plot squeezed between Central Avenue and the northbound side of the 15 freeway, two blocks south of University Avenue in City Heights.
APR (All Phase Remodel) owner Eric Scarbrough says he had been doing public projects for years when he saw the notice from the city’s Public Works Department about the park project. He thought it was a great opportunity.
In August 2014 the City awarded the bid to APR. Scarbrough says he was able to bid low because he self-performs almost all the work and subcontracts little to none of it. He also relied on APR’s status as a Small Local Business Enterprise and an Emerging Local Business Enterprise, which provides a bidding advantage under City policy.
Work on the mini park was to begin in October and the skate plaza in December. Both were due for completion in September 2015.
Scarbrough says he worked on the project from October 2014 through June 2015. He completed plumbing, demolition and trench work, and he built the block wall separating the residential area from the park.
But eventually, the city fired APR for “lack of diligence” and “delayed progress.” However, Scarbrough says it was the City who lacked diligence and delayed the project.
First, Scarbrough says, the City was not paying APR for its work. Four out of six invoices were not paid. Scarbrough says the City would demand a small revision to an invoice and after he revised it the City would demand another small revision, then another; instead of telling APR all the revisions they wanted at once.
The Whitebook, the City’s specifications and procedures manual for public projects, requires the City to submit any challenge to an invoice order within seven days of receiving it. If the City fails to do that it’s liable to pay within thirty days.
For most of APR’s unpaid invoices the City did not request a revision. It simply ignored them, Scarbrough says. “The city never explained why we were not getting paid. My project manager inquired about unpaid invoices and was given the runaround by City Resident Engineer [Jorge Acevedo.] The city intentionally delayed paying us,” says Scarbrough. “They stopped paying us for four consecutive months.”
Scarbrough believes the City failed to pay because it ran out of money for the project after the first two payments. He points out that Hazard Construction Company, the company that replaced APR and completed the project, also had problems with delayed payments.
Eric’s wife Vanessa Scarbrough suggests the reason the City gave them a bad-faith default termination was to get access to their surety funds, which she believes the City needed to complete the project. She points to an email the City’s Project Manager Alexandra Corsi sent on January 8, 2016 about the money APR’s surety provided for the project. Corsi stated, “The good news is there is money in the project :).”
Regarding a state grant that was provided to fund part of the project, Scarbrough explains, “The city had to have substantial completion in order to receive any monies from the block grant, so the City still had to find a way to fund the project.”
APR had another problem the Whitebook didn’t help them with — the City’s plans were incorrect. When discovering a problem with the plans after the project begins, one option a contractor has is to submit a Request for Information to the City.
However, Scarbrough says the Whitebook “does not have any RFI deadlines and so they can take as long as they want without any consequences.”
One hang-up with the plans was the off-site storm drain catch basin. The plans had incorrect elevation information for it. APR submitted a Request for Information and a Submittal (another way to communicate with the City about the project.) Acevedo continued to pressure APR to keep moving forward with the work. Scarbrough says Acevedo didn’t address the problem. He told them to continue work according to the plans, which for APR wasn’t an option. “Contractors cannot move forward until RFIs are answered. If APR would’ve built per plans the catch basin would’ve stuck out one foot off the ground. The city’s plans described a specific slope for the storm drain pipe in order for the water to run down at a certain speed down to the manhole. If the slope gets built too high then the water will run down the pipe too fast and cause interior deterioration of the manholeWe would’ve completed more work had the city not delayed RFIs and submittals. Some RFIs were not even answered.” says Scarbrough.
“Despite APR’s efforts to propose a solution to what was a relatively straightforward and simple problem, the City never facilitated a resolution of the issue by the time of the termination.” They waited more than four months for the City to respond to the issue before they were fired.
Hazard ran into the same problem when they took over the job in September 2015. Their first RFI was about the elevation issue with the storm drain catch basin. Despite Acevedo’s attempt to force APR to build it according to plans the City finally acknowledged there was a problem with the plans after Hazard took over and raised the same issue.
Hazard was first scheduled to complete the project spring of 2016. The park didn’t open until September 2016, a year after APR’s original completion date.
Several months after terminating APR’s contract for the City Heights project one city employee pushed hard to give them a default on another project — the La Jolla Cove Lifeguard Tower. Obtained through public records, a group email chain spanning January 26 to February 4 of 2016 reveals Public Works employees discussing APR.
Myrna Dayton, director of Public Works Field Engineering, stated in a January 26 email, “We decided today to DEFAULT APR for LJ Cove LGS…” James Nagelvoort, assistant director of public works, emailed on February 2, “the default notice has not gone out yet, but it will go out before the end of the week. The contractor has 5 days to respond.”
Dayton responded, “...Was the default not discussed to the Stakeholders?...If not we need to do this asap! ...I need DEFAULT letter out tomorrow!” Monica Muñoz responded to her, “We won’t notify stakeholders until we are sure that surety will take over. No need to get them all riled up in case the contractor decides to finish.”
Still, resident engineer Jorge Acevedo seemed to think APR still had a chance to finish the project. On February 4 he emailed, “I’m expecting Change Order #5 fully executed today, which is what APR has requested in order to proceed with the corrective work on the stairs. If we don’t see any action from their end on Monday morning, I will issue the Default Notice that same day, which allows them 5 working days to cure the default.”
“No more payments! Default them! Call me,” Dayton responded.
Scarbrough thinks there is a connection between the City’s default determination on their City Heights project and the effort to default them on the La Jolla project. APR did finish the project in La Jolla without getting terminated.
But the City Heights project termination took its toll. APR specialized in public works and government projects including improvements for ADA access, recreation centers, public restrooms, and naval base renovations. The June 2015 termination for default disabled APR’s bonding capacity and they could no longer do these types of projects. “I went back to residential remodel, tenant improvement, and commercial construction,” Scarbrough says.
“A termination for default is the harshest punishment the City can level on a contractor. It was a nightmare. We incurred expenses from funding the project for four months without pay including labor, material purchases, taxes, insurance fees, and bond fees. We were unable to pay all suppliers we owed after we were defaulted so we instructed them to file a claim on our bond. Needless to say, we lost our relationship with those suppliers.”
APR’s attorney Todd Verbick said the project contract had a provision for resolving disputes but the City skipped right over that and went straight to termination for default.
In December 2016 APR sued the City. Verbick took over the case in June 2018. “He learned 3 years of litigation in 3 months.”
The trial started in August 2018 and lasted eight days. The jury deliberated for two.
On September 10, the jury found the City, not APR, was at fault for the project’s delays. The jury ruled in favor of APR on all three counts against the City: breach of contract, breach of the covenant of good faith and fair dealing, and breach of implied warranty of correctness of plans and specifications.
APR’s contract with the City precludes them from collecting attorney fees so their compensation will barely cover their litigation expense and they will remain with their financial losses. “I know, it’s sickening,” says Vanessa Scarbrough. “They almost put APR out of business. My husband wanted to pursue this lawsuit to clear his name.”
She says the verdict also clears APR to begin building their credit and bonding capacity.
Construction investigator and civil engineer Michael Cornelius served as an expert witness for APR at trial. He says, “It is unconscionable what the City is doing. I have twice addressed the city council and requested meetings with each council member with no response. The City has been doing this to small firms for years. Most contractors cave. APR and Tri-Group are the only 2 contractors who have [litigated grievances against the city]. The city is 0 for 2 with hundreds of thousands of dollars wasted.”
Cornelius told the city council in May 2017 the City’s Public Works Department has “extreme dysfunction, unaccountability, and lack of standard industry practices and procedures.”
He was also interviewed by KUSI’s Michael Turko in 2015 when he said, “This Field Engineering Division of Public Works in my opinion is incompetent and corrupt. They put on the back of all these small sub-contractors the burden of financing their mistakes.”
Tri-Group Construction and Development is the company Turko’s story covered. In November 2017, it won a $340,860 jury verdict against the City for breach of contract and breach of implied warranty of correctness of plans and specifications.
As for Scarbrough, he says, “I will no longer be doing business with the City of San Diego.”
The city, through a spokesman, would only comment, “The City strongly disagrees with APR’s claim.”■