4/8/2019 11:45 AM

19CV15654

7 IN THE CIRCUIT COURT OF THE STATE OF OREGON

8 IN AND FOR THE COUNTY OF MULTNOMAH
9
CORP INC., Case No.:_____________________
10
Plaintiff, COMPLAINT (Breach of Contract,
11 Quantum Meruit, Prompt Pay Act)
v.
PRAYER: $523,894.43
12
SCHOOL DISTRICT NO. 1J,
MULTNOMAH COUNTY, OREGON, FILING FEE: $265 (ORS 21.135(1))
13
dba PORTLAND PUBLIC SCHOOLS,
Not Subject to Mandatory Arbitration
14
Defendant.
DEMAND FOR JURY TRIAL
15

16 COMES NOW plaintiff Corp Inc. (“CORP”) and for its claims against defendant School

17 District No. 1J, Multnomah County, Oregon, dba Portland Public Schools (“PPS”), alleges as

18 follows:

19 PARTIES

20 1. CORP is an Oregon corporation, licensed to do business as a general contractor in

21 the state of Oregon.

22 2. PPS is a public school district in Portland, Oregon.

23 JURISDICTION AND VENUE

24 3. This Court has jurisdiction over the parties, who at all material times were

25 residents or were conducting regular, sustained business activity in Multnomah County,

26 Oregon.

Page 1 COMPLAINT FOREMAN STURM & THEDE, LLP

P.O. Box 13098
Portland, Oregon 97213
Telephone: 503.206.5824
 1 4. Venue is proper in the Circuit Court for the County of Multnomah pursuant to a
2 Law and Venue provision (Provision 20.b.) in the construction contract entered into between
3 the parties, which requires all litigation arising from that contract to be brought in Multnomah
4 County, Oregon.
5 FACTUAL ALLEGATIONS
6 A. PPS Fails to Pay CORP Sums Owing Under the Contract
7 5. CORP and PPS entered into a construction contract (numbered C 66271)
8 (“Contract”) in or around May 2018 for certain improvements to the Fernwood – Beverly
9 Cleary school (“Project”) in Portland, Oregon, for the base Contract Sum of $4,675,000.
10 6. The Contract set forth specific dates for commencement and completion of the
11 work. In accordance with the Contract, CORP was scheduled to begin its work on June 13,
12 2018, and complete all phases of the work by January 31, 2019.
13 7. Over the course of the Project, additional work was required by PPS beyond the
14 terms of the Contract, and which was required to be paid pursuant to Modifications of the
15 Contract. The Contract defines Modifications to include a written amendment to the Contract,
16 Change Orders, and Change Directives.
17 8. As a result, CORP incurred not less than $876,862.70 in additional construction
18 costs.
19 9. The additional work was created due to design inconsistencies, unforeseen
20 conditions, undocumented asbestos and resulting abatement, and other increases in the scope of
21 work, including measures to prevent attendant delays.
22 10. CORP notified PPS that not less than 46 extra days were required to complete the
23 additional work addressed by the Change Orders.
24 11. CORP timely submitted all required notices under the terms of the Contract.
25 12. Despite ordering CORP to preform the extra work, PPS has failed to pay CORP
26 all sums owing under the Contract, totaling not less than $523,894.43

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P.O. Box 13098
Portland, Oregon 97213
Telephone: 503.206.5824
 1 B. PPS Wrongfully Terminates CORP for Cause
2 13. On January 9, 2019, PPS issued a letter to CORP informing it that PPS was
3 pursuing a Termination for Cause under the terms of the Contract (“Termination Letter”).
4 14. The Termination Letter claims that CORP “persistently disregarded orders of
5 public authority ([PPS]) having jurisdiction over the jobsite location,” and CORP “breached
6 provisions of the Contract Documents by failing to observe safety and other precautions
7 including [PPS’s] and [CORP’s] own policies.” PPS ordered CORP to cease and desist all work
8 onsite immediately and to demobilize within seven business days.
9 15. As a party to the Contract, PPS is not a “public authority having jurisdiction over
10 the jobsite location,” but is bound by its terms. PPS cannot unilaterally and arbitrarily create
11 and attempt to hold CORP to extra-contractual requirements. CORP’s obligations to PPS are
12 found solely in the Contract.
13 16. The claimed “safety” violations by PPS are, likewise, not a legitimate basis for
14 termination for cause as defined by the Contract. As examples, the Termination Letter claims
15 that CORP failed to keep the Project Site “free from dust, or accumulation of waste materials or
16 rubbish.” Even if that were true, it is not a “cause” for termination. PPS also complains that
17 CORP failed to timely submit a “site specific safety plan.” Construction went on for months
18 and PPS never complained about or even mentioned the timeliness of the safety plan until the
19 Termination Letter in January 2019. At that time, it was in full compliance as it had provided
20 the “site specific safety” plan several months earlier.
21 C. PPS Faced Highly Critical Repots and News Reporting When Terminating
22 CORP
23 17. When the Termination Letter was written, PPS was under public and
24 governmental scrutiny for its spending practices. The Oregon Secretary of State had just
25 completed an audit report that was “highly critical of” PPS and to which PPS responded by
26 laying out “plans to swiftly fix what state officials said are bloated expense practices.”

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P.O. Box 13098
Portland, Oregon 97213
Telephone: 503.206.5824
 1 18. The audit report follows very public examples of PPS’s poor fiscal management
2 of on-going construction projects including a $190 million shortfall to renovate four schools
3 and PPS’s admission that a “construction management consultant warned school officials in
4 January 2017 – months before the bond was passed – that the cost estimates were ‘too lean.’”
5 As a result, PPS began “evaluating options to manage project costs and determine additional
6 funding opportunities.”
7 19. Further public examples of embarrassing fiscal practices include a $13,000
8 retirement party held on the Portland Spirit featuring expensive crystal gifts and leis flown in
9 from Hawaii; the Lincoln High School construction project $58 million over budget before
10 construction started; and spending $250,000 fighting (and losing) valid public records requests.
11 20. Within the context of these public examples of fiscal irresponsibility, the CORP
12 project was behind schedule and over budget due to PPS’s conduct and had been criticized by
13 school administration, staff and union officials. PPS attempted to save face by terminating the
14 Contract “for cause” even though 97.5% of the work was already completed.
15 21. After terminating for cause as opposed to termination for convenience, PPS
16 incurred additional expenses to finish the Project and CORP expects PPS to attempt to back-
17 charge those expenses to CORP, all of which results in PPS wrongfully lowering its total
18 Project costs at the expense of CORP.
19 22. As a further result of PPS’s actions, CORP will suffer additional damages beyond
20 the Project, including higher bond premiums, lower bond capacity, and loss of market ability to
21 bid and be awarded public construction contracts if this wrongful termination remains in place.
22 CORP’s damages are continuing as a result of PPS’ breach of contract.
23 D. PPS Fails to Participate in Mediation in Good Faith, Resulting in this Lawsuit
24 23. The Contract obligates the parties to “exercise their best efforts in good faith to
25 resolve all disputes in mediation.”
26

Page 4 COMPLAINT FOREMAN STURM & THEDE, LLP

P.O. Box 13098
Portland, Oregon 97213
Telephone: 503.206.5824
 1 24. On January 14, 2019 CORP promptly responded to the Termination Letter and
2 made a good faith request for mediation as required by the Contract.
3 25. CORP asked for mediation in February 2019 to avoid escalating damages and
4 suggested a qualified mediator. PPS refused any early and timely mediation. Instead, PPS
5 demanded that mediation occur in May 2019.
6 26. PPS then refused to give CORP any access to the Project or the Project
7 documents. PPS continues to refuse access to Project documents and gone out of its way to
8 obstruct the mediation process.
9 27. Ignoring the language of its own Contract, PPS first claimed is had “absolutely
10 no obligation to pay Corp..[because]... Corp was terminated for cause.” Without explanation,
11 PPS then issued partial payments to CORP
12 28. PPS’s obfuscation, bad faith and stone-walling has forced CORP to file this
13 lawsuit so that the parties are on a level playing field. Concurrent with filing this lawsuit,
14 CORP includes its First Request for Production of Documents to PPS. These requests were
15 necessitated by PPS’s refusal to allow any access to Project documents.
16 CLAIMS FOR RELIEF
17 FIRST CLAIM FOR RELIEF
18 (Count I: Breach of Contract – Express)
19 29. CORP incorporates all allegations set forth above.
20 30. PPS wrongfully terminated CORP without good cause and in violation of the
21 express terms of the Contract under which PPS is entitled to recover its expectation and
22 consequential damages.
23 31. CORP has incurred damages as a result of PPS’s breach of the Contract in an
24 amount of not less than $523,894.43.
25 ///
26

Page 5 COMPLAINT FOREMAN STURM & THEDE, LLP

P.O. Box 13098
Portland, Oregon 97213
Telephone: 503.206.5824
 1 (Count II: Breach of Contract – Implied)
2 32. CORP incorporates all of the allegations in paragraphs 1-28 as if fully set forth
3 herein.
4 33. PPS’s breached the implied covenant of good faith and fair dealing incorporated
5 into the terms of the Contract as a matter of law.
6 34. PPS’s contrived artificial reasons to terminate CORP from the Project in an
7 attempt to reduce the amount of money owed to CORP under the Contract. Following the
8 termination, PPS has acted in bad faith regarding its mediation obligations.
9 35. CORP has incurred damages as a result of not less than $523,894.43.
10 SECOND CLAIM FOR RELIEF
11 (Quantum Meruit)
36. CORP incorporates all of the allegations in paragraphs 1-28 as if fully set forth
12
herein.
13
37. CORP’s work on the Project was for the benefit and at the insistence of PPS.
14
38. CORP’s work and the amounts charged for such work on the Project was
15
reasonable.
16
39. CORP is entitled to the principal amount owing for such work in the amount of
17
$488,836.11, plus interest which continues to accrue.
18
THIRD CLAIM FOR RELIEF
19
(Prompt Payment Act)
20 40. CORP incorporates all of the allegations in paragraphs 1-28 as if fully set forth
herein.
21
41. PPS has refused to make progress and final payments for the work on the Project
22
completed by or on behalf of CORP in the principal amount of $488,836.11.
23
42. PPS owes interest on all overdue sums in accordance with ORS 279C.570.
24
43. CORP is entitled to recover all interest due to it under ORS 279C.570.
25

26

Page 6 COMPLAINT FOREMAN STURM & THEDE, LLP

P.O. Box 13098
Portland, Oregon 97213
Telephone: 503.206.5824
 1 44. CORP is entitled to recover its costs and reasonable attorney fees under ORS
2 279C.570.
3 PRAYER FOR RELIEF
4 WHEREFORE, plaintiff Corp Inc. prays for judgment as follows:
5 1. On the First Claim for Relief (Counts I and II) direct and consequential damages,
6 in an amount to be proven at trial, of not less than $523,894.43.
7 2. On the Second Claim for Relief damages, in an amount to be proven at trial, of not
8 less than $488,836.11.
9 3. On the Third Claim for Relief damages as follows:
10 a. That it recovers any and all interest due at the maximum legal rate under the
11 Contract and ORS 279C.570.
12 b. That it recovers attorney fees and costs pursuant to ORS 270C.570.
13 4. That it be awarded such other relief as is just and proper.
14 DATED this 8th day of April, 2019.
15

16

17 FOREMAN STURM & THEDE LLP

18
By: /s/ Kyle A. Sturm
19 Kyle A. Sturm, OSB No. 080214
20 kyle@foremansturm.com
Brian L. Gingerich, OSB No. 920174
21 brian@foremansturm.com

22 Attorneys for Plaintiff

Trial Attorney: Kyle A. Sturm
23

24

25

26

Page 7 COMPLAINT FOREMAN STURM & THEDE, LLP

P.O. Box 13098
Portland, Oregon 97213
Telephone: 503.206.5824