A Michigan-based water driller will be allowed to continue
its $2.4 million federal racketeering lawsuit against Chicago’s Public Building
Commission and two contractors, after a federal judge said the driller has done
enough to this point to back its assertions the CPBC and the contractors withheld
information about underground asbestos-wrapped pipes on the construction site
for a new Chicago police station, and then subsequently withheld payment, driving
the driller out of business while maximizing their own margins.
U.S. District Judge Robert W. Gettleman on June 28 denied
the requests from the CPBC and other defendants, including Plainfield-based
Harbour Contractors and Environmental Design International, of Chicago, to dismiss
most of the lawsuit brought by DT Boring Inc., of Portland, Mich. The lawsuit alleged
the defendants violated the federal Racketeer Influenced and Corrupt
Organizations (RICO) Act and committed fraud.
DT Boring brought the lawsuit in December 2015, asking the
court to step into its years-long dispute with Harbour, EDI and the CPBC. DT had been hired in 2011 by Harbour to
perform drill borings and perform other work associated with the installation
of a geothermal heating and air conditioning system at the city of Chicago’s
new 12th District Police Station, which was being constructed on a
former Chicago Housing Authority site near the intersection of S. Blue Island
Avenue and S. Racine Avenue in the city’s University Village neighborhood.
Court documents said DT began work in May 2011, and its
crews soon encountered underground structures remaining from the demolished CHA
building on the site. According to the complaint, the structures were made of
steel rebar-reinforced concrete, and included old steam heating lines wrapped
in asbestos coverings.
DT said the official bid documents did not disclose the existence
of either those structures, or their asbestos-wrapped pipes, even though DT
alleged Harbour, EDI and the CPBC all knew they were there.
In its complaint, DT said the undisclosed underground
obstacles quickly escalated the cost and slowed work. Yet, throughout the
delays, DT accused the CPBC and Harbour of stringing DT along, by allegedly agreeing
to changes to the project suggested by DT, while never intending to pay DT for
DT alleged this was just one instance of a pattern of
conduct by the CPBC and its selected general contractors to allegedly defraud
smaller subcontractors to keep the city’s public building projects at or below
estimated cost, while boosting the general contractors’ profits.
DT alleged the general contractors appear to submit bids
well below those of competitors, but only through an established relationship with
the CPBC, which allows the general contractors to allegedly make up the
difference and hit is desired profit margins by shortchanging its
DT said the pattern was documented in an investigation
published in Crain’s Chicago Business in 2012.
DT was removed from the 12th District Police
Station project in November 2011, and later went out of business. DT filed suit
in 2013 in federal and state court seeking the money it said it was due. Its
federal action was dismissed, and DT settled with Harbour’s bond insurer for a
portion of what it said it was owed.
The defunct driller then brought its RICO action against the
CPBC and the contractors, seeking $400,000 in compensation, plus at least $2
million in punitive damages.
The CPBC and the contractors responded with motions to dismiss,
asserting DT’s complaint fell short of the legal standards needed to support
their racketeering accusations.
The judge, however, said, while some elements of DT’s
complaint can’t be sustained, the bulk of DT’s allegations are strong enough to
allow the litigation to continue.
He said DT has sufficiently alleged the defendants, in
communicating with each other concerning the purported “scheme,” committed “numerous
instances of mail and wire fraud.” The judge said the complaint sufficiently
alleges the purported scheme was part of a larger pattern, dating back to at
least 2008. And the judge said the allegations “plausibly suggest that the
conspiracy led to plaintiff’s injuries.”
Gettleman noted Harbour, in its arguments, “concedes … the
enterprise has a common purpose,” but then “attempts to re-characterize the
alleged purpose as merely constructing buildings for the least amount to allow
the contractors to realize a profit,” which is “the purpose of every building
owner and every general contractor for every construction project.”
But the judge said this misses the point of the lawsuit.
“Harbour’s argument ... fails to acknowledge that
plaintiff has alleged that the enterprise’s goal is accomplished through fraud
and extortion,” the judge said.
DT Boring is represented in the action by attorneys
Cristofer E. Lord and Bruce Rose, both of Chicago.
The CPBC is represented by the firm of Neal & Leroy, of
Harbour Contractors is defended by the firm of Duane Morris,
of Chicago, and EDI is represented by attorney Elizabeth D. Sharp, of Chicago.