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 the changes.
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 subcontractors.
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 Chicago.
Harbour Contractors is defended by the firm of Duane Morris, of Chicago, and EDI is represented by attorney Elizabeth D. Sharp, of Chicago.