The Chicago Public Building Commission, a city agency in charge of constructing and renovating Chicago’s city-owned buildings, has agreed to pay out about $1.35 million, including more than $300,000 to a Michigan-based water well driller, to settle a federal racketeering action brought by the driller who accused the CPBC and two contractors of withholding information about underground asbestos-wrapped pipes on the site a new Chicago police station and then effectively putting the driller out of business by withholding payment.
A federal judge in Chicago agreed last month to dismiss with prejudice the lawsuit brought by DT Boring Inc., of Portland, Mich., against the CPBC and contractors, Plainfield-based Harbour Contractors and Environmental Design International, of Chicago, over the problems DT claimed it encountered after it was hired as a subcontractor for the city’s new 12th District Police Station.
That dismissal, in turn, came about a month after the CPBC approved the settlement deal, which had been negotiated at a July settlement conference, according to a copy of the settlement agreement obtained by The Cook County Record under a Freedom of Information request filed with the CPBC.
The deal closes out both the District 12 Police Station project, and the legal actions that have swirled about the project since DT Boring first filed suit in late 2015, asking the federal courts to step into a years-long dispute with the CPBC and Harbour.
DT had been hired in 2011 by Harbour to perform drill borings and other work associated with the installation of a geothermal heating and air conditioning system at the 12th District station, which was being built 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’s crews soon encountered underground structures remaining from the demolished CHA building on the site, made of steel rebar-reinforced concrete enclosing old steam heating lines wrapped in asbestos coverings.
DT said official bid documents did not disclose the existence of those structures or the pipes, even though DT alleged the CPBC and Harbour knew they were there.
As the need to work around the structures and pipes slowed the work and boosted costs, DT said Harbour and the CPBC essentially strung them along, allegedly agreeing to changes to the project but not paying DT for the extra work.
DT alleged this was but an example of a pattern of conduct by the CPBC and its selected general contractors to allegedly defraud subcontractors to keep Chicago’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.
Following DT’s filing, the CPBC also filed a cross claim against Travelers Casualty and Surety Company, asserting breach of surety bond obligations.
U.S. District Judge Robert W. Gettleman in mid-2016 rejected attempts by the CPBC and the other defendants to dismiss DT’s case, leading to the settlement talks.
The approved agreement said the parties involved decided to settle the matter to “avoid the time-consuming, costly and burdensome nature of continued litigation and trial.”
Under the deal, the CPBC would pay $50,000 directly to DT, while Harbour would pay the drilling firm $245,000. Other defendants would also chip in an additional $27,500, bringing DT’s total award under the deal to $322,500.
Under a separate agreement, the CPBC also agreed to pay Travelers $1.05 million, after receiving credit for $245,000 it would pay to DT Boring on behalf of Harbour. In all, the CPBC would pay $1.35 million to resolve the litigation, the agreement said.
DT Boring was represented in the action by attorneys Cristofer E. Lord and Bruce Rose, both of Chicago.
The CPBC was represented by the firm of Neal & Leroy, of Chicago.
Harbour Contractors was defended by the firm of Duane Morris, of Chicago, and EDI was represented by attorney Elizabeth D. Sharp, of Chicago.