New Mexico Highlands University regents have fired the opening shot in what could turn into a messy court battle with the contractor they blame for delays in the construction of the student center building.
Regents fired general contractor Makwa Builders LLC. in February, and the Albuquerque-based company and the university are now fighting over how much Makwa is owed.
Attorneys for the university filed a declaratory judgment lawsuit against Makwa in state district court here on Tuesday seeking to invalidate a provision in their contract that mandates that they submit to binding arbitration to resolve disputes rather than take the matter to court. The suit was filed a day after regents met behind closed doors with their attorneys.
If the university succeeds in invalidating the arbitration clause in the contract, then either party will be able to file suit against the other to enforce the contract.
Attorney Ross Crown, with the Lewis & Roca law firm, had been representing Makwa on the matter. Contacted on Wednesday, Crown declined to comment on the court action, referring calls to Phoenix attorney Bob Berens, who is now representing Makwa in the Highlands matter. Berens didn’t immediately respond to a message left at his office Wednesday afternoon.
University spokesman Sean Weaver said the university doesn’t comment on potential litigation.
Makwa submitted a payment request to the university in late April seeking $3.2 million. The company states that $2.8 million of that is for work already done by Makwa and its subcontractors; another $98,000 is for termination costs while the remaining $340,607 is for overhead and profit on work that has not been executed and for gross receipts tax on that amount.
The university has rejected Makwa’s claim. In an Aug. 10 document, Highlands attorneys Stevan D. Looney and Mariposa Padilla Sivage of the Sutin, Thayer & Browne law firm, state that the university “owes Makwa nothing.”
In the document, the university contends that Makwa is trying to charge for work that neither it nor its subcontractors performed or completed, that it’s trying to recover payments for subcontractors’ work that Highlands has already paid and that it is trying to collect costs it isn’t entitled to.
Further, the university attorneys argue, any money that Highlands legitimately owes Makwa — they peg the amount at $294,449 — needs to be offset by work Makwa didn’t execute or perform and for the cost of correcting defective work. The university contends that those sums total $644,942, including $543,162 to correct work it calls defective.
The complaint for declaratory judgement filed by the university states that regents never agreed to waive their right to file a lawsuit against Makwa in the event of a dispute.
Regents met on May 12, 2010 and voted to award the bid for the student center to Makwa. The university was subsequently provided a construction contract, and Highlands President Jim Fries signed it on behalf of the university. According to the complaint, the contract contained a binding dispute resolution section in which the parties can select a “check the box” provision to determine how any disputes would be handled. The arbitration box was checked on the contract.
Regents contend that they were never given a copy of the contract and that they never considered or approved the arbitration provision.
University attorneys argue that under state law, regents couldn’t delegate to Fries their authority to sue or be sued.
“While the Board of Regents selected Makwa as the contractor for the student center, it did not, and could not delegate its power to sue or be sued, and it did not relinquish its right to choose the method or forum for the resolution of legal disputes arising under the contract,” the complaint states.
It’s worth noting that regents exercised the “termination for convenience” clause in the contract, hoping that choosing that option would allow the university to move forward faster in selecting a new contractor and trying to get the project back on track.
But the contract specifies that in the event of a termination for convenience, the contractor is entitled to reasonable overhead and profit on work that hadn’t been executed. If the termination for default clause had been invoked, the contractor would have been on the hook for the results of the breach.
The massive glass structure at the northwest corner of National Avenue and Eighth Street was supposed to have been completed this past December. The project is already about $4.8 million over budget, its cost having jumped from nearly $20.6 million when it was first approved to just over $25.4 million. That amount doesn’t include any settlement with Makwa.
Franken Construction has taken over as the general contractor on the project, which is now scheduled for substantial completion by Dec. 22 of this year. Franken Construction officials have said a number of things were done wrong with the project.
Highlands Regent Jesus Lopez has previously said that the university suspected from the beginning that Makwa had underbid the project by about $2 million, but he added that the university couldn’t do anything because of the state procurement code, which required Highlands to go with the lowest bidder.
Crown has previously denied any wrongdoing on the company’s part.