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Jacobs Engineering Settles Long-Running Power Project Battle

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Image Courtesy of Gibbs, Giden, Locher, Turner & Senet LLP
California co-generation plant site was shut in 2006 and liquidated after costs tripled.
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After nearly a decade involved with a now-scrapped co-generation project in Victorville, Calif., including half that time in legal battles with the city, engineer Carter & Burgess and its parent, Jacobs Engineering Group Inc., agreed to a $54-million settlement with officials in a closed-door session on Nov. 9.

The pact settles a lingering professional negligence lawsuit with the Southern California city, located about 80 miles northeast of Los Angeles, over the troubled plant whose costs had nearly tripled before officials halted work and liquidated plant components in 2006. "This compensates the city for 100% of the verdict judgement, plus its attorney's fees," says Glenn E. Turner, the city's Los Angeles-based attorney. Jacobs executives did not return calls for comment by ENR press time on Nov. 27.

The city hired Carter & Burgess, Fort Worth, Texas, in 2003 for design and construction management on a planned $22-million, 17.5-MW powerplant. The firm, which Pasadena, Calif.-based Jacobs acquired in 2007, had recommended the project as a low-cost energy source in a feasibility study.

"Carter & Burgess provided the city with a misleading pro forma and used inflated revenue numbers," says Turner. The project ran into trouble, however, when construction costs reached $60 million before work halted in 2006. The plant, which was 75% complete, required another $50 million to finish.

Victorville recouped $8 million through project refinancing and an equipment fire sale. In 2008, Carter & Burgess sued for $106,196 in unpaid fees after receiving $8.2 million for the unfinished plant. Victorville responded with a countersuit. "The city didn't know about making electricity. It relied on Carter & Burgess," says Turner. After a seven-week trial in 2010, a jury found the firm guilty of financial mismanagement, misrepresentation and breach of contract. According to Turner, the decision represented a first-time "breach of fiduciary duty" verdict against a California engineering firm.

Carter & Burgess sought a dismissal of the ruling; it had offered previous settlements to the city before agreeing to pay the current amount. Turner says payment is expected within 60 to 90 days. Victorville has recovered some $62 million of the $84-million bond issue used to finance the plant, says a published report.

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