A federal judge has ruled that the joint venture between Flatiron and AECOM must pay AECOM Technical Services $14.2 million in a prolonged legal battle related to the $276 million C-470 Express Lanes project south of Denver. The dispute, which has lasted several years, was characterized by the presiding judge as bordering "on the absurd."

Los Angeles-based AECOM Technical Services, which served as the lead designer on the project commissioned by the Colorado Department of Transportation, was awarded $8.3 million in attorney costs and $5.9 million for expert witness and other litigation expenses by U.S. District Court Senior Judge William Martínez. Initially, the firm had sought $16 million in total.

Background of the Dispute

The litigation stems from complications in the C-470 Express Lanes project, which broke ground in 2016. The general contractor on the project was a joint venture between Flatiron, headquartered in Broomfield, Colorado, and AECOM, based in Dallas. However, the joint venture soon encountered budget overruns and delays, leading to legal conflicts between the parties.

Flatiron/AECOM initially agreed to complete the project by 2019 for $204 million, later increasing the budget to $237 million due to change orders. However, final expenditures skyrocketed to over $502 million, as reported by The National Law Review.

In October 2019, AECOM Technical Services filed a lawsuit against the joint venture, claiming breach of contract and unjust enrichment. The firm alleged it was owed $5.3 million for out-of-scope design services that remained unpaid.

In response, Flatiron/AECOM countered with three claims: breach of the teaming agreement, negligent misrepresentation, and breach of subcontract. The JV sought $263.5 million in damages, blaming cost overruns and delays on AECOM Technical Services' allegedly flawed preliminary design work.

Legal Proceedings and Court Rulings

Over the course of the case, the court dismissed two of Flatiron/AECOM’s three claims. The remaining claim was scheduled for jury adjudication in February 2024.

However, just ten days before the trial, the joint venture filed a motion proposing to pay AECOM Technical Services the full amount it sought while also attempting to switch roles and become the plaintiff. Additionally, it sought to dismiss AECOM Technical Services’ claim for unjust enrichment. Judge Martínez denied both requests on January 25, 2024, stating that the case itself “borders on the absurd.”

Following the trial, the jury awarded AECOM Technical Services $5.26 million in unpaid design fees and dismissed Flatiron/AECOM’s counterclaim. Settlement discussions between the parties afterward proved unsuccessful. Consequently, AECOM Technical Services petitioned the court to recover its legal expenses, which was largely granted in the March 11 ruling.

Industry Reactions and Takeaways

The case highlights the complexities and potential pitfalls of large-scale construction litigation. Despite securing a favorable judgment, both parties incurred significant legal costs.

Christopher Ng, managing partner at Gibbs Giden, a Los Angeles-based construction law firm, noted the broader implications in a LinkedIn post.

“This litigation also underscores the importance of carefully drafted preliminary services agreements with explicit liability limitations, and a reminder to parties to invest in robust dispute resolution mechanisms before positions harden,” said Ng. “The true lesson here may be the value of prevention over cure in an industry where margins rarely support protracted legal battles.”

Attempts to obtain comments from Flatiron and AECOM were unsuccessful at the time of publication.

Lessons for the Construction Industry

The dispute underscores the importance of well-defined contracts, clear delineation of responsibilities, and effective conflict resolution strategies in construction projects. Legal experts suggest that proactive measures such as arbitration clauses, structured change order processes, and collaborative project management frameworks could help prevent similar disputes in the future.

Additionally, the case serves as a cautionary tale about the financial risks of litigation in construction. Even when a party prevails in court, the time and money spent on legal fees can significantly erode any financial gains from the judgment.

With construction projects growing in complexity and involving multiple stakeholders, legal battles like this one may become more common unless firms prioritize risk management and contractual clarity from the outset.

Originally reported by Julie Strupp in Construction Dive.