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Dec 28, 2023

Judge: Lane Broke JV Terms With Skanska, Granite on I

A joint venture of Skanska USA, Granite Construction and Lane Construction was

A joint venture of Skanska USA, Granite Construction and Lane Construction was the contractor that built Florida Dept. of Transportation's I-4 Ultimate project, seen here under construction in 2020.

Photo courtesy of Florida Dept. of Transportation

A federal judge in Florida found that the Lane Construction Corp. breached its joint venture agreement with Skanska USA Civil Southeast Inc. and Granite Construction Co. when it stopped paying its share of capital calls for a delayed and over-cost Florida highway project. But the validity of Lane's own claims against Skanska must still be determined at trial.

The lawsuit relates to the Florida Dept. of Transportation's I-4 Ultimate project, which involved improvements and widening along 21 miles of the highway through the Orlando area. The team faced delays related to a drilled-shaft design required by FDOT, according to court filings. About three years into work, the project was months behind schedule and the contractors were facing losses of more than $100 million. While it was originally valued at $2.3 billion, costs ultimately reached closer to $3 billion, U.S. District Judge Roy Dalton Jr. noted in his June 5 order.

Lane had wanted to exit the contract, but its JV partners opted to stick with the plan. The firm initially filed a lawsuit against Skanska in 2021, but the case has grown via a countersuit and intervention to also include Granite, the JV itself and Lane's parent and guarantor, WeBuild S.p.A. Inc.

Representatives of Skanska and Granite declined to comment on the case. A spokesperson for Lane could not immediately comment.

The joint venture, called SGL and with Skanska SE as managing partner, had contracted with FDOT's design-build-operate partner, I-4 Mobility Partners, to construct the highway project. Under terms of its contract, I-4 Mobility Partners was required to exercise its rights to the joint venture's benefit. Lane says I-4 Mobility Partners should have exercised the termination clause in its contract with FDOT that allowed the contractor to bow out if the project was more than six months behind schedule, if the highway agency would agree to allow it.

Dalton notes, however that I-4 Mobility Partners stood to get $75 million annually for decades as the concessionaire responsible for operating and maintaining the highway. Further complicating the situation is that I-4 Mobility Partners is owned by two Skanska subsidiaries, meaning the company had interests in the project as both developer and managing partner of the builder. Lane alleges that prompts a fiduciary breach under Florida law, but Skanska disputed in court filings that there was a conflict of interest.

Instead of terminating the contract, Skanska negotiated a deal with FDOT for $125 million to remedy the delay and a one-year extension to finish the work. But even with the extra money, the partners faced capital outlays of more than $20 million per month by January 2021 to keep the project going. They would end up contributing $265 million, but Lane refused to pay its portion of the funding, according to Dalton's order.

That was a "clear" breach of contract, the judge wrote, noting that the joint venture agreement requires the partners to contribute a proportionate share when called unanimously. He noted that under agreement terms, even if a partner disputed need or amount of the payment, it was still required to pay pending an independent audit.

But Dalton wrote that to determine damages for the breach, he needs more information about the joint venture's remaining financial obligations and how much each partner has paid or should have paid. The judge pushed that question to the trial, which is set to begin Oct. 2 in Orlando federal court. Lane will also be able to argue its case accusing Skanska of breach of fiduciary duty and gross negligence.

In his order, Dalton also tossed out claims filed by Lane, Skanska, Granite and the joint venture that related to previously ongoing capital payment calls, as the project now is substantially complete. Those claims will instead be subsumed into the contract damages.