Residents to go to court to resolve contract dispute with dredging company

Residents to go to court to resolve contract dispute with dredging company
Equipment owned by DredgIt, a dredging company contracted by the Millers Creek Special Tax District, stands idle during early May.

Millers Creek Special Tax District residents were “furious,” to learn the Texas-based company they had contracted with to dredge the waterway by their homes had walked off the job in early March citing the COVID-19 pandemic and has filed a lawsuit to terminate its contract, while demanding the board pay $250 an hour in standby fees.

DredgIt, a dredging company from Houston, Texas, had contracted with the homeowners to remove sediment from Millers Creek in September 2019. It was the lowest bidder of four dredging companies with a bid of $855,000. Each of the four bids received by the board met the specifications and were based on removing 30,000 cubic yards of sediment. At the time it exited the project, Dredgit had completed only 40% of the work, said former Millers Creek Special Tax District President Michelle Wright.

“We’re invested. We’ve been working so hard for years only to have something like this happen to us.  It’s just very unfair,” Wright said. “When we tell people what’s going on, they are just in shock. During COVID-19, there’s been dredging going on all over the city.  It’s just their way out of the project because they way underbid.”

During a board meeting June 15 at Mudville Grille, Wright resigned as president of the Millers Creek Special Tax District to make way for the election of John Rowland III, a resident who owns a marine equipment company and has years of experience in the marine business. “When I took this role over a year ago, my goal and passion was to work and manage a dredging project,” said Wright. “As we enter this litigation phase, I feel that my commitment and passion does not align with this new phase.”

According to the contract with DredgIt, the project was supposed to be completed January 31, said Wright. Although there were different “hiccups” along the road, such as failed equipment, the board didn’t see any red flags. “We had a great working relationship with DredgIt,” she said. “I had talked to the president and he said they were a Texas-based firm looking for a way to get into the Florida market. It was to be a win-win for both of us,” she explained.

However, some residents had heard rumblings from DredgIt crew members that the company had underbid and was “losing its tail on the project,” she said. 

Enter the Coronavirus pandemic, and everything changed.

During the week of March 14, Wright received both a phone call and email from DredgIt President Jared Mark saying he was suspending the job due to the unknown nature of COVID-19. “He had a crew of four employees – two on the dredge boat and two on the church property. They could easily social distance. There was a lot of uncertainty at that time, but I didn’t see a problem with it,” Wright said. However, a couple of days later, she called Mark and suggested they could extend the time because of the uncertainty but wanted to put it in writing as a change order at no cost to either party. “I said that we wouldn’t charge him for being late, but I never heard back from him on that. It was two days after he had sent me the email and the phone call,” she said.

Even so, Wright was shocked to receive a letter from DredgIt’s Texas-based lawyer saying the dredging company was terminating the contract due to COVID-19. 

“They were asking us to release them from the contract, and there is a clause in the contract called a “standby” that says any delays that are no fault of DredgIt require that we pay a $250-an-hour fee. They were trying to say that they would waive the standby fee if we would release them from the contract! But they can’t really use that because COVID-19 is not our fault, either. It goes both ways.” she said.

Wright immediately called an emergency board meeting by phone, which was also attended by the board’s attorney, Wayne Flowers of Lewis, Longman & Walker, P.A. Flowers then sent a letter to DredgIt disputing its claim saying that the executive order to stay-at-home due to Coronavirus by Florida Gov. Ron DeSantis fully exempted open construction projects. “We cited several current dredging projects going on in Northeast Florida that never stopped throughout this whole Coronavirus pandemic,” said Wright.

Fortunately, the Millers Creek board had purchased a performance bond from Suretec Insurance Company at a cost of $12,000 when it signed the contract with DredgIt in September 2019. The bond was meant to ensure DredgIt will perform the work to completion and will pay any subcontractors it had hired to work on the creek.

Flowers copied Suretec in his letter to DredgIt to put them on notice that it was considering declaring contractor default under the terms of its performance bond. Suretec’s first step was to serve as mediator during a tele-conference between DredgIt and the board, which was represented by Flowers, Wright, and Bobby Baker, husband to Tamara Grooms Baker, a board member.

“We got nowhere,” said Wright. “We were very kind, and we were offering to give them a time extension. They said ‘no, we want off the project.’ The bottom line is they underbid the project and were trying to use COVID-19 as a force measure by saying it made it difficult to work on the project,” she said.

Commissioned with the task to find out how much it might cost to hire another dredging company to finish the job, Wright contacted the next two original lowest bidders – Dames Point Workboats LLC and Brance Diversified, which is also known as BDI. Dames Point Workboats had originally bid $877,487 and BDI had bid, $1,187,000, to do the original work. Dames Point was not interested and would not be able to get a bond, she said. Meanwhile, Lance Young of BDI was invited meet with the board June 15 at the Mudville Grille to discuss finishing the project. 

DredgIt was also asked what the additional cost would be for them to finish the job, but never came back with a number, said Wright. On May 15, the board finally got a letter from Jacksonville attorney E. Lanny Russell of Smith, Hulsey & Busey with an offer: DredgIt proposed to terminate the contract and drop the standby fees they planned to charge the board but demanded Millers Creek residents pay half of the demobilization fee – $37,500 – to remove their equipment from the site.

“What they are banking on – it’s a scare tactic – is that we are limited and don’t have an endless checkbook where we can pay to go into litigation,” Wright said, noting she had an emergency meeting of the board and some Millers Creek residents in mid-May to discuss the next step.

On May 22, the angry board decided to dispute the claim. In a letter written to the DredgIt’s lawyer by Flowers, the board stated that nothing had prevented DredgIt from completing the job and offered a counter proposal: DredgIt should pay all attorney’s fees for the tax district as well $336,000, what it would cost for another dredging company to finish the job. Also, they demanded liquidated damages due to a clause in the contract that says for every day DredgIt is late past the contract date of January 31 it will pay $450 a day. That totaled $52,000 as of the date of the letter. 

“We were asking them for over $400,000 to release them from the contract and not trigger the bonding company, Wright explained, noting if a dredging company loses its bonding capability it affects its ability to get future work. “They lose their ability to bond the minute a claim is made,” she said.

However, DredgIt did not respond to the board’s May 29 deadline and instead filed a claim with the Duval County Circuit Court.

“Everyone is furious. We know we have a strong case. The problem is the litigation costs,” Wright said.

During an emergency board meeting June 1, the board voted to move forward with the litigation and pay for it through private donations and money already budgeted for litigation. The district’s yearly assessment to each Miller’s Creek homeowner of $3,000 will remain and by law cannot be raised, she said.

The board also contacted the bonding company on June 2. If it agrees that DredgIt is in default, it will cover the cost of the remaining 60% of the dredging project, she said, adding that Suretec will not pay for the litigation costs. Suretec has hired a consultant to investigate the case and advise it in how to proceed, she said.

Recognizing that litigation can take as long as one to two years, the board also decided to request BDI submit a proposal to complete the work as soon as possible. However, during the June 15 board meeting, after the board met with Young, it recognized the risk it would take by hiring the dredging company without first getting the bonding company’s approval. Reconsidering its decision, it voted to wait until its July 20 board meeting to move forward with the BDI contract. “We don’t want to jeopardize our claim with the bonding company by overstepping the process,” Wright said.

By Marcia Hodgson
Resident Community News

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