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OC Performing Arts Center settles suit over concert hall construction cost overruns*

May 9, 2009 |  6:00 am

Segerstrom

After tangling in court over nearly $40 million in cost overruns on the Renee and Henry Segerstrom Concert Hall, the Orange County Performing Arts Center has reached an undisclosed settlement with the project's architects and builders.

Orange County Superior Court Judge David C. Velasquez approved the mediated settlement and on Thursday dismissed the case that the Costa Mesa center filed in August 2007, against Pelli Clarke Pelli Architects and the construction giant, Fluor Corp.

With the terms undisclosed, it was uncertain whether the outcome eases or exacerbates the $52-million fundraising burden that the hall still represents for OCPAC. *Reached Monday, Terrence Dwyer, the center's president, said he couldn't comment on the case's implications for OCPAC's finances and fundraising challenges: "The terms of the settlement are confidential, and I do need to stick to that."

 The center, which has been forced to cut staff and make an emergency fundraising appeal to try to balance this year's recession-wracked operating budget, has raised $188 million in a decade-long capital campaign that's still far short of its $240 million goal.

After OCPAC had fired the first legal salvo in the construction case, the Irving, Texas-based Fluor counter-sued, saying the center had withheld $37.7 million owed to it and 10 subcontractors. Fluor sought interest penalties of 2% monthly for payments it alleged had been "wrongfully withheld."

In its suit, the center had said it was the designers' and builders' fault that costs ballooned from $200 million to $240 million. Consequently, the suit contended, the hall, which opened in September, 2006, was "less attractive and less valuable than ... expected," with such problems as obstructed sight lines and a lack of legroom in certain spots.

SegerstromBuilders The contractor's counter-suit contended that the center failed to pull construction permits in time or address unforeseen design changes promptly, "creating numerous delays, coordination problems ... and an inordinate number of project design defects."

A brief the center filed in February of this year, two weeks before the last two mediation sessions, aimed at tapping into the insurance policies of several architectural and engineering consultants hired to augment lead architect Cesar Pelli and his New Haven, Conn., firm. "Disputes arose ... regarding the sufficiency, accuracy, timeliness and completeness of the design work," center attorneys said, resulting in overruns that exceeded the project's $20 million insurance policy for design problems.

The design and engineering consultants, who were not defendants in the suit, argued that their insurance policies should be off-limits, because their work on the concert hall was covered under the project's own policy. But the judge ordered them to show their policies to the center's lawyers, to determine whether OCPAC was entitled to collect under those policies' terms.

A comparable lawsuit concerning cost overruns at Walt Disney Concert Hall in Los Angeles was settled in 2006, with the ad-hoc nonprofit corporation that oversaw the project paying its contractors an additional $13.3 million. An insurance policy covering architect Frank Gehry, who was not a defendant in the case, yielded $4.5 million more for the builders. The outcome raised Disney Hall's total cost from $274 million to $284 million. The main contractor, M.A. Mortenson, had sued saying that, together with its subcontractors, it was owed $43.3 million for delays and unforeseen costs incurred trying to carry out the hall's complex design.

In the Segerstrom Concert Hall case, Pelli's firm and Peter Walker and Partners, the project's landscape architect, said in court documents that they had "performed the vast majority of their work prior to...construction...and the majority of the alleged issues which arose during construction were between Fluor, the [construction] subcontractors and the Orange County Performing Arts Center." The architects said it was not their responsibility, but Fluor's, to produce "detailed final construction documents" that would allow work to proceed smoothly and on-budget.

Attorneys for the architects also said that OCPAC had not produced any evidence that their work was flawed, and that permitting delays "are an inherent component of the construction process" for which they shouldn't be blamed. Also, "acts of God" had contributed to the delays and cost escalations, Pelli contended. In a 2006 interview, Fluor's project director told The Times that it had taken 15 months to pump out all the ground water beneath the site -- at 750,000 gallons per day -- and filter out pollutants. During the second year of the three-year project, rainfall was nearly double the annual norm, causing more delays.

To manage the complex case, the judge had separated it into a Superior Court action on the design issues, which ended this week, and a related case on the construction issues, which was handled by a retired judge paid by the parties and acting as "referee."  Keith Stephens, a spokesman for Fluor, said a settlement also has been reached on the construction issues, and it is now "in the process of being dismissed." He said he couldn't comment further on the settlements.

-- Mike Boehm

Photos: Renee and Henry Segerstrom Concert Hall. Credit: Lori Shepler/Los Angeles Times

Concert Hall under construction about six months before opening. Credit: Karen Tapia-Andersen/Los Angeles Times.

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