Trial began Friday in Houston in a multimillion-dollar dispute between Kellogg Brown & Root, the Houston-based global giant in engineering and construction services, and a Mexican construction company over a losing bid to participate in building a huge refinery in southern Mexico.
The Mexican company, Constructora Hostotipaquillo, known informally as “Hosto,” contends that it lost more than $186 million in potential revenue because KBR breached its fiduciary duty to Hosto in several key ways, causing the companies not to be awarded a lucrative contract for one phase of construction of a vast government-owned refinery in Dos Bocas, Tabasco. The two companies joined forces to bid on work related to the refinery project. The Dos Bocas refinery was originally projected to cost more than $8 billion; due to overruns and construction delays, the final cost was more than $18 billion.
Hosto’s damage claim is “a big number because it was a big project,” Hosto’s lawyer, Butch Boyd of Houston, said in his opening statement to jurors in the court of state District Judge Donna Roth. When KBR decided it did not want to continue participating in the project, Boyd said, “they abandoned Hosto.”
KBR counters that it had no fiduciary duty to Hosto because the two companies did not enter into a formal partnership or joint venture to bid on contracts related to construction of the refinery. Rather, KBR’s lawyers said, the two companies were merely “associated” but not bound by the terms of a business partnership or joint venture agreement.
Hosto lost out on the construction bid because it failed to perform well on an earlier phase of the project, Cameron Byrd of AZA in Houston, one of KBR’s lawyers, told jurors in his opening statement.
“Hosto is finger-pointing at KBR,” Byrd said, adding, “Hosto didn’t do its job, so it didn’t get paid.”
In addition to Boyd, court documents list Hosto’s attorneys as Michael J. Blanchard and Jillian Scherrer of the Butch Boyd Law Firm and Troy Chandler of Chandler McNulty in Bellaire, Texas.
In addition to Byrd, the AZA lawyers representing KBR include, among others, John Zavitsanos, a co-founder of the firm, Rey Flores, Daryl Moore and Justin Kenney.
A key issue in the case is the proper translation of the Spanish phrase “convenio de asociación” in documents binding Hosto and KBR together in pursuing work related to the refinery project. Hosto contends the phrase means “joint venture agreement,” which carries with it mutual fiduciary duties of the parties to one another.
In an earlier ruling, Judge Roth said: “This whole case rests on whether it was a joint venture agreement or not.”
KBR contends the phrase “convenio de asociación” merely means “association agreement.” The two firms were working together, Byrd said, but “we were not a joint venture or a partnership.”
“You can have a boxing partner or a dance partner or a study partner,” he said. “That doesn’t mean you’re in business together.”
The trial is expected to last about three weeks.
The case is Constructora Hostotipaquillo, SA DE CV v. Kellogg Brown & Root, LLC in Harris County state district court, case no. 2021-20545.