A $30 million construction defect lawsuit that has endured for more than a decade has ended with a take-nothing decision in an arbitration ordered by the Texas Supreme Court.
The case, G.T. Leach Builders LLC v. Sapphire VP, involved extensive damage to a luxury condominium development in South Padre Island. The project was still under construction when it was heavily damaged by Hurricane Dolly, and Sapphire VP, the developers, sought to recover millions in water damage, construction delays, lost revenues and increased constructions costs. Moreover, it was 2008, and Sapphire’s condominium project found itself plagued by a cratering real estate market and restless investors who withdrew their purchases.
Sapphire sued their insurance carrier for the project, alleging that eight days before the storm hit South Padre, the insurance carrier allowed the standard builder’s risk policy to be supplanted by a permanent insurance policy. After several years of litigation, the insurance carrier, in turn, identified other parties they thought should share responsibility, among them G. T. Leach Builders.
G. T. Leach moved to compel arbitration with Sapphire VP under a clause in their contract. Sapphire opposed the arbitration, claiming that G.T. Leach had waived that right by moving, among other things, for a continuance to prepare for the court case, showing that it had “substantially invoked the judicial process,” as opposed to arbitration. The trial court agreed. G.T. Leach appealed.
In what became an oft-cited decision on rules governing an arbitration waiver, SCOTX ruled that G.T. Leach had not, in fact, waived its right to arbitration. The court noted that the builders had been added to the lawsuit 18 months after it was originally filed against Sapphire’s insurance brokers. The court ruled that G.T. Leach had participated in the litigation merely to defend itself. “Merely taking part in litigation,” the court noted, “is not enough (to imply a waiver of arbitration).”
Though the Texas high court case ordered to arbitration in 2015, Sapphire did not enter into arbitration with G.T. Leach until last year, instead focusing on settlements with the other parties involved. The take-nothing arbitration decision, which effectively ends a decade of the Hurricane Dolly litigation, hinged on multiple claims of breach of contract-refuted by G.T. Leach lawyers-and a dispute over the state of completion at the time of the storm.
“Despite claims to the contrary, the Sapphire project had not been completed when Dolly made shore. It was imperative to show the arbitrator that our client acted reasonably and responsibly,” said Lawrence J. West of the Houston-based West Mermis firm. “It was an exceptionally complex case that had endured a number of detours, but we are pleased to have secured the decisive win G.T. Leach deserved and that this chapter can finally be closed.”
“This case may have been the most complicated and complex construction case among all the complicated and complex construction cases I’ve seen in 30 years of handling complex construction litigation,” said West. “But we were fortunate to have a client who stood his ground and an insurance carrier who supported that decision.”
Other West Mermis lawyers involved were Justin W. Safady and Stephen A. Dwyer.