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SETTLEMENT AGREEMENT
This Settlement Agreement (“Agreement”) is entered into by and between the City of East Palo Alto, a municipality organized under California law (“City”), and A. Teichert & Son, Inc., dba Teichert Construction, a California corporation (“Contractor”) (referred to collectively as the “Parties,” and individually as a “Party”), as of the Effective Date as defined in Section 2 herein.
RECITALS
A. On or about April 24, 2020, the Parties entered into a publicly bid construction contract (“Contract”) pursuant to which Contractor promised to construct City’s Bay Road Improvements Phase II/III Project, Project No. CIP-ST-05A-13 (“Project”) as general contractor for the amount of $9,871,452.00 (“Contract Price”).
B. During construction of the Project, City approved 18 Contract change orders, which cumulatively increased the Contract Price by $3,323,614.26, for a revised Contract Price of $13,195,066.25.
C. On or about June 30, 2022, Contractor submitted a claim to City (“Claim”), alleging entitlement to additional compensation for two unresolved claims pertaining to installation of the new storm drain system (referred to as “NOPC 1” and “NOPC 3”), unpaid progress payments, unpaid retention, statutory penalties for late payment of progress payments and release of retention, and additional interest penalties, seeking a total of $7,127,151.14, plus unspecified attorneys’ fees.
D. The Parties agree that following submission of the Claim, City has paid Contractor all remaining progress payments, released all retention, and has further paid Contractor the statutory penalties due pursuant to Public Contract Code section 20105.50 for late payment of progress payments, and pursuant to Public Contract Code section 7107 for late release of retention, and that none of these items remain in dispute.
E. Pursuant to Public Contract Code section 9204(d)(2)(A), the Parties met and conferred on the Claim on October 6, 2022 and October 27, 2022, but were unable to resolve their dispute with regard to NOPC 1, NOPC 3, or with regard to Contractor’s assertion that it was entitled to additional interest penalties on NOPC 1 and NOPC 2.
F. Pursuant to Public Contract Code section 9204(d)(2)(B), the Parties engaged in mediation of the unresolved components of Claim on March 8, 2023, with Deborah S.
Ballati serving as the mutually agreed upon neutral mediator.
G. The Parties have not changed their respective positions regarding the unresolved issues in the Claim, but have agreed to the compromise settlement memorialized herein in order to avoid the time, cost, and risk of litigation of the disputed matters, conditioned upon and subject to approval of this Agreement by City’s City Council. Following that
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approval, the Parties intend this Agreement to be enforceable to fully and finally resolve all remaining issues in disputed in the Claim, subject to the terms and conditions set forth herein.
TERMS AND CONDITIONS
NOW, THEREFORE, for value received and in consideration of the covenants and conditions set forth below, the Parties agree as follows:
1. Recitals.
The Parties agree that the facts stated above are true and correct. The above recitals are incorporated herein and made part of this Agreement.
2. Effective Date.
This Agreement will become effective following approval by the City Council, upon full execution by both Parties via DocuSign (“Effective Date”).
3. Settlement Terms.
a. Settlement Payment. In consideration Contractor’s full release of all claims as set forth in Section 5 below, City will pay Contractor $1,100,000.00 (“Settlement Payment”). City may issue a change order to increase the final Contract Price by the amount of the Settlement Payment. The Settlement Payment will be tendered to Contractor in the form of a check payable to “A. Teichert & Son, Inc., dba Teichert Construction,” which will be sent via overnight delivery (e.g., FedEx) to Downey Brand, LLP, counsel to Contractor, at 621 Capitol Mall, 18th Floor, Sacramento, CA 95814, to the attention of Scott McElhern, within 14 days following the Effective Date.
Contractor agrees to accept the Settlement Payment as full and final payment for its work under the Contract and resolution of all outstanding issues in its Claim, and in so doing expressly waives any further claim to additional compensation under the Contract. b. Subcontractors. Contractor agrees that it is solely responsible for any payments due or alleged to be due to any subcontractor or other third party who provided services, supplies, labor, or equipment for the Project pursuant to a separate contract with Contractor (a “Subcontractor”), and Contractor will fully indemnify, hold harmless, and defend the City against any payment claims, if any, by any Subcontractor. As of the Effective Date, the Parties are unaware of any potential or pending Subcontractor claims or unmet payment obligations.
4. Contract Provisions.
The Parties hereby agree that, except as expressly set forth in this Agreement, all of the Contract provisions that expressly survive termination of the Contract will remain in full force and effect.
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5. Releases.
a. Subject to the terms and conditions set forth in this Agreement, including the exceptions set forth in subsection 5.c, below, Contractor hereby fully and finally releases and forever discharges City and its past, present and future City Council members, officers, officials, employees, consultants, attorneys, insurers, and their respective successors and assigns, from the Claim and from any and all claims pertaining to or arising from the Contract or Project, including any demands, actions, causes of action, rights, remedies, penalties, liens, stop notices, obligations, fees, costs, interest, expenses, damages, attorney fees, expert and consultant fees, losses and liabilities, of any kind or nature, whenever or however derived, known or unknown, foreseen or unforeseen, suspected or unsuspected, past, present or future, arising out of or relating in any way to the Contract or Project.
b. Subject to the terms and conditions set forth in this Agreement, including the exceptions set forth in subsection 5.c, below, City hereby fully and finally releases and forever discharges Contractor and its past, present, and future directors, officers, officials, employees, consultants, attorneys, insurers, sureties, subcontractors, and their respective successors and assigns, from any and all claims pertaining to or arising from the Contract or Project, including any demands, actions, causes of action, rights, remedies, penalties, obligations, fees, costs, interest, expenses, damages, attorney fees, expert and consultant fees, losses and liabilities, of any kind or nature, whenever or however derived, known or unknown, foreseen or unforeseen, suspected or unsuspected, past, present or future, arising out of or relating in any way to the Contract or Project.
c. Notwithstanding any provisions of this Agreement, the Parties agree that the following are not released, waived, impaired, or discharged:
(1) Rights, obligations, and defenses created or reaffirmed by this Agreement.
(2) Rights, obligations, and defenses in connection with latent deficiencies (as that term is defined in California Code of Civil Procedure Section 337.15) in connection with the Project and not known as of the Effective Date. As of the Effective Date, the Parties are unaware of any latent deficiencies in the work performed by Contractor. (3) Written warranty obligations in connection with the Project, if and to the extent that any warranty obligations are still in effect on the Effective Date.
Provided, however, nothing herein releases, waives, impairs, or discharges any written warranties by any manufacturer, distributor, or vendor. As of the Effective Date, the Parties are unaware of any outstanding and unresolved warranty issues.
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(4) Indemnity, defense, and/or contribution rights and obligations, and defenses thereto, in connection with claims asserted by third parties seeking relief or based upon:
(a) Personal or bodily injuries related to the Project; (b) Damage to tangible property other than the Project itself; and/or (c) Payment for work, labor, equipment, materials, and services, penalties, wages, and/or contributions.
As of the Effective Date, the Parties are unaware of any such pending or potential third party claims.
6. Waiver of Civil Code Section 1542.
As to the matters within the scope of the releases set forth in Section 5, each Party expressly agrees to waive the terms of Civil Code section 1542, which provides as follows:
“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.”
7. No Admission of Liability.
This Agreement is made without admission of liability, fault, negligence, or breach of obligations by either Party. This Agreement is inadmissible in any legal proceeding as evidence of liability by either Party; provided, however, the Agreement is admissible in any proceeding, notwithstanding Evidence Code section 1119 et seq., in order to enforce its terms.
8. Covenant Not to Sue.
Provided all terms and conditions in this Agreement are fully satisfied, the Parties covenant and agree not to make, assert, maintain, or in any way cause to be made, asserted or maintained, any claim, demand, action, cause of action, suit or proceeding against any person or entity released herein for anything released herein. Each Party further warrants and represents that it has not assigned, conveyed, granted or otherwise transferred any rights or duties pertaining to the Claim or Contract. This Agreement may be pleaded as a full and complete defense to, and may be used as the basis for, any injunction against any action, suit or other proceeding that may be instituted or prosecuted in breach of this Agreement.
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9. Representation by Counsel.
By signing below, each Party acknowledges that it has had the opportunity to be advised and represented by legal counsel of its own choice and has executed this Agreement after having been so advised or represented or after electing not to obtain the advice and representation of qualified legal counsel. Each Party further acknowledges that it and its counsel have had an adequate opportunity to make whatever investigation or inquiry it may deem necessary or desirable in connection with the subject matter of this Agreement. Each Party further acknowledges that, prior to execution of this Agreement, it has read, understood, and approved the language of this Agreement, with or without the assistance and advice from its legal counsel.
10. General Provisions.
a. Interpretation. This Agreement embodies the entire agreement and understanding between the Parties and supersedes all prior agreements and understandings, if any, relating to the Claim. No course of prior dealing between the Parties, no usage of the trade, and no parole or extrinsic evidence of any nature will be used or be relevant to supplement, explain, or modify any term used herein. Each Party expressly waives the provisions of Civil Code section 1654 and acknowledges and agrees that this Agreement will not be deemed prepared or drafted by one Party or the other and will be construed accordingly.
b. Severability. If a court of competent jurisdiction or mutually-appointed arbitrator determines or finds that any part, term, portion or provision of this Agreement is invalid, illegal or unenforceable, the remaining parts, terms, portions and provisions will be deemed severable and the validity, legality and enforceability of the remaining parts, terms, portions and provisions will not be affected or impaired. c. Modification. Neither this Agreement nor any of its provisions may be changed, waived, discharged, or terminated except by a written and dated instrument duly authorized and signed by the Party against whom enforcement of the change, waiver, discharge, or termination is sought.
d. No Waiver. Except as limited by this Agreement, no failure to exercise and no delay in exercising any right, power, or remedy hereunder will operate to impair any right, power or remedy which either Party may have, nor will any such delay be construed to be a waiver of any such right, power, or remedy, or any acquiescence in any breach or default of this Agreement; nor will any waiver of any breach or default by either Party be deemed a waiver of any subsequently occurring default or breach. All rights and remedies granted to either Party under this Agreement will remain in full force and effect notwithstanding any single or partial exercise of, or any discontinuance of, any action begun to enforce any such right or remedy. The rights and remedies specified herein are cumulative and not exclusive of each other or of any rights or
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remedies which either Party would otherwise have. Any waiver, permit, consent or approval by either Party of any breach or default hereunder must be in writing and will be effective only to the extent stated in a writing signed by the Party to be charged and only as to that specific instance.
e. Non-Exclusive Remedies. In the event of a breach of any provision of this Agreement, each Party, in addition to and not in lieu of the remedies expressly provided in this Agreement, will be entitled to exercise such remedies that exist at law or equity to enforce this Agreement including, but not limited to, seeking specific performance.
f. Choice of Law and Venue. This Agreement will be construed in accordance with, and governed by, the procedural and substantive law of the State of California, and the venue of any litigation in connection with this Agreement will be in the Superior Court of California in San Mateo County and no other place. g. Attorney Fees. Each Party will bear its own attorney fees and costs incurred up to and including the date of execution of this Agreement. If any legal action or proceeding is brought between either of the Parties arising out of, relating to or seeking the interpretation or enforcement of the terms of this Agreement, the prevailing party will be entitled to its reasonable attorney fees and costs, including attorney fees and costs for any arbitration, appeal, or enforcement of judgment. h. Headings. Captions, section headings and numbers have been set forth in this Agreement for convenience only and are not to be used in construing this Agreement.
i. Necessary Acts. Each Party agrees to timely perform any further acts and execute and deliver any further documents that may be reasonably necessary to carry out the provisions of this Agreement, including execution of a final Change Order to amend the Contract Price.
j. Authority to Execute and Bind. Each Party represents and warrants that each of the persons executing this Agreement on its behalf has full and complete legal authority to do so, subject to City Council approval of this Agreement with respect to City, and thereby binds the Party on behalf of whom this Agreement is executed. k. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together will constitute one agreement. The Agreement may also be executed electronically via DocuSign and signatures on such electronically transmitted copies will be deemed original signatures.
[Signature page follows]
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The Parties agree to this Agreement as witnessed by the signatures below:
CITY OF EAST PALO ALTO
_______________________________ Date: __________________________ Melvin E. Gaines, City Manager
Approved as to form:
_______________________________
John Lê, City Attorney
A. TEICHERT & SON, INC., DBA TEICHERT CONSTRUCTION
______________________________ Date: __________________________ Jim Gallagher
Regional Manager, Bay Area Region
Approved as to form:
_________________________________
Scott McElhern, Downey Brand, LLP