Don O’Keefe Successfully Defends Product Liability Arbitration Claim Against Winco

PS Partner: Don O’Keefe

We Represented: Winco

Type of Case: Product Liability Arbitration Claim

Facts:

This arbitration claim involved a construction project at Auburn University, known as the South Donahue Residence Hall Project (“Project”).  It was arbitrated over a week through the American Arbitration Association on May 16-18 and June 21-22, 2017.  The prime contractor for the Project was W.G. Yates & Sons Construction Company (“Yates”).  Yates entered into a subcontract with G&S Glass and Supply, Inc. (“G&S”) for installation of windows for this Project.  Winco was the window supplier and Pitzer Snodgrass’ client.  The Project included 1,760 windows, 750 openings on about 6 floors.

Work on the dormitory commenced and was completed in 2013. Winco manufactured the windows, but that was the extent of its role.  Winco was not involved in any respect with the trim construction or the window installation. Winco provided no on-site supervision or oversight of the installation, as it was not asked to provide such services in its proposal or as the Project was progressing.  Winco timely supplied and delivered the windows that were accepted for this Project.

In December of 2013, G&S filed a Demand for Arbitration, asserting claims against Yates for extra work, delays, and acceleration damages arising out of water infiltrating various windows at the dormitory.  These leaks delayed the work and required significant remediation. Yates countersued G&S, alleging defective and non-conforming work.

G&S amended its claims to include Winco.  G&S alleged manufacturing defects in the sub-sill design and pre-fabricated joinery and that these claimed defects purportedly allowed water to permeate the joinery assembled by Winco.  G&S did not have a contract with Winco.  Yates did not have a contract with Winco either.  Auburn University actually issued a purchase order to Winco for aluminum windows and trim pieces.  Winco’s letter made its acceptance of Auburn’s purchase order subject to Winco’s terms and conditions and, more importantly, specified that “the purchase order is a contract between Winco and the University….”   Auburn University ultimately paid for the windows.

Yates was identified only as the special agent for Auburn University under the Auburn purchase order.  Yates, however, was not named in its individual capacity under the purchase order, so its rights and responsibilities were for the sole purpose of serving as the agent for Auburn University.  Auburn University did not assert any claims against Winco nor did Yates characterize its role in arbitration as the agent for Auburn University.  Winco argued there was no privity of contract with these parties or an agreement to arbitrate.  Winco challenged its inclusion in the arbitration by a separate motion.

A special arbitrator found Winco to be subject to arbitration, believing it had an arbitration clause in its terms and conditions with Auburn.  Thus, Winco was found to be a proper party to the AAA arbitration.  Soon thereafter, Yates filed a crossclaim against Winco seeking separate damages for the alleged defects in the windows.

Yates and G&S then claimed the following damages as against Winco:

 

 

G&S

$163,051.16 Subcontract balance
$13,473.69 Delay damages
$156,275.70 Extra work damages
$322,099.51 Attorney’s fees and costs
$654,900.06 Total

 

Yates

$310,343.50 Deductive change orders
$212,839.92 Attorney’s fees and costs
$523,183.42 Total

 

Combined, Yates and G&S sought $1,178,083.48 in damages and each argued Winco was liable for their full damages.  Winco sought solely attorney’s fees and costs of $125,383.57 following the hearing on the grounds that neither Yates nor G&S stated valid claims against Winco that would justify an award in this arbitration. Winco maintained from the beginning that it was the installation that led to over $1 million in damages, while Yates and G&S both contended that Winco’s design of its sub-sill was faulty and that Winco had provided defective windows.

Winco Windows

 Yates and G&S claimed that there were certain manufacturing irregularities in Winco’s windows as determined from some water testing conducted by Auburn.  Nonetheless, minor manufacturing deficiencies were not quantified by G&S and/or Yates in terms of either their location or frequency.  Winco contended that any joinery issues were compromised during the water testing itself.  Winco also believed some of the issues could have arisen in terms of how the installer may have handled the Winco windows.  Regardless, the installation extended well beyond any minor pre-fabricated joinery issues.  Winco claimed that the majority of the problems were related to the installer’s failure to seal key window parts, including the stack joint, closure clips, sub-sill and the mullion joints.

G&S’ Installation

 The installer’s own evidence presented during the arbitration clearly established that the work lacked its usual “quality.”  An employee of the installer who worked on the Project admitted that the acceleration of work by the prime contractor led to “poor” installation quality, as they were trying to complete 32 window openings a day.  The job was noted to be behind schedule, and the installer blamed the prime contractor for poor project management and scheduling delays.  The prime contractor blamed the installer for poor workmanship.  Both claimed certain manufacturing defects against Winco.

A window testing firm who was brought in to test the windows and find the source of the leakage “concluded that water leakage through the windows was primarily caused by installation issues.” The prime contractor also characterized the windows as having a “systematic problem with field applied sealants” based on different tests performed.  Another independent forensic tester claimed that the window leaks were due to improper sealing of the windows to the exterior and to the interior.

Winco’s Sub-Sill Design

 Winco’s window installation instructions and relevant portions of the approved shop drawings were offered at the arbitration.  The approved shop drawings clearly outlined the sill detail.  The installer claimed the sill was not the appropriate height, leading to water intrusion.  After the windows were approved, no changes were made with regard to the sub-sill detail, and no issues were raised concerning the sub-sill height to Winco.  In fact, the installer had used the same sub-sill design on two prior jobs.  Winco’s sub-sill design was and still is standard for Winco windows and has been used for years with proven success.

It was established during the arbitration that there was a mock-up window called for in the specifications which passed the appropriate water testing performed by a tester in 2012.  Winco’s window design was clearly appropriate for the Project given the fact that if the windows were properly sealed, the windows would pass the water tests.  This proved that the design works, as the sub-sill actually passed even greater test pressures than what was denoted in the test reports.

The Arbitrator’s Holding

 The arbitrator held that while some of the windows experienced various problems, the source of the leaks was improper and poor installation of the windows.  Winco consistently maintained the position that this was a case between the prime contractor and the installer.  At no point before the arbitration hearing did Winco even assert a claim against the installer or prime contractor.  Only after Winco was forced to arbitrate these claims over 5 days and expend significant sums did Winco ask for its fees and expenses.

The prime contractor’s claims against Winco were denied, as the prime contractor did not prove by a preponderance of the credible evidence any basis for any recovery against Winco.  Similarly, the installer did not prevail on any claim against Winco.  Walking into arbitration, Winco was facing an arbitration claim for over $1 million.  Winco prevailed, however, and was able to recover its attorney’s fees and costs of $125,383.57 from the prime contractor and installer, to be split equally.

 

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