Aecom wins ruling over its own JV in saga that ‘bordered on absurd’

Time-lapse, night-shot of the Colorado 470 highway in Morrison, near Denver, US. (Image: Adobe Stock)

The case rolled on for years but ended this month with a $14.2 million judgment awarded to plaintiff Aecom Technical Services (ATS).

Aecom’s case against its own JV

The legal battle stemmed from a Colorado Department of Transportation project to expand highway capacity just south of Denver; the state’s largest city.

Colorado-based construction contractor Flatiron, as lead contractor in the design-build joint venture with Aecom, originally bid $204 million for the work. After change orders, the contract rose to $237 million, but the joint venture said it ultimately spent more than $502 million.

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ATS, which provided design services, sued the joint venture first in 2019 to recover $5.3 million in unpaid invoices. The JV countered with a far-reaching $263 million claim, blaming the designer for alleged errors that it said led to rework, delays and cost escalation.

Aecom v. Flatiron/Aecom ‘borders on absurd’

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The battle entered the bizarre in early 2024 after a late motion – just days before the trial was set to take place – was entered by Flatiron/Aecom.

The motion sought to pay Aecom the $5.3 million claim it requested in full. However, the motion also asked to have the JV and ATS formally swap sides; the JV assuming the role of plaintiff at trial and seeking a $263-million claim.

US District Judge William Martínez rejected the move as untimely and called it “bordering on the absurd.” Martínez wrote the court saw “no legal or factual justification for it to impose, by means of a judicial order, what amounts to a settlement offer by Flatiron on Aecom without the latter’s consent.”

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Instead, the trial proceeded as planned, and in March, a jury ruled in Aecom’s favour. The court awarded the design firm the full $5.26 million in unpaid fees, rejected the joint venture’s counterclaims, and later ordered the JV to pay an additional $14.2 million in legal fees and expert costs – $8.3 million in attorneys’ fees and $5.9 million in expenses.

The ruling caps a rare instance of one party in a joint venture suing another and then facing a substantial financial penalty for doing so.

Notes for construction industry after Aecom’s unique legal battle

In some instances, using the modified total cost method can be costly to contractors. (Image: Adobe Stock)

Central to the trial was the joint venture’s use of the “modified total cost method” to calculate damages – a debated approach that calculates losses as the difference between a contractor’s actual costs and its bid, then adjusts for errors or costs not attributable to the defendant.

While the method is disfavoured by many courts, the judge allowed expert testimony using the approach, noting it had been modified to account for multiple factors.

Aecom argued that the JV’s damages expert was still effectively using a disallowed “total cost” theory. But the court ruled otherwise, clearing the way for a jury to weigh the evidence.

Ultimately, the jury agreed with Aecom, awarding the firm exactly what it asked for and rejecting the JV’s efforts to shift blame for the overruns. The judge’s final ruling also dismissed the JV’s attempt to frame the payment as a confessed judgment.