(CN) - A federal judge sidelined most counterclaims filed against consultants to the renovation of the federal building in downtown San Francisco's Civic Center.
The dispute stems from an August 2009 deal that HKS Inc. struck with the U.S. General Service Administration to provide architectural services on the federal building renovation.
Though the agency favored a 21st century "green building" concept, it allegedly stressed that the budget might not allow it.
Two firms that HKS had hired as consultants, Architectural Resources Group Inc. and Ideas Consulting Inc., said HKS felt pressured to accommodate this design vision while keeping costs down, and that pressure fell on them.
They claimed to have "devoted huge amounts of time and resources, trying (successfully) to meet unrealistic project deadlines and to solve problems created by expressed design needs that did not realistically appear to fit into the originally stated budget, which plaintiffs are informed and believe has since been increased significantly." (Parentheses in original.)
HKS then allegedly notified the firms on March 24, 2010, that the GSA had decided to go with another team of architects and designers. The firms said that, nearly three months later, HKS sent them another letter that said it planned to convert their previous "termination for convenience to termination for cause."
In their federal complaint, the firms said this termination for cause lacked legal and factual basis. They also said HKS had failed to pay them for work they performed up to the date of termination.
HKS filed counterclaims alleging that the consultants violated the constraints of the budget, scope and schedule, and that they failed to understand or appreciate historic design requirements in the consultant agreements and in its directives.
When the GSA took a different direction, referred to in the court record as Design Option B, HKS said that its altered federal contract led it to lose hundreds of thousands of dollars in fees.
The consultants countered by saying that the altered contract actually set HKS to take in more than $400,000 in fees as compared with the old deal.
Last week, U.S. District Judge Susan Illston dismissed counterclaims against the consultants for breach of contract, implied indemnity and bad faith.
"The counter-complaint does not explain how adoption of a design plan within the budget of GSA after KHS's termination of the counter-defendants for alleged disregard of budget constraints resulted in 'a net loss of hundreds of thousands of dollars in fees, fees which would have been earned had GSA not felt the need to proceed with Design Option B," Illston wrote. "In addition, the contract modification states that upon adoption of Design Plan B, HKS's fee increased. Although HKS argues in its opposition that this increase in price also required an increase in scope, effort and capital, these fact are not alleged in the counter-complaint, and thus cannot be considered in determining the sufficiency of the complaint."
HKS has leave to amend this and the other dismissed claims, however.
The consultants can still pursue claims for negligence and express indemnity claim, according to the ruling.
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