PSJA ISD Lawsuits Bring Damning Comment from Local Architect About RGV Litigation
Money-grubbing attorneys? Tradesman guilty of shoddy workmanship? Multiple PSJA ISD school campuses currently suffering from some sort of construction defect even if they’re nearly 10 years old? Where does the truth really lie in the huge litigious wave of legal filings currently washing over PSJA ISD?
Over the past approximate 18 months, PSJA ISD has been using contingency-fee attorneys to file multiple lawsuits against contractors, architects, subcontractors of every shade and stripe who once did work for the district dating all the way back to 2011. In fact, the most recent lawsuit filed last week concerns construction work done at Kennedy Middle School (finished 2011).
Without taking the time to put pencil to paper, just looking through all of the approximate 13 lawsuits that list PSJA as the plaintiff, counting the defendants’ names, it looks as if dozens and dozens and dozens of subcontractors have been sued, along with approximately five or so general contractors, almost all of whom have local ties.
Each of the 13 suits comes with a cover sheet that bears those dreaded words: “NOTICE TO DEFENDANT: You have been sued.”
Meaning, the next time they go out to renew their liability insurance, their premiums will typically increase substantially when they answer the question – Have you been named as a defendant in a lawsuit over the past 12 months? In some cases, they may not be able to even find insurance, especially if they’re now named in not just one, but multiple lawsuits involving multiple campuses.
Over time, plaintiff attorneys have argued that litigation, which almost always turns into mediation, is a good way to weed out the bad from the good, the wheat from the chaff, because face it, who can argue that there isn’t poor workmanship underway in the RGV. If you don’t take the bad vendors to court, how are you ever going to ensure that future public projects are built with quality in mind?
The contractors and subs counter: Yeah, but you’re suing us without even letting us look at the alleged problem; much less, offer to fix it at no charge. Every time in the past, you’ve told us about a problem, we’re there to fix it. Now you don’t call? You don’t write. You just go and file a lawsuit without us even knowing about it? If you say you did try and contact us, where is the certified letter return receipt you surely would have requested? Any emails discussing the problem? If anyone says they tried to call, where is there any record of that?
Questions, questions, questions.
Board Takes Heat
The PSJA ISD school board is already taking heat from some vendors named in the two most recent lawsuit(s) filed last month for alleged construction-related problems at Berta Palacios Elementary and Palmer Elementary. For example, during a called meeting last Thursday (Feb. 4), the seven board trustees and superintendent were told by eight people signed up to speak during a virtual “public-comments” session that what they were doing was flat-out wrong, primarily because no one from the district had called them to report a problem.
Each of the eight speakers was allowed three minutes to state their case.
D. Wilson Construction, a long-time Valley firm dating back to 1957, was represented by current president and CEO Josue Reyes. Speaking last Thursday during public comments, Reyes told the school board and superintendent, “There are better ways to resolve these types of issues without suing our entire industry in the Valley. The Right to Repair Act provides a pathway for resolution, and I think all of us wait patiently for your call for any legitimate issue you have with our past performance.”
Reyes said that over a span of approximately 10 years of doing business with the district, D. Wilson Construction Co. had never failed to respond when any warranty issue was presented to them. In this case, though, no one from the district had ever called to say, hey, we have a problem here.
During a subsequent phone interview, Reyes said there were rumors floating around last year that new lawsuits might be coming down the PSJA pike, but it wasn’t until recently (January 2021) that his company was actually served (Palacios Elementary; filed Jan. 14, 2021) and (Kennedy Middle School; filed Feb. 2, 2021).
“[But] there are no recent requests by PSJA to address any related building deficiencies in our current records,” Reyes said. “We stand behind our work, we always will, and we love to address those construction issues when alerted by our clients. Litigation has never been needed.”
During last Thursday’s same public comments session, the executive director of the Lower Rio Grande Valley chapter of the American Institute of Architects, Maria Sustaeta, told the board: “These lawsuits are detrimental to the architectural profession in the Rio Grande Valley, especially now at a time when a pandemic has already hit home and hit hard both at a personal and business level.”
During the same meeting, longtime local architect Luis Figueroa (ROFA Architects) perhaps had the most damning thing to say about the way he sees RGV business being conducted, relative to these contingency-fee lawsuits (the attorneys take a percentage off the top of any settlement). Figueroa’s daughter is also an architect, he said, but after she graduated from A&M, he never encouraged her to return home, which is why she’s now an architect in Seattle.
Figueroa, the seasoned architect, told the board that he isn’t happy with what he sees going on in the RGV: “Which I consider to be a corrupt, litigious environment fueled by greed.”
After the public-comments session ended, the seven trustees went into executive session with staff and legal counsel. Approximately an hour and 40 minutes later, they came out from the back room and adjourned the meeting without comment.
Court filings show that all of the 16 PSJA-related lawsuits and countersuits first filed in 2019 up until today flow right through the same district court (Judge Israel Ramon’s 430th). The first 15 are linked together by Cause Numbers (that will surely be debated); the 16th, filed only last Tuesday (Feb. 3), is a separate stand-alone case, albeit now under the same court’s jurisdiction (the 430th), most likely because it’s styled the same way (parties named).
With each passing lawsuit, more defendants are named. In the lawsuit filed last Tuesday (Feb. 2), two general contractors are listed as the defendants, Barcom and D. Wilson; but so are 26 subcontractors who reportedly did work for them at Kennedy Middle School from approximately the summer of 2008 through August of 2011.
That long ago, you ask? That long ago. In the construction trade, contractors can be sued up to 10 years after a project is completed (a limitation known as the Statute of Repose). Add 10 years to 2011 and it becomes evident why the Kennedy Lawsuit had to be filed no later than 2021.
Will New Laws Matter Here?
Before a new state law went into effect two years ago, attorneys working for a plaintiff like PSJA ISD, or any other public entity (political subdivision), could basically blindside contractors, subcontractors, and often did. Process servers could hand them a notice that they were being sued for alleged faulty construction on a public project even though no one had ever told them a problem existed. Nor had they been given the opportunity to repair said problem.
The new state law, House Bill 1999, known as the Right to Repair Act, was supposed to change that process. Moving forward from September 2019, any contractor, subcontractor, or vendor on the verge of being sued first had to be notified that their work was being called into question, given the chance to inspect it, and repair it if required. Obviously, both parties would have to agree who was at fault. Was it really shabby construction/workmanship? Or was sloppy maintenance on the part of the political subdivision to blame?
An amendment (HB 2826) to that Right to Repair Act later addressed the matter of paying plaintiff attorneys on a contingency basis as opposed to an hourly rate, where the district is forced to put some “skin” into the game.
If, for example, a plaintiff’s attorney gets an insurance company to pony up a $1-million settlement because work done at School XYZ by their client is being called into question, and they know that historically speaking, a settlement in Hidalgo County usually costs less than it does to go to trial, should that contingency-fee attorney really be entitled to 40 percent right off the top of the $1 million? Four hundred thousand dollars? For how much work?
In the new addendum (HB 2826) to Right to Repair, before putting such a contingency attorney under contract to file a lawsuit against a general contractor, for example, political subdivisions first have to place a public notice in a legal newspaper that would attempt to explain a whole lot of things. Such as, why is a contingency attorney needed as opposed to an attorney charging by the hour, or the attorneys already working for the school district?
What is the nature of any relationship between that contingency-fee attorney(s) and the governing body (e.g., school board trustees, city commissioners) that’s agreeing to give him/her work? Why pursue a lawsuit in the first place? What’s the desired outcome?
To wind the 2019 Right to Repair Act tighter, say that a political subdivision (public school district, for example) jumps through all of the new hoops mapped out in House Bill 1999 – it publishes a legal notice that explains the alleged construction problem, tries to hire an hourly attorney, tells the public why an “in-house” attorney can’t do the work, explains why hiring an attorney on contingency is in the best interest of the taxpayers, and approves the contract in an open meeting, etc. – the political subdivision still has to file a request with the Office of the Texas Attorney General, requesting a review of the contingency-fee contract for legal services before it can be executed.
Within 90 days of review, the AG may approve the contingency-fee contract; or refuse to approve it because all the requirements haven’t been met (public notice published, etc.); or something even simpler as laid out in HB 2826: “because pursuit of the matter by the political subdivision will not promote the just and efficient resolution of the matter.”
They can re-file a second time, but after reading through the law, it looks like there is a limit as to how many times the would-be plaintiff’s attorney can screw up before it gets settled with prejudice by the AG (meaning, you can’t use a contingency attorney on this case, so don’t come back again).
For the legal geeks out there, to look up the two new state laws that may or may not be applicable to PSJA ISD’s long string of 16 lawsuits, do an online search for “Texas HB 1999,” and “Texas HB 2826.” At the top of each page, look for the “Download” link, which will bring up the text of each bill. Both stem from the 2019 86th Texas Legislative session.
Big question left standing: how will the new state construction-defect laws affect the multiple lawsuits PSJA attorneys have filed against contractors and subcontractors after the new laws went into effect?
Just check the filing dates on the new lawsuits. Most came after the new Right to Repair Act and the requirement for AG approval tied to contingency-fee attorneys went into effect Sept. 1, 2019.
Based on court filings and the cause numbers, it appears clear that Jolly and his two co-counsels, Rene Ramirez and Eric Jarvis, are trying to piggyback the new lawsuits onto the original countersuit filed Aug. 30, 2019, which just escaped the Sept. 1, 2019 date when the new construction-defect laws went into effect.
State Representative and Attorney Terry Canales, D-Edinburg, said by phone earlier this week, if PSJA was his client, he’d recommend that it file a motion to abate (put the lawsuits on hold) until the Texas AG can rule on the contingency-fee contract PSJA has with its team of lawsuit legal eagles, led by Houston-based Norman Jolly.
“Construction Defect Lawyers are unnecessarily drumming up litigation, by and through school districts,” said Canales. “These lawyers pour over the construction contracts, and look for anything they can find, then sue everyone under the sun, whether or not they had anything to do with the alleged problem.”
The Lawsuits Mount
There are currently 16 lawsuits, mas o menos, on file with the Hidalgo County District Clerk that will attempt to address the alleged PSJA ISD construction defects, even though, if history holds, they’ll never make it to trial in Hidalgo County. Instead, the vendors’ respective insurers will typically settle out of court during mitigation with school attorneys working the contingency-fee circuit, figuring successful mitigation costs far less than a full-blown trial.
This particular lawsuit story actually begins back in 2015 when PSJA ISD declared that Texas Descon was in default of its contract to do construction work at the San Juan Middle School and Alamo Middle School. When the district entered into the contract with Descon two years earlier, the company led by Doug Smith (son of the company’s founders) was blowing and going, working jobs in the RGV and the San Antonio area. Smith was a high-flyer, living large by the looks of his social media posts at the time. Exotic cars, Rolex watches, trips to Vegas. By 2015, though, for reasons unknown, Smith’s Descon had crashed to the ground and was basically bankrupt.
Left holding the bag, one among several, was PSJA ISD, because Smith had never finished work begun at Alamo Middle School and San Juan Middle. On the periphery, after PSJA declared Descon to be in default, countless vendors were left fingering now-worthless unpaid invoices, and/or paid costs for construction supplies for the two projects that they had already purchased from their own pockets, but now had nowhere to go.
The bond companies, led by Fidelity and Deposit Company of Maryland, and Colonial American Casualty and Surety Company, eventually came to town, and things started to really drag. It took months and months before work started up again. The subs wouldn’t talk on the record for fear of retaliation, but during that period, they said under condition of anonymity that the bond companies were squeezing them dry, proposing, in their opinion, ridiculous requests in terms of both getting paid what was already due, and how much they’d get paid to finish the work.
The surety companies either wanted (allegedly) the subs to accept pennies on the dollar for outstanding invoices, and then even if they said yes, they’d often lose the remainder of the work to another sub, because the bond companies could find another sub to do the job for less, and the insurance companies were no longer subject to conditions of the original contract with Texas Descon. The only obligations the bond companies had, was to make sure the two school jobs – Alamo Middle and San Juan Middle – were finally completed.
In the end, in June of 2019, the two bond companies sued PSJA ISD, claiming they were still owed approximately $2.2 million for finishing the two projects.
The school district responded by countersuing Yates Construction, LLC; D. Wilson Construction; Texas Descon, L.P.; Spawglass; and VCC Construction Company LLC. for alleged poor workmanship done not only at the two middle schools, but also past work done by these contractors at multiple campuses across the district. Even the PSJA Stadium had problems, according to the countersuit filed by PSJA in late August of 2019.
From August of 2019, through 2020, the lawsuits and countersuits continuing escalating.
Meet the man at the center of the multiple construction-related lawsuits – Houston-based Attorney Norman Jolly – whose name has long been a bane to the local construction industry. They have a word for him, but it’s not for print.
In a previous lawsuit-related story published in The Advance, speaking about building contractors and their subs, Jolly said, “If they don’t dislike me, I guess I wouldn’t be doing my job. All the contractors dislike me, I’m sure. I hope they do.”
Jolly first came to the RGV approximately 22 years ago helping former Hidalgo County Judge Ramon Garcia, himself a lawyer, work a construction-lawsuit case tied to Rio Grande City CISD. Jolly, too, has done previous work (construction-related lawsuits) in the past on behalf of PSJA ISD, which also came courtesy of Ramon Garcia.
One of the common slams against Jolly is that one of his representatives down here (Valley plaintiff attorneys) will scour the RGV, asking cities and/or school districts if the Houston legend can bring in outside supposed A-Team inspectors to see if any construction defects exist within their respective jurisdiction. If there are defects, they can be remedied through litigation, is the common thread.
That charge simply isn’t true, Jolly said during an interview The Advance did with him in 2018.
“First off, I don’t even have a business card, so every case that we’ve gotten, we’ve gotten by word of mouth, and not on every case is there a referring attorney. Sometimes a client hires us directly just because they heard about something that we did.”
Going back to 1999, here is a partial list of the cities and school districts that have hired Jolly to sue contractors and subcontractors for alleged sub-par construction: Santa Rosa ISD; Donna ISD; Edcouch Elsa ISD (multiple suits); Raymondville ISD; La Joya ISD; City of Edinburg (multiple suits); City of Hidalgo; City of Progreso; Progreso ISD; Edinburg CISD; San Benito ISD; Rio Grande City CISD (six lawsuits), and McAllen ISD.
Jolly said he doesn’t go around shopping for business as some contractors allege.
“We certainly don’t go out looking (for lawsuits to file). There are lawyers in the Valley that hear about the things we do, and I’m sure they inquire (about our work), but not always.”
A contingency-fee contract Jolly had proposed to a local school district back in 2017, shows that his firm would collect a 40-percent contingency fee if a settlement is made after the lawsuit is filed. Of that, his firm would collect 70 percent, while handing off the remaining 30 percent to two local co-counsels.
The president and CEO of D. Wilson Construction Company, Josue Reyes, said there’s a reason that attorneys like Jolly are disliked in the construction industry, because the ones who really get hurt when lawsuits are filed against them are the relatively smaller subcontractors:
“In particular, our subcontractors, the smaller businesses, are the ones that really feel the brunt of it,” said Reyes. “The guys that are doing the waterproofing, roofing, masonry… those guys, their premiums skyrocket. Not only that, their options are very limited because (insurance) underwriters just don’t want to cover them here in the Valley because of the history of the claims. It becomes very problematic. It’s not an open market for them. They have a very limited amount of underwriters that will offer in their area, and the premiums just continue to increase with additional claims.”
A final note: There is an action item posted on the regular PSJA ISD board meeting agenda for Feb. 9 (Tuesday).
It reads: Discussion and action to take appropriate action regarding lawsuits affecting District buildings.
Stay tuned: Story about Tuesday night’s meeting posted online Wednesday (Feb. 10), and in next Wednesday’s print edition (Feb. 17).