As the construction joint venture’s losses on the Florida Dept. of Transportation’s I-4 Ultimate project ramped up toward nearly $500 million, Skanska USA Civil Southeast Inc. acted “in the best interest” of its partners when it refused to let one of the team members walk away from the job, a federal judge wrote in a May 3 opinion. It was the judge’s second decision in favor of Skanska and one of its JV partners, Granite Construction Co., against their other partner, Lane Construction Co.

In his lengthy and detailed ruling, U.S. District Judge Roy Dalton Jr. in Orlando found that Skanska SE did not breach its fiduciary duties to its partners in the Skanska-Granite-Lane Constructors (SGL) joint venture as Lane had alleged in a lawsuit.

Dalton also issued a summary judgment against Lane last year, finding it was liable for breaching the JV agreement when it stopped paying its share of capital calls amid a dispute between the partners. In the newly published opinion, the judge found that Lane and its parent company and guarantor, WeBuild S.p.A. Inc., owe Skanska SE $48.9 million and Granite $30.4 million, plus interest to both, for its unpaid share.

The judge also directed Skanska SE and Granite to file motions for their attorneys’ fees and court costs, and ordered the parties to submit a proposed final judgment in line with his order.

In separate statements, Skanska and Granite representatives both said their firms were “pleased with” the court’s decision. 

“From the beginning, we committed to building the I-4 Ultimate project and delivered the highway’s reconstruction for the community of Central Florida,” Skanska said in its statement. 

An attorney for Lane said the company had no comment. 

The I-4 Ultimate project reconstructed 21 miles of Interstate 4 in the Orlando area. The team built four express toll lanes, widened or replaced 140 bridges, reconstructed 15 interchanges and performed other related infrastructure work. 

FDOT selected I-4 Mobility Partners (I4MP), which is co-owned by a separate Skanska business unit, Skanska Infrastructure Development, and John Laing Investments Limited, as its design-build-operate partner for the highway under a 40-year concessionaire agreement. I4MP contracted SGL as design-builder. Construction started in early 2015 and was initially expected to complete in late 2020 at a cost of $2.3 billion.

Within the first few years of construction, the project began to face issues such as higher-than-expected material costs and labor shortages, Dalton wrote. In 2018, the contractors faced a major setback when two drilled shafts failed because of an unexpected fissure, necessitating a redesign. 

The JV partners began needing multimillion-dollar capital calls every few months starting in April 2018 to keep the project advancing. The next month, they decided to submit a claim to recover $48 million and add 245 days of delay because of the drilled shaft problem.

Uncooperative ‘Hotheads’

Meanwhile, Italy-based WeBuild had closed on its acquisition of Lane after construction started, and it began sending over employees from Italy in place of other of the firm's workers already engaged on the project. However, members of the project team viewed them as uncooperative “hothead[s],” the judge wrote in a summary of the case. As the project faced increasing cost overruns, WeBuild was focused on getting its money back, and at one point a WeBuild executive reportedly asked Lane’s then-CEO, “What ass are we kicking?” 

While SGL’s partners had initially been in agreement about seeking relief from FDOT for the drilled shaft issue, later in 2018 Lane switched its position. Provisions in the contract would allow SGL to seek termination from the project in the event of certain circumstances causing a delay of more than 180 days, if I4MP and FDOT would allow it. Lane advocated for SGL to pursue that option.

“Lane’s presentation of the termination option did not go well,” Dalton wrote. Its outside counsel did not have a white paper on the option it had told its partners they would have at the meeting, and its counsel ended up leaving the meeting early while the partners’ questions remained unanswered. The partners decided to continue pursuing a settlement with FDOT rather than termination. 

Work funded by the partners’ capital calls continued into the next year, as did negotiations with FDOT over a supplemental agreement covering the drilled shaft claim and other previously submitted relief claims. In August 2019, the JV partners’ relationship “irretrievably broke” after Lane’s then-CEO said he was no longer authorized to agree to capital calls, and Lane later demanded in writing that SGL pursue the termination option, the judge wrote.

However, Skanska SE and Granite wanted to continue negotiations with FDOT. Pursuing termination would eliminate their ability to negotiate, place their work under increased scrutiny, make the contractors “persona non grata” with FDOT and leave a black mark on their records while bidding for other projects in the future, an attorney for Skanska warned.

“Walking off the project would have subjected SGL to potentially unlimited damages, and no one reasonable actually planned to walk off the project,” Dalton wrote. “And executives at all of the JV partners were deeply concerned that pursuing termination would ruin the companies’ reputations and result in war with FDOT.”

Favorable Terms

SGL ended up finalizing the supplemental agreement with FDOT in early 2020, and it included “very favorable terms for the JV,” Dalton wrote. It resulted in a $125-million payment from FDOT to SGL and lowered its delay-related damages from $178,000 per day to about $4,600 per day. And while the terms waived SGL’s ability to pursue termination, it permitted the contractors to seek a cumulative impact claim for another $368 million, though that claim is reportedly still pending with FDOT. Lane voted against the deal, but Skanska SE and Granite supported it, and SGL signed. 

The cash infusion from FDOT temporarily stopped the need for capital calls, but the money ran out again by December 2020. At that point, Lane stopped paying its share of the capital calls, and it sued Skanska SE in January 2021, alleging Skanska SE had put the interests of its corporate parent above those of its JV partners because of Skanska Infrastructure Development’s role with I4MP. Skanska counter-sued over the unpaid share of capital calls, and Granite also later joined the litigation. 

After Dalton issued the summary judgment against Lane last summer, the case went to trial in the fall to determine the validity of Lane’s claims against Skanska. Dalton wrote that the risks of seeking termination showed that it would not have been in the best interests of SGL or its partners, and that he found Lane’s expert who testified to the contrary was not credible. 

“Simply put, the evidence at trial was overwhelming that Skanska SE acted in SGL’s and Lane’s best interest in rejecting the termination option,” Dalton wrote. 

Work on the project completed in 2022 at a cost closer to $3 billion. The partners contributed a total of $486.4 million in working capital. 

The parties’ proposed final judgment is due to Dalton by May 17.