How a $2.3 million Florida highway project turned into an $80 million court battle

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This feature is part of ‘The Dotted Line’ series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.

A $2.3 billion Florida highway project that once promised contractors about $255 million in profits collapsed in losses of more than half a billion dollars, according to a recent federal appeals court ruling.

The presentation gives contractors a look at what can happen when a public-private partnership enters litigation. In April, the 11th Circuit Court of Appeals upheld one 80 million dollars in favor of Skanska USA and Granite Construction against joint venture partner Lane Construction. The companies joined the I-4 Ultimate Projecta massive P3 rebuild effort for the Florida DOT.

The dispute centered on Lane’s effort to pursue legal theories that could allow the joint venture to exit the project before completion. The appeals court ultimately sided with Skanska and Granite. The contractors did not respond to requests for comment after the ruling.

“Almost whenever costs rise beyond what is expected on any construction project, the parties begin to look for ways to shift liability,” said Matthew Skaroff, an attorney at the Fort Lauderdale, Fla., law firm Cohen Seglias. “P3 infrastructure jobs invite unique contract structures and entity forms and often differ significantly legally from the standard design-bid-build format.”

JV disputes can get worse when incentives differ

The case offers lessons about alignment between joint venture partners, especially in megaprojects, Skaroff said.

“Contractors and joint venture partners should understand the makeup and future plans of the companies they are partnering with,” Skaroff said. “This dispute shows what can happen when the wrong parties are involved, with different incentives and a focus on self-preservation rather than the success of the partnership.”

The court opinion noted that Lane had previously worked successfully with Skanska and Granite before Lane was acquired by Italian contractor WeBuild in 2015. After the acquisition, the ruling said, the partnership soured. In 2018, the joint venture expected a loss of $108 million on the project. By 2023, when the trial between builders began, the losses had risen to more than $500 million, according to the ruling.

“The court recognized that WeBuild appeared to be the primary driver of the termination scheme, exceeding the recommendations of both Lane’s counsel and CEO,” Skaroff said. “Not only must the parties to a joint venture understand each other at the time they come together, but this dispute also illustrates the importance of understanding each partner’s plans that may materially affect the leadership or operations of a partnership while the JV is in operation.”

The structure of the I-4 Ultimate project added another layer of complexity to the dispute.

Unlike a traditional public construction contract, the work operated under a P3 model in which the concessionaire I-4 Mobility Partners financed the project and assumed responsibility for handing it over to the State. In return, the concessionaire was to receive milestone payments and a long-term maintenance agreement valued at about $75 million annually, according to the court ruling.

At the same time, Skanska’s parent company also had a stake in the concessionaire itself, creating what Lane later argued became a conflict of interest once the project’s losses began. The appeals court ultimately rejected that argument because the overlapping structure was disclosed early on and that aspect of the deal was relatively common in P3 deals, according to the court filing.

Termination rights rarely favor contractors

The case shows how dangerous termination strategies can become in large infrastructure construction works where contracts favor project completion.

“Construction contracts often do not grant termination rights to contractors, and when they do, they are not broad rights,” Skaroff said. “Most construction contracts require the completion and continuation of work in the event of a dispute, and the consequences of abandoning a project without justification are usually enormously negative for a contractor.”

In a legal analysis of the ruling, John Mark Goodman and Lee Ann Brown, attorneys at Birmingham, Ala.-based Bradley Arant Boult Cummings, wrote the highlights of the dispute. the dangers of using termination threats as leverage rather than an option of last resort. The lawyers also noted that the case shows the importance of reviewing the provisions of layered P3 agreements.

“The case is a must-read behind-the-scenes look at a mega-project in trouble due to unexpected cost overruns,” according to the attorneys’ release. “The case is a cautionary tale for contractors and lawyers in complex construction disputes to carefully consider the reasons and consequences of termination before pulling the trigger.”

A central point of the litigation involved a drafting error in the project documents. Lane argued that the error could have distanced the joint venture’s construction obligations. The appeals court rejected this interpretation.

“In large infrastructure projects involving billions of dollars, small drafting issues have the potential to create very large disputes,” Skaroff said. “When millions of dollars are at stake, some parties get creative and find anything they can to cover it up.”