Accumyn Consulting Adds Value In Construction Lien Dispute At A HPIB Unit

Accumyn director Robert James, PE, and chemical engineer Carl Bradow were hired by counsel for Amegy Bank National Association (the plaintiff) to provide expert services in support of the bank’s position in a matter involving contractor liens on materials and equipment.  After the bankruptcy of its owner, several contractors (the defendants) had claimed removal of their installed improvements at a High Purity Isobutylene (“HPIB”) unit constructed in Pasadena, Texas.  Mr. James’ testimony was deemed credible and given substantial weight in the Court’s Memorandum Opinion on the matter. Mr. James and Mr. Bradow’s research and analysis, and James’ testimony in deposition and at court, resulted in denial of more than 80% of the contractors’ claims.

As background, counsel made the pair of experts aware of unique statutes governing the issues in the case. Specifically, under certain circumstances, Texas law on liens and removables allows contractors to remove materials and equipment from a facility as compensation for non-payment.  The law requires that removal operations will not result in material injury to (i) the land, (ii) the pre-existing improvements, or (iii) the improvements themselves.

Initial review of this background with counsel resulted in agreement that Accumyn would provide expert opinions in reports and testimony on construction, or process technology issues that may arise in the case. James, as an expert specializing in engineering and construction of chemical plant facilities, would address aspects of physical removal.  Bradow, as an expert in petrochemical process operations, would address impact to plant operations.  A third expert, Robert Nall, vice president at Ventech Engineering, a firm specializing in disassembly and relocation of process plant equipment with whom James had worked in the past, was also engaged to opine on the value of removed material.

The three parties claiming removal of materials and equipment were the boiler supplier, the piping supply and install contractor, and the instrumentation and electrical (“I&E”) contractor.  More than $3.08 million was at stake; $1.45 million claimed by the I&E contractor, $533,000 by the boiler supplier, and $1.10 million by the piping contractor.

Two site visits were made by experts James, Bradow and Nall, accompanied by counsel and   representatives of past and present owners of the HPIB unit.  Interviews were conducted and photos were taken.   James and Nall prepared separate expert reports testifying on (i) the ability of materials and equipment to be removed without damage to itself or to pre-existing improvements, and (ii) the market value of materials at installation and once removed.  The piping fabricators’ expert, a metallurgist, submitted a report describing removal of pipe spools that emphasized adaptability to other applications.  Counsel for both the I&E contractor and the boiler equipment supplier elected to not appoint an expert witness.

Depositions of expert witnesses James, Nall, and the defendant’s metallurgist, plus fact witnesses from each of the three contractors were conducted. Rebuttal reports were submitted by James, Nall and the metallurgist.

As the trial date approached the I&E contractor relinquished its $1.45 million claim, evidently realizing upon review of expert reports and deposition transcripts that removal of instrument tubing, conduit and wire could not be removed without material self-damage and damage to pre-existing improvements. The boiler and piping fabricator maintained their positions and the matter went to trial in the United States Bankruptcy Court, Southern District of Texas, Houston Division.  All three experts, James, Nall and the defendant’s metallurgist, were called to testify in the four-day bench trial in front of Judge Jeff Bohm.

The piping fabricator’s $1.10 million claim was denied.  In addition to a negative finding on the validity of that contractors’ lien, the Court found both experts James and Nall to be credible witnesses and gave “substantial weight” to their testimony.  Working in the bank’s favor was testimony by witness James on material damage due to removal methods; the piping systems design as related to removal for ordinary maintenance; and the impact of removal of equipment and piping on plant operations.  Witness Nall added value by testimony on marketability of removed equipment and piping.

The Court discounted the testimony of the pipe contractor’s expert witness to a certain extent, giving only “some weight” to his testimony.  Credibility had been reduced by the expert’s failure to conduct more than a five-minute drive-by at the plant.

The Court found the boiler equipment in question was situated in a manner that allowed removal under the statute and ruled a claim of $533,000 unpaid billings be awarded to the boiler supplier.  In sum, the banks liability in the bankruptcy matter was reduced by $2.55 million.

Lessons Learned:

Involvement of multiple resources from within and external to Accumyn adds value to the services we provide.  Here we were able to provide expertise in three areas: chemical engineering, construction operations, and marketing of process materials and equipment.

Never represent case preparation activity that was only symbolic to be substantial in an expert report or testimony.  In this case the Court was easy to convince the drive-by site visit by the defendant’s expert lacked substance, leading to reduction of weight given to his testimony.

When appropriate, advise counsel about the value of an expert. This matter involved multiple defendants against a single plaintiff. Failure by two of the defendants to appoint an expert witness worked against them.