Newport Challenges Arbitration Award to Koll

The city of Newport Beach is challenging a $1.75-million arbitration award to Koll Construction in an unusually messy fight about overruns and legal costs stemming from construction of the $8.6-million central library two years ago.

The city refused to pay the binding arbitration amount, prompting Koll to seek a court order confirming the award. A hearing is set for next Thursday in Orange County Superior Court.

The city, meantime, is asking the arbitrator, retired Ventura County Superior Court Judge Edwin M. Osborne, to knock down the $1.1 million in attorney’s fees, contending the fees are out of proportion to the amount Koll won.

Koll contends the city missed the deadline for seeking reconsideration of the award and isn’t entitled to it, anyway.

The dispute has been raging since the Newport Beach construction company, an arm of giant developer Koll Co., completed the library in June 1994.

Koll contended that various blueprints put together by a city-selected architectural design team wouldn’t work and that the city was taking too long to redesign them, pushing construction into the rainy season and delaying the project further.

The city asserted that Koll caused much of the delay, especially with faulty work. The copper metal roof, for instance, began to leak, and Koll refused to repair it until the litigation began. The cost to Koll was more than $600,000, the city said.

Each side accused the other of being recalcitrant in negotiations to settle their differences.

The arbitration took up parts of 52 days over 10 months, and Osborne rendered his decision in late January.

Koll sought $4 million, including $1.6 million in attorney fees. The city sought $1.8 million, including $779,000 in attorney fees. Koll was awarded $78,400. Osborne decided that Koll also was entitled to attorney fees because it was the prevailing party.

But to City Manager Kevin J. Murphy, the system seemed outrageous, considering that Koll got only a fraction of what it sought, excluding attorney fees.

“When they seek so much and get so little, someone’s got to look at the equities here,” the city manager said.

The city also has an arbitration pending with its design team for reimbursements allegedly owed to the city.

Now, Koll and the city say they’d think twice about working together again.

“In public contracting, we have to take the lowest responsible bidder,” Murphy said. “If it turned out to be Koll, we’d take them, but we’d be very cautious, very careful, about the way in which the contract is administered and how disputes are resolved along the way.”

Koll’s lawyer, Paul R. Hamilton, said that whether Koll would ever bid on a Newport Beach project again is a “tough question.”