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Washington Supreme Court Sides with Local Small Business; Affirms Improper Termination of Conway Construction Co.

July 8, 2021

Overview

SEATTLE (July 8, 2021) – Today, the Supreme Court of the State of Washington affirmed the trial court’s decision that Conway Construction Co. (Conway) was not in default when the City of Puyallup terminated its contract. It upheld the trial court’s decision to convert the termination into one for convenience. As the contract between Conway and the City stated, the Supreme Court also held that Conway is entitled to attorneys’ fees, thereby reversing the Court of Appeals decision and reinstating the trial court award of fees.

In March 2016, the City gave Conway notice of suspension and alleged breach of contract for an arterial road they were hired to build. The notice identified contract violations. Conway disputed the violations but also took steps to remedy the breaches. On several occasions, Conway asked to meet and discuss the City’s concerns, but the City refused. Just over two weeks after the initial notice, the City issued a final notice of termination for default to Conway and withheld further payments. Conway sued the City, arguing that the termination for default was improper and should be converted to a termination for convenience under the contract. After a lengthy trial, the trial court sided with Conway and found that the termination was one for convenience. The City appealed the decision to the Court of Appeals. 

The Court of Appeals affirmed the trial court’s rulings but reversed Conway’s award for attorney fees. Today, the Supreme Court affirmed the trial court’s decision in its entirety and held that Conway is in fact entitled to attorneys’ fees under the contract. This decision is substantial not only for Conway, but for construction companies around the state because it sets clear standards for termination in public works contracts in Washington going forward.

The Supreme Court recognized that government entities must act reasonably and in good faith in terminating contracts. The Supreme Court noted that the City’s “actions leading up to termination were unreasonable and made in bad faith.”

“We are pleased with the unanimous court decision to side with a local small business and affirm the trial court’s decision. Conway Construction is finally made whole again, five years later,” said Joe Straus, Schwabe attorney for Conway Construction. “This ruling pushes cities to work with contractors to resolve perceived issues before taking the drastic step to terminate a contract. The contract termination could have driven our client out of business had Conway not stood up and fought this decision.”

The City has already paid Conway $1,359,273.58 in response to the underlying judgment. Now the City must pay over $1.5 million in attorneys’ fees and costs from the original trial court award, plus additional fees on appeal.

Please see the Tacoma News Tribune article Puyallup suffers another loss in contentious road-work case, on hook for attorney’s fees published on 7/9/2021.

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