Amelco Electric v. City of Thousand Oaks

In this case we determine whether the abandonment theory of liability applies against a public agency, and whether plaintiff public works contractor, which sued for breach or abandonment of the public works contract, is entitled to compensation under a total cost method of measuring damages. The jury found the contract was breached and abandoned, and awarded total cost damages. The Court of Appeal affirmed. We conclude the *232 theory of abandonment does not apply against a public entity, and that Amelco Electric failed to adduce sufficient evidence to warrant instructing the jury on total cost damages for breach of contract. We therefore reverse the judgment of the Court of Appeal.

I. Factual and Procedural Background

In 1992, defendant City of Thousand Oaks (City) solicited bids for electrical work to be performed in the construction of the Civic Arts Plaza, a project including a civic center or office building, a dual-purpose 400-seat council chamber and forum theater, an 1,800-seat civic auditorium or performing arts theater, and an outside area (the project). Instead of a general contractor, the project was managed by Lehrer McGovern Bovis, Inc. (LMB), and the City…

It has long been the rule in this state, 1 in other states, 2 and in federal court, 3 that when an owner enters into a construction contract with a builder or contractor, and the owner thereafter *249 “imposes upon the contractor an excessive number of changes such that it can fairly be said that the scope of the work under the original contract has been altered” (Peterson, supra, 172 Cal.App.3d at p. 640), the law provides the contractor a remedy. When such a situation arises in this state, the original contract is considered mutually abandoned and replaced with a new contract that allows the contractor to recoup its actual costs. (Id. at p. 645.) Whether labeled an “abandonment” of the contract or a “cardinal change,” 4 the doctrine is limited to the construction context. Albeit rarely invoked, 5 the doctrine operates as a safety valve for contractors to recover their actual costs for construction projects that, through no fault of their own, go out of control, far beyond the intention of the contracting parties.

Until today, no court, state or federal, has limited this doctrine only to contractors and builders that contract with a private owner. Nor, indeed, is this defendant…

In this case we determine whether the abandonment theory of liability applies against a public agency, and whether plaintiff public works contractor, which sued for breach or abandonment of the public works contract, is entitled to compensation under a total cost method of measuring damages. The jury found the contract was breached and abandoned, and awarded total cost damages. The Court of Appeal affirmed. We conclude the theory of abandonment does not apply against a public entity, and that Amelco Electric failed to adduce sufficient evidence to warrant instructing the jury on total cost damages for breach of contract. We therefore reverse the judgment of the Court of Appeal.

In 1992, defendant City of Thousand Oaks (City) solicited bids for electrical work to be performed in the construction of the Civic Arts Plaza, a project including a civic center or office building, a dual-purpose 400-seat council chamber and forum theater, an 1,800-seat civic auditorium or performing arts theater, and an outside area (the project). Instead of a general contractor, the project was managed by Lehrer McGovern Bovis, Inc. (LMB), and the City solicited bids for the various prime…