News

Palo Alto-based contractor Vance Brown awarded $5.75 million in Woodside construction dispute

 

A panel of arbitrators has ordered Woodside homeowner and venture capitalist Jeff Drazan and his wife Stacy Drazan to pay Palo Alto-based housing contractor Vance Brown Corp. a total of $5.75 million in a dispute over a construction project on an $18 million home on Bridle Lane in Woodside.

The three arbitrators concluded, after 51 days of hearings, that the couple's excessive number of changes to the home's design and the failure to pay the costs associated with those changes was a "material breach" of a contract, according to a Sept. 7 statement from contractor Loren Brown.

While the case actually concluded in February, Brown said he was waiting for the dust to settle before making news of the award. "You never really know when the thing is over," he said.

The Drazans' attorney, Dan Alberti of Palo Alto-based McDermott, Will & Emory, said that the Drazans "desperately needed to be in front of a jury" but that Vance Brown fought for two years to keep the case out of a courtroom.

An appellate court panel of three judges eventually ordered the case into arbitration, overturning a recommendation for a jury trial on two occasions in San Mateo County Superior Court and once by an earlier and different three-judge appellate panel, Alberti said.

The arbitration panel, Alberti said, consisted of three retired construction lawyers. "From the outset, the deck was stacked against the homeowner," Alberti said. "It was just banging your head against a wall."

Under the rules of arbitration, lawyers from both sides said, the decision can be appealed only if there is proof of fraud on the panel. Unlike a trial, legal and factual errors during the proceedings are not a basis for appeal.

The award included payment of $2.5 million for Vance Brown's attorney fees, about $2.5 million spent by the contractor that the Drazans "refused to pay for," and another $663,300 in attorney fees during the years that the case was in court, said Vance Brown attorney Gregg Dulik of the San Francisco law firm Sedgwick, Detert, Moran and Arnold.

The couple have paid "every penny," Dulik said.

"It's a spectacular house," he added. "It was just a nightmare getting it built for them." Had the couple not paid up, Vance Brown could have put the finished $18 million home up for auction to recoup its costs, Dulik said.

After the award had been granted, Vance Brown took the case back to Superior Court to get the decision "confirmed," which allowed the contractor to put the Drazans' house up for auction should there be difficulty in getting payment, according to the lawyers for both sides.

The couple's own outlay for attorneys was about $3.75 million for the arbitration part of the proceedings, and that was on top of what they paid during the court proceedings, Dulik said.

Comments

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Posted by What a Downer!
a resident of Adobe-Meadow
on Sep 9, 2010 at 7:54 pm

What a depressing story. You spend millions on a home, spend millions on a lawsuit on the home, and now you get to live in a home where you hate the people who built it because you have to pay THEIR lawyers.

And the attorneys make millions on it. I wonder if the case was fun for them.

Imagine all the good that could have been done with all this money. Very sad.


Like this comment
Posted by Anon.
a resident of Crescent Park
on Sep 10, 2010 at 10:55 am

>> The three arbitrators concluded, after 51 days of hearings,
>> that the couple's excessive number of changes to the
>> home's design and the failure to pay the costs associated
>> with those changes was a "material breach" of a contract,
>> according to a Sept. 7 statement from contractor Loren Brown.

I don't see anything depressing about it. They made lots of changes they did not pay for, and not just a trivial amount of changes apparently, almost 6 million dollars. So they have to pay for their house to get what they wanted, how is that depressing? I imagine a 17 million, or 22 million dollar house will be plenty of fun for them in case you are worrying.


Like this comment
Posted by A-Nation-Of-Lawyers
a resident of Another Palo Alto neighborhood
on Sep 10, 2010 at 12:45 pm

> The three arbitrators concluded, after 51 days of hearings,
> that the couple's excessive number of changes to the home's
> design and the failure to pay the costs associated with those
> changes was a "material breach" of a contract, according to a
> Sept. 7 statement from contractor Loren Brown.

Without seeing the contract, this claim of "material breach" is hard to understand. This problem comes up all the time in the world of software, and many procedures have been put in place by reputable software vendors to deal with the issue of client-initiated change requests. While there is no industry standard for this process, reputable vendors look at all change requests as potentially destabilizing to the project, the project's delivery date and the profitability of the project, under the original contract/project specifications. Prudent software vendors will insure that all changes are tightly controlled, well specified, and any additional costs that must be incurred by the client well identified at the time that both parties (vendor and client) sign off on a "charge request".

If the construction industry has not adopted such practices, it operates at its own peril. Even though having all of the paperwork in place does not insure that all clients will pay their bills properly, during the home work as the project goes into "change mode" would have made the time-to-decide this case shorter than almost two months.


Like this comment
Posted by local gurl
a resident of Greenmeadow
on Sep 10, 2010 at 1:35 pm

What a terrible waste of time and money. It's hard to feel sorry for folks who burn through that much cash on a house . . .


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