Listen to the article

5 min

This audio is auto-generated. Please let us know if you have feedback.

This feature is part of “The Dotted Line” series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.

A $2.3 billion Florida highway project that once promised contractors about $255 million in profit eventually collapsed into more than half a billion dollars in losses, according to a recent federal appeals court ruling.

The filing offers contractors a peek into what can happen when a public-private partnership spirals into litigation. In April, the 11th Circuit Court of Appeals affirmed an $80 million ruling in favor of Skanska USA and Granite Construction against joint venture partner Lane Construction. The firms partnered on the I-4 Ultimate Project, a massive P3 reconstruction effort for the Florida DOT.

The dispute centered on Lane’s effort to pursue legal theories that could allow the joint venture to exit the project before completion. The appeals court ultimately sided with Skanska and Granite. The contractors did not respond to requests for comment after the ruling.

“Almost anytime costs climb beyond what is expected on any construction project, parties start looking for ways to shift responsibility,” said Matthew Skaroff, attorney at Philadelphia-based law firm Cohen Seglias. “P3 infrastructure jobs invite unique contract structures and entity forms and often differ significantly legally from the standard design-bid-build format.”

JV disputes can worsen when incentives differ

The case offers lessons about alignment between joint venture partners, especially on megaprojects, said Skaroff.

“Contractors and joint venture partners should understand the composition and future plans of the companies with whom they are partnering,” said Skaroff. “This dispute shows what can happen when the wrong parties are involved, with different incentives and a focus on self-preservation rather than success of the partnership.”

The court opinion noted Lane had previously worked successfully with Skanska and Granite before Lane was acquired by Italian contractor WeBuild in 2015. After the acquisition, according to the ruling, the partnership worsened. By 2018, the joint venture expected a loss of $108 million on the project. In 2023, when the trial between builders began, the losses had ballooned to over $500 million, per the ruling.

“The court recognized that WeBuild seemed to be the primary driver of the termination scheme, overriding recommendations of both counsel and Lane’s CEO,” said Skaroff. “Not only do parties to a joint venture need to understand each other at the time they first come together, but this dispute illustrates also the importance for understanding each partner’s plans that may materially affect a partnership’s leadership or operations while the JV is in operation.”

The structure of the I-4 Ultimate project added another layer of complexity to the dispute.

Unlike a traditional public construction contract, the job operated under a P3 model in which concessionaire I-4 Mobility Partners financed the project and assumed responsibility for delivering it to the state. In return, the concessionaire stood to receive milestone payments and a long-term maintenance agreement reportedly valued at about $75 million annually, according to the court ruling.

At the same time, Skanska’s parent company also held an ownership interest in the concessionaire itself, creating what Lane later argued became a conflict of interest once project losses started. The appeals court ultimately rejected that argument, since the overlapping structure was disclosed from the start and that aspect of the agreement was relatively common in P3 arrangements, according to the court document.

Termination rights rarely favor contractors

The case shows how dangerous termination strategies can become on major infrastructure construction jobs where contracts favor project completion.

“Construction contracts do not often grant termination rights to contractors, and when they do, they are not broad rights,” said Skaroff. “Most construction contracts require the completion and continuation of work in the event of a dispute, and the consequences of abandonment of a project without justification are typically enormously negative for a contractor.”

In a legal analysis of the ruling, John Mark Goodman and Lee Ann Brown, attorneys at Birmingham, Alabama-based Bradley Arant Boult Cummings, wrote the dispute highlights the dangers of using termination threats as leverage instead of a last-resort option. The attorneys also noted the case shows the importance of vetting provisions across layered P3 agreements.

“The case is a must-read glimpse behind the scenes of a mega project in trouble due to unexpected cost overruns,” according to the attorneys’ post. “The case is a cautionary tale to contractors and attorneys in complex construction disputes to carefully consider the grounds and consequences of termination before you pull the trigger.”

One focal point of the litigation involved a drafting error in the project documents. Lane argued the mistake could have shifted construction obligations away from the joint venture. The appeals court rejected that interpretation.

“On large infrastructure projects involving billions of dollars, small wording issues have the potential to create very large disputes,” said Skaroff. “When millions of dollars are on the line, some parties get creative and will find anything they can to give them cover.”