UPDATE: Deceptive trade practices, fraud alleged in City lawsuit against water plant’s engineers, manufacturers

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Fraud, negligence, breach of contract and violations of the Deceptive Trade Practices Act are among the allegations cited in a 13-page lawsuit that the City of San Benito filed against the engineers and manufactures involved in the design and construction of a problematic water treatment facility.

The civil suit was filed Monday, Aug. 25, and names Evoqua Water Technologies, LLC; U.S. Filter Wastewater Group Inc.; Siemens Corporation; CSA Construction, Inc.; and Cruz-Hogan Consultants, Inc. as the defendants.

The City argues that Orlando Cruz, identified in the suit as a principal owner of Cruz-Hogan, “advised plaintiff of the need to expand plaintiff’s ability to treat water” – this after he began serving as San Benito’s city engineer in 2002. According to the suit, the City then contracted with Cruz-Hogan to provide engineering services for the preliminary design and construction of Water Treatment Plant No. 2 – a $17 million facility prone to malfunctions and currently rendered inoperable.

More recently, Assistant City Manager Hector Jalomo said Plant No. 2’s membrane filters may have malfunctioned and estimated up to $100,000 in repairs. However, concerns that the facility’s membranes were at fault have since been reported, and a study conducted by Lou Portillo and Associates PLLC as well as Coym, Rehmet & Gutierrez Engineering LP stated that the facility “never operated efficiently except in the early months of operation.”

In the suit, the City states that Cruz-Hogan created a pilot study, which was approved through bid specifications, to be conducted on the membranes. Three membrane manufacturers participated in the 90-day study, one of which was U.S. Filter. CSA Construction was selected as the general contractor and Siemens Corporation provided all components of the water filtration system.

In 2004, U.S. Filter was acquired by a Siemens division purchased in 2013 by AEA Investors, L.P. and turned into Evoqua Water Technologies.

Concerning the pilot study, the suit alleges, “…during the second run, a sudden ‘fouling event occurred that the membrane never truly recovered from’ causing the membrane to fail. U.S. Filter and Cruz-Hogan did not adequately investigate the failure or perform a root cause analysis of the failure. Instead, U.S. Filter and Cruz-Hogan proceeded to replace the membrane filter with a brand new filter, and proceeded with the testing schedule.”

The City also argues that Cruz-Hogan and U.S. Filter were contracted to construct Plant No. 2 with a capacity of treating 6 to 10 million gallons of water per day (MGD). But the Portillo study reportedly found that Plant No. 2 produces just 2.4 MGD; 2.8 MGD is achievable “with great effort on the part of City staff.”

Cruz-Hogan, Siemens, U.S. Filter and Evoqua have specifically been accused of negligence while Siemens, U.S. Filter and Evoqua alone face allegations of fraud for allegedly installing different membrane products than those represented in the pilot study and presented to the City for selection.

The four companies are also accused of negligent misrepresentation, breach of warranty and violations of the Deceptive Trade Practices Act.

All defendants face breach of contract allegations.

The City is also seeking the following in damages: actual and direct damages; statutory damages; consequential damages; cost of repair and/or replacement; cost of reconstruction; cost of removal; statutory entitled treble damages where applicable; diminution in value of Plant No. 2; court costs; attorneys’ fees; pre- and post-judgment interest; lost profits; litigation expenses; and punitive, additional, statutory and exemplary damages of the maximum amount allowed by law.

Attempts to reach the defendants’ representatives were unsuccessful as of press time Friday.

City officials, meanwhile, were candid in a statement issued on Friday.

“The City of San Benito’s newest water treatment plant has experienced significant problems that required its closure,” the statement read. “The failure of the new plant to operate as expected has led the City Commission to consult with multiple outside parties, including top industry specialists. We came to the conclusion that there was no choice but to file a lawsuit against the parties responsible for the plant’s deficiencies. Resolution of the issues at little or no cost to the residents remains a top priority for the City Commission.

“The City’s goal in filing a lawsuit is to make sure that the City and its residents get what they were promised by the parties that designed, built, and provided important equipment for the plant. What the City contracted for was a plant that could treat 6 million gallons of water per day with the ability to expand to 10 million gallons in the future. This plant has never come close to that, and its maintenance has been very costly.”

Water Treatment Plant No. 1, which was once deemed antiquated and potentially incapable of continuing to serve a growing San Benito, continues to serve the citizens’ water needs without limitation.

“For the time being, the City has been able to meet current needs by relying on its older water treatment plant,” the City statement concluded.


Permanent link to this article: https://www.sbnewspaper.com/2014/08/30/update-deceptive-trade-practices-fraud-alleged-in-city-lawsuit-against-water-plants-engineers-manufacturers/

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