Legal skirmish over flawed Harmon may never reveal defect blame

The Harmon Hotel at CityCenter sits empty and unfinished with the Veer Towers seen in the background Friday, July 29, 2011.

Harmon Hotel

The Harmon Hotel at CityCenter, which sits empty and unfinished and now serves as a giant billboard, is seen Friday, July 29, 2011. Launch slideshow »

The stunted Harmon hotel at CityCenter stands as a constant reminder of the most startling construction defects case in Las Vegas: What was to be a 49-story tower is instead paralyzed and empty at 26 stories because of overwhelming construction flaws.

Situated at one of the most prominent locations on one of the most famous streets in the world, the Harmon stands as an embarrassment to its developer — MGM Resorts International, which wanted the hotel-condo complex to serve as an architectural gateway to the $8.5 billion CityCenter — as well as to the general contractor, Tutor Perini Corp., which was overseeing the construction of a building deemed too flawed to finish.

Nobody wants to take the fall for what happened at Harmon.

For now, the tower — a carcass sheathed in a shiny skin with an ad promoting the show “Viva Elvis” — is evidence in unfolding litigation. It can’t yet be repaired and completed, or razed, because it holds clues to what everyone wants to know:

Who screwed up the Harmon?

But we may never find out, because MGM and Perini — equally matched in resources and political connections — may be afraid that at a civil trial, either may be found partly responsible. Each company might consider it more prudent to avoid a courtroom showdown.

“There’s an old saying ... that a good settlement is better than a great lawsuit,” said Jack Juan, a lawyer with Marquis & Aurbach in Las Vegas. “If you’re looking at a hotly contested trial that could take a few months, you have to ask yourself if you can sustain this kind of complex litigation with all of these lawyers and experts and whether a jury is going to pay attention to the details.”

Construction stopped on the Harmon in 2008 after an engineer uncovered significant problems with the placement of reinforcing steel in the building. After months spent fixing the problem, MGM halted construction and topped off the building.

Perini says it’s still owed money for work on CityCenter, an ambitious project that involved numerous design changes midstream and a budget that ballooned by billions of dollars during construction. In its lawsuit against MGM filed last year, Perini said MGM halted construction because it no longer made sense in the worsening economy. In its countersuit, MGM claims it halted work indefinitely because a subsequent investigation revealed more extensive problems, involving multiple building components, than were initially at issue during the repair work.

Mistakes and cost overruns are common on major construction jobs, especially on fast-track projects such as Las Vegas resorts, building experts say. Massive “design-build” structures are often built under ambitious deadlines, with design and construction occurring at the same time because of pressure to pay down expensive construction loans, they say.

In the rush to build, “mistakes happen,” said Lorence Slutzky, a construction law professor at John Marshall Law School and a partner with Robbins Schwartz Nicholas Lifton & Taylor in Chicago.

“Sometimes, the time schedule prevails, because every day of delay is money out of (the developer’s) pocket,” he said. “Things required are simply missed or intentionally omitted.”

Most construction-related disputes settle out of court, avoiding the time and expense of complex litigation that could take several years to resolve. That has held true for major resorts around town with at least one notable exception.

In 2003, a jury awarded $44.2 million to the contractor that built the Venetian, with Venetian owners awarded $2.2 million for incomplete and defective work on the resort, which opened late after cost overruns and disputed payments. The parties settled subsequent disputes and appeals in 2005, six years after the Venetian opened.

More important, settlements occur because neither party wants to risk an adverse ruling that could damage a company’s reputation or assets, building experts say. Such considerations are likely in play with the Harmon, a major project where highly technical building procedures are at issue, they said.

“Nobody necessarily wants to roll the dice” in a courtroom, said Neil Opfer, a construction management professor at UNLV who has served as a consultant or expert witness in more than 2,000 construction-related lawsuits. Only about 40 of those cases went to trial, Opfer said.

The truth may not be learned even if the dispute reaches a jury, experts say.

“Each side is going to publish its version of the truth, using their experts who will agree on a set of facts,” said Juan, who specializes in construction defect law. “But do they all have the same facts and are they looking at them the same way? You may have four witnesses with different interpretations of the facts, not because they are lying but because ... the truth is always going to be in the eye of the beholder.”

Generally speaking, the general contractor bears primary responsibility for delivering a safe and secure building that meets code requirements and is built according to plan, say building experts not involved in the litigation.

Inspectors and others are likely complicit for not catching problems at the Harmon until the building was well under way, Slutzky said. “The real responsibility rests with Perini, which has an obligation to comply with the plan specifications,” he said.

Proving liability in court may not be simple.

While acknowledging problems at the Harmon, Perini claims it was given faulty design drawings. MGM denies that claim and cites an engineering assessment that construction was faulty despite sound design plans.

If Perini knew the plans were wrong from the get-go, then the company bears responsibility for seeking revisions before continuing to build, Opfer said. The full extent of Perini’s knowledge isn’t known, however, he said.

Yet to be addressed before a judge, jury or arbitrator is the timing and extent of the problems discovered by the structural engineer hired by MGM to monitor the Harmon’s construction. Engineering firm Halcrow Yolles found problems repeated on at least 14 floors. MGM and Perini acknowledge efforts to fix those problems once they became known — although it’s unclear when and how they were notified.

Clark County inspectors and those employed by a third-party inspection company hired by MGM apparently didn’t catch the problems, either.

Sorting out who knew what when is a key component in major construction defect suits, as liability may be shared among multiple parties, Juan said.

“Everybody on one side of the table — a contractor and subcontractor, let’s say — could be found liable. But the contractor could say, ‘You (the developer) had your fingerprints on it, too. It’s up to a decision maker to figure out whether you are, say, 20 percent at fault or 80 percent at fault. It comes down to a percentage.”

MGM and Perini have declined further comment on the dispute beyond recent prepared statements. Clark County representatives also have declined to comment because of the litigation.

Tensions escalated last month after an engineer hired by MGM to assess the Harmon stated that the building was at risk of collapse in an earthquake. In a statement, Perini denied the claim and said MGM is misleading the public because “the Harmon is worth more dead than alive to MGM.”

Perini said its efforts to repair the Harmon have been rebuffed by MGM, which released a statement last month that it has “zero confidence or trust that Perini can and will properly fix a building it has so badly constructed thus far.”

“Perini’s continued requests to fix the Harmon is like the director of ‘Ishtar’ demanding a sequel,” MGM spokesman Gordon Absher said last month.

MGM expects to submit a plan for how to resolve the Harmon errors by a county-imposed deadline of Monday. It’s unclear whether the company will spell out plans to repair the building or tear it down, especially after an engineer hired by MGM to assess the Harmon recently recommended as many as 12 to 14 months of additional testing to determine the extent of the building’s problems.

The Harmon’s future is anyone’s guess. Some have speculated that it can be salvaged and reopened in better times, with the public none the wiser. Others appear convinced that the building would cost more to fix than it’s worth and can be taken down carefully with strategically placed explosives.

Don’t expect the building to come down anytime soon.

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