OC Streetcar contractor sues OCTA for $50 million, a move that could stall construction

Workers donning hardhats in downtown Santa Ana’s historic 4th Street continue to pave the way for the OC Streetcar through uneven trenches after a month’s worth of contentious construction.

Business owners have decried the project’s impact on commerce since work began on several closed-off blocks of the thoroughfare with some shopkeepers demanding an accelerated timeline for completion, and Santa Ana City Council responded by approving $1.5 million in relief funds to businesses earlier this month.

But will a lawsuit filed by the contractor in Orange County Superior Court bring construction for the urban rail system to a screeching halt?

Walsh Group, a Chicago-based company with a regional office in Corona, claimed that the Orange County Transportation Authority is in breach of the $220.5-million contract signed between the two parties in November 2018. The OC Streetcar, a $509.5-million project, is expected to connect riders from the Santa Ana Regional Transportation Center through downtown with a final stop in Garden Grove near Willowick Golf Course.

The suit argued that the price tag should be heftier, at least where the work of Walsh Group is concerned, as the company is seeking at least $50 million in damages.

In the complaint, Walsh Group contended that, unlike OCTA, it has upheld all contractual obligations, which included plans where “significant and material changes would not be necessary” to complete the project.

The company further alleged that the agency is in breach of contract by requiring Walsh Group to work above and beyond its terms without boosting the overall price of the agreement.

“Walsh contends it is commercially impractical and unreasonable to proceed with the work unless the price to be paid by OCTA to Walsh for work is increased significantly,” the suit reads, “and OCTA has failed to acknowledge these facts.”

A laundry list of other allegations include OCTA failing to provide “adequate” and “buildable” plans for the OC Streetcar as well as falling short on coordinating with local government and property owners impacted by construction.

According to the complaint, requests for work extensions and suspensions went unheeded as did attempts to negotiate a supplemental agreement.

The OC Streetcar’s contractor is asking a judge to affirm that it has no obligation to continue construction work.

(Kevin Chang / Staff Photographer)

An OCTA spokesman declined to comment on Walsh Group’s suit against the agency.

“What we can say is that OCTA is committed to completing the OC Streetcar project, which is already approximately 60% built,” Eric Carpenter wrote in an email. “OC Streetcar will be Orange County’s first modern electric streetcar and the 4.1-mile route in Santa Ana and Garden Grove will serve one of the nation’s most densely populated communities, giving the area that includes Santa Ana’s thriving downtown, courts and job centers another important public transit option that produces zero emissions.”

For the moment, many downtown businesses are scrambling to survive, much less thrive.

Eric Hansen manages Rhodes Jewelry and Loans, a family-owned business on 4th Street for almost 50 years. The pawn shop finds itself on an intersection sandwiched between blocks of streetcar construction in both directions, but that hasn’t shielded it from the ripple effects.

“Parking is absolutely horrible,” Hansen said. “Our customers can’t figure out how to get down here anymore.”

Business owners brought similar complaints about signage, security and economic survival before Santa Ana City Council amid construction expected to last at least through late summer 2022, if not longer. A majority of council members voted to approve an initial $1.5-million to help businesses while guiding city staff to look into bringing an appropriation of the same amount before them as early as April.

Businesses along 4th Street in downtown Santa Ana are pushing for more assistance as OC Streetcar construction heads to court.

(Kevin Chang / Staff Photographer)

But downtown Santa Ana businesses aren’t the only ones who have complained about streetcar construction.

A lawsuit filed by Elite Body Shop against Walsh Group on Feb. 22 alleged that it suffered a 95% loss in business after crews began working on an elevated railway system bridge for the OC Streetcar three years ago.

The auto shop near Garden Grove specialized in body and paint repairs for dealerships, insurance companies and walk-in customers. The owners leased the property with an option to buy and were unaware of construction plans until March 2019.

That’s when construction began.

The complaint alleged that “clouds of construction and dirt dust” from 20 to 30 yards behind the body shop constantly got sucked into the air intake vent for a spray-paint booth. As a result, workers had to repaint half of their jobs amid alleged token abatement efforts by Walsh Group. The situation is said to have deteriorated business to the extent that the body shop owners abandoned plans to buy the property and vacated it completely in July 2021.

Walsh Group’s grievances with OCTA predate dust-ups with downtown business owners over construction on 4th Street.

The company presented a claim on June 26, 2020 that addressed “cost and schedule impacts.” Bob Webb, OCTA’s principal contracts administrator, sent a letter to company president Sean Walsh on Sept. 8, 2021 that stated the agency rejected the claim in its entirety.

It also gave warning to Walsh Group that it had six months to take legal action. The company heeded the timeline and filed its suit on March 4, with days to spare.

As the case is before O.C. Superior Court Judge Linda Marks, Walsh Group is asking for a court judgement on the question of whether it can suspend work on the OC Streetcar’s construction until OCTA completes its plans and changes the agreed upon price of the contract.

The contractor also argued that it has standing to be released from contractual obligations altogether on account of the alleged breaches.

For business owners along 4th Street, the suit presents the specter of stalled construction that they can ill afford.

“It would kill a lot of the businesses,” Hansen said. “It would kill downtown, if they shut down completely and didn’t finish the job.”

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