Dannenbaum Engineering Corp. and insurance company lawsuit goes to federal court

A civil lawsuit that Dannenbaum Engineering Corp. filed against an insurance company to recover more than $1 million incurred in litigation with the Brownsville Navigation District was moved to federal court Monday, court records show.

Houston-based DEC initially filed the lawsuit against the Illinois-based insurance company, Continental Casualty Company, in a Harris County state district court in September, the court record reflects.

The insurance company filed the notice of removal to federal court.

According to DEC’s lawsuit, the insurance company issued a Professional Liability Policy to DEC covering April 1, 2004 through April 1, 2005.

DEC maintains that in early 2005 it became aware of a potential claim against it arising from the professional services it provided to the Brownsville Navigation District (BND) and that DEC gave the insurance company notice of the claim in February 2005.

BND sued DEC in late March 2005 in a Cameron County state district court, attempting to recover about $15.5 million that BND paid to the firm from 1997 to 2004 to engineer and manage an international bridge project proposed at the Port of Brownsville, other court records show. Mexico never approved the project.

DEC states in its lawsuit against the insurance company that the insurance company neither accepted nor denied DEC’s request for a defense.

DEC and BND reached an agreement in February 2007, but DEC maintains that it still incurred and paid $1,458,172 in attorney fees and expenses in the litigation with BND and that the insurance company ultimately only reimbursed DEC $445,100.

DEC’s lawsuit against the insurance company further notes that the insurance company never explained why the fees were not reimbursed in full and alleges that the insurance company breached the policy. DEC also claims that the insurance company breached the duty of good faith and fair dealing and violated the Texas Business and Commerce Code.

DEC seeks to recover unspecified actual and consequential damages, attorney fees and court costs.

The insurance company’s attorney, David W. Waddell, of Houston, was not immediately available for comment Tuesday.

A Brownsville Herald inquiry that began in March 2004 showed that BND spent about $21.5 million on consultants, professionals and engineers toward development of an international bridge. The majority, $15.5 million, was paid to DEC.

BND later conducted an in-house inquiry. Special counsel Charles Willette found that of the money paid to DEC, $9.2 million was not justified, $1.7 million in success fees was questionable, and the firm might have done about $4.5 million in engineering work.

Willette also found that of the money to DEC, DEC paid $10.5 million to 17 different subcontractors and that about $9.2 million of that went to three Mexican companies with ties to DEC engineer Louis H. Jones Jr.

DEC maintained that the firm was misled by the Mexican sub-consultants.

BND didn’t recover any money in the 2007 settlement with DEC. DEC promised to do $2.9 million worth of work to complete the engineering required for the bridge on the U.S. side of the border.

"We did receive a set of construction drawings," BND CEO Eduardo A. Campirano said Tuesday. Campirano said BND’s engineering department determined that the plans are in an acceptable format.

A criminal inquiry into the monies paid to DEC was also conducted by the Cameron County District Attorney’s Office.

DA Armando Villalobos obtained the forfeiture of $1 million from DEC last year, claiming that the funds were stolen or misapplied from BND.

In past interviews, DEC’s James D. Dannenbaum and Jones said they were cleared of criminal wrongdoing.

A special grand jury last year issued a sealed indictment charging theft in the case.

The indictment remains sealed. Villalobos’ office had "no comment" Tuesday as to whether it would ever be unsealed.