Preview
HANSON BRIDGETT LLP
ELED
ANDREW G. GIACOMINI, SBN 154377 SAN MATFO COUNTY
agiacomini@hansonbridgett.com
ANDRE K. CAMPBELL, SBN 188585 APR 2 4 2017
acampbell@hansonbridgett.com
STEVEN D. MILLER. SBN 236080
smiller@hansonbridgett.com
LAUREL E. O'CONNOR, SBN 305478
COOONCDCDLOJN—X
Ioconnor@hansonbridgett.com
425 Market Street, 26th Floor
San Francisco, California 94105
Telephone: (415) 777—3200
Facsimile: (415) 541—9366
Attorneys for Defendant/Cross-Complainant
PENINSULA CORRIDOR JOINT POWERS BOARD
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN MATEO
PARSONS TRANSPORTATION GROUP, Case No. 17CIV00786
an Illinois corporation,
CROSS-COMPLAINT FOR BREACH OF
Plaintiff, CONTRACT, PROFESSIONAL
NEGLIGENCE, NEGLIGENT
v. MISREPRESENTATION AND BREACH
OF PERFORMANCE BOND
PENINSULA CORRIDOR JOINT POWERS
BOARD, a joint powers authority; and
DOES 1 through 25, inclusive,
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Defendants.
Action Filed: February 22, 2017
ODO'I-hQ-‘INAOCDOONOUU'l-BOON—‘O
PENINSULA CORRIDOR JOINT POWERS
BOARD, a joint powers authority,
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Cross-Complainant, iuieldwoa
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PARSONS TRANSPORTATION GROUP,
3% INC., an Illinois corporation; ZURICH-
AMERICAN INSURANCE COMPANY, a
New York corporation; FEDERAL
r____..__
INSURANCE COMPANY, an Indiana
axe corporation; FIDELITY AND DEPOSIT
COMPANY OF MARYLAND, a Maryland
I.
corporation, and ROE ONE through ROE
@ N \l
TWO HUNDRED, inclusive,
Cross—Defendants.
N 00
Case No. 17CIV00786
134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD
Defendant/Cross-Complainant Peninsula Corridor Joint Powers Board ("JPB")
alleges as follows:
fENERAL ALLEGATlONS
The Parties
1. At all times mentioned herein, JPB was, and now is, a joint powers authority
OCOCDNODU‘l-hODNA
created under Section 6500, et seq. of the California Government Code. JPB is the
public entity that owns, operates, and is responsible for the commuter rail service in the
San Francisco Bay Area commonly referred to as "Caltrain." Caltrain serves San
Francisco, San Mateo, and Santa Clara counties, operating commuter rail service from
San Francisco to the City of Gilroy. JPB is the owner of the Caltrain Peninsula Rail
Corridor (the "Caltrain Corridor"), which includes approximately 52 route miles from the
San Francisco northern terminus to Control Point ("CP") Lick, south of San Jose.
Caltrain also operates on the Union Pacific Railroad for approximately 22 miles from
CP Lick south to the City of Gilroy. Caltrain serves over 18 million passengers per year,
owns and maintains 32 stations, and operates up to 92 trains per day. In addition,
Caltrain dispatches other railroads' trains on the Caltrain Corridor (i.e., tenants), such as
the Union Pacific Railroad freight rail system and the Capitol Corridor, Altamont
Commuter Express, and Amtrak passenger rail systems. Caltrain also maintains a
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central control facility in San Jose that houses Caltrain's rail operations control system
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and user workstations.
2. JPB is informed and believes, and on that basis alleges, that at all times
mentioned herein, plaintiff/cross-defendant Parsons Transportation Group, Inc. was, and
now is, an Illinois corporation doing business in San Mateo County. Parsons
Transportation Group, Inc. holds itself out as a company with expertise in the area of train
technology, although it has proven either unwilling or unable to perform the requirements
of its contract with JPB.
3. JPB is informed and believes, and on that basis alleges, that at all times
mentioned herein, cross-defendant Zurich American Insurance Company was, and now
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134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD'
A is, a New York corporation doing business as a performance bond surety in San Mateo
County.
4. JPB is informed and believes, andon that basis alleges, that at all times
mentioned herein, cross-defendant Federal Insurance Company was, and now is, an
‘
Indiana corporation doing business as a performance bond surety in San Mateo County.
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5. JPB is informed and believes, and on that basis alleges, that at all times
mentioned herein, cross-defendant Fidelity and Deposit Company of Maryland was, and
now is, a Maryland corporation doing business as a performance bond surety in San
Mateo County.
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O 6. JPB does not know the true names or capacities of cross-defendants
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named herein as Roe One through Roe Two Hundred, and therefore, sues these
_\
N defendants by their fictitious names. JPB will ask leave to amend their true names and
_\ OD
capacities when the same have been fully ascertained.
_\
A 7. Cross-defendant Parsons Transportation Group, Inc. and cross-defendants
_x 01 named herein as Roe One through Roe Twenty are hereinafter collectively and severally
_\ O) referred to as "Parsons" in’the remainder of this Cross-Complaint. Cross—defendant
Zurich American Insurance Company and cross-defendants named herein as Roe
_\_\
MN
Twenty—One through Roe Forty are hereinafter collectively and severally referred to as
_\
(D the "Zurich" in the remainder of this Cress-Complaint. Cross-defendant Federal
N0 Insurance Company and cross-defendants named herein as Roe Forty-One through Roe
MIC)
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Sixty are hereinafter collectively and severally referred to as the "Federal" in the
remainder of this Cross-Complaint. Cross-defendant Fidelity and Deposit Company of
N (.0 Maryland and cross-defendants named herein as Roe Sixty-One through Roe Eighty are
NL hereinafter collectively and severally referred to as the "Fidelity" in the remainder of this
N 01 [Cross-Complaint.
N 0) 8. JPB is informed and believes, and on that basis alleges, that each of the
N \l fictitiously named defendants is in some way legally responsible for the acts alleged in
N 00 this Cross-Complaint.
-3- Case No. 17CIVOO786
134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD
A The Federal Mandate to Implement Posit_ive Train Control
9. In 2008, a‘Union‘ Pacific freight train and a Metrolink commuter passenger
train collided head-on in the Chatsworth district of Los Angeles, causing injuries to
hundreds of passengers as well as causing 25 deaths.1 The accident was primarily
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attributable to human error, in the form of a distracted engineer. Had a Positive Train
Control (“PTC") system2 been installed on the trains, the horrific collision may have been
prevented. The National Transportation Safety Board (“NTSB”) has been recommending
positive train control for over 40 years. Between 2004 and 2014, the NTSB has
completed investigations of 25 train accidents — which took approximately 65 lives,
O injured thousands, and caused millions of dollars in damages — which the NTSB believes
—\
would have been prevented or mitigated had PTC been implemented.3 . ‘
r
N 10. In direct response to the tragic Chatsworth train collision and upon NTSB
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recommendation, Congress enacted the Railroad Safety Improvement Act of 2008, which
I
A mandated the development and implementation of PTC on all Class I and commuter
01
railroads by December 31, 2015.4 PTC systems use integrated technologies to prevent
0) train-to-train collisions, overspeed derailments, and movement of trains through switches
\l left in the wrong position, as well as prevent train incursions into work areas. PTC
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systems allow a train to receive information about its location, understand where it can
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safely travel, communicate with other trains on nearby tracks, and prevent unsafe
0.0
movement. The US. Department of Transportation, Federal Railroad Administration
—\
1
Rubin, Simmons, and Landsberg, 'Total Destruction': At Least 17 Die in Head-on
N Metrolink Crash, Los Angeles Times (September 13, 2008)
http://www.latimes.com/IocaI/Ia-me-traincrash13-20083ep13-storv.htm| [as of
00
November 28, 2016],
2
A In general, positive train control systems allow for the monitoring and controlling of train
movements, with a safety backup to automatically stop trains.
01
3
See National Transportation Safety Board, Most Wanted List, Implement Positive Train
0) Control Systems (2014) http://www.ntsb.qov/safetv/mwl/Paqes/mwl8 2014.aspx [as of
’
November 2016].
\l
4 See Rail Safety Improvement Act of 2008, Pub. L. No. 110-432, 122 Stat. 4848 (2008),
00 at Section. 104.
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134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD
(“FRA”) published a final rule in 2010 regulating PTC systems design, installation, testing,
and implementation, and is also authorized to assess significant fines and penalties, and
even prevent operation, where railroads fail to comply with the PTC mandate.5
11. The public safety risks associated with delayed implementation of PTC are
(OQNOO'IAOONA
significant. Even after the Chatsworth collision and enactment of the Railroad Safety
Improvement Act, preventable train accidents continue to occur. For example, in
December 2013, a Metro-North Railroad Hudson Line train derailed in New York City,
caused in part by an engineer failing asleep, killing four and injuring dozens.6 In May
2015, an Amtrak train derailed in Philadelphia, likely caused by engineer distraction,
killing eight and injuring more than 200.7 Most recently, in September 2016, a New
Jersey Transit train crashed at the Hoboken Terminal in New Jersey during rush hour,
killing one and injuring more than 110‘others, including the train operator.8 A" of these
accidents could have been prevented had the trains been operating with PTC. NTSB
Chairman Christopher Hart believes that, "[e]very PTC-preventable accident, death and
injury on tracks and trains affected by the law will be a direct result of . . . the delayed
implementation of this life-saving technology.”9
12. Caltrain is an integral part of the economic engine driving Silicon Valley,
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5
See 49 C. F. R Part 236, Subpartl.
6
Flegenheimer, Matt, Metro- North Train Sped at 82 M. P. H. Ahead of Curve In Fatal
Crash, New York Times (December2, 2013),
http: //www. nvtimes. com/2013/12/03/nvreqion/metro-north-train-accident-
bronx. html?Daqewanted=all (as of November 23,2016).
7
Mele, Christopher, Amtrak Agrees to $265 Million Settlement In Philadelphia Crash that
Killed Eight, New York Times (October 27, 2016),
http: //www. nvtimes.com/2016/10/28/us/amtrak-265-million-settlement—philadelphia-crash-
that-killed-eight.html (as of November 23, 2016).
8
McGeehan, Rosenberg and Fitzsimmons, Hoboken Train Crash Kills 1 and Injures
Over 100, New York Times (September 29, 2016),
http://www.nvtimes.com/2016/09/30/nvreqion/new-iersev-transit-train-crash-hoboken.html
(as of November 23, 2016).
9
NTSB "2016 Most Wanted List,"_ available at http://www.ntsb.qov/news/press-
releases/Pages/PR20160113.a§px.
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134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD
A providing public commuter rail passenger service between San Francisco and Gilroy.
N Based on the annual ridership count conducted'in January and February of 2016,
00 Caltrain serves an average of 62,416 passengers per weekday, an increase of 7.2
A percent over 2014 and 83 percent since 2010. Supported by this growing ridership —
01
which is anticipated to keep growing due to the continued job growth in Silicon Valley and
0) increased vehicular traffic congestion along the US. 101 corridor— Caltrain’s primary
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concern continues to be the safety of its riders and the rail system. JPB believes that
implementing PTC is not only federally required, but it is also a critical tool for assuring
(O Caltrain’s safe, reliable, and efficient rail operations. JPB has acted quickly to fulfill the
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federal mandate to implement PTC.
‘
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FIRST CAUSE OF ACTION
...x
Breach of Contract
(Against Parsons, Including Roe One through Roe Twenty)
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_x
13. JPB realleges and incorporates herein by reference paragraphs 1, 2, and 6
through 12, above.
.
_x.._\
14. On October 6, 2011, the JPB Board of Directors awarded Contract Number
_\
10—PCJPB-T—021 to Parsons‘(the "Contract"), for Parsons to design, procure, test, and
_\
install Caltrain's Communications Based Overlay Signal System ("CBOSS") PTC
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system.10 While JPB followed a public and competitive solicitation process, JPB did n_ot
N select the lowest cost proposal for contract award. Instead, JPB selected Parsons
[\J because Parsons: (1) represented itself as the foremost leader in train technology;
N (2) promised to exercise the degree of professional care, skill, efficiency and judgment of
N contractors with special expertise in railroad technology and train control systems; and
N (3) promised to comply with all current and successor laws and regulations.11 In addition,
N
10
N See Peninsula Corridor Joint Powers Board, Resolution No. 2011-43‘
(October 6, 2011). 4
N 11
See Exhibit A, Contract, Sections 2 and 15. The attachments and documents
N incorporated into the Contract are extremely voluminous, and for that reason'are not
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134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD
A Parsons promised to staff its positions with qualified personnel, and Parsons emphasized
N that it was committed to maintaining the continuity. of its key personnel. Parsons'
00 proposal is incorporated into the Contract, a true and correct excerpt of which is attached
A hereto as Exhibit A and incorporated herein by reference. Since 2011, the Contract has
. 01
been amended to incrementally increase the scope of work and related costs, with a total
O) current Contract amount of $159,761 ,261.
\l 15. Given the federally—mandated requirement to implement PTC by
00 December 31, 2015, and the equally important, if not more important critical public safety
CD concerns, Parsons' proposed schedule was a crucial component of the Contract. JPB
_x
O issued Notice to Proceed to Parsons on January 27, 2012 and the Contract required
A
-\
Initial In-Service Acceptance12 no later than October 31I 2015, with Final Acceptance
_L
N two hundred and ten days thereafter.13
_x 00 16. JPB has performed all terms, conditions, and obligations of the Contract to
...x
h be performed on its part, excepting only those that have been waived or excused by
_x U1 Parsons' actions or failures of performance.
_\ 0) 17. Unfortunately for JPB, and the over 18 million people served by Caltrain
_x \I each year, Parsons has breached the Contract in numerous ways, including but not
_.L
m limited to the following:
_\
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attached to this Cross-Complaint. An excerpt of the Contract is attached to this Cross-
Complaint, and the entire Contract will be made available at trial.
NN
12
To achieve "In-Service Acceptance" Parsons must complete over 20 steps to JPB's
N (.0 satisfaction, including fully testing and configuring for CBOSS PTC system operation and
receipt of the Federal Railroad Administration's written approval for placing the CBOSS
NA
PTC system in revenue service. For a more detailed description of ln-Service
N U"
Acceptance, see Exhibit A, Contract, Attachment A, Part 2, Scope of Work, section 2.0.1.
13 "Final Acceptance" also requires Parsons to complete over 20 provisions, including
[\J 0)
that the Caltrain PTC system continue to meet the PTC interoperability requirements.
For a more detailed description of Final Acceptance, see Exhibit A, Contract,
N \l
Attachment A, Part 2, Attachment A, Part 2, Scope of Work, section 2.0.2. and Exhibit A,
N 00 Section 1001, Part 1.02.
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134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD
Parsons" Failure to Deliver t_he Complete CBOSS PTC System in@015
I
18. Despite its repeated assurances, made both orally and in writing, that it
would meet the In-Service Acceptance deadline, Parsons failed to deliver the CBOSS
PTC system on October 31, 2015. Prior to October 2015, Parsons submitted numerous
OOQNODU'l-hOONA
monthly reports promising that it would achieve the In-Service Acceptance deadline of
October 31, 2015. Unfortunately, despite its many assurances, Parsons failed to meet
the October 31, 2015 deadline. Parsons must have known that it could not meet the
October 31, 2015 deadline, because Parsons continually failed to meet crucial interim
milestones without notifying JPB that such failures would impact the overall deadline of
t
October 31, 2015.
. 19. Vlfith the December 31, 2015 deadline looming, on October 29, 2015
Congress extended the PTC implementation deadline by three years to
December 31, 2018.14 This deadline did not require delay in PTC implementation, but
merely permitted it. Mindful of the critical public safety issues involved, JPB did not relax
the Contract requirements that Parsons achieve Initial In-Service Acceptance no later
than October 31, 2015 and Final Acceptance two hundred and ten days thereafter.15
20. Following the Congressional extension, which did not alter the Contract
schedule, Parsons began to unilaterally delay the In-Service Acceptance deadline without
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JPB approval. This was a clear breach of the Contract requirement that JPB approve
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schedule changes. For example, Parsons began submitting monthly progress schedules
beginning in April 2015 (even before any Congressional extension), using
December 31, 2015 as its new In-Service Acceptance date.16 Beginning on
February 5, 2016, Parsons advised JPB in writing that it would deliver the CBOSS PTC
14
See Surface Transportation Extension Act, Pub. L. No. 114- 73, 129 Stat. 568 (2015),
at Section 1302.
15
In fact, had Parsons complied with the
Contract schedule, JPB would not have needed
an extension to the original December 31, 2015 deadline.
16
The Contract required In-Service Acceptance by October 31, 2015.
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134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD
system by October 31 2016
,
— a full year later than the Contract requirement — even
though JPB did not approve the extended schedule. It subsequently became clear that
Parsons could not even meet this extended October 31,2016 deadline, and on or about
August 31, 2016 Parsons acknowledged that it would deliver the CBOSS PTC system at
omummAwN—x
least two years late, predicting an October 31, 2017 delivery date. Most recently, at a
meeting on or about October 19, 2016, Parsons admitted to JPB that the October 2017
deadline would be further delayed to an unspecified date in 2018. As of October 2016,
Parsons essentially did not know when, if at all, it could deliver the CBOSS PTC system.
Parsons' failure to deliver the CBOSS PTC system by October 31, 2015 is an
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unequivocal breach of the Contract.
—‘O
_\
flilure to Deliver t_he On-_Board Silosvstem
._\
N 21. Parsons subcontracted with GE Transportation Systems Global Signaling,
._\ 00 LP to design and install the core subsystem of the CBOSS PTC, the On-Board System,17
_L
L by June 2014. However, instead of achieving the delivery date of June 2014, Parsons
_L 01 delivered to JPB an Excel spreadsheet entitled "30’Step Plan to Completion," proposing
_\
a new completion date of May 18, 2015. This date was almost a year behind schedule,
._\
and Parsons' spreadsheet failed to describe the impact this delay would have on the
_L
OCCCIJNO)
overall Project schedule. Parsons also proposed to release various iterations of the
_L
system in a piecemeal approach rather than delivering the entire subsystem as required.
N In July 2014, JPB notified Parsons that the delays were unacceptable, the piecemeal
N —\
approach was unlikely to succeed, and JPB was seriously concerned with Parsons’ lack
of progress. Nonetheless, Parsons persisted in its approach. In addition, an or about
N'N
July 8, 2014, Parsons notified JPB that its subcontractor GETS had created "an alliance"
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N -h
17
N 0'1 The On-Board System is a complex |nteroperabIe-Incremental Train Control System
that includes an on—board computer that will use its location, onboard database, and
N 0) information received from the back office and wayside equipment to monitor and control
train movements (e.g., location determination, target enforcement, predictive braking,
N \l
speed enforcement, wireless crossing activation). The On-Board System will also allow
N (I) for interoperability so that the C‘altrain system can communicate with other PTC systems.
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Case No. 17CIV00786
1 3427347 .2 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD
—.‘L
with Alstom, and that the On-Board System would be supplied by Alstom rather than
GETS. Under the Contract, JPB reserved the right to approve all subcontractors, yet
Parsons never requested, and JPB never provided, formal approval of Alstom, who
nevertheless began work as the key On— Board System subcontractor.
22. Parsons continued to fall further behind schedule throughout 2014. Only on
(OWNODCJAOON
May 8, 2015 did Parsons formally notify JPB that Parsons would fail to meet even its
unauthorized extended deadline of May 18, 2015. Moreover, on May 8, 2015, Parsons
provided a new plan that fragmented the On-Board System delivery milestones even
further, stating that its plan was to design a "Revenue Sen/ice Demonstration" ("RSD")
_L
0 version of the On-Board System by May 22, 2015. But the RSD version would not be
—\ _\
interoperable — meaning it could not communicate with the PTC system of another host
_L
N railroad, a key requirement of the Contract —— and it would not include other important
_\ (A)
functionalities required in the Contract. Parsons told JPB on May 8, 2015 that it would
_\
A not deliver these functions until December 31, 2015. Furthermore, on May 12, 2015,
_x 01
Parsons admitted to JPB that the December 31, 2015 deadline was not actually feasible
_L O) and the full delivery was more likely to occur during the first quarter of 2016.
23. As time progressed, Parsons' repeated delay in providing the On-Board
_\_\ CD‘I
System obviously made it impossible that Parsons could meet the stated deadline for In-
_x
(0 Service Acceptance deadline. Nonetheless, Parsons' monthly schedules continued to
N0 include entirely unrealistic time frames for In-Service Acceptance. For example, on
NA November 4, 2015, after Parsons had already breached the Contract by failing to meet
-l\) m the October 31, 2015 deadline, Parsons made a presentation to JPB that included a
N 00 patently faISe schedule, stating that it would have the RSD application ready to be
NA submitted to the US. Department of Transportation, Federal Railroad Administration by
N 01 December 6, 2015. This would have allowed Parsons essentially one month to complete
N 0) all testing and in any event would have made the December 31, 2015 deadline for In-
N \l Service Acceptance impossible. Indeed, by December 3, 2015, Parsons was
N 03 backpedaling from its commitment to submit the RSD application in December, made
'
'
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134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD
less than one month previously, and was already suggesting that a more realistic date
was June 2016. As a purported leader in train technology, Parsons must have known
that its repeated submission of inaccurate schedules was false and unachievable.
24. Following Parsons' unilateral and unauthorized decision to extend the In-
cooououm-hcow—x Service Acceptance deadline to October 31, 2016, Parsons made a similar unilateral and
unauthorized decision to extend its deadlines to deliver the On-Board System. For
example, on or around February 2016, Parsons stated that the On—Board System version
3.3.3, which does not meet the Contract's requirements, would not be delivered until
March 17, 2016. Parsons told JPB that it would deliver the final version 3.3.4, with
_L
0 functionalities required by the Contract, on August 9, 2016. .Unfortunately, Parsons also
_\ —¥
missed that deadline. To date, Parsons still has not provided the On-Board System, and
_L
N has failed to commit to a date certain for when it will provide the On-Board System.
_x 00 Failure to Exercise Specializil Knowledge, Skill and Expertise
_x
-h 25. Parsons also loaded and tested its software without following required
_L 01
protocols, potentially causing significant problems. The FRA sets safety standards for all
_\ 0) stages of PTC development, inCluding field testing requirements.18 In compliance with
Preview
HANSON BRIDGETT LLP ELED ANDREW G. GIACOMINI, SBN 154377 SAN MATFO COUNTY agiacomini@hansonbridgett.com ANDRE K. CAMPBELL, SBN 188585 APR 2 4 2017 acampbell@hansonbridgett.com STEVEN D. MILLER. SBN 236080 smiller@hansonbridgett.com LAUREL E. O'CONNOR, SBN 305478 COOONCDCDLOJN—X Ioconnor@hansonbridgett.com 425 Market Street, 26th Floor San Francisco, California 94105 Telephone: (415) 777—3200 Facsimile: (415) 541—9366 Attorneys for Defendant/Cross-Complainant PENINSULA CORRIDOR JOINT POWERS BOARD SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN MATEO PARSONS TRANSPORTATION GROUP, Case No. 17CIV00786 an Illinois corporation, CROSS-COMPLAINT FOR BREACH OF Plaintiff, CONTRACT, PROFESSIONAL NEGLIGENCE, NEGLIGENT v. MISREPRESENTATION AND BREACH OF PERFORMANCE BOND PENINSULA CORRIDOR JOINT POWERS BOARD, a joint powers authority; and DOES 1 through 25, inclusive, NNNNNNN—A—LA—LA—XAAA—k Defendants. Action Filed: February 22, 2017 ODO'I-hQ-‘INAOCDOONOUU'l-BOON—‘O PENINSULA CORRIDOR JOINT POWERS BOARD, a joint powers authority, ‘\ '1 I L69€LV : '' ssma lOU "LI- Cross-Complainant, iuieldwoa 98L00—lll3 V. lllllIlllllllllllllllllllllllIlllll PARSONS TRANSPORTATION GROUP, 3% INC., an Illinois corporation; ZURICH- AMERICAN INSURANCE COMPANY, a New York corporation; FEDERAL r____..__ INSURANCE COMPANY, an Indiana axe corporation; FIDELITY AND DEPOSIT COMPANY OF MARYLAND, a Maryland I. corporation, and ROE ONE through ROE @ N \l TWO HUNDRED, inclusive, Cross—Defendants. N 00 Case No. 17CIV00786 134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD Defendant/Cross-Complainant Peninsula Corridor Joint Powers Board ("JPB") alleges as follows: fENERAL ALLEGATlONS The Parties 1. At all times mentioned herein, JPB was, and now is, a joint powers authority OCOCDNODU‘l-hODNA created under Section 6500, et seq. of the California Government Code. JPB is the public entity that owns, operates, and is responsible for the commuter rail service in the San Francisco Bay Area commonly referred to as "Caltrain." Caltrain serves San Francisco, San Mateo, and Santa Clara counties, operating commuter rail service from San Francisco to the City of Gilroy. JPB is the owner of the Caltrain Peninsula Rail Corridor (the "Caltrain Corridor"), which includes approximately 52 route miles from the San Francisco northern terminus to Control Point ("CP") Lick, south of San Jose. Caltrain also operates on the Union Pacific Railroad for approximately 22 miles from CP Lick south to the City of Gilroy. Caltrain serves over 18 million passengers per year, owns and maintains 32 stations, and operates up to 92 trains per day. In addition, Caltrain dispatches other railroads' trains on the Caltrain Corridor (i.e., tenants), such as the Union Pacific Railroad freight rail system and the Capitol Corridor, Altamont Commuter Express, and Amtrak passenger rail systems. Caltrain also maintains a NNNNNNNNNAAAAAAAAA—x central control facility in San Jose that houses Caltrain's rail operations control system m\lCT)\'J'I-h(at)[\J—kCJCOCXJ\lCDU'I-hmkk.)—L and user workstations. 2. JPB is informed and believes, and on that basis alleges, that at all times mentioned herein, plaintiff/cross-defendant Parsons Transportation Group, Inc. was, and now is, an Illinois corporation doing business in San Mateo County. Parsons Transportation Group, Inc. holds itself out as a company with expertise in the area of train technology, although it has proven either unwilling or unable to perform the requirements of its contract with JPB. 3. JPB is informed and believes, and on that basis alleges, that at all times mentioned herein, cross-defendant Zurich American Insurance Company was, and now -2- Case No. 17CIVOO786 134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD' A is, a New York corporation doing business as a performance bond surety in San Mateo County. 4. JPB is informed and believes, andon that basis alleges, that at all times mentioned herein, cross-defendant Federal Insurance Company was, and now is, an ‘ Indiana corporation doing business as a performance bond surety in San Mateo County. mmu-mmL'wN 5. JPB is informed and believes, and on that basis alleges, that at all times mentioned herein, cross-defendant Fidelity and Deposit Company of Maryland was, and now is, a Maryland corporation doing business as a performance bond surety in San Mateo County. _L O 6. JPB does not know the true names or capacities of cross-defendants _L ._L named herein as Roe One through Roe Two Hundred, and therefore, sues these _\ N defendants by their fictitious names. JPB will ask leave to amend their true names and _\ OD capacities when the same have been fully ascertained. _\ A 7. Cross-defendant Parsons Transportation Group, Inc. and cross-defendants _x 01 named herein as Roe One through Roe Twenty are hereinafter collectively and severally _\ O) referred to as "Parsons" in’the remainder of this Cross-Complaint. Cross—defendant Zurich American Insurance Company and cross-defendants named herein as Roe _\_\ MN Twenty—One through Roe Forty are hereinafter collectively and severally referred to as _\ (D the "Zurich" in the remainder of this Cress-Complaint. Cross-defendant Federal N0 Insurance Company and cross-defendants named herein as Roe Forty-One through Roe MIC) N—L Sixty are hereinafter collectively and severally referred to as the "Federal" in the remainder of this Cross-Complaint. Cross-defendant Fidelity and Deposit Company of N (.0 Maryland and cross-defendants named herein as Roe Sixty-One through Roe Eighty are NL hereinafter collectively and severally referred to as the "Fidelity" in the remainder of this N 01 [Cross-Complaint. N 0) 8. JPB is informed and believes, and on that basis alleges, that each of the N \l fictitiously named defendants is in some way legally responsible for the acts alleged in N 00 this Cross-Complaint. -3- Case No. 17CIVOO786 134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD A The Federal Mandate to Implement Posit_ive Train Control 9. In 2008, a‘Union‘ Pacific freight train and a Metrolink commuter passenger train collided head-on in the Chatsworth district of Los Angeles, causing injuries to hundreds of passengers as well as causing 25 deaths.1 The accident was primarily ©00\lO)U1-l>~00l\>_ attributable to human error, in the form of a distracted engineer. Had a Positive Train Control (“PTC") system2 been installed on the trains, the horrific collision may have been prevented. The National Transportation Safety Board (“NTSB”) has been recommending positive train control for over 40 years. Between 2004 and 2014, the NTSB has completed investigations of 25 train accidents — which took approximately 65 lives, O injured thousands, and caused millions of dollars in damages — which the NTSB believes —\ would have been prevented or mitigated had PTC been implemented.3 . ‘ r N 10. In direct response to the tragic Chatsworth train collision and upon NTSB O.) recommendation, Congress enacted the Railroad Safety Improvement Act of 2008, which I A mandated the development and implementation of PTC on all Class I and commuter 01 railroads by December 31, 2015.4 PTC systems use integrated technologies to prevent 0) train-to-train collisions, overspeed derailments, and movement of trains through switches \l left in the wrong position, as well as prevent train incursions into work areas. PTC (X) systems allow a train to receive information about its location, understand where it can NNNNNNNNN—‘AAA—L—LA—XAA safely travel, communicate with other trains on nearby tracks, and prevent unsafe 0.0 movement. The US. Department of Transportation, Federal Railroad Administration —\ 1 Rubin, Simmons, and Landsberg, 'Total Destruction': At Least 17 Die in Head-on N Metrolink Crash, Los Angeles Times (September 13, 2008) http://www.latimes.com/IocaI/Ia-me-traincrash13-20083ep13-storv.htm| [as of 00 November 28, 2016], 2 A In general, positive train control systems allow for the monitoring and controlling of train movements, with a safety backup to automatically stop trains. 01 3 See National Transportation Safety Board, Most Wanted List, Implement Positive Train 0) Control Systems (2014) http://www.ntsb.qov/safetv/mwl/Paqes/mwl8 2014.aspx [as of ’ November 2016]. \l 4 See Rail Safety Improvement Act of 2008, Pub. L. No. 110-432, 122 Stat. 4848 (2008), 00 at Section. 104. ' -4- Case No. 17CIV00786 134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD (“FRA”) published a final rule in 2010 regulating PTC systems design, installation, testing, and implementation, and is also authorized to assess significant fines and penalties, and even prevent operation, where railroads fail to comply with the PTC mandate.5 11. The public safety risks associated with delayed implementation of PTC are (OQNOO'IAOONA significant. Even after the Chatsworth collision and enactment of the Railroad Safety Improvement Act, preventable train accidents continue to occur. For example, in December 2013, a Metro-North Railroad Hudson Line train derailed in New York City, caused in part by an engineer failing asleep, killing four and injuring dozens.6 In May 2015, an Amtrak train derailed in Philadelphia, likely caused by engineer distraction, killing eight and injuring more than 200.7 Most recently, in September 2016, a New Jersey Transit train crashed at the Hoboken Terminal in New Jersey during rush hour, killing one and injuring more than 110‘others, including the train operator.8 A" of these accidents could have been prevented had the trains been operating with PTC. NTSB Chairman Christopher Hart believes that, "[e]very PTC-preventable accident, death and injury on tracks and trains affected by the law will be a direct result of . . . the delayed implementation of this life-saving technology.”9 12. Caltrain is an integral part of the economic engine driving Silicon Valley, NMNNNNNNN—l—X—A—LAAA—A—L—L WNOm-hWN—‘OCOWNOU'l-BWN—‘O 5 See 49 C. F. R Part 236, Subpartl. 6 Flegenheimer, Matt, Metro- North Train Sped at 82 M. P. H. Ahead of Curve In Fatal Crash, New York Times (December2, 2013), http: //www. nvtimes. com/2013/12/03/nvreqion/metro-north-train-accident- bronx. html?Daqewanted=all (as of November 23,2016). 7 Mele, Christopher, Amtrak Agrees to $265 Million Settlement In Philadelphia Crash that Killed Eight, New York Times (October 27, 2016), http: //www. nvtimes.com/2016/10/28/us/amtrak-265-million-settlement—philadelphia-crash- that-killed-eight.html (as of November 23, 2016). 8 McGeehan, Rosenberg and Fitzsimmons, Hoboken Train Crash Kills 1 and Injures Over 100, New York Times (September 29, 2016), http://www.nvtimes.com/2016/09/30/nvreqion/new-iersev-transit-train-crash-hoboken.html (as of November 23, 2016). 9 NTSB "2016 Most Wanted List,"_ available at http://www.ntsb.qov/news/press- releases/Pages/PR20160113.a§px. -5- Case No. 17CIV00786 134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD A providing public commuter rail passenger service between San Francisco and Gilroy. N Based on the annual ridership count conducted'in January and February of 2016, 00 Caltrain serves an average of 62,416 passengers per weekday, an increase of 7.2 A percent over 2014 and 83 percent since 2010. Supported by this growing ridership — 01 which is anticipated to keep growing due to the continued job growth in Silicon Valley and 0) increased vehicular traffic congestion along the US. 101 corridor— Caltrain’s primary m,\l concern continues to be the safety of its riders and the rail system. JPB believes that implementing PTC is not only federally required, but it is also a critical tool for assuring (O Caltrain’s safe, reliable, and efficient rail operations. JPB has acted quickly to fulfill the ._L federal mandate to implement PTC. ‘ ._L FIRST CAUSE OF ACTION ...x Breach of Contract (Against Parsons, Including Roe One through Roe Twenty) _L _x 13. JPB realleges and incorporates herein by reference paragraphs 1, 2, and 6 through 12, above. . _x.._\ 14. On October 6, 2011, the JPB Board of Directors awarded Contract Number _\ 10—PCJPB-T—021 to Parsons‘(the "Contract"), for Parsons to design, procure, test, and _\ install Caltrain's Communications Based Overlay Signal System ("CBOSS") PTC —L mNmmAwNAoommLWN—‘O system.10 While JPB followed a public and competitive solicitation process, JPB did n_ot N select the lowest cost proposal for contract award. Instead, JPB selected Parsons [\J because Parsons: (1) represented itself as the foremost leader in train technology; N (2) promised to exercise the degree of professional care, skill, efficiency and judgment of N contractors with special expertise in railroad technology and train control systems; and N (3) promised to comply with all current and successor laws and regulations.11 In addition, N 10 N See Peninsula Corridor Joint Powers Board, Resolution No. 2011-43‘ (October 6, 2011). 4 N 11 See Exhibit A, Contract, Sections 2 and 15. The attachments and documents N incorporated into the Contract are extremely voluminous, and for that reason'are not -6- Case No. 17ClV00786 134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD A Parsons promised to staff its positions with qualified personnel, and Parsons emphasized N that it was committed to maintaining the continuity. of its key personnel. Parsons' 00 proposal is incorporated into the Contract, a true and correct excerpt of which is attached A hereto as Exhibit A and incorporated herein by reference. Since 2011, the Contract has . 01 been amended to incrementally increase the scope of work and related costs, with a total O) current Contract amount of $159,761 ,261. \l 15. Given the federally—mandated requirement to implement PTC by 00 December 31, 2015, and the equally important, if not more important critical public safety CD concerns, Parsons' proposed schedule was a crucial component of the Contract. JPB _x O issued Notice to Proceed to Parsons on January 27, 2012 and the Contract required A -\ Initial In-Service Acceptance12 no later than October 31I 2015, with Final Acceptance _L N two hundred and ten days thereafter.13 _x 00 16. JPB has performed all terms, conditions, and obligations of the Contract to ...x h be performed on its part, excepting only those that have been waived or excused by _x U1 Parsons' actions or failures of performance. _\ 0) 17. Unfortunately for JPB, and the over 18 million people served by Caltrain _x \I each year, Parsons has breached the Contract in numerous ways, including but not _.L m limited to the following: _\ (O N0 N —-‘~ attached to this Cross-Complaint. An excerpt of the Contract is attached to this Cross- Complaint, and the entire Contract will be made available at trial. NN 12 To achieve "In-Service Acceptance" Parsons must complete over 20 steps to JPB's N (.0 satisfaction, including fully testing and configuring for CBOSS PTC system operation and receipt of the Federal Railroad Administration's written approval for placing the CBOSS NA PTC system in revenue service. For a more detailed description of ln-Service N U" Acceptance, see Exhibit A, Contract, Attachment A, Part 2, Scope of Work, section 2.0.1. 13 "Final Acceptance" also requires Parsons to complete over 20 provisions, including [\J 0) that the Caltrain PTC system continue to meet the PTC interoperability requirements. For a more detailed description of Final Acceptance, see Exhibit A, Contract, N \l Attachment A, Part 2, Attachment A, Part 2, Scope of Work, section 2.0.2. and Exhibit A, N 00 Section 1001, Part 1.02. -7- Case No. 17ClV00786 134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD Parsons" Failure to Deliver t_he Complete CBOSS PTC System in@015 I 18. Despite its repeated assurances, made both orally and in writing, that it would meet the In-Service Acceptance deadline, Parsons failed to deliver the CBOSS PTC system on October 31, 2015. Prior to October 2015, Parsons submitted numerous OOQNODU'l-hOONA monthly reports promising that it would achieve the In-Service Acceptance deadline of October 31, 2015. Unfortunately, despite its many assurances, Parsons failed to meet the October 31, 2015 deadline. Parsons must have known that it could not meet the October 31, 2015 deadline, because Parsons continually failed to meet crucial interim milestones without notifying JPB that such failures would impact the overall deadline of t October 31, 2015. . 19. Vlfith the December 31, 2015 deadline looming, on October 29, 2015 Congress extended the PTC implementation deadline by three years to December 31, 2018.14 This deadline did not require delay in PTC implementation, but merely permitted it. Mindful of the critical public safety issues involved, JPB did not relax the Contract requirements that Parsons achieve Initial In-Service Acceptance no later than October 31, 2015 and Final Acceptance two hundred and ten days thereafter.15 20. Following the Congressional extension, which did not alter the Contract schedule, Parsons began to unilaterally delay the In-Service Acceptance deadline without NMNNNNNNNAA-A—l—LA—LA—X—k JPB approval. This was a clear breach of the Contract requirement that JPB approve mflo’m-tAOOWNOm-kWNA schedule changes. For example, Parsons began submitting monthly progress schedules beginning in April 2015 (even before any Congressional extension), using December 31, 2015 as its new In-Service Acceptance date.16 Beginning on February 5, 2016, Parsons advised JPB in writing that it would deliver the CBOSS PTC 14 See Surface Transportation Extension Act, Pub. L. No. 114- 73, 129 Stat. 568 (2015), at Section 1302. 15 In fact, had Parsons complied with the Contract schedule, JPB would not have needed an extension to the original December 31, 2015 deadline. 16 The Contract required In-Service Acceptance by October 31, 2015. -3- Case No. 17CIV00786 134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD system by October 31 2016 , — a full year later than the Contract requirement — even though JPB did not approve the extended schedule. It subsequently became clear that Parsons could not even meet this extended October 31,2016 deadline, and on or about August 31, 2016 Parsons acknowledged that it would deliver the CBOSS PTC system at omummAwN—x least two years late, predicting an October 31, 2017 delivery date. Most recently, at a meeting on or about October 19, 2016, Parsons admitted to JPB that the October 2017 deadline would be further delayed to an unspecified date in 2018. As of October 2016, Parsons essentially did not know when, if at all, it could deliver the CBOSS PTC system. Parsons' failure to deliver the CBOSS PTC system by October 31, 2015 is an _L unequivocal breach of the Contract. —‘O _\ flilure to Deliver t_he On-_Board Silosvstem ._\ N 21. Parsons subcontracted with GE Transportation Systems Global Signaling, ._\ 00 LP to design and install the core subsystem of the CBOSS PTC, the On-Board System,17 _L L by June 2014. However, instead of achieving the delivery date of June 2014, Parsons _L 01 delivered to JPB an Excel spreadsheet entitled "30’Step Plan to Completion," proposing _\ a new completion date of May 18, 2015. This date was almost a year behind schedule, ._\ and Parsons' spreadsheet failed to describe the impact this delay would have on the _L OCCCIJNO) overall Project schedule. Parsons also proposed to release various iterations of the _L system in a piecemeal approach rather than delivering the entire subsystem as required. N In July 2014, JPB notified Parsons that the delays were unacceptable, the piecemeal N —\ approach was unlikely to succeed, and JPB was seriously concerned with Parsons’ lack of progress. Nonetheless, Parsons persisted in its approach. In addition, an or about N'N July 8, 2014, Parsons notified JPB that its subcontractor GETS had created "an alliance" (JON N -h 17 N 0'1 The On-Board System is a complex |nteroperabIe-Incremental Train Control System that includes an on—board computer that will use its location, onboard database, and N 0) information received from the back office and wayside equipment to monitor and control train movements (e.g., location determination, target enforcement, predictive braking, N \l speed enforcement, wireless crossing activation). The On-Board System will also allow N (I) for interoperability so that the C‘altrain system can communicate with other PTC systems. -9- . . Case No. 17CIV00786 1 3427347 .2 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD —.‘L with Alstom, and that the On-Board System would be supplied by Alstom rather than GETS. Under the Contract, JPB reserved the right to approve all subcontractors, yet Parsons never requested, and JPB never provided, formal approval of Alstom, who nevertheless began work as the key On— Board System subcontractor. 22. Parsons continued to fall further behind schedule throughout 2014. Only on (OWNODCJAOON May 8, 2015 did Parsons formally notify JPB that Parsons would fail to meet even its unauthorized extended deadline of May 18, 2015. Moreover, on May 8, 2015, Parsons provided a new plan that fragmented the On-Board System delivery milestones even further, stating that its plan was to design a "Revenue Sen/ice Demonstration" ("RSD") _L 0 version of the On-Board System by May 22, 2015. But the RSD version would not be —\ _\ interoperable — meaning it could not communicate with the PTC system of another host _L N railroad, a key requirement of the Contract —— and it would not include other important _\ (A) functionalities required in the Contract. Parsons told JPB on May 8, 2015 that it would _\ A not deliver these functions until December 31, 2015. Furthermore, on May 12, 2015, _x 01 Parsons admitted to JPB that the December 31, 2015 deadline was not actually feasible _L O) and the full delivery was more likely to occur during the first quarter of 2016. 23. As time progressed, Parsons' repeated delay in providing the On-Board _\_\ CD‘I System obviously made it impossible that Parsons could meet the stated deadline for In- _x (0 Service Acceptance deadline. Nonetheless, Parsons' monthly schedules continued to N0 include entirely unrealistic time frames for In-Service Acceptance. For example, on NA November 4, 2015, after Parsons had already breached the Contract by failing to meet -l\) m the October 31, 2015 deadline, Parsons made a presentation to JPB that included a N 00 patently faISe schedule, stating that it would have the RSD application ready to be NA submitted to the US. Department of Transportation, Federal Railroad Administration by N 01 December 6, 2015. This would have allowed Parsons essentially one month to complete N 0) all testing and in any event would have made the December 31, 2015 deadline for In- N \l Service Acceptance impossible. Indeed, by December 3, 2015, Parsons was N 03 backpedaling from its commitment to submit the RSD application in December, made ' ' -10- Case No. 17CIV00786 134273472 CROSS-COMPLAINT OF PENINSULA CORRIDOR JOINT POWERS BOARD less than one month previously, and was already suggesting that a more realistic date was June 2016. As a purported leader in train technology, Parsons must have known that its repeated submission of inaccurate schedules was false and unachievable. 24. Following Parsons' unilateral and unauthorized decision to extend the In- cooououm-hcow—x Service Acceptance deadline to October 31, 2016, Parsons made a similar unilateral and unauthorized decision to extend its deadlines to deliver the On-Board System. For example, on or around February 2016, Parsons stated that the On—Board System version 3.3.3, which does not meet the Contract's requirements, would not be delivered until March 17, 2016. Parsons told JPB that it would deliver the final version 3.3.4, with _L 0 functionalities required by the Contract, on August 9, 2016. .Unfortunately, Parsons also _\ —¥ missed that deadline. To date, Parsons still has not provided the On-Board System, and _L N has failed to commit to a date certain for when it will provide the On-Board System. _x 00 Failure to Exercise Specializil Knowledge, Skill and Expertise _x -h 25. Parsons also loaded and tested its software without following required _L 01 protocols, potentially causing significant problems. The FRA sets safety standards for all _\ 0) stages of PTC development, inCluding field testing requirements.18 In compliance with