2007 – Page 6 – Construction Law

General Contractor Bears Burden of Disproving Claim for Employer Contributions by Labor Union Under Collective Bargaining Agreement

Aug 25 2007

Kane Builders, Inc. v. S. New Jersey Bldg. Laborers Dist. Council, LIUNA, 2007 WL 2416470 (D.N.J. Aug. 21, 2007)

In this case, a labor union brought various claims against a general contractor (“GC”) stemming from a collective bargaining agreement (“CBA”) entered between the Union and the GC. Briefly stated, the union asserted a multi-million dollar claim for unpaid employer contributions that the GC would have been obligated to pay, had it not violated the CBA by not using union laborers on over 100 “covered projects” in New Jersey. Relying on ERISA’s record keeping provision (29 U.S.C. § 1145), the union argued that the GC bore the burden of proving which hours worked were not subject to contribution.

The court, following 11^th Circuit precedent, adopted the burden-shifting approach. It determined that the union had satisfied its initial burden of setting forth sufficient evidence concerning the amount and extent of work performed through an expert auditor’s report. The court ruled that, at that point, the burden of proof shifted to the GC to disprove, or raise an issue of fact, regarding the extent of work performed on covered projects and/or whether covered employees performed the work. Because the GC was unable to produce any records to disprove the union’s claim, the court entered partial summary judgment on the issue of damages.

Courts Apply Heightened Pleading Standards to Fraud Claims in Adversary Proceeding

Aug 20 2007

In re Andrew Velez Constr., Inc., 373 B.R. 262 (Bankr. S.D.N.Y. 2007)

This adversary proceeding was brought by Andrew Velez Construction, Inc. (“Velez”), a general contractor on a major construction project for Con Edison Company of New York, Inc. (“Con Edison”), against Con Edison. After substantial cost overruns, delays and changes in the scope of work, the parties each claimed that the other committed pre-petition defaults under their contract. The parties asserted numerous causes of action, including claims for: fraudulent transfers, turnovers, declaratory relief, fraud, fraudulent inducement, quantum meruit, unjust enrichment, trust fund violations, and defamation. Because the court was presented with Con Edison’s motion to dismiss, this decision examined the pleading standards for each claim.

Court Favors Arbitration in Disputes Between Contractor and Subcontractor

Aug 19 2007

Actus Lend Lease LLC v. Integrated Bldg. Res. Dev. LLC, 2007 WL 2362389 (N.D.N.Y. Aug. 14, 2007)

Here, defendant moved to dismiss the action for breach of its subcontract with plaintiff-contractor on the basis that the action was subject to binding arbitration. According to the subcontract, a dispute between the parties must be resolved by mandatory arbitration when the dispute (1) arises in connection with the subcontract and either party elects, by written notice, to submit the matter to binding arbitration; or (2) involves the correlative rights and duties of the owner. The subcontract also provided that a party must provide written notice to elect binding arbitration.

In support of its motion, defendant submitted a notice of motion and an affirmation with exhibits; however, it did not submit a memorandum of law to set forth its legal arguments. The court held, therefore, that factual disputes existed as to whether the alleged dispute was subject to arbitration under the terms of the agreement. However, the court granted defendant leave to renew its motion to dismiss upon submission of the proper papers, reasoning that there is a strong public policy in favor of arbitration.

Scope of Arbitration Agreement in Home Warranty to be Determined by Arbitrator, Not Court

Aug 16 2007

Mercedes Homes, Inc. v. Colon, 966 So.2d 10 (Fla. Dist. Ct. App. 2007)

In this case, an individual entered into an agreement with a contractor for construction of a new home, which included a provision requiring the contractor to install sod. When the home buyer fell in his yard eleven days after closing, he brought a personal injury claim against the contractor claiming it had installed the sod negligently. The contractor moved to compel arbitration of the personal injury claim, based on the arbitration agreement contained in the home warranty purchased by the home buyer. In response, the buyer argued that he was not required to arbitrate his personal injury claim because negligence claims were expressly excluded from the home warranty.

Contractor Not Required to Provide Pre-Suit Notice, May Plead Both Negligent Construction and Breach of Contract

Aug 10 2007

Centex Homes v. Mr. Stucco, Inc., 2007 WL 2264622 (M.D. Fla. Aug. 6, 2007)

In this case, a general contractor brought suit against several subcontractors for breach of contract and negligent construction of residences in the general contractor’s development. In response, the subcontractors moved to dismiss the action on the grounds that the contractor had failed to provide notice prior to filing the action as required by section 558.004 of the Florida Statutes. The subcontractors also moved to dismiss the negligence claim on the grounds that the contractor had not alleged any tort injury separate from the breach of contract claim in order to survive the economic loss rule.

Considerations in Exercise of Court’s Power to Grant Anti-Suit Injunction

Aug 08 2007

(1) Starlight Shipping Co. (2) Overseas Marine Enters. Inc. v. (1) Tai Ping Ins. Co. (2) Int’l Econ. & Trading Corp., Wugang Group, 2007 WL 2186944, [2007] EWHC 1893 (Queen’s Bench Div., Commercial Ct.)

In this case, the owner (Starlight) and the manager of a ship (Overseas) applied for an injunction restraining proceedings brought by the respondent insurer (Tai Ping) in the Maritime Court of Wuhan in China. Starlight had chartered its vessel subject to an arbitration agreement which was incorporated into a bill of lading to which a sub-charterer (Wugang) had then become a party. The ship and cargo were lost en route from Brazil to China. Tai Ping commenced proceedings for recovery of sums paid in indemnification of Wugang. Starlight and Overseas disputed jurisdiction of the Chinese court on grounds of breach of the arbitration agreement, and sought an injunction in the English Commercial Court in restraint of those proceedings. Tai Ping and Wugang argued that they were not bound by the arbitration agreement as a matter of Chinese law. Read More

Existence of Dispute for Purposes of Obtaining Stay of Judicial Proceedings

Aug 07 2007

Loon Energy, Inc. v. Integra Mining, 2007 WL 2139992, [2007] EWHC 1876 (Queen’s Bench Div., Commercial Ct.)

In this case, the court considered the application of s.9 of the Arbitration Act 1996 which requires it to stay its proceedings if the dispute before it is one falling within the scope of an arbitration clause. Loon sought and obtained specific declarations in relation to oil exploration rights under English law contracts. In the meantime, Integra launched arbitration in accordance with the terms of a Texas law confidentiality agreement into which the parties had entered prior to concluding the English law contracts. Loon amended its own claim for relief to include a declaration that the confidentiality agreement had been superseded. Integra sought to stay Loon’s application under s.9. Loon countered that at the time it issued its own claims there was no dispute in existence in relation to the confidentiality agreement and that therefore there was no obligation on the court under s.9. Read More

Insurer Has Duty to Defend General Contractor for Injuries Arising Out of Subcontractor’s Work Where General Contractor is Named as Additional Insured on Subcontractor’s Policy

Aug 06 2007

Parker v. John Moriarty & Assocs., Inc., 2007 WL 2429719 (Mass. Super. Ct. July 29, 2007)

This case arose from personal injuries suffered by the plaintiff while working at a construction site in Brighton, Massachusetts. The general contractor of the construction project subcontracted some aspects of the project; plaintiff was an employee of the subcontractor. The plaintiff filed a complaint, asserting a negligence claim against the general contractor for negligently failing to provide a safe workplace and the general contractor settled. By third-party complaint, the general contractor brought claims against the subcontractor and the subcontractor’s insurer for indemnification, contribution, and breach of contract for failure to provide insurance. The insurer moved for summary judgment on all claims against it, arguing that the insurance policy did not provide coverage on the claims. The insurer argued that it did not owe a duty to defend the claims and did not have a duty to indemnify because the general contractor was not covered for the claims under the additional insured endorsement and such claims were excluded from coverage under the cross-suits provision. The general contractor opposed and filed a cross-motion for summary judgment, asserting that, as a matter of law, the policy provided coverage in that the insurer had a duty to defend and to indemnify for the settlement of the claims. The subcontractor also moved for summary judgment in its favor on the breach of contract claim for failure to provide insurance, arguing that it had named the general contractor as an additional insured on the policy. Read More

Insurer Not Entitled to Summary Judgment on Breach of Performance Bond Claim

Aug 05 2007

Klewin Bldg. Co. v. Heritage Plumbing & Heating, Inc., 840 N.Y.S.2d 144 (N.Y. App. Div. 2007)

In this case, plaintiff was the construction manager for a building project and had entered into a subcontract with defendant Heritage Plumbing & Heating pursuant to which Heritage was required to supply plumbing materials and services for the project. Defendant Hartford Fire Insurance Company provided a performance bond to Heritage for the benefit of Klewin. Hartford’s obligations to Klewin under the bond would only arise upon certain conditions, including, among other things, Klewin’s declaration that Heritage had defaulted and a termination of Heritage’s right to complete the subcontract.

Award Overturned for Serious Irregularity Where Decision Based on Issues Not Argued

Aug 03 2007

OAO N. Shipping Co. v. Remolcadores De Marin SL, 2007 WL 2139977, [2007] EWHC 1821 (Queen’s Bench Div., Commercial Ct.)

In this case, buyers of a tug boat had brought a claim for damages for a misrepresentation by the sellers as to the total rated power of the vessel’s engine which had induced the contract. The sellers argued, inter alia, that the representation, made in the form of a certificate of total rated power, was true, that the buyers had not relied on the representation, and had not shown that the representation was false. The tribunal held that there had not been a representation by the sellers as to the “truth” of the certificate, but only as to its “authenticity.” The buyers appealed the award under s.68 of the Arbitration Act 1996 (the “Act”) on the basis that no argument had been heard on the point. Read More

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