Case Summaries – Page 12 – Construction Law

Finding Surety Sufficiently Pled for Quia Timet, Court Denies Motion to Dismiss

Sep 20 2008

Safeco Ins. Co. of America v. Tarragon Corp., 2008 WL 427969 (M.D. Fla. Sept. 16, 2008)

In Safeco, a third-party sued a general contractor and a surety in state court to recover against a Section 713.24 lien transfer bond. Because the contractor refused to honor its obligations to the surety under their indemnity agreement, the surety then sued the contractor in federal court, asserting a claim quia timet, based on the future monies that the third-party was demanding on the bond. Quia timet allows a person to seek equitable relief from future probable harm to a specific right. Under Florida law, quia timet relief is not appropriate without proof that the surety realistically faces loss under the bond and is in jeopardy.

The Class of One Theory of Equal Protection has No Application in the Public Hiring Context

Sep 12 2008

Douglas Asphalt Co. v. Qore, Inc., 541 F.3d 1269 (11th Cir. Sept. 2, 2008)

In Douglas Asphalt, a highway paving contractor sued State Department of Transportation officials, in their individual capacity, under 42 U.S.C. Section 1983. The contractor claimed that the Department wrongfully singled out the contractor and treated it differently than other paving contractors in violation of the equal protection clause. The contractor argued that the officials were not shielded from liability by their qualified immunity defense because the contractor was alleging a “class of one” equal protection claim.

The Eleventh Circuit disagreed and held that the reasoning behind the U.S Supreme Court’s 2008 decision in Engquist v. Oregon, 128 S. Ct. 2146 (2008), a government-employee relationship case, applied in the government contractor context. Specifically, there is a “crucial difference between the government exercising its power to regulate or license, as lawmaker, and the government acting as proprietor to manage its internal operation.” Employment decision making, including the hiring of government contractors, is “often subjective and individualized, resting on a wide array of factors that are difficult to articulate and quantify.” Thus, the class of one theory of equal protection has no application in the public hiring context—otherwise every government hiring decision would become a constitutional matter.

Contractor Authorized by Condo Association to Work on Common Areas May Sue Association as Unit Owners’ Representative

Sep 10 2008

Trintec Constr., Inc. v. Countryside Village Condo. Assoc., 992 So. 2d 277 (Fla. Dist. Ct. App. 2008)

This case addresses whether the term “owner” for the purpose of applying mechanic’s lien law to a condominium property and improvements to its common elements refers to: (a) each and every unit owner in the condominium, or (b) the condominium association created by the declaration. The association argued that lien law’s use of “owner” means each individual condominium owner such that those owners are indispensable parties. The Court, analyzing the construction lien statute and Florida civil procedure rules as to condominium associations held that the unit owners are not indispensable parties and the roofing contractor could proceed against just the association.

Contracts Cancelled Because of Illegal Actions May be Unenforceable

Jul 30 2008

FCI Group, Inc. v. City of New York, 2008 WL 2796591 (N.Y. App. Div. July 22, 2008)

In this case, plaintiff contractor sued to recover the outstanding balance for work already completed on a construction project after the city cancelled the contract because of plaintiff’s attempted bribery of two city officials. The Appellate Division, First Department, granted defendants’ motion for summary judgment, holding that: (i) “plaintiff agreed to conduct itself ethically…and consented to the imposition of penalties for violating the contractual prohibition against dispensing monetary inducements to City workers;” and (ii) the illegal conduct at issue was central to plaintiff’s performance under the contract.

The court rejected defendants’ alternative argument that the contract’s alternative dispute resolution clause required dismissal in favor of arbitration. The court held that the narrow ADR provision only applied to specified disputes in accordance with the intent of the parties and could not be interpreted so as to render the language limiting its scope mere surplusage.

Washington’s Limited Liability Company Act is Applicable Retroactively and Permits Liability for Individual LLC Members or Managers

Jul 01 2008

Emily Lane Homeowners Ass’n v. Colonial Dev., LLC, 139 Wash. App. 315, 160 P.3d 1073 (2007)

In this case, Emily Lane Homeowners Association sought damages against Colonial Development, LLC and its individual company members and managers. Emily Lane alleged that members of Colonial failed to act in a timely manner to address warranty claims. When Emily Lane filed suit on July 19, 2005, Colonial had already dissolved and filed a certificate of cancellation. The trial court granted summary judgment, finding that Emily Lane’s action against Colonial could proceed even though Colonial had already dissolved. However, the trial court also dismissed Emily Lane’s claims against the members and managers of Colonial, presumably finding that they were immune from liability as individuals.

On appeal, there were two main issues. First, whether the 2006 amendment to Washington’s Limited Liability Company Act, RCW 25.15, could be applied retroactively to permit an action against a dissolved limited liability company (LLC). Second, whether members and managers of a company could personally be liable under the Limited Liability Company Act if they did not properly wind up the dissolution of the LLC. Read More

Finding No Bad Faith, Court Enforces Termination for Convenience and Conversion Provisions Included in Parties’ Contract

Jun 23 2008

Stony Brook Constr. Co. v. Coll. of N.J., 2008 WL 2404174 (N.J. Super. Ct. App. Div. June 16, 2008)

This appeal arose out of a lawsuit filed by a contractor, Stony Brook Construction Co. and its surety, Fidelity & Deposit Company of Maryland (F & D), against The College of New Jersey (TCNJ), in connection with the construction of a new three-story building on the TCNJ campus. In August 1998, TCNJ entered into multiple prime contracts for the construction. TCNJ retained Stony Brook to perform the general construction work for its bid price of $3,783,565. The anticipated completion date for the project was August 17, 1999. TCNJ retained a construction management firm, CMM, to coordinate and schedule the project. Two TCNJ employees (Rogers and Bressler) were also designated as project supervisors. Due to numerous delays and disagreements between the parties, the project remained unfinished as of the anticipated completion date.

In October 1999, TCNJ terminated its contract with Stony Brook for nonperformance. On November 5, 1999, TCNJ and F & D executed a takeover agreement, by which F & D agreed to complete the work in exchange for the unpaid balance of the contract price. Problems continued, and in September 2000, F & D ceased performance, claiming that TCNJ breached the takeover agreement. TCNJ hired another contractor to complete the general construction. Read More

Pay-When-Paid Clause Does Not Shift Risk of Non-Payment to Subcontractor

Jun 20 2008

Otis Elevator Co. v. Hunt Constr. Group, Inc., 859 N.Y.S.2d 850 (N.Y. App. Div. 2008)

In this case, plaintiff subcontractor sought damages resulting from an alleged breach by defendant general contractor for payments due under the subcontract. Both parties moved for summary judgment. Defendant argued that its receipt of payment from the owner was a condition precedent to its obligation to pay plaintiff, and that it was under no obligation to pay because it had not yet received payment from the owner. The court rejected this argument, holding that “the pay-when-paid clause in the subcontract merely regulated the time of payment, and did not shift the risk of owner nonpayment to plaintiff.” Because plaintiff submitted evidence establishing its entitlement to payment, plaintiff’s motion for summary judgment was granted, and defendant’s motion was denied.

Showing that Adequate Safety Devices were Absent is Sufficient to Establish Prima Facie Liability under NY Labor Law §240(1)

Jun 19 2008

McCarthy v. Turner Constr., Inc., 859 N.Y.S.2d 648 (N.Y. App. Div. 2008)

In this case, plaintiff brought claims under Labor Law §240(1) for injuries sustained when the unsecured ladder he was standing on to drill holes in the ceiling tipped over and he fell to the floor. The Supreme Court granted summary judgment to plaintiff on the issue of liability under the Labor Law and the Appellate Division, First Department, affirmed.

The court held that, for purposes of establishing a prima facie case of liability under the statute, the plaintiff need only show that adequate safety devices to prevent the ladder from slipping were absent; plaintiff is not required to show the ladder was defective. Further, the owner and general contractor would still be liable even if the apprentice electrician working with plaintiff disobeyed an instruction to hold the ladder steady, as this is not the type of “safety device” contemplated by the statute.

Self-Performance by General Contractor Forbidden under New Jersey Community College Contracts Law

Jun 17 2008

D.A. Nolt, Inc. v. Camden County Coll., 2008 WL 2277095 (N.J. Super. Ct. App. Div. June 5, 2008) (Unpublished)

In this case, a general contractor sued its client for breach and sought declaratory judgment when the college refused to allow the general contractor to self-perform work that had been assigned to a Small Business Enterprise (SBE) in the construction bid. The trial court granted summary judgment in favor of the college and dismissed the complaint. On appeal, summary judgment was affirmed. The appellate court upheld the trial court’s conclusion that self-performance is equivalent to substitution of another sub-contractor because the result is the same – the subcontractor on the bid does not perform the work. Moreover, both outcomes would thwart the aim of New Jersey County College Contracts Law (“CCCL”) to foster competitive bids by disallowing bid shopping. As substitution of another contractor is not permitted under the CCCL, then similarly, self-performance by the general contractor is likewise not permitted.

Claims Against Architectural Firm Fell Under Professional Services Exclusion Based on Allegations of Underlying Complaints

Jun 15 2008

Wimberly Allison Tong & Goo, Inc. v. Travelers Prop. Cas. Co., 2008 WL 2357863 (D.N.J. June 5, 2008)

In this case, plaintiff architectural firm sued commercial general liability (CGL) and excess liability insurers seeking damages and a declaratory judgment that insurers had a duty to defend it in the underlying suits, which arose from the collapse of a parking garage designed by plaintiff. Both insurers denied coverage under provisions that excluded from coverage injuries arising out of plaintiff’s provision of professional services. Both sides moved for summary judgment. The court granted summary judgment for the defendants finding that all the claims filed against plaintiff in the wake of the garage collapse fell within the professional services exceptions of both policies, based on the factual pleadings of each of the complaints.

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