Case Summaries – Page 7 – Construction Law

The Federal Prompt Pay Act Does Not Create A Private Right Of Action

Oct 24 2011

United States of Am. ex rel. IES Commercial, Inc. v. The Continental Ins. Co., Inc., Civ. Action No. 11-0985 (ESH), 2011 WL 4526018 (D.D.C. Sept. 30, 2011)

In this case, the court ruled that the Federal Prompt Payment Act (31 U.S.C. §§3901 et seq.) (the “PPA”) does not provide a subcontractor with an independent cause of action or an implied right of action against a Prime Contractor (or presumably its surety).

A prime contractor was awarded a contract by the United States Architect of the Capitol to perform certain design/build work on utility tunnels connecting the U.S. Capitol Power Plant to the Capitol. Included was electrical work which was, in turn, subcontracted to the Plaintiff, IES Commercial, Inc. (“IES”) in the sum of $118,600.00. Following disputes relating to certain changes and delays between the Prime and IES, IES sued the Prime’s Miller Act (40. U.S.C. §§3131 et seq.) payment bond surety. Thereafter, the Prime intervened and IES sued the Prime for (a) breach of contract and (b) violation of the PPA.

Standards Applicable to Construction Site Safety, Conditions and Injuries

Oct 01 2011

Cain v. Bovis Lend Lease, Inc., 817 F. Supp. 2d 1251 (D. Or. 2011)

A subcontractor employee fell from a ladder at a hospital renovation site and suffered injuries. The injured worker sued the hospital, the renovation general contractor, the ladder fabricator (a subcontractor) and the architect. The worker’s direct employer was statutorily immune from liability. The case is the review of summary judgment motions by all parties resulting in a recommended series of decisions by a federal magistrate.

Appellate Court Upholds Contract Requirement For Arbitration of Disputes

Sep 25 2011

Gemstone Builders, Inc. v. Stutz, 261 P.3d 64 (Or. Ct. App. 2011)

Contractor sued homeowners, who had hired contractor to build a home for them. Contractor sued for breach of contract, unjust enrichment and fraud. The parties disagreed regarding the interpretation of their contract as it pertained to arbitration. The contractor argued that the terms were irreconcilably contradictory, making the arbitration provisions unenforceable. The homeowner sought to compel arbitration. Addressing the issue, the trial court denied defendants’ petition to compel arbitration and defendants appealed.

Recent Third Circuit Decision Provides Insight into Pennsylvania’s Approach to CGL Coverage for Faulty Construction Claims

Sep 23 2011

By: Richard F. Paciaroni & Amy Ream, K&L Gates, Pittsburgh

Despite substantial uniformity in language among commercial general liability (“CGL”) policies, the extent of coverage can vary depending upon which state’s law applies. One contested issue among the states is whether CGL policies should extend coverage for property damage caused by faulty construction, and what the extent of any such coverage should be. This article discusses a recent opinion reflecting the current status of Pennsylvania law with respect to CGL coverage for faulty construction claims, and briefly touches on the policy behind Pennsylvania’s existing approach.

A recent Third Circuit decision applying Pennsylvania law, Specialty Surfaces International, Inc. v. Continental Casualty Co., addressed the scope of an insurer’s duty to defend and indemnify a contractor for faulty workmanship claims under a CGL policy. In Specialty Surfaces, the source of the defective construction allegations stemmed from a project to install synthetic turf fields and drainage systems for four schools in the Shasta Union High School District (“Shasta”). Empire and Associates, Inc. (“Empire”) was hired as a subcontractor to provide and install synthetic turf fields manufactured by Specialty Surfaces, Inc., (“Specialty Surfaces”) as well as to install drainage systems. Empire and Specialty Surfaces, working together as “Sprinturf,” provided an eight-year warranty for each of the fields.

To continue reading and to view footnotes, click here.

Prompt Payment Penalties: CA Court of Appeal Relaxes Standard, “Good Faith Dispute” To Be Proven By Objective Evidence

Jun 29 2011

FEI Enters., Inc. v. Kee Man Yoon, 194 Cal. App. 4th 790 (2011)

To encourage general contractors to make timely payments to subcontractors, California Business and Professions Code section 7108.5 requires a general contractor to pay its subcontractors within 10 days of receiving a corresponding progress payment from the project’s owner, unless the parties agree otherwise in writing. If the general contractor fails to do so, the subcontractor may recover a payment penalty. That penalty is fixed at 2% of the amount due per month for every month the payment is not made.

The general contractor, however, may withhold progress payments and avoid the payment penalty if there is a “good faith dispute” over the amount owed. The question is what constitutes a “good faith dispute.” In the recent case of FEI Enters., Inc. v. Kee Man Yoon, 194 Cal. App. 4th 790 (2011), the California Court of Appeal held that a “good faith dispute” exists “where the arguments asserted or positions taken have objective legal tenability.” In other words, the subcontractor does not need to show what a general contractor believed in his or her own mind. The subcontractor only needs to show objective evidence that the general contractor’s actions were unreasonable.

Architects Beware – You Better Be Licensed In The Project Location, Even If It’s Foreign Soil

May 10 2011

By: Lawrence M. Prosen, K&L Gates, Washington, D.C.

Sturdza v. United Arab Emirates, 11 A.3d 251 (D.C. 2011)

In a case of first impression in the District of Columbia (“D.C.”), an Architect has been barred from recovering fees for architectural services in the District of Columbia where the architect lacked a license to practice in D.C. when it negotiated terms for a services contract. This bar was upheld even where (a) the architect was licensed in another jurisdiction; and (b) the project was actually on “foreign soil” in that it was for the Embassy of the United Arab Emirates (“UAE”) located in the United States.

Subcontractor Not Prejudiced When Contractor Stipulates to Liability

May 09 2011

By: Bonita Gutierrez, Anthony Badaracco, K&L Gates, New York

Zawadzki v. 903 E. 51st Street, LLC, 80 A.D.3d 606, 914 N.Y.S.2d 272 (N.Y. App. Div. 2011)

In this case, the injured plaintiff, subcontractor’s employee, sued the owner and general contractor of a construction contract in Brooklyn. The owner filed a third-party complaint against the subcontractor, which filed cross-claims against the contractor for contribution and indemnification. The contractor filed a fourth-party complaint against the subcontractor, seeking indemnification. The Appellate Division, Second Department, denied the subcontractor’s motion to dismiss or sever the fourth-party indemnification complaint, brought on the ground that the subcontractor would be prejudiced by the contractor’s stipulation of liability, to which the subcontractor did not consent. The court found that the subcontractor was not prejudiced, because even though the contractor admitted liability, the subcontractor still could assert a defense to the contractor’s indemnification claim on the ground that the contractor was actively negligent and therefore not entitled to indemnification.

No License; No Claim; No Recovery: Oregon Contractors Beware!

Feb 07 2011

Stellar J Corp. v. Smith & Loveless, Inc., 2010 WL 3118360 (D. Or. Aug. 5, 2010)

By: Tom Wolfendale, K&L Gates, Seattle

Overview:

A general contractor ("general") brought a claim, originally in state court, against one of its first tier subcontractors ("sub") for breach of contract; in turn, the first tier subcontractor removed the action to federal court and brought claims against the general and its surety for breach and quantum meruit.

On a public works project, the sub was to supply and install equipment for a city wastewater treatment project. At the time of contracting with the general, the sub did not have an Oregon Contractor’s license. During the work, the general terminated the sub for failure to perform. The sub counterclaimed alleging the general breached and also sued the general’s surety for recovery. The general asserted an affirmative defense that the sub did not have an Oregon license and could not prosecute its counterclaims.

The general contractor sought summary judgment against the sub claims based on the sub’s failure to obtain an Oregon license. The federal contract dismissed the sub’s claims.

No Recovery For an Injury Sustained at a Trailer Where Work Was Not Performed

Jan 20 2011

Lynch v. 99 Washington, LLC, 80 A.D.3d 977, 915 N.Y.S.2d 353 (N.Y. App. Div. 3d Dep’t 2011)

In Lynch, the plaintiff injured his knee when stepping out of a trailer on a job site onto a free-standing stairwell that was allegedly misaligned with the trailer. He sued under New York Labor Law and advanced common law negligence theories. The Appellate Division, Third Department, held that the defendant’s motion for summary judgment should have been granted on all claims, reasoning that because the plaintiff was not performing construction work when the injury occurred, recovery was not available under a statute providing a cause of action for work-related injuries.

Subcontractor Defendant Permitted to Amend its Answer to Plead Lack of Privity

Jan 10 2011

Logan-Baldwin v. L.S.M. Gen. Contractors, Inc., 914 N.Y.S.2d 617 (N.Y. Sup. Ct. 2011)

In this case, the homeowner plaintiffs sued the contractor, subcontractors, and their principals alleging breach of contract and fraudulent inducement, arising out of a renovation project in their historic Rochester home. A subcontractor moved for summary judgment, alleging lack of privity with the plaintiffs, who defended on the ground that the subcontractor failed to plead lack of privity in its answer, thereby waiving that defense. The Supreme Court granted the defendant’s motion, finding that privity is an essential element of a breach of contract claim and allowing the defendant to amend its answer to add the defense of privity. The court emphasized that this was a matter of judicial discretion, and the defense appeared to have merit, the general rule being that an owner has no privity with a subcontractor. Here, the court found no clear language to the contrary.

Catagory:Case Summaries