The Americas – Page 19 – Construction Law

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 June 5, 2008) (Unpublished)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.

Court Declines to Strike Defendant’s Answer as Sanction for Spoliation of Evidence

Jun 13 2008

Carroway Luxury Homes, LLC v. Integra Supply Corp., 859 N.Y.S.2d 834 (N.Y. App. Div. 2008)

In this case, plaintiff brought suit for construction delays and business expenses that arose after a forklift rented from defendant rolled over while being operated by plaintiff’s subcontractor. Defendant answered asserting affirmative defenses and counterclaims. Plaintiff moved to strike defendant’s answer based on intentional spoliation of evidence, asserting that defendant had sold the forklift at issue before plaintiff had the opportunity to examine it. The court denied plaintiff’s motion, holding that striking a pleading is a drastic sanction and that the record, at that time, was insufficient to determine whether the unavailability of the forklift for examination would deprive the plaintiff of the means to prove its case.

Sureties Are Not Necessary Parties under FRCP

Jun 12 2008

D&D Assocs., Inc. v. N. Plainfield Bd. of Educ., 2008 WL 2277121 (D.N.J. June 2, 2008)

In this case, the court addressed whether a surety company was a necessary party under Fed. R. Civ. P. 19(a) and whether a motion to amend the pleadings to include the surety was untimely, prejudicial and futile. D&D Associates had sued the Board of Education to recover the contract balances owed in connection with work on a school construction project. Almost five years after commencing the lawsuit, the Board sought to amend their answer to join the surety, American Motorists Insurance Company, to the litigation. The court denied the motion on the grounds that sureties are not necessary parties, and because it was untimely, prejudicial, wasteful and futile to join the party at such a late stage of litigation.

International Arbitration: A Tool to Manage Risk When Dealing in High Growth/High Risk Markets

May 31 2008

By K&L Gates partner, Ian Meredith, and published in The Metropolitan Corporate Counsel.

As many businesses experience declining growth in their domestic and traditional markets, they are looking increasingly towards the "BRIC" countries (Brazil, Russia, India and China) and other high growth economies outside their traditional trading areas. The report of the International Monetary Fund entitled the "World Economic Outlook" which was released on 9 April 9, 2008 downgraded projections for growth in 2008 and 2009 across the major Advanced Economies including those of the US, Canada and Western Europe whilst continuing to project relatively higher rates of growth across certain Emerging and Developing Economies including China and India. It seems likely that the move by many US businesses to target Emerging and Developing Economies will gather pace.

This article will assess the extent to which international arbitration can play a role in assisting US businesses in managing commercial risk when seeking to invest and/or trade in higher risk overseas markets and it will provide a number of suggestions on ways to limit risk[1].

Read the full article here.

Consequential Damages in Today’s Construction Industry

May 30 2008

Pittsburgh partner Jason Richey recently teamed up with associate Bill Wickard to write “Consequential Damages in Today’s Construction Industry,” which appears in the May 5, 2008 issue of Constructioneer.

In the article, Jason and Bill stress the importance of project-specific consequential damages waivers, noting that f ailure to include such a waiver can leave construction managers open to costly lawsuits. Waivers should be both "project-specific" (anticipating the potential types of damages that could arise with a certain project) and mutual (the list of damages should be the same for the owner and contractor).

Jason and Bill point to Perini Corp. v. Greater Bay Hotel & Casino to illustrate the importance of these waivers. In the Perini case, the construction manager responsible for the renovation of the Sands, an Atlantic City, N.J. hotel and casino, produced his façade for the building four months late. The original contract did not include a damages waiver and the Sands argued that their lost profits were due to the lateness of the façade. An arbitration panel awarded the Sands $14.5 million in damages, nearly 24 times the contract fee.

To read the full article, please click here (posted with permission).

Exclusion of Coverage for Claims Arising from Breach of Contract Includes All Claims with Substantial Nexus to Breach or Having “But For” Relationship with Breach

May 22 2008

N. Plainfield Bd. of Educ. v. Zurich Am. Ins. Co., 2008 WL 2074013 (D.N.J. May 15, 2008)

In this case, the Board of Education had been sued by various contractors and subcontractors for breach of contract and various tort claims, and sought specific performance from Zurich American Insurance Co. to defend against the claims under their insurance policy. Zurich denied coverage, citing the policy provision excluding from coverage all claims arising from breach of contract. The court found that that this exclusion covered any action that alleged a breach of duty, neglect, error, misstatement or omission and that grew out of or had substantial nexus with breach of contract, or any injury that would not have occurred but for the contract breach. Thus, Zurich was justified in refusing coverage and indemnity for those claims, and the court granted Zurich’s motion for summary judgment against the Board.

Surety Found Not Liable for Attorneys Fees without Express Provision in Bond

May 19 2008

Titan Stone, Tile & Masonry, Inc. v. Hunt Constr. Group, Inc., 2008 WL 2038857 (D.N.J. May 12, 2008)

In this case, the court ruled on a motion for reconsideration of a finding that a subcontractor who defaulted on performance, but not the surety, was responsible for the attorneys fees of the general contractor, Hunt Construction Group. The court applied the principle that a surety can be held liable only in accordance with the strict terms of its undertaking, and found that the surety bond in this case did not specifically provide for reimbursement of attorneys fees. Hunt argued that the obligations of Titan under the performance bond should be coextensive with those of Titan under the agreement. The court rejected this argument as inconsistent with the purpose of a performance bond, which is to provide the general contractor with the funds to complete the project upon the default of the subcontractor, not to make the general contractor whole.

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