Construction Law

Legal issues, news, and regulations concerning the construction industry

1
Green Building: Design and Construction Contract Issues
2
LLC Must Register as Contractor; Member Registration Not Sufficient
3
Idaho Supreme Court Upholds Damages Award For Architectural Services Rendered Without A Written Contract
4
Court Imposes Strict Liability Under NYC Excavation Ordinance
5
Violation of Building Permit Requirement Not a Basis for Criminal Liability Under NY Executive Law
6
Objects Falling From Ground Level Can Trigger Liability Under NY Scaffold Law
7
Court overturns City Rejection of Low Bidder based on alleged lack of Necessary Experience
8
Prevailing Parties Denied Attorney Fees for Lack of a Public Works License
9
The Federal Prompt Pay Act Does Not Create A Private Right Of Action
10
Building Information Modeling (BIM): Special Contract Issues

Green Building: Design and Construction Contract Issues

By Gregory R. Andre, K&L Gates, Chicago

“Green Buildings” feature energy efficient and environmentally friendly elements.  Governmental regulation, cost savings and public relations are driving the trend.  While architects, engineers, contractors and facilities managers focus on Green Building design, construction, equipment and operation issues, lawyers may wish to consider Green Building issues in the contracts entered into between the owner and the design and construction professionals.  This article addresses the special contract issues that may arise in connection with the design and construction of Green Buildings.

To read the full article, click here.

Reprinted with Permission. ©2012 CCH Incorporated. All rights reserved.

LLC Must Register as Contractor; Member Registration Not Sufficient

Stonebrook Constr. LLC v. Chase Home Fin., No. 37868, 2012 WL 1433471 (Idaho Apr. 26, 2012)

The Idaho Supreme Court made clear that a contractor entity cannot foreclose a lien unless it is a registered contractor; registration of an LLC member is not sufficient.  Here, Stonebrook performed construction services for homeowners who had given a deed of trust to Chase.  Homeowners did not pay Stonebrook, so Stonebrook placed a lien on the property and commenced a foreclosure action.  Chase moved to dismiss because, while one of Stonebrook’s members was a registered contractor, Stonebrook itself was not.  The Court affirmed the trial court’s dismissal of the lien claim, rejecting claims of substantial compliance and unreasonably harsh results.
 

Idaho Supreme Court Upholds Damages Award For Architectural Services Rendered Without A Written Contract

Farrell v. Whiteman, 152 Idaho 190, 268 P.3d 458 (2012)

Damien Farrell, an architect originally licensed only in Michigan, brought suit against developer, Kent Whiteman, for uncompensated architectural services rendered for Whiteman’s condominium project.  Whiteman counterclaimed, arguing that Farrell was not entitled to compensation because some of the services rendered were rendered before Farrell obtained his architectural license in the State of Idaho and because some of the services rendered were provided without a written contract.

The District Court found that an implied in fact contract existed between the parties and awarded Farrell damages on the theory of quantum meruit for services rendered after obtaining his Idaho license, and unjust enrichment damages for services rendered before obtaining his license. Whiteman appealed.

Upon review, the Supreme Court of Idaho upheld the district court’s decision, including consideration of the speed and quality of Farrell’s work, in determining the amount of damages to award under the quantum meruit theory.  The Court also awarded Farrell his attorney fees.

Court Imposes Strict Liability Under NYC Excavation Ordinance

Yenem Corp. v. 281 Broadway Holdings, 18 N.Y.3d 481 (N.Y. 2012)

On February 14, 2012 the New York Court of Appeals held that former Administrative Code of the City of New York § 27-1031(b)(1), a municipal ordinance (“the Ordinance”), triggers strict liability for defendants who cause damage to adjoining property through excavation work.

In Yenem Corp., Defendants purchased a lot adjacent to a building located at 287 Broadway and began a construction project requiring an excavation eighteen feet below street level.  As a result, 287 Broadway shifted out of plumb; eventually, the Department of Buildings deemed the building unsafe for occupancy.  The plaintiffs, the owner and a tenant of 287 Broadway, sued for damages resulting from the excavation and moved for summary judgment under the Ordinance, which states that “when an excavation is carried to a depth of more than ten feet below the legally established curb level the person who causes such excavation shall at all times and at his or her own expense, preserve and protect from injury adjoining structures”.

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Violation of Building Permit Requirement Not a Basis for Criminal Liability Under NY Executive Law

People of the State of New York v. Grimditch, 936 N.Y.S.2d 527 (Sup. Ct. Essex Co. 2012).

In a case of first impression, the Court in People v. Grimditch held that a contractor cannot be held liable under New York Executive Law § 382(2) solely for building without a permit.  The Defendant contractor had been constructing a boathouse on Lake Placid when the town building code enforcement officer issued a stop work order for failure to obtain a building permit under the state building code.  When Defendant contractor disobeyed the order by continuing construction, he was indicted by the Essex County District Attorney’s Office for violating Executive Law § 382(2), which provides that failure to follow an “order to remedy any condition found to exist in, on, or about any building” or knowingly violating an order by a local government regarding the “standards for construction, maintenance, or fire protection” will result in fines or imprisonment.  The Court held that the indictment was defective because building without a permit did not amount to a condition existing “in, on, or about” the building and therefore was not a violation of the express language of the statute.  The Court also held that the requirement of a building permit was not a “standard of construction or maintenance.”

Objects Falling From Ground Level Can Trigger Liability Under NY Scaffold Law

Wilinski v. 334 East 92ND Housing Dev. Fund Corp. et. al., 18 N.Y.3d 1, 935 N.Y.S.2d 551 (N.Y. 2011)

The New York Court of Appeals held that New York Labor Law § 240(1) could apply to injuries caused by a falling object whose base stands at the same level as the injured worker.  The Plaintiff was a construction worker who, while in the process of demolishing walls in a vacant building, was injured when two ten-foot poles which rose out of the floor on which he was working fell on him.  The Court clarified its prior holding in Misseritti v. Mark IV Constr. Co., 86 N.Y.2d 35, 657 N.E.2d 1318 (NY 1995), by stating that Labor Law § 240(1), a scaffold law, could be invoked even if the injury was caused by an object on ground level.  In so doing, the Court explained that in order to state a claim under the statute, the plaintiff has to prove both that the injury was caused by the effect of gravity and that use of the protective equipment listed in the statute could have prevented the injury from occurring.  In this case, though the Court determined that the injuries caused by the poles falling were caused by the effect of gravity, summary judgment in favor of the plaintiff worker was precluded because an issue of fact remained as to whether the equipment prescribed by the statute could have prevented the injury from occurring.

In addition, Plaintiff brought a claim under 12 NYCRR 23-6.3(b)(3), a regulation promulgated under New York Labor Law § 241(6), which provides that “walls, chimneys and other parts of any building or other structure shall not be left unguarded in such condition that such parts may fall, collapse or be weakened by wind pressure or vibration.”  The Court found that Defendant could be liable despite the fact that neither wind pressure nor vibration contributed to the poles falling.  The Court reasoned that the wind pressure and vibration clause only attached to the words “be weakened” and not to the clauses “fall” and “collapse.”

Court overturns City Rejection of Low Bidder based on alleged lack of Necessary Experience

Hillside Landscape Constr. Inc. v. City of Lewiston 151 Idaho 749, 264 P.3d 388 (2011)

The City of Lewiston received multiple bids on a public works project.  It rejected the low bidder’s offer on the ground that the low bidder lacked sufficient experience for the project.  The low bidder brought an action against the City for declaratory relief, injunctive relief, and damages.  The district court dismissed the complaint, and the low bidder appealed.

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Prevailing Parties Denied Attorney Fees for Lack of a Public Works License

Harris, Inc. v. Foxhollow Constr. & Trucking Inc., 151 Idaho 761, 264 P.3d 400 (2011)

Following work on a public project, a general contractor brought suit against a paving subcontractor and an excavation subcontractor alleging breach of contract, fraud and other claims.  The paving sub had a public works license for contracts up to $500,000, but the excavation sub had no license.  In what the district court called an “illegal ruse,” the subs agreed to submit a joint bid, using the paving sub’s license.  The total bid, including paving and excavation, exceeded $500,000.  After a trial to the court, the district court entered judgment for defendants, including an award of attorney fees to the paving subcontractor.  The general contractor appealed.

The Supreme Court of Idaho affirmed the judgment in favor of defendants, but reversed the award of attorney fees.  Under Idaho law, reasonable attorney fees are allowed in “any action to recover on a contract for services or in any commercial transaction.” I.C. § 12-120(3).  The Supreme Court found, however, that even if this was a commercial transaction, the contract was illegal because the licensed subcontractor engaged in a “flagrant disregard of the law” by teaming up with an unlicensed subcontractor.  As a result, the paving subcontractor was not entitled to recover its attorney fees despite having prevailed in a commercial transaction.

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

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.

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Building Information Modeling (BIM): Special Contract Issues

By Gregory R. Andre, K&L Gates, Chicago

Building Information Modeling (“BIM”) is the use of a digital database to integrate the work of all of the design and construction project team members and generate two-dimensional and three-dimensional models, plans and reports.  Cost and scheduling can be added to create fourth and fifth dimensions. It is a tool that facilitates design collaboration and is intended to avoid conflicts and errors in the plans.  Simply stated, BIM makes design a group effort, and it raises special contract issues as discussed below.  BIM can be used under all of the delivery methods, and is especially encouraged under Integrated Project Delivery (“IPD”).

Instead of each design professional (architect, steel fabricator, HVAC subcontractor, etc.) producing multiple separate and independent plans for one building, BIM allows a team of architects and engineers to all contribute their respective plan and specifications data to one computer model for one building.  BIM provides the technology to not only coordinate various building component designs, but also to understand how design changes will impact the cost and timing of the project.  The design of one building component, say the HVAC ductwork, can be changed, and BIM will automatically change the other building components to accommodate it and present the overall economic effect and schedule impact due to the change.

To read the full article, click here.

Reprinted with Permission. ©2011 CCH Incorporated. All rights reserved.

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