Construction Law

Legal issues, news, and regulations concerning the construction industry

1
Court Rules Lien Timely Filed Pursuant to Florida Statute 713.08(5)
2
Insurer Granted Summary Judgment against General Contractor where Contract between Subcontractor and Injured Worker’s Firm Fails to Meet Indemnification Requirements
3
Inability to Determine Whether Owner Owed General Contractor when Subcontractor filed Lien Precludes Summary Judgment
4
Finding Surety Sufficiently Pled for Quia Timet, Court Denies Motion to Dismiss
5
The Class of One Theory of Equal Protection has No Application in the Public Hiring Context
6
Contractor Authorized by Condo Association to Work on Common Areas May Sue Association as Unit Owners’ Representative
7
Contracts Cancelled Because of Illegal Actions May be Unenforceable
8
K&L Gates Arbitration World, Summer 2008
9
Washington’s Limited Liability Company Act is Applicable Retroactively and Permits Liability for Individual LLC Members or Managers
10
Finding No Bad Faith, Court Enforces Termination for Convenience and Conversion Provisions Included in Parties’ Contract

Court Rules Lien Timely Filed Pursuant to Florida Statute 713.08(5)

J.S.L. Constr. Co. v. Levy, 994 So.2d 179 (Fla. Dist. Ct. App. 2008)

In this case, a homeowner sued a contractor to discharge a mechanic’s lien and for breach of contract.  The contractor was hired to construct the shell of a residence, with non-shell work performed by change order.  Among other things, this case addresses whether the contract recorded its claim of lien timely.

Florida Statutes Section 713.08(5) provides that a "claim of lien may be recorded at any time during the progress of the work or thereafter but not later than 90 days after the final furnishing of the labor or service or materials by lienor."  The parties had agreed that the contractor would oversee work performed by electrical and other subcontractors.  Moreover, because the subcontractors’ permits were tied to the master permit, the contractor could not close out its permit and complete the project until the electrical and other subcontract work was performed.  The contractor also did a final walk through of the project with the building inspector.  Because the contractor filed its claim of lien within 90 days of those activities, the claim of lien was timely.

Insurer Granted Summary Judgment against General Contractor where Contract between Subcontractor and Injured Worker’s Firm Fails to Meet Indemnification Requirements

Connolly Bros., Inc. v. Nat’l Fire & Marine Ins. Co., Civ. No. 06-11673-NG, 2008 WL 5423198 (D. Mass. Sept. 30, 2008)

In this case, the Federal District Court for the District of Massachusetts granted an insurer’s motion for summary judgment on a general contractor’s claim for indemnification and for unfair and deceptive practices under M.G.L. c. 93A, because the general contractor was not covered for the relevant incident by the insurer’s policy.

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Inability to Determine Whether Owner Owed General Contractor when Subcontractor filed Lien Precludes Summary Judgment

In Nitro Dynamics v. Petruzzi Bros., Inc., 2008 WL 4635884 (Mass. Super. Ct. Sept. 26, 2008)

In this case, a subcontractor sued three defendants – the owner, the general contractor, and a surety – asserting claims for breach of contract, quantum meruit, and for recovery on a mechanic’s lien dissolution bond.  The Superior Court granted the owner’s motion for judicial notice of a stipulation of dismissal in a related action, but denied the owner’s motion for summary judgment.

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

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.

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

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

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.

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Contracts Cancelled Because of Illegal Actions May be Unenforceable

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.

K&L Gates Arbitration World, Summer 2008

By K&L Gates attorneys Ian Meredith, John L. Boos and others.

Arbitration World is an update for clients and contacts on recent development in international arbitration law and practice.

Welcome to the Sixth Edition of Arbitration World, a publication from K&L Gates’ Arbitration Group which aims to highlight significant developments and issues in international arbitration for executives and in-house counsel with responsibility for dispute resolution.

In this edition, our review of key case law includes reports on the keenly awaited U.S. Supreme Court decision in Hall Street v. Mattel, a U.S. appellate decision excluding class actions, and a recent case from the Court of Arbitration for Sport with potentially wide-ranging implications.

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

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

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

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