In re Kara Homes, Inc., 374 B.R. 542 (Bankr. D.N.J. 2007)

On an issue never before addressed in a published opinion, a U.S. Bankruptcy Court decided an issue critical to the New Jersey Lien Law.  A major New Jersey based residential home building group (the “Debtors”), owning several large single-family home development projects, entered numerous agreements with various subcontractors who provided goods and services on the projects.  When the Debtors failed to pay, the subcontractors took steps to protect their rights under the New Jersey Construction Lien Law.  However, most of the Debtors initiated Chapter 11 bankruptcy proceedings before the subcontractors could fully complete all of the Lien Law’s requirements.  The Debtors then filed adversary proceedings to determine the extent, validity, and priority of any liens.

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Alaska Servs., Inc. v. County of Morris, 2007 WL 2385941 (N.J. Super. Ct. App. Div. Aug. 23, 2007)

In this case, a county solicited bids for laundry services for a county-run nursing care facility pursuant to New Jersey’s Local Public Contracts Law (“LPCL”) (N.J.S.A. 40A:11-1, et seq.).  The county refused to award the contract to the lowest bidder, finding that the bid was “materially non-responsive," and because the services were such that the county could utilize the LPCL’s “competitive contracting” provision (an exception for certain “special” goods and services permitting a public entity to consider additional factors beyond the “lowest responsible bidder” standards set by the LPCL).  The county awarded the contract to another bidder.

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Gale v. New Jersey Iron, Inc., 2007 WL 2385948 (N.J. Super. Ct. App. Div. Aug. 23, 2007)

This case arose after an employee of a sub-subcontractor sued the project owner, the general contractor (“GC”) and the subcontractor for negligence over personal injuries he sustained after falling from a steel beam at the construction site.  All issues settled except for the owner’s cross-claim against the GC alleging that the GC breached its contract when it failed to obtain insurance coverage that protected the owner from its own negligence.

The Appellate Division affirmed the trial court’s dismissal of the claim.  Initially, the court determined that the “insurance” section of the contract did not specifically require such insurance and was more consistent with the industry standard requiring a GC to provide insurance to indemnify an Owner against acts of negligence by the GC or a subcontractor.  Moreover, the "indemnity” section of the contract merely required the GC to indemnify the owner only to the extent caused by the GC, a subcontractor or anyone employed by them.

Kane Builders, Inc. v. S. New Jersey Bldg. Laborers Dist. Council, LIUNA, 2007 WL 2416470 (D.N.J. Aug. 21, 2007)

In this case, a labor union brought various claims against a general contractor (“GC”) stemming from a collective bargaining agreement (“CBA”) entered between the Union and the GC.  Briefly stated, the union asserted a multi-million dollar claim for unpaid employer contributions that the GC would have been obligated to pay, had it not violated the CBA by not using union laborers on over 100 “covered projects” in New Jersey.  Relying on ERISA’s record keeping provision (29 U.S.C. § 1145), the union argued that the GC bore the burden of proving which hours worked were not subject to contribution. 

The court, following 11^th Circuit precedent, adopted the burden-shifting approach.  It determined that the union had satisfied its initial burden of setting forth sufficient evidence concerning the amount and extent of work performed through an expert auditor’s report.  The court ruled that, at that point, the burden of proof shifted to the GC to disprove, or raise an issue of fact, regarding the extent of work performed on covered projects and/or whether covered employees performed the work.  Because the GC was unable to produce any records to disprove the union’s claim, the court entered partial summary judgment on the issue of damages.