K&L Gates Construction Law Blog : Construction and Engineering Lawyers & Attorneys : K&L Gates Law Firm : Financing, Development, Dispute Resolution, Government Contracting

Politano v. GPA Constr. Group, 2008 WL 515661 (Fla. Dist. Ct. App. Dec. 10, 2008)

In Politano, an owner moved to discharge a contractor's lien for willful exaggeration based on the contractor's inclusion of overhead and profit.  The Third DCA affirmed the trial court's decision to reduce the amount of the lien accordingly, but not discharge the lien based on the finding that the disallowed items included in the lien were a result of mistake not willful exaggeration.  It rejected the owner's argument that a lien is willfully exaggerated if it includes non-lienable items without regard to ignorance or good faith, or that a court's reduction of a lien amount necessarily means the original lien amount was fraudulent.
 

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Brookshire v. GP Constr. of Palm Beach, Inc., 99 So.2d 179 (Fla. Dist. Ct. App. 2008)

In Brookshire, an owner filed a complaint to discharge a contractor’s lien and the clerk issued an order to show cause under Florida Statute Sec. 713.21(4).  Accordingly, the contractor had 20 days to show cause as to why his lien should not be enforced by action or vacated and cancelled of record.  Failure to do so would result in cancellation of the contractor’s lien.  The contractor filed a motion to compel arbitration and set it for hearing within the 20 day period, but did not respond to the show cause order.  The contractor argued that the motion to compel satisfied Section 713.21.  The appellate disagreed and directed the trial court to discharge the lien.

The contractor had argued that the motion to compel arbitration satisfied Section 713.21 because the dispute would ultimately be arbitrated and the contractor wanted to avoid any issue as to whether he was waiving arbitration.  The court held that Section 713.21 does not allow for exceptions, such as extensions of time, nor does it leave the court with any discretion to excuse a failure to comply.  The court also noted that any concern regarding waiving arbitration could have been satisfied by contemporaneously filing a motion to arbitrate those issues that were allegedly subject to arbitration.

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BDI Constr. Co. v. Hartford Fire Ins. Co., 2008 WL 4568075 (Fla. Dist. Ct. App. Oct. 15, 2008)

In BDI Construction Co., a subcontractor filed a third party action on a sub-subcontractor’s performance bond.  The surety moved for summary judgment claiming that the agreed five-year statute of limitations under Florida Statute Section 95.11(2)(b) began to run when the subcontractor accepted the sub-subcontractor’s work as complete and paid for the work in full.  The subcontractor on the other hand argued that the statute of limitations began to run when the entire project was completed and accepted by the owner.  The subcontractor relied on the Florida Supreme Court’s opinion in Fed. Ins. Co. v. Southwest Florida Retirement Ctr., Inc., 707 So. 2d 1119, 1121 (Fla. 1998), which stated that Section 95.11 “as it applies to an action on a performance bond, accrues on the date of acceptance of a project as having been completed according to the terms and conditions set out in the construction contract.”
 

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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.

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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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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.

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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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Great American Ins. Co. v. Gen. Contractors & Constr. Management, Inc., 2008 WL 2245986 (S.D. Fla. May 29, 2008)

In this case, a surety company sought indemnification from a contractor under a payment bond.  The surety had paid claimants under the bond and argued that it was contractually entitled to reimbursement.  The contractor argued that the surety failed to bear its alleged initial burden of proving that the surety paid the claims in good faith.  The Court held that the surety’s initial burden was satisfied by evidence that the surety had indeed paid claims under the bond.  Thereafter, it was then the contractor’s burden to provide contradictory evidence or evidence that the surety paid the claims in “bad faith.”

It is well settled in Florida that a surety’s bad faith is the only defense to a surety’s indemnity claim.  Therefore, Florida courts will uphold a surety’s contractual right to indemnification so long as the surety acted on a good faith belief that it was required to act or pay, regardless of whether any liability existed.  To establish a surety’s bad faith, the contractor must demonstrate that the surety acted “with deliberate malfeasance”—meaning that that surety intentionally and wrongfully acted without legal right.  A lack of due diligence or negligence is not the equivalent of bad faith and even “gross negligence” is not the same as bad faith.

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Baker County Med. Svcs., Inc. v. Summit Smith, 2008 WL 2245587, Case 3:05-cv-541-J-33HTS (M.D. Fla. May 29, 2008)

In this case, an owner sued a contractor under a design-build contract, alleging that the contractor breached the contract by failing to fulfill its implied duty to perform according to established industry and professional standards.  While Florida law permits such “professional negligence” actions to be pled as a breach of contract or a tort, such an action must be brought under the more specific two year professional malpractice statute of limitation, not the general four year limitation for actions based on “design, planning, or construction of an improvement to real property.”

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Niehaus v. Big Ben’s Tree Svc., Inc., 982 So. 2d 1253 (Fla. Dist. Ct. App. 2008)

In this case, the court held that a contractor’s lien under Section 713.05 never attached because the parties never had a meeting of the minds as to a material term of their contract.  The owner had contacted a contractor to cut down and “remove” a tree.  The owner believed that “remove” meant that the tree would be taken from her property, but the contractor intended for remove to have its technical meaning in the tree industry, which is to simply move the tree.  The owner refused to pay the contractor when he would not take the tree from her property, resulting in the contractor recording a mechanic’s lien under Section 713.05.

A mechanic’s lien can only attach when a valid contract exists, and parties’ must agree as to material terms for there to be a valid contract.  The court found that “removal” was a material term of the parties’ contract in this case, and that they had different understandings as to the term’s meaning.  Therefore, the contractor’s lien never attached, and the owner was entitled to attorney’s fees under Section 713.29 for her successful defense against the lien.

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Fisher Island Holdings, LLC v. Cohen, 983 So. 2d 1203 (Fla. Dist. Ct. App. 2008)

In this residential construction case, an owner entered into a short-term lease because of substantial delays in the completion of his single family home.  The owner sued the contractor for delay, and the jury awarded the owner both delay damages and damages for alternative living arrangements.  The appellate court held that this was not a double recovery.  The jury permissibly awarded delay damages (measured by the rental value of the building under construction during the delay period) for the period of the contractor’s delay up to the commencement date of the owner’s nine month lease.  The jury then awarded alternative living damages for the duration of the lease.

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J.C. Gibson Plastering Co. v. XL Specialty Ins. Co., 2008 WL 1931348 (M.D. Fla. May 2, 2008)

In J.C. Gibson Plastering, the U.S. District Court for the Middle District of Florida held that a surety could state a claim for common law indemnity against a subcontractor despite the absence of privity.  The court found that the two elements necessary to state a claim for common law indemnity were satisfied:  (i) the surety may be constructively, vicariously or derivatively liable for the subcontractor’s failure to pay sub-subcontractors, and (ii) the surety was without fault in causing the loss it was required to bear, despite failing to timely respond to the claim.

Also, despite the lack of Florida authority on the question, the court also held that a surety’s failure to respond to the subcontractor’s claim for payment under a payment bond within forty-five days (as required under the bond) barred the surety from challenging the claim or from asserting counterclaims to the extent the surety could have reasonably identified the bases of its affirmative defenses or counterclaims’ during the forty-five day period.  By failing to respond timely, the claim was undisputed and subject to summary judgment.

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Saltponds Condo. Assoc. v. Walbridge Aldinger Co., 979 So. 2d 1240 (Fla. Dist. Ct. App. 2008)

In this case, a condo association sued a contractor in connection with alleged construction defects discovered after the control of the association passed from the developer to the unit owners.  The contractor argued that the claims were barred by the three-year “statute of limitations” set forth in Florida Statute Section 718.203.  That Section, however, merely sets the warranty period for construction improvements and materials, not the statute of limitations.

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Mineo v. Lakeside Village of Davie, LLC, 983 So.  2d 20 (Fla. Dist. Ct. App. 2008)

Where a contract for the purchase of real property and construction of a residence gave the seller the option of retaining deposits and change order payments as liquidated damages in the event of the buyer’s default, or the seller could sue for specific performance at the purchase price plus interest as delay damages, the liquidated damages provision was not an unenforceable penalty because the contract did not provide the seller with the option to sue for actual damages (which would have change the character of the forfeiture as agreed damages).

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Liberty Mutual Ins. Co. v. Aventura Eng’g & Constr. Corp., 534 F. Supp. 2d. 1290 (S.D. Fla. Jan. 8, 2008)

The U.S. District Court for the Southern District of Florida has interpreted Florida law as allowing a surety to settle not only an owner’s claims on a performance bond, but also the principal’s claims against the owner.  In Aventura Eng’g, a surety completed construction of a project pursuant to an owner’s demand against a performance bond.  The principal, a general contractor, had allegedly defaulted on its contract with the owner, and thereafter refused the surety’s demands for indemnification.  The surety eventually executed a settlement agreement with the owner, whereby the surety exercised its power of attorney to execute a release of all claims that the contractor had against the owner growing out of the bonded contract. 

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Mercedes Homes, Inc. v. Colon, 966 So.2d 10 (Fla. Dist. Ct. App. 2007)

In this case, an individual entered into an agreement with a contractor for construction of a new home, which included a provision requiring the contractor to install sod.  When the home buyer fell in his yard eleven days after closing, he brought a personal injury claim against the contractor claiming it had installed the sod negligently.  The contractor moved to compel arbitration of the personal injury claim, based on the arbitration agreement contained in the home warranty purchased by the home buyer.  In response, the buyer argued that he was not required to arbitrate his personal injury claim because negligence claims were expressly excluded from the home warranty.

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Centex Homes v. Mr. Stucco, Inc., 2007 WL 2264622 (M.D. Fla. Aug. 6, 2007)

In this case, a general contractor brought suit against several subcontractors for breach of contract and negligent construction of residences in the general contractor's development.  In response, the subcontractors moved to dismiss the action on the grounds that the contractor had failed to provide notice prior to filing the action as required by section 558.004 of the Florida Statutes.  The subcontractors also moved to dismiss the negligence claim on the grounds that the contractor had not alleged any tort injury separate from the breach of contract claim in order to survive the economic loss rule.

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