2007 – Page 7 – Construction Law

Court of Claims Ruling Upheld – Contractor Entitled to Reimbursement from Government Under Unit Contract

Jul 23 2007

Harrison & Burrowes Bridge Constructors, Inc. v. New York, 839 N.Y.S.2d 854 (N.Y. App. Div. 2007)

The claimant filed suit in the Court of Claims seeking additional compensation for its rehabilitation and resurfacing of eight bridges under a unit-price contract with the State of New York. The state offered several reasons for its refusal to pay the claimant for labor and materials supplied under the contract.

First, the contract required the state to pay the claimant for the total number of markers installed, including any markers damaged by traffic. The state refused to pay for an additional 1,478 replacement markers installed by the claimant, arguing that the bid proposal, upon which the contract was based, only covered the installation of 868 markers. Affirming the Court of Claims, the appellate court found that the state should pay for the additional 1,478 replacement markers. Although the contract (which required the claimant to replace damaged markers) did not specify who would be obligated to pay for those markers, the court reasoned that the contract did not require the claimant to include the cost of replacing markers in its bid.

Economic Loss Rule Remains Alive and Well in Texas

Jul 19 2007

Pugh v. Gen. Terrazzo Supplies, Inc., 243 S.W.3d 84 (Tex. Ct. App. 2007), petition for review filed (Mar. 24, 2008)

In this case, the court affirmed a take-nothing summary judgment in favor of a materials supplier based on the economic loss rule. Pugh arose out of a residential construction project involving an exterior insulated finishing system (“EIFS”). After discovering alleged water damage to their home’s wood frame and interior wood flooring, the homeowners sued the masonry subcontractor and veneer supplier for negligence, “product liability (marketing defect),” and breach of the “implied warranties of good and workmanlike service and habitability.”

In a motion for summary judgment, the material supplier argued that the economic loss rule barred the homeowners’ claims for negligence and strict liability.

Massachusetts Building Code Does Not Render Either Engineer or Architect Liable for Unsafe Working Conditions on Owner’s Site

Jul 14 2007

Garcia v. Federics, 2007 WL 2367672 (Mass. Super. Ct. July 9, 2007)

In this case, the Superior Court granted a motion for summary judgment brought by the architect and engineer of a project on claims asserted by a construction worker injured on the job. As grounds for its ruling, the court found that neither the contract between the owner and the construction company nor the contract for architect’s services assigned responsibility to the architect or engineer for safety issues on the project. Thus, the court found that the architect and engineer did not have a contractual duty to protect the worker against unsafe working conditions.

In reaching its decision, the court rejected plaintiff’s argument that the Massachusetts Building Code created a duty for the architect and engineer to control safety conditions. Specifically, the court noted that the Massachusetts Building Code places the responsibility for the conditions of the building on the owner of the building rather than the architect or engineer. Plaintiff’s additional claims also failed because he could not demonstrate a reasonable expectation of proving that the architect and the engineer had a duty of care to the worker. The cross-claims by the owner failed because the architect and the engineer were not directly liable to the worker.

K&L Gates’ Arbitration World, Summer 2007

Jul 01 2007

By K&L Gates attorneys Wing L. Cheung, Martha J. Dawson, Ira S. Kaufman, Ian Meredith, Sarah A. Munro, Glenn R. Reichardt, Thomas M. Reiter, Stephen A. Smith, Sarah Turpin and Tiffany Yeung.

Arbitration World highlights the significant developments and issues in international arbitration that matter to in-house counsel and company executives with responsibility for dispute resolution.

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

In this edition we look back at the firm’s third annual London International Arbitration Seminar at the Mandarin Oriental Hotel in Knightsbridge in April and look forward to hosting a similar event in San Francisco on 4-5 October 2007 (details in the Forthcoming Events section on the back page).

We are pleased to include a guest contribution from Petter Tornquist of Setterwalls, the leading Swedish law firm, on the new rules of the Arbitration Institute of the Stockholm Chamber of Commerce.

General Contractor Has No Indemnification Claim Against Subcontractor Where Claims Arise Out of Contractor’s Own Failure to Supervise

Jun 24 2007

Fireman’s Fund Ins. Co. v. Falco Constr. Corp., 493 F. Supp. 2d 143 (D. Mass. 2007)

A property insurer, Fireman’s Fund Insurance Company, asserted claims against a general contractor and subcontractor after an insured home sustained fire damage. The general contractor had performed extensive renovations on the home, and the subcontractor had constructed a masonry fireplace at the home. In Counts I and II, the insurer sought recovery from the subcontractor for improperly installing the fireplace on theories of negligence and breach of contract. In Counts III and IV, the insurer brought the same claims against the general contractor for failing to supervise. The general contractor subsequently filed a cross-claim for indemnification against the subcontractor. Read More

Cancelled LLC Can Be Sued, But Cannot Sue

Jun 23 2007

Chadwick Farms Owners Assoc. v. FHC, LLC, 139 Wash. App. 300, 160 P.3d 1061 (2007)

This case presents a similar set of facts to Maple Court. Condominium developer FHC, LLC was administratively dissolved on March 24, 2003. On August 18, 2004, Chadwick Farms Homeowner’s Association filed suit against FHC, alleging construction defects. Seven months later, on March 24, 2005, FHC was administratively cancelled because it failed to reinstate during the two-year dissolution period. Two months after cancellation, FHC filed third party claims against its subcontractors, and in August 2005 moved for summary judgment against Chadwick on the ground that it was no longer a legal entity.
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Developer and Construction Manager Lose Pending Claims

Jun 22 2007

Maple Court Seattle Condo. Assoc. v. Roosevelt, LLC 139 Wash. App. 257, 160 P.3d 1068 (2007)

In June 2007, Division One of the Court of Appeals rendered its decisions in three cases involving the issue of a dissolved limited liability company’s standing to maintain claims. Maple Court illustrates the adverse impact that administrative dissolution can have on the pending claims of a developer and general contractor.

On September 23, 2002, condominium developer Roosevelt, LLC allowed itself to be administratively dissolved by the Secretary of State. Fifteen months later, Roosevelt was sued by the condominium homeowners’ association. In response, Roosevelt filed third party complaints against its construction manager and subcontractors. During the pending litigation, on September 23, 2004, Roosevelt was administratively "cancelled" pursuant to RCW 25.15.270(6) because it did not reinstate itself following the prior administrative dissolution.
Read More

Government Agency May Compel Production of Documents in Specific Format Through Subpoena Duces Tecum

Jun 15 2007

Nat’l Labor Relations Bd. v. Champagne Drywall, Inc., 502 F. Supp. 2d 179 (D. Mass. 2007)

Under the National Labor Relations Act, the National Labor Relations Board moved for an order from the court to enforce two subpoenas duces tecum served on Champagne Drywall as part of the NLRB’s investigation of Champagne’s alleged practice of refusing to consider and hire qualified job applicants based on their union affiliation. Champagne objected because even though the data sought existed within the organization, Champagne did not possess the information in the format sought by the NLRB – namely, as a list. Read More

General Contractor May Recover from Subcontractor Without Joining Owner as Party

May 27 2007

Floor Express, Inc. v. Daly, 138 Wash. App. 750, 158 P.3d 619 (2007)

In this case, a subcontractor sued a general contractor for failing to make payments on the parties’ contract. The general contractor asserted a counterclaim against the subcontractor for the cost of removing and replacing the subcontractor’s work. On the first day of trial, the subcontractor moved to dismiss the counterclaim, arguing that the project owner was a necessary party and that the general contractor had no standing to sue the subcontractor because the alleged defective work injured only the owner. The trial court granted the motion, but Division Two reversed.

The Court of Appeals noted that, where a subcontractor breaches its agreement with a general contractor by failing to perform the work pursuant to the parties’ agreement, the general contractor has legal exposure to the owner. The court held that the owner was not a necessary party to the litigation under Civil Rule 19 because the general contractor’s claims were based on the subcontract, to which the owner was not a party. The court also held it could afford complete relief to the general contractor, and that the owner’s absence did not impede any of the owner’s interests. Accordingly, the general contractor’s claim against the subcontractor should have been allowed to proceed.

Winning Race to Courthouse Does Not Win ERISA Preemption

May 25 2007

Bd. of Trustees of Cement Masons & Plasterers Health & Welfare Trust v. GBC Northwest, LLC, 2007 WL 1306545 (W.D. Wash. May 3, 2007), reconsid’n denied, 2007 WL 1521220 (W.D. Wash. May 22, 2007)

A split of authority exists between Washington state courts and federal courts regarding whether an employee benefit trust fund can use state lien laws to recover unpaid employee benefit contribution payments. In 2000, the Washington Supreme Court held that ERISA preempted the state public works lien law. Int’l Bd. of Elec. Workers v. Trig Elec. Contr. Co., 142 Wash.2d 431, 13 P.3d 622 (2000). Two years later, however, Judge Coughenour of the U.S. District Court for the Western District of Washington noted that federal law, as determined by federal courts, governs questions of ERISA preemption, and that ERISA does not preempt Washington’s public works lien laws. Ironworkers Dist. Council of the Pacific Northwest v. George Sollit Corp., M.A., 2002 WL 31545972 (W.D. Wash. Sept. 4, 2002).

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