Archive: February 2008

1
Bond Issuer Lacks Authority to Release Claims Related to Construction
2
Builder Liable for Intentional Infliction of Emotional Distress and Consumer Protection Act Violations Based on Verbal Abuse of New Home Purchasers
3
Kitchen Contractor Potentially Liable Under New Jersey’s Consumer Fraud Act
4
General Contractor Cannot Bring Direct Action Against Subcontractor’s Insurer Regardless of General Contractor’s Status as Additional Insured Under Subcontractor’s Policy
5
Texas Statute Bars Property Owner’s Liability for Injury to Independent Contractors
6
Owner Potentially Liable for Fraud and Consumer Protection Act Violations Based on False Promises of Payment
7
Potential Pitfalls in Australian Dispute Resolution Clauses
8
Municipal Authority’s Claim Against Surety for Bad Faith Falls Short

Bond Issuer Lacks Authority to Release Claims Related to Construction

Eaton Elec., Inc. v. Dormitory Auth. of New York, 852 N.Y.S.2d 363 (N.Y. App. Div. 2008)

In this case, plaintiff contracted with Dormitory Authority of New York to perform electrical work in the renovation of a library.  Plaintiff experienced delays and financial problems, eventually forcing it to assign its payment interest in the construction contract to AXA Global Risks U.S. Insurance Company in exchange for financial assistance.  Later, in return for payment from Dormitory Authority, AXA executed a release to discharge Dormitory Authority from any claims of liability in relation to the underlying construction project.  That release later became problematic when plaintiff sought an additional $12 million from Dormitory Authority as reimbursement for unanticipated and unforeseen additional costs incurred on the project.  Dormitory Authority moved for summary judgment, arguing that AXA had released it from any such liability.  The Supreme Court denied Dormitory Authority’s motion, reasoning that AXA lacked authority to release any such claims. Read More

Builder Liable for Intentional Infliction of Emotional Distress and Consumer Protection Act Violations Based on Verbal Abuse of New Home Purchasers

Lepp v. V.M.S. Realty Trust, 2008 WL 375971 (Mass. App. Div. Feb. 8, 2008)

This is a per curiam decision by the Massachusetts Appellate Division that addresses the liability of homebuilders and vendors.  In Lepp, the purchasers of a newly built home sued the vendor of the home for breach of contract for failure to install the agreed upon insulation.  The purchasers also sued the builder, who was an employee of the vendor, for breach of contract, breach of the implied warranty of good workmanship, intentional infliction of emotional distress and violation of M.G.L. c. 93A — the Massachusetts Consumer Protection Act.  The trial court found for the plaintiffs on all counts in a jury-waived trial and the defendants appealed.
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Kitchen Contractor Potentially Liable Under New Jersey’s Consumer Fraud Act

CZAR, Inc. v. Heath, 939 A.2d 837 (N.J. Super. Ct. App. Div. 2008)

In this case, a homeowner brought claims against a custom kitchen contractor under New Jersey’s Consumer Fraud Act.  During the construction of a new home, the homeowner had contracted directly with a custom kitchen contractor for the installation of custom kitchen cabinets, interior doors, a front door, and certain moldings.  The trial concluded that the home improvement practice regulations found in N.J.A.C. 13:45A-16.1 to 16.2 were not applicable to plaintiff and, therefore, dismissed the CFA claims.  The trial court reasoned that the kitchen contractor’s work was not a “home improvement” within the meaning of the regulation because the construction and installation of the doors, cabinets, and moldings were part of the construction of a new residence and, therefore, excluded from the definition of “home improvement.”

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General Contractor Cannot Bring Direct Action Against Subcontractor’s Insurer Regardless of General Contractor’s Status as Additional Insured Under Subcontractor’s Policy

Ohio Cas. Ins. Co. v. Time Warner Entm’t Co., L.P., 244 S.W.3d 885 (Tex. App. Feb. 6, 2008)

In this case, a general contractor brought a declaratory judgment action against its subcontractor’s primary and umbrella insurers to recover the cost of removing and replacing fiber optic cable that the subcontractor installed improperly.  Although the trial court granted summary judgment in favor of the general contractor, the Dallas Court of Appeals reversed.
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Texas Statute Bars Property Owner’s Liability for Injury to Independent Contractors

Vanderbeek v. San Jacinto Methodist Hosp., 246 S.W.3d 346 (Tex. App. 2008)

A plumber working on a remodel project for San Jacinto Methodist Hospital cut and capped a drainage pipe from a sink in an adjacent room.  Although he instructed a hospital employee that the sink was out of order and should not be used, hospital employees poured a drain cleaner into the sink when it wouldn’t drain.  When the plumber returned to remove the drainage line cap, a caustic liquid came out of the pipe, causing him chemical burns.  He sued the hospital for negligence for allowing caustic drain cleaner into the sink when he had given notice it was not to be used. Read More

Owner Potentially Liable for Fraud and Consumer Protection Act Violations Based on False Promises of Payment

Atlantis Int’l Constr. Servs., Inc. v. Sluggo, LLC, 71 Mass. App. Ct. 1106 (2008) (Unpublished)

In this unpublished decision, the Massachusetts Appeals Court held that an owner could be held liable for fraud, breach of contract and violation of the Massachusetts Consumer Protection Act (M.G.L. c. 93A) for inducing a general contractor continue work based on the promise that the general contractor’s numerous disputed change order requests would be paid in full.  After completion of the project the owner refused to pay many of the general contractor’s change orders. Read More

Potential Pitfalls in Australian Dispute Resolution Clauses

Seeley Int’l Pty. Ltd. v. Electra Air Conditioning BV, 2008 WL 276689, [2008] FCA 29 (Fed. Ct. Austl.)

This Australian case illustrates the issues, in that jurisdiction, which can turn on niceties in the drafting of dispute resolution clauses.  Seeley, a distributor of air conditioners sued their manufacturer, Electra, in the Australian Federal Court for breach of contract, seeking a declaration and summary judgment.  Electra sought to restrain the proceedings on the basis of an agreement to arbitrate any issue between the parties before a single arbitrator seated in Melbourne under the IAMA Rules.  However, the relevant clause also provided that nothing in it “prevents a party from seeking injunctive or declaratory relief in the case of a material breach or threatened breach of this Agreement.”
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Municipal Authority’s Claim Against Surety for Bad Faith Falls Short

Intercon Constr., Inc. v. Williamsport Mun. Water Auth., 2008 WL 239554 (M.D. Pa. Jan. 28, 2008)

This case involved standard breach of contract claims and counterclaims between a general contractor and a public municipal authority.  In addition, the municipal authority also sued a performance bond surety on claims of bad faith. The municipal authority alleged that the manner in which the surety investigated and denied coverage under the performance bond, and its withholding of certain information from the authority, constituted bad faith under the Pennsylvania bad faith insurance statute. Read More

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