Catagory:Case Summaries

1
Violation of Building Permit Requirement Not a Basis for Criminal Liability Under NY Executive Law
2
Objects Falling From Ground Level Can Trigger Liability Under NY Scaffold Law
3
Court overturns City Rejection of Low Bidder based on alleged lack of Necessary Experience
4
Prevailing Parties Denied Attorney Fees for Lack of a Public Works License
5
The Federal Prompt Pay Act Does Not Create A Private Right Of Action
6
Standards Applicable to Construction Site Safety, Conditions and Injuries
7
Appellate Court Upholds Contract Requirement For Arbitration of Disputes
8
Recent Third Circuit Decision Provides Insight into Pennsylvania’s Approach to CGL Coverage for Faulty Construction Claims
9
Prompt Payment Penalties: CA Court of Appeal Relaxes Standard, “Good Faith Dispute” To Be Proven By Objective Evidence
10
Architects Beware – You Better Be Licensed In The Project Location, Even If It’s Foreign Soil

Violation of Building Permit Requirement Not a Basis for Criminal Liability Under NY Executive Law

People of the State of New York v. Grimditch, 936 N.Y.S.2d 527 (Sup. Ct. Essex Co. 2012).

In a case of first impression, the Court in People v. Grimditch held that a contractor cannot be held liable under New York Executive Law § 382(2) solely for building without a permit.  The Defendant contractor had been constructing a boathouse on Lake Placid when the town building code enforcement officer issued a stop work order for failure to obtain a building permit under the state building code.  When Defendant contractor disobeyed the order by continuing construction, he was indicted by the Essex County District Attorney’s Office for violating Executive Law § 382(2), which provides that failure to follow an “order to remedy any condition found to exist in, on, or about any building” or knowingly violating an order by a local government regarding the “standards for construction, maintenance, or fire protection” will result in fines or imprisonment.  The Court held that the indictment was defective because building without a permit did not amount to a condition existing “in, on, or about” the building and therefore was not a violation of the express language of the statute.  The Court also held that the requirement of a building permit was not a “standard of construction or maintenance.”

Objects Falling From Ground Level Can Trigger Liability Under NY Scaffold Law

Wilinski v. 334 East 92ND Housing Dev. Fund Corp. et. al., 18 N.Y.3d 1, 935 N.Y.S.2d 551 (N.Y. 2011)

The New York Court of Appeals held that New York Labor Law § 240(1) could apply to injuries caused by a falling object whose base stands at the same level as the injured worker.  The Plaintiff was a construction worker who, while in the process of demolishing walls in a vacant building, was injured when two ten-foot poles which rose out of the floor on which he was working fell on him.  The Court clarified its prior holding in Misseritti v. Mark IV Constr. Co., 86 N.Y.2d 35, 657 N.E.2d 1318 (NY 1995), by stating that Labor Law § 240(1), a scaffold law, could be invoked even if the injury was caused by an object on ground level.  In so doing, the Court explained that in order to state a claim under the statute, the plaintiff has to prove both that the injury was caused by the effect of gravity and that use of the protective equipment listed in the statute could have prevented the injury from occurring.  In this case, though the Court determined that the injuries caused by the poles falling were caused by the effect of gravity, summary judgment in favor of the plaintiff worker was precluded because an issue of fact remained as to whether the equipment prescribed by the statute could have prevented the injury from occurring.

In addition, Plaintiff brought a claim under 12 NYCRR 23-6.3(b)(3), a regulation promulgated under New York Labor Law § 241(6), which provides that “walls, chimneys and other parts of any building or other structure shall not be left unguarded in such condition that such parts may fall, collapse or be weakened by wind pressure or vibration.”  The Court found that Defendant could be liable despite the fact that neither wind pressure nor vibration contributed to the poles falling.  The Court reasoned that the wind pressure and vibration clause only attached to the words “be weakened” and not to the clauses “fall” and “collapse.”

Court overturns City Rejection of Low Bidder based on alleged lack of Necessary Experience

Hillside Landscape Constr. Inc. v. City of Lewiston 151 Idaho 749, 264 P.3d 388 (2011)

The City of Lewiston received multiple bids on a public works project.  It rejected the low bidder’s offer on the ground that the low bidder lacked sufficient experience for the project.  The low bidder brought an action against the City for declaratory relief, injunctive relief, and damages.  The district court dismissed the complaint, and the low bidder appealed.

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Prevailing Parties Denied Attorney Fees for Lack of a Public Works License

Harris, Inc. v. Foxhollow Constr. & Trucking Inc., 151 Idaho 761, 264 P.3d 400 (2011)

Following work on a public project, a general contractor brought suit against a paving subcontractor and an excavation subcontractor alleging breach of contract, fraud and other claims.  The paving sub had a public works license for contracts up to $500,000, but the excavation sub had no license.  In what the district court called an “illegal ruse,” the subs agreed to submit a joint bid, using the paving sub’s license.  The total bid, including paving and excavation, exceeded $500,000.  After a trial to the court, the district court entered judgment for defendants, including an award of attorney fees to the paving subcontractor.  The general contractor appealed.

The Supreme Court of Idaho affirmed the judgment in favor of defendants, but reversed the award of attorney fees.  Under Idaho law, reasonable attorney fees are allowed in “any action to recover on a contract for services or in any commercial transaction.” I.C. § 12-120(3).  The Supreme Court found, however, that even if this was a commercial transaction, the contract was illegal because the licensed subcontractor engaged in a “flagrant disregard of the law” by teaming up with an unlicensed subcontractor.  As a result, the paving subcontractor was not entitled to recover its attorney fees despite having prevailed in a commercial transaction.

The Federal Prompt Pay Act Does Not Create A Private Right Of Action

United States of Am. ex rel. IES Commercial, Inc. v. The Continental Ins. Co., Inc., Civ. Action No. 11-0985 (ESH), 2011 WL 4526018 (D.D.C. Sept. 30, 2011)

In this case, the court ruled that the Federal Prompt Payment Act (31 U.S.C. §§3901 et seq.) (the “PPA”) does not provide a subcontractor with an independent cause of action or an implied right of action against a Prime Contractor (or presumably its surety).

A prime contractor was awarded a contract by the United States Architect of the Capitol to perform certain design/build work on utility tunnels connecting the U.S. Capitol Power Plant to the Capitol.  Included was electrical work which was, in turn, subcontracted to the Plaintiff, IES Commercial, Inc. (“IES”) in the sum of $118,600.00.  Following disputes relating to certain changes and delays between the Prime and IES, IES sued the Prime’s Miller Act (40. U.S.C. §§3131 et seq.) payment bond surety.  Thereafter, the Prime intervened and IES sued the Prime for (a) breach of contract and (b) violation of the PPA.

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Standards Applicable to Construction Site Safety, Conditions and Injuries

Cain v. Bovis Lend Lease, Inc., 817 F. Supp. 2d 1251  (D. Or. 2011)

A subcontractor employee fell from a ladder at a hospital renovation site and suffered injuries.  The injured worker sued the hospital, the renovation general contractor, the ladder fabricator (a subcontractor) and the architect.  The worker’s direct employer was statutorily immune from liability.  The case is the review of summary judgment motions by all parties resulting in a recommended series of decisions by a federal magistrate.

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Appellate Court Upholds Contract Requirement For Arbitration of Disputes

Gemstone Builders, Inc. v. Stutz, 261 P.3d 64 (Or. Ct. App. 2011)

Contractor sued homeowners, who had hired contractor to build a home for them.  Contractor sued for breach of contract, unjust enrichment and fraud.  The parties disagreed regarding the interpretation of their contract as it pertained to arbitration.  The contractor argued that the terms were irreconcilably contradictory, making the arbitration provisions unenforceable.  The homeowner sought to compel arbitration.  Addressing the issue, the trial court denied defendants’ petition to compel arbitration and defendants appealed.

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Recent Third Circuit Decision Provides Insight into Pennsylvania’s Approach to CGL Coverage for Faulty Construction Claims

By: Richard F. Paciaroni & Amy Ream, K&L Gates, Pittsburgh

Despite substantial uniformity in language among commercial general liability (“CGL”) policies, the extent of coverage can vary depending upon which state’s law applies.  One contested issue among the states is whether CGL policies should extend coverage for property damage caused by faulty construction, and what the extent of any such coverage should be.  This article discusses a recent opinion reflecting the current status of Pennsylvania law with respect to CGL coverage for faulty construction claims, and briefly touches on the policy behind Pennsylvania’s existing approach.

A recent Third Circuit decision applying Pennsylvania law, Specialty Surfaces International, Inc. v. Continental Casualty Co., addressed the scope of an insurer’s duty to defend and indemnify a contractor for faulty workmanship claims under a CGL policy.  In Specialty Surfaces, the source of the defective construction allegations stemmed from a project to install synthetic turf fields and drainage systems for four schools in the Shasta Union High School District (“Shasta”).  Empire and Associates, Inc. (“Empire”) was hired as a subcontractor to provide and install synthetic turf fields manufactured by Specialty Surfaces, Inc., (“Specialty Surfaces”) as well as to install drainage systems.  Empire and Specialty Surfaces, working together as “Sprinturf,” provided an eight-year warranty for each of the fields.

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Prompt Payment Penalties: CA Court of Appeal Relaxes Standard, “Good Faith Dispute” To Be Proven By Objective Evidence

FEI Enters., Inc. v. Kee Man Yoon, 194 Cal. App. 4th 790 (2011)

To encourage general contractors to make timely payments to subcontractors, California Business and Professions Code section 7108.5 requires a general contractor to pay its subcontractors within 10 days of receiving a corresponding progress payment from the project’s owner, unless the parties agree otherwise in writing.  If the general contractor fails to do so, the subcontractor may recover a payment penalty.  That penalty is fixed at 2% of the amount due per month for every month the payment is not made.

The general contractor, however, may withhold progress payments and avoid the payment penalty if there is a “good faith dispute” over the amount owed.  The question is what constitutes a “good faith dispute.”  In the recent case of FEI Enters., Inc. v. Kee Man Yoon, 194 Cal. App. 4th 790 (2011), the California Court of Appeal held that a “good faith dispute” exists “where the arguments asserted or positions taken have objective legal tenability.”  In other words, the subcontractor does not need to show what a general contractor believed in his or her own mind.  The subcontractor only needs to show objective evidence that the general contractor’s actions were unreasonable.

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Architects Beware – You Better Be Licensed In The Project Location, Even If It’s Foreign Soil

By: Lawrence M. Prosen, K&L Gates, Washington, D.C.

Sturdza v. United Arab Emirates, 11 A.3d 251 (D.C. 2011)

In a case of first impression in the District of Columbia (“D.C.”), an Architect has been barred from recovering fees for architectural services in the District of Columbia where the architect lacked a license to practice in D.C. when it negotiated terms for a services contract.  This bar was upheld even where (a) the architect was licensed in another jurisdiction; and (b) the project was actually on “foreign soil” in that it was for the Embassy of the United Arab Emirates (“UAE”) located in the United States.

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