On June 8, 2020, Level 10 Construction, LP (“Level 10”), a construction company hired by Sea World San Diego (“Sea World”), filed a Complaint in California federal court alleging that Sea World is withholding over $3.2 million dollars in payments from Level 10. In the Complaint, Level 10 alleged that Sea World has declined to issue payments until the Sea World park reopens. Sea World has remained closed since March 2020 due to COVID-19. Continue Reading Level 10 Construction v. Sea World LLC: Can Force Majeure Save Sea World?
This article was originally published in Government Construction (Volume 5, Issue 2 – Summer 2020), an ABA Division 13 Quarterly Newsletter. It is republished here with permission.
The United States Civilian Board of Contract Appeals (the “Board”) recently issued a decision that may be particularly pertinent in light of the COVID-19 pandemic. In Pernix Serka Joint Venture v. Department of State,1 the Board rejected a contractor’s claim for additional costs related to demobilization and remobilization of the job site in Freetown, Sierra Leone, due to an Ebola virus outbreak. The Pernix decision should put government contractors on notice that, depending on applicable contract language, federal contractors may be entitled to schedule relief, but not costs, as contractors deal with COVID-19 related impacts. Continue Reading CBCA Offers Potential Insight Into How Board Will Handle Claims Related to COVID-19
Published in Dispute Resolution Journal (June 2020, Vol. 74, No. 3), the flagship publication of the American Arbitration Association. © 2020, American Arbitration Association. It is reprinted here with permission.
“There is a deceptive simplicity about the way in which arbitral proceedings are conducted… In fact, the appearance conceals the reality.”
Arbitration is simple. Parties select a person or persons — the arbitrator(s) — whose expertise or judgment they trust to resolve their differences in a privatized forum. After each party puts on their case, the arbitrator(s) consider the arguments and evidence and renders a binding decision. Continue Reading Internationalizing Domestic Arbitration: How International Arbitration Practices Can Improve Domestic Construction Arbitration
United States Army Corps of Engineers v. John C. Grimberg Co., Inc., No. 2019-1608, 2020 BL 215269 (Fed. Cir. June 9, 2020)
The Court of Appeals for the Federal Circuit reversed a decision by the Armed Services Board of Contract Appeals (“Board”), which had found in favor of a contractor on a Type I differing site condition claim. The Board had held that, even though the contractor’s interpretation of the contract documents was unreasonable, it was more reasonable than the government’s. The Federal Circuit reversed, holding, as a matter of law, that the contractor’s unreasonable interpretation of the contract documents barred its claim. Continue Reading Federal Court Holds the Reasonableness of the Government’s Interpretation of Geotechnical Data is Irrelevant to Differing Site Condition Claim
P.A.L. Environmental Safety Corp. v. North American Dismantling Corp. Et Al., No. 19-11630, 2020 BL 198779 (E.D. Mich. May 28, 2020)
A Michigan federal court partially granted Consumers Energy Company’s (“CEC”) motion to dismiss P.A.L. Environmental Safety Corporation’s (“PAL”) complaint alleging numerous causes of action in connection with its suit against CEC and contractor North American Dismantling Corporation (“NADC”) for outstanding payment stemming from asbestos abatement work at a CEC-owned power plant in Essexville, Michigan (the “Power Plant”).
According to the decision, CEC, as owner, and NADC, as prime contractor, entered into a written contract whereby NADC agreed to abate, dismantle, and demolish the Power Plant. In turn, NADC subcontracted with PAL to perform abatement of all asbestos containing material at the Power Plant. While the subcontract price was $7,996,331, PAL alleged entitlement to an adjusted price of $23,841,833 in unpaid labor and materials for its asbestos abatement work. Specifically, PAL alleges that it performed additional work not accounted for in the subcontract including fly ash and coal dust removal, refractory brick abatement, and extra asbestos removal.
While PAL’s complaint included numerous counts against Defendants NADC, CEC, and labor and material payment bond surety North American Specialty Insurance Company (“NASIC”), the opinion is most notable for its treatment of CEC’s motion to dismiss several counts against it including: (i) quasi-contractual claims; (ii) a third-party breach of contract claim; and (iii) a negligent misrepresentation claim. Continue Reading Michigan Federal Court Permits Subcontractor’s Quasi-Contractual Claims to Proceed Despite Existence of Express Contract Covering the Same Subject Matter
Gables Construction, Inc. v. Red Coats, Inc., No. 23, 2020 BL 193791, 2020 MD LEXIS 264 (Md. May 26, 2020)
Upper Rock II, LLC (“Upper Rock”) contracted Gables Construction, Inc. (“GCI”) to construct a multi-building apartment complex in Rockville, Maryland (the “Project”) per the terms of the American Institute of Architects (“AIA”) A102TM-2007, Standard Form Agreement Between Owner and Contractor and AIA A201TM – 2007, General Conditions of the Contract for Construction. The General Conditions required Upper Rock to purchase and maintain a property insurance policy. It also contained a waiver of subrogation provision under which Upper Rock waived all rights against GCI and other Project participants for damages caused by fire to the extent covered by insurance. Continue Reading Maryland Court Holds No Right of Contribution Where a Waiver of Subrogation Precludes Common Legal Responsibility
The U.S. Supreme Court issued a unanimous decision on June 1 in GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC, holding that, in some circumstances, even nonsignatories to an agreement may invoke international arbitration. The Court ruled that the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) did not prohibit the application of the U.S. doctrine of equitable estoppel to permit the enforcement of arbitration agreements by nonsignatories. In doing so, the Court clarified that the doctrine of equitable estoppel recognized under Chapter 1 of the Federal Arbitration Act (FAA) for U.S. domestic arbitrations could also be applied to international arbitration proceedings governed by Chapter 2 of the FAA.
For parties who regularly engage in multi-tiered international commercial arrangements like the kind seen in GE Energy, the ruling expands the reach of international arbitration agreements and gives those parties greater clarity into their own ability to utilize international arbitration to resolve complex disputes. Continue Reading Supreme Court Interprets New York Convention to Allow Arbitration Agreement Nonsignatories to Invoke International Arbitration
D.A. Nolt, Inc. v. The Philadelphia Municipal Authority, 2020 BL 199761 (E.D. Pa. May 28, 2020)
The Philadelphia Municipal Authority (the “Authority”) contracted D.A. Nolt, Inc. (Nolt) to renovate a building that would serve as the City’s new police headquarters. After Nolt had performed a portion of the renovation work, the Authority cancelled the project. Nolt sued the Authority, alleging that the Authority owed it $2.5 million for work performed before the project was cancelled. The Authority denied that payment was due, claiming that Nolt had delayed the project by 255 days and that a $10,000 per day liquidated damages provision in the contract thus offset Nolt’s claim.
Nolt moved for summary judgment on the Authority’s liquidated damages counterclaim. It argued that the provision was unenforceable because the $10,000 per day amount was not a reasonable forecast or approximation of the loss the Authority expected to suffer in the event of delay. Nolt cited testimony from the Project Director for the City’s Department of Public Property, who was responsible for finalizing the Authority’s contract with Nolt. The Director testified that he did not estimate the anticipated harm that might occur in the event of a delay in Nolt’s work. Rather, he determined that $10,000 per day was reasonable because prior City projects of a similar scope and magnitude included $10,000 per day liquidated damages provisions. The Director was not personally involved in the analysis which the City had undertaken on the referenced prior projects, and he did not personally analyze any of the calculations or estimates that the City completed for those prior projects. Continue Reading Federal Court in PA Finds Liquidated Damages Provision Unenforceable Where the Per Day Liquidated Damage Amount Was Copied from Contracts for Prior Unrelated Projects Rather than a Project-Specific Forecast of Likely Damages
N. Plains Res. Council v. United States Army Corps of Eng’rs, No. 4:19-cv-00044-BMM, 2020 BL 35412 (9th Cir. May 14, 2020)
Oil and gas pipeline construction may no longer proceed under Nationwide Water Permit 12 (NWP 12). The Ninth Circuit, by way of a two-judge panel, denied challenges to a district court decision vacating NWP 12 and enjoining the United States Army Corps (Army Corps) from authorizing oil and gas pipeline construction projects pursuant to NWP 12. The Order, which was issued without an opinion, has national effect and set a briefing schedule for reconsideration of a motion for an administrative stay. N. Plains Res. Council v. United States Army Corps of Eng’rs, No. 4:19-cv-00044-BMM. Continue Reading Ninth Circuit Orders Enjoinment of Oil and Gas Line Construction Proceeding Under Nationwide Water Permit 12
On April 17, the California Court of Appeal decided Crosno Construction, Inc. v. Travelers Casualty & Surety Company of America,1 effectively narrowing the scope of enforceable “pay-when-paid” provisions in construction subcontracts to the extent the subcontractor seeks recovery against a general contractor’s payment bond surety. Although the Crosno case involved a public works project, the rationale and holding should apply with equal force to private works projects. Basing the bulk of its decision on the Wm. R. Clarke Corp. v. Safeco Insurance Co.2 case, the court found that an open-ended “pay-when-paid” provision in a subcontract is not enforceable against a subcontractor that seeks to recover on a public works payment bond claim. This article discusses the Crosno decision and the implications for contractors on both sides of the contract moving forward. Continue Reading California Appeals Court Provides Guidance on ‘Pay-When-Paid’ Provisions in Construction Subcontracts