Atlantic City Associates, LLC v. Carter & Burgess Consultants, Inc., et al
2011 U.S. App. LEXIS 9191 (3rd Cir. May 4, 2011)

* Please note that the Third Circuit issued this opinion as a non precedential opinion pursuant to Third Circuit Internal Operating Procedure Rule 5.7.

Atlantic City Associates (“ACA”) hired Carter & Burgess Consultants, Inc. (“C&B”) to oversee construction of a development in Atlantic City, New Jersey. Following numerous delays, ACA sued C&B and obtained a total recovery, including attorneys’ fees, costs and interest, of nearly $13 million. On appeal, C&B argued that the District Court failed to apply several clauses of the parties’ agreement waiving consequential damages, and failed to enforce an additional clause limiting C&B’s total liability to its compensation.


Continue Reading Third Circuit, Applying NJ Law, Revisits Distinction Between Direct and Consequential Damages and Holds Indemnification Obligation Only Applies When Seeking Damages for Third-Party Losses

Los Angeles Unified School District v. Great American Insurance Company
49 Cal. 4th 739 (July 12, 2010)

On July 12, 2010, the California Supreme Court filed a ruling significant to public entities entering into contracts for public works projects. In Los Angeles Unified School District v. Great American Insurance Company, the Court held that a public entity “may be required to provide extra compensation if it knew, but failed to disclose, material facts that would affect the contractor’s bid or performance,” even when the failure to disclose information was not fraudulent. Articulating a test modeled after the federal courts’ superior knowledge doctrine, the high court articulated four conditions that must be met for such liability to attach.


Continue Reading California Supreme Court Holds Public Entity May Be Liable to Contractor for Nondisclosure of Material Information Under Superior Knowledge Doctrine – Proof of Affirmative Concealment or Intentional Misrepresentation Not Required

Trevdan Building Supply v. Toll Brothers, Inc.
2010 PA Super. 100, 996 A.2d 520 (May 28, 2010)

On May 28, 2010 the Pennsylvania Superior Court filed a ruling that is significant to project owners as well as subcontractors and suppliers. In Trevdan Building Supply v. Toll Brothers, Inc., the Court held that an unpaid supplier had an “equitable lien” on contract funds that the owner had interpleaded into Court; and that the contractor, its bankruptcy estate and its secured bank creditor did not have a cognizable interest in the contract funds because, under the terms of the construction contract, the contractor did not earn the funds until it had both performed the work and paid its suppliers. The Court considered the unpaid supplier’s rights to be so clear that the Court denied the owner’s statutory claim to be reimbursed its attorneys’ fees for filing the interpleader action, stating that the owner was guilty of “delay” and acted “unreasonably” by “ignoring” the supplier’s equitable claim and refusing “to exercise its undisputed contractual right to pay” the supplier (this despite two judges in the same case – the trial judge and a dissenting Superior Court judge – having decided the case differently).


Continue Reading Pennsylvania Superior Court Holds Unpaid Supplier’s Right to Contract Funds is Superior to Rights of Failed Contractor’s Secured Bank Creditor and Bankruptcy Estate – Owner’s Recovery of Attorneys’ Fees in Interpleader Disallowed

Hartford Fire Insurance Co. v. City of Mont Belvieu
2010 U.S. App. Lexis 14277 (5th Cir. July 13, 2010)

The Court of Appeals for the Fifth Circuit recently held that a Texas City’s bond claim was time barred under the statute of limitations and equitable remedies based on estoppel were unavailable to revive claims on the bond.

Hartford Fire Insurance Company issued a performance bond for a contractor constructing a public recreational facility for the City of Mont Belvieu, Texas. The bond was a requirement under Texas public work contracts. By statute, the bond was subject to a one-year limitations period commencing from project final completion. The project progressed with numerous delays and changes. However, the City issued a certificate of occupancy in mid-2001, taking possession and operating the facility by July 2002.

At that time, numerous punch list items remained and several subcontractors owed payment by contractor filed claims on a payment bond. Hartford advised the City to be cautious when releasing further payment to contractor. Thereafter, in July 2002, City paid contractor almost $675,000 as an equitable adjustment via a change order. Critically, the change order stated that the project’s completion date was July 19, 2001.


Continue Reading U.S. Court of Appeals for the Fifth Circuit Holds Performance Bond Claim Time Barred – Estoppel Excuse Not Available to City

Indianapolis – Marion County Public Library v. Charlier Clark & Linard, P.C
2010 Ind. LEXIS 397 (Indiana, June 29, 2010)

The Indianapolis-Marion County Public Library entered into contracts with Woollen Molzan and Partners, Inc. (“Architect”) for the design for the renovation and expansion of the Library’s facility including its parking garage. The Architect entered into subcontracts with Thornton Tomasetti Engineers (“TTE”) and Charlier Clark and Linard, P.C. (“CCL”) to perform architectural and engineering services. TTE performed structural engineering services and CCL administered various services for the Project, including reviewing and inspecting the construction plans and construction progress to determine if construction was in general compliance with the construction documents. The Library never consulted directly with TTE or CCL.


Continue Reading Indiana Supreme Court Holds Economic Loss Doctrine Bars Owner’s Claims for Design Deficiencies Against Engineering Firms Not in Privity

Circle Y Construction, Inc. v. WRH Realty Services, Inc.
2010 U.S. Dist. LEXIS 67812 (N.D. Ga. July 8, 2010)

Circle Y Construction, Inc. contracted with WRH Hidden Colony to perform certain renovation work at nine unoccupied apartment units. The contract designated Brown, vice president of construction services for WRH Realty Services, as the person responsible for administering the contract on behalf of WRH Hidden Colony and stated that Brown was the only person authorized to approve changes to the scope of work. The contract further provided that “all extra or changed work shall be authorized by a written change order.”


Continue Reading U.S. District Court in Georgia Holds Written Change Order Requirement Waived By Course of Conduct

Kuhn Construction Company v. Ocean and Coastal Consultants, Inc.
2010 U.S. Dist. LEXIS 71057 (D. Del. July 15, 2010)

Diamond State Port Corporation (“DSPC”) engaged Ocean and Costal Consultants, Inc. (“OCC”) to prepare engineered drawings, plans, and specifications for a project at the Port of Wilmington in Delaware. In soliciting bids, DSPC utilized the bid documents designed and prepared by OCC. Kuhn Construction Company (“Kuhn”) relied upon those documents to prepare its bid for work on the project. As the lowest bidder, Kuhn entered into a contract with DSPC.


Continue Reading U.S. District Court in Delaware Allows Contractor’s Tort Claims Against Engineer to Proceed – Also Holds Owner Not an Indispensable Party

Raito, Inc. v. Cardi Corp.
2010 R.I. Super. LEXIS 108 (RI Super. Ct. July 14, 2010)

The Superior Court of Rhode Island was recently asked to reconsider its earlier ruling in which it found that a condition precedent to recovery under a performance bond was not satisfied and, therefore, summary judgment in favor of the surety was warranted. The Court found no reason to disturb its prior ruling and denied the motion for reconsideration.


Continue Reading Rhode Island Court Holds Notice of Default and Termination Prior to Completion a Condition to Claim on Subcontractor Performance Bond

John L. Mattingly Constr. Co. v. Hartford Underwriters Ins. Co.
2010 Md. LEXIS 327 (Md. July 27, 2010)

The Maryland Court of Appeals determined that the waivers of subrogation clause in AIA A107-1997 is ambiguous as to whether it encompasses losses sustained after completion of construction and final payment. As a result, the case was remanded to the Court of Special Appeals so that it could resolve the ambiguity by considering extrinsic evidence.

In 2002, K.B.K., Inc. and John L. Mattingly Construction Company, Inc. entered into AIA form contract number A107-1997 to build an Arby’s Restaurant. Section 16.4 of the Contract required K.B.K. to “purchase and maintain property insurance until final payment has been made” or until no person … other than K.B.K had an insurable interest.” Section 16.5 of the Contract stated that K.B.K. and Mattingly “waived all rights against … each other and any of their subcontractors for damages covered by property insurance … applicable to the Work.”


Continue Reading Court of Appeals of Maryland Holds AIA A107-1997 Waivers of Subrogation Clause Ambiguous – Therefore Extrinsic Evidence Should Be Considered to Determine Whether the Parties Intended the Waiver to Apply to Claims Arising After Construction

Mastec North America, Inc. v. El Paso Field Services, L.P.
2010 Tex. App. LEXIS 3436 (Tex. App. May 6, 2010)

The Court of Appeals of Texas recently held that when a contract places the risk of differing site conditions on the contractor, the contractor is not required to bear the risk “that the bid documents misrepresent the nature and amount of the work to be performed.”

The matter involved replacement of a pipeline that extended from Houston to Corpus Christi. Defendant El Paso contracted with Plaintiff MasTec, for the replacement work.


Continue Reading Texas Court Holds Contract Allocation of Risk of Underground Conditions Overridden by Owner’s Affirmative Assurances in Specifications