James M. Kwartnik Jr.

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Lend Lease (US) Constr. LMB Inc. v. Zurich Am. Ins. Co., No. 11, 2017 N.Y. LEXIS 112 (N.Y. Feb. 14, 2017)

Early, in its opinion, the New York Court of Appeals noted that “[o]ne of the most dramatic images of [Superstorm Sandy] depicts the damage caused to [a] crane [being used on the construction of a 74-story skyscraper] when the boom of the crane collapsed in high winds and teetered precariously from a height equal to the top of the building.” At the time of the incident, Extell, the owner of the project, was the named insured on a $700 million builder’s risk insurance program comprised of five separate insurance policies.  Lend Lease, the contractor, was an additional insured on the policies.

Following the incident, Extell and Lend Lease submitted a claim to the insurers seeking to recover the damages incurred by Extell and Lend Lease resulting from weather-related harm to the crane. The insurers denied the claim and disclaimed that there was coverage under the policies.  This action ensued.  Both parties filed motions seeking summary judgment on the coverage issue.  The trial court denied the motions, ruling that there was an issue of fact regarding the applicability of certain exclusions in the policies.  On appeal, the Appellate Division granted the insurers’ motion for summary judgment, finding that there was no coverage because the crane did not fall within the policies’ definition of “temporary works.”  This appeal followed.

Resolving the appeal required the Court of Appeals to answer two questions. First, was the damage to the crane covered under the policies in the first instance.  Second, if there was coverage, was it defeated by the policies’ contractor’s tools exclusion.  As explained below, the court concluded that although there may have been coverage in the first instance, the coverage was defeated by the exclusion.Continue Reading New York Court of Appeals Holds That Tower Crane Damaged By Superstorm Sandy Is Not Covered by Project’s Builder’s Risk Insurance Program

Hensel Phelps Constr. Co. v. Thompson Masonry Contractor, Inc., et. al., No. 151780, 2016 Va. LEXIS 166 (Va. Nov. 3, 2016)

The dispute arose from the construction of a student health and fitness center at Virginia Tech. The prime contractor, Hensel Phelps, and its subcontractors substantially completed their work in 1998, and Virginia Tech made final payment in 1999. In April 2012, Virginia Tech discovered defects in the work, elected to repair them, and then sought to recover the costs from Hensel Phelps. Despite the significant passage of time between completion of the work and Virginia Tech’s assertion of its claims, Hensel Phelps could not invoke the statute of limitations because under Virginia Code § 8.01-231, statutes of limitation do not apply to claims asserted by Commonwealth agencies such as Virginia Tech.  Ultimately, Hensel Phelps paid $3,000,000 to Virginia Tech to settle the defective work claims.

Hensel Phelps, in turn, sought to recover from the subcontractors that performed the defective work. When the subcontractors refused to pay, Hensel Phelps commenced an action alleging, among other things, breach of contract against the subcontractors and their sureties. All of the defendants argued that Hensel Phelps’ claims were barred by the applicable statute of limitations. The lower courts agreed. On appeal, the Virginia Supreme Court affirmed.Continue Reading Virginia Supreme Court Holds That Subcontractors Did Not Waive Statute of Limitations, With The Result That The General Contractor Was Liable To Owner For Defective Work But With No Recourse Against Subcontractors Who Performed The Work

Elliott-Lewis Corp. v. Skanksa USA Bldg., Inc., 2016 U.S. Dist. LEXIS 59406 (E.D.Pa. May 4, 2016)

The Federal District Court for the Eastern District of Pennsylvania held that the narrow exception to the economic loss doctrine carved out in Bilt-Rite Contractors, Inc. v. The Architectural Studio – where the Pennsylvania Supreme Court held that architects and other design professionals may be held liable to third parties that rely to their detriment on false information provided in design documents by architects and other design professionals – does not apply to a contractor that supplied information to design professionals in connection with remedial work performed by the contractor.Continue Reading Eastern District of Pennsylvania Distinguishes Bilt-Rite in Dispute Involving Information Provided to Designers by Remedial Contractor

NFL Mgmt. Council v. NFL Players Ass’n, 2015 U.S. Dist. LEXIS 117662 (S.D.N.Y. Sept. 3, 2015)

“Arbitration has been proven to be an effective way to resolve disputes fairly, privately, promptly and economically.”  So provides the preamble to the Construction Industry Rules of the American Arbitration Association.  A large part of the advantage of arbitration is the finality of the result, stemming from the lack of a meaningful appeal rights on legal issues, contractual interpretation, factual determinations, or the dispute resolution process itself.  Indeed, the Federal Arbitration Act, 9 U.S.C. §10, provides that an arbitration award is to be confirmed as a judgment unless one of four specific and narrow conditions for vacatur is met.

Probably the most notorious instance of an appeal of an arbitration award (and certainly the one most likely to come up in cocktail party conversation) was decided in September 2015 by Judge Richard M. Berman of the United States District Court for the Southern District of New York – the successful appeal by All-Pro Quarterback Tom Brady and the NFL Players Association of Brady’s four game suspension based on accusations of complicity in a scheme to gain an unfair competitive advantage in an NFL playoff game.  NFL Mgmt. Council v. NFLPA, No. 15-Civ.-5916 (RMB) (S.D.N.Y. Sept. 03, 2015)  There, the Southern District applied the Federal Arbitration Act standard to its review of Brady’s suspension, the same standard of review usually applied to an arbitration award arising from a claim under a construction contract with an arbitration clause. [1]  But Brady, unlike the vast majority of parties disappointed with arbitration awards, succeeded in having his suspension vacated.  The NFL Management Council has appealed the Southern District’s decision, and the matter is currently on an expedited appeal track, with argument before the Second Circuit scheduled for March 1, 2016.Continue Reading Review Of Arbitration Awards: Lessons for the Construction Industry from the Tom Brady Case

Apex Directional Drilling, LLC v. SHN Consulting Eng’rs & Geologists, Inc., 2015 U.S. Dist. LEXIS 105537 (N.D. Cal. Aug. 11, 2015)

The United States District Court for the Northern District of California held that an engineer that prepares plans and specifications to be relied upon by contractors in preparing their bids for a construction project owes a duty of care to those contractors, and therefore can be held liable to the contractors for breach of professional duty and/or negligent misrepresentation.Continue Reading U.S. District Court for Northern District of California Holds Engineer May Be Liable to Contractor for Breach of Professional Duty and Negligent Misrepresentation

King County v. Vinci Construction Grands Projects/Parsons RCI/Frontier-Kemper, JV, 2015 Wash. App. LEXIS 2735 (Nov. 9, 2015)

The Court of Appeals of Washington recently decided King County v. Vinci Construction Grands Projects/Parsons RCI/Frontier-Kemper, JV, a dispute between a joint venture contractor (the Contractor) and King County, Washington (the County). The dispute stemmed from problems that arose and significant delays that occurred during a major expansion of the County’s wastewater treatment system, known as the Brightwater project. The case illustrates the potential pitfalls of a contractor’s claim of differing site conditions.Continue Reading Washington State Court Affirms $155M Jury Award Against Contractor and Surety Stemming from Claim of Default Due to Delayed Performance, Sustaining Denial of Contractor’s Differing Site Condition Defense

Gongloff Contracting, L.L.C. v. L. Robert Kimball & Assocs., Architects and Eng’rs, Inc., 2015 Pa. Super 149 (Pa. Super. Ct. July 8, 2015)

Pennsylvania law generally bars negligence claims when the injured party has suffered only economic losses.  This principle is commonly referred to as the economic loss doctrine.  An exception to this doctrine is found in Section 552(1) of the Restatement (Second) of Torts, which provides that, “one who, in the course of his business, profession or employment … supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.” In Bilt-Rite Contractors, Inc. v. Architectural Studio, 581 Pa. 545 (2005), the Pennsylvania Supreme Court adopted this exception and found it to be applicable in cases where information is negligently supplied by an architect or design professional under circumstances where it is foreseeable that others will rely upon that information.  In Gongloff, the Superior Court of Pennsylvania, interpreting Bilt-Rite, held that the Bilt-Rite exception can be triggered when an architect or design professional negligently includes faulty information in its design documents.  The Gongloff court rejected the argument that, under Bilt-Rite, an injured party is required to identify an “express” misrepresentation in a particular communication or document in order to support a claim of negligent misrepresentation.Continue Reading Superior Court of Pennsylvania Holds that Negligent Misrepresentation Exception to Economic Loss Doctrine Under Bilt-Rite May Be Predicated on Implied Representation in Negligently Prepared Design Documents

State v. Perini Corp., 2015 N.J. LEXIS 388 (N.J. April 30, 2015)

The Supreme Court of New Jersey held that for an improvement supplying critical utilities to multiple buildings constructed as part of a multi-phase construction project, the ten year statute of repose (N.J.S.A. 2A:14-1.1(a)) begins to run from that time when the final buildings comprising the project are substantially complete and the improvement is hooked up to all of the buildings it is designed to serve.Continue Reading Supreme Court of New Jersey Determines When Statute of Repose Begins to Run for a Mechanical System Serving a Project Completed in Phases

U.W. Marx, Inc. v. Koko Contracting, Inc., No. 518611, 2015 N.Y. App. Div. LEXIS 600 (N.Y. App. Div. Jan. 22, 2015)

The Appellate Division of the Supreme Court of New York affirmed judgment in favor of a subcontractor holding that although the subcontractor failed to comply with a contractual provision requiring it to give timely notice of its intent to stop work due to contractor’s failure to make payment, the contractor’s prior failure to make three consecutive progress payments to subcontractor constituted an uncured, material breach that relieved the subcontractor from performing its remaining obligations under the parties’ contract.Continue Reading New York Appellate Division Holds That Subcontractor’s Failure to Give Cure Notice Before Stopping Work Did Not Bar Recovery Because Contractor’s Prior Unjustified Failure to Make Three Successive Progress Payments Constituted Uncured, Material Breach

Philadelphia Auth. for Indus. Dev. v. United States, 114 Fed. Cl. 519 (2014)

In this action, the United States Court of Federal Claims denied the Government’s motions to dismiss and for summary judgment, holding that plaintiff had sufficiently pled and supported claims against the Government based upon misrepresentations and omissions in data supplied by the Government in a negotiated procurement.  The Court held that negligent estimate, superior knowledge, misrepresentation and mutual mistake were viable theories upon which to pursue such a claim.  It rejected the Government’s position that a claim for negligent estimate could not be maintained in the context of a negotiated procurement, and also held that the plaintiff’s expectation of a limited loss did not negate the element of reliance with respect to much larger losses attributable to undisclosed or misrepresented information.Continue Reading Court of Federal Claims Determines That Government Contractor May Recover for Losses Attributable to Omissions and Inaccuracies in Data Provided By Government in Negotiated Procurement