Scungio Borst & Assocs. v. 410 Shurs Lane Developers, LLC et al., 2014 Pa. Super. LEXIS 4527 (Pa. Super. Ct. 2014)

On reconsideration of an earlier panel decision of the Pennsylvania Superior Court, the Court en banc rejected a contractor’s contention that Pennsylvania’s Contractor and Subcontractor Payment Act (“CASPA”) extends liability for non-payment beyond the actual contracting parties.

This action arose out of the construction of a condominium project in Philadelphia’s Manayunk neighborhood (the “Project”).  The owner, 410 Shurs Lane Developers, LLC (the “Owner”), entered into a written contract with Scungio Borst & Associates (the “Contractor”) for the construction of the Project.  The Contractor performed the contracted-for construction services, as well as $2.6 million in additional work at the direction of the Owner and the Owner’s President and fifty percent shareholder, Robert DeBolt.  When the Contractor was not paid approximately $1.5 million incurred due to the additional work, it filed suit against the Owner and Mr. DeBolt individually, alleging, inter alia, breach of contract and violation of CASPA.


Continue Reading En Banc Pennsylvania Superior Court Rejects Extending CASPA Liability Beyond Contracting Parties

Travelers Indem. Co. v. Crown Corr, Inc., 2014 U.S. App. LEXIS 21101 (9th Cir. 2014)

This action arose out of the construction of the University of Phoenix Stadium (the “Stadium”), home of the Arizona Cardinals.  Tourism and Sports Authority (the “Owner”) entered into a Design/Build Agreement with the Arizona Cardinals and Hunt Construction Group (the “Contractor”) for the design and construction of the Stadium (the “Prime Contract”).  The Contractor then entered into a subcontract with Crown Corr, Inc. (the “Subcontractor”) for the design of the Stadium’s exterior enclosure system (the “Subcontract”).


Continue Reading Ninth Circuit Enforces Waiver of Subrogation Clause in Design/Build Agreement Against Post-Construction Property Insurer

Pending House Bill 473 seeks to amend the current lien law by creating a centralized construction notices registry in Pennsylvania known as the State Construction Notices Directory (“Directory”), which would provide owners and general contractors with access to a database listing all potential lien claimants on a registered project.

An owner would have the option of registering a project by filing a notice of commencement on the Directory and posting a copy at the site of the project prior to the start of physical construction.


Continue Reading Proposed Changes to Pennsylvania Mechanics’ Lien Law Would Provide for Internet-Based Directory to Serve as a Standardized Statewide System for Filing Construction Notices

Laquila Grp., Inc. v. Hunt Constr. Grp., Inc., 2014 N.Y. Misc. LEXIS 2824 (N.Y. Sup. Ct. June 25, 2014)

This action arose out of a payment dispute following construction of the Barclays Center in Brooklyn, New York.  General contractor Hunt Construction Group, Inc. (“Hunt”) retained Laquila Group, Inc. (“Laquila) as a subcontractor to perform excavation and foundation work for the project.  The parties executed a subcontract whereby Laquila would perform the work for $27.5 million with the understanding that the work had to be completed in a timely manner due to events at Barclays already scheduled around the completion date.  The subcontract further specified that Hunt was not liable to Laquila for any additional costs or changes in the work absent a written change order.

The project experienced various complications, which resulted in the parties entering into numerous change orders.  Hunt paid Laquila the money due under the original $27.5 million subcontract, plus payments covering the change orders.  Each change order executed by Laquila contained the clause, “[a]cceptance of this Change Order constitutes a waiver of any claim, additional compensation and time whatsoever in relationship to the items covered under this Change Order.”  Moreover, with each progress payment, Laquila submitted releases and a “Partial Waiver of Claims” including a waiver of liens that confirmed that it had been properly paid for its work.


Continue Reading New York Court Rules that Excavator’s Suit Against GC May Proceed Despite Releases It Provided with Progress Billings

United States ex rel. Heggem-Lundquist Paint Co. v. Centerre Gov’t Contracting Grp., LLC, 2014 U.S. Dist. LEXIS 66161 (D. Colo. Apr. 23, 2014) 
 Am. Constr. & Envtl. Servs. v. Total Team Constr. Servs., Inc., 2014 U.S. Dist. LEXIS 57467 (E.D. Cal. Apr. 23, 2014)

Federal district courts for the District of Colorado and the Eastern District of California have ruled  subcontract provisions that disputes will be resolved in accordance with the dispute resolution provisions in a prime contract are insufficient to waive or postpone a subcontractor’s Miller Act rights.

These cases involved claims asserted by subcontractors (collectively “Plaintiffs”) against the upstream contractors and their sureties (collectively “Defendants”) for work performed on federal government projects.  The plaintiff in Haggem-Lundquist performed as a sub-subcontractor on a Department of Veterans Affairs renovation project at a medical center in Denver, Colorado.  The plaintiff in Am. Constr. & Envtl. Servs. performed as a subcontractor in support of a contract with the Army Corps of Engineers to replace emergency generators at a Veterans Administration Care Facility in Fresno, California.  In both actions, Plaintiffs filed claims against the bonds issued for the projects pursuant to the Miller Act to recover money allegedly owed for changed and additional work performed.


Continue Reading District Courts in California and Colorado Hold Subcontract References to Prime Contract Disputes Procedures Do Not Waive Miller Act Rights

BG Group PLC v. Republic of Argentina, 134 S. Ct. 1198 (Mar. 5, 2014) 

This action arose from an investment by British company BG Group PLC (“BG”) in Argentina and under the protection of a treaty between the United Kingdom and Argentina.  The treaty included a provision that required an aggrieved investor to submit their dispute to a local court in the country where the investment was made for a period of eighteen months prior to pursuing arbitration.   BG invoked the treaty for Argentina’s alleged breach of a natural gas distribution contract.  However, prior to exhausting the treaty’s local litigation requirement, BG proceeded to arbitration in Washington D.C.

Argentina argued that the arbitral panel lacked jurisdiction because BG had not complied with the local litigation requirement. The arbitral panel concluded that it had jurisdiction, finding, among other things, that Argentina’s conduct (such as enacting new laws that hindered recourse to its judiciary by investors in BG’s situation) had excused BG’s failure to comply with the local litigation requirement.  The matter proceeded through arbitration where BG was awarded $185 million in damages.

Argentina turned to American courts to overturn the award, again advancing the argument that the arbitral panel lacked jurisdiction.  The district court initially confirmed the award, but on appeal to the Circuit Court it was vacated.  The Circuit Court held that the gateway issue of arbitrability at hand—whether BG was required to commence litigation before the local courts and wait eighteen months before it could commence arbitration—was for a court, and not the arbitral panel, to decide.


Continue Reading U.S. Supreme Court Holds Arbitrators Are to Decide Meaning and Application of Procedural Preconditions to Arbitration if Contract Does Not Specify Otherwise

Bd. of Comm’rs v. Teton Corp., 3 N.E.3d 556, 2014 Ind. App. LEXIS 43 (Ind. Ct. App. 2014)

This action arose out of a repair and renovation project to the Jefferson County Courthouse in Madison, Indiana (the “Project”). The Jefferson County Board of Commissioners (the “Owner”) contracted with Teton Corporation (the “Contractor”) for the work. The parties’ agreement incorporated a form construction contract prepared by the American Institute of Architects (the “AIA Contract”). The AIA Contract required the Owner to provide builder’s risk insurance for the Project, or to notify the Contractor so that the Contractor could procure the insurance and pass the cost on to the Owner through a change order. The AIA Contract also provided for a mutual waiver of the right to subrogation between and among the Owner, Contractor, and all subcontractors. The Owner did not obtain separate property (or builder’s risk) insurance for the Project, instead relying on its existing property and casualty insurance policy. And, the Owner also did not inform the Contractor that it was not securing separate insurance for the Project.

During the renovations, a fire broke out, causing over $6 million in damage to the property, including damage beyond the scope of the Contractor’s “Work” as defined in the AIA Contract. After the Owner’s insurance company paid under the terms of its policy, the Owner sued the Contractor and its subcontractors for the damages. The Contractor moved for summary judgment. The Contractor argued that the Owner agreed to provide insurance for the Project, and the Owner waived its subrogation rights against the Contractor; therefore, the Owner was not entitled to recover damages from the Contractor that were caused by the fire. The trial court agreed with the Contractor and granted summary judgment. The Owner appealed.


Continue Reading Indiana Court of Appeals Holds Waiver of Subrogation Clause in Standard AIA Contract Not Limited to Damage to Contractor’s “Work”

Metcalf Constr. Co. v. United States
742 F.3d 984 (Fed. Cir. 2014)

This action arose out of the design and construction of military housing units at a U.S. Navy facility in Hawaii.  Pre-bid documents for the project supplied by the government provided test information regarding soil conditions on the site.  The government also included a disclaimer that this information was “for preliminary information only” and the resulting contract required that the contractor conduct its own independent soil investigation.

Metcalf Construction Company (the “Contractor”) was awarded the contract.  When the Contractor conducted its independent soil investigation it discovered that the soil was not as represented.  The Contractor notified the government and discussions ensued.  In those discussions, the Contractor recommended a different design and construction approach to account for the newly uncovered conditions, while the government generally insisted on following construction requirements set out in the original contract.  After a year’s delay, the Contractor decided that the cost of waiting for the government to approve the design changes had become too high, and it began to implement those changes without a contract modification.  As a result, the Contractor spent approximately $26 million over the original contract amount to remedy the soil conditions and finish the project.


Continue Reading Federal Circuit Court Clarifies Standard for Establishing Government’s Breach of the Implied Duty of Good Faith and Fair Dealing in Addressing Claim for Differing Site Conditions

Liberty Mut. Fire Ins. Co. v. Kay & Kay Contr.
2013 U.S. App. LEXIS 23587 (6th Cir. Nov. 19, 2013)

This action arose out of a commercial general liability (“CGL”) policy issued by Liberty Mutual Fire Insurance Co. (“Liberty Mutual”) to MW Builders, Inc. (“MW Builders”) and Kay and Kay Contracting, LLC (“Kay & Kay”) for the construction of a Wal-Mart store in Morehead, Kentucky. Wal-Mart Stores, Inc. (“Wal-Mart”) contracted with MW Builders as general contractor for the construction of the building. MW Builders then entered into a subcontract with Kay & Kay to perform site preparation work and construct the building pad beneath the structure. Liberty Mutual issued the CGL policy to Kay & Kay, with MW Builders as an additional insured (the “Policy”). The Policy was the standard ISO (Insurance Services Office, Inc.) policy containing the standard coverage language. Specifically, the Policy provided: “This insurance applies to ‘bodily injury’ and ‘property damage’ only if… [t]he ‘bodily injury’ or ‘property damage’ is caused by an ‘occurrence’ that takes place in the ‘coverage territory’…” The Policy defined “occurrence” to mean “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The term “accident” was not defined in the Policy.


Continue Reading Sixth Circuit Court of Appeals, Applying Kentucky Law, Holds Subcontractor’s Allegedly Faulty Construction of a Building Pad and the Resulting Damages Is Not an “Occurrence” Under a Commercial General Liability Policy

Gulf Group Gen. Enters. Co. W.L.L. v. United States
2013 U.S. Claims LEXIS 899 (Fed. Cl. July 2, 2013)

This action arose from a contractor’s claim that the U.S. Army (the “Army” or the “Government”) abused its discretion in terminating contracts for its convenience. In September 2004, Gulf Group General Enterprises Co. W.L.L. (“Gulf Group”) entered into four contracts worth approximately $15.8 million with the Army to provide cleanup and sanitation services in Kuwait. Three of the contracts—the camp package master blanket purchase agreement for provisions (the “BPA contract”), the latrine contract, and the dumpster contract—were terminated by the Army for its convenience within a month after they were awarded. The fourth contract, for bottled water distribution (the “bottled water contract”), was not terminated and instead extended into 2005.


Continue Reading Court of Federal Claims Holds Government Abused Discretion in Terminating Contract for Convenience; Also Finds Contractor Liable for Violations of the False Claims Act