Fed. Ins. Co. v. Empresas Sabaer, Inc.
2013 U.S. Dist. LEXIS 112930 (D.P.R. Aug. 9, 2013)

This action arose out of a surety’s claim for expenses incurred for correcting a subcontractor’s defective work. DTC Engineering and Constructors, LLC (“DTC”) and the U.S. Army Corps of Engineers (the “Corps”) entered into a contract for the design and construction of the Armed Forces Reserve Center at Fort Buchanan, located in Guaynabo, Puerto Rico. Federal Insurance Company (“Federal”) and DTC subscribed to a payment and performance bond as surety and principal, respectively, naming the government as obligee. DTC subsequently entered into a subcontract (the “Subcontract”) with Empresas Sabaer, Inc. (“Sabaer”) and BBS Developers, S.E. (“BBS”) (collectively the “Subcontractors”). The Subcontract provided that Sabaer was required to complete the work under Subcontract, while BBS was responsible for providing technical and economic support. United Surety and Indemnity Co. (“USIC”) and the Subcontractors, as surety and principal, respectively, subscribed to a payment and performance bond and named DTC as obligee. DTC assigned to Federal all of its rights emerging from the Subcontract and USIC’s bond.


Continue Reading U.S. District Court in Puerto Rico, Applying Connecticut Law, Considers Application of Notice Requirements to Termination of Joint Subcontractors

United States ex rel. Tymatt Indus. v. Allen & Shariff Constr. Servs.
2013 U.S. Dist. LEXIS 114015 (D. Md. Aug. 13, 2013)

This action arose out of a subcontractor’s Miller Act claim for unpaid contract balances on a federal construction project. Allen & Shariff Construction Services, LLC (“Allen & Shariff”) was the prime contractor on a federal contract for the construction of a dam in Bethesda, Maryland, and related remediation (the “Project”). United States Security Company (“USSC”) was the surety on the Miller Act payment bond for the Project. Allen & Shariff subcontracted with Tymatt Industries, Inc. (“Tymatt”) to perform work on the Project (the “Subcontract”). The Subcontract contained a default provision stating that “should Tymatt fail to perform, after giving three days written notice Allen & Shariff had the option to terminate the [S]ubcontract for default if the defective performance was not cured.” Allen & Shariff issued three such notices to Tymatt, the last of which was issued on November 11, 2011. When Tymatt failed to cure, USSC sent Tymatt a termination notice on November 18, 2011 stating that the “[S]ubcontract…has been terminated due to lack of performance effective immediately.” Additionally, Allen & Shariff notified Tymatt that its “base access privilege [would] be terminated on November 23, 2011,” and requested that its equipment be removed prior to that date. Tymatt subsequently alleged that Allen & Shariff failed to pay $107,665.26 in amounts owed for work performed under the Subcontract. On Monday, November 26, 2012, Tymatt filed a Miller Act claim against USSC, as surety, to recover the monies allegedly due and owing.


Continue Reading U.S. District Court in Maryland Holds Work Performed After Termination Does Not Delay Commencement of One-Year Miller Act Statute of Limitations

United States of America ex rel D&M General Contracting, Inc v. Arch Ins. Co.
2013 U.S. Dist. LEXIS 111260 (D. Md. Aug. 5, 2013)

This action arose out of subcontractor’s claim for increased costs allegedly incurred as a result of delays on a federal government project. NTVI Enterprises, LLC (“NTVI”), as general contractor, entered into an agreement with the government to upgrade the chiller plant for a National Security Agency facility (the “Project”). NTVI posted a labor and material payment bond for the Project (the “Bond”) issued by Arch Insurance Company (“Arch”). NTVI then subcontracted with D&M General Contracting, Inc. (“D&M”) to perform electrical work on the Project. Midway through the Project, D&M alleged that the sequence of its work was altered by the government resulting in an additional $206,674.07 in costs to D&M. Pursuant to the Miller Act, D&M filed suit against Arch, as surety, to recover under the Bond its increased costs allegedly incurred.


Continue Reading U.S. District Court in Maryland Holds One-Year Statute of Limitations Under Miller Act Did Not Commence Until After Required Testing Performed by Subcontractor

Ravens Group, Inc. v. United States
2013 U.S. Claims LEXIS 979 (Fed. Cl. 2013)

This action arose out of a contractor’s claim for additional compensation for unanticipated work. The U.S. Army (the “Government”) solicited private contractors to provide the maintenance and repair services for General and Flag Officers Quarters (“GFOQ”) at Fort Myers, Virginia and Fort McNair, Washington D.C. GFOQ is military housing specifically designated for senior officers of the military and their families. Traditionally, the Government used “in-house” personnel to respond to the majority of the maintenance and repair service calls at GFOQ housing. The solicitation from private contractors marked a new initiative in which the service calls at these two bases would be handled exclusively by a private contractor.


Continue Reading Court of Federal Claims Holds Contract Term Prescribing Adjustment for Variances Does Not Bar Claim for Breach of Contract Based on Negligent Estimates

Berks Products Corp. v. Arch Ins. Co.
72 A.3d 315 (Pa. Commw. Ct. 2013)

Note: A petition for allowance of appeal from this decision has been filed with the Pennsylvania Supreme Court, but has not been acted upon as of January14, 2014.

This action arose from a payment bond secured by a general contractor for work performed on a public school building. Skepton Construction, Inc. (“Skepton”) entered into an agreement with the Wilson Area School District (the “District”) to be the general contractor for the construction of a new intermediate school (the “Project”). Under its agreement with the District, Skepton was required to secure a payment bond in order to guarantee its payment obligations. Skepton secured its payment bond through Arch Insurance Company (“Arch”). The payment bond (the “Bond”), in relevant part, stated: “[I]f the Principal and any subcontractor of the Principal to whom any portion of the work under the Agreement shall be subcontracted,…promptly shall pay or cause to be paid, in full, all money which may be due any claimant supplying labor or materials…, then this Bond shall be void; otherwise this Bond shall be and shall remain in force and effect.”


Continue Reading Pennsylvania Commonwealth Court Interprets Payment Bond Language to Waive Bond Law “Safe Harbor” Against Double Payment

RSP Architects, Ltd. v. Five Star Dev. Resort Communities, LLC
306 P.3d 93 (Ariz. Ct. App. 2013)

This action arose from a payment dispute on a construction project where an architectural firm, RSP Architects, Ltd. (“RSP”), contracted with a developer, Five Star Development Resort Communities, LLC (“Five Star”), to provide architectural services for a development known as the Palmeraie (the “Project”). Pursuant to the architectural services contract (the “Architectural Agreement”), RSP was tasked with several different duties, including “construction administration,” “overall coordination,” and “conceptual design” related to the Project. For its services, RSP was to receive approximately $3,000,000. Prior to completion, however, RSP ceased work on the Project and sued Five Star, alleging, among other claims, a violation of Arizona’s Prompt Payment Act, A.R.S. § 32-1129 et seq. (the “PPA”).


Continue Reading Arizona Court of Appeals Rules Prompt Payment Act Does Not Apply To Design Professionals When Performing Normal Architectural and Engineering Services

Shelter Prods. v. Steelwood Constr., Inc.
307 P.3d 449 (Or. Ct. App. 2013)

This action arose from a payment dispute between a general contractor, Catamount Constructors, Inc. (“Catamount”), and one of its subcontractors, Steelwood Construction, Inc. (“Steelwood”). Catamount contracted with Steelwood (the “Subcontract”) to provide materials and perform work for the construction of a Home Depot distribution center in Salem, Oregon (the “Project”). Included in the Subcontract was a provision that allowed Catamount to terminate the Subcontract for convenience and “without cause.” In the event the Subcontract was terminated for convenience, Steelwood would be entitled to the cost of all work performed on the Project as of the date of termination.


Continue Reading Oregon Court of Appeals Holds General Contractor Cannot Offset Costs of Repairing Subcontractor’s Defective Work After Subcontractor Is Terminated “For Convenience” Without an Opportunity to Cure

Atl. Marine Constr. Co. v. United States Dist. Court
2013 U.S. LEXIS 8775 (U.S. 2013)  

This action arose out of a forum-selection clause in a contract for a federal construction project. The U.S. Corps of Engineers contracted with Atlantic Marine Construction Company (“Atlantic”), a Virginia Corporation, to build a child development center at Fort Hood, a military base located in the western district of Texas. Atlantic then entered into a Subcontract Agreement (the “Subcontract”) with J-Crew Management, Inc. (“J-Crew”), a Texas corporation, to provide labor and materials. The Subcontract included a forum-selection clause, providing that disputes “shall be litigated in the Circuit Court for the City of Norfolk, Virginia, or the United States District Court for the Eastern District of Virginia, Norfolk Division.” Following a dispute over payment, however, J-Crew sued Atlantic in the Western District of Texas.


Continue Reading U.S. Supreme Court Holds Forum-Selection Clauses Are Presumptively Enforceable