Construction Dispute

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LeBlanc v. Logan Hilton J.V.
463 Mass. 316 (2012)

The Massachusetts Supreme Court ruled where there is evidence that design professionals had actual knowledge of deficiencies in the installation of electrical switchgear but failed to fulfill their contractual duties to report the deficiencies to the property owner, the evidence of is sufficient to support a finding of professional negligence without an expert opinion.

GII Industries, Inc. v. New York Dep’t of Transp.
2011 Bankr. LEXIS 3663 (Bankr. E.D.N.Y. Sept. 30, 2011)

The Bankruptcy Court for the Eastern District of New York considered the appropriate method for calculating a contractor’s inefficiency damages and whether the contractor was entitled to prejudgment interest in connection with a highway reconstruction project. The Court held that the total cost method was the appropriate manner by which to calculate damages and that the contractor was entitled to prejudgment interest running from the date final payment was due.

SNC-Lavalin America, Inc. v. Alliant Techsystems, Inc.
2011 U.S. Dist. LEXIS 118312 (W.D. Va. Oct. 13, 2011)

SNC-Lavalin America, Inc. and Alliant Techsystems, Inc. (“ATK”) entered into a contract under which SNC would provide engineering, procurement, and construction services for the construction of a nitric acid and sulfuric acid concentration plant at the Radford, Virginia arsenal operated by ATK. SNC claimed that ATK’s delay in choosing an appropriate acid-resistant concrete for the ground floor and ATK’s denial of SNC’s request for an extension of time for severe winter weather each damaged SNC.

ATK moved for partial summary judgment, seeking to bar, among others, SNC’s claims (1) resulting from ATK’s delay in choosing a material and (2) resulting from severe winter weather.

Structure Tone, Inc. v. Universal Services Group, Ltd.
929 N.Y.S. 2d 242 (App. Div. 2011)

This action arose out of the construction of a Whole Foods Market in the AOL/Time Warner Center at Columbus Circle in Manhattan. The general contractor, Structure Tone, Inc., (“STI”) retained Universal Service Group (“USG”) to waterproof the market. STI sued USG, claiming that the waterproofing failed on 15 occasions, causing water to leak from the Whole Foods Market into various tenant spaces below. STI undertook to remedy the problem, and as a result, allegedly sustained damages totaling $1.2 million. STI alleged causes of action for negligence and breach of contract, seeking as damages the costs of remediation, loss of profit, recovery of the amounts paid to USG and contract balances not paid by Whole Foods.

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.

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.

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.

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.

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.

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.”