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Eugene Water & Elec. Bd. v. MWH Americas, Inc., 2018 Ore. App. LEXIS 879 (July 25, 2018)

On July 25, 2018, an Oregon appellate court concluded that a pair of subcontractors could not compel an owner to arbitrate its claims against them by virtue of a “flow-down” provision in a prime construction contract which also contained an arbitration clause.  The case is a reminder that principles of contract interpretation govern the enforcement of arbitration agreements and that courts will not compel arbitration where both parties have not expressly consented to arbitrate their disputes.

As part of an improvement project for the Leaburg Dam near Eugene, Oregon, the Eugene Water and Electric Board (“EWEB”) entered into a prime contract with Advanced American Construction (“AAC”) as the general contractor for the project.  AAC subsequently entered into subcontracts with MacTaggart, Scott & Company Limited (“MacTaggart”) and Olsson Industrial Electric, Inc. (“Olsson”).  When the improvements to the Leaburg Dam failed, EWEB filed a complaint in Oregon state court against AAC and, shortly thereafter, asserted claims against the two subcontractors in an amended complaint.

During the proceedings, AAC sought to compel arbitration of EWEB’s claims against AAC because the prime contract contained an arbitration clause.  As litigation proceeded, both MacTaggart and Olsson also sought to compel arbitration of EWEB’s claims against them.  Problematically, however, because MacTaggart and Olson, as subcontractors, were only in direct privity with AAC, and not EWEB, no express agreement to arbitrate existed between EWEB and the two subcontractors. 

G4S Tech. LLC v. Mass. Tech. Park Corp., 2018 Mass. Lexis 357 (June 13, 2018)

A state development agency (the “Agency”), received state and federal funding to build a 1,200-mile fiber optic network.  It contracted with G4S Technology LLC (“G4S”) for the project under a $45.5 million design-build agreement.  As a result of project delays – the cause of which the parties disputed – G4S achieved final completion of the work more than one year after the contractual deadline.  Shortly after completion, the Agency issued a notice of withholding, claiming a right to withhold $4 million from G4S to compensate the Agency for delays and expenses incurred as a result of G4S’s alleged failures to perform.

G4S sued the Agency in Massachusetts Superior Court, asserting claims for breach of contract and quantum meruit.  It sought release of the contract balance plus an equitable adjustment of the contract price and deadlines.  In discovery, the Agency learned that G4S had repeatedly submitted inaccurate progress payment applications during the project, which falsely represented that G4S had timely paid its subcontractors.  The Agency cited this evidence in support of a motion for summary judgment, arguing that G4S’s conduct barred its right to recover money owed to it under the contract and under a theory of quantum meruit.  The Superior Court granted the motion, and G4S appealed.

A.L. Prime Energy Consultant, Inc. v. Mass. Bay Transport Auth., 479 Mass. 419 (May 2, 2018)

In a case of first impression, the Massachusetts Supreme Court held that general contract principles, and not federal case law, govern the treatment of termination for convenience clauses in state procurement contracts.

In January 2015, the Massachusetts Bay Transportation Authority (“MBTA”) issued an invitation for bids for the supply of ultra-low sulfur diesel fuel for a two year term.  Following bidding, the MBTA awarded the contract to A.L. Prime Energy Consultant, Inc. (“Prime”) in July 2015.  The contract included a termination for convenience clause that provided:

The [MBTA] may, in its sole discretion, terminate all or any portion of this Agreement . . . at any time for its convenience and/or for any reason by giving written notice to the Contractor thirty (30) calendar days prior to the effective date of termination. . . . (emphasis added).

Approximately a year later, the MBTA determined that it could acquire its fuel supply from a different supplier at a lower price.  Accordingly, the MBTA notified Prime of its intent to terminate the contract for convenience.

Rai Indus. Fabricators, LLC v. Fed. Ins. Co., 2018 U.S. Dist. LEXIS 74612 (N.D. Cal., May 2, 2018)

Sauer Incorporated (“Sauer”) contracted with the U.S. Army to design and construct the Operational Readiness Training Complex at Fort Hunter, California.  Sauer subcontracted with Agate Steel, Inc. (“Agate”) for the erection of steel for the project.  Agate’s subcontract with Sauer contained a no-damage-for-delay clause, which generally provided that extensions of time were Agate’s sole remedy for delay.
According to Agate, the project suffered from substantial delays because of the acts and omissions of Sauer.  In particular, Agate alleged that Sauer failed to properly coordinate the work of its subcontractors, failed to follow the project’s schedules, failed to follow the subcontract’s change order procedures, and made unanticipated changes to the project’s scope and work flow sequence. Agate argued that these delays constituted a cardinal change and/or abandonment of the subcontract, which rendered the no-damage-for-delay clause unenforceable.  Agate sued Sauer for damages from the delays and disruptions to its work.

Pinnacle Crushing & Constr. LLC v. Hartford Fire Ins. Co., 2018 U.S. Dist. LEXIS 67965 (W.D. Wa. Apr. 23, 2018)

The Army Corps of Engineers (the “Corps”), as owner, and Cherokee General Corporation (“CGC”), as prime contractor, entered into a contract (the “Contract”) in connection with work at the Yakima Training Center (the “Project”).  CGC subcontracted with SCI Infrastructure (“SCI”) for certain work related to the Project (the “SCI Subcontract”), and SCI subcontracted with Pinnacle Crushing & Construction, LLC (“Pinnacle”) (the “Pinnacle Subcontract”).  CGC obtained a Miller Act payment bond (the “Bond”) from Hartford Insurance Co. (the “Surety”) to provide coverage for labor and materials supplied in carrying out the work.

After the Corps terminated the Contract with CGC, CGC submitted a claim under the Contracts Disputes Act.  As required by the SCI Subcontract, CGC asserted SCI’s pass through claims against the Corps, which included amounts allegedly owed to both SCI and Pinnacle.

Separately, SCI and Pinnacle sued CGC and the Surety to recover under the Bond for the work they performed under the subcontracts, but for which CGC had not paid them.

Aquatic Renovations Sys. v. Vill. of Walbridge, 2018 Ohio App. Lexis 1581 (April 13, 2018)

This post was published on July 7, 2018 in The Pennsylvania Record.

On May 2, 2012, Aquatic Renovations Systems, Inc. (“Aquatic”) entered into a contract with the Village of Walbridge (“the Village”) for the installation of a new pool liner (“Contract 1”).  Prior thereto, the Village council adopted an ordinance which authorized the mayor to enter into Contract 1 (“Ordinance”).  On April 12, 2013, the mayor signed a new contract for the balance of the work (“Contract 2”).  A few days after Aquatic completed its work, the pool liner began to lift.  The Village then refused to pay Aquatic for the completed and approved work.

Aquatic sued the Village for non-payment, alleging the Village breached Contract 2.  Aquatic also alleged that the Village was liable under a theory of quantum meruit and unjust enrichment.  The trial court granted the Village’s motion for summary judgment, holding that Contract 2 was not valid because it did not comply with the Ohio Revised Statute which required the mayor, the clerk, and the Village administrator to authorize all Village Contracts.  Thus, because Contract 2 was unenforceable, Aquatic could not recover under a breach of contract, quantum meruit or unjust enrichment theory.

Fraser Eng’g Co. v. IPS-Integrated Project Servs., LLC, 2018 US Dist. LEXIS 51392 (D.N.H. March 27, 2018)

IPS-Integrated Project Services, LLC (“IPS”) was the general contractor on a project to design and construct a manufacturing facility in Portsmouth, New Hampshire. IPS subcontracted with Fraser Engineering Company (“Fraser”) for the project’s mechanical and plumbing scope of work. Shortly after award, IPS notified Fraser that it may be directed to accelerate its work. In response, Fraser put IPS on notice that acceleration would result in labor inefficiencies for which it expected to be reimbursed.  Thereafter, IPS directed Fraser to accelerate and Fraser complied by using extra overtime over the next several months. During that time, the parties communicated numerous times about Fraser’s claim for labor inefficiencies.

Under its subcontract with IPS, Fraser was required to submit lien waivers with each of its payment applications. According to the court, the waivers at issue “do not merely release lien rights, but also ‘all claims, demands, or causes of action . . . which [Fraser] has, or might under any present or future law, assert against [IPS] or [the owner] relating to the Partial Payment and/or the labor services, materials or equipment for which the partial payment has been made.’” During its work, Fraser submitted eight such waivers.

City of Whiting v. Whitney, Bailey, Cox & Magnani, LLC, 2018 U.S. Dist. LEXIS 44943 (N.D. Ind. Mar. 20, 2018)

The City of Whiting, Indiana (the “City”) undertook a 26-acre lakefront development project.  It hired an engineering firm to serve as the consultant for the project.  The consultant subcontracted with a subconsultant for marine engineering services, including design of a rock revetment on the lakefront for shoreline protection.  According to the City, the revetment failed on three occasions, resulting in damage to the City’s property at the project site, including a walking path, landscaping and existing trees, a gazebo, and an existing Gun Club structure, which the City had planned to convert to a restaurant.

After accepting assignment of the consultant’s contract with the subconsultant, the City filed a six-count complaint and alleged that the subconsultant’s negligent revetment design caused damage to the City’s property.  The subconsultant moved for summary judgment on the City’s negligence claim, arguing that the economic loss rule precluded liability against it in tort.  The court noted that Indiana’s economic loss rule bars tort liability when there is damage only to the product contracted for itself, but that the rule does not preclude tort liability if there is personal injury or damage to “other property.”

G&G Mech. Constructors, Inc. v. Jeff City Indus., Inc., No. WD80840, 2018 Mo. App. LEXIS 271 (Mar. 20, 2018)

This case arose out of a project in Columbia, Missouri on which Jeff City Industry, Inc. (“JCI”) was the general contractor and G&G Mechanical Constructors, Inc. (“G&G”) was a subcontractor.

The draft subcontract contained an interest provision which provided that overdue payments “shall bear interest at the annual rate of 18% or the highest rate allowed by law, if lower. Retainage shall not be held out of payment.”  JCI struck through this provision, wrote “5% Retiange [sic]” in the margin, initialed it, and sent it to G&G.  G&G also initialed the revision.

When JCI failed to pay G&G for its work, G&G sued JCI for breach of contract, unjust enrichment, and violation of Missouri’s Prompt Pay Act.  A jury returned a verdict against JCI, and the trial court entered a judgment against it which included prejudgment interest at the rate of 9% pursuant to Missouri Revised Statute § 408.020.

Meridian Eng’g Co. v. United States, 2018 U.S. App. LEXIS 7024 (Fed. Cir., Mar. 20, 2018)

Meridian Engineering Company (“Meridian”) was hired by the United States (“Government”) to construct flood control structures on the Chula Vista Project.  Meridian encountered what it considered to be differing site conditions on the project.  The Government issued two contract modifications in response to Meridian’s claims.  Later, structural failures occurred and the Government ultimately terminated Meridian.  Meridian filed suit in the Court of Federal Claims.

The court held that Meridian failed to establish a compensable differing site condition because the bid documents sufficiently notified contractors of potential water conditions at the site that could result in the conditions claimed.  Also, the court held that Meridian was charged with knowledge of the conditions that a pre-bid site visit would have revealed, which included the conditions in question.  The Court of Appeals affirmed the trial court on that issue.