Wyman v. Ayer Properties, LLC, 469 Mass. 64,  2014 Mass. LEXIS 524 (July 10, 2014)

The Massachusetts Supreme Court ruled that the economic loss rule, which bars recovery of tort damages from the negligent supplier of a defective product when there is no claim of personal injury or damage to other property, does not apply to claims asserted by a condominium association or similar condominium organization seeking compensation for damage to common areas of a condominium building caused by defective construction.

This case arises out of a dispute between the Market Gallery Condominium Trust, the trustees responsible for management of a condo building, and Ayer Properties, the developer and builder of the condo building, after the trustees observed that Ayer had negligently constructed the window frames, the exterior brick masonry, and the roof of the building. The trustees commenced an action alleging that the negligent construction caused damage to both the common areas and the residential units in the building.


Continue Reading Massachusetts Supreme Court Holds Economic Loss Rule No Bar to Condo Trustees’ Claim for Damages to Common Areas Caused By Building Defects

United States ex rel JEMS Fabrication, Inc. v. Fidelity & Deposit Co. of Maryland, 2014 U.S. App. Lexis 8175 (5th Cir., April 30, 2014)

This dispute arises out of a construction project to renovate and redevelop pumping stations located at various sites along the Mississippi River.  The U.S. Corp of Engineers entered into a contract with Benetech, LLC for the project.  Benetech then entered into a subcontract with plaintiff JEMS, whereby JEMS agreed to supply custom-fabricated structural steel for use on the project.  The contract amount, including approved change orders, was $2.38 million and required JEMS to provide shop drawings, materials and on-site labor.

JEMS delivered all of the shop drawings and most of the materials required by the subcontract.  However, JEMS did not supply most of the on-site labor, as Benetech and JEMS agreed that Benetech would supply the labor to satisfy its self-performance obligations in its contract with the Corp of Engineers.  JEMS and Benetech also agreed to a subcontract modification such that Benetech would purchase a custom building directly from JEMS’ subcontractor for $54,000.  However, because of changes made by the Corp of Engineers, which were not incorporated into the subcontract, Benetech’s cost for the custom building was $147,000.  Ultimately, Benetech paid JEMS just under $1 million for its work on the project and alleged that JEMS was not entitled to any additional payment.  Benetech claimed that it was entitled to a set-off against any amount due under the subcontract because it had to purchase materials that JEMS should have supplied for the project.


Continue Reading Fifth Circuit Holds Contractor May Not Assert Set-Off for Defective Work Because It Failed to Comply with Subcontract Provisions for Notice and Opportunity to Cure