CB&I Areva Mox Servs., LLC v. United States, 2018 U.S. Claims Lexis 1549 (November 9, 2018)

Nearly two decades ago, the Department of Energy, National Nuclear Security Administration (“NNSA”) awarded a contract for the design, construction and operation of a Facility at the Savannah River Nuclear Site (‘the Contract”) to Mox Services’ (“Mox’s”) predecessor in interest, Duke, Cogema, Stone & Webster, LLC.  Mox has no employees and subcontracts out the entirety of its work under the Contract to subcontractors.  CB&I Project Services Group (“CPSG”), Mox’s parent company, was the principal subcontractor.  The Contract followed a “cost reimbursement” model whereby NNSA would pay Mox for certain allowable costs that Mox incurred in performing the Contract.

In 2015, CPSG began an employee “re-slotting” process where CPSG changed its employees titles and, in some cases, their compensation.  During this process, CPSG put nearly all of its non-craft workforce (roughly 863 employees) into new positions.  Of the 863 employees, 55 received salary increases.  CPSG increased its billing rate for these 55 employees.  Mox did not specifically notify NNSA about this re-slotting and increase, but instead provided the increased billing rates to NNSA as part of its pay requisitions.  In April 2016, upon realizing the increase, NNSA notified Mox that the information it provided to justify the salary increase was insufficient and requested additional information, and warned it would take “appropriate action” to protect itself.  The NNSA later withheld 2% of the total direct non-craft labor expenses –$1,142,112.00.

Maxum Indemnity Co. v. Robbins Co., P.C., No. 1:17-CV-01968, 2018 U.S. Dist. LEXIS 57729 (N.D. Ohio Mar. 28, 2018)

On March 21, 2018, the United States District Court for the Northern District of Ohio granted a motion for judgment on the pleadings in favor of Maxum Indemnity Co. and declared that Maxum has no duty to defend or indemnify The Robbins Company in an international arbitration initiated by a third-party, JCM Northlink, LLC.

Robbins is a designer, manufacturer, and supplier of tunnel-boring machines (“TBMs”) and was engaged by JCM to supply a TBM for Seattle’s Northgate Link Extension project to add additional light rail lines to the city’s existing public transportation system.  Maxum insured Robbins under two commercial general liability policies in connection with the Northgate Link Extension project.

SM Architects, PLLC v. AMX Veteran Specialty Servs., LLC, 2018 Tex. App. LEXIS 9203 (November 8, 2018)

AMX Veteran Specialty Services, LLC (“AMX”) filed a demand for arbitration alleging professional negligence against SM Architects, PLLC (“SMA”).  A Texas statute requires a plaintiff in an action or arbitration involving architectural services to file a certificate of merit affidavit by a third-party licensed architect in support of its claims.  AMX attempted to meet this requirement by attaching an unsigned letter by an architect to its demand.

AMX twice amended its demand.  It attached to its second amended demand a signed certificate of merit affidavit by the same architect.  The affidavit was substantially similar to the original unsigned letter, but with added information regarding SMA’s alleged negligence.

SMA moved to dismiss AMX’s claims for failure to comply with the certificate of merit requirement.  SMA argued that the unsigned letter submitted with AMX’s first demand for arbitration was not an affidavit, and that the affidavit filed with its second amended demand was ineffective because its failure to file an affidavit contemporaneously with the first-filed complaint could not be cured by amendment.  The arbitration panel denied SMA’s motion.

K-Con, Inc. v. Sec’y of the Army, 2018 U.S. App. LEXIS 31196 (Fed. Cir., November 5, 2018)

In September 2013 K-Con, Inc. (“K-Con”) entered into two contracts with the government to supply and construct pre-engineered metal buildings for a laundry facility and a communications equipment shelter.  The government issued both contracts using Standard Form 1449, entitled Solicitation/Contract/Order for Commercial Items.  The contracts’ terms did not contain any requirement to provide a performance or payment  bond.  Nor did they include FAR 52.228-15, which requires performance and payment bonds on construction contracts.

In October 2013 the government directed K-Con to supply performance and payment bonds before a notice to proceed could be issued.  K-Con initially refused but ultimately provided the bonds two years later.  The contracts were then adjusted to add the cost of the bonds.

K-Con submitted a claim under each contract for increases in costs for the two year delay, for a total value of $116,336.56.  The Contracting Officer denied the claim on the basis that the agreements were construction contracts, for which performance and payment bonds were mandatory pursuant to FAR 52.228-15, and that that provision was incorporated into the contracts pursuant to the Christian doctrine under which a court may insert a clause into a government contract by operation of law if that clause is required under applicable federal regulations.  G.L. Christian & Associates v. Unites States, 312 F.2d 418 (Ct. Cl. 1963).  K-Con appealed to the Armed Services Board, which affirmed the denial of the claims.  K-Con then appealed to the United States Court of Appeals for the Federal Circuit.

Paulozzi v. Parkview Custom Homes, L.L.C., 2018 Ohio App. Lexis 4739 ( Nov. 1, 2018)  

 This case arose out of a dispute between homeowners and their contractor.  Dissatisfied with the work, the Paulozzis sued their contractor, Parkview Custom Homes, alleging, inter alia, breach of contract, unjust enrichment, and fraud.  In response, Parkview moved to stay the litigation and compel arbitration under the agreement’s arbitration provision.

The parties did not dispute that the contract required the Paulozzis to proceed through arbitration.  But the contract also specified that “the arbitration shall be conducted under the auspices of the Ohio Arbitration and Mediation Center in accordance with its rules, at Cleveland, Ohio.”  However, when the Paulozzis filed suit, the OAMC appeared to be defunct.

The Paulozzis argued that because the chosen forum no longer existed, the arbitration provision was unenforceable.  In response, Parkview maintained that the essential purpose of the arbitration provision was still capable of substantial accomplishment, and that the court should enforce it.  In the end, the trial court held that the original forum was defunct, and because the arbitration provision did not provide for an alternative forum, it was unenforceable under the doctrine of impossibility.  On appeal, the Ohio Court of Appeals reversed.

Coalview Centralia, LLC v. Transalta Centralia Mining LLC, 2018 U.S. Dist. LEXIS 185914 (W.D. Wash. Oct. 30, 2018)

This case involves a dispute over Coalview Centralia, LLC’s (“Coalview”) performance of environmental cleanup work at a coal mine and associated power plant near Centralia, Washington.  TransAlta Central Mining (“TCM”) hired Coalview to remediate and restore three waste coal slurry impoundment ponds.  In general terms, Coalview agreed to dredge the ponds, extract the coal fines for use in the power plant, and deliver the remaining slurry for final disposal.  Coalview was to submit monthly invoices – and to be paid – based on the weight of slurry removed or the weight of usable coal recovered, whichever is greater.

The Master Services Agreement (“MSA”) between TCM and Coalview provided, in pertinent part, that: (1) TCM had 30 days to “dispute” an invoice and explain the reasons for its dispute; (2) the parties had a one-year period to correct invoice “inaccuracies”; and (3) “[n]otwithstanding any disputes … contractor and owner shall diligently proceed with performance of this Agreement.”

Ohio N. Univ. v. Charles Constr. Servs., 2018 Ohio LEXIS 2375 (Oct. 9, 2018)

This post was published in the National Association of Credit Management eNews on December 20, 2018.

This case arose out of the construction of an inn and conference center at Ohio Northern University (“ONU”).  After completion of the project, ONU discovered water damage and structural defects in the work and filed suit for breach of contract against its general contractor, Charles Construction Services, Inc. (“Charles”).  Charles, in turn, sought defense and indemnity from its commercial general liability insurer, Cincinnati Insurance Company (“CIC”).  As required by ONU, Charles’s policy contained a “products-completed operations-hazard” (“PCOH”) clause and terms specifically related to work performed by subcontractors.  Under Charles’ policy, the insurance covered “property damage” only if it was caused by an “occurrence,” defined as “[a]n accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  “Accident,” however, was not defined.  CIC intervened in ONU’s suit, seeking a declaratory judgment that it was not required to defend or indemnify Charles.

The trial court granted CIC summary judgment, holding that CIC had no duty to indemnify or defend Charles.  The trial court based its holding on Westfield Inc. Co. v. Custom Agri Sys., Inc., 979 N.E.2d 269, a 2012 decision in which the Ohio Supreme Court concluded that claims for faulty workmanship are not fortuitous, and therefore, not claims for “property damage” caused by an “occurrence” covered by a CGL policy.

IES Commercial, Inc. v. Manhattan Torcon, A Joint Venture, 2018 U.S. Dist. LEXIS 164973 (D. Md. Sept. 26, 2018)

In 2009, the Army Corps of Engineers hired Manhattan Torcon Joint Venture (“MT”) as general contractor to build a biological research facility at Fort Detrick, Maryland.  MT subcontracted with IES Commercial, Inc. (“IES”) to perform the electrical system work.

In August 2013, after IES had completed over 90% of its work, a fire destroyed or damaged more than half of the facility, including significant portions of IES’s work. MT ordered IES to perform significant fire remediation work in addition to the remainder of its base contract work. In November 2013, IES and MT entered into a subcontract amendment referred to as the “Fire Rider,” which included an agreed rate schedule for the fire remediation work, along with a procedure by which IES would perform work at MT’s direction, submit daily work tickets and monthly invoices, and be paid within ten days after MT received payment from its insurer.

Fid. & Deposit Co. of Md. v. T

ravelers Cas. & Sur. Co. of Am., 2018 U.S. Dist. LEXIS 162265 (D. Nev., September 21, 2018)
Clark County School District (“CCSD”) hired Big Town Mechanical (“Big Town”) as general contractor to perform HVAC upgrades at five schools.  Big Town in turn hired F.A.S.T. Systems (“FAST”) to complete low-voltage work at the schools.  Big Town obtained performance bonds from Travelers Casualty and Surety Company of America (“Travelers”) and FAST obtained performance bonds from Fidelity & Deposit Company of Maryland (“F&D”).

Following FAST’s default on its subcontracts, F&D opted to complete FAST’s work and hired a substitute subcontractor, Perini.  In May 2012, Perini notified Big Town that it had “substantially completed” all of FAST’s work.  After Big Town refused payment, F&D filed suit against Big Town and Travelers in early 2013.  In May of 2013, CCSD rejected Big Town’s final payment application, stating that the project was incomplete and claiming there were significant defects in the work.  CCSD then sued Travelers seeking specific performance and liquidated damages for delay.  Travelers eventually settled CCSD’s suit but through its counterclaim sought reimbursement from F&D for its settlement plus costs expended to complete the project.

Gindel v. Centex Homes, 2018 Fla. App. LEXIS 13019 (Fla. 4th DCA Sept. 12, 2018)

 A group of townhome owners (the “Homeowners”) sued the contractor and a subcontractor (collectively, “Contractor”) who built their townhomes, alleging that Contractor performed defective work.  Contractor had completed construction and conveyed the townhomes to the Homeowners on March 31, 2004.  The Homeowners did not discover the alleged defect until years later.  On February 6, 2014, nearly ten years after Contractor completed the work, the Homeowners notified Contractor of the claimed construction defect.  The Homeowners provided that notice in accordance with Florida’s construction defect statute (Fla. Stat. §§ 558.003; 558.004) that requires pre-suit notice of construction defect claims.  The Homeowners completed the statutory pre-suit procedure and filed their lawsuit on May 2, 2014, more than ten years after taking possession of the townhomes.

Contractor argued that Florida’s ten-year statute of repose barred the lawsuit.  While acknowledging that they filed their lawsuit beyond the ten-year period, the Homeowners stressed that the claims were timely because the action truly had commenced within the ten year period when they submitted the pre-suit notice of claim.  The trial court agreed with Contractor and entered summary judgment in its favor.  The Homeowners appealed.