Nova Group/Tutor-Saliba v. United States, 125 Fed. Cl. 469 (Fed. Cl. Mar 16, 2016)

The United States Naval Facilities Engineering Command (the “Navy”) contracted with the joint venture of Nova Group and Tutor-Saliva (the “JV”) for construction of a pier at the Puget Sound Navy Shipyard in Bremerton, Washington.  The contract assigned selection of pier stability assessment methods to the JV’s discretion.  Exercising that discretion, the JV selected a SAP 2000 model for performance design loads.  Five months after the Navy had approved the JV’s design submittals, the Navy’s construction manager voiced concerns about the design and questioned the JV’s reliance upon the SAP 2000 model.

Allstate Insurance Company v. Structures Design/Build, LLC, 2016 U.S. Dist. LEXIS 34349 (WD VA March 17, 2016)

This construction dispute case arises from a failed pipe connector that caused water damage to a facility and insured personal property, which Hillel at Virginia Tech, Inc. (“Hillel”) owned in Blacksburg, Virginia. Hillel contracted Structures Design/Build, LLC (“Structures”) to design and construct the facility. Structures, in turn, subcontracted PJ Little Plumbing, Inc. (“PJ”) for plumbing and mechanical installation. PJ purchased the failed pipe connector from CMC Supply, Inc. (“CMC”). Allstate Insurance Company (“Allstate”) insured Hillel for the damage to the facility and the personal property.

As Hillel’s subrogee, Allstate filed a complaint against Structures and PJ. Allstate sued Structures for various state law claims. It sued PJ for negligence and breach of express and implied warranties. PJ filed a third-party complaint to join CMC on a breach of implied warranty theory. PJ and CMC moved to dismiss the claims against them.

Securiforce Int’l America, LLC v. United States, 125 Fed. Cl. 749 (March 21, 2016)

Plaintiff Securiforce International America, LLC (“Securiforce”) was awarded a contract by the Defense Logistics Agency Energy (“DLA Energy” or the “agency”) to deliver diesel fuel and gasoline to eight Department of State sites in Iraq.  But, within three months of the award, the agency partially terminated the contract for the convenience of the government.  The remainder of the contract was terminated for cause shortly thereafter.

As a result of its termination, Securiforce submitted claims to DLA Energy’s contracting officer, seeking, among other things, a declaration from the contracting officer that the termination for convenience was invalid and constituted a breach of contract.  The contracting officer denied the claims.

Turner Constr. Co. v. BFPE Int’l, Inc., No. JKB-15-368, 2016 U.S. Dist. LEXIS 39161 (D. Md. Mar. 25, 2016)

The University of Maryland Medical Center (“UMMC”) entered into a contract (the “Prime Contract”) with Turner Construction Company (“Turner”), pursuant to which Turner agreed to renovate UMMC’s hospital offices.  Turner then entered into a subcontract (the “Subcontract”) with BFPE International, Inc. (“BFPE”), pursuant to which BFPE agreed to perform work associated with the fire protection system, including demolishing sprinkler piping and coordinating sprinkler outages to accommodate the renovations.
The Prime Contract included a waiver of subrogation, under which UMMC and Turner waived all rights against each other and any subcontractors for damages covered by property insurance, even if the subcontractor would otherwise have a duty to indemnify.[i]  The Subcontract incorporated the Prime Contract by reference and included flow down provisions, but the Subcontract also stated that if any provision “irreconcilably conflicts” with a provision of the Prime Contract, “the provision imposing the greater duty or obligation on [BFPE] shall govern.”  The Subcontract included an assumption of liability, under which BFPE assumed liability for all property damage in connection with its work and agreed to indemnify Turner from any claims that result.[ii]  This assumption of liability seemed inconsistent with the waiver of subrogation in the Prime Contract.

Dallas/Fort Worth International Airport Board v. INET Airport Systems, Inc., et al., 2016 U.S. App. LEXIS 6646, 819 F.3d 245 (5th Cir. Apr. 12, 2016)

This action arose out of a construction project in terminal E of the Dallas/Fort Worth International Airport (“DFW”), in which pre-conditioned air and rooftop air handling units were to provide conditioned air (cooling and heating) to passenger boarding bridges and aircrafts parked at terminal gates (the “Project”).  In August, 2009, following a competitive bidding process, owner Dallas Fort Worth International Airport Board (the “Owner”) entered into a contract with contractor INET Airport Systems, Inc. (the “Contractor”) to construct the Project. The plans and specifications for the contract included detailed drawings, the precise rooftop units and parts to be used, approved manufacturers and performance requirements.  Under the contract and these plans, the Contractor was obligated to install operational rooftop units that were required to use 30 percent ethylene glycol/water supplied through DFW’s existing piping system. The Contractor was not allowed to substitute products or designs for those agreed upon in the contract documents without authorization from the Owner. The contract also required that if anything in the agreed-upon plans needed to be changed, the Contractor would alert the Owner and the parties would collaborate to come up with a workaround that would be incorporated into the contract by written change order issued by the Owner with agreed prices for performing the change order work.

Balfour Beatty Rail, Inc. v. The Kansas City Southern Railway Company, 2016 U.S. Dist. LEXIS 39086 (N.D. Tex., March 25, 2016)

The contractor contracted with owner to install 65 miles of railroad track, for a price of $12,206,666.  The owner had engaged another contractor to grade and prepare the substrate for the railroad track, and was to furnish and deliver aggregate for track ballast and track rail material to various locations along the rail route.  The contractor’s scope included all other work.  The contractor fell behind in its work, and the owner hired additional contractors to complete a portion of its scope.  The contractor blamed the delays on the owner’s late delivery of aggregate and rail, and improper subgrade preparation under a theory of differing site conditions. It sought $4.35 million in unpaid change orders, delay damages, and penalties under Texas’ prompt payment statutes.  The owner in turn sought $2.6 million in completion costs and costs of wasted aggregate.

United States ex rel Jack Daniels Construction, Inc. v. Liberty Mutual Insurance Company, 2015 U.S. Dist. LEXIS 172189 (M.D. Fla. Dec. 28, 2015)

This action arises from the construction of the Joint Intelligence Technical Training Facility at Goodfellow Air Force Base in San Angelo, Texas (the “Project”).  Plaintiff Jack Daniels Construction, Inc. (“Jack Daniels”) was a sub-subcontractor who was retained by the subcontractor, Ragghianti Foundations III, Inc. (“Ragghianti”), to perform certain concrete work at the Project.  Jack Daniels commenced its work on the Project in late August of 2011, but it was demobilized by early September as a result of problems encountered by Ragghianti and the prime contractor.  Jack Daniels resumed its work in late October, but by November of 2011, the Project was behind schedule.

Time is money in construction, and project delays can cause contractors to incur substantial additional costs. To avoid responsibility for paying these costs, project owners often include a no-damage-for-delay (NDFD) clause in the contract, where legally permitted.[1] An example of a typical NDFD clause reads as follows:

The Contractor agrees to make no claim for damages for delay in the performance of this contract occasioned by any act or omission to act of the [Owner] or any of its representatives, and agrees that any such claim shall be fully compensated for by an extension of time to complete performance of the work as provided herein.[2]

An NDFD clause may bar a contractor from recovering delay damages. But, in most states, the enforceability of NDFD clauses is also subject to exceptions.[3] As shown in the clause quoted above, NDFD clauses often provide that the exclusive remedy for delay is an extension of time. The issue is whether an NDFD clause, which provides a time extension as an exclusive remedy, also bars claims for acceleration. As explained below, there are several approaches to this issue.

Boone Coleman Constr., Inc. v. Vill. of Piketon, 2016-Ohio-628, 2016 Ohio LEXIS 441 (Ohio Feb. 24, 2016)

A general contractor entered into a construction contract with a public agency for a road construction project with a $700 per day liquidated damages provision. The contractor completed the project over one year late, and was assessed $277,900 in liquidated damages. The original contract price was $683,300. The trial court granted summary judgment for the public agency, awarding the full amount of the liquidated damages. An intermediate appellate court overturned the ruling based upon an after-the-fact comparison of the total liquidated damages imposed in relation to the contract price, stating, “the amount of damages [as a whole] is so manifestly unreasonable and disproportionate that it is plainly unrealistic and inequitable.” The Ohio Supreme Court vacated the decision of the appellate court and remanded for further consideration.

Zacherl, Inc. v. Flaherty Mechanical Contractors, LLC, 131 A.3d 1030, 2016 Pa. Commw. LEXIS 22 (Jan. 6, 2016)

The West Allegheny School Board (the “School Board”) voted to approve the School District’s (the “District’s”) plan to renovate its high school building (the “Project”).  The District contracted with Flaherty Mechanical Contractors, LLC (“Flaherty”) to act as the prime contractor.  Flaherty submitted the names of its subcontractors for the School Board’s review.  When the School Board raised no objections to Flaherty’s submission, Flaherty subcontracted with F. Zacherl, Inc. (“Zacherl”) to perform sheet metal work at the Project.

During the Project, the District made timely payments to Flaherty, but Flaherty failed to make timely payments to its subcontractors, including Zacherl.  The District terminated Flaherty’s contract in part as a result of Flaherty’s payment issues.  Flaherty, in turn, terminated Zacherl’s contract.