Metcalf Constr. Co. v. United States
742 F.3d 984 (Fed. Cir. 2014)

This action arose out of the design and construction of military housing units at a U.S. Navy facility in Hawaii.  Pre-bid documents for the project supplied by the government provided test information regarding soil conditions on the site.  The government also included a disclaimer that this information was “for preliminary information only” and the resulting contract required that the contractor conduct its own independent soil investigation.

Metcalf Construction Company (the “Contractor”) was awarded the contract.  When the Contractor conducted its independent soil investigation it discovered that the soil was not as represented.  The Contractor notified the government and discussions ensued.  In those discussions, the Contractor recommended a different design and construction approach to account for the newly uncovered conditions, while the government generally insisted on following construction requirements set out in the original contract.  After a year’s delay, the Contractor decided that the cost of waiting for the government to approve the design changes had become too high, and it began to implement those changes without a contract modification.  As a result, the Contractor spent approximately $26 million over the original contract amount to remedy the soil conditions and finish the project.

Window Specialists, Inc. v. Forney Enterprises, Inc.,
2014 U.S. Dist. LEXIS 2014 U.S. Dist. LEXIS 34702 (D.D.C. March 18, 2014)

This dispute arises out of a construction contract to repair property at Fort McNair in Washington, D.C.  The Army contracted with a general contractor, IIU Consulting Institute, who in turn contracted with defendant subcontractor, Forney Enterprises.  Forney entered into a sub-subcontract with plaintiff Window Specialists, Inc. for the labor and materials to supply and install over 680 windows and over 60 doors on the project.  During the course of the project, the Army issued a 10-day cure notice identifying numerous issues with the general contractor’s demolition of existing windows and Window Specialists’ installation of new windows.  Ultimately, Forney terminated the contract with Window Specialists and the general contractor had to demolish, re-order, and re-install all of Window Specialists’ work on the project.
Window Specialists filed suit against Forney, the general contractor, the general contractor’s payment bond surety, and the Secretary of the Army, bringing claims for breach of contract, unjust enrichment, a payment bond claim, and for injunctive relief.  Forney filed two counterclaims against Window Specialists, one for breach of contract and one seeking indemnification related to the costs the general contractor incurred replacing Window Specialists’ work.

Oakland-Macomb Interceptor Drain Drainage Dist. v. Ric-Man Constr., Inc.,
2014 Mich. App. LEXIS 204 (Mich. Ct. App. Jan. 30, 2014)

The Michigan Court of Appeals, applying the Federal Arbitration Act, 9 U.S.C. § 1, et seq., ruled that while a court generally will not entertain a suit to address pre-award objections to the impartiality or expertise of an arbitrator, pre-award relief is available where a third-party arbitration administrator appoints an arbitrator who fails to meet specific qualifications spelled out in the parties’ arbitration agreement.

The case involved a multi-million dollar dispute between a public sector drainage district and a construction company (the “parties”) arising out of a construction contract. The parties, by amendment to the construction contract added a detailed arbitration agreement. The new arbitration agreement submitted the parties’ dispute to the American Arbitration Association (AAA). The provision outlined arbitrator selection criteria to be followed by the AAA in the event that it had to appoint one of the three arbitrators contemplated by the arbitration agreement. Among other things, the agreement required that the attorney member of the panel be a member of the AAA’s Large Complex Construction Dispute panel with at least 20 years of experience in construction law with an emphasis in heavy construction.

Liberty Mut. Fire Ins. Co. v. Kay & Kay Contr.
2013 U.S. App. LEXIS 23587 (6th Cir. Nov. 19, 2013)

This action arose out of a commercial general liability (“CGL”) policy issued by Liberty Mutual Fire Insurance Co. (“Liberty Mutual”) to MW Builders, Inc. (“MW Builders”) and Kay and Kay Contracting, LLC (“Kay & Kay”) for the construction of a Wal-Mart store in Morehead, Kentucky. Wal-Mart Stores, Inc. (“Wal-Mart”) contracted with MW Builders as general contractor for the construction of the building. MW Builders then entered into a subcontract with Kay & Kay to perform site preparation work and construct the building pad beneath the structure. Liberty Mutual issued the CGL policy to Kay & Kay, with MW Builders as an additional insured (the “Policy”). The Policy was the standard ISO (Insurance Services Office, Inc.) policy containing the standard coverage language. Specifically, the Policy provided: “This insurance applies to ‘bodily injury’ and ‘property damage’ only if… [t]he ‘bodily injury’ or ‘property damage’ is caused by an ‘occurrence’ that takes place in the ‘coverage territory’…” The Policy defined “occurrence” to mean “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The term “accident” was not defined in the Policy.

Gulf Group Gen. Enters. Co. W.L.L. v. United States
2013 U.S. Claims LEXIS 899 (Fed. Cl. July 2, 2013)

This action arose from a contractor’s claim that the U.S. Army (the “Army” or the “Government”) abused its discretion in terminating contracts for its convenience. In September 2004, Gulf Group General Enterprises Co. W.L.L. (“Gulf Group”) entered into four contracts worth approximately $15.8 million with the Army to provide cleanup and sanitation services in Kuwait. Three of the contracts—the camp package master blanket purchase agreement for provisions (the “BPA contract”), the latrine contract, and the dumpster contract—were terminated by the Army for its convenience within a month after they were awarded. The fourth contract, for bottled water distribution (the “bottled water contract”), was not terminated and instead extended into 2005.

Fed. Ins. Co. v. Empresas Sabaer, Inc.
2013 U.S. Dist. LEXIS 112930 (D.P.R. Aug. 9, 2013)

This action arose out of a surety’s claim for expenses incurred for correcting a subcontractor’s defective work. DTC Engineering and Constructors, LLC (“DTC”) and the U.S. Army Corps of Engineers (the “Corps”) entered into a contract for the design and construction of the Armed Forces Reserve Center at Fort Buchanan, located in Guaynabo, Puerto Rico. Federal Insurance Company (“Federal”) and DTC subscribed to a payment and performance bond as surety and principal, respectively, naming the government as obligee. DTC subsequently entered into a subcontract (the “Subcontract”) with Empresas Sabaer, Inc. (“Sabaer”) and BBS Developers, S.E. (“BBS”) (collectively the “Subcontractors”). The Subcontract provided that Sabaer was required to complete the work under Subcontract, while BBS was responsible for providing technical and economic support. United Surety and Indemnity Co. (“USIC”) and the Subcontractors, as surety and principal, respectively, subscribed to a payment and performance bond and named DTC as obligee. DTC assigned to Federal all of its rights emerging from the Subcontract and USIC’s bond.

United States ex rel. Tymatt Indus. v. Allen & Shariff Constr. Servs.
2013 U.S. Dist. LEXIS 114015 (D. Md. Aug. 13, 2013)

This action arose out of a subcontractor’s Miller Act claim for unpaid contract balances on a federal construction project. Allen & Shariff Construction Services, LLC (“Allen & Shariff”) was the prime contractor on a federal contract for the construction of a dam in Bethesda, Maryland, and related remediation (the “Project”). United States Security Company (“USSC”) was the surety on the Miller Act payment bond for the Project. Allen & Shariff subcontracted with Tymatt Industries, Inc. (“Tymatt”) to perform work on the Project (the “Subcontract”). The Subcontract contained a default provision stating that “should Tymatt fail to perform, after giving three days written notice Allen & Shariff had the option to terminate the [S]ubcontract for default if the defective performance was not cured.” Allen & Shariff issued three such notices to Tymatt, the last of which was issued on November 11, 2011. When Tymatt failed to cure, USSC sent Tymatt a termination notice on November 18, 2011 stating that the “[S]ubcontract…has been terminated due to lack of performance effective immediately.” Additionally, Allen & Shariff notified Tymatt that its “base access privilege [would] be terminated on November 23, 2011,” and requested that its equipment be removed prior to that date. Tymatt subsequently alleged that Allen & Shariff failed to pay $107,665.26 in amounts owed for work performed under the Subcontract. On Monday, November 26, 2012, Tymatt filed a Miller Act claim against USSC, as surety, to recover the monies allegedly due and owing.

United States of America ex rel D&M General Contracting, Inc v. Arch Ins. Co.
2013 U.S. Dist. LEXIS 111260 (D. Md. Aug. 5, 2013)

This action arose out of subcontractor’s claim for increased costs allegedly incurred as a result of delays on a federal government project. NTVI Enterprises, LLC (“NTVI”), as general contractor, entered into an agreement with the government to upgrade the chiller plant for a National Security Agency facility (the “Project”). NTVI posted a labor and material payment bond for the Project (the “Bond”) issued by Arch Insurance Company (“Arch”). NTVI then subcontracted with D&M General Contracting, Inc. (“D&M”) to perform electrical work on the Project. Midway through the Project, D&M alleged that the sequence of its work was altered by the government resulting in an additional $206,674.07 in costs to D&M. Pursuant to the Miller Act, D&M filed suit against Arch, as surety, to recover under the Bond its increased costs allegedly incurred.

Ravens Group, Inc. v. United States
2013 U.S. Claims LEXIS 979 (Fed. Cl. 2013)

This action arose out of a contractor’s claim for additional compensation for unanticipated work. The U.S. Army (the “Government”) solicited private contractors to provide the maintenance and repair services for General and Flag Officers Quarters (“GFOQ”) at Fort Myers, Virginia and Fort McNair, Washington D.C. GFOQ is military housing specifically designated for senior officers of the military and their families. Traditionally, the Government used “in-house” personnel to respond to the majority of the maintenance and repair service calls at GFOQ housing. The solicitation from private contractors marked a new initiative in which the service calls at these two bases would be handled exclusively by a private contractor.

Berks Products Corp. v. Arch Ins. Co.
72 A.3d 315 (Pa. Commw. Ct. 2013)

Note: A petition for allowance of appeal from this decision has been filed with the Pennsylvania Supreme Court, but has not been acted upon as of January14, 2014.

This action arose from a payment bond secured by a general contractor for work performed on a public school building. Skepton Construction, Inc. (“Skepton”) entered into an agreement with the Wilson Area School District (the “District”) to be the general contractor for the construction of a new intermediate school (the “Project”). Under its agreement with the District, Skepton was required to secure a payment bond in order to guarantee its payment obligations. Skepton secured its payment bond through Arch Insurance Company (“Arch”). The payment bond (the “Bond”), in relevant part, stated: “[I]f the Principal and any subcontractor of the Principal to whom any portion of the work under the Agreement shall be subcontracted,…promptly shall pay or cause to be paid, in full, all money which may be due any claimant supplying labor or materials…, then this Bond shall be void; otherwise this Bond shall be and shall remain in force and effect.”