Cases of the Month
Significant Cases and Decisions Impacting the Construction Industry
By: Ira Genberg and Cory Menees
1. Owner’s Failure to Respond to Requests for Admission Allows Perfection of Lien Claim, Platz Assoc. v. Finley, 973 A.2d 743 (Me. 2009).
* What the Court Considered: Maine’s lien law provides that an architect has a lien against property when the property’s owner either contracts with the architect or consents to the architect’s provision of services to the property. In Finley, the architect provided services to the prospective purchaser of property. When the purchaser failed to pay the architect’s bill, the architect filed a lien against the property and later filed a complaint against both the prospective purchaser and owner, alleging their failure to pay for the architect’s services. Requests for admission served on the owner by the architect went unanswered. As the owner failed to answer the requests, they were deemed admitted by default. Citing the default admissions as evidence of the owner’s consent to the architect’s provision of services to the property, the architect moved for and won summary judgment on its claim against the owner. The owner appealed.
* What the Court Said: Accepting the default admissions, the Maine Supreme Judicial Court upheld summary judgment in favor of the architect on its lien claim.
* What the Opinion Means: In Maine, as in most states, the failure to fully and punctually participate in the discovery process may harm litigants’ ability to defend against claims and, in some cases, may result in the entry of adverse judgment.
2. Reliance a Prerequisite to Claims for Negligent Misrepresentation and Fraud, Steffy v. Home Depot, Inc., Case No. 1:06-CV-02227 (M.D. Pa. 2009).
* What the Court Considered: A GC paneled the interior of a newly constructed building with plywood. After spending time in the new building, occupants experienced burning eyes and headaches. A test of the building’s interior air quality revealed the air to contain excessive levels of formaldehyde. The plywood used as paneling was tested and discovered to emit high amounts of formaldehyde. The GC thereafter made several claims against the plywood supplier, including claims for fraud and negligent misrepresentation. The supplier moved for summary judgment.
* What the Court Said: As the GC had no evidence showing its reliance on any representation made by the supplier relative to the plywood, the supplier’s motion for summary judgment was granted.
* What the Opinion Means: Absent the ability to show reliance on a representation made by a defendant, a plaintiff cannot make out a claim for either fraud or negligent misrepresentation. Reliance is an essential element of both claims.
3. Connecticut Court Recognizes Continued Enforceability of No Damages for Delay Clauses, Mafco Electrical Contractors, Inc. v. Turner Construction Co., 2009 U.S. Dist. LEXIS 24499 (D. Conn. 2009).
* What the Court Considered: A sub sued a GC, seeking an equitable adjustment of nearly $900,000 to a subcontract. The adjustment was sought largely because of the GC’s alleged "abandonment of the Subcontract schedule . . . requiring . . . out of sequence work." The GC moved for summary judgment on the sub’s breach of contract claim, citing a no damages for delay provision contained in the subcontract. The sub argued against the GC’s motion by claiming that the GC was grossly negligent in performance under the subcontract, and that the GC should be denied the protection of the no damages for delay clause as a consequence.
* What the Court Said: Finding that the no damages for delay clause was enforceable and that the GC was not grossly negligent, the court granted the GC summary judgment.
* What the Opinion Means: In Connecticut, no damages for delay clauses remain enforceable. A party will not be denied the protection of a no damages for delay clause unless it can be shown to have been “willful” “malicious” or “reckless,” i.e., grossly negligent, in causing delays.
4. Dispute Arising from Work Performed Pursuant to Written Change Order Held Arbitrable Pursuant to Terms of Subcontract, Hood Elec., Inc. v. Dodson Construction Co., 2009 U.S. Dist. LEXIS 29755 (E.D. Okla. 2009).
* What the Court Considered: A sub submitted a written change order to a GC seeking approval for the commitment of extra labor to a project. The GC approved the change order. When the project was finished and the GC failed to pay the sub all amounts it believed it was due, the sub sued for breach of contract and quantum meruit. The GC counterclaimed and moved the court to stay the suit and to compel mediation and/or arbitration. The GC argued that the change order was issued pursuant to the subcontract and that the subcontract incorporated the prime contract by reference. Consequently, any dispute related to the change order was subject to the arbitration provision contained in the prime contract. The sub countered that the GC’s agreement to allow additional labor on the project amounted to an oral contract separate and apart from the subcontract.
* What the Court Said: Finding the change order to be a modification of the existing subcontract, the court granted the GC’s motion to compel arbitration.
* What the Opinion Means: Provided changed work is within the scope of the work originally contemplated by the parties to a contract containing an arbitration clause, disputes relating to such changed work will likely be held subject to the arbitration.
5. Contractual Condition Precedent Not Created Absent Express Language, General Steel, Inc. v. Delta Bldg. Sys., 676 S.E.2d 451 (Ga. App. 2009).
* What the Court Considered: A contractor entered into an open account agreement with a supplier. The owner of the contractor personally guaranteed the contractor’s payment on the open account. After the contractor failed to pay on the account, the supplier sued both the contractor and its guarantor. The guarantor defended against the suit, claiming the supplier’s claims were barred by the failure of the supplier to provide the guarantor with copies of invoices. The guarantor argued that provision to him of the invoices was a contractual condition precedent to his guaranty obligations. The trial court agreed with the guarantor and granted him summary judgment. The supplier appealed.
* What the Court Said: Reversing the trial court, the appeals court held that the written guaranty lacked explicit language conditioning the guarantor’s obligations on the provision to him of copies of invoices. Absent such language, the guarantor could not defend the case against him based on the failure of a contractual condition precedent.
* What the Opinion Means: In Georgia, where “the contract’s terms are clear and unambiguous and do not clearly establish a condition precedent, a court cannot construe the contract to create one.”