Cases of the Month
Significant Cases and Decisions Affecting the Construction Industry
By: Craig F. Martin
Lamson, Dugan & Murray, LLP
1. Contractor is not entitled to delay damages unless owner’s active interference is willful or in bad faith. C and H Electric, Inc. v. Town of Bethel, 2014 Conn. Lexis 264 (Aug. 5, 2014).
* What the Court Considered: The Town of Bethel (the Town) hired C and H Electric, Inc. (C&H) as the general contractor to renovate the high school. The contract contained a delay remedy clause that limited C&H’s remedy to time extensions. The only exception to the delay remedy clause was for a delay caused by the active interference of the Town with C&H’s work. However, the contract did not define active interference rather it stated that the Town’s exercise of its contractual rights did not constitute active interference. C&H had completed its work on the project on time but there had been delays caused by the asbestos abatement process and C&H incurred additional expenses. C&H filed a lawsuit requesting compensation for losses incurred claiming that the Town concealed the asbestos abatement work from C&H and that the Town ordered C&H to start work on the project while knowing that the abatement work would be an interference. C&H argued that the plain meaning of active interference was an affirmative or willful act which unreasonably interfered and the conduct of the Town amounted to active interference. The Town in reply argued that the contract phrase “active interference” is ambiguous because courts have interpreted it to mean either bad faith or a willful act.
* What the Court Said: The Court found that the contract phrase “active interference” was ambiguous and that interference of the town did not reach to the high bar level of bad faith or the low bar level of a purposeful or willful act. The Court reasoned that the Town had discussed the progress of the abatement process on a regular basis at public meetings and that there was no evidence that the town knew the abatement work would interfere with C&H’s work.
* What the Opinion Means: A contractor must be able to show either bad faith or affirmative willful conduct in order to claim active interference of the owner to circumvent the delay remedy clause.
2. Miller Act provides remedy for sub-subcontractors not licensed within state of construction for federal projects. . Technica LLC v. Carolina Casualty Insurance Co., 749 F.3d 1149 (9th Cir. 2014).
* What the Court Considered: A general contractor, in accordance with the Miller Act (the Act), provided a payment bond for a federal construction project in California. The general contractor hired a subcontractor to complete a portion of the work and the sub-contractor hired a sub-subcontractor for a portion of their work. The sub-subcontractor had furnished almost $893,000 in labor, services, and materials for the project and had only been paid $288,000 of the amount due when the general contractor terminated the subcontract. The sub-subcontractor brought an action against the general contractor and its bond in federal court to recover the balance. The general contractor argued that the sub-subcontractor could not recover because it was not licensed in California and the claim was barred under the California Business and Professions Code § 7031(a), which prevents an unlicensed contractor from bringing a claim for payment of services in California.
* What the Court Said: The issue was one of first impression in California. The court considered the remedial purpose of the Act which is to provide a sub-subcontractor with a cause of action in federal court to recover payment and determined that the scope of the remedy is a matter of federal rather than state law. The court articulated that by requiring sub-subcontractors to comply with state licensing laws in any state they may work would be contrary to the intent of the Act.
* What the Opinion Means: If a sub-subcontractor works in several states on federal projects they may not be required to comply with state licensing laws in order to recover in the event of non-payment for work performed.
Craig Martin is a partner in the firm of Lamson, Dugan & Murray, LLP, in Omaha, Nebraska; and is the primary author of the Construction Contractor Advisor blog, www.ConstructionContractorAdvisor.com. These summaries were drafted with the assistance of Jessica Weborg and Spencer Murphy. For more information, or if you have any questions, please contact us at firstname.lastname@example.org.