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SLDF Case Updates

2008

May 2008 - Tricon Kent Co. v. Lafarge North America, Inc., et al. (no damages for delay)
On May 1, the Colorado Court of Appeals agreed with ASA, rulingthat the trial court did not err when it awarded damages to a subcontractor under the "active interference" exception to "no damages for delay." This was the first ruling in Colorado on the validity and enforceability of such clauses. ASA's Feb. 27, 2007 brief stated that, if enforceable, "no damages for delay" clauses ought to be strictly construed against the owner and contractor, and exceptions should apply given sufficient evidence. In this case, subcontractor work was delayed due to a revised project schedule, but no allowances were made by the general contractor. Tricon was able to provide evidence that Lafarge knew of the impact of project delays and proceeded to require Tricon to stick to its previous schedule anyway.

2007

December 2007 - Collins & Hermann, Inc. v. Union Electric Co. (mechanic's lien and payment bond rights on quasi-public construction)
On Dec. 21, 2007, the Missouri Court of Appeals for the Eastern District granted ASA's request to file an amicus brief in this case that will determine whether public utilities are subject to Missouri's mechanic's lien law and its "little" Miller Act. The trial court held that public utilities are not subject to mechanic's lien laws, but as public projects, must comply with the "little" Miller Act. The quasi-public utility appealed the ruling, seeking to avoid any requirement to post payment and performance bonds. The subcontractors have cross-appealed, seeking to reverse the trial court's finding that mechanic's lien laws do not apply to construction projects on public utilities. In its brief, ASA's goal will be to further the interest of all subcontractors in Missouri and the United States by supporting and executing the declared policy of providing security to subcontractors and suppliers for payment of the value of improvements they make to real estate whether that real estate is owned by private parties, the government or quasi-public bodies.

December 2007 - U.S. Fire Insurance Co. v. J.S.U.B. (insurance - coverage of construction defects)
On Dec. 20, 2007, the Supreme Court of Florida ruled that unexpected and unintended property damage arising out of the work of a subcontractor constitutes a covered occurrence of property damage under the general contractor's CGL policy. In this clear victory for construction subcontractors, the court cited the arguments made by amici curiae, including ASA, in its decision. In its August 2006 friend-of-the-court brief , ASA argued that excluding coverage would render the provisions of a standard CGL policy superfluous and effectively defraud a contractor who relies on the plain meaning of the policy language.

December 2007 - Auto-Owners Insurance Co. v. Pozzi Window Coverage. (insurance - coverage of construction defects)
On Dec. 20, 2007 the Supreme Court of Florida ruled that damage to defective windows themselves, even though installed by a subcontractor did not constitute property damage. In an August 2006 amicus curiae brief , ASA joined several other construction associations urging the Court to affirm a federal district court decision holding that a standard CGL policy insuring a general contractor covers the cost of correcting construction defects allegedly arising from the work of a subcontractor. ASA argues that standard CGL policies would not make sense if the "subcontractor provision" providing overage for damage resulting from "work performed by a subcontractor on behalf of the named insured" does not mean what it says. Although ASA finds little to distinguish between damage to the defective work itself and other work, for the purposes of the definition of property, the court appears to believe that its ruling is consistent with its ruling in J.S.U.B. (see above).

November 2007 - John Patrick Lowe, Trustee for NA Flash Foundation v. Palmetco, Inc. (bankruptcy preference)
On Nov. 28, 2007, ASA filed a brief in the U.S. Court of Appeals, Fifth Circuit, seeking to clarify that a Chapter 7 bankruptcy trustee can not reach back to recover payments from subcontractors and suppliers when those subcontractors and suppliers can no longer perfect liens to recover from the owner. ASA argued that to rule otherwise would dramatically increase the risks to subcontractors and suppliers who extend credit to others in the construction industry, potentially disrupting the practice throughout the industry.

November 2007 - Myrex Industries v. Suretec Insurance Company (timeliness of little Miller Act notice)
On Nov. 19, 2007, ASA asked the Texas Supreme Court to hear and reverse an Appeals Court decision that held that the law which extends a filing period to the next business day when the deadline falls on a weekend or holiday does not apply to payment bond claims under the McGregor Act. The Appeals Court held that Myrex's payment bond claim was untimely and thus invalid. ASA's letter in support of the subcontractor's appeal argues that the Appeals Court ruling sets up a potential trap for the unwary, resulting in the invalidation of otherwise meritorious claims.

November 2007 - Mid-Ohio Mechanical v. Eisenmann Corporation (mechanic's liens/time-and-material invoices)
On Nov. 2, ASA filed a new friend-of-the-court brief supporting the original appeal of Mid-Ohio Mechanical v. Eisenmann Corporation. On Oct. 6, 2006, an Ohio appellate court reversed a lower court decision that would have stripped Ohio subcontractors of mechanic’s lien rights for most types of equipment installations. With that victory, Mid-Ohio tried to collect a cash deposit made in lieu of its mechanic’s lien. In its second appeal, Eisenmann Corp. challenged Mid-Ohio’s right to collect the cash bond on several grounds. The general contractor’s new appeal contends that it does not have to honor Mid-Ohio Mechanical’s claim because of the “wastefulness,” “extravagance,” etc., of its time-and-material (T&M) invoices, and that Mid-Ohio has to take additional procedural steps to collect the cash bond. In its Nov. 2 brief, ASA argues that “Eisenmann seeks to create procedural hurdles for contractors and subcontractors who cooperate with an owner seeking to provide such alternate security” and fails to substantiate its case in “any provision of the Ohio Civil Rules or any applicable Ohio case law.” Subcontractor Mid-Ohio Mechanical performed work under a T&M contract on part of the construction and installation of the paint line of a factory. Eisenmann did not pay Mid-Ohio’s invoices and Mid-Ohio filed a mechanic’s lien, which Eisenmann and the project owner released by posting a cash bond. The lower court’s Oct. 6, 2006, decision was based on an interpretation of Ohio’s mechanic’s lien law that would have invalidated a $750,000 lien securing payment on machinery a subcontractor installed by lowering it through a hole in the roof, bolting it to a special foundation then attaching it to power lines physically connected to the utility lines serving the building.  In a May 22, 2006, friend-of-the-court brief , ASA argued that the lower court decision denying the lien “ignores the plain language of the Ohio Mechanic’s Lien statutes, contradicts recent Ohio precedent and destabilizes the foundation of the construction industry. The appellate court agreed, ruling that the subcontractor’s work and materials are “as a matter of law, improvements to a building, fixture, appurtenance or other structure” and subject to lien.

August 2007 - Lamar Homes v. Mid-Continent Casualty (construction defect) On Aug. 31, 2007, the Texas Supreme Court issued a ruling agreeing with ASA that that property damage caused by a defective foundation is covered by a building contractor's general liability insurance, which most contractors and insurance agents assume includes coverage for "completed operations." In Feb. 2006, ASA joined several other construction associations on an amicus curiae brief arguing that the "marketing" of general liability insurance policies "emphasizes the availability of coverage for various categories of defective work," and that "the premium charged ... would be excessive to say the least," if the insurer's argument - that defective construction is not covered by the standard policy language - succeeded. The case was sent to the Texas Supreme Court on certified questions from the U.S. Court of Appeals for the Fifth Circuit, after ASA filed an amicus brief in that court on Jan. 11, 2005, which made similar arguments.

April 2007 - TA Operating v. Solar Applications (mechanic's liens)
On April 27, the Supreme Court of Texas granted the petition for review in the case. Argument of the case is expected to take place in September or October of 2007. ASA previously filed a brief in May 2006 urging the Texas Supreme Court to overturn an appeals court decision that would force subcontractors to release their liens in order to preserve their customers' rights to payment from the owner in any case where the prime contract requires unconditional lien releases to be submitted with the application for final payment.

April 2007 - Dugan & Meyers Constr. Co., Inc. v. Ohio Dept. of Adm. Servs. (owner warranty of defective plans)
In an April 25 decision , the Supreme Court of Ohio limited the Spearin doctrine, which provides that owners warrant that their plans are suitable for construction, to owner representations about job site conditions, declining to allow contractors to collect damages resulting from delays caused by owner-provided plans that are defective. ASA filed a friend-of-the-court brief on March, 27 2006, urging the high court to reverse an appeals court decision in Dugan & Meyers Constr. Co., Inc. v. Ohio Dept. of Adm. Servs., and allow contractor Dugan & Meyers Construction Inc. to collect damages for delays it experienced due to inaccurate and incomplete plans on an Ohio State University (OSU) project it led. ASA later filed another brief in September 2006 urging the Ohio Supreme Court to review the case because of its importance to the construction industry, and the court agreed to review the case in December 2006. After being discharged from the project by OSU, Dugan & Meyers filed a complaint in the Court of Claims seeking damages for delays. The Court of Claims ruled that the principal cause of the delays were the deficient plans, and that OSU had breached the contract. A Court of Appeals reversed that decision on the grounds that the contract contained a “no damages for delay” clause, which was legal in Ohio at the time, and that it included a specific procedure to be followed for changes and extensions. Dugan & Meyers did not file any requests for extensions, and the appeals court refused to hold that OSU had implicitly warranted that its plans were constructible, accurate and complete, or that an implied warranty took precedence over the express contractual terms. The Ohio Supreme Court agreed.

February 2007 -
Fowler & Peth, Inc. v. Regan (Colorado Trust Fund Statute)
A U.S. District Court for the District of Colorado decision threatened to eliminate one of the three main ways in which subcontractors and suppliers can recover payments for the work they perform under the state's mechanic's lien laws. ASA and ASA of Colorado (ASAC) defended the payment recovery option provided by the state's Trust Fund Statute throughout the appeals process. On Feb. 5, the Colorado Supreme Court concluded that the Trust Fund Statute "protects subcontractors, laborers, and material suppliers who add value to property but are unable to recover monies owed to them through the lien claim process." In the case of Fowler & Peth, Inc. v. Regan, a roofing material supplier had not been paid but did not follow lien claim procedures to perfect a lien on property. The supplier decided, however, to exercise its right to payment recovery as prescribed under the Trust Fund Statute, which permits a direct claim on funds held in trust for its work. ASA and ASAC filed a joint friends-of-court brief in September 2005 asking the 10th U.S. Circuit Court of Appeals to overturn a ruling by the U.S. District Court for the District of Colorado. The District Court ruled that the trust fund protections applied only when the lien claim process for a lien on property had been followed, but ASA and ASAC argued that the ruling was flawed because it would render the Trust Fund Statute's protection redundant, and therefore, useless. The Circuit Court referred the question to the Colorado Supreme Court. ASA and ASAC filed a joint brief with the high court and ASA member attorney Gilbert Egle of Denver-based Preeo, Silverman, Green & Egle, presented oral arguments in the case on ASA's and ASAC's behalf.
 

2006

November 2006 -
Crawford v. Weather Shield Mfg. (construction defect, duty to defend)
ASA filed a friend-of-the-court brief with the Supreme Court of California Nov. 28 asking it to overturn an appeals court's decision to enforce a subcontract provision that would make a non-negligent subcontractor bear the costs of defending a developer against a suit brought by homeowners. In its brief, ASA argues that California law "bars general contractors and developers from requiring their non-negligent subcontractors to defend them in litigation." ASA's brief builds on an ASA victory earlier this year in which the California Supreme Court, prompted by an amicus letter filed by ASA, decided to grant review of the appeals court's decision. In this case, subcontractor Weather Shield Manufacturing Inc. challenged a lower court ruling that found it responsible for a developer's defense costs because of a subcontract provision "to defend any suit or action" founded upon any claim "growing out of the execution of the work." ASA's brief points out, however, that California law does not separate a general indemnity obligation from the duty to defend and that the California Legislature enacted the anti-indemnity law to protect the public and businesses from negligent parties that would simply pass their liabilities on to others without consequence.

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November 2006 -
Welsbach Electric v. MasTec North America
(pay-if-paid, venue)
In a Nov. 20 decision , the New York Court of Appeals fashioned a limited exception to the policy of not enforcing pay-if-paid clauses in construction contracts. The court asserted that New York lien law "seeks to protect New York subcontractors from the oppressive use of bargaining power" but permitted enforcement of pay-if-paid terms in a contract between two out-of-state contractors whose contract for electrical work on a project in New York contained a choice-of-law provision specifying Florida law, and a pay-if-paid provision, which Florida law allows. In July 2006, ASA filed a friend-of-the-court brief arguing that contractors cannot circumvent the state's policy by using venue provisions that apply out-of-state laws. The court concluded, however, that the out-of-state contractors are "sophisticated commercial entities that knowingly and voluntarily entered into the subcontract," and that "the checkered history of pay-if-paid clauses" provided insufficient grounds upon which to void the parties' choice of law. Despite the court's decision, it is likely to have limited application. Choice-of-law provisions in New York contracts on private improvements of $250,000 or more that designate out-of-state laws as controlling are void under the state prompt pay law that went into effect on Jan. 14, 2003.

November 2006 - Templeton Development Corp. v. Dick Emard Electric, Inc. (Venue – dispute resolution)
In October, ASA filed a letter with the California Court of Appeal for the 3rd Appellate District supporting the request of Dick Emard Electric to publish the court’s decision holding that contract clauses that compel subcontractors to arbitrate or mediate disputes outside the state are unenforceable. The court granted the request in November. Originally the court had not intended to publish the decision, which would have meant it could not have been used as a precedent.

October 2006 -
KSW Mechanical Services, Inc. v. American Protection Insurance Company
(insurance)
ASA filed a friend-of-the-court brief with an appeals court in New York in a case that is likely to have important implications concerning the kinds of damages claims that insured parties can make against the carriers of owner-controlled insurance programs (OCIPs).

October 2006 -
 Mid-Ohio Mechanical v. Eisenmann Corporation (mechanic's liens)
On Oct. 6, an Ohio appellate court reversed a lower court decision that would have stripped Ohio subcontractors of mechanic’s lien rights for most types of equipment installations. The lower court decision was based on an interpretation of Ohio’s mechanic’s lien law that would have invalidated a $750,000 lien securing payment on machinery a subcontractor installed by lowering it through a hole in the roof, bolting it to a special foundation then attaching it to power lines physically connected to the utility lines serving the building.  In a May 22 friend-of-the-court brief , ASA argued that the lower court decision denying the lien “ignores the plain language of the Ohio Mechanic’s Lien statutes, contradicts recent Ohio precedent and destabilizes the foundation of the construction industry. The appellate court agreed, ruling that the subcontractor’s work and materials are “as a matter of law, improvements to a building, fixture, appurtenance or other structure” and subject to lien

September 2006 - Eschbach Bros. v. Contracting Systems, Inc. (pay-if-paid)
In a Sept. 12 decision, a Superior Court in Pennsylvania rejected a trial court’s argument that the Pennsylvania Contractor and Subcontractor Payment Act created a “pay-if-paid” clause in every construction contract. The non-precedential Superior Court decision concluded that “the parties never argued during trial that the provisions of the Contractor and Subcontractor Payment Act at issue were incorporated into the parties’ written contract, contrary to the parties’ contract, or negated the condition precedent established in the contract. Therefore, we find any argument with regard thereto to be waived.” In a February 2006 friend-of-court brief , ASA argued that that the trial court had ignored the state law and inferred a payment clause not intended by the parties or created by the contract language.

February 2006 - Lamar Homes v. Mid-Continent Casualty (construction defect)
On Feb. 1, ASA filed an amicus curiae brief, joined by the AGC Texas Building Branch and by PHCC, requesting the Texas Supreme Court to rule that property damage caused by a defective foundation is covered by a building contractor's general liability insurance, which most contractors and insurance agents assume includes coverage for "completed operations." The brief argues that the "marketing" of general liability insurance policies "emphasizes the availability of coverage for various categories of defective work," and that "the premium charged ... would be excessive to say the least," if the insurer's argument - that defective construction is not covered by the standard policy language - succeeds. The case was sent to the Texas Supreme Court on certified questions from the U.S. Court of Appeals for the Fifth Circuit, after ASA filed an amicus brief in that court on Jan. 11, 2005, which made similar arguments (AGC and PHCC were not parties to that brief).

2005 and Prior

November 2005 - Environmental Energy Partners v. Siemens Building Technologies (mechanic's liens)
ASA has asked the Missouri Supreme Court to overturn an appeals court decision that would allow a general contractor to make a claim of tortious interference against an unpaid subcontractor, based on the subcontractor's filing of a mechanic's lien and settlement of its lien claim with a construction owner. In its amicus curiae brief, filed on Nov. 30, ASA states that, if allowed to stand, the appeals court decision would have devastating effects by opening the door to unwarranted tortious interference claims by general contractors.

October 2005 – Dublin Suites v. Shook, Inc. (Delay Damages – Subcontractor’s Liability to Owner)
On Oct. 26, the Ohio Supreme Court agreed with ASA's brief and overturned an appeals court ruling that allowed an owner to directly sue a subcontractor, with whom the owner had no privity of contract, for delay damages.

September 2005 - Mikula v. Miller Brewing (Worker Injury - hold harmless and additional insured)
On Sept. 8, the Wisconsin Supreme Court denied ASA's request that it review an appeals court decision forcing a subcontractor to indemnify a project owner for personal injuries to a third party caused by the owner's allegedly faulty freight elevator.

July 2005 - National Union Fire Insurance Company of Pittsburgh v. Wadsworth Golf (payment bond claim - waiver of defenses)
On July 21, Maryland's highest court ruled that a payment surety's failure to send a response to a claim within 45 days, as required by the AIA's A312-1984 bond form, prevented the surety from disputing the claim, and required the claim to be paid in full. In May, ASA filed an amicus curiae ("friend of the court") brief arguing that if subcontractors have to meet the time deadlines for claims as they are stated in a bond form, then the sureties should have to meet their time deadlines as well.

February 2005 - Gem Plumbing v. Rossi (Mechanic's Liens - due process)
On Feb. 22, Rhode Island's Supreme Court reversed a trial court decision that the filing of a notice of mechanic's lien violates the owner's right to due process under the U.S. Constitution. ASA filed an amicus brief in the case urging reversal of the trial court decision because its reasoning would have invalidated existing liens in at least 48 states, by forcing subcontractors to sue the project owner in advance of filing a mechanic's lien. Just prior to the Supreme Court's decision (and after the trial court's decision), ASA's Rhode Island chapter successfully amended Rhode Island's mechanic's lien law to clarify the owner's right to a hearing after a lien is filed, which proved crucial:
"Tipping the scales in favor of constitutionality is the combination of the claimant's statutory preexisting interest in the property [argued in ASA's brief] and the availability of a prompt post-deprivation hearing [thanks to the amendment by ASA's Rhode Island chapter]."

January 2005 - Walsh Construction v. Mutual of Enumclaw (Worker Injury – additional insured)
Click here to read the Oregon Supreme Court's ruling that a general contractor, named as an "additional insured" on a subcontractor's general liability insurance policy, did not have coverage under the policy "for losses arising in whole or in part from the [general contractor]'s fault," under Oregon's anti-indemnity statute. Last August, ASA filed a "friend of the court" brief   in the case, and last October, ASA filed a memorandum of additional authorities.

2004

October 2004 - ISEC Inc. v. Diamond Building Group (Payment – pay-if-paid)
Do pay-if-paid terms violate public policy in your state? The question is still an open one in Arizona, thanks to a brief filed by ASA in an Arizona court of appeals. The court overturned summary judgment against the unpaid subcontractor, which was based on a pay-if-paid clause, and remanded the case for a trial. The court's opinion says in one place that pay-if-paid clauses "do not violate public policy" (para. 17), but says in another place that "To the extent that ASA in its amicus brief raises public policy issues not raised by either party, we do not consider the merits of those arguments" (para. 29). In other words, ASA's brief is now mandatory reading for lawyers who collect unpaid accounts for Arizona subcontractors. Has your lawyer read the brief?

May 2004 - J.A. Jones Construction v. Lehrer McGovern Bovis (Payment for delays - "No Damage for Delay")
ASA's amicus brief helped convince the Nevada Supreme Court to recognize exceptions to enforcement of "no damage for delay" clauses. Footnote 6 of the Court's decision references a 77-page article that was attached to ASA's brief, to support its conclusion that "an instruction including ... exceptions should have been given" to the jury.

April 2004 - Interstate Contracting Corp. v. City of Dallas (Payment- Pass- Through Claims)
The Texas Supreme Court ruled that subcontractors are permitted, under Texas law, to recover owner-caused damages without suing the general contractor, by reaching a "pass-through" agreement with the general contractor permitting the subcontractor to sue the owner in the general contractor's name. The case presented "difficult issues of first impression for this Court," but ASA's amicus brief walked the court, step-by-step, to the proper conclusion .

January 2004 - American Family v. The Pleasant Company (Construction Defect - denial of coverage under standard general liability terms)
View the Wisconsin Supreme Court’s final decision and ASA’s amicus curiae brief in a case holding that standard Commercial General Liability (CGL) insurance policies cover claims for defective construction that are made against the insured contractor. The court essentially adopted ASA’s argument that various provisions of the policy would be superfluous if construction defect coverage were excluded, defrauding contractors who buy a policy assuming that those provisions do have meaning and are not superfluous (see ¶47 of the decision).

September 2003 - Mahoney v. Team America 3, Inc. (Worker Injury - safety regulation requiring "overhead protection")
View ASA's amicus brief and the final decision in an Ohio Supreme Court case holding that a hard hat provides sufficient "overhead protection" to satisfy an Ohio safety regulation requiring that "Overhead protection shall be provided for employees on a scaffold exposed to hazards from overhead," where the only overhead hazard comes from an adjacent scaffold employing toeboards to block falling debris.

May 2003 - Star Electrical Contractors v. Stone Building Company (Worker Injury - "hold harmless" indemnity)
View ASA's amicus brief and the final decision in an Alabama Supreme Court case holding that subcontractors are not automatically liable to indemnify general contractors against worker injury claims in cases where the subcontractor refuses to defend a general contractor who subsequently settles with the injured worker.

November 2002 - Barton-Malow Co. v. Grunau Co.
View ASA's amicus brief and the final decision in a Florida Court of Appeals case holding that subcontractors could not be forced to pay a general contractor's defense costs in a construction defect lawsuit, where the "hold harmless" clause in the subcontracts was unenforceable under Florida's anti-indemnity law.

April 2002 - Chrysler v. Merrell & Garaguso, Inc. (Worker Injury - "additional insured" indemnity)
View ASA's amicus brief and the final decision in a Delaware Supreme Court case holding that "additional insured" requirements "may, under certain circumstances, be unenforceable" under Delaware's Anti-Indemnity Law.