Construction Liens Filed by Suppliers in New Jersey After Contractor’s Filing of Bankruptcy Petition Are Barred by the Automatic Stay Provision of the Bankruptcy Code

In re: Linear Electric Co., Inc., No. 16-1477, 2017 U.S. App. Lexis 5527 (3d Cir., March 30, 2017)

This case concerns whether suppliers, Cooper Electrical Supply Co. and Samson Electrical Supply Co. (“Suppliers”), could file construction liens under New Jersey law, despite the fact that Linear Electric Inc. (“Contractor”), filed a petition for bankruptcy, which automatically stays any act to create or perfect any lien against the contractor’s property. Two weeks after Contractor filed for bankruptcy, the Suppliers filed construction liens against projects in New Jersey where the materials were incorporated.  Following a motion by the Contractor, the Bankruptcy Court held that the liens were in violation of the automatic stay provision of the Bankruptcy Code. The District Court affirmed the Bankruptcy Court’s holding that, under New Jersey law, the liens were claims against the Contractor’s accounts receivables, which receivables are part of the bankruptcy estate and protected by the automatic stay.  On appeal, the Third Circuit affirmed the ruling of the District Court. Continue reading

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Massachusetts Appellate Court Holds That No-Damages-for-Delay Clause Does Not Bar Claim for Schedule Compression and Affirms Award of Total Cost Damages

Central Ceilings, Inc. v. Suffolk Constr. Co., Inc., 2017 Mass App. Lexis 36 (March 29, 2017).

 The Massachusetts State College Building Authority contracted with Suffolk Construction Company (“Suffolk”) to serve as the general contractor for the construction of dormitories at Westfield State University (“the Project”). Suffolk subcontracted with Central Ceilings, Inc. (“Central”) to install interior and exterior framing, drywall, and door frames for the Project.

Central’s work was impeded by Suffolk’s failure to: coordinate the work of other trades; establish proper elevation, column, and control lines; timely and properly coordinate delivery of the door frames; and ensure that the buildings were weather-tight and properly heated. Its workers were forced to repeatedly demobilize from one area and remobilize in another, and to work in the same space and at the same time as other subcontractors, i.e. stacking of trades.  Central’s project manager and other supervisors were forced to coordinate and administrate the remobilizations.  Both the remobilizations and the stacking of trades significantly increased Central’s labor costs. Continue reading

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Federal Court in Alaska Holds Insurer Liable Under E&O Policy to Indemnify and Defend Construction Manager for Claims by Subcontractor That Construction Manager Failed to Properly Perform Construction Management Services

KICC –Alcan Gen. v. Crum & Forster Specialty Ins. Co., 2017 U.S. Dist. LEXIS 37560 (March 16, 2017)

A Contractor/Construction Manager, KICC-Alcan General (“KICC”), entered into a subcontract with an MEP subcontractor, Superior Group (“Superior”), concerning the construction of two buildings at an airforce base in Alaska. Superior sued KICC for approximately $2 million in costs it incurred in excess of the contract value, allegedly caused by KICC’s failure to properly manage the project.  KICC tendered Superior’s claims to its Errors and Omissions insurance carrier, Crum & Forster Specialty Insurance Company (“C&F”).  C&F denied both defense and indemnity of Superior’s claims.  KICC settled its claims with Superior prior to trial.  KICC then sued C&F for its breach of the duty to defend and indemnify against Superior’s claims, as well as a breach of its duty of good faith.

The terms of KICC’s E&O policy provided coverage for “damages… because of… an act error or omission in the rendering or failure to render professional services by any insured.”  The contract defined “professional services” as “those functions performed for others by you or by others on your behalf that are related to your practice as a consultant, engineer, architect, surveyor, laboratory or construction manager.”

Superior alleged that KICC: mismanaged a soil contamination issue at the beginning of the project; failed to provide timely responses to requests for information and contract modifications; and directed other subcontractors to work in the same areas at the same time as Superior, resulting in delays and added costs to Superior on the project. Superior submitted a request for equitable adjustment (“REA”) for these costs and delays, but KICC denied the REA.  In its lawsuit, Superior asserted claims for breach of contract and quantum meruit. Continue reading

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Colorado Appellate Court Holds that Commercial Entity that Owns a Senior Living Facility Is a “Residential Property Owner” Within the Meaning of the Homeowner Protection Act and Is Therefore Entitled to More Lenient Statute of Limitations

Broomfield Senior Living Owner, LLC v. R.G. Brinkmann Co., 2017 Colo. App. Lexis 261 (March 9, 2017)

R.G. Brinkmann Company, as general contractor, was retained by Sunrise Development, Inc., a major national developer, for the construction of a senior assisted and independent living facility in Broomfield, Colorado. The project was owned by Broomfield Senior Living Owner, LLC.

Section 13.7 of the contract between Brinkmann and Sunrise provided that all claims arising from defects in Brinkmann’s work would be deemed to accrue no later than final completion of the project. On May 15, 2009, the project achieved final completion when a certificate of occupancy was issued.  No defects in the project were noted at that time.  In the Fall of 2012, however, Broomfield discovered broken sewer pipes at the project.  Further investigation revealed a number of defects that Broomfield attributed to Brinkmann’s poor construction.

On July 21, 2014, Broomfield filed a lawsuit asserting various defective workmanship claims against Brinkmann. Brinkmann responded by moving for summary judgment, arguing that under Section 13.7 of its contract with Sunrise, all defective work claims accrued no later than final completion on May 15, 2009 and that Colorado’s two year statute of limitations for civil claims therefore expired on May 15, 2011.  The trial court granted Brinkmann’s motion and dismissed Broomfield’s claims. Continue reading

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Fifth Circuit Holds That Spearin-like Provision of Louisiana Civil Code Bars Negligent Failure to Warn Claim

LaShip, LLC v. Hayward Baker, Inc., 2017 U.S. App. LEXIS 3694 (5th Cir. Mar. 1, 2017)

Beginning in 2007, LaShip, LLC (“LaShip”) undertook the construction of a large shipbuilding facility in Houma, Louisiana (the “Project”), situated on its own private land as well as land owned by the Terrebonne Port Commission (“TPC) – a subdivision of the Louisiana state government. In July 2008, LaShip accepted a bid from Hayward Baker, Inc. (“HBI”) to complete the soil mixing and drill shaft work on the Project.

The contract between LaShip and HBI (the “Contract”) provided for HBI to install subterranean soil-mix columns to form the foundation of the shipbuilding facility and prevent it from collapsing into the soft and compressible Louisiana soil. Pursuant to the Contract, HBI obtained soil samples to ascertain the columns’ strength.  Laboratory testing revealed that, in general, the soil possessed the requisite compressive strength provided for in the Contract.  Nevertheless, as the work progressed the columns exhibited spiraling, and HBI experienced several cave-ins during its installation of the drill shafts and unwanted settlement of the foundation columns.

On January 21, 2011, LaShip filed suit against HBI in the Louisiana Federal District Court alleging that HBI violated Louisiana law by not warning LaShip about alleged defects in the design of the columns. TPC joined the lawsuit on March 6, 2013, also claiming that HBI acted negligently in failing to warn of a dangerous condition.  The District Court ruled that LaShip failed to prove by a preponderance of the evidence its claims against HBI.  LaShip and TPC then appealed. Continue reading

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