New York Court of Appeals Holds That Direct Consent by Landlord Is Not Necessary for Contractor to Enforce a Lien Against the Property for Work Performed for a Tenant

Ferrara v. Peaches Café LLC, 2018 NY Lexis 3244 (November 20, 2018)

COR Ridge Road Company, LLC (“COR”), as landlord, entered into a 10 year lease with Peaches Café, LLC (“Peaches”).  The lease imposed certain construction requirements on Peaches for it to operate its restaurant, including adherence to specific electrical specifications. The lease also provided that COR approve of any improvements to the premises, that Peaches submit to COR all design plans for the electrical work, and that any improvements made become part of the realty.  Angelo Ferrara (“Ferrara”) performed some of the electrical work.

After Peaches closed its business, Ferrara filed a mechanics lien against the property for more than $50,000 Peaches owed him, noticing both Peaches and COR. Ferrara subsequently sought to foreclose on the lien.  Both Ferrara and COR moved for summary judgment in the foreclosure action, and the trial court granted COR’s motion and dismissed the complaint against it. The Appellate Division granted Ferrara’s motion for summary judgment, upholding the validity of the lien on COR’s property. COR appealed to the Court of Appeals, which affirmed. Continue reading

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Government’s Notice That It Questioned Certain Costs and Would Take ‘Appropriate Action’ Is Not a Notice of ‘Disallowance’ as Required by the Contract: Contractor Granted Summary Judgment for Over $1 Million

CB&I Areva Mox Servs., LLC v. United States, 2018 U.S. Claims Lexis 1549 (November 9, 2018)

Nearly two decades ago, the Department of Energy, National Nuclear Security Administration (“NNSA”) awarded a contract for the design, construction and operation of a Facility at the Savannah River Nuclear Site (‘the Contract”) to Mox Services’ (“Mox’s”) predecessor in interest, Duke, Cogema, Stone & Webster, LLC.  Mox has no employees and subcontracts out the entirety of its work under the Contract to subcontractors.  CB&I Project Services Group (“CPSG”), Mox’s parent company, was the principal subcontractor.  The Contract followed a “cost reimbursement” model whereby NNSA would pay Mox for certain allowable costs that Mox incurred in performing the Contract.

In 2015, CPSG began an employee “re-slotting” process where CPSG changed its employees titles and, in some cases, their compensation.  During this process, CPSG put nearly all of its non-craft workforce (roughly 863 employees) into new positions.  Of the 863 employees, 55 received salary increases.  CPSG increased its billing rate for these 55 employees.  Mox did not specifically notify NNSA about this re-slotting and increase, but instead provided the increased billing rates to NNSA as part of its pay requisitions.  In April 2016, upon realizing the increase, NNSA notified Mox that the information it provided to justify the salary increase was insufficient and requested additional information, and warned it would take “appropriate action” to protect itself.  The NNSA later withheld 2% of the total direct non-craft labor expenses –$1,142,112.00. Continue reading

Posted in Cost-Reimbursable Contract | Tagged , ,

Boring Through the Details: U.S. District Court Declares Boring Company Dispute Not Covered by Insurance Policies

Maxum Indemnity Co. v. Robbins Co., P.C., No. 1:17-CV-01968, 2018 U.S. Dist. LEXIS 57729 (N.D. Ohio Mar. 28, 2018)

On March 21, 2018, the United States District Court for the Northern District of Ohio granted a motion for judgment on the pleadings in favor of Maxum Indemnity Co. and declared that Maxum has no duty to defend or indemnify The Robbins Company in an international arbitration initiated by a third-party, JCM Northlink, LLC.

Robbins is a designer, manufacturer, and supplier of tunnel-boring machines (“TBMs”) and was engaged by JCM to supply a TBM for Seattle’s Northgate Link Extension project to add additional light rail lines to the city’s existing public transportation system.  Maxum insured Robbins under two commercial general liability policies in connection with the Northgate Link Extension project.

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Posted in Arbitration, Breach of Contract, Delay, Indemnity, Insurance | Tagged , , , , , ,

Although Texas Statute Expressly Allows an Immediate Interlocutory Appeal of Any Decision Granting or Denying a Motion to Dismiss Based Upon the Certificate of Merit Requirement, There Is No Jurisdiction for an Interlocutory Appeal of an Arbitrator’s Decision on That Issue

SM Architects, PLLC v. AMX Veteran Specialty Servs., LLC, 2018 Tex. App. LEXIS 9203 (November 8, 2018)

AMX Veteran Specialty Services, LLC (“AMX”) filed a demand for arbitration alleging professional negligence against SM Architects, PLLC (“SMA”).  A Texas statute requires a plaintiff in an action or arbitration involving architectural services to file a certificate of merit affidavit by a third-party licensed architect in support of its claims.  AMX attempted to meet this requirement by attaching an unsigned letter by an architect to its demand.

AMX twice amended its demand.  It attached to its second amended demand a signed certificate of merit affidavit by the same architect.  The affidavit was substantially similar to the original unsigned letter, but with added information regarding SMA’s alleged negligence.

SMA moved to dismiss AMX’s claims for failure to comply with the certificate of merit requirement.  SMA argued that the unsigned letter submitted with AMX’s first demand for arbitration was not an affidavit, and that the affidavit filed with its second amended demand was ineffective because its failure to file an affidavit contemporaneously with the first-filed complaint could not be cured by amendment.  The arbitration panel denied SMA’s motion. Continue reading

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Federal Circuit, Citing the Christian Doctrine, Holds That Performance and Payment Bonds Are Required for All Construction Contracts, Even When the Bonding Requirement Is Not Expressly Stated in the Contract

K-Con, Inc. v. Sec’y of the Army, 2018 U.S. App. LEXIS 31196 (Fed. Cir., November 5, 2018)

In September 2013 K-Con, Inc. (“K-Con”) entered into two contracts with the government to supply and construct pre-engineered metal buildings for a laundry facility and a communications equipment shelter.  The government issued both contracts using Standard Form 1449, entitled Solicitation/Contract/Order for Commercial Items.  The contracts’ terms did not contain any requirement to provide a performance or payment  bond.  Nor did they include FAR 52.228-15, which requires performance and payment bonds on construction contracts.

In October 2013 the government directed K-Con to supply performance and payment bonds before a notice to proceed could be issued.  K-Con initially refused but ultimately provided the bonds two years later.  The contracts were then adjusted to add the cost of the bonds.

K-Con submitted a claim under each contract for increases in costs for the two year delay, for a total value of $116,336.56.  The Contracting Officer denied the claim on the basis that the agreements were construction contracts, for which performance and payment bonds were mandatory pursuant to FAR 52.228-15, and that that provision was incorporated into the contracts pursuant to the Christian doctrine under which a court may insert a clause into a government contract by operation of law if that clause is required under applicable federal regulations.  G.L. Christian & Associates v. Unites States, 312 F.2d 418 (Ct. Cl. 1963).  K-Con appealed to the Armed Services Board, which affirmed the denial of the claims.  K-Con then appealed to the United States Court of Appeals for the Federal Circuit. Continue reading

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