Rhode Island Supreme Court Rules That Despite Deference Afforded Arbitrator, the Award Must Be Vacated Where Arbitrator’s Decision Was Contrary to Contract Language

Nappa Constr. Mgmt., LLC v. Flynn, 2017 R.I. LEXIS 13 (R.I. Jan. 23, 2017)

Caroline and Vincent Flynn (the “Flynns”) contracted with Nappa Construction Management, LLC (“Nappa”) to construct an automobile repair facility. The parties executed the American Institute of Architects’ A101-2007 Standard Form of Agreement Between Owner and Contractor.  The contract provided that the owner could terminate the contract for cause; could order the contractor to suspend the work without cause “for such period of time as the Owner may determine”; and could terminate the contract for convenience.

Six months after Nappa commenced work, the Flynns directed Nappa to “immediately cease any further work on the project,” contending that Nappa was not constructing the flooring according to the project plans or industry standards. Thereafter, Nappa submitted a payment application that included expenses for the disputed flooring, which the Flynns declined to pay.  Nappa notified the Flynns that they were in breach of the contract and filed for mediation.  Nappa ultimately terminated the contract for nonpayment.  Continue reading

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Federal Court in California Rules That the Federal Arbitration Act Preempts California Statute That Requires Arbitrations Relating to California Construction Projects Take Place in California

Bell Prods. v. Hosp. Bldg. & Equip. Co., 2017 U.S. Dist. LEXIS 9183 (ND of Cal. Jan. 23, 2017)

A Contractor, Hospital Building and Equipment Company (“HBE”) entered into a subcontract with a mechanical subcontractor, Bell Products, Inc. (“Bell”), on a design-build project for a California hospital.  Bell sued HBE, asserting that HBE’s plans and specifications were deficient and failed to meet requirements of the applicable regulatory agencies, resulting in 15 months of delay to the project.  Bell initially sued HBE in State Court.  However, the case was removed to federal court, and the federal court stayed the proceedings pending conclusion of arbitration.

The subcontract provided that:  all claims between HBE and Bell shall be decided by arbitration; the arbitration shall be per the Construction Industry Rules of the American Arbitration Association; the arbitration provisions shall be governed by the Federal Arbitration Act (“FAA”) and “unless [HBE] requests the locale to be the place of the Project, the arbitration locale shall be St. Louis, Missouri.  Bell sought relief from the venue provision, based upon a California Statute, C.C.P. § 410.42(a)(1), which provides:

(a) The following provisions of a contract between the contractor and a subcontractor with principal offices in this state, for the construction of a public or private work of improvement in this state, shall be void and unenforceable:
(1) A provision which purports to require any dispute between the parties to be litigated, arbitrated, or otherwise determined outside this state.
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Federal Court in Oklahoma Rules that Bond Issued on a Sovereign Tribal Construction Project is Not a Miller Act Bond Even Though it Stated it was Issued Pursuant to the Act and Named The United States As Obligee

United States ex rel. J.A. Manning Constr. Co. v. Bronze Oak, 2017 U.S. Dist. LEXIS 6054 (N.D. Okla. Jan. 17, 2017)

 In May 2014 the Cherokee Nation issued a bid notice for bridge and roadway construction in Mayes County, Oklahoma (the “Project”). Funding was authorized pursuant to the Secretary of Transportation and Secretary of the Interior’s Tribal Transportation Program, 23 U.S.C. § 202, by which federal funding is offered to Native American tribal governments to pay the costs of certain transportation projects located on, or providing access to, tribal lands.

Bronze Oak, LLC submitted a bid proposal and was hired as the general contractor for Project, and J.A. Manning Construction Company (“JAMCC”) was hired as a subcontractor to supply labor and materials to the Project. Bronze Oak’s bid proposal provided that any resulting contract would be construed under U.S. and Cherokee Nation laws.  A payment bond was issued for the Project naming Bronze Oak as the principal, Mid-Continental Casualty Company as surety, and the United States as obligee.  The payment bond also stated it was for the protection of persons supplying labor and materials pursuant to the Miller Act. Continue reading

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Federal Court in Idaho Rules That a Government Contractor May Recover Consultant Fees, So Long as Those Fees Were Incurred in Contract Administration and Negotiation of an Equitable Adjustment But Denies Recovery Because the Consultant Failed to Maintain Proper Records

Tri-State Elec., Inc. ex rel. Apex Enters. v. Western Sur. Co., 1:14-CV-00245, 2017 U.S. Dist. LEXIS 4974 (D. Idaho Jan. 11, 2017)

The United States Department of Veterans Affairs (the “VA”) contracted with Sygnos, Inc. (“Sygnos”) for improvements to the electrical system at a VA hospital in Boise, Idaho. Sygnos subcontracted a portion of the work to Apex Enterprises, Inc. (“AEI”), who in turn subcontracted a portion of its work to Tri-State Electric, Inc. (“Tri-State”).  Delays plagued the project from the outset, and the work – originally scheduled for completion in 240 days – ultimately took more than 950 days to perform.  Disputes concerning responsibility for and the amount of delay damages ensued.

Sygnos submitted a request for equitable adjustment to the VA as a result of the delays. Receiving no timely response from the VA, Sygnos converted the request for equitable adjustment to a claim for delay damages under the Contract Disputes Act, which the VA and Sygnos settled for $645,000.  AEI and Tri-State subsequently sued Sygnos for delay damages they incurred on the project.  Sygnos did not dispute that AEI and Tri-State had suffered delays but it disputed some categories of damages claimed and cited the no-damage-for-delay clause in Tri-State’s contract as barring its claims. Continue reading

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Kentucky Appellate Court Holds That a Contractor May Pursue Claim of Negligent Misrepresentation Against Architect Despite Lack of Contract, the Economic Loss Rule, and Project Waivers

D.W. Wilburn, Inc. v. K. Norman Berry Assocs., No. 2015-CA-001254-MR, 2016 Ky. App. Lexis 206 (Ky. Ct. App. Dec. 22, 2016)

This case arose out of a construction project in which the Oldham County Board of Education (the “Board”) was the owner, K. Norman Berry Associates (“KNBA”) was the architect and D.W. Wilburn (“Wilburn”) was the general contractor. The Board’s contract with Wilburn provided that: (i) change orders must be signed by the architect, contractor, and owner; (ii) claims for additional time, money or delay damages must be submitted within twenty-one days of the event giving rise to the claim; (iii) change orders resolved all claims for time and money relating to the scope of the change order, and (iv) the contractor’s acceptance of final payment waived its claims, except those identified in writing as unsettled at the time of final application for payment.  Pursuant to the contract, the parties executed twenty-one change orders and Wilburn submitted a final payment application and closeout form.

Later, Wilburn was sued by one of its subcontractors for delay to the project. Wilburn then sued KNBA in a third party complaint asserting that KNBA was liable for the delay as a result of its defective plans and specifications.  The trial court granted KNBA summary judgment, dismissing Wilburn’s claim for lack of contractual privity.  Wilburn appealed, and the Court of Appeals reversed. Continue reading

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