Federal Court in Mississippi Holds That Although Projects Were Constructed With Federal Funds, They Were Not “A Public Work of the Federal Government” and Therefore the Court Had No Jurisdiction Over a Subcontractor’s Claim Under the Miller Act, Where the United States Was Not a Contracting Party and the Projects Were Not Constructed on Federal Property

United States ex rel. Metro Mech., Inc. v. Triangle Constr. Co.,  2018 U.S. Dist. LEXIS 1487 (S.D. Miss. Jan. 4, 2018)

Triangle Construction Company, Inc. (“Triangle”) contracted with Mississippi Portfolio Partners III, LP (“Mississippi Partners”) to serve as the prime contractor on four apartment complex construction projects (the “Projects”) in Mississippi.  Triangle subcontracted the HVAC and plumbing work to Metro Mechanical, Inc. (“Metro”).  After Metro completed its work, Metro filed suit in the Federal District Court under the Miller Act, to collect sums due from Triangle and its payment bond surety.  Triangle moved to dismiss, asserting that the Court was without Miller Act jurisdiction because the projects and contracting parties were private.

The Miller Act requires contractors on “public work[s] of the Federal Government” to obtain payment bonds for the protection of subcontractors and suppliers.  See 40 U.S.C. § 3131.  To that end, the Millers Act also creates a civil action in federal court in favor of any “person that has furnished labor or material in carrying out work provided for” under a Miller Act contract and “that has not paid in full within 90 days.” 40 U.S.C. 3133(b)(1).  The District Court applied two alternative tests to determine whether the Projects were “public works of the Federal Government subject to the Miller Act.” Continue reading

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Claim of Fraudulent Inducement of a Construction Contract Does Not Invalidate Arbitration Clause in That Same Contract

Koudela v. Johnson & Johnson Custom Builders, LLC, 2017 Ohio App. Lexis 5800 (December 29, 2017)

In this case, Nicolas and Monica Koudela (the “Koudelas”) entered into a construction contract with “Johnson & Johnson Builders” (the “Agreement”), whereby Johnson & Johnson Builders agreed to construct a single family home for the Koudelas in Ohio.  However, Johnson & Johnson Builders was a fictitious name for Johnson & Johnson Custom Builders, LLC (“J&J”), and was not an entity registered with the Ohio Secretary of State.

In the Agreement, the parties agreed to submit all disputes to binding arbitration in Cleveland, Ohio.  The arbitration clause further provided that the cost of the arbitration would be borne by the party initiating the claim.

After disputes arose on the project regarding the work performed by J&J, the Koudelas filed suit in the State Court of Ohio against J&J and its principals, alleging claims for fraud in the inducement, breach of contract, negligence, conversion, unjust enrichment/detrimental reliance, and a declaratory judgment that the arbitration clause in the Agreement was unenforceable.  J&J moved for an order dismissing the complaint, or, in the alternative, staying the litigation pending binding arbitration.  The trial court granted J&J’s motion and stayed the litigation pending binding arbitration.  Continue reading

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Applying Florida’s “Eight Corners Rule,” Eleventh Circuit Finds that Insurer Has a Duty to Defend Claim That Insured’s Faulty Paint Work on Balcony Railings Caused Damage to Adjacent Balcony Slabs

Addison Ins. Co. v. 4000 Island Blvd. Condo. Ass’n, 2017 U.S. App. LEXIS 26870 (11th Cir. Dec. 28, 2017)

The owner of a high-rise condominium building in Florida hired a contractor to replace the building’s concrete balcony railings with new railings featuring aluminum and glass.  The contractor on the project, Poma Construction (“Poma”), entered into a subcontract with Windsor Metal Specialties (“Windsor”), under which Windsor agreed to paint the new aluminum railings.

Two years after the work was completed, the owner sued Poma and Windsor in Florida state court, alleging that the railings were defective and required replacement.  In addition to replacing the railing system, the owner alleged that Windsor’s defective paint finish damaged other surrounding property, including railing post pockets and the concrete balcony slabs.

Windsor submitted the claim to its liability carrier, Addison Insurance Company (“Addison”).  Addison then filed a declaratory judgment action in the United States District Court for the Southern District of Florida, seeking a declaration that it had no duty to defend Windsor in the owner’s underlying lawsuit.  Windsor’s policy provided a defense against claims alleging that an “occurrence” caused “property damage.”  But the policy excluded claims alleging damage to Windsor’s own work product or to the particular part of a property on which Windsor performed its work.  Addison had invoked that exclusion, arguing that the owner merely alleged damage to Windsor’s own work and/or the part of the property on which Windsor performed its work, i.e. the balcony.  The District Court granted summary judgment in favor of Windsor, and Addison appealed. Continue reading

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Kentucky Supreme Court Holds “Pay-if-Paid” Provision in Subcontract Is Valid and Enforceable, Shifting Risk to Subcontractor

Superior Steel, Inv. v. Ascent at Roebling’s Bridge, LLC, 2017 Ky. LEXIS 511 (December 14, 2017)

Corporex Development and Construction Management, LLC (“Corporex”), a design builder, contracted with Dugan & Meyers Construction Company (“D&M”), a construction manager and general contractor on the Ascent at Roebling’s Bridge (the “Project”), a 21-floor luxury condominium in Covington, Kentucky.

As a cost saving measure, D&M asked Superior Steel, Inc. (“Superior”) to fabricate the steel and to have Ben Hur Construction Company (“Ben Hur”) complete the erection and installation work.  Superior and D&M entered into a fixed price contract for $1,814,000.  In turn, Superior subcontracted with Ben Hur to erect the steel and metal decking for $444,000.  As structured, the payments would flow from Corporex to D&M to Superior.  Superior would then pay Ben Hur. Continue reading

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No Privity, No Problem: Louisiana Court of Appeals Holds That Project Manager Owes a Duty of Professional Care to General Contractor Despite a Lack of Privity

Lathan Co. v. State, No. 2016-CA-0913, 2017 La. App. LEXIS 2277 (La. App. 1st Cir. Dec. 6, 2017).

On December 6, 2017, the Louisiana Court of Appeals, First Circuit, reversed and remanded the trial court’s decision to grant the appellee’s, Jacobs Project Management Co./CRSS Consortium (“Jacobs”), motion for summary judgment.  In its opinion, the court of appeals held that a project manager owed a general contractor a duty of professional care and thus, could be held liable to a general contractor under Louisiana law, even if the project manager was not in direct privity with the general contractor.

On August 13, 2010, the appellant, The Lathan Company, Inc. (“Lathan”), entered into a public works contract with the State of Louisiana, Department of Education, Recovery School District (“Owner”) to renovate the William Frantz School in New Orleans.  Jacobs, through its contract with the Owner, served as project manager on behalf of the Owner.  Four years later, in August 2014, after filing an original lawsuit against the Owner in 2012 for payment of undisputed amounts due, Lathan filed an amended pleading that alleged inter alia Lathan was entitled to damages from Jacobs under general tort law for negligent professional undertaking and under Louisiana’s Unfair Trade Practices Act.  According to Lathan, Jacobs owed Lathan a duty of conduct in accordance with a standard of care similar to professionals in the industry and that Jacobs breached its duty of care by failing to (i) disclose mold conditions and the existence of an underground fuel tank at the outset of the project; (ii) timely respond to Lathan’s 400+ requests for information; (iii) perform inspections consistent with industry standards; and (iv) review, certify, and/or approve amounts due to Lathan.  Continue reading

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