Eleventh Circuit Strictly Construes Notice and Final Payment Provisions of Subcontract

Associated Mechanical Contractors, Inc. v. Martin K. Eby Constr. Co., Inc.
No. 00-10784, 2001 U.S. App. LEXIS 24235 (11th Cir. Nov. 9, 2001)

Martin K. Eby Construction Company, Inc. (“Eby”) was the prime contractor on a Georgia prison construction project. Eby entered into subcontract with Associated Mechanical Contractors, Inc. (“Associated”) pursuant to which Associated agreed to perform the mechanical, heating, ventilation, air-conditioning, and plumbing work for the project.

Associated was to commence performance on or before May 2, 1990. From the beginning, the Project was plagued with delays. In November of 1992, Associated presented Eby with a claim for equitable adjustment to its contract price and schedule seeking compensation in the amount of $737,343.96 and a 462-day time extension.

Eby denied the request and Associated initiated an action before the District Court. The District Court awarded summary judgment against Associated, holding that Associated failed to preserve its delay claim as required by the subcontract. The Court also awarded summary judgment against Associated’s claim for withheld retainage, holding that all conditions precedent to receiving the retainage had yet to occur.

On appeal, the Eleventh Circuit Court of Appeals affirmed in part and reversed in part the decision of the District Court. The appellate court agreed that, pursuant to the subcontract, Associated had to preserve any claim for damages by providing written notice within ten days from the commencement of the alleged damage. Here, Associate incurred damage from the very start of the project. However, it did not provide notice of delay at that time. Rather, it provided notice of all project delays and resultant damages in August of 1990. The appellate court agreed with the District Court that such notice was insufficient to preserve the delay claims that occurred between May and July of 1990. However, it reversed the District Court’s decision as to delays which occurred after July 1990, because the August 1990 notice could have preserved these claims. Accordingly, the Court remanded the matter to determine which of its claims Associated had, in fact, preserved.

With respect to Associated’s claim for retainage, the appellate court affirmed the District Court’s holding. Before Associated could receive this final payment, all causes of action and/or lawsuits related in any way to the subcontract must be resolved. As demonstrated by the pendency of Associated’s appeal before the Eleventh Circuit, this condition had not been met. Therefore, the appellate court concluded that summary judgment in Eby’s favor on the retainage claim was proper.

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