Federal Court in Delaware Rejects Road Signage Supplier’s Claim Under Delaware Construction Prompt Payment Act, Holding that Act Applies Only to Construction of Buildings

VSI Sales, LLC v. Griffin Sign, Inc., 2014 U.S. Dist. LEXIS 57620 (D. Del. Apr. 25, 2014).
The Delaware Department of Transportation awarded a contract for a highway construction project. Defendant Griffin Sign, Inc. (“Griffin”) was hired as the subcontractor responsible for installation of road signage on the project. Griffin then subcontracted with Plaintiff VSI Sales, LLC (“VSI”) for the supply of overhead highway sign structures, accompanying hardware, and installation materials.

A dispute arose regarding VSI’s right to payment for work performed on the project. Griffin disputed that it owed VSI payment and contended that VSI’s performance was untimely and deficient. In its seven count complaint against Griffin and its payment bond surety, VSI asserted a claim for violation of the Delaware Construction Prompt Payment Act, Del. C. §§ 3501-3509. The defendants sought to dismiss the Payment Act claim on the basis that the work performed by Griffin and VSI—the supply and installation of highway signs—was outside the scope of the Act.

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Ohio Court of Appeals Holds Liquidated Damages Unenforceable Where Amount of Liquidated Damages Is Disproportionate to Contract Price

Boone Coleman Construction, Inc. v. Village of Piketon, 2014-Ohio-2377, 2014 Ohio App. LEXIS 2317 (Ohio Ct. App. May 22, 2014)

The Court of Appeals of Ohio held that a liquidated damages provision in a public construction contract constituted an unenforceable penalty because the amount of liquidated damages sought – nearly one-third of the total contract price – was “so manifestly unreasonable and disproportionate” to the contract price that it was unenforceable.

The defendant in that case was the Village of Piketon, Ohio, which solicited bids for a public construction project for roadway improvements. Plaintiff, Boone Coleman Construction, Inc., was the low bidder on the project. The parties entered into a contract under which Boone Coleman agreed to construct the project for $683,300. The contract further provided that if Boone Coleman had not substantially completed its work within 120 days, it would pay the Village $700 per day in liquidated damages until the project was substantially completed. Ultimately, Boone Coleman did not complete its work until 397 days after the agreed project completion date. Upon completion, the Village paid Boone Coleman $535,823 for its work.

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U.S. Supreme Court Holds Arbitrators Are to Decide Meaning and Application of Procedural Preconditions to Arbitration if Contract Does Not Specify Otherwise

BG Group PLC v. Republic of Argentina, 134 S. Ct. 1198 (Mar. 5, 2014) 

This action arose from an investment by British company BG Group PLC (“BG”) in Argentina and under the protection of a treaty between the United Kingdom and Argentina.  The treaty included a provision that required an aggrieved investor to submit their dispute to a local court in the country where the investment was made for a period of eighteen months prior to pursuing arbitration.   BG invoked the treaty for Argentina’s alleged breach of a natural gas distribution contract.  However, prior to exhausting the treaty’s local litigation requirement, BG proceeded to arbitration in Washington D.C.

Argentina argued that the arbitral panel lacked jurisdiction because BG had not complied with the local litigation requirement. The arbitral panel concluded that it had jurisdiction, finding, among other things, that Argentina’s conduct (such as enacting new laws that hindered recourse to its judiciary by investors in BG’s situation) had excused BG’s failure to comply with the local litigation requirement.  The matter proceeded through arbitration where BG was awarded $185 million in damages.

Argentina turned to American courts to overturn the award, again advancing the argument that the arbitral panel lacked jurisdiction.  The district court initially confirmed the award, but on appeal to the Circuit Court it was vacated.  The Circuit Court held that the gateway issue of arbitrability at hand—whether BG was required to commence litigation before the local courts and wait eighteen months before it could commence arbitration—was for a court, and not the arbitral panel, to decide.

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