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

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 “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”

Mississippi Federal District Court Permits General Contractor’s Negligence Claim to Proceed Against Project Consultant Given Consultant’s Contractual Obligations to Owner

S. Indus. Contractors, LLC v. Neel-Schaffer, Inc., No. 1:17CV255-LG-JCG, 2017 U.S. Dist. LEXIS 196804 (S.D. Miss. Nov. 30, 2017)

This case arises out of the West Pier Facilities project at the Port of Gulfport, Mississippi (“Project”).  Southern Industrial Contractors, LLC (“SIC”), the Project’s general contractor, filed suit for negligence against CH2M, the Project’s program manager and consultant, to recover increased costs incurred while excavating and working around underground debris at the Project site.  SIC alleged first that CH2M owed it a duty to ensure that the Project plans, specifications and bidding documents accurately represented the Project’s conditions, and second that CH2M breached this duty by failing to warn SIC of the underground obstructions it had encountered.  SIC argued that, as a result of CH2M’s breach, the Project became much more expensive and time-consuming.  CH2M filed a motion to dismiss the complaint, arguing it owed no duty to SIC.

The court first recognized that Mississippi law imposes upon design professionals, such as architects and engineers, a duty to exercise ordinary skill and diligence, and further, that Mississippi law allows third parties to rely upon the contractual obligations that a design professional owes to a project’s owner.  The court explained that, because of the design professional’s contractual obligations to the owner, the design professional owes a further duty, sounding in tort, to a contractor who relies upon the design to his economic detriment.  The court recognized that whether the design professional owes such a duty to a contractor is a factual determination that must be made on a case-by-case basis. Continue reading “Mississippi Federal District Court Permits General Contractor’s Negligence Claim to Proceed Against Project Consultant Given Consultant’s Contractual Obligations to Owner”