Construction Law 2016-11-29T13:50:33+00:00

Topical and timely news and information on Construction Law issues from Benesch’s Construction Practice Group.

D.C. Circuit Favors Contractual Text Over Construction Norms in Design-Build Dispute

July 17th, 2017|0 Comments

by: Anthony Sallah

On June 30, 2017, the D.C. Circuit Court of Appeals affirmed a district court’s grant of summary judgment in favor of an architecture and design firm. The D.C. Circuit held that a general contractor’s breach of contract claim was barred by the statute of limitations, and that the contract’s indemnification clause did not apply as between two contracting parties.

In Hensel Phelps Construction Company v. Cooper Carry, Inc., a design firm initially entered into a design agreement with an owner. Roughly two years later, the owner entered into a design-build agreement with contractor Hensel Phelps and assigned its rights and obligations under the original design contract to Hensel Phelps, with the design firm retaining complete design coordination. Less than six months later, the D.C. Department of Consumer and Regulatory Affairs informed the design firm that its design was not in compliance with the local fire code, which Hensel Phelps contended required significant excess changes in mechanical and electrical scopes.

After unsuccessful attempts to mediate, Hensel Phelps brought the designer to federal court, asserting a breach of contract claim along with an indemnification claim. The district court granted summary judgment for the designer on both issues, holding that the […]

GENERAL CONTRACTOR FAILED TO PRESENT EVIDENCE OF BAD FAITH AGAINST SURETY, SIXTH CIRCUIT SAYS

November 22nd, 2016|0 Comments

by: Anthony Sallah
On November 7, 2016, the Sixth Circuit Court of Appeals affirmed a judgment in favor of a surety on a Michigan public construction project as against the general contractor. In affirming, the Sixth Circuit held that the general contractor failed to present sufficient evidence of bad faith on the part of the surety, who settled the general contractor’s claims with the State of Michigan allegedly without the contractor’s knowledge.

In Great American Insurance Company v. E.L. Bailey & Company, Inc., E.L. Bailey & Company (“Bailey”) entered into a contract with the State of Michigan to construct a prison kitchen. After various delays on the project, Bailey and Michigan sued each other in the Michigan Court of Claims. Michigan argued that Bailey had not achieved timely substantial completion under the parties’ contract and it was therefore was entitled to withhold liquidated damages of $1,000 per day. Bailey never completed the project, so Bailey’s surety, Great American Insurance Company (“GAIC”) stepped in and negotiated another contractor to replace Bailey. After litigation in the Court of Claims and two stages of mediation, GAIC, litigating on behalf of Bailey, settled with Michigan for $358,000 in lieu […]

OHIO APPELLATE COURT HOLDS THAT AGGRIEVED CUSTOMER HAS STANDING TO PURSUE BOND CLAIM AGAINST SURETY

September 26th, 2016|0 Comments

On September 8, 2016, the Eighth District Court of Appeals reversed a trial court’s holding granting summary judgment in favor of a surety that had issued a bond to a contractor, ruling that the aggrieved customer had standing to pursue a bond claim issued by the surety. Koster v. Mohammed Chowdhury, 8th Dist. No. 103489, 2016-Ohio-5704. The court held that the parties had intended that the bond issued by the surety was intended to benefit the residents of Cleveland aggrieved by a licensed contractor, thus providing an aggrieved citizen with standing to sue under the bond.

Under Cleveland Codified Ordinances 3107.02(a), to register as a building contractor in the city of Cleveland, an applicant must furnish a $25,000 surety bond to the city. In Koster, the defendant, a building contractor, registered with the city and furnished a surety bond provided by Western Surety Company (“Western Surety”). An aggrieved customer of the contractor subsequently brought a claim on the bond against the contractor and Western Surety. In the trial court, Western Surety sought summary judgment on the grounds that the customer had no standing because the city ordinance did not provide the customer with a private right […]

NEW JERSEY APPEALS COURT HOLDS THAT PRE-SUIT NOTICE OF TORT CLAIM NEED NOT BE SERVED ON A GOVERNMENT CONTRACTOR

August 23rd, 2016|0 Comments

On April 14, 2016, a New Jersey appellate court reversed the trial court’s dismissal of Plaintiff Gina Marie Gomes’s six-count tort complaint against the County of Monmouth and Correct Care Solutions, Inc. (“CCS”). Gomes v. Cty. of Monmouth, No. A-1679-14T4, 2016 N.J. Super. LEXIS 52 (Super. Ct. App. Div. Apr. 14, 2016). The New Jersey appeals court’s decision has widespread importance for New Jersey private government contractors. Government contractors must now recognize that they are not required to receive pre-suit notice of tort claims, nor are subcontractors required to serve such a notice of tort claim on contractors on New Jersey public construction projects. However, the court was clear that its holding was limited to the pre-suit notice provisions of the Tort Claims Act (“TCA”), and that “derivative immunity” for government contractors is still possible.
Co-defendant CCS is a private company that provided medical services to inmates at the Monmouth County Medical Institution. In a case of first impression, the appeals court held that the TCA does not require service of a notice of a tort claim upon a private government contractor under N.J.S.A. 59:8-8.
Plaintiff Gomes served her notice of tort claim upon defendants County of Monmouth, the Monmouth County Correctional […]

SMALL BUSINESS ADMINISTRATION MODIFIES REGULATIONS RELATING TO IDENTITY OF INTEREST AFFILIATION

August 23rd, 2016|0 Comments

On May 31, 2016, the Small Business Administration (“SBA”) issued its long awaited final rule regarding affiliation based on an identity of interest under 13 C.F.R. § 121.103(f).  Specifically, the final rule amends the SBA’s regulations concerning identity of interest arising out of family relationships and economic dependence.  With respect to familial relationships, the final rule expressly limits the type of familial relationships potentially giving rise to affiliation, and additionally provides a rebuttable presumption for firms under consideration.  With respect to economic dependence, the final rule presumes an identity of interest if the firm “derived 70% or more of its receipts from another concern over the previous three fiscal years,” and again provides a rebuttable presumption for firms.

The SBA’s final rule raises important considerations for disadvantaged business enterprises (“DBE”), particularly those firms seeking new certification as a DBE and DBEs seeking to maintain existing certification.  Specifically, 49 C.F.R. § 26.65 provides that an eligible DBE “must be an existing small business, as defined by [SBA] standards,” and a state regulating DBEs “must apply current SBA business size standard(s) found in 13 CFR part 121.”  Thus, the final rule amending 13 C.F.R. § 121.103(f) will directly affect those firms seeking new DBE […]