ADSC West Coast Chapter Richard D. Kalson, Esq. - - PowerPoint PPT Presentation

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Richard D. Kalson, Esq. rkalson@beneschlaw.com 614.223.5380 (W) 412.417.4209 (C)

ADSC West Coast Chapter

STATUTE OF LIMITATIONS

Washington: Dep't of Transp. v. Seattle Tunnel Partners, 2019 Wash. App. LEXIS 281

• WSDOT contracted with Seattle Tunnel Partners (STP) to construct an underground bored tunnel in

Seattle 1.7 miles in length and 57 feet in diameter. During excavation of the tunnel, the boring machine encountered the steel casing of an abandoned test well and could not continue its progress.

• WSDOT sued STP for breach of contract related to the stoppage; STP counterclaimed against WSDOT

for failing to disclose the well referred to as TW-2. STP also brought claims against S&W the geotechnical engineer.

• S&W argued STP’s claims were barred by the statute of limitations. STP argued that the statute of

limitations was tolled until it determined whether TW-2 was the “true cause” of the TBM stoppage that the discovery rule should apply to contract claims involving latent construction defects that the plaintiff would be unable to detect at the time of the breach. However, the case relied on by STP was limited to a situation where “the defect was of a kind that the [plaintiff] would simply never know or have reason to know of the defect or that it would cause detectable damage years later.” See, 1000 Virginia.

• However, the Court held, that the statute of limitations period begins to run when the factual elements of

a cause of action exist and the injured party knows or should know they exist, even if the party cannot yet conclusively prove the tortious conduct has occurred. The discovery rule did not apply to extend the commencement of the limitation period. A smoking gun is not necessary to commence the limitation

• period. An injured claimant who reasonably suspects that a specific wrongful act has occurred is on

notice that legal action must be taken.

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PAY IF PAID

Nevada: APCO Constr. v. Gemstone Dev. W., 2017 Nev. Dist. LEXIS 2019

• ZBCI brought suit against the general contractor, APCO for failure to pay change orders and

retention following termination of the subcontract.

• APCO relied on the pay if paid clause as a defense to payment. However, the court

invalidated the Subcontract's pay-if-paid provisions as being against public policy under Nev.

• Rev. Stat. 624.628(e).
• The court then relied on Nev. Rev. Stat. 624.626(3) which automatically approves written

requests for change orders unless the higher-tiered contractor denies the requests in writing within 30 days after the lower-tiered contractor submits the requests. Here, this Court concludes that because ZBCI did not receive any written denials of its change order requests within 30 days of request, ZBCI's change order requests amounting to $347,441.67 were approved by operation of law. ZBCI is therefore entitled to payment in the amount of $347,411.67 for all of the change orders submitted.

• Court held: APCO breached the Subcontract by refusing to pay ZBCI all of the amount owed for

the Retention and the change orders. ZBCI awarded $750,807.16 in damages. In a later hearing, ZBCI also awarded close to $200k in attorneys fees as the prevailing party pursuant to language in the subcontract.

• Note, absent the breach of contract ruling, ZBCI could have recovered under Nev. Rev. Stat.

624.626(6): when contracts are terminated, subcontractor to be paid for all work performed prior to termination.

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RIGHT TO WITHHOLD SUMS

California: United Riggers & Erectors, Inc. v. Coast Iron & Steel Co (2018), 4 Cal. 5th 1082

• United Riggers filed suit against Coast Iron for, among other things, its failure to make prompt

payment of the retention monies it had received from Universal according to California Civil Code Section 8814

• There was no dispute over the quality of the subcontractor’s work, and no dispute that the prime

contractor withheld retention funds after receiving the same from the owner.

• Separately, Subcontractor claimed additional compensation for extra work, and the prime

contractor disputed those claims. In turn, the prime contractor relied upon the dispute to justify its retention withholding, and to avoid a violation of the prompt payment law.

• The Court held that a contractor is only entitled to withhold retention when there is a dispute

arising out of the work on which the retention is based. Timely payment may be excused only when the payor has a good faith basis for contesting the payee's right to receive the specific monies that are withheld. Controversies concerning unrelated work or additional payments above the amount both sides agree is owed will not excuse delay; a direct contractor cannot withhold payment where the underlying obligation to pay those specific monies is undisputed.

• Retention may only be withheld when: (1) the subcontractor’s construction-related performance is

the subject of a good faith dispute, (2) the liens or other demands from third parties expose the direct contractor to double payment, or (3) when payment would result in the subcontractor receiving more than the minimum amount both sides agree is due.

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PREVENTION DOCTRINE

Washington: Kenco Constr., Inc. v. Porter Bros. Constr., Inc., 2018

• Wash. App. LEXIS 1323
• Porter, the general contractor, argued that Totem failed to give timely, adequate,

certified notice of its claims, which was a condition precedent to their right to seek an extension of time and costs.

• If liability under a contract depends upon a condition precedent one cannot avoid

his liability by making the performance of the condition precedent impossible.

• Totem did give notice to Porter that it could not stay on schedule and budget,

because other contractors' work was not complete however it failed to provide a revised schedule or cost estimate for its additional work within 30 days as required by the contract.

• Totem requested a recovery plan from Porter showing when other contractors

would complete their work so that it could provide a revised schedule and cost

• estimate. Only Porter could control the work of other trades or provide and update a

recovery schedule. Porter’s failure to do so prevented Totem from complying strictly with the notice requirements. As such, Totem was excused from the condition precedent to making its claim.

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DELAY DAMAGES AND EXTRA WORK

Arizona: Southwest Concrete Paving Co. v. SBBI, Inc., 2018 Ariz. App. Unpub. LEXIS 761

• Hensel Phelps Construction Co. was the general contractor for the Project. SBBI contracted

with Hensel Phelps to perform certain site work and paving work.

• Disputes arose between SBBI and its concrete paving subcontractor Southwest Concrete

Paving Co.

• Damages for delay:

– The paving portion of the Project suffered numerous delays, totaling twenty-five days. The parties disputed who caused the delays; Southwest contended that SBBI failed to properly coordinate other subcontractors' work and that one subcontractor, Bray Construction, caused significant delays through surveying and aggregate base layer

• errors. SBBI, on the other hand, contended Southwest was responsible for some of the delays alongside Bray.

– The parties agreed that "no delay damages" clauses generally are enforceable, Southwest contends that SBBI’s interference is an exception to the enforceability of the clause. However, the court held, SBBI willfully and knowingly delayed Southwest's ability to timely perform" by failing to appropriately supervise Bray.

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DELAY DAMAGES (CONT’D)

• Extra work:

– Southwest also sought damages for power washing and to remove and replace a concrete panel, all of which it contended constituted extra work beyond the scope of the Southwest Contract. – Contract contained a clause stating subcontractor was not to proceed with extra work without a written change order. – SBBI did not issue written extra work orders for the power washing or concrete panel repairs but Southwest presented evidence showing SBBI did not always enforce this requirement. – Southwest presented evidence that SBBI verbally directed it to proceed with the concrete panel repairs and directed it to proceed with concrete cleaning in a punch list. SBBI's project manager testified that formal orders were not always prepared. Court found this evidence was enough to authorize Southwest to perform the work which it was entitled to be paid for.

• Attorney fees:

– SBBI contends Southwest was not the successful party because it only recovered approximately $68,000 of its original $442,602.63 demand. – Court granted Southwest its fees stating the fact that a party does not recover all of its requested relief does not preclude it from being deemed the successful party.

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LIMITATION OF LIABILITY

Nevada: Southwest Specialty Contrs. v. V Linford Contract, 2018 Nev. Dist. LEXIS 939

• Contractor sued manufacturer of ACM panels for failing to provide goods as contracted

for in a reasonably timely manner.

• Although experts testified that such clauses were extremely rare in the industry, the

Court allowed a provision limiting manufacturer’s liability in its Credit Application to stand despite such language not being included in the proposal or purchase order. Said clause limited manufacturer’s liability to repair or replacement of any defective panels; the agreement between the parties also waived consequential damages.

• However, court found that the limitation of liability provision failed to meet its essential

purpose and was unenforceable. Liability was limited to repair or replacement, however, manufacturer was unable to provide the contracted panels in an agreed or reasonable period of time. Court went on to explain that where the limitation of liability clause and damages clause are an inseparable whole rather than a specifically negotiated allocation of different risks, the manufacturer’s failure of repair or replacement becomes oppressive to the purchaser. Therefore, the limitation of damages clause is unenforceable as it would leave the purchaser with no recourse. AFI's inability to reasonably provide required panels in a timely manner caused SWSC losses which were not part of the bargained for allocation of risk between itself and AFI.

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DUTY TO ARBITRATE

Oregon: Eugene Water & Elec. Bd. v. MWH Americas, Inc., 293 Ore. App. 41

• The question here is, when claims are brought by or against

entities who are not parties to the prime contract, such as subcontractors, whether those entities are "parties," within the meaning of the prime contract’s arbitration provision, who may also insist on arbitration of disputes.

• The subcontracts do not include arbitration provisions, but they

do reference the prime contract. Issue for the court is whether the arbitration provision is included in the flow-down clause.

• Court held that agreements with the subcontractors which

incorporate by reference the terms of the prime contract do not extend to the subcontractors the right to arbitration.

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EMPLOYER LIABILITY FOR WORKPLACE INJURY

Nevada: Sedano v. Houston, 2018 Nev. App. Unpub. LEXIS 280

• Nevada employers and co-employees of a person injured in the course of

employment are immune from liability under the Nevada Industrial Insurance Act ("NIIA"). NRS 616B.612

• However, a subcontractor or independent contractor is not a statutory employee if it

is not in the same trade, business, profession or occupation as the employer of the injured worker.

• The general rule is that major repairs, or specialized repairs of the sort which the

employer is not equipped to handle with his own force, are held to be outside his regular business.

• Here, plaintiff’s employer was not qualified to use the cranes to install the trusses

so it hired Houston to perform the crane work on the project. However, court found that Houston was hired to provide a service directly in furtherance of the overall project i.e., building a residential structure. Court held that Houston’s job was not ancillary and was not performing a specialized repair to be excused from the exclusive-remedy provision in NRS 616A.210.

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WORK PLACE INJURY

California: Strouse v. Webcor Construction, L.P., 2019 Cal. App. Unpub. LEXIS 2167

• Strouse, an ACCO employee, suffered a workplace injury when his leg fell into a 12-inch deep

expansion joint after the plywood safety cover gave way.

• General rule is that when an employee of an independent contractor is injured in the

workplace, he or she may not recover tort damages from the hirer of the independent

• contractor. Except that the hirer of an independent contractor may be liable to the contractor's

injured employee when the hirer has retained control over safety conditions at a worksite, and the hirer's negligent exercise of retained control has “affirmatively contributed” to the employee's injuries.

• Webcor’s safety manager testified it was his job to ensure that safety conditions at the jobsite

complied with applicable Cal-OSHAregulations. Evidence showed that the accident took place in a general access area under Webcor’s control for the safety in that area and that Webcor had notice of the problems with the safety covers in that area. It was reasonable for ACCO employees to trust that Webcor had properly installed, secured, and inspected the safety

• covers. Villela also admitted Webcor was responsible for conducting daily safety inspections of

the worksite, though there was no documentation of inspections performed on the weekend before Strouse's Monday morning accident.

• Webcor held liable for the injury and damages. ACCO also awarded attorneys fees from

Webcor.

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INSURANCE

Washington: Zurich Am. Ins. Co. v. Ledcor Indus. (USA) Inc., 2019 Wash. App. LEXIS 645, *43

• Zurich American Insurance Company filed a declaratory judgment action

against Ledcor claiming it did not owe coverage under its policies.

• Court hold that Ledcor was not an additionally insured under the policy

issued to SQI by FMIC. In addition, because Ledcor was not covered as an additional insured under the policies, Ledcor has failed to demonstrate that FMIC's denial of coverage was unreasonable, frivolous, or unfounded.

• The question for the court was whether SQI was engaged in any “ongoing
• perations” for the additionally insured—Ledcor—at the time the original

policy began on May 1, 2006. It is undisputed that SQI's final maintenance at The Admiral concluded on May 10, 2005. The contract unambiguously provides, “A person's or organization's status as an additional insured under this endorsement ends when your operations for that additional insured are completed.”

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PUBLIC INFORMATION REQUESTS

• Pennsylvania: Crouthamel v. DOT, 2019 Pa. Commw. Lexis

335 (April 5, 2019)

• Can a contractor successfully request commercial and

financial information about its competitors that are in the possession of a public owner?

• Do such records constitute trade secrets or confidential

proprietary information?

• Proprietary mix formula for asphalt not required to be

disclosed

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FINAL ITEMS TO CONSIDER TO INCREASE PROFITABILITY IN 2019

• Notice
• Lien waivers
• Consequential damages
• Control over sequence and order of work
• Daily logs

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OPEN DISCUSSION

Richard D. Kalson, Esq.

Benesch Friedlander Coplan & Aronoff LLP 41 South High Street, Suite 2600 Columbus, Ohio 43215-3506 614.223.9380 (W) 412.417.4209 (C) rkalson@beneschlaw.com

QUESTIONS?

www.beneschlaw.com

Richard D. Kalson, Esq. Benesch Friedlander Coplan & Aronoff LLP 41 South High Street, Suite 2600 Columbus, Ohio 43215-3506 412.417.4209 rkalson@beneschlaw.com

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