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Archive for the ‘Construction & Surety Law’ Category

The “City in a Forest” Only Saw the Trees: Prompt Pay Act Waiver Requires Specificity

Posted on: June 8th, 2017

The City of Atlanta v. Hogan Construction Group, LLC, A17A0520, June 7, 2017

By: Jake Carroll

A recent opinion from the Georgia Court of Appeals provides construction professionals with an excellent example of the benefits and consequences of contract drafting in the face of a payment dispute or legal challenge.

Our story begins in late 2011, when the City of Atlanta entered into a contract with Hogan Construction Group, LLC to build a new fire station in northwest Atlanta. While the contract allocated approximately $3 million for construction costs, the costs soon swelled with the “discovery” of a state waterway and a Georgia Power transmission pole. These discoveries also required the relocation of a retention pond and additional soil testing. When the City refused to pay for these changes, Hogan brought suit under Georgia’s Prompt Pay Act.

Georgia’s Prompt Pay Act provides for the payment to contractors and subcontractors of interest on monies owed on construction projects at the rate of 1 percent per month, and reasonable attorney’s fees. Although the Prompt Pay Act appears expansive in the rights given to contractors and subcontractors, it provides that nothing in the Act prohibits owners, contractors, and subcontractors from agreeing by contract to rates of interest, payment periods, and contract and subcontract terms different from those stipulated to in the Act.

The case reached the Georgia Court of Appeals on the issue of whether Hogan’s claims for interest and attorney’s fees under the Prompt Pay Act were waived by the terms of the City’s contract. Instead of the 1 percent a month provided by statute, the City’s contract provided for interest based on the prime rate, and specifically stated that “[t]his clause shall supersede the Georgia Prompt Pay Act and any modifications or successors to it.” Accordingly, the Court of Appeals reversed the trial court’s decision, and determined that Hogan had waived its claims to interest.

The City also argued that the contract clause waived Hogan’s right to attorney’s fees under the Act, but the Court did not agree. Instead, the Court held that because the City’s contract did not explicitly address attorney’s fees—only interest—Hogan did not waive his right to seek attorney’s fees. So, while the City successfully contracted out of the higher interest rate under the Prompt Pay Act, it failed to proscribe the recovery of attorney’s fees. Ironically, the attorney’s fees will probably cost more than the interest.

For questions about common construction contract terms, including important issues arising out of indemnity and arbitration provisions, feel free to reach out to the Construction Law team at FMG.

Is Your Project On The List?

Posted on: April 12th, 2017

By: Scott C. Hofer

In a change to the Pennsylvania Mechanic’s Lien Law of 1963 the Pennsylvania Department of General Services has opened the State Construction Notices Directory, which is now online and ready to accept lien-related notices. Pennsylvania has joined a trend in several states where Owners of significant construction projects may file notices with the State/Commonwealth in an effort to cut-off the lien rights of suppliers of labor and/or materials.

If a Pennsylvania project costs a least $1.5 million the owner may file a Notice of Commencement prior to the start of any labor, work or materials on a project. This document puts all suppliers of labor and/or materials on notice that they must file a document giving notice of the furnishing of that labor and/or materials promptly after beginning to do so.  The Notice of Commencement is required to include the following: (1)the name, address and e-mail address of the (prime) contractor; (2) the name and location of the project (including the county); (3) a legal description of the property; (4) the tax identification number of the parcel(s) on which the project is located; (5)the name, address and e-mail address of the Owner; (5) surety and bonding information (if applicable); and (6) the identifying number assigned by the Department of General Services that was assigned concurrent with the filing the notice. Once the Notice of Commencement is properly filed the Owner must then post a copy of it in a conspicuous place at the property prior to the beginning of work and make sure that it remains posted until the work is completed.

Once the Owner has properly filed and posted a Notice of Commencement then any provider of labor and/or materials is required to file a Notice of Furnishing within 45 days of first providing work for, or delivering materials to, the project. If the provider of labor and/or materials fails to provide this notice within the timeframe required by the statute it loses its lien rights.

In addition to the required filings there are optional filings that may also be utilized. An Owner may file a Notice of Completion in an effort to establish an outside date for the filing of any lien claims.  A supplier of labor and/or materials may utilize a Notice of Nonpayment to inform the Owner, Owner’s agent, contractor acting as the Project agent or the subcontractor of the nonpayment. This filing is for information purposes but can be utilized to put pressure on the party responsible for payment.

Suppliers of labor and/or materials also need to know that the directory notices do not do away with any of the preconditions that already exist to perfect a lien. For instance, a subcontractor or supplier to the (Prime) Contractor must still file a Notice of Intent to File Mechanic’s Lien within the time required by the Lien Law to preserve the right to perfect a lien when it is finished in addition to filing a Notice of Commencement within 45 days of beginning.

It is unclear what effect this change will have long-term. While the change provides Owners a mechanism to cut off the lien rights of the unwary, it also provides the essential information that have often led to additional costs in lien filings (such as property search costs).  As a result, the law can trap the unwary but a time/cost-saver for the wise.  As of April 1, 2017 thirty-nine (39) projects had been registered.

For additional information related to this change in the Pennsylvania Mechanic’s Lien Law of 1963 and for advice regarding how to navigate the various laws that impact contractors in the Commonwealths of Pennsylvania and Virginia, the States of New Jersey and Maryland and the District of Columbia you can contact Scott C. Hofer of the law firm of Freeman, Mathis & Gary, LLP at (267) 758-6023 or [email protected].

When it Comes to Materialmen’s Liens, it is Better to Be Safe than Sorry

Posted on: March 13th, 2017

By: Jake Carroll

While every construction law practitioner should be aware of the numerous technical requirements of Georgia’s lien law, last week, the Georgia Court of Appeals sent yet another reminder that there is little room for error when it comes to deadlines in the lien statutes. In Bibler Masonry Contractors, Inc. v. J. T. Turner Construction Co., Inc., 2017 WL 922955 (Ga. Ct. App. March 6, 2017), the court upheld an entry of summary judgment declaring a lien void, when the underlying affidavit of non-payment was filed more than 60 days after the date listed on the waiver and release.

While the strict construction of lien deadlines is nothing new, the appellate court upheld the finding even after considering evidence submitted in a motion for reconsideration which disclosed that the waiver and release was actually executed within the 60-day period, but was backdated to the date of substantial completion of the project. The appellate court disregarded the evidence of the actual date of execution, and held that the materialman must file any notice of non-payment within 60 days of the date shown on the waiver and release, consistent with the plain language of the statute.

For construction law practitioners, the lessons from Bibler are straightforward: in order to recover under the materialmen’s lien statutes, the party must strictly follow the procedures of Georgia’s lien statutes. For contractors and other materialmen, it is better to be safe than sorry. Deadlines for filing must be followed, no matter what facts or ambiguities you think may change your statutory obligations. This opinion comes on the heels of the October decision in Lang v. Brand-Vaughan Lumber Co., Inc., 792 S.E.2d 461 (Ga. Ct. App. 2016), which also required the materialman to strictly follow the procedures of Georgia’s lien and judgment statutes, and leaving no room for error.

For any questions, contact Jake Carroll at [email protected].

The Fate of REAXX

Posted on: February 13th, 2017

By: Daniel A. Nicholson

Per a January 27th ruling, the International Trade Commission (ITC) has ordered Customs to exclude “Bosch Reaxx table saws, and cartridges for those saws, from entering the United States” and issued a Cease and Desist letter to Robert Bosch Tool Corp. that Bosch must “cease and desist from conducting any of the following activities in the United States: importing, selling, marketing, advertising, distributing, transferring (except for exportation), and soliciting United States agents or distributors for imported [Reaxx] table saws.”[1]

A Brief Recap As we have reported before, flesh-detecting injury-mitigation technology like SawStop’s may become the industry standard for table saws in the future. Bosch developed its own flesh-detecting technology and implemented it in the REAXX table saw marketed for the U.S. and Canada (where it will still be available). SawStop, currently the only major manufacturer of such technology in the United States, filed suit against Bosch for patent infringement in July of 2015. Bosch moved forward with the release of the saw late last year during the litigation proceedings.

On November 17, 2016 the ITC, after reviewing the legal arguments of both Bosch and SawStop, put the public on notice that it would not review the initial determination by an Administrative Law Judge that ruled Bosch had infringed on two SawStop patents and would review the ALJ’s recommended remedy. On January 27, 2017, after several extensions, the ITC ultimately ruled in favor of SawStop by issuing a Limited Exclusion Order to U.S. Customs and Border Protection, and a Cease and Desist Order to Bosch. The Commission, coming to this conclusion after “having reviewed the record in this investigation, including the written submissions of the parties,”[2] makes these decisions based on public policy: public health and welfare, competitive conditions in the United States economy, competitive production, the United States consumer, and foreign relations.

The decision of the ITC will now move to the United States Trade Representative (USTR), as delegated by the President, who must approve or disapprove the ITC’s final decision in sixty (60) days. The USTR rarely goes against the ITC, having disapproved of the ITC’s determination once in nearly 30 years. During this sixty (60) day period the REAXX saws will most likely still be on sale, as Bosch is allowed to import and sell the saw and cartridges under bond which the ITC set at 0%.

What the Ruling Means for You According to the Cease and Desist order the expiration of the REAXX ban will be February 1, 2022. We spoke to Bosch to clear up a misconception some may have in the industry that the cartridges will not be available due to the ITC ruling; that is not the case. Owners of REAXX table saws will still be able to purchase cartridges and have their saws serviced indefinitely because the cartridges are produced in the U.S. – so if you own one, or are thinking of buying one within the 60 day period, you are safe to continue using it and purchase one without worry that it will eventually become inoperable or obsolete.

Here’s Bosch’s official response regarding the ruling:

Robert Bosch Tool Corp. is disappointed with the ITC’s decision. We are now in the 60-day presidential review period, in which we hope the president will review the facts of the case and then veto this exclusion order.

Bosch maintains that development of its professional table saw product respects other companies’ patents and represents a new and unique technology in the construction market. It is disappointing that a competitor is continuing its campaign to stop the sale of REAXX technology to consumers.

We believe that advanced REAXX safety technology does not violate any competitor’s intellectual property rights. The patents asserted against REAXX are based on applications filed more than 15 years ago; Bosch does not believe they apply to REAXX technology. In addition, Bosch believes that if the U.S. Patent and Trademark Office had complete information, it would not have issued certain patents in the first place.

It is our firm belief that the development, marketing and distribution of the REAXX Jobsite Table Saw is completely separate and distinct from anything other brands or manufacturers are doing.

At Bosch, safety is a priority. We will work to defend consumers’ rights to buy our products.

For any questions, please contact Daniel Nicholson at [email protected].

To view the original online article, click here.

Eleventh Circuit Rules: Attorney’s Fees for Everyone! (Including Sureties and General Contractors)

Posted on: January 31st, 2017

By: Jake Carroll

In U.S.A. f/u/b/o RMP Capital Corp. v. Turner Construction Co., et al., 2017 WL 244066 (11th Cir. 2017) (unpublished), the Court of Appeals for the Eleventh Circuit clarified a previously undecided area of law in holding that general contractors and its insurer sureties may recoup attorney’s fees under the Miller Act.

In the underlying case, Turner, the general contractor, contracted with the Department of Veterans Affairs to construct a portion of the Community Living Center in Orlando, Florida. Pursuant to the Miller Act, Turner obtained a payment bond from several sureties. Inevitably, a dispute arose between Turner and a subcontractor regarding allegedly deficient work, and Turner did not pay the subcontractor the full contract amount. The subcontractor later assigned its accounts receivable to RMP, who brought suit against Turner and its sureties under the Miller Act. RMP determined on the first day of trial that it would drop its Miller Act claims, which prompted Turner and the sureties to move for attorney’s fees, based on the subcontractor’s contract. The district court denied the motion, finding that while Eleventh Circuit precedent supports an award for attorney’s fees for subcontractors, it does not afford the same to general contractors. Turner and the sureties appealed.

The circuit court reversed the district court, and clarified that while the Miller Act does not mention attorney’s fees, Eleventh Circuit precedent dictates that “attorney’s fees are a recoverable item under [a] Miller Act bond” when provided for in a contract. This includes attorney’s fees for both subcontractors and general contractors. The holding brings the Eleventh Circuit in line with several other circuits, including the 1st, 4th, 5th, 8th and 9th. In making its determination, the court relied on the American Rule, which states that each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise. Of course, while federal law may govern the availability of attorney’s fees in Miller Act cases, state law governs the interpretation of a contract provision allowing for attorneys’ fees. See U.S. ex rel. W.W. Gay Mech. Contractor, Inc. v. Walbridge Aldinger Co., 543 Fed. App’x. 937 (11th Cir. Nov. 1, 2013).

The opinion reminds every construction professional and attorney for both subcontractors and general contractors to: (1) practice careful contract drafting; and (2) always read the contract before seeking legal action. Courts have repeatedly upheld contractual provisions, and parties should be well-aware of the terms of the agreement not only during the project, but also when pursuing legal action. For RMP, the cost of this litigation is not limited to the $240,000.00 that went unpaid by Turner, but may also include an additional $47,580.91 in attorney’s fees for bringing suit in the first place.

For any questions, please contact Jake Carroll at [email protected].