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Legal Updates
FOURTH CIRCUIT HOLDS THAT CONTRACTOR’S GUARANTY TO PAY SUBCONTRACTOR DOES NOT CREATE THIRD-PARTY BENEFICIARY RELATIONSHIP WITH SUPPLIER. PDF Print

(January 1, 2015) - We have previously written about the difficulty faced by subcontractors and suppliers when asserting third-party beneficiary claims against owners or general contractors (click here). A recent decision by the U.S. Court of Appeals for the Fourth Circuit continues that trend and demonstrates how, in the absence of a timely payment bond claim or properly-perfected mechanic's lien, subcontractors and suppliers have few available remedies outside of a standard breach of contract claim.

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VIRGINIA SUPREME COURT RULES THAT PARTIES WITH A PECUNIARY INTEREST ARE NECESSARY TO A SUIT TO ENFORCE A MECHANIC’S LIEN. PDF Print

(November 17, 2014) - Late last month, the Virginia Supreme Court cleared up any ambiguity regarding who must be named in a lawsuit to enforce a mechanic’s lien.  In Sychronized Construction Services, Inc. v. Prav Lodging, LLC, 2014 WL 5490663 (Va. Sup. Ct. Oct. 31, 2014), the Court examined whether a general contractor that had no financial interest in a bond posted to release a mechanic’s lien was a necessary party to the subcontractor’s mechanic’s lien enforcement action.

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ANTI-INDEMNIFICATION STATUTE HELD INAPPLICABLE TO CONSTRUCTION EQUIPMENT RENTAL AGREEMENTS. PDF Print

(September 8, 2014) - This August, the U.S. District Court for the Western District of Virginia considered whether Virginia’s anti-indemnification statute, which voids certain indemnification provisions in construction contracts, applies to rental equipment contracts.

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ONE-SIDED ARBITRATION CLAUSE IN CONSTRUCTION CONTRACT HELD UNENFORCEABLE BY MARYLAND FEDERAL COURT. PDF Print

(July 22, 2014) – This last month, the U.S. District Court for the District of Maryland considered the question of whether a “one-sided” arbitration clause is enforceable in a construction contract. As many readers know, these kinds of clauses grant only one contractual party the option to demand arbitration.

In United States ex rel. Birckhead Electric, Inc. v. James W. Ancel, Inc., No. WDQ-13-2498, 2014 WL 2574529 (D.Md.  June 5, 2014), a subcontractor installing electrical systems at the Baltimore Army Reserve Center filed suit against the general contractor and its surety for the remaining balance owed under its subcontract. The electrical subcontract contained the following provision: “All disputes between the Contractor and Subcontractor…shall, at the Contractor’s sole option, be resolved by arbitration in accordance with the rules of the American Arbitration Association.” Based upon this provision, the general contractor and its surety moved to stay the lawsuit pending arbitration. The subcontractor objected, arguing that the arbitration clause was unenforceable due to a lack of mutual consideration.

In considering the defendants’ motion, the District Court first looked to Maryland law because, under the Federal Arbitration Act, the arbitration agreement must be valid and enforceable as determined by state law. Under Maryland law, the arbitration provision itself – not the contract as a whole – must be supported by mutual consideration to find enforceability of the arbitration provision. Relying on Maryland decisions analyzing consumer contracts, the District Court found that an arbitration provision that binds only one party lacks mutual consideration and is therefore unenforceable. As the instant arbitration provision could only be employed by the general contractor, it was unenforceable under Maryland law. While the defendants attempted to argue that the decisions relied upon by the District Court involved parties of unequal bargaining power, the District Court found that commercial contracts should not be treated any differently from consumer contracts. Therefore, the District Court denied the defendants’ motion to stay pending arbitration.   

Throughout the country, jurisdictions differ over whether one-sided arbitration provisions are enforceable. For instance, while the Birckhead Electric decision found that such provisions are unenforceable in Maryland, Virginia courts have previously upheld such provisions even in consumer contracts. Therefore, contracting parties wishing to include a one-sided arbitration clause must take care to review the state law applicable to the construction contract at the time of drafting, or risk losing their right to demand arbitration altogether. 

 
UNLICENSED CONTRACTORS CAN MAINTAIN SUIT AGAINST MILLER ACT PAYMENT BOND DESPITE STATE LAWS TO THE CONTRARY. PDF Print

(May 23, 2014) - Many jurisdictions, including California, Florida, Virginia, and Arizona, prohibit or limit an unlicensed contractor’s ability to maintain a lawsuit or enforce a contract in relation to a construction project.

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FEDERAL CIRCUIT REJECTS NARROW STANDARD FOR BREACH OF THE DUTY OF GOOD FAITH AND FAIR DEALING CLAIMS. PDF Print

(March 28, 2014) - Over the years, the long-standing legal theory of breach of an implied duty of good faith and fair dealing has been eroding. Contractors seeking to sue the government for breaching this implied duty were frequently unsuccessful because of the difficult legal burden for proving such a claim. In a recent case with far-reaching implications, however, the Federal Circuit recently decided that the Court of Federal Claims erred when it applied the wrong legal standard to a government contractor’s claim for breach of the duty of good faith and fair dealing.

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FOURTH CIRCUIT AFFIRMS JUDGMENT IN FAVOR OF MILLER ACT CLAIMANT AGAINST SUCCESSOR COMPANY. PDF Print

(December 26, 2013) - In L&W Supply Corp. v. Greenway Enterprises, Inc., 2013 WL 583224 (4th Cir. Oct. 31, 2013), the Fourth Circuit affirmed the entry of summary judgment by the U.S. District Court for the Eastern District of Virginia under the Miller Act in favor of a supplier claimant who, despite not having a contract to supply materials with the subcontractor for the federal project, had an open account credit agreement with a predecessor to the subcontractor.

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MARYLAND FEDERAL COURT GRANTS SUMMARY JUDGMENT IN FAVOR OF SURETY IN INDEMNITY ACTION AND PERMITS CAUSE OF ACTION UNDER TRUST FUND STATUTE. PDF Print

(December 26, 2013) - Since the 2004 decision of Atlantic Contracting & Material Co., Inc. v. Ulico Cas. Co., 380 Md. 285 (2004), sureties in Maryland state and federal courts have faced great difficulty obtaining summary judgment in contractual indemnification actions. In reliance upon Atlantic Contracting, Maryland courts consistently require sureties to proceed to trial to prove that losses suffered by the surety were reasonably incurred. However, a recent decision by the U.S. District Court for the District of Maryland indicates that sureties may again have the opportunity to save cost and time through summary judgment and have a right of action under the Maryland Trust Fund Statute (MTFS).

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FOURTH CIRCUIT HOLDS THAT FALSE PAYMENT APPLICATIONS MAY CONSTITUTE FRAUD FOR PURPOSES OF BANKRUPTCY NONDISCHARGEABILITY. Print

(August 14, 2013) - This June, the U.S. Court of Appeals for the Fourth Circuit affirmed a bankruptcy court’s ruling that false certifications contained in payment applications constitute fraud for the purposes of making those debts attributable to the certifications non-dischargeable in bankruptcy.

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U.S. SUPREME COURT HOLDS THAT VIRGINIA CAN EXCLUDE NON-CITIZENS FROM ACCESS TO PUBLIC RECORDS. PDF Print

(June 11, 2013) – Last month, in McBurney v. Young, the Supreme Court of the United States considered whether Virginia’s Freedom of Information Act, which provides open access to and copying of public records solely to citizens of the Commonwealth of Virginia, violated the U.S. Constitution by denying non-Virginians access to Virginia public records. In an unanimous decision, the Supreme Court upheld the Commonwealth’s limitation of access to Virginia citizens, finding that it did not violate the Privileges and Immunity Clause of Article IV. To read the Supreme Court’s opinion, click here, and to read an article analyzing the opinion, click here.

 

 
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News

ROBERT J. DIETZ CO-AUTHORS CHAPTER OF 2017 A201 DESKBOOK.

(November 14, 2017) – Robert J. Dietz has co-authored a chapter in the ABA Forum on Construction Law 2017 A201 Deskbook. The A201 document, the industry's most frequently used set of ...

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ROBERT J. DIETZ AND SHOSHANA E. ROTHMAN HAVE BEEN NAMED PARTNERS WITH BRIGLIAMCLAUGHLIN.

(November 1, 2017) - BrigliaMcLaughlin is pleased to announce that Robert “Rob” J. Dietz and Shoshana “Shana” E. Rothman have been promoted to Partners with the firm. Rob and Shana ...

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RAZIYE ANDICAN JOINS BRIGLIAMCLAUGHLIN.

(September 18, 2017) - BrigliaMcLaughlin, PLLC is pleased to announce the addition of attorney Raziye ("Raz") Andican. Ms. Andican joins BrigliaMcLaughlin following her judicial clerkship with the Honorable Michael A. ...

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