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Legal Updates
VIRGINIA FINDS MECHANICS’ LIENS ENFORCEABLE BUT REMANDS TO EXAMINE WHETHER THE ENTIRE PROPERTY MAY BE SOLD TO SATISFY THE LIEN. PDF Print

(May 3, 2013) - In Glasser & Glasser, PLC v. Jack Bays, Inc., 2013 WL 718748 (Va. Sup. Ct.) (Record Nos. 120287-120289) (Feb. 28, 2013), the Virginia Supreme Court recently examined fourteen assignments of error raised by the petitioners to a circuit court’s final order directing the sale of twenty-two acres of land to satisfy several mechanic’s liens.  On appeal, the Court rejected all but one assignment of error but ultimately remanded to take evidence as to the propriety of the sale of the entire 22 acre property to satisfy the mechanic’s liens when the improvements were only made on 2.8 acres.  Of note in this decision, is the Court’s analysis on the application of the 90-day rule and the 150-day rule that provides additional guidance to lien claimants.

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VIRGINIA FEDERAL COURT EXAMINES THE INCORPORATION OF THE VIRGINIA PUBLIC PROCUREMENT ACT INTO A MASONRY SUBCONTRACT. PDF Print

(April 11, 2013) - In South End Construction, Inc. v. Tom Brunton Masonry, Inc., 2013 WL 792779 (W.D.Va. Feb. 25, 2013) (Civil Action No. 7:12-cv-390), the U.S. District Court for the Western District of Virginia examined whether a subcontractor could bring a separate cause of action against the prime contractor for violating the Virginia Public Procurement Act (“VPPA”), as a result of the prime contractor’s withholding ten percent of all progress payments owed to the subcontractor as retainage, rather than the five percent proscribed by the VPPA.

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MARYLAND FEDERAL COURT STRICTLY ENFORCES THE MILLER ACT’S 90-DAY NOTICE REQUIREMENT FOR SECOND TIER SUBCONTRACTORS. PDF Print

(February 26, 2013) - The federal Miller Act, 40 U.S.C. §§ 3131-3134, requires a second tier subcontractor (a subcontractor or supplier with no direct relationship with the prime contractor) who wants to file suit on a payment bond in connection with a federal construction project to provide written notice of their claim within 90 days from the last date on which it performed labor or furnished or supplied material for which the claim is made.

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FOURTH CIRCUIT ENFORCES ARBITRATION CLAUSE IN SUBCONTRACT AGAINST PERFORMANCE BOND SURETY. PDF Print

(December 17, 2012) – A recent ruling by the Fourth Circuit considered an important issue for sureties, their principals, and claimants on construction projects regarding the enforceability of arbitration clauses against the surety.

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RECENT COURT OF FEDERAL CLAIMS DECISION DEMONSTRATES THE PERIL TO FEDERAL CONTRACTORS OF SUBMITTING INFLATED CLAIMS. PDF Print

(November 30, 2012) – Over the last few years, government contracting practitioners have noted an increase in the federal Government’s efforts to combat contractor fraud. At the Court of Federal Claims (COFC) Judicial Conference earlier this month, several practitioners lamented that the Department of Justice (DOJ) may have developed the unofficial policy of actively searching for fraud in every case before the COFC and filing a fraud counterclaim if potentially supportable in order to gain a litigation advantage. The harm to government contractors caused by a finding of fraud can be severe, as the Government has several potent anti-fraud remedies in its arsenal.

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NEVADA SUPREME COURT REJECTS FRAUD IN THE INDUCEMENT CLAIM IN CONSTRUCTION CONTEXT. PDF Print

(Nov. 1, 2012) - In its recent opinion in Road & Highway Builders, LLC v. North Nev. Rebar, Inc., 284 P.3d 377 (Nev. Aug. 9, 2012), the Nevada Supreme Court considered whether a subcontractor had a valid claim for fraud in the inducement, allowing it to recover punitive damages against a general contractor. In this case, Road and Highway Builders, LLC (Builders), the general contractor on a Nevada Department of Transportation project, retained North Nevada Rebar, Inc. (NN Rebar) to provide all rebar needed for the project. Due to the large quantity of rebar required, NN Rebar agreed to a lower unit price in its contract. However, at the time the subcontract was being executed, Builders had already made the decision to use a different method for constructing roadside concrete boxes (precast instead of poured), and had already retained a precast box supplier, substantially reducing the amount of rebar necessary for the project. The Builders did not disclose to NN Rebar that it had no intention of ordering the amount specified.

After several disputes arose between Builders and NN Rebar, Builders filed suit.  NN Rebar filed a counterclaim asserting a tort claim for fraudulent inducement along with claims for breach of contract.  Finding in favor of NN Rebar, the trial court found that NN Rebar had been fraudulent induced to enter into the subcontract, and awarded it $700,000 in compensatory damages and $300,000 in punitive damages. 

On appeal, the Nevada Supreme Court overturned the trial court’s award for punitive damages for fraud in the inducement. The Court explained that the fraudulent inducement claim contradicted the express terms of the subcontract.  Here, the subcontract contained a changes clause specifically permitting Builders to order revisions to NN Rebar’s work, regardless of any changes to the rebar work provided under the prime contract.  In addition, the total price was subject to additions and deductions for changes in the work while the unit prices were fixed regardless of quantity.  Based on these provisions, the Court found that the parties contemplated a potential alteration in the scope of the work to be performed.  Therefore, the fraud in the inducement claim was at odds with the express terms of the subcontract, and could not stand as a matter of law.

Despite the fact that Builders knew that it would be unilaterally reducing NN Rebar’s scope of work at the time of signing the subcontract, Builders avoided a tort claim and punitive damages by drafting a subcontract that permitted it to unilaterally reduce the rebar quantities. Conversely, NN Rebar limited itself to pure contract damages by fixing the price of its rebar, while permitting Builders to unilaterally alter the quantity at any time for any reason. Although NN Rebar lost its fraudulent inducement claim, it could have avoided the losses altogether by providing for a mechanism to adjust the price of rebar depending on the quantity required, or simply by setting a minimum quantity for the rebar. Courts routinely deny fraud claims in breach of contract cases, especially when the parties to the contract are sophisticated commercial players. 

 
FEDERAL CIRCUIT DISTINGUISHES BETWEEN ALLOWABLE AND UNALLOWABLE ATTORNEY’S FEES UNDER THE FEDERAL CLAIMS PROCEDURES. PDF Print

(September 28, 2012) - Unlike private construction contracts, in which a contractor’s recovery of attorney’s fees is typically limited to those incurred in litigation, a contractor on a federal government project may be able to recover legal fees incurred in preparing, submitting, and negotiating change orders as “contract administration costs.”

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COURT OF FEDERAL CLAIMS LIMITS CONTRACTOR'S ABILITY TO CONTEST NEGATIVE PERFORMANCE EVALUATION. PDF Print

(August 27, 2012) - Last month, the U.S. Court of Federal Claims took up an issue not previously decided by the Federal Circuit – whether the Court of Federal Claims has authority to issue injunctive relief to revise a federal contractor’s “unsatisfactory” rating.  In Davis Group, Inc. v. United States, No. 12-275, 2012 WL 2688053 (Fed. Cl. July 6, 2012), the United States Army Corps of Engineers (“USACE”) entered into a design-build contract with a general contractor to perform construction services at an airfield in Savannah, Georgia. After the project’s completion was delayed by almost seven months, the USACE withheld substantial liquidated damages to cover the delay period and rated the contractor’s performance as “unsatisfactory.”  Pursuant to 48 C.F.R. § 42.1503(c), this rating was entered into the Government’s Past Performance Information Retrieval System (“PPIRS”) for use by agencies for the next six years.  After submitting claims to the contracting officer for additional costs associated with a design defect and remission of liquidated damages, which were denied, the contractor filed suit directly in the Court of Federal Claims. In addition to its claims for monetary relief, the contractor moved for a preliminary injunction, seeking removal of the “unsatisfactory” rating from the PPIRS.

On the contractor’s motion, the court first considered whether it had authority to issue injunctive relief in these circumstances. While the court agreed that it had jurisdiction over a contractor’s claim for a performance evaluation deemed unfair and inaccurate, it did not have authority to issue a preliminary injunction to remove or alter that evaluation during the pendency of the action.  In making this determination, the court rejected the contractor’s argument that the parties start with a “clean slate” when commencing an action. Rather, the court held that, although there was judicial precedent for the “clean slate” notion, such a suggestion was meant to refer to the legal standard of review– i.e., de novo proceedings are reviewed “from the beginning.” Furthermore, the court rejected the contractor’s argument that the court’s power to “remand appropriate matters to any…official with such direction as it may deem proper and just”  granted the court the authority to direct the contracting officer to remove the “unsatisfactory” rating during the pendancy of the case. By filing the action with the Court of Federal Claims, the contractor divested the contracting officer of any authority to act on the claim while the action was pending. Finally, the absence of any express statutory authority led the court to the inevitable conclusion that it lacked the power to proceed by way of injunctive relief in these circumstances. Therefore, the contractor was without a remedy to remove the negative evaluation during the pendency of the case. Given the lengthy process of litigating claims at the Court of Federal Claims level, this decision has significant ramifications for contractors looking for immediate redress.

To read the decision, click here.

 

 
MARYLAND FEDERAL COURT UPHOLDS ONE-WAY ARBITRATION PROVISION. PDF Print

(July 9, 2012) - Last month, the U.S. District Court for the District of Maryland considered whether an arbitration provision found in a contract between a public owner and a contractor required the parties to arbitrate all disputes.

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ELEVENTH CIRCUIT UPHOLDS STRICT ENFORCEMENT OF CONTRACT’S CHANGE ORDER APPROVAL PROCESS. PDF Print

(June 5, 2012) – A recent 11th Circuit decision considered whether a contractor could recover the costs for work that was undisputedly outside the scope of the construction contract when the contractor failed to obtain prior approval from a specific party.

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News

RECENT DECISION HIGHLIGHTS THE BENEFITS THAT QUALIFIED MECHANIC’S LIEN COUNSEL CAN PROVIDE TO LIEN CLAIMANTS.

(June 26, 2017) - Earlier this month, the Virginia Supreme Court issued a mechanic’s lien decision that underscores the benefits of having a qualified mechanic’s lien attorney prepare and file ...

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SHANNON J. BRIGLIA CO-AUTHORS ARTICLE IN TORT TRIAL & INSURANCE PRACTICE LAW JOURNAL.

(May 1, 2017) – Shannon J. Briglia has co-authored an article for the Winter 2017 edition of  the American Bar Association’s Tort Trial & Insurance Practice Journal titled: “Recent Developments ...

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BRIGLIAMCLAUGHLIN OBTAINS COMPLETE RECOVERY ON SUMMARY JUDGMENT FOR SURETY CLIENT.

(March 31, 2017) - On March 7, 2017, BrigliaMcLaughlin obtained summary judgment on behalf of a surety client in the case Developers Surety and Indemnity Company v. Belcher, et al., ...

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