The Concrete (Legal) Jungle

Victor Metsch | Smith Gambrell & Russell | November 21, 2019

Serge Somrov purchased apartment 7A at the Bay Parkway Terrace  Condominium. After moving in Somrov replaced the floor of the terrace with Board approval.

Ten years later, Somrov was told that a leak on his terrace was causing water damage to the apartment below. Pursuant to the By-Laws Somrov was required to remove the tiles he installed as well as the cement underneath. And Bay Parkway was obligated to install waterproofing  after which Somrov could re-install the tiles. Somrov  removed the tiles but did not remove the cement. Bay Parkway refused to install the waterproofing until the cement was removed.

Somrov sought a preliminary injunction that required Bay Parkway to remove the cement and install the waterproofing.

To obtain a preliminary injunction, Somrov was required to demonstrate: a likelihood of success on the merits; an irreparable injury absent the injunction; and a balancing of the equities in his favor. The for the injunction was the allegations that Bay Parkway refused to install the waterproofing without a valid justification. Thus, Somrov argued that Bay Parkway Terrace was insisting that he “remove not only my tiles and adhesive, but the original concrete floor down to the existing layer of waterproofing material. The original concrete and the existing layer of waterproofing was not affected by either the installation of my original tiles, nor their removal.”

Bay Parkway’s By-Laws stated, concerning the terrace, that the owner of the unit must install “protective decking” and was responsible for the maintenance of any decking installed as well as the “repair or replacement of surface material where damaged”. The  By-Laws  also stated that Bay Parkway was responsible for “structural elements, such as rafters, bulkheads, etc.”

Somrov was clearly required  to remove the tiles and the surface material of the terrace. Bay Parkway argued that  the concrete was a  surface material which was the responsibility of Somrov.

The Court found that was a question of whether or not the concrete should be considered sub-surface material, a distinct category. There were further questions whether Somrov removed all the tiles and glue which he was obligated to do. Thus, while it was true that a preliminary injunction could be granted where some facts are in disputes, some evidence of likelihood of success must be presented. Therefore, when “key facts” are in dispute and the basis for the injunction rests upon “speculation and conjecture” the injunction must be denied.

In this case the entire basis for Somrov’s request was subject to factual and legal questions, namely which party was responsible to remove the sub-surface concrete. While Somrov insisted it was the responsibility of Bay Parkway  considering the nature of the material, there remained questions whether the responsibility rested with Bay Parkway  Since Somrov did not demonstrate a likelihood of success on the merits, the motion seeking a preliminary injunction was denied.

Guessing as to your Construction Damages is not the Best Approach

David Adelstein | Florida Construction Legal Updates | August 24, 2019

Arbitrarily guessing as to your construction damages is NOT the best approach.  Sure, experts can be costly.  No doubt about it.  Having an expert versus guessing as to your construction damages caused by another party’s breach of contract is a no brainer.  Engage an expert or, at a minimum, be in a position to competently testify as to your damages caused by another party’s breach of contract.  Otherwise, the guessing is not going to get you very far as a concrete subcontractor found out in Patrick Concrete Constructors, Inc. v. Layne Christensen Co., 2018 WL 6528485 (W.D. New York 2018) where the subcontractor could not competently support its delay-related damages or change orders and, equally important, could not support that the damages were proximately caused by the general contractor’s breach of the subcontract.

In this case, the concrete subcontractor entered into a subcontract to perform concrete work for a public project. The project was delayed and the general contractor was required to pay liquidated damages to the owner.  Not surprisingly, the subcontractor disputed liability for delays and sued the general contractor for all of its delay-related damages “in the form of labor and materials escalation, loss of productivity, procurement and impact costs, field and home office overhead, idle equipment, inability to take on other work, lost profits, and interest.”  Patrick Concrete Constructors, 2018 WL at *1.

The general contractor moved for summary judgment as to the plaintiff’s delay-related damages – the subcontractor’s damages were nothing but guesses and the subcontractor could not prove the general contractor was the cause of the subcontractor’s damages.

The portion of the deposition transcript of the subcontractor’s president that may have also been its corporate representative as to damages is telling:

Q: After today’s exercise, do you believe you’re entitled to [$]681,740 under those items [regarding change orders]?

A: No.

Q: What amount [are] you entitled to?

A: I don’t know. I’d have to work it up.

Q: So as of right now, with my one chance to depose you, the person on damages, you can’t give me a figure that you’re actually entitled to?

A: No. We just ripped all these figures apart, so now I got to go back and refigure.

With regard to the amount of damages sought for “extra costs,” Bell [the President of subcontractor] testified as follows:

Q: Okay. Then you have – you total everything here, total of everything except for the Amount Due on Contract and Outstanding Change Order heading. So that [$]915[,000] basically added up everything under Extra Costs Not Submitted all the way down to Extra Equipment?

A: Yes.

Q: You’re asking for [$]915[,000] in this. Do you believe that’s actually what you’re entitled to today?

A: Well, like I said, we were – like you said, we have to do some adjustments here.

Q: Okay. Adjustments downward, correct, sir?

A: Yes.

Q: Can you tell me today what you think you’re actually entitled to?

A: No.

And, there was more.  The subcontractor could not locate its original estimate for the job, which is important for any loss of productivity or inefficiency claim – or any claim dealing with added labor and equipment usage. The subcontractor could not identify payroll records, time cards, vendor invoices, or anything to justify the damages it sought.  The subcontractor guessed as to labor hours without the back-up substantiating the labor hours and, equally important, could not establish it incurred the guesstimated labor hours caused by the general contractor.

In essence, Plaintiff [subcontractor] concedes that it cannot provide the Court with an “intelligent estimate without speculation or conjecture,” for either category of damages. Because Plaintiff has failed to make a factual showing sufficient to establish that the “extra costs” and “change orders” damages are capable of being proved with reasonable certainty, summary judgment dismissing these claims is appropriate.

***

Here, Plaintiff asserts that Defendant [general contractor] breached the Subcontract by delaying the Project, and that Defendant’s delay caused it to sustain damages. However, Plaintiff has admitted that Defendant was not responsible for all of the delay, and that Plaintiff and its reinforcing bar subcontractor contributed to the delay as well. Because, by Plaintiff’s own admission, it contributed to the damage-causing delays, it is required to allocate the amount of delay and resultant damages between, at a minimum, itself and Defendant.

Patrick Concrete Constructors, 2018 WL at *4.

Ten-Year Statute of Repose to Sue For Latent Construction Defects

David Adelstein | Florida Construction Legal Updates | August 18, 2019

If you are dealing with latent construction defects, it is imperative that you consult with counsel to understand your rights.  This not only includes claims for property damage stemming from latent construction defects, but also personal injury stemming from such defects.  There is a ten-year statute of repose to sue for latent construction defectsSee Fla.Stat. s. 95.11(3)(c).  After the expiration of this statute of repose you are out of luck, meaning you can no longer sue.

Now, I probably will not be the first to tell you that the statute of repose is not written so clear that you know the precise date it ends (or the last date you can sue for a latent defect).  For this reason, you really want to operate conservatively, meaning it is always better to sue early if you think you could be running on the end of the statute of repose period.  It is always advisable to avoid any legitimate argument that you filed your construction defect lawsuit too late.

In Harrell v. The Ryland Group, 44 Fla. L. Weekly D2054b (Fla. 1st DCA 2019), a subsequent owner of a house sued the original homebuilder in negligence for a construction defect causing a personal injury. The subsequent owner claimed the homebuilder defectively installed an attic ladder (that provided access to the attic for the original construction) which collapsed as he was using it. The homebuilder filed a motion for summary judgment that the statute of repose expired so the owner’s claim was time-barred. The First District agreed.

The subsequent owner tried to argue that the statute of repose did not apply because the installation of an attic latter does not constitute an “improvement” to real property and the statute of repose is based on actions “founded on the design, planning, or construction of an improvement to real property.”  The First District was not having this argument because “the attic ladder at issue here was installed as part of the construction process of the home, required labor and money, made the property more useful/valuable in that it provides a more convenient means of access to another level, was not mere repair or replacement, and was affixed to the attic, making it an integral part of the home.

Even something perceived as nominal like the installation or construction of an attic ladder can constitute an improvement to real property making it subject to the ten-year statute of repose to sue for latent defects.   Hence, do not sit idle if you are dealing with a latent construction defect – take the conservative approach and start the required litigation process sooner than later.

Asbestos/Duty of Care: Connecticut Court Addresses Construction Project/Liability Issues

Mitchell, Williams, Selig, Gates & Woodyard | October 25, 2019

The Superior Court of Connecticut (Judicial District of Hartford) (“Court”) addressed in a September 30th opinion certain issues arising in an asbestos exposure case. See Julian Poce, et al., v. O&G Industries, Inc., et al., 2019 WL 5295545.

The Court addressed Summary Judgment Motions arguing certain project contractors did not owe mason laborers a duty of care.

Several mason laborers (collectively “Plaintiffs”) were employed by Connecticut Mason Contractors, Inc. to work at certain points on a building project at a high school in Connecticut. They alleged that while working on the building project they were exposed to asbestos.

Plaintiffs filed an action against Southern Middlesex Industries, Inc. (“SMI”) and O&G Industries, Inc. (“O&G”) for negligent infliction of emotional distress in regards to both O&G and SMI. They alleged repeated exposure to asbestos from working in areas of the building project designated by O&G as the project manager. Asbestos was stated to have been disturbed that was present in the floors, walls, and ceilings.

O&G was argued to have had actual or constructive notice of dangerous site conditions/defects, including the presence of asbestos and PCBs. It is stated to have supervised all phases of work along with exercising possession and control of the project. Plaintiffs claimed that even though O&G controlled (or had the ability to control) the means and method of work, the relevant areas were not sampled, remediated or tested for asbestos prior to the Plaintiffs’ exposure. This is alleged to have resulted in asbestos being inhaled by Plaintiffs.

O&G was allegedly aware of the exposure. Further, it was alleged that such exposure was allowed to occur despite an agreement signed with the Town of Wethersfield requiring O&G to observe safety protocols and procedures.

SMI was alleged to have performed demolition work involving asbestos remediation at the site. Plaintiffs claimed that SMI did not properly section off regulated work areas to ensure plaintiffs were not exposed to materials being remediated. This is alleged to have contributed to a lack of adequate testing and sampling of materials including an absence of advance warning to the Plaintiffs.

Both O&G and SMI filed Motions for Summary Judgment arguing that they owed Plaintiffs no duty of care.

Various AIA contract documents along with deposition transcripts were filed in support of the Defendant’s Motion for Summary Judgment.

O&G argued that it owed no duty to the Plaintiffs because issues related to hazardous materials were specifically excluded in its contract from its scope of work. The Plaintiffs responded that legal duty is a question of fact, noting that:

  • O&G supervised safety at the worksite
  • O&G had a duty of care to third parties because it was in control of the site
  • O&G had a duty of care under the Occupational Safety and Health Act Regulations

O&G replied that its contract provided it did not have control over construction means or safety precautions at the site. Further, it claimed that there was no duty under the common law or Occupational and Safety Health Act regulations.

The Court addressed each of these three arguments and granted Summary Judgment concluding that O&G did not owe the Plaintiffs a duty of care with regard to the discovery and removal of asbestos.

SMI argued in support of its Motion for Summary Judgment that it owed no duty of care because it was not hired to identify asbestos. Instead, it argued that the obligation was to remove hazardous materials that had already identified by their contractors.

Plaintiffs responded that an analysis of legal duty ordinarily leads to a question of fact and that SMI was in the best position to ensure their safety. It was argued to have performed its work in such a way as to create hazardous situations and that the company owed a duty of care under Connecticut common law along with the Occupational and Safety Health Act regulations.

SMI replied it had no duty to perform work that was beyond the scope of its contract.

The Court concluded it was evident that SMI was not hired for the specific purpose of identifying and locating hazardous materials. However, it determined this did not establish that it bore no responsibility whatsoever for the identification and discovery of asbestos on the worksite while it performed its demolition or remediation duties. Questions of fact were held to remain regarding SMI’s capacity to identify any previously undiscovered hazardous materials to which the Plaintiffs alleged they were exposed.

As a result, SMI’s Motion for Summary Judgment was denied.

A copy of the opinion can be downloaded here.

Owner Did Not Waive Right to Damages by Terminating Design Contract for Convenience

Christine Fan | Pepper Hamilton | October 25, 2019

Chinese Hosp. Ass’n v. Jacobs Eng’g Grp., Inc., 2019 BL 330340, 2 (N.D. Cal. Sept. 03, 2019)

This case arises out of the alleged breach of contract and defective design for the construction of a new hospital in San Francisco. During construction, property owner and plaintiff Chinese Hospital Association (“Chinese Hospital”) became aware of alleged defects involving the designs provided by its subcontractor, architect-defendant Jacobs Engineering Group, Inc. (“Jacobs”). Chinese Hospital terminated its contract with Jacobs for convenience mid-construction.

To complete the project, Chinese Hospital and Jacobs entered into a Termination and License Agreement that allowed for Chinese Hospital to hire a replacement architect. Chinese Hospital ultimately completed the project with significantly increased costs and filed suit against Jacobs.

Jacobs moved for summary judgment and argued that Chinese Hospital waived its rights to recover damages under the contract. The Northern District of California disagreed.

First, the court rejected Jacobs’ argument that, under the contract, Chinese Hospital waives its rights to recover damages if it terminates the contract for convenience and not for cause. The contract contains separate provisions detailing early termination both for cause and for convenience. The for-cause provision provides that should Jacobs fail to cure its performance defaults within seven days of written notice from Chinese Hospital, then Chinese Hospital “may without prejudice to any other remedy terminate the employment of [Jacobs].”

In contrast, the court stated that there is nothing in the for-convenience provision or anywhere else in the contract that provides a similar waiver should Chinese Hospital terminate the contract without cause (i.e. for convenience). Based on the contract terms and the lack of clear indication that the parties intended otherwise, the for-cause provision does not apply to bar Chinese Hospital’s remedies following a termination for convenience.

The court found that it is unclear the for-cause termination provision is either the exclusive remedy or a remedy at all in cases of early terminations. Indeed, specifying that a termination is without prejudice to a remedy is not the same as actually providing a remedy, let alone an exclusive one. Under these circumstances, the court could not find as a matter of law that Chinese Hospital waived its rights to claim damages.

Further, the parties’ later Termination and License Agreement contained indemnity and no-waiver provisions that expressly reserved Chinese Hospital’s rights to claim damages against Jacobs. These later provisions effectively modified any waiver that might have occurred under the original contract. Ultimately, there is sufficient ambiguity in the contract to at least create a material issue of fact as to whether Chinese Hospital indeed waived its rights to claim damages.

Finally, Jacobs also failed to meet its burden in proving its other affirmative defenses. As to the doctrine of prevention, Jacobs failed to address the parties’ express reservation of rights or prove that it could have performed the contract had Chinese Hospital terminated the contract with cause. As to implied waiver, the court noted that not every trier of fact would find that Chinese Hospital intended to waive its damages claims.