ADSC West Coast Chapter Richard D. Kalson, Esq. rkalson@beneschlaw.com 614.223.5380 (W) 412.417.4209 (C) www.beneschlaw.com
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. 2
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. 3
RIGHT TO WITHHOLD SUMS California: United Riggers & Erectors, Inc. v. Coast Iron & Steel Co (2018), 4 Cal. 5 th 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. 4
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. 5
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. 6
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. 7
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