Tag Archives: New Hampshire Construction Lawyer

Promise to Pay Doesn’t Change Mechanic’s Lien Deadline

By on February 20, 2018

In a recent decision, D5 Iron Works, Inc. v. Danvers Fish & Game Club, Inc., & Others, the Appeals Court of Massachusetts ruled that an owner’s promise to make payment to the subcontractor did not excuse the subcontractor’s failure to timely file suit.

In the case, the general contractor was delinquent in paying the subcontractor. The subcontractor timely filed a Notice of Contract  as well as a Statement of Account .  Nevertheless, Massachusetts lien law requires that a lawsuit be filed within 90 days of filing the Statement of Account.

According to the Subcontractor, the project owner represented that the subcontractor would be paid. The subcontractor testified that it relied on that representation in not timely filing the lawsuit.

Consistent with its prior decisions, the court ruled that mechanic’s lien statutory deadlines are to be strictly enforced, and denied the subcontractor’s claims.*  This case stands as a fresh reminder that the statutory deadlines for mechanic’s lien filings are enforced strictly, and not generally subject to extension or modification by private agreement.  Contractors and subcontractors should take care to observe deadlines ardently in order to avoid losing their mechanic’s lien rights.

 

*At the time of this article, it remains unclear whether either party will appeal the decision, which went unpublished. 

 

OSHA Injury Tracking Application Enforcement Delayed to December 15, 2017

By on December 8, 2017

The Occupational Safety and Health Administration (OSHA) recently extended, for the second time, the enforcement deadline for compliance with electronic reporting of injury and illness data through its Injury Tracking Application (ITA) until December 15, 2017.

The new rule took effect January 1, 2017, and required certain employers to submit injury and illness information electronically through the new tracking application.  The information required to be submitted to OSHA remains largely unchanged from the information already required to be kept under current regulations.  In other words, the primary difference is that it must be submitted through the ITA rather than through traditional methods.

In late November, the deadline was pushed back again to December 15, 2017.  Despite the second delay in enforcement it appears that the rule will eventually begin enforcement, even amid speculation that the rule might be scuttled entirely.  For the time being, construction employers should be prepared to submit their 300A and related forms electronically for years 2016 and forward electronically by December 15, 2017 to insure compliance with the new rule and avoid exposure to citations.

Contractors Beware: OSHA Begins Enforcement of New Respirable Crystalline Silica Standard

By on October 30, 2017

On October 19, 2017, OSHA released interim enforcement guidance for its Respirable Crystalline Silica in Construction Standard. This standard began full enforcement on October 23, 2017.

The Interim Enforcement Guidance issued refers to the standard promulgated on September 23, 2017.  Initially, rather than issue citations for violations of the standard, OSHA’s compliance officers were instructed to assist employers making good faith efforts to comply with the new standard for the first 30 days of its enforcement.  With the new Guidance issued on October 19, full enforcement of the new standard was rolled out on October 23.  Accordingly, employers in the construction industry, and particularly those where substantial silica exposures may be encountered, should be cognizant that full enforcement of the standard will now be enforced by compliance officers.    

The Respirable Crystalline Silica in Construction Standard established a new exposure limit for respirable crystalline silica at 50 micrograms per cubic meter of air as a weighted average during a worker’s an eight hour shift.  This new permissible exposure limit is five times lower than the prior limit for respirable crystalline silica. 

Because prolonged and intense exposure to crystalline silica is known to cause cancer, and crystalline silica is byproduct of many construction activities and materials, such as concrete, rock, mortar and sand, OSHA’s Respirable Crystalline Silica in Construction Standard is intended to limit such exposures.  Many safety measures can be installed and protective equipment can and should be used to avoid intense or prolonged exposures to crystalline silica. Contractors frequently involved in operations where such exposure is likely should be careful to provide all necessary safety measures, safety equipment and personal protective equipment necessary to comply with the new standard.

If you have questions regarding OSHA’s new guidance, your compliance with other OSHA safety standards, or in connection with your rights after a citation has been issued, you are well-advised to consult with counsel familiar with OSHA matters.

Show Me the Money: Getting Paid on Private Massachusetts Construction Projects

By on March 15, 2017

As a general rule, parties to private contracts are afforded wide latitude to dictate and negotiate the terms as they see fit. While this notion of “freedom of contract” is an entrenched tradition within American law it is not without its limitations.  The Prompt Pay Act, enacted in 2010, is one such limitation that every Massachusetts sub-contractor and contractor should have an acute awareness of.

In effect the Prompt Pay Act requires that standard state provisions be incorporated into otherwise private construction contracts with an original valuation of over three million dollars. The Prompt Pay Act specifically affects the interpretation of payment clauses in such contracts.

As a reminder, “pay-if-paid” clauses create a condition precedent to subcontractor payment. That is, a subcontractor has no right to payment for completed work until the general contractor has received payment from the owner. “Pay-when-paid” clauses create no such condition precedent to subcontractor payment. Rather, the general contractor has a ‘reasonable time’ to obtain payment from the project owner, but in the event the owner does not pay the general contractor within the ‘reasonable time’ the subcontractor still has the right to seek payment from the general contractor. Ambiguous contract language often complicates the subtle, yet substantial, differences between the two types of clauses leading to high stakes contract interpretation disputes.

In 2004, Massachusetts did away with distinction between “pay-if-paid” and “pay-when-paid” clauses on state-level public construction projects.  Framingham Heavy Equip. Co., Inc. v. John T. Callahan & Sons, Inc., 807 N.E.2d 851, 855 (Mass. App. 2004). Thus with regard to Massachusetts state-level public construction projects “pay-if-paid” causes have been effectively eliminated in favor of “paid-when-paid” clauses.”

Federal-level public construction projects, on the other hand, have not completely eliminated the distinction between “pay-if-paid” and “pay-when-paid” contract clauses. On federal-level public construction projects “pay-if-paid” language included in a subcontract could complicate subcontractor recovery in relation to the principal contractor. The limited amount of Federal case law on the issue, however, leads to the inference that Federal Courts disfavor allowing “pay-if-paid” clauses to operate in the federal-level public construction context.

The Prompt Pay Act directs that, on private construction projects valued at over three million dollars, payment clauses be interpreted as “pay-when-paid,” thus effectively eliminating “pay-if-paid” in most instances. Specifically, and with very narrow exception, “[a] provision in a contract for construction which makes payment to a person performing the construction conditioned upon receipt of payment from a third person that is not a party to the contract shall be void and unenforceable.” MGL c. 149 sec. 29E (e).

This statutory language is a clear attempt, in the name of the broad public interest, to provide protections to subcontractors by endeavoring to ensure swift payment for work provided in order to keep construction projects moving and companies afloat by regulating cash flow.

Smith Ironworks, Inc. v. Torrey Co., Inc., Not Reported in N.E.3d (2014), is the only Massachusetts case to discuss the Prompt Pay Act at any length. Even so, it is an arbitration decision as discussed in Smith, and not the Court itself, that provides the limited interpretation of the Act. In Smith, the subcontractor applied for payment from the contractor for work provided on a private project. Disputes as to the actual amount owed existed, however, rather than actively reject the request for payment, the contractor did not respond at all. Pursuant to the terms of the Prompt Pay Act the request for payment was deemed approved after the statutorily prescribed time passed without formal rejection. The parties submitted to voluntary arbitration and an arbitrator found that the contractor was liable to the subcontractor for the amounts submitted, plus interest, as the contractor failed to properly respond to the request for payment as prescribed by the Prompt Pay Act. The contractor was deemed liable even though it had not been paid in full by the owner.

To reiterate, while Smith details an outcome favorable to a subcontractor by application of the Prompt Pay Act, that outcome is not of true precedential value. Questions remain as to the effectiveness of the Prompt Pay Act. Specifically, questions regarding the true parameters and enforceability of payment timelines and the exact remedy for non-compliance. Thus, subcontractors should keep an eye towards the development of the law in this area and strive to understand how the Prompt Pay Act may apply to various projects. If you have any questions about payment issues on public construction projects you should contact a Massachusetts construction lawyer.

Show Me the Money: Getting Paid on Federal Public Construction Projects

By on July 18, 2016

It is imperative that subcontractors and material suppliers seeking payment for completed work on federal-level public construction projects be aware of the paradigm of laws and policies that exist governing such matters. To start, The Miller Act, codified as 40 U.S.C. §§ 3131-3134, exists to provide subcontractors on federal-level public construction projects a means by which to secure their right to payment in an analogous manner to how M.G.L. c. 149, § 29 operates to provide Massachusetts subcontractors and material suppliers on state-level public construction projects a means by which to secure the same. Specifically, the Miller Act requires general contractors on federal projects to provide performance bonds and payment bonds to the awarding authority where the prime contract exceeds $100,000. (for a comprehensive overview of subcontractor Miller Act rights see, “Federal Subcontractors – Understanding the Basics of Your Rights Under the Miller Act.”). 

While the legal framework behind federal-level public construction projects and state-level public construction projects often operate in tandem it is imperative to note that Federal law and Massachusetts law treat the enforceability of “pay-if-paid” and “pay-when-paid” subcontract clauses somewhat differently. This distinction is one that subcontractors need be wary of when entering into public construction contracts.

“Pay-if-paid” clauses create a condition precedent to subcontractor payment. That is, a subcontractor has no right to payment for completed work until the general contractor has received payment from the owner. “Pay-when-paid” clauses create no such condition precedent to subcontractor payment. Rather, the general contractor has a ‘reasonable time’ to obtain payment from the project owner, but in the event the owner does not pay the general contractor within the ‘reasonable time’ the subcontractor still has the right to seek payment from the general contractor. Ambiguous contract language often complicates the subtle, yet substantial, differences between the two types of clauses leading to high stakes contract interpretation disputes.

In 2004, Massachusetts did away with the fraught distinction between “pay-if-paid” and “pay-when-paid” clauses on state-level public construction projects. See, Framingham Heavy Equip. Co., Inc. v. John T. Callahan & Sons, Inc., 807 N.E.2d 851, 855 (Mass. App. 2004). Thus with regard to Massachusetts state-level public construction projects “pay-if-paid” causes have been effectively eliminated in favor of “paid-when-paid” clauses.” 

Federal-level public construction projects, on the other hand, have not completely eliminated the distinction between “pay-if-paid” and “pay-when-paid” contract clauses. Thus, on federal-level public construction projects “pay-if-paid” language included in a subcontract could complicate subcontractor recovery in relation to the principal contractor. The limited amount of Federal case law on the issue, however, leads to the inference that Federal Courts disfavor allowing “pay-if-paid” clauses to operate in the federal-level public construction context, particularly on Miller Act projects.

According to Federal Courts in both the First and Ninth Circuits, “the Miller Act is ‘highly remedial in nature,’ and should be construed and applied liberally to ‘effectuate the Congressional intent to protect those whose labor and materials go into public projects.’” United States ex rel. J.H. Lynch & Sons v. Travellers Cas. & Surety Co. of Am., 783 F. Supp. 2d 294, 296 (D.R.I. 2011) quoting, United States ex rel Walton Tech., Inc. v. Weststar Eng’g, Inc., 290 F.3d 1199, 1209 (9th Cir. 2002). Furthermore, according to the reasoning of the Ninth Circuit, because the Miller Act itself conditions payment, not on whether prime contractor is paid, but rather, whether the subcontractor has performed AND whether the statutory amount of time to bring a Miller Act claim has passed, it then follows that the terms of the Miller Act trump subcontract “pay-if-paid” language absent a “clear and explicit” waiver on the part of the subcontractor. Of particular note, the Ninth Circuit, specifically states, and the District Court of Rhode Island, located in the First Circuit, specifically quotes, the following language; “A subcontractor that has performed as agreed need not await the Government’s payment of the contractor before initiating an action under the Miller Act against the contractor or the surety.” United States ex rel Walton Tech., Inc. v. Weststar Eng’g, Inc., (9th Cir. 2002); United States ex rel. J.H. Lynch & Sons v. Travellers Cas. & Surety Co. of Am., (D.R.I. 2011).

The law is far from settled regarding the enforceability and distinction between “pay-if-paid” and “pay-when-paid” subcontract clauses on federal-level public construction projects. While there is some guidance on this issue in the context of the Miller Act, the distinction between the two clauses may still prove thorny for subcontractors seeking to enforce their right to payment.  Thus, subcontractors should keep an eye towards the development of the law in this area as it is likely that more distinct legal trends will begin to emerge. If you have any questions about payment issues on public construction projects you should contact a Massachusetts construction lawyer.

Punch List and Remedial Work May Not Extend the 120 Day Period to Secure a Mechanic’s Lien in New Hampshire

By on February 8, 2016

A recent ruling in the Rockingham County Superior Court offers further guidance to contractors regarding the extent of the right to maintain a mechanic’s lien in New Hampshire.  In the matter of Fabcon Precast, LLC, v. Zirkelbach Construction, Inc., et al. Strang Scott attorney Corey N. Giroux secured a discharge of the plaintiff’s mechanic’s lien as untimely for its client, Zirkelbach Construction, Inc., of Florida, despite the plaintiff performing work within the statutory 120 period to perfect a mechanic’s lien.

The plaintiff, Fabcon Precast, LLC, secured a mechanic’s lien against the subject project, on an ex parte basis, in September of 2015.  Fabcon completed its scope of work on the project in January of 2015, and issued a sworn payment application to the general contractor indicating that it had completed 100% of its scope of work on the project at that time.  Subsequently, in May of 2015, Fabcon returned to address punch list items related to its scope of work.  While on site to complete the punch list work, Fabcon’s workers performed some limited work that they had failed to perform initially that was properly part of Fabcon’s original scope of work on the project.

In order to secure a mechanic’s lien against the project, it was necessary for Fabcon to perfect its mechanic’s lien within 120 days of its last date of work on the project.  Thus, in order for its September 2015 attachment to be proper, Fabcon relied upon the punch list work and other work performed in May of 2015 to support its right to the mechanic’s lien.  Fabcon argued that its punch list work, and the “new” work performed – that is, the work it failed to perform that was part of its subcontract — was sufficient to support its mechanic’s lien pursuant to NH RSA 447, New Hampshire’s mechanic’s lien statute.

On behalf of its client, Strang Scott argued that the September 2015 lien was defective because Fabcon’s work in May of 2015 was insufficient to support the mechanic’s lien and therefore insufficient to extend the 120 day statutory period to perfect its lien.  In particular, it was argued that Fabcon’s sworn payment application in January 2015, which averred that Fabcon had completed 100% of its work in January 2015, commenced the running of the 120 period for Fabcon to perfect its lien, despite the subsequent performance of punch list, remedial, or original scope work by the plaintiff.  The Court agreed. 

The Court directed the plaintiff “could have preserved its right to extend the lien by representing [in January] that it still needed to complete some work.”  “Because it represented that the work was 100% complete, the Court finds that the work performed …. was remedial.  The 120 days [to perfect the plaintiff’s lien] began to run on January 15, 2015.”

This ruling should be instructive for subcontractors and general contractors alike.  Subcontractors should be careful to avoid representing to general contractors that they have fully completed their scope of work if punch list or other work remains to be performed on their subcontracts.  General contractors should take care to insure that their payment applications contain sworn statements from subcontractors as to the extent of the work performed or which payment is sought.  Contractors with questions regarding the extent, duration or nature of their mechanic’s lien rights would be well-advised to consult with their New Hampshire construction attorney.

Subcontractors: Do You Really Know What You’ve Waived in Your Lien Waiver?

By on April 27, 2015

Many subcontractors treat lien waivers interchangeably:  that is, if you’ve seen one, you’ve them all.  More and more, treating lien waivers in this manner could lead to significant and costly consequences.  Increasingly, general contractors and construction managers are providing subcontractors and suppliers with a new breed of lien waiver.  Unlike traditional lien waivers that sought only to protect the owner from the prospect of unwanted labor and materials (mechanic’s) liens cropping up on their projects, many new “lien waivers” are crafted with the intent for the subcontractor to agree to far more than a simple waiver of its lien.

In New Hampshire, and other jurisdictions, it’s well-settled law that contractors and subcontractors may waive their right to assert or perfect a mechanic’s lien by contract.  Savvy owners, developers and general contractors have long drafted contracts with this in mind.  As more and more subcontractors rejected provisions that limited or restrained their right to assert mechanic’s liens, owners, developers and general contractors have started to shift additional waiver language from subcontracts into lien waivers.  As an illustration, consider the following, taken in part from a lien waiver recently reviewed by the author:

 “In consideration of receipt of payment, the undersigned irrevocably and unconditionally releases and waives any and all mechanic’s liens or other liens or right to claim any and all mechanic’s liens or other liens against [the property].  Additionally, the undersigned waives and releases any and all other claims against the Owner, the property or the Contractor, or any other claims of any kind whatsoever in connection with the Subcontract and the property.  The undersigned shall defend, indemnify and hold harmless the Owner and Contractor against any lien, bond, claims or suits in connection with the materials, labor and everything else in connection with the subcontract.

In this instance, the subcontractor waived not only its right to assert a mechanic’s lien or any other lien upon accepting payment, but the subcontractor also waived its right to assert ANY claim related to the contract or the property.  Furthermore, the subcontractor has affirmatively agreed to indemnify the owner and contractor for any claims connected to the materials, labor or “anything else in connection with the subcontract.”  Among other things, this means that contractor has agreed to pay the general contractor and the owner for any costs they might incur in dissolving a lien on the project arising from the subcontractor’s sub-subcontractors or suppliers or in resolving any other claim or lawsuit connected with the sub-subcontractor or material supplier’s involvement in the project.  This so-called “waiver,” contains substantially more than a waiver of the subcontractor’s right to claim a lien in consideration of its partial payment on the subcontract.  

Some lien waivers go a step further.  Consider the following language, taken in part, from another lien waiver recently reviewed by the author:

 “In consideration of the receipt of the payment above, the receipt and sufficiency of which are hereby acknowledged, [the subcontractor] releases and forever discharges [the contractor and owner] of and from any and all claims, causes of action, liabilities and other obligations respecting payment for, upon or by reason of work, labor and/or materials furnished through the date shown below to the construction project.”

At first blush, this provision appears ordinary enough.  A more thorough consideration of the highlighted language, however, reveals that the provision is carefully calculated to insure that each month the subcontractor waives its right to pursue payment for all work performed before the date the lien waiver is signed. 

So why is this a problem?  To the extent that the subcontractor signing such a lien waiver performed extra work, change order work or has disputed work that occurred prior to signing the lien waiver, and the subcontractor accepts the payment referenced in the lien waiver without carving an exception for the added, changed or disputed work, the subcontractor has agreed to relinquish its right to any further payment, a lien or a claim for payment for that work.  In other words, the subcontractor has agreed not to be paid anything further for work performed through the date the lien waiver is signed, regardless of whether the subcontractor is otherwise entitled to payment.  In tying the subcontractor’s waiver to a particular date in time, rather than to an agreed upon amount to be paid, this waiver extinguishes any claim for payment for any work performed that wasn’t included in the subcontractor’s payment for which the lien waiver was signed.  This subtle, but very important distinction, can prove costly when the subcontractor fails to appreciate its impact on its right to payment.

Other lien waivers seek to make the subcontractor a trustee, converting the funds paid to the subcontractor into trust funds for the benefit of its subcontractors and suppliers, by agreement.  Take the following example:

 “The undersigned [subcontractor] acknowledges and agrees that it is receiving the funds paid in consideration of this payment application as a trustee, and said funds will be held in trust for the benefit of all subcontractors, materialmen, suppliers and laborers who supplied work for which the beneficiaries or their property might be liable, and that the [subcontractor] shall have no interest in such funds until all these obligations have been satisfied in full.”

In this instance, rather than taking payment as the rightful owner of the funds paid, the subcontractor accepts payment as a trustee for its sub-subcontractors and materials suppliers, installing affirmative obligations and fiduciary duties on the subcontractor to its sub-subcontractors and suppliers, which otherwise do not exist.  By virtue of the language in this provision, the subcontractor has agreed to restrict its discretion and ability to use the funds paid to it for its work as it deems necessary, replacing its discretion with the affirmative obligation to hold and distribute the funds paid to its subcontractors and suppliers on behalf of the owner and general contractor.  In a perfect world, every subcontractor would pay each of its sub-subcontractors and suppliers in full out of each payment it received on a project.  In the real world, there are often good business reasons for subcontractors to withhold some or all of the payments claimed due by its sub-subcontractors and suppliers, or to apply certain portions of the payments it receives elsewhere.  This language removes the subcontractor’s discretion to do so.

With increasing frequency, developers, owners and general contractors employ “lien waivers” intended to do much more than insure that mechanic’s liens aren’t perfected against a property after payment has been made.  Instead, this new breed of “lien waivers” is intended to create “knowing” waivers of subcontractors’ affirmative rights after they have signed their subcontract.  These “lien waivers” are intended to rewrite the bargain to which the parties agreed in their subcontract by downshifting the owner’s and general contractor’s desired contractual terms into a lien waiver when it might otherwise have been rejected in the subcontract.  It’s no longer sufficient for subcontractor’s to review only the proposed subcontract and scope of work.  Subcontractors must review proposed lien waivers carefully to insure that the lien waivers aren’t an agreement not to be paid.  If you have any questions or concerns regarding the provisions of your lien waivers, consult your construction attorney for a thorough assessment of the risks and exposures.