Author Archives: Chris Strang

About Chris Strang

Mr. Strang is a founding partner of the firm and specializes in business litigation and construction law. He has represented clients through all phases and forms of dispute resolution including bid protests at the Attorney General’s office, mediations, arbitrations and first-chairing at trial.

Court Awards Damages Despite “No Damage for Delay” Clause

By on March 29, 2017

The Massachusetts Appeals Court recently upheld a trial court’s award of damages to a subcontractor in spite of a “no damages for delay clause” in the subcontract.

On a public construction project, the subcontractor entered into a subcontract that contained a clause making extensions of time the exclusive remedy for delays to the subcontractor. The project coordination did not go according to the original schedule, and the subcontractor was not able to start on various phases at the expected times. Despite this, the general contractor did not grant the subcontractor any time extensions. Instead, it insisted that the subcontractor increase the onsite labor, along with other accommodations.

The subcontractor filed suit, seeking payment for additional labor costs incurred due to the site not being ready for that trade’s work and related inefficiencies. The court awarded such damages, finding the failure to grant warranted time extensions to be a “deprivation of remedy.” In other words, the general contractor could not use the defense of the “no damage for delay” clause if it itself did not abide by the terms of the clause.

You can read the full decision here:  Central Ceilings, Inc. v. Suffolk Construction Company, Inc. *This decision may still be subject to further appeal.

Negotiate Your Lien Waiver Terms with Your Contract

By on January 24, 2017

Most construction project owners require general contractors to provide periodic lien waivers from subcontractors and material suppliers to verify they received payment. This is generally a good thing, as it helps ensure payment is flowing down to the proper parties. Lien waivers, however, can become the source of conflict when parties can’t agree on their terms.

Lien waivers frequently become contentious because they are presented for the first time when payment is due. Almost inevitably the lien waiver will contain terms that are inconsistent with or in addition to existing contract terms, and every day spent negotiating the particular language of the lien waivers delays payment already due. Delayed payments have a ripple effect, as contractors rely on prompt payments to keep up with labor and material costs, and to keep the project running on schedule.

Among the most common sticking points is waiver language that is simply too broad. Payment is being made in exchange for labor and materials provided on a project through a particular date. Yet owners often propose lien waivers that try to force contractors to release much more than that. Commonly owners propose clauses that require the payee to promise to indemnify the payor for other liens filed on the project, among others. Of course, the party holding the money maintains some unfair leverage to force the other to sign away rights not contemplated when negotiating the original contract in order to get paid.

To prevent disruptive disputes during the course of construction, prudent parties should review and negotiate the actual lien waiver forms as appendices to contracts, prior to signing anything. This practice is wise for contracts between owners and general contractors as well as between general contractors and subcontractors or material suppliers. It is also always best to have a construction attorney review your contracts and lien waivers to fully understand the rights and responsibilities included in them.

Massachusetts Attorney General Finds Minority-Owned Business Goals to be Statutorily Mandated

By on June 27, 2016

In a recent bid protest decision the Massachusetts Attorney General allowed a protest contesting a bidder’s right to submit Minority Business Enterprise (“MBE”) or Women’s Business Enterprise (“WBE”) qualifications after the bid opening. The opinion deemed MBE and WBE goals to be statutory and therefore not waivable by the awarding authority. The decision also found that allowing such post-bid submissions would violate the equal-footing principles upon which bidding laws rely.

The Fall River project required M/WBE compliance forms to be included with bids. The low bidder listed itself as an MBE in its bid. However, it soon learned that a change in the law made it no longer qualified to be a certified MBE. It then provided the city with the name of a qualifying subcontractor, albeit post bid opening. The city was willing to accept this post-bid supplement, however, another bidder filed a protest.

Generally speaking, cities may use their discretion in waiving their own public bidding requirements in certain circumstances. However, they are not authorized to waive statutory requirements. M.G.L. c. 7C, § 6(a)(6), enacted in 2013, provides that “state assisted construction contracts shall include language… setting forth the participation goals of minority and women workers to be employed on each such contracts.” Given the mandate of the “shall” language, the AG hearing officer found the M/WBE participation requirements to be statutory and therefore the city could not waive them.

The decision went further in finding that accepting the supplement post-bid would violate equal footing principles. An entity that already has the low bid will tend to have more leverage in negotiating prices with subcontractors and suppliers than competitors had pre-bid. Such advantages are not allowed.

Bidders should use caution going forward in verifying the current status of the M/WBE components of their bids and including thoroughly completed participation compliance forms in bid submissions.

Sub-Subcontractor’s Ambiguous E-mail Insufficient to Satisfy Statutory Notice Requirements for Claim on General Contractor’s Payment Bond

By on March 14, 2016

In an opinion issued this week in N-Tek Construction Services, Inc. v. Hartford Fire Insurance Company, the Massachusetts Appeals Court ruled that a sub-subcontractor’s e-mail to a general contractor on a public construction project failed to clearly present a claim that would satisfy the notice requirements of M.G.L. c. 149, s. 29.

The unpaid sub-subcontractor on a public bridge painting project sent an e-mail to the general contractor that stated the following. “Enclosed is the January 15, 2010 Statement to [subcontractor] for services through that date by [sub-subcontractor] for the [project] that are still unpaid. Please give me a call at [telephone number] when you have a chance.” The attached Statement listed ten invoices. The general contractor’s project manager testified to having never heard of this sub-subcontractor prior to the e-mail, and did not understand the e-mail to be some form of claim.

M.G.L. c. 149, s. 29, requires parties that do not have a direct contractual relationship with the general contractor to provide written notice to that general contractor of any claims of non-payment within 65 days of last providing labor or material on the project. The statue merely requires that the notice state “with substantial accuracy the amount claimed, [and] the name of the party for whom such labor was performed.”

The Court’s opinion included a nuanced analysis of the purpose of this notice requirement. It held that the implied purpose is to give general contractors a clear, timely understanding that a claim is being directed against them. This is to allow an opportunity to attempt to resolve the claim prior to litigation and involvement of the payment bond surety.

In ruling against the sub-subcontractor, the Court looked at all of the circumstances surrounding the e-mail and deemed it inadequate, for failing to state “explicitly or implicitly” that the e-mail constituted a claim for an unpaid balance due on the project.

Sub-subcontractors and material suppliers on public construction projects in Massachusetts should consult with a construction attorney prior to sending 65-day notices to general contractors to insure the preservation of their payment bond rights.

Contractual Arbitration Clauses Can’t Supersede Arbitration Statute

By on March 9, 2016

Arbitration clauses for dispute resolution are a common component of all manner of contracts. While the pros and cons of arbitrating in lieu of litigating are hotly debated, the finality of arbitrators’ decisions is often cited favorably. A reduced chance of future appeals generally keeps costs down.

That finality can prove to be a bit too harsh, for some. Massachusetts courts have consistently refused to vacate arbitration awards even for errors of law or fact. In an effort to minimize the probability of such a result, the parties negotiating a certain arbitration clause included language addressing it. The clause stated, in part, that a judge could overturn the award in the event of an arbitrator’s “material, gross and flagrant error.”

As luck would have it, the parties ended up taking various disputes to arbitration. Not surprisingly, the losing party sought relief it court for what it argued, among other things, was such an arbitrator’s error.

This week the Supreme Judicial Court of Massachusetts issued a decision, Katz, Nannis & Solomon, P.C., & Others v. Bruce C. Levine & Another, in which it denied that request for relief.

The court reasoned that the state statute governing arbitrations, M.G.L. 251, does not allow for alteration of the standards for judicial review. Specifically, Section 11 mandates “the court shall confirm an award” except in the specific situations listed in other sections of the statute. Katz, citing M.G.L. c. 251, s. 11.  Since the language in the parties’ arbitration clause differed from the limited statutory exceptions, the court refused to apply it.

Contracting parties in Massachusetts should use caution in selecting the right arbitrators. Arbitrators’ mistakes can still be binding, even when all parties agree they should not be.

Prime Contractors Can Use Subcontractor’s Qualifications to Meet Specification Requirements

By on February 22, 2016

In a recent decision, the Massachusetts Attorney General’s Bid Protest Unit ruled that in certain circumstances a prime or general bidder on public construction projects can use the experience and qualifications of a subcontractor to meet the requirements of the project specifications.

The case, In re Department of Mental Health, Attorney General Bid Protest Decision (February 19, 2016), involved bid documents that required bidders to have at least five years of experience with smoke and fire damper maintenance. The protester argued that the general contractor submitting the low bid did not have such experience. In rejecting the protest, the hearing officer found that the low bidder’s subcontractor’s experience met the qualification.

The ruling is expressly limited to unique circumstances. The word “bidder” usually is limited to the general or prime bidder in public construction. Here, however, the bid documents stated that a sub-bid is called a “bid.” It appears that future bid documents will need similar language for the general or prime bidders to be able to rely on subcontractors’ experience in meeting the requirements for bidders.  Our Massachusetts construction lawyers will continue to monitor the impact of this decision.

Massachusetts Attorney General’s Bid Protest Decisions Finds No Violation of Public Construction Bidding Laws Where Low Bidder Included Minor Deviation on Bid Form

By on October 27, 2015

In a recent decision, In re: Town of Danvers; Thorpe School Library Project (October 8, 2015), the Massachusetts Attorney General’s Bid Unit rejected a protest from the second low sub-bidder, on the grounds that the low bidder’s notation on the bid form was a clerical error that gave it no unfair advantage.

The town’s bid form included a line requesting the proposed contract price “without alternates.” The low bidder’s form listed a price on that line and added the notation that its price included three alternates. However, the price of each alternate was listed separately, making the mistake easy to ascertain, and the awarding authority accepted it as the low bid.

The second lowest bidder filed a protest, claiming the notation was “an addition not called for” in violation of the public bidding statutes, mandating rejection. The Bid Unit disagreed, deeming this a “clerical error,” a well-established exception to the otherwise strict statutory bid requirements.

The Bid Unit further analyzed whether there was any way in which the low bidder gained an unfair advantage over other bidders by allowing this notation and decided it did not. Finding no prejudice to the other bidders is central to one of the statutory purposes of the bid laws; that is, putting all bidders on equal footing.

While the low bidder ultimately survived this protest, it should serve as a reminder to all bidders to use great caution when adding any words to a statutory bid form. You can read the full decision below.

http://www.bpd.ago.state.ma.us/

Bidding in the Wrong Place at the Right Time

By on September 22, 2015

The Massachusetts Attorney General Bid Unit recently held that an awarding authority should not re-bid a project where the original bid documents were confusing as to the address for submitting bids.

The Town of Weston solicited bids for an exterior duct work construction project. The Invitation to Bid listed one address, and the Instructions to Bidders listed a different address. In response to questions received on “addresses and dates” Weston issued Addendum 1, listing a third different address. Confusing things even more, it turns out that this third address in the Addendum was also a mistake. Two bidders submitted bids at the address listed in Addendum 1, while four others submitted bids at the address listed in the Instructions to Bidders.

The Attorney General decided that Addendum 1 overrode contrary bid documents, regardless of it actually being a mistake. The decision deemed the low bidder at the address listed in Addendum 1 as entitled to the contract, and ruled that the project should not be re-bid.

Bidders should use caution in reviewing addendums thoroughly and follow instructions accordingly. A full copy of the decision can be found here:  In Re: Town of Weston: Exterior Duct Repair, September 11, 2015, http://www.bpd.ago.state.ma.us/.

 

Do You Have a Contract You Can Lien On?

By on July 21, 2015

To file a mechanic’s lien in Massachusetts, a contractor must have a written contract with the property owner (or owner’s authorized agent).  Subcontractors and material suppliers must show that written contracts exist for their labor and materials as well.  Although this may seem like a rather simple requirement, in some instances whether a written contract exists is not entirely clear.

In 1996, the legislature amended Mass. Gen. Laws c. 254 (the mechanic’s lien statute) to define “written contract” as “any written contract enforceable under the commonwealth.” This means courts can rely on standard contract law to determine whether a written contract is sufficient for a mechanic’s lien.  Taking into account the new amendment, the appellate court in Harris v. Moynihan Lumber of Beverly, Inc., concluded that a memorandum or writing sufficient to satisfy the Massachusetts statute of frauds should also meet the requirement of a written contract for purposes of the statute. The statute of frauds requires a writing “signed by the party to be charged,” in the event that a contract cannot be performed in less than one year’s time. The requirements of the statute of frauds are less stringent than the pre-1996 standard of “an entire and continuing arrangement in writing.”

On many occasions since 1996, Massachusetts courts addressed the question of what constitutes a written contract for purposes of establishing a valid mechanic’s lien.  While the cases have led to disparate results, several rules have emerged.  First, in order for a contract to be enforceable, the terms need not all appear on the same document.  Taken together, however, the series of writings must contain the essential terms of a contract, such as price, quantity, time of performance, and type of material or services.  Noreastco Door & Millwork, Inc. v. Vahradahatu of Massachusetts, Inc. (finding that a one-page cover sheet “original proposal” and a one-page reply memorandum did not constitute a contract for the purposes of the mechanic’s lien statute).  The purpose of this requirement is to ensure project owners have adequate notice of contract terms, so they may make informed choices to protect their interests.  Second, at least one of the documents being used as evidence of a contract must be signed by the party against whom the contract is being enforced (note that e-mail acceptance may be sufficient for a signature).  Third, the connection between the papers may be established by oral evidence, which, taken together with the content of the documents, shows the intent of the parties was to form a contract.  In Moynihan Lumber, Inc., the court found that a series of documents including a sales contract, credit application, and price quotations taken together constituted a contract for mechanic’s lien purposes.  In contrast, that same year the court in Nat’l Lumber Co. v. Fort Realty Corp., found no sufficient written contract because the documents lacked information on the price and quantity of the supplies, which is necessary information for owners to possess in order to protect their interests.  In Scituate Ray Precast Concrete Corp. v. Intoccia Const. Co. Inc., however, a series of signed delivery tickets and their corresponding invoices satisfied the statute of frauds and met the requirements of the mechanic’s lien statute, provided that the person signing for the deliveries was authorized to do so.

The best case scenario is for all parties to sign a single document with clear terms. The realities of the construction industry frequently do not allow that luxury.  When a fully signed contract with containing all the necessary terms hasn’t been executed, it is important to consult with a Massachusetts construction attorney to determine whether the documents you have are sufficient to support your mechanic’s lien.

Payment Bonds on Federal Construction Projects – Last Date of Work

By on June 3, 2015

When did you last work, for the purposes of filing a timely payment bond claim on a federal public construction project?

The Miller Act, which governs federal construction project payment bond claims, provides that suit be brought within one-year from the day on “which the last of the labor was performed or material was supplied by the person bringing the action.” 40 U.S.C. § 3133(b)(4). The same date is used to determine the 90-day notice requirement for sub-subcontractors and material suppliers. What constitutes labor or material supplied in the context of contract work is often not clear; work performed prior to a subcontractor’s substantial completion clearly counts. Warranty work that involves coming back to repair defects in the subcontractor’s own work generally does not. However, “punch list” items may sometimes include both incomplete contract work (which generally counts) and defective work performed that requires correction (which generally does not count). Sometimes the distinction is not entirely clear, and courts struggle to find a bright line rule on this point.

Massachusetts Federal Court Standard for “Last Date of Work” on a Miller Act Claim

The Massachusetts’ standard is that the one-year statute of limitations will begin to run on the last date on which materials or labor were supplied on the project for the purpose of completing subcontract work. U.S. for Use & Benefit of Lab. Furniture Co. v. Reliance Ins. Co., 274 F.Supp. 377, 379-80 (D.Mass. 1967) (emphasis added). Corrective work, which is performed for the purpose of making repairs following the inspection of the project, will not extend the statutory deadlines. D.D.S. Industries v. C.T.S., Inc., 2012 WL 2178962, *1 (Mass.Super. June 13, 2012) (making clear that the date of substantial completion is not the relevant date).

For material suppliers, the “date of last work” is the day of last supplying material on the project. The First Circuit, which encompasses Massachusetts federal courts, ruled that where a supplier provides material on a single, federally-owned project, all material supplied will be covered by that project bond.  This is true regardless of whether the material supplier and general contractor treat each delivery of project material as part of one contract or under distinct and separate contracts. G.E. Supply v. C & G Enterprises, Inc., 212 F.3d 14, 18 (1st Cir. 2000).

Massachusetts considers punch list work provided as a requirement for completion of the project to be contract work; whereas punch list work provided as a correction, repair, or as clean up, is not contract work and will not prevent the statutory deadlines from running. U.S. for Use & Benefit of Lab. Furniture Co. citing U.S. for Use and Benefit of Austin v. Western Elec. Co., 337 F.2d 568, 572-75 (9th Cir. 1964). The value of materials supplied is not relevant in determining whether work was provided to complete the contract or as corrective work. Labor and materials supplied which are ultimately not used in the project still count as “work,” for statute of limitation purposes, so long as it is toward completion of the contract work. In U.S. for Use & Benefit of Lab. Furniture Co., the court considered replacement of plastic identification buttons on faucets and nozzles in a physics laboratory “corrective” punch-list work and could not extend statutory deadlines. The court weighed the following key factors in reaching this conclusion: (1) the buttons were supplied as replacements for buttons previously provided during the original performance of the subcontract; (2)  seven months passed between when the subcontractor substantially completed work and the installation of replacement buttons; (3) four months elapsed after termination of the subcontractors’ contract until the button replacement; and (4) a demand letter sent to the subcontractor’s surety initiated the replacement work. 

An Alternative Standard for Determining the “Last Date of Work” on a Miller Act Claim

The Fifth Circuit Court of Appeals created a test, which is not the law in Massachusetts at this time, to determine whether labor and material will be considered “contract work” or “corrective work.” The test involves weighing the following factors: (1) the value of the materials, (2) the original contract specifications, (3) the unexpected nature of the work, and (4) the importance of the materials to the operation of the system in which they are used. U.S. for Use of Georgia Elec. Supply Co., Inc. v. U.S. Fidelity & Guaranty Co., 656 F.2d 993, 996 (5th Cir. 1981).[1]

This standard was adopted by the Eleventh Circuit Court of Appeals in Southern Steel Co, Inc. v. United Pacific Ins. Co., 935 F.2d 1201 (11th Cir. 1991). Based on the four above factors, the Court held that work to replace defective locks in a county jail were arguably “contract work” as repair or replacement of defective locks was called for under the original contract; replacement of the locks necessary due to circumstances outside the subcontractor’s control, and were therefore unexpected; that functional locks were deemed very important to operating the jail; and, given the circumstances of the case, the unclear value of the work was immaterial.

Additionally, the Fifth Circuit’s test is applied in Miller Act claims before the District Court for New Jersey. In U.S. v. Fidelity & Deposit Co. of Maryland, the court held that operation and maintenance manuals, provided approximately one year after the other subcontract material and labor, were “contract work” within the meaning of the Miller Act, and therefore tolled the statute of limitations until the date upon which they were provided. 999 F.Supp. 734, 747 (D. NJ 1998). In applying the test from the Fifth Circuit, the court held that the value of the manuals ($5,000) was substantial, regardless of the overall subcontract value ($700,000); that contract specifications specifically provided for the provision of the manuals; that an item containing instructions for repairing equipment does not make that item itself a repair item; and that the manuals were sufficiently important to operating the equipment provided under the contract.

What This Means for Subcontractors and Material Suppliers on Federal Construction Projects in Massachusetts

While the Fifth Circuit’s standard is similar to the standard followed in Massachusetts, it arguably applies a more predictable standard for determining whether the work is “contract work.” The benefit of the four-factor test developed by the Fifth Circuit is that it allows courts to assess standard categories for the work and allows flexibility to value more persuasive factors at a higher value, as opposed to missing or unclear factors. The Fifth Circuit’s test could be adopted by the Massachusetts federal court, as there is currently some ambiguity about what constitutes a date last worked on federal projects remains.

The above information is only meant to provide a general summary regarding rights and obligations for recovering under payment bonds provided on federal public construction projects. Because each project presents a different set of facts, the process and outcome of attempting to recover under a project payment bond will vary depending on the circumstances. If you are uncertain about anything regarding your company’s ability to recover under a payment bond, you should contact Massachusetts construction attorney to ensure the necessary steps are taken to achieve the best possible outcome.

[1] In U.S. for Use of Georgia Elec. Supply Co., Inc. v. U.S. Fidelity & Guaranty Co. the Fifth Circuit Court of Appeals interpreted Georgia state law, the language of which mirrors the language of the Miller Act.