Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law
English: Alexandria, Virginia U.S. Custom House and Post Office (1900)
Here at Construction Law Musings, we often discuss the Federal Miller Act and its Virginia equivalent (the “Little Miller Act“). These two statutes provide subcontractors on government projects (on which no mechanic’s lien can attach) the protection of payment and performance bonds.
One question that often arises in this context is which subs can claim against the payment bond. Recently, the Eastern District of Virginia District Court affirmed that a second tier subcontractor has the right to claim against a payment bond under the Federal Miller Act. In U.S. ex rel IGW Electric LLC v. Scarborough, the Virginia federal court considered the claim of an electrical “sub-subcontractor” which held a contract with the subcontractor to build cottages in Norfolk, Virginia for the U. S. Navy.
Recently, the Virginia Supreme Court weighed in again on the question of construction fraud and criminal allegations. In O’Connor v. Tice, the Court discussed a malicious prosecution action brought by a contractor against owners of a commercial building. In O’Connor, the owners and the contractor got into a disagreement over alleged damage to the roof of the owners’ building and who was responsible. In response to this disagreement, the owners contacted the local sheriff’s office, accusing the contractor of construction fraud, and then wrote a “15 day letter” to the contractor outlining the criminal consequences should he fail to pay the damages sought in the owners civil lawsuit. Subsequently, a criminal warrant was issued against the contractor based solely upon the word of the owners. This last occurred at the insistence of the owners (who did not inform the sheriff’s deputy or the Commonwealth Attorney that they’d had this conversation or that the contractor had partially performed) after they discussed the matter with the contractor’s attorney and were informed that any claim that they may have had was civil in nature.
Based upon these facts, the Circuit Court of Northumberland County entered judgment for the contractor in his malicious prosecution action and the Supreme Court affirmed. The Supreme Court held that by threatening criminal action to collect a civil debt and concealing certain facts, the jury could properly find that the owners instituted a criminal action without probable cause and did so maliciously.
The takeaway? From a contractor’s perspective, you do not need to take actions like those outlined in this case lying down. Should you be in the unfortunate position of facing such allegations from an owner, contact an experienced construction attorney to help determine your rights and how to respond.
As a building owner, the lesson here is to take a deep breath, talk with an attorney, and think long and hard about whether you want to escalate a civil claim for damages into a criminal case. If you decide to take such action, make sure that you share everything with the authorities before moving forward. Failure to do so can be disastrous.
As always, I welcome and encourage your comments below, please share your thoughts. Also, please subscribe to keep up with the latest Construction Law Musings.
For this week’s Guest Post Friday, we welcome back Nathan B. Hinch. Nate is an attorney at the law offices of Mueller, Reece & Hinch, LLC in Bloomington, Illinois, where his practice includes advising real estate, construction, environmental, and other businesses regarding the law, and represents them in conflict mitigation and resolution efforts, including arbitration, litigation, and administrative proceedings. He can be reached at nhinch@muellerreece.com .
Most if not all States have statutes on the books seeking to protect consumers from fraudulent business transactions generally. It is essential for contractors to be aware of these laws and how their requirements affect your business operations. In this article I will highlight some key issues in one such statute in my home State, Illinois. While these statutes can vary from State to State, many of the same principles will apply. To be sure of the specifics in your State, check with an attorney licensed in that jurisdiction.
For this week’s Guest Post Friday here at Construction Law Musings, we welcome a friend and sometime co-presenter Craig Martin. Craig (@craigmartin_jd) is a partner in the law firm of Lamson Dugan and Murray, LLP in Omaha, Nebraska. He has a background and experience in all aspects of construction law. As part of his practice he counsels contractors, subcontractors, developers, owners, materials suppliers and design professionals in various construction disputes. He also successfully represents them in both State and Federal courts. Craig’s business goal is to provide cost-effective and distinguished counsel to the construction industry. Craig also authors the Construction Contractor Advisor blog.
The Florida Supreme Court was recently asked to weigh in on whether the Economic Loss Rule bars an insured’s suit against an insurance broker for economic damages. Instead of limiting its ruling to an esoteric insurance law question, the Court reviewed its entire history of applying the Economic Loss Rule. The court reversed its earlier decisions that applied the rule to construction cases and held that from now on, it should only apply in products liability cases. This is quite a change in Florida law and may have ramifications throughout the country.
1976 Little Construction Vehicles (Photo credit: JD Hancock)
Here at Construction Law Musings, I have discussed many areas of the law relating to construction claims. Most of this discussion has focuses on the claim itself, whether made by breach of contract lawsuit, payment bond claim or mechanic’s lien. The latter two of these types of claims can and should lead to collection, either by settlement check or judgement/foreclosure because either the bond or the property liened provides security for collection.
This post is not about those types of construction claims. This post is about the claims that you, as a contractor, may have against either a company or individual and for which a successful claim ends in a judgment. This post is about those construction claims that result in unsecured rights to collect. In short, this post is about claims for payment that end up in a piece of paper giving you the right to collect money from the other guy, but that require more action to turn that paper into money.
