Eastern District of Virginia – Construction Law Musings- Richmond, VA

Another Reminder to ALWAYS Show up for Court

Originally posted 2020-01-17 11:09:52.

I have discussed the need to always respond to a lawsuit on multiple occasions here at Construction Law Musings. However, I keep reading cases where the defendant fails to appear either by pleading or in person. Such action is never a good idea as demonstrated once again in the case of Balfour Beatty Infrastructure, Inc. v. Precision Constr. & Mgmt. Group, LLC, a case out of the Eastern District of Virginia. Continue reading Another Reminder to ALWAYS Show up for Court

Uniwest Rides Again (or, Are Architects Subject to Va. Code Section 11-4.1?)

Originally posted 2018-10-03 11:07:55.

In 2010, the Virginia Supreme Court held in Uniwest Const., Inc. v. Amtech Elevator Servs., Inc., that Va. Code Sec. 11-4.1 renders completely void and unenforceable any indemnification provision in a construction contract between a contractor and subcontractor that seeks to indemnify the indemnified party from its own negligent acts. In short, the Virginia Supreme Court stated that such overly broad provisions violate Section 11-4.1.

A recent case out of the Eastern District of Virginia Federal District Court examined a provision in a contract between a designer/architect and a contractor or owner on a project. In Travelers Indem. Co. of Conn. v. Lessard Design Inc. the Court examined the application of Section 11-4.1 to the following provision of a design contract where Lessard, the indemnitor, agreed to:

[i]ndemnify, defend and hold the Owner, Owner’s Developer, and Owner’s and Owner’s Developer’s wholly owned affiliates and the agents, employees and officers of any of them harmless from and against any and all losses, liabilities, expenses, claims, fines and penalties, costs and expenses, including, but not limited to reasonable attorneys’ fees and court costs relating to the services performed by the Architect hereunder . . .

Continue reading Uniwest Rides Again (or, Are Architects Subject to Va. Code Section 11-4.1?)

Chinese Drywall Remediation Redux

Originally posted 2012-02-10 14:56:07.

Earlier here at Musings, I opined that sometimes the old saw about no good deed goes unpunished applies to construction. The subject of that post was litigation in the Eastern District of Virginia federal court between a contractor who reached an informal settlement with certain homeowners relating to Chinese drywall damages. On March 24, 2010, the Virginia court dismissed a counterclaim by the builder seeking to have the insurer pay its remediation costs with leave for the builder to amend its counterclaim. In the earlier opinion, the Court cited a lack of factual support for any litigation or threatened litigation that would show that the builder was under a legal obligation to pay damages in a way that would put it under the insuring agreement.

Well, the builder did just that and added certain language to the amended counterclaim that, this time, survived dismissal. In Dragas II, Judge Smith cited certain amendments, among them the factual allegation that the settlement was in response to four lawsuits by owners. Judge Smith determined that this allegation of threatened litigation was enough to survive a motion to dismiss. Judge Smith then went on to consider other defenses of the insurers, including the “voluntary payments” provision of the policy, and rejected those arguments as well.

I highly recommend this opinion and Judge Smith’s prior opinion to any lawyer or contractor who is faced with the situation of trying to be reimbursed by an insurance company for its pro-active stance toward remediation of potential defects. These two opinions outline the pleading requirements in stark contrast because of the differing results (though Judge Smith is careful to point out that she makes no ruling on the ability of Dragas to prove its factual allegations).

In sum, while the prior Dragas opinion seems to work against the “good Samaritan” who seeks to act proactively, this latest opinion seems to remove contractors from the Gordian knot (hat tip to Tim Hughes (@vaconstruction)) of either fixing a problem and potentially losing coverage, or waiting to get sued. Of course, a careful reading of these opinions and the advice of a Virginia construction attorney prior to taking action will go a long way toward determining if your circumstances are such that the proactive approach is the legally sound one.

UPDATE: For more good analysis on this case, check out my friend Tim Hughes’ discussion from his blog.

Image via stock.xchng.

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More Reminders that the Specific Contract Terms Matter

If there is a theme I have pounded upon here at Construction Law Musings in the over 13 years of posting, it is that the specific terms of your construction contracts will make a huge difference. While there have been reminders galore, a case from the Eastern District of Virginia presented another wrinkle on this theme. The wrinkle? A factoring company.

In CJM Financial, Inc. v. Leebcor Services, LLC et. al., the Court examined this scenario (though it went into more detail than I will here): Leebcorp hired a subcontractor, Maston Creek Services to provide certain construction services under two separate contracts. Maston then hired CJM, a factoring company, and assigned CJM its receivables and the right to collect those receivables. We wouldn’t be discussing this case if all had worked out as planned, so you likely anticipate at least some of what came next. The short story is that Matson failed to pay some of its suppliers and Leebcorp exercised its termination rights under those contracts when Matson refused to cure. In the interim, CJM had paid part of certain payment applications to Matson in compliance with the factoring agreement. When Leebcorp failed to pay CJM for Matson’s work, CJM exercised its assigned rights to collect the receivables and sued Leebcorp for breach of contract. In response, Leebcorp counterclaimed for, among other counts including civil conspiracy, breach of contract based on Matson’s failure to perform. CJM moved to dismiss the counterclaims. Continue reading More Reminders that the Specific Contract Terms Matter

When is Forum Selection in a Construction Contract Enforceable?

If there is one mantra that is repeated often here at Construction Law Musings, it is that your construction contract will be strictly construed and Virginia Courts will enforce the provisions as written. This rule includes forum selection clauses. For those that aren’t attorneys, this means that absent a statute to the contrary, the parties can pick the location of any litigation or arbitration by contract. However, the timing of signing that contract makes a difference as a relatively recent Eastern District of Virginia case points out.

Marathon Res. Mgmt Grp v. C. Cornell, Inc. examined what happens when work is performed by one party to the contract prior to the execution of the written contract that contains the forum selection provision. In this case, the defendant C. Cornell, Inc. obtained a default judgment in Texas for non-payment by Marathon for painting and cleaning of rooms at Texas A & M University for work invoiced on August 22, 2017, and September 11, 2017. Upon receipt of the garnishment from the Texas Court, Marathon sued C. Cornell in Virginia state court and the defendant removed the case to federal court. Marathon alleged two separate breaches of contract, the first was that C. Cornell violated the forum selection clause of a Master Services Agreement (“MSA”) executed on September 23, 2017. The second was a violation of another clause of the MSA that barred direct communication with any of Marathon’s customers. The second breach was alleged to be by virtue of the garnishment summons to one of Marathon’s customers.
Continue reading When is Forum Selection in a Construction Contract Enforceable?