Lawsuit – Construction Law Musings- Richmond, VA

Fraud, the VCPA and Construction Contracts

Originally posted 2014-11-10 09:36:15.

I’ve discussed the economic loss rule here at Musings on several occasions. The economic loss rule basically states that where one party assumes a duty based in contract or agreement, the Virginia courts will not allow a claim for breach of that duty to go forward as anything but a contract claim. This doctrine makes fraud claims nearly, though not absolutely, impossible to maintain in a construction context. In a majority of instances, fraud and construction contracts are very much like oil and water, leaving parties to fight it out over the terms of a particular contract despite actions by one party or the other that non-lawyers would clearly see as fraud.

However, a recent case decided by the Virginia Supreme Court gives at least some hope to those who are seemingly fooled into entering a contract that they would not other wise have entered into. In Philip Abi-Najm, et. al, v Concord Condominium, LLC, several condominium purchasers sued Concord under for breach of contract, breach of the Virginia Consumer Protection Act (VCPA) and for fraud in the inducement based upon flooring that Concord installed that was far from the quality stated in the purchase contract. Based upon these facts, the Court looked at two questions: 1. Did a statement in the contract between Concord and the condo buyers create a situation in which the merger doctrine barred the breach of contract claim, and 2. Did the economic loss rule bar the VCPA and fraud claims?

After analyzing the merger claim and determining that the merger doctrine did not bar the breach of contract claim, the Court moved on to its analysis of the VCPA and fraud in the inducement claims. In both instances, the Court determined that the causes of action would stand. It reasoned that the VCPA created an independent statutory requirement making it unlawful to misrepresent that goods are of a particular quality. Because this duty arose independent of the contract, the claim was not barred by the economic loss rule.

Similarly, the fraud in the inducement claim was not barred because the plaintiffs alleged that Concord deliberately misrepresented the quality of the flooring knowing that it would likely cost Concord the sales if it disclosed the actual quality of the floors. In short, the fraud, as alleged, was independent of the contract because it was conceived to bring buyers in despite Concord’s having no intention to follow through on the quality of the floors.

The lesson here is that pleading matters and that not all is lost for a consumer or home buyer that thinks that he or she is subject to fraud. However, the devil is in the details and in the details put into the pleadings. Without pleading some independent duty outside of the contract, any fraud or other non-contract claim will fail. The advice of an experienced Virginia construction attorney will help you parse through the facts and properly package them for presentation to the Court.

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.

E-Mail Can Waive Arbitration (sometimes)- A Cautionary Tale

Originally posted 2010-12-11 10:00:10.

We have discussed arbitration clauses at length here at Musings. From the judicious use of these clauses to help resolve disputes to waiver of rights under these clauses through inaction, arbitration clauses permeate the construction landscape. A recent case out of the Western District of Virginia Federal Court adds a new wrinkle to this analysis. In Protherapy Associates LLC v. AFS of Bastian, Inc et al, the Court considered an arbitration clause in a service agreement.

In this case, the Plaintiff provided therapy services to residents of nursing homes. It sued for breach of a contract that included a standard arbitration clause stating that all disputes relating to the contract are to be resolved through arbitration. Subsequently, the parties reached a settlement agreement through e-mail negotiation. The agreement, again in e-mail form, stated the amounts to be paid to the plaintiff by the defendants and on what schedule. The settlement e-mail also stated that any dispute relating to the non-solicitation provisions of the contract would be resolved in the Western District of Virginia Federal Court. However, this final e-mail did not provide for any particular jurisdictional requirements for payment disputes and explicitly left any unchanged portions of the original contract in full force.

The defendants brought a motion to compel arbitration under the original contract. The Court denied this motion relating to the non-solicitation claims and granted it as to the payment dispute. The Court reasoned that the parties specifically waived arbitration as to the non-solicitation provisions but specifically left arbitration in force regarding all other contractual claims.

While this case is not one relating to a construction contract, it provides some good lessons for construction professionals and the construction lawyers who advise them.

1. E-mails resulting in changes to a contract, even through settlement negotiations, can waive contractual provisions.

2. Choose your words in such e-mails carefully, you may end up in two different venues like the defendants in this case if you are not careful to either keep arbitration in force for all claims or for none.

3. The power in point 1 of this list, when used carefully, can assure that the parties to a contract end up in the venue that they desire when seeking to enforce a negotiated settlement.

In short, be careful when crafting a non-judicial settlement of a contractual dispute to avoid litigation over what the settlement means. It is expensive enough to litigate any breach of terms of a settlement without having a court tell you what those provisions entail.

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As always, I welcome your comments below. Please subscribe to keep up with this and other Construction Law Musings.

Early Action on Your Construction Contract is Key

Originally posted 2014-09-23 10:59:49.

ONE OF ONLY A FEW CONSTRUCTION PROJECTS COMPLE... — (Photo credit: Wikipedia)

I bang the drum of early and frequent consultation with one of us construction attorneys on a regular basis here at Musings and in other places of the “blawgosphere.”

Why do I do this? Doesn’t such consultation help to avoid the problems that seem to make those of us in the construction law business happy? Aren’t all of us lawyers just out to complicate things and throw a monkey wrench into construction projects? In short, why would I constantly advise on ways to avoid exactly the construction litigation that you would think would make me the most money?

Continue reading Early Action on Your Construction Contract is Key

Yet Another Reason That Your Contract Matters

Originally posted 2012-01-16 09:00:11.

I have discussed on several occasions the fact that construction contracts matter. The words in contracts matter and, in Virginia (as well as other states), most provisions, if not all will be enforced to the letter. Recently, the Western District of Virginia federal court ruled in a way that reminded me of another reason for a well-drafted contract.

In Rockingham Precast, Inc. v. American Infrastructure – Maryland, Inc. the Western District of Virginia Court considered a motion to transfer the venue to Maryland filed by American Infrastructure. The plaintiff, Rockingham Precast, a Virginia-based company sued in Virginia. American Infrastructure conceded that VA could be a proper forum for the lawsuit but argued that the form was much too inconvenient and costly for the party and non-party witnesses and that the cost made the forum an unfair place to try the case.

Continue reading Yet Another Reason That Your Contract Matters

When is Mediation Appropriate for Your Construction Case?

Originally posted 2015-04-21 10:03:28.

A simple statistical mediation model. (Photo credit: Wikipedia)

Here at Construction Law Musings, I have often discussed mediation as a good alternative to the expense and headaches of litigation. What I have discussed less often are the circumstances in which it is most appropriate to consider or even push for mediation.

The obvious and clearest time that mediation must be used is where the contract requires it. Many construction contracts, including those from the AIA (when the parties check the appropriate box) require mediation as a prerequisite to arbitration or litigation. As is almost always the case in Virginia, this clause will be enforced. In short, if your construction contract has such a clause, and despite my reservations about “mandatory mediation,” you need to at least go through the process before moving forward with your construction claim.

The more interesting case is where no such clause exists and the parties reach an impasse, sometimes prior to litigation and often after the filing of a construction complaint or demand for arbitration. What questions should you as a construction attorney be asking both to and about your construction clients before attempting mediation? Continue reading When is Mediation Appropriate for Your Construction Case?