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