Here at Musings, we like to discuss (likely more than readers would like) the fact that in Virginia, the contract is king and its terms will be looked at carefully by the courts. One of those provisions that will be looked at carefully is the so-called “cure period.” The “cure period” is the time that a subcontractor has to fix any non-compliant construction after receiving notice of any deviation from the contract documents that must be fixed.
In United States ex rel Allan Myers VA, Inc. v. Ocean Construction Services, Inc. the federal court for the Eastern District of Virginia examined what it means to grant a proper opportunity to cure. The Ocean Construction Services case arises from a contractual dispute between Allan Myers VA Inc. and Ocean Construction Services Inc., or OCS, involving renovation work performed in sections of Arlington National Cemetery. Presently before the court is Myers’ motion for partial summary judgment, arguing that the undisputed facts demonstrate that it was not provided with a three-day cure period, a contractual prerequisite to OCS terminating the subcontract for default.
Allan Myers argued that even though Ocean Construction Services, the general contractor, provided notice and then waited seven days before terminating Allan Myers from the project, the opportunity to cure was not a real opportunity given two pieces of evidence on which Allan Myers relied: (1) an August 9 letter between the United States Army Corps of Engineers, or USACE, and OCS indicating that OCS had a plan in place to replace Myers as a subcontractor and (2) OCS enforcing the USACE-issued stand-down order, thus preventing Myers from working on the project site. Because of these pieces of evidence, Allan Myers argued that the Court need not look at Ocean Construction Services’ intent in evaluating whether Ocean Construction Services provided proper opportunity to cure.
The Court denied the motion for summary judgment, essentially stating that, despite what may look like objective evidence to the contrary and when looking at the evidence in the light most favorable to Ocean Construction Services, there was enough gray area that summary judgment was inappropriate. In short, Allan Myers would have to show that Ocean Construction Services intended to terminate Allan Myers whether they tried to cure or not. Absent such uncontroverted state of mind evidence, the Court could not grant summary judgment.
The takeaways? 1. Summary Judgment is hard to get. This case seemed ripe for such a judgment and the Court did not grant it, and 2. Intent matters. The Court held that it could not properly determine intent, but that lack of true intent to grant opportunity to cure could lead to a judgment for Allan Myers. While there is rarely a smoking gun type communication specifically stating that the party giving notice has no intention to honor the opportunity to cure, the Court seemed ready to allow for other evidence to show just that and to assure that the party terminated for default had an actual opportunity to cure.
As always, I both recommend the case linked above to your reading and that you contact experienced construction counsel when analyzing your options under your construction contract.
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