Legal Fees In a Construction Dispute?... You're Not Alone.

John Parnass over at Washington Construction Law, an excellent Washington State Construction Law resource, is reporting on this article from the Law Blog of the Wall Street Journal.  The Donald is suing his attorneys over the fees they billed in representing him in a construction matter.

Great quotes from Trump regarding the underlying dispute and legal case over the breach of the earth-moving contract in the construction of a Golf Course:

"I have a Ph.D. in legal fees. I know when fees are fair and when they are not."

"Ninety percent of the conversations I had ... were about legal fees, not the case,"

"We won the case because I'm a great witness."

Whether or not they've got their own TV Show, clients should work with attorneys to establish a beneficial fee structure and ensure that they're getting value for their money.

The Home Repair and Remodeling Act Does Not Apply to Subcontractors

In MD Electrical Contractors, Inc., v. Fred Abrams (Il. Sup. Ct. 2008; Doc. No. 104000)  the plaintiff had sued under the theory of quantum meruit, stating that it had no contract with the defendant for electrical work performed on the defendant's home.  The defendant claimed that the Home Repair and Remodeling Act prohibited a suit by the plaintiff.  The circuit court had reasoned that quantum meruit was a legal theory that implied a contract where none existed.  Since the Home Repair and Remodeling Act was against the contract, and the subcontactor fell under it, the court could not imply a contract where the act would forbid such a contract.  The Appellate Court had disagreed and remanded the decision.  And now, the Supreme Court's decision has squarely stated that the act does not apply to subcontractors.

  • The Home Repair and Remodeling Act applies only to those who contract directly with the Home Owner.

The court refused to address the intriguing issue of whether or not a sub-contractor could have any recourse in quantum meruit, or outside the Mechanic's Lien Statute.

In a strong-toned dissent, Justice Freeman points out that the complaint was insufficient on its face to offer the factual issues that the court relied upon in determining this matter.  The complaint asserts that MD Electrical was a sub-contractor, but there is no evidence of that fact anywhere in the record.  The dissent goes on to argue that the court did not have to reach the issue of the Home Repair and Remodeling Act's application to sub-contractors and should not have done so.

Coverage for a Breach of Contract Action Under Illinois Law?

In Cincinnati Insurance Company v. Taylor Morley, Inc., (Doc. No. 06-cv-1035-MJR, S.D. Il, 2008) the Southern District of Illinois has issued a coverage opinion reaffirming the substantive Illinois law.   Construction defects alleged by a buyer against a builder and claims by buyers against a builder for diminished property values because of the builders failure to fulfill its contract and construct a "championship golf course" around which their homes were to have been built, are not afforded coverage under a CGL policy. 

Is the Benefit Worth The Risk For A General Contractor to Get Involved in Safety?

   


        In this recent opinion from the First District, the Court has upheld that a general's control through asserting its authority to stop work due to safety violations by its sub; the mandate that the sub hold weekly safety meetings and submit the minutes of those meetings for the general's review; and the subs contractual obligation to submit a site-specific safety plan all amount to enough retained control to present an issue of fact as to the general's liability under §414 of the restatement of torts.

            §414 states in relevant part that:

            "One who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care."

            In the case of Wilkerson v. Schwendener (1-06-2653) the plaintiff was the employee of a sub and was placing some joists on a second floor of a retirement home project when his co-worker handed him a joist and struck him in the foot.

            The general had won summary judgment on the issue of §414 liability where it claimed to not have retained control of its subs work.  The Court found that the general had retained control where it required its sub to (1) comply with a 21 part list of safety regulations generated by the general; (2) hold weekly safety meetings and submit the minutes of those meetings; (3) prepare and submit a site-specific safety plan; and (4) attend the general's weekly safety meetings.  Additionally, at some point prior to the plaintiff's accident the general had sent a letter to the sub stating that the sub needed to get its safety program in order or the general "WILL STOP" (yes, it was all caps in the actual letter) the sub from continuing its work.

            The Court noted that generally, just having a supervisory role over safety would not have implicated the general in §414 liability, but here, with all the factors taken into account, and the threat of stopping the work if safety was not performed properly, the general did retain sufficient control and with it, liability.

            This raises some interesting questions regarding safety.  We know that a general wants to eliminate workplace accidents and that if it is not in charge of workplace safety, its subs might not toe the line (as here).  We also know that a general can't be everywhere at once on a job site.  So what should a general do now?  Should they be standing back and not getting involved in safety programs and full-on supervision?  Would that increase the number of accidents, but shield generals from liability under §414?  It seems a bit ridiculous that because a general was concerned with safety (preventing accidents) and interceded in different ways to increase safety (increase the prevention of accidents) that it should be held to be liable under §414 where its sub didn't have adequate safety in place in order to protect its own employees but where it did try to get the sub to conform to the plan and put adequate protections in place.  If the general hadn't had a plan and hadn't butted in, and hadn't threatened to stop the subs work, the accident would have happened, probably sooner, but it would be able to stand back and have a better argument against §414 liability.  The general didn't control all the safety, and unless there's a reason to believe that the sub would have put in place different and better safety measures than it could under the general's program, it's a bit ridiculous to say that the general should be at fault because it took certain steps to get the safety program of its lackadaisical subcontractor.

Read the back of those Purchase Orders!

    These pesky forum selection clauses keep popping up, but in this interesting twist, the court is now enforcing them when they're not part of the original contract or negotiations with someone, but arrive after work has been started on the back of a purchase order.  In Compass Environmental, Inc. v. Polu Kai Services, LLC, it was Polu Kai's fault for not objecting to or raising an issue about the forum selection clause printed on the back of a purchase order.  But, even if they had, what were they to do when they had already started work on the project?  Would it be an actionable repudiation if Polu Kai had just walked, four days into its job, after it received its purchase order and didn't like the terms printed on the back... terms which weren't negotiated between the parties beforehand and now appear to be deemed accepted unless action is taken?

Forced to litigate in Florida?

            For those out-of-state contractors, architects, and builders working on projects in some other place for Illinois' residents, there are some interesting lessons in the Fourth District's Isringhausen v. Prime Contractors and Associates, Inc., opinion regarding keeping yourselves from being subjected to Illinois law.

            It should come as no surprise that a Florida company working on building a house in Florida that was contacted and did no business in Illinois was not subject to Illinois jurisdiction.  But, what if the Florida contractor was advertising here in Illinois, or had made a few trips to Illinois to complete the contract?  What if the escrow or some other portion of the contract were to be completed in Illinois so that the contractor, although minimally, were availing itself of Illinois law?  It would be wise to work out the full details for out-of-state construction both for owners in Illinois and contractors elsewhere, lest the parties find themselves in costly litigation hundreds or even thousands of miles away.