Construction Law Blog

Scaffold Law Claims Against Contractors Continue To Increase

Posted on Mon, Mar, 27, 2017

     Few topics in construction law are more controversial than Labor Law Section 240, better known as the Scaffold Law, which imposes absolute liability on contractors, property owners, and their agents for elevation-related injuries to construction workers. The number of Scaffold Law cases has increased by 500% since 1990.[1] Although Scaffold Law reform is frequently discussed, the barrage of Scaffold Law cases continues, if the numerous case decisions that I turned up in a recent search of the New York Official Reports is any indication, and the alarming trend is for courts to impose liability on contractors and even property owners.

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            In recent cases, courts have followed the precedent that a worker’s own carelessness is not a defense under the Scaffold Law. In Jerdonek v. 41 W. 72 LLC,[2] the court affirmed the liability of a contractor under the Scaffold Law for a worker’s injury, regardless of the parties’ disagreement regarding the circumstances of the injury. Because it had been established that the scaffold in question lacked required guardrails and was not properly secured, the court found against the contractor regardless of allegations that the worker might have been negligent himself.[3] A court reached a similar result in Kupiec v. Morgan Contracting Corp., even where other workers testified that the plaintiff himself had removed a guardrail, where the witnesses had not seen whether the guardrail allegedly removed by the plaintiff caused his fall.[4]

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     Moreover, liability continues to be assessed against parties regardless of their actual ability to foresee and prevent construction injuries. In Nazario v. 22 Broadway, LLC,[5] the plaintiff was an employee of an electrical subcontractor and was injured when, working without gloves, he suffered an electrical shock, and the unsecured ladder which he grasped to secure himself fell. The court found that the general contractor and property owner were liable regardless of the electrical subcontractor having had exclusive control of the plaintiff’s work site, noting that “the duties of the owner and contractor cannot be delegated.”[6] (Nor was the court deterred by the plaintiff’s failure to wear protective gloves, noting that possible comparative negligence was not a defense under the Scaffold Law, as discussed above.)[7]

      Recent decisions also expand the Scaffold Law’s coverage to untraditional fact patterns. In Myiow v. City of New York, the plaintiff had fallen 13 or 14 feet from a flatbed truck rather than a scaffold or ladder, and the defendants argued that the Scaffold Law did not apply.[8] The court sided with the plaintiff, observing that a fall such as the plaintiff’s presented “precisely the type of elevation-related risk envisioned by the statute.”[9] By broadening the scope of hazards to which the scaffold law applies, this decision makes way for an expansion of traditional Scaffold Law liability, with foreboding ramifications for construction firms’ duties to foresee and prevent elevation-related injuries to employees.

      Scaffold Law reform continues to be proposed. In 2016, the New York State Association of Counties, citing increased construction and insurance costs, resolved to petition Governor Andrew M. Cuomo for the repeal or modification of the Scaffold Law.[10] Nevertheless, until proposals to repeal or amend the Scaffold Law become action, it is imperative for construction firms to develop and follow risk management procedures that will minimize employee injuries. Pending the much-promised but not-yet-delivered Scaffold Law reform, the only other alternative is for contractors to continue paying costly awards of damages and correspondingly high insurance premiums.

John_Caravella_construction_lawyer.jpgJohn Caravella, Esq. is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email at John@LIConstructionLaw.com or by telephone at (516) 462-7051.

 

[1] Lawsuit Reform Alliance of New York. Scaffold Law Reform: Ending Absolute Liability. https://lrany.org/wp-content/uploads/2016/08/Scaffold-Law-One-Pager_final.pdf (last visited Jan. 8, 2017).

[2] 143 A.D. 3d 43 (1st Dep’t 2016).

[3] Id. at 45-46.

[4] 137 A.D.3d 872, 873 (1st Dep’t 2016).

[5] 135 A.D.3d 506 (1st Dep’t 2016).

[6] Id.

[7] Id.

[8] 143 A.D.3d 433 (1st Dep’t 2016).

[9] Id. (citation omitted).

[10] New York State Association of Counties, Standing Committee on Public Employee Relations. Resolution Calling for the Full Repeal of the New York State Scaffold Law or Reform to Include a Pure Standard of Comparative Negligence. http://www.nysac.org/files/PublicEmployeeResos.pdf (last visited Jan. 8, 2017).

Tags: Construction Contracts, Construction Attorney, contractor injury, Scaffold saftey, long island construction attorneys, safe work enviorments for contractors, construction injury, scaffold injury

Homeowners Unable To Recover For Emotional Distress In Construction Disputes

Posted on Mon, Mar, 20, 2017

     Many homeowners who consult with me regarding construction disputes are not only financially damaged but emotionally distressed, and understandably so. Our homes are not only our biggest financial investments but our sanctuaries, and misconduct by unscrupulous contractors that damages those sanctuaries makes us feel that we have no place of safety and, in some instances, makes us worry that we may be homeless altogether. Thus, the question is often posed to me whether homeowners can collect damages for emotional distress that results from construction contract disputes, in addition to their economic damages.

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     Unfortunately, current law is well settled that emotional distress damages are not available in such situations. The general rule is that parties cannot recover damages for emotional distress in contract disputes, at least not unless a separate duty, other than contract performance, has been violated.[1] Even if a homeowner tries to seek emotional distress damages in the context of a separate, non-contract claim for infliction of emotional distress, damages for emotional distress are usually not available when the distress was caused by the destruction of property.[2] The courts have simply refused to award emotional distress damages when they are a side effect of damage to a person’s property rights, rather than the direct result of the defendants’ conduct.[3]

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     Several cases have directly addressed this issue in the context of construction disputes. In one case, Jensen v. L.C. Whitford Co., the plaintiff homeowner suffered damage to her property as the result of a contractor’s negligence in constructing a nearby roadway, but the court refused to award her damages under a theory of infliction of emotional distress because only property had been damaged, and the homeowner had not alleged that she had suffered, or been caused to fear, physical injury.[4]

     Another case, Rocco v. Town of Smithtown, involved a traditional situation in which homeowners sued their contractor for defective construction work.[5] The court refused to award emotional distress damages under either tort or contract theories, stating that the act of defectively constructing the plaintiffs’ home was not outrageous enough to sustain a theory of infliction of emotional distress.[6] The court noted that the contractor’s misconduct “amount[ed] to the breach of a construction contract, not the extreme and outrageous conduct required to support a cause of action for the negligent or intentional infliction of emotional distress.”[7]

     As you can see, the courts have been skeptical of claims for emotional distress injuries in construction disputes. Where the distressing conduct, such as performance delays and defective construction, constitutes a breach of contract, homeowners will be precluded from collecting for their emotional distress. Nevertheless, homeowners remain entitled to traditional construction contract remedies such as costs of reconstruction and delay damages, so the law will at least hold unscrupulous and incompetent contractors accountable for the financial, if not the emotional, harm that they cause.

John_Caravella_construction_lawyer.jpgJohn Caravella, Esq. is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email at John@LIConstructionLaw.com or by telephone at (516) 462-7051.

 

[1] Fleming v. Allstate Ins. Co., 106 A.D.2d 426, 426, 482 N.Y.S.2d 519, 520 (2d Dep’t 1984), aff'd, 66 N.Y.2d 838, 489 N.E.2d 252 (1985); Campbell v. Silver Huntington Enterprises, LLC, 288 A.D.2d 416, 417, 733 N.Y.S.2d 685, 686 (2d Dep’t 2001).

[2] Jensen v. L.C. Whitford Co., 167 A.D.2d 826, 827, 562 N.Y.S.2d 317, 318 (4th Dep’t 1990); see also, Rocco v. Town of Smithtown, 229 A.D.2d 1034, 1034–35, 645 N.Y.S.2d 187, 188 (4th Dep’t 1996).

[3] Probst v. Cacoulidis, 295 A.D.2d 331, 332, 743 N.Y.S.2d 509, 511 (2d Dep’t 2002).

[4] 167 A.D.2d at 827, 562 N.Y.S.2d at 318.

[5] 229 A.D.2d at 1035, 645 N.Y.S.2d at 188.

[6] Id.

[7] Id.

Tags: Construction Contract, Contractor Liability, construction defects, New York Construction Law, Emotional Distress in Construction

 Alternative Dispute Resolution An Option For Construction Contractors Under NY’S Prompt Payment Act

Posted on Mon, Mar, 06, 2017

     Perhaps the most common construction-related dispute is the refusal of a party to make payment to its contractors or subcontractors. While litigation is the traditional avenue for resolving such disputes, methods of alternative dispute resolution such as arbitration and mediation are enjoying growing importance in the field of construction law. Not only do the American Institute of Architects’ form construction contracts prominently feature arbitration and mediation as alternatives to litigation,[1] but arbitration has been legislatively incorporated into New York State’s statutes governing construction contracts. New York’s Prompt Payment Act both preserves the right of construction firms to pursue their remedies through the quicker, more efficient means of arbitration and protects those firms from oppressive contract provisions that might otherwise preclude them from obtaining satisfaction.

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     In 2002, the New York State Legislature enacted the Prompt Payment Act,[2] which, as its name implies, is intended to ensure that construction contractors and subcontractors receive timely payment for their services. Finding that “firms and organizations that provide construction services in this state expect and deserve to be paid in a prompt and timely manner”, and observing that unjustified payment delays might discourage construction firms from doing business in New York, the Legislature intended to set standards for payment for construction services and provide remedies when those standards are not met.[3] Undoubtedly recognizing the expediency of arbitration when compared with traditional litigation, the Legislature made arbitration a prominent part of the statutory scheme.

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     Initially, the Prompt Payment Act applies to construction contracts that meet criteria set forth in the statute. A “construction contract” under the statute is “a written or oral agreement for the construction, reconstruction, maintenance, moving, or demolition of any building, structure, or improvement” where the contract sum including labor and materials is at least $150,000.00.[4] The following types of projects are expressly excluded from the Prompt Payment Act’s definition of construction contracts:

  • Public improvements;
  • One, two, or three family residential homes;
  • Residential tract developments comprised of 100 or fewer one or two family homes;
  • Any residential project 4,500 square feet or less in size; and
  • Certain income-backed residential projects of fewer than 75 units which receive government financial assistance.[5]

       Nevertheless, most commercial projects in the Long Island area are likely to be covered by the Prompt Payment Act.

    As long as the Prompt Payment Act applies, it provides contractors and subcontractors with a statutory right to seek arbitration of disputes. Specifically, when a contractor, subcontractor, or material supplier feels that an owner or other contracting party has violated its payment obligations, the aggrieved party may serve a written complaint by any means that provides written, third-party verification of delivery.[6] If the dispute is not then resolved to the satisfaction of the aggrieved party within fifteen (15) days of the receipt of third-party verification of the notice being delivered, that party may refer the matter to the American Arbitration Association for expedited arbitration.[7] The award of the arbitrator pursuant to this procedure is final and binding upon the parties unless vacated pursuant to Article 75 of the Civil Practice Law and Rules.[8]

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     While the inclusion of expedited, binding arbitration as a means of resolving construction contract disputes is a valuable tool for contractors and subcontractors, the Prompt Payment Act also protects that right from being bargained away. The Act specifically declares any contract provision that makes the expedited arbitration discussed above unavailable to one or both parties to be void and unenforceable.[9] In a recent case, the Third Department found that this provision of the Prompt Payment Act voided a contract clause declaring litigation to be the parties’ sole method of dispute resolution and allowed an unpaid subcontractor to pursue payment from a recalcitrant contractor through expedited arbitration.[10] Although it acknowledged that the Prompt Payment Act generally provides that the terms of the parties’ agreement supersedes the Act’s terms, the court ruled that “General Business Law § 757(3) clearly operates to void and render unenforceable the contract’s dispute resolution provision[.]”[11]

     The Prompt Payment Act’s provisions not only create and preserve the right of construction firms to arbitrate disputes, but they protect those firms from contract clauses with a history of being abused to the detriment of subcontractors. Out-of-state contractors have been known to employ contracts requiring disputes to be resolved in distant states, and the resulting expense and inconvenience of pursuing dispute resolution in such forums, whether arbitration or litigation, has frustrated the attempts of subcontractors to obtain relief. With the advent of the Prompt Payment Act, however, any provision in a covered construction contract that imposes another state’s law on the interpretation of the contract or, more importantly, requires arbitration or another form of dispute resolution to be conducted in another state, is now void and unenforceable.[12] Thus, the Prompt Payment Act not only confers a right to arbitration that cannot be altered by contract terms, but it ensures that such arbitration cannot be removed to a distant forum, which would create additional delay in, if not outright frustration of, construction firms’ efforts to collect defaulted payments.

      If the Prompt Payment Act is any indication, the trend toward alternative dispute resolution, especially arbitration, as a means of resolving construction disputes will continue. In passing the Act, the Legislature provided construction firms with a valuable tool for obtaining relief from defaulting owners or contractors, and it also conferred its approval on arbitration as the method to do so. Considering the benefit to construction firms in terms of avoiding the delays and costs associated with litigation, it can be anticipated that businesses in the construction industry will increasingly take advantage of the arbitration available under the Prompt Payment Act.


John_Caravella_construction_lawyer.jpgJohn Caravella, Esq. is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email at John@LIConstructionLaw.com or by telephone at (516) 462-7051.

 [1] See, e.g., AIA Document A201-2007 General Conditions for the Contract of Construction.

[2] Gen. Bus. Law § 756 et. seq.

[3] GENERAL BUSINESS—CONSTRUCTION CONTRACTS, 2002 Sess. Law News of N.Y. Ch. 127, § 1 (S. 7724–A).

[4] Gen. Bus. Law § 756(1).

[5] Id.

[6] Gen. Bus. Law. §§ 756-b(3)(a) and (b).

[7] Gen. Bus. Law. § 756-b(3)(c).

[8] Gen. Bus. Law. §§ 756-b(3)(d) and (e).

[9] Gen. Bus. Law. § 757(3).

[10] In re Arbitration Between Capital Siding & Const., LLC, 138 A.D.3d 1265, 31 N.Y.S.2d 230 (3d Dep’t 2016).

[11] Id.

[12] Gen. Bus. Law § 757(1).

     This is a general information article and should not be construed as legal advice or legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for specific advice on their concern.

 

Tags: Construction Litigation, Construction Contract, construction contract terms, New York Construction Law, Construction Contract Drafting, aia agreements, arbitration, construction arbitration, long island arbitration, Prompt Payment Act, New York Prompt Payment Act, Alternate Dispute Resolution

Construction Business Owner Challenges Complying With New Employment and Labor Laws

Posted on Wed, Jan, 18, 2017

     Owners of New York based construction businesses are more likely to be mindful of construction law issues relating to contract performance and defective work. Many however are unaware they are also under increasing risks of liability in compliance with newly enacted requirements under New York Employment and Labor Laws.

     Without awareness of these new trends, business owners are unable to take steps in advance to prepare for such new regulations and take pro active steps to be in compliance.

     To share awareness of these new trends, the Nassau County Bar Association has published my article examining these issues 'Employment and Labor Compliance Challenges for Construction Contractors' in their January 2017 edition of the Nassau Lawyer.

    Owners of New York construction businesses are encouraged to familioarize themselves with these liability risks and consider if they are in compliance with these regulations before any claims filed.

 

Download Employment and Labor Compliance Challenges for Construction Contractors

 

     Your comments and future article topic suggestions are invited in thefield below.

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John Caravella, construction attorney      The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

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Tags: Long Island Contractors, Contractor Liability, Construction, New York Construction Law, construction risks, contractors, Long Island Builders, contractor regulation, regulations, Potential Liability, Construction law, Labor Law, contractor injury

Recent New York Litigation Highlights Increasing Risks to Contractors

Posted on Tue, Jan, 10, 2017

     Construction contracts require contractors and subcontractors to carry commercial general liability, or CGL, insurance and to name not only the contracting parties but additional third parties, such as project owners, as additional insured. Recent CGL litigation, however, suggests that contractors and subcontractors should review the language of their CGL policies carefully because third parties to the contract, even if they are contractually required to be additionally insured, may actually be excluded by the insurance policies.

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     CGL policies often contain additional insured clauses or endorsements that define who constitutes an additional insured, usually based on whether the insured contractor has a written contract requiring that person to be named as additional insured. When the person seeking coverage is a party to the contract, the courts interpret an additional insured clause to provide coverage, as the court did in Zurich American Insurance Company v. Burlington Insurance Company.[1] The insurance policy at question in that case provided that an additional insured would be “any person or organization for whom you have agreed in writing in a contract or agreement that such person or organization be added as an additional insured[.]”[2] Because the insured subcontractor had a written contract with the contractor, requiring that the contractor be named as additional insured, the court ruled that the contractor was covered under the subcontractor’s policy. [3]

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     A recent case, however, shows that third parties who are required to be named as additional insureds may be left without coverage. In Gilbane Building Co./TDX Construction Corp. v. St. Paul Fire & Marine Insurance Company,[4] the court considered whether an additional insured endorsement in a contractor’s CGL policy extended coverage to a construction manager in a lawsuit by the project owner for structural damage to the project. The prime contractor had agreed with the project owner to name the construction manager as additional insured, but there was no contract between the construction manager and the contractor.[5] The CGL policy provided that “any person or organization with whom you have agreed to add as an additional insured by written contract” would be an additional insured. [6]

     The construction manager argued that it should be additionally insured, but the court disagreed. Finding that the language of the policy “clearly and unambiguously requires that the named insured execute a contract with the party seeking coverage as additional insured,” the court refused to extend coverage to the construction manager when it did not have a contract with the prime contractor, regardless of the language in the prime contract.[7] The key language seems to be “with whom you have agreed”, which triggered a requirement that the insured have a contract directly with the proposed additional insured for coverage to exist.

     This holding has troubling implications for contractors and subcontractors who are contractually required to name project owners and other parties as additional insureds but do not have contracts directly with them. The courts in cases such as Gilbane may not have been persuaded by the contents of the underlying construction contracts to extend coverage against the language of the policy, but the failure to obtain a compliant insurance policy may constitute a breach of contract, as the Gilbane court acknowledged in its decision.[8] Thus, it behooves construction contractors and subcontractors to review their CGL policies carefully and consult with counsel to identify potential gaps in additional insured coverage so that they can be addressed proactively, rather than discovered in litigation with potentially disastrous consequences.

     Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney      The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

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[1]  No. 651383/14, 2016 N.Y. Slip Op. 30568(U)(N.Y. CO. Sup.Ct. Apr.4, 2016)

[2] Id. at *2-3.

[3] Id. at 8-9.

[4] 143 A.D.3d 146 (1st Dep't 2016).

[5] Id. at 148

[6] Id. at 149.

[7] Id. at 151-52.

[8] Id. at 153.

 

Tags: Contractor Liability, Construction, construction risks, contractors, regulations, Construction law

Post Contract Signing Considerations For The New York Contractor

Posted on Wed, Jan, 04, 2017

     Contractors and subcontractors frequently consult with their attorneys in the negotiation of construction contracts before they are signed, but counsel’s involvement generally ends at that point until and unless litigation arises down the road. Nevertheless, additional consultation with attorneys after execution of contracts can ensure that contractors and subcontractors meet their respective obligations and may confer savings that far offset the costs.

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     To give one common example, contractors are served with litigation involving its subcontractor, only to discover that the subcontractor lacked commercial general liability insurance in the amount required by their subcontract. Just because a subcontractor may agree to obtain required coverage does not ensure that it will do so, and Without compliance to confirm, the contractor may be exposed to liability to its surprise. As the focus moves from legalities to. Additional input and coordination from counsel can prevent the fumbling of major compliance issues once the contract is signed. The cost savings and potentially improved bonding capacity that can be achieved in exploration of contract compliance and risk management procedures can be critical to long term business planning.

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     As a consequence of lacking a procedure to ensure that its subcontractor maintained adequate insurance coverage, the contractor in my example was faced with a significant gap between the subcontractor’s coverage limit and the prospective judgment, which in turn threatened the goodwill between the contractor and the project owner. Situations like this are often preventable with some guidance regarding risk management procedures.

     Construction law attorneys frequently deal with issues of risk management and can provide contractors and subcontractors with valuable guidance. In the case of the insurance coverage gap I just discussed, legal counsel can help firms establish procedures to ensure that insurance policies are received, verify adequate coverage, and schedule follow ups prior to policy expirations. Consequently, the risk of insufficient coverage or lapsed policies can be eliminated. 

     The costs of any Post-execution consultation with an attorney should not be excessive, and the benefits can substantially outweigh the costs in addition to scenerios as well. Aside from ensuring the quality of your services, which translates into goodwill and repeat business, you can also anticipate financial benefits. Insurance carriers encourage clients to implement procedures that minimize risk—after all, it saves them money when clients are more careful—so developing internal risk management practices may result in lower insurance and bonding premiums. 

John_Caravella_construction_lawyer.jpgMr. Caravella is a former project architect and currently a practicing construction attorney who represents architects, engineers, contractors, subcontractors and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. Mr. Caravella has been selected to serve as a member of the Construction Industry Panel of Neutrals to the American Arbitration Association.

 For more information on The Law Offices of John Caravella, P.C., visit www.LIConstructionLaw.com

 

 

Tags: Construction Contract, Contractor Liability, construction risks, construction contract administration, aia agreements, contractors, subcontractor, construction risk management, Construction law

Architects Will See Greater Demand in Services as More Construction Projects Get Underway

Posted on Wed, Nov, 16, 2016

John Caravella, a Construction Attorney at The Law Offices of John Caravella, P.C. and a former architect, says a recent report showing a lower demand for architects’ services last month is part of the business cycle and that, in some parts of Long Island, demand has been steady, especially for the construction of high-end and luxury homes. He adds that the improving economy will mean architects will be in greater demand as more money will be spent on construction projects.

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 The American Institute of Architects (AIA) recently reported that the Architecture Billings Index (ABI) — a leading economic indicator of construction activity — fell to 49.7 last month, compared to the mark of 51.5 in July. This is the second time this year and the first time in seven months that demand for design services declined. Any score below 50 indicates fewer requests for architectural services. The ABI measures demand for commercial and industrial facilities such as hotels, office buildings, multi-family residential buildings, schools, hospitals and other institutions.

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 The report cited a labor shortage in the construction sector in which 25,000 jobs were lost in the second quarter of 2016, and fewer contractors being able to hire or retain skilled workers.

 “The billing index and the construction industry are cyclical,” Mr. Caravella says. “The periods of expansion, contraction and additional expansion are typical and much of the basis of future forecasts. For a period of contraction, however, the relatively slight amount of the contraction speaks to the overall underlying strength and demand in the sector.”

 One bright spot in the report is that the index for design contracts went up in August to 52.7, compared to 51.8, meaning more construction firms are looking to work with architects or architectural firms in the coming months. Further, the report showed more balanced levels of design activity among the commercial/industrial, institutional and residential sectors, with scores of 50.8, 50.7 and 50.9, respectively. Mr. Caravella says that an improvement in the economy will spur demand for architectural services, citing Long Island as an example.

 “In many areas of Long Island, especially in the East End communities, such residential demand and activity is at consistent levels,” Mr. Caravella says. “Some areas of high-end or luxury residential construction have increased, but those are not reflected in the ABI.”

 Mr. Caravella is a former project architect and currently a practicing construction attorney who represents architects, engineers, contractors, subcontractors and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. Mr. Caravella has been selected to serve as a member of the Construction Industry Panel of Neutrals to the American Arbitration Association. The Law Offices of John Caravella P.C. has locations in Manhattan, Uniondale and Fort Lauderdale, Florida.

 For more information on The Law Offices of John Caravella, P.C., visit www.LIConstructionLaw.com

Nassau County Bar Association Offers Alternatives To Litigation

Posted on Mon, Oct, 24, 2016

     Construction disputes are not going away any time soon, so every contractor will eventually be faced with the prospect of deciding whether to go to court to get paid for its work. Litigation in the court system has been the traditional collection method for contractors, but the length and costs of litigation mean that recovering might take years and absorb a chunk of your recovery, and the backlog in the court system has led courts to encourage litigants to seek other means of getting paid. Mediation and arbitration are viable alternative methods of resolving construction disputes, and the Nassau County Bar Association Alternative Dispute Resolution, or ADR, program offers both services from qualified neutrals at competitive prices.

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     Mediation is useful because it dispenses with the time-consuming, costly discovery practice and trial that are required in litigation. In mediation, the parties mutually select an impartial person from a pool of approved mediators with special training and, with the aid of the mediator, attempt to negotiate a binding agreement to resolve their differences. Rather than issuing a binding decision regarding who is right or wrong, a mediator facilitates communication and provides an impartial viewpoint to assist the parties in coming to their own resolution, so that the parties have flexibility in determining a mutually agreeable outcome.

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     Arbitration, meanwhile, has the benefit of a shorter process much like mediation, but like litigation it involves a neutral third-party hearing each side’s case and issuing a binding decision in much the same manner as a judge. The procedure is streamlined, which saves costs, and the arbitrator’s decision, or award, can be enforced like a court’s judgment. Thus, arbitration is a good alternative for parties who want the benefit of a judgment on the merits of their cases without going to the time and expense of litigation.

     Traditionally, organizations such as the American Arbitration Association (the AAA) have dominated the provision of mediation and arbitration services, but the AAA’s administrative fees for an arbitration can run in the thousands of dollars (for example, $3,000 for a $75,000-$150,000 claim),[1] plus the hourly fees for the arbitrator. The Nassau County Bar Association’s fees, on the other hand, consist of a $500 administrative fee for each case, plus a set $300 per hour charge for the arbitrator or mediator. The Nassau County Bar Association panel of mediators and arbitrators consists of attorneys with a minimum of 10 years’ experience, qualified by a Judiciary Committee of the Nassau County Bar Association itself. The parties select their mediator or arbitrator, so they even have the opportunity to choose someone with knowledge of construction law and the unique issues it presents.

      The bottom line for contractors is getting paid in the quickest and least expensive manner, so the Nassau County Bar Association ADR services are worth considering. You can learn more about the benefits of mediation and arbitration by consulting with a construction law attorney, and you can learn more about the ADR programs offered by the Nassau County Bar Association by visiting its web site, www.nassaubar.org, or by calling (516) 747-4070 or emailing info@nassaubar.org.

 

John_Caravella_construction_lawyer.jpgThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

This is a general information article and should not be construed as legal advice or legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for specific advice on their concern.

 1] Information retrieved from https://www.adr.org/aaa/ShowPDF?doc=ADRSTAGE2031504

 

The Home Improvement Licensing Rule: A Shield And Not A Sword

Posted on Tue, Oct, 18, 2016

 

            If you have read previous articles of this blog, you may be aware that New York construction contractors can be barred from suing or enforcing a mechanic’s lien if they do not possess required home improvement licenses, which has resulted in the dismissal of many contractors’ claims. On the other hand, project owners sometimes argue that a contractor’s failure to possess a license should not only prevent the contractor from recovering more money but should require the contractor to return all monies already paid for the work. Courts’ responses to this argument have been mixed.

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            Many courts have ruled that project owners cannot recover money they have already paid to a contractor, even if the contractor is unlicensed. In Host v. Gauntlett,[1] a homeowner sued an unlicensed contractor for the return all of the money that she had paid him, basing her request only on the absence of a home improvement license, but did not allege that the work had been defective. The court found in favor of the contractor, noting that ordering the return of all monies might unfairly enrich the homeowner at the contractor’s expense.[2] A similar result was reached in Voo Doo Contracting Corp. v. L & J Plumbing & Heating Co., Inc.[3]

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            Nevertheless, it seems that the courts will order the return of monies if the project owner can prove that the work was not performed properly. In Maltese v. New England Contractors,[4] homeowners hired a contractor to perform construction work, including electrical and plumbing, on their Brooklyn property, but the contractor was not licensed. The homeowners sought the return of the money they had paid to the unlicensed contractor, and they provided proof that the unlicensed electrical and plumbing work were defective and needed to be redone.[5] Relying on the “disparity between the sums paid and value received,” the court ordered the return of the homeowners’ payments.[6]

             Judging from these cases, the return of payments made to an unlicensed contractor is not automatically mandated by the consumer protection laws. While the unlicensed provision of home construction work must not be encouraged, the courts will not be persuaded that a homeowner should benefit from acceptable construction work without paying, either. The difference will therefore depend upon proof of the quality of the work and the costs of correction.

John_Caravella_construction_lawyer.jpgThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

This is a general information article and should not be construed as legal advice or legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for specific advice on their concern.

 

[1] 73 Misc. 2d 96 (N.Y. City Civ. Ct., Queens Co. 1973).

[2] Id. at

[3] 264 A.D.2d 361 (1st Dep’t 1999).

[4] No. 21884/06, 17 Misc.3d 1134(A), 2007 N.Y. Slip Op. 52259 (Sup. Ct. Kings Co. Nov. 28, 2007).

[5] Id. at *2.

[6] Id. at *4.

Invalidating Choice of Law or Forum Selection Clauses

Posted on Tue, Sep, 06, 2016

          Contracts commonly provide for a specific state’s law to apply (choice of law) or for disputes to be litigated or arbitrated in another state (forum selection). Unfortunately, out-of-state contractors often make subcontracts with New York subcontractors on New York projects subject to the laws of, and requiring disputes to be resolved in, other states, using the added expense and inconvenience as a means to dissuade subcontractors from pursuing claims. This unfair side effect of choice of law and forum selection clauses begs the question: must a New York subcontractor pursue his remedies in another state or under another state’s law where its contract says so? The answer may be no.

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             Courts frequently grapple with the enforceability of choice of law and forum selection clauses. With respect to choice of law, New York courts follow a general rule that parties are free to make the contract subject to the law of whatever state they want, but the law of the state with the most “significant contacts” with the contract should ultimately be applied.[1] Applying this rule, a federal court in S. Leo Harmonay, Inc. v. Binks Manufacturing Company, a lawsuit by a New York subcontractor against an Illinois contractor involving a New York construction project, refused to enforce an Illinois choice of law because the only contact with Illinois was the home state of the contractor, while the work was performed in New York, the prime contract was subject to New York law, and the subcontractor was a New York corporation.[2] This situation is remarkably similar to the situation of many New York subcontractors faced with an out of state choice of law, so such a clause will probably not be enforceable in most situations.

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             On the other hand, forum selection clauses are upheld by the courts unless it can be shown that “enforcement would be unreasonable or unjust or that the clause is invalid because of fraud or overreaching, i.e., a trial in the contractual forum would be so gravely difficult and inconvenient that the challenging part would, for all practical purposes, be deprived of his or her day in court.”[3] In Bell Constructors, Inc. v. Evergreen Caissons, Inc., the court refused to invalidate a forum selection clause requiring a construction contract dispute to be litigated in New York, even though the contract was performed in Colorado and the defendant subcontractor was a Colorado corporation and would face expense and loss of business time in litigating the dispute in Colorado.[4] Thus, absent extremely unusual circumstances, forum selection clauses have been upheld by New York courts, a rule that has led to unfair results and created substantial expense and inconvenience for New York subcontractors.

             More recently, however, the New York State Legislature has taken action to protect the rights of New York subcontractors by enacting the Prompt Payment Act.[5] The Prompt Payment Act contains provisions relating to timing of payments that go beyond the scope of this article, but importantly the Prompt Payment Act declares that contract provisions that impose the law of another state or that require dispute resolution to be conducted in another state are void and unenforceable,[6] meaning that a New York subcontractor under a contract subject to this law cannot be required to litigate in another state or under another state’s law. The Prompt Payment Act does not govern all contracts, and only an experienced construction law attorney can review your subcontract to determine whether the Prompt Payment Act applies, but it may nevertheless provide a means to avoid oppressive forum selections and choices of law by out-of-state contractors that would otherwise be enforced by the courts.

John_Caravella_construction_lawyer.jpgThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

 [1] See, Compania de Inversiones Internacionales v. Industrial Mortgage Bank of Finland, 269 N.Y. 22, 198 N.E. 617 (1935); Haag v. Barnes, 9 N.Y.2d 554, 175 N.E.2d 441 (1961).

[2] 597 F. Supp. 1014, 1025-26 (S.D.N.Y. 1984).

[3] Bell Constructors, Inc. v. Evergreen Caissons, Inc., 236 A.D.2d 859, 860, 654 N.Y.S.2d 80, 81 (4th Dep’t 1997).

[4] Id.

[5] N.Y. Gen. Bus. Law. §§ 756 et seq.

[6] N.Y. Gen. Bus. Law § 757.