Wednesday, December 3, 2014

Architect that substantially contributes to excavation design in NYC may have strict liability for adjacent property damage

When the Court of Appeals decision in Yenem Corp. v. 281 Broadway came down in 2012 it signaled a potential avalanche of strict liability claims against persons that "cause an excavation to be made."  The question remained: who causes an excavation to be made?  Clearly the owner of the property and the contractor that performs the excavation "cause it to be made."  The more interesting question has been whether and architect and/or engineer that are involved with excavation "cause the excavation to be made" and, as such, may be held strictly liable under Yenem and Section 3309 of the NYC Building Code.

While the question remains open, the First Department sent out a signal last week in what may be the first appellate division commentary on the issue.  In 87 Chambers, LLC v. 77 Reade, LLC the First Department stated that the engineer's motion for summary judgment dismissing the 3309.4 claim against it was properly denied.  The decision indicates that an engineer may face strict liability under Section 3309, and be a person who "causes an excavation to be made" where the evidence establishes that the design professional "substantially contributed to the design and methodology employed during the excavation process."  In this instance, the court found there were questions of fact as to whether the engineer was such a substantially contributing factor.  However, the reasoning, in this writer's opinion, is a loud signal that design professional do indeed face strict liability and the First Department may have just given us the first outline of the test for liability.  Stay tuned as other departments chime in on this critical issue.

Vincent T. Pallaci is the managing partner of the New York law firm of Kushnick | Pallaci PLLC where his practice concentrates on construction law.  With offices in the New York City metropolitan area and Buffalo, KP serves the construction industry across the State of New York.

Friday, November 28, 2014

Court enforces 6 month contractual limitations period against NYC

Generally, a claim for breach of contract in New York has a 6 year limitations period.  However, parties are generally free to negotiate and shorten the limitations period in their contract.  Such was exactly the case in Dart Mech. Corp. v. City of New York where the contract limited the period to bring claims to 6 months.  In upholding and enforcing the 6 month limitations period, the Court found that six months is not an unreasonably short period (as would have permitted the Court to void the provision).  Dart Mech. Corp. is a good lesson for contractors:  always read your contracts!  Don't assume that what you have experienced in the past is the "rule" in your current and future situations.  

Vincent T. Pallaci is the managing partner of the New York law firm of Kushnick | Pallaci PLLC where his practice concentrates on construction law.  With offices in the New York City metropolitan area and Buffalo, KP serves the construction industry across the State of New York.  

Thursday, November 27, 2014

Pursuing and Proving Delay Damages

Recently the Third Department of the Appellate Division issued some interesting and insightful commentary on pursuing and proving a delay claim (see Mascorp, Inc. v. United States Fid. & Guar. Co.).  The Court noted that "a contractor wrongfully delayed by its employer must establish the extent to which its costs were increased by the improper acts because its recovery will be limited to damages actually sustained."  The concept seems pretty simple: to recover there must be actual damages.  Curiously here, the Court found that the plaintiff's own records established not a loss, but a profit.   Though the Court noted the documents established a 13% profit, I wonder whether a higher profit would have been made had the delay not occurred?  If so, wouldn't there have been delay damages not withstanding the profit?  It appears that the plaintiff's expert failed to identify what records it relied upon in reaching his determination that there were delay damages.  The Court stated that "we can find no correlation between the numbers in the reports and the expert's figures."   In concluding that there was no foundation for the damages claimed, the Court found that the plaintiff's expert affidavit was "conclusory and insufficient to raise a triable issue of whether damages were actually sustained."

The lesson to be learned?  Be careful with your expert affidavits and testimony.  Many (MANY) experts like to talk.  They like to explain how they are right and smarter than everyone else.  Unfortunately they don't always explain themselves well and simply get from point A to point B because "they are right."  Work with your experts and make sure they understand how to explain their position and convince others that their position is correct.  Sometimes your expert can be too smart for his or her own good!

Saturday, September 28, 2013

Quick Construction Contract Tips: Sometimes its OK to Suspend Work for Non-Payment (even if your contract says its not...)

One of the most common responses to non-payment under a construction contrat is almost human nature:  don't pay me and I'll stop working.  But can you?  Some contracts, if not many, say that a contractor may not suspend work even if he or she has not been paid.  Luckily for contractors in New York, the legislature has given them protection against these clauses.  Specifically, Section 757 of the General Business Law says some contract clauses are void, including:

   2. A provision, covenant, clause or understanding in, collateral to or affecting  a  construction contract stating that a party to the contract cannot suspend performance under the contract if another  party  to  the contract fails to make prompt payments under the contract.

Now this doesn't mean that you can simply walk off the job the first day a payment is "late."  There are two important things to remember when attempting to use Section 757:  First, we have to determine whether another party has failed to make "prompt payment."  Just what is "prompt payment" in a construction contract?  You can look two places: the contract itself and the rest of the Prompt Payment Act in G.B.L. Article 35E.  Second, Section 757 of the GBL only voids the provision prohibiting suspension in the event of non-payment, it does not say that the unpaid contractor may abandon the job.  So while work may be suspended, the contractor would have to return upon cure of the failure to make "prompt payment."  
As always, make sure you read, and understand your contract before signing it and before taking a drastic action like suspending work.  
Vincent T. Pallaci is the managing partner of the New York law firm of Kushnick | Pallaci PLLC where his practice concentrates on construction law.  With offices in the New York City metropolitan area and Buffalo, KP serves the construction industry across the State of New York.  

Sunday, June 16, 2013

Construction Contract Tip: Attorneys' fees are not recoverable, unless...

One of the biggest drawbacks to litigation, or even arbitration, is the cost associated with attorneys.  In New York, a corporation or an LLC must have an attorney in litigation.  Corporations and LLCs are not permitted to represent themselves in Court in the State of New York.  This leads to a difficult decision one a dispute develops on a construction project: is it cost effective to proceed to litigation or should I just cut my losses?  Take for example a $4,500 dispute.  Because it is under $5,000, you can proceed (in most counties) through small claims court.  Small claims court is not overly expensive.  You can typically pay all of the fees and even hire an attorney to handle the hearing for you fairly cheaply.  Even if you are sitting in court for 4 hours the day of the hearing you probably still will not pay more than $1,500 for everything (fees included).  But that is still 1/3 of your money.  A claim for more than $5,000 and you are proceeding to the Civil Court (in NYC), the District Court (on Long Island) or perhaps the County Court (upstate).  Much more than $5,000 and you could end up in Supreme Court.

Litigation in the Courts means Court appearances, depositions, pleadings, motions and discovery.  That means lots of time for attorneys and lots of money spent.  Complex construction litigation can easily cost more than $100,000.  Even basic uncomplicated litigation (if such a thing exists) can easily cost over $10,000.  It is with these smaller amounts that there is what I call a gray area.  If you are owed $20,000 do you really want to spent $18,000 to recover it?  Keep in mind there are no guarantees.  You could spend $18,000 and lose.  You could spend $18,000 and win but be left with an collectible judgment.  What if you spend $21,000 to recover the $20,000?  It easily gets to the point where it is not cost effective to proceed.

But if you win at the end of the day you get all your costs back right?  WRONG.  New York follows the "American Rule" whereby all parties to litigation absorb their own costs.  This means even if you win, even if you were 100% right and should have never had to litigate, you eat your own costs.  Doesn't seem fair right?  Well, luckily, there is an option.  While the default rule is you pay your own fees, you can change that rule by contract.  So, first things first, make sure you have a written contract!  The days of the handshake agreement in construction should be long gone.  A written contract is essential to protecting your rights.  Even the most well intentioned contractor can have things go wrong and you need protection.  Now that you have your written contract, you simply need to insert a provision that says the prevailing party is entitled to recover its attorneys fees from the other party.  That's it.  If you win, you can recover your (reasonable) attorneys' fees. With an attorneys' fee provision in your contract it is now much easier to decide to chase after that $20,000 debt.  It also makes the pain of long drawn out (and expensive) litigation a bit less.

There is another advantage to an attorneys' fee provision aside from merely recovering your fees.  Sometimes there is an unwritten rule that the best defense for a party with no real defense is to try and "outspend" the opponent.  Parties will think twice about dragging out questionable litigation and driving up your costs if they know that they will be paying those costs back at the end of the day (in addition to paying their own costs).  Of course there is a downside: if you are the one in the wrong you may be the one stuck paying fees.  But it is a risk that you have to decide and weigh.

Vincent T. Pallaci is a partner with the New York law firm of Kushnick | Pallaci, PLLC.  With offices in Buffalo and the NYC Metro area, KP provides legal services to the construction industry across the State of New York.