Tuesday, November 15, 2016

Protesting a Construction Contract Award with NY OCS

Certain publicly bid and awarded contracts have to be approved by the New York Office of the State Comptroller.  In those instances where you want to challenge the contract award (sometimes called a bid protest), the Comptroller's office has established procedures to be followed.

Generally, there are two types of protests that you can file with the Comptroller.   One is an appeal of a protest of a decision made by the procuring agency.   The other is a direct protest filed with the Comptroller's office.

Protesting Agency Determination

Any interested party (such as another contractor that bid on the contract and lost) may appeal the contract award and the agency's determination by filing a written protest with the Comptroller within ten (10) business days of its receipt of the agency protest determination.  While the Comptroller can waive the ten (10) day requirement, we never suggest being a test case.  The written appeal must be served on the contracting agency, the successful bidder and any other party that participated in the protest to the agency.

Direct Protest to the Comptroller

A direct appeal to the Comptroller is permitted if (1) the contracting agency does not have a written protest procedure; (2) the contracting agency has not provided notice of its protest procedure in the solicitation document; or (3) the facts that give rise to the protest are not known to, and could not have been reasonably known to, an interested party prior to the date by which a protest was required to be filed with the contracting agency.

The direct protest to the Comptroller, like the agency protest, must be in writing and must be filed within ten (10) days of notice of the contract award.  Again, while the Comptroller can waive the notice requirement, it is not a good idea to be a test case.  In addition, if the appealing party is not provided with notice of the contract award then it may file a protest with the Comptroller at any time after the contract is awarded and prior to the Comptroller's approval of the contract.

To read the Comptroller's detailed procedures you can click here.

Vincent T.  Pallaci is the managing member of Kushnick Pallaci PLLC.   His practice focuses on construction law including issues such as bid protests in the construction industry.  

Saturday, September 3, 2016

Claims for Damage from Tropical Storm Hermine

As tropical storm Hermine approaches Long Island the first and most important concern is always to make sure that everyone is safe.   But once the storm passes, many people will likely turn to questions about damage from the storm.  Windows, roofs and siding may be damaged from the wind or projectiles flying through the air.  Wind driven rain may have caused damage through leaking roofs or windows.   For those close to the shore, the storm surge may have even caused flood damage.

Hopefully, you have insurance in place to cover and protect your home and the contents.  If you are in a flood zone, hopefully you have flood insurance.  Before the storm hits make sure you have your important documents in a safe dry place.  Don't store important documents you will need to submit a claim in the basement where they may be exposed to moisture and destruction.  Its a good idea to have your insurance policy numbers handy and have phone numbers in an easy to access place so you know exactly where to call once the storm passes.  There are a few important things to keep in mind when submitting an insurance claim:

  • Document your damage.  Photos and videos may be your best friend when dealing with submission of claims to your insurance company.  
  • If you pay for any repairs or clean up - keep receipts for everything.  
  • Before discarding personal contents that were damaged by the storm, make sure you catalog and photograph them.  Its hard to submit a claim for contents if you don't know exactly what they were.  
  • You don't have to allow the damage to sit.  You are free to begin making repairs or taking steps to secure your home and prevent further damage.  Just remember to document the conditions before you alter them whenever that is possible.  
  • Phone calls are fine to initiate and expedite a claim but you should always follow up in writing.   
Remember, if your claim, or a part of it, is denied for any reason, you have the right to challenge that denial.  When in doubt, contact an attorney familiar with property damage and insurance claims to get advice and find out whether the denial of your claim may have been improper.  

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC.  His practice includes property damage and complex insurance claim litigation.  He can be reached at (631) 752-7100 or vtp@kushnicklaw.com  

Friday, June 24, 2016

Legislature seeks to define substantial completion and limit retainage

Every once in a while the New York Legislature has an idea that catches the attention of the construction industry.  Once such idea is set forth in Assembly Bill 10446 which was sent to the committee on economic development on May 27, 2016.
This proposed amendment to the General Business Law (specifically section 756) has a few interesting components:
  1. It would amend section 756 and add a definition of “substantial completion.”  The bill proposes to define substantial completion as “the state in the progress of the project when the work required by the construction contract with the project owner is sufficiently complete in accordance with the construction contract so that the project owner may occupy or utilize the work for its intended use…”  This definition is not so out there or different from the generally understood meaning of the term (and some contracts even specifically define substantial completion in almost this exact manner).  However, codifying the definition of such a critical term in the construction industry is a big step.  It will be interesting to see how the committee considers this term.
  2. It would amend section 756-a of the General Business Law to allow subcontractors to submit a final invoice for payment upon reaching substantial completion (using the new definition).  Notably, the current version of 756-a says that a subcontractor can submit a final invoice “upon the contractor’s performance of all the contractor’s obligation under the contract.”  The current phrase is admittedly vague but the proposed definition of substantial completion isn’t exactly black and white.  One this is certain:  the new language would be far more beneficial to subcontractors.  For example, when the punch list remains outstanding the the subcontractor has not “peformed all of his obligations under the contract.”  But when the punch list is outstanding the project has most likely reached substantial completion.  This could be a different of days, weeks or even months in terms of when the subcontractor would be permitted to issue a final invoice.
  3. Finally, and not least of all, the bill would amend section 756-c of the General Business Law to put a specific fixed cap on retainage.  Currently, the law only says that retainage is limited to a “reasonable amount.”  You can almost guarantee that the owner, general contractor and subcontractor have a different view of what exactly constitutes a reasonable amount.  But the revised section 756 would limit retainage to no more than 5%.
Right now the bill is in its infancy and may die in a committee somewhere along the way.  As of this writing, there are no floor votes scheduled for the bill.   But it is one that is worth keeping an eye on: especially for subcontractors.

Monday, December 7, 2015

Case Law Update: Court holds Ohio Venue Provision in Contract Void under GOL 757

HVS, LLC v Fortney & Weygandt, Inc.
Decided 9/24/15 by the Supreme Court, Rockland County
The issue in this appeal concerns the validity of an arbitration agreement entered into by the parties.
 The parties entered into a written subcontract agreement, wherein the Plaintiff, an electrical company, agreed to furnish all labor and material necessary to complete the electrical scope of the work on the project, which was located in New York.  Delays arose during construction, the parties disputed the revised work schedule, and the Defendant terminated the subcontract and refused to permit Plaintiff to complete its work.  Soon thereafter, Plaintiff filed a mechanics lien with the Rockland County Clerk and filed a Summons and Complaint, seeking damages for breach of contract and for the foreclosure of the lien.  Defendant filed a demand for arbitration with the American Arbitration Association, arguing that pursuant to the subcontract, Cuyahoga County, Ohio, was the proper venue for arbitration.
 The Court stated that pursuant to General Obligations Law §757, unless the contract is with a material supplier, any provision in a construction contract which makes the contract subject to the laws of another state and requires any litigation arbitration to be held in another state shall be void and unenforceable.  The Court pointed to the fact that as Plaintiff was not merely a material supplier, the provision requiring that Cuyahoga County, Ohio be the forum governing disputes arising from the agreement was void and unenforceable pursuant to GOL §757.
 The Defendant argued, citing to supportive case law, that the clause preempts GOL §757 as there were numerous out-of-state entities involved in the transaction.  However, the Court was not swayed.  The Court found that unlike the case law cited to by Defendant, the Plaintiff here is a local company, obtained the majority of the materials from local suppliers, and performed all of its work in New York.  Furthermore, although there were suppliers who, as Defendant pointed out, have offices in other states, they all are present in New York as well.  Additionally, all the meetings concerning the project occurred at the project site in New York. 
 The Court related the present case to another New York case, King C Ironwork, Inc. V Burdg, Dunham & Associates Construction Corp., wherein the Judge found the arbitration provision valid except for the forum selection and choice of law provisions.  Thus, keeping in mind that the basic purpose of FAA §2 is for claims to be arbitrated rather than litigated, the Court in the present case severed the improper provision of the arbitration agreement and ordered that the parties proceed with arbitration in New York, rather than in Ohio, and stayed the lien foreclosure action pending the New York arbitration outcome.

Case Law Update: Subcontractor has no Quasi-Contract Claim Directly Against Owner

 MCM Prods. USA, Inc. v Aliusta Design

Decided November 16, 2015 at Sup. Ct., New York County

This case presented the classic issue of whether a subcontractor has a valid cause of action for unjust enrichment against the owner of property, where the governing contract was between the subcontractor and the general contractor.

Here, Plaintiff, the owner of the property at issue, hired and entered into a contract with a general contractor, A.J.S. Project Management Inc. (“AJS”).  AJS then hired various subcontractors, with whom Plaintiff had no contractual relationship with, to assist on the construction on the property.  Certain subcontractors filed mechanic’s liens on the property, based off of money owed to them by AJS.  Plaintiff brought suit seeking a declaratory judgment that Plaintiff is not liable to the subcontractors for any money due and owing between them and AJS.  One of the subcontractors, Hudson Concrete Publishing Inc. (“Hudson”) alleged certain counterclaims against Plaintiff, including a claim for unjust enrichment, wherein Plaintiff moved to dismiss Hudson’s counterclaims for failure to state a cause of action.  This decision addresses the Plaintiff’s motion to dismiss.

The Court explained that, as a general rule, a quasi-contractual claim, such as unjust enrichment, is ordinarily precluded where there is the existence of a valid and enforceable contract which governs the events arising out of the same subject matter.  This general rule is applicable to claims brought against non-signatories, precluding quasi-contract claims being brought against third party non-signatories to a contract that covers the same subject matter of the claim. 

Under a quasi-contract claim, “if services were performed at the behest of someone other than the Defendant, the Plaintiff must look to that person for recovery.”  Thus, it is not enough that the Plaintiff received a benefit from Hudson.  The Court ruled that where an express contract exists between the general contractor and the subcontractor, the mere owner of the property where the work is being done may not be held directly liable to the subcontractor under a quasi-contract theory “unless he assented to such an obligation.”  Thus, the sole remedy of a subcontractor lies against the general contractor with whom the contract was entered into with.

Hudson admitted to being hired by AJS, the general contractor, and failed to assert allegations linking Plaintiff to the services it alleges to have performed on Plaintiff’s property.  As Hudson sought payment for services performed under its contract with AJG, the claim is governed by the terms under that contract, thus the quasi-contract claim against the Plaintiff must fail.