Contractor Waived Claims Not Expressly Set Forth in Notice

The First Department of the Appellate Division recently held that a contractor had waived certain claims in connection with a government contract because the contractor did not expressly set forth the claims in an extension of time request.  The decision notes:

The contract governing the construction project required any request for an extension of time filed by petitioner to include a statement, "in detail," that petitioner "waives all claims except for those delineated in the application, and the particulars of any claims which [petitioner] does not agree to waive.

 Apparently, the contractor did not sufficiently identify the claims it wished to preserve when it submitted an extension request.  The Contract Dispute Resolution Board (CDRB) determined that the contractor had, thus, waived the claims.  The Appellate Division agreed and rejected the contractor's argument that the parties prior course of conduct should support no such waiver.  The Court noted that such and argument (called estoppel) is generally unavailable against government agencies and the particular contract at issue here specifically mentioned that the conduct of the City and its agents could not create an estoppel situation.

The case is a good reminder to contractors to carefully read their contracts and be careful in sending out notices.   When sending out any contract notices it is a good idea to engage counsel to review the contract and the notice and make sure that any possible claims are properly preserved.  It is never too early to engage counsel.  A bit of review and consultation during the project could potentially save tens of thousands of dollars on later litigation.

The case was LAWS Const. Corp. v. CDRB.

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC.   His practice concentrates on construction law including contract drafting and review.

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.  

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.  

The Miller Act and the Little Miller Act: What New York Contractors Need to Know

Have you ever worked on a public construction project for the federal government?  How about a public construction project for the State of New York or even a local municipality? If so, then you may know that you cannot file a traditional mechanic's lien (that attaches to the property). In New York, you can file a mechanic's lien against the public fund, known as a lien on a public improvement.  But on a federal project, you cannot file any type of mechanic's lien.  Instead, public construction projects, both federal and state, almost always give contractors, suppliers, materialmen, etc. the protection of a payment bond.  These bonds are posted thanks to the Miller Act (federal projects) and its little brother in New York, often colloquially referred to as the "little Miller Act", found in State Finance Law Section 137.  Here is what anyone working on a construction project within the State of New York needs to know about protecting itself from non-payment and protecting its payment bond claim.

The Miller Act

The Miller Act, enacted in 1935, protects subcontractors and material suppliers on any public construction project of $100,000 or more in the United States.  The Miller Act requires the posting of a bond, known as a payment bond, that provides the subcontractor or material supplier with protection against non-payment.  In essence, the payment  bond will guarantee that if the subcontractor or material supplier performed its work properly, and was not paid by the general contractor for any reason, the surety that issued the bond will step in and make the payment.  You probably noticed that I did not mention general contractors (a/k/a prime contractors) in those that can file a claim against the payment bond.  That's because they can't.  The Miller Act does not protect the general/prime contractor from non-payment.  

The time within which to bring a Miller Act claim is short.  Claims must be brought to suit within 1 year of the last time that you provided labor or materials to the project.  Sub-sub contractors and material suppliers to subcontractors must jump through the additional hoop of serving a proper written notice, satisfying the requirements of the Miller Act, on the general/prime contractor within 90 days of the time that you last provided labor or materials to the project.  The Miller Act is strict and non-compliance with the notice requirements will likely lead to rejection of the claim and no protection under the bond.  It is therefore strongly recommended that you hire an attorney to serve the notice for you.  

New York's Little Miller Act (State Finance Law Section 137)

Subcontractors and suppliers in New York also are protected when they perform work on a public project (whether it is the State, County, City or Town).  This protection is provided through State Finance Law Section 137.  State Finance Law Section 137 (a/k/a the Little Miller Act) applies to public construction projects of more than $100,000 but only if those projects are not subject to New York's Wick's Law.  State Finance Law Section 137 provides that an eligible party may bring a claim against the bond once 90 days have elapsed since the last furnishing of labor or materials and a non-payment situation exists.  Sub-subcontractors and suppliers and materialmen to subcontractors may bring a claim against the payment bond as well but only if, within 120 days of the time that they last furnished labor or materials to the project, they have put the contractor on notice of their claim.   

The notice to the contractor must set forth with substantial accuracy: 1) the amount claimed; 2) the name of the party to whom the material was furnished or labor was performed; and 3) must be served personally or registered (not certified) mail.  You should note that if the contractor actually receives the notice it is effective even if the service method was not proper under the statute but it is not recommended that you try this method.  Stick to the statute when at all possible to avoid problems with service.  

The lawsuit against a bond procured pursuant to State Finance Law Section 137 must be filed within 1 year of the date that the project was completed and accepted by the public owner.  Additionally, State Finance Law Section 137(c) provides that the claim may include interest and that the Court may, in its discretion, award attorney's fees to the prevailing party as well, and the fees will be covered by the bond, if it is determined that the original claim or the defense to the claim was without substantial basis in law or fact.  

Like the Miller Act, the notice requirements of the Little Miller Act in New York are strict.  It is wise to hire an attorney to prepare and serve the notice on your behalf to make sure that you do not lose your rights to protection under the bond due to a technical misstep.  

Vincent T. Pallaci is a partner in the New York law firm of Kushnick Pallaci, PLLC.  His practice focuses primarily on the areas of construction law, including surety claims.  He can be contacted at (631) 752-7100 or vtp@kushnicklaw.com.  You can also visit our firm site at www.nyconstructionlaw.com  

The Wicks Law Debate

In New York, all public construction projects (with very few limited exceptions) must be separately specified and bid out so that various different contracts for various trades can be awarded rather than allowing the public entity to hire the classic general contractor who can then hire all of the various trade subcontractors itself.  Wicks law is frequently the topic of hot debate with many wondering whether it is the most effective way to manage public construction in New York (and prevent corruption) or whether it simply makes projects more expensive and poorly managed?

When does Wicks Law apply?


Pursuant to General Municipal Law Section 101, any public entity entering into a contract for erection, construction, reconstruction, or alteration of buildings, when the cost of such project exceeds:

• $3,000,000.00 in New York City (Queens, Bronx, Kings, New York and Richmond Counties); or
• $1,500,000.00 in Nassau County; or
• $1,500,000.00 in Suffolk County; or
• $1,500,000.00 in Westchester County; or
• $500,000.00 in any other County in New York 

then Wicks Law applies and Municipal Law Section 101 must be followed.  

What does Wicks Law require?

When Wicks Law is applicable, the following three groups of trades must be broken into different contracts:

1.  Plumbing and gas fitting;

2.  Steam heating, hot water heating, ventilating and air conditioning apparatus; and

3.  Electric wiring and standard illuminating fixtures

In other words, the three trades must be done by three different contractors (one plumbing contractor, one HVAC contractor and one electrical contractor).  The responsibility for then overseeing these contractors falls back to the public entity.

Is Wicks Law effective?

Maybe.  It certainly depends on what entity is running the project and in which County the work is being performed.  If the entity running the project is not familiar with construction management it could end up being a negative for the project since there is no general contractor overseeing the work and reporting to the public entity.  Without a central control, there can be communication and coordination problems between the three trades that can lead to delays and cost overruns.  

Repealing Wicks Law could allow public entities to do what every other construction developer does:  bid a project out and award the contract to the most qualified, most cost efficient and effective option rather than breaking the contract into separate trades that could significantly increase the overall costs.  Those in favor of Wicks Law argue that it prevents corruption and allows the government to get the "wholesale" price rather than paying a markup through a general contractor.  But is the added hassle of dealing with four separate contractors (the three trades and then the general contractor overseeing the remaining work) really worth the cost savings?  Doesn't the additional overhead on the government end to oversee the trades directly cut out any potential savings?  

While the Wicks Law debate rages on, and calls in Albany for change have become much louder the past couple of years, I wonder what experiences, positive and/or negative, each of you have had with Wicks Law?  I am also curious whether upstate contractors, where the Wicks Law threshold is much less, feel differently about the law than downstate contractors?  

Vincent T. Pallaci is a partner in the New York law firm of Kushnick Pallaci, PLLC and practices primarily in the area of construction law.  Kushnick Pallaci has offices in Buffalo, New York and Long Island and provides legal services to the construction industry across the State of New York.

State Finance Law Section 137 Amended: Bond Claims Due Within One Year of Completion and Acceptance

Up until recently, anyone that submitted a claim under a payment bond on a public project in New York could expect that the statute of limitations to bring a claim was one year from the time that payment became due.  However, effective August 3, 2011, the legislature has amended State Finance Law Section 137 and an action against a payment bond must now be commenced within one year from the time that the public entity accepted the completion of the project.

However, you should still be careful in reviewing the timeliness of your payment bond claim.  Many payment bonds have very specific timing provisions listed in them.  The amendment to State Finance Law Section 137 cannot override an enforceable pre-existing contract provision.  That means that if your payment bond said that the action to enforce a claim had to be brought within one year of the time that payment became due, then that provision still controls. 

For new claims, there will be those that will argue that State Finance Law Section 137 provides a minimum and any contractual provision that creates a one year period that would expire before one year from the time the project is accepted is illegal and unenforceable.  But my suggestion is to not become the test case.  Follow the provisions of your payment bond and you are in good shape to avoid procedural problems and you will be able to focus on establishing that you performed your work properly and on time and should be paid. 

Vincent T. Pallaci is a construction attorney in New York.  He can be reached at (631) 752-7100 or vtp@kushnicklaw.com   His firm's website is http://www.nyconstructionlaw.com/  

School Construction Authority's Disqualification of Contractor Upheld

In Matter of Surton Construction v. NYC School Construction Authority a contractor challenged being disqualified from the list of contractors allowed to bid or work on public projects within the City of New York.  The School Construction Authority claimed that the contractor engaged in a "persistent and repeated pattern of knowingly and intentionally submitting false and misleading information to the SCA in connection with the prequalification review process."  This pattern led to disqualification.  The trial court upheld the determination and the determination was confirmed by the Appellate Division. 

This should be a warning for contractors to carefully consider the accuracy of documents they submit in the bidding process.  False statements may doom them not just for the particular bid but from being able to bid on any project in the future. 

Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on the area of construction law.  He can be reached at (631) 752-7100 or vtp@kushnicklaw.com

Court rejects late submission of payment bond claim

Pursuant to State Finance Law Section 137:  "a person having a direct contractual relationship with a subcontractor of the contractor furnishing the payment bond but no contractual relationship express or implied with such contractor shall not have a right of action upon the bond unless he [or she] shall [give] written notice to such contractor within one hundred twenty days from the date on which the last of the labor was performed or the last of the material was furnished, for which his [or her] claim is made." In Brer-Four Trans. Corp. v. Zurich America Ins. Co. the general contractor hired a subcontractor to remove excavated materials from a site.  The subcontractor (S1) then hired another contractor to assist it with the removal (S2).  S2 claimed that it was not paid in full and brought a claim against Zurich (the surety that issued the payment bond to the GC pursuant to State Finance Law Section 137).  Zurich moved to dismiss claiming that S2 failed to comply with State Finance Law Section 137 by notifying the GC of the claim within 120 days from the date on which the last of the labor was performed. 

While the trial court originally denied the motion, the Appellate Division revered and found that since S2 did not submit the bond claim to the general contractor within 120 days the claim was barred under State Finance Law Section 137.  The lesson to be learned is to submit your bond claim on time, in writing and not to wait until the last day to do so.  Also, you should keep in mind that some bonds contain provisions requiring notice within less than the 120 days provided by State Finance Law Section 137.  The AIA Payment Bond (AIA A 312) for example, has a provision requiring notice to be submitted within sixty days.  When in doubt, read the bond in full and contact a construction attorney to find out what deadlines apply to your particular claim. 


Vincent T. Pallaci is a partner at the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on the area of construction law.  He can be reached at (631) 752-7100 or vtp@kushnicklaw.com

How to File Mechanic's Lien in New York

There is a lot of wrong, misguided and incomplete information out there about how to file a mechanic's lien in New York. A lot of confusion results from the fact that many mechanic's lienors reside outside of New York and may simply have shipped materials to New York or worked on a project in New York. New York's lien laws, while similar to many other lien laws, are not exactly "typical." So, we come to the key question: How do I file a mechanic's lien in New York? Here is your answer:


Private Lien (Not a Single Family Home)


1. First you need to make sure that you are within your time to lien. For private projects in New York (that are not single family dwellings) you have eight (8) months to file a mechanic's lien. The time begins to run from the last time that you performed services or provided materials to the subject site. There is a lot of confusion out there about just what makes something a "commercial" project subjecting it to the eight (8) month period as opposed to the four (4) month period applied to single family dwellings. Its simple: if its a single family dwelling, regardless of any other factor, it is the four month period. It does not matter if the single family dwelling is owned by a corporation or that the single family dwelling is part of a condo or cooperative (condos and co-ops raise entirely different issues).


2. If you are okay time wise, find out who owns the property. This can be fairly simple within New York City because you can use ACRIS. If you are outside of New York City (or not confident in your ability to properly use ACRIS) a title company can tell you who the owner of the property is for a small fee.



3. Find out the legal description of the property. Normally, the section block and lot along with the address will suffice. Some upstate counties require a more in depth description (including the infamous "schedule A" description).



4. Fill out your notice of mechanic's lien with all of the information required by the Lien Law. If you are not familiar with the information that is required then you should consult with an attorney. Failure to include ALL of the necessary information in the mechanic's lien may render it facially defective and ultimately null and void. In general, the mechanic's lien must include, at least, the following terms: 1) name of the lienor; 2) the lienor's address; 3) the name of the owner of the property; 4) the name of the person/entity that hired the lienor; 5) a description of the labor and/or materials provided to the project by the lienor; 6) the total contracted value of the work; 7) the amount unpaid (the lien amount); 8) the first date when labor and materials were provided and the last date when labor and materials were provided; and 9) a description of the property to be liened.


5. Once your lien is filled out, sign the verification and serve it on everyone required (again refer to the lien law but generally you have to serve the owner, general contractor and any other subcontractor's in the chain above you).



6. Pay the filing fee (varies by county) and file your mechanic's lien and your affidavit of service of the mechanic's lien with the county clerk. The affidavit of service must show that the mechanic's lien was served no more than 5 days before the mechanic's lien was recorded and no more than 30 days after the mechanic's lien was recorded.



7. Remember that your mechanic's lien will last for 1 year if not discharged through some action by a third party (bonding, petition to cancel, etc.).



A few important things to remember: 1) do NOT wait until the day before your lien rights will expire to file your lien. In general, starting the process 10-15 days before the lien rights expired is as close as I would recommend getting to the deadline. You want to give yourself adequate time to gather the necessary information and handle any problems that may come up; 2) do NOT wait until the day before your lien expires to file an extension. Again, try to get the process rolling no less than 10-15 days before the lien expires to deal with any issues that come up; and 3) remember that your mechanic's lien in New York is not self executing. In other words, your mechanic's lien, in and of itself, does very little for you. It does not get you paid. It simply preserves your security interest in the property that you improved. If you want to enforce your mechanic's lien then you need to file a lien foreclosure action.

While filing a mechanic's lien in New York yourself is certainly possible, I highly recommend hiring an attorney to handle it for you. If there is a defect in your lien then you could risk loosing your security interest and, if the owner or contractor you provided services to is insolvent, you could be left with nothing to collect against. Most construction attorneys are able to prepare, file and serve the mechanic's lien to you for a very reasonable price.


Private Project (Single Family Dwelling)


Just about everything above that applies to a non single family home is applicable except: 1) a mechanic's lien against a single family dwelling must be filed no later than four (4) months (120 days) after you last provided labor or services at the project; and 2) you cannot extend the lien as of right. You must obtain a court order if you want to extend your mechanic's lien past the 1 year that it is valid. Keep in mind that the mechanic's lien must actually be extended before it expires so you need to start the process of obtaining a court order (in my opinion) about 60 days before it expires.  Note that when filing a mechanic's lien for "home improvement" services, you must generally have a home improvement license issued by the County where the project is located.

Public Project


Public projects are entirely different animals when it comes to filing a mechanic's lien. The biggest distinction is that you cannot file a lien against publicly owned property. You file your lien against the funds due to the general contractor from the public entity. Every public project is different in terms of who you have to serve and where. Therefore, it is highly advisable that you hire a construction attorney in New York to file your mechanic's lien against a public project. You have thirty (30) days from the time that the project is accepted by the public entity - regardless of when your work was finished - to file your mechanic's lien on a public project in New York. If you are doing, for example, site work early on, then it may be difficult for you to know when the project is ultimately accepted since you may have been gone for months or years at that point. The solution is to serve the public entity with a demand at the beginning of the project to notify you when they accept the project.

A note to our construction industry readers that do not maintain an office within the State of New York:  Recent cases have held that in order for you to file a valid mechanic's lien, your mechanic's lien must list a New York State attorney as your attorney in order for the lien to be held valid.  This only applies if you do not maintain an office within the State of New York. 

Remember, with all mechanic's liens in New York, whether public or private, once your lien rights have expired there is nothing even the most skilled construction attorney can do to reinstate them. So if you have a claim that you want to secure and you want to make sure that it is done properly the first time then you should consult with a construction attorney and pay the small fee associated with having the attorney prepare the lien for you. A small fee up front - before a problem develops - can prevent thousands of dollars in legal fees down the line.

Vincent T. Pallaci is a partner in the New York law firm of Kushnick Pallaci, PLLC.  His practice focuses primarily on the area of construction law, including preparing mechanic's liens and prosecuting and defending mechanic's lien foreclosure actions.  For more information, or if you are looking to hire a New York mechanic's lien attorney, please visit our website at https://www.nyconstructionlaw.com, or contact Mr. Pallaci at vtp@nyconstructionlaw.com or (631) 752-7100.