Florida Construction Lawyer Blog

A recent ruling by the Second District Court of Appeal in a lawsuit against Raymond James Financial Services for securities violations has major implications for the use of arbitration to resolve construction disputes. The court ruled that Florida's statute of limitations does not apply to arbitration unless the contract between the parties expressly provides for its application. This decision has far-reaching implications for those construction contracts which call for arbitration to resolve disputes. Until the decision is reviewed by the Florida Supreme Court or another district court, parties to a construction contract could potentially be liable for construction defects indefinitely if their contract calls for arbitration and does not specifically state that Florida's statute of limitations is applicable.

The Raymond James case hinges on the language in the contract, which fails to expressly state that Florida's statute of limitations is applicable. The contract stated that it will not "limit or waive the application of any relevant state or federal statute of limitation." Therefore, it essentially left it to the courts to determine whether Florida's statute of limitations is relevant to arbitration.

The appellate panel upheld the circuit court's ruling that Florida's statute of limitations was not applicable to the Raymond James account holders' arbitration claims. The lower court applied the Florida Supreme Court's decision in Miele v. Prudential-Bache Securities which determined that arbitrations are not considered "actions" or "proceedings."

The appellate court agreed with the circuit court's decision, noting that if the legislature intended for the word "proceeding" to include arbitrations, it could have expressly defined it to include arbitrations or specifically included a reference to arbitrations in the corresponding statutes. Absent this, the court determined that it was a stretch to determine that the legislators' intent was to extend the state's limitations periods to arbitrations. The appellate court also noted that most jurisdictions which have considered this question have not read into their statute of limitations any implicit extension to arbitrations as they are not generally regarded as "proceedings."

The problem for Raymond James is that it used a standard clause in the contract that it believed was suitable for use nationwide. It did not expressly include in its contract that Florida's statute of limitations would apply to any claims, and thus, the court determined that Florida's statute of limitations was inapplicable.

The appellate court determined that the applicability of the limitations periods to arbitration was an issue of first impression in Florida, and it certified the following question to the Florida Supreme Court as a question of great public importance:

DOES SECTION 95.011, FLORIDA STATUTES, APPLY TO ARBITRATION WHEN THE PARTIES HAVE NOT EXPRESSLY INCLUDED A PROVISION IN THEIR ARBITRATION AGREEMENT STATING THAT IT IS APPLICABLE?

Our construction law attorneys will continue to monitor whether the Supreme Court or another appellate court addresses this issue, which we will cover in this blog as it unfolds. In the meantime, all construction firms in the state should work with qualified legal counsel to ensure that their contracts expressly include Florida's statute of limitations in the arbitration agreement. Otherwise, they will remain potentially liable for construction defect claims in perpetuity.

A recent ruling by the Fourth District Court of Appeal serves as an important reminder for general contractors and construction firms which are contracted by tenants for improvements to leased property. The court upheld the lower court's decision that found that the contractor could not assert a claim of lien against the landlord when the tenant defaulted on its construction contract. For the landlord's perspective on this ruling and related changes to Florida's lien law, click here to read the article by Fern Musselwhite in our real estate blog.

In its ruling, the court specifically placed the burden on the general contractor, MHB Construction Services, to understand the landlord's prohibition against liens and protect itself by binding the landlord under its construction contract with the tenant.

The appellate panel noted in its decision that the Notice of Commencement filed by the landlord/lessor does not provide the contractor with the right to lien the property of the landlord who is not party to the contractor-lessee contract for the improvements. Also noted in the decision were the facts that the landlord's lease and its properly recorded Notice of Lien Prohibition expressly prohibited claims of lien for improvements made by the tenant, the lease required advance written consent for the improvements by the landlord, and the lease did not require that the improvements be made by the tenant.

The court also was not swayed by the arguments by MHB Construction that a $10,000 reimbursement by the landlord towards the tenant's improvements constituted an unfair scheme by the landlord to avoid liens and use the tenant as a strawman for the improvements. The court found in its ruling that the $10,000 amounted to less than 10 percent of the total costs of the improvements and was contingent on the tenant receiving a final release from MHB.

The contractor in this case is now unable to assert a lien against the landlord and, additionally, must pay the landlord's attorney fees in the matter. Ultimately, it has learned a very expensive lesson about the importance of contractually ensuring its right to a claim of lien against the landlord/lessor in construction contracts with a lessee tenant.

Our South Florida construction law attorneys work closely with our clients to help ensure that their lien rights are soundly protected in all of their contracts with tenants, landlords and owners. We write about important cases and matters affecting the construction industry in this blog, and we encourage industry followers to submit their e-mail address in the subscription box at the top of the column on the right in order to automatically receive all of our future articles.

Our construction law attorneys in South Florida work very closely with our clients in reviewing and finalizing all of their job contracts. A decision by the Fifth District Court of Appeal from earlier this year serves as an excellent reminder for construction firms of the importance of avoiding mistakes in their contracts stemming from the use of multiple job proposals before contracts are finalized.

L & H Construction Company, the general contractor in the case, filed the appeal after the trial court ruled in favor of Circle Redmont, the subcontractor which had sued L & H for breach-of-contract. The trial court concluded that the contract between the two parties was in error as a result of a mutual mistake or scrivener's error stemming from Redmont's submission of multiple job proposals, which L & H had requested. The error resulted in an impasse on the issue of whether Redmont would complete the installation of a staircase or simply supervise the installation.

The appellate panel agreed with the trial court's ruling that the word "install" in the contract was the result of a mutual mistake, and it was the express understanding of both parties that Redmont would supervise the installation rather than actually install the staircase. However, the appellate court ruled that the trial court's judgment was internally inconsistent. It could not support the lower court's finding that L & H breached the contract in May 2006, as it could not find any conduct by L & H that constituted a breach by that date. The court noted that it was hampered in reviewing the record because the trial court had sustained objections by Redmont and disallowed evidence about exactly what transpired when the parties reached the stalemate on the installation issue. The trial court found that this evidence constituted settlement negotiations, represented attorney-client communications, or was irrelevant. As a result, the panel ruled that this resulted in insufficient evidence to support the trial court's final judgment, so Redmont essentially may have lost the appeal due to its own objections regarding the admission of the additional evidence.

Of course, this litigation very likely could have been avoided by both parties if they had thoroughly reviewed the contract for ambiguities to ensure it was complete and correct. The mistake now appears to have proven to be very costly for Redmont as well as L & H, and the case has become just one of the many examples of the potential implications of errors in construction contracts. Our other construction law attorneys and I will continue to monitor and write about cases and issues such as this, and we encourage industry followers to enter their e-mail address in the box on the right in order to automatically receive all of our future blog posts.

A recent ruling by the Third District Court of Appeal affirmed the lower court's decision that a subcontractor used delay tactics in its dispute with the general contractor for a construction project at a Miami Beach elementary school. The appellate panel confirmed the trial court's decision that the subcontractor had been properly terminated.

The case stemmed from a breach-of-contract action filed by Mario's Enterprises Painting and Wallcovering, Inc. ("Mario's") against Veitia Padron, Inc., the general contractor which had contracted Mario's as a painting subcontractor for renovations at the Feinberg Fisher K-8 Center school in Miami Beach. Once the painting work began at the school, lead was discovered in the building that was being painted, and the general contractor notified the subcontractor of several deficiencies in its work. However, the subcontractor refused to return to the school to complete its work until the lead report on the entire project was completed, even though the tested levels in the building that had been painted were well below acceptable exposure limits.

The general contractor notified the painter that if it did not return to the jobsite to continue working within 72 hours, the company would hire a replacement painting subcontractor to complete the project. After the painting was completed by the new subcontractor, Mario's sued the general contractor for breach of contract. The trial court found in favor of Veitia Padron, and the appellate panel upheld the decision and noted in its ruling that "there is sufficient competent evidence in the form of correspondence and witness testimony in the record to uphold the trial court's findings that the painter's actions were essentially delay tactics and that it was properly terminated."

This ruling reaffirms that the courts will not tolerate delay tactics by subcontractors after they are notified of deficiencies in their work and a dispute arises. Our attorneys who focus on construction law matters will continue to monitor and write about court decisions affecting the construction industry in Florida, and we encourage industry members to submit their e-mail address in the box on the right in order to automatically receive all of our blog posts.

A recent appellate ruling reversed the trial court's decision and cleared the president of a carpentry company from individual liability after the lower court found that he had filed a fraudulent claim of lien. The ruling has the potential to affect many other cases in which the courts determine that a claim of lien is fraudulent and, as a result, statutory damages are awarded.

In the case of Bruce Tansey Custom Carpentry, Inc. v. Goodman, Edmond B. Tansey, as president of the carpentry company, contracted with Goodman and subsequently filed a claim of lien and an amended claim of lien against Goodman. In its final judgment, the trial court determined that the contracting parties were Gary W. Goodman, Jennifer Goodman, Edmond B. Tansey, individually, and Bruce Tansey Construction, which was the fictitious name of Edmond B. Tansey at the time that the contracts were executed.

The trial court found that Tansey's claim of lien and amended claim of lien were fraudulent, and that Edmond B. Tansey, individually, and Bruce Tansey Custom Carpentry, Inc. were both liable to the Goodmans for statutory damages. The Florida Second District Court of Appeals reversed the ruling that Tansey was individually liable on the grounds that the complaint and amended complaint did not allege individual liability and, even if the complaints had alleged that Tansey was individually liable, the evidence did not support individual liability because Custom Carpentry was the lienor and Tansey signed the liens as president of Custom Carpentry. The appellate ruling also found that neither the original lien nor the amended lien stated or implied that Tansey, individually, was the lienor.

The attorneys who focus on construction law in South Florida at our firm as well as others throughout the state will be sure to reference this decision whenever questions arise about individual liability in cases where the court finds that a claim of lien is fraudulent. Our firm will continue to monitor and share information about important court decisions for the Florida construction industry in this blog, and we encourage industry members to submit their e-mail address in the box on the right in order to subscribe to the blog and automatically receive all of our future posts.

A recent construction lien claim and appeal that we handled on behalf of Miami-based CDC Builders, Inc. against developer Riviera Almeria, LLC led to a reversal of the lower court's decision that would have discharged CDC's construction liens over two stalled Coral Gables custom home projects. The appellate court's ruling in the case overruled the trial court's interpretation and application of Chapter 713 of the Florida Statutes wherein the trial court incorrectly discharged and invalidated CDC's construction liens against the developers due to the trial court's finding that the contractor's interim payment requests were inaccurate.

The appellate ruling, which has significant implications for many other contractor lawsuits and construction liens, was the subject of a report in the Thursday, December 9, edition of the Daily Business Review. The article quoted 3rd District Court of Appeal Chief Judge Juan Ramirez who wrote that the Miami-Dade Circuit Court's ruling in this case would have "a deleterious impact . . . on the construction industry as a whole. If we agree with the trial court, the purpose of liens would be undercut. Liens could be subject to attack for inaccuracies or simple mathematical errors. That was not what the Florida Legislature intended when it enacted the construction lien law."

The article further explains:

"Miami-Dade Circuit Judge Gill Freeman granted the developer's motion for partial summary judgment and discharged the lien, ruling that CDC had wrongly filed false interim payment applications because it had withheld subcontractor money.

The 3rd DCA panel ruled that Freeman should not have discharged the lien because CDC was adhering to its contract with Riviera.

'Not only was CDC Builders allowed to withhold a retainage, it was contractually required to do so,' Ramirez wrote.

The opinion also pointed to state law, which 'does not prevent any person from withholding any payment, or any part of a payment . . . if there is a bona fide dispute regarding the amount due.'

The court added that 'to agree with the trial court's application of the statute would mean that otherwise valid liens would violate the lien law.'"

We were very pleased to have helped our client prevail in this appeal, and we believe the reversal of the trial court's decision in this case is going to have a positive impact for many of the contractors which have filed construction lien claims in the state. The South Florida construction law attorneys at our firm will continue to write about important cases and rulings in the state's courts, and we encourage those who are interested in our analysis and insights to add their e-mail address to the subscription box at the top of the column on the right in order to automatically receive all of our future blog posts.

Construction contracts in Florida frequently have indemnity clauses, which are aimed at shifting liability to the wrongdoing party. In the construction setting, a job-site injury could involve a number of potential defendants, including the contractor, subcontractors, engineer, architect, owner, laborers and suppliers. Construction law attorneys at our firm work closely with our clients on indemnity claims by examining the acts or omissions of the parties and the extent to which they gave rise to liability.

Under Florida's common law, indemnification is allowed only where the party against whom indemnity is sought bears the entire fault for the loss. A two-prong test must be satisfied to prevail on a common law indemnity claim. "First, the indemnitee must be faultless and its liability must be solely vicarious for the wrongdoing of another. Second, in order for the faultless party to shift liability to the other, the indemnitor must be at fault. "

In addition to common law indemnity, there can be express contractual indemnity provisions. Contractual indemnity provisions are not concerned with vicarious, derivative or technical liability, but with "the express terms of the agreement to indemnify." In an illustrative case, an engineering firm sought indemnification from the general contractor. The sub-subcontractor's employee received an electrical shock from a crane that was too close to a power line, resulting in permanent brain damage. His guardian sued the engineering firm as well as the general contractor, subcontractor and other parties. The engineer eventually settled the lawsuit for $3.55 million and filed a complaint against the contractor for indemnity.

The contractor argued that the engineer had no right to indemnity under the indemnity clause in their contract because the engineer had been sued for its own negligence, and not the contractor's negligence. The contractor's position was that unless the engineer had been sued on a theory of vicarious liability for the contractor's negligence, both common law and contractual indemnity were not available to the engineer.

The court disagreed. It stated that the indemnity provision "clearly expresses the parties' intent that the engineer may be indemnified by the contractor even if the engineer is sued for its own wrongful conduct." The court observed that the intent of the parties "was to indemnify [the engineer] for any claim arising out of the negligence of [the contractor] even if [the engineer] was also negligent." Thus, the engineer could seek indemnity from the contractor even if some of the fault could be attributed to the engineer. The court concluded that if all or part of the settlement was based on potential liability for negligence that was unrelated to design, then the engineer would be entitled to indemnity for the monies paid to the sub-subcontractor's employee.

In accordance with section 725.06, Florida Statutes (2009), any contract in connection with the construction, alteration, repair or demolition of a building, structure or appliance wherein any party promises to indemnify the other party for liability for damages "caused in whole or in part by any act, omission or default of the indemnitee arising from the contract or its performance, shall be void and unenforceable unless the contract contains a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents, if any." Pursuant to the statute, the monetary limitation on the extent of the indemnification "by any party in privity of contract with such owner shall not be less than $1 million per occurrence, unless otherwise agreed by the parties."

The statute further specifies that "such indemnification shall not include claims of, or damages resulting from, gross negligence, or willful, wanton or intentional misconduct of the indemnitee or its officers, directors, agents or employees, or for statutory violation or punitive damages except and to the extent that the statutory violation or punitive damages are caused by or result from the acts or omissions of the indemnitor or any of the indemnitor's contractors, subcontractors, sub-subcontractors, materialmen, or agents of any tier or their respective employees."

The full implications of the recent changes to this statute have not yet been tested. The statute states that a construction contract which allows one party to indemnify the other for the other party's own negligence is unenforceable, unless it contains the monetary limitation and other requirements. Common law indemnity requires that the indemnitee be entirely without fault in order to receive indemnification from the indemnitor. Thus, "there is the potential, under the new statutory language, for the argument that partial or contributory negligence on the part of the indemnitee may prevent any recovery ."

Indemnity provisions in construction contracts should be carefully drafted to incorporate the requirements of section 725.06, Florida Statutes. Considerations include:

(1) whether the contract clearly expresses an intent to indemnify a party against its own negligence,
(2) whether there are particular claims for which the indemnitor must reimburse the indemnitee;
(3) whether there is a monetary limitation on the extent of the indemnification and whether the other statutory requirements are met;
(4) the risks that are being indemnified, such as bodily injury, property damage, economic loss, and attorneys' fees; and
(5) whether there is a duty to defend if the other party is partially at fault.

A poorly worded indemnity provision could lead to the loss of protection or a costly claim. It is imperative for businesses in the construction industry in Florida to work with experienced construction law attorneys for the drafting of any indemnity clause.