The firm’s Stuart Sobel was quoted in an article in today’s Daily Business Review, South Florida’s exclusive business daily and official court newspaper, about a lawsuit by client ADF International, the steel contractor on Brightline’s downtown Miami train station. ADF was hired in 2016 by Suffolk Construction Co. Inc., the MiamiCentral general contractor, to work on Brightline’s private passenger rail station and one of the office buildings in the complex. The company claims it is owed $25.8 million for extra work blamed on on-site issues and incomplete and faulty plans. It is suing Suffolk Construction, project architect and engineer Skidmore, Owings & Merrill LLP, and All Aboard Florida, which plans to run Brightline trains between Miami and Orlando and is building MiamiCentral along Northwest First Avenue between Third and Eighth streets.
The American Institute of Architects’ (AIA) contract documents, which are generally regarded as the construction industry standards, are updated by the organization every 10 years, and the 2017 update released earlier this year contains considerable changes from the 2007 editions.
The changes in the documents directly impact the roles and responsibilities of each of the parties in construction and design contracts. Some of the major owner/contractor changes include:
- New exhibit with comprehensive insurance and bonds provisions that can be attached to many of the AIA owner/contractor agreements.
- Expression provision in the AIA A201-2017 General Conditions addressing the rights of the contractor and the obligations of the owner in the event of a loss on the project if there is no property insurance procured.
- New provisions relating to direct communications between the owner and contractor.
- Revised provisions pertaining to the owner’s obligation to provide proof that it has made financial arrangements to pay for the project and the contractor’s rights related thereto.
- Simplified provisions for the contractor to apply for, and receive, payments.
- Single Sustainable Projects Exhibit that can be used on any project and added to most AIA contracts to address the risks and responsibilities associated with sustainable design and construction services.
The latest edition of the University of Miami Law Review, the quarterly legal journal published by the UM School of Law, features an article that was authored by the firm’s Steven M. Siegfried, H. Hugh McConnell and James S. Czodli, together with Allen Bonner and the late Ervin A. Gonzalez of Colson Hicks Eidson. The article, which is titled “The Economic Loss Rule: Is a Building a Product? — Another View,” is among the last published works co-authored by Gonzalez (pictured here), the highly renowned civil trial attorney who tragically passed away in June. Our firm’s attorneys and professionals extend our deepest and most heartfelt condolences to Ervin’s family, friends and colleagues.
For insight into the ramifications of important court rulings involving construction law in South Florida, the region’s most widely read and highly regarded business and real estate media outlets often turn to the expertise of our firm’s construction lawyers. The latest example can be found in articles on an appellate ruling against the Trump National Doral golf resort that appeared today in the Daily Business Review, The Real Deal and South Florida Business Journal. Journalists from all three of these outlets interviewed firm partner Nicholas D. Siegfried, who is board certified in construction law by The Florida Bar, and quoted him in their articles.
The litigation stems from The Paint Spot’s 2014 lien against Trump National Doral Miami, which is owned by companies belonging to President Donald Trump. The paint supplier claimed it was due a final payment of approximately $32,000 from the resort. The renovation project utilized two contractors, and a Trump representative inadvertently handed The Paint Spot incorrect contractor information for its pre-suit notice to owner.
The Trump company argued the lien was invalid because The Paint Spot had served the wrong contractor. However, the appellate court ruled that the resort had actual knowledge of the supplier’s “notice to owner,” which had “substantially complied with statutory requirements.”
The end result for the Trump company is that by fighting the $32,000 bill, it will now end up paying well over 10 times as much just for the plaintiff’s attorney fees. According to the report by the Daily Business Review, South Florida’s exclusive business daily and official court newspaper, the resort is now facing a legal tab of approximately $390,000 to cover the prevailing party’s attorneys’ fees and costs.
That’s because the circuit court ruling applied a risk, or contingency fee, multiplier of 1.75 to calculate The Paint Spot’s reasonable attorney rates, which amounted to approximately $284,000 prior to the appeal. Now the company expects to tack on the multiplier for the appellate proceedings, multiplying the $75,000 it incurred on appeal also by 1.75. In addition, the amount for the lien itself has ballooned with interest to about $50,000, and the costs for the resort’s own legal fees undoubtedly are also very substantial.
The article concludes:
“This is what happens in these cases. Legal fees start to drive it,” said construction attorney Nicholas Siegfried, who was not involved in the litigation. “It appears that it got to a point where the parties were really fighting about the fees, and both sides dug in on their position,” he said.
A 2015 opinion by the Fifth District Court of Appeal had significant ramifications for the application of the statute of repose in construction defect cases. In response to the uncertainty created by the ruling, Florida lawmakers have introduced a bill to clarify one the trigger dates for the tolling of the statute of repose.
In Cypress Fairway Condominium v. Bergeron Construction Co., the condominium association brought suit on February 2, 2011 on behalf of the condominium, and as assignee of claims held by the general contractor, for recovery of more than $15 million in damages caused by construction defects. Da Pau Enterprises, Inc., the only remaining defendant after other parties reached settlements, moved to dismiss and/or for summary judgment against the association, alleging that the statute of repose expired three days prior to the date the litigation commenced.
The statute of repose in Section 95.11(3)(c) provides that actions for latent construction defects must commence within 10 years of the last of the following four events:
- the date of actual possession by the owner;
- the date of the issuance of a certificate of occupancy;
- the date of abandonment of construction if not completed; or
- the date of completion or termination of the contract between the professional engineer, registered architect or licensed contractor and their employer.
At issue was the last of the four trigger events under Section 95.11(3)(c). The defendant argued that the statute of repose commenced the date the contractor submitted its Final Application for Payment on January 31, 2001, which represented the “completion of construction.” However, the association contended that the repose period did not begin until the date final payment was actually paid by the owner on February 2, 2001, which represented the date of the “completion of contract.” The trial court disagreed with the association and granted summary judgment to the defendant, dismissing its claims.
The Fifth DCA reversed, reasoning that the unambiguous statutory language of Section 95.11(3)(c) required the completion of performance of the contract by both parties, and not just the completion of the performance of the contractor’s duties under the contract. The appellate panel concluded that the statute of repose was not triggered upon completion of construction. It found that the final act for the “completion of the contract” was final payment, and not three days earlier when the Final Application for Payment was submitted.
The firm’s Nicholas D. Siegfried authored an article that appeared as a “Board of Contributors” guest column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper. The article, which is titled “Contractor’s Fraudulent Lien Doesn’t Mean Owner Automatically Wins,” focuses on the surprising results of a recent ruling by the Fourth District Court of Appeal involving a contractor’s lien that the lower court found to be fraudulent. His article reads:
For those in the construction industry, the right to impose a lien against the improved property in the event of nonpayment is an effective tool to get paid. Chapter 713, Florida Statutes, as well as countless cases require lienors to prepare their liens accurately and to include only lienable items. The failure to properly prepare a claim of lien can result in a claim for punitive damages and exposure to attorney fees and costs.
However, based upon a Fourth District Court of Appeal case, not all is lost if a contractor’s lien is discharged as fraudulent. In fact, despite a contractor’s fraudulent lien, a contractor can still be deemed the prevailing party in an action against an owner and avoid a claim for attorney’s fees.
In Scott Newman v. Sony Construction et al., the homeowner retained the general contractor to build an addition to his home. When the owner failed to pay, the contractor ceased work, recorded a claim of lien for approximately $134,000 and later recorded a partial release of lien reducing the lien to about $100,000.
The contractor filed suit against the owner for foreclosure of the construction lien, breach of contract and quantum meruit (payments due that are not enforceable under contract). The owner filed a counterclaim against the contractor for fraudulent lien and breach of contract, and the parties subsequently agreed to a bifurcated proceeding whereby the trial court would first determine whether the claim of lien was fraudulent prior to a trial on the remaining issues.
The trial court found that many of the charges included in the lien amount by the contractor were not lienable. These included a charge for approximately $15,000 for supervision and an additional $22,200 for the contractor’s 20 percent profit margin. The trial court found that these charges, which represented a large percentage of the lien, were not supported by the contract between the parties and therefore were not lienable items. It also found other charges included in the lien for pool cleaning chemicals and services, hand tools purchased for use at the job site but not left on the premises after completion, air-conditioning warranty work and rental equipment abandoned by the contractor at the job site were “not lienable by any stretch of the imagination.”
The firm’s Lindsey Thurswell Lehr authored a guest column that appeared in the “Board of Contributors” page of today’s Daily Business Review, South Florida’s exclusive business daily and official court newspaper. The article, which was titlted “Ruling Reinforces Need to Abide by Contracts in Construction Disputes,” focused on a recent Florida appellate court ruling finding that property owners which forgo the contractual mechanisms for resolving construction disputes will not prevail in the state’s courts. Her article reads:
Strictly adhering to the modus operandi for addressing and resolving disputes that is codified in construction contracts is essential to prevailing in any resulting litigation.
The Florida Third District Court of Appeal recently reinforced the obligation of construction defect litigants to adhere to the terms of their contract, finding that property owners which forgo the contractual mechanisms for resolving disputes will not succeed in Florida’s courts.
The ruling by the Third DCA in the case of Magnum Construction Management v. City of Miami Beach relieved the contractor of liability for alleged safety concerns with a playground that it installed at the city’s South Pointe Park. The appellate panel ruled that the city did not give the contractor the opportunity to fix the purported issues with the playground as required under its contract. Instead, the court stated that the city replaced the playground in its entirety without considering that the safety concerns could have been corrected by the contractor.
The court’s decision in this case reinforces the importance of abiding by all contract terms and requirements in construction disputes. Construction contracts often allow the contractor which performed the work to have the opportunity to fix and cure any purported problems and defects. If a property owner ignores this contractual stipulation, as the city of Miami Beach appears to have done in this case, Florida’s courts are very likely to rule against them.
Firm partners Steven M. Siegfried, Stuart Sobel and Berenice M. Mottin-Berger were featured in an article about their work on behalf of one of the firm’s construction clients that appeared in today’s Daily Business Review, South Florida’s exclusive business daily and official court newspaper. The report, which was titled “Caribbean Construction Firm Scores $4M Judgment,” chronicles the highly contentious litigation and arbitration that led their securing a $4.3 million judgment against DeVry Education Group (NYSE: DV) for Moorjani Caribbean Ltd., a Barbados-based construction company. The article reads:
Coral Gables lawyers won a $4.3 million award against a subsidiary of for-profit college company DeVry Education Group in what they say was one of the nastiest arbitration battles they’ve ever fought.
Barbados-based construction company Moorjani Caribbean Ltd. sued over alleged underpayment for the construction of student housing and classroom projects at DeVry’s St. Kitts veterinary school.
Although both parties admitted some aspects of their work relationship was relaxed, with unsigned contracts and loose deadlines, the father-and-son construction company claimed it submitted detailed accounting for both projects and spent years trying to get payment before filing suit.
DeVry Medical International Inc. fought back with counterclaims, alleging it spent more than $1 million fixing design and construction defects in Moorjani Caribbean’s work on the student housing project.
By the time the 2009 bills for the two projects came to the arbitration panel this year, interest and attorney fees made the award much larger than it might have been, Moorjani Caribbean’s lawyers said. Interest on the award continues to grow at a rate of about $593 per day, according to the Aug. 19 final arbitration award.
Firm partner B. Michael Clark, Jr. authored an article that appeared in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper. The article, which was titled “Ruling Creates Opening for Property Owners to Escape from Liens,” focuses on the implications of a recent ruling by the Second District Court of Appeal that has created a potential new opening for property owners to quickly wipe away the lien rights of unwary lienors. Michael’s article reads:
The decision came in the case of Georgia Hiller v. Phoenix Associates of South Florida. Hiller, a homeowner, contracted Phoenix for work on her home and then allegedly failed to pay. Phoenix recorded a lien against her property, and Hiller responded by posting a transfer bond to remove the cloud of the encumbrance from the property.
Hiller proceeded to record a notice of contest under section 713.22(2), shortening the time frame for Phoenix to commence an action against the transfer bond to 60 days.
The contractor had already filed a complaint against Hiller to foreclose the lien as well as for breach of contract and unjust enrichment. However, despite having notice of the transfer and the contest, it failed to commence an action against the surety within the 60-day deadline. Instead, after the passage of more than 60 days, it filed a motion to amend its complaint to add the surety of the transfer bond to the suit.
Hiller, presuming that the transfer bond automatically extinguished after the 60 days elapsed, filed a motion for the release of the transfer bond, which was denied by the trial court and became the basis for her appeal.
Firm shareholder Stuart Sobel authored a guest column that appeared in the May issue of Construction Executive magazine, one of the leading construction industry trade publications in the country. His article, which was titled “Dispute Review Boards: An ADR Technique That Works,” focused on the use of DRBs for major projects as an effective means to avoid or resolve disputes that may arise during construction. Stuart’s article reads:
Disputes are endemic to the collaborative nature of construction. It seems prudent to anticipate the disputes, even where the precise nature of the dispute is unknowable, and create a structure for proactively addressing and resolving them when they do arise. Traditional dispute resolution, whether arbitration or litigation, when invoked at the end of the project, takes place too late to save it or get it back on track. Instead, proactive onsite real-time dispute resolution is warranted to protect working relationships, cash flows and schedule progress.
Arbitration has become the preferred alternative dispute resolution forum for resolving construction disputes because it is private, streamlined and presided over by experienced construction professionals.
However, just as with litigation, arbitration only comes into play after a dispute has ripened. The arbitration process usually extracts a considerable toll on the project participants through damaged relationships and expenses. The parties involved are very unlikely to continue doing business together in the future. In addition, discovery in arbitration proceedings is now wider, longer and more expensive, and its growing resemblance to litigation has become unmistakable. Thus, despite its reputation as a cheaper alternative to litigation, arbitration has become more expensive as the process permits more litigation-like discovery, with attendant administrative costs and arbitrators’ fees.
Instead, consider the scenario where an independent person or board, respected by all project participants, is designated in the operative construction contracts to stay abreast of the design and construction and to attend and observe all pertinent meetings (owner/architect/contractor meetings, change order meetings and even important contractor/subcontractor meetings). Through this process, the dispute resolution neutral or, where there is more than one, the Dispute Resolution/Review Board (DRB), can quickly understand the nature and genesis of disputes that are blossoming — before they slow or stop the construction progress.