HERE’S AN UPDATE ON THE EFFECT OF PRIOR RULINGS ON SUBSEQUENT LITIGATION

In a prior post, this blog explained how the Supreme Court held that an owner’s claims against subcontractors were barred because they were either brought or could have been brought in the owner’s prior arbitration against the general contractor. Girolametti v. Michael Horton Assocs., Inc., 332 Conn. 67, 71 (2019). The court ultimately determined that the contractual relationship between a general contractor and its subcontractors was sufficient to determine that they were “sharing the same legal right.” Therefore, “the rule of claim preclusion,” which prevents the re-litigation of a claim once the claim has had a full and fair hearing “regardless of what additional or different evidence or legal theories might be advanced in support of it,” applied in this case even though the subcontractors did not participate in the arbitration. Id. at 75.

Girolametti involved a situation where the dispute between the owner and general contractor included claims that the work performed by subcontractors was defective. Although the subcontractors were not parties to the arbitration, they were no doubt happy with the result and more than willing to have that decision applied to the owner’s subsequent lawsuit against them.

In my prior post,

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DON’T LET YOUR MECHANIC’S LIEN RIGHTS LAPSE DURING THE COVID-19 PANDEMIC

Because of the current crisis, the state has closed the courts to all activities except essential functions. Almost the entire civil docket has been suspended. In order to mitigate those effects, the Governor’s Executive Order No. 7G (the “Executive Order”) suspends “all time requirements, statutes of limitation or other limitations or deadlines relating to service of process, court proceedings or court filings” including “all time limitations in Chapters 959, 959a, 960 and 961 of the General Statutes.” The problem is that a mechanic’s lien is recorded on the land records (not in court) and mechanic’s liens are discussed in Chapter 847 of the General Statutes, instead of the chapters specifically mentioned above. Thus, regardless of whether the omission was intentional, mechanic’s liens are not expressly covered by the Executive Order.

Because land records are maintained by Connecticut’s municipalities, the Executive Order does not extend the deadline to record a mechanic’s lien. However, the problem with recording mechanic’s liens during the pandemic is that most City and Town Clerk’s offices are not open to the public. Each City and Town is handling the situation differently. Some are accepting submissions online. Others have a drobox outside City Hall or Town Hall.

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PROPOSED LEGISLATION IN NEED OF SUPPORT

In a previous post, I explained that the way Connecticut substitutes bonds for mechanic’s liens needs to be changed. I have now been honored to participate in a group that drafted proposed legislation for this purpose, which has been presented to the Connecticut General Assembly as Raised Bill No, 5428.

Raised-Bill-No.-5428-1Download

On Tuesday, March 10, 2020, there is a public hearing on the Raised Bill. If I were allowed to testify, I would offer the following:

Our mechanic’s lien laws serve the important purpose of allowing those who provide labor, materials, and/or services for the improvement of real property without payment to obtain a security interest in improved property, but it was never the intention of our mechanic’s lien laws to prevent the free transfer of real property. For that reason, Conn. Gen. Stat. § 49-37 allows a person interested in the improved property to substitute a surety bond for the mechanic’s lien. In that situation, the lienor’s alleged debt is still secured, but the property owner may sell or refinance the improved property. The problem is that the process required by Conn. Gen. Stat. § 49-37 is cumbersome and time consuming.

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A RECENT SUPREME COURT DECISION DRAMATICALLY AFFECTS SUBCONTRACTORS’ RIGHTS

In Girolametti v. Michael Horton Assocs., Inc., the Supreme Court determined when a subcontractor’s rights will be affected by an arbitration in which the subcontractor did not participate. Girolametti v. Michael Horton Assocs., Inc., 332 Conn. 67, 71 (2019). This decision was based upon “the rule of claim preclusion,” which prevents the re-litigation of a claim once the claim has had a full and fair hearing “regardless of what additional or different evidence or legal theories might be advanced in support of it.” Id. at 75. In order for claim preclusion to apply, the following requirements must be met:
(1) The prior judgment must have been rendered on the merits by a court of competent jurisdiction;
(2) The parties to the prior and subsequent actions must be the same or in privity;
(3) There must have been an adequate opportunity to litigate the matter fully; and
(4) The same underlying claim must be at issue.
Id. After applying these requirements in Girolametti, the Supreme Court held that the owner’s claims against the subcontractors were barred because they were either brought or could have been brought in the owner’s arbitration against the general contractor.

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How to Successfully Deal with OSHA

At the outset, I want to stipulate that it is important to protect worker health and safety. At the end of the day, the most important thing is to have everyone go home safe and sound. The Occupational Safety and Health Administration (“OSHA”) is an administrative agency charged with promoting the health and safety of workers across many industries. While I do not want to belittle OSHA’s mission, there is no question that government regulation can be detrimental to business, and it could be argued that OSHA is unnecessary.

Without question, there is not a single employer who wants anything to happen to its workers. While there might be an occasional employer who does not fully value its employees, even the most callous individual would recognize that employee injuries and/or deaths are detrimental to productivity and profits. Therefore, the last thing anyone wants is for there to be any accidents.

Notwithstanding the foregoing, OSHA is not going to be going way any time soon. Thus, if you are working in the construction industry, it is important to know your rights and to know how to handle both a routine inspection and/or an accident situation.

Connecticut is one of four states that has both federal and state OSHA.

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When the Breach of a Construction Contract is not a Breach

The doctrine of substantial performance holds that a contractor’s breach of a construction contract does not entitle the owner to damages because the contractor’s performance was close enough to that which the contract required. “Technical violations are excused not because compliance [is] impossible, but because actual performance is so similar to the required performance that any breach that may have been committed is immaterial. Substantial performance occurs when, although the conditions of the contract have been deviated from in trifling particulars not materially detracting from the benefit the other party would derive from a literal performance, [the other party] has received substantially the benefit [it] expected, and is, therefore, bound to perform.” United Concrete Prod., Inc. v. NJR Constr., LLC, No. CV176011932S, 2018 WL 5733720, at *4 (Conn. Super. Ct. Oct. 17, 2018). The classic example of this doctrine is a situation where the contract specifies a product manufactured by Company A but the contractor provides the same product manufactured by Company B. Because the contract expressly stated that the product shall be manufactured by Company A, the installation of the same product manufactured by a different company is a breach of the contract. However, because the products are identical other than the name of the manufacturer,

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Connecticut’s Procedure for Substituting a Bond for a Mechanic’s Lien Needs to be Changed

The purpose of a mechanic’s lien is to provide collateral for a contract debt. If you perform work on a project and are not paid, then the mechanic’s lien laws allow you to attach the property where the work was performed. In other words, a mechanic’s lien provides you with a property right you can foreclose in the same manner a bank can foreclose a mortgage. However, before you can force a sale of the property to collect your money, you have to prove you are entitled to the payment you claim. Therefore, a mechanic’s lien could be in place a long time.

Because the lien laws are intended to provide security for a debt, but are not intended to prevent the property from being transacted, most states, including Connecticut, have a procedure by which a surety bond can be substituted for a mechanic’s lien. The problem with Connecticut’s procedure is that it is too long and cumbersome.

While a mechanic’s lien is in place, a property cannot be refinanced, or sold – at least not without addressing the mechanic’s lien to a lender’s and/or buyer’s satisfaction. It is possible that the property might be refinanced or sold if the owner places the lien amount in escrow,

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FILING A MECHANIC’S LIEN WITHOUT AN ATTORNEY IS ALLOWED BUT DIFFICULT TO DO SO CORRECTLY

I don’t recommend that contractors file their own mechanic’s liens without the aid of an attorney. Every client and/or potential client that has ever come to me asking that I foreclose a mechanic’s lien that they filed on their own had some fatal defect. The reason for that is the arguably conflicting laws in the statutes and in the court decisions interpreting those laws.

A prime example of something that is not readily apparent by reading the mechanic’s lien laws is the notice and service requirements. According to our courts, “[r]ead together, [Sections] 49-34 and 49-35 [of the Connecticut General Statutes] require the [contractor filing the lien] to serve a copy of the certificate upon each owner of the property within 90 days after he ceased performing services or furnishing materials.” Steeltech Bldg. Prod., Inc. v. Viola, 2000 WL 726367, at *2 (Conn. Super. Ct. May 16, 2000). Of course, one may not reach that same conclusion reading [Sections] 49-34 and 49-35 on their own. According to Connecticut General Statutes § 49-34, “[a] mechanic’s lien is not valid unless the person performing the services or furnishing the materials [records a certificate of mechanic’s lien in the land records] within ninety days after he has ceased to do so…” However,

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The Importance of Reading and Understanding Your Construction Contract

Everyone knows that they ought to eat right and exercise; yet, far too few of us do it. Similarly, proper construction contract management requires a contractor to thoroughly understand their contracts but many fail to do so. Of course, the reason that contractors are often largely ignored are understandable. Most construction contracts have the same substantive provisions with which contractors are already familiar; the specific requirements for any given project will be discussed at the preconstruction meeting; and the more specific details of any contract tend to only really matter in the rare occasions that the parties end up in a dispute they cannot resolve on their own. However, the few instances that result in litigation may make having proper practices in place for every project worthwhile.

On a positive note, most contractors that I encounter are now reading their contracts before signing them, as opposed to only reading them after a problem develops. As obvious as this may sound, actually taking the time to thoroughly read a contract before a project begins is the only way to be certain that you will fully comply with all your obligations. In addition, reading a contract before signing can prevent a contractor from experiencing an unfortunate surprise.

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WHAT TO DO WHEN YOU ARE NOT BEING PAID

The most common issue I confront as a construction attorney is what to do when my client is not being paid. The standard approaches include sending a demand letter, making a demand for disputed funds to be placed in escrow in accordance with the prompt payment statute, and, of course, filing mechanic’s liens and/or bond claims. The larger issue becomes what to do when my client can no longer to perform its work without payment.

As a general rule, a contractor is better off completing its work, and then fighting about the monies due, as opposed to walking off the job. While it is true that there are Connecticut cases which hold that a contractor is excused from finishing its work if progress payments are not made when due, but reliance on such cases is fraught with potential problems.

If you ever forced to litigate, you want to be viewed as the one wearing the white hat. You want to be the injured party that is as pure as the driven snow. If at all possible, you do not want to give the other side any arguments to raise. Thus, if you walk off the job for nonpayment,

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