BEFORE PROCEEDING WITH LITIGATION, YOU NEED TO FULLY EVALUATE YOUR CONSTRUCTION CONTRACT CLAIM

As I have often stated, any settlement you can live with is far better than the result an attorney will achieve for you at trial.  Trials are time consuming and expensive, and, no matter how good your case is, there is no guarantee what the result will be when you let an arbitrator, judge or jury decide your fate.  In addition, it is not productive for you and your employees to spend weeks away from your current projects to prepare for and attend a trial intended to resolve a dispute from a job that has long been completed.  Thus, even a “win” at trial may not be considered a true success once you add in all the ancillary costs.

In light of the foregoing, for a case to go to trial, at least one of the parties must have an unreasonable valuation of the case.  For example, I once defended a contractor from a subcontractor’s lost productivity claim that greatly exceeded the subcontractor’s actual costs.  The subcontractor’s lost productivity claim was based upon a Measured Mile Analysis that purportedly determined that the subcontractor suffered $27 million in damages.  However, the subcontractor’s financial statements indicated that its total loss was only $12 million. 

THE FALSE CLAIMS ACT: A BAD IDEA WHOSE TIME HAS (UNFORTUNATELY) COME

Right now, more than half the states and the federal government have some version of a False Claims Act that is applied to the construction industry.  In general, a False Claims Act allows the government to impose civil penalties for presenting what are determined to be “false claims.”  The federal False Claims Act imposes a civil penalty upon anyone that knowingly presents a “false” claim to the government that shall be “not less than $5,000 and not more than $10,000 … plus 3 times the amount of damages which the Government sustains because of the act of that person.”  (Emphasis added)  31 U.S.C.S. § 3729.  Using the federal statute as an example is appropriate because most of the states that have their own False Claims Acts have modeled their statutes after the federal act’s requirements, penalties, and interpretation, and the states that are in the process of developing such acts are likely to do so as well.  That’s important because the federal act does not specifically define “fraud” and there is no requirement in the federal act for a claimant to have a specific intent to defraud the government before a claimant can be found liable.

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.

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.

Recent Supreme Court Case Teaches Important Lessons

It is no secret that public works construction is a difficult business.  On any given project there are innumerable ways that things can go wrong. With any project involving excavation and underground utilities, encountering changed conditions should not be a surprise.  Of course, such changed conditions are not the contractor’s responsibility.  What is the contractor’s responsibility, however, is providing the public owner with proper notice of its claims in accordance with the subject agreement.

One of the reasons public works construction projects are more onerous than their private counterparts is because public owners rarely negotiate contract terms. Contracts that are slanted significantly in the public owner’s favor are the norm.  Thus, as the contractor in a recent state Supreme Court decision learned, it is vitally important to read the contract and abide by its terms.

One of the lessons from Old Colony Cosntr., LLC v. Town of Southington, 316 Conn. 202 (Conn. April 21, 2015) is that general assertions of entitlement to damages and/or additional contract time is not sufficient when the contract requires more detail.  During the long duration of the project, the contractor in Old Colony repeatedly indicated that each problem that occurred impacted its schedule and costs.