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Recent Decision Discusses Procedure for Challenging the Arbitrability of a Dispute

Arbitration is a private dispute resolution procedure that is intended to be more efficient and less expensive than a traditional court trial. In arbitration, a private individual or panel of private individuals act as both judge and jury and decide the outcome of a matter in controversy. Because arbitration is a private process, parties can only be forced to arbitrate issues that they agree to arbitrate. The arbitrability of any particular issue is based upon the parties’ agreement. Of course, once a contractual relationship breaks down, the parties may disagree over the arbitrability of their dispute.

In construction contracts, arbitration clauses tend to be sufficiently broad that, in general, it is difficult to successfully challenge the arbitrability of any dispute arising out of or pertaining to the subject agreement and/or project. In Girolametti v. Rizzo Corp., 152 Conn.App. 60 (Conn.App.,2014), the Connecticut Appellate Court elaborated on the procedure for preserving the issue of arbitrability for judicial review and the severable nature of arbitration clauses.

In Girolametti, the plaintiff sought to vacate the arbitration award that had entered in the defendant’s favor. The court first questioned whether the plaintiff had properly preserved the arbitrability issue for judicial determination and noted that,

An Explanation of The Home Improvement Act’s Licensed Contractor Exception

Chapter 400 of the Connecticut General Statutes is known as the Home Improvement Act. “The purpose of the Home Improvement Act is to ensure that home improvements are performed by qualified people.” Santa Fuel, Inc. v. Varga, 77 Conn.App. 474, 495 (Conn.App.,2003). A “[h]ome improvement contract” means an agreement between a contractor and an owner for the performance of a home improvement.” Conn. Gen. Stat. § 20-419. As a general rule, a home improvement contract is not enforceable against a homeowner unless the contract complies with the writing requirements of the Home Improvement Act. Laser Contracting, LLC v. Torrance Family Ltd. Partnership, 108 Conn.App. 222, 226, (Conn.App.,2008).

The Home Improvement Act serves a valid purpose but may be heavy handed in its application. In holding that the failure to comply with the statutory requirements for a home improvement contract bars all recovery, including claims sounding in implied contract and unjust enrichment, the Connecticut Supreme Court said the following:

We recognize that our decision may lead to a harsh result where a contractor in good faith but in ignorance of the law performs valuable home improvements without complying with § 20-429.

A Connecticut Court Grants Defendant’s Motion To Stay An Application To Discharge Mechanic’s Lien Pending Arbitration

As regular readers of this blog know, a mechanic’s lien provides a contractor with a security interest in the real property where its work was performed. Because, however, it is not the intent of the mechanic’s lien laws to restrict the free transfer of title of real property, there are two statutory procedures by which an owner may obtain a release of a mechanic’s lien. Specifically, the property owner may seek to substitute a surety bond for the lien or the property owner may seek an order discharging or reducing the lien. In CDO Properties, LLC v. Bogaert Construction Co., Inc., Docket No. CV 13-6018411 (JD of New London), the Court issued a decision staying the property owner’s application for discharge of a mechanic’s lien. Based upon this decision, an owner’s attempt to promptly discharge a lien may be thwarted or delayed by a court and an owner may be forced to live with a lien until after arbitration.

The decision was based upon the Connecticut General Statutes, which require the court to stay any legal proceeding if the dispute is subject to an agreement to arbitrate. Conn. Gen. Stat. § 52-409 states:

If any action for legal or equitable relief or other proceeding is brought by any party to a written agreement to arbitrate,

The Appeal of A Decision Discharging a Mechanic’s Lien Can Potentially Be Rendered Moot

As previously discussed in this blog, anyone that has furnished labor, materials, or services for the improvement of real property and has not been paid for its work may file a mechanic’s lien against the subject property. The owner of said property may then make application to the court to obtain a discharge of said mechanic’s lien. If the property owner prevails, the contractor that filed the mechanic’s lien has a statutory right to file an appeal.

As the Connecticut Supreme Court explained in Lichtman v. Beni, “an order entered pursuant to § 49–35b is a final judgment for the purposes of appeal.” Lichtman v. Beni, 280 Conn. 25, 32 (2006). Conn. Gen. Stat. §49–35c “requires that an appeal be taken within seven days of the court’s judgment, but provides an automatic stay during that period.” Id. However, a contractor seeking to appeal an order discharging its mechanic’s lien must also use to seven stay period to obtain an order preventing the owner from recording the court order discharging its mechanic’s lien.

If the contractor does not file an additional motion requesting that the court stay the order discharging the mechanic’s lien,

If Your Mechanic’s Lien is Discharged, You’ve Lost the Battle But Not the War

After a mechanic’s lien is filed, an owner has two options. The owner can wait because, if the lien is not foreclosed within a year, it evaporates by operation of law; or, the owner can file an application with the court seeking an order discharging the lien. If the owner files an application for discharge, the court will hold a hearing during which the contractor “shall first be required to establish that there is probable cause to sustain the validity of his lien,” and, if that occurs, the owner must “prove by clear and convincing evidence that the validity of the lien should not be sustained or the amount of the lien claimed is excessive and should be reduced.” Conn. Gen. Stat. §49-35b. Thus, if a lien is discharged, either there was not “probable cause” to sustain the lien or the owner was able to present “clear and convincing evidence” that the lien should be discharged. In either case, it is evidence that the contractor’s claim for the underlying debt was weak.

The question then is whether a contractor may commence its own action against the owner to the collects the amounts that had been secured by a mechanic’s lien that had been discharged after a hearing.

You Should (Almost) Never Request a Jury for a Construction Case

Construction Contract disputes are complicated legal matters. Both sides usually have valid points to make. The winner is determined by the application of relatively complex facts to the law. Such cases often involve information beyond the knowledge and understanding of the average juror. Although it is true that most judges do not have a construction background either, judges have likely heard a prior construction case; and, as trained jurists, have a good understanding of the legal arguments that are being raised. In addition, judges are being paid to pay attention to your case. Conversely, the average juror has no understanding of construction or the law; typically does not want to be serving as a juror; and is missing out on a day’s pay. In light of the foregoing, I almost never recommend that my clients request a jury.

There is one area, however, where choosing a jury may be the right choice. Until relatively recently, it was understood that a contractor had no claim for damages arising out of a bid protest. See Lawrence Brunoli, Inc. v. Town of Branford, 247 Conn. 407, 412 (1999) (holding that the only remedy to be afforded unsuccessful bidders under the municipal bidding statutes is injunctive relief);

Scott Orenstein
06.01.2013
Bid Protest, Connecticut Construction Law, Connecticut construction lawyer, Construction Attorney, Construction Law, Public Owner

Different Treatment for Different Mechanic’s Lien Deadlines

The Connecticut courts have often been schizophrenic in their interpretation of Connecticut mechanic’s lien law. On one hand, the courts refer to mechanic’s liens as a right created by statute and, therefore, must be strictly interpreted. On the other, the courts refer to mechanic’s liens as remedial in nature and, therefore, should be liberally construed. Based upon some recent decisions, it appears that that deadline to record and serve the mechanic’s lien is being strictly interpreted but the deadline to foreclose the lien is being liberally construed.

For a mechanic’s lien to be valid, it must be recorded within 90 days of the last day worked. The mechanic’s lien, however, will expire if not foreclosed within one year of its recording. Recently, the courts examined whether: 1.) the 30 day time limit for service was included within the 90 days for recording; and 2.) if the 30 days a marshal has to serve papers extended the one year deadline to foreclose. Based upon the language of the statutes, the decisions came out the exact opposite as you might expect.

Conn. Gen. Stat. §49-34 states that the lien must be recorded within 90 days after the last date worked and served upon the owner within 30 days of recorded the certificate.

Subcontractors Only Have Very Limited Rights Against Public Owners

On private construction projects, subcontractors and/or suppliers that furnish labor, material, or services but are not paid by the project’s general contractor have a variety of claims that they may assert against a private owner. For example, such subcontractors and/or suppliers may assert claims for unjust enrichment or file a mechanic’s lien. No such rights exist, however, where the project owner is the State of Connecticut or one of its cities or towns.

As an alternative to the typical claims a subcontractor or supplier has against a private owner, Conn. Gen. Stat. § 49-41 requires general contractors that enter contracts for public projects over a certain dollar amount to post surety bonds that guarantee payment to their subcontractors and suppliers. The exact language of Conn. Gen. Stat. § 49-41 states that “[e]ach contract . . . [for] any public building or public work of the state or a municipality shall include a provision that the person to perform the contract shall furnish . . . a bond . . . for the protection of persons supplying labor or materials . . .” By the plain language of the statute, the onus is put on the general contractor to supply the bond;

A Contractor That Acts as His Own Expert Witness May Inadvertently Waive Attorney Client Privilege

The general rule is that a party does not have to disclose communications with its attorney seeking legal advice. A recent Superior Court decision, Noble v. the City of Norwalk, 2012 Conn. Super. LEXIS 2017, however, has found an exception to the attorney client privilege that contractors need to be aware about.

During a trial, witnesses are not allowed to give their opinion unless they are qualified as an “expert.” Under the legal definition, an “expert” is anyone that has knowledge through education, training or experience that would be helpful to the jury given the subject matter of the lawsuit. Based upon the foregoing definition, almost anyone can qualify as an expert if the right case came along. For example, my 13-year-old daughter has been taking ballet lessons since she was 3. If ballet ever became relevant to a key issue in a lawsuit, my daughter would qualify as an expert on that subject.

In construction litigation, there are always questions that are not clearly fact or opinion. For example, the amount of time that the forms have to remain in place after a concrete pour is a subject upon which there is disagreement and often depends upon the structure that was poured and the conditions under which the concrete was placed.

The Contract and Not Common Sense Determines the Proper Parties to an Arbitration

Many construction contracts require the parties to resolve their disputes through alternate dispute resolution procedures such as mediation and arbitration. Arbitration is intended to be a cost effective alternative to litigation. The issue of whether arbitration works as well as intended will be the subject of a future post on this Blog but the topic of discussion here is the question of determining the proper parties to any given arbitration. The answer is counterintuitive.

When it comes to arbitration, there are several well settled rules. For example, courts favor arbitration, arbitration is a creature of contract, and no party will be forced to arbitrate when it has not agreed to do so. In light of the foregoing, you might believe that a party, who is named in a demand for arbitration, files an answer to the demand, and participates in the arbitration hearing, has agreed to arbitrate and should be held liable for any arbitrator’s award that enters against it. If you did believe that, however, you’d be wrong.

In CDIFUND, LLC v. Lenkowski, disputes arising out of home construction contracts were arbitrated. CDIFUND, LLC v. Lenkowski, 2011 Conn. Super.

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