CONSTRUCTION DEFECT CLAIMS

CLAIM OF SYSTEMIC DEFECTS IN REDEVELOPMENT/CONDOMINIUM CONVERSION

Trustees of a condominium association which took over a complex of buildings after conversion, brought suit vs. the redevelopers of the buildings, alleging failure to perform the full scope of recommended repairs, defects in the repairs that were performed and code violations in nearly every element of the building. Costs of repairs claimed by the plaintiffs would exceed $10 Million Dollars. The redeveloper defendants, for their part, argued they had spent millions more than their budget on repairs, the work was performed properly and the scope of the problems were not as significant as claimed, could be fixed for much less scope and cost, and several claim elements fell into the category of general maintenance,  which was plaintiffs’ responsibility. The case went through significant discovery. Mediation was held over two days and then follow up efforts and negotiations occurred for the next several months. With candid evaluations from the mediator in both parties’ possession, negotiations resulted in settlement providing substantial dollars toward repairs and renovations.

PRODUCT LIABILITY--CLAIM OF FAILED FLOOR-LEVELING PRODUCT

A commercial flooring contractor brought claims against a manufacturer/supplier of a floor leveling product that the contractor claimed failed in use at a hospital. The product was proposed by the manufacturer and presented to the contractor for use in the project, renovation and new construction over several floors in a high volume hospital. After about half of material was down and flooring installed in a third of the area, the contractor and project general contractor observed what they claimed were issues with the floor adhesion.  The manufacturer responded and analyzed the situation, recommending removal in some areas and repairs in others. Ultimately, the decision was made to remove the entire area and re-install, which the flooring contractor undertook at its own cost. At mediation, the manufacturer acknowledged problems with limited batches of the material, but contended that it had replaced that material free of charge. It also argued that the contractor failed to mitigate damages and that the complete removal and replacement of the floor areas was a waste and not necessary to solve the problem. After several rounds of negotiation, both parties recognized that the other had legitimate points concerning the other’s position and a compromise was reached late in the day.

RENOVATION AND ADDITION OF PRIVATE RESIDENCE—MULTIPLE ISSUES

The second generation owners of a family home renovated the home for their family and the parents who were original owners of the house. Multiple issues were raised during and after construction with various claimed defects vs. the builder, and a designer who performed limited design and construction oversight work. Mediating this dispute required a detailed assessment of the scope of individual problems, and which of the problems actually required repairs, which were based perhaps on misunderstanding of the builder’s commitments, and which were not significant obstacles to the use of the home. After a substantial amount of time during the day, the parties were able to arrive at a compromise financial settlement providing resources for the family to focus on the most important modifications and the defendants to move on to other projects.

CLAIM OF FAILED REPAIR OF HEATING AND COOLING SYSTEM

The board of a cooperative hi-rise tower sought damages for the costs to re-do completely a repair to a heating and cooling system in the facility. The cooperative had awarded a multi-phase design-build contract for such repair based on a recommendation from a consultant that the system required replacement. During construction, one insulation subcontractor was terminated for defective work and a new subcontractor brought in. In addition, the owner’s consultant provided substantial input on the contractor’s means and methods which, in some instances, resulted in changes to how the work was performed. Near completion, the cooperative alleged multiple problems occurred, particularly leaks and/or excess condensation coming off the riser pipes, leading to water damage inside individual units. The cooperative retained the last portion of the contract and the contractor stopped working. With a new consultant involved, the decision was made to rip out and replace the entire (new) system that the original contractor had designed and installed, at a cost of millions of dollars. A prior mediation effort had failed.

During 3 mediation sessions, with 8 parties involved, all potential claims, defenses, offsets, indemnification and insurance coverage aspects were analyzed. Also, the defendants strongly pursued an argument that the “fix” was not just a fix but a substantial betterment over what the Owner originally contracted for and that betterment was not their responsibility. With full awareness of the risks, and the likely costs to try the case (for a month or more), with substantial open questions on insurance coverage, the parties ultimately settled four months after the first mediation session.

CLAIMS OF MULTIPLE DEFECTS IN DESIGN AND CONSTRUCTION OF A CONDOMINIUM/STATUTE OF REPOSE ISSUES

Trustees of a multi-unit condominium brought suit nearly seven years after completion against the developer, alleging significant defects in multiple areas which would require millions of dollars to repair. Trustees also alleged that the developer, while retaining control of the condominium, failed to investigate, maintain and/or repair defective conditions. Chief among the defects were alleged design and construction flaws in the attics of the buildings resulting in multiple sprinkler leaks and breaks as well as inadequate heating in the living units, plus bad installation of the showers leading to leaks in many bathrooms at the facility.

The developer added the designer and general contractor who, in turn, added multiple subcontractors as defendants. Settling the matter was complicated significantly by: a. a substantial chance of a statute of repose defense to many of the trustees’ claims; and b. the lack of assets of the developer and many of the other parties, combined with insurance coverage questions.

After the first mediation session, the parties were willing, with mediator assistance, to continue negotiations on an individual basis, assessing the strengths and weaknesses of each party’s position and the realistic time and cost to try the case. After 6 months of regular communication, an adequate pool of money was gathered to convince the plaintiffs the risks of non-recovery were not worth taking and the matter was settled.

CONSTRUCTION—CONTRACT DISPUTES INVOLVING SURETIES

LARGE-SCALE DISPUTE WITH ELECTRICAL SUBCONTRACTOR AND SURETY ON LAW SCHOOL PROJECT

The electrical subcontractor on a very large law school dormitory and classroom building massively overspent on its subcontract budget. The surety for the subcontractor funded much of the completion work and was left with a multi-million dollar cost overrun which it pursued together with the subcontractor. The construction manager defended the claim primarily on the grounds that the subcontractor missed work scopes in its bid, underbid other items, and on site mismanaged (or failed to manage) its labor, resulting in thousands of hours of unproductive labor. The subcontractor and surety countered that the project suffered large scale delays and the promised construction sequence was not followed, forcing the electrician to work in a completely inefficient manner. Complicating the matter was the difficult relationship of the principals for the subcontractor with the surety and the surety’s assertion of a right to indemnity from the principals. After more than a full day of mediation, the surety and general contractor senior officers asked for an in-person meeting with the mediator. With a candid evaluation of the strengths/weaknesses of each party’s position from the mediator in hand and a recommended settlement value, the parties reached agreement and resolved the matter. 

SETTLEMENT OVER SUBCONTRACTOR TERMINATION AFTER GENERAL CONTRACTOR DEFAULT TERMINATION

In this complicated matter on a public college construction project, a subcontractor determined to terminate its contract based on alleged failures to pay by the surety for the original general contractor on the project, which had ceased business operations and defaulted on its contract. The replacement contractor and surety for the original general contractor had re-negotiated the subcontract and directed the subcontractor to proceed. The subcontractor struggled with schedule and alleged defective work. Complicating matters was the architect’s and public owner’s insistence on removal of materials that had been approved, but which did not technically comply with project specifications. After the subcontractor terminated its subcontract, the surety and replacement general contractor completed the work including the removal and replacement of the alleged non-compliant materials, at an excess cost of more than a million dollars. The subcontractor claimed entitlement to a large portion of its contract balance, plus extras and the surety claimed excess costs over the subcontract more than seven figures. 

An initial mediation session was unsuccessful, but after several months of information exchange and continued re-evaluation of the parties’ positions, a second mediation session was scheduled and the case was successfully resolved. 

MULTI-PARTY LITIGATION RESOLVED INCLUDING SURETY AND INSURANCE CARRIERS ON ROOFING/WATERPROOFING SUBCONTRACTS

A general contractor awarded two roofing and waterproofing subcontracts on a public college project and a private commercial development. Prior to completion, the general contractor alleged defective work on portions of both projects, which the subcontractor denied. Litigation was commenced by the subcontractor to collect its balances, and for claims on the general contractor’s payment bonds. The general and surety defended on the basis of the defective work and failure to provide all required closeout documents, in particular roof warranties on the private development. The litigation was extremely contentious, with hundreds of thousands of dollars spent on legal fees. At mediation, in addition to the two principals, the general liability carrier for the subcontractor and the surety for the general contractor actively participated. The input of those professionals was critical to resolving the matter, as different scenarios were considered which, if implemented by the carrier or the surety, could have a substantial effect on one party or the other. At the end of two days of mediation, the parties were finally able to arrive at a resolution, acceptable to all, and pursuant to which all contract documents, including warranties, were delivered.

SETTLEMENT ON CASE POST-AWARD/PRE-APPEAL 

In a very contentious matter, a subcontractor on a power plant renovation project was awarded significant damages (including a Chapter 93A award for fees) at a multi-week jury-waived trial against a general contractor and its payment bond surety. The Owner of the plant was also party to the case, and the trial had been split with the claims between the owner and general contractor reserved for a second phase trial. All parties wanted to avoid the expense of the second trial, and maximize available resources to settle the disputes. The risks of adjustment to the award before final judgment would enter, and maintaining the judgment on appeal were carefully weighed among all parties. In addition, the range of likely decisions on the owner/general contractor disputes were also analyzed with the parties, to assist in generating sufficient money to globally resolve the matter. After a day plus of mediation, and several hours of additional work by phone, the parties were able to resolve the matter satisfactorily.  

SUBCONTRACTOR/DEFAULTED GENERAL CONTRACTOR AND SURETY—CLAIM SUBMITTED AT WORK COMPLETION

A subcontractor agreed to perform specialized work on a military installation outside of the US for a general contractor. The schedule duration was limited and the subcontract referenced the need for coordination among multiple different trades all working in the same area. Issues arose from commencement on site and the work dragged for two plus months longer than anticipated. The subcontractor raised concerns over the issues, but did not submit any change requests or formal claims until the completion of its work, when it submitted a series of change requests for several hundred thousand dollars. The general contractor experienced other issues on the project, and also claimed that the subcontractor had caused many delays itself, and would be liable for a portion of liquidated damages. The general contractor’s surety was heavily involved in managing the overall project by this time. In addition, the subcontractor claimant had executed a progress payment waiver for its payment at completion, which the general and surety highlighted as a complete defense to the claims.  The parties debated the likely success of the claims as well as the legal defenses, as well as the sufficiency of the claimant’s notices. Through follow up, the case was settled two days after mediation was held. 

CONSTRUCTION—GENERAL CONTRACT DISPUTES

SUBCONTRACTOR TERMINATION ON HIGHWAY BRIDGE PROJECT

The bridge project was awarded under a “fast track” procurement imposing an aggressive schedule on all. The subcontractor was responsible for forming and placing concrete supports and abutments for the bridge. Over a period of months, delays in payment occurred, which the subcontractor attributed to the general and the general attributed to the owner. The general asked the subcontractor to increase manpower in order to meet required deadlines and the subcontractor agreed to do so in exchange for some payroll funding by the general. Due to miscommunications, the subcontractor’s force increases were limited and the general determined to terminate the subcontractor for failure to meet the schedule. Claims and counter-claims were filed and the subcontractor made a demand for direct payment to the awarding agency, which ended with an escrow of nearly all of the subcontractor’s contract balance, exacerbating the cash situation on the project. After the initial session failed to produce a settlement, the two principals of each company met privately with the mediator and an agreement was reached. 

CONTRACTOR CLAIMS ON HIGHWAY BRIDGE PROJECT—DIFFERING SITE CONDITIONS/DEFECTIVE WORK

A marine foundation contractor and a state transportation department had multiple long-running disputes over differing site conditions and the scope and cost for repair of alleged defective work performed by the subcontractor. Multiple claims were submitted during and just after completion of the work, with several related to claimed differing site conditions. Also, the subcontractor claimed the agency’s directed “fix” of a problem with a poured concrete shaft was excessive in relation to the scope of the problem and cost it hundreds of thousands of additional dollars to complete. Total claims exceeded $5 Million Dollars. After several years of litigation, the parties mediated over two days—the general contractor had resolved its issues with the subcontractorand so the parties agreed to a direct mediation between the agency and subcontractor. The agency acknowledged responsibility for certain of the claims but disputed the amounts. The agency was also adamant that the repairs to the defective work were necessary and appropriate and that the subcontractor was provided multiple opportunities to develop and support a less expensive fix, but had not done so. Given the multi-year duration of the litigation, pre-judgment interest became a potentially significant factor as negotiations progressed. After a thorough evaluation of the potential exposure to the agency, negotiations intensified and, near the end of a second mediation day, the parties resolved their disputes. 

SUBCONTRACTOR ESCALATION CLAIM VS. GENERAL CONTRACTOR AND PUBLIC OWNER

A public works project commenced and then was delayed for several months due to differing site conditions. The general contractor submitted its own claims for the increased costs due to the change and the impacts caused by that condition, including labor, material and equipment escalation and other costs. The general contractor requested any similar claims that the trade subcontractors might have as a result of the issues. A mechanical/plumbing subcontractor submitted a large claim and subsequently adjusted the claim downward over ensuing months. The public authority paid a substantial change to the general contractor, but its engineer denied the subcontractors’ escalation claims. The general contractor claimed the increases were not for escalation and the denial of the subcontractor’s claims was appropriate under the contract terms. At the end of the job, the denial was affirmed by the Authority and the general contractor accepted final payment. The subcontractor sued, contending that the general contractor received money for delays and that it had waived the right to rely on a “no damage for delay” clause to deny its claim. The contract language was reviewed and the potential for a defense verdict was debated, as was the issue of the general contractor’s decision to close out the project without pursuing the subcontractor’s claims in litigation with the owner. After two plus years of litigation, one day of mediation was held and the matter was resolved.

CONTRACTOR/SUBCONTRACTOR—DISPUTE OVER FINAL CONTRACT BALANCE—EFFECT OF “PAY IF PAID” LANGUAGE IN SUBCONTRACT

A mechanical subcontractor on a multi-building residential construction project sought payment of its final contract balances. The general contractor defended by: a. disputing the balance claimed due to defective work that had required repair; and b. asserting a “pay if paid” defense as the owner of the project was unable to make final payment to the contractor. After several hours reviewing the merits (and costs) of the offsets alleged by the general contractor, the parties focused on whether a settlement, even at a discounted amount, would be funded by the general contractor. With evaluation from the mediator, the parties were able to craft a settlement consisting of a substantially discounted payment and the potential for future work, within defined parameters, between the general contractor and subcontractor.

ELECTRICAL SUBCONTRACTOR ON UNIVERSITY RENOVATION PROJECT/LOST PRODUCTIVITY CLAIM

An electrical subcontractor on the renovation of a multi-use building for a university, near the end of the project, submitted a seven figure plus claim for lost productivity due, it alleged, to large scale changes to its scope, inability of owner and the construction manager to make decisions, and lack of progress of other trades. Assessing and resolving the claim was complicated by the late submission and, according to the construction manager and university, lack of notice of such claim. The electrical contractor countered that it had constantly notified all parties of its challenges and that it was working in multiple areas with substantially more people than anticipated, without being able to complete any one area due to these problems. Still, no formal claim or an order of magnitude on the claim, was submitted until just before substantial completion.

At mediation, the electrical contractor was able to show how much it had spent on the project and that its damages and thus the exposure to the construction manager and, in turn, university, was real. Both of those parties argued that they responded to all complaints in real time and issued change orders throughout the job; as such, the electrical contractor’s problems were of their own making, overstated or not legally valid.

After a full day and into the evening, the parties assessed the possibility of the legal defenses succeeding and the likely cost and time to go to trial (suit had not even been filed as of the mediation date). A settlement was achieved late in the evening of the mediation session.

CONSTRUCTION—RESIDENTIAL PROJECT DISPUTES

HOMEOWNER CLAIMS FOR MISREPRESENTATION OVER WATER DAMAGE AND ALLEGED MOLD ISSUES AS PART OF PURCHASE/SALE OF HOME

A couple who purchased a nice home asserted claims against the sellers, the broker and their home inspector, alleging that each of them misrepresented the status of the home prior to the sale. In particular, the homeowners alleged that a systemic water intrusion problem existed at the home, and that the homeowners and broker failed to disclose the problem and allegedly covered it up with minimal ineffective repairs made prior to the closing. The homeowners alleged that the home inspector violated the standard of care in failing to detect and then affirmatively notify them of the same issues. The defendants countered that the problems were identified in advance, that the repairs that were made prior to listing the property were effective and, most important, that the homeowners’ scheduled repairs and costs were excessive and, in large part, unnecessary. Complicating the matter, an attorney for the homeowners was not party to the case, but the homeowners’ defense, in part, was based on reliance on advice of counsel.

Due in part to the emotion of the situation, the parties focused at mediation on the scope of repairs undertaken to date and planned by the homeowners and how much of the costs of same would be recoverable at trial. This allowed negotiations to proceed with emotional factors kept to a minimum, and led to settlement approximately three weeks after the mediation session.

OWNER/SITE CONTRACTOR—DISPUTES OVER CLAIMED BALANCES/EXTRAS AND OFFSETS FOR DEFECTIVE WORK

A site and landscape contractor sought payment from a residential homeowner for balances and extras claimed due for work performed on a new site plan on a waterfront property. The homeowner disputed liability arguing that: a. many of the extras claimed were contract work and no notice was submitted and costs not proven; b. the contractor was late completing the work; and c. some of the work was defective and required repair. An initial day of mediation proved unsuccessful, but with continued follow-up and a detailed evaluation of the strengths/weaknesses of each party’s position, the case was resolved approximately six weeks later. 

EMPLOYMENT CLAIMS

CLAIM FOR UNPAID TRAVEL TIME AND OVERTIME

Plaintiff was employed as a driver for a company that managed “roll-off” dumpsters from 18-wheel trucks. The plaintiff claimed that the employer failed to pay him promised overtime for travel time between the company yard and the site of the project, which was fixed. The employer defended by saying they had allowed the employee to drive the truck to the project site each day as an accommodation at his request and, therefore, the time spent driving to the project was not compensable time. In addition, the plaintiff had worked on the project nearly two years without inquiring about the failure to pay, when he had regularly questioned his wage statements on many other occasions. Settlement of the case hinged on liability with automatic treble damages under the Mass. wage statute increasing the employer’s exposure substantially. After a half day of mediation, the parties were able to arrive at a settlement reflecting the employer’s exposure to a degree.

ALLEGED UNPAID OVERTIME CLAIM

Plaintiff was employed on an hourly basis as a practice assistant at a medical care facility for several years. With the facility’s shift to an all-electronic records management system, Plaintiff found her job more difficult to complete. As she struggled to complete the tasks, she required more time and alleged that she worked 10 to 15 extra hours per week over the course of two years, which she did not record on her time cards, nor was she paid overtime for those hours. Plaintiff’s struggles got worse and ultimately she left the facility for another job, but made a claim for unpaid wages and overtime under the Mass. Wage Act. A liability finding would result in treble damages and likely attorney’s fees against the facility. Since the time was not recorded, the employer contested the amount of overtime claimed by Plaintiff, and argued that she regularly took breaks off site or came in late, and that she rarely worked even eight hours per day, and not much overtime at all. After a review of many different records (email logs, time stamps on memo edits), the parties recognized that any judgment would be quite subjective and both parties had risks. The administrators also had favorable feelings toward the plaintiff, which made them more inclined to work to a reasonable settlement. A settlement was reached mid-way through the day.

DISPUTES INVOLVING DESIGN PROFESSIONALS

MULTI-PARTY DISPUTE INVOLVING MUNICIPALITY, CONTRACTORS AND DESIGN PROFESSIONAL

A complicated dispute arose at completion of a municipal stormwater control project. Five parties were involved. A well-installation subcontractor claimed substantial cost increases due to alleged differing site conditions, which the general contractor passed on to the municipal owner. The architect/engineer responded for the owner denying the claim and asserting that the subcontractor’s poor construction practices caused all of its excess costs and that there were no differing site conditions. The design professional also claimed that, due to the subcontractor’s poor performance, it incurred substantial extra costs to manage the work and ensure that federal regulations for the work were complied with, a condition for approval of the finished project. After two full days of mediation, the case was resolved with payment of a portion of the subcontractor’s claimed costs, release of the contract balance to the lead designer and an allocation of such balance, plus compensation for the geotechnical engineer’s claimed excess costs.

CLAIM OF NEGLIGENT DESIGN CAUSING LOSS OF DEVELOPMENT RIGHTS

A developer/contractor of a residential subdivision claimed that the defendant engineering company committed several errors in designing stormwater runoff and drainage systems for the subdivision. As a result, the plaintiff claimed that the local zoning board shut down the project and, by the time the permit was re-issued, the market for the homes had collapsed. The plaintiff sought the costs for modifying the elements of the system it claimed were improperly designed and for lost income. Plaintiff had other disputes with third parties over other issues related to the development, which complicated discussion on causation by this defendant. At the close of a single day of mediation, the case was resolved with a financial settlement to the developer and mutual releases of all parties.

DESIGN PROFESSIONAL/OWNER—FEE DISPUTE ON INCREASED SCOPE, CONSTRUCTION COST OVERRUNS

An architectural firm submitted a request for substantial extra compensation at the conclusion of a multi-phase, multi-year renovation and new construction project for a hospital. The firm had an initial contract with its fees based on a percentage of the final construction cost. It claimed that the multiple program changes and lengthy local approval process led to substantial revisions to the program, overall design and individual components, which then resulted in substantial additional design, community and construction administration work for which it claimed compensation. The firm also argued that it was exposed to claims for additional compensation from its subconsultants, which had become very difficult to resolve. The owner, in turn, argued that the firm had failed to track the design to meet budget needs which were known at the outset and repeated as time went on. As a result, the owner believed that much of the increased compensation sought by the design firm was due to its own failure to design to budget and also that its actual costs did not match up with the fees claimed. After a full day of mediation, and some reconciliation of actual cost records, the parties were able to arrive at a settlement, with the owner committing to additional compensation and then working with the design firm to communicate its complaints to the subconsultants and thereby limit the firm’s exposure.