Category: Construction

CASE ALERT—New Arizona Appellate Decision Enforces Narrow Form Indemnity Clause Against General Contractor

On November 13, 2008, the Arizona Court of Appeals issued its decision in MT Builders, LLC v. Fisher Roofing, Inc., interpreting a “narrow form” subcontract indemnity provision which reads, in part as follows: “the [Subcontractor] shall indemnify and hold harmless [General Contractor] ... from and against all claims . . . arising out of [Subcontractor’s] work . . . to the extent caused in whole or in part by any negligent act or omission of the [Subcontractor]...”. The case involved a construction defect lawsuit filed by a condominium association against MT Builders (MTB), the general contractor, and at least nineteen subcontractors, including Fisher Roofing, Inc. MTB tendered defense of the case to its subcontractors and filed cross-claims for indemnity against the subcontractors. The subcontractors declined to defend MTB. Eventually, MTB settled the association's claims. In turn, MTB then settled its claims against all of the subcontractors except Fisher, the roofing subcontractor. The trial court considered competing motions for summary judgment filed by Fisher and MTB, and ruled in MTB’s favor on the indemnity claims, establishing $240,523 as the portion of the settlement attributable to Fisher. The appeals court reversed and issued three rulings that substantially impact owners, developers, contractors and subcontractors relating to indemnity obligations on construction projects.

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Posted by Jeffrey Steffen at 3:18 PM | Email Post | 0 comments
Categories: Contract | Construction | Arizona

Arizona Supreme Court Rules on Contract Provisions Capping Damages

Professional service contracts often include provisions that limit the service providers’ liability to the amount received under the contract.  In a decision earlier this year, the Arizona Court of Appeals ruled that, under the Arizona constitution, the decision whether and how to enforce such provisions must be made by the jury, rather than the judge.  1800 Ocotillo, LLC v. The WLB Group, Inc., No. 1 CA-CV 07-0037. In reaching this conclusion, the Court of Appeals analogized the provision to the defense of “assumption of risk,” which, under the Arizona Constitution, must be submitted to the jury.Fennemore Craig addressed this decision in a litigation update on February 25, 2008.  In that update we noted that, “[i]t will be challenging for defendants, seeking to rely upon such provisions, to persuade juries to apply them in situations where the injured party’s damages greatly exceed the limit in the contract.”

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Posted by Christopher L. Callahan at 12:08 PM | Email Post | 0 comments
Categories: Construction

Bovis Strikes Back - Nevada Supreme Court Takes Mulligan On Pay-if-Paid

In June, the Nevada Supreme Court released its opinion in Bovis v. Bullock, 124 Nev. Adv. Op. 39, 185 P.3d 1055 (June 2008).  See this blog post on the case for details of the facts.  In the Court's June opinion, it held that pay-if-pay provisions in subcontract agreements violate Nevada public policy.  Although the subcontract at issue was entered into before the 2001 amendments to NRS Chapter 624, the Court declared in Footnote 33 that the prompt payment sections included in the 2001 amendments render pay-if-paid provisions unenforceable for contracts entered into after the amendments.

Now, the Supreme Cout has withdrawan its June opinion and replaced it with Bovis v. Bullock, 124 Nev. Adv. Op. 92 (Oct. 30, 2008). 

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Posted by Anthony Golden at 4:02 PM | Email Post | 0 comments
Categories: Construction | Lien | Nevada | Pay-if-Paid | Pay-when-Paid

Is a Lien Claimant Entitled to Post-Judgment Attorney Fees?

In Carl B. Barney v. Mt. Rose Heating & Air Conditioning, 124 Nev. Adv. Op. 71 (Sept. 18, 2008), the Nevada Supreme Court addressed, among other things: (1) whether NRS 108.237(1), which allows for recovery of attorney’s fees in a mechanic’s lien action, covers all fees incurred to enforce the mechanic’s lien, including those post-judgment attorney fees incidental to the lien’s enforcement through foreclosure; and (2) whether the district court erred in denying a post-judgment motion to enter satisfaction of the judgment because not all of the attorney fees were paid.  Carl B. Barney (“Barney”) contracted with Reno Construction, Inc. (“RCI”) to renovate his house.  RCI subcontracted with Mt. Rose Heating & Air Conditioning (“Mt. Rose”) to provide equipment and services as part of the renovations.  Barney refused to pay for the work, which he determined was defective, and RCI and Mt. Rose filed mechanic’s liens against the property.  Both RCI and Mt. Rose obtained judgments and decrees of foreclosure against Barney.  Mt. Rose, prior to any foreclosure sale, garnished funds Barney held in a bank, and attempted to execute upon Barney’s personal property.  Barney filed and won a motion to exempt his bank account from execution and to quash the garnishment.  Mt. Rose sought supplemental attorney fees and costs (“First Mt. Rose Motion”); the court granted their request.  Later, Mt. Rose filed a supplemental motion (“Second Mt. Rose Motion”), seeking fees for post-judgment matters, including the judgment’s execution, the garnishment, and the release of Barney’s bank funds.

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Posted by Jeffrey Steffen at 12:31 PM | Email Post | 0 comments
Categories: Construction | Lien | Nevada

Contractor's License is Intangible Personal Property that is Subject to a Claim for Conversion

In M.C. Multi-Family Dev. v. Crestdale Assoc., 124 Nev. Adv. Op. No. 77 (Oct. 2, 2008), the Nevada Supreme Court concluded that a contractor's license is the personal property of the entity or individual named on the license.  Therefore, it is subject to a claim of conversion if another entity or individual exercises "wrongful dominion" over the license.  The qualifying employee of Walter Homes, Ltd. used Walter Homes' contractor's license to develop real property under a separate company, Crestdale Associates, Ltd., without the permission of the majority interest owners of Walter Homes.  During trial, after the plaintiff's case in chief, the district court entered a directed verdict against the plaintiff's conversion claim.  The district court found that Crestdale Associates had not "taken" the license.

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Posted by Anthony Golden at 7:54 AM | Email Post | 0 comments
Categories: Construction | Nevada

Court Holds Discretionary Immunity Protects Governmental Entity from Tort Liability in Accepting or Rejecting Bids for Public Works Projects

The Nevada Supreme Court held recently that a Boulder City engineer's requirement that a low-bidding general contractor replace a particular subcontractor before the City would accept the bid was an action falling under discretionary immunity and precluded liability against the City for tortious interference of the subcontractor's contract.  City of Boulder City v. Boulder Excavating, Inc., 124 Nev. Adv. Op. 65 (Sept. 11, 2008).  Over a period of several years, Boulder Excavating, Inc. ("BEI"), as a general contractor, secured several accepted bids with Boulder City for public works projects.  In 2000, however, a dispute between BEI and Boulder City over a road construction project occurred and was resolved by protracted arbitration proceedings, after which both parties claimed to have prevailed.

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Posted by Anthony Golden at 7:48 AM | Email Post | 0 comments
Categories: Construction | Nevada

Nevada Supreme Court Decides Enforceability of Contractual Lien Waiver Provisions

The Nevada Supreme Court recently addressed two issues of concern to contractors and owners: (1) the enforceability of lien waiver provisions, and (2) the enforceability of pay-if-paid provisions. Lehrer McGovern Bovis, Inc. v. Bullock Insulation, Inc., 124 Nev. Adv. Op. 39 (June 2008), is the latest saga from the Venetian mechanics' lien lawsuits. The case involved the owner and general contractor attempting to foil a subcontractor's lien foreclosure and breach of contract claims by asserting a lien waiver provision and a pay-if-paid provision in the subcontract agreement. The Court declared that Nevada's public policy "favor[s] contractors' rights to secured payment for labor, materials, and equipment furnished." Based on this policy, the Court struck down both the lien waiver provision and the pay-if-paid provision. The subcontract agreement at issue predated the legislative amendments to the mechanics' lien statutes, NRS Chapter 108, requiring specific forms for lien waivers and predated the amendments to NRS Chapter 624, which created Nevada's prompt payment statutes. Although not at issue, the Court thought it necessary to state, without explanation or analysis in what will become known as the infamous Footnote 33, that the amendments to Chapter 624 creating the prompt pay statutes, "make pay-if-paid provisions entered into subsequent to the Legislature's amendments unenforceable."

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Posted by Anthony Golden at 1:14 PM | Email Post | 0 comments
Categories: Construction | Lien | Nevada | Waiver