Construction Law Insights

Mobilization Funding, LLC v. W.M. Jordan Co., 2018 U.S. Dist. LEXIS 202748, 2018 WL 6257109 (E.D. Va. Nov. 28, 2018)

Riverside Retirement Services (“Riverside”) contracted with W.M. Jordan (“Jordan”) to build the Apartments at Patriots Colony in Williamsburg, Virginia. Jordan’s project manager, Jerry Barthelemy (“Barthelemy”), approved payments to subcontractors. On December 12, 2016, Jordan and Mexarg Contractors, LLC (“Mexarg”) entered into a subcontract (the “Subcontract”). On January 10, 2018, Mexarg’s subcontractors complained that Mexarg had not paid them. On January 20, 2018, Mexarg submitted a payment application to Jordan. Barthelemy approved Mexarg’s payment application, but did not notify Mexarg that he had approved the payment application. On January 30, 2018, Mexarg entered into a loan agreement with Mobilization Funding, LLC (“Mobilization”) for up to $361,155.00 and was secured by contract assignments, among other collateral (the “Loan Agreement”). On January 31, 2018, Jordan entered into a Joint Check Agreement (“JCA”) with Mexarg and Mobilization. During the JCA and Loan Agreement, Mobilization did not know about Mexarg’s failure to pay subcontractors.

A.E. v. Ashford Gateway TRS Corp. Grp., 2018 U.S. Dist. LEXIS 198948, 2018 WL 6106375 (E.D. Va. Nov. 21, 2018)

A.E. (a child) and her family were attending a family reunion in a Marriott Hotel ballroom in Arlington, Virginia. During the reunion, a large light fixture fell from the ceiling on A.E.’s head. Prior to the incident, Marriott, Humphrey Rich Construction Group, Inc. (“Humphrey”), and Cabling Solutions of Rutherford County, LLC (“Cabling Solutions” and collectively the “Defendants”) all participated in the design, installation, and/or inspection of the ballroom as part of a renovation. Two days before the incident, Cabling Solutions removed the lenses in the ballroom’s lighting in order to gain access to the work above the ceiling, negligently reinstalling them without properly securing them. A.E. filed a lawsuit against the Defendants in the Circuit Court for the City of Richmond. Cabling Solutions removed the case to Federal District Court and moved to transfer venue form the Richmond Division to the Alexandria Division of the Eastern District of Virginia.

JK Moving & Storage, Inc. v. Winmar Constr., Inc., 2018 U.S. Dist. LEXIS 194932, 2018 WL 5985678 (E.D. Va. Nov. 13, 2018)

JK Moving & Storage, Inc. (Plaintiff) is a Virginia corporation in the moving, storage, and relocation industry sued Winmar Construction, Inc. (Defendant), a commercial interior and hospitality construction company. The lawsuit was originally filed in Virginia state court and removed to Federal District Court. After a two-day trial, a jury awarded Plaintiff just over $74,000, the full amount of its complaint. Plaintiff then filed a bill of costs in the amount of over $12,000, and attorney’s fees of $399,915.50. Defendant objected to the requested attorney’s fees as well as the costs.

Mediko, P.C. v. Roanoke, 2018 Va. Cir. LEXIS 623 (Cir. Ct. Roanoke Cnty, Nov. 9, 2018)

Roanoke County (the “County”) serves as the fiscal agent for the Western Virginia Regional Jail Authority (“WVRJA”) and handles procurements for the WVRJA. On November 8, 2016, the County published a request for proposals (“RFP”) for healthcare services for inmates of the jail pursuant to the Virginia Public Procurement Act (“VPPA”). The RFP requested sealed, formal proposals from qualified firms and stated that the contract would not necessarily be awarded to the lowest bidder, but would be awarded to the proposer who could best meet the requirements based on the criteria enumerated in Virginia Code § 2.2-4301. Mediko, P.C. (“Mediko”) submitted a bid. After various meetings and conversations, Mediko thought the County and WVRJA had

InDyne, Inc. v. Beacon Occupational Health & Safety Servs., 2018 U.S. Dist. LEXIS 182031, 2018 WL 5270331 (E.D. Va. Oct. 23, 2018)

InDyne, Inc. (“InDyne”) submitted a proposal to the United States Air Force (“Air Force”) for a contract to provide services and support for the Solid State Phased Array Radar System and proposed Beacon Occupational Health & Safety Services, Inc. (“Beacon”) as a subcontractor to provide certain medical services. Before submitting the proposal to the Air Force, InDyne and Beacon entered into a teaming agreement (the “Teaming Agreement”). On March 5, 2018, InDyne was awarded the contract with the Air Force. On March 30, 2018, InDyne requested a best and final offer from Beacon for the scope of work to be included in the potential subcontract between InDyne and Beacon. On April 4, 2018, Beacon replied with a letter arguing that the Teaming

United States v. Lyon, 2018 U.S. App. LEXIS 29046 (4th Cir. Oct. 16, 2018)

A jury convicted brothers Dennis Joe Lyon and Daniel Frank Lyon, Jr. of counts related to a scheme in which they provided worthless surety bonds to obtain a construction contract from the United States Department of Veterans Affairs (“VA”). Dennis Lyon was convicted of conspiracy to defraud the United States, 14 counts of major fraud against the United States by obtaining money under false pretenses, and 3 counts of wire fraud. The court sentenced Dennis Lyon to 10 years imprisonment, followed by 3 years of supervised release, and ordered $4,030,577.42 in restitution. Daniel Lyon was convicted of 13 counts of major fraud against the United States by obtaining money under false pretenses. The court sentenced Daniel Lyon to 4 years imprisonment, followed by 3 years supervised release, and ordered $3,707,985.87 in restitution. The Lyons appealed, challenging the court’s admission of evidence regarding two prior surety fraud schemes and the sufficiency of the evidence to support their convictions.

Fluor Enters. v. Mitsubishi Hitachi power Sys. Ams., 2018 U.S. Dist LEXIS 176250, 2018 WL 4956513 (E.D. Va. Oct. 12, 2018)

Mitsubishi Hitachi Power Systems Americas, Inc. (“Mitsubishi”) and Virginia Electric and Power Company (“VEPCO”) entered into a Turbine Supply Agreement (“TSA”) for Mitsubishi to sell turbine generators to VEPCO for use in a power generating facility in Brunswick County (the “Brunswick Project”). VEPCO contracted with Fluor Enterprises, Inc. (“Fluor”) for Fluor to construct the Brunswick Project (the “Fluor Contract”). Under the Fluor Contract, Fluor was responsible to engineer, procure, and construct the Brunswick Project. Around the same time VEPCO entered into the Fluor Contract, it assigned the TSA to Fluor through a Partial Assignment, Agreement (the “Assignment Agreement”), but VEPCO retained the obligation to pay Mitsubishi per the terms of the

Akian, Inc. v. Spotsylvania Cty. Pub. Schs., 2018 Va. Cir. LEXIS 329 (cir. Ct. Spotsylvania Cnty. Sept. 21, 2018) 

Spotsylvania County Public Schools (“Spotsylvania County”) and Akian, Inc. entered into a construction contract for a contract price of $687,095.00 to make alterations and additions to Spotsylvania County’s Family Resource Center building (the “Project”). Several major delays and issues arose related to the Project and Spotsylvania County failed to pay Plaintiff $197,675.29 of the Contract price. Plaintiff sued Spotsylvania County for breach of contract, unjust enrichment, and quantum meruit. In response, Spotsylvania County filed a plea in bar on the unjust enrichment and quantum meruit claims, arguing that sovereign immunity bars such quasi-contract claims against a Virginia Public School Board.

With the COVID-19 virus (Coronavirus) impacting everyday life, you may have heard people in the construction industry asking “has anyone reviewed the force majeure provision in our contract?” But what does “force majeure” mean and what impact does it have on your contract?

Fluor Fed. Sols., LLC v. PAE Applied Techs., LLC, 2018 U.S. App. LEXIS 9148 (4th Cir. Apr. 12, 2018)

In 2000, PAE Applied Technologies, LLC (“PAE”) prepared a bid for an Air Force contract. To make its bid competitive, PAE requested that Fluor Federal Solutions, LLC (“Fluor”) and other subcontractors cap the rate of their General and Administration (“G&A”) costs at 2.3 percent of direct costs. PAE contended that Fluor agreed to do so, but Fluor asserted that it never agreed the 2.3 percent cap. Regardless, PAE submitted its final bid to the Air Force, using the reduced 2.3 percent G&A rate, and won the Air Force contract. Thereafter, PAE and Fluor entered into a subcontract (the “Subcontract”), which required Fluor to submit invoices every two weeks and for PAE to pay Fluor’s invoices within 30 days. In October of 2002, Fluor began billing PAE for work completed under the Subcontract. In January of 2004, Fluor began submitting invoices to PAE with G&A costs exceeding the 2.3 percent cap. PAE rejected the increased rate and continued to pay Fluor the amount due under the Subcontract rate. Intermittently over the years, Fluor complained about the G&A cap, but PAE continued to pay, and Fluor continued to accept, payment at the Subcontract G&A rate.

Allegheny Cas. Co. v. River City Roofing, LLC, 2018 U.S. Dist. LEXIS 63142, 2018 WL 1785478 (E.D. Va. Apr. 13, 2018)

In 2014, Allegheny Casualty Company (“Allegheny”) issued performance and payment bonds (“P&P Bonds”) on behalf of River City Roofing, LLC, (“River City Roofing”), as principal, for three construction projects that River City Roofing, Rodney G. Young, Karen R. Young, and Sterling Young (the “Defendants”) subcontracted with Branch & Associates, Inc. (“Branch”) to perform. In November of 2014, Allegheny and the Defendants entered into a general indemnity agreement (“GIA”) in which the Defendants agreed to be jointly and severally liable to Allegheny in the event of any loss on the P&P Bonds. Rodney G. Young, Karen R. Young, and Sterling Young executed the GIA as individual indemnitors and Rodney G. Young executed the GIA on behalf of River City Roofing. In February of 2017, Allegheny received a $27,312.01 payment bond claim from American Builders & Contractors Supply Co. (“ABC Supply”), which is supplier of River City Roofing. Allegheny paid $16,440.17 to ABC Supply. In May of 2017, Allegheny received a $105,333.47 performance bond claim from Branch, which Allegheny expended $13,388.94 investigating. In September of 2017, Allegheny received a $5,189.40 payment bond claim from Brock Associates, LLC (“Brock”), which is another supplier of River City Roofing. Thereafter, Allegheny demanded that the Defendants post collateral sufficient to protect Allegheny as required by the GIA. On October 3, 2017, Allegheny filed a complaint against the Defendants to enforce the GIA, and then filed a Motion for Summary Judgment. 

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