1st Circuit Pending Appeal - Construction Contract Defenses & Miller Act

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In Endicott Constructors Corp. v. E. Amanti & Sons, Inc., No. 1:14-CV-12807-LTS, 2017 WL 3028877 (D. Mass. July 14, 2017), the plaintiff-subcontractor Endicott Constructors Corp. (“Plaintiff”) filed a lawsuit claiming breach of contract and quantum meruit against the defendant-general contractor E. Amanti & Sons, Inc. (“Defendant Contractor”) on a construction renovation project at a Veterans Affairs building in Bedford, Massachusetts. Plaintiff also brought a claim against Safeco Insurance of America (“Defendant Surety”) pursuant to the Miller Act, 40 U.S.C. § 3133.  The two Defendants moved for summary judgment against Plaintiff's claims. The District of Massachusetts granted the motions. Plaintiff is now appealing the decision to the First Circuit.

Though factually detailed, the decision serves as a review of numerous key concepts in construction law including the requirement of strict performance to recover on a contract breach, requirement of substantial performance to recover under quantum meruit, cardinal change, necessity of expert testimony, contractual notice provisions, and tolling applicable to the Miller Act statute of limitations.

• The Court held that Plaintiff could not, as a matter of law, show "complete and strict performance of all its terms" because Plaintiff walked off the project with 1/3 of the subcontract to complete, and therefore could not recover on the contract itself.  

• Moreover, in addition to walking off the job, Plaintiff acknowledged, inter alia, that it performed defective work and did not pay federally-required wages.  Accordingly, the Court concluded that the Plaintiff, as a matter of law, "did not substantially perform its contract obligations" which extinguished its claim for "quantum meruit" as well.

• To avoid this harsh result on its contract-based claims, Plaintiff argued that a "cardinal change" had occurred excusing its performance.  The Court hesitated to confirm that Massachusetts has adopted this doctrine, but in any event, held that the elements of a cardinal change were not present. The Court observed that there must be "alteration in the work [effected by the government] so drastic that it effectively requires the contractor to perform duties materially different from those originally bargained for."  Here, because Plaintiff only pointed to the government adding supervisory personnel to its payroll and a large number of change orders, the Court was not persuaded that Plaintiff's scope was "drastically altered." Indeed that court emphasized that, In re Boston Shipyard Corp., 886 F.2d 451, 456 (1st Cir. 1989) the court had held that even 86 change orders was not sufficient to show a cardinal change to construction contract.

• With respect to Plaintiff's extended time claim, the Court, in dicta, questioned whether an expert is required to prove such a delay claim, but also noted that Plaintiff's failure to do so may be at its peril as it had not presented a "coherent analysis" to allow a factfinder to could find in its favor.

• Adding to Plaintiff's challenges, it failed to present evidence that it had given notice of its claims within 7 days as required by the contract. The Court, without delving into whether the defendant was prejudiced by the delay, succinctly held that failure to comply with the contractual provision "will generally preclude all relief."

• With respect to the Miller Act action that Plaintiff filed on the bond provided by Defendant Surety, the Court was not persuaded that presence of Plaintiff's trailers on the construction site would extend limitations period.  The Miller Act requires that any action on the bond must be brought within one year of the "last of the labor was performed or material was supplied" by the contractor or supplier bringing the action.

If the First Circuit has an opportunity to weigh in, the law in these areas, as recounted above, may be further honed by its decision. If so, we will update this blog.

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The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts. She is an associate at Pierce Atwood, LLP in Providence, Rhode Island. She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.

LEED Appeals

In this second post about LEED, we briefly review the achievement categories for construction projects.  Then we take a look at LEED appeals and challenging whether credits within the categories were fulfilled.

As discussed in the post #1, LEED is a rating system for sustainable and efficient building, which achievement level—denoted by platinum, gold, silver, and certified—may be a requirement in the project specifications or a condition for funding.  The level is determined by points (up to 110 are available) earned in several categories.  The categories are often interrelated.  For example, the location selected can affect energy options including harnessing renewable power.  The universal categories (there are also regional categories) and brief examples of strategies for generating points follow:

•  location/transportation – (16 points) – develop areas near pre-existing roads/infrastructure and already developed surfaces to limit urban sprawl and avoid occupying green space, develop at a high priority sites like a brownfield, locate near public transportation, incentivize carpooling; provide electric car recharging services;
• sustainable sites – (10 points) - use native plants in landscaping, limit size of the building footprint by building upward to protect open space and habitats, minimize lighting or use screened or timed units, install pervious surfaces, collect and use rainwater for landscaping or even process water; use reflective or light-colored roofs or roof gardens and reduce paved surfaces to avoid heat absorption;
• water efficiency – (11 points) - limit water use by installing efficient plumbing valves and restrictors, use dual flush or low flow toilets, use rainwater as process water, monitor water use to manage consumption, use drought-tolerant plants in landscaping, install high-performance irrigation systems;
• energy/atmosphere – (33 points) - incorporate natural air sources through appropriate venting or harness wind energy, use solar energy and sunlight for some or all building power sources, insulate walls and the roof to conserve energy, give due consideration of size demands of the use and build appropriately, select high-performance appliances, lighting, and HVAC, design appropriately sized HVAC loops for heating and cooling;
• materials/resources – (13 points) - reuse building materials, rely on efficient framing spacing to use less material, use local materials to reduce travel emissions, use renewable, recycled, long-lasting, prefabricated materials, adopt streamlined recycling and waste programs;
• indoor environmental quality – (16 points) - design systems to filter air as it enters the building; test for radon, avoid building materials that emit volatile organic compounds; design ingress/egress to limit particulates collection from outside, use pest control that does not rely on chemicals; 
• innovation – (6 points) – credit is given for a cutting edge methodology even if it exceeds or does not fit into a specific category.

LEED certification process begins when a project team registers its application online.  (For guidelines on the entire application process, see the LEED Certification Guide). The team provides all necessary information about the project and documentation to establish the various credits.  The U.S. Green Building Council’s Green Building Certification Institute (“GBCI”) reviews the application, allows for supplemental clarifications during the “Preliminary Review,” and then provides a “Final Review” that states whether and to what level the project will receive LEED certification. 

At that point, the owner or project team has 25 days to appeal the credit decisions contained in the Preliminary Review.  Called the “Appeal Review,” the project team may amend their application with respect to single credit or seek out additional credits not previously submitted for review.  Generally the original reviewer will respond to the appeal.  This appeal process may be raised for a single credit or multiple credits and may be repeated without limit. However, each credit addressed is considered its own appeal and requires payment of its own appeal fee.  Interestingly, the appeal fee is greater depending on the complexity of the credit.  While this “Appeal Review” process is unlimited to the project team (a change from the 2012 version of LEED guidelines wherein an Appeal Board had the final say on credits), it may suffer from its new Laissez-faire approach.  For example, a formal review from an uninterested and qualified panel (or reviewer) is highly important when a credit decision is questioned.  As presently set up, the same reviewer who rejected the credit maybe the same person to review the appeal.

A variation of the “Appeal Review,” the project team also has the option of pursuing Credit Interpretation Rulings (CIR), which are project specific, or LEED Interpretations, which set precedents for all projects.  The CIR process invites the project team to seek out technical guidance related to a particular credit or facet of the LEED rating system. LEED Interpretations tend to ask similar questions as CIRs, but may be more complex or, in the LEED estimation, is worthwhile to use as precedent.  The difference between a CIR /LEED Interpretation and the Appeal Review described above appears to be the timeframe and breadth of appeal.  Appeal Review is necessarily during the application process, whereas the other two may be accomplished before application.  Appeal Review appears focused on sufficiency of backup for a credit as opposed to the technical guidance or the LEED regulations as a whole.

On the flipside of the project team’s appeals and interpretations is the “Certification Challenge.”  This policy is intended to ferret out “incidents of intentional or inadvertent misrepresentation which result in the inappropriate award of LEED certification.”  See the LEED Certification Guide.  Essentially it is an audit process that may initiated by the GBCI president for “any reason or no reason at all” within 18 months of LEED certification.  The GBCI may also proceed with a Certification Challenge if a third party with “specific personal knowledge” comes forward with a complaint.  In either case, there is an investigation by GBCI and an opportunity for the project team to be heard.  Upon an adverse determination, the project team may appeal to the GBCI Board of Directors.  In the event of an adverse decision before that board, the decision is final, and the LEED certification may be revoked.

Final Post: We will examine considerations in construction contracting in this green-building era aimed at avoiding disputes on a sustainable project.  For example, the AIA has adopted its own guide and contract language.  See AIA D503.

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The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts.  She is an associate at Pierce Atwood, LLP in Providence, Rhode Island.  She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.