Saturday, February 18, 2017

Massachusetts Appeals Court Awards Attorneys’ Fees for Public Works Bond Claim and then Vacates Fees for Unfair and Deceptive Business Practice Claim

The Plaintiff in Aggregate Industries – Northeast Region, Inc. v. Hugo Key & Sons, Inc., 90 Mass.App.Ct. 146 (2016) contracted with the Defendant to supply and install asphalt for a public works project in Salem, Massachusetts.  The project’s Defendant general contractor furnished a payment bond as required by state statute (Bond Statute).  In January of 2011, the Plaintiff submitted a bid for the asphalt scope of work that contained two qualifications: 1) costs for additional grader services at $400/HR, and 2) the cost of asphalt material would escalate accordingly with the price of liquid asphalt.

The Plaintiff submitted two revised bids in May 2011, neither of which were accepted by the Defendant because of the asphalt escalation clause.  With no agreement in place, the Defendant sent a purchase order to the Plaintiff in mid-May 2011 for the revised bid price but did not include the grader costs or escalation clause.  The Plaintiff returned the purchase order marked up to include the grader unit costs and escalation clause which the Defendant immediately rejected.  The Defendant then issued another purchase order which identified the unit cost of asphalt in order to expressly exclude the escalation clause. Plaintiff signed this purchase order and executed the work.  During the course of the project, the Defendant required the Plaintiff to perform grading activities which the Plaintiff completed and subsequently submitted pricing with the $400/HR unit cost.  The Plaintiff submitted its final invoice on July 6, 2011 in the amount of $89,989.90, $11,400 of which was for the grader rental and asphalt escalation costs.  With not payment received as of October 31, 2011, the Plaintiff filed a complaint in Superior Court.

The Plaintiff’s complaint alleged breach of contract and quantum meruit claims under the state’s Bond Statute.  The complaint also contained claims for violations of the state’s unfair and deceptive business practice statute (Business Statute) for withholding payments due at the completion of the project.  Following the filing of the complaint, the Defendant issued a check to the Plaintiff for $68,525.40 and offered to negotiate for reasonable grader costs.  The Plaintiff refused the payment and the Defendant then counterclaimed violations of the Business Statute.

The trial court found that the contract entered into by the parties did not contain the asphalt escalation clause nor the $400/HR grader unit cost, but under the quantum claim, the Plaintiff was entitled to reasonable grader cost in the amount of $7,125. The trial court further found that “fairness would be the victim” if recovery under the Bond Statute and its attorneys’ fees were allowed.  The trial court reasoned that the Defendant was “ready, willing, and able to resolve at [a] fair and reasonable” cost the disputed work. The trial court also ruled for the Defendant on the cross-Business Statute claim calling the Plaintiff’s claims under the Bond Statute “extortion.” Instead of awarding damages under the Business Statute, the court withheld pre and post-judgement interest on the quantum claim and then awarded attorneys’ fees to the Defendant in the amount of $67,319.  The Plaintiff appealed.

The Massachusetts Appeals Court examined the case and found the trial court’s finding of fact accurate that a valid contract did exist which excluded the asphalt escalation clause and grader unit costs of $400/HR.  Accordingly, no breach of contract occurred based upon the Defendant's issuance of payment for the base contract scope of work.  The Court next reviewed the Bond Statute claim and the Plaintiff’s claims for attorneys’ fees under that statute.  The Plaintiff argued that the once the trial court found damages in quantum for the grader rental, the Bond Statute provision of attorneys’ fees must apply because the elements of the statute were satisfied.  The Court agreed.

The Court reviewed the Bond Statute’s elements along with its attorneys’ fees provision which requires a judgement in favor of a claimant “shall include reasonable legal fees.” The Court found the Plaintiff plainly met the requirements by 1) filing an action with the Superior Court, 2) within the one-year period from completion of the work, 3) which alleged nonpayment within sixty-five days of the last invoice, and 4) prosecuted the claim "to final adjudication and execution for the sums justly due the claimant as provided in this section."  Accordingly, the Court found the compulsory usage of “shall” required the award of attorneys’ fees to the Plaintiff.

The Court next reviewed the Plaintiff’s argument that its refusal to negotiate with the Defendant over the asphalt escalation and grader unit costs “did not constitute unfair or deceptive acts or practices in the course of trade or commerce” as required by the language of the Business Statute.  The Court once again agreed with the Plaintiff finding that “ordinary contract disputes, or the failure to negotiate a settlement in lieu of litigation, however, typically fall outside the reach of the statute.” The Court further mused that even if the Plaintiff’s claims were weak, it was within its rights to file suit and litigate them.

The Court remanded the Bond Statute claim back to the trial court to award of pre and post-judgement interest plus reasonable attorneys’ fees and then vacated the award of attorneys’ fees for the Defendant’s Business Statute claim.

The author, Brendan Carter, is a contributor to The Dispute Resolver and a former Student Division Liaison to the Forum on Construction Law.  He is an attorney and a Senior Consultant with Navigant’s Global Construction Practice based in Boston, MA.  He may be contacted at 617.748.8311 or

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