Friday, June 29, 2018

One Out of Eight Ain’t Bad: NH Court Rules First Reservation of Rights on Final Release for Project Long Claims is Enough to Sustain Lien Rights

Design/builder IPS-Integrated Project Services (IPS) entered into a subcontract with Fraser Engineering (Fraser) for work on a new pharmaceutical manufacturing facility in Portsmouth, NH.  Fraser signed the contract in February of 2016 for the mechanical and plumbing scopes of work in the amount of $5,312,100.00.  During the course of contract negotiations starting in the fall of 2015, IPS and the owner made Fraser aware that it may be required to accelerate its work on the project for certain schedule considerations.  In December of 2015 IPS directed Fraser to institute an overtime program for the project which ended up lasting for months.  During this time, IPS and Fraser were in communication about the costs and labor inefficiencies associated with such a prolonged overtime schedule. Ultimately Fraser worked an additional 59,845 manhours on the project.

Fraser’s subcontract contained two provisions related to additional work it might experience during the execution of the project.  The first required Fraser to report any unforeseen conditions resulting in a change and any failure to provide IPS notice would result in the waiver of claims for time or money.  The second provision required Fraser to submit conditional lien waivers with each monthly requisition of which Fraser submitted eight throughout the project. The first of the seven waivers Fraser submitted contained no reservation of rights related to the additional manhours for the IPS-directed acceleration, the eighth and final did. 

At some point Fraser submitted a claim for over $4 million of which $3,324,083.30 was related to labor inefficiencies due to the owner and IPS directed acceleration. Fraser further contended it was owed $1,554,867.29 in retainage and unpaid contract balances.  On January 26, 2017, Fraser filed a motion for and was granted an ex parte attachment to perfect a mechanic’s lien in Rockingham County Superior Court.  After objecting to the attachment in state court, the defendant removed the matter to federal court.

IPS argued that Fraser waived its lien rights by executing waivers throughout the project before finally reserving its rights for the acceleration claim on its final requisition. The Court rejected IPS’s lien waiver argument by pointing out in the record IPS had actual knowledge when the seven lien waivers were submitted that Fraser would seek additional costs related to the directed acceleration.  The Court identified Fraser’s numerous communications with IPS between December 2015 and August 2016 that it was experiencing labor inefficiencies due to the directed acceleration.  

The Court also discussed due to the “remedial nature” of the mechanic’s lien statute, it could not state with certainty the N.H. Supreme Court would “ignore the defendant’s awareness of the labor inefficiencies and strictly enforce the lien waivers.” 

Finally, the Court found that IPS made no attempt to separate costs for the additional work Fraser experienced between the seventh lien waiver in May 2016 and the eighth and final lien waiver in August 2016. Since IPS does not dispute the work was actually completed, it is impossible for the Court to reduce the lien amounts for work prior to May 2016.

Ultimately the Court found the lien enforceable in the amount of $4,917,122.20.

The author, Brendan Carter, Esq., is the Director of Industry Advancement & Labor Relations with the AGC of Massachusetts based in Wellesley, MA. He is a monthly contributor to The Dispute Resolver and a former Student Division Liaison to the Forum on Construction Law.  He may be contacted at 781.786.8916 or

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