Author: Thomas H. Welby

Our readers will not be surprised to learn that we believe that mechanic’s liens are a powerful tool to assist unpaid contractors in collecting their money. We recently wrote about how failing to follow the requirements of asserting and foreclosing such liens is fatal to any subsequent recovery on the lien. In a nutshell, because the mechanic’s lien is a statutory compromise that gives a contractor the right to sue someone with which it has no contractual relationship, the need for the lienor to follow formalities (such as filing and renewing a Notice of Pendency) is emphasized. In the recent case of Marine Bulkheading, Inc., v Ibex Construction Company, LLC, and Costco Wholesale Corporation, an appellate court rejected an attempt by a subcontractor to get around the fact of a bankrupt general contractor and its own failure to renew a required Notice of Pendency by seeking to amend its complaint to include direct non-lien foreclosure claims against the project’s owner.

Background

In late 2015, Ibex Construction Company entered into a contract to construct a Costco on Third Avenue in Brooklyn. Because of the proximity of the property to the Gowanus Canal, foundation piles were required. That scope of work was subcontracted to Marine Bulkheading, Inc. Marine performed its work, but was not paid by Ibex. Marine filed a mechanic’s lien, and ultimately sued Ibex and Costco to foreclose the lien. Marine also asserted contract claims against Ibex. Marine filed a Notice of Pendency at the time it started the lawsuit, but never renewed its filing after three years, as required by the statute. 

Ultimately, Ibex filed for bankruptcy, and the lawsuit was stayed by federal law as a result. (Many practitioners mistakenly believe that a bankruptcy filing and the Automatic Stay prohibit taking ANY action against a bankrupt debtor; this is not true, a creditor is permitted to take actions to perfect and maintain liens pending the bankruptcy. The only thing prohibited by the Bankruptcy Code are attempts to collect on that lien.) By the time the lawsuit resumed, the deadline to renew the Notice of Pendency had passed (and, if you read our recent column, you realize that this resulted in the effective voiding of the mechanic’s lien). In an attempt to get around the now unrecoverable mechanic’s lien and the bankrupt general contractor, Marine moved to amend its complaint to assert a quasi-contractual quantum meruit claim directly against Costco, the project’s owner. In so moving, Marine noted the delays to the case and that there would be no prejudice to Costco as all facts were already known. Costco opposed, noting that there was already a contract between Marine and Ibex that covered the subject matter of the dispute, and arguing that such direct subcontractor against owner claims were improper.

Decision

The motion court denied the motion, following well settled law that holds that where there is already a written contract governing the subject matter of the dispute, quasi-contractual claims arising out of that same dispute are barred. Marine, with no other avenue to salvage any recovery, appealed. The Appellate Court affirmed, not only finding that the existing contract barred the proposed new claims, but also that “a property owner who contracts with a general contractor does not become liable to a subcontractor on a quasi-contract theory unless it expressly consents to pay for the subcontractor’s performance. The owner’s mere consent to and acceptance of improvements placed on his [or her] property by the subcontractor, without more, does not render it liable to the subcontractor”. 

Comment

While one has to admire Marine’s attempt to extricate itself from the effects of both the GC’s bankruptcy and its own failure to renew the Notice of Pendency, such were too little, too late. As we noted in a recent column, mechanic’s lien formalities are necessary because the mechanic’s lien is a statutory compromise that gives a contractor the right to sue someone with which it has no contractual relationship—and, in most circumstances, provides security for the underlying debt. Here, the contractor failed to follow all of the required formalities to keep its lien in place (the maintenance of the Notice of Pendency by making sure that it was timely renewed). Accordingly, once the Notice of Pendency expired, so did the contractor’s right to maintain the lien foreclosure lawsuit. Its post-hoc efforts to salvage recovery by asserting alternative claims against the only remaining solvent defendant (the owner) were not sufficient as a matter of law.

Mechanic’s liens must be prepared, filed, served (with proof thereof), and perfected (and maintained) correctly.  It is simple, fast and inexpensive to renew a Notice of Pendency.  It is very costly not to do so. Therefore, should you have any questions as to how to best protect your rights to recover on a mechanic’s lien, you should consult with experienced construction counsel.

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

One of the more ubiquitous provisions in a construction contract is the provision that the contract cannot be modified except in writing. This issue usually (but not always) arises in the context of a fight about open change orders that were not signed off by the owner or upstream contractor before the work was performed, or a provision requiring that all change orders or other modifications be in writing. When this fight arises, all of the “just get it done and we will do paperwork later”, and similar conversations, are conveniently forgotten, and all of a sudden contractual formalities become paramount to the party resisting the change order. However, an appellate court, in the recent case of Tekton Builders, LLC v 1232 Southern Boulevard LLC, reminds us that even in the presence of such a modified-only-in-writing provision, the parties’ course of conduct, how they deal with each other during the project, can amount to a waiver of a contract’s requirements, including requirements relating to writings.

Background

In March of 2015, 1232 Southern Boulevard LLC, the entity which owns the property housing the Children’s Aid College Prep School, entered into an agreement with Tekton Builders for Tekton to serve as the construction manager for Children’s Aid’s project to build a charter school. The project was to have been completed in time for the 2016-17 school year, but the project was beset with various delays from the start. These delays were thoroughly discussed between all relevant parties in jobsite meetings, in email correspondence, and in other similar notes. Ultimately, in January of 2017, Tekton was terminated, and it sued to foreclose a mechanic’s lien and recover its costs, including its extended general conditions and the work it performed after the original completion date.

After discovery, Children’s Aid moved for summary judgment dismissing Tekton’s delay and change order claims, arguing that the contractual notice requirements were not followed and, therefore, Tekton waived its right to recoup these costs. (Children’s Aid also moved for summary judgment discharging Tekton’s mechanic’s lien, arguing that it was exaggerated.) In opposition, Tekton argued that Children’s Aid was kept fully apprised of the nature and extent of the delays in meetings, through email correspondence, through proposed change orders requesting extensions of time (and associated costs), and through stop work orders issued by the City. Accordingly, Tekton argued that Children’s Aid could not credibly claim any prejudice as a result of the failure to reduce this common knowledge to a contractually required written form. In that regard, to the extent that the contract required such formalized written notice, Tekton argued that such was waived by Children’s Aid’s own failure to comply with the contract in failing to promptly respond to change order requests, and in directing extra work notwithstanding such failures. 

Decision

The motion court denied that branch of Children’s Aid’s motion which was for summary judgment on its failure to comply with the condition precedent (written notice) defense, holding that there were issues of fact as to whether Children’s Aid waived the protection of the contractual provision by its course of conduct, and that such issue would have to be reserved for trial. (The motion court did, however, grant Children’s Aid summary judgment discharging Tekton’s mechanic’s lien, finding that it was willfully exaggerated, and that the amount of damages sustained by Children’s Aid as a result would be determined at the trial.)

Children’s Aid appealed the denial of summary judgment on its written notice affirmative defense, but fared no better before the appellate court. In affirming the order, the appellate court held that “even when a contract contains a nonwaiver clause and a provision stating that it cannot be modified except by a writing, it can still be effectively modified by actual performance and by the parties’ course of conduct”, and that there were issues of fact as to whether the parties waived this provision by their conduct which precluded an award of summary judgment to Children’s Aid. (On Tekton’s cross-appeal, the appellate court also affirmed the discharge of the exaggerated mechanic’s lien, holding that Tekton’s explanation of “inadvertent inclusions” in the lien, without an attempt at explanation, was not sufficient to rebut the showing that the lien was otherwise willfully exaggerated.)

Comment

While a written notice provision is designed to protect the parties by ensuring that there is an adequate paper trail for any dispute, parties are always free to chart their own course of action outside of the contractual provisions. However, when a dispute arises, if the parties ignored the specifics of the contract at the time, they cannot realistically expect a court to belatedly enforce the specifics of the contract simply because it would be more expedient for one of the parties. 

If you find this decision to be encouraging, take note of the fact that both of the contracting parties here were private entities.  A very different result may have been reached if the owner was a public entity. Public owners benefit from statutory requirements of strict compliance, and courts are generally more reluctant to stray from contractual adherence because there is no equitable estoppel doctrine applicable against municipalities. After all, the public policy rationale in that context is to protect the taxpayers’ pocketbook!

In order for a contractor to best protect its rights under its contract (and preserve its right to rely upon, or set aside its provisions in connection with any dispute), it would be well advised to consult with experienced construction counsel. (And, on another note, exaggerating a mechanic’s lien is still a very bad idea.)

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

This column has often extolled the virtues of a mechanic’s lien as a powerful tool to help contractors get paid. A mechanic’s lien, however, is not something that can be deposited into a bank account. In order for a contractor to obtain the benefits of a lien, all of the formalities required by the Lien Law must be followed. As a contractor learned in the recent case of Hewitt Builder and Renovations v Tectonic Builders, one of the formalities that must be followed is the filing of a Notice of Pendency in connection with the filing of the lien foreclosure lawsuit, and the failure to follow all required formalities is fatal. 

Background

In April of 2021, Hewitt Builders and Renovation entered into a contract with Tectonic Builders for Hewitt to perform drywall and carpentry work for Tectonic at a property owned by Farmingville Associates. Hewitt finished its work in October of that year, but was still owed over $100,000. In order to secure its right to payment of that sum, on November 29, 2021, Hewitt filed a mechanic’s lien. When payment was still not forthcoming, in March of 2022, Hewitt filed a lien foreclosure lawsuit against both Tectonic and the owner, Farmingville. Hewitt, however, did not file a Notice of Pendency at the time it filed its lawsuit.  (A Notice of Pendency is, essentially, a “red flag” that a plaintiff files in the County Clerk’s office at the time the lawsuit is started [or shortly thereafter] that will stand out to anyone searching the title to the property notifying them that there is a lawsuit filed of which a prospective buyer or lender may need to be aware. A Notice of Pendency extends a mechanic’s lien for three years, and not just the one year that is otherwise available to a lienor by a traditional extension; a Notice of Pendency, however, is only available in the context of a lien foreclosure lawsuit.) In December of 2022, the owner obtained a mechanic’s lien discharge bond.

In September of 2023, the owner moved to dismiss the complaint insofar as asserted against it, arguing that as the mechanic’s lien had not been extended by the filing of a Notice of Pendency (or otherwise extended by any other filing), the mechanic’s lien expired by operation of law one year after its filing and could no longer be foreclosed upon. In opposition, Hewitt argued that as a bond had issued to serve as substitute security for the property, the filing of a Notice of Pendency was no longer necessary. 

Decision

The motion court granted the owner’s motion, noting that as the mechanic’s lien had already expired by the time the bond was procured, even if the bond had been filed with the County Clerk (which it had not), it was not sufficient to salvage a cause of action against the owner (or the surety). Accordingly, the motion court dismissed the claim. 

Hewitt appealed. However, it did not fare any better as the appellate court affirmed. In doing so, that court held that the bond, procured after the expiration of the lien, could not serve to extend the lien. The appellate court also declined to salvage any unjust enrichment claim against the owner, finding that Hewitt’s relationship was with Tectonic, and not the owner. 

Comment

In the private and public sectors, mechanic’s liens are a powerful tool to help an unpaid contractor get paid, but only if all of the required formalities are followed. These formalities are necessary because the mechanic’s lien is a statutory compromise that gives a contractor the right to sue someone with which it has no contractual relationship—and, in most circumstances, provides security for the underlying debt. Here, the contractor failed to follow all of the required formalities to keep its lien in place (the filing of the Notice of Pendency). Accordingly, once the lien expired, so did the contractor’s right to maintain the lien foreclosure lawsuit. 

Mechanic’s liens must be prepared, filed, served (with proof thereof), and perfected correctly.  Therefore, should you have any questions as to how to best protect your rights to recover on a mechanic’s lien, you should consult with experienced construction counsel.

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

New York is among a handful of states where funds paid to a contractor are trust funds, and must be first used to satisfy the claims of unpaid laborers, suppliers, and subcontractors. This is to prevent the practice of “pyramiding”, where a contractor uses the funds received on Project-B to pay a subcontractor for work on Project-A. The obvious problem with pyramiding is that eventually, like all Ponzi-type arrangements, it collapses under its own weight, leaving laborers, suppliers, and lower-tier subcontractors holding the proverbial bag. In the recent case of L.C. Whitford Co., Inc. v Babcock & Wilcox Solar Energy, Inc., an appellate court reminds us that trust funds received by a general contractor must first be used to satisfy downstream claims before it can reimburse itself for what are also legitimate construction costs.

Background

In February of 2021, Babcock & Wilcox entered into contracts to construct several solar energy projects. Under these contracts, B&W was to have been paid over $12 million. B&W retained L.C. Whitford and others as subcontractors. Disputes arose on the project, and the owner ceased paying B&W. At that time, B&W had been paid only $9.5 million, but had paid out over $20 million to its subcontractors. Notwithstanding these payments, there were still nearly $7 million in subcontractor mechanic’s liens outstanding.

Ultimately, B&W settled its dispute with the owner for just over $1.2 million. Once the subcontractors learned of the settlement, they notified B&W that these funds constituted statutory trust funds under Article 3-A of New York’s Lien Law, and then demand payment accordingly. B&W responded that as the amounts B&W previously paid out exceed the amount of trust funds received, the trust had been exhausted, and thus it was free to reimburse itself for those subcontractor payments out of the settlement funds. The subcontractors immediately moved for a preliminary injunction prohibiting B&W from reimbursing itself, arguing that the settlement monies constituted statutory trust funds, and thus should be segregated. B&W pressed its position that even when adding the settlement funds to the trust funds already received, the math was clear that B&W expended over $10 million more than it received. In light of that math, B&W argued, the trust was extinguished, and the settlement funds were no longer trust funds.

Decision

The motion court issued an injunction prohibiting B&W from reimbursing itself, and requiring B&W to segregate the settlement funds. In doing so, the motion court noted the broad purpose of the trust fund statutes to protect laborers, suppliers and subcontractors who provided work and materials to the project, and that the trust also extended to unmatured rights to future payment. Further, the motion court cited well settled case law that the trust continued until all trust claims are satisfied, or until all such trust assets have been applied.

B&W appealed, and a divided appellate court affirmed with a 3-2 majority. The majority of the appellate court also cited the broad purposes of the trust fund statutes, and noted that the contractor’s trust needed to be used to pay claims of subcontractors, laborers, and suppliers, amongst other specific beneficiaries, whereas an owner’s trust permits the owner to pay for the “costs of improvement”, which is a broader category. The dissent argued that B&W’s payment of subcontractor claims with non-trust assets was for a trust purpose, and the reimbursement of those monies was proper as the monies were not going towards paying B&W’s personal debts. The dissent also noted that the practical effect of requiring a contractor in B&W’s position to pay later acquired funds to subcontractors would be that such contractors would simply withhold payment, potentially indefinitely, until such funds were received from the owner, and would refrain from making advance payments of such claims.  In order to avoid what would be viewed as penalizing a contractor from advancing its own funds to keep a project moving, the dissenters would have denied the injunction.

Comment

Both the motion court and the appellate court (both the majority and the dissent) reiterated the broad, laudable purposes of the trust fund statutes, which is to protect those who most directly provided the labor and materials for a construction project. Any time a contractor sees a payment by an upstream entity not flowing down to a trust fund beneficiary, it should be on guard for a potential diversion of trust funds. Also note that an owner who receives proceeds from a construction loan is similarly the Trustee of a separate statutory trust relating to those funds, to which the contractors are the beneficiaries. Additionally, an individual who diverts or misapplies trust funds takes on personal liability for the diversion.  These trust issues are often helpful in collecting contract funds downstream.

The fact that the Appellate Division’s decision was 3-2 gives B&W the right to a direct appeal to the Court of Appeals without having to make the usual motion requesting permission to do so. In the event that B&W does undertake such an appeal and we get an answer to the question of whether the reimbursement for non-trust funds advanced for trust fund purposes is permissible, we will follow up on this article. In the meantime, if you have any questions as to what funds can be expended, and for what purpose, do not hesitate to reach out to experienced construction counsel.

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

With insurance claims (and costs) skyrocketing thanks to New York’s infamous scaffold law, it is more important than ever to be sure to understand the insurance coverage afforded to you under the various insurance policies you rely on to protect you. While you may have a thorough understanding of your own insurance policy, contractors frequently obtain insurance coverage from their subcontractors, and contractors routinely also provide insurance to other entities, such as upstream contractors and owners. In that regard, it is also important that you understand the terms of the policies of others which are affording you coverage. A federal appellate court, in the recent case of BCC Partners, LLC v Travelers Property and Casualty Company of America, reminds us of the importance of understanding the language of the applicable policy; here, the differences between being an “additional insured” and a “named insured”.

Background

BCC Partners was the owner of a project to build an apartment complex. BCC contracted with Ben F. Blanton Construction to be the general contractor for the project. Blanton, as required by its contract with BCC, procured insurance with Travelers; Blanton was the “named insured” on the policy, and BCC was the “additional named insured”.

During the construction, a retaining wall failed, causing significant property damage, as well as delays to the project. BCC placed a claim under Blanton’s policy with Travelers, as an “additional named insured”, to recover its lost rental income and other soft costs arising out of the collapse and resulting delays. Travelers denied the claim, noting policy language that only the “named insured” is covered against such losses. BCC sued Travelers for breaching the policy, and Travelers moved for summary judgment dismissing the lawsuit, arguing that the policy language was clear that such losses were only covered for the “named insured”.

Decision

The lower court granted Travelers’ motion, finding that the policy language was clear that only the “named insured” qualified for loss of income coverage under the policy. BCC appealed, and the appellate court affirmed. In doing so, the appellate court noted that the policy’s coverage extends to “the actual loss of ‘rental value’ you sustain” and “your ‘soft costs’” that result from certain construction delays, but that the policy explicitly states twice that “the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations” (i.e.: Blanton). As to the “additional named insured”, the appellate court noted that the policy specifically limited the available coverage to: “Owners of Covered Property”; “Mortgagees or loss payees”; “Contractors, sub contractors and sub-sub contractors”; and “Lessors or lessees” of “Covered Property”, which the policy defined as the sum of: “Permanent Works,” such as construction equipment and materials, and “Temporary Works,” such as scaffolds, fencing, trailers, or other “temporary buildings or structures incidental to completion of the project”, but only “to the extent of their financial interest in the Covered Property”. Given this specific definition of “additional named insured”, BCC’s argument that it was an additional “named insured” under the policy (and, therefore, the “named insured” coverage should also be afforded to it) was rejected.

Comment

Many owners and upstream contractors are content to allow construction to proceed merely upon a downstream party’s provision of a certificate of insurance showing that an insurance policy is in force which shows that a required entity may be afforded coverage under the policy. Not only are these certificates specifically provided “for informational purposes only” (meaning that they are legally unenforceable), they do not go into same detail as the terms of the actual policy itself, and can easily leave someone believing that there is insurance coverage when there is not. An insurance policy is a contract, and will be interpreted as such.  In order to remedy the issue, contractors would be well advised to review the terms of not only their own insurance policy, but any other policy on which they (or any other person or entity for whom they are providing coverage) will rely in the event of a loss. Here, simply comparing the policy’s definitions of “named insured” and “additional named insured” side by side would have revealed the significant gap in coverage. Accordingly, while the property damage itself was covered under the policy, after Blanton’s bankruptcy BCC was left to shoulder a $1.4 million dollar loss without the prospect of recovery.

About the Authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

In today’s highly technological world, computer generated documents are still subject to the limitations of the human/keyboard interface, which limitations are manifested by the typographical error. While many of these errors are simply embarrassing, others can have financial import—such as those which work their way into price terms. Where this happens, a contractor is not without recourse because courts maintain the inherent power to correct clearly established mutual mistakes that make their way into contracts. However, a court, in the recent case of Titan Construction Services v Board of Managers of PS90 Condominium, reminds us that the tool of reformation is limited to genuine mistakes, and not what would be termed as “buyer’s remorse” in pricing.

Background

In July of 2016, Titan Construction Services entered into an agreement with the Board of Managers of the PS90 Condominium for Titan to perform certain terra cotta repair work on the PS90 building. The contract provided that the price for “TRC 02” work was $2.06 per square inch. The contract included an addendum which provided that the price for that work was $285 per square inch. The contract also had a unit price provision under which any additional terra cotta work added would be performed at the same price.

The original contract required Titan to repair 832 square inches of terra cotta. The condo ultimately added another 50,000 square inches, which Titan refused to do at the $2.06 per square inch rate, claiming that the rate was actually $285 per square inch. Titan submitted a $14 million change order accordingly. The condo refused to pay that rate, claiming there was a mutual mistake in the contract as to price, and $2.06 per square inch was the correct number. Titan proceeded with the work under protest, and sued to recover the monies it was claiming under the contract. The lawsuit ultimately went to trial on the issue of what the intended price was.

Decision

After trial, the court found that the agreed upon price was $2.06 per square inch, and that $285 was a square foot price (mathematically, $2.06 per square inch works out to slightly over $285 per square foot). The court relied upon statements made by Titan which conceded that “there was a bid submission of $2.06 that was changed later that day to $285 a square inch. In our view it should have been $285 a square foot, not square inch”. This concession was supported by other evidence, such as Titan’s field reports, and other documents, which referred to the $2.06 number. In fact, the evidence established that the dispute arose only after the condominium sought to include extra work because Titan found it “financially infeasible” to perform so much work at $2.06 per square inch. The court found that Titan’s financial infeasibility could not control its decision, and that the mutual mistake had to be resolved at $2.06 per square inch, not $285. Accordingly, the court entered judgment in Titan’s favor for only $59k, which was the amount for the work at $2.06 per square inch, minus some backcharges.

Comment

The court’s decision here made it clear that the parties always intended to proceed at $2.06 per square inch, and that the claim that the price was $285 for that same unit was a product of bidder’s remorse.  While contractors may, for business reasons, price smaller, introductory jobs much lower than standard rates (think of that 99 cent per pound turkey at Thanksgiving; the store is losing money at that price, but is making it up when you buy the stuffing and the rest of the trimmings), that does not give them the right to walk away from that price under a mistake theory once it is agreed upon.

One thing that strikes us about this case is the scope of the change order being a 6,000% increase in the scope of work (832 square inches of original work, with a 50,332 square inch change order). While mutual mistake did not work, there is a doctrine in the law that provides that where a change order is so significant that it was not within the reasonable contemplation of the parties at the time of the contract, it actually constitutes an entirely new contract because the change is considered a “cardinal change”, rather than simply a change order. As such, it would give the contracting party the opportunity to decline the work absent reaching a completely new agreement. It is not known whether a cardinal change argument would have prevailed here (because it wasn’t tried). Contract law and interpretations are not always simply plain reading and common sense. If you are faced with a similar situation, you should reach out to experienced construction counsel so that you can determine all of your options before proceeding.

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

As has been happenstance (and perhaps should be the start of a tradition), our December article provides good news about the dreaded Scaffold Law. Previous Holiday Season articles have addressed the recent ability to send a Scaffold Law claim to a jury where the accident is unwitnessed and there is evidence putting the plaintiff’s version in dispute; that sending a Scaffold Law claim to a jury is appropriate where there is a question as to whether the injured plaintiff is the sole proximate cause of his or her injuries; and that the Scaffold Law applies only to workers on the site, and not a transient building inspector or passing-by member of the public. In the recent case of Claesen v VRD Contracting, Inc., an Appellate Court once again invokes the sole proximate cause defense to refer one of these claims to a jury.

Background

In August of 2017, William Claesen was working for Certified Interiors, a carpentry subcontractor, on a project at the Miller Avenue Elementary School of the Union Free School District of Shoreham Wading River. Certified was hired by VRD Contracting, the project’s general contractor. At that time, Claesen was performing spackling in the gymnasium with the use of a scaffold. Claesen placed his spackle bucket on top of the scaffold so he could reach it easily during his work. Once Claesen finished his work in the gymnasium, he and a coworker had to move the scaffold to the next room. In order to do so, because the scaffold had to pass under a partition wall in the ceiling, they had to disassemble the scaffold’s safety railings and toeboards, which they did. When they went to move the scaffold, the spackle bucket, which was still on top of the scaffold, fell off and struck Claesen in the back, causing injuries.

Claesen commenced suit against VRD and others, alleging violations of the Scaffold Law. At the end of discovery, Claesen made the typical plaintiff’s motion for summary judgment on the issue of liability. Here, because Claesen had himself both placed the spackle bucket on top of the scaffold, and had partially disassembled it, the defendants cross-moved for summary judgment dismissing the claim, arguing that Claesen’s actions were the sole proximate cause of his injuries.

Decision

The motion court denied Claesen’s motion and granted the defendants’ motions, finding that as the spackle bucket was placed on the scaffold by Claesen, and as he removed the safety devices from the top of the scaffold while leaving the spackle bucket on top, he was the sole proximate cause of his injuries and could not recover under the Scaffold Law. Claesen appealed, and the appellate court modified the motion court’s order so as to deny the defendants’ motions for summary judgment dismissing the complaint. However, the appellate court did not go so far as to reverse the denial of Claesen’s own motion for summary judgment. In doing so, that court acknowledged that where the plaintiff is the sole proximate cause of his or her own injuries there is no liability under the Scaffold Law, but found that liability could not be determined on the motions, as a matter of law, without a finding of fact that it was Claesen’s responsibility to check the top of the scaffold before moving it (which would make him the sole proximate cause of his injures). Accordingly, the appellate court referred the case to a jury to determine whether Claesen was the sole proximate cause of his injuries.

Comment

In the not so distant past, an injured plaintiff’s motion for summary judgment on liability in a Scaffold Law claim was granted as a matter of course. However, in recent years, courts have been more receptive to finding that there can be issues of fact as to whether the sole proximate cause defense (or a related defense for recalcitrant workers who affirmatively disregard safety instructions) applies. In such cases, courts will deny those plaintiffs’ motions, ordering a trial and sending those cases to their respective juries.

Historically,  with summary judgment on the issue of liability in hand, a plaintiff’s counsel could engage in hardball negotiations because the only question is how big the check is going to be. Clearly, with a young worker—particularly a union worker—economic damages are going to be significant, and plaintiff’s counsel has that in mind during those negotiations. Accordingly, while having a Scaffold Law claim dismissed on a motion for summary judgment is a blue rose, having such a claim referred to a jury (because there is a genuine issue of fact to be tried) is a huge victory because it turns the question from one simply as to how big the check to the injured plaintiff is going to be, to one of whether there is going to be a check at all. In that regard, the settlement discussions are less one sided, and a less costly settlement can be reached.

In order to put you in the best position to defeat a plaintiff’s motion and reach that jury, the best course of action is for contractors to document their safety plans and procedures, and communicate them to employees and job site contractors—and do so on an ongoing basis. Similarly, when an accident occurs, thorough photographing and documenting of the accident and any item related to the accident is crucial.

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

As most of you undoubtedly know, “No Damages For Delay” clauses are commonplace in construction contracts. Prior to 1986, New York courts often did not enforce such clauses, holding “uncontemplated delays” as being compensable. With the decision of the New York Court of Appeals in the case of Corinno Civetta Construction Corp v the City of New York, courts began enforcing “No Damages For Delay” clauses with a vengeance.  Yet in the Civetta decision, the Court set forth four very limited circumstances under which a contractor may still recover delay damages notwithstanding the presence of such a clause. (This column usually discusses these exceptions in the context of whether a seemingly lengthy delay was within the contemplation of the parties at the time of contract.) Recently, in the case of Nagori Contracting Corp. v City of New York, a court reminds us that these same circumstances can also support recovery where the contract provides for the recovery of damages for some (but not all) causes of delay, and that the possibility of recovering often turns on the facts of the case.

Background

In late-2019, Nagori Contracting Corp. submitted a bid for a project to construct a composting facility for the New York City Department of Sanitation. In December of 2019, this bid was accepted and the contract was awarded. The project term was to have been 485 days (16 months) from the issuance of a Notice to Proceed. The pandemic struck shortly after, and three months after the award of the contract, Executive Order 202 was issued, shutting down all non-essential activities. (You may recall that public construction was considered an essential activity which was permitted to proceed.)

The Notice to Proceed was ultimately issued by the City in March of the following year, with a proceed date of April 19, 2021. The project was completed in 2023, and Nagori was paid the full adjusted contract sum of $17.2 million. However, Nagori incurred over $1.5 million in increased costs for labor, materials, and insurance attributable to the delay in issuing the Notice to Proceed, and it placed a claim with the City to recover those costs. The City denied the claim, arguing that the delay did not meet the criteria for compensation under Section 11.4 of the Standard Construction Contract. Nagori then commenced a lawsuit to recover those damages. The City ultimately moved for summary judgment dismissing the lawsuit accordingly.

Decision

The court denied the City’s motion. In doing so, the court addressed the City’s contention about the delay damages provision in the contract, finding that it was questionable as to whether it applied to delays incurred only after the issuance of the Notice to Proceed, as was argued by the City, or whether such damages could be awarded for any time after the contract was awarded. However, the court did not delve deeper on the contractual issue because it found an issue of fact as to whether two of the four common law exceptions to a No Damages For Delay clause (which, by way of reminder, are for: (1) delays caused by the contractee’s bad faith or its willful, malicious, or grossly negligent conduct; (2) uncontemplated delays; (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee; and (4) delays resulting from the contractee’s breach of a fundamental obligation of the contract) could be applied. Specifically, the court held that the issuance of a Notice to Proceed was a fundamental obligation of the contract, and found that there were questions of fact as to whether the City’s delay in issuing the Notice constituted a breach of that fundamental obligation. The court also found that there were issues of fact as to whether a 15 month delay in issuing a Notice to Proceed on a 16 month project was contemplated by the parties at the time of the contract. Accordingly, the court directed the parties to proceed to trial.

Comment

The court here made it clear that although the contractual provisions would be applied, there are certain principles of common law which will be grafted into all contracts—here, the common law exceptions to a No Damages For Delay clause. While the issue of whether Nagori is entitled to compensation for the delay under its contract will be litigated, the court gave Nagori two other lifelines in the event that its contractual claim is ultimately unsuccessful at trial. Accordingly, even if the contract claim fails, Nagori may yet recover if it proves either that the City breached a fundamental obligation of the contract in delaying the issuance of the Notice to Proceed, or that the 15 month delay in issuing a Notice to Proceed on a 16 month project was not contemplated by the parties at the time of the contract.

As we mentioned in last month’s column, contract law and contract interpretations are not always simply plain reading and common sense. Further, there may be remedies available outside of the contract, including those granted by statute, regulation, or case law. Accordingly, if you face an event of delay that is seemingly outside of the compensation provisions of the contract (including a blanket No Damages For Delay clause), you should reach out to experienced construction counsel so that you can determine all of your options before proceeding.

About the authors: Thomas H. Welby, an attorney and licensed professional engineer, is General Counsel to the CIC and the BCA, and is the Founder of, and Senior Counsel to the law firm of Welby, Brady & Greenblatt, LLP, with offices located throughout the Tri-State Region. Gregory J. Spaun, General Counsel to the Queens and Bronx Building Association, and an attorney and a partner with the firm, co-authors this series.

Back in February, we wrote about the case of Gibraltar Contracting, Inc. v. Tully Construction Co., Inc., where the parties attempted to shorten a statute of limitations period within their subcontract, but the appellate court declined to enforce that shortened period (although that period seemingly ran before the lawsuit was started) because the event which triggered the running of the limitations period was uncertain. After being sent back to the lower court, and after discovery, the court found that the shortened limitations period there was void because it was tied into a contingent payment provision.

Background

In September of 2014, Tully Construction entered into a contract with the Triborough Bridge & Tunnel Authority to rehabilitate the Hugh Carey Tunnel (formerly the Brooklyn-Battery Tunnel). Two months later, Tully entered into a subcontract with Gibraltar Contracting for the tiling scope of work. The contract included a shortened limitations period of six months from the owner’s issuance of a certificate of substantial completion or, if no such certificate was issued, then six months from the owner’s acceptance of the work.

Gibraltar performed its obligations under the contract, including extra work—including a $4.5 million change order resulting from Governor Cuomo’s last minute requirement to use “New York Blue” and “New York Gold” tiles, instead of the white tiles specified. Gibraltar was also impacted by delays, and it incurred costs accordingly. When payment for several open change orders and Gibraltar’s impact costs was not forthcoming, Gibraltar sued, seeking payment of over $5 million. Tully moved to dismiss the lawsuit as being too late, citing the shortened limitations period. It provided the court with a document on MTA letterhead, signed by its Chief Engineer, denominated as a “Certificate of Final Completion”, advising that Tully has fully performed its work, and recommending acceptance of the project. The motion court denied the motion, citing the provision of the contract that required either the issuance of a certificate of substantial completion or of final acceptance by the owner, noting that the document provided was only a recommendation that the owner accept the project, not the acceptance itself. Tully appealed, and the appellate court affirmed. In doing so, the appellate court agreed that the document provided was not the final acceptance of the project, but only a recommendation that it be accepted.

While the appeal was pending, discovery proceeded. After the decision on the appeal, Tully moved for summary judgment (which also permits the use of affidavit evidence), adding an affidavit from the Chief Engineer averring that by signing the “Certificate of Final Completion”, he was indicating the owner’s acceptance. Gibraltar opposed and cross-moved to dismiss the shortened limitations defense in its entirety, noting that the owner’s acceptance is not the only condition to triggering the period, but that there was also a continent payment provision which made Tully’s receipt of its final payment a condition precedent to its obligation to pay Gibraltar. In light of the combination of these two conditions, Gibraltar argued, the shortened limitations period was not reasonable because Gibraltar had no way to verify the running of the period. In reply, Tully argued that Gibraltar could have demanded its money at any time and started the period running for itself, and its failure to do so was fatal to its claims.

Decision

The court denied Tully’s motion and granted Gibraltar’s motion for summary judgment dismissing the defense. In doing so, the court cited appellate precedent holding that a contingent payment provision making the obligation to remit final payment downstream contingent on the general contractor’s receipt of money from the owner renders a shortened limitations period unreasonable because the subcontractor has no way to know when the shortened limitations period commences to run. Based on that established case law, the motion court was constrained to make a similar finding as to the unreasonableness of the shortened limitations period here.

Comment

The last time we addressed this issue, we noted the importance of making the event which triggers the shortened limitations period unequivocal. This time, we note that the event which commences the running of the limitations period also has to be ascertainable by the party which will be subject to the limitation. Stated simply, the triggering event cannot be something that the subcontractor would not ordinarily have knowledge of (such as when an owner remits payment to a general contractor). Stealth may be valuable if you’re flying a bomber against an enemy, but it cannot be something that a general contractor bakes into a contract in order to avoid an otherwise legitimate claim. Consulting with construction counsel in drafting and reviewing contracts so that you can be sure that any shortened limitations period passes the reasonableness test (and does not run before the claim accrues), how to best trigger the provision, and how to best timely assert any claims within that shortened period, could be very helpful. And, as always, please also study your contract at the beginning of the job—not at the end.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100

To say that Sections 200, 240(1), and 241(6) of the Labor Law, New York’s “Scaffold Law”, is the bane of the construction industry would be a gross understatement. The Scaffold Law results in ever increasing insurance costs, and ultimately stunts the development it is ostensibly designed to make safer. One small ray of hope is that where an injured plaintiff is said to be the “sole proximate cause” of his or her injuries (that there could be nothing else that contributed to the injuries other than the plaintiff’s own actions), the Scaffold Law’s absolute liability will no longer apply. Unfortunately, courts are quite strict in interpreting what actions constitute sole proximate cause.

One perverse side effect of the Scaffold Law is the increasing frequency of staged accidents, where a plaintiff—who is not always a construction worker—will enter a job site and climb up on to a ladder or scaffold (or other elevation) and throw him or herself from it. There are currently some lawsuits working their way through the court system under the Racketeer Influenced Corrupt Organizations Act (the RICO act, which was the tool used to topple the Mafia) alleging that these claims are part of an orchestrated scheme between criminal alien smugglers, dishonest doctors, and dishonest lawyers to churn settlements and verdicts out of the insurance industry through their insureds—you! Without delving into these allegations, an appellate court, in the recent case of Anguisaca-Morales v St. Paul and St. Andrew Condominium Association, held that video evidence created an issue of fact as to whether the plaintiff intentionally fell from the ladder, thus making himself the sole proximate cause of his injuries.

Background

In July of 2020, the plaintiff fell three feet from a ladder. Video surveillance footage of the job site showed that at the time of his fall, the plaintiff was leaning to the side, apparently throwing himself from the ladder. Importantly, the ladder did not shift until after the plaintiff fell. The plaintiff brought suit and ultimately made the typical Scaffold Law motion for summary judgment on the issue of liability. In opposition, the defendants noted the video evidence showing that the plaintiff apparently threw himself from the ladder, and that the ladder did not move until after the plaintiff was already off of it. The court granted the plaintiff’s motion, finding that the plaintiff’s testimony that the ladder moved prior to the fall was sufficient to grant summary judgment to him. The defendants moved to both reargue, and to amend the complaint to assert a counterclaim for fraud based on the staged nature of the accident. The court denied both motions. The defendants appealed.

Decision

The appellate court held that under the circumstances of the video evidence, it was not sufficient to have granted the plaintiff’s motion. The appellate court reasoned that the video evidence created a question of fact as to whether the plaintiff intentionally fell; if such was indeed the case, then the plaintiff would be considered the sole proximate cause of his injuries and, thus, outside the ambit of the Scaffold Law. Accordingly, the appellate court directed that the matter be tried. However, the appellate court did not go so far as to permit the assertion of the fraud counterclaim, finding that it was not sufficient.

Comment

While the appellate court did not go so far as to grant the motion to assert a fraud counterclaim, it denied what would ordinarily be a slam-dunk motion for summary judgment, and it referred the issue of whether the plaintiff intentionally caused his own injuries to a jury. Crucial to the appellate court was the video evidence which “created a question of fact as to whether the plaintiff intentionally fell”. The lesson to be gleaned from this decision is the importance of video surveillance on the jobsite to catch such ne’er-do-wells in the act and establish that they, by intentionally causing their own injuries, were the sole proximate cause of their injuries. Even if the accident is not staged, a video record will establish exactly how the accident happened, and whether the plaintiff could nevertheless be considered the sole proximate cause of their injuries by, for instance, failing to tie off a ladder despite instructions to do so (as we reported in our November, 2023 column). Worst case, the video merely confirms the plaintiff’s version of events, which would be sufficient to establish Scaffold Law liability even in the absence of the video. Stated differently, there is no downside to video surveillance when it comes to a Scaffold Law claim; it will never make you any more liable than you would otherwise be, but it could save you otherwise unwarranted liability.

If you would like more information regarding this topic please contact Thomas H. Welby at twelby@wbgllp.com or call (914) 428-2100