Pittsburgh’s Bureau of Building Inspection plans to modernize its technology to improve efficiency in the building and construction industry. To see a video of Maura Kennedy, Pittsburgh’s new Chief of the Bureau of Building Inspection, discussing the planned changes, click here.
The West Virginia Supreme Court’s recent decision in the Brooks v. City of Huntington case overturned years of precedent regarding what a claimant may recover for property damage. Prior to the Brooks decision, the law in West Virginia was that a party claiming property damage was required to determine whether the cost of repair would exceed the fair market value of the property before it was damaged, and either the loss of the fair market value or the cost to repair, whichever was less.
The West Virginia Supreme Court changed this rule of law when it announced its decision in Brooks v. City of Huntington, on November 13, 2014. In Brooks, the Court declared: “Where the owner of residential real property which is damaged can establish that the pre-damage fair market value of the residential real property cannot be fully restored by repairs and that a permanent appreciable residential diminution in value will exist even after such repairs are made, then the owner may recover both the cost of repair and for such remaining diminution in value.” Id. at Syl. Pt. 6.
Thus, following Brooks, residential property owners may recover both cost of repairs and loss of value if the repairs will not restore the property back to its pre-damage fair market value. The Brooks case did not involve commercial property, and thus, it remains to be determined if this new rule also extends to commercial property.
The Brooks Court further eroded the prior rule by declaring that a party alleging property damage in West Virginia “may recover the reasonable cost of repairing it even if those costs exceed the property’s fair market value before the damage.” Syl. Pt. 4, Brooks v. City of Huntington. The claimant may also recover “the related expenses stemming from the injury, annoyance, inconvenience, and aggravation, and loss of use during the repair period.” Id. Thus, pursuant to Brooks, a property damage claimant may now recover loss in fair market value and cost to repair, even if the cost to repair exceeds the fair market value of the property prior to the damage.
Damages, however, are not unlimited. Instead, at least for residential property damage, to the extent repair costs “exceed the fair market value of the property before it was damaged, damages awarded for cost of repair must be reasonable in relation to its fair market value before it was damaged.” Id. at Syl. Pt. 5. Again, it remains unclear whether this reasonableness limitation announced by the Court applies to commercial properties. Babst Calland will continue to track the Brooks decision to see if and how it is interpreted by courts in a commercial context.
Arbitration has historically been the preferred method for resolving construction disputes in the United States, as many in the industry have (1) preferred the idea of having complex construction disputes decided by someone with construction-specific experience and expertise, and (2) viewed arbitration as being quicker and more cost-effective than litigation. More recently, however, arbitration has lost some of its reputation as the best method to satisfy the construction industry’s desire for efficient and cost-effective alternative dispute resolution. See Thomas J. Stipanowich, Arbitration and Choice: Taking Charge of the “New Litigation,” 7 DePaul Bus. & Com. L.J. 383 (Spring 2009) (“Despite meaningful efforts to promote better practices and ensure quality among arbitrators and advocates, criticism of American arbitration is at a crescendo”).
In response to some of this recent criticism, on June 15, 2014, the American Arbitration Association (“AAA”) implemented new supplementary rules, in which parties involved in construction disputes will now have the ability to limit the time and cost of arbitration. In conjunction with the National Construction Dispute Resolution Committee, the AAA created Supplementary Rules for Fixed Time and Cost Construction Arbitration (the “Supplementary Rules”) that are intended “to provide an arbitration process that will be predictable in terms of total time and cost.” The Rules “envision the parties and their representatives working in a collaborative manner to move cases along within the required timeframes.” For example, for cases in the $250,000 to $500,000 range, the Supplementary Rules prescribe a maximum of 180 days from filing to award, with no more than three (3) hearing days. Arbitrator compensation for hearing days and study time (limited to 12 hours) is capped at $275 an hour. Administrative fees to the AAA are fixed at $5,000.00
“Parties involved in certain construction dispute cases can now be more certain about the time and cost associated with their arbitration,” says Rodney Toben, AAA Vice President, Construction Division. “We believe the solution responds to many concerns that arbitration costs in terms of dollars and time may have grown unpredictable. We see the new supplementary rules as innovative, reasonable, and clearly defined so that all parties benefit,” M. Toben said. To learn more about the Supplementary Rules, please visit http://go.adr.org/FixedTimeandCost.
According to a report in the Pittsburgh Business Times, Robert Bruno, a labor and employment relations professor at the University of Illinois at Urbana-Champaign, has determined that the shale fields in Western Pennsylvania, Eastern Ohio and Northern West Virginia are a strong job growth engine that have provided work for between 36,320 and 45,400 construction jobs between 2008 and 2014. The Pittsburgh Business Times quotes Mr. Bruno’s study, saying “An examination of national and relevant state employment data for the construction industry indicates that but for natural gas projects, the [Western Pennsylvania, Eastern Ohio and Northern West Virginia] region would have experienced substantially higher incidences of construction industry job displacement.”
The full Pittsburgh Business Times article about Professor Bruno’s study is available here.
The Pennsylvania Supreme Court, in Shafer Electric & Construction v. Mantia, recently held that a contractor’s could still recover under a theory of quantum meruit (also known as unjust enrichment) despite the contractor’s failure to comply with the Pennsylvania Home Improvement Consumer Protection Act (HICPA). In relevant part, the HICPA requires that all contractors register with the Pennsylvania Office of the Attorney General (OAG) as well as enter into written contracts for the performance of improvements. Both of these requirements were designed to protect purchasers of home improvement services from contractors engaging in deceitful practices. A violation of one of HICPA’s requirements results in the contract being deemed invalid and unenforceable against the homeowner.
In Shafer, the contractor’s written contract with the homeowner was deemed invalid for its failure to register with the OAG. In holding that the contractor could still recover, the Court reasoned that contractors should still be entitled to recover the reasonable value of the services provided even if they violated the HICPA, otherwise the homeowner would receive a complete windfall.
On October 14, 2014, Governor Tom Corbett signed into law Act No. 142 (the “Act”) amending the Pennsylvania Mechanics’ Lien Law, 49 P.S. 1101 et seq., which brings Pennsylvania in line with several other states by creating a more structured notice procedure for owners and subcontractors to follow, as well as a central repository to file notices under the Mechanics’ Lien Law. (The Act is not yet published on-line — once it becomes available we will post another blog entry with a link to the Act.)
These amendments were supported by both owners and general contractors in an effort to provide them with a better method to identify all subcontractors and material suppliers with lien rights on a project. Before the amendments, an owner did not have a legally-defined method to identify subcontractors working on a project in order to contact them and ensure they had received payment before making payment in full to the contractor. General contractors had the same issue with respect to second-tier subcontractors with lien rights. In short, the amendments seek to give owners and general contractors a better opportunity to protect against the situation where they may need to pay twice for the same work due to the existence of mechanics’ lien rights. Consequently, general contractors also will reap the benefit of having second-tier subcontractors identified through this new process so they can avoid the double payment problem where a contractor may need to defend and indemnify the owner from a lien claim because a first-tier subcontractor failed to pay a second tier-subcontractor.
As noted, the Act creates an internet-based “Construction Notices Directory” maintained by the Pennsylvania Department of General Services where certain notices required or permitted by the Act must be filed. The Act instructs the Department of General Services to have the Directory operational by December 31, 2016 or sooner. If the Department designates an operational date other than December 31, 2016, it will be published 90 days in advance of the operational date in the Pennsylvania Bulletin.
Importantly, the new notice procedures apply only to a “searchable project,” which is defined as a project consisting of the construction, alteration or repair of an improvement costing at least $1.5 Million. If the project costs are less than $1.5 Million, these amendments will not apply and the existing Mechanics’ Lien Law procedures must be followed. The Act does not specifically state whether “soft costs” (costs related to real estate, marketing, financing, legal, etc.) may be included in determining whether the $1.5 Million threshold is met.
The Act allows for four types of notices to be filed with the Directory: (1) Notice of Commencement; (2) Notice of Furnishing; (3) Notice of Completion; and, (4) Notice of Nonpayment.
First, the Notice of Commencement is filed with the Directory by the Project owner or an agent of the owner, and it must be filed before any labor, work or materials are furnished for the Project. A contractor may serve as an agent of the owner for purposes of filing the Notice of Commencement if specifically authorized by contract and the owner assumes responsibility for the contractor’s actions. The Notice of Commencement must include (1) the full name, address and e-mail address of the contractor; (2) name and location of the project, including the county in which the project is located; (3) the legal description of the property upon which project is being constructed; (4) full name, address and e-mail address of the owner of the project and, if different, owner of record of the property upon which the project is being constructed; (5) if applicable, the name and contact information of a surety for any performance or payment bonds applicable to the project, including the bond numbers; and, (6) the unique identifying number that is assigned to the Notice of Commencement. The owner must then post a copy of the Notice of Commencement in a conspicuous place at the project site before physical work commencements on the project. The owner also has an obligation to take reasonable measures to ensure the Notice of Commencement remains posted until completion of the project.
Second, if the owner properly and timely files and posts the Notice of Commencement in accordance with the Act, it requires subcontractors to timely file a Notice of Furnishing to preserve their lien rights. Indeed, a subcontractor must file a Notice of Furnishing with the Directory within 45 days after first performing work or delivering materials at the project site or it will loses its lien rights. The Notice of Furnishing must include: (1) a general description of the labor or materials furnished; (2) full name and address of person supplying the labor or materials; (3) full name and address of the person that contracted for the labor or materials furnished by the subcontractor; and (4) a description of the project sufficient to identify it based on the description set forth in the Notice of Commencement. The Act also provides a form for the Notice of Furnishing. The Act expressly directs that a subcontractor’s failure to “substantially comply” with these requirements results in the forfeiture of the right to file a lien claim.
Third, the Act also permits an owner to file a Notice of Completion within 45 days of the actual completion of work on the project, which is then transmitted through the Directory to all subcontractors who filed Notices of Furnishing. “Actual completion” means either (1) the issuance of an occupancy permit and the acceptance of work by the owner, in addition to the completion of all work on the project (including punch list work), or (2) the complete termination of all work on the project for 30 days or more if work is never resumed under the same contract. This Notice is filed by the owner only for informational purposes.
Fourth, subcontractors are permitted to file a Notice of Nonpayment with the Directory for informational purposes when they have not received payment in full for their work or materials. The failure to file this Notice does not impair a subcontractor’s lien rights. Similarly, the filing of this Notice does not relieve a subcontractor of its obligation to comply with the Notice of Furnishing requirement or existing notice requirements of the Lien Law.. This Act also does not change or affect an owner’s right to file a blanket lien waiver by requiring a general contractor to post a payment bond for a project.
The Act further specifies that each Notice or other document submitted to the Directory must contain the county in which the project is located, the tax identification number of each parcel included in the project property, and the building permit number for the project. Persons who filed a notice for a project with the Directory will receive notice of any subsequent filings related to the project via the e-mail, mailing address or fax number.
The Act also includes a safeguard against unlawful attempts to force a subcontractor to indirectly waive its lien rights by not filing a Notice of Furnishing. To protect against this, the Act expressly provides that a subcontractor cannot be required to refrain from filing a Notice of Furnishing as a condition of entering into a contract to furnish labor or materials. A person that violates this section by requesting, encouraging or requiring a subcontractor to not file a Notice of Furnishing is subject to criminal sanctions. Furthermore, if a subcontractor proves that it failed to file a Notice of Furnishing as a direct result of an owner or its agent violating this provision, the subcontractor will not lose its lien rights. A subcontractor also is provided with a statutory civil cause of action against a person who causes the subcontractor to not file a Notice of Furnishing as a result of the prohibitive conduct mentioned above. This statutory cause of action permits the subcontractor to recover actual damages, in addition to reasonable attorney fees and court costs.
Another requirement imposed by the Act is that a contract for a project to which this Act applies must contain a notice that expressly warns that a subcontractor’s failure to file a Notice of Furnishing may forfeit the right to file a mechanics’ lien. This contractual notice must also convey that it is unlawful for an owner, owner’s agent, contractor or subcontractor to request, encourage or request that a subcontractor not file a Notice of Furnishing.
Likewise, the Act contains provisions that seek to punish a person who abuses the Directory by filing a notice (1) without a good faith reason to do so, (2) with the intent to obtain payment of an amount greater than that which is due to the person, or (3) to obtain an unjustified advantage or benefit. A person who is determined to have abused the Directory is liable for the amount of actual damages or $2,000, whichever is greater.
The Act was largely supported by owners and general contractors. Some subcontractor associations, however, appeared before the General Assembly to oppose the proposed amendments. Undoubtedly, the amendments will provide some benefit to subcontractors in the form clear and definitive information about the project owner and property, which may be helpful to resolve nonpayment issues and comply with existing lien notices and procedures. However, the threat of a subcontractor losing lien rights due to forgetting to timely file or by improperly filing a Notice of Furnishing during the hectic mobilization and start-up period of a project is significant. Subcontractors will need to be diligent with preserving their rights at the beginning of a project and should enact protocols that ensure that a Notice of Furnishing is timely filed for projects to which this Act applies. Notably, the notice requirements of the Act will apply only to projects commenced on or after the operational date of the Directory, so those in the construction industry should have a sufficient adequate of time to prepare for the day when they need to begin complying with the provisions of the Act. For general contractors, the Act will eliminate the historic problem of having second-tier subcontractors with lien rights without even knowing the identity of these subcontractors.
On September 29, 2014, the Pennsylvania Department of Transportation (“PennDOT”) issued a press release announcing that the Pennsylvania Public-Private Partnership (“P3″) Board approved a project seeking a private partner to design, build, finance, operate and maintain compressed natural gas (“CNG”) filling stations at as many as 37 transit facilities throughout the state. According to PennDOT, the CNG filling stations must be designed to provide CNG for public transportation vehicles as well as for private parties with CNG vehicles. Once the fueling stations are build and operating, PennDOT will retain an unspecified portion of the fuel sales revenue for use in future capital projects. The rest of the fuel sales revenue will presumably go directly to the private partner.
The press release indicates that PennDOT will soon issue a Request for Qualifications to solicit interested parties and that PennDOT expects to invite qualified teams to submit proposals as early as next year, with a project team selection coming as early as summer 2015. Additional information regarding the P3 CNG Fueling Station Project is available at Pennsylvania’s P3 website.
On September 10, 2010, Frederick T. Prinz, an New Jersey based Occupational Safety and Health Administration (“OSHA”) instructor pleaded guilty to selling false OSHA 30 Hour cards to New Jersey construction workers. Mr. Pritz’s actions qualify as a felony, and he now faces up to five years in prison and as much as a $250,000 fine. Court documents indicate that Mr. Printz will receive his sentence on December 10, 2014.
An OSHA 30 Hour card certifies that the card holders completed 30 hours of OSHA regulations and standards training and may only be issued by a certified OSHA instructor to individuals who complete one of OSHA’s Outreach Training Program classes and pass a test. According to documents filed by prosecutors with the United States Federal Court for the District of New Jersey, Mr. Frintz became certified to conduct OSHA Outreach Training Program classes and then, for a period spanning February 2011 through July 28, 2012, Mr. Prinz issued authentic OSHA 30 Hour cards to construction workers in New Jersey that had neither taken nor passed the OSHA required safety courses. The Philadelphia Business Times has reported that Mr. Frintz sold more than 100 the false OSHA 30 Hour cards, charging a fee between $150 to $250 for each card.
It is not uncommon for a subcontractor, for example, to call his or her attorney regarding filing a lawsuit against the prime contractor, 13 months after the dispute arose, only to learn that buried deep within the 50 page, single spaced, 8-point font contract, lurks a clause that shortened the statute of limitations to bring the lawsuit.
In Pennsylvania, the statute of limitations for breach of a written contract is generally four (4) years. See 42 Pa.C.S. §5525. But, Pennsylvania expressly permits parties to a written contract to modify the statute of limitations to bring suit, as follows:
An action, proceeding or appeal must be commenced within the time specified in or pursuant to this chapter [Limitation of Time] unless, in the case of a civil action or proceeding, a different time is provided by this title or another statute or a shorter time which is not manifestly unreasonable is prescribed by written agreement.
42 Pa.C.S. §5501(a)
As construction contracts continue to become even more burdensome to contractors and subcontractors, it is inevitable that an owner or prime contractor will (or has already) attempted to shorten the time to file a mechanics’ lien. Under the Pennsylvania Mechanics’ Lien of 1963 (the “Lien Law”), contractors and subcontractors must file their lien claim within six (6) months after the “completion of work.” 49 P.S. § 1502(a)(1). “Completion of Work” is defined by the Lien Law as the “performance of the last of the materials required by the terms of the claimant’s contract or agreement, whichever last occurs.” Id. § 1201(8).
Pennsylvania courts have not been confronted with the issue of whether parties may contractually modify the six-month limitations period for filing a mechanics’ lien. Recently, however, the Missouri Court of Appeals was confronted with the issue in Manning Constr. Co., Inc. v. MCI Partners, LLC, 419 S.W.3d 134 (Mo. Ct. App. W.D. 2013).
In Manning, MCI Partners, LLC (the “Owner”) was the owner of a condominium project in Kanas City (the “Project”). The Owner’s Construction Manager (the “CM”) contracted with Manning Construction Company (the “Contractor”) to construct three buildings on the Project, in two phases, on a cost-plus basis. The Contractor ultimately only built one building (Building #2) before the Project was stopped due to the Owner’s inability to obtain additional financing. A certificate of substantial completion for Building #2 was issued in August 2007.
During the Project, the Contractor submitted twelve (12) pay applications for its work between January 25, 2007, and April 14, 2008. The Contractor received full payment on the first nine (9) pay applications, but received only partial payment on applications ten, eleven, and twelve. According to the Contractor, the total value of its work was in excess of $3.3 million, but that it was paid slightly more than $3.1 million.
Sometime in December 2008, in an attempt to work things out without resorting to litigation, the Contractor’s principal met with a representative of the CM to discuss payment for the unpaid invoices. In addition, the Contractor told the CM that the time to file a mechanics’ lien was quickly approaching. Under Missouri law (like Pennsylvania) the lien claim must be filed within six (6) months after the performance of the last of the labor or delivery of the last of the materials required by the contract. See Mo. Rev. State. § 429.080.
Using the substantial completion date of August 2007 as the date of the last of the labor performed under the contract, the Contractor told the CM it had to file the lien by February 2008. The CM requested that the Contractor not file a mechanics’ lien, because doing so would interfere with the Developer’s efforts to sell the condominium units, and to obtain financing for further construction.
Understandably, the Contractor was likely worried about obtaining additional work from the CM and Owner. Thus, rather than immediately filing a mechanics’ lien, the Contractor accepted the CM’s offer to perform landscaping work on the Project in exchange to extend Contractor’s lien rights. The Contractor performed the work and issued Change Work Order # 10, which was approved by the CM on December 17, 2008. Then in June 2009, the CM and Contractor agreed to Change of Work # 11, which authorized the Contractor to perform additional landscaping, to further extend Contractor’s lien filing deadline.
Finally, after still not being paid, the Contractor gave-up and filed its mechanics’ lien on November 19, 2009. The lien filing claimed that “Contractor last furnished labor, materials and services to the Project on June 1, 2009” Thereafter, Contractor brought suit to foreclose on its mechanics’ lien.
Following a two-day bench trial, the court held that Contractor’s November 2009 lien filing was untimely because it failed to comply with the six-month limitations period. The court rejected Contractor’s claim that the landscaping work performed under Change of Work Orders 10 and 11 extended the six-month lien-filing period. More specifically, the court found that the work was done solely for the purpose of attempting to extend the mechanics’ lien filing deadline. Further, none of the work was directly related to or improved the building on which the Contractor sought to establish its lien. Therefore, the Contractor’s failure to file the lien within six months of substantial completion (i.e., February 2008) barred a mechanics’ lien from being imposed on the completed structure.
The Contractor appealed to the Missouri Court of Appeals. The court affirmed the trial court’s ruling. Specifically, the court held that a contractor and property owner cannot extend the six-month filing deadline by agreement. The court reasoned that “the requirement of filing the lien on time is not something which defendant can enlarge … A mechanics’ lien is a creature of statute, and not of contract.” Consistent with this principle, explained the court, a contractor cannot perform additional work simply to extend or revive a mechanics’ lien.
Similar to Missouri, Pennsylvania courts may not permit a contractor to extend the time for filing a lien under certain circumstances. For example, a contractor cannot “unilaterally” extend the time for filing a mechanics’ lien by “purposely” failing to complete his work under the contract by omitting a small item and performing it later in time to toll the statute. South Hills Co. v. Kelly, 85 Pa.D&C. 495 (C.P. Allegheny 1953). More recently, the Pennsylvania Superior Court held that a contractor’s performance of “corrective work” will not extend the date of completion. Neelu Enterprises, Inc. v. Agarwal, 58 A.3d 828 (Pa. Super. 2012).
Unlike Missouri, Pennsylvania has not addressed whether the parties to a written contract may modify the Lien Law’s six month limitation period. Even though Pennsylvania courts have consistently held over the past century that the Lien Law must be strictly construed because it is a derogation of common law the Pennsylvania Supreme Court’s recent opinion in Bricklayers of Western Pennsylvania Combined Funds v. Scott’s Development Co. potentially opens the door for a lient claimant to argue that the statute should be liberally construed to effect its remedial purpose. In conclusion, the take away here is you should not assume that you are able to contractually agree to extend the time file a mechanic’s lien claim.
Recent economic data suggests that construction starts are down significantly over the first half of the 2014 calendar year. According to the Tall Timer Group, as reported by the Pittsburgh Business Times, housing starts are down 37.3% and non-residential construction is down 29.4% during the first half of 2014. Much more information about the sluggish construction numbers for the beginning of this year may be found by following this link to a blog post about the subject found on Building Pittsburgh, a blog operated and maintained by the Tall Timber Group’s president, Jeff Burd.
On July 9, 2014, Governor Tom Corbett signed into law legislation amending Pennsylvania’s Mechanics’ Lien Law of 1963 (the current Mechanics’ Lien Law in Pennsylvania). The stated primary purpose of the amendments is to protect homeowners who pay the prime contractor(s) that perform improvements to their residential property from mechanics’ liens of subcontractors that the prime contractor fails to pay. The amendments accomplish this by eliminating a subcontractor’s right to a mechanics’ lien on residential property if: (1) the owner or tenant pays the full contract price to the prime contractor; (2) the property is to be used as the residence of the owner or a tenant of the owner; and (3) the residential property consists of one or two dwelling units.
Although this new law will likely be viewed as good public policy for owners, it potentially hurts the subcontractor or supplier who did not contract with the owner. Typically, subcontractors and material suppliers do not know if or when an owner makes payment to a general contractor. As such, mechanics’ liens can be effective tools for subcontractors and suppliers to obtain payment on a project when a general contractor absconds with the owner’s payment.
Now, subcontractors and suppliers must manage their projects and accounting more closely than ever before. Failure to do so could leave the subcontractor or supplier with no legal recourse after it financed a project to completion.
The amendments also clarify and significantly expand the definition of “costs of construction” as the term is used in the Mechanics’ Lien Law. Specifically, the amendments define “costs of construction” as
all costs, expenses, and reimbursements pertaining to erection, construction, alteration, repair, mandated off-site improvements, government impact fees and other construction-related costs, including but not limited to, costs, expenses, and reimbursements in the nature of taxes, insurance, bonding, inspections, surveys, testing, permits, legal fees, architect fees, engineering fees, consulting fees, accounting fees, management fees, utility fees, tenant improvements, leasing commissions, payment of prior filed or recorded liens or mortgages, including mechanics liens, municipal claims, mortgage origination fees and commissions, finance costs, closing fees, recording fees, title insurance or escrow fees, or any similar or comparable costs, expenses or reimbursements related to an improvement, made or intended to be made, to the property.
The definition is especially notable because it brings legal fees, accounting fees, and other “soft costs” that are typically not considered recoverable as part of a mechanics’ lien within the definition of “costs of construction.” Unfortunately, however, this expanded definition may have little or no impact for contractors and subcontractors performing work within the Commonwealth because the term “costs of construction” only appears in the the section of the Mechanics’ Lien Law related to the priorities given to mortgages on the property being improved.
Specifically, following the amendments, open-ended mortgages will only receive priority over a mechanics’ lien if at least 60% of the proceeds from the mortgage “are intended to pay or are used to pay all or part of the costs of construction.” Thus, while the amendments define “costs of construction” very broadly, that broadly defined term may have a very limited impact on the substantive rights the Mechanics’ Lien Law provides to contractors and subcontractors performing work within the Commonwealth because the term is not used to describe those things that an contractor or subcontractor may include in its lien.
Nevertheless, the inclusion of such a broad definition of “costs of construction” in the Mechanics’ Lien Law may open the door for parties to argue that their mechanics’ lien claims should include damages that were once thought to be well outside those that could be included in a mechanics’ lien claim.
The amendments took effect September 7, 2014, and will apply to any lien perfected on or after September 7, 2014 regardless of when the construction giving rise to the lien commenced.
The Pittsburgh Business Times, citing an analysis of Labor Department Data performed by the Associated General Contractors of America, recently reported that over the past twelve months, the Commonwealth of Pennsylvania has experienced the fourth highest amount of construction job gains. According to the Pittsburgh Business Times, over the past year, Pennsylvania has experienced a 4.3% increase in construction jobs. This increase translates to the addition of approximately 9,800 construction jobs within the Commonwealth.
Although 39 of the 50 states experienced construction job gains, the Labor Department data suggests that the construction industry is far from fully recovering from the recent economic downturn. In fact, according to the Pittsburgh Business Times article, only North Dakota is now adding construction jobs at a rate above prior peaks in job growth percentages. The full Pittsburgh Business Times article is available here.
A South Carolina contractor who failed to take legally-required precautions to remove asbestos while renovating an oceanfront condominium was sentenced to six months in prison for violation of the Clean Air Act. The Environmental Protection Agency (“EPA”), who assisted in prosecuting the contractor, released the following statement: “Today’s sentence should serve notice that EPA and its partner agencies remain committed to protecting communities through tough enforcement of the nation’s environmental laws.” Read more about the case in the EPA’s News Release.
On April 17, 2014, the Pennsylvania Supreme Court issued its long-awaited decision in Bricklayers of Western Pennsylvania Combined Funds v. Scott’s Development Co., and reversed the Superior Court decision which held that a union trust fund had mechanics’ lien rights as a subcontractor under the Pennsylvania Lien Law. The Supreme Court indicated that the primary issue presented by this case was weather the union trust fund qualified as a “Subcontractor” under section 201(5) of the Lien Law (which grants lien rights to first and second-tier subcontractors) or is excluded as a Lien Law claimant under section 303(a) of the Lien Law (which states that no lien is allowed in favor of any person other than a contractor or subcontractor (as defined in the Lien Law) regardless of whether such person furnished labor or materials to an improvement). The Court indicated that the “plain language” of the Lien Law was not clear on this point, so the Court considered the following factors in order to determine that the legislature did not intend to include a union trust fund in the definition of subcontractor: (1) the “most natural meaning” of the word “subcontractor” “simply does not denote employees of a contractor,” (2) at the time the 1963 Lien Law was passed the PA Constitution prohibited statutes authorizing the extension of liens, (3) section 303(a) of Lien Law must be given some meaning, and (4) unintended consequences cut against including employees (or their unions of union trust funds) in the definition of subcontractor. On this last point, the Supreme Court noted that giving union trust funds lien rights would essentially make a property owner the guarantor of its contractor’s general employment obligations, which would expose an owner to a significant increase in liability on a project. This scenario places too significant a burden on property owners, particularly with respect to new construction, which makes such a holding intolerable and impractical. Accordingly, the Supreme Court held that it could not endorse such a dramatic shift in the interpretation of the Lien Law without the General Assembly clearly evincing such an intent. The Court next considered whether the Trustees had lien rights under an “implied-in-fact contract” theory, and ruled (1) this theory was not pled in the Complaint, therefore should not have been considered by the Superior Court, and (2) “the concept that implied contracts were formed between the Unions and Contractor in relation to the improvement on Developer’s property is too attenuated to withstand scrutiny.” Interestingly, despite the fact that the Supreme Court specifically indicated that one of the questions before the Court was “whether the Superior Court erred in concluding that the 1963 Act should be liberally construed,” the Court did not specifically address this issue. Pennsylvania courts have consistently held over the past century that the Lien Law must be strictly construed because it is a derogation of common law. With the Supreme Court declining to address the Superior Court’s surprising change to the way the Lien Law is interpreted, parties to a mechanics’ lien action will likely argue either way until an appellate court clarifies this issue.
The February/March 2014 edition of Foundation Drilling Magazine features an article written by Babst Calland attorneys Richard D. Kalson and Marc J. Felezzola entitled “P3: The Future of the Construction Industry?” The article discusses the growing popularity of public-private partnerships as an alternative means for public construction and the most common public-private delivery methods.
Foundation Drilling Magazine is published by the International Association of Foundation Drilling. For more information regarding Foundation Drilling Magazine, including how to obtain a copy of the February/March 2014 edition of Foundation Drilling Magazine containing the article referenced above, please visit the International Association of Foundation Drilling’s website or contact one of the article’s authors via the links provided above.