The New Jersey Prompt Payment Act ("PPA"), N.J.S.A. 2A:30A-1, et. seq., includes numerous provisions that protect contractors including, the ability to collect interest of prime plus 1% on overdue balances and the ability to suspend performance after seven-day written notice of non-payment. In ERCO Interior Systems, Inc. v. National Commercial Builders, Inc., a New Jersey contractor sued a Kansas company for work that the contractor performed in New Jersey. When the NJ contractor brought suit for non-payment, the Kansas company moved to dismiss the case on the basis that the contract has a forum selection clause mandating that any enforcement actions be brought in Kansas. However, the Appellate Division held that due to the fact that the case involved the PPA, the forum selection clause was invalid. Noting that forum selection clauses will not be enforced where such enforcement would violate the public policy of New Jersey, the Court found that there was a strong public policy behind the PPA and that the PPA claim, along with the other associated claims of breach of contract, etc. must all be litigated in New Jersey. ERCO Interior Systems, Inc. v. National Commercial Builders, Inc.
In an unpublished decision from March 25th, the Appellate Division found a general contractor to be responsible for providing a safe working environment for the employees of its subcontractors based on the specific set of facts in that case. Notably, the court did not examine the terms of the subcontract (which wasn’t signed until after the accident), but relied upon provisions in the general contractor’s agreement with the owner that placed responsibility for safety barriers and OSHA compliance on the general contractor. Consequently, the court found that the general contractor owed a duty of care to a subcontractor’s employee that fell through a hole in the roof where there were no safety barriers or other fall protection. In doing so, the Appellate Division quoted the almost twenty-year-old case of Kane v. Hartz Mtn. Industries, stating, “[t]he public interest supports imposing a duty of care upon [the general contractor] for Plaintiff’s benefit. We have held the ‘public policy of this State … favors the general contractor as the single repository for the safety of all employees of a job.’” (Joel Rivera v. PNL Jersey Properties LLC, et. al.)
The awarding of a $163.5 million contract to design and build a school in Passaic was upheld by the Appellate Division in an unpublished decision earlier this month. The 2nd highest bidder attempted to have the bid rejected for failure to comply with the bid specifications of the New Jersey Schools Development Authority. Specifically, there was a requirement that the technical proposal be submitted in PDF form in addition to the multiple hard copies that were required. While a PDF was submitted by the lowest bidder, the PDF was incomplete and missing an organizational chart and some subcontractor forms. However, the missing items were included with the hard copies that were submitted simultaneously with the bid. Consequently, both the authority itself and the court agreed that such failure was insufficient to overturn the award to the lowest bidder, stating that while the electronic copy didn't fully match the paper submission, it was not a material defect. (Ernest Bock & Sons, Inc. v. New Jersey Schools Development Authority, et. al.)
The New Jersey Consumer Fraud Act ("CFA") protects homeowners from (among other things) unconscionable commercial practices of residential contractors, including those who threaten to file criminal charges if they are not paid. A recent Appellate Court decision involved a homeowner who withheld payment to an HVAC contractor who failed to repair an air conditioning system after three service calls. The contractor then proceeded to threaten the homeowner with the filing of criminal charges, and then (when payment wasn't made) actually filed charges for theft of services with the local police department. The charges were eventually dismissed by the municipal court, and the homeowner was ultimately successful on a CFA claim in Superior Court.
On appeal, the Appellate Division upheld the finding of a CFA violation but remanded the case back to the trial court to revisit the award of only $19,800 in attorney fees and costs. In doing so, the court noted the specific conduct of the contractor stating, "[the contractor] admitted that [it] has a history of instituting criminal actions as a means of collecting its unpaid invoices. This outrageous abuse of our criminal justice system is precisely the type of unconscionable commercial practice the CFA was designed to protect consumers from and deter unscrupulous commercial entities from engaging in." Accordingly, the matter was remanded to the trial court to revisit the amount of attorney fees and costs awarded. (Jeffrey S. Jacobs v. Mark Lindsay and Son Plumbing & Heating, Inc., et. al.)
A ten-year battle over a subcontractor lien claim was decided by the Appellate Division recently, and provided guidance regarding interpretation of the New Jersey Construction Lien Law ("CLL"). This case centered around a 100-unit residential development where the general contractor filed for bankruptcy, leaving its subcontractors unpaid. The subcontractor at issue in this lawsuit filed a lien claim in hopes of getting paid from the owner directly for its work performed in conjunction with the development. The lien was signed by the subcontractor's "Accounting and Information Systems Manager," and the issue before the court was whether or not this person was the appropriate signatory on the lien.
Prior to 2011, the CLL required that a lien claim be signed by a "duly authorized officer" of the company filing the lien. In 2011 the legislature revised the CLL and instead prescribed that a lien claim be signed by an “officer/member”, and included with the statute a revised lien claim form that indicated signature by, "the Secretary (or other officer/manager/agent) of the Corporation (partnership or limited liability company)”. In this matter, the Appellate Division held that this change in language was a new requirement that should be applied prospectively only, and was not a clarification of prior term of "duly authorized officer". Despite winning on this issue, the subcontractor ultimately failed to establish that its "Accounting and Information Systems Manager" was a duly authorized officer. The Court noted that: the subcontractor's Board of Directors did not identify the signer in any resolution, by-law provision, or other written document as a corporate officer; the subcontractor did not memorialize in writing that it authorized that person to execute lien claims; and on the subcontractor's requests for classification forms (which are needed for classification by the Division of Property and Management), the signatory was not identified as a corporate officer. As a result of having the wrong individual at the company sign the lien claim, the lien was dismissed and the subcontractor was left with no ability to recover the monies owed. (Diamond Beach LLC v. March Associates, Inc., et. al.)
In an unpublished decision that was issued today, the Appellate Division reversed a trial court's award of $50,832.17 to a stucco subcontractor and dismissed the subcontractor's claim for the unpaid contract balance with prejudice. The two-judge appellate panel did not disturb the trial court's finding that the general contractor did, in fact, breach its contract with the subcontractor. However, despite the breach of contract, the court reversed the Law Division judge and held that the subcontractor could not recover any damages whatsoever since the subcontractor failed to prove what portion of the monies owed constituted lost profit. The appellate panel stated that the trial court, "omitted, however, the second step: calculating 'the difference between the contract price and the cost of performance or production'." This ruling confirms that the burden of proving lost profits is on the party seeking damages, and evidence must be presented that is sufficient to enable the court to identify what portion of the monies due represent the subcontractor's profit. (Professional Stone, Stucco & Siding Applicators, Inc. v. JMOC Builders, Inc.)
In an unpublished trial court opinion released today, a Superior Court Judge in Bergen County dismissed the claims of a condominium association against the sponsor/developer of the condominium complex related to construction defects that were discovered by the Association. After dismissing the Association's contractual claims based on the statute of limitations, the Court found that all other claims asserted by the Association, including claims under the New Jersey Consumer Fraud Act ("CFA") were barred by the ten-year statute of repose. Noting that the New Jersey judiciary has shown, "an unwillingness to recognize a fraud exception to the statute of repose," the court held the CFA claims were subject to the statue of repose, were not filed within ten years after the TCO was issued, and therefore were barred by the statute of repose. (Vela Townhomes Condominium Assoc. Inc. v. Rosen Partners LLC)