New Jersey's Public bidding laws were enacted to protect the taxpayer by providing an even playing field for public construction projects (such as school construction), and mandating the project be awarded to the lowest responsible bidder. Taken from a recent opinion, a plaintiff submitted the lowest bid for work to be performed at a public school and the defendant submitted the third-lowest bid for the project. However, the school board decided to "review" the bids after bidding closed and subsequently disqualified plaintiff (and the second-lowest bidder) because those bid submissions included certifications from subcontractors which were used in a prior round of bidding for the same project, three weeks prior. Thus the board awarded the defendant the construction project.
Plaintiff filed suit and the trial court judge reversed the school board's decision, and anointed the plaintiff the lowest responsible bidder. The trial judge found that the three-weeks old certifications were not a material defect but were rather a minor defect which did not cause the parties to be on unequal footing when submitting their respective bids. Further, the plaintiff's bid would save the taxpayers nearly $190,000 verses the defendant. An appeal was filed by the defendant seeking to be reinstated as the lowest responsible bidder but the Appellate Division rejected the attempt and adopted the trial judge's reasoning.
This highlights two important reminders to the bidders for public contracts: pay attention to the details in your submissions, and mere technical defects should not override the public policy of saving the taxpayer money. (Thassian Mechanical Contracting, Inc. v. East Brunswick Board of Education and Hanna's Mechanical Contractors, Inc.)
In a recent unpublished decision of the Appellate Division, a construction management company was seeking to recover 50% of the profits from the construction of two new buildings in Montclair. The Plaintiff claimed that he had brought the Defendant into the project because the Plaintiff did not have the bonding capacity or experience needed in order to be awarded the project, and also participated in some of the pre-construction services. While there appears to have been some verbal discussions regarding a possible joint venture, nothing was ever put in writing and the Plaintiff did not actually participate in the construction of the buildings.
In finding that there was no joint venture created, the court found that the Plaintiff was, "unable to contribute money, property, effort, knowledge, skill or other asset to the common undertaking. Plaintiff's contribution to the joint venture seems to have been simply connecting [the owner and the Defendant] to perform the necessary work." The panel affirmed the trial court and found that the Plaintiff did not make any substantial contribution to the venture, and lacked the relevant construction experience and bonding capacity for the project. Finally, the court cited Supreme Court authority for the proposition that there cannot be joint venture unless there is an agreement to share not just profits, but also losses, and that was not present here. Consequently, the mere referral of a customer was found to be an insufficient basis to form a joint venture. (The Holder Group, Inc. v. Pike Construction Co., LLC, et. al.)
New Jersey Residential home improvement contractors are required to provide clients with an estimated timeframe for the completion of the work. In a recent unpublished case from the Appellate Division, a contractor provided the homeowner with a 45-day time period from the date of the contract to complete an addition. However, due permit delays and other reasons, the work did not begin until months later. Despite the contractual time-frame not being met, the court found that there was no violation of the CFA, stating that the homeowners, "were aware that ... [c]onstruction began approximately 120 days from the contract date, yet defendants did not cancel the contract or allege a breach at that time." Furthermore, although a change order for additional work was never signed by the homeowner, a regulatory violation of the CFA, the court found that since there was no ascertainable loss suffered by the homeowner as a result of the regulatory violation, the contractor was not liable for damages under the CFA. (MYCWHome, LLC v. White, et. al.)
A recent non-precedential Appellate Division case serves as a reminder that not all arbitration provisions are drafted equally. At issue in a residential construction suit was the defendant-contractor's arbitration provision which required an aggrieved homeowner to file a claim with the American Arbitration Association in lieu of filing an action in court. However, the provision at issue did not contain specific language which would have informed a reasonable homeowner that by going to arbitration they would be "waiving a right to seek relief in a court of law." (see Atalese v. U.S. Legal Servs. Grp., 219 N.J. 430 (2014)). This proved fatal to the defendant-contractor's invocation of arbitration, and the defendant-contractor's motion to compel arbitration was reversed and the matter remanded to the trial court for (expensive) litigation. This serves as a reminder for all businesses and individuals with arbitration clauses in their contracts to have same reviewed by an attorney knowledgeable on the subject matter. (Becker v. Ollie Slocum and Son, Inc.)
A group of homeowners joined together to sue the builder of their development for selling them homes with infiltrator septic systems instead of stone and pipe septic systems, which allegedly have a substantially-shorter useful life. Since many of the homes were sold over ten years prior to the filing of the complaint, the Plaintiffs only filed Consumer Fraud Act ("CFA") claims and did not file faulty design or construction defect claims. However, the Appellate Division affirmed the ruling of the trial judge that all claims must be dismissed based upon the statute of repose. Noting the broad application of the statute of repose, that it covered all claims regardless of how a plaintiff couches the cause of action, citing the legislature's use of the language that no action could be brought after ten years, "whether in contract, in tort, or otherwise." (Allen, et. al. v. Beazer Homes Corporation)
The New Jersey Consumer Fraud Act ("CFA") places many responsibilities upon a home improvement contractor which, if violated, render the contract null and void. However, if the CFA violations are only "technical" and "inadvertent" in nature, then the contractor can still recover monies for unpaid work performed under a theory of quantum meruit. This was specifically the situation presented to the court in CB Construction, Inc. v. Jill Panico, which was decided on June 26th. There, the Appellate Division affirmed an award in favor of a contractor despite three technical violations of the CFA. Moreover, even though the technical CFA violations did entitle the homeowner to recover attorney fees, the trial court substantially reduced such fees to only 10% of what was requested by the homeowner defendant. As stated by the trial judge, "The litigation could have been resolved in the Special Civil Part at minimal legal expense to the parties, but for Defendant's decision to utilize the CFA as a sword in an effort to win a large judgment and attorneys' fees award. Defendant made the decision to transform this case from a simple dispute over a book account, into, relatively speaking, a "high stakes" multi-count, multi issue dispute. That defendant failed on almost all of her factual defenses and legal theories must also weigh heavily on this court as it tries to determine a fair and proportionate counsel fee award." The appellate court upheld this substantial reduction. (CB Construction, Inc. v. Jill Panico)
Where there is no contractual privity with a property owner, a subcontractor cannot sue an owner for unpaid work performed except under the Construction Lien Law. Consequently, in the event that the lien fund available under the Construction Lien Law is insufficient to make a subcontractor whole, the subcontractor can only seek additional payment from the general contractor who hired them, not the owner. In a recent matter before the Appellate Division, a landscaping contractor was owed $87,696.40 from the general contractor, who failed to make payment. The landscaper filed a lien against the property and prevailed on such claim. However, since there was only a limited lien fund available, the landscaper only received its pro rata share of $35,300.94 from the lien fund, leaving an unpaid balance of over $50,000. The landscaper then attempted to recover the remaining balance from the property owner directly by asserting quasi-contractal claims in the Law Division, but the matter was ultimately dismissed. The Appellate Division affirmed such dismissal, stating that, "New Jersey law is clear that subcontractors who are not paid by the general contractor who hired them cannot sue the property owners who they lack privity." (Ash Maple, LLC, et. al. v. Jeral Construction Company, Inc., et. al.)
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.)
Peter J. Vazquez, Jr.