Where an owner of a property sues a contractor in a construction litigation case, the burden of proof is upon the owner to both prove that the work was defective and what it will cost to have the defective work repaired. In an unpublished decision from February 2021, the Appellate Division noted that even without testimony from the contractor who prepared the repair estimate, the repair estimate may still be admissible as a business record exception to the rule against hearsay. The court noted that the repair estimate, "may have been admissible as a business record if: (a) the author prepared the document in the regular course of business, contemporaneously with its estimate, and not for litigation, (b) the business regularly made such estimates, and (c) the method, purpose or circumstances of preparation did not indicate that it was not trustworthy. Accordingly, while the better evidence would still be to bring in the contractor for live testimony, the court found that the trial court (among other things) should have at least considered if the estimate was admissible as a business record and therefore the case was reversed and remanded. (Olivera v. NJ Asphalt Services)
In an unpublished decision issued earlier this week, the Appellate Division reaffirmed that mere puffery regarding a contractor does not amount to an actionable statement under New Jersey Consumer Fraud Act. (“CFA”) The judgment had been entered against Jeff Sands (“Sands”), who met with the Plaintiffs as a result of them contacting Stanley’s Home Improvement LLC (“Stanley’s”). Sands took notes during the meeting, gave his sales pitch about the great work that Stanley’s did and the company’s terrific reputation, but indicated that someone else would be in touch with the Plaintiffs in order to give them a cost estimate.
After the Plaintiffs decided to hire Stanley’s, Fed Zappolo (“Zappolo”) met with Plaintiffs and provided them a cost estimate of $28,000. Although Zappolo introduced himself as Stanley’s foreman, the agreement given to the Plaintiffs to sign was with Zappolo’s company named Fred Allen Builders, not Stanley’s. When Fred Allen Builders failed to complete the work, the Plaintiffs contacted Sands who advised that he was no longer with Stanley’s and that they had gone out of business. Eventually, the Plaintiffs were forced to hire another contractor at a cost of $39,600 to complete the unfinished work and correct the deficient work.
The trial court entered a judgment against all of the defendants, including Sands individually, for over $200,000. Sands was the only party to appeal, and the court agreed that there was no basis to find that Sands violated the Consumer Fraud Act. The court noted that being an officer of a business entity, without more, does not amount to liability under the CFA. Instead there must be an affirmative act, knowing omission or administrative violation personally committed by an individual. Here, the court determined that Sands’ statements in his sales pitch that Stanley’s stood by their work, had a terrific reputation, etc. were mere puffery and did not provide a basis for liability under the CFA. Consequently, the over $200,000 judgment was vacated as to Mr. Sands. (Pellegrino v. Fred Allen Builders, et. al.)
A recent unpublished decision from the Appellate Division exhibits why caution should be used when incorporating prime contracts into subcontracts “by reference”. In this matter, a General Contractor ("GC") had an agreement with an Owner to construct two grocery stores. The prime contract between GC and Owner contained a forum selection which directed any disputes to be filed in courts in upstate New York. The GC subcontracted the electrical work to a Subcontractor (“SC"), but the subcontract had no such forum selection clause. Instead, there was language directing mediation for disputes in the same upstate New York locale, and further language that all disputes were to be, "settled according to the dispute resolution procedures in the Prime Contract."
As is unfortunately too common in the construction realm, SC completed work but was not paid. Prompting SC to file construction lien claims against the GC and Owner along with a lawsuits in the New Jersey counties where each property was located seeking damages under the Prompt Payment Act ("PPA") and enforcement of the construction liens. The Owner objected to jurisdiction in New Jersey based on the prime contract's language and incorporation into the subcontract. At the trial level, each judge held that the selected New Jersey venues were proper and rooted their decisions on the PPA's language whereby it states, such an "action shall be conducted inside of this State."
On appeal, the Appellate Court would not endorse a complete preclusion from contracting away venue selection. Instead, the appellate panel conducted an in-depth review of the language of both contracts, and noted that there was a great deal of ambiguity and confusion as to the terms of each. The court noted that the subcontract included a venue provision only for mediation and was silent as to the terms of any other form of dispute resolution if mediation was unsuccessful. While there was reference to the prime contract, the court found that the prime contract contained very little instruction for a how to resolve subcontractor disputes, and specifically focused on the resolution of disputes between the Owner and GC. To apply those terms to a subcontractor was nonsensical in the courts mind, and therefore the Appellate Division found there to be no forum selection clause in the subcontract as to litigation and permitted the two lawsuits to proceed. (Sal Electric Company, Inc. v. The Pike Co., Inc, et. al.)
The Appellate Division has upheld an arbitration award of $552,202 in favor of a general contractor who was not paid in full after completing a five-million dollar contract to construct a medical facility in Paterson. After the contractor's success at arbitration, the owner petitioned the Superior Court to vacate the arbitration award, while the contractor cross-moved to confirm the award. At the trial level, the trial court judge read the award and stated, "quite frankly, I can't follow it," and found that the arbitrator did not give a well-reasoned decision. Therefore the trial court vacated the award and ordered re-arbitration, prompting the contractor's appeal. On appeal, the three-judge panel cited N.J.S.A. 2A:23B-22 for the proposition that an arbitration award can only be vacated in six specific situations, and found that none of the six were present in this matter. Consequently, whether or not the court thought the arbitrator's decision was well-reasoned, it was not fraudulent, corrupt, or in line with any of the other grounds for vacating an arbitration award, and the $552,202 award in favor of the contractor was updheld. (Paterson Medical Plaza LLC v. Litana Development, Inc.)
In a split bench (4-3), the NJ Supreme Court has established that an aggrieved property owner need to show a diminution of property value prior to being entitled to restoration damages when a neighbor illicitly cuts down generic foliage (trees, shrubs or bamboo) on another's property. This game changer of a case flies in the face of property rights.
At issue in this case was a lot of bamboo. As one may know, bamboo is not easily contained once planted. It easily spreads and does not adhere to drawn property lines. In this case, Neighbor planted bamboo years ago which ultimately spread across his property and onto that of Next-door Neighbor's. Neighbor did not claim this bamboo held a "peculiar value" to him but rather referred to this bamboo as a "fence" used for privacy. One day Next-door Neighbor's landscapers came and removed all the bamboo from both properties. Neighbor sued seeking damages to replace the torn down bamboo.
The Supreme Court held that although a trespass occurred and foliage was undisputedly removed, without showing the property's value had been diminished, Neighbor was out of luck in seeking restoration damages. The Majority suggests that Neighbor should have shown either the bamboo was near and dear to him or that the value of his property was reduced by the removal. This holding seems very wrong when viewed through the lens of property rights and the dissent took this position. The evidence here established Next-door Neighbor's landscapers removed all of the bamboo from Neighbor's property without permission. Damages should be the cost to replace what was removed regardless of a personal attachment and regardless if the property value was diminished. (Kornbleuth v. Westover)
In a recently-published opinion from the Appellate Division, the court found that the plain language of the County Improvement Authorities Law exempts county improvement authorities from the provisions of the Municipal Mechanics’ Lien Law which permit liens to be filed for unpaid work on public projects. Relying upon the definitions of a “public agency” in the lien law, as well as language in the statute permitting county improvement authorities and stating that they are not, “a county or municipality or agency or component of a municipality for the purposes of any other law,” the Court found that the plain language of the applicable laws exempted county improvement authorities from being subject to the lien law. Consequently, contractors and sub-contractors should be aware that there is no ability to file a lien on any projects funded by a county improvement authority. (Mastec Renewables Construction Co. Inc. v. Sunlight General Mercer Solar LLC)
Held: NJ Construction Company's Workers Compensation Benefits Must Cover the Costs of Former Employee's Medicinal Marijuana
In a case of first impression in New Jersey, the Appellate Division held that an employer can be ordered to reimburse an injured worker for the costs of purchasing medicinal marijuana in conformity with the workers' compensation act and the medical marijuana act (the "MMA"). In this case the employer argued it could not be ordered to purchase pot for a patient because that would amount to aiding and abetting a crime. However the Appellate Division disagreed and ordered the employer to buy the marijuana for the former employee.
The facts of the matter involved a former construction worker who was injured on the job and suffered some severe spinal injuries. The injuries caused great pain and over the course of a decade and a half, the injured worker had several surgeries to no avail. Eventually the worker was using opioids as the sole form of pain relief. In trying to prevent a cycle of drug abuse, the injured worker sought the assistance of a doctor that specialized in prescribing medical marijuana and received a prescription for same.
Part of the issue is that under Federal Law, marijuana is a Class 1 drug (meaning there is no inherent medicinal benefit through use) and opioids are Class 2 drugs (meaning there is a medicinal benefit with use). New Jersey's MMA creates an affirmative defense to a patient if caught in the State with marijuana. However, the Federal government does not recognize such a defense. In addition, this case turned away a pre-emption challenge (State law vs. Federal law) by the former employer. In doing so the Court weakly pointed to the mere words of this State's Legislature when that body declared that, "compliance with this act does not put the State of New Jersey in violation of federal law." (Vincent Hager v. M & K Construction )
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.)
Peter J. Vazquez, Jr.