Articles Posted in Construction Law

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A newly-constructed multi‐story condominium building suffered water damage, allegedly caused by the painting subcontractor, National, failing to apply an adequate coat of sealant to the exterior. In Illinois state court, the condominium association sued the general contractor, developer, and subcontractors. The defendants tendered the defense to Westfield, National’s insurer, Westfield filed a federal action seeking a declaration that it owed no duty to defend in the underlying action. The district court determined that the complaint triggered Westfield’s duty to defend. The Seventh Circuit affirmed the grant of summary judgment, rejecting an argument that failure to apply an adequate amount of paint cannot be considered an “accident” that would constitute a covered “occurrence” under the policy. Westfield also argued that because the damage is to the building itself, which was a new construction and not an existing structure, the association has not demonstrated that there was property damage that is subject to its policy. The policy defines “occurrence” to include the “continuous or repeated exposure to substantially the same harmful conditions,” so the allegation that National acted negligently was sufficient under Illinois law to constitute an “occurrence.” National’s actions allegedly damaged parts of the building that were outside of the scope of its work, so the complaint alleges potentially covered property damage sufficient to invoke the duty to defend. View "Westfield Insurance Co. v. National Decorating Service, Inc." on Justia Law

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Plaintiffs filed a putative class action against Kolbe & Kolbe Millwork, alleging that Kolbe sold them defective windows that leak and rot. Plaintiffs brought common-law and statutory claims for breach of express and implied warranties, negligent design and manufacturing of the windows, negligent or fraudulent misrepresentations as to the condition of the windows, and unjust enrichment. The district court granted partial summary judgment in Kolbe’s favor on a number of claims, excluded plaintiffs’ experts, denied class certification, and found that plaintiffs’ individual claims could not survive without expert support. The Seventh Circuit affirmed. Plaintiffs forfeited their arguments with respect to their experts’ qualifications under “Daubert.” Individual plaintiffs failed to establish that Kolbe’s alleged misrepresentation somehow caused them loss, given that their builders only used Kolbe windows. Though internal emails, service-request forms, and photos of rotting or leaking windows may suggest problems with Kolbe windows, that evidence did not link the problems to an underlying design defect, as opposed to other, external factors such as construction flaws or climate issues. View "Haley v. Kolbe & Kolbe Millwork Co.," on Justia Law

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A subcontractor, CSC, installed the windows defectively at Metro's Chicago condominium. The building sustained significant water damage following a 2006 storm. The unit owners incurred personal-property damage. In 2009 Metro sued the developer, which was insolvent; in 2013 it added a claim against CSC for breach of the implied warranty of habitability. Metro and CSC reached a settlement. Metro dismissed its state court lawsuit; CSC assigned to Metro CSC’s rights to up to $700,000 of insurance coverage from Allied, arising out of the claims asserted against CSC in the lawsuit. The only pending claim against CSC in that lawsuit was for breach of the implied warranty of habitability. The settlement specified that it was not intended to compensate for the cost of repairing or replacing CSC’s defectively installed windows, but rather for the resultant damage to the remaining parts of the condominium and to the unit owners’ personal property. Allied obtained a declaratory judgment that it was not liable under CSC’s standard commercial general liability policy. The Seventh Circuit affirmed. The measure of damages for a breach of the implied warranty of habitability is the cost of repairing the “defective conditions,” here the defectively installed windows. Illinois courts have concluded that CGL policies like Allied’s do not cover the cost of repairing the insured’s defectively completed work; the Allied policy specifically excludes the cost of repairing CSC’s defective work. View "Allied Property & Casualty Insurance Co. v. Metro North Condominium Association" on Justia Law

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Midwest Fence, which provides guardrails, challenged federal and state programs that offer advantages in highway construction contracting to disadvantaged business enterprises (DBEs). For purposes of federally-funded highway construction, DBEs are small businesses that are owned and managed by “individuals who are both socially and economically disadvantaged,” 49 C.F.R. 26.5, primarily racial minorities and women, who have historically faced significant obstacles in the construction industry due to discrimination. States that accept federal highway funding must establish DBE participation goals for federally funded highway projects and must attempt to reach those goals through processes tailored to actual market conditions. Midwest, which is not a DBE, alleged that the DBE programs violated its equal protection rights. The Seventh Circuit affirmed summary judgment in favor of the government-defendants. While DBE programs permit contracting decisions to be made with reference to racial classifications and are subject to strict scrutiny, they serve a compelling government interest and are narrowly tailored to further that interest. Remedying the effects of past or present discrimination can be a compelling governmental interest. The program provides states with ample discretion to tailor their DBE programs to the realities of their own markets and requires the use of race- and gender-neutral measures before turning to race- and gender-conscious ones. View "Midwest Fence Corp. v. United States Department of Transportation" on Justia Law

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In 2014, Lend Lease, the construction manager of the Chicago River Point Tower Project, hired Cives as a subcontractor. Cives hired Midwest Steel. Midwest had, years before, hired AES to supply Midwest with additional workers, who were co‐employed by Midwest and AES. Lend Lease entered into a “contractor-controlled insurance program” with Starr Liability with a $500,000 deductible. All subcontractors were to join in the policy. AES had, several years earlier, obtained workers’ compensation for its workers from TIC, so that injured AES‐Midwest workers could obtain workers’ compensation from either Starr (or Lend Lease under the deductible) or TIC. Four ironworkers, jointly employed by Midwest and AES and performing work for Midwest were injured on the job and sought workers’ compensation. The claims exceeded $500,000, so Lend Lease had to pay its full deductible. Starr paid the remaining claims. Lend Lease filed suit against TIC, AES’s insurer, and AES, seeking reimbursement of the $500,000. The district court dismissed. The Seventh Circuit affirmed. Lend Lease made a deal with Starr and is bound by it. The court rejected an argument that AES has been unjustly enriched; AES was not obligated to purchase an insurance policy that would cover Lend Lease's deductible. View "Lend Lease (US) Construction, Inc. v. Administrative Employer Services, Inc." on Justia Law

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Schaefer’s employer, Brand Energy, was erecting scaffolding at a Dynegy power plant. Brand had complete control over the scaffold construction. Brand acquired the scaffold components from Universal, but Dynegy paid for the scaffolding and owned it. Brand workers had difficulties with the Universal components because faulty components would not readily lock. A bar popped loose and struck Schaefer on the head. Schaefer suffered serious injuries. In addition to bringing a workers’ compensation claim against Brand, Schaefer sued Universal. Because the piece of scaffolding that hit him was lost, he added claims for negligent spoliation of evidence against Brand and Dynegy. Schaefer also alleged construction negligence and failure to warn against Dynegy. The district court granted summary judgment for defendants, holding that without the missing piece, Schaefer could not prove his product liability claims; that Dynegy was not liable for any defects or negligence; and that Schaefer could not prove the spoliation claims because, without proof that the missing piece was defective, it was not possible to prove that its loss caused any damage. The Seventh Circuit affirmed in part, but reversed as to spoliation. Illinois law does not require a plaintiff to prove that he would have won his case but for the spoliation, it requires only that the plaintiff show a “reasonable probability” of success. Schaefer adduced evidence from which a jury could make this finding: the batch of scaffolding had a large number of defective pieces. View "Schaefer v. Universal Scaffolding & Equip., LLC" on Justia Law

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Rizvi and his company, Prime Builders, performed repair work for Alikhan, whose house was damaged in a fire. When the work was completed in 2009, Alikhan paid Rizvi only part of what he owed. Rizvi sued for breach of contract in federal court, invoking diversity jurisdiction under 28 U.S.C. 1332. (Rizvi and Prime are Illinois citizens. Alikhan is a citizen of Texas.) When Alikhan failed to appear, plaintiffs obtained a default judgment, then served a citation to discover assets on Allstate under an Illinois statute that governs supplementary proceedings to assist in collecting on a judgment. Allstate responded that Alikhan had no accounts of any sort with Allstate, had no claims pending with Allstate, and was not owed any insurance payments by Allstate. Plaintiffs then asked the court to order Allstate to remit “outstanding insurance proceeds of $110,926.58” and to impose sanctions, arguing that Allstate had participated in negotiating the repair contract and had made a partial payment to Alikhan in 2008. The court ultimately dismissed the supplemental action. The Seventh Circuit affirmed. Allstate is a citizen of Illinois, the supplemental proceeding against Allstate was sufficiently independent of the underlying case as to require its own basis for subject matter jurisdiction. View "Rizvi v. Allstate Corp." on Justia Law

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In 2011, Horning won the subcontract for roofing work at the Dayton Veterans Affairs Medical Center. The Davis‐Bacon Act, 40 U.S.C. 3141–43, requires contractors who perform construction for the federal government to pay their workers the “prevailing wage.” Department of Labor regulations at that time set the base rate for a Dayton Sheet Metal Worker at $26.41 per hour; the fringe benefit rate was another $16.82 an hour. The workers were properly classified and received the appropriate base rate. All employees who work at Horning for more than 90 days are eligible for insurance; some receive vacation days. After a year, they become eligible for matching contributions to a 401(k) account. Accountants advised Horning about the amount to deposit into its benefits trust to comply with ERISA and Davis‐Bacon. Horning deducted a flat hourly fee from the paycheck of each Medical Center worker, regardless of whether the employee was eligible for any benefits. The amount did not correspond to the actual monetary value of the benefits each individual employee received. The Union filed a qui tam action under the False Claims Act, 31 U.S.C. 3729–3733, rather than filing under Davis-Bacon. The Seventh Circuit affirmed judgment in favor of Horning. Under the False Claims Act, the Union had to show that Horning knowingly made false statements (or misleading omissions) that were material to the government’s payment decision. The Union did not proffer enough evidence to permit a reasonable jury to conclude that Horning acted with such knowledge. View "Sheet Metal Workers Int'l Assoc. v. Horning Invs., LLC" on Justia Law

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William Charles Construction (WCC) entered into a labor agreement with the Illinois Department of Transportation for the “Biggsville” construction project to expand a section of Rt. 34 to four lanes. A jurisdictional dispute between two unions, each claiming the right for their member drivers to operate large trucks involved in the excavation work, was resolved by an arbitrator. Later, a Joint Grievance Committee (JGC) determined, under a subordinated collective bargaining agreement, that WCC owed the Teamsters back pay and fringe benefit contributions ($1.4 million) for having assigned the operation of heavy trucks to the International Union of Operating Engineers rather than the Teamsters. A second JGC award determined that WCC was liable for two days’ back pay for having assigned work to two Teamsters in violation of other Teamsters’ seniority rights. WCC filed a declaratory action under the Labor-Management Relations Act, 29 U.S.C. 185. The court granted the Teamsters summary judgment, finding that WCC filed its complaint outside the statute of limitations. The Seventh Circuit reversed the grant of summary judgment to the Teamsters and dismissed the Teamsters’ counterclaim for enforcement of one of the JGC awards. WCC's challenge to the awards is not barred by the statute of limitations because WCC did not receive notice of their final entry. The greater of the two JGC awards is void because WCC did not agree to arbitration by the JGC. View "William Charles Constr. Co., LLC v. Teamsters Local Union 627" on Justia Law

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Using a form provided by CGS, the general contractor for construction of an 18-story Milwaukee office building, PNA submitted a $12,675,421 bid to provide a glass curtainwall--a nonstructural outer covering for weatherproofing and aesthetics. The contract manual provided by CGS stated that “[t]he bidder must accept all terms of the [standard CGS] subcontract as a condition for submitting a bid.” After CGS chose PNA’s bid, PNA repeatedly expressed a need to review the finalized prime contract before it would execute a formal subcontract. CGS and PNA engaged in a “value engineering process” during which they refined the price and other terms of the subcontract. PNA regularly updated the proposed price and communicated the updates to CGS. Several times, PNA raised concerns about subcontract terms. CGS never indicated to PNA that, in CGS’s view, there was already an agreement in place. The parties never entered into a formal subcontract. CGS had to use a different subcontractor at a higher price. CGS filed suit. The district court granted PNA summary judgment, finding that the parties did not intend to be bound until the execution of a formal subcontract. The Seventh Circuit affirmed, agreeing that the parties never entered into a binding contract and that CGS’s promissory estoppel claim fails as a matter of law. View "C.G. Schmidt Inc. v. Permasteelisa N. Am." on Justia Law