Construction & Infrastructure Law Blog : Construction & Infrastructure Lawyer & Attorney : Sheppard Mullin Law Firm : Public Works & Professional Liability

By Robert T. Sturgeon & Edward B. Lozowicki

The California First District Court of Appeal has issued an opinion which may place a heavy burden on public works contractors under the California False Claims Act, Cal. Gov't Code § 12650 et seq. In San Francisco Unified School Dist. v. Laidlaw Transit, Inc., the Court of Appeal applied the federal "implied certification" doctrine to hold that when a contractor on a public works project submits a request for payment to the public entity at a time when the contractor knows it is in breach of the express terms of the contract, the contractor may be held to have submitted a false claim, and may be subject to liability under the state False Claims Act. San Francisco Unified School District ex rel. Manuel Contreras, et al. v. Laidlaw Transit, Inc., 182 Cal. App. 4th 438 (2010)
 

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By John A. Yacovelle and Matthew W. Holder

In a recent case the California Court of Appeal confirmed in an unpublished decision that, when a construction manager is tasked with supervising and managing a general contractor, the construction manager does not owe a duty of care to the general contractor to prevent economic loss. The Court reasoned that imposing such a duty would subject the construction manager to an untenable conflict in loyalties. Appellate courts in other states are split on this issue. Ledcor Builders, Inc. v. Janez Development, LLC, 2010 WL 925876 (Mar. 16, 2010).
 

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By Edward B. Lozowicki and Bram Hanono

Dillingham-Ray Wilson v. City of Los Angeles, 182 Cal.App.4th 1396 (opinion modified by 106 Cal.Rptr.3d 691, (April 16, 2010, No. B192900))

In Dillingham-Ray Wilson v. City of Los Angeles, the California Court of Appeal signaled its holding in the first sentence of its opinion: "The City of Los Angeles (City) obtained millions of dollars worth of construction work that it does not want to pay for." The City argued it was absolved of any obligation to pay the contractor, Dillingham-Ray Wilson (DRW), pursuant to Public Contracts Code sections 7105 and 7107 and Amelco Electric v. City of Thousand Oaks (2002) 27 Cal.4th 228 on the theory that they dictate a method of proving contract damages, a method DRW said was impossible under the circumstances. The Court disagreed because "section 7107 [sic] and Amelco impact the measure of damages, not the method of proving them . . . ." The Court also held that the modified total cost method of proving damages is permissible in California.
 

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By Robert T. Sturgeon

Harper/Neilsen-Dillingham, Builders, Inc. v. United States, 81 Fed. Cl. 667 (2008)

California has long followed a public policy which limits the enforcement of so-called "no damage for delay" clauses in construction contracts on public projects. The policy is embodied in part by section 7102 of the Public Contract Code, which limits the enforcement of such clauses contained in both public contracts between contractors and public entities, and in subcontracts between private parties relating to public projects. The rule against "no damage for delay" clauses is based on the common law principle that courts should strictly construe clauses which work a forfeiture, a policy which arguably applies with equal force to both public and private contracts. In this regard California Civil Code section 1635 provides that public and private contracts are to be interpreted by the same rules. Thus, many California practitioners believe that the rule does or should extend generally to all construction contracts, both public and private. The case of Harper/Nielson-Dillingham Builders, Inc. v. United States is significant because it presents a potential exception to this long-standing rule. In Harper/Nielson-Dillingham, the United States Court of Federal Claims held that under California law, "no damage for delay" clauses in contracts between private parties on federal public works projects are per se enforceable, and that a federal agency may successfully defeat a subcontractor's pass-through delay claim by relying on a "no damage for delay" clause in the subcontract between the general contractor and subcontractor.
 

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This article was originally posted on Sheppard Mullin's Government Contracts Blog, which can be found at governmentcontractslawblog.com. For further information concerning our Government Contracts Practice, contact either of our Practice Group Leaders, Bryan Daly in Los Angeles at (213) 617-5466 or Anne Perry in Washington, D.C. at (202) 218-6875.

By: Daniel J. Marcinak & Edward B. Lozowicki

Introduction

Construction companies performing projects for federal agencies such as the Corps of Engineers, Veterans Administration, and General Services Administration are now subject to the new E-Verify rules summarized in this article. Under the new rules hiring is now more risky since the building trades may have workers who have immigrated to the United States from other countries and may not have properly documented immigration status. Further, project estimators and engineers may also have entered the United States from other countries, and should be properly documented. The E-Verify requirements flow down to subcontractors as well as general contractors on covered projects.
 

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By Edward B. Lozowicki and James G. Higgins

Owners, developers and major general contractors are ramping up their use of wrap-up insurance policies on building and industrial projects. When sponsored by an Owner, wrap-ups are dubbed  Owner-Controlled Insurance Program ("OCIPs"). If the general contractor sponsors the wrap-up, it is termed a Contractor Controlled Insurance Program ("CCIPs"). These policies offer significant cost savings to owners and generals. Traditionally, bid packages required the general contractor and its subcontractors each to carry liability insurance and to indemnify the Owner and name it as an additional insured. This arrangement has been criticized as requiring costly duplication of coverage, and causing needless litigation over indemnity rights. Wrap-ups seek to avoid these consequences by affording liability coverage to all participants on a project under a single policy. However there have been problems with wrap-ups such as inadequate policy limits and gaps in coverage. And the controversy over contractual indemnity clauses continues.
 

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By Edward B. Lozowicki

As residential and commercial construction markets evaporate and contractors fight for survival, new opportunities are appearing in the form of public infrastructure projects. The federal government is pouring money into public infrastructure and construction projects, to the tune of about $143 billion in total. Of that total, about $14 billion is designated for the California market. In addition, the State continues to fund projects from Proposition 1B and 1C bonds, and gas tax revenues. Much of the money will fund infrastructure projects awarded by the state and local government agencies. These new opportunities, however, come with new risks. One such risk is a general contractor's liability for its subcontractors' unpaid or under-paid employees on public infrastructure projects.
 

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We are excited to announce the launch of our new blog dedicated to the needs of the construction and infrastructure industry. Refer back to this blog for updates on such topics as federal and local stimulus plans, claims on government and private projects, public-private partnerships, and the legal issues that impact the success or failure of construction and infrastructure projects.

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By Candace L. Matson

As most construction professionals know, California law requires that any person engaged in the business of a contractor, or that acts in the capacity of a contractor, must be properly licensed by the Contractors State License Board (“CSLB”). Cal. Bus. & Prof. Code § 7028. A contractor is defined broadly, as follows:
 

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