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

In a recent decision the California Supreme Court expanded the implied warranty of specification suitability to include claims for a public agency's failure to disclose material information. In doing so it resolved a split in the decisions of the lower appellate courts. Notably, the Court adopts virtually the same rationale recognized by the Federal Circuit and Court of Federal Claims on federal procurement contracts, namely, the "superior knowledge" doctrine. In Los Angeles Unified School Dist. v. Great American Ins., 49 Cal. 4th 738, 2010 WL 2720825 (July 12, 2010), the Court held that a contractor need not prove intentional misrepresentation to recover compensation for a public entity's failure to disclose material information. The Court expressly disapproved Jasper Construction v. Foothill Junior College, (1979) 91 Cal. App. 3d 1, which held to the contrary.
 

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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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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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In a case of first impression, the Court of Appeal in Violante v. Communities Southwest Development and Construction Co. held that employees on public works projects may only sue their own employer for alleged prevailing wage violations.

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