Washington Construction Law Blog

Once in a while, a disappointed bidder seeking to contract with a state or local government agency -- or in this case the actual contractor who received the award but then wanted to enjoin the local government from terminating the contract -- goes to federal court in search of a TRO. The normal theory is that the contractor has been deprived of its due process rights under the 14th Amendment. And the contractor ordinarily loses.

This 7th Circuit case is no exception. But given that (1) it arises out of a bitter Chicago contract dispute and (2) the facts and law are whipped up in a colorful Posner-ian souffle, it is worth a look. And you will learn something about how the 14th Amendment applies to state and local construction contract and bid processes. Who says construction law isn't sexy???

The only Washington case to have examined similar issues is Quinn Construction v. Fire Protection District, 111 Wn. App. 19 (2002).

This Division 3 case is a nice summary of the "joint check rule" and how it operates in the context where the general contractor who writes the joint check then attempts to sue a subcontractor on an cause of action assigned to it by a lower-tier subcontractor.

Confusing? Yes. But if you read the details, it is also a good lesson in how to avoid the trap evidently presented by the "joint check rule", which in short provides:

Many jurisdictions (including Washington; see Dauphin, 42 Wn. App. at 496) have adopted the "joint check rule" to this purpose: "{w}hen a subcontractor and his materialman are joint payees, and no agreement exists with the owner or general contractor as to allocation of proceeds, the materialman by endorsing the check will be deemed to have received the money due him.

...the costs of Bechtel's nuclear waste vitrification operation -- which has escalated in cost from $4.3 billion to $11 billion -- has become a political football of sorts in our Nation's Capitol.

Like a lot of differing site conditions (DSC) cases, this new case only makes sense if you spend the time to read the whole decision and absorb the details concerning what the contract "indicated" the builder would encounter. When all is said and done, Universal Construction, Inc. dodged the summary judgment bullet in a claim arising from a $500,000 road project in Idaho.

Here's an interesting resource for keeping up with recent decisions affecting the admissibility of expert testimony -- Daubert on the Web -- including testimony offered by engineers and architects.

These folks also offer a daily blog of recent Rule 702 decisions and developments, which looks quite helpful as well.

What happens if the size of a surety bond is increased at some point in time, but the increase occurs after the breach which is insured by the bond? Does the increased bond apply to the preexisting breach or not?

Apparently not, according to a new Division 2 case. The contractor originally maintained a $6,000 bond but the amount jumped to $12,000 in July 2001 due to a legislative amendment. By that time, the principal on the bond (the builder) had already breached its contract to build a custom home. The homeowner obtained judgment against the builder in 2005 and argued that the surety bond in effect at the time of the judgment (the $12,000 bond) was liable.

The Court of Appeals rejected this argument:

Thus, the statute links any suit against the bond to the underlying claim when the contractor breaches by abandoning the work or by failing to remedy minor defects. In this statutory scheme, we look to the amount of the bond on the date of the breach.

At the end of its recent decision involving discovery sanctions against the maker of an EIFS product, the Supreme Court announced a significant damages ruling: in a defect case, where the damage to property is "permanent" in nature, the plaintiff will be entitled to both the cost of repair and dimunition in property value. Said the Court by a 9-0 vote:

(5) Damages for Diminished Value. Sto argued that the trial court erred in awarding the Mayers "stigma damages," damages for the home's diminished value. However, where the damage to real property is permanent, a plaintiff is entitled to recover, not only for the costs of restoration and repair, but also for the property's diminished value. See Pugel v. Monheimer, 83 Wn. App. 688, 692, 922 P.2d 1377 (1996) (determining that withdrawal of building's lateral support permanently damaged marketability); see also Grant v. Leith, 67 Wn.2d 234, 237, 407 P.2d 157 (1965) (sustaining an award for restoration and permanent depreciation). The Court of Appeals noted that "{t}he Mayers presented unrebutted expert testimony that in addition to the repairs, they had suffered a permanent loss because they will have to disclose that the home is sided with EIFS, a known defective product." 123 Wn. App. at 464. We affirm the Court of Appeals on the trial court's award of stigma damages.

In Washington, a disappointed bidder has a recognized right to sue to enjoin the execution of a public works contract in a situation where such execution would violate the principles of competitive procurement. By contrast, the bidder has no statutory right to collect damages such as bid & proposal (B&P) preparation expenses or lost profits.

In Alaska, a disappointed bidder does have a statutory right to seek B&P costs under AS 36.30.585. This new case from the Alaska Supreme Court makes it clear, however, that recovery of B&P costs under that statute requires strong proof of causation between the expenses incurred and the alleged violation of the procurement rules. It is not enough, for example, to establish the rules were breached by the agency. Instead, according to this decision, the claimant must also demonstrate the amount of B&P costs specifically incurred due to the specific violation. And because the claimant here failed to make that connection, the Court rejected the claim for B&P costs recovery even as it assumed the agency had in fact violated state procurement law.

The first in this term's Supreme Court roster of cases pertinent to the construction industry is out: the Lakemont Ridge case. By a 9-0 vote, the Supreme Court held that a homeowner need not file its 45 day pre-suit notice to cure in a situation where the "construction professional" has failed to file its own notice advising the homeowner of the existence of the homeowner's pre-suit notice requirement. The takeaway quote:

The statute unambiguously establishes two distinct notice requirements. These provisions of chapter 64.50 RCW operate together to achieve the legislature's dual goals of reducing potentially burdensome and expensive construction defect litigation and preserving rights and remedies for property owners. We construe the statute to give effect to both notice provisions. At the beginning of the parties' relationship, the construction professional must notify the homeowner of the construction professional's right to notice and the opportunity to cure any defects. RCW 64.50.050(1). If the construction professional fails to provide the notice required by this section, the Act ensures that the homeowner's failure to give prelitigation notice "shall not preclude or bar any action." RCW 64.50.050(3). However, if the construction professional
provides notice of the prelitigation notice requirement, the homeowner must give prelitigation notice of the alleged defects and follow the statutory procedures designed to avoid litigation. RCW 64.50.020(1). This interpretation gives effect to each notice provision of chapter 64.50 RCW.