Revisiting The Intricacies Of New York Lien Law § 38

In the realm of construction law, disputes over the enforcement and validity of mechanic’s liens are fairly common. The recent case of  176 Washington Park LLC v. Empire Core Group LLC, 2024 N.Y. Slip Op. 50906(U) (Sup. Ct., NY Co., June 21, 2024), serves as a classic illustration of the complexities involved.

New York Lien Law § 38 is clear in its mandate: a lienor must provide a detailed statement of the labor and materials that constitute the claimed lien amount. This includes a comprehensive breakdown of materials used, their quantities, costs, and the specifics of labor, including the nature of the work, hours spent, and the rates charged.

In 176 Washington Park LLC v. Empire Core Group LLC, the defendant’s submission fell short of these requirements. The court found the provided classifications of costs, such as “Porta Potty,” “Construction Site Signs,” “Waste Removal,” “DOB Drawings,” and “DOT Permits,” to be too general. They lacked the necessary detail regarding the nature of the labor and the hours and wages expended. Furthermore, payments to subcontractors were listed without adequate information about the services rendered or the basis for the charges.

The materials section was similarly lacking, with no specifics on the quantity or costs of materials used, despite listing the suppliers and amounts disbursed. This lack of detail ultimately led to the court’s decision to grant the plaintiff’s motion in part, requiring the defendant to provide a proper verified itemized statement within 30 days. Failure to comply would result in the discharge of the mechanic’s lien.

This case underscores the importance of record-keeping and transparency in construction projects. It emphasizes the need of contractors and subcontractors to adhere to the requirements of Lien Law § 38 to ensure the enforceability of their liens.

Jose A. Aquino (@JoseAquinoEsq on X) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and of the Cuba Business Group.  Mr. Aquino focuses his practice on construction law, lien law and government procurement law. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

Duane Morris Named to Construction Executive’s Top 50 Construction Law Firms List

Duane Morris has been named named to Construction Executive’s Top 50 Construction Law Firms list for the fourth consecutive year.

Construction Executive is the leading source for news, market developments and business issues impacting the construction industry. In its June 2024 issue, CE published a comprehensive ranking of the Top 50 Construction Law Firms featuring breakouts and analysis accompanied by an article in which leading legal experts discuss their construction clients’ most pressing business concerns. Read the article for more information.

Flaws In Project Scope Lead To Court Most Often, Report Says

Jeffrey L. Hamera, vice chair of Duane Morris’ Construction Group , was quoted in the Law360 article, “Flaws In Project Scope Lead To Court Most Often, Report Says.”

From Law360:

[Mr. Hamera said] that project owners have looked toward reducing design or project delivery costs by starting construction before design work wraps up entirely, in a trend that’s been building for years.

Hamera said those objectives can be valid, although they can distress a project if parties haven’t planned for it.

“If the parties are sophisticated and understand there’s going to be some completion of the design after the initial bids are in place, it’s something that can be managed,” he said. “There’s always a friction between what’s anticipated from the design on which the contractor’s bids are based, and what’s really a change that wasn’t anticipated and couldn’t be anticipated.”

To read the full article, please visit the Law360 website (subscription may be required).

 

Duane Morris’ Benton T. Wheatley Named Austin Construction “Lawyer of the Year” by Best Lawyers

Duane Morris partner Benton T. Wheatley has been recognized by Best Lawyers® as the “2024 Construction Lawyer of the Year” in Austin, Texas. The recognition is given to only one attorney for each practice area and city. Lawyers are selected based on high marks received during peer-review assessments conducted by Best Lawyers each year.

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Can We Learn Anything from Adjudications in Expedited Arbitrations?

Construction projects are a ripe ground for disputes. When these disputes arise, they often threaten to bring the project itself to a halt if not resolved expeditiously. However, many large-scale construction projects (particularly international ones) provide for their disputes to be referred to arbitration.

To read the full text of this post by Selvam LLC attorney Luis Duhart, please visit the Duane Morris International Arbitration Blog,

New York Announces Investments In Clean And Efficient Buildings

Yesterday, New York Governor Kathy Hochul announced new investments in clean and efficient buildings. As part of her 2023 State of the State, Governor Hochul introduced a series of building decarbonization initiatives, including zero-emission for new construction and the phase out of the sale of new fossil fuel heating equipment.

“I’m proposing a plan to end the sale of any new fossil-fuel-powered heating equipment by 2030,” said the governor. “And I’m calling for all new construction to be zero-emission, starting in 2025 for small buildings and 2028 for large buildings. We are taking these actions because climate change remains the greatest threat to our planet, and to our children and grandchildren.”

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New York Court Rejects Building Owner’s Motion For Default Judgment Against Subcontractor And Architect

A recent decision of the New York Supreme Court, LAM Group v. Anthony T. Rinaldi LLC, 2022 WL 17881264 (Sup. Ct., NY Co., Dec. 22, 2022), illustrates the importance of meticulously following the procedures set forth in civil practice statues and rules.  In LAM, the owners of a commercial building in lower Manhattan brought an action against their contractor, a subcontractor, and other construction professionals alleging breach of contract, negligence, and other claims in connection with the installation of a stucco façade on their property.

Plaintiffs alleged that pieces of the stucco façade from the exterior of the building dislodged and landed on a neighboring property causing damage. Eventually, the entire stucco façade required replacement. Defendant Bayport Construction Group (“Bayport”), a subcontractor, had performed the masonry and stuccowork. Bayport and another defendant, Nobutaka Ashihara Architect PC (“NAA”), the initial architect retained for the project, were served with the summons and verified complaint by service on the New York Secretary of State, pursuant to New York Business Corporation Law § 306(b). However, neither Bayport nor NAA filed an answer or otherwise appeared in the action. Plaintiffs filed a motions for default judgment against the two non-appearing defendants. The court found that plaintiffs properly served Bayport and NAA with process and with the motion papers, but refrained from entering a default because plaintiffs failed to strictly follow the procedure set forth in the New York Civil Practice Law and Rules (“CPLR”).

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TCC Issues New Decision Addressing the Definition of Concurrent Delay

Concurrent delay occurs whenever two or more separate events – at least one of which is an employer risk event and at least one a contractor risk event – independently delay the critical path of a project.

The substantial majority of standard form construction and engineering contracts are silent as to either the definition of or apportionment of responsibility for concurrent delays, and it is generally rare for parties to seek to include language to that effect by way of bespoke amendment. This reluctance to legislate for concurrent delay in contracts probably reflects the inherent difficulty in formulating language that would adequately address what is always a complex and necessarily heavily fact-dependent issue.

Nevertheless, the consequence of this widespread lack of contractual language is that issues concerning concurrent delays are usually left to be determined by the law of the contract.

Traditionally, the cases raising concurrency in the Courts of England and Wales have concerned concurrent delays by a contractor that is claiming an extension of time against an Owner.  In the seminal case, Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [1999] 70 Con. L.R. 32, the Court recognized that in such a situation the Contractor would be entitled to an extension of time but not to prolongation costs.

The determination of what is required for two delays to be concurrent under English law, however, has remained unclear.

The preferred approach, the “dominant cause approach”, assigns liability to whichever delay is the “effective, dominant cause” of the critical path impact. If there is such a dominant cause, the delays are not concurrent; concurrency occurs only when both delays are of “approximately equal causative potency.”  North Midland Building Ltd v Cyden Homes Ltd [2018] EWCA Civ 1744; H. Fairweather & Co Ltd v London Borough of Wandsworth [1987] 39 BLR 106 (OR).

A contrary line of cases, however, has resolved apparently concurrent delays based on a first-in-time approach under the reasoning that a subsequent concurrent delay does not actually effect the completion date of the Works: Royal Brompton Hospital NHS Trust v Frederick A Hammond & Ors [2000]. Under this approach, true concurrency would require that “both events in fact cause delay to the progress of the works and the delaying effect of the two events is felt at the same time.”  Id. Note that this approach does not require the events themselves to be concurrent, only the effects of those events.

This view has seemingly been dominant in recent years, having been adopted in Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm) (11 April 2011) and Saga Cruises BDF Ltd v Fincantieri SPA [2016] EWHC 1875 (Comm) (29 July 2016).

This approach has also been recommended in the Second Edition of the Society for Construction Law’s Delay and Disruption Protocol, but was condemned by Scotland’s courts as “unnecessarily restrictive and [an approach] which would militate against the achievement of its obvious purpose of enabling the architect, or other tribunal, to make a judgment on the basis of fairness and a common-sense view of causation.”   City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190 (30 Nov. 2007) – a judgment that was itself criticized in Walter Lilly & Co. Ltd v Mackay [2012] EWHC 1773.

The contrasting approaches adopted by the Courts in this regard undoubtedly reflect the fact that whilst the Courts recognize that this is an area that requires judicial guidance, it is also heavily fact-dependent, such that an approach adopted in one case may not be appropriate with a different set of facts.

Insofar as it is possible to establish overarching principles, they are likely to be those summarized in Saga Cruises v Fincantieri and drawn from Henry Boot v Malmaison:

  • Where an employer risk event actually causes a delay to completion, the contractor will always be entitled to an extension of time notwithstanding any concurrent contractor risk events. This is based in part on the principle that an employer cannot hold a contractor to an obligation that the employer himself has prevented the contractor achieving (the “prevention principle”).
  • The delay caused by an employer risk event must be actual, not notional or theoretical.
  • Where a contractor risk event has caused concurrent delay, the contractor’s claim for prolongation costs arising from the employer risk event is likely to fail for want of causation.
  • In cases of concurrency, the Courts (and therefore contract administrators) should be very cautious to attempt to apportion critical delay between two or more concurrent events.

Notwithstanding these principles, the treatment of concurrency remains uncertain, especially under international contracts where the law of England and Wales is being applied by an external tribunal or arbitrator.

It is thus noteworthy that last week the TCC rendered a decision addressing concurrent delays: Thomas Barnes & Sons PLC v Blackburn with Darwen Borough Council [2022] EWCH 2598 (TCC) (17 Oct. 2022).  The Borough Council for the borough of Blackburn with Darwen (“Blackburn”) contracted with Thomas Barnes to construct a bus terminal under the terms of a Joint Contracts Tribunal agreement.  The subsequent litigation stemmed from Blackburn’s denial of Barnes’ extension of time claims and termination of the Contract based on delays to the Works.

Barnes’ extension of time claim was based on structural steel defects (deflection under load) for which Barnes was not contractually responsible. Completion of the structural steel work was necessary to allow pouring of the concrete topping, which in turn was required for exterior wall construction and interior finishing thereafter.  While the structural steel delays were ongoing, Barnes independently suffered delays to its roof works, which were also a required prerequisite to interior finishing.  The roof delays, however, arose after the structural steel delays, and were resolved prior to the construction of the exterior walls, and therefore did not independently cause delay to the critical path.

The Court found that these roof delays, although subsumed entirely within the critical path impact of the structural steel delays, were concurrent, writing:

“In my judgment this is a case where these causes were concurrent over the period of delay caused by the roof coverings. That is because completion of the remedial works to the hub structural steelwork was essential to allow the concrete topping to be poured and the hub SFS to be installed, without which the hub finishes could not be meaningfully started, but completion of the roof coverings was also essential for the hub finishes to be meaningfully started as well. It is not enough for the claimant to say that the works to the roof coverings were irrelevant from a delay perspective because the specification and execution of the remedial works to the hub structural steelwork were continuing both before and after that period of delay.  Conversely, it is not enough for the defendant to say that the remedial works to the hub structural steelwork were irrelevant from a delay perspective because the roof coverings were on the critical path. The plain fact is that both of the work items were on the critical path as regards the hub finishes and both were causing delay over the same period.”

The Court held that Barnes was entitled to an extension of time based on the delay caused by the steel frame deflection, but was only entitled to prolongation damages for the periods of delay that were not concurrent with Barnes’ own delays to the roof works.

Even given the diversity of approaches taken by the Courts on concurrency this is a curious decision. On the facts as given in the judgment, it appears that the dominant cause of delay was the completion of remedial works to the hub structural steelwork, and that this is therefore not an instance of true concurrency. However, the Court does not discuss the dominance of these works, and it is possible that this issue was not raised in submissions before it. The Court also appears to have ascribed at least some significance to the parties’ contemporaneous evaluation of the critical path impacts of the two delays, a consideration that has not played a prevalent role in prior decisions addressing concurrent delays.

It is not currently known whether this decision will be appealed. Nevertheless, in the meantime this case only increases the uncertainty surrounding the definition of “concurrent delay” under the law of England and Wales.

For More Information

If you have any questions about this blog, the final guidance or its potential implication, please contact Vijay Bange, Chris Chasin, Owen Newman or Steve Nichol.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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