construction – Duane Morris Construction Law

December 20, 2024December 20, 2024 by Jose A. Aquino

Mechanic’s Liens and Licensing Laws: Court Ruling Highlights Strict Enforcement

The recent decision by the Supreme Court, Appellate Division, Second Department, New York, in the case of Mikoma Electric, LLC, et al. v. Otek Builders, LLC, et al., emphasizes the importance of adhering to licensing requirements within the construction industry. The case revolves around a dispute where plaintiffs, Mikoma Electric, LLC (Mikoma Electric), and Mikoma Technology of Power and Lights Wiring and Control Limited Liability Partnership (Mikoma Tech), sought to recover damages for breach of contract from Otek Builders, LLC, the general contractor for various WeWork properties.

Mikoma Tech, which was not licensed to perform electrical work in New York City, subcontracted with Otek Builders to carry out electrical work on several properties. Although Mikoma Electric, a licensed entity, obtained the necessary permits and allegedly supervised the work, the court found that this arrangement did not satisfy the licensing requirements stipulated by the Administrative Code of the City of New York § 27–3017(a), This section mandates that electrical work must be performed by a licensed master electrician or under their direct supervision.

The defendants moved to dismiss the complaint and discharge the mechanic’s liens filed by Mikoma Tech, arguing that Mikoma Tech’s lack of a proper license barred its recovery. The Supreme Court initially denied this motion, but upon appeal, the Appellate Division reversed the decision. The appellate court held that the documentary evidence provided by the defendants, which included printouts from the New York City Department of Buildings’ webpage, did not meet the criteria for documentary evidence under CPLR 3211(a)(1). However, the court agreed that Mikoma Tech’s failure to obtain the required license precluded it from recovering under breach of contract or quantum meruit theories and from foreclosing on its mechanic’s liens. Consequently, the Appellate Court dismissed the complaint as to Mikoma Tech and discharged the mechanic’s liens filed by Mikoma Tech.

This decision underscores the strict interpretation of licensing statutes aimed at protecting public health and welfare. The court emphasized that employing or subcontracting work to a licensed entity does not fulfill the statutory requirements if the primary contractor is unlicensed. Consequently, Mikoma Tech’s argument that it should recover because Mikoma Electric, a licensed subcontractor, performed the work was deemed insufficient.

The ruling serves as a critical reminder for contractors and subcontractors in New York City to ensure compliance with licensing regulations to avoid forfeiting their lien rights and the right to recover payments for their work. It also highlights the importance of understanding and adhering to legal requirements in contractual agreements within the construction industry.

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.

October 27, 2024October 27, 2024 by Jose A. Aquino

NY Court Affirms Labor Law Protections For Ancillary Construction Tasks

Last week, in Rodriguez v. Riverside Center Site 5 Owner LLC, a New York appellate court unanimously held that a plaintiff who sustained injuries after falling from a cement truck while cleaning its chute was engaged in a protected activity under New York’s Labor Law.

The case arose from an incident at a Manhattan construction site, where the plaintiff was responsible for delivering and pumping cement. After completing the delivery, workers on site directed him to move his truck approximately ten feet forward to a designated “wash box” area for cleaning the truck’s chute. The plaintiff climbed onto the truck’s elevated platform, which was equipped with a railing, to wash the chute. While descending and holding onto the railing, it gave way, causing him to fall approximately ten feet to the ground.

The appellate court concurred with the trial court’s finding that the plaintiff’s activity of cleaning the cement truck was “necessary and incidental” to the overall construction work at the site, thereby qualifying as protected work under Labor Law § 240(1). The court emphasized that tasks integral to construction work, even if ancillary, fall within the statute’s protective scope, cautioning against assessing the moment of injury in isolation from the general context of the work.

This decision underscores New York courts’ commitment to an expansive application of the Labor Law, ensuring protection for workers performing tasks integral to construction activities, even when such tasks may appear secondary. The ruling reinforces the broad interpretation of Labor Law § 240, commonly known as the “Scaffold Law,” affirming protections for workers across construction projects in New York State.

October 22, 2024October 22, 2024 by Jose A. Aquino

INSIGHTS INTO NEW YORK’S CONSTRUCTION LIABILITY LAWS

In a recent decision, Injai v. Circle F 2243 Jackson (DE), LLC, the New York Appellate Division, Second Department, affirmed the denial of a plaintiff’s motion for summary judgment in a case involving alleged violations of New York’s Labor Law §§ 240(1) and 241(6). This case, centered on a construction site accident, highlights the complexities and requirements of proving liability under New York’s Labor Laws.

The plaintiff, a carpenter, was injured after falling from a ladder while working at a construction site. He claimed that the ladder wobbled or moved as he was ascending it, causing him to lose balance and fall. The plaintiff filed a lawsuit against the property owner and its contractor, alleging common-law negligence and violations of Labor Law §§ 200, 240(1), and 241(6). The defendants filed a third-party action against the subcontractor that had allegedly hired the plaintiff.

The plaintiff sought summary judgment on the issue of liability, focusing on the alleged violations of Labor Law § 240(1) and § 241(6). Labor Law § 240(1), commonly known as the “Scaffold Law,” imposes a nondelegable duty on owners and contractors to provide safety devices to protect workers from elevation-related risks. To prevail, a plaintiff needs to show that the statute was violated and that the violation was a proximate cause of his or her injuries.

The court found that the plaintiff’s evidence raised triable issues of fact. There were unresolved questions about how the accident occurred, whether the ladder was indeed unsecured, and the credibility of the plaintiff’s account, given that he was the sole witness to the accident. The court explained that when the plaintiff is the sole witness to the accident or their credibility is in question, it is improper to grant summary judgment in favor of the plaintiff under Labor Law § 240(1). Consequently, the court denied the motion for summary judgment on the Labor Law § 240(1) claim.

The court also found unresolved factual issues regarding the alleged violation of Labor Law § 241(6), which was based on a violation of 12 NYCRR 23–1.21(b)(4)(ii). This regulation pertains to safety standards for ladders used in construction, stating in part that “[a]ll ladder footings shall be firm.” The plaintiff’s inability to conclusively prove that this regulation was violated and that such a violation caused his injuries led to the denial of summary judgment on this claim as well.

This decision highlights the standards that plaintiffs must meet to obtain summary judgment in construction accident cases under New York’s Labor Laws. It emphasizes the necessity for clear, unequivocal evidence when alleging safety violations and the importance of corroborative testimony or documentation, especially in cases where the plaintiff is the sole witness to the accident. The ruling illustrates the need for thorough and credible proof in proving liability under Labor Law §§ 240(1) and 241(6).

October 14, 2024October 14, 2024 by Jose A. Aquino

KEY TAKEAWAYS UNDER ARTICLE 3-A OF THE LIEN LAW FROM A RECENT NY APPELLATE COURT DECISION

The New York Appellate Division, First Department, recently revisited several legal principles of Article 3-A of the New York Lien Law in the case of Flintlock Construction Services, LLC v. HPH Services, Inc., 230 A.D.3d 446 (1st Dept. 2024). The court’s ruling provides important clarifications on personal liability, standing in trust asset diversion claims, and the conditions under which punitive damages may be awarded.

A key aspect of this case is the court’s affirmation of the contractor’s standing to assert a claim for the diversion of trust assets under Article 3-A of the New York Lien Law. Article 3-A establishes a trust fund for monies received in connection with improvements to real property and designates the recipient of such funds—whether an owner, contractor, or subcontractor—as the trustee of those funds. The trustee is obligated to hold the funds in trust until the claims of all trust fund beneficiaries are either paid or discharged.

Trust beneficiaries, where the subcontractor is a trustee, include sub-subcontractors, architects, engineers, surveyors, laborers, and suppliers who provided labor or materials for the improvement. Section 77 of the Lien Law provides that the “holder of any trust claim, including any person subrogated to the right of a beneficiary of the trust holding a trust claim,” may maintain a cause of action for the enforcement of the trust.

In Flintlock, the court found that the contractor had standing to enforce a trust claim against its subcontractor. This standing was based on the contractor’s status as a subrogee of the subcontractor’s suppliers, a status formed by the contractor’s involuntary payments to the subcontractor’s unpaid vendors. Under the doctrine of subrogation, one party gains the right to enforce another party’s claim by paying the other party’s debt under compulsion or to protect some interest. By making these “involuntary” payments, the contractor acquired the right to assert claims initially held by the subcontractor’s suppliers.

Although the appellate opinion leaves some ambiguity regarding what constitutes an involuntary payment, an earlier decision by the trial court provides clarification. It explains that a payment can be deemed involuntary either due to a contractual obligation or the necessity to protect the payer’s legal or economic interests. The trial court emphasized that when relying on the latter, the party must prove that the action is not just beneficial but essential to safeguard its interests.

For instance, a contractor who makes payments to trust beneficiaries can enforce an Article 3-A trust if they have already paid the subcontractor and are subsequently required to pay the subcontractor’s suppliers or sub-subcontractors due to the subcontractor’s failure to do so. Among other situations, this requirement can arise from either a contractual obligation or a payment bond obligation.

The First Department’s opinion in Flintlock aligns with the Appellate Division, Second Department’s ruling in J. Petrocelli Constr., Inc. v. Realm Elec. Contrs., Inc., 15 A.D.3d 444 (2d Dept. 2005). In Petrocelli, the court similarly found that a contractor who involuntarily paid a subcontractor’s unpaid vendors could maintain a cause of action under Article 3-A, recognizing the contractor as a subrogee with standing to enforce trust claims. The court emphasized that involuntary payments to cover a subcontractor’s obligations can establish standing to enforce trust fund claims.

It is also noteworthy that the appellate court in Flintlock found the principal of the subcontractor personally liable for the diversion of trust assets. The evidence presented showed that the principal knowingly participated in the diversion, including a substantial payment that was funneled through various accounts before ending up with one of his companies.

While punitive damages can be awarded for violations of Lien Law Article 3–A involving the diversion of trust assets, the court in this case declined to adopt a fixed rule that would make such damages recoverable in every instance. The plaintiff’s failure to demonstrate that punitive damages were warranted under the specific circumstances of this case serves as a reminder that such awards are not automatic and must be justified by the particular facts presented.

The decision in Flintlock Construction Services, LLC v. HPH Services, Inc., highlights the potential personal liability for those who divert trust assets. It also clarifies that while punitive damages can be a remedy for diversion of trust assets, they are not automatically awarded and must be justified by the specific circumstances of each case. Furthermore, the ruling provides valuable insight into the conditions under which a contractor can establish standing as a subrogee to enforce trust fund claims, emphasizing the necessity of demonstrating involuntary payments made to protect their economic interests.

August 30, 2024September 6, 2024 by Duane Morris

Duane Morris Attorneys Named “Lawyers of the Year” for Construction Law and Litigation

Duane Morris partners Frederick Cohen and Allen J. Ross have been recognized by Best Lawyers® as 2025 “Lawyers of the Year.” 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.

Cohen has been selected as the “Lawyer of the Year” in New York City for Construction Law. He also received this distinction in 2018 and was named for Litigation – Construction in 2014.

Ross has been selected as the “Lawyer of the Year” in New York City for Litigation – Construction. He also received this distinction in 2015 and 2016.

Continue reading “Duane Morris Attorneys Named “Lawyers of the Year” for Construction Law and Litigation”

September 22, 2023 by Duane Morris

Private Equity in Construction

Duane Morris partner Benton Wheatley is featured in the ABA Construction Law podcast episode” Private Equity in Construction.” Ben explores the issues raised and opportunities presented by the infusion of private equity money in the construction industry and resulting issues in the field of construction law.

Listen to the podcast.

February 15, 2021 by Duane Morris

UK Construction & Engineering: Cladding Crisis and Latest Government Intervention

By Vijay Bange

There was considerable interest as to what more the Government will do in its effort to tackle the issue of high rise residential buildings with dangerous cladding, and further measures to help the plight of long leaseholders who are facing significant costs to undertake necessary fire safety remedial works.

To read the full text of this blog post by Vijay Bange please visit the Duane Morris London Blog.

December 17, 2020January 6, 2021 by Duane Morris

Climate Change and Construction Revisited

The issue of pollution in major cities in the UK has again been highlighted by the tragic death of a child whose family lived near the south circular in Lewisham. In a landmark case, the second coroner’s inquest found that the levels of pollution were above world safe levels, and that air pollution was a material cause of her death. This tragic case will bring to the fore the national debate on pollution and climate change.

To read the full text of this blog post by Duane Morris attorney Vijay Bange, please visit the Duane Morris London Blog.

October 23, 2020 by Duane Morris

How We Won a $7.9 Million Arbitration Award: Construction Litigator Talks Shop

A real estate investor in an independent living facility in Texas has won a $7.9 million arbitration award against a construction company that delivered a project 179 days late.

The case should serve as a warning bell for integrated developer-owner-contractor companies that set up a “special purpose entity” for their development projects, said Benton Wheatley, partner in Duane Morris in Austin, who represented plaintiff Montgomery Street Partners.

To read the full text of this article, originally published in Texas Lawyer, please visit the firm website.

May 12, 2020 by Duane Morris

Considerations of UK Construction Remobilisation, Part 2

Last week we discussed, in light of the encouragement from Robert Jenrick MP (Secretary of State for Housing, Communities and Local Government) for the construction industry to remobilise, the government’s apparent reluctance to provide confidence and clarity for the construction industry in respect of the safe operation of sites.

In the Prime Minister’s address to the nation on 10 May 2020, he re-stated that encouragement for the construction industry, where possible, to return to work.

To read the full text of this post by Duane Morris attorneys Steve Nichol and Matthew Friedlander, please visit the Duane Morris London Blog.