construction law – Duane Morris Construction Law

April 4, 2025April 4, 2025 by Jose A. Aquino

Court Reinforces Limits on “Piggybacking” in Public Bidding

In New York, “piggybacking” refers to a procurement method authorized by General Municipal Law §103(16), which allows a municipality or school district to purchase goods or services through another governmental entity’s contract without conducting its own bidding process, if certain conditions are met. The original contract must have been awarded through competitive bidding or a process that satisfies the legal equivalent under New York law, and it must permit other public entities to make purchases from it. While intended to promote efficiency and cost savings, piggybacking is strictly limited in scope and is not a blanket exemption from public bidding requirements.

On February 13, 2025, the Supreme Court of New York, Broome County, issued decision in Daniel J. Lynch, Inc. v. Board of Ed. of the Maine-Endwell Central School Dist., addressing the limits of “piggybacking” under General Municipal Law (GML) §103(16) in the context of public construction contracts.

The case arose from a capital improvement project for which the School District awarded a sitework contract to Smith Site Development, LLC. Several contractors, including plaintiff, challenged the award, arguing that the District improperly relied on a piggybacking arrangement to avoid traditional competitive bidding procedures. Specifically, the District piggybacked on a municipal contract that had not been awarded through sealed bidding as required by GML §103.

The Court held that the District’s use of piggybacking was impermissible. The Court found that GML §103(16) only authorizes piggybacking when the original contract was awarded through a process compliant with GML §103’s requirements – namely, public advertisement and sealed competitive bidding. Furthermore, the Court interpreted the statutory term “vendor” as applying only to suppliers of apparatus, materials, equipment, or related services, and not to contractors performing construction or alteration of buildings. Because the original contract did not meet these criteria, the piggybacking arrangement was invalid.

This decision cautions that piggybacking under GML §103(16) is restricted to eligible vendor contracts and cannot be used to bypass competitive bidding rules for construction projects. The ruling provides a clear precedent for challenging awards made through improper reliance on piggybacking.

Jose A. Aquino (@JoseAquinoEsq on X) is a special counsel at Duane Morris LLP’s New York office, where he is a member of both the Construction Group and of the Cuba Business Group, specializing in 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 herein are those of the author and do not necessarily reflect the views of Duane Morris LLP or its individual attorneys.

March 18, 2025 by Jose A. Aquino

Court Upholds Sanctions for Frivolous Filing of Notice of Pendency

In Consumer Protection Restoration, LLC v. Hickory House Tenants Corp., the Second Department of the New York Appellate Division upheld a trial court’s decision to impose sanctions and legal fees on the plaintiffs for filing a frivolous notice of pendency. The plaintiffs initially sought to foreclose on two mechanic’s liens and recover damages for breach of contract and unjust enrichment against the defendant, Hickory House Tenants Corp. (hereinafter “Hickory House”). However, the Supreme Court of Rockland County had previously directed the expungement of the mechanic’s liens under Lien Law § 39, ruling that they were willfully exaggerated.

Subsequently, the plaintiffs filed a notice of pendency against Hickory House’s cooperative apartment complex in relation to their sole remaining claim for unjust enrichment. Hickory House moved to impose sanctions, arguing that the notice of pendency was frivolous.

The Second Department affirmed the lower court’s ruling that the plaintiffs’ notice of pendency was frivolous and upheld the imposition of sanctions. The court reiterated that a notice of pendency is proper only when a plaintiff’s claim directly affects the title, possession, use, or enjoyment of real property. In this case, the plaintiffs’ unjust enrichment claim did not implicate a property interest in a manner that justified filing a notice of pendency.

The ruling underscores the judiciary’s willingness to impose financial consequences on litigants who file a notice of pendency without a legitimate property interest claim.

February 21, 2025 by Jose A. Aquino

Appellate Court Highlights the Essential Role of Pre-Bid Inspections in Construction Projects

A recent appellate decision underscores the importance of due diligence in construction projects. The dispute arose from a construction contract between Maric Mechanical, Inc. (“Maric”) and the New York City Housing Authority (“NYCHA”). The contract involved the replacement of boilers at the Ravenswood Houses in Queens. According to the contract documents, the project required the construction of 40 temporary shoring towers. However, Maric later discovered that 206 shoring towers were necessary, significantly increasing the project’s cost.

Maric sought compensation for this “extra work,” arguing that the additional towers were not included in the original contract. NYCHA moved to dismiss the complaint, citing Maric’s failure to perform a pre-bid site inspection and the explicit disclaimers in the contract documents regarding the accuracy of the provided information.

The Supreme Court, New York County, granted NYCHA’s motion to dismiss the complaint. The decision was unanimously affirmed by the Appellate Division, First Department.

The appellate court’s decision was based on several factors. First, Maric admitted that it did not conduct a pre-bid project work site inspection, as required by the contract. This acknowledgment meant Maric could not claim that the need for additional shoring towers was unforeseeable. Second, the contract documents explicitly warned that NYCHA did not assume responsibility for the accuracy or completeness of the information regarding existing conditions. This disclaimer placed the responsibility on Maric to independently verify the site conditions. Lastly, Maric’s argument that its engineer’s post-contract determination of the need for extra work could not have been made based on a pre-bid inspection was deemed conclusory and insufficient to support its claim.

The decision in Maric Mechanical, Inc. v. New York City Housing Authority serves as an important reminder for contractors and legal professionals alike. It highlights the importance of pre-bid inspections and the need for documentation and verification of site conditions. Contractors must conduct pre-bid inspections to inspect and document all site conditions before submitting a bid. Additionally, contractors should pay close attention to disclaimers in contract documents, recognizing the limitations of the provided information.

The lower court’s decision can be found here, and the appellate decision here.

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.

February 6, 2025February 6, 2025 by Jose A. Aquino

Appellate Court Affirms That Flagging Work Qualifies for Prevailing Wage

The New York Appellate Division, First Department’s decision in Santana v. San Mateo Construction Corp., entered on January 16, 2025, reinforces the enforceability of prevailing wage claims under Administrative Code of City of N.Y. § 19-142. The court clarified that section 19-142 applies to any permit issued “to use or open a street,” not just public works projects. It reaffirmed that flagging work qualifies for prevailing wages, and that laborers can enforce agreements related to this provision as third-party beneficiaries.

San Mateo Construction Corp.’s flagging contracts obligated compliance with all laws, making putative class members third-party beneficiaries despite contractual disclaimers, which the court deemed void as against public policy. The ruling also affirmed that prevailing wage rights under Administrative Code § 19-142 extend to private projects, rejecting the contractual forfeiture of such rights as contrary to public policy.

February 4, 2025February 4, 2025 by Jose A. Aquino

Trust Fund Diversion Claims Require Clear Evidence of Unauthorized Expenditures

In a recent decision, a New York appellate court reversed a trial court ruling that had granted summary judgment in favor of the plaintiff in a dispute over alleged diversion of trust funds under Article 3-A of the New York Lien Law. The case, 1 Park East Construction Corp. v. Uliano, underscores the evidentiary burden required for a plaintiff to establish a case of trust fund diversion for summary judgment.

The underlying dispute arose from a construction project in which the plaintiff alleged that a corporation owned by defendant, acting as a subcontractor, received trust funds from plaintiff to purchase materials for the installation of a stormwater filtration system but failed to pay the vendor. The plaintiff sought recovery of trust funds pursuant to N.Y. Lien Law Article 3-A. Initially, the trial court denied the plaintiff’s motion for summary judgment without prejudice, allowing for renewal once issue had been joined. The plaintiff subsequently renewed its motion, which the trial court granted, awarding damages in the principal sum of $78,066.62 against the defendant. The defendant appealed, leading to the reversal of the trial court’s decision.

The Appellate Division, Second Department, found that the plaintiff had failed to establish, as a matter of law, that the defendant had diverted trust funds. Under Article 3-A of the Lien Law, contractors and subcontractors who receive payments for construction projects hold those funds in trust for the benefit of subcontractors, suppliers, and other designated beneficiaries. Any unauthorized use of these funds before all trust claims have been satisfied constitutes an impermissible diversion, regardless of intent. However, the court emphasized that a plaintiff moving for summary judgment must eliminate all triable issues of fact regarding whether the trust assets were improperly used for unauthorized expenditures.

In this case, while it was undisputed that the defendant had received trust assets and had not paid the vendor, the plaintiff failed to show that the defendant had used the funds for unauthorized purposes. The court cited precedents emphasizing that summary judgment is inappropriate where factual questions remain unresolved, particularly in cases involving allegations of improper use of trust assets.

This decision serves as a reminder that plaintiffs seeking summary judgment on claims of trust fund diversion must present undisputed evidence that the defendant misused trust assets in violation of Lien Law § 71. Mere nonpayment to a vendor, without additional proof of improper diversion, is insufficient to grant summary judgment. The ruling confirms that summary judgment is inappropriate when factual disputes exist, leaving such issues to be resolved at trial.

Notably, however, the opinion fails to address how the plaintiff acquired standing to assert a trust fund diversion claim. Under the trust fund provisions of the Lien Law, only those who are beneficiaries—that is, those entitled to receive payment from the trust—generally have standing. In this case, the opinion states that the plaintiff paid trust funds to defendant’s corporation, a fact that typically indicates the plaintiff was merely the payer rather than a beneficiary. The sole exception in the statute is found in Lien Law § 71‑a(4)(a), which provides that under a home improvement contract, payments received from an owner by a home improvement contractor prior to substantial completion may be considered trust funds, thereby designating the owner as the beneficiary. Unfortunately, the decision does not address whether the dispute involves a home improvement contract, nor does it clarify the plaintiff’s actual role in the construction project, leaving its standing under the trust fund diversion claim uncertain.

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.

December 14, 2024 by Jose A. Aquino

Appellate Court Ruling Clarifies Legal Boundaries of Surety Roles in Mechanic’s Liens

The Supreme Court, Appellate Division, First Department, New York, recently issued a decision in Thorobird Grand LLC et al. v. M. Melnick & Co., Inc., et al., affirming the lower court’s ruling that granted the plaintiffs’ motion for summary judgment on their cause of action alleging willful exaggeration of mechanic’s liens by the defendant Surety.^{^[1]} The court invalidated and discharged the Surety’s liens but denied the plaintiffs’ claim for damages under Lien Law § 39-a.

The court determined that the plaintiffs had demonstrated the Surety did not meet the statutory definition of a contractor under Lien Law § 2, thereby invalidating its liens. The plaintiffs had engaged M. Melnick & Co., Inc. as their general contractor for certain projects. In accordance with their agreement, Melnick, along with the Surety acting as Melnick’s guarantor, executed payment and performance bonds. Upon Melnick’s termination, which triggered the Surety’s obligations under the performance bond, the Surety elected to retain Melnick to complete the project.

Subsequently, the plaintiffs initiated an action asserting breach of contract claims against both Melnick and the Surety. In response, the Surety filed three mechanic’s liens for unpaid work, while Melnick filed its own liens. The Surety also counterclaimed against the plaintiffs and additional counterclaim defendants, asserting causes of action for breach of contract, quantum meruit, unjust enrichment, declaratory relief, and lien foreclosures. The plaintiffs then filed an amended complaint that included, among other claims, a cause of action for willful exaggeration of liens.

The plaintiffs moved for partial summary judgment on the willful exaggeration claim, contending that the Surety’s liens were invalid as a matter of law because sureties lack the right to file mechanic’s liens. In opposition, the Surety argued that it qualified as a contractor with standing to file liens and had not waived its lien rights by contract.

The court concluded that the takeover agreement between the parties was clear and unambiguous, establishing that the Surety remained in its capacity as a surety and did not assume the role of a contractor. As a result, the court found the Surety lacked standing to file mechanic’s liens. However, it declined to award damages to the plaintiffs under Lien Law § 39-a, noting that such damages are unavailable when a lien is discharged for reasons other than willful exaggeration.

This decision underscores the importance of precise contractual language and the legal distinction between a surety and a contractor in disputes involving mechanic’s liens.

[1] 2024 WL 5080524 (1st Dep’t December 12, 2024)

December 12, 2024December 12, 2024 by Jose A. Aquino

Mechanic’s Liens: Examining and Enforcing Through Foreclosure Actions vs. Special Proceedings

In the matter of Arcadia Landing, LLC v. CVM Construction Corp., the Supreme Court, Appellate Division, Second Department, New York, recently rendered a decision concerning a mechanic’s lien filed by CVM Construction Corp. The petitioner, Arcadia Landing, LLC, demanded an itemized statement of the lien pursuant to Lien Law § 38, which CVM Construction Corp. provided along with supporting exhibits. However, Arcadia Landing deemed the response insufficient and sought further details through an amended petition.

The Supreme Court, Nassau County, presided over by Judge Eileen C. Daly-Sapraicone, denied the amended petition and dismissed the proceeding. Upon appeal, the Appellate Division affirmed the lower court’s order.

Lien Law § 38 mandates that a lienor must furnish a written statement detailing the labor and materials that constitute the lien, along with the terms of the contract. In this instance, CVM Construction Corp. complied by listing the items of work and asserting that the work was completed. The petitioner disputed the completion of the work, but the court determined that such disputes are more appropriately resolved in an action to enforce the mechanic’s lien rather than through additional demands for information in the special proceeding under Lien Law § 38.

This decision is consistent with the precedent established in Matter of Mr. White, L.L.C. v. Pink Shirt Constr., Inc., where the court exercised its discretion to vacate and cancel a mechanic’s lien because the respondent failed to commence an action to enforce the lien as required by Lien Law § 59. The validity of the lien and any disputes regarding the completion of work were to be resolved in a foreclosure action, which the respondent in that case admitted it never commenced. Similarly, in the Arcadia Landing case, the court emphasized that the appropriate forum for resolving disputes about the completion of work is in a foreclosure action, not through procedural demands for more detailed statements.

This decision underscores the critical importance of resolving factual disputes concerning the completion of work delineated in a mechanic’s lien within the context of a foreclosure action, rather than through a special proceeding seeking an itemization of the lien. The appellate court’s affirmation of the lower court’s decision elucidates the judiciary’s position on the adequacy of compliance with Lien Law § 38 and delineates the proper procedural avenues for addressing such disputes.

September 5, 2024September 5, 2024 by Jose A. Aquino

Court Emphasizes Strict Compliance in Construction Contracts

In a recent ruling, a New York appellate court sided with a contractor in a dispute over a 33-story building project.[1] The contractor initially hired a subcontractor to supply equipment for the project, but the subcontract was later assigned to another entity. Shortly thereafter, the contractor alleged breaches of the subcontract, terminated the agreement, and took possession of the equipment. The contractor then filed a lawsuit seeking compensation for delays and additional costs resulting from the defendants’ defective work. In response, the defendants counterclaimed for breach of contract and sought foreclosure of mechanic’s liens. They also filed a third-party claim against the property owner and its surety, seeking to foreclose on the liens.

The court dismissed the defendants’ counterclaims and third-party claims, highlighting the defendants’ reliance on unsigned and unnotarized requisitions and change orders, which failed to meet the contractual requirements. The court citing precedent underscored that payment requisitions must be both signed and notarized, and that change orders must be formally documented and mutually approved in strict compliance with the terms of the contract.[2]

Additionally, the court found that the contractor had provided sufficient evidence to support its claims for delay damages. The contractor presented documentation detailing additional work performed by other vendors, as well as payments made to replacement subcontractors, due to the delays attributed to the defendants. The court found that such evidence raised genuine issues of material fact regarding the impact of the defendants’ actions on the project’s timeline and costs, prompting the court to deny the defendants’ motion for summary judgment on this issue.

The court also rejected the defendants’ claims for unpaid equipment rental, as they were unable to demonstrate that the proposed monthly rental rates had been agreed upon. The subcontract specified only a 12-month rental period, and the defendants could not provide evidence of any additional rental terms beyond that period.

This decision highlights the importance of adhering to contractual documentation and approval processes in construction projects. It serves as a reminder to contractors and subcontractors alike to ensure that all requisitions and change orders are properly signed, notarized, and approved to avoid disputes and potential legal challenges. Furthermore, the ruling underscores the necessity of maintaining thorough records and evidence to substantiate claims for damages and delays. The court’s decision reinforces the judiciary’s commitment to enforcing strict compliance with agreed upon contract terms.

[1] Hudson Meridian Construction Group LLC v. Bayport Construction Corp., 228 A.D.3d 531, 215 N.Y.S.3d 78 (1st Dept. 2024)

[2] F. Garofalo Elec. Co. v. New York Univ., 270 A.D.2d 76, 80, 705 N.Y.S.2d 327 (1st Dept. 2000), lv dismissed 95 N.Y.2d 825, 712 N.Y.S.2d 450, 734 N.E.2d 762 (2000); Martin Iron & Constr. Corp. v. Howell Co., 242 A.D.2d 608, 609, 664 N.Y.S.2d 746 (2d Dept. 1997).

August 25, 2024 by Jose A. Aquino

New York NY Court Dismisses Construction Defect Case Over Statute of Limitations

The New York Appellate Division, Second Department, recently affirmed the dismissal of a breach of contract lawsuit related to alleged construction defects.[1] The plaintiff claimed that the defendant had breached their remodeling contract by improperly installing flooring in the plaintiff’s basement. However, the appellate court affirmed the lower court’s ruling that the plaintiff’s claim was barred by the statute of limitations.

Under New York law, breach of contract claims are subject to a six-year statute of limitations.[2] This limitations period begins to run upon the contractor’s completion of the work. In this case, the court determined that the claim accrued on May 26, 2015, the date on which the plaintiff made the final payment under the contract, with no subsequent work performed. The plaintiff filed the lawsuit on January 21, 2022, well beyond the six-year statutory period.

The court also considered the potential tolling of the statute of limitations due to executive orders issued during the COVID-19 pandemic. However, even with these tolling provisions, the court found the plaintiff’s action untimely. Consequently, the lower court’s dismissal of the complaint was upheld on appeal.

In affirming the lower court’s decision, the Appellate Division emphasized that the burden rests with the defendant to establish that the statute of limitations has expired. Once this burden is met, the plaintiff must then demonstrate a factual basis for tolling the statute of limitations or show that the claim was filed within the statutory period. In this case, the plaintiff failed to present a factual issue that could preclude dismissal, resulting in the affirmation of the dismissal the complaint.

The ruling underscores the critical importance of understanding and adhering to the statute of limitations in construction-related disputes. It also highlights the necessity for plaintiffs to act promptly when they believe they have a claim, as delays can easily result in losing the right to sue.

[1] Hillaire v. Jose A. Torres, ___ N.Y.S.3d ___, 2024 WL 3281628 (2d Dep’t 2024).

[2] N.Y. C.P.L.R. § 213(2)