9th Circuit Plumbs Through the Federal and State False Claims Acts
January 16, 2024 —
Garret Murai - California Construction Law BlogYou may have heard of the False Claims Act and know that it penalizes companies and individuals in contract with the government who present false claims. The federal False Claims Act was signed into law by President Abraham Lincoln in 1863 to penalize profiteers during the Civil War who were selling the Union Army moth eaten blankets, boxes of sawdust instead of guns, and sometimes re-selling the Army calvary horses several times over. Since then, many states, including California, as well as municipalities, have enacted their own false claim statutes.
As currently written, the federal False Claims Act provides for statutory penalties against any person who:
- “[K]nowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval”;
- “[K]nowingly makes, uses or causes to be made or used, a false record or statement material to a false or fraudulent claim”;
- “[H]as possession, custody, or control of property or money used, or to be used, by the Government an knowingly delivers, or causes to be delivered, less than all of that money or property”;
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
Got Licensing Questions? CSLB Licensing Workshop November 17th and December 15th
November 15, 2017 —
Garret Murai - California Construction Law BlogA rare opportunity to hear it straight from the folks who process the applications . . .
CSLB Licensing Workshop Offers Helpful Information for Applicants
The Contractors State License Board (CSLB) is hosting free workshops for those looking to become a licensed contractor. Current licensees are encouraged to pass this information along to their workers and to those who might be interested in learning more about the application process.
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Garret Murai, Wendel Rosen Black & Dean LLP Mr. Murai may be contacted at
gmurai@wendel.com
Breach Of Duty of Good Faith And Fair Dealing Packaged With Contract Disputes Act Claim
March 27, 2023 —
David Adelstein - Florida Construction Legal UpdatesAn interesting opinion on a motion to dismiss came out of the United States Court of Federal Claims dealing with the claim that the government breached its duty of good faith and fair dealing in administering the prime contract. The contractor’s argument was that the government breached its duty of good faith and fair dealing by denying the contractor’s claim under the Contract Disputes Act (CDA). This was a creative claim and argument that deserves consideration because it tied in the contracting officer’s denial of the CDA claim for additional money with a breach of the duty of good faith and fair dealing.
In this case, Aries Construction Corp. v. U.S., 2023 WL 2146598 (Fed. Cl. 2023), a prime contractor was hired for a water pipeline construction project. The contractor encountered unexpected difficult site conditions that required additional equipment and labor. The contractor informed the contracting officer and alleged it was instructed to proceed with the additional equipment and labor. The contractor submitted a claim under the CDA but the contracting officer denied the claim. The contractor pursued the claim in the United States Court of Federal Claims arguing the government breached the contract and, of interest, breached its duty of good faith and fair dealing.
The government moved to dismiss the breach of good faith and fair dealing claim arguing that besides failing to state a cause of action the Court of Federal Claims had no jurisdiction because the breach of the duty of good faith and fair dealing was not properly presented to the contracting officer under the CDA. The Court of Federal Claims denied the government’s motion.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Will a Notice of Non-Responsibility Prevent Enforcement of a California Mechanics Lien?
March 05, 2015 —
William L. Porter – Porter Law Group, Inc.The “Notice of Non-Responsibility” is one of the most misunderstood and ineffectively used of all the legal tools available to property owners in California construction law. As a result, in most cases the answer to the above question is “No”, the posting and recording of a Notice of Completion will not prevent enforcement of a California Mechanics Lien.
The mechanics lien is a tool used by a claimant who has not been paid for performing work or supplying materials to a construction project. It provides the claimant the right to encumber the property where the work was performed and thereafter sell the property in order to obtain payment for the work or materials, even though the claimant had no contract directly with the property owner. When properly used, a Notice of Non-Responsibility will render a mechanics lien unenforceable against the property where the construction work was performed. By derailing the mechanics lien the owner protects his property from a mechanics lien foreclosure sale. Unfortunately, owners often misunderstand when they can and cannot effectively use a Notice of Non-Responsibility. As a result, the Notice of Non-Responsibility is usually ineffective in protecting the owner and his property.
The rules for the use of the Notice of Non-Responsibility are found in California Civil Code section 8444. Deceptively simple, the rules essentially state that an owner “that did not contract for the work of improvement”, within 10 days after the owner first “has knowledge of the work of improvement”, may fill out the necessary legal form for a Notice of Non-Responsibility and post that form at the worksite and record it with the local County Recorder in order to prevent enforcement of a later mechanics lien on the property.
What commonly occurs however is that early in the process the owner authorizes or even requires its tenant to perform beneficial tenant improvements on the property. This authorization is often set forth in a tenant lease or other written document. The dispositive factor for determining whether the Notice of Non-Responsibility will be enforceable though is that the owner knows that these improvements will be made to the property and intends that they be made, usually long before the work begins. Indeed, the owner has usually negotiated these very terms into the lease contract. The owner then mistakenly believes that once work on the property commences it has 10 days to post and record a Notice of Non-Responsibility and thereby protect itself from a mechanics lien.
The usual error is two-fold. First, the statute states that the Notice is available when the owner “did not contract for the work of improvement”. The fact though is that the owner did contract for the work of improvement. It did so through the lease contract. This is true even though the owner’s contract was not with the contractor or supplier directly. Secondly, the 10 day period to post and record the Notice begins when the owner first “has knowledge” of the work of improvement. This knowledge was of course gained when the lease was negotiated and signed, providing knowledge typically many days before the work has begun. Thus, the 10 day period can also seldom be met. The Notice of Non-Responsibility will therefore fail both rules because the owner has in fact contracted for the improvement and because he does not act within 10 days of gaining this knowledge.
The next event in the typical scenario occurs when the tenant does not pay its contractor. The contractor then has nothing to pay its subcontractors. Material suppliers also go unpaid. Mechanics liens are then recorded by the unpaid claimants, followed by foreclosure actions within ninety days thereafter. Owners will typically point to the Notice of Non-Responsibility they posted and recorded, claiming its protection. Claimants then in turn point to the lease or other evidence that the owner knew of the pending improvements and contracted in some way that the improvements be performed, often also more than 10 days before they posted the Notice. Judges generally agree with the unpaid mechanics lien claimants and the Notice of Non-Responsibility is deemed ineffective.
The fact that the Court does not enforce the Notice of Non-Responsibility under these circumstances is not an unfair result. Since the owner authorized the work to be performed and it received a substantial benefit in the form of those improvements, it is not unfair that the owner should pay for those benefits. It would be inequitable for the owner to obtain the benefit of the improvements which it authorized but for which it did not pay, while allowing those who provided the benefit to go unpaid. Moreover, without such a system in place the door would be open to owners setting up sham “tenants” who would enter into contracts to have work performed, only to disappear when the work is completed, leaving the contractor without a source of payment. The system in place as described above prevents such duplicity. Owners would do well to arm themselves with proper knowledge of when the Notice of Non-Responsibility will and will not protect them and then responsibly use the Notice of Non-Responsibility.
For the legal eagles among you, the following cases illustrate the view of the courts, consistent with the above: Baker v. Hubbard (1980) 101 Cal.App.3d 226; Ott Hardware v. Yost (1945) 69 Cal. App.2d 593 (lease terms); Los Banos Gravel Co. v. Freeman (1976) 58 Cal.App.3d 785 (common interest); Howard S. Wright Construction Co. v. Superior Court (2003); 106 Cal.App.4th 314 (participating owner).
William L. Porter of
Porter Law Group, Inc. located in Sacramento, California may be contacted at (916) 381-7868 or bporter@porterlaw.com
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The Job is Substantially Complete, the Subcontract was Never Signed, the Subcontractor Wants to be Paid—Now What?
July 28, 2016 —
John P. Ahlers – Ahlers & Cressman PLLCA recent case in North Carolina illustrates the types of problems created when a general contractor accepts a subcontractor’s bid and then allows the subcontractor to perform the work without obtaining a signed subcontract.[i] In this case, the general contractor (Choate Construction Company – “Choate”) accepted a bid from a foundation subcontractor (Southeast Caissons, LLC – “SEC”). Choate sent the subcontract to SEC. SEC provided its changes in a “Proposed Addendum” to the subcontract stating, “[SEC] hereby accepts the terms of the attached Subcontract, subject to and conditioned upon Choate[’s] acceptance of the terms set forth in this Addendum[.]” After that, Choate called SEC and exchanged emails concerning the subcontract terms, but did not reach an agreement. SEC then performed its subcontract and sought payment, and acknowledged it had not signed the subcontract. Choate agreed it owed SEC something, but refused to pay because SEC did not have a signed subcontract, asserting the subcontract was not binding on Choate.
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John P. Ahlers, Ahlers & Cressman PLLCMr. Ahlers may be contacted at
jahlers@ac-lawyers.com
Bel Air Mansion Construction Draws Community Backlash
December 17, 2015 —
Beverley BevenFlorez-CDJ STAFFAccording to the New York Times, a Bel Air hillside mansion in Los Angeles has outraged neighbors who refer to the unfinished, 30,000 square foot and almost 70 feet high building as “the Starship Enterprise.” Despite legal violations such as tearing down the original structure without the city’s permission, the height being twice the legal limit, and digging into the hillside though the site is an “earthquake-induced landslide area,” the case has not progressed much in four years because the actual owner is a shell company.
The New York Times summarized the issues at 901 Strada Vecchia as follows: “After the unapproved teardown and leveling of the hillside, the construction team did ask permission to grade the hill but used a survey that made it appear that workers had not already removed significant loads of dirt. Then they joined two buildings that were supposed to be separate and built so high that they drastically violated the city’s height limit.”
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California’s Right to Repair Act not an Exclusive Remedy
August 20, 2014 —
Beverley BevenFlorez-CDJ STAFFKaren L. Moore of Low, Ball & Lynch in JD Supra Business Advisor analyzed “two decisions holding that California’s Right to Repair Act ('SB 800') is not the exclusive remedy for a homeowner seeking damages for construction defects that have also resulted in property damage.” If property damage occurs due to construction defects, a homeowner “may also pursue common law tort causes of action.”
After providing a brief background of California’s SB 800 and Aas v. Superior Court (which precluded the Right to Repair Act), Moore discussed the results of Liberty Mutual Insurance Company v. Broofield Crystal Cove, LLC, followed by a review of Burch v. Superior Court. Moore commented that “[t]hese two cases will likely be used by homeowners to avoid application of the Right to Repair Act’s pre-litigation procedures.”
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California Appellate Court Rules That Mistakenly Grading the Wrong Land Is Not an Accident
June 27, 2022 —
Jared De Jong & Scott S. Thomas - Payne & FearsIn a decision that further muddies the already murky waters of “occurrence” jurisprudence, the California Court of Appeal has ruled that a general liability policy does not cover a homeowner who mistakenly grades the wrong piece of land because the act of grading land is not “accidental.”
In Ghukasian v. Aegis Security Insurance Company, ___ Cal. App. 5th ___, 2022 WL 1421511 (2022), a homeowner instructed her contractor to clear and level a piece of land that the homeowner believed was part of her property. Unfortunately, the land was owned by a neighbor, who sued the homeowner and the contractor for trespass and negligence. The homeowner tendered to her insurer, Aegis. The homeowner’s policy contained a standard insuring agreement creating coverage for property damage caused by an “occurrence,” defined by the policy as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The insurer denied coverage, arguing that intentionally grading land is not an accident. Coverage litigation ensued.
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Jared De Jong, Payne & Fears and
Scott S. Thomas, Payne & Fears
Mr. De Jong may be contacted at jdj@paynefears.com
Mr. Thomas may be contacted at sst@paynefears.com
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