The Construction Advantage

Contractor’s Failure to Strictly Perform Contract May Not Bar Recovery from Owner under Quantum Meruit

By: Mike Hodgins

In a June 2018 decision, the Supreme Judicial Court for the Commonwealth of Massachusetts modified well established holdings that a building contractor cannot recover on a contract without showing complete and strict performance with all terms, limiting “strict performance” to design and construction, but reversed a summary judgment adverse to the contractor’s quantum meruit claims, reviving a $10 million claim. G4S Technology, LLC v. Mass. Technology Park Corporation.

The case involves a contract between G4S Technology, LLC (G4S) and the Massachusetts Technology Park Corporation (MTPC) to design and build a fiber optic network. The contract was delayed, but eventually completed according to its specifications, and MTPC, a state development agency created by statute, withheld approximately $4 million from G4S as liquidated damages. G4S sued, claiming $10 million for additional time and costs to complete the project.

Critical factual issues were revealed during discovery, including clear evidence that G4S made multiple misrepresentations to MTPC during the payment process that it had timely paid its subcontractors. In fact, evidence revealed that G4S had withheld substantial payments for the purpose of bolstering its quarterly financial reports to enhance its value as a publically traded company. The trial court held on summary judgment that the false certifications barred the claims of G4S for additional compensation on both contract and quantum meruit claims.

The Supreme Court held that the trial court was correct to grant summary judgment because G4S was in breach of the contract, but not before clarifying the “strict performance” doctrine. The Court reversed, however, a grant of summary judgment on the quantum meruit claims based upon bad faith, and sent that part of the case back to the trial court for further factual findings, and perhaps trial.

Regarding the contract claim, the Court concluded that strict performance is still required for all construction contract terms relating to design and construction, as has long been the law in Massachusetts. However, although the payment issues and misrepresentations made by G4S did not relate to the actual design and construction, the Court addressed those contractual breaches under a “materiality standard,” and held that the misrepresentations, particularly in light of the strong public policy relating to assurances that subcontractors are paid promptly on public works projects, constituted a breach of the contract that would have permitted MTPC to walk away from the contract. Therefore, although the subcontractor payment representations did not relate to design or construction, those breaches were so material to the contract G4S was prevented from pursuing its claim for damages under contract theories.

The Court took a different approach on the quantum meruit claim which requires proof of substantial performance of the work and good faith. The Court noted that substantial performance was not disputed, although the work had been delayed. When interpreting whether the misrepresentations about subcontractor payments constituted a violation of the good faith requirements, the Court held there was no causal connection between the misrepresented payments to subcontractors, and the damages sustained by G4S in completing the work. The trial judge had relied upon a long line of cases that suggest an intentional violation of the contract terms would be inconsistent with the necessary good faith to recover under quantum meruit. The Court expressly overruled that line of cases as not dispositive if the breach does not relate to completion and the value of the work provided. The Court noted that there were factual disputes as to whether G4S or MTPC was responsible for the extensive delays which had resulted in G4S’s claim, and the loss of any possible remedy after satisfactory, albeit late completion, would have been an unfair hardship to the contractor.

What’s New at OSHA?  Extension of Comment Period on New Crane Rule; Increase in Civil Penalty Amounts; New Violation Cracks OSHA’s Top 10 Most Frequently-Cited Violations List

By: Meredith Eilers

OSHA Extends Comment Period on New Crane Rule

OSHA has proposed a new rule intended to provide clarity regarding crane operator certification requirements. The new rule was announced on May 18, 2018, and the public comment period was recently extended to July 5, 2018. Details regarding the new rule are available here. Comments may be submitted electronically at https://www.regulations.gov/

The new rule amends crane standards published in 2010, but which never went into effect. The new rule discontinues the requirement that crane operator certification must include the crane lifting capacity for which the operator is certified. The 2010 rule would have allowed for operators to be qualified on any crane with the same or lower-rated capacity than the crane they had been tested on. According to OSHA, concerns regarding the cost of compliance and the difficulty of finding appropriate certification training spurred the most recent change. The new rule also reinstates the employer duty to ensure that a crane operator is qualified to safely operate equipment; reliance on certification alone is no longer sufficient proof of competency.

Increase in Civil Penalty Amounts

In accordance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, OSHA has raised civil penalty amounts by two percent for 2018. Penalties for willful and repeated violations are now $129,336 per violation; serious, other-than-serious, and posting requirement violations are now $12,934 per violation. Failure-to-abate is now $12,934 per day beyond the abatement date.

Fall Protection – Training Requirements Joins the Ranks of 10 Most Frequently Cited Violations for 2017

OSHA’s list of the ten most frequently-cited violations for a given fiscal year seldom changes – until now. New to the list for 2017, Fall Protection – Training Requirements (29 CFR 1926.503) is now in the ninth position. The full list is as follows:

1. Fall protection, construction (29 CFR 1926.501)
2. Hazard communication standard, general industry (29 CFR 1910.1200)
3. Scaffolding, general requirements, construction (29 CFR 1926.451)
4. Respiratory protection, general industry (29 CFR 1910.134)
5. Control of hazardous energy (lockout/tagout), general industry (29 CFR 1910.147)
6. Ladders, construction (29 CFR 1926.1053)
7. Powered industrial trucks, general industry (29 CFR 1910.178)
8. Machinery and Machine Guarding, general requirements (29 CFR 1910.212)
9. Fall Protection–Training Requirements (29 CFR 1926.503)
10. Electrical, wiring methods, components and equipment, general industry (29 CFR 1910.305)

Nearly all of these violations are relevant to, if not specific to, the construction industry, and serve to remind us of the importance of maintaining a safe and productive work environment.

Did you know that Bernstein Shur’s Construction and Employment attorneys have experience navigating clients through the OSHA citation, informal conference, and appeal process? If you have concerns or questions related to a recent OSHA visit, we can help.