The recent decision in Nationwide Mut. Fire Ins. Co. v. Advanced Cooling and Heating, Inc., 38 Fla. L. Weekly D2256a (Fla. 4th DCA 2013), gives us the opportunity to revisit a hotly contested issue in the construction industry: what triggers an insurer’s duty to defend under a post-1986 standard form commercial general liability insurance policy? The short answer is that an insurer’s duty to defend arises when the allegations in the complaint (and only the complaint) fairly and potentially raise a claim against an insured that is covered by the policy. Continue Reading
The Florida law firm of Cole, Scott & Kissane, P.A. is pleased to announce that two of its construction lawyers (George Truitt and Greg Willis) obtained a complete defense verdict in a seven day jury trial in Miami-Dade County. Cole, Scott & Kissane P.A. represented a geotechnical engineer who was sued for professional malpractice by the developer landlord of a CVS site in Miami. When the developer turned the site over, CVS discovered that the site was not prepared in accordance with the terms of the ground lease. The defects included improper demucking of the site, neglecting to fill areas below the water line with gravel, and backfilling the site with material for the building pad and parking area that was materially different from the specifications. Continue Reading
The Florida Supreme Court recently issued an opinion in the Maronda Homes case and broadened the common law implied warranty of fitness and merchantability, also known as an implied warranty of habitability. Maronda Homes dealt with whether a developer’s common law implied warranty of fitness and merchantability extends to initial purchasers of residential property for defects in offsite improvements. The Supreme Court answered the question in the affirmative. Continue Reading
When problems arise during a construction project, there are a few options that may help guide the parties to a resolution. For example, the parties may engage in informal settlement discussions, onsite arbitration conference, consult with neutral third-parties identified in construction contracts, or attend informal mediation, likely also established through the construction agreement. If the parties are unable to reach an informal agreement to resolve the matter at that point, the parties can turn to the courts and engage in litigation. Continue Reading
The Florida law firm of Cole, Scott & Kissane, P.A. is pleased to announce that two of its construction lawyers (George Truitt and Dan Levin) obtained a complete defense verdict in a hotly-contested construction defect case after nine weeks of trial. The trial commenced on May 10, 2013, and finished on August 2, 2013. Continue Reading
The Florida law firm of Cole, Scott & Kissane, P.A. is pleased to announce that three of its construction law attorneys, David Salazar, George Truitt, and Kevin Schumacher, recently received Board Certification in Construction Law from the Florida Bar. According to the Florida Bar, Board Certification is the highest level of evaluation of competency and experience within an area of law, as well as professionalism and ethics in practice. Board Certified specialists are required to have a minimum amount of experience and undergo a rigorous examination to demonstrate their competency in specific areas of the law. Continue Reading
Florida law provides a conduit to obtain prevailing party fees where there is no other statutory or contractual basis to seek them. This tool is generally referred to and recognized as an “Offer of Judgment” and/or “Proposal for Settlement”, as codified in Florida Statute §768.79 and Florida Rule of Civil Procedure 1.442(c)(3). Both Plaintiffs and Defendants utilize these provisions to secure fee awards, the result of which can often exceed the underlying value of the case.
Given the implications in obtaining a fee award, Florida Courts have required extreme strict adherence to the black letter of §768.79 and Rule 1.442(c)(3). Recently, on April 17, 2013, the Second District Court of Appeal followed the long standing premise that every “t” must be crossed when seeking to enforce fee awards. Specifically, in Cobb v. Durando, the appellate Court overturned the lower court’s order granting prevailing party fees to two plaintiffs that failed to apportion their respective offers of judgment as required by Rule 1.442; the rule requires that a demand made by multiple parties serving a joint proposal “….shall state the amount and terms attributable to each party.”  A discussion of the case and the Court’s rationale is as follows:
Plaintiffs, a husband and wife, brought suit against their roofing contractor for breach of contract relating to work performed on a home they owned as tenants by the entirety. During the course of the lawsuit, Plaintiffs jointly and timely served an offer of judgment on the contractor, and the contractor timely rejected same. Upon prevailing on their underlying claim, Plaintiffs sought fees pursuant to their offer of judgment, and the trial court entered an order granting the requested relief.
The contractor appealed on the basis that the dual Plaintiffs, husband and wife, failed to apportion the offer of judgment in violation of the requirements codified in Rule 1.442(c)(3). Plaintiffs defended the appeal in claiming that their mutual claim arose of out their ownership of their home that they held as tenants by the entirety, and hence, the offer was not required to be apportioned.
The Second District Court of Appeals agreed with the contractor and reversed the award. The Court’s reasoning in reversing the order was two-fold: First, the Court disagreed that Plaintiffs’ claim directly arose out of the ownership of their home. Conversely, the claim was for breach of contract, and accordingly, the fact that they owned the home as tenants by the entirety was not a relevant consideration. Second, even if the claim did directly arise out of the ownership of the home, the Court applied strict construction to the interpretation of Rule 1.442: “…the rule requiring apportionment of proposals for settlement made by multiple plaintiffs does not recognize an exception for joint proposals made by tenants by the entireties.”
The above decision represents a long standing trend of strict adherence to the fine letter of the law governing offers of judgments and/or proposals for settlement. When defending an award, it is important to dissect every aspect of the offer that was served to determine whether any oversight can give rise to striking the claim. On the other hand, perhaps the more important lesson is to ensure stringent compliance with the rules when situated as the party seeking to enforce the award. In sum, although successfully opposing a fee award may be a victory, having your own award overturned can be costly.
 Cobb v. Durando, 111 So.2d 277 (Fla. 2nd DCA 2013)
 See Rule 1.442(c)(3), Fla.R.Civ.P: “(3) A proposal may be made by or to any party or parties and by or to any combination of parties properly identified in the proposal. A joint proposal shall state the amount and terms attributable to each party.”
 See Cobb, Id. at 278; citing Feldkamp v. Long Bay Partners, LLC., No.2:09-cv-253-FtM-29SPC, 2012 WL 3941773, at *2 (M.D.Fla. Sept. 10, 2012(affirming that a husband and wife should not necessarily be considered a single party when interpreting the rules governing offers of judgment).
As we have previously written about here, the Florida Supreme Court has recently narrowed the scope of the economic loss rule in Tiara Condo. Ass’n, Inc. v. Marsh & McLennan Companies, Inc., 110 So. 3d 399, 407 (Fla. 2013). In summary, the Court receded from prior rulings to the extent that they have applied the economic loss rule to cases other than products liability. Note, however, that the Supreme Court did not recede from the reasoning in the seminal case of Casa Clara Condominium Association v. Charlie Toppino And Sons, Inc., 620 So.2d 1244 (Fla. 1993), where the Court made a determination a constructed home is a single product, as opposed to a group of disparate components. It remains to be seen how courts apply the economic loss rule post-Tiara in construction defect actions.
After the ruling in Tiara, there was a concern that the door is now open to negligence or other tort claims in construction defect actions. This concern was highlighted by the dissenting opinion in Tiara wherein Chief Justice Polston stated, “the majority greatly expands the use of tort law at a cost to Florida’s contract law. Now, there are tort claims and remedies available to contracting parties in addition to the contractual remedies which, because of the economic loss rule, were previously the only remedies available.”
However, another interpretation of the ruling in Tiara was expressed in the concurring opinion of Justice Pariente who noted that independent of the economic loss rule, “[b]asic common law principles … restrict the remedies available to parties who have specifically negotiated for those remedies,” and Tiara “does nothing to alter these common law concepts.” The dismissal of a tort claim remains appropriate under basic contractual principles, which prohibit a party to a contract from seeking to obtain a better bargain by turning an alleged breach of contract into a tort “when the parties have negotiated remedies for nonperformance pursuant to a contract.” Id. (quoting 891 So. 2d at 542). To bring a valid tort claim to recover for economic losses, a plaintiff must still demonstrate that all of the required elements for the cause of action are satisfied, including that the tort is independent of any breach of contract claim. For instance, under Florida law, a claim of intentional interference with a business relationship is not independent from an alleged breach of contract. Rosa v. Fla. Coast Bank, 484 So. 2d 57, 58 (Fla. Dist. Ct. App. 1986).
The Southern District of Florida recently analyzed whether a plaintiff can proceed with fraud claims based on a contractual relationship between two parties after the ruling in Tiara. In Altenel, Inc. v. Millennium Partners, L.L.C., 2013 WL 2363233 (S.D. Fla. 2013), the court ruled that two theories supported dismissal of the fraud claims. It stated “[f]irst and most obvious is that allowing Plaintiffs to proceed with fraud claims contradicted by a subsequent agreement is to invite contracting parties to make agreements … and then avoid them simply by taking the stand and swearing that they relied on some other statement.” (quotation omitted). The court also recognized that “the existence of contrary [contractual] provisions makes reliance on the fraudulent misrepresentations unreasonable as a matter of law.”
Thus, despite the initial concern over the ruling in Tiara, courts may be leaning towards Justice Pariente’s concurring opinion and allowing the economic loss rule to serve as a valid defense against tort claims between contracting parties when they are duplicative of contractual remedies including the Economic Loss Rule. These rulings also emphasize the importance of clearly limiting the parties’ remedies in a dispute or claim to those remedies set forth initially in the contract. Given the significance of the ruling in Tiara, it will be a very interesting line of case law to follow to determine its true impact on construction litigation.
Liens are a useful tool for contractors or subcontractors to obtain payment from the owners of construction projects in the event they are not paid for the work that has been performed. Under Florida Statute § 713.06, if the contractor is not in privity with the owner, the contractor must give notice to the owner of the property of the non-privity contractor’s ability to file a lien against the property. Privity, as used in the lien statute, requires “both knowledge by an owner that a particular subcontractor is supplying service or materials to the job site and an express or implied assumption by the owner of the contractual obligation to pay for those services or materials.” C.L. Whiteside & Assocs. Constr. Co. v. Landings Joint Venture, 626 So. 2d 1051, 1052-1053 (Fla. 4th DCA 1993).
Now, it has long been established in Florida Law that in instances where there is a common identity between an owner and contractor (such that one entity is serving in the dual capacity as an owner and a general contractor whom contracts with the subcontractors) that the lienor is not required to serve a notice to the owner. Fla. Woods Servs., Inc. v. Osprey Links Joint Venture 720 So. 2d 591, 593 (Fla. 5th DCA 1998). The purpose of the notice requirement is to protect the owner of the possibility of either double-paying for the work to be performed or being unable to determine if the subcontractors are unpaid by the general contractor. In an instance where a common identity exists between the owner and the contractor, Florida Law has held that privity exists, as it can be presumed that the entity knows of the contractual obligation to pay the subcontractor.
A question that had remained unanswered, is “does a successor owner automatically have knowledge of the contractual obligation of its assumed duty to pay for the services of the contractor?” One such instance where this question arises has recently been answered by a recent Florida 4th DCA decision concerning a successor owner that is a related company, or subsidiary, to the original owner.
In Marble Unlimited, Inc. v. Weston Real Estate Investment Corporation, et al., Case No. 4D11-3113 (Fla. 4th DCA 2013), Marble, the contractor, entered into an agreement with Weston Real Estate Investment Corporation (“Weston Investment”) to perform renovations. At some point during the property, Weston Investment transferred control of the property to Weston Real Estate Development, LLC (“Weston Development”). The two Weston entities were related, but not the same. At a minimum, the same individual filed notices of contest on behalf of both corporations against the lien. At trial, the circuit court judge dismissed the lien claims against Weston Development, citing that, Weston Development was not in privity with Marble. However, on appeal, the 4th DCA held that the close relationship between Weston Investment and Weston Development makes it clear that Weston Development knew about its obligation to Marble, and it would be adverse to public policy to release Weston Development of its lien obligation due to an improperly applied technicality. Thus, the Court reversed the trial court’s decision and directed the trial court to enforce the lien against Weston Development.
The public policy argument to the Court’s holding is rootly founded in the concept that allowing owners the ability to transfer their ownership interest to a related entity and requiring a lienor to give notice to the new owner may lead other owners to attempt a similar move to avoid the risk of a lien being filed. In this decision, the Court was reinforcing longstanding policy that it is in the public’s best interest that contractual obligations be respected and enforced as well as protecting contractors and subcontractors by preventing owners from circumventing the lien statute by creating additional hurdles for the lienor to overcome in order to obtain payment for their work.
Earlier this month, the Florida Legislature wrapped up its 2013 Regular Session. With its close on May 3, 2013, came the demise of legislation intended to make changes to Florida’s construction lien laws. The legislation sought to:
- Revise the mandatory notice provision in contracts between owners and contractors [F.S. § 713.015 (1)];
- Revise notice requirements relating to liens of persons not in privity [F.S. § 713.06 (2)(a)];
- Delete a provision classifying certain payments as improper payments [F.S. § 713.13 (1)(c)]; and
- Revise the notice of commencement form and building permit card and application to conform to changes made by act and to provide additional warning [F.S. § 713.13 (1)(d) and F.S. § 713.135 (1)(a)].
The proposed changes were first introduced on the House side in the form of HB 0889 by State Representative Mike Fasano (R) of District 36 (in Pasco County). An identical bill, SB 1136, was introduced days later on the Senate side by State Senator Arthenia Joyner (D) of District 19 (comprising parts of Pinellas, Hillsborough, and Manatee counties). Both bills were referred to their respective judiciary subcommittees where they remained through the close of the Regular Session.
The changes contemplated by the now-deceased bills were small but significant. Currently contracts for construction of 1 to 4 residential units and over $2,500.00, are required to contain a notice provision that states, among other things, that an Owner should, as part of the contract, stipulate that, “before any payment is made [the] Contractor is required to provide [Owner] with a written release of lien from any person or company that has provided a ‘Notice to Owner’” as contemplated by F.S. 713.06(2)(a). The proposed legislation would have revised the notice provision to advise an owner to stipulate that the Contractor provide the Owner and Owner’s Lender with a written release prior to each payment along with a notarized list of persons or companies owed money for the payment being made, along with their respective addresses and phone
F.S. § 713.06 (2)(a) requires all lienors, except laborers to serve a notice on the owner with certain basic information about the lienor and the work it being performed. In the case of sub-subcontractors and materialman to a subcontractors or sub-subcontractors the notice must also be served upon the contractor. In addition, for the lien to be perfected, F.S. § 713.06 (2)(a) currently requires the notice be served “before commencing [work] or not later than 45 days after commencing [work], and … before the date of the owner’s disbursement of the final payment after the contractor has furnished his [final payment affidavit demonstrating that all lienors have either been paid or identifying those who have not]”. The proposed revisions would have altered the deadline for service on the notice to before commencing work or before the date on which payment is due to the materialman for his services and/or materials. Interestingly, the proposed change by its terms, would have apparently tied the deadline for service all notices to the date payments become due to the materialman, regardless of the identity of the ultimate lienor or the services which would be the subject of the lien.
Perhaps the most significant proposed change is the deletion of the provision within F.S. § 713.13 (1)(c) which currently classifies payments made by an owner on a direct contract after expiration of the notice of commencement as “improper payments.” The effect of such a change, had it become law, would have likely been the expansion of the “proper payments defense” which allows the owner to escape liability in excess of the contract price as properly paid, even though the lieonor had properly followed the lien procedure.
The final set of proposed changes in F.S. § 713.13 (1)(d) and F.S. § 713.135 (1)(a) would have altered the notice to the owner within the Notice of Commencement form and Permit form to eliminate all reference to the potential for an Owner to “pay twice” due to improper payments. This change was necessitated as a result of the changes to F.S. § 713.13 (1)(c) eliminating “improper payments.” The proposed revisions also added language to the notice so as to advise Owners of their continuing responsibility to record the Notice of Commencement and any amendments thereto, insure the Notice of Commencement has correct contact information for all parties, and, in the case of a change of contractor to record a new Notice of Commencement.
The proposed changes would have been favorable to an Owner seeking to make improvements to real property. The changes, had they been adopted into law would have given Owners (assuming the notice was followed) additional tool to prevent overpayment to an unscrupulous contractor that fails to pay subs and suppliers, and potentially limit the amounts a subcontractor or materialman can recover if an Owner makes payment on the direct contract. However, to accomplish it would place an additional administrative burden on a contractor to affirmatively demonstrate that potential lienors are being satisfied, introduce ambiguity into the deadlines for service of the notice for liens not involving a materialman, and could leave subcontractors and materialmen holding the bag for unpaid materials and services.