Archive for the ‘Dispute A Lien’ Category

California Civil Procedure Series – How to File Suit

As an attorney in multiple states (California and Louisiana) there are many overlapping rules and theory of law that are transferable from jurisdiction to jurisdiction. However, there are many local and state wide idiosyncrasies that are not necessarily taught in law school or not easily attainable for pro se or pro per litigants. This post has some helpful tips regarding filing a law suit.

California is a jurisdiction of forms. The State Bar has gone to great lengths to make a form for just about any situation. In that same light there are many that overlap and you nearly need a law degree just to navigate through the long list. The California Courts also have very helpful information regarding the legal process and all of the different procedural devices used by lawyers.

A typical checklist for items needed when you file your civil case are 1) Complaint, 2) Civil Cover Sheet, 3) Summons, and 4) Receipt and Acknowledgement. The complaint is your main document to be filed. This is where the Plaintiff lists out all of the facts and causes of action that related to the allegations being asserted in the suit. The complaint is the lawsuit itself and will be a part of the public record. The Civil Cover Sheet is a mandatory form that needs to accompany any new filing. This tells the clerk what type of case is being filed. Next is the Summons. This document tells the court and the opposition who is being sued and what that person/entity’s legal rights are with regard to an answer. Lastly is a handy little form that I like to include called Notice and Acknowledgment of Receipt. This form allows for you to mail serve the Summons and Complaint on your adversary saving time and money. If the defendant does not reply within 20 days, it will be obligated to pay for your service fees. The normal delay to respond to a suit is 30 days.

Once you get your complaint filed you will want to serve your adversary with the documents to complete the process. You can use the Notice form listed above but if that fails then you will have to hire a process server to get the suit to the defendant. Regardless of how you serve them the clerk of court requires proof of service. This too is another form, Proof of Service of Summons. This helpful form has a long check list of methods of possible service. You make sure you followed one of the statutory required methods, file your proof and then your law suit has formally begun. You then must wait for your adversary to answer.

This blog post is a part of the California Civil Procedure Series written by Wolfe Law Group. You should contact an attorney when dealing with procedure issues as there are strict time limitations which need to be followed.

Posted in:     About Our Services, Business Matters, California, Construction News, Dispute A Lien, Disputes, From The Experts, Litigation  /  Tags: , , , , , , ,   /   Leave a comment

Construction Lien Removal Suit in Louisiana

Attention all home owners or property owners, there is only one surefire way to have that annoying illegal lien (in Louisiana called a statement of claim and privilege) removed from the title of your property, a Mandamus action. In Louisiana and other states, a Mandamus can be used for a number of things (listed out in La R.S. §44:114) and it is a summary proceeding, meaning that it should go faster than ordinary litigation.

The Louisiana Private Works Act codified in La. R.S. §9:4801 et seq., is the origin of the rules which govern construction liens for private projects in this state. The specific statue that allows for an individual to request a Court to order the Clerk of Court to cancel a lien is La. R.S. §9:4833. The statute reads in pertinent part:

If a statement of claim or privilege is improperly filed or if the claim or privilege preserved by the filing of a statement of claim or privilege is extinguished, an owner or other interested person may require the person who has filed a statement of the claim or privilege to give a written request for cancellation in the manner provided by law directing the recorder of mortgages to cancel the statement of claim or privilege from his records.” La. R.S. §9:4833(A).

The best part about this statute is that if all of the proper notice requirements are followed and the illegal lien is not removed from the mortgage records by other means than this Mandamus proceeding, the property owner who brings the Mandamus suit is entitled to attorney fees and costs. This is huge because, this type of proceeding can cost a homeowner thousands just in legal fees. Here at Wolfe Law Group, we charge a flat rate of $3,500 for this type of proceeding, which covers all things from notices, to the actual Mandamus suit, to the trial.

Liens can be very technical and there are many instances where the letter of the law is not followed. In those instances, an owner can have the lien removed and even against the will of the party who filed the lien. As a contractor, filing a lien is very important to preserve rights against parties it did not contract with who may be liable for payment. Here at Wolfe Law Group we file liens all the time, but if your are like most contractors, funds are short and hiring an attorney can be too costly. Companies like Zlien.com are excellent resources for all things related to liens. Fortunately for lawyers and unfortunately for services like Zlien.com, enforcement of a lien and/or a Mandamus suit for removal of an illegal lien can only be filed by an attorney (or individual if self represented). I recently posted a Petition for Mandamus recently drafted and filed by Wolfe Law Group on JDSupra.com.

Bottom line: owners should file suit to have illegal liens removed from the mortgage records. If not then selling or refinancing the property will be impossible with the cloudy title. If you file suit and receive a judgment then you will be entitled to attorney fees and costs, which are provided by statute.

Posted in:     About Our Services, Construction News, Damages, Dispute A Lien, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , , , , , , ,   /   1 Comment

Litigation Topics for Prime / Subcontractor Contracts

I had a speaking engagement today here in Kenner, Louisiana (a suburb of New Orleans) whereby I had the pleasure of speaking to a group of contractors and architects regarding construction contracts. The bulk of the discussion focused on the most contested provisions within construction contracts.

The information is very helpful to contractors and can be used a resource when a contractor begins the contracting phase of a construction project to help get a better understanding of what is going on within the contract documents.

Prime/Subcontractors Contracts

Contracts between prime/general contractors and their subcontractors make up a vital link in the construction project chain. Here both parties need to negotiate terms to better protect when a dispute arises. A well crafted contract can better protect a prime and/or a sub when default arises. Typically subcontractors are at the mercy of the prime. A good subcontractor will have his attorney review any agreement to make sure that the deal is an even one.

AIA – American Institute of Architects is the most common standard form contracts in the construction industry. AIA contracts are a good starting point and offer contracts for Prime/sub relationships, Architect/owner, Owner/Prime, and any other design professional/contractor relationship that may exist.

• Commonly litigated subcontract provisions

There are a number of provisions which could be contained in a prime/subcontractor contract that need to raise a red flag when present and should be negotiated by either party so as to keep the contract from becoming one-sided.

1. Incorporation by Reference Clauses: (flow-up & flow-down provisions)

  • a Flow-down provision in a prime/sub contract will incorporate by reference terms and provisions of the owner/prime contract;
  • conversely, a Flow-up provision incorporates the duties owed by the owner to the prime into the prime/sub contract;
  • Many times parties enter into these agreements with out ever seeing the referenced document making them susceptible to unknown provisions;
  • Enforcement depends on the reciprocality of the provisions and lack of ambiguity

2. Scope of Work Provisions

  • Prime contractors want a broad scope of work provision with subs so that they can pin other work to them later on if needed;
  • Subs should demand very specific scope of work provisions so as to know exactly what work is expected and what exactly they have bid on;
  • This provision can incorporate other documents such as plans and specifications;
  • Provision needed for extra work or change order if work called for is outside of the scope;

3. Change Order and Extra Work Provisions

  • Very popular area for dispute in construction contracts – changes are always happening
  • There should be a clear provision in the contract outlining the process whereby CO’s are made and approved;
  • Define change order – modification to work already contemplated by the agreement; (ie different materials)
  • Define extra – item of work beyond the original scope of work that is added during construction;
  • MAKE SURE change orders and/or extras are in writing;

4. Notice Provisions

  • Found in various places within a prime/sub contract
  • Very important risk-shifiting devices – can determine a win or loss regarding a claim

5. Indemnity Clauses

  • Typically these trickle down the line Owner -> Prime -> Sub
  • These are generally enforceable, Subs should be careful and not allow indemnity for negligence of another party
  • Insurance can be purchased by prime or sub to cover the indemnity obligation

6. No Damages for Delay Clauses

  • Owners and Primes try to insert “no damage for delay” provisions in contracts for protection against unforeseen delays
  • Parties want to check all referencing documents to see if this provision is in there

7. LD’s – Liquidated Damages Provisions

  • Very helpful provisions because the pre-determine delay damages, usually on a per day basis;
  • Enforceable unless determined to be a penalty or if they are a “one- size fits all” provision;
  • LD’s are a good way to measure delay damage but can enhance the need for Contractor/Sub to accelerate work to avoid further damage, leading to defects and workmanship issues;
  • For LD’s to apply the contractors work must be a substantial factor in the delay;

8. Lien Waivers

  • reduce the chance for encumbrances to be placed on the title of the property;
  • Usually not enforceable if lien waiver required before work performed;
  • A good tool for Prime and Owner to reduce exposure;
  • Can be used in an incremental fashion as payments are distributed

9. “Pay-when-paid” v. “Pay-if-paid”

  • Pay-if-paid is defined as a subcontractor gets paid by the general contractor only if the owner pays the general contractor for that subcontractor’s work.” Requires a condition precedent.
  • Pay-when-paid in contrast to the pay-if-paid; a pay-when-paid clause does not establish a condition precedent, but merely creates a timing mechanism for the general contractor’s payment to the subcontractor.

10. Retainage

  • Typically 5%-10% of each payment will be withheld by the Owner/Prime until a later date, such as substantial completion
  • Its purpose is to keep a pool of money to remedy any defects in workmanship by that sub

11. Termination provisions

  • Termination for Cause
  • Usually nonpayment, excessive delay, insolvency, or convenience are reasons to terminate the contract

12. ADR Clause (Arbitration/Mediation clauses)

  • Arbitration (most popular) – binding way to avoid litigation;
  • Mediation – non-binding way to avoid litigation;
  • Both can be effective, typically arbitration can be more intimidating due to its binding and no (very limited) ability to appeal

13. Attorney fee provisions

  • Very popular as no one likes to pay an attorney!
  • Many provisions will say that the unsuccessful party must pay attorney fees but others to be careful will put the burden on one party
  • Primes and subs should include an attorney fee provision in all contracts
  • Good to be specific on the provision and include for litigation and ADR

14. Forum selection & choice of law

  • If working out of state, make sure you know which venue a dispute will be held in;
  • This can be a very costly provision

(list partially obtained from the ABA’s Fundamentals of Construction Law)

 

Posted in:     Arbitration & ADR, Change Orders, Construction Contracts, Construction News, Damages, Delays, Dispute A Lien, Disputes, Insurance, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , ,   /   2 Comments

Filing Mistake Invalidates $12.4 Million Mechanics Lien

Mechanic lien laws are highly technical, and they frequently change in unpredictable ways (see recent controversial example from Washington). We’ve expressed the sentiment a hundred times on this mechanics lien blog – it’s very easy to make a common lien mistake.

Unfortunately for JE Dunn Construction Co., it seems someone may have really dropped the ball filing its $12.4 Million mechanics lien. The developer of a stalled West Edge project in Kansas City now claims the construction company’s mega-lien has a mistake that invalidates it.

When it comes to filing a mechanics lien, sometimes you only get one chance to get it right. Depending on the merit of the developer’s claim, JE Dunn Construction Co. may have gotten a very frustrating and expensive lesson about the technical nature of mechanics liens.

From the press, it looks like the lien would have converted the debt from an unsecured claim into a secured claim in the bankruptcy proceedings pending on the West Edge project. Without the lien, the claim falls to an unsecured one, making collection a lot less likely. That makes this lien mistake one of the country’s most expensive.

What Could Have Gone Wrong?

What could have went wrong with the mechanics lien, you ask? What kind of mistake could invalidate such a big claim?

Funny enough, the biggest claims in the world can be invalidated by just the simplest and most technical oversight. Here are examples of common filing errors that could have cost JE Dunn Construction Co. its secured claim:

  • Poorly Identifying the Property: Most states require the use of a legal property description, and others require specific descriptions of the property. In every state, the requirement is technical, and a lien can be invalidated because of an inadequate description. (See article about describing properties on mechanic liens).
  • Signing Mistakes: Mechanic liens must be signed in a particular way. Some states require they be notarized, some states require a verification with specific and statutory language. The smallest waiver from these requirements can result in the mechanics lien being invalidated. (See article on Washington lien invalidated because of verification error)
  • Not Sending Notice: Some states require notice when you begin work. Some states require notice immediately before filing a mechanics lien. Some states require notice immediately after filing a lien. Failing to deliver this notice, can forfeit your mechanic lien rights. (See blog posts about preliminary and other notices)

Who is Filing Your Mechanics Lien?

Let us be the first to tell you that if you are about to file a $12.4 Million mechanics lien, you have no business filing it without the counsel of a qualified and experienced construction attorney. That is big money, and it’s certainly worth spending a few thousand dollars on counseling.

However, there are occasions when it doesn’t make financial or practical sense to hire an attorney to file a mechanic’s lien. That’s when we really shine. And some law firms - like this one in Georgia – have even recommended using a lien service to file a construction lien in the right circumstances.

For this, check out zlien, a lien filing service that was founded by Scott Wolfe Jr., principal attorney for Wolfe Law Group.

This article was originally posted on zliens topic-specific Construction Lien Blog.

Posted in:     Dispute A Lien, Filing Requirements  /  Tags: , , , ,   /   Leave a comment

Washington Appeals Case Confirms Lien Requirements Are Technical, But Fighting Liens Risky

Alan Middleton of the Washington Construction Law Blog published a pithy update to its site last week concerning mechanic liens in Washington State. In “Battle of the Lien Forms: Claims of Lien Must Strictly Comply with the Lien Statute,” Alan reports on a recent Division II appeal decision that “underscores the need…to comply with the lien statute.” The case is Williams v. Athletic Field Inc.

Alan’s right. This decision really accentuates just how technical lien statutes are in Washington. More interesting to me, however, was the decision to award the loser of the suit attorneys fees, which accentuates how risky it is to litigate the validity of a Washington construction lien.

Form, Form, Form – How to Sign A Lien

RCW 60.04.091 requires all mechanics liens to be “signed by the claimant or some person authorized to act on his or her behalf…” The statute itself has an example form for the lien (see here), and a specific form for the claimant’s or agent’s signature.

The Division II decision released just last month (March 2010) was actually a re-consideration of the original decision. On the matter’s first hearing, the appeals court ruled that a lien filing corporation could sign on behalf of the claimant, as the statute allows an authorized agent to sign the lien. The court was then urged to reconsider its decision, and specifically consider the manner that the lien filing corporation signed the document.

The lien filing corporation was a corporation, and they signed the lien for the claimant using the general form provided by the legislature. The property owner argued that the lien corporation was required to sign the lien using the corporate form for authenticated signatures in Washington.

The form used by the lien filing company stated as follows:

I am the claimant (or attorney of the claimant, or administrator, representative, or agent of the trustees of an employee benefit plan) above named; I have read or heard the foregoing claim, read and know the contents thereof and believe the same to be true and correct and that the claim of lien is not frivolous and is made with reasonable cause, and is not clearly excessive under penalty of perjury.

However, the Court held that 60.04.091(2) requires the notice of claim be acknowledged pursuant to Chapter RCW 64.08. Therefore, despite the “lien form” in the statute having the above attestation clause, since a corporation was signing the attestation clause should have complied with RCW 64.08.070, and have the following form for corporate acknowledgement:

On this ___ day of _____, 20___, before me personally appeared ________, to me known to be the (president, vice president, secretary, treasurer, or other authorized officer or agent, as the case may be) of the corporation that executed the within and foregoing instrument, and acknowledged said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that he was authorized to execute said instrument and that the seal affixed is the corporate seal of said corporation.

The attestation was not sufficient, and because of this technical defect, the lien was declared null and void.

Lien Declared Invalid, but Lien Claimant Wins Attorneys Fees

Earlier this year, I wrote a blog post about the risks of litigating a construction line in Washington. This Athletic Field decision really underlines the risks of litigating a construction lien.

According to RCW § 60.04.081(4), if someone files suit to have a construction lien removed from property records, someone is going home with attorneys fees. If the lien is declared “frivolous and made without reasonable cause, or clearly excessive,” the property owner or interested party gets attorneys fees. If the lien is not declared “frivolous,” the lien claimant gets attorneys fees.

There’s just one wild card: “Although all frivolous liens are invalid, not all invalid liens are frivolous.” Intermountain Elec., Inc. v. G-A-T Bros. Constr., Inc., 115 Wn. App. 384, 394 (2003).

So, what happens when a lien is declared invalid, but not frivolous? That’s exactly what happened in Athletic Field.

The Court in Athletic Field held that while the lien was invalid because of the erroneous attestation clause, it was not frivolous because construction of §60.04.091 presented a debatable issue of law. The result: Athletic Field, the lien claimant, lost its lien right but was awarded all of its attorneys fees in defending the action to declare the lien invalid.

So, the loser was awarded attorneys fees.

What This Means

This decision largely means three things:

  1. Make sure your lien meets the technical requirements of the lien statutes
  2. Washington liens are very powerful, because even invalid liens are risky to litigate and invalidate
  3. If you want to challenge a Washington construction lien, tread carefully

This article was originally posted on Express Lien’s topic-specific Construction Lien Blog.

Posted in:     Dispute A Lien, Filing Requirements, Washington  /  Tags: , , , , , ,   /   Leave a comment