Articles Posted in Construction Law

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Suppliers sold electrical materials to Linear, which Linear incorporated into construction projects. The developers did not pay Linear for its work and Linear did not pay Suppliers. In July 2015, Linear filed a voluntary Chapter 11 bankruptcy petition; two weeks later, Suppliers filed construction liens on the developments into which Linear had incorporated the materials purchased from Suppliers. The bankruptcy court discharged the liens as violating the automatic stay that resulted from the bankruptcy petition. Linear then collected the full amounts owed by the developers. The bankruptcy court held that the construction liens were void ab initio for violation of the automatic stay. The district court and Third Circuit affirmed. Under New Jersey law, if a supplier sells materials on credit to a construction contractor and the contractor incorporates those materials into property owned by a third party without paying the supplier, the supplier can file for a lien on the third-party property. The courts rejected Suppliers’ argument that the liens attached to the third-party properties, not to the property of the bankruptcy estate. The courts reasoned that, under state law, the ability to create and the value of the liens depend on the amount that the contractor owes the suppliers--the value of the contractor’s accounts receivable--and fall within the definition of property of the estate, 11 U.S.C. 541. View "In re: Linear Electric Co., Inc." on Justia Law

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Nagle and Fink were co-owners and executives of concrete manufacturing and construction businesses. The businesses entered into a relationship with a company owned by a person of Filipino descent. His company would bid for subcontracts on Pennsylvania transportation projects as a disadvantaged business enterprise. Federal regulations require states that receive federal transportation funds to set annual goals for participation in transportation construction projects by disadvantaged business enterprises, 49 C.F.R. 26.21. If his company won the bid for the subcontract, Nagle and Fink’s businesses would perform all of the work. Fink pled guilty to conspiracy to defraud the United States. A jury found Nagle guilty of multiple charges relating to the scheme. The Third Circuit affirmed Nagle’s conviction, upholding the admission of electronic evidence discovered during searches of the businesses’ offices, but vacated both sentences, based on loss calculation errors. View "United States v. Nagle" on Justia Law

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Realtor Willis planned Southgate, involving the purchase of 68 acres on St. Croix, re-zoning, subdivision, building infrastructure, and selling individual lots. Willis worked with defendants Cheng and Dubois and their entities (OMEI, Ocean View) for financing, but the defendants did not actually intend to develop the property. Pollara, a 47-year veteran of the construction industry, was hired to create the subdivision’s entrance. Ultimately Cheng and Dubois stopped paying Pollara and locked him out of his site office. Pollara was never paid for repair work to the roadway after flooding. Defendants, standing on both sides of the financing, refused any extension of the financing terms; they withheld their consent to selling the land at a profit to a buyer whom Willis had found. They caused Ocean View to foreclose, acquiring the property free of Willis’s and Pollara’s interests. The jury found that Ocean View and Cheng had made intentional misrepresentations and that OMEI had made negligent misrepresentations and that Dubois had made negligent misrepresentations with respect to the building permit and proposals for the development plan, and intentional misrepresentations as to the other three subjects. The jury awarded Pollara compensatory damages of $391,626 from all of the defendants and punitive damages of $90,000 against Cheng. The Third Circuit affirmed. View "Frank C Pollara Grp. LLC v. Ocean View Inv. Holding, LLC" on Justia Law

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The New Jersey Prevailing Wage Act, N.J. Stat. 34:11-56.25 (PWA) provides that laborers on certain public works projects are to be paid the prevailing wage. Carpenters hired to work on the Revel Casino Project in Atlantic City claimed that the Revel Casino Project is a “public work” within the meaning of the PWA because it received financial assistance in the form of incentives, tax exemptions, and tax reimbursements from the New Jersey Economic Development Authority (EDA), which, they argued is a “public body” within the meaning of the Act. They assigned their claims for unpaid prevailing wages to the plaintiffs, employee benefit plans within the meaning of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001, and trust funds within the meaning of the Labor Management Relations Act (LMRA), 29 U.S.C. 141. The district court held that the claims were completely preempted under ERISA section 502(a). Although it did not directly address LMRA complete preemption, the court also noted that the complaint “seeks interpretation of the collective bargaining agreement.” The Third Circuit vacated and remanded with instructions to remand to state court, holding that neither statute completely preempts the PWA. View "NJ Carpenters v. Tishman Constr. Corp. of NJ" on Justia Law

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The Sponsors formed West Run to construct and manage West Virginia University off-campus housing and retained CBRE to secure financing. CBRE provided prospective lenders with confidential information. Huntington’s predecessor loaned $39.975 million and construction began. A competing project (Copper Beach) was built across the street. West Run learned that Huntington had loaned $20 million for that project; West Run alleged that Huntington divulged to Copper Beach proprietary West Run information provided by CBRE. West Run‘s occupancy dropped from 95 percent to 64 percent. West Run sued, alleging that Huntington had breached its duty of good faith and fair dealing by financing Copper Beech. Two similar projects, involving the Sponsors, alleged breach of contract based on Huntington‘s failure to provide funds under their construction loan agreements. Huntington claimed that they had sold insufficient units to require Huntington to disburse additional funds under the agreements. The district court dismissed. The Third Circuit affirmed in part, holding that the complaint contained no corroborating facts that confidential information was disclosed and that no contract terms prohibited Huntington from lending to competitors. The court vacated with respect to the other projects for a chance to provide evidence showing that the pre-sale numbers in the original complaint were incorrect. View "W. Run Student Hous. v. Huntington Nat'l Bank" on Justia Law

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In 1987, Waterfront purchased 5.3 acres in Philadelphia’s Central Riverfront District, zoned G-2 industrial. In exchange for rezoning to C-4 commercial, for a mixed-use, high-rise project, Waterfront agreed to restrictive covenants. When financing became possible in 2005, Waterfront obtained a permit for demolishing existing structures and constructing a 28-story apartment tower and entered into a financing agreement with a construction start date of February 2006. Waterfront had to postpone construction. In March 2006, the city extended to the site a zoning overlay with a height restriction of 65 feet and a width restriction of 70 feet. Waterfront alleged mistake; that the area councilman admitted that inclusion of the site was a mistake; and that Mayor Street stated that he would not have signed it had he known that the height restriction applied to the site. Waterfront unsuccessfully sought repeal, but never applied for a permit under the ordinance and did not seek a variance. Waterfront filed suit. In 2010 the city rescinded application of the height restriction. The district court held that the rescission mooted federal constitutional claims, denied Waterfront’s motion to amend to attack the width restriction, and granted the city summary judgment on all other claims. The Third Circuit affirmed. View "CMR D.N. Corp. v. City of Philadelphia" on Justia Law

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The Port Authority’s subsidiary, PATH, operates the Grove Street Station in Jersey City. The Station was built in 1910. In 2000 PATH planned to expand the Station to accommodate larger trains and persons with disabilities, a project that would have involved construction of a new entrance and two elevators. After September 11, 2001, and the resulting closure of two stations, ridership increased at the Station. Concerned about congestion and safety, PATH scrapped its renovation plans and undertook a “fast track” project. Construction began in 2002 and concluded in 2005. Plaintiffs alleged that the renovations triggered an obligation under the Americans with Disabilities Act, 42 U.S.C. 12101–12213, to make the Station accessible to handicapped persons. They also alleged violations under New Jersey’s Law Against Discrimination and certain state construction code provisions. The district court dismissed, state-law claims on the basis that allowing such claims to proceed would violate the interstate compact between New York and New Jersey that created the Authority, but ordered the Authority to make the east entrance accessible. The Third Circuit affirmed dismissal of the state law claims, but remanded the ADA issue for trial on the issue of feasibility. View "Hip Heightened Indep. & Progress, Inc. v. Port Auth. of NY & NJ" on Justia Law

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Stoerr pled guilty to bid rigging, 15 U.S.C. 1; conspiracy to provide kickbacks and to defraud the United States, 18 U.S.C. 371; and assisting in the preparation of false tax returns, 26 U.S.C. § 7206(2). The convictions stemmed from kickback payments that Stoerr solicited and accepted from sub-contractors in connection with environmental remediation projects managed by Sevenson, his employer from 1980 to October 2003. In total, the district court determined that the scheme resulted in losses of $134,098.96 to the EPA and $257,129.22 to Tierra. After Sevenson learned of the kickbacks scheme, it paid Tierra approximately $241,000 to compensate for its losses. It then commenced a civil action against Stoerr in state court to recover its losses, and sought restitution in connection with Stoerr’s sentencing, under the Mandatory Victims Restitution Act, 18 U.S.C. 3663A, for reimbursement of the amount that it paid to Tierra. The district court denied Sevenson‟s request for restitution, instead ordering that Stoerr pay restitution to Tierra. The Third Circuit dismissed; as a non-party, Sevenson lacks standing to appeal. View "United States v. Stoerr" on Justia Law

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Andrews was designated as contractor for improvements to the sewage system, in a no-bid process involving kickbacks and bribery, having made numerous false statements in the bond application package. After the contract was terminated, he submitted a claim of $748,304, based on false statements and duplicate charges. Evidence indicated that Andrews was not capable of the project work and that the entire scheme was fraudulent. He was convicted of one count of conspiracy, 18 U.S.C. 371, four counts of wire fraud, 18 U.S.C. 1343, 1346, and 2, one count of program fraud, 18 U.S.C. 666(a)(1)(B) and 2, one count of making a false claim upon the Government of the Virgin Islands, 14 V.I.C. 843(4), and one count of inducing a conflict of interest, 3 V.I.C. 1102, 1103, and 1107. The Third Circuit affirmed the conviction, but remanded for resentencing. Errors in the indictment and jury instructions concerning honest services fraud did not affect substantial rights. Although the 151-month term of imprisonment was within the statutory maximum for Counts Two through Five, it exceeded the statutory maximum for Counts One and Six; it was not possible to determine whether the sentence was legal as to each count View "United States v. Andrew" on Justia Law

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The Pennsylvania Steel Products Procurement Act,73 Pa. Cons. Stat. 1881-1887, prohibits the use of temporary bridges made out of foreignsteel on public works projects. The district court rejected a claim that the law was preempted by the Buy America Act, 23 U.S.C. 313, and that it violated the Commerce Clause, Contract Clause, and Equal Protection Clause. The Third Circuit affirmed. The federal Act contemplates more restrictive state laws. The state law was authorized by Congress, is rational, and did not, at its enactment, impair plaintiff's existing contracts. View "Mabey Bridge & Shore, Inc. v. Schoch" on Justia Law