VIOLATION OF DAVIS BACON ACT COULD SUPPORT FALSE CLAIMS ACT VIOLATION

Posted on September 26, 2015September 26, 2015 by Edward Garber

The Davis Bacon Act is a prevailing wage federal statute that applies to contractors and subcontractors performing work on federally assisted or federally funded projects in excess of $2,000 for the construction, alteration, or repair, including painting and decorating, of a public project. 40 U.S.C. s. 3142. Contractors and subcontractors performing work on Davis Bacon projects must pay mechanics or laborers minimum wages / prevailing wages based on the class of labor and project determined for the locale of the project per a wage determination published by the United States Department of Labor. 40 U.S.C. s. 3142. These rates must be certified through weekly certified payroll. For more information on the Davis Bacon Act, check out the United States Department of Labor’s website. You can also check out wage determinations or prevailing wage rates to get an understanding of prevailing wage rates for the class of project and labor based on the locale of the project.

Over the last few years, there have been federal decisions supporting the argument that a violation of the Davis Bacon Act can form the basis for a violation of the False Claims Act otherwise known as a qui tam action.

For instance, in United States ex rel. Brian K. Smith v. Clark/Smoot/Russell, 796 F.3d 424 (4^th Cir. 2015), a relator (private person) brought a qui tam action (violation of False Claim Act) against his employer, in particular, for failing to pay him locally prevailing wage rates as set forth by the Department of Labor. The Fourth Circuit reversed the dismissal of this claim by the trial court finding that a violation of Davis Bacon could support a violation of False Claims Act action.

Here, the relator alleged that he was a labor or mechanic that worked on federal construction projects governed by the Davis Bacon Act. The relator claimed he was paid based on an improper, lower-paying labor classification and was never paid or provided fringe benefits required for his labor classification. He lodged a complaint with the Department of Labor’s Wage and Hour Division that concluded he was not properly being paid. Thereafter, he was temporarily reassigned to a non-Davis Bacon project, meaning there was no prevailing wage rates and he could be justifiably paid at a lower wage rate. The reassignment also resulted in a substantially longer commute. He was then assigned to another federal project, but while it was a Davis Bacon project, he was only given limited hours to work. Based on these facts, the relator filed a qui tam action (violation of False Claims Act) stating (1) the submission of false Davis Bacon certified payroll constituted a false claim because he was not paid prevailing wages based on any applicable Davis Bacon wage schedule / wage determination and (2) his reassignment and reduction in work hours violated the whistleblower (anti-retaliatory) provision of the False Claims Act because they were retaliatory in nature based on his complaint to the Department of Labor.

This case shows the dynamics of a project governed by Davis Bacon. You need to know the prevailing wages inclusive of fringe benefits for labor classes. Also, you know to understand that a wage determination for a project showing the prevailing wages is probably not going to touch upon every class of labor that a construction contract requires. You need to recognize this and inquire as to the prevailing wage you think should apply so that the public agency can get a project-specific wage determination from the Wage and Hour Division of the Department of Labor. What you do not want, however, is to have to deal with a violation of Davis Bacon or a potential qui tam action under the False Claims Act for violating the prevailing wage requirements of Davis Bacon.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

QUALIFYING AGENTS AND COMMON LAW NEGLIGENCE

Posted on September 19, 2015September 19, 2015 by Edward Garber

Can a qualifying agent be sued for negligence? Yes, there is authority for arguments to pursue a qualifying agent under a common law theory of negligence.

A qualifying agent is not individually liable for breaching its statutory duties set forth in Florida Statutes Chapter 489— Chapter 489 governing qualifying agents for contractors does not create a private civil cause of action against qualifying agents. See Murthy v. Sinha Corp., 644 So.2d 983 (Fla. 1994). However, the Florida Supreme Court in Murthy held: “We agree that an owner may recover from a negligent qualifying agent, but only under a common law theory of negligence….” Id. at 986-87.

Further, in Cannon v. Fournier, 57 So.3d 875 (Fla. 2d DCA 2011), discussed here, the Second District Court of Appeal found that a qualifying agent of a general contractor could be liable in a personal injury action for control of the job site and supervision of matters relating to safety.

Finally, the recent decision in Taylor Morrison Services, Inc. v. Ecos, 163 So.3d 1286 (Fla. 2015), dealt with the discrete issue of whether the contractor was licensed as of the date of the contract. That was it. In dealing with this discrete issue, the First District noted:

Even though Guy [qualifying agent] was not listed on the permit as the contractor, he was responsible as the primary qualifying agent for all of Appellant’s [contractor] construction projects. Whether he carried out this responsibility faithfully is a separate question from whether he could be considered a qualifying agent that Appellant…, and one that the trial court did not need to decide.

Taylor Morrison Services, 163 So.3d at 1292, n.6 (noting that while contractor may have had qualifying agent as of the date of the contract to render it a licensed contractor under the law and the discrete issue before the court, this did not eliminate transgressions that may have occurred after the date of the contract). In other words, the Court noted that whether the qualifying agent carried out his responsibilities faithfully was a separate issue not before the court.

The bottom line is that a qualifying agent is not automatically immune from tort liability. There is authority to sustain arguments for a common law negligence claim against a qualifying agent for torts committed by the qualifying agent. But, simply violating certain statutory requirements set out in Chapter 489 should not create a private civil cause of action against a qualifying agent.

DID I JUST BUY THE MONEY PIT?

Posted on September 12, 2015September 12, 2015 by Edward Garber

You bought a house. Congratulations! You are all excited. You move in, get settled, and then the dreadful happens. You discover that the new house you bought contains water intrusion or other significant construction defects. You begin to think about the money pit you just bought; hilarious movie, by the way, so I digress with a funny scene from the movie:

Back to the issue. What do you do with the perceived money pit that you know or anticipate will cost you substantial sums to repair. First, assuming this was not new construction, you pull up the seller’s disclosure to see whether the seller (former owner) disclosed any of the water intrusion or construction defects. The seller did not. You believe the seller knew or reasonably should have known of these construction defects. How could they not? So you consult a lawyer (always a good first step) to explore what is known as the Johnson v. Davis line of cases that stand for the proposition that a seller has a duty to disclose known defects with the house they are selling. See Johnson v. Davis, 480 So.2d 625 (Fla. 1985).

A new case, Bowman v. Barker, 40 Fla. L. Weekly D2091b (Fla. 1^st DCA 2015), bolsters a buyer’s claims against a seller for not disclosing known defects in their house. In this case, the sellers apparently purchased a dilapidated house (cheaply) and renovated the house with the intent on flipping the house to another buyer. The house was sold. Defects were not disclosed. After the sale, the buyer discovered numerous construction defects. The buyer sued the seller, amongst others, for failing to disclose these defects that the buyer contended the seller knew about or should have reasonably known about.

The First District explained:

The duty to disclose known defects under Johnson v. Daviscontinues to exist for a home sold “as is.” The sellers do not dispute this principle. Despite selling this house “as is,” the sellers had a duty to disclose what they knew about its condition, and they undertook to make disclosures to Appellant [buyer] about the condition of the house. The record demonstrates triable issues of fact about what that condition was, what the sellers knew about it, what disclosures were made, and whether those disclosures were accurate.

This means the buyer is able to let the trier of fact (jury or judge) determine the issue of whether the seller knew of the construction defects but failed to disclose them to the buyer. This is a good case for a buyer since it supports the argument that these are issues to be determined by the trier of fact, putting pressure on the seller based on how the trier of facts may interpret the facts knowing the house they just sold contains numerous construction defects. For instance, in this case, the First District noted: “This evidence raises a question of fact about the appellees’ [seller’s] knowledge, as well as questions about their credibility and the plausibility of their denying knowledge of the property’s substantial defects and what repairs it needed.”

Consult an attorney if you purchase a house and discover construction defects, especially if you believe you just bought a money pit. An attorney can assist you with potential recourse under the law.

STATUTE OF LIMITATIONS AND REPOSE FOR INDEMNIFICATION CLAIMS (STEMMING FROM CONSTRUCTION DEFECT)

Posted on September 6, 2015September 6, 2015 by Edward Garber

I have written articles regarding the statute of limitations and statute of repose relating to construction disputes governed under Florida Statute s. 95.11(3)(c):

Within Four Years. An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.

In the construction defect context, a claimant has four years to sue from the date they knew or reasonably should have known with the exercise of due diligence the defect (e.g, the latent defect). This is the statute of limitations. Nonetheless, a claimant must sue no matter what on a latent defect within ten years from the project’s completion (see statute above). This is the statute of repose. A construction defect lawsuit cannot be initiated after the expiration of the statute of repose.

Let’s assume the following dates:

Project completion (start of limitations) 2005

First discovery of water intrusion 2008

General contractor completes repairs 2011

General contractor sues subcontractor for indemnification 2013

In this scenario, the subcontractor may argue that the general contractor’s statute of limitations to sue the subcontractor for the defect and damage is barred by the statute of limitations since the first discovery of water intrusion was in 2008 and the general contractor waited to sue until 2013 (five years later).

But, wait…the general contractor is going to sue the subcontractor for indemnification (preferably, contractual indemnification based on the terms of the subcontract). In this scenario, the general contractor is suing after it completed repairs and established its liability to the owner for repairing the defects and damage.

“The statute of limitations for an action seeking indemnity does not being running until the litigation against the third-party plaintiff [general contractor] has ended or the liability [against the third-party plaintiff], if any, has been settled or discharged by payment.” Castle Constr. Co. v. Huttig Sash & Door Co., 425 So.2d 573, 575 (Fla. 2d DCA 1982) (finding general contractor’s indemnity claim against subcontractor did not accrue until the owner’s litigation against the general contractor ended or the general contractor’s liability determined). Stated differently, the statute of limitations for the general contractor’s indemnification claim did not begin to start running until 2011 when its liability to the owner for the defects was discharged / settled.

Now, let’s assume the following dates:

Project completion (start of limitations) 2005

First discovery of water intrusion 2008

General contractor completes repairs 2013

General contractor sues subcontractor for indemnification 2016

In this instance, the subcontractor may argue that the statute of repose expired because the general contractor waited until 2016 or eleven years after the statute of limitations started to accrue in 2005. Guess what? The subcontractor would be right. See Dep’t of Transp. V. Echeverri, 736 So.2d 791 (Fla. 3d DCA 1999) (explaining that the statute of repose for construction defect claims still applies to claims for indemnity). Stated differently, even though the general contractor sued the subcontractor for indemnification within three years of establishing its liability, it was still bound by the ten year statute of repose that started accruing in 2005, meaning such lawsuits were barred after 2015.