Construction / Commercial Litigation / Business & Employment Law

WK Law Defeats Owner’s Motion to Dismiss Contractor’s Claims which leads to Substantial Settlement for Contractor

Woolford Kanfer recently obtained a favorable settlement for a general contractor following a key ruling by the court denying an owner's motion for summary judgment in which it sought dismissal of the Contractor’s claims. We represented a Lancaster-based GC who had built a senior housing facility on the east side of Wilmington, Delaware. The project was supposed to take 16 months, but due to a myriad of delays, it took 3 years to build. There were many change orders executed during the project. However, the Owner refused to sign change orders for delay costs and for 10 items of additional work.

At the end of the project, the Contractor requested that the Owner pay the balance due under the contract. The Contractor submitted a waiver with its final payment request, and identified the delay and extra work claims it did not intend to release on the waiver form stating that they were excluded from the waiver. The Owner refused to pay the contract balance telling the Contractor that it did not have the right to exclude the delay and extra work claims.

We filed suit in Delaware on the Contractor’s behalf. We asserted Breach of Contract, a Mechanics’ Lien claim and alleged a violation of the Delaware Prompt Payment Act. We argued that the Owner withheld payment of the undisputed contract balance in an effort to leverage the Contractor into giving up the extra work and delay claims. After months of discovery, depositions and expert reports, the Owner filed a motion for summary judgment on the eve of trial requesting that the court dismiss the Contractor's claims. It argued that the contract required all change orders to be in signed by the Owner. Since the Owner didn’t sign the change orders, it asked the judge to rule, as a matter of law, that the Contractor was not entitled to recover. The Owner argued it did not violate the Delaware Prompt Payment Act because it was justified in withholding payment due to the fact that the Contractor would not sign an unconditional release. We countered that written notice of the claims was provided and that the Owner unreasonably refused to sign the change orders. It would be disastrous, we argued, if an owner was permitted to immunize itself for the cost of legitimate changes by simply not signing the change order proposals.

A judge of the Delaware Superior Court rejected the Owner's arguments and ruled that the Contractor was entitled to present all its claims to the jury. The jury would have to decide whether the Owner unreasonably refused to sign the change orders, the judge said. The judge also ruled that it was the jury’s job to determine whether the Owner withheld payment of undisputed funds to leverage the Contractor into giving up the disputed claims. Immediately after the judge denied the Owner's motion, the Owner offered a substantial settlement which the Contractor accepted. The Contractor obtained the funds due under the contract and payment for a majority of its claims for additional compensation.