Volume 8 - Number 25 | June 21, 2010

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Recent Issues

  EDITOR'S NOTES | Issue 8-25
The interplay between binding arbitration and mechanic's lien rights has always created tension. Arbitration is a creature of contract. The parties to a construction contract mutually agree to resolve their disputes through binding arbitration in accordance with stipulated procedures. As a contractual right, however, the right to arbitrate can be waived through conduct inconsistent with the intent to resolve disputes through arbitration. This creates a conflict with mechanic's liens.

Lien rights are created by statute. They provide a judicial remedy. A mechanic's lien can be foreclosed only through a suit in a court of law. Isn't the assertion of a mechanic's lien inconsistent with, and a waiver of, the right to submit disputes to binding arbitration?

In one recent case, a contractor was allowed to file and perfect a mechanic's lien, preserving those rights, while simultaneously enforcing its arbitration rights. A Florida court ruled that while the underlying dispute - the amount owed the contractor - was to be determined through arbitration, the timely filed mechanic's lien could be used to secure the payment of any eventual arbitration award.

Other cases this week address a contractor's right to sue design professionals for delay damages and the ability of multiple claimants to reach a contractor's licensing bond. A federal appeals court said state law in Vermont was unclear on a contractor's right to recover delay damages from A/Es that were allegedly slow in providing and correcting design documents. And, a Washington court said a contractor's registration bond proceeds had to be divided pro rata between two claimants.
  LIEN RIGHTS NEED NOT BE STATED IN ARBITRATION AWARD
A mechanic’s lien can be used to secure payment of any eventual arbitration award. The arbitration proceeding determines the amount due, but the right to foreclose the lien is not dependent on authorization under the arbitration award.
  FEDERAL APPEALS COURT FINDS STATE LAW SILENT ON A/E LIABILITY TO CONTRACTOR
In a contractor’s suit against design professionals for delay damages, the status of applicable Vermont law was unclear. A federal appellate court certified questions to the Vermont Supreme Court regarding professional liability and negligent misrepresentation.
  MULTIPLE CLAIMANTS REACH CONTRACTOR LICENSING BOND ON PRO RATA BASIS

When two project owners attempted to reach the limited proceeds of a contractor registration bond, the “first in time” rule did not apply. The proceeds had to be divided according to the relative amounts of the respective default judgments the owners obtained.