Virginia Lawyers Weekly VA Lawyers Weekly
Where a general contractor and subcontractor involved in a federal construction project at Fort Benning claimed the other was liable for damages, the court resolved all outstanding issues in a comprehensive opinion following a bench trial.
Background
This suit concerns a dispute among entities involved in a federal construction project at Fort Benning, Georgia. McKenney’s Inc. (subcontract0r) and Leebcor Services LLC (general contractor) both claim that they were damaged by the other’s breach of their subcontract. Both also bring claims against the others sureties. This opinion and order resolves all outstanding issues following a bench trial.
Subcontract balance
Leebcor’s concerns with McKenney’s timeliness and work quality were well-founded. However, the payment provisions the parties agreed to in the subcontract contemplated Leebcor timely paying McKenney’s for its completed work following acceptance, and then addressing potential disputed amounts later. No subcontract language gave Leebcor the right to withhold payment for already completed and accepted work based on these disputes.
Recent digests and articles on commercial issues:
Accordingly, McKenney’s is entitled to the following damages for Leebcor’s failure to pay its invoices in violation of the subcontract terms: (1) $159,988.14 for the January invoice, with prejudgment interest accruing as of March 2, 2019; (2) $88,270.75 for the March invoice, with prejudgment interest accruing as of April 28, 2019 and (3) $5,527.61 for the May invoice, with prejudgment interest accruing as of June 30, 2019.
Initial delay damages
According to McKenney’s, Leebcor is liable for $367,005 in damages McKenney’s allegedly sustained during the initial delay. In response, Leebcor first contends that this claim is not ripe for adjudication, as it is still empowered to appeal the government’s decision to pay a portion of its claim for damages related to the initial delay. The court concludes that the lack of “fitness of the issue[ ] for judicial decision” outweighs any “hardship to the parties of withholding court consideration.” McKenney’s claim for damages relating to the initial delay is therefore dismissed as prudentially unripe.
Construction delay claim
McKenney’s seeks $544,493 in damages stemming from delays allegedly caused by Leebcor and its other subcontractors once construction began. However, because McKenney’s own conduct delayed its completion of its scope of work, and because McKenney’s failed to adequately distinguish periods of alleged Leebcor-caused delay from delay caused by its own conduct, this claim must fail.
Critical path delay claim
Leebcor’s damages expert testified that McKenney’s caused 14 days of critical path delay during the period of November 1 through Nov. 30, 2019. Given the lack of record evidence on the issue, however, the court cannot reconcile a claim of 14 days of delay attributable solely to McKenney’s when there were multiple other issues apparently holding up the test and balance, or TAB, process and project completion.
Leebcor also contends that McKenney’s was responsible for 81 days of critical path delay to the project stemming from McKenney’s failure to prepare its systems for the TAB, commissioning and performance verification processes. The court finds that McKenney’s failures undoubtedly contributed to the extended duration of these processes.
However, concurrent issues within Leebcor’s control also delayed them, and no evidence was offered that would permit the court to disentangle McKenney’s deficiencies from those attributable to Leebcor. Leebcor did not demonstrate that any of its alleged delay damages are directly traceable to McKenney’s breach, rather than its own conduct.
Unapproved change orders
McKenney’s alleges that Leebcor has also wrongfully withheld payment for several activities McKenney’s completed which were beyond the scope of the subcontract. Specifically, it argues that it is entitled to compensation for work documented in several change order proposals, or COPs, that Leebcor failed to approve, and therefore could not be properly invoiced. Because McKenney’s failed to prove that these activities fell outside of its subcontract scope of work, however, all of its claims relating to the unapproved COPs are denied.
Miller Act claim
McKenney’s argues that Cincinnati is jointly and severally liable for the damages it seeks under the terms of the payment bond, issued in accordance with the Miller Act. Cincinnati, on the other hand, contends that it cannot be liable because McKenney’s failed to timely file this action. The court disagrees. Accordingly, the court holds that McKenney’s timely-filed its action, and that Cincinnati is therefore jointly and severally liable for the amounts owed by Leebcor to McKenney’s.
Performance bond claim
Leebcor argues that Hartford is liable for McKenney’s breaches of the subcontract as the guarantor of the performance bond it issued. For the reasons explained above, Leebcor is not entitled to any funds from McKenney’s. Further, Leebcor’s failure to give reasonable notice of McKenney’s default breached the terms of the performance bond, providing an alternative reason Leebcor is not entitled to payment from Hartford.
Attorneys’ fees
McKenney’s seeks attorneys’ fees and other costs it has incurred in this litigation because it asserts that Leebcor’s failure to pay it, and instead file counterclaims and claims against Hartford, were actions taken in bad faith. However, neither the subcontract, nor general principles governing the award of such expenses, entitle McKenney’s to such relief. This court finds no bad faith, just government contract disagreements and an acrimonious relation between the prime contractor and one of its subcontractors.
So ordered.
McKenney’s Inc v. Leebcor Services LLC, Case No. 4:20-cv-179, Aug. 18, 2022. EDVA at Newport News (Smith). VLW 022-3-360. 114 pp.
