Johnson & Conway, LLP


Recent Legal Developments Related to Our Practice Areas
This page was last updated: October 7, 2013
(Notice: The case summaries on this page are not intended to provide legal advice.
Interested parties should consult the original sources.)

New Jersey - Consumer Fraud - The New Jersey Supreme Court has held that unless a plaintiff can survive a motion for summary judgment or a motion for involuntary dismissal at trial on the issue of ascertainable loss, the plaintiff is not entitled to attorney’s fees on a Consumer Fraud Act claim, even if the plaintiff obtains summary judgment on the liability aspect of the claim, e.g. it is able to show a technical violation of the regulations. Perez v. Professionally Green, LLC,, 2013 WL 4836706 (Sept. 12, 2013)


New Jersey - Economic Loss Doctrine - In an unpublished decision, the Law Division, Middlesex County held, in a case of first impression, that a general contractor is barred by the economic loss doctrine from asserting a claim against an engineer with which it was not in privity of contract. The trial court reasoned that engineers have no independent imposed by law (as contrasted with attorneys and doctors) and that the contractor had a remedy for its economic losses through its contract with the owner. Spectraserv, Inc. v. The Middlesex Co. Utilities Auth,, Middlesex Co. Law Div., Docket No. L-2577-07 (July 25, 2013)


New Jersey - Consumer Fraud - Home Improvement - In an unpublished decision, the Appellate Decision affirmed that a homeowner is entitled to recover attorney’s fees even where the factfinder finds no ascertainable loss so long as the homeowner establishes a violation of the Consumer Fraud Act or its regulations. In dictum the court suggested that the refund provisions of the Act (N.J.S.A. 56L8-11) are limited to misrepresentation in eating establishments. This calls in to question the holding of Artistic Lawn & Landscape Co. v. Smith, 381 N.J.Super. 75 (Law Div.2005). In any event, the Appellate Division found that the homeowner had received the benefit of the bargain and, therefore, was not entitled to a refund. Logatto v. Lipsky 2013 WL 3716871 (July 17, 2013)


New Jersey - Contractor liability for subcontractor safety - Where a contractor does not have control over the subcontractor’s means and methods and has no special or contractual relationship and had not helped to create the dangerous situation, the Appellate Division affirmed that the contractor cannot be held liable for an injury to the subcontractor’s employee. Tarabokia v. Structure Tone (Docket No. A-3822-11T2)(November 16, 2012)


New Jersey - Damages - The Appellate Division has held that the proper measure of damages for the repair a defective roof was the cost of repair (as opposed to diminution in value) because this would not result in unreasonable economic waste. The court also permitted the repair costs to be proven by the testimony of an employee of the repair company even though he was not qualified as an expert. Rational Contracting, Inc. v. Congregation Agudath Israel of West Essex. (Docket No. A-5644-10T45644-10T4)(July 10, 2012)


New Jersey - New Home Warranty - The Appellate Division has held that only plaintiff homeowners’ claims against their New Home Warranty were subject to mandatory arbitration and that the non-warranty claims, in particular the bad faith of the insurer, were preserved for trial. Frumer v. National Home Insurance Company and Home Buyers Warranty Corporation III. (Docket No. A-6157-10T4)(July 6, 2012)


New Jersey - Consumer Fraud - The Appellate Division has held that plaintiff homeowners were entitled to recovered attorney’s fees against a swimming pool contractor for failure to include start and end dates in the contract even though the plaintiffs were unable to show ascertainable loss at trial. Perez v. Professionally Green and Swim-Well Inc. (Docket No. A-2850-09)(October 13, 2011)


New Jersey - Statute of Repose - The Appellate Division has ruled against the statute of repose defense asserted by certain subcontractors on the ground that the allegations included a claim that the defects were “unsafe” as required by the statute of repose. Port Imperial Condominium Assoc., Inc. v. K. Hovnanian Port Imperial Urban Renewal, Inc. (Docket No. A-1013-10T1)(May 2, 2011)


New Jersey - Spoliation - The New Jersey Supreme Court held that Courts confronted with spoliation in commercial construction litigation should consider the identity of the spoliator, the manner in which the spoliation occurred,; the prejudice to the non-spoliator and whether that party bears any responsibility for the loss of spoliated evidence, and the alternate sources of information available to the non-spoliator. Courts should balance all of those considerations in crafting an appropriate remedy consistent with fundamental fairness.. Robertet Flavors,Inc. v. Tri-Form Construction, Inc. (Docket No. A-70/71-08)(August 3, 2010)


New Jersey - Affidavit of Merit - The New Jersey Supreme Court held that the failure to hold a Ferreria conference does not toll the time limitation for the filing of an Affidavit of Merit required by N.J.S.A. 2A:53A-27. Paragon Contractors, Inc. v. Peachtree Condominium Assoc., et al. (Docket No. A-41-2009)(June 28, 2010)


New Jersey - Consumer Fraud - The Appellate Division held that the individuals at a business who personally participated in a regulatory violation under the Consumer Fraud Act can be held personally liable. Allen v. V and A Brothers, Inc. (Docket No. A-4427-08T14424-08T1)(June 23, 2010)


New Jersey - Consumer Fraud - Arbitration - The Appellate Division held that the plaintiff did not waive her right to a jury trial and could not be forced to arbitrate his Consumer Fraud Act claim against GMAC where the contract did not specifically indicate and intend to submit statutory claims to arbitration. GMAC v. Pittella (Docket No. A-3876-08)(May 26, 2010)


New Jersey - Consumer Fraud - Arbitration - The Appellate Division held that the plaintiff waived his right to a jury trial and could be forced to arbitrate his Consumer Fraud Act claim against Verizon Wireless where the contract stated that any controversy or claim is subject to arbitration and the cellular agreement defined claims to include the statutory right for reimbursement of attorney’s fees.  Curtis v. Cellco Partnership (Docket No. A-5863-07)(April 15, 2010)


New Jersey - Architectural Malpractice - The Appellate Division held that in opposing a motion for summary judgment, it is sufficient that plaintiff’s expert testify based on his understanding of the consensus in the architectural community and need not cite to a written standard.  Vitale v. Seibert (Docket No. A-3638-08T)(December 11, 2009)


New Jersey - Affidavit of Merit - The New Jersey Supreme Court ruled that defendants who brought in their surveyor in on a third party complaint seeking indemnification and contribution need not submit an affidavit of merit supporting a claim for professional negligence until the plaintiff has submitted evidence that the surveyor had committed an error.  Highland Lakes Country Club and Community Assoc. v. Nicastro, (Docket No. a-10-09)(December 8, 2009)


New Jersey - Construction Liens - In an unpublished decision, the Appellate Division ruled that that sub subcontractors have no claim against a landlord for unjust enrichment or under the construction lien law unless the landlord approved the subcontract as opposed to the work to be performed under the subcontract.  Herod Rutherford Developers, LLC v. Submax Services, LLC, (Docket No. A-2460-08T2)(November 19, 2009)


New Jersey - Consumer Fraud Act - Products Liability Act - The Appellate Division ruled that second owners of a house cannot claim under the Consumer Fraud Act against the manufacturer of the home's EIFS system because no misrepresentations were made to them.  In addition, the owners' tort claim under the Products Liability Act was barred by the economic loss rule because there was no damage to anything other than the house; the EIFS was deemed to be an integral part of the house.  Dean v. Barrett Homes, Inc. (Docket No. A-1479-07T1)(April 15, 2009)

New Jersey - Consumer Fraud Act - In another unpublished decision, the Appellate Division reaffirmed that the "CFA, by its very terms, imposes direct personal liability on a corporate principal".  Anne Milgram v. Comfort Direct, Inc. and Kevin Dyevich, (Docket No. A-0360-07T20360-07T2)(October 28, 2008)

New Jersey - Consumer Fraud Act - In an unpublished decision, the Appellate Division reaffirmed that a corporate officer or employee who participates personally in Consumer Fraud Act violations can be held personally liable.  In this case, the employee was held accountable for technical violations of the Act, e.g. failure to include start and end dates in the contract and failure to obtain signed change orders.  Lanza v. Secret Gardens Landscaping, Inc., (Docket No. A-2613-07T22613-07T2)(October 14, 2008)

New Jersey - Construction Lien Law - The Appellate Division held that a third tier supplier (a supplier that is does not have privity with the owner or a general contractor or a subcontractor that is in privity with the general contractor) cannot file a lien under the Construction Lien Law (N.J.S.A. 2A:44A:1 et seq.) Eastern Consrete Materials, Inc. v. Tarragon Edgewater Associates, LLC,  (Docket No. A-0067-07T3)(September 18, 2008)

New Jersey - Public Contract - Reformation - The Appellate Division held that where a contractor sought to take advantage of the New Jersey Turnpike Authority by failing to bring to the engineer's attention a patent ambiguity in the specifications and then proceeded to do extra work, the appropriate remedy was to reform the contract, so that the NJTA was given a fair price for the work.  In addition, the contractor was denied prejudgment interest.  Dugan Constr. Co. Inc. v. New Jersey Turnpike Auth. (Docket No. A-3576-06T1)(March 3, 2008) 

New Jersey - Application of Home Improvement Regulations to New Home Construction - The Appellate Division held that a contractor that deals directly with the homeowner to install cabinets in a new home, where the contractor did not construct the homeowner's new home, comes within the definition of of a home improvement contractor under N.J.A.C. 13:45A-16.1A.  Czar, Inc. v. Heath, 2008 WL 313062 (App. Div. Feb. 6, 2008) 

New Jersey - Statute of Repose - The New Jersey Supreme Court has ruled that where a contractor's or designer's services end before the issuance of the certificate of occupancy, the 10 year New Jersey  Statute of Repose (N.J.S.A. 2A:14-1.1(a)) begins to run from the  completion of the services and not from the later issuance of the certificate of occupancy.  Daidone v. Buterick Bulkheading (Docket No. a-60-06) (June 26, 2007).

New Jersey - Award of statutory treble damages in arbitration - Under the New Jersey Arbitration Act (N.J.S.A. 2A:23B-1 et seq.) an arbitrator may not award statutory treble damages or attorney's fees under the Consumer Fraud Act unless the claimant has notified the respondent in advance that such relief would be requested.  Block v. Plosia (Docket No. A-4919-05T1 (February 23, 2007).

New Jersey - Substitution of Subcontractors - The Appellate Division has ruled that, like public bodies covered by the Local Public Contracts Law, the New Jersey Schools Construction Corporation (SCC) cannot allow general contractors to substitute the names of subcontractors named in the bidding documents.  The SCC is governed by The New Jersey Economic Development Authority Act.  O'Shea v. New Jersey Schools Construction Corp.(Docket No. A-5459-04T1 (October 19, 2006).

New Jersey - Prompt Payment Law - Effective September 1, 2006, New Jersey has enacted a Prompt Payment Law (N.J.S.A. 2A:30A-1 and 2) that requires prompt payment by public and private owners to contractors and by contractors to subcontractors and material suppliers.  The delinquent party will be liable for interest at a rate equal to prime plus 1 percent.  The act also provides for the award of attorney's fees to the prevailing party in the event a dispute concerning payment is litigated.

New Jersey - Arbitration of Consumer Fraud Act complaint - In an unpublished decision, the Appellate Division held that the arbitration clause in the contract of sale for a new home encompassed alleged Consumer Fraud Act violations where the language  included "all . . . statutory causes of action."  Riehl v. Toll Brothers (Docket No. A-2383-05T3283-05T3(May 17, 2006).

New Jersey - Recovery from the New Home Warranty Program Fund - The Supreme Court ruled that a condominium association was barred from recovering repair costs from the fund because it failed to follow the regulatory requirement that it first obtain two estimates and obtain prior approval of the Department  of Community Affairs.  The fund was established pursuant to the New Home Warranty and Builders' Registration Act (N.J.S.A. 46:3B-1 et seq.) to compensate homeowners in the event that their builders did not make repairs.  Aqua Beach Condo. Assn. v. Dept. of Community Affairs et al., (Docket No. A-111-04)(January 18, 2006).

New Jersey - Insurance Broker Malpractice - The Appellate Division declined to extend the rule permitting recovery of attorneys' fees in legal malpractice cases to malpractice cases against insurance brokers.  Tweer v. John Hill Agency (Docket No. A-1521-04T1)(October 4, 2005).

New York - Notice of Claim against School - The Court of Appeals ruled that the statutory (Public Authorities Law § 1744 (2)) three month notice period for claims against the New York City School Construction Authority commences from the date the contractor's damages are ascertainable and not from the date the claim is denied, as under Education Law § 3813 (1), which applies to claims against school districts.   C.S.A. Contracting Corp. v. New York City School Construction Authority, (2005 NY Slip Op 05751)(July 6, 2005).

New Jersey - Construction Lien Law - The Appellate Division has held that an owner may not decrease the lien fund available to satisfy subcontractor construction liens by negotiating liquidated damages with the contractor.  The court viewed liquidated damages as similar to retainage which was held not to reduce the lien fund under a prior decision.  Labov Mechanical. Inc. v. East Coast Power, LLC, (Docket No. A-)(May 5, 2005).

New Jersey - Arbitration - The Appellate Division ruled that in complex cases like construction cases where some claims may be subject to arbitration, but others are pending in court, and where there appears to be an overlap of parties and issues, it is appropriate to stay the court proceeding pending the outcome of the arbitration.  Elizabethtown Water Company v. Watchung Square Assoc., LLC, et al., (Docket No. A-0732-04T3)(April 20, 2005).

New Jersey - Pollution Exclusion - The Supreme Court of New Jersey has limited the pollution exclusion of the commercial general liability policy to traditional environmental claims.  Thus, a personal injury claim arising out of exposure to fumes from painting and floor sealing is not excluded by the contractor's pollution exclusion. Nav-Its, Inc. v. Selective Insurance Company, (Docket No. A-20/21-04)(April 7, 2005).

New Jersey - Statute of Repose - The Supreme Court of New Jersey ruled that that the statute of repose (N.J.S.A. 2A:14-1.1), which bars all claims ten years after the furnishing of services on a construction project (usually marked by substantial completion), does not bar the amendment of a complaint after the expiration of the ten year period to substitute a party where the plaintiff has followed the fictitious pleading practice allowed by R. 4:26-4.  This means that even though the substituted party cannot be identified at the time of the filing of the complaint within the ten year period, it must be functionally described and the plaintiff must have made diligent efforts to identify the unnamed party. Greczyn v. Colgate-Pomolive, (Docket No. A-2-04)(March 21, 2005).

New Jersey - Affidavit of Merit - The Appellate Division ruled an architect who sues his consulting engineer seeking to pass on the owner's claims of negligence is not required to file an Affidavit of Merit (N.J.S.A. 2A:53A-27) because he is not deemed to be raising a "new affirmative claim."  Diocese of Metuchen v. Prisco & Edwards, AIA, (Docket No. A-4139-03T2)(January 25, 2005).

New Jersey - Developer Code Violations - In a decision that will have repercussions for New Jersey home builders, the Supreme Court has reversed a decision of the Appellate Division and has held that construction code officials may issue notices of violations and penalties against the builder after issuance of the certificate of occupancy and after title has been transferred.  Some of the NOV's were issued five years after issuance of the CO.  DKM Residential Properties Corp. v. Montgomery Twp., (Docket No. A-61-03) (January 24, 2005).

New York - Architectural Malpractice - Statute of Limitations - The New York Court of Appeals ruled that a party cannot convert what is essentially an architect malpractice claim subject to the three year statute of limitations afforded by CPLR 214(6) into a contract action subject to a six year statute of limitations by alleging that a particular act or omission by the architect violated a contractual provision.  Mtr. of Kliment v. McKinsey & Co., Inc., (2004 NY Slip Op 09319)(December 16, 2004).

New Jersey - Consumer Fraud Act - The Appellate Division ruled that where there is no causal connection between a misrepresentation alleged to violate the Consumer Fraud Act and the damages claimed, plaintiff is not entitled to an award of attorney's fees.  Pron v. Carlton Pools, Inc., (Docket No. A-0514-03)(November 18, 2004).

New Jersey - Home Improvement Contractor Registration - On November 8, 2004, the Governor signed A3258 into law (P.L.2004, c.155), which changes the effective date of the "Contractors' Registration Act" from November 9, 2004, to December 31, 2005.  This allows home improvement contractors additional time to register.  However, the contractors who have already registered and are therefore able to display their registration numbers may enjoy a competitive advantage.   Click here for additional information from Division of Consumer Affairs.

New Jersey - Contractor's Duty of Care - In a case that makes it easier for construction site visitor's to sue contractors, the Appellate Division has ruled that a contractor's duty of care for the safety of persons who come on a construction site is governed by general negligence principles rather than the common law doctrine of premises liability enjoyed by the property owner.  Raimo v. Robert Discher et al., (Docket No. A-   )(October 20, 2004).

New Jersey - Insurance Coverage - Mold - The Appellate Division ruled that even though a particular policy excluded damage caused by mold, it did not exclude coverage for mold as damage.  Therefore, the cost of remediating the mold was covered.  Simonetti v. Selective Ins. Co., (Docket No. A-3755-03T2)(October 15, 2004).

New Jersey - Home Improvement Contractor Registration - The Division of Consumer Affairs has posted on its web site ( for public comment proposed regulations for the (home improvement) Contractor's Registration Act. N.S.J.A. 56:8-136 et seq.

New Jersey - Statute of Repose - The Supreme Court has decided that the manufacturer of a kit used in the construction of an in ground swimming pool is not protected by the 10 year statute of repose (N.J.S.A. 2A:14-1.1) because it was not a member of the protected class defined in the statute, namely "person[s] performing or furnishing the design, planning, surveying, supervision or construction or construction."  In addition, those who design for manufacturers are also excluded.  However, the installer of the pool does fall within the statute.   Dziewiecki v. Bakula, (Docket No. A-33/34-03  ) (August 3, 2004)

New Jersey - OSHA Preemption - In a case involving a worker injured by a forklift without a backup warning device, the Appellate Division held that OSHA regulations, which did not require such a device, preempted state tort claims and dismissed the claim based on a standard that conflicted with OSHA's standards. Gonzalez v. Ideal Tile Importing Co., Inc. (Docket No. A-  ) (July 22, 2004)

New Jersey - Surety - Construction Trust Fund Act - The Appellate Division ruled that the trust imposed by the Construction Trust Fund Act (N.J.S.A. 2A:148) on monies paid on a public contract "continues to follow those funds throughout the contractual chain and beyond it to any recipient of those funds, at least with respect to those who have knowledge that the source of those funds is a public project."  This ruling enabled the surety to recover funds diverted by a contractor to its financial consultant's account.    Reliance Insurance Co. v. The Lott Group, Inc., 370 N.J.  Super. 563 (App. Div., July 6, 2004)

New Jersey - Insurance Coverage - In a case of apparent first impression, the Appellate Division ruled that there is no public policy against an insurance company being required to provide a defense under a Directors & Officers policy to both the corporation and the officer, where both have asserted claims against each other and where the language of the policy would require it.    Mohamed Hebela v. Healthcare Ins. Co. (Docket No. A-0417-02T3) (June 28, 2004)

New Jersey - Anti-Bid Shopping Law - Interpreting N.J.S.A. 40A:11-16, the Appellate Division held that this provision of the Local Public Contracts Law requires bidders to obtain price quotes from subcontractors where multiple subcontractors are named in the bid, but that the statute does not require a pre-bid price quote where the bidder names only a single subcontractor.    Clyde N. Lattimer & Son Constr. Co. v. Monroe MUA, (Docket No. A-1155-03T5) (June 22, 2004)

New Jersey - Local Public Contracts Law - In another decision interpreting N.J.S.A. 40A:11-23.2, the Appellate Division has ruled that the 1999 amendment to the Local Public Contracts Law which made certain types of bid defects automatic grounds for rejection of the bid, is not limited to contracts relating to public buildings even though one of the required items is the "listing of subcontractors pursuant to Section 16" and N.J.S.A. 40A:11-16 refers to contracts relating to public buildings.  The court found that such a narrow interpretation would conflict with the Legislative goals of the 1999 amendments.    Star of the Sea Concrete Corp. v. Middlesex County Board of Freeholders,  (Docket No. A-) (June 17, 2004)

New Jersey - Termination for Convenience by State - The Appellate Division has upheld the State's termination for convenience provision, which it has recently begun to include in its contracts.  The court held that absent a showing of bad faith by the State, such provisions are enforceable, even in situations where the government agency terminates the contract for convenience  after causing "unreasonable delay in providing the contractor access to the work site."  Capital Safety, Inc. v. New Jersey Division of Buildings and Construction (A- ) (May 24, 2004).

New Jersey - Contractors Registration Act - On May 13, 2004, New Jersey enacted the Contractors Registration Act, which for the first time requires home improvement contractors to register.  Registration may be refused to contractors with criminal histories or who engage in deceptive practices or repeat acts of negligence.  The statute mandates specific contract language beyond the requirements of the current regulations.  The statute will take effect on November 9, 2004.  A copy of the bill can be found here.

New Jersey - Non-compete Agreements - The Supreme Court reversed the Appellate Division in Karol Maw v. Advanced Clinical Communications, Inc. (A-99-02) (May 4, 2004) and held that a private dispute concerning a non-compete agreement does not implicate a violation of a clear mandate of public policy as contemplated by Section 3c(3) of the Conscientious Employee Protection Act (CEPA).  N.J.S.A. 34:19-1 et seq.

New Jersey - Employer Liability - The Supreme Court held in Galvao v. G.R. Robert Construction Co., (Docket No. A-27 ) (April 29, 2004) that where a construction company sets up a subsidiary for which the sole function is to supply union labor to the construction company and the subsidiary has no control over the project, the subsidiary cannot be held vicariously liable under a theory of respondeat superior for injuries caused by the negligence of its employees when they are working for the general contractor.

New Jersey - Consumer Fraud Act - The Appellate Division has ruled that the Consumer Fraud Act (N.J.S.A. 56:8-1) does not apply to subcontractors.  The court stated:  "The contract between the contractor and the subcontractor is not within the purview of the Act, and need not be under its purpose and premise, for by its terms the contractor is responsible to the consumer and the commissioner of consumer protection for whatever the subcontractor may do.  The level of the Act's protection does not reach the contractor in his relationship with a subcontractor.  In such a business relationship, the contractor is not a consumer."  Messeka Sheet Metal Co., Inc. v. Hodder (Docket No. A- ) (April 1, 2004).

New Jersey - Pollution Insurance - In keeping with the continuous-trigger principle of Owens-Illinois, the Supreme Court has ruled that an insured must satisfy the full deductible for each triggered policy in a long-tail environmental exposure case.  The insured is not entitled to have the deductibles allocated.  Benjamin Moore & Co. v. Aetna Casualty & Surety Co. (Docket No. A-77-02) (March 24, 2004).

New Jersey - Construction Lien Law - The Supreme Court has ruled that an owner cannot be liable for more than the amount owed to the contractor.  In Craft v. Stevenson Lumber,  Docket No. A-92-02) (March 23, 2004), the homeowner had fully paid his contractor at the time the contractor walked of the job.  The contractor paid a portion of the monies to its lumber supplier, which in turn used the payment to satisfy the contractor's oldest account, which did not coincide with the homeowner's project.  When the contractor went into bankruptcy, the lumber supplier sought to lien the homeowner's property.  The Supreme Court ruled that the supplier had a duty to determine which of the contractor's projects was the source of the payment and to allocate the payment accordingly.  Furthermore, the lien cannot exceed the "lien fund"; where the owner has fully paid the contractor, there is no lien fund.  Thus, the owner is protected from having to pay multiple times.

New Jersey - Worker's Compensation - Although the Workers' Compensation Act excepts injuries resulting from "recreational or social activities" (N.J.S.A. 34:15-7), the employer can render such injuries work related where it compels participation in the social activity.  In Loranzo v. Frank DeLuca Construction (Docket No. A-104-02) (March 10, 2004) the Supreme Court held that an employee injured while using a homeowner's "go cart" at the direction his employer was deemed to have suffered a work related injury and was entitled to workers' compensation benefits.

New Jersey - Statute of Repose - Affirming that the statute of repose (N.J.S.A. 2A:14-1.1) is an absolute bar to actions brought more than 10 years after the furnishing of services in connection with construction, the Appellate Division ruled in Greczyn v. Colgate-Palmolive (Docket No. A-5033-02T1) (March 10, 2004) that an claim against an architectural firm asserted after the statute of repose expired should be dismissed even though the plaintiff had pled a fictitious "John Doe" defendant.  The court held that concept of relation back does not apply to the statute of repose.

New York - Substantial Compliance under Lien Law - Because the Lien Law must be "liberally construed to secure [its]  . . . beneficial interests and purposes", the First Department has held that substantial compliance is sufficient in the naming of the property owner.  Accordingly, the court allowed a contractor to maintain a foreclosure action even though the property owner had transferred ownership to a closely related company and the contractor failed to update its title search. PM Construction Co. v. 32 AA Associates, (2004 NYSlipOp 0112100690) (February 19, 2004).

New York - Constructive Trust under Lien Law - Under New York's Lien Law, construction funds, including construction loans, are deemed to be held in trust for the payment of contractors and material suppliers.  In Aspro Mechanical Contracting, Inc. v. Fleet Bank, N.A., (2004 NYSlipOp 00690) (February 12, 2004), the New York Court of Appeals held that a construction lender violated its fiduciary duty under the Lien Law when it repaid its construction loan before all  the contractors had been paid.  The Court noted that Fleet could have filed a "Notice of Lending" under Lien Law § 73.  The Notice provides a mechanism for the for trustees to alert beneficiaries to the distribution of trust assets to repay advances made by lenders.  The filing of the Notice (with the County Clerk) is an affirmative defense to a claim against the transferee.

New Jersey - Local Public Contracts Law - The Appellate Division has ruled that that the 1999 amendment to the Local Public Contracts Law which made certain types of bid defects automatic grounds for rejection of the bid should not be construed as a change in the criteria articulated in Twp. of River Vale v. R.J. Longo Constr. Co., 127 N.J. Super. 207 (Law Div. 1974) for determining whether a bid defect constitutes a material and non-waivable irregularity.  The court has now held that the enumeration of five mandatory items in N.J.S.A. 40A:11-23.2 was not intended to confer authority on local public contracting authorities to waive defects that would have been considered material by the courts prior to adoption of the amendment.   P&A Construction, Inc. v. Twp. of Woodbridge,  (Docket No. ) (January 6, 2004)

New Jersey - Freshwater Wetlands Protection Act - The Appellate Division has upheld the Department of Environmental Protection's amendment of N.J.A.C. 7:7A-2.4 which now permits the classification of wetlands of exceptional resource value  based on their potential for supporting threatened or endangered species as compared with the former requirement that there have been documented sightings of such species.  In re Adopted Amendments to N.J.A.C. 7:7A-2.4 (Docket No. A-0) (December 23, 2003)

New York - Right to Use New York City Vaults - The First Department ruled that a commercial condominium unit did not have title or an easement over vaults adjacent to its unit.  The court affirmed that title to the vaults is vested with the City and cannot be transferred.  However, the condominium building could have an easement to use the vaults in which case the easement was a common element.  However, the condominium declaration that granted the commercial unit a right to use the vault adjacent to its cellar did not grant it an express easement for exclusive use.  Board of Managers of Atrium Condominium v. West 79th Street Corp.,  (2003 NYSlipOp 19548) (December 16, 2003)

New York - Partial Release and Waiver of Mechanics' and Suppliers' Lien - The First Department reversed summary judgment for contractor.  The court found triable issues of fact where tile subcontractor had signed releases for progress payments that state that they are "expressly limited, and unconditional, to the extent of, and as covered by, payments actually received".  The court held that this language did not bar, as a matter of law, claims for extra work and delays not covered by the progress payments.  Navillus Tile, Inc. v. Turner Construction Co. and The Aetna Casualty. and Surety Co.,  (2003 NYSlipOp 19394) (December 11, 2003)

New York - Developer's "in lieu of parkland" fees - Town Law § 277 - Planning boards can require developers to set aside parkland.  In this case, the Court of Appeals upheld the ancillary power to require a monetary payment where the board determines that a suitable park cannot be located within the subdivision.  Twin Lakes Development Corp. v. Town of Monroe, (2003 NYSlipOp 18507) (November 20, 2003)

New York - Insurance Law § 3420 - The Court of Appeals ruled that an unexcused 48-day delay by an insurer in notifying its policyholder of its intent to deny coverage was unreasonable as a matter of law.  The statute requires notice "as soon as reasonably possible"; its case must be determined on its own merits.  However, prejudice to the policyholder need not be shown.  First Financial Ins. Co. v. Jetco Contracting Corp., (2003 NYSlipOp 18512) (November 20, 2003)

New Jersey - Tort Claims Act - In a case of first impression, the Appellate Division has ruled that the presuit notice provisions of the New Jersey Tort Claims Act apply to claims for intentional tort against public employees (except for claims such as federal civil rights, the New Jersey Law Against Discrimination and retaliatory discharge under the Worker's Compensation Law.) Bonitsis v. New Jersey Institute of Technology, 2003 WL 22438873 (October 29, 2003).

New Jersey - DPMC Aggregate Rating - In a decision that is certain to greatly complicate public bidding for contractors and owners, the Appellate Division ruled in Seacoast Builders Corp. v. Jackson Twp. Bd. of Ed., Docket No. A-6306-02T1 (October 21, 2003) that under the regulations promulgated by the Division of Property Management and Construction (N.J.A.C. 17:19-2.1 et seq.), a bid must be certified not to exceed contractor's aggregate rating both at the time of bid and at the time of the bid award.  However, for the purposes of determining  whether the aggregate rating has been exceeded, the contractor need not take into account contract alternates at the time of the bid, but must do so at the time of the bid award when the alternates have been chosen.

New York - Labor Law § 240 - The Court of Appeals ruled in Norberto Prats v. The Port Authority of New York and New Jersey (2003 NYSlipOp 17547) (October 21, 2003), that a worker who fell off a ladder while conducting inspections with his employer's construction work was entitled to claim under this absolute liability statute.  The court found a sufficient nexus between the inspections and the construction.  Labor Law § 240 (1) provides special protection to those engaged in the "erection, demolition, repairing, altering, painting, cleaning or pointing of a building or structure."  In the companion case, Striegel v Hillcrest Hgts. Dev. Corp. (2003 NYSlipOp 17548) (October 21, 2003), the Court found that Section 240 also covered a roofer who slipped and was injured on the roof.  The Court found that the worker incurred an "elevation-related risk" when he was injured.  The statute does not require that the worker be injured by hitting the ground.

New Jersey - Uniform Construction Code Act - The Appellate Division has ruled in DKM Residential Properties Corp. v. Township of Montgomery, ----- N.J. Super. ----- (September 15, 2003), that municipal construction officials may not issue a Notice of Violation to a developer after it has transferred title to the residential owners.  (Apparently, the municipal officials issued the NOV's in an effort to aid homeowners who had brought suit against the developer over a defective stucco-like finish applied to their homes.)

New Jersey - Worker's Compensation - In a restrictive interpretation of the "minor deviation" exception to the requirement that workers must be engaged in the direct performance of their duties, the New Jersey Supreme Court denied benefits to a municipal employee who was injured while stopping by the post office during his daily rounds checking pump stations on city business.  Jumpp v. City of Ventnor, --- N.J. ----, 828 A.2d 905, N.J., Aug 13, 2003.

New Jersey - Condemnation of contaminated property - In a pair of cases, the New Jersey Supreme Court ruled that contaminated property that is the subject of a condemnation proceeding must be valued as though remediated with the determined value to be placed in escrow pending a subsequent cost recovery action.  The condemnor, however, must reserve its right in the condemnation proceeding to bring the subsequent action so as not to run afoul of the Entire Controversy Doctrine.  Housing Auth. of New Brunswick v. Suydam Investors, LLC, 177 N.J. 2 (July 10, 2003); NJ Transit Corp. v. Cat in the Hat, LLC, 177 N.J. 29 (July 10, 2003).

American Arbitration Association - Construction Arbitration Rules - Effective July 1, 2003, the AAA has amended the rules applicable to the arbitration of construction issues.  Probably the biggest changes to the newly named "Construction Arbitration Rules and Mediation Procedures" are the lowering of the monetary threshold for large, complex construction disputes to $500,000 from $1,000,000 and the establishment of a refund schedule.  The large case procedures allow for far more detailed pre-hearing

New York - Pollution Exclusion - The New York Court of Appeals has found the Absolute Pollution Exclusion to be ambiguous when applied to personal injury caused by inhaling paint fumes.  Belt Painting Corp. v. TIG Ins. Co., 2003 WL 21498685, 2003 N.Y. Slip Op. 15691, N.Y., Jul 01, 2003.

New Jersey - Construction Lien Law - Relation Back and Bankruptcy - The Bankruptcy Court for the Southern District of New York has ruled that a post-petition filing of a construction lien does not relate back to a pre-petition event unless the lienor filed a notice of unpaid balance and right to file lien ("NUB").  Consequently, the debtor-in-possession or the trustee becomes an intervening lien creditor under U.S.C. § 544(a). Therefore, even though New Jersey's Construction Lien Law, in most cases, did away with the prefiling requirements of the old Mechanic's Lien Law, this decision may make such filings advisable (where possible). Schoover Electric Co. v. Enron Corp. and Garden State Paper Co., LLC, 2003 WL 21435524 (Bankr. S.D.N.Y. June 23, 2003).

New Jersey - Registration of Subcontractors on Public Works - On June 17, 2003, the New Jersey Legislature enacted an amendment to N.J.S.A. § 34:11-56.51 requiring that subcontractors have obtained their registration before they can be listed in a bid proposal on a public works project.  Prior to this enactment, pursuant to an Appellate Division decision, subcontractors merely had to be registered before they commenced work.  R.C.G. Construction Co., Inc. v. Borough of Keyport, 346 N.J. Super. 58 (App.Div. 2001).

New York - Statute of Limitations - Architect Malpractice - Where a school board brought a claim for property damage because an architect negligently certified an area to be asbestos free, the three year statute of limitations will run from completion of all work pursuant to CPLR 214(6) and not from discovery of the asbestos.  The court refused to apply the special toxic tort statute of limitations (CPLR 214-c) because there was no allegation of personal injury.  Germantown Central School Dist. v. Clark, Clark, Millis & Gilson, AIA, 100 N.Y.2d 202, 2003 WL 21284905, 2003 N.Y. Slip Op. 14720, N.Y., Jun 05, 2003.

New Jersey - Construction Lien Law - The Supreme Court has held that although the construction lien in question was valid even though signed by the contractor's attorney under a power of attorney, in the future all construction liens must be signed by a corporate officer.  D.D.B. Interior Contracting, Inc. v. Trends Urban Renewal Assoc., 176 N.J. 164, 821 A.2d 1135 (NJ May 12, 2003).

New York - Construction Contracts Act - Effective January 14, 2003, NY has enacted the Construction Contracts Act, which applies to all private contracts valued at $250,000 or more. NY General Business Law Sec. 756-a. In general it regulates the payment terms among the parties and requires owners to approve or disapprove all invoices within 12 business days of submission and to pay the undisputed portion of the invoices within 30days of approval. Approval cannot be withheld unreasonably or in bad faith. The same applies to contractors in their dealings with subs. If the owner (or contractor) fails to comply, the contractor can stop work and is entitled to interest at the rate of 1% per month. The terms of a construction contract are deemed to supersede the Act, so contracts should be drafted accordingly.

New Jersey - Statute of Repose - The Appellate Division has interpreted New Jersey's 10 year statute of repose (NJSA 2A:14.1-1), which protects contractors and engineers, to extend not only to claims for damages by the State, but also to equitable enforcement actions such as an action by the Department of Community Affairs based on construction deficiencies in a condominium complex.  Louis Cyktor, Jr. v. Aspen Manor Condo. Assoc., 359 N.J.Super. 459, 820 A.2d 129, (N.J.Super.A.D., Apr 17, 2003).  The court noted, however, that the statute of repose does contain exceptions (e.g. environmental claims and warranties exceeding 10 years)

New Jersey - Sexual Harassment - The New Jersey Supreme Court has made clear that an employer cannot assert a "safe harbor" defense as a matter of law merely because it has in place written policies and procedures against sexual harassment.  In order to avoid vicarious liability because of sexual harassment by an employee, the employer must be able to show that its policies were implemented in a meaningful way.  As a practical matter, this means mandatory training for the employees.  Gaines v. Bellino, 173 N.J. 301 (July 24, 2002).