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Federal Court in Florida Favors Subcontractor in Dispute Over Assessment of Delay Damages

rapconA prime contractor was unable to secure a summary judgment against its electrical subcontractor regarding the collection of delay damages from the subcontractor. The U.S. District Court for the Middle District of Florida refused to issue the summary judgment because the subcontractor had enough proof to raise a viable argument that it was entirely not to blame for the delays that led to the imposition of damages. The sticking point, for the prime contractor, was the terms of its own subcontractor agreement, which gave the prime contractor discretion to apportion the payment of damages among its subcontractors, but did not give it discretion to determine which subcontractors were, or were not, at fault in causing the delay.

The case arose from a project at an air force base in North Carolina. The project’s prime contractor, Central Florida-based The Davis Group, Inc., agreed to build a radar approach control for the US Army Corps of Engineers. Davis signed Ace Electric, Inc. to serve as the subcontractor responsible for electrical work on the project. The contract called for certain protocols if the electrical work did not proceed according to schedule, including the contractor’s right to recover from its subcontractors any damages it owed on account of a delay if that subcontractor was wholly or partially responsible for the delay.

The project ran well over the deadline, not wrapping up until more than eight months after the original deadline. The Corps assessed liquidated damages against Davis for those delays. Davis, in turn, attempted to exercise its agreements with its subcontractors to make the subcontractors pay the damages. Ace refused to pay any of the damages. A flurry of court filings ensued, with Davis suing Ace in federal court in Florida for breach of contract. The prime contractor eventually filed three different motions for summary judgment against the subcontractor, arguing that the terms of its contract with Ace plainly gave it the right to collect the delay damages from the subcontractors, including Ace. Ace, on the other had, argued that it could not be required to pay because it did not cause the delays and that the contractor’s apportionment of damages was unreasonable.

The court denied all of the contractor’s motions. One of the failings in Davis’ case lay within the terms of its agreement with its subcontractor. While the contract with Ace gave Davis the right to collect a portion of the liquidated delay damages from the subcontractor, the agreement only allowed Davis to do so if the subcontractor was responsible, in whole or in part, for the delays that triggered the damages assessment. Equally importantly, while the contract gave the contractor wide latitude in deciding which portion each subcontractor should pay, it did not give Davis the discretion to decide unilaterally whether or not a particular subcontractor had a hand in causing the delays.

In this case, there was a genuine dispute regarding whether or not Ace was part of the cause for the delays. The subcontractor had an expert witness who concluded that the delays were 100% not Ace’s fault. If Ace was blameless when it came to causing the project delays, by the terms of the agreement, Davis was not entitled to collect a portion of the liquidated damages from Ace. Since Ace had enough evidence to demonstrate the presence of a legitimate factual dispute regarding whether Davis was entitled to collect from the subcontractor, issuing a summary judgment in favor of the prime contractor was improper.

In dealing with any complex business dispute, such as a contractor-subcontractor disagreement, it is important to have experienced and skilled legal counsel on your side. The Florida business law attorneys at Stok Folk + Kon have many years of experience helping business clients pursue the best results possible. Talk to our commercial litigation attorneys today about your case and see how we can help you.

Contact us online or by calling (305) 935-4440 to schedule your consultation.

More blog posts:

Default Judgment Blocks Arguments About Liability in Florida Contract Dispute Case, Florida Business Lawyers Blog, Nov. 11, 2015

Company’s Lack of Bad Intent Allows It to Escape Contempt in Florida Breach of Contract Case, Florida Business Lawyers Blog, May 27, 2015