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Loss on ‘Hotly Contested’ Contract Claim in Florida Trial Court Didn’t Automatically Make Subsontractor’s Lien Fraudulent

gas pipelineThere are several things you may have to address if someone with whom you’ve contracted breaches the agreement. One of these is obtaining a lien. In one recent Tampa Bay breach of contract case, the Second District Court of Appeal has reiterated that losing a claim on the merits does not automatically make the lien related to that claim fraudulent. A lien is only fraudulent if you lacked a good-faith basis for your claim or intentionally exaggerated the amount. Losing a closely contested issue in court does not qualify as either willful exaggeration or a lack of good faith.

The commercial contract that ultimately spawned this litigation set out the terms under which a 14-mile-long pipeline would be built in Polk County. Tampa Electric Company contracted with Westra Construction Corporation to build the pipeline. Westra then subcontracted one part of the pipeline — the horizontal directional drill portion of the project — to another business, Gator Boring & Trenching, Inc.

At the outset, Gator anticipated that its work would consist primarily of drilling through sand. Instead, much of what Gator had to do involved drilling through rock. This, of course, significantly increased the amount of work Gator had to do and raised the cost of the subcontractor’s work by a large margin. Gator finished its work and demanded payment. Tampa Electric and Westra, however, did not pay the full amount that Gator demanded. Gator then went out and secured a lien in the amount of $889,792, which included in that sum more than $676,000 in additional costs that were due to the unanticipated work of drilling through rock as opposed to sand.

Gator also sued for breach of contract, asserting that Westra owed in excess of $1.03 million in damages. In its complaint, the subcontractor reiterated its assertion that it racked up more than $676,000 in costs incurred in dealing with unexpected site conditions. Westra asked the trial court to issue a summary judgment in its favor. The contractor argued that, under the terms of the contract, Gator was not entitled to any extra money. Specifically, the contract did not have a changed conditions clause in it, which, Westra argued, meant that Gator assumed the risk of unanticipated site conditions (like the presence of rock) and was legally prohibited from collecting any extra money simply because the work was more difficult, time-consuming, and expensive than Gator anticipated.

The trial court issued a partial summary judgment against Gator on the changed conditions claim, ruling that the lack of a differing site conditions clause meant that Gator was obliged to complete the work regardless of unanticipated conditions and was not entitled to demand extra money simply because the site conditions were not what it expected them to be.

Based upon this, Westra sought to get the lien thrown out entirely. Gator had asserted an entitlement to $676,000 in extra costs as part of the lien, but the court had concluded that the subcontractor was not entitled to this money. This meant, Westra argued, that Gator had exaggerated the lien by $676,000, which should trigger throwing out the lien as fraudulent. The trial court agreed and found the lien fraudulent and unenforceable.

Gator appealed and secured a reversal of the decision that threw out its lien as fraudulent. Solely because Westra emerged victorious in the trial court on Gator’s changed conditions claim did not automatically mean that the subcontractor’s lien based in part upon those costs was fraudulent. Florida courts have long held that if a contract party unsuccessfully disputes an issue of compensation, that does not automatically make a lien arising from that dispute necessarily fraudulent if the dispute was pursued in good faith. “Moreover, simply because a court reduces the amount of a lien does not render the lien fraudulent,” the court’s opinion stated. In order for a lien to be fraudulent, the underlying claim must lack a good-faith basis or be the result of a willful, intentional overstatement of the amount owed. In Gator’s case, the issue of changed conditions costs was a “hotly contested” one that the subcontractor clearly had a good-faith basis for advancing, even if it ultimately emerged unsuccessful on the merits in the end.

There are many things that may go along with a commercial breach of contract case. In addition to your trial, there may be establishing liens, actions to enforce the judgment you’ve won, and other procedures. The experienced Florida commercial litigation attorneys at Stok Folk + Kon have been through all of these procedures before while representing the rights of other clients like you and are here to help you defend your business’ interests.

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

More blog posts:

Media Rights Sale to Argentine Government Stymies Florida Marketing Firm’s Breach of Contract Lawsuit, Florida Business Lawyers Blog, Sept. 16, 2016

Language in Contract Defeats Subcontractor’s Summary Judgment in Florida Contract Breach Case, Florida Business Lawyers Blog, July 15, 2016