The Board of Directors of the Empire State Subcontractors Association (ESSA) has adopted a 7-bill program for the 2001 legislative session. The Board of Directors of NESCA’s state affiliate approved the legislative program at a December 12th meeting of the Board.

ESSA lobbyist Terry Burke of Harris Beach, LLP announced the 2001 program at NESCA’s January 11th membership meeting. He stated that the legislative program consisted of a variety of proposals intended to protect the rights of subcontractors as well as suppliers to the construction industry. The 2001 ESSA legislative program includes the following:

· Retainage Reduction - This legislation would require a 50% reduction in retainage on all public works projects upon completion of 50% of the project. Retainage held on state and local public works projects can amount to a significant amount of money for many subcontractors. This bill would get a large portion of the money held as retainage by the public owner into the pockets of subcontractors sooner than it now is.

· Bid Listing/Standard Subcontract/Direct Pay - This is “back burner” legislation only intended to be pushed if it appears the Wicks Law is in jeopardy. It would require bid listing of subcontracts in excess of $25,000, a standard form subcontract, and direct payment to listed subcontractors by public owners.

· Payment Bonds - This legislation would require a payment bond be posted on certain “hybrid” projects in New York State such as those where a private owner leases property from a public entity and then constructs a building on this property for the benefit of the private owner. Currently, subcontractors and suppliers have no lien rights on these hybrid projects. This bill would provide payment bond protection to subs and suppliers.

· Hold Harmless - 3rd Parties - This legislation would close a long-standing loophole in the general obligations law by prohibiting hold harmless clauses which require subcontractors to indemnify the general contractor or the general contractor to indemnify the owner, for damages caused by the negligence of 3rd parties.

· Delay Damages - This legislation would impact on all public works projects in New York State by allowing contractors and subcontractors to recover delay damages where such delay is for an unreasonable period of time and is the fault or responsibility of the public owner. Since the 1983 Court of Appeals decision Kalisch-Jarcho, Inc. v. City of New York, in order for a contractor to recover delay damages from a public owner, it has had to prove that the owner acted in bad faith and with deliberate intent, a standard which is almost impossible to meet.

· Retainage held in interest-bearing escrow account - This legislation would require that retainage on public and private projects in NYS be deposited into an interest-bearing escrow account for the benefit of those from which retainage is being held. Several other states already have such escrow account laws.

· Bond to discharge a lien - Currently in New York State, undertakings to discharge liens, which are usually in the form of a bond, are required to be set by a judge with or without a stipulated agreement between the surety providing the bond and the lienor. The time and expense of this procedure can be eliminated by statutorily setting the amount of the undertaking at given percentage of the lien amount. Legislation will be introduced which will follow the New Jersey law which sets the amount of the undertaking at 110% of the amount of the lien.

In addition to the foregoing, ESSA will continue to work with other construction industry organizations in seeking relief from sections 240 & 241 of the Labor Law, the so-called “Safe Place to Work” law. This law places a standard of “absolute liability” on contractors and owners to provide a safe place to work. It has resulted in runaway litigation which has had a huge negative cost and insurance impact on the construction industry since injured workers don’t have to prove negligence. ESSA will join others in seeking amendments to this onerous and costly law.

PRESIDENT’S MESSAGE Go Top

One of the primary reasons why my company joined NESCA many years ago, and why we continue our active membership to this day, is the many opportunities the association provides me to obtain information.........to learn! Through information contained in the Newsletter, our many educational seminars and courses, and our monthly membership meetings, NESCA provides all members with a myriad of opportunities to increase our knowledge and benefit our businesses. Take this year’s membership meetings, for example. Since September, NESCA has presented a series of “mini-seminars” at our monthly meetings which have exposed members to a tremendous amount of useful information! Our January 11th meeting topic focused on “Payment and Payment Language”, and our speaker, Linda Mandel Clemente, supplied members who attended this meeting with a wealth of advice and plenty of tips on shoring up contract language and payment collection practices. Linda supplemented her comments with some great handouts! Those of you who did not come the meeting would have left with helpful documents such as:

· A sample pre-bid letter defining payment terms.

· An examination of pay-when-paid vs pay-if-paid terms.

· Examples of the latest onerous payment language showing up in subcontracts.

· A blanket disclaimer to counter pay-if-paid language.

· Tips for negotiating contingent payment terms out of your subcontract.

· A sample financial questionnaire for the General Contractor.

· How to modify onerous subcontract payment terms.

· A guideline on payment for stored material.

· Sample language to defuse undesirable waiver and back charge practices.

· A sample notice of work stoppage for nonpayment.

· A sample request for payment information from the architect.

· A description of relevant payment laws covering NYS public projects.

· A cash flow checklist for subcontractors.

· Strategies for negotiating fair payment terms.

If you’re not taking advantage of our mini-seminar programs, you really are missing out on lots of valuable information! Even if you can’t come to a particular meeting due to a conflict, send someone else from your company to attend!

In February, in lieu of our regular membership meeting NESCA will hold the 16th Annual Frank Campito Memorial Car/Cash Giveaway. This event will be held on February 22nd at the Century House. Please remember that this event is NESCA’s primary fund raiser for the year, and offers all ticket holders a great evening out as well as the chance to win a grand prize worth $25,000! If you would like a ticket, please contact the NESCA office.

Steve Dewey

President

A WILLFUL EXAGGERATION LIEN CLAIM DOES NOT SURVIVE THE SETTLEMENT OF THAT LIEN’S FORECLOSURE ACTION Go Top

A New York State Appellate Court has recently ruled that when a lienor and property owner agree to discharge the lienor’s mechanic’s lien, a claim for willful exaggeration under New York Lien Law §39 of the amount of the mechanic’s lien counterclaimed by the property owner is not available. Wellbilt Equip. Corp. v. Fireman, 715 N.Y.S.2d203.

In this case, defendant Sheldon Fireman (“Fireman”) hired plaintiff Wellbilt Equipment Corporation (“Wellbilt”) to construct the Red Eye Grill restaurant in Manhattan. Wellbilt asserted that after the construction commenced, Fireman made many alterations to the plans, including changing architects, building plans and the interior construction requirements of the building. Wellbilt informed Fireman that because of these changes, construction costs would rise from the original contracted amount. Upon the completion of the construction and the opening of the Red Eye Grill in November, 1996, Wellbilt demanded that Fireman make the additional payment toward the construction costs, which Wellbilt claimed to be a $5 million increase. Fireman admitted Wellbilt was entitled to almost half of the additional $5 million amount demanded, but disputed the remainder.

Wellbilt filed a $5 million mechanic’s lien (of which close to $3 million remained unpaid and in dispute). Thereafter, Wellbilt commenced an action to foreclose on this mechanic’s lien for the outstanding amount due. After commencing its action, Wellbilt discovered its mechanic’s lien was defective. Because of this fatal flaw, Wellbilt properly filed a second mechanic’s lien and sued under lien #2.

In response to Wellbuilt’s mechanic’s lien foreclosure action, Fireman counterclaimed that 1) each of the filed lien amounts were “willfully exaggerated” and 2) the two liens, when aggregated together, necessarily exaggerated the amount due. Upon a motion for summary judgment, the Court awarded Wellbilt a portion of the money they sought in their foreclosure. The Court denied Fireman’s cross-motions for willful exaggeration. Both parties were preparing for trial on the remaining issues and Fireman was planning an appeal of the summary judgment rulings. Before Fireman’s appeal was perfected, both parties entered into an agreement to discharge the lien, and discontinued the foreclosure. Fireman thereafter petitioned the Appellate Court for an appeal of the lower court ruling.

The Appellate Court addressed Fireman’s two pronged appeal with two rulings. First, the Court held that the filing of Wellbilt’s second mechanic’s lien was plainly done in recognition of its first lien being defective, and the filing did not support Fireman’s claim for willful exaggeration of the amount due. As the first lien was invalid and non-existent, Fireman incorrectly tried to categorize them as duplicative when in fact only one lien existed. Secondly, with respect to willful exaggeration based upon the liens individually, the Court held that a willful exaggeration defense can only be asserted in an action brought to enforce a mechanic’s lien, namely, a foreclosure action. Once a lien has been discharged for whatever reason, the action ceases to be one of enforcement of the mechanic’s lien and the action becomes one in contract. The Court held that it is irrelevant whether mechanic’s liens were discharged for procedural reasons or because of a mutual agreement between the parties.

In conclusion, this case supports the filing of a second mechanic’s lien where a prior one was defective and both liens could not be aggregated to support a claim of willful exaggeration. Furthermore, if parties agree to a stipulated settlement of a mechanic’s lien foreclosure action, a willful exaggeration claim based on such lien will not survive.

Terence J. Burke

NESCA Legal Counsel

WELCOME NEW MEMBER Go Top

Sunstream Corporation

6 Spring Forest Ave.

Binghamton, NY 13905

(607) 724-4400; Fax (607) 724-0386

Contacts: Tom Meade Gaenett Bolan

DON’T FORGET THE GENERAL

DUTY CLAUSE Go Top

The General Duty Clause, section 5(a)(1) of the Occupational Safety and Health Act requires that all workers must be provided with a safe a healthful workplace. OSHA uses this clause in penalty and enforcement actions when a hazardous situation is present and there is no specific standard covering that hazard.

The General Duty Clause states that “each employer shall furnish to each of his employees employment and a place of employment which is free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.”

In simple terms, this statement means that you, as an employer, are obligated to protect your employees from recognized hazards in the workplace even if there is not an OSHA standard that applies to the situation, or if hazards still exist after compliance with a standard. In effect, the General Duty Clause obligates employers to take additional steps toward safety if the well-being of employees is in jeopardy.

WIN $50!! PARTICIPATE IN NEW MEMBER RECRUITMENT INCENTIVE Go Top

Want to make an easy $50? NESCA’s Membership Committee Chairman Mark Woodward has come up with a way for you to do just that through NESCA’s new member recruitment incentive for 2000-2001. Effective retroactive to July 1, 2000, any NESCA member who recruits a new member into the association between July 1, 2000 and June 30, 2001 will receive $50. There is no limit to how many new members may be recruited. If you recruit one new member, you’ll receive $50 -- if you recruit ten new members, you’ll receive $500! The following NESCA members have already won at least $50 in this membership recruitment campaign:

¨ Dick McNitt - KAMCO Supply Corp.

¨ Dennis Colgan - C & C Welding Co., Inc.

¨ Ed Lawless - Weather Guard Industries, Inc.

¨ Russell Veith - Royal Crane, Inc.

¨ Jeff Senft - S & O Construction Services, Inc.

¨ Jim Vellano - Vellano Bros., Inc.

¨ Bill Edwards - Rainbow Sheet Metal

¨ Ed Minkiewicz - Huff ‘n’ Puff Insulators, Inc.

ESSA BOARD ADOPTS 2001 LEGISLATIVE PROGRAM Go Top

PRESIDENT’S MESSAGE Go Top

A WILLFUL EXAGGERATION LIEN CLAIM DOES NOT SURVIVE THE SETTLEMENT OF THAT LIEN’S FORECLOSURE ACTION Go Top

WELCOME NEW MEMBER Go Top

WIN $50!! PARTICIPATE IN NEW MEMBER RECRUITMENT INCENTIVE Go Top