Protecting Your Rights On A Public Works Project by Kenneth S. Grossbart, Abdulaziz, Grossbart & Rudman

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The case of Golden State Boring & Pipe Jacking, Inc. v. Eastern Municipal Water District deals with the timing involved on public works projects with respect to Stop Notices (now called Stop Payment Notices).In 2006, the Eastern Municipal Water District (“Water District”) hired S.J. and Burkhardt, Inc. (“General Contractor”) for the public works project in question.  The General Contractor hired Golden State Boring & Pipe Jacking, Inc. (“Subcontractor”) to perform the tunneling portion of the project.  Performance and payment bonds were executed for the project by Safeco Insurance Company (“Safeco”).  After the Subcontractor’s work was done in September of 2006, they were owed a total of $593,063.20, which the General Contractor had agreed with.

The project was completed in 2008 after three Cessations of Labor which exceeded 30 days.  The Subcontractor alleged that a Stop Notice was filed in January of 2008.  In March of 2008, the General Contractor notified Safeco that it could not meet its obligations.  The Subcontractor then sued the General Contractor for nonpayment of the contract in July of 2008.  The lawsuit also included a cause of action against the Water District for Enforcement of the Stop Notice as well as a cause of action against Safeco in a claim on the Payment Bond.  The Water District accepted completion of the project in October of 2008.

Safeco moved for Summary Judgment on the cause of action regarding the payment bond stating that the Subcontractor’s claim was untimely (Summary Judgment is a ruling by the court on an issue and can only happen when there are no factual issues to be tried as a matter of law).  The court found that since there had been three Cessations of Labor, which triggered the Subcontractor’s duty to file a Stop Notice, the claim was untimely and Safeco’s Summary Judgment was granted.  The remaining causes went to trial.  However, the Subcontractor appealed the Summary Judgment issue.

The Subcontractor’s argument was that time did not begin to run until the Notice of Acceptance/Completion was recorded.  Therefore, it was a timely claim.  However the Court of Appeal agreed with the trial court and affirmed their decision.  Civil Code section 3184 (now Civil Code section 9356) requires a Stop Notice to be filed within 30 days after the recording of a Notice of Cessation or Completion in order for the claim on the Stop Notice to be timely.  There were three separate Cessations recorded on this project, according to both courts, they constituted completion.  That completion is the trigger to the Subcontractors time limitations to file a Stop Notice.  Since the Subcontractor did not file its Stop Notice until more than 30 days after the various Notices of Cessation, the Court of Appeal held that Subcontractor’s claim was untimely.

In order to protect yourself on any project, make sure that you are aware of when you need to file your Stop Payment Notice (or Mechanic’s Lien on private works) so that you do not lose your rights as this subcontractor did.

Download a PDF Copy of Protecting Your Rights on a Public Works Project

Kenneth Grossbart is recognized as one of the foremost authorities in California construction law.  Over the past 30 years, Ken has become a respected speaker on Mechanic’s Liens and other construction related issues.  Abdulaziz, Grossbart & Rudman provides this information as a service to its friends & clients and it does not establish an attorney-client relationship with the reader. This document is of a general nature and is not a substitute for legal advice.  Since laws change frequently, contact an attorney before using this information.  Ken Grossbart can be reached at Abdulaziz, Grossbart & Rudman: (818) 760-2000 or by E-Mail at ksg@agrlaw.com, or at www.agrlaw.com

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