Fraser Engineering Company, Inc. v. IPS-Integrated Project Services, LLC et al
Filing
54
///ORDER re 12 Motion Verified Motion for Ex-Parte Attachment to Perfect Mechanic's Lien. For the reasons set within, the court concludes that the defendants have not demonstrated that Fraser's lien should be dischar ged or reduced. The court therefore overrules the defendants' objections and grants Fraser's motion to perfect the lien in the amount of $4,917,122.02. So Ordered by Magistrate Judge Andrea K. Johnstone.(ko) Modified on 3/28/2018 to add: ///(ko).
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Fraser Engineering Company, Inc.
v.
Case No. 17-cv-102-JD
Opinion No. 2018 DNH 067
IPS-Integrated Project Services, LLC
and Lonza Biologics, Inc.
O R D E R
Fraser Engineering Company, Inc., alleges that IPSIntegrated Project Services, LLC, and Lonza Biologics, Inc.,
wrongfully withheld payments for subcontract work Fraser
performed on a construction project.
IPS served as general
contractor on the project, which involved the design and
construction of a building in Portsmouth, New Hampshire.
owned the building.
Lonza
Fraser entered into a subcontract with IPS
to provide mechanical and plumbing services as part of the
project.
The sole issue before the court is whether Fraser may
perfect a mechanics lien on the property. 1
Fraser moved for, and
was granted, an ex parte attachment in state court.
1
The
Arbitration will resolve the merits of the parties’
dispute. See Jan. 11, 2018 Order (doc. no. 40) at 8-9
(DiClerico, J.) (ordering the parties to proceed to
arbitration).
defendants objected to that attachment before removing the case
to this court.
They then filed an assented-to motion for a
hearing on their objections pursuant to N.H. Rev. Stat. Ann.
(RSA) § 511-A:3.
The district judge granted that motion and
directed Fraser to refile its complaint and its motion for ex
parte attachment and the defendants to refile their objections
to that motion.
(DiClerico, J.).
Mar. 22, 2017 Order (doc. no. 8) at 2-3
The district judge designated the undersigned
magistrate judge, pursuant to 28 U.S.C. § 636(b)(1)(A), to
consider and resolve the defendants’ objections. 2
The court held a hearing on the objections in May 2017.
At
that time, the court granted the parties leave to file posthearing memoranda and statements of fact.
Following the
hearing, Fraser moved to compel the defendants to produce the
prime contract governing the project.
The defendants objected,
and the district judge referred the motion to the undersigned.
2
The undersigned indicated in a previous order that the
mechanics lien issue had been referred for report and
recommendation. In doing so, the undersigned misconstrued under
which subsection of 28 U.S.C. § 636 the district judge
designated this matter for review. Section 636(b)(1)(A) allows
a district judge, with certain exceptions not presently
applicable, to “designate a magistrate judge to hear and
determine any pretrial matter pending before the court . . . .”
The undersigned may therefore resolve the present matter by way
of written order. See, e.g., Osgood v. Kent, No. 11-cv-477-SM,
2011 WL 6740411, at *1 (D.N.H. Dec. 21, 2011) (magistrate judge
resolved mechanics lien issue via order); H.E. Contracting v.
Franklin Pierce Coll., 360 F. Supp. 2d 289, 290 (D.N.H. 2005)
(same).
2
The court initially deferred ruling on the motion to compel
based on the parties’ representation that they would mediate
this matter in November 2017.
When that mediation did not
occur, however, the court conducted an in camera review of the
prime contract and granted the motion to compel in part.
Following that ruling, the parties submitted a statement of
undisputed facts, statements of disputed facts, post-hearing
memoranda, and replies.
The mechanics lien issue is therefore
ripe for resolution.
Having reviewed the parties’ pre- and post-hearing filings
and their arguments at the hearing, the court overrules the
defendants’ objections to Fraser’s attachment.
As discussed
below, the defendants have not demonstrated that Fraser failed
to timely perfect the lien, that Fraser waived the lien, or that
the lien amount should be reduced.
Fraser is accordingly
entitled to a mechanics lien on the property in the amount of
$4,917,122.02.
I.
Standard of Review
Absent an applicable federal statute, “the law of the state
where the [district] court is located” governs attachment
proceedings.
Fed. R. Civ. P. 64(a), (b).
Under New Hampshire
law, any person who performs labor or furnishes materials in the
amount of $15 or more when erecting or repairing a building
3
pursuant to a contract with the owner of that building has a
lien on the materials furnished and on the building.
447:2, I.
See RSA
RSA 447:5 extends that right to subcontractors
performing work or furnishing materials pursuant to a
subcontract, so long as certain notice requirements are met.
The lien continues for 120 days after the work is performed or
the materials are furnished, unless payment is made.
447:9.
See RSA
The lien may be secured beyond the 120-day period by
attaching the subject property during the lien period.
RSA
447:10.
RSA 511-A, which governs pre-judgment attachment
procedures, applies to proceedings to secure mechanics liens
under RSA 447.
See Chagnon Lumber Co. v. Stone Mill Const.
Corp., 124 N.H. 820, 823 (1984).
Under RSA 511-A:8, a court may
attach property ex parte if a plaintiff establishes probable
cause of its basic right to recovery and the amount of the lien.
RSA 511-A:8, III; Chagnon, 124 N.H. at 823.
When a court grants
an ex parte attachment, the party against which the attachment
is made may object and is entitled to a prompt hearing.
RSA
511-A:8.
Though a burden-shifting framework typically applies during
attachment hearings, see RSA 511-A:3, several courts, including
at least two in this district, have declined to follow this
framework when analyzing mechanics liens, see Osgood v. Kent,
4
No. 11-cv-477-SM, 2011 WL 6740411, at *3 (D.N.H. Dec. 21, 2011);
H.E. Contracting v. Franklin Pierce Coll., 360 F. Supp. 2d 289,
291 (D.N.H. 2005); W. Side Dev. Grp. v. D’Amour, No. 04-C-018
(N.H. Super. Mar. 24, 2004); Consolidated Elec. Distrib., Inc.
v. SES Concord, Co., No. 89-C-571/579 (N.H. Super. Nov. 21,
1989).
Those courts instead analyze whether a plaintiff has met
its burden under RSA 511-A:8, which a defendant may rebut by
challenging the plaintiff’s basic right to recovery, the lien
amount, or the notice provisions.
See Osgood, 2011 WL 6740411,
at *3; H.E. Contracting, 360 F. Supp. 2d at 291.
Both parties
agreed at the hearing that the RSA 511-A:3 framework does not
apply in the present context.
at 71-74.
See Hearing Trans. (doc. no. 29)
Accordingly, the court will analyze this matter under
the standard articulated by those courts that have found RSA
511-A:3 inapplicable.
II.
Background 3
Lonza leases a building on property in Portsmouth, New
Hampshire.
Doc. no. 43 ¶ 1.
On September 8, 2014, Lonza and
IPS entered into an agreement for the design, procurement, and
construction of a manufacturing facility on that property.
¶ 2.
Id.
That agreement was subsequently amended on July 19, 2016.
3
The following background is derived from the parties’
statement of undisputed facts and the evidence in the record.
5
Id. 4
Pursuant to these documents, Lonza was required to pay IPS
for “the cost of trade labor including the indirect costs,
overhead and profit for all [s]ubcontractors and equipment
necessary for construction.”
See Prime Contract § 17.16
On October 9, 2015, IPS notified Fraser that it intended to
award Fraser a subcontract to perform mechanical piping and
plumbing work on the project.
Doc. no. 43 ¶ 5.
Fraser and IPS
executed a formal subcontract on February 11, 2016, whereby
Fraser agreed to furnish all labor, services, materials, tools,
equipment, supplies, and any other items necessary or incidental
to perform the plumbing and mechanical scope of work on the
project.
Id. ¶¶ 3, 6.
$5,312,100.
The original subcontract sum was
Id. ¶ 7.
The subcontract contained specific procedures for
performing extra work.
See, e.g., doc. no. 12-1 at 5, 71.
Though Fraser did not always follow those procedures, IPS
approved change orders totaling $1,535,350.87.
12-2, 12-3.
$317,461.17.
See doc. nos.
IPS rejected four change orders totaling
See doc. no. 12 ¶ 12; doc. no. 12-5.
In December 2015, Fraser and IPS began having discussions
about Fraser potentially accelerating its work on the project.
4
The court will refer to the September 8, 2014 agreement
and the July 19, 2016 amendment collectively the prime contract
unless it is necessary to distinguish between them.
6
Doc. no. 20-4.
On December 11, 2015, Fraser indicated to IPS
and Lonza that doing so would result in labor inefficiencies.
Doc. no. 20-5.
On December 21, 2015, IPS directed Fraser to
accelerate its work by using extra overtime under the
subcontract.
Doc. no. 20-7.
The accelerated work continued for
months, during which time the parties communicated on numerous
occasions about purported labor inefficiencies resulting from
the acceleration.
See doc. nos. 20-8 through 20-14.
The
inefficiencies directly resulted in Fraser’s employees working
59,845 additional man-hours on the project.
Doc. no. 12-6 at 7,
29.
The subcontract required Fraser to tag valves and mark
pipes.
Doc. no. 43 ¶ 12; doc. no. 12-1 at 32.
this work on August 9, 2016.
Fraser started
Doc. no. 20-16 at 11.
The work
continued through at least October 3, 2016.
See id. at 11-13;
doc. no. 20-17 at 4-7; doc. no. 20-18 at 1.
All told, Fraser
employees spent 1,199 hours tagging valves and marking pipes in
August, September, and October 2016.
See doc. no. 20-16 at 11-
13; doc. no. 20-17 at 4-7; doc. no. 20-18 at 1.
The subcontract contained several additional clauses
relevant to the present dispute.
Under section 10.6, IPS has
the sole and exclusive option to arbitrate any disputes arising
under the subcontract, which it has invoked in this case.
no. 12-1 at 13.
Section 4.18 contains what the defendants
7
Doc.
characterize as a waiver of indirect damages.
8.
Doc. no. 12-1 at
Section 2.17 required Fraser to notify IPS of any unforeseen
conditions resulting in changes to the work, and indicated that
failure to do so would result in Fraser waiving any claim for an
adjustment of time of completion, milestone dates, or agreement
value.
Id. at 4-6.
Section 2.6 required IPS to submit
conditional lien waivers with each request or invoice for a
progress payment.
Id. at 3, 79.
During the course of its time
on the project, Fraser submitted eight individual lien waivers
pursuant to section 2.6.
Fraser did not exclude any claims from
the first seven of these waivers, the last of which was executed
on May 31, 2016.
See doc. no. 14-5.
The eighth waiver,
executed October 26, 2016, included exclusions.
See doc. no. 45
¶ 29.
On August 31, 2016, Fraser submitted a closeout claim to
IPS in the amount of $4,006,505.72.
12-6.
Doc. no. 43 ¶ 10; doc. no.
Fraser specifically sought $3,324,083.30 for unpaid man-
hours caused by the labor inefficiency (doc. no. 12-6 at 7, 29)
and $682,422.42 resulting from changes in the scope of Fraser’s
work during the course of the project (doc. no. 12-6 at 2, 4,
7).
See also doc. no. 43 ¶ 10.
Fraser further indicated in its
closeout claim that it was entitled to $1,554,867.29 in
retainage and unpaid contract balance amounts.
2.
Doc. no. 12-6 at
On September 16, 2016, IPS rejected the closeout claim.
8
Doc. no. 43 ¶ 11.
On January 24, 2017, Fraser provided IPS and Lonza with a
notice of intent to lien.
See doc. no. 12-7.
Two days later,
Fraser filed a verified motion for ex parte attachment to
perfect a mechanics lien in Rockingham County Superior Court.
See doc. no. 1-1 at 12-18.
Fraser specifically sought a lien
totaling $4,917,122.02, including $3,324,083.30 in unpaid manhours resulting from the labor inefficiency, $682,422.42 caused
changes to the scope of Fraser’s work, $593,155.13 in
outstanding subcontract balance, and $317,461.17 in outstanding
change order requests.
Id. at 12.
The state court granted
Fraser’s motion on an ex parte basis to the extent it sought to
attach the building, fixtures, and leasehold held by Lonza.
at 19.
Id.
After appearing and objecting to the attachment in state
court, the defendants removed the matter here.
See doc. no. 1.
III. Discussion
By virtue of having received an ex parte attachment in
state court, Fraser has met its initial burden under RSA 511A:8.
See id. (requiring that a plaintiff “establish[] probable
cause to the satisfaction of the court of [its] basic right to
recovery and the amount thereof” in order to receive an ex parte
attachment).
Thus, the burden shifts to the defendants to
challenge Fraser’s basic right to recovery, the lien amount,
9
and/or the notice provisions.
See Osgood, 2011 WL 6740411, at
*3; H.E. Contracting, 360 F. Supp. 2d at 291.
In objecting to
the lien, the defendants contend (1) that Fraser did not timely
perfect the lien; (2) that Fraser waived its right to the lien;
and (3) that the lien amount must be reduced.
The court
considers each argument in turn.
A.
Failure to Timely Perfect
The defendants contend that Fraser did not perfect the
mechanics lien within 120 days, as required by RSA 447:9 and RSA
447:10.
Though the defendants concede that Fraser last
performed work on the project within the 120-day period, they
argue that any work performed after September 16, 2016 — 132
days before Fraser sought to perfect the lien — was “remedial
punch list work and other inconsequential work.”
20.
Doc. no. 44 at
Relying on Bader Co. v. Concord Elec. Co., 109 N.H. 487
(1969), the defendants contend that this work cannot extend
Fraser’s lien.
In response, Fraser argues that it performed work required
by its subcontract with IPS — namely, tagging valves and marking
pipes — less than 120 days before it sought to secure the
mechanics lien.
In Fraser’s view, work expressly required by a
subcontract must count toward the 120-day calculation.
Fraser
further contends that the facts in Bader bear little resemblance
to those in this case.
10
Neither side is entirely correct.
On the one hand, the
defendants overstate the holding in Bader.
In that case, the
New Hampshire Supreme Court ruled that certain work “could be
found not to . . . extend the duration of the plaintiff’s lien”
and that the trial court therefore “could properly find and rule
that [the plaintiff] did not have a mechanic’s lien . . . .”
Id. at 489 (emphasis added) (citations omitted).
This language,
plainly conditional, does not constitute a broad holding.
Indeed, it does not even suggest that the trial court’s ruling
was the only acceptable outcome.
Rather, the court in Bader
merely concluded that the trial court did not err in ruling for
the defendant based on the evidence before it.
Bader’s
precedential value is accordingly limited.
And in any event, the court agrees with Fraser that Bader
is factually distinguishable.
Whereas the plaintiff in Bader
returned to the jobsite nearly a month after completing the
subcontract to perform certain remedial work, the record here
suggests that Fraser remained on the property continuously
through at least October 3, 2016.
20-18.
See doc. no. 20-17; doc. no.
Similarly, while the Bader court accepted the trial
court’s finding the work at issue “was not done pursuant to the
contract,” id. at 488-89, there is no dispute here that the
subcontract expressly required Fraser to tag valves and mark
pipes, see doc. no. 12-1 at 32 (“Perform all tagging and
11
labelling as indicated per the contract drawings and
specifications.”); doc. no. 43 ¶ 12.
These factual differences
further limit Bader’s applicability to the present
circumstances. 5
At the same time, however, Fraser’s contention that work
performed pursuant to a subcontract must count toward the 120day calculation appears to be at odds with precedent.
In
Peabody v. Wentzell, 123 N.H. 416 (1983), the New Hampshire
Supreme Court declined to reach whether the plaintiff’s work was
inconsequential, gratuitous, or remedial “because there was
sufficient evidence to support the . . . finding that the work
at issue was not included in the parties’ contract.”
419.
Id. at
Though arguably dicta, this language suggests that work
performed pursuant to a contract, but nonetheless
inconsequential, gratuitous, or remedial, may not extend a
mechanics lien period.
As the New Hampshire Supreme Court has
neither disavowed nor elaborated upon this language, 6 this court
5
The defendants’ reliance on Fabcon Precast, LLC v.
Zirkelbach Constr. Inc., No. 218-2015-cv-1101 (N.H. Super. Nov.
25, 2015), is misplaced for essentially the same reasons. In
Fabcon, the court concluded that caulking work performed by the
plaintiff did not extend the lien period because it was not
performed as part of the final contract. Id. at 5. There is no
similar evidence in the record here.
6
Indeed, there appears to be only one other New Hampshire
Supreme Court case that even addresses what types of work
qualify to extend a mechanics lien. See Tolles-Bickford Lumber
Co. v. Tilton Sch., 98 N.H. 55 (1953). But that case is
12
is disinclined to hold as a matter of law that work done
pursuant to a contract necessarily extends a mechanics lien.
For its part, the mechanics lien statute provides little
guidance.
For one, any strict construction of that statute in
Fraser’s favor would seemingly be at odds with Peabody.
More
fundamentally, however, RSA 447 provides no definition of what
sort of work creates a lien thereunder, and in fact uses
multiple terms interchangeably to refer to that work.
RSA 447:2, :5 (“labor”) with RSA 447:9 (“services”).
Compare
As such,
the court is left without any concrete standard for determining
what types work performed pursuant to a contract might
nonetheless fail to extend a mechanics lien period.
Even so, the court is not without recourse.
The New
Hampshire Supreme Court has noted, as recently as 2010, that
“the purpose of the mechanics’ lien law is remedial.”
Alex
Builders & Sons, Inc. v. Danley, 161 N.H. 19, 24 (2010)
(citation omitted).
“The general rule is to construe remedial
statutes liberally in favor of the person the statute is
designed to benefit.”
Id.
Here, Fraser has presented evidence
that its employees tagged valves and marked pipes for 1,199
hours over a nearly two-month period, concluding less than 120
unhelpful here, both because, like Bader, it addressed work
performed after the underlying contract was completed and
because it concerned allegedly gratuitous work. See id. at 58
(citation omitted).
13
days before the date Fraser sought to perfect its lien.
See
doc. no. 20-16 at 11–13; doc. no. 20-17 at 4-7; doc. no. 20-18
at 1.
Additionally, there is no dispute that the subcontract
expressly required valve tagging and pipe marking.
12-1 at 32; Hearing Tr. (doc. no. 30) at 91.
See doc. no.
Given the remedial
nature of the mechanics lien statute, and the absence of any
authority compelling a different outcome, the court cannot
conclude that this work was so de minimis that it did not extend
Fraser’s lien.
The court therefore overrules the defendants’
objections insofar as they contend that Fraser failed to timely
perfect the mechanics lien.
B.
Waiver
The defendants further four arguments with respect to
waiver: (1) that the arbitration clause in the subcontract
constituted a waiver of the lien; (2) that Fraser waived the
lien by waiving indirect damages in the subcontract; (3) that
Fraser waived the lien by executing lien waivers throughout the
course of its work on the project; and (4) that Fraser waived
the lien by failing to give the defendants notice of its
inefficiency claim prior to performing the work. 7
7
The court
IPS also argues in its reply to Fraser’s post-hearing
memorandum that the prime contract contains an explicit lien
waiver and that the subcontract incorporated the prime contract
through a “flow-down” provision. As IPS does not explain its
delay in raising this argument, and Fraser has not had the
14
considers these arguments in succession.
1.
Arbitration Clause
The defendants contend that the arbitration clause in the
subcontract constitutes a waiver of Fraser’s mechanics lien
claim.
They cite Pine Gravel, Inc. v. Cianchette, 128 N.H. 460
(1986), in support of this request.
The court need not linger
on this argument, as Pine Gravel in fact holds the opposite.
See id. at 465 (“[An] arbitration provision is not a waiver of
the . . . right to a [mechanics] lien.”).
The court accordingly
overrules the defendants’ objections insofar as they contend the
arbitration clause waived the lien. 8
2.
Waiver of Indirect Damages
Next, the defendants point to section 4.18, which they
contend precludes Fraser from recovering indirect damages from
IPS.
The defendants argue that this section constitutes a valid
opportunity to respond, the court declines to address it. See
Pukt v. Nexgrill Industries, Inc., 2016 DNH 085, 12 n.2
(DiClerico, J.) (citations omitted) (“Ordinarily, the court does
not consider arguments raised for the first time in a reply.”);
cf. United States v. Casey, 825 F.3d 1, 12 (1st Cir. 2016)
(“[A]rguments raised for the first time in an appellate reply
brief [are] ordinarily deemed waived . . . .”).
8
To the extent the defendants believe Pine Gravel mandates
the dismissal of Fraser’s underlying action, then this request
is beyond the scope of the present review. See Mar. 22, 2017
Order (doc. no. 8) (designating the undersigned to resolve “the
defendants’ objections to the plaintiff’s attachment”). The
court notes, however, that Judge DiClerico has already indicated
that “[o]nce the motion for an attachment is resolved, the case
will be closed.” Jan. 11, 2018 Order (doc. no. 40) at 9.
15
waiver of the mechanics lien.
The court disagrees.
It is well-established under New
Hampshire law that in order to waive the right to a mechanics
lien by contract, “a clear expression of intent to waive the
right must exist.”
Daniel v. Hawkeye Funding, Ltd. P'ship, 150
N.H. 581, 584 (2004) (quoting Pine Gravel, 128 N.H. at 465).
Unlike in Daniel, where the contract in question had a provision
titled “No Liens” and expressly waived “any Lien on the Facility
Site, the Facility, or any part or interest in either,” id. at
582, section 4.18 does not mention liens at all, see doc. no.
12-1 at 7.
The court accordingly declines to discharge the lien
pursuant to section 4.18. 9
3.
Subsequent Lien Waivers
The defendants next contend that Fraser executed a series
of eight explicit lien waivers during the course of its work on
the project.
The defendants contend that Fraser did not exclude
any of its claims from the first seven of these waivers, the
last of which was executed May 31, 2016.
9
See doc. no. 14-5.
The defendants appear to alternatively argue that even if
section 4.18 did not constitute a lien waiver, it did waive
Fraser’s right to recover much of the lien amount. In response,
Fraser contends that the amounts it seeks to recover are not
consequential or indirect damages, but rather actual costs
arising from labor and materials related to the project. These
arguments, which go to the heart of the underlying dispute, are
beyond the scope of the present analysis.
16
The defendants concede that the eighth waiver, executed October
26, 2016, included exclusions.
See doc. no. 45 ¶ 29.
The
defendants contend that in executing these waivers, Fraser
waived some, if not all, of its lien.
Fraser does not dispute that it signed the waivers in
question.
But according to Fraser, the waivers are not
enforceable because IPS knew they were not accurate at the time
they were signed.
To this end, Fraser contends that it
repeatedly communicated with the defendants between December 11,
2015, and August 31, 2016, regarding labor inefficiencies
stemming from IPS accelerating Fraser’s work on the project.
See doc. nos. 20-4 through 20-14.
Fraser cites Metro. Pier &
Exhibition Auth. ex rel. Pitt-Des Moines, Inc. v. Mc3D, Inc., 56
F. Supp. 2d 984, 988 (N.D. Ill. 1999), for the proposition that
a party cannot rely on an explicit lien waiver when it knew the
waiver did not accurately reflect the current subcontract price
and payment status.
Though both sides’ arguments have their relative merits,
the court ultimately declines to discharge the lien on the basis
of these waivers.
reasons.
The court reaches this determination for two
First, there can be no reasonable dispute, based on
the evidence in the record, that the defendants were aware that
Fraser would seek compensation for labor inefficiencies at the
time many of the waivers were signed.
17
Though Metro. Pier does
not control the present analysis, the defendants have not cited,
and the court cannot identify, any New Hampshire Supreme Court
decision rejecting the proposition in that case.
Given the
remedial nature of the mechanics lien law, the court is unable
to say with certainty that the New Hampshire Supreme Court would
ignore the defendants’ awareness of the labor inefficiencies and
strictly enforce the lien waivers.
Thus, the court declines to
hold as a matter of law that the defendants’ awareness is
irrelevant. 10
Even assuming the waivers are enforceable, however, the
court is unable to determine from the present record the extent
to which this affects Fraser’s lien.
The defendants do not
dispute that the last waiver under which Fraser did not reserve
its rights was executed May 21, 2016.
10
Yet they have made no
Typically, when presented with an issue of New Hampshire
law that the New Hampshire Supreme Court has not yet confronted,
this court “must make an informed prophecy of what that court
would do in the same situation.” Galvin v. EMC Mortg. Corp., 27
F. Supp. 3d 224, 227 (D.N.H. 2014) (brackets, internal quotation
marks, and citations omitted). Prudence cautions against doing
so here. The waivers at issue do not merely release lien
rights, but also “all claims, demands, or causes of
action . . . which [Fraser] has, or might under any present or
future law, assert against [IPS] or [Lonza] relating to the
Partial Payment and/or the labor services, materials or
equipment for which the partial payment has been made.” Doc.
no. 14-5 at 1. In other words, the enforceability of these
waivers goes directly to the merits of the underlying dispute.
That dispute is not before this court; it is left for the
arbitrator to decide.
18
attempt to separate the unpaid work Fraser performed before that
date from the unpaid work Fraser performed thereafter.
As there
is no dispute that Fraser performed the work in question, this
failure leaves the court with an insufficient record to reduce
the lien by those amounts for which payment became due on or
before May 21, 2016.
See Guyotte v. O’Neill, 157 N.H. 616, 620-
621 (2008) (noting that lien waivers do not extend to amounts
due and owing after their execution).
The court accordingly overrules the defendants’ objections
to the extent they rely on the lien waivers Fraser executed
during the course of its performance on the project.
4.
Notice of Inefficiency Claim
Finally, the defendants argue that Fraser waived its right
to include its inefficiency claim in the lien because it did not
give the defendants notice of that claim before performing the
work.
In support of this argument, the defendants point to
section 2.17 of the subcontract, which states in pertinent part
that “[Fraser] shall notify [IPS] immediately of any unforeseen
conditions that will result in changes to work.
Failure [to do
so] shall result in waiver by [Fraser] of a claim for any
adjustment to time of completion, milestone dates, or agreement
value, related to the impacts.”
(capitalization omitted).
Doc. no. 12-1 at 4-5
In response, Fraser notes that
section 2.17 does not explicitly waive liens and contends that,
19
in any event, Fraser provided the defendants with notice of its
labor inefficiency claim before IPS directed Fraser to
accelerate its work.
Fraser has the better argument at this juncture.
Section
2.17 neither mentions liens nor uses language supporting the
inference that it was designed to extend to liens.
It is
therefore not a clear expression of Fraser’s intent to waive its
lien rights.
See Daniel, 150 N.H. at 584.
Moreover, Fraser has
provided evidence that it first informed the defendants on
December 11, 2015, that accelerating its work on the project
would result in labor inefficiencies, but that IPS nevertheless
ordered Fraser to accelerate.
See doc. nos. 20-5; 20-7.
While
the arbitrator will ultimately determine the legal significance
of these facts, they are sufficient for now to sustain Fraser’s
lien claim.
The court therefore declines to discharge or reduce
the lien based on the language in section 2.17.
C.
Lien Amount
Finally, the defendants contend that the mechanics lien
amount should be reduced.
They raise a series of arguments to
this end: (1) that Fraser overstated its claim to include
disputed amounts; (2) that the lien is limited by law to the
amount Lonza owed IPS at the time of Fraser’s notice of lien;
and (3) that Fraser’s claim prematurely includes unpaid
retainage.
Additionally, Lonza argues that the lien amount must
20
be reduced based on the New Hampshire Supreme Court’s decision
in Axenics, Inc. v. Turner Constr. Co., 164 N.H. 659 (2013).
Once again, the court discusses each argument in turn.
1.
Disputed Amounts
The defendants contend that Fraser improperly included
amounts for the labor inefficiency and outstanding change order
requests as part of its lien.
The defendants claim that Fraser
did not receive prior written approval from IPS to perform the
work resulting in these amounts, as required by section 2.18 of
the subcontract.
The defendants contend that, absent written
authorization or actual knowledge, claims for additional or
extra work do not fall within the scope of the mechanics lien
statute.
The court is not persuaded by this argument.
It is well-
established under New Hampshire law that, under certain
circumstances, “the written terms of a contract may be waived
orally or by implication.”
D.M. Holden, Inc. v. Contractor’s
Crane Serv., Inc., 121 N.H. 831, 835 (1981) (citation omitted).
To this end, the New Hampshire Supreme Court has upheld a
finding that an advanced-approval requirement in a construction
contract was waived when that requirement was “disregarded by
the parties.”
Id.
Here, Fraser has provided evidence, disputed
by the defendants, that neither Fraser nor IPS adhered to the
requirements of section 2.18 during the course of Fraser’s work
21
on the project.
While the arbitrator will ultimately resolve
this dispute, Fraser has a non-frivolous argument that the
parties’ subsequent conduct eliminated or limited section 2.18’s
enforceability.
The court therefore declines to reduce the lien
based on a strict construction of section 2.18.
2.
Amount Owed by Lonza to IPS
The defendants next argue that Fraser’s lien must be
limited to the amount Lonza owed IPS under the prime contract at
the time Fraser provided notice of its intent to lien.
The
defendants cite Russell v. Woodbury, 135 N.H. 432 (1992), and
RSA 447:6 in support of this argument.
The defendants contend
that Lonza owed IPS $1,866,951.87 under the prime contract on
the date Fraser provided its notice of lien. The defendants
contend that Fraser’s lien should be limited to this amount.
Fraser responds with two arguments.
First, Fraser contends
that the prime contract is a “cost of work” contract that did
not limit the total amount Lonza may be required to pay IPS for
work on the project.
Alternatively, Fraser contends that IPS
has failed to adequately demonstrate that Lonza only owed
$1,866,951.87 under the prime contract as of the date Fraser
provided its lien notice.
Either way, according to Fraser, the
lien amount should not be reduced.
Fraser’s first argument is persuasive.
RSA 447:6 states
that if a subcontractor provides notice of its intent to lien
22
after performing labor, its mechanics lien “shall be valid to
the extent of the amount then due or that may become due to the
contractor . . . .”
The New Hampshire Supreme Court has
interpreted this language to limit recovery “to those sums in
fact due and owing to the general or principal contractor at the
time of notice plus any sums which actually become due to the
general or principal contractor after notice is given.”
Russell, 135 N.H. at 435.
Here, Fraser has demonstrated that
IPS has not paid it for work it performed and materials it
furnished as part of the project.
Should Fraser prevail on the
merits of its underlying claims, those amounts are actually due.
Additionally, Fraser has pointed to language in the prime
contract suggesting that Lonza must pay IPS for “the cost of
trade labor including the indirect costs, overhead and profit
for all [s]ubcontractors and equipment necessary for
construction.”
See Prime Contract § 17.16; see also id. §
10.6.1 (requiring Lonza to pay IPS for work performed by
subcontractors under their subcontracts).
Given this language,
the court cannot conclude that $1,866,961.87 is the total
actually due to IPS under the prime contract.
The court
therefore declines to limit the lien to that amount.
3.
Unpaid Retainage
The defendants contend that Fraser’s lien claim improperly
23
includes unpaid retainage. 11
The defendants contend that
Fraser’s inclusion of retainage is premature, as Fraser has not
yet met certain conditions precedent to be entitled to that
amount.
In response, Fraser argues, among other things, that it
properly included retainage in its lien because its lien arose
when it performed the work.
The court agrees with Fraser.
Under New Hampshire law, the
“creation of a lien does not depend upon the owner’s nonpayment;
rather, the contractor ‘creates’ its own lien by performing the
work or furnishing the materials.”
Daniel, 150 N.H. at 583.
There does not appear to be any meaningful dispute here that IPS
is withholding retainage for work Fraser actually performed or
materials Fraser actually furnished as part of the project.
This amount was therefore properly included in the lien.
4.
Axenics
At the hearing, Lonza argued that Fraser’s lien must be
reduced based on the New Hampshire Supreme Court’s holding in
Axenics.
Lonza elaborates upon this argument in its post-
hearing memorandum.
In pertinent part, Lonza contends that the
majority of Fraser’s claim is based upon equitable adjustments
11
IPS is withholding $627,187.47 in unpaid retainage. Doc.
no. 43 ¶ 21. This amount includes the $593,155.13 in
outstanding subcontract balance Fraser includes in its lien and
$34,032.46 in credits Fraser has agreed to provide IPS. Doc.
no. 12-4 at 2.
24
or quasi-contractual remedies.
Citing Axenics, Lonza contends
that Fraser may not avail itself of these remedies because clear
contractual provisions control the dispute.
Lonza’s argument is unavailing for at least three reasons.
First, another judge in this district considered and rejected
the same argument in Osgood v. Kent.
*3.
See 2011 WL 6740411, at
Lonza makes no attempt to distinguish Osgood, and the court
finds the reasoning in that case to be persuasive.
The court
therefore declines to deviate from Osgood here.
Next, as noted in Osgood, the New Hampshire Supreme Court
has previously reversed the discharge of a mechanics lien in a
case brought “under theories of breach of contract, quantum
meruit and unjust enrichment . . . .”
Inc. v. Danley, 161 N.H. 19, 21 (2010).
Alex Builders & Sons,
No portion of that
decision suggests that a party cannot secure a mechanics lien
for claims brought under a quasi-contract theory, at least so
long as there was an underlying contract between the parties.
This, too, militates against Lonza’s reading of Axenics.
Finally, and perhaps most fundamentally, Lonza in essence
raises a substantive defense to Fraser’s underlying claims.
It
is up to the arbitrator, not this court, to determine the
relative merits of Fraser’s claims and the defendants’ defenses
to those claims.
It is beyond the scope of the present review
to delve into those waters now.
25
The court therefore declines to reduce the lien simply
because Fraser asserts claims under a quasi-contract theory.
IV.
Conclusion
For the reasons set forth above, the court concludes that
the defendants have not demonstrated that Fraser’s lien should
be discharged or reduced.
The court therefore overrules the
defendants’ objections and grants Fraser’s motion to perfect the
lien in the amount of $4,917,122.02.
SO ORDERED.
__________________________
Andrea K. Johnstone
United States Magistrate Judge
March 27, 2018
cc:
Ronald D. Ciotti. Esq.
Seth Michael Pasakarnis, Esq.
Rene David Quinlan, Esq.
Shawn R. Farrell, Esq.
Peter G. Callaghan, Esq.
Christopher T. Hilson, Esq.
26
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