Legal Assistance Fund
Overview:
Over the past decade, the American Subcontractors Association of the
Carolinas Legal Assistance Fund (LAF) has addressed numerous subcontractor and
supplier issues by providing legal assistance in cases which have the potential
to establish favorable legal precedent in North and South Carolina.
The LAF provides financial assistance to subcontractors and suppliers who
face lawsuits in which the legal expenses are either not affordable or are
excessive in terms of the amount of money in controversy in the case.
The fund is designed to assist in legal cases where the outcome will
establish a legal precedent which will benefit all members of the American
Subcontractors Association of the Carolinas (ASAC) and the subcontracting
industry in general. Lending moral
and financial support in prominent cases in the Carolinas, the LAF has been the
mainstay of subcontractor and supplier rights in the judicial arena.
The following are examples of support which the LAF is designed to give
to suppliers and subcontractors in the legal field.
- to provide assistance with the legal fee.
- to provide counsel to an ASAC member or to a
member’s attorney to aid in the prosecution of a case.
- to appear by counsel on behalf of the ASAC in
appellate and legislative matters.
- to maintain a library of information available to ASAC
members and their attorneys.
- to provide expert witnesses to assist in judicial and
administrative proceedings.
- to file amicus curiae briefs on behalf of
subcontractors and suppliers.
History:
The LAF was proposed at the ASAC's annual convention in September 1986,
upon a presentation and motion by Rob Roberson and Fenton Erwin.
Approximately Twenty Two Thousand ($22,000) Dollars were pledged at the
annual convention and a new era in the subcontractor industry had begun.
Since the LAF’s inception, approximately twenty-five applications for
assistance from the LAF have been filed by subcontractors engulfed in costly
litigation, and approximately half the applications have been approved.
Procedure:
An application form is available to subcontractors and suppliers to apply
for assistance by the LAF. Each
application is reviewed by legal counsel and considered by the ASAC’s
Executive Committee which has the authority to send specific cases to the
ASAC’s Board of Directors for final approval.
The Executive Committee considers the impact each case will have on the
entire subcontracting and supplier industry rather than an direct benefit to the
individual applicant.
Representative Cases:
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The Legal Assistance Fund has funded several amicus curiae briefs, which
supported favorable legal
precedents in North and South Carolina. The
LAF filed an amicus curiae brief
which supported the North Carolina Supreme Court’s final ruling that
promissory estoppel cannot be used in North Carolina to hold a subcontractor to
a low bid without some assurance from the general contractor that a contract
will be awarded to the successful low bidder.
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An amicus curiae brief was filed in South Carolina in support of a
Specialty Trades Association Council (STAC) sponsored law awarding attorney’s
fees to litigants when payment of undisputed charges is not made within 45 days
of demand. The law was upheld and
is an effective tool in collecting construction debts in the state.
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In North Carolina, the LAF filed an amicus curiae brief in support of a
supplier’s lien rights. The North
Carolina Court of Appeals held that a second-tier subcontractor or supplier who
has not been paid by a first tier subcontractor or supplier has the right to
place a mechanic’s lien directly upon the project.
This would be true even if no money was owed by the general contractor to
the first tier subcontractor.
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An amicus curiae brief was filed in North Carolina which supported the
final ruling of the North Carolina Supreme Court that a contractor could recover
economic loss directly from an engineer or design professional for negligent
supervision on a construction project.
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The LAF financed expert testimony and video in a case which attacked
bid-shopping as an unfair trade practice. It
also funded the services of a former federal prosecutor regarding the
possibility of criminal indictments in a payment-diversion case.
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A general contractor in South Carolina flouted bid-listing requirements
by naming several alternative subcontractors for each division of the work.
This invited bid-shipping and undermined the basic purpose of the
bid-listing process. The LAF
financed an amicus brief and the expert testimony at the trial level, but the
trial judge refrained from declaring the bid non-responsive.
The South Carolina Supreme Court reversed the trial court and the bid was
declared unresponsive.
TOMMY L. GRIFFIN PLUMBING:
A Success Story
The question was
unresolved as to whether contractors can sue design professionals for
economic losses resulting from professional negligence. The South
Carolina Supreme Court traditionally applied the economic
loss doctrine, which bars recovery in tort for purely economic loss.
In 1995 the South Carolina Supreme Court held that because of the
“special relationship” between a design professional and a contractor, the
design professional owes an independent duty, not only to the owner, but also to
a contractor, not to negligently design or supervise the project.
Tommy L. Griffin Plumbing & Heating Co. v. Jordan, Jones &
Goulding, Inc., 463 S.E.2d 85 (S.C. 1995)
Through the use of the
LAF, the ASAC had a significant influence in the
landmark decision of Griffin Plumbing, by assisting counsel and filing an
amicus curiae brief in a related case. Griffin
Plumbing was a landmark decision of monumental importance to subcontractors.
Future Challenges for
The Fund
Over the past decade, the successes of the LAF have been many.
Correspondingly, its financial resources have been gradually depleted.
Meanwhile, unfortunately, industry problems and abuses have seemed to
escalate.
Eight South Carolina subcontracting firms have been in litigation for
three years seeking recovery of over one-half million dollars of
subcontractor-earmarked funds that were misappropriated.
The payment bond mandated by the bid documents was never issued.
The trial judge ruled the architect owed no duty to assure the bond was
issued in proper form. With the
support of the LAF, the case is now on appeal.
An out-of-state general contractor was excoriated by the State Engineer
for bid shopping on the University of South Carolina stadium project, but beat
the resulting bid protest by obtaining the contract as an “emergency
procurement.” A subcontractor who
protected its interests by filing a mechanic’s lien was required to pay the
owners’ attorney’s fees, even though the subcontractor relented from
enforcing the lien and even consented to its dismissal.
In a devastating procedural ruling, the North Carolina Appeals ruled that
a general contractor could not assert against the owner the claim of a
subcontractor.
Several critical subcontractor legal issues are being dealt with by the
courst nationally. A looming issue
which is bound to be determined by the appeals courts in South Carolina in the
near future is the enforceability of pay-if-paid clauses in subcontracts.
In 1995, the New York Supreme Court held “a pay-when-paid clauses,
conditioning a subcontractor’s payment by the contractor on the owner’s
payment of the contractor, violates New York public policy embodied in the Lien
Law’s prohibitions against no-lien contracts.”
West-Fair Elec. Contractors v. Aetna Casualty & Surety Co.,
661 N.E.2d967 (N.Y. 1995). More
recently however, the Tennessee Supreme Court held that a pay-when-paid clause,
which clearly states that the general contractors receipt from the owner is a
condition precedent to the contractor’s duty to pay the subcontractor, is
enforceable. Mark Koch, d/b/a
Commercial Painting Company, Inc. v. Construction Technology, Inc., et. al..
When this and other such issues arise in the Carolinas, the LAF must be ready to
respond.
Cases / Firms /
Contributions
Home
Electric v. Hall & Underdown Heating & Air Conditioning
Patton
Boggs & Blow
$662.50
Contract
Steel Sales v. Freedom Construction Company
Weinstein
& Sturges, PA
$584.25
Franklin
Lee Homes, Inc. v. Carolina Glass & Interiors, Inc.
Faison
& Brown
$2,000
B
& B Contracting Co., Inc. v. Shook, Inc.
Delany
& Sellers, PA
$2,000
Electric
Supply Co. of Durham, Inc., et. al. v. Swain Electrical Co., Inc., et. Al.
Weinstein
& Sturges, PA
$2,500
Accent
Contracting, Inc. v. Powers Construction, Inc.
Robinson,
McFadden & Moore, PC
$2,500
General
Electric Company, et. al. v. James M. Dixon, Jr., et.al.
Hodgman,
Elam, Gordon & Churchill
$1,000
Pepper
Burns Insulation, Inc. v. Artco Contracting Corp.
Patton,
Boggs & Blow
$1,028.72
Creed
Construction v. W. Powers McElveen & Associates
and
Tommy
L. Griffin Plmb/Htg. v. Jordan, Jones, Goulding
Nexsen
Pruett Jacobs & Pollard
$3,500
Ray
Bell Construction v. M.B. Kahn
Robinson,
McFadden & Moore, PC
$3,500
Members
Interior Construction, Inc. v. Leader Construction Company, Inc. and
Hartford
Fire Insurance Company
Eisele
& Ashburn, PA
$1,5000
Cullum
Mechanical Construction, Inc. v. Baptist Medical Center, et.al
Robinson,
McFadden & Moore, PC
$3,500
F&D Electrical Contractors, Inc. v. Powder
Coaters, Inc. et. al.
Bruner, Powell, Robbins, Wall & Mullins, LLC
$2,000
American Subcontractors
Association of the Carolinas
Legal Assistance Fund (LAF)
Guidelines
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The purpose
of the LAF is to promote the interests of the subcontracting and
supply industry through judicial involvement.
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Prior to
considering a grant request, an Application for Assistance must be
presented to the Board along with other pertinent information.
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Each
application will be funneled through the Board to the ASAC North
Carolina or South Carolina General Counsel for consultation prior to
approval.
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LAF grants
will be assigned a case number, such as ASAC LAF 96-1.
This number will appear on all LAF documents.
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Prior to
each Board meeting the case attorney will, for each open case,
prepare a status report referring to each case by number and name.
(If the case has been resolved, explain results; if open, report status.)
Reports should be brief, written in laymen's language and should be
provided to the Board in a timely manner to allow discussion at the
Board meeting.
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To
facilitate the Board’s comprehension, cases presented for
consideration and/or status reports should identify each reference
to the party to Board is interested in by underlining their name or
any other term referring to them, such as plaintiff or defendant.
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A case
approved for LAF grant will be so noted by confirmation letter to
the appropriate attorney indicating the amount of the grant.
In appropriate cases, the grant letter may stipulate that, upon
successful completion of the case, the recipient will be required to
repay a portion or the entire amount of the grant for the purposes
of reseeding the LAF.
Court awarded legal fees, actually collected, will be repaid to the LAF.
If the case is settled or the effort otherwise disbanded, full
reimbursement will be required.
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Each time a
grant is approved by the board, the representing attorney will write
a brief description of the case (excluding names of parties and
other information that may jeopardize the case) for publication in
ASAC and ASA newsletters. The
article will be evaluated prior to publication by ASAC counsel to
assure that appropriate perspective is maintained.
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When a LAF
case has been settled, the representing attorney will write an
article for ASAC and ASA publications. Credit will be given the attorney for representing the case.
The article will be evaluated prior to publication by ASAC counsel to
assure that appropriate perspective is maintained.
ASAC LAF Application for
Assistance
The Subcontractors
Legal Assistance Fund is available to subcontractors and suppliers who face
lawsuits in which the legal expenses are either not affordable or are excessive
in terms of the amount of money in controversy in the case.
The fund is designed to assist in cases where the outcome will constitute
a legal precedent, which will benefit all ASAC members and the industry in
general.
Click
here to download a .PDF version of our application. 
Click
here to download a free copy of Adobe Acrobat Reader (to view PDF files)
Click
here for a copy of the application in Microsoft Word format.
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