Construction & Claims: April 2023

Welcome to Construction & Claims, a periodic digest of the headlines, statutory and regulatory changes and court cases involving construction news, claims, bid protests, contract administration and payment-related disputes. 

If there is a particular subject or jurisdiction you’d like to see covered, please let us know.

Cell-Crete Corporation v. Federal Insurance Company

In this case, the Court of Appeal examined whether a payment bond surety, who prevails in a claim against the payment bond, is entitled to statutory attorneys’ fees when the party actually incurring the attorneys’ fees was the general contractor, pursuant to its defense and indemnity obligations, as opposed to the surety itself. The Court explained that a judge must award reasonable attorneys’ fees to the prevailing party regardless of whether the prevailing party ultimately is responsible for paying the fees. This case clarifies that prevailing payment bond sureties, even if defended by the general contractor pursuant to a defense and indemnity agreement, are entitled to recover the attorneys' fees incurred in defending against claims against the payment bond. Click here to read the decision.

Regional Measure 3

Earlier this year, the California Supreme Court issued its ruling dismissing a lawsuit challenging Regional Measure 3 (RM3).

RM3 was approved by voters in July 2018 to help solve the Bay Area's growing congestion problems through bridge toll funds.  Those funds are to be collected and applied towards construction of highway and transit improvements. RM3 toll revenues will be used to finance $4.45 billion of planned highway and transit improvements.  But the Howard Jarvis Taxpayers Association argued that the toll was a local tax, requiring a two-thirds vote under state law, because it would fund programs that were unrelated to the bridges and would benefit the general public, not just users of the bridges.  The Supreme Court’s dismissal sent the case back to the Court of Appeal, which disagreed with Howard Jarvis.

The RM3 funds are not yet available for use. The Metropolitan Transportation Commission (MTC) is awaiting final procedural instruction from the California Court of Appeal on how to begin releasing RM3 funds.