Legal Assistance Fund

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

• 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.
• 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.
• 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.
• 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.
• 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.
• 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$662.50 – Patton Boggs & Blow
• Contract Steel Sales v. Freedom Construction Company$584.25 – Weinstein & Sturges, PA
• Franklin Lee Homes, Inc. v. Carolina Glass & Interiors, Inc.$2,000 – Faison & Brown
• B & B Contracting Co., Inc. v. Shook, Inc.$2,000 – Delany & Sellers, PA
• Electric Supply Co. of Durham, Inc., et. al. v. Swain Electrical Co., Inc., et. Al.$2,500 – Weinstein & Sturges, PA
• Accent Contracting, Inc. v. Powers Construction, Inc.$2,500 – Robinson, McFadden & Moore, PC
• General Electric Company, et. al. v. James M. Dixon, Jr., et.al.$1,000 – Hodgman, Elam, Gordon & Churchill
• Pepper Burns Insulation, Inc. v. Artco Contracting Corp.$1,028.72 – Patton, Boggs & Blow
• Creed Construction v. W. Powers McElveen & Associates and Tommy L. Griffin Plmb/Htg. v. Jordan, Jones, Goulding$3,500 – Nexsen Pruett Jacobs & Pollard
• Ray Bell Construction v. M.B. Kahn$3,500 – Robinson, McFadden & Moore, PC
• Members Interior Construction, Inc. v. Leader Construction Company, Inc. and Hartford Fire Insurance Company$1,500 – Eisele & Ashburn, PA
• Cullum Mechanical Construction, Inc. v. Baptist Medical Center, et.al$3,500 – Robinson, McFadden & Moore, PC
• F&D Electrical Contractors, Inc. v. Powder Coaters, Inc. et. al.$2,000 – Bruner, Powell, Robbins, Wall & Mullins, LLC

American Subcontractors Association of the Carolinas
Legal Assistance Fund (LAF) Guidelines

1. The purpose of the LAF is to promote the interests of the subcontracting and supply industry through judicial involvement.
2. Prior to considering a grant request, an Application for Assistance must be presented to the Board along with other pertinent information.
3. Each application will be funneled through the Board to the ASAC North Carolina or South Carolina General Counsel for consultation prior to approval.
4. LAF grants will be assigned a case number, such as ASAC LAF 96-1. This number will appear on all LAF documents.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.