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(A revised version of this article appears in The Construction
Lawyer, Volume 23, No. 1, Winter 2003, published by
the American Bar Association's Forum on the Construction
Industry.)
By John W. Ralls
Howrey LLP
An
electrical subcontractor declared bankruptcy in the middle
of a project in Las Vegas, Nevada. At the time of the bankruptcy
filing, the subcontractor had failed to credit its union
workers for vacation and fringe benefits that were deducted
from their paychecks.
The
union and trustees of its benefits trust fund for workers
filed a complaint against the prime contractor, claiming
the prime was liable for the unpaid benefits pursuant to
Nevada Revised Statutes §608.150, which provides that
"[e]very original contractor making or taking any contract
in this state… is liable for the indebtedness for labor
incurred by any subcontractor or any contractors acting
under, by or for the original contractor…."
Although
the case was referred to arbitration, the court granted
the plaintiffs' two motions for partial summary judgment
(a motion on liability followed by a motion on damages),
which disposed of the case. The trial court awarded $21,846.72
in unpaid benefits to the union and trustees and more than
twice as much, $43,872.84, in attorney fees and costs.
The
prime contractor appealed. The Nevada Supreme Court affirmed.
U.S. Design & Construction Corp. v. IBEW, Local
357, 50 P.3d 170 (Nev. 2002).
On
appeal, the prime contractor argued that only the district
attorney may enforce NRS §608.150. The court disagreed.
The court noted that while NRS §608.150 specifically
permits the district attorney to file a civil action to
collect unpaid wages and benefits, the statute "does
not preclude or explicitly exclude a private right of enforcement."
The court concluded that "the legislative history and
related statutes supported the conclusion that the legislature
intended "to permit workers to have a private right
of action...."
The
prime contractor also attacked the award of attorney fees
and costs as excessive. Again, the court disagreed, finding
the award of fees and costs to be well within the permissible
discretion of the trial court. The court also noted that
the prime contractor had rejected a settlement offer early
in the case for an amount lower than what it was ultimately
required to pay. The court also pointed to evidence that
the prime contractor had improperly changed its position
regarding the calculation of benefits owed, first relying
on its own records of hours worked by the subcontractor
but later rejecting a proposal by the plaintiffs to use
those as a basis for a damage calculation.
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For more information about the issues covered in this report, please contact John Ralls in our San Francisco office at 415-848-3362 or at rallsj@howrey.com or contact your Howrey attorney. For more information about Howrey's Construction Practice Group, click here.
©2003 Howrey LLP
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