Construction Claims- Who Do You Sue?

Construction Claims- Who Do You Sue?

So, here you are, a general contractor, subcontractor or supplier and you haven’t been paid. You know you should be paid and are at the end of your rope after what seem like hundreds of demands by phone and e-mail. You’re ready to file a claim and try and get paid. Simple enough, right? Not so fast.

The first question involves the simple question of who to claim against or drag into court. The obvious first answer is simply the company or person that failed to pay you according to the contract between you and them. This type of claim will be directly controlled by the (hopefully well drafted and clear) contract between the parties. In many ways it is the most straight forward and usually legally (if not factually) easily understood. You didn’t get paid, they didn’t pay you, you go after them for payment. Again, seemingly simple but not the end of the analysis.

Of course, possible collection issues relating to any judgment you may get from the Court and the desire to bring other parties to the table or bring extra pressure to bear may have you and your construction attorney looking for additional folks to bring to the table. Depending on the timing of your claim, your contract and the project owner, other parties may be proper and desirable to have on the other side of the case.

If you are a material supplier, the likelihood is that you work off of a credit agreement and that credit agreement may (or if it doesn’t, should) contain a personal guaranty from one or more of the principals of the construction company to whom you supply the materials. In that case, on additional party would be that guarantor. Such a guaranty is one reminder to be sure to bring all parties to the construction contract into your suit.

If your project is a private, non-government owned, project, then be sure to keep your mechanic’s lien rights in tact. I won’t go into all of the requirements here, but assuming you properly record and send notice of your lien, the owner of the project, general contractor, and even the financing bank can and will be parties to the claim.

If your project is a government owned one, then be sure to get a copy of the payment and performance bond early on if possible. Why? Because if you don’t get paid, then you already have all that you need to give proper notice and preserve your payment bond rights. If you follow the appropriate state or Federal statute, you, as a claimant that provided labor and materials to the project can and should sue the bonding company and general contractor.

As you can see, depending on how you bring your claim and the type of project you may not be left with just the one party with whom you signed your construction contract. Having more than one party as a defendant has clear advantages. One is that having more parties in the lawsuit means more parties with some incentive to settle. More parties with this incentive means more places from which you can get paid. Another is that the risk that one party will become insolvent leaving you with a judgment worth the paper it’s printed on is lessened when more companies are involved. This means that you are more likely to be paid in the event of a judgment.

In short, more parties means a better chance of getting paid so be sure to analyze all of your options prior to filing any legal claim.

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