Florida contractor SMC Construction Southeast, LLC filed a lawsuit against Missouri’s Claypool Holdings, LLC d/b/a Merric Millwork and Seating on March 26, 2021, claiming numerous breaches of contract and failure to perform its work in a timely manner — incidents which SMC Construction claims caused them significant financial damages.
In the action, SMC Construction seeks a financial judgement that includes punitive damages and attorney’s fees, as well as costs for bonding off Merric’s mechanics lien — which SMC Construction is also trying to have deemed fraudulent and discharged.
Deep dive: The Consequences of Fraudulent Liens
SMC Construction and Merric’s original contract from June 6, 2019, establishes Merric as a subcontractor responsible for the manufacturing of cabinetry and other millwork intended for two adjoining hotels which SMC Construction was building as a general contractor.
According to the lawsuit, SMC Construction and Merric “specifically agreed” that speed and timely delivery was a critical part of their agreement, and that any materials shipped were required to be coordinated for “on time delivery.”
As part of this joint goal, the contract established that deliveries of Merric’s millwork would begin in May 2020. However, SMC Construction claims that “substantial portions” of the scope of work were delayed by Merric during the fall of 2020, resulting in other work on the project being kept from completion for several months later than scheduled.
SMC Construction further alleges that significant parts of Merric’s millwork arrived at the project having been damaged in transit, requiring on-site repairs.
The lawsuit claims that both parties agreed in the initial contract that Merric would take measurements of all areas of the project where its millwork was to be installed, so that they could ensure that all work was done to the specifications of its intended space.
However, SMC Construction alleges that “substantial portions” of Merric’s millwork were not suitable for installation because of mismeasurement or a lack of project-specific necessary components, requiring SMC Construction to conduct its own modifications on site.
SMC Construction claims that as of January 19, 2021, Merric’s scope of work had not yet been completed, with a number of contractually-required goods missing and a number of already-delivered goods not meeting the standards of the original contract — noting that this directly caused financial damages to the project.
Claims of fraudulent lien puts Merric in difficult position
On February 23, 2021, Merric filed a mechanics lien on the project for $107,607.93 (which was later amended on March 15, 2021), claiming that it had begun fulfilling its contractual obligations to SMC Construction on May 22, 2020, and completed them on January 12, 2021. This action followed its ninth and tenth applications for payment on November 16, 2020, and January 10, 2021 — which totalled the same sum claimed in the lien.
However, according to the lawsuit, SMC Construction believes that Merric’s lien is not legitimate due to its previous failings to complete the scope of its work, saying that Merric was unfairly claiming it was entitled to the full balance of its contract before it had completed the scope of its work.
The suit alleges that Merric included in the lien filing claims for work that it did not perform, noting that the monetary balance of the lien included prices for items which had components missing, were not delivered on time, and were not ultimately used on the project.
Filing a fraudulent lien can lead to serious consequences in most states. Florida has particularly strict penalties in these cases — lienors found to have filed fraudulent liens can be held liable for the defrauded party’s damages, which include attorney’s fees and punitive damages, significantly raising the cost of a lien action. In rare situations, lienors can even be convicted of third-degree felony and given jail time.
SMC Construction maintains that its issues with Merric’s lien involve legitimate negligence. Construction attorney Alex Bennaroche pointed out the importance of intent in a case involving a possible fraudulent lien.
“Fraud is a claim that gets thrown out a lot. But proving that a lien claim is fraudulent can be challenging, and the burden of proof is on the party alleging fraud,” says Bennaroche.
“Minor mistakes or a good faith disputes over the amounts owed won’t render the claim fraudulent. There needs to be some willful intent or gross negligence in calculating the lien amount to constitute a complete defense in a foreclosure action.”