You hear people say it all the time, “it’s the little things that matter.” Well when dealing with courts, little errors can become big problems. Considering the average construction case involves multiple parties, there are even more procedural pitfalls then the basic one v. one cases you see on Law and Order. One simple procedural error can turn into a catastrophic situation as this Vermont contractor learned the hard way.
The owner on a condominium project in Stratton, Vermont ended up filing suit against the general contractor, Engelberth Construction, Inc.. Engelberth submitted third-party claims against the subcontractors on the project to receive indemnity in the event the contractor was found liable to the owner. Then, Engelberth filed a motion to dismiss the owner’s claim based on a statute of limitations argument. The court allowed the motion and noted that it would dismiss the third-party claims as moot unless a party took action, which none did. The claims were dismissed. Pursuant to the dismissal, however, the owner filed an appeal. Later, the parties agreed to settlement.
So, what’s the issue? The third-party claims were dismissed and no action was taken, so the subcontractors were off the hook. Engelberth and the owner settled and the court dismissed the case. Then Engelberth discovered the procedural mishap. Of course, Engelberth tried to argue a case for resurrecting the third-party claims, (so that the subs would bear the cost) but I wouldn’t be writing about this if they were successful.
In Stratton Corp. v. Engelberth Constr., Inc., 2015 VT 75, the argument Engelberth presented was that if the owner’s appeal was successful, the third-party claims should be reinstated. The problem with Engelberth’s argument was they presented no independent basis for the resurrection of the claims. Engelberth decided to settle with the owner without “altering the law of the case.” If Engelberth had exercised its rights and brought the dismissals of the third-party claims to the courts attention, they may not be footing the whole settlement bill. Vermont Supreme Court stated
Given the absence of any appeal or any other modification of the underlying decision, it is the law of the case that Engelberth has no liability to Stratton, and thus, Engelberth has no basis upon which to assert any third-party claims . . . Engelberth raised no timely objection to the dismissal of its claims. It chose to settle Stratton’s appeal without altering the law of the case and it is bound by the result.
This case is an excellent reminder of how important attention to detail is with procedural operation. Courts can be very unforgiving when simple and avoidable mistakes are made. In this case, the Vermont Supreme Court was no exception. In this case, a contractor ended up paying for a settlement for claims for which it may have been indemnified. This isn’t a good result for the contractor, and provides a good lesson in paying attention to details. If details are overlooked, they can be costly.