Wednesday, November 29, 2006 The Critical Path, December 2006   VOLUME 1 ISSUE 2  
Topic List
From the Editor
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State Case Notes
Federal Case Notes
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Fall Federal Case Notes
by Catherine L. Schnaubelt


Murdock & Sons Construction, Inc. v. Goheen General Construction, Inc., 461 F.3d 837 (United States Court of Appeals for the Seventh Circuit August 17, 2006). 

The United States Court of Appeals for the Seventh Circuit recently affirmed a decision by the lower court that a subcontractor was not entitled to an extension of time to complete work under the terms of a contract.  The underlying lawsuit involved the subcontractor, Murdock & Sons, requesting a “claim of constructive acceleration,” which arises when the owner requires the contractor to adhere to the original performance deadline in the contract even though the contract provides the contractor with periods of excusable delay that entitle the contractor to a longer performance period.  To show entitlement to such a claim, Murdock was required to show that: (1) it experienced an excusable delay entitling it to a time extension, (2) it properly requested an extension, (3) the project owner refused to grant the extension, (4) the project owner instead demanded that the work be completed by the original due date, and (5) Murdock actually accelerated the work in order to complete the project by the original completion date and incurred added costs as a result. 

The most hotly contested issue was whether Murdock had experienced “excusable delay.”  Murdock is a masonry company which was hired to perform all masonry work for a maximum security prison for the State of Indiana.  However, Murdock’s union masons did not work nearly as fast as projected, which left Murdock severely behind its original completion date.  Murdock requested an extension under the terms of the contract, but the State denied the extension.  Murdock eventually walked off the job and filed a claim against the general contractor and the State.  Following a bench trial, the lower court found in favor of the defendants.  Murdock appealed, but the Seventh Circuit affirmed the decision. 

While Murdock likened the union masons’ slow work to a force majeure because the labor problems were out of its control, the court explained that while clerical or arithmetic errors are legitimate reasons to obtain relief from an inaccurate bid, mistakes of judgment are not.  Unexpected difficulties “should not relieve a contractor from its obligations” or serve as a justification to get more time or money.  The fact that Murdock had “grossly underestimated” the time, effort, and skill required for the job is a risk that “falls squarely on the shoulders of the subcontractor.”

United States v. President R.C. – St. Regis Management Co., 451 F.3d 44 (United States Court of Appeals for the Second Circuit June 1, 2006
). 

In this case, the United States Court of Appeals for the Second Circuit determined that the Indian Gaming Regulatory Act (“IGRA”) has superseded 25 U.S.C. § 81, titled “Contracts with Indian Tribes or Indians.”  The dispute originated from a casino construction contract purported to be collateral to a gaming management agreement between the St. Regis Mohawk Tribe and President R.C.  The gaming management agreement was submitted to the National Indian Gaming Commission (“NIGC”) for approval as required by IGRA.  Under the agreement, President R.C. was entitled to enter into construction contracts for the “Mohawk Casino.”  After the gaming management agreement was approved, President R.C. did enter into a construction contract to build the casino for approximately $14 million dollars.  The construction contract was never submitted to NIGC for approval.     

 

When Mohawk Casino opened, business was not as brisk as anticipated.  The Tribe fired President R.C. prior to the expiration of the gaming management agreement.  President R.C. brought suit for breach of contract, but the case was stayed because the Tribe brought this action in the district court to have the construction contract declared null and void because it was never submitted to NIGC. 

 

The parties both agreed that the gaming management agreement had been properly approved under IGRA, but disagreed as to whether the construction agreement needed approval by NIGC.  The Second Circuit, in affirming the decision of the lower court to dismiss the action, held that the lower court did not have jurisdiction to hear the claim and that IGRA had superseded 25 U.S.C. § 81, which had previously provided for a qui tam action for declaratory judgment. 

 
First, the lower court did not have jurisdiction because the Tribe was required to exhaust their administrative remedies before bringing an action in the district court.  Therefore, the court reasoned, if the Tribe disputed the construction contract, it should have first submitted it to the NIGC for review under 25 U.S.C. § 2711(f).  Because the Tribe had not done so, the district court had no jurisdiction to hear the case.  Second, the Tribe could not proceed under § 81, even though that provision had been in effect at the time of the construction contract’s signing, because the statute had since been superseded by IGRA, which did not provide the Tribe with the ability to bring a declaratory judgment action on the construction contract.


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