BOISE, ID – Best Lawyers® has chosen attorneys Wayne Meuleman, Kimbal L. Gowland, and Geoffrey J. McConnell, partners in the law firm Meuleman Mollerup LLP, for their accomplishments in the fields of construction law and real estate law.  Mr. Meuleman was honored with the additional designation as Idaho’s 2012 Lawyer of the Year in Litigation and Construction. (The Best Lawyers in America® 2012. Copyright 2011 by Woodward/White, Inc., Aiken, SC)

 

Wayne Meuleman, a founding partner of Meuleman Mollerup LLP, was recognized for his expertise in Construction Law.  He has 37 years experience representing clients throughout the western U.S. involving a variety of public and private projects.  Mr. Meuleman served as the Chair for the Board of Directors of the Idaho Associated General Contractors from 1998-2003, he is the Executive Director of the Idaho State Building Authority, and he served as counsel for the Nevada Real Property Corporation which provides lease-purchase financing of state governmental facilities for the State of Nevada.  Mr. Meuleman, a Martindale-Hubbell AV Preeminent peer-rated attorney and a member of Who's Who in American Lawyers, has been recognized by Best Lawyers® in America annually since 2005 and by Mountain States Super Lawyers since 2007.  

 

Kimbal L. Gowland has 23 years as a real estate and estate planning attorney with emphasis in commercial real estate and shopping centers.  From 1984 through 1987, Mr. Gowland was a tax consultant at Touche Ross & Co. (now Deloitte), where his duties included research, planning and tax return preparation in areas of individual, corporate, partnership, pension, estate and trust taxation.  Best Lawyers® states that Mr. Gowland is lauded as a conscientious and meticulous attorney.  Mr. Gowland has served on the Boise Chamber’s Boise Valley Economic Development Committee, he is a graduate of the Boise Metro Chamber of Commerce “Leadership Boise” program, and  he is a former member of the Idaho Association of Commerce and Industry’s Tax Committee.  Mr. Gowland, a Martindale-Hubbell AV Preeminent peer-rated attorney, has been recognized by Best Lawyers® in America annually since 2005, and he has also been named by Chambers and Partners USA, America’s Leading Lawyers for Business, since 2004.

 

Geoffrey J. McConnell was recognized by Best Lawyers® in America for his expertise in Construction Litigation and Government Contracts.  He has 25 years of experience in construction litigation representing general contractors, owners and subcontractors in state and federal courts and before federal boards of contract appeals.  Mr. McConnell earned his Juris Doctorate at the University of the Pacific McGeorge School of Law, and he is licensed to practice law in Idaho, Utah and California. He has also been recognized for his legal expertise in construction law by Mountain States Super Lawyers since 2009, a designation given to only 5% of the lawyers in Idaho.  Mr. McConnell is a member of the American Bar Association Section on Public Contract Law and the American Bar Association’s Forum Committee on the Construction Industry.  Mr. McConnell is an active member in the exclusive lawyer referral organization, LEGUS International Network of Law Firms.

 

Best Lawyers is based on an exhaustive peer-review survey in which thousands of leading lawyers in the U.S. confidentially evaluate their professional peers.  Because of the rigorous and transparent methodology used by Best Lawyers, and because lawyers are not required or allowed to pay a fee to be listed, inclusion in Best Lawyers is considered an honor.   Corporate Counsel Magazine has called Best Lawyers “the most respected referral list of attorneys in practice.”

 

Meuleman Mollerup LLP is a law firm specializing in the practice of law pertaining to construction law, real estate law, and business law including employment matters, commercial litigation, and estate planning.  Meuleman Mollerup attorneys have served the construction, real estate, and business communities for over 30 years.  Contact us at 208.342.6066 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  More information online at www.lawidaho.com.

 

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Click here to print:  The City of Lewiston and Idaho Procurement Law

Given an Inch, Sometimes Government Takes a Mile

By Geoff McConnell

(as published in the Idaho Construction Review)

 

From time to time, some governmental entities abuse their authority and behave as if the law does not apply to their actions.  Unfortunately, more often than not, the victims of their abuse are private businesses with lesser bargaining power.  The story below describes recent abuse by the City of Lewiston which was ultimately overturned by the Idaho Supreme Court.

 

          Prior to 2005, the statutes governing the procurement of goods and services by local public entities (school districts, highway districts, cities, counties, etc.) were located throughout the Idaho Code.  No uniformity existed.  In large part, the only common principle that applied to competitive bidding was that contract awards were made to the lowest responsible bidder.

 

          In 2005, the legislature enacted a uniform law governing the procedures by which local public entities purchase goods and services.  In an effort to eliminate varying and sometimes conflicting statutes relevant to public procurement (and to eliminate varying and conflicting court decisions pertaining to those statues), the legislature enacted a uniform set of laws to be followed by virtually all public entities in the state.

 

          In creating a single set of procurement statutes, the legislature codified the traditional means of competitive bidding and an alternative means of competitive bidding utilizing pre-qualification of bidders.  The effort was collaborative and included input from the contracting community.  In the end, it appeared that both the interests of the public entities and the interests of the contracting community were served as the legislature created a statutory scheme which provided: (1) a traditional means of competitive bidding; and (2) a method utilizing subjective criteria by way of pre-qualification.

 

          Most public entities adhered to the new statute without difficulty.  In large part, most public entities continued to award projects to the lowest bidder as they had traditionally done for years.  A few public entities prequalified contractors pursuant to the statute. 

 

          Unfortunately, some public entities attempted to exploit what they perceived to be a loophole in the law. Instead of awarding jobs to the lowest bidder or going through the prescribed pre-qualification process, a few public entities sought to award projects on a completely subjective basis without regard to the statutory requirements.  The City of Lewiston was one of those entities. 

 

          On Wednesday, November 2, 2011, the Supreme Court issued a decision rebuking Lewiston’s attempt to ignore statutory constraints and award contracts on the basis of the City’s subjective criteria.  Rather than following the law, Lewiston invited bids without pre-qualifying prospective bidders for the City’s golf-course construction project, then, after-the-fact, the City decided to subjectively determine which bidder was most qualified, from the City’s standpoint.  In essence, the City simply selected the bidder that it wished to do business with, without regard to the law.  The 2005 law provides that a public entity may award contracts to the lowest pre-qualified bidder.  However, Lewiston acted as if the law permitted it to subjectively select the winning bidder after-the-fact without regard whether the contractor had submitted the lowest bid amongst bidders pre-qualified by the City.  

 

          The City believed the statute permitted the City to qualify bidders in any manner the City saw fit, at any time, and even to permit a favored bidder to modify its bid after-the-fact.  The district court in Lewiston supported the City’s decision, ruling that the law permitted public entities to award contracts to bidders without regard to price.

 

          The Supreme Court in Hillside Landscape Construction vs. City of Lewiston corrected the City’s attempt to disregard the law.  The Supreme Court held that the 2005 law did not give license to public entities to award contracts to whomever they wished.  Rather, the Court held that public entities may pre-qualify bidders using the criteria set forth in the statute (and then award to the lowest pre-qualified bidder), or the public entity may simply award contracts to the lowest bidder without pre-qualification, unless the apparent low bidder is clearly not acceptable due to something like demonstrated irresponsibility on other projects, or licensing issues, or significant bid irregularities. 

 

          The Hillside case re-affirms the interpretation of the 2005 statutes as they were understood by the contracting community and the majority of public entities throughout the state.  From time to time rogue public entities will exercise their power in ways far beyond their statutory authority.  Fortunately, our judicial system still has the power to curb those transgressions.

Geoff McConnell is a partner at Meuleman Mollerup LLP, focusing his practice in the areas of construction law, commercial litigation, and business law.  He has been selected by Best Lawyers in America and Mountain States Super Lawyers for his legal expertise in construction litigation and government contracts.  Mr. McConnell can be contacted at 208.342.6066, or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  More information on the web at www.lawidaho.com

 

Click here to print:  "Best Practices for Contracts"

By Anna E. Eberlin

(Published by the Idaho Business Review) 

     We have all seen the mortgage crisis play out in the news over the past several years.  From mortgage companies foreclosing on the wrong property to lenders completely halting foreclosures due to paperwork issues, the problems run the gamut.  These lenders failed to focus on the details, and the details are coming back to haunt them now.  So what can contractors learn from the mortgage crisis?  Maintain control of your record-keeping and document everything.

     Although it may not be the first thing contractors think about when starting a new job, good record-keeping should be high on the priority list of construction contractors.  It is critical in setting up the scope of work and terms of the agreement, submitting applications for payment, getting proper lien waivers from subcontractors and/or suppliers, documenting delay issues or other problems on the job, verifying compliance with scopes of work and/or code requirements, and, ultimately, proving claims or defenses if litigation should arise.

     Every project should start with a written contract—no more handshakes in place of a contract and no more one-page invoices substituting as a contract.  In years past when business was booming, some projects moved forward without a written contract and construction went smoothly.  Even if there were a few issues, they were often ignored because the money was still flowing and everyone was getting paid.  

     Today, however, with every dollar and cent accounted for in both large and small projects, problems are inevitable without a detailed written contract in place.  What happens when there is a question about scope of work?  How are changes to be handled?  Is this a time-and-materials contract, a fixed price contract, or a cost plus contract?  How often and in what amount are payments to be made?  When will as-built drawings be provided, and what happens if they aren’t?  Is all the necessary insurance in place, and who is paying for it?  Who is responsible for defects or delays?  

     All of these questions can be answered with a written contract in place.  Laying out and clearly defining the duties, rights, and obligations of all the parties is critical.  Eliminating ambiguity between the owner and contractor and between the contractor and subcontractors will in turn eliminate future disputes. 

     Accurately documenting your work throughout a project is also important when it comes to protecting your right to place a lien on a property.  As a lien claimant you must be able to support the amount of your lien via the written contract, change orders, daily reports, pay applications, and any other documents to show the amount of the contract and when you started and stopped work. 

     The lien itself is also crucial, as it must comply with all the requirements of Idaho Code § 45-501 et seq. to be enforceable.  The claim of lien must state: 1) the amount of the claimant’s demand, after deducting all credits and offsets; 2) the name of the owner or reputed owner of the property, if known; 3) the name of the person who hired the claimant or to whom materials or equipment were furnished; 4) a sufficient description of the property; and 5) a verification by the oath of the claimant, his agent or attorney, to the effect that the affiant believes the same to be just.  With a written contract in place and good record-keeping throughout the project, most—if not all—of this information should be readily available. 

     Because disputes can arise even in the simplest of projects, record-keeping is a key component in the defense or pursuit of a claim.  Supporting your claims or defenses in litigation can be a nightmare without proper documentation, and you could end up losing a case because of your failure to keep thorough and timely records.  Mortgage companies and other lenders fell into the trap of keeping incomplete or non-existent records and they are paying the price for that.  Contractors should take note and use best practices: start with a written contract, uphold and enforce that written contract throughout the project, and accurately document your work.  Putting in a little time and money up front and throughout the project will save a lot of time and money later.

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Anna Eberlin is an attorney with the law firm Meuleman Mollerup LLP, practicing in the areas of construction law and real property acquisition, development, finance, and leasing.  Ms. Eberlin had five years of real estate management and investment experience prior to joining Meuleman Mollerup.  Ms. Eberlin can be reached at 208.342.6066 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  More information at www.lawidaho.com. 

Meuleman Mollerup LLP attorneys Geoffrey J. McConnell, Wayne Meuleman and Richard W. Mollerup have been selected for recognition by Mountain States Super Lawyers 2011 for exemplary work in the areas of real estate law, construction law and litigation.  The goal of the Super Lawyers selection process is to create a credible and inclusive listing of lawyers to be used as a resource for sophisticated consumers in the search for legal counsel.  Less than five percent of attorneys nationwide are chosen for this distinction.  

Mr. McConnell has been recognized by Mountain States Super Lawyers since 2009 for his expertise in Construction Litigation and Government Contracts.  He has 25 years of experience in trial representation of owners, contractors, and design professionals in lawsuits and other disputes on public and private construction projects ranging in size from $1,000,000 to $220,000,000.  He has assisted in the preparation of claim packages and risk assessments resulting in the settlement of disputes ranging in size from $100,000 to $14,000,000 without the need for costly and extensive litigation.  Mr. McConnell is licensed to practice law in Idaho, Utah and California.  

Mr. Meuleman, a founding partner of Meuleman Mollerup, has been recognized by Mountain States Super Lawyers each year since 2007 for his expertise in Construction Litigation.  Mr. Meuleman served as the Chair for the Board of Directors of the Idaho Associated General Contractors from 1998-2003, and he is the Executive Director of the Idaho State Building Authority which provides lease-purchase financing of state governmental facilities for the State of Idaho. 

Mr. Mollerup has 18 years of experience as a real estate attorney with emphasis in commercial real estate and title insurance in matters arising out of title, escrow, foreclosures, and regulatory issues.  Prior to practicing law he was in the title insurance and real estate lending business for 19 years.  He has been selected by Mountain States Super Lawyers since 2008 for his thorough understanding of complex property issues and title insurance work.  Mr. Mollerup serves on the legislative committee for the Idaho Land Title Association.  

Super Lawyers, a division of Thomson Reuters, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a rigorous multi-phased process that includes a statewide survey of lawyers, an independent research evaluation of candidates, and peer reviews by practice area. 

Meuleman Mollerup LLP attorneys have provided industry-specific legal solutions for the business, construction and real estate communities since 1981.  The founding partners understood the demand for cost-effective, quality legal services, and limited the firm’s scope of practice to provide clients with the highest quality of legal representation at a reasonable cost.  Meuleman Mollerup’s “Super Lawyers” can be reached by calling 208.342.6066.  More information is available online at www.lawidaho.com.

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Click her to print:  More "Right to Work" for Idaho

Written by Wayne Meuleman

(as published in the Idaho Construction Review)

In 1985, the Idaho Legislature adopted the Right to Work Act stating “in order to maximize individual freedom of choice in the pursuit of employment and to encourage an employment climate conducive to economic growth, that the right to work shall not be subject to undue restraint or coercion”.  In general, the Right to Work Act provides that no one may be required, as a condition of employment, to be or become a member of a union, or to refrain from or withdraw from membership in a union, or to pay dues or fees to unions, or to be referred or recommended for employment by a union.  The Act is intended to protect the right of individuals to determine whether or not to join a union and to prohibit agreements between employers and unions to require union membership as a condition of any employment.  It also prohibits employers from preventing its employees from being union members if they choose.

 

The 1985 enactment of the Act was very controversial and followed several unsuccessful attempts to enact a right-to-work law over the preceding years.  Until this year, the Act has been amended only once in a 1995 to make its provisions applicable to public employment by State and local government agencies, as well as private employment.  The 2011 legislature has now added two new section to the Idaho Right to Work law which will take effect on July 1, 2011.

 

          One of the new sections, referred to as the Fairness in Contracting Act, prohibits   (a) contractors and subcontractors from receiving any wage subsidy, bid supplement or rebate on behalf of its employees or from providing subsidies, bid supplements or rebates to its employees; (b) labor organizations from paying a wage subsidy or rebate to its members in order to subsidize a contractor or subcontractor; and (c) the use any fund derived from wages collected by or on behalf of labor organizations to subsidize contractors or subcontractors in Idaho.  A violation of the new Fairness in Contracting Act carries substantial penalties; up to $10,000.00 for the first offense, $25,000.00 for the second, and $100,000.00 per violation for each additional offense.  Any interested party, including any bidder, contractor, subcontractor, or taxpayer has a standing to challenge any violation of the new act and entitles the challenger to an award of attorney’s fees and costs in the event the challenge succeeds.

 

          The second amendment, to be known as the “Open Access to Work Act”, applies to public works construction in Idaho.  This amendment prohibits state agencies and cities, counties, school districts, and other political subdivisions from requiring contractors to pay a specified wage scale or provide specified employee benefits to its employees for work on public works projects in Idaho, except as may be required by federal wage laws applicable to public works projects supported by federal funds.  It also prohibits Idaho government agencies from requiring contractors, subcontractors and suppliers to sign collective bargaining or other union agreements in order to bid on or perform contracts for construction of public works projects.

 

          These were adopted, at least in part, as a reaction to union picketing and demonstrations around Boise and the surrounding area over the last few years.  The new prohibition against use of wage subsidies, bid supplements and rebates will impact some private and public projects because trade unions have occasionally subsidized union contractors in order to help union contractors to be more competitive in bidding public works projects.  However, the prohibition against state and local agencies specifying wage rates and benefit requirements for public works project should not be significant because agencies have rarely, if ever, specified wage rates or benefits for public projects since the repeal in 1985 of Idaho’s “Davis Bacon Act” which mandated predetermined wages rates and benefits for public construction projects statewide.  Similarly, the prohibition against agencies requiring collective bargaining or other union agreements on public construction projects will probably have little effect because government agencies in Idaho have not required union agreements as a condition for constructing public works projects.

 

Right to Work continues to be a popular political issue in Idaho.

 

Wayne V Meuleman is a founding partner of the law firm Meuleman Mollerup LLP, representing businesses with legal concerns involving contracts, real property matters, construction, commercial issues, and litigation.  He can be contacted at 208.342.6066 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

 

 

The Idaho Associated General Contractors has named Boise lawyer, Wayne Meuleman, as Idaho Associated General Contractors 2010 Associate of the Year.  The award, presented by Idaho AGC Executive Director Mark Dunham, praised Mr. Meuleman’s significant contributions to the Idaho AGC and the betterment of the construction industry.

Mr. Meuleman, a founding partner of the law firm Meuleman Mollerup LLP, also received the award in 1998.  Meuleman Mollerup LLP has been a member of the Idaho AGC for more than two decades and the firm is a proud supporter of the AGC’s core purpose of promoting the commercial construction industry. 

 Mr. Meuleman is active in community and professional organizations and served on the board of directors of the Idaho Association of General Contractors from 1998 through 2003.  He serves as Executive Director and general counsel to the Idaho State Building Authority and he has served on the boards of the Idaho Credit Rating Enhancement Committee, the Idaho Botanical Gardens, and the Advisory Board of the Assistance League of Idaho.  Throughout his legal career he has been the recipient of many professional accolades including Mountain States Super Lawyers 2007-2010, Best Lawyers in America 2005-2011, and Who’s Who in American Lawyers.

 Meuleman Mollerup LLP is a Boise law firm engaged in the practice of law involving construction law, real estate law, and business law, including complex commercial litigation, employment matters and estate planning.  More information is available online at www.lawidaho.com.

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Click here to print:  Construction Contract Payment Remedies

By Arnold L. Wagner

(as published in the Idaho Construction Review and the Idaho Business & Law Magazine, March 2011)

Getting paid for work performed on a construction project is obviously one of the most important issues for all parties involved in each project.  As such, before signing a contract one must review and evaluate the contract.  Pay close attention to provisions relating to progress and final payments, retention, withholding payments for defective work, delays, liens or payment bond claims, suspension of work, and termination of the contract.  All of those provisions can, in one way or another, affect when and how much you may be paid under your contract. 

No less important is the question of the financial ability of the party with whom you are contracting to actually make payment in a timely manner as the work progresses.  Contractors should make an appropriate inquiry into the financial worth of the owner/developer and the provisions for the financing of the project.  Responsibility of the owner/developer and the general contractor are also important questions for subcontractors and suppliers to consider before entering into contracts.

The challenge in the construction industry, especially in these trying times, is to be paid for your work as it is performed.  Delays in receiving payment erode profitability and it can mean disaster if the unpaid amount is large and the delay is long.  If you have not been paid for providing work or materials on a construction job, you may have the right to suspend your performance on the job.  Your right to suspend your performance may be specifically set forth in your contract; if not, your right to stop work will be determined under general contract law principles.  Review your contract carefully to see if it addresses your rights upon nonpayment. 

One typical example of contract language allowing an unpaid contractor to suspend performance for nonpayment is found in section 9.7.1 of AIA Document A201-1997.  This type of provision is helpful to the contractor because it eliminates an element of uncertainty regarding the consequences of nonpayment.  The provision specifically grants the contractor the right to stop work, and gives the owner a reasonable period of time (7 days) within which to cure its nonpayment before the contractor may suspend its performance due to nonpayment. 

Most construction contracts permit withholding all or a portion of progress payments for specific reasons such as uncorrected defective work and delays in performance.  An example of this provision is in section 9.5.1 of AIA Document A201-1997.  Similarly, subcontract agreements typically permit a general contractor to withhold payments from subcontractors to the extent any payment is withheld by the owner for reasons attributable to that subcontractor.

Whether or not a legitimate cause exists for withholding a payment is often a matter of serious dispute between the parties.  In the face of such a dispute, refusing to perform further work under the contract as a means for enforcing payment can be risky.  If cause exists for withholding a payment, then a refusal to continue performance may be a material breach of the contract.

Care should also be taken not to confuse a “stop work” provision with a “termination” provision.  Many contracts contain both and they are intended to address different situations.  A “stop work” provision typically allows the contractor to temporarily suspend performance due to nonpayment, but requires the contractor to return to work after payment, if made within a reasonable period.  A “termination” provision, on the other hand, allows the contractor to permanently refuse further performance upon the occurrence of stated events.  One such stated event may be nonpayment, but a nonpayment giving rise to a right to terminate is usually more serious and longer-lasting than a nonpayment giving rise to a right to temporarily stop work.

If a contractor is going to temporarily cease working on the project because of delayed payment, it is important that the contractor makes it clear that the contractor is suspending work temporarily rather than terminating the contract.  An owner who is unable to make payment to a contractor may attempt to characterize the contractor’s action as an improper termination of the contract.  By doing so, the owner creates an argument that the contractor has breached the contract.

If the contract or subcontract does not specifically allow the contractor to stop work upon nonpayment, the contractor’s right to suspend performance is governed by general contract law principles.  In any event, it is important for contractors to read and understand the provisions in their contract.  An experienced construction attorney can answer any questions about the contractor’s rights.  

 

Click here to print:  Beware of Federal False Claim Act on State and Local Projects

by Joe Meuleman

(as published in the Idaho Construction Review, April 2011

Most contractors with experience on federal construction projects are familiar with the federal False Claim Act (“FCA”) which provides for civil and administrative penalties for anyone who knowingly submits or causes the submission of a false or fraudulent claim to the United States.  The civil penalties range from $5,500 to $11,000 for each false claim submitted to the federal government, plus three times the amount of damages sustained by the government.  The administrative remedies include suspension or debarment from work on future federal projects. 

 The FCA has evolved since it was introduced in 1863 to reflect a growing concern about fraud against the federal government.  It was amended in 1986 to encourage private citizens known as whistleblowers to bring lawsuits against alleged violators of the FCA on behalf of the United States.  In addition to providing financial incentives to whistleblowers, the FCA protects these individuals from retaliation if they bring a lawsuit against their employer.  Recoveries under these lawsuits have dramatically increased over the years from less than $400,000 in 1986 to approximately $3,000,000,000 in 2010.   The trend is a result of increased education to potential whistleblowers and the expanding scope of the FCA provided by the courts and statutory amendments.

 Many states, including Montana, Nevada and California, have false claim statutes that address claims made to state governments based on the FCA model.  Contractors should determine whether these statutes exist and what potential liabilities they provide when performing state and local government work in other states.

 Although Idaho has not enacted a state false claims statute, a recent revision to the FCA has expanded its applicability to contractors performing state and local government work in Idaho.  The number of contractors performing government work in Idaho has also increased due to the economic downtown over the last several years.   Many contractors who previously bid primarily private construction projects are now bidding government projects.  Contractors must be more mindful than ever of FCA and its reach.

 The FCA was significantly expanded in 2009 to cover all projects funded at least in part by federal funds.  A large number of state and local projects in Idaho are at least partially funded by federal money.  These projects now fall within the scope of the FCA even without federal agency involvement.

Another expansion of the FCA impacts subcontractors and suppliers.  Federal courts were historically divided on whether subcontractors, sub-tier contractors, and sub-tier suppliers were subject to FCA liability.   In a 2008 decision, the Supreme Court found that the FCA applied to a subcontractor who makes a false statement to the prime contractor intending that it be passed through to the federal government.  The Court rejected the notion that the FCA extended liability to any entity receiving federal funds directly or indirectly.  In response to the decision, the 2009 revision expands the scope of the FCA to cover subcontractors and suppliers at all tiers.

FCA liability can arise in a number of situations at every stage of the project.  Although each phase of a project presents different potential false claims, several bases for FCA liability are worth noting. 

False statements in bids or negotiations often result in FCA liability.  These statements can include everything from knowingly identifying an unavailable employee as the project manager or superintendant to identifying a sham disadvantaged business enterprise subcontractor for the project.  

Certifications of payment and compliance with laws and regulations are also common bases for liability.  Contractors must be vigilant to ensure that subcontractors comply with environmental regulations, the Davis-Bacon Act, and Buy America Act.  Certification can also lead to FCA liability when a prime contractor withholds funds from a subcontractor or supplier due to an alleged breach of contract.  A contractor should notify the government agency in writing anytime it requests payment that it does not intend to pass through to the party performing the work or supplying the material or equipment.  Similarly, a prime contractor should never hold retention from a subcontractor when it has received full payment from the government.    

Probably the most recognized act giving rise to FCA liability is false or inflated pricing which typically arises during the change order process.  Contractors should avoid using the word “cost” when submitting pricing to perform extra work on government projects.  If the contract requires that change order requests are based on cost estimates, contractors should carefully analyze all costs to ensure accuracy and retain supporting documentation.  If a cost-based change order results in overpayment by the government, a contractor’s failure to refund the overpayment may result in FCA liability.

Given the expansion of the FCA, the steep liability for violations, and a substantially more aggressive attitude by the federal government toward enforcement, contractors that perform government work at any level should establish an internal education and compliance system to reduce potential liability under the FCA. 

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Joe Meuleman is an attorney with the law firm Meuleman Mollerup LLP practicing in the areas of construction law and commercial litigation.  Mr. Meuleman serves on the Steering Committee of the Construction Leadership Council of the Associated General Contractors of America.  Locally he is an active member of the Idaho AGC and the Idaho Chapter of the U.S. Green Building Council.  He can be contacted by telephone at 208.342.6066 or via email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it . More information is available at www.lawidaho.com.

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Click here to print:  A Construction Lien for Work Performed for a Purchaser May Not Be Sufficient

By Richard W. Mollerup

(as Published in the Idaho Construction Review, November 2010)

Relying on a construction lien for work performed at the request of a purchaser of real property is dangerous and may not insure payment.  Many real property purchase and sale agreements, particularly transactions in which the property is to be developed or renovated, provide that the purchaser may perform substantial work on the property prior to closing the transaction for due diligence or obtaining subdivision or other approvals.  The performance of due diligence or securing of approvals may actually be an express condition of the purchaser’s obligation to buy the property.  In the event the purchaser fails to pay for work, the lien rights of the contractor or engineer may be of little use even if the sale is consummated and the purchaser becomes the fee owner.

The initial question is whether the purchaser is contracting for work or professional services as the purchaser or as an agent for the owner.  Idaho Code § 45-501 creates a lien for any person performing labor, furnishing materials or professional services at the request of the owner or his agent.  The Idaho Supreme Court has determined that the work must be requested by the owner and the owner’s knowledge or permission for the purchaser to perform the work is not sufficient. The reason is that one cannot encumber or create a lien on an real property interest greater than his own.

Idaho Code § 45-507 specifically provides that, if the person requesting the work to be performed owns less than a fee simple interest, then only the interest of the person causing the work or services to be performed is subject to the lien.  This is normally raised in the context of a tenant requesting work to be done on his premises and whether the lien for such work attaches to the fee simple interest of the owner or the leasehold interest of the tenant.  However, some courts have applied the statute to a purchaser holding that, at the time the work or services were commenced to be furnished, the purchaser owned only an executory or future interest in the property. If the purchaser does not complete the purchase, that interest essentially goes away.  If the purchaser completes the purchase, the lien should attach to the fee interest in the property.  However, the construction lien may be junior to a purchase money mortgage recorded after the work was commenced.

The relative priority of a construction lien for work requested by a purchaser and recorded before the purchaser completes the transaction versus the priority of a purchase money mortgage requires analyzing two competing statutes.  Idaho Code § 45-506 provides that a construction lien is preferred to any lien, mortgage or other encumbrance which may have attached subsequent to the time when the work was done. 

However Idaho Code § 45-112 provides that a mortgage given for the price of real property (a purchase money mortgage) has priority over all liens created against the purchaser.  A purchase money mortgage does not have to be a mortgage in which the seller of the property is the mortgagee.  A mortgage or deed of trust to a third party or institutional lender is a purchase money mortgage so long as the entire proceeds are used for the purchase price. One District Court held that a construction lien for work requested by a purchaser was essentially a lien against the purchaser because he had only an executory interest and therefore, the construction lien was junior to the purchase money mortgage.

For a purchase money mortgage to have priority, the mortgagee must be a bona fide purchaser without knowledge of adverse claims to the property.  Based on that, one would think that a purchase money lender who not only knew work was being performed at the instance of the purchaser, but required it as a condition of the loan would not be a good faith purchaser.  However, a recent District Court in a case with essentially those facts held that purchase money mortgage had priority because there was no evidence that the mortgagee had knowledge or reason to know that the person performing the work had not been paid.

Therefore, a contractor, material provider or other party with lien rights under Idaho Code § 45-501 et seq who performs work or delivers materials at the request of a purchaser assumes additional risks unless the work was requested directly by the owner.  He assumes the risk of the transaction not closing, in which case there is no lien, or having a lien which is junior to a substantial purchase money mortgage recorded after work was commenced or materials.

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Richard Mollerup is a partner with the law firm Meuleman Mollerup LLP, practicing in the areas of real property law, title insurance and escrow law, and in business matters including formation and operation of corporations, partnerships and joint ventures.     Mr. Mollerup can be contacted by phone at 208.342.6066 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  More information is available online at www.lawidaho.com.

By Brian J. Holleran

Click here to print;  Understanding the Purpose of a Lien is Required to Ensure Payment

It is generally understood that a supplier of labor, materials, or equipment on a private construction project can secure a mechanic’s or materialmen’s lien on the subject property.  The purpose of such lien is to ensure payment to those supplying the labor, materials, or equipment.  

Idaho’s materialmen’s and mechanic’s lien statute, however, does not allow a laborer, materialman, or equipment supplier to attach a lien to public, government-owned property.  The laborer or materialman is therefore deprived of his or her typical security interest in the project.  Recognizing this shortcoming, Idaho has adopted a series of laws designed to protect the rights of those providing labor, materials, or equipment to projects on public property.

This alternative remedy is the “payment bond.”  Idaho law requires a general contractor on a state, county, city, or any other public works project to post a payment bond before the contract for construction is awarded.  The public, contracting authority sets the amount of the payment bond, but it cannot be less than 85% of the entire contract amount.  The general contractor will typically secure the payment bond via a licensed surety company.  Pursuant to the statute, the payment bond is solely for the protection of persons supplying labor, materials, or equipment to such public works project.

A person seeking payment via the payment bond must meet various qualifications in order to sue for payment under the statute.  First and foremost, the person seeking payment must qualify as a claimant under the statute.  The statute limits claimants to first-tier and second-tier subcontractors.  A “first-tier subcontractor” is a subcontractor that supplies labor or materials directly to the general contractor.  A “second-tier subcontractor” (also known as a “sub-subcontractor”) is a subcontractor that supplies labor or materials to a first-tier subcontractor.  Thus, a person that supplies labor or materials to a second-tier subcontractor cannot make a claim against the payment bond because his relationship to the general contractor is too remote. 

The next requirement is of course that the claimant has provided labor, material, or equipment to the project.  Quite obviously, a “laborer” performs some physical act at the project site.  A person providing a professional service, such as a project manager, engineer, or architect may qualify as a “laborer” if such professional supplies 1) on-site; 2) physical toil; and 3) and the professional’s work is supervisory in nature.  A claimant supplies “materials” to the project if, at the time of sale, he reasonably expects such materials to be used in the project.  Finally, claimant provides “equipment” if he rents, leases, or otherwise supplies equipment to the project. 

Next, the claimant must not have been paid in full within 90 days after last furnishing labor, materials, or equipment to the project.  Here is where the distinction between first-tier and second-tier subcontractors is relevant.  A first tier-subcontractor is not required to give notice to the general contractor of his claim within this 90 day period.  A second-tier subcontractor, however, is required to give notice to the general contractor of his claim during the 90 day period.  Specifically, the second-tier subcontractor must give notice directly to the general contractor via registered or certified mail, stating that such second-tier subcontractor has not been paid for the labor, materials, or equipment supplied.  The notice must state with substantial accuracy: 1) the amount claimed; and 2) the name of the person to whom the labor, materials, or equipment was furnished.  In addition, the notice must be sent to any place where the contractor maintains an office or conducts his business, or the notice may be sent to the contractor’s residence.

Finally, the claimant must institute a lawsuit against the payment bond within the appropriate amount of time.  Here again, the first-tier/second-tier distinction is relevant.  A first-tier subcontractor is entitled to file suit within one year from the date on which final payment under the subcontract became due.  A second-tier subcontractor, however, has a shorter time period to bring suit.  The second-tier subcontractor must bring suit within one year from the date on which he last supplied labor, materials, or equipment to the project. 

It is also important to note that there are federal statutes providing a similar remedy for first-tier and second-tier subcontractors where the project is on federal land.  However, because there are differences between the federal and state statutes, the subcontractor should consult such federal statutes before commencing a federal action.

 Under Idaho state law, a prevailing subcontractor may be entitled to a reasonable attorney’s fee.  On the flip side, a subcontractor who does not prevail may be required to pay the other party’s reasonable attorney’s fee.  As such, it is highly recommended that a subcontractor contact a construction attorney before commencing an action against the general contractor's payment bond.

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Brian J. Holleran is an attorney with the law firm Meuleman Mollerup LLP focusing in the areas of construction law and commercial litigation.  Mr. Holleran earned his undergraduate degree in English from the University of Idaho, and he received his J.D. in 2010 from the Gonzaga University School of Law. Prior to law school, he served as Project Manager for an Idaho Commercial Development and Management firm.  Mr. Holleran can be contacted at 208.342.6066 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . 

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Meuleman Mollerup LLP attorneys have served the construction, real estate, and business communities for over 29 years.  More information is available at www.lawidaho.com

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