If you saw the Netflix thriller Bird Box last year, you know that what you see does not always lead you down the right path. As a construction litigation attorney, the “claim” is often about telling the story of a breach of contract, or failed expectations, or unforeseen delays, all through the testimony of individuals or the introduction of documents.
In a recent case, Wollaston Industries v. Robert E. Ciccone d/b/a Ciccone Door Services, (U.S.D.C. Mass) (Dec. 16, 2019), the court evaluated a sub-subcontractor’s claim on a construction contract dispute arising from the renovations at the Longfellow Bridge and the Hatch Shell in Boston, Massachusetts. Although the projects involved different prime contractors, the same specialty door subcontractor was claimed to have failed to pay the sub-subcontractor, who sued for approximately $140,000.
The defendants filed a motion to dismiss a number of the sub-subcontractor’s claims, including one for fraudulent inducement. Under Massachusetts law (like most states), in order to prevail on a claim for fraudulent inducement, a plaintiff must allege a false representation, material to the negotiations, upon which the plaintiff reasonably relied in entering into an agreement with the defendant. Here, the sub-subcontractor’s fraudulent inducement claim was based on the theory that the subcontractor submitted false documentation (i.e., certifications and/or lien waivers) to the prime contractors to obtain payment. Specifically, the sub-subcontractor alleged that the subcontractor represented to each of the prime contractors “that no subcontractors were owed money for their work, which was a prerequisite to the prime contractors paying [the subcontractor].”
Now, remember, this is at the motion to dismiss and/or summary judgment stage. The court was not deciding on the credibility of the evidence or whether the allegations were true. Instead, the court focused on whether the plaintiff sufficiently alleged a cause of action against the defendants. The court concluded that any false statements about pay apps or lien waivers were not relevant to the claim for fraudulent inducement:
This is not enough for [the sub-subcontractor] to state a claim for fraudulent inducement against Defendants. [The sub-subcontractor] nowhere alleges that Defendants made false representations of material fact to [them]. Nor does [the sub-subcontractor] allege that it acted in reliance on any false statements made by Defendants.
Accordingly, the court granted the motion to dismiss the fraudulent inducement claim.
So what? The opinion is silent about whether there was a breach of contract claim alleged by the sub-subcontractor. But the real lesson for contractors is to make sure the payment provisions expressly address the use of conditional and unconditional lien waivers. In other words, if you are a subcontractor, you want to make sure your lien rights are conditionally waived only upon payment.