Category Archives: Commercial Litigation

“But They Breached First”… Why You May Still Be Obligated To Peform

It is not uncommon for a general contractor or subcontractor to stop working on a project when they are not paid for work previously performed and invoiced. However, professionals in this situation should be careful to make sure their contract does not have any provision that forbids them from stopping their work.  They should also make sure that they are in compliance with the Texas Property Code.

According to Sec. 28.009 of the Texas Property Code:

(a)  If an owner fails to pay the contractor the undisputed amount within the time limits provided by this chapter, the contractor or any subcontractor may suspend contractually required performance the 10th day after the date the contractor or subcontractor gives the owner and the owner’s lender written notice:

(1)  informing the owner and lender that payment has not been received;  and

(2)  stating the intent of the contractor or subcontractor to suspend performance for nonpayment

The code makes it clear that work can be stopped only after giving notice. Failure to provide this notice could result in a court finding that stopping work resulted in a breach of Contract. Generally speaking, under traditional contract principles if both parties breach a contract, the first party to breach is the party that will be responsible for damages. However, it is critical that the non-breaching party determine whether the initial breach was “material”.

The Texas Supreme Court recently addressed this issue in Bartush v. Cimco, No. 16-0054, 2017 WL 1534053 (Tex. 2017) (April 28, 2017). In that case Bartush hired Cimco to install a new refrigeration system in its manufacturing plant. They system that Cimco installed failed to properly cool. Bartush refused to pay the remaining contract balance alleging that Cimco had breached and the breach excused Bartush’s performance.

At trial, the jury found that both parties breached the contract but that Cimco breached first and awarded Bartush damages for the cost of repairing the system. Cimco appealed and won. The appellate court held Bartush for the contract balance because the court held that Cimco’s breach was not material.

The Texas Supreme Court affirmed the appellate court’s decision that Cimco’s breach was not material. Relying on Mustang Pipeline Co. v. Driver Co., 134 S.W.3d 195 (Tex. 2004), the Court explained that: (i) a contractor’s material breach excuses the owner from making further payments; but (ii) a non-material breach simply gives rise to a claim for damages. The Court stated that “while a party’s nonmaterial breach does not excuse further performance by the other party, neither does the second breach excuse the first.”

In applying the principle above, the Court concluded that although Cimco was the first to breach, the breach was not material and did not excuse Bartush’s obligation to pay the remaining contract balance. The Court also stated that, Bartush’s subsequent breach did not excuse Cimco’s obligation to install a working refrigeration system. Consequently, Cimco’s contract balance should have been offset by Bartush’s repair balance.

Clearly, parties to a contract have a great deal to consider before deciding to forego performing their obligations under a contract. It is best to consult counsel with actual contract litigation experience before refusing to perform. However, if a party has breached and it is too difficult to determine whether the breach is material, it is best to continue to fulfill any contractual obligations so long as the breaching party is not insolvent. This is because the party that fully performs, has clean hands, presents well to a court or jury, and is generally entitled to damages.

Nothing in this article is to be considered legal advice. If you have questions or need representation concerning a construction matter, please call 832-930-0529 or email us at info@stephenspllc.com

Give Us a Break…Literally: Senate Bill Considers Mandatory Breaks for Construction Workers

It’s 2:00 pm on a sunny Friday in Houston, Texas. The temperature is 102 degrees with humidity thick enough to make you question why you elected to spend your summer in the city. You stop at a light downtown and see 20 or more guys in long sleeve shirts working diligently on a construction project. You think to yourself, “My goodness, how can they work out in that heat all day?”

Well, a Texas Senate Panel is considering taking an action that it believes will make those jobs safer for workers. In an effort to prevent illness and deaths from the Texas heat, the panel considered Senate Bill 473 which proposes a requirement that construction companies to give workers mandatory rest breaks. The legislation would require 15-minute rest breaks for every four hours of work on construction sites.

Some cities in Texas have already implemented a similar policy on work sites. In Dallas, construction workers are entitled to a 10-minute break every four hours. Austin is another Texas city that requires breaks. There are also a handful of states that require breaks at construction sites.

The Debate

There is a debate among builders and worker advocates regarding the bill. Builders argue that safety regulations regarding construction work sites should be left to OSHA. OSHA has safety guidelines that are recommended to builders. Builder advocates explain that failure to follow OSHA recommendations can result in fines and is typically strong evidence of negligence in workplace safety litigation which could result in big verdicts against companies. They believe that the threat of litigation and fines are strong enough incentives to push companies to provide a safe work site.  They also believe that the bill could result in over-regulation because the federal government already regulates safety through OSHA and cities could pass similar legislation. Compliance with all three regulations could increase construction costs which would be passed down to the buyer.

Construction worker advocates point out that OSHA does not have a specific heat stress standard. OSHA relies on Section 5(a)(1) of the Occupational Safety and Health Act of 1970 (OSH Act) (also known as the General Duty Clause) to require employers to provide a safe and healthy environment for all workers and recommends that employers, including roofing employers, implement policies to address working during hot weather conditions. OSHA uses a heat index to make suggestions to builders on what to do when the heat reaches certain temperatures. Proponents of the bill argue that companies are not required to follow OSHA’s suggestions and many do not.

Senate Bill 473 would do much more than suggest breaks. Breaks would be mandatory and failure to comply will afford workers a right to file a complaint through the Texas Workforce Commission. The complaints would be investigated and handled by the Commission. Then, the commission could potentially penalize companies through the same process it uses for wage disputes.

There are a number of questions regarding the way this bill would impact the industry. From a legal standpoint one can expect that if passed, the bill will have a significant impact on construction contracts. Specifically, delay and delay damages clauses could be affected. Project timelines could also be impacted.

Nothing in this article is to be considered legal advice. If you have questions or need representation due to nonpayment on a construction project , please call 832-930-0529 or email us at info@stephensbell.com

The Buck Stops Here: Buc-ees vs. Bucky’s

Drive down any Texas interstate long enough and you’ll run into Buc-ees. It is a Texas staple and many Texans’ favorite chain of convenience store. What most Texans don’t know is that there is a war brewing due to the arrival of Bucky’s, a Nebraska based chain of convenience stores.

Further complicating matters is the fact that the two companies have bumped heads in the past. Both companies sought trademark protection for their brands only a few months apart. In 2009, they entered into a consent agreement allowing them to both continue using their names due to the fact there was such a great distance between them.

However, Bucky’s has recently decided to play hardball and has already taken steps to bring six of its stores to Texas. Naturally, Buc-ees has filed suit to prevent their competitor from being able to operate in Texas. Buc-ees suit alleges that Bucky’s looking to confuse the market and asserts claims of trademark infringement and unfair competition.

Unfair Competition

What exactly is “unfair competition”?  In all competitive situations there is some degree of unfairness. However, what makes unfair competition a cause of action is that it is categorized as arising out of business conduct which is contrary to honest practices in industrial or commercial matters. U.S. Sporting Prods., Inc. v. Johnny Stewart Game Calls, Inc., 865 S.W.2d 214, 217 (Tex. App.–Waco 1993, writ denied) (quoting Am. Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3, 14 (5th Cir. 1974)). This includes

1) passing off or palming off;

2) trade secret misappropriation, and

3) common law misappropriation. Id.;

Conceal City, L.L.C. v. Looper Law Enforcement, LLC, 917 F.Supp.2d 611, 618 (N.D. Tex. 2013); see also Taylor Pub. Co. v. Jostens, Inc., 216 F.3d 465, 486 (5th Cir. 2000).

Obviously, Buc-ees will argue that if allowed to operate in Texas, Bucky’s will receive the benefit of 35 years of undeserved brand recognition. They’ll also probably assert that certain Bucky’s goods are going to be “passed off” as Buc-ees goods.