Court of Appeals Issues New Ruling on Municipal Construction Contract Disputes

Paul F. Bohn, Esq.

As a law firm with both municipal clients and construction business clients, we see both ends of construction litigation disputes. The latest case out of the Michigan Court of Appeals, DiPonio Contracting, Inc. v. City of Howell, sheds light on the importance of obtaining competent representation in such cases.

DiPonio Contracting, Inc. (DCI) was awarded a bid for a road reconstruction project in the City of Howell. After the contract was received, DCI received a set of revised plans, and DCI was asked by Howell on at least two occasions to stop work on the project and make some emergency repairs that were unrelated to the road project.

DCI requested project extensions so that work could be completed prior to the deadline, given the various additional requests. DCI eventually ceased working on the project, although they believed their work was complete. The City alleged that they were entitled to liquidated damages at $1,550 per day (for 32-plus days) for DCI failing to complete their work, specifically for street sign replacement. DCI believed the City’s changing of the brackets that were needed to replace the signs precluded them from those damages.

DCI filed a complaint against the City alleging a breach of contract and unjust enrichment, for $121,872.52. The City filed a counter-claim alleging they were entitled to $88,350 in liquidated damages.

The trial court ruled that the City wrongfully denied DCI’s request for extensions of time on the project and awarded DCI the full $121,872.50. But, the court also ruled the City was, in fact, entitled to 10 days of liquidated damages of $15,500, resulting in a net judgement of over $105,000 for DCI. The Court of Appeals affirmed the ruling, and ultimately, DCI was awarded an additional $24,000 in attorney fees.

The City accused the court of not enforcing the liquidated damages clause of the contract. However, the Court of Appeals noted that the trial court simply awarded 10 days of liquidated damages rather than the full amount of $88,000, which the court found to be unreasonable.

Large-scale construction projects such as this one can be complex, especially when the need for emergency repairs arise. Matters only become more complex when breach of contract allegations results from misunderstandings and miscommunication. Whether you are a municipality or a business, Fausone Bohn, LLP attorneys have extensive experience in both municipal matters and construction litigation. Don’t hesitate to contact us for a consultation.

Paul Bohn is a partner at the law firm of Fausone Bohn, LLP, and was named one of the Top Attorneys in Michigan in 2014 by Crain’s Detroit Business, and practices in the areas of construction and municipal law. If you need help on a construction or municipal law issue, contact Fausone Bohn, LLP at 248-468-4536, or visit us online at www.fb-firm.com.