Claims against RIDOT - Important Judicial Decisions in 2019

The Rhode Island Superior Court came down with a few interesting decisions this year concerning Rhode Island General Law Section 37-13.1-1. That statute deals with actions against the State of Rhode Island on Highway and Public Works contracts. The statute provides in part:

• 37-13.1-1. Suits allowed – Jurisdiction – Statute of limitations – Procedure. (a) Any person, firm, or corporation which is awarded a contract subsequent to July 1, 1977, with the state of Rhode Island, acting through any of its departments, commissions, or other agencies, for the design, construction, repair, or alteration of any state highway, bridge, or public works other than those contracts which are covered by the public works arbitration act may, in the event of any disputed claims under the contract, bring an action against the state of Rhode Island in the superior court for Providence county for the purpose of having the claims determined, provided notice of the general nature of the claims shall have been given in writing to the department administering the contract in accordance with the contract specifications set forth for the specific contract. No action shall be brought under this section later than one year from the date of the acceptance of the work by the agency head as so evidenced; provided, however, that no action shall be brought under this section on any contract awarded prior to July 1, 1977. Acceptance of an amount offered as final payment shall preclude any person, firm, or corporation from bringing a claim under this section. The action shall be tried to the court without a jury. All legal defenses except governmental immunity shall be reserved to the state. Any action brought under this section shall be privileged in respect to assignment for trial upon motion of either party.

Various aspects of the statute have been litigated over the years but litigation involving the sections bolded above resulted in two major takeaways from the 2019 Superior Court decisions:

1. The State’s sovereign immunity can be waived if a party substantially complies with the notice provision as provided in the applicable contract specifications; and
2. The statute does not permit jury trials in disputes concerning public works.

RIDOT Claims it Cannot Be Sued - Manafort Brothers, Inc. v. State of Rhode Island and RIDOT

On September 28, 2016, Manafort Brothers, Inc. (“Manafort”) filed suit against the State of Rhode Island (“State”) and the Rhode Island Department of Transportation (“RIDOT”) seeking compensation for expenses related to differing site conditions, project delays, and extra work associated with the construction of a 4-lane bridge and adjacent ramp north and south of the Providence Viaduct, as well as breach of the parties settlement agreement.

After almost two years of litigation, the State asserted a jurisdictional defense arguing that the State enjoys sovereign immunity if an opponent fails to fully comply with the various criteria provided for in RIGL § 37-13.1-1. In short, the State argued that Manafort had not fully complied with RIGL § 37-13.1-1(a) because there were no “disputed claims,” and because Manafort failed to provide adequate notice of its claims. Because of Manafort’s alleged failures, the State determined that it had not waived its sovereign immunity under the statute, and therefore, it could not be sued.

The Superior Court quickly dismissed the contention that there were no disputed claims. Following the Rhode Island Supreme Court’s 1994 decision in Clark-Fitzpatrick, Inc/Franki Found. Co. v. Gill, 652 A.2d 440, 447 (R.I. 1994), the Court reiterated that substantial compliance, not strict compliance, is all that is required for the notice provision under the construction contract specifications. The various letters, meetings, and conferences in which Manafort had let the State know of its claims, were all deemed sufficient to comply with the statute such that the Court held that the State had waived its claim to sovereign immunity.

Despite the ruling, the Court issued a stay so the State could seek further guidance on the sovereign immunity issue, among other topics, from the Supreme Court. The State filed a petition for writ of certiorari on July 18, 2019 and Manafort filed its opposition on September 13, 2019. On November 14, 2019, the Supreme Court granted certiorari to address whether under the circumstances, there had been a waiver of sovereign immunity. Briefing before the Supreme Court is to commence before the year is out.

Takeaway: Until the Rhode Island Supreme Court rules otherwise, contractors should take comfort that substantial compliance with the notice provisions of the applicable contract specifications document is all that is required to satisfy the notice provision under RIGL § 37-13.1-1.

No Jury Trials - Cashman Equipment Corp., Inc. v. Cardi Corp. et al. v. RIDOT

On May 2, 2011, Cashman Equipment Corporation, Inc. (“Cashman”) filed a twenty-count complaint against Cardi Corporation, Inc. (“Cardi”), Safeco Insurance Group, and RT Group (“RTG”) alleging breach of contract, tortious interference with prospective business relations, negligence, and a claim on the payment bond for various work done on the Sakonnet River Bridge. In June 2011, Cardi filed a third party complaint against the State of Rhode Island and RIDOT. Additional defendants, James Russel (“Russel”) and Steven Otten (“Otten”) were later brought into the case via Cardi’s amended complaint in 2015, but the original claim was between the general contractor, Cardi, and its subcontractor, Cashman.

Defendants RTG, Russel, and Otten demanded a jury trial but Cashman filed a motion to strike that demand. Defendants RTG, Russel, and Otten argued that because Cashman’s claims were not specifically directed at RIDOT that RIGL § 37-13.1-1 did not apply to their dispute and that they were therefore entitled to a jury trial as opposed to a bench trial as provided for in the statute.

While acknowledging that the Rhode Island Supreme Court has not addressed the issue of whether the statute’s bench trial requirement applies as to disputes solely between a subcontractor and a general contractor, although related to a public works contract, the Court nevertheless determined that RIGL § 37-13.1-1 applied to the matter because “the Legislature intended to have a judicial determination concerning those disputed claims which arise under a public-works contract.” The Superior Court noted that Cashman repeatedly referenced communications and interactions with RIDOT in its complaint and that Cashman entered into a contract with Cardi solely due to Cardi’s contract with RIDOT. Because there was “no question” that Cashman’s amended complaint arose out of disputes related to the contract between Cardi and RIDOT, and because the statute “clearly states that disputes arising out of a contract with the State involving the ‘design, construction, repair, or alterations of any state …bridge’ must be tried ‘without a jury,’ AND because the statute must be strictly construed, the Court granted the motion to strike the jury demand. Find the complete September 9, 2019 decision here.

While Defendants RTG, Russel, and Otten petitioned the Rhode Island Supreme Court to take up their jury trial issue, the Supreme Court denied the petition for writ of certiorari on October 10, 2019. Trial began in Cashman v. Cardi et al. v. RIDOT before Justice Sarah Taft-Carter in the Superior Court on October 20, 2019 and is ongoing.

Takeaway: Don’t expect to have a trial before a jury of members of the community if your dispute is related to a public works contract. Cashman v. Cardi et al. v. RIDOT makes clear that all such disputes will be tried before a judge -- not a jury.