Kittay v. Landegger (In Re Hagerstown Fiber Ltd. Partnership)
277 B.R. 181 | United States Bankruptcy Court, S.D. New York | 2002
What This Case Means for Subcontractors
A bankruptcy trustee sued the general contractor (SBCCS) and others over a failed waste paper treatment facility, claiming fraud and breach of contract. The court split the claims: construction-related disputes go to arbitration and are stayed, but claims about post-operation misconduct (hiding losses during the first 91 days) also go to arbitration. This matters because it shows courts will enforce arbitration clauses in construction contracts even in bankruptcy, but may carve out claims involving fraud or post-performance wrongdoing.
Key Takeaways
- •Arbitration clauses in construction contracts are enforceable and will be upheld even when disputes end up in bankruptcy court
- •Claims about construction defects, performance failures, and fraud during the building phase are typically arbitrable and won't proceed in court
- •Post-completion operational claims (like hiding losses or manipulating financial results) may also be arbitrable if they relate to contractual performance obligations
These claims are arbitrable, and will be stayed.
Frequently Asked Question
If my general contractor breaches the contract and I'm in bankruptcy, can I still sue them in court or do I have to arbitrate?
You'll likely have to arbitrate if the construction contract contains an arbitration clause—courts enforce these even in bankruptcy. However, claims involving fraud or misconduct after the project is complete may be treated differently. Check your contract's arbitration language and consult a bankruptcy attorney about your specific claims.
Related Cases
Texas Natural Resource Conservation Commission v. IT-Davy
Sovereign immunity bars a contractor's breach-of-contract suit against a state agency absent express legislative consent; neither the agency's conduct, contract terms, nor general statutes waive immunity from suit.
Martin K. Eby Construction Company, Inc. v. Dallas Area Rapid Transit
A contractor must exhaust administrative remedies established by a regional transportation authority before pursuing breach of contract claims in court, even when the authority lacks governmental immunity from suit.
Edwin P. Harrison, and United States of America, Party in Interest v. Westinghouse Savannah River Company
The Fourth Circuit reversed the district court's dismissal, holding that the False Claims Act broadly reaches false statements made to obtain government contract approval, not just false payment claims themselves.
United States v. Winstar Corp.
The Government's contractual promises regarding supervisory goodwill accounting treatment are enforceable despite subsequent regulatory changes, and the Government is liable for breach when Congress eliminated those accounting benefits.
Green International, Inc. v. Solis
No-damages-for-delay clauses in construction contracts need not meet the conspicuousness requirement established in Dresser for exculpatory negligence clauses, and such clauses are enforceable to bar delay damages absent specific exceptions.
Flameout Design & Fabrication, Inc. v. Pennzoil Caspian Corp.
Summary judgment for defendants was properly granted because Flameout failed to satisfy the statute of frauds for an alleged three-year contract, as the three documents cited did not constitute a signed, enforceable written agreement for the sale of goods.