How Prior Litigation Affects Owners, Contractors and Subcontractors
There is a fundamental principle in law that states that once a matter has been decided, it cannot be litigated again. More specifically,”[t]he rule of claim preclusion prevents reassertion of the same claim regardless of what additional or different evidence or legal theories might be advanced in support of it.” Girolametti v. Michael Horton Assocs., 332 Conn. 67, 75. Typically, claim preclusion applies in subsequent cases involving the same parties. However, because of the unique relationship between a general contractor and its subcontractors, courts in multiple jurisdictions have found it appropriate to apply claim preclusion in cases involving subcontractors that did not participate in the first proceeding between a general contractor and an owner. Typically, however, claim preclusion prevents an owner from bringing a subsequent claim against a subcontractor after there is a finding in a general contractor’s favor in a prior matter between an owner and said general contractor. A rule that would hold a subcontractor liable to an owner as a result of a proceeding in which the subcontractor did not participate, and, therefore, did not have an opportunity to defend itself would be more problematic.
When deciding whether to bar a claim in a matter between an owner and a subcontractor that was previously litigated in a matter involving only an owner and a general contractor, a court must consider whether the contractor and subcontractor were in “privity.” “While it is commonly recognized that privity is difficult to define, the concept exists to ensure that the interests of the party against whom collateral estoppel [or res judicata] is being asserted have been adequately represented . . . . A key consideration in determining the existence of privity is the sharing of the same legal right by the parties allegedly in privity.” Id. at 76. In Girolametti v. Michael Horton Assocs., the court held that, “when a property owner and a general contractor enter into binding, unrestricted arbitration to resolve disputes arising from a construction project, subcontractors are presumptively in privity with the general contractor concerning the preclusive effects of the arbitration on subsequent litigation arising from the project.” Id. at 87. To find that there was privity between the subcontractor and the general contractor, the court in Girolametti analyzed the prime contract between the general contractor and the owner. The court noted that the prime contract included several “flow down” provisions that required the general contractor to be liable to the owner for the actions of its subcontractors and further stated that, “[b]y an appropriate agreement, written where legally required for validity, the Contractor shall require each Subcontractor, to the extent of the Work to be performed by the Subcontractor, to be bound to the Contractor by the terms of the Contract Documents, and to assume toward the Contractor all the obligations and responsibilities which the Contractor, by these Documents, assumes toward the Owner.” Id. at 89.
In analyzing the contractual relationship, the court determined that there was such unity of interest between the general contractor and the subcontractor that it was reasonable to believe that the subcontractor’s interests were adequately represented despite its lack of participation in the prior matter. However, the court said this determination that, for claim preclusion purposes, a general contractor and a subcontractor are in privity is a rebuttable presumption. Id. at 87. Therefore, this determination of presumption of privity is not automatic and may be rebutted by sufficient evidence. Aguiar v. Between-The-Bridges, LLC, 2020 Conn. Super. LEXIS 116, *8.
Notwithstanding the foregoing, there is no rebuttable presumption that, if an owner prevails against a subcontractor seeking to enforce its mechanic’s lien rights, a general contractor will be barred from bringing a claim to recover monies it is owed for the subcontractor’s work. In Strazza Bldg. & Constr., Inc. v. Harris, the court stated that “a ‘flow up’ obligation establishing privity could exist under circumstances in which a general contractor is seeking only the same funds that a subcontractor sought and lost in a prior action, but, in such a case, the property owner would not be able to rely on the Girolametti presumption.” Strazza Bldg. & Constr., Inc. v. Harris, 207 Conn. App. 649, 655. While this reasoning may initially seem flawed, it makes perfect sense. There are good reasons why a general contractor should not have to rely upon a subcontractor to represent its interests.
The court in Strazza Bldg. & Constr., Inc. recognized that a subcontractor and a general contractor are not similarly situated. Specifically, a subcontractor is only involved with a small portion of the project while a general contractor is responsible for the entire project, and, therefore, a subcontractor may not be ideally suited to defend a general contractor against an owner’s claims and prosecute the general contractor’s claims for payment. Id. at 655-657.
The most interesting part of all this is that, because the rule with regard to subcontractors only imposes a rebuttable presumption and because a case involving a general contractor may potentially still be barred without there being a rebuttable presumption, there are no guarantees as to how any court may decide these issues on any given day.
In light of the foregoing, if you have questions about how a prior matter may affect your claim regardless of whether you participated in the first case, please give me a call.
Scott Orenstein
(203) 640-8825