Groff Murphy succeeds in piercing the corporate veil
When chasing a financially weak corporate entity, piercing the corporate veil is a goal often pursued but rarely achieved. On March 31, 2014, however, Groff Murphy scored a victory for its client Northwest Cascade when Division One of the Court of Appeals pierced the corporate veil of a debtor corporation. The Court held that the corporate shareholders were personally liable for the obligation due Northwest Cascade where they regularly diverted funds from the corporation for their personal use, used corporate assets without compensation, and stripped the corporation of its real estate assets after Northwest Cascade had filed suit. The Court of Appeals rejected the shareholders’ argument that these acts were simply poor accounting. The decision provides some clarity to Washington law by rejecting the argument that a creditor must prove that the shareholder intended to fraud the corporate creditors, instead interpreting Washington law to simply require manipulation of the corporation in a way that harms the creditor.
Northwest Cascade was represented at trial and on appeal by Michael J. Murphy.
Groff Murphy wins unanimous decision of the Washington Supreme Court in land use case ensuring level playing field for its client
A level playing field is critical for everyone engaged in business. Although market conditions normally play a key role in leveling the playing field, government can dramatically alter the playing field when it makes regulatory and land use decisions. Michael Murphy and William Crittenden successfully represented Ellensburg Cement Products, Inc., in overturning a decision of Kittitas County that would have allowed a competitor to engage in rock crushing on agriculturally-zoned lands – an activity that historically had not been allowed under the County land use code. Even though “rock crushing” was expressly designated a permitted or conditional use in other specific zones, the County issued a decision allowing rock crushing on agriculturally-zoned property on the theory that rock crushing was permitted as “processing of products produced on the premises,” a use classification only allowed in agricultural zones. On February 6, 2014, a unanimous Washington Supreme Court agreed with Ellensburg Cement Products, Inc., that “processing of products produced on the premises” was an agricultural use that did not include rock crushing.
The decision is also noteworthy for its handling of the issue of how much deference is due the government in its decision making. The County and the permit applicant argued that the court was required to defer to the County’s interpretation of its own zoning code. The Supreme Court disagreed, noting that the County’s decision to allow rock crushing in the current case was not a consistent policy and, therefore, the decision was not entitled to any deference from the courts. The Supreme Court decision not only ensures a level playing field in this particular case, but it is also a victory for fairness, predictability and consistency in local permitting decisions, significantly limiting the ability of local governments to make unsupported ad hoc decisions.
The Court also agreed with Ellensburg Cement Products, Inc., that the county’s administrative appeal procedure violated state law. The county’s procedure for appealing the permit decision under the State Environmental Policy Act, Chap. 43.21C RCW (“SEPA”) effectively prevented interested parties from presenting evidence or even addressing the permitting board regarding the SEPA decision by making the appeal a “closed record appeal.” The Supreme Court ruled that the County’s SEPA appeal procedure violated provisions of the 1995 land use regulatory reform statutes that were intended to standardize local government permit processes. Under those state statutes the County could not provide a “closed record appeal” unless the County first provided an “open record hearing” at which interested parties could present testimony and evidence.
Ellensburg Cement Products, Inc. v. Kittitas County, 179 Wn.2d 737, 317 P.3d 1037 (2014)
If you have any questions about the Ellensburg Cement Products decision or other land use matters please call Michael Murphy at 206-628-9500 or William Crittenden at 206-361-5972.
Groff Murphy scores victory in government contract dispute
Groff Murphy succeeded in defending a client on a government project facing an inflated, total cost delay claim submitted by a subcontractor in arbitration. The subcontractor claimed its productivity was impacted by the prime contractor’s directives and decisions on the Federal environmental remediation project at issue. Groff Murphy established that the subcontractor failed to prove a loss of productivity , failed to prove liability on behalf of the prime contractor, and succeeded in defeating the over $2.5 million in impact damages claimed.
If you have any questions about this decision or other government contract disputes, please call Marisa Bavand at (206) 628-9500.
Groff Murphy obtains a $60 million judgment for a Federal government contractor client
On September 5, 2012, Groff Murphy was successful in obtaining a judgment in excess of $60 million for its Federal government contractor client in a U S District Court lawsuit against a foreign procurement agent with offices in Seattle and Singapore. The client was the BOS contractor for the US Navy on the Indian Ocean island of Diego Garcia, and Groff Murphy successfully established that the defendants had engaged in various forms of procurement fraud, conspiracy, RICO violations and breach of contract.
Groff Murphy Helps Obtain Victory For Contractors In Supreme Court Lien Case
Good news for mechanic’s lien claimants - on September 15, 2011, the Washington State Supreme Court unanimously overturned the Court of Appeals decision in Williams v. Athletic Field, Inc. In Williams, the Court of Appeals had invalidated a lien filed by a lien service on behalf of the contractor. The contractor’s lien service had used the exact sample lien form set forth in the statute, which the law says shall be sufficient to state a valid claim of lien. But the Court of Appeals held that the lien was not properly “acknowledged,” and was therefore invalid. In doing so, the Court of Appeals failed to “liberally construe” the lien statute to protect the claimant, as it is specifically required to do by the statute.
The Court of Appeals decision in Williams posed a significant trap for lien claimants. Numerous pending liens, representing untold millions of dollars in work were at risk of being declared invalid. Moreover, future lien claimants also ran the risk of having their liens declared invalid even though they relied in good faith on the sample lien form.
Because of our experience with this issue and the importance of this case to our clients and the industry, Groff Murphy was an active participant in the effort to have Williams overturned. Mike Grace filed an amicus curiae brief in the case on behalf of the AGC of Washington, and Mike Grace argued the AGC’s position to the Supreme Court.
In a 9-0 decision, the Supreme Court agreed with lien claimants and the AGC, holding that a properly filed lien based on the sample form is indeed sufficient to state a valid lien. Moreover, the Court also said that the mechanics lien statute is to be “liberally construed” by the courts in order to provide payment security for claimants.
From our perspective, although the Williams decision is important because it confirms that lien claimants can rely on the sample form in the statute, perhaps the broader significance of the decision is the Court’s clarification of the liberal construction standard in RCW 60.04.900. There are a variety of issues and defenses raised in lien disputes to which the liberal construction standard will apply, to the benefit favor of lien claimants.
If you have any questions regarding the Williams decision or any other aspect of lien law, please call Mike Grace or Marisa Bavand at 206-628-9500.
WSDOT defeats $177 million construction project bid protest
Groff Murphy successfully defeated a bid protest on a $177 million construction project for Washington State Department of Transportation on behalf of its general contractor client. The disgruntled bidder sought to enjoin the award of the contract to the low bidder based upon the low bidder’s use of the term “mechanical” in its subcontractor listing. The Thurston County Superior Court denied the requested injunction and allowed the contract to be awarded to our client.
King County Superior Court order enforces a subcontract “pay if paid” clause
Groff Murphy obtained an order enforcing a subcontract “pay if paid” clause in King County Superior Court. The subcontractor sued our general contractor client for payment. Groff Murphy argued that the subcontractor was not entitled to payment because the general contractor had not been paid by the project Owner and the subcontract included a “pay if paid” provision. The Superior Court agreed, enforced the “pay if paid provision,” and dismissed the claims against our client.
New precedent set in Washington for bad faith claims handling
Groff Murphy established new precedent expanding the scope of an insurer’s liability for bad faith claims handling in Washington. In denying the insurers’ motion to dismiss, the Western District of Washington held that an insurance claims representative may be held individually liable for bad faith claims handling. In addition, the Court granted our client’s motion for summary judgment on its bad faith claims based on the insurer’s failure to honor the “made whole” rule during settlement negotiations