Arizona Contractor Groups Object to Ruling

September 28, 2010

Phoenix – The American Subcontractors Association, joined by ASA of Arizona, the Arizona Builders' Alliance and the Arizona chapter of the Associated General Contractors, has filed a “friends of the court” brief supporting a specialty trade contractor in the court case Galeb-Miller Development v. Markham Contracting Company Inc.

The Arizona Court of Appeals case involves a ruling that could unduly discourage or penalize lien claimants, particularly on large multi-lot properties. Although a developer failed to pay Markham Contracting in a timely manner for its work and did not provide the required notice that it had bonded off the contractor's liens, a court found Markham Contracting's filing of five lis pendens (lien notices) “groundless.” The court fined the contractor for filing false documents, citing Arizona's False Documents Act.

The court derived the fine amount using a formula that calculates the fine based on the number of lots affected by the notices instead of the number of purportedly false documents filed. Not only did the court's use of the formula result in a much higher fine, but the action could set a precedent affecting lien claimants nationwide.

ASA urged the Arizona Court of Appeals to reverse the lower court judgment because “in short, the ruling … tips the balance of power between developers and contractors sharply – and unfairly – in favor of developers.” The brief also urged the appellate court to “reverse and make clear … that developers may not use the threat of A.R.S. § 33-420(A) [False Claims Act] penalties as a bludgeon to prevent contractors from exercising their lawfullien rights.”

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