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Dive Brief:
Makers Line, the construction arm of Q Factor, a Salt Lake City-based development firm, faces at least 15 lawsuits that allege the contractor failed to pay its subcontractors on several different construction projects in Utah, according to several court documents.
In total, the lawsuits seek about $2.8 million in damages, according to The Salt Lake Tribune.
Makers Line did not respond to requests for comment. The contractor has reportedly gone silent in recent weeks, with employees experiencing furloughs or job cuts, though its owner told Building Salt Lake in October that the company had not officially shut down at that point.
Dive Insight:
Q Factor has been an up-and-coming developer during Utah’s commercial construction boom, which faltered as interest rates rose, according to Building Salt Lake. The developer’s downfall illustrates the pitfalls facing private construction projects in the current environment, even as publicly-backed infrastructure and manufacturing builds continue to flourish.
Many of the suits against Makers Line include construction lien claims on associated properties, according to the court documents.
For example, H&E Equipment Services filed liens against several properties where Makers Line has involvement. H&E, a Baton Rouge, Louisiana-based equipment rental company, claims it never received full payment for the rental equipment provided during construction.
In a separate lawsuit, LG Concrete, an Ogden, Utah-based subcontractor, alleges Titus, a concrete firm and sister company of Makers Line, failed to pay in full for the construction labor, materials and equipment LG provided for the project. Similarly, Bingham Plumbing & Mechanical, another Utah-based subcontractor, alleges in another lawsuit that Makers Line failed to pay in full for the plumbing and mechanical work and materials Bingham provided for the project.
Utah law entitles subcontractors to have each of their liens foreclosed and the properties sold at a sheriff’s sale to recover from the proceeds the reasonable value of the unpaid work. But that rarely happens, with the owners of the properties themselves ultimately settling the disputes directly with subs. Liens in that sense gives subs leverage to get owners to the table.
Several more lawsuits filed in Utah contain similar allegations of Makers Line’s failure to pay its subcontractors, and the firm has at least eight total ongoing projects in Salt Lake City, according to city records.
One suit also alleges Makers Line decided to substitute untreated lumber on a project in Ogden in place of fire-treated lumber, as originally prescribed in the contract, according to the Standard-Examiner. Use of that wood prompted the city to order a halt to construction on March 29 due to the structure’s fire hazard.
Pay-if-paid clauses
According to the Salt Lake Tribune, Makers Line has claimed that it cannot pay its subcontractors until it gets paid by project owners. So-called “pay-if-paid” provisions are common in construction, and ultimately mean that if a general contractor doesn’t get paid by a project owner, it doesn’t have to pay its subs.
In that respect, pay-if-paid clauses shift the risk of getting paid from the general contractor down to subcontractors. Only seven states — California, Delaware, New York, North Carolina, South Carolina, Wisconsin and Virginia — have laws that explicitly make pay-if-paid clauses unenforceable by statute, according to a survey by law firm Woods Aitken.
Still, nine other states — including Utah — have language on the books or legal precedent that make pay-if-paid clauses unenforceable under certain conditions, according to the Woods Aitken survey.
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