Municipalities and Other Public Entities May Be Liable to Contractors for Unpaid Work

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February 22, 2013
Matthew Horn
SmithAmundsen Construction Alert

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On February 20, 2013, the Second District Appellate Court of Illinois ruled in Lake County Grading Company, LLC v. The Village of Antioch, 2013 IL App. 2d 120474 (2nd Dist. 2013), that the Village of Antioch was liable to Lake County Grading Company (LCGC) for unpaid grading work performed by LCGC on two stalled Neumann Homes projects in Antioch.

The court predicated Antioch’s liability on the fact that Antioch entered into “infrastructure agreements” with Neumann Homes for the performance of grading work, amongst other work, but failed to require Neumann Homes to obtain payment bonds on the projects guaranteeing payment to its contractors for that work, as required under the Public Construction Bond Act. The court essentially found that since LCGC was unable to recover payment for its work on the payment bonds which should have been issued, but were not, Antioch was liable to LCGC for the cost of that work.

This opinion has significant practical implications for any contractor performing work on public projects, and especially those contractors constructing public improvements on private projects. Contractors now have yet another weapon in their arsenal when pursuing payment for unpaid work—filing suit directly against the municipality or public entity responsible for the improvements. As always, contractors should continue to pursue and perfect mechanics lien and bond claims, as needed, but in the event the appropriate bonds have not been obtained guaranteeing payment for the work, contractors should now consider directly pursuing the public entity or municipality ultimately responsible for those improvements.