ASA and ASA of Arizona Hail Arizona Appeals Court for
Stopping ‘Chilling Effect’ on Lien Claimants

ALEXANDRIA, Va. — Construction contractors in Arizona can feel more secure when exercising their mechanic’s lien rights, thanks to a May 19, 2009, ruling by an Arizona Court of Appeals that will help keep project owners from wrongfully threatening contractors with allegations that they may be penalized for filing false documents. The American Subcontractors Association and ASA of Arizona, joined by the Arizona Builders’ Alliance and the Arizona chapter of the Associated General Contractors of America, filed an amici curiae, or “friends of the court,” brief in Galeb-Miller Development v. Markham Contracting Company, Inc. supporting reversal of False Documents Act penalties against specialty trade contractor Markham Contracting. ASA hailed the appeals court’s decision, which reversed the penalties imposed by a lower court.

In the case, developer Galeb-Miller failed to pay Markham Contracting in a timely manner for its work on a multi-lot residential project. Seeking payment, Markham filed five lis pendens (lien notices) on the project. Unknown to Markham before the filing, Galeb-Miller had procured lien discharge bonds to prevent lien claims, although Arizona law (A.R.S. § 33-1004) requires that the contractor be timely notified. A lower court found Markham’s filing of the lien notices “groundless” and fined the contractor for filing false documents, citing Arizona’s False Documents Act.

On appeal, ASA, ASA of Arizona and its allies, filed a Nov. 7, 2008, brief urging the Arizona Court of Appeals, Division One, to reverse the lower court’s 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 court to “make clear…that developers may not use the threat of” the state’s False Documents Act and “penalties as a bludgeon to prevent contractors from exercising their lawful lien rights.”

The Court of Appeals agreed with ASA’s position, and reversed the lower court’s decision. Since the owner did not timely inform Markham that it procured lien discharge bonds, the court said, False Documents Act penalties did not apply and fines against Markham were vacated.

ASA’s Subcontractors Legal Defense Fund, which supports critical legal activities and protects the common interests of all subcontractors, funded the brief, including a contribution from the Arizona Builders’ Alliance and the Arizona chapter of the Associated General Contractors of America. Funded solely by contributions, SLDF funds are invested in precedent-setting cases across the country. To learn more about this case and the SLDF, visit www.sldf.net.

Founded in 1966, ASA amplifies the voice of, and leads, trade contractors to improve the business environment for the construction industry and to serve as a steward for the community. ASA’s vision is to be the united voice dedicated to improving the business environment in the construction industry. The ideals and beliefs of ASA are ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity and membership diversity.

American Subcontractors Association, Inc.
1004 Duke St.
Alexandria, VA 22314American Subcontractors Association, Inc.
1004 Duke St.
Alexandria, VA 22314

Contact: David Mendes
(703) 684-3450, Ext. 1335
dmendes@asa-hq.com