Contractor must pay into health fund after subcontractor didn’t

By Cy Ryan

Wednesday, Aug. 26, 2009 | 10:50 a.m.

CARSON CITY – In a case that is more than a decade old, a federal appeals court has ruled a Las Vegas construction company must pick up the tab for its subcontractor who failed to pay into a union health and trust fund.

The case that started out at about $70,000 had grown into more than $400,000 at an accounting two years ago.

The 9th U.S. Circuit Court of Appeals has held that Richardson Construction is responsible for the debt incurred by subcontractor Desert Valley Landscape and Maintenance, which never made payments to the trusts of health and welfare, pension, vacation and training.

Adam Segal, attorney for the Trustees of the Construction Industry and Laborers Health and Welfare Trust, said Richardson Construction had contracts for building schools and senior centers in Clark County. It hired Desert Valley, a company that eventually faded away without paying into the local 872 union joint fund.

The appeals court said, “Under Nevada law, Richardson was liable for the ‘indebtedness for labor’ incurred by its subcontractor.” It said the indebtedness includes liquidated damages and attorneys fees.

Richardson asked that the judgment in favor of the union trustees by U.S. District Judge Philip Pro be overturned because it didn’t receive the required notice from the trustees that they intended to sue when the subcontractors failed to make the payments.

The Nevada Supreme Court, at the request of the federal court, issued a ruling that the trustees’ claims against Richardson didn’t require notice.

Segal said he did write a letter in 1998 to the Richardson company about the problems with Desert Valley Landscape. Desert Valley's bankruptcy and wage claims by workers were resolved by the state labor commissioner, he said.

Union trustees also filed suit against Hartford Fire Insurance Company, which had agreed with Richardson to serve as a surety on the required bonds.

But the federal appeals court ruled the case could not be brought against Hartford because it had not received the notice. The Nevada Supreme Court ruled that the union trustees must provide notice for claims against sureties but notice is not required against general contractors.

Richardson may ask for a rehearing from the appeals court or carry the case to the U.S. Supreme Court.