Posted on June 26, 2009 by Marcus Eyth

False Claims Act For Oregon

Construction contractors working on Oregon procurement projects beware (including general contractors, subcontractors and suppliers).  Oregon is on the verge of passing the state equivalent of the federal False Claims Act (31 USC 3729).

The Oregon bill essentially mimics the federal act, penalizing contractors who "knowingly" present false claims to the government.  This includes construction contractors who "exaggerate" their percentage completion on payment applications.  What qualifies as "knowing" has been debated ad nauseam in federal government contracts case law where Oregon courts will look for guidance as needed.

Note that "no harm, no foul" does not apply because a contractor triggers the violation upon submission of a problematic payment application.  No payment need be received from the agency.

Penalties are not as severe as under federal law ... yet.  The bill addresses civil liability only.  That means company executives won't go to jail, but fines of $10,000 per violation (for example, for each pay app) can add up quickly.

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Posted on June 26, 2009 by Marcus Eyth

Owner Payment To Contractor Still No Defense To Subcontractor Lien Claim

Lien laws in most jurisdictions provide the Building Owner with a defense to a subcontractor lien if the Owner has paid the contractor for that subcontractor's work.  But not in Oregon.  Here, Owners may end up paying twice if the general contractor fails to pay its sub from funds the Owner has already paid to the general contractor.

Not fair?  Certainly not from an Owner's perspective.

A bill amending Oregon lien law circulated in the legislature over the last couple of months addressing this issue.  The new law would require a court to:

dissallow the lien if the owner proves that the owner paid the contractor for materials, equipment, labor, or services that are the basis for the lien

(See page 4). 

But subcontractors breathed a big sigh of relief when the bill died in the Oregon Senate.   The status quo remains: Owners continue to have no legal defense to subcontractor liens even if the Owner has already paid the general contractor.

Reminder of the day for Owners:  get proper lien and claim waivers from general contractors and subcontractors for all payments.

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