Thomas Czik is an attorney with Cullen and Dykman LLP in Garden City, N.Y. His e-mail address is tczik@cullenanddykman.com.

Tread Carefully with Electronically Filed Claims

Using electronic communications for official notices can result in
legal troubles if contractors fail to obtain proper consent.

by Thomas D. Czik

Construction project participants routinely communicate with each other by facsimile, e-mail, Blackberry, or other electronic means. Based on this industry practice, a contractor might expect that it can serve claims against an owner electronically.

However, such notice may be improper and result in dismissal of the contractor's claim. Rulings by courts in New York and other states suggest that electronic notice will not be permitted unless provided for in the contract or consented to by the parties.

For example, when an attorney moved to dismiss his client's indictment in a 2002 case, the court denied the motion and concluded that the defendant's electronic notice was improper. In the case, New York v. Terrence Welch, the Superior Court of Monroe County stated: "The only recognized authority for service by electronic means is addressed by the [New York] Civil Practice Law and Rules, which recognizes service by electronic means only if the party being served has consented to service in this manner and service is followed up with a mailed written notice."

One way to ensure that electronic notice is acceptable is by specifying it in the project contract. Even if the owner agrees to service by electronic means, however, the contractor should also be prepared to serve notice by a traditional method to avoid the possibility that a technical failure prevents the notice from arriving within the required timeframe.

In Baguah v. Rodriguez, a 2005 case in the U.S. Southern District of New York, one party filed a motion to vacate an order because the attorney did not receive electronic notice of the proposed action because of a technical failure. In denying the motion, the federal court cautioned that "counsel who rely upon e-mailed notices of electronic filing to keep abreast of their cases do so at their peril. They are responsible for knowledge of what appears on the docket sheet regardless of any e-mail failures."

Indeed, even if an owner agrees to accept electronic notice, the contractor must also obtain proof of service. While the legal weight of the decision does not apply in this region, a case in Indiana's Court of Appeals, First Division, offers a cautionary tale.

In Hendricks County Bank & Trust Co. v. Guthrie Building Materials Inc., the court ruled that a fax did not constitute sufficient service of notice under the Adverse Claims Act to render a bank liable to a material supplier. The court found that service of notice had a definite meaning and, unless otherwise provided by law, referred to personal service of the individual in such a way that the party who makes service would be able to provide proof.

When an owner agrees to receive electronic notice, the contractor also must ensure that its e-mail makes clear that it is serving notice. Contractors must remember that electronic communications are often used to correspond informally, and that to avoid it being ignored, the heading or caption must clearly convey that it is formal notice.

In Roderick J. Campbell v. General Dynamics Government Systems Corp., another out-of-region 2005 case that provides further example of electronic communications pitfalls, the U.S. Court of Appeals for the First Circuit in New England ruled that an employer being sued by its employee could not force the case into arbitration.

The employer had moved to stay the proceeding and compel arbitration based on a new dispute resolution policy. The employee, however, asked the court to rule that the policy could not be enforced because of insufficient notice.

Although the parties agreed that the employer sent an e-mail to its employees advising of the new policy, the e-mail's heading did not indicate that it was important or intended to change employee rights. The court sided with the employee.

Such recent decisions indicate that various courts do not view electronic notices and traditional written notices as interchangeable. The prudent contractor will make certain that it complies with the manner of service requirements of its contracts and that it provides for alternate versions and proofs for electronic notice where appropriate.