Within the terms of virtually every EPC contract is an indemnification provision in which the EPC contractor must indemnify and hold the property owner harmless from the construction liens and lien enforcement lawsuits of the project subcontractors and sub-subcontractors. As such, the EPC contractor can be placed in the unenviable position of having to defend against the claims of a sub-subcontrator, while being saddled with an adverse owner and an unresponsive or insolvent subcontractor. In such situations, the New Jersey Construction Lien Law (“CLL”) imbues the EPC contractor with standing to defend against the sub-subcontractor’s claims.
The lien claimant sub-subcontractor must file suit against the subcontractor, property owner, EPC contractor and any possible parties the subcontractor knows to have an interest in the real property that would be adversely affected by the judgment. The CLL permits the EPC contractor the right to defend against such foreclosure regardless of the position taken by the subcontractor or property owner:
N.J.S.A. 2A:44A-16. Party defendants joined by claimant, entitlement to defense
a. A claimant shall join as party defendants the contractor or subcontractor who is alleged to have failed to make the payments for which the lien claim has been filed and any other person having an interest in the real property that would be adversely affected by the judgment. A party required to be joined under this subsection shall be joined if feasible pursuant to R.4:28-1(a) of the Rules Governing the Courts of the State of New Jersey, unless prohibited by law.
b. Any party to an action to establish a lien shall be entitled to any defense available to any other party in contesting the amount for which a claimant seeks to have his lien reduced to judgment.
(emphasis added);see, also, Kvaerner, 368 N.J. Super. 200 (“We are mindful that N.J.S.A. 2A:44A-14a(2) confers upon a lienee the opportunity to force an evaluative review of the lien claim. Logic suggests that the property owner’s representative, a general contractor, should have the same opportunity”).
In this manner, an EPC contractor enjoys standing to object to and defend against the sub-subcontractor’s lien claim, regardless of the position taken by the owner or subcontractor.
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