Appellate Court of Maryland

Case no.: 951, September Term, 2024
Date filed: August 19, 2026

A Maryland appeals court has ruled that ongoing negotiations of responsibility for late completion did not establish that the contractor knew “the basis for the claim.” Such knowledge would have triggered a 30-day claim notice deadline.

The Maryland Department of Transportation, State Highway Administration (SHA) awarded a fixed-price contract to Milani Construction LLC to install noise barriers and landscaping along a section of highway in Baltimore County. This contract stipulated a 17-month performance period and called for liquidated damages of $1,230 per day for late completion.

During the performance of the contract, SHA issued a change order requiring Milani to perform a considerable amount of additional work. The change order was unpriced. The parties agreed that Milani would complete the work and then submit a request for an equitable adjustment (REA).

Work on the project was completed 328 days after the contractual deadline. There was no disagreement regarding the direct cost of the extra work. There was, however, a dispute regarding responsibility for the late completion. At times, SHA threatened to assess liquidated damages for the entire period. But at other times, they contemplated treating portions of the late completion period as compensable or excusable, reducing the liquidated damages assessment accordingly.

Negotiations spanning several years produced volumes of communication between the parties. Milani sent an email in September 2018 to SHA stating that settlement negotiations regarding responsibility for the late completion had failed. Negotiations continued, however. SHA sent a letter to Milani in September 2020 informing the contractor that the owner intended to withhold liquidated damages for the entire period of late completion.

SHA formally denied Milani’s REA on May 4, 2022. Milani submitted a formal notice of claim on May 27, 2022. The Maryland statute in effect at that time required a written notice of claim under a public construction contract within 30 days after “the basis for the claim is known or should have been known.”

Milani appealed the denial of its claim to the Maryland State Board of Contract Appeals. Two of the three panel members decided to grant summary judgment in favor of SHA. The board majority reasoned that the communications from September 2018 and September 2020 established that the contractor knew the basis of its claim long before it filed its untimely notice.

The dissenting member of the board argued that the parties had continued to negotiate right up to the time of SHA’s formal denial of Milani’s REA. Shortly before denial, SHA was still contemplating treating some of the delay days as excusable or compensable. The contractor could not know the specific basis for its claim when matters were in such flux.

Milani appealed the board’s ruling to the Circuit Court for Baltimore City. That court agreed with the dissenting member of the panel and reversed the summary judgment in favor of the project owner. SHA appealed.

The Appellate Court of Maryland, in an unreported opinion, criticized an approach that would pressure contractors into issuing a formal notice of claim while negotiations were ongoing and the parties' positions were evolving.

“This case highlights the tension between resolving issues that arise during the course of a construction contract through negotiation, rather than prophylactically pressing ‘go’ on adversarial proceedings. The record shows that Milani did not file its notice of claim as soon as questions arose about how SHA would treat the extra days it took Milani to complete additional work required by Change Order No. 11.”

The court also said: “Milani actually and reasonably relied on its ongoing negotiations and communications with SHA as grounds to believe that, up until the District 4 Engineer denied its REA on May 4, 2022, SHA had not yet denied its request for an equitable adjustment for time-related costs.”

The court said it would be detrimental to both parties to force the immediate filing of a notice of claim early in the REA process. “[T]his ‘quick-claim’ mandate would create the proverbial ‘hair-trigger’ for equitable assessment adjustments. . . . a prospect that predictably presents its own set of problems when put into practice, both for contractors and for SHA.”

The Maryland state legislature amended the claim statute, Md. Code section 15-219(a), effective July 1, 2026. The 30-day notice period now commences with the denial of a request for an equitable adjustment or a declaration by one party that negotiations have reached an impasse. For all other claims, the notice period still begins when the basis of the claim is known. The revised statute did not apply retroactively to the dispute between Milani and SHA.

Contractors walk a tightrope when balancing the need to protect their claim rights with the hope that a dispute can be resolved expeditiously. Forcing a matter under negotiation into an adversarial litigation posture is expensive.

Participants: No attorneys of record listed
Before: Judges Leahy, Kehoe, and Sharer
Opinion by: Judge Sharer
Outcome: Judgment of Circuit Court affirmed

Source: Attach the complete opinion or decision PDF here.