Best Practices Construction Law

2011 Construction Law Update Is Available

Matt DeVries — Mon, 14 May 2012 07:40:52 -0500

One of the largest groups for construction lawyers is the American Bar Association's Forum on the Construction Industry. In the weeks leading up to to the Forum's 2012 annual meeting in Las Vegas, Nevada last month, a number of construction attorneys and I were feverishly reviewing submissions for Division 10's annual Construction Law Update. The document is a compilation of cases and legislation affecting the construction industry. The updates are provided throughout the year by attorneys all over the country. This year, Division 10 released its 6th Annual Update.

The following are examples of the types of information that you will find in the Construction Law Update: Cases and Legislation Affecting the Construction Industry (2011-12):

Senate Bill Number 59, Alabama 2011 Regular Session. The bill amends §§ 6-5-221, 6-5-222, 6-5-225 and 6-5-227, Code of Alabama, 1975, reducing the statute of repose for actions against an architect, engineer or builder from 13 years to 7 years from the substantial completion of the construction of an improvement on or to real property. This Bill will become effective upon signature and approval by Governor Robert Bentley.
In William Smith v. Krishna Pinnamaneni et al., 2011 Ariz.App. LEXIS 59, 607 Ariz.Adv.Rep. 35, (2011), the Arizona Court of Appeals held that the defense of lack of licensure could be waived if not timely and appropriately raised in an arbitration proceeding. Accordingly, the Court rejected defendants’ claims that the plaintiff contractor was not appropriately licensed and therefore was precluded by statute from pursuing its affirmative claim when defendants first raised the defense after plaintiff moved to confirm the arbitration award. The Court noted that contracts executed by unlicensed contractors are voidable, not void, and that unlicensed contracting constituted an affirmative defense that could be waived like any other affirmative defense.
In Midwest Asphalt Coating Inc. v. Chelsea Plaza Homes Inc, 45 Kan.App.2d 119, 243 P.3d 1106 (Kan.App. 2010), the Court reaffirmed that claims for breach of contract and quantum meruit are mutually exclusive and a quantum meruit claim is permitted only if the contract is unenforceable. Additinally, pursuant to Kansas Fairness in Construction Act (K.S.A. §§ 16-1805 and 16-1806) attorney fees and costs are recoverable only if “undisputed” sums are not timely paid. Here there was a dispute if the work was completed and thus the amount owed was disputed. The Court also reasoned that even if it was a quantum meruit claim the amount was not liquidated or still in dispute until an award was made and thus fees are not recoverable.
In Voigt Consultants, LLC v. Plymouth Crossroads Station, LLC, 2011 WL 1119697 (Minn. Ct. App. March 29, 2011), the court held that, in order for a mechanic’s lien to have priority, a mortgage holder must have actual notice that the lien claimant had not been paid. Moreover, the mortgage holder has no affirmative duty to inquire about whether the mechanic’s lien claimant has been paid in full.

There are updates from all over the country. In addition, we have included references to recent federal legislation that affects the construction industry. If you would like a copy of the Construction Law Update, all you have to do is the following:

First, go to the ABA Forum's main website
Then, look to the left column and connect with the Forum via Facebook LinkedIn, or Twitter
Finally, send me an email saying which you did.

If you would like copies of the past year's updates, please see my Resources, Articles, Presentations page.

Paper to Paperless: Webinar on Construction Documentation and Legal Disputes

Matt DeVries — Tue, 01 May 2012 17:42:18 -0500

You will rarely find me advertising on this blog. However, since I have received numerous inquiries about my presentation at the AGC National Conference in Honolulu last month, I am pleased to announce that I will be doing a similar Webinar tomorrow, Wednesday, May 2, 2012 at 1:00pm EST.

You can learn best practices for documentation and record management in this 90-minute webinar — From Paper to Paperless: Controlling Construction Documentation, Improving Record Management and Identifying Risk in an Electronic Age. This interactive program will provide you with guidance to help you develop effective procedures for documenting your projects, including the transformation to the paperless project. You’ll get answers to your pressing questions about electronic evidence on a construction project, including the legal issues surrounding social media. This course will explore:

Why are proper records so essential for claims and disputes?
“Putting it in writing” rule – what should you record?
What is the hearsay rule?
Critical project documentation – what you absolutely need to document; and non-critical documentation – what you don’t need to document
How to use project management software and Web-based capabilities to move towards a paperless project, establish good audit trail and consolidate project documentation
Are electronic documents subject to the same discovery rules as paper documents?
Is a written instruction via e-mail the same as a change order?
How do social media platforms (Twitter, Facebook, MySpace) affect your project? Do you need a social media policy for your employees?
AND MUCH, MUCH MORE!

To register and receive a special blogger's discount, follow this link.

Digital Databases: The Legal Implications of Harnessing Knowledge

Matt DeVries — Wed, 18 Apr 2012 07:46:06 -0500

A recent ENR headline caught my attention: "Structural Engineers Learn Lessons From Failures Through Digital Databases." The article by Nadine Post discussed a new digital database—similar to YouTube, SharePoint and Wikipedia—being developed by structural engineers to “harness knowledge” to avoid future loses.

As noted in Post's article, "[w]ith global engineering research, knowledge and failure data at their fingertips, designers are able to connect the dots as never before." Whether it is a post-construction meeting, survey or other analysis, construction industry players are wise to understand the legal implications associated with harnessing knowledge of lessons learned.

Is this type of information discoverable in subsequent litigation? Any lawyer worth his weight in gold would give you the only correct answer: It depends! The key question is whether a "self-critical analysis" can be used by the opposing party as evidence of liability, breach of contract or violation of some standard of care. The courts have treated the issue differently—a few of which hold that these type of documents are “privileged” and are not discoverable. The self-critical analysis privilege should not be confused with attorney-client communications, which as a general rule are privileged and not discoverable.

The Majority Rule. Most courts have rejected the self-critical analysis privilege entirely or defined it vary narrowly. Examples of project documents where courts have rejected application of the self-critical analysis privilege include:

Safety review and meeting notes
Quality control documents
Audit documents and other information
Environmental assessments and analysis
Internal communications and corporate reviews

Ultimately, you need to be concerned that any document containing your company’s self-critical analysis is generally not privileged and, therefore, will be subject to discovery in the event of litigation. However, this should not dissuade you from using “lessons learned” or “best practices” to ensure future successes and to avoid future losses.

Image: Paul Garland

Construction Contracts: New Technology for ConsensusDocs to be Released

Matt DeVries — Fri, 13 Apr 2012 09:20:03 -0500

I just received an email this morning from ConsensusDocs, announcing that they will be offering a new and significantly improved new technology platform for ConsensusDocs contracts within the next two weeks that will improve the contract process.

I have been involved in some of beta-testing and I am really excited about this platform for attorneys, contract managers, and anyone dealing with the construction contract process. Below are just a few of the many new features that are included in the new system:

24/7 Access – Access your contracts anytime from anywhere via our new secure cloud-based system.
Easy to Edit – If you know how to use MS Word®, you know how to customize ConsensusDocs contracts.
Easy to Collaborate – Invite anyone to collaborate on your contract for free - you control editing rights.
Create Favorites – Create “Favorites” from ConsensusDocs contracts that have been modified to meet your unique needs.
Convert & Compare – Comparison tools allow you to easily see changes from one document version to another. Upload and convert your own documents.
Free Guidance – User instructions are embedded within the contracts and reference the free ConsensusDocs Guidebook.

Question: Have you used any of the ConsensusDOCS? What about other online platforms?

Development and Construction Contracts: What You Need to Know

Matt DeVries — Mon, 09 Apr 2012 08:49:51 -0500

Noted author and business attorney, Peter Siviglia, once said: "In this world, ... there are two forms of writing: creative (such as novels, plays, and poetry) and expository (such as treatises, letters, memorandums, and briefs). I've tried both and prefer a third: contracts, which do not entertain, do not convey information or ideas, and do not try to persuade."

In the world of commercial real estate and construction contracts, Siviglia hit the nail on the head. Using some of Siviglia's tips in Courses on Drafting Contracts, 12 Scribes J. Legal Writing 89 (2008-09), here are a few items to think about when drafting contracts:

A contract is about defining transactions and relationships. This more more than the definition that we learn in law school (i.e., "An agreement between or among two ore more parties for the purpose of ..."). According to Siviglia, the contract will help define: (1) a transaction, such as the purchase of real estate; (2) a relationship, such as a partnership, or (3) a combination of both, such as a partnership to purchase and develop real estate.
A contract is a set of instructions. Just like the building plans and specifications instruct the contractor how to build the water treatment plant, commercial condo or new hospital, the written contract instructs the parties on their course of conduct in the transaction. And when problems arise ... and they will ... the written contract instructs the parties on how to perform in such circumstances.
A contract should include standard provisions. Although each contract is different, there are a number of terms and conditions that are part of the "A Player" list, including:

Termination, which defines the parties' rights to terminate the contract;
Assignment, which outlines whether the parties are allowed to assign their rights to another party and the terms in which they are allowed to do so;
Governing law, which defines the law (i.e., Tennessee, Virginia, New York) that will apply to the parties' contract in terms of both substance and procedural issues;
Disputes, which defines whether the the parties will litigate in court, mediate, or arbitrate;
Notice, which identifies where legal notice of disputes, claims, changes, etc. are directed;
Modifications, which outlines the procedures for modifying or amending the contract terms (not to be confused with a "changes" clause);
Changes, which outlines the procedures for modifying or changing the scope of work by one of the parties (not to be confused with a "modification" or "amendment" clause);
Claims, Rights and Remedies, which describes the method for submitting claims and may also include rights to recover or limit certain types of damages (consequential damages, liquidated damages for delays, attorneys' fees, interest); and
Indemnification, which describes the circumstance in which one party may have to indemnify (or pay the losses or claims) of the other party for some legal purpose.

Of course, each transaction or relationship should have a written contract tailored to its own project or development needs. In other words, while standard form agreements can be used on successive and multiple transactions, each project should nonetheless be reviewed for the applicability of particular standard form provisions to the particular project. On occasion, circumstances dictate the necessity of revisions to your standard agreement.

How Do You Do It All: Work? Family? Blog? Answer: Google Reader.

Matt DeVries — Fri, 06 Apr 2012 08:41:29 -0500

A week does not go by without a friend, colleague, or new acquaintance asking me, "How do you do it all?" The short answer: "It's tough ... very tough ... but I have some help. For home and family issues, I have my lovely wife. For unloading the dishwasher, I have seven children. For getting out letters, I have an outstanding legal assistant. For researching legal issues, I have a number of associate attorneys who can help. And for blogging and staying current with the construction industry, I have Google Reader." (...Okay, so my answer was not that short...)

I use Google Reader to track and scan hundreds of blogs, news sources and Twitter feeds relating to the construction industry, leadership, marketing and social media. Rather than try to explain how it works, check out the following short video:

Now, let's see how Google Reader has helped my blogging efficiency for an actual blog post. Last month, I read an article in my Google Reader about a skull and human bones found at a San Carlos construction site. Since the article highlighted what I thought was an instance where "best practices" can help a contractor in such a situation, I blogged about the incident, as well as some construction management tips.

How can Google Reader help you? The tool can be used:

To track your "go to" websites that you regularly check
To track certain terms in the mainstream media (i.e. "construction bids Tennessee" or "green incentives for developers")
To follow certain Twitter feeds for people or terms

Since words have different meanings to people, there may be problems with some of the initial feeds you set in Google Reader. It may take time to determine whether the inquiries you set are returning useful information. Overall, this is a "must use" for anyone who wants to be a leader in their industry.

Does a Construction Manager Have a Legal Duty for Site Safety?

Matt DeVries — Tue, 03 Apr 2012 15:55:25 -0500

Today's guest post is written by Joe Hardesty, who handles complex litigation in construction and business disputes. He has defended and prosecuted claims for clients arising from major construction projects throughout the country, surety disputes, commercial real estate disputes and a variety of disputes arising from business transactions. He also advises clients on matters related to government contracting and compliance.

Does a construction manager have a duty of care to employees of contractors and subcontractors to provide a safe project site? This was the question that the Indiana Supreme Court addressed in its opinion issued on March 22, 2012, in the case of Hunt Construction Group, Inc. v. Garrett.

The Facts. Hunt was the construction manager agent for the construction of the Lucas Oil Stadium in Indianapolis and had contracted with the owner, the Indiana Stadium and Convention Building Authority. Baker Concrete Construction, Inc. had also entered a contract with the Stadium Authority to perform concrete work on the stadium. Shannon Garrett, an employee of Baker, was injured while removing forming material from concrete. Garrett pursued a workers compensation claim against her employer, Baker, but also sued Hunt, the construction manager, for negligence in not providing a safe job site.

The Opinion. The Indiana Supreme Court addressed the issue of whether a construction manager has a legal duty of care for job site safety to employees of contractors and subcontractors. The Court held that a construction manager has a legal duty of care to workers on the job site for job safety in only two circumstances: (1) when such a duty is imposed on the construction manager by a contract to which it is a party; or (2) when the construction manager assumes such a duty, even gratuitously or voluntarily.

In this case, the Court found that there were no provisions in the construction manager’s contract under which Hunt contractually accepted the duty to maintain safety on the project. The Court noted that the contract provided that the contractors, not the construction manager, have the responsibility for project safety and the safety of their employees. The Court found no safety provisions in Hunt’s contract that imposed any specific legal duty to or responsibility for the safety of all employees on the construction site. Therefore, the Court held that Hunt’s contract did not create a duty to employees for job site safety and that Hunt’s only responsibilities for safety were owed to the Stadium Authority.

The Court next considered whether Hunt had assumed a legal duty for job site safety through its conduct beyond that required by its contract. The Court stated that a construction manager could be responsible for job site safety to individual employees where it specifically agrees to take on specific safety responsibilities beyond those set forth in its contract. Examples of such conduct are appointing a safety director, initiating weekly safety meetings, directing that certain safety precautions be taken and inspecting the job site for safety. Garrett argued that the fact that Hunt’s safety representative conducted safety committee meetings every Monday and inspected the site daily for violations of the project safety program demonstrated that Hunt had assumed responsibility for job site safety and owed a duty to workers for job site safety. The Court found that these activities were activities required by Hunt’s contract with the owner and, therefore, these were not additional duties voluntarily assumed by Hunt to job site workers. Hence, the Court found that Hunt did not assume specific supervisory responsibilities for job site safety beyond those set forth in its contract and, therefore, there was no duty owed by Hunt to Garrett or other workers for job site safety.

Lessons Learned. This case focused only on the issue of whether a construction manager owes a duty to workers for job site safety such that individual workers would have a claim against the construction manager. It found that a construction manager’s duty for job site safety is normally only owed to the owner rather than to individual employees of contractors and subcontractors. Construction Managers should note, however, this case did not address what liabilities a construction manager might incur to OSHA for job site injuries. Construction managers must assess not only its duties to owners and workers for job site safety but also its legal obligations under OSHA.

AAA Announces Game Changer: Potential Arbitrators Now Available Online!

Matt DeVries — Fri, 23 Mar 2012 10:14:47 -0500

The NCAA college basketball tournament is not the only exciting game in town. The American Arbitration Association (AAA) recently announced a game changer called Arbitrator Select.

Although potential mediators have always been available prior to disputes being filed, the AAA will now assemble potential lists of arbitrators without a case filing or case fee payment. While it would be nice if this service were free, there is a refund of the case is ultimately filed with the AAA. The charge for the service is based on the number of names requested. Under this new Arbitrator Select service, the AAA will also get conflicts run by the potential arbitrators.

Why would this be helpful for the construction lawyer, contractor or developer? For as long as I have practiced law, arbitration has been touted as "the cheaper, quicker method of dispute resolution." And for just as long a period of time, there have been critics to that statement. By allowing parties to begin the selection process on the front end to check the availability of an arbitrator or panel of arbitrators before investing in the process, AAA is cutting some of the time and investment cost. It will be interesting to get some feedback from those who have used the new service.

You can read more about the Arbitrator Select service in this AAA brochure.

Image: The West End

(Bonus Questions: Who's in the picture above?)

Supreme Court's Decision in Sackett v. EPA May Assist Construction Projects

Matt DeVries — Thu, 22 Mar 2012 05:01:29 -0500

In June of this year, one of my partners Greg Young and I will be speaking at the AGC Environmental Conference in Washington, DC. Our panel discussion will focus on the dangerous intersections between construction law and environmental law. One of those crossroads is the applicability of the Clean Water Act to construction projects.

Yesterday, the United States Supreme Court handed down a unanimous decision in the closely watched case of Sackett v. Environmental Protection Agency. Reversing the courts below, the Supreme Court held the Sacketts have the right to challenge an EPA decision that their property contained wetlands:

“[T]here is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review—even judicial review of the question whether the regulated party is within the EPA’s jurisdiction. Compliance orders will remain an effective means of securing prompt voluntary compliance in those many cases where there is no substantial basis to question their validity.”

The Clean Water Act does not preclude judicial review under the Administrative Procedures Act (APA) and, thus, the Court remanded the case to allow the Sacketts to bring a civil action under the APA to challenge the issuance of the EPA’s order.

For transportation and other development projects, which frequently have to deal with issues of wetlands jurisdiction, this decision will hopefully lead to a process where EPA jurisdiction can be challenged up front and early in the planning process rather than waiting for the EPA to assert a violation after the fact, as it did with the Sacketts. No doubt, the decision will also have a dramatic impact on EPA's actions to demand administrative compliance.

Free Webinar: Best Legal Apps for Construction Lawyers

Matt DeVries — Tue, 20 Mar 2012 18:20:31 -0500

I just returned from speaking at the AGC National Convention last week and I am trying to get through the pile of work on my desk. I was able to stay connected all the way from Hawaii to my office and family in Nashville with the help of my iPad.

I know it is late notice, but if you get a chance tomorrow, Wednesday, March 21, 2012, at 12:00 noon (CST), please join me for a free webinar sponsored by the ABA Forum on the Construction Industry on "The Best Legal Apps for Construction Lawyers."

Tom Mighell, Chair of the ABA's Law Practice Management Section, attorney and blogger at iPad 4 Lawyers, and I will be reviewing some of the best legal apps for construction lawyers (as well as non-construction lawyers) (as well as non-lawyer constructors)! Topics include:

Documents and Notes
Pretrial and Depositions
File Management and Productivity
Jury Selection/Tracking
Evidence Presentation
Legal Research
Meetings
Construction Apps

For more details on how to register or connect to this Free Webinar, follow the link here.

Guest Post on Construction Law Musings: Making a Connection at a Construction Conference

Matt DeVries — Fri, 09 Mar 2012 09:18:55 -0500

As a construction lawyer, I do a good deal of public speaking. Next week, I will be speaking at the AGC National Conference in Honolulu, Hawaii on the following topic: From BIM and PDFs to Tweets and eDiscovery: Planning and Managing a Technology-Driven Construction Project.

After attending at least 100 conferences and trade shows over the last 20 years, I have made a few observations about the people, booths and information presented by the companies in attendance, which I share today on Christopher Hill's blog, Construction Law Musings. To continue reading, click here...

Attachments in a Mobile World? Explain What You're Sending

Matt DeVries — Wed, 07 Mar 2012 05:02:39 -0500

In this day of iPhones, DROIDS, and Blackberries, the construction industry has to deal with new forms of communication. Since we live in world of mobile devices and technology, you have to assume that everyone else is on the same mobile playing field and are working on-the-go. What does that mean?

It means that as a construction executive, management member or project level player, you are being pulled in all directions. On some days, you may be in the office, while other days you may be onsite, and even other days you are traveling across the country. Given your on-the-go status, it helps when people know how to reach you and how to communicate effectively.

One area where you can improve your communication skills is to make sure you actually explain what is attached to the email because it may be read on a mobile device. In other words, when sending an attachment, you should do the following:

Do not use "FYI" ... This assumes that the recipient knows what the email string involves and what has transpired prior to this particular email. You don't have to write a novel about the attachment, but include more than an "FYI."
Explain what the attachment is ... "Attached is a copy of the draft change order language from ABC Development Co. on the USA Zoo project." Since many construction contracts are lengthy and legal pleadings are voluminous, it is often impossible to download the full attachment and actually read it on a mobile device.
State whether the matter is urgent or whether you need a response ... The owner will be out of town for a week so we do not need to respond immediately. Again, if the attachment is a letter from the opposing party that requires an immediate response, then you should say so in the email. Don't assume that your recipient can or has read the attachment.

You may think these tips are no-brainers, but they have changed the way I communicate with my clients over the last year. For example, I previously sent the "Please see attached" emails to my clients without even thinking that the email was sent to a Blackberry or iPhone (...even though I carry my phone everywhere and expect the same communication from my assistant ...) Thanks to some lessons learned, I am taking the extra minute to explain my attachments and include a response line.

Question: Do you have any tips for communicating in the digital age?

The Supremes Side with Road Builders in Clean Water Act Case

Matt DeVries — Wed, 29 Feb 2012 22:49:45 -0500

I had an admiralty professor at law school who would often refer to the Justices of the Supreme Court of the United States as ... get this ... the Supremes! In honor of Professor Jones, today's post is about the Supremes' decision in PPL Montana, LLC v. Montana (pdf), where the court declined to expand the definition of "navigable" under federal law.

What is "navigability"? In the case, the Montana Supreme Court held that the state of Montana owns and may charge for use of riverbeds where privately owned hydro-electric dams were located. It was undisputed that the state owned all riverbeds that were navigable at the time of statehood, but that title remained with the federal government for those beds of river that were not navigable. Thus, the ultimate question turned on whether the waterway at issue was "navigable" and which test applied. In a 26-page unanimous decision, the Supremes held that navigability must be determined segment by segment, and that river segments which are sufficiently obstructed that travelers must portage are not navigable.

Why is the decision important to the construction industry? The decision is hailed as a victory by the American Road & Transportation Builders Association, which was the only transportation construction association involved in the case and who filed a brief with eight other industry associations. According to a press release by ARTBA, the ruling removed a "road block" that unnecessarily had the potential of delaying transportation projects:

For purposes of transportation development, once something is considered “navigable” it is under federal control, and subject to the permitting authority of the U.S. Environmental Protection Agency (EPA) and the Army Corps of Engineers (Corps). An expanded definition of “navigability” could have resulted in a scenario where the EPA and Corps would have the option of exerting jurisdiction over roadside ditches, potentially adding years to already expansive review and approval process for transportation infrastructure projects that are needed for increased mobility and improved safety.

If the state decision had been upheld, any water body ... including water features that are common on highway and other transportation projects ... could have been deemed to be navigable simply because someone could use it for a “recreational purpose."

Image: Orin Zebest

Construction Battlefield? The Importance of the "Story" in Your Construction Claim

Matt DeVries — Tue, 28 Feb 2012 05:05:21 -0500

You can search a legal database and find thousands of construction disputes. If you are lucky, you find the one case that has similar facts to your dispute and the court reaches the same legal conclusion that you seek. And it's a good story.

If you end up in court, either pursuing a construction claim or defending a breach of contract claim, your attorney should be a good story-teller. Ultimately, you will have to convince either a judge, jury or arbitrator that your side of the story is correct. One of my favorite stories in a construction dispute comes from the court in Blake Construction Co. v. C.J. Coakley Co. Inc., 431 A.2d 569 (D.C. 1981), where the court described the painful construction dispute as follows:

Except in the middle of a battlefield, nowhere must men coordinate the movement of other men and all materials in the midst of such chaos and with such limited certainty of present facts and future occurrences as in a huge construction project such as the building of this 100 million dollar hospital. Even the most painstaking planning frequently turns out to be mere conjecture and accommodation to changes must necessarily be of the rough, quick and ad hoc sort, analogous to ever-changing commands on the battlefield. Further, it is a difficult task for a court to be able to examine testimony and evidence in the quiet of a courtroom several years later concerning such confusion and then extract from them a determination of precisely when the disorder and constant readjustment, which is to be expected by any subcontractor on a jobsite, become so extreme, so debilitating and so unreasonable as to constitute a breach of contract between a contractor and a subcontractor.

Honorable mention goes to Mobil Chemical Co. v. Blount Brothers Corp., 809 F.2d 1175 (5th Cir. 1987), where the court introduced the theme of the case with the follow words: "The parties to this action somehow built a chemical plant. They have been trying to figure out who should pay for it ever since."

If you have a construction dispute, you will have to be prepared to tell you side of the story in a credible way, supported by written documentation, and you must have reasonable expectations. Too many times clients get bogged down in the "fine print" details without focusing on the big picture. To me, the details are important ... but they cannot replace the overall story that must be told.

Question: What are some of your favorite construction stories?

Time Out: Dealing with the Automatic Stay of Bankruptcy in Construction Disputes

Matt DeVries — Mon, 27 Feb 2012 05:00:35 -0500

When it rains and the kids cannot got out to play, our house can get a little chaotic. A few weeks ago, I lost my cool demeanor. Jackson (below) was screaming at the top of his lungs and was chasing three other kids with a light-saber. I yelled: "Time out! Everyone!" They all stopped dead in their tracks.

This kind of "time out" is occurring more and more frequently in the construction industry. It is called the automatic stay and it can affect the entire construction project when one of the parties files for bankruptcy protection. Sometime, parties attempt to get around the automatic stay of bankruptcy by including a waiver provision in their contracts, which can read something like this:

Subcontractor hereby waives the protection of the automatic stay provisions under federal bankruptcy laws, 11 U.S.C. section 362, or any other similar stay provisions under any present or future state or federal law relating to bankruptcy or insolvency.

That cannot be enforceable, can it? What's the point of a time out ... the automatic stay of litigation that is guaranteed by filing for bankruptcy protection ... if you can waive it? Certainly, the bankruptcy courts do not appreciate their jurisdiction and powers being waived? Wrong. The issue is not so simple.

Courts have treated pre-petition waivers differently and inconsistently throughout the country.

The courts generally fall into the following categories:

Those jurisdictions where pre-petition waivers are enforceable, whether on public policy grounds or freedom of contract grounds.
Those jurisdictions where pre-petition waivers are unenforceable, as against a statutory policy or to protect other creditors.
Those jurisdiction where pre-petition waivers are viewed on a case-by-case basis.

If you understand the purpose of the automatic stay, then you understand why there might be divergent views from the courts. The waiver of automatic stay provision should not be confused with a blanket prohibition against filing for bankruptcy, which would not be enforceable. In other words, the automatic stay is not to provide an absolution of liability, but rather to "stay" the litigation of claims that exist outside the bankruptcy court. The stay ... or "time out" ... gives the debtor, the creditors, the trustee and the court a resting area to begin, assess, and analyze the restructuring process. For an good review of the law, see Michael L. Bernstein's article for the American Bankruptcy Institute entitled, "Enforceability of Prepetition Waivers of the Automatic Stay."

What are the lessons learned when dealing with the automatic stay? There are a few: (1) read your contracts before you sign them; (2) understand what the laws are in your jurisdiction and whether a pre-petition waiver is valid; and (3) don't violate automatic stay once the "time out" is in place. Penalties can include voiding the action, damages, and even contempt of court.

Contractor Asks: Are Pre-Employment Physical Exams Legal? Depends.

Matt DeVries — Fri, 24 Feb 2012 06:08:46 -0500

Last night at an AGC of Middle Tennessee dinner, a contractor asked me, "Are pre-employment physical exams legal?" I gave him my favorite legal response: "It depends!"

More and more, employers in the construction industry want to implement pre-hire health exam programs to determine whether prospective employees are physically capable of performing the particular construction job. The concern for contractors is that a new hire with a physical limitation gets re-injured and costs the company to defend workers' compensation claims. So the legal question is whether the employer can conduct a pre-hire examination without violating either state or federal law.

What are the legal limitations? The American with Disabilities Act (ADA), which applies to employers of 15+ full-time employees, comes into to play in this situation. In addition, your particular state's human rights laws probably adopt the same or substantially similar limitations as those required by the ADA. The fear is that, as an employer, you do not want to face a claim of discrimination for refusing to hire someone with a physical disability that is protected under the ADA or its state law companion.

In order to comply with both state and federal law, the following general requirements should be met:

An offer of employment should be made conditioned on the results of a subsequent physical health examination.
The health examination focus only on the job-related abilities that are essential to the position.
The health examination should be required of all people that are conditionally offered employment for the particular position.

What happens when the health examination demonstrates a limitation? If the person does not pass the physical examination and the employer decides to withdraw the conditional offer of employment, then it must notify the person within 10 days of the decision to withdraw. The employer must provide the medical basis for withdrawing the offer.

What are some best practices for implementing a program? Of course, each state is different. However, some general tips to follow include:

You should have a written file on the physical requirements of each job description, which can be used by the examining physician
Any information learned from the health exam should be kept confidential, so as not to violate any privacy rights of the prospective employees
Leave the medical assessment to the health examining physician and do not ask medical questions during applicant interviews

The law can be confusing when talking about pre-hire health exams and you are well advised to seek legal counsel if you want to develop such a program.

Image: Lower Columbia College

Ambiguous Words in a Construction Contract Can LEED to Miscommunication

Matt DeVries — Wed, 22 Feb 2012 09:22:15 -0500

I have my Google reader set to search various blogs, news sites, and Twitter feeds to help me keep current with the latest trends in the construction industry. There remains one major problem: the words we use have different meanings for everyone.

Take, for example, my search of Twitter feeds (above) for Building Information Modeling (BIM). If you were to do the same search during a weekday morning, the majority of results would return various individuals involved in some aspect of the construction industry either praising or criticizing BIM. Now, if you were to do the same search on any given Friday or Saturday night, you might be surprised to get a varied assortment of results (and photographs) of individuals out for a night of partying. You see, BIM is also slang for "bimbo" or ... how do I say this ... a "lady with questionable morals"?

What's the lesson here? Did you click on this article because you thought it related to LEED or Green Buildings? It kinda does. It kinda doesn't. The lesson is that we live and work in a world where information spreads quickly. In addition, we have become informal in our communications through the use of email, texting and Twitter. (And in our personal lives, there may not be anything wrong with informality in our communications.)

However, the construction project is built on expectations and performance. Where those expectations are accurately and correctly reduced to a writing, the parties have a written contract. Where the parties use words that have different meanings (and both interpretations are reasonable), we now have an ambiguity. A judge or arbitrator will then be asked to interpret that ambiguity based upon any number of legal tools (i.e., parties' words and conduct, other writings outside the four cornings of the contract, industry norms, etc.). As the construction industry begins to employ new technologies, such as BIM, or new performance based goals, such as energy performance from a LEED certified building, then it becomes even more important that we use words that do not lead to miscommunication.

Question: What are some examples of contract ambiguity you have experienced or seen?

What To Do When Bones Are Found on Your Construction Site?

Matt DeVries — Tue, 21 Feb 2012 10:00:22 -0500

CBS San Francisco reported last week that a construction crew unearthed human remains while installing new plumbing lines in San Carlos, California. Construction was halted while sheriff’s detectives and investigators from the San Mateo County coroner’s office arrived and began an investigation. Has this ever happened at one of your sites?

If you find bones or other archeological artifacts during excavation and construction, here are a few tips on what you should do:

Stop work. Many contract documents, including the AIA 201 (2007), require the contractor to "immediately suspend" the operations upon the discovery of human remains or other archeological findings. Even if your contract does not address this situation, you should stop work to properly analyze the situation.
Call others. This includes the owner, the architect/engineer of record, and local police. Check your state's law to see whether you have an obligation to notify any other public authority, such as Tennessee Code section 11-6-107, which requires you to notify the coroner or medical examiner upon the discovery of human remains during construction.
Assess options. Depending on your jurisdiction, you may be required to rebury the remains pursuant to a local statute. For example, if you have excavated a cemetery or other historical burial site, you will be required to rebury the remains by using either a funeral home or an archeological group.
Preserve claims. As always, the parties' contract should address risks such as "bones" found on the construction site. Generally, the owner of the site is required to take action to continue the work and resolve the problem. The contractor may be entitled to additional time and money for the impact of the discovery and remediation efforts.

In the situation above, the police and coroner's officials will continue to investigate to determine whether any crime was committed. At the conclusion of the investigation, the property owner and contractors can continue their work.

Image: Hyoung Chang

Speakers, What To Do When Your Computer Locks During Your Presentation

Matt DeVries — Mon, 20 Feb 2012 12:31:57 -0500

You have a captive audience for 45 minutes. You've worked hard on your presentation: slides, transition, talking point, and animation. You are introduced. You click on the first slide. Nothing. Your computer locks and you feel the sweat trickle on your brow as you hit, CTRL-ALT-DEL.

This exact scenario occurred once when I was giving a presentation to a group of architects, engineers and contractors. The worst part was that my talk, Lessons from the Movies: Negotiating and Drafting Construction Contracts, absolutely required the use of a computer. So, there I stood, with two locked computers, a presentation that focused exclusively on movie clips, and a captive audience.

What should you do? Here are some tips when your presentation goes bad:

Prepare for the "bad" before the presentation. Since I had problems with a similar presentation, I thought I was prepared by bringing two computers. Little did I know (or expect) that the second computer would not work either. Luckily, I printed out my presentation earlier in the day and had some written notes on the slides. I was able to adjust the presentation based upon my written notes.
Embrace "humility" in your presentation. When the first laptop went down, I chuckled. When the second laptop went down, I smiled. (I admit, I was not too happy on the inside!) Although I had some written notes, this mishap gave me an opportunity to show the real me. Rather than movie scenes, I talked about my marriage and children, which provided some good examples of negotiating and drafting contracts. I talked about my move from Washington to Nashville, which provided some good talking points about reputation and integrity. In other words, you can turn a bad situation into good by opening your own "book of life" and sharing some experiences. Be humble. They will understand.
Remember the "point" of your presentation. Of course, a presentation that has embedded video clips may be "more polished" than the previous speakers at this event. However, you are presumably speaking because you have something to say ... some words of wisdom ... some advice. Understand that "you" are the presentation, which may help prepare you for those occasions when the laptop fails.

Question: What tips do you have for when the presentation goes bad?

Image: Filippo Minelli

Risky Business: What Contractors Need to Know About Alternative Funding for Infrastructure

Matt DeVries — Thu, 16 Feb 2012 05:00:20 -0500

In the absence of a new transportation policy, investment in infrastructure is largely left to alternative sources of funding, such as Public Private Partnerships (PPPs). With all the buzz about PPPs, contractors should first learn the "basics" about alternative financing and then appreciate the risks.

If you watched the State of the Union Address a few weeks ago, you know that President Obama's speech was largely silent on the details behind any support for infrastructure investment. According to The Transport Politic, "Mr. Obama’s address, whatever its merits from a populist perspective, nonetheless failed to propose dramatic reforms to encourage new spending on transportation projects, in contrast to previous years."

With little encouragement from the Administration, what should contractors know about infrastructure investment? In an earlier post, I talked about whether PPPs could help revive the highway and bridge industry. Looking at the same issue one year later, here are some thoughts:

Contractors need to understand the PPP enabling legislation in their state. As states explore utilizing PPPs for roads, bridges and other infrastructure, they need to approve enabling legislation. A state legislature has to consider a number of issues that will be important to contractors, who should be engaged in the debate.
Contractors need to understand that PPPs don’t create new money. Instead, the arrangement relies on the private sector and other resources to help develop the infrastructure. Public funds will eventually be a part of the equation to pay back the private investment.
Contractors need to understand the different risks involved with PPPs. If you are going to participate in a project involving alternative financing, you need to understand the new risks and opportunities that you will encounter. The AGC of American published a White Paper on Public Private Partnerships (pdf), which gives a good overview of the history of PPPs, the legislative hurdles encountered by states, and the legal issues to consider by contractors.

If you are a contractor that is going to participate in a PPP project, you should consider some of the following risks that may be new to your traditional understanding:

As shown in the above chart, many of the obligations traditionally borne by the public agency are now shifted to the PPP. The contractor should be directly involved in the contract negotiations since risks are being allocated differently.

Source: AGC of America