Construction Law Toolbox

Arbitrator's Decisions Upheld by Mississippi Court of Appeals

Christopher Solop — Wed, 15 May 2013 10:19:12 -0600

Arbitration has found some favor in the construction industry with parties over the last decade in part because of its finality. Unlike civil litigation, the right to appeal an arbitrator’s award is extremely limited under the Mississippi Construction Arbitration Act, Miss. Code Ann. §11-15-101, et seq. The specific grounds for vacating an arbitrator’s award are set forth in Miss. Code Ann. § 11-15-133(1). Click here to read Miss. Code Ann. § 11-15-133(1).

The Mississippi Court of Appeals recently considered a challenge to an arbitrator’s award which was confirmed by the circuit court. (It appears from the opinion that the arbitration was governed by the Construction Industry Arbitration Rules for the American Arbitration Association.) The appellant objected to the arbitrator’s decision not to grant appellant a continuance when requested and also prohibiting appellant from introducing evidence that it had not produced during discovery. The Court found that the refusal to grant the continuance was justified by the appellant’s dilatory conduct in refusing to pay its half of the arbitration cost and its four changes in legal counsel. The Court also found the arbitrator acted within its authority when it denied appellant’s admission of evidence where it failed to produce any documents during the discovery period or prior to the arbitration.

Once again, the lesson to be learned is that while arbitration is a more informal proceeding than litigation, there are procedural rules that govern arbitration. When an arbitrator renders a decision on these procedural matters, the courts will be inclined to enforce such decision because of the extremely narrow scope of appellate review.

Beware of Tolling Agreements

Christopher Solop — Tue, 23 Apr 2013 14:02:41 -0600

A tolling agreement is an agreement to suspend or extend the statute of limitation (the time within which you are required to file a lawsuit or lose the right to sue). These types of agreements are typically proposed to delay the filing of a lawsuit while parties attempt to settle the matter in dispute. However, you should proceed with caution when considering such agreements, because Mississippi has another law that forbids changing certain statutes of limitation.

Recently, the Mississippi Supreme Court considered these types of agreements again. Although the Court decided that the statute of limitation could be tolled for certain kinds of actions, the Court also ruled that the statute of repose cannot be touched. The statute of repose is a maximum period of time under which a lawsuit can be filed no matter what the circumstances may be.

The Court also listed five requirements that must be met in those situations where a tolling agreement is allowed:

A tolling agreement may be enforceable if (1) it is not prohibited by statute; (2) it contains a definite and reasonable time period; (3) it is formed after the cause of action has accrued, or in the instance of a statute of repose, after the plaintiff has notice of the cause of action; (4) it is not made at the same time as, or part of , the obligation sued upon; and (5) it is entered into before the expiration of the applicable limitations period.

If you are considering entering into a tolling agreement, don’t make that decision alone. You can be giving up substantial rights if a Mississippi court refuses to recognize the agreement. Before signing, consult with legal counsel experienced in contract law.

Fifth Circuit Upholds Mississippi's $1 Million Cap On Noneconomic Damages

Lynn Patton Thompson — Thu, 28 Feb 2013 15:00:58 -0600

Yesterday the Fifth Circuit Court of Appeals issued its opinion upholding as constitutional the Mississippi statute that caps the award of noneconomic damages at $1 million. Miss. Code § 11-1-60(2)(b) provides:

[i]n any civil action filed on or after September 1, 2004, …in the event the trier of fact finds the defendant liable, they shall not award the plaintiff more than One Million Dollars ($1,000,000.00) for noneconomic damages.

The term "noneconomic damages" is defined in §11-1-60(1)(a) to include "subjective, nonpecuniary damages arising from" death, pain, suffering, inconvenience, mental anguish, emotional distress, loss of enjoyment of life, loss of consortium, and other nonpecuniary damages. However, "noneconomic damages" do not include punitive or exemplary damages.

Lisa Learmonth was injured in an automobile accident and sued Sears, Roebuck and Co. for her injuries. A total award of $4 million was made by a jury, and $2.2 million of that amount was deemed to be for her noneconomic damages. When the district court reduced the $2.2 portion of the award to $1 million under §11-1-60(2)(b), Learmonth challenged the law as violating the Mississippi Constitution’s jury trial guarantee and separation of powers provisions.

The Fifth Circuit affirmed the lower court’s application of the $1 million cap. Noting it was Learmonth’s duty to prove the statute unconstitutional, the Fifth Circuit determined that burden was not met on the issues she presented on appeal. The Fifth Circuit rejected Learmonth’s argument that the legislature could not enact a legal remedy which limited an award of damages made by a jury. The Fifth Circuit also rejected her argument that the statute impermissibly allowed the legislature to dictate to the judiciary procedures or guidelines for determining awards. You can find the opinion here.

Agreement to Arbitration Trumps Right to Jury Trial

Christopher Solop — Fri, 15 Feb 2013 19:48:42 -0600

In a recent Mississippi Supreme Court decision the Court considered language in a contract which contained an arbitration provision, which excluded aesthetic-effect claims from arbitration. Click here to see decision. The contract in question was the AIA Document A101-1997 Standard Form of Agreement Between Owner and Contractor and AIA Document A201-1997 General Conditions for the Contract for Construction. The Owner maintained that because the contract stated "[a]ny Claim arising out of or related to the Contract, except Claims relating to aesthetic effect and except those waived…shall, be subject to mediation as a condition precedent to arbitration or the institution of legal or equitable proceedings by either party" there had been no clear waiver of its right to a jury trial. The trial court disagreed and on appeal the Mississippi Supreme Court affirmed.

The Court found the language of the contract required arbitration of all claims with the exception of those relating to aesthetic effect. Opinion on whether there had to be an express waiver of the right to a jury trial, the Court stated:

No caselaw suggests that, to be valid, an arbitration agreement must include an express statement which waives the right to a jury trial.

[T]he Constitution does not ‘confer the right to a trial, but only the right to have a jury hear the case once it is determined that the litigation should proceed before a court. If the claims are properly before an arbitral forum pursuant to an arbitration agreement, the jury trial right vanishes.

McKenzie Check Advance of Miss., LLC v. Hardy, 866 So.2d 446, 455 (¶30)(Miss. 2004)(citations omitted). Section 11-15-103 requires only a written agreement to arbitration.

Thus, the Court makes it clear that where a contract includes an agreement to arbitrate disputes, there is no need to have an express waiver of the right to a jury trial.

Mississippi's "Preference" Statute--It is really quite simple.

Christopher Solop — Fri, 04 Jan 2013 14:36:21 -0600

Mississippi has two "preference" statutes. The first one is found under the statutory scheme for the Board of Public Contractors at Miss. Code Ann. §31-3-21(3) (Rev.2010). The second one is found under the Mississippi statutes dealing with Public Purchases at Miss. Code Ann. §31-7-47 (Supp. 2012). The purpose of these statutes is to ensure that Mississippi contractors are given the benefit of any "preference" afforded by a non-resident contractor bidding in Mississippi. In other words, in deciding the lowest and best bidder, the governing authority in Mississippi would apply the percentage increase to each out-of-state bidder’s price which is equal to the percentage of "preference" given to a non-resident contractor in the bidder’s home state.

For example, assume a Mississippi resident contractor bids $100 while a non-resident contractor bids $95. On its face, the non-resident contractor would appear to be the low bidder. However, if the non-resident contractor’s state grants a ten percent (10%) preference to its own resident contractors, then Mississippi’s governing authority must add ten percent (10%) to the non-resident contractor’s price when evaluating the bid. This results in the non-resident contractor’s bid being adjusted to $104.50 ($95 x .10 = $9.5 + $95 = $104.50). Therefore, the Mississippi contractor’s bid would be the lowest and best bid and awarded the contract. See generally, Refrigeration Sales Co., Inc. v. State of Mississippi, 645 So. 2d 1351 (Miss. 1994)(interpreting the application of Mississippi’s "preference" statute to bid of non-resident contractor from New York).

Despite the simple and straight forward nature of these "preference" statutes, the Mississippi Attorney General has opined that if a low bid from a non-resident contractor is "equal or substantially equal" to that of the second low bidder that is a Mississippi contractor, these statues require the governing agency to "prefer" the Mississippi resident contractor over the low non-resident bidder, even though the words "equal or substantially equal" do not appear in either statute.Miss. Attorney General Opinion No. 2007-00452, addressed to Malcolm Jones (September 4, 2007). Until the Mississippi Supreme Court or the Court of Appeals addresses the Mississippi Attorney General’s interpretation, the actual application of these statutes to the bidding process will be more complicated than the statutes require.

SBA PUBLISHES PROPOSED RULE TO INCREASE TWO SIZE STANDARDS IN HEAVY AND CIVIL ENGINEERING NAICS CODES

Lynn Patton Thompson — Wed, 18 Jul 2012 13:40:49 -0600

Today the Small Business Administration published a proposed rule to increase the size standard for Land Subdivision and for Dredging and Surface Cleanup Activities, which are both in the Heavy and Civil Engineering Construction sector. SBA proposes to increase the size standard for Land Subdivision (NAICS 237210) from $7 million to $25 million in average annual receipts. Dredging and Surface Cleanup Activities is an "exception" sub-category of Other Heavy and Civil Engineering Construction. For Dredging and Surface Cleanup Activities, SBA proposes to increase the size standard from $20 million to $30 million in average annual receipts. Otherwise, the size standard for Other Heavy and Civil Engineering Construction (NAICS 237990) remains at $33.5 million.

If adopted as a final rule, these changes would allow contractors that have outgrown the previous size standards to become "small" again and prevent contractors that may be on the "other than small" bubble to remain "small". These changes also increase the pool of small businesses in these industry categories, allowing agencies to set more procurements aside for small-business concerns.

Interested parties must submit their comments not later than September 17, 2012, to SBA. The proposed rule is attached here.

Failure of Prime Contractor to Comply With "Percentage of Work" Requirements Entitles Government to Damages

Lynn Patton Thompson — Mon, 18 Jun 2012 14:54:20 -0600

In a case of first impression, the United States Civilian Board of Contract Appeals upheld a contracting officer’s final decision assessing damages against a prime contractor that failed to comply with the requirement to perform at least 50% of the on-site work. On a contract awarded by the Federal Highway Administration ("FHWA"), prime contractor, Singleton Enterprises ("Singleton") subcontracted the vast majority of its work to Talley Construction ("Talley"). Singleton’s only employees on-site were supervisors, which Singleton apparently borrowed from Talley but paid directly. It was unclear whether Singleton had paid for equipment used on the site, but the CBCA determined that whether or not Singleton had paid for equipment costs, it still performed substantially less than 50% of the value of on-site work.

The FHWA decided that if Singleton did not perform the on-site work, it was not entitled to the benefit of the unit prices it charged for that work. Talley was essentially acting as prime contractor so the FHWA decided it should only pay Singleton what Singleton was paying Talley. To calculate its damages, once the final quantities were determined, the FHWA multiplied Talley’s unit price to Singleton for the work, which was less than Singleton’s unit price to the FHWA for the work. Singleton had already been paid more than the FHWA would have paid based on Talley’s pricing. The appeal upheld not only the FHWA’s decision that it was entitled to recoup its "overpayment" damages from Singleton for not meeting the percentage of work requirement but also the reasonableness of the FHWA’s method of calculating its damages for that breach.

The decision notes that it has no precedential value. However, in similar circumstances, contractors should expect both the Department of Transportation and the Civilian Board of Contract Appeals to act as they did here. See Singleton Enterprises v. Department of Transportation, CBCA No. 2716, June 14, 2012.

Mississippi District Court Finds Mississippi Stop Payment Statute Unconstitutional

Christopher Solop — Mon, 04 Jun 2012 07:00:33 -0600

On April 12, 2012, United States Magistrate Judge S. Allan Alexander issued an order and opinion finding Mississippi’s "stop payment" statute, Miss. Code Ann. §85-7-181 (1972) unconstitutional stating:

[T]he court is compelled to hold that Mississippi’s stop notice statute violates due process by authorizing what is in practical effect the prejudgment attachment of funds without prior notice and hearing, or an acceptable post-seizure remedy. Consequently, §85-7-181 is facially unconstitutional...

The decision has been appealed. Because the district court’s decision is based upon an "Erie guess", the State courts in Mississippi are not bound to follow the district court’s decision. Nonetheless, subcontractors that have previously relied upon "stop payment" rights may see this decision cited by general contractors and owners to challenge a stop payment notice.

It will be interesting to see how this decision develops on appeal. Stay tuned for more information.

Construction Industry Legislation for 2012

Christopher Solop — Thu, 10 May 2012 10:15:53 -0600

There are only two pieces of construction related legislation that passed during the 2012 session worthy of mention. The first piece of legislation is HB 1301. Click here to see HB 1301. This bill amends Miss. Code Ann. § 85-7-185 to add the requirement that an owner or contractor furnish a copy of a payment bond when requested by a subcontractor or supplier. The second bill is SB 2902. Click here to see SB 2902. This bill makes it a misdemeanor for a contractor to negotiate a joint check "tendered in payment for material or equipment furnished or labor performed" without the authorization of the other party. The offending contractor could also be fined up to $500.00, ordered to make full restitution and be required to pay the attorney’s fees.

Mississippi Code Section 31-5-41 Not Applicable to Performance Bonds

Christopher Solop — Fri, 30 Mar 2012 09:42:50 -0600

The Mississippi Supreme Court recently decided an appeal concerning whether Miss. Code Ann. § 31-5-41 applied to a performance bond surety where the performance bond incorporates the terms and conditions of a construction contract. Miss. Code Ann. § 31-5-41 provides that all public or private construction contacts that contain a provision agreeing to "indemnify or hold harmless another person from that person’s own negligence is void as against public policy and wholly unenforceable." It also states that "[t]his section does not apply to construction bonds or insurance contracts or agreements."

In the case decided by the Court, the general contractor was sued by the owner of a building for alleged construction defects. The owner also sued the performance bond surety for breach of the performance bond and bad faith denial of its claims. The surety sought to enforce its indemnity agreement with the general contractor. However, the trial court denied the surety’s claim for indemnification finding its potential liability arouse out of its own negligence. The Mississippi Supreme Court reversed the trial court simply finding the language of Miss. Code Ann. § 31-5-41 provides that it does not apply to "contraction bonds or insurance contracts or agreements." The Court went on to state that "[t]his remains true even if the performance bond incorporates the construction contract by reference."

Even though the general contractor was unable to use Miss. Code Ann. § 31-5-41 as a defense against the surety’s claim for indemnity, this statutory provision does afford the general contractor protection against broad indemnity provisions in other construction related contracts.

When do you have a contract with a public entity?

Christopher Solop — Tue, 20 Mar 2012 09:38:25 -0600

It can be unclear when a contractor bidding on a public construction project actually has a binding contract with a public entity. This question appears to have been addressed by the Mississippi district court in Northeast Mississippi Community College District v. Vanderheyden Construction Company. In that case, the community college had issued an advertisement for bids from qualified contractors for the construction of a new science and math building. The advertisement reserved the right to reject any and all bids. After bids were opened, Vanderheyden was declared the low bid. The Board of Trustees ("the Board") voted to award the contract to Vanderheyden but after the board meeting the second low bidder challenged the award alleging a number of deficiencies in Vanderheyden’s bid. Rather than risk a lawsuit by the second low bidder, the Board decided to rescind the award and readvertise. At the second bid opening the protester on the original procurement was the low bidder and Vanderheyden was the second low bidder.

The issue presented to the district court was whether the Board could properly rescind its prior award to Vanderheyden and readvertise the project. The district court concluded that "a public entity cannot reject all bids and readvertise the project after it has already accepted the lowest responsible bidder." In analyzing the actions of the Board, the district court when on to state:

[T]he court is of the opinion that once the board chose to accept Vanderheyden’s bid, the reserved right to reject any and all bids had not been exercised and it was no longer operative. To hold otherwise would be contrary to well-established principles of contract law and would permit the possibility of favoritism in public bidding, the very evil which the bidding process statutes were enacted to prevent.

Therefore, once a public entity has officially accepted a bid, there is a binding contract between the parties unless the public entity has expressly conditioned the award upon certain requirements.

U.S. Government Accountability Office Report

Brenda T. Redfern — Thu, 15 Mar 2012 10:20:48 -0600

The U.S. Government Accountability Office ("GAO") has recently issued a report setting forth statistics for bid protests for the fiscal years 2007 through 2011. See GAO Report here. The report also contains a synopsis of a number of recent notable GAO decisions on various issues including Historically Underutilized Business Zones ("HUBZones") and Service-Disabled Veteran Owned Small Business Concerns ("SDVOSBC").

Both Christopher Solop and Lynn Patton Thompson file pre- and post-award bid protests and practice before the GAO and the United States Court of Federal Claims.

Lynn Thompson Wins Two Bid Protests at GAO for BISC Client

Christopher Solop — Wed, 11 Jan 2012 16:24:14 -0600

Lynn Patton Thompson recently secured 2 wins for client W.B. Construction and Sons, Inc. before the General Accountability Office (GAO) in Washington, DC. The protests involved separate procurements and different issues, and Ms. Thompson prevailed on both.

On December 16, 2011, the GAO issued its public decision sustaining W.B. Construction’s protest of an award made by the Department of the Army for various construction and maintenance services at Fort Polk, Louisiana. The procurement was advertised as an 8(a) set-aside. When the Army announced award to an entity that was not certified as an 8(a) concern, W.B. Construction protested. You can read the full decision here.

On January 4, 2012, the GAO issued its public decision sustaining W.B. Construction’s protest of an award to Tanner Heavy Equipment, LLC by the Army’s Corps of Engineers. Award was to be made on the basis of the lowest, technically-acceptable bid. W.B. Construction submitted the lowest bid and was deemed technically acceptable. However, the Army refused award to W.B. Construction because its bid had omitted a price for one line item and was alleged to be unbalanced. GAO sustained W.B. Construction’s protest. As demonstrated by Ms. Thompson, omission of the price for one line item did not render W.B. Construction’s bid non-responsive, and the Army did not comply with applicable regulation in determining that W.B. Construction’s bid was unbalanced. You can read the full decision here.

Appeals from School Board Orders--Do not delay!

Christopher Solop — Thu, 01 Dec 2011 09:34:36 -0600

If you are bidding on a project for a school board and are aggrieved by the decision to award the contract to another party, you must appeal the order "within ten (10) days from the date of adjournment of the meeting at which the order is entered." Miss. Code Ann. § 37-7-115. The procedure for appealing the award decision is the same as set forth in Miss. Code Ann. § 11-51-75 and requires preparing and filing a bill of exceptions with the circuit court. Because of the short time within which to appeal the decision, a contractor must not delay in deciding whether to appeal or walk away and fight another day.

"Redesignated" HUBZones Expiring October 1, 2011 - May Affect Your HUBZone Eligibility

Lynn Patton Thompson — Thu, 08 Sep 2011 07:38:16 -0600

On October 1, 2011, "redesignated" HUBZone areas will expire. These areas were previously set to expire at earlier dates, but in 2004, Congress extended and "grandfathered" their HUBZone status until the results of the 2010 Census were published. The original "redesignated" expiration date was June 1, 2011, but it was extended and now will take effect on October 1, 2011. The Small Business Administration is encouraging all currently-certified HUBZone concerns to assess the impact expiration of "redesignated" areas will have on their eligibility to remain in the HUBZone program, whether a concern’s principal office is currently located in a "redesignated" area or if it relies upon the employment of residents in redesignated areas to meet the "35%" rule.

The HUBZone program does not require termination of existing HUBZone contracts if a concern is no longer eligible after October 1, 2011. However, because a concern must be properly certified and eligible as of the date (a) it submitted its initial offer for the contract and (b) the date the contract was awarded, expiration of "redesignated" areas may impact pending offers. Also, regardless of whether a current HUBZone concern has an offer pending for a federal contract, it must always notify the SBA of any "material" change which could impact its HUBZone eligibility. Firms that will no longer qualify for the HUBZone program as of October 1, 2011, can voluntarily de-certify. If that is not done, the SBA will send proposed de-certification letters which must be responded to within thirty (30) days.

Concerns which voluntarily decertify or otherwise become non-compliant with the HUBZone program as of October 1, 2011, can re-apply after ninety (90) days have passed since the date of a voluntary decertification agreement or decertification.

Mississippi Department of Employment Security (MDES) offers E-Verify Assistance

Christopher Solop — Wed, 20 Jul 2011 08:39:02 -0600

In an article published on June 9, 2011, by Brenda Redfern, employers were reminded that effective July 1, 2011, the Mississippi Employment Protection Act requires all Mississippi businesses to E-Verify all new employees. In conjunction with this statutory mandate, the Mississippi Department of Employment Security ("MDES") has announced it will E-Verify any prospective employees for employers who are looking to retain workers through MDES. Click here to see the article published regarding this e-verify service in the Mississippi Business Journal on July 18, 2011. An employer simply has to place a job order with MDES by calling 888-844-3511 or contacting a WIN Job Center. MDES will send a list of prospective employees, all of whom will be E-Verified. When an individual is hired, the employer simply notifies MDES and it will send an official "Certification of I-9 Completion" to the employer. This service can assist contractors in identifying potential employees and save many administrative hours and headaches.

In addition, MDES has also agreed to implement a process it calls "reversal referrals". This is where an employer identifies a prospective employee and can send him/her to a WIN Job Center where the individual is E-Verified. The name of the individual is sent back to the prospective employer by MDES and, if hired, MDES will send the required certification. Employees that use MDES for E-Verification may relieve themselves from potential liability under the Mississippi Employment Protection Act.

Contractors should consider taking advantage of this free service by MDES in these difficult economic times.

The Duty to Proceed--Do I really have to do change order work without getting paid?

Christopher Solop — Tue, 12 Jul 2011 13:49:20 -0600

During the course of construction, contractors will sometimes find that the owner and/or architect are demanding more work than the contractor reasonably interprets the plans and specifications to require. The typical owner and/or architect solution to the dispute is simply to tell the contractor its interpretation is incorrect and direct the contractor to proceed with what the contractor considers additional work. Later, the owner may attempt to rely upon the lack of a written change order authorizing the performance to deny compensation and/or time for performance of additional work.

Does the contractor walk off the job or proceed with the additional work notwithstanding this dispute? Most contracts require contractors to proceed with the work notwithstanding the existence of a dispute; otherwise, the contractor might be subject to a default termination. However, such provisions also typically require the owner to continue payments under the contract for undisputed work. The idea is to keep the project moving forward—i.e., to prevent the contractor from bringing the project to a halt pending resolution of disputed items and to prevent the owner from holding the contractor’s funds hostage pending the resolution of the dispute.The contractor must therefore generally proceed with the performance of additional work without immediate compensation for that work.

However, it does not mean that the contractor is performing the work gratuitously. The refusal of the owner to issue a change order for the additional work may not insulate it from liability. "[U]nder Mississippi law, where the owner orders the contractor to perform extra work outside the contract, the contractor is entitled to compensation for that work, despite the fact that no change order was issued." See Sentinel Industrial Contracting Corp. v. Kimmins Industrial Service Corp. In Sentinel, the Mississippi Supreme Court recognized the inherent inequity in allowing the contractor to demand a subcontractor perform extra-contractual work without a change order and then deny compensation because a change order had not been issued.

This same rationale should apply to the situation where an owner directs the contractor to perform work without a change order. When this occurs, the contractors must place the owner and/or architect on written notice of its objection to the additional work and reserve its right to recover the costs and/or time associated with the change order work. Simply stated, the duty to proceed does not entitle the owner to avoid paying for legitimate change order work even in the absence of a written change order.

Claims for Construction Defects--Where did I put my insurance policy?

Christopher Solop — Tue, 05 Jul 2011 10:12:36 -0600

Mississippi contractors should know that Mississippi law (§15-1-41) allows a party to bring suit for defective construction within six (6) years “after the written acceptance or actual occupancy or use, whichever occurs first, of such improvement by the owner thereof.” The last thing a contractor wants to be confronted with, especially if the contractor is no longer in business, is a demand or lawsuit to address allegedly defective work. This scenario may not have seemed likely five years ago, but with the downturn in the economy, many contractors are being forced to close their doors. Don’t panic—yet. Your insurance or that purchased by your subcontractors where you were identified as an additional insured may provide you with defense and indemnity protection.

When you do get a demand or served with a lawsuit from a former client alleging defective construction, you should contact your legal counsel and insurance agent. Your legal counsel can advise you how to respond to the demand or lawsuit and your insurance agent can help you find the policy in place when the project was constructed. You will then be in a position to notify your insurance carrier of the situation. Hopefully, your policy will either cover the claim of defective construction or pay for the cost associated with defending against the claim. If your insurance carrier or that of your subcontractor sends you a letter denying coverage, do not take no for an answer—at least not right away. You should have your attorney review the applicable policy language to verify whether there is coverage.

General Disclaimers in Plans and Specifications

Christopher Solop — Mon, 27 Jun 2011 12:40:22 -0600

In an attempt to avoid liability for the various deficiencies in its plans and specifications, some architects and engineers rely upon the general disclaimers set forth in the contract documents. However, the United States Supreme Court has held these general disclaimers are unenforceable as a matter of law. In U.S. v. Spearin, the Supreme Court ruled that the Owner is responsible and affirmatively warrants the adequacy of its plans and specifications and that responsibility "is not overcome by the usual clauses requiring builders to visit the site, check the plans, and to inform themselves of the requirements of the work." Similarly, in Baldi Bros. Constructors v. U.S., the U.S. Court of Federal Claims ruled that such general contractual provisions, even including a provision which states the owner does not guarantee the statements of fact in the specifications, will not relieve the owner from liability for providing misleading information to the contractor

Neither the Owner nor the design professional can fully shield itself from liability for its errors and/or omissions in the plans and specifications through disclaimers in the contract documents. Likewise, disclaimers shifting the burden of costs associated with errors and/or omissions are also generally unenforceable. A contractor is therefore typically entitled to rely on the representations in the plans and specifications, but the contractor should nevertheless perform a reasonable site inspection and review of the plans and specifications so that obvious errors and/or omissions can be addressed prior to bidding.

When a contractor does find itself confronted with such general disclaimers and the owner and/or architect nonetheless issues a directive to proceed, the contractor must document its position with regard to the error and/or omission to protect its position. The lack of such documentation may substantially impair, if not be fatal, to the contractor’s claim for additional compensation and/or time.

July 1, 2011 Deadline for ALL Employers to Comply with Mississippi Employment Protection Act

Brenda T. Redfern — Thu, 09 Jun 2011 09:49:07 -0600

By now, most employers have heard of the federal "E-Verify" program which is designed to identify and prohibit employment of illegal aliens. In the 2008 legislative session, the Mississippi Legislature adopted the "Mississippi Employment Protection Act" ("MEPA") which has features similar to the "E-Verify" Act, but is broader in its application.

Unlike federal law, the MEPA applies to every employer. An "employer" is defined as "any person or business that is required by federal or state law to issue a United States Internal Revenue Service Form W-2 or Form 1099 to report income paid to employed or contracted personnel in Mississippi." In other words, the MEPA applies to virtually everyone.

So what must the employer do under the MEPA? "Every employer shall register and utilize the status verification system [i.e., the federal E-Verify Program] to verify the federal employment authorization status of all newly hired employees." There are no exceptions! So if you are a small business and hire just one new employee, you are still covered and expected to verify the employment authorization status of the employee. Under the law, employers in the state of Mississippi shall only hire U.S. legal citizens or legal aliens. The E-Verify Program is the authorized means by which employers can verify the employee’s status.

The MEPA was implemented in stages since its adoption. However, effective July 1, 2011, the MEPA is fully implemented and, as mentioned previously, applies to all employers.

What are the consequences for failing to comply? Substantial! Any contract with the state or other public body can be cancelled and you can be ineligible for any public contracts for up to three years. You can also lose any license, permit, certificate or other document issued by any public entity which gives you the right to do business in Mississippi for up to one year. Effectively, these consequences could put you out of business, even if you do not hire an illegal alien! The mere failure to follow the verification requirements could subject you to these penalties.

Can the state do this? Yes. On May 26, 2011, the United States Supreme Court handed down a decision affirming similar laws in Arizona. In the case of Chamber of Commerce of the U.S.A. v. Whiting, the U.S. Supreme Court upheld Arizona’s law which the Court concluded did not preempt the federal law, but instead merely imposed licensing conditions on businesses operating within the state. The Supreme Court further concluded that nothing prevented states from making mandatory the federal E-Verify program. The MEPA appears to be consistent with the U.S. Supreme Court’s ruling and, therefore, would likely be upheld.

Bottom line: Comply with the MEPA. If you have not already registered for E-Verify, do so now and learn how to use it so that you will be ready on July 1^st.