Thursday, January 17, 2008
Congratulations!
We are proud to announce that Richard G. Kotarba and James R. Mall have been included in the 2008 edition of "Best Lawyers in America," published by Woodward and White, for their practice of Construction Law. Dick Kotarba has been included in the past 10 editions of the book. Inclusion in "Best Lawyers in America" is widely considered an honor, as attorneys are nominated and evaluated by their peers.
Timing of Bid Protests Critical
By: Nicole H. King, Esquire nhk@muslaw.com
In Stanton-Negley Drug Company v. Department of Public Welfare, the Commonwealth Court of Pennsylvania recently affirmed the time in which a business owner may protest a state-issued request for proposal (RFP). Citing the Procurement Code, the Court held that actual bidders – or those business owners who actually respond to the RFP – have only seven days from the date they became aware of the grounds for protest. Unfortunately, that date is often the day the business owner received the RFP. Conversely, prospective bidders – or those who only receive the RFP – may protest a RFP until the close of the RFP. Consequently, business owners should immediately consult with counsel after receiving an RFP if they feel there may be a basis for protest, but intend to submit a proposal nonetheless.
For more information on protesting a state-issued RFP or other construction law questions, contact Nicole H. King at nhk@muslaw.com or call 412-456-2559.
In Stanton-Negley Drug Company v. Department of Public Welfare, the Commonwealth Court of Pennsylvania recently affirmed the time in which a business owner may protest a state-issued request for proposal (RFP). Citing the Procurement Code, the Court held that actual bidders – or those business owners who actually respond to the RFP – have only seven days from the date they became aware of the grounds for protest. Unfortunately, that date is often the day the business owner received the RFP. Conversely, prospective bidders – or those who only receive the RFP – may protest a RFP until the close of the RFP. Consequently, business owners should immediately consult with counsel after receiving an RFP if they feel there may be a basis for protest, but intend to submit a proposal nonetheless.
For more information on protesting a state-issued RFP or other construction law questions, contact Nicole H. King at nhk@muslaw.com or call 412-456-2559.
Award of Interest, Penalties, and Attorneys’ Fees
By: Richard G. Kotarba, Esquire rgk@muslaw.com
In Imperial Excavating & Paving v. Rizzetto Construction Management, the Pennsylvania Superior Court decided on October 23, 2007, that excessive withholding by a general contractor warranted the assessment of interest, penalties and attorneys’ fees. The general withheld more than $262,000, even though the school district had withheld only $120,000 from the general and the general had to expend only $81,000 to correct the problems noted by the school district. The Superior Court found no reasonable relationship between the amount of the payment withheld from the subcontractor and the value of the general’s good faith claim against the subcontractor.
For more information on this case or the Prompt Payment Act, contact Richard G. Kotarba at rgk@muslaw.com or call 412-456-2812.
In Imperial Excavating & Paving v. Rizzetto Construction Management, the Pennsylvania Superior Court decided on October 23, 2007, that excessive withholding by a general contractor warranted the assessment of interest, penalties and attorneys’ fees. The general withheld more than $262,000, even though the school district had withheld only $120,000 from the general and the general had to expend only $81,000 to correct the problems noted by the school district. The Superior Court found no reasonable relationship between the amount of the payment withheld from the subcontractor and the value of the general’s good faith claim against the subcontractor.
For more information on this case or the Prompt Payment Act, contact Richard G. Kotarba at rgk@muslaw.com or call 412-456-2812.
Interest; No Penalty; Attorneys’ Fees to be Determined
By: Jason M. Yarbrough, Esquire jmy@muslaw.com
In Ruthrauff, Inc. v. Ravin Inc. et al., the Pennsylvania Superior Court found a heating subcontractor was not required to employ its own design engineering experience in installing a heating system where the subcontractor was hired to install the system pursuant to the general contractor’s plans and the manufacturer’s recommendations. The subcontractor brought a Pennsylvania Contractor Subcontractor Payment Act (“PCSPA”) claim against the general contractor, seeking damages, interest on the retainage withheld, penalties and attorneys’ fees. The award of interest, penalties and attorneys’ fees are assessed by different standards under the PCSPA.
The subcontractor was entitled to interest because the general contractor “unreasonably withheld” paying retainage given the subcontractor’s performance of its duties. The Court did not impose a penalty on the general contractor given the trial court’s findings that the retainage was not “wrongfully withheld” because the general contractor withheld payment in good faith (believing the subcontractor was required to use its HVAC experience) and the amount withheld was customary in the industry (10%). Finally, the Court found the trial court needed to evaluate whether the net judgment in favor of the subcontractor made it a “substantially prevailing party” entitled to attorneys’ fees.
For more information on this case or the Pennsylvania Contractor Subcontractor Payment Act, please contact Jason M. Yarbrough at jmy@muslaw.com or call 412-456-2592.
In Ruthrauff, Inc. v. Ravin Inc. et al., the Pennsylvania Superior Court found a heating subcontractor was not required to employ its own design engineering experience in installing a heating system where the subcontractor was hired to install the system pursuant to the general contractor’s plans and the manufacturer’s recommendations. The subcontractor brought a Pennsylvania Contractor Subcontractor Payment Act (“PCSPA”) claim against the general contractor, seeking damages, interest on the retainage withheld, penalties and attorneys’ fees. The award of interest, penalties and attorneys’ fees are assessed by different standards under the PCSPA.
The subcontractor was entitled to interest because the general contractor “unreasonably withheld” paying retainage given the subcontractor’s performance of its duties. The Court did not impose a penalty on the general contractor given the trial court’s findings that the retainage was not “wrongfully withheld” because the general contractor withheld payment in good faith (believing the subcontractor was required to use its HVAC experience) and the amount withheld was customary in the industry (10%). Finally, the Court found the trial court needed to evaluate whether the net judgment in favor of the subcontractor made it a “substantially prevailing party” entitled to attorneys’ fees.
For more information on this case or the Pennsylvania Contractor Subcontractor Payment Act, please contact Jason M. Yarbrough at jmy@muslaw.com or call 412-456-2592.
NLRB Decision in Glen Falls Building & Construction Trades Council
By: Diana E. Leech, Esquire del@muslaw.com
On July 31, 2007, the National Labor Relations Board (“NLRB”) issued its opinion in Glen Falls Building & Construction Trades Council. In this case, the NLRB held that an agreement between an owner and labor unions requiring all contractors employed on a construction site to sign a project labor agreement (“PLA”) violated the National Labor Relations Act (“NLRA”) because the agreement was neither negotiated in the context of collective bargaining nor was the agreement entered into for the purpose of alleviating problems associated with having both union and non-union employees on the same construction site. The NLRB held that the agreement requiring contractors to execute the PLAs was entered into by the owner in order to gain union support in obtaining the necessary project permits. Accordingly, the NLRB ruled for the owner holding that the agreement was illegal and void under the NLRA, thus invalidating any basis for a claim.
On July 31, 2007, the National Labor Relations Board (“NLRB”) issued its opinion in Glen Falls Building & Construction Trades Council. In this case, the NLRB held that an agreement between an owner and labor unions requiring all contractors employed on a construction site to sign a project labor agreement (“PLA”) violated the National Labor Relations Act (“NLRA”) because the agreement was neither negotiated in the context of collective bargaining nor was the agreement entered into for the purpose of alleviating problems associated with having both union and non-union employees on the same construction site. The NLRB held that the agreement requiring contractors to execute the PLAs was entered into by the owner in order to gain union support in obtaining the necessary project permits. Accordingly, the NLRB ruled for the owner holding that the agreement was illegal and void under the NLRA, thus invalidating any basis for a claim.
Commerce and Complex Litigation Center
By: James R. Mall, Esquire jrm@muslaw.com
Starting in January, 2008, complex construction cases filed in the Court of Common Pleas of Allegheny County may, upon motion of one of the parties, be assigned to one of two judges who will hear cases in the newly constituted Commerce and Complex Litigation Center. In addition to construction cases, this division of the Court will decide cases involving intellectual property, securities violations, electronic commerce, and restrictive covenants along with various types of litigation involving business entities involved in commercial transactions.
The benefits anticipated from this new Center will be that participants in construction projects, including owners, contractors and subcontractors, will have their disputes resolved more expeditiously and preliminary pretrial rulings will be made more consistently and uniformly by an experienced jurist familiar with the types of issues and claims which ordinarily comprise construction disputes. The current system of case assignment in the Civil Division calls for the random assignment of cases to judges without regard for their experience and expertise in complex construction cases.
Starting in January, 2008, complex construction cases filed in the Court of Common Pleas of Allegheny County may, upon motion of one of the parties, be assigned to one of two judges who will hear cases in the newly constituted Commerce and Complex Litigation Center. In addition to construction cases, this division of the Court will decide cases involving intellectual property, securities violations, electronic commerce, and restrictive covenants along with various types of litigation involving business entities involved in commercial transactions.
The benefits anticipated from this new Center will be that participants in construction projects, including owners, contractors and subcontractors, will have their disputes resolved more expeditiously and preliminary pretrial rulings will be made more consistently and uniformly by an experienced jurist familiar with the types of issues and claims which ordinarily comprise construction disputes. The current system of case assignment in the Civil Division calls for the random assignment of cases to judges without regard for their experience and expertise in complex construction cases.
ConsensusDOCS
By: Benjamin D. Kerr, Esquire bdk@muslaw.com
On September 28, 2007, twenty leading construction associations released “ConsensusDOCS” contract documents as an alternative to traditional AIA contract documents. ConsensusDOCS were collaboratively drafted by designers, owners, contractors, subcontractors and sureties and are intended to be a neutral contract documents construction, as each party involved in the drafting process was given a full vote on the final contract terms. ConsensusDOCS include more than 70 contracts and forms and address all project delivery methods. Additional information regarding ConsensusDOCS may be found at www.consensusdocs.org.
On September 28, 2007, twenty leading construction associations released “ConsensusDOCS” contract documents as an alternative to traditional AIA contract documents. ConsensusDOCS were collaboratively drafted by designers, owners, contractors, subcontractors and sureties and are intended to be a neutral contract documents construction, as each party involved in the drafting process was given a full vote on the final contract terms. ConsensusDOCS include more than 70 contracts and forms and address all project delivery methods. Additional information regarding ConsensusDOCS may be found at www.consensusdocs.org.
U.S. Supreme Court to Hear Case on Federal Arbitration Act
By: Benjamin D. Kerr, Esquire bdk@muslaw.com
On November 7, 2007, the Supreme Court will hear arguments regarding Hall Street Associates, L.L.C. v. Mattel, Inc., a case on appeal from the United States Court of Appeals for the Ninth Circuit. At issue is whether the terms of the Federal Arbitration Act (“FAA”) preclude companies from agreeing to expanded grounds for judicial review of an arbitration award, outside of the bases for review which are set forth in the FAA. The Ninth Circuit had ruled that the FAA precluded such agreements. Arbitration is traditionally marketed as less expensive and faster than litigation, however, expanded judicial review has the potential to involve lengthy appeals processes in what is supposed to be a streamlined process.
On November 7, 2007, the Supreme Court will hear arguments regarding Hall Street Associates, L.L.C. v. Mattel, Inc., a case on appeal from the United States Court of Appeals for the Ninth Circuit. At issue is whether the terms of the Federal Arbitration Act (“FAA”) preclude companies from agreeing to expanded grounds for judicial review of an arbitration award, outside of the bases for review which are set forth in the FAA. The Ninth Circuit had ruled that the FAA precluded such agreements. Arbitration is traditionally marketed as less expensive and faster than litigation, however, expanded judicial review has the potential to involve lengthy appeals processes in what is supposed to be a streamlined process.
Construction Manager’s Contract Defines its Duties for Project Safety
By: David E. Sweitzer, Esquire des@muslaw.com
In Farabaugh v. Pennsylvania Turnpike Commission and Trumbull Corporation, the Pennsylvania Supreme Court ruled that a construction manager may be held responsible for injuries to employees of subcontractors if the construction manager is negligent in performing its contract obligations to the owner regarding project safety.
An employee of the general contractor was killed on the jobsite when the dump truck he was driving left a temporary road constructed by the general contractor and plummeted down an embankment. The worker’s Estate filed suit against the owner (the Pennsylvania Turnpike Commission) and the construction manager (Trumbull) alleging that both were responsible for the incident. Plaintiff’s theory against Trumbull was that the construction manager has a social duty to perform its contractual obligations without injuring third parties on the site.
The Court of Common Pleas of Allegheny County dismissed the case against Trumbull at a preliminary stage, ruling that the construction manager owed no legal duty to workers on the site. The Supreme Court ruled that the trial court’s analysis was incorrect and held that the obligations contained in the construction manager’s contract with the owner triggered a duty to workers on the site to perform its safety obligations in a non-negligent manner. The Supreme Court remanded the case to the Court of Common Pleas for trial on whether the construction manager breached its duty and caused the incident.
The Courts Will Analyze the CM’s Contract on a Case-by-Case Basis
Parties are free to define their obligations for project safety in their contract. In Farabaugh, Trumbull was paid to assume an active role in assuring safety on the site. It agreed to develop, implement, maintain and monitor a comprehensive project safety/insurance program. It agreed to review and approve other contractors’ site safety plans, and to assess those contractors’ compliance with their respective plans. Additionally, Trumbull had the power to stop work if it noticed safety problems. All of these facts were cited by the Supreme Court to support the conclusion that the construction manager assumed the duty to perform its obligations in a non-negligent manner. This analysis is critical. If the construction manager does not assume an active role, but only a passive one, the construction manager will not assume a legal duty for project safety.
The Farabaugh decision is significant for construction managers. There is no rigid definition of the duty of construction managers. Courts will analyze the contractual obligations between the construction manager and the owner for a definition of those duties. The construction manager needs to be clear in its understanding of its obligations, and it must be equally clear in expressing those obligations in its contract with the owner. In its negotiations with the owner, the construction manager should certainly be cognizant of what the owner wants and then work with its insurance consultant to assure adequate coverage relative to those desires.
For more information on this case or general construction litigation issues, please contact David E. Sweitzer at des@muslaw.com or call 412-456-2843.
In Farabaugh v. Pennsylvania Turnpike Commission and Trumbull Corporation, the Pennsylvania Supreme Court ruled that a construction manager may be held responsible for injuries to employees of subcontractors if the construction manager is negligent in performing its contract obligations to the owner regarding project safety.
An employee of the general contractor was killed on the jobsite when the dump truck he was driving left a temporary road constructed by the general contractor and plummeted down an embankment. The worker’s Estate filed suit against the owner (the Pennsylvania Turnpike Commission) and the construction manager (Trumbull) alleging that both were responsible for the incident. Plaintiff’s theory against Trumbull was that the construction manager has a social duty to perform its contractual obligations without injuring third parties on the site.
The Court of Common Pleas of Allegheny County dismissed the case against Trumbull at a preliminary stage, ruling that the construction manager owed no legal duty to workers on the site. The Supreme Court ruled that the trial court’s analysis was incorrect and held that the obligations contained in the construction manager’s contract with the owner triggered a duty to workers on the site to perform its safety obligations in a non-negligent manner. The Supreme Court remanded the case to the Court of Common Pleas for trial on whether the construction manager breached its duty and caused the incident.
The Courts Will Analyze the CM’s Contract on a Case-by-Case Basis
Parties are free to define their obligations for project safety in their contract. In Farabaugh, Trumbull was paid to assume an active role in assuring safety on the site. It agreed to develop, implement, maintain and monitor a comprehensive project safety/insurance program. It agreed to review and approve other contractors’ site safety plans, and to assess those contractors’ compliance with their respective plans. Additionally, Trumbull had the power to stop work if it noticed safety problems. All of these facts were cited by the Supreme Court to support the conclusion that the construction manager assumed the duty to perform its obligations in a non-negligent manner. This analysis is critical. If the construction manager does not assume an active role, but only a passive one, the construction manager will not assume a legal duty for project safety.
The Farabaugh decision is significant for construction managers. There is no rigid definition of the duty of construction managers. Courts will analyze the contractual obligations between the construction manager and the owner for a definition of those duties. The construction manager needs to be clear in its understanding of its obligations, and it must be equally clear in expressing those obligations in its contract with the owner. In its negotiations with the owner, the construction manager should certainly be cognizant of what the owner wants and then work with its insurance consultant to assure adequate coverage relative to those desires.
For more information on this case or general construction litigation issues, please contact David E. Sweitzer at des@muslaw.com or call 412-456-2843.
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