Sustainable building has become an important part of the construction landscape in Western Pennsylvania and looks to become even more prevalent in the future. However, the process carries with it many hurdles and potential pitfalls that can quickly derail a project and affect you or your clients’ bottom line. Whether you are new to green building or are looking to enhance your green building practices, this seminar is for you. From planning and site acquisition through end certification, we will address various key areas that those in the real estate and construction industry face when building green.
Hosted by: Patricia E. Farrell , Esquire - Chad I. Michaelson, Esquire - Joshua R. Lorenz, Esquire
Date: February 19, 2009
Time: 8:30 - 10:00 am
Location: Meyer, Unkovic & Scott LLP
RSVP to: Beth Ansell at (412) 456-2552 or rsvp@muslaw.com by Monday, February 16 - Enrollment is limited.
Monday, February 2, 2009
Wednesday, January 28, 2009
Law Costs Contractors
By: Chad I. Michaelson, Esquire cim@muslaw.com
A new law meant to protect consumers from unscrupulous home remodeling contractors likely will increase the business costs of all contractors.
The Pennsylvania Home Improvement Consumer Protection Act imposes a host of new requirements on contractors in the home improvement business.
For one thing, contractors performing work on private residences will have to register with the Bureau of Consumer Protection every two years, starting July 1, 2009. Any contractor who earns more than $5,000 annually will have to register.
While the registration cost is only $50, it will be a little more expensive for contractors to include their new registration number on all advertisements, as the law requires. Contractors will have to pay for new billboards, car insignia, letterhead, business cards and other marketing material.
The new law also states that all remodeling contracts must contain a number of detailed terms and conditions. Under the new law, contractors also must get written change orders signed by both the contractor and customer for every change to the scope of work.
The new law requires contractors to maintain liability insurance covering a minimum of $50,000 in both personal injury and property damage. While many contractors currently have insurance, for some smaller ones, buying insurance will be a new business cost.
The largest cost burden of the new law will be borne by contractors who commit the new criminal offense of "home improvement fraud," for which the penalty could be as much as ten years in jail and a fine of $25,000.
A new law meant to protect consumers from unscrupulous home remodeling contractors likely will increase the business costs of all contractors.
The Pennsylvania Home Improvement Consumer Protection Act imposes a host of new requirements on contractors in the home improvement business.
For one thing, contractors performing work on private residences will have to register with the Bureau of Consumer Protection every two years, starting July 1, 2009. Any contractor who earns more than $5,000 annually will have to register.
While the registration cost is only $50, it will be a little more expensive for contractors to include their new registration number on all advertisements, as the law requires. Contractors will have to pay for new billboards, car insignia, letterhead, business cards and other marketing material.
The new law also states that all remodeling contracts must contain a number of detailed terms and conditions. Under the new law, contractors also must get written change orders signed by both the contractor and customer for every change to the scope of work.
The new law requires contractors to maintain liability insurance covering a minimum of $50,000 in both personal injury and property damage. While many contractors currently have insurance, for some smaller ones, buying insurance will be a new business cost.
The largest cost burden of the new law will be borne by contractors who commit the new criminal offense of "home improvement fraud," for which the penalty could be as much as ten years in jail and a fine of $25,000.
Friday, October 10, 2008
Congratulations to our “2009 Best Lawyers in America”
This year fourteen Meyer, Unkovic & Scott LLP attorneys have been selected for inclusion in The Best Lawyers in America, 2009 edition, published by Woodward/White. Inclusion is widely considered a significant honor because lawyers are selected on the basis of peer evaluations.
Those named include Kevin F. McKeegan, the firm’s Managing Partner, Robert Mauro, W. Grant Scott and Richard G. Kotarba all for their practice of real estate law. Kevin F. McKeegan was also recognized for his work in land use & zoning law. Richard G. Kotarba and James R. Mall were both selected for their work in construction law. Also named were Dennis Unkovic, for his international trade and finance law practice, Joel Pfeffer for his work in immigration law, Joel M. Helmrich for his practice in creditor-debtor rights, Thomas A. Berret for his work in personal injury litigation, Laura A. Candris for her labor and employment law practice, John W. Powell for his work in trusts and estates, David G. Oberdick for his work in commercial litigation and intellectual property law, Patricia L. Dodge and Russell J. Ober for their work in commercial litigation. Patricia L. Dodge was also recognized for her product liability litigation practice.
Please contact Meyer, Unkovic & Scott LLP at 412.456.2800 or postmaster@muslaw.com.
Those named include Kevin F. McKeegan, the firm’s Managing Partner, Robert Mauro, W. Grant Scott and Richard G. Kotarba all for their practice of real estate law. Kevin F. McKeegan was also recognized for his work in land use & zoning law. Richard G. Kotarba and James R. Mall were both selected for their work in construction law. Also named were Dennis Unkovic, for his international trade and finance law practice, Joel Pfeffer for his work in immigration law, Joel M. Helmrich for his practice in creditor-debtor rights, Thomas A. Berret for his work in personal injury litigation, Laura A. Candris for her labor and employment law practice, John W. Powell for his work in trusts and estates, David G. Oberdick for his work in commercial litigation and intellectual property law, Patricia L. Dodge and Russell J. Ober for their work in commercial litigation. Patricia L. Dodge was also recognized for her product liability litigation practice.
Please contact Meyer, Unkovic & Scott LLP at 412.456.2800 or postmaster@muslaw.com.
Tuesday, August 26, 2008
Buy-Sell Agreement Needed
By: Carl F. Staiger, Esquire cfs@muslaw.com
A buy-sell agreement is a contract between business partners that describes the framework for transferring ownership of the business. A buy-sell agreement is important for all businesses, and particularly for businesses owned by baby boomers, most of whom will probably be retiring within the next 10 years.
The buy-sell agreement is a "last will and testament" for business partners that determines the process for transferring ownership if the partners want to split or if one partner dies, retires, becomes disabled, is divorced or just wants out. The agreement should address not only the events that trigger a transfer of ownership, but also the method for valuing the company.
Partners often don't think about how they will fund the purchase of the business under the agreement. Neither partner may have enough money to satisfy the obligation to buy the business. To make sure there is money to enable the business to be purchased by a partner, the partners should consider funding buy-sell obligations with life insurance.
Finally, a business owner shouldn't assume that a one-size-fits-all buy-sell agreement exists. Every business situation is different. For example, the terms of a buy-sell agreement between unrelated business partners may be significantly different than the terms of a buy-sell agreement between family members. Tax issues also may play an important role in structuring a buy-sell agreement.
A buy-sell agreement is a contract between business partners that describes the framework for transferring ownership of the business. A buy-sell agreement is important for all businesses, and particularly for businesses owned by baby boomers, most of whom will probably be retiring within the next 10 years.
The buy-sell agreement is a "last will and testament" for business partners that determines the process for transferring ownership if the partners want to split or if one partner dies, retires, becomes disabled, is divorced or just wants out. The agreement should address not only the events that trigger a transfer of ownership, but also the method for valuing the company.
Partners often don't think about how they will fund the purchase of the business under the agreement. Neither partner may have enough money to satisfy the obligation to buy the business. To make sure there is money to enable the business to be purchased by a partner, the partners should consider funding buy-sell obligations with life insurance.
Finally, a business owner shouldn't assume that a one-size-fits-all buy-sell agreement exists. Every business situation is different. For example, the terms of a buy-sell agreement between unrelated business partners may be significantly different than the terms of a buy-sell agreement between family members. Tax issues also may play an important role in structuring a buy-sell agreement.
Wednesday, March 19, 2008
Construction Manager Safety Responsibilities
By: David E. Sweitzer, Esquire des@muslaw.com
The Pennsylvania Supreme Court has ruled that under certain circumstances a construction manager can be held responsible for injuries to employees of its subcontractors.
Here’s what happened: a construction worker was killed when he drove a dump truck off a temporary road and down an embankment. The family sued the construction manager, but the Court of Common Pleas of Allegheny County dismissed the case, ruling that the construction manager owed no legal duty to the worker, who was the employee of a subcontractor. The Pennsylvania Supreme Court then overruled the lower court, saying that the general contractor was responsible for safety and that a trial must be held to determine if the construction manager had in any way been negligent.
The problem is that there is no rigid definition of the duties of a construction manager. In determining negligence and liability, courts must analyze each contract for a definition of those duties.
In the case in question, the construction manager agreed in the contract to assume an active role in developing, implementing, maintaining and monitoring a safety program for the project. The court said that meant the construction manager assumed an obligation to ensure the safety of the employees of its subcontractors.
The lesson for construction managers is obvious: review contracts carefully and make sure there is adequate insurance to cover potential liabilities.
The Pennsylvania Supreme Court has ruled that under certain circumstances a construction manager can be held responsible for injuries to employees of its subcontractors.
Here’s what happened: a construction worker was killed when he drove a dump truck off a temporary road and down an embankment. The family sued the construction manager, but the Court of Common Pleas of Allegheny County dismissed the case, ruling that the construction manager owed no legal duty to the worker, who was the employee of a subcontractor. The Pennsylvania Supreme Court then overruled the lower court, saying that the general contractor was responsible for safety and that a trial must be held to determine if the construction manager had in any way been negligent.
The problem is that there is no rigid definition of the duties of a construction manager. In determining negligence and liability, courts must analyze each contract for a definition of those duties.
In the case in question, the construction manager agreed in the contract to assume an active role in developing, implementing, maintaining and monitoring a safety program for the project. The court said that meant the construction manager assumed an obligation to ensure the safety of the employees of its subcontractors.
The lesson for construction managers is obvious: review contracts carefully and make sure there is adequate insurance to cover potential liabilities.
Thursday, February 21, 2008
Pennsylvania Commonwealth Court Approves Measured Mile Method to Calculate Contractor’s Productivity Damages
By: David E. Sweitzer, Esquire des@muslaw.com
For the first time, a Pennsylvania appellate court has affirmed the use of the Measured Mile method to calculate a contractor’s loss of labor productivity as the result of a public owner’s ordered acceleration of work. In James Corporation v. North Allegheny School District, the Pennsylvania Commonwealth Court affirmed the trial court’s verdict in favor of the general contractor which included $215,000 for acceleration costs.
In accordance with Pennsylvania’s Separations Act, separate prime contracts were entered into for asbestos abatement, site preparation, general construction, HVAC, electrical, roofing and plumbing for the renovation and construction of an elementary school. The School District assumed responsibility for construction management, and specifically, maintenance and supervision of the project schedule. In order to comply with its contractual obligations, the School District contracted with a separate construction manager.
There were multiple owner-caused delays before the general contractor could commence its work. There was a two-week delay associated with the issuance of the notice to proceed. There was a six-week delay because of the owner’s failure to obtain the necessary erosion and sedimentation control plan, and the general contractor was delayed for several weeks because of the plumbing prime contractor’s delays.
The District’s construction manger acknowledged these delays and prepared an updated schedule to account for them. The School District disagreed with this acknowledgement and terminated the construction manager’s contract, opting to hire a new construction manager which then took a very aggressive approach with respect to the schedule going forward. The trial court found that the School District acted in such a manner because of its stated belief that accepting the delays would subject it to a claim by the contractor. Not only did the District refuse to acknowledge the delays it caused, it also required the general contractor to meet the original completion date or be at risk of having its contract terminated.
The contractor met the original schedule but necessarily had to accelerate its work and as a result, it incurred significant losses in the form of labor inefficiencies. The contractor filed suit under the Pennsylvania Procurement Code to recover the acceleration damages. In addition to the acceleration claim the School District refused to pay several undisputed contract invoices and arbitrarily withheld $13,000 from another invoice.
After a three week trial, a verdict was returned in favor of the contractor. The trial court accepted the contractor’s use of the Measured Mile method of calculating loss of productivity damages and awarded $215,000 for the acceleration claim. Additionally, because the trial court agreed that the School District acted in bad faith by wrongfully refusing to pay undisputed invoices, the verdict included the invoice amounts, plus penalty and interest under the Procurement Code, plus attorney fees in the amount of $110,000.
The Measured Mile analysis involves examination of two snapshots of the project. Expert testimony is utilized to compare the contractor’s cost of completing work during times where there is no delay or acceleration (unimpacted period) with the costs of completing work in times of delay or acceleration period (impacted delay). While the Pennsylvania Board of Claims has considered the method in prior disputes, no appellate court has addressed the issue before the James decision. The method has now been ratified as reasonable and appropriate to quantify acceleration claims.
Aside from the Measured Mile being accepted, the James decision is significant because it gives several examples of disputes which can arise on construction projects, especially those which are governed by Pennsylvania’s Separations Act. Commonly, contracts contain no-damages-for-delay provisions. While these are generally enforceable in Pennsylvania, the James decision confirmed once again that an owner cannot use such provisions as a shield when it causes the delay. Additionally, contracts contain provisions regarding notice of claims. These can be perilous to a contractor which seeks additional compensation but a court may find notice provisions are satisfied if the owner has knowledge of the delays and/or acceleration even though formal notice is not given by the contractor.
For further information on this case and the multiple issues presented, call David E. Sweitzer at 412-456-2843.
For the first time, a Pennsylvania appellate court has affirmed the use of the Measured Mile method to calculate a contractor’s loss of labor productivity as the result of a public owner’s ordered acceleration of work. In James Corporation v. North Allegheny School District, the Pennsylvania Commonwealth Court affirmed the trial court’s verdict in favor of the general contractor which included $215,000 for acceleration costs.
In accordance with Pennsylvania’s Separations Act, separate prime contracts were entered into for asbestos abatement, site preparation, general construction, HVAC, electrical, roofing and plumbing for the renovation and construction of an elementary school. The School District assumed responsibility for construction management, and specifically, maintenance and supervision of the project schedule. In order to comply with its contractual obligations, the School District contracted with a separate construction manager.
There were multiple owner-caused delays before the general contractor could commence its work. There was a two-week delay associated with the issuance of the notice to proceed. There was a six-week delay because of the owner’s failure to obtain the necessary erosion and sedimentation control plan, and the general contractor was delayed for several weeks because of the plumbing prime contractor’s delays.
The District’s construction manger acknowledged these delays and prepared an updated schedule to account for them. The School District disagreed with this acknowledgement and terminated the construction manager’s contract, opting to hire a new construction manager which then took a very aggressive approach with respect to the schedule going forward. The trial court found that the School District acted in such a manner because of its stated belief that accepting the delays would subject it to a claim by the contractor. Not only did the District refuse to acknowledge the delays it caused, it also required the general contractor to meet the original completion date or be at risk of having its contract terminated.
The contractor met the original schedule but necessarily had to accelerate its work and as a result, it incurred significant losses in the form of labor inefficiencies. The contractor filed suit under the Pennsylvania Procurement Code to recover the acceleration damages. In addition to the acceleration claim the School District refused to pay several undisputed contract invoices and arbitrarily withheld $13,000 from another invoice.
After a three week trial, a verdict was returned in favor of the contractor. The trial court accepted the contractor’s use of the Measured Mile method of calculating loss of productivity damages and awarded $215,000 for the acceleration claim. Additionally, because the trial court agreed that the School District acted in bad faith by wrongfully refusing to pay undisputed invoices, the verdict included the invoice amounts, plus penalty and interest under the Procurement Code, plus attorney fees in the amount of $110,000.
The Measured Mile analysis involves examination of two snapshots of the project. Expert testimony is utilized to compare the contractor’s cost of completing work during times where there is no delay or acceleration (unimpacted period) with the costs of completing work in times of delay or acceleration period (impacted delay). While the Pennsylvania Board of Claims has considered the method in prior disputes, no appellate court has addressed the issue before the James decision. The method has now been ratified as reasonable and appropriate to quantify acceleration claims.
Aside from the Measured Mile being accepted, the James decision is significant because it gives several examples of disputes which can arise on construction projects, especially those which are governed by Pennsylvania’s Separations Act. Commonly, contracts contain no-damages-for-delay provisions. While these are generally enforceable in Pennsylvania, the James decision confirmed once again that an owner cannot use such provisions as a shield when it causes the delay. Additionally, contracts contain provisions regarding notice of claims. These can be perilous to a contractor which seeks additional compensation but a court may find notice provisions are satisfied if the owner has knowledge of the delays and/or acceleration even though formal notice is not given by the contractor.
For further information on this case and the multiple issues presented, call David E. Sweitzer at 412-456-2843.
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.
Monday, December 31, 2007
Contractor and Cable Company Held Responsible for Sub’s Negligence
By: Benjamin D. Kerr, Esquire bdk@muslaw.com
The August 4, 2006 decision, Rateau v. Comcast of Pa. II, Inc., from the Court of Common Pleas of Allegheny County, Pennsylvania, illuminates the previously undecided issue of whether the Commonwealth recognizes a cause of action against a contractor that negligently hires a sub-contractor who is a financially irresponsible. A financially irresponsible contractor is loosely defined as one who does not have adequate liability insurance or assets to compensate victims injured by its negligence.
In this case, the Rateau family ordered high-speed internet access from their cable provider, Comcast. To facilitate installation of the service, underground utility lines had to be laid on their property. Comcast contracted with a company named Conn-X to perform this work. Conn-X subcontracted the excavation portion of the work to a company named Wellhead. As Wellhead was performing the work, it struck a gas line and caused a leak.
At approximately this time, the Rateau children had arrived home from school. Though there was ample time to warn the children to get out of the house, proper steps were not taken to ensure that the children were evacuated. Tragically, the gas leak caused an explosion, which severely injured both children.
Wellhead was undercapitalized and did not carry liability insurance. As such, the plaintiffs brought suit against Conn-X and Comcast, both of whom had liability insurance. Conn-X and Comcast denied liability. Hence the main issue was whether the plaintiffs were permitted to proceed under the theory that Conn-X and Comcast negligently hired a subcontractor who was financially irresponsible.
The plaintiffs noted that under Section 411 of the Restatement (Second) of Torts “an employer is subject to liability for physical harm to third persons caused by his failure to exercise reasonable care to employ a competent and careful contractor.” The defendants argued that under Section 411, financial irresponsibility of a contractor is not a basis for finding negligent hiring.
The Court looked to a Third Circuit Court of Appeals opinion which addressed this same issue in Becker v. Interstate Properties. In Becker, the Third Circuit predicted that the New Jersey courts would hold that a contractor can be negligent for hiring a financially irresponsible subcontractor. As such, the Court held that employers can be responsible in certain instances for acts or omissions of independent contractors and that employers have an affirmative duty to ensure the financial fitness of their subcontractors. As such, the action was permitted to proceed against Conn-X and Comcast.
In light of this ruling, contractors should exercise care in selecting their subcontractors to ensure that the subcontractors are financially responsible.
For more information about a contractor’s potential liability for the subcontractors they hire, contact Benjamin D. Kerr at 412-456-2589 or e-mail him at bdk@muslaw.com.
The August 4, 2006 decision, Rateau v. Comcast of Pa. II, Inc., from the Court of Common Pleas of Allegheny County, Pennsylvania, illuminates the previously undecided issue of whether the Commonwealth recognizes a cause of action against a contractor that negligently hires a sub-contractor who is a financially irresponsible. A financially irresponsible contractor is loosely defined as one who does not have adequate liability insurance or assets to compensate victims injured by its negligence.
In this case, the Rateau family ordered high-speed internet access from their cable provider, Comcast. To facilitate installation of the service, underground utility lines had to be laid on their property. Comcast contracted with a company named Conn-X to perform this work. Conn-X subcontracted the excavation portion of the work to a company named Wellhead. As Wellhead was performing the work, it struck a gas line and caused a leak.
At approximately this time, the Rateau children had arrived home from school. Though there was ample time to warn the children to get out of the house, proper steps were not taken to ensure that the children were evacuated. Tragically, the gas leak caused an explosion, which severely injured both children.
Wellhead was undercapitalized and did not carry liability insurance. As such, the plaintiffs brought suit against Conn-X and Comcast, both of whom had liability insurance. Conn-X and Comcast denied liability. Hence the main issue was whether the plaintiffs were permitted to proceed under the theory that Conn-X and Comcast negligently hired a subcontractor who was financially irresponsible.
The plaintiffs noted that under Section 411 of the Restatement (Second) of Torts “an employer is subject to liability for physical harm to third persons caused by his failure to exercise reasonable care to employ a competent and careful contractor.” The defendants argued that under Section 411, financial irresponsibility of a contractor is not a basis for finding negligent hiring.
The Court looked to a Third Circuit Court of Appeals opinion which addressed this same issue in Becker v. Interstate Properties. In Becker, the Third Circuit predicted that the New Jersey courts would hold that a contractor can be negligent for hiring a financially irresponsible subcontractor. As such, the Court held that employers can be responsible in certain instances for acts or omissions of independent contractors and that employers have an affirmative duty to ensure the financial fitness of their subcontractors. As such, the action was permitted to proceed against Conn-X and Comcast.
In light of this ruling, contractors should exercise care in selecting their subcontractors to ensure that the subcontractors are financially responsible.
For more information about a contractor’s potential liability for the subcontractors they hire, contact Benjamin D. Kerr at 412-456-2589 or e-mail him at bdk@muslaw.com.
Waiver of Written Notice on Change Orders
By: Jason M. Yarbrough, Esquire jmy@muslaw.com
In LBL Systems (USA) Inc. v. APG America, Inc., the United States District Court for the Eastern District of Pennsylvania found that contractual notice requirements for change order requests (“CORs”) may be waived and modified by the conduct of the owner and contractor. The subcontract and the prime contract at issue required the subcontractor to present CORs within five business days of the date the subcontractor had knowledge of the basis for the CORs. However, because the Court found the owner and contractor had manifested an intent not to enforce the notice requirement through their conduct, they could not subsequently reject the CORs because they were untimely.
For more information, contact Jason M. Yarbrough at jmy@muslaw.com or 412-456-2592
In LBL Systems (USA) Inc. v. APG America, Inc., the United States District Court for the Eastern District of Pennsylvania found that contractual notice requirements for change order requests (“CORs”) may be waived and modified by the conduct of the owner and contractor. The subcontract and the prime contract at issue required the subcontractor to present CORs within five business days of the date the subcontractor had knowledge of the basis for the CORs. However, because the Court found the owner and contractor had manifested an intent not to enforce the notice requirement through their conduct, they could not subsequently reject the CORs because they were untimely.
For more information, contact Jason M. Yarbrough at jmy@muslaw.com or 412-456-2592
‘No Damage for Delays’ Provisions in Construction Contracts: Recent Pennsylvania Case Law
By: Benjamin D. Kerr, Esquire bdk@muslaw.com
In a recent case, Guy M. Cooper, Inc. v. East Penn School District, the Pennsylvania Commonwealth Court ruled that the trial court properly refused to set aside a “no damage for delay” clause when an owner does not guarantee or indemnify against loss occasioned by the delays of independent contractors which may be reasonably anticipated.
In Cooper, the school district awarded a general contractor the overall construction contract and a mechanical contractor the heating, ventilation and air-conditioning contract. Completion of the project was to occur within 460 days of the issuance of the notice to proceed; however, delays developed and substantial completion was delayed by 505 days beyond the original completion date.
The mechanical contractor’s complaint alleged that the school district breached its contract with the mechanical contractor by failing to see that construction proceeded without delay, and specifically that the school district failed to prevent delays by the general contractor.
The “no damage for delay” clause in the contract stated:
“[The School District] shall not be liable to contractor or any subcontractor for claims of damages of a monetary or any other nature caused by or arising out of delays contemplated or not contemplated at the signing of the contract. The sole remedy against [the School District] for delays shall be the allowance to claimant of additional time for completion of work.”
Though “no damage for delay” clauses are generally enforceable in Pennsylvania, prior cases have held that they may be unenforceable where there is a positive or affirmative interference by the owner with the contractor’s work or the owner fails to act on some essential matter necessary to the performance of the work. Similarly, an owner cannot insulate itself from a delay damage claim where it fails to perform an essential contractual duty.
Analyzing the contract language which imposed the duty of coordination and construction scheduling on the general contractor, the Commonwealth Court found no duty in the school district to oversee the construction schedule and held that reasonably anticipated delays by general contractors are covered by the “no damage for delay” clause.
For more information about this case or “no damage for delay” clauses, contact Benjamin D. Kerr at 412-456-2589 or bdk@muslaw.com
In a recent case, Guy M. Cooper, Inc. v. East Penn School District, the Pennsylvania Commonwealth Court ruled that the trial court properly refused to set aside a “no damage for delay” clause when an owner does not guarantee or indemnify against loss occasioned by the delays of independent contractors which may be reasonably anticipated.
In Cooper, the school district awarded a general contractor the overall construction contract and a mechanical contractor the heating, ventilation and air-conditioning contract. Completion of the project was to occur within 460 days of the issuance of the notice to proceed; however, delays developed and substantial completion was delayed by 505 days beyond the original completion date.
The mechanical contractor’s complaint alleged that the school district breached its contract with the mechanical contractor by failing to see that construction proceeded without delay, and specifically that the school district failed to prevent delays by the general contractor.
The “no damage for delay” clause in the contract stated:
“[The School District] shall not be liable to contractor or any subcontractor for claims of damages of a monetary or any other nature caused by or arising out of delays contemplated or not contemplated at the signing of the contract. The sole remedy against [the School District] for delays shall be the allowance to claimant of additional time for completion of work.”
Though “no damage for delay” clauses are generally enforceable in Pennsylvania, prior cases have held that they may be unenforceable where there is a positive or affirmative interference by the owner with the contractor’s work or the owner fails to act on some essential matter necessary to the performance of the work. Similarly, an owner cannot insulate itself from a delay damage claim where it fails to perform an essential contractual duty.
Analyzing the contract language which imposed the duty of coordination and construction scheduling on the general contractor, the Commonwealth Court found no duty in the school district to oversee the construction schedule and held that reasonably anticipated delays by general contractors are covered by the “no damage for delay” clause.
For more information about this case or “no damage for delay” clauses, contact Benjamin D. Kerr at 412-456-2589 or bdk@muslaw.com
Loss of Bonding Capacity as Basis for Injunction
By: Nicole H. King, Esquire nhk@muslaw.com
A recent ruling by the Pennsylvania Superior Court suggests that a subcontractor’s loss of bonding capacity could support an award of injunctive relief. In Greenmoor, Inc. v. Burchick Construction Company, Inc., decided on September 11, 2006, Greenmoor sought an injunction reinstating it to the renovation of the Moore Federal Building. Greenmoor had executed five contracts with the general, Burchick, to perform asbestos removal, but was fired after the conclusion of the first contract. In attempting to prove that it had suffered irreparable harm, one of the six elements of an injunction, Greenmoor offered evidence that after its termination, it could no longer obtain appropriate bonding for its future projects and Greenmoor actually prevailed in the trial court. Though the Superior Court ultimately denied Greenmoor’s claim and reversed the trial court, it did so because on this issue, Burchick offered contrary evidence that bonding was available to Greenmoor from a national provider. Accordingly, under this decision, a terminated contractor may be able to seek injunctive relief if it can prove that its termination was wrongful and its bonding capacity was irreparably damaged by the termination.
For more information on this case or other construction law issues, contact Nicole H. King at nhk@muslaw.com or call 412-456-2559.
A recent ruling by the Pennsylvania Superior Court suggests that a subcontractor’s loss of bonding capacity could support an award of injunctive relief. In Greenmoor, Inc. v. Burchick Construction Company, Inc., decided on September 11, 2006, Greenmoor sought an injunction reinstating it to the renovation of the Moore Federal Building. Greenmoor had executed five contracts with the general, Burchick, to perform asbestos removal, but was fired after the conclusion of the first contract. In attempting to prove that it had suffered irreparable harm, one of the six elements of an injunction, Greenmoor offered evidence that after its termination, it could no longer obtain appropriate bonding for its future projects and Greenmoor actually prevailed in the trial court. Though the Superior Court ultimately denied Greenmoor’s claim and reversed the trial court, it did so because on this issue, Burchick offered contrary evidence that bonding was available to Greenmoor from a national provider. Accordingly, under this decision, a terminated contractor may be able to seek injunctive relief if it can prove that its termination was wrongful and its bonding capacity was irreparably damaged by the termination.
For more information on this case or other construction law issues, contact Nicole H. King at nhk@muslaw.com or call 412-456-2559.
Partial Releases of Liens May Limit Claims
By: Nicole H. King, Esquire nhk@muslaw.com
Partial releases and waivers of liens have become commonplace as a requirement for subcontractor payment. A recent ruling in Philadelphia County imposed significant restrictions on a subcontractor’s ability to recover payment for delay and impact claims when such releases are signed.
In Kleinknecht Electric Co. v. Jeffrey M. Brown Associates, Inc. and Federal Insurance Company, Kleinknecht Electric entered into an electrical subcontract with Brown, the general contractor. The actual cost of work exceeded the original contract price, thus requiring Kleinknecht to submit change orders. Throughout the project, Brown required Kleinknecht to submit partial releases and/or waivers of liens as a pre‑condition to payment.
At the conclusion of the project, Kleinknecht filed suit against Brown and its surety, Federal Insurance Company, to recover payment for extra work performed by Kleinknecht. Kleinknecht also sought to recover money for an impact claim – valued at nearly $3,000,000 – that it had previously asserted against Brown in a change order.
Strictly construing the language in the partial release, the court held that Kleinknecht was barred from pursuing any claim – including its impact claim – that existed at the time it executed the partial release. The court reasoned that since Kleinknecht had previously asserted the claim in a change order, it was undoubtedly aware of the existence of its claim and had failed to reserve its rights or limit the terms of the release. Consequently, the court held that Kleinknecht was barred from pursuing its impact claim.
The court rejected Kleinknecht’s defenses of economic duress and unknown value. Specifically, the court held that Kleinknecht was aware, at the outset of the contract, that it would be required to sign partial releases. It did not matter if Kleinknecht needed the money to finish the project and therefore felt coerced to sign the partial releases. Similarly, the court rejected the notion that the unknown value of Kleinknecht’s impact claim preserved the claim. It did not matter that Kleinknecht could not have known the value of the claim until the conclusion of the project.
The court did note, however, that Kleinknecht could have preserved its claim by limiting the terms of the release or reserving its rights to bring a claim at a future date. Of course, whether a contractor will issue payment upon receipt of a qualified partial release is always an open question. In the meantime, however, contractors and subcontractors must consider the consequences of signing any partial release or waiver of liens without preserving existing claims. If the claim is reserved, there is a question of whether payment will be made. However, if the claim is not reserved, it could be waived.
For more information about the Kleinknecht case or construction law issues, contact Nicole H. King at 412-456-2559 or nhk@muslaw.com.
Partial releases and waivers of liens have become commonplace as a requirement for subcontractor payment. A recent ruling in Philadelphia County imposed significant restrictions on a subcontractor’s ability to recover payment for delay and impact claims when such releases are signed.
In Kleinknecht Electric Co. v. Jeffrey M. Brown Associates, Inc. and Federal Insurance Company, Kleinknecht Electric entered into an electrical subcontract with Brown, the general contractor. The actual cost of work exceeded the original contract price, thus requiring Kleinknecht to submit change orders. Throughout the project, Brown required Kleinknecht to submit partial releases and/or waivers of liens as a pre‑condition to payment.
At the conclusion of the project, Kleinknecht filed suit against Brown and its surety, Federal Insurance Company, to recover payment for extra work performed by Kleinknecht. Kleinknecht also sought to recover money for an impact claim – valued at nearly $3,000,000 – that it had previously asserted against Brown in a change order.
Strictly construing the language in the partial release, the court held that Kleinknecht was barred from pursuing any claim – including its impact claim – that existed at the time it executed the partial release. The court reasoned that since Kleinknecht had previously asserted the claim in a change order, it was undoubtedly aware of the existence of its claim and had failed to reserve its rights or limit the terms of the release. Consequently, the court held that Kleinknecht was barred from pursuing its impact claim.
The court rejected Kleinknecht’s defenses of economic duress and unknown value. Specifically, the court held that Kleinknecht was aware, at the outset of the contract, that it would be required to sign partial releases. It did not matter if Kleinknecht needed the money to finish the project and therefore felt coerced to sign the partial releases. Similarly, the court rejected the notion that the unknown value of Kleinknecht’s impact claim preserved the claim. It did not matter that Kleinknecht could not have known the value of the claim until the conclusion of the project.
The court did note, however, that Kleinknecht could have preserved its claim by limiting the terms of the release or reserving its rights to bring a claim at a future date. Of course, whether a contractor will issue payment upon receipt of a qualified partial release is always an open question. In the meantime, however, contractors and subcontractors must consider the consequences of signing any partial release or waiver of liens without preserving existing claims. If the claim is reserved, there is a question of whether payment will be made. However, if the claim is not reserved, it could be waived.
For more information about the Kleinknecht case or construction law issues, contact Nicole H. King at 412-456-2559 or nhk@muslaw.com.
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