Best Practices Construction Law : Construction Lawyer & Attorney : Matthew DeVries : Stites & Harbison Law Firm : Green Building & LEED Litigation

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

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

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

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

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

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

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

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

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

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

Image: Paul Garland

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Image: The West End

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Image: Orin Zebest

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

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

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

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

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

Question: What are some of your favorite construction stories?

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

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

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

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

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

  The courts generally fall into the following categories:

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

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

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

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