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

I am one of those people who tend to have a better understanding of something when I can "see" it.  So, when I came across this infographic by Rock & Dirt that highlights some of the top construction projects, I had to share it with you.

Question: Did they get it right?  Anything missing you would put in there?

• Email This
• Print
• Comments

When I moved to Nashville in 2006, I was sworn into the Tennessee bar by a local judge.  My partner happened to be in trial on a significant prevailing wage dispute, and the court a break during the trial to admit me to the practice of law in Tennessee.  Five minutes later, the parties returned to their week-long trial on the wage determination claims.

Fast forward seven years and a new bill is being sent to Governor Bill Haslam's desk that essentially repeals Tennessee's Prevailing Wage Act. Generally, present law requires that the prevailing wage rate, as determined by the prevailing wage commission, be paid to workers on all state construction projects, which are projects that are: (1) over $50,000 for any type of building and construction work for which state funds may be appropriated or expended; or (2) for construction work on any streets, highways or bridges.

HB-0850, which was signed by the House and Senate on April 15, 2013 and sent to the Governor for approval on April 16, 2013, revises the current law as follows:

• Eliminates the state mandate of specified wages on state building projects;
• Eliminates the mandatory certified payrolls and other paperwork submitted to the State of Tennessee on those projects;
• For projects other than highway construction, "no such contract may require the private employer to pay wages that exceed the Tennessee Occupational Wages Report" 

The bill, as amended, does not impact highway (TDOT) projects. This is due to the Federal mandate of requiring a specified wage rate on road work. If a state does not have a mandated state Prevailing Wage, then the Davis-Bacon rate would be adopted for the wages for workers on the highway project.

This bill comes on the heels of HB-0501, which became law on April 16, 2013, that prohibits local governments from mandating health insurance benefits, leave policies, hourly wage standards or prevailing wage standards that deviate from state statutorily imposed standards on private employers as either a condition of operating a business within the jurisdictional boundaries of the local government or when the local government contracts with a private employer.

Image: USDAgov

• Email This
• Print
• Comments (1)

Today's guest post is from my good friend and law partner, M. Clark Spoden, who focuses on business litigation, labor and employment, environmental and construction law. The full article was published by Construction Executive. You can contact Clark at clark.spoden@stites.com.

Last April, the U.S. Equal Employment Opportunity Commission (EEOC) issued its long-awaited Enforcement Guidance regarding employers’ use of arrest and conviction records in employment decisions.

The guidance highlights the EEOC’s approach to using criminal records in background checks. Because claims can be made against employers by people who are injured by negligently hired or retained employees, firms need to know the risks involved in hiring decisions. Construction companies must walk the tightrope between potential claims of race discrimination by their employees or the EEOC, and claims by victims of those employees’ actions.

Essentially, employers must take due care to avoid presenting unreasonable risks of injury to their employees (and others), while limiting the use of arrest or conviction records in their hiring decisions.

Negligent Hiring. Negligent hiring and retention is a civil action (called a tort) recognized across the United States. According to the 2002 case Morris v. JTM Materials, Inc., an employer may be liable for negligent hiring if it knowingly (or should have known by the exercise of reasonable care) hires an incompetent, unfit or dangerous employee—thereby creating a foreseeable unreasonable risk of harm to others. In other words, a victim of a tort may recover against an employer for negligent hiring, supervision or retention of an employee if the victim establishes the elements of a negligence claim. The victim must prove the employer knew the employee was unfit for the job and verify the victim’s injury was foreseeable (see Phipps v. Walker).

It’s difficult for an employer to dismiss a negligent hiring claim without a trial. Given the importance of foreseeability, records showing a person has been arrested or convicted of a similar offense in the past could be used by the victim as evidence that similar conduct was foreseeable and could have been prevented by the employer by not hiring (or retaining) the employee.

The EEOC’s View of Arrest and Conviction Records.  Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex or national origin. According to the EEOC, approximately 6.6 percent of all persons born in the United States in 2001 will serve time in state or federal prison during their lifetimes. Assuming current rates continue, approximately one in 17 Caucasian men will serve time in prison compared to approximately one in six Hispanic men and approximately one in three African-American men. In light of the relatively high conviction rates for African-American and Hispanic men, the EEOC issued its guidance in April 2012 as an update to prior policy statements about Title VII and using criminal records in employment decisions.

The EEOC found the reliability of criminal arrest and conviction records was suspect, stating “[A] significant number of state and federal criminal record databases included incomplete criminal records…[and] reports of documented criminal records may be inaccurate.” Additionally, the EEOC concluded third-party proprietary databases vary significantly in the types of information compiled and may be “missing certain types of disposition information, such as updated convictions, sealing or expungement orders or orders for entry into a diversion program.” In essence, “whether a covered employer’s reliance on a criminal record to deny employment violates Title VII depends on whether it is part of a claim of employment discrimination based on race, religion, sex or national origin.”

For the rest of the article, click here.

• Email This
• Print
• Comments

Last week, I saw a Tweet about the United States Supreme Court granting certiorari in a construction dispute ... and I thought it had to be an April Fools' Day joke because they never take construction cases on appeal.  So, being quite the jokester, I naturally sent out the following Tweet:

Well, the joke is on me.  Last week, the Supreme Court did announce that it will review the decision of the Fifth Circuit in In re Atl. Marine Const. Co., Inc., 701 F.3d 736 (5th Cir. 2012) cert. granted, 12-929, 2013 WL 1285318 (Apr. 1, 2013).  

Forum selection clause.  The dispute relates to a subcontract agreement on a construction project located on Fort Hood in Texas. When the general contractor did not pay the subcontractor for its work, the subcontractor filed a lawsuit in federal court in Texas based upon diversity jurisdiction (...that means a dispute in excess of $75k between parties of different states...).  The general contractor tried to get out of the lawsuit by filing a motion to dismiss or, in the alternative, tried to get the case transferred to Virginia based upon a forum selection clause in the subcontract agreement.

Trial court.  The trial judge did not dismiss the case, nor did he agree to transfer the case to Virginia.  The court held that the project, and most of the project documentation, was located in Texas.  In addition, almost all of the witnesses lived in Texas and would not be able to testify if the case were transferred to Virginia.

The appeals court.  The general contractor filed an appeal to the United States Court of Appeals for the Fifth Circuit in the form of what was called a Petition for Writ of Mandamus in an attempt to reverse the trial court's ruling. The Fifth Circuit denied the write petition.  All three panel members agreed that the standard for obtaining a writ of mandamus was not met in this case.  One of the panel members agreed with the result, but wrote a concurring opinion.  In its decision, the majority of the panel concluded that the parties’ contractual choice of forum was not the only factor which should be weighed in a motion to transfer venue.  Stated differently, the majority reasoned that the federal venue statutes, not the parties' contractual forum selection clause, should govern whether Texas, as opposed to Virginia, was a proper forum for the case to be heard.

The Supreme Court. SCOTUSblog has all of the key documents and dates leading up the to grant of certiorari by the Supreme Court.  The issues on appeal are: (1) Whether the Court’s decision in Stewart Organization, Inc. v. Ricoh Corp. changed the standard for enforcement of clauses that designate an alternative federal forum, limiting review of such clauses to a discretionary, balancing-of-conveniences analysis under 28 U.S.C. § 1404(a); and (2) whether district courts should allocate the burdens of proof among parties seeking to enforce or to avoid a forum-selection clause.  

Practical implications.  While the issues on appeal are not construction-specific, such as whether pay if paid clause is enforceable, the ultimate decision may affect the contracting process for parties to a construction project.  Until there is clear guidance from the Supreme Court on these issues, some things to think about include:

• Forum selection clauses are not always enforced as written. As demonstrated in the Atlantic Marine Construction case, a court may focus instead on whether the plaintiff's chosen venue is proper under the statutes. The court may not place the same emphasis on where the parties agreed to litigate.
• When drafting a forum selection clause, you should think about all the where questions: (a) where the parties are located; (b) where the witnesses reside; (c) where the contract negotiations took place; and (d) where the project is located.
• By requiring in your forum selection clause that disputes be resolved in state court, you can eliminate these issues from the dispute.  For example, the majority panel in Atlantic Marine Construction noted dismissal would have been proper had the parties' forum selection clause required the case to be heard only in state court since federal courts may only transfer cases to other federal court.  

When the Supreme Court issues its decision on the American Marine Construction case, there may be some additional practical implications.

• Email This
• Print
• Comments

You don't need to go any further than this Washington Post article to read about a delayed construction project where the parties are passing blame back and forth.  The Silver Spring Transit Center is reported to be two years behind schedule and suffering from significant cost increases. No doubt the dispute will be resolved in litigation.

When contractors seek additional compensation for changes, design impacts, differing site conditions or other delays, they must convince the court or arbitrator of the amount they are entitled to be paid. Whenever these types of events occur on larger construction projects, there is usually a substantial loss of productivity. Yet, contractors are frequently unable to prove the appropriate amount.

The Measured Mile. One way to determine lost productivity on a project is by determining what is known as the measured mile—comparing the cost of “impacted” work with the cost incurred to perform the same or similar “unimpacted” work. Because the measured-mile calculation is based on comparing the impacted productivity and unimpacted productivity on the same project, it tends to be a more accepted approach.

Steps that Contractors Need to Take. Applying the measured-mile method is straightforward if the contractor has kept productivity records by location, type of work and crews.

• Identify and define impacted work, including the unit of measurement for the work. For example, certain aggregates designated by the agency as suitable for use in the concrete may not be suitable if the soils contain large lumps of clay. Under this first step, you need to identify and define the impacted work.
• Identify the impacted and unimpacted time periods and project locations for the analysis. Selecting the unimpacted (measured-mile) period and location for the project is crucial. Most common tasks on projects are constructed in different phases, at different times of the year and in different locations. In the above example, the contractor may be able to achieve a higher production after identifying and approving a different aggregate source.
• Carefully evaluate the difference between the two periods and select a representative unimpacted period. Remember that a potential challenge to this approach is the argument that the unimpacted selection is not representative of the project. This is because the measured-mile method assumes all work on the project would have been performed at the same rate as the unimpacted segment.
• Locate and assemble job-cost records, identifying man-hours, equipment and material used. Record keeping is critical to calculate and support any lost productivity claim. On highway construction projects, contractors must break the work down by location, activity and event. Review records for all unimpacted work periods. Field personnel need to maintain the records in generally the same manner for the impacted and unimpacted sections.
• Determine whether you will base the analysis on hours or dollars. Then develop an unimpacted benchmark productivity measurement. An hourly approach is based on the total crew hours required to complete a work task, such as yards of concrete paved. A dollar approach is based on the total cost to complete a task, including labor costs, equipment rental, operating costs and consumables that vary with time. Once you have developed the productivity factors and crew costs, simply apply these to the impacted work quantities.

A measured mile analysis is generally acceptable if based on reasonably similar work to the impacted work. The impacted and unimpacted work activities should draw on labor from the same labor pool, and both activities should involve similar skill level and effort. Identify and evaluate possible other causes for the claimed impact. Be prepared to explain why these do not apply.

Image: thisisbossi

• Email This
• Print
• Comments

ConsensusDocs released the new ConsensusDocs 498 Design-Build Teaming Agreement today, which provides a standard contract for parties desiring to form a team for the purpose of submitting a bid on a design-build project.

According to the press release, this agreement has the flexibility for those team members to include design professionals, contractors and other parties. One team member serves the role as team leader for the purposes of compiling and submitting the proposal, as well as for negotiation of the owner agreement, if awarded. Critical issues such as confidentiality, withdrawal from the team, and document ownership are included. Post-award considerations are addressed and team members are required to enter good faith negotiations for a subsequent agreement covering the work (e.g., the ConsensusDocs 298 Joint Venture Agreement or the 299 Joint Venture LLC Operating Agreement).

My friend Kory George, was chair of the teaming working group, said the following: “With the industry’s increase in joint ventures and design-build construction, there is an increased need for a standard preliminary teaming agreement. The new document provides an excellent contractual foundation for all parties desiring to form a design-build teaming arrangement prior to forming a joint venture.”

The contract is specifically drafted to address the unique considerations of a design-build teaming arrangement. Similar to all ConsensusDocs standard contract documents, this agreement takes a project-first approach and promotes collaboration, communication and integration.

• Email This
• Print
• Comments

Lessons in leadership are just as applicable to running a business as they are to raising a family. That's why you should let your children play on fresh asphalt.  That's why you should bury sarcasm, yelling and bad attitudes.  And that is why you should make it a priority this weekend to have fun with your kids on St. Patrick's Day.

You may think this post is off topic, but it is directly on point.  You see, if the goal of parenting is to reach your children's heart, then you will not reach it by force, loud words, or through submission. You will reach it through a giggle or a smile. Businesses are the same way. In his book 1001 Ways to Energize Employees (affiliate link), Bob Nelson says that the “power of positive reinforcement” is common sense, but “not common practice in most organizations.” You need to find ways to connect with your group in a fun way, and the rewards will follow.

And now, here are a few ideas that you can do this weekend to have fun with your kids:

My four-year-old Jackson came running into our bedroom, yelling, "A leprechaun went pee in every toilet in the house!"  He could not stop giggling.   My two-year-old Mia was smiling ear year with a handful of jelly beans that no doubt the same leprechaun left for the kids on the stairs.

My six-year-old Faith and eight-year-old Addy couldn't stop laughing at the Lucky Charms that mysteriously appeared in their normal Frosted Mini Wheats cereal box.  (...Man, that little green guy must have been busy last night...)

The other kids were happy with green fruit kabobs and rainbox cupcakes!  Cupcakes for breakfast? Yes, it's okay to let kids be kids every now and then!

And finally, looks like the leprechaun left a snack for later in the day ... a bag of clouds, rainbows, and pots of gold (... marshmellows, jelly beans, and peanut butter cups...).

I hope you treat your employees and co-workers to a little fun today and your kids with a lot of fun this weekend.  Happy St. Patrick's Day.

• Email This
• Print
• Comments (1)

Labor and employment laws regularly intersect with the construction industry—whether you are dealing with employment issues such as the hiring and firing of employees, compliance with state and federal E-Verify requirements, or applicability of project labor agreements on a project. 

New Hires.  When you hire a new employee, you are well advised to properly document the process, as you may have certain reporting requirements depending on your construction project.  For example, did you know that you are required to complete and retain a Form I-9 for every employee you hire for employment in the United States?  The U.S. Citizenship & Immigration Services (USCIS) website lists the following exemptions: 

• Individuals hired on or before Nov. 6, 1986, who are continuing in their employment and have a reasonable expectation of employment at all times. Some limitations to this exception apply.) Also excepted are individuals hired for employment in the Commonwealth of the Northern Mariana Islands (CNMI) on or before Nov. 27, 2009.
• Individuals employed for casual domestic work in a private home on a sporadic, irregular or intermittent basis.
• Independent contractors or individuals providing labor to you who are employed by a contractor providing contract services (for example, employee leasing or temporary agencies).
  Individuals not physically working in the United States.

Even though independent contractors are exempt, federal law prohibits individuals or businesses from contracting with an independent contractor knowing that the independent contractor is not authorized to work in the United States.

The Breaking News.  On Friday, March 8, 2013, the USCIS released a new Employment Eligibility Verification Form I-9 (pdf) and all employers should begin to use the new form immediately for new hires. The form is now two pages, has expanded instructions, and includes new fields for an email address and phone number in Section 1.  You can read about the background to the new form (pdf) here. The old form can be used until May 7, 2013 and the new form can be used now, but will be mandatory after May 7, 2013.

Applicability to construction industry.  If you are a contractor or subcontractor and use E-Verify, then you can still require identification of an applicant's social security number.  The new instructions make clear that identifying a social security number for Section 1 purposes remains voluntary, unless the employer is enrolled in E-Verify.

Image: Will Merydith

• Email This
• Print
• Comments

No doubt you have heard, read or seen reports about the sequestration process.  As part of the Budget Control Act of 2011, Congress passed and President Obama signed into law an automatic, indiscriminate process of across-the-board budget cuts called sequestration. Earlier this week, the Washington Post had a great blog post called The Sequestration: Absolutely everything you could possibly need to know, in one FAQ.  There is a lot of doom and gloom.

Will the construction industry be affected by sequestration?  Last December, the Associated General Contractors of American (AGC)  released a report called Sequestration and Its Possible Impacts on Construction (pdf). According to the Report, the sequestration process directly reduces many federal construction investment accounts...which has a direct affect on the livelihood of both existing and planned projects.  In a recent update about What Contractors Should Know, AGC estimates that as much as $4 billion in federal construction funding could be cut during the next seven months.

What contractors are affected? Since we are dealing with federal funding, contractors who work on public projects at all levels could be affected.  First, contractors who work directly with federal agencies could experience the greatest impact.  For example, with agency cuts will come employee furloughs that could affect the work by contracting officers and other acquisition personnel.  Also, there will likely be requests by the agencies for contractors to hold over their bids for a period of time.  Finally, there will likely be terminations and suspensions of existing contracts where appropriate.

Next, contractors who work with state and local governments on projects that involve federal monies may also experience issues resulting from sequestration.  Again, the primary areas will be delays in funding, processing and review by federal employees involved in those local projects, and an overall decrease in funds available. 

What can contractors do to preserve claims?  If an agency or local government issues a notice of suspension or termination for convenience, then the first place you need to go is your contract.  Ultimately, you may need to challenge the basis for the suspension or termination, which will largely depend on the facts of the case.  If sequestration is alleged by the government to be the basis of the suspension or termination, then the question will turn on whether that event creates liability for the government.

Communication throughout this process is key.  When you receive any notice from the contracting officer or government representative, make sure you respond quickly.  In your response, make sure that you provide notice of claims and reserve all rights.  It is important that you are working closely with your scheduling team to document the status of work in place and time for completion.  You will need to use this information for identifying and proving any delays as a result of the suspension or termination.

Image: I'ennui d'ennui

• Email This
• Print
• Comments

Given the increase of today's mobile technologies available on the construction site ... from smart phones, to iPads and tablets, to electronic drawings and specifications ... there are going to be new disputes involving those technologies.

In particular, I think we are going to find an increase in disputes when it comes to the use of emails as a means of communication among project members.  First, email communications tend to be sent "off the cuff" without creating a draft of the communication that can be reviewed by team members.  In addition, you may not have the accurate contract provisions in front of you when you are sending an email from the project site, so your communication may not include the appropriate contract references that you need to support your position or claim.  Finally, email communications simply tend to be more informal and can lead to "miscommunications" among the project team members.

Notwithstanding these potential problems, people continue to use email without having a full understanding of the risks involved.  For example, did you know that your email communications can be used to establish an enforceable contract, change order, or settlement?  In Tennessee, there is the Uniform Electronic Transactions Act (UETA) that applies to electronic records and electronic signatures relating to a transaction. The statute expressly states that:

1. A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.
2. A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.
3. If a law requires a record to be in writing, an electronic record satisfies the law.
4. If a law requires a signature, an electronic signature satisfies the law.

The UETA was recently relied upon by an appellate court in Tennessee, Waddle v. Elrod, where the parties had reached a settlement agreement through the email communications of the attorneys. Although one party later attempted to renege on the settlement agreement, the court found that the emails by counsel constituted a valid contract.

Question: Do you have a computer use policy for your project managers? Are you training your construction teams on the use of emails?

Image: Sean MacEntee

• Email This
• Print
• Comments

No doubt you have read about or seen reports of a gas explosion at JJ's Restaurant in Kansas City last night. The fire department does not suspect any foul play in the incident.  According to Missouri Gas Energy, "Early indications are that a contractor doing underground work struck a natural gas line, but the investigation continues."

While the explosion in Kansas does not appear to have involved an accident at a construction site, early reports do indicate that the cause may have been a contractor performing underground work that struck a gas line. In any event, there are some lessons to learn when investigating or handling an accident on a construction site.  These include:

• Prepare before the accident. It is important to prepare before the accident by having a checklist or best practices protocol to follow if an accident should occur.  This should include identifying chain of command for notice purposes, identifying internal investigation team members, identifying who will be a company spokesperson, and identifying your risk management team (insurance and legal).
• Act diligently when an accident occurs.  Don't waste all that preparation time before the accident and then not follow your protocol.  Make sure medical issues are resolved immediately and lock down the site for evidence preservation.  Make a list of all witnesses. Photograph and video the conditions.
• Organize post-accident activities.  There may be contractual obligations, regulatory requirements and public relation issues that will come after the accident occurs.  Make sure that you review your contract to comply with any notice requirements that may need to be given.  If OSHA becomes involved in the workplace accident, then prepare for the investigation with your safety team and risk management team.
• Manage the accident documents.  While on the job site, an investigator may ask to see certain records such as the OSHA 300 logs, safety manuals, first aid / medical records, training records, safety meeting minutes, inspection records, and accident reports. In order to keep track of what has been requested and provided to the investigator, make a list of all requested documents and keep a transmittal log of how various documents were transmitted.
• Understand privileges.  Please note that accident reports should be reviewed by your attorney prior to production to any investigator.  Accident reports should be limited to the facts and should not contain any speculative theories or guesses as to why an accident occurred. If your attorney has directed the preparation of the accident report, that report is privileged and should not be produced to the inspector.

Most construction companies, at some point in their life, will experience a job site accident. It is important for your company to have a plan in place for the day.  What lessons learned can you share?

• Email This
• Print
• Comments

"There is an undeniable need for logical, factually supportable and credible evidence to assist in calculating delay, time extensions, concurrency and compensability as well as liquidated damages and actual damages."  Don Gavin & Robert D'Onofrio (Oct 2012)

It almost goes without saying that if you have to pursue or defend a delay claim, you are going to need some evidence (whether by expert or otherwise) to establish or to challenge entitlement to the damages sought.  And we all know that there can be different routes to the same goal.  However, the different methods of schedule analysis can lead to varying results.  So, which method is correct?

In a great Construction Law International article by my friends Don and Rob, the authors suggest a series of best practices that should improve on the reliability of schedule analysis and increase its acceptability in the industry.  According to the article, there are eight guidelines that any schedule delay analysis comply with, including:

1. Compare the planned work before and after each delay. Practically, this means that you should compare the plan to perform the remaining work before each delay and the plan to perform the remaining work after that delay, which will require a review of the schedule updates during the project.  This will also involve looking at the estimated impact, as well as the actual impact, of the delay.
2. Identify the critical delays. Generally, the delay must affect the critical path of the work to be compensable.  If the delay absorbs the "float" in the schedule, then it is not compensable.  According to the authors, "If an activity does not have any float, by definition it is critical as it would impact the required contract completion date."
3. Evaluate the delays in both a chronological order and a cumulative manner.  If you do not look at the delays in sequence, it can "mask" what actually occurred on the project. 
4. Adjust the completion date to reflect excusable delay as it occurs.  This will assist in finding the actual float values and determining which activities are actually critical at any point during the project timeline.
5. Include accurate as-built information.  Again, it is important analyze the actual progress of construction, which can best be achieved through accurate as-built data.
6. Minimize projected future delays.  If you include projected future delays in the schedule, they should be minimized because projected delays can alter float calculations and possibly change which activities are critical. 
7. Correct any logic flaws.  If you correct any logic flaws found in the schedule, make sure to document and explain the changes at the time they are made.  Understand that judges and arbitrators can be skeptical when substantial changes are made after construction is complete.
8. Tie causation to each delay.  Ultimately, you will have to show whether the delay is non-excusable, excusable/compensable, or excusable/non-compensable. 

Using these guidelines, any contractor can begin to evaluate and prepare a potential delay claim as the conditions on project causing the delay occur.  If the claim turns to a dispute, you will have done a significant amount of preliminary work that an attorney and/or consultant will need to assist you in the claim. 

Question: What other best practices can you identify for putting together a delay claim?

• Email This
• Print
• Comments

Yes, there are limits to what parties can include in a construction contract.  For example, many states like Tennessee have choice of law and venue statutes that make it unlawful to include a provision in a contract requiring the substantive laws of another state or the venue of litigation/arbitration in another state for real estate improvement projects that are located in Tennessee.  Other states like Maryland prohibit lien waivers in executory construction contracts.

Recently, the Supreme Court of Nevada held that a general indemnification agreement was void and unenforceable based upon the purposes and intended effects of the Americans with Disabilities Act.  In Rolf Jensen & Associates v. Eighth Judicial District Court of Nevada, the design contract included an indemnification provision where the design professionals agreed to indemnify the project owner for "any damages arising from any act, omission, or willful misconduct." 

The Facts.  The owner of the Mandalay Bay Resort contracted with Rolf Jensen on the expansion project to provide certain consulting services involving ADA compliance.  Following completion of the project, the Department of Justice investigated certain violations related to lack of handicap accessibility at the property.  The owner estimated that it would take approximately $20 million to bring the resort into compliance.  The owner sued Rolf Jensen under the indemnification provisions to recover the costs of the repair work.

The Holding.  The procedural aspects of the court's decision are tricky, but in the end the decision was clear: "We conclude that Mandalay's state law claims for indemnification pose an obstacle to the objectives of the ADA and therefore are preempted."  Ultimately, the court concluded that allowing the indemnification claims would weaken an owner’s incentive to prevent violations of the ADA, which would conflict with the purpose and intended effects of the statute.. “Simply put, such claims would allow owners to contractually maneuver themselves into a position where, in essence, they can ignore their nondelegable responsibilities under the ADA.”

An Observation.  While the Rolf Jensen decision appears to undermine parties' freedom to contract, there have always been limitations on those freedoms.  Perhaps the question in this case stems from the lack of a clear prohibition against waiver of the ADA in contracts.  Perhaps this was simply an example where public policy trumps freedom to contract.  I think one of the real lessons is to make sure to review your construction contracts to make sure the agreement complies with the applicable state and federal law.

Question: Have you read the decision?  What are your thoughts?

• Email This
• Print
• Comments

Yesterday, I received an email alert from the American Arbitration Association announcing ClauseBuilder, an on-line arbitration and mediation tool that assists individuals and organizations in drafting arbitration and mediation agreements. According to the alert, ClauseBuilder is the "first tool of its kind to be offered by an Alternative Dispute Resolution (ADR) service provider."

The new tool provides parties with the AAA’s standard arbitration agreement, in addition to an array of options parties may consider when crafting customized ADR clauses, including specifying:

• the number of arbitrators;
• arbitrator qualifications;
• locale provisions;
• governing law;
• the duration of arbitration proceedings; and
• whether to use arbitration, mediation, or both.

This morning, I took ClauseBuilder for a spin.  Below I describe the process of creating an arbitration clause for an existing dispute, as well as my thoughts about the usefulness of the platform:

1. Industry Application.  There is no current option for construction contract, and AAA readily admits that ClauseBuilder only deals with commercial arbitration contracts at this time. I look forward to seeing how the application integrates construction and international contracts.
2. Timing of Dispute.  After selecting the type of dispute, you are asked to select whether the arbitration clause is for a "Future" dispute or an "Existing" dispute.  I appreciate this option because there will be times that parties will agree to arbitration, although there is no dispute provision in their contract or in the absence of a contract.  The "Existing" dispute option allows you to quickly create an arbitration agreement to allow the parties to proceed with ADR.
3. Standard versus Tailored.  After selecting the timing of the dispute, ClauseBuilder allows you to simply use the standard clause or choose optional clause provisions.  Currently, the standard clause reads: "We, the undersigned parties, hereby agree to submit to arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules the following controversy: __________________________. We further agree that a judgment of any court having jurisdiction may be entered upon the award."  If you choose "optional clause provisions" then you will have the option of selecting: (a) the number of arbitrators; (b) arbitrator qualifications; (c) location of proceedings; (d) governing law; (e) extent of discovery; (f) extent of oral evidence and argument; (g) duration of proceedings; (h) types of damages or remedies; (i) attorneys fees and costs; and (j) whether a reasoned opinion is to be given with the award. There are other options such as confidentiality provisions, non-payment of arbitration fees, and appeal rights that the parties may agree upon.
4. Review the Clause.  At the end of the process, you have an opportunity to review the clause online, download it as a text file, or print it.  If you want to save the clause for future use through the ClauseBuilder website, you will need to use your login information.  When I chose to "download" the clause, it immediately opened in MicrosoftWord and I was able to make any additional edits and finalize the provision.

In the end, I think this is a good resource for outlining some of the alternative dispute resolution options for either an existing or future dispute.  It is not enough for me to simply take the "test version" that I just drafted and update for future use on my own computer because there are so many options available, depending on the parties, the dispute, the amount in controversy, etc. (...you get the picture...).  I definitely would return to ClauseBuilder to review some of these many options. I will be interested to see what additional information will become available with the construction and international versions.

• Email This
• Print
• Comments