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

Thanks for all inquiries and well wishes for our family.  Yesterday, my wife was released from the hospital after a prolonged two-week stay.  She has been ordered on bed rest for the near future, but we are on the road to recovery. 

All the emails and phone calls from my friends and colleagues ("Matt, what's going on?"  "Yo! Why have you not responded?"  "I hope your family is okay.")  illustrate a good lesson for construction projects:

Facts are important.

More appropriately, facts are really important!  I have found that a construction dispute with good facts and bad law can, nonetheless, result in a good outcome. Rarely, however, do you find that bad facts and good law will result in a good outcome. 

Since facts are so important, what can you do to develop and preserve the facts necessary to help you win your case?  Here are some tips:

1. Keep written records.  Although conditions in the field may constantly change, make sure you have a process in place to reduce to writing all pertinent facts that affect construction.  This may be a changed condition, interference by another party, unusually severe weather conditions, a change in material price, etc.  If you have a pertinent conversation by phone or in person, make sure you follow-up the conversation in writing.  I cannot tell you how many times I have heard, "Well, they agreed to the change order on the phone."
2. Record just the facts.  If you take the time to record the facts in writing, make sure you leave out all the informal language and other information that will make a good exhibit in litigation.  There is no need to tell the owner's representative that he is an idiot (...even if he is...) in a request for information.  There is no need to tell the contractor's project manager that he is incompetent (...even if he is...) in an email responding to the RFI.  Stick to the facts.
3. Organize your information.  Whether you keep hard-copy documents or you have incorporated the paperless project, make sure you take the time to use a folder structure system that organizes the information in a chronological manner.  This will help you (and your attorney) in the event a dispute arises.

Although this is my own personal opinion, remember that 90% of disputes are fact-driven ... which means that you need to get the facts right, reduce them to writing, and keep them organized.

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I received an alert from my friends at KraftCPAs yesterday with the following subject line: "How long should your keep you tax records?"

The post by Morganne Keel contains some very basic, succinct and easy-to-implement ideas for document retention of tax records, including the following:

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Individual taxpayers

Keep at least three years, but six year may be better.  The following records are commonly used to substantiate a taxpayer’s income and expense items:

• Form(s) W-2
  
• Form(s) 1099
  
• Form(s) K-1
  
• Bank and brokerage statements
  
• Canceled checks or other proof of payment of deductible expenses

At a minimum, the above tax records should be kept for a three-year period following the date that you file your return (or its due date, if later). However, the IRS’s time limit for initiating an audit on a return where income was grossly understated, yet no fraud was discovered, is six years. Therefore, retain the above documents for at least six years to better protect yourself in the event of an audit.

Pass-through business entities

If you are an owner in a subchapter S corporation, LLC, LLP, or a limited partnership, you should retain a copy of the annual Form K-1 for as long as you own an interest in the entity plus seven additional years. Also, keep any paperwork related to the sale or other disposition of your interest for at least seven years after the disposition.

Corporate income tax returns

It is highly advisable that you retain copies of all corporate tax returns indefinitely.

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For construction companies, I think Morganne is right on track for retention of tax records, particularly in this day and age of electronic storage.  It is not too difficult to maintain these types of documents indefinitely in the event of an audit.

In the construction industry, the next question becomes: How long do you keep project records?  Project documents, including the contract, change orders, correspondence, drawings, specifications, daily logs, field notes, monthly reports, schedules, etc., should be kept and stored for at least as long as the applicable statute of limitations or repose period for the state in which your project is located.  Here is a good explanation of a statutes of limitations and repose for construction defect claims and how it applies to disputes.  In short, if your particular jurisdiction has a 10-year statute of repose, then you should keep you records maintained for at least 11 years. 

Image: agrilifetoday

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Although I am out of town this week preparing for a trial, I promised a few attendees that I would share with them my webinar presentation last month.  If nothing else, the first slides are entertaining.  Let me know if you have any questions and I will chat with you on the other side.

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