Does your construction company, architectural firm or development group have a Facebook fan page?  Are you worried about what advertising laws apply to a social media platforms?

The Federal Trade Commission has eliminated any question of whether liability can arise in connection with consumer endorsements for the obvious reason that consumers may rely on endorsements in making purchasing decisions.  Any third-party “claim” that a consumer derived some benefit from a product or service should meet false advertising standards, as with any other type of commercial advertising claim.  But what about when a company claims that a certain number of consumers “Like us on Facebook” – particularly where the company runs “like-gated” contests or giveaways (that require entrants to “like” a company as a condition to entry) that draw a large number of virtual “fans?”  

The tightening of endorsement regulations is reflected in the FTC’s revised Endorsement Guides issued in October 2009.  In 2010 and 2011, the FTC proved that it intends to enforce these more stringent guidelines by entering settlements with two companies who generated online “consumer endorsements” that were actually prepared and posted by affiliate marketers with financial ties to the sponsor.  See Legacy Learning Systems, Inc. File No. 102 3055 ($250,000 fine to settle charges that company deceptively advertised its products through online affiliate marketers who falsely posed and ordinary consumers or independent reviewers); Reverb Communications, Inc., C-4310( Aug. 26, 2010)(Challenging public relations agency hired by video game developers engaged in deceptive practices by having employees pose as consumers and post reviews on itunes.com web site). 

Now, in a case of first impression, the National Advertising Division of the Council of Better Business Bureaus has considered the Endorsement Guides in the context of social media promotions.  The NAD focused on what claims a company can make regarding the strength of its following on Facebook and other social media sites.  The NAD concluded that because of the various message that a “Facebook like” may convey to consumers, that "the overall message conveyed by Facebook ‘like’ or the total number of ‘likes’ on Facebook is one of general social endorsement."  However, the NAD warned that had the advertiser presented the number of Facebook “likes” in a false or misleading manner, the claim may not have withstood NAD scrutiny and recommended that the company clarify that the number of “likes” it claimed was actually an aggregate taken from the company’s various international Facebook sites.

Companies should treat social media advertising as they do traditional forms of advertising and review “like-gated” promotions for compliance with applicable advertising guidelines.  A copy of the FTC’s Advertising Guides are available on the FTC web site.

Today’s post is by fellow Stites attorney Amy Sullivan Cahill, whose practice focuses on trademark and copyright litigation, advertising review, and trade secrets litigation.

Words matter. Yesterday, the Supreme Court of Tennessee released its decision in a construction dispute between Ray Bell Construction Company and the Tennessee Department of Transportation.  Where the contractor won the first two rounds at the trial court and intermediate appellate court levels, TDOT prevailed in the final appeal.

The Dispute.  The primary issue in dispute was whether the completion date in the parties’ contract could be amended or moved to account for the impact of increased quantities and other delays.  TDOT argued that the completion date could be modified for purposes of the disincentive payment and liquidated damages, but under no circumstance could the date be modified for purposes of the incentive payment.  The contractor argued that the date could be modified for all purposes, including the incentive payment.  Ultimately, the claims commissioner awarded the contractor the $2.5 million early completion bonus, finding that the incentive date provision could be amended consistent with prior instances.

The Court of Appeals affirmed the claims commissioner’s finding that “a definite latent ambiguity exist[ed] for which parol evidence not only is admissible, but frankly, absolutely necessary in both understanding and deciding the issues in this case."  

In a short opinion [pdf], the Supreme Court reversed that finding and concluded that the contract language was plain and ambiguous.  When the contract language is unambiguous it is the duty of the courts to interpret the contract according to its plain terms. According to the Court,"TDOT’s refusal to extend the incentive date beyond December 15, 2006, was therefore consistent with the contract."

Lessons Learned.  The RBCC case is worthy for a number of reasons:

  1. The appellate court decisions provide a good overview of the public contracting claims process. Like many other jurisdictions, the Claims Commission in Tennessee resolves claims involving tax recovery, state employee workers’ compensation, negligence by state officials or agencies, and contract claims involving the State. The RBCC dispute went to trial before a claims commissioner and was appealed to the Court of Appeals and Supreme Court.
  2. The case summarizes the two sides to a contract interpretation question.  Like almost every construction dispute, the contract will determine the rights and obligations of the parties.  In this case, a $2.5 million early incentive payment was at stake and the decision turned on whether there was an ambiguity in the parties’ contact and what evidence could be used to resolve that ambiguity.  The Court of Appeals described in detail the ambiguity in the contract, where the Supreme Court found the contract unambiguous.
  3. The case involved a truly "interesting" factual story.  The dispute involved a multi-million dollar claim … design delays … easement delays … unexecuted change orders … quantity overruns …  contract ambiguities … a compelling letter by the state agency … a compelling letter by the federal agency … and much more.

It appears to be the end of the road for this claim.  Noticeably absent from the Supreme Court’s decision is any discussion of the circumstances leading up to this particular contract, which arguably formed the basis of the trial court’s initial decision and the intermediate appellate court’s decision.  The evidence included prior projects where the incentive date was allowed to be modified, as well as letters between TDOT and the Federal Highway allowing for a change to the incentive payment date.  The Supreme Court’s opinion was silent on these issues most likely because it found the contract to be without ambiguity.

[Note: I was involved in this case along with lead counsel Greg Cashion at the trial court and court of appeals, but I moved law firms to Stites & Harbison before the appeal had been taken to the Supreme Court.]

Image: Blue RidgeKittie

A few weeks ago I received my diploma in "moderating panels for non-profit groups that support research and education in real estate and urban land use" when I received call from Nashville ULI to moderate a local panel on the emerging trends in the real estate market.  Lucky me!  Lucky them!

This morning, ULI Nashville presented its highlighted event, "Real Estate Outlook 2012 featuring Emerging Trends in Real Estate."  ULI’s annual report, available for download, reflects the views of leading real estate executives from around the world who completed surveys or were interviewed as a part of the research process for the reports. Interviewees and survey participants represent a wide range of industry experts—investors, developers, property companies, lenders, brokers, and consultants.

This year, ULI Nashville was proud to host Dean Schwanke, Vice President and Executive Director, ULI Center for Capital Markets and Real Estate.  Dean oversees and coordinates ULI’s work on real estate finance and capital markets issues, including books, Emerging Trends reports, online content, continuing education programs and sessions at ULI meetings and conferences.  Among many other items, Dean highlighted two emerging trends for the new year:

  • For 2012, real estate investors must resign themselves to a "slowing, grind-it-out economic recovery following a period of mostly sporadic growth."  This is confined largely to a few real estate markets that offer the primary 24-hour transportation hubs with global access.
  • "Well-leased core real estate in leading markets will continue to produce solid single-digit, income-oriented returns." According to the report, more opportunistic investors will ratchet down forecasts – even projections of returns in the mid-teens appear to be a stretch as risk increases from questionable supply/demand fundamentals.

Local panel members included Bert Mathews of The Mathews Company and Charles Carlisle of Bristol Development Group. 

We all need to hear stories of determination, hope and recovery. It’s what the construction industry as a whole wants to see happen.  It’s what our economy needs to see happen.  It’s what local construction laborer Rodney Johnson embodies.

From our friends at Trojan Labor in Nashville, I wanted to share a great interview with one of their construction laborers.  Unemployed and wanting to make it on his own, Rodney left Florida over six months ago.  And here is what he had to say:

Trojan Labor Nashville: Rodney, how difficult was it to leave your home, family … friends?

Rodney Johnson: Really difficult. But I felt kept, like a house cat. I wanted to earn my own.

TLN: What did you do when you got to Nashville? Did you have a place to stay?

RJ: I had to stay at the mission. (Nashville Rescue Mission). It’s a good place to try to save your money until you get to the next level. I could walk from there to Trojan Labor every day.

TLN: I didn’t even know that it was walking distance.

RJ: Sure, I’d get some exercise.

TLN: What happened here at Trojan Labor?

RJ: I did all the paperwork and they didn’t treat me any different…me coming from the mission and all.

TLN: Did you work right away?

RJ: Yes, pretty much right away.

TLN: And was work available every day or was it sporadic?

RJ: I’d say most of the time I was working. There were probably a couple of days I didn’t work. Most of the time I was working.

TLN: That tells me you were here at 5 am every morning. And you’d already exercised…
(We laugh)

TLN: Tell us about the work you were sent out on. How was it on a day-to-day basis? How were treated. And no need to sugar-coat it.

RJ: I was treated real well but I have to admit, though, on the bigger jobs, when they saw me coming with my long hair (I’d cover it with a hat) but I think maybe they thought I wasn’t serious.

TLN: Because of the way you looked?

(He shows me dreadlocks that’ve been tucked into his jacket).

RJ: Yeah. But after a few days, they took me seriously.

TLN: Oh, so you were asked back?

RJ: Yeah, they give me a repeat. (For our readers: a "repeat ticket" is when an employer requests a particular worker back.)

TLN: That’s cool – so you were judged on your work, then, in the end?

RJ: You have to prove it to employers – that you’re really serious about working. They want to see that you will work, and that you’re willing to work, that you’re awake and alert and that you’re not coming to work with any other distraction. I think if your expectation for yourself is even higher than theirs… if you’re ‘stand up’, then they’ll respect you.

TLN: So no complaints?

RJ: Except getting lost in big buildings!  (laughter)

TLN: What are your hopes for the future, Rodney?

RJ: (big smile) I hope to be the leader of a reggae band.

TLN: Well, this is the right city for it! Wow. You sing?

RJ: Sing, write, play guitar, drums. I was born with some talents and I gotta keep the dream alive. Even though I work every day. I’m keeping the dream alive… that one day I might be able to do that.

TLN: Well, we hope so too! Thank you so much, Rodney, it’s our pleasure at Trojan Labor to know you.

___________________________________

Thanks to Jolene Dressel at Trojan Labor for sharing this interview and best wishes to Rodney and other laborers this holiday season.

Yesterday, the American Institute of Architects (AIA) and Associated Builders and Contractors (ABC) announced a marketing partnership agreement that is designed to foster a greater understanding and exchange of ideas between architects and contractors in the construction industry.

According to the press release, the industry giants have great things to say about each other.

  • AIA President, Clark Manus: “We see this as the beginning of a larger, long-term partnership between the AIA and ABC. For more than 100 years, the AIA has been committed to promoting greater industry collaboration among architects, owners and contractors, and this partnership is a natural extension of this work. ABC’s decision to partner with the AIA speaks volumes about the fair and balanced nature of AIA documents and their universal acceptance in the industry.”

  • ABC President and CEO Mike Bellaman: “We believe this partnership will provide value to ABC members by giving them access to more resources to help them  win work and deliver that work safely and productively.  This partnership will allow for a healthy exchange of best practices and enhance relationships between architects and contractors, as well as bring more value to the industry.”

As part of the partnership, AIA will provide a number of benefits to ABC members, including a discount on the purchase of any retail-priced AIA Contract Document software license and access to AIA Contract Documents education programs.

In my personal opinion, this will be an interesting partnership to watch.  You may already know about the growing acceptance of ConsensusDOCS, which includes 35 coalition partners including the Associated General Contractors, as well as ABC.  I look forward to seeing what comes out of the program discussions between AIA and ABC.

Image: Cara_VSAngel

Some of the most frequent public contracting questions I receive are about the permissible activities for joint ventures between a minority contractor and a larger contractor.  In February 2011, the Small Business Administration made some significant changes to its Section 8(a) business development program, which helped me answer many of those questions. 

One major category of the February 2011 changes involved joint ventures between SBA firms and larger companies.  Under the former SBA rules, a joint venture had a limited duration of existence and could not submit more than three offers as a joint venture over a two-year period.  Here are some key points about the new rules: 

  • The rules apply to all applications for the 8(a) business development program pending before SBA and all 8(a) procurement requirements accepted by SBA on or after March 14, 2011.
  • A specific joint venture can be awarded three contracts within a two year period. Additionally, the JV partners could form multiple joint venture entities, each of which could be awarded up to three contracts.
  • The 8(a) partner to the JV must perform at least 40% of the work performed by the JV, which replaces the “significant portion” language of the previous regulations. The rule differentiates between populated and unpopulated joint ventures and applies different requirements.

Additionally, as part of the annual review process, the Section 8(a) participant must demonstrate how it is meeting the "performance of work’ requirements for each contract that is performing as a joint venture.  Finally, at the completion of every 8(a) contract awarded to a JV, the participant must explain how "performance of work" requirements were met.

The new rules also included changes to the mentor/protege program.  To see the full overview of the rules, see the SBA’s website on the changes. 

According to the U.S. Environmental Protection Agency’s (EPA), healthcare facility owners and organizations spend nearly $8.8 billion on energy each year to meet patient needs.  To improve energy efficiency, thousands of hospitals rely on the EPA’s Energy Star tools to help track consumption and prioritize facilities for energy upgrades.

Last week, EPA released an important update to Energy Star’s national energy performance scale methodology for hospitals. The updated performance scale will help hospitals better assess their energy performance and make more informed financial and investment decisions in order to cut costs and improve their energy efficiency.

Energy Star’s Portfolio Manager, an online energy measurement and tracking tool, will now include the updated hospital methodology. Over 85 percent of the acute care hospital market has already benchmarked their energy use with Portfolio Manager, making it the most widely used tool of its kind in the healthcare market. The update to Portfolio Manager reflects new survey data provided by the American Society for Healthcare Engineering and the significant changes in how hospitals use energy in recent years.

The updated Energy Star national energy performance scale methodology for hospitals now includes data inputs for the number of MRI machines and personnel and adjustments to weather normalization to reflect the amount of energy used to cool the building. Additionally, the methodology’s 5 million square foot size cap was removed, allowing larger hospitals to take advantage of the online tool.

Happy Halloween!  Today’s post is not about ghosts, ghouls and goblins, though.  It’s much scarier … it’s about contractors, subcontractors and insurance companies! (….shriek….)

In a noteworthy decision issued last week, the Tennessee Supreme Court held that all construction contracts have an implied duty on part of the contractor to perform in a "careful, skillful, diligent, and workmanlike manner." In Federal Insurance Co. v. Winters (pdf), the court adopted the "majority rule" that has been applied in most states.  According to the court’s decision, a contractor may not escape liability for performing in a workmanlike manner by "delegating" or subcontracting the work to a subcontractor.

In Winters, the defendant contractor entered into a contract to replace a roof. When the newly installed roof developed leaks, the defendant hired an independent contractor to make the necessary repairs. While performing the work, the independent contractor caused a fire, resulting in an $871,069.73 insurance claim by the homeowners.

The plaintiff insurance company sued the defendant contractor in both tort and in contract based upon theories of subrogation (i.e., stepping in the shoes of the homeowner to assert their rights for claims arising out of the fire). The defendant contractor filed a motion for summary judgment, asserting that because he had subcontracted the work to another contractors, he could not be liable. The trial court granted the motion on both the negligence and breach of contract claims.

The Court of Appeals reversed, holding that the defendant had a non-delegable contractual duty to perform the roofing services in a careful, skillful, and workmanlike manner.  The Supreme Court granted the defendant’s application for permission to appeal. Because the defendant had an implied non-delegable duty to install the roof in a careful, skillful, diligent, and workmanlike manner, the Supreme Court affirmed the decision.

I told you it was scarier than ghosts, ghouls and goblins!  Is there a lesson to be learned?  Yes. Even the Supreme Court acknowledged that this rule was not a prohibition against delegation of construction contracts.  Rather, the lesson learned is that the delegation must be accompanied by a release from the other party.

Image: Pedro Ferreira

Earlier this week, I received an alert that "Five AIA Contract Documents are going green!" Developed using AIA’s flagship documents as a base, and incorporating concepts and model language from the AIA’s Guide for Sustainable Projects, the new documents address the unique roles, risks and opportunities encountered on sustainable design and construction projects.

 “The development of these new documents for sustainable projects is a natural next step following the release of the Guide for Sustainable Projects in the spring,” said Ken Cobleigh, Managing Director and Counsel for AIA Contract Documents Content. “We continue to see a demand for incorporating sustainable elements in projects. The AIA Contract Documents program continues to revise existing documents and develop new documents and guides, as necessary, to remain current with trends and changes in the industry and law.”

 The new AIA Contract Documents created for use on sustainable projects include:

  1. A101™-2007 SP, Standard Form of Agreement between Owner and Contractor, for use on a Sustainable Project where the basis of payment is a Stipulated Sum
  2. B101™-2007 SP, Standard Form of Agreement Between Owner and Architect, for use on a Sustainable Project
  3. A201™-2007 SP, General Conditions of the Contract for Construction, for use on a Sustainable Project
  4. C401™-2007 SP, Standard Form of Agreement Between Architect and Consultant, for use on a Sustainable Project
  5. A401™-2007 SP, Standard Form of Agreement Between Contractor and Subcontractor, for use on a Sustainable Project

AIA Document D503™-2011, Guide for Sustainable Projects (free download), including Agreement Amendments and Supplementary Conditions, was released by the AIA in May 2011. In the short time since it was released, over 4,000 users have downloaded the Guide. In addition to providing model language that may be used to amend or supplement AIA Contract Documents for design-bid-build projects, the Guide discusses the applicability of key concepts to other delivery models such as design-build, construction management and integrated project delivery.

Question: Have you compared the AIA green docs with the ones from ConsensusDOCS?

Image: wonderlane

Where is the best place to start when you have been away from work for a family emergency? Naturally, you go back to the basics.  In my next few posts, I review some of the "basic building block" or "essential" construction cases every contractor should know.  The first two are Spearin and Luria Bros.

U.S. v. Spearin, 248 U.S. 132 (1918) is perhaps the most important construction case to understand.  Spearin established the well-known rule that the government/owner impliedly warrants the adequacy of its design. The United States Supreme Court held that detailed specifications describing the work "imported a warranty that if the specifications were followed, the sewer would be adequate. This implied warranty is not overcome by general disclaimer clauses requiring the contractor to examine the site, check the plans and specifications and assume responsibility for the work until completed." The rule, which has come to be known as the Spearin Doctrine, has, for years, allowed contractors to recover the costs incurred as a result of defective design specifications provided by the government. The Spearin Doctrine has been adopted by most states.

In Luria Bros. v. U.S., 369 F.2d 701 (Ct. Cl. 1966), the Court of Claims further expanded upon the Spearin Doctrine to make clear that the government must timely correct its defective design. The court found that the original specifications were defective.  When defective specifications delay the work, the court reasoned, the contractor is entitled to recover damages. In Luria Bros., the government was dilatory in recognizing the need for and in revising defective specifications, which constituted a breach of the implied obligation not to do anything that would hinder or delay the contractor’s performance.

Both Spearin and Luria Bros. provide a legal assurance to contractors that additional costs may be recovered for defects in the design by the owner.

Next post features what is an equitable adjustment.

Image: stevendepolo