The News Tribune reported this morning about a local machinist in Tacoma, Washington who was "worried he might be put out of business by an unexpected find on the site of his soon-to-be-built shop."  Construction workers were moving dirt and clearing the site when they found a bone sticking out of a chunk of concrete.  Ever happened on one of your sites?  

If you find bones or other archeological artifacts during excavation and construction, here are a few tips on what you should do:

  • Stop work.  Many contract documents, including the AIA 201 (2007), require the contractor to "immediately suspend" the operations upon the discovery of human remains or other archeological findings.  Even if your contract does not address this situation, you should stop work to properly analyze the situation.
  • Call others.  This includes the owner, the architect/engineer of record, and local police.  Check your state’s law to see whether you have an obligation to notify any other public authority, such as Tennessee Code section 11-6-107, which requires you to notify the coroner or medical examiner upon the discovery of human remains during construction. 
  • Assess options.  Depending on your jurisdiction, you may be required to rebury the remains pursuant to a local statute.  For example, if you have excavated a cemetery or other historical burial site, you will be required to rebury the remains by using either a funeral home or an archeological group. 
  • Preserve claims.  As always, the parties’ contract should address risks such as "bones" found on the construction site.  Generally, the owner of the site is required to take action to continue the work and resolve the problem.  The contractor may be entitled to additional time and money for the impact of the discovery and remediation efforts.
In the situation above, the police and coroner’s officials determined the bone belonged to an animal and the property owner was cleared to continue excavation at the site.

Image: Hyoung Chang

 

Some court decisions provide little instruction for future disputes.  Other court decisions give you a great road map for analyzing your claims.  Every now and then you find a decision where the court is split and you wonder which side is right, such as the opinion in Davis v. McGuigan (pdf), issued by the Supreme Court Tennessee on October 26, 2010.

A husband and wife alleged that the appraiser, who was hired by the bank financing the husband and wife’s home construction, recklessly overestimated the value of their proposed construction and that they reasonably relied on the appraisal value to their detriment. The intermediary appellate court affirmed the trial court’s ruling, holding that an appraisal is an "opinion" that cannot form the basis for a fraudulent misrepresentation claim. 

In the (3-2) opinion by the Supreme Court of Tennessee, the majority held that an "opinion" can form the basis of a fraudulent misrepresentation claim. The majority also concluded that genuine issues of material fact precluded summary judgment as to the husband and wife’s claims against the appraiser.  The dissent reached a different conclusion as to the facts of the case: "Even though an opinion can provide the basis for a fraudulent misrepresentation claim, the undisputed facts in this record, and the inferences reasonably drawn from these facts, support only the following conclusions."

The opinion in Davis is 32 pages with both the majority and dissent opinions.  The majority opinion provides a good road map for what elements are required to prove an intentional misrepresentation claim, including an analysis of each element and the applicable factual allegations.  The dissent opinion provides a good road map of proof required to establish summary judgment and to shift the burden of production to the non-moving party.

If you are a legal practitioner, the Davis decision is worthy of a read (although it may take you some time to fully digest the two opinions).  If you are an owner, developer, seller or appraiser, be warned that opinions may be used to establish an intentional misrepresentation claim.

In Kampert v. Valley Farmer Cooperative (pdf), an opinion issued on October 19, 2010, the Tennessee Court of Appeals validated a forum selection clause in a construction contract that specified venue in a county other than where the property was located. 

The primary issue in dispute was whether the proper venue in a case involving the breach of construction contract lawsuit should be the county named in the forum selection clause of the contract, or in the county where the construction project and land was located. 

In Kampert, the owner entered into an agreement with the contractor to construct an operational dairy facility on the Kamperts’ farm, including barns, sheds, and milking facilities. The contract contained a forum selection clause requiring that "venue for any litigation shall lie in the Circuit or Chancery Court for McMinn County, Tennessee.”

Following disputes between the parties, the owner filed a lawsuit in Giles County (where the property was located) for breach of contract, negligence, civil fraud, intentional infliction of emotional distress, and violation of the Tennessee Consumer Protection Act. The trial court denied the motion to dismiss for improper venue, holding that the property was located in Giles County and, thus, venue was proper.  Although this may seem to be a straight-forward analysis, the opinion contained some noteworthy points.

First, the venue issue must have been important to Tennessee jurisprudence because the Court of Appeals granted an "extraordinary appeal" under Rule 10.  The trial court concluded that the claim involved injury to land, which required that suit be brought in the county where the project was located.  The contractor filed a request for an interlocutory appeal, which the trial court denied. The appellate court granted the motion for extraordinary appeal, perhaps because the case addressed an ambiguous area of law or involved important legal issues.

Second, breach of construction contracts do not necessarily invoke a "local action involving land."  The appellate court noted the distinction between causes of action that are transitory versus local.  A transitory action is based on a cause of action of a type that can arise anywhere, whereas a local action can only arise in the particular county because the injury is tied to that locality.  Here, a breach of construction contract would be transitory, but an injury to property claim would be local.

Third, venue provisions and forum selection clauses are valid and enforceable.  Notably, the appellate court made a distinction between injury to existing buildings and injury to new buildings: 

In contrast, the alleged negligence in the present case involved faulty construction of new buildings on the plaintiffs’ land.  If we were to hold this to be a local action, it would effectively make all actions on construction contracts local, and it would render void any forum selection clause in a construction contract that designates venue in a county other than the one where the construction takes place.

The court found statutory support for its conclusion that contractual venue provisions are valid under Tennessee Code Section 66-11-208.

It is suggested that the dispute is resolved "for now" because it may be appealed to the Tennessee Supreme Court.  An interesting legal issue is the Court of Appeals’ reliance on the statutory provisions of section 66-11-208, which address venue in cases involving real property. 

Subsection 208(a) provides that a contract requiring application of the laws of another state or requiring resolution of disputes in another state involving improvement of property in this state is void and unenforceable.  Subsection 208(b) provides that for projects partially located in Tennessee and partially located in another state, venue can be in any state in which part of the property is located. 

Although the provision expressly applies to multiple state disputes, the appellate court in Kampert concluded (perhaps correctly, perhaps incorrectly) that the provision applied to venue challenges involving two counties in Tennessee.  The "Supremes" may be asked to weigh in on the subject.  For now, contractual provisions calling for venue in one county involving construction projects in another county are valid.

There’s a time in every blogger’s life where you simply have to grab your login information by the boot straps, step up to the blogosphere plate, and give a shout-out to another organization’s event, such as: 

The Tennessee Builders’ Ball brings together industry organizations to solidify support of the designs, Real Estate and Construction Industries, all while raising funds for the ACE Mentor Program of Tennessee.  If you are not signed up or if you have any questions, please send Kelly Dando an email.

In addition to supporting a great cause, the event is a great opportunity to network with other players in the construction and real estate development industries.  Here is a list of participants signed up so far:

RC Mathews * Stites & Harbison PLLC * MJ Harris * Gresham, Smith and Partners * Rock City Construction Co., Inc. * Lewis King Krieg & Waldrop, P.C. * AGC of TN, Middle TN Branch * AGC of East TN * Crowe Horwath LLP * Skanska * The Parent Company * PBG Builders, Inc. * RJ Griffin & Company * Orion Building Corporation * URS * PSI * Thomas, Miller & Partners, PLLC * Tuck-Hinton Architects * Burns Cooley Dennis Inc. * T. W. Frierson Contractor, Inc. * Barge Waggoner Sumner & Cannon * Earl Swensson Associates * supportive desiGN llc * MCDR Construction, LLC * Heery International * Reynolds & Reynolds Janitorial Services, Inc. * DevMar Products, LLC * Builders Exchange of Tennessee * WASCO INCORPORATED * HCA * Vanderbilt University * J&S Construction * ACE Mentor Program of America * Design & Survey Concepts, LLC * Balfour Beatty Construction * TN AGC CompTrust

Are you going to be added to this list? 

In a new federal report released last week entitled "An Economic Analysis of Infrastructure Investment"(pdf), the Department of the Treasury, Council of Economic Advisers outlined why now is an optimal time to increase investment in transportation infrastructure.

The short twenty-five page report is, according to AGC, "a sobering reminder of the tremendous economic costs of years of under investment in the nation’s transportation infrastructure." Some of these sobering facts include:

  • America ranks 25 out of 32 OECD nations when asked about public satisfaction with the public transit systems in the world
  • America ranks 17 out of 32 with respect to satisfaction with our roads and highways
  • Almost 19 out of 20 Americans are concerned about America’s infrastructure
  • 84% of Americans support greater investment to address infrastructure problems

But the report is more than just an analysis of public support for infrastructure investment. The report notes that the United States is investing less in infrastructure than other nations. Significantly, we spend approximately 2% of GDP on infrastructure, a 50% decline from 1960. Other nations such as China and Europe, by contrast, spend close to 9% of GDP on infrastructure.

According to the report, now is the time to increase the nation’s investment in transportation infrastructure based upon the economic impact of transportation investment (or under investment as the case may be) as indicated. 

So long as the Administration is committed to making a significant investment in rebuilding the nation’s infrastructure, there is good reason to support a plan recommending more investment.  There are plenty of critics, as noted in this feature by Atlantic Wire, questioning: Is Now the Time For  an Infrastructure Overhaul?   However, in the end, the debate is largely a political one … and commentary will remain just that … commentary. 

Image: squeaks2569 on Flickr

Bill Ferrell is a fellow colleague who practices intellectual property law.  Recently, Bill wrote an article on what you can do to protect your intellectual property. As I reviewed this list of recommendations, I began to appreciate the intersection between construction law and intellectual property law.  

You see, the economic realities currently faced by the construction industry require streamlined designs, new systems, and innovative materials.  As new products, methods, and designs emerge, they need to be protected through copyrighted drawings, trademarks, patents, trade secrets or other means.

Based up some of Bill’s tips and my own comments, here’s what you can do to protect your intellectual property and prevent infringement or misuse:

  1. Iden­tify your intel­lec­tual prop­erty. The first step to pre­vent­ing infringe­ment is to iden­tify what types of intel­lec­tual prop­erty your com­pany pos­sesses. Many items con­sid­ered an expense can be con­verted into IP assets. Adver­tis­ing, train­ing mate­ri­als, instruc­tion man­u­als and com­puter pro­grams are com­monly over­looked as IP.  In the construction industry, IP can also include designs and methods of construction. 
  2. Pro­tect your intel­lec­tual prop­erty. Deter­mine whether you should pro­tect your assets with U.S. and/or for­eign patents, trade­marks or copy­rights. In many instances, reg­is­tra­tion of IP is the only means of enforc­ing your rights. Since reg­is­tra­tion of intel­lec­tual prop­erty can be expen­sive, care­fully select what to pro­tect.
  3. Choose busi­ness asso­ciates wisely. Thor­oughly inves­ti­gate any busi­ness asso­ciates. Con­firm that rel­e­vant con­tracts con­tain pro­vi­sions for pro­tect­ing your intel­lec­tual prop­erty. If out­sourc­ing man­u­fac­tur­ing to other coun­tries or working with foreign partners, con­sider split­ting man­u­fac­tur­ing between var­i­ous vendors to pre­vent any one vendor from learn­ing every­thing about your product.
  4. Mon­i­tor your intel­lec­tual prop­erty. Insti­tute a pol­icy under which the rel­e­vant com­merce streams are mon­i­tored for infring­ing goods or services.
  5. Vig­or­ously pro­tect your intel­lec­tual prop­erty. Vig­or­ously enforc­ing rights not only stops infringe­ment but also deters would-be infringers. Although it can be dif­fi­cult to get for­eign infringers into a U.S. court, intel­lec­tual prop­erty laws may allow enforce­ment against the domes­tic sub­sidiaries or dis­trib­u­tors of the infring­ing com­pany and the pur­chaser of the infring­ing goods. If there is a copyright or trademark infringement, you may seek an injunction, damages, and attorney’s fees.

Still not convinced about the intersection between construction law and intellectual property law? Consider some of the following examples:

  • You may need to exchange certain IP as part of forming a joint venture to pursue a construction job … how do you protect that exchange of information?
  • Suppose you want to advertise as being the best green-building contractor in the area … what kind of slogans can you use?
  • Your information technology assistant re-tools your scheduling software to interact with your cost reporting system … have you violated any license use restrictions? 

 

Two weeks ago I attended the Mobile Healthcare Technology Summit sponsored by Smith Seckman Reid, Inc.  in Nashville, Tennessee.  The healthcare industry is one of the most regulated ones in the nation, which can present some special challenges for design and construction. 

Although the summit focused on mobile technologies in the healthcare industry, I walked away with a number of construction and design lessons when dealing with either new construction or renovation projects involving hospitals or other medical care facilities:

  1. It is imperative to get your information technology team at the design table.  It is no secret that technology changes on a regular basis … Just check how much your laptop is worth two months after you purchase a new one!  In the healthcare industry, the available technology can radically change from the time the design is finished to the time of substantial completion of the construction or renovation.  By bringing the IT folks to the design table, you can begin to prepare for many of the changes in technology.
  2. It is important for all the players to be flexible.  Since technology changes so rapidly (… see point above … ), flexibility is key to a successful implementation of new equipment, renovation of entire floors, or new construction of a medical facility.  For example, one panel member shared the experience of the design change (during construction) of the in-room work stations to allow physicians and nurses to face the patient while reviewing and charting information, as opposed to having their back to the patient, as originally designed.
  3. Choose equipment that allows all systems to communicate with each other.  Although systems are beginning to be more compatible, it is important to talk with your vendors and specialty suppliers to make sure the various systems can integrate properly.  
  4. Get the end-users involved in the design and construction process.  That does not mean your nurses will be carrying around hammers and nails.  It means that the design team needs to understand the work flow of the end users and be ready to adapt to that information learned in the design process.  It is equally important to understand the expectations of the end users and to implement those expectations into the end result.
  5. Prepare a contingency plan for your IT needs. Stated another way, don’t put all your eggs in one basket.  While this may seem to be a no-brainer, the entire team needs to talk through contingencies.  These contingencies can involve problems, emergencies or expenses.  The real lesson is to make sure each player (owner, architect, engineer, contractor) is talking about the same contingency and then to plan for that contingency. 

As there continues to be an upward trend for healthcare construction in the coming years, what tips can you suggest?

Image: Mars Discovery District on Flckr

Seems like I have been doing a lot of out-of-town speaking lately.  Fortunately, my next gig will be in my own office, in front of a computer, with a headset attached.  You should consider joining me on October 13, 2010, at 1:00 to 2:30pm (Eastern) for what will be an exciting webinar:

From Paper to Paperless:

Controlling Construction Documentation,

Improving Record Management, and

Identifying Risk in an Electronic Age

The event is hosted by It is sponsored by WPL Publishing Co., Inc., the publishers of Construction Claims Advisor, Construction Project Controls & BIM Report and Green Building Insider. Some of the exciting topics include:

  • “Putting it in writing” rule – what should you record? What is the hearsay rule?
  • Why are proper records so essential for claims and disputes?
  • 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!

If you have any great construction “war stories” that you would like to share, please send me an email.

UPDATED: If you are a regular follower of the blog and want a huge discount to the webinar, please click here for registration.  Make sure the link has “BLOGGER’S DISCOUNT”.

There is a lot of hot air in Albuquerque, New Mexico this week. And it’s not because I was in town … it’s because of the Albuquerque International Hot Air Balloon Fiesta. It truly is a beautiful sight!


Okay, some of the hot air may have been coming from me, as I was training about 30 project managers, engineers, accountants, and tribal attorneys from the Navajo Nation in Window Rock, Arizona. In the day-long seminar on Monday, we talked about:

  • basic construction law principles;
  • tribal immunity issues;
  • the ten most common tensions on a project;
  • various project delivery systems;
  • project management and documentation best practices; and
  • lessons learned from projects gone wild.

The last hour of the day was spent answering questions about some of the day-to-day issues faced by the tribal nation. Based upon that dialogue, I came to a few realizations about my time in New Mexico and Arizona.  Whether you are sovereign tribe like the Navajo Nation, a local public authority like a school board, or a private developer, the following project tips may be helpful:

  1. Identify your available resources and make a plan for success. A successful project has the right people in place, working with clearly defined job descriptions, to achieve a well articulated goal. If you determine that your resources are limited such that you cannot hire full-time employees to manage a particular project, then perhaps you should consider staff augmentation from an experienced group that provides the right project support. They can be hired for any number of reasons—to train your staff, provide support on a temporary basis, or even provide full-time support. Likewise, legal training from a contract administration point of view is better spent money than legal assistance to pursue or defend claims in litigation.
  2. Start where you are now and begin to make incremental changes. Even the most successful owner-developer can identify areas of improvement in management of their projects. And whether you are the public owner of a multi-million dollar health care facility or a new K-12 school, you can improve your current project management skills by: (1) purposeful assessment of your needs; (2) common sense planning; and (3) incremental implementation of change. If contract management is an issue, invest some time and money in getting a workable contract for your projects. If document management is the issue, draft a document management plan that will be incorporated in all your in-house training sessions and in all project manuals. The key is to start somewhere now.
  3. Finally, you should understand that your greatest stumbling block may simply be an institutional acceptance of the status quo. What do I mean by that? Many times, contract administration and project management is performed with the following mentality: “Well, we have always done it this way.”  By talking with others in the industry and seeking out advice from those with similar practical experience, you begin to identify those things you are doing right and those things require change.

If you can identify areas of improvement in your project management protocols, plan to make incremental changes, and accept that there may be new ways to perform your work, the sky’s the limit on your project successes.

Question: What other tips do you have to help create change to the long-standing approaches you’ve used in the past?

The Tennessee Court of Appeals released another opinion in a construction dispute earlier this week.  In East Tennessee Grading v. Bank of America (.pdf), the court grappled with competing ownership claims and made its decision primarily on grounds of timing.

 

In this case, the owner of a residential development did not pay the excavation contractor.  The contractor filed suit to enforce its $2 million lien for excavation and road work.  An agreed judgment was entered as to the contractor’s claims against the owner, awarding judgment for materials and labor performed on the property.  It was discovered that one parcel of the total 150 acres of property was owned by someone other than the developer.  That small parcel was subject to a deed of trust in favor of Bank of America.

The trial court held that Bank of America had priority over the contractor as to 1.9 acres because the contractors had not filed its "Notice of Lien" in a timely matter to maintain priority over the subsequent owners pursuant to Tenn. Code Ann. § 66-11-112.  However, the trial court also held that the contractor had priority over Bank of America as to the remaining 4.46 acres because the contractor’s Notice of Lien was filed before the Amended Deed of Trust in favor of Bank of America was filed.  The appellate court affirmed the trial court’s decision

The decision provides some key practice points for lien claimants:

  • You must know, understand and follow your deadlines.  The case was brought under the pre-2007 amendments and the court in East Tennessee Grading had to carefully walk through the timeliness of notice requirements.  Also, since the contractor abandoned the work based upon the owner’s non-payment, there was an additional timeliness question for "completion or abandonment" of the work.  You need to make sure you understand all the notice requirements and filing deadlines.
  • A lien may be enforced even against subsequent purchasers.  In limited circumstances, if a sworn statement is not recorded within the applicable statutory time period, the lien’s priority as to subsequent purchasers or encumbrancers is determined as of the date of the recording.  In other words, you may lose priority over a subsequent purchaser even if the work was performed prior to the sale.
  • Tennessee is now a "substantial compliance" state.  This is a new standard within the past few years. Tennessee lien law once required “strict construction,” as was stated in the East Tennessee Grading opinion.  However, the General Assembly changed the law in 2007 to require only “substantial compliance.”  The new statute is to be “construed and applied liberally.” T.C.A. § 66-11-148(a). This was a significant change in the law.

Image: Catherine on Flickr