Apply Common Sense To Indemnity Claim

A mechanical sub’s employee is severely injured during a coffee break when an improperly-fastened section of limestone façade comes loose near where he is sitting. Should the mechanical sub owe a duty of indemnity to the prime contractor? The Massachusetts Appeals Court does not think so, either. It is hard to imagine a set of facts where the mechanical sub’s indemnity obligation would arise for this sort of accident.

The Appeals Court was thorough, examining and reciting various terms of the prime contract, in addition to the sub’s indemnity obligation. That indemnity, both in the subcontract itself and via the Massachusetts anti-indemnity law, was limited to claims caused by the sub. The GC’s argument was that the injured worker’s claim arose out of the mechanical sub’s work, because otherwise the worker would not have been on the site. Please. The appellate court politely declined to adopt that interpretation. The GC had “overall responsibility” to protect the health and safety of workers on the project, and was also responsible for coordinating the work of the various subs. If an area was unsafe, it had a duty to warn workers in that area. In short, the Appeals Court found that GC had a duty to prevent the façade sub from performing work in a manner unreasonably dangerous to others.

The appellate decision includes some statements that many prime contractors may find troublesome, as to the scope of their duty to protect workers of the various trades when means and methods have been delegated to those trades. But that is to be expected when the GC seeks to invoke an indemnity obligation of a sub who had nothing to do with the injury or the conditions that caused it. Common sense prevailed. The case is Leahy v. Daniel O’Connell’s Sons, Inc., 2015 Mass. App. Unpub. LEXIS 777 (July 20, 2015).

Right To Challenge Arbitration Award Cannot Be Waived By Contract

A subcontract arbitration clause states that the parties may take steps to confirm an arbitration award, but agree not to challenge any award. A Georgia appellate court has held that the restriction on challenging an award impinges on the Georgia Arbitration Code and is unenforceable. Thus, the losing party in the arbitration can pursue an action to vacate or modify the award per the arbitration law. The case is Atlanta Flooring Design Centers, Inc. v. R.G. Williams Construction, Inc., 2015 Ga. App. LEXIS 471 (July 16, 2015).

The Georgia appellate court cited cases under the Federal Arbitration Act to the same effect, that grounds existing under the FAA to vacate an award “may not be waived or eliminated by contract.” The Georgia court thus held that the subcontract clause “conflicts with and frustrates Georgia public policy as expressed in the [Georgia Arbitration Code], and is void and unenforceable” to the extent it would deny a party the right to challenge an award. A concurring judge wrote to express “serious concerns” about any agreement to bar judicial review. The concurrence noted that safeguards inherent in the arbitration laws “would be eviscerated, and the integrity of the arbitration process could be compromised,” should courts be allowed only to rubber stamp arbitration awards. Agreed.

Duane Morris Partner Michael Chartan to Present at ABA’s “Yes, You Can Try a Construction Case: Planning and Handling a Construction Trial from Voir Dire to Closing Argument” Program

Duane Morris partner Michael L. Chartan will be presenting at the American Bar Assocation (ABA) Section of Litigation’s Regional CLE Workshop, titled “Yes, You Can Try a Construction Case: Planning and Handling a Construction Trial From Voir Dire to Closing Arguments,” which will be held on Wednesday, September 9, 2015, in New York City. Mr. Chartan will participate in a panel discussion on “Wrapping It Up; Closing Arguments and Effective Use of Jury Instructions in a Construction Case” from 4:00 p.m. to 5:00 p.m.

For more information about the CLE workshop, please visit the event page on the Duane Morris website.

A Promising Future for Public-Private Partnerships in Georgia

Partner Antony L. Sanacory and associate William W. Fagan III, in Georgia, discuss the fiscal restraints at all levels of government that have made curating new projects and repairing existing facilities even more difficult propositions, in their article for the Daily Report. In the face of these challenges, the Georgia General Assembly and the State University System of Georgia have taken imperative steps to solve these issues by adopting the use of public-private partnerships (P3s) in the state . A P3 is formed through a contractual agreement between a public (federal, state or local) agency and a private sector or entity. The idea is to have the public sector obtain ownership of the project with the costs and risks being maintained and financed by the private sector. In the future, there will most likely be more P3 projects.

To read the full text of the article, please visit the Duane Morris website.

Mayor De Blasio Appoints Maria Torres-Springer As Next NYC Economic Development Corporation President

New York City Mayor Bill de Blasio appointed Maria Torres-Springer as the next president of the New York City Economic Development Corporation (EDC). EDC is a not-for-profit corporation charged with using New York City’s assets to promote economic growth, create jobs and improve the quality of life in in each of the City’s five boroughs. EDC also helps create affordable housing, new parks, shopping areas, community centers and cultural centers.

Torres-Springer will be the first woman to lead EDC. She has been the Commissioner of the NYC Department of Small Business Services (SBS) since 2014. Former EDC president Kyle Kimball resigned in March to join Consolidated Edison as Vice President of Government Relations.

“Maria has a proven track-record opening doors for New Yorkers and working closely with businesses to grow our economy. We are proud to have her lead EDC. Maria will focus on growing vital sectors in our economy, and preparing New Yorkers to seize those opportunities so they can be a part of our economic success story,” said Mayor Bill de Blasio.

Before being appointed Commissioner of SBS, Torres-Springer served as the Executive Vice President and Chief of Staff at EDC. Torres-Springer has also served at the Office of the Deputy Mayor for Economic Development & Rebuilding as a Senior Policy Advisor and as the Chief Operating Officer of Friends of the Highline. Torres-Springer received a B.A. in Ethics, Politics and Economics from Yale University and a Master’s in Public Policy from Harvard University’s Kennedy School of Government.

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and focuses his practice on commercial litigation with a concentration in construction law, mechanics’ lien law and government procurement law.. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.

Closing Out An Arbitration Award (How Not To)

Two contractors concluded arbitration proceedings and the panel issued its award in February 2011. Upon request of one party, the panel amended its award to address outstanding liens, in March 2011. The amended award required certain lien waivers to be submitted in exchange for payment of the $379,939 award amount. Over four years later, with multiple lower court and two Alabama Supreme Court decisions in the rear view mirror, the case is still not resolved. The most recent dispute concerned the starting point of the interest clock, and the Alabama high court has held that one party’s failure to submit all required lien waivers means that interest did not start to accrue until September 2014, instead of March 2011. Plus, the case has once again been remanded to the trial court.

One cannot discern from the decision if only one party, or both, have been difficult – maybe “obstinate” is a better term. But there had to have been a better way for both sides to work out the final details. The decision notes objections by the party who was to furnish the lien waivers, that it did not want to do so until it had been paid. And the other side objected to the lien waiver proposed by one particular sub. These are the types of issues that parties and their counsel deal with all the time, and invariably manage to resolve. It is a shame that two contractors in Alabama and their counsel could not work out the final details, and instead have burned through four years and thousands of dollars of additional costs. The case is Southeast Constr., LLC v. WAR Construction, Inc., 2015 Ala. LEXIS 83 (June 26, 2015).

Overbroad Indemnity Is Still Enforceable Within Statutory Limits

Oregon has a law, similar to many other states, prohibiting overbroad indemnities in construction contracts. The Oregon Supreme Court has ruled that the law allows an arguably overbroad indemnity to be enforced within the statutory constraints, rather than being entirely invalidated. The court concluded that two sections of the anti-indemnity law, read together, had the effect of “saving” an overbroad indemnity.

The indemnity in question required the subcontractor to indemnify the prime contractor from claims “whether or not caused in part by [the prime].” The trial court held that this indemnity ran afoul of subsection (1) of the Oregon law, ORS § 30.140, which states that an overbroad indemnity “is void.” But subsection (2) reads, in part: “This section does not affect any provision in a construction agreement that requires a person … to indemnify another against liability … to the extent that the … injury … arises out of the fault of the indemnitor.” Also, subsection (1) includes the proviso “except to the extent provided under subsection (2).” Reading those two clauses together, the Oregon high court held that subsection (2) permits the subcontract indemnity to be enforced within the bounds of the sub’s causation of the underlying claim. The valid scope of the construction indemnity would not be affected by the invalid scope, and the prime contractor could enforce that indemnity to the extent of the sub’s causative actions. The case is Montara Owners Ass’n v. La Noue Development, LLC, 357 Ore. 333, 2015 Ore. LEXIS 419 (June 18, 2015).

An anti-indemnity law that does not have the equivalent of subsection (2) of the Oregon law might compel a different result. One strategy to address an anti-indemnity law is to preface the indemnity with the phrase “to the fullest extent permitted by law,” or something similar. Courts in other states have taken such a phrase and construed or enforced the indemnity in question so as to be consistent with any statutory constraints.

Senate Bill Would Transfer VA Project Oversight to Corps

The Hill reports that an amendment to the Senate defense bill would transfer oversight of any U.S. Dept. of Veterans Affairs construction project larger than $100 million to the Army Corps of Engineers. The amendment is reportedly sponsored by the Colorado senators, who are responding to the problem-plagued Aurora, Colorado VA hospital project. We previously wrote about AGC of America’s unprecedented position supporting this very step. The Senate bill will still need to be merged with the House bill.

State Supreme Court Orders Official To Set Prevailing Wage Rates

The New Mexico Supreme Court has ordered a public official to establish prevailing wage rates in accordance with current collective bargaining agreements. In what appears to have been a show-down among the legislative and executive branches, the court has sided with the legislators. The NM high court held that “the Director has a mandatory, nondiscretionary duty to set prevailing wage and prevailing benefit rates the same as those negotiated in applicable CBAs.” The court ordered this action to be taken within 30 days of the decision. We recently reported challenges to state prevailing wage laws in a related post. But in other states where there are threats to these laws, it is the legislative branch seeking to amend state laws, and not the executive branch refusing to carry out or enforce the laws.

Under NM law (similar to most states), a public official is authorized and directed to establish prevailing wage rates, and those rates are to be established consistent with the collective bargaining agreement rates in the same vicinity as the project. Apparently, the NM Director of Labor Relations Division, of the state Dept. of Workforce Solutions, failed to take this step for more than five years since the state prevailing wage law was amended. Instead, the state agency “has been simply setting the rates the same as those that have been in effect since 2010.” Thus, workers on NM public projects have had their wages set at 2010 rates ever since, regardless of any change in CBA rates or terms. The NM matter was a unique set of circumstances, and the unions have convinced the courts that the laws must be carried out. The case is New Mexico Bldg. and Constr. Trades Council v. Dean and Bussey, 2015 N.M. LEXIS 158 (June 15, 2015).

Criticize the Contractor? An Arbitration Award for Defamation

Hell hath no fury like a homeowner scorned, particularly one with access to sophisticated IT professionals who will establish and optimize a website solely to criticize the contractor. But the cabinetry contractor – whose arbitration award including attorneys’ fees was just affirmed by a Connecticut appellate court – is having the last laugh. The arbitrator awarded damages and attorneys’ fees for the homeowners’ defamatory actions. And the appellate court confirmed that the arbitrator did not engage in “manifest disregard” for the law when he found the homeowners to have acted maliciously in conducting their war of words.

In an age of web-based commentary and criticism that forms the basis of sites such as Yelp, the homeowners’ actions here went well beyond the norm. The husband used his company’s IT professionals to establish a website and take steps to ensure that anyone searching for the cabinetry business would find his site, with all its critical comments, first. But the original site (the current site appears to be a toned-down version, and as of this post has not been updated with the recent decision) included statements that the arbitrator found not only defamatory, but also to have been issued with malice.

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