Administrative Fees Should Be Considered When Selecting a Dispute Resolution Provision

Both lawyers and clients agonize over the tactical advantages and disadvantages of arbitration and litigation. Generally, the reason for the prolonged deliberation is the parties are attempting to make a reasoned and informed decision when selecting a dispute resolution provision for their contract.

Some parties prefer arbitration, because they believe arbitration is faster and provides them with a decision-maker who is experienced in the industry. Others prefer litigation, because, among other things, they want access to a trial by jury. Costs are also a decisive factor in determining whether to arbitrate or litigate.

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Pennsylvania State Court Enforces Pay-If-Paid Clause

Last summer, the United States Court of Appeals for the Third Circuit issued a precedential opinion in Sloan Co. v. Liberty Mutual Ins. Co., 653 F.3d 175 (3d Cir. 2011), that had broad implications for the construction community, because it affirmed an important industry-standard practice. More specifically, the Third Circuit held that a “pay-if-paid” provision in a subcontract, which provided that the general contractor’s receipt of full payment from the owner is an express condition precedent to the subcontractor’s right to full payment from the general contractor, was valid and enforceable by the general contractor and/or its payment bond surety.

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Governor Christie Unveils His 2012 “Project Portfolio” for School Construction Projects

On February 15, 2012, Governor Chris Christie announced his recommendation of twenty new capital school construction projects in eighteen municipalities. These new school projects will be financed and administered through the New Jersey Schools Development Authority (“SDA”).

The 20 projects set to advance in 2012 were divided into three categories addressing: 1) high educational priority needs; 2) high educational priority needs that require further discussions; and 3) serious facility deficiencies.

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NRC to Issue First-Ever Combined Licenses for Construction and Operation of New Nuclear Reactors

On February 9, 2012, the Nuclear Regulatory Commission (NRC) announced it concluded its mandatory hearing on Southern Nuclear Operating Company’s (SNC) application for two Combined Licenses (COL) at the Vogtle site in Georgia, and that in a 4-1 vote, the NRC found the staff’s review adequate to make the necessary regulatory safety and environmental findings, clearing the way for the NRC’s Office of New Reactors to issue the COLs.

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The Pennsylvania Commonwealth Court Approves Liquidation of First Sealord Surety Insurance, and Bonds Issued By This Surety Will Terminate Within 30 Days

On February 8, 2012, the Pennsylvania Insurance Department (the “Department”) announced that the Pennsylvania Commonwealth Court approved its petition to liquidate First Sealord Surety Insurance.

According to the Department’s Commissioner, Michael Consedine, the Department petitioned the Commonwealth Court for a liquidation order because “First Sealord Surety is no longer able to meet its policyholder obligations or pay its debts as they come due.”

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Pennsylvania Does Not Adopt the 2012 International Code Council’s Model Construction Codes

On January 18, 2012, the Pennsylvania Uniform Construction Code Review and Advisory Council (the Council) voted 11 to 5 against the adoption of the 2012 I-Codes, the model building codes published by the International Code Council (ICC). The Council, however, did make an exception regarding the accessibility portion of the 2012 model code. Based on this vote, the Council is now charged with submitting a report to the Secretary of Labor and Industry by July 2012, and the bulk of the 2009 edition of the ICC’s codes will remain the basis for Pennsylvania’s uniform construction code.

Because the 2012 I-Codes were not adopted, the ICC’s new “green building” model code, called the International Green Construction Code will not be included in Pennsylvania’s construction code.

Many of Pennsylvania’s construction trade organizations celebrated the Council’s decision, because they believe the implementation of new codes would add additional costs that the construction industry cannot afford. Similarly, the Council voted against the 2011-I Codes, because, inter alia, the new codes were complicated and impossible to enforce.

Big Cities Lost Construction Jobs in 2011

The Association of General Contractors of America released its construction employment data for 2011, and, as expected, the overall construction market remains weak. Although construction spending between December 2010 and December 2011 increased by 4.3 percent, two of the country’s largest cities, Philadelphia and New York City, experienced sharp declines in their construction workforce. More specifically, out of the 337 metropolitan areas listed by the AGC, Philadelphia reported the largest job loss with a loss of 4,800 construction jobs, a 7 percent decline. New York City was a close second with a construction job loss of 4,600 jobs, a 4 percent decline.

On the bright side, Lake County-Kenosha County, Ill.-Wis., added both the most and the highest percentage of new construction jobs (33 percent, 3,900 jobs). Other areas adding a large number of jobs included Edison-New Brunswick, N.J. (3,700 jobs, 11 percent); Portland-Vancouver-Hillsboro, Ore.-Wash. (3,600 jobs, 8 percent); Louisville-Jefferson County, Ky.-Ind. (3,100 jobs, 13 percent) and San Jose-Sunnyvale-Santa Clara, Calif. (3,100 jobs, 10 percent).

Overall, construction employment increased in 148 out of 337 metropolitan areas between December 2010 and December 2011, decreased in 128 areas, and stayed level in 61 areas. Association officials said that recent developments in Washington that could lead to passage of long-delayed highway, bridge, transit and aviation investment legislation could give a needed boost to construction employment in many areas.

Amtrak Announces Major Projects for 2012

As passenger rail service continues to rise, Amtrak has announced an “aggressive” construction agenda for 2012. For example, Amtrak intends to spend $15 million in 2012 for planning and other pre-construction activities on its Gateway Program to provide additional capacity into Manhattan for Amtrak intercity and New Jersey Transit commuter services, including the proposed NextGen HSR system. As part of the overall plan, which is expected to cost several billion dollars, Amtrak will build two additional tunnels under the Hudson River to access expanded terminal facilities serving New York Penn Station and the future Moynihan Station on the site of the former Farley Post Office. In addition, Amtrak plans to replace and expand the century old Portal Bridge over the Hackensack River and increase from two to four the number of tracks between Newark and New York.

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Pennsylvania Superior Court Holds that Unions May File Mechanic’s Liens for Unpaid Contributions

Under Pennsylvania’s Mechanics’ Lien Law, only a “contractor” or “subcontractor” is permitted to file a lien claim against an owner of property, 49 P.S. § 1303(a), for the payment of debts due by the owner to the contractor or by the contractor to any of his subcontractors for labor or materials furnished during a project. 49 P.S. § 1301; see 49 P.S. § 1201(4), (5) (defining “contractor” and “subcontractor”).

On January 6, 2012, the Pennsylvania Superior Court held in Bricklayers of W. Pa. Combined Funds v. Scott’s Dev. Co., 2012 PA Super 4; 2012 Pa. Super. LEXIS 5 (2012) that a labor union is a “subcontractor” under the Mechanic’s Lien Law, and, therefore, trustees of a union benefit fund have standing to file a mechanic’s lien claim on behalf of its members.

As a result of the Superior Court’s ruling, labor unions will likely file more mechanics’ lien claims for unpaid and/or delinquent contributions. Thus, in order to ensure that no mechanic’s liens are filed on a project, owners should attempt to verify on a monthly basis that money is properly disbursed down the construction chain. Towards that end, an owner needs to obtain partial payment releases from its contractors and subcontractors on a monthly basis. In addition, an owner should consider making certain payments by joint check, if the owner suspects any problems.

The Nuclear Regulatory Commission Approves Amended Version of AP1000 Nuclear Reactor Design for Use in the United States

On December 22, 2011, the United States Nuclear Regulatory Commission approved a rule certifying an amended version of Westinghouse’s AP1000 reactor design for use in the United States. The amended design certification, which will be incorporated into the NRC’s regulations, will be valid for 15 years.

The AP1000 is a 1,100 megawatt electric pressurized-water reactor. Westinghouse submitted an application for certification of the original AP1000 standard plant design on March 28, 2002, and the NRC issued a rule certifying that original design on January 27, 2006.

Westinghouse, however, submitted an application to amend the AP1000 on May 27, 2007, in order to ensure that the AP1000 could meet certain post 9/11 requirements, which included incorporation of protection around the building that could sustain the impact of an airplane crash.
Many in the industry now expect that the NRC will issue combined construction and operating licenses for new nuclear units.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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