It’s been a busy year for construction legislation, with new regulations and statutes putting more and more obligations on contractors and suppliers. The national trend continues with the new legislative changes in Florida, which require modification of certain construction methods and documentation.
We suggest that anyone involved in the construction industry in Florida review these new laws to ensure that they are fully compliant. The amendments touch on many parts of the construction process, and in some instances only slightly change prior legislation. The following is a general overview of the new requirements that provide the flavor of the changes:
Surety Bonds: public performance and payment bonds, as well as private payment bonds
Construction Liens for Work Performed for Tenants
In our continuing search for interesting articles, we came across an article by Seth Reagan of Manatt, Phelps & Phillips, LLP. Though we do not normally discuss issues relating specifically to litigation, this article on good faith settlement determinations seemed interesting and relevant to decisions owners and construction companies need to make more often than they’d like.
“In lawsuits involving multiple defendants, it is not unusual for the plaintiff to settle with one or more of the defendants as the lawsuit progresses. If, after a hearing, the court determines that such a settlement was made in good faith, a settling defendant is exempt from any claims of contribution or indemnity by the remaining defendants. Consequently, those defendants remaining in the lawsuit may wish to block such settlements, so that they are not left “holding the bag,” and responsible for the entirety of any judgment. Once the court makes a good faith settlement determination, is there any recourse for the remaining defendants? May they appeal that determination, or is there another method by which they must contest the trial court’s determination?
Last month, the Second District Court of Appeal (Division 8) addressed these questions in Oak Springs Villas Homeowners Ass’n v. Advanced Truss Sys., Inc. (June 14, 2012) 206 Cal.App.4th 1304. The court held that aggrieved parties in this situation should file a writ petition under Code of Civil Procedure section 877.6—not file an appeal—since a good faith settlement determination is a nonappealable interlocutory ruling.
In Oak Springs Villas, a homeowners association was dissatisfied with the construction of its condominium complex, which had defects including a sagging roof. As a result, the homeowners association sued the building developers, the general contractor, and the subcontractors who were involved in constructing the roof. Multiple defendants cross-complained against each other for indemnity.
One by one, the homeowners association began to settle with the defendants. When the homeowners association settled with the developers, one of the remaining defendants, subcontractor Advanced Truss Systems (ATS), opposed the settlement, vigorously arguing that it was not in good faith. The trial court, however, disagreed and determined that the settlement had in fact been made in good faith. ATS’s cross-complaint for indemnity against the settling defendants was therefore dismissed.
ATS’s next step proved to be a critical error in judgment. Rather than file a writ petition as expressly provided in Code of Civil Procedure section 877.6, ATS instead chose to file a notice of appeal from the court’s determination of a good faith settlement. Relying on a Fourth District (Division One) Court of Appeal case, Cahill v. San Diego Gas & Elec. Co. (2011) 194 Cal.App.4th 939, ATS argued that it was authorized to appeal the trial court’s determination since that determination resulted in the dismissal of ATS’s cross-complaint.
The Court of Appeal disagreed with ATS, dismissing its appeal. The court explained: “ATS has appealed from a non-appealable order,” and with regard to ATS, no final judgment existed. Under the one final judgment rule, “a party who remains in the action [cannot] base its appeal on an order involving a different party.” Furthermore, the court declared, Cahill was wrongly decided. A writ petition filed under Section 877.6 is the only means by which a remaining defendant may immediately challenge a trial court’s good faith settlement determination. Thus, because ATS had not filed a writ petition within the 20-day time limit of that statute, the good faith determination would not be reviewed.
Oak Springs Villas teaches that remaining defendants can seek prompt appellate review of their good faith settlement challenges, but only if they follow the proper procedure. It is possible that ATS and similarly situated parties might be able to get a good faith settlement determination reviewed on appeal after a final judgment has been issued. But why wait? As the court in Oak Springs Villas points out, Section 877.6 “expressly permits nonsettling defendants to obtain [prompt] review of a good faith settlement determination through a writ petition.” It seems that a wise defendant would choose to seek immediate review of the determination in the manner expressly authorized by statute, rather than to pursue the alternative of waiting for a final judgment and hoping to have the determination reviewed and overturned on appeal.
Update for Our Readers
As we predicted in our last issue, the California Supreme Court granted review of Kurwa v. Kislinger (2012) 204 Cal.App.4th 21. In Kurwa, the Second District Court of Appeal interpreted the “one final judgment rule” in a new way, stating that the rule does not prohibit an appeal when a trial court issues a judgment disposing of fewer than all of the causes of action framed by the pleadings, so long as none of the causes of action remain actually pending in the trial court. If the Supreme Court endorses this new interpretation, such judgments may be deemed “final” and appealable.”
The long anticipated post-construction stormwater runnoff regulations have incurred yet another delay. The EPA announced that it is taking more time to consider and draft the regulations, which originally had a deadline of September 2011. The new deadline was supposed to be April 2012, but but that date also came and went. The EPA just announced that it will issue draft regulations by June 2013, and final regulations by December 2014.
Even the idea of the regulations is controversial, and some have opined that the delays may have something to do with the pending United States Presidential election. The new dates represent substantial delays from the original schedule. While many owners and construction companies welcome the delay, it does continue to provide uncertainty to the market, something for which the current administration has been criticized.
The $46 million school renovation project of Dracut High School in Northeastern Massachusetts may provide signs that the construction economy is finally improving. Since the 2008 financial crisis, governments have found great deals for their construction projects. With construction companies vying for work, public projects let out for bid have generally received numerous bids, often times well over the normal numbers in pre-crisis years. With the increased competition came decreased prices, saving governments large amounts of money when performing much needed construction work.
But the increase in bidders and lower prices is not a sign of economic strength. In fact, it is a generally a sign of weakness, indicating that not enough private or commercial construction work exists to keep contractors busy, resulting in a rush to public works projects.
The recent bids for the Dracut High School, therefore, are good economic indicators. Because only two bids were even proffered for the project, and because the lowest bid was priced only 1% over the construction manager’s estimate, the project may be a sign that things are finally improving. While this one project located in Northeastern Massachusetts is not necessarily an indicator of a national trend, LienItNow.com will be continuing to look for signs of a change in the construction industry.
The bids were reported on July 24, 2012 by the Lowell Sun.
As we delve deeper into the electronic age, emails are increasingly used to enter into an confirm numerous transactions on a daily basis. The courts are just beginning to be confronted by the effect of emails, and the law on email communications is rapidly evolving.
In a recent, the Massachusetts Superior Court found that an email exchange among parties pursuing a real estate purchase transaction satisfied the signature requirement embodied in the Statute of Frauds. In Feldberg v. Coxall, buyers’ counsel emailed to seller’s counsel a proposed offer to purchase real estate which included a financing contingency. The next day, the seller emailed buyer’s counsel directly, stating that if a written approval letter from the buyer’s lender was received by 5 p.m., “I think we are ready to go.” Buyer’s counsel provided a lender’s commitment letter the same afternoon, before 5 p.m.
The transaction then fell apart, and the buyers ran to court to try to protect their deal. The seller contended that the email exchange did not satisfy the Statute of Frauds.
In rendering its decision, Court noted that the courts have “not yet set forth rules of the road for the intersection between the seventeenth-century statute of frauds and twenty-first century electronic mail.” Calling the issue presented by the case one of first impression, the court stated that the Massachusetts Uniform Electronic Transactions Act (“MUETA”), was one attempt to provide those rules of the road to persons involved in real estate transactions.
That statute applies to “transactions between parties each of which has agreed to conduct transactions by electronic means,” and under that statute, whether the parties have so agreed is “determined from the context and surrounding circumstances, including the parties’ conduct.” MUETA §5. The Court noted that in using email to conduct negotiations, the parties could be found to have agreed to conduct the transaction by email.
With regard to the signature requirement of the Statute of Frauds, MUETA §7(d) states that “if a law requires a signature, an electronic signature satisfies the law.” An electronic signature is “an electronic…symbol or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” MUETA §2.
According to the Court, in an extraordinary finding, both an email signature block, as well as the “from” portion of an email, may constitute a signature under the statute.
Both houses of the New Jersey Legislature have passed A-1338 (Act) — a law that extends and modifies the Permit Extension Act of 2008. Approvals are broadly defined to include local, county and state permits and entitlements.
Not every approval is covered, however. Excluded from the extension are federal permits and all permits in environmentally sensitive areas such as the Pinelands and Highlands as well as lands located in Planning Areas 4 & 5 under the State Development and Redevelopment plan. The Act applies to all approvals in effect on and after January 1, 2007.
Under certain circumstances, approvals can be extended for additional 6 months after December 31, 2014. In addition the Act does not prevent the developer from seeking additional extensions of the approval if other grounds exist for an additional extension.
As for the Pinelands, all permits in the “Extension Areas” i.e. growth areas of the Pinelands are extended.
Many construction companies are not aware that there are lawyers that specialize in construction and business development for construction companies. When choosing a lawyer, many often go for the general practitioner that may not know a hammer from a mallet. An excellent article written by Eugene H. Heady explores this issue and makes a powerful case for finding a lawyer that specializes in construction when construction claims arise. The text of the article is reprinted here.
“As your business grows it becomes increasingly more important to have available a trusted team of financial and legal advisors. Including an experienced construction lawyer on your team can go a long way to help keep your projects out of trouble and thus help ensure that your business remains healthy and profitable.
Claims and disputes in the construction industry are commonplace. On a construction project of any complexity, disputes are often the rule–not the exception. During the lifetime of most construction companies, it is likely that the company will become embroiled in a claim or dispute that cannot be resolved without the assistance of a lawyer. While it is best to avoid construction claims and disputes from the beginning of a project, it is important to resolve them quickly and efficiently once they arise.
Avoidance or a quick resolution of disputes is often crucial to the economic success of the project. Claims and disputes involving construction projects tend to be technically complex and factually intensive. As a result, arbitration or litigation of construction disputes can be time consuming and costly.
Construction litigation is generally characterized as “complex litigation” because the legal and procedural issues involved are typically very complex. If you are faced with a construction claim or dispute, it is very important not only to hire a lawyer who knows his or her legal trade but to hire a lawyer who also knows the construction trade—i.e., hire a seasoned construction lawyer.
Hire a seasoned construction lawyer, not a general practitioner.
Your first goal should be to find a lawyer with a thorough knowledge of the construction industry. Owning a pickup truck and having a law license does not make one a construction lawyer. Nonetheless, there is no shortage of available lawyers who have handled a few matters for construction companies and later market themselves as “construction attorneys.” Successfully drafting construction contracts or later litigating, arbitrating, mediating, negotiating or otherwise resolving construction claims and disputes, however, requires that the lawyer have a thorough familiarity with the construction industry and a thorough knowledge of the unique problems that arise on construction projects.
When selecting a construction lawyer, you should consider the following. Does the lawyer and the lawyer’s firm concentrate on representing participants involved in the construction industry? Does the lawyer understand the construction business and have experience in helping construction participants avoid and efficiently resolve construction claims and disputes? Does the lawyer have any practical hands-on experience in the construction industry? Does the lawyer have a background in construction, engineering or architecture? Note that while having a technical or construction background is certainly very helpful, many outstanding construction lawyers have never picked up a hammer. If presented with disputes while the project is ongoing, does the lawyer understand that typically it is critically important to keep the project moving forward while helping to resolve disputes that may threaten to derail the project? Has the lawyer published, lectured and taught on construction law topics? Is the lawyer someone whom you can trust and someone with whom you can develop a long term relationship?
Also consider the law firm that the construction lawyer is associated with. How deep is the law firm’s bench of construction lawyers? What is the breadth of their experience? What sub-specialties are they focused on? Do other members of the law firm have focused experience in particular construction law issues that can be drawn upon if necessary? If the law firm has an extensive in-house network of construction lawyers, the collective experience and knowledge base of those lawyers can be a tremendous asset to the client. Have other members of the law firm extensively published, lectured and taught on a wide variety of construction law topics? Is the law firm, and are its members, actively involved in the construction industry? Is the law firm, and are its members, actively involved in trade associations? Does the law firm keep abreast of current legal issues and changes in the law affecting the construction industry? Is the law firm dedicated to sharing that information with the industry via newsletters, white papers and client alerts? How long has the law firm been in business? Does the law firm have an established national practice so that it can support you as your own business grows and expands into other geographical regions? Is the law firm, and are its members, well-respected by their industry peers? Has the law firm earned a good, solid national reputation within the construction industry?
Get a seasoned construction lawyer involved early.
Consider developing a long term professional relationship with an experienced construction lawyer. A seasoned construction lawyer can be a very important member of your team of valued and trusted advisors. Most participants in the construction process who have been involved in a contentious claim or dispute will agree that one of the best ways to avoid a claim or dispute is to get a seasoned construction lawyer involved at the very beginning of a project and, certainly, as soon as a claim or dispute arises.
A seasoned construction lawyer can assist and support you in obtaining “quiet” successes by providing thoughtful and experience-based advice and counseling that enable you to achieve your business goals without contentious disputes or protracted litigation. If litigation or arbitration becomes necessary to resolve a claim or dispute, a seasoned construction lawyer can help you develop parallel strategies to (1) efficiently advance the case toward a court verdict or an arbitration award, and (2) identify and seize upon opportunities to resolve claims and settle disputes early.
On the front end of a project, the construction lawyer can help draft or review contracts and provide sage advice regarding how best to allocate and manage contractual risks. During the construction phase of a project, the construction lawyer can help guide you through the minefields that often threaten the economic success of a project. Construction claims and disputes during construction typically involve very short deadlines and strict contractual notice requirements. When a claim or dispute arises, the construction lawyer can help develop strategies for resolving the claim or dispute early or for minimizing the risks going forward. On the back end of a project, the construction lawyer can assist you in: closing out the project; collecting unpaid contract balances; and perfecting lien and bond claims. In most states, the courts strictly interpret statutes governing mechanics’ and materialmen’s liens and claims against payment and performance bonds. Courts strictly enforce the relatively short filing deadlines associated with lien and bond claims. Thus, it is critically important that you do not wait until days before the filing deadline to contact a construction lawyer for assistance.
Initiate a Conflicts Check. The construction industry is sometimes a small world. Understand that once you have selected a construction lawyer, there may be existing conflicts or potential conflicts of interest that prevent the selected lawyer from representing you on a particular matter. For example, the lawyer may already be representing an opposing party. When you first contact your selected construction lawyer regarding any new matter, you should expect the lawyer to run a “conflicts check” before the lawyer can discuss your case with you. The purpose of running a conflicts check is to make sure that the law firm does not already represent someone whose interests are opposed to yours. Thus, before you share any confidential information with the lawyer, be prepared to provide the following information: (1) name of your company and the names of all related business entities; (2) names of all adverse parties with interests opposed to yours; (3) names of all potentially adverse parties; (4) the project name; and (5) the project location. Once the construction lawyer has reported that there are no conflicts, you will then be free to candidly discuss the facts of your case.
Prepare and organize for the initial conference.
There are many reasons to hire a construction lawyer. For example, your objective in hiring a construction lawyer may be to (1) have a contract reviewed or drafted, (2) get an evaluation of a claim or dispute, (3) file a lawsuit or prepare a demand for arbitration, (4) obtain a defense of an action filed against you, (5) initiate a request for mediation, (6) file a lien, (7) assist in recovering an unpaid contract balance, or (8) to get legal advice about the consequences of a particular course of action. In any event, be prepared to define and discuss your overall objectives and to clearly communicate what you would like to achieve by involving the construction lawyer.
Organize your files before meeting with your construction lawyer. Have handy all of the documents, including contracts, subcontracts, or purchase orders, that may be relevant to the issues you would like to discuss. The quality and completeness of the information that you provide to your lawyer can have a direct impact on the reliability of any predicted outcomes that are discussed.
The Pennsylvania General Assembly recently passed the Real Property Electronic Recording Act. H.B. 970, passed the Senate as amended 49-0 on June 25, and passed the House on concurrence 198-0 on June 29. The bill brings into Pennsylvania law the Uniform Real Property Electronic Recording Act.
The Act’s purpose is to allow county clerks and recorders to electronically record information on real property and land records. As the drafter of the Uniform Act stated, “electronic information technology has progressed rapidly in recent years” and “innovations in software, hardware, communications technology and security protocols have made it technically feasible to create, sign and transmit real estate transactions electronically.” The Act authorizes, for example, county recorders of deeds to receive electronic documents as a means for recording real property. It also permits “electronic signatures” for certain documents. This could make the recording of Pennsylvania Mechanics Liens much faster, and help companies more easily comply with the PA mechanics lien law service rules.