Source: https://www.bestpracticesconstructionlaw.com/
Timestamp: 2019-04-21 20:37:25+00:00

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On Saturday, I took the kids to the zoo for a day-long adventure. Faith’s favorite attraction was the turtle compound that was filled with about 20 slowpokes walking a circle. Like watching paint dry, we sat on the sidelines as these mini-dinosaurs trekked the park at a whopping .25 mph.
When we think of delays on a construction project, the first inquiry is to identify the turtle—the one party holding up progress or causing the delay. Many times, the parties’ contract will dictate whether the contractor can recover delay damages or will be limited to a time extension for delays beyond the contractor’s reasonable control. In Perez-Gurri v. McLeod, 238 So.3d 347 (Fl. Ct. App. 2018), the court examined whether a “No Damages for Delay” clause extended to parties other than the owner.
The general contractor in McLeod filed a malpractice action against the architect on a public contract for the City of Miami. The renovation project was located in the Caribbean Marketplace in an area known as Little Haiti. When the construction project was delayed, the general contractor filed suit against the numerous designers, architects, engineers and subconsultants.
The architect filed a motion for summary judgment, arguing that the general contractor’s delay claim was contractually barred by a “No Damages for Delay” clause in the contract between the general contractor and the City of Miami. The trial court granted summary judgment in favor of the architect. The appellate court reversed, finding that the owner-contractor agreement did not insulate the architect from liability.
No claim for damages or any claim, other than for an extension of time, shall be made or asserted against City by reason of any delays except as provided herein. Contractor shall not be entitled to an increase in the Contract price or payment or compensation of any kind from City for direct, indirect, consequential, impact or other costs, expenses or damages, including but not limited to costs of acceleration or inefficiency, arising because of delay, disruption, interference or hindrance from any cause whatsoever, whether such delay, disruption, interference or hindrance be reasonable or unreasonable, foreseeable or unforeseeable, or avoidable or unavoidable . . .
The McLeod decision reiterates yet one more time that “words have meaning.” More importantly, it is always advisable to think about and negotiate key provisions at the start of the project, rather than litigating the meaning of the provision during a dispute after the project is complete. Take a look at my Top 20 series where I blogged about key contract clauses and their meanings.
After a great extended weekend on the beaches of Florida, we embarked upon the drive back to Nashville with six kids. Despite the clearly defined travel rules, the antagonizing kid was putting his feet on the emotional kid. The creative kid was writing on the seat with markers, while the perfect kid screamed foul. The lazy teenagers slept. Mom and dad were triggered for eight hours.
On June 2, 2008, contractor entered into an agreement with owner to construct house for $572,000, but at the time the contract was signed the contractor’s license limit was $350,000.
Under the prior version of Tennessee Code Section 62-6-103, an “unlicensed contractor” was limited to recover only the actual documented expenses that could be shown by clear and convincing evidence.
The question that often came up was whether a contractor who exceeds its monetary limit was “unlicensed” for purposes of this rule on damages.
In Anchor Pipe Company, Inc. v. Sweeney-Bronze Development, LLC (Tenn. Ct. App. Aug. 2, 2012), the court held that a licensed contractor who contracts above his or her monetary limit still is considered “licensed” for application of the rule on damages above. The Anchor Pipe court was interpreting and applying the prior version of Section 103.
We believe the date of the contract to be more significant here than the date of the filing of the complaint. By the time Pickens filed his complaint, all the operative, underlying events of this case had transpired. The amendment to Tenn. Code Ann. § 62-6-103 was substantive in nature. The effect of the amendment was to expand the limitation of actual documented expenses to any contractor required to be licensed under the statute and rules, whereas before this limitation applied only to unlicensed contractors. When Pickens signed the contract and performed the work for the Underwoods, he was not subject to that limitation as he was not unlicensed. Pickens is not limited retroactively by the provisions of the amended statute.
It appears that all of the loops have been closed. Currently, the law states that if you exceed your licensing limit or otherwise violate some provision of the licensing laws, you cannot file a lien and your damages will be limited to actual documented expenses proven by clear and convincing evidence.
Today’s guest post is by Chris Meyers and Cheri Gatlin, two of my fellow partners at Burr & Forman, LLP. Chris is a partner and Cheri Gatlin is Chair of the firm’s Construction and Project Development Practice Group. The Group counsels clients throughout the U.S. on safety policies, OSHA and regulatory compliance, contracts, disputes, and all areas where law and construction intersect.
Last week marked the end of Construction Safety Week 2018, a combined effort by the Construction Industry Safety (CISI) group and the Incident and Injury Free (IIF) CEO Forum. Together these entities are comprised of 80 national and global construction firms, with a goal of promoting safety in the construction industry. Concern for safety is apparent on construction projects throughout the country and world, as evidenced by daily/weekly construction briefings and the familiar “___Days Since a Lost Work Accident” signs. People that work in the Construction Industry know firsthand the dangers and want to see their co-workers go home safely to their families after a long day. In addition, time is money in this business. Safe projects are more likely to be profitable projects due to lack of delays and prevention of claims for jobsite injuries. For employers, criminal liability for job site construction accidents is more and more a concern. Mainstream headlines highlight several cases where construction accidents = criminal charges.
From the well-publicized October 21, 2016 drowning of two construction workers in Boston after a trench in which they were working collapsed, to the March 18, 2018 pedestrian bridge collapse at Florida International University (FIU), which killed 6 and injured 9 more, construction accidents that result in loss of life are commonly viewed as more than “accidents.” There appears to be a trend toward construction incidents being investigated by various agencies for criminal liability. Inevitably, accidents happen in every area of life, from “fender bender” automobile accidents to high profile construction accidents, which result in extensive property damage and, unfortunately at times, loss of life. When, though, is an accident something more?
With regard to the Boston trench collapse, the Suffolk County District Attorney’s office presented evidence of manslaughter against the employer—both as a corporate entity and the company’s owner—related to the accident. There, the deceased were killed when underground materials supporting a hydrant in an allegedly unshored hole they were digging gave way and the hydrant burst, flooding the trench. Prosecutors claim the employer was pushing the men to work faster because the project was behind schedule. Motions to Dismiss manslaughter charges were considered and denied, leaving the employer and its owner subject to criminal prosecution. In an industry where liquidated damages and other pressures lead to acceleration, this is a headline of note.
As Construction Safety Week concludes, Burr congratulates all our clients that participated in the activities. Focusing on safety is critical to the industry’s success and the life and livelihood of those who rely upon it.
We live in a world of e-mails, IMs, texts, Snapchats, Instagrams and the occasional fax. Although information is transmitted instantaneously in today’s environment, proof of receipt of that information (often called “Notice”) remains subject to some very strict rules imposed by contract, case law or statute.
Notice of Claims. In a recent transportation case involving a personal injury, Department of Transportation v. Jones, the Court of Appeals of Georgia explained the importance of strict compliance with certain notice provisions. The plaintiff was injured in a single-car accident on State Route 42 and he sued the Georgia Department of Transportation (“GDOT”). The plaintiff claimed that GDOT’s improper maintenance of the roadway led to an accumulation of water, which caused his truck to hydroplane into a tree, severely injuring him. GDOT filed a motion to dismiss, arguing that the plaintiff failed to strictly comply with the notice provisions of the Georgia Tort Claims Act (“GTCA”). The trial court denied that motion and the Court of Appeals reversed.
The Green Card. The GTCA requires that notice of the claim be sent to “the Risk Management Division of the Department of Administrative Services.” At the hearing, the plaintiff presented the following evidence: (a) the notice letter; (b) the green return receipt card sent to the Commissioner of GDOT; (c) a response letter from the Risk Management Division acknowledging receipt of the notice letter; and (d) a U.S. Postal Service tracking document showing that “something was sent by certified mail to the Department of Administrative Services.
The Holding. Despite this evidence, the Court held that the plaintiff failed to strictly comply with the statute because there was no proof by the plaintiff that the letter was sent by certified mail to the Risk Management Division. The green card submitted showed proof of delivery to the Commissioner of GDOT. The attorney for GDOT admitted in court that the notice letter received by the Commissioner of GDOT was then sent internally by the Commissioner’s office to the Risk Management Division, which then sent the acknowledgement letter. Nevertheless, the plaintiff did not comply with the statute requiring that he sent notice of the claim to the Risk Management Division.
So What? While this may seem like a hyper-technical application of the rule, that’s precisely what “strict construction” means according to one court in George. Whether you are contractor, developer, specialty subcontractor, or professional service provider in the construction industry, the real lesson learned is to read the express terms of any applicable contract or statute when a dispute arises, and follow both “the letter and the spirit” of the law.
A contractor in North Dakota wasn’t laughing when it was not allowed to pass “Go” and could not immediately collect its $200,000 for work performed. In Snider Construction v. Dickinson Elks Building, LLC, the court held a contractor was not entitled to recover for labor and materials during a time period when the contractor was unlicensed. There, the out-of-state contractor entered into the construction contract on December 26, 2011, but did not get its contractor’s license until February 5, 2012. The contractor later filed a lien for approximately $200,000. The trial court awarded the contractor its claim for damages, and the owner appealed.
On appeal, the owner argued that North Dakota Code requires a contractor be licensed at the time of contract formation or commencement of work under the contract to maintain a claim or action related to the work performed under the contract. Because the contractor did not obtain a license until after it had entered into the contract with the owner and started working on the project, the owner claimed that the contractor barred from bringing any claim.
While the contractor was unable to pass “Go” to immediately collect its $200,000, its claims were not totally lost. The appellate court held that although the contractor could not recover for labor and materials during period that it had not received license (i.e., the lien claim), the contractor was entitled to recover in quantum meruit and unjust enrichment for labor and materials provided after it was granted a license.
Depending on your state, you may or may not be able to maintain an action as an unlicensed contractor. For example, Arizona requires a valid license at entry into contract and when cause of action arose; Utah requires a valid license at time of contracting and “[c]ontinuously while performing the work for which compensation is sought”; and North Dakota bars all claims only during a period of time the contractor was not licensed. If you work in another state, make sure you pass “GO” (…get licensed…) and collect your $200.
Sometimes, we avoid doing bad things because of the risk of getting caught. Other times, we avoid doing bad things because we simply choose to do right things. Whatever the camp you fall into, a recent government contracts case tells a story that should be avoided when submitting payment applications to the government.
In U.S. ex rel. Jesse Sloan v. Waukegan Steel, LLC, an employee brought a False Claims Act (FCA) against his employer for false billing and certification on a goverment project. The Attorney General has primary authority for enforcing FCA, but the law includes what is called a qui tam provision, which permits a private party to bring a civil action alleging fraud against the Government on its own behalf as well as on behalf of the United States. 31 U.S.C. § 3730(b). If the private party prevails, he receives a percentage of the recovery. 31 U.S.C. § 3730(d).
Waukegan was responsible for fabricating and installing the structural steel of project. The design specifications require that the contractors adhere to various professional codes, including those of the American Institute of Steel Construction (AISC), the American Society for Testing and Materials (ASTM), and the American Welding Society (AWS). The subcontractor was required to submit “fabrication quality control and weld inspection certificates” to the government before payment was issued. According to the employee, Waukegan did not have any of these certificates.
In Sloan, the president of the company allegedly asked the employee to fabricate the inspection certificates. When he refused, the president allegedly approached another employee who was not a qualified welding inspector. That employee fabricated the requested welding inspection certificates.
While the court’s decision focused on the type of allegations necessary to prove fraud on the FCA, the opinion is instructive to avoid FCA claims. To prove an FCA claim, a plaintiff must prove that (1) the defendant made a statement in order to receive money from the government, (2) the statement was false, (3) the defendant knew it was false, and (4) the statement was material to the decision to pay or approve the false claim.
In the end, you can choose to follow the law because you are fearful that one of your employees may become a tattletale, like the decision in Sloan, or because it is the right thing to do. Whichever the case, false and misleading statements submitted to the government will most likely be discovered and create problems for you.

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