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Archive for the ‘Construction & Surety Law’ Category

When is Engineering Required? City of Atlanta Issues New Code Interpretation

Posted on: October 18th, 2017

By: Cheryl H. Shaw

The City of Atlanta recently published its second International Residential Code interpretation of 2017, confirming that structural designs utilizing Structural Composite Lumber (SCL) must be designed and sealed by an engineer licensed to practice within the State of Georgia. The stated purpose of the binding interpretation is to provide consistency between the Office of Building staff and design professionals who issue construction documents in multiple jurisdictions.

In issuing the interpretation, the City noted the IRC’s requirement that structural elements which do not conform to the prescriptive requirements of the code must be “designed in accordance with accepted engineering practice.” To this end, while visually-graded lumber is regulated by span tables within the code, SCL, a proprietary engineered wood product, does not have span tables or design values represented within the IRC. Instead, design values are furnished by manufacturers. Although manufacturers have created design software that is widely available, the only party authorized to provide an “engineered design” for structural elements is an engineer.

Accordingly, all residential construction documents submitted for permit that utilize SCL must be designed and sealed by a licensed Georgia professional engineer. In addition to identifying the type, size and manufacturer of the SLC, the engineer must provide other design-specific information.  A link to the interpretation with a complete list of requirements can be found here: 2007-IRC-002. The requirements apply to Laminated Veneer Lumber (LVL), Parallel Strand Lumber (PSL), Laminated Strand Lumber (LSL), and Oriented Strand Lumber (OSL).

Unnecessary engineering can increase construction costs, but failing to obtain required engineering can result in costly delays. Understanding when engineering is required—and when it is not—is critical to the success of your project. FMG’s Construction Law practice group is here to help. If you have questions or would like more information, please contact Cheryl H. Shaw at [email protected].

 

LOL (Limitation of Liability) Clauses in A&E Contracts: He who laughs last, laughs best

Posted on: October 11th, 2017

By: Cheryl H. Shaw

It’s no coincidence that the abbreviation for “Limitation of Liability” is LOL. That’s the reaction design professionals often get when they include an LOL clause in a contract proposal. LOL or “exculpatory” clauses limit the designer’s liability for future claims—usually to the cost of services or a fixed dollar amount. Clients frequently balk at these clauses, but since the client reaps the bulk of the rewards for a successfully completed project (vs. the designer who’s “reward” is limited to his fee), shouldn’t the client also shoulder the bulk of the risk?

In Georgia, design professionals can contractually limit their liability for negligence. However, the LOL clause must be narrowly drafted so it does not violate Georgia’s anti-indemnity statute1. This means, among other things, that the clause should limit the designer’s liability to his client only, and not to third-parties who are “strangers” to the contract. Attempts to avoid liability to third-parties may render the entire clause unenforceable even if the claim is actually asserted by the client.

Additionally, because an LOL clause contemplates satisfaction of future claims and waives substantial rights, it must be “explicit, prominent, clear and unambiguous” in the contract. In determining if a clause is sufficiently prominent, Georgia courts consider several factors, including whether the clause is contained in a separate paragraph; whether the clause has a separate heading; and whether the clause is distinguished by features such as font size.

In one case, the Georgia Court of Appeals found an LOL clause unenforceable where it was “camouflaged” in the same font as the surrounding contract provisions and was listed under the heading “miscellaneous” instead of having its own separate paragraph. Conversely, an LOL clause contained entirely in its own paragraph, in bold and underlined text, and announced in a heading that clearly informed the reader of the clause’s content was sufficiently prominent.

A well-crafted LOL clause can be an effective tool to cap exposure in the event a lawsuit is filed and should be considered when negotiating contracts for professional services. If the client does, in fact, “laugh out loud” in response to your proposal, one strategy is to provide the option: You can either perform the services without an LOL clause for one fee, or you can lower the fee if the client will accept the clause.

FMG’s Construction Law practice group is here to assist you in drafting these important contact provisions. If you have questions or would like more information, please contact Cheryl H. Shaw at [email protected].

Homebuilder Defamed By Online Reviewer

Posted on: August 8th, 2017

By: Ze’eva R. Kushner

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After approximately three years of litigation, a jury in Gwinnett County, Georgia recently found that a homebuilder had been defamed by an individual’s online review of the homebuilder and awarded the plaintiffs $120,000 in damages and $12,000 in legal fees.

As we all know, it can be difficult to determine the identity of individuals posting “anonymous” reviews on the Internet. After Kudzu.com rejected a request to remove the bad review of the homebuilder Georgian Fine Properties, LLC, one of the owners of the business, Richard S. Jacobs, made it his business to figure out who had written the negative review of his company. Mr. Jacobs figured out the identity of the author of the inflammatory review, which made it possible to bring the lawsuit against that person. As it turned out, the defendant author had never purchased a home from Georgian Fine Properties, LLC and had never been a customer or client of the business.

The Gwinnett County jury was not persuaded by the argument that the review was the personal opinion of the defendant and thus was constitutionally protected speech. Nonetheless, the homebuilder did not succeed at recovering the $1,000,000 dollars in damages allegedly having resulted from a drop in sales despite an upswing in the housing market following the publication of the defendant’s critical review. Instead, the jury reduced the damages and legal fees award by close to a factor of ten.

Even if defendant appeals the jury verdict, businesses may have recourse against “anonymous” online individuals who write unflattering reviews. The Construction Law practice group attorneys are here to assist you. Please contact Ze’eva R. Kushner at [email protected] for more information.

Florida Statute of Repose Clarified

Posted on: August 7th, 2017

By: S. Jake Carroll

blogWhile the statute of limitations may limit a contractor’s exposure to claims for repair or replacement of defective construction work, many states have also enacted so-called “Statutes of Repose” designed to lay to rest any actions arising from the design or construction of a building or structure after the passage of the prescribed period of time.

Florida’s statute of repose, Section 95.11(3)(c), provides that the absolute latest date that an engineer, architect, or contractor can be liable for his or her work or services, is 10 years after “the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract … whichever date is latest.”

But the “date of completion” of the contract was held by at least one Florida Courts to mean the date the owner made final payment. See Cypress Fairway Condominium v. Bergeron Construction, 164 So. 3d 706 (Fla. 5th DCA 2015). This interpretation was cause for concern given the recent rise in litigation brought by condo associations and building owners who could postpone final payment with the hopes of extending the 10-year period.

In light of these concerns, Governor Scott signed House of Representatives Bill 377 which clarifies “completion of the contract” to mean the later of “the date of final performance of all the contracted services” or “the date that final payment for such services becomes due,” regardless of the date final payment is made. This new definition will prevent a customer’s delay in making final payment from extending a contractor’s potential exposure for construction defects, and was effective July 1, 2017.

The new law gives builders more say and certainty on when a statutory window of liability for completed projects begins to run. However, even with these changes, builders and contractors should still review their construction contracts for specific provisions regarding completion and payment.

If you have any questions or would like more information, please contact S. Jake Carroll at [email protected].

Bilt-Rite but Otherwise Wrong? – How Far does Design Liability Extend in Pennsylvania?

Posted on: August 4th, 2017

By: Scott C. Hofer

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It has long been held that construction design professionals and others who engage in the business of supplying information to others for pecuniary gain may be held liable if incorrect information is provided. See Bilt-Rite Contractors, Inc. v. The Architectural Studio, 866 A.23d 270, 285 (Pa. 2005). Since that time it has been argued by some, including some design professionals, that Bilt-Rite applies to anyone that supplies information regarding what goes into a construction project. The case Elliott-Lewis Corp. v Skanska Building, Inc., 2015 WL 4545362 (EDPA July 28, 2015) is an example of this phenomenon.

In the Elliott-Lewis case the mechanical contractor (“Elliott-Lewis”) sued the general contractor (“Skanska”) for its failure to pay in full for the labor and materials, including change order work, Elliott-Lewis provided. Skanska thereafter made third-party claims against the design team (hereinafter referred to as “Designers”), who then filed fourth-party claims against several other parties, including the pump manufacturer (“Patterson”) and its manufacturer’s representative (“Clapp”).

Thereafter Clapp[1] and Patterson filed motions to dismiss the action, pointing out that Designers’ tort claims were barred by the economic loss doctrine. Clapp and Patterson explained to the Court that while Clapp and Patterson provided some information about Patterson’s product to Elliott-Lewis they were in the business of providing a product, not providing information to be used by others. The designers responded by claiming that because Clapp and Patterson provided information about Patterson’s pumps they were suppliers of information for pecuniary gain under Bilt-Rite.

The Court soundly rejected the Designers’ argument. The Court found that Patterson manufactured and was in the business of providing a product and that Clapp was in the business of facilitating the sale of that product. It noted that manufacturing and selling a product is very different from the services provided by accountants, lawyers and architects that were noted in Bilt-Rite. The Court noted that any other outcome would effectively eviscerate the economic loss doctrine, as almost all sales involve at least some conveyance of information from the seller to the purchaser.

The Elliott-Lewis case does an excellent job of illustrating how narrow the Bilt-Rite exception to the economic loss rule is. This is incredibly valuable for construction professionals that help develop construction projects but do not engage in what is traditionally considered “design” work.

For additional information related to Pennsylvania law on issues related to design and construction liability in the Commonwealths of Pennsylvania and Virginia, the States of New Jersey and Maryland and the District of Columbia you can contact Scott C. Hofer of the law firm of Freeman, Mathis & Gary, LLP at (267) 758-6023 or [email protected].

[1] Via this writer.