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Archive for the ‘Construction & Surety Law’ Category

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.

The “City in a Forest” Only Saw the Trees: Prompt Pay Act Waiver Requires Specificity

Posted on: June 8th, 2017

The City of Atlanta v. Hogan Construction Group, LLC, A17A0520, June 7, 2017

By: Jake Carroll

A recent opinion from the Georgia Court of Appeals provides construction professionals with an excellent example of the benefits and consequences of contract drafting in the face of a payment dispute or legal challenge.

Our story begins in late 2011, when the City of Atlanta entered into a contract with Hogan Construction Group, LLC to build a new fire station in northwest Atlanta. While the contract allocated approximately $3 million for construction costs, the costs soon swelled with the “discovery” of a state waterway and a Georgia Power transmission pole. These discoveries also required the relocation of a retention pond and additional soil testing. When the City refused to pay for these changes, Hogan brought suit under Georgia’s Prompt Pay Act.

Georgia’s Prompt Pay Act provides for the payment to contractors and subcontractors of interest on monies owed on construction projects at the rate of 1 percent per month, and reasonable attorney’s fees. Although the Prompt Pay Act appears expansive in the rights given to contractors and subcontractors, it provides that nothing in the Act prohibits owners, contractors, and subcontractors from agreeing by contract to rates of interest, payment periods, and contract and subcontract terms different from those stipulated to in the Act.

The case reached the Georgia Court of Appeals on the issue of whether Hogan’s claims for interest and attorney’s fees under the Prompt Pay Act were waived by the terms of the City’s contract. Instead of the 1 percent a month provided by statute, the City’s contract provided for interest based on the prime rate, and specifically stated that “[t]his clause shall supersede the Georgia Prompt Pay Act and any modifications or successors to it.” Accordingly, the Court of Appeals reversed the trial court’s decision, and determined that Hogan had waived its claims to interest.

The City also argued that the contract clause waived Hogan’s right to attorney’s fees under the Act, but the Court did not agree. Instead, the Court held that because the City’s contract did not explicitly address attorney’s fees—only interest—Hogan did not waive his right to seek attorney’s fees. So, while the City successfully contracted out of the higher interest rate under the Prompt Pay Act, it failed to proscribe the recovery of attorney’s fees. Ironically, the attorney’s fees will probably cost more than the interest.

For questions about common construction contract terms, including important issues arising out of indemnity and arbitration provisions, feel free to reach out to the Construction Law team at FMG.

Is Your Project On The List?

Posted on: April 12th, 2017

By: Scott C. Hofer

In a change to the Pennsylvania Mechanic’s Lien Law of 1963 the Pennsylvania Department of General Services has opened the State Construction Notices Directory, which is now online and ready to accept lien-related notices. Pennsylvania has joined a trend in several states where Owners of significant construction projects may file notices with the State/Commonwealth in an effort to cut-off the lien rights of suppliers of labor and/or materials.

If a Pennsylvania project costs a least $1.5 million the owner may file a Notice of Commencement prior to the start of any labor, work or materials on a project. This document puts all suppliers of labor and/or materials on notice that they must file a document giving notice of the furnishing of that labor and/or materials promptly after beginning to do so.  The Notice of Commencement is required to include the following: (1)the name, address and e-mail address of the (prime) contractor; (2) the name and location of the project (including the county); (3) a legal description of the property; (4) the tax identification number of the parcel(s) on which the project is located; (5)the name, address and e-mail address of the Owner; (5) surety and bonding information (if applicable); and (6) the identifying number assigned by the Department of General Services that was assigned concurrent with the filing the notice. Once the Notice of Commencement is properly filed the Owner must then post a copy of it in a conspicuous place at the property prior to the beginning of work and make sure that it remains posted until the work is completed.

Once the Owner has properly filed and posted a Notice of Commencement then any provider of labor and/or materials is required to file a Notice of Furnishing within 45 days of first providing work for, or delivering materials to, the project. If the provider of labor and/or materials fails to provide this notice within the timeframe required by the statute it loses its lien rights.

In addition to the required filings there are optional filings that may also be utilized. An Owner may file a Notice of Completion in an effort to establish an outside date for the filing of any lien claims.  A supplier of labor and/or materials may utilize a Notice of Nonpayment to inform the Owner, Owner’s agent, contractor acting as the Project agent or the subcontractor of the nonpayment. This filing is for information purposes but can be utilized to put pressure on the party responsible for payment.

Suppliers of labor and/or materials also need to know that the directory notices do not do away with any of the preconditions that already exist to perfect a lien. For instance, a subcontractor or supplier to the (Prime) Contractor must still file a Notice of Intent to File Mechanic’s Lien within the time required by the Lien Law to preserve the right to perfect a lien when it is finished in addition to filing a Notice of Commencement within 45 days of beginning.

It is unclear what effect this change will have long-term. While the change provides Owners a mechanism to cut off the lien rights of the unwary, it also provides the essential information that have often led to additional costs in lien filings (such as property search costs).  As a result, the law can trap the unwary but a time/cost-saver for the wise.  As of April 1, 2017 thirty-nine (39) projects had been registered.

For additional information related to this change in the Pennsylvania Mechanic’s Lien Law of 1963 and for advice regarding how to navigate the various laws that impact contractors 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].