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Archive for the ‘Construction & Design Professional’ Category

Who Did What for Whom? Construction Lien Rights in Georgia Depend on the Contractor, Not the Cost

Posted on: March 18th, 2019

By: Jason Kamp

In 2013, the Georgia General Assembly expanded the scope of items covered under its construction lien statute, O.C.G.A. § 44-14-361, by amending subsections (c) and (d). The statute now allows contractors to claim liens for contract expenditures for general conditions or other costs that are not strictly for labor, services, or materials that become part of the property as traditionally required. For example, a general contractor can now claim a lien for insurance, security, or cleaning costs or interest owed on the principal amount due under its construction contract.

Importantly, the expansion of the type of costs entitled to lien rights does not translate into an expansion of the type of contractors entitled to lien rights. The expanded lien rights still depend on whether the contractor at issue fits into one of the nine categories laid out under subsection (a) of the statute. To illustrate, a general contractor can now claim a lien on costs for providing security services on site under its contract, because it furnishes other materials and services for the improvement of real estate under (a). However, a security services contractor is not entitled to a lien on the costs for providing security services on a construction site, because it does not fit within any of the (a) categories.

It is easy to see how Georgia’s expansion of lien rights to non-traditional costs may blur the distinction between actor and act in practice. Additional attention to “who did what for whom” may be warranted when undertaking lien waivers, organizing contractor relationships, or other activities touching on lien rights as a result.

If you have any questions or would like more information, please contact Jason Kamp at [email protected].

The Supreme Court Sets Groundwater Pollution in its Sights

Posted on: February 20th, 2019

By: Ze’eva Kushner

Yesterday, the United States Supreme Court decided to hear an appeal from the Ninth Circuit’s decision in Hawai’i Wildlife Fund et al. v. County of Maui, 886 F.3d 737 (9th Cir. 2018). The Supreme Court will be hearing this case in the Fall to resolve a circuit split regarding whether discharging pollution that travels underground before emerging into an ocean, river or other major waterway requires a permit under the Clean Water Act.

Congress passed the Clean Water Act in 1972. The goal of the Clean Water Act is “to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.” 33 U.S.C. § 1251(a). One of the primary provisions of the statute makes it unlawful for anyone to discharge a pollutant, meaning adding pollution, to the waters of the United States, including the territorial seas. 33 U.S.C. §§ 1362(12), (7).

The provisions of the Clean Water Act have been interpreted by a number of courts over the years, with the coverage of groundwater pollution being a thorny issue for some time. In February 2018, the Ninth Circuit held that Maui County had to comply with the permitting requirement of the Clean Water Act in order to continue to dispose treated water through underground wells after it was shown that the treated water made its way into the Pacific Ocean through fissures in the ocean floor.

The Fourth Circuit made a similar finding a few months later in a case involving a gasoline pipeline spill in South Carolina when it determined that the Clean Water Act covered claims that the spill contaminated nearby creeks and wetlands after traveling through groundwater.

However, in September 2018, the Sixth Circuit changed direction when it ruled on two cases involving the pollutants released by coal ash ponds, holding that the Clean Water Act cannot be used to regulate pollution that travels through groundwater before reaching navigable waters such as a river or ocean.

Thus, it is up to the Supreme Court to resolve the debate regarding how direct of a connection there must be between a source of pollution and the waters that get polluted. Whether a pollutant that goes underground before making its way into a major waterway is subject to the Clean Water Act will have a major impact on industries across the country.

If you have any questions or would like more information, please contact Ze’eva Kushner at [email protected].

Georgia Court of Appeals Concludes the Term “Affiliate” is Ambiguous

Posted on: February 4th, 2019

By: Jake Carroll

In Salinas v. Atlanta Gas Light Company,[1] the Georgia Court of Appeals’ recently examined whether Georgia Natural Gas (“GNG”) and Atlanta Gas Light Company (“AGLC”) were “affiliates.” Both AGLC and GNG were owned and controlled, either directly or through an intermediary, by a company named AGL Resources, Inc.

In Salinas, AGLC sought to dismiss Plaintiff’s claims and compel arbitration. In support of its argument, AGLC relied on a term in GNG’s service agreement that required the Plaintiff to arbitrate any disputes with GNG’s “affiliates.” However, since the term “affiliate” was not defined in GNG’s agreement, the Court of Appeals looked at how the term “affiliate” is defined in the Georgia Code, Black’s Law Dictionary, and other jurisdictions, and ultimately determined that the term is ambiguous. The Court of Appeals construed the agreement against GNG—the drafter of the contract—and as a result, AGLC could not demand arbitration of Plaintiff’s dispute.

While the Court of Appeals did not set-out a specific definition for “affiliate,” the Court’s analysis provides a couple of practice tips to anyone involved in drafting, reviewing, or enforcing contracts, including commercial agreements, government contracts, or insurance policies.

  1. Define Your Terms: The Salinas Court may not have had to address the meaning of “affiliates” if the Agreement had defined the term. But, since the term was not defined, the Court looked elsewhere, including other jurisdictions, the Georgia Code, and the dictionary to determine its meaning. Including a definitions section is an easy way to set out the agreed-upon meaning of a term throughout a contract, and should not be overlooked.
  2. Be Explicit: If there is a certain sibling or parent corporation that should be a beneficiary of a contract, consider listing the specific “affiliates” to which the contract or agreement should apply.
  3. Check Your State’s Code: The Court noted that the term “affiliate” is defined over 20 times in the Georgia Code, and the definitions vary. For example, in the context of financial institutions, an affiliate is an entity that controls the election of a majority of directors, trustees of a financial institution, or an entity that owns or controls 50 percent or more of the financial institution. O.C.G.A. § 7-1-4 (1). In Georgia’s Corporations Act, the definition of affiliate is broader: “a person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a specified person.” O.C.G.A. § 14-2-1110 (1).[2] Depending on the type of corporate entity, “affiliate” may not include every entity in a corporate structure, and certain rules regarding ownership and control may be relevant.

If you need help with this issue, or any other commercial law questions, Jake Carroll practices construction and commercial law, is licensed to practice in Georgia and Florida, and is a member of Freeman Mathis & Gary’s Construction Law and Tort and Catastrophic Loss practice groups. He represents corporations and manufacturers in a wide range of litigation and corporate matters involving breach of contract, business torts, and products liability claims. He can be reached at [email protected].

[1] 347 Ga. App. 480; 819 S.E.2d 903 (2018).
[2] See also O.C.G.A. § 18-2-71 (1) (B) (“Affiliate” has multiple definitions, including “[a] corporation 20 percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the debtor or a person who directly or indirectly owns, controls, or holds with power to vote 20 percent or more of the outstanding voting securities of the debtor[.] …”).

Amendments To Pennsylvania’s CASPA Will Change The Landscape Of Payment Disputes

Posted on: August 3rd, 2018

By: Jonathan Romvary

Anyone who has ever done any amount of work as a contractor or who has represented them in collections cases has learned from hard experience that it can be all but impossible to get paid for one’s work. In Pennsylvania, the Contractor and Subcontractor Act (CASPA) was introduced in 1994 as a complement to the Pennsylvania Mechanic’s Lien Law and was intended to provide contractors (and subcontractors) with additional remedies against those owners/contractors withholding payment for their services. However, the landscape of these payment disputes is likely to significantly change as a result of recent legislation.

Last year, a Pennsylvania state representative introduced a bill, which sought to substantially amend the act and for the first time since 1994, provide further protections for contractors against those withholding funds for the work. That bill has languished in the House Commerce Committee since last year. Nonetheless, a similar bill amending CASPA was referred to the state senate and in June 2018, Governor Tom Wolf signed the bill into law as Act 27. Amongst the numerous amendments to CASPA, Act 27 now provides:

  • If an owner fails to adhere to the terms or withholds payment, contractors and subcontractors may stop performance of the work (subject to contractual limits);
  • There is no permissible waiver of any provision of CASPA;
  • Failure to provide the contractor with a 14 day written notice of a deficiency results in a waiver of the right to withhold payment for the deficiency and requires full payment of the invoice;
  • If a party alleges an invoice contains an error, that party must pay the correct amount on the date payment would otherwise be due otherwise it will be an improper withholding; and,
  • Withholding retention for longer than 30 days after final acceptance of the work generally qualifies as improper withholding.

These new changes are scheduled to take effect on October 10.

Without question, these changes increase the negotiation power of contractors and subcontractors, however, more importantly, the changes reinforce the need for owners and contractors to maintain clear payment records as only clear payment records will provide owners and contractors a sufficient defense in any payment dispute. Owners, contractors and subcontractors involved in payment disputes need to be aware of their respective obligations and rights.

Anyone in the construction industry that has questions about these amendments and how they may affect their business or current projects, please contact Jonathan Romvary at [email protected].

Cyberrisks to Contractors and Securing Proper Coverage

Posted on: June 29th, 2018

By: Barry Brownstein

Increasingly sophisticated hackers have targeted personal and business data held by companies like Target Corp., Sony Corp., Equifax Inc. and Yahoo Inc. during the past decade. The construction industry is just as susceptible to these risks as any other industry.  As construction projects increase in size and there is more sharing of data related to buildings and projects, and as more of that sharing becomes electronic, cyberrisks increase as well.

Contractors and their business partners hold personal information about their clients and employees, and they are increasingly using more electronic means to exchange data and survey construction projects. A significant threat for companies in the construction industry comes from the open and increasingly connected network between those in charge of a project and their various subcontractors and business partners, who need swift and seamless access to plans and other sensitive data to do their part of the work.

Many companies in the construction industry assume that since they have policies that cover losses stemming from physical and property damage, any infiltration into their systems that result in the loss of access to sensitive information is covered by such insurance.  However, most commercial general liability policies carve out cyberthreats from coverage.  While contractors can still make claims under more traditional policies and may find that some of their losses are covered, relying solely on these protections may be dangerous and result in uncovered losses.

Specialized cyberinsurance can fill in the gaps left by commercial general liability policies that do not account for losses caused by damage to virtual information systems, and ensure that any damages, injuries or delay caused by downstream contractors or business partners are covered as well. Once policies are in place, contractors need to revisit them regularly to account for changes in the cyberthreat landscape as they relate to the construction industry.

If you have any questions or would like more information, please contact Barry Brownstein at bbro[email protected].