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Posts Tagged ‘contract’

Florida Employment Law and The Use of Consistent Terminology

Posted on: January 17th, 2019

By: Michael Kouskoutis

Florida’s First DCA recently reversed summary judgment in favor of Florida A&M University (FAMU) in a contract dispute with the school’s former head football and basketball coaches.

The coaches both had 4-year contracts with the University, each with a specific end date and permitting early termination only in specific circumstances.  Well before their contractual end dates, both coaches received 60 days’ notice of termination, with neither coach having committed any of the terminable offenses listed in the contract. The coaches filed suit, demanding (among others) payment on the remainder of the contracts. On FAMU’s motion for summary judgment, the trial court agreed with the University, that the terminations were justified by the University’s regulations, which permit employee termination upon 60 days’ notice.

On appeal, the First DCA emphasized that FAMU did not use consistent terminology with respect to termination in its regulations and employment contracts, leading the Court to conclude that an ambiguity exists since different meanings may have been intended. Further, because the Court determined that the termination provisions were ambiguous, it also reversed summary judgment on the coaches’ claims for fraudulent inducement and negligent misrepresentation.

As this case awaits trial, employers should be mindful of the terminology used among its employment and regulatory documentation.  If you have any questions or would like more information, please contact Michael Kouskoutis at [email protected].

Circuits Now Split Three Ways Over False Claims Act Limitations Period

Posted on: April 26th, 2018

By: Robyn Flegal

The Eleventh Circuit Court of Appeals (governing Georgia, Alabama, and Florida), recently held that the three-year statute of limitations for the False Claims Act (FCA) begins when the government learns of alleged violations of the FCA, rather than when a whistleblower/relator learns of alleged violations.  As we previously explained in the FMGBlogLine, the FCA allows whistleblowers to bring claims for violations on behalf of the government in return for a share any recovery.  In United States of America ex rel. Billy Joe Hunt v. Cochise Consultancy, Inc. d/b/a The Parsons Corporation, a former employee alleged that certain contractors defrauded the Department of Defense out of millions of dollars for work performed pursuant to a wartime contract in Iraq.  According to the Complaint, an Army Corps of Engineer officer forged contract documents after accepting bribes and gifts.  The United States declined to intervene in the lawsuit.

The United States District Court for the Northern District of Alabama dismissed the suit on the basis that Billy Joe Hunt (the employee) was outside of the three-year limitations period for FCA claims.  FCA claims must be filed (1) within six years after the violation occurred, or (2) within three years of the time the appropriate government body is made aware of the violation and within ten years of when the fraud occurred.  The Eleventh Circuit determined that this second, three-year limitations period applies even where the United States declines to intervene in a qui tam action.  Indeed, although the employee knew of the fraud more than three years before he filed suit—his claim was timely because he filed the suit within three years of disclosing the underlying facts to the United States officials.  Simply put, in the Eleventh Circuit, the limitations period begins to run when the relevant federal government official learns of the facts; when the whistleblower learns of the fraud is simply immaterial to the statute of limitations.

There is now a three-way circuit split in the Federal Courts of Appeals regarding the tolling deadlines for FCA claims.  In contrast to the Eleventh Circuit’s holding above, the Fourth, Fifth, and Tenth Circuits have ruled that the three-year limitations period does not apply to whistleblowers at all.  The Third and Ninth Circuits have held that the three-year period begins when the whistleblower learns of the fraud.  As there is a split in the circuits, this particular action could be ripe for a decision by the Supreme Court if the defendants petition for a writ of certiorari.

As such, we will continue to monitor developments in this area.  For questions please contact Michael Bruyere at [email protected], Robyn Flegal at [email protected], or Ali Sabzevari at [email protected]

Georgia Adopts Protection for Design Professionals from Hold Harmless Clauses

Posted on: May 11th, 2016

By: Bart Gary

Georgia recently adopted legislation that declares an indemnity or hold harmless agreement in connection with or collateral to a contract or agreement for engineering, architectural, or land surveying services against public policy and void and unenforceable.  The legislation excepts, and therefore permits, indemnification for losses and damages, “to the extent caused by or resulting from the negligence, recklessness, or intentionally wrongful conduct of the indemnitor” (the party obligated to indemnify the other) or his or her employee or agent.

In the convoluted way statutes are written, this new law voids indemnity clauses in agreements for services by an architect, engineer or land surveyor, unless the clause is confined to instances, or “to the extent,” caused by the negligence, recklessness, or misconduct of a party. The important language is the phrase “to the extent of,” which is already used in many form indemnity clauses, and has been interpreted to call for a comparison of the negligence or  fault of an indemnitor with that of the party to receive indemnity protection  or third parties .  In other words, the indemnitor is only responsible for that portion of the loss it caused.  The new law is written to apply to any party to the design contract, but is mainly for the benefit of the designer.

Georgia still outlaws indemnity clauses in construction-related agreements that purport to indemnify one for his or her own sole negligence, and care needs to be used in drafting contracts in light of that law. Now in contracts for design services prudent drafting dictates that the indemnity clause should expressly adopt the exception in the new law with inclusion of the “to the extent of” language for the actual fault of the designer.

One question that the new law does not address is the status of design/build contracts where a single party, usually a general contractor or construction manager, is responsible for both the design and construction of a building or structure. Since design/build contracts include architectural and engineering services, the indemnity agreement in the contract could be made unenforceable even if the loss was unrelated to the design services. In any event, the extent of the indemnity coverage for the project owner in a design/build contract may be less that under current law.

The new legislation is codified in Section 13-8-2 (c) of the Georgia Code and goes into effect on July 1, 2016. The new law does not affect existing agreements, but would apply to those coming into existence after July 1, 2016.

Georgia And California Increase Scrutiny Of Employee Loyalty And No-Rehire Provisions As Restraints Of Trade

Posted on: September 2nd, 2015

By: Mike Wolak

Restrictive covenants typically involve the “big three”: agreements not to compete, not to solicit the Company’s customers, and not to raid the Company’s staff upon separation from employment.  As a result, the language of the “big three” must be given careful thought when drafting the employee’s agreement.  Recent state and federal appellate opinions in Georgia and California make clear, however, that employee agreements and settlement agreements are being scrutinized more closely, such that even the more standard “loyalty” and “no-employment” provisions are being construed as restrictive covenants to determine whether they constitute unenforceable restraints of trade. 

For instance, in Early v. MiMedx Group, Inc., 768 S.E.2d 823 (Ga. Ct. App. 2015), the Georgia Court of Appeals invalidated a loyalty provision of a consulting agreement requiring the employee to “devote her full working time (not less than forty (40) hours per week) to [the] performance of [her] duties.”  Analyzing this provision as a restrictive covenant, the Court of Appeals held that the provision constituted an illegal restraint of trade, rather than a mere loyalty provision, because it prohibited the employee from performing any kind of work during the term of the agreement other than for MiMedx.  Indeed, MiMedx admitted during oral argument that the provision prohibits Early from “babysitting on the weekends or working in a bookstore,” even though such work is not related in any way to the type of enterprise in which MiMedx is engaged.  The Court of Appeals held that the loyalty provision contained “no limitation at all concerning either scope or territory,” which is required of restrictive covenants in Georgia.  Unfortunately for MiMedx, the consulting agreement was entered into prior to enactment of Georgia’s Restrictive Covenant Act, which applies to all agreements entered into on or after May 11, 2011 and is more favorable to restrictive covenants than Georgia’s common law.  Under the new law, this particular provision could likely be “blue-penciled” or judicially modified if it does not “promote or protect the purpose or subject matter of the agreement or relationship.”

Similarly, in Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), the Ninth Circuit Court of Appeals held that the district court abused its discretion by categorically excluding a standard “no-employment” provision in a settlement agreement from the ambit of California’s non-competition/restraint on trade statute (Cal. Bus. & Prof. Code § 16600) on the sole ground that the provision did not constitute a covenant not to compete.  The Ninth Circuit concluded that nothing in Section 16600 or any California decisions explicitly limit the statute’s reach to traditional non-compete clauses or render the statute inapplicable to other contractual restraints on professional practice.  Accordingly, the Court remanded for a determination whether the “no-employment” provision – in which the former employee waived all rights to future employment with the Company “or at any facility that [the Company] may own or with which it may contract in the future” – constitutes a “restraint of a substantial character” under Section 16600.   

The MiMedx and Golden decisions are a strong reminder that employers should, in addition to ensuring their standard “big three” restrictive covenants comply with applicable state law, also carefully examine their employment, consulting, and severance agreements to ensure that loyalty, best efforts, no-rehire, and other similar provisions comply with the applicable restrictive covenant law and are not considered an unenforceable restraint on trade.   In doing so, employers should keep in mind that restrictive covenant laws vary widely by state, thus requiring drafting of applicable provisions on a state-by-state basis.  Additionally, restrictive covenant law is evolving in many states, requiring agreements to be updated regularly to ensure compliance with existing law. 

 

 

Georgia Court of Appeals: General Conditions Costs and Interest Cannot Be Included in Claim of Lien

Posted on: July 12th, 2012

By: Kamy Molavi

On July 11, 2012, the Georgia Court of Appeals issued an opinion in the case of 182 Tenth, LLC v. Manhattan Construction Company (2012 WL 2819414).  The Court ruled that “items of general conditions costs described in the payment applications were not lienable because they were not labor, services, or materials which actually went into and became a part of the property.”  The Court based its decision on an interpretation of prior case law to the effect that liens apply only to “work and material or machinery [which] have increased the value of the realty by becoming a part thereof.”

Further, the Court found that “interest due on the unpaid payment applications was not a lienable item.”  Previously, the Court had held that interest may be recoverable.

The case related to a contract for the construction of a condominium complex.  The parties to the contract were Manhattan Construction Company and 182 Tenth, LLC, which was not the owner of the property.  Manhattan received some payment for its work under the contract, but apparently it stopped work after seven (7) of its applications for payment, in the combined amount of $2,126,148, were unpaid.  Manhattan obtained a default judgment against 182 Tenth, LLC for $4,886,606, which included $2,126,148 for unpaid amounts due under the contract.

The Court of Appeals ruled that the amount of the default judgment merely provided a maximum amount for the lien, and shifted the burden to the owner to prove that the default judgment included an amount that was not lienable.  Surprisingly, the Court nonetheless held that, “[e]ven though the amount of Manhattan’s judgment against [the property owner] was proved and not contested, this was not conclusive or prima facie proof of Manhattan’s right to a lien in the full amount of the judgment. The burden remained on Manhattan to prove the lien amount to which it was entitled by producing evidence of lienable items included in the judgment against [the property owner].”  Presumably, at the end of that sentence the Court intended to refer to the judgment against 182 Tenth, LLC.  The Court went on to exclude from the claim of lien those amounts it attributed to general conditions costs.

This case has significant implications.  If it is not challenged and overturned, a general contractor will not be able to rely on the agreed amount of its contract to file a mechanics lien in Georgia.  It will be required to parse the amount owed under the contract to exclude general conditions costs and possibly other amounts.  Moreover, there is no apparent basis to exclude subcontractors from this outcome.  The implications for construction managers could be monumental.

Although the Court did not address certain other costs, the logic upon which the opinion was founded could suggest there is no lien for the contractor’s profit or for other costs such as testing, safety, engineering services, preparation of shop drawings, and the like.  Items such as freight and vendor discounts may be questioned.  This is because those costs, although traditionally included in the contract price, may not constitute “work and material or machinery [that] increased the value of the realty by becoming a part thereof,” according to the Court.