Recently, the New Jersey Supreme Court shed some new light on an old question impacting construction claims, i.e., when does the statute of repose commence? In New Jersey, the statute of repose bars actions “arising out of the defective and unsafe condition of an improvement to real property” that are brought “more than 10 years after the performance or furnishing of such services and construction.” In State v. Perini Corporation, the Court examined the question in the context of a claim involving an improvement that serviced a larger, phased construction project. The Supreme Court affirmed, as modified, the Appellate Division’s decision, holding that the statute of repose did not commence until the date of substantial completion of the entire overall phased project. Continue Reading
By Harriet C. Jenkins, K&L Gates, Doha
Liquidated Damages (LDs) are treated very differently across the Gulf region and from the position as understood within the English common law jurisdiction.
The universal starting point for LDs is in contract; parties should pre-determine the rate of damages a contractor should pay to the employer in the event of a (specified) breach, most commonly that of late completion. For the purposes of this article, we shall consider LDs solely in the context of delay damages, whereby in the event of delay to project completion, an employer can demand a fixed compensatory sum from the contractor.
The position of the civil law jurisdiction of the Middle East is very different from that understood within the English common law system. It is commonly accepted that English courts are generally very reluctant to look beyond the contractual position and open up any agreed position on LDs. Across the Gulf however, differing civil codes empower courts (and tribunals) to look behind the parties’ contract and adjust delay damages based upon principles of actual loss and fairness.
This article discusses the differing treatments of LDs across three Gulf jurisdictions (namely, the United Arab Emirates, Qatar and Saudi Arabia), and reveals what parties can expect in regards to their compensation for delay.
By Christoph Mank and Eva Hugo, K&L Gates, Berlin
A construction principal faces a lot of questions if material defects occur while a building is still under construction: he can decide to continue with construction in order to prevent a delay in completion, but faces the risk that it might be difficult, or rather, impossible, to outline and, in particular, to later prove the background and causes of defects. Furthermore, warranty claims against contractors or architects can become time-barred if the works continue for years without clarification of the defect. On the other hand, if construction stops until a court proceeding takes place, the project might be delayed due to the excessive duration of German construction court proceedings, possibly causing enormous financial losses. Besides the principal, contractors and architects also have an interest in the causes and responsibility for an occurring, material construction defect being promptly clarified and assessed.
Aims of independent evidentiary proceedings
Independent evidentiary proceedings, as provided in the German Code of Civil Procedure, can help those principals, contractors and architects involved in construction project to step out of the above scenarios.
Independent evidentiary proceedings are initiated by the application of one party. It is not required that a court proceeding be pending. Independent evidentiary proceedings aim to secure the state of construction and to clarify the causes of, and responsibilities for, a defect through an expert’s participation. This enables construction parties, for example, the principal and a contractor, to come to an agreement and to avoid a subsequent court proceeding. The defect can be remedied and the project continued to completion. Even if an agreement cannot be reached and a court proceeding follows, an independent evidentiary proceeding will help accelerate the construction court proceeding, because the independent evidentiary proceeding’s results will be considered as evidence in the court proceeding.
Independent evidentiary proceedings have to be applied for at the court that would also settle the legal matter. Furthermore, the applicant party has to provide a legitimate interest to establish the state or value of an object, the cause of property damage or a material defect or the effort required to remedy the property damage or material defect by a written expert opinion. Such a legitimate interest is statutorily presumed if the establishment serves to avoid a court proceeding.
Evidence can be taken by way of written expert opinion. In its application, the applicant has to precisely designate the opponent, as well as the facts and circumstances on which evidence should be taken; it is not allowable to describe vague, unsubstantiated facts only for the purpose of obtaining information to concretize an argument of fact. However, it is permitted to describe the facts as they appear to the applicant as a lay person in construction matters. The court then decides whether to take evidence on the application, and chooses an expert to be instructed. The expert´s opinion only assesses the case on a factual basis; legal questions and interpretations are excluded.
Independent evidentiary proceedings end with the delivery of the expert´s opinion and, possibly, with an agreement between the parties, which then will be recorded by the court, but not by a contentious decision of the court. The court may set a time period within which the parties can raise objections to the expert´s opinion and may apply for appointments to orally discuss the opinion with the expert. If, however, the case is later brought before court by one of the parties as the result of the independent evidentiary proceedings, the expert´s opinion will be treated as if it was obtained during the court proceeding.
The opening of an independent evidentiary proceeding also affects the underlying claims. The limitation of those claims, especially warranty claims, will be suspended from the beginning of the independent evidentiary proceeding until six months after its end, a further advantage of this special type of proceeding.
By Jesse G. Shallcross, K&L Gates, Chicago
In a recent decision from the 1st District Appellate Court of Illinois, A.G. Cullen Constr., Inc. v. Burnham Partners, LLC, defendants husband and wife were held personally liable for roughly $450,000 due to unpaid construction work performed under contract with the limited liability company controlled by the couple.
Robert Halpin owned defendant Burnham Partners, LLC (“Burnham”), a real estate development company with a 90 percent stake in defendant Westgate Ventures, LLC (“Westgate”), and Halpin’s wife, Lori, ran the bookkeeping for both companies. Westgate engaged plaintiff A.G. Cullen Construction, Inc. (“Cullen”) to build a warehouse and distribution facility in Big Beaver, Pennsylvania.
During the course of construction, Westgate refused to approve one of Cullen’s payment requests for work performed, and Cullen took the dispute to arbitration. The arbitrator awarded Cullen $448,406.87 for the unpaid work and associated expenses and penalties, and the award was reduced to a judgment in Allegheny County, Pennsylvania.
Shortly before the arbitration hearing, Westgate sold the project and Halpin began winding up Westgate’s affairs and liquidating its assets, using the proceeds of the sale to pay other creditors. He also paid a $400,000 developer’s fee to Burnham and transferred roughly $97,500 to himself and his wife, leaving a zero balance in the operating account of Westgate and no means with which to pay the Pennsylvania judgment.
Cullen filed suit in Cook County, Illinois against Westgate, Burnham and the Halpins to recover the amount owed by Westgate on the Pennsylvania judgment. In attempting to hold Burnham and the Halpins liable for Westgate’s debts, Cullen argued that Burnham, through Halpin, perpetrated a fraud by transferring all of Westgate’s assets to themselves and other creditors. The trial court ruled in favor of the defendants, however, finding that Cullen failed to present “undisputed evidence” of fraud.
The appellate court reversed the trial court’s decision and ruled in favor of Cullen, finding that the activity of the defendants presented nine of the 11 factors or “badges of fraud” set forth in the Illinois Uniform Fraudulent Transfer Act (UFTA) (740 ILCS 160/5) which give rise to an inference or presumption of fraud:
- There was a transfer of funds to a company “insider”, which term includes individuals who control the company and the relatives of such individuals, such as Robert and Lori Halpin.
- The action of transferring assets out of Westgate was concealed from Cullen.
- The transfer of Westgate’s assets to Burnham served to remove or conceal the assets themselves from Cullen.
- Before any of the transfers occurred, Cullen’s demand for arbitration had put the defendants on notice of a threatened lawsuit.
- Substantially all of Westgate’s assets were transferred.
- Westgate did not receive “reasonably equivalent value” in exchange for (a) its payment of a $400,000 development fee to Burnham or (b) its repayment of a $120,000 “loan” from the Halpins, the original payment of which, the court found, should have been a capital contribution from Burnham to Westgate under the terms of the company operating agreement.
- Westgate became insolvent after the transfers.
- The transfers occurred just 10 months after Cullen’s demand for arbitration and two months before the arbitration award was entered.
- Westgate had transferred assets to Burnham, a lienor, and Burnham then transferred those assets to the Halpins, who were insiders.
The court found that the defendants’ transfers of Westgate’s assets to themselves and other unsecured creditors when they knew about Westgate’s potential liability to Cullen amounted to fraud in violation of the UFTA.
While this finding of fraudulent activity of the defendants was a victory for Cullen, it did not necessarily follow that each of the defendants would be held personally liable for the obligations of Westgate to pay Cullen. This is because a company is ordinarily treated as a separate legal entity, the debts and liabilities of which its shareholders or principals are not responsible for.
However, the common law system has developed a legal doctrine by which the principal of a company may be held liable for the debts and obligations of the company. Where the principal has, for example, treated the company as a mere “alter ego”, failed to obey corporate formalities, or engaged in fraudulent activity, courts may “pierce” or “lift” the corporate veil to hold the principals liable for the actions of the company.
Under Illinois law, efforts to pierce the corporate veil of a company are governed by the law of its state of incorporation. As Westgate was a Delaware limited liability company, the court applied Delaware law, which states that the corporate veil may be pierced where there is fraud. The presence of nine of the 11 “badges of fraud” was enough to convince the court that the defendants had engaged in fraud. As a result, the court ruled that Cullen may pursue each of Burnham and the Halpins for the $457,416.37 Pennsylvania judgment against Westgate.
A recent Victorian Supreme Court case has clarified the impact of Commonwealth insolvency set-off provisions on State-based security of payments legislation.
The case demonstrates that although a principal is generally precluded from relying on a set-off or counterclaim in certain contexts under the Building and Construction Industry Security of Payment Act 2002 (Vic) (BCISP Act), this does not apply if the claimant is in liquidation, due to the operation of section 553C of the Corporations Act 2001 (Cth) (Corporations Act).
The case also provides useful commentary on what is considered a ‘payment schedule’ for the purposes of the BCISP Act.
If you would like to read more about this case, please click here.
 Façade Treatment Engineering Limited v Brookfield Multiplex Construction Pty Ltd  VSC 41.
The consequences for a contractor who delays in submitting an application for an extension of time, or who gets his payment application in late, can differ dramatically depending on the contract terms and also the governing law of the contract.
In order to ensure contractors submit their claims as they arise (rather than ‘roll them over’ to the end of a project) and to assist in efficient cash-flow management, it is common practice for both bespoke and standard form contracts to include express procedures for submitting claims for time, money or other relief. Provisions dealing with claims for an extension of time for example will frequently stipulate time limits for each of the following:
- the initial notification of the events giving rise to the claim,
- submission of particulars,
- a response/request for further particulars on behalf of the employer, and
- an assessment of what if any extension should be awarded.
What happens though if one of the parties does not complete the relevant action or step forming part of the procedure within the stipulated time?
This will depend first on what the contract says the consequences are to be. The usual practice in the standard forms mentioned above is to expressly provide that a failure to (say) submit the particulars of the claim strictly in accordance with the time period prescribed will invalidate the claim i.e the claim becomes “time barred”. Looked at in another way, such express provisions are seeking to make timely submission of the required particulars a condition precedent to recovery.
This raises the interesting question of whether such time bars are enforceable. On the one hand it would seem disproportionate to bar a substantial claim if a contractor was only one day late in filing its claim, but on the other hand, an employer might have made certain assessments as to liability and closed its position with respect to issues in relation to the events surrounding the claim. It would arguably be unfair to ignore the terms of the contract and permit the employer to continue to be exposed to claims.
The issue of enforceability will depend to a significant extent on the law of the contract. In common law systems such as the United Kingdom for example, clearly drafted time bars (such as those found in FIDIC sub-clause 20.1 and NEC3 clause 61.3) have in the past generally been enforced.
An issue which is however currently generating debate in the UK is how to properly assess the time period for first notifying an event. NEC3 clause 61.3 states that if the contractor does not notify a compensation event (i.e a variation) “within 8 weeks of becoming aware of the event, he is not entitled to a change in the Prices [or] the Completion Date”. FIDIC sub-clause 20.1 requires the contractor to give notice “as soon as practicable and not later than 28 days after the contractor became aware, or should have become aware of the event or circumstance [giving rise to the claim]”. Although both clearly state the condition precedent aspect of the timely giving of notice, the more difficult issue is when does that time start running?
There is frequently a delay between the time an event occurs, and when the effect of that event as giving rise to a claim is identified. Equally, for an ongoing event which spans several days or weeks (such as a prolonged period of bad weather), should notice be given on day one (on a ‘just in case’ basis even though the duration and effect of the event are unknown) or at the end of the event (which the effect is known but with the risk the employer will say you have given notice too late?). These were the type of issues considered by the UK courts in the 2014 case of Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar where the court said the notice provisions should be construed broadly, meaning the time should be calculated from when the contractor became aware (or should have become aware) of the delay, rather than from the date of the event itself.
Across the common law jurisdictions, the hardest line against time bars is taken in Australia, with the 2012 decision in Andrews v Australia and New Zealand Banking Group Ltd that such time bars can be unenforceable as penalties.
The approach in civil code jurisdictions such as the GCC generally take the middle ground.
The UAE Civil Code neither expressly prohibits time bars nor enforces them.
Instead, prescribed time periods need to be read in the context of certain provisions of the UAE Civil Code including:
- Article 106 – prohibiting the exercise of rights if the desired interest or result is disproportionate to the harm that will be suffered by the other party;
- Article 246 – requiring the parties to act in good faith; and
- Article 249 – prohibiting a party from exercising its rights in a manner that is oppressive or abusive
These provisions, read together, have the effect of meaning that time bars are neither expressly permitted nor expressly prohibited under UAE law. Instead, consideration will be given to matters which under common law are considered as being “equitable principles” such as whether the parties were acting in good faith, whether the actions are oppressive or unconscionable, and whether the benefit enjoyed by one party will be disproportionate to the harm suffered by the other party. Although such an approach is to be commended, since it ensures that a party is prevented from unnecessarily abusing its position under the contract, it does mean that the terms of the contract may be ignored in some instances. It is not clear as to the frequency at which courts in the UAE are willing to intervene and override the express terms of the contract, and this is an area we are continuing to monitor with interest.
Of course, a different scenario arises if a clause is silent on the consequences of a failure to submit a claim strictly in accordance with the time period prescribed by the construction contract. The question then becomes whether a time bar is implied when the prescribed steps to making a claim are not followed. One of the leading authorities on time-bars is Brember Handels GmbH v Vanden Avenne Izegem PVBA, HL which is authority for the proposition that, for a notice requirement clause to be a condition precedent, the clause must state the precise time for service and make it plain by express language that unless the notice is served within that time, the party required to give notice will lose its rights under that clause. Hence the conclusion should be that time bars will never be implied. However notably Jackson J in Multiplex Construction (UK) Ltd v Honeywell Control Systems permitted a time bar to be implied despite the contract being silent on the matter. Some commentators however have suggested that a clear intention for a condition precedent is required, and that the decision in Multiplex can be distinguished on the basis of the Prevention Principle. Although there is no clear guidance in the UAE on whether a UAE court would be willing to view notice requirements as a condition precedent without clear words to that effect, in our view the UAE courts do not follow the principles which are equivalent to those in Brembar but instead weigh up the circumstances of each case and determine the fairest approach.
  EWHC 1028 (TCC)
 (2012) 290 ALR 595
  2 Lloyd’s Rep 109
  EWHC 477 (TCC)
I. HICPA Does Not Foreclose Contractors From Recovery Under A Theory Of Quantum Meruit.
The Supreme Court of Pennsylvania recently held that the Home Improvement Consumer Protection Act, 73 Pa. C.S. § 517.1-517.18 (“HICPA”), does not preclude a contractor from recovering under the theory of quantum meruit in the absence of a valid and enforceable home improvement contract. Shafer Elec. & Const. v. Mantia, 96 A.3d 989 (Pa. 2014). The decision affirmed the holding of the Superior Court of Pennsylvania, albeit on slightly different grounds.
Instead of focusing on the General Assembly’s intent (as the Superior Court of Pennsylvania did), the Court relied on Durst v. Milroy General Contracting, Inc., 52 A.3d 357 (Pa. Super. 2012), holding that “the plain, unambiguous language of Section 517.7(g) does not prohibit the cause of action in quantum meruit.” Shafer Elec. & Constr., 96 A.3d at 996. The Court noted that “[i]t is well settled at common law . . . that a party shall not be barred from bringing an action based in quantum meruit when one sounding in breach of express contract is not available,” and that “[w]hile traditional contract remedies may not be available due to the contractor’s failure to adhere to Section 517.7(a) . . . Section 517.7(g) does not contemplate the preclusion of common law equitable remedies such as quantum meruit when a party fails to comply with subsection (a).” Id. The Court concluded that “[i]f the General Assembly had seen it fit to modify the right of non-compliant contractors to recover in contract or quasi-contract, statutory or common law, or otherwise, it could have done so,” but did not. Id.
The Court’s decision has important implications for contractors’ ability to use Pennsylvania’s mechanics’ lien law, 49 P.S. § 1101, et seq. as a tool in recovering unpaid amounts owed for work performed on a home improvement project. In Pennsylvania, mechanics’ liens must be based on a contract, either express or implied. See 49 P.S. § 1201 (defining “contractor” as one who, “by contract with the owner, express or implied, erects, constructs, alters or repairs an improvement . . . or furnishes labor, skill or superintendence . . . or supplies or hauls materials, fixtures, machinery or equipment reasonably necessary for and actually used . . .”) (emphasis added). The Court’s holding preserves a home improvement contractor’s ability to file and obtain a judgment on a mechanics’ lien based on an implied contract and in the absence of an express contract (i.e., where the contract does not comply with Section 517.7(a) of HICPA).
II. Quantum Meruit Allows Recovery Of The Value Of The Work Performed.
The Supreme Court of Pennsylvania’s decision in Shafer makes clear that contractors found to have an invalid home improvement contract under HICPA are still able to recover money for work performed by bringing a quasi-contract claim under a theory of quantum meruit. Where a contractor is successful in bringing a cause of action in quantum meruit, the contractor is entitled to recover the value of the benefit conferred on the homeowners. See, e.g., Durst, 52 A.3d at 360 (quoting Am. & Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc., 2 A.3d 526, 532 n.8 (2010) (“Quantum meruit is an equitable remedy to provide restitution for unjust enrichment in the amount of the reasonable value of services.”) (citing Black’s Law Dictionary (8th ed. 2004))); Com., Dep’t of Pub. Welfare v. UEC, Inc., 397 A.2d 779, 782 (Pa. 1979) (amount owed under a quantum meruit theory was “the reasonable value of the services performed”). As such, contractors should be prepared to prove the value of the services performed and materials provided on the project to recover under a theory of quantum meruit. Although the cost of materials and labor expended is normally a good proxy for the value conferred on a particular project, contractors should be mindful that under certain circumstances the value conferred may exceed the contractors’ costs and that, in those circumstances, relying on the contractors’ costs may undervalue the contractors’ quantum meruit claim.
III. The Case Law Interpreting HICPA Is Scarce.
There is a relative lack of caselaw interpreting HICPA and stating under what circumstances HICPA should apply. The legislative history of HICPA suggests that HICPA should not apply to all home improvement projects—in particular, those involving sophisticated homeowners (i) who have a contractor that fully performed, and (ii) who have obtained all of the benefits of the contract but have not complied with the burdens (i.e., payment). Given the undeveloped nature of the caselaw interpreting HICPA, contractors attempting to recover payment for unpaid work based on a home improvement contract should (if the facts permit) assert causes of action (or facts supporting causes of action) for both breach of contract and, in the alternative, quantum meruit recovery.
 The Superior Court of Pennsylvania focused its rationale on canons of statutory construction to ascertain legislative intent. See Shafter Elec. & Constr., 96 A.3d at 996.
 Section 517.7(g) “Contractor’s recovery right,” provides:
Nothing in this section shall preclude a contractor who has complied with subsection (a) from the recovery of payment for work performed based on the reasonable value of services which were requested by the owner if a court determines that it would be inequitable to deny such recovery.
Shafer Elec. & Constr., 96 A.3d at 992.
 The General Assembly enacted HICPA to protect vulnerable consumers, such as the elderly, infirm, and first-time homebuyers from predatory contractors (i.e., contractors that abscond with homeowners’ money without completing the work). See 2008 Pa.H.R. Jour., No. 65 p.2292 (Statement of Representative Preston) (“If you care about the senior citizens or the young couple who is buying a first-time starter house and they want to be able to remodel it and not be able to be ripped off,” then “I am going to ask [those] members…to support the Tomlinson bill.”); 2008 Pa.H.R. Jour., No. 64, p.2199 (Statement of Representative Marsico) (the Pennsylvania Legislature’s intent behind HICPA was to “address the problems of home improvement contractors who take people’s money and leave town without doing the work”).
London partner Matthew Smith recently attended the International Railway Summit 2015 in Barcelona. The International Railway Summit provides a meeting ground for senior decision makers from the world’s key rail operators, transport ministries and solution providers. Matthew had the opportunity to discuss the importance of risk assessment, project delivery structure, and risk allocation in rail contracts as a presenter at the conference.
To view a copy of the full presentation titled “Procurement Strategies for Major Rail Projects,” please click here.
A recent decision by the New Jersey Supreme Court in Atalese v. U.S. Legal Servs. Grp., and subsequent opinions by New Jersey’s state and federal courts applying Atalese, strongly suggest that arbitration provisions contained in contracts relating to construction and engineering projects and services will not be enforceable under New Jersey law unless they contain clear and unambiguous language signaling that the parties are surrendering their rights to pursue their claims in court.
The Atalese Decision
In its September 2014 opinion in Atalese, the New Jersey Supreme Court reversed the rulings of the lower courts and held that an arbitration provision in a consumer contract was unenforceable because it “did not clearly and unambiguously signal to plaintiff that she was surrendering her right to pursue her statutory claims in court.” Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 99 A.3d 306 (2014). A detailed discussion of the Supreme Court’s holding in Atalese can be found in our October 2014 Commercial Disputes Alert.
Recent Decisions Applying Atalese
In the months since Atalese, New Jersey’s state and federal courts have already cited the Supreme Court’s opinion on several occasions and, in doing so, have rejected arguments that Atalese is limited to consumer contracts and that it does not apply to contracts involving sophisticated business parties and/or parties that are represented by counsel in connection with execution of the contract. To the contrary, New Jersey’s Courts have expanded the Atalese requirement for arbitration provisions to apply to a broad variety of contracts types:
- Asset Purchase Agreements: In Rosenthal v. Rosenblatt, the Appellate Division of the New Jersey Superior Court applied Atalese to an arbitration provision contained in an asset purchase agreement for the sale of a dentistry practice. See A-3753-12T2, 2014 WL 5393243, at *4 (App. Div. Oct. 24, 2014). The court held that the arbitration provision was unenforceable because it did not contain “clear and unambiguous language that plaintiff is giving up his right to bring his claims in court or have a jury resolve the dispute,” as required by the Atalese decision, despite stating that all disputes between the parties “shall be exclusively resolved as provided herein through mediation and arbitration.” The court specifically stated that the Atalese requirement for arbitration applied even between parties engaged in sophisticated business transactions.
- Condominium Purchase Agreements: In Dispenziere v. Kushner Cos. (the first published opinion to apply Atalese), the Appellate Division held that an arbitration provision contained in purchase agreements between a condominium developer and condominium unit purchasers was not enforceable because, like the provision involved in Atalese, it was “devoid of any language that would inform unit buyers such as plaintiffs that they were waiving their right to seek relief in a court of law.” 438 N.J. Super. 11, 18 (App. Div. 2014). The Appellate Division expressly rejected the position that Atalese—which only involved causes of action pursuant to the New Jersey Consumer Fraud Act and the New Jersey Truth-in-Consumer Contract Warranty and Notice Act—is limited to claims for statutory violations and, instead, held that Atalese applies equally to common-law causes of action. The Appellate Division also rejected the argument that Atalese should not apply when the parties are represented by counsel in connection with the execution of the contract.
- Collective Bargaining Agreement: In the Appellate Division’s unpublished opinion in Kelly v. Beverage Works N.Y. Inc., the court applied Atalese to an employment discrimination case and held that an arbitration provision contained in a union employee’s collective bargain agreement (CBA) was unenforceable because the provision did not “put plaintiff on notice that he was waiving his right to try his claims in court.” L-1285-13, 2014 WL 6675261 (App. Div. Nov. 26, 2014). The Appellate Division specifically rejected the argument that Atalese applied only to “consumer service agreement[s],” explaining that it “discern[s] no reason to conclude that employees bound by a CBA should be charged with greater understanding of their rights than the average consumer.”
New Jersey’s federal courts have also applied Atalese on at least two occasions. In Guidotti v. Legal Helpers Debt Resolution, the District Court of New Jersey held that an arbitration provision contained in an agreement to provide debt-adjustment services was unenforceable because it failed to advise the plaintiff of the provision’s effect and significance, “namely, that it bars [plaintiff] from seeking court relief.” No. 11-1219, 2014 WL 6863183, *1 (D.N.J. Dec. 3, 2014). In Ricci v. Sears Hldg. Corp., the District Court cited Atalese and held that an arbitration provision in an employment agreement containing the following language was enforceable: “[This agreement to arbitrate] constitutes a waiver of [the employee’s] right to bring the current action in a court of law and, instead, requires arbitration of [the employee’s] claims.” No. 14-3136-RMB-JS, 2015 WL 333312, at *1, 5 (D.N.J. Jan. 23, 2015).
On January 21, 2015, the defendant in Atalese filed a Petition for Writ of Certiorari with the United States Supreme Court, arguing that the New Jersey Supreme Court’s decision contradicts the plain language of the Federal Arbitration Act and conflicts with the decisions of other federal and state courts. Whether the Court will grant the Petition in Atalese is questionable. The New Jersey Supreme Court framed the question in Atalese as one of purely New Jersey contract law, and the United States Supreme Court receives approximately 10,000 petitions for a writ of certiorari each year but grants only 75–80. For now, Atalese is binding precedent, and companies doing business in New Jersey should review their contracts to evaluate whether they comply with Atalese. Companies should be mindful that they may face uphill battles enforcing arbitration provisions that were routinely enforced prior to Atalese. Moreover, the opinions in Rosenthal, Dispenziere, Kelly, Guidotti, and Ricci demonstrate that courts will not limit Atalese to statutory claims, and may extend Atalese beyond consumer contracts. Companies should also be mindful that Atalese will apply in federal court when the contract is governed by New Jersey law.
By Gregory R. Andre, K&L Gates, Chicago
To meet the demands of an aging population and health care reform, many new hospitals and other health care facilities are being built. These projects are typically large, costly and complex and, therefore, merit careful attention to cost control and efficiency. The health care industry is using new teamwork approaches to design and construct new facilities that significantly reduce project costs, shorten schedules, minimize claims and disputes and improve overall project quality.
To read the full alert, click here.