K&L Gates Construction Law Blog : Construction and Engineering Lawyers & Attorneys : K&L Gates Law Firm : Financing, Development, Dispute Resolution, Government Contracting

By Michael Schrier and Joel Rubinstein

The State of Maryland is cracking down on what it perceives to be a problem with construction or landscaping contractors and subcontractors misclassifying workers as “independent contractors” instead of as “employees.” Maryland’s new enforcement mechanisms have the potential to impose significant penalties for misclassification. As a result of these new enforcement schemes, all construction companies with workers located in Maryland and who are classified as “independent contractors” should carefully review such classifications for compliance with new statutory and enforcement regimes to make sure such workers have not been inadvertently misclassified.

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By Peter Dzakula, K&L Gates

1. What is the risk?

Since the end of April 2009, when swine flu (Influenza A(H1N1)) was first reported in Mexico and the United States , swine flu has spread globally. It has been reported that there are now almost 36,000 cases in 76 countries (with over 6,000 cases in the UK ).  As a result, the World Health Organisation has raised the swine flu alert to "Phase 6" and referred to it as a "global pandemic".  At this stage, it has been reported that the symptoms of swine flu have been mild and the number of deaths, globally, have been in line with seasonal flu averages.  However, it has been said that if the virus mutates and becomes more virulent it will pose a greater threat, particularly in the winter months.  The consequences under construction contracts used for major projects in such a scenario are examined below.

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By Ian Meredith, K&L Gates

This chapter was first published in the PLC Cross-border Dispute Resolution Handbook 2009/09 Volume 2: Arbitration Handbook and is posted here with permission.

All too often the dispute resolution clause is the clause that receives the least attention. Pre-existing clauses are cut and pasted from existing agreements with little or no assessment made of the suitability of specific provisions, often late in the life of the drafting process. While any form of dispute resolution clause is rarely high on a party’s list of priorities when the contract is drawn up, the terms of that clause may well be crucial in the event of a dispute.

This chapter considers:

• The essential requirements of a valid agreement to arbitrate.
• Core provisions of an arbitration clause.
• Further optional provisions to address specific requirements.
• The interaction with other forms of dispute resolution.

To read the rest of this chapter, click here.

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Fort Worth Business Press, March 9, 2009
By K&L Gates Partner,  David Coale

A critical component is shipped from Asia, sent across Texas by a distributor, and used on a Fort Worth construction project before it breaks and causes weeks of delay. Who in this “stream of commerce” may be responsible?

The owners of a corporation are generally protected from liability for the acts of the company.  Even so, under the “single business enterprise” doctrine, Texas law once held that a company could be responsible for the liability of another if they shared a name or operations such as accounting, employees, offices, and finances.

Read the entire article here.

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By K&L Gates partner, Ian Meredith, and published in The Metropolitan Corporate Counsel.

As many businesses experience declining growth in their domestic and traditional markets, they are looking increasingly towards the "BRIC" countries (Brazil, Russia, India and China) and other high growth economies outside their traditional trading areas.  The report of the International Monetary Fund entitled the "World Economic Outlook" which was released on 9 April 9, 2008 downgraded projections for growth in 2008 and 2009 across the major Advanced Economies including those of the US, Canada and Western Europe whilst continuing to project relatively higher rates of growth across certain Emerging and Developing Economies including China and India.  It seems likely that the move by many US businesses to target Emerging and Developing Economies will gather pace.

This article will assess the extent to which international arbitration can play a role in assisting US businesses in managing commercial risk when seeking to invest and/or trade in higher risk overseas markets and it will provide a number of suggestions on ways to limit risk[1].

Read the full article here.

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New legal implications arise from building environmentally friendly

By K&L Gates attorneys Patrick J. Perrone and Loly Garcia Tor, and David Crump Jr., Director of Legal Research for the National Association of Homebuilders

Appearing in the March 24, 2008 issue of the New Jersey Law Journal, this article explores the potential risks builders may face when building and marketing “green” homes and buildings.

View the full article here.

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By K&L Gates attorneys Richard F. Paciaroni and Janet M. Serafin

Limitation of liability clauses are frequently relied upon in design and/or construction contracts to manage risk by limiting the damages recoverable from contractors and design professionals.  Historically, these clauses have generally been upheld, particularly when the contracting parties are both sophisticated entities.  However, a growing concern over the trend of design professionals requiring contracting partners to indemnify them, despite the former’s own negligence, caused most states to adopt anti-indemnity statutes.  What remains somewhat uncertain is how these anti-indemnity laws affect the enforceability of limitation of liability clauses.  Two recent cases have invalidated a limitation of liability clause under the relevant anti-indemnity statute.  While these cases still represent the minority view, they beg the question of the prudence of continued reliance on such clauses, particularly in jurisdictions which have not yet ruled on the issue.

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By K&L Gates attorneys John R. Dingess and Kari M. Horner

In December 2006, the Connecticut Department of Transportation (“ConnDOT”) was surprised by the lack of contractor response to its request for proposals for a $400-million plus, seven-year project to build a ten-lane bridge replacement for the Pearl Harbor Memorial Bridge on Interstate 95.  Not a single contractor bid on the project.

Contractors were likely hesitant to build on the Pearl Harbor Memorial Bridge project because of uncertainties and difficulties in predicting labor and material costs for a seven-year project.  One surety commented that the length of the project also contributed to the "risk profile" of the project.  Another deterrent was the fact that the contract terms placed most of the risk on contractors, while also imposing high liquidated damages for failing to meet milestones.  In response to the lack of bids, ConnDOT may break up the project or re-allocate the risk to lessen the risk burden on the contractors.

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By K&L Gates partner Jason L. Richey

Imagine a contractor who has done an outstanding job of building a magnificent skyscraper in the heart of one of the world’s largest cities.  The skyscraper is 65% complete, expected to be finished on time and within budget.  The contractor has not defaulted, and proudly touts that this construction project will be the centerpiece of the company’s accomplishments.  Suddenly, the owner of the project notifies the contractor that it has been terminated from the job for the owner’s convenience.  To complete the skyscraper, the owner replaces the contractor with one of its competitors.  Can the owner unilaterally terminate the contractor even though the contractor was not in default?  If so, what compensation is the contractor entitled to recover?  The answer to these questions lies within the termination for convenience provision which has become increasingly common in private construction contracts.

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By K&L Gates attorneys Jason L. Richey and William D. Wickard

Contractual provisions that mutually waive the rights of the owner and contractor to recover consequential damages have become common-place in today’s construction contracts.  Effective waivers will expressly define the type of consequential damages the provision is intended to bar.  Such a provision will allow courts and arbitration panels to dismiss all or part of a construction case at an early stage if the waiver clearly bars a demand for certain types of consequential damages.  However, a broad consequential damages waiver that is improperly drafted may cause contractors and owners to expend significant time and money defending claims that seek damages for delay, lost profits or other damages commonly thought to only be “consequential.” 

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By K&L Gates attorneys Timothy L. Pierce and R. Michael Viayra, Jr.

Express indemnity clauses are a common component in virtually all construction contracts, yet they are routinely included in such contracts without a full understanding of the risk transfer objectives of the parties or whether the indemnity clause fulfills those objectives.  Indemnity clauses are risk transfer provisions whereby one party seeks to shift the risks of claims on a construction project down the line to the entity closer to the actual work.  Typically such clauses transfer risk from the owner to the general contractor and subsequently to the subcontractors.  This article examines the forms of indemnity clauses, issues often not specifically addressed in such clauses, jurisdictional limitations on indemnity provisions and the influence such clauses may have on additional insured coverage.  Finally guidance is provided on ways to negotiate more effective indemnity clauses.

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By K&L Gates attorneys Joseph L. Luciana, III and Thomas C. Ryan

Proper risk allocation is critical to the ultimate success of a construction project.  And, the cornerstone of proper risk allocation for any construction project is a well-conceived and appropriately tailored insurance program.  Too often, the concept of insurance remains an afterthought because contracting parties blindly rely on standard language in form agreements prepared earlier without fully investigating and understanding the current insurance market conditions.  Moreover, most contractors do not want to consider the possibility of a disaster or another party’s failure to perform that may have project-wide implications.

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This article, by K&L Gates attorneys David R. Cohen and Kari M. Horner, appears in the April 2007 edition of Construction Law International, the magazine of the IBA International Construction Projects Committee. 

Important amendments to the US Federal Rules of Civil Procedure (the Rules) relating to electronic discovery in litigation became effective on 1 December 2006.  Every party involved in litigation in US federal courts should become familiar with these Rules.  This article provides an overview of the key provisions of the new Rules.

View the full article here.

This article was first published in the Construction Law International Vol 2 No 1, April 2007, and is reproduced by kind permission of the International Bar Association, London, UK.  © International Bar Association 2006.

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This article, by K&L Gates London partner Christopher G. Causer, appears in the April 2007 edition of RICS Construction Journal.  It explains the "ins and outs" associated with PFIs and presents arguments for making the whole process easier, and more accessible, for all parties.

PFI has its detractors and it is sometimes difficult to draw out any clear principles from the mass of claims, counterclaims and innuendo appearing in the press – and even in academic journals.  But there is one undeniable fact:  as a procurement method, PFI is complex and requires a high level of intervention from external legal advisors.  It is hard to envisage a PFI project reaching contractual close without at least three sets of lawyers working on it.

So how has the nature of the lawyers’ work changed since PFI started in the early 1990s?  What changes are likely in the next few years, and are there any obvious ways in which the delivery of services can be improved?

View the full article here.  Posted with permission.

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This article by Preston Gates & Ellis Anchorage partner Paul L. Davis appears in the May 2006 edition of Alaska Business Monthly.  It discusses how the search for front-end efficiencies can derail construction project agreements:

In all but the smallest construction projects, written project agreements are a necessity and, depending on the complexity of the project and number of parties involved, can evolve from a few pages to many.  When anticipating construction projects, parties often spend more time visualizing the project itself, overlooking the time or money necessary to fully develop a new project agreement.  The result is the frequent use of standard form agreements that are modified, many times by the parties themselves, to fit the circumstances of the new project’s specifications.  While this may create efficiencies, project owners may find themselves more disadvantaged by the use of standard forms than contractors and designers.

View the full article here.

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By Michael R. Gordon, Ruvym D. Gilman, Kathryn Plunkett and contribution by John R. Nolon, professor at the Pace University  School of Law and counsel to its Land Use Law Center.

This article appeared in the New York Law Journal on January 17, 2006.

Lawyers practicing in the design and construction fields cannot ignore emerging trends, and “green construction”— the use of environmentally conscious design, construction, and operation methods to create sustainable commercial and residential buildings—is an emerging trend.  For New York construction lawyers, it is an important trend because New York is leading the nation in green construction.  The number of green buildings and green construction projects underway in New York is steadily increasing.  Completed green buildings in New York City include the Solaire residential buildings in Battery Park City and Four Times Square.  Still to be completed are the Hearst Magazine Building and the Bank of America Tower near Bryant Park, to name a few.

Why the focus?  There are a number of reasons, including a concern for energy efficiency and a growing environmental consciousness, but the most notable cause is no doubt the adoption of mandatory green construction laws and guidelines and the creation of financial incentives on municipal, state and federal levels. . . . 

Read the full article here.

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The building boom could hit many parties in the head.

By K&LNG attorneys Michael R. Gordon and Daniel J. Doron

New York Law Journal:  Trends in Real Estate and Title Insurance
April 11, 2005

We are in the midst of one of the great construction booms in recent history.  There are over 75 high-rise buildings under construction in New York City, with dozens of others being renovated or reconstructed.  The Freedom Tower, the Hearst Magazine Building, the Atlantic Yards Project in Brooklyn, and 505 Fifth Avenue are all underway.  An overhaul of the Hudson Rail Yards on the Lower West Side is imminent, as the New York Sports and Convention Center or as another major redevelopment project.  In such an environment, buyers and sellers of construction services must be mindful of recent developments in construction law.  This article highlights a few of those developments.

View the full article here.
Posted with permission.

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