2011 – Page 2 – Construction Law

Are Prevailing Wages “Prevailing”? – GAO Report Finds Fault with Davis-Bacon Act Wage Determinations

Jul 01 2011

By: Lawrence M. Prosen, Samson Y. Chen, K&L Gates, Washington DC

On March 22, 2011, the United States Government Accountability Office (“GAO”) released a report (the “Report”) raising several issues with how the U.S. Department of Labor (“DOL”) has been making Davis-Bacon Act wage determinations. This is a significant report, in that the Davis-Bacon Act plays a substantial role in federal and federally funded construction projects throughout the United States. The Davis-Bacon Act, located at 40 U.S.C. 3141 et seq., requires contractors on federally funded construction projects in excess of $100,000.00 to pay locally “prevailing wages” to their hourly paid field employees performing work on the project site. In other words, in order to bid on federal construction projects, construction contractors and subcontractors alike must pay their field employees at least as much as other construction workers in the area earn as determined by the DOL’s Wage-Hour Division. The Davis-Bacon Act’s stated purpose is to preserve local wage standards and promote local employment. This alert briefly highlights DOL’s problems in determining wage rates and summarizes GAO’s recommendations for improvement.

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Prompt Payment Penalties: CA Court of Appeal Relaxes Standard, “Good Faith Dispute” To Be Proven By Objective Evidence

Jun 29 2011

FEI Enters., Inc. v. Kee Man Yoon, 194 Cal. App. 4th 790 (2011)

To encourage general contractors to make timely payments to subcontractors, California Business and Professions Code section 7108.5 requires a general contractor to pay its subcontractors within 10 days of receiving a corresponding progress payment from the project’s owner, unless the parties agree otherwise in writing. If the general contractor fails to do so, the subcontractor may recover a payment penalty. That penalty is fixed at 2% of the amount due per month for every month the payment is not made.

The general contractor, however, may withhold progress payments and avoid the payment penalty if there is a “good faith dispute” over the amount owed. The question is what constitutes a “good faith dispute.” In the recent case of FEI Enters., Inc. v. Kee Man Yoon, 194 Cal. App. 4th 790 (2011), the California Court of Appeal held that a “good faith dispute” exists “where the arguments asserted or positions taken have objective legal tenability.” In other words, the subcontractor does not need to show what a general contractor believed in his or her own mind. The subcontractor only needs to show objective evidence that the general contractor’s actions were unreasonable.

Can Government Contractors Certify That Their Goods and Services “Exist in Productive Harmony” with Nature? New Rule for Federal Green Contracting

Jun 23 2011

By: Lawrence Prosen, Barry Hartman, Nickolas Milonas, K&L Gates, Washington D.C.

Federal Agencies Issue Interim Rule Promoting Sustainability & Green Building

Sustainability and “green building” have continued to gain momentum and visibility. Over the past several years, the Federal Government and its various agencies and administrations have increased the extent to which these goals are embodied in government contracting, ranging from green design outlined in the U.S. Green Building Council’s LEED (Leadership in Energy and Environmental Design) requirements to the use of recycled paper for printers and copiers. This trend has continued to gain prominence through such things as changes in building codes to President Obama’s issuance of Executive Orders on the topic. See Exec. Order No. 13,423; Exec. Order No. 13,514.

On May 31, 2011, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration issued a joint interim rule (the “Rule”) that for the first time directly and specifically incorporates sustainability requirements into the Federal Acquisition Regulation (located at Title 48 of the Code of Federal Regulations). 76 Fed. Reg. 31,395 (May 31, 2011). The Rule took effect immediately and implemented the aforementioned Executive Orders that require Federal agencies to lead by example in conservation and energy efficiency.

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International Commercial Arbitration in Brazil – A Primer

Jun 22 2011

By: Richard F. Paciaroni, K&L Gates, Pittsburgh

Background

Pre-1980 Brazil could rightly be said to have been hostile towards arbitration, clinging to the “Calvo doctrine” which did not permit foreigners any different treatment than Latin American nationals. In the late 1980’s, however, Brazil began to emerge from its shell and take its first steps towards a more modern approach in respect of international arbitration.

The first movement towards modernization was Brazil’s ratification of the Panama Convention in 1995, closely followed by: (1) the adoption, in 1996, of its own national arbitration law, Law No. 9.307, 23 September 1996 (the “Arbitration Act”) and (2) the adoption of the Mercosur Protocol in 1998, all of which set the stage for modern arbitration practice in Brazil. While the new Arbitration Act was enacted in 1996, it took another five years to come into full force due to a constitutional challenge lodged in the Brazilian Supreme Court, which ultimately decided, in December 2001, that the Arbitration Act was constitutional. After 2001, the Brazilian courts have routinely enforced arbitration clauses in commercial contracts, thus bringing Brazil in line with internationally accepted standards. With the ratification of the New York Convention in July 2002, Brazil joined the family of nations who offer a viable legislative and enforcement framework for international arbitration proceedings.

Further adding to the acceptance and visibility of the arbitration practice in Brazil are the actions of the Brazilian Arbitration Committee (“CBAr”) which has taken steps in recent years to promote international arbitration in Brazil by forming relationships with international institutions like the ICC, LCIA and ICDR and by holding major conferences in Brazilian cities, such as the ICCA bi-annual convention which was held in Rio de Janeiro in 2010. What follows is a brief summary of the key points of the Arbitration Act and various court decisions that provide support for international commercial arbitration in Brazil.

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Sales of Goods: Battle of the Forms Under UCC and CISG – A Practical Perspective (Live Audio Conference)

Jun 07 2011

Offered via Webinar by Lorman Education Services

Please join K&L Gates partners Jason L. Richey and Richard F. Paciaroni for this informative seminar on Wednesday, August 10, 2011 at 1:00 p.m. U.S. Eastern Daylight Time. (CLE credit is being provided for this event, where available. See the registration link to the right for more details.)

Session Description
This live audio conference will focus on Standard Terms and Conditions for Sales of Goods, Uniform Commercial Code (UCC) 2-207 “Battle of the Forms,” and a discussion of the UN Convention on the International Sale of Goods (CISG) with an emphasis on the outcome of the Battle of the Forms.

The session will analyze when the UCC and CISG apply to certain transactions. We will then look at “best practices” in use for standard forms for both buyers and sellers, examine some example scenarios and compare and contrast likely outcomes between UCC and CISG controlled contracts. The program will also look at recent legal developments for both the UCC and the CISG.

Registration:
Click here to register and receive a 20% discount. When registering, use priority code 15800 and discount code F2716129.

Supreme Court Ruling Impacts Arbitration Appeals

May 31 2011

By: Jason L. Richey, Amy Ream, K&L Gates, Pittsburgh

Following the Supreme Court’s decision in Hall Street Associates, LLC v. Mattel, courts across the country have divided as to whether an arbitrator’s “manifest disregard of the law” remains a proper basis for judicial review of arbitration awards. For construction disputes taken to arbitration, this unsettled question could impact the final outcome of the dispute.

Whether “manifest disregard of the law” is an acceptable ground for judicial review of an arbitration award concerns the application of the Federal Arbitration Act (FAA). The FAA provides expedited judicial review for confirming, vacating, or modifying an arbitration award. Under the FAA’s expedited review process, a reviewing court must confirm an arbitration award unless a specific ground for judicial review exists. The primary grounds for judicial review appear in the statute itself, under sections 10 and 11 of the FAA. These sections set forth specific grounds, such as an arbitrator’s material miscalculation of an award, that trigger a court’s power to vacate or modify an award.

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Architects Beware – You Better Be Licensed In The Project Location, Even If It’s Foreign Soil

May 10 2011

By: Lawrence M. Prosen, K&L Gates, Washington, D.C.

Sturdza v. United Arab Emirates, 11 A.3d 251 (D.C. 2011)

In a case of first impression in the District of Columbia (“D.C.”), an Architect has been barred from recovering fees for architectural services in the District of Columbia where the architect lacked a license to practice in D.C. when it negotiated terms for a services contract. This bar was upheld even where (a) the architect was licensed in another jurisdiction; and (b) the project was actually on “foreign soil” in that it was for the Embassy of the United Arab Emirates (“UAE”) located in the United States.

Subcontractor Not Prejudiced When Contractor Stipulates to Liability

May 09 2011

By: Bonita Gutierrez, Anthony Badaracco, K&L Gates, New York

Zawadzki v. 903 E. 51st Street, LLC, 80 A.D.3d 606, 914 N.Y.S.2d 272 (N.Y. App. Div. 2011)

In this case, the injured plaintiff, subcontractor’s employee, sued the owner and general contractor of a construction contract in Brooklyn. The owner filed a third-party complaint against the subcontractor, which filed cross-claims against the contractor for contribution and indemnification. The contractor filed a fourth-party complaint against the subcontractor, seeking indemnification. The Appellate Division, Second Department, denied the subcontractor’s motion to dismiss or sever the fourth-party indemnification complaint, brought on the ground that the subcontractor would be prejudiced by the contractor’s stipulation of liability, to which the subcontractor did not consent. The court found that the subcontractor was not prejudiced, because even though the contractor admitted liability, the subcontractor still could assert a defense to the contractor’s indemnification claim on the ground that the contractor was actively negligent and therefore not entitled to indemnification.

K&L Gates’ Arbitration World, May 2011

May 05 2011

From the Editors

Welcome to the 15th edition of Arbitration World, a publication from K&L Gates’ Arbitration Group. This special edition focuses on issues and recent developments in the insurance coverage field. We also include our usual round-up of news items in international commercial arbitration and investment treaty arbitration.

We hope you find this edition of Arbitration World of interest, and we welcome any feedback (email ian.meredith@klgates.com or peter.morton@klgates.com).

In this Issue:

News from around the World
World Investment Treaty Arbitration Update
Business Interruption Claims and Natural Disasters
Drafting Arbitration Clauses for Insurance Policies
Repeat Arbitrator Appointments and Issue Conflicts in Bermuda Form Arbitrations
Continued Conflict over Whether McCarran-Ferguson Act “Reverse Pre-emption” Bars International Insurance Arbitrations
Political Risk Insurance – Making Recoveries and the Use of Arbitration
U.S. Courts Expand the Extent of Insurance Coverage for Construction Defects under Commercial General Liability Policies

View the entire May 2011 edition here.

Heads Up – SBA Makes Major Revisions and Changes to 8(a) Program

Apr 01 2011

By: Lawrence M. Prosen, Andrew R. McFall, K&L Gates, Washington, D.C.

The United States Small Business Administration’s (“SBA”) 8(a) Small Business Development Program plays a significant role in federal procurement. The 8(a) program was developed by the SBA, from enabling legislation known as the Small Business Act, to assist small disadvantaged businesses (“SDBs”) owned by socially and economically disadvantaged individuals.

In recent years, the United States Congress and the United States Government Accountability Office (“GAO”), as well as various Offices of Inspector General and “watchdog groups,” have increasingly monitored and investigated the 8(a) program. As a result of these investigations and oversight, the GAO released a report on March 2010, which identified a number of contracts that had been awarded to businesses that were not eligible for the 8(a) program. Concurrent with various investigations, the SBA began the process of updating the regulations that govern the 8(a) program. On February 11, 2011, the SBA published its final revised 8(a) program regulations, which are the first significant changes to the program in a decade or longer. This white paper focuses on a few key provisions in the new 8(a) regulations that affect not only the SDBs themselves, but often large businesses as well.

To view the complete white paper, click here.

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