Category: The Americas

1
Flintco Pacific, Inc. v. TEC Mgmt. Consultants, Inc.: “Reasonable Reliance” on Subcontractor’s Bid
2
Considerations for Construction Industry Employers as They Continue to Prepare for New Salary Thresholds Under White-Collar Overtime Exemptions
3
Building from the Sky Down: New FAA Rules Affect Use of Drones in Construction Industry
4
Picerne Constr. Corp. v. Castellino Villas
5
New Jersey Supreme Court Gives Supreme Win to Policyholders
6
Welcome to the 32nd Edition of K&L Gates’ Arbitration World
7
THE CURIOUS CREATURE THAT IS A MECHANIC’S LIEN IN BANKRUPTCY
8
Timely Response to U.S. Army Corps of Engineers Notice Critical for Stakeholders Interested in Securing Congressional Authorization for Future Water Resources Development Projects
9
Preparing for a New Era in the Design and Construction Industry
10
How Are Your Construction Activities Regulated under OSHA’s Final Silica Rule?

Flintco Pacific, Inc. v. TEC Mgmt. Consultants, Inc.: “Reasonable Reliance” on Subcontractor’s Bid

By Timothy L. Pierce, Hector H. Espinosa, and Benjamin Kussman, K&L Gates, Los Angeles

In California, general contractors can “reasonably rely” on subcontractors’ bids when submitting their own bids to the owner.  In Flintco Pacific, Inc. v. TEC Mgmt. Consultants, Inc., Case No. B258353 (July 19, 2016), the California Court of Appeal addressed what constitutes “reasonable” reliance, holding that it was unreasonable for a general contractor to rely on a subcontractor bid based on price alone, while ignoring other, material conditions of the offer.

In Flintco, Flintco Pacific, Inc. (“Flintco”), a general contractor, received a bid from TEC Management Consultants (“TEC”) to perform subcontract work on a community college building project.  In addition to the bid price of $1,272,960, TEC’s bid included the following conditions: (1) a 35% up-front deposit; (2) the right to withdraw its bid if not accepted within 15 days; and (3) a minimum 3% price escalation, per quarter, after the 15-day acceptance period.  Flintco used TEC’s bid price in compiling its own bid and was awarded the contract in July 2011. Read More

Considerations for Construction Industry Employers as They Continue to Prepare for New Salary Thresholds Under White-Collar Overtime Exemptions

By Amy L. Groff, K&L Gates, Harrisburg and Matthew D. Duncan, K&L Gates, Raleigh

Employers in the U.S. construction industry should act now to address recent changes to the overtime exemptions for “white-collar” employees. On May 18, 2016, the U.S. Department of Labor (DOL) published its highly anticipated final rule, which more than doubles the salary threshold required for certain executive, administrative, and professional employees to qualify for an exemption from overtime pay under the Fair Labor Standards Act (FLSA). The new rule will take effect on December 1, 2016. In this relatively short time frame, employers must review their current practices, determine which positions should be reclassified and how they should be classified and paid, consider related policies that should be revised, and plan how to communicate changes to employees.

These changes to the overtime exemptions will touch almost every employer in the country, but they are likely to have a disproportionate impact on construction-related businesses, which are among the industries projected to have the most affected workers. The final rule makes it much more difficult to treat employees such as first-line construction supervisors as exempt from overtime pay, and employers are now required to make hard staffing and economic choices in their businesses.

To read the full alert on K&L Gates HUB, click here.

 

Building from the Sky Down: New FAA Rules Affect Use of Drones in Construction Industry

By Gregory R.  Andre, K&L Gates, Chicago and Thomas R. DeCesar, K&L Gates, Harrisburg

On August 29, 2016, the Federal Aviation Administration’s (FAA) long-awaited final rules regarding the commercial operation of small unmanned aircraft (a.k.a. drones) become effective.[1] The FAA’s new rules, which will primarily be codified under Part 107 of the Federal Aviation Regulations, are a major step for the eventual integration of unmanned aircraft into business operations nationwide. Part 107 represents the FAA’s first comprehensive regulation of unmanned aircraft operations.

Before Part 107, companies had to obtain preapproval through the lengthy Section 333 exemption process (named for Section 333 of the FAA Modernization and Reform Act of 2012) before conducting commercial unmanned aircraft operations. The Section 333 exemption process imposed significant restrictions on unmanned aircraft operations and required operators of unmanned aircraft to have a pilot’s certificate. The new rules, however, generally permit companies to use unmanned aircraft in commercial operations without obtaining preapproval from the FAA and with fewer restrictions than were required under Section 333 exemptions.  In addition, the rules create a new class of pilot’s certificate specific to unmanned aircraft that is easier to obtain than a typical pilot’s certificate.

The construction industry will stand to benefit from Part 107, as unmanned aircraft can be employed in a variety of operations helpful to construction companies, including: topographical surveys, access to hard-to-reach locations, job progress tracking, videography/marketing, building and structure inspections, site security, safety, and general construction site troubleshooting. In fact, in an early survey of companies seeking FAA authority to use unmanned aircraft, nearly half of applicants identified the construction industry as a field where they would use their device.[2] This post summarizes the new FAA rules and highlights a few issues of particular importance in the construction industry.

Read More

Picerne Constr. Corp. v. Castellino Villas

By Hector H. Espinosa and Benjamin Kussman, K&L Gates, Los Angeles

Under California’s mechanic’s lien laws, a general contractor has 90 days from “completion” of its work to record a claim of mechanic’s lien. Ca. Civ. Code §8412.  Previously, it remained unsettled as to when this 90-day period began to run because some California courts held that the 90-day clock was triggered upon substantial completion of contractor’s work.  In Picerne Constr. Corp., the California Court of Appeal rejected this interpretation of Ca. Civ. Code §3115[1], ruling that completion (for purposes of the 90-day window) only occurs upon “actual completion” of the work of improvement as defined by statute.

Read More

New Jersey Supreme Court Gives Supreme Win to Policyholders

By Frederic J. Giordano, Robert F. Pawlowski, Denise N. Yasinow, K&L Gates, Newark

On August 4, 2016, the Supreme Court of New Jersey unanimously affirmed the Appellate Division’s holding that consequential damages caused by a subcontractor’s faulty workmanship constitute “property damage” and an “occurrence” under the 1986 Insurance Services Office, Inc. (“ISO”) form commercial general liability (“CGL”) insurance policy.  This holding is welcome news to real estate developers, general contractors, and commercial policyholders who may seek coverage for damage caused by the faulty work of their subcontractors.

To read the full alert, click here.

Welcome to the 32nd Edition of K&L Gates’ Arbitration World

Welcome to this 32nd edition of Arbitration World.

To view Arbitration World, click here.

To download a printable PDF of the publication, open the link above and click on the fourth icon from the right in the magazine toolbar at the top of the page.

We are very pleased to include in this edition, as part of our series of guest contributions from expert witnesses, an article by Howard Rosen and Noel Matthews of FTI Consulting, regarding how “country risk” can affect the value of investments and the approach towards this issue in damages calculations in international arbitration.

We review recent developments in arbitration in Qatar, including court decisions regarding the validity of arbitration agreements and the enforcement of arbitration awards. As part of a series of articles related to so-called “Bermuda Form” liability insurance policies, we look at the process of formation of the arbitral tribunal in Bermuda Form policies and whether such insurance policies may conflict with certain U.S. state laws regulating insurance.

We report on a recent decision of the English Commercial Court regarding enforcement of a tribunal’s order for a provisional payment, as well as a recent UK Privy Council decision on the meaning and effect of permissive arbitration clauses. We review the new mediation rules of the Vienna International Arbitration Centre (VIAC) and report on the work of an International Bar Association (IBA) Subcommittee in assessing how states have defined the public policy exception under the New York Convention.

We review some recent decisions of the Federal Supreme Court of Switzerland on arbitration award set-aside applications in the past year. We are also very pleased to include a guest contribution from Ben Beaumont, a barrister from Thomas More Chambers and Chairman of the Arbitration Club, regarding a recent decision of the Federal Supreme Court of Switzerland on the role of a Dispute Adjudication Board (DAB) under the FIDIC Red Book regime.

We also provide our usual update on developments from around the globe in international 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).

THE CURIOUS CREATURE THAT IS A MECHANIC’S LIEN IN BANKRUPTCY

By Joseph B.C. Kluttz, K&L Gates, Charlotte

“God looks out for drunks, fools and construction lawyers.”

— with apologies to Otto von Bismarck

Many contractors and non-bankruptcy practitioners are generally aware that upon the filing of a bankruptcy petition a variety of collection impediments spring into existence, including indignities like the “automatic stay,” lien-trumping provisions and “preferences.”

Many involved in the construction industry may be unaware, however, that because of special provisions and exemptions applicable to mechanics’ liens in bankruptcy, a contractor (or subcontractor) may be able to improve its position dramatically on the eve of — or even after — the filing of a bankruptcy petition by a counterparty.  That could become increasingly important as clouds of economic and political uncertainty continue to gather on the horizon.

Read More

Timely Response to U.S. Army Corps of Engineers Notice Critical for Stakeholders Interested in Securing Congressional Authorization for Future Water Resources Development Projects

By Stephen A. Martinko, James A. Sartucci, Michael G. H. Pfeifer, K&L Gates, Washington, D.C.

Preparing for a New Era in the Design and Construction Industry

By Justin L. Weisberg, K&L Gates, Chicago

The construction industry is currently on the precipice of substantial changes impacting all participants involved in the design and construction of modern projects.  Economic volatility has resulted in significant pressure on all participants to increase efficiency and deliver projects at reduced costs.  New technology, including BIM, is impacting the very responsibilities and interactions of project participants.  Over the past decade, environmental and sustainable design considerations have gone from nonexistent to a driving factor in the design and construction of numerous projects.

While Design Bid Build (“DBB”) was historically the leading method of project delivery, progressive methods have made substantial gains over the last decade.  Progressive project delivery methods include Design Build (“DB”), Construction Manager at Risk (“CMAR”), and Integrated Project Delivery (“IPD”).  These progressive methods take advantage of construction expertise during the design phase of the construction project.

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How Are Your Construction Activities Regulated under OSHA’s Final Silica Rule?

By Barry M. Hartman, K&L Gates, Washington, D.C. and Stephen J. Matzura, K&L Gates, Harrisburg

On March 24, 2016, OSHA issued the prepublication version of the final rule regarding occupational exposure to respirable crystalline silica, including one standard for the general industry and maritime, and another standard for construction work (“Final Rule”). The rule applicable to construction work will be codified at 29 C.F.R. § 1926.1153. It becomes effective June 23, with compliance obligations beginning at least a year later (June 23, 2017). The more stringent permissible exposure limit (“PEL”) of 50 μg/m3 and the “action level” of 25 μg/m3 are the same as in the proposed rule that OSHA issued in 2013.

The Final Rule essentially creates three categories of construction activities that are regulated differently depending on levels of exposure to respirable silica: (1) activities excluded from regulation; (2) activities listed in Table 1 that are afforded a “safe harbor” from the requirement to conduct an exposure assessment; and (3) activities that require an exposure assessment. Any employers that perform “construction work” – which may also include employers outside of the construction industry – must consider where their activities fall within the construction standard for silica.

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