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CLIENT ALERT: Construction Law Update: Communication is Key! And Other Lessons Learned From A Recent Public Project Court Decision

In a recent decision, the Ohio Court of Claims entered a $2.2 million judgment in favor of the general trades contractor, and against a public university, in connection with an on-campus renovation project. Mid American Construction, LLC v. Univ. of Akron, Ct. of Cl. No. 2016-00685JD, 2018-Ohio-4513.

Delivered as a “multi-prime” project, the university entered into separate contracts with a construction manager and an architect, in addition to separate contracts with the general trades, plumbing, HVAC, and electrical contractors. The project was delayed and the general trades contractor and university asserted breach of contract claims against one another, each arguing that the other party’s delays and failure to perform caused the other to suffer damages.

Following trial, Judge Crawford entered a decision finding that the university’s ongoing failure to pay for work, as well as problems with coordination and schedule, not only justified the contractor’s decision to walk-off the job, but also prevented the contractor from completing its work. Thus, the university was found liable to the general trades contractor in the amount of $2.2 million, while the university’s counterclaim was denied.

The Court’s detailed thirty-three (33) page decision offers many rules and reminders for public owners, contractors, construction managers, construction claims consultants, and damages experts alike:

1.  Communication is Key. In observing the risk inherent in all construction projects, Judge Crawford aptly noted: “[p]ublic construction contracts are vast documents containing thousands of construction and procedural details, all of which amount to legal promises, and some of which would be difficult to perform. Business at the construction site is performed by skilled and unskilled workers who seek to coordinate a schedule that is often developed at a laboratory away from the work site and without communication with those individuals putting one brick on top of another.”

The point is clear. Communication delivers results. The more communicative, transparent and effective the construction team functions, the better the results. In his opinion, Judge Crawford identified thirty (30) separate reasons for delays on construction projects, the majority of which arise in the pre-construction phase and can easily be avoided with more effective communication.

What are you doing to improve communication, both internally and with other project participants? 

2.  Control What You Can Control. This decision also serves as a reminder to project owners of the importance of selecting an appropriate project delivery method, taking steps to ensure that the design is adequately developed, considering input from all stakeholders, issuing payment in a timely manner, issuing timely approvals, delivering the site to the contractor in a timely manner, hiring qualified design and construction teams, and following the contract’s written notice requirements.

Likewise, it is incumbent on contractors to identify and provide notice of unrealistic schedules, errors in contract documents, apparent design errors, constructability concerns, and questions concerning scope. Contractors are also reminded that so long as they make an honest effort to perform their contracts, and do not willfully refuse to perform, they are entitled to some portion of the contract price so long as they achieve substantial completion.

3.  The Value (or Cost) of a Good (or Bad) Construction Manager. This decision is a cautionary tale for owners and construction managers alike as the university’s liability arose, in part, from the failings of its construction manager. If the owner chooses to implement the Construction Manager At-Risk project delivery method, it must carefully select a qualified construction manager. Equally important, construction managers must deliver value to the project and their owner clients by following contract requirements such as conducting partnering sessions with contractors, providing monthly progress reports, providing look-ahead schedules, maintaining accurate and current schedule updates, timely responding to RFI’s and executing CCDs, and appropriately coordinating among contractors.

4.  Credibility Matters. If a claim arises that escalates to litigation or arbitration, judges and arbitrators tend to believe and find credibility with witnesses who are not evasive when asked tough questions, maintain a patient and frank demeanor, and provide consistent answers supported by the project documents.

5.  Battle of the Experts. Along the same lines, if a claim arises that requires expert testimony, judges and arbitrators have a tendency to agree with experts who are well-qualified, thorough, maintain an objective demeanor and deliver objective explanations, and offer testimony that is not conclusory, but is based on support and factual detail.

6.  Liquidated Damages or Compensatory Damages, But Not Both. Liquidated damages are not available under Ohio law where the party seeking to impose them is found to have contributed to an unreasonable delay. However, even in instances where a court may find a liquidated damages clause enforceable, and the party seeking damages is not in breach, it is well-settled law in Ohio that a non-breaching party may not recover both compensatory and liquidated damages.

For additional information, please feel free to contact Attorney Justin Alaburda at Brennan Manna & Diamond. He can be reached at www.jmalburda@bmdllc.com, or (330) 253-9134. 

CLIENT ALERT: IRS Announces 401(k) and HSA Contribution Limits for 2020

With 2020 just around the corner, the IRS announced important information for the upcoming year for both 401(k) Contributions and Health Saving Accounts (HSAs).

CLIENT ALERT: U.S. Department of Labor, Wage and Hour Division Sets Enforcement Record

In advance of Halloween, the U.S. Department of Labor announced the results of its Wage and Hour Division's (WHD) recovery efforts for Fiscal Year 2019, and it reads like a horror story. The good news to lull you into a feeling of safety was that the 18,844 Complaints Registered was the fewest amount over the past 22 years or published records.

CLIENT ALERT: Will Ohio Recognize a Biddle Claim in a Post-HIPAA World?

OHIO SUPREME COURT WILL HEAR CASE INVOLVING CLASS ACTION FOR ALLEGED HIPAA VIOLATIONS: Will Ohio Recognize a Biddle Claim in a Post-HIPAA World?

CLIENT ALERT: Proposed New Rules to both the Stark Law and the Anti-Kickback Statute

On October 9, 2019, as part of the “Regulatory Sprint to Coordinate Care,” the Centers for Medicare and Medicaid Services (“CMS”), along with the US Department of Health and Human Services, Office of Inspector General (“OIG”), proposed new rules to both the physician self-referral law (“Stark Law”) and the Anti-Kickback Statute (“AKS”). Rule changes are aimed at fostering innovative arrangements for coordinating care consistent with a shift to a value-based system. Both proposed rules are expected to be published to the Federal Register on October 17, 2019. Public comments are due 75 days after publication.

CLIENT ALERT: New Overtime Rule Raises Minimum Salary Requirements and Other Changes to the Fair Labor Standards Act

Today, the U.S. Department of Labor (DOL) issued its Final Rule updating the regulations under the Fair Labor Standard Act: Effective January 1, 2020, employees who make less than $35,568 are now eligible for overtime pay under a final rule issued by the U.S. Department of Labor (“DOL”). The DOL expects 1.3 million workers to become newly eligible for overtime by updating the thresholds. The new rule will raise the salary threshold to $684 per week ($35,568 annualized) from $455 per week. This means that even if your employee qualifies under one of the overtime exemptions, if the employee is not earning at least $684/week, the employee will be eligible for overtime and minimum wage requirements.