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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. 

Florida’s “Stay-at-Home” Order and What it Means for Businesses

On April 1, 2020, in response to the State’s ongoing efforts to fight the spread of COVID-19, Governor Ron DeSantis issued Executive Order 20-91, which is State-wide “Stay-at-Home” Order. The Order goes into effect Friday, April 3, 2020 at 12:01 a.m., and expires on April 30, 2020, unless extended by subsequent order (the full text of the order is available here).

CMS Offers New Stark Waivers and More Flexibility to Health Care Providers Due to COVID-19

On March 30, 2020, the Centers for Medicare & Medicaid Services (CMS) issued several temporary regulatory waivers to further enable the American healthcare system to respond to the COVID-19 pandemic with more efficiency and flexibility. The official publication can be found here: Physicians and Other Clinicians: CMS Flexibilities to Fight COVID-19.

#CancelRent – What’s Next for Landlords?

Across the country, residential tenants, small businesses, and even national retailers such as Cheesecake Factory, Subway, and Mattress Firm have declared war on their landlords by refusing to pay rent on account of the Covid-19 pandemic (“COVID-19”). This has sent shockwaves through the real-estate industry. As of April 1st, residential tenants owe an estimated $40 Billion in rent. Estimates for the commercial sector are not far off. So far, federal, state, and local measures have focused on providing relief to residential and commercial tenants and even to some commercial landlords.

Record Keeping Requirements to Receive FFCRA IRS Tax Credit

On April 1, 2020, the IRS and Department of Labor issued temporary regulations to provide clarity regarding the documents required by employees requesting leave under the Families First Coronavirus Response Act (FFCRA) and the documentation that employers need to maintain.

Eviction & Foreclosure During the COVID-19 Pandemic

Like most areas of our society, the COVID-19 pandemic has greatly impacted the business relationships between landlords and tenants and between lenders and borrowers. In most states, non-essential retailers and other businesses have closed their doors and are doing business online, to the extent that they can. Some businesses, like The Cheesecake Factory, have announced that they would not be paying rent at any of their locations for at least a month due to the pandemic. Landlords and homeowners are concerned about being able to pay their mortgages and tenants are concerned about being able paying their rent.