Client Alerts, News Articles & Blog Posts

Everything you need to know about BMD and the industry.

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. 

“I’m Out Of Here!” Now What?

We all know that the healthcare industry is experiencing a wave of integration. This trend has been evident for many years. Fewer physicians are willing to assume the legal, financial and other business risks associated with owning their own practices. More and more physicians, including anesthesiologists, are becoming employed by large physician groups, health systems and national providers. This shift necessarily involves not only entry into new employment arrangements but also the termination of existing relationships. And those terminations are often governed by written employment agreements, state and federal healthcare laws and employer benefit plans and other policies and procedures. Before pursuing their next opportunity, physicians should pause for a moment and first attend to the arrangement that they are leaving. Departing physicians need to understand their legal rights and obligations when leaving their current employment relationships in order to avoid unintended consequences and detrimental missteps along the way. Here are a few words of practical advice for physicians contemplating an exit from their current employment arrangements.

Investment Training for the Second and Third Generations

Consider this scenario. Mom and Dad started the business from the ground up. Over the decades it has expanded into a money-making machine. They are able to sell the business and it results in a multimillion-dollar payday for their labors. The excess money has allowed Mom and Dad to invest with various financial advising firms, several fund management groups, and directly with new startups and joint ventures. Their experience has made them savvy investors, with a detailed understanding of how much to invest, when, and where. They cannot justify formation of a full family office with dedicated investors to manage the funds, but Mom and Dad have set up a trust fund for the children to allow these investments to continue to grow over the years. Eventually, Mom and Dad pass. Their children enjoy the fruits of their labors, and, by the time the grandchildren are adults, Mom and Dad's savvy investments are gone.

Provider Relief Funds – Continued Confusion Regarding Reporting Requirements and Lost Revenues

In Fall 2020, HHS issued multiple rounds of guidance and FAQs regarding the reporting requirements for the Provider Relief Funds, the most recently published notice being November 2, 2020 and December 11, 2020. Specifically, the reporting portal for the use of the funds in 2020 was scheduled to open on January 15, 2021. Although there was much speculation as to whether this would occur. And, as of the date of this article, the portal was not opened.

Ohio S.B. 310 Loosens Practice Barrier for Advanced Practice Providers

S.B. 310, signed by Ohio Governor DeWine and effective from December 29, 2020 until May 1, 2021, provides flexibility regarding the regulatorily mandated supervision and collaboration agreements for physician assistants, certified nurse-midwives, clinical nurse specialists and certified nurse practitioners working in a hospital or other health care facility. Originally drafted as a bill to distribute federal COVID funding to local subdivisions, the healthcare related provisions were added to help relieve some of the stresses hospitals and other healthcare facilities are facing during the COVID-19 pandemic.

HHS Issues Opinion Regarding Illegal Attempts by Drug Manufacturers to Deny 340B Discounts under Contract Pharmacy Arrangements

The federal 340B discount drug program is a safety net for many federally qualified health centers, disproportionate share hospitals, and other covered entities. This program allows these providers to obtain discount pricing on drugs which in turn allows the providers to better serve their patient populations and provide their patients with access to vital health care services. Over the years, the 340B program has undergone intense scrutiny, particularly by drug manufacturers who are required by federal law to provide the discounted pricing.