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March 2017

Construction Law Update

First Quarter 2017

Gordon & Rees's Construction Group is pleased to publish the latest issue of our Construction Law Update, a quarterly take on trends of interest to design professionals, contractors, and developers throughout the country.

INSIDE THIS ISSUE
  1. A Cautionary Tale to Subcontractors Opting for Unapproved Counsel in Construction Defect Cases in Florida

  2. Quantum Meruit Recovery Is Alive, But Don’t Rely On It

  3. When is it Unreasonable for a General Contractor to Rely on A Subcontractor’s Bid?

  4. Gordon & Rees Construction Attorneys Making Headlines

  5. Gordon & Rees Construction Law Blog

  6. About Gordon & Rees's Construction Group

I. A Cautionary Tale to Subcontractors Opting for Unapproved Counsel in Construction Defect Cases in Florida
     
By Ari C. Shapiro and Daniel A. Garcia
   

Prior to owner controlled insurance programs (“OCIPs”), developers, general contractors and subcontractors carried their own general commercial liability policies (“GCLs”). It was, and still is, often the case that the general contractor is required to name the developer as an additional insured under its policy, and the general contractor in turn requires the subcontractors to name the general contractor as an additional insured to their individual policies. Of course, the general contractor typically extracts from the subcontractors a broad indemnification agreement that will shift liability to the subcontractor in the event that litigation stemming from a construction project arises.

To read a full, expanded version of this article, click here.

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II. Quantum Meruit Recovery Is Alive, But Don’t Rely On It
     
  By Brandon R. Carroll
   

Washington’s Court of Appeals, Division III, recently weighed in on the application of quantum meruit recovery when timely notice is at issue. In General Construction Company v. Grant County PUD No. 2, 195 Wn. App. 698, 380 P.3d 636 (2016), the court was tasked with determining if the doctrine of quantum meruit still held in Washington. The court’s own description as an “unduly convoluted and overly lawyered” matter arose out of a contract to build a fish ladder along the Columbia River in Central Washington. As with most complicated projects, “[c]hange was constant” and “numerous.” Not surprisingly, some changes were formally requested by the general, and some were not.

To read a full, expanded version of this article, click here.

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III. When is it Unreasonable for a General Contractor to Rely on A Subcontractor’s Bid?
     
  By Brendan P. Bradley
   

It is well established law in California that a general contractor may reasonably rely on a subcontractor’s bid when submitting its prime bid to an owner. Further, a general contractor can recover under the doctrine of promissory estoppel when the general contractor reasonably relies on the bid, but the subcontractor fails to honor it. (Drennan c. Star Paving Co. (1958) 51 Cal. 2d 409) However, in the court’s recent ruling in Flintco Pacific, Inc. v. TEC Management Consultants, Inc. (1 Cal. App. 5th 727), the court found a general contractor’s bid reliance was unreasonable where it relied only on the amount of the bid, but failed to consider other material terms of the bid. This case emphasizes the importance for general contractors to read past the dollar amount when relying on subcontractors’ bids.

To read a full, expanded version of this article, click here.

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IV. Gordon & Rees Construction Attorneys Making Headlines

Tampa partner Amy Darby and associate Maura Lally recently obtained summary judgment in the 18th Judicial Circuit on behalf of their subcontractor client. The case involved a condominium association that sued the general contractor/developer for a variety of construction defects throughout the multi-family project, alleging damages in excess of $11,000,000. The general contractor/developer, in turn, sued our client for third-party contractual indemnity, common law indemnity, violation of the building code and breach of contract. Darby and Lally argued that the contractual indemnity claim was void under Florida Statute § 725.06 because the contract or bid documents did not include a monetary limitation on the extent of the indemnification obligation. It was also argued that Florida’s elements of common law indemnity were not met for two reasons: (1) the general contractor/developer owed its own duty and warranty to the Association, so that the general contractor/developer was not without fault as a matter of law, and (2) there was no special relationship between the parties. Finally, Darby and Lally successfully argued that the condition about which the general contractor/developer complained was open and obvious at the time of construction, and therefore, the violation of building code and breach of contract claims were time-barred. This was the first summary judgment awarded in the case after the judge had denied dozens of other motions for summary judgment, including two prior motions seeking to summarily adjudicate the indemnity claims. The case had been through two unsuccessful mediations and trial was sixty days out when the judge granted our motion for summary judgment on all counts.
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Chicago partner Tom Cronin will be co-presenting a webinar with The Hanover Insurance Group in March entitled, “Construction Phase Services: Controlling Your Construction Related Risks.” The program will focus on the importance of construction phase services and the risks incurred in all aspects of the construction process, from time-related risks, implementation of changes, and effective planning.

On April 22, 2017, Amy Darby will speak at the 2017 Forum on Construction Law Annual Meeting at the J.W. Marriott in Washington, D.C. The forum is headlined as “A Capital View: Best Practices in Inside and Outside Construction Counseling.” Darby will be presenting on attorney-client communications, and her topic is entitled: “Behind the walls of our conference rooms, between the borders of our country and beyond, how you can stop making everyday mistakes that can cost you the attorney-client privilege.”

Dallas partner Keith Cramer, senior counsel Soña Garcia, and associate Christopher Norcross recently put on a mock mediation for Markel claims examiners in Plano, Texas. The mock mediation was premised upon a construction defect claim scenario involving a school district’s new athletic complex, and the presentation communicated the benefits of mediation as a forum for dispute resolutions as well as effective settlement negotiation tactics.

On March 14, 2017, managing partner Dion Cominos will be co-presenting a webinar with Berkley Design Professional Underwriters entitled, “A/E Contractual Deal Makers.” Cominos’ presentation will focus upon the most common contractual pitfalls in A&E service agreements and will discuss navigation of certain business and legal risks that commonly arise throughout contract negotiation. For more information or to register for the event, click here.

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V. Gordon & Rees Construction Law Blog

The Gordon & Rees Construction Law Blog continues to post new content addressing topical issues affecting the construction industry throughout the country. From analysis of new court decisions, discussions of timely legislation, and commentary on real-world, project-specific issues, Gordon & Rees’s Construction Law Blog provides insight on the issues that affect the construction industry now.

We invite you to visit the blog at www.grconstructionlawblog.com and see for yourself what we are up to. If you like what you see, do not hesitate to subscribe under the “Stay Connected” tab on the right side of the blog. There you can choose how you would like to be informed of new content (Twitter, LinkedIn, email, etc.). If you have any questions about the blog or would like to discuss further any of its content, please do not hesitate to contact us.

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VI. About Gordon & Rees's Construction Group

Gordon & Rees's Construction Group consists of more than 100 lawyers in 39 offices throughout the nation. The firm continues to expand, opening two new offices in 2016 and 2017 which include Westchester, New York and Salt Lake City, Utah.

Gordon & Rees’s construction attorneys focus their practice on the comprehensive range of legal service required by all participants in the construction industry – architects, engineers, design professionals, design joint ventures, owners, developers, property managers, general contractors, subcontractors, material suppliers, product manufacturers, lenders, investors, state agencies, municipalities, and other affiliated consultants and service providers.

We serve clients who design, develop, or build all types of structures, including commercial buildings, single and multifamily residential projects, industrial facilities, universities, hospitals, museums, observatories, amusement parks, hotels, shopping centers, high-rise urban complexes, jails, airports, bridges, dams, and power plants. We also have been involved in projects for tunnels, freeways, light rail, railway stations, marinas, telecom systems, and earth-retention systems. Our experience includes private, public, and P3 construction projects.

If you have questions about this issue of the Construction Law Update or our nationwide construction practice, click here to visit our practice group page or contact partner Tom Cronin.

Thomas G. Cronin
Gordon & Rees, LLP
1 North Franklin
Suite 800
Chicago, IL 60606
(312) 980-6770
tcronin@gordonrees.com

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