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June 2019

Construction Law Update

Second Quarter 2019

Gordon & Rees' 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. "Class Actions in South Carolina Construction Defect Claims: Lessons Learned"

  2. Quantifying Disruption Damages Using Systems Dynamics Modeling

  3. Arbitration Agreement in International Builder’s Risk Policy Upheld Despite Louisiana Law Barring Arbitration Agreements in Insurance Policies – Conformity to Statute Clause Does Not Result in Reverse-Preemption of Preempted Statute

  4. Gordon & Rees Construction Attorneys Making Headlines

  5. Gordon & Rees Construction Law Blog

  6. About Gordon & Rees' Construction Group

I. "Class Actions in South Carolina Construction Defect Claims: Lessons Learned"
       
By A. Victor Rawl Jr., Hal Frampton, and Elizabeth Fritz Bailey
     

As recently reported in The Post and Courier (Charleston, S.C.), residential construction defect claims—particularly in the Lowcountry of South Carolina continue to soar as development expands.1 Multi-family units and large planned unit developments are particularly prone to class-action construction defect litigation. These lawsuits raise a variety of unique defense issues, including the interaction of Rule 23 and the South Carolina Notice and Opportunity to Cure Construction Dwelling Defects Act (Right to Cure Act) and strategies for moving the litigation to non-state court forums.

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

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II. Quantifying Disruption Damages Using Systems Dynamics Modeling
       
    By Julie M. Araujo
     

Delays are a common occurrence on large, complex construction projects. There have been myriad cases where the project owner causes delays through its actions such as issuing change orders, supplying owner-furnished items late, or because of incomplete or defective design information for which the owner has assumed contractual responsibility. In the case of late or defective design, the ensuing consequences for the contractor can involve schedule slippage while awaiting the completion or correction of the design. But quite often if the design defect is discovered after the work has started, the contractor experiences delays and significant additional costs due to re-work and the knock-on disruption to the contractor’s overall work scope. In hotly disputed situations, proving that the owner is responsible for delay and disruption can present significant challenges for a contractor. But that is only part of the challenge. Once liability is established, the contractor faces the additional and crucial burden of credibly quantifying and proving the delay and disruption damages that it hopes to recover.

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

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III. Arbitration Agreement in International Builder’s Risk Policy Upheld Despite Louisiana Law Barring Arbitration Agreements in Insurance Policies – Conformity to Statute Clause Does Not Result in Reverse-Preemption of Preempted Statute
       
    By Julie M. Araujo
     

On Monday, May 13, 2019, the US Court of Appeals for the Fifth Circuit upheld a district court’s decision that dismissed the plaintiff/construction contractor’s federal lawsuit against its builder’s risk insurers in favor of arbitration. In McDonnel Group, L.L.C. v. Great Lakes Ins. SE, UK Branch, C.A. No. 18-30817 (5th Cir. May 13, 2019), the contractor obtained a builder’s risk policy from U.K. insurers for a construction project in New Orleans, Louisiana. The policy contained an express agreement to arbitration any disputes that arose under the policy. The contractor made a claim under the policy which was denied by the insurers. This prompted the contractor to file a lawsuit for breach of contract and bad faith in federal court. The contractor disregarded the arbitration agreement in the policy, and instead, relied on Louisiana law that bars arbitration agreements in insurance policies1 because the policy also contained a “conformity to statute” provision. That provision of the policy states: “In the event any terms of this Policy are in conflict with the statutes of the jurisdiction where the Insured Property is located, such terms are amended to conform to such statutes.”

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

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IV. Gordon & Rees Construction Attorneys Making Headlines

Los Angeles Partner Brenda Radmacher represented a major solar developer in connection with a $11 Million solar farm construction project located in Gallup, New Mexico. The general contractor on the project sought over $1.3 Million in past due payments which created a breakdown in the relationship between the general contractor and our client. To further complicate matters, the general contractor had an ongoing contract for the maintenance of the solar facility. In addition to the complex construction related claims presented in the case, the parties were required to arbitrate the matter within a short 45 day period. Ms. Radmacher, assisted by Senior Counsel Artin Avetisove, was able to expeditiously reach a settlement while concurrently preparing for arbitration, saving the client over $500,000 in connection with the unpaid sums and legal and expert fees. In addition, Ms. Radmacher was able to resolve the matter in a manner whereby our client was able to extract itself from the long-term relationship with the general contractor. The client was thrilled with the result.

New Jersey Of Counsel Lee Henig-Elona resolved a personal injury and property damage claim asserted by co-op tenant (and her dog) relating to demolition and construction of retail space below residential co-op on Madison Avenue, NYC. Represented SL Green.

Los Angeles Partner Brenda Radmacher and Senior Counsel Sonia Taylor presented a webinar entitled, "Pot & Your Employees: Construction Industry Employers’ Rights in an Age Where Pot is Legal," on May 29, 2019. The presentation covered employers' rights with respect to drug testing and disciplinary action for the use of marijuana and related questions about the use of legalized drugs.

Louisville Partner Angela Richie will give a presentation entitled, "No Good Deed Goes Unpunished: What You Need to Know About Design-Assist Projects Before You Bid and Sign the Contract in Order to Prevent a Bet the Company Mistake," at the Southern Association of Steel Fabricators (SASF) Ponte Vedra Convention on June 7, 2019. She also gave several presentations entitled:

  • "What Fabricators Need to Know About Providing Early Involvement Pre-Construction Services verses Engaging in a Design-Assist Contract" at the Early Involvement & Marketing Workshop for the Structural Steel Industry, American Institute of Steel Construction, on May 23, 2019;
  • “What You Need to Know About Defending and Prosecuting Claims - Before You Get into a Dispute” at the NASCC: The Steel Conference, on April 3, 2019
  • “It's Time to Take Another Look at Your Subcontracts” at the NASCC: The Steel Conference, on April 3, 2019;
  • “Defending and Prosecuting Delay Claims” at the NASCC: The Steel Conference, on April 3, 2019;
  • “14 Contract Terms You Should Look for in Every Contract Before You Bid (Or Sign) so That You Can Avoid Saying "I've Got a Bad Feeling About This!" as a webinar for the Structural Steel Industry on March 7, 2019.

Louisville Senior Counsel Jean Terry was selected as a Diversity Fellow by the American Bar Association, Forum on Construction Law. She presented a seminar entitled, “Sustainable Construction and the Evolving Standard of Care,” at the Center for Watershed Protection’s National Meeting and another seminar entitled, “You Down with UCC? Making Sure your Supply Chain Contracts Are Giving You the Goods,” at the American Bar Association, Forum on Construction Law, Division 9, Annual Meeting.

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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’ 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' Construction Group

Gordon & Rees' Construction Group consists of more than 140 lawyers in offices nationwide. In 2019, the firm opened its 68th office, creating the world’s first 50-state law firm. The full list of Gordon & Rees' offices and local contacts can be found here.

Gordon & Rees’ 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 Scully Mansukhani
1 North Franklin
Suite 800
Chicago, IL 60606
(312) 980-6770
tcronin@grsm.com

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