Adam Walters
Adam Walters is an associate in the Construction and Design group. Adam’s practice focuses primarily on the drafting, negotiation, review and administration of construction contracts, particularly EPC contracts in the renewable energy sector. He also advises clients on the resolution of construction contract disputes. Adam’s experience includes transactional work and disputes related to a broad range of construction and infrastructure projects in the public and private sectors. He is familiar with a number of procurement methods common throughout the Pacific Rim and the British Commonwealth, as well as those commonly used in the United States. Adam also has significant experience advising state and local government on building industry regulation matters and representing government agencies in administrative disciplinary proceedings and prosecutions of building professionals, firms and companies for professional misconduct and criminal offenses committed in the course of their activities in the building industry.
One to Watch: BIAW Sues to Stop New Washington Residential Energy Efficiency Standards
In November 2009 the Washington State Building Code Council (“WSBCC”) approved amendments to the Washington State Residential Energy Code imposing additional energy efficiency requirements for newly permitted homes. The controversial changes, found in Chapter 9 of the new Code, are scheduled to take effect on July 1, 2010.
The new regulation at issue requires that “Dwelling units permitted under this Code shall comply with all provisions of Chapter 5 of this Code [building component performance requirements] and develop 1 credit from Table 9-1.” The requirements thus apply to both new residential units and additions to existing units. Table 9-1 contains a list of 13 options for achieving energy efficiency in newly permitted homes each of which qualify for between .5 and 2 credits and some of which must be combined with other listed options to qualify. Most of the options involve increasing the efficiency of HVAC systems, while others address things such as building envelope efficiency, water efficiency and on-site generation of renewable (solar or wind-generated) energy.
Various members of the Washington building industry have strenuously objected to the new regulation on the grounds that it will add to the cost of new homes built in Washington, therefore making them more difficult to sell in a down real estate market and ultimately harming the state’s building industry.
On May 25, 2010, the Building Industry Association of Washington and various building industry participants consisting mainly of residential builders and HVAC consultants and equipment suppliers, sued the WSBCC in the U.S. District Court for the Western District of Washington (Case No. 3:10-cv-05373-RJB). The complaint requests a temporary injunction prohibiting the State from implementing the new regulation and a declaration that the regulation is unconstitutional.
The Plaintiffs contend that the new energy efficiency regulation violates both the Supremacy Clause (Article VI) and the Interstate Commerce Clause (Article I, Section 8, cl. 3) of the U.S. Constitution. The primary argument set forth in the complaint is that the new regulation has the effect of imposing more stringent energy efficiency standards than those imposed under federal law, and is therefore in contravention of the Supremacy Clause in that such regulations are preempted by the federal Energy Policy Conservation Act of 1975 (EPCA) and similar acts.
Table 9-1 does not directly impose standards higher than those imposed under federal law, but the plaintiffs argue that many of the options listed are impractical and effectively force home builders and buyers to select expensive HVAC, water heating and plumbing equipment that exceeds federal standards, thus contravening the EPCA and adding between $4,000 and $15,000 to the cost of a new home.
The EPCA prohibits states from imposing higher energy efficiency standards than those imposed under the Act but also includes exceptions, including one allowing states to enact performance-based building codes that provide multiple options for compliance.
In response to the complaint, WSBCC may argue that Chapter 9 meets the performance-based building code exceptions of the EPCA and other relevant federal laws, that Table 9-1 provides a number of different ways to achieve one credit of additional energy efficiency, that the options are not impractical or unduly burdensome and/or that the plaintiffs’ allegations regarding the impact on the industry and the cost of new homes in Washington are exaggerated.
The plaintiffs’ complaint spends little time on the Commerce Clause argument, which is that the new regulation will disadvantage the residential building industry in Washington as compared to competitors doing business in other states that have less stringent regulations.
The plaintiffs’ Supremacy Clause argument should garner the most attention from the court and it will be interesting to see how the case is decided. The decision may come down to a factual analysis of the various options set forth in Table 9-1. Although the complaint addresses several of the allowed options, it provides little detail as to why the options are impractical. For instance, the complaint states, without further discussion, that the renewable energy options “are simply not viable for many homes/home sites.” Such factual issues should provide a fertile battleground for the litigants.
As of the date of this Blog, the court has not yet ruled on the request for temporary injunction pending the outcome of the proceedings; however, this may become a moot issue, as it appears that Governor Gregoire has requested that implementation of the new standards be delayed by nine months.
Whatever the outcome, this case is certain to have widespread implications for the Washington residential building industry and could set an important precedent for other states wishing to impose new residential energy efficiency standards.
Default on Skyscraper Punctuates Dreary Outlook for Commercial Construction in Seattle
It is no secret that the commercial real estate market has been one of the biggest losers of the great recession. Seattle is no exception and as if to belabor the point, it has been reported this week that Beacon Capital Partners, the owner of Seattle’s icon skyscraper, the Columbia Center, missed its $1.65 million loan payment this month.
At 285 meters high the 76-story building formerly known as Bank of America Tower and Columbia-Seafirst Center (but long referred to by locals as Columbia Tower) not only looms large over the Seattle skyline but also carries the distinction of being the tallest building West of the Mississippi River by number of floors. However, bigger is not always better, as the Seattle Times reports that the tower is nearly forty percent vacant and Puget Sound Business Journal points out that the situation will only get worse as Amazon recently announced that it is taking its sizable ball (230,000 Square feet of leased office space in the tower) and going home, that is, to its new digs in South Lake Union courtesy of landlord Paul Allan. This comes on the heels of Columbia Center’s loss of one of its largest and oldest tenants a couple of years back, mega-firm K&L Gates (formerly Preston Gates and Ellis).
Although speculation is that the loan servicer will likely try to restructure Beacon’s loan, there appears to be little hope on the horizon in the near term for Seattle’s commercial real estate market, which of course means no new commercial construction is in the cards for the immediate future. (A brief look out this author’s window at the Seattle skyline confirms this assessment, revealing but one lonely crane on the horizon).
On the other hand, at least one brave developer is looking on the bright side, as Ed Hewson of HB Capital was quoted today in the Seattle Times saying: "Right now I can get great people to work on all the aspects of the project" in response to a report that HB Capital has filed a preliminary application for city approval of a 200 unit 17-story apartment building at Third Avenue and Cedar in Belltown. (Given the location of the proposed building, the developers should be further encouraged by the Seattle Police Department’s announcement last week that it will be increasing foot patrols in the area).
A sign of hope: rental car garage at Sea-Tac to proceed
Puget Sound Business Journal reported this week that the Port of Seattle has announced that it will re-commence work on its 23-acre, $419 million dollar rental car facility at Seattle-Tacoma International Airport. The project was put on hold in December 2008 due to the anemic long-term bond market. According to the Port, it has now sold $317 million in revenue bonds to finance construction of the remainder of the massive parking structure, an optimistic sign that the finance markets (or at least the public bond markets) are starting to loosen up.
WA Supreme Court Confirms Right to Claim Liens over Improvements on Public Property
It is well known that public property is not lienable in most states, including Washington. However, it has been generally assumed that under Washington’s mechanic’s lien statute (RCW 60.04), improvements constructed on public property are lienable. In Estate of Haselwood v. Bremerton Ice Arena, Inc., No. 80411-7 (June 25, 2009) the Supreme Court of Washington, by a 7-2 majority, issued a decision holding that a subcontractor’s lien attached to an ice arena built on property owned by the City of Bremerton. However, the court noted that, pursuant to RCW 60.04.051, the attachment of a lien to improvements on public land is limited “to the interest of the person who requests the labor or materials, or that person’s agent.” In this case, under the terms of a concession agreement between the city and Bremerton Ice Arena, Inc., the latter party owned the arena for the duration of the concession agreement, while the city retained ownership of the underlying land. Therefore, in determining whether an improvement on public property in Washington is lienable, it is important to inquire into the precise nature of the interest owned by the person that commissions the construction work. The Haselwood Court also held that Washington’s lien priority statute applies to liens over such improvements on public land, such that a mechanic’s lien has priority over a deed of trust where work or professional services commenced or materials were provided prior to the date the deed of trust was recorded. The majority, concurring and dissenting opinions can be read here.
New WA Supreme Court Opinion has several Construction law implications
On June 18, 2009 the Washington Supreme Court issued its decision in Cambridge Townhomes, et al. v. Pacific Star Roofing, Inc., et al., 81003-6. The decision touches on several issues of interest to the construction industry in Washington. In particular, the Court clarified the law about when a corporation may be held liable as a successor in interest to a sole proprietorship (generally, where control in the company remains in the same hands, such that the old entity was effectively just wearing a “new hat”). The Court also enforced a broad indemnity provision in a subcontract, rejecting the subcontractor’s argument that its indemnity should be construed to apply only to third party tort claims. Finally, the court had occasion to revisit RCW 4.16.326(1)(g) which went into effect in July 2003 and requires that construction defect claims be filed within six years of substantial completion of construction or termination, whichever is later. The Court had held in 1000 Virginia Ltd. P’ship v. Vertecs Corp., 158 Wn.2d 205 (1994) that this provision did not apply retroactively. In Cambridge Townhomes, the Court clarified that application of the statute of repose turns on the date when the claim accrues, not when it is filed. You can read the entire decision here.
Chinese drywall claims now certified as a class action
Our Sean Gay recently blogged here and here about recent complaints out of Florida and elsewhere concerning defective Chinese-manufactured drywall that emits noxious sulfur gas and has been linked to problems with electrical and air conditioning systems. The latest news is that several such claims have recently been consolidated into a single federal class action lawsuit. After much wrangling by the respective parties over where the consolidated cases would be heard, a panel of federal judges decided that the matter would go to Judge Fallon of the U.S. District Court for the Eastern District of Louisiana. You can read more about the consolidation decision at consumeraffairs.com. To follow the latest developments in the case check out the Court’s web page for the matter.
Statute of limitations: State entity trumps in Safeco Field case
On March 5 2009 the Supreme Court of Washington issued a 6-3 decision in WA State Major League Baseball Stadium Public Facilities District v. Huber, Hunt & Nichols-Kiewit Construction, No. 81029-0, in which the court held that the 6-year the statute of limitations for breach of contract did not apply to a construction defect claim concerning the construction of Safeco Field due to the exemption in RCW 4.16.1 for actions brought “for the benefit of the State”.
The case arose after the Mariners discovered that the fire protection coating system to the stadium’s structural steel beams and columns failed, allegedly because the contractor applied a primer layer that was incompatible with the coating layer. The Public Facilities District and the Mariners (who are responsible for the maintenance of the stadium) filed suit more than seven years after the date of substantial completion of the stadium. The court of appeals granted summary judgment in favor of the contractor because the matter was not timely filed. In holding that the statute of limitations did not apply in this case, the Court stated that the State’s sovereign powers had been delegated to the Public Facilities District, the public municipality created to build the baseball stadium. The Court reasoned that the construction of Safeco Field was a manifestation of the State’s sovereign function of providing for public recreation, in much the same manner as the improvement of a city park or public library. The dissent disagreed that the action was for the benefit of the public, noting that the public had to pay a private for-profit entity for a ticket to gain admission to the stadium.
As a consequence of this decision, contractors should not assume that the statute of limitations will apply on projects involving a state-delegated entity, even where the improvement being constructed appears to be substantially or exclusively for private use. In such circumstances a reasonable limitation period for claims should be agreed and set out in the construction contract.
