Karl Oles
Karl Oles is a partner of Stoel Rives LLP practicing in the Construction and Design section of the Litigation practice group. Karl has experience in complex commercial litigation, including construction matters, business disputes and legal malpractice defense. His construction experience includes representation of owners, architects, engineers, contractors and subcontractors on major projects involving technical engineering issues and critical path scheduling. Karl has experience drafting and negotiating design and construction contracts for public and private clients on major commercial and alternative energy projects. He has also represented a wide variety of clients with commercial disputes outside of the construction context.
Live Blog From ABA Forum Meeting - Part 1
2/1/2012; 4:37 p.m.
I'm heading down to Houston for a meeting of the ABA Forum on the Construction Industry. You can learn about the Forum on the ABA website. It has subdivisions that focus on various interests such as insurance, owners and lenders, etc. I'll try to "live blog" from the meeting, describing papers of interest that are presented.
2/2/2012; 7:19 p.m.
I'm in Houston at the ABA forum Midwinter Meeting. The theme is strategies for complex projects. The first presentation today is called "Design Control and Delegation." It contrasts traditional design/construction relationships with the allocation of design responsibilities under building information modeling, or “BIM”. This paper and other papers being given today will be available from the ABA Forum website.
A program was announced today for young construction lawyers seeking trial experience. The program will accept 36 students for a week in Washington DC in June 2012, using experienced trial instructors in a realistic courtroom setting. The trial issues will be based on a construction project. Actual construction experts will serve as witnesses. There is now, or will shortly be, information about this on the Forum website.
2/2/2012; 10:11 a.m.
The third session is about open book accounting as it can contribute to the success of a collaborative project delivery method.
2/2/2012; 11:56 a.m.
Now listening to an interesting comparison between different methods of schedule delay analysis. The presenters note that different methods can yield significantly different results in particular cases and then make recommendations about how a reliable analysis should be done.
2/2/2012; 1:34 p.m.
Now we are hearing about how QA and QC procedures can differ for various project delivery systems (design-bid-build vs design-build). And how performance guarantees fit into the picture (we are in Houston so much of the attention is on energy projects).
2/2/2012; 2:14 p.m.
We are concluding with a series of scenarios about potential ethical issues arising from lawyers representing joint ventures and JV partners. It has been an informative day.
Washington Supreme Court Reverses Williams
In Williams v. Athletic Field, Inc., 155 Wn. App. 434 (2010), the Washington Court of Appeals ruled that a lien filing was invalid because it was not properly acknowledged. This decision created a stir among Washington construction lawyers, because the lien claimant had used a lien filing service which in turn had used a form patterned after the one provided in the lien statute, RCW 60.04.091(2).
On September 15, 2011, the Washington Supreme Court unanimously reversed the Court of Appeals, holding that a lien filing that follows the statutory form is valid even if not properly acknowledged. The court relied heavily on the statutory language to the effect that the form provided “shall be sufficient.”
The court also clarified the apparently competing principles that, on the one hand, lien law is to be “liberally construed” in favor of claimants and, on the other hand, that lien are in derogation of common law and are to be “strictly construed.” The answer is that strict construction applies to the determination whether the claimant’s services are of the type that creates a lien. If they are, then liberal construction is applied to extend the protections of the lien statute.
This decision should bring comfort to persons performing lienable work who depend on lien filing services from time to time. Such services would be well advised to adhere closely to the form of lien given in the statute.
Keep An Eye On This Major Seattle Project
On January 6, 2011, the Washington State Department of Transportation (WSDOT) signed a contract with Seattle Tunnel Partners for the biggest piece of the SR 99 Viaduct replacement project, the 1.7 mile long tunnel carrying traffic from the south end of the Seattle waterfront to near the Seattle Center. This is a design-build contract with an estimated value of about $1.35 billion.
The SR 99 viaduct was built in the 1950s and concerns have been expressed about its ability to survive a major earthquake, in part because its foundations rest in part on fill materials that may liquefy in such an event. After studying various options, WSDOT has decided to replace the viaduct with a bored tunnel, which will require the use of one of the largest tunnel boring machines ever built. The SR 99 replacement project has many other parts, some of which are already in the preliminary phases of construction.
The WSDOT website has lots of interesting information about the project, including video simulations of how the existing viaduct and nearby seawall might collapse during a major earthquake and how it will look to drive through the completed tunnel.
Washington Supreme Court Re-Examines Economic Loss Rule
The Economic Loss Rule plays an important part in construction disputes, but it has not been clearly defined or understood, or so the Washington Supreme Court has recently stated. The Economic Loss Rule has been generally described as applying to “economic damages” in cases where the plaintiff has a contract that addresses or could reasonably address the risk of those economic damages. The Economic Loss Rule has been applied in Washington to disputes relating to product liability and construction matters.
The Washington Supreme Court revisited the Economic Loss Rule in two cases issued on November 4, 2010, Eastwood v. Horse Harbor Fdn., Inc., and In re Affiliated FM Insurance Co, v. LTK Consulting Services, Inc. The court concluded that the Economic Loss Rule had been misunderstood. The nature of damages is not determinative (since many kinds of damages can be stated in monetary terms), and the presence of a contract is also not determinative. Instead, the key issue is really whether the plaintiff can identify a duty owed independently of any contract. The court said that the Economic Loss Rule should be renamed the Independent Duty Doctrine.
In Eastwood, the court ruled that a tenant’s duty to avoid waste was independent of a similar duty stated in the lease, and so the plaintiff in that case could pursue claims in tort and for breach of contract simultaneously. In Affiliated FM Insurance, the court held that an engineer hired by the City of Seattle to make recommendations about repairs to the Seattle Monorail owed a duty of care to the company that operated the Monorail, independent of its contractual duty to the City. As a result, the operating company could pursue a claim against the engineer for negligence after a Monorail train caught fire.
Both Eastwood and Affiliated FM Insurance include multiple opinions, concurring and dissenting, that discuss various aspects of the old Economic Loss Rule, now renamed the Independent Duty Doctrine. All of the opinions should be examined to understand the status of the law in this area.
Two results of interest to construction litigators should survive the restatement of the rule. In Washington, a contractor given faulty plans by its client/owner may not sue the owner’s architect for negligence in preparing those plans. And Washington does not recognize a cause of action for negligent construction. Any case needs to be analyzed on its particular facts, however.
Washington Court Holds Statute of Limitations Doesn't Apply to Arbitration
Contributor: Stephen P. Kelly
In Broom v. Morgan Stanley DW, Inc., the Washington State Supreme Court held that state statute of limitations did not apply to a contractual arbitration. The arbitrators of an investment-related dispute had dismissed certain claims because plaintiffs failed to bring them before the applicable statutes of limitations lapsed. Analyzing the Washington statute of limitations and arbitration statutes, the court found that the legislature didn’t intend the term “action” in the statute of limitations – to include arbitration. Because of this, the court reasoned, the arbitrators weren’t authorized to apply the state statute of limitations to plaintiffs’ claims. The court made clear, though, that people can agree, by contract, to apply a state statute of limitations to arbitration provisions.
Construction and design contracts as well as many other types of contracts commonly specify arbitration as the exclusive forum for disputes, and commonly select what laws apply to the contract. This decision could affect a variety of construction-related disputes including construction defect and payment claims and the full impact of the decision remains to be seen. In the meantime, for a construction contract in Washington where arbitration is the forum for disputes, parties that want the Washington statutes of limitations to apply to the arbitration should make this clear.
Government Involvement Has Consequences (Part 2)
Here is list of laws that may apply to projects in which the federal government is involved.
These reflections about government involvement are prompted by recent changes to the Federal Acquisition Regulations that give federal contractors an affirmative duty to disclose any “credible evidence” that comes to their attention of (a) the violation of certain criminal laws (e.g., those involving fraud or bribery), (b) violations of the civil False Claims Act, and even (c) “substantial overpayments” from the government. Contractors are also required to train their employees to ensure that misconduct will be detected and reported. This regulation reminds us that working with the government can trigger serious legal issues. As public-private partnerships and other forms of government involvement become more common, it is important to find out whether the government is involved in your project and, if it is, what consequences that has for your company.
Government Involvement Has Consequences (Part 1)
In an effort to stimulate the economy, federal and state government agencies are seeking to promote new construction projects. This trend of government involvement in construction projects is likely to continue. When the government is involved, it is important to know whether this involvement causes public contracting laws to apply.
Governmental involvement in a construction project can range from outright ownership to a behind-the-scenes role in financing. Multiple governmental agencies may be involved in a single project. If you have a project in which a federal or state agency is involved, you risk substantial penalties for failing to follow applicable public contracting laws.
There are many federal and state laws that may apply if the government is involved in a project. In Part 2 of this post, I’ll link to a list of some of the federal laws.
Be Alert to New AIA Construction Contract Forms
Contractors and owners used to the pre-2007 AIA document forms should know that the AIA has revised its most popular forms and that the AIA software no longer supports the older versions. You may still see the older forms in Word or similar formats, but you won’t be seeing the official AIA document that automatically highlights changes from the official forms. That means you need to be more cautious about form contracts you receive that appear to be based on the older AIA forms. Changes from the official AIA versions won’t necessarily be highlighted. Construction lawyers have mixed feelings about the new AIA forms. They correct some provisions that didn’t work well in the past, but create some new concerns. As always, you need to consider the specific circumstances of your project before using any standard form contract.
Exciting Times at the Boring Machine
The $1 billion Brightwater wastewater treatment plant in north King County is experiencing delays. The attached video describes a problem with one of the large boring machines. The project, which includes several long tunnels and a central treatment plant, is divided up among several large contracts.
Unexpected Risk for Engineering Corporations
The Washington statute governing registration of engineers, RCW 18.43, establishes a licensing board with jurisdiction over disciplinary proceedings against engineers. Under RCW 18.43.130, a corporation may engage in engineering if the corporation submits an application to the board that designates a licensed engineer as “responsible for the practice of engineering by the corporation in this state [with] full authority to make all final engineering decisions on behalf of the corporation.” This statute may create problems for engineers who practice in S or C corporations.
While the apparent purpose of this statute is to make the “designated engineer” answerable to the board if the corporation departs from professional standards, a Washington trial judge recently ruled that the “designated engineer” was personally liable in tort for the negligent acts of corporate employees.
There is also a risk that the licensing board could conclude that, under the statute, the “designated engineer” must exercise his or her authority by personally making or confirming every engineering decision of the company. This would obviously be impractical for a large firm. The board has not had occasion to rule on this issue.
The statute provides that professional services corporations established under RCW 18.100 are exempt from the “designated engineer” requirement. Engineers in corporate firms practicing in Washington, or other states with similar licensing requirements, should consider whether changing to a professional services corporation will reduce their risk of unwanted consequences.
