Think the ADA preempts contractual risk shifting? Not so fast, says the Ninth Circuit.

Rejecting an argument that the ADA preempts all contractual claims for indemnity and contribution, the Ninth Circuit recently upheld a public owner’s right to seek contribution for damages arising out of ADA violations caused by the designer and contractor of a transportation facility. See City of Los Angeles v. AECOM Services, Inc. (here).

This decision bucks a disturbing trend. As noted elsewhere in this blog, a number of courts have held that the ADA preempts an owner’s right to enforce a contractual right of indemnity or contribution for damages arising out of a violation of the ADA.  The Ninth Circuit distinguished the other leading case on this issue – Equal Rights Center v. Niles Bolton Associates – noting that only claims for indemnity or contribution for damage arising out of a party’s own negligence frustrate the purpose of the ADA.  Where a party seeks indemnity or contribution for only damage arising out another party’s negligence, there is no conflict with the ADA and the claims are not preempted. In an interesting side bar, the Ninth Circuit also suggested that an important part of an owner’s ADA compliance program is requiring ADA compliance as part of its contracts with its designers and contractors.

Although the Ninth Circuit’s decision involved a public owner’s attempt to enforce its contractual right to contribution, the court’s holding offers a glimmer of hope to private developers who, like public entities, often do not have the expertise, personnel, or equipment necessary to construct projects themselves. To maximize their chances of recovering damages caused by the failure of contractors and designers to comply with the ADA, developers should include contractual provisions requiring their designers and contractors to comply with all legal requirements, including the ADA and FHA, and to provide defense and indemnity commensurate with their own wrongdoing.

No Right to Damages Between Public Works Bidders

In the world of public works bidding, competition can be fierce. At times the competition may even break some laws in lowering their costs in order to ensure the lowest possible bid.  Historically, the only procedure for the aggrieved bidder was to submit a bid protest, and if necessary, file a petition for writ of mandate against the awarding agency.  However, suing the agency provides a limited remedy, and in most cases, damages are not recoverable.  Other than this indirect attack, there have been no remedies available to sue the competition directly.  Several contractors decided to test a new theory, and sued the alleged wrongdoer for intentional interference with prospective economic advantage.  The California Supreme Court recently heard the matter in a case of first impression.

In Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc., several slurry seal contractors became incensed when their competitor, American Asphalt South, continued to outbid them.  Several plaintiff contractors jointly sued American, alleging several theories, including intentional interference with prospective economic advantage.  To support this allegation, the plaintiffs alleged that the costs of the materials for all of the bidders were essentially the same.  However, they alleged that American submitted deflated bids, because it failed to pay prevailing wage and overtime compensation in connection with the projects.  The plaintiffs alleged that this unlawful and unfair activity interfered with their relationship with the various agencies to successfully bid the work.

The first element of the tort is the existence between the plaintiff and a third party of an economic relationship that has the probability of a future economic benefit. Here, that would be the relationship between the plaintiff contractors and the awarding agencies.  Analyzing this element, the Supreme Court held that a bidder on a public works project does not have an “economic relationship” with an agency.  Rather, the bidder merely has the “hope of one.”  Since the aggrieved bidders failed to show the existence of an economic relationship with the various public agencies, their cause of action failed.

For now, the status quo remains unchanged. The only procedure available to aggrieved bidders is to follow bid protest procedures and seek a writ of mandate against the public agency.

Public Private Partnerships Provide an Opportunity to Leverage Private Sector Expertise and Financing for Public Benefit

Creative solutions will likely be required to bridge the gap between the cost of addressing growing infrastructure needs in the U.S., currently estimated at $4 trillion, and the amount of available public funding.  One increasingly popular possibility involves supplementing public funds with private financing through agreements that allow for greater private sector participation in the delivery and financing of public infrastructure projects.  In my recent Daily Journal of Commerce article, I look at the pros and cons of such agreements, which are often known as “Public-Private Partnerships” or “P3s.” Read the full article here.

Originally published as “OP-ED: Leveraging private expertise and financing for public benefit” by the Daily Journal of Commerce on June 15, 2017.

What’s Up with Bertha?

Regular readers of this blog know that Stoel Rives represents the State of Washington Department of Transportation (“WSDOT”) with regard to construction of the new highway 99 tunnel in downtown Seattle. The giant tunnel boring machine, named “Bertha” (not “Big Bertha” as is sometimes reported), finished its work in April and is now undergoing a combination of disassembly and demolition.  There is a limited market for used 57-foot diameter tunnel boring machines.  Some pieces of the machine are being scrapped, some are being preserved for sale or re-use, and a few are being preserved as evidence in the lawsuit between WSDOT and the contractor.  The contractor claims that WSDOT should pay for the fact that Bertha stopped working and needed two years of repairs.  WSDOT claims that the delays are the contractor’s own responsibility.  Trial of those claims is currently scheduled for June 2018.  The new highway is expected to open for traffic in 2019.

When Can You Rest Easy? A Primer on Statutes of Repose

A statute of repose provides an outside limit as to when construction claims can be brought and is intended to give contractors and design professionals a degree of certainty as to when the risk associated with claims on a particular project diminishes. In my latest article for the Daily Journal of Commerce, I give you an overview of the statute of repose, including how it differs from a statute of limitation, how it is varies in several Western states, and what a defendant must do to successfully assert a statute of repose defense. Read the full article here.

“When Can You Rest Easy? A Primer on Statutes of Repose” was originally published by the Daily Journal of Commerce on May 19, 2017.

WSBA Construction Section Annual Seminar – June 9, 2017

On June 9, 2017, my colleague, Karl Oles, and I (both from the Seattle office of Stoel Rives) will present at the annual meeting and seminar for WSBA’s Construction Section, which this year is entitled Washington Statutes Affecting Construction.  This seminar, located at the WSBA Conference Center in Seattle, will feature in-depth discussions regarding important topics to the construction lawyer: statutory limitation periods, bidder responsibility and public works solicitations, top 10 mistakes in prevailing wage compliance, contractor registration requirements and condominium issues.  In addition, Karl and I will present on the subject of Washington construction lien claims and how the Washington statutes governing lien rights and claims are applied to different factual scenarios.  The seminar will also include information regarding new laws and legislative developments in the 2017 legislative session, an update on significant cases impacting the construction industry in Washington and ethical considerations for the construction law practitioner.  Lastly, attendees will gain insightful judicial perspectives on litigating complex construction cases from a panel of three King County Superior Court judges.  Click here to learn more and to register for this seminar online.

Important Lessons from Record-Setting Settlement in Building Collapse Case

Philadelphia, United States - June 11, 2013: Building collapse memorial on June 11, 2013 in Philadelphia. The unoccupied building collapsed during demolition on June 5, 2013 killing 6 and injuring 14 people.

Having lived in Philadelphia in 2013 when the four-story “Hoagie City” building collapsed during demolition and toppled the neighboring Salvation Army thrift store, killing seven people and injuring 12 others, I closely followed the recent civil trial that resulted in a $227 million settlement of the plaintiffs’ personal injury and wrongful death claims—a reported record for Pennsylvania state court.

According to news reports, $27 million of the settlement is being paid by the Hoagie City building owner, New York real estate investor Richard Basciano, and the remaining $200 million is being paid by the Salvation Army. Basciano’s demolition contractor, Griffin Campbell, and Campbell’s excavation operator, Sean Benschop, did not participate in the settlement, as both are serving long prison terms for their role in the collapse.  Also not participating: the architect hired by Basciano to monitor the demolition, Plato A. Marinakos, who was believed to have already exhausted his insurance coverage.  The settlement was reached while the jury was deliberating its damages award, having already found both Basciano and the Salvation Army liable to the plaintiffs.

According to the same new reports, evidence presented during the trial showed that Basciano—who died last week—did minimal due diligence before hiring Marinakos, who had little to no experience overseeing similar demolition projects, or before hiring Campbell, who was similarly unqualified and was unlicensed. The evidence also showed that the Salvation Army ignored warnings of the building’s imminent collapse and did not tell its employees and customers about the danger.

There are many lessons to be learned on all sides of this tragedy, including by owners who might otherwise assume they are insulated from liability for the acts and omissions of the professionals and contractors they hire. The tragedy in Philadelphia serves as an important reminder that owners have an obligation to perform reasonable due diligence in vetting designers and contractors—particularly when a project involves high-risk work.  And while carefully drafted contract provisions can provide owners with some degree of protection, even the most owner-friendly contract likely would not have saved Basciano.  For one, Basciano’s liability to the plaintiffs stemmed from his own obligation to vet and hire qualified professionals and contractors.  Further, many states—including Oregon—prohibit a party to a construction contract from indemnifying any other person for that person’s own negligence.

There are similar insights to be gained by designers and contractors, the most obvious being that they should not perform work for which they are unqualified, and should make sure that the consultants and subcontractors they hire also perform only work they are qualified to perform.

And—as the Salvation Army learned—even neighboring property owners without any involvement or control over construction activities can have liability if they ignore warnings of imminent danger caused by their careless neighbor.

These lessons may seem obvious. But too often obvious takes a back seat to expediency and up-front cost savings.

Oregon Women In Construction Conference

DSC_0180 DSC_0989 DSC_1057 (2) DSC_0013 (1) DSC_0031 (1) DSC_0056 (1)Stoel Rives is proud to have co-created and been the leading sponsor in the first annual “Oregon Women In Construction Conference” hosted by the University of Oregon last Thursday, April 27.  The event was emceed by City of Portland construction attorney Molly Washington (who led all aspects of the event including topics, speakers, locale, etc.) and featured Stoel’s Tami Boeck as one of the moderators.  The conference was a series of expert panels comprised of Oregon’s top construction industry leaders, including those from the legal, consulting, design, general contractor and subcontractor communities.  The event sold out quickly and, unlike many seminars, maintained a packed house for the entirety of the program and the cocktail hour afterwards.  Thanks to all who participated, including our own client representatives who donated their time and the other sponsors who participated with funds for the event and the charity raffle. We look forward to being a major part of this event again next year!

 

 

Buyer Beware: Oregon Courts Will Enforce Anti-Assignment Provisions in Insurance Policies

An anti-assignment provision in an insurance policy may prohibit the insured from assigning its rights under the policy. In my latest DJC article, I discuss a recent decision by the Oregon Court of Appeals, in which a claimant learned the hard way that Oregon courts will not hesitate to enforce an anti-assignment provision in an insurance policy to invalidate an insured’s assignment of its claim. Read the full article here.

“Buyer Beware: Oregon Courts Will Enforce Anti-Assignment Provisions in Insurance Policies” was originally published by the Daily Journal of Commerce on April 21, 2017.

The Devil is in the Details: Contractual Additional Insured Requirements

Owners frequently require their contractors to name them as additional insureds. Owners and contractors often include requirements seeking to have the obligation to name them as additional insureds “flow down” to parties with whom they lack a direct contractual relationship (e.g., subconsultants, subcontractors, and suppliers).  Despite the simplicity and appeal of this arrangement, contractual additional insured requirements can be worthless without the appropriate insurance endorsements.

The standard additional insured endorsement, ISO form CG 20 33, requires a direct contractual relationship between the named insured and the additional insured.  The problem is apparent.  Although CG 20 33 allows an owner to assert a claim as an additional insured under its contractor’s insurance policies, it does not allow an owner to assert a claim as an additional insured under subconsultants’, subcontractors’, or suppliers’ insurance policies.  This could undermine the benefits of additional insured coverage and expose a contractor or designer to a breach of contract claim based on its failure to procure, or require the procurement of, the required insurance coverage.

Insurance companies do offer a wide variety of additional insured endorsements, and endorsement CG 20 38 provides a solution for owners, designers, and contractors seeking to avoid the problem identified above. That endorsement provides broad contractual additional insured coverage to “any other person or organization you are required to add as an additional insured under the [same] contract or agreement.”  Owners should require use of CG 20 38 and confirm that the subcontractors have provided the endorsement.  Contractors should likewise require their subcontractors to use this endorsement to fulfill these contractual requirements or they may be in breach of their contractual duties to provide insurance.

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