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March 2012

Construction Quarterly

On a quarterly basis we provide important nationwide information about the latest construction industry news and legal developments.  Our national construction practice platform allows us to provide you insight into the developing trends and legal changes throughout the country.  This newsletter is intended to provide information for those concerned about managing construction related risks and disputes.

If you have any questions about this issue of the Construction Quarterly newsletter or our nationwide construction practice, please click here to visit our practice group page or contact Mark Russell or George Milionis.
 

INSIDE THIS ISSUE

 

  1. The Expanding Reach of The Crawford Decision and the Impact On Construction Indemnity Agreements

  2. National Legislative Updates in Construction Law 

    - Illinois Establishes General Contractor’s Lack of Liability Where Work Not Entrusted to Independent Contractor

    - Colorado Court of Appeals Addresses Statute re: When Repose Begins to Run on a Multi-Phase Project

  3. Construction Law Developments and Perspectives 

    - California: Amendments to Summary Adjudication  Procedures


    - Risk Management Helpful Hint – Control Your Own Destiny - Your Contract is a Key Risk and Financial Management Tool

  4. Speaking Engagements and Other Important Announcements

  5. About Gordon & Rees's Construction Practice

 

 

I.  The Expanding Reach of The Crawford Decision and the Impact On
     Construction Indemnity Agreements

 

 

Scott Austin

 

 

Michael Wilson

Searles Valley Minerals Operations, Inc. v. Ralph M. Parsons Service Company, 191 Cal.App.4th 1394 (2011)

San Francisco, CA - In the period since the California Supreme Court published the seminal decision in Crawford v. Weathershield  (“Crawford”) and refused to consider or reverse the California Court of Appeal Decision in UDC-Universal Development, L.P. v. CH2MM Hill (“CH2MM Hill”) the construction industry has been trying to come to grips with the importance and significance of these court rulings that set forth the defense and indemnity obligations owed by architects, engineers, design professionals and contractors in the State of California.  While the California Senate made an unsuccessful attempt to overturn these court decisions with Senate Bill 972, many design professionals and subcontractors involved in active litigation proceedings took a “wait and see” approach to evaluating, responding and accepting tenders of defense and indemnity issued by developers and general contractors.  This in turn led to a new court decision that not only reaffirmed the Crawford ruling, but reminded the construction industry of the potential repercussions of not accepting a valid tender of defense under a contractual indemnity agreement.  In particular, the California Court of Appeals, Fourth Appellate District published Searles Valley Minerals Operations, Inc. v. Ralph M. Parsons Service Company, 191 Cal.App.4th 1394 (2011) (“Searles”), which held that a party’s Crawford rights – the right to defense and indemnity upon a proper tender -- can be assigned and enforced by an assignee.

To read the full text of this statute, please click here.

 


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II.  National Legislative Updates in Construction Law

Scott Austin

Thomas Cronin 

Illinois Establishes General Contractor’s Lack of Liability Where Work Not Entrusted to Independent Contractor

Chicago, IL. - The First District of the Illinois Appellate Court recently found that a general contractor serving as construction manager did not have any liability for the injuries sustained by the Plaintiff employee of a subcontractor with whom the general contractor did not have a contract or agreement.  In O’Connell v. Turner Construction Co., 2011 Ill. App. LEXIS 273 (March 25, 2011), a local community initiated the construction of a new high school campus and retained Turner Construction Company (“Turner”) to manage the project.  Id. at *1-2.  As part of its duties, Turner assisted the school district in drafting contracts, reviewing the safety programs of other contractors, and advising as to the overall acceptability of contractors.  Id. at *2.  Turner did not enter into any contracts or agreements with any of the contractors or subcontractors involved on the project.  Id.
 
Plaintiff was employed by Linden Erectors, a subcontractor of Waukegan Steel, who served as a contractor on the project.  During the course of construction, Plaintiff was injured; he filed suit against several parties, including Turner, alleging fault premised upon negligence and premises liability.  Id. at *4.  The trial court granted Turner’s Motion for Summary Judgment, and Plaintiff appealed.  Id. at *5. 

On review, the Appellate Court upheld the lower court’s fining.  It ruled Plaintiff’s allegation of Turner’s liability baseless since Turner never entrusted any work to his employer in the first place.  Id. at *7.  The Court even took its reasoning a step further in stating that unless Turner actually selected the contractors or subcontractors, it cannot be said that it ever entrusted them with the work.  Id. at *8.  The Court concluded that it was therefore irrelevant as to what control, if any, Turner exercised over the jobsite, as control alone does not trigger liability in this instance.  Id. 

The Court additionally found no liability with respect to Plaintiff’s premises liability allegations.  Analyzing the requirements for possessing land, the Court compared the act of exercising control over land with control over individuals and activities on that land, finding that Turner’s degree of authority over the land did not exceed that of the school district.  Id. at *10-11. 

The O’Connell decision not only represents a key victory for general contractors and construction managers in Illinois, but it also provides direction regarding the parameters of their role on a jobsite.  Depending on whether a contractor is hired to serve in a managerial or advisory role, it must be keenly aware as to the scope of its responsibility and authority as outlined in the contract.  Aside from the written agreement, a contractor must also ensure that its actions and directions do not exceed its scope in taking on a more active role with respect to a subcontractor’s work.  




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David Heckadon

 


 

Amy Darby

Colorado Court of Appeals Addresses Statute re: When Repose Begins to Run on a Multi-Phase Project

 

 

Denver, CO - In Shaw Construction, LLC v. United Builder Services, et al., 2012 Colo. App. LEXIS 172 (Colo. App. 2012), the Colorado Court of Appeals recently addressed the issue of when the statute of repose begins to run on a multi-phase construction project.  The Court held that “an improvement may be a discrete component of the larger project, which can be substantially completed before the entire project is finished.”  (Id.)  Thus, it is possible that more than one statute of repose periods will apply to one project.

In Shaw, a homeowner’s association filed suit against the builder alleging various construction defects in a condominium project built in three phases.  The builder filed a third-party complaint against its subcontractors including a drywall installer and a roofer.  The subcontractors argued that the statute of repose had run on the date the final certificate of occupancy was issued.  The builder argued that the statute did not begin to run until the architect certified completion of the entire project.  The trial court awarded summary judgment, finding that the final certificate of occupancy indicated substantial completion of the project. 

Please click here to read the full overview.   
 


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III.   Construction Law Developments and Perspectives

David Heckadon

David Heckadon


 

Kathleen Rhoads and David King

California: Amendments to Summary Adjudication Procedures

Sacramento, CA - Beginning this year, an amendment to the California Code of Civil Procedure may have significant consequences for motions for summary adjudication.  Code of Civil Procedure section 437c now allows a party to “move for summary adjudication of a legal issue or a claim for damages other than punitive damages that does not completely dispose of a cause of action, an affirmative defense, or an issue of duty.” (Emphasis added.)

With this new amendment, certain important requirements apply to parties who hope to utilize these additional provisions.  First, the motion for summary adjudication may only be brought upon a joint stipulation by the parties setting forth the issues to be adjudicated, as well as a declaration from each stipulating party “demonstrating that a ruling on the motion will further the interests of judicial economy by reducing the time to be consumed in trial or significantly increasing the probability of settlement.”  (Code Civ. Proc. § 437c(s)(3).)  Within 15 days of receiving the stipulation, the court will make a determination as to whether the motion may be submitted.  (Id.)  Any non-stipulating party who is not a party to the motion must be served with the stipulation, and within ten days, may object to the determination of the issues.  (Code Civ. Proc. § 437c(s)(6).)  Finally, the notice of motion must contain specific language set forth in subsection (s)(4).  The new procedure expires after January 1, 2015, unless the Legislature acts to extend it.  (Code Civ. Proc. § 437c(u).)

Please click here to read an overview of upcoming amendments to summary adjudication procedures in California.   
 


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David Heckadon

 


 

Mark Russell 

Risk Management Helpful Hint – Control Your Own Destiny -Your Contract is a Key Risk and Financial Management Tool

San Francisco, CA - The handling of risk in construction contracts varies considerably. This depends on the nature and location of the work, the operator and contractor involved and the prevailing contracting climate. Each of these varies over time and there are also outside influences such as banks, governments and the insurance market.

In recent years, operators and contractors have remarked that the balance and handling of risks in some contracts was not ideal.  To best control your risk and financial consequences, you and your contract must:

  • identify risk;
  • identify the financial consequences of the risk
    becoming a reality;
  • help the contracting parties to achieve their appropriate
    risk balance;
  • try to avoid parties accepting risks they don’t understand;and
  • deal with unknown risks.

In addition to controlling your financial risks, an effective contract helps:

  • improve dialogue;
  • improve risk apportionment and understanding in contracts and projects;
  • improve efficiency and project delivery;
  • improve operator/contractor relations;
  • save money;
  • avoid litigation;
  • increase opportunities;
  • facilitate the development of alternative solutions; and
  • sustain the industry.

The importance of a good contract cannot be understated. Indemnity and Limitation of Liability provisions are just two examples of risk tools that can help you control your financial success.  By reviewing your project contracts to ensure they accurately reflect your desired goals, our office can assist you in limiting your legal and financial risks. 

 

 


 

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IV. Speaking Engagements and Other Important Announcements

 

 

Christine Barker, an associate in the Irvine office and a member of the firm's Construction Group, has joined the Board for the Construction Law Section Group of the Orange County Bar Association as Secretary/Treasurer.  In this position, Ms. Barker will be responsible for developing topics of discussion and coordinating speakers.
 



In January 2012, Carl Gebo and Cecily McLeod spoke at the U.S. Women's Chamber of Commerce and National Association of Small Business Contractors Annual Southeastern Symposium on the topic of "Teaming Agreements and Joint Ventures in Government Contracting."   
 

 



In 2012, Gordon & Rees announced the opening of three new offices in Carlsbad, Washington D.C., and St. Louis.  The new offices reflect a continuation of the firm’s ambitious expansion plans that have taken it from a regional, California-based legal services provider to a full service national law firm in the span of less than 10 years. 

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V. About Gordon & Rees's Construction Attorneys

Gordon & Rees's Construction Group consists of more than 75 lawyers nationwide who focus their practice on representing 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 throughout the United States.

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

Our lawyers are also active in speaking, writing and providing seminars about construction issues. Please click here to view our recent Publications and click here to view past and future speaking engagements.

Specializations:  Contracts/Fee Disputes, Bid Protests, LEED/Environmental, Government & False Claims, Public Works, Complex Residential  & Residential , Private Building, Hospital, and Infrastructure


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