Boone Coleman Constr., Inc. v. Vill. of Piketon, 2016-Ohio-628, 2016 Ohio LEXIS 441 (Ohio Feb. 24, 2016)

A general contractor entered into a construction contract with a public agency for a road construction project with a $700 per day liquidated damages provision. The contractor completed the project over one year late, and was assessed $277,900 in liquidated damages. The original contract price was $683,300. The trial court granted summary judgment for the public agency, awarding the full amount of the liquidated damages. An intermediate appellate court overturned the ruling based upon an after-the-fact comparison of the total liquidated damages imposed in relation to the contract price, stating, “the amount of damages [as a whole] is so manifestly unreasonable and disproportionate that it is plainly unrealistic and inequitable.” The Ohio Supreme Court vacated the decision of the appellate court and remanded for further consideration.

Zacherl, Inc. v. Flaherty Mechanical Contractors, LLC, 131 A.3d 1030, 2016 Pa. Commw. LEXIS 22 (Jan. 6, 2016)

The West Allegheny School Board (the “School Board”) voted to approve the School District’s (the “District’s”) plan to renovate its high school building (the “Project”).  The District contracted with Flaherty Mechanical Contractors, LLC (“Flaherty”) to act as the prime contractor.  Flaherty submitted the names of its subcontractors for the School Board’s review.  When the School Board raised no objections to Flaherty’s submission, Flaherty subcontracted with F. Zacherl, Inc. (“Zacherl”) to perform sheet metal work at the Project.

During the Project, the District made timely payments to Flaherty, but Flaherty failed to make timely payments to its subcontractors, including Zacherl.  The District terminated Flaherty’s contract in part as a result of Flaherty’s payment issues.  Flaherty, in turn, terminated Zacherl’s contract.

J.C. Penney Props. v. Hiram LL, LLC, 2016 U.S. Dist. LEXIS 8027 (N.D. Ga. Jan. 25, 2016)

In January 2008, Hiram LL, LLC (“Hiram”) leased property to J.C. Penney Properties, Inc. (“J.C. Penney”) for the construction and operation of a J.C. Penney retail store.  Pursuant to the lease, Hiram was required “to design and construct certain improvements on the property” to prepare the site on which J.C. Penney planned to build its store.  Based on plans and specifications prepared by an architect, Hiram entered into a contract (the “Contract”) with Benning Construction Company (“Benning”) to construct the site.  The Contract was based on two AIA forms:  the A101 standard agreement and the A201 general conditions.  Benning completed its construction work and J.C. Penney eventually opened the store for business.

Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 226 Md. App. 420, 130 A.3d 1024, 2016 Md. App. LEXIS 3 ( Md. Ct. Spec. App. Jan. 28, 2016)

The City of Baltimore retained a design professional, Rummel Klepper & Kahl (“RK&K”), to produce a design for construction of a wastewater treatment plant.  The City then invited bids for construction of the plant, and contractor Balfour Beatty Infrastructure (“Balfour Beatty”) was the successful bidder.  RK&K and Balfour Beatty each had a separate contract with the City, but did not have a contract with one another.  After alleged defects in RK&K’s design caused Balfour Beatty to incur delays and increases to the cost of its work, it sued RK&K, but not the City.

The construction industry has been a leader in the use of arbitration to resolve disputes. In the past 30 years, it is fair to say that arbitration has outpaced litigation as the dominant method of dispute resolution. The protracted time for a construction case to get to trial and the attendant cost and expense has led the construction bar away from the courthouse and into the arbitration room. It not unusual for a lawyer bringing a construction case to court to receive a frosty reception from the judge, whose first remark is often akin to “why are you not in arbitration?” In other words, sitting through a construction trial is not among the court’s favorite pastimes.

The decision to arbitrate is made most typically, although not exclusively, by the parties’ agreement. The American Institute of Architects’ templates of construction agreements include an arbitration option wherein the parties agree that all disputes arising out of the agreement shall be determined in an arbitration to be administered pursuant to the Construction Industry Rules of the American Arbitration Association. These rules, well known to construction lawyers, provide for the orderly administration of an arbitration. Most construction lawyers, out of either lassitude or ignorance, pay scant, if any, attention to the arbitration clause. This is a mistake, perhaps a significant one, that can affect the outcome of the arbitration in numerous ways that cannot be predicted when the underlying contract is signed.

Pavarini Construction Co. v. Ace American Insurance Co., 2015 U.S. Dist. LEXIS 151247 (S.D. Fla. Oct. 29, 2015)

This action arose out of a construction project to build a 63-story luxury condominium tower located in Miami, Florida (“Project”).  Pavarini Construction Co. (“Pavarini”) was the general contractor for the construction of the Project.   Pavarini hired a subcontractor for the installation of the concrete masonry unit walls and certain reinforcing steel, and a second subcontractor for the supply and installation of reinforcing steel within the cast-in-place concrete columns, beams, and sheer walls. The work performed by both of these subcontractors was deficient.  A significant amount of reinforcing steel was either omitted entirely or improperly installed, including within important concrete structural elements, resulting in destabilization throughout the building.  This, in turn, caused stucco debonding and cracking on the walls of the building, worsening cracking of cast-in-place concrete elements, and cracking in the mechanical penthouse enclosure on the roof, which led to water infiltration.

NFL Mgmt. Council v. NFL Players Ass’n, 2015 U.S. Dist. LEXIS 117662 (S.D.N.Y. Sept. 3, 2015)

“Arbitration has been proven to be an effective way to resolve disputes fairly, privately, promptly and economically.”  So provides the preamble to the Construction Industry Rules of the American Arbitration Association.  A large part of the advantage of arbitration is the finality of the result, stemming from the lack of a meaningful appeal rights on legal issues, contractual interpretation, factual determinations, or the dispute resolution process itself.  Indeed, the Federal Arbitration Act, 9 U.S.C. §10, provides that an arbitration award is to be confirmed as a judgment unless one of four specific and narrow conditions for vacatur is met.

Probably the most notorious instance of an appeal of an arbitration award (and certainly the one most likely to come up in cocktail party conversation) was decided in September 2015 by Judge Richard M. Berman of the United States District Court for the Southern District of New York – the successful appeal by All-Pro Quarterback Tom Brady and the NFL Players Association of Brady’s four game suspension based on accusations of complicity in a scheme to gain an unfair competitive advantage in an NFL playoff game.  NFL Mgmt. Council v. NFLPA, No. 15-Civ.-5916 (RMB) (S.D.N.Y. Sept. 03, 2015)  There, the Southern District applied the Federal Arbitration Act standard to its review of Brady’s suspension, the same standard of review usually applied to an arbitration award arising from a claim under a construction contract with an arbitration clause. [1]  But Brady, unlike the vast majority of parties disappointed with arbitration awards, succeeded in having his suspension vacated.  The NFL Management Council has appealed the Southern District’s decision, and the matter is currently on an expedited appeal track, with argument before the Second Circuit scheduled for March 1, 2016.

City of Whiting, Indiana v. Whitney, Bailey, Cox, & Magnani, LLC, 2015 U.S. Dist. LEXIS 150229 (N.D. Ind. Nov. 5, 2015)

The City of Whiting, Indiana (the “City”) contracted with American Structurepoint, Inc. (“Engineer”) to design a lakefront park that would protect its shoreline from erosion (the “Project”).  Engineer subcontracted with Whitney, Bailey, Cox, & Magnani, LLC (“Subconsultant”) to serve as the marine engineer for the Project (the “Subcontract”).  Pursuant to the Subcontract, Subconsultant designed a revetment to protect the Project shoreline.  The revetment failed, damaging the City’s property and necessitating remediation.

Butch-Kavitz, Inc. v. Mar-Paul Co., Inc., 2015 U.S. Dist. LEXIS 160652 (M.D. Pa. Dec. 1, 2015)

The United States Army Corps of Engineers (the “Owner”) entered into a contract (the “Contract”) with Mar-Paul Company, Inc. (“Mar-Paul”) for $3,381,000.00, under which Mar-Paul would serve as general contractor on a construction project for renovations to a building at the Tobyhanna Army Depot in Tobyhanna, Pennsylvania (the “Project”).  In turn, Mar-Paul entered into a subcontract (the “Subcontract”) with Butch-Kavitz, Inc. (“Butch-Kavitz”) for $452,000.00, under which Butch-Kavitz would perform the electrical and generator work in connection with the Project.

Apex Directional Drilling, LLC v. SHN Consulting Eng’rs & Geologists, Inc., 2015 U.S. Dist. LEXIS 105537 (N.D. Cal. Aug. 11, 2015)

The United States District Court for the Northern District of California held that an engineer that prepares plans and specifications to be relied upon by contractors in preparing their bids for a construction project owes a duty of care to those contractors, and therefore can be held liable to the contractors for breach of professional duty and/or negligent misrepresentation.