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This article was originally published in the April 2020 issue of ConsensusDocs Construction Law. It is republished here with permission.

State and local governments throughout the country continue to issue orders in response to the novel coronavirus (COVID-19) outbreak. Many states have ordered the shutdown of all businesses, with various exceptions such as businesses that are “essential” and/or “life-sustaining.” Each jurisdiction has provided a list and/or guidance on what kinds of businesses must close and what can remain open. Pepper Hamilton continues to monitor these orders and update its “COVID-19 – State Business Impact Tracker” map, an interactive tool that shows shutdown orders by state.

Whether construction projects can continue is an ever-changing issue. In some jurisdictions, such as Boston, all construction projects were shut down. In other locations, whether construction can continue may depend on the county, or even city, where the project is located and/or the type of project. However, those supplying labor, materials and/or equipment to construction projects should closely monitor how their projects are being impacted, including whether and when to exercise statutory remedies available, e.g., ‘ lien, stop payment notice and/or bond rights. In many states, the statutory deadlines to assert these rights are triggered by “completion” of a project.

Univ. of Iowa Bd. of Regents v. Am. Arbitration Ass’n, No. 17-0949, 2019 BL 7069 (Iowa Ct. App. Jan. 09, 2019)

Modern Piping, Inc. (“Modern Piping”) and the University of Iowa, Board of Regents, and State of Iowa (“University”) entered into two construction contracts, both containing arbitration provisions.  Disputes arose related to each contract and Modern Piping filed a demand for arbitration with the American Arbitration Association (AAA).  The University filed an action against AAA, seeking to enjoin it from arbitrating the disputes.  AAA filed a motion for summary judgment on the grounds that arbitral immunity doctrine applied.  The district court granted AAA’s motion and the University appealed.

The doctrine of arbitral immunity provides that arbitrators are immune from liability for acts performed in their arbitral capacity and generally shields all functions which are integrally related to the arbitral process.  The doctrine applies to a claim against an arbitrator where the claim effectively seeks to challenge the decisional act of an arbitrator or arbitration panel.  The immunity extends to associations administering arbitration procedures.

Dlorah, Inc. v. KLE Constr., LLC, No. CIV. 16-5102-JLV, 2017 U.S. Dist. LEXIS 11043 (D.S.D. July 17, 2017)

Plaintiff, Dlorah, Inc. (“Dlorah”), filed suit against defendant, KLE Construction, LLC (“KLE”), in connection with an agreement for KLE to perform construction services at an apartment complex in Rapid City, South Dakota.  According to Dlorah, KLE’s actions while carrying out the construction breached the agreement and constituted fraud/deceit.

KLE moved the court to compel arbitration or alternatively stay the proceedings pursuant to an arbitration clause contained in the parties’ agreement.  Dlorah objected to KLE’s motion on three grounds: (i) defendant had not satisfied the conditions precedent to compel arbitration; (ii) the dispute at issue did not fall within the scope of the arbitration clause; and (iii) the arbitration clause was permissive, not mandatory, and therefore permitted Dlorah to file suit in court.  After concluding that the parties had in fact entered into a binding arbitration agreement, the court considered and rejected each of Dlorah’s arguments.

Tilson Home Corp. v. Zepeda, No. 14-16-00075-CV, 2016 Tex. App. LEXIS 12022 (Tex. App. Nov. 8, 2016)

The Court of Appeals of Texas has held that an arbitrator—not a trial court—must determine whether a prerequisite to the obligation to arbitrate has been met. Thus, when faced with the procedural question of whether an arbitration demand was timely filed, Texas trial courts must compel arbitration, leaving the question to the arbitrator. 

In Tilson Home Corp., Jorge and Lisa Zepeda hired Tilson to build a home on their property.  The contract’s arbitration provision stated:

Any dispute or claim which arise[s] from or relates to this Agreement, the Work and/or the Home will be barred unless the claim is filed with the [AAA] by Owner or Contractor within two (2) years and one (1) day from the date the cause of action accrues.