Get Your Contracts Lean- Its Better than Dieting

Brian Perlberg | ConsensusDocs

I recently took the AGC Lean Construction Educations Program Units 1-7. After studying diligently, I’m happy to say that I passed the exam and earned my CM-Lean credential. Surprisingly, this makes me the first attorney to earn this distinction out of over 1,200 CM-Lean holders. So why is a construction attorney learning about lean? After all, this was my first exam in 20 years since I took the bar.

Well, according to McKinsey Global Institute, construction actually became less productive from 1995 through 2009. When it comes to efficiency, construction still lags significantly behind the manufacturing sector and the overall economy. Construction contracts – what we sign and the way in which we negotiate them, or lack thereof – is a principal reason why construction productivity is stagnant.

Contracting under an integrated lean project delivery method (ILPD) and incorporating Lean construction tools is the most powerful means to increase efficiency and add-value to owners. Owners are the client’s end-users of construction projects. ConsensusDocs has taken a leadership role in publishing the first standard ILPD contract which is an integrated form of agreement (IFOA). The ConsensusDocs 300 Integrated Project Delivery (IPD™) provides an off-the-shelf solution to contract utilizing lean tools. Not every owner can or is comfortable using an IPD approach. Consequently, ConsensusDocs produced the ConsensusDocs 305 Construction Lean Construction Addendum last year to provide an option for contracting for lean on Construction Management at-Risk and design-build projects. Some people call this approach IPD-lite or IPD’ish. Some disfavor such terms, because those terms have been used loosely on projects that aren’t very Lean.

What are some of the fundamental characteristics of a lean contract? Lean contracts fundamentally attempt to:

  • Align individual party’s financial success (and risks) with overall project success, rather than individual protection
  • Create a two-way conversation, rather than a detailed list of mandates and dictates assumed at contract signing with incomplete information
  • Pull (schedules and the supply chain), rather than push
  • Focus on adding value to the owner, rather than lowest first price
  • Pool risk by allocating it to the core team, including the owner, rather than push risk to individual parties (who may be in the weakest to avoid or to manage the risk)

Having gone through the AGC lean curriculum, I can say that it provides the building blocks necessary for all experience levels to transform their projects and their companies towards a learning. There is even a free in an introductory course online. The exam and earning the credential provide a realistic assessment of the knowledge and understanding of concepts.

The knowledge gained by taking these courses, will help equip me to continue to work with the ConsensusDocs Coalition’s volunteer leaders. The Coalition’s associations collectively represent over 300,000 company and individual members in the A/E/C community. Much has been accomplished to date but much still needs to improve in the area of construction contracts.

“Wait! Do You Have All Your Ducks in a Row?” Filing of a Certificate of Merit in Conjunction With a Complaint

Rahul Gogineni | The Subrogation Strategist

In Barrett v. Berry Contr. L.P., No. 13-18-00498-CV, 2019 Tex. LEXIS 8811, the Thirteenth District Court of Appeals of Texas considered, among other things, the procedural timing requirements of filing a certificate of merit in conjunction with a complaint. The court concluded that the proper reading of the statute requires a plaintiff to file a certificate of merit with the first complaint naming the defendant as a party.

In Barrett, after sustaining injuries while working at a refinery, David Barrett (Barrett) filed suit against Berry Contracting, LP and Elite Piping & Civil, Ltd. on July 6, 2016. In Barrett’s first amended complaint, which he filed on August 23, 2016, Barrett added Govind Development, LLC (Govind) as another defendant. Barrett subsequently filed a second amended complaint (omitting Govind) and, on December 27, 2017, shortly before the statute of limitations ran, a third amended complaint (reasserting claims against Govind). On January 28, 2018, after the statute of limitations period ran, Barrett filed a certificate of merit. Govind filed a motion to dismiss the claim, asserting that Barrett violated the statute that required a certificate of merit to be filed with the complaint, Tex. Civ. Prac & Rem. Code §150.002.

Tex. Civ. Prac. & Rem. Code §150.002(a) states,

In any action or arbitration proceeding for damages arising out of the provision of professional services by a licensed or registered professional, a claimant shall be required to file with the complaint an affidavit of a third-party licensed architect, licensed professional engineer, registered landscape architect or registered professional land surveyor…

There is an exception to the requirement that the certificate of merit be filed contemporaneously with the complaint. Specifically, if the complaint is filed within ten days of the expiration of the statute of limitations and the plaintiff specifically pleads that he or she cannot obtain a certificate of merit in such a short period of time, then the plaintiff can supplement his or her pleading with a certificate of merit, so long as it is filed within 30 days of the date of the filing of the complaint. Tex. Civ. Prac. & Rem. Code §150.002(c).

Although the exception exists, in Barrett the court of appeals clarified that §150.002(c) only applies to the first time a defendant is named in a complaint. Accordingly, if a plaintiff names a defendant in a complaint without including a certificate of merit and, subsequently, within ten days of the expiration of the statute of limitations period, files an amended complaint that also names the defendant, the plaintiff is not protected by §150.002(c)’s 30 day-extension period for filing the certificate of merit. Because the court of appeals found that Barrett should have filed a certificate of merit when he first named Govind as a defendant on August 23, 2016, the court upheld the trial court’s dismissal of the claims against Govind.

This case serves as a good reminder that before a lawyer files suit against a professional such as an engineer or architect, the lawyer should review the applicable jurisdiction’s procedural rules for specific certificate of merit requirements. Absent compliance with a jurisdiction’s procedural rules, a lawyer’s temptation to file suit against all parties that may possibly be liable could lead to unintended consequences, including preclusion of a valid claim.

Connecticut Supreme Court Further Refines Meaning of “Collapse”

Tred R. Eyerly | Insurance Law Hawaii

   Connecticut courts have been inundated with collapse cases the past couple of years due to insureds’ living in homes that were constructed with defective concrete manufactured by J.J. Mottes Concrete Company. In a duo of cases, the Connecticut Supreme Court responded to a certified question from the U.S. District Court, holding that collapse required that the building be in imminent danger of falling down. Vera v. Liberty Mut. Fire Ins. Co., 2019 Conn. LEXIS 339 (Conn. Nov. 12, 2019). 

    Plaintiffs had resided in their home since 2009. The home was built in 1993. In August 2015, after learning about the problem of crumbling basement walls affecting homes in their community due to cement manufactured by Mottes, they retained a structural engineer to evaluate their basement walls. The engineer found spider web cracking approximately 1/16 of an inch wide in the basement walls and three small vertical cracks. There were no visible signs of bowing. The engineer did not find that the walls were in imminent danger of falling down, but recommended that the basement walls be replaced. 

    Plaintiffs submitted a claim under their homeowners policy to Liberty Mutual. The claim was denied. The policy did not define collapse, but stated that collapse did not include “settling, cracking, shrinking, bulging or expansion.”

    Plaintiffs sued in state court and Liberty Mutual removed to the federal district court. Liberty Mutual moved for summary judgment, arguing that plaintiffs could not establish a substantial impairment of the structural integrity of the basement walls without proof that the walls were in imminent danger of falling down or caving in. The federal district court certified a question to the Connecticut Supreme Court, asking the Supreme Court to clarify the meaning of the term “collapse” when the term was not defined in a homeowner’s policy. 

    The seminal case in Connecticut was Beach v. Middlesex Mut. Assurance Co., 532 A. 2d 1297 (1987), where the court held that “collapse,” when not defined in the policy, was sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity of the insured’s home. Now the court considered whether “collapse” also required that the building be in imminent danger of falling down or caving in. 

    The court held that to meet the substantial impairment standard, an insured whose home had not actually collapsed had to present evidence demonstrating that the home nevertheless was in imminent danger of such a collapse. In other words, the insured had to show that the building was in imminent danger of falling down or caving in. 

Update: Lawyers Can Be Bound to Confidentiality Provision in Settlement Agreement

Danielle Ward | Balestreri Potocki & Holmes

In July 2019, the California Supreme Court ruled that an attorney’s signature under the often-used phrase “approved as to form and content” does not preclude a finding that the attorney could be bound to the terms of a settlement agreement. (Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781.) This decision marks a reversal of the Fourth District Court of Appeal’s 2018 ruling that approval of a contract is not tantamount to an agreement to be bound by that contract.

The underlying action stemmed out of a wrongful death suit by Wendy Crossland and Richard Fournier, parents of the decedent, against Monster Energy Company. The parties negotiated a settlement, a critical of element of which was a confidentiality provision aimed at keeping the the settlement secret.

The confidentiality provision prohibited plaintiffs and their counsel of record from disclosing both the existence of the settlement, or the terms thereof, to any person, entity, or publication, including the legal website Lawyers & Settlements. The attorneys signed the agreement under the phrase “approved as to form and content.”

Shortly after the settlement agreement was executed, the Plaintiffs’ attorney Bruce Schechter disclosed his clients’ settlement with Monster in an interview with Lawyers & Settlements. Monster filed suit against Mr. Schechter for breach of contract, among other causes of action. Mr. Schechter challenged the lawsuit with a SLAPP motion, essentially arguing that the lawsuit was meritless and merely an attempt to thwart freedom of speech.

The trial court denied Mr. Schechter’s motion as to the breach of contract cause of action finding that the settlement clearly contemplated that the attorneys were subjected to the terms of the agreement, and Schechter’s claim that he was not a party because he merely approved as to form and content was “beyond reason.”

The Fourth District Court of Appeal reversed, concluding that Mr. Schechter was not a party to the agreement by virtue of his signature approving the form and content, and the Plaintiffs had no authority to bind their attorney to the terms of the agreement. The Court of Appeal found that by affixing his signature to the agreement Mr. Schechter was merely manifesting his “professional thumbs up” in line with legal industry’s customary understanding.

In its reversal, the California Supreme Court did not disturb the legal community’s understanding of the phrase “approved as to form and content.” Rather, the Court concluded that an attorney’s signature under that often-used phrase does not preclude as a matter of law that the attorney intended to be bound by the agreement. The entire agreement, including the substantive provisions, need to be examined to determine the attorney’s intent in affixing his/her signature to the agreement.

Turning to the Crossland/Fournier Monster settlement agreement, the Court was unpersuaded by Mr. Schechter’s argument that he was not bound to the agreement because counsel was not included in the definition of “party”. The Court stated that it’s the substance of the agreement that determines whether counsel is a party to the contract, as opposed to a party to the lawsuit.

The Court was persuaded, in part, by the important role that confidentiality plays in brokering settlements. It noted that public disclosure of private settlements would serve to “chill” parties’ ability to resolve matters short of trial, and there was little doubt that confidentiality was an important term of the Crossland/Fournier Monster settlement. In concluding that Monster had met its burden to defeat an anti-SLAPP motion, the Court pointed to the numerous references to counsel in the substantive provisions of the agreement which a trier of fact could conclude bound Mr. Schechter to the confidentiality terms.

Delays Caused When Government (Owner) Pushes Contractor’s Work into Rainy/Adverse Weather Season

David Adelstein | Florida Construction Legal Updates

There are a number of horizontal construction projects where a contractor’s sequence of work and schedule is predicated on avoiding the rainy season (or certain force majeure events).  The reason is that the rainy season will result in delays due to the inability to work (and work efficiently) during the adverse weather (including flooding caused by the weather).  

There are a number of horizontal construction projects where a contractor’s sequence of work and schedule is predicated on avoiding the rainy season (or certain force majeure events).  The reason is that the rainy season will result in delays due to the inability to work (and work efficiently) during the adverse weather (including flooding caused by the weather).   If the work is pushed into the rainy season, is such delay compensable if the government (or owner) delayed the project that pushed work out into the rainy season?  It very well can be.

For example, in Meridian Engineering Co. v. U.S., 2019 WL 4594233 (Fed. Cl. 2019), a contractor was hired by the Army Corps of Engineers to construct a flood control project for a channel in Arizona. Due to delays, including those caused by the government, the project was pushed into the monsoon season, which caused additional delays largely due to flooding caused by the heavy rain.  One issue was whether such delays were compensable to the contractor – the government raised the argument that the contractor assumed the risk of potential flooding from the rainy season.  The Court found this argument unconvincing:

[The contractor’s] initial construction schedule planned for a completion of the channel invert work, a necessary step in protecting the site from flooding, to be completed by late June 2008…[M]any issues arose in the project’s early stages that led to cumulative substantial delay, including those caused by the government’s failure….The government cannot now claim that [the contractor] assumed the risk of flooding from monsoon season when the government was largely responsible for [the contractor’s] inability to complete the project prior to the beginning of the monsoon season.  Simply put, the government cannot escape liability for flood damages when the government is responsible for causing the contractor to be working during the flood-prone season.

Meridian Engineering, 2019 WL at *7 (internal citations omitted)

In other words, but for delays caused by the government, the contractor’s work would not have been pushed into the monsoon season.  The Court’s outcome, perhaps, would have been different if the contractor was the sole cause of delays that pushed the project into the monsoon season or the contractor’s original schedule was unrealistic to begin with.

It very well can be.

For example, in Meridian Engineering Co. v. U.S., 2019 WL 4594233 (Fed. Cl. 2019), a contractor was hired by the Army Corps of Engineers to construct a flood control project for a channel in Arizona. Due to delays, including those caused by the government, the project was pushed into the monsoon season, which caused additional delays largely due to flooding caused by the heavy rain.  One issue was whether such delays were compensable to the contractor – the government raised the argument that the contractor assumed the risk of potential flooding from the rainy season.  The Court found this argument unconvincing:

[The contractor’s] initial construction schedule planned for a completion of the channel invert work, a necessary step in protecting the site from flooding, to be completed by late June 2008…[M]any issues arose in the project’s early stages that led to cumulative substantial delay, including those caused by the government’s failure….The government cannot now claim that [the contractor] assumed the risk of flooding from monsoon season when the government was largely responsible for [the contractor’s] inability to complete the project prior to the beginning of the monsoon season.  Simply put, the government cannot escape liability for flood damages when the government is responsible for causing the contractor to be working during the flood-prone season.

Meridian Engineering, 2019 WL at *7 (internal citations omitted)

In other words, but for delays caused by the government, the contractor’s work would not have been pushed into the monsoon season.  The Court’s outcome, perhaps, would have been different if the contractor was the sole cause of delays that pushed the project into the monsoon season or the contractor’s original schedule was unrealistic to begin with.