Legal Implications of 3D Printing in Construction Loom

Aldo E. Ibarra | Engineering News-Record | June 28, 2018

Imagine a printer in the middle of a construction site programmed with a designer’s plans and specifications to build an entire home from scratch. As concrete is fed into the printing device, a technician hits enter on her computer and a 3D printer starts fabricating the structure’s walls and roof.

The final product will be created almost entirely by pre-programmed software and a movable printer injecting concrete, with no need for human construction workers. This isn’t science fiction, it’s a reality on the cutting edge of construction and technology.

The use of 3D printers in the construction industry will have legal implications that will affect owners, contractors, manufacturers and software developers.

The additive manufacturing boom has reached the construction industry and will certainly impact the way construction projects are managed. The rise of 3D printers will translate into fewer workers on construction sites, as printers will be automated and largely autonomous. Projects will be completed faster, as 3D printers will be capable of working at all hours, and will not require overtime.

Current concrete-injection 3D printers developed by WinSun Decoration Design Engineering, in China, have the capacity to print small houses, including walls and roofs, at a pace of up to 10 small houses in 24 hours.

3D printing capabilities go beyond just concrete. The team of MX3D, in Amsterdam, is currently working on delivering the first completely 3D-printed steel bridge. U.S.-based Contour Crafting is developing 3D and autonomous construction technologies that would allow for the construction of tall concrete towers, such as wind turbines, using climbing robots that would “print” the contour of the structure as they move upward.

Developers have positioned 3D printers tailored to the construction industry to work almost like robots. That is, the 3D printer is not just printing a door or a beam that will later be installed by construction workers, although that capability certainly exists, it is effectively installing the printed component in-place.

For example, in the case of steel structures, a 3D printer/robot can print a small section of steel using metallic powders and a “printer” head in a process known as direct metal laser sintering that uses a welding arm that will move along over that portion to create the next one, and so on, until the structure is completed. The result is an entirely new structure constructed wholly by the 3D printer.

Innovation and disruptive technology bring new legal risks and implications. In the context of construction defects claims, 3D printers will expose manufacturers and developers to liability and claims that would normally be attributed to human error.

Instead of human workers building a structure, a 3D printer will additively manufacture it after a pre-generated plan is uploaded to the printer’s software. How will liability be apportioned when the finished structure is found to have cracks, be uneven, improperly thick or have the wrong finish?

Whether the 3D printer is owned by the contractor, is being leased as equipment or is the equipment of a subcontractor will affect who can be found liable.

If the defect is the result of the printer’s malfunction, the contractor will have warranty and indemnity claims against the manufacturer arising out of privity from purchasing or leasing the 3D printer.

If the defect is the result of a software malfunction, that could open the developer to negligence and warranty claims for the value of the defects in the project at issue.

If there is an independent technician, acting as a subcontractor, feeding the plans into the 3D printer could also be open it to liability if the defect was the result of improperly uploading those plans or operating the 3D printer.

In addition to claims against the contractor, the owner could also have claims against the manufacturer or software developer for economic loss, even in the absence of direct privity, if the owner can show the damage to his property caused by the 3D printer was foreseeable.

The case Biakanja v. Irving (1958) 49 Cal. 2d 647, 649 gives courts a roadmap even if they didn’t foresee technology such as additive manufacturing.

When faced with a construction defect caused by a 3D printer used by the contractor or one of its subcontractors, the owner will certainly have, at the very least, an argument that the manufacturer of the printer or developer of the software should have been aware that a malfunction of its hardware or software would, in turn, impact the owner’s property.

Increased prevalence of this emerging technology will also have an impact on material suppliers. If 3D printers will be used in a specific project, designers and contractors should provide proper specifications for material compatible with the specific 3D printer. Material suppliers will also have to certify their materials as compatible with the printers.

Failure to do so could open designers and material suppliers to liability for construction defects resulting from the incompatibility of the material with the specific 3D printer.

The use of 3D printers in construction projects is also likely to conflict with current licensing and permit regulations.

For example, California Code of Regulations, Title 24, Building Standards Code, Section 110 et seq. provides for different types of inspections that are necessary before the government certifies a structure for use and occupancy. The increased speed with which 3D printers can complete projects could be slowed down by current inspection requirements and inspection scheduling procedures.

As the use of 3D printers becomes more common, government agencies in charge of inspecting construction projects will have to adapt to the faster-paced construction offered. In the ideal scenario, governmental agencies would embrace the new technologies in the construction industry and, for example, invest in automated scanner drones that could inspect an automated 3D printer’s work and, immediately thereafter, send the inspection’s result to the governmental agency for certification.

Such advances, however, may be difficult to achieve unless states, cities and counties make significant investments in infrastructure.

As 3D printers/robots become more commonplace on construction projects, contractors should be mindful of including express warranty clauses in purchase and leasing contracts for 3D printers.

Designers and material suppliers will have to confirm that construction materials under plans and specifications will be compatible with 3D printers; and governmental agencies will have to adapt to the fast production rate of 3D printers.

Five Strategies for Effective Settlement Negotiations

Hon. Geraldine Soat Brown (Ret.) | Global Construction Solutions | July 3, 2018

Every litigator knows that many more cases settle than go to judgment. At some point in almost every lawsuit, the parties will discuss settlement, either on their own or with a push from the judge. During my 16 years as a United States Magistrate Judge, I conducted more than 100 settlement conferences each year. I witnessed the whole range of lawyer performance. Underprepared lawyers and their clients stumbled into settlement conferences, often resulting in a negotiation that didn’t lead to settlement, or they settled on terms they found disappointing. Effective lawyers, on the other hand, approached settlement negotiations strategically and with thoughtful preparation.

Here are five strategies to maximize your clients’ chances of a favorable outcome.

1. Develop a litigation strategy for each individual case.

There is a temptation, especially in high-volume practice areas like personal injury, to view a case just like any other case that has a similar fact pattern. While it’s important to apply lessons from previous experiences, you should avoid a boilerplate, “this is what we always do” approach.

Discuss your client’s objectives candidly at the start of the litigation and throughout. From a defense point of view, the client usually wants to end the case as inexpensively as possible, but not always. The client may want to demonstrate its willingness to defend cases it views as meritless rather than pay a nuisance settlement.

The client’s view on litigation may change over time. For example, I conducted a settlement conference where the plaintiff’s case was not very strong, but it received a better settlement than the facts of the case would otherwise suggest. On the day of the settlement conference, the defendant company was in the process of being sold, and the owners wanted to eliminate any contingent liabilities.

2. Identify, gather and produce the most important information early.

Settlement negotiations are most effective at the proverbial sweet spot, when each side has the information it believes it needs to make a judgment about settlement but before discovery expenses allow the sunk costs mentality to take hold.

As early as possible, identify the information that would make the most difference to both your client’s and the opposing party’s view of the potential risk.

If the information the other side wants most is discoverable, it’s almost always in your client’s interest to produce it before the settlement negotiations. A party always assumes that withheld information is favorable to its side, and it calculates its settlement position accordingly. A classic example is a defendant who argues that a judgment would be uncollectable. I have never seen a plaintiff reduce its demand on that basis without first seeing credible financial information from the defendant.

3. Look for settlement opportunities.

Windows of opportunity for settlement open at various times in a lawsuit. For a defendant, it’s almost always worthwhile to ask the plaintiff’s lawyer during the first phone call, “What is your client really looking for in this case?” The answer to that question will tell a lot about whether to start negotiations then or wait.

Another opportunity is when the most important information has been gathered; for example, when the key witnesses have been deposed.

Yet another opportunity is at a hearing in court. Most judges will ask at a status hearing whether the parties have talked settlement. Before appearing at the status hearing, decide with your client how you want to use this opening: to get a settlement conference with the judge, to start lawyer-to-lawyer settlement talks or to discuss the possibility of private mediation.

While you can call opposing counsel at any time, scheduling a private mediation or judicial settlement conference requires matching the parties’ schedules to the judge’s or mediator’s schedule. It’s important to foresee and thus schedule settlement opportunities early.

Waiting until a summary judgment motion has been filed risks missing the window of opportunity. A defendant that has invested significant fees in discovery and the summary judgment motion usually wants to see if that will end the case. Plaintiffs are rarely sufficiently intimidated by a summary judgment motion to reduce the demand dramatically.

4. Consider the best context for settlement discussions.

Settlement talks can take place in a number of contexts. Direct, lawyer-to-lawyer talks can be effective when the lawyers have a good rapport and the necessary authority from their clients, and when money is the only (or primary) topic of negotiation. They are not as effective when the clients want to control the negotiation or there are many variables to the settlement.

A settlement conference with a sitting judge works well when one party wants “a day in court.” Judges, however, can give only a limited amount of time to any particular case, and only when their calendars permit. Not every judge wants to conduct settlement discussions or has mediation skills. The fact that a settlement conference was held and whether it resulted in a settlement will be on the docket available to the public and media.

A private mediation is completely confidential. The parties can choose the mediator and schedule a convenient time and place. The mediator will be available for as much time as the parties need, which can be important in a business dispute with a number of aspects to work out.

5. Prepare carefully to maximize the settlement opportunities.

The choice to settle or not belongs to the client, but it is your responsibility to make sure the client makes an informed choice.

2018 Florida Legislature Amends Construction Statute Of Limitations And Repose

Jaret Fuente | Carlton Fields | June 28, 2018

The Florida Legislature has amended the construction statute of limitations and repose a second time in two years. Effective July 1, the amendments include (1) a provision addressing completion of the contract and final performance, and (2) a provision extending the statute of repose in certain circumstances.

Pursuant to Fla. Stat. §95.11(3)(c), Florida’s four-year statute of limitations and 10-year statute of repose, the time for commencing an action founded on the design, planning, or construction of an improvement to real property runs from the latest of the date of:

  1. actual possession by the owner;
  2. issuance of a certificate of occupancy;
  3. abandonment of construction if not completed; or
  4. completion of the contract or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer.

Completion of the Contract and Final Performance

To address final performance with regard to “completion of the contract,” which last year was defined to mean “the later of the date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment was made,” the 2018 Legislature added the following provision:

With respect to actions founded on the design, planning, or construction of an improvement to real property, if such construction is performed pursuant to a duly issued building permit and if a local enforcement agency, state enforcement agency, or special inspector, as those terms are defined in s. 553.71, has issued a final certificate of occupancy or certificate of completion, then as to the construction which is within the scope of such building permit and certificate, the correction of defects to completed work or repair of completed work, whether performed under warranty or otherwise, does not extend the period of time within which an action must be commenced.

This provision clarifies that repair or correction of completed work, including warranty work, performed after issuance of a certificate of occupancy or certificate of completion, does not delay the start of the running of the statute of limitations or repose.

Extension of the Statute of Repose

The 2018 Legislature also added the following provision to the statute of repose:

However, counterclaims, crossclaims, and third-party claims that arise out of the conduct, transaction, or occurrence set out or attempted to be set out in a pleading may be commenced up to 1 year after the pleading to which such claims relate is served, even if such claims would otherwise be time barred.

This provision extends the time for defendants in construction defect actions, upon being served, to commence a counterclaim, crossclaim, or third-party claim against other responsible persons or entities. It essentially provides a cushion where, for example, an owner sues a general contractor on the eve of the expiration of the SOR, thereby leaving the general contractor limited or no time to investigate and commence an action against responsible subcontractors.

New Louisiana Law Requires Public Entities to Pay Interest on Late Payments to Contractors

Mark W. Mercante and Nicholas R. Pitre | Baker Donelson | June 20, 2018

On May 30, 2018, Louisiana Governor John Bell Edwards signed into law Act No. 566 of the 2018 Regular Session, amending Louisiana Revised Statute Section 38:2191(B) effective August 1, 2018, to provide for interest on late payments by public entities. Under the amendment, a payment is considered late and interest begins to accrue 45 days following the public entity’s receipt of a proper request for payment. Interest is set at 0.5 percent daily, not to exceed 15 percent. The amended statute will require contractors to distribute late interest payments among the contractor and subcontractors in proportion to the principal amount due within ten days of the contractor’s receipt of an interest payment.

The text of the amendment is set forth below (bold and underlined words are additions to prior law; no words were deleted):

B. (1) Any public entity failing to make any progressive stage payment within forty-five days following receipt of a certified request for payment by the public entity without reasonable cause shall be liable for reasonable attorney fees and interest charged at one-half percent accumulated daily, not to exceed fifteen percent. Any public entity failing to make any final payments after formal final acceptance and within forty-five days following receipt of a clear lien certificate by the public entity shall be liable for reasonable attorney fees and interest charged at one-half percent accumulated daily, not to exceed fifteen percent.

(2) Any interest received by the contractor pursuant to Paragraph (1) of this Subsection shall be disbursed on a prorated basis among the contractor and subcontractors, each receiving a prorated portion based on the principal amount due within ten business days of receipt of the interest.

The Supreme Court Narrows Its Holding in American Pipe & Construction Co. v. Utah

Ryan Vanderford and Mark D. Litvack | Pillsbury Winthrop Shaw Pittman LLP | June 18, 2018

TAKEAWAYS

  • The Supreme Court’s decision in China Agritech, Inc. v. Resh cements a new limit on the filing of successive class actions.
  • Tolling provisions established in landmark American Pipe decision do not extend to individual class members wanting to file a new action on behalf of others after the statute of limitations deadline has passed.

In American Pipe & Construction Co. v. Utah, 414 U.S. 538, 554 (1974), the Supreme Court held that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” In Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 103 (1983), the Supreme Court clarified American Pipe’s tolling rule by holding the rule is not dependent on putative class members intervening in or joining an existing suit; it includes putative class members who, after denial of class certification, “prefer to bring an individual suit rather than intervene … once the economies of a class action [are] no longer available.”

At issue in China Agritech, Inc. v. Resh, No. 17-432, 2018 WL 2767565, at *3 (2018) was whether the American Pipe tolling rule applies only to subsequent actions brought by a previously absent class member on an individual basis, or whether it also extends to subsequent class actions filed by previously absent class members.

On Monday, June 11, 2018, the Supreme Court unanimously refused to extend its American Pipe tolling rule to subsequent class actions, holding, “American Pipe does not permit a plaintiff who waits out the statute of limitations to piggyback on an earlier, timely filed class action.” Id. at *6. “[T]here is little reason to allow plaintiffs who passed up those opportunities to enter the fray several years after class proceedings first commenced.” Id. at *7.

The Court reasoned that “[t]he ‘efficiency and economy of litigation’ that support tolling of individual claims do not support maintenance of untimely successive class actions.” Id. at *6 (internal citations omitted). The Court fleshed out the competing efficiency arguments between successive individual claims versus successive class claims, noting:

American Pipe tolls the limitation period for individual claims because economy of litigation favors delaying those claims until after a class-certification denial. If certification is granted, the claims will proceed as a class and there would be no need for the assertion of any claim individually. If certification is denied, only then would it be necessary to pursue claims individually.

With class claims, on the other hand, efficiency favors early assertion of competing class representative claims. If class treatment is appropriate, and all would-be representatives have come forward, the district court can select the best plaintiff with knowledge of the full array of potential class representatives and class counsel. And if the class mechanism is not a viable option for the claims, the decision denying certification will be made at the outset of the case, litigated once for all would-be class representatives.

Id. The Court also noted that Federal Rule of Civil Procedure 23 “evinces a preference for preclusion of untimely successive class actions by instructing that class certification should be resolved early on.” Id.at *7 (citing Fed. R. Civ. P. 23(c)(1)(A)).

The Court found a contrary holding would allow the statute of limitations to be extended “time and again; as each class is denied certification, a new named plaintiff could file a class complaint that resuscitates the litigation.” Id. at *8. While “[t]he time to file individual actions once a class action ends is finite, extended only by the time the class suit was pending; the time for filing successive class suits, if tolling were allowed, could be limitless.” Id.

While the Court’s decision more clearly defines the limitations period for potential liability on a classwide basis, it may also lead to more protective class action filings by plaintiffs apprehensive about impending limitations deadlines.