Mechanic's Lien / Payment Bond Reforms Pending in NC

Since many Virginia contractors also perform work in North Carolina, I thought those that do might be interested in pending reforms to NC's mechanic's lien and payment bond statute that were filed today in the state's General Assembly. Some of these changes are very substantial. A link to the NC General Assembly web page with the proposed legislative changes follows: S864, Mechanics Liens/Payment Bond Reforms.

COFC Bid Protect Authority: DOD proposal to make force protestor forum choice

The DOD is requesting Congress to amend COFC bid protest jurisdiction to adopt the same timelines as are applicable to a GAO bid protest.  The result is that protestors would then have to choose forums initially. There are certainly pros and cons to this approach, but it is regardless an important develop those with potential interests should follow, and as deemed appropriate enter into the political fray. The DOD proposal can be found at the following link:
http://www.dod.mil/dodgc/olc/docs/25April2012Proposals.pdf

COFC held to have exclusive jurisdiction for trade secret misappropriation claim

In a recent, odd decision, the U.S. Court of Appeals for the Fifth Circuit recently ruled that the Court of Federal Claims had exclusive jurisdiction over claims that the Navy had misappropriated trade secrets of a contractor.  The decision is United States Marine Inc. v. United States, 5th Cir., No. 11-30177, 5/11/12. While issued as a nonprecedential decision, the holding is of note because of its potential applicability to other claims. The claimant contractor claimed that the Navy misappropriated its trade secrets by providing them to other prospective contractors, and was awarded $1.5M by the district court. The Fifth Circuit reversed though, holding that the disclosure was in the form of a contractual breach, and so jurisdiction lay exclusively with the COFC. This is despite the fact that one of the claimant contractors did not have a contract with the Navy, and as the dissent therefore noted likely had no ability to assert claim against the Navy for breach of contract. How this decision may get expanded will be interesting to see, but it clearly creates a bit of a quagmire for prospective plaintiffs seeking recovery for government misappropriation.

Maintaining and Producing Evidence: It really is that important

Most construction projects involve thousands of documents; not only in hard copy, but also as electronically stored information. Once a case is in litigation, or even anticipated to go that route, it is incumbent upon parties to maintain claim related documentation. But what happens if the information is not maintained? Many things could result. At the least, it is likely that the court will construe the inability to produce the document as being a document that, if produced, would be detrimental to the party that cannot produce it. But a more recent case in Fairfax went even further, and through the defendant's defensive case out entirely. Originally the defendant claimed the evidence had been destroyed as part of an office renovation, but it was later determined that this was not true. Once this came before the court, the presiding judge concluded there had been "spoliation" of the evidence, and as a penalty to the defendant precluded the defendant's entire liability defense case. While intentional spoliation is uncommon, this case illustrates the increasing duties courts are placing on parties to maintain evidence so it can later be produced in discovery, and is a cautionary tale for all.

Am I Really Responsible for That?

Landowners hire contractors to perform work for the landowner.  Contractors then typically hire multiple subcontractors to perform various portions of that work.  And, subcontractors then hire sub-subcontractors to perform various portions of their work.  And, so on depending upon the nature of the particular project.  Often the work being performed is dangerous, and this can result in personal injury or property damage.  Who is responsible when that happens?

There is a general rule in Virginia that one is not liable for the acts of an independent contractor.  But as with many things in the law there are exceptions to that rule. One of those exceptions is liability for inherently dangerous work done by someone one hires.  So what is inherently dangerous?  Unfortunately, there is no simple or single answer to that, and obviously much of what is done in for a typical construction project could qualify.

Some guideline conditions to something being inherently dangerous include the following: 1) work must be dangerous in and of itself and not just dangerous because it might be negligently performed; 2) the inherent danger must be naturally apprehended or reasonable recognizable by the parties when they contract; and 3) the inherently dangerous activity must be one in which injury to others will definitely occur unless special precautions are taken. 

An easy example is blasting activities. But the fact that most things in construction are dangerous make creating a definitive list very difficult, and so ultimately this is decided on a case by case basis by the courts.  One recent construction activity example that was determined as inherently dangerous is the digging and laying of a waterline under a road, which a Roanoke judge ruled last year met each of these guideline conditions.

Duties owed to third parties affected by inherently dangerous activities are not delegable to independent contractors.  Therefore, where inherently dangerous activities are concerned, the delegating party remains liable for the negligence of independent contractors doing those activities.  But that liability is not without limits.  For example, this liability doctrine is intended to protect third parties and not the independent contractor or its employees.  Similarly other defenses to liability would apply as in any other claim, including for Virginia negligence suits such things as contributory negligence.

In later blogs I will discuss potential protective measures to try and avoid or limit such liability exposure.  To learn more about this before then or to discuss the concepts in this blog, please contact me at nlowenstein@vanblk.com or (757) 446-8600, or one of the other construction professionals in Vandeventer Black’s Construction and Public Contracts Department.

Subcontractor Not Third Party Beneficiary to Prime Contract

In Environmental Staffing Corp. v. B & R Construction Mgmt., 283 Va. ___ 111067, ___ S.E.2d ___ (2012), just recently decided by the Virginia Supreme Court on April 20, 2012, the court held that a subcontractor was not a third party beneficiary to its contractor's prime contract with the owner. The court noted that the prime contract expressly noted that it was intended for the benefit of project developer, and reasoned that this express inclusion therefore necessarily permitted an intended third party beneficiary conclusion on the part of the subcontractor. The court also rejected the subcontractor's argument that the project's bond requirements supported the third party beneficiary claim, reasoning that while the subcontractor was indeed a beneficiary under the bond itself, that did not extend to being a beneficiary under the prime contract itself. Although the surety was bankrupt, the court noted that the subcontractor still could have pursued its bond remedy against the surety's principal, but chose to not do so. 

Mediation: Is if for you?

I recently had a client question why he should participate in mediation. The short answer is mediation allows parties to create their own solution to a construction dispute. Otherwise, the dispute is resolve by arbitrators, a judge, or a jury, depending upon how the construction contract is written. Mediation is not mandatory, unless set as a condition precedent in a contract; as typically done with AIA contracts. And even when mandatory, there is no requirement to settle the case. But often mediation can be the earliest, least expensive means of resolving a dispute between parties, including by getting the input from a neutral evaluator who typically would have a strong construction background. I'll talk further about mediation in later blogs. I'm interested in whatever views participants in the mediation process have; good or bad - so please send your thoughts.