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.

Certified Claim Not Necessary to Appeal LD Assessment

The Civilian Board of Contract Appeals recently ruled that it had jurisdiction over a Department of Agriculture contractor's challenge to a liquidated damages assessment even though the contractor failed to submit a certified claim (National Fruit Product Co. Inc. v. Department of Agriculture, CBCA, No. 2445, 3/26/12).  The Government had argued that the Board lacked jurisdiction because NFPC had not "certified" a claim for the LD challenge amount, apparently trying to take advantage of newer precedent respecting board jurisdiction.  The Board rejected that argument, noting that the Contracting Officer had issued the LD assessment as part of a final decision that NFPC timely appealed.  On the merits, though, the Board rejected NFPC's appeal, finding that the Government had cause to assess the LDs because NFPC failed to mitigate.  But the Board did modify the LD amount, and made award to NFPC for that reduction.

Mechanic's Lien Law Changes: Updated

Updating my earlier blog about pending HB 1265, those changes will not be adopted, at least this year. Sen. Purkey had made some "accommodation" changes to try and make it more palatable to the construction industry, such as limiting it to residential construction and changing the notice period to 30 days, but that was not enough to satisfy the State Senate, which passed on the bill for this year and referred it to the 2013 session of the Senate Courts of Justice Committee by a 15 to 0 vote. This now allows plenty of time for those with any interest in this draft bill to provide their input to their elected representatives. Even as changed it is not a good bill for contractors, in my opinion; so if you are involved in construction, and in particular residential construction, you should consider explaining your concerns and why they should vote no if it comes up for vote next year.

New FAR Rules Confirms No Priority Among Socio-Economic Programs

FAR Part 19.203 has been modified to confirm that there is no priority among socio-economic programs. This applies to the 8(a), HUBZone, SDVOSB, and WOSB programs. This was adopted, in part, to contravene prior GAO decision that the HUBZone program "trumped" the other SE programs. The new regulation is effective as of April 2, 2012. Also addressed in this new rule as intended clarifications of the existing programs are the following:

• for acquisitions above the SAT, contracting officers shall consider a SDVOSB sole-source award before considering a general small business set aside, but a competitive SDVOSB set aside should be considered before a SDVOSB sole-source award;

• contracting officers may award a general small business set aside or use the SDVOSB program when the acquisition is below the SAT;

• for acquisitions above the SAT, the contracting officer shall consider an award under the 8(a) program before considering a general small business set aside;

• contracting officers may award a general small business set aside or use the 8(a) program when the award is below the SAT;

• the CO shall consider 8(a) set asides or sole-source awards before considering a general small business set aside;

• for acquisitions above the SAT, the contracting officer shall consider a HUBZone sole-source award before considering a general small business set aside, but a competitive HUBZone set aside should be considered before a HUBZone sole-source award; and

• contracting officers may award a general small business set aside or a competitive HUBZone set aside when the acquisition is below the SAT, but HUBZone sole-source awards are not permitted at or below the SAT.

Full text of the new rule is at the following link:

It is available at: http://www.gpo.gov/fdsys/pkg/FR-2012-03-02/pdf/2012-4488.pdf.