Monday, October 8, 2018

Please Join Me at the Boar’s Head for Some Construction Law Fun

39th Annual Construction Law and Public Contracts SeminarOn November 2nd and 3rd, 2018, Virginia CLE will be putting on the 39th Annual Construction Law and Public Contracts Seminar.  I’ve recommended this seminar and given a “post mortem” on it on multiple occasions here at Musings and want to recommend it again.  If you, like me, are a construction attorney that practices in Virginia, I highly recommend that you attend.

I am not only recommending it because I’ll be speaking along with Eric Olsen of DPOR on the topic of representation before the Contractor’s Board, but because I learn something or meet someone new every year.  This year’s seminar covers topics ranging from the above mentioned topic to mechanic’s liens, to environmental considerations on construction projects.  The topic list even includes “Wine + Construction = Issues! “In short, whether you’ve been filing mechanic’s liens and reading and/or litigating construction contracts for 2 or 30 years, there’s likely a topic that you will find of interest.  Throw in 12 hours of CLE credit (including those elusive 2 hours of ethics credit) and the education alone would be worth the trip.

Even with the great topics above (not to mention the full boat of CLE), my favorite aspect of these two days in Charlottesville is not the education (though that’s a big part of it). My favorite part of these seminars is the ability to meet construction attorneys, new and experienced, that I haven’t met before and to see old friends to catch up. I always enjoy talking construction law and other things with my fellow construction attorneys. Whether discussing a legal problem, “networking,” or just getting a new perspective, I always find the chance to interact with the others in attendance to be a blast.  This seminar is one of the many reasons I find the construction bar here in Virginia to be so collegial.

In short, sign up, show up, and look me up when you get to the Boar’s Head, you’ll be glad you did.

As always, I welcome your comments below.  Please subscribe to keep up with this and other Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 license.

Please Join Me at the Boar’s Head for Some Construction Law Fun

39th Annual Construction Law and Public Contracts SeminarOn November 2nd and 3rd, 2018, Virginia CLE will be putting on the 39th Annual Construction Law and Public Contracts Seminar.  I’ve recommended this seminar and given a “post mortem” on it on multiple occasions here at Musings and want to recommend it again.  If you, like me, are a construction attorney that practices in Virginia, I highly recommend that you attend.

I am not only recommending it because I’ll be speaking along with Eric Olsen of DPOR on the topic of representation before the Contractor’s Board, but because I learn something or meet someone new every year.  This year’s seminar covers topics ranging from the above mentioned topic to mechanic’s liens, to environmental considerations on construction projects.  The topic list even includes “Wine + Construction = Issues! “In short, whether you’ve been filing mechanic’s liens and reading and/or litigating construction contracts for 2 or 30 years, there’s likely a topic that you will find of interest.  Throw in 12 hours of CLE credit (including those elusive 2 hours of ethics credit) and the education alone would be worth the trip.

Even with the great topics above (not to mention the full boat of CLE), my favorite aspect of these two days in Charlottesville is not the education (though that’s a big part of it). My favorite part of these seminars is the ability to meet construction attorneys, new and experienced, that I haven’t met before and to see old friends to catch up. I always enjoy talking construction law and other things with my fellow construction attorneys. Whether discussing a legal problem, “networking,” or just getting a new perspective, I always find the chance to interact with the others in attendance to be a blast.  This seminar is one of the many reasons I find the construction bar here in Virginia to be so collegial.

In short, sign up, show up, and look me up when you get to the Boar’s Head, you’ll be glad you did.

As always, I welcome your comments below.  Please subscribe to keep up with this and other Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 license.

Wednesday, October 3, 2018

Uniwest Rides Again (or, Are Architects Subject to Va. Code Section 11-4.1?)

Photo Credit: Rett HillIn 2010, the Virginia Supreme Court held in Uniwest Const., Inc. v. Amtech Elevator Servs., Inc., that Va. Code Sec. 11-4.1 renders completely void and unenforceable any indemnification provision in a construction contract between a contractor and subcontractor that seeks to indemnify the indemnified party from its own negligent acts.  In short, the Virginia Supreme Court stated that such overly broad provisions violate Section 11-4.1.

A recent case out of the Eastern District of Virginia Federal District Court examined a provision in a contract between a designer/architect and a contractor or owner on a project.  In Travelers Indem. Co. of Conn. v. Lessard Design Inc. the Court examined the application of Section 11-4.1 to the following provision of a design contract where Lessard, the indemnitor, agreed to:

[i]ndemnify, defend and hold the Owner, Owner’s Developer, and Owner’s and Owner’s Developer’s wholly owned affiliates and the agents, employees and officers of any of them harmless from and against any and all losses, liabilities, expenses, claims, fines and penalties, costs and expenses, including, but not limited to reasonable attorneys’ fees and court costs relating to the services performed by the Architect hereunder . . .

While this looks like a pretty simple matter where there is a high potential for violation of 11-4.1 given its terms, we all know that the courts in Virginia look at the plain language of a statute, and this one states:

Any provision contained in any contract relating to the construction, alteration, repair or maintenance of a building, structure or appurtenance thereto, including moving, demolition and excavation connected therewith, or any provision contained in any contract relating to the construction of projects other than buildings by which the contractor performing such work purports to indemnify or hold harmless another party to the contract against liability . . .  caused by or resulting solely from the negligence of such other party or his agents or employees, is against public policy and is void and unenforceable. . .

Because Travelers argued that Lessard was a designer and not a “contractor,” that the design contract was not one “relating to construction” the Court had to look at the statute nd its purpose in analyzing whether this statute did in fact apply.  The Court rejected Travelers’ attempted narrow reading of the statute.  Specifically, it found that the contract required Lessard to perform certain construction phase related duties and therefore the contract was one that related to construction as required under the Code.  Secondly, it held that the term “contractor” could, in certain circumstances, include architects or engineers so long as they were performing, managing or superintending construction.  It found that the contract at issue required such performing, managing or superintending and for this reason and to implement the clear purpose of Section 11-4.1, the Court determined that Lessard fell within the scope of the statute as a “contractor.”

The Court did point out that this is a fact specific inquiry where the particular services of the architect are to be taken into account.  For instance, an architect that merely provides design services, but does not provide owner representation or other construction related services, would likely not fall under the terms of this statute.

After determining that the statute did apply to Lessard, the Court examined the indeminification provision itself and found that it was general enough and broad enough in its “relaing to” language that it required Lessard to indemnify the Owner or contractor for their own negligent acts.  The Court then applied the statute and Uniwest to wholly invalidate the provision.  The result of this ruling was a dismissal of Travelers’ complaint and Travelers being unable to recoup the attorney fees and damages it paid ostensibly due to Lessard’s actions.

The takeaway? Contract drafting matters!  As always, the terms of the contract will be applied as written and not as intended (if those two are not the same).  Careful drafting of your indemnification provisions can avoid this type of result and consultation with an experienced construction attorney is a good way to assure that indemnification provisions are properly drafted to assure that the right person is paying for the problem.

Other thoughts?  I’d love to hear them below.

As always, I welcome your comments below.  Please subscribe to keep up with this and other Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 license.

Uniwest Rides Again (or, Are Architects Subject to Va. Code Section 11-4.1?)

Photo Credit: Rett HillIn 2010, the Virginia Supreme Court held in Uniwest Const., Inc. v. Amtech Elevator Servs., Inc., that Va. Code Sec. 11-4.1 renders completely void and unenforceable any indemnification provision in a construction contract between a contractor and subcontractor that seeks to indemnify the indemnified party from its own negligent acts.  In short, the Virginia Supreme Court stated that such overly broad provisions violate Section 11-4.1.

A recent case out of the Eastern District of Virginia Federal District Court examined a provision in a contract between a designer/architect and a contractor or owner on a project.  In Travelers Indem. Co. of Conn. v. Lessard Design Inc. the Court examined the application of Section 11-4.1 to the following provision of a design contract where Lessard, the indemnitor, agreed to:

[i]ndemnify, defend and hold the Owner, Owner’s Developer, and Owner’s and Owner’s Developer’s wholly owned affiliates and the agents, employees and officers of any of them harmless from and against any and all losses, liabilities, expenses, claims, fines and penalties, costs and expenses, including, but not limited to reasonable attorneys’ fees and court costs relating to the services performed by the Architect hereunder . . .

While this looks like a pretty simple matter where there is a high potential for violation of 11-4.1 given its terms, we all know that the courts in Virginia look at the plain language of a statute, and this one states:

Any provision contained in any contract relating to the construction, alteration, repair or maintenance of a building, structure or appurtenance thereto, including moving, demolition and excavation connected therewith, or any provision contained in any contract relating to the construction of projects other than buildings by which the contractor performing such work purports to indemnify or hold harmless another party to the contract against liability . . .  caused by or resulting solely from the negligence of such other party or his agents or employees, is against public policy and is void and unenforceable. . .

Because Travelers argued that Lessard was a designer and not a “contractor,” that the design contract was not one “relating to construction” the Court had to look at the statute nd its purpose in analyzing whether this statute did in fact apply.  The Court rejected Travelers’ attempted narrow reading of the statute.  Specifically, it found that the contract required Lessard to perform certain construction phase related duties and therefore the contract was one that related to construction as required under the Code.  Secondly, it held that the term “contractor” could, in certain circumstances, include architects or engineers so long as they were performing, managing or superintending construction.  It found that the contract at issue required such performing, managing or superintending and for this reason and to implement the clear purpose of Section 11-4.1, the Court determined that Lessard fell within the scope of the statute as a “contractor.”

The Court did point out that this is a fact specific inquiry where the particular services of the architect are to be taken into account.  For instance, an architect that merely provides design services, but does not provide owner representation or other construction related services, would likely not fall under the terms of this statute.

After determining that the statute did apply to Lessard, the Court examined the indeminification provision itself and found that it was general enough and broad enough in its “relaing to” language that it required Lessard to indemnify the Owner or contractor for their own negligent acts.  The Court then applied the statute and Uniwest to wholly invalidate the provision.  The result of this ruling was a dismissal of Travelers’ complaint and Travelers being unable to recoup the attorney fees and damages it paid ostensibly due to Lessard’s actions.

The takeaway? Contract drafting matters!  As always, the terms of the contract will be applied as written and not as intended (if those two are not the same).  Careful drafting of your indemnification provisions can avoid this type of result and consultation with an experienced construction attorney is a good way to assure that indemnification provisions are properly drafted to assure that the right person is paying for the problem.

Other thoughts?  I’d love to hear them below.

As always, I welcome your comments below.  Please subscribe to keep up with this and other Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 license.

Thursday, September 13, 2018

Owners Can Get Cake and Icing Under New Tennessee Lien Law

Seems like last week I was just celebrating one kid’s birthday and I had to do it again last night!  Oh, that’s right, I have seven kids with two birthdays in September. So, it was not a dream?!?!?!  Although they both got to choose their own family dinner destination, we are going to have one huge cake this weekend…with tons of icing!

Owners in Tennessee are celebrating a new law recently passed because they may get their icing, too!  The new statute, signed into in May 2018, immediately created a cause of action providing for remedies for the successful challenge of the validity of a lien against a property.  Under the new law, Tennessee Code Section 66-21-108 provides a description of the “icing” that the owner may recover:

[A] real property owner who prevails in an action challenging the validity of a lien, including in a slander of title proceeding, shall recover:

(1) The owner’s reasonable attorney’s fees; 

(2) Reasonable costs incurred by the owner to challenge the validity of the lien;

(3) Liquidated damages in an amount equal to ten percent (10%) of the fair market value of the property not to exceed one hundred thousand dollars ($100,000); and 

(4) Any actual damages incurred by the owner.

The banking industry was able to get a carve-out because the above remedies do not apply “if the action was brought to challenge a lien that is based on a loan agreement for which the encumbered property was listed as collateral to secure the repayment of the loan.”

While there were other remedies available to owners under Tennessee’s mechanic’s lien statutes (such as right to bond off enforcement, right to demand enforcement, or exaggeration of lien claims), this new section provides additional remedies in the form of liquidated damages and actual damages.

Owners Can Get Cake and Icing Under New Tennessee Lien Law

Seems like last week I was just celebrating one kid’s birthday and I had to do it again last night!  Oh, that’s right, I have seven kids with two birthdays in September. So, it was not a dream?!?!?!  Although they both got to choose their own family dinner destination, we are going to have one huge cake this weekend…with tons of icing!

Owners in Tennessee are celebrating a new law recently passed because they may get their icing, too!  The new statute, signed into in May 2018, immediately created a cause of action providing for remedies for the successful challenge of the validity of a lien against a property.  Under the new law, Tennessee Code Section 66-21-108 provides a description of the “icing” that the owner may recover:

[A] real property owner who prevails in an action challenging the validity of a lien, including in a slander of title proceeding, shall recover:

(1) The owner’s reasonable attorney’s fees; 

(2) Reasonable costs incurred by the owner to challenge the validity of the lien;

(3) Liquidated damages in an amount equal to ten percent (10%) of the fair market value of the property not to exceed one hundred thousand dollars ($100,000); and 

(4) Any actual damages incurred by the owner.

The banking industry was able to get a carve-out because the above remedies do not apply “if the action was brought to challenge a lien that is based on a loan agreement for which the encumbered property was listed as collateral to secure the repayment of the loan.”

While there were other remedies available to owners under Tennessee’s mechanic’s lien statutes (such as right to bond off enforcement, right to demand enforcement, or exaggeration of lien claims), this new section provides additional remedies in the form of liquidated damages and actual damages.

Monday, September 10, 2018

Where Standing, Mechanic’s Liens, and Bankruptcy Collide

Photo Credit: Rett HillI have spoken often about mechanic’s liens and the implications of such liens as they relate to bankruptcy here at Construction Law Musings.  A recent case out of Loudoun County, Virginia added another wrinkle to this discussion, that of standing and what happens on conveyance of the property and what interest in the property is required to allow a party to seek removal of the mechanic’s lien.

In Leesburg Bldg. P’rs LLC v. Mike Berger Inc. the Loudoun County Circuit Court faced the following scenario.  Leesburg Building Partners developed certain condominiums and hired Lansdowne Construction to perform the work as general contractor and paid Landsdowne in full for the work.  Lansdowne hired Mike Berger, Inc. (“MBI”) to perform concrete work for the project.  Landsdowne didn’t pay MBI approximately $48,000.00 and subsequently filed for bankruptcy.  MBI, seeking to protect it’s interest in the money it was owed, recorded a mechanic’s lien on the property.  Leesburg Building Partners filed an action to declare the lien invalid and have it removed from the property based upon its “payment defense” and the fact that it had paid Landsdowne in full.  A relatively simple scenario and one that has been discussed before here at Musings.  Not so fast. . .

The wrinkle to this case is that after paying Landsdowne and before the bankruptcy and the lien were filed, Leesburg Building Partners sold all of the condominiums to third party purchasers.  Because of this fact, MBI moved to dismiss the petition by Leesburg Building Partners, stating that Leesburg Building Partners did not have an interest in the property under Va. Code Section 43-17.1 and therefore did not have standing to pursue the claim.  While even the Court acknowledged that this argument works on first blush, the devil is, as always, in the details.

Leesburg Building Partners had conveyed the property with special warranty of title that by Virginia statute required it to “forever warrant and defend such property. . .unto the grantee[s] … against the claims and demands of … all persons claiming … through . . . [the grantor].”  Furthermore, a mechanic’s lien in Virginia is an inchoate lien that attaches at the time of the provision of labor or furnishing of materials and the lien recording process is merely a perfection of that lien and a notice to the world that the lien exists.  Because the lien attached at the time of the work when Leesburg Building Partners owned the property and before the conveyance and MBI was therefore “claiming through the grantor” the Court found that Leesburg Building Partners had standing to challenge the lien stating:

Thus, despite the fact that all of the units in the Project had been conveyed by LBP to third party owners, having conveyed each of those units with special warranty of title, LBP retains an interest in the condominium units of the Project within the meaning of Code § 43-17.1. Accordingly, LBP has standing to file a separate proceeding by petition under Code § 43-17.1 challenging the validity of MBl’s Mechanic’s Lien against the Project.

After dismissing certain other arguments (that I recommend for your review), the Court found that Leesburg Building Partners had a good payment defense, denied MBI’s motion to dismiss and declared the lien invalid.

The takeaways? 1. Standing inquiries are not as easy as they look in these cases and 2. Somtimes even when you do everything you can to protect your interest, things don’t go your way. These cases are very fact specific and nuanced so I highly recommend that you find an experienced construction lawyer before moving forward with any action or defense relating to a Virginia mechanic’s lien and that you read the opinion linked above carefully and draw your own conclusions.

As always, I welcome your comments below.  Please subscribe to keep up with this and other Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 license.