Interesting Bill in Congress Imposes Prison Term for Safety Violations

I got tipped off about HB 2067, introduced by California U.S. Rep Lynn Woolsey, from Finance-Commerce.com.   Styled the “Protecting America’s Workers Act,” the bill’s summary explains that it would let the Occupational Safety and Health Administration (OSHA) enforce stiffer penalties for willful safety violations that result in serious injury or death.”

What kind of stiffer penalties?    Well, many are concerned that the bill could extend criminal liability to foremans, superintendents and safety directors within an organization.

Is this a serious problem?   Will this bill gain traction?

The folks at 16deathsperday.com would argue the problem is serious, and certainly hope that the bill moves through congress.    According to the organization, 16 workers are killed each day in the United States “because of reckless negligence on the part of their employers.”

If HB 2067 becomes law, and this organization’s numbers are correct, that could expose employees and owners to stiffer penalties and possible criminal sanctions 16 times per day.

Track the bill over at OpenCongress.org here, and stay tuned to the Monitor for future updates if this thing gets pushed through.

The Project in Las Vegas A Large-Scale Example of Typical Construction Dispute

A mega-project in Las Vegas is having real problems; mega-problems.   But when you look past the large numbers, all that is left is a simple construction dispute that is played out everyday across the nation between contractors, subcontractors and owners.   The dispute – reported recently by the Wall Street Journal – serves as a good, large-scale example of how things can go wrong in a construction project.

Here are three key components of this dispute:

  • The general contractor claims the owner hasn’t paid according to the payment schedule, and the owner claims it is owed money because of construction defects.
  • Failure to pay the prime trickled down to the subs, and they have filed liens.
  • The owner further refuses to pay the prime because (i) they have a contractual duty to keep the project lien-free; and (ii) The liens are causing the owner damages in that it is more difficult to sell the condominium units.

Sound familiar?   Of course it sounds familiar, this is a summary of nearly every owner / prime contractor dispute across the country.

As your construction project approaches completion, keep these issues in mind.   Owners very frequently get tighter on the final payments because they’re afraid the prime contractor will bail before work is 100% complete.   But the budget squeeze results in subcontractor liens, animosity, catch-22s and the spark of a litigation war.

We usually recommend two ways to handle these frequent problems.

First, handle it in the contract.    Think about these issues before you sign anything, and make the contract clear about how the contract will reach final completion.

Second, set up a way to resolve the dispute out of court (mediations, initial decision makers, and the like).

What do you guys think?   Any other recommendations?

New Orleans Declares Felons Not Responsible Bidders on Public Projects and Washington Contemplating Similar Rule

Mike Purdy’s Public Contracting Blog is so awesome, he got to this unique story that touts a legal link between Seattle, WA and New Orleans, LA before I could.    Before getting to the article, let me comment that if your company does public contracting work anywhere in the nation, Mike Purdy’s blog is going to consistently feed you very relevant information on the topic.   I highly recommend you check it out, and subscribe to his feed.

With that said, what article am I talking about?

Well, if you’re from the New Orleans area you likely remember the spat between former Mayor Ray Nagin and the city council about whether convicted felons are considered “responsible bidders” on city contracts.    After the fight, the vote, the veto, and the veto override, an ordinance (Ordinance Calendar No. 27,892) was adopted designed to stop the city from awarding contracts or grants to folks convicted of felonies in the previous 5 years.

Defining “Responsible Bidder”

What is a “responsible bidder?”   Nearly every state and city’s public bid laws use the term, allowing government entities to award contracts only to “responsible bidders.”    This interesting question of just what makes a bidder “responsible” was squarely in dispute between the New Orleans mayor and city council.

In the mayor’s veto message, he wrote that “under Louisiana law, responsibility [refers to] likely contractor performance, not the conviction history of a contractor’s principals, members and/or officers.”

Council-member Stacey Head lead the fight against the mayor for the council, arguing that responsibility does refer to the qualifications of the bidder him/her/itself, and not simply whether the contractor is likely to perform.    In her veto-override press release, she quotes the Louisiana Attorney General and Louisiana Supreme Court on the subject.

The AG states that “responsibility refers to the character or quality of the bidder – whether it is an entity with which you are safe doing business.”   Understanding Public Bid Law, Michael J. Vallan, Assistant Attorney General, February 20, 2008.

The Supreme Court allows an municipality to look at “financial ability, skill, integrity, business judgment, experience, reputation…and other similar factors bearing on the bidder’s ability to successfully perform the contract.”  Louisiana Associated General Contractors v. Calcasieu Parish School Board, 586 So.2d 1354 (La 1991).

Ordinance Cal. No. 27-892

So, what does this ordinance say?   Simplly, it prohibits the city from contracting with certain felons.   Here is the precise language:

[Prohibits City from contracting with] any person, corporation, or entity, whose principal(s), member(s), and/or officer(s) have within the preceding five years been convicted of, or pled guilty to, a felony under state or federal statutes for embezzlement, theft of public funds, bribery, falsification or destruction of public records.

The ordinance does not cast a terribly wide net, and so it’s surprising that this caused any controversy at all.    The City is not restricted from contracting with any felons, only those who committed a felony that has some sort of public-corruption element.

Responsible Bidder Criteria Important in Washington and Elsewhere

New Orleans is not the only place examining the criteria of a “responsible bidder” in public bid law.  As Mike Purdy points out in his post, bidder responsibility is a hot topic in Washington, where a task force was created by the Capital Projects Advisory Review Board (CPARB) to “address concerns by contractors of how public agencies are using responsibility criteria.”

tThe CPARB has released Guidelines on Bidder Responsibility (check them out, and the CPARB page here).   The criteria guidelines released by CPARB are much broader than the New Orleans ordinance, requiring consideration of things like delinquent state taxes, on-going lawsuits and the like.

One difference between the “Guidelines” and the “ordinance” is, of course, that the New Orleans ordinance actually prohibits a class of persons from being considered a responsible bidder, while the guidelines only offers suggestions as to what municipalities should consider when selecting a responsible bidder.    Will Washington take the next step and mandate the elimination of certain bidders?   Mike Purdy points out that they have the power:

Under RCW 39.04.350, a public agency in Washington State could establish Supplemental Bidder Responsibility Criteria similar to the New Orleans measure on not contracting with firms whose owners are convicted felons.   The Task Force on Bidder Responsibility will hold its second meeting on May 20, 2010.

Around the Web in Construction Law – May 21, 2010

  • 29 States Add Construction Jobs Between March and April:    The Associated General Contractors of America released its report on the rise/fall of construction jobs around the country for the most recently reported month, and there is a mixture of good news and bad news (depending on where you are).   29 states splits the country directly in half, with some folks having a good month and some folks not.   The New Orleans City Business Blog chimed in to pass along word that Louisiana lost jobs during the period. Washington and Oregon gained jobs in the period, barely.   .01% and .02% respectively.
  • I subscribed to a new blog this week, Government Contracts Legal Forum, recently launched by Crowell Moring and focusing on….government contracting law.   Involved with this blog is our friend in green building law, Chris Cheatham, who works at Crowell Moring and will be posting on the new blog from time to time.   Chris runs the Green Building Law Update blog.   One of his firsts posts on the new blog points out an Obama Executive Order that will require more green building projects.
  • New Lead Based Paint, Renovation, Repair and Painting Rule is causing contractors to panic, as per Andrea Goldman’s Massachusetts Builders Law Blog.   Andrea has posted a great deal about the new RRP rules, and if you deal with lead-based paint in any way or you renovate homes or buildings with lead-based paint, you will want to pay attention to these important changes from the EPA.
  • Louisiana Construction Law Blog on Blogspot discusses “Initial Decision Makers” in construction projects.   While IDMs have been around for a while, there really became popular when the AIA incorporated the concept into its contract documents a few years ago.    This post from our friends up in Shreveport, Louisiana, offers a great primer on the concept.

Interested in more articles and blog posts around the web on construction law?   You can check out other articles I’ve shared over the past week on my Google Reader Shared Items Feed.

Why You Should Lien First (and Ask Questions Later) in Virginia

Christopher Hill is a LEED AP and construction lawyer in Richmond, VA.  He is a member of Virginia’s Legal Elite in Construction Law and authors the Construction Law Musings blog.  You can also follow him on Twitter at  @constructionlaw.

First of all, thanks to Scott for allowing me the forum to guest post here at the Construction Law Monitor.  When I was thinking of a topic, I realized that mechanic’s liens in Virginia are extremely powerful.  Their power is particularly helpful when, like now, the construction economy is not exactly booming.

Why do I say that a lien in Virginia is so powerful?  Two reasons, 1. the lien (with one exception) takes priority over even a first mortgage or deed of trust, and 2. a lien in Virginia (assuming it is filed correctly) is perfected and enforceable as soon as it is recorded.  This one two punch creates a situation in which a construction subcontractor can suddenly move from a position of vulnerability to one of strength.  Once the lien hits the courthouse, and notice goes to the Owner, things generally start to happen:

1.  The bank gets nervous; 2.  The Owner begins to fret and squeeze the General Contractor to see why the sub has not been paid; 3.  The subcontractor’s construction attorney hopefully gets a call; and, importantly 4.  Money starts to flow (or at the very least the General Contractor is forced to file a bond with the Court to assure that the sub will be paid).  In short, until you, a construction professional who is owed money, are presented with the “fish or cut bait” scenario of having to file a suit to enforce the lien or stick with a breach of contract action, you are in the driver’s seat.  Of course, this assumes that you and your attorney have properly met the picky requirements of a Virginia mechanic’s lien.

The second point is equally important.  The fact that a commercial subcontractor or supplier does not need to perform any additional steps, aside from recording the lien, in order to perfect it means that your lien not only survives bankruptcy if filed prior to the Owner’s bankruptcy filing, it means it can be a secured lien even after bankruptcy of the Owner.  All that the bankruptcy does regarding your lien is to stop the clock on the 6 month filing deadline for the length of the stay.  I have seen more than one instance where having this secured position in a bankruptcy is the difference between pennies on the dollar and almost full recovery out of the bankruptcy.

In short, don’t wait to file your lien in hopes that you will get paid.  While I always prefer that construction professionals work things out short of litigation and enjoy representing construction pros in and around Richmond because they generally do so, now is not the time to let your lien rights lapse.  Any General Contractor or Owner that balks at your exercising your lien rights is not likely to pay in any event.  Those Owners and General Contractors that see your actions as “just business” are more likely to be folks for whom you will want to work in the future.

In sum, a mechanic’s lien, filed in a timely and proper fashion, can be, and generally is, a cost effective and powerful collection tool for Virginia contractors.  Construction professionals in Virginia should not see such liens as a last resort, but as one of the arrows in their collection quiver to be used when an Owner or General Contractor (with or without fault) fails to pay them in a timely fashion.

Around the Web in Construction Law – May 13, 2010

For some time in 2009, the Construction Law Monitor published an “Around The Web” post each Friday, highlighting some of the top construction law updates around the web that week.   We’ve fallen off the wagon a bit in recent months, but we’re doing our best to bringing the feature back.

A lot of the Around The Web material will come from my personal Google Reader Shared Items Feed. You can subscribe to its RSS directly.

Here’s what we’ve been following ( and talking about) for the past few weeks:

Louisiana 2nd Circuit Reiterates Difficulty in Overturning Arbitration Awards

Check out our Arbitration & ADR category of posts at the Louisiana Construction Law Blog, where we discuss cases and statutes applicable to arbitration proceedings and decisions under Louisiana law.

The treatment of arbitration clauses and arbitration awards in Louisiana under the Louisiana Arbitration Act is very similiar to how such clauses and awards are treated under the FAA (Federal Arbitration Act), in Washington and Oregon, and elsewhere. How? Strictly.

If you sign an arbitration agreement, you’ll likely be compelled to arbitrate. And, as the Louisiana 2nd Circuit, reiterated in a decision this week in Gilbert v. Robert Angel Builder, Inc., when arbitration awards are rendered…the parties are usually stuck with them.

This case originally made headlines in 2008 when the arbitrator destroyed the case record immediately following the arbitration. The plaintiffs filed a Motion to Compel the arbitrator in state court, and argued the arbitrator failed to properly safeguard the evidence.

This original controversy, however, was reduced to a mere footnote by the 2nd Circuit in the decision published this week. The guts of the appellate decision turned on the guts of the Louisiana Arbitration Act insofar as challenges to arbitration awards are concerned….and that means the 2nd Circuit considered this from the Act:

The grounds for vacating an arbitration award are: (A) where the award was procured by corruption, fraud or undue means; (B) where any of the arbitrators evidenced partiality or corruption; (C) where the arbitrators refused to postpone the hearing, upon sufficient cause shown, refused to heard evidence pertinent and material to the controversy, or are guilty of any other misconduct prejudicial to the rights of any party; or (D) where the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made. Quoting La. R.S. 9:4210.

Construing this statute, the 2nd Circuit refused to consider any evidence or argument that spoke to the merits of the decision. They were only curious as to these four factors – all of which have nothing to do with the underlying dispute.

Finding nothing to show that the decision was improperly made (not even the destruction of the record following the arbitration), the arbitration award was confirmed.

Lesson: Arbitration is an alternative to litigation…but remember, its benefits (speed) can also be its warts (finality and lack of appealability).

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Construction Law Blog.