Monthly Archives: November 2013

When the Well Runs Dry: Seven Tips for Guarding Against a Failure in Project Financing

Photo by inkknife_2000 via Flickr *

Photo by inkknife_2000 via Flickr *

Last Thursday, November 14, 2013, I participated in a webinar hosted by Engineering News-Record® on “The Five Risks You Never Saw Coming,” which is still available on-demand and free to the public on ENR’s webinar page.

The first risk addressed by the panel is the subject of this post: the risk that a private owner’s financial well might run dry.

As one of the panelists, Atlanta construction attorney Gina Vitiello (@GinaVitiello on Twitter), discussed, project funding can fail for a number of reasons.  The owner might run out of capital funds, perhaps because it overestimated the availability of project funding or underestimated the total costs of the endeavor.  Or the owner might lose its financing, for example by defaulting on its loan obligations.  Or the lending institution financing the project might fail.

No matter how or why the financial well might run dry, the consequences for the prime contractor, construction manager at risk or design-builder can be catastrophic.  What can be done to guard against this risk?

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Filed under Construction Risk Management, Contract Review & Negotiation, Feature story

AAA’s New Optional Appellate Arbitration Rules Seek to Bridge the Gap Between Arbitration and Appellate Rights.

While many construction industry participants favor the finality of binding arbitration, some are put out by the inability to appeal an unfavorable award (see my previous blog post for more on the limited bases for challenging arbitration awards in court).

Photo by Eric Kilby via Flickr *

Photo by Eric Kilby via Flickr *

The American Arbitration Association® (“AAA”) has announced a new set of rules intended to bridge that gap.  As of November 1, 2013, the AAA has made available for use its “Optional Appellate Arbitration Rules,” the purpose of which was articulated by AAA in its press release:

The objective of arbitration is a fair, fast and expert result that is achieved economically.  Consistent with this goal, an arbitration award traditionally will be set aside by a court only where narrowly defined statutory grounds exist.  Sometimes, however, the parties may desire a more comprehensive appeal of an arbitration award within the arbitral process.  …  In order to provide for an easier, more standardized [appellate] process, the AAA has developed these Optional Appellate Rules.

I greeted news of the Appellate Rules with much curiosity and, truth be told, a fair amount of skepticism: how could AAA marry up a meaningful appellate process with the streamlined nature of arbitration?  And so before reviewing the new rules, I jotted down a list of questions I hoped they would address.  Those questions, and what I discovered upon reviewing the rules, follow:

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Filed under Arbitration

4th Circuit Stages “The Collateral Battle” Between A Contract Surety & Its Principal’s Trustee in Bankruptcy

stage-233086_640Prelude:

Friends, underwriters, bond claim managers: lend me your eyes, and behold the saga of a surety that accepted collateral security from a financially unstable principal as an inducement for the issuance of new Miller Act performance & payment bonds.  The drama unfolds when the principal files for bankruptcy protection within 90 days of the collateral transfer and the bankruptcy trustee — that most formidable of foes! — seeks to avoid the transfer as preferential.  Fear not, dear readers!  Our hero fights gallantly in In re ESA Environmental Specialists, Inc., and is richly rewarded in this Fourth Circuit Court of Appeals production.

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Filed under Federal case law, Surety Law