March 7, 2014 · 8:57 AM

Is the U.S. Green Building Council Becoming a Not-So-Jolly Green Giant?

Friday ForumAs folks who travel in sustainability circles know well, the Leadership in Energy and Environmental Design green rating system, better known as LEED® certification, is far and away the industry leader when it comes to validating green construction projects.  Developed by the Washington, D.C. non-profit the U.S. Green Building Council (“USGBC”), LEED had been used to certify the green bona fides of more than 55,000 projects around the world as of October 2013; by way of comparison, a rival system, Green Globes, had been used for just 850.

My Twitter feed has featured a series of “good news” chirps for USGBC lately.  For example, about a month ago, the agency touted its release of the 2013 Top Ten States for LEED (North Carolina cracked the top ten at #7):

Locally, Barnhill Contracting promoted a Triangle Business Journal slideshow featuring some high-profile Triangle projects to obtain LEED certification recently:

https://twitter.com/BarnhillCC/status/436692686863482880

But another series of tweets reveals that the USGBC is facing unprecedented challenges that call into question its continued dominance of the rating system marketplace.  As best as I can tell, these challenges fall into three categories: (1) its competitor, Green Globes, is starting to make inroads; (2) some state legislatures are seeking to ban use of LEED on public construction projects; and (3) the adoption of green building codes by state and local governments calls into question the value of voluntary rating systems like LEED and Green Globes altogether.

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March 5, 2014 · 8:57 AM

When More Is Less: The Paradox of Differing Site Conditions Clauses

Wednesday WisdomIf I were to tell you that unforeseen subsurface conditions — for example, wetter-than-expected soils requiring a change to a building’s foundation — resulted in a substantial cost-overrun on a publicly bid project, you’d probably say, “that’s lousy news.”  In the context of that one project, I’d have to agree with you; unexpected cost increases can create uncomfortable financial, PR and political pressures for a public project’s participants, not to mention unwelcome additional costs for John Q. & Jane Q. Taxpayer.

But what if I told you that the contractor’s entitlement to increased compensation on that one project would ultimately save the government much more money on future projects?  “Sounds great,” you might respond, “but I don’t believe in fairy tales.”

You don’t have to.  You just have to believe in the differing site conditions (“DSC”) clause.

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March 3, 2014 · 8:57 AM

Title Insurers Seek Further Erosion of Sub & Supplier Lien Rights in North Carolina

Monday MemoUPDATE 3/11/14 7:00 p.m.  I just received word that the N.C. Land Title Association believes it needs more time to explain to other construction industry stakeholders the concerns giving rise to its legislative proposals.  As a result, NCLTA has decided not to pursue its current proposals as part of the legislative study committee’s recommendations for legislation during the upcoming short session.  NCLTA will seek to discuss its concerns with interested stakeholders over the next few months in the hope of reaching a consensus on solutions that can be recommended as legislation during the 2015 long session.  In the interim, I am leaving this post up for informational purposes only.

With apologies to Yogi Berra, it’s déjà vu all over again.

Like in 2012, when the N.C. Land Title Association (“NCLTA”) successfully guided lien agent legislation through the North Carolina General Assembly’s short session, the organization is once again promoting a policy proposal widely opposed by the contracting community in advance of the Legislature’s May reconvening for its abbreviated 2014 get-together.

This time, the NCLTA has the Claim of Lien Upon Funds in its sights.

Here’s what you need to know:

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February 28, 2014 · 8:57 AM

Think You Have Grounds for a Bid Protest? Your Time to Act Is Now.

Bid protests are the focus of my inaugural Friday Forum, as I’ve been inspired by this compelling tweet yesterday from Birmingham, Alabama construction attorney Burns Logan:

https://twitter.com/BurnsLogan/status/439086321207091200

The linked story by Lisbon, Ohio’s Morning Journal discusses the dismissal of a lawsuit asserted by an architectural firm against an Ohio school board alleging the wrongful award of a design contract to one of the firm’s competitors.  The problem with the suit, as the judge apparently saw it, was its untimeliness.  Construction on the project had already begun, and a substantial amount of money already had been paid to those involved.

Friday ForumBy way of example, the design firm chosen for the project had substantially completed its work and been paid more than $1 million for its services.  The construction manager had been paid more than $100,000 for its pre-construction services, had billed more than $3 million in site prep work and had entered into numerous subcontracts for the project.

That’s a lot of water under the bridge before seeking to protest, as I observed in response to Burns’ chirp:

Whether you’re an architect or a prime contractor, you don’t have time to waste if you believe that a public procurement has been improperly administered.  Once the contract you’re seeking is awarded to a rival, and even if you’re bid protest has merit, you are unlikely to recoup any meaningful damages beyond your bid preparation costs.  To protect your rights, you need to stop the public owner from awarding the contract, either voluntarily or through judicial process, now.

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February 26, 2014 · 8:57 AM

There’s No Place Like Home: Forum Selection, Arbitration & Home-Field Advantage

Wednesday WisdomTo limit the risk of litigating in multiple jurisdictions, regional and national prime contractors usually seek to centralize dispute resolution by including a forum selection clause in their subcontracts.  But some states, North Carolina included, have statutes on the books declaring such clauses unenforceable as against public policy.  See N.C. Gen. Stat. §§ 22B-2, 3.  The legislatures in states like North Carolina apparently have concluded that subs should be able to litigate in the state in which the project is being built. While that public policy is no doubt embraced by local subs, it might irk primes who perform work across state lines.

Which begs this question: can prime contractors circumvent such anti-forum selection statutes and ensure home field advantage when litigating against first-tier subcontractors?

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February 24, 2014 · 8:55 AM

Various Options for Strengthening Liens on Leaseholds in North Carolina

Monday MemoThe House Committee on Mechanics’ Liens and Leasehold Improvements of the N.C. General Assembly reconvenes at 1:00 p.m. on Monday, March 3.  Now that the Committee has spent its first two of four meetings considering the pros and cons of potential legislative action, the expectation is that its members will turn their focus to considering actual legislative proposals next week.

Contractors and suppliers are likely to push for legislation extending liens on leaseholds to the underlying “fee simple” ownership interest of landlords in virtually all circumstances, while commercial realty and banking interests are likely to ask the General Assembly to do nothing.  You can read more about these polar opposite approaches in my previous liens-on-leasehold blog posts here and here, respectively; a white paper from the N.C. Subcontractors Alliance, Inc., embracing an expansive approach to contractor protection, can be found here.

Between these poles, might a middle ground be found?

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February 23, 2014 · 8:40 PM

Ch-Ch-Ch-Ch-Changes

Image by nemo / pixabay.com

Image by nemo / pixabay.com

Winston Churchill once observed, “To improve is to change; to be perfect is to change often.”  (UPDATE 3/7/14: I SWEAR I pulled this quote before watching Season 2 of House of Cards; my wife and I had a chuckle when Frank and Remy used it).

While this blog is unlikely to achieve perfection, I am constantly seeking opportunities to improve it.  To that end, last week I introduced three new Twitter timelines to my sidebar: one showcasing chirps from leading AGC and ABC tweeps; one delivering the latest construction industry news; and one that features the tweets I favorite.  My goal?  To keep you informed while introducing you to some of the construction industry’s thought leaders.

Even bigger changes arrive this week.  Starting tomorrow, in an attempt to provide you with more focused, consistent content, I am endeavoring to deliver three regular features each week: the Monday Memo, some Wednesday Wisdom and the Friday Forum.

Monday MemoThe Monday Memo will be my weekly in-depth blog post analyzing a legal issue relevant to members of the construction contracting community, particularly stakeholders in North Carolina.  Whether it’s analysis of a case, statute or policy proposal that could affect your business, the Monday Memo will seek to explore all the angles and provide you with bulleted takeaway points.

Wednesday WisdomWednesday Wisdom will provide you with a hump-day quick hit.  It may alert you to a construction risk you might not be thinking about, identify an online resource worthy of bookmarking or provide a brief contract negotiation, performance or claim resolution tip.  My goal here is provide value to your business in two minutes or less in the middle of each week.

Friday ForumLast but not least, the Friday Forum will showcase the tweets of my construction risk management influencers and my reactions to their observations.  Like the #AEC Top Tweets it will be replacing, the Friday Forum is intended to amplify the perspectives of others, highlight the vibrancy of the online AEC conversation and to further the dialogue by providing my spin.

I can’t promise I’ll always deliver three posts each week — client work comes first, after all, and occasionally can be all-consuming — but I will do my level best to meet this regular schedule.

I truly hope you will enjoy the changes.  Ideas about future posts are most welcome; please feel free to comment below with your suggestions.

As always, thanks for reading N.C. Construction Law, Policy & News.

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February 19, 2014 · 8:57 AM

Lost Profit Claims in Construction Litigation: Speak Now, Or Forever Hold Your Peace?

In an unpublished February 18, 2014 decision, the North Carolina Court of Appeals (“COA”) refused to let a project owner pursue drastically higher lost profit damages after its counterclaim had been tried, appealed and remanded for further findings on the issue of damages.

Image by Nemo / pixabay.com

Image by Nemo / pixabay.com

In J.T. Russell & Sons, Inc. v. Silver Birch Bond, LLC, the owner, Silver Birch Pond (“SBP”), was the developer of a subdivision that had hired a paving company to perform the project’s asphalt paving work for about $150,000.  SBP refused to pay for the work, citing deficiencies in the contractor’s performance.  At trial, SBP successfully defeated the contractor’s claim for payment and prevailed on its own counterclaim for construction defects, but on appeal, the contractor successfully argued that the jury’s award of damages wasn’t fully supported by the evidence.  The COA agreed, sending the case back to the trial level for further findings of fact on various damages issues.

That’s when SBP tried to up the ante on its alleged lost profit damages.

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February 12, 2014 · 8:57 AM

N.C. Condo Owners Should Get Their Ducks in a Row Before Filing Derivative Claims for Construction Defects

Under the N.C. Nonprofit Corporation Act, members of North Carolina nonprofit corporations, including incorporated condo associations, have standing to assert the rights of their organizations derivatively.  N.C. Gen. Stat. § 55A-7-40(a).  That means members of incorporated condo associations upset about perceived construction defects can assert the rights their associations might have against the parties potentially responsible for those deficiencies.

Why would condo members want to assert defective construction claims derivatively, as opposed to individually?  Simple answer: prevailing plaintiffs under the Act can recover their expenses in maintaining derivative claims, including their attorneys’ fees.  N.C. Gen. Stat. § 55A-7-40(e).  That arguably creates an incentive for condo owners to join derivative claims alongside individual claims when suing for defective construction.

Image by digitalart / FreeDigitalPhotos.net

Image by digitalart / FreeDigitalPhotos.net

But as the N.C. Court of Appeals (“COA”) made clear in its January 21, 2014 decision in McMillan v. Ryan Jackson Properties, LLC, condo owners who want to assert claims for construction defects on behalf of their associations had better get their facts straight before pulling the litigation trigger.  Pointing the finger at the wrong guy can lead not only to dismissal of a derivative claim, but also to an award of attorneys’ fees in favor of the defendant.

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February 6, 2014 · 8:57 AM

N.C. Banking & Realtor Groups Speak Out Against Extending Liens on Leaseholds to Owners

In the second of four meetings, the House Committee on Mechanics’ Liens and Leasehold Improvements of the North Carolina General Assembly heard from representatives of the banking and commercial real estate industries on Monday, February 3.  Both representatives spoke forcefully against extending liens for tenant improvements to the record owner’s underlying interest in the leased property improved.  (For context, you can find my coverage of the committee’s initial meeting here).

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