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November 3, 2011
Anytime I read something that includes “first of its kind” and “prosecution,” I am naturally intrigued as a lawyer. When it also involves a contractor, it warrants a post here on Law under Construction.
Recently, the Marion County Prosecutor’s Office announced that it has reached a plea agreement with a local contractor in a matter involving a common construction wage violation. As most readers know, the Indiana Common Construction Wage Act (f/k/a the prevailing wage law) requires any entity awarded a contract for public work (including subs) to pay no less than the common wage, as predetermined by a committee in each county. Employees are classified as either unskilled, semi-skilled, and skilled. Further, a contractor or subcontractor who knowingly fails to pay the rate commits a Class B misdemeanor.
The contractor in question worked on two Indianapolis Public School projects. A grand jury investigation showed that several employees on the projects were underpaid. The company had incorrectly listed skill levels and pay rates and misrepresented the status of employees to the IRS. As part of the plea agreement, the company was fined $1,000 and had to submit to an audit to determine amounts owed, which were estimated to be greater that $50,000.
Hopefully, there won’t be a “second-ever prosecution” anytime soon…
October 13, 2011
LAW under CONSTRUCTION is back to its regularly scheduled programming. Some interesting cases have been decided over the last few months, including a recent decision from the Indiana Court of Appeals on mechanic’s lien priority. You may recall a similar post here.
In City Savings Bank n/k/a LaPorte Savings Bank v. Eby Construction, LLC, a construction company sought to foreclose a mechanic’s lien related to costs and materials it provided during the construction of buildings and other facilities on some commercial real estate. The bank had previously loaned money to the owner of the property to fund the construction, loans which were secured by mortgages on the real estate. The construction company asserted that its mechanic’s lien had priority over the liens held by the bank.
The trial court held that although Indiana statutory and case law provides that the mortgages should have priority over the later-recorded mechanic’s lien, the mechanic’s lien has priority over the mortgages pursuant to principles of equity and on public policy grounds. Thus, the court ruled in favor of the construction company.
On appeal, the decision of the trial court was reversed. The Court of Appeals first noted that it has previously held “[w]ith regard to commercial property, where the funds from the loan secured by the mortgage are for the specific project that gave rise to the mechanic’s lien, the mortgage lien has priority over the mechanic’s lien recorded after the mortgage.” Citing Harold McComb & Son v. JP Morgan Chase Bank, 892 N.E.2d 1255 (Ind. Ct. App. 2008). Since it was undisputed that the mortgages were recorded before the mechanic’s lien, the Court of Appeals held that the mortgages were superior.
The court went on to say “[t]he trial court, although attempting to use its equitable powers to achieve what it believed to be a more fair and balanced result, failed to appreciate the importance of the doctrine ‘equity follows the law.’ While equity has the power, where necessary, to pierce rigid statutory rules to prevent injustice, where substantial justice can be accomplished by following the law, and the parties’ actions are clearly governed by rules of law, equity follows the law. Because there is nothing in the designated evidentiary material to indicate that substantial justice cannot be accomplished by following the law, and the parties‟ actions are clearly governed by our priority statutes, equity must follow the law.”
The full text is available here.
July 25, 2011
Greetings loyal readers, followers, and googlers. Law under Construction is taking a short hiatus. I (Ryan Bowers) have moved my practice to Barnes & Thornburg LLP (and, on a personal note, recently welcomed our first child, Harrison David) and will be taking a break from my blog updates during the transition, but will be returning soon. Also, from now on, Jennifer Watt is blogging at Legal Construction Zone (http://legalconstructionzone.com/). Check it out for more great posts from Jennifer.
June 20, 2011
In one of my first posts, I discussed changes to the A312 Performance Bond. As I mentioned in that post A312 Bonds are widely used on many projects. The golden rule when facing a default on a project is to read the bond. Most bonds list certain conditions that must be met before an enforceable claim may be asserted against the bond. In a relatively new case, decided by the Indiana Court of Appeals, the Court has reinforced this mandate.
In the Town of Plainfield v. Paden Engineering Co., Inc. 943 N.E.2d 904 (2011), which can be found here, the Court granted partial summary judgment in favor of the surety. The Court held that the claimant did not satisfy conditions necessary to recover from the surety on an A312 Bond. Here are some of the most important points to take away from this case as it relates to making a claim against an A312 Bond:
- Read the Bond. In order to recover on a bond certain conditions must be met. In this case, an A312-1984 Performance Bond, the surety’s obligations is triggered only after (1) the Owner has notified the Contractor and the Surety that the Owner is considering declaring a Contractor in default and request and attempt to arrange a conference with the Contractor and Surety no later than 15 days after receipt of the notice from the Owner; (2) the Owner declares the Contractor in default and formally terminates the Contractor’s right to complete the contract. The Owner must not declare the Contractor in default earlier than 21 days after the Contractor and Surety have received the first notice; and (3) the Owner has agreed to pay the balance of the contract price to the Surety.
- In Indiana, there is a Rebuttal Presumption of Prejudice. Many times, if a claimant fails to meet the technical requirements of making a claim against the bond, such as late notice, the Court will look to see whether or not the surety was actually prejudiced by the technical failure. If the surety was not prejudiced, then the surety may still be liable under the bond. The Court in Paden Engineering affirmed Indiana’s position that if a surety asserts a defense of untimely notice there is a rebuttable presumption of prejudice in favor of the surety. The surety need not show actual prejudice. It is then the claimant’s responsibility to rebut this presumption of prejudice.
- A Contract of Surety is Not an Insurance Contract. The Court emphasized the unique nature of a surety contract. Insurance indemnifies another against loss, damage, or liability resulting from an uncertain event. A surety answers for the debt or default of another. Therefore, the Court held that a surety’s liability must be measured by the strict terms of the contract. (Insurance contracts are typically read in favor of the insured.) The Court summarized its position by stating “the Sureties are liable for no more than the contract provisions would dictate.”
Sureties have the unenviable job of taking responsibility where others have failed. Rightfully, before a surety is required to undertake responsibility it may dictate its rights and the terms for its takeover for payment or performance. I’ve said it once, and I’ll say it again and again, always read the Bond. There are steps that must be taken by a claimant before a surety is required to perform under the terms of the bond.
April 20, 2011
Back in October 2010, in our very first substantive post “OSHA crackdown coming?” (where oh where does the time go), Law under Construction reported the following:
OSHA announced on October 19, 2010 its intent to expand its interpretation of the word “feasible” as related to occupational noise exposure standards. Under current standards, a citation can be issued if a company fails to use engineering and administration controls (i.e. limit employee exposure) when they cost less than hearing conservation equipment or such equipment is ineffective. OSHA intends to update “feasible” to “capable of being done,” which will result in citations for not implementing engineering and administration controls unless such controls will put them out of business or threaten the company’s viability. OSHA is accepting comments on the proposed interpretation until December 20, 2010.
Well, it appears that the OSHA crackdown on this issue recently turned into an OSHA backdown, although those representing businesses and workers differ on whether this is a beneficial change. Earlier this year, OSHA withdrew this proposed change to workplace noise standards, which, if adopted, would basically have required employers to adopt increased safety measures to protect the hearing of employees instead of just providing them with ear protection gear, such as ear phones. It appears that OSHA is exploring how to address the hearing loss issue without incurring these types of significant costs.
We will keep you updated here at Law under Construction if the proposed change resurfaces in some other form.
March 8, 2011
Mister Rogers’ Neighborhood is my 2 year old’s favorite show. Since she could talk, she has looked up at me and asked for, “Rogers?” If you have children, you know, what a 2 year old wants, a 2 year old generally gets. So, I watch Mister Rogers, every day, twice a day. After literally watching hundreds of episodes (most of them at least twenty times) I’ve relearned old songs (“Shoo Turkey Shoo”) and found out that Mister Rogers is just as relevant now as he was when I little. In fact, he was ahead of his time. (In one favorite episode, Mister Rogers test drives an electric car, complete with 15 car batteries linked together to run the car.) After spending many hours in Mister Rogers’ neighborhood, I wondered whether Mister Rogers’ neighborhood is the type of neighborhood that the LEED Neighborhood Development Certification strives for, an integrated neighborhood of smart locations, neighborhood design, and green infrastructure and building.
A seldom discussed LEED certification area is the LEED-ND Certification. By integrating LEED Neighborhood Development polices, profit and non-profit developers, builders, city and neighborhood planners can build a more sustainable, attractive and vibrant community. Here is a brief overview of what the USGBC looks for and the general process for certifying a neighborhood project. Visit the USGBC site (here) for more information regarding getting your project plan certified LEED-ND.
Projects that qualify for LEED for Neighborhood Developments can range from small infill projects to large master planned communities. Existing communities may also be retrofitted using LEED standards and policies.
The following credit categories are included in the rating system:
Smart Location and Linkage assesses location, transportation alternatives, and preservation of sensitive lands and discouraging sprawl.
Neighborhood Pattern and Design assesses overall design for vibrant neighborhoods that are healthy, walkable, and mixed-use.
Green Infrastructure and Buildings assesses the design and construction of buildings and infrastructure that reduce energy and water use, use of sustainable materials, and renovating existing and historic structures.
Innovation and Design Process recognizes exemplary and innovative performance reaching beyond the existing credits in the rating system, as well as the value of including an accredited professional on the design team.
Regional Priority encourages projects to focus on earning credits of significance to the project’s local environment.
There are three stages of certification, which relate to the phases of the real estate development process.
Stage 1 – Conditionally Approved Plan: provides the conditional approval of a LEED-ND Plan available for projects before they have completed the entitlements, or public review, process.
Stage 2 – Pre-Certified Plan: pre-certifies a LEED-ND Plan and is applicable for fully entitled projects or projects under construction.
Stage 3 – Certified Neighborhood Development: completed projects formally apply for LEED certification to recognize that the project has achieved all of the prerequisites and credits attempted.
The rating system can be downloaded for review by interested parties. If you are developing a project its worth taking the time to review the rating system for possible incentives or as an evaluation tool.
Mister Rogers believed strongly in living a deep and simple life. He invested in our future and community. He taught us all to make the same investment. His legacy will always live on through his good work on television. In fact, the Fred M. Rogers Center building officially opened on the Saint Vincent College Campus in October 2008. It’s only fitting that the facility was awarded the LEED gold rating.
We live in a world in which we need to share responsibility. It’s easy to say ‘It’s not my child, not my community, not my world, not my problem.’ Then there are those who see the need and respond. I consider those people my heroes. -Fred Rogers