ASCE Report Calls for Sweeping Changes to Texas Grid Infrastructure
March 28, 2022 —
C.J. Schexnayder - Engineering News-RecordA just-released detailed analysis of the catastrophic 2021 Texas winter storm finds systemic flaws in the state's electric sector contributed to a “cascade of failures” that overwhelmed its power grid and left millions freezing in the dark.
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ENR may be contacted at enr@enr.com
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You're Doing Construction in Russia, Now What?
May 16, 2022 —
Anazette Ray & Michael Vardaro - Zetlin & De Chiara LLPIn recent weeks, there has been a long list of companies, from all industries spanning from construction/engineering to fashion and hospitality, that have announced that they are completely severing ties with Russia, while a host of others have announced a temporary halt. See Jeffrey A. Sonnenfeld, Over 400 Companies Have Withdrawn from Russia – But Some Remain, Yale School of Management (Updated Mar. 21, 2022), https://som.yale.edu/story/2022/over-400-companies-have-withdrawn-russia-some-remain?utm_campaign=mb. For those developers, EPC contractors, and design professionals (engineers and architects) who have construction projects in Russia, the question is, “How should we proceed?”
The U.S. initially stated that it was not issuing a total embargo on business dealings and trade relations with Russia in response to the nation’s invasion of Ukraine. Instead, the U.S., along with many other Western nations, issued targeted sanctions. See Francesco Giumelli, Understanding Targeted U.N. Sanctions: An Empirical Analysis, International Affairs, 91(6), 1351-1368 (explaining the difference between embargoes and targeted sanctions). However, after evidence of war crimes by Russia emerged, President Biden issued an Executive Order prohibiting U.S. individuals, whether in the states or abroad, from new investments in Russia and prohibiting U.S. individuals from transactions with Russian state-owned entities. See April 6, 2022, Presidential Actions, https://www.whitehouse.gov/briefing-room/presidential-actions/2022/04/06/prohibiting-new-investment-in-and-certain-services-to-the-russian-federation-in-response-to-continued-russian-federation-aggression/. This new Executive Order is said to not affect existing contracts in Russia, but instead prohibits new ones.
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Anazette Ray, Zetlin & De Chiara LLP and
Michael Vardaro, Zetlin & De Chiara LLP
Ms. Ray may be contacted at aray@zdlaw.com
Mr. Vardaro may be contacted at mvardaro@zdlaw.com
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Be Careful With Construction Fraud Allegations
April 06, 2016 —
Christopher G. Hill – Construction Law MusingsHere at Construction Law Musings we have discussed the intersection of contracts, construction and fraud on several occasions. We’ve even discussed how such fraud can bleed over from the civil to the criminal.
Recently, the Virginia Supreme Court weighed in again on the question of construction fraud and criminal allegations. In O’Connor v. Tice, the Court discussed a malicious prosecution action brought by a contractor against owners of a commercial building. In O’Connor, the owners and the contractor got into a disagreement over alleged damage to the roof of the owners’ building and who was responsible. In response to this disagreement, the owners contacted the local sheriff’s office, accusing the contractor of construction fraud, and then wrote a “15 day letter” to the contractor outlining the criminal consequences should he fail to pay the damages sought in the owners civil lawsuit. Subsequently, a criminal warrant was issued against the contractor based solely upon the word of the owners. This last occurred at the insistence of the owners (who did not inform the sheriff’s deputy or the Commonwealth Attorney that they’d had this conversation or that the contractor had partially performed) after they discussed the matter with the contractor’s attorney and were informed that any claim that they may have had was civil in nature.
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Christopher G. Hill, Construction Law MusingsMr. Hill may be contacted at
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How Small Mistakes Can Have Serious Consequences Under California's Contractor Licensing Laws.
February 15, 2018 —
Eric Reed - Myers, Widders, Gibson, Jones & Feingold, LLPIn construction, some risks have nothing to do with how well a contractor executes a project. Licensing problems is one of these risks. Even a brief lapse caused by an unintentional administrative error can give the CSLB grounds to discipline a contractor, or enable a customer to seek disgorgement and other remedies provided by Business and Professions Code section 7031. This article discusses five tips for mitigating the liabilities associated with licensing problems.
Tip 1: Take workers' compensation insurance very seriously. Workers’ compensation insurance problems can trigger license suspension in California. Business and Professions Code section 7125.4 calls for automatic suspension if a contractor cannot provide proof of workers’ compensation insurance for any period of time. This is particularly serious for residential remodelers who claim exemption for workers’ compensation but are later discovered – usually during litigation with a homeowner – to have “off the books” workers helping them. Courts can declare the contractor retroactively unlicensed under these circumstances and order it to disgorge,
i.e., to pay back, every penny paid by the customer for the entire project (even for materials). (Bus. & Prof. Code, § 7031, subd. (b);
Wright v. Issak (2007) 149 Cal.App.4th 1116.) The contractor will also find itself unable to collect any amounts owed to it by the customer. (Bus. & Prof. Code, § 7031, subd. (a).)
Tip 2: Watch out for licensing confusion after a merger or acquisition. The economic downturn of 2008 and 2009 resulted in consolidation throughout the building industry. The newly merged or acquired entities often allowed redundant licenses to expire, assuming they could complete all pending projects under the umbrella of the acquiring company's license. Many learned this was a mistake the hard way. Armed with the California Supreme Court's opinion in
MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, customers began refusing to pay invoices and demanding disgorgement under Business and Professions Code section 7031 because the original contractor did not maintain licensure “at all times.” Many of these customers succeeded.
Tip 3: If a license suspension has occurred or is imminent, prepare to prove substantial compliance. Section 7031(a) and (b) give a disgruntled or indebted customer every incentive to capitalize on a contractor's licensing problems. Subdivision (e) is where a contractor must turn to protect its interests if this happens. It allows the contractor to prove “substantial compliance” with licensing requirements and avoid (a)’s and (b)’s sharp edges if it can show the following:
(1) The contractor “had been duly licensed as a contractor in this state prior to the performance of the act or contract”;
(2) It “acted reasonably and in good faith to maintain proper licensure”; and
(3) It “acted promptly and in good faith to remedy the failure to comply with the licensure requirements upon learning of the failure.”
The Court of Appeal confirmed in
Judicial Council of California v. Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882 that a contractor, upon request, is entitled to a hearing on these three factors before it is subjected to disgorgement under Section 7031(b). The legislature amended Section 7031 shortly after the Court of Appeal published this case. The Assembly’s floor analysis went so far as to directly quote the opinion’s observation that penalizing a construction firm for “technical transgressions only indirectly serves the Contractors Law’s larger purpose of preventing the delivery of services by unqualified contractors.” (Assem. Com. on Bus. and Prof., Off. of Assem. Floor Analyses, analysis of Sen. Holden's No. 1793 (2015-2016 Reg. Sess.) as amended August 2, 2016, p. 2.) This echoed an industry consensus that clarifying the law was needed to ensure that properly licensed and law-abiding construction firms were not “placed at fatal monetary risk by malicious lawsuits motivated by personal gain rather than consumer protection.” (Assem. Com. on Judiciary, com. on Assem. Bill No. 1793 (2015-2016 Reg. Sess.), pp. 6-7.)
Unfortunately, existing law does not give many examples of what it means to act “reasonably and in good faith to maintain proper licensure” or to act “promptly and in good faith” to fix license problems. A practical approach is for a contractor to work backwards by assuming it will need to prove substantial compliance at some point in the future. Designated individuals within the organization should have clear responsibility over obtaining and renewing the proper licenses and should keep good records. If necessary, these designees can testify about the contractor's internal policies and their efforts to fix licensing problems when they arose. For example, if the suspension resulted from not providing the CSLB proof of workers’ compensation insurance, the designee can testify about the cause (a broker miscommunication, transmission error,
etc.) and produce documents showing how he or she worked promptly to procure a certificate of insurance to send CSLB. Saved letters, emails, and notes from telephone calls will provide designees and their successors with an important resource months or years down the line if a dispute arises and the contractor is required to reconstruct the chronology of a licensing glitch and prove its due diligence.
Tip 4: Don't sign new contracts unless all necessary licenses are active and any problems are resolved. A recently-formed contractor should not begin soliciting and signing contracts until all required licenses are confirmed as “active.” The first requirement of substantial compliance – being “duly licensed as a contractor in this state prior to the performance of the act or contract” – cannot be met by a contractor that first obtains its license mid-project. (Bus. & Prof. Code, § 7031, subd. (e)(1);
Alatriste v. Cesar’s Exterior Designs (2010) 183 Cal.App.4th 656.) A licensed contractor should also consider refraining from signing new contracts if there is any reason to believe its license might be suspended in the near future – especially if the suspension will be retroactive. Having a suspension on record at the time of contracting may complicate the question of whether the contractor was “duly licensed . . . prior to performance” for the purposes of substantial compliance.
Tip 5: Any judgment against a contractor can cause license suspension if not handled promptly and correctly. The Business and Professions Code authorizes the CSLB to suspend the license of a contractor that does not pay a construction related court judgment within 90 days. The term “construction related” is interpreted to include nearly all types of disputes involving a contractor. (16 Cal. Code Reg. 868;
Pacific Caisson & Shoring, Inc. v. Bernards Bros. Inc. (2015) 236 Cal.App.4th 1246, 1254-1255.) This means a contractor should treat a judgment against it for unpaid office rent, for example, as one carrying the same consequences as one arising from a construction defect or subcontractor claim. The contractor should also not assume that filing an appeal, or agreeing with the other side to stay enforcement, automatically excuses the 90-day deadline in the eyes of the CSLB. It does not. A contractor must notify the CSLB in writing before this period expires, then post bond for the amount of judgment, if it wishes to delay payment for any reason. (Bus. & Prof. Code, § 7071.17, subd. (d).) A suspension may result if it does not. This applies even to small claims judgments.
Recent case law and the 2016 amendments to Business and Professions Code section 7031 provide some solace to those caught in the dragnet of California's licensing laws. But avoiding these problems altogether is preferable. Consider licensing the foundation of a successful business and deserving of the same attention as the structures a contractor builds.
Eric R. Reed is a business and insurance litigator in the Ventura office of Myers, Widders, Gibson, Jones & Feingold, LLP.
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Eric Reed, Myers, Widders, Gibson, Jones & Feingold, LLPMr. Reed may be contacted at
ereed@mwgjlaw.com
Contract Terms Can Impact the Accrual Date For Florida’s Statute of Repose
October 19, 2017 —
William L. Doerler - White and Williams LLPWhen the validity of a construction defect claim depends on whether the claim is barred by the applicable state’s statute of repose, it is important to review the statute to identify when claims subject to the statute of repose accrue. In Busch v. Lennar Homes, LLC, 219 So.3d 93 (Fla. Ct. App. (5th Dist.) 2017), the Court of Appeals of Florida clarified the accrual date for the statute of repose in cases where the accrual date depends on a construction contract’s completion date. Pursuant to Busch, the date of full performance under the contract, not the building’s purchase closing date, is the date on which claims accrue.
In Busch, Timothy Busch (Busch), pursuant to a Purchase and Sale Agreement, contracted to have Lennar Homes build him a house. Nearly ten years after closing on the home, Busch served Lennar Homes with a notice of construction defects, as required by Florida’s right-to-repair act. Shortly thereafter, but more than 10 years after the home’s closing date, Busch filed suit against Lennar Homes, alleging that there were multiple construction defects associated with the home. Lennar Homes, relying on Florida’s statute of repose, Fla. Stat. § 95.11(3)(c), filed a motion to dismiss Busch’s complaint.
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William L. Doerler, White and Williams LLPMr. Doerler may be contacted at
doerlerw@whiteandwilliams.com
Repair of Part May Necessitate Replacement of Whole
February 10, 2012 —
CDJ STAFFJudge Gleuda E. Edmonds, a magistrate judge in the United States District Court of Arizona issued a ruling in Guadiana v. State Farm on January 25, 2012. Judge Edmonds recommended a partial summary judgment in favor of the plaintiff.
Ms. Guandiana’s home had water damage due to pluming leaks in September 2004. She was informed that polybutylene pluming in her house could not be repaired in parts “it must be completely replaced.” She had had the plumbing replaced. State Farm denied her claim, arguing that “the tear-out provision did not cover the cost of accessing and replacing those pipes that were not leaking.”
In September 2007, State Farm filed a motion to dismiss. The court rejected this motion, stating that “If Guadiana can establish as a matter of fact that the system that caused the covered loss included all the pipes in her house and it was necessary to replace all the pipes to repair that system, State Farm is obligated to pay the tear-out costs necessary to replace all the pipes, even those not leaking.”
In March 2009, State Farm filed for summary judgment, which the court granted. State Farm argued that “the tear-out provision only applied to ‘repair’ and not ‘replace’ the system that caused the covered leak.” As for the rest of the piping, State Farm argued that “the policy does not cover defective materials.”
In December 2011, Ms. Guadiana filed for summary judgment, asking the court to determine that “the policy ‘covers tear-out costs necessary to adequately repair the plumbing system, even if an adequate repair requires replacing all or part of the system.”
In her ruling, Judge Edmonds noted that Ms. Guadiana’s claim is that “the water damage is a covered loss and she is entitled to tear-out costs necessary to repair the pluming system that caused that covered loss.” She rejected State Farm’s claim that it was not obligated to replace presumably defective pipes. Further, she rejected State Farm’s argument that they were only responsible for the leaking portion, noting “Guadiana intends to prove at trial that this is an unusual case where repair of her plumbing system requires replacement of all the PB plumbing.”
Judge Edmonds concluded by directing the District Court to interpret the tear out issue as “the tear-out provision in State Farm’s policy requires State Farm to pay all tear-out costs necessary to repair the plumbing system (that caused the covered loss) even if repair of the system requires accessing more than the leaking portion of the system.”
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Eleven WSHB Attorneys Honored on List of 2016 Rising Stars
September 01, 2016 —
Beverley BevenFlorez-CDJ STAFFWood Smith Henning & Berman LLP (WSHB) announced that eleven of their lawyers were recognized on the list of 2016 Rising Stars®:
- Raymond Babaian: Partner, Rancho Cucamonga
- Emil Macasinag: Senior Counsel, Los Angeles
- Amy Pennington: Partner, Los Angeles
- Christopher Perez: Senior Counsel, Rancho Cucamonga
- Keith Smith: Partner, Riverside
- Kevin Gillispie: Partner, Concord
- Alicia Kennon: Senior Counsel, Concord
- Eugene Zinovyev: Senior Associate, Concord
- Timothy Repass: Partner, Seattle and Portland
- Jodi Mullis: Senior Associate, Phoenix
- Vincent Beilman: Partner, Tampa and Miami
“We are pleased to have 11 of our best selected for this year’s lists,” Dan Berman, Firm Chairman and Founding Partner stated. “We value our selections to Rising Stars because the choices come from our peers. It is truly an honor and a validation of all of the great work we do at WSHB.”
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Licensing Mistakes That Can Continue to Haunt You
November 28, 2022 — Alexa Stephenson & Rick Seely - Kahana Feld
Today there are nearly 290,000 contractors licensed in California. This number continues to grow as California law requires businesses or individuals who alter any road or structure to be licensed contractors if the total cost of the project is $500 or more (including labor and materials). Complaints about improper and defective work performed by contractors are constantly filed with the California Contractors State License Board (“CSLB”) and any violations by those contractors could result in a license suspension. A contractor whose license is suspended by the CSLB or otherwise becomes unlicensed jeopardizes a contractor’s livelihood, compromises current insurance policies, and curtails an ability to obtain future insurance coverage. Moreover, being unlicensed could force a contractor to disgorge all money received on a project per California Business & Professions Code § 7031. What can contractors do to stay vigilant and avoid these scary outcomes? Stay tuned for a few suggestions.
1. Stay Qualified
Contractors must make sure the correct person and/or entity is holding the contractor’s license. Contractors can obtain licenses as a sole owner, partnership, corporation, joint venture, or limited liability company. For any form of the business entity, one individual must act as qualifier to meet the CLSB license requirements. This qualifying individual must have the knowledge, experience, and skills to manage the daily activities of a construction business (including field supervision) or be represented by someone else with at least four years of experience within the past ten years as an unsupervised journeyperson, foreperson, supervising employee, or contractor in the trade being applied for.
Reprinted courtesy of Alexa Stephenson, Kahana Feld and Rick Seely, Kahana Feld
Ms. Stephenson may be contacted at astephenson@kahanafeld.com
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