Assessing Defective Design Liability on Federal Design-Build Projects
March 22, 2021 —
Dirk Haire, Adam Hamilton & Dana Molinari - ConsensusDocsA common misconception by many government officials is that a design-builder is always responsible for every design error or omission on a design-build project. This article examines the actual liability standard applied by the courts and boards of contract appeals when a design defect arises on a federal design-build project.
Background: Design-Build Contracts and the Spearin Doctrine
Design-build contracts combine the design and construction elements of a construction project into one contract. Design-build contracts often include two types of specifications: design and performance. Design specifications may set forth various parameters, such as precise measurements, tolerances, and materials. In doing so, the specifications create a fixed “roadmap” governing a contractor’s performance of the project. Performance specifications, on the other hand, set forth “operational characteristics” to achieve a particular objective or standard, but generally leave the details to the contractor.
Reprinted courtesy of
Dirk Haire, Fox Rothschild LLP,
Adam Hamilton, Fox Rothschild LLP and
Dana Molinari, Fox Rothschild LLP
Mr. Haire may be contacted at dhaire@foxrothschild.com
Mr. Hamilton may be contacted at ahamilton@foxrothschild.com
Ms. Molinari may be contacted at dmolinari@foxrothschild.com
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Giant Floating Solar Flowers Offer Hope for Coal-Addicted Korea
March 21, 2022 —
Heesu Lee - BloombergMore than 92,000 solar panels in the shape of plum blossoms, floating on the surface of a reservoir in South Korea, offer a vision of how land-scarce developed nations can overcome local resistance to giant renewable-energy projects.
The 17 giant flowers on the 12-mile-long reservoir in the southern county of Hapcheon are able to generate 41 megawatts, enough to power 20,000 homes, according to Hanwha Solutions Corp., which built the plant.
It’s one of the biggest floating solar plants in the world, and it’s in a nation that has been a laggard in adopting renewable energy, even though South Korea’s industrialized economy relies heavily on imported fossil fuels.
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Heesu Lee, Bloomberg
Mind Over Matter: Court Finds Expert Opinion Based on NFPA 921 Reliable Despite Absence of Physical Testing
September 12, 2022 —
Gus Sara - The Subrogation StrategistIn Smith v. Spectrum Brands, Inc., 2022 U.S. Dist. LEXIS 142262, the United States District Court for the Eastern District of Pennsylvania (District Court) considered whether the plaintiffs’ liability expert met the requirements of Rule 702 of the Federal Rules of Evidence and could testify that a filter pump for an aquarium tank was defectively designed and caused a fire at the plaintiffs’ home. The defendant filed a motion to exclude the plaintiffs’ liability expert on grounds that the expert’s opinion did not satisfy the reliability element of Rule 702 because the expert never conducted physical testing on the filter pump. The court found that the cognitive testing employed by the expert through various methods, including visual inspections of the evidence, a review of photographs of the scene and literature from the manufacturer, and research on similar products, was sufficiently reliable to admit his opinion.
The Smith case involved a civil action brought by Jeanette Scicchitano Smith and Alexander Smith that arose from a 2019 fire at their residence in Lincoln University, Pennsylvania. The fire purportedly started in a filter pump, which was operating at the time of the fire, that the plaintiffs purchased in 2002 as part of an aquarium tank kit.
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Gus Sara, White and WilliamsMr. Sara may be contacted at
sarag@whiteandwilliams.com
Vertical vs. Horizontal Exhaustion – California Supreme Court Issues Ruling Favorable to Policyholders
May 11, 2020 —
Alan Packer & James Hultz - Newmeyer DillionFor years, when faced with damage or injury spanning several policy periods, excess general liability insurers have argued that all potentially applicable underlying policies must be exhausted before the excess drops down to provide coverage (“horizontal exhaustion”). Insureds, on the other hand, insist that they are entitled to immediately access an excess policy for any given policy year, if that year’s underlying policy has exhausted (“vertical exhaustion”). Vertical exhaustion not only enables insureds to directly tap into the excess insurance for which they paid substantial premiums, but also enables the insured to moderate risk given that different lower level policies might (1) be needed for other claims, (2) have larger self-insured retentions, or (3) have other less favorable coverage provisions. Allowing an insured to proceed via vertical exhaustion would also eliminate the heavy administrative and logistical burden that could result from having to pursue and exhaust all underlying coverage on multi-year claims.
In Montrose Chemical Corp. v. Superior Court, 2020 WL 1671560 (April 6, 2020), the California Supreme Court has come down in favor of policyholders and vertical exhaustion. The Montrose case involved contamination that allegedly occurred between 1947 and 1982 and different liability insurance towers (comprised of primary and excess layers) for each year. The insured, Montrose, maintained a tower of insurance coverage, year by year, and faced claims asserting damage that spanned several decades. Montrose sought coverage from excess insurers under a vertical exhaustion approach. Not surprisingly, Montrose’s excess insurers insisted that horizontal exclusion was required and that Montrose was required to exhausted all other policies with lower attachment points in every single involved policy period. The California Supreme Court ruled in Montrose’s favor, holding that the insured may insist upon full coverage from an excess insurer once the layer directly below it has exhausted. The Court reasoned that the burden of spreading the loss among insurers is one that is appropriately borne by insurers, not insureds.
Reprinted courtesy of
Alan H. Packer, Newmeyer Dillion and
James S. Hultz, Newmeyer Dillion
Mr. Packer may be contacted at alan.packer@ndlf.com
Mr. Hultz may be contacted at james.hultz@ndlf.com
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Beware: Hyper-Technical Labor Code Violations May Expose Employers to Significant Claims for Penalties under the Labor Code California Private Attorneys General Act of 2004 (PAGA)
May 10, 2017 —
Angela Reston-Nunez – Newmeyer & Dillion LLPMost employers know that companywide policies or practices that do not strictly comply with applicable state or federal employment laws can expose employers to class action lawsuits by large numbers of employees seeking recovery of massive sums in damages, attorneys’ fees and costs. Unfortunately, traditional class action lawsuits are not the only representative actions employers should be concerned with. Recent litigation trends have shown that California’s lesser known Labor Code Private Attorneys General Act of 2004 (“PAGA”) can be equally, if not more harmful to employers than class actions due to steep penalties for minor violations.
WHAT IS PAGA?
Under PAGA, “aggrieved employees” can sue employers for alleged Labor Code violations. Like class actions, a PAGA plaintiff sues on a representative basis on behalf of themselves and other workers. However, unlike class action plaintiffs, PAGA plaintiffs do not seek damages; rather, they seek civil and statutory penalties formerly recoverable solely by state agencies in enforcement actions.
The distinction between recovery of damages in class actions and recovery of penalties in PAGA actions reflects the often-insidious nature of PAGA claims. While workers have long alleged “derivative” PAGA claims for penalties in connection with more substantive underlying Labor Code violations (meal or rest break violations, for example), we have seen a recent spike in PAGA suits alleging hyper-technical Labor Code violations with no underlying substantive violation, and where the “aggrieved employees” have suffered no actual harm.
WHAT'S AT STAKE?
Equally troubling for employers is the method by which significant penalties are aggregated. With a few significant exceptions, penalties generally range from $50 to $250 per violation. At first blush, this may not seem like much, however total penalties rise rapidly when considering that calculations are made on a per-employee and a per-pay period basis.
AN EXAMPLE ON HOW PAGA WORKS
Consider the following example based on one recent case:
Issue: An employee brought a PAGA-only lawsuit on behalf of himself and 400 other “aggrieved employees” against his employer for alleged Labor Code violations.
Claim: The employee claimed the employer’s 30-year practice of paying employees 9 days after the close of the applicable payroll period violated Labor Code Section 204(d), which requires payment to be made within 7 days of the close of the payroll period. The employee claimed that, under PAGA, the employer was liable for a minimum penalty of $100 per employee, per pay period, going back at least one year (the statutory limitations period for PAGA claims).
Exposure: With 400 employees, 24 pay periods per year, and $100 per violation, the plaintiff sought a minimum of $960,000 in penalties (not including substantial attorneys’ fees, costs and interest also available under PAGA), despite offering no evidence of harm suffered by the employees or prior notice of the issue.
OTHER IMPORTANT CONSIDERATIONS
In addition to a draconian penalties scheme, there are a myriad of additional aggravating factors for employers involved in PAGA litigation, such as:
- PAGA plaintiffs are not required to meet the rigorous class certification standards required of class action plaintiffs, meaning plaintiffs’ attorneys may be more likely to bring meritless “strike suits” aimed at obtaining quick settlements based on significant alleged penalties exposure.
- 75% of PAGA penalties recovered by way of settlement or judgment are directed to the state of California, while the "aggrieved employees” only keep 25%, reinforcing the notion that PAGA claims are frequently attorneys’-fee-driven, rather than for protecting employees.
STEPS FOR EMPLOYERS TO PROTECT THEMSELVES
Fortunately, there are a number of measures employers can take prior to and during wage and hour litigation which can dramatically reduce, or even eliminate, exposure to substantial penalties and damages. This includes:
- Regular reviews. Prior to litigation, we recommend regular detailed reviews of company policies and practices in order to identify areas of possible concern and ensure compliance with California’s ever-changing labor laws.
- Take action. On receipt of a new PAGA claim, taking immediate action to remedy an alleged violation within the Labor Code’s 33-day “safe harbor” time-period may help limit an employer’s exposure, and could bar a plaintiff from filing suit at all.
- Be aggressive. Once a PAGA or class action claim is in litigation, a proactive, aggressive approach to claim evaluation, investigation and litigation is critical.
For these reasons and more, it’s in an employers’ best interest to monitor these issues closely and seek input when appropriate.
Angela Reston-Nunez is a labor and employment attorney in Newmeyer & Dillion’s Walnut Creek office. For questions regarding PAGA, class action or individual wage and hour issues, or other employment law matters, please feel free to contact Angela Reston-Nunez at (925) 988-3249 or angela.reston-nunez@ndlf.com.
About Newmeyer & Dillion
For more than 30 years, Newmeyer & Dillion has delivered creative and outstanding legal solutions and trial results for a wide array of clients. With over 70 attorneys practicing in all aspects of business, employment, real estate, construction and insurance law, Newmeyer & Dillion delivers legal services tailored to meet each client’s needs. Headquartered in Newport Beach, California, with offices in Walnut Creek, California and Las Vegas, Nevada, Newmeyer & Dillion attorneys are recognized by The Best Lawyers in America©, and Super Lawyers as top tier and some of the best lawyers in California, and have been given Martindale-Hubbell Peer Review's AV Preeminent® highest rating. For additional information, call 949-854-7000 or visit www.ndlf.com.
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Three Key Takeaways from Recent Hotel Website ADA Litigation
April 26, 2021 —
Shane Singh & Grace Mehta - Lewis BrisboisDespite the COVID-19 pandemic and its chill on the hospitality industry, ADA-related digital lawsuits increased by approximately 23% in 2020. Many of these lawsuits are filed against hotels. The complaints allege that a hotel’s online reservation system failed to provide enough detail for individuals with disabilities to decide if the hotel meets their accessibility needs.
These plaintiffs will often claim that it is insufficient to describe an aspect of a hotel or room as “accessible” because the term is an opinion or conclusion. Plaintiffs argue that a hotel’s reservation system must report specific information, such as the dimensions of space under accessible desks and sinks, the slopes of surfaces, doorway clearance, and numerous other technical requirements under the ADA.
Many hotels are fighting back, arguing that the detail provided is sufficient and in compliance with the ADA. So far this year, in February 2021, two judges in the U.S. District Court for the Central District of California, Judge Percy Anderson and Judge Cormac Carney, agreed with the defendants, dismissing three cases with prejudice.
Reprinted courtesy of
Shane Singh, Lewis Brisbois and
Grace Mehta, Lewis Brisbois
Mr. Singh may be contacted at Shane.Singh@lewisbrisbois.com
Ms. Mehta may be contacted at Grace.Mehta@lewisbrisbois.com
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Indictments Issued in Las Vegas HOA Scam
January 22, 2013 —
CDJ STAFFA federal grand jury has indicted eleven individuals involved in the Las Vegas homeowners association scam. Leon Benzer, Keith Gregory, and Barry Levinson were all indicted for their roles in the scam, where conspirators took over homeowners associations in order to profit from construction defect suits. According to the Las Vegas Review Journal, all eleven were charged with conspiracy to commit mail and wire fraud. Mr. Levinson's license to practice law has been suspended due to an investigation that he misappropriated client funds. Mr. Benzer has been described as the "mastermind" of the scam.
Twenty-eight defendants have plead guilty, with all but one agreeing to cooperate with investigators. The report quotes William C. Woerner, the acting special agent in charge of the FBI in Las Vegas, as saying that "today's indictment demonstrates the continued commitment of the FBI and its law enforcement partners to identify and root out public corruption at all levels."
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Green Construction Claims: More of the Same
May 10, 2021 —
Christopher G. Hill - Construction Law MusingsFor this week’s Guest Post Friday, Musings welcomes back Timothy R. Hughes, Esq., LEED AP. Tim (@timrhughes on Twitter) is a Shareholder in the Arlington, Virginia firm of Bean, Kinney & Korman, P.C. In his practice as a business, corporate, and construction law attorney, Tim was the Chair of the Construction Law and Public Contracts Section of the Virginia State Bar. He was recognized by Virginia Lawyer’s Weekly as a 2010 “Leader in the Law” and a member of the Legal Elite for Construction Law for 2010 by Virginia Business Magazine. A regular speaker and writer, Tim is the lead editor of his firm blog, Virginia Real Estate, Land Use and Construction Law.
Green construction liability risk has received a lot of discussion over time. My take is that sustainable design and construction projects present the same type of risk profile as other construction projects, with the caveat that there may be “a little more”. A little more risk. A little more lack of predictability. A little more process overlay. Thus, green construction claims really are just “more of the same”.
I have watched and participated in the discussion. With regards to the Chesapeake Bay Foundation building, the reality is that any project can face challenges of product specification and performance, green or not. We can see plenty of examples where products have created tremendous risk and liability to the construction industry, the avalanche of EIFS litigation and Chinese drywall standing as just two of the most recent examples. A product failed, but that is nothing truly new.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
