Appellate Court reverses district court’s finding of alter ego in Sedgwick Properties Development Corporation v. Christopher Hinds (2019WL2865935)
August 13, 2019 —
Frank Ingham - Colorado Construction LitigationDivision V of the Colorado Court of Appeals addressed, for the first time, corporate veil-piercing in the context of a single-member, single-purpose LLC that is managed under a contract by another company. On July 3, 2019, the Court of Appeals reversed the order of the Honorable Ross B. Buchannan, Denver District Court Judge (17CA2102), who held that Plaintiff/Appellee Christopher Hinds satisfied the elements required to pierce the corporate veil of Sedgwick Properties Development Corporation (“Sedgwick”).
Background
Defendant 1950 Logan, LLC (“1950 Logan”) was the developer of a building located at 1950 Logan Street, in Denver, called The Tower on the Park (“Project”), which contained 141 individually owned condominium units. The Project was completed in 2006. 1950 Logan was a single-purpose entity created for the construction of the Project, which is a common practice in the construction industry. After the units were sold in 2006, the LLC wrapped up operations.
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Frank Ingham, Higgins, Hopkins, McLain & Roswell, LLCMr. Ingham may be contacted at
ingham@hhmrlaw.com
William Lyon Homes Unites with Polygon Northwest Company
June 26, 2014 —
Beverley BevenFlorez-CDJ STAFFBig Builder’s Les Shaver reported that William Lyon Homes has acquired Polygon Northwest Company, “the largest private home builder in the [Pacific Northwest] region,” for “approximately $520 million.”
"Polygon Northwest Company brings an attractive level consistency to William Lyon Homes with a steady average of 57 homes per month and a portfolio of communities that includes a nice product mix of single family detached [80 percent] and attached product [20 percent]," Catherine LaFemina, director of business development in the Seattle market for Metrostudy, told Big Builder. "Based on the trailing 12 months of home closings, [June 2013 to May 2014], Lyon’s acquisition of Polygon will increase the volume of homes being delivered by 50 percent to an average monthly volume of about 115 homes per month."
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Ensuing Loss Provision Found Ambiguous
April 25, 2012 —
Tred R. Eyerly - Insurance Law HawaiiAfter the insurer denied coverage in a homeowner’s policy for construction defects under various exclusions, the court found the ensuing loss provision was ambiguous.Kesling v. Am. Family Mut. Ins. Co., 2012 U.S. Dist. LEXIS 38857 (D. Colo. March 22, 2012).
After purchasing a home from the sellers, the insureds noticed problems with the deck of the home. Massive cracking appeared, causing lifting and leaking on the deck and water running through the exterior foundation wall into the home. There was also damage to the roof and crawlspace.
The insureds had a homeowner’s policy with American Family, which covered accidental direct physical loss to property described in the policy unless the loss was excluded. They requested coverage for "conditions, defects and damages." American Family denied coverage because wear and tear, as well as damage to foundations, floors and roofs were excluded. The policy did provide coverage, however, for "any resulting loss to property described . . . above, not excluded or excepted in this policy.
When coverage was denied, the insureds sued American Family.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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How Are You Dealing with Material Delays / Supply Chain Impacts?
June 07, 2021 —
David Adelstein - Florida Construction Legal UpdatesIn a prior article I discussed a material escalation provision in your construction contract to account for the volatility of the material price market. While including such a provision may not have been much of a forethought before, it is now!
What about concerns with the actual supply chain that impacts the availability of and the lead time of materials? How are you addressing this concern in your construction contract?
The pandemic has raised awareness to this issue as certain material availability has been impacted by the pandemic. As a result, parties in construction have tried to forecast those materials where delivery issues may occur including those materials with longer than expected lead times. But equally important is how this issue is being addressed in your construction contract including how you want to negotiate this risk in future construction contracts.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
New Jersey’s Governor Puts Construction Firms on Formal Notice of His Focus on Misclassification of Workers as Independent Contractors
May 24, 2018 —
Kevin J. O'Connor & Joseph M. Vento - Peckar & Abramson, P.C.We have written quite a bit about the mounting threat to employers, both nationally and locally, of claims of misclassification of workers as independent contractors rather than employees. New Jersey’s new Gov. Phil Murphy signed an executive order last week that establishes a task force on employee misclassification to punish contractors who commit fraud by classifying their employees as independent contractors.
In the words of Governor Murphy: “I am signing this order to crack down on unscrupulous contractors who commit 1099 fraud to exploit workers and rob them of family and medical leave and safe workplace protections that the law provides,” Murphy said. “The employer gives themselves an unfair business advantage and this practice is illegal. This is a question of enforcing what is already on the books.” He has vowed that any employer caught misclassifying workers will either be brought into compliance or put out of business. The task force will foster compliance with the law and conduct a comprehensive review of existing practices.
Reprinted courtesy of
Kevin J. O'Connor, Peckar & Abramson, P.C. and
Joseph M. Vento, Peckar & Abramson, P.C.
Mr. O'Connor may be contacted at koconnor@pecklaw.com
Mr. Vento may be contacted at jvento@pecklaw.com
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Busting Major Alternative-Lending Myths
July 22, 2024 —
Warren Miller - Construction ExecutiveAlternative capital is a broad term for financing provided by institutions or firms that typically fall outside of the purview of the larger, regulated institutions (i.e., not traditional banks). While these funding sources may not always be the first option for many businesses, alternative lending is a perfect option for many small and mid-sized capital-intensive companies, like construction companies, which often require fast access to capital that is incompatible with the stringent and laborious processes imposed by traditional banks.
Construction companies should take a closer look at alternative financing, understand its benefits, and evaluate its usefulness for achieving their unique funding requirements.
REALITY 1: ALTERNATIVE LENDING IS SAFE AND PROVEN
Private lending has been around for a long time, and has become increasingly common since the 1990s, when major consolidation took place in the banking industry. As the large, consolidated banks set their sights on providing loans to large enterprises, they left a gap in the small and mid-size market that was filled by alternative lenders. By 2000, alternative lenders had overtaken traditional banks for the majority of corporate loans. Stricter regulation of banks following the Global Financial Crisis of 2007 intensified underwriting standards for bank loans and further diminished banks’ appetites for SMB lending.
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Warren Miller, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Although Property Damage Arises From An Occurrence, Coverage Barred By Business Risk Exclusions
July 08, 2011 —
Tred R. Eyerly - Insurance Law HawaiiThe homeowners hired the insured to raise the structure of their home twenty-four inches above the flood zone. Lafayette Ins. Co. v. Peerboom, 2011 U.S. Dist. LEXIS 58985 (S.D. Miss. June 2, 2011). When the insured’s crew returned from lunch one day, they found the house had fallen from hydraulic jacks being used to raise the structure a few inches at a time. There was substantial damage to the entire structure.
The homeowners sued, asserting several claims, including negligence and breach of contract. The complaint alleged the homeowners entered a contract with the insured to raise their structure while maintaining its integrity. However, the insured failed to use proper equipment, which caused the house to fall and be completely destroyed.
The insured tendered the claim to its insurer, Lafayette Insurance Company. Lafayette defended under a reservation of rights and filed suit for a declaratory judgment. Lafayette’s subsequent motion for summary judgment contended there was no “occurrence” alleged in the underlying complaint and, even if there was, the business risk exclusions barred coverage.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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Are Construction Defect Laws Inhibiting the Development of Attached Ownership Housing in Colorado?
October 29, 2014 —
James M. Mulligan, Esq. – Snell & Wilmer, LLPThis article responds to the article published in the September 18, 2014 issue of the Construction Defect Journal. It provides a different perspective to this issue, based on the author's experience with these matters during the past decade of attention to this specific challenge.
During recent years, there has been much discussion about the lack of attached ownership housing construction in Colorado. The main culprit, according to several sources within the community, seems to be our state's construction defect laws.
Since 2001, there has been a periodic series of legislative fixes to our construction defect laws that saw the pendulum swing back and forth between the interests of the consuming public who purchase the homes and certain protections of the developers and homebuilders from excessive and unnecessary litigation. Some say that the current state of the law is more onerous than necessary on the developers and homebuilders and it is artificially inhibiting the development of multifamily ownership housing in a time of high demand and low supply.
A recent opinion article in the September 29th, 2014 issue of the Denver Post stated, in part:
"No one is suggesting that developers escape liability for construction defects or that homeowners be denied the right to sue. But under the state's current defect laws, the scales have tilted too far in favor of litigation as the default tool for resolving disputes. And this appears to be the biggest reason for the collapse in the number of new multifamily [ownership] dwellings in recent years."
Rather than the typical conflict between the plaintiffs’ bar (representing the homebuyer) and the homebuilding industry that has produced the "back-and-forth" nature of our construction defect laws in the past, this 2014 legislative session found new constituents and a different perspective on the issue. A broad ranging coalition that included the Metro Mayors Caucus, major segments of the affordable housing community, and the general business community came together to address what their research showed as an astonishing lack of construction of ownership attached housing. There was a continuing boom going on in the development of multifamily "rental" housing, but an even more unusual deficit in multifamily "ownership" housing. Research apparently showed that, although about 20% + of construction of attached housing was in the ownership format throughout the Rocky Mountain West, Colorado was only producing about 2%. Interviews conducted by the research group that was retained by this coalition revealed that the development and homebuilding community were not willing to commence construction of ownership attached housing because of the continuing threat of litigation available under current interpretations of our state's construction defect laws. Lenders were also reluctant to provide financing for such projects faced with the apparent real threat of litigation that could shut down their projects and materially impact their loan viability and the value of the loan's collateral. Moreover, insurance premiums to cover such claims were so high, and many times unavailable, as to make such projects unfeasible.
This lack of available multifamily ownership housing was creating an ever-increasing concern over the resulting imbalance of housing options in and around the metro area, where the urban character of the metro region would need such ownership options in the attached housing format in order to address the more dense character of the urban setting. This imbalance of ownership attached housing was thwarting the advancement of "community" in the context of creating opportunities for all options of housing so important for a community balance. This included ownership options in this format that address the need for the younger professionals entering the workforce, newly forming households, seniors desiring to scale down their housing size and location, as well as the segment of the market who have limited means and need to address the affordability of homeownership. This was being most clearly felt along the FasTracks lines where attached ownership housing was an important element in originally advancing the TOD communities that are expected to be developed around these transit stops.
Rather than engage the battle of creating more contention in the various aspect of construction defect legislation per se, this coalition attempted to temper their approach and address specific issues that seemed to advance protection of the consuming homeowner while, at the same time, advocating a method of dispute resolution encouraged in the state's laws regarding such issues.
Normally, attached ownership housing is developed under our state laws governing the creation of Common Interest Communities ("CIC's"), including those communities where there are units that are attached and contain common elements. These CIC's will be encumbered by certain recorded documents (normally referred to as "Declarations") that structure the "community" within which the units are located and set up certain rules and restrictions that are intended to respect the common interests of the unit owners within that community. There is also a Homeowners Association ("HOA") organized for the common interest community that is charged with the management of the common elements and the enforcement of the rule and regulations governing the community.
The coalition chose to address their concerns through a bill including a couple of changes in the state laws governing CIC's, which would provide further protection to the homeowner and advance alternative dispute resolution as an expedient approach to resolving disputes should they arise. Those changes included:
1. Majority Owner Vote Re: Litigation -Rather than allowing two owners plus a vote of the HOA Board to determine whether or not to file litigation alleging construction defects in a CIC, the proposed change would require a simple majority vote of the unit owners who are members in the respective HOA where the alleged defect occurred. This approach addressed the increasing concern of unit owners whose homes are unmarketable and not financeable during the course of any such litigation.
This does not prevent an aggrieved owner from pursuing claims regarding that person's own unit, it just requires a majority of the owners to vote for litigation that affects the entire CIC in such litigation. This approach also included a provision for advance notice to the owners of such pending litigation accompanied by several disclosures regarding the potential litigation and its potential impact on the respective owner. This approach to protecting the rights of homeowners in a CIC seemed to be in line with everyone's interests, while not preventing an individual consumer/unit owner to advance its own claims.
2. Alternative Dispute Resolution -This proposal clarified the stated intent of the CIC statutes that advances alternative dispute resolution by providing that any mandatory arbitration provisions that are already contained in the Declaration that encumbers the respective unit in a CIC shall not be changed or deleted without the permission of the Declarant (e.g.; the developer of the CIC). This provision was to affirm a provision that the purchasing unit owner was aware of at the time of purchase and that it follows the spirit and intent of the state statutes governing such CIC's.
Notwithstanding the curative nature of these proposals, the legislation did not address the issue because a legislative maneuver was employed that did not allow for its consideration during the waning days of the session.
More recently, one of Colorado's municipalities, the home rule city of Lakewood, passed a local ordinance addressing this issue in a similar fashion, with a few more definitive suggestions regarding how to alleviate the lopsided nature of our current state of law. Without going into detail at this time with that specific ordinance, or the issue of its ability to address matters of a state-wide concern at the local level, the point is that several of Colorado's local communities, frustrated with the inability of the state legislature to deal with the issue are, at the very least, sending a signal that something must be done and, if the state is unwilling to lead on this matter, local communities will have to act.
This issue has not receded into the back room, and we will see a continuing crusade from an updated coalition to address these reasonable modifications to our state laws that will at least provide some protections to the CIC homeowner regarding unwanted litigation and some relief to the homebuilding industry from excessive litigation.
James M. Mulligan is a partner in the Denver office of Snell & Wilmer, LLP, a full-service commercial law firm located in nine cities throughout the Western United States and in Mexico. The firm’s website is http://www.swlaw.com.
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