The Controlling Employer is Liable for OSHA Violations
The Occupational Safety and Health Review Commission recently overturned its 2007 decision in Summit and announced that a nonexposed, controlling employer on a multiemployer worksite is liable for Occupational Safety and Health Administration (“OSHA”) violations. The Court of Appeals for the Eighth Circuit overturned the Commission’s decision in Summit in February of 2009. The Commission’s recent decision also involved Summit Contractors, the general contractor in both instances. Likewise, in both Summit cases a subcontractor was working in the area of the OSHA violation and Summit had very few supervisory employees in place.
Specifically, the Commission addressed the OSHA terminology in 29 C.F.R. § 1910.12(a) which states that “[e]ach employer shall protect the employment and places of employment of each of his employees engaged in construction work by complying with the appropriate standards prescribed in this paragraph.” The Commission, like the Eight Circuit in the first Summit case, interpreted this to mean that the employer is required to protect not only his or her own employees, but also other employees at the worksite.
By placing the responsibility for total workplace compliance on controlling employers, the result should be a safer workplace for all employees. Here is a link to the full text opinion.
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Arbitration Agreement Only Exempts Enumerated Issues
On July 15, A Michigan appellate court determined that since the parties’ arbitration agreement did not specifically exempt the issue of rescission of the purchase contract, that issue is arbitrable. Meneghel v. Mondrian Properties Weston Downs, LLC , No. 291105, Mich. App.; 2010 Mich. App. LEXIS 1376 . The Plaintiffs in this case purchased a new-construction condominium from Mondrian. The parties signed a purchase agreement, which included an “Arbitration and Claims” clause compelling the parties to arbitrate any construction defect dispute worth more than $2,500.
The Plaintiff purchasers arranged for two inspections after construction was completed, but before closing. The inspections revealed various construction defects; thus the purchasers informed Mondrian that they wished to rescind their purchase contract. Mondrian refused to comply with this request and the Plaintiffs brought suit for rescission of the purchase agreement, breach of contract, negligent construction, violation of public policy, violation of consumer protection law, fraudulent inducement and declaratory judgment. Mondrian moved to compel arbitration, which the trial court denied.
On appeal, the appellate panel noted that an issue is arbitrable if an arbitration provision exists, the disputed issue is arguably within the scope of the arbitration provision, and there is no express exemption of the issue from the arbitration provision. In a word, since there was no express exemption of the issue of rescinding the contract, the parties must arbitrate.
This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.
Strict Liability Statute Does Not Apply to Contractors
The court in Fields v. J. Haynes Waters Builders held that contractors are not subject to strict liability for construction damages. 376 S.C. 545, 658 S.E.2d 80 (2008). In Fields, subsequent homeowners filed suit against the homebuilder for damages related to moisture intrusion in their home. Id. at 552. The homeowners hired an attorney who put them in contact with building inspectors and investigators. Id. The inspections revealed that the water intrusion and related structural damage was caused by the synthetic stucco material, known as exterior insulation and finish system (E.I.F.S.), used in the construction of their home. Id. The homeowners asserted eight causes of action against the builder, including strict liability. Id. at 55.
South Carolina’s strict liability statute provides that "[o]ne who sells any product in a defective condition . . . is subject to liability for physical harm caused to the ultimate user or consumer, or to his property, if [t]he seller is in the business of selling such a product." S.C. Code Ann. § 15-73-10 (2009). Because the court held that general contractors provide a service and are not in the business of selling products, they are immune from the strict liability statute. Fields, 376 S.C. at 565. This is true "even though the result of the [contractor's] service is to supply a structure or building to the owner." Id.
This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.
A Gain in Residential Construction is on the Horizon
New OSHA Requirements for Crane Operators
According to new Occupational Safety and Health Administration regulations, crane operators will be required to undergo third party certification in an effort to increase jobsite safety and save lives. The rule will take effect on November 8, 2010; however, the third party certification requirement will not take effect for another four years due to the limited availability of OSHA-accredited training facilities. Many employers criticize these costly new regulations, but OSHA officials hope that third party certifications will protect workers and prevent many jobsite accidents. It is important to note that this new standard will not preempt state and local requirements.
This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.
Here is a link to the regulatory text.
Court Rules That Termination For Convenience May Not Be Enforceable If It Is For "Convenience" of Bid Shopping
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Contract Modifications May Trigger Disruption Claims
A government agency hired a general contractor to construct a laboratory building. Bell BCI Co. v. United States, 81 Fed. Cl. 617 (2008). After nine months from the beginning of construction, the government asked that an additional floor be added to the building. The change resulted in over 200 modifications by the government and delayed the completion of the project by almost two years. Moreover, the government's modifications increased the cost to complete construction by $21 million.
When the government refused to pay the contractor the additional costs, the contractor filed suit. The government denied owing the contractor any money. To the contrary, the government claimed the contractor owed the government $447,678 in liquidated damages for not completing the project in time. See id. at 619.
The contractor brought a cumulative impact claim: it sought recovery for the total losses the government's changes caused to the contractor. The contractor's alleged damages totaled over $6 million and included an unpaid balance of the contract price, about $1.6 million in unresolved changes, about $1.6 million in delay damages, over $2 million in inefficiency costs due to the cumulative impact of the changes, and the lost profit on the inefficiency cost. See id.
The court first found that the contractor was not liable to the government for liquidated damages due to failure to complete the project within the timeframe specified in the contract. Furthermore, the court distinguished delay damages from disruption damages. Delay damages are costs resulting from not being able to work. Disruption damages are the costs of having to work less efficiently than planned. See id. at 636.
As the court noted, bilateral modifications will compensate a contractor for performing the changed work. However, these modifications do not pay the contractor for the impact such changes have on the rest of the project. The contractor must only assert a reasonable basis for its cumulative impact claim. The court found that such basis was established: the contractor's historical productivity data and project records showed the government's changes affected the contractor's performance of unchanged work. See id. at 638.
The court noted that none of the change orders approved on the project waived disruption, cumulative impact, or labor inefficiency claims. Without such express waiver, the court could not conclude there was meeting of the minds between the parties. The government, therefore, was liable for the cumulative impact its changes had on the contractor. See id. 639.
This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.
Failure to Raise All Related Claims at Once May Preclude Parties from Bringing Any Remaining Claims Later
The legal doctrine of res judicata or claim preclusion precludes parties from bringing suit for claims they should have brought up in earlier suits. "Res judicata" is a Latin phrase that means a matter already adjudged.
A simple example of the application of the doctrine is an owner who sues a builder for negligence in constructing his house (first suit). The court awards damages to the owner. The owner then brings a second suit, bringing claims of breach of implied warranties against the contractor (second suit). The owner is precluded from bringing the second suit against the contractor because he should have brought all claims in the first suit.
Under res judicata, subsequent claims are precluded if: (1) the judgment in the first suit was on the merits or final; (2) the parties in the first and second suit are either identical or in privity; and (3) the claims in the second suit arise "out of the same transaction or series of transactions" as the claims in the first suit. Bouchat v. Bon-Ton Dep't Stores, Inc., 506 F.3d 315, 326-27 (4th Cir. 2007) (citation omitted).
An important point to remember is that some construction contracts mandate certain procedures as initial steps to resolve claims between parties. If one of the party refuses to take part in such mandatory procedures, that party may lose its right to bring any claims against the other party later.
The South Carolina Court of Appeals dealt with this issue in 2004 when it barred a contractor's defective work claims against a subcontractor. See Palmetto Homes, Inc. v. Bradley, 357 S.C. 485 (Ct. App. 2004). The construction contract mandated the American Arbitration Association rules to govern arising disputes between the parties. Therefore, the Court held that the contractor had to either submit his claims to the arbitration proceeding or be barred by res judicata. The contractor could not bring a second suit to assert claims either actually arbitrated, or claims that could have been arbitrated. See id. at 495-96.
This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.
Exception to the Economic Loss Rule Extended to Commercial Construction
The economic loss rule is a court-created doctrine that bars liability in tort where the only damages are injuries to the defective product itself: this means no personal injuries or damages to other property exist. See Kennedy v. Columbia Lumber & Mfg. Co., 299 S.C. 335, 341 (1989). The rule only applies where the duty owed by the wrongdoer to the aggrieved arises out of a contract.
In 2008, the Supreme Court of South Carolina considered the applicability of the economic loss rule in the context of commercial context. See Colleton Preparatory Acad., Inc. v. Hoover Universal, Inc., 379 S.C. 181 (2008)Colleton Preparatory Acad., Inc. v. Hoover Universal, Inc., 379 S.C. 181 (2008). Plaintiff, a private school in Walterboro, South Carolina, sued Defendant for negligence and reckless/gross negligence. Defendant manufactured the fire retardant used to treat the wood on Plaintiff's roof. The school alleged that the roof's truss system had to be replaced for safety reasons because the retardant caused the wood to deteriorate.
The Court noted that like builders who have a legal duty outside of the contract to meet industry standards, manufacturers owe the expected users of their products the duty of care to conform with industry standards also. The focus is the defendant's actions, rather the consequences of their conduct. Accordingly, the court found that defendant manufacturer of the retardant owed more than a contractual duty to the school. Therefore, the economic loss rule was not applicable.
The important part of the decision was with regard to commercial plaintiffs versus home buyers or other consumers. Namely, the Court noted that commercial users or owners also do not have to wait until a defective product causes personal injuries or damages to other property to have a tort claim.
Manufacturers owe commercial plaintiffs the duty to manufacture products that do not pose a "serious threat of physical harm." Id. at 191. This duty is separate and apart from contractual duties. See id. Importantly, however, the Court limited this duty to serious threats of injury. Damages would then be the costs to repair or remove the dangerous product. Id. at 193.
This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.
Contractors, Remember to Perfect Your Mechanic's Lien to Stay Protected
Section 29-5-10 of the South Carolina Code of Laws Annotated allows providers of labor or materials for the repair, alteration, or erection of a structure to file a lien either on the structure or on the owner's interest in the land on which the structure is located. The materials must be actually used in such repair or erection to be "lienable".
Contractors must remember, however, to follow the statutory procedures for filing and perfecting a lien to be able to enforce their right to payment against owners. First, file the mechanic's lien within 90 days of the completion of the work in the county where such work was performed. S.C. Code Ann. Section 29-5-90. You may file such lien either in the Register of Deeds Office or with the Clerk of of Court. Remember to serve the owner with a copy of the lien. Perfection is valid only if the filed statement adequately describes the affected property and identifies the property owner's name.
Contractors must foreclose the lien either six months from the last day labor or materials were provided or six months from the date the lien was filed, whichever is earlier. S.C. Code Ann. Section 29-5-120. Note, however, that warranty or repair work by the contractors may revive the contractors' opportunity to file a lien if they had failed to do so initially. If an owner asks the contractor for additional repairs or other obligations under a warranty, the time for filing a mechanic's lien starts with the last day the latest work or materials were provided. Butler Contracting, Inc. v. Court St., LLC, 369 S.C. 121, 130-31 (2006). BUT, such additional labor or materials must be "done in good faith at the request of the owner OR for the purpose of fully completing the contract." Id. at 130. If the contractor provides the owner with such additional labor or materials merely as a gratuity or a friendly accommodation to the owner, the period for filing a lien will not restart. Id. Good faith means that the contractor is not doing the additional work solely to get a new chance to file the lien.
This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.
