The American Arbitration Association (“AAA”) issued revised Construction Industry Arbitration Rules which took effect July 1, 2015. There are significant changes in the new rules which are intended to make the arbitration process more efficient and cost-effective. The changes include several completely new rules which provide expanded authority to the arbitrator to control the course of the arbitration. For example, the new rules provide:
Continue Reading Revised Construction Industry Arbitration Rules Adopted by American Arbitration Association
Sheppard Mullin
Principal Architects on Residential Projects Liable for Construction Defects Outside Their Control; Developers and Owners May Pay the Price
Beacon Residential Community Assoc. v. Skidmore, Owings & Merrill, LLP (Cal. Supreme Court., 07/03/2014, S208173)
On July 3, 2014, the California Supreme Court decided the much watched case Beacon Residential Community Assoc. v. Skidmore, Owings & Merrill, LLP. The court held that the “principal architect” “owes a duty of care to future homeowners in the design of a residential building . . . even when they do not actually build the project or exercise control over construction.” (Emph. added.)Continue Reading Principal Architects on Residential Projects Liable for Construction Defects Outside Their Control; Developers and Owners May Pay the Price
A Construction Defect Insurance Carrier Need Only Demonstrate That Another Insurance Carrier’s Policy May Potentially Cover The Claim In Order To Recover Equitable Contribution To A Settlement
A California Appellate Court recently clarified the burden of proof for an insurance company seeking contribution from another insurance company in settlement of a construction defect action. When a company involved in construction is sued for allegedly causing property damage to the building or structure it built (i.e. a construction defect), the company typically turns to its commercial general liability insurance policy. Depending on the nature of the defect claim the construction company may have more than one policy that could potentially provide coverage. Different insurance carriers may respond to their insured’s tender in different ways. When one carrier agrees to defend and indemnify its insured from a claim potentially covered by another carrier, but the second carrier refuses to cover, the first might settle the claim and then seek a court ruling that the second provide “equitable contribution” to the settlement amount paid. In that situation, what does the settling carrier have to show? That the claim was absolutely and certainly with in the coverage of the second insurance policy?
Continue Reading A Construction Defect Insurance Carrier Need Only Demonstrate That Another Insurance Carrier’s Policy May Potentially Cover The Claim In Order To Recover Equitable Contribution To A Settlement
New Court Decision Clarifies Mechanic’s Lien Valuation Statute
The amount of a mechanic’s lien in California is generally the lesser of: 1) the reasonable value of the work; or 2) the price agreed upon in the lien claimant’s contract. But does the same measure apply if a lien defendant was not a party to the contract? In Appel v. Superior Court of Los Angeles County, 214 Cal. App. 4th 329 (2013), the appellate court clarified that the same measure does apply.
Continue Reading New Court Decision Clarifies Mechanic’s Lien Valuation Statute
Developers May Require That Construction Defect Disputes Be Resolved Through Arbitration
The California Supreme Court recently ruled that developers – by including an arbitration provision under the Federal Arbitration Act (FAA) in Homeowners’ Association Covenants, Conditions and Restrictions (“CC&R’s”) – may require that construction defect actions be resolved through arbitration rather than by jury trial. In Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, 55 Cal. 4th 223 (2012), California’s high court ruled that such provisions are consistent with the Davis-Stirling Act and that the homeowners’ associations can be bound by the arbitration provision in the recorded CC&R’s.
Continue Reading Developers May Require That Construction Defect Disputes Be Resolved Through Arbitration
Charter Cities Are Not Required to Pay Prevailing Wages on Local Public Works Projects
Labor unions have long been at odds with California charter cities over whether such cities must pay prevailing wages on public works projects. While many charter cities have either not exempted themselves from state prevailing wage laws, or have passed their own prevailing wage laws, other charter cities have no prevailing wage laws for public works projects whatsoever. The building trades have challenged those charter cities which have no such laws. However, the California Supreme Court recently sided with the charter cities on this issue. In State Building and Construction Trades Council of California AFL-CIO v. City of Vista (July 2, 2012, S173586) ___ Cal.4th ___. Relying on 80 years of precedent, the Court held that contract worker wages of locally funded public works are municipal affairs, not of statewide concern, and are exempt from state prevailing wage laws (see City of Pasadena v. Charleville (1932) 215 Cal. 384, 389).
Continue Reading Charter Cities Are Not Required to Pay Prevailing Wages on Local Public Works Projects
Special Advisory: New Mechanics Lien Act in California
In 2010, the California Legislature enacted Senate Bill (“SB”) 189 to reorganize and simplify the laws governing works of improvement. The bill completely re-writes the statutes which provide for mechanics liens, stop notices and certain construction bonds. These revisions took effect on July 1, 2012. In addition to this reorganization, some substantive changes to the laws governing mechanics’ liens, construction bonds, and stop notices were made. As a result, all of the forms commonly used in the industry, such as the 20-Day Preliminary Notice, Notice of Completion, and Progress/Retention Payment Releases must be changed.
Continue Reading Special Advisory: New Mechanics Lien Act in California
Court Broadly Defines Subcontractors Who Qualify For Payment Bond Claims
Can a supplier of construction materials be considered a “subcontractor” for purposes of enforcing its claim on a public works payment bond? The answer is “yes” according to a recent decision of the California Court of Appeal. In Eggers Industries v. Flintco, Inc., et al., 201 Cal. App. 4th 536 (3d Dist. 2011), rev. denied (Feb. 15, 2012). The Court affirmed the rule that a “subcontractor’s status as a subcontractor must be determined based on what the subcontractor agrees to do, not what it actually ends up doing,” citing a fifty year-old California Supreme Court decision. In so holding, Eggers provides important guidance regarding the scope of recovery against a public works payment bond permitted by Civil Code sec. 3248 and its replacement, the newly chaptered Civil Code sec. 9554, which takes effect in July 2012.
Continue Reading Court Broadly Defines Subcontractors Who Qualify For Payment Bond Claims
Federal Courts Overrule GAO and Require Reinstatement of Low Bidder
Contractors who file a bid protest challenging a federal contract award can do so in one of three forums: (1) the agency whose procurement decision is being challenged; (2) the Government Accountability Office (“GAO”); or (3) the Court of Federal Claims (“COFC”). Many federal contractors choose to file protests with the GAO because the GAO represents the middle ground between an agency-level protest and a COFC protest. Typically, a protestor wants to avoid filing a protest in the very agency whose conduct is being protested and wants to avoid the time an expense of filing a protest with the COFC. Additionally, although GAO decisions are non-binding, they have almost always been fully implemented by the Contracting Officer (“CO”) of the applicable agency and have traditionally been given a high level of deference by the COFC. However, a case decided by the COFC this past year may signal the deterioration of high deference afforded to GAO decisions.
Continue Reading Federal Courts Overrule GAO and Require Reinstatement of Low Bidder
Public Private Partnership Upheld For Construction of Presidio Parkway
In 2009, the California legislature amended Section 143 of the Streets and Highways Code and greatly expanded availability of the public-private partnership (“P3”) as a mechanism to finance transportation infrastructure projects. In early 2010, under the authority of the newly amended Section 143, the California Department of Transportation (“CalTrans”) began to implement part of the Presidio Parkway Project (“Project”) as a P3.
Continue Reading Public Private Partnership Upheld For Construction of Presidio Parkway
Construction Arbitration Clause Calling for Expanded Judicial Review Must be Explicit and Unambiguous
By Robert Sturgeon
Parties to construction arbitrations who are disappointed with the arbitrator’s award are often doubly-disappointed to learn that they have very little chance of successfully appealing in a court to overturn the arbitrator’s decision. Because arbitration is intended to be a final and complete alternative dispute resolution process, judicial review of the arbitrator’s award is quite limited. Ordinarily a court may not review the merits of the dispute, or overturn an arbitration award on ground that the arbitrator made legal errors or erred in applying the law to the facts. In general, a court is authorized to overturn an arbitration award only where (i) the award was procured by corruption or fraud; (ii) there was corruption or misconduct by the arbitrator, (iii) the arbitrator exceeded his or her powers, (iv) the arbitrator refused to postpone the hearing despite there being good cause to do so and that prejudices the parties, or (v) the arbitrator failed to disclose potential grounds on which he or she could be disqualified or refused to disqualify himself when there was cause to do so. See, e.g., Cal. Civ. Proc. Code 1286.2.Continue Reading Construction Arbitration Clause Calling for Expanded Judicial Review Must be Explicit and Unambiguous