Supplemental Conditions

Dear Clients: Step away from the C-Mail

Posted in Construction Law

Yes, c-mail. Let me explain.

I am part of a certain segment that came of professional age at the dawn of the internet revolution.  We spent the first 18-20 years of lives completely – or mostly – detached from the internet, and the other half completely immersed in it.  I guess that gives us a unique perspective on the whole thing.

I sent my first email about 22 years ago as a freshman in college.  I learned about the ability to sent an “electronic mail” to someone the way you would learn about (at the time) something like a bootleg album, which is to say standing around a keg at a party (people may have even been smoking cigarettes directly next to non-smokers and indoors for that matter). Curious, I went to a “computer lab” in the basement of some ancient building at Villanova and asked one of the folks working there how to send an email.  After two levels of log ins, I sat in front of a blue screen with yellow DOS style font letters.  I typed a message to a friend at a different college, sent it, and forgot about the whole thing for at least a week.  The whole thing was a novelty and I don’t think I sent another message for the remainder of the year.

While the email platform improved over my remaining college years – from the Tandy 1000 style platform that I sent my first email on to the a platform roughly resembling Outlook – the prevalence of its use did not.  By my senior year, I checked email maybe once a week.  When I entered law school, the administration, perhaps having a premonition, basically forced the students to communicate with the faculty by email.  By the time, I became an associate checking, drafting, and sending email was part of my daily routine.

While the frequency of email use and its prevalence in society steadily increased, one thing that remained fairly constant – at least in the professional sphere – was that email remain true to its origins.  It was electronic mail.  In other words, it was used as an electronic letter.

Today, the way we use email bears no hallmarks to its original name.  Rather, what is has become are electronic conversations or conversation mail or C-mail for short.  Herein lies the problem.  One need to look no further than this week’s news where c-mails have created a host of problems for the Trump administration (and before that c-mail caused headaches for Hillary and the DNC).  I saw the problems C-mail creates closer to home as I spent half of the day cross-examining a witness based on what he did or did not say in email strings was involved with.  I have spent entire trials hammering witnesses with snippets of emails they sent long ago and likely thought little about before they sent it.

The problem with c-mail is that it can and will be used against you.  C-mail is sterile.  It does not have tone or context.  Its tone and context is left of the discretion (or mood) of the reader.

How did this happen?  The iPhone.  Before the iPhone, email was left at work.  If you were not at your computer, you were not reading and replying to mail.  When the iPhone arrived, email became an invasive species begging for attention 24 hours a day, 7 days a week.  It is no surprise that when the iPhone arrived so did c-mail.

The invasive nature of c-mail and incessant need for a reply has also caused people to send c-mails completely without any emotional filter.  That never ends well for the sender.

So my advice, if a matter can be handled with a telephone call or in person meeting, it should be.  If you feel the need to respond to an email to establish a record, type a letter in word, convert it to pdf and send it as an attachment.  Even further, if you are a very high level executive with administrative staff, do the unthinkable and completely scrap email.  I understand that the President does this.  (Actually, its not that radical considering the medical, scientific, business, and industrial progress civilization was somehow able to make in the centuries before email existed.)

The later serves a dual purpose.  First, a stand alone letter on your letterhead is a much more impacting piece of evidence or exhibit to a motion than an email buried in some string.  Second, taking the extra sixty seconds (trust me I know because I do it) to type the letter and then convert it to a pdf gives you sixty seconds to cool off and send a much more logical and powerful reply than the emotional one you would have sent.  (And, for those bold enough to go email free you never have to worry about incriminating emails.)

So I urge all of you to Make Email Great Again!



The Comcast Project is Not Likely to Be Shut Down Too Long

Posted in Secondary Boycotts, Unions

Jan Von Bergen at the Philadelphia Inquirer reported that work on Comcast’s new tower came to a halt this morning when striking members of Local 542 picketed the Comcast tower project and other union trades refused to cross the picket line.  However, this show of solidarity (during the afternoon on the Friday before the Fourth of July) is unlikely to last past the long weekend.  Why?  Because any conduct by Local 542 aimed at encouraging a work stoppage by other union members is illegal and the companies that employ the sympathetic union members are in breach of contract if they do not work on Tuesday.

Any actions by Local 542 to encourage members of a different trade unions to honor their picket line is a secondary boycott.  The National Labor Relations Act prohibits secondary boycotts.  Specifically, the NLRA prohibits a union for inducing employees of an employer not subject to a labor dispute to refuse to work.

The Comcast tower situation is a classic secondary boycott.  The primary employer – the employer in the labor dispute with the Operators – is the subcontractor that employs the members of the Local 542.  Everyone else – Comcast, the general contractor, the other trade subcontractors – are secondary employers and inducing their employees to stop working is prohibited.

Also, the subcontractors that do not employ members of Local 542 have a duty to perform their work regardless of a labor dispute with another contractor.  You can be sure that the attorneys for the general contractor have sent letters to the subcontractors that employed the union members that showed solidarity today reminding them that their members have to cross the picket line and work or they (the subcontractor) will be in breach of contract.  In turn, those union members that showed solidarity today will also want to work so they can get paid.  So, come Tuesday, I am sure there will be a bunch of “hey brother I support you, but I have a mortgage to pay.”


Huge Win for Economic Liberty

Posted in Construction Law

Sadly, in Philadelphia, the City that gave birth to the United States Constitution, respect for the Constitution by government officials is woefully lacking.  Luckily, the United States Federal Court for the Eastern District of Pennsylvania, which sits in Philadelphia, has served as a bulwark to Philadelphia bureaucrats who ignore the individual freedoms the Constitution guarantees. Last week, Judge Michael Baylson handed economic liberty advocates a huge win in Checker Cab Philadelphia v. The Philadelphia Parking Authority.  The importance of the decision has national implications.

The case involves the Philadelphia Parking Authority’s alleged decision to enforce taxi cab regulations against traditional taxis but not against ride sharing services like Lyft and Uber.  The plaintiffs in the case are a group of taxi cab medallion holders.  Plaintiffs claim disparity in treatment between taxis and ride sharing services. Specifically, the taxi cab owners claim that the Parking Authority’s strict enforcement of regulations against taxis while failing to enforce them against ride sharing services, violated their Fourteenth Amendment equal protection rights.

The Parking Authority moved to dismiss the complaint, which the Court denied.  In denying the Motion to Dismiss, the Court that the taxi cab owners alleged disparate treatment and provided detailed allegations that taxis and ride sharing services are similarly situated.  More importantly, the Court denied the motion to dismiss filed by the Parking Authorities executive director based on qualified immunity.  The Court held that “the right to equal protection of the laws is clearly established.”

Clearly, Judge Baylson’s decision has implications beyond the taxi versus ride sharing context.  For example, based on his decision, a property owner, developer, or business owner sufficiently states an equal protection claim against a government authority that enforces land use regulations or local codes stringently against him but gives breaks to a similar property owner, developer, or business owner.

While Judge Baylson rightly notes that his decision to allow the case to proceed is not a decision on the merits and the defendants can revisit issues at summary judgment, the decision is a nonetheless a victory for individuals against a regulatory state that is all too often abused.


The Death of Retail and Legal Issues

Posted in Construction Law

The National Review recently published an article about the wide ranging economic and social impacts of the death of traditional mid-market shopping malls.  The article is not overtly political and at time waxes nostalgic about the prototypical 1980’s shopping mall.  However, the article highlights real problems facing the owners of these malls and other traditional shopping centers.

As expected, the economic issues have spurred legal and litigation issues for landlords. One of the issues I have been dealing with is what are a big box tenant’s obligations after a lease expires.  Many of the big box tenants that are now vacating malls and shopping centers have been long term tenants.  Sometimes, their leases go back decades.  In the meantime, the mall may have changed hands.  The original lease signed with a second or third removed owner and no doubt amended several times might be long forgotten.

It is worth remembering those leases and spending the time and money to located them because certain provisions in the lease could save the already struggling landlord hundreds of thousands of dollars.  Most commercial leases contain some sort of provision requiring the vacating tenant to return the space to the landlord in substantially the same condition they received it.   Long time large retail tenants have probably made several different alterations to the store.  They may also have added adjacent space.  Eager for increased revenue the retail tenant may not have paid much attention to what would happen if they needed to vacate the space.  This presents an opportunity for landlords, who can demand that the tenant pay for returning the space to its original condition.

Another issue that I have seen are environmental issues.  At one point, automotive centers were common additions to big box retail.  These were largely discontinued in the mid to late 80’s.  If there were automotive centers at the property, there was likely an underground storage tank for waste oil and other fluids.  That tank should have been properly been removed before the center was discontinued.  That removal should have been documented.  Because the current property owner is removed from the owner of the property at the time the center operated, the new owner may have no idea that the automotive center even existed.  Here again it is worth doing your research before shaking hands with a long term vacating tenant.

Narberth Mayor Urges Dubious Legal Action

Posted in Zoning

When I left Philadelphia, I thought I had largely left NIMBY zoning disputes behind.  However, I quickly learned that the Main Line NIMBY is simply a tiger of a different stripe (and better financed and represented than their Philadelphia brethren).

One dispute that recently caught my attention concerns the proposed demolition of a 120 year old church in Narberth.  A developer wishing to demolish a church and develop apartments and drawing the ire of certain neighbors is something that is routine in Point Breeze or Fishtown.  However, apparently the same is true on the Main Line.  At issue in the case, is a restriction contained in a 1891 deed that apparently states that only a church can be built on the property.  (The article discussing the case does not quote the precise language of the purported restriction.)

What is interesting about the Narberth situation is Narberth’s elected officials seem to be encouraging neighbors to seek an injunction against the demolition of the church based on the deed restriction.  According to the article, Narberth Mayor Tom Grady said neighbors could bring a challenge to the proposed development.  Narberth Council President Aaron Muderick doubled down and is quoted as saying “[i]f neighbors wanted to file for an injunction, they could.” In Philadelphia, the politicians typically remain in the shadows while encouraging neighbors to do their bidding.

The residents of Narberth should hope that their Mayor’s and Council President’s political acumen is better than their legal acumen because they are peddling a dubious legal position.  The reason – as is often the case is NIMBY litigation – is standing.  In Pennsylvania, there is no general standing to challenge the use of another’s land. Instead a person must demonstrate an substantial, immediate, and direct interest in the proposed use of the land. The vague desire to keep “the character of the community” intact is not enough.  The prohibition on general standing is what I frequently invoke to quash the appeal of a zoning variance granted to a developer.  The NIMBY’s rarely have the requisite standing to challenge the local zoning board’s decision.

With deed restriction the standing requirements – for lack of a better word – are even more restrictive. Pennsylvania courts allow neighbors standing to enforce deed restrictions in two instances: (1) where plaintiffs are clearly identified as the third party beneficiaries of the restriction; and (2) where plaintiffs are given rights to enforce the restriction through a planned subdivision with a shared restrictive covenant.

In the Narberth case, scenario two is not at play because the deed restriction is not part of a planned subdivision or shared restrictive covenant.  So, the neighbors would have to show that they are clearly identified third party beneficiaries of the restriction.  Even without the benefit of the language of the deed restriction at issue, that would seem to be impossible. Since none of the neighbors were alive when the deed was drafted, they could not have been named as beneficiaries.  So unless the deed contains some language that clearly states that the restriction is for the benefit of the neighbors in general, which is unlikely because the Borough of Narberth did not even exist in 1891, then any challenge is not likely to survive the pleading stage.

Worse yet, if the neighbors were to follow the advice of their elected officials, they could end up on the wrong side of a Dragonetti lawsuit by the developer.

Philadelphia Voters to Consider Best Value Bid Procurement

Posted in Public Bidding, Public Contracts

My friend and colleague, Chris McCabe, recently published an opinion piece on concerning the May 16 ballot question that asks Philadelphia voters to approve a change in the way Philadelphia awards public contracts.

Currently, Philadelphia, like all municipalities in Pennsylvania, uses an objective lowest responsible bidder standard in the award of public contracts. Under this approach, public contracts must be awarded to a bidder that responds to all of the criteria of the request for bids and offers the lowest price. Under this traditional approach the award of public contracts is completely transparent.

The May 16 ballot initiative seeks to change this.  If approved, Philadelphia could award public contracts using a host of subjective factors.  What those factors would be are unknown because the policies are not yet written.

Pennsylvania courts have long held that the essence of the lowest responsible bidder approach to public contracts is to guard against fraud, waste, abuse, and favoritism.  Unfortunately, fraud, waste, abuse, and favoritism are the rule rather than the exception in Philadelphia.  The long history of insider dealing and corruption in Philadelphia government has so eroded the public trust that the letting of public contracts cannot be seceded to the subjective whims of bureaucrats.

Furthermore, the problems with Philadelphia’s proposed best value procurement proposal do not end with concerns over waste, fraud, and favoritism.  While one would hope that any subjective factors injected into the procurement process would be limited to those that actually brought value taxpayers,  history suggests otherwise.   If passed, taxpayers can be assured that the subjective criteria will driven by special interest groups and identity politics. Special interest groups will lobby to include criteria that benefit their membership.  Meanwhile, leftist Philadelphia elected officials will seek to include criteria aimed at righting some social wrong or bringing justice to the afflicted group of the week.

In the end, best value procurement will be a boon to insiders.  But, as usual, the taxpayers will be left holding the bag.

District Court denies Carpenters Union Motion to Dismiss RICO case- What it Means

Posted in Unions

In a case that has been widely discussed on this blog, a United States federal district court Judge denied the Philadelphia Carpenters’ Union’s motion to dismiss a federal RICO case filed against it by the Pennsylvania Convention Center.  Judge Nitza I. Quiñones Alejandro issued the ruling on the Union’s motion.

Unfortunately, Judge Quinoses Alejandro did not issue an opinion to go along with her order.  This is a bit unusual. Federal Judges routinely issue opinions (if only in footnote form) even on motion dealing with procedural issues. like discovery disputes.  The lack of an opinion prevents us from knowing the Judge’s rationale for denying the motion. Therefore, the order lack precedental value for subsequent cases.  However, I do not believe the order is any less significant.  Potential plaintiffs now know that a federal RICO case against a union can survive a motion to dismiss. Moreover, the attorneys for the Convention Center have provided potential plaintiffs a road map for doing so. As I have stated before, the fact pattern in the Convention case is hardly unique and the tactics the Carpenters used in that case are de ri·gueur.  

Faced with the threat of trebel (triple damages) and attorneys fees from a successful RICO claim, unions should certainly be on notice following this decision.  In particular, the attorney fees provision of the RICO act makes these cases attractive to attorneys that will bring such cases on a contingent or reduced fee.  This removes the burden of the high costs that a plaintiff in a RICO case would usually have to bear and the prohibitive effect that high fees would have on an otherwise solid case .

How to Fund Your Lawsuit to Get the Justice You Deserve

Posted in Construction Law

This is a guest blog post from LexShares, a leading funder of commercial litigation. They can be reached by emailing or calling 877-290-4443. 

As many daily headlines in the business sections of newspapers across the country will attest, business is not for the faint of heart.  Meticulously planned deals can fall through at the eleventh hour; partners may prioritize their own short-term gains over the long-term well being of the company; competitors could engage in smear campaigns meant to expand their base at any cost, even at the expense of good will others took decades to build.  When your business suffers unfairly from the misdeeds of third parties, sometimes the only recourse is to resolve the dispute in court.

For these sorts of injuries, a business tort lawsuit can be the best way to set things right.  Business torts, also known as economic torts, encompass a range of claims, mostly stemming from principles at common law, that can be brought against businesses, their officers, or other parties whose actions lead to an economic injury or loss.  Actions commonly categorized as business torts include:

  • Unfair competition (where competitors use illegal means to gain an advantage)
  • Breach of fiduciary duty (where a person who serves in a fiduciary capacity – such as an officer, board member, or employee – fails to fulfill his or her responsibility)
  • Commercial disparagement or trade libel (where someone publishes derogatory information about an individual or business meant to discourage others from dealing with them)
  • Fraudulent misrepresentation (where a false representation is made knowingly or recklessly with the intention of being relied upon, and that representation is, in fact, detrimentally relied upon)
  • Tortious interference (wrongful interference with a contractual or business relationship)
  • Trade secret misappropriation (theft of economically valuable information whose secrecy is a core aspect of the advantage it confers)

Frequently, however, proving another party’s misdeeds to a court’s satisfaction can be a difficult and protracted endeavor.  As is often the case with complex litigation in general, a business tort lawsuit has the potential to be arduous, time-consuming, and expensive for all involved.  Not every business is equipped to handle the stresses and costs of litigation, especially if it is already reeling economically due to the malfeasance that gave rise to the claim.

Where resources rather than merits limit your capacity to seek justice for business wrongs, litigation finance can help.  Also called litigation funding or lawsuit funding, it allows third-party investors to help fund case-related expenses. Litigation finance can be used to retain top-tier legal counsel, acquire expert testimony, and engage in premier courtroom strategies such as mock trials and simulations, or even additional funding to give an underlying business the ability to endure the litigation process, in exchange for a portion of the recovery should the lawsuit succeed.  Even then, the process of seeking out and acquiring litigation finance can itself be an onerous task, especially for plaintiffs already strained to the breaking point both by the demands of litigation and the economic injury underlying the lawsuit.  This is where LexShares excels at connecting meritorious plaintiffs with accredited investors to the mutual benefit of both.

By the very nature of the action, plaintiffs in business tort lawsuits come to court in less than optimal financial shape.  When the other party has profited from the malfeasance, the divide between the resources that plaintiffs and defendants can bring to bear only widens.  LexShares and its base of accredited investors can provide plaintiffs equal access to the resources, expertise, and support they need to give them their day in court and the chance to obtain the just outcome they deserve.


District Court Allows DBE False Claims Act Case to Proceed

Posted in Construction Law, Disadvantage Business Enterprises (DBE), False Claims Act

Last week, I posted about how whistleblowers continue to receive large settlements related to DBE fraud. A somewhat recent case from the federal court in Maryland shows how whistleblowers are ferreting out DBE fraud on construction projects receiving any form of federal funding.

The Case

The case involves a bridge painting project in Maryland that was let by the Maryland State Highway Administration. The contract required the prime contractor to meet a 15% DBE participation goal.  The prime contractor submitted a bid stating it would have 15.12% DBE participation.  After it was awarded the contract, the prime contractor – as is typical – submitted additional forms certifying to the MSHA that 15.12% of its contract price would be performed by a DBE firm.  The prime contractor indicated that one DBE subcontractor, Northeast Work and Safety Boats, LLC (“NWSB”), would perform the 15.12% of the work.

Two employees of another subcontractor, Brighton Painting Company, brought a claim against the prime contractor under the False Claims Act.  They alleged that Northeast was merely a pass through entity that performed no commercially useful function on the project and that the work was actually performed by Brighton, a non-DBE firm.

Plaintiffs’ False Claims Act case was based on five categories of allegedly false documents submitted by the prime contractor to MSHA: (1) the initial bid proposal; (2) payroll documents; (3) quarterly DBE participation reports; (4) contractor progress estimates; and (5) documents related to the prime’s request for final payment.  In all of these documents, the prime contractor made some form of certification about its DBE utilization and its compliance with the DBE program.

The prime contractor moved to dismiss the case.  In denying the motion to dismiss, the District Court held that all of the five categories of documents satisfy the “claim” requirement under the False Claims Act.  Moreover, the District Court ruled that all of these documents could be material false statements because the false statements had the “natural tendency” induce the government to make payment.

The Takeaway

There are several:

  1. Because of the number of documents a prime contractor submits to a transportation agency that make representations concerning utilization of DBE subcontractors, transportation contracts are ripe for False Claims Act cases.
  2. The documents that the prime contractor submitted in the Maryland case are required in one form or another in all jurisdictions.  For example, on PennDOT projects the prime contractor is required to submit (a) a monthly DBE status report (FORM EO-402); (b) an annual DBE Commercially Useful Function Report (FORM EO-354); and (c) a DBE Participation form (FORM EO-380).  Additionally, PennDOT contracts contain language stating that failure of the prime contractor to carry out the requirements of the Department of Transportation’s DBE program is a material breach of contract.
  3. Anyone on the project with knowledge of the pass through scheme can act as a potential plaintiff.
  4. The case has probably cost the prime contractor several hundreds of thousands of dollars in legal fees thus far.

Whistleblowers Continue to Receive Large Settlements in DBE Fraud Cases

Posted in Disadvantage Business Enterprises (DBE), False Claims Act

It has been awhile since I last blogged about fraud involving the Department of Transportation’s disadvantaged business enterprise (DBE) program.  Trust me, the problem has not gone away. If anything, prosecutions and civil claims filed under the False Claims Act alleging DBE fraud have become so frequent, I could not write a blog post about each one.  The biggest winners in 2016 may have been the whistleblowers that brought the DBE fraud to the attention of the Department of Justice, who were awarded millions of dollars for doing their part to ferret out fraud.  Recent whistleblower settlements include:

  • June 2016 – $1,485,000 awarded government contractor;
  • May 2016 – $500,000 awarded to a former employee of Mountain States Construction;
  • June 2015 – $1.8 million awarded to two former employees of a commercial facilities contractor; and
  • May 2014 – $12 million awarded to former project manager on airport project.

Because whistleblowers are typically represented by attorneys on a contingent fee basis, they do not incur attorneys fees in filing such a claim.