June 2011

Former GOP rising star/policy wonk/excellent Governor, Bobby Jindal of Louisiana,  recently signed into a law a bill banning government mandated PLA’s.  Louisiana is the fifth State in 2011 and the ninth overall to ban the use of PLA’s on government funded projects.

Thanks to aggressive efforts of organizations like the Associated Builders and Contractors and the National Right to Work Committee, State Houses are finally waking up to the waste of taxpayer dollars caused by PLA’s.

Looking for last minute CLE credits?  Please join me on August 30, 2011 for at 12:30 p.m. for a 2 credit CLE “A Primer on Mechanics’ Liens and Bond Claims.”

We will address:

•Who can file a mechanics lien claim?

•What projects are subject to a mechanics lien claim?

•What are the specific requirements for filing a mechanics lien claim?

•Common mistakes made that caused mechanics lien claims to be stricken.

•When are payment and performance bonds required?

•Who can make a claim on a performance or payment bond?

•What are the requirements for making a performance or payment bond claim?

 

EMAIL DETOX. My name is Wally and I am an email-aholic.

This week, based largely on the Four Hour Work Week email principles of Tim Ferriss, I began an email detox program.  Early results: absolutely liberating.

Email is was supposed to make us more efficient.  Email is was supposed to free us from the confines of our office allowing us to enjoy life and work from anywhere.  That is the email dream.  In reality email has turned into a nightmare for many us, especially lawyers.  My computer, iphone, and ipad are all linked to my email account.  Like many you, email did not liberate me, it enslaved me.  In many cases, an email from an opposing counsel or client would put me in a really bad mood when I was supposed to be having fun.

Therefore, I have begun a three step email detox program.

  • First, I only check and reply to email at strict intervals: 9 am, 11 am, 2 pm, and 5 pm.
  • Second, I turn my email offline when I am checking and replying to emails.
  • Third, I keep my inbox clear.  This means I either delete an email, respond to an email and archive/delete it, or print it out and add it to my to-do list.

The effects are immediately noticeable.  I can finish blog posts without email interrupting me.  At home, I read a book or watch a game without being interrupted by email.  Finally, I enjoy my surroundings more.  (Surprisingly, Philly is not as dirty as I thought.)

This is not to say that the detox has been easy.  Of course, I find myself with the urge to check my iphone for email when I am bored.  However, those urges are gradually waning.  Considering that I survived the first 23 years of my life without email (I started using email regularly mid-way through law school) and somehow was still able to get work done, meet up with friends, and otherwise live my life, I do not think I checking email 4 times a day will be so hard.

Raise A Glass: We raise a glass to former heavyweight champion Jack Dempsey.  He would have been 116 today.  Happy Birthday Jack.

CNBC has an amazing story of the closing of Empire, NV, a town wholly owned by drywall manufacturer USG.  It illustrates the broad and long ranging effects of the downturn in the construction industry.   This story is also amazing for another reason:  company towns still exist?

An excavator’s, landscaper’s, or demolition contractor’s right to a mechanics lien in Pennsylvania is a tricky question because, unlike typical trade contractors,  there is not a per se right to a mechanics lien for excavating, demolition, or landscaping. The Mechanics Lien Law states  erection, construction, alteration, or repair work includes demolition, excavation, and landscaping only “when such work is incidental to the erection, construction, alteration, or repair” of a building.  For years, this was accepted to mean that a building must actually be completed before a mechanics lien for demolition, excavation, or landscaping would attach.

However, as first blogged about by Robert Ruggieri across the street at Cohen Seglias, the Pennsylvania Superior Court recently issued an opinion stating that the completion of a building is not a prerequisite to an excavating contractor’s right to a mechanics lien.

In B.N. Excavating, Inc. v. PBC Hollow-A, L.P., 2011 WL 2190768 (Pa.Super.2011), the Superior Court overturned the trial court’s dismissal of a mechanics lien claim of an excavating contractor on a project that was never completed.  The trial court reasoned that in order for claimant’s work to be “incident” to construction a building must be completed.  The Superior Court squarely rejected this reasoning stating:

“we do not interpret the [Mechanics Lien Law] . . . as creating a bright-line rule that a mechanic’s lien can never attach to land absent an erected structure.”

The Superior Court declined to equate the Mechanics Lien Law’s phrase “incidental to the erection [or] construction” with the requirement that the structure actually exist.  The Court found more important whether the excavation work was performed “in preparation for planned construction.”

This decision has obvious implications on the myriad of projects that are left half finished because of lending issues.  It also raises the question as to whether landscapers and paving contractors should file mechanics liens and argue for a more liberal interpretation of the definition of “erection, construction, alteration, or repair.”

This is the first of my weekly Friday “Out In the Street”  posts (named after Bruce Springsteen’s ode to Friday “Out In the Street”)  where I take a break from discussing business and turn my attention to other topics of interest – politics, pop-culture, sports, ect.

He is no Wade BoggsWNTP in Tampa reports that Sheriff’s deputies arrested a man who became belligerent after drinking 48 beers on his birthday.   James Taylor (not the singer) told Sheriff’s deputies he had “about 10 beers to many” after drinking 48 beers to celebrate his 48 birthday.  I guess if he was 38 he would be in the clear.  As amazing as this story is, it pails in comparison to former Hall of Famer (and ironically former Tampa Bay Ray’s third basemen) Wade Boggs’ claim that he once drank 64 Miller Lites on a cross country flight to Seatlle.

Raise a Glass: Each week I will ask that you raise a glass at your local establishment to a deserving individual or individuals.  Speaking of the Boss, I ask that you raise a glass to E Street Saxophonist Clarence Clemons who suffered a stroke this week and is recovering.  Get well soon Big Man.

See you next week.

Crain’s New York Business is reporting that New York construction unions agreed to cut wages of members working on the massive residential Gotham West project located on Manhattan’s far West Side by 20%.

The gradual erosion of union influence on Manhattan construction projects is a theme we have been following because it indicates a larger national trend.  It also begs the question: can the unions that agreed to the wage cuts now protest that merit based contractors are not paying wages according to area standards?

My article in the February 2011 issue of Construction Executive Magazine “The ‘Accidental’ Release: Pay Close Attention to Standard Lien Waivers,” discussed the Western District of Pennsylvania’s decision in Sauer Incorporated v. Honeywell Building Solutions SES Corporation, 742 F.Supp.2d 709 (W.D.Pa.2011) where the Court dismissed Sauer’s delay claims based upon the language contained in standard lien waivers and releases that Sauer submitted with its monthly payment applications.  A copy of the article can be found here.

Recently, the Eastern District reached a similar decision in First General Construction Corp. v. Kasco Construction Co, Inc., 2011 WL 2038542 (E.D.Pa.2011).  In this case, First General, a concrete subcontractor, brought a breach of contract claim against Kasco for payment of additional work it claimed was verbally ordered by Kasco’s project superintendent.    Kasco moved for summary judgment based upon, among other things, releases First General executed throughout the course of the project.  While the Court’s decision does not specifically state that the releases were submitted with monthly payment applications, based upon the language of the releases quoted by the Court, a conclusion can be made that they were.

The Court granted Kasco’s motion for summary judgment and dismissed all of First General’s claims for additional work performed prior to the date of the last release.  The Court rejected First General’s argument that the releases were unenforceable because they lacked consideration stating:

“[t]he consideration for the releases is the same as the consideration for [the] Subcontract. Accordingly, no additional or independent consideration is necessary because the parties were careful to include the releases as a term of the contract.”

What are the lessons from Honeywell and First General?

  1. Subcontractors cannot wait to properly document claims;
  2. Subcontractors cannot ignore standard lien waivers and releases and treat them as a matter of routine; and
  3. Conversely, owners and higher tier subcontractors should not hesitate to use lien waivers and releases to bar change order and delay claims that have not been properly documented.

 

After a slew of bad economic news the past few weeks, we have some good news to report about two major construction projects courtesy of the always keen eyes over at NakedPhilly.com.

First, NakedPhilly reports a major PennDot infrastructure project for the I-95 Girard Avenue interchange.  According to the report:

“The project will separate the interchange into six sections (under six different construction contracts) along a three mile stretch which spans from Race Street to Allegheny Avenue. Construction, in all its six phases, will endure from fall 2010 up to fall 2019 and is projected to reach a total of $950M.”

Second, NakedPhilly reports about a more modest, albeit still substantial, project headed up by the Children’s Hospital of Pennsylvania.  According to the report, CHOP is requesting proposals for the development of a 9 acre site at the base of the South Street Bridge.

As the industry struggles with a potential double dip recession and continued high employment, this news could not come soon enough.

In an earlier post, I mentioned what appeared to be the increased number of bids that have been rejected because all bids came in over budget.  I surmised that one potential reason for this was the soaring cost of material and fuel prices.  Here is an interesting article from the AGC of America about how rising material costs coupled with stagnant finished building prices are further threatening contractors margins.  According to the report:

“Construction spending has sunk to 1999 levels, forcing contractors to keep bid prices down to win projects, despite huge price increases for key inputs,” said Ken Simonson, the association’s chief economist. “That steadily widening gulf threatens to put construction firms out of business and their employees out of work.

Contractors are powerless in controlling the finished price of buildings.  However, they do have options in dealing with rising material costs.  In an upcoming article for Construction Executive magazine, I outline how you can protect yourself from volatile material costs.  As soon as the article is published, I will be sure to link to it here.