December 2016

In early September a Texas jury awarded a janitorial $5.3 million against the local chapter of the SEIU.  The janitorial firm claimed that the SEIU damaged its reputation and caused it damages when it spread false, defamatory, and disparaging stories about the firm.  Specifically, the janitorial firm claimed that the SEIU told the janitorial firms customer and potential customers that the firm “systematically failed to pay its employees for all hours worked, instructed janitors to work off the clock and had fired, threatened or refused to hire janitors who supported joining a union.”  According to Law360.com, the union did this with “fliers, handbills, letters, emails, newsletters, speeches and postings on its website accused [the firm] of violating wage-and-hour and other labor laws.”

The SEIU’s apparently tactics are hardly unique. Union campaigns that use fliers, handbills, letters, emails, newletters, ect. to pressure third-parties from doing business with a targeted employer are hardly unique.  In fact, they are quite common place in Philadelphia and its surrounding suburbs, particularly with the building trades unions.  Most of the business owners of the company’s that are the target of the campaign are frustrated – to say the least – with the truthfulness of the statements contained in the union’s literature.  For example, many unions claim a non-union employers pays substandard wages or wages less than what the union pays.  However, the union has no way of know whether that is truthful or not and the many firms offer packages that are better than the union rate.

Could a suit similar to the one brought in Texas be successful in Pennsylvania?  Yes.  In the Texas case, the SEIU was sued for defamation.  Pennsylvania recognizes the tort of defamation.  In the commercial context, defamation concerning a business is referred to as “commercial disparagement.”  A plaintiff in a commercial disparaging case needs to prove the following elements: (1) the statement is false, (2) the publisher either intends the publication to cause pecuniary loss or reasonably should recognize that publication will result in pecuniary loss, (3) a loss does in fact result, (4) the publisher either knows that the statement is false or acts in reckless disregard of its truth or falsity, an (5) no privilege attaches to the statement.

In many of the union campaigns that we see, the first three elements can usually be found.  The fourth could probably be proved through discovery, unless the plaintiff’s customer outright terminates their contract, in which case the company would have other remedies against the union.  The challenge would be element 5.

A conditional privilege attaches to a commercially disparaging statement when the statement involves some interest of the person who publishes it, some interest of the person to whom it is published or some other third person, or a recognized interest of the public.  KBT Corp. v. Ceridian Corp., 966 F. Supp. 369, 374 (E.D. Pa. 1997).  However, this privileged is lost when it is abused by “publication that is the result of malice, i.e. ‘a wrongful act done intentionally or without excuse or generated from reckless or wanton disregard of another’s rights.'”
There are no know reported cases in Pennsylvania involving a case against a trade union for commercial disparagement.  This might be because of the previous difficulty plaintiff had in proven the fifth element of the claim. However, as the Texas case showed, in the digital age proving that element is getting easier. In the Texas case, the plaintiff obtained emails showing that the intent of the union was to put the janitorial firm out of business and bragging about when the firm in fact lost business.  If a plaintiff can find emails like that, it makes it very hard for the defendant to claim that it was not acting in a manner done with the intent to harm the business.

An opinion piece in today’s Philadelphia Inquirer concerning proposed legislation that would change the way the City of Philadelphia awards public construction projects is causing quite a stir. The article concerns legislation that would allow the City to award public construction contracts based on a “best value” approach rather than the current requirement that the contract be awarded to the lowest responsible and responsive bidder.  The author worries that by removing the current objective criteria and replacing it with subjective ones, contracts can be steered to politically favored contractors.  The author cites the recent no-bid contract awarded to a law firm run by the friend of Mayor Jim Kenney as an example of the chaos would ensue if this bill was passed.

Considering that the Bill’s sponsor, Bobby Hennon, is under FBI investigation,  and some of the Mayor’s biggest supporters are as well, the author has ever right to be concerned.  However, article comes up short in explaining what the Bill says and what best value procurement, if adopted, would mean for public construction work in Philadelphia.

First, the Bill that Councilman Hennon is proposing is actually a Bill that would make the best value procurement question a ballot question next November.  In other words, the Bill, if passed, would but to a City wide vote the question of whether the City should change it procurement practices to permit the best value approach to be used in addition to the low bid approach that is current used.

Second, the best value approach that the citizens would be asked to vote on in November, would not permit the current administration – or any future administration – to steer contracts to favored contractors by fiat or decry. Rather, before the best value approach can be used, the Procurement Commissioner must determine in writing that the low bid approach may not yield the best value to the City.  This would be done proposals for the project are solicited.

This approach is similar to the approach that the Commonwealth uses and has been permitted to use since 2014 (the federal government also uses a best value approach).  Under 62 Pa.C.S.A Section 513, when a contracting officer determines in writing that the use of the low bid approach is not practicable or advantageous to the Commonwealth, a best value approach may be used.

While low bid does provide objective criteria that can prevent corrupting and favoritism, it also can cost the taxpayers more money because the contract has to be awarded to the low bidder who sometimes provides inferior work that has to be corrected.  Or, the contractor intentionally underbids the project only to make up the difference via change orders.  The key to best value working is to require that the criteria for evaluating each proposal be adequately set forth in the request for proposal.  That way if a proposal is simply steered to a favored contractor without regard to the evaluating factors, the award is subject to challenge.  I would suggest that the City go one step further an adopt requirements similar to the federal rules that mandate that the contracting officer support in writing the award to a specific contractor.

The New Year will bring with it the biggest change to Pennsylvania’s Mechanics Lien Law since the current law was passed in 1963.  These changes will impact owner, contractors, and subcontractors equally.  However, the biggest benefits will probably be for real estate developers and other project owners.

On December 31, 2016, Pennsylvania will go live with a website known as the State Construction Notices Directory. On that date, owners will have the option of making projects costing $1,500,000 or more “searchable projects.”  An owner makes a project a searchable project by filing with the Notices Directory a “Notice of Commencement” before works begins.  The Notice of Commencement must include the name, address, and email address of the contractor, full name and location of the searchable project, the county where the project is located, a legal description of the searchable property, and the name address, and email address of the searchable project owner. Importantly, the owner must also post a copy of this Notice of Commencement at the project site.

If an owner does this, a subcontractor wishing to maintain its lien rights must file a Notice of Furnishing within forty-five (45) of first performing work on the project.  The notice of furnishing must include the general description of the labor and materials provided, the full name and address of the person supplying the services or items, the full name of the person that contracted for the services, and a description of the searchable project.

The impact of these changes cannot be emphasized enough.  First, subcontractors can no longer wait to take action in order to preserve their lien rights.  This means no more waiting for your invoice to age a few months before filing a lien. The old rule that you have six months after completion of your work to file your lien no longer applies if you fail to act within 45 days of starting your work.

Second, owners need to diligent file the Notice of Commencement and post the Notice at the project.  It is expected that many subcontractors (at least those that do not follow this blog) will not file a required Notice of Furnishing within forty-five days of beginning their work.  That means if you – the owner – have filed the required Notice of Commencement you can bar a significant number of mechanics liens.

These rules only apply to projects beginning on or after December 31, 2016.  But failure to understand these new rules going forward will have significant consequences to owners and subcontractors.