Contractor's "Speech" SLAPP-ed in Massachusetts?

http://www.cohassetma.org

Recently, the First Circuit faced an interesting issue concerning contractor "speech."  In fact, the appellate court in Steinmetz v. Coyle & Caron, Inc., 862 F.3d 128 (1st Cir. June 29, 2017), certified the question to the Massachusetts Supreme Judicial Court to clarify the Commonwealth's law prohibiting strategic lawsuits against public participation (more commonly known as "anti-SLAPP" statutes). The result, which is pending, may cause some contractors to pause before selecting certain projects.

Underlying the case was a residential construction project in Cohasset, Massachusetts, a coastal community located near Boston.  Before construction could begin, the plaintiff owner needed permits and approvals from various local sources including the town conservation commission.  A group of neighbors opposed the planned construction and to make their point, hired the defendant design contractor to prepare renderings of the proposed structure for the commission.  According to the plaintiff owner, these renderings were "false, fraudulent, and defamatory" and "depicted a 'hideous behemoth looming over the tree line of the island.'" Also at least one of the renderings had been posted on a Facebook page created by the neighborhood group. The commission ultimately denied the construction project and the plaintiff owner sued the defendant contractor alleging negligence, gross negligence, defamation, and violation of the Massachusetts consumer protection statute, Mass. Gen. Laws ch. 93A.

In turn, the defendant contractor filed a "special motion" to dismiss relying on the Massachusetts anti-SLAPP statute, Mass. Gen. Laws ch. 231, § 59H.  (Note that about 1/2 of the 50 states have adopted similar statutes as well.)  Anti-SLAPP statutes are aimed at preventing lawsuits that serve to chill the valid exercise of free speech.  In other words, prohibiting suits that try to silence or intimidate critics by making them spend time and money to defend claims brought against them. Motions to dismiss these lawsuits are granted unless the lawsuit-filing plaintiff can show the criticism "was devoid of any reasonable factual support or any arguable basis in law" and the criticism caused "actual injury." Mass. Gen. Laws ch. 231, § 59H.  Massachusetts recently adopted a gloss to this shifting standard by allowing non-moving party (lawsuit-filing plaintiff) to demonstrate that the claims were not "primarily brought to chill" the petitioning activities and that there is "'some reasonable possibility’ of a decision in the party's favor."  Blanchard v. Steward Carney Hosp., Inc., 75 N.E.3d 21 (2017).

Here, the defendant contractor claimed that the plaintiff owner's lawsuit was motivated to silence the speech of the neighborhood group -- of which the defendant contractor was hired to assist by preparing the renderings.  The First Circuit confirmed that if the anti-SLAPP regime applied here, the defendant contractor's renderings constituted a petitioning activity, the renderings were not void of factual basis, and the the plaintiff owner's claims were frivolous (it did not need to reach the question whether the claims "primarily brought to chill").  However the Court concluded that "given our uncertainty that the anti-SLAPP statute applies to third-party contractors . . . in the first place, we certify that question to the [Supreme Judicial Court]." Steinmetz, 862 F.3d at 136.  In so doing the Court commented that the Supreme Judicial Court "has warned several times, albeit in dicta, that the statute encompasses only parties who “petition their government as citizens, not as vendors of services" Id. 

Once the Supreme Judicial Court presents its answer to this question we will update this blog.  In the meantime contractors, especially in Massachusetts, are cautioned that the anti-SLAPP defense may not exist in its defense arsenal.
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The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts. She is an associate at Pierce Atwood, LLP in Providence, Rhode Island. She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.

Appeals Court of Massachusetts: The Statute of Repose for a Designer Standard of Care Claim Did Not Start Running with the Issuance of a TCO

In 2002, Defendant Carter-Burgess (Carter) entered into an “Architectural/Engineering Services Agreement” with the developer of a proposed retail complex located in Reading, Massachusetts. The agreement contained typical provisions which identified the agreed upon standard of care for design services as well as providing indemnification requirements. Also in the agreement, Jordan’s Furniture (Jordan) was identified as a “potential tenant.”  The complex Carter designed consisted of two retail stores stacked vertically in a single facility with Jordan occupying three floors. Jordan utilized the second floor as its warehouse space complete with a floor to ceiling “high rack” storage system and a “stockpicker” lift machine which acted as a forklift to access the upper reaches of the “high rack” system.  Carter’s design for the second floor deck was a suspended 135,000 S.F. reinforced concrete slab supported by girders and beams.  Carter later testified that it accounted for the 9,300 lbs. “stockpicker” when it designed the warehouse slab assembly incorporating additional structural members at specific locations. 

As construction operations were winding down, Carter requested a temporary certificate of occupancy (TCO) on September 2, 2004 which allowed Jordan’s employees to begin product display installations on the second floor.  Carter further requested an additional TCO on September 14, 2004 to allow for displays to be installed on the third floor.  At that time, 54% of the facility was available for Jordan’s employees to install its merchandise displays.  The store opened to the general public on October 29, 2004. 

In April of 2005, Jordan’s employees noticed that specific portions of the second floor slab were crumbling and notified Carter of the problem.  Carter recommended that a third-party consultant be engaged to diagnose the situation which Jordan accepted. The consultant produced a report in July of 2005 stating that the problem was a result of concrete freezing shortly after placement.  A second consultant concurred with the findings.  The recommended remediation procedure from Carter was to remove and replace a large section of the slab. The original general contractor, Suffolk Construction (Suffolk), assumed responsibility for the work and completed it in March 2006. In October of the same year, Jordan once again noticed cracking at the newly repaired slab areas and informed Carter.  Carter inspected and agreed to produce a report which it did nearly six months later in April 2007.  In its report, Carter identified the cracking was due to shrinkage of the newly installed concrete (not a structural integrity issue) plus Suffolk’s failure to properly install structural steel reinforcing members.  Suffolk rejected Carter’s claims confident it had installed the structural steel per the contract drawings and it contended once again that the cause of the deficient slab was Carter’s inadequate design for the rolling “stockpicker.” No resolution could be reached with Suffolk and Carter asserting blame to the other party. In 2009 Jordan engaged a forensic engineer who determined that the damage to the slab was the result of an inadequate design by Carter.

At a bench trial, it was determined that the second floor slab was, “inadequate for [its] intended use, and negligently designed, with the concentrated demand of the stockpicker exceeding the capacity of the floor as designed” and that negligent design, “constituted a deviation from the exercise of reasonable care required of members of the engineering profession engaged in the design of commercial facilities.” The judge awarded compensatory damages based upon the cost of necessary repairs in the amount of $1,744,793.  Both sides appealed with Jordan claiming that Carter contractually agreed to a higher standard of care and promised a specific result, thus breaching its contract and express warranty.  Jordan further asserted that it is entitled to indemnification from Carter for its attorney’s fees.  Carter argues that the suit is barred by the statute of limitations and statute of repose. 

The Court first examined Jordan’s claim for breach of contract and breach of express warranty claims.  The trial court judge found that these claims were duplicative of the negligence claim and dismissed them accordingly.  Jordan argued that the owner-architect agreement established a heightened duty of care for the designer. The Court sided with the trial judge by finding the relevant portions of the contract did not in fact require any additional standards beyond what is the generally accepted standard of professional practice for a designer.  The Court also rejected Jordan’s claim that as a matter of contract, it was entitled to be indemnified by Carter for fees and costs.  The Court stated that the owner-architect provision was narrowly drawn and there was not a reasonable inference by either party that a prospective building tenant would fall under the indemnification terms of the agreement.

The Court next reviewed the statute of limitations and statute of repose for architects who provide "`individual expertise' in the business of designing, planning, constructing, and administering improvements to real estate." Dighton v. Federal Pac. Elec. Co., 399 Mass. 687, 696 (1987).  The statute of limitations for such a negligence claim is three years.  The statute of repose for damages "arising out of any deficiency or neglect in the design, planning, construction or general administration of an improvement to real property . . . shall be commenced . . . [no] more than six years after the earlier of the dates of: (1) the opening of the improvement to use; or (2) substantial completion of the improvement and the taking of possession for occupancy by the owner." M.G.L  c. 260, § 2B .  Jordan filed its claim against Carter on September 17, 2010.  

The Court began its analysis with the statute of repose and Carter’s assertion that the TCO’s issued in September of 2004 marked the opening of the improvement for use.  The Court agreed with the trial judge and rejected that argument by finding that the TCO’s issues in 2004 had the narrow and specific purpose to allow Jordan’s employees to install merchandise.  The Court also noted that Jordan’s was not allowed to utilize the main entrance, the IMAX theatre, and other retail space on the second and third floors prior to the third October TCO.  Finally, it was noted that as of September 14th, Jordan’s main entrance, exterior façade, warehouse, parking lot, and site work were not complete.  The Court next analyzed the statute of limitations claim with Carter asserting that Jordan had knowledge or sufficient notice that it was harmed before its cause of action could accrue. The Court once again agreed with the trial judge when it concluded that Jordan could not have reasonably known that any time prior to September 17, 2007 the cause of the deficient concrete was the result of Carter’s faulty design.  The Court further noted that Jordan had in fact acted diligently to ascertain the cause of the cracked concrete and Carter repeatedly insisted that it was the fault of others, which contradicts its position.

The Court affirmed the trial courts judgment in full and award of $1,744,793.

JORDAN'S FURNITURE, INC. vs. CARTER & BURGESS, INC. & another

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The author, Brendan Carter, is a contributor to The Dispute Resolver and a former Student Division Liaison to the Forum on Construction Law.  He is the Director of Industry Advancement & Labor Relations with the AGC of Massachusetts based in Wellesley, MA.  He may be contacted at 781.786.8916 or carter@agcmass.org.

Thanks to Mary Jay Torres-Martin from Trauner Consulting Services, Inc. for being a friend of Division 1 and providing this blog post by her colleague Mark Nagata: 

 

Requesting Time Extensions: To Wait or Not to Wait?

By Mark Nagata

Construction contractors struggle with the eternal question: “When is the right time to request a time extension from the owner?” Even when the owner is clearly responsible for critically delaying the project, they may be reluctant to submit a time extension request right away.

The window for submitting a time extension request can vary from during or directly after the owner critically delays the project to after the project is complete. Contractors often put off submitting a time extension request. The reasons may include believing they can’t develop a convincing and properly documented request or delaying the submission to “maintain a good working relationship” with the owner.

The Consequences
Not requesting a time extension in a timely manner may have unintended contractual, financial, and delay-mitigation consequences. Potentially, these are:

·        Contractual: Most contracts contain notice requirements that are imbedded within specific contract provisions, like the time extension provision, that require the contractor to submit a request for additional contract time within a specific time frame. By not submitting within the required time frame, the contractor may waive its right to recover additional compensation related to that delay. By waiting until the end of the project and choosing not to submit a time extension request in accordance with the contract, the contractor may inadvertently waive its right to recover extra contract time and delay damages.

 

·        Financial: If the contractor can demonstrate that the owner delayed the project and caused it to incur delay damages (extended field office overhead, unabsorbed home office overhead, idle labor, idle equipment, etc.), then resolving the issue now will avoid the need for the contractor to finance the cost of these impacts.

 

By waiting until the end of the project, the contract has effectively put itself into the position of having to decide to either accelerate the project to finish on time using its own funds or finishing late and running the risk of being charged liquidated damages. Simply put, choosing to wait until the end of the project causes the contractor to take on the substantial financial risk for the delay.

·        Delay Mitigation: If the contractor provides immediate notification, a reasonable owner should recognize the situation and work with the contractor to quickly identify the problem and resolve the issue. Because impacts are generally much cheaper to mitigate and resolve at the beginning of a project and tend to become more difficult and expensive to resolve over time, an owner should see the wisdom in resolving the issue as early as possible. 

 
This approach is also more consistent with the intent of most contracts, which is to work as a team to achieve mutually beneficial outcomes. By waiting until the end of the project to request a time extension, the contractor gives the owner two options: (1) pay for the impact or (2) not pay for the impact. 

When the owner has its completed project, it may opt for the latter, taking the position that the contractor did not follow the contract and, thereby, did not afford the owner with the ability to mitigate the impact. Therefore, to best protect your risk and retain the protection provided to you under the contract, don’t wait: request that time extension now.

Mark Nagata is a Director/Shareholder of Trauner Consulting Services, Inc. and is an expert in the areas of critical path method scheduling, delay and inefficiency analysis, and construction claim preparation and evaluation. He loves to get questions at mark.nagata@traunerconsulting.com.

The King’s Time Is Up: Arizona Supreme Court Holds That the Statute of Repose Bars Untimely Claims by State Entities and Overrides the Doctrine of Nullum Tempus Occurrit Regi    

City of Phoenix v. Glenayre Elecs., Inc., 2017 Ariz. LEXIS 121 (Ariz. May 10, 2017)

Between 1960 and 2000, Carlos Tarazon (“Tarazon”) performed work installing and repairing water piping for various contractors and developers in the City of Phoenix, Arizona (the “City”).  In 2013, after developing mesothelioma from exposure to asbestos while working on these projects, Tarazon filed a personal injury suit against numerous defendants, including the City and the various contractors and developers for whom he had worked.

The City filed a third-party complaint against the contractors and developers, alleging that they had agreed to defend and indemnify the City against negligence claims relating to these projects.  With respect to the contractors, their various contracts with the City each expressly required the contractor to indemnify the City from all suits arising from their work. 

The City brought these indemnity claims more than eight years after the completion of the construction projects at issue.  However, Arizona’s statute of repose states that “notwithstanding any other statute…no action or arbitration based in contract may be instituted…more than eight years after substantial completion of the improvement to real property.”  A.R.S. § 12-552(A).  Consequently, the contractors moved to dismiss the City’s claims, arguing that they were based in contract and therefore time-barred by the statute of repose.

The City opposed the motion, arguing that the statute of repose does not apply to the state’s political subdivisions because: (1) the common law doctrine of nullum tempus occurrit regi (“time does not run against the king”) allows for state entities to bring claims that would ordinarily be barred by the applicable statute of limitations and (2) the express language of A.R.S. § 12-510 codifies this doctrine and provides that claims by state entities are not barred by statute of limitations.  The Superior Court rejected the City’s argument and ruled that neither Section 12-510 nor the doctrine of nullum tempus exempt the City from the statute of repose.  The Court of Appeals of Arizona affirmed.

On appeal, the Supreme Court of Arizona agreed with the lower courts, holding that “the statute of repose controls over other, potentially conflicting state laws[,]” such as the nullum tempus doctrine and A.R.S. § 12-510.  While Arizona common law has “consistently recognized” the nullum tempus doctrine, both that doctrine and its codification in Section 12-510 serve only to exempt the state from the statute of limitations, and not from the statute of repose.  In support of this holding, the Court reasoned that the statute of repose expressly applies “notwithstanding any other statute” which “makes clear” that it “controls over other, potentially conflicting state laws.”

Accordingly, the Supreme Court affirmed the dismissal of the City’s indemnity claims against the contractors because they were: (1) based in contract and (2) brought more than eight years after the completion of construction.  Thus, the statute of repose barred the City’s claims despite the doctrine of nullum tempus.

The author, Kristopher Berr, is an associate in the Philadelphia office of the Pepper Hamilton Construction Practice Group.