Toolbox Talk Series Recap – Arbitration Motion Practice

In the June 22, 2023 edition of the Toolbox Talk Series, Adrian Bastianelli, Peckar & Abramson, P.C., and Brian Cashmere, Williams Mullen, moderated by Jennifer Millender of the American Arbitration Association (“AAA”), discussed motion practice in arbitration. Specifically, they offered advice on how to choose the right issue for a motion, how to get approval for a motion, how to write the motion, and how to get the arbitrator to grant it. They also discussed the pros and cons of motion writing in arbitration settings.

1.      How to choose the “right issue” for a motion in arbitration

The panel discussed what type of issues can, or should, be brought up in a motion in arbitration.  Cashmere stated that a clear and concise issue is best for this type of review.  For example, statute of limitations, notice, or contract interpretation issues may make great summary judgment or partial summary judgment motions.  Essentially, an issue that the arbitrator may resolve via primarily a question of law is more likely to succeed.  Bastianelli warned against submitting just any “available” motion, as the practice may turn the arbitrator against you. Both panelists mentioned the need to consider strategy before filing a motion—ask, “how will filing this motion help or hurt reachingArbi final resolution.”  Cashmere noted that sometimes the threat of bringing the issue to a hearing can put pressure on the adverse party in a way that is favorable to your client’s goals; possibly even more so than actually submitting the issue.

2.      How to get approval for a motion in arbitration

Bastianelli noted that, under AAA Rule 34, a party must first receive approval to submit a substantive motion before actual submission. Cashmere warned that some states, like California, do not typically allow motions, at all. Usually, where permitted, you must submit a letter to the arbitrator on why they should allow the motion, though Cashmere stated that sometimes the need for a motion may be raised during a case management conference. Both panelists stated that the key to getting approval for the motion is trying to convince arbitrator that your situation is the exception: the sometimes-unusual situation where the law is truly all they need to decide the issue.  They emphasized the need to make a case that the issue can be settled if the arbitrator allows a motion.  Bastianelli recommended making the arbitrator feel guilty; argue that arbitrator resolution of the issue on motion will save time and money.

3.      How to write a good motion in arbitration

The panelists also discussed how to write a convincing motion. Cashmere suggested sticking mainly to law and only mentioning truly uncontested facts, but only if they would help decide the issue.  If the motion can be solved purely through questions of law, as it should, then the panelists suggested leaving all the “messy” facts out. Bastianelli underscored that, like with any motion to a court, the motion should be well written and have adequate legal basis, so as not to waste time or upset the arbitrator.

As to timing of the motion, Bastianelli emphasized that if you can get the motion in before discovery is done, it could save everyone the time and money of doing discovery on what may become a moot issue.  The earlier the submission, the better.

4.      How to get the arbitrator to grant a motion in arbitration

The panelists confirmed that, once a motion is submitted, the chances the arbitrator will grant it are nonetheless low.  Out of five motions Cashmere submitted in arbitration, all five were denied.  Despite forty years of arbitrator service, Bastianelli can count on two hands the times he granted a motion.  The panelists discussed some of the reasons for this, including that almost every legal issue has a fact-dependent element.  Additionally, arbitrators may be concerned that, by excluding evidence, they may give the other party basis to vacate the award.

Both panelists agreed that, regardless of these obstacles, if your motion focuses on a pure legal issue and emphasizes that it saves everyone time and money, success on a motion is possible.

5.      Pros and Cons of motions in arbitration

In sum, the panelists provided some possible pros and cons that attorneys should consider when deciding whether to submit a motion during arbitration:

Pros:

• A potential to win on that issue?
• Saves client time and money?

Cons:

• Costly to write the motion - is it in budget?
• Will an unfavorable decision on the motion hurt the remainder of the arbitration?
• Motions are rarely granted - will the time and effort be wasted if it does not actually move the case forward?

The goal is to use motions in arbitration to better serve your client.  While they should be used sparingly and are rarely granted, there can be times and places to make a motion in arbitration.

Click here to view the discussion in its entirety.  

---

Author Michael Zehner is a construction attorney with BBG Construction Law in Denver, Colorado.  Michael counsels clients on legal issues through all phases of their construction projects, from contract negotiation to completion of the work and beyond, with a focus on litigation.  Michael can be reached at mzehner@bbglaw.com.

Editor Douglas J. Mackin is a construction attorney with Cozen O’Connor in Boston, Massachusetts. Douglas counsels owners, developers, contractors, and subcontractors in all phases of a construction project, from contract negotiation through to completion, including disputes, litigation and arbitration. Douglas can be contacted at dmackin@cozen.com.

Courthouse Reporter Series: The Travails of Statutory Construction...Defining “Labor” under the Miller Act

In a recent case—United States ex rel. Dickson v. Fidelity & Deposit Co. of Maryland (“Dickson”)—the U.S. Court of Appeals for the Fourth Circuit recently re-examined and defined what work qualifies as “labor” under the Miller Act. United States ex rel. Dickson v. Fidelity & Deposit Co. of Maryland, No. 21-160, 67 F.4th 182 (4th Cir. April 26, 2023) (slip op.).

Unlike private projects, unpaid subcontractors cannot encumber the federal government’s property with mechanics liens. Instead, the Miller Act provides a remedy for subcontractors in the form of a payment bond on all federal public works contracts exceeding $100,000. 40 U.S.C. § 3131(b).

In the Dickson case, Claimant Elliot Dickson served as a subcontractor to Forney Enterprises (“Forney”), with whom the Department of Defense (the “DOD”) contracted to renovate several staircases and the fire suppression systems at the Pentagon.

In late 2018, the DOD terminated the prime contract with Forney. On January 10, 2019, Dickson submitted a bond claim to Fidelity & Deposit Company of Maryland (“Fidelity”). Fidelity denied Dickson’s claim on January 14, 2020, primarily because Dickson did not submit evidence he performed “labor” on the project. Fidelity stated it would review a revised Proof of Claim if Dickson revised it to remove hours worked off-site and clerical and administrative tasks performed on-site. Instead, Dickson sued under the Miller Act on February 5, 2020. The district court granted Fidelity’s motion for summary judgment, holding that supervisory duties do not constitute “labor” for purposes of the Miller Act, and even if supervision did qualify as “labor”, the project ended more than one year before Dickson brought suit. The district court also rejected Dickson’s contention that Fidelity’s offer to re-investigate Dickson’s claim estopped Fidelity from arguing the suit is time-barred. Dickson appealed to the Fourth Circuit.

In its decision entered on April 26, 2023, the Fourth Circuit began with a historical review of the little recourse available to a subcontractor at common law if the contractor or owner failed to pay. For government contracts, payment bonds secured subcontractors and workers from the risk of non-payment. For the federal government, Congress first enacted the Heard Act in 1894 to provide subcontractors security from non-payment by prime contractors; replaced by the Miller Act in 1935[1]. The Court acknowledged that case law on what constitutes “labor” under the Miller Act is “sparse” but looking to state “Little Miller” case law and other federal cases, the court noted the trend in the available case law that work involving “physical toil” and “on-site supervision of physical toil” generally qualify as “labor” The Court also looked to the Heard Act, the Miller Act’s predecessor, and cited a 1915 case answering the question of what constituted labor under the Heard Act—Bankers’ Surety Co. of Cleveland v. Maxwell (“Maxwell”), 222 F. 797 (4th Cir. 1915). The Maxwell Court held that “labor” included those who physically toiled on the project and those who supervised those workers, i.e., the foreman. Further, the Maxwell Court drew upon a Supreme Court case interpreting the definition of “labor” under a state mechanics lien statute where the Supreme Court distinguished services of a “professional character, such as those of a mining engineer” from physical labor performed by labors or foreman (by directly supervising labor and where necessary, assisting the labors). Id. (citing Maxwell 222 F. at 799, in turn citing Mining Co. v. Cullins, 104 U.S. 176, 177-78 (1881).

Although Maxwell did not expressly require “physical toil” to find whether a claimant performed labor, the Dickson Court noted the opinion’s emphasis on performing physical labor meant that the Heard Act only protects workers who perform physical labor.

The Dickson Court noted the Miller Act essentially was grafted on the old rootstock of the Heard Act. Slip Op. at 11 (“When a statute’s language is obviously transported from another legal source … it brings the old soil with it.”) (internal quotations omitted). Therefore, the body of law interpreting the Heard Act informs what “labor” meant in 1935. The court also that “it is far from clear that the meaning of labor changed between 1894 and 1935.” Id. at 13. Accordingly, the court held that the term “labor” had not changed appreciably in that time and to qualify under the Miller Act, only labor involving a physical component is eligible.

Having determined that “labor” required a physical element, the court turned to the work Dickson performed on the project. The court held that Dickson’s supervision of work through January 2019 qualified and found the district court erred when it ruled otherwise. However, the inventory Dickson completed on February 8, 2019, did not qualify because it did not involve “physical exertion and bodily toil.” The court rejected the notion that conducting inventory was possibly “physical” in a broad sense but is more typical of administrative or clerical work than physical exertion.

The court also rejected Dickson’s claim that Fidelity was estopped from asserting a statute of limitations defense. Fidelity stated that if Dickson completed another Proof of Claim, Fidelity would investigate. The court held that in offering to investigate, Fidelity did not promise to pay or otherwise acknowledge the claim’s validity. Because the physical labor that qualified ended more than a year before Dickson filed suit, the claim was time-barred.

However, in dissent, Senior Judge Floyd noted that he would find “mental exertion” to qualify as “labor” under the Miller Act. Id. at 19 (Floyd, J. dissenting). Judge Floyd noted that the “labor” as used in the Miller Act has no qualifying language limiting “labor” to just physical labor and that he would evaluate “labor” as the term was understood at the time of the Miller Act’s passage. Judge Floyd pointed to contemporary dictionary definitions that included mental exertion or toil. To restrict “labor” to strictly physical labor, as the Fourth Circuit held over a century earlier under the Heard Act is to employ “woefully dated conceptions of labor.” Accordingly, Judge Floyd opined that Dickson’s inventory on February 8, 2019 would qualify as “labor” under the Miller Act and would not be time-barred.

Although not cited in the majority opinion or dissent, both the Eighth Circuit and the D.C. Circuit Courts of Appeal have noted that supervisory work qualifies as “labor”; however, those cases do not address purely “mental” exertion or labor such as the inventory conducted by Dickson. United States Ex Rel. American Civil Construction, LLC v. Hirani Engineering & Land Surveying, PC, 58 F.4th 1250 (D.C. Cir. 2023); United States Ex Rel. Olson v. W.H. Cates Construction Co., 972 F.2d 987 (8th Cir. 1992).

---

[1] 49 Stat. 793-94 §5. 

Author Brendan J. Witry is an associate attorney with Conway & Mrowiec Attorneys LLLP in Chicago, Illinois. Brendan advises owners, general contractors, construction managers, and trade contractors in construction disputes. Brendan may be reached at bjw@cmcontractors.com. 

Conversations with My Younger Self: 5 Things I Wish I Knew Then

The author, Steve Swart, on his graduation from
George Mason University School of Law (2009)

I remember the morning I became a construction law attorney. It was on my birthday several years ago when a partner called me into his office and asked me to review the A107 contract form for a large firm client. The assignment gave me a new language to speak and contract provisions that I came slowly to understand.

I quickly moved into construction litigation and would soon learn that a "fragnet" was not the newest social media app but an important part of a delay claim. I read Spearin's biography and learned how to assess recoverable damages for different claims—costs to repair, replacement and betterment, increased financing/carrying costs, and the like.

It took a lot of blood, sweat, and tears to get to where I am now. Echoing Rod Stewart’s sentiment—“I wish that I knew then, what I do now, when I was younger”—here are five tips I’d pass along to the younger me or anyone who is beginning their career as a construction lawyer:

1. Read and Analyze All of the Contract Documents.

In many places, the Contract is king and “the law of the case.” The Agreement and General Conditions are a great place to start, but that's only the beginning. Per the standard A201 General Conditions, Section 1.1.1, the “Contract Documents” include:

• The Agreement,
• Conditions of the Contract (General, Supplementary and other Conditions),
• Drawings,
• Specifications,
• Addenda issued prior to execution of the Contract,
• Other documents listed in the Agreement, and
• Modifications issued after execution of the Contract, which include:
• written amendments to the Contract signed by both parties, 
• Change Orders,
• Construction Change Directives, and 
• written orders for a minor change in the Work issued by the Architect.

The Specifications are particularly crucial to understanding each party’s responsibilities and the legal theories. Typically, the Specifications are organized by “Divisions” applicable to various trades/types of work. The “Divisions” most commonly used are based on the Construction Specifications Institute (CSI) MasterFormat, which has Divisions 00 through Division 48.

Many procedural/claim/closeout requirements may be found in Divisions 00 (Procurement and Contracting Requirements) and Division 01 (General Requirements). This is important as a potential source of duties/responsibilities not covered by the Agreement or General Conditions.

Study the Division applicable to the portion of work in issue: for example, if you’ve got a problem with your HVAC System, start with Division 23 (Heating, Ventilating, and Air Conditioning). These Divisions will likely contain more specific installation instructions, warranty requirements, and references to industry standards (more on that below) than the Agreement and General Conditions.

Next, come the Drawings. There is a wealth of information in the Drawings, including notes on how to perform portions of the Work, details on how it is to be installed, and limitations on what is required — i.e., Work that is included graphically and items that are omitted from the Drawings.

Finally, you have to review the Change Orders. Although the Agreement, General Conditions, and initial Issued-for-Construction Drawings and Specifications are important, they are static and only reflect the initial agreement. I’ve never encountered a project without modifications. Understand the chronology and effects of Modifications to the Contract Documents—Modifications are Contract Documents themselves and they may change the particular aspect of the Work at the heart of your case.

2. Be Curious About the Technical Aspects of the Project

A quote attributed to Arthur Aufderheide is helpful here: “All knowledge is connected to all other knowledge. The fun is in making the connections.” One of the keys to construction litigation is in connecting the technical aspects of the case to the legal ones. Don’t rely solely on experts — be curious and understand how the technical aspects of the Work tie into your legal theory (or raise a problem for the other side).

Yes, this requires effort. It means digging into not just the Specifications and Drawings (although those are important) but also (1) the referenced industry standards, (2) manufacturer literature (Shop Drawings, Product Data, Samples, Submittals, etc.), and (3) Requests for Information and responses regarding the key technical parts of your case. That work often requires expert assistance. But don’t be afraid to dig into architecture, engineering, or technical industry sources — go outside the box. You don’t have to fully understand them, but they are helpful in understanding what was required, what Work was done, and what might be the disconnect. For example:

• If you have or are facing a delay claim, you can read the Association for Advancement of Cost Engineering International (“AACE”) Recommended Practices;
• If you have or are facing a claim about window installation, you can look to the American Architectural Manufacturers Association (“AAMA”) or National Fenestration Rating Council (“NFRC”) for pertinent information.
• Have a case about elevators? Look at American National Standards Institute/American Society of Mechanical Engineers Standard A17.1: Safety Code for Elevators and Escalators.

The list isn’t exhaustive: the point is that technical resources are out there. Google or YouTube work to illustrate technologies you don’t yet understand. Mastery is not required, but curiosity and extra reading are important: you have to connect your legal knowledge with your new-found technical know-how.

3. Consider Multiple Remedies/Causes of Action — Not Just Breach of Contract

Breach of contract is a stock cause of action nearly always raised in construction cases. I would caution my younger self, however, to look harder at the contract remedy-granting clauses and other causes of action/remedies. Start at the treatise level (Bruner & O’Connor, Nash & Cbinic, ABA Forum Publications). They will lead you to additional actions/remedies/legal theories that may bolster the entitlement or damages part of your case, including:

• Acceleration (Constructive or Directed)
• Constructive Change
• Equitable Adjustment
• Good Faith and Fair Dealing
• Cardinal Change
• Warranty/Strict Liability
• Mechanic’s Lien
• Statutory Warranties
• Contractor’s Right to Repair and Notice
• Indemnity
• Betterment
• Economic Waste
• Waiver/Release

A further description of potential actions/remedies/defenses, including those above, is beyond the scope of this post. The point, as above, is to be curious and think outside the box. Look at the case whollistically — what are your issues and what remedies have been developed to address them? There are many possibilities.

4. Read Federal Decisions in Government Contract Cases

The decisions rendered by the Federal Circuit, Court of Federal Claims, and agency Board of Contract Appeals decisions in government contract cases have a wealth of information for the construction lawyer.

These opinions typically address theories of liability, entitlement, damages, and remedies in greater detail than state courts and are often adopted in, referenced by, or persuasive to explain the legal issues to state and federal judges who may not have a construction background. They are “must-read” resources for the construction litigator to hone his or her case.

5. Explain Your Case at a 7th Grade Level

Lastly, and most importantly, distill the technical and legal arguments to a 7th grade level. Per a quote attributed to Albert Einstein, “If you can’t explain it simply, you don’t understand it well enough.” This is key to any trial or hearing whether your fact finder will be a judge, jury, or panel of arbitrators. Your case must be catchy and understandable.

Take these two examples, and figure out which one you like better:

Example A: The Tyvek air barrier was not wrapped into the head, jambs and sills in accordance with the AAMA Standard 2400-02, Section 5.3, and the window manufacturer’s installation procedures, resulting in water infiltrating a gap in the building air barrier and damaging the exterior sheathing.

Example B: The windows were not caulked and sealed as required by the manufacturer and good practice, allowing water behind the Tyvek barrier and damaging the wood framing.

Both examples convey the same concept but Example B does so in a way that is easier to grasp. The point is, just like any litigation, the technical aspects must be understandable and digestible. It’s not easy and may take months, but the resources mentioned above—your expert, treatises, other cases, your co-counsel—will help immensely. Just remember that if your theory of the case would bore your friends or significant others, it will probably get the same reception from a judge or jury.

A final point: Construction litigation is fascinating, combining many legal theories with really interesting technical knowledge into a concise, digestible presentation. Getting there, however, is not easy. I wish I had the five points above when I was starting out and hope that I can continue to implement them as I grow.

Someday, they may help you, too.

---

Author Steve Swart is a construction attorney with Williams Mullen in Tysons, Virginia. Steve counsels owners, developers, contractors, and subcontractors in all phases of a construction project, from contract negotiation through to completion, including disputes, litigation and arbitration. Steve can be contacted at sswart@williamsmullen.com.

Consultant Corner: Litigation Budgets...This Ain’t Your First Rodeo, or Is It?

Service providers targeting the construction litigation arena tend to follow a similar path when it comes to finding new clients and getting hired for the first matter: Get an initial meeting, learn about the client, tout the provider’s vast expertise – showing how it aligns with said client – then wait for the new client to call with the ideal matter. 

Sound familiar?

Companies who face construction litigation turn to a variety of different service providers for assistance: lawyers, experts, and eDiscovery vendors to name a few. We can all agree that, while every construction project and claim present their similarities and differences, there are probably more of the former than the latter.  Although the parties, timing, COVID impacts, location, and nuances of the issues in dispute might differ—for the most part, the similarities tend to parallel more than they tend to diverge.  So why do we all tend to freeze when it comes to pinpointing the dreaded B word: The Budget?

At a panel discussion amongst several large general contractors’ in-house counsel a few months ago, the words of Logan Hollobaugh, VP- Legal for Clough N.A., really stood out: “Everyone on this panel works for a general contractor.  Our companies leverage our experience to get awarded new jobs which always require budgets, despite the many unknowns common on construction projects. This begs the question: why are outside counsel and the consultants any different?  If consultants are as experienced in construction litigation as they claim, why is it like pulling teeth when it’s time to prepare an initial case budget? Why do we only hear “[i]t is too difficult to budget at this time or there are too many ‘unknowns’ when it is time to prepare a budget?”

The solution: building better budgeting tools to give the client a strong sense of what is coming with clear understanding the budget is not an NTE. What’s more, a tool equipped for updates based upon real developments in the matter.  As a vendor of eDiscovery services, when developing a budget, we consider various inputs including:

• expected duration of the matter;
• average size of the project files and email sets of similar projects;
• average deduplication and data reduction rates of similar cases;
• number of parties involved;
• types and number of claims asserted;
• relevant data retention policies and compliance therewith; and
• software platforms and other specialized technology the project employs. 

Consultants and counsel alike have used the tried and true method of guesstimation based upon the total litigation costs of a similar matter multiplied by some inflationary markup factor.  Moreover, neither the consultant nor the client tend to look at this budget again unless and until the total amount billed has already exceeded the budget number.  While this methodology works some of the time, a blown budget often leaves the in-house counsel embarrassed.  Given this similarly repeated conundrum our clients face, can we do better as an industry?

For instance, consultants guide clients well by providing a budget that lives and breathes as information develops rather than sticking with the guesstimate that only proves inaccurate when outstripped.  A living and breathing budget evolves as the client and counsel obtain more accurate information.   Specific to the eDiscovery realm, consultants can create budgeting tools that facilitate immediate updates when data inputs change. As in a scenario involving the inputs above, the eDiscovery consultant might instantly update the budgeting model once the consultant collects data, thus providing exact data set sizes, while replacing the initial estimate based upon previous case similarities.  Consultants can, likewise, revise any data input when it confirms actual figures (or even when it receives better estimates) providing a more accurate budget in real time.  This way, the client receives updated budget forecasting – enabling counsel to inform other constituents within the organization – before receiving the bill.   

The construction industry embraces technology at a rapid pace which enables project teams to prepare more accurate budgets faster than ever. There is an explosion (and maybe some fear) about AI and automation replacing certain tasks within both the construction and legal industries.  With the increased pressure on attorneys and consultants alike to prove their value, isn’t this a perfect time to ‘level up’ our offering?  Let’s continue sharpening our skills utilizing data from prior assignments and real time updates to guide companies through litigation’s financial unknowns. By using the information that we see every day to align with our construction company clients’ business needs and financial concerns – something that automation and ChatGPT really can’t touch – we will position our firms to add value for the foreseeable future.

---

Author Lauren Abeyta is the Chief Operating Officer, Construction Discovery Experts (CDE), a full-service eDiscovery concierge that guides its clients in all aspects of eDiscovery while maximizing their time and resources.

Editor Thanh Do is an Associate in Thornton Tomasetti, Inc.'s Forensics practice group. As a structural engineer, structural failure analyst and investigator, Dr. Thanh Do examines infrastructure inadequacies and determines the root cause of the alleged failures. He specializes in building collapse investigation, standard of care assessment, construction defects and design errors/omissions evaluation.