Top 10 Take-Aways: the ABA Forum's 2024 Mid-Winter Meeting

The Forum on Construction Law convened last week at Caesars Palace in sunny Las Vegas for its 2024 Mid-Winter Meeting. Carrie Okizaki and David Suchar (along with John Cook, Karen Erger, and countless others) put together a truly outstanding program on power projects. Here are my top 10 take-aways from this unique and insightful event:

10. The demand for power projects is steadily increasing. The increasing demand for power construction projects is being driven chiefly by the need to replace aging infrastructure as well as the desire to develop cleaner and more sustainable generation facilities. The constant demand for more and more electricity is not that surprising but, according to Jeff Richardson (Energy Solutions) and Eric S. Gould (Modus Strategic Solutions), the pipeline market size for power-generation projects in 2028 is expected to reach $10.6 trillion, i.e., double what it was just in 2022.

9. "Net Zero" is the new normal. In December 2021, President Biden issued an executive order proclaiming that, by 2050, the federal government will be a Net-Zero contributor to the climate crisis. To achieve this goal, the greenhouse gasses ("GHGs") released by government operations must be less than (or equal to) the GHGs  absorbed/removed from the environment. Other government bodies and private companies alike are adopting similar Net-Zero goals. Because not all of these promises are created equal, Moody’s Investors Services has a tool to help consumers compare and evaluate companies' carbon transition plans. According to panelists, Amanda Schermer MacVey (Venable), Brendan Hennessey (Pillsbury), and Laszlo von Lazar (Black & Veatch), these Net-Zero commitments are likely to result in more rigorous supplier codes of conduct and heightened carbon tracing efforts on construction projects.

8. The quest for Net Zero is our modern-day "moonshot." Currently, coal and natural gas are responsible for almost 60% of electric generation on the U.S. market. That means, to get to Net Zero, the U.S. market will have to replace 60% of electric generation with green energy. This is no small feat. Amanda Schermer MacVey aptly analogized the pledge to achieving Net Zero to President Kennedy's public commitment in 1962 that the United States would land a man on the moon before the decade was over. The gauntlet has been thrown, now we have to figure out how to get there.

7. Despite their promise, nuclear-powered projects have proven difficult to execute. Building out more nuclear-powered project would aid immensely on the way to Net Zero. Given the intermittent availability of wind and solar, nuclear energy is presently the only source of non-GHG electric power that is also reliable for base load generation. Despite their promise, nuclear projects do not have a strong track record of successful execution in the United States. Only two nuclear projects were constructed in the United States since the turn of the century (10 more nuclear projects which were planned were subsequently canceled). One of these projects―Vogtle Units 3 and 4 in Georgia―was $17 billion over budget and 7 years late. While extreme, these schedule and cost overruns are lessons to be learned from, not justifications to avoid nuclear power projects entirely.

6. We may be on the verge of a new Nuclear Revival. According to Jeff Richardson (Energy Solutions) and Eric S. Gould (Modus Strategic Solutions), the key to seeing the nuclear energy sector flourish is learning how to construct these projects on budget and on time. Building something the same way more often tends to yield more predictable the outcomes; the problem with nuclear projects is that very few of them have been approached the same way. Favoring Small Modular Reactors ("SMRs") which, as the name suggests, are smaller in scale and rely on modular construction techniques could allow us to get to a place where contractors could learn to literally stamp out nuclear plants with less risk of extreme budget and/or schedule deviations.

5. The delivery systems and risk allocations traditionally relied on might not work anymore. Power projects historically relied on an Engineering Procurement Construction, or "EPC", delivery model where a single contractor assumed the risk of delivering the project on time and within budget. Finding a good EPC contractor to take on power projects has become increasingly difficult. In a panel discussion with Matthew Meaker (Sundt Construction) and Laura B. LoBue (Pillsbury), Neal Sweeney (Jones Walker)  hypothesized that the traditional EPC contract was "dead." What we need to see in its place are more collaborative contracts that emphasize shared objectives, open communication, joint risk management, and incentive-based payment structures. This sort of radical approach will foster shared accountability and better position the project for a successful outcome.

4. The goal on any power project should be to encourage early reporting and resolution of disputes. If a dispute arises on a power project, or any mega project for that matter, owners and contractors should do their best to keep the project moving forward while parallel tracking claim investigation. Panelists Robert Brown (McKenney’s), Joseph Dennis (Arup), Daniel Fuchs (Manion Stigger), and John Snyder (Bechtel) shared their insights into what to do early in the claims process to set claims counsel up for success. Perhaps most insightful was their suggestion for clients to appoint a case manager (someone who is not on the project team) to liaise with outside counsel and coordinate access to the fact witnesses and documents. It was refreshing to hear that they also saw the value of document discovery and devoting the time and resources to an "Early Case Assessment" so counsel can fully understand the issues before formal dispute resolution has commenced. 

3. Keep your insurance brokers close. Christopher DeBruin (Alliant) and Chase Johnson (Lockton) gave an insightful presentation on common insurance-related issues on construction projects. The big take home here was for owners and contractors to consult with their brokers early and often and report any potential claims to their carriers as soon as they arise. If contractors attempt to address warranty issues which later turn out to be defects on their own, their subsequent claim may be denied. Another piece of advice from Chris and Chase: hire a claim submission consultant to help assemble what you need to properly document your claim. When contractors don't hire these vendors, the documentation is poor and the claims get denied.

An Elvis sighting at the welcome reception...

2. We should learn to prioritize people over profits. In 2021, the San Manuel Band of Mission Indians (the "SMB") acquired the Palms Hotel & Casino, becoming one of the first tribal enterprises to own and operate a casino in Las Vegas. Peter Arceo, Chief Gaming Officer of the SMB, spoke of the heightened emphasis tribal gaming organizations place on employee wellbeing and social responsibility. When the SMB acquired the Palms, the previous owner had already invested hundreds of millions of dollars in its redevelopment. But it was clear to Peter that none of that money had been spent on the back-of-the house spaces that only employees would see. The first dollars that the SMB spent at the Palms were used to renovate the employee locker rooms and dining room. Where many companies might see such investment as a waste given the lack of clear return, Peter saw value in such improvements because they would make the Palms a better place to work. 

1. If you're going to lose money gambling, it's best to do so amongst friends. Some of the best lessons I take away from the Forum meetings occur outside the conference room. So when three of the Forum's divisions (D1, D2, and D12) joined together for an evening of craps and cocktails, I knew it would be an instructive night. Thanks to the generous sponsorship of Solomon Page, I learned there is truth to craps being the most difficult table game in Vegas. Aside from learning the odds associated with the dizzying amount of bets available, I now appreciate that it takes a certain skill to be able to roll the die hard enough so they hit the back of the table, but not so hard enough that they fly off the table entirely. At the end of the night, I don't think I was the only one who fared poorly against the House...thankfully, we still have our day jobs.

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Author and Editor-in-Chief Marissa L. Downs is a construction attorney in Chicago, Illinois where she has been practicing law since 2009. Marissa is a partner at Laurie & Brennan, LLP and represents owners, general contractors, and subcontractors in all phases of project procurement, claim administration, litigation, and arbitration/trial. Marissa can be contacted at mdowns@lauriebrennan.com.

Seeing Around Corners: The Value and Challenges of ECA in a Data-Heavy World

It’s hard to argue with the assertion that the earlier you understand your case, the better. Whether it means avoiding arguments that cannot be supported by the evidence or asserting legal theories that will maximize insurance coverage, knowing where you want to go is the best way to find the shortest route there.

Of course, that is easier said than done. Long gone are the days when Early Case Assessment (ECA) involved rifling through boxes of documents and interviewing key witnesses. Each contractor, sub, architect and consultant brings their own data, often utilizing different software platforms. Identifying, collecting, reducing, and reviewing documents can be an involved task, often at a stage when clients are not ready to open the spigot for the expense of ediscovery.

Balancing the timing of litigation costs with the need to understand your case can be tricky. But there are tools available to do so. As with most aspects of the litigation process, it just takes some thought and planning.

The Value

It is worth first reviewing some of the benefits of ECA in construction cases. Here are five key ways that ECA can give you an advantage in your case.

1. Effective Third-Party Discovery. Third-party discovery can take time, particularly when trying to obtain documents from a list of smaller subs. Knowing what you already have helps identify what you need to obtain through subpoenas so you can start issuing them. Targeted requests for what you need help avoid broad requests that lead to unnecessary posturing and motion practice.

2. Find Relevant Evidence Quickly. Too often, lawyers simply focus on the data that is easiest to collect. But accessibility does not equate to relevancy. Cost data may exist in a contractor’s third-party accounting system. Key communications may be on the mobile devices of individuals in the field. Identifying the type of software where potential evidence is stored as early as possible can help hone in on determinative evidence. From there, it is a matter of determining how to collect it, filter it, and review it. Waiting too long to address such data issues can lead to always being a step behind, dealing with exorbitant costs from last-minute collections and reviews.

3. Maximize Insurance Coverage. Insurance coverage is often overlooked as a key factor in ECA. But to state the obvious, the availability of coverage can dictate the resolution. It is therefore wise (if not imperative) to evaluate potential coverage issues early and frame arguments accordingly. There’s nothing worse than pleading yourself out of coverage.

4. Understand the Damages. Having a sense of the damages at stake is key in any matter, particularly in construction disputes. 

5. Early Resolution. The cost of construction litigation has led many clients to push for early resolution, often through mediation. Of course, many would prefer to defer any time-intensive analysis until after mediation, in the hope that a settlement will save costs. But fruitful mediations require a deep dive into a number of complex issues. “Winging it” just isn’t an option.

If you are looking for a deeper dive into the issues that should be surfaced early in construction litigation, this Construction Law Today podcast is a great source.

But, How?

With relevant evidence often buried in gigabytes (or even terabytes) of data, how do you go about identifying it, especially at an early stage? The key is to incorporate data considerations into each phase of your investigation. These seven steps will help you navigate ECA and develop a comprehensive understanding of your data.

1. Ask Clients About Data Sources. When conducting initial interviews with client witnesses, be specific in your questioning about document locations. If the witness indicates that they communicated with emails and texts, identify the email provider and the type of mobile phone. On a site visit, ask about documents and plans associated with what you are seeing and inquire about where they are stored. Also ask your witnesses what they may know about the other parties' data sources: how they communicated, if they are aware of which accounting and project management systems were used, etc. Be sure to interview purely custodial witnesses (who may not have factual knowledge but are familiar with the client’s information systems). Such custodians may include IT professionals and administrators.

2. Address the Other Parties’ Data Sources Early. Don’t wait until the other parties serve their written discovery responses to find out where they have been storing data. Try to identify data sources during initial meet and confers and when negotiating ESI protocols. There is no reason that another party cannot tell you upfront whether they use Office 365 or G Suite or disclose what type of accounting system they use.

3. Start Planning for Collection, Filtering and Review. Once you have a sense of where the data is, start working with your support team or outside vendor to evaluate potential approaches to collecting and making that data useful. For example:

• If your client has a large number of emails in Office 365, determine whether using Microsoft’s Purview to filter data before exporting is an option, or whether entire email boxes should be exported and filtered in an ediscovery tool.

• Identify what data is generally available from accounting and project management systems. Your client can probably educate you on its own systems. For third-party systems used by the other parties, you may be able to obtain information from the software provider’s website or even get a demo.

• Determine whether you need the other parties to produce data in a certain format.

• If data is stored in interactive/dynamic project management software (such as Primavera or Buildertrend), then reviewing the data in that software is often preferable. (License sharing among the parties is one way to allow access to parties that do not already have the software.) By contrast, if all you need from AutoCAD or BIM drawings are snapshots, then conversion to PDF can save the need for access to the original software. Addressing issues such as these early will save you from last-minute scrambling. If there are uncommon or older data sources from which data cannot easily be extracted and reviewed, start looking for experts who can extract such data if necessary.

4. Do Your Legal Research. Knowing what legal theories may be applicable will help guide you in decisions regarding which data might be relevant. For example, how is “occurrence” defined under the governing law for purposes of property damage? What factual arguments might get around a design defect exclusion? Waiting until you are six months into a document review to start exploring a new legal theory can lead to significant added expense.

We pause here to note that, at this juncture, your client has not yet needed to make any significant investment in the collection, processing, hosting or review of data. Many clients resist addressing data issues early because of the cost. But the foregoing steps can be easily incorporated into other tasks that would have to be done anyway, such as witness interviews and meet and confers. And yet, they can save thousands of dollars and maximize your advantage. 

Once you have addressed the preliminary issues, created your data map, and started honing in on key legal theories, you can more effectively begin the data collection and analysis process through the next steps:

5. Collect Once. Armed with all the information from above, you can determine how best to start collecting your client’s data. There may be certain information that can be pre-filtered before collection. You should also make sure that you are collecting in a format that will comply with the ESI protocol. Otherwise, you risk having to go back and collect again.

6. Do Some Initial Analysis. This part is perhaps the hardest, as it is more art than science. Since we are talking about the ECA stage (not production for discovery purposes), the fundamental challenge is how to quickly identify likely relevant evidence without combing through hordes of data. One common option is to utilize data mining tools to filter documents matching certain search terms. Another is clustering to identify documents that have similar content. Often, the best process is an iterative one where you apply subject matter expertise to make educated guesses, and then utilize technology to either verify or disprove your assumptions.

7. Start Issuing Third-Party Discovery. Once court rules allow, it is usually a good idea to start issuing third-party subpoenas. Chasing down such information can often take time, and the earlier the start, the better. Third parties may also be more forthcoming than adversaries with certain information, which will help you get to the relevant evidence more quickly.

Don’t Worry

As the amount and types of construction data explode, dealing with it in litigation can be daunting. But getting ahead of the data and planning accordingly can make it manageable from a cost perspective – and thorough Early Case Assessment will put you in the driver’s seat when it comes to the resolution of the dispute.

Meet the Forum's In-House Counsel: KATE GOLDEN

Company: Mortenson 
Email: kate.golden@mortenson.com 
Website: www.mortenson.com
College: University of Iowa (Bachelor of Science in Engineering, 1991)
Graduate School: University of Minnesota (Master of Science in Civil Engineering, 1994)

Law School: William Mitchell College of Law (now Mitchell | Hamline School of Law) (JD 1999)

States Where Company Operates/Does Business: Mortenson is a national builder and developer with 13 regional office locations.

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Q: Describe your background and the path you took to becoming in-house counsel.

A: In high school, I loved math and science, so I attended the University of Iowa College of Engineering and studied civil engineering, with a focus on environmental engineering.  To practice environmental engineering at that time, you generally needed a master’s degree, so I attended the University of Minnesota, where my thesis for my degree program was “Organochlorines in Lake Michigan.”  I then worked as an environmental engineer for a consulting firm called Montgomery Watson (now MWH) assisting clients with various environmental issues from air permitting to watershed reports to risk assessments of contaminated sites. 

I went to law school thinking environmental law might be my practice area, but then I joined Faegre and discovered construction law.  I had the privilege to work with and learn from Phil Bruner and Pat O’Connor on various matters, and was involved in cite checking chapters of their treatise then under development.  While at Faegre, I focused on dispute resolution of construction matters, and transactional advice to owners and material suppliers.

While I found the law firm experience much more enjoyable than I anticipated, my long-term goal was always to go in-house.  I joined the Mortenson in-house legal department in 2006, as the second attorney.  We are now a team of 18, including 11 lawyers.  Joining Mortenson made my career path make sense!

Q: How does working in-house compare or differ from firm life? 

A: What I love about working in-house is being closer to the business, and as a result, being able to provide insightful legal advice that is specifically targeted and directly impactful. I enjoy translating legal requirements into easily understood guidance, capturing concepts or compromises in contract language, and helping solve problems.

Being in-house, I occasionally miss reading cases and writing briefs in advocacy of a position (truly practicing law).  I often describe what we do as being “a mile wide and an inch deep.” I need to know a little bit about many legal areas, so I can: (a) quickly triage an issue and determine if I can answer it with my legal knowledge; (b) answer it with a limited amount of work; or (c) dig in further and even consult with a legal expert.

Q: What kind of work does your company do? Do you focus on specific sectors, states or regions? 

A: Mortenson is a construction industry leader in markets like sports facilities, renewable energy (i.e., wind, solar, and storage facilities), data centers, and healthcare.

Q: What are the work/business-related issues that tend to keep you up at night? 

A: The issues on my mind today are the Corporate Transparency Act and ESG (Environmental, Social and Governance) requirements (particularly new California laws).  One thing I love about being in-house is that by next week it will likely be something else!

Q: What advice would you give to outside counsel about how to meet or even exceed their client's expectations? 

A: To meet or exceed their client’s expectations, outside counsel should: (1) understand what success looks like for their client with respect to the matter(s) being handled; (2) be a problem solver; (3) listen and work with the client, especially if the first approach or solution you propose will not work for that business; (4) be experts in their fields, but also recognize we might have expertise too, and we might expect to collaborate to develop the best plan of action; (5) provide drafts of briefs or significant correspondence 1-2 weeks in advance of filing or transmitting; (6) anticipate and prepare for various possible outcomes (we don’t like surprises); (7) understand how to estimate and manage legal costs, and be a project manager of the matter; and (8) be smart and reasonable in the eyes of the court or other decision maker.

Q: What is your biggest pet peeve about working with outside counsel? 

A: My greatest frustration with outside counsel is not having sufficient time to review work product prior to filing or transmitting.  My success is your success, so give me the opportunity to help you be successful (and help both of us avoid frustrating company business leaders). 

Also, it seems like a little thing, but it is remarkable to me when outside counsel do not include contact information, especially a preferred phone number, on all emails (including, and especially, reply emails). In a fast-paced environment, the time it takes to track down your phone number may cause me to not call you, or to call someone else.

Q: What is your experience litigating or arbitrating construction disputes? Was your experience generally positive or negative? Why? 

A: I represented clients involved in various construction matters in mediations, arbitrations, and litigation prior to going in-house. My experience was generally positive, but like all attorneys, I can recall occasions of unnecessary vitriol from opposing counsel. Zealous advocacy can occur without personalizing or demonizing other advocates.

A specific positive memory involved my first jury trial (as a second chair) representing an architectural firm. I had worked for nearly 2 years on the case, and at the time of scheduling the trial, I was pregnant with my third son. The court’s docket had us setting the trial a couple of weeks after my due date. The first chair partner (male) asked the judge to postpone the trial until after my maternity leave. The judge (female) knew of my involvement in the case on various motions and was agreeable. Opposing counsel (male), who had been difficult in many circumstances throughout the case, was also agreeable.  I’m grateful for that opportunity and the adjustment the lawyers and judge made.

Q: What is your company or your department doing in the area of DEI?

A: Our legal department and company are engaged in a number of DEI activities. We recently became a Mansfield Certified in-house department, the first in-house construction company legal department to do so. We are also involved in Twin Cities Diversity in Practice, an organization helping legal employers working together to build a vibrant, diverse, and inclusive legal community in the Twin Cities. Additionally, we engage with NAMWOLF to help us identify minority and women owned law firms when we need legal services.

Q: What are some of your interests or hobbies?

A: I’m a proud Iowa Hawkeye. My husband and I both graduated from the University of Iowa College of Engineering, and my 3 sons are either currently attending or have graduated from the University of Iowa College of Engineering.

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Assistant Editor-in-Chief Jessica Knox is a Partner in the Minneapolis office at Stinson LLP. She represents owners, general contractors, and subcontractors in litigation disputes. Jessica can be contacted at jessica.knox@stinson.com. 

If a Defect Occurs During Construction, Is It an "Occurrence?"

Establishing insurance coverage for construction defects is almost as important as establishing liability in the underlying construction defect litigation itself.

The risk to the defendant contractor of defending a construction claim can place significant burdens on a contractor’s operations and an uninsured judgment might even put the contractor out of business.

For owners, suing a contractor for construction defects can become academic if there is no prospect of insurance coverage; obtaining a $1 million judgment against a contractor with limited assets would be a pyrrhic victory.

Commercial General Liability (CGL) carriers are obligated to defend claims that potentially fall within the coverage granted by the policy.[1] When presented with a claim, CGL insurers typically have three options: (1) assume the defense without reservation; (2) assume the defense asserting defenses to coverage, and depending on the state, reserving the right to recover defense costs if it later determines there is no duty to defend; or (3) deny the claim outright and seek a declaratory judgment holding that the insurer has no duty to defend or indemnify. An insurer may deny the claim outright and not seek a declaratory judgment, but does so at its peril because it can expose the insurer to significant liability if the insured later shows the insurer in fact had a duty to defend.

In construction defect cases, claims typically arise from “occurrences” under the “property damage” coverage afforded by CGL policies. Whether a claim involves an “occurrence” such that there is “property damage” varies from state to state.

In some states, damage to the contractor’s defective work itself will be deemed an “occurrence.” In others, there must be damage to property other than the work itself (i.e., personal property of the owner/tenant) before an occurrence will be found. Black & Vetach Corporation v. Apsen Insurance (Uk) Ltd., 882 F.3d 952 (10^th Cir. 2018) (construing New York law to suggest that a subcontractor’s defective work damaging others’ work could be an occurrence).

The law in a handful of states (e.g., Kentucky) is that virtually no occurrence can ever be the result from faulty workmanship. See Cincinnati Ins. Co. v. Motorists Mut. Ins. Co., 306 S.W.3d 69 (Ky. 2010); Martin/Elias Properties LLC v. Acuity, 544 S.W.3d 639 (Ky. 2018) (because contractors intended to build a structure and had control over the construction, the faulty workmanship is not “accident[al]” so as to qualify as an occurrence).

Notwithstanding the Kentucky approach, in recent years, the trend has been for more states to recognize a duty to defend in construction defect cases.

In Acuity v. M/I Homes of Chicago, LLC, 2023 IL 129087, the Illinois Supreme Court recently clarified that defective work causing property damage is an occurrence, overruling decades of patchwork appellate decisions. The Illinois Supreme Court expressly rejected the notion that there must be damage to other property besides the work.  The Michigan Supreme Court held similarly after analyzing the changes of the 1986 changes to the CGL policy-language in Skanska USA Building Inc., v. MAP Mechanics Contractors, Inc., 952 N.W 2d. 402 (Mich 2020).

This patchwork approach can be challenging to navigate. Given that CGL policies offer nationwide coverage and typically lack a choice of law provision, they may invoke difficult choice-of-law issues, as well. However, as construction litigators, we would be doing our clients a disservice if we do not attempt to understand them.    

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[1] CGL insurers typically have a broader obligation to defend than to indemnify, even if the merits of the suit are suspect.

Editor Brendan J. Witry is an Associate at Laurie & Brennan LLP. His practice focuses exclusively on representing and advising owners, contractors, and trade contractors in construction disputes at all stages.