Tuesday, April 30, 2024

Toolbox Talk Series Recap: Preserving Evidence after Façade Failure

In the April 25, 2024, edition of Division 1's Toolbox Talk Series, David Schnerch, Senior Engineer and Building Science Specialist at RDH Building Science Inc., presented on preserving evidence after façade failure.

In the wake of a façade failure, preserving evidence is critical for understanding the root cause of an incident and determining liability. As covered by David's presentation, there are many ways to document conditions and preserve evidence, including:

1. Visual Documentation

According to David, visual documentation is often the primary means of documenting conditions. David highlighted three aspects of visual documentation he predominately sees in practice today: panoramic photography, computational photography, and construction cameras.

2. Spatial Documentation

David then discussed using Light Detection and Ranging ("LiDAR") and Photogrammetry to supplement visual documentation.

LiDAR is the process of capturing, mapping, and visualizing the 3D geometry of existing site infrastructure conditions.

Photogrammetry is a method of extracting 3D information from photographs. The process involves taking overlapping pictures of a structure and converting them into 2D or 3D digital models.

3. Vibration Data

According to David, vibration data is particularly needed in urban areas where facades are adjacent to new construction. Often, you can set up a seismograph before the construction activities begin and report the size and graph on a continuous basis. That way, you can monitor vibration levels during construction and verify whether the vibrations are occurring at or below a level that would be expected to cause damage.

4. Temperature and Humidity Analysis

In his practice today, David noted that they often use infrared cameras to determine the temperature of surfaces and infer moisture conditions below materials. He said infrared cameras can be particularly helpful in deciding where to make inspection openings in the façade.

5. Sample Collection

Lastly, David talked about how collecting samples is important for preserving evidence.  David acknowledged that although collecting samples can be costly and time-consuming, it is essential to collect enough to ensure you can say that you have a representative sample of the range of conditions on a structure.

In sum, there are various means for documenting conditions after a façade failure. David stressed the importance of not only thinking about why something occurred and who is responsible for it but also understanding other parties' hypotheses so you can obtain information to either prove or disprove those hypotheses.

Thank you to David for the valuable information and insight on preserving evidence after a façade failure.


Author Michael Filbin is an associate attorney with Cozen O’Connor in Boston, Massachusetts. Michael is a part of Cozen O’Connor’s Construction group and represents owners, developers, contractors, and subcontractors in construction-related disputes. Michael can be contacted at mfilbin@cozen.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.

Tuesday, April 23, 2024

Meet the Forum's In-House Counsel: J. PAUL ALLEN

Company: Fischer Homes 

Law School: Chase College of Law at Northern Kentucky University (JD 1992)

States Where Company Operates/Does Business: Kentucky, Ohio, Indiana, Georgia, Missouri, Florida

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

A: I started at a large Cincinnati firm straight out of law school. I moved in-house for a client of the firm after about 8 years and have remained in-house ever since. The in-house experience has been rewarding and varied over the last 24 years. I have worked for a Fortune 500, publicly traded steel company, a private equity led construction products company, and, finally, a family-owned residential homebuilder. I had the good fortune to be General Counsel at the last 2 in-house companies and was able to establish a legal department from scratch at Fischer Homes. As time went on and I gained experience, I stayed in-house because of the ability to work for a single client and have a greater impact on the business side of things. 

Q: How and when do you use outside counsel? In what kinds of matters?  

A: For me, outside counsel serve as an extension of my legal department team. As I train new attorneys to work in-house, I focus on finding the "80% answer" quickly and accurately. Understanding the facts colleagues are sharing and the issues they raise helps you provide directionally accurate guidance at the speed of business. Sometimes that is good enough (e.g., "that makes sense, just make sure to be alert for A, B and C" or "deviating from our usual contracting process with this vendor creates risk we aren't ready to take"). In other cases, a deeper dive is needed. That is typically where outside counsel comes in. In my experience, the time and effort to get to an 80% answer is usually about the same as getting the last 20% buttoned up. Most in-house counsel have neither the bandwidth nor expertise to do this, so outside counsel is a key resource to employ. 

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

A: Fischer Homes is a top 30 residential homebuilder in the U.S. After starting in a garage in Northern Kentucky and eventually moving across the river into Cincinnati, Fischer Homes counterintuitively expanded during the Great Recession into Columbus, Indianapolis and then into Atlanta. After a brief lull, expansions into Louisville, Dayton, St. Louis and the Gulf Coast of Florida have occurred during my tenure. As I wind down towards retirement on May 1st, additional expansion opportunities are being evaluated. The responsibility of providing such a huge investment to our customers, and the "canvas on which their life will be painted" is not taken lightly. Whether the customer is a first-time homeowner, a step-up buyer, an empty-nester or anywhere in-between, the importance of the process cannot get lost in profit and loss statements. We recognize and embrace that responsibility with our founder's motto: "Promise only what you can deliver and deliver what you promise."   

Q: How can outside counsel best serve you and your company? 

A: The skills most highly valued in the outside counsel we repeatedly return to include: listening, responsiveness, and initiative. I try to begin each relationship with a new attorney by explaining that I want and need teammates I hire as outside counsel to question everything we do and ask whether it can be done more efficiently, accurately, quickly or cheaply. I want to leverage work outside counsel does to make my business better over the long haul. A classic example is via an After Action Report on concluded litigation. After a long, tough case, both the attorney and the client are usually happy to move on to other items. If both parties do so and don't perform a root cause analysis, you are certain to be back there again in short order. However, if the costs of that dispute or litigation can be amortized across the next 100 or 1,000 similar situations you can show value. Fact patterns that either don't turn into litigation or are at least much more manageable if they do, allow costs to be converted to investments in the future.  

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

A: Knowing when to refer a matter outside your own firm is a tricky skill for attorneys to learn. All too often I have been referred to an attorney in another department by the relationship attorney only to find out that person isn't the right fit, and the relationship attorney knew it when the referral was made. The desire to keep revenue and, if  applicable, billing credit within the firm is significant, but doing this can be shortsighted. Hopefully, as the relationship attorney, you have learned what will and won't work with a client. A longer lens allows the client to see that you put their needs first by making the right referral to an expert that handles the matter capably and efficiently. Instead of being concerned about lost revenue or the referral attorney poaching the client, be confident that you are providing the best services to a client that you intend to have a long term relationship with. For me, that has always cemented the relationship rather than threatening it. 

Q: What experience do you have using a third-party neutral to mediate construction disputes? 

A: Construction disputes tend to be good candidates for early neutral mediation because of the complexity and amounts involved. Selecting a neutral that will understand the technical aspects of the case, while still being strong enough to communicate to both parties the downside of continuing down the adversarial path, can be difficult. Reliance on feedback from other construction professionals, typically within the ABA Forum, has always been a practice of mine. It has worked out repeatedly over the years. That said, make sure the other side is committed to both the mediation process and the timing of the process before you get started. Without that, you can sometimes feel like you are "pushing rope."

Q: What do you plan on doing after retiring? 

A: The non-serious answer, after 32 years of practicing law, the last 24 in-house, is nothing! Of course, I want to stay active, particularly with the Forum, for both professional and psychosocial reasons. One of the great things about the practice of law is that "retirement" can be planned as more of a dimmer switch on a light rather than an on/off switch. I have formed an LLC and plan to do some very occasional work for former employers at first. Beyond that, I am exploring the fractional law space with an emphasis on temporary or part-time general counsel work and construction mediation/arbitration as well. For the most part, I am just "retiring" from going to the office every day. 


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. 

Monday, April 15, 2024

Top 10 Take-Aways from the 2024 Annual Forum Meeting in New Orleans

Over 600 construction lawyers, experts, and consultants met in New Orleans last week for the Forum’s 2024 Annual Meeting where Program Coordinators Brenda Radmacher and Joseph Imperiale together with John Cook and Buck Beltzer put together an insightful program focused on all things construction litigation. Here are our 10 top take-aways from this unique program. 

10. Don't underestimate the soft skills that are necessary to effectively represent your clients. There are different ways to measure success when it comes to construction litigation, according to Stephen Dale (WSP USA), Melissa Beutler Withy (Big-D), and Matthew Whipple (Wohlsen Construction). What these (and likely other inside counsel) will look for when retaining outside counsel is the ability to accurately forecast litigation expense and timely communicate case developments. Being able to master these "soft" skills is as important (if not more so) as an attorney's aptitude for trial advocacy. The in-house counsel who hire litigation counsel will be held accountable to deliver results on the investment they are making in legal fees. Outside counsel who cannot manage budgets or avoid surprises in the course of a case will not be successful as litigators.


Live band music outside the renowned Orpheum Theater
9. Don’t pay the troll. Though more prevalent in other areas of the law, the construction industry is not immune from litigation trolls who file boilerplate complaints seeking a quick settlement. Kimberly Hurtado noted that filing a Rule 12(e) motion for more definite statement (or a bill of particulars) can provide a defending attorney an opportunity to disabuse a serial filer's expectation of obtaining a big pay-day with minimum effort or even have the potential to resolve the case entirely. For cases arising in jurisdictions outside the defendant’s home state, motions to dismiss for lack of personal jurisdiction, may also be the (International) Shoe that fits. Counsel should (of course) confer with their clients to measure the pros and cons of potentially costly motion practice against the potential for a low-cost settlement.

8. Insurance policies should be like a drum line. A construction project requires multiple insurance policies to cover the wide variety of risks that can occur during a construction project. It is essential that construction lawyers negotiating construction contracts understand what risks must be covered and to avoid coverage gaps and inconsistencies. When insurance coverages are coordinated and in harmony with each other, risks are adequately covered and there is music. When insurance coverage are not harmonized, there is dissonance, or worse, silence. Insurance coverages that are out of sync can result in costly coverage battles and potential uninsured exposure.

7. Don't lose the forest for the trees (or the leaves). This was one of many tips conveyed by Jack Rice, a nationally recognized and award winning criminal defense lawyer. The importance of focusing on the big picture when presenting any case at trial and avoiding information overload was a common theme throughout several of the plenaries as well as the practicum. It is easy to become hyper-focused on the nuances of the Project or the dispute but focusing too much on the weeds can lose the judge or jury. We cannot underestimate the power of a strong theme.


No trip to NOLA would be complete without beignets...
6. Know your audience and how to present to them. Construction disputes can be presented to judge, jury, or arbitrator. Each type of trier of fact has its advantages and practicalities to consider when preparing the case. If the trier of fact is not familiar with construction cases, it is crucial for lawyers and experts not only to speak plainly, but to also develop a narrative the fact finder can follow. While juries may not understand construction drawings, they will understand a story that illustrates that the owner and contractor agreed a vapor barrier must be installed, no vapor barrier was installed, and as a result, the building experienced moisture infiltration and damage to interior walls. 

5. Don't be afraid to take a construction case to a jury trial. Construction attorneys are famously reticent to take cases to trial before a jury and, when permitted the option, will include a jury waiver in the contracts they draft. The desire to avoid a jury trial is based on the concern that jurors cannot be made to understand (or care) about the technical issues involved in the disputes that we litigate. As it turns out, that concern might be misplaced. Panelists Jason Rodger-da Cruz, Allen Miller, and Rick Fuentes opined that even the most complex case can be made easy to understand with proper theme development. The panelists also discussed the results they have seen in numerous mock trials before both simulated jury pools and simulated judges. While the mock judges tended to "split the baby," the mock jurors were more inclined to award full judgments where justified and demonstrated a strong desire to "get it right." If you do decide to take a case to a jury trial, be sure you get off on the right foot… according to these panelists, more than 50% of jurors make up their mind during opening statements.


4. A picture is worth a thousand words. Another common theme across many of the sessions was the need to have a good demonstratives to accompany your presentation of evidence at trial. The pressure to develop visual demonstratives is higher than ever and will only continue to grow. That said, Megan O'Leary demonstrated that it is easier than ever to create effective trial graphics. PowerPoint has all the tools needed to put together a professional looking presentation that, not all that long ago, would have needed to be outsourced to a vendor at significant cost to the client.

 

3. Check with your client’s IT team before agreeing to ESI protocols. Discovery protocols can easily reduce the burden of discovery in document-heavy cases. However, attorneys need to confer with their clients to ensure they do not agree to something that proves difficult or time-consuming to do. Documents stored in a database frequently contain links to other documents elsewhere in the same or another database. For example, an email may contain a link to a draft change order; producing one document (the email) will not produce the other, linked document (the draft change order). If a party agrees to an ESI protocol requiring production of linked documents but does not have a way to automatically produce linked documents, parties may manually have to locate and produce the linked and non-produced document.

Forum friends at the Friday afternoon crawfish boil

 

2. It's important to track your damages early and often. Although proving entitlement is the first hurdle a litigant must clear, proving damages is equally vital. Michael Subak (Troutman), Andrea Gross (Bechtel), and Patrick McGeehin (FTI Consulting) discussed the importance of tracking damages as they are sustained. Not only will it help during the negotiations for a change order or equitable adjustment, should the dispute evolve into litigation or arbitration, the party will have a head start on preparing a summary of damages based on data collected closer in time to the events giving rise to the dispute. It is more difficult, and conversely, more expensive to evaluate damages months or years after the claim arises.

 

1. Attorneys and consultants who invest in the Forum will get back more than they give. During the annual awards ceremony, the Forum honored Andy Ness of JAMS with the Cornerstone Award in recognition for his long-term service to the construction industry, the public, and the legal profession. As much as the Cornerstone Award is intended to honor those who give back to the Forum over the course of a career, Andy remarked that his contributions to the Forum were far eclipsed by the value the organization has, in turn, provided to him over the years. Whether through lessons in leadership to connections within the industry the Forum offers its members countless benefits. Andy is right in observing that the more you give to this valuable organization, the more you will get back in return.


Co-Authors Marissa L. Downs and Brendan Witry are construction attorneys at Laurie & Brennan, LLP where they represent owners, general contractors, and subcontractors in all phases of project procurement, claim administration, litigation, and arbitration/trial. They can be contacted at mdowns@lauriebrennan.com and bwitry@lauriebrennan.com.

Tuesday, April 9, 2024

Toolbox Talk Series Recap – Best Practices for Productive Rule 26(f) Conferences on Discovery Plans

In the April 4, 2024 edition of Division 1’s Toolbox Talk Series, Julian Ackert and Steve Swart presented on how to prepare for and structure Rule 26(f) conferences to be more effective.  While Swart and Ackert focused on the requirements of Federal Rule of Civil Procedure 26(f) regarding the requisite conference of the parties prior to a scheduling conference or scheduling order, it is worth noting that many states have substantially similar requirements.  

Rule 26(f) requires the parties to (i) discuss the nature and basis of their claims or defense; (ii) make or arrange for mandatory disclosures pursuant to Rule 26(a)(1); (iii) discuss issues about preserving discoverable information (including Electronically Stored Information – “ESI”); and (iv) develop a proposed discovery plan.  Swart and Ackert’s presentation focused on the preservation of ESI and the proposed discovery plan.

In preparing for the conference, Swart and Ackert recommend reviewing resources on best practices for ESI production and sample ESI Protocols, including:

·  The Sedona Conference, The Sedona Principles, Third Edition: Best Practices, Recommendations & Principles for Addressing Electronic Document Production, 19 Sedona Conf. J. 1, 72 (2018)

·   The Sedona Conference, including Working Group 1

· ABA Forum on Construction Law: Discovery Deskbook for Construction Disputes (John M. Cook et al. eds., 2d ed. 2015)

·   Federal Court website with sample/default ESI Protocols, e.g.:

o   Northern District of California

o   Northern District of Illinois

o   District of Maryland

  Crowell & Moring, Federal Court and Government Agency e-Discovery Rules and Guidelines

It can be helpful to have ESI vendors/consultants and client representatives participate in the Rule 26(f) conference to assure that the discovery plan is realistic, technically sound, and sufficiently comprehensive.

Although ESI productions are often significantly larger in scope than traditional productions, Swart discussed how counsel have the same essential duties in either scenario of identification, preservation, collection, review, and production. See DR Distributors, LLC v. 21 Century Smoking, Inc., 513 F. Supp. 3d 839, 923, 925 (N.D. Ill. 2021) (imposing a $2.5 million sanction for failure to identify and search web-based emails).

Regarding identification, counsel should work with all relevant individuals (IT, HR, accounting, project management, and ESI consultants) to gain an understanding of the proper custodians and the hardware, software, and third-party services used by your client.  Ackert and Swart stressed how the identification of custodians and documents will be an iterative process, often requiring multiple meetings and draft discovery plans to take advantage of search terms and the client’s organization of documents.  During interviews with identified custodians, the best practice is to have someone from IT present to integrate knowledge of the relevant documents and where those documents actually reside.

For preservation, Ackert distinguished between options to preserve documents in place or to preserve by collecting them.  Some systems, such as Office 365, have built-in options to preserve select documents, which can reduce costs.  Others do not allow for such preservation in place and instead will require preservation by collection.  Regardless of the selected option, special attention should be paid to “chat messages” – such as google, slack, text messages, and similar messaging interfaces.  These are often the most difficult to preserve and to collect, but can be a source of valuable communications.

The better prepared parties can be for the Rule 26(f) conference, the more thorough the discovery plan and the more valuable the discussion with the opposing part and the Court.  Swart and Ackerman emphasized the importance of considering each of the above elements of e-discovery to allow for a robust conference covering your client’s position on, among other things, the size of data and costs of production, proposed search terms, proposed production formats, metadata, and timelines/phases of discovery.  Those interested in further information on these topics should read the references listed above.

Thank you to Swart and Ackerman for highlighting considerations for a Rule 26(f) conference and for sharing their experiences of what works best in practice.


Author 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.

Monday, April 1, 2024

Navigating Threshold Arbitration Issues in Construction Contracts

Including an arbitration clause in your construction contract may not mean that your dispute will be confined to arbitration. Instead, parties often find themselves in court litigating threshold issues related to the existence and/or enforceability of an arbitration clause. Common issues include whether the underlying contract containing the arbitration clause is valid, whether the dispute falls within the scope of the clause, whether the parties complied with contractual prerequisites to arbitration, whether issues related to arbitrability are decided by the court or arbitrator, and whether one of the parties has waived their right to arbitrate. This blog post highlights two recent construction cases addressing threshold issues that a party seeking to enforce—or oppose enforcing—an arbitration clause might face.

Seifert v. United Built Homes, LLC: Delegating Issues of Arbitrability to the Arbitrator

In Seifert, an owner sued a homebuilder in Texas federal court for breach of contract and sought damages and declaratory relief. No. 3:22-CV-1360-E, 2023 WL 4826206 (N.D. Tex. July 27, 2023). The builder moved to compel arbitration. The owner opposed and argued that: (1) there was no agreement to arbitrate because the underlying contract was null and void, and (2) its claim for declaratory relief fell outside the scope of the arbitration clause. The court did not address the merits of either argument. Instead, it determined that these were issues for the arbitrator to decide.

The court reasoned that the parties had delegated issues of arbitrability to the arbitrator by agreeing to arbitrate under the AAA Home Construction Arbitration Rules. Rule 11(a) of these rules provides that “[t]he arbitrator shall have the power to rule on his or her jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.” The court explained that, under Fifth Circuit precedent, the “express incorporation of the AAA rules providing that the arbitrator will determine questions of arbitrability constitutes clear and unmistakable evidence of intent to delegate gateway arbitration questions.” Thus, the court granted the builder’s motion to compel arbitration.

Professional Construction, Inc. v. Historic Walnut Square, LLC: Waiver by Litigation Conduct

The court in Professional Construction addressed whether, under Indiana law, a contractor waived its right to compel arbitration by initiating a lawsuit for breach of contract against the owner. 224 N.E.3d 352 (Ind. Ct. App. 2023). By way of background, the contractor sent a letter demanding that the owner participate in mediation and arbitration per the parties’ agreement. The owner declined. The contractor then sued the owner in Wisconsin state court asserting claims for breach of contract and seeking relief that included “an order compelling Owner to comply with the Construction Contract’s mediation and arbitration clauses.”

Thereafter, the owner commenced a separate lawsuit against the contractor—in Indiana—asserting claims for breach of contract. The contractor moved to compel arbitration in the Indiana court. The owner opposed, arguing that the contractor had waived its right to arbitration by commencing the lawsuit for breach of contract in Wisconsin. The Indiana trial court denied the motion to compel arbitration and the contractor appealed.

The Indiana Court of Appeals explained that commencing a lawsuit for breach of contract before a court “is a presumptive waiver of the right to arbitrate.” This presumption could be rebutted, however, if invoking the judicial process “does not signify an intention to proceed in a court to the exclusion of arbitration.” The court determined that, under the circumstances, the contractor did not act inconsistently with its right to arbitrate by commencing the lawsuit in Wisconsin. It reasoned that there were no attempts to litigate the merits of the dispute and that the contractor’s complaint had specifically requested an order requiring the owner to comply with the agreement’s arbitration clause. As such, the Indiana court compelled the owner to arbitration.

Lessons From These Two Recent Cases

Seifert and Professional Construction underscore the importance of anticipating threshold issues to arbitration—both when drafting an arbitration clause and preparing for a dispute. Consistent with Seifert, most state and federal courts hold that incorporation of AAA Construction Arbitration Rules and Mediation Procedures or JAMS Construction Arbitration Rules & Procedures, which each provide that arbitrators are to decide arbitrability issues, effectively delegates to arbitrators authority to decide most gateway issues. However, some courts have decided otherwise. Construction arbitration clauses can expressly include in the body of the agreement a delegation clause providing that the arbitrators, not the court, decide questions of arbitrability—something parties might consider doing as a matter of “belts and suspenders” where that is what is intended.

As to the question of waiver, the court in Professional Construction reached a common-sense conclusion—filing a lawsuit and requesting that a party be compelled to arbitrate should not by itself give rise to waiver of the right to arbitrate. This is especially so since the U.S. Supreme Court ruled in Morgan v. Sundance that prejudice is not a necessary element to establish waiver of the right to arbitrate under the Federal Arbitration Act, making it easier for a court to find that there has been waiver. 596 U.S. 411 (2022). While state arbitration law may have a different standard for waiver, the Supreme Court’s decision in Morgan is likely to be considered by state courts as they assess the standard for waiver of the right to arbitrate under state law. Indeed, the California Supreme Court is poised to decide in Quach v. California Commerce Club, Inc., whether to continue to apply a prejudice requirement to waiver of the right to arbitrate under California law. 78 Cal. App. 5th 470 (2022), review granted August 24, 2022, S275121; see also Daniel D. McMillan, et al., Goodbye Saint Agnes?, Daily Journal (Nov. 10, 2022), https://www.dailyjournal.com/articles/369872. 

Arbitration continues to be a frequently specified alternative to the courthouse for resolving construction disputes. The recent cases of Seifert and Professional Services illustrate that issues of arbitrability and waiver of the right to arbitrate continue to be raised. Paying close attention to the language of the arbitration agreement, the parties’ conduct, and the applicable arbitration rules and law may minimize unexpected procedural outcomes and make it more likely that you can avoid the courthouse.


Author Daniel D. McMillan is a partner with Jones Day in Los Angeles. Dan’s practice focuses on complex commercial, business, and construction litigation. As co-chair of Jones Day’s global construction practice, Dan represents owners, design professionals, and contractors in large construction disputes and in negotiating and drafting the full panoply of contracts for large projects.

Author TJ Auner is an associate with Jones Day in Los Angeles. TJ represents clients in complex commercial, construction, and energy disputes, with a focus on domestic and international arbitration.

Editor Marcus Quintanilla is an experienced arbitrator and mediator with over 20 years of experience in international arbitration and cross-border litigation. Marcus maintains arbitration chambers in San Francisco, Houston, and Miami.

The views and opinions set forth in this article are the personal views or opinions of the authors and do not necessarily reflect the views or opinions of the law firm with which they are associated.