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The Construction Advantage

Asha Echeverria, Michael R. Bosse

In this new edition of The Construction Advantage, Mike Bosse reviews a Philadelphia case in which a contractor is convicted of criminal negligence, and a Massachusetts case where the Spearin Doctrine was updated for the construction manager context. Asha Echeverria reports back from the American Bar Association Forum on Construction’s Fall Meeting discussing alternative dispute resolution. 

When Negligence is a Crime: A Philadelphia Contractor Convicted of Criminal Negligence

By Mike Bosse

In a closely watched case, a Philadelphia jury recently cleared a contractor of murder charges, but found him guilty of involuntary manslaughter for the negligent demolition of a building that collapsed in 2013 killing six people in the neighboring structure. This case is a reminder that the construction industry is a dangerous one, and when people are injured or killed, the possibility of criminal prosecution exists.

The prosecutors in Pennsylvania had charged the contractor with a half dozen counts of third-degree murder for what was alleged to be the known use of wrongful methods to demolish a building in downtown Philadelphia. The demolished building collapsed into a Salvation Army thrift store and killed six people. The contractor’s attorney argued that the project architect was in control of the site and that the contractor only had been following orders being given by the architect. The jury acquitted the contractor of murder. However, the jury still convicted the contractor for involuntary manslaughter for conducting the operations negligently, because he had removed the steel supports from the building to sell as scrap, thereby destabilizing the building and causing its collapse. The contractor will be sentenced in January with each involuntary manslaughter charge carrying a maximum sentence of up to five years. Civil suits have also been filed, which will continue after the criminal trial. Here is further information on the conviction.

Criminal trials of contractors in Maine are rare indeed, but it is worth remembering that construction being performed every day is a dangerous exercise. While we are often focused on OSHA and workers compensation issues, it’s useful to remember that criminal prosecutions can happen when there is a death or serious injury on a project.

Construction Manager at Risk Decision in Massachusetts: Spearin Updated for a New Century

By Mike Bosse

In a widely reported case in Massachusetts, Coghlin Electrcial v. Gilbane Building Company, the Massachusetts Supreme Judicial Court upheld the implied warranty for the accuracy of plans and specifications from an owner in a context of a construction manager at risk project. In an updated twist on the Spearin Doctrine, Massachusetts has reaffirmed the doctrine and updated it for the construction manager context.

In Coghlin, there were design issues presented regarding spacing between the ceilings and the bottom of the structural steel in the construction of a psychiatric facility at the site of the Worcester State Hospital. Coghlin Electrical submitted a request for an equitable adjustment related to placement of the electrical work in the area between the steel and the ceilings, and sued the construction manager Gilbane thereafter. Gilbane sued the project owner because it relied upon the accuracy of plans submitted by the owner to Gilbane, acting as the construction manager at risk.

The court held that the construction manager can apply the implied warranty for the accuracy of plans and specifications when it has relied on the plans in good faith and acted reasonably to comply with its own design obligations. The Court distinguished the construction manager at risk delivery model from the traditional design bid build delivery mechanism, noting that a construction manager at risk “may provide consultation regarding the design of the project and therefore may influence the project’s final plans and specifications.” In determining whether a construction manager acted “reasonably,” the Court concluded that a factfinder may analyze the construction manager’s level of participation in the design phase and the extent to which the construction manager has been delegated the design responsibility. The more involved the construction manager is in the design, the “greater the burden will be to show” that its reliance on the defective design was reasonable and in good faith. This decision does not completely relieve the construction manager at risk from responsibility, but it does reaffirm the Spearin Doctrine in the construction manager setting.

Alternate Dispute Resolution

By Asha Echeverria

Earlier this month I attended a summit on alternate dispute resolution at the American Bar Association Forum on Construction’s Fall Meeting in Austin, Texas. One of the sessions I found particularly interesting was a session titled “Has Arbitration Fulfilled its Promise?” The presenters were William K. Andrews of Andrews Myers, P.C., L. Tyrone Holt of The Holt Group, LLC and Shelly L. Ewald of Watt, Tieder, Hoffar & Fitzgerald, LLP, where I clerked in law school. They gave several points to consider as you decide whether to include an arbitration clause in your next construction contract.

In the past few years, many construction contracts have included arbitration provisions, but the question remains, has arbitration lived up to expectations? Parties shifted to arbitration based on a promise of an efficient and final resolution to disputes, rather than litigation (which some parties found to be plagued with delay and inefficiency, to some degree due to the ever pending threat of appellate review). But has arbitration come to look too much like litigation over the years? Where might arbitration have gone wrong?

The cost of arbitration is almost always directly related to the amount of discovery permitted. In recent years, discovery in arbitration has expanded during a time in which federal courts have been attempting to rein in discovery, especially e-discovery. Barring action by Congress, as of December 1, 2015, federal courts are moving away from broad rights of discovery to a new emphasis on cost/benefit balancing to limit discovery. Arbitrators are given broad discretion to manage arbitration, so this same guidance on discovery may not always govern discovery in arbitration. Parties employing arbitration should remember that unlike in a court proceeding, the parties themselves select the arbitrator. Therefore, parties and their counsel should consider interviewing arbitrators pre-selection to determine whether the potential arbitrator’s philosophy toward discovery and arbitration generally matches the parties’ expectations regarding how much, or how little, discovery is appropriate as well as the process for the arbitration generally.

One of the blessings and curses of arbitration has tended to be the finality of the award, but now even this is under attack. Unlike court judgments which can be appealed on many grounds, arbitration rulings were generally thought to be final. However, in recent years the American Arbitration Association has instituted optional rules that allow for appellate-like review of AAA decisions with an ability to overturn decisions based on material and prejudicial errors of law and clearly erroneous determinations of fact. Again, this is an example of arbitration creeping closer to litigation. If parties want to avoid such options, the best solution may be to affirmatively reject such rules or include a contract term that allows a party to recover its attorneys’ fees and costs in a successful defense of an arbitration award.

My final thought is that arbitration is what the parties make of it – what they contract to and who they decide on as an arbitrator. Parties enjoy the strengths of arbitration when they take control and make it what they want – by drafting the right kind of arbitration provision and agreeing to the right kind of arbitrator for the case.

Upcoming events

Members of the Construction Law Practice Group will be attending the American Council of Engineering Companies of Maine Fall Forum and Engineering Excellence Awards on November 3, 2015. Please visit the ACEC website for event information.