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Florida Construction Lawyer Blog

StuartSobel2013.jpgThe firm’s Stuart Sobel has once again written an article that appeared in the annual special report on Alternative Dispute Resolution published by the Daily Business Review, South Florida’s exclusive business daily and official court newspaper. Stuart’s article, which was published in today’s edition of the DBR and also appeared in Texas Lawyer and the Daily Report (Atlanta), focused on the use of formal mediation proceedings to resolve claims involving catastrophic construction accidents. Earlier this year he represented Miami Dade College in a $33.5 million mediated settlement that included 22 defendants for the collapse of a parking garage during construction.

Stuart’s article reads:

Tragically, a collapsed structure introduces personal injuries, wrongful deaths, economic losses and disappointed expectations on top of the impact to the completion of the project. As such, any formal dispute resolution, whether it be arbitration, litigation or several of both types of proceedings, will involve many parties and claims as well as many issues related to each party and each claim.

Add to this, many parties will have insurance available, but the coverage may be offered in layers, with underlying and surplus policies introducing even more grist for the dispute mill. Insurance policies may have several of the construction participants as additional insureds, and they may also have subrogation waivers and other nuances that must be considered in working toward a just resolution. Additionally, there will also likely be performance bond sureties that will have indemnity rights to bring to the party.

Consider then what the trial or arbitration hearing will look like. How long will it take to select a jury given the number of peremptory challenges? How long will a simple side-bar in a jury trial take? How long do depositions take to conclude, with 20-plus parties each having the opportunity to question important lay and expert witnesses? And, how much will all this cost?

How then best to manage this not so rare occurrence? At the risk of being accused of blasphemy, the answer is to run a mediation track parallel to the formal dispute resolution track.

Statistics tell us that nearly 99 percent of all filed lawsuits are settled. The settlement rate of arbitrations is not quite as high, but we should take some solace in the fact that, in all likelihood, a well-managed mediation process can also resolve our catastrophic construction claim.

So then, what is a well-managed mediation process? It must begin with the recognition that mediation is, itself, a process, not an event. Mediation is most effective when the parties understand the process, which calls for everyone to be brought together with a common goal — settling the claim — even if the goals diverge when each party wants someone else’s money to be used. Still, with everyone in the room, the opportunity for cooperative compromise in furtherance of the common goal becomes possible.

His article concludes:

When successful, mediation also allows for creative solutions that may not be available through formal dispute resolution. Correction of work, rather than the payment of money, may prove an attractive piece of a settlement. Resolutions may be kept confidential and private, while a jury verdict is never confidential.

Successful mediation requires a clear vision of what success will look like on paper. With so many parties, claims and issues, documenting a settlement reached in principle presents its own challenges.

Will all the insurers join in the settlement, disclosing their contributions and submitting to the jurisdiction of the court for the purpose of enforcement? If not, what default mechanism will work best to ensure that all of the parties pay, so that the plaintiff is not left with some paying, some not, and questions about collectability? Consider bringing a draft settlement agreement, leaving numbers blank, to the mediation so that it too can be negotiated, rather than leaving that task, with its own hazards, for the days or weeks after the dollar settlement is achieved.

Mediation provides parties the opportunity to see how their presentation of their case is received by others, and also to see their opponent’s case articulated in a manner that allows for more objective consideration. The process enables principals to sit across from each other with the ability to control the outcome of the dispute — as opposed to placing their fate in the hands of a judge, a jury or a panel of arbitrators. That control is appealing, and it has led the construction industry to embrace mediation as an important tool for the resolution of disputes involving construction catastrophes.

Our firm congratulates Stuart for sharing his insights into this important topic with the readers of the Daily Business Review, Texas Lawyer and the Daily Report. Click here to read the complete article in the DBR’s website (registration required).

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JCristeswearingin.jpgThe mentoring of young lawyers is paramount to their future success in the profession, and our firm is proud of our ongoing mentoring of law school students and graduates as law clerks with the firm before they become newly minted attorneys.

John I. Criste and Berenice M. Mottin-Berger are our firm’s latest law clerks to be admitted as members of The Florida Bar. Both of them worked very closely with partner Stuart Sobel, who was honored to preside over their swearing in ceremony at our offices last week.

We are also very pleased to welcome John and Berenice as our firm’s newest associate attorneys. In addition to focusing on commercial litigation, they will both continue to work with Stuart as important new additions to our construction law practice group, and Berenice will also focus on community association law.

BMottinswearingin.jpgBoth John and Berenice graduated with cum laude honors from the University of Miami School of Law in May 2015. They were trial partners for the law school’s Litigation Skills Program and the John T. Gaubatz moot court competition. John earned his bachelor’s degree from Stanford University in 2011, and Berenice earned her bachelor’s degree from the University of Miami in 2010.

On behalf of everyone at our firm, we congratulate John and Berenice on their admissions to the bar and promotions from law clerks to associates.

A recent editorial by the Miami Herald commemorated the one-year anniversary of the opening of the PortMiami Tunnel by highlighting the impact that this remarkable project has already made.

The editorial reads:

. . . it has been largely smooth sailing for the $643-million tunnel, which came in $90 million under budget — a feat unheard of for such massive projects. “We did it without the drama,” Christopher Hodgkins, CEO of Miami Access Tunnel, told the Editorial Board on Monday.

Built through an innovative public/private partnership, the tunnel is operated and maintained by Miami Access Tunnel, which also built the facility through a contractor, the French firm Bouygues — all with the help of a German-built tunnel boring machine.
In its first year, the tunnel has diverted 80 percent of the street-clogging cargo trucks headed for the port away from downtown Miami. Thousands of cruise-ship passengers have done the same. Now passengers landing at Miami International Airport don’t even have to get on Biscayne Boulevard. They can travel on state roads 836 or 112 and connect to I-395 east to the tunnel, which spills out at the port.

MHerald2015.jpg“The tunnel has been a great success,” Mr. Hodgkins said. “We have changed the quality of life in downtown Miami.”

Mr. Hodgkins is absolutely correct, as more than 14,000 vehicles are now using the tunnel every day and bypassing the city’s downtown streets. He is also right about the fact the builder was able to avoid “the drama” that typically accompanies construction projects of such a massive scale, and I was pleased to have helped tunnel builder Bouygues Civil Works Florida to do so when it encountered unexpected site conditions that required additional work and funds to overcome. The issue could have created a lengthy impasse during construction, and my work as the lead legal counsel for the builder helped the company to secure a $58.5 million settlement that was the subject of a front-page article in the February 5, 2013 edition of the Daily Business Review titled “Dispute Resolution Board Reaches Rapid Settlement with PortMiami Tunnel Builder.” The article read:

Imagine securing a $58.5 million settlement from a dispute panel that bans lawyers from the room.

That’s the scenario Coral Gables attorney Stuart Sobel faced while representing Bouygues Civil Works Florida Inc., which is constructing the $1 billion tunnel that will connect PortMiami to I-395.

It didn’t surprise Sobel — he helped set up the tunnel’s Technical Dispute Resolution Board when his client won the project.

The report chronicled how I devoted many hours to preparing for the hearings on liability before the Technical Dispute Resolution Board outside of normal schedules. “My work was at night, trying to anticipate the issues that were going to be discussed the next day,” I was quoted in the article, which continued to read:

For the board presentation, Sobel put together PowerPoint presentations for his witnesses to use and coached them on how to answer the panel’s anticipated questions. The board heard evidence for 13 days before making its decision largely in favor of Bouygues.

dbrlogo.jpgThe article explained that the tunnel dispute was over extra work for grouting the limestone as the company dug. “We determined there was a changed condition. The geologic conditions were different than what we’d been led to expect,” I noted.

I was also quoted discussing the merits of using Technical Dispute Resolution Boards for major construction projects. “The concept is you have construction people dealing with construction problems,” I concluded.

I am very proud of our firm’s work in enabling the tunnel builder to quickly and fairly resolve this matter and avoid any delays during construction. The award-winning tunnel is emblematic of the potential for public/private partnerships, which are expected to continue growing as the predominant paradigm for such large scale infrastructure projects in the years to come.

In a recent appellate ruling with significant precedential implications for litigation by contractors against construction lenders in Florida, the court found that Florida’s Construction Lien Law bars common law remedies for contractors to sue lenders for work performed by the contractors and other lienors. The court affirmed the lower court’s summary judgment for a lender over a contractor’s claims stemming from a failed housing development.

The case of Jax Utilities Management, Inc. v. Hancock Bank involved contractor Jax Utilities, developer Plummer Creek, LLC and successor lender Hancock Bank. In 2009, after the developer suffered financial difficulties it failed to pay Jax. As a result of the developer’s financial difficulties, Hancock Bank obtained a final judgment of foreclosure against Plummer Creek and the project in September 2011. Subsequent to that, in December 2011, Jax filed a claim for breach of contract against Plummer Creek as well as claims for unjust enrichment, and it sought to impose an equitable lien against Hancock Bank.

The trial court issued a final judgment for Jax against Plummer Creek for more than $587,000, but it also granted a summary judgment to Hancock Bank finding that the contractor’s equitable lien claim was barred by the one-year statute of limitations which governs actions to enforce equitable liens. It also found that §713.3471 of Florida’s lien law precluded Jax’s common law remedies.

On appeal, Jax and Hancock disagreed as to when the statute of limitations began to run to enforce an equitable lien. Jax took the position that it did not begin to run until the bank had instituted foreclosure proceedings. The First District Court of Appeals disagreed, holding, “By its plain language, section 95.11(5)(b) requires that a claim for equitable lien be brought within one year of the last furnishing of labor, services, or material for the improvement of real property.”

1dca.jpgThe First District Court of Appeal also agreed with Hancock Bank’s arguments that the lien law precluded Jax’s common law claims for equitable lien and unjust enrichment. §713.3471 establishes the proper procedures for lenders to notify contractors if they decide to cease disbursing funds under a construction loan, and it also sets the damages for a bank’s failure to provide notice. The court concluded that:

Section 713.3471(2) expressly immunizes lenders who provide notice, prescribes the damages where notice is not provided, and states that the cause of action cannot become the basis for an equitable lien claim. Moreover, a common law claim would conflict with the statute. If a lender complies with the statute, it has no liability. If the lender fails to comply, a contractor may seek damages as prescribed by the statute.

The court also noted that its holding was reinforced by the lack of a provision preserving common law remedies in the statute.

For contractors such as Jax, which had apparently earned the funds that it was not paid, the court’s holding delivers a clear message that they cannot forgo their rights under the lien law in favor of common law claims against lenders. Even in cases in which a construction lender disregards the requirements under the lien law by not issuing the proper notice to the contractor when it decides to stop disbursing loan proceeds, the lender’s liability is delineated solely by the statute.

Our firm’s other construction law attorneys and I work very closely with contractors, subcontractors and other lienors to enable them to utilize all of their rights to recover the funds that they are owed. We write in this blog on a regular basis about important legal and business matters for the construction industry in Florida, and we encourage industry followers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

NSiegfried2013.jpgThe firm’s Nicholas D. Siegfried was interviewed as part of the Expert Interview Series for the Surety Solutions blog. Nicholas discusses construction law and some of the elements of the Florida Construction Lien Law in the article. Surety Solutions specializes in the Surety Bonds and has over 50 years of experience in the industry. Its clients range from local construction contractors to Fortune 500 companies, foreign conglomerates to financial institutions, government entities to hedge funds, and both public and privately held companies.

Click here to read the feature in the company’s blog.

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In recognition of the opening of One World Observatory in New York City, EarthCam has created a commemorative time-lapse video showing the building’s construction progress from October 2004 to Memorial Day 2015. The firm’s Stuart Sobel represented ADF Steel Corp. in 2012 in a lawsuit filed against the U.S. subsidiary of Canada-based ADF Group Inc. by WTC Tower 1 LLC, an assignee of 1 World Trade Center LLC owned by the Port Authority of New York and New Jersey. The suit alleged that ADF breached its contractual obligations by refusing to ship the steel for the 458-foot spire that tops the iconic new skyscraper. ADF had not been paid by its client, the subcontractor responsible for fabricating and erecting the steel, even though the Port Authority apparently paid the subcontractor for ADF’s work. With Stuart’s help, ADF Group settled the dispute, getting ADF paid, while allowing the steel to be shipped before the St. Lawrence Seaway froze over for the winter, thus insuring that the erection of the spire crowning the tower could proceed as scheduled.

Click below to watch the incredible new time-lapse video.

 

 

A recent opinion by the Fifth District Court of Appeal has significant implications for the application of the statute of repose in construction defect cases.

In Cypress Fairway Condominium v. Bergeron Construction Co., the condominium association brought suit on February 2, 2011 on behalf of the condominium, and as assignee of claims held by the general contractor, for recovery of more than $15 million in damages caused by construction defects. Da Pau Enterprises, Inc., the only remaining defendant after other parties reached settlements, moved to dismiss and/or for summary judgment against the association, alleging that the ten-year statute of repose period expired three days prior to the date the litigation commenced.

The ten-year statute of repose in Section 95.11(3)(c) provides that actions for latent construction defects must commence within 10 years of the latest of the following four events:

  • the date of actual possession by the owner;
  • the date of the issuance of a certificate of occupancy;
  • the date of abandonment of construction if not completed; or
  • the date of completion or termination of the contract between the professional engineer, registered architect or licensed contractor and their employer.

At issue was the last of the four trigger events under Section 95.11(3)(c). The defendant argued that the statute of repose commenced the date the contractor submitted its Final Application for Payment on January 31, 2001, which signified the “completion of construction.” However, the association contended that the repose period did not begin until the date final payment was actually paid by the owner on February 2, 2001, which signified the date of the “completion of contract.” The trial court disagreed with the association and granted summary judgment to the defendant, dismissing its claims.

5DCA.JPGThe Fifth DCA reversed, reasoning that the plain unambiguous statutory language of Section 95.11(3)(c) required the completion of performance of the contract by both parties, and not just the completion of the performance of the contractor’s duties under the contract. Thus, the statute of repose was not triggered upon completion of construction. Rather, here, the appellate panel held that the final act for the “completion of the contract” was final payment, and not three days earlier when the Final Application for Payment was submitted.

It is unclear how this decision will be applied by the courts when the owner fails to issue final payment or holds off on making the payment for a considerable length of time after the completion of construction and issuance of the certificate of occupancy. There are often disputes that arise resulting in the final payment being withheld, and as in Cypress v. Bergeron, three days can make a critical difference of whether or not the statute bars any claims.

This decision should serve to remind property owners who discover latent defects of the importance of consulting with highly qualified and experienced construction attorneys. Our firm’s other construction lawyers and I write in this blog about important legal and business issues for the construction industry in Florida, and we encourage industry followers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

The firm’s Stuart Sobel, Steven Siegfried and Michael Clark represented Miami Dade College in securing a $33.5 million settlement over the partial collapse of its parking garage while it was under construction at the school’s West Campus in Doral in 2012.

After repeated mediations over period of more than a year, the construction settlement that was finalized last week enabled all of the 22 parties that were involved to avoid the uncertainties and vicissitudes of litigation.

According to Stuart, the most significant obstacle for the college was to have all of the parties accept the engineering reality that the remaining portion of the newly constructed garage had to be demolished, including removal of its foundation, with a new garage being constructed from the ground up. Based on its belief that it was the safest and most appropriate course, the college demolished the remaining portion of the garage while the mediation was still in progress and before a settlement had been reached. It relied on its trial team to either convince the responsible parties and their insurers through the mediation process or, if necessary, convince a jury through trial that its action was justified. Through the settlement, the SRHL trial team achieved consensus supporting the college’s course of action.

Click below to watch the video of the report by Willard Shepard of NBC 6, click here to read the article from the Daily Business Review (registration required), and click here for the article that appeared in The Miami Herald.

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In the recent decision of Carithers v. Mid-Continent Casualty Company, the Eleventh Circuit Court of Appeals affirmed a trial court’s decision that a general liability carrier had an obligation to defend a homebuilder and satisfy a $90,000 consent judgment, which had been entered against the homebuilder.

The appeal stemmed from a lawsuit filed by homeowners Hugh and Katherine Carithers against Cronk Duch Miller, their homebuilder. The Carithers alleged that their home, built in 2005, had been constructed with numerous defects. The suit alleged that shoddy work by subcontractors had resulted in a faulty electrical system, damage to tile and exterior bricks and a leaky balcony that caused wood rot in the garage.

The court first examined what appropriate “trigger” controlled the date on which the property damage “occurred” and thus what policy period was implicated. The court noted that Florida state courts were divided as to whether the injury occurred when it “in fact” occurred or when it “manifested” itself. In this instance, the damages allegedly “manifested” themselves in 2010 after the Mid-Continent policy had expired. However, the trial court found that, although the injury might have manifested itself in 2010, it “in fact” occurred in 2005 giving rise to coverage. Notably, in affirming the trial court, the appellate court limited its holding that the “in fact” trigger applied to this case, noting that its application would be problematic where it is difficult or impossible to determine when the injury actually occurred:

“We note the difficulty that may arise, in cases such as this one, where the property damage is latent, and is discovered much later. We also note that the district court found as a fact in this case that the property was damaged in 2005. For this reason, we limit our holding to the facts of this case, and express no opinion on what the trigger should be where it is difficult (or impossible) to determine when the property was damaged. We only hold that the district court did not err in applying the injury-in-fact trigger in this case.”

11circourtappeals.jpgIn the remainder of the decision the appellate court applied Florida law from United States Fire Insurance Co. v. J.S.U.B., Inc. and its progeny in concluding what did and did not constitute covered property damage. Generally speaking, the J.S.U.B. court held that damage which resulted from the defective work of a subcontractor constitutes covered property damage. The Carithers court followed Amerisure Mutual Ins. Co. v. Auchter Co., 673 F.3d 1294 (11th Cir. 2012), which held that property damage constituted an occurrence, giving rise to coverage, if it was damage to work other than that which the subcontractor performed. For instance, if the bricks were damaged by the application of the brick coating, and the installation of the bricks and application of the brick coating was performed by two separate subcontractors, the damage to the brick constituted property damage.

Most notably, perhaps, the court held that the cost to demolish and repair the defective balcony, which was not otherwise covered, was covered property damage because it was necessary to repair the damage to the non-defective garage. The court held that this was part of the “cost of repairing damage caused by the defective work . . . “, quoting U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 889 (Fla. 2007).

Complications often arise when ongoing property damage remains latent and is not discovered for years, and this decision will only add some clarity to cases involving the exact set of circumstances and policy language that applied in this case. However, the court’s decision to cover “rip and tear” costs as property damage could have far reaching implications.

A recent case involving an engineering firm’s lawsuit for nonpayment against a Miami Beach condominium association illustrates the importance for contractors and engineers to file liens for work performed under a single contract as opposed to umbrella liens for services rendered under multiple contracts.

Pursuant to Florida law, construction liens may only be imposed for work performed under a single contract. However, an engineering firm sought to recover more than $107,000 for concrete and stucco remediation, replacement windows, sliding glass doors, cabanas and a new entrance as part of its work under nine separate contracts with the condominium association.

The Miami-Dade Circuit Court Judge overseeing the case issued partial summary judgment in favor of the condominium association. The decision extinguished the lien for failing to comply with Florida Statute §713.09, which states: “A lienor is required to record only one claim of lien covering his or her entire demand against the real property when the amount demanded is for labor or services or material furnished for more than one improvement under the same direct contract.”

It is well established in Florida that separate liens are required for claims attributable to separate contracts, yet filing mistakes such as this one by the engineering firm and its attorneys occur from time to time. flbarbcconstruction.jpg As liens can be filed against real estate only within 90 days of the final furnishing of non-corrective work being performed, the repercussions of flawed lien filings such as the one in this case can prove to be very costly for construction and design firms.

This case is yet another example of the importance of working exclusively with highly experienced construction attorneys for all matters involving construction-related liens and litigation. Our firm’s other construction attorneys and I write regularly in this blog about important legal and business issues for construction professionals in Florida, and we encourage industry followers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.