Risk management is at the heart of our Construction Industry Group’s philosophy. That philosophy comes into play whenever our clients ask us to help, be it during the project planning and client selection, design and construction, project closeout, or dispute resolution. Blending knowledge of the facts, the contracts, and the law with decades of experience and common sense, we help our clients see the situation for what it is and make decisions on how to handle that situation consistent with the client’s best interests as they define them.
At the 5th Annual Intermountain Construction Defect & Dispute Conference held on February 8, 2019, the Utah chapter of Advise & Consult awarded Craig Coburn with its Lifetime Achievement Award for Craig’s contributions in construction law. Richards Brandt congratulates Craig for this much deserved award honoring him for his level of excellence and longtime service in the field of construction law.
by Craig Coburn and Lincoln Harris
For decades, the golden rule – that is, ‘he who has the gold rules” – was the name of the game in design and construction contracting. Under the rule, project owners pushed risks, usually on a take-it-or-leave-it basis, onto prime contractors who, in turn, pushed them onto subcontractors, even though no one
in this contracting scheme was in a better position to manage that risk than anyone else. The ‘go-to’ provisions in this regard were the so-called ‘indemnity’ provisions.
In 1997, Utah subcontractors found some measure of relief from these provisions with passage of Utah Code Ann. 13-8-1. Under 13-8-1, subcontracts could
no longer require subcontractors to hold harmless, indemnify and defend their customer (e.g., a prime contractor) against claims resulting from the customer’s own fault. Still, because a construction team collectively controls a job site, these types of provisions remain permissible in the owner-prime contract to properly allocate responsibility for job-site risks.
Similar provisions having different import have long been the norm in design professional contracts as well – similar
in that the provisions transferred risk to design professionals that they could not control, but different in that the provisions created insurability issues that arose only under professional liability policies, not contractor/ subcontractor commercial general liability policies. In short (and
with more than a touch of irony), a design professional contract’s indemnity provision often compromised the professional liability insurance required elsewhere in the same contract. Still other provisions in design professional contracts purported to raise the standard of care for design professionals above that required under Utah law and, arguably, to a unattainable level.
For several years, we at Richards Brandt Miller Nelson (RBMN) had suggested that design professions consider running a bill to address these concerns. In 2017, ACEC Utah and AIA Utah took RBMN up on its suggestion and RBMN drafted and, in 2018, helped these associations secure passage of HB 279. Slated to be codiied at Utah Code Ann. §13-8-7, HB 279 will alleviate much of what has concerned design professionals working in the public sector for generations and has only gotten worse in the last few years.
What Does Utah Code Ann. §13-8-7 Do?
• Applies to public-sector ‘design professional services contracts’ – deined as contracts tah governmental entity or for an improvement to real property owned or to be owned by a Utah government entity – entered into on or after May 8, 2018.
• Prohibits and voids, as against public policy, provisions in these contracts that:
• require a design professional to hold harmless or indemnify anyone for injuries or losses except to the extent caused by the design professional or those for whom the design professional is legally liable;
• require a design professional to defend anyone for injuries or losses allegedly caused by a design professional’s alleged breach or fault; or
• impose a professional standard of care other than Utah’s common law standard – that is, same/similar licensure, locality, services and timeframe – except
where the project reasonably requires specialized expertise.
What Utah Code Ann. §13-8-7 Does Not Do
• Does not apply to private-sector design professional services contracts;
• Does not apply to a ‘construction contract’ as deined in Utah Code
Ann. §13-8-1, which would may include contracts between a design-builder and a design professional;
• Does not prohibit indemnity provisions that require a design professional to reimburse its client for costs incurred defending against claims for injuries
or losses to the extent caused by the design professional or those for whom the design professional is legally liable; and
• Does not lower the professional standard of care for design professionals.
In short, going forward §13-8-7 levels
the public-sector playing ield for design professionals by prohibiting provisions which inappropriately transfer risk that the design professional can’t control, which compromise design professional liability coverage or which raise the bar on design professional performance to inappropriate levels.
As for design professional contracts not covered by §13-8-7 – that is, design professional service contracts in the private sector or with design-build contractors
– design professionals should closely scrutinize their contracts to ensure, inter alia, that they can control the risks they are being asked to take, that the contract does not compromise the design professional’s insurance and that their services are judged by an appropriate standard of care. And lest there be any doubt in this regard, design professionals would do well to remember that their contracts are the single most- effective risk management tool they have. n
Craig Coburn and Lincoln Harris are shareholders at RBMN where a main focus of both their practices is counseling and representation of design and other industry professionals on business and professional risk management, claims prosecution and defense and dispute resolution. They can be reached at (801) 531-2000 or https://www.richardsbrandt.com/practice-areas/construction-industry/.
by Craig Coburn and Lincoln Harris
The 4th Annual Intermountain Construction Defect and Dispute Conference was held Friday, February 9th, 2018 at which the organizers recognized five professionals in the community for their contributions in the construction industry.
Lincoln Harris received the Attorney of the Year Award honoring him for his level of excellence and longtime service in the field of construction law. Besides this award, he was acknowledged for his work in local government and solving the legislative issues facing his clients. Lincoln’s further credits, which were pointed out at the ceremony, are representing the Appalachian Education and Defense Funds.
Lincoln Harris
June 2017
Denison Mines (USA) Corporation et al. v. KGL Associates, Inc.
In 2009, Denison entered into a construction contract with KGL for the construction of a mill tailings cell at the White Mesa Mill in Blanding Utah. Including change orders, the construction contract price exceeded $5,000,000. During construction, Denison accelerated payments to KGL in order to assist KGL with its cash flow problems. However, when Denison refused to issue additional change orders, KGL unilaterally terminated the parties’ contract, abandoned the project prior to completion and placed a lien on Denison’s property. When KGL abandoned the project, Denison had paid KGL all but about $450,000 of the $5,000,000 contract price, but at the same time, KGL owed more than $2,000,000 to its subcontractors and suppliers. Denison ultimately paid KGL’s subcontractors and suppliers more than $1,800,000 and spent another $350,000 completing the project.
After both parties brought competing claims against one another (Denison alleged nine claims and KGL raised three), they eventually agreed to submit their dispute to binding arbitration. After a two week arbitration hearing, the arbitrator ruled in favor of Denison determining that 1) KGL had mismanaged its work on the project, had abandoned the project and had materially breached the parties’ contract, 2) Denison’s completion actions and decisions were justified, 3) Denison was entitled to its reasonable costs of completion following KGL’s abandonment, 4) KGL was not entitled to a monetary award and 5) Denison was entitled to damages and interest totalling almost $4,000,000 ($4,800,000 after attorneys’ fees and costs).
Following the arbitrator’s award, Denison filed a motion in the district court to confirm the Final Award and KGL filed a counter-motion to vacate the Final Award. After the district court dismissed KGL’s countermotion and entered the Final Award, KGL appealed to The Utah Court of Appeals.
In its appeal, KGL contended that the district court erred in confirming the final award because 1) the arbitrator exceeded his authority and 2) the arbitrator exhibited evident partiality in favor of Denison. The Utah Court of Appeals rejected KGL’s arguments and held that the arbitrator did not exceed his authority and did not exhibit evident partiality. Thus, the Utah Court of Appeals let stand the district court’s decision confirming the arbitrator’s award of approximately $5 million dollars.
RBMN is pleased with the tremendous effort put forth by its team of highly qualified construction attorneys, Craig Coburn, Lincoln Harris and Brian Bolinder. Their skill, coupled with hard work and dedication garnered a very successful outcome for their client. If you have a construction dispute that needs resolution, please contact one of our experienced construction attorneys to assist you.
August 2016
Contractors, subcontractors and suppliers understand that the usual course of construction requires a paper trail of documents beginning with plans, specifications, drawings, bids and proposals, and concluding with inspections, punch lists, final payment and warranties. Moreover, standard contract clauses and simple prudence require those in the construction industry to retain documents for years. The advantages of storing documents and conducting all related business electronically is obvious. But, are electronically signed contracts enforceable?
In 2000 Utah’s legislature passed the Uniform Electronic Transactions Act. The statute permits the use of electronic documents and signatures in a transaction if both parties agree. Electronic contracts and signatures “may not be denied legal effect or enforceability solely because…in electronic form.” Utah Code Ann. § 46-4-201(1), (2). If a law requires that a record be in writing, or that a signature be obtained, an electronic record or signature is acceptable. Id., at (3), (4). For example, in Anderson v. Bell, 2010 UT 47, the Utah Supreme Court held that electronic signatures on a petition to place an unaffiliated candidate’s name on the statewide ballot for governor satisfied the requirement under Utah’s Election Code for such a petition to be signed by 1,000 registered voters. Id., ¶ 26. In judicial proceedings, the law requires a party to use the original record of a transaction to prove the terms of the transaction. The Uniform Electronic Transactions Act addresses this requirement by stating that an electronic record can suffice as an “original” if it “accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise” and “remains accessible for later reference.” Utah Code Ann. § 46-4-301(1). “In a proceeding, evidence of a record may not be excluded solely because it is in electronic form.” Utah Code Ann. § 46-4-302.
To improve the chances that electronically signed contracts are enforceable, and can be admitted as evidence of the terms of the parties’ transaction, contractors should amend their form subcontracts. If you have any questions regarding the enforceability of electronic documents in Utah, or need help in drafting suitable contract clauses, contact Jack W. Reed at Richards Brandt Miller Nelson.
Zack Peterson
February 2015
Pentalon v. Rymark
http://www.utcourts.gov/
The Court of Appeals reversed the district court’s grant of summary judgment in favor of the lender in a mechanics’ lien foreclosure action. The district court ruled that excavations for footings and foundations were not sufficient improvements to constitute commencement of work under the 2008 version of 38-1-5.
Foundation & Footings
As a matter of law, the Court of Appeals determined the contractor’s excavation work, which included excavations in specific shapes through the use of heavy machinery on site, was sufficient to constitute commencement of work under the statute. Davis, J. dissented on the grounds that he would not rule as a matter of law, and he believed issues of fact predominated.
Risk management is at the heart of our Construction Industry Group’s philosophy. That philosophy comes into play whenever our clients ask us to help, be it during the project planning and client selection, contracting, design and construction, project closeout, or dispute resolution. Blending knowledge of the facts, the contracts, and the law with decades of experience and common sense, we help our clients see the situation for what it is and make decisions on how to handle that situation consistent with the client’s best interests as they define them.
We work with our clients at every stage of the design and construction process.
Each participant in design and construction has specific project rights and responsibilities and distinct yet largely compatible interests. Knowing where and how these factors converge or diverge is critical to understanding the risks facing our industry clients and how to help manage or eliminate these risks. Having represented clients in virtually every project participant category, we understand or can quickly discern the factors driving most any project issue to the end of providing solid counsel to our client.
While the risks in design and construction are generally very similar from project to project, no two projects are the same. Understanding the legal and contractual principles as they might apply to a specific type of project is an acquired skill. Having represented a variety of clients on projects ranging from single-family residences to heavy construction and industrial, to research and high-tech facilities, we understand where these basic principles intersect with the challenges unique to the most complex of projects.
Design and construction are high-risk undertakings. Experienced design and construction professionals know that managing these risks plays a critical role in the success of any project. From procurement, contracting and insurance through trouble-shooting problem projects and claims handling/resolution, Richards Brandt’s Construction Industry Group is ready, willing and able to help you maintain control of the situation.
Procurement of design and construction services by federal, state and local government entities is governed by myriad statutes, rules and regulations. The intent of these laws is to promote competition and ensure a level playing field for those pursuing a government contract. These laws change frequently and courts strictly enforce their requirements. Staying on top of these laws is a priority for our Construction Industry Group and we can quickly assist you where government procurement may not have been conducted as it should have been.
To say that construction is a contract-intensive industry would be an understatement. Project participants’ rights and responsibilities are defined by contracts and the process is managed through these contracts. And in any construction dispute, the legal analysis invariably starts with and usually gets resolved according to the parties’ contracts. Simply stated, your project contracts are critical to managing your project risks and our construction lawyers are here to help you deal with contracting issues, from drafting and review through interpretation and enforcement.
The industry has seen a sharp rise in design and construction defect claims in the last decade. As problems arise before, during or after construction, our attorneys have the experience to assess the risk exposure for our clients. As each project is unique, so too is the analysis for each of our clients.
Getting paid can be a challenge for those in the construction industry. Navigating lien and bond issues can be difficult and time sensitive. Our experienced attorneys have the expertise to assist you in dealing with these and other aspects of construction management.
With multiple participants, contracts, facts and technical issues, construction industry disputes are among the most complex and expensive to resolve. Getting a handle on them and resolving them early is critical.
As your counsel, we will help you cut through these complexities and the posturing that accompanies any dispute and get to the heart of the matter. And, once there, we’ll help you better understand and evaluate your real risks and craft cost-effective alternatives for resolution.
In those cases where we are not your counsel, we provide cost-effective neutral services, as mediator or arbitrator, to help you and the other parties resolve your dispute before attorneys and expert fees spin out of control.
When it comes to government relations, Richards Brandt has been on point for the design professions and construction industry for decades. The issues facing the construction industry can be complicated. But that does not mean that resolving them before the legislature and government agencies needs to be complicated. Our Construction Industry Group has learned that the best way to affect legislation is to engage the stakeholders and the decision makers in a candid and transparent discussion that leads to good public policy and an effective legislative solution.
Q: Is an LLC or Corporation right for my business?
Answered by:
A: To decide which entity is right for you, we look at: liability, taxation, and maintenance. Both corporations and LLC’s have limited personal liability—this means that owners are usually not responsible for business debts. However, corporations and LLC’s are taxed very differently—corporations are classified as a separate taxable entity, whereas LLC’s are typically taxed as a pass-through entity (unless you choose otherwise). And corporations and LLC’s have different levels of maintenance—LLC’s have fewer reporting requirements and can operate solely with members acting as the managers. Conversely, corporations are required to hold certain annual meetings, keep certain records, and appoint boards and officers to manage the company for the stockholders. Every situation is unique so we recommend that you consult with an attorney in making your decision. Contact our firm, Richards Brandt, if we can help you decide which entity is right for you.
Q: Is an LLC or Corporation right for my business?
Answered by:
A: To decide which entity is right for you, we look at: liability, taxation, and maintenance. Both corporations and LLC’s have limited personal liability—this means that owners are usually not responsible for business debts. However, corporations and LLC’s are taxed very differently—corporations are classified as a separate taxable entity, whereas LLC’s are typically taxed as a pass-through entity (unless you choose otherwise). And corporations and LLC’s have different levels of maintenance—LLC’s have fewer reporting requirements and can operate solely with members acting as the managers. Conversely, corporations are required to hold certain annual meetings, keep certain records, and appoint boards and officers to manage the company for the stockholders. Every situation is unique so we recommend that you consult with an attorney in making your decision. Contact our firm, Richards Brandt, if we can help you decide which entity is right for you.
Q: Is an LLC or Corporation right for my business?
Answered by:
A: To decide which entity is right for you, we look at: liability, taxation, and maintenance. Both corporations and LLC’s have limited personal liability—this means that owners are usually not responsible for business debts. However, corporations and LLC’s are taxed very differently—corporations are classified as a separate taxable entity, whereas LLC’s are typically taxed as a pass-through entity (unless you choose otherwise). And corporations and LLC’s have different levels of maintenance—LLC’s have fewer reporting requirements and can operate solely with members acting as the managers. Conversely, corporations are required to hold certain annual meetings, keep certain records, and appoint boards and officers to manage the company for the stockholders. Every situation is unique so we recommend that you consult with an attorney in making your decision. Contact our firm, Richards Brandt, if we can help you decide which entity is right for you.
Utah Manufacturing Company Needed Employment Contracts For Key Staffers
Utah Construction Company Needed Planning For Business Growth & Protection
Utah Family Enterprise Needed Guidance and Representation to Sell Business
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Craig Coburn Receives Lifetime Achievement Award
Leveling the Playing Field
CDDC Announce 2018 Award Winners